Minutes of PCSCB Hearings 6/26/98 and 6/27/98

July 17, 1998


HEARING AND MEETINGS OF THE PRESIDENT'S COMMISSION TO STUDY CAPITAL BUDGETING

Hearing and Meeting of Friday, June 26, and Meeting of Saturday, June 27

Minutes

Transcript available

The hearings and meeting were transcribed. Copies of the transcriptions are available upon request to Dick Emery, the Executive Director of the Commission.

Hearing and Meeting of Friday, June 26

Introduction. Co-chair Kathleen Brown opened the meeting at 9:15 a.m. at One New York Plaza (Broad and Water Streets), The Annex, 43rd Floor, New York, NY 10004. Commissioners not present for the entire day were Mr. Stein and Mr. Kramer. Sitting at the table with the Commissioners was William Dinkelacker, Designated Federal Official from the Department of the Treasury. As required by the Federal Advisory Committee Act, the meeting had been announced in the Federal Register, and the meeting was open to the public.

Several items were distributed to the public and the Commission or were available at the meeting:

Purpose. The purpose of the meeting was to take testimony from Mr. DeSeve about capital budgeting, and discuss capital budgeting issues.

Discussion. At the beginning of the meeting the Comission approved hiring Bob Litan as the writer for the Commission's report, and approved the minutes for the May 8 and 9 meetings. The Commission also discussed briefly the "Proposed Work Plan (June 23, 1998)." As part of this discussion, the Commission decided to cancel the meeting scheduled in Washington for Friday, September 18, and to meet all day Saturday, September 19.

Dick Emery, Executive Director, then presented items from a matrix of possible capital budgeting problems and options, which had been sent to the Commission in advance. After a brief presentation of each item, there was general discussion among the Commissioners. The possible problems were: 1) there is little long-term planning for capital in a life-cycle context outside of the Department of Defense; 2) no one is fully responsible for capital planning; 3) information about physical and financial characteristics of assets is inadequate; 4) accounting standards do not include current cost or imputed interest; 5) pork barrel projects are often chosen over projects with higher returns; 6) dedicated revenues are not fully used to finance designated investment; 7) there are no goals or targets for any category of investment; 8) funding is not always assured to complete projects efficiently; 9) projects often take more than one year to complete; 10) spikes in necessary funding sometimes deter justified investment; 11) programs are not charged uniformly and fully for their use of capital; 12) programs are not charged uniformly for their use of labor and support services; 13) inappropriate choices are made in regards to leasing or buying; 14) cost overruns, delays, and poor quality plague many acquisitions; 15) government often buys hi-tech, custom projects that are not wise choices; 16) capital is often poorly maintained; and 17) capital is often poorly utilized.

At 11:00 a.m., Mr. DeSeve presented testimony to the Commssion that included a slide presentation. His presentation ended about 12:15, at which time the Commission had lunch.

The meeting reconvened at 1:00 p.m. Ms. Brown announced that the Commission would begin its Saturday meeting at 8:15 a.m. and try to conclude about 10:45 a.m. The Commissioners continued to discuss the material presented in the morning. Beginning about 1:45, Mr. Emery and the Commissioners discussed for about an hour the synopses of how decisions are made for individual Federal programs, which had been mailed to the Commission in advance. The programs were: 1) Coast Guard; 2) the recently enacted surface transportation legislation; 3) the Department of Defense acquisition processes; 4) the campus for the National Institute of Standards in the Department of Commerce; 5) the Space Station; 6) the Department of Energy; 7) research in the National Science Foundation; 8) the Internal Revenue Service; 9) the women, infants, and children's program (WIC); 10) the Ronald Reagan building; and 11) water resources development projects.

The Commission took a break about 2:45, then reconvened about 3:00 p.m. Mr. Marvin Phaup, of the Congressional Budget Office (CBO), discussed for about ten minutes the recently released CBO paper, The Economic Effects of Federal Spending on Infrastructure and Other Investments (June 1998).

Mr. Levy then discussed the work his group had done on macroeconomic issues. This was followed by a discussion by Mr. Penner of the work his group had done on depreciation and intergenerational/timing issues.

Mr. Brittain then distributed a revised draft outline for the Commission's report, which was for discussion the next day. The meeting adjourned at 3:45 p.m.

Meeting of Saturday, June 27

Introduction. Co-chair Jon Corzine opened the meeting at 8:20 a.m. The meeting took place at One New York Plaza (Broad and Water Streets), The Annex, 43rd Floor, New York, NY 10004. Mr. Stein and Mr. Rattner were absent. Sitting at the table with the Commissioners was William Dinkelacker, Designated Federal Official from the Department of the Treasury. As required by the Federal Advisory Committee Act, the meeting had been announced in the Federal Register.

The same handouts were available to the public as those on June 26.

Discussion. A draft outline for the Commission's report had been distributed at the end of the previous day's meeting. Woody Brittain led a discussion of the outline, which lasted until the meeting adjourned. Commissioners were asked to send proposed potential recommendations to the co-chairs, who planned to meet July 15 or 16 with Bob Litan and Dick Emery to discuss them. The potential recommendations would be sent to the Commissioners prior to the next meeting, scheduled to be held in Washington on July 24 and 25, when the Commission planned to take a preliminary vote on the recommendations.

The meeting adjourned at 10:45 a.m.

President's Commission to Study Capital Budgeting


Meeting and Hearing Minutes

Minutes from 9/19/98

Minutes from 1/30-31/98

Minutes from 11/13/98

Minutes from 3/6-7/98

Minutes from 12-13-97

Minutes from 4/24-25/98

Minutes from 5/8-9/98

Minutes from 6/26-27/98

Minutes from 7/24/98


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