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                                                      Calendar No. 341
107th Congress     }                                    {       Report
                                 SENATE
 2d Session        }                                    {      107-141
_______________________________________________________________________




                         CONCURRENT RESOLUTION


                             ON THE BUDGET


                                FY 2003

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                          UNITED STATES SENATE

                              to accompany

                            S. Con. Res. 100

                             together with

                            ADDITIONAL VIEWS







              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







Setting forth the congressional budget for the United States Government 
                   for fiscal years 2003 through 2012 

                 April 11, 2002.--Ordered to be printed 

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
99-010                     WASHINGTON : 2002












                        COMMITTEE ON THE BUDGET

                  KENT CONRAD, North Dakota, Chairman
ERNEST F. HOLLINGS, South Carolina   PETE V. DOMENICI, New Mexico
PAUL S. SARBANES, Maryland           CHARLES E. GRASSLEY, Iowa
PATTY MURRAY, Washington             DON NICKLES, Oklahoma
RON WYDEN, Oregon                    PHIL GRAMM, Texas
RUSSELL D. FEINGOLD, Wisconsin       CHRISTOPHER S. BOND, Missouri
TIM JOHNSON, South Dakota            JUDD GREGG, New Hampshire
ROBERT C. BYRD, West Virginia        OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 BILL FRIST, Tennessee
DEBBIE STABENOW, Michigan            GORDON SMITH, Oregon
HILLARY RODHAM CLINTON, New York     WAYNE ALLARD, Colorado
JON S. CORZINE, New Jersey           CHUCK HAGEL, Nebraska
                Mary Ann Naylor, Majority Staff Director
                  G. William Hoagland, Staff Director
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                                                      Calendar No. 341
107th Congress     }                                    {       Report
                                 SENATE
 2d Session        }                                    {      107-141

======================================================================



 
        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2003

                                _______
                                

                 April 11, 2002.--Ordered to be printed

                                _______
                                

 Mr. Conrad, from the Committee on the Budget, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                    [To accompany S. Con. Res. 100]

      I. The Concurrent Resolution on the Budget: Fiscal Year 2003

    The Committee-reported Congressional Budget Resolution for 
Fiscal Year 2003 provides a strong response to all the serious 
challenges facing America today. Unfortunately, the President 
and the Republican-controlled Congress last year squandered a 
golden opportunity to address the serious problems facing the 
nation before the terrible September 11 attacks. And, while it 
appropriately provides the resources necessary to wage the war 
on terrorism, the budget the President submitted this year does 
no better in facing up to the challenges that existed before 
September 11 than did the Republican budget last year.
    Unlike the President's budget, the Committee-reported 
resolution not only provides the resources needed to meet the 
challenge of fighting the war against terrorism at home and 
abroad, it also faces up to all of the other challenges facing 
the nation.
     The budget resolution provides all the resources 
requested by the President for homeland security.
     The budget resolution provides all the resources 
requested by the President for the Department of Defense for 
the next two years. It includes a reserve fund that will 
provide all the defense funding requested by the President in 
2005 through 2012 if it becomes clear that the funds are 
needed. If the funds in the defense reserve are not needed for 
future defense needs, those funds will be used to pay down the 
debt.
     The budget resolution proposes to pay down more 
debt than the President would, reducing it as much as possible 
given the other high priority needs of the nation. If the 
amounts in the defense reserve fund are not needed to meet 
unanticipated demands in the defense area, debt paid down under 
the budget resolution will exceed the debt paid down under the 
President's budget by about $502 billion over 10 years. If the 
defense reserve funds are needed to boost spending for national 
security, the budget resolution would still provide more than 
$233 billion more debt reduction than the President's budget 
would.
     Unlike the President's budget, the budget 
resolution puts the budget on a path back to balance without 
the use of the Social Security trust funds so that those funds 
can be used as intended--to help prepare for the retirement of 
the baby boom population--instead of to pay for tax cuts and 
other programs. The budget resolution puts in place a mechanism 
that will require Congress to consider a plan next year that 
would lead to a balanced budget without Social Security by 
2008. The President's budget does not achieve balance without 
Social Security in any year.
     The budget resolution assumes no repeal or delay 
of tax rate reductions that are scheduled to occur in future 
years under the law enacted last year. Unlike the President's 
budget, it also assumes that any additional tax cuts will be 
paid for.
     The budget resolution proposes a Medicare 
prescription drug benefit that will provide real help for the 
nation's elderly. The budget resolution also provides resources 
that are needed to expand health coverage for Americans who 
currently lack insurance. The resources for these purposes 
provided in the budget resolution are almost double the amount 
proposed by the President.
     Unlike the President's budget, the budget 
resolution provides new mandatory spending to ensure that the 
Individuals with Disabilities Education Act will be fully 
funded.
     And unlike the President's budget, the budget 
resolution provides the resources for crucial investments that 
will meet high priority current needs and help prepare the 
nation to meet all of the daunting challenges facing us in 
coming years. For instance, in 2003:
           It provides $5.4 billion more than the 
        President for education;
           It provides $3.5 billion for COPS and other 
        state and local law enforcement assistance programs, 
        $1.4 billion more than the President;
           It provides $5.7 billion more funding than 
        the President for highways;
           It provides $1.2 billion more than the 
        President for veterans' medical care; and,
           It provides $2.4 billion more than the 
        President for natural resources and environment 
        programs.

                             The Challenges

    America faces tremendous challenges as winter turns to 
spring in 2002. Some of these challenges are all too obvious 
every morning in the nation's newspapers and every evening on 
the nightly news: the challenge of rooting out al Qaeda and 
Taliban fighters that confronts our troops in Afghanistan; the 
challenge of responding to the possibility of more terrorist 
attacks against our homeland; and the challenge of ensuring 
that the American economy resumes the robust economic growth 
that marked the record-breaking economic expansion that ended a 
year ago.

Facing the retirement of the baby-boom generation

    But America also faces other very serious challenges that 
are not so much in the daily news. In just six years, the 
oldest members of the huge baby-boom population will become 
eligible for federal retirement benefits. As the number of 
citizens over 65 grows--that population is expected to double 
by 2035--the pressure on the federal budget will increase 
dramatically. The Congressional Budget Office (CBO) estimates 
that the cost of Social Security, Medicare, and Medicaid will 
nearly double by 2030, to almost 15 percent of gross domestic 
product (GDP). Currently, total federal spending equals 19 
percent of GDP. In testimony before the Senate Budget Committee 
in January, CBO Director Dan Crippen stated that:

          Put more starkly, Mr. Chairman, the extremes of what 
        will be required to address our retirement are these: 
        We'll have to increase borrowing by very large, likely 
        unsustainable amounts; raise taxes to 30 percent of 
        GDP, obviously unprecedented in our history; or 
        eliminate most of the rest of the government as we know 
        it. That's the dilemma that faces us in the long run 
        and these next ten years will only be the beginning.

    This demographic tidal wave represents a challenge unlike 
any this nation has ever faced. Although the most serious 
impacts on the budget posed by this graying of America will not 
be felt in the next 10 years, what is done in the budget over 
the next decade will have a crucial effect on how the nation is 
able to meet the long-term challenge.

Facing the need for a Medicare prescription drug benefit

    In addition to the challenge posed by the anticipated needs 
of tomorrow's elderly population, we also face a challenge to 
provide today's elderly with relief from the crippling costs of 
prescription drugs. The federal Medicare program has made a 
great contribution to the well-being of America's elderly 
citizens, ensuring that they will receive the hospital and 
physician services they need without bankrupting themselves and 
their families. But when Medicare was enacted nearly four 
decades ago, its proponents did not foresee the tremendous 
strides that would be made in the development of 
pharmaceuticals and did not include a general prescription drug 
benefit in the Medicare package. Today, thousands of drugs that 
were unknown decades ago play a crucial role in keeping our 
elderly population alive, healthy, and active. But the costs of 
these drugs are skyrocketing and the lack of prescription drug 
coverage in Medicare and the cost of private prescription drug 
insurance are forcing seniors to spend far too much of their 
limited income on prescription drugs or to do without 
prescriptions they need.

Facing the need for improved education, infrastructure, and 
        environmental protection

    We also face a series of challenges in providing our 
citizens with the tools they will need to prosper. The first 
challenge is to provide a high-quality education to every 
American. Not only do all Americans deserve an education that 
will allow them to make the most of their potential, but 
investing in a first-class educational system is the best way 
to ensure that the American economy will remain the strongest 
in the world and our citizens will be able to meet all of the 
challenges that will face them in coming decades. Another 
challenge is to make investments that will improve our highways 
and other elements of our infrastructure that play a crucial 
role in our economy and in the well-being of our citizens. We 
also must meet the challenge of protecting our environment 
while promoting strong economic growth.

Facing the need to protect the well-being of our citizens

    We also face a challenge to ensure that Americans are 
secure not only against the threat of terrorism but also from 
other threats to their health and happiness. We must provide 
resources for police who can protect our citizens from crime 
and ensure that neighborhoods are safe and full of vitality. We 
must make sure that all Americans are protected from the threat 
of inadequate access to health care. We must provide first-
class services for veterans of our nation's armed services. We 
must ensure that workers who temporarily lose their jobs and 
citizens who are struggling to enter the workforce have the 
resources they and their families need to prepare for a better 
future.
    These challenges are daunting, but the American people have 
the capacity to meet them and continue to move this country 
forward if the nation's leaders face up to the challenges and 
help citizens prepare to meet them.

                        Squandered Opportunities

    Last year our national leaders were presented with a golden 
opportunity to set this nation on a course to deal with the 
challenges facing it. After more than 15 years of nearly 
constant efforts toreduce large budget deficits and a decade-
long economic expansion that was spurred at least in part by that 
fiscal discipline, the near-term budget outlook was unprecedentedly 
bright. The Congressional Budget Office projected that unified 
surpluses would total $5.6 trillion over the 2002-2011 period. 
Excluding the Social Security and Medicare trust funds, the projected 
surpluses would still total $2.7 trillion over that period.
    The Senate Democrats developed a budget plan that would 
have used those unprecedented projected surpluses in a manner 
that would address all of the issues facing the nation. That 
plan would have devoted all of the Social Security and Medicare 
trust fund surpluses to pay down the debt, instead of allowing 
them to be used to pay for tax cuts or other programs. The 
remaining $2.7 trillion would have been divided into thirds and 
used to meet the other national needs. One-third ($900 billion) 
would have been devoted to a tax cut that would go primarily to 
middle- and working-class Americans, would provide an immediate 
boost to help fend off or dampen a recession, and would not 
explode in costs in the later years of the plan. A second $900 
billion would have been devoted to high priority needs such as 
a Medicare prescription drug benefit and needed improvements in 
education. The final $900 billion of the available (non-Social 
Security, non-Medicare) surplus would have been set aside as a 
cushion against unanticipated reductions in the projected 
surplus and to fund needed major reforms of Social Security and 
Medicare.
    But the President and Republicans in Congress instead 
pushed through a plan that had only one priority--tax cuts. The 
President proposed a tax cut that would have cost nearly $2.2 
trillion over 10 years (including interest costs). Because of 
the huge tax cut, there were not enough resources left to 
address other challenges. The President's budget proposed an 
inadequate Medicare prescription drug benefit, did not fully 
fund all of the nation's education needs (even though he called 
education his top priority), and did not set aside any funds to 
reform Social Security or Medicare. The cost of the President's 
tax cut over 10 years was reduced slightly as it made its way 
through Congress, but that largely reflected a slow phase-in of 
key provisions in the bill and the sunset of all provisions of 
the bill at the end of 2010. More importantly, if the 
provisions in the tax bill are made permanent, the cost would 
exceed $4 trillion in the second decade--2012 through 2021--
without counting the cost of increased interest payments. This 
would drain a vast amount of resources from the government just 
as the costs of the retirement of the baby-boom population 
begin to soar.
    The effects of this squandered opportunity are being felt 
this year. Because of enactment of the huge tax cut, there was 
no cushion against the unanticipated costs of the war on 
terrorism or against the revenue drain resulting from the 
economic slowdown that began last March. As a result, we are 
facing deficits excluding Social Security until 2010 if current 
policies remain unchanged.
    According to CBO, the President's budget would not ever 
produce a surplus without using Social Security. In fact, 
without Social Security, deficits under the President's budget 
would total $1.8 trillion for the entire 2003-2012 period. 
Given the drain on resources resulting from last year's tax 
cut, it is not surprising that the President has once again 
failed to propose adequate resources for a Medicare 
prescription drug benefit, for needed education improvements, 
or for a host of other priority national needs. And once again 
the President has failed to propose any resources for Social 
Security or Medicare reform, much less the resources that would 
be needed to implement any of the alternatives proposed by his 
own Social Security commission.
    Perhaps worst of all, the budget submitted by the President 
this year proposes even more tax cuts. In fact, tax cuts 
represent the largest cost in his budget. According to CBO, his 
proposed tax cuts would costs more than $680 billion (including 
refundable tax credits but not including interest costs) over 
the next 10 years. This is 42 percent more than the $483 
billion CBO estimated the President's proposed increase in 
defense spending would cost during the same period.
    The President's budget does represent an appropriate 
response to the September 11 attacks--it provides the resources 
that will allow our armed forces, homeland security personnel, 
and citizens to respond to the challenge posed by terrorists. 
But--just as last year--the President's budget does not respond 
adequately to the other major challenges facing this nation.

          RESPONDING TO THE CHALLENGES--THE BUDGET RESOLUTION

    The budget resolution represents a budget that confronts 
all of the challenges facing our nation and provides the 
resources needed to help Americans meet these challenges the 
way our forefathers have met challenges throughout our history.
    Homeland Security.--The events of September 11 and their 
aftermath require that homeland security be one of the nation's 
highest priorities. The budget resolution reflects the national 
commitment to homeland security by fully funding the 
President's $37.7 billion request for homeland security for 
2003 ($4.7 billion of this total is offset by user fees under 
both the President's budget and the budget resolution). This 
total represents an $8.4 billion increase above the 2002 level 
provided for activities identified as homeland security. Of the 
total funding for 2003, $7.8 billion is for defense-related 
homeland security. The remaining net spending of $25.2 billion 
is for domestic agency homeland security activities, which are 
spread throughout the government. As identified in the 
President's budget, that funding is for activities dealing with 
first responders, biological terrorism, border security, 
aviation security, and information technology.
    National Security.--The budget resolution provides the full 
amount of discretionary funding requested by the President for 
defense activities for fiscal years 2003 and 2004 ($393 
billion, including $10 billion requested as an unallocated 
contingency fund, and $400 billion, respectively). The amount 
provided for 2003 represents a $35.9 billion increase above the 
level appropriated for 2002, adjusted for inflation. This 
amount provides full funding for the war on terrorism and 
defense-related homeland security efforts, accelerated 
transformation of the armed services, a 4.1 percent pay raise 
for all military personnel, and accelerated replacement of 
military family housing.
    The budget resolution includes a Reserve Fund for Defense 
that guarantees that the full amount requested by the President 
for 2005 through 2012 will be available if events prove that 
the full amount is needed in those years as well as in 2003 and 
2004. If the reserve funds are not needed for defense spending, 
they will be devoted to protecting Social Security and paying 
down the debt.
    In 2004, defense funding provided in the budget resolution 
is $34 billion above the level provided for 2002, adjusted for 
inflation. The budget resolution assumes that, in the absence 
of unanticipated levels of military action due to the war on 
terrorism after 2004, it will be possible to achieve savings in 
defense in 2005 and later years through transformation and 
reform efforts touted by the Secretary of Defense and others 
inside and outside the administration. The budget resolution 
assumes that defense funding will grow at the rate of inflation 
from the 2004 level through 2012. Over the entire 2003-2012 
period, defense funding without the reserve funds would be $378 
billion above CBO's projections of the amount required to 
maintain the current level of funding, adjusted for inflation. 
Over that ten years, it would be almost $900 billion above what 
CBO estimated in January 2000 would be required to maintain the 
enacted fiscal year 2000 level of funding, adjusted for 
inflation. At the level of spending provided for 2003, the 
United States will spend more on defense than the next 18 top-
spending other nations combined.
    The budget resolution provides mandatory funding of $516 
million in 2003 and $17.8 billion over 10 years to provide full 
concurrent receipt of military retirement and veterans 
disability benefit to veterans who are 60 percent to 100 
percent disabled as a result of military service. Phase-in of 
this benefit begins in 2003 and is fully in place by 2007. The 
budget resolution supports the same policy on concurrent 
receipt as the budget resolution reported by the House Budget 
Committee on March 13, but provides funding for 10 years (the 
House resolution covers only five years).
    Paying Down Debt. If the defense reserve fund amounts do 
not have to be used to meet unanticipated defense costs, $502 
billion more in debt reduction will be achieved under the 
budget resolution than under the President's budget. Even if 
the defense reserve is needed to fund a higher-than anticipated 
level of defense spending instead of being used to pay down the 
debt, the debt reduction in the budget resolution still exceeds 
that in the President's budget by $233 billion.
    Protecting the Social Security Trust Funds.--The budget 
resolution includes a ``circuit breaker'' that will put the 
budget on a path to balance without Social Security by 2008. 
Under this circuit breaker mechanism, if the Congressional 
Budget Office determines next January that the outlook has not 
improved and the Social Security trust funds are still in 
danger of being used for other than their intended purposes 
over the next decade, the Budget Committee will be required to 
report a budget plan that will return the budget to balance 
without Social Security within five years. In contrast, the 
President's budget would not put the budget on a path to 
balance. According to the Congressional Budget Office, in 2012 
there would still be a deficit of $100 billion without Social 
Security under the President's budget.
    The budget resolution recognizes that it is crucial to 
return the budget to balance without Social Security as soon as 
possible because the first members of the baby-boom generation 
will become eligible for Social Security in 2008 and the 
effects of this demographic tidal wave will begin to grow 
rapidly in the succeeding years. Balancing the budget without 
Social Security will help pay down the debt, boost economic 
growth, and make sure resources are available to pay for needed 
reforms of Social Security and Medicare.
    Medicare Prescription Drugs and Other Health Care.--The 
budget resolution includes a $500 billion (over 10 years) 
reserve fund for a bill or bills that would establish a 
Medicare prescription drug benefit, provide relief for Medicare 
providers, or expand health care coverage for Americans 
currently lacking health insurance. It also provides that 
additional benefits that would push the total cost of the 
package above $500 billion will be allowed if those additional 
benefits are paid for.
    The health care funding provided in the budget resolution 
contrasts with the $258 billion over 10 years included in the 
President's budget for Medicare prescription drugs and expanded 
health coverage. The amount provided in the President's budget 
clearly is insufficient for a prescription drug benefit that 
will truly meet the needs of the nation's elderly citizens and 
to expand health coverage for working families without health 
care coverage. The President's budget did not provide any funds 
for Medicare provider relief.
    The budget resolution matches the President's request for a 
$3.9 billion increase for 2003 above last year's level for the 
National Institutes of Health. This amount meets the target for 
the final installment in the plan to double the agency's budget 
over five years (1999-2003). The budget resolution provides a 
$1 billion increase in funding above the President's request 
for the Indian Health Service. It also provides an increase of 
$0.5 billion above the President's request for the Centers for 
Disease Control and Prevention. This willfully restore the cuts 
the President proposed to programs including Chronic Disease 
Prevention, Occupational Safety and Health, Infectious Disease 
Control, and Public Health Improvement.
    Education.--The budget resolution provides a substantial 
increase in 2003 program year education funding above last 
year's level. Taking into account discretionary funding for the 
Department of Education and new mandatory funding proposed for 
the Individuals with Disabilities Education Act (IDEA), it 
provides an increase of $6.8 billion over the 2002 program 
level. This is slightly higher than last year's $6.7 billion 
increase above the 2001 program level. By comparison, the 
President's budget proposed only a $1.4 billion increase this 
year.
    This $6.8 billion increase includes $2.5 billion over the 
2002 program level for elementary and secondary education 
programs in the No Child Left Behind Act. In contrast, the 
President's budget proposes a nearly $1000 million cut in these 
programs.
    The budget resolution assumes that full funding of IDEA 
will be phased in over the next six years. To help ensure that 
outcome, it includes a reserve fund that provides new 
mandatorybudget authority increases in each year of $2.5 billion over 
the previous years until the full funding level is reached. This new 
mandatory spending totals $91 billion in outlays over 10 years.
    State and Local Law Enforcement.--The budget resolution 
provides $1.4 billion to restore cuts the President proposed in 
2003 for state and local law enforcement grants, including 
Community Oriented Policing Services (COPS) grants. Although 
the President cuts current COPS programs by almost $500 
million, he claims an increase in COPS funding because of a 
proposed new $800 million Justice Assistant grant he wants 
included under the COPS umbrella. More importantly, he proposes 
a $1.7 billion cut in all other state and local law enforcement 
grant funding, so that total funding for state and local law 
enforcement assistance would decline by $1.4 billion under the 
President's budget.
    Highways and other Transportation.--The budget resolution 
rejects the President's request for a deep cut in the Federal 
Aid Highway Program (FAHP) obligation limitation that would 
force states to forego or postpone critical highway 
infrastructure investments. The budget resolution assumes a 
FAHP obligation limitation of $28.9 billion in 2003--$5.7 
billion above the President's revised request. The amount 
provided in the budget resolution would allow states to proceed 
with their plans and could save more than 200,000 jobs that 
would be lost under the President's proposal. The funding 
provided in succeeding years will allow for steadily increasing 
spending on highways while maintaining a sufficient cash 
balance reserve in the Highway Trust Fund throughout the period 
expected to be covered by the next surface transportation 
reauthorization bill.
    The budget resolution provides $1.2 billion in funding for 
Amtrak in 2003, $679 million above the amount requested by the 
President and $579 million above the level enacted for 2002. In 
addition, it fully funds the President's request for $4.8 
billion for the newly-created Transportation Security 
Administration, which will coordinate and manage federal 
security efforts across all transportation modes and will be 
responsible for overseeing passenger screening and aviation 
security.
    Veteran's Services.--The budget resolution provides a $2.6 
billion increase in funding in 2003 above last year's level for 
veterans' medical care, $1.2 billion above the amount requested 
by the President. The budget resolution rejects the President's 
proposal to impose a $1,500 deductible for medical services on 
certain veterans, That proposal would cause an estimated 
100,000 or more veterans to leave, or choose not to enroll in, 
the Department of Veterans Affairs medical care system. Another 
300,000 veterans would have their health care services 
diminished. The additional funding provided by the budget 
resolution will relieve the financial pressure on the Veterans 
Health Administration and allow it to provide the high quality 
care it is capable of delivering. Most importantly, this 
funding will ensure that we are able to meet the health care 
needs of those who have served our nation through military 
service.
    The Environmental and Energy Security.-- The budget 
resolution restores $2.4 billion in cuts (below the 2002 level, 
adjusted for inflation) proposed by President Bush for natural 
resource and environment program. It restores over $1 billion 
in funding for water resources, $113 million for Superfund 
cleanup, and bolsters effective federal enforcement of our 
existing environmental laws.
    Including additional amounts provided for salmon 
conservation and restoration, the budget resolution provides 
$2.5 billion more in funding for natural resource and 
environment programs. The budget resolution provides full 
funding of the Land, Conservation, Preservation and 
Infrastructure Improvement Program at $1.9 billion in budget 
authority in 2003.
    The budget resolution assumes enactment of the Energy 
Policy Act of 2002. Following the authorizations in the Act, it 
provides a net increase of $4.3 billion for priority energy 
research and development over 10 years.
    The budget resolution rejects the President's proposal to 
supplement renewable energy research and development with funds 
made available through the sale of oil and gas drilling rights 
in the Arctic National Wildlife Refuge.
    Help for America's Farmers.--The budget resolution assumes 
timely enactment of a farm bill with funding consistent with 
the Senate-passed bill and the President's overall request for 
programs covered by the farm bill. This funding will facilitate 
establishment of a new approach to providing assistance to our 
nation's hard-pressed farmers in place of the failed policies 
of the Federal Agricultural Improvement and Reform Act of 1996 
(also known as the Freedom to Farm Act).
    Help for America's Working Families.--The budget resolution 
assumes reauthorization of the Child Care Development Block 
Grant and the Temporary Assistance for Needy Families Block 
Grant and provides $23 billion over 10 years to help expand and 
improve upon the accomplishments to welfare reform and to 
ensure that families that have moved from welfare to work 
continue to move up the ladder of economic success.
    The budget resolution restores more than $500 million in 
cuts the President proposed in low-income housing assistance 
programs and $300 million in cuts the President proposed in the 
Low Income Home Energy Assistance Program.
    The budget resolution provides $900 million for 2003 to 
restore cuts proposed in the President's budget for the 
Department of Labor's job training and employment services 
programs, including assistance for low-income and disadvantaged 
youth and adults, displaced workers, and community services for 
older Americans. It also funds a $73 million increase that the 
President proposed for the Job Corps program.
    The budget resolution provides a $400 million increase 
above last year's program level for Head Start, $270 million 
more than the President proposed in his budget. The budget 
resolution alsoprovides $150 million to prevent the elimination 
of the early learning fund and cuts in community services and research 
programs, which the President proposed in his budget.

                                       SENATE COMMITTEE-REPORTED BUDGET RESOLUTION FOR FY 2003: TOTALS BY CATEGORY
                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2003       2004       2005       2006       2007       2008       2009       2010       2011       2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Revenues

Total budget..............................    2,046.2    2,179.8    2,337.8    2,463.3    2,585.2    2,722.7    2,870.6    3,018.7    3,285.2    3,554.6
On-budget.................................    1,500.8    1,606.3    1,735.7    1,832.4    1,924.3    2,030.4    2,144.0    2,254.5    2,482.8    2,712.4

                  Outlays

Discretionary.............................      794.7      816.5      835.4      847.4      858.3      884.9      906.6      929.1      955.2      969.8
Mandatory.................................    1,168.9    1,196.1    1,278.5    1,358.7    1,443.8    1,547.6    1,648.2    1,759.1    1,890.2    1,983.5
Net interest..............................      174.8      193.7      198.3      196.7      193.0      187.9      181.5      173.1      163.1      146.1
      Total budget........................    2,138.4    2,206.3    2,312.3    2,402.9    2,495.0    2,620.4    2,736.3    2,861.3    3,008.5    3,099.4
      On-budget...........................    1,768.7    1,826.8    1,920.9    1,997.3    2,074.6    2,184.0    2,280.7    2,384.3    2,509.6    2,574.7

                  Surplus

Total budget..............................      -92.2      -26.5       25.6       60.4       90.2      102.3      134.3      157.4      276.7      455.3
On-budget.................................     -267.9     -220.6     -185.2     -164.9     -150.3     -153.7     -136.7     -129.8      -26.9      137.7
Debt held by the public...................    3,516.9    3,557.5    3,548.3    3,503.4    3,427.6    3,338.8    3,217.5    3,072.5    2,806.6    2,361.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes.--On-budget totals exclude the Social Security surpluses and the Postal Service. These estimates assume that defense reserve funds will be
  available to protect Social Security and pay down the national debt.

                II. The Congressional Budget Resolution

    A Congressional budget resolution is a document through 
which the Congress expresses its collective judgment about the 
overall path of the federal budget and about priorities within 
that budget. Although the budget resolution does not directly 
affect federal spending or revenues, once it has been adopted 
by the Senate and the House of Representatives it serves as a 
blueprint that guides Congressional consideration of 
legislation that does provide appropriations, increase or 
decrease mandatory spending, or make changes in tax laws.

               What is a Congressional Budget Resolution?

    The Congressional budget resolution and the procedures that 
enforce the resolution are provided for in the Congressional 
Budget and Impoundment Control Act of 1974 (the Budget Act). 
The nature and content of the budget resolution are set forth 
in section 301 of the Budget Act. The budget resolution is a 
concurrent resolution, which is a legislative form used to deal 
with matters relating to the operations of both Houses of 
Congress. A concurrent resolution does not have the force of 
law (which is why it cannot directly affect spending or 
revenues) because it is not presented to the President to sign 
or veto as is required by the Constitution for any measure 
making new law. A concurrent resolution instead takes effect 
when it is adopted in identical form by the Senate and the 
House of Representatives (even matters set forth in the 
resolution that affect only one body do not take effect until 
both houses have adopted the resolution).

              Coverage and Content of a Budget Resolution

    Section 301(a) of the Budget Act provides that a budget 
resolution shall cover at least five years--the budget year 
(the fiscal year starting during the current session of the 
Congress) and the four succeeding years. In recent years, 
resolutions have covered the budget year and the nine 
succeeding years. The resolution may also contain revisions for 
the current year. Section 301(a) provides that for each of the 
covered years, the resolution shall set forth appropriate 
levels for:
           Totals of new budget authority and outlays;
           Total federal revenues, and the amount, if 
        any, by which revenues should be increased or 
        decreased;
           The surplus or deficit;
           New budget authority and outlays for each of 
        the major budget functions (there are 19 such functions 
        covering broad program areas plus a function for 
        allowances);
           The public debt; and
           Social Security outlays and revenues for 
        purposes of Senate enforcement. (These off-budget 
        outlays and revenues of the Social Security Old-Age and 
        Survivors and Disability Insurance trust funds are 
        explicitly excluded from the amounts in the resolution 
        listed above.)
    Section 301(b) of the Budget Act provides that the 
resolution may include other matters, most notably 
reconciliation directives that require Senate and House 
Committees (other than the Budget Committees) to report 
legislation needed to implement the budget resolution. 
Legislation reported pursuant to such reconciliation directives 
is considered under special procedures in the Senate and the 
House (set forth in section 310 of the Budget Act) that are 
intended to expedite final disposition of the reconciliation 
legislation.

     Content of the Budget Committee Report on a Budget Resolution

    Section 301(e)(2) of the Budget Act requires that any 
committee report accompanying the budget resolution include:
           A comparison of the spending, revenues, and 
        surplus or deficit set forth in the budget resolution 
        with those in the budget submitted by the President;
           The budget authority and outlays set forth 
        in the budget resolution for each function divided 
        between mandatory and discretionary amounts;
           The economic assumptions underlying the 
        budget resolution;
           Information about the basis on which the 
        committee determined the levels of spending, revenues, 
        and surpluses or deficits set forth in the budget 
        resolution;
           The estimated levels of tax expenditures by 
        major items and functional categories; and
           An allocation of the spending set forth in 
        the budget resolution among Congressional committees.
    This so-called 302(a) allocation is the basis for points of 
order under the Budget Act against legislation which provides 
spending within the jurisdiction of a committee in excess of 
amounts assumed in the budget resolution for that committee.
    Section 301(e)(3) provides that the committee report may 
include other information, including any ``other matters, 
relating to the budget and fiscal policy, that the committee 
deems appropriate.''

                             III. Economics

    The budget resolution is built upon CBO's assumptions about 
the future path of the U.S. economy. CBO has made an economic 
forecast for 2002 and 2003 that reflects the current state of 
the economy and business cycle conditions. It has made 
projections for years 2004 through 2012 that reflect is 
assessment of average value for that period based on longer-
term trends in the economy.

                                overview

    The country's longest economic expansion on record came to 
an end in March 2001. The unemployment rate, which had edged up 
from 4 percent in December 2000 to 4.3 percent in March 2001, 
jumped to 5.8 percent by the end of the year. Growth in real 
(inflation-adjusted) GDP, which had moderated substantially 
starting in the second half of 2000, fell by 1.3 percent in the 
third quarter of 2001. To date, the recession looks fairly 
typical in terms of job losses and reductions in hours worked, 
compared with the median postwar recession. However, strong 
productivity growth has kept output losses very moderate by the 
standards of past recessions. Economists' worst fears about the 
negative effects of the September 11 terrorists attacks were 
not realized, and recent data suggest that the contractionary 
phase of the current business cycle has probably ended. GDP 
rose again in the fourth quarter at a rate of 1.7 percent, 
after only one quarter of negative growth and the unemployment 
rate in March was 5.7 percent. Although considerable 
uncertainty remains about how strong and sustainable an 
expansion we can expect, the short-term outlook has been 
improving.
    The economic expansion of the 1990s was extraordinary for a 
number of reasons besides its length. For example, inflation 
remained tame even as the unemployment rate declined to rates 
that had not been seen in three decades. Usually in the late 
stages of an expansion, aggregate demand begins to run ahead of 
aggregate supply and inflation begins to heat up, which, in 
turn, leads the Federal Reserve to make monetary policy more 
restrictive. A second notable feature of the expansion was 
extraordinary business investment in equipment and software, 
which grew at double-digit rates from 1993 to 2000. In part 
because of this furious pace of investment, productivity, which 
usually slows in the mature stages of an expansion, instead 
accelerated between 1995 and 2000.
    The origins of most postwar recessions can be traced to 
some combination of a loss of consumer confidence and a 
tightening of monetary policy in response to inflationary 
pressures. The current recession, however, appears to be more 
related to a retreat from the exuberance of the late 1990s. 
After tripling in value between January 1994 and March 2000, 
the stock market (as measured by the broadly based Wilshire 
5000 index), lost a quarter of its value over the next year and 
was down nearly a third by the end of September 2001. Business 
investment in equipment and software has fallen for five 
straight quarters to a level nearly 9 percent below its peak. 
Adding to the economy's weakness in the short run, businesses 
pared back their inventories substantially.
    In contrast to many past recessions when economic policy 
responses were poorly timed, policyhas helped moderate this 
recession. The Federal Reserve aggressively cut short-term interest 
rates beginning in January 2001. However, the deterioration of the 
long-term budget outlook, due in large measure to the deferred 
provisions of the tax cut, was most likely an important factor keeping 
long-term interest rates from falling as much as might have been 
expected as a result of the Fed's substantial easing of monetary 
policy.
    Look ahead, CBO, like the administration and most private 
sector forecasters, expects an economic recovery to begin this 
year. In fact, the most recent data now suggest that the 
economy bottomed out in the fourth quarter of last year. The 
advance estimate of GDP growth for that quarter was 0.2 percent 
at an annual rate when most forecasters were expecting a 
decline of about 1 percent; the preliminary estimate based on 
more complete data was 1.4 percent. This stronger-than-expected 
growth led CBO to revise its January economic forecast when it 
re-estimated the President's budget in March. CBO is now 
projecting an even shallower recession, though it has not 
revised its longer-term economic projections for 2004 and 
beyond. And as noted above, the revised final estimate for 
fourth quarter GDP growth was 1.7 percent.
    Despite this brighter forecast, the economic outlook 
remains murky. The sharp contraction in inventories, which hurt 
growth in the short run, means that the economy should get some 
stimulus simply from a return to normal inventory-building 
behavior. However, a sustained recovery requires a more broadly 
based pick-up in demand. The sharp contraction in business 
investment may have worked off some of the excess capacity that 
built up at the end of the last expansion, but there are few 
signs yet of a strong revival in business demand. Household 
spending held up remarkably well in the recession, but that 
probably means that there is correspondingly less likelihood of 
a strong bounce-back in consumption to drive the recovery. 
Finally, weak performance in the rest of the world means that 
the United States cannot count on robust demand for our exports 
as a resource of strength in the recovery.

       Comparison of CBO's Economic Assumptions and those of the 
               Administration and the Blue Chip consensus

    At the time the administration released its budget, the 
forecasts of CBO, the Office of Management and Budget (OMB), 
and the Blue Chip consensus of private forecasters were quite 
similar and within the normal bounds of error for such 
forecasts. However, the forecasts were predicated on different 
assumptions. CBO's baseline assumes no policy changes. In 
contrast, the administration assumes adoption of the 
President's policies, including a stimulus package. Individual 
Blue Chip forecasters make their own assumptions about what 
policies will or will not be enacted, and such assumptions can 
vary substantially. Because both the CBO and Blue Chip 
forecasts have been updated to incorporate new information, 
they now show stronger real growth in 2002 than OMB does, 
though the changes mainly affect 2002 and 2003, not the 
outyears.

                                 Growth

    All three forecasts see a recovery in 2002 and even faster 
growth in 2003. CBO forecasts that GDP in calendar 2002 will be 
1.7 percent higher than it was in 2001 and that it will grow a 
further 3.4 percent from 2002 to 2003. OMB forecasts lower 
growth in 2002 (with stronger ``catch-up'' growth in 2003), but 
by 2012 CBO and the administration have nearly identical 
projections for real GDP. The February Blue Chip consensus is 
slightly below CBO in 2002 and 2003.

                               Inflation

    All three forecasts expect inflation to remain tame. CBO 
forecasts that the GDP price index will grow 1.4 percent in 
2002 and 2.0 percent in 2003, a pattern roughly similar to that 
of the Blue Chip consensus. The administration has a somewhat 
larger increase in the GDP price index in 2002, which boosts 
nominal income and, other things equal, expected revenues. The 
three forecasts are in closer agreement on consumer price 
inflation, though the administration assumes slightly slower 
growth in the consumer price index than CBO.

                             Income Shares

    Some types of national income are more highly taxed than 
others. In particular, corporate profits and wages and salaries 
are the main tax base. Assuming roughly similar average tax 
rates, revenues as a share of GDP are higher when taxable 
income is higher as a share of GDP. CBO's revisions between 
January and March were all to corporate profits. CBO assumes 
that corporate profits and wages and salaries fall from 57.1 
percent of GDP in 2001 to 56.7 percent in 2002 before rising 
back above 57 percent thereafter. The administration has a more 
optimistic course, mainly because corporate profits are not 
assumed to fall off as much in 2002 and are assumed to bounce 
back more strongly in 2003.

                             Interest Rates

    CBO assumes three month Treasury bills fall to 2.2 percent 
in 2002 in the face of economic weakness, but then rise back to 
4.5 percent in 2003 and 4.9 percent thereafter. The 
administration and the Blue Chip forecast the same drop in 
2002, but both assume a more modest increase in 2003. 
Thereafter, the administration is the most optimistic about 
short-term interest rates and CBO is the most pessimistic. CBO 
assumes 10-year Treasury notes yield 5.1 percent in 2002, with 
the yield rising to 5.5 percent in 2003 and 5.8 percent 
thereafter. The Blue Chip consensus has a similar path, but the 
administration assumes long-term rates do not rise much above 
their 2002 level.

                    Sensitivity to Economic Changes

    To illustrate the impact of economic uncertainty on the 
budget, CBO has computed the baseline surplus under alternative 
assumptions about when the recovery takes place (using the 
January baseline, not the revised March baseline.) In the 
``Faster Recovery'' scenario, both GDP and taxable income start 
to grow rapidly from the beginning of 2002. CBO reports that 
such rapidbouncebacks occurred in 1968 and 1972. In the 
``Deeper Recession'' scenario, CBO assumes that recovery does not begin 
in 2002 but rather that the recession mimics the average of postwar 
recessions.

                            SURPLUSES/DEFICITS UNDER ILLUSTRATIVE ECONOMIC SCENARIOS
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                            2002     2003     2004     2005     2006   2002-2006
----------------------------------------------------------------------------------------------------------------
Faster Recovery.........................................       50       99      146      176      193       664
CBO Baseline............................................      -21      -14       54      103      128       250
Deeper Recession........................................      -89     -143      -64       10       50      -236
----------------------------------------------------------------------------------------------------------------

    Over the first 5 years, the Faster Recovery scenario 
produces unified surpluses that are $414 billion higher than in 
the CBO baseline. The Deeper Recession scenario produces a 
cumulative deficit of $236 billion, $486 billion less than the 
$250 billion cumulative surplus in the CBO baseline.

                                       COMPARISON OF ECONOMIC ASSUMPTIONS
----------------------------------------------------------------------------------------------------------------
                                                                      Forecast          Projected Annual Average
                                                   Estimate  ---------------------------------------------------
                                                     2001         2002         2003      2004-2007    2008-2012
----------------------------------------------------------------------------------------------------------------
Nominal GDP (year or end of period, billions of
 dollars):
    CBO (March)................................       10,206        10,52       11,092       13,639       17,532
    CBO (January)..............................       10,193        10,42       11,063       13,639       17,532
    OMB........................................       10,197        10,48       11,073       13,614       17,404
Real GDP (percentage change):
    CBO (March)................................          1.2          1.7          3.4          3.2          3.1
    CBO (January)..............................          1.0          0.8          4.1          3.2          3.1
    OMB........................................          1.0          0.7          3.8          3.4          3.1
    Blue Chip..................................         n.a.          1.5          3.5          3.3          3.2
GDP price index (percentage change):
    CBO........................................          2.2          1.4          2.0          2.0          2.0
    OMB........................................          2.3          2.0          1.8          1.8          1.9
    Blue Chip..................................         n.a.          1.4          1.8          2.1          2.2
Consumer price index (percentage change):
    CBO........................................          2.9          1.8          2.5          2.5          2.5
    OMB........................................          2.9          1.8          2.2          2.4          2.3
    Blue Chip..................................          2.9          1.5          2.4          2.7          2.6
Unemployment Rate (percent):
    CBO........................................          4.8          6.1          5.9          5.2          5.2
    OMB........................................          4.8          5.9          5.5          5.0          4.9
    Blue Chip..................................          4.8          6.0          5.6          4.9          4.9
Three-month treasury bill rate (percent):
    CBO........................................          3.4          2.2          4.5          4.9          4.9
    OMB........................................          3.4          2.2          3.5          4.2          4.3
    Blue Chip..................................          3.4          2.1          3.4          4.6          4.7
Ten-year treasury note rate (percent):
    CBO........................................          5.0          5.0          5.5          5.8          5.8
    OMB........................................          5.0          5.1          5.1          5.2          5.3
    Blue Chip..................................          5.0          5.1          5.6          5.7          5.8
Taxable Income Share (corporate profits plus
 wages and salaries as share of GDP):
    CBO........................................         57.1         56.7         57.1         57.2         57.1
    OMB........................................         56.9         57.0         57.5         57.8         57.5
----------------------------------------------------------------------------------------------------------------
Sources: Office of Management and Budget; Congressional Budget Office; Blue Chip Economic Indicators, Aspen
  Publishers, Inc.
Notes.--February Blue Chip consensus for 2001-03; Blue Chip for 2004-2012 based on October 2001 long-run survey.

                       IV. Spending and Revenues


                           BUDGET ASSUMPTIONS

    One of the essential tools the Budget Committee uses in 
determining the budget policies in the budget resolution is a 
set of baseline projections that indicate what the level of 
spending, revenues, and surpluses or deficits will be if 
current policies remain unchanged. The baseline used by the 
Budget Committee is based on projections made by the 
Congressional Budget Office in its January 2002 Budget and 
Economic Outlook: Fiscal Years 2003 through 2012, as revised 
and reported in CBO's March 2002 Analysis of the President's 
Budgetary Proposals for Fiscal Year 2003.
    In preparing its baseline projections CBO follows the 
baseline rules laid out in Section 257 of the Balanced Budget 
and Emergency Deficit Control Act. For discretionary spending 
(which is controlled by annual appropriation bills), the rules 
provide that the projections should assume that discretionary 
appropriations are maintained at the level enacted in the 
current year (in this case, fiscal year 2002), adjusted for 
inflation, throughout the projection period (currently, 2003 
through 2012). For mandatory spending and revenues, which are 
usually governed by permanent law, the rules generally provide 
that the projections should assume no changes in current law 
(any phasing in, or phasing out, of policy changes provided for 
in current law are taken into account). There are certain 
specified exceptions. In the case of mandatory spending, any 
programs in place in 1997 that have outlays of $50 million or 
more a year are considered to be permanent even if they 
actually expire under current law. (See Table 4-7 on pages 82-
83 of CBO's January 2002 Budget and Economic Outlook for a list 
of programs that the baseline assumes will continue beyond 
their current expiration dates.) In the case of revenues, any 
excise tax dedicated to a trust fund is assumed to be continued 
in the baseline even if it is scheduled to expire under current 
law. This special rule primarily affects the projections for 
taxes that finance the Highway Trust Fund, most of which expire 
on September 30, 2005.
    The rules laid out in the Balanced Budget and Emergency 
Deficit Control Act specify the conceptual basis for baseline 
projections. They do not tell CBO or anyone else how to make 
estimates of the level of spending and revenues that will 
result from the policy assumptions specified in those rules. 
The level of spending and revenues will depend on innumerable 
factors, including economic growth, the rate of inflation, the 
number of people qualifying for entitlement programs such as 
Medicare, and even the weather. CBO uses its judgement in 
determining an economic forecast and other assumptions to be 
used in making its baseline projections.
    The baseline used by the Budget Committee in developing the 
budget resolution for fiscal year 2003 is based on the projects 
of CBO, with a few adjustments, including taking account of 
legislation enacted since CBO issued its baseline, including 
the stimulus bill signed into law on March 9, 2002.

                        A. Spending by Function


                     Function 050: NATIONAL DEFENSE

    Under current law, spending for Function 050 (National 
Defense) will total $347.4 billion in budget authority and 
$384.0 billion in outlays for 2002. This includes spending 
authorized and appropriated in regular 2002 authorization and 
appropriations bills, in addition to the emergency anti-terror 
supplemental for 2002 attached to the 2002 Defense 
Appropriations bill. For 2003 the President has requested 
$392.8 billion in budget authority and $379.6 billion in 
outlays for the Department of Defense (DoD), the Atomic Energy 
Defense Programs of the Department of Energy (DoE), 
intelligence activities, and other defense-related programs at 
the Departments of Commerce, Transportation (including the 
Coast Guard), and Justice. The President's budget places 
particular emphasis on the war on terrorism and defense-related 
homeland security efforts. The budget request includes a $10.0 
billion unallocated contingency fund in 2003 and an additional 
$10.1 billion to $12.0 billion in a Defense Emergency Response 
Fund (DERF) in every year of the 2003-2007 Future Years Defense 
Plan (FYDP).

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............   393.4   401.1   411.7   422.8   434.1   445.5   457.3   469.2   481.3   493.7
    Outlays.....................   380.1   394.4   405.8   411.6   415.3   432.9   446.2   459.7   476.7   481.9
President's Budget:
    Budget Authority............   392.8   400.4   421.4   442.4   464.3   476.8   489.6   502.8   516.3   530.1
    Outlays.....................   379.6   392.7   411.7   426.5   440.2   462.0   477.3   492.2   510.7   517.3
----------------------------------------------------------------------------------------------------------------

Discretionary

    The resolution provides $392.8 billion in budget authority 
and $380.2 billion in outlays for defense in 2003, and assumes 
increases in defense funding in succeeding years.
    In particular, the resolution supports the President's 
request for 2003, including the $10.0 billion unallocated 
contingency fund, for an increase of $35.9 billion over the 
baseline (current services) level. This level of funding is $88 
billion higher than the 1998 level in constant 2003 dollars, 
and assumes full funding for the war on terrorism and defense-
related homeland security efforts, accelerated transformation, 
a 4.1 percent pay raise for all military personnel, and 
accelerated replacement of military family housing.
    The resolution also provides a $377.7 billion increase in 
budget authority over baseline over 10 years. This funding 
level provides the President's proposed additional National 
Defense budget increases through the end of 2004, and increases 
that level at the rate of inflation throughout the remainder of 
the 10-year budget window.
    The resolution includes a Reserve Fund for Defense which, 
if necessary, would allow for the President's entire defense 
budget request over the next 10 years. The reserve fund makes 
available all of the additional budget authority requested by 
the President in 2005-2012, should such funding be needed.
    The resolution provides funding for sharpening the American 
military's already unmatched combat forces and trimming support 
and overhead. Recent testimony received by the Senate Budget 
Committee regarding the funding of the ``Tail-to-Tooth'' 
Commission indicated that this ratio stands today at an 
inefficient 70/30 proportion, and substantial savings are 
possible annually. Realization of such savings through long 
overdue organizational improvements is not only an obligation 
to American taxpayers, but is imperative to support a stronger, 
faster, more lethal military force.
    The resolution accommodates $6.7 billion for the Department 
of Energy's (DoE's) Environmental Management Program for 2003 
as requested by the President. The resolution also recommends 
that an additional $300 million be made available, consistent 
with the President's request, to fully fund DoE's expedited 
cleanup agreements with the States. The resolution recommends 
that DoE ensure each site in the complex be provided sufficient 
funding to continue cleanup at not less than last year's level.

Mandatory

    The resolution adds $516 million in 2003 and $17.8 billion 
over 10 years to provide full concurrent receipt of DoD 
retirement and Veterans disability benefits to veterans who are 
60-100 percent disabled as a result of military service. Phase-
in of this benefit begins in 2003 and it is fully in place by 
2007. The resolution supports the same policy on concurrent 
receipt as the budget resolution reported by the House Budget 
Committee on March 13, but provides funding across the entire 
10 year budget window (the House resolution only covers five 
years).
    In all other respects the resolution supports the 
President's mandatory request for Function 050.

                  Function 150: INTERNATIONAL AFFAIRS

    Under current law, total spending for Function 150 
(International Affairs) will total $23.7 billion in budget 
authority and $21.9 billion in outlays for 2002. This function 
includes funding for International Affairs activities 
including: U.S. embassies and other diplomatic missions abroad; 
development aid and technical assistance to developing 
countries; security assistance to foreign governments; refugee 
assistance; military aid, particularly activities of the 
Foreign Military Sales Trust Fund; contributions to 
international organizations, including financial institutions; 
and the Export-Import Bank and other trade promotion programs.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    25.7    26.3    26.9    27.4    27.9    28.4    28.8    29.6    30.0    30.4
    Outlays.....................    22.0    22.8    22.8    23.1    23.6    24.2    24.4    24.9    25.3    25.8
President's Budget:
    Budget Authority............    25.2    26.1    26.9    27.5    28.2    28.9    29.5    30.5    31.1    31.8
    Outlays.....................    21.6    22.1    22.4    23.0    23.7    24.4    25.0    25.7    26.3    26.9
----------------------------------------------------------------------------------------------------------------

Discretionary

    The resolution assumes discretionary spending will total 
$25.8 billion in budget authority and $24.9 billion in outlays 
for international affairs in 2003. This represents an increase 
of $1.8 billion in budget authority and $12 million in outlays 
from the 2002 level. This also represents an increase of $500 
million in budget authority over the President's 2003 budget 
request.
    The resolution assumes that funds will be directed toward 
bolstering U.S. international affairs investments in such areas 
as global health, public diplomacy, global education, 
multilateral debt relief, international development, refugee 
assistance, and embassy security.
    In particular, the resolution provides $200 million for the 
Global Fund for HIV/AIDS, $100 million more than requested by 
the President. When contributions from Function 550 (Health) 
are included, the resolution provides $500 million overall for 
the Global Fund, $300 million more than the President's 
request.
    The resolution assumes P.L. 480 Title II will be funded at 
no less than $866 million, the non-emergency 2002 current 
services level. Further, the resolution assumes that total U.S. 
food aid across all budget functions in 2003 will match the 
2002 level, if not exceed it. If necessary, increased resources 
included in the resolution for Function 150 could accommodate 
additional funding for P.L. 480 Title II. However, the 
Committee strongly urges the Administration to continue to 
utilize Section 416(b) authority at no less than the 2002 level 
for this purpose.
    The resolution recognizes, in light of September 11, the 
need for new thinking and new approaches toward U.S. foreign 
assistance in order to more effectively and efficiently address 
the conditions which allow extremism and terrorism to take 
root. In particular, the resolution funds new initiatives to 
encourage and assist developing countries in providing 
education, accountable democratic governance, and economic 
opportunities, and to improve public diplomacy to better 
explain U.S. policy.
    The resolution encourages the initiation of a pilot program 
to target foreign assistance on debt relief, development, 
global health, and trade towards top performing countries in 
Africa and other developing regions of the world. The 
resolution supports efforts to build upon the success of 
bilateral debt relief for highly indebted poor countries (HIPC) 
to assist those developing countries which demonstrate the most 
progress toward democratization, economic development, and the 
provision of basic human services in reaching their development 
goals. Additional funding for multilateral debt relief, global 
HIV/AIDS programs, and other development purposes is assumed in 
the resolution.

Mandatory

    The budget resolution assumes no mandatory increases or 
decreases in this function.

          Function 250: GENERAL SCIENCE, SPACE AND TECHNOLOGY

    Under current law, total spending for Function 250 (General 
Science, Space and Technology) will total $22.1 billion in 
budget authority and $21.0 billion in outlays for 2002. This 
function includes the National Aeronautics and Space 
Administration (NASA) civilian space program, and basic 
research programs of the National Science Foundation (NSF) and 
the Department of Energy (DOE) Office of Science.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    22.9    23.2    23.6    24.0    24.4    24.8    25.3    25.7    26.1    26.6
    Outlays.....................    22.1    22.8    23.1    23.4    23.8    24.3    24.7    25.2    25.6    26.0
President's Budget:
    Budget Authority............    22.6    23.2    23.7    24.3    24.8    25.4    26.0    26.7    27.3    27.9
    Outlays.....................    21.8    22.5    23.1    23.7    24.2    24.8    25.4    26.0    26.6    27.2
----------------------------------------------------------------------------------------------------------------

Discretionary

    The resolution assumes $22.8 billion in discretionary 
budget authority and $21.9 billion in discretionary outlays for 
2003. This represents an increase of $0.86 billion in budget 
authority and $1.03 billion in outlays from the 2002 level. 
This also represents an increase of $380 million in budget 
authority over the President's 2003 budget request.

National Science Foundation (NSF)

    To provide increased support for scientific research, which 
is a driving force behind technological innovations that spur 
economic growth and improve our quality of life, the resolution 
assumes $5.2 billion for NSF in 2003. This represents an 
increase of $500 million above the 2002 level and is $261 
million above the President's request. The resolution does not 
assume cuts in programs from other budget functions in order to 
pay for increases in NSF funding.
    The resolution assumes increased funding for NSF's research 
activities in such areas as the physical sciences, engineering, 
and the social and behavioral sciences.
    The resolution also assumes increased funding for NSF 
education programs, which are instrumental in developing future 
generations of American scientists. It supports the President's 
increases for Math & Science Partnerships and Graduate 
Education, and encourages increased funding for other programs 
such as the Experimental Program to Stimulate Competitive 
Research (EPSCoR) and the Science, Technology, Engineering, and 
Mathematics Talent Expansion Program (STEP).

Department of Energy Science Programs

    The resolution assumes $3.4 billion for the DOE's science 
programs, an increase of $166 million above the 2002 level. 
This is $120 million above the President's request. The 
resolution also assumes enactment of the Energy Policy Act of 
2002, which provides a net increase of $1.3 billion in budget 
authority over 10 years for DOE's science programs.

National Aeronautics and Space Administration (NASA)

    The resolution assumes the President's request of $14.2 
billion for NASA. This amount does not include NASA funds 
located in the Transportation budget function.

Mandatory

    The budget resolution assumes no mandatory increases or 
decreases in this function.

                          Function 270: ENERGY

    Under current law, spending for Function 270 (Energy) will 
total $2.2 billion in budget authority and $0.4 billion in 
outlays for 2002. This function includes most civilian 
activities of the Department of Energy, the Rural Utilities 
Service, power programs of the Tennessee Valley Authority, and 
the Nuclear Regulatory Commission. Mandatory spending in this 
function contains large levels of offsetting receipts, 
resulting in net mandatory spending of -$1.1 billion in budget 
authority and -$2.8 billion in outlays for 2002. Congress 
provided $3.3 billion in discretionary budget authority for 
2002.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............     2.7     2.9     2.7     2.5     2.4     2.3     2.3     2.3     2.4     2.4
    Outlays.....................     0.8     1.0     1.0     1.0     1.0     0.9     0.9     1.0     1.1     1.2
President's Budget:
    Budget Authority............     2.5     2.8     2.7     2.2     2.2     2.8     2.8     2.8     2.8     2.8
    Outlays.....................     0.7     1.0     0.9     0.9     0.9     1.2     1.3     1.5     1.6     1.7
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes $3.6 billion in budget 
authority and $3.4 billion in outlays for this function in 
2003. This represents an increase of $280 million in budget 
authority and $129 million in outlays from the President's 
request.
    Over the next ten years, the budget resolution assumes an 
allocation of $38.6 billion in budget authority and $38.1 
billion in outlays for programs in this function.
    The budget resolution assumes enactment of the Energy 
Policy Act of 2002. Consistent with authorizations in the Act, 
it assumes $3 billion in new budget authority over ten years in 
this function for energy research and development, including 
increases above the 2002 enacted level for energy efficiency 
and renewable energy.
    In this function, the budget resolution accommodates the 
non-defense share of the $6.7 billion requested by the 
administration for the Department of Energy's Environmental 
Management Program. Additionally, the resolution recommends 
that additional funding be made available, consistent with the 
administration's request, to fully fund DOE's expedited cleanup 
agreements with the states.
    The budget resolution rejects the President's proposal to 
supplement renewable energy research and development with funds 
made available through the leasing of oil and gas drilling 
rights in the Arctic National Wildlife Refuge.

Mandatory

    The budget resolution assumes that the Bonneville Power 
Administration will receive $1.3 billion in new borrowing 
authority, to enable it to construct critical projects that are 
urgently needed to ensure the reliability of the West Coast's 
transmission system, integrate new generation facilities, make 
federal hydroelectric generation more efficient, and increase 
renewable resource generation and conservation.

            Function 300: NATURAL RESOURCES AND ENVIRONMENT

    Under current law, spending for Function 300 (Natural 
Resources and Environment) will total $30.0 billion in budget 
authority and $28.7 billion in outlays for 2002. This function 
includes funding for water resources, conservation and land 
management, recreation resources, and pollution control and 
abatement. Agencies with major program activities within the 
function include the Environmental Protection Agency, the Army 
Corps of Engineers, the National Oceanic and Atmospheric 
Administration, the Forest Service (within the Department of 
Agriculture), and the Interior Department, including the 
National Park Service, the Fish and Wildlife Service, the U.S. 
Geological Survey, the Bureau of Land Management and the Bureau 
of Reclamation.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    33.3    34.4    35.3    36.2    35.4    36.3    37.9    38.7    39.5    40.2
    Outlays.....................    31.5    32.8    33.9    35.2    35.6    36.2    37.3    38.1    39.0    39.7
President's Budget:
    Budget Authority............    29.6    30.5    31.4    31.0    31.6    32.1    33.2    34.0    34.7    35.4
    Outlays.....................    29.3    30.0    30.7    31.6    31.7    31.7    32.5    33.0    33.8    34.4
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending for 
natural resources and the environment will total $30.1 billion 
in budget authority and $29.4 billion in outlays for 2003. This 
represents an increase of $2.5 billion in budget authority and 
$1.7 billion in outlays from the President's request.
    Over the next ten years, the budget resolution assumes an 
allocation of $333.8 billion in budget authority and $326.3 
billion in outlays for programs in this function to continue a 
strong investment in clean air, clean water, effective 
enforcement of our existing environmental laws, stewardship of 
our public lands and wildlife, and agricultural conservation.
    The budget resolution rejects the $2.4 billion in cuts 
below 2003 baseline levels to natural resource and 
environmental programs proposed by the Bush administration.
    The budget resolution does not support the President's 
proposal to further reduce federal environmental enforcement 
activities at the Environmental Protection Agency. Instead, it 
assumes $15 million in budget authority above the President's 
budget for federal enforcement personnel to help rebuild 
effective federal enforcement capacity. The budget resolution 
also assumes increased Superfund cleanup funding of $113 
million compared to the President's budget, and supports the 
administration's request of $200 million for the Brownfields 
program.
    The budget resolution assumes an increase of $990 million 
in 2003 budget authority from the President's request for the 
Army Corps of Engineers, bringing discretionary funding to $5 
billion. It assumes at least $888 million in budget authority 
for the Bureau of Reclamation to address the increasing backlog 
in authorized projects, and recommends increasing this funding, 
given the importance of the Bureau's drinking water and 
irrigation construction activities. It assumes full funding of 
the Clean Water State Revolving Fund within the Environmental 
Protection Agency.
    The resolution assumes full funding of the Land, 
Conservation, Preservation and Infrastructure Improvement 
Program (LCPIIP) at $1.92 billion in 2003 budget authority. It 
assumes $800 million in 2003 budget authority for salmon 
conservation and restoration in the Columbia River Basin and in 
Alaska, California, Oregon and Washington, and for the purpose 
of meeting obligations under the Pacific Salmon Treaty (a $164 
million increase over the President's 2003 request).
    The budget resolution assumes an additional $137 million in 
budget authority over the President's proposal for the 
operations of the National Park Service in 2003, to help 
preserve unimpaired the natural and cultural resources and 
values of the national park system for this and future 
generations. The resolution acknowledge funding shortfalls for 
the operations of the National Park Service and recommends 
increasing this funding over the next five years. It also 
recommends increased 2003 funding for the National Wildlife 
Refuge System to support the System in its centennial year.

Mandatory

    The budget resolution assumes enactment of a farm bill with 
agricultural conservation provisions.
    The budget resolution does not assume any future receipts 
from the leasing of oil and gas drilling rights in the Arctic 
National Wildlife Refuge.

                       Function 350: AGRICULTURE

    Under current law, spending for Function 350 (Agriculture) 
will total $25.3 billion in budget authority and $24 billion in 
outlays for 2002. The function includes farm price support, 
export promotion, crop insurance, credit, research, marketing, 
and related activities within the Department of Agriculture.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    30.0    23.9    24.9    22.1    21.8    20.3    19.2    18.8    18.7    18.9
    Outlays.....................    28.7    22.5    23.6    20.8    20.7    19.2    18.1    17.8    17.7    17.9
President's Budget:
    Budget Authority............    27.9    25.6    23.6    22.9    22.6    21.9    21.5    21.7    21.8    21.8
    Outlays.....................    26.8    24.2    22.3    21.6    21.4    20.7    20.4    20.7    20.8    20.8
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution sets discretionary agricultural 
spending at the baseline level in 2003.

Mandatory

    The budget resolution assumes enactment of a conference 
report on the farm bill, consistent with Congressional action 
and the President's request for funds for this purpose.
    Mandatory agricultural assumptions reflect the spending 
levels in the farm bill approved by the Senate on February 13, 
2002. It is anticipated that these assumptions will be received 
to reflect the farm bill conference.
    This year's farm bill should respond to the policy 
shortcomings of the Federal Agricultural Improvement and Reform 
(FAIR) Act of 1996 by providing for an improved means of 
counter-cyclical support for farm income in periods of low 
commodity prices. Yet, it should retain many of the planting 
flexibility and market-oriented provisions of the FAIR Act.

               Function 370: COMMERCE AND HOUSING CREDIT

    Under current law, spending on Commerce and Housing Credit 
agencies and programs is expected to total $6.1 billion in 
budget authority and $3.5 billion in outlays in 2002. Of the 
$3.5 billion in total outlays, $2.3 billion is mandatory and 
$1.2 billion is discretionary. Function 370 includes funding 
for discretionary housing programs, such as subsidies for 
single and multifamily housing in rural areas and mortgage 
insurance provided by the Federal Housing Administration; the 
United States Postal Service; discretionary funding for 
commerce programs, such as international trade and exports, 
science and technology, and the census; discretionary funding 
for small business credit and assistance programs; and 
mandatory spending for deposit insurance activities related to 
banks, savings and loans, and credit unions.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
        Budget Resolution

On-Budget:
    Budget Authority............     5.6     5.5     7.5     7.4     7.4     7.6     7.8     7.9     8.1     8.3
    Outlays.....................     1.2     1.0     3.0     3.1     3.2     3.2     3.3     3.6     3.9     4.2
Off-Budget:
    Budget Authority............     0.7     0.1    -0.7     0.0     0.0     0.0     0.0     0.0     0.0     0.0
    Outlays.....................     0.7     0.1    -0.7     0.0     0.0     0.0     0.0     0.0     0.0     0.0

              Total

Budget Authority................     6.3     5.6     6.8     7.4     7.4     7.6     7.8     7.9     8.1     8.3
Outlays.........................     1.9     1.1     2.3     3.1     3.2     3.2     3.3     3.6     3.9     4.2

       President's Budget

Budget Authority................     5.7     4.9     5.7     5.9     7.0     7.4     8.3    12.6     7.3     7.2
Outlays.........................     1.6     0.5     1.4     1.7     2.6     2.9     3.6     7.1     4.2     3.6
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending will 
total $0.5 billion in BA and $0.2 billion in outlays in 2003. 
This represents an increase of $0.5 billion in budget authority 
and $0.3 billion in outlays above the President's request.
    The budget resolution restores deep cuts proposed in the 
President's budget to programs that provide invaluable 
assistance to small businesses, including credit programs at 
the Small Business Administration (SBA) and the Manufacturing 
Extension Program at the Department of Commerce. The resolution 
also funds the fee reductions for small business borrowers 
authorized under Public Law 107-100. In total, the resolution 
provides an additional $200 million above the President's level 
for small business programs at the SBA and $98 million above 
the President's level for the Manufacturing Extension Program, 
which provides technical and other assistance to improve the 
competitiveness of small U.S. manufacturers.
    In addition, the resolution assumes a substantial 
increase--$220 million--in funding for the Securities and 
Exchange Commission (SEC) to ensure that it can adequately 
administer and enforce the nation's securities laws. First, 
consistent with Public Law 107-123, the resolution addresses 
the severe retention problem currently faced by the SEC and 
allows it to raise the pay of its employees to a level that is 
commensurate with the compensation offered by federal banking 
regulatory agencies. Second, in stark contrast to the 
President's budget, which does not provide enough funding for 
the SEC even to adequately maintain its 2002 level of review 
and enforcement activity, the budget resolution ensures the 
agency can hire additional employees and substantially increase 
its review and inspection of investor complaints and inquiries, 
new securities issues, and investment advisors.
    Finally, the resolution includes two sense of the Senate 
provisions. The first expresses the sense of the Senate 
regarding the unsatisfactory performance of the Office of 
Management and Budget (OMB) and the Small Business 
Administration in estimating the cost of small business credit 
programs. Since the enactment of the Federal Credit Reform Act 
of 1990, the Small Business Administration and Office of 
Management and Budget have repeatedly overestimated the cost of 
the Small Business Administration's 7(a) and 504 credit 
programs. For the 7(a) program alone, SBA and OMB have 
reestimated more than $1 billion in subsidy costs, resulting 
both in borrowers and lenders paying higher than necessary fees 
to participate in the two programs and in the needless 
diversion of resources from other discretionary programs. The 
resolution directs the administration to expeditiously complete 
its new model for the 7(a) program and to immediately begin 
work on improving its estimates of the 504 program.
    The second sense of the Senate resolution concerns the lack 
of broadband technologies (including wireless and satellite 
network capabilities) in rural and underserved areas, and 
expresses the sense of the Senate that the Congress should 
encourage the deployment of such services through grant 
assistance to the private sector and through investments in 
research that address the barriers to increased availability in 
rural and underserved areas.
    The Committee notes that the administration's budget 
proposes phasing in a fee during 2003 that would apply to 
round-turn commodities futures and options transactions. The 
resolution does not specifically assume enactment of this fee. 
The Committee acknowledges concern that such a fee could harm 
the competitive position of U.S. futures exchanges and 
encourages customers to use overseas markets at the expense of 
U.S. employment and government receipts.

Mandatory

    The budget resolution assumes mandatory spending will total 
$5.8 billion in budget authority and $1.8 billion in outlays in 
2003. The President proposes no new initiatives for mandatory 
spending in function 370. The budget resolution similarly 
includes no mandatory proposals. (Proposals regarding spectrum 
auctions are included and discussed under function 950.)

                      Function 400: TRANSPORTATION

    Under current law, spending for Function 400 
(Transportation) will total approximately $64.5 billion in 
budget authority and $62.9 billion in outlays for 2002. The 
function includes funding for the Department of Transportation, 
including the newly-created Transportation Security 
Administration (TSA); ground transportation programs, such as 
the Federal-Aid Highway Program (FAHP), mass transit, motor 
carrier safety, and the National Rail Passenger Corporation 
(Amtrak); air transportation programs through the Federal 
Aviation Administration (FAA) airport improvement program, 
facilities and equipment program, research, and operation of 
the air traffic control system; water transportation through 
the Coast Guard and Maritime Administration; the Surface 
Transportation Board; the National Transportation Safety Board; 
and the Research and Special Programs Administration (RSPA). In 
addition, funds for air transportation programs under NASA are 
included within this function.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    65.8    65.2    67.0    68.3    69.7    71.1    72.5    74.0    75.5    77.0
    Outlays.....................    65.1    63.2    64.0    65.3    66.4    68.0    69.4    70.9    72.4    73.8
President's Budget:
    Budget Authority............    63.4    58.4    64.6    65.9    67.2    68.6    70.0    71.4    72.9    74.4
    Outlays.....................    62.5    58.4    57.8    58.5    59.3    60.5    61.6    63.1    64.6    66.1
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending in 
this function will total $21.4 billion in budget authority and 
$61.8 billion in outlays for transportation in 2003. This 
represents an increase of $2.6 billion in budget authority and 
$4.5 billion in outlays above the 2002 level and an increase of 
$1.0 billion in budget authority and $2.6 billion in outlays 
over the President's 2003 budget request. The majority of the 
increase above the President's budget request is due to 
additional funding for the FAHP, Amtrak, FAA programs, and New 
Start capital grants through the FTA.
    The budget resolution assumes the funding of the 
President's request of $4.8 billion for the newly-created 
Transportation Security Administration, which will coordinate 
and manage federal security efforts across all transportation 
modes and will be responsible for overseeing passenger 
screening and aviation security.
    The budget resolution rejects the President's revised 
request for an $8.6 billion cut in the Federal-Aid Highway 
Program (FAHP) obligation limitation compared to the 2002 
enacted funding level. Instead, the budget resolution assumes a 
FAHP obligation limitation of $28.9 billion in 2003--$5.7 
billion above the President's revised request. The amount 
provided in the budget resolution would allow states to proceed 
with their transportation plans and could save more than 
200,000 jobs that would be lost under the President's proposal. 
This funding level includes sufficient sums to provide for an 
obligation ceiling for fiscal year 2003 that is at least at the 
level articulated as a funding floor in S. 1917, the Highway 
Funding Restoration Act, as introduced by the bipartisan 
leadership of the Committee on Environment and Public Works. 
The funding level provided in the resolution will allow for 
steadily increasing authorization levels while maintaining a 
sufficient cash balance reserve in the Highway Trust Fund 
throughout the period expected to be covered by the next 
Surface Transportation Reauthorization Bill.
    In addition, the budget resolution assumes $1.2 billion for 
Amtrak, a funding level $679 million above the President's 
request and $579 million above the 2002 enacted level. The 
resolution also assumes $100 million in budget authority above 
guaranteed levels for FTA News Starts capital grants. Finally, 
the resolution assumes $183 million above the President's 
requested level for the FAA; these additional funds could be 
used to meet critical construction or research needs. The 
budget resolution does not include the rail safety fees 
included in the President's budget.

Mandatory

    The budget resolution assumes $44.4 billion in mandatory 
budget authority and $3.3 billion in outlays in 2003.

            Function 450: COMMUNITY AND REGIONAL DEVELOPMENT

    Under current law, spending for Function 450 (Community and 
Regional Development) will total $18.9 billion in budget 
authority and $14.6 billion in outlays for 2002. The function 
includes the Federal Emergency Management Agency (FEMA), the 
Appalachian Regional Commission (ARC), non-power programs of 
the Tennessee Valley Authority (TVA), and the Economic 
Development Administration (EDA) within the Commerce 
Department. The function also includes the Community 
Development Block Grant (CDBG) program of the Department of 
Housing and Urban Development, the Bureau of Indian Affairs 
within the Department of the Interior, and rural economic 
development programs at the Department of Agriculture.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    15.9    15.9    16.2    16.5    16.6    16.9    17.2    17.5    17.7    18.0
    Outlays.....................    16.4    17.3    17.1    16.4    16.2    15.8    16.0    16.2    16.5    16.8
President's Budget:
    Budget Authority............    15.2    15.6    15.8    16.2    16.7    17.1    17.5    18.0    18.4    18.8
    Outlays.....................    16.0    16.9    16.6    15.9    15.7    15.6    16.0    16.3    16.7    17.1
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending will 
total $15.5 billion in budget authority and $16.7 billion in 
outlays for community and regional development in 2003. This 
represents an increase of $381 million in budget authority 
above the President's 2003 budget.
    The budget resolution fully funds the President's request 
for $3.5 billion in 2003 to support first responders. This 
proposal is an integral component of the President's homeland 
security request and will help train and equip firefighters, 
law enforcement officials and medical professionals. The 
administration, however, has not yet provided a detailed plan 
of how this program would be structured. Consequently, the 
budget resolution does not assume the elimination of existing 
grant programs. Rather, the budget resolution assumes continued 
funding for these programs until Congress changes them.
    The resolution rejects the President's cuts to the 
Community Development Block Grant program (CDBG). The budget 
resolution adds $269 million above the President's request for 
2003. The CDBG program is an important tool in helping local 
governments tackle the most serious challenges facing their 
communities. The CDBG program works to ensure decent affordable 
housing and to provide services to the most vulnerable in our 
communities. In addition, the grants are used to create jobs 
and expand business opportunities.
    The budget resolution rejects the President's cuts to the 
Community Development Financial Institutions (CDFI) fund. The 
budget resolution adds $32 million above the President's 
request for 2003. The CDFI fund was created with bipartisan 
support to expand the availability of credit, investment 
capital, and financial services in distressed urban and rural 
communities. By stimulating the creation and expansion of 
diverse CDFIs and by providing incentives to traditional banks 
and thrifts, the Fund's investments work toward building 
private markets, creating healthy local tax revenues, and 
empowering residents. The CDFI fund provides relatively small 
infusions of capital to institutions that serve distressed 
communities and low-income individuals.
    The budget resolution restores the President's elimination 
of funding for Round II empowerment zones and enterprise 
communities. The budget resolution includes $15 million for 
rural communities and $45 million for urban communities. This 
program, through federal grants, tax incentives, and 
partnerships with government, for-profit and non-profit 
entities, has funded the opening of new businesses and created 
jobs, housing, and new educational and healthcare opportunities 
for thousands of Americans.
    The budget resolution includes $20 million above the 
President's budget for Indian school construction. The Bureau 
of Indian Affairs (BIA) funds 185 schools that are operated 
directly by the Bureau, tribes, or tribal organizations. Many 
of these schools are in need of major renovations or 
replacement. The President's budget provides funding for the 
replacement of six schools for 2003. The budget for resolution 
accelerates this effort by adding funding for an additional 
school each year.
    The budget resolution assumes the President's funding of 
$300 million for the Flood Map Modernization Fund. Accurate 
flood maps are necessary to prevent loss of life and property 
and to reduce costs to the National Flood Insurance Program and 
disaster assistance funds. The Federal Emergency Management 
Agency estimates that modernization of its map inventory would 
help avoid an estimated $26 billion in flood damage over a 50-
year period by providing accurate data for siting new 
construction and retrofitting existing buildings.

Mandatory

    The budget resolution includes funding for rural 
development programs in the farm bill.

   Function 500: EDUCATION, TRAINING, EMPLOYMENT AND SOCIAL SERVICES

    Under current law, spending for Function 500 (Education, 
Training, Employment and Social Services) will total $78.2 
billion in budget authority and $70.3 billion in outlays for 
2002. This function includes funding for elementary and 
secondary, vocational, and post-secondary education programs; 
job training and employment services; children and family 
services programs; national and community service; statistical 
analysis and research related to these areas; and funding for 
the arts and humanities.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    85.6    92.2    95.9    99.7   103.5   106.0   107.8   109.2   110.8   112.4
    Outlays.....................    79.5    85.3    91.2    95.5    99.3   103.1   106.0   107.8   109.5   111.1
President's Budget:
    Budget Authority............    81.0    83.0    85.0    86.9    88.8    91.0    93.2    95.1    97.4    99.7
    Outlays.....................    78.4    81.0    82.8    84.4    86.2    88.3    90.5    92.3    94.5    96.8
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending in 
this function will total $76.3 billion in budget authority and 
$71.0 billion in outlays for the 2003 program level. This 
represents an increase of $4.6 billion in budget authority and 
$0.8 billion in outlays over the 2003 CBO baseline and $5.6 
billion in budget authority and $1.1 billion in outlays over 
the 2002 program level.
    The budget resolution assumes a budget authority increase 
of $2.5 billion over the 2002 program level for elementary and 
secondary education programs in the No Child Left Behind Act. 
This is $2.6 billion more than requested in the President's 
budget. The resolution includes $1.35 billion to restore the 
President's proposed cuts and adds $1.275 billion over the 
President for high priority programs, including Title I, 
teacher quality, after school programs, bilingual, and rural 
education.
    The budget resolution also assumes that full funding of the 
Individuals with Disabilities Education Act (IDEA) Part B state 
grants program will be phased in over the next six years. In 
addition to the discretionary funds currently provided for 
IDEA, the resolution assumes new mandatory budget authority 
increases in each year of $2.5 billion over the previous year 
until the full funding level (40 percent of the national 
average per pupil expenditure) is reached. For 2003, the 
President proposed a $1.0 billion increase for IDEA.
    For other education programs, the budget resolution assumes 
an increase of $1.8 billion over the 2002 program level and 
$1.3 billion over the President's request. It includes $0.4 
billion to restore cuts proposed by the President and provide 
$0.9 billion more than the President for high priority 
programs, including the Pell Grant program.
    If discretionary education programs and funding for IDEA 
are considered, the budget resolution provides a budget 
authority increase of $6.8 billion over the 2002 program level. 
By comparison, the President's budget requested a $1.4 billion 
increase.
    The budget resolution includes $0.8 billion to restore the 
cuts proposed by the President in the Department of Labor's job 
training and employment services programs, including assistance 
for low-income and disadvantaged youth and adults, displaced 
workers, and community services for older Americans. The 
resolution assumes these programs would be funded at their 2002 
enacted levels adjusted for inflation. It also provides a $73 
million increase over 2002 for the Job Corps program as 
requested by the President. The resolution does not assume the 
President's proposal to transfer $179 million in veterans 
employment and training programs to the Department of Veterans 
Affairs.
    The budget resolution assumes an increase of $0.7 billion 
over the 2002 program level for Administration of Children and 
Families (ACF) programs administered by the Department of 
Health and Human Services (HHS). This is $0.4 billion over the 
President's request. For the Safe and Stable Families program, 
the resolution includes an increase of $155 million as proposed 
by the President. The resolution also provides an increase of 
$400 million for the Head Start program, $270 million more than 
the President, and $150 million to restore the President's 
proposals to eliminate the early learning fund and cut 
community services and research programs.
    The budget resolution provides an increase of $0.3 billion 
over 2002 for the Corporation for National and Community 
Service as requested by the President.

Mandatory

    The budget resolution includes a new mandatory spending 
proposal that assumes full funding of the Individuals with 
Disabilities Education Act (IDEA) Part B state grants program 
will be reached over the next six years. The resolution assumes 
annual increases in budget authority in each year of $2.5 
billion over the amount provided in the previous year until the 
full funding level, including both mandatory and discretionary 
funding, is reached in 2008. This would cost $112 billion in 
budget authority and $91 billion in outlays over ten years. The 
resolution assumes this new mandatory spending is in addition 
to the discretionary funds currently provided in appropriations 
bills.
    The budget resolution also includes $285 million in budget 
authority and $275 million in outlays over ten years, as 
requested in the President's budget, to expand the current 
student loan forgiveness program to allow math, science, and 
special education teachers who teach in high-poverty schools 
for at least five years to have up to $17,400--up from $5,000--
of their federal student loans forgiven.
    The budget resolution does not include the President's 
proposal to eliminate the H-1B Skill Training Grants program in 
2003 or to create a new refundable education tax credit.

                          Function 550: HEALTH

    Under current law, spending for Function 550 (Health) will 
total $201.2 billion in budget authority and $195.1 billion in 
outlays for 2002. The major programs in this function include 
Medicaid, the State Children's Health Insurance Program, health 
benefits for federal workers and retirees, the National 
Institutes of Health, the Food and Drug Administration, the 
Health Resources and Services Administration, the Centers for 
Disease Control and Prevention, the Substance Abuse and Metal 
Health Services Administration, Indian Health Services, and the 
Agency for Healthcare Research and Quality.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............   211.5   242.2   261.7   279.4   299.6   321.0   343.7   369.3   396.4   426.4
    Outlays.....................   217.9   241.8   261.0   278.8   298.1   319.8   342.3   367.8   394.9   425.1
President's Budget:
    Budget Authority............   220.7   242.8   258.0   276.6   297.2   318.6   341.3   366.8   394.5   424.9
    Outlays.....................   217.7   239.6   257.6   275.9   295.6   317.2   340.1   365.6   392.9   423.3
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary health spending 
will total $50.9 billion in budget authority and $46.0 in 
outlays in 2003.
    The budget resolution matches the President's request for 
the National Institutes of Health (NIH), which is a $3.9 
billion increase in budget authority and a $4 billion increase 
in outlays for the agency above the 2002 level. This amount 
meets the target for the final installment in the plan to 
double the agency's budget over five years (1999-2003).
    The budget resolution assumes a $1 billion increase in 
budget authority and an $825 million increase in outlays above 
the President's request for the Indian Health Service. This 
represents a 37 percent increase for the agency above the 2002 
level and will be used primarily to expand clinical services. A 
portion of the increase will also be used to fund contact 
support costs and restore the President's cuts to health 
facilities construction.
    The budget resolution assumes an increase above the 
President's request of $868 million in budget authority and 
$302 million in outlays for the Health Resources and Services 
Administration. This represents a two percent increase in 
funding for the agency above the 2002 level. The increased 
funding will fully restore the President's cuts to such 
programs as Rural Health, the Community Access Program, the 
Universal Newborn Hearing Screening program, Children's 
Hospitals Graduate Medical Education, and Health Professions.
    The budget resolution assumes an increase above the 
President's request of $534 million in budget authority and 
$126 million in outlays for the Centers for Disease Control and 
Prevention, which is a 2.4 percent increase in funding over the 
2002 level. This funding will fully restore the President's 
cuts to programs including Chronic Disease Prevention, 
Occupational Safety and Health, Infectious Disease Control, and 
Public Health Improvement.
    The budget resolution assumes $300 million in budget 
authority and $30 million in outlays for the Global Fund to 
Fight HIV/AIDS, Tuberculosis and Malaria within discretionary 
health funding. Another $200 million for the Global Fund is 
included in Function 150, International Affairs. In total, the 
Fund will receive $500 million in 2003, a $300 million increase 
above the President's request and the 2002 level.
    Last year, Congress provided independent children's 
teaching hospitals with equitable funding for graduate medical 
education. To assure children's future access to health care 
and the capacity for pediatric research, the budget resolution 
assumes the continuation of full, equitable funding ($292 
million) for the Children's Hospitals Graduate Medical 
Education program.
    The Committee is concerned about current shortages and the 
geographic maldistribution of health professionals in the 
nation and recognizes that the health professions training 
programs administered by the Health Resources and Services 
Administration have been effective in addressing these 
challenges.
    The Committee recognizes the importance of improving the 
nation's capability to track chronic disease, and potential 
contributing risk factors, including environmental exposures.

Mandatory

    The resolution includes a reserve fund for health that 
provides up to $95 billion to expand health insurance coverage 
to the uninsured. (These resources are included in the reserve 
fund for Medicare, prescription drugs, and health care, which 
is described in the ``Other Provisions'' portion of this 
document.) These resources should build upon and strengthen 
private and public coverage and be targeted to those who need 
it most. Legislation that provides health insurance for the 
uninsured should not substantially weaken the employer-based 
and public health insurance systems through which the large 
majority of Americans obtain health insurance coverage.
    Appropriate uses of these funds include, but are not 
limited to, funding legislation that provides States the option 
of allowing families of disabled children to purchase coverage 
under the Medicaid program for these children (commonly 
referred to as the ``Family Opportunity Act of 2002''); that 
extends and simplifies the transitional medical assistance 
program under title XIX of the Social Security Act (Medicaid); 
or that allows states to extend health insurance coverage to 
low-income pregnant women through public programs.

                         Function 570: MEDICARE

    Medicare is a federal health insurance program that covers 
40 million Americans aged 65 and older as well as younger 
adults who are disabled or suffer from end-state renal disease. 
Medicare spending is expected to reach $226 billion by the end 
of this year and is the second largest entitlement program, 
exceeded only by Social Security. By 2012, spending for the 
Medicare program will total about $432 billion under current 
policies. Medicare's share of the economy is expected to 
increase from 2.1 percent of GDP in 2002 to 2.5 percent in 
2012, growing at an average annual rate of 6.7 percent.

                                            [In billions of dollars]
                                             [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............   240.1   256.2   290.5   312.4   342.9   382.1   415.8   452.4   498.0   531.8
    Outlays.....................   240.0   256.5   290.4   312.2   343.2   382.0   415.5   452.7   497.8   531.5
President's Budget:
    Budget Authority............   238.6   251.0   270.1   295.6   322.0   346.3   372.2   399.6   432.7   459.4
    Outlays.....................   238.4   251.3   270.0   295.4   322.3   346.2   371.9   399.9   432.6   459.2
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes that discretionary spending 
for Medicare administrative expenses will total $3.7 billion in 
2003, 2.8 percent above last year's appropriation.
    The resolution rejects the President's proposal to impose a 
$1.50 fee on duplicate or paper claims submitted by Medicare 
contractors. This proposal would unfairly penalize small 
providers in rural areas who cannot afford to invest in up-to-
date claims processing technology.
    The resolution also rejects the President's $4.5 billion 
cut in Medicare administrative expenses and, instead, allows 
for growth of about four percent a year. The General Accounting 
Office (GAO) has advised that too great a mismatch between the 
Medicare program's administrative capacity and its designated 
mandate will leave the Centers for Medicare and Medicaid 
Services (CMS) unprepared to handle anticipated Medicare 
changes (including the addition of a pharmaceutical benefit) 
and future enrollment growth. Sufficient resources are 
particularly important to support key oversight activities--
such as ensuring proper payment of claims--and to make capital 
investments in information systems that could help the agency 
and its contractors conduct the program more efficiently.

Mandatory

    The budget resolution assumes an increase in mandatory 
spending of up to $500 billion over the next ten years to 
provide a prescription drug benefit that is voluntary, 
affordable, accessible to all beneficiaries, sustainable over 
time, and protects beneficiary access to covered health care 
services and providers.\1\
---------------------------------------------------------------------------
    \1\ These resources are included in the reserve fund for Medicare, 
prescription drugs, and health care, which is described in the ``Other 
Provisions'' section of this document. The Medicare function contains 
the full $500 billion reserve, which is the allocation allowed for 
Medicare and prescription drugs. An additional $95 billion is included 
in the Health function, and is the allocation allowed for expanded 
health care coverage. An adjustment which reduces the total resources 
allocated for these purposes to $500 billion is included in the 
Allowances function.
---------------------------------------------------------------------------
    Today about 38 percent of all Medicare beneficiaries lack 
prescription drug coverage because the program does not include 
a drug benefit. This lack of coverage has made it difficult for 
many seniors to afford life-sustaining pharmaceuticals and this 
problem has been exacerbated by double digit annual increases 
in prescription drug prices. Those without drug coverage pay 
significantly more (68 percent on average) out-of-pocket for 
their medications than those with prescription drug coverage. 
Studies have shown that these seniors tend to be in poorer 
health, have lower incomes, and are disproportionately sicker 
than their insured counterparts.
    Even for those with prescription drug insurance, access to 
coverage is not stable. Over the last decade, increasing 
numbers of employers have dropped retiree health coverage, 
supplemental insurance costs have continued to skyrocket, and 
Medicare+Choice plans have continued to leave the Medicare 
program. Including a comprehensive and affordable prescription 
drug benefit in the Medicare program, which is available to all 
40 million Medicare beneficiaries, will help ensure all seniors 
have access to much-needed prescription drug coverage. The 
President included $169 billion in his budget to provide a 
state-based low-income drug assistance program and to 
``modernize Medicare''. The House included $350 billion for 
Medicare modernization and prescription drugs. These resources 
are inadequate to fund an affordable, comprehensive, 
prescription drug benefit.

                     Function 600: INCOME SECURITY

    Under current law, spending for Function 600 (Income 
Security) will total $311.6 billion in budget authority and 
$314.1 billion in outlays for 2002. This function contains: 1) 
major cash and in-kind means-tested entitlements; 2) general 
retirement, disability, and pension programs excluding Social 
Security and veterans' compensation programs; 3) federal and 
military retirement programs; 4) unemployment compensation; 5) 
low-income housing programs; and 6) other low-income support 
programs. Function 600 is the third largest functional category 
after Social Security and defense. Mandatory programs account 
for 87 percent of total spending in this function.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget authority............   322.7   319.2   326.5   336.6   344.0   357.8   369.6   382.7   400.7   392.3
    Outlays.....................   325.7   319.7   326.4   335.7   342.5   356.3   367.7   380.6   398.4   389.9
President's Budget:
    Budget authority............   317.0   317.5   324.6   335.1   342.7   356.2   367.9   380.6   407.7   400.4
    Outlays.....................   319.4   318.0   324.9   335.0   342.2   355.7   367.5   380.4   407.7   400.6
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending in 
this function will total $45.7 billion in budget authority and 
$49 billion in outlays for 2003.
    The budget resolution does not accept the President's cut 
of over $500 million in low-income housing assistance programs 
such as the Public Housing Capital and Operating funds, Native 
American Housing Assistance, Rural Housing and Economic 
Development, Housing for Special Populations, and other housing 
programs. The budget resolution also includes a $205 million 
increase for the HOME Investment Partnerships Block Grant. The 
budget resolution includes the administration's assumption that 
$1.1 billion in Section 8 funds will be recaptured and 
reapplied towards purposes of the Section 8 program.
    The budget resolution increases budget authority for the 
Supplemental Nutrition Program for Women, Infants, and Children 
by $364 million over the 2002 enacted level to support 
nutrition assistance for a projected 7.8 million at-risk low-
income women, infants, and children per month.
    The budget resolution assumes $60 million in education and 
training vouchers for youth aging out of the foster care 
system.
    The budget resolution does not accept the President's $300 
million cut for the Low Income Home Energy Assistance Program.

Mandatory

    The budget resolution assumes reauthorization of the Child 
Care Development Block Grant and the Temporary Assistance for 
Needy Families Block Grant. In addition, the resolution 
includes $23 billion over ten years to help expand and improve 
upon the accomplishments of welfare reform to ensure that 
families that have moved from welfare to work continue to move 
up the ladder of economic success. The resolution includes 
funds for food and nutrition assistance programs.

                     Function 650: SOCIAL SECURITY

    Under current law, spending for Function 650 (Social 
Security) will total $459.0 billion in budget authority and 
$457.0 billion in outlays for 2002. This function includes old-
age, survivors, and disability Social Security benefit payments 
and administrative expenses.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
        Budget Resolution

On-Budget:
    Budget Authority............    13.4    14.4    15.3    16.2    17.4    18.8    20.5    22.4    25.6    28.1
    Outlays.....................    13.4    14.4    15.3    16.2    17.4    18.8    20.5    22.4    25.6    28.1
Off-Budget:
    Budget Authority............   465.0   484.7   509.4   536.0   564.8   595.8   631.0   669.4   709.4   753.8
    Outlays.....................   462.8   482.6   507.1   533.5   562.2   593.1   628.2   666.4   706.1   750.4
Total:
    Budget Authority............   478.4   499.2   524.7   552.2   582.2   614.6   651.5   691.8   735.0   781.9
    Outlays.....................   476.3   497.0   522.4   549.8   579.6   611.9   648.7   688.8   731.8   778.5
President's Budget:
    Budget Authority............   478.4   499.3   524.9   552.3   582.3   614.7   651.6   691.9   735.0   782.0
    Outlays.....................   476.3   497.1   522.5   549.9   579.7   612.0   648.7   688.8   731.8   778.5
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending will 
total $3.9 billion in budget authority and $3.8 billion in 
outlays for Social Security in 2003. This represents an 
increase of $0.3 billion in budget authority and $0.3 billion 
in outlays from the 2002 level. The increase will allow the 
Social Security Administration (SSA) to improve services for 
Social Security beneficiaries. The President's discretionary 
spending request for function 650 assumes a $166 million 
increase for SSA administrative expenses starting in 2004 and 
growing with inflation through 2012. No policy change related 
to this new spending was included in the President's budget 
submission. It is the Budget Committee's understanding that 
this funding was included in the President's budget request in 
error. It is not assumed in the budget resolution.

Mandatory

    The budget resolution assumes no mandatory increases for 
decreases in the function from current policies. The budget 
resolution assumes mandatory spending will total $474.5 billion 
in budget authority and $472.4 billion in outlays in 2003. This 
represents an increase of $19.1 billion in budget authority and 
$19.0 billion in outlays from the 2002 level. The increase 
primarily reflects an increase in the number of individuals 
eligible for Social Security benefits and additional costs 
associated with cost-of-living adjustments.

              Function 700: VETERANS BENEFITS AND SERVICES

    Under current law, spending for Function 700 (Veterans 
Benefits and Services) will total $50.5 billion in budget 
authority and $49.9 billion in outlays for 2002. This budget 
function includes funding to meet the income security needs of 
disabled veterans, indigent veterans, and survivors of deceased 
veterans through compensation benefits, pensions and life 
insurance programs. Major education, training and 
rehabilitation and readjustment programs include the Montgomery 
GI Bill, the Veterans Educational Assistance program and the 
Vocational Rehabilitation and Counseling program. Priorities 
also include the maintenance of veterans cemeteries as national 
shrines and burial benefits for veterans and eligible family 
members. Roughly half of all spending in this function is for 
the Veterans Health Administration, which comprises hospitals, 
nursing homes and outpatient clinics.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    56.2    58.2    62.3    61.8    61.1    65.0    66.7    68.4    72.7    70.1
    Outlays.....................    55.3    57.8    61.8    61.3    60.6    64.7    66.3    68.0    72.4    69.7
President's Budget:
    Budget Authority............    55.2    56.8    60.7    60.0    59.2    62.9    64.3    65.9    70.0    67.5
    Outlays.....................    54.7    56.5    60.3    59.6    58.7    62.6    64.0    65.5    69.6    67.0
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending in 
this function will total $26.7 billion in budget authority and 
$26.1 billion in outlays for 2003. This represents an increase 
of $2.8 billion in budget authority and $2.3 billion in outlays 
over the 2002 level. The budget resolution provides a $1 
billion increase in budget authority and a $561 million 
increase in outlays above the President's request for 
discretionary funding.
    The budget resolution assumes an increase of $2.6 billion 
above the 2002 level for the medical care appropriation for the 
Department of Veterans Affairs (VA). This is an increase of 
$1.2 billion above the President's request for medical care. 
The additional monies will provide full funding for the 
Veterans Health Administration to ensure access to quality 
health care for all veterans. The resolution rejects the 
President's proposal to impose a $1,500 deductible on priority 
7 veterans for medical services.
    The budget resolution does not assume the transfer of 
programs from the Department of Labor's Veterans Employment and 
Training Service to the Department of Veterans Affairs for the 
establishment of a veterans employment and training competitive 
grants program.

Mandatory

    The budget resolution assumes $29.5 billion in budget 
authority and $29.2 billion in outlays for veterans' mandatory 
spending in 2003. This is an increase of $3 billion in budget 
authority and $3.1 billion in outlays above the 2002 level. 
This provides for a 1.8 percent of living adjustment in 2003, 
which is included in the mandatory baseline.
    The budget resolution assumes the President's proposal to 
extend to 2012 Internal Revenue Service income verification on 
means-tested veterans and survivors benefits.
    The budget resolution assumes the additional one-year 
extension (from 2011 to 2012) of certain fees paid by veterans 
who obtain a government-guaranteed housing loan.

                Function 750: ADMINISTRATION OF JUSTICE

    Under current law, spending for Function 750 
(Administration of Justice) will total $36.2 billion in budget 
authority and $34.3 billion in outlays in 2002. This function 
funds the federal law enforcement activities at the Department 
of Justice and the Treasury Department. The law enforcement 
activities include criminal investigations by the Federal 
Bureau of Investigation (FBI) and the Drug Enforcement Agency 
(DEA), as well as border enforcement and the control of illegal 
immigration by the Customs Service and the Immigration and 
Naturalization Service (INS). The function also includes civil 
rights enforcement and prosecution; federal block, categorical, 
and formula grant programs to state and local governments; 
prison construction and operation; the United States Attorneys; 
and the federal judiciary.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    38.4    37.9    36.6    37.4    38.3    39.2    40.1    41.1    42.0    43.0
    Outlays.....................    39.0    38.5    36.7    37.0    37.7    38.8    39.7    40.6    41.6    42.6
President's Budget:
    Budget Authority............    37.1    40.2    37.8    38.7    39.6    40.6    41.5    42.5    43.5    44.6
    Outlays.....................    38.4    40.4    38.4    38.8    39.2    40.2    41.1    42.1    43.1    44.1
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending will 
total $34 billion in budget authority and $35.4 billion in 
outlays for administration of justice in 2003. This represents 
an increase of $1.4 billion in budget authority above the 
President's request for 2003.
    The budget resolution fully funds the President's $8.8 
billion request for border security, including the 
administration's new technology initiative that will enhance 
security while allowing for the free flow of people and 
commerce across the nation's borders.
    The budget resolution, however, does not accept the 
President's cuts to the Community Oriented Policing Services 
(COPS) grant program and other state and local law enforcement 
grants. State and local governments are struggling to meet 
increased security needs at the same time they face 
unprecedented strains on their budgets. The federal government 
should not add to their burden by withdrawing critical law 
enforcement support.
    Overall, the budget resolution increases funding by $1.4 
billion above the President's request for COPS and other state 
and local law enforcement assistance. This funding will protect 
the COPS in schools grants, the universal hiring program, and 
law enforcement technology grants. In addition to the COPS 
program, the budget resolution restores funding to the Byrne 
Grant program, the State Criminal Alien Assistance program, and 
the local law enforcement block grant program.
    The President's budget includes an obligation limitation 
for expenditures from the Crime Victims Fund for 2003. This 
limitation ensures that a stable level of funding will remain 
for these programs. The budget resolution carries this 
limitation forward in all years.

Mandatory

    The budget resolution assumes that Customs user fees will 
be extended. This fee offsets $14.9 billion in spending over 
the period 2004-2012.

                    Function 800: GENERAL GOVERNMENT

    Spending on General Government agencies and programs is 
expected to total $17.2 billion in budget authority and $16.6 
billion in outlays in 2002. Function 800 funds the government's 
legislative, executive, financial, and management activities. 
As such, it includes the Legislative Branch, the Executive 
Office of the President, the Department of the Treasury 
(including the Internal Revenue Service), the Office of 
Personnel Management, and the General Services Administration. 
It also includes payments to the District of Columbia and U.S. 
territories and the sharing of natural resources receipts with 
state and local governments. About 90 percent of all spending 
in function 800 is discretionary, with the Internal Revenue 
Service accounting for more than 60 percent of that total.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority............    16.7    16.5    16.7    17.0    17.3    17.2    17.5    17.8    18.1    18.5
    Outlays.....................    16.6    16.8    16.7    16.8    17.0    17.0    17.1    17.4    17.7    18.2
President's Budget:
    Budget Authority............    17.2    18.4    17.4    18.1    18.2    18.2    18.6    19.1    19.5    20.0
    Outlays.....................    16.9    18.5    17.3    17.9    17.9    17.9    18.2    18.6    19.0    19.7
----------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes discretionary spending will 
total $15.1 billion in budget authority and outlays in 2003. 
This represents a decrease of $0.5 billion in budget authority 
and $0.3 billion in outlays from the President's request. Over 
the 2003-2007 period, the resolution provides $77.8 billion in 
budget authority for discretionary programs.
    Much of the savings from baseline occurs from dropping 
emergency spending and other one-time items, such as funding 
provided to the District of Columbia for emergency planning, 
and the payment to the District of Columbia Corrections 
Trustee, which will complete its work in 2002. Additionally, 
the budget resolution assumes budget authority at the level 
provided in 2002 for many of the remaining discretionary 
programs. The resolution, however, assumes full funding of the 
President's proposal to improve homeland security. 
Additionally, it restores the President's proposed cut of more 
than 20 percent for payments to state and local governments in 
lieu of taxes. It also assumes the President's proposal to 
increase funding by one-half--$52 million--in 2003 for the 
Office of the Special Trustee for American Indians. That amount 
will help the Department of the Interior better comply with the 
U.S. District Court order in Cobell v. Norton to account for 
the funds held in trust by the U.S. government on behalf of 
individual Native Americans. The resolution also proposes an 
additional $8 million in 2003 for the Department of the 
Treasury to develop and implement a program to provide 
financial services, such as access to ATMs, to low- and 
moderate-income individuals.
    Finally, the resolution includes a sense of the Senate 
resolution that there should continue to be parity in the 
annual adjustment in compensation of the members of the 
uniformed services and civilian employees, as there has been in 
almost every year during the past two decades.

Mandatory

    The budget resolution assumes mandatory spending will total 
$1.5 billion in budget authority and outlays in 2003. Mandatory 
programs funded within this function include payments of claims 
and judgments against the federal government, the Presidential 
Election Campaign Fund, payments to U.S. territories and states 
freely associated with the U.S., the sharing of certain natural 
resources receipts with state and local governments, and 
Members' salaries and related administrative expenses. The 
President's budget proposes to increase mandatory spending by 
$1.6 billion over the 2003-2012 period. Virtually all of that 
increase results from the President's proposal to share one-
half of the receipts (included in function 950 in the 
President's budget) from drilling in the Arctic National 
Wildlife Refuge with the state of Alaska ($1.25 billion of that 
increase occurs in 2004 under the President's budget). That 
proposal is not included in the budget resolution.

                       Function 900: NET INTEREST

    Function 900 (Net Interest) totaled $168 billion in budget 
authority and outlays in 2002. Net interest is a mandatory 
payment; there are no discretionary programs in Function 900. 
Net interest includes interest on the public debt after 
deducting the interest income received by the federal 
government. Interest on the public debt, or gross interest, is 
the cost of financing the entire public debt of the U.S. 
government, including debt held in the Social Security trust 
funds and other government accounts.

                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               2003       2004       2005       2006       2007       2008       2009       2010       2011       2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
             Budget Resolution

On-Budget:
    Budget Authority......................      259.1      286.7      302.3      312.9      322.3      331.3      339.9      347.3      354.1      354.8
    Outlays...............................      259.1      286.7      302.3      312.9      322.3      331.3      339.9      347.3      354.1      354.8
Off-Budget:
    Budget Authority......................      -84.3      -93.0     -104.0     -116.2     -129.4     -143.4     -158.3     -174.2     -191.0     -208.7
    Outlays...............................      -84.3      -93.0     -104.0     -116.2     -129.4     -143.4     -158.3     -174.2     -191.0     -208.7

                   Total

Budget Authority..........................      174.8      193.7      198.3      196.7      193.0      187.9      181.5      173.1      163.1      146.1
Outlays...................................      174.8      194.7      198.3      196.7      193.0      187.9      181.5      173.1      163.1      146.1

            President's Budget

Budget Authority..........................      179.9      199.0      201.6      199.9      197.4      194.9      189.4      181.8      174.3      165.6
Outlays...................................      179.9      199.0      201.6      199.9      197.4      194.9      189.4      181.8      174.3      165.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

                        Function 920: ALLOWANCES

    Function 920 (Allowances) displays the budgetary effects of 
proposals that cannot be easily distributed across other budget 
functions because the precise effects are uncertain, the 
proposals are not clearly specified, or they affect multiple 
functions. Examples include contingent reserves, such as the 
President's proposal last year to create a National Emergency 
Reserve; the President's proposal this year for an unspecified 
economic stimulus plan; and across-the-board agency cuts. Once 
enacted, the Office of Management and Budget allocates the 
effects across specific budget functions. To prevent a point of 
order, last year's resolution included a negative adjustment in 
920 equal to the difference between the discretionary totals 
assumed in that resolution and the lower cap on discretionary 
spending set in law at that time for 2002.

                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  2003     2004     2005     2006     2007     2008     2009     2010     2011     2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Budget Authority..........................................     -5.4    -12.1    -14.6    -14.9    -15.1    -15.8    -16.3    -17.1    -17.6    -18.1
    Outlays...................................................     -1.2    -10.3    -13.9    -14.7    -15.0    -15.7    -16.2    -17.0    -17.5    -18.0
President's Budget:
    Budget Authority..........................................      8.0      2.9      1.4      0.1      0.1      0.1      0.0      0.0      0.0      0.0
    Outlays...................................................      8.0      1.5      0.1      0.2      0.3      0.3      0.4      0.4      0.3      0.3
--------------------------------------------------------------------------------------------------------------------------------------------------------

Discretionary

    The budget resolution assumes rescissions of discretionary 
spending in 2003 of just over $4 billion--an amount that is 
well below the recent annual average of more than $5 billion. 
The resolution rejects the President's proposal to change the 
accruals of future retirement and health benefits for current 
federal employees.

Mandatory

    This function includes an adjustment to the health reserve 
fund. The adjustment is needed because spending on Medicare and 
prescription drugs, which is included in Function 570 
(Medicare), is capped at $500 billion, while spending on 
expanded health coverage, which is included in Function 550 
(Health), is capped at $95 billion. Since total spending from 
the fund cannot exceed $500 billion, and adjustment to bring 
the total increase in spending for those purposes to that 
amount is included in the Allowances function.

            Function 950: UNDISTRIBUTED OFFSETTING RECEIPTS

    Undistributed offsetting receipts will total $46.4 billion 
(negative budget authority and outlays) in 2002. Most 
offsetting receipts, which are derived from business-type 
activities that distinguish them from taxes and other 
compulsory revenues, are recorded as offsets to other budget 
functions. Function 950, however, displays several particularly 
large sources of offsetting receipts that, if distributed, 
would distort the other functional totals. Examples of 
undistributed receipts include: the payment federal agencies 
make to the retirement trust funds on behalf of their 
employees, payments made by companies for the right to explore 
and produce oil and gas on the outer continental shelf, and 
payments by those who bid for the right to buy or use public 
goods and assets, such as the electromagnetic spectrum. The 
receipts in function 950 are all mandatory.

                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        2003      2004      2005      2006      2007      2008      2009      2010      2011      2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Budget Resolution

On-Budget:
    Budget Authority................................     -44.5     -58.2     -61.4     -54.3     -54.4     -56.6     -58.4     -60.7     -63.1     -65.5
    Outlays.........................................     -44.5     -58.2     -61.4     -54.3     -54.4     -56.6     -58.4     -60.7     -63.1     -65.5
Off-Budget:
    Budget Authority................................      -9.6     -10.3     -11.1     -11.8     -12.5     -13.4     -14.2     -15.2     -16.3     -17.0
    Outlays.........................................      -9.6     -10.3     -11.1     -11.8     -12.5     -13.4     -14.2     -15.2     -16.3     -17.0

                        Total

Budget Authority....................................     -54.0     -68.5     -72.4     -66.1     -66.9     -69.9     -72.6     -75.9     -79.4     -82.6
Outlays.............................................     -54.0     -68.5     -72.4     -66.1     -66.9     -69.9     -72.6     -75.9     -79.4     -82.6

                 President's Budget

Budget Authority....................................     -53.9     -70.6     -71.8     -66.0     -66.6     -69.0     -71.5     -74.7     -78.0     -81.2
Outlays.............................................     -53.9     -70.6     -71.8     -66.0     -66.6     -69.0     -71.5     -74.7     -78.0     -81.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The budget resolution assumes the reauthorization of the 
Federal Communications Commission's authority to publicly 
auction the nation's electromagnetic spectrum. Extending that 
authority, which expires at the end of 2007, will increase 
offsetting receipts by about $3.0 billion over the 2008-2012 
period. The authority, which was first provided under the 
Omnibus Budget Reconciliation Act of 1993, has successfully and 
fairly allocated this limited public resource, as well as 
deposited more than $14 billion in receipts at the U.S. 
Treasury. In addition, the resolution assumes the President's 
proposal to delay two auctions of spectrum currently assigned 
to television channels 60-69 and 52-59. Delaying the two 
auctions is estimated to increase receipts to the federal 
government by almost $1 billion over the 2003-2007 period. 
Finally, the resolution neither includes the President's 
proposal to assess an analog spectrum leasing fee on television 
broadcasters nor does it include his proposal to compensate 
agencies for relocated within the spectrum.

                              B. REVENUES

    Federal revenues are taxes and other collections from the 
public that result from the government's sovereign or 
governmental powers. Federal revenues include individual income 
taxes, corporate income taxes, social insurance taxes, excise 
taxes, estate and gift taxes, custom duties and miscellaneous 
receipts (which include deposits of earnings by the Federal 
Reserve System, fines, penalties, fees for regulatory services, 
and others).
    This year, total revenues are projected to equal 19.3 
percent of GDP. Under current law, revenues will average 
between 19.1 percent and 19.2 percent of GDP through 2010, the 
period during which the 2001 tax cut is effective. After the 
sunset of the 2001 tax cut, projected revenues as a percentage 
of GDP increase of the years 2011 and 2012.
    The budget resolution assumes no tax increases and no 
delays in tax reductions scheduled under current law. The 
budget resolution assumes the following tax legislative 
initiatives:
     Energy security legislation is expected to contain 
tax incentives to promote the production of energy from 
domestic sources, to reduce consumption of energy, and to 
encourage cleaner production of energy. The budget resolution 
assumes that the cost of these energy-related tax incentives 
will be offset.
     Legislation is expected to be considered in the 
Finance Committee to provide new incentives for taxpayers to 
support charitable organizations and for low-income individuals 
to save. The budget resolution assumes that the cost of these 
charitable and savings incentives will be offset.
     One possible offset includes legislation that will 
address abusive tax shelters, as well as provide meaningful 
penalty relief and reform for individual and corporate 
taxpayers. The budget resolution assumes that the Finance 
Committee will act to shut down tax shelters, such as those 
which may have been abused by Enron and possibly other 
corporate taxpayers. The budget resolution also assumes, in the 
wake of the Enron bankruptcy, legislation to provide stronger 
protection for employee pensions and other tax-favored 
retirement savings vehicles.
     Additional savings can be realized as a result of 
legislation to implement the President's budget recommendations 
for improving tax administration. The budget resolution assumes 
that the Finance Committee will act on the Bush 
administration's proposal to modify the IRS Restructuring and 
Reform Act's employee infractions subject to mandatory 
termination and permit a broader range of available penalties. 
The budget resolution further assumes that the Finance 
Committee will permit the IRS to increase revenue collections 
by entering into installment agreements with taxpayers that do 
not guarantee full payment of liability over the life of the 
agreement.
    The President's budget proposed to eliminate the December 
31, 2010 sunset contained in the Economic Growth and Tax Relief 
Reconciliation Act of 2001 (EGTRRA), which, according to an 
analysis by the Congressional Budget Office, would reduce 
revenues by $374.4 billion over 2003-2012. Extending EGTRRA's 
provisions that sunset prior to 2010 would reduce revenues by 
an additional $241.4 billion over the same period. Extending 
the EGTRRA tax cuts would reduce revenues by approximately $4 
trillion in the decade after 2011. The budget resolution 
assumes that the cost of any change in EGTRRA sunset dates 
would be paid for.

----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
        Budget Resolution

On-Budget revenues..............    1501    1606    1736    1832    1924    2030    2144    2254    2483    2712
Off-Budget revenues.............     545     574     602     631     661     692     727     764     802     842
                                 -------------------------------------------------------------------------------
      Total Revenues............    2046    2180    2338    2463    2585    2723    2871    3018    3285    3554

       President's Budget

On-Budget revenues..............    1467    1576    1712    1811    1899    2003    2115    2224    2340    2465
Off-Budget revenues.............     545     574     602     631     661     693     727     764     803     842
                                 -------------------------------------------------------------------------------
      Total Revenues............    2013    2150    2314    2442    2560    2695    2842    2988    3143    3307
----------------------------------------------------------------------------------------------------------------

                             c. debt levels

    The government's debt situation has deteriorated 
dramatically over the last year. A year ago, the President's 
budget estimated that $2 trillion would be available to lower 
the government's debt under the President's policies. Now it 
estimates over 10 years just $0.5 trillion will be available. 
As a result of the change in outstanding debt, CBO estimates 
that the government will spend nearly $1.0 trillion more on 
interest payments in 2002 through 2011 than it estimated a year 
ago.
    Similarly, the President's budget also projected last year 
that the $5.95 trillion ceiling on statutory debt would not be 
reached under the President's policies until 2008. In August 
2001, the administration revised that projection to 2004. In 
December 2001, it revised it downward yet again to as early as 
February 2002 and requested that the Congress expeditiously 
increase the ceiling by $750 billion to $6.7 trillion--an 
amount that would be the second-largest, one-time increase ever 
in the debt ceiling.
    The budget resolution puts the budget back on a path of 
fiscal discipline. As a result, under the budget resolution 
(and assuming defense reserve funds are available to protect 
Social Security and pay down the debt), debt held by the public 
would be more than $500 billion lower in 2012 than it would be 
under the President's budget. In total, under the Chairman's 
plan, debt held by the public declines by more than $1.0 
trillion over the 2003-2012 period.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                   2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
----------------------------------------------------------------------------------------------------------------
Budget Resolution:
    Debt Held By Public.........   3,517   3,558   3,548   3,503   3,428   3,339   3,218   3,072   2,807   2,362
President's Budget:
    Debt Held By Public.........   3,587   3,650   3,641   3,608   3,552   3,479   3,370   3,238   3,096   2,885
----------------------------------------------------------------------------------------------------------------

                          D. TAX EXPENDITURES

    The Congressional Budget Act of 1974 requires a listing of 
tax expenditures in the President's budget submission and in 
reports accompanying congressional budget resolutions. Tax 
expenditures are defined by the Act as ``revenue losses 
attributable to provisions of the Federal tax law which allow a 
special exclusion, exemption, or deduction from gross income or 
which provide a special credit, a preferential rate of tax, or 
a deferral of tax liability.'' Under this definition, the 
concept of tax expenditures refers to revenue losses 
attributable exclusively to corporate and individual income 
taxes. The estimates presented here are those of the Joint 
Committee on Taxation and are based on the committee's most 
recent report of January 17, 2002 (Estimates of Federal Tax 
Expenditures for Fiscal Years 2002-2006) (JCS-1-02). Because of 
the interaction among provisions, the Joint Committee on 
Taxation warns that it is incorrect to assume that estimates of 
separate tax expenditures can be summed to calculate a total 
revenue effect of a repeal of a group of tax expenditures. The 
tax expenditures in the following list are estimated 
separately, under the assumption that all other tax 
expenditures remain in the code. If two or more tax 
expenditures were estimated simultaneously, the total change in 
tax liability could be smaller or larger than the sum of the 
amounts shown for each item separately.
    Tables follow:

                                     TABLE 1.--TAX EXPENDITURE ESTIMATES BY BUDGET FUNCTION, FISCAL YEARS 2002-2006
                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Corporations                                 Individuals
                      Function                       ------------------------------------------------------------------------------------------   Total
                                                        2002     2003     2004     2005     2006     2002     2003     2004     2005     2006    2002-06
--------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense:
  Exclusion of benefits and allowances to Armed       .......  .......  .......  .......  .......      2.3      2.3      2.4      2.4      2.4      11.8
   Forces personnel.................................
  Exclusion of military disability benefits.........  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
International Affairs:
  Exclusion of income earned abroad by U.S. citizens  .......  .......  .......  .......  .......      2.8      3.0      3.2      3.4      3.6      16.0
  Exclusion of certain allowances for Federal         .......  .......  .......  .......  .......      0.3      0.4      0.4      0.4      0.5       2.0
   employees abroad.................................
  Exclusion of extraterritorial income..............      4.8      5.2      5.6      6.0      6.5  .......  .......  .......  .......  .......      28.1
  Deferral of active income of controlled foreign         4.2      4.4      4.7      5.0      5.3  .......  .......  .......  .......  .......      23.6
   corporations.....................................
  Inventory property sales source rule exception....      4.8      5.2      5.6      6.0      6.4  .......  .......  .......  .......  .......      28.0
  Deferral of certain financing income..............      0.6      0.2  .......  .......  .......  .......  .......  .......  .......  .......       0.8
General Science, Space, and Technology:
  Tax credit for qualified research expenditures....      5.0      5.4      4.7      2.8      1.5    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      19.4
  Expensing of research and experimental                  4.5      4.7      4.7      4.8      5.0    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      23.7
   expenditures.....................................
Energy:
  Expensing of exploration and development costs:
    Oil and gas.....................................      1.6      1.2      0.7      0.3      0.6    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       4.4
    Other fuels.....................................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.2
  Excess of percentage over cost depletion:
    Oil and gas.....................................      0.5      0.4      0.4      0.4      0.4    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       2.2
    Other fuels.....................................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
  Tax credit for enhanced oil recovery costs........      0.2      0.2      0.2      0.2      0.2      0.1      0.1      0.1      0.1      0.1       1.4
  Tax credit for production of non-conventional           1.3      0.8      0.5      0.5      0.5      0.3      0.2      0.1      0.1      0.1       4.5
   fuels............................................
  Tax credit for alcohol fuels \2\..................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......  .......  .......  .......  .......     (\1\)
  Exclusion of interest on State and local              (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.1      0.1      0.1      0.1      0.1       0.7
   government industrial development bonds for
   energy production facilities.....................
  Exclusion of energy conservation subsidies          .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
   provided by public utilities.....................
  Tax credit for investments in solar and geothermal    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
   energy facilities................................
  Tax credit for electricity production from wind,      (\1\)    (\1\)    (\1\)    (\1\)      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.3
   closed-loop biomass, and poultry waste...........
Natural Resources and Environment:
  Expensing of exploration and development costs,       (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.3
   nonfuel minerals.................................
  Excess of percentage over cost depletion, nonfuel       0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1       0.7
   minerals.........................................
  Expensing of multiperiod timber-growing costs.....      0.2      0.2      0.2      0.2      0.2    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.9
  Exclusion of interest on State and local                0.2      0.2      0.2      0.2      0.2      0.4      0.4      0.4      0.4      0.4       2.9
   government sewage, water, and hazardous waste
   facilities bonds.................................
  Special rules for mining reclamation reserves.....    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.2
  Special tax rate for nuclear decommissioning            0.2      0.2      0.3      0.3      0.3  .......  .......  .......  .......  .......       1.3
   reserve fund.....................................
  Exclusion of contributions in aid of construction     (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......  .......  .......  .......  .......       0.1
   for water and sewer utilities....................
Agriculture:
  Expensing of soil and water conservation              (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.2
   expenditures.....................................
  Expensing of fertilizer and soil conditioner costs    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.1      0.1      0.1      0.1      0.1       0.3
  Expensing of the costs of raising dairy and           (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
   breeding cattle..................................
  Exclusion of cost-sharing payments................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
  Exclusion of cancellation of indebtedeness income   .......  .......  .......  .......  .......      0.1    (\1\)    (\1\)    (\1\)    (\1\)       0.2
   of farmers.......................................
  Cash accounting for agriculture...................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.5      0.3      0.3      0.3      0.3       1.7
  Income averaging for farmers......................  .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
  Five-year carryback period for net operating          (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.2
   losses attributable to farming...................
Commerce and Housing:
  Financial institutions:
    Exemption of credit union income................      0.9      0.9      0.9      1.0      1.0  .......  .......  .......  .......  .......       4.7
  Insurance companies:
    Exclusion of investment income on life insurance      1.3      1.4      1.4      1.5      1.5     23.6     24.2     24.9     25.5     26.2     131.6
     and annuity contracts..........................
    Small life insurance company taxable income           0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.7
     adjustment.....................................
    Special treatment of life insurance company           1.2      1.3      1.3      1.4      1.4  .......  .......  .......  .......  .......       6.6
     reserves.......................................
    Deduction of unpaid loss reserves for property        2.9      3.0      3.0      3.1      3.2  .......  .......  .......  .......  .......      15.2
     and casualty insurance companies...............
    Special deduction for Blue Cross and Blue Shield      0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
     companies......................................
  Housing:
    Deduction for mortgage interest on owner-         .......  .......  .......  .......  .......     66.5     69.8     72.1     76.5     80.5     365.5
     occupied residences............................
    Deduction for property taxes on owner-occupied    .......  .......  .......  .......  .......     21.4     22.1     21.4     18.8     15.5      99.2
     residences.....................................
    Exclusion of capital gains on sales of principal  .......  .......  .......  .......  .......     13.8     13.8     13.9     14.0     14.1      69.6
     residences.....................................
    Exclusion of interest on State and local              0.3      0.3      0.3      0.3      0.3      0.7      0.8      0.8      0.8      0.8       5.3
     government bonds for owner-occupied housing....
    Exclusion of interest on State and local              0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.2      0.2      0.2       1.0
     government bonds for rental housing............
    Depreciation of rental housing in excess of           0.3      0.3      0.3      0.3      0.3      2.5      2.7      2.8      3.1      3.4      16.0
     alternative depreciation system................
    Tax credit for low-income housing...............      2.7      2.9      3.0      3.2      3.3      1.2      1.2      1.3      1.4      1.4      21.6
    Tax credit for first-time homebuyers in the       .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)  .......  .......       0.1
     District of Columbia...........................
    Tax credit for rehabilitation of historic             0.4      0.4      0.4      0.4      0.4      0.1      0.1      0.1      0.1      0.1       2.5
     structures.....................................
  Other business and commerce:
    Reduced rates of tax on long-term capital gains.  .......  .......  .......  .......  .......     65.1     57.4     56.8     53.8     53.3     286.4
    Exclusion of capital gains at death.............  .......  .......  .......  .......  .......     37.3     40.1     43.1     46.3     49.8     216.6
    Carryover basis of capital gains on gifts.......  .......  .......  .......  .......  .......      4.2      4.4      4.6      4.8      5.1      23.1
    Deferral of gain on non-dealer installment sales      0.6      0.6      0.6      0.7      0.7      0.4      0.4      0.4      0.4      0.4       5.2
    Deferral of gain on like-kind exchanges.........      1.3      1.4      1.4      1.5      1.5      0.4      0.5      0.5      0.5      0.5       9.5
    Deferral of gain on involuntary conversions       .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
     resulting from Presidentially-delcared
     disasters......................................
    Depreciation of buildings other than rental           1.2      1.2      1.1      0.9      0.9      0.5      0.5      0.4      0.4      0.3       7.4
     housing in excess of alternative depreciation
     system.........................................
    Depreciation of equipment in excess of               28.0     31.0     32.8     33.9     34.5      7.5      8.4      8.8      9.0      9.1     203.0
     alternative depreciation system................
    Expensing of depreciable business property......      0.3      0.3      0.2      0.2      0.1      1.3      1.3      0.9      0.6      0.4       5.6
    Amortization of business startup costs..........    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.5      0.5      0.5      0.5      0.6       2.6
    Reduced rates on first $10,000,000 of corporate       4.7      4.7      4.8      4.9      5.0  .......  .......  .......  .......  .......      24.1
     taxable income.................................
    Permanent exemption from imputed interest rules.    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.2      0.3      0.3      0.3      0.3       1.4
    Expensing of magazine circulation expenditures..    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.2
    Special rules for magazine, paperback book, and     (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
     record returns.................................
    Completed contract rules........................      0.2      0.2      0.2      0.2      0.2    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       1.2
    Cash accounting, other than agriculture.........    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.3      0.3      0.3      0.3      0.3       1.5
    Exclusion of interest on State and local              0.1      0.1      0.1      0.1      0.1      0.3      0.3      0.3      0.3      0.3       1.9
     government small-issue industrial development
     bonds..........................................
    Exception from net operating loss limitations         0.5      0.5      0.5      0.5      0.5  .......  .......  .......  .......  .......       2.5
     for corporations in bankruptcy proceedings.....
    Tax credit for employer-paid FICA taxes on tips.      0.1      0.1      0.1      0.1      0.2      0.2      0.3      0.3      0.3      0.3       2.0
    Ordinary income treatment of losses from sales    .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.2
     of small business corporation stock............
Transportation:
  Deferral of tax on capital construction funds for       0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
   shipping companies...............................
  Exclusion of employer-paid transportation benefits  .......  .......  .......  .......  .......      3.7      3.7      3.8      3.8      3.9      18.9
  Exclusion of interest on State and local              (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.5
   government bonds for high-speed rail.............
Community and Regional Development:
  Emplowerment zone tax incentives..................      0.2      0.3      0.3      0.3      0.3      0.3      0.4      0.4      0.4      0.4       3.3
  Renewal community tax incentives..................      0.1      0.1      0.1      0.2      0.2      0.3      0.4      0.4      0.4      0.4       2.7
  New markets tax credit............................    (\1\)    (\1\)      0.1      0.2      0.2    (\1\)      0.1      0.1      0.2      0.3       1.3
  District of Columbia tax incentives...............    (\1\)    (\1\)      0.1      0.1      0.1    (\1\)      0.1      0.1      0.1      0.1       0.6
  Indian reservation tax incentives.................      0.2      0.2      0.1    (\3\)     -0.1      0.1      0.1      0.1    (\3\)     -0.1       0.7
  Expensing of environmental remediation costs            0.1      0.1    (\1\)    (\3\)    (\3\)      0.1      0.1      0.1    (\3\)    (\3\)       0.5
   (``Brownfields'')................................
  Tax credit for rehabilitation of structures, other    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
   than historic structures.........................
  Exclusion of interest on State and local                0.2      0.2      0.2      0.2      0.2      0.5      0.5      0.5      0.5      0.5       3.6
   government bonds for private airports, docks, and
   mass-commuting facilities........................
Education, Training, Employment, and Social
 Services:
  Education and training:
    Tax credits for tuition for post-secondary        .......  .......  .......  .......  .......      4.3      4.3      4.3      4.3      4.3      21.5
     education......................................
    Deduction for interest on student loans.........  .......  .......  .......  .......  .......      0.6      0.6      0.7      0.8      0.8       3.5
    Deduction for higher education expenses.........  .......  .......  .......  .......  .......      1.5      2.1      3.7      2.9      0.1      10.3
    Exclusion of earnings of trust accounts for       .......  .......  .......  .......  .......      0.3      0.4      0.5      0.6      0.7       2.5
     education (``Coverdell accounts'').............
    Exclusion of interest on educational savings      .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
     bonds..........................................
    Exclusion of earnings of qualified tuition        .......  .......  .......  .......  .......      0.1      0.2      0.2      0.3      0.3       1.1
     programs.......................................
    Exclusion of scholarship and fellowship income..  .......  .......  .......  .......  .......      1.3      1.4      1.5      1.5      1.6       7.3
    Exclusion of employer-provided education          .......  .......  .......  .......  .......      0.5      0.7      0.8      0.8      0.9       3.7
     assistance benefits............................
    Parental personal exemption for students age 19   .......  .......  .......  .......  .......      1.0      1.0      0.9      0.4      0.1       3.4
     to 23..........................................
    Exclusion of interest on State and local              0.1      0.1      0.1      0.1      0.1      0.2      0.2      0.2      0.2      0.3       1.7
     government student loan bonds..................
    Exclusion of interest on State and local              0.2      0.2      0.2      0.3      0.3      0.6      0.6      0.6      0.6      0.7       4.4
     government bonds for private nonprofit
     educational facilities.........................
    Tax credit for holders of qualified zone academy    (\1\)    (\1\)      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.3
     bonds..........................................
    Deduction for charitable contributions to             1.0      1.1      1.2      1.3      1.4      5.5      6.1      6.4      6.6      6.5      37.1
     educational institutions.......................
  Employment:
    Exclusion of employee meals and lodging (other    .......  .......  .......  .......  .......      0.8      0.9      0.9      0.9      0.9       4.4
     than military).................................
    Exclusion of benefits provided under cafeteria    .......  .......  .......  .......  .......     11.4     12.7     13.7     14.8     15.6      68.2
     plans \4\......................................
    Exclusion of housing allowances for ministers     .......  .......  .......  .......  .......      0.4      0.4      0.5      0.5      0.5       2.3
    Exclusion of miscellaneous fringe benefits......  .......  .......  .......  .......  .......      5.7      6.0      6.2      6.4      6.7      31.0
    Exclusion of employee awards....................  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.7
    Exclusion of income earned by voluntary           .......  .......  .......  .......  .......      1.6      1.7      1.7      1.8      1.9       8.7
     employees' beneficiary associations............
    Special tax provisions for employee stock             0.8      0.9      0.9      0.9      0.9      0.2      0.2      0.3      0.3      0.3       5.7
     ownership plans (ESOPs)........................
    Work opportunity tax credit.....................      0.3      0.1      0.1    (\1\)    (\1\)      0.1    (\1\)    (\1\)  .......  .......       0.6
    Welfare-to-work tax credit......................      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......  .......       0.2
    Exclusion of spread on acquisition of stock       .......  .......  .......  .......  .......      0.5      0.6      0.8      0.9      1.0       3.8
     under incentive stock option plans and employee
     stock purchase plans...........................
  Social services:
    Tax credit for children under age 17 \5\........  .......  .......  .......  .......  .......     26.9     26.9     26.8     30.2     31.5     142.3
    Tax credit for child and dependent care expenses  .......  .......  .......  .......  .......      3.1      3.1      3.0      2.5      2.0      13.8
    Exclusion of employer-provided child care \6\...  .......  .......  .......  .......  .......      0.6      0.8      0.8      0.9      0.9       4.0
    Tax credit for employer-provided child care.....    (\1\)      0.1      0.1      0.1      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.6
    Exclusion of certain foster care payments.......  .......  .......  .......  .......  .......      0.5      0.5      0.6      0.6      0.6       2.8
    Adoption credit and employee adoption benefits    .......  .......  .......  .......  .......      0.2      0.2      0.3      0.3      0.3       1.3
     exclusion......................................
    Deduction for charitable contributions, other         1.7      1.9      2.1      2.2      2.4     30.0     32.9     34.8     35.8     35.1     178.9
     than for education and health..................
    Tax credit for disabled access expenditures.....    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.1      0.1      0.1      0.1      0.1       0.4
Health:
  Exclusion of employer contributions for health      .......  .......  .......  .......  .......     69.1     75.1     80.0     86.5     93.3     404.1
   care, health insurance premiums, and long-term
   care insurance premiums \7\......................
  Exclusion of medical care and CHAMPUS/TRICARE       .......  .......  .......  .......  .......      1.4      1.5      1.5      1.5      1.5       7.4
   medical insurance for military dependents,
   retirees, and retiree dependents.................
  Deduction for health insurance premiums and long-   .......  .......  .......  .......  .......      1.6      2.4      2.8      2.9      3.1      12.8
   term care insurance premiums by the self-employed
  Deduction for medical expenses and long-term care   .......  .......  .......  .......  .......      5.6      6.0      6.4      6.8      7.2      32.0
   expenses.........................................
  Exclusion of workers' compensation benefits         .......  .......  .......  .......  .......      3.5      3.7      3.8      3.9      4.0      18.9
   (medical benefits)...............................
  Archer medical savings accounts...................  .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
  Exclusion of interest on State and local                0.4      0.4      0.4      0.4      0.4      1.0      1.0      1.0      1.0      1.1       7.2
   government bonds for private nonprofit hospital
   facilities.......................................
  Deducation for charitable contributions to health       1.0      1.0      1.1      1.2      1.3      3.8      4.2      4.4      4.5      4.5      27.0
   organizations....................................
  Tax credit for orphan drug clinical testing.......      0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.7
Medicare:
  Exclusion of untaxed Medicare benefits:
    Hospital insurance..............................  .......  .......  .......  .......  .......     16.9     18.0     19.5     21.0     22.6      98.0
    Supplementary medical insurance.................  .......  .......  .......  .......  .......      9.8     11.1     11.9     12.7     13.7      59.2
Income Security:
  Exclusion of workers' compensation benefits         .......  .......  .......  .......  .......      5.4      5.6      5.8      6.1      6.4      29.3
   (disability and survivors payments)..............
  Exclusion of damages on account of personal         .......  .......  .......  .......  .......      1.4      1.4      1.4      1.4      1.4       7.0
   physical injuries or physical sickness...........
  Exclusion of special benefits for disabled coal     .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.3
   miners...........................................
  Exclusion of cash public assistance benefits......  .......  .......  .......  .......  .......      0.7      0.7      0.7      0.7      0.8       3.6
  Net exclusion of pension contributions and
   earnings:
    Employer plans..................................  .......  .......  .......  .......  .......     87.9     87.7     86.7     89.1     93.5     445.0
    Individual retirement plans.....................  .......  .......  .......  .......  .......     14.0     14.2     15.4     16.8     18.1      78.5
    Keogh plans.....................................  .......  .......  .......  .......  .......      5.6      5.7      5.8      6.0      6.3      29.3
  Tax credit for certain individuals for elective     .......  .......  .......  .......  .......      1.3      1.9      1.7      1.6      1.5       8.0
   deferrals and IRA contributions..................
  Tax credit for new retirement plan expenses of        (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
   small businesses.................................
  Exclusion of other employee benefits:
    Premiums on group term life insurance...........  .......  .......  .......  .......  .......      2.3      2.4      2.5      2.6      2.7      12.5
    Premiums on accident and disability insurance...  .......  .......  .......  .......  .......      2.3      2.4      2.6      2.7      2.8      12.8
  Additional standard deduction for the blind and     .......  .......  .......  .......  .......      2.0      2.1      2.2      2.3      2.3      10.8
   the elderly......................................
  Tax credit for the elderly and disabled...........  .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.1
  Deduction for casualty and theft losses...........  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       1.1
  Earned income credit (EIC) \5\....................  .......  .......  .......  .......  .......     33.7     35.0     35.7     36.2     37.0     177.6
Social Security and Railroad Retirement:
  Exclusion of untaxed social security and railroad   .......  .......  .......  .......  .......     22.6     23.5     24.3     25.0     25.7     121.1
   retirement benefits..............................
Veterans' Benefits and Services:
  Exclusion of veterans' disability compensation....  .......  .......  .......  .......  .......      2.3      2.4      2.4      2.5      2.6      12.1
  Exclusion of veterans' pensions...................  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.6
  Exclusion of veterans' readjustment benefits......  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.7
  Exclusion of interest on State and local              (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)       0.2
   government bonds for veterans' housing...........
General Purpose Fiscal Assistance:
  Exclusion of interest on public purpose State and       6.1      6.2      6.2      6.3      6.4     15.7     15.8     16.0     16.3     16.5     112.0
   local government debt............................
  Deduction of nonbusiness State and local            .......  .......  .......  .......  .......     44.9     46.3     45.3     41.5     34.7     212.7
   government income and personal property taxes....
  Tax credit for Puerto Rico and possession income,       2.6      2.2      2.0      1.8      0.5  .......  .......  .......  .......  .......       9.1
   and Puerto Rico economic activity................
Interest:
  Deferral of interest on savings bonds.............  .......  .......  .......  .......  .......      1.6      1.6      1.6      1.6      1.6       8.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Positive tax expenditure of less than $50 million.
\2\ In addition, the exemption from excise tax for alcohol fuels results in a reduction in excise tax receipts, net of income tax effect, of $0.7
  billion per year in fiscal years 2002 through 2006.
\3\ Negative tax expenditure of less than $50 million.
\4\ Estimate includes amounts of employer-provided health insurance purchased through cafeteria plans and employer-provided child care purchased through
  dependent care flexible spending accounts. These amounts are also included in other line items in this table.
\5\ The amount of refundable child tax credit and earned income tax credit used to offset taxes other than income tax or paid out as refunds is: $38.5
  billion in 2002, $39.5 billion in 2003, $40.2 billion in 2004, $40.5 in 2005, and $43.4 billion in 2006.
\6\ Estimate includes employer-provided child care purchased through dependent care flexible spending accounts.
\7\ Estimate includes employer-provided health insurance purchased through cafeteria plans.

Note.--Details may not add to totals due to rounding.

Source: Joint Committee on Taxation.




  SENATE COMMITTEE BUDGET AUTHORITY AND OUTLAY ALLOCATIONS PURSUANT TO SECTION 302 OF THE CONGRESSIONAL BUDGET
                                           ACT, BUDGET YEAR TOTAL 2003
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                   Direct spending        Mandatories funded in
                                                                    jurisdiction          annual appropriations
                                                             --------------------------           acts
                          Committee                                                    -------------------------
                                                                 Budget      Outlays       Budget
                                                               authority                 authority     Outlays
----------------------------------------------------------------------------------------------------------------
Appropriations
    General Purpose Discretionary...........................      766,167      757,552            0            0
    Memo:
        on-budget...........................................      762,329      753,735            0            0
        off-budget..........................................        3,838        3,817            0            0
    Highways................................................            0       29,282            0            0
    Mass Transit............................................            0        6,030            0            0
    Conservation............................................        1,922        1,872            0            0
      Subtotal, discretionary...............................      768,089      794,736            0            0
    Mandatory...............................................      384,973      371,629            0            0
      Total (on-budget).....................................    1,149,224    1,162,548            0            0
Agriculture, Nutrition, and Forestry........................       27,083       22,162       38,588       38,389
Armed Services..............................................       77,001       76,293          160          121
Banking, Housing and Urban Affairs..........................       13,480        1,270          134            6
Commerce, Science, and Transportation.......................       12,557        8,389          871          866
Energy and Natural Resources................................        2,553        2,269           64           77
Environment and Public Works................................       33,612        2,210       -1,393            0
Finance.....................................................      738,122      740,448      283,651      283,684
Foreign Relations...........................................       11,077       10,068          185          184
Governmental Affairs........................................       64,395       64,287       16,408       16,408
Judiciary...................................................        8,984        8,143          507          506
Health, Education, Labor, and Pensions......................        4,650        4,155        2,835        2,786
Rules and Administration....................................           83           47          100          100
Ingelligence................................................            0            0          223          223
Veterans' Affairs...........................................        1,348        1,396       28,640       28,279
Indian Affairs..............................................          233          222            0            0
Small Business..............................................            3         -238            0            0
Unassigned to Committee.....................................     -345,465     -334,970       14,000            0
                                                             ---------------------------------------------------
      Total (on-budget).....................................    1,798,940    1,768,699      384,973      371,629
----------------------------------------------------------------------------------------------------------------


  SENATE COMMITTEE BUDGET AUTHORITY AND OUTLAY ALLOCATIONS PURSUANT TO SECTION 302 OF THE CONGRESSIONAL BUDGET
                                          ACT, 5-YEAR TOTAL: 2003-2007
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                   Direct spending        Mandatories funded in
                                                                    jurisdiction          annual appropriations
                                                             --------------------------           acts
                          Committee                                                    -------------------------
                                                                 Budget      Outlays       Budget
                                                               authority                 authority     Outlays
----------------------------------------------------------------------------------------------------------------
Agriculture, Nutrition, and Forestry........................      108,443       89,803      200,191      199,272
Armed Services..............................................      416,308      414,911          602          614
Banking, Housing and Urban Affairs..........................       65,484          915          707           68
Commerce, Science, and Transportation.......................       49,340       28,935        4,750        4,726
Energy and Natural Resources................................       12,024       10,895          320          341
Environment and Public Works................................      173,621        9,609       -7,253            0
Finance.....................................................    4,074,689    4,080,813    1,635,720    1,635,755
Foreign Relations...........................................       57,800       52,340          933          932
Governmental Affairs........................................      348,946      348,359       91,803       91,803
Judiciary...................................................       29,691       30,083        2,591        2,594
Health, Education, Labor, and Pensions......................       26,293       23,682       14,978       14,813
Rules and Administration....................................          412          409          515          515
Veterans' Affairs...........................................        6,620        6,663      154,452      153,621
Intelligence................................................            0            0        1,197        1,197
Indian Affairs..............................................        1,221        1,197            0            0
Small Business..............................................            8         -416            0            0
----------------------------------------------------------------------------------------------------------------


  SENATE COMMITTEE BUDGET AUTHORITY AND OUTLAY ALLOCATIONS PURSUANT TO SECTION 302 OF THE CONGRESSIONAL BUDGET
                                          ACT, 10-YEAR TOTAL: 2003-2012
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                   Direct spending        Mandatories funded in
                                                                    jurisdiction          annual appropriations
                                                             --------------------------           acts
                          Committee                                                    -------------------------
                                                                 Budget      Outlays       Budget
                                                               authority                 authority     Outlays
----------------------------------------------------------------------------------------------------------------
Agriculture, Nutrition, and Forestry........................      184,228      153,814      433,198      431,333
Armed Services..............................................      912,099      909,880        1,116        1,194
Banking, Housing and Urban Affairs..........................      130,502       -1,513        1,505          583
Commerce, Science, and Transportation.......................      103,440       61,845       10,667       10,614
Energy and Natural Resources................................       21,515       19,836          640          661
Environment and Public Works................................      366,920       17,782      -15,265            0
Finance.....................................................    9,276,396    9,277,447    4,034,104    4,033,894
Foreign Relations...........................................      122,574      111,987        1,878        1,877
Governmental Affairs........................................      771,297      769,998      209,478      209,478
Judiciary...................................................       54,814       54,802        5,386        5,375
Health, Education, Labor, and Pensions......................       58,419       52,911       32,115       31,831
Rules and Administration....................................          808        1,025        1,082        1,082
Veterans' Affairs...........................................       12,509       12,559      332,582      331,329
Intelligence................................................            0            0        2,589        2,589
Indian Affairs..............................................        2,605        2,561            0            0
Small Business..............................................           13         -492            0            0
----------------------------------------------------------------------------------------------------------------

                  VI. Enforcement and Other Provisions

    A budget resolution does not become law, and cannot amend 
law. However, provisions of a budget resolution can affect the 
consideration of legislation to implement the policies assumed 
in the resolution. The committee-reported budget resolution 
includes a number of such provisions.

            TITLE II--BUDGETARY RESTRAINTS AND RESERVE FUNDS

                    Subtitle A--Budgetary restraints


Sec. 201. Circuit Breaker to Protect Social Security.

    The committee-report resolution provides that starting in 
January 2003, if CBO's budget and economic outlook report for a 
fiscal year projects an on-budget deficit (excluding Social 
Security) for the budget year or any subsequent fiscal year 
covered by its projections, then the budget resolution must 
protect Social Security by reducing those deficits, and put the 
budget on a path to achieve balance within five years (but 
shall not reduce Social Security benefits). A budget resolution 
that fails to reduce such deficits and put the budget on a path 
to balance within 5 years will be subject to a point of order 
in the Senate. An amendment to a budget resolution that would 
increase on-budget deficits relative to the budget resolution 
or that would cause the budget to fail to reach balance within 
5 years will also be subject to a point of order in the Senate. 
There is an exception for war and low economic growth.

Sec. 202. Extension of Supermajority Enforcement.

    The committee-reported resolution would extend for five 
years, for purposes of Senate enforcement, the supermajority 
waiver and appeal provisions of Sections 904(c)(2) and 
904(d)(3) of the Congressional Budget Act of 1974, currently 
due to expire on September 30, 2002. Those provisions require a 
three-fifths vote to waive the following points of order, or to 
appeal a ruling of the Chair:
           Sec. 301(i) of the Congressional Budget Act, 
        against a budget resolution that reduces Social 
        Security surpluses;
           Sec. 302(c) of the Congressional Budget Act 
        of 1974, against considering appropriations bills 
        without 302(b) allocations;
           Sec. 302(f) of the Congressional Budget Act 
        of 1974, against bills exceeding committee or 
        Appropriations subcommittee allocations;
           Sec. 310(g) of the Congressional Budget Act 
        of 1974, against a reconciliation bill that changes 
        Social Security;
           Sec. 311(a) of the Congressional Budget Act 
        of 1974, against legislation breaching the budget 
        resolution's levels for total budget authority, 
        outlays, revenue floors, and Social Security surpluses;
           Sec. 312(b) of the Congressional Budget Act 
        of 1974, against legislation exceeding the 
        discretionary spending caps;
           Sec. 312(c) of the Congressional Budget Act 
        of 1974, against legislation exceeding the maximum 
        deficit amount;
           Sec. 258(a)(4)(C) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985, prohibiting 
        amendments to resolutions on low growth or war;
           Sec. 258A(b)(3)(C)(i) of the Balanced Budget 
        and Emergency Deficit Control Act of 1985, against 
        nongermane amendments to a joint resolution modifying a 
        sequestration order;
           Sec. 258B(f)(1) & 258B(h)(1) of the Balanced 
        Budget and Emergency Deficit Control Act of 1985, 
        against nongermane amendments to a joint resolution 
        affirming the President's decision regarding 
        sequestration of function 050 (defense);
           Sec. 258B(h)(3) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985, against 
        amendments and conference reports on a joint resolution 
        that would increase Function 050 outlays above the 
        President's recommended cuts, unless they are offset;
           Sec. 258C(a)(5) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985, against any 
        reconciliation bill that exceeds the maximum deficit 
        amount; and
           Sec. 258C(b)(1) of the Balanced Budget and 
        Emergency Deficit Control Act of 1985, which makes the 
        provisions of sections 305 and 310 of the Congressional 
        Budget Act of 1974 apply also to the consideration of 
        resolutions, reconciliation bills, and reconciliation 
        resolutions reported under section 258C of the Balanced 
        Budget and Emergency Deficit Control Act.

Sec. 203. Pay-as-You-Go Rule in the Senate.

    The fiscal year 1994 budget resolution (H. Con. Res. 64) 
established a ``pay-as-you-go'' point of order in the Senate 
that prohibited consideration of direct spending and tax 
legislation that would increase the deficit or decrease the 
surplus in the first fiscal year of the budget resolution, the 
first five fiscal years, or the succeeding five fiscal years. 
This point of order could be waived only by an affirmative vote 
of three-fifths of the Senate. The fiscal year 1995 budget 
resolution modified and extended the point of order through 
fiscal year 1998. The fiscal year 1996 budget resolution (H. 
Con. Res. 67) modified and extended the point of order through 
September 30, 2002. The fiscal year 2000 budget resolution (H. 
Con. Res. 68) further modified this point of order, so that it 
now applies only to direct spending and tax legislation that 
would cause or increase an on-budget deficit in the first year, 
the first five years, or the succeeding five years.
    The committee-reported budget resolution restores the 
stricter, more fiscally responsible version of the paygo rule 
that was used in the Senate prior to fiscal year 2000. It 
provides, consistent with the paygo sequestration statute in 
section 252 of the Balanced Budget and Emergency Deficit 
Control Act of 1985, a supermajority point of order against 
mandatory spending and tax legislation that would decrease the 
on-budget surplus, cause an on-budgetdeficit, or increase an 
on-budget deficit in the first year, the first five years, or the 
second five years covered by the budget resolution.

Sec. 204. Advance Appropriations.

    The committee-reported resolution amends the exception to 
the supermajority point of order in the fiscal year 2002 budget 
resolution that limited advance appropriations enacted last 
year for fiscal year 2003. The revised provision will limit 
appropriations bills that first become effective in fiscal year 
2004 to $25.403 billion (excluding appropriations for the 
Corporation for Public Broadcasting). It strikes language in 
the fiscal year 2001 budget resolution providing points of 
order against advance appropriations and delayed obligations.

Sec. 205. Emergency Designations.

    The committee-reported resolution expands the current 
exception to the supermajority emergency designation point of 
order in the Senate so that the point of order does not apply 
to emergency designations for discretionary appropriations for 
defense or nondefense, including homeland security.

Sec. 206. Improvement in Budget Projections Dedicated toward Further 
        Debt Reduction.

    The committee-reported resolution provides that if CBO's 
summer budget and economic update includes improved deficit/
surplus numbers, the improvement in those amounts shall be 
dedicated toward debt reduction.

Sec. 207. Discretionary Spending Limits.

    The committee-reported budget resolution establishes a 
supermajority point of order in the Senate against considering 
any bill, joint resolution, amendment, motion, or conference 
report that would exceed overall caps on discretionary spending 
for fiscal year 2003 of $768.089 billion in budget authority or 
$794.736 billion in outlays, unless a declaration of war is in 
effect. The adoption of any supplemental appropriations Act or 
Acts shall adjust those caps.

                       Subtitle B--Reserve Funds


Sec. 211. Reserve Fund for Medicare, Prescription Drugs, and Health 
        Care.

    The committee-reported resolution allows the Chairman of 
the Budget Committee, in consultation with the members of the 
Budget Committee and the Chairman and ranking member of the 
appropriate committee, to adjust the allocations to the Finance 
Committee for legislation reported by the Finance Committee to 
expand health insurance coverage to the uninsured, and for 
legislation to provide a prescription drug benefit, protect 
beneficiary access to covered health care services and 
providers, and strengthen Medicare. A total of $500 billion 
over fiscal years 2003 through 2012 is made available for these 
purpose. The Committee may use all of this amount for providing 
a prescription drug benefit, protecting access to health care 
services and providers, and modernizing Medicare; or the 
Committee may use up to $95 billion of the total for expanded 
health insurance coverage legislation; or the Committee may 
provide for some combination of the two, up to $500 billion. In 
addition, the reserve fund does not preclude provisions that 
would exceed the reserve fund's limits, so long as those 
provisions are effective only upon the enactment of legislation 
producing savings sufficient to offset the cost of such 
provisions.

Sec. 212. Reserve Fund for the Individuals with Disabilities Education 
        Act.

    The committee-reported resolution allows the Chairman, in 
consultation with the members of the Budget Committee and the 
Chairman and ranking member of the appropriate committee, to 
increase the Health, Education, Labor, and Pensions (HELP) 
Committee's allocations by up to $2.5 billion in new budget 
authority and $50 million in outlays for fiscal year 2003, 
$37.5 billion in new budget authority and $21.4 billion in 
outlays for the total of fiscal years 2003 through 2007, and 
$112.5 billion in new budget authority and $90.6 billion in 
outlays for the total of fiscal years 2003 through 2012, for 
legislation that would increase funding for Part B grants, 
other than Section 619, under IDEA, with the goal that funding 
for these grants, when taken together with amounts provided by 
the Appropriations Committee, provides 40 percent of the 
national average per pupil expenditure for children with 
disabilities in the sixth years.

Sec. 213. Reserve Fund for Defense.

    The committee-reported resolution establishes a reserve 
fund for fiscal years 2005-2012 to accommodate possible war-
related or other defense expenses which may materialize in 
those years. It supports President Bush's defense increases for 
two years, and then increases the 2004 level at the rate of 
inflation thereafter. The reserve fund provides a mechanism to 
allow total budget authority and outlays and functional totals 
in the budget resolution to be increased by the Budget 
Committee in consultation with the Chairman and ranking member 
of the appropriate committee, by up to $11 billion in budget 
authority and $7 billion in outlays for 2005, $21 billion in 
budget authority and $17 billion in outlays in 2006, $32 
billion in budget authority and $27 billion in outlays in 2007, 
$33 billion in budget authority and $31 billion in outlays in 
2008, $35 billion in budget authority and $33 billion in 
outlays in 2009, $36 billion in budget authority and $35 
billion in outlays in 2010, $38 billion in budget authority and 
$37 billion in outlays in 2011, and $39 billion in budget 
authority and $38 billion in outlays in 2012, in the event that 
the Armed Services Committee reports legislation supporting 
such increases for expenses related to the war on terrorism. In 
the event that the reserve fund is not used, those amounts are 
dedicated toward debt reduction.

Sec. 214. Application and Effect of Changes in Allocations and 
        Aggregates.

    The committee-reported resolution contains language 
identical to that included in previous resolutions which makes 
clear when adjustments to the levels in the resolution for 
reserve funds will take effect, and clarifies the authority of 
the Budget Committee to make such adjustments.

                         Subtitle C--Rulemaking


Sec. 221. Exercise of Rulemaking Powers.

    As always, the committee-reported resolution includes 
language stating Congress' authority to legislate rules of 
procedure for the House and Senate.

                     Title III--Sense of the Senate

    Title III of the committee-reported resolution consists of 
the following non-binding provisions:

Sec. 301. Sense of the Senate Regarding Estimates of the Cost of Small 
        Business Credit Programs.

    The committee-reported resolution expresses the sense of 
the Senate that the administration should improve its credit 
estimates of small business programs and work with the Congress 
to ensure that adequate funding is provided in fiscal year 2003 
for small business credit programs.

Sec. 302. Sense of the Senate Regarding Federal Employee Pay.

    Expresses the sense of the Senate that there should 
continue to be parity between the adjustments in the 
compensation of members of the uniformed services and the 
adjustments in the compensation of civilian employees of the 
United States.

Sec. 303. Sense of the Senate Regarding Broadband Capabilities for 
        Underserved Areas.

    Expresses the sense of the Senate that Congress should 
provide grants to facilitate private sector deployment of 
broadband telecommunications networks and capabilities to 
underserved rural areas.

Sec. 304. Rejecting Reductions in Guaranteed Social Security Benefits.

    Expresses the sense of the Senate that Congress should 
reject the reductions in guaranteed Social Security benefits 
proposed by the President's Commission to Strengthen Social 
Security.

Sec. 305. Sense of the Senate on Mental Health Parity.

    Expresses the sense of the Senate that if the enactment of 
mental health parity legislation has a negative impact on the 
Social Security trust funds, the Secretary of the Treasury 
shall transfer from the general fund an amount sufficient to 
ensure that the Social Security trust funds are not reduced by 
the legislation.

Sec. 306. Sense of the Senate on Beneficiary Access to Health Services.

    Expresses the sense of the Senate that Congress should 
provide sufficient resources to ensure beneficiary access to 
high quality health services provided by home health agencies, 
skilled nursing facilities, physicians, and hospitals, 
including rural, teaching, community, and safety net hospitals 
that serve communities across the nation.

Sec. 307. Sense of the Senate on Cost of Prescription Drugs and 
        Competition.

    Expresses the sense of the Senate that if Congress passes 
legislation that utilizes market forces and competition to 
lower the cost of prescription drugs, and if CBO says that 
these measures save the Federal government money, these savings 
should be set aside to enhance a prescription drug benefit for 
Medicare recipients.

Sec. 308. Sense of the Senate on Equal Access to Medicare.

    Expresses the sense of the Senate that none of the funds 
provided in this resolution should be used to provide 
reimbursements under the Medicare program to any provider who 
requires beneficiaries to pay an access or membership fee, or 
requires the purchase of non-Medicare covered services as a 
precondition for receiving Medicare-covered care.

Sec. 309. Sense of the Senate Regarding Home Health Care.

    Expresses the sense of the Senate that Congress and the 
administration should work together to avoid the 15 percent 
reduction in the prospective payment system for home health 
care, and extend the 10 percent bonus payment for rural 
Medicare home health providers.

Sec. 310. Sense of the Senate Regarding Medicare Equity.

    Expresses the sense of the Senate in support of promoting 
geographic equity in Medicare fee for service payments and 
rewarding, rather than punishing, providers who deliver high-
quality, cost-effective Medicare services in all areas of the 
country.

Sec. 311. Sense of the Senate on Expanding Access to Affordable Health 
        Care Coverage for the Uninsured.

    Expresses the sense of the Senate that sufficient funding 
will be made available to expand access to affordable health 
care coverage for the uninsured; and that such funding shall 
permit a mix of options for private and public coverage, build 
upon and strengthen private and public coverage, target those 
who need it most, avoid creating new bureaucracies, and promote 
flexibility in expanding coverage.

Sec. 312. Sense of the Senate on Adequate Stockpile for Childhood 
        Immunizations.

    Expresses the sense of the Senate that adequate stockpiles 
be made available for all routine immunizations universally 
recommended for children.

Sec. 313. Sense of the Senate on Medicaid Commission.

    Expresses the sense of the Senate that Congress should 
establish a National Commission on Medicaid and State-Based 
Health Care Reform to study and make recommendations to 
theCongress, the President, and the HHS Secretary with respect to the 
program under title XIX of the Social Security Act.

Sec. 314. Sense of the Senate on Child Care Funding.

    Expresses the sense of the Senate that Congress should 
increase funding for the Child Care and Development Fund to 
meet the work requirements under the reauthorization of welfare 
programs and to allow states to expand child care programs to 
meet the needs of lower-income working families.

Sec. 315. Sense of the Senate Regarding the Child Tax Credit.

    Expresses the sense of the Senate that the Committee on 
Finance should extend the child tax credit for 2011 and the 
succeeding years, and that the Committee on Finance should 
offset the cost of that extension by enacting legislation to 
close down abusive corporate tax shelters and other abusive tax 
practices brought to light as a result of its investigations 
into the collapse of the Enron Corporation.

Sec. 316. Sense of the Senate on Defense Science and Technology.

    Expresses the sense of the Senate that science and 
technology should be no less than three percent of the budget 
of the Department of Defense by 2007.

Sec. 317. Sense of the Senate on Department of Defense Review of Tail-
        to-Tooth Commission.

    Expresses the sense of the Senate that Congress should 
request that the Department of Defense review the findings of 
the ``Tail-to-Tooth Commission'' and should closely evaluate 
ways to streamline overhead and support functions, and any 
savings made in this area should be used to provide the best 
support to our troops fighting the war or terrorism or critical 
resources for homeland defense.

Sec. 318. Sense of the Senate Regarding the National Guard.

    Expresses the sense of the Senate that the resolution 
assumes the Department of Defense will give priority to funding 
the Active Guard/Reserves and Military Technicians at least at 
the minimum required levels.

Sec. 319. Sense of the Senate on Concurrent Receipt of Military Retired 
        Pay and Veterans' Administration Disability Compensation.

    Expresses the sense of the Senate that Congress should 
repeal any law that established the offset of military retired 
pay by Veterans Disability Compensation, enact legislation that 
fully funds restoration of military retired pay to eligible 
disabled veterans, and that the President should provide full 
funding for military retired pay in future budget requests.

Sec. 320. Sense of the Senate on Full Funding for the Assistance to 
        Firefighters Grant Program.

    Expresses the sense of the Senate that the Assistance to 
Firefighters Grant Program administered by FEMA should be fully 
funded and remain a separate and distinct program that provides 
financial resources for basic fire fighting needs.

Sec. 321. Sense of the Senate on National Infrastructure Protection 
        Center.

    Expresses the sense of the Senate that the FBI should not 
receive the additional $21 million in budget authority 
requested for the National Infrastructure Protection Center 
(``NIPC'') until the Attorney General reports to the Congress 
that NIPC will remain an inter-agency organization and will not 
be transferred solely to the FBI.

Sec. 322. Sense of the Senate Regarding Tribal Colleges and 
        Universities.

    Expresses the sense of the Senate that priority 
consideration will be provided to tribal colleges through 
funding for the Tribally Controlled College or University 
Assistance Act, the Equity in Educational Land Grant Status 
Act, and Title III of the Higher Education Act; and such 
priority consideration reflects Congress' intent to continue to 
work toward statutory Federal funding goals for the Tribal 
Colleges and Universities.

Sec. 323. Sense of the Senate Regarding the Pell Grant.

    Expresses the sense of the Senate that the maximum Pell 
Grant award should be raised to the maximum extend practicable, 
and funding for the Pell Grant program should be higher than 
the level requested by the President.

Sec. 324. Sense of the Senate on Superfund.

    Expresses the sense of the Senate that funding for 
Superfund should be at a level sufficient to significantly 
increase the number of toxic waste sites cleaned up through the 
Superfund program.

Sec. 325. Sense of the Senate Regarding PILT Funding.

    Expresses the sense of the Senate that the Payment in Lieu 
of Taxes (``PILT'') program should be fully funded.

Sec. 326. Sense of the Senate on the State and Local Costs of Providing 
        Services to Illegal Immigrants.

    Expresses the sense of the Senate that the Federal 
government should pay for the costs incurred by state and local 
government for providing services to undocumented immigrants.

Sec. 327. Sense of the Senate on Balanced Budget Constitutional 
        Amendment.

    Expresses the sense of the Senate regarding a Senate vote 
on a balanced budget Constitutional amendment.

                   VII. Committee Views and Estimates

                                       U.S. Senate,
         Committee on Agriculture, Nutrition, and Forestry,
                                     Washington, DC, March 8, 2002.
Hon. Kent Conrad,
Chairman.
Hon. Pete V. Domenici,
Ranking Minority Member, Committee on the Budget, Washington, DC.
    Dear Mr. Chairman and Senator Domenici: This letter 
provides the views of the Senate Committee on Agriculture, 
Nutrition, and Forestry regarding the FY 2003 Budget 
Resolution. These views are provided in response to your 
February 4, 2002 letter and are in accordance with requirements 
of the Congressional Budget Act of 1974.
    As you know, a House and Senate conference committee is 
working to finalize a new multi-year farm bill which, if 
enacted, will replace the Federal Agriculture Improvement and 
Reform Act of 1996 that is due to expire later this year. We 
have differing views on farm policy and the commodity support 
budget, so we are reporting developments in those areas without 
providing policy guidance. With respect to other titles of the 
farm bill, this year's views and estimates letter addresses 
those areas where we have substantial agreement.
    For the past several years, American farmers and ranchers 
have been buffeted by persistently low commodity prices, 
especially for field crops. A combination of the programs of 
the Federal Agriculture Improvement and Reform Act of 1996 and 
four consecutive years of ad hoc farm assistance have been able 
to cushion these financial blows, at least in part. Although 
new farm income was at a healthy level of $49.4 billion in 2001 
with the help of supplemental payments totaling $5.5 billion, 
USDA projects that net farm income could decline by 20 percent, 
or more than $8 billion, for 2002 if additional assistance is 
not provided.
    The FY 2002 budget resolution provided the House Committee 
on Agriculture and the Senate Committee on Agriculture, 
Nutrition and Forestry with an FY 2002 allocation and a FY 
2003-2011 reserve fund that would permit the crafting of a farm 
bill that could spend up to $73.5 billion above baseline levels 
for the ten-year period. That process is well underway, with 
the passage of a House bill (H.R. 2646) in October 2001 and a 
Senate bill (S. 1731) in February 2002.
    We anticipate that passage of a new 2002 farm bill in the 
very near future will include farm programs with greater 
countercylical protection. While the final form of the farm 
bill is still under discussion in a House-Senate conference, 
the bills from both chambers retain the marketing assistance 
loan program and also incorporate a second counter-cyclical 
program that is partially decoupled. As a result of changes in 
assistance mechanisms, there is also likely to be a modest 
expansion of agricultural producers eligible for federal 
support.
    The farm bills passed by both the House and Senate reflect 
a commitment to strengthen voluntary, incentive-based 
conservation programs that would be available to more farmers 
than under current programs and funding levels. The increased 
funding levels should enable the Department of Agriculture to 
meet pending applications for existing programs, as well as 
provide new access to conservation programs for farmers not 
previously served, such as producers of horticultural corps and 
livestock. Under current law, the majority of conservation 
funds have been devoted to paying farmers to retire 
environmentally fragile land under the Conservation Reserve 
Program. While the CRP may expand to some extent in the next 
farm bill, a greater share of funding will also be devoted to 
encouraging conserving practices on working farmland.
    The Committee's strong support for agricultural research is 
also manifested in ongoing farm bill discussions. The funding 
level for the initiative for Future Agriculture and Food 
Systems, established under the Agricultural Research, 
Extension, and Education Reform Act of 1998 seems likely to be 
increased in the new farm bill providing greater opportunities 
for competitively-awarded agricultural research at land grant 
universities and other institutions. The U.S. agricultural 
sector continues to face a wide range of challenges that 
threaten its profitability. The negative effects of many of 
these challenges may be lessened or eliminated by more 
intensive research. Some of the most crucial issues include 
fighting plant and animal disease, developing new outlets and 
uses for agriculture products, and exploring new techniques to 
preserve the natural environment.
    Both the soft national economy and the financial problems 
faced by American farmers have contributed to weakness in the 
rural economy. In order to create more opportunities for rural 
residents, farmers and non-farmers alike, it is important that 
more resources be devoted to meeting infrastructure needs, 
improving the quality of life, and establishing access to 
capital for rural value-added efforts that provide benefits for 
local communities, not just absentee businesses.
    Foreign markets are an important outlet for U.S. 
agricultural commodities. The Committee notes that a new round 
of multilateral trade negotiations was launched in Doha, Qatar 
in November, 2001, giving additional impetus to further 
discussions on agricultural trade reform that had been underway 
since early 2000. A bill providing the President with authority 
to finalize trade agreements passed the House of 
Representatives last fall, and will likely be considered in the 
Senate in the next few months, together with other important 
trade-related legislation. The new farm bill includes a 
substantial new commitment to strengthening U.S. agricultural 
exports.
    Over the past several decades, U.S. international food 
assistance programs have played an important role in supporting 
advancement in developing countries, while fostering stronger 
commercial and political relationships with their governments. 
We expect to carefully review the President's proposal to limit 
the participation of private voluntary organizations to those 
food aid programs run by the Agency for International 
Development, as well as other matters relating to the operation 
and effectiveness of the food aid programs under the 
Committee's jurisdiction.
    Under consideration for the new farm bill are significant 
reforms of the federal food stamp program, including provisions 
that simplify program rules and encourage participation by 
eligible individuals, ones that will ensure a more successful 
transition from welfare to work, and others that modestly 
increase program benefits and restore benefits to legal 
immigrants who have been in the United States for at least five 
years or who have at least a four-year work history in the 
United States. The Senate-passed bill would also provide 
commodities to emergency food sites and our nation's schools 
and fund the Senior and WIC farmers' market nutrition programs. 
USDA's child nutrition programs are also due to be re-
authorized in 2003.
    The Committee believes that the U.S. agricultural sector 
has the potential to play a significant role in producing 
renewable energy and reducing our reliance on imported sources 
of energy. We support the inclusion of tax incentives for bio-
fuels, wind generation, and other renewable forms of energy and 
a renewable fuel standard in the comprehensive national energy 
policy bill. This is also a need to provide incentives for 
greater research, commercialization, production, and use of 
renewable energy, some of which are contained in the energy 
title in the Senate-passed farm bill.
    The Senate-passed farm bill also contains provisions to 
help deter and respond to bioterrorism directed at the 
agricultural sector. Recent biological terrorism and threats 
underscore the need to put additional resources (to fund both 
scientists and facilities) into detecting and combating animal 
and plant disease, whether accidentally or deliberately 
introduced. We must continue to be diligent in our efforts to 
protect the American food supply given the threat of 
bioterrorist attacks.
    The Committee is concerned with any fees or taxes proposed 
for sectors within the areas of the Committee's jurisdiction. 
For example, the Committee is concerned with the 
Administration's proposed fee on futures transactions and the 
potential adverse effects of such a fee on the competitiveness 
of the nation's regulated futures exchanges. This transaction 
tax would arguably put U.S. future exchanges at a competitive 
disadvantage to foreign and over-the-counter (OTC) competitors 
and may cause significant portions of the business to move to 
lesser regulated markets. For these reasons, the Committee 
urges that the 2003 budget resolution not assume any revenues 
from a transaction tax on futures trading.
    As your Committee considers the aggregate discretionary 
spending levels in the FY2003 budget resolution, we ask you to 
keep in mind several important items that are funded in the 
agricultural appropriations bill. These include rural economic 
development, competitive and formula funding for agricultural 
research, biomass and other renewable energy research, 
conservation, food aid, nutrition, and bioterrorism. The 
Committee will continue to review and monitor spending in both 
the farm and food and nutrition areas.
            Sincerely,
                                                Tom Harkin,
                                                          Chairman.
                                          Richard G. Lugar,
                                           Ranking Minority Member.
                                ------                                

                                       U.S. Senate,
                               Committee on Armed Services,
                                     Washington, DC, March 6, 2002.
Senator Kent Conrad,
Chairman.
Senator Pete Domenici,
Ranking Member, Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Kent and Pete: In accordance with your request, I am 
forwarding my recommendations on funding for the programs in 
the jurisdiction of the Armed Services Committee for the Fiscal 
Year 2003 Budget Resolution.
    In the near term, I believe there are some unfunded costs 
of the war on terrorism for fiscal year 2002, including the 
incremental costs of Operations Enduring Freedom and Noble 
Eagle, for which a fiscal year 2002 supplemental is needed. 
While I cannot comment on the specific supplemental request 
until it is submitted to the Congress, I do believe some level 
of supplemental funding will be required for FY2002.
    Our Committee is just beginning its review of the FY2003 
budget and the FY2003-2007 Future Years Defense program. With 
respect to FY2003, at this time I have a concern about the 
request for $10 billion in funding for which no specific 
programs have been identified. The Department of Defense has 
indicated that these funds will be needed for continuing 
military operations, including Operation Enduring Freedom, in 
fiscal year 2003. At this point neither the Congress nor the 
Administration is in a position to determine how much funding 
will be needed for such purposes. The additional funding 
required to support military operations in fiscal year 2003 
could be more or less than the amount proposed.
    It would be unprecedented and, in my view, unwise for 
Congress to authorize and appropriate a large account for 
unspecified military operations. Therefore, I believe that 
Congress should hold in reserve the $10 billion requested by 
the Administration for conducting the war on terrorism in 
fiscal year 2003 but for which a specific purpose has not yet 
been identified. Congressional action should be required for 
the release of such funds, but only after a request identifying 
the specific purposes for which the funds would be used.
    With respect to fiscal years after 2003, the 
administration's budget requests no real growth in fiscal year 
2004, an additional 7% real increase over the remaining years 
of the Future Years Defense Program, and no real increase after 
fiscal year 2007. It also appears to include approximately $10 
billion in each year beyond fiscal year 2003 for programs 
described as related to the ``cost of war''. At this point I do 
not know how long the war on terrorism will continue, or in 
what form. For this reason it is too soon to make long-term 
decisions on whether additional funds for the cost of the war 
will be needed for as long as ten years, or on the specific 
level of resources that will be needed for national defense in 
the future. I believe that the significant funding increases 
requested for fiscal year 2003 make it even more important that 
business process reforms such as the upcoming base closure 
round, acquisition reform, and improved financial management be 
vigorously implemented by the Department of Defense. Such 
reforms could free up additional resources that will be needed 
to modernize and transform our armed forces to meet the threats 
of the new century while at the same allowing us to continue to 
attract and retain quality people in the military services and 
maintain realistic training and high readiness levels.
    With respect to direct spending programs, in light of the 
strong support in the Senate for reform of the statute 
prohibiting concurrent receipt of military retirement and 
veterans disability compensation, I also recommend that the 
Budget Resolution provide a sufficient mandatory spending 
allocation for the Armed Services Committee to permit enactment 
of legislation providing full funding of these benefits.
    I look forward to working with you on a Budget Resolution 
for Fiscal Year 2003 that provides the necessary funding to 
protect and advance our national interests.
            Sincerely,
                                                Carl Levin,
                                                          Chairman.
                                ------                                

                                       U.S. Senate,
                               Committee on Armed Services,
                                     Washington, DC, March 5, 2002.
Hon. Kent Conrad,
Chairman.
Hon. Pete V. Domenici,
Ranking Member, Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Kent and Pete: In accordance with your request, I am 
forwarding my recommendations for the fiscal year 2003 budget 
resolution.
    During his State of the Union address on January 29, 2002, 
President Bush stated that the budget he would send the 
Congress would reflect his belief that, ``Our first priority 
must always be the security of our Nation.'' I strongly support 
this priority of our President, particularly as it pertains to 
homeland security. To accomplish this priority, the President 
established broad goals for America, which included winning the 
global war on terrorism, and protecting our homeland and our 
citizens from further attack. The fiscal year 2003 defense 
budget and Future Years Defense Plan (FYDP) which the President 
submitted to the Congress in February clearly supports these 
priorities and goals with significant increases in defense 
expenditures. I think we would all agree with the President's 
statement that, ``While the price of freedom and security is 
high, it is never too high.''
    I strongly support the fiscal year 2003 defense budget 
request of $379 billion in budget authority, which represents 
the largest increase--$48 billion over the fiscal year 2002 
appropriated level--for the Department of Defense in two 
decades. Following the most devastating attack on our homeland 
in history, with our Nation at war, it is essential that the 
Congress stand together with our President and provide our men 
and women in uniform the resources they need to successfully 
win this war and prepare for the many challenges ahead.
    It should be noted that almost half of the $48 billion 
increase--$19.4 billion--it specifically to pay for the costs 
of the global war on terrorism, both at home and abroad. 
Included in the $19.4 billion for the cost of the war is a $10 
billion contingency war reserve fund to pay for the anticipated 
fiscal year 2003 costs associated with the war. In my view, 
this $10 billion war reserve is a critical part of the 
President's Budget request, which will give the President and 
the Department of Defense the resources and flexibility they 
need to decisively fight the war on terrorism, both at home and 
abroad. This also sends a strong signal to all concerned of 
America's commitment.
    Given congressional oversight responsibilities and the 
power of the purse, I plan to work with my colleagues to seek a 
mechanism to ensure that the Congress is fully informed of how 
these contingency funds are expended.
    I am concerned that any failure on the part of the Congress 
to provide adequate funding for this ongoing war--both this 
year and throughout the FYDP--could be seen by terrorists and 
nations around the world as a weakening of the U.S. long-term 
commitment to fight terrorism. The terrorist threat is real, 
and growing. The funding we provide must be adequate to show 
our resolve to counter and defeat this threat, whatever it 
takes. In his State of the Union address, President Bush 
clearly stated, ``Our war on terror is only beginning . . . 
Tens of thousands of trained terrorists are still at large and 
we must pursue them, wherever they are. So long as training 
camps operate, so long as nations harbor terrorists, freedom is 
at risk.'' It is important that we provide our President the 
flexibility to vigorously prosecute the war against terrorism. 
We cannot know, with certainty, every detail of where this 
struggle will take us. But we must be prepared and able to 
respond.
    The budget request also provides significant increases for 
readiness, quality of life improvements for our uniformed 
personnel and their families, and modernization initiatives. 
The $379 billion request includes a $2.7 billion increase for 
military and civilian pay raises; a 3% real increase in 
operations and maintenance accounts; a 9% real increase in R&D 
accounts; and a 15.5% real increase in critical procurement 
accounts, resulting in total defense procurement of over $70 
billion. In the war in Afghanistan, the military has used high-
tech sensors and precision-guided munitions already in its 
inventory. This budget includes the resources to replenish and 
expand these inventories. At the same time, the budget request 
funds investment in new technologies to take us beyond current 
capabilities--it includes funds for missile defense, unmanned 
ships and planes, and space surveillance systems. The $48 
billion increase the President is requesting clearly continues 
the momentum needed to improve the Department's ability to 
perform its mission of protecting our Nation and its people.
    While I support the President's budget, I do have some 
concerns I plan to address during the course of the Committee's 
review of the budget request. Despite a $48 billion increase, 
this budget request does not fully address the requirements of 
our military, as evidenced by lists of ``unfunded 
requirements'' submitted by the Services which are in excess of 
$23 billion.
    I believe it is clear that the $379 billion in budget 
authority requested by the President for the Department of 
Defense (051), with an appropriate outlay funding level, is the 
minimum amount that should be included in the fiscal year 2003 
budget resolution. The amount for the National Defense function 
(050) should be $396.8 billion for fiscal year 2003.
    While the proposed budget includes funding for a number of 
critical quality of life initiatives, the issue of ``concurrent 
receipt'' remains to be addressed. Last year, the Congress 
included a provision in the Fiscal Year 2002 National Defense 
Authorization Act which allows military retirees to receive 
full military retirement pay as well as veterans disability 
pay, but made that authority contingent upon ``qualifying 
offsetting legislation.'' It is time for the Congress to act to 
remove that contingency and provide the necessary funding.
    There is overwhelming bipartisan support in the Senate and 
House to allow our military retirees to receive their full 
military retirement pay as well as any compensation for 
disabilities incurred during their service to our Nation. The 
Congressional Budget Office estimates that $1 billion in 
discretionary spending and $3.1 billion in mandatory spending 
are required for fiscal year 2003, and $5.5 billion in 
discretionary spending and $18.2 billion in mandatory spending 
are needed over fiscal years 2003 through 2007 to fund this 
important legislation.
    I request that you include funding in the budget resolution 
for this important program ``above'' the $379 billion in fiscal 
year 2003 for the Department of Defense requested by the 
President. If this amount is not added ``above the line,'' 
Congress would be forced to cut a number of the President's 
requested initiatives and programs, contained in his budget 
submission, to fund this hard-earned benefit.
    I look forward to working with you on a Budget Resolution 
for Fiscal Year 2003 that fully supports our strong national 
defense and provides the resource necessary to fulfill the 
critical mission our President has established--``To make sure 
our country is safe from further attack.'' We owe our Nation no 
less.
    With kind regards, I am
            Sincerely,
                                               John Warner,
                                                    Ranking Member.
    Attachment.

Ten Year Projection (050) Defense*--Total New Budget Authority ($B)

Fiscal year:
    2002.......................................................... 350.7
    2003.......................................................... 396.8
    2004.......................................................... 405.6
    2005.......................................................... 426.6
    2006.......................................................... 447.7
    2007.......................................................... 469.8
    2008.......................................................... 482.5
    2009.......................................................... 495.5
    2010.......................................................... 509.0
    2011.......................................................... 522.8
    2012.......................................................... 537.0

* FY02 does not reflect inclusion of any supplemental funding.
                                       U.S. Senate,
           Committee on Banking, Housing, and Urban Affairs
                                     Washington, DC, March 4, 2002.
Hon. Kent Conrad, Chairman.

Hon. Pete V. Domenici, Ranking Member,
Committee on the Budget, Washington, DC.
    Dear Senators Conrad and Domenici: This letter transmits 
the views and estimates of the Committee on Banking, Housing 
and Urban Affairs regarding the funding of programs in our 
jurisdiction, as required by Section 301 of the Congressional 
Budget Act.

                   Securities and Exchange Commission

    The Banking Committee is committed to providing the 
Securities and Exchange Commission (SEC) with the ability to 
pay its employees on a par with the employees of the Federal 
banking regulators. Early in the 107th Congress, the Committee, 
in legislation reducing SEC fees, included provisions to enact 
pay parity. The Competitive Market Supervision Act (S. 143) was 
the subject of a Committee hearing on February 14, 2001, and 
was marked up and reported out of Committee on March 1, 2001. 
The Senate on December 20, 2001, passed H.R. 1088, the Investor 
and Capital Markets Fee Relief Act, which would accomplish 
these purposes.
    While this problem was addressed in principle when the 
President signed the bill into law (Pub. L. No. 107-123) on 
January 16, 2002, the SEC must have enough money to exercise 
that authority and pay employees on a par with those of other 
agencies. It should be able to do so without having to cut back 
on the number of authorized employees. However, the President's 
budget request does not contain the funds to actually pay the 
employees at increased levels. We support budget authority to 
fully fund pay parity for the SEC.
    In addition, the Committee is concerned that the SEC have 
adequate financial resources to effectively perform its mandate 
to protect investors and assure the integrity of the securities 
markets. Healthy securities markets are essential to keeping 
our economy strong, and the Commission has a central role to 
play in assuring the integrity of the markets on which the 
critical element of investor confidence depends. In effect, a 
chain links the trust of the ordinary investor to the vigor of 
our economy; it is the responsibility of the SEC to keep that 
chain unbroken.
    The Commission is addressing many important issues 
involving investor protection, accounting, market regulation, 
disclosure and other matters facing the securities markets and 
needs adequate resources to deal with them. Among these are the 
concerns raised by the failure of Enron Corp. and the role of 
accountants, securities analysts, and rating agencies, which 
threaten public confidence in the securities markets. Some have 
called for the Commission to take a more active role in 
regulating the accounting profession. However, the Commission 
lacks the resources to do so. When asked at a press conference 
on January 17, 2002, why the Commission is not taking a more 
active role overseeing the accounting profession, Chairman Pitt 
responded, ``there's an awful lot that has to be done, and we 
would need hundreds--if not more--staff people and many more 
tens of millions of dollars to fund this out of the public's 
monies.'' The Commission's budget resources have not kept pace 
with the growth in the markets. For example, over a ten-year 
period the number of Commission disclosure review staff has 
remained stationary, while the value of public offerings nearly 
tripled; the dollar volume of securities transactions on 
exchanges and over-the-counter has increased at an annual rate 
of over 35%, while the number of Commission staff has increased 
at a rate of less than 4%.
    The Committee is also concerned that the SEC's resources 
have been spread too thin. This concern is hardly new. Twenty 
years ago, at the nomination hearing of Chairman-designate John 
Shad, I pointed out that the private sector often bears the 
burden of inadequate SEC staffing, since initiatives must be 
put off when decisions are delayed.
    And fifteen years ago, speaking from his vantage point as a 
private citizen, Harvey Pitt observed to the Senate Banking 
Committee that lagging pay scales were making it increasingly 
difficult for the Commission to attract young and talented 
lawyers graduating from law school, and to retain its 
professional staff members after investing in their training 
and professional development.
    The President's request for the fiscal year 2003 budget 
does not provide sufficient funds for the Commission to hire 
the necessary staff to effectively address developments in the 
market and to pay the staff appropriately. This is necessary to 
protect the integrity of the markets and maintain the public 
confidence. Former Commissioner Bevis Longstreth once described 
the Commission as ``a jewel among government agencies.'' It has 
never been more urgent than it is now for the Commission to 
maintain that high standard.
    On February 12, 2002, the Senate Banking Committee held the 
first in a series of oversight hearings on the topic of 
``Accounting and Investor Protection Issues Raised by Enron and 
Other Public Companies.'' The witnesses were five former 
Chairmen of the Securities and Exchange Commission: Roderick M. 
Hills, Harold M. Williams, David Ruder, Richard C. Breeden, and 
Arthur Levitt. These former Chairmen were unanimous about the 
need for additional resources for the SEC and the urgency for 
pay parity with other financial regulators, as provided in the 
``Investor and Capital Markets Fee Relief Act'' (PL 107-123). 
The fee reduction provisions of this legislation were 
implemented immediately upon the signature of the President, 
but, unfortunately, the pay parity provisions require 
additional funds, none of which were included in the 
Administration's budget request for the SEC in Fiscal Year 
2003.
    The Committee feels strongly that at a time when the 
Commission is being called upon to confront some of the most 
difficult law enforcement, market structure, and accounting 
issues that have ever faced this Nation, and to do so in a 
prudent, forceful yet timely manner, it is of critical 
importance that the SEC be able to attract and retain talented 
and experienced staff.

                          Housing Programs/HUD

    The Committee has undertaken a thorough review of housing 
needs among low-income Americans, and has heard considerable 
testimony that the housing needs in this country continue to 
grow. In hearings held late last year, these needs were clearly 
laid out before the Committee. It is estimated that almost 5 
million extremely low-income households, those whose incomes 
are under 30% of the area median income, have worst case 
housing needs. These families pay over half of their income in 
rent or live in substandard housing. If all households are 
included in this measure, 14 percent of American families would 
be considered to have worst case housing needs. The Committee 
is concerned that without adequately funded and effective 
housing programs, many of these families face losing their 
housing. The significant gap between the wages of low-income 
workers and housing costs makes evident that housing assistance 
is necessary for many working families. On average, a family in 
this country needs to earn over $13 an hour to afford a modest 
2-bedroom apartment. This is over two times the minimum wage. 
In some high-cost areas, a family would need to have three or 
four full-time minimum wage earners to afford a 2-bedroom 
apartment.
    Based on the data and information presented to the 
Committee, it is clear that a substantial commitment to Federal 
housing programs is necessary. The Committee believes that an 
adequate budget for HUD programs is essential. The 
Administration's budget proposal for fiscal year 2003 
unfortunately funds most HUD programs at the FY2002 level. 
While the Administration's budget shows an increase in budget 
authority for FY2003, this increase in budget authority does 
not expand housing programs or serve additional families, but 
is needed to renew contracts in the Section 8 program. Much has 
been made of the rising costs of Section 8. However, as you 
know, long-term Section 8 contracts are expiring and being 
renewed on one-year terms. As a result, budget authority has 
risen each year to reflect the annual renewals. However, 
outlays have remained relatively steady. Some small number of 
incremental Section 8 vouchers have been added to this total in 
the past several years. The Section 8 program serves 1.4 
million households, and funding for all renewals is necessary 
to ensure these families can remain in their homes.
    Given the testimony presented before this Committee about 
the number of families in need of housing assistance, we 
believe that the level of funding in the Administration's 
proposed budget is not adequate to ensure the programs operate 
effectively and are serving families in need. One area of great 
concern is the proposed cut of $417 million from the Public 
Housing Capital Fund. Public housing assists over 1.3 million 
of this nation's neediest families. A cut to the Capital Fund, 
the fund used to modernize and repair public housing, will mean 
that roofs and boilers go unrepaired, and that more families 
will live in substandard housing.
    The Administration has proposed a change to the way public 
housing agencies fund their capital needs, by allowing housing 
agencies to mortgage their properties in order to finance 
capital repairs. While this idea might generate private funds 
for public housing, we are concerned with some aspects of this 
proposal. We will work with the Administration to address these 
concerns.
    The Administration argues that this new initiative will 
decrease the need for Capital Funds next year. However, we 
strongly believe that the new legislative proposal for funding 
capital repairs must be viewed as a separate issue from the 
funding the Capital Fund receives in fiscal year 2003. The new 
proposal will not affect the needs of housing agencies in the 
next few years. Capital needs in public housing grow by $2.3 
billion every year, and an independent consultant has estimated 
that the backlog of needed capital repairs is over $20 billion. 
Any cut in the Capital Fund will result in the further 
deterioration of this nation's public housing stock. In 
addition, legislation implementing the Administration's plan 
has not yet been considered, and even if it is passed by the 
start of the next fiscal year, public housing agencies will not 
be able to take advantage of the program soon enough to lower 
the need for Federal capital funds in FY2003. Therefore, we 
believe that the budget should fully fund the Capital Fund at 
$3 billion, the amount the Capital Fund received in FY2001. We 
want to underscore the importance of preserving affordable 
housing, such as public housing. Maintaining existing 
affordable housing ensures that families are not displaced, and 
protects the Federal investment made in this housing.
    In addition, as witnesses in testimony before this 
Committee have reiterated, additional resources for the 
construction of new rental housing for extremely low-income 
families are needed. In the past decade, the number of units 
available to extremely low-income renters has dropped by 14%, a 
loss of almost a million units. The Committee is concerned that 
without additional Federal resources for affordable housing 
production, the need for affordable housing will surely not be 
met.
    We believe that additional funds may also be necessary to 
help families who receive housing assistance find decent, safe 
and affordable housing. The Committee will be looking at ways 
to improve the utilization of Section 8 vouchers. In some 
areas, families who receive voucher assistance are unable to 
find suitable housing that can be afforded with a voucher. In 
these cases, housing counseling, landlord outreach and other 
forms of search assistance may be necessary. A modest increase 
in funding may be needed to address these issues in the voucher 
program.
    The Committee will continue to examine the housing needs in 
America and how HUD programs can work to meet these needs. In 
addition, we will continue to conduct oversight into the 
Department's operations to ensure that housing and community 
development programs are effectively assisting families and 
communities in need. We are concerned with the current 
reorganization efforts at HUD, which have occurred with very 
little Congressional knowledge or input. HUD has faced 
significant management challenges in the past, and in an effort 
to address these problems, a number of independent offices were 
established, such as the Real Estate Assessment Center and the 
Office of Procurement. These offices were specifically designed 
to separate program and oversight functions, and their 
independence was critical in helping HUDmake progress, as found 
by the General Accounting Office and the National Academy of Public 
Administration. HUD recently moved these offices so they are no longer 
independent and do not report directly to the Secretary. We will be 
conducting oversight to ensure that such changes do not impede the 
progress HUD has made over the past few years.

                        Federal Transit Program

    Throught the Federal transit program, the Federal 
government supports states and localities in their efforts to 
develop multimodal transportation systems that meet the 
mobility needs of their communities. In 1998, Congress passed 
the Transportation Equity Act for the 21st Century (TEA-21), 
which reauthorized the Federal highway and transit programs. 
TEA-21 authorizes total transit funding of $41 billion and 
provides for guaranteed levels of transit funding in each of 
the six years of the authorization. The Committee will conduct 
oversight hearings on the transit program this year in 
preparation for the reauthorization of TEA-21 in 2003.
    The Committee believes that the Federal transit program 
should be funded at or above the FY03 guaranteed level of $7.2 
billion. The Committee also supports the continuation of the 
guaranteed funding firewalls through FY03 and beyond. Strong 
investment in our nation's transit systems is critical to our 
ability to restore America's economic growth, and is especially 
indispensable to our efforts to sustain and revitalize our 
metropolitan areas. Safe and efficient transit systems provide 
significant benefits both to transit riders and to others in 
the community, including employers, property owners, and 
automobile drivers. Moreover, the transit industry employs 
almost 400,000 workers.
    Transit ridership has increased twenty-one percent over the 
last five years. Robust support for transit is essential in 
light of this increasing demand. The U.S. Department of 
Transportation estimates that an annual investment of $10.8 
billion to $16 billion (in 1997 dollars) is needed to maintain 
and improve transit systems' condition and performance.
    The President's budget proposes two new initiatives--the 
New Freedom Initiative and environmental streamlining efforts--
which would be funded through a take-down from the Formula 
Grants Program. The Administration has not yet submitted 
authorizing legislation for these initiatives. The Committee 
has concerns about paying for these new initiatives out of 
funds already dedicated to existing programs.

                       First Accounts Initiative

    This year, the Committee's agenda includes examination of 
solutions for increasing access to affordable and convenient 
financial services for the millions of Americans who currently 
lack a relationship with an insured depository insitution. 
Numerous studies show that a lack of access to affordable 
banking services makes it difficult for individuals to 
establish traditional credit and limits their ability to access 
other financial products that help build wealth. The Committee 
is working closely with the Treasury Department on implementing 
the ``First Account'' initiative which was proposed by the 
Treasury in early 2000 to address the problems faced by the 
``unbanked.'' The initiative will support the development of 
innovative pilot programs to extend the benefits of an account 
in a Federally-insured financial institutions to low- and 
moderate-income Americans who cannot afford or lack convenient 
access to banking services and do not qualify for the 
Electronic Funds Transfer program. By reducing the cost to the 
depository institution of establishing low-cost accounts and 
providing by grants to be used for financial literacy, the 
initiative will help many lower-income consumers avoid being 
victimized by fringe financial institutions and predatory 
leaders.
    Congress appropriated $10 million for FY 2001 for the First 
Accounts initiative and the Treasury Departments has made 
substantial progress in developing and implementing the 
program. Unfortunately, the President's proposed budget would 
allocate only $2 million for the initiative in FY 2003. In 
order to have a real impact on the lives of the estimated 10 
million low- and moderate-income families that do not have bank 
accounts, it is essential that funding for First Accounts 
initiative be increased. We will work closely with the 
Appropriators to ensure adequate funding for this important 
initiative. First Accounts is a modest effort to develop 
opportunities for low- and moderate-income Americans to become 
part of the economic mainstream. The benefit will not only 
extend to lower-income Americans but to the financial 
institutions with which they do business and to our society as 
a whole.

           Community Development Financial Institutions Fund

    Many low-income individuals lack access to capital and 
affordable basic financial services that enable them to fully 
participate in the economic mainstream. As a result, their 
communities suffer from disinvestment and a proliferation of 
fringe financial entities that engage in predatory and abusive 
practices. Community Development Financial Institutions (CDFIs) 
have played an important role in stimulating economic 
development and transforming distressed communities across this 
nation. CDFIs create new economic opportunity for many 
businesses, individuals, and institutions that have been 
ignored by traditional financial institutions by successfully 
expanding the availability of credit, investment capital, and 
financial services.
    In 1994, a bipartisan Congress enacted legislation creating 
the Community Development Financial Institutions Fund. The CDFI 
Fund provides relatively small grants of capital to 
institutions that serve distressed communities and low-income 
individuals. The Fund's activities leverage private-sector 
investments from banks, foundations, and other funding sources. 
Since the Fund's creation, it has more than $534 million in 
awards to community development organizations and financial 
institutions.
    The President's proposed budget of $68 million for FY 2003 
is inadequate for the CDFI Fund to continue to effectively 
carry out its mission. While applications for grants continue 
to increase every year, we have witnessed a disturbing trend in 
budget requests from the Administration. The proposed budget 
for FY 2003 represents a $42.4% drop from the $118 million 
Congress approved for FY 2001 and equals that requested for FY 
2002 althoughCongress appropriated $80 million for this fiscal 
year. The proposed budget appears inconsistent with the 
Administration's commitment to improving the availability of credit and 
services in underserved communities. The CDFI Fund has proven that 
government and the private sector can work together successfully to 
help to infuse capital and investments in some of the most distressed 
communities across the nation. We will work closely with the 
Appropriators to increase the budget for this important agency.

                    National Flood Insurance Program

    The President has submitted several proposals for changes 
in the National Flood Insurance Program (NFIP). The Committee 
is concerned that these changes could result in significantly 
higher premiums that would place a substantial burden on 
policyholders, who may not be able to reduce their risk or move 
without significant mitigation assistance from FEMA. Any change 
in the premium structure should be undertaken only after 
careful consideration.
    The President requests $300 million for the Flood Map 
Modernization Fund. The Committee supports this request. 
Accurate flood maps are necessary to prevent loss of life and 
property and to reduce costs to the NFIP and disaster 
assistance funds. FEMA's flood plain maps are outdated and in 
serious need of modernization. According to FEMA, there are at 
least 2,700 flood-prone communities that are currently 
unmapped. Furthermore, 38% of FEMA's flood maps are over 15 
years old, and another 23% are between 10 and 15 years old. 
FEMA estimates that modernization of their map inventory would 
help avoid an estimated $26 billion in flood damage over a 50-
year period by providing accurate data for siting new 
construction and retrofitting existing buildings.
            Sincerely,
                                          Paul S. Sarbanes,
                                                          Chairman.
                                ------                                

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                     Washington, DC, March 1, 2002.
Hon. Kent Conrad, Chairman.
Hon. Pete V. Domenici, Ranking Republican Member,
Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Senators Conrad and Domenici: This letter sets forth 
the views of the Committee on Energy and Natural Resources on 
the budget for fiscal year 2003, in response to your letter of 
February 4, 2002 and in accordance with the requirements of the 
Budget Act.
    As you know, the Senate will soon begin debating 
comprehensive energy legislation to reduce our dependence on 
foreign oil, increase domestic energy production, improve 
energy efficiency, and strengthen energy research and 
development programs. The legislation is likely to have 
significant budgetary effects, which will need to be reflected 
in this year's budget resolution.
    In addition, the President has recommended development of a 
nuclear waste repository at Yucca Mountain, Nevada, and we 
believe the Senate will soon be called upon to approve his 
recommendation. Development of the repository will require 
significant spending increases for the Department of Energy to 
build and operate the repository.
    The Committee continues to support full funding of programs 
under the conservation spending categories added to the Budget 
Act in 2000. In addition, the Committee continues to believe 
that payments in lieu of taxes should be fully funded, even 
though it is not fully funded under the conversation spending 
categories.
    The Committee is also likely to consider legislation to 
increase the borrowing authority of the Bonneville Power 
Administration, to fund community-based restoration projects 
within the National Forest System and on public lands, to 
address California water and environmental issues, including 
the Calfed Bay-Delta Program, and to settle water claims in 
Arizona. While the budgetary effects of these measures are 
uncertain at this time, they are likely to be significant, and 
will need to be reflected in the budget resolution.
    We appreciate your consideration of our views and look 
forward to working with you and your Committee on the FY 2003 
budget.
            Sincerely,
                                   Frank H. Murkowski,
                                           Ranking Republican Member.
                                   Jeff Bingaman,
                                           Chairman.
                                ------                                

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                     Washington, DC, March 1, 2002.
Hon. Kent Conrad, Chairman.
Hon. Pete V. Domenici, Ranking Member,
Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Kent and Pete: In response to your letter of February 
4, 2002, we have prepared the following views and estimates for 
programs under the jurisdiction of the Committee on Environment 
and Public Works. As in previous years, a brief summary of the 
Committee's legislative initiatives also is included.

                        LEGISLATIVE INITIATIVES

    The Committee on Environment and Public Works will work on 
a number of legislative initiatives this year. The Committee 
expects to report the following bills:
    1. A multi-pollutant legislative initiative that will 
result in lower emissions for key pollutants from power plants;
    2. Legislation that provides additional funds for drinking 
water and wastewater treatment infrastructure needs. We have 
recently introduced a bill, S. 1961, that authorizes an 
additional $35 billion for FY 03-07 to increase funding to 
State revolving funds for use in meeting these needs:
    3. The Committee will work toward the development and 
passage of a Water Resources Development Act (WRDA) in 2002. 
The last WRDA was passed in 2000. This legislation will 
continue to support the authorization of important Corps 
activities;
    4. The Committee will begin the process of reauthorizing 
the Transportation Equity Act for the 21st Century (TEA-21). 
The next six-year authorization bill will actually be acted on 
by the Committee during the first session of the 108th 
Congress;
    5. Legislation to reverse the reduction in highway funding 
proposed by the administration for FY 03. The Highway Funding 
Restoration Act, S. 1917, sets the spending level for highways 
in FY 03 to not less than the level authorized in TEA-21 ($27.7 
billion);
    6. Legislation to provide new tools and increased resources 
to States and the Environmental Protection Agency to bring 
underground storage tanks into compliance with the Solid Waste 
Disposal Act. A bill currently awaiting action by the 
Committee, S. 1850, authorizes $25 million in general revenues 
and $385 million from the Leaking Underground Storage Tank 
Trust Fund (LUST) in FY 2003. The total authorization for FY 
03-07 is $1.155 billion ($125 million from general revenues and 
$1.030 billion from the LUST trust fund); and
    7. Legislation to expand the Department of Commerce's 
Economic Development Administration's (EDA) efforts to provide 
assistance to projects that redevelop brownfield sites.

                    SPECIFIC DISCRETIONARY PROGRAMS

1. Environmental Protection Agency

    The President requested $7.724 billion in discretionary 
spending and 17,648 Full Time Equivalents (FTE) for the EPA's 
FY 03 budget. This request represents a $283 million or 3.5% 
reduction from the FY 02 enacted level of $8.007 billion and an 
increase and an increase of 3 FTE. The request reflects $107.1 
million in additional benefits contributions in FY 03 and, for 
comparison sake, includes $103.6 million in additional benefits 
contributions for FY 02.
    The request for EPA's operating program is $4.056 billion, 
a $71 million or 1.8% increase in spending from the FY 02 
enacted level of $3.985 billion. EPA's operating program 
includes most of the agency's research, regulatory, partnership 
grants, enforcement program, and new responsibilities 
associated with homeland defense.
    In FY 02, the EPA allocated $12.5 million in base resources 
to homeland defense and received an additional $175.6 million 
in resources in an FY 02 supplemental. In FY 03, the President 
allocates $9.4 million in base resources to homeland defense 
and requests an additional $124 million in new in investments. 
In summary, $133.4 million or 1.7% of EPA's proposed budget 
would be allocated to homeland defense.
            Brownfields and Superfund
    The Committee strongly supports the Administration's 
request for $200 million for the brownfields program, an 
increase of $102 million or 104% from the FY 02 enacted level. 
The brownfields program will provide $29 million in funding and 
technical support for 74 new assessments and 52 existing 
assessments. About $30 million will be used to support 
assessment and cleanup of petroleum contaminants in 50 
brownfields communities. The Agency also will provide $50 
million for States and Indian tribes to establish or enhance 
their response programs.
    The Superfund program is proposed to be funded at $1.293 
billion, an increase of $3.5 million over FY 02 enacted levels. 
However, the budget request for the superfund programdeclines 
by $72 million compared to FY 02 enacted levels when the transfers to 
the Inspector General and Science and Technology accounts are made.
    The Committee notes that for the first time over 50% of the 
Superfund program will be funded by general revenues, and the 
Administration is projecting that this level will rise rapidly 
as the Superfund Trust Fund is nearing depletion. The Committee 
understands that EPA is increasingly targeting the cleanup of 
more complex sites, however, the Committee is concerned that 
sufficient funds be available to address the backlog of 
existing Superfund site cleanups and the cleanup of newly 
declared Superfund sites.
            State Revolving Loan Funds
    The President's budget request includes $1.212 billion for 
States and Tribes for the Clean Water State Revolving Fund 
(CWSRF), a reduction of $138 million or 10% from the FY 02 
enacted level. The Drinking Water State Revolving Fund (DWSRF) 
is requested at $850 million, the same as enacted in FY 02. The 
Committee supports spending levels for both SRF's at levels not 
less than those enacted in FY 02 and would urge the Budget 
Committee to support the levels contained in S. 1961.
    For the Clean Water SRF, S. 1961 would increase spending to 
$3.2 billion in FY 03 and FY 04, $3.6 billion in FY 05, $4 
billion in FY 06 and $6 billion FY 07. For the Drinking Water 
SRF, funding would rise to $1.5 billion in FY 03, $2 billion in 
FY 04 and FY 05, $3.5 billion in FY 06 and $6 billion in FY 07.
    The Committee notes with some concern that the 
Administration's budget proposal assumes that by FY 06 the 
CWSRF will no longer need Federal assistance and will provide 
$2 billion in average annual financial assistance. The 
Committee believes that this level of financial assistance will 
not be adequate given the estimated $300 billion to $1 trillion 
backlog in local clean water projects.

2. Federal Highways

    The Committee is strongly in favor of increasing the FY 
2003 Federal-aid highway obligation limit to at least $27.746 
billion, the level set in TEA-21. The President's budget 
proposes to reduce FY 2003 highway funding by $4.369 billion to 
reflect a negative Revenue Aligned Budget Authority (RABA) 
calculation. The Revenue Aligned Budget Authority mechanism was 
created in TEA-21 to ensure that spending from the highway 
account of the Highway Trust Fund would correspond to revenues 
into the trust fund. The President's budget provides $23.2 
billion for highways, down sharply from $31.8 billion in the 
current fiscal year. In addition to providing this additional 
funding under function 400, the Committee would like to work 
with the Budget Committee to ensure that a mechanism is in 
place to maintain the FY 2003 highway and transit budgetary 
firewalls if no statutory discretionary spending cap is 
implemented.
    The Committee feels very strongly that budget firewalls for 
highway and transit spending continue to be in place and will 
work closely with the Budget Committee to ensure that any 
legislation that extends the statutory discretionary spending 
cap also extends the transportation firewalls.

3. Department of Interior

    The budget request for current appropriations for the Fish 
and Wildlife Service is $1.3 billion, $8 million over the FY 02 
enacted level. Including the permanent accounts the budget 
request is $1.9 billion, the same level as enacted in FY 02. In 
FY 03, the Refuge System will celebrate the centennial of its 
creation by President Theodore Roosevelt. With a projected 40 
million annual visitors in FY 03 and a substantial operations 
and maintenance backlog, the Committee strongly supports the 
Fish and Wildlife Service's $56.5 million increase in the 
budget for the National Wildlife Refuge System.
    The Committee is also supportive of the increased funding 
levels for the Candidate Conservation Program, the Landowner 
Incentive Program, and Private Stewardship Grants. However, the 
Committee is concerned about a proposed $25 million decrease in 
State and Tribal Wildlife Grants. Also, given that funding for 
these programs will be derived through the Land and Water 
Conservation Fund (LWCF), the Committee supports full funding 
for the LWCF.
    Given the poor state of the nation's fish hatcheries, the 
Committee is concerned about the President's proposed cut of $5 
million from FY 02 enacted levels in hatchery operations and 
maintenance. The Committee is also concerned about the 
projected cuts in the Fish and Wildlife Service's construction, 
land acquisition, the Cooperative Endangered Species 
Conservation Fund, and neotropical migratory bird grants, as 
this will have an impact on the multinational species 
conservation fund.

4. Federal Emergency Management Agency

    The President's budget includes a new $3.5 billion First 
Responder Initiative. The initiative will nearly double the 
agency's FY 02 budget. FEMA's Office of National Preparedness 
will administer the new initiative. The Committee applauds the 
President's decision to allow FEMA to administer the 
initiative. The Committee looks forward to working with FEMA to 
establish a distribution formula that will recognize the need 
for terrorism preparedness in all areas of the country.
    The President's budget also establishes a competitive $300 
million grant program for hazard mitigation to replace the 
existing post-disaster mitigation program. The Committee 
anticipates an active dialogue with the agency to ensure that 
the new grant program does not work to the detriment of small, 
less populous states.

5. U.S. Army Corps of Engineers (Civil Works)

    The President's request for the civil works program for the 
Army Corps of Engineers is $4.29 billion, a $25 million 
decrease from the fiscal year 2002 appropriated amount. Of the 
requested amount, $115 million is a contingent amount for full 
funding of Federal retiree costs further decreasing the amount 
available to fund Corps projects. Even though funds have been 
requested to complete 30 construction projects, the Committee 
is concerned about the continued backlog in Corps projects.

6. General Services Administration (Public Buildings Service)

    The Committee supports the Administration's requested 
funding levels for construction, repairs, and alternations of 
public buildings. The President's budget request for the Public 
Building Service is $6.885 billion: $3.153 billion for rental 
of space; $2.011 billion for building operations; $986 million 
for repairs and alterations; $179 million for installment 
acquisition payments; and $557 million for construction and 
acquisition of facilities.
    We appreciate this opportunity to comment on the programs 
within the jurisdiction of the Environment and Public Works 
Committee. We look forward to working with you as you prepare 
the fiscal year 2003 budget.
            Sincerely,
                                   Jim Jeffords,
                                           Chairman.
                                   Bob Smith,
                                           Ranking Member.
                                ------                                

                                       U.S. Senate,
                                      Committee on Finance,
                                     Washington, DC, March 5, 2002.
Hon. Kent Conrad,
Chairman, Senate Committee on Budget, U.S. Senate, Washington, DC.
Hon. Pete Domenici,
Ranking Member, Senate Committee on Budget, U.S. Senate, Washington, 
        DC.
    Dear Kent and Pete: Pursuant to section 301(d) of the 
Congressional Budget Act of 1974, we are submitting our views 
and estimates with respect to federal spending and revenues 
within the jurisdiction of the Senate Committee on Finance for 
Fiscal Year 2003.

Medicare

    Medicare modernization continues to be a top priority for 
Congress this year. Updating the program's benefit package to 
include coverage for prescription drugs is one of the most 
important steps Congress can take to bring the program into the 
21st Century. Bipartisan principles for a drug benefit should 
ensure that benefit options available to seniors are 
affordable, comprehensive, universally available and part of 
the Medicare program. Special attention should be paid to 
policies that assure access in rural and other traditionally 
underserved areas, guarantee continuous availability of benefit 
options over time, and promote cost containment.
    Updating the Medicare benefit package is not the only step 
that Congress should consider in attempting to modernize the 
program, however. The Finance Committee will continue its 
efforts to provide regulatory relief to hospitals, physicians 
and other providers participating in Medicare. Legislation we 
introduced last year, together with Senators Kerry and 
Murkowski, would help make the Centers for Medicare and 
Medicaid Services (CMS) more responsive in its dealings with 
providers as well as beneficiaries.
    The Medicare+Choice (M+C) program represents another area 
where reform is needed. The administered pricing system 
currently used to reimburse M+C plans should be replaced with a 
more rational payment system. More specifically, payments to 
plans should be made on a competitive basis that would provide 
a more predictable and stable payment mechanism for plans. 
Plans should be neither advantaged nor disadvantaged relative 
to payments made on behalf of beneficiaries in the fee-for-
service program. Further, any reforms to the M+C program should 
implement comprehensive risk adjustment, thereby ensuring that 
payments to plans that enroll healthier or ``sticker'' than 
average beneficiaries are adjusted accordingly.
    The Finance Committee is concerned about the long term 
financial stability of the Medicare program, which will be 
tested as the number of beneficiaries doubles over the next 
thirty years when the baby boom generation retires. We support 
efforts to improve the measurement and transparency of 
Medicare's financial condition. These efforts should not 
undermine the current financing structure of the program, 
however.
    The views and estimates letter we submitted last year 
cautioned against consideration of provider payment increases, 
so-called ``Medicare givebacks.'' Since that time, an advisory 
panel to Congress has recommended changes in payment policy 
that could increase program costs substantially--by as much as 
$174 billion, according to some observers. These changes would 
impact virtually every provider group, including physicians, 
hospitals, rural providers, home health agencies, skilled 
nursing facilities and dialysis facilities. The Finance 
Committee will evaluate these recommendations for payment 
changes by provider type to assess their adequacy, accuracy and 
equity over the coming months. In doing so, the Committee will 
consider recent estimates by the Congressional Budget Office 
that Medicare outlays are expected to grow at an average annual 
rate of over 7.2 percent in the next decade as well as the 
unified budget deficit projected for 2003. The Committee's 
evaluation will also take into consideration recent evidence 
from the U.S. General Accounting Office about the 
appropriateness of current-law payment levels.
    Finally, the Committee remains concerned about current 
levels of funding for CMS. The agency's annual appropriations 
have not kept pace with increases in Medicare spending or with 
its Congressionally-mandated workloans. Many provisions from 
the Balanced Budget Act of 1997, the Balanced Budget Refinement 
Act of 1999, the Benefits Improvement and Protection Act of 
2000, and the Health Insurance Portability and Accountability 
Act of 1996 have yet to be implemented. Pending legislation, 
including proposals to reform Medicare through regulatory 
relief for providers and administrative reforms affecting both 
beneficiaries and CMS, will only exacerbate the current CMS 
workload and cost precious administrative dollars to implement. 
Moreover, the patchwork of computer systems and lack of updates 
to CMS' information technology capabilities have prevented the 
Congress from accessing timely data to adequately determine 
whether Medicare appropriately pays its providers.

Uninsured

    An estimated 39 million Americans were uninsured for the 
entire calendar year in 2000, the latest year for which 
official estimates are available. Although this represents a 
decrease of 600,000 from the previous year, the economic 
recession that began in March 2001 is believed tohave increased 
the number of people without health coverage by 2.0 million. Moreover, 
premiums for employer-sponsored health insurance are expected to 
increase by more than 15 percent in 2002. As a result, 13 percent of 
small employers and 6 percent of large employers are considering 
dropping health benefits, according to a recent survey. In short, the 
economic expansion of the late 1990s did little to expand health 
coverage, and the recent recession has substantially undermined any 
progress that was made.
    Although there is widespread recognition that lack of 
health insurance coverage and the growing ranks of the 
uninsured is a national crisis, there is little agreement on 
the solutions for addressing the problem. Many believe that the 
best approach to expand health coverage is to build on existing 
public programs, such as Medicaid and the Children's Health 
Insurance Program, while others, including the President, 
advocate tax incentives as a preferred approach.
    A bipartisan solution to increase health insurance coverage 
will involve a comprehensive approach that combines utilization 
of public programs and tax incentives. This approach is 
supported by the notion that some populations are best served 
by public programs, such as those with very low-incomes, people 
with disabilities, and others for whom employer-sponsored 
coverage is not an option. Other populations are better served 
through the provision of tax subsidies. Irrespective of income, 
over 80 percent of the uninsured are in working families who 
are either not offered insurance or turn down health benefits. 
Tax subsidies provide incentives for employers to offer 
insurance or for individuals to purchase insurance.
    Another dimension of the uninsured population that does not 
receive as much attention, but for whom policy solutions are 
within reach, are those who are eligible for--but not enrolled 
in--public programs. Improving outreach and enrollment efforts 
by examining the barriers that individuals and states face in 
accessing public programs should be part of any legislation to 
expand health insurance coverage.

Family Opportunity Act

    Last year, we requested, and received, a budget allocation 
specifically for the ``Family Opportunity Act.'' This 
legislation, cosponsored by 75 members in the Senate and 214 in 
the House, would provide health care assistance for children 
with disabilities. We believe that a similar allocation should 
be made in the FY 2003 budget.

TANF Reauthorization

    In 1996 Congress passed landmark welfare reform 
legislation, ending the sixty-year old Aid to Families with 
Dependent Children (AFDC) program and replacing it with the 
Temporary Assistance for Needy Families (TANF) block grant. 
Under TANF, aid is no longer an entitlement and states are 
required to move welfare recipients into work. Congress gave 
states substantial flexibility to achieve this goal. The 1996 
reform law was one of the most ambitious domestic policy 
efforts of recent decades.
    At this time, the Finance Committee is commencing a review 
of the 1996 law and its impact. We believe the program has been 
a success. Millions of welfare recipients have gone to work, 
just as we intended. We expect to us the 2002 reauthorization 
effort as an opportunity to build upon this success and to look 
for ways to improve TANF.
    With this in mind, we object to reductions in current TANF 
funding levels. While cash assistance rolls are down, states 
have used the flexibility in TANF to support former welfare 
recipients while they work and they should continue to have the 
resources to do so. In fact, additional TANF funds, 
particularly the restoration of ``supplemental'' funding to 
poorer states with relatively small TANF allocations, may be 
necessary. There is also a need to restore and improve the 
recently expired ``contingency fund'' that was intended to help 
states hit by severe economic downturns. Further, we believe 
that authorized funding levels for the Social Services Block 
Grant should be restored.
    The Finance Committee also will review the network of work 
supports, including child care, transitional Medicaid, and 
other related programs, which help low-income families get and 
keep jobs. We will work together to improve this network by 
building on initiatives such as transitional Medicaid. In 
addition, the Finance Committee has jurisdiction over certain 
aspects of the Child Care and Development Block Grant, which 
also must be reauthorized this year. This program could be used 
as the basis to assist more families with child care.
    Child support collections can be an important source of 
support for low-income working mothers. The President has 
proposed a set of policies intended to encourage states to 
increase the amount of these collections received by custodial 
parents. We plan to review these proposals and consider them in 
the context of TANF reauthorization.

Trade

    The Finance Committee will hold hearings as part of its 
continuing effort to vigorously oversee and ensure 
congressional involvement in international trade negotiations. 
Oversight attention will focus first on ongoing discussions 
aimed at concluding a new agreement under the aegis of the 
World Trade Organization. The Committee will also carefully 
oversee bilateral negotiations with Chile and Singapore as well 
as the development of the Free Trade Area of the Americas to 
ensure that congressional priorities are reflected in those 
negotiations.
    The Committee will also continue to oversee the application 
of U.S. Trade laws, particularly with reference to major trade 
disputes involving softwood lumber and steel.
    Legislatively, the Committee will work to secure Senate 
passage of important international trade legislation. In 2001, 
the Committee reported an historic expansion of the Trade 
Adjustment Assistance program that extends training, support, 
and adjustment assistance to workers, firms, and communities 
adversely impacted by trade. In the closing weeks of the 
session, the Committee also passed legislation to extend fast 
track negotiating authority--also referred to as Trade 
Promotion Authority--to the president coupled with 
congressional objectives for trade negotiations.
    Several other important pieces of trade legislation are 
also on the Committee's agenda. In the first session, the 
Committee reported an expansion of trade benefits to Andean 
countries--Peru, Columbia, Ecuador, and Bolivia--known as the 
Andean Trade Preference Act. The Committee also hopes to extend 
the Generalized System of Preferences, which expired in 2001.
    The Committee hopes to win passage for this legislation in 
the second session and, ultimately, see it signed into law.
    Finally, the Committee will also address the results of 
international dispute settlement proceedings. Concerns have 
been raised about the results of several WTO dispute settlement 
proceedings and the Administration may seek Senate 
consideration of legislation responding to recent panel 
decisions on the long-running dispute on the tax treatment of 
U.S. companies' overseas operations.

Revenues

    The Finance Committee has reported or will consider 
legislation that addresses revenues in a number of areas.
    Energy Security.--The Finance Committee has reported 
legislation to promote the production of energy from domestic 
sources, to reduce the consumption of energy, and to encourage 
cleaner production of energy.
    Economic Stimulus.--The Finance Committee may consider 
legislation to provide tax relief, extended unemployment 
benefits, and other matters such as extension of expiring tax 
provisions, as economic stimulus.
    Rebuilding New York.--The Finance Committee has reported 
legislation to provide tax incentives to aid in the rebuilding 
of lower Manhattan. These include bond incentives, a tax credit 
for hiring and retaining workers in the recovery zone, and 
depreciation and expensing rules to promote construction in New 
York City.
    Tax Compliance.--The Finance Committee expects to consider 
legislation that will address abusive tax shelters as well as 
provide meaningful penalty relief and reform for individuals 
and corporate taxpayers.
    Pension Reform.--The Finance Committee will review 
proposals to minimize reductions in retirement asset when the 
value of their employers' stock drops. The Committee will 
review proposals to increase disclosure to workers, to maximize 
opportunities for diversification, and to ensure fair rules on 
divestiture of company stock. In addition, in light of the 
elimination of the issuance of 30-year Treasury securities, the 
Committee will consider legislation to establish an appropriate 
benchmark for the computation of employer contributions to 
defined benefit plans.
    Encourage Charitable Giving.--The Finance Committee intends 
to mark up legislation that will provide new incentives for 
American taxpayers to support charitable organizations. The 
Committee will review proposals such as allowing a deduction of 
charitable giving by individuals who do not itemize, allowing a 
charitable withdrawal of individual retirement accounts (IRAs), 
an increase in corporate charitable tax deductions and expanded 
treatment of charitable donations of food.
    Rural America Economic Development.--We are both committed 
to promoting legislation in support of the agricultural 
communities that has previously passed the Senate. Such a 
package would help rural communities, community banks, 
cooperatives, farmers, ranchers, and fishermen. In addition, 
the Committee intends to consider other legislation related to 
rural economic development, including incentives for small 
businesses.
    It would be useful if the FY2003 Budget Resolution contains 
language that would allow consideration of the legislative 
items specified above.

Social Security

    The Social Security system is projected to run significant 
annual surpluses over the next decade. However, as the baby 
boomer generation reaches retirement, these annual surpluses 
will diminish and ultimately turn into deficits. The Finance 
Committee is committed to finding a bipartisan solution to the 
financial problems facing Social Security. Although developing 
a plan to protect and improve Social Security will be a complex 
and challenging task, we believe our efforts can succeed if 
Democrats and Republicans are willing to work together in a 
spirit of bipartisanship.
    The non-partisan, independent Social Security Advisory 
Board has reported a number of significant problems with the 
administration of the Social Security program, particularly the 
Disability Insurance program (and the disability portion of the 
Supplemental Security Income program). For example, processing 
times average an astounding 970 days for moving applications to 
the Disability Insurance program through all layers of appeal 
(not including the federal courts). At Commissioner Barnhart's 
confirmation hearings, she promised that she would provide the 
Committee early this spring with a comprehensive evaluation of 
the way the Social Security program is administered and how 
much in additional resources would be needed to run the program 
properly. The Committee will carefully review any request for 
additional funds and will be prepared to request an appropriate 
adjustment in the Budget Resolution as warranted.
    The costs of administering the Social Security program must 
be viewed from an even broader perspective, however. In recent 
years, laws were enacted that were intended to completely 
remove the Social Security program from the federal budget. Yet 
surprisingly, the costs of administering this program are 
required to be taken into account when determining whether the 
caps on all discretionary spending have been exceeded. As a 
result, these costs must compete with the needs of all other 
discretionary programs in the budget, even though the entire 
Social Security program is supposed to be outside the budget. 
If new legislation is advanced this year that extends the caps 
beyond FY 2002, we strongly recommend that this legislation 
provide an appropriate adjustment in the caps for any 
additional costs of administering the Social Security program 
as identified by the Commissioner and approved by the 
Committee. We also recommend that the Budget Committee give 
serious consideration to modifying the budgetary treatment of 
the administrative costs of the Social Security Administration 
to make such treatment consistent with the treatment of the 
remainder of the Social Security program.
    Thank you for the opportunity to convey our views. We look 
forward to working with you.
            Cordially Yours,
                                   Max Baucus,
                                           Chairman.
                                   Charles E. Grassley,
                                           Ranking Member.
                                ------                                

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                     Washington, DC, March 1, 2002.
Hon. Kent Conrad,
Hon. Pete V. Domenici,
Committee on the Budget, U.S. Senate, Washington DC.
    Dear Kent and Pete: I write in response to your request for 
the views and estimates of the Committee on Foreign Relations 
on the budget for programs in our committee's jurisdiction. 
Although not all of the programs within Function 150 are in 
this Committee's jurisdiction, most of them are.
    At the outset, let me repeat my previously-expressed view 
that in drafting the budget resolution, the Committee should 
think of function 050 and function 150 as a collective 
``national security budget.'' Both national defense and 
international affairs programs are essential to the nation's 
security, and we should fund both adequately. This was true 
before the tragic events of September 11, and is all the more 
true today as we wage the global war on terrorism.
    I would also repeat a point that I made to the Committee 
last year: the difficulty of estimating the nation's needs for 
foreign affairs for a ten-year period should be underscored. 
Predicting the future in the field of international affairs is 
nearly impossible, because so many events outside of the 
control of the United States can affect the course of American 
policy, as the events of September 11 demonstrated. That said, 
I think we safely say that for the next decade the United 
States will remain the preeminent political, economic, and 
military power on the planet. Accordingly, in planning our 
foreign affairs budget for this ten year period, we should 
assume that our global interests and responsibilities will not 
shrink, but will either remain relatively constant or expand.
    Against this background, let me turn to a specific 
discussion of the budget.
    The President's budget request for international affairs in 
Fiscal 2003 is $25.4 billion, which represents a 5.9 increase 
in nominal terms as compared to the regular appropriations 
provided last year. But these are not regular times, as the 
President has rightly emphasized. As compared to the total 
amount provided in Fiscal 2002, including the emergency funds 
provided after September 11, the budget for Fiscal 2003 results 
in both a nominal and real decrease in the budget. The budget 
thus appears to assume that we can return to the status quo 
ante. The international affairs budget should reflect that the 
current world situation has changed considerably as a result of 
the terrorist threat. In my view, it does not.
    The Committee should assume that the base operating budget 
of the Department of State will need to remain at least at the 
current level (after accounting for inflation) over the 10 year 
period of the budget resolution. As I noted, our international 
interests are unlikely to diminish over this period; in fact, 
the opposite is true. In the age of globalization, with ever-
increasing links in commerce, travel, and communications, it is 
more likely that our interests will increase. More Americans 
will travel overseas, and more foreign visitors will come to 
the United States, putting a greater demand on passport 
services and consular operations. Expansion of trade and 
commercial opportunities for American business will add to the 
workload of American diplomats. The proliferation of dangerous 
weapons technologies will continue, forcing America to respond. 
And so on. In sum, we cannot reduce our overseas activities and 
remain a first-rate global power.
    The Department of State's core operations budget request of 
$3.4 billion provides (after subtracting the costs of federal 
employee retirement) for a $242 million increase. A key portion 
of this is $108 million for additional hiring of 399 employees. 
It should be emphasized that this is part of a three-year plan 
(begun in Fiscal 2002) to hire roughly 1,000 new employees to 
fill personnel shortfalls in the Department and create a 
``training float'' so that personnel can receive training on a 
regular basis--as the U.S. military does. Without such a 
training float, officers are rushed from one assignment to 
another, and often do not have time to obtain important 
language, management, or other training. I urge the Committee 
to support this important objective. Many of the other major 
increases in the Department's budget are for facilities--
including a new center for anti-terrorism training. I support 
these projects. The Center for AntiTerrorist and Security 
Training will be located near Washington, and will consolidate 
training in one site for the Diplomatic Security agents and 
training for foreign officials under the Anti-Terrorism 
Assistance Program, some of which is currently conducted at 
multiple sites around the country. It requires an investment at 
the front end, but will save resources and improve efficiency 
over the long run.
    I am concerned that the Department's proposed budget for 
security may be inadequate given the continuing terrorist 
threat against U.S. missions. Despite considerable investment 
of resources in embassy security since the August 1998 embassy 
bombings, we still have a long way to go. Some 80 percent of 
the Department's overseas missions do not meet current security 
standards. Yet the President's capital budget for security 
projects in the State Department is reduced from $665 million 
to $608 million. Even if you include the non-security capital 
spending ($50 million to design a new Embassy in Beijing), this 
account is essentially straight-lined. Ideally, we should have 
a capital account which provides advance appropriations, as was 
requested by the prior administration. The Department has 
prepared a multi-year multi-billion dollar construction plan; 
advance funding would maximize efficiencies and improve the 
speed of construction.
    On the foreign operations side of the function, the 
Committee should assume continued funding of one of the largest 
portions of the budget, the assistance to the Middle East. The 
United States remains committed to the security of Israel, a 
commitment that is unshakable. The Congress must stand behind 
this commitment.
    The Committee should also assume a continued significant 
commitment, over at least the next few years, to combating the 
drug trade in the Andean region of South America. In Fiscal 
2000, the United States expanded its efforts in this region by 
providing over $1 billion in funding for Colombia and her 
neighbors, and for U.S. interdiction programs in the region. 
The President is seeking to continue this program. When it was 
first approved, it was understood that a significant program of 
reducing coca cultivation and trafficking, and building 
alternative economic opportunities, would take several years to 
bear fruit. The nations of the Andean region are all working 
closely with the United States, and are committed to the task 
of fighting drugs. We need to continue to support these allies 
with substantial financial and political support.
    As you are aware, the HIV/AIDS crisis shows no signs of 
abating. United Nations Secretary--General Kofi Annan has 
called for an international war chest of $7 to $10 billion a 
year to fight the spread of the deadly disease. If we calculate 
the U.S. share of that based on the formula used to determine 
the amount we contribute to the United Nations, it means that 
we should be dedicating at least $1.5 to $2.2 billion a year to 
HIV/AIDS programs, through bilateral and multilateral programs. 
Yet the President's budget provides only $1.1 billion. In 
addition, it is essential that the money used to combat HIV/
AIDS not come at the expense of other assistance programs. It 
is imperative that the United States lead by example, in order 
to galvanize the rest of the international community to 
contribute to this cause. Unless we dedicate the proper 
resources to the Global Fund for AIDS, Tuberculosis and 
Malaria, and fund our bilateral programs sufficiently, valuable 
momentum may be lost among other donors.
    I would note that the President's budget contains a 
significant omission--assistance for Afghanistan is listed as 
``to be determined.'' In the donors' conference at Tokyo last 
year, the United States pledged $296 million in first-year 
funds, which will come from FY 2002 resources. But the United 
States will need to follow this commitment with an additional 
infusion of reconstruction funds in Fiscal 2003. The United 
States and the international community have committed to not 
abandon Afghanistan, as it did after the Soviets left in 1988; 
we must keep that commitment. The Administration has indicated 
that there may be a supplemental request for Fiscal 2002 which 
could include funds for Afghan reconstruction. If that request 
does not occur, Committee should allow for additional funds in 
the resolution.
    I urge the Committee to support a significant increase in 
funding for non-proliferation programs, especially those 
targeted at securing the raw materials and human expertise in 
the former Soviet Union necessary for weapons of mass 
destruction. For Fiscal Year 2002, through regular and 
supplemental appropriations, Congress provided approximately 
$1.2 billion for U.S. non-proliferation programs in Russia and 
other Newly Independent States. But we need to do much more. A 
task force co-chaired by former Senator Howard Baker and former 
White House Counsel Lloyd Cutler recommended last year that the 
U.S. government ``quickly formulate a strategic plan to secure 
and/or neutralize in the next eight to ten years all nuclear 
weapons-usable material located in Russia and to prevent the 
outflow from Russia of scientific expertise that could be used 
for nuclear or other weapons of mass destruction.'' This 
visionary plan carries a substantial price tag: up to an 
additional $30 billion over the next eight to ten years, which 
is only one percent of the estimated defense budget over this 
same period, but two or three times what we are spending today. 
But the money spent will be a bargain for the United States if 
we can stem the risk that weapons of mass destruction materials 
or expertise will spread to such hostile regimes as Iran, Iraq, 
or to international terrorist organizations. Increased funding 
for a full range of non-proliferation programs is absolutely 
vital to our security, which Congress should strongly support 
over the ten-year period of the budget resolution, beginning in 
Fiscal Year 2003.
    One way to lower the bill for truly safeguarding Russian 
weapons of mass destruction materials and expertise is to get 
our allies to shoulder more of this burden. Subtitle III.B of 
S. 1803, the Security Assistance Act of 2001 (which the Senate 
approved on December 20, 2001) authorizes the President to 
offer Russia a reduction in its Soviet-era debt to the United 
States (estimated to be roughly $2.5 billion), in return for 
Russia's agreement to invest the proceeds in agreed programs to 
promote non-proliferation or democracy and the rule of law. 
U.S. leadership in this regard could prompt our allies to take 
similar actions with the far larger Soviet-era Russian debt 
that they hold, thus easing the financial burden that Russia 
might otherwise press us to bear for safeguarding its sensitive 
materials and expertise. No debt reduction can be offered, 
however, unless there is an appropriation for the amount of 
expected revenue loss. I urge you, therefore, to make room in 
the FY 2003 budget for at least $300 million in Russian debt 
reduction.
    The President proposes a significant increase for the Peace 
Corps, from $278 million to $320 million. This is part of a 
five-year program to double the number of volunteers. This 
objective is consistent with P.L. 106-30, which Congress 
approved in 1999. The Peace Corps represents the best of 
America, and I am confident that Congress will support the 
President's initiative.
    Finally, I am concerned that the President's budget for 
public diplomacy, especially international exchanges and 
international broadcasting, is inadequate. Exchanges are a key 
instrument in our foreign policy for building goodwill around 
the world for the United States over the long-term. Yet the 
budget provides only a three percent increase for international 
exchanges, barely keeping pace with inflation. The budget for 
the Broadcasting Board of Governors falls short in two 
respects--it results in some reductions in current services at 
the three major services (Voice of America, Radio Free Asia and 
Radio Free Europe/Radio Liberty) and does not fund the new 
Afghan service of Radio Free Europe, which was authorized by 
Congress in the last few months. In the aftermath of September 
11, we need to expand our contacts with foreign lands--to 
engage foreign publics, to explain American foreign policy and 
American values, and build support for the anti-terrorism 
campaign. International exchanges and international 
broadcasting provide an important means of doing so, and we 
should provide more resources for these programs. I anticipate 
the Committee will consider legislation in this area this year.
    I appreciate your consideration of these comments as you 
formulate the budget resolution.
            Sincerely,
                                      Joseph R. Biden, Jr.,
                                                          Chairman.
                                ------                                

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                     Washington, DC, March 7, 2002.
Hon. Kent Conrad,
Hon. Pete V. Domenici,
Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Kent and Pete: I have at hand--and appreciate--your 
request for my views and estimates on the budget for programs 
within the jurisdiction of the Committee on Foreign Relations.
    The President and his Secretary of State deserve 
commendation for having established a budget after the events 
of September 11 reflecting our priorities. Since our resources 
are not limitless, our present efforts must be focused on the 
identification of vital tasks that deserve being given priority 
in light of recent events, closely followed by the setting of 
priorities for the balance of function 150 tasks.
    The program constituting our responses to terrorism command 
our vigorous support. In that struggle against terrorism, time 
is a critical element and the Congress must make effective use 
of available resources supplemented by slight increases in 
pursuit of successful and promising initiatives. We must not 
engage in a wholesale increase of funds in the hope that their 
expenditure will achieve the desired results. The appropriate 
level for the overall budget for the international affairs 
tasks should be equal to or slightly above the President's 
request.
    The wisdom of our earlier efforts to modernize and 
strengthen our foreign affairs establishment has helped the 
United States to respond quickly and effectively to the present 
crisis. The current budget request for the Department of 
State's core operations, with its increase in hiring authority, 
appears to provide adequately for its requirements save in four 
categories:
    (1) The Non-Proliferation and Disarmament Fund and the 
Export Control and Border Security Assistance function should 
be increased on the order of 15-25 percent in order to ensure 
that preventive and corrective security measures are taken as 
quickly as possible.
    (2) The Department has not realized the success in 
upgrading and consolidating its classified communications 
infrastructure that it has begun to realize in its unclassified 
networks. Progress in this area is overdue and constitutes a 
defensive vulnerability that can no longer be tolerated. 
Provisions should therefore be made to consolidate the 
authority and provide the funding for the upgrading of the 
classified communications infrastructure. This process will 
entail an increase of $25 million for the initial phase and 
follow-on efforts and should be provided in multi-year funding.
    (3) The role of treaties, agreements and cooperative bodies 
in controlling the spread of weapons of mass destruction and 
keeping them from terrorist hands have risen even further in 
importance. However, these mechanisms cannot provide any 
protection in the war against terrorism by their mere 
existence.
    The key to their utility is the process by which compliance 
with international commitments and obligations is verified as 
an essential precursor to enforcement. The verification process 
should be strengthened by additional funding of $10 million per 
year over the present request to ensure that nations and 
organizations fulfill the obligations they have undertaken in 
the fields of non-proliferation and arms control.
    (4) The capital budget for the Department benefits from the 
increased efficiencies realized from recent Overseas Building 
Operations management changes and standardization of building 
design. Its current budget therefore constitutes a real 
increase over previous levels of funding. However, further 
efficiencies could be gained by funding the Department's 
overseas building plan for a two-year period. This would not 
necessarily increase the total amount of the funds devoted to 
building construction, but it would allow for the much more 
efficient use of the funds and avoid the delays attributable to 
funding a long-term capital plan in successive one year 
increments.
    Many bilateral and multilateral programs hold promise of a 
safer, better environment in which democracies, economies and 
personal liberties, including religious liberties, can prosper. 
However, we must ensure that the participants and circumstances 
associated with these programs provide the basis upon which 
that promise can be realized before we commit our limited 
resources. We should have the patients and fortitude to prepare 
the ground before we plant the seed. Part of that preparation 
is done by theNational Endowment for Democracy. While I have 
been critical of this institution in the past, it has apparently heeded 
these and other comments and taken effective measures to ensure that it 
truly fulfills the role envisaged by Ronald Reagan when he created it. 
It can now function as an effective tool in advancing the goals of our 
foreign policy. The Endowment could effectively employ an amount equal 
to double its present funding ($36 million) as a frontline measure to 
deprive terrorist organizations of their recruiting grounds abroad, 
serving as a distant defense of the U.S. homeland. In order to maximize 
the effectiveness of such an increase, the increase should be directed 
to the four core grantees of the Endowment with a special focus on 
Central Asia, Africa and closed societies such as China, Cuba, Burma 
and Vietnam. There is also a strong bipartisan belief in the Committee 
that democracy and pluralism in other nations directly serves U.S. 
interests. As a reflection of this belief, the USAID Office of 
Transition Initiatives should be budgeted at 10 percent above the 
President's request for FY 2003, and sustained thereafter at that 
level. As a related measure, funding for the USAID center for democracy 
and governance should be a separate budget item and at least sustained 
at the level enjoyed in the last year of the previous Administration.
    We should select carefully the mechanisms by which we 
dispense aid. Bilateral delivery increases U.S. leverage and 
ensures a higher degree of accountability regarding both the 
appropriate distribution and use of aid. This reduces the 
probability that aid will be diverted by an undemocratic 
government for the counter-productive perpetuation of state 
power rather than the purposes we intended. These 
considerations dictate that, over the ten-year period of the 
budget resolution, the amount of multilateral assistance 
provided indirectly through international organizations and 
programs should be kept at no more than its present absolute 
numerical level without inflation offsets even if there are 
general increases in foreign assistance.
    We should continue to press for reform at the United 
Nations and all international organizations. I am concerned 
that we may be becoming complacent as the Helms-Biden reforms 
are implemented. Sadly, there remains much to be done. I intend 
to study further whether he budgets associated with these 
organizations are transparent and fair. Where possible, we 
should assist international organizations to improve their own 
operations and our support should reflect the considered value 
of their activities. In that respect, the budget should reflect 
a double payment of U.S. dues to the United Nations in FY '03. 
The U.S. should also restore the practice of paying the U.S. 
portion of the regular budget in January rather than October as 
is the current practice. This re-synchronization of payments 
will dramatically improve the U.N. ability to manage better its 
finances. Restoring this practice, which was abandoned twenty 
years ago, could be achieved by a one-time payment of two years 
of dues within the next fiscal year. A double payment was 
incorporated into the FY '02 Commerce-Justice-State 
Appropriations bill, passed by the Senate, and into the Foreign 
Relations Authorization Act for FY '02 and '03, reported by the 
Senate Foreign Relations Committee.
    There are also a number of precise funding adjustments that 
should be incorporated in this budget. U.N. conference funding 
should be considered a candidate for reduction and in no event 
should funding be increased above its current level, given the 
propensity of these events to become divisive, politicized 
performances, such as the August-September 2001 World 
Conference Against Racism in Durban. Funding for international 
financial institutions should also remain at their present 
level, especially the International Development Association 
(IDA) of the World Bank which would require a replenishment 
authorization this year. The President has proposed a shift 
from loans to grants at the IDA. Loan resources should reflect 
this shift and not be returned to their previous level. The 
International Fund for Agricultural Development should also 
remain at its present level of funding. Migration and refugee 
assistance should be increased by up to five percent above the 
President's request to accommodate recent events in South and 
Central Asia. Funding for the Commission on International 
Religious Freedom should remain funded at its present level, 
based on the anticipated extension of the current commission 
sunset date of May 14, 2003. Finally, funding for the United 
States Institute of Peace should be decreased as part of a 
policy of weaning away from governmental support. The Institute 
has been noticeably successful in attracting private funding to 
the extent that it currently plans to build a headquarters on 
the Mall. Anticipating continued success, the Institute should 
be funded at fifteen percent ($13 million) lower than last 
year.
    There is strong bipartisan support on the Committee for a 
significantly increased effort to combat terrorism and the drug 
trade in the Andean region of South America. The expanded 
efforts already underway in this region should continue and can 
be anticipated to require additional resources for the 
foreseeable future. I understand that the amount of this 
increase will be the subject of a supplemental request by the 
President. In addition, the funding ``fences'' previously 
enacted to ensure the use of funds for intended purposes have 
proven counter-productive. The maintenance of these fences 
creates artificial barriers to the efficient achievement of the 
ultimate goal of these programs: the suppression of narco-
terrorist activity in the region and the return of the rule of 
law to the people of Colombia.
    Assistance provided to Central Asian States should 
similarly dispense with any artificial distinctions between 
funds provided to combat drugs, proliferation, terrorism and 
crime, especially when the effort focuses on strengthening 
border security. The same measures undertaken to defeat the 
movement of money, drugs and weapons also will serve to prevent 
and detect the movements of terrorists and prohibited 
materials. The fencing of funds provided for these programs 
should be eliminated to allow the most efficient and effective 
use of the resources available. We also need to ensure that the 
cooperative programs confronting problems associated with the 
demise of the former Soviet Union do not deal with the Russian 
Federation in isolation. The roles of the other nations that 
have emerged from the former Soviet Union will play a critical 
role in the solution of these issues, especially Ukraine, 
George and the Republic of Armenia. Fiscal earmarks should be 
applied to ensure that they receive the funding support that 
they deserve.
    The President's budget provides $1.1 billion to combat the 
HIV/AIDS crisis, a very substantial sum, and I applaud the 
President's leadership on this issue. That being said, I will 
continue to work with my colleagues on the foreign Relations 
Committee and on the Budget Committee to see what additional 
resources may need to be brought to bear in this fight. It is 
critical that foreign governments who receive our largesse to 
combat disease demonstrate their willingness to address the 
underlying causes of these epidemics by making fundamental 
changes in their policies.
    These views and estimates represent the most pressing--but 
by no means all--of the adjustments that should be made to the 
international affairs budget. Even more than usual, our 
deliberations will be influenced by the development of events 
as we work to construct a prudent budget.
    I trust that any necessary revisions will be given 
appropriate consideration and I look forward to working closely 
with you as we develop our international affairs budget 
priorities.
            Sincerely,
                                                       Jesse Helms.
                                ------                                

        U.S. Senate, Committee on Health, Education, Labor, 
            and Pensions,
                                     Washington, DC, March 1, 2002.
Hon. Kent Conrad,
Chairman, Senate Committee on the Budget, Dirksen Senate Office 
        Building, Washington, DC.
Hon. Pete V. Domenici,
Ranking Member, Senate Committee on the Budget, Dirksen Senate Office 
        Building, Washington, DC.
    Dear Kent and Pete: I write to provide Democratic views and 
estimates from the Health, Education, Labor, and Pensions 
Committee for your consideration as you prepare the fiscal year 
2003 budget.
    From a budgetary perspective, as you know, we find 
ourselves in a dramatically different and far less advantageous 
position than we did one year ago. In January 2001, CBO 
projected an on-budget surplus of $3 trillion dollars over the 
decade. One year later, the projection is for a $242 billion 
deficit. According to CBO, an on-budget surplus will not 
reappear until FY 2010.
    The Administration's proposed budget would massively expand 
the raid on Social Security. The Bush plan would consume $1.464 
trillion of Trust Fund revenue for non-Social Security purposes 
during the same ten-year period. The Administration's budget 
would also consume the entire $560 billion Medicare Part A 
surplus.
    The Administration's proposed raid on Social Security is 
not a temporary incursion necessitated by the recession and the 
war on terrorism. It is a systemic diversion of payroll tax 
revenue to finance general operations of government that should 
be funded from the income tax. The Social Security Trust Fund 
would be used to cover an on-budget shortfall every year 
through FY 2012. In essence, the tax cuts are so deep that they 
have transferred part of the cost of running the government to 
the payroll tax at the expense of Social Security.
    I urge the Budget Committee to clearly reject this improper 
use of Social Security funds. It should also reject the 
additional $600 billion in tax cuts which the Administration 
has proposed this year on top of those already enacted last 
year. Further cuts would only exacerbate the existing budget 
crisis, and hurt key priorities of the HELP Committee and other 
committees.
    Whatever the merits or demerits of last year's tax bill at 
the time it was enacted, those circumstances clearly no longer 
exist. In the aftermath of September 11th, we are facing major 
new demands on our national resources which must take priority. 
We cannot both meet those demands and afford such an enormous 
tax cut and still meet the education, health, and human 
resources needs that are before the HELP Committee and the 
Senate.
    We can and should postpone a portion of the future tax cuts 
enacted last year, specifically those provisions benefitting 
only the wealthiest taxpayers. These tax cuts are not scheduled 
to be made until 2004 and later. We should put them on hold 
until we are certain that we can afford a prescription drug 
benefit for senior citizens, make the needed investments in 
education and health care, protect Social Security and fully 
provide for the common defense.
    We can achieve approximately $350 billion in savings by 
postponing future reductions in the tax rates paid by the 
wealthiest taxpayers in the highest three income brackets, and 
by maintaining the tax on estates above $4 million. Under such 
a plan, more than one trillion dollars of tax cuts would still 
take effect as scheduled. No taxpayer would pay a higher tax 
rate than he or she paid last year. In fact, income tax rates 
for everyone would be lower in 2002 and in succeeding years 
than they were in 2001.
    These future tax cuts for those at the top are not part of 
the fight against the recession. They are not scheduled to 
occur until long after the economy emerges from the downturn. 
In fact, taking fiscally responsible action now will actually 
help the economy--by leading to reductions in long-term 
interest rates that have remained stubbornly high because of 
the fear that unaffordable tax cuts will lead to growing 
federal deficits throughout the decade. Reducing that threat 
will reduce the cost of long-term borrowing for businesses, and 
provide a stimulus for new job creation now.
    Such a modest reduction in future tax cuts will help us to 
meet our responsibility to the American people to improve 
education all along the continuum from birth through college, 
to extend better health care to more people, and to ensure that 
workers can find the training that they'll need to fully 
participate in the modern world economy. The American people 
have not made future tax cuts their first priority, and 
Congress should not either.
    Further, at a time when resources are so scare, we should 
not be tolerating corporate tax loopholes which allow major 
corporations to avoid paying their fair share of tax on their 
income. The Enron scandal has focused public attention anew on 
the serious problem of transactions undertaken for tax 
avoidance rather than for a legitimate business purpose. The 
problem extends far beyond Enron. These dubious tax shelters 
result in billions of dollars in lost revenue each year. The 
rules governing the shifting of income between a corporation's 
domestic and foreign affiliates need to be substantially 
tightened. The budget should make provision for legislation 
that would generate significant additional revenue from the 
closing of these corporate tax loopholes.

                               EDUCATION

    Education should continue to be one of our top budget 
priorities. I am deeply concerned that for fiscal year 2003 the 
Administration has proposed the smallest education budget 
increase in more than a half dozen years. Without even 
considering the negative impact of inflation, the 
Administration's budget actually cuts the recently enacted No 
Child Left Behind Act, signed less than two months ago. 
Unfortunately, the Administration's proposed increase in Title 
I is funded by cuts in other essential ESEA programs. This 
approach will not provide America's public schools with the 
resources required to make real the promise of education 
reform. We must provide schools with additional resources if 
they are to prepare students to compete in the global economy 
and ensure that newly enacted education reforms are well 
implemented. Less than a $10 billion increase in the fiscal 
year 2003 education budget will allow us to implement the 
President's school reform law at its carefully negotiated 
authorized levels, make a down payment on the full federal 
obligation to pay special education costs, and help hard-
pressed families pay for college.
    Because of the downturned economy and growing student 
enrollment, our public schools face ever greater challenges. 
School age child poverty is expected to grow by another 650,000 
children next year. Today, Title I funding is sufficient to 
cover only one-third of eligible children, and the 
Administration's budget leaves over 6 million needy children 
behind in terms of Title I education support. Limited English 
proficient child enrollment has grown by another 300,000 
children over the last year, but the Administration fails to 
propose even an inflationary increase in bilingual education 
funding. The nation will need to hire over 2 million teachers 
in the coming decade to cope with increases in enrollment and 
teacher retirement. Forty percent of all high poverty school 
teachers have neither a major nor minor undergraduate degree in 
their primary instructional field. As local communities 
struggle with declining property tax receipts, the federal 
government continues to force them to pay over half of the 
federal share of special education costs. Finally, we are 
seeing a series of states cut their higher education budgets to 
balance revenue shortfalls and public college tuition is rising 
as a result. Ohio State University, for example, plans to raise 
in-state tuition for new students by 34% next year.
    I believe we must increase funding of the Title I education 
program for disadvantaged children to its authorized level next 
year in order to reach ``the next third'' of needy children 
left behind and put us on a glide path to truly leaving no 
child behind from the promise of school reform. I strongly 
support increased investment in the Title II teacher quality 
program, limited English language learner programs, 21st 
Century after-school program, Star Schools, and Ready to Learn 
and Ready to Teach programs, and the Reading First and Early 
Reading First programs.
    Among our top education priorities should be to fully fund 
the Individuals with Disabilities Education Act (IDEA) within 
the next six years, and to convert this to a mandatory program. 
After the effects of inflation are taken into consideration, it 
will take another 33 years before IDEA is fully funded at the 
rate the Administration proposes. Under the Bush budget, a 1st 
Grader when IDEA was first passed will be 67 years old by the 
time we fully fund special education. A $2.45 billion increased 
commitment to IDEA this year will set us on a glide path to 
full funding within six years.
    Finally, the Pell Grant program needs to be placed on sound 
financial footing and the maximum Pell Grant increased to meet 
the heightened need students have due to increasing college 
costs. Higher funding levels are needed for campus-based 
programs to help compensate for reduced state aid. The TRIO and 
GEAR-UP programs need to be expanded in order to make the dream 
of a college education a reality for all. Support for graduate 
education should be sustained so that the very best minds 
continue to be formally developed.
    Early childhood education must be one of our top budget 
priorities this year. Science tells us that the roots of 
academic difficulty are established well before the first day 
of school. In the absence of intervention, children from low-
income families score consistently lower on developmental tests 
by age 2 and the differences increase over time. Children who 
fall far behind before they enter school have a far more 
difficult time catching up. We must do more to close the gap. 
Well designed programs staffed with high quality teachers can 
enhance their learning in the early years. I am proposing an 
initiative that will provide federal incentives to states 
willing to develop and implement a state-wide system of early 
care and education based on inter-agency planning and community 
partnerships. States participating in this program will assure 
that the system will be built around existing agencies and 
programs that will continue to exist as part of a larger 
system. I estimate that full funding of this will be $1-$5 
billion next year, or $10-$50 billion over ten years.

                                 HEALTH

    On health care, the Budget Committee should provide for 
prescription drug coverage under Medicare. The cost of an 
adequate benefit over the ten year budget window is 
approximately $800 billion. While this is a large sum, coverage 
of prescription drugs is essential if Medicare is to provide 
promised health security for senior citizens. It should be one 
of our nation's top domestic priorities.
    The current recession has highlighted the need to provide 
health care coverage for the uninsured--both through temporary 
measures to help laid-off workers and through longer-term 
solutions. In the latter category, passage of the Familycare 
legislation that will provide expanded coverage for low and 
moderate income children and their parents should be a 
priority. To provide for both a substantial expansion of 
insurance coverage for working families and temporary help for 
the unemployed, the budget should allocate at least $120 
billion.
    It is important to fully fund the Family Opportunity Act, 
which specifically addresses the greatest barrier to work for 
families raising severely disabled children--access to a 
Medicaid buy-in for their disabled children's health care. For 
two years, Senator Grassley and I have been working on this 
legislation to enable families of disabled children to stay 
together and stay employed. No family should ever be forced 
into poverty or forced to give up custody of theirchild in 
order for that child to access needed health care. This bill is an 
investment to truly end the permanent economic recession that these 
American families face everyday.
    Two critical health needs are enactment of legislation to 
end insurance discrimination against the mentally ill and to 
provide for a patients' bill of rights. Both bills have been 
passed by the Senate in various forms. While both are primarily 
regulatory, CBO estimates that they result in some indirect 
losses of revenue to the government. Because these losses are 
small and addressing them creates procedural difficulties, the 
budget resolution should provide reserve fund language that 
will avoid the necessity of offsetting these costs.
    Providing quality health care for our senior citizens and 
for all citizens requires adequate payment for Medicare 
services. The excessive cuts in Medicare made in the Balanced 
Budget Act should be rescinded. Among the many areas requiring 
special attention is assuring that cuts in Graduate Medical 
Education scheduled to take effect next year are eliminated.
    It is also important to invest in essential health care 
services, research, and public health activities which benefit 
the nation. I support a substantial increase in funding this 
year for Community Health Centers, which serve 10 million low-
income and medically underserved Americans each year. NIH 
should receive the resources necessary to continue on the 
current course of doubling biomedical research over a five-year 
period. An adequate response to bioterrorism will require 
substantial expansions in funding beyond those provided in last 
years appropriation bills.
    Proposed cuts in budget authority should be restored and 
additional investments be made in the Agency for Health Care 
Policy and Research; in the chronic disease prevention 
activities at the Centers for Disease Control and Prevention, 
such as $50 million for increased childhood and adult 
immunizations; personnel training at the Health Resources and 
Services Administration; the regulatory responsibilities of the 
Food and Drug Administration; and in the Substance Abuse and 
Mental Health Services Administration's mental health and 
substance abuse services, including restoration of the proposed 
47 million cut in its Programs of Regional and National 
Significance. In particular, funding should be provided to 
address the long-term mental health needs of victims of 
terrorism, children who witness or are the victims of violence, 
and the mentally ill at risk of incarceration. Funding should 
also be provided for initiatives from our Committee to 
substantially reduce mortality and morbidity from stroke and 
heart seizures.
    Higher funding should also be provided for treatment grants 
under the Ryan White CARE Act to help states provide AIDS 
therapies and reduce disparities in the burden of HIV/AIDS on 
minority communities.

                             HUMAN SERVICES

    At the same time we must pursue improved quality 
enhancements in Federal Human Services programs such as Head 
Start. We must do more to ensure all eligible children have 
access to Head Start and Early Head Start by increasing the 
funding by $1 billion next year and $10 billion over the next 
10 years. I also urge you to support funding of the Early 
Learning Opportunities Program by increasing the funding to 
$250 million next year and $2.5 billion over the next 10 years.
    As you know, we will reauthorize the Child Care and 
Development Block Grant this year. Seventy-five percent of 
children under age five with working parents are in some type 
of child care. More than half of all mothers with infants are 
working today. Yet the average annual cost of child care in 
every state exceeds the cost of tuition at public universities 
in every state. We must do more to ensure that low-income 
working families who receive child care subsidies can find 
child care. In the wake of the No Child Left Behind Act, we 
can't ignore the quality of care that children receive. If we 
do not strengthen the quality of care, we will only exacerbate 
the school readiness gap that kindergarten teachers already 
report seeing when children arrive at school. Improving the 
quality of care begins with addressing the child care 
workforce. As part of the Child Care and Development Block 
Grant reauthorization, we will set aside funds for child care 
teacher compensation and training. To improve the quality of 
child care and expand the number of families who receive 
assistance, we estimate that we will need a $2 billion a year 
increase, or $20 billion over ten years. Additionally, I urge 
an increase in the quality set aside in the Child Care and 
Development Block Grant.
    Finally, we must ensure that states that ``played by the 
rules'' during the implementation of welfare reform are not 
penalized for their efforts. To do this we must ensure that the 
TANF block grant funds are maintained at their current levels 
and adjusted for inflation.
    In response to the current recession, state welfare 
programs are facing increased demand. It is particularly 
important that we ensure that adequate resources are there to 
address this need. Doing so requires not merely maintaining 
level funding of the TANF block grant--which was set five years 
ago and has eroded by nearly 30 percent in value--but that the 
amount of the block grant funds are increased to adjust for 
inflation.
    I urge the Committee to provide at least inflationary 
increases for Older Americans Act (OAA) programs in the fiscal 
year 2003 budget. OAA programs provide home-delivered and 
congregate meals, senior center and social services, home care 
and a range of protective services including legal assistance 
and ombudsman programs. The Older Americans Act also includes 
the National Family Caregiver Support Program, which provides 
critical support for our nation's family caregivers, including 
respite care, information, counseling, training, and assistance 
in locating services. In the absence of a long-term care health 
benefit, the Older Americans Act provides home and community-
based long-term care services for the elderly. As our 
population ages, OAA programs need additional funds to be able 
to meet the increasing demand for services. In the fiscal year 
2003 budget, I strongly urge you to provide inflationary 
increases for Older Americans Act programs that help to meet 
the day-to-day needs of seniors and the long-range needs of our 
nation.

                                 LABOR

    In the current struggling economy, investments in our 
workforce are crucial. More than eight million workers are 
unemployed. Despite growing needs for unemployment benefits, 
low-wage workers are turned away because antiquated payroll 
systems fail to report their earnings. Others are denied 
benefits because they are seeking part-time work. Many have no 
pay and no unemployment insurance because they have exhausted 
their benefits before they could find a new job. Unemployment 
insurance is our nation's best counter-cyclical stimulus 
program, and improving it will put money into the hands of 
those most likely to spend it quickly. We must invest in 
updating our unemployment insurance system to meet the needs of 
the modern workforce. Specifically, we must make permanent the 
changes for part-time and low-wage workers that were included 
in the original Democratic economic recovery proposal, and 
ensure that benefits are extended during recessionary times.
    In addition, at a time when we need to invest more in the 
unemployment insurance system, the Administration's proposal to 
devolve funding for administrative functions to the states 
makes no sense. It will put states in the unfair position to 
choose between cutting benefit levels or raising taxes. 
Instead, we should fully fund UI administration at $3.7 
billion.
    In the current economic environment, a top labor priority 
must be to ensure support for Employment and Training 
Administration programs, including the Workforce Investment 
Act, by fully funding the programs at $7,062,500,000, plus an 
adjustment for inflation. An economic slowdown is upon us. The 
number of displaced workers is rising substantially each month. 
Training programs are critical during such a period as workers 
take time to develop the skills they will need to remain 
productive in the modern economy. I am especially concerned 
that Youth Opportunity Grants are fully funded at $225,000,000 
and other youth training initiatives, particularly those that 
serve needy populations, be fully funded. The Senior Employment 
Program should also receive full funding.
    We must continue to ensure the fair treatment of all 
workers. The budget must provide the Employment Standards 
Administration with the resources to fully protect the workers 
covered by the laws under its purview, including the Fair Labor 
Standards Act, the Family Medical Leave Act, and Executive 
Order 11246. I request at least the inflation-adjusted amount 
of $396 million for the Employment Standards Administration.
    The Occupational Safety and Health Administration and the 
Mine Safety and Health Administration must be able to continue 
strong enforcement and standards setting. It is particularly 
important that OSHA's enforcement budget be fully funded with 
an adequate inflationary adjustment over last year's 
appropriation. I recommend at least $459 million for OSHA and 
$266 million for MSHA.
    The Administration's request to cut the International Labor 
Affairs Bureau (ILAB) by 63 percent is unacceptable. Amidst 
rapid globalization, the work of this office takes on growing 
importance. I recommend full funding for ILAB.
    Thank you for your consideration of these views. I look 
forward to working closely with you once again this year to 
improve education, health, and work opportunities for all 
Americans.
            Sincerely,
                                                 Edward M. Kennedy.
                                ------                                

        U.S. Senate, Committee on Health, Education, Labor, 
            and Pensions,
                                     Washington, DC, March 7, 2002.
Hon. Kent Conrad,
Chairman, Senate Committee on the Budget, Dirksen Senate Office 
        Building, Washington, DC.

Hon. Pete V. Domenici,
Ranking Member, Senate Committee on the Budget, Dirksen Senate Office 
        Building, Washington, DC.
    Dear Kent and Pete: Pursuant to Section 301(d) of the 
Congressional Budget Act, I want to thank you for giving me the 
opportunity to provide the Budget Committee with the Republican 
views and estimates regarding the Fiscal Year 2003 budget as it 
affects programs under the jurisdiction of the Committee on 
Health, Education, Labor and Pensions.
    The Committee on Health, Education, Labor and Pensions has 
jurisdiction over programs that make a difference in the lives 
of all Americans. Committee Republicans are committed to 
working to review and strengthen major programs under our 
jurisdiction eliminating redundancy where we find it, 
consolidating and simplifying programs, offering flexibility in 
exchange for increased accountability, and improving the 
delivery of services. We are committed to the important 
principle of a balanced budget, but also to policies which 
ensure a quality education for America's children, a safe and 
secure workplace for America's workers, and attainment of the 
American Dream for America's families.

                              HEALTH CARE

Bioterrorism

    We must prevent, and be prepared to respond to, a 
biological or chemical attack. Congress must ensure that the 
Centers for Disease Control, National Institutes of Health, and 
Food & Drug Administration have the funds necessary to develop 
a coordinated defense and response plan and that emergency 
personnel are well-trained and properly equipped. It is also 
important to ensure an appropriate quantity, quality, and 
variety of antibiotics, vaccines and other medical devices and 
supplies in the National Pharmaceutical Stockpile. We must also 
continue to improve hospital, state and local response 
capabilities, and ensure that our agriculture and food supply 
are protected. This year's events have highlighted unmet gaps 
in bioterrorism preparedness. To address this problem, short-
term emergency funding expansions are needed at the Federal, 
State and local levels, particularly through the implementation 
of block grants to States for preparedness activities.

Prescription Drug User Fee Act

    Congress must reauthorize and improve the Prescription Drug 
User Fee Act (PDUFA) this year. Thanks to PDUFA, the FDA has 
been able to more quickly and efficiently provide patients with 
the latest, most effective medicines. Congress must build on 
the success of PDUFA, and extend the user fee model to FDA's 
review of medical devices. By speeding the review process, 
while at the same time ensuring product safety, such a program 
would encourage medical innovation and provide improved access 
to the next generation of life saving medical devices and 
treatments.

National Institutes of Health

    NIH should receive the final installment in the 
Congressional commitment to doubling the NIH budget over five 
years. With these added resources, adequate oversight and 
accountability are needed to ensure that NIH funds are 
allocated and research areas priorities in a manner that is 
appropriate for serving the health research needs of Americans.

Medicare

    As the primary provider of health care services for our 
nation's seniors, Medicare must be preserved and improved. The 
Administration continues to develop a privately-run drug card 
program that would offer seniors between 10-30% discounts on 
their prescription medications. While such a program is not a 
substitute for a comprehensive prescription drug benefits under 
Medicare, it will provide seniors with immediate relief from 
rising drug costs. With the projected budget surplus all but 
gone, it is critical that Congress couple any prescription drug 
benefit with structural reforms that fully address Medicare's 
solvency. Fundamental reforms are also necessary in order to 
ensure that Medicare providers are fairly reimbursed for their 
services. This is the most responsible approach to 
strengthening Medicare and for giving America's seniors the 
coverage and benefits they need.

Nursing shortage

    As the baby boomers reach retirement, a serious shortage of 
nurses has developed and is expected to worsen. We must 
continue to support grant programs administered by the Health 
Resources and Services Administration to increase the number of 
nurses and those with advanced degrees, promote diversity in 
the nursing workforce, and encourage nursing in underserved 
communities. The Senate-passed bill addressing this issue 
should be fully funded.

Caring for the uninsured

    Today there are approximately 39 million Americans who lack 
health insurance. There has always been a significant segment 
of our population, the size of which fluctuates with the 
economy, that falls between the gaps in our fragmented, 
private/public health system. The current recession is expected 
to cause a spike in the number of uninsured and highlights the 
need to address this problem and to ensure that more Americans 
do not lose their health insurance. To this end, the budget 
should not include allowances for health care legislation that 
exacerbates the problem of the uninsured.
    Instead, the budget should provide solutions that bolster 
and expand access to private health insurance. Ideally, the 
budget should provide for market-based solutions, such as the 
President's tax credit proposal, which would benefit the 
largest segment of the uninsured. About $100 billion would need 
to be allocated for such a proposal, which should be 
accompanied by some reasonable market reforms in order to 
bolster the purchasing power of individuals and small groups. 
At a minimum, the budget should include temporary assistance 
for those who lose coverage as a result of the current 
recession, such as the House-passed health care tax credit.
    We must also continue to improve and expand our nationwide 
network of community health centers and clinics, which provide 
cost-effective care and serve as a health care safety net to 
more than 11 million patients--many of whom are uninsured and 
live in underserved communities. Together with the National 
Health Service Corps, these programs have a proven track record 
of expanding access to health care services regardless of 
income or locality.

Promoting healthy communities

    Congress must focus on programs that emphasize prevention 
and educate and promote healthy habits and lifestyles. That is 
why it is important that we provide $20 million for the 
President's Healthy Communities Initiative, which would 
encourage the development of private/public partnerships to 
reduce the incidence of obesity, diabetes, asthma and heart 
disease.

Consolidation of research

    I support the President's request to consolidate behavioral 
and social science research occurring throughout various Health 
and Human agencies to the Office of the Assistant Secretary for 
Planning and Evaluation (Centers for Disease Control and 
Prevention, Agency for Healthcare Research and Quality, 
Substance Abuse and Mental Health Services Administration and 
the Health Resources and Services Administration). This effort 
will cut costs while increasing coordination and efficiency.

                               EDUCATION

Early learning

    With the passing of monumental reforms in elementary and 
secondary education during the last session of Congress, we 
have taken major steps to improve the education of our students 
grades K-12. In order for our nation's students to take full 
advantage of these reforms, it is imperative that children 
enter school ready to learn. We support the President's efforts 
to focus on early childhood development, specifically in the 
area of early literacy. Currently, we have several federal 
early childhood development programs, including Head Start, 
that need to better serve our nation's children. As part of the 
previous reauthorization of Head Start, this committee 
authorized the first national impact study of the program to 
see what is working and what is not. We are currently looking 
at Head Start as part of a larger examination of early learning 
to see what role the federal government should play in ensuring 
that children are ready to learn on their first day of school. 
We believe that improving Head Start is critical to ensuring 
that young children, particularly disadvantaged children, are 
equipped to learn.

Elementary and secondary education

    On January 8, 2002, President Bush signed into law the No 
Child Left Behind Act (NCLBA), NCLBA includes the most sweeping 
reforms in education since 1965. NCLBA is a comprehensive 
overhaul of the federal Elementary and Secondary Education Act 
(ESEA), which was first enacted in 1965. ESES authorizes 
numerous education programs and is the principal federal law 
affecting elementary and secondary education.
    NCLBA was based on three complementary principles linked to 
increasing student achievement: (1) accountability, (2) 
flexibility and local control, (3) parental empowerment.
    Accountability. The Cornerstone of NCLBA is annual testing 
in math and reading in grades 3 through 8. Annual testing will 
allow parents to monitor the academic progress of their child 
across multiple grades. The results of the testing will be made 
available to parents in school report cards. As a result, 
parents will be better equipped to judge the quality of their 
child's school.
    Local flexibility. One of the primary goals of NCLBA was to 
give states and local communities significantly more 
flexibility over the management of federal dollars. Under the 
Act, local school districts will be permitted to make 
significant spending decisions on up to 50 percent of the non-
Title funds, by being allowed to move these funds from account 
to account without federal approval. The bill includes a local 
flexibility program that gives 150 districts the opportunity to 
apply for waivers for virtually all federal education rules and 
requirements associated with a variety of education programs in 
exchange for agreeing to obtain certain levels of achievement 
for their low-income students.
    Parental Empowerment. Under this bill, for the first time, 
the parents of a child who is trapped in a failing school will 
be able to take a portion of the monies available under Title I 
for their child and use it for private tutorial services. This 
tutorial support can come from public institutions, private 
providers or faith-based educators. A parent whose child is 
trapped in a failing school may also have the alternative of 
sending his child to another public school which is not failing 
and have the transportation costs paid. The bill also creates a 
major new expansion of the charter school initiative. Charter 
schools represent an opportunity for parents, educators and 
interested community leaders to create schools outside the 
bureaucratic structure of the local educational establishment 
and federal and state regulations.
    In addition to aforementioned reforms, NCLBA:
           Targets more money on the school systems 
        with the most needy students;
           Requires that all teachers be highly 
        qualified by 2005 and gives school districts the 
        necessary flexibility and funds to hire teachers, to 
        improve teacher professional development, or to provide 
        merit pay or other innovative ways to reward and retain 
        high quality teachers;
           Includes language that would shield 
        teachers, principals and other school professionals 
        from frivolous lawsuits; and
           Reorganizes the bilingual education program 
        so that the emphasis is now on teaching English rather 
        than separating children who do not speak English and 
        putting them in an atmosphere where they do not learn 
        English. It gives parents significant new authority and 
        information relative to where their children are being 
        placed so the children do not end up being locked in a 
        limited English situation.
    The federal government's role in elementary and secondary 
education is limited, but with this law we will use that role 
to expand the opportunities to parents of low-income children 
to get quality education for their children, while giving more 
flexibility to the state and local school districts in using 
federal funds in exchange for better academic achievement.
    The President coupled the significant reforms contained in 
NCLBA with a budget that requested historic increases in Title 
I--the largest federal education program for disadvantaged 
children.
    For fiscal year 2003, the President has requested $1 
billion in new funding for Title I, which would raise the 
amount of money we spend on educating disadvantaged children to 
$11.3 billion. This request for $1 billion follows on the 
footsteps of a $1.6 billion increase. These billion dollar 
increases dwarf any previous increase in Title I funding. In 
fact, federal funding for Title I will increase nearly as much 
in just the first 2 years of this Administration, as it did in 
all of the previous eight years combined.
    In light of these dramatic increases in Title I funding and 
the fact that we are now experiencing a budget shortfall, it 
would be irresponsible to increase Title I funding, beyond the 
President's request.

              INDIVIDUALS WITH DISABILITIES EDUCATION ACT

    The authorization for several programs in the Individuals 
with Disabilities Education Act expires this year. The 
Committee plans to review the current IDEA law to address the 
problems that plague our special education system. For example, 
many children, particularly minority students--are 
misidentified for special education. Another frequent complaint 
we hear from many school administrators and teachers is the 
fact that IDEA creates a double standard when it comes to 
disciplining violent students, as students under IDEA are not 
subject to discipline in the same way as other students. Some 
have also expressed concerns that paperwork requirements 
associated with IDEA unduly burden teachers and administrators.
    In addition to the Committee's review of the legislation, 
President Bush's Commission on Excellence in Special Education 
is expected to issue recommendations on improving and reforming 
special education in July.
    When Congress passed IDEA in 1975, we committed to pay 40% 
of the average per pupil expenditure to offset the excess cost 
of educating a disabled child. Since taking control of 
Congress, Republicans have increased spending for IDEA, Part B, 
Grants to States, which funds direct services to students, by 
224% and have increased the Federal government contribution of 
funding from 7.3% in FY 1996 to 16.5% in FY 2002. In fact, 
funding for IDEA has grown at a more rampant and accelerated 
rate than at any other time in the history of the program.
    President Bush's budget proposal includes a $1 billion 
increase for IDEA, for a total of $9.7 billion request. As was 
true with Title I, President Bush's request for IDEA marks the 
largest presidential request in the history of the program. The 
$9.7 billion request ($8.5 billion designated for Part B 
alone), marks the highest level of Federal support ever 
provided for children with disabilities.
    While I support full funding of IDEA, Part B, I believe 
that funding increases must be linked to fundamental reform.

                              TAX CREDITS

    The President has proposed an education tax credit that 
would empower low-income parents to send their children to a 
high quality, safe school. Under the President's tax credit 
proposal, low-income parents who make the difficult decision to 
remove their child from a chronically failing school and enroll 
him in a private school, would receive a refundable tax credit 
to cover the cost of tuition at a private school.
    The President's proposal is consistent with the reforms in 
NCLBA to ensure that no child is left behind. The Committee 
should follow his lead and continue to build on the reforms of 
NCLBA by looking for further avenues to expand education choice 
for parents with children trapped in failing schools. All 
parents, regardless of income, should be able to choose the 
safe, and good schools for their children.

                            HIGHER EDUCATION

Pell Grants

    As the primary federal student aid program assisting low-
income students, Pell Grants have been, and will continue to 
be, a priority for the Committee's Republicans. We fully 
support the recent increase in the maximum Pell Grant to 
$4,000, and are committed to working with the Democrats to 
insure that the current $1.3 billion shortfall in this program 
is resolved.

Loan forgiveness

    The Committee's Republicans support President Bush's 
efforts to provide additional loan forgiveness under the FFEL 
Program and the Direct Loan Program for highly qualified 
teachers of mathematics, science, and special education serving 
in low-income neighborhoods. Too often schools in high-need 
communities have to settle for unqualified teachers in these 
areas. Loan forgiveness will provide these schools with a 
useful tool to help them recruit and retain highly qualified 
math, science, and special education teachers.

Minority-serving institutions

    The Committee's Republicans commend President Bush for his 
commitment to minority serving institutions and support his 
proposed 3.5% increase in Title III funding, including 
increases for Historically Black Colleges and Universities, 
Historically Black Graduate Institutions, Hispanic Serving 
Institutions, Tribally Controlled Colleges and Universities, 
and Alaska Native and Native Hawaiian Serving Institutions. 
These institutions comprise a critically important part of our 
nation's higher education community and deserve our continued 
support.

Student loan administration

    The administration of the student financial aid programs is 
currently funded through a combination of discretionary, 
mandatory, and subsidy accounts which primarily support 
payments to private-sector contractors and guaranty agencies. 
The Committee's Republicans support the Bush Administration's 
plan to improve accountability and ensure the efficient, cost-
effective delivery of federal student aid by consolidating 
these accounts (totaling more than $900 million) into a new 
discretionary Student Aid Administration account.

Rising tuition

    Despite much attention and study, tuition at America's 
colleges and universities continues to rise at a rate higher 
than inflation. We are committed to seeking ways in which the 
federal government can contribute to practical solutions to 
this problem, without unwarranted intrusion into the legitimate 
prerogatives of postsecondary institutions.
    Committee Republicans are also committed to finding sound 
solutions to keep the price of attending college reasonable. We 
addressed this issue during the 1998 reauthorization of the 
Higher Education Act (HEA) by authorizing a record increase for 
Pell Grant maximums, while drastically reducing interest rates 
on student loans and keeping loan fees at a minimum. We also 
required colleges to provide detailed consumer information with 
respect to a college's income, expenses and tuition increases 
in order to enable families to make informed choices when 
selecting a college.

                                 LABOR

Unemployment insurance

    The recession and the aftermath of September 11 have 
demonstrated the need for reforms to the state/federal 
partnership on unemployment insurance. The current system is 
disjoined, cumbersome and inefficient. The reforms proposed by 
President Bush call for the consolidation of the administrative 
and financial control of the program at one level of 
government. This will permit the improvement of services for 
unemployed workers, while giving states the flexibility to 
tailor additional services to address the specific needs of 
their citizens and businesses. The proposal also retains 
meaningful oversight authority at the U.S. Department of Labor 
to insure against economic hardship while maintaining standards 
of service.

Retirement security

    Committee Republicans are committed to applying the lessons 
learned from the collapse of Enron to provide greater 
retirement security and opportunities to employees. Protecting 
workers pensions will best be accomplished through increased 
employee rights to diversify their own holdings and improved 
education and investment advice. Giving them needed 
protections, and the tools and understanding to make informed 
choices is preferred to increasing mandates, lawsuits and gag 
rules that will undoubtedly chill the voluntary retirement 
savings system.

Davis-Bacon

    The Davis-Bacon Act is a highly controversial and costly 
law that has not been updated in decades to reflect modern 
construction workplace practices. The prevailing wage law 
continues to impose out-dated craft distinctions that frustrate 
training and opportunity for workers, and that discourage 
employers with innovative and flexible management practices 
from participating ingovernment contracts. Davis-Bacon 
increases federal construction costs by $10 billion a year and is 
estimated to inflate the costs of individual projects by 5% to 38%.
    Yet, on dozens of bills in virtually every committee, 
special interests are demanding that senators convert otherwise 
meritorious policies into 1930s-style public works projects 
that restrict competition, increase construction costs, and 
limit the impact of the policies being implemented. Until the 
problems with the Davis-Bacon Act are squarely addressed, 
Congress must oppose the expansion of the law to new categories 
of funding arrangements and to state and local projects with 
limited federal involvement. In particular, good policies in 
the areas of education, health care, and the environment must 
not be held hostage by efforts to attach lasting Davis-Bacon 
obligations to revolving loan programs, bonding arrangements or 
other financial arrangements managed by the states.

Compensatory time off

    When the Fair Labor Standards Act was enacted in 1938, the 
American labor force was almost entirely made up of industrial 
and agricultural workers; the right to collective bargaining 
was not yet three years old; and less than 16 percent of 
married women were working outside their homes. Congress must 
modernize workplace laws to reflect changes in the structure 
and needs of today's society. To help achieve this goal, I have 
introduced S. 624, the Workplace Flexibility Act, which would 
amend outdated federal law to give families and employers 
greater flexibility in meeting and balancing the demands of 
work and family.

FMLA clarification legislation

    Congress designed the Family and Medical Leave Act for 
families to use for critical situations such as after the birth 
or adoption of a child or for leave to care for a child, 
spouse, or one's own ``serious medical condition.'' 
Unfortunately, the prior Administration's interpretation of 
certain provisions of the Act has resulted in significant 
unintended administrative burdens and costs on employers; 
resentment by co-workers when the Act is misapplied; invasions 
of privacy; and disruptions to the workplace. Accordingly, I 
have introduced S. 489, the Family and Medical Leave 
Clarification Act, to make reasonable and much needed technical 
corrections to the FMLA, to ensure a proper working of the law 
for both employees and employers.

Office of the 21st Century Workforce

    I applaud the President's establishment of the Office of 
the 21st Century Workforce to provide a focal point for the 
identification and study of issues relating to the workforce of 
the United States and the development of strategies for 
effectively addressing such issues. I look forward to working 
with the Administration and the Department of Labor to find 
ways to eliminate duplicative or overlapping rules and 
regulations and eliminate statutory and regulatory barriers to 
assisting the workforce in successfully adapting to the 
challenges of the 21st century.

Worker training

    The September 11 terrorist attacks had a devastating and 
direct impact on American workers, making our federal worker 
training programs more crucial than ever. We should maintain 
our commitment to providing the most efficient and effective 
workforce training programs to help retrain those who have lost 
jobs, as well as assist those entering the workforce for the 
first time. Congress should provide adequate resources for our 
federal job training infrastructure, redirecting funds from 
poorly performing programs to effective ones. In addition, I 
support the President's proposal to consolidate and streamline 
existing job training programs that are currently scattered 
across ten different federal agencies.

Workplace safety

    Congress must maintain the commitment made in the 
Occupational Safety and Health Act to ``assure so far as 
possible every working man and woman in the nation safe and 
healthful working conditions.'' To this end, I support policies 
that establish and promote cooperative relationships between 
labor, management, and OSHA to address worker safety and health 
issues and expand worker protection. We should combine rigorous 
enforcement measures with new efforts to prevent injuries and 
illnesses from occurring in the workplace. In addition, our 
policies must be grounded upon sound evidence and valid 
scientific data.

                     WELFARE REFORM AND CHILD CARE

TANF

    The overall assessment of the 1996 Temporary Assistance for 
Needy Families (TANF) law is that work is working. Welfare 
rolls have declined greatly, more mothers than ever are 
working, the average income of female-headed families is 
increasing, and poverty has dropped substantially. I commend 
the President's TANF reauthorization goals to increase 
opportunities for more people to achieve the dignity of 
independence through work; promote child well-being by 
encouraging health marriages and families; and provide states 
with even greater flexibility to create innovative and 
comprehensive welfare initiatives that will help more people 
reach self-sufficiency. It will be important to maintain our 
current commitment of TANF funding, so that states will have 
sufficient funds to provide necessary and creative work 
supports for the additional people who leave the welfare rolls 
and enter the workforce. In addition, we must increase 
coordination between job training activities under TANF and 
those conducted under the Workforce Investment Act, our major 
federal job training law.

Child care

    Committee Republicans recognize that childcare assistance 
is critical to allow mothers to obtain and retain employment. 
This year, the Committee will reauthorize the Child Care 
Development Block Grant (CCDBG), which provides dollars to 
States to subsidize the cost of childcare for low-income 
families. Funding for the CCDBG has more than double in the 
last five years to $2.1 billion, and the President proposes to 
maintain this funding. Additional available childcare funding 
includes mandatory dollars authorized by the Ways and Means 
Committee and the TANF block grant.

             CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

    In this State of the Union message, President Bush called 
on all Americans to serve their country and announced new ways 
for Americans to help those in need and promote the common 
good. Under an Executive Order signed by the President, the 
newly formed USA Freedom Corps Council will manage the citizen 
service initiative. The USA Freedom Corps will have three major 
components: (1) a newly created Citizen Corps to engage 
citizens in homeland security; (2) an improved and enhanced 
AmeriCorps and Senior Corps under the Corporation for National 
and Community Service; and (3) a strengthened Peace Corps.
    A major part of the USA Freedom Corps will be the programs 
of the Corporation for National and Community Service including 
AmeriCorps, Senior Corps, and Learn and Serve America. In 
support of the President's challenge to every American to 
serve, the Committee will work with the Administration to 
achieve the following objectives: (1) support and encourage the 
greater engagement of citizens in volunteering; (2) provide 
greater assistance to secular and faith-based community 
organizations, including those that address the homeland 
security needs of the nation; and (3) make federal support more 
accountable and responsive to State and local need. The 
principal mechanism for achieving those objectives is 
reauthorizing the Corporation for National and Community 
Service and improving its programs.
    Thank you for the opportunity to comment on the areas 
within the Health, Education, Labor and Pensions Committee's 
jurisdiction. I look forward to working with you both on 
developing a Budget Resolution for Fiscal Year 2003.
            Sincerely,
                                                Judd Gregg,
                                                    Ranking Member.
                                ------                                

                                       U.S. Senate,
                               Committee on Indian Affairs,
                                     Washington, DC, March 1, 2002.
Hon. Kent Conrad,
Chairman, Committee on the Budget, U.S. Senate, Washington, DC
Hon. Pete V. Domenici,
Ranking Member, Committee on the Budget, U.S. Senate, Washington, DC
    Dear Chairman Conrad and Senator Domenici: We are writing 
in response to your request that the Views and Estimate of the 
Committee on Indian Affairs on the President's Fiscal Year 2003 
budget request for Indian programs be submitted to the 
Committee on the Budget no later than March 1, 2002.
    On February 4, 2002, the President submitted his budget 
request for Fiscal Year 2003. The budget request totals $2.128 
trillion, includes $746 billion in discretionary budget 
authority, and provides an overview of the President's Federal 
spending priorities for FY2003.

           I. FEDERAL SPENDING TRENDS FISCAL YEARS 1975-2003

    As it has done in previous years, the Committee has called 
upon the Library of Congress' Congressional Research Service 
(CRS) to prepare an analysis of Federal spending trends in 
programs and services for or affecting American Indians and 
Alaska Natives (AI/AN), and a comparative analysis of spending 
patterns for other Americans. The Committee has asked the CRS 
to produce a report documenting Federal spending trends for 
Fiscal Years 1975-2003.\1\
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    \1\ The Committee will submit a copy of the Memorandum from Mr. 
Roger Walke, Specialist in American Indian Policy, Domestic Social 
Policy Division, Congressional Research Service (CRS) entitled Indian-
Related Federal Spending Trends, FY1975-2003, as soon as it is 
completed.
---------------------------------------------------------------------------

                 II. PROFILE OF INDIAN COUNTRY IN BRIEF

    In General. There are currently 561 Federally-recognized 
tribes in the United States, with some 40% of tribes located in 
the State of Alaska. The 2000 census data indicates there are 
2.5 million \2\ American Indians and Alaska Natives (AI/AN) in 
the United States, with over 57% living in urban areas and the 
remainder residing on Indian reservations or in rural areas, 
sometimes hundreds of miles from the nearest urban area. In 
addition, approximately 4.1 million census respondents 
identified themselves in the AI/AN racial category or ancestry 
who also claimed other races or ancestry. Many of these 
individuals are or could be eligible for Federal services.
---------------------------------------------------------------------------
    \2\ For the first time, the 2000 Census allowed individuals to 
identify themselves by a single or multiple racial category or 
ancestry. This number reflects individuals who identified themselves by 
a single racial category or ancestry. The 1990 Census reportedly 
undercounted AI/AN by 5% overall and by 12% on reservations. The 2000 
Census made a concerted effort to remedy this inadequacy in accounting.
---------------------------------------------------------------------------
    The United States has a unique historical and legal 
relationship with AI/AN people, which serves as the basis for 
the Federal Government's trust responsibility and obligations. 
This government-to-government relationship is a well-settled 
principle of Federal-Indian law that is reflected in the U.S. 
Constitution and expressed in treaties, executive agreements 
and orders, statutes, the course of dealings, and hundreds of 
Federal court decisions. There are also moral components to the 
relationship which has been described as a ``mutuality of 
obligations'' between the parties. The relationship is most 
easily understood by reference to the cession of millions of 
acres of land by tribes to the United States in return for 
peace, protection of tribal sovereignty, and the provision of 
programs and services by the United States.
    Regardless of where AI/AN's reside, however, they continue 
to rank at near the bottom of nearly every social, health, and 
economic indicators, as compared to all other groups of 
American citizens. They continue to suffer the highest rates of 
unemployment and poverty, live in substandard housing, have 
poor health, receive an inadequate education, and contend with 
disintegrating social systems, all of which erode both the 
quality and dignity of life in Native communities and serve as 
indicators that the United States has not lived up to its 
responsibilities and promises.
    The President's Budget Request for Indian programs for 
Fiscal Year 2003 does not request the resources necessary to 
effectively address or remedy the long standing problems in 
Indian Country. The President's Budget Request, for example, 
expresses dismay that Congress earmarked funding for 690 
projects in the Department of Health and Human Services alone, 
totaling $532 million,\3\ though the fact remains that when 
tribal governments must compete with States or limited 
resources, tribal governments lose. This pattern has been 
reflected over and over again. Therefore, in order to insure 
that Indians receive the resources that were promised to them 
in treaties, Congress is forced to earmark spending for 
American Indian and Alaska Native communities.
---------------------------------------------------------------------------
    \3\ Fiscal Year 2003 Budget of the U.S. Government, at 161.
---------------------------------------------------------------------------
    In addition, the President's Budget Request reflects an 
``initiative to integrate budget and performance * * *[by] 
shifting resources to more effective programs.'' \4\ Through 
achieving more effectiveness is a laudable goal, the Committee 
is troubled by this philosophy if it should effect a further 
erosion of the fulfillment of Federal obligations and 
responsibilities to AI/AN. Improving effectiveness is 
difficult, if not impossible, without adequate funding. 
Increased resources are needed to alleviate the dire conditions 
in Native America and address the basic human needs of American 
Indians and Alaska Natives.
---------------------------------------------------------------------------
    \4\ Fiscal Year 2003 Budget of the U.S. Government, at 47.
---------------------------------------------------------------------------
    Education. The educational attainment for Native youth is 
deficient compared with other groups in the U.S. with Native 
youth achieving fewer high school and college degrees. A 
significant and aggravating factor in educational performance 
is the continued inability of the Federal government to ensure 
adequate, safe and clean educational facilities conducive to 
learning. As of 2001, there is a $1 billion backlog in unmet 
needs for school facilities in Native communities, and the 
Committees believes that Federal resources can be augmented 
through the use of innovative financing mechanisms such as the 
issuance of school bonds.
    Energy. Tribal lands contain significant energy resources 
and have an important role to play in the development of a 
sound national energy policy. Notwithstanding this potential, a 
vast majority of reservations are still poverty stricken and 
lack the basic infrastructure fundamental to modern living 
conditions as well as the building blocks of economic 
opportunity. Indian lands have contributed approximately 11% of 
the nation's onshore oil and natural gas production, and 11% of 
its coal production. This contribution could increase in the 
future given available supplies of fossil energy resources on 
Indian lands and the potential development of significant 
renewable energy resources. As for on-reservation energy needs, 
much needs to be done. A recent Department of Energy report 
estimated that 14.2% of all Native American homes on 
reservations have no access to electricity compared to just 
1.4% of all U.S households. The high cost of energy is 
particularly harmful to these reservation communities when 
unemployment averages 43%. Another 33% who reside in 
communities outside of reservation boundaries earn wages below 
the poverty level. Given these statistics, tribes with 
substantial energy resources and high unemployment rates have a 
critical interest in the development of their energy resources 
as well as providing electrical services to their reservation 
communities.
    Employment and Income. Given the near-complete absence of 
private sector enterprises in reservation communities, nearly 
one in three American Indians and Alaska Natives, or 31.2%, 
live in poverty. In the U.S. today, the unemployment rate is 
5.6%, whereas in Native communities the unemployment rate 
hovers near 50%--nearly twice that of the national unemployment 
rate in the Great Depression of the 1930's. The earning 
capacity of AI/AN also lags behind that of other Americans: for 
every $100 earned by the average American family, an Indian 
family earns $62. Similarly, the average annual per capita 
income for Indians is $8,284.\5\
---------------------------------------------------------------------------
    \5\ U.S. Bureau of the Census, 1990 Census of Population, 
``Characteristics of American Indians by Tribe and Language,'' 1990 CP-
3-7.
---------------------------------------------------------------------------
    Health Status. Perhaps most striking are the health 
statistics involving American Indians and Alaska Natives. 
Diabetes, tuberculosis, alcoholism, Fetal Alcohol Syndrome 
(FAS) and increasingly, AIDS, plague America's Native 
communities at rates far and above the incidence for other 
Americans. As of 2001, there is a $900 million backlog in unmet 
needs for health facilities, contributing to the degenerating 
health of Native communities.
    Housing. Census information reveals that 18% of all 
reservation households are ``severely crowded'' as compared 
with 2% for non-natives, with 90,000 Indian families homeless 
or under-housed. One of every five Indian houses lacks complete 
plumbing facilities. Reliance on Federal financing for housing 
is made greater by the difficulties American Indians and Alaska 
Natives have in accessing private sector capital and mortgage 
lending in particular.

                        III. Funding Priorities

    Given the continuing need for a significant commitment of 
Federal resources, the Committee has continually supported the 
overall budget requests for Indian-related programs, and in 
many instances urged that they be increased. In no instance has 
the committee suggested that the overall budget request for 
Indian programs and services be reduced.
    In terms of the administration of Federal programs, 
significant amounts of Federal funds appropriated for the 
provision of programs and services to Native communities have 
many times resulted in an expanded and unresponsive Federal 
bureaucracy rather than direct benefits to Native people. In 
recent years, Congress has implemented tribal recommendations 
regarding the need for greater local autonomy and flexibility 
in spending decisions as more fully set out below.
    The Tribal Priority Allocations (TPA) mechanism has proven 
successful in affording tribal governments the capacity to set 
spending priorities for governmental services and, if faced 
with changing needs, to reallocate TPA funds accordingly. The 
increase in requested funds for this program for FY 2003 
reflects only a 4% inflationary rate.
    The TPA mechanism continues to enable Indian tribal 
governments to flexibly respond to local concerns and to 
provide governmental services such as child welfare and elder 
care programs, forestry, agriculture and range management, fire 
protection, adult vocational education training, and a host of 
other programs and services to those residing on Indian lands.
    By focusing 42% of the BIA resources on TPA, the 
President's Budget Request continues the trend of directing 
greater amounts of resources to priorities identified by tribal 
governments for the provision of services. Tribal governments, 
closest to those they serve, are most acutely aware of their 
needs and how best to address them.
    Similarly, beginning with the enactment of the Indian Self-
Determination and Education Assistance Act of 1975, as amended, 
(Pub. L. 93-638) there has been a gradual shift away from the 
Federal dominance in the administration of Indian programs to 
one in which tribal governments assume the responsibilities of 
the United States for the provision of services and programs to 
reservation residents.
    Through self-determination contracts and self-governance 
compacts, Indian tribal governments and tribal consortia have 
developed greater levels of administrative acumen and delivered 
higher quality services than were previously made available. 
The Committee strongly supports the continued funding and 
expansion of tribal contracting and compacting under the 1975 
act and urges that sufficient funds be provided to ensure the 
continued success of the program, including full funding of 
Contract Support Costs.

                     IV. COMMITTEE RECOMMENDATIONS

IV. A. Department of Interior--In General

    The President's Budget request includes $10.339 billion in 
funding for the Department of Interior, but this figure 
reflects an overall decrease of $12.7 million from the FY 2002 
enacted level. In addition, the President's Budget Request 
``includes a proposal to transfer to agencies the full costs of 
the Civil Services Retirement System and Federal Employees 
Health Benefits program.'' \6\ This proposal would increase the 
Interior budget request to $13.2 billion, if the proposal were 
currently in effect. However, if funding for this proposal has 
been added to the FY 2002 enacted level, the amount requested 
for FY 2003 would effect on an overall decrease of $5 million.
---------------------------------------------------------------------------
    \6\ Fiscal Year 2003, The Interior Budget in Brief (Feb 2002), at 
DO-5.
---------------------------------------------------------------------------
    The Budget Request continues to anticipate a complete 
elimination of the backlog in school facilities by Fiscal Year 
2006, but only six Indian schools are slated for replacement 
although additional funding is proposed to reduce the school 
repair and maintenance backlog. The Committee commends the 
Request's increase to the Bureau of Indian Affairs (BIA) school 
operations budget by $18.8 million over the FY 2002 enacted 
level.
            1. Bureau of Indian Affairs (BIA)
            a. Operation of Indian Programs (OIP)
    The President's Budget Request for FY 2003 reflects only a 
3.2% increase over FY 2002 enacted level. Given an actual 4% 
inflation rate, the overall funding request for FY 2003 is 
eroded by approximately $128,153,000. The OIP account provides 
funding for core governmental functions including contract 
support costs to carry out contracts and compacts under the 
Indian Self-Determination and Education Assistance Act of 1975, 
(ISDEA), as amended; housing repair funds for Housing 
Improvement Program (HIP); road maintenance; BIA Trust 
Management Improvements; funds for Indian tribal courts; funds 
for adult care facilities; and other accounts.
    Funding for contract support costs for BIA programs, for 
example, acts as a critical incentive to encouraging and 
expanding tribal contracting and compacting under the ISDEA. 
Until full contract support costs are provided, the level and 
quality of services provided under these contracts and compacts 
will suffer.
            b. Law Enforcement Activity
    Safe and crime-free environments are critical to improving 
the quality of life in Native communities and are central to 
any effort to attract capital and employment opportunities to 
strengthen tribal economies. For the past 5 fiscal years, 
funding has been provided to the ongoing joint Department of 
Justice--Department of Interior Law Enforcement Initiative. The 
Committee encourages the President to continue funding this 
initiative so that the success of the Law Enforcement 
Initiative can be continued.
    The President's Budget requests $161.4 million for ongoing 
law enforcement programs in Indian Country and basic detention 
services. The request includes $3 million for facility 
operations targeted for new detention centers that are 
scheduled to open in 2003. The Committee encourages substantial 
increases for FY 2003. As in the past, any new funding 
increases would be used for additional law enforcement 
personnel, police vehicles, communications equipment, and staff 
detention services. The Committee continues to encourage and 
looks forward to the heightened degree of inter-agency 
coordination for law enforcement evidenced by the Law 
Enforcement Initiative.
    The Budget Request proposes $17 million for Tribal Courts, 
a $4 million increase over FY 02. The funding increase is 
needed to allow Tribal Courts to timely adjudicate additional 
civil cases in such areas as probate associated with recent 
trust reform regulations. In FY 2001, in partnership with 
Indian Tribes, the BIA collected Tribal court caseload 
information. Of the 176 Indian tribes who responded, they 
reported a backlog in excess of 61,345 cases. Although the 
Committee supports the $4 million increase, the Committee 
believes a more substantial increase is necessary.
            c. Education Activity
    The centerpiece of the President's Indian education agenda 
is a school privatization proposal. The President's Budget 
requests $12.2 million to implement the proposal, which would 
provide Indian tribes with the option of assuming the 
management of BIA operated schools or, if a tribe does not 
elect to do so, the BIA will enter into partnerships with 
private entities to manage the school. Although the Committee 
is still reviewing the proposal, the Committee is concerned 
that insufficient funding is being proposed for tribal 
management of the BIA schools.
    Continuing the trend started in the last Administration, 
the Budget Request includes approximately $293 million for new 
school facilities construction in FY 2002, this includes $120.2 
million to construct 6 new schools and $164.4 million ($2.8 
million increase over FY02) for school facilities improvement 
and repair. The Budget Request also seeks a $3 million increase 
to expand the Family and Child Education program. The Committee 
supports the requested funding levels for these programs.
    The Committee anticipates legislation to authorize the 
issuance of bonds to raise capital for the construction of new 
schools. The Committee recommends $30 million for this 
proposal.
    The Committee is concerned about the proposed decrease of 
$2 million for Tribally Controlled Community Colleges. These 
funds are used to defray expenditures for academic, 
educational, and administrative purposes and for the operation 
and maintenance of Tribal Colleges (except Dine College). 
Although the Tribally Controlled College or University 
Assistance Act authorizes $6,000 per student, the President's 
Budget only requests $3,526 per student. The Committee supports 
full funding of $6,000 per student.
    The Committee has concerns about the funding request for 
Indian Student Equalization Program (ISEP). The President's 
Request seeks no programmatic increase; in fact, there is a 
proposed program reduction of $2 million. By law, BIA must 
provide funding to enable the BIA system to pay teachers at the 
Department of Defense (DoD) school rate. The BIA deducted the 
amount needed to pay teachers the DoD rate from the ISEP 
program, but ISEP program funds are to be used only for the 
operations of Bureau-funded schools. The Committee suggests 
that ISEP funding be increased by $10 million.
    Although the Committee supports the $2 million increase for 
student transportation, the Committee urges additional funding. 
The public school per-mile average 6 years ago was $2.97 per 
mile, yet even with this increase, BIA funded schools will only 
receive $2.37 per mile. Last year, BIA estimated that student 
transportation was underfunded by $11 million. The Committee 
recommends full funding for student transportation, an 
additional $9 million over the President's request.
    This year, the BIA acknowledges that it only addresses 70% 
of need for the Administrative Cost Grants (AC Grants). 
Although the Committee is encouraged by the $3 million 
requested increase, the increase would only bring AC Grant 
funding up to 75% of need. The Committee recommends AC Grant 
funding at $61,420,000 to meet 100% of need.
            d. Energy
    The committee supports the increase of $1.062 million 
within the Tribal Priority Allocations to address energy needs 
in Indian country: Economic Development ($585,000) and Natural 
Resources ($477,000). Given the potential for energy resource 
development on Indian lands this development can provide tribes 
with substantial opportunities for economic development and 
opportunities to provide electric services to rural 
communities.
    The committee also supports the $1 million dollar request 
in the non-recurring programs, Minerals Mining line item to 
work with tribes in assessing energy resource development and 
initiatives for the development of all potential sources of 
energy available on tribal lands. The committee strongly 
recommends that these funds also be used for the assessment of 
renewable energy sources such as wind and solar energy in 
addition to non-renewable resources to facilitate tribal 
participation in the Secretary's initiative on renewable 
energy.
    Given the potential for development of energy resources on 
Indian lands and the potential tribal contribution to lessening 
the nation's dependence on foreign energy sources, the 
Committee recommends that these amounts be increased to ensure 
tribal participation in the development and implementation of a 
national energy policy.
            2. Office of Special Trustee for American Indians (OSTAI)
    In 1994, Congress enacted the American Indian Trust Fund 
Management Reform Act, 25 U.S.C. Sec. 4001, et seq., to bring 
required reforms to Indian trust assets, accounts, and 
resources managed by the United States. Little or no progress 
in implementing the Act was made in the years immediately 
following enactment.
    Beginning in 1997, through several oversight and 
legislative hearings, the Committee grew concerned with the 
pace and direction of planned trust management reforms of the 
Department of Interior and its bureaus. Since FY 1998 more than 
$200 million has been appropriated by Congress to the 
Department of Interior for purposes of trust management 
reforms.
    Trust management continues to be the subject of great 
controversy, and a class action initiated by beneficiaries of 
Individual Indian Money accounts entitled Cobell v. Norton 
(formerly Cobell v. Babbitt) continues to be litigated before 
Judge Lamberth of the U.S. District Court for the District of 
Columbia. While state-of-the-art computer and accounting 
systems are essential to the completion of needed reform of 
trust management procedures, doubts remain as to the adequacy 
of the Trust Asset and Accounting Management System 
(``TAAMS''), an adaptation of an off-the-shelf program 
initiated in 1998 that was intended to provide a comprehensive, 
integrated, and automated system for title and trust asset 
management. Furthermore, the High Level Implementation Plan 
(``HLIP''), developed by the Department in 1998 to guide trust 
reform activities, is now regarded by the Department as 
``obsolete.'' The Committee is gratified that a comprehensive 
review of both TAAMS and the HLIP has been undertaken by the 
Department.
    In late 2001, the Department proposed to transfer trust 
management functions from the Bureau of Indian Affairs to a new 
entity to be named the Bureau of Indian Trust Asset Management 
(``BITAM'') and sought approval from the relevant Congressional 
committees to reprogram appropriations to allow the proposed 
reorganization to be implemented. The requested approval was 
withheld, however, pending completion of ongoing 
consultationsbetween the Department and affected Indian tribes and the 
conduct of oversight hearings by the House Committee on Resources and 
the Senate Indian Affairs Committee.
    Recognizing that substantially increased funding will be 
necessary in the next several years to complete the trust 
reform process, the President's Budget Proposal includes an 
increase of $53.366 million (from $99,224,000 to $152,590,000) 
in funding for Federal trust programs under the direction of 
the Office of Special Trustee for American Indians (``OSTAI''). 
The Committee is heartened by the Department's commitment to 
substantially increased funding of trust management activities 
and looks forward to working with the Department to reach a 
full and fair solution to this long-standing problem. The 
Committee urges, however, that this substantial increase in 
funding for trust management reform not be viewed as 
justification for a corresponding reduction in funding of other 
programs intended to fulfill the United States' trust 
responsibilities to Native Americans.
    The President's budget request for OSTAI includes the 
following language:

          For operation of trust programs for Indians by direct 
        expenditure, contracts, cooperative agreements, 
        compacts, and grants, [$99,224,000] $152,590,000, to 
        remain available until expended: Provided, That funds 
        for trust management improvements may be transferred, 
        as needed, to the Bureau of Indian Affairs ``Operation 
        of Indian Programs'' account and to the Department 
        Management ``Salaries and Expenses'' account[.]\7\

    \7\ Budget of the United States Government, Fiscal Year 2003--
Appendix, at 598.

    While the Committee does not wish to unnecessarily limit 
the Department's flexibility, continuing controversy regarding 
BITAM makes it necessary for the Committee to state its intent 
that the language quoted above not be interpreted to authorize 
an reorganization of trust management functions within the 
Department that would otherwise require Congressional approval.
    While the Department of the Interior has repeatedly 
identified the consolidated of fractionated interests in Indian 
lands as one of the highest priorities, the President's Budget 
Request proposes to reduce funding for Indian Land 
Consolidation from $10,980,000 to $7,980,000, or a reduction of 
$3 million. The Department has stated elsewhere that with the 
expected carryover of funds from prior years approximately $15 
million will be available during the coming year to continue 
land acquisition under this program. The Indian trust 
beneficiaries are the innocent victim of a long-standing breach 
of trust by the United States and its officials, and it would 
be a cruel irony indeed if trust reform, when finally achieved, 
were to come at the expense of other essential Indian programs.
            3. Indian Health Service (IHS)
    The FY 2003 Budget Request includes $64.019 billion for 
discretionary programs within the Department of Health and 
Human Services (DHHS), an increase of $2.403 billion over FY 
2002 enacted levels. Just as last year, the bulk of the 
increase ($4 billion) will go to the National Institutes of 
Health (NIH). This Committee applauds the President's 
commitment to fund more health care research, however, the 
Committee is opposed to a new parking facility at NIH funded at 
expense of Indian Health Service Sanitation Facilities.\8\
---------------------------------------------------------------------------
    \8\ Fiscal Year 2003, Budget of the U.S. Government, at 140.
---------------------------------------------------------------------------
    The Committee is concerned that the Department of Health 
and Human Services restructuring initiative will affect the 
priorities for the construction Indian Health Service hospitals 
and clinics by merging the Indian Health Service health care 
facilities construction priority list with other national 
priorities, when the IHS facilities construction responsibility 
is transferred to the Office of the Secretary as proposed in 
the President's Budget.
            a. Health Services
    The Budget Request includes $2.513 billion for the Indian 
Health Service (IHS), an increase of 2.6% over the FY 2002 
enacted level of $2,389 billion. This increase provides $60.027 
million and 83 Full-Time Equivalents (FTEs). These new FTE's 
are needed to staff new facilities that are scheduled to open 
in FY 2003. However, $8.8 million is ``saved'' by reducing the 
recurring based funding for 100 FTE's.\9\ These 100 FTE's are 
critical for both tribally-operated and Federally-administered 
programs. The Committee objects to any budgetary savings at the 
expense of Hospitals and Health Clinics Services or Direct 
Operations.
---------------------------------------------------------------------------
    \9\ Justification of Estimates for Appropriations Committees, 
Department of Health and Human Services, Indian Health Service, Fiscal 
Year 2003, at IHS-9.
---------------------------------------------------------------------------
    The Committee believes that in spite of the increase in 
funding requested, an additional $300 million is needed to 
begin to address the disparities in the health status of 
American Indians and Alaska Natives and the rest of America. 
With the requested amount, Indian Health Service cannot even 
begin to address the overwhelming health care needs of the 
individuals it serves, and the failure to address the loss of 
purchasing power due to inflation undermines the ability of the 
agency to continue to provide services at the current level. If 
the medical inflation costs go unaddressed, the effectiveness 
of existing programs will be eroded.
            b. Contract Support Costs.
    For the last several years, the Indian Affairs Committee 
and other committees have devoted significant time and 
resources to addressing the issue of chronic shortfalls to 
funding to address contract support costs (CSC) associated with 
the provision of programs and services operated under the 
authority of the Indian Self-Determination and Education 
Assistance Act of 1975, as amended. The FY 2003 request 
includes less than a $3 million increase in the funds for 
contract support costs. In addition, the funding request caps 
new and expanded contracts at $2.5 million, down from $20 
million enacted for FY 2002.
    The Committee is well aware of the need to provide more 
funds to address existing CSC needs, and to provide an 
incentive to other tribes and tribal organizations to provide 
health care and other services under the Indian Self-
Determination and Education Assistance Act of 1975, as amended. 
The Committee is concerned that the request for a decrease in 
contract support costs may cause serious damage to the Indian 
Health Service system as whole. An additional amount of at 
least $119 million is needed to address the CSC needs, with at 
least $40 million for new or expanded CSC in FY 2003.
            c. Health Facilities
    Although the FY 2003 budget request for health facilities 
include a request to continue ongoing construction, there 
appears to be only a $1 million request for new funding. The 
Committee is advised that there is a $1 billion backlog in the 
construction of replacement health care facilities in Indian 
country. The Committee is also concerned that the President's 
Budget Request reduces costs of this needed program by 
eliminating $14,260,000 in facilities construction.\10\
---------------------------------------------------------------------------
    \10\ Ibid.
---------------------------------------------------------------------------
            d. Other DHHS Programs
    Drug Treatment Initiative: The President's Budget Request 
increases access to substance abuse treatment services and 
works to close the treatment gap by providing a $59 million 
increase for the Substance Abuse and Mental Health Services 
Administration as part of the Drug Treatment Initiative. This 
funding increase will support an additional 52,000 drug abuse 
treatment slots. There is no indication whether these increases 
apply to Native communities as well.
    Promoting Safe and Stable Families: The President's Budget 
Request includes funding for the Promoting Safe and Stable 
Families program at $475 million in FY 2003, a $123 million 
increase over the FY 2002 enacted level. These additional 
resources will help States keep children with their biological 
families, if safe and appropriate, or to place children with 
adoptive families, but it is unclear whether the funds 
available to tribal governments are for the same purposes.
    Administration for Native Americans: Universally 
acknowledged as a successful tool in assisting tribes and 
native communities develop and implement economic, 
environmental and cultural initiatives, the Administration for 
Native Americans (ANA) program is slated to receive $45 million 
in FY 2003, a decrease from the FY 2002 enacted level of 
$45,996,000. The Committee does not support any decrease in 
funding for this program.
    Administration on Aging: The President's Budget Requests 
$28 million for Grants to Tribes. The FY 2002 enacted level for 
this account was $26 million. The Committee recommends $30 
million for this account serving Indian tribes, Alaska Natives 
and Native Hawaiians. This program is the primary vehicle for 
providing nutrition and a wide range of other supportive 
services and is often the only program serving older Native 
Americans in remote areas.
    The Committee is also aware of the need to improve access 
to social services by elders in Indian Country and recommends 
an additional amount of $500,000 for this purpose.
            4. Agriculture and Related Activities--Bureau of Indian 
                    Affairs (BIA)
            a. Agriculture
    The BIA supports American Indians and Alaska Natives in 
developing conservation and management plans to protect and 
preserve natural resources on trust land, which includes over 
46 million areas used for farming and grazing by livestock and 
game animals. The BIA provides technical assistance in 
Inventory and Research, Farm and Range Planning, Farmland 
Improvements, Rangeland Improvements, Rangeland Protection, 
Leasing and Permitting Services, Contract Monitoring, and 
Agriculture Extension.
    The Budget Request proposes $22.5 million for agriculture 
services. A $2 million increase is proposed for agriculture 
services to be used to complete soil and range inventories and 
conservation management plans on an additional 1 million acres 
of trust lands per year. The Committee supports this increase 
as soil and range inventories are necessary to provide data for 
use in developing conservation and management plans to protect 
and preserve natural resources on Indian trust lands.
            b. Forestry
    The BIA's forestry program manages or assists Indian tribes 
with the management of their forests consistent with tribal 
goals and objectives identified in forest management plans or 
integrated resource management plans. Indian forests cover over 
17 million acres and are located on 260 Indian reservations in 
26 states. Forest management activities consist of forest 
inventory and management planning including the development of 
Integrated Resource Management Plans, forest products 
marketing, timber sale management, forest protection, woodland 
management, forest productivity enhancement, and intensive 
forest development procedures, to ensure the sustainable 
management of Indian forests.
    The Budget Request proposes $21.6 million for forestry 
services, an increase of $1.5 million over FY02. The Committee 
supports the increase which is targeted for forest management 
activities to enhance the harvest of forest products.
            c. Bison restoration
    The President's Budget requests $1.2 million, a $4 million 
decrease from FY02. The actual need for bison restoration 
efforts is $15 million. The Committee strongly urges an 
increase in funding, which is critical to maintaining social 
educational, economic development and cultural sustainability.

IV. B. Agriculture and Related Activities: Department of Agriculture 
        (USDA)

    With agriculture as the second largest employer in Indian 
communities, the USDA plays a fundamental role in aiding Indian 
economic and community development.
    The Committee is encouraged by the $1.1 billion request for 
the Farm Service Agency, a $1 million increase from FY2002. The 
Committee does, however, recommend $12 million for the American 
Indian Livestock Feed Program, the same amount that was funded 
in FY2002.
    The availability of a solid physical infrastructure is 
often a critical factor in the decision of outside investors 
and Indian entrepreneurs to engage in business activities on 
Native lands. The Committee supports the increase in the Budget 
Request, which includes $184.3 million for FY2003 versus the 
$133.7 million provided for FY2002.
    The Committee also supports continued funding of the Rural 
Community Advancement Program (RCAP), Water and Waste Disposal 
Direct Loans and Grants at the FY2002 levels for Native 
Americans and Alaska Natives and encourages funding for Indian 
country while USDA reviews the need for electric and 
telecommunications services. The Committee recommends increased 
funding for the Conservation Technical Assistance and for the 
Environmental Quality Incentives Program and supports funding 
for all programs at last year's level.
    The Budget Request proposes to improve water quality and 
wetland protection through voluntary measures by targeting 
technical and financial assistance to farmers and ranchers who 
operate in the watersheds with the greatest needs. The 
Committee encourages the USDA to also work with Indian tribes 
to ensure that Indian tribes and tribal farmers and ranchers 
also have access to technical and financial assistance.
    The Budget Request proposes to improve delivery of USDA 
services provided by the National Resources and Conservation 
Service, Farm Service Agency and Rural Development by 
consolidating offices and administrative functions, such as 
payroll and reporting requirements. The Committee recommends 
that the needs of Indian tribes be considered when 
consolidating offices and any offices not located on Indian 
reservations should be monitored to ensure that adequate and 
fair service is provided to Indian tribes and Indian people.
    The Committee encourages full funding for the Food Stamp 
Program; the Child Nutrition Program; the Women, Infants and 
Children Program; and the Food Distribution Program on Indian 
Reservations. The Committee anticipates a proposal to authorize 
Indian tribes to determine eligibility for Food Stamps and to 
establish one-stop centers for Food Stamps and other welfare 
programs and recommends funding for this proposal once enacted.
    The Committee is encouraged by the level funding for Tribal 
Colleges. The Committee recommends, however, substantial 
increases in all Tribal College funding programs, including the 
1994 Institutions' Endowment Fund, which is not scored as 
budget authority or outlay. The Committee urges at least $15 
million for the Endowment Fund.

IV. C. Educational Activities--Department of Education

            1. Elementary and Secondary Education
    In 2001, the Elementary and Secondary Education Act (ESEA) 
was amended and reauthorized to include increased 
accountability for student performance, increased state and 
local flexibility, and enhanced parental choice. The Budget 
Request maintains funding for Safe and Drug Free Schools, and 
Even Start while these programs are evaluated.
    Under the President's Budget Request, Title I Grants to 
Local Educational Agencies would receive $11.4 billion, a $1 
billion increase from fiscal year 2002. The grants are used to 
help students in high-proverty schools meet the new 
accountability requirements for improved performance in reading 
and math. The Committee supports this level of funding.
    The Budget Request proposes $1 billion for Reading First 
($1 million increase over FY2002), a program to ensure that all 
students can read at grade level by the end of the third grade. 
The program provides funds to support proven reading practices. 
Seventy-five million dollars is also provided for Early Reading 
First (the same level as FY2002) to develop model programs to 
help children in high-poverty communities prepare for school. 
The Committee supports this level of funding.
    The Budget Request proposes $1.1 billion for Impact Aid for 
schools serving large numbers of military dependents or Indian 
children, with a decrease of $3.5 million from FY2002. The 
Committee urges funding at FY2002's level as the proposed 
decrease will come from school construction funds.
    The President's Budget Request also includes $122.3 million 
for Indian education to improve teaching and learning for 
American Indian children, a $2 million increase from last 
year's level to fund research, evaluation, data collection, and 
related activities. The Committee is concerned about the 
funding requests for supplemental education services for Native 
Hawaiians ($18 million, a $12 million decrease from FY2002) and 
Alaska Natives ($14 million, a $10 million decrease from 
FY2002). The Committee recommends $34 million for programs 
authorized by the Native Hawaiian Education Act and $28 million 
for substantial increases over FY2002 funding levels.
            2. Office of Special Education and Rehabilitative Services
    The Committee is encouraged by the funding request of $9.6 
billion for Individuals with Disabilities Education Act (IDEA), 
which is a $1 billion increase over FY2002. This includes $8.5 
billion for Special Education Grants, and $437 million for 
states to identify and serve infants and toddlers with 
disabilities.
    The Budget Request proposes a $30 million incentive grant 
for State Vocational Rehabilitation agencies to help 
individuals with disabilities prepare for and obtain employment 
to the extent of their abilities. Although Indian tribes are 
eligible for a 1%-1.5% set aside, it is not clear whether 
tribes are eligible for the proposed incentive grants.
            3. Office of Vocational and Adult Education
    The Committee supports the $7 million request for Tribal 
Colleges, a $500,000 increase from FY2002, to support Tribal 
Colleges to ensure continued and expanded educational 
opportunities for Indian students.
            4. Office of Postsecondary Education
    The President's Budget Request focuses resources on student 
aid programs that help needy students pay for college, higher 
education programs that help students prepare for postsecondary 
education, and institutional development programs that provide 
support for colleges which serve low-income and minority 
students. As part of this initiative, the Budget Request 
proposes to redirect resources from unrequested earmarks and 
low priority programs in FY2002 to the Pell Grant Program. 
Other increases are proposed for teacher loan forgiveness for 
teachers who work in high-poverty schools for five years. The 
proposal would forgive up to $17,500 in Federal student loans, 
up from $5,000.
    The Department of Education (DOE) proposes to reprogram up 
to 3% of discretionary funds from unrequested earmarks and low-
priority programs in 2002 to the Pell Grant program, up from 1% 
in Fiscal Year 02. In light of the decreased funding request 
for Alaska Native and Native Hawaiian education, the Committee 
is concerned that the Department of Education may consider 
these low priority programs.
    The funding request for Tribal Colleges is $18 million, a 
$500,000 increase from FY2002. The Committee recommends $24 
million, $12 million for the Title III basic funds and $12 
million for the Tribal Colleges facilities program. The Budget 
Request also proposes an increase of $500,000 for Alaska Native 
and Native Hawaiian Serving Institutions, up from $6.5 million 
for FY2002.

IV. D. Law Enforcement and Public Safety--Department of Justice

    The Committee urges that Indian country be considered in 
the President's Counterterrorism Enhancements and Border 
Security initiatives. According to the BIA, there are 35 tribes 
with jurisdiction over lands adjacent to the Canadian or 
Mexican borders and jursidction over waters directly accessible 
by boat from the Canadian or Mexican borders. The lands 
comprise over 260 miles of a total 7,400 miles of international 
borders patrolled by the United States. In addition, many 
tribes have dams and oil and gas facilities located on or near 
tribal lands and have law enforcement jurisdiction over these 
lands.
    Indian Country will be impacted by the proposed elimination 
of funding for tribal detention facilities. Many of the 80 or 
so tribal detention facilities are at the end of their useful 
life, and a number have been condemned by Federal or tribal 
courts. The total estimated backlog is approximately $400 
million. In FY2002, $35.2 million was provided to construct 
tribal detention facilities. The President's Budget Request 
provides no funding for the construction of tribal detention 
facilities in FY 2003.
    The Budget Request proposes to decrease Community Oriented 
Policing Services funding for Indian country for $35 million 
provided in FY2002 to $30 million for FY2003. The Committee 
encourages additional funding over FY2002 for this essential 
program. Today, there are 1.3 law enforcement officers per 
1,000 citizens in Indian country, compared to 2.9 law 
enforcement officers per 1,000 citizens in non-Indian 
communities. And the Committee anticipates that greater burdens 
will be placed on Indian Country law enforcement as tribal 
governments play an integral role in securing America's borders 
and energy sources.
    The Budget Request proposes to provide $8 million for 
tribal courts in FY2003, the same amount provided in FY2002. 
The Committee urges a substantial increase in funding for 
tribal courts. Tribal court funds are used to develop, enhance, 
and operate judicial systems, to enhance civil and criminal 
justice administration on Indian lands and to encourage 
implementation of the Indian Civil Rights Act. Additional 
funding is needed to address the increased caseload on tribal 
court dockets resulting from increased arrests and rising 
crime, to encourage development of and investment in Indian 
lands by Indians and non-Indians, and to assist Federal courts 
in lessening the ever increasing Federal district court 
caseload.
    The Committee continues to support existing programs and 
funding for victim/witness coordinators within the Federal 
Bureau of Investigation and evidence and forensic examinations; 
funding for U.S. Attorney positions to investigate and 
prosecute crimes in Indian country; funding for drug testing, 
treatment, and diversion programs; funding for Youth Mental 
Health and Behavior Problems; and funding for sexual assault 
nurse examiner units. The Committee strongly encourages that FY 
2003 levels be increased for law enforcement activities 
sufficient to address these problems.

IV. E. Housing and Community Development--Dept. of Housing and Urban 
        Development

    The President proposes a $31.5 billion budget for 
Department of Housing and Urban Development (HUD), which is a 7 
percent increase over FY 2002 levels. HUD's primary focus is 
helping families achieve homeownership, particularly for 
minorities.
    Studies have documented that housing conditions in Native 
America are the worst in the nation, with 40 percent of Native 
Americans living in overcrowded or physically inadequate 
housing conditions, and 33 percent considered very-low income. 
The current level of need for housing stock in Native 
communities is $1.075 billion, up from $972 million from just a 
few years ago. This translates into an immediate need of at 
least 200,000 housing units, which doesnot include the 
estimated 52,000 units currently in need of renovation and 19,000 
needing replacement.\11\
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    \11\ Based on the Coalition for Indian Housing and Development, 
Submission to the Millennial Housing Commission, June 29, 2001.
---------------------------------------------------------------------------
    The rural nature of Indian Country translates into high 
housing costs. Many reservations lack basic infrastructure, so 
tribes must make large investments in water lines, sewage and 
sanitation facilities, and paved roads.\12\ Furthermore, the 
remote and isolated nature of Indian lands means more costly 
supplies and skilled labor and greater shipping expenses.
---------------------------------------------------------------------------
    \12\ The Indian Health Care Improvement Act Amendments (P.L. 94-
437) stated that the Indian Health Service has the primary 
responsibility and authority to provide safe and adequate water supply 
systems and sanitary sewage waste disposal systems in all Indian homes. 
Housing and infrastructure needs must be addressed together in Indian 
Country. All appropriation of $180 million increase in the Sanitation 
Facilities Construction for IHS would be needed, coupled with the 
NAHASDA block grants, would be a good start to address the housing 
problems.
---------------------------------------------------------------------------
    Access to financing (private sector capital and mortgage 
lending) is another barrier. Because Federal trust land cannot 
be used as collateral, Native Americans have difficulty 
obtaining mortgages. Even ``financially able'' Native Americans 
have to rely upon Federal housing programs because of the lack 
of alternative financing in Indian Country or because a limited 
private housing market makes housing prohibitively expensive.
            1. The Native American Housing Assistance and Self-
                    Determination Act (NAHASDA)
    The FY 2003 appropriation for the Native American Housing 
Block Grants is $646,600,000 \13\ which is $2,000,000 less than 
FY 2002. NAHASDA authorizes direct block grants to tribal 
governments or tribally-designated entities to develop, 
maintain, and administer safe and affordable housing for low-
income Native Americans. NAHASDA also encourages creative 
financial options that allow tribes to leverage public and 
private funds.
---------------------------------------------------------------------------
    \13\ This sum includes $5 million (down from $6 million in FY 2002) 
for the Indian Housing Loan Guarantee which will secure approximately 
$200 million in private loans. The sum also includes the Title VI 
Tribal Activities Loan Guarantee program was cut from $6 million to $2 
million in FY 2003.
---------------------------------------------------------------------------
    Tribes' housing needs remain disproportionately high 
compared with their housing block grant. As a result, tribal 
housing entities are only able to maintain their housing status 
quo and have had difficulty making headway to addressing their 
members' overall need. The Committee believes that housing 
funding under NAHASDA should address existing unmet needs.
            2. Native Hawaiian Housing
    The Native Hawaiian Housing Block grant was added this year 
in the amount of $10 million for FY 2003. The Native Hawaiian 
Home Loan Guarantee Fund was again funded for $1 million.\14\ 
Although Native American conditions are appalling, Native 
Hawaiians continue to have the greatest unmet need, with 95 
percent of eligible Native Hawaiians in need of housing.\15\ 
Therefore the Committee supports increasing this block grant to 
$15 million for FY 2003, and $40 million for each year 
thereafter. And although Native Hawaiians face the same 
problems of American Indians and Alaska Natives (limited access 
to urban centers, limited access to capital, lack of 
infrastructure, and restricted use of trust lands), Native 
Hawaiian housing needs are unique and the Committee recommends 
that this funding be separately identified and appropriated 
from NAHASHD funding for American Indians and Alaska Natives.
---------------------------------------------------------------------------
    \14\ This $1 million credit subsidy will secure approximately $40 
million in private loans.
    \15\ Overcrowding in Native Hawaiian homes is 36 percent, versus 3 
percent for all other homes. Native Hawaiian housing problems are 49 
percent for Native Hawaiians (44 percent for American Indians and 
Alaska Natives), versus 27 percent for other homes. Coalition for 
Indian Housing and Development, Submission to the Millennial Housing 
Commission: June 29, 2001.
---------------------------------------------------------------------------
            3. Community Development Block Grants (CDBG)
    The President's Budget Request for the Indian set-aside of 
the Community Development Block Grant Program is $72.5 million 
for FY 2003 which is a $2.5 million increase from FY 2002. 
Tribes use these grants for reservation infrastructure and 
economic development. The funding increase is welcomed, but 
more is needed for Native Americans to achieve economic self-
sufficiency that will reduce their reliance on Federal housing 
subsidies. The Committee therefore recommends that the Indian 
set-aside be increased from 1.5 percent to at least 3 percent 
of the total CDBG amount, or approximately $144 million.
            4. Proposed Emergency Fund
    Unlike HUD's public housing programs, there is no emergency 
fund for Native American housing. Last year, the Committee 
learned that toxic black mold had infested homes on at least 17 
Indian reservations which forced emergency evacuations of many 
homes. The cost of remediation has not been calculated, however 
three North Dakota tribes estimate needing $20 million to 
address their mold problems. To address this problem, the 
Committee recommends that an emergency housing fund be 
established that will enable tribes to quickly address toxic 
mold problems or other emergency problems plaguing Indian 
Country housing.\16\
---------------------------------------------------------------------------
    \16\ This toxic mold has been linked to serious health problems 
among the most vulnerable populations--the young and old. HUD 
represented to the Committee that tribes are eligible to apply for 
grants under the Lead-Based Paint program to address the problem of 
toxic mold in their houses. FY 2003 appropriation will increase to $126 
million from $110 million provided in FY 2002.
---------------------------------------------------------------------------
            5. Eliminated Programs
    Indian communities will be negatively impacted by two 
proposed budget eliminations. The President has not proposed 
funding for the Rural Housing and Economic Development program 
(which eventually was funded at $25 million in FY 2002). This 
program is particularly well-suited for Indian Country given 
all of the problems of rural America and the difficulty with 
economic development on reservations. The President also again 
proposes to eliminate the Drug Elimination Grant Program for 
the second year. This program is essential to ensuring safe 
housing through programs targeting at-risk youth and crime 
reduction activities. The Committee would encourage that both 
of these programs receive funding that will support economic 
development in Indian Country and provide safe reservation 
communities.

IV. F. Housing Loans--Department of Veterans Affairs

    The extreme housing needs of Native America have been well 
documented. To assist in addressing this epidemic need, 
Congress established the Native American Veterans Housing Loan 
Program. This pilot program provides direct loans to American 
Indians, Alaska Natives, and Native Hawaiians living on Federal 
trust lands. These loans are available to purchase, construct, 
or improve homes to be occupied as a veteran's residence. The 
President's Budget Request seeks $565,000 for FY 03, an 
increase of $21,000 over FY 02.

IV. G. Commercial Activities--Department of Commerce

    The Department of Commerce has specific programs from which 
Native communities benefit. One such program is the Economic 
Development Administration (EDA). The Budget Request proposes 
an $8 million reduction in funding for EDA. EDA promotes a 
favorable business environment to attract private investments 
and high-wage jobs through infrastructure and capacity 
building. One of the principal barriers to economic development 
in Indian County is the lack of infrastructure available to 
businesses wishing to locate in Indian country. The Committee 
urges additional funding for EDA so that Indian country can 
attract the businesses necessary to create jobs and stimulate 
economic growth.
    The President's Budget Request provides $31 million for the 
Minority Business Development Agency (MBDA), which works to 
facilitate access to resources for the minority business 
community in order to help minority businesses. Native American 
Business Development Centers are eligible for these funds. With 
the high level of unemployment in Indian Country, the Committee 
recommends an increase for MBDA.
    The Budget Request proposes to eliminate the Technology 
Opportunities Program (TOP), which provides grants for rural 
and underserved communities for advanced telecommunications 
technologies. In FY2001, TOP funding was $45.4 million, which 
included $4.2 million for Indian County. In FY2002, TOP funding 
was $15.5 million. The amount for Indian Country has not yet 
been determined. For FY2003, the President has determined that 
the program should be eliminated on the basis that the program 
is no longer needed as all sectors of society have access to 
the Internet and related technologies. This rationale ignores 
the realities of Indian Country.
    Telecommunications needs in Indian country are different 
from those in the rest of the nation because of the poor state 
of existing infrastructure in most native communities. In 1995, 
it was estimated that 53% of Indian homes on reservations did 
not have telephones, compared to only 5% of all other homes in 
the United States. Even in rural locations, only 9% of homes 
did not have telephones. In a 1999 survey conducted by EDA, 13 
of 48 tribes reported that they did not have 911 service and 
only eight have a technology infrastructure or 
telecommunications plan.
    The Indian Affairs Committee intends to work closely with 
the Commerce Committee to develop legislation to address 
telecommunication needs for Indian Country. Funding may be 
requested for FY2003 for any proposed legislation. The 
Committee also encourages the Department of Commerce to 
implement the recently enacted Native American Business 
Development, Trade Promotion and Tourism Act, Pub. L. No. 106-
464, and the Indian Regulatory Reform and Business Development 
Act, Pub. L. No. 106-447.

IV. H. Labor Activities--Department of Labor

    Unemployment rates in Native communities continue to hover 
in the 43-45% range compared to the national unemployment rate 
of 5.6%. Thus, Native communities have a serious need for job 
training programs.
    The President's Budget Request proposes to reform Federal 
job training programs. Currently, there are 48 Federal job 
training programs administered by 10 Federal agencies. The 
President proposes to consolidate or eliminate 20 programs so 
that in FY2003, there will be 28 programs administered by 10 
Federal agencies. Within the Department of Labor (DOL), there 
are 17 job training programs for dislocated workers, adult 
employment and training, and youth activities. For FY2003, the 
Budget Request proposes to eliminate or consolidate 7 job 
training programs and to transfer 1 program to the Department 
of Veterans Affairs, so that a total of 9 job training programs 
will be administered by the DOL. The Budget Request also 
proposes to eliminate or consolidate 4 programs within the 
Department of Education that affect adult education, vocational 
education and individuals with disabilities. Within the 
Department of Interior, the President proposes to consolidate 
or eliminate 9 job training programs that affect American 
Indians and Alaska Natives. Further elimination or 
consolidation of programs under the Workforce Investment Act 
should be expected in the FY2004 budget.
    Indians, Alaska Natives and Native Hawaiian youth and 
adults are eligible to participate in the Comprehensive 
Services program of the Workforce Investment Act (WIA). In 
FY2002,this program received $55.3 million. The 2000 Census 
shows increases in the Indian population since 1990 that range from 20% 
to 40%, depending on the state. The committee recommends a substantial 
increase (at least $60 million) for the Indian WIA Section 166 
Comprehensive Services program.
    In FY2002, the tribal Supplemental Youth Services program 
under WIA received $16.5 million. This program benefits youth 
in reservation areas, Oklahoma, Alaska and Hawaii, who are in 
or will soon enter the workforce. The FY2003 request is $15 
million, a $1.5 million decrease. The Committee recommends that 
$20 million be appropriated for this program.
    The Youth Opportunity Grant benefits Indian tribes in 
numerous states. The Budget Blueprint proposes a decrease for 
this program. The Committee recommends funding this program at 
the FY2002 level.
    The Welfare to Work grants provided funding in 1998 and 
1999, to be expended for up to 5 years after the funds were 
provided. Many tribes operating Welfare to Work grants have 
already expended their funds. The Committee anticipates 
proposed legislation to consolidate the Native Employment Works 
program with the Welfare to Work program. The amount needed for 
this proposal is estimated at $37 million.
    In FY2002, $900,000 was provided for a bison labor and 
training program for training of meat processors, veterinary 
science technicians, wildlife stewardship training and other 
areas. The Committee recommends continued funding for this 
vital economic development program.

IV. I. Transportation Activities--Department of Transportation

    The President's Budget Request seeks $290 million in FY 
2003 (down from $294 million in FY 2002) for the Indian 
Reservation Roads (IRR) program.\17\ The FY 2003 budget totals 
$59.3 billion which is an overall increases of $4.7 billion 
from FY 2002.
---------------------------------------------------------------------------
    \17\ The Indian Reservations Roads program falls under the Federal-
Aid Highways program under the Transportation Equity Act for the 21st 
Century and is jointly administered by the Bureau of Indian Affairs and 
the Federal Highway Administration. The Federal-aid highways funding 
for FY 2003 is $22,608,787,000 (down from $31,799,104,000 in FY 2002).
---------------------------------------------------------------------------
    The IRR program's purpose is to provide safe and adequate 
transportation and access to public roads near and within 
Indian reservations, Indian trust land, restricted Indian land, 
and Alaska Native villages. Funding may be used to construct 
and improve roads, bridges, and transit facilities leading to, 
and within, Indian reservations or other Indian lands. 
Approximately 25,000 miles are under the jurisdiction of the 
Bureau of Indian Affairs and tribes, the majority of which were 
rated to be in ``poor condition.'' \18\ Another 24,000 miles 
are under State and local roads.
---------------------------------------------------------------------------
    \18\ Only 11 percent of BIA roads are paved and rated in ``good 
condition.'' Close to 90 percent of the unpaved roads are in ``poor 
condition,'' resulting in muddy roads that are washed-out during fall 
and spring rains and are rendered useless.
---------------------------------------------------------------------------
    The Committee notes that there is an estimated $11 billion 
backlog of needed transportation improvements in Indian 
Country. Although Indian Reservation Roads compose 2.63 percent 
of the roads in the Federal Aid Highway program, Indian roads 
receive less than one percent of this Federal aid. As a result 
of this inequitable funding, these roads remain in poor and 
unsafe condition, leading to a fatality rate in Indian Country 
that is more than 4 times the national average. Furthermore, 
inadequate transportation infrastructure has a devastating 
impact on emergency and medical services, law enforcement 
response time and capabilities, and economic development 
efforts. Given the poor condition of the Indian Reservation 
Roads system and given that these roads have not received an 
equitable amount of funding over the years, the Committee 
recommends funding the IRR program at $1 billion.

IV. J. Environmental Activities--Environmental Protection Agency (EPA)

    The Committee is concerned about the proposed cuts and 
decreases to environmental grants to tribes and states for the 
clean air and clean water programs. In particular, the 
Committee is concerned about the proposed decrease in the Clean 
Water State Revolving Fund (CWSRF), which helps tribes and 
states meet their significant infrastructure needs by providing 
funds to construct drinking water and wastewater treatment 
facilities. These funds are an important tool to both tribes 
and states in assisting communities to achieve clean drinking 
water. The President proposes to decrease this fund from $1.4 
billion to $1.2 billion. Of the CWSRF, tribes only receive one 
and one-half percent of the funds, which amounts to $18.2 
million. The level of need in Indian Country, however, is far 
greater than this amount. The EPA and the Indian Health Service 
estimate that it will cost more than $650 million to correct 
inadequate wastewater treatment systems or to construct systems 
where none currently exist.
    The Committee is also concerned that the President has not 
requested an increase in the amount available in the Drinking 
Water State Revolving Fund (DWSRF) which is used to help tribes 
upgrade and modernize drinking water systems.
    As for Alaska Native water programs, the Committee is 
concerned that there has not been a request for an increase 
even though the EPA estimates that more than 20,000 homes in 
Native villages lack basic sanitation facilities.
    The Committee strongly supports the increase of $5 million 
to the general assistance grants, which are used by tribal 
governments for a range of environmental regulatory activities.
    The Committee supports the increase of $5.5 million to 
prevent pollution at the local level and to study environmental 
conditions in Indian Country since part of this money will go 
to the American Indian Environmental Office, which serves as 
EPA's principal liaison with Indian Country. This increase 
supports the goal of establishing an environmental presence in 
Indian Country.

IV. K. Energy Sources--Department of Energy

    The Committee supports the President's Request of a 25% 
increase in the Department of Energy Federal Management Program 
(FEMP). Currently, to comply with Federal green power goals, 
Federal facilities must purchase up to 2.5% of their current 
energy usage from renewable sources. In the Technical Guidance 
and Assistance line item, the Committee requests consideration 
of the following language: ``Any Federal facilities that 
conduct energy efficiency through FEMP programs should apply 
50% of their energy savings funds towards the purchase of green 
tags from tribal renewable energy projects.''
    The Committee supports the proposed 20% increase in the 
Weatherization Assistance Program but suggests that Congress 
look at methods to assure tribal participation in the grant 
program since the current program funding is provided to states 
or through state energy offices.
    The Committee strongly supports the increase of 196% of the 
Renewable Indian Energy Resources line item in the DOE: Power 
Technologies Program Funding. There are currently no incentives 
for renewable energy development on Indian lands despite the 
significant potential that exists. The Department of Energy has 
reported that there are 61 Indian reservations that have 
renewable energy resources such as wind, solar, and geothermal 
that could be developed for central station-generation. The 
development of distributed renewable energy systems could also 
help electrify the home of rural Indian communities.

IV. L. Energy Sources--Department of Agriculture

    Rural Utility Loan Program. The Committee is concerned that 
at present, it appears that the Rural Utility Service only 
makes loans for rural energy projects where the energy is 
consumed in the rural areas. However, the market for the 
renewable energy sources is often in urban areas where the 
electricity demands are greater and costs for electricity are 
higher. The Committee intends to see an amendment to the Rural 
Utilities Service legislation to add the terms ``renewables'' 
or ``renewable energy technologies'' as well as ``tribes'', as 
``act beneficiaries'', under Rural Utility Service.

IV. M. Energy Sources--Department of Defense

    The Committee is working on a tribal energy initiative to 
encourage energy development on Indian lands. This includes 
developing tribal partnerships with Federal agencies, including 
the Department of Defense. Since the Department of Defense is 
the largest consumer of energy in the U.S. government, the 
Committee believes there is an excellent opportunity for tribes 
to provide power to Department of Defense facilities, 
installations, and ranges to assist the Department in meeting 
government agency's obligations to purchase renewable energy 
and to contribute to the energy security needs of the 
Department. Accordingly, the Committee may request funding to 
implement tribal/DOD energy partnerships.

                        V. COMMITTEE CONCLUSIONS

    On February 28, 2002, the members of the Committee on 
Indian Affairs favorably adopted this letter of recommendations 
on the budget views and estimates.
    In approving this letter, however, the members of the 
Committee want to make clear that the Committee reserves the 
right to supplement this letter with the CRS memorandum on 
Federal spending trends when it becomes available.
    The Committee appreciates the opportunity to provide this 
information on the President's FY 2003 Budget Request for 
Indian-related programs to the Committee on the Budget and very 
much looks forward to working with the Budget Committee in the 
coming year.
            Sincerely,
                                   Ben Nighthorse Campbell,
                                           Vice Chairman.
                                   Daniel K. Inouye,
                                           Chairman.
                                ------                                

                                       U.S. Senate,
                                Committe on Indian Affairs,
                                    Washington, DC, March 14, 2002.
Hon. Kent Conrad,
Chairman, Committee on the Budget, U.S. Senate, Washington, DC.

Hon. Pete V. Domenici,
Ranking Member, Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Chairman Conrad and Senator Domenici: The Committee on 
Indian Affairs would like to submit the following amendment to 
the Views and Estimates Letter, which was submitted to the 
Committee on the Budget on March 1, 2002.
    At the end of paragraph IV.C.3. Office of Vocational and 
Adult Education, add the following:
    The Committee is concerned about the elimination of $3 
million in funding for the United Tribes Technical College 
(UTTC). UTTC is a unique institution; it is the only 
intertribally-controlled postsecondary vocational institution 
in the country, and has been funded in the President's budget 
every year since 1981. UTTC provides valuable educational 
opportunities to students from over 40 tribes across the 
nation, as well as services for their families. The Committee 
supports funding for UTTC at a minimum of $3 million.
    The Committee also supports $1.2 million for Crownpoint 
Institute of Technology (CIT), a fully-accredited postsecondary 
vocational/technical education institution. Funding for this 
institute was eliminated in the FY 2002 budget.
            Sincerely,
                                   Ben Nighthorse Campbell,
                                           Vice Chairman.
                                   Daniel K. Inouye,
                                           Chairman.
                                ------                                

                                       U.S. Senate,
                          Select Committee on Intelligence,
                                     Washington, DC, March 4, 2002.
Hon. Kent Conrad,
Chairman, Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: We are writing to respond to your letter 
dated February 4, 2002, requesting a ``views and estimates'' 
report on proposed Fiscal Year 2003 spending for programs and 
activities that fall within the jurisdiction of the Senate 
Select Committee on Intelligence.
    Consistent with prior years, we will not submit a separate 
``views and estimates'' report for intelligence spending for 
Fiscal year 2003 because expenditures for intelligence are 
classified and contained within other specified accounts, 
including those for the Departments of Defense, State, 
Treasury, Energy, and Justice.
    Should you or any member of your staff have any questions, 
please contact the Committee's Budget Director, Melvin Dubee, 
at (202) 224-1700.
            Sincerely,
                                   Bob Graham,
                                           Chairman.
                                   Richard C. Shelby,
                                           Vice Chairman.
                                ------                                

                                       U.S. Senate,
                                Committee on the Judiciary,
                                     Washington, DC, March 1, 2002.
Hon. Kent Conrad, Chairman.
Hon. Pete V. Domenici, Ranking Republican,
Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Kent and Pete: Thank you for your letter of February 
4, 2002, requesting views and estimates from the Committee on 
the Judiciary for your consideration as you prepare the Fiscal 
Year 2003 budget resolution.
    During the past year the Justice Department has confronted 
the unprecedented and daunting challenge of protecting the 
United States against international terrorism in the wake of 
the attacks of September 11, 2001, and the subsequent anthrax 
attacks. The Justice Department, under the leadership of the 
Attorney General, deserves credit for sustaining the confidence 
of the American people in the government's ability to assure 
their safety.
    I have concerns, however, that in the Administration's 
budget proposal for Fiscal Year (FY) 2003, only Department of 
Justice (DOJ) agencies that are considered key to homeland 
defense would receive large increases in funding, even as the 
DOJ's overall discretionary spending would stay level. While 
increased spending to fight terrorism at home and secure U.S. 
borders is of great importance, there are a number of 
questionable figures proposed for the DOJ budget.
    The Department of Justice requests a $30.2 billion budget 
for FY 2003, which includes $539.2 million to continue on-going 
initiatives funded in the FY 2002 Counterterrorism 
Supplemental. I support the Administration's decision to give 
high priority to combating terrorism, including border 
security. We have a duty, however, to take a closer look at 
details that may not have been considered when the Supplemental 
was adopted last year.

                    FEDERAL BUREAU OF INVESTIGATION

    The Justice Department component with plans to grow most 
sharply is the Federal Bureau of Investigation (FBI). Over a 
two-year period the FBI budget will increase from $3.25 billion 
in FY 2001 to $4.32 billion in FY 2003. The Judiciary Committee 
held FBI oversight hearings last year at which some members 
raised the questions about whether the FBI needed more money or 
just better management. Senator Grassley and I have also 
introduced S. 1974, the FBI Reform Act, which seeks to address 
some of these issues in a bipartisan manner.
    Director Robert Mueller is making management reforms. He 
announced the first phase of his FBI reorganization in 
December. I praised his action as responding to the need to 
strengthen FBI intelligence, security, and information 
management. He and Deputy Attorney General Thompson are now 
taking a wider look at ways to streamline the FBI 
responsibilities to enable greater focus on detecting 
prevention and the investigation of terrorists. This may 
require a shift of certain types of criminals to be handled by 
other federal agencies and state law enforcement. The Judiciary 
Committee will hear from Mr. Mueller and Mr. Thompson on their 
plans and the realignment of criminal law enforcement tasks.
    One of the most important FBI initiatives is the TRILOGY 
program for upgrading the Bureau's information technology. The 
Counterterrorism Supplemental for FY 2002 included $237 million 
for advanced computer equipment and software under the TRILOGY 
program, and the FBI requests another $109.4 million in FY 2003 
for information technology projects including TRILOGY. I 
support these investments. From an oversight perspective, 
however, I am disappointed that the Justice Department and the 
FBI have failed to submit quarterly status reports on TRILOGY 
as required in the Appropriations Act for FY 2001. Such reports 
are especially important to monitor the effectiveness of 
planning and testing for new software, and I have urged the 
Attorney General to provide a current status report on TRILOGY 
to the Congress as soon as possible.
    Over the past seven years, the growth of the FBI's Joint 
Terrorism Task Forces (JTTF) has strengthened national 
counterterrorism efforts with full-time participation by other 
federal agencies and state and local police personnel, co-
located at dedicated facilities with support funding in 36 FBI 
field offices. Director Mueller plans an increase in these task 
forces to all 56 offices, and I support this plan. After the 
September 11th attacks, separate Anti-Terrorism Task Forces 
were established by the Attorney General in each U.S. 
Attorney's office. Former FBI executives have publicly raised 
serious concern that the new Task Forces would ``undermine the 
capabilities of the nation's primary agency responsible for the 
prevention and investigation of terrorist activity.'' Although 
a memorandum from Deputy Attorney General Thompson, dated 
October 25, 2001, indicates that FBI JTTFs retain primary 
authority for operational and investigative matters not related 
to prosecutions, the concern expressed by these former FBI 
executives about the divided responsibility for investigations 
through duplicative task forces should be addressed.
    For example, the U.S. Attorneys' Anti-Terrorism Task Forces 
are coordinating the current program for interviews of 5,000 
nonresident aliens using state and local law enforcement 
personnel. The results are to be compiled in a new database for 
U.S. Attorneys being designed by the Justice Management 
Division. The development of a new database suggests a long-
term investigative role for the U.S. Attorneys-led Task Forces 
using state and local law enforcement personnel. The potential 
for divided leadership and accountability is troubling. 
Moreover, it is not clear whether the Attorney General's 
Guidelines for FBI investigations would apply to 
theinvestigative activities of the U.S. Attorneys' Anti-terrorism Task 
Forces.

               IMPROVING STATE AND LOCAL LAW ENFORCEMENT

    The Community Oriented Policing Services (``COPS'') Program 
has been a resounding success--since its inception in 1994, the 
COPS Program has awarded over $7 billion in grants to law 
enforcement agencies, putting more than 114,000 new law 
enforcement officers on the street, and is credited for 
reducing the crime rate and getting more police officers on the 
street. I support the full funding of the program to keep COPS 
on course to fund an additional 36,000 law enforcement officers 
by the end of 2005 to help maintain communities and reduce 
crime.
    The Administration's Fiscal Year 2003 budget cuts COPS by 
almost $500 million. Congress appropriated $1,050,440,000 for 
the COPS program for FY02. Enactment of this budget would mean 
an end to police hiring grants and school resource officers; 
and drastic reductions in technology, equipment, and support 
staff grants--on which State and Local law enforcement agencies 
heavily rely. The request proposes to cut the Universal Hiring 
Program by 100 percent, cut the COPS in Schools program by 100 
percent, and cut the COPS technology program by 67 percent.
    The overall budget for COPS does not increase, as the 
Administration claims. It proposes to cut more than $1.6 
billion from the $2.5 billion appropriated for FY2002 for state 
and local law enforcement grants, and, in an accounting shift, 
combines what is left into a new $800 million Justice 
Assistance Grant Program. The budget request places that new 
grant under the COPS account, making it appear as if overall 
COPS funds increase, when, in fact, they do not. The 
Administration merely repackages many of DOJ grant programs, 
and then cuts their funding.
    Grant programs targeted for elimination include the State 
and Local Law Enforcement Block Grants (LLEBG), which received 
$400 million this year; Byrne law enforcement block grants for 
efforts to improve state and local courts, which received $500 
million for FY02; and aid for states incarcerating illegal 
aliens, which got $565 million this year. The Bureau of Justice 
Assistance (BJA) makes Byrne Program funds available through 
two types of grant programs: discretionary and formula. 
Discretionary funds are awarded directly to public and private 
agencies and private nonprofit organizations; formula funds are 
awarded to the states, which then make subawards to state and 
local units of government. I support maintaining the 
discretionary grant component of the program.
    I support full funding of the Edward Byrne Memorial State 
and Local Law Enforcement Assistance Program to make grants to 
states, for use by states and local units of government, to 
improve the functioning of the criminal justice system, with 
emphasis on violent crimes and serious offenders, and to 
enforce state and local laws that establish offenses similar to 
those in the Federal Controlled Substances Act. As a senator 
from a rural state that relies on these grants to combat crime, 
I am concerned with these funding and program eliminations, as 
well as the repackaging of well-established grant programs that 
have proven to be highly effective for state and local law 
enforcement agencies. For FY02, Congress authorized 
$594,489,000 for the Edward Byrne Memorial State and Local Law 
Enforcement Assistance Program, of which $94,489,000 was for 
discretionary grants and $500,000,000 was for formula grants 
under this program.
    The President's budget proposes to level-fund the 
Bulletproof Vest Partnership (BVP) Grant Program at $25.4 
million, even though, through the Bulletproof Vest Partnership 
Grant Act of 2000, Congress authorized $50 million for FY 2003 
for the successful program that protects the lives of local and 
state law enforcement officers.
    To better protect our nation's law enforcement officers, 
Senator Campbell and I introduced the Bulletproof Vest 
Partnership Grant Act which became law in 1998. That law 
created a $25 million, 50 percent matching grant program within 
the Department of Justice to help state and local law 
enforcement agencies purchase body armor for fiscal years 1999-
2001.
    Senator Campbell and I sponsored the Bulletproof Vest 
Partnership Grant Act of 2000 to build upon the success of this 
program by doubling the annual funding to $50 million for 
fiscal years 2002-2004. It improves the program by guaranteeing 
jurisdictions with fewer than 100,000 residents receive the 
full 50-50 matching funds because of the tight budgets of these 
smaller communities. For larger jurisdictions with populations 
at or over 100,000, the program pays up to 50 percent of each 
applicant's total vest costs, based upon any remaining funds. 
Specific funding levels for larger jurisdictions are determined 
once all applications have been submitted. Given the projected 
number of eligible jurisdictions and the limit funds available, 
the BVP already may not have sufficient funds to provide 50 
percent for applications from larger jurisdictions. The law 
also allows for the purchase of stab-proof vests to protect 
corrections offers and sheriffs who face violent criminal in 
close quarters in local and county jails. I support for the 
full funding of $50 million for the Bulletproof Vest 
Partnership Grant Program for Fiscal Year 2003.

                            BORDER SECURITY

    The Justice Department's budget calls for increased 
spending on border security, and that proposal is a step in the 
right direction. I am confident that the Congress will continue 
on its path toward fulfilling the goal that we included in the 
USA PATRIOT Act of tripling the number of Border Patrol agents, 
INS Inspectors, and Customs Service officers, and I am grateful 
that the Administration appears supportive of that goal. The 
security of our borders is not and should not be a partisan 
issue. We must all recognize that our northern border need to 
be made dramatically more secure, and we must be willing to 
provide the necessary funding. This budget is a good start, and 
I hope we do more to make sure that the Northern Border gets 
the additional personnel and equipment it needs.
    The Northern border provisions added to the anti-terrorism 
bill, enacted last October, authorize a tripling of border 
security on the U.S.-Canada boundary. Efforts since then to 
begin implementing the Northern Border provisions have 
originated in Congress and have met resistance from the White 
House. The President's new budget plan is the first movement by 
theAdministration toward those goals. The budget calls for a 
$1.2 billion increase for INS law enforcement efforts, from $4.1 
billion in 2002 to $5.3 billion in 2003. That increase would more than 
double the number of Border Patrol agents and INS inspectors. In his 
budget, the President has also said that new hiring should focus 
particularly on the Northern Border.
    The President also proposes a $300 million increase in the 
Customs budget for staffing and technology. The President's 
focus on Northern Border needs applies here as well and 
Congress should provide more direction to the Customs Service 
on where to display new staff.

                      Tobacco Litigation Resources

    I have been disappointed in the Bush Administration's 
public comments about its views on the strength of the Justice 
Department's litigation against the tobacco industry, and its 
calls for an out-of-court settlement to the pending federal 
lawsuit against the tobacco industry--a move that could end the 
government's most aggressive assault against cigarette makers. 
This is a curious way to begin negotiations to recover billions 
of taxpayer dollars spent by the federal government on tobacco-
related health care costs. History has shown that the tobacco 
industry is particularly adept at crafting legal loopholes that 
benefit its bottom line at the expense of the health of the 
American people. I hope to work to see that the United States' 
case against the tobacco industry will continue to be 
thoroughly prosecuted.
    The President's budget seeks $25.2 million for DOJ 
litigation against the tobacco industry, United States v. 
Philip Morris, Inc, et al., DDC Civil Action No. 99-2496 
(``Tobacco Litigation''). Up to $44.4 million will be needed, 
however, as the litigation team prepares for trial, scheduled 
to begin in July 2003. To fill the gap between the pending 
program request and requirements, the Department plans to seek 
Health Care Fraud and Abuse Control (HCFAC) funding as well as 
funding from other departmental sources, as they have in other 
years.
    Up to $38.2 million was made available to the tobacco 
litigation team in FY02 so that the government can comply with 
fact and expert discovery requirements established by the court 
and prepare its case for a trial that is only 17 months away. 
Most of this funding comes from the HCFAC account, though the 
DOJ also draws on its own resources to fund some team salaries 
and benefits, the services of experts who are likely to 
testify, and the services of litigation support specialists 
responsible for organizing information needed to estimate 
government awards.
    Currently, there are 36 team members (26 attorneys and 10 
support staff). Staffing for FY03 is projected to rise to 50 
positions. Litigation support will continue to be vital to the 
team's ability to assess damages that may be paid to the 
government under civil RICO. These services will also be needed 
to prepare exhibits, retrieve information for trial attorneys, 
and provide trial presentation services.

                        Protecting Civil Rights

    In contrast to the President's proposed budget, I support 
an increase in funding for our nation's essential civil rights 
enforcement agencies, including the DOJ's Civil Rights 
Division. This funding would allow the DOJ Civil Rights 
Division to add positions to prosecute hate crimes, deter the 
victimization of migrant workers, combat police misconduct, 
fight housing and employment discrimination, eliminate 
discrimination against persons will disabilities, guard voting 
rights, and protect fundamental opportunities.
    I am also disturbed by what could be interpreted as a shift 
in focus away from effective civil rights enforcement. 
Immediately after the September 11 terrorist attacks, the 
President addressed the nation and reminded us all that 
racially, ethnically, and religiously motivated violence would 
not be tolerated. I commend the President for his public words 
on this critical issue. It is important that the President and 
Justice Department match this admirable rhetoric with real 
enforcement and maintain the Department's longstanding 
leadership role in national civil rights enforcement during 
these difficult and eventful times.
    The President's proposed budget appears to fall short of 
the rhetoric. While that budget calls for increased funding for 
many components of the Department of Justice, these increases 
do not reach the Civil Rights Division, the chief federal body 
charged with actually enforcing U.S. civil rights laws. While I 
support efforts to fund election reform in the states and 
provide education on hate crimes enforcement to state and local 
authorities, these efforts are simply no substitute for 
maintaining a vibrant federal enforcement role in securing our 
most basic civil rights. These rights, all protected by the 
enforcement efforts of the Civil Rights Division, include 
voting, employment, housing, and disability rights as well as 
the rights of institutionalized persons, protection against 
police abuse and corruption, protection for victims of 
trafficking, and hate crimes enforcement.
    As one example, the problems of racial, ethnic, gender, 
sexual orientation, and religious discrimination and violence, 
unfortunately, stubbornly persist within our borders. We were 
reminded of these problems by the rash of crimes against Arab 
and Muslim Americans after the September 11 attacks. These 
acts, and indeed all acts of discrimination, cut at the very 
heart of what the terrorists hope to destroy in the United 
States--our tolerance and our diversity. In recent answers to 
questions which you provided based upon his December 6, 2001, 
appearance at the Senate Judiciary Committee, Attorney General 
Ashcroft noted that the FBI had commenced approximately 300 
federal criminal investigations involving post-September 11 
attacks on Arab or Muslim Americans, or others, based upon 
their actual or perceived ethnicity. To date, however, there 
have only been eight federal cases resulting from these 
approximately 300 investigations. In short, there has been no 
federal prosecution in over 97 percent of these investigations. 
I would be remiss if I did not point out this significant gap 
between the President's admirable rhetoric and the enforcement 
actions of the Justice Department since September 11.
    A second example where rhetoric has outstripped enforcement 
involves the protection of voting rights. During his 
confirmation hearing, Attorney General Aschcroft recognized 
that ``[v]oting is a fundamental civil right'' and pledged 
that, if confirmed, he would ``work aggressively and vigilantly 
to enforce federal voting rights laws.'' He assured the 
Judiciary Committee that ``[i]twill be a top priority of a Bush 
Department of Justice, part of what I hope would be its legacy.'' 
Unfortunately, the President's budget request did not call for any 
additional resources for the Department's Voting Rights Section, even 
though there have been recent press reports critical of the 
Department's role in delaying a redistricting plan for congressional 
seats in Mississippi are disturbing.

                          COMBATING CYBERCRIME

    Technology has ushered in a new age filled with unlimited 
potential for commerce and communications. The Internet age has 
also, however, ushered in new challenges for federal, State and 
local law enforcement officials. These challenges were clearly 
evident as our nation's law enforcement officials investigated 
the recent cyberhacker attacks. Congress and the Administration 
must work together to meet these new challenges while 
preserving the benefits of our new era.
    The Leahy-Dewine Computer Crime Enforcement Act, which 
authorized a $25 million Department of Justice grant program to 
help States prevent and prosecute computer crime, is intended 
to help States and local agencies in fighting computer crime. 
Grants under the bipartisan law may be used to provide 
education, training, and enforcement programs for local law 
enforcement officers and prosecutors in the rapidly growing 
field of computer criminal justice. All 50 States have now 
enacted tough computer crime control laws. They establish a 
firm groundwork for electronic commerce, and protecting this 
part of our critical infrastructure. Unfortunately, too many 
State and local law enforcement agencies are struggling to 
afford the high cost of training and forensic work needed to 
realize the potential of State computer crime statutes. I 
support funding for these important initiatives.

                   CURBING DRUG TRAFFICKING AND ABUSE

    Drug use and abuse is a contributing factor to spousal and 
child abuse, property and violent crime, the spread of AIDS, 
workplace and motor vehicle accidents, and absenteeism in the 
workforce. The Senate has already passed a version of S. 304, 
the Hatch-Leahy Drug Abuse Education, Prevention, and Treatment 
Act to aid States and local communities in their efforts to 
prevent and treat drug abuse. It establishes drug treatment 
grants for rural States and authorizes money for residential 
treatment centers for mothers addicted to heroin, 
methamphetamines, or other drugs. This legislation also will 
help States and communities reduce drug use in prisons through 
testing and treatment. It will fund programs designed to reduce 
recidivism through drug treatment and other services for former 
prisoners after release. In addition, this bill will 
reauthorize drug courts and authorize juvenile drug courts. 
Finally, the bill directs the Sentencing Commission to review 
and amend penalties for a number of drug crimes involving 
children. The bill will authorize $1.4 billion in 
appropriations over four years. I hope that the Congress will 
send this bill to the President soon and that the Justice 
Department will work with us for full funding of the programs 
it authorizes.

    IMPROVING FORENSIC SCIENCE SERVICES AND REDUCING THE DNA BACKLOG

    Forensic science is widely accepted as a key to effective 
administration of justice, but State crime laboratories are now 
seriously bottlenecked. Backlogs in many laboratories have 
impeded the use of new technologies, such as DNA testing, in 
solving cases without suspects--and reexamining cases in which 
there are strong claims of innocence--as laboratories are 
required to give priority status to those cases in which a 
suspect is known. Timeliness and quality concerns in the 
forensic science services threaten the administration of 
justice in the United States.
    Two years ago, Congress passed the Paul Coverdell National 
Forensic Sciences Improvement Act, which authorizes the 
appropriation of $134.7 million for Fiscal Year 2003 to improve 
State forensic science services for criminal justice purposes. 
Congress also passed the DNA Analysis Backlog Elimination Act 
of 2000, which authorizes the appropriation of $40 million for 
Fiscal Year 2003 to reduce the backlog of untested DNA samples 
in our nation's crime labs. I support full funding of each of 
these programs.

           PROTECTING THE ENVIRONMENT AND ENFORCING TAX LAWS

    The President's budget also calls for cuts in the 
Environmental and Natural Resources Division and the Tax 
Division of the DOJ. These are the Department's components 
responsible for enforcing the environmental laws and bringing 
cases against tax evaders. Given the recent tax cuts and 
changes over the last year in the nation's environmental 
regulatory scheme, aggressive enforcement of the remaining tax 
and environmental laws should be a priority. The President's 
cuts seem to run counter to this idea.
    Thank you for your careful consideration of these issues. 
We look forward to working with you on the Fiscal Year 2003 
Budget Resolution.
            Sincerely,
                                             Patrick Leahy,
                                                          Chairman.
                                ------                                

        U.S. Senate, Committee on Small Business and 
            Entrepreneurship,
                                     Washington, DC, March 1, 2002.
Hon. Kent Conrad,
Chairman, Committee on the Budget, U.S. Senate, Washington, DC.

Hon. Pete Domenici,
Ranking Minority Member, Committee on the Budget, U.S. Senate, 
        Washington, DC.
    Dear Kent and Pete: As Chairman and members of the 
Committee on Small Business and Entrepreneurship, we are 
submitting the following views and estimates on the President's 
FY2003 budget request for the Small Business Administration 
(SBA or Agency) and other matters under the Committee's 
jurisdiction in compliance with section 301(d) of the 
Congressional Budget Act.

                    FY 2003 BUDGET REQUEST OVERVIEW

    The Administration has requested $798 million for the SBA's 
FY2003 budget. Last year, the President requested $539 million, 
and Congress appropriated $768.5 million. While this year's 
overall request is an increase, virtually all of it goes to 
administrative expenses and staffing and leaves core programs 
inadequately funded. To adequately fund those programs, we are 
short about $200 million.
    Of major concern is the 17 percent decrease in small-
business lending and investment programs from $19.7 billion to 
$16.4 billion. The SBA's programs are typically counter-
cyclical, growing in demand when the economy is weak and the 
private sector tightens credit. This economy is proving no 
different. For example, over the past year, lending surveys by 
the Federal Reserve found that more than 40 percent of banks 
cut back on lending to small businesses, making it harder and 
more expensive to get loans. Consistent with that, in dollars, 
the FY2002 usage of 7(a) loan is up 16 percent and of 504 loans 
by 26 percent, over the same period in FY2001. Given the 
economy and the increased demand for the SBA's credit programs, 
this budget request is insufficient to meet the needs of small 
businesses, and we do not support it.
    Specifically, we oppose the 50 percent reduction in the 
7(a) Loan Guaranty Program, the fee increase in the 504 Loan 
Guaranty Program, and the insufficient funding for the SBA 
Microloan Program. The 7(a) loan program, which is critical to 
our nation's small businesses for long-term working capital, is 
proposed to be funded at a program level of $4.85 billion for 
FY2003. If implemented, that proposal would have a serious 
impact on our states. For example, in FY2001, 234 small 
businesses in North Dakota got 7(a) loans, which meant $41 
million invested in the economy and, by the SBA's own budget 
assumptions, the creation 1,242 jobs. In New Mexico, 201 small 
businesses got 7(a) loans, which meant $44 million invested in 
the economy and the creation of 1,333 jobs. Nationwide, as big 
business carried out massive lay-offs and two million people 
lost their jobs, it is estimated that the 7(a) program created 
nearly 300,000 jobs. To provide $11 billion in 7(a) loans, we 
request an additional appropriation of $93 million to bring the 
Administration's request of $85 million to a total of $178 
million.
    In order to prevent losing half of that stimulus to the 
economy, we oppose the budget proposal and request a program 
level of $11 billion. This is a slight increase over the 
historical program level of $10 billion, but our request is far 
less than the authorized level of $16 billion and is reasonable 
given the increase in demand described earlier.
    In addition to inadequate funding for 7(a) loans, we are 
concerned about the inaccuracy of its subsidy rate. Year after 
year, we struggle to secure adequate funding only to have the 
same amount and more returned to Treasury. For example, in 
FY2002, the budget estimates that $100 million will be 
appropriated for working capital loans, and that $179 million 
will be returned. Unfortunately, this problem is not isolated. 
The subsidy rates for most of the SBA's credit programs are a 
serious problem for the Agency and are burdensome on borrowers 
and lenders, including the 504 program, the Microloan Program, 
and the SBIC programs. We ask for the Budget Committee's help 
in rectifying this problem and possibly amending the Federal 
Credit Reform Act as you reauthorize it this year.
    Another major concern about the budget is funding for the 
504 program. As you know, the 504 loan program is not funded 
through appropriations; it is funded entirely through fees paid 
by borrowers and lenders. The fees are excessive, and have 
resulted in about $400 million in negative re-estimates over 
the past several years. In the FY2003 budget, even though 
defaults went down slightly, the subsidy rate for the 504 
program went up. Consequently, this caused the borrower's 
annual loan fee to rise. It is very hard to justify an increase 
in fees when the President's budget estimates that in FY2002 
the 504 loan program will send $110 million to Treasury. In 
order to provide fee relief for the borrowers and compensate 
for the increase, we request $13 million for the 504 loan 
program. We also request $34 million to provide some funding 
for one year of the two-year fee changes enacted as part of PL 
107-100.
    Like 7(a) and 504 loans, the budget does not request 
adequate funding for the Microloan Program. The Administration 
has requested a program level of $26.5 million for direct 
microloans, and $17.5 million for microloan technical 
assistance. We are greatly concerned about the technical 
assistance request because $17.5 million is not even enough to 
maintain the outstanding portfolio of microloans.
    As you know from previous letters, microloan technical 
assistance is integral to the success of microentrepreneurs, 
and therefore to the success of the program, because it helps 
ensure repayment of the loans. Since this program made its 
first loan in 1992, there have been no losses to the 
government. No other program has this success rate. The 
Committee has had a very hard time securing adequate microloan 
technical assistance in the past, and we respectfully urge you 
to consider a level of $35 million.That would be enough to 
serve outstanding microloans and to serve new microloans to be made in 
FY2003. We request a program level of $35 million for direct microloans 
because, as with the 7(a) and 504 programs, usage is up. During times 
of major lay-offs, the need for microlending increases because people 
turn to self-employment and income-patching to support themselves. In 
summary, we request an extra appropriation of $17.5 million for 
microloan technical assistance for a total budget of $35 million, and 
an extra appropriation of $1.1 million for direct microloans for a 
total program level of $35 million.
    Unfortunately, microloan technical assistance is not the 
only non-credit program to be under-funded or cut in the FY2003 
budget. The BusinessLINC Program and the Program for Investment 
for Microinterprises (PRIME) were completely eliminated from 
the budget. As with last year, we request $7 million for 
BusinessLINC and $15 million for PRIME. Women's Business 
Centers were funded at $12 million, and we request an 
additional $2.5 million for a program level of $14.5 million. 
Between 1997 and 2002, women-owned businesses increased 14 
percent, which is twice the rate of all firms in the U.S. It 
makes no sense to freeze funding for women's business centers 
when the demand is increasing. The grants to centers have been 
cut in past years because of inadequate funding. If we are to 
fund existing centers and also fund new centers, which was 
Congress' intent when it passed the Women's Business Center 
Sustainability Act of 1999, then the program must be funded at 
$14.5 million.
    The Administration has requested $88 million for the Small 
Business Development Centers (SBDCs). Once again, this is not 
adequate to serve small businesses in our country. In FY 2001, 
the SBDC program provided counseling and training assistance to 
almost 610,000 clients. These figures represent almost a 5 
percent increase over FY2000. Last year 24 states took serious 
cuts in federal funding because of population changes 
identified by the 2000 Census. It wasn't because they lost 
population; it was because their population did not grow as 
fast as the national average during the '90s. We cannot expect 
the SBDCs to serve the same number of businesses, with the same 
quality, with fewer dollars. To rectify the shortfall, 
consistent with Amendment No. 183 that passed by unanimous 
consent to the FY2002 budget resolution, we request a program 
level of $105 million. This amount would help compensate for 
the growth in demand and restore cuts that states took last 
year as a result of the 2000 Census.
    We do fully support the following: a program level of $4.5 
billion for 504 loans; a program level of $4 billion for SBIC 
Participating Securities; a program level of $3 billion for 
SBIC Debentures; $1.5 million for the state conferences on 
small business; $500,000 for PRO-Net; and $1 million to fund 
outreach to Native Americans. With an average unemployment rate 
of 43 percent on reservations, as cited in the budget, it is an 
understatement to say we need to concentrate on using the SBA's 
counseling and lending partners to build sustainable economic 
opportunity in those communities.
    As Chairman and members of the Committee, we have two more 
requests. One, we would like a line item for the SBA's Office 
of Advocacy. In order to give the Office of Advocacy true 
independence from the Agency, as has always been intended by 
its authorizing legislation, it needs to control its budget and 
its hiring. We also request a line item for the relocation of 
employees. Under salaries and expenses, the budget for ``travel 
and transportation of employees'' increased from $3.8 million 
to $7.9 million. That is more than double. In the footnotes, 
the increase is justified as ``a small increase to restore 
these funds back to a more normal operating level, plus costs 
of proposed employee relocations.'' Rather than lump the two 
expenditures together, we recommend separating them.
    You have asked for guidance for programs under the 
jurisdiction of the Committee on Small Business and 
Entrepreneurship for the ten-year period of 2003-2012. We would 
like to work further with you to develop these projections 
because we disagree with the baseline in the chart CBO 
provided. The starting baseline for FY2002 for the Small 
Business Administration's credit programs and non-credit 
programs, which are calculated as part of salaries and 
expenses, is too low. For example, in FY2002, the President's 
budget proposal cut funding for the SBA's non-disaster programs 
by 26 percent. While significant cuts were restored, level 
funding was far less than levels set by the authorizing 
Committee, and historically the Agency has not seen adequate 
funding for its programs to maximize their potential to the 
economy. We ask that you not use the ten-year projection 
provided and that we work to establish a baseline before 
applying CBO's inflators that will guide the budget authority 
targets for the next ten years.
    In closing, let us thank you for all your help last year. 
While this year's budget for the SBA is not good, last year's 
was far worse and your support helped prevent harmful proposals 
from being enacted. Probably the most serious was the increase 
in interest rates on disaster loans. No one could have known 
that the terrorist attacks of September 11th would happen, but 
we do know that the people who lost homes and businesses would 
be much worse off today if they were being charged more for 
their disaster loans. Again, thank you.
    We look forward to the opportunity to work with you to 
develop this portion of the Budget Resolution for FY2003.
            Sincerely,
                    John F. Kerry; Carl Levin; Tom Harkins; Joseph L. 
                            Lieberman; Paul Wellstone; Max Cleland; 
                            Mary Landrieu; John Edwards; Maria 
                            Cantwell; Jean Carnahan.
                                ------                                

        U.S. Senate, Committee on Small Business and 
            Entrepreneurship,
                                    Washington, DC, March 15, 2002.
Hon. Kent Conrad,
Chairman, Committee on the Budget, United States Senate, Washington, 
        DC.

Hon. Pete Domenici,
Ranking Member, Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Kent and Pete: As Ranking Member of the Committee on 
Small Business and Entrepreneurship (Committee), I submit the 
following views and estimates on the President's Fiscal Year 
2003 budget request for the Small Business Administration (SBA) 
and other matters under the Committee's jurisdiction, as 
directed by Sec. 301(d) of the Congressional Budget Act.
    In general, I continue to believe the SBA must rely more on 
the electronic delivery of services. Having staff members 
answering every inquiry would necessitate an unwieldy expansion 
of SBA personnel, leading to a further expansion of managerial 
staff to oversee them. The President's e-government initiatives 
can find a promising model in the SBA's HUBZone program, in 
which firms submit their applications electronically. (I have 
further views on specific electronic initiatives being 
undertaken by the SBA, below).
    However, in some areas the SBA has had additional functions 
imposed on it by statute, and some additional personnel and 
funding will be necessary to carry out those mandates in an 
effective, efficient, and economical manner. This is true even 
of the HUBZone program, as will also be discussed further 
below.
    7(a) Guaranteed Business Loan Program. The small business 
community must have access to a strong 7(a) loan program to 
obtain long-term financing that would not otherwise be 
available. Each year, 40,000 or more small business concerns 
turn to the SBA's 7(a) program for critical financing. The 
budget request includes a significant decrease in the program 
authority from $10.5 billion to $4.8 billion. This cutback, if 
not reversed, will have a harmful impact on small business 
start-ups and growth.
    During the past five years, the Committee studied closely 
the management of the credit subsidy rates for the credit 
programs at the SBA. For the past decade, the losses under the 
programs have declined dramatically; however, these program 
improvements have not been fully recognized by the Office of 
Management and Budget (OMB) and the SBA in calculating the 
credit subsidy rate. Consequently, last year Senate Kerry and I 
requested the General Accounting Office (GAO) to undertake a 
comprehensive examination of the 7(a) credit subsidy rate 
calculations.
    In July 2002, the GAO delivered its report to the 
Committee. Significantly, the GAO revealed that since Fiscal 
Year 1992, defaults and recoveries for the 7(a) program were 
overestimated by the SBA and OMB. What the overestimates mean 
in real cost is that the Federal government collected 
significantly more money than needed to fund the loss reserve 
accounts as required under the Credit Reform Act of 1990. 
Specifically, the GAO found that the Federal government had 
collected over $950 million in excess fees paid by borrowers 
and lenders and by taxpayers' funds appropriated by the 
Congress. This amount has grown to over $1.1 billion with the 
information supplied in the President's Fiscal Year 2003 budget 
request.
    In response to proposed legislation to direct the OMB to 
correct the credit subsidy rate problem, the Budget Committee 
staff received assurances last October from the OMB that the 
7(a) credit subsidy rate would not exceed 50 basis points (0.50 
percent) in the Fiscal Year 2003 budget request. The Small 
Business Committee relied on the OMB assurances when the 
Congress passed S. 1196, which lowered the fees paid by the 
small business borrowers and lenders participating in the 7(a) 
loan program. The President signed the bill into law on 
December 21, 2001, as Public Law 107-100. Subsequently, in 
February 2002, and contrary to the assurances provided by the 
OMB to the Budget Committee staff in October 2001, the budget 
request included a credit subsidy rate of 88 basis points (0.88 
percent), which is 76 percent higher than the level promised by 
the OMB.
    To some, this difference might seem slight--merely 
splitting hairs. But in reality, the difference is significant. 
The 38 basis points (0.38 percent) above the maximum level set 
by the OMB last fall means that the Congress will need to 
appropriate at least an additional $45.6 million, and probably 
more, to fund the 7(a) loan program in Fiscal Year 2003. Based 
on the GAO analysis of the credit subsidy rate, it will not be 
long before this additional appropriation, along with some fees 
collected from borrowers and lenders, will be found to be 
``excess'' and will be sent to the general Treasury. It is 
clear that the SBA and OMB will be collecting fees well in 
excess of the program's needs. Unless changes are made to this 
process, the Congress will have to resort to appropriating 
funds, which otherwise would not be needed, to allow the 7(a) 
program to meet the credit needs of the small business 
community.
    HUBZone Program. The Historically Underutilized Business 
Zone (HUBZone) program is one area in which additional funding 
is needed. This program was adopted in the Small Business 
Reauthorization Act of 1997 and authorized at $5 million for 
Fiscal Years 1998 through 2000. In the Small Business 
Reauthorization Act of 2000, the HUBZone program was 
reauthorized at $10 million for Fiscal Years 2001 through 2003. 
Actual appropriations for this program, however, have remained 
at $2 million each year for Fiscal Years 1998 through 2001. In 2002, an 
unexpected omission in the Commerce-Justice-State Appropriations bill 
deleted the HUBZone program funding, although in the Defense/
Supplemental Appropriations bill the Congress subsequently directed 
that HUBZone funding be restored through a reprogramming request.
    Although the Federal government has numerous economic 
development programs, the HUBZone program is a unique response 
to a particular problem. Economic development in distressed 
areas is particularly challenging due to the lack of an 
established customer base. Tax abatements, regulatory relief, 
and other incentives to attract small business into distressed 
areas are important but inadequate. Indeed, if businesses that 
locate in historically underutilized business areas do not have 
customers, they will soon fail and the economic development 
efforts will be for naught. The HUBZone program answers this 
need by providing incentives for the government to act as a 
customer to these businesses. While HUBZone firms stabilize 
their revenues and establish a non-governmental customer base, 
Federal contracts can keep these firms alive and keep the 
economic development effort from collapsing.
    Consistent underfunding of the HUBZone program threatens 
the program's ability to deliver on these promises. In Fiscal 
Year 2003, Federal agencies are to award 3% of all prime 
contract dollars through the program, or approximately $6 
billion in prime contracts. Moreover, Sec. 8(d) of the Small 
Business Act requires large business concerns to submit HUBZone 
program subcontracting plans in contracts over $500,000 ($1 
million for construction contracts). To date, the SBA has 
certified over 4,700 firms in the HUBZone program, a 
substantial improvement over last year. However, 4,700 firms is 
still insufficient to support this volume of contracting. 
Additional funding is necessary to seek out and certify a 
sufficient number of qualified firms, and particularly to 
identify firms that supply goods and services needed by Federal 
purchasing offices in different regions of the country. As 
HUBZone participation increases, the need for increased 
enforcement and oversight of program requirements will also 
increase correspondingly. Accordingly, the HUBZone 
appropriation for Fiscal Year 2003 should be increased, at a 
minimum, to the $5 million originally authorized in the HUBZone 
Act of 1997.
    Procurement Center Representatives (PCRs). Like all Federal 
agencies whose workforce is nearing retirement age, the SBA 
also faces a serious ``brain-drain'' of procurement knowledge 
as its staff of Procurement Center Representatives (PCRs) has 
shrunk below sustainable levels. Moreover, many of the existing 
staff have no funding to travel to the procurement centers 
nominally assigned to them, so the SBA's ability to monitor and 
strengthen small business contracting is even less than it 
appears on its face.
    Failure to hire and retain sufficient PCRs will further 
diminish the SBA's ability to carry out its statutory mandates 
as existing staff retires. Procurement is a technical 
discipline that requires knowledge and experience to manage 
effectively. Insufficient staff cannot be overcome by tasking 
these responsibilities to other SBA employees as a part-time 
function. Without enough PCRs, the SBA will be unable to work 
with procuring centers to develop small business-friendly 
procurement strategies, and will be forced to intervene at the 
last minute (for example) to appeal proposed bundling of 
contracts. This will result in delays in contracting by other 
agencies, frustrating their efforts to carry out their own 
responsibilities.
    Accordingly, the budget should include funding to hire and 
train an additional 20 PCRs in Fiscal Year 2003, while 
replacing attrition among existing PCRs. Based on costs to hire 
PCRs in the past, this will require an additional $2 million 
for the SBA Office of Government Contracting. Reports 
accompanying the budget resolution should clearly state the 
purpose for which this funding is provided, to ensure it is 
allocated to its intended purpose.
    Federal and State Technology (FAST) Partnership Program. 
This program, established by the Small Business Innovation 
Research (SBIR) Program Reauthorization Act of 2000, is a 
competitive matching-grant program to encourage States to 
create an atmosphere conducive to the development of high-
technology small businesses, including the establishment of 
coalitions of university and private sector organizations. 
While the program is administered by the SBA, each agency with 
an SBIR program participates in the determination of State 
programs that should be funded. The FAST program is intended to 
support the SBIR program, by marshalling more and higher 
quality research and development proposals to SBIR agencies.
    The SBA was appropriated $3.0 million for the FAST program 
for Fiscal Year 2002. Fifty States, the District of Columbia 
and four territories are eligible for funds under the program. 
While funding under the FAST program is to be provided on a 
competitive basis and the program does not require that each 
State receive funds, if each State or jurisdiction submits an 
eligible proposal and receives funds, the average grant amount 
will be approximately $54,500. This amount is insufficient to 
provide an effective incentive to States to encourage the 
development of small, high-technology businesses. Therefore, I 
request that the FAST program be funded at its authorized level 
of $10 million.
    SBIR Technical Assistance (Rural Outreach Program). One 
critical component of the SBIR program, to help small companies 
in rural States seek SBIR awards, is the Rural Outreach Program 
(ROP). The Rural Outreach Program provides technical assistance 
grants to State programs and research centers to assist small 
companies in preparing Small Business Innovative Research 
submissions seeking research awards. Currently, many of the 
SBIR awards are awarded to small businesses in urban States. 
The ROP is designed to create a more competitive atmosphere by 
providing rural States with leverage to assist their small 
businesses seeking research awards. Currently, 25 States 
participate in the ROP.
    For Fiscal Year 2003, the Administration seeks to fund the 
ROP at $500,000. This amount would provide only $20,000 per 
State, which is insufficient for States to maintain even their 
current ROP efforts. I believe that the ROP should be funded 
for Fiscal Year 2003 at its authorized level of $2 million.
    Office of National Ombudsman. Once again the budget request 
proposes to under-fund and undermine the importantance of this 
program by requesting the same flat-line amount of $500,000, 
which has served as a virtual placeholder for this line-item. I 
find this astonishing. When President Bush was sworn into 
office, he took an early lead in reviewing the crunch of last-
minute regulations pushed through by the outgoing Clinton 
Administration. It is therefore remarkable that the 
Administration's budget shows so little support for Office of 
National Ombudsman and its efforts to monitor the impact of 
regulations on small businesses. I would think this program 
would be in-tune with the President's oversight of agency 
regulations and would warrant greater support.
    The Regulatory Fairness program, administered by the 
Ombudsman, was created under the Small Business Regulatory 
Enforcement Fairness Act (SBREFA) that passed the Senate 
without opposition in 1996 (Public Law 104-121). The SBA Office 
of National Ombudsman is charged with overseeing the ten 
Regional Fairness Boards that convene throughout the U.S. to 
listen to small businesses described their experiences with 
Federal regulatory agencies. This program provides small 
businesses an opportunity to tell someone in the Federal 
government when they have been treated unfairly by agencies in 
enforcement actions. This is not about small businesses trying 
to avoid their responsibilities; it is about providing a 
sounding board so that the Administration and the Congress can 
find out what is actually happening out in the country.
    This program therefore provides a critical link between 
small businesses and Federal agencies. In Fiscal Years 2001 and 
2002, this program was appropriated only $500,000, making it 
very difficult to conduct the necessary follow-up to ensure 
that agencies are responding to the concerns raised through the 
reports submitted by the Fairness Boards. This undermined the 
ability of the program to meet the goals I envisioned in the 
SBREFA legislation.
    At a minimum, this allocation should be increased to $1.625 
million. This will permit more meetings of the Regulatory 
Fairness Boards to be held and more staff to be hired. With ten 
Regional Fairness Boards throughout the country, at 
approximately $10,000 per meeting, the previous allocation only 
allowed one meeting of each board per year. This should be 
increased to at least four meetings per board per year, which 
will require an increase of approximately $300,000. Ideally, at 
least one meeting of a board should occur in each State each 
year. Further, increased staff support will allow for greater 
specialization and thus better follow-up with the agencies.
    Finally, this greater allocation will permit more promotion 
of the program and greater use of technology by designing 
better on-line filing options for small businesses to file 
their complaints. One of the problems with this program has 
been a lack of awareness among small businesses, so that they 
have not come forward with their accounts of how they were 
treated by Federal agencies. This can be resolved, consistent 
with the President's e-government initiatives, through 
technology.
    Small Business Development Center (SBDC) Program. The SBDC 
program is the SBA's largest management and technical 
assistance program. The SBDCs serve more small businesses and 
individual entrepreneurs than all other SBA programs, credit 
and non-credit, combined. In Fiscal Year 2001, the SBDC program 
provided counseling and training assistance to over 600,000 
persons and small businesses.
    The budget request of $88 million is the same amount that 
was appropriated for Fiscal Year 2002. This amount, while 
significant, fails to address the changes that have occurred in 
recent years. As the result of the 2000 Census, twenty-four 
State SBDC programs have taken cuts in SBA funding for Fiscal 
Year 2002. These twenty-four States took cuts, not because they 
lost population, but because their population did not grow as 
fast as the national average during the 1990s. Consequently, I 
recommend that the SBDC funding is increased to $105 million so 
that SBDC services will not be curtailed in States that are 
experiencing decreases in funding from the SBA.
    E-Government Portal Business Compliance One-Stop. The 
request is $5 million to develop a better government Internet 
portal for small businesses is one that requires close 
scrutiny. In the past, I have been concerned about the SBA's 
ability to define clear project goals, Sometimes, it appears 
that the SBA's appetite for funding is greater than its ability 
to manage and implement the task all the way through to 
completion. The Committee has submitted to the SBA a number of 
questions in this area, following the SBA budget hearing 
conducted on February 27th. Answers to these questions will 
provide a better idea of an appropriate funding level for this 
initiative. My staff will be at your disposal for funding 
discussions when those answers have been provided and reviewed.
    Other E-Government Initiatives. I support the President's 
request for $2.8 million to upgrade information technology 
infrastructure and to enhance IT security. Obviously, the 
current international environment has made all government 
entities more conscious of security needs, both physical 
security and electronic security. I am concerned that the SBA 
has been slow to conduct risk assessments, and I urge the SBA 
to complete them during Fiscal Year 2003. The President has 
also proposed $750,000 to implement an electronic documents 
management system. I support this effort.
    Thank you for the opportunity to comment on programs within 
the Committee's jurisdiction. I look forward to working with 
you to develop a budget resolution that is cognizant of both 
the Administration's reform agenda and of the need for a strong 
small business program. If you have questions about this 
letter, please contact Cordell Smith of my Small Business 
Committee staff at (202) 224-4086.
            Sincerely,
                                       Christopher S. Bond,
                                                    Ranking Member.
                                ------                                

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                     Washington, DC, March 6, 2002.
Hon. Kent Conrad, Chairman.
Hon. Pete V. Domenici, Ranking Member,
Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Kent and Pete: Pursuant to Section 301(d) of the 
Congressional Budget Act of 1974, the leadership of the 
Committee on Veterans' Affairs (hereafter, ``Committee'') 
hereby reports to the Committee on the Budget its views and 
estimates on the fiscal year 2003 (hereafter, ``FY 03'') budget 
for Function 700 (Veterans' Benefits and Services), and for 
Function 500 (Education, Training, Employment and Social 
Services) programs within the Committee's jurisdiction. This 
letter fulfills the Committee's obligation to provide 
recommendations on veterans' programs within its jurisdiction.

                               I. SUMMARY

    The Department of Veterans Affairs (VA) requires $2.5 
billion in additional funding in FY 03 to support its medical 
care operations. This needed sum includes $1.1 billion to 
obviate the need for a proposed health care deductible--a 
proposal which we find unacceptable--and $1.4 billion to cover 
payroll increases for VA health care personnel, medical 
inflation, and VA's existing medical care shortfall. We expect 
VA to improve insurance collections by $400 million over and 
above the $400 million in added collection revenues that VA 
already projects for FY 03. Thus, we limit our requested 
medical care increase to $2.1 billion for FY 03. An increase 
limited to that amount will allow VA to maintain current 
services and obviate the need for legislation to suppress 
demand.
    As you both are undoubtedly aware, VA's proposed budget--
and all Department budgets--show increases in discretionary 
spending of 2.9 percent attributable to a proposed shift in 
personnel-related costs under proposed legislation to revise 
accounting for Federal pension and post-retirement health 
benefits contributions. We express no view on this technical 
proposal. Our statements with respect to proposed funding 
levels for VA, however, do not assume that costs associated 
with this proposal will be transferred to VA.
    With respect to mandatory account programs, we support the 
Administration's request--as far as it goes. But we request, in 
addition, funding sufficient to allow for an increase in 
survivors' educational benefits.

                   II. DISCRETIONARY ACCOUNT SPENDING

                   A. Proposed Medical Care Spending

    VA requires a significant increase in funding to better 
address the needs of an aging population, to improve services 
and quality, and to reduce clinical waiting times. But VA does 
not request the level of funding needed. Instead, it requests 
legislation to impose new fees--a $1500 annual ``deductible'' 
on so-called ``Priority 7'' veterans. We opposite this 
proposal. Accordingly, while we agree with the Administration 
on the level of funding required to support the VA health care 
system, we differ on the amount that needs to be appropriated--
and the amount that can be collected from insurance carriers 
and garnered directly from veterans in the form of fees and 
deductibles. Our views are summarized below:

                FY 2003 PROPOSED MEDICAL CARE BUDGET ($)
------------------------------------------------------------------------
                                Total                        Committee
   Current      Deductible      assets      Collections       view of
  services        offset       required    efficiencies    appropriation
------------------------------------------------------------------------
Payroll: 572  ..............  .........  Consolidate MCCF
 m                                        operations
Inflation:    ..............  .........  Execute private
 396 m                                    sector
                                          contracts
Drug Costs:   Revenue: 260 m  .........  Reduce
 306 m                                    outstanding
                                          receivables
FY 02         Enrollment:     .........  Require
 Deficit:      855 m                      enrollees'
 258 m                                    insurance
                                          information
  Total:            +$1.1b       +$2.5b        -$0.4b       -\2\ +$2.1b
   \1\ +$1.4
   b
------------------------------------------------------------------------
\1\ The cost of maintaining current services plus compensating for the
  FY 02 shortfall actually exceeds $1.4 billion. We have chosen,
  however, to limit our base calculations to this level.
\2\ Total excludes the Administration's proposed accrual of full funding
  for Federal retiree costs.

1. Current Services (+$1.4 billion)

    Payroll inflation, increases in the costs of goods, and 
other ``uncontrollables'' dictate funding increases of at least 
$1.27 billion in FY 03 simply to maintain the level of current 
services. In addition to this amount, the VA health care system 
is currently running a sizeable deficit which is accounted for 
in our proposed level of funding.
    VA's medical care payroll costs will increase by almost 
$572 million in FY 03 due to non-optional cost-of-living and 
within-grade salary and wage adjustments and increases in 
government-paid Social Security, health insurance, retirement, 
and other benefits. The cost of inflation and rate changes for 
goods and services dictates an additional $396 million in 
funding in FY 03. And according to VA, pharmaceutical inflation 
requires $306 million in funding over and above the amount 
included in general inflation request. This additional 
pharmaceutical need comes despite an aggressive VA 
pharmaceutical management program.
    VA's FY 02 deficit also requires attention. To partially 
fill the $400 million deficit in the current fiscal year, it is 
our understanding that the Administration will request $142 
million in supplemental funding. The remainder--$258 million--
must also be addressed, as it is manifesting itself is 
disturbing ways: VA is approving no new community-based 
clinics; managers of many existing community-based clinics have 
been told to stop accepting new patients; hundreds of millions 
of dollars have been reallocated from 16 health care networks 
to fund emergency shortfalls in five networks; and waiting 
times for even basic primary care have grown to alarming 
levels.

2. Proposed $1,500 Deductible (+$1.1 billion)

    VA has seen a substantial increase in enrollment, 
especially in the number of Priority 7 veterans--so-called 
``higher income'' veterans--whose financial means are above 
approximately $24,000. There are about 1.9 million currently-
enrolled Priority 7 veterans; VA projects further growth, 
estimating that the number of Priority 7 enrollees will account 
for more than one-third of the total number of enrollees in FY 
07. Anecdotal evidence (provided in the form of testimony 
before this Committee in July 2001) suggests that many Priority 
7 veterans have turned to VA for drug coverage because Medicare 
lacks similar coverage.
    While the Administration's request assumes that enrollment 
will remain open, the deductible is most certainly designed to 
slow the growth of enrollees. VA estimates that the 
deductible--if it were to be enacted--would raise $260 million 
in revenue. More significantly, it estimates that enactment 
would cause more than 100,000 veterans to leave (or choose to 
not enroll in) the VA medical care system, yielding ``savings'' 
of $855 million. We believe veterans needing care should not be 
deterred from enrolling for care. Our view is that the $1.1 
billion in projected savings and revenue stemming from a 
proposed deductible designed to deter such enrollment must be 
allocated to the VA medical care account.

3. Efficiencies from the Medical Care Cost Collections Fund (-$400 
        million)

    While we concur with VA that at least $2.5 billion in 
additional spending for FY 03 is needed to support medical care 
operations, we estimate that only $2.1 billion of that amount 
need come from appropriations. We are confident that the 
remaining $400 million in discretionary resources can be 
secured through both efficiencies in VA's management and needed 
improvements to VA's medical collections effort. VA anticipates 
collecting $1.5 billion in ``third party'' insurance and 
TRICARE reimbursements and ``first party'' patient copayments. 
VA can--and VA must--do much better than this.
    VA's increase in the prescription drug copayment alone will 
increase collections by approximately $140 million. In 
addition, inflation-driven increases in the ``reasonable 
rates'' VA will charge to insurance companies in FY 03 will 
generate additional collections. VA also expects to implement 
new long-term care copayments for nonservice-connected veterans 
with incomes over $9,000 per year; it anticipates an additional 
$40 million in revenue from this change. Finally, additional 
collections from insurers will be made possible by our 
rejection of the proposed $1500 deductible since patients with 
insurance coverage will not have been deterred from enrolling 
for VA care. These modifications alone--modifications that will 
not require VA improve its business practices at all--will 
allow VA to approach its goal of collecting $1.5 billion from 
first and third-party sources. But VA must do more.
    We believe VA can add to least $400 million more to the 
$1.5 billion target it has set for itself. VA must consolidate 
collection operations, take advantage of private sector 
contract opportunities, and reduce outstanding receivables 
(currently more than $700 million in receivables are due). VA 
must also improve clinician medical record documentation and be 
more persistent in requiring that veterans provide insurance 
information when they enroll for and receive health care. (VA 
currently identifies insurance from only 15% of veterans 
seeking care for nonservice-connected conditions.) For our 
part, the Committee will examine proposals to require health 
insurance companies to recognize VA as a preferred provider. 
Such proposals may enable VA to foster closer working 
relationships with these companies and result in smoother 
billing practices.

                            B. Construction

    We support VA's proposal to move forward now on 
construction of the national cemeteries mandated by Public Law 
106-117. We hope that the request will enable VA to gain full 
funding for these--and other--projects. There can be no delay 
as the World War II and Korean War veterans are aging rapidly.
    We are also pleased to see a proposed increase of $7 
million for the State Veterans Cemetery Grant Program. This 
program is a popular alternative for States with small veteran 
populations; it provides a way for those States to honor and 
commemorate the service of their veterans.
    We also support VA's requested funding for major and minor 
medical construction. The VA health care system has significant 
infrastructure needs that have gone unfunded in the pastseveral 
budget cycles. While the Committee still must authorize all major 
construction projects--and it looks forward to reviewing the merits of 
requested projects--we nonetheless are pleased to see a proper funding 
request in this budget. We support the level sought for both the major 
and minor construction needs of VA.

                     C. General Operating Expenses

    We support the VA budget request of $1.4 billion for the 
General Operating Expenses (GOE) account. The request will 
support an increase of 147 FTE over the FY 02 level on the 
heels of two years of 800+ FTE increases. VA has indicated that 
the Veterans Benefits Administration (VBA) cannot absorb 
greater increases; new employees hired over the last two years 
are only now getting up to speed.
    We are cognizant of VA data gathering limitations which 
prevent VA from demonstrating the level of gains, if any, 
already achieved from the influx of newly-hired employees. It 
is significant, we think, that the President's nominee to serve 
as Under Secretary for Benefits, who also chaired the 
Secretary's Task Force to examine VA's claims processing 
system, has stated as follows: ``I must say that I think the VA 
has the necessary resources right now to do the job . . . the 
Agency can't justify asking for more people right now.'' In 
light of that, we do not seek additional FTE for the GOE 
account at this time.

              D. Veterans Employment and Training Service

    VA's proposed budget assumes a shift of veterans employment 
and training services from the Department of Labor (DOL) to VA, 
a shift that would result in the movement of $197 million in 
discretionary appropriations from DOL to VA. VA has not 
described how existing programs would be replaced except to 
state that it would initiate a ``competitive grant program.'' 
Without a more detailed program design, we cannot realistically 
assess anticipated program costs or required staffing levels. 
And inasmuch as this proposed transfer has not been authorized 
or even formally requested, it is clearly premature for VA to 
include anticipated costs in its proposed FY 03 budget.

                       E. Emergency Preparedness

    This year, preparations for the consequences of terrorism 
have affected all Federal budget and all hospital networks, 
VA's included. VA must equip and train staff to protect 
themselves--and VA patients--during a crisis. VA must also meet 
its obligations to provide care to potential civilian 
casualties; it does so by serving as the largest single medical 
asset supporting the Federal Response Plan for disasters, the 
infrastructure backbone of the National Disaster Medical 
System, and as the medical back-up to the Department of 
Defense. In October 2001, VA's Preparedness Review Working 
Group estimated that a minimum of $118 million would be 
required to prepare the health care delivery system alone for 
disasters. The VA budget requests only $55 million for all 
emergency programs.

  FY 2003 COMMITTEE ESTIMATE FOR MINIMAL EMERGENCY MEDICAL PREPAREDNESS
                                   ($)
------------------------------------------------------------------------
    Personal
   protective
   equipment/       Staff    Emergency     Regional     Minimum  FY 2003
     Patient       disaster     PTSD    pharmaceutical   total   request
 decontamination   training   services      caches
    equipment
------------------------------------------------------------------------
      100 m           2 m       10 m           6 m       118 m     55 m
------------------------------------------------------------------------

    We believe VA's FY 03 budget should include, at minimum, 
$118 million for emergency preparedness. This minimal 
investment is required if VA medical centers are to avoid 
choosing between emergency preparedness and necessary medical 
care for veterans. In addition, we believe that VA could play a 
much greater role in preparing for and meeting mass medical 
care needs during a public health crisis. Although we make no 
separate request for preparedness funds for this purpose, we 
anticipate doing so in the future after careful consideration 
of VA's potential contribution and concomitant needs in the 
context of homeland security.

                    iii. mandatory account spending

    We support the budget request $29.6 billion, which reflects 
an increase of $1.6 billion in mandatory funds for benefits 
payments above the FY 02 level of $28.6 billion. This increase 
in mandatory funds provides for a 1.8 percent cost of living 
adjustment in 2003. But we also recommend an increase, above 
the FY 03 baseline, in the mandatory spending ceiling of $250 
million in FY 03, $1.3 billion from FY 03 through FY 07, and 
$2.5 billion from FY 03 through FY 12.

                           A. OBRA Provision

    The budget request recommends legislation to make permanent 
an Omnibus Budget Reconciliation Act (OBRA) extender--
information-matching with the IRS to verify VA needs-based 
pensioners' income. Last year's budget resolution assumed that 
this provision, which expires at the end of FY 02, would be 
extended. However, there were jurisdictional complications 
associated with a necessary corresponding amendment to the tax 
code allowing the IRS to provide to VA requested information. 
We will work to overcome these obstacles this year. And while 
we intend to extend this provision of law, we do not anticipate 
making it permanent.

           B. Survivors' and Dependents' Education Assistance

    Last year's budget resolution afforded the Veterans' 
Committees the opportunity to make significant enhancements to 
Montgomery GI Bill (MGIB) education benefits and other 
veterans' programs through enactment of the Veterans Education 
and Benefits Expansion Act of 2001. We appreciate your action 
to make these statutory improvements possible. The centerpiece 
of this legislation was an historic, 47 percent increase in the 
MGIB monthly benefit. This increase, after it is phased-in over 
a two year period, will provide for a basic monthly benefit of 
$985 beginning in October 2003.
    The Veterans Education and Benefits Expansion Act also 
increased the Survivors' and Dependents' Education Assistance 
(DEA) monthly education benefit--but only from $607 to $670. 
(DEA benefits are provided to the spouses and dependent 
children of a) service members who die on active duty, b) 
veterans who die as a result of service related injuries, and 
c) veterans who are permanently and totally disabled.) A recent 
VA program evaluation report concluded that increasing the DEA 
monthly benefit to approximately $800 would encourage usage 
among almost 90% of those who otherwise would not have used it. 
Furthermore, the report recommended that future DEA benefits 
``should be the same as [the] MGIB benefit.'' VA concurs as 
indicated by testimony of Deputy Secretary of Veterans Affairs 
Leo McKay before the Committee. Accordingly, we hope to 
increase the DEA monthly benefit to the same amount, and on the 
same phased-in basis, as the MGIB monthly benefit. That reform 
would increase direct spending by $250 million in FY 03, $1.3 
billion in FY 03-FY 07, and $2.5 billion in FY 03-FY 12. We 
request an adjustment to the Committee's mandatory account 
spending ceilings to accommodate this needed legislation.
            Sincerely,
                                    John D. Rockefeller IV,
                                                          Chairman.
                                             Arlen Specter,
                                                    Ranking Member.

                         VIII. Committee Votes

    On March 20, 2002, Chairman Conrad presented the Chairman's 
Mark for the fiscal year 2003 budget resolution to the 
Committee.
    Votes taken during Committee consideration of the 
concurrent resolution on the budget were as follows:

                             March 20, 2002

    (1) By a vote of 20 yeas to 0 nays the Committee agreed to 
the Conrad motion that the Committee begin consideration with 
the Chairman's mark as original text for purposes of amendment, 
and that no amendment be in order that would increase spending 
or reduce revenues relatives to the Chairman's mark unless the 
amendment is fully offset in each and every year, except for an 
amendment in the nature of a substitute to be offered by 
Senator Hollings, a Republican substitute, and a substitute 
representing President Bush's budget.
        Yeas: 20                      Nays: 0
 Conrad
Hollings
Sarbanes
Murray
Wyden
Feingold
Johnson
Byrd
Nelson
Stabenow
Clinton
Corzine
Domenici
Nickles
Bond
Gregg
Snowe
Frist
Smith
Allard

Not voting: Grassley, Gramm, Hagel.

                             March 21, 2002

    (2) By voice vote the Committee adopted the Clinton and 
Johnson amendment expressing the sense of the Senate that 
Congress should provide sufficient resources to ensure 
beneficiary access to high quality health services provided by 
home health agencies, skilled nursing facilities, physicians, 
and hospitals, including rural, teaching, community, and 
safety-net hospitals that serve communities across the nation.
    (3) By voice vote the Committee adopted the Feingold, Bond, 
Stabenow, and Nelson amendment expressing the sense of the 
Senate that Congress and the administration should work 
together to avoid the 15 percent reduction in the prospective 
payment system for home health care and extend the 10 percent 
bonus payment for rural Medicare home health providers.
    (4) By voice vote the Committee adopted the Snowe amendment 
expressing the sense of the Senate that Congress should 
increase funding for the Child Care and Development Fund to 
meet the work requirements under the reauthorization of welfare 
programs and to allow states to expand child care programs to 
meet the needs of lower-income working families.
    (5) By voice vote the Committee adopted the Feingold 
amendment expressing the sense of the Senate that the 
resolution assumes the Department of Defense will give priority 
to funding the Active Guard/Reserves and Military Technicians 
at least at the minimum required levels.
    (6) By voice vote the Committee adopted the Nelson 
amendment expressing the sense of the Senate that science and 
technology should be no less than three percent of the budget 
of the Department of Defense by 2007.
    (7) By voice vote the Committee adopted the Johnson, 
Conrad, and Domenici amendment expressing the sense of the 
Senate that priority consideration will be provided to tribal 
colleges through funding for the Tribally Controlled College or 
University Assistance Act, the Equity in Educational Land Grant 
Status Act, and Title III of the Higher Education Act; and such 
priority consideration reflects Congress' intent to continue to 
work toward statutory Federal funding goals for the Tribal 
Colleges and Universities.
    (8) By voice vote the Committee adopted the Stabenow 
amendment expressing the sense of the Senate that Congress 
should request that the Department of Defense review the 
findings of the ``Tail-to-Tooth Commission'' and should closely 
evaluate ways to streamline overhead and support functions, and 
any savings made in this area should be used to provide the 
best support to our troops fighting the war or terrorism on 
critical resources for homeland defense.
    (9) By voice vote the Committee adopted the Feingold, 
Grassley, Murray, Johnson, Domenici, and Smith amendment 
expressing the sense of the Senate encouraging the promotion 
ofgeographic equity in Medicare fee-for-service payments and rewarding, 
rather than punishing, providers who deliver high-quality, cost 
effective Medicare services in all areas of the country.
    (10) By voice vote the Committee adopted the Smith, Snowe, 
Clinton, and Corzine amendment expressing the sense of the 
Senate that sufficient funding will be made available to expand 
access to affordable health care coverage for the uninsured; 
and that such funding shall permit a mix of options for private 
and public coverage, build upon and strengthen private and 
public coverage, target those who need it most, avoid creating 
new bureaucracies, and promote flexibility in expanding 
coverage.
    (11) By voice vote the Committee adopted the Nelson 
amendment expressing the sense of the Senate that Congress 
should repeal any law that established the offset of military 
retired pay by Veterans Disability Compensation, enact 
legislation that fully funds restoration of military retired 
pay to eligible disabled veterans, and that the President 
should provide full funding for military retired pay in future 
budget requests.
    (12) By voice vote the Committee adopted the Domenici 
amendment expressing the sense of the Senate that Congress 
should establish a National Commission on Medicaid and State-
Based Health Care Reform to study and make recommendations to 
the Congress, the President, and the OHS Secretary with respect 
to the program under title XIX of the Social Security Act.
    (13) By voice vote the Committee adopted the Stabenow 
amendment expressing the sense of the Senate that if Congress 
passes legislation that utilizes market forces and competition 
to lower the cost of prescription drugs, and if CBO says that 
these measures save the Federal government money, these savings 
should be set aside to enhance a prescription drug benefit for 
Medicare recipients.
    (14) By voice vote the Committee adopted the Feingold and 
Smith amendment expressing the sense of the Senate that the 
maximum Pell Grant award should be raised to the maximum extent 
practicable, and funding for the Pell Grant program should be 
higher than the level requested by the President.
    (15) By voice vote the Committee adopted the Corzine 
amendment expressing the sense of the Senate that Congress 
should reject the reductions in guaranteed Social Security 
benefits proposed by the President's Commission to Strengthen 
Social Security.
    (16) By voice vote the Committee adopted the Sarbanes 
amendment expressing the sense of the Senate that the 
Assistance to Firefighters Grant Program administered by FEMA 
should be fully funded and remain a separate and distinct 
program that provides financial resources for basic fire 
fighting needs.
    (17) By voice vote the Committee adopted the Snowe, Smith, 
and Stabenow amendment against reducing Social Security 
benefits.
    (18) By voice vote the Committee adopted the Clinton 
amendment expressing the sense of the Senate that adequate 
stockpiles be made available for all routine immunizations 
universally recommended for children.
    (19) By voice vote the Committee adopted the Smith 
amendment expressing the sense of the Senate that the Payment 
in Lieu of Taxes (``PILT'') program should be fully funded.
    (20) By voice vote the Committee adopted the Corzine 
amendment expressing the sense of the Senate that funding for 
Superfund be at a level sufficient to significantly increase 
the number of toxic waste sites cleaned up through the 
Superfund program.
    (21) By voice vote the Committee adopted the Clinton 
amendment expressing the sense of the Senate that the Federal 
government should pay for the costs incurred by state and local 
government for providing services to undocumented immigrants.
    (22) By voice vote the Committee adopted the Grassley 
amendment expressing the sense of the Senate that the FBI 
should not receive the additional $21 million in budget 
authority requested for the National Infrastructure Protection 
Center (``NIPC'') until the Attorney General reports to the 
Congress that NIPC will remain an inter-agency organization and 
will not be transferred solely to the FBI.
    (23) By voice vote the Committee adopted the Allard 
amendment expressing the sense of the Senate regarding a Senate 
vote on a balanced budget Constitutional amendment, with 
Senators Sarbanes and Murray voting in the negative.
    (24) By voice vote the Committee adopted the Nelson 
amendment expressing the sense of the Senate that none of the 
funds provided in this resolution should be used to provide 
reimbursements under the Medicare program to any provider who 
requires beneficiaries to pay an access or membership fee, or 
requires the purchase of non-Medicare-covered services as a 
precondition for receiving Medicare-covered care.
    (25) By voice vote the Committee adopted the Domenici 
amendment to provide revenue reductions, offset with a 
corresponding unspecified reduction in spending in Function 
920, for legislation to ensure that group health plans and 
group health insurance issuers who offer mental health benefits 
do not impose different treatment conditions or financial 
requirements for mental health benefits than they do for 
medical/surgical benefits; and providing that there shall be no 
negative impact on the Social Security trust funds as a result 
of the amendment.
    (26) By a vote of 22 yeas to 0 nays the Committee adopted 
the Conrad amendment expressing the sense of the Senate that 
the Committee on Finance should extend the child tax credit for 
2011 and the succeeding years, and that the Committee on 
Finance should offset the cost of that extension by enacting 
legislation to close down abusive corporate tax shelters and 
other abusive tax practices brought to light as a result of its 
investigations into the collapse of the Enron Corporation.
        Yeas: 22                      Nays: 0
Conrad
Hollings
Sarbanes
Murray
Wyden
Feingold
Johnson
Byrd
Nelson
Stabenow
Clinton
Corzine
Domenici
Grassley
Nickles
Gramm
Bond
Gregg
Snowe
Frist
Smith
Allard

Not voting: Hagel.

    (27) By a vote of 10 yeas to 12 nays the Committee defeated 
the Gramm amendment to make unspecified spending cuts in 
Function 920 of over $56 billion, and use the proceeds to 
reduce revenues.
        Yeas: 10                      Nays: 12
Domenici                            Conrad
Grassley                            Hollings
Nickles                             Sarbanes
Gramm                               Murray
Bond                                Wyden
Gregg                               Feingold
Snowe                               Johnson
Frist                               Byrd
Smith                               Nelson
Allard                              Stabenow
                                    Clinton
                                    Corzine

Not voting: Hagel.

    (28) By a vote of 11 to 11 the Committee defeated the Gregg 
and Feingold amendment, as modified, to establish discretionary 
spending limits; to allow Senators to have provisions of 
appropriations bills, amendments, and conference reports 
stricken pursuant to a supermajority point of order; and 
provide that if Congress has not adopted a concurrent 
resolution on the budget for any of fiscal years 2003 through 
2007 before May 15 of each of those calendar years, then the 
discretionary spending limits in the amendment would become 
302(a) spending allocations to the Appropriations Committee.
        Yeas: 11                      Nays: 11
Feingold                            Conrad
Domenici                            Hollings
Grassley                            Sarbanes
Nickles                             Murray
Gramm                               Wyden
Bond                                Johnson
Gregg                               Byrd
Snowe                               Nelson
Frist                               Stabenow
Smith                               Clinton
Allard                              Corzine

Not voting: Hagel.

    (29) By a vote of 8 yeas to 14 nays the Committee defeated 
the Conrad amendment in the nature of a substitute reflecting 
President Bush's budget for fiscal year 2003.
        Yeas: 8                       Nays: 14
Domenici                            Conrad
Grassley                            Hollings
Nickles                             Sarbanes
Gramm                               Murray
Bond                                Wyden
Gregg                               Feingold
Frist                               Johnson
Allard                              Byrd
                                    Nelson
                                    Stabenow
                                    Clinton
                                    Corzine
                                    Snowe
                                    Smith

Not voting: Hagel.

    (30) By a vote of 13 yeas to 9 nays the Committee adopted 
the Domenici amendment to add discretionary spending limits for 
fiscal year 2003 for purposes of Senate enforcement at a level 
of $768.089 billion in budget authority and $794.736 billion in 
outlays.
        Yeas: 13                      Nays: 9
Feingold                            Conrad
Nelson                              Hollings
Stabenow                            Sarbanes
Domenici                            Murray
Grassley                            Wyden
Nickles                             Johnson
Gramm                               Byrd
Bond                                Clinton
Gregg                               Corzine
Snowe
Frist
Smith
Allard

Not voting: Hagel.

    (31) By a vote of 10 yeas to 12 nays the Committee defeated 
the Domenici amendment to (1) eliminate the reserve fund in the 
Chairman's mark which provides additional funding for defense-
related expenses in fiscal years 2005 through 2012 if they are 
needed, up to the level requested by the President in his 
budget; (2) make unspecified spending cuts in Function 920 by 
$179.907 billion in budget authority and $160.460 billion in 
outlays over the next 10 years; (3) cut national defense 
spending by $5.579 billion in budget authority and outlays in 
fiscal year 2004; and (4) increase defense spending by a total 
of $185.486 billion in budget authority and $166.039 billion in 
outlays in fiscal years 2005 through 2012.
        Yeas: 10                      Nays: 12
Domenici                            Conrad
Grassley                            Hollings
Nickles                             Sarbanes
Gramm                               Murray
Bond                                Wyden
Gregg                               Feingold
Snowe                               Johnson
Frist                               Byrd
Smith                               Nelson
Allard                              Stabenow
                                    Clinton
                                    Corzine

Not voting: Hagel.

    (32) By a vote of 12 yeas to 10 nays the Committee agreed 
to the Conrad motion that the Committee report favorably the 
Chairman's mark as amended.
        Yeas: 12                      Nays: 10
Conrad                              Domenici
Hollings                            Grassley
Sarbanes                            Nickles
Murray                              Gramm
Wyden                               Bond
Feingold                            Gregg
Johnson                             Snowe
Byrd                                Frist
Nelson                              Smith
Stabenow                            Allard
Clinton
Corzine

Not voting: Hagel.

                          IX. Additional Views

                  ADDITIONAL VIEWS OF SENATOR FEINGOLD

    We all should acknowledge the efforts of the Chairman and 
his staff in crafting a budget resolution this year. This is 
the first such resolution the Budget Committee has considered 
under Chairman Conrad's leadership, and he deserves enormous 
credit for crafting a budget under the severe constraints 
imposed by the profilgate policies of last year's budget.
    The Chairman is very much in the position of convincing the 
man with a hangover that a hair of the dog is not the solution 
to his problems. This year's budget is a morning after budget, 
and I realize how difficult it has been for Chairman Conrad to 
argue for fiscal responsibility in the wake of last year's 
binge.
    At some point, I am convinced that Chairman Conrad's 
message for restraint and responsibility will have a more 
receptive audience and we will get back to reducing the deficit 
in a more serious way, an effort that served the budget and the 
economy so well during the 1990s. For the good of the Nation, I 
hope that time comes soon.
    While I have shared my thoughts with the Chairman about the 
need to go further in reducing the deficit, I certainly believe 
his mark began that process. Moreover, I doubt a different 
Chairman could have come anywhere near achieving what he did in 
his proposal.
    Having said that, I must indicate that as it stands now, 
while I voted to report this concurrent budget resolution out 
of the Budget Committee, unless it is significantly improved on 
the floor, I will not be able to support it. The spending 
priorities are not balanced, and it does not adequately reduce 
the budget deficit.
    Not all of the additional spending provided for an already 
bloated Defense budget is justified. We all support the 
President in his effort to fight terrorism, but billions of the 
additional spending he proposed for the military has nothing to 
do with the fight against terrorism. As I have noted before, it 
makes no sense to fully fund three separate tactical fighter 
aircraft programs. It did not make sense a year ago, and it 
does not make sense now.
    More broadly, I am greatly concerned that the lack of 
sufficient fiscal restraint in the resolution will compound the 
damage done by last year's budget when we squandered the 
opportunity to address the serious long-term fiscal challenges 
facing our nation--strengthening Social Security, modernizing 
Medicare, reforming long-term care, and paying down our massive 
Federal debt.
    Chairman Conrad is certainly not to blame for the policies 
that put us in this situation. Indeed, he warned us all that 
this would happen. And I know that his mark must be, to some 
extent, a consensus document. Unfortunately, it is hard to make 
tough choices by consensus.
    In the long run, the only way we will eliminate the deficit 
is if we force ourselves to do so through budget rules. Such 
constraints cannot in and of themselves make tough decisions 
for us, but they can oblige us to do so. That is the consensus 
for which we must strive.
    Budget rules certainly were instrumental in the efforts 
that led to a balanced budget, however briefly. The Chairman 
included some provisions in his mark, and we added a modest 
discretionary spending cap provision during committee 
deliberations. While I regret the stronger enforcement 
provisions proposed by Senator Gregg and myself were not 
adopted by the committee, I look forward to working with my 
colleagues on the floor to strengthen the provisions that the 
committee did approve, and, as well, to enact meaningful 
enforcement mechanisms in law.
    I supported moving this resolution out of committee because 
if we had not reported that measure, the precedents of the 
Senate would have put us at risk of being saddled with a budget 
that is far worse. The same wrong-headed policies that led to 
the current fiscal mess are just over the horizon waiting to 
pounce. As badly as the Social Security Trust Fund fares under 
the resolution approved by the Budget Committee, failing to 
report that resolution could have laid the Trust Fund open to 
huge raids.
    Again, I thank Chairman Conrad for his efforts and those of 
his staff. Though I cannot be an enthusiastic supporter of the 
Budget Committee's work product, I recognize and appreciate the 
work that has gone into it.
    I cannot help but think that if Senator Conrad has chaired 
the Budget Committee at this time last year, we would be in a 
far stronger budget position than we are now, and we would have 
produced a resolution that I could enthusiastically support.

                                                     Russ Feingold.

                  ADDITIONAL VIEWS OF SENATOR JOHNSON

    I was pleased to join my colleague from New York, Senator 
Clinton, in offering an amendment to the budget resolution to 
express the need to provide sufficient funding in the budget 
for health care providers, particularly in rural and frontier 
America.
    To use a term that I recently heard, but one that captures 
the true essence of the situation, we are facing ``a perfect 
storm'' in the wake of our health care system. It is no secret 
that throughout this country health care costs are rising at 
astonishing rates. Prescription drug spending alone continues 
to increase by nearly 15 percent yearly. Seniors in this 
country are forced to choose between paying for medications or 
daily life necessities. Providers are facing reductions in 
Medicare reimbursements, yet costs of delivering health care 
services continue to escalate. These devastating effects are 
felt throughout the entire industry by home health agencies, 
skilled nursing facilities, hospitals, physicians and other 
health care providers. But it doesn't stop there, ultimately 
beneficiaries themselves feel the impact, whether it be through 
a reduction in access to health care services or no services at 
all.
    Often faced with conditions of geographic isolation, low 
population density, and poor economic conditions, many rural 
areas impose economic hardships on existing providers and make 
it difficult to attract health professionals. Despite rural 
Americans making up 20 percent of the nation's population and 
nearly 22 million rural residents living in federally 
designated Health Professions Shortage Areas and Medically 
Underserved Areas, only 9 percent of the nation's physicians 
practice in rural counties. As well, rural health care givers 
typically serve a disproportionately high number of Medicare 
beneficiaries further straining their financial condition as 
Medicare reimbursements are reduced. For example, the hospitals 
in Eureka and Faulkton, South Dakota derive 89 percent and 91 
percent of their revenue respectively from Medicare patients.
    As economic conditions force states to decrease health care 
reimbursement rates and an aging baby boomer population excerts 
further demand on many providers, particularly in states such 
as South Dakota where we have one of the highest rate per 
capita of individuals over the age of 80, we are going to see 
an ever increasing need to address the inadequacies and 
disparities of Medicare reimbursement rates.
    Promoting beneficiaries' access to medically necessary 
health care of high quality is one of the primary objectives of 
the Medicare program. Therefore, I am pleased the Committee 
adopted the provider resources amendment so that we ensure 
resources are made available to those health care providers who 
are delivering critically necessary health care services.

                                                       Jim Johnson.

       ADDITIONAL VIEWS OF SENATORS DOMENICI, FRIST, AND GRASSLEY

    The President's budget request sets forth three clear 
goals: (1) national security, (2) homeland security, and (3) 
economic security. The Republican Members of the Senate Budget 
Committee support these goals and find the Committee-reported 
FY 2003 Budget Resolution falling short of at least two of the 
President's objectives.
    The resolution (S. Con. Res. 100) would risk both our 
national security and our country's fiscal future. By reducing 
the President's long-term defense commitment at this time, the 
resolution sends the wrong signal to those who wish our country 
harm. While the Majority's resolution ostensibly funds the 
President's defense request the next two years, the Majority 
thwarted efforts by Republicans in the Committee to guarantee 
that funding by establishing a firewall between defense and 
non-defense appropriations. Failure to establish this firewall 
for one year, a year in which 258,000 U.S. troops are deployed 
overseas, once again, calls into question the stated commitment 
to the President's defense request in the near term.
    The resolution contradicts its stated goal of future fiscal 
responsibility with new, expansive domestic spending programs. 
The resolution increases domestic spending both now and in the 
future, and furthermore, relaxes budget enforcement tools and 
increases taxes when compared to the President's budget. The 
resolution's 10-year numbers understate the growth in domestic 
spending thus masking certain pressure for major tax increases 
that would be required to fund programs in the future. And not 
once does the resolution or supporting documentation address 
accountability in governing nor mention the President's five 
management reforms for agencies' budgets: management of human 
capital, competitive sourcing, E-government, financial 
management, and budget and performance integration.
    The Chairman of the Budget Committee states that within the 
overall level of discretionary funding for FY 2003 that the 
President's request for domestic non-defense, homeland security 
funding has been met at $25.2 billion. The Republican Members 
have no basis to challenge this statement, and accept that this 
funding will be provided within the guidelines of the 
resolution. Competition will be fierce for these non-defense, 
non-international affairs discretionary dollars, however, given 
other spending commitments made in the resolution.
    While establishing the laudable goal of balancing the 
federal budget without counting funds from the social security 
program in the future, the resolution continues to use social 
security surpluses throughout the decade. After months of 
criticism of the President's budget, this 
Democraticresolution's so-called circuit breaker or trigger provision 
puts off to another day, another Congress, another budget, the hard 
choices for tomorrow. Over the period FY 2003-FY 2012 the resolution 
uses $1.3 trillion in social security surplus for programs other than 
social security. If this Congress is not willing to at least exercise 
some fiscal restraint today, it is disingenuous to try to demand such 
restraint from its successors.
    The Republican Members' concerns follow:
    1. Increased Spending.\1\--The resolution sets total 
federal spending in FY 2003 at $2.132 trillion, up 6.5 percent 
over the current year. Defense discretionary outlays will grow 
by 9.2 percent in FY 2003, while domestic spending (including 
nondefense discretionary and mandatory spending) will grow by 
6.4 percent. The resolution's 10-year numbers shows a path of 
total spending slowing from this year's 6.5 percent growth to 
an annual average rate of 4.5 percent over the decade. But the 
slowdown in spending is due to the resolution reducing and 
slowing defense expenditures. While defense spending in the 
resolution would grow at only 3.3 percent annually over the 
next decade, all domestic spending would grow at 5.2 percent 
annually. Mandatory spending grows at even a faster rate of 6.0 
percent. Analysis of the resolution's spending assumptions 
suggest that even this rate of growth in domestic spending is 
understated in the resolution. The resolution increases total 
domestic spending over the President's request by almost $350 
billion and nearly $600 billion over current law for the next 
10-year period.\2\ Even in the budget year--FY 2003--the 
resolution would increase total domestic spending nearly $14 
billion over the President's request, and $25 billion over 
current law policies.
---------------------------------------------------------------------------
    \1\ For purposes of accurate and fair comparisons the numbers 
presented in this text exclude the President's economic security plan 
included in his FY 2003 budget submission and exclude the recently 
enacted Job Creation and Worker Assistance Act of 2002 (P.L. 107-147)
    \2\ Summary tables included in these views that compare the 
reported resolution to the President's budget request as reestimated by 
the CBO, excluding the effects of the recently enacted Job Creation and 
Worker Assistance Act of 2002 (P.L. 107-147). Comparisons are also 
presented relative to the CBO March baseline estimates, again excluding 
P.L. 107-147. The spending and revenue impact form P.L. 107-147 is 
assumed in the reported resolution. Therefore to make direct 
comparisons to the President's budget which included different stimulus 
spending and revenue assumptions than those finally enacted, both P.L. 
107-147 and the President's assumed stimulus policies have been 
excluded from some tables.
---------------------------------------------------------------------------
    Compared to the President's request, nearly 70 percent of 
the resolution's increased spending over the next decade is in 
the area of mandatory spending programs. The resolution creates 
$100 billion in new mandatory spending for an education program 
that needs reform (IDEA--Individuals with Disabilities 
Education Act). An expansive prescription drug benefit is added 
to the Medicare program with no stipulation made that Medicare 
be reformed. Both programs will grow, not subject to 
appropriations in the future, and will place unique pressure on 
future federal budgets.
    The resolution increases domestic discretionary spending 
authority over the President's budget request in 2003 by $15.5 
billion while claiming to be at the President's request. First, 
the resolution omits the President's proposal to budget for the 
accrual cost of retirement benefits for federal employees, but 
nonetheless adds $9.0 billion to its discretionary mark. The 
resolution also increases 2003 advance appropriations $2.2 
billion over current practice and it assumes a ``historical'' 
rescission of $46.7 billion in budget authority and $39.0 
billion in outlays over the next decade. Outlay savings from 
this assumption are highly unlikely.
    Domestic appropriated accounts are $106 billion higher than 
the President's request over the decade, even without including 
an allowance for the FY 2002 supplemental request of $27.1 
billion transmitted to Congress on March 21. Further, most 
domestic discretionary account increases, assumed in the 
resolution in the early-years, are clearly understated in the 
out-years. As an example, while the resolution increases 
domestic appropriation outlays in FY 2003 by $10.3 billion 
compared to the President's request, the resolution assumes 
that these adds are somehow one-time increases and will 
gradually be reduced over the decade. The combination of major 
increases in mandatory spending programs that will grow in the 
future, and an understatement in the future of the current year 
increases in domestic appropriated accounts, combined with 
highly questionable savings from rescissions, portend an 
unsustainable future fiscal path.
    2. Limited Enforcement Provisions.--The resolution does 
extend, in the Senate, some expiring points-of-orders and pay-
go provisions. But only because of the effort led by the 
Republicans does the resolution establish a one-year cap on 
discretionary spending. Efforts in the Committee to extend the 
caps further and strengthen enforcement provisions failed, but 
will be revisited in the full Senate. Even Senator Domenici's 
effort to guarantee that the resolution's commitment to funding 
the President's defense request just for one year--FY 2003--
failed when he tried to include a firewall between defense and 
non-defense spending in that year.
    Other provisions in the resolution weaken its enforcement 
provisions, such as increasing domestic advance appropriations 
by over $2.2 billion this year and eliminating the emergency 
designation point-of-order for non-defense discretionary 
spending. This point-of-order is the Senate's only mechanism 
for reviewing the use of the emergency designation. Moreover, 
many would have toagree that it has been invoked most 
judiciously.
    The advance appropriations limit has been increased from 
the level set in last year's resolution--$23.2 billion. That 
limitation was designed to accommodate the advances that had 
been made in the FY 2001 bills into FY 2002, or in other words: 
the appropriators were held harmless for this advance spending, 
but were to do no more. The Appropriations Committee complied 
with the rule, and the advances contained in the FY 2002 bills 
were within the set limit. It is clear that with respect to FY 
2003, the resolution intends to permit an additional $2.2 
billion in spending beyond what the President has proposed.
    3. Cuts in National Security/International Affairs.--The 
resolution reduces defense spending authority $245 billion 
below the President's request. The resolution claims that a 
``reserve fund'' for defense expenditures would be available if 
needed. But unlike reserve funds in past GOP budget resolutions 
which accounted for the reserved amounts in the totals but 
withheld them from the committees of jurisdiction, in this 
resolution the funds have simply vanished. This allows the 
proponents of the resolution to claim greater debt reduction 
than would be the case without these reserves. In contract to 
the ``reserved'' but non-existent defense dollars, new 
domestic, mandatory spending programs for education and health 
care are allocated within the budget totals and not set outside 
the budget in any imaginary ``reserve'' construction.
    In another contrast to the President's recent commitments 
and efforts to increase funding for foreign aid programs, the 
resolution cuts the President's request nearly $5 billion over 
the next decade.
    4. Increased taxes relative to President's request.--The 
resolution provides for no tax cuts over the entire decade. 
Bipartisan congressional tax cut proposals, such as the CARE 
Act designed to increase incentives for charitable giving and 
the recently reported Finance Committee energy tax credits are 
not accommodated within the resolution. Further, expiring tax 
provisions such as the R&E tax credit and those provisions that 
expire in 2010 such as marriage penalty relief, child credit 
and marginal tax rate reductions would not be permitted if the 
resolution's blueprint is adopted in the Congress. In total 
compared to the President's budget, the resolution would 
increase taxes $553 billion over the next decade.
    5. The Trigger.--The resolution has a magic trigger 
referred to as a circuit breaker. The resolution includes the 
following new process, it is a ``wait until next year'' 
procedure. If in any year an on-budget deficit is projected in 
CBO's January 2003 annual report, then next year's budget 
resolution would be out of order unless it included policies to 
achieve a balanced budget excluding social security trust 
funds. This path would require such balance within 5 years (FY 
2008). Even if the resolution for this year were to perfectly 
come true, then it would project on-budget deficits in 2004 and 
throughout the remainder of this decade. Therefore, under the 
policies called for in this reported budget resolution, next 
year's budget resolution would be required to include a series 
of policies to adhere to the trigger:
           Raise taxes $570 billion; or
           Further reduce the President's defense 
        request by another 25%; or
           Further reduce the President's non-defense 
        spending by 26%; or
           Freeze all discretionary spending at the 
        2002 level; or
           Cut Medicare by 30%; or
           Eliminate food stamps, TANF, child care, 
        child nutrition, SCHIP, foster care, veterans' benefits 
        and veterans' pensions beginning in 2004; or
           Some combination or portion of all of the 
        above, but not until next year!
    Supporting documentation for these Minority Views are 
presented in the following summary tables that compare (among 
other things) the resolution to the CBO March baseline, CBO's 
reestimate of the President's Budget, and with and without the 
recent Job Creation and Worker Assistance Act of 2002.
    Tables to follow:
           Rates of Growth in the SBC Reported 
        Resolution;
           Comparison of SBC Reported Resolution With 
        CBO's March Baseline and the Reestimate of the 
        President's Budget, With Economic Stimulus and 
        Excluding Accruals;
           Comparison of SBC Reported Resolution With 
        CBO's March Baseline and the Reestimate of the 
        President's Budget Without Economic Stimulus and 
        Excluding Accruals;
           Comparison of SBC Reported Resolution and 
        CBO March Baseline, Without Economic Stimulus and 
        Excluding Accruals--FY 2003 to FY 2012;
           Comparison of SBC Reported Resolution and 
        CBO Reestimate of the President's Budget, Without 
        Economic Stimulus and Excluding Accruals;
           Comparison of Discretionary Budget Authority 
        in the SBC Reported Resolution, the CBO March Baseline, 
        and the Reestimate of the President's Budget.

                                   Senator Pete V. Domenici,
                                           Committee on the Budget, 
                                               Ranking Member.
                                   Senator Charles Grassley,
                                           Committee on the Budget.
                                   Senator Bill Frist,
                                           Committee on the Budget.

        RATES OF GROWTH IN THE SBC REPORTED RESOLUTION WITHOUT ECONOMIC STIMULUS AND EXCLUDING ACCRUALS*
----------------------------------------------------------------------------------------------------------------
                                                        In billions of dollars                    Avg. percent
                                                  --------------------------------- % change,    annual growth,
                                                      2002       2003       2012    2002-2003      2002-2012
----------------------------------------------------------------------------------------------------------------
Defense..........................................      348.2      380.2      479.5        9.2                3.3
Nondefense.......................................      382.6      414.5      490.3        8.3                2.5
Discretionary....................................      730.7      794.7      969.8        8.8                2.9
Mandatory........................................    1,102.6    1,165.3    1,983.5        5.7                6.0
NDD and Mandatory................................    1,485.2    1,579.9    2,473.8        6.4                5.2
Total Outlays....................................    2,000.7    2,131.7    3.099.4        6.5                4.5
Outlays with no interest.........................    1,833.3    1,960.1    2,953.2        6.9                4.9
----------------------------------------------------------------------------------------------------------------
* The SBC Reported Resolution does not include the effect of the enactment of the Job Creation and Worker
  Assistance Act of 2002 (P.L. 107-147).

 Source: Senate Budget Committee Republican Staff.


  COMPARISON OF SBC REPORTED RESOLUTION WITH CBO'S MARCH BASELINE AND THE REESTIMATE OF THE PRESIDENT'S BUDGET
                                  WITH ECONOMIC STIMULUS AND EXCLUDING ACCRUALS
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                               CBO reest
                                                   CBO March     of the     SBC reported   SBC less    SBC less
                                                   baseline   President's  resolution **   baseline   reestimate
                                                                budget *
----------------------------------------------------------------------------------------------------------------
FY 2003:
    Discretionary...............................        761          784           795           34          10
    Mandatory...................................      1,148        1,170         1,169           21          (1)
    Net Interest................................        170          180           175            5          (5)
        Total Spending..........................      2,080        2,134         2,138           59           4
    Total Revenues..............................      2,086        2,013         2,046          (40)         33
    Unified Deficits/Surpluses..................          6         (122)          (92)         (98)         29
        On-budget Deficits/Surpluses............       (170)        (297)         (268)         (98)         29
    Discretionary Spending BA...................        732          759           768           36           9
        Defense.................................        357          393           393           36           0
        Nondefense..............................        375          366           375           (0)          9
FY 2003-2012:
    Discretionary...............................      8,557        8,853         8,798          241         (55)
        Defense.................................      3,966        4,449         4,289          323        (160)
        Nondefense..............................      4,591        4,403         4,509          (82)        106
    Mandatory...................................     14,602       15,038        15,275          673         236
    Net Interest................................      1,517        1,884         1,808          291         (75)
        Total Spending..........................     24,677       25,775        25,881        1,204         106
    Total Revenues..............................     27,057       26,455        27,064            7         609
    Deficits/Surpluses Unified..................      2,380          680         1,183       (1,197)        503
        Deficits Surpluses On-budget............       (102)      (1,802)       (1,299)      (1,197)        503
----------------------------------------------------------------------------------------------------------------
* CBO's Reestimate of the President's Budget includes the President's budget amendment submitted on March 14,
  2002, as well as the President's economic security proposal.
** The SBC Reported Resolution includes the effect of the enactment of the Job Creation and Worker Assistance
  Act of 2002 (P.L. 107-147).

Source: Senate Budget Committee Republican Staff.


  COMPARISON OF SBC REPORTED RESOLUTION WITH CBO'S MARCH BASELINE AND THE REESTIMATE OF THE PRESIDENT'S BUDGET
                                WITHOUT ECONOMIC STIMULUS AND EXCLUDING ACCRUALS
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                               CBO reest
                                                   CBO March     of the     SBC reported   SBC less    SBC less
                                                   baseline   President's  resolution **   baseline   reestimate
                                                                budget *
----------------------------------------------------------------------------------------------------------------
FY 2003:
    Discretionary...............................        761          784           795           34          10
    Mandatory...................................      1,148        1,162         1,165           17           3
    Net Interest................................        170          174           172            1          (3)
        Total Spending..........................      2,080        2,121         2,132           52          11
    Total Revenues..............................      2,086        2,078         2,086           (0)          8
    Unified Deficits/Surpluses..................          6          (43)          (46)         (52)          3
        On-budget Deficits/Surpluses............       (170)        (219)         (224)         (55)         (5)
    Discretionary Spending BA...................        732          759           768           36           9
        Defense.................................        357          393           393           36           0
        Nondefense..............................        375          366           375           (0)          9
FY 2003-2012:
    Discretionary...............................      8,557        8,853         8,798          241         (55)
        Defense.................................      3,966        4,449         4,289          323        (160)
        Nondefense..............................      4,591        4,403         4,509          (82)        106
    Mandatory...................................     14,602       15,029        15,271          669         242
    Net Interest................................      1,517        1,767         1,751          233         (17)
        Total Spending..........................     24,677       25,649        25,820        1,143         171
    Total Revenues..............................     27,057       26,499        27,051           (5)        553
    Deficits/Surpluses Unified..................      2,380          850         1,232       (1,149)        382
        Deficits Surpluses On-budget............       (102)      (1,633)       (1,251)      (1,149)        382
----------------------------------------------------------------------------------------------------------------
* CBO's Reestimate of the President's Budget includes the President's budget amendment submitted on March 14,
  2002, but does not include the President's economic security plan proposal.
** The SBC Reported Resolution does not include the effect of the enactment of the Job Creation and Worker
  Assistance Act of 2002 (P.L. 107-147).

Source: Senate Budget Committee Republican Staff.


                                          COMPARISON OF SBC REPORTED RESOLUTION AND CBO MARCH BASELINE WITHOUT ECONOMIC STIMULUS AND EXCLUDING ACCRUALS
                                                                                    [In billions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2003       2004       2005       2006       2007       2008       2009       2010       2011       2012    2003-2007  2003-2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SBC Reported Resolution *:
    Defense.................................................      380.2      393.9      405.0      410.1      413.4      430.9      444.1      457.5      474.4      479.5     2002.6     4288.9
    Nondefense..............................................      414.5      422.6      430.4      437.3      444.9      454.0      462.5      471.6      480.8      490.3     2149.7     4509.0
        Discretionary.......................................      794.7      816.5      835.4      847.4      858.3      884.9      906.6      929.1      955.2      969.8     4152.3     8797.9
    Mandatory...............................................     1165.3     1196.1     1278.5     1358.8     1443.8     1547.7     1648.2     1759.1     1890.2     1983.5     6442.5    15271.0
    Net Interest............................................      171.6      188.0      191.2      189.5      186.3      181.7      175.8      167.7      152.7      146.1      926.7     1750.8
        Total Outlays.......................................     2131.7     2200.6     2305.2     2395.7     2488.4     2614.2     2730.6     2855.9     2998.1     3099.4    11521.5    25819.7
    Revenues................................................     2085.6     2208.9     2341.4     2447.2     2568.3     2706.6     2856.9     3008.5     3278.0     3549.9    11651.4    27051.4
    Unified Surplus.........................................      -46.1        8.3       36.2       51.5       80.0       92.4      126.3      152.6      279.9      450.6      129.9     1231.7
        On-budget...........................................     -222.0     -185.9     -174.7     -174.0     -160.6     -163.7     -144.8     -134.6      -23.8      132.9     -917.3    -1251.1
        Off-budget..........................................      175.9      194.2      210.9      225.5      240.6      256.1      271.1      287.2      303.6      317.6     1047.1     2482.8
CBO March Baseline:
    Defense.................................................      354.2      363.4      374.7      380.5      386.6      400.0      410.5      421.2      435.9      439.2     1859.4     3966.2
    Nondefense..............................................      407.0      420.5      431.6      441.9      452.9      463.9      475.3      487.1      499.1      511.6     2153.9     4590.9
        Discretionary.......................................      761.2      783.9      806.3      822.4      839.5      863.8      885.8      908.3      935.1      950.8     4013.3     8557.1
    Mandatory...............................................     1148.2     1180.4     1241.0     1312.4     1384.7     1471.4     1562.3     1661.7     1778.1     1862.0     6266.6    14602.0
    Net Interest............................................      170.2      183.7      183.5      177.5      169.5      159.2      146.4      130.6      111.9       84.9      884.4     1517.4
        Total Outlays.......................................     2079.6     2148.0     2230.7     2312.3     2393.7     2494.4     2594.5     2700.6     2825.1     2897.7    11164.3    24676.5
    Revenues................................................     2085.9     2209.3     2341.8     2447.7     2568.9     2707.2     2857.5     3009.2     3278.7     3550.7    11653.6    27056.9
    Unified Surplus.........................................        6.3       61.3      111.1      135.4      175.2      212.8      263.0      308.6      453.7      653.1      489.2     2380.4
        On-budget...........................................     -169.6     -132.9      -99.9      -90.1      -65.4      -43.3       -8.1       21.4      150.0      335.4     -557.9     -102.4
        Off-Budget..........................................      175.9      194.2      210.9      225.5      240.6      256.1      271.1      287.2      303.6      317.6     1047.1     2482.8
Difference:
    Defense.................................................       26.0       30.5       30.3       29.6       26.8       30.9       33.6       36.3       38.5       40.3      143.2      322.8
    Nondefense..............................................        7.5        2.1       -1.2       -4.6       -8.0       -9.9      -12.8      -15.5      -18.3      -21.3       -4.2      -82.0
        Discretionary.......................................       33.5       32.6       29.1       25.0       18.7       21.0       20.8       20.8       20.2       19.0      139.0      240.8
    Mandatory...............................................       17.1       15.7       37.5       46.4       59.1       76.3       85.9       97.4      112.1      121.5      175.9      669.0
    Net Interest............................................        1.5        4.3        7.8       12.0       16.8       22.5       29.4       37.1       40.8       61.2       42.3      233.4
        Total Outlays.......................................       52.1       52.6       74.4       83.4       94.7      119.8      136.1      155.3      173.0      201.7      357.2     1143.2

    Revenues................................................       -0.3       -0.4       -0.4       -0.5       -0.5       -0.6       -0.6       -0.7       -0.7       -0.8       -2.1       -5.5
    Unified Surplus.........................................      -52.4      -53.0      -74.9      -83.9      -95.2     -120.4     -136.7     -156.0     -173.8     -202.5     -359.3    -1148.7
        On-budget...........................................      -52.4      -53.0      -74.9      -83.9      -95.2     -120.4     -136.7     -156.0     -173.8     -202.5     -359.3    -1148.7
        Off-budget..........................................        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0        0.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
 *The SBC Reported Resolution does not include the effect of the enactment of the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147).

Source: Senate Budget Committee Republican Staff.


                               COMPARISON OF SBC REPORTED RESOLUTION AND CBO REESTIMATE OF THE PRESIDENT'S BUDGET WITHOUT ECONOMIC STIMULUS AND EXCLUDING ACCRUALS
                                                                                    [In billions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 2003       2004       2005       2006       2007       2008       2009       2010       2011       2012    2003-2007  2003-2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SBC Reported Resolution *:
    Defense.................................................      380.2      393.9      405.0      410.1      413.4      430.9      444.1      457.5      474.4      479.5     2002.6     4288.9
    Nondefense..............................................      414.5      422.6      430.4      437.3      444.9      454.0      462.5      471.6      480.8      490.3     2149.7     4509.0
        Discretionary.......................................      794.7      816.5      835.4      847.4      858.3      884.9      906.6      929.1      955.2      969.8     4152.3     8797.9
    Mandatory...............................................     1165.3     1196.1     1278.5     1358.8     1443.8     1547.7     1648.2     1759.1     1890.2     1983.5     6442.5    15271.0
    Net Interest............................................      171.6      188.0      191.2      189.5      186.3      181.7      175.8      167.7      152.7      146.1      926.7     1750.8
        Total Outlays.......................................     2131.7     2200.6     2305.2     2395.7     2488.4     2614.2     2730.6     2855.9     2998.1     3099.4    11521.5    25819.7
    Revenues................................................     2085.6     2208.9     2341.4     2447.2     2568.3     2706.6     2856.9     3008.5     3278.0     3549.9    11651.4    27051.4
    Unified Surplus.........................................      -46.1        8.3       36.2       51.5       80.0       92.4      126.3      152.6      279.9      450.6      129.9     1231.7
        On-budget...........................................     -222.0     -185.9     -174.4     -174.0     -160.6     -163.7     -144.8     -134.6      -23.8      132.9     -917.3    -1251.1
        Off-budget..........................................      175.9      194.2      210.9      225.5      240.6      256.1      271.1      287.2      303.6      317.6     1047.1     2482.8
CBO Reestimate of the President's Budget **:
    Defense.................................................      380.2      388.3      406.2      420.4      433.8      455.1      470.0      484.4      502.4      508.5     2028.9     4449.4
    Nondefense..............................................      404.2      411.5      416.9      422.9      431.1      441.1      451.6      465.7      473.7      484.6     2086.6     4403.2
        Discretionary.......................................      784.4      799.8      823.1      843.3      864.8      896.2      921.6      950.1      976.1      993.1     4115.5     8852.5
    Mandatory...............................................     1162.1     1200.5     1266.1     1351.1     1430.5     1518.9     1612.3     1714.4     1842.6     1930.4     6410.3    15028.9
    Net Interest............................................      174.5      189.2      189.3      187.1      184.8      182.4      177.0      169.2      161.4      152.2      925.0     1767.3
        Total Outlays.......................................     2120.9     2189.6     2278.5     2381.5     2480.2     2597.6     2710.8     2833.7     2980.2     3075.7    11450.7    25648.7
    Revenues................................................     2077.9     2197.3     2323.9     2424.9     2542.5     2680.1     2830.3     2980.0     3137.4     3304.2    11566.5    26498.5
    Unified Surplus.........................................      -43.1        7.7       45.4       43.4       62.3       82.5      119.5      146.2      157.2      228.5      115.8      849.8
        On-budget...........................................     -218.8     -186.3     -165.4     -182.0     -178.3     -173.6     -151.6     -141.1     -146.5      -89.3     -930.8    -1632.9
        Off-budget..........................................      175.7      194.1      210.8      225.4      240.6      256.1      271.1      287.3      303.8      317.8     1046.6     2482.7
Difference:
    Defense.................................................        0.0        5.6       -1.2      -10.3      -20.4      -24.2      -25.8      -27.0      -28.1      -29.1      -26.3     -160.5
    Nondefense..............................................       10.3       11.1       13.6       14.4       13.8       12.9       10.9        5.9        7.2        5.7       63.2      105.8
        Discretionary.......................................       10.3       16.6       12.4        4.1       -6.6      -11.4      -14.9      -21.0      -20.9      -23.3       36.9      -54.6

    Mandatory...............................................        3.3       -4.4       12.4        7.7       13.3       28.7       35.9       44.7       47.5       53.1       32.2      242.2
    Net Interest............................................       -2.8       -1.2        1.9        2.4        1.5       -0.7       -1.2       -1.5       -8.7       -6.1        1.7      -16.5
        Total Outlays.......................................       10.8       11.0       26.7       14.2        8.2       16.6       19.8       22.2       17.9       23.7       70.8      171.0
    Revenues................................................        7.7       11.6       17.5       22.3       25.9       26.5       26.6       28.6      140.6      245.7       84.9      552.9
    Unified Surplus.........................................       -3.0        0.5       -9.2        8.1       17.7        9.9        6.8        6.4      122.7      222.0       14.1      381.9
        On-budget...........................................       -3.2        0.4       -9.3        8.0       17.6        9.9        6.8        6.5      122.8      222.2       13.6      381.8
        Off-budget..........................................        0.2        0.1        0.1        0.1        0.0        0.0       -0.0       -0.1       -0.1       -0.2        0.5        0.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* The SBC Reported Resolution does not include the effect of the enactment of the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147).
** CBO's Reestimate of the President's Budget includes the President's budget amendment submitted on March 14, 2002, but does not include the President's economic security plan proposal.

Source: Senate Budget Committee Republican Staff.


   COMPARISON OF DISCRETIONARY BUDGET AUTHORITY IN THE SBC REPORTED RESOLUTION, THE CBO MARCH BASELINE, AND THE REESTIMATE OF THE PRESIDENT'S BUDGET--
                                                           WITHOUT RETIREMENT ACCRUAL PROPOSAL
                                                                [In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                        2003-     2003-
                                               2003     2004     2005     2006     2007     2008     2009     2010     2011     2012     2007     2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
SBC Reported Resolution:
    Discretionary Spending BA..............    768.1    786.5    804.2    822.1    841.0    860.2    880.8    900.8    921.2    942.4   4021.9    8527.3
        Defense............................    392.8    400.5    410.8    421.2    432.2    443.5    455.2    467.0    478.9    491.2   2057.5    4393.1
        Nondefense.........................    375.3    386.0    393.4    400.9    408.8    416.8    425.6    433.9    442.4    451.2   1964.4    4134.2
CBO Restimate of the President's Budget*:
    Discretionary Spending BA..............    759.1    773.7    801.0    827.9    858.8    881.4    904.4    931.6    949.6    973.5   4020.5    8660.9
        Defense............................    393.8    394.9    415.6    436.2    457.7    469.8    482.1    494.8    507.8    521.2   2097.1    4572.9
        Nondefense.........................    366.4    378.7    385.5    391.7    401.1    411.6    422.3    436.7    441.7    452.3   1923.4    4088.0
CBO March Baseline:
    Discretionary Spending BA..............    732.4    751.2    770.3    789.6    810.0    830.8    852.7    874.8    897.0    920.1   3853.4    8228.9
        Defense............................    356.9    366.3    375.7    385.2    395.2    405.5    416.3    427.1    437.9    449.2   1879.4    4015.4
        Nondefense.........................    375.5    384.9    394.5    404.4    414.7    425.3    436.4    447.7    459.1    470.9   1974.1    4213.4
SBC Reported Resolution less President's
 Reestimate:
    Discretionary Spending BA..............      9.0     12.8      3.2     -5.7    -17.8    -21.1    -23.6    -30.8    -28.4    -31.1      1.4    -133.6
        Denfense...........................      0.0      5.6     -4.7    -15.0    -25.5    -26.4    -27.0    -27.9    -29.0    -30.0    -39.6    -179.8
        Nondefense.........................      8.9      7.3      7.9      9.2      7.7      5.2      3.3     -2.9      0.6     -1.1     41.0      46.2
SBC Reported Resolution less CBO March
 Baseline:
    Discretionary Spending BA..............     35.7     35.3     33.9     32.5     31.0     29.4     28.0     26.0     24.2     22.2    168.5     298.5
        Defense............................     35.9     34.2     35.1     36.0     36.9     37.9     38.9     39.9     40.9     41.9    178.1     377.7
        Nondefense.........................     -0.2      1.1     -1.2     -3.5     -5.9     -8.4    -10.8    -13.9    -16.7    -19.7     -9.6    -79.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
* CBO's Reestimate of the President's Budget includes the President's budget amendmemt submitted on March 14, 2002.

 Source: Senate Budget Committee Republican Staff.

                                                                       [all]