July 20, 2000
(House)

The President's FY 2001 Budget is based on a balanced approach that maintains fiscal discipline, eliminates the national debt, extends the solvency of Social Security and Medicare, provides for an appropriately sized tax cut, establishes a new voluntary Medicare prescription drug benefit in the context of broader reforms, expands health care coverage to more families, and funds critical investments for our future. An essential element of this approach is ensuring adequate funding for discretionary programs. To this end, the President has proposed discretionary spending limits at levels that we believe are necessary to serve the American people.

Unfortunately, the FY 2001 congressional budget resolution provides inadequate resources for discretionary investments. We need realistic levels of funding for critical government functions that the American people expect their government to perform well, including education, national security, law enforcement, environmental protection, preservation of our global leadership, air safety, food safety, economic assistance for the less fortunate, research and technology, and the administration of Social Security and Medicare. Based on the inadequate budget resolution, the Committee bill does not address critical needs of the American people. In addition, the Committee bill includes several objectionable provisions.

Across the appropriations bills, there is a pattern of underfunding core government operations such as air safety, park maintenance, and the administration of Social Security and Medicare. The Committee bill continues this pattern by underfunding the Internal Revenue Service, counterterrorism programs, Presidential transition expenses, and necessary construction and repair of Federal facilities. If the bill were presented to the President in its current form, his senior advisers would recommend that he veto it.

The attachment provides a discussion of our specific concerns with the Committee bill. We look forward to working with the House to address our mutual concerns.

Attachment

Attachment

Department of the Treasury

The Administration appreciates the Committee's full funding of key provisions of our National Gun Enforcement Initiative. However, the Administration is very concerned with the large reductions in the Committee bill for key priorities of the Department of the Treasury. The bill provides $873.0 million less than the President's request for Treasury's programs, which would significantly reduce funding for vital programs in the IRS, counterterrorism, Customs, and other activities. Specific funding issues include:

• Internal Revenue Service. The Administration strongly objects to the deeply inadequate funding level provided for the IRS and urges the Committee to fully fund the President's budget request. The House Committee mark provides $8.5 billion for the IRS, $466.0 million (5.2 percent) below the President's request. The mark would halt many of our current efforts to modernize the IRS and to improve both customer service and compliance. In 1998, an overwhelming, bipartisan majority of the Congress passed the IRS Reform and Restructuring Act (RRA) and joined the Administration in calling for changes that would improve service to taxpayers and enhance the ability of the IRS to administer our Nation's tax system in a fair and efficient manner. The Committee mark would make it impossible to implement many of the core improvements contemplated under the RRA. Instead, the mark would require the IRS to reduce its current staffing by more than 2,000 full-time employees. It would eliminate numerous customer service initiatives and reduce audit rates to an unacceptably low 0.26 percent. We urge the House to restore the funding necessary to carry through on the bipartisan commitment to improve the ability of the IRS to serve its customers and administer the tax code in a fair and efficient manner.

• Counterterrorism and Drug Kingpins. The Committee has not provided any of the $77.0 million requested for counterterrorism initiatives. These funds would enhance Treasury's work to deter and detect terrorist activity and continue the high level of effort undertaken during the Millennium celebration events. Treasury, because of its unique financial investigative capabilities and role in border control, is a critical component of the enhanced Government-wide effort to combat terrorism. What we learned during the Millennium New Year period concerns many of us. There is consensus that the threat of domestic terrorist attack has increased significantly and that we need to increase our efforts to protect against it. The Administration is very concerned that the Committee has failed to address this heightened threat.

Further, the Committee has failed to include any of the $55.0 million requested to replenish Treasury's Counterterrorism Fund. The Counterterrorism Fund ensures that Treasury is able to cover the costs associated with responding to unanticipated acts of terrorism. Treasury bureaus have important counterterrorism responsibilities in this Government-wide effort, including: protecting the President; designing and implementing security at National Special Security Events; investigating arson, explosives, and firearms incidents; preventing weapons of mass destruction from entering our country; and, conducting financial investigations relating to terrorism.

The Committee mark excludes all of the FY 2001 proposed initiatives for the Office of Foreign Assets Control (OFAC), which emphasize countermeasures against drug kingpin organizations, including: $2.9 million for 11 FTEs for improved services under the International Emergency Economic Powers Act; and, the $3.0 million full-year cost of 20 positions supporting the Narcotics Kingpin Designation Act. Restoration of these funds will continue the bipartisan legislative efforts to address these critical national security and narco-terrorism issues.

• United States Customs Service. The Administration appreciates the $105.0 million in funding provided for the Automated Commercial Environment (ACE). We urge the House to provide the full $210.0 million needed to fully fund this project. To provide this funding, we urge the House to consider the fee proposed in the President's budget. While we appreciate the Committee's recognition of the importance of Customs' work to combat international child labor by funding a $2 million increase, we urge the Congress to fully fund the requested $5 million increase in order to enforce the ban on the importation of goods made with forced or indentured child labor, denying such products access to the lucrative U.S. marketplace.

• First Accounts. While the Administration is pleased that the Committee has provided $2.0 million for the President's First Accounts initiative, we urge the Committee to provide the full $30.0 million requested. The First Accounts initiative would expand access to mainstream financial services for millions of "unbanked" Americans families who lack this basic passport to the modern American economy. Access to bank accounts, ATMs, and consumer education can help to reduce costs for low-income families, help families manage household finances, and to plan and save for the future. Failure to fully fund this bipartisan initiative will result in millions of families being denied access to the financial services mainstream.

• Financial Management Service. We urge the House to restore the $4.0 million reduction to the President's request for the Financial Management Service. The Committee mark eliminates funding for investments that are important to provide security and modernize the financial systems through which we account for all government spending, and through which most Federal payments are made.

• Federal Public Key Infrastructure. The Committee bill does not allocate the requested $7.0 million to fund the full-scale development and implementation of a Federal Public Key Infrastructure, which is critical to providing a secure environment for electronic government. We urge the House to provide funding for this important initiative in the Administration's request.

• Money Laundering. The Administration reiterates its request for full funding the $15.0 million Money Laundering Strategy. The fight against money laundering is critical. Counter-money laundering efforts allow us to pursue those who commit the underlying crimes that produce dirty money -- whether drug dealing, fraud, corruption, or other forms of organized crime.

General Services Administration

The Administration is disappointed by the Committee's funding levels for key priorities of the General Services Administration (GSA). The Committee bill provides $1.1 billion less than the President's request for GSA's programs, which would significantly reduce vital programs in courthouse construction, Presidential transition, and other activities. Specific funding issues include:

• Construction and Repair and Alteration Funding. The Committee bill fails to fund any new design or construction, including courthouses, the FDA and ATF headquarters, and several border stations, and significantly underfunds needed repair and alterations of existing Federal buildings, such as those in Suitland, Maryland. The Administration strongly urges the House to provide funds for these needed projects, especially those with important safety, security, and health benefits.

• Presidential Transition. The bill fails to fund the $7.0 million requested for the expenses of the Presidential transition, including office space, travel, communications postage, and personnel. These funds are needed primarily between the months of November 2000 - March 2001 to ensure a smooth transition of both the incoming and outgoing Administrations. We urge the House to provide the requested funds.

• Policy and Operations. The Committee bill cuts funding for the GSA Policy and Operations account $22.0 million below the request and $4.0 million below the FY 2000 enacted level. The bill does not provide funding for any new initiatives, such as the requested $15.4 million for the critical infrastructure protection program, including $10.0 million for FIDNet and $5.4 million for FedCIRC, and $2.0 million for the RISC/OIRA Consolidated Information System. We urge the House to provide funding for these important initiatives in the Administration's request.

• Federal Building Operations. The bill freezes funding for Federal building operations at the FY 2000 enacted level, which is $44.0 million below the request. Such a reduction would hinder GSA's ability to protect, operate, and maintain the buildings in its inventory, especially with more than three million square feet of new Government-owned space scheduled to come on-line during FYs 2000 and 2001. We encourage the House to provide the requested increase.

Drug Prevention Programs

The Administration appreciates the Committee's support of the President's drug control funding priorities but is disappointed that the bill does not fully fund the request for the National Youth Anti-Drug Media Campaign, the Drug-Free Communities Program, and the Criminal Justice Treatment initiative of the Office of National Drug Control Policy (ONDCP). Advertising costs have increased almost 40 percent in the past two years, and reduced funding would diminish ONDCP's ability to deliver messages to local media markets, where specific drug use problems, including use of ecstasy and methamphetamine, are of concern. The $5.0 million reduction in the Drug-Free Communities Program would cause 50 fewer communities to receive grants to support coalitions working to prevent youth substance abuse.

National Archives and Records Administration

The House Committee mark provides $201.2 million for the National Archives and Records Administration (NARA), $108.0 million below the request and $23.4 million below the FY 2000 enacted level. The mark provides no funding for the Archives I renovation project, which includes eliminating serious fire safety threats. Delaying the renovation project could place the lives of visitors and staff at risk and endanger irreplaceable archival records, including the Charters of Freedom. The Committee mark also does not provide funding for essential repairs needed to the Kennedy Library due to severe water damage.

Office of Personnel Management

The Administration strongly objects to the elimination of $6.2 million in requested funding for the Federal Cyber Services (FCS) initiative. The President's overall critical infrastructure protection initiative is essential to ensuring that the Federal Government is protected from acts of cyber-terrorism and can maintain its information security infrastructure with a highly trained and competent workforce. FCS is a key element to ensure that adequate numbers of people are recruited, trained, and motivated to remain in Federal service.

Merit Systems Protection Board

The Administration is concerned that the Committee level for the Merit Systems Protection Board (MSPB) does not reflect the June 5, 2000, budget amendment for $580,000. These funds are needed for MSPB to carry out its congressional mandate to adjudicate FAA appeals retroactively to March 1, 1996, and to pay for higher rent associated with the need to re-compete expiring leases, including relocating its Washington Regional Office to a location accessible to public transportation.

Office of Special Counsel

The Administration is concerned that the Committee bill does not include $828,000 requested by the Office of the Special Counsel (OSC) to support 10 additional FTEs needed to continue the Office's efforts to reduce its pending backlog. In 1994, Congress imposed upon the OSC a 240-day deadline for processing and investigating complaints, including those involving prohibited personnel practices and reprisal for whistleblowing. The request for additional staff is an essential part of an aggressive, multi-year strategy by the agency to meet the congressional mandate, in the face of an escalating number of complaints.

Food Aid

The Administration strongly objects to a provision added in Committee that would require OMB to apportion at least 75 percent of the FY 2001 funding for international food assistance provided by the Department of Agriculture no later than December 31, 2000. The provision would also limit OMB's involvement with the interagency Food Assistance Policy Council (FAPC) to administrative matters. OMB has played a positive and vital role in the Administration's recent record high food donation levels by helping to ensure that there is sound program management and interagency policy coordination. First, OMB, for decades, has been delegated by the President his statutory responsibility for execution of the budget. This provision would seriously restrict the President's ability to discharge his responsibilities. Second, the provision would hamper the President's ability to conduct foreign policy since the FAPC provides a forum for different agencies to work together to ensure that food donations are provided in a way that is consistent with U.S. international objectives.

Unanticipated Needs/Other Executive Office of the President Issues

The Committee bill includes neither the $1.0 million requested to meet general unanticipated needs related to the national interest, security, or defense, nor the $2.5 million specifically requested to facilitate public education in Puerto Rico on the islands' status options and a local choice among them. Although Puerto Rico was acquired over a century ago, its ultimate status still has not been determined. The situation raises questions of democracy and the appropriate economic and social policies for the islands. A primary reason for the situation -- and the requested funding -- is that Puerto Ricans have been unsure of the possible options for the islands' status. The United States has a responsibility to ensure that Puerto Ricans are aware of and can seek a fully democratic governing arrangement if they wish. This serious concern is one of several concerns regarding funding for the Executive Office of the President presented by the bill. The Administration will work with the Congress to address those concerns as the bill moves forward.

Objectionable Language Provisions

The Administration objects to several language provisions in a variety of programs. Specific issues include:

• Firearms Procurement. We strongly oppose a provision of the bill and a further amendment may be offered that would restrict the Department of the Treasury, while pursuing the procurement of the highest quality firearms and ammunition, from working with the gun industry to reform the way gun manufacturers design, distribute, and market their products. Such reforms, like those being implemented through the Administration's historic agreement with Smith & Wesson, can make significant progress in the fight to reduce gun violence in America and save lives. At a time when our Nation loses nearly 12 children per day in gunfire, Congress should be doing all it can to move forward, not backward, in the fight to reduce gun violence.

• Federal Employees Health Benefits Program (FEHBP) Abortion Coverage. The Administration strongly opposes any provisions that would restrict FEHBP coverage for abortions except in situations where the life of the mother is endangered or the pregnancy is the result of rape or incest and would support an amendment to strike the Committee provisions. While the President believes that abortion should be safe, legal, and rare, the Administration does not believe that Federal employees and their families should be precluded from choosing to purchase health insurance that includes broader coverage.

• FEHBP Contraceptive Coverage. The Administration supports the language in the Committee bill that continues requirements in current law for coverage of prescription contraceptives by health plans participating in the FEHBP and would oppose an amendment that may be offered that would strike this authority.

• FEHBP Cost Accounting Standards. The Administration has consistently opposed a broad-based statutory waiver of the cost accounting standards (CAS). CAS provide a mechanism for experience-rated carriers to accumulate and report consistently Federal Employees Health Benefits Program (FEHBP) administrative costs (i.e., overhead), along with other financial data, to OPM. This information provides a means for ensuring that the carriers are accurately allocating these costs between their FEHBP business line and their other business lines, so that, among other things, OPM can ensure that taxpayers and participating Federal employees are paying an equitable amount of administrative costs in their health insurance premiums.

• Metropolitan Washington Airports Authority Police. The Committee bill contains an objectionable provision that would treat Metropolitan Washington Airports Authority Police officers as law enforcement officers for retirement purposes. Following a comprehensive on-site review by retirement and classification experts, OPM issued a report finding that the duties and responsibilities of these police officers do not meet the criteria for law enforcement retirement coverage under Title 5, U.S.C. Allowing law enforcement officer coverage for these police officers would create an inequity vis-a-vis Federally-employed police officers, who do not generally qualify for such coverage.

• Section 517. The Administration recognizes that the trade in "conflict diamonds" fuels instability in Africa and, therefore, launched a State Department Initiative in 1999 aimed at curbing the illegal diamond trade. We strongly support the intent conveyed in section 517, in particular the intent to restrict trade in illegal diamonds while recognizing the certification of origin of rough diamonds by the Government of Sierra Leone. We also support the identification of countries actively engaged in the illicit diamond trade. We are concerned, however, that section 517 does not extend a similar exemption to Angola and the certificate of origin regime recently agreed to by the Angolan Government.

The Administration believes that while countering illicit trade in diamonds, legitimate diamond producers should be protected and encouraged. Therefore, we cannot support language that would inhibit trade in diamonds that are legitimately certified by duly recognized governments, such as Angola, under internationally-accepted certification regimes. In addition, the provision, as drafted, is unenforceable. Customs would not be able to determine the country in which diamonds are mined when they are imported from diamond centers such as Belgium, as there is currently no legal requirement to specify the country in which a diamond is mined, and the provision does not impose such a requirement. The Administration would be pleased to work with the House to try to develop language that resolves these concerns while preserving the intent of section 517.

• Kyoto Protocol. The Administration opposes the Committee bill language relating to the Kyoto Protocol. The language, which purports to prohibit implementation of the Kyoto Protocol, is unnecessary, as the Administration has no intention of implementing the Protocol prior to ratification.

• Federal Contracting. The Administration understands that an amendment may be offered that would bar the Executive Branch from promulgating a regulation to assist contracting officers in determining whether a prospective contractor has the requisite record of integrity and business ethics to be eligible for award of a Federal contract. The amendment would prevent implementation of this regulation until the General Accounting Office (GAO) has completed an assessment of the extent to which Federal agencies have contracted with companies that have violated Federal laws. GAO has already completed several such studies. The Administration would strongly oppose such an amendment.

The Administration believes that it is inappropriate to delay implementation of a regulation that reinforces the basic legal requirement for Federal contracting officials to consider a prospective contractor's record of integrity and business ethics before awarding a contract. GAO recently issued a report indicating that violations of laws by contractors doing business with the Defense Department resulted in the assessment of more than $400.0 million in fines in the last five years alone. This is the second GAO report finding violations of laws by contractors within the last five years. The proposed regulation provides guidance on what constitutes integrity and business ethics; ensures that contracting officials have the information they need to make this assessment; and, includes provisions that ensure fairness and due process for those companies that wish to do business with the Federal Government. Additionally, the proposed regulation does not alter current appeal rights for small entities from adverse decisions by contracting officials. For these reasons, the Administration strongly urges the House to oppose this amendment.

• Section 620. Section 620 of the bill raises substantial separation of powers concerns because it could be read to limit the ability of the President and his appointed heads of departments to supervise and control the operations and communications of the Executive Branch, including the control of privileged and national security information. We therefore object to this provision.

• Infringement on Executive Authority. The Administration objects to a number of provisions in the Committee bill that would require congressional approval before Executive Branch execution. The Administration will interpret these provisions to require only notification of Congress, since any other interpretation would contradict the Supreme Court ruling in INS v. Chadha.

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