3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY INVESTING IN PEOPLE ---------------------------------------------------------------------- Our national economic strategy for America will put people first at every stage of their lives. We will dramatically improve the way parents prepare their children for school, give students the chance to train for jobs or pay for college, and provide workers with the training and retraining they need to compete in tomorrow's economy. President Bill Clinton ---------------------------------------------------------------------- This discussion highlights significant Administration investments that follow through on the President's commitment to "put people first." These investments play a dual role. In a global economy where a nation's only unique resources are the skills and knowledge of its workforce, these investments are the key to prosperity. Further, because many of these investments are targeted to our youngest and least fortunate citizens, they also help break the cycle of poverty and open success to all. The Administration is committed to producing real change in people's lives. To do so within existing budget constraints requires choosing investments with records of success or the ability to leverage other resources. It requires reforming programs to make them more effective. And it requires combining opportunity with an emphasis on responsibility. Table 3B-1. MAJOR INVESTMENTS IN PEOPLE (Discretionary budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Young children................ 5,977 7,064 8,054 +990 +14% Education..................... 7,278 7,539 9,089 +1,550 +21% Workforce Investments......... 5,010 5,474 6,480 +1,006 +18% National Service.............. 279 575 850 +275 +48% ---------------------------------------------------------------------- Each section of this discussion addresses an important aspect of Investing in People: o Investing in Young Children will ensure that children start out healthy, are prepared to enter school, and receive good parenting. o Improving Education will raise the achievement of all children, and help reach the National Education Goals. o Investing in the Workforce will aid students' transitions from school to work, train the disadvantaged and retrain workers who lose their jobs in a changing economy. o Encouraging National Service will provide opportunities for young Americans to serve their communities and earn educational benefits in return. o Reforming Welfare will hold parents responsible for their children and provide them with the skills they need to support themselves and their families through work. o Redirecting Housing Assistance for families will provide better neighborhoods for raising children and expand opportunities for work. INVESTING IN YOUNG CHILDREN As early as the fourth century B.C., the philosopher Plato stressed the importance to a just and prosperous society of investing in children from an early age. In The Republic, he discusses the type of poetry youth should learn, physical exercise they should undertake and diets they should follow to prevent diseases. He observes "... the first step, as you know, is always what matters most, particularly when we are dealing with those who are young and tender. That is the time when they are taking shape and when any impression we choose to make leaves a permanent mark." Several millennia later, numerous scientific studies confirm Plato's suppositions about the importance of investing in our children. Research on early, high-quality children's education programs shows gains that may last into adulthood, including higher earnings, lower unemployment rates, and lower crime rates. Supplementing the diets of pregnant women and infants, and immunizing children against early childhood diseases, also save lives and improve health. As Chart 3B-1 shows, these investments both enhance the life prospects of children and save money for the taxpayer over the long run. Insert chart: CHRT3B-1 Programs such as Head Start, childhood immunization and the Special Supplemental Food Program for Women, Infants and Children (WIC), with demonstrated success in stretching the minds and strengthening the bodies of children, ought to reach more of their target population. Other programs like Family Support and Preservation can teach parenting skills, help families with children at risk of abuse and neglect to stay together, and avoid foster-care placements. Accordingly, the Administration is committed to expanding resources for such programs. These and other programs for children and families also need to be integrated in ways that insure seamless services to recipients, as recommended by the National Performance Review. Working with the Congress, the Administration has already increased funding for these programs by 19 percent. For 1995, the budget proposes an additional 21 percent increase for a total increase exceeding $2.6 billion (or 44 percent) over the two years it has been in office (See Table 3B-2). Table 3B-2. PROGRAMS INVESTING IN YOUNG CHILDREN (Budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Immunization Funds\1\......... 341 528 888 +68% +54% Children Receiving Immunization (000s)\2\....... N/A N/A 13,186 N/A N/A Head Start Funds.............. 2,776 3,326 4,026 +21% + 246% Head Start Slots (000s)....... 714 750 840 +12% +53% Percent of Target Population Reached\3\................... 51% 54% 60% N/A N/A WIC Funds..................... 2,860 3,210 3,564 +11% +54% WIC Recipients (000s)......... 5,920 6,510 7,220 +11% +28% Percent of Target Population Reached\4\................... 79% 85% 95% N/A N/A Family Preservation and Support Funds\5\............. -- 60 150 +150% N/A Individuals Served (000s)..... -- N/A N/A N/A N/A Percent of Target Population Reached...................... -- N/A N/A N/A N/A Mandatory Programs............ -- 60 574 +857% N/A Discretionary Programs........ 5,977 7,064 8,054 +14% +96% Total......................... 5,977 7,124 8,628 +21% +209% ---------------------------------------------------------------------- \1\1995 funding shows a combined $464 million (current discretionary immunization program) and $424 million (new entitlement program). Specific goals will be established after survey data become available. \2\Data is for all children up through age 18. \3\Target population is 1.4 million Head Start eligible children. \4\Target estimate is based on a 1993 CBO study estimating that 84 percent of all WIC eligibles will apply for WIC. \5\Since Family Preservation and Support is a new entitlement program, participation estimates have not yet been developed. N/A: Not applicable ---------------------------------------------------------------------- Childhood Immunization Children should be immunized against at least nine diseases. Most inoculations should be received by age two. Through grants to State and local health agencies, the Centers for Disease Control and Prevention (CDC) currently finance about a quarter of all childhood immunizations. State, local, and other Federal programs finance an additional quarter. The remainder is financed through the private sector. Investments in childhood immunizations have high returns in averted medical costs, hospitalization and deaths. According to one study, the combined measles, mumps and rubella vaccine saves more than $14 for every dollar invested. Increasing childhood immunization keeps our children healthy, prevents tragic, avoidable losses of life, and reduces future medical costs. While countries such as Belgium, Denmark and Spain had immunization rates at or above 80 percent for measles, polio, diphtheria and tetanus by the mid-1980s, the United States had immunized only 55 to 65 percent of its pre-school children. A survey of nine cities in 1991 found a median measle, mumps and rubella immunization rate of 38 percent for children under two years. In some inner-city areas, the vaccination rate may be as low as 10 percent. For 1992, data indicate higher vaccination rates, but 71-72 percent of children at or below the poverty level were still in need of at least one vaccine. In the past, drops in vaccine use have caused dramatic increases in the incidence of preventable childhood diseases such as measles and mumps. Reported measles cases, for example, rose from a record low of 1,497 in 1983 to 46,000 between 1989 through 1991, before dropping again. One barrier to childhood immunization has been the high cost of vaccine. To eliminate that barrier, the President sponsored an initiative, enacted in OBRA 1993, to establish a new Federal vaccine entitlement program by October, 1994. The new program, called the Vaccines for Children Program, will buy free vaccine for underinsured and certain low-income children. With the new program underway, health officials have set a target of bringing vaccination rates for all two-year olds nationwide up to 90 percent by the year 2000. Another barrier to childhood immunization has been access to services. In 1995, the Administration will request $46 million in added discretionary funds for extended clinic hours, mobile vaccination units, vaccine purchases, publicity campaigns about the importance of vaccinating young children and other outreach activities. Combined funding levels for the new entitlement program and the current discretionary program represent about a 68 percent increase over the past year's funding level. Ultimately, the President's health reform plan will have universal coverage for childhood immunization as part of a comprehensive benefit package available to all. The Administration will continue to explore linkages between participation in federally assisted programs for child care and immunization, along the lines of school immunization standards. When children are in group settings like child care, infectious diseases are the most dangerous. Immunizing children in child care programs can prevent the spread of communicable illnesses. Preventing childhood diseases by early immunization makes good sense. These measures also help children enter pre-school programs (such as Head Start) and elementary school healthy and ready to learn. Head Start Head Start is a $3.3 billion program offering comprehensive social services for pre-school children. The 2,000 local Head Start centers provide early childhood development services such as education, health care, and nutritious meals. The program helps disadvantaged preschoolers aged 3 to 5, 90 percent of whom must be from families below the poverty line, prepare to succeed in school. In addition, virtually all of Head Start families receive social services directly or through referral from Head Start, and 36 percent of paid Head Start staff are current or former Head Start parents. Evaluations of Head Start children have found short-term gains in IQs, better reading and math skills, higher socio-emotional test scores, and improved health status. Former Head Start children are more likely to be promoted to the next grade and less likely to be assigned to special education classes. Long-lasting positive effects are harder to prove. One long-term study, which followed a group of participants in a high-quality pre-school program through age 27, found that it returned $7.16 for every dollar invested because it halved participants' crime rates, significantly increased participants' earnings and property wealth as adults, and increased their labor-force participation. Unfortunately, not all Head Start programs deliver the high-quality services needed to produce such results. For these reasons the Administration is committed not only to a major expansion of Head Start, but also to improvements in quality. To address both issues, the Administration appointed a bipartisan Advisory Committee in June 1993 to review Head Start and make recommendations for its improvement and expansion. This panel has identified three principles to guide Head Start: o Excellence.--We must strive for excellence in serving both children and families. This means more emphasis on improvements in staffing, in financial management, in facilities, and in Federal oversight and research. o Expansion.--We must expand the number of children served and the scope of services provided in a way that is more responsive to the needs of children and families. This means more full-day, full-year programs, more targeting of resources to high concentrations of poverty, and a possible expansion to younger children. o Partnerships.--We must encourage Head Start to develop partnerships with key community and State institutions and programs with similar objectives. The Administration has embraced this framework in its vision of Head Start for the 21st century. For 1994, it obtained a 20 percent increase over the past year's funding level; and it requests a 21 percent funding increase for 1995. As Chart 3B-2 shows, the proposed number of Head Start slots for children increases by about 18 percent from 1993 to 1995. Insert chart: CHRT3B-2 The budget supports significant and sustained increases to continue expansion of Head Start services, to ensure quality in all aspects of the program, and to provide local flexibility to respond to family and community needs. Program quality set-asides of one quarter of the annual increase in funding will be spent on higher staff salaries, upgrades to facilities and teaching tools, and transportation (such as new buses for the children). For the children of working parents, the Administration plans to offer about 100,000 all-day program slots by 1995 (See Chart 3B-2) and about 290,000 by 1999. These expansions and quality improvements invest not only more, but also more wisely, in the future of our most vulnerable children and families. To maintain their intellectual and social gains, Head Start alumni must enter stronger, more challenging schools. The Administration's reauthorization proposal for Title I is an essential element in reforming and restructuring schools attended by poor children, and for providing continuity between pre-school and elementary school education (See the following "Education" section). Special Supplemental Food Program for Women, Infants, and Children (WIC) The WIC program, established in 1972, improves the nutrition of eligible low-income pregnant, breastfeeding or post-partum women, and their children under age five. The program provides supplements such as eggs, cereal, milk, juice, and cheese--foods often lacking in low-income diets--as well as nutrition counselling and referrals to other services such as health care. To be eligible, participants must have incomes below 185 percent of the poverty line (about $22,000 for a family of three in 1993) or receive Medicaid, Food Stamps, or Aid to Families with Dependent Children, and be found to be at medical or nutritional risk. The program is fully federally funded. Today, about four in every ten babies born in America participate in WIC. Recent studies of WIC suggest the program improves the health status of pregnant women and reduces by 25 percent adverse birth outcomes such as low birthweight among Medicaid beneficiaries. Chart 3B-3, for instance, shows that in five States WIC mothers consistently had lower percentages of babies born with very low birthweights than non-WIC mothers. (Low birthweight causes health and development problems--and is present in 61 percent of all U.S. infant deaths.) Insert chart: CHRT3B-3 WIC also improves nutrition and prenatal care, and lowers fetal mortality. One study concluded that every dollar spent on WIC for pregnant women saves $1.77 to $3.13 in Medicaid costs in the first 60 days after birth. WIC has also been found to reduce iron deficiencies in infants and improve vitamin and mineral intakes in young children. Recognizing the role of WIC in children's health, the 1994 budget provided a 15 percent increase, or $427 million above the previous year. The budget proposed that by the end of 1996, States should have the funds to serve the 7.5 million post-partum women, infants and children who meet current eligibility requirements and want to participate in WIC. In this year's budget, the President seeks to increase WIC spending by another 11 percent. This will expand the program to serve about 7.2 million women and children in 1995--up from 6.5 million in 1994--and maintain the funding needed to achieve the participation targets in the 1994 budget. Because participation in WIC is so closely linked with improved health, the Administration further addresses WIC in the Health Security Act, the President's health care reform proposal. The Act includes a special fund to supplement annual WIC appropriations, and thus ensure that the program's participation targets for 1996 will be met. Parenting and Family Support Although government can improve the health, nutrition, and education of children, even more important to their welfare is good parenting and strong families. Yet some parents receive almost no help in learning to raise the next generation, and new babies do not come with easy-to-read instructions. The Home Observation for Measurement of the Environment scale, which measures conditions like the quality of the physical environment, the availability of intellectual stimulation, and the degree of emotional support provided by parents, suggests that 11 percent of all children aged 3 to 5 years have deficient home environments. Among low-income households, this rate more than doubles. Today, parenthood is all the more difficult because of the dual burdens of so many working mothers, parents who are trying to raise children alone, and the gradual decline in informal sources of information and support, such as extended families. Substance abuse, community violence, poverty, and homelessness have touched too many families, making the challenge of raising healthy children even greater. Most families can raise their children with only a little extra help, but some need more intensive services, and a few have such serious problems that there is no alternative to out-of-home placement. From 1981 to 1991, child abuse and neglect reports increased two-fold to about 2.7 million (Chart 3B-4), and the foster care caseload increased by roughly 60 percent, to nearly 430,000 children. By 1990, there were approximately six children per thousand in foster care, the highest measured rate since 1962. Aside from the trauma of being removed from their parents, children in foster care also may face frequent shuttling between foster homes and interminable waiting periods before permanent placement (a phenomenon known as "foster care drift"). Insert chart: CHRT3B-4 To meet the needs of families for both preventive services, like parenting education, and more intensive crisis services, community-based programs have sprung up across the country. But such services reach too few families. Recognizing this, the President proposed a major new program, Family Preservation and Support, in 1993. This new law, the most significant change in over a decade, will provide services such as family counselling, respite care of children, stress management and parenting skills training. The new program: o provides community-based services that help and support parents to raise their children more effectively; o prevents abuse and neglect before they occur; and o helps children in foster care to return to their families as quickly as possible. Family Preservation and Support, which will provide over $900 million over five years, has a 75 percent Federal funding match rate. Families with children at risk of placement in substitute care and parents opting to improve their parenting skills are eligible, without regard to income levels. Using the new funds, States could expand home visiting programs like the Home Instruction Program for Preschool Youngsters in Arkansas and the Parents as Teachers program in Missouri, which have been replicated in almost every State. Home visiting programs, which are provided nationwide in countries such as the United Kingdom and Denmark, can teach parents about child development, provide developmentally appropriate activities for parents and children to complete together, and ensure developmental screening of participating children. Longitudinal studies have found lasting benefits from some targeted home visiting programs in the United States, including less welfare dependency, a lower incidence of abuse and neglect, and higher IQ scores. States will also provide services such as intensive family preservation. Such programs employ caseworkers to work intensively with troubled families in their homes for a short time. Caseworkers provide referrals for problems such as substance-abuse treatment where needed, and help families cope with stress and other factors that may lead to child abuse and neglect. In conjunction with the Family Preservation and Support program, the Administration also obtained changes to the cluster of programs that provide child welfare services: o States receive three years of enhanced (75 percent) Federal funding matches to develop automated child welfare management information systems. Such systems provide regular and timely status updates for each child in the child welfare system, allaying long-time concerns that many States do not have adequate information about the children they have in foster care. o An estimated $35 million of the Family Preservation and Support funds will be awarded as grants to State court systems to determine more effective, streamlined ways to handle foster care cases and to otherwise apply child welfare laws judiciously. Overcrowded court dockets make it difficult to adjudicate child welfare cases swiftly and contribute to foster care drift. o The Independent Living program, which provides transitional support to foster children who "age out" of the foster care system, was permanently reauthorized. Independent Living teaches teenagers basic skills such as how to budget their income, keep house, and find a job. The program will continue at its current annual level of $70 million. o $26 million of the authorized funding for Family Preservation and Support is set aside for evaluation, research, demonstration, training and technical assistance. Because the Family Preservation and Support program is new, it is important to monitor how well it works. Evaluation grants will help to determine which types of services best help families of at-risk children and teach good parenting skills. Millions of parents struggle to raise children with little assistance or support from the community. New and inexperienced parents may lack the knowledge to raise a child. Families may not get services until they are reported for abuse or neglect, and sometimes not even then. Family preservation and support services help communities deliver parenting training and assistance to troubled families before crises erupt. The Administration pledges to seek significantly greater resources for programs such as childhood immunization, Head Start, WIC, and Family Preservation and Support. Such programs can improve the life prospects for children, especially those from low-income families, and help ensure that they enter the school system ready to learn. EDUCATION A world-class education for all children is one of the Administration's highest priorities. The American education system is a partnership of States, communities, educators, and parents, but national leadership is essential. With enactment of the Administration's legislative and budget proposals, the Federal Government will become a full partner in the nationwide effort to raise the educational achievement of all children and reach the National Education Goals. The Administration has proposed new education legislation and seeks increased resources to improve the education system. The discretionary budget authority increase for the Department of Education--seven percent, or $1.7 billion, over 1994--is one of the largest increases for any department. The Administration is not just proposing to invest more. It is also proposing to reinvent the Federal role in elementary and secondary education to raise faltering educational achievement. The new role would change the whole system, through high standards and accountability for results; new flexibility for States, communities and schools; and new Federal funding to support them. ---------------------------------------------------------------------- LEGISLATION PROPOSED AND ENACTED: The Student Loan Reform Act of 1993 National Service Trust Act of 1993 LEGISLATION PROPOSED AND PENDING IN CONGRESS: The Goals 2000: Educate America Act The Improving America's Schools Act The Safe Schools Act The School-to-Work Opportunities Act ---------------------------------------------------------------------- Table 3B-3. FUNDING OF SELECTED INVESTMENTS TO RISE 23 PERCENT IN 1995 (Budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Goals 2000.................... ...... 105 700 +595 +567% School to Work (Education and Labor)....................... ...... 100 300 +200 +200% Title I Education for Disadvantaged................ 6,696 6,912 7,579 +667 +10% Safe and Drug-Free Schools.... 582 472 660 +188 +40% Head Start.................... 2,776 3,326 4,026 +700 +21% National Service.............. 279 575 850 +275 +48% -------------------------------------- Total....................... 10,333 11,490 14,115 +2,625 +23% ---------------------------------------------------------------------- Elementary and Secondary Education Insert chart: CHRT3B-5 The elementary and secondary education system is in serious trouble, and has been for many years. Government at all levels, business groups, and others have documented low educational performance relative to other nations, declining college entrance test scores, weak educational preparation of teachers, substantial numbers of adults without the literacy skills to get a driver's license or read a ballot, and inefficiencies in school management. Federal, State and local spending for elementary and secondary education has soared during this period--rising 33 percent in constant dollars from 1982 to 1992--without comparable nationwide improvement in student achievement. Few States or school districts have established challenging performance standards for their students; most measure progress with tests that are not related to the material taught. Parents can rarely obtain information to hold their children or the schools accountable for performance. There are many examples of individual schools, teachers, and States changing their systems and achieving good results. But there are too few such examples to improve educational performance nationwide. The Nation's Governors and the Federal Government agreed in 1990 to the National Education Goals. ---------------------------------------------------------------------- THE NATIONAL EDUCATION GOALS. By the Year 2000: 1. All children will start school ready to learn. 2. High school graduation rate at least 90 percent. 3. Competency in challenging academic subjects. 4. First in the world in science and mathematics. 5. Literacy for all adults. 6. Safe and drug-free schools. ---------------------------------------------------------------------- National goals are the first step. Still needed are: challenging academic standards; curricula designed around those standards; teachers trained in helping children learn the curricula; and assessments that fairly and accurately measure progress so that there will be accountability to students and parents. Systemic Reform.--The centerpiece of the Administration's education reform agenda is the Goals 2000: Educate America Act. Sent to Congress by the President on April 21, 1993, Goals 2000 will provide the national framework to coordinate Federal, State, and local efforts into an integrated strategy for effective education reform. Goals 2000 will disseminate reforms throughout the education system. In 1993, about half of the States were planning for one or another of the components of systemic reform, but only one or two had fully developed plans and timetables for reform. School reform has to move more rapidly and more consistently in all school districts in order to achieve dramatic improvement in educational achievement. Educators, business leaders, and parents are beginning to learn what works; these findings must now be used to improve schools in much larger numbers and in approaches designed by each community to meet its needs. New resources and national assistance under Goals 2000 will encourage communities and States to focus their efforts and sharply accelerate the pace of reform. States and communities will receive new Federal funds and other assistance to change whichever parts of their systems stand in the way of world-class performance. Some States need to plan and test new ideas. Others need funds for teacher training and technical assistance to implement reforms in all schools. Still others need to replace outmoded tests with multi-faceted assessment systems linked to the new standards and curricula. For 1995, the Administration seeks $700 million for Goals 2000, an increase of $595 million over the 1994 appropriation. Beginning in 1996, the budget calls for annual appropriations of $1 billion. With this major commitment, every State and as many as 20,000 public schools (about one-fifth of all schools in the nation) would receive financial assistance to implement reforms by 1996, with more schools added every year thereafter. Goals 2000 would also establish an independent National Education Goals Panel, consisting of governors, State legislators, Congressional leaders, and Administration officials. The Panel would monitor the Nation's progress toward the education goals and report annually on accomplishments and remaining problems. The Act would also create: a National Education Standards and Improvement Council to certify voluntary national and voluntary student performance standards; and a National Skill Standards Board, to work with business, labor and schools to develop standards for what students should know to enter different careers. State and local participation would be voluntary, in keeping with this Nation's tradition of local and State control of education. However, these groups will provide much-needed models of world-class standards toward which reformers can aim. The Improving America's Schools Act.--Goals 2000 would provide the new educational setting in which over $10 billion would be spent under the Administration's proposal to reauthorize and restructure the Elementary and Secondary Education Act (ESEA). The proposal was transmitted to Congress on September 13, 1993 as The Improving America's Schools Act. Particularly in the largest ESEA program, Chapter 1 (1994 funding: $6.9 billion), Federal law and policy since the mid-1960s have stressed discrete and separate services for children with low educational achievement. Unfortunately, that approach has too often failed to improve the overall education they received. Emphasis has been on compliance with resource tracking rules, not on improved educational performance. Constant testing is required, using tests that stress mastery only of low-level basic skills, not challenging subject matter. Little has been done to improve the training of teachers or the quality of curriculum. National evaluation studies by independent groups and the Department of Education document that Chapter 1 and other ESEA programs have had little impact on the educational progress of the five million children served, despite expenditure of tens of billions of dollars over the years. Furthermore, studies provide stark evidence that the educational achievement of children in schools with the highest levels of poverty is very low. Over half the children in schools with the highest concentrations of poverty are low achievers, compared to only 15 percent in schools with the least poverty. ESEA programs need to be restructured to produce better results. The Administration's reauthorization proposal is based on five principles: o High standards for all children.--This is the essential starting point for improving student and school performance. Federal programs, particularly those for at-risk children, have generated low expectations for students, focusing instruction on low-level basic skills. To receive funding under the new proposal, schools would set challenging performance standards for all students, including those at most risk of failure, and design curricula based on those standards. o Focus on teaching and learning.--Opportunities for professional development of teachers and other school staff have been haphazard, short-term and ineffective. An expanded "Eisenhower Professional Development Program" would support quality pre-service and in-service training and education for teachers and administrators. These would be tied to the high standards. A system of regional technical assistance centers would coordinate Federal programs and would assist States and communities implementing educational improvements. A new education technology program would support innovation to raise educational achievement for all students. o Flexibility to stimulate local initiative, coupled with responsibility for improved student performance.--Flexibility and responsibility would replace compliance with administrative process regulations as the hallmark of ESEA programs. The proposal would give schools and communities greater flexibility by simplifying the law and providing a broad waiver authority to remove Federal obstacles to State and community success. More schools with the highest concentrations of poor children could use Federal funds to raise educational improvement throughout the whole school rather than for selected grades or groups of students. A public "charter schools" initiative would encourage teachers, parents and others to create their own high-performance schools, "schools within schools," or clusters of schools, operated outside restrictive rules and regulations. Funding for the proposal's Title I (successor to Chapter 1) could help extend the school day or school year. Under Title I, schools and school districts would be sanctioned for failure to make progress toward State performance standards, and would be rewarded for outstanding performance. o Link schools, parents, and communities.--Schools alone, particularly in high poverty communities, cannot ensure that all students reach high standards. The new Act will encourage and enable parents to work in partnership with teachers and administrators to improve learning, and help schools forge strong ties with community social services. Parents would be encouraged to help their children do well in school. o Resources targeted to greatest needs and in amounts sufficient to make a difference.--Federal resources are currently spread too thinly across too many schools. Academic performance tends to be lowest in schools with high concentrations of poor children. Under the new Act, Title I funds would be better targeted to the poor children in the schools and school districts serving areas with the highest concentrations of poverty. In the Migrant Education program, funds would be targeted to the children with the greatest need for additional services: those children who have moved within the previous 24 months. Thirty percent of resources distributed by States to school districts under the Safe and Drug-Free Schools and Communities program would be targeted on a limited number of high-need school districts. Overall, spending on ESEA programs would increase more than $900 million over 1994. State and local programs under the restructured ESEA Title I would be funded at $7.6 billion, an increase of $667 million, or 10 percent, over comparable activities in 1994. Safe and Drug-Free Schools.--Violence and drug and alcohol abuse in many schools make effective teaching and learning impossible. On May 25, 1993, the Administration proposed the Safe Schools Act to help schools reduce violence by adding security personnel, finding and removing weapons, and teaching alternative approaches to dispute resolution. Congress appropriated $20 million for 1994 contingent upon enactment; the budget includes $100 million for 1995. In addition, the Administration proposes to expand the current "Drug-Free Schools and Communities Act" into a new Safe and Drug-free Schools and Communities program that would add violence prevention activities. The budget requests $560 million for the new Act, an increase of $108 million, or 24 percent, over comparable activities in 1994. Beginning in 1996, the separate Safe Schools Act would be phased out as comprehensive State and local violence and drug abuse prevention strategies take over. (See also Chapter 5, "Personal Security: Crime, Illegal Immigration, and Drug Control.") School-to-Work Opportunities Act.--In contrast to those in other industrialized nations, few of our Nation's schools work with businesses to prepare students for the workplace or further skill training. The School-to-Work Opportunities Act, sent to Congress on August 4, 1993, provides a framework to help States implement such strategies, and increases funding to $300 million, $200 million more than Congress appropriated for comparable activity in 1994. (See the following "Workforce Investment" section.) Improving literacy.--Findings from the National Adult Literacy Survey indicate that over 40 million adults can function only at the lowest literacy proficiency level--unable to do even simple tasks, such as locating a meeting time and place on a form. Literacy must be addressed at all age levels. Even Start in the Education Department and Head Start in the Department of Health and Human Services both address inter-generational literacy by working with young children and their parents together. Grants to States under the Adult Education program would be funded at $267 million, an increase of $12 million, or 5 percent over 1994, to help States provide basic literacy improvement and high school equivalency degrees for disadvantaged adults. Workplace literacy grants would be funded at $24 million, $5 million, or 26 percent above 1994 to help businesses work with educational institutions to raise the literacy levels of workers. Head Start.--The budget provides $4 billion for Head Start in 1995, an increase of $700 million, or 21 percent over 1994. Head Start is the key program in the Federal Government's strategies to help the Nation reach the first National Education Goal of all children entering school ready to learn. The Administration's Title I proposal calls for coordination with Head Start in each Title I school district. (See the previous section, "Investing in Young Children.") Postsecondary Education Increasingly, the economy demands, and high-paid jobs require, education or training beyond the high school level. Yet without grants or loans, higher education is beyond the reach of many families. The Federal Government is the largest provider of need-based student aid. The major Federal programs are Pell grants and student loans. The loan programs have become very costly, difficult to administer, and subject to abuse. The growing use of loans to finance postsecondary education and training overburdens increasing numbers of borrowers, who often make career decisions based more on the income needed to pay off debt than on real career desires. In response, the President sent to Congress two bills: The National Service Trust Act and The Student Loan Reform Act. Both were enacted in 1993. (See the "National Service" section below.) The Student Loan Reform Act.--The guaranteed loan system that has evolved since 1965 is riddled with administrative complexities; provides high subsidy payments to banks, intermediary guaranty agencies and secondary markets; confuses students and schools; and has default costs in excess of $2 billion per year. It has been the subject of repeated Congressional investigations and GAO and Inspector General criticisms. Insert chart: CHRT3B-6 The Administration's Student Loan Reform Act replaces guaranteed lending with Federal direct lending. Direct lending, plus the Act's reductions in the cost of the guaranteed program during the phase-in period, saves taxpayers $4.3 billion (CBO estimate) over the first five years. The Act lowers charges and interest rates paid by borrowers and increases fees on banks, guaranty agencies and secondary markets. Direct lending simplifies administration, over time eliminating from new lending the 8,000 banks, 46 guaranty agencies and the secondary markets. The Act phases in direct lending over several years, so that by 1998, at least 60 percent of lending will be direct lending--or more if the schools ask for it. The direct and guaranteed loan programs together provide about $20 billion per year in loan capital to 5.5 million borrowers. The new Act creates income-contingent repayment options for direct loan borrowers. Instead of repaying on fixed or other amortization schedules over ten years or less, regardless of earnings, borrowers may repay loans as a small percentage of income over an extended period. Borrowers may also suspend repayment during times of low family earnings, to avoid defaults. All borrowers who now have loans, or will take out guaranteed loans during the phase-in period, can convert those loans to Federal direct loans to take advantage of income-contingent repayment. Through this repayment option, borrowers may take volunteer or low-paying community service jobs and still meet their loan obligations. Program management.--The rapid growth in size and complexity of the postsecondary grant and loan programs through the 1980s, accompanied by inadequate Federal management, led to substantial abuses by some schools and default costs exceeding $2 billion per year. Laws enacted since 1989, especially the Higher Education Amendments of 1992, give the Education Department many new tools to improve the integrity of the programs, protect students, and reduce defaults. In particular, the new State Postsecondary Review Program, for which the budget seeks $35 million, $14 million--or 65 percent--over 1994, reviews schools with indications of program abuses and helps remove unscrupulous schools from student aid programs. The Student Loan Reform Act, when fully implemented, will further simplify loan program administration. The budget provides new staff and resources to manage student aid programs. Pell grants.--The 1995 budget provides $6.5 billion for the Pell grant program for school year 1995-1996. Of this amount, $118 million would complete the retirement of the current estimate of the funding shortfall from prior years. For school year 1995-1996, $6.4 billion would provide grants to 4.1 million individuals, the most ever. The Administration also proposes to increase the maximum award by $100 to $2,400. Table 3B-4. EDUCATION DEPARTMENT BUDGET INCREASES 7 PERCENT OVER 1994 (Discretionary budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Goals 2000.................... -- 105 700 +595 +567% School to Work (Education share)....................... -- 50 150 +100 +200% Title I....................... 6,696 6,912 7,579 +667 +10% Safe and Drug-Free Schools.... 582 472 660 +188 +40% Impact aid.................... 840 798 750 -48 -6% Professional Development...... 711 650 800 +150 +23% Bilingual and Immigrant Education.................... 213 227 254 +27 +12% Education of the Disabled..... 2,966 3,109 3,295 +186 +6% Vocational and Adult Education 1,474 1,481 1,447 -34 -2% Pell Grant Program............ 5,788 6,304 6,393 +89 +1% Pell Grant Shortfall.......... 671 250 118 -132 -53% Work-Study; Supplemental Grants....................... 1,200 1,200 1,300 +100 +8% Other Student Aid Programs.... 253 245 18 -227 -93% Historically Black Colleges... 98 101 106 +5 +5% Other Higher Education Programs..................... 735 793 783 -10 -1% Research and Statistics....... 189 202 226 +24 +12% All Other..................... 1,278 1,455 1,481 -26 -2% -------------------------------------- Total....................... 23,694 24,354 26,060 +1,706 +7% ---------------------------------------------------------------------- The Department of Education Budget Discretionary budget authority for the Department of Education in the 1995 budget is $26.1 billion, an increase of $1.7 billion, or 7 percent over 1994. Although a number of programs would receive increased funding, not all of Education's 230 current programs should be funded or have funding increased. Many are too small to have any significant impact. Others address lower-priority issues, are ineffective, or have long since accomplished their original purpose. The National Performance Review (NPR) cited 34 such programs. Seven of these were terminated by Congress in 1994. The remaining 27 NPR programs, plus another six programs, would be ended by the 1995 budget. Thus, 33 programs, funded for a total of $639 million in 1994, would receive no funding in 1995. For example, the budget provides no funding for the Impact Aid "b" program, funded at $123 million in 1994. Impact Aid generally compensates schools for educating children who live on, or whose parents work on, Federal property. Funding is continued for children who both live on and have parents who work on Federal property. WORKFORCE INVESTMENTS Economic change has challenged America throughout its history, and successfully meeting this challenge has long set America apart from less flexible societies. But in recent years, advancing technological developments, defense downsizing, corporate restructuring, and intensifying global competition have altered the nature of our challenge. Many Americans are anxious about economic change and fearful about their economic security. Current training and unemployment programs were designed in a different time to suit a different economy. When the existing system was established, a much larger number of low-skill, entry-level jobs awaited high-school graduates. Today's typical eighteen-year-old needs a higher level of skill to compete in the emerging global economy. A large share of the unemployed cannot expect to return to their old jobs, and must seek new work. Gaining entry to the labor market requires a higher level of skill. Finally, maintaining membership in the workforce requires greater flexibility. This means fundamentally rethinking government's role in the labor market. The transition from school to work is at once more important and more difficult to manage. As skill requirements rise, the transition from one job to the next is more hazardous and, for some, more common. To preserve Americans' historical adaptability and openness to change, government must help citizens equip themselves to negotiate these workforce transitions. To boost productivity growth and create a better-prepared workforce, the Administration has proposed new investments in working people, and a shift in policy from simply buffering the pain of unemployment to actively promoting re-employment. Despite the extraordinary budget constraints facing all discretionary programs, the 1995 budget includes $6.5 billion in budget authority for employment and training programs, an increase of $1.0 billion, or 18 percent, from the 1994 level. (See Table 3B-5.) Table 3B-5. WORKFORCE PROGRAMS (Budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Percent 1993 1994 1995 Change: Actual Enacted Propos- 1994 to ed 1995 ---------------------------------------------------------------------- Grants for Training the Disadvantaged. 1,692 1,647 1,729 +5.0% Dislocated Worker Assistance.......... 651 1,118 1,465 +31.0% Job Corps............................. 966 1,040 1,157 +11.3% Summer Youth Employment............... 1,025 888 1,056 +19.4% School-to-Work (DOL Share)............ -- 50 150 +200.0% One-Stop Career Shopping.............. -- 50 250 +400.0% Other Employment and Training......... 676 681 673 -1.1% ------------------------------ Total............................... 5,010 5,474 6,480 +18.4% ---------------------------------------------------------------------- The Clinton Administration's three-pronged workforce investment strategy will finance initiatives that promote: (1) first jobs for people just entering the workforce; (2) new jobs by easing access for workers in transition from one job to the next; and (3) better jobs for all Americans as the economy continues to evolve. First Jobs The Administration's budget request includes targeted increases in high-payoff measures to ensure all young Americans a solid start in the working world. Building a National School-to-Work System.--Too few young Americans possess the skills they need to qualify for entry-level jobs in high-wage careers. The proposed School-to-Work Opportunities Act, passage of which is anticipated in 1994, will provide students with on-the-job experience tightly integrated with classroom training, leading to a school diploma and, for most students, a degree or diploma certifying successful completion of at least one year of postsecondary education, and an industry-recognized credential with currency in the job market. The proposed legislation contains special provisions for serving poor and at-risk youth. The program operated as a demonstration in 1994. For 1995, the budget requests $150 million each for the Departments of Labor and Education for expanded activities. Under the proposed legislation, a nationwide system would be established in waves, with states competing--on the basis of innovative program designs--to join earlier waves. All States would have the opportunity to implement school-to-work systems by the end of 1997. In the long run--once Statewide systems are in place--the Federal role will be limited to information dissemination and program evaluation. Expansion of the Job Corps.--The Job Corps is America's oldest, largest, and most comprehensive residential training and education program for young, unemployed, and undereducated youth. Designed for severely disadvantaged youth ages 14 through 24, the program breaks the cycle of poverty and welfare dependence by providing the vocational training and job placement that youths need to become taxpaying citizens. The $1.2 billion program boasts a proven track record and is administered through a network of 109 centers, located in 45 states, Puerto Rico, and the District of Columbia. The budget requests $100.5 million to expand this proven program. An additional $30 million is requested to address a backlog of needed repairs. The expansion funds would launch six new centers in addition to the eight initiated last year. When the current expansion is completed over the next decade, the number of centers will have increased to 162 and the number of slots from 42,500 to 62,500--a 50 percent increase in capacity. Summer Youth Employment.--Title II-B of the Job Training Partnership Act authorizes the Summer Youth Employment and Training program, which provides temporary summer jobs and academic enrichment for disadvantaged youth ages 14-21. Internal audits and external reviews show that the young people involved in the program are well-supervised, perform useful work for the community, and often receive substantial education benefits. The increased funding will maintain approximately the same participation level in the summers of 1994, 1995, and 1996 as were supported in the summer of 1993. The Administration's request for programs helping youth into their first job does not reflect an automatic, across-the-board increase in all programs. Indeed, while proven or promising approaches are expanded, $60 million less is being sought for one major program--Title II-C of the Job Training Partnership Act--until the Administration can remedy problems it has identified in the program. New Jobs Each year, about 27 percent of all U.S. workers move to new jobs, whether to advance careers or rebound from job loss. Countless others fear job loss and feel insecure about their employment outlook. The Clinton Administration's "new jobs" investment initiative will help experienced workers move from one job to the next, and ease fears about job change. Proposed for this purpose are a $1.5 billion comprehensive worker adjustment program for displaced workers and $250 million to continue work on a network of one-stop career centers with improved labor market information and services for all job-seekers, as well as a small but strategic investment in a national network of occupational skills standards. The "new jobs" initiative also builds on the recently mandated program for "profiling" claimants for unemployment benefits. Profiling identifies workers likely to have difficulty finding new jobs and refers them to intensive job search assistance programs early in their period of unemployment. While the Federal Government spends more than $1 billion annually for worker adjustment assistance, existing programs often are rigid and ineffective, and serve only a fraction of the 2 million workers permanently displaced each year. A patchwork of categorical programs targets subsets of the dislocated worker population--such as workers displaced by trade, defense downsizing, or environmental initiatives--raising serious concerns about equity and efficiency. The Administration will propose legislation to consolidate, expand, and improve existing programs under a comprehensive Workforce Security program. The 1995 budget includes $1.5 billion for the new program, a 31 percent increase from the 1994 level. Serving some 750,000 workers in its first year of operation, the Workforce Security program is projected to serve 1.3 million dislocated workers or virtually all of those estimated to need and want services upon full implementation. Program expansion would refine and build on growth already begun with the Administration's 1994 dislocated worker investment proposal. In 1994, the $1.1 billion in budget authority for dislocated worker assistance was a 72 percent increase over the prior year, and the corresponding number of participants is estimated to rise 43 percent, reaching 500,000. The Administration's Workforce Security program emphasizes services with proven effectiveness, and those that displaced workers find most valuable. Early outreach is the critical first step in helping dislocated workers. Thus, the new program will improve State rapid-response activities and refer UI applicants who have been identified as at risk of long-term unemployment to early reemployment services. In addition, all dislocated workers will have access to basic reemployment services, including (1) information on job openings, labor market trends, and the quality of education and training providers; (2) referral to appropriate programs, including student financial aid; (3) individual assessment; (4) job counseling; and (5) job search assistance, including job clubs. Dislocated workers who need more intensive services can choose long-term training, in the form of occupational skills training (both classroom and on-the-job), basic skills training, and entrepreneurial training. Most importantly, the new program will hold training providers accountable for their results. Potential trainees will be armed with information on the track record of training providers, including their success in keeping participants enrolled, placing them in jobs, and securing higher earnings and licensure rates for their graduates. Unscrupulous or unsuccessful training providers whose curricula fail to meet these--and other--quality standards will be barred from program participation. Finally, under the legislation, qualified long-term trainees will receive supportive services and be eligible for income support to allow them to complete training and launch new careers. As another part of the "new jobs" investment strategy, the Administration proposes to establish a network of user-friendly One-Stop Career Centers to provide a single point of entry into the employment and training system. Growing from a 1994 budget of $50 million, the proposed 1995 funding of $250 million will provide Federal "seed money" to help States plan and implement programs that streamline access to the full range of employment and training services--aided, where necessary, by waivers of Federal requirements. Eventually, the Administration's One-Stop Shopping initiative will provide all jobseekers with easy access to jobs, career information, and Federal training and employment programs. Finally, one title of the Administration's "Goals 2000" initiative (discussed under "Education" above) is pivotal to the "new jobs" agenda. The Administration requests $12 million for Title IV of Goals 2000, which authorizes a National Skill Standards Board. This program would create a national system of voluntary skill standards and certification. These standards will introduce real accountability to the training system and insure that workers make the investments that firms value. Better Jobs The Administration is pursuing three tactics to create an environment for better jobs. The first tactic focuses on the economy in general, stimulating investment through low deficits; investing in new technologies; expanding retraining programs; and opening global markets to American made products. The second and third focus on the job site, promoting the high performance workplace and enhancing enforcement of workplace laws. Toward the second goal, the Secretary of Labor is initiating a new mission of promoting high performance workplace practices such as employee training, performance-based pay, and front-line decision-making. This is an innovation with important practical consequences for companies and workers, but one that, by design, has few Federal budgetary consequences. To meet the third goal, the Department of Labor is launching new efforts to enforce workplace rules that protect both workers and responsible employers and that will total 355 staff and $66.7 million. These additional resources would address new responsibilities under recent laws such as the Family and Medical Leave Act and new regulations. Also included are initiatives addressing new workplace hazards, inspection of small mines and mine health issues, review of the periodic roll in the Federal Employees' Compensation Act program, and coordinated, high-profile enforcement interventions that focus on repeated and egregious violations of key labor laws. In addition, the Administration will work with Congress to improve occupational safety and health. Reforms could include: a decentralized worksite-based approach to workplace safety and health, such as written health and safety programs and worksite health and safety committees; extension of OSHA coverage to Federal, State, and local government employees not now covered by the Act's provisions; increased employee participation in workplace safety and in OSHA inspections and accompanying protection measures; and targeting those that historically have been egregious violators of Federal laws and regulations. Included in the amounts referenced above are 132 staff and $18 million for improved oversight of workplace safety and health. While seeking additional resources for some purposes, the Administration also will reinvent its enforcement practices to be more efficient, more strategic, more outcome-based, and fairer. This involves fairness to both workers and firms. When irresponsible companies seek competitive advantage by illegally underpaying wages and taking shortcuts to health and safety, it undermines the position of responsible companies that comply with workplace laws. Good corporate citizens, as well as workers, benefit from efficient and even-handed enforcement of workplace rules. NATIONAL SERVICE National service enhances educational opportunity, rewards responsibility, rebuilds local communities and fosters a sense of national community. Signed into law on September 21, 1993, the National and Community Service Trust Act will provide Americans of all ages and backgrounds with opportunities to serve their country addressing educational, public safety, human needs, and environmental problems. The Act established the new Corporation for National and Community Service and a new "AmeriCorps," under which participants will receive an education award of $4,725 per year in return for service for up to two years. These awards may be used for post-secondary education, approved training, or to pay off education loans. The 1995 budget for the Corporation totals $850 million, a $275 million (48 percent) increase over 1994. This includes financing to expand the new programs started in 1994, as well as to continue existing programs formerly operated by ACTION and the Commission on National and Community Service. With this funding, the Corporation will provide opportunities for more than three-quarters of a million Americans to engage in service. AmeriCorps is the heart of the President's vision of national service. Through formula and competitive grants, local communities will develop and implement programs to fund 20,000 service positions by the end of 1994. The 1995 request will finance 33,000 service positions (over three times the size of the Peace Corps and VISTA combined in 1995). WELFARE REFORM Our current welfare system violates two core American values: work and responsibility. Instead of giving people the education and training they need to work, it encourages dependence. Instead of encouraging teenagers to defer parenthood and insisting that absent parents support their children, it allows both to act irresponsibly. Instead of assisting parents who are working hard to support their families, it devotes most of its resources to those who are not. The Administration will forward to Congress in late spring a detailed, comprehensive, deficit-neutral welfare reform plan. In the interim, the Administration will consult extensively on a bipartisan basis to finalize the plan and the entitlement reforms which finance it. From Welfare to Work Fundamental reform of the welfare system will require four major steps: 1. Promoting parental responsibility to help prevent the need for welfare in the first place. 2. Rewarding people who go to work by insuring that families have the tax credits, the health insurance, and the child care they need to make work pay. 3. Substituting work for welfare by providing job search, education, and training to those who need it, and expecting them to work at the end of two years. 4. Reinventing government assistance to reduce administrative bureaucracy, combat fraud and abuse, and give states greater flexibility within a system focused on work. These reforms cannot be considered in isolation. The Administration has undertaken many closely linked initiatives to spur economic growth, improve education, expand opportunity, restore public safety and rebuild a sense of community: worker training and retraining, parenting education, family preservation and support, educational reform, Head Start, National Service, Empowerment Zones, community development banks, community policing, violence prevention, and more. Welfare reform is one piece of a larger whole, but it is an essential piece. Two important steps in the Administration's welfare reform have already been taken: expansion of the Earned Income Tax Credit (EITC) as part of the Omnibus Budget Reconciliation Act of 1993; and introduction of The Health Security Act in September 1993. Both will help to make work pay, as described in more detail below. The Current Welfare System Currently, there are about 9.5 million children on Aid to Families with Dependent Children (AFDC). This is 14 percent of all children, up from 9 percent in 1970. Government at all levels spent $23 billion for this aid in 1993, and more than twice that amount when noncash benefits (like Food Stamps and Medicaid) for the same families are included. Yet, the system left most of its families still poor. In 1993, AFDC benefits for a mother with two children and no other income ranged from a low of $120 per month in Mississippi to $923 per month in Alaska. The median for all states was $367 per month. Combined with Food Stamps, the total was $652, about 70 percent of the poverty level. Worst of all, the system discourages work and marriage. Under current welfare rules, a recipient who goes to work or marries often sees little increase in income. This system serves no one well. It is anti-work; it is anti-family; and it leaves children in poverty. Promoting Parental Responsibility Poverty (especially long-term poverty) and welfare dependency are increasingly associated with growing up in one-parent families. Although most single parents do a heroic job of raising their children, the fact remains that welfare dependency could be significantly reduced if more young people delayed childbearing until they were ready to assume the responsibility of raising children. Insert chart: CHRT3B-7 Increasingly, single-parent families are headed by an unwed mother. Further, between 1983 and 1992, cases headed by unwed mothers accounted for about four-fifths of the growth in the welfare rolls. These mothers typically have little education or other resources with which to raise children. About three-fourths receive AFDC. Only one in six receives any financial help from the child's father. Given these trends, rebuilding an ethic of parental responsibility is fundamental. No one should bring a child into the world until he or she is prepared to support and nurture that child. Government does not raise children; families do. To encourage parental responsibility, the Administration's plan will: o Require absent parents to support their children by strengthening paternity establishment and collecting child support. o Reduce the number of teenagers having children through family planning and other measures. o Require unwed teens with children to live with their parents in order to receive benefits, except in exceptional circumstances. The first step in promoting parental responsibility will be to ensure that both parents support their children. Welfare reform will expect parents who go on welfare to work to support their children. Noncustodial parents should be held equally accountable. Unfortunately our current system of child support enforcement sends the opposite message. Almost two-thirds of single women with children receive little or no child support; and the gap between what absent parents could pay and what they do pay was an estimated $34 billion in 1990. Insert chart: CHRT3B-8 To improve on the current system, the Administration is considering: o A universal and simplified paternity establishment process at time of birth; o A strict requirement that mothers applying for welfare cooperate with the authorities in establishing paternity; o Periodic updating of child support orders to reflect the current income and circumstances of the noncustodial parent; o Greater penalties for nonpayment combined with more help for noncustodial parents who need education, training, or other support to stay involved in their children's lives; and o More streamlined establishment of paternity, better record-keeping at the state and national level, and other measures to insure that those who should pay, do pay. Better child support enforcement will not only add to the incomes of single-parent families but may also deter some men from fathering children they are not prepared to support. The problem of irresponsible childbearing is particularly acute among teenagers. Teenage birth rates, after dropping in the 1970s and early 1980s, have been rising since 1987. By one estimate, about 40 percent of all women will experience at least one pregnancy before age 20. Most teen mothers do not intend to get pregnant; most teen fathers do not intend to start a family. Unfortunately, the majority of the mothers end up on welfare. The Nation paid about $34 billion in 1992 to assist families begun by a teenager. To remedy this situation, the Administration will: o Encourage and support more responsible family planning; o Work with community leaders, educators, and the media to foster more responsibility; and o Experiment with programs to reduce teen pregnancy and other high risk behavior among youth, especially in distressed communities. Making Work Pay Even full-time work can leave a family poor--especially as real wages have declined significantly over the past two decades. In 1974, some 12 percent of full-time, full-year workers earned too little to keep a family of four out of poverty. By 1992, the figure was 18 percent. To support the efforts of parents to work their way off the welfare rolls, the President has already launched an expansion of the EITC. Unlike welfare, the EITC is available only for people who work. Because the EITC is refundable, an eligible family may receive any portion of the credit not needed to offset tax liability through a direct payment from the Department of the Treasury. When the expansions enacted last year are fully implemented, a parent with two children may qualify for an EITC totalling more than $3,500. Combined with the current federal minimum wage of $4.25 per hour, the maximum EITC increases the effective wage for a worker with two children to about $6.00 per hour. The expanded EITC brings such a family up to the poverty level, even if the parent is working at a low-wage job. However, we must find better ways to deliver the EITC on a timely basis throughout the year. Insert chart: CHRT3B-9 Ensuring that all Americans can count on health insurance coverage is also essential. Non-working poor families on welfare often have better coverage than working families. Enactment of the Health Security Act will end this inequity. Health reform is necessary to make work better than welfare so that no parent need sacrifice his or her children's health by going to work. With the EITC and health reform, the major missing element to make work really pay is child care. For this reason, the Administration's plan will include: o Expanded child care and Head Start for the working poor and public assistance recipients moving toward independence. o Coordinated child care programs and requirements that States ensure seamless coverage for persons who leave welfare for work. Providing Education and Training, Imposing Time Limits, and Expecting Work The Family Support Act of 1988 provided a new vision of mutual responsibility and work. Government would provide welfare recipients access to the education and training they need to find employment, and recipients would be expected to take advantage of these opportunities to move from welfare to work. This legislation created the Job Opportunities and Basic Skills (JOBS) program to deliver the services for recipients to become economically independent. The Administration's plan will build on the Family Support Act. As an architect of that effort, the President is committed to building on its vision. Unfortunately, the site visits and hearings of the President's Welfare Reform Working Group over the past year indicated that this vision is largely unrealized at the local level. The primary function of welfare offices is still writing checks while conforming to all the myriad administrative rules concerning eligibility and the calculation of benefits. The Administration seeks to transform the culture of the welfare bureaucracy and fulfill the promise of the Family Support Act. We do not need a welfare program built around "income maintenance;" we need a program built around work. The Administration's goal is to establish a welfare system in which people are asked to move toward work and independence. Welfare recipients will be required to look for work from day one. If none is available, they will enter into a social contract to help develop and then follow a plan for self-sufficiency, if the State provides the services in the plan. After two years, people still on welfare who can work but have not found a private sector job will be required to search for a job and work in community jobs to support their families while they are searching. The Administration's plan will transform the current welfare system: Expanded Access to Education and Training Services Through the JOBS Program.--The current JOBS program serves only 7 percent of adult welfare recipients. The plan will expand the JOBS program to give many more recipients the services they need to find lasting employment, and many more recipients will be required to participate. A More Integrated Education and Training System.--Under reform, the JOBS program will not be a completely separate education and training system for welfare recipients, but will provide access to, and information about new job search and placement, training and education programs, including National Service, School-to-Work, One-Stop Shopping and income-contingent student loans. The plan will also serve as a link to such existing programs as Pell grants, JTPA, and Job Corps. A Time Limit for Cash Benefits.--Limiting the length of time employable persons can receive cash assistance to two years is part of the effort to shift the welfare system from issuing checks to promoting work and self-sufficiency. The two-year time limit will guide both the recipient and welfare agency toward continuous efforts to find a job. Making Work Available to Those Who Have Reached the Time Limit.--Persons who have reached the time limit for cash assistance will have to work, preferably by finding regular work in the private sector. The goal is for participants to find lasting employment outside the program. States will likely have discretion in the work programs to achieve this end. For example, a State could subsidize short-term private sector jobs or positions in not-for-profit agencies, in the expectation that many of these positions would become permanent. Reinventing Government Assistance The current welfare system is enormously complex, with multiple programs with different rules and requirements that confuse and frustrate recipients and caseworkers alike. The welfare reform plan, in keeping with the Administration's commitment to reinvent government, will rationalize, consolidate and simplify the existing social welfare system. It will: o Establish performance measures which emphasize moving people from welfare to work, while giving States and localities flexibility to design their programs for the task. o Use technology to prevent waste, fraud and abuse. o Streamline AFDC application, budgeting and redetermination processes by simplifying and eliminating rules and reporting requirements, particularly those concerning earnings. o Make AFDC rules more consistent with those in the Food Stamp program. The above measures are a fundamental change in direction, from a system based on welfare, to support for work and family. Welfare reform means more independence, control, and security for America's families. It means government helping people to help themselves. Ultimately, it means fewer people on welfare, a more productive citizenry, and lower costs for the taxpayer. MOVING TO INDEPENDENCE: HOUSING AND THE HOMELESS The 1995 budget also includes initiatives to expand and reform low-income housing and aid to the homeless in ways that better support families and work. These proposals will redirect housing and homeless programs to complement the Administration's proposals for welfare reform. Reforming Housing Assistance for Families Housing assistance can and should support those who work at low-paying jobs or who are struggling to grow from dependency to economic independence. Too often, however, it has trapped families in poor neighborhoods and increased their dependency. Timely housing assistance, combined with other services, should instead encourage transitions. A mother or father can use a housing voucher to move to an area offering greater job opportunities, better schools for the children, and safety. A young resident of public housing can gain skills and job experience rehabilitating the apartments where he or she lives. Homeless families and individuals can have shelter and stability, appropriate transitional services, and rent subsidies, to allow them to live independently, with dignity. All this can be done with: o Faster expansion of housing assistance to help program beneficiaries live in safe neighborhoods with job opportunities; o Redirection of some family housing assistance to the homeless and those working or moving toward work to emphasize and reward transitions from dependency to independence; and o Changes in Federal program organization and administration to link programs for the homeless with existing mainstream programs to provide a "continuum of care;" The cost can be paid with careful trimming of many existing Federal housing subsidies and other money-saving reforms. Moving to Independence.--The budget redirects the Department of Housing and Urban Development's (HUD's) housing assistance for families to provide stronger support for economic transitions. The Moving to Independence initiative combines housing certificates with counseling and apartment search assistance to ensure that all certificate holders can truly choose where they will live. Some families, particularly those in high-poverty communities, may choose to move to neighborhoods where they will have more housing choices, better access to jobs, and less concern about their safety and the quality of schooling. Too many assisted tenants have been housed in distressed neighborhoods. These families pay lower rents, but lack some basic amenities: community services, safety from violence, neighbors who work and serve as positive role models for children, and access to good jobs. Experience with housing assistance in combination with support for wider apartment search suggests that it has long-term benefits for low-income families, especially the children. Metropolitan area-wide assisted housing.--In addition, the Administration proposes a three-year demonstration ($24 million in 1995) to improve social and economic opportunities for low-income families who live in highly segregated neighborhoods. Such neighborhoods are often particularly isolated from good schools, social services, and employment opportunities. This initiative would establish pilot programs in three locations around the country. Each pilot would be operated by a private non-profit organization. Each organization would be charged with expanding housing opportunities for low-income families by coordinating the region's tenant selection, assignment, and counseling services. This approach to housing assistance would reduce the concentration of families by race, ethnicity, and income and link them to opportunities for sustained self-sufficiency. Other reforms affecting families.--To emphasize that housing assistance supports transitions to independence, working families who cannot afford adequate housing will be selected ahead of similar welfare-dependent families from the waiting lists for public and other assisted housing. As working poor families increase their incomes and no longer need housing subsidies, those funds will be freed to serve additional families. As another support for economic transitions, the budget also proposes expanded use of public housing modernization and other Federal resources to create jobs for public housing residents, especially youth. Other public housing initiatives include an expanded Tenant Opportunity program to help residents organize and conduct job training, and develop businesses; and continued support for Family Investment Centers, to expand access to education and jobs. The budget also expands support for Family Self-Sufficiency Coordinators to link housing with other social services for families in transition. To meet the housing needs of families in rural areas, the budget proposes to double the amount of guaranteed loans for single-family housing and maintain direct loans at the 1994 level. These loans are for very low-, low-, and moderate-income rural households who otherwise cannot secure mortgage financing. Interest rates on the direct loans vary by recipients' income and can be as low as one percent. In 1995, the budget proposes to conform to other Federal housing standards the amount of income loan recipients contribute to their direct loan mortgage payments; recipients would pay 30 rather than 20 percent of their income. To aid rural renters, the Administration proposes to continue funding for rural housing vouchers, which received their first appropriation last year, at the 1994 level. These vouchers provide a flexible source of housing assistance, especially in areas with a surplus of rental units. Homeless Assistance Homelessness is one of the most disturbing products of the failure of society to provide adequate opportunity and care for all of its citizens. Communities, States, and the Federal Government have expanded their efforts. Annual Federal appropriations have surpassed $1 billion. Most of the funds for aid to the homeless were authorized in the 1987 Stewart B. McKinney Homeless Assistance Act--with HUD and HHS receiving the largest share of funds. To date, these responses do not appear to have substantially reduced the numbers of people with no place to call home. One problem is a lack of coordination both across Federal agencies and at the local level. Federal homeless funds often do not link with mainstream Federal programs for which the homeless may be eligible, or with other homeless programs in the locality. Providers are heroes battling on the front lines, but they cannot succeed unless programs properly diagnose the needs of the homeless, give them appropriate transitional services, and graduate them from shelters to relatively independent, stable housing. Increases in 1994.--In 1994, the Administration made homeless assistance a top priority, proposing more than $1.4 billion for assistance targeted to homeless families and individuals. Congress provided more than $1.3 billion--about 25 percent above the 1993 level. Federal Plan.--Federal assistance aims to break the cycle of existing homelessness and prevent future homelessness. To advance these goals, President Clinton signed an Executive Order on May 19, 1993, calling for the Interagency Council on the Homeless, chaired by HUD Secretary Cisneros, to develop a Federal plan to break the cycle of homelessness. This plan, which will be completed in February 1994, will review the distribution of funding and the way current programs work together. The Interagency Council is now compiling and analyzing information from Federal sources, States and localities, nonprofit providers, advocates, and homeless persons through the Domestic Policy Council. 1995 overall proposed increase.--The 1995 budget proposes more than $2.1 billion in funding for programs specifically targeted to aid homeless families and individuals--an increase of 60 percent over 1994 and almost double the 1993 appropriation. This increase is in addition to the mainstream Federal assistance provided to the homeless (e.g., through programs like Food Stamps and AFDC) and surplus Federal equipment, food and real property provided to homeless persons. For HUD alone, the budget proposes $1.76 billion, more than 85 percent over the 1994 level. Components of the HUD funding include: --$1.12 billion to reorganize the HUD McKinney Act programs. Under the proposed reorganization, funds would support activities to form a "continuum of care" to assist homeless persons and prevent future homelessness. Grant funds would initially be allocated to communities that can demonstrate a comprehensive plan to address homelessness; forge partnerships with local, private, and nonprofit providers; and improve participants' access to mainstream services and income-support programs. In subsequent years, awards may be phased out as mainstream programs take over. Some of the funds could be used for the Secretary's Innovative Homeless Initiative, which also promotes comprehensive homeless systems through local partnerships: --$514 million for 15,000 rental vouchers for five years to help previously homeless families pay the rent in private apartments that they select. These vouchers provide a vital last link of the "continuum of care" that moves families from homelessness through shelter and transitional housing to relative independence. --$130 million to continue the Emergency Food and Shelter program authorized under Title III of the McKinney Act and previously administered by FEMA. Focus on mainstream programs.--In addition to the increases in funding targeted to homeless persons, the President's budget also links homeless assistance with mainstream programs providing services and income support, to help homeless people to break the cycle of homelessness. The mainstream Job Training Partnership Act program has been modified to focus more funding on persons with the greatest need, including the homeless population. Similarly, HHS' mainstream Community Services Block Grant program, along with existing HHS targeted programs, helps states and localities to provide health and substance abuse treatment services to the homeless. Finally, HUD's reorganization of its McKinney Act programs also increases linkages with mainstream sources, with some grants initially allocated to communities that have demonstrated efforts to improve access by homeless persons to mainstream services and income-support programs. INVESTING IN KNOW HOW SCIENCE AND TECHNOLOGY ---------------------------------------------------------------------- Investing in technology is investing in America's future: a growing economy with more high-skilled, high-wage jobs for American workers; a cleaner environment ... Scientific advances are the wellspring of the technical innovations whose benefits are seen in economic growth, improved health care, and many other areas. President Bill Clinton February 1993/October 1993 ---------------------------------------------------------------------- Investment in science and technology (S&T) is essential to build a prosperous economy, create high quality jobs, improve health care and education, and maintain national security. Federal programs can play a key role in supplementing private research in areas where returns on research investments are too distant or uncertain for private firms to bear. During the Cold War era, Federal S&T programs were dominated by investments in space, defense, and basic research; civilian technology benefited primarily by serendipitous spin-off. The end of the Cold War and sharp increases in international competitive pressure on U.S. industries demand a new approach. The Administration's response was outlined in `Technology for America's Economic Growth, A New Direction to Build Economic Strength' (February, 1993), including three main goals: o Reaffirming our commitment to fundamental science, the foundation upon which all technical progress is built. o Improving the contribution of federally sponsored S&T innovation to economic growth and environmental protection by forging closer working partnerships among industry, Federal and state governments, workers, and universities. o Coordinating federally supported S&T investments across the Federal Government. The major progress made toward these goals during 1993 was reported in "Technology for Economic Growth: President's Progress Report" (November, 1993). Programs proposed for the 1995 budget are designed to sustain this momentum. S&T Highlights National Science and Technology Council (NSTC).--In responding to a key recommendation of the National Performance Review, the cabinet-level NSTC was created in November 1993 (Executive Order 12881) to coordinate Federal S&T investments and policies. While we are imposing strict limits on Federal spending to reduce our Federal budget deficit, the NSTC will ensure that taxpayers receive the maximum benefit for their investment. The Committee of Advisers on Science and Technology was established along with the NSTC to serve as a private sector advisory group to the President and the NSTC. The NSTC will spend the next year examining how to improve the integration of S&T activities in a broad range of areas, including information technology, manufacturing, health, transportation, environment, fundamental science and education. This more comprehensive review process should be ready for the 1996 budget. Research and Development (R&D) Investments.--While there are some sophisticated technologies that are not included in the Federal R&D budget (e.g., the Space Shuttle, operational weather satellites, technical information services, etc.), the R&D budget has traditionally been considered the most comprehensive summary of Federal S&T activities. The Administration is proposing $71 billion in R&D investments (excluding facilities) in 1995, a $2.5 billion or four percent increase over 1994 (Table 3B-6). Civilian R&D will increase over $1 billion or four percent to $32 billion. The combination of continued annual growth for civilian R&D, anticipated decreases in defense R&D after 1995, and the inclusion of dual-use defense R&D is likely to cause the civilian share of the R&D budget to exceed 50 percent earlier than the 1998 date predicted in the 1994 budget. Much of this increase will be focused on cost-shared and competitively selected projects that are industry-defined and industry-led (i.e., consortia, cooperative R&D, etc.). In 1995, university-based research will increase to $12 billion, a $437 million or four percent increase over 1994. University-based research continues to provide an important contribution to the creation of knowledge, technological innovation, and the training of scientists and engineers. Research Grant Overhead Payments.--The Federal Government awards over $17 billion in research grants each year to universities and other non-profit institutions, including substantial amounts (over $3 billion) for reimbursement of overhead costs. In a year in which total discretionary spending is being frozen, and government administrative costs are being aggressively reduced, it is necessary to ask universities and other non-profit institutions to participate in this restraint. Instead of a permanent cut or cap on overhead payments, the 1995 budget proposes a one year pause that instructs grantee institutions not to seek additional payments for overhead above the amounts claimed in 1994.(See the Supplemental Proposals section of the Budget Appendix for specific implementation language.) The yearlong pause will provide time for the Council of Economic Advisers, the Office of Science and Technology Policy, and the Office of Management and Budget--with advice from representatives of affected institutions--to conduct a comprehensive review with the goal of improving the incentives that govern overhead reimbursement for a wide range of federal research grantees and contractors. Putting S&T to Work for America's Future. Expand Cost-shared R&D Partnerships/Technology Transfer.--Partnerships ensure that federally sponsored research is relevant and efficiently put to use in private markets. The Federal agencies (including Defense, Energy, Health and Human Services, NASA, Transportation, EPA, and Agriculture) play a key role in building these partnerships with industry and the university community, including the use of cooperative research and development agreements (CRADAs). There will be over 3,200 CRADAs in 1995, a 453 or 16 percent increase over 1994, with public and private cash and non-cash investments exceeding $1.5 billion. The Federal agencies will also invest $865 million in 1995 on technology transfer activities, a $314 million or 57 percent increase over 1994. Expand the Commerce Department's National Institute for Standards and Technology (NIST) R&D Programs.--The Advanced Technology Program (ATP), Manufacturing Extension Partnerships (discussed latter), and in-house research on measurements, standards, data verification, and test methods form the core of the NIST activities. The $451 million budget more than doubles the ATP in 1995. The budget will support roughly 200 ATP projects, with 100 new projects in strategic program areas chosen in cooperation with industry. Funding for in-house research increases to $316 million in 1995, with major new increases in advanced manufacturing ($18 million), biotechnology ($4 million), environmental technology ($5 million), advanced materials ($17 million), information infrastructure ($38 million), international standards ($5 million), and math and science post-doctoral education. Table 3B-6. FUNDING FOR SCIENCE & TECHNOLOGY HIGHLIGHTS (Budget authority; dollars amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Research & Development (R&D): Civilian: Basic........................ 11,951 12,578 12,880 +301 +2% Applied & development........ 16,384 17,770 18,621 +850 +5% -------------------------------------- Total....................... 28,335 30,349 31,500 +1,152 +4% Defense: Basic........................ 1,411 1,212 1,232 +20 +2% Applied & development........ 40,004 36,923 38,296 +1,373 +4% -------------------------------------- Total....................... 41,415 38,136 39,528 +1,393 +4% Total R&D (without facilities) 69,750 68,484 71,029 +2,544 +4% Total R&D (with facilities)... 72,478 71,073 73,045 +1,972 +3% Civilian share of R&D\1\...... 43 47 47 NA NA Defense share of R&D.......... 57 53 53 NA NA R&D by agency (without facilities): Defense...................... 38,617 35,538 36,971 +1,433 +4% Health & Human Services...... 10,336 11,033 11,484 +451 +4% National Aeronautic and Space Administration.............. 8,090 8,493 8,597 +105 +1% Energy....................... 5,827 6,054 6,052 -2 -* National Science Foundation.. 1,882 2,026 2,220 +194 +10% Agriculture.................. 1,335 1,393 1,394 +1 +*% Other........................ 3,664 3,948 4,310 +362 +9% -------------------------------------- Total R&D................... 69,750 68,484 71,029 +2,544 +4% R&D support to university researchers.................. 11,674 11,719 12,156 +437 +4% Cost-Share R&D Partnerships/Technology Transfer Technology Transfer.......... 384 551 865 +314 57% Number of CRADAs............. 2,230 2,758 3,211 +453 16% Public/Private Cash and Non-cash value of CRADA Investments................. 813 1,176 1,504 +328 28% NIST R&D programs............. 366 490 874 +384 +78% National Science Foundation... 2,734 3,018 +3,200 +182 +6% NASA's new technology investments.................. ...... 42 67 +25 +60% Health research............... 10,336 11,033 11,484 +451 +4% (National Institutes of Health)..................... 9,891 10,486 10,994 +508 +5% Human genome project: National Institutes of Health 106 129 152 +23 +18% Energy....................... 63 70 89 +19 +27% International space station... 2,262 2,104 2,121 +17 +1% Civilian industrial technologies: Manufacturing technologies... NA 1,841 2,000 +159 +9% NIST manufacturing extension partnership................. 18 30 61 +31 +103% National information infrastructure: National Telecomunications Information Administration.. ...... 26 100 +74 +285% National Technical Information Service......... 8 ...... 18 +18 +* High performance computing and communications: Defense..................... 298 341 397 +56 +16% National Science Foundation. 225 267 329 +62 +23% Energy...................... 100 123 125 +2 +2% National Aeronautics and Space Administration....... 82 113 125 +12 +11% National Institutes of Health..................... 47 58 82 +24 +42% Commerce.................... 12 29 82 +53 +183% EPA......................... 8 7 14 +7 +92% -------------------------------------- Total HPCC................. 772 938 1,154 +216 +23% Transportation: Federal Aviation Administration research..... 230 254 267 +13 +5% New generation of vehicles (Energy only)............... 107 141 175 +34 +24% Alternative fuel vehicles.... 29 44 69 +25 +57% Intelligent vehicles/highway systems..................... 155 214 289 +75 +35% Next generation high-speed rail........................ 5 4 33 +29 +725% NASA aeronautics research.... 129 287 347 +60 +21% U.S. Global Change Research Program National Aeronautics and Space Administration........ 932 1,022 1,236 214 +21% National Science Foundation.. 125 142 208 +66 +46% Energy....................... 87 93 126 +33 +35% Commerce..................... 67 63 84 +21 +34% Agriculture.................. 48 49 58 +8 +19% Environmental Protection Agency...................... 25 27 31 +4 +14% Interior..................... 38 33 33 -1 -1% Smithsonian.................. 7 7 8 * +3% Defense...................... 7 6 6 * +*% National Institutes of Health 3 3 4 * +13% Tennessee Valley Authority... * * 1 +1 +233% -------------------------------------- Total USGCRP................ 1,338 1,446 1,794 +348 +24% ---------------------------------------------------------------------- \1\Includes Defense Dual-Use Activities. *Less than $500 thousand. NA: Not applicable. ---------------------------------------------------------------------- National Science Foundation (NSF).--The budget proposes $3.2 billion for NSF, a $182 million or six percent increase over 1994. The NSF supports peer-reviewed, university-based science and engineering research, including interagency research efforts in global change research, high performance computing, and manufacturing. NASA's New Technology Investments (NTI).--The budget proposes $67 million for the second year of the NASA NTI program (a $25 million or 60 percent increase over 1994). The NTI is focused on industry-led projects, including industry-defined advanced technologies and small satellite technologies Health Research.--The budget proposes roughly $11.5 billion for health-related R&D activities funded through the Department of Health and Human Services, a $451 million or four percent increase over 1994. Of these funds, roughly $11 billion is for the National Institutes of Health, $508 million or 5 percent over 1994. NIH supports biomedical and behavioral research. Human Genome Project.--The budget proposes 241 million in Energy and NIH, a $42 million or 21 percent increase over 1994, for this multi-year effort to decode the information locked in the chemical building blocks that form human genetic inheritance. New Facilities for Fundamental Science and Applied Research.--The budget includes $40 million to begin constructing the Advanced Neutron Source (ANS) research reactor project at the Oak Ridge National Lab, a $23 million increase over 1994. In addition, $116 million is included for the B-meson research facility at Stanford ($46 million) and the Tokamak Physics Experiment (TPX) facility at Princeton ($70 million). The ANS will replace aging neutron sources and supports research on disease and human genetics, high-temperature superconductivity, nuclear medicine, and advanced materials. The B-meson facility will explore the dynamics of matter in the Universe's earliest moments, a central question in science. The TPX will advance the development of an economically attractive fusion energy reactor. International Space Station.--The budget includes $2.1 billion for the redesigned space station and Russian participation. The space station will be a premier orbital research facility for life science and materials research. NASA also plans a number of Shuttle flights to the Russian Mir space station. This collaborative project on the Mir will provide valuable information for the construction and operation of the international space station. Moving Manufacturing Technologies to the Global Marketplace. Accelerate Investments in Civilian Technologies.--Federal programs aimed at increasing competitiveness of civilian industries while improving the environment will be coordinated by the NSTC's Committee on Civilian Industrial Technology. Working closely with the private sector, the Committee will develop a government-wide plan for improving manufacturing technologies that are broadly applicable to U.S. industries and of special importance to our nation's economy. In 1995, nine agencies propose to spend over $2 billion for R&D in manufacturing technologies, a $159 million or 9 percent increase over 1994. Defense, Energy, Commerce, NASA, and NSF are the primary contributors. Deployment of Civilian Industrial Technologies.--The Federal Government's effort to deploy technologies includes NIST's Manufacturing Extension Partnerships (MEP). The budget funds NIST's MEP at $61 million, a $31 million increase or doubling over 1994. This partnership will help small- and medium-sized manufacturers to tap into regional and national sources of information, knowledge, and assistance in the use of modern manufacturing and production technologies. The Administration anticipates more than 100 manufacturing extension centers by 1997. The Technology Reinvestment Project in Defense and programs in industrial extension in Energy will complement the NIST MEP program. Realizing the Opportunities of the Information Age Improve the National Information Infrastructure (NII).--All Americans have a stake in the construction of the communications network, computers, databases, and consumer electronic products that constitute the NII. While the private sector will build the NII, the Federal Government has a key role to play by investing in research and advanced communications applications, and by becoming a leading-edge adopter of information technologies. Federal NII projects are coordinated by the Information Infrastructure Task Force chaired by Commerce. In January, the Vice President challenged the private sector to connect all our classrooms, libraries, hospitals and clinics to the NII by 2000. High Performance Computing and Communications (HPCC).--The HPCC, which will become part of the NSTC Committee on Information and Communications, funds research programs to create more powerful computers, faster computer networks, and more sophisticated software; and to address complex scientific and engineering computing problems known as `Grand Challenges,' such as weather forecasting, designing life-saving drugs, and modeling aircraft. For 1995, the budget proposes $1.2 billion for HPCC, a $216 million or 23 percent increase over 1994. The HPCC program also includes a component called Information Infrastructure Technologies and Application (IITA) which applies HPCC technologies in a broad range of applications with large societal impacts, including health care, education, libraries, and manufacturing. National Telecommunications and Information Administration's (NTIA) Networking Pilot and Demonstration Projects.--The NTIA funds competitively selected grants to connect schools, clinics, hospitals, libraries, and other non-profit entities to existing computer networks. The budget proposes $100 million for this activity, a $74 million or 285 percent increase over 1994. National Technical Information Service (NTIS).--The NTIS proposes a one-time $18 million pool of investment capital to help support the electronic dissemination of data generated by the Federal Government. Transportation and the Economy A transportation system that can move people, goods, and services quickly and efficiently needs technologies to minimize the maintenance of existing transportation infrastructure, and lead to the next generation of transportation modes. Federal Aviation Administration (FAA) Research, Engineering, and Development (RE&D).--The budget includes $267 million for FAA RE&D, a five percent increase above 1994. FAA conducts research in improving the safety, security, productivity, and capacity of the air traffic control system, including the use of satellite-based navigation and communications technologies. Partnership for a New Generation of Vehicles.--President Clinton, Vice President Gore, and the CEOs of General Motors, Ford, and Chrysler agreed to an ambitious set of research goals to enhance the competitiveness of the U.S. automobile industry and to improve the environment. This agreement, which involves Commerce, Defense, Energy, Transportation, NASA, EPA, and NSF, will target advanced manufacturing processes, technologies for near-term improvements in fuel economy, and up to three-times improvement in fuel economy in about a decade. While the interagency budget will be fully developed during 1994, Energy alone is proposing $175 million for these activities, a 24 percent increase over 1994. Energy's efforts focus on advanced lightweight and ceramic materials, fuel cells, more efficient engines, electric vehicles, and hybrid vehicles. Another $69 million is proposed in 1995 by Energy for alternative fuel vehicle development and purchases of alternative fuel vehicles for the Federal fleet, a $25 million or 57 percent increase over 1994. Intelligent Vehicles/Highway Systems.--The Department of Transportation (DOT) is conducting research on improving highway safety, increasing highway automation and productivity. The 1995 budget proposes $289 million, an increase of $75 million or 35 percent over 1994. Next Generation High-Speed Rail.--The objective of this DOT program is to promote private industry investments in futuristic, cost-effective rail technologies through the use of existing infrastructure. The program will be funded at $33 million in 1995, a $29 million increase over 1994. Where possible, the program will be administered in conjunction with Commerce's Advanced Technology Program and Defense's Technology Reinvestment Project. NASA Aeronautics Research.--The aviation industry employs nearly 1 million people, generates almost $100 billion in annual sales, and produces tens of billions of dollars in exports. In collaboration with industry, NASA is sponsoring high-speed research (HSR), advanced subsonic technologies (AST), and the HPCC activities mentioned above. Industry concepts envision a high-speed civil transport that could carry 300 people overseas at Mach 2.4 (arriving in roughly half the current subsonic transport time and at comparable subsonic fares). The AST program will increase subsonic aircraft productivity and lower operating costs through the development of lightweight engines and airframes, optical flight systems, and integrated wing designs, and other technologies. For 1995, the budget proposes $347 million for HSR and AST, a $60 million or 21 percent increase over 1994. In addition, most of the $74 million of 1994 funding is available in 1995 for the definition of requirements and design, in collaboration with industry, for new or drastically modified U.S. wind tunnels. Energy and Environment: New S&T for Environmentally-Safe Economic Growth Energy and environment S&T activities can help balance economical growth with lower energy use and environmental protection. The Administration is developing a comprehensive energy and environment approach, including the U.S. Global Change Research Program to improve knowledge of our planet's climate, the Climate Change National Action Plan to curb greenhouse emissions, and the development of environmental and energy conservation technologies (for more details, see the Investing in the Quality of Life section). Defense Technology: The Payoffs for Economic and Military Security For 1995, $9.3 billion is proposed for defense S&T programs. This includes $4.2 billion for basic and applied research, as well as $5.1 billion for advanced technologies. These efforts form the foundation for advanced military capabilities--such as stealth aircraft and precision weapons convincingly demonstrated during Operation Desert Storm. In addition, in the post-Cold War era defense technology investments can provide for national security requirements and contribute to economic growth. In 1995, Defense dual-use S&T activities will total $2.1 billion, which includes both established programs and initiatives such as the Technology Reinvestment Project, an effort jointly funded by the Federal Government and private sources (for more details, see the next section on Defense Reinvestment and Conversion). DEFENSE REINVESTMENT AND CONVERSION ---------------------------------------------------------------------- Clearly, defense conversion can be done and can be done well, making change our friend and not our enemy. But in order to do it we must act, act decisively, act intelligently and not simply react years after the cuts occur. President Bill Clinton March 11, 1993 ---------------------------------------------------------------------- The end of the Cold War provides an opportunity to reinvest some defense industrial, technological and work force capabilities to contribute to our Nation's economic competitiveness: those who helped us win the Cold War can help us compete globally. The Administration's five-year, multi-agency Defense Reinvestment and Conversion program, unveiled in March 1993, capitalizes on this opportunity through the President's investment priorities of worker retraining, community redevelopment, and advanced technology investments. For workers, the Department of Labor's (DOL) workforce security initiative provides retraining and job search assistance. In 1995, an estimated $195 million of the overall initiative could be expected to be used to assist displaced defense workers. SWAT teams of labor program experts respond to layoff announcements or base closures to provide quick-reaction job-search services and assistance information. For Department of Defense (DOD) civilian and military personnel, the conversion program provides funding for separation and transition programs, including the Troops-to-Teachers program which provides financial incentives to local school districts to hire separating military personnel. DOD also provides early retirement incentives to manage the personnel drawdown and ease the transition for those leaving military service. For communities, DOD's Office of Economic Adjustment (OEA) is often the first Federal agency on the scene after the announcement of intended military base closures or defense contract cutbacks. The $39 million requested in 1995 ensures access to redevelopment and diversification planning grants. The Department of Commerce's Economic Development Administration (EDA) funds long-range economic planning, construction of infrastructure and development facilities, and management and technical assistance. For 1995, $140 million is requested for EDA's defense conversion activities, a $60 million increase over 1994. In response to the July 1993 round of military base closure announcements, the Administration developed a five-point plan for revitalizing affected communities. The plan, distinct from the overall conversion program, promotes redevelopment through the transfer of base property to communities at low or no cost, rapid environmental cleanup, and improved access to Federal programs and funding. For industry, the defense conversion program reflects a two-pronged strategy: invest in civilian high-technology conversion opportunities for defense firms, and promote dual-use technologies that have both a commercial and military application. Table 3B-7. DEFENSE REINVESTMENT AND CONVERSION\1\ (Budget authority in millions of dollars) -------------------------------------------------------------------------------- Proposed Total 1993 1994 ---------------------- ------- Actual Estimate 1995 1996 1997 1993-97 -------------------------------------------------------------------------------- Department of Defense Personnel Assistance and Community Support........ 1,020 1,265 1,192 \2\1,192 \2\1,192 5,861 Department of Energy Worker and Community Transition Program....... 92 200 125 100 100 617 Department of Labor Workforce Security Program.................. \3\ \4\125 \4\195 \4\195 \4\195 710 Department of Commerce Community Diversification Assistance (EDA)......... \5\ 80 140 140 140 500 ---------------------------------------------------- Total: Worker and Community Assistance Programs................ 1,112 1,670 1,652 1,627 1,627 7,688 Department of Defense Dual-Use Technology...... 882 1,441 1,429 1,454 1,479 6,685 Technology Reinvestment Project (TRP)........... \6\465 554 625 650 675 2,969 Other Dual-use Initiatives............. 417 887 804 \2\804 \2\804 3,716 New Federal High Technology Investments (Conversion Opportunities)\7\........ ....... 907 1,734 2,054 2,444 7,139 Other Industry Assistance Programs................. ....... \8\50 \8\50 ....... ....... 100 ---------------------------------------------------- Grand total: Programs that will assist defense workers, communities and firms.. 1,994 4,068 4,865 5,135 5,550 21,612 -------------------------------------------------------------------------------- \1\This program reflects funding above 1993 levels plus that portion of existing programs re-directed to conversion efforts. \2\This is the 1995 level. Specific estimates for 1996 and 1997 are not yet available. \3\$75 million was transferred in 1993 from the Department of Defense to the Department of Labor. \4\This is the portion of the overall investment increase that could be expected to be used to assist displaced defense workers. \5\In addition, $80 million was transferred in 1993 from the Department of Defense. \6\In addition to $465 million of TRP funding, the 1993 TRP solicitation included $7 million in separately budgeted Small Business Innovative Research funds for a total of $472 million. \7\This includes investment programs that provide direct conversion opportunities (e.g., NASA's aeronautics initiative) and 50 percent of programs that provide some conversion opportunities (e.g., Department of Commerce program for Information Highways.) \8\ This reflects the National Shipbuilding Initiative which the Congress funded in 1994 in the defense budget. Funding for 1995 loan subsidies is provided in the Department of Transportation budget. -------------------------------------------------------------------------------- Civilian Technology Investment. The multi-agency conversion program provides more than $7 billion over five years for civilian high-technology investments. For example, NASA's aeronautics initiative helps defense firms and workers use defense expertise in civilian aircraft technology development. The Department of Commerce's Information Highways use defense-related software and hardware. These investments leverage the talents and resources of defense workers and firms, diversify the economy, and build overall competitiveness. Dual-Use Technologies. The defense technologies that make us the strongest military power can also promote industrial competitiveness. At the same time, dual-use technology increases national security because the unprecedented advances in civilian technology benefit military systems. For 1995, the defense conversion program provides $1.4 billion for dual-use programs including the Technology Reinvestment Project (TRP), a multi-agency effort administered by DOD's Advanced Research Projects Agency to promote commercial-military technology integration. 1995 funding for the TRP has been increased to $625 million, over $70 million more than the 1994 level. Coordination of the Defense Reinvestment and Conversion program is within the Executive Office of the President, to ensure that resources are delivered effectively, fairly and in keeping with the goals of the program. Funding. As shown in Table 3B-7, the conversion program brings together activities from across the Federal Government. In almost all cases, increased funding has been requested for 1995. These increases, when combined with additional 1993 and 1994 spending in key conversion programs, bring the defense conversion program to about $22 billion over five years--$2 billion over the $20 billion level announced in March 1993. INVESTING IN PHYSICAL CAPITAL IMPROVING THE NATION'S INFRASTRUCTURE ---------------------------------------------------------------------- To build a twenty-first century economy, America must revive a nineteenth century habit--investing in the common, national economic resources that enable every person and every firm to create wealth and value. The only foundation for prospering in the global economy is investing in ourselves. President Bill Clinton ---------------------------------------------------------------------- Americans have come to expect public infrastructure investments that are safe, dependable, and well maintained. Investments in transportation, water resources, and the environment: o promote growth of production, employment, productivity, and living standards; o make the Nation more competitive in the world economy; o contribute to a clean environment; and o create jobs. This Administration is committed to increasing funding to improve the infrastructure and to targeting resources to projects that provide the greatest benefits. Therefore, this budget: o fully funds core highway investments at the congressionally authorized level, but eliminates funding for selected so-called "demonstration projects"; o increases formula capital grants for mass transit and proposes an urban congestion initiative, but waits for a revised evaluation process to fund additional discretionary "new starts;" o increases funds for air traffic control improvements, and maintains the current level of airport grants; and o increases funds for water treatment and supply facilities, and funds ongoing water resources development projects. The 1995 budget proposes $34.4 billion for infrastructure spending. (See the summary Table 3B-8 below and the detailed Table 3B-9 at the end of this section.) This is $0.5 billion, or 2 percent, more than proposed for 1994. Chart 3B-10 displays the percent of 1994 spending for types of infrastructure. Highway spending accounts for 60 percent of the total. Table 3B-8. SUMMARY OF INFRASTRUCTURE INVESTMENT (Discretionary program level; dollar amounts in billions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Pro- Pro- 1994 1994 to posed\1\ posed to 1995 1995 ---------------------------------------------------------------------- Highways...................... 18.0 20.3 20.3 -* -*% Other Transportation.......... 7.1 7.5 8.3 +0.7 +10% Water Treatment and Supply.... 3.1 3.1 3.3 +0.3 +9% Water Resources Development... 2.2 2.1 1.6 -0.5 -22% Other Infrastructure Investment................... 0.8 0.9 0.9 -- -- -------------------------------------- Total Infrastructure........ 31.3 33.9 34.4 +0.5 +2% ---------------------------------------------------------------------- Note: Program level is budget authority, obligations, or obligation limitation. *$50 million or less or 0.5 percent or less. \1\Includes proposed supplementals and rescissions for 1994. ---------------------------------------------------------------------- Insert chart: CHT3B-10 Federal, State, and local governments all have important roles in infrastructure investment. Infrastructure investment by all levels of government totaled $65.9 billion in 1990. State and local governments financed $40.2 billion or 61 percent of this amount (according to a recent study by the Congressional Budget Office (CBO); latest data available). The Federal Government financed the remaining $25.7 billion, of which $21.4 billion was grants to State and local governments. In order to improve the Nation's infrastructure, the Administration seeks not only greater investment, but also more effective investment. Toward this end, the President recently issued an Executive Order setting forth principles for Federal infrastructure investments. The Order instructs agencies to conduct systematic economic analysis of these investments. Because the benefits from infrastructure facilities depend in part on how well they are managed, the Order also requires periodic reviews of management practices, including operation and maintenance activities, contracting practices, and pricing policies. Economic Growth.--Many recent studies (such as How Federal Spending for Infrastructure and Other Public Investments Affects the Economy, CBO, 1991) have documented the important contribution of infrastructure investment to economic growth. Transportation and other infrastructure systems can reduce costs and increase productivity, helping the private sector compete in the international arena. However, public investment financed at the expense of more productive private investment can hinder economic growth. Thus, increased public investment is important, but only the most effective investments merit funding, and there must be a balance between public and private investment. Clean Environment.--Selective infrastructure investments also protect the environment. Because pollution crosses State lines, there is an important Federal role in investments in water and wastewater treatment systems. Job Creation.--Infrastructure investment also contributes to job creation. Estimates indicate that $1 billion of Federal highway construction generates as many as 26,000 jobs and, by increasing the productivity and competitiveness of the economy generally, aids job creation and retention in the private sector. Addressing Infrastructure Problems in the 1995 Budget Highways The Administration proposes full funding of the Intermodal Surface Transportation Efficiency Act (ISTEA) authorized level for the core highway programs, which are the categorical grants distributed to the States under the Federal-aid highway programs. These grants help finance the preservation of 900,000 miles of major highways, including the 43,000 miles of the Interstate Highway System. Individual projects are selected by the States. For these core programs, the Administration requests $19.8 billion in budgetary resources for 1995, $0.7 billion or 4 percent more than in 1994. This funding permits the States to address a wide range of priorities from Interstate preservation to congestion mitigation and air quality improvement. Full funding also permits the States to take maximum advantage of the flexibility provisions of ISTEA. ISTEA provides States the discretion to transfer funding between highway and transit uses. The Administration has submitted to Congress recommendations for the National Highway System. The proposed system includes nearly 159,000 miles of Interstate highways, major arterials and defense support roads, and key corridors. If enacted as proposed, the System would include highways that carry about 40 percent of total vehicle miles travelled and 75 percent of interstate truck traffic. The National Highway System will provide the focus for major State highway investment decisions. Elimination of Funding for Low Priority Highway Projects.--To "free up" limited funding for the core highway programs, the Administration proposes rescissions of $4.7 billion for selected "highway demonstration" projects. This includes prior year balances and authorized amounts for 1995-1997. Both the recent National Performance Review (NPR) and the General Accounting Office (GAO) have criticized increased congressional earmarking of projects at the Federal level. According to these reports, there are three reasons that rescission of these projects is warranted. First, most of the projects do not respond to the most critical Federal-aid highway needs of States and regions. For example, in more than half of the cases, the projects were not even included in State or regional plans. Second, there is no guarantee that these projects, once started, would be finished. GAO determined, for example, that project costs greatly exceed authorized Federal and State funding levels, and that State officials are uncertain of their ability to contribute more. The excess costs have been estimated to be more than $27 billion for ISTEA projects. Third, many States are of the view that these projects offer only limited benefits, especially compared with other projects that could use additional Federal funding to greater advantage. In conclusion, reducing or eliminating these projects allows funding for other, critical highway spending. If the projects are a high priority, the States may choose to fund from the core programs. Increased Funding for Smart Cars/Smart Highways.--To promote more efficient use of the existing infrastructure, the Administration supports the intelligent vehicle highway system (IVHS), or "smart cars/smart highways," which uses advanced technology to provide drivers with congestion and safety information. This will improve traffic flow, reduce congestion and travel time, and improve safety. The budget requests an increase of $75 million for 1995 for this program, from $214 million in 1994 to $289 million in 1995. Emergency Highway Repair.--The 1995 budget estimates do not display requested funding for the repair of highways in and around Los Angeles damaged by the recent San Fernando Valley earthquake. Funding of $1.4 billion for highways has been transmitted to Congress separately. Much of the 1994 amount for emergency repairs ($0.7 billion) included in the budget and shown in Table 3B-9 is associated with continuing repair work for highways damaged in the 1993 floods and the Loma Prieta earthquake in Northern California in 1989. Mass Transit Formula Capital Grant Increases.--Mass transit is critical to reducing congestion and pollution. The Administration proposes a 40 percent increase for formula capital spending, from $1.6 billion in 1994 to $2.3 billion in 1995. With this funding, the Federal Government shares with State and local governments the cost of purchasing and rehabilitating buses, bus facilities, rail systems, and other investments. These investments improve public mass transportation in approximately 500 urban and rural areas in the country. Reductions for Discretionary Projects.--Compared with formula grant funding, discretionary grant funding is normally allocated to relatively few cities. For some discretionary projects, costs have been much higher, and ridership lower, than originally estimated. To ensure that Federal resources are directed only to the most effective investments, the Administration is developing a revised "new start" evaluation process, as required by ISTEA. The $1.5 billion in budgetary resources for transit discretionary capital grants would maintain 1994 funding levels for rail modernization and bus projects, but limit funds for "new start" construction to projects already approved. Urban Congestion Relief Initiative.--Highway congestion has increased, especially in large urban areas. The percentage of urban Interstate travel that is congested during the daily peak travel hour increased from 55.4 percent in 1983 to 70.2 percent in 1991. Congestion in the Nation's 50 largest urban areas now costs more than $39 billion annually in lost productivity and fuel costs. Many of these areas also have serious automobile-related air quality problems. The Administration is developing an urban congestion initiative to address this growing and costly problem. As part of this initiative, 10 percent of the formula capital grants would be used as an incentive to urban areas to implement projects that will contribute to decreased traffic congestion. Railroads Improving Rail Transportation in the Northeast Corridor.--The Federal Government invests in improved passenger rail service in the Northeast Corridor between Washington, D.C., and Boston. Grants to the National Railroad Passenger Corporation (Amtrak) are used to electrify track between New Haven, Connecticut and Boston, and for other projects to reduce travel time. The Administration requests $0.2 billion to continue this program in 1995. The Administration also proposes to form a partnership with New York State, New York City, and Amtrak to redevelop Penn Station in New York City. Penn Station is the largest intermodal hub in the country, and serves Amtrak, the Long Island Railroad, New Jersey Transit, and the New York City subway. For 1995, the Administration requests $90 million to support this project, which will renovate the James A. Farley Post Office building as a train station and commercial center, and upgrade Penn Station. Funds will be contingent upon financial contributions from the State of New York, New York City, and Amtrak. A 1994 supplemental appropriation of $10 million is requested to initiate the project. The grant to Amtrak for capital spending will allow for the purchase of new equipment, station improvements, and capital equipment overhauls, all of which will reduce operating costs in the long run. The Administration is requesting $0.3 billion for these grants for 1995, an increase of 29 percent over 1994. Air Transportation The Federal Government invests in air transportation through modernization and maintenance of facilities and equipment for the air traffic control system and through airport development grants. Air Traffic Control Investment.--The Federal Aviation Administration's air traffic control modernization program supports growth in aviation activity. Benefits include reduced delays, more efficient aircraft routing, fewer accidents, and more cost-effective operation. The Administration requests $2.3 billion in budget authority for facilities and equipment, an increase of $0.2 billion (nine percent) over 1994. The 1995 proposal implements the Capital Investment Plan with new solid-state navigation and landing aids and highly-automated work consoles to replace controller work stations to handle increased air traffic of the 1990s and beyond. Airport Grants.--Approximately 3,300 large and small airports are eligible to receive capital grants from the Federal Government to assist local airport authorities in the construction of runways and other capital improvements. The Administration requests $1.7 billion for the airport grants program for 1995, the same amount as for 1994, to assist with capital needs. These grants supplement locally generated capital, which on average funds 90 percent of the development costs of large hub airports. This local funding includes approximately $0.7 billion in local passenger facility charges, which were authorized in 1990 and are paid by passengers for the improvement of the aviation facilities they use. The collections go directly to the local airports for improvement projects. Water Treatment and Supply The Administration requests $3.3 billion in budget authority for 1995 for water treatment and supply programs, $0.3 billion or 9 percent more than in 1994. Most of this spending is in the Environmental Protection Agency (EPA). Clean Water and Drinking Water State Revolving Funds (EPA).--The clean water State revolving fund (SRF) program provides capitalization grants to State revolving funds, which make low-interest loans to municipalities to finance wastewater treatment facilities and other specified activities to improve water quality. The goal of the program is to create, in each State, a fund to provide steady loan amounts year after year, even after the Federal Government has ended its annual capitalizations. This will occur as loan repayments to the fund are loaned out again. To date, the Federal Government has provided more than $9 billion in capitalization funds. The Administration requests $1.6 billion for the clean water State revolving funds, $0.4 billion more than the 1994 amount, to meet the immense needs for water quality protection and restoration. With leveraging and repayments of prior loans, States will be able to provide more than $2 billion in loans in 1995. The Administration will apply the revolving loan fund concept to drinking water as well, to meet treatment requirements under the Safe Drinking Water Act. In 1994, $0.6 billion was provided for drinking water State revolving funds. For 1995, the Administration is requesting $0.7 billion in budget authority, to become available after the drinking water State revolving fund program is authorized. Targeted Wastewater Assistance.--EPA also provides wastewater assistance targeted to special needs outside the normal State revolving fund allocation formula. For 1995, the Administration proposes $250 million, including $150 million for Mexican border environmental projects in support of NAFTA--of which $50 million will be devoted to the colonias in Texas--and $100 million for cities that meet stringent criteria of high needs for secondary treatment and high current user charges. Rural Water and Wastewater Programs.--The Department of Agriculture funds construction, repair, and improvement of rural water and wastewater disposal systems through direct loans and grants for low-income communities with populations of less than 10,000. Many rural communities need Federal assistance for water and sewer systems because they cannot afford private credit terms for needed facilities, including those necessary to meet the requirements of the Clean Water Act and the Safe Drinking Water Act. The interest rate on the direct loans varies depending on the income of the community and whether the water or sewer project is necessary for health and safety reasons. Under a proposed reorganization, these programs will operate through a "Rural Utilities Service." The Administration requests $1.0 billion in loan authority for rural water and wastewater facilities, a 17 percent increase above 1994; and $0.5 billion in budget authority for grants, a $25 million or 5 percent increase above 1994. The proposed loan level will support about 934 systems, while about 896 communities will receive grants. This will give rural Americans access to clean water and will also provide important environmental benefits. In addition, the Administration is requesting $25 million in grants for drinking water projects targeted to the colonias along the Mexican border. Water Resources Development Water Resources Projects Already Underway.--Water resources investments include multi-use facilities such as dams that provide flood control, water storage for irrigation and drinking water, hydropower, and recreation; single-purpose facilities, such as channels and levees for flood damage reduction, and locks and dams for inland waterways; and major commercial ports to aid water transportation. The Administration requests $1.6 billion for 1995 for water resources infrastructure, $0.5 billion less than in 1994. These programs are operated primarily by the Army Corps of Engineers and the Bureau of Reclamation. The request will support work on projects already underway. Army Corps of Engineers.--The Corps of Engineers operates more than 400 multi-purpose dams. In addition, the Corps is responsible for locks and dams along major water routes. It has constructed and now maintains 25,000 miles of navigation channels that serve 130 of the Nation's 150 largest cities, and is responsible for construction and maintenance of 100 major commercial ports. Ports and waterways now handle more than 2 billion tons of cargo per year. Corps facilities provide 4 percent of the Nation's electrical energy, water supply for more than 9 million people, and account for 644 million recreational visits. Infrastructure programs of the Corps are cost-shared with State and local governments and through collection of user fees. For 1995, the Administration requests $1.2 billion in discretionary budget authority for the construction programs of the Corps, $0.4 billion or 24 percent less than the 1994 amount of $1.6 billion. The 1995 request emphasizes completion of projects already underway. There will be no new starts--170 projects will be funded and 13 are expected to be completed in 1995. These projects are economically justified and environmentally sound. Bureau of Reclamation.--Programs of the Bureau of Reclamation are located exclusively in the western United States. The Bureau has constructed multi-purpose projects for storage and conveyance of water to almost 10 million acres. These projects service the full water supply needs of 15 million people, provide 2 percent of the Nation's electrical energy, and account for 79 million recreational visits. Program emphasis is shifting from project construction to resource management, consistent with recommendations of the National Performance Review. As an example of this transition, the budget includes $10 million in grants to the Los Angeles area to fund a water reclamation and reuse pilot program, which is not a traditional water resources development project and is included as an environmental investment. The Administration requests $371 million in infrastructure development budget authority for 1995, $67 million or 15 percent less than the 1994 amount of $438 million. The decrease is largely the result of construction projects nearing completion. As with the Corps, there are no new water resources development projects proposed for 1995. Other Infrastructure Investment Approximately 20 percent of the Community Development Block Grant program (Department of Housing and Urban Development) is used for urban streets and other infrastructure. Infrastructure spending from this grant is estimated to be $0.9 billion in 1995, the same as in 1994. Additional Information on Investment Spending in the 1995 Budget Other sections in this Chapter discuss budget proposals for investing in research and development and education and training. Chapter 8 of 1995 Budget Analytical Perspectives, "Federal Investment Outlays and Capital Budgets," provides more comprehensive information on outlays for all physical capital investment, including infrastructure, and outlays for research and development and education and training. The Historical Tables volume, which also accompanies this budget, provides historical data on investment outlays: outlays for physical capital are in Section 9; and outlays for the conduct of research and development and for education and training are in Section 10. Table 3B-9. INFRASTRUCTURE INVESTMENT (Discretionary program level in billions of dollars) ---------------------------------------------------------------------- Dollar 1993 1994 1995 Change: Actual Pro- Pro- 1994 posed\1\ posed to 1995 ---------------------------------------------------------------------- TRANSPORTATION Department of Transportation: Highways: Core categorical highway grants..... 16.5 19.1 19.8 +0.7 Emergency repair\2\................. 0.5 0.7 0.1 -0.6 Highway demonstrations and other projects........................... 1.0 0.5 0.4 -0.1 ------------------------------ Subtotal, highways................... 18.0 20.3 20.3 -* Mass transit: Formula capital grants.............. 0.9 1.6 2.3 +0.7 Discretionary grants................ 1.7 1.7 1.5 -0.2 ------------------------------ Subtotal, mass transit............... 2.6 3.3 3.8 +0.4 Railroads: Northeast corridor.................. 0.2 0.2 0.2 -- Penn Station redevelopment.......... -- * 0.1 +0.1 Amtrak capital...................... 0.2 0.2 0.3 +0.1 ------------------------------ Subtotal, railroads.................. 0.4 0.4 0.5 +0.1 Air transportation: Air traffic control facilities and equipment.......................... 2.3 2.1 2.3 +0.2 Grants for airports................. 1.8 1.7 1.7 -- ------------------------------ Subtotal, air transportation......... 4.1 3.8 4.0 +0.2 ------------------------------ Subtotal, transportation.............. 25.1 27.9 28.6 +0.7 WATER TREATMENT AND SUPPLY Environmental Protection Agency: Clean water State revolving funds.... 1.9 1.2 1.6 +0.4 Drinking water State revolving funds. -- 0.6 0.7 +0.1 Targeted wastewater assistance\3\.... 0.6 0.6 0.3 -0.3 Department of Agriculture: Rural water and wastewater programs: Grants and loans.................... 0.5 0.6 0.7 +* Loan level.......................... (0.8) (0.8) (1.0) (0.1) ------------------------------ Subtotal, water treatment and supply.. 3.1 3.1 3.3 +0.3 WATER RESOURCES DEVELOPMENT Army Corps of Engineers............... 1.7 1.6 1.2 -0.4 Bureau of Reclamation (Department of Interior)............................ 0.5 0.4 0.4 -0.1 ------------------------------ Subtotal, water resources development. 2.2 2.1 1.6 -0.5 OTHER INFRASTRUCTURE INVESTMENT Community development block grants\4\. 0.8 0.9 0.9 -- ============================== Total infrastructure.................. 31.3 33.9 34.4 +0.5 ---------------------------------------------------------------------- Note: Program level is budget authority, obligations, or obligation limitations. *$50 million or less. \1\Indicates proposed supplementals and rescissions for 1994. \2\Budget does not include estimates associated with the recent San Fernando Valley earthquake. Funding of $1.4 billion for highways has been transmitted separately. \3\$500 million in 1994 for targeted wastewater assistance is subject to congressional authorization. \4\Includes 20 percent of these grants, which is the approximate amount used for infrastructure. ---------------------------------------------------------------------- DEVELOPING URBAN AND RURAL ECONOMIES ---------------------------------------------------------------------- The best way to serve distressed communities in urban and rural America is through a comprehensive, coordinated, and integrated approach that combines bottom-up initiatives and private sector innovation with responsive Federal-State support. President Bill Clinton ---------------------------------------------------------------------- This budget includes an array of new initiatives for the economic development of distressed urban and rural communities. Taken together, they will: o mobilize underused human and physical capital resources; and o redress inequalities in economic opportunity arising either from history or from more recent dislocations. The Clinton Administration's strategy to increase economic opportunity for people in distressed urban and rural communities balances investments in human and physical capital, in businesses and in housing. The evolving new approach to aiding distressed communities both provides financial resources and additional flexibility to use them for redevelopment. In addition to creating new jobs in areas of concentrated poverty, it provides residents of those areas with new means to obtain training and to move to areas with jobs and economic stability. Finally, it reforms the relationship between the Federal government and State and local governments. Communities are encouraged to think and plan strategically, to form new community-based partnerships, to integrate resources from different Federal programs, and to set measurable performance objectives. Their efforts will be judged primarily on whether they achieve the objectives they have set for themselves. Proposed 1995 funding for urban and rural development initiatives is highlighted in the Table 3B-10. Table 3B-10. PROPOSED URBAN AND RURAL DEVELOPMENT INITIATIVES (Discretionary loan levels and grant budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Agency/Program Actual Enacted Pro- 1994 1994 to posed to 1995 1995 ---------------------------------------------------------------------- HUD: Community/Economic Development Assistance Project-Based Community Development Grants Economic Revitalization Grants.................... -- -- 150 +150 NA Community Viability Fund... -- -- 150 +150 NA Empowerment Zones Grants... -- -- 500 +500 NA Colonias Assistance Program -- -- 100 +100 NA -------------------------------------- Subtotal, HUD............. -- -- 900 +900 NA USDA: Rural and Infrastructure Investment Water and wastewater disposal loans............. 850 834 977 +143 +17% Water and wastewater disposal grants............ 425 500 525 +25 +5% Community facilities loans.. 152 300 375 +75 +25% Rural Community and Business Assistance Business and Industry guaranteed loans........... 187 249 1,116 +867 +348% Intermediary relending direct loan program........ 34 100 125 +25 +25% Rural Development Grants.... 21 42 50 +8 +19% Rural Housing Assistance Single family direct loans.. 1,295 1,800 1,800 -- -- Single family guaranteed housing loans.............. 580 728 1,300 +572 +79% Rural rental assistance grants..................... 404 447 523 +76 +17% Other rural housing loan and grant assistance........... 49 85 85 -- -- -------------------------------------- Subtotal, USDA............... 3,997 5,085 6,876 +1,791 +35% Commerce: Urban/Rural Business Development EDA Guaranteed Loans........ ...... ...... 269 +269 NA Other Independent Agencies: Community/Economic Development Assistance Community Development Financial Institutions............... ...... ...... 144 +144 NA -------------------------------------- TOTAL, URBAN AND RURAL DEVELOPMENT INITIATIVES...... 3,997 5,085 8,189 +2,691 +53% ---------------------------------------------------------------------- NA: Not applicable. ---------------------------------------------------------------------- Empowerment Zones and Enterprise Communities The Administration's effort was launched in 1993 with enactment of its Empowerment Zones and Enterprise Communities. This new approach to urban and rural redevelopment is designed to empower people and communities all across the nation by inspiring Americans to work together to create jobs and opportunity. It combines tax benefits, social service grants, improved program coordination, and local flexibility in nine Empowerment Zones and ninety-five Enterprise Communities. The competitive application process will encourage creative planning by requiring each applicant to develop and submit a strategic vision for change. The community must demonstrate strong relationships between the local government and the private sector and show how its plan will combine resources from Federal programs and other sources. Urban Zones and Communities will be designated by the Secretary of HUD; Rural Zones and Communities will be designated by the Secretary of Agriculture. Federal financial support will be concentrated primarily in the six urban and three rural Empowerment Zones. Enterprise Communities will also receive grant money, and will benefit mostly from special access to other Federal programs as well as regulatory waivers from various program requirements. The President's Community Enterprise Board--the White House committee established in September to develop and implement the Administration's urban and rural revitalization strategy--communicates with leaders from local government, community and religious groups, private businesses, and others to implement the new community empowerment program. The Administration plans to designate the six urban and three rural Empowerment zones and a large portion of the Enterprise Communities by August, 1994. Tax incentives available to designated Enterprise Communities and businesses include: o tax exempt facility bonds for qualified zone businesses; and o tax credits of 50 percent for individual and group contributions to Community Development Corporations. Additional tax incentives available to Empowerment Zone communities and businesses include: o a wage tax credit for private employers hiring Zone residents. An employer located within a Zone receives a 20 percent tax credit on the first $15,000 in wages or certain training expenses for employees who live in the Zone; o accelerated depreciation for certain property in the Zones; and In addition, $1 billion of Title XX Social Service Grants will be divided among the Empowerment Zones and Enterprise Communities. Each urban Zone receives $100 million; each rural Zone receives $40 million; and each urban and rural enterprise community receives $2.95 million. Communities may use these funds for a broad range of activities, including making investments in community development corporations; purchasing or improving land; paying wages to individuals as a social service; creating drug and alcohol prevention and treatment programs; establishing training programs for zone residents on construction and rehabilitation of affordable housing; public infrastructure and community facilities; afterschool programs to protect families and children; job counseling; transportation services; and homeownership counseling. New Community and Economic Development Initiatives The Department of Housing and Urban Development (HUD) is proposing a set of new initiatives to help local governments create jobs and bring new economic vitality to urban neighborhoods. These will not only fund individual projects but also strengthen local capacity to plan, design, and implement community-building efforts. The new community economic development initiatives reinforce and enhance other programs including Empowerment Zones and Enterprise Communities, the Community Development Block Grant (CDBG) program, and the related Section 108 loan guarantees. They reflect the National Performance Review's recommendation of flexible assistance to enable localities to identify and respond to their specific needs. All will be competitively awarded, based on the strength of local commitments as well as needs. They all address the shortage of jobs and economic opportunities in so many urban neighborhoods. The new initiatives include: o Economic Revitalization Grants. The budget proposes $150 million in grants to help finance projects under the Section 108 loan guarantee program. Section 108 loans, which are guaranteed by future CDBG revenues, finance a wide range of community economic revitalization activities. The proposed grants, which would be awarded on a competitive basis, would encourage greater use of Section 108 loans by giving localities a source of loan repayment and a way to reduce the effective interest rates on the loans. o Community Viability Fund. Many distressed communities lack the capacity to use existing Federal and state resources. The budget proposes $150 million in competitive grants for strategic local and regional planning, innovative urban design, and comprehensive local and regional planning for strategic economic development. This fund would focus national attention on local and regional efforts for economic redevelopment; reduce the spatial isolation of lower-income groups; and expand amenities and community services in distressed urban areas. Twenty million dollars of these funds will be used to continue the NCDI initiative authorized last year. o Empowerment Zones and Enterprise Communities Grants. The budget proposes $500 million in grants to finance capital projects, including housing, in urban Empowerment Zones and Enterprise Communities. These grant funds would complement other Federal resources (e.g., tax incentives and Title XX Social Service Block Grants) authorized in the Omnibus Budget Reconciliation Act of 1993. The grants could be used for a range of activities, at local discretion, including: repayment of debt financed by municipal bonds; financing section 108 loan guarantee projects and other economic development projects; and project-based rental assistance, and other housing activities. o Leveraged Investments for Tomorrow (LIFT). The budget proposes $200 million within CDBG for the LIFT competitive grant program to provide subsidies for private investment in strategic nonresidential or mixed-use development projects in distressed urban neighborhoods. o Colonias assistance. The Colonias program will provide $100 million for severely distressed settlements along the United States-Mexico border. These areas have inadequate roads and drainage, inadequate or nonexistent water and sewer facilities, and grossly substandard housing. Applicants would be required to develop comprehensive action plans to address housing, infrastructure and social service needs in conjunction with other Federal and state resources. Economic Development Administration (EDA) Guaranteed Loans. The budget proposes creation of a $50,000,000 EDA credit subsidy reserve to guarantee $269,000,000 in loans to private and public entities. The loans will have broad eligibility and will help businesses in distressed communities to access investment capital. This credit reserve will complement similar programs of the Small Business Administration and Farmers Home Administration by targeting potential commercial borrowers that do not meet the criteria used by these agencies. Rural Development Initiative The Administration's Rural Development Initiative (RDI) was first proposed in 1994 when Congress enacted 67 percent of the requested $1.9 billion investment increase. For 1995, the Administration again requests increased resources to improve rural infrastructure, which provides the necessary underpinning for rural economic development. It would also directly assist rural communities and businesses to improve the quality of rural life, increase rural employment and housing opportunities, and further diversify the rural economy. The budget request includes a significant increase in funding for Department of Agriculture (USDA) Small Community and Rural Development Programs by leveraging Federal investment loan and grant programs to allow rural areas to help themselves. Overall, the total 1995 program level for the RDI is $6.9 billion (grants plus loans at face value), which is a 35 percent increase over the comparable 1994 enacted level, and more than a 70 percent increase over 1993. (See Table 3B-10.) $1.5 billion will be available in 1995 for loans and grants to improve rural water and wastewater disposal systems. Often small rural communities are unable to meet expensive water and sewage standards without Federal assistance. Community facility loans are proposed at $375 million. These loans are available to finance essential community facilities, such as hospitals and fire stations. To help support business development and job creation in rural areas, $1.1 billion would be available through USDA's Business and Industry guaranteed loan program. In addition, $125 million in one percent interest rate loans would be available to State-sponsored rural economic development intermediaries, that, in turn, relend to rural businesses and emerging "micro-enterprises". All assistance would continue to be coordinated through existing State Rural Development Councils, whose members include representatives from Federal, State and local government agencies, as well as the private sector. The RDI would also improve the housing conditions of low- and moderate-income persons in rural areas. Direct and guaranteed homeownership loans totaling $3.1 billion would be provided in 1995, an increase of nearly $600 million over 1994. Rental assistance in rural areas would also be provided through housing vouchers and grants for use in rental units. Vouchers would be targeted to areas where rental units are available, but not currently affordable for low-income persons. Community Development Financial Institutions The Administration has proposed the creation of a Community Development Financial Institutions Fund (Fund) to provide assistance to qualifying community development lenders. The purpose of the program is to support lenders who are committed to providing credit and related financial services to currently underserved and distressed communities. For example, the program will help lenders provide loans to otherwise creditworthy first-time homebuyers with limited or mixed credit histories, or to offer financing to local community groups hoping to start a daycare program, or to provide credit to an entrepreneur planning to rehabilitate affordable apartment buildings in a deteriorating area. In addition, the program will help lenders offer basic banking services--checking and savings accounts--in communities where a lack of depository institutions forces residents to rely on expensive check cashing services. The Administration supports legislation currently before Congress which would establish the CDFI Fund as an independent agency. To be eligible for assistance, a community development financial institution (CDFI) must have a primary mission of lending to and developing an underserved target population that is low-income or disadvantaged. All types of new and existing community development financial institutions will be eligible for assistance, including community development banks, community development credit unions, revolving loan funds, micro-loan funds, minority-owned banks, and community development corporations. All CDFIs will be required to present a strategic plan in their application which clearly states how they will meet the economic and community development needs of their targeted communities. The Fund will provide capital (equity investments and grants), loans, and technical assistance to qualifying applicants. A dollar-for-dollar match for investment in insured depository CDFIs will be required. A match is also required for investment in other CDFIs, but the amount is at the discretion of the Fund. Eligibility for assistance will also be based on the applicant's level of community support, the likelihood that the applicant will become self-sustaining, and the extent of community lending that will result from the federal support. All insured depositories receiving assistance from the Fund will still be subject to all laws and regulations established by Congress and the banking regulatory agencies. Community Reinvestment Act In July 1993, the President requested the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation and the Federal Reserve Board to undertake a comprehensive review and overhaul of the interagency regulations implementing the Community Reinvestment Act (CRA). Under the CRA, banks and thrifts have an affirmative obligation to help meet the credit needs of their entire communities, including low and moderate income areas. The President charged the agencies with reforming the CRA regulations to emphasize performance over documentation, and to refocus the regulations on making credit and financial services available to all communities, including underserved areas throughout urban and rural America. In response to the President's request, the agencies issued proposed revised regulations on December 21, 1993. Following a public comment period, final regulations will be issued. Currently, banks and thrifts' CRA assessments are based on 12 general factors. The regulatory agencies and examiners within the agencies have interpreted and judged these factors differently, resulting in inconsistent CRA ratings. The Administration's initiative calls for more specific, uniformly applicable assessment standards based on measurable performance in three specific areas: lending, service, and investment. Under the proposal, banks and thrifts would be evaluated based on the products and services offered in their normal course of business. The proposed revisions will improve the implementation of the CRA in four key ways. First, financial institutions will have clearer guidance. Quantitative measures of performance will be stressed instead of the current public relations and documentation focus. Second, public participation will be encouraged by advance publication of examination schedules and solicitations for public comments prior to examinations. Third, unnecessary compliance burdens will be reduced and improved performance will be rewarded. The proposal provides for streamlined, but rigorous, small institution examinations and shifts the examination burdens from the institution to the examiner. Fourth, the proposal provides for flexibility for examinations of diverse institutions by distinguishing between large and small retail institutions and among retail, wholesale, and limited-purpose institutions. The proposed reforms will help financial institutions focus on what they do best--lending--rather than on regulatory compliance. This in turn, will greatly expand the credit and financial services available in currently underserved, distressed communities. INVESTING IN THE QUALITY OF LIFE: INCREASED ENVIRONMENTAL PROTECTION AND NATURAL RESOURCES ENHANCEMENT, WITH ECONOMIC EFFICIENCY ---------------------------------------------------------------------- Preserving our heritage, enhancing it, and passing it along is a great purpose worthy of a great people. If we seize the opportunity and shoulder the responsibility, we can enrich the future and ennoble our own lives. President Bill Clinton ---------------------------------------------------------------------- With these words in his April 1993 Earth Day speech, President Clinton offered a new set of challenges to the American people regarding environmental policy and the need to invest in our own quality of life. The 1995 budget carries through that theme by focusing resources on strengthening our stewardship of the Nation's natural resources and improving our environmental regulatory and management programs. The aim of the environment and natural resources budget is to achieve these two goals by targeting limited financial resources to high-priority areas to support key programs and, in many cases, fund the initial stages of powerful new approaches to environmental management, such as ecosystem management. These priority areas comprise about one-third of total spending on the environment and natural resources. The budget request increases discretionary funding for these investment priorities by 18 percent above the 1994 enacted levels, from $8.8 billion up to $10.4 billion. (See Tables 3B-11 and 3B-12.) These priority investments include funding for such programs as State revolving funds for clean water and drinking water; natural resource protection and enhancement of our national forests, national parks, and other protected lands and waters; global climate change national action and research programs; pilot programs in ecosystem management; and international programs supporting the North American Free Trade Agreement (NAFTA). Funding for most other environment and natural resource programs is being maintained at about the same level as in 1994, with a number of individual programs increasing substantially--EPA's Operating Program, energy conservation, solar and renewable energy research and development, international environmental aid, and the Montreal Protocol. Federal facilities cleanup funding also continues to increase, though not at the same rate as in recent years. Overall, total discretionary funding for environment and natural resources increases for 1995 by 5 percent, or $1.6 billion, over 1994, from $33.6 billion to $35.2 billion. Compared to 1993, this represents a 12-percent increase, when spending totalled $31.4 billion (Table 3B-11). Table 3B-11. TARGETING RESOURCES TO HIGH-PRIORITY ENVIRONMENT AND NATURAL RESOURCE PROGRAMS (Discretionary budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Pro- 1994 1994 to posed to 1995 1995 ---------------------------------------------------------------------- Priority Investments.......... 8,100 8,798 10,385 +1,587 +18% Total Spending by Program Category: EPA's Operating Program...... 2,750 2,689 3,051 +362 +13% Stewardship.................. 15,136 15,129 15,409 +280 +2% Ecosystem Management and Biodiversity................ 56 511 610 +99 +19% Cleanup and Compliance....... 11,643 13,438 13,931 +493 +4% International Cooperation.... 1,810 1,807 2,238 +431 +24% -------------------------------------- Total....................... 31,395 33,574 35,239 +1,665 +5% ---------------------------------------------------------------------- This discussion presents the 1995 environment and natural resources budget in five major categories, which are briefly summarized below: EPA's Operating Program.--The budget for this program is one of the key indicators of the Administration's commitment to providing adequate resources to manage the country's environmental protection activities, carry out numerous Congressional mandates, and introduce needed reforms in overall Environmental Protection Agency (EPA) management. The budget requests an increase of 13 percent, to $3.051 billion, up from $2.689 billion in 1994. Along with this, the budget includes an increase in staffing to fulfill one of the recommendations of the National Performance Review, which is to encourage some conversion from contractor to Federal employees in key areas where the result will be better program control and management. Stewardship of Natural Resources.--In keeping with the President's Earth Day statement, the budget places a high priority on the management, protection, and enhancement of the Nation's natural resources. Management of Federal lands in the national parks, national forests, national wildlife refuges, lands under management by the Bureau of Land Management, and coastal and marine areas under management by the National Oceanic and Atmospheric Administration all receive increased funding. In addition, the budget requests increased support for the Climate Change National Action Plan and for State and local water infrastructure grant and loan programs. The budget request in this area is for $15.4 billion, an increase of $280 million. Ecosystem Management and Biodiversity.--Nothing better characterizes the Administration's new approach to natural resource management than the emphasis on ecosystem management. This emphasis on managing whole ecosystems replaces the piecemeal approach of the past wherein land, water, air, endangered species, and mineral and other resources were primarily dealt with one by one. The budget includes funding for four pilot projects covering a range of ecosystems: the forests of the Pacific Northwest; the Everglades of Florida; the marine ecosystem of Prince William Sound in Alaska; and an urban river in the Nation's capital. In addition, the Administration plans strong support for information collection and other programs to protect and preserve our rich heritage of biodiversity. The budget request in this area is $610 million in discretionary spending, an increase of 19 percent over 1994. Cleanup and Compliance.--A very large share of the Federal government's discretionary spending on environmental issues is devoted to cleaning up the problems of the past. The largest Federal programs are those at the Departments of Energy and Defense, cleaning up the environmental legacy of the Nation's weapons and defense programs of the past fifty years. Another key program is the Superfund, dealing with hazardous wastes at over one thousand inactive contaminated sites around the country. The Administration is proposing significant changes in this program in order to streamline it, speed cleanups, reduce their cost, and decrease private-sector spending on litigation--without sacrificing human health or the environment. The 1995 budget request for cleanup and compliance is $13.9 billion, an increase of 4 percent over 1994. International Cooperation.--International environmental leadership is part of our Nation's global role. The budget includes a significant increase in funding to support the implementation of the NAFTA agreement, the U.S. global change research program, a new initiative in global environmental education, the Montreal Protocol on reducing ozone-depleting chemicals, and environmental funding through multilateral and bilateral assistance programs. The request for $2.2 billion represents a $431 million increase over 1994. Table 3B-12. PRIORITY INVESTMENTS AND OTHER MAJOR ENVIRONMENT AND NATURAL RESOURCE PROGRAMS (Discretionary budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Pro- 1994 1994 to posed to 1995 1995 ---------------------------------------------------------------------- PRIORITY INVESTMENTS: Stewardship: Clean water state revolving funds (SRFs) (EPA).......... 1,944 1,240 1,600 +360 +29% Drinking water SRFs (EPA).... ...... 599 700 +101 +17% Water/wastewater grants/loans (USDA)...................... 548 616 661 +45 +7% Watershed restoration (EPA).. 50 80 100 +20 +25% So. CA water reclamation and reuse pilot prog. (DOI)..... ...... 10 10 -- *% Needy cities (EPA)........... 100 \1\100 100 -- *% Climate charge national action plan (DOE/EPA/USDA/Others)....... ...... 45 283 +238 +529% Enhanced Federal natural resource protection and environmental infrastructure: National parks (DOI)........ 984 1,062 1,128 +66 +6% National forests (USDA)..... 749 735 782 +47 +6% Wildlife refuges (DOI)...... 506 483 541 +58 +12% Public lands (DOI).......... 293 269 296 +27 +10% -------------------------------------- Subtotal................... 2,532 2,549 2,747 +198 +8% Recover fisheries and protected species (NOAA)... 232 231 281 +50 +22% Wetlands plan (Corps/DOI/EPA/Others)...... 590 635 708 +73 +11% Environmental technology (EPA)....................... 92 128 172 +44 +34% Green programs (EPA)......... 8 26 35 +9 +35% Federal aid highways, congestion mitigation & air quality (DOT)............... 601 681 718 +37 +5% Ecosystem management and biodiversity: Pacific northwest forest plan (USDA/DOI/Others)........... ...... 302 372 +70 +23% Everglades/South FL restoration (DOI/Corps/EPA/NOAA)........ 52 39 59 +20 +51% National Biological Survey (DOI)....................... ...... 167 177 +10 +6% International cooperation: NAFTA env. support (EPA/USDA/Treasury/Others).. 209 148 300 +152 +103% U.S. global change research program: Ground-based (DOE/NSF/USDA/NOAA/Others). 406 424 558 +134 +32% Space-based (mission to planet earth) (NASA)....... 932 1,022 1,236 +214 +21% -------------------------------------- Subtotal:.................. 1,338 1,446 1,794 +348 +24% Global environmental education (NOAA/NASA)....... ...... 1 12 +11 +1,100% ====================================== Total, priority investments\2\ 8,100 8,798 10,385 +1,587 +18% OTHER MAJOR PROGRAMS: EPA's operating program....... 2,750 2,689 3,051 +362 +13% Stewardship: o Wetlands reserve program (mandatory) (USDA).......... 15 67 283 +216 +322% o Solar and renewable energy research and development (DOE)....................... 302 340 390 +50 +15% o Energy conservation (DOE).. 576 690 978 +288 +42% o Pesticide reduction initiative: selected programs (USDA)............. 103 118 159 +41 +35% Cleanup and compliance: o Federal facility/site cleanup: DOE (environmental management program)........ 5,521 6,175 6,280 +105 +2% DOD......................... 1,686 2,579 2,710 +131 +5% Others (USDA/DOI/DOT/Others) 196 201 229 +28 +14% -------------------------------------- Subtotal................... 7,403 8,955 9,219 +264 +3% o Superfund (EPA)(Non-Fed. facility/site cleanup)...... 1,589 1,497 1,499 +2 *% o Environmental compliance and pollution prevention (DOD)....................... 1,804 2,324 2,557 +233 +10% o Research and development for environmental programs (DOD)....................... 373 343 353 +10 +3% International cooperation: o Montreal Protocol (EPA/STATE)................. 25 25 48 +23 +92% o Multilateral and bilateral international assistance (Funds Appropriated to the President/AID).............. 272 277 326 +49 +18% ====================================== Total, other major programs\2\ 15,202 17,315 18,839 +1,524 +9% ---------------------------------------------------------------------- \1\1994 funding level not yet determined pending Congressional reauthorization. \2\Total does not add due to elimination of double counts and mandatory spending. *$500 thousand or less or 0.05 percent or less. ---------------------------------------------------------------------- The sections below on EPA's operating program, stewardship, ecosystem management and biodiversity, cleanup and compliance, and international cooperation provide more detail on the Administration's budget for increasing environmental protection and enhancing natural resource conservation, with economic efficiency. EPA'S OPERATING PROGRAM The budget requests $3.1 billion for the EPA's Operating Program, providing a 13-percent increase over 1994. The Operating Program provides funding for research, regulatory development, enforcement, and State grants. This major increase signals the Administration's commitment to increased environmental protection and includes these specific initiatives: o A $53 million increase to continue the Climate Change National Action Plan implemented in CY 1993, 98 percent over 1994. o A $44 million, or 34-percent, increase in funding for environmental technology. o A $20 million, or 25-percent, increase for watershed resource restoration grants to States. o A $56 million, or 12-percent, increase for implementing the 1990 Clean Air Act Amendments. EPA's workforce will increase 4.5 percent from the 1994 approved level. Specific workforce increases are provided to continue implementation of the Climate Change National Action Plan (98 FTEs), and convert up to 900 contractor positions to EPA employees. This contractor conversion will allow EPA to address Congressional and EPA Inspector General criticisms of its reliance upon, and ability to manage, contractors by increasing contractor oversight and by reassigning certain critical tasks to Federal employees. STEWARDSHIP Water Infrastructure Environmental Protection Agency (EPA) The budget requests substantial additional funds for EPA water infrastructure in 1995. For the Clean Water State Revolving Funds (SRFs), $1.6 billion is requested, a $360 million increase over the 1994 enacted level for continued capitalization of these SRFs. In addition, the Administration is proposing substantive changes to the Clean Water Act (CWA) that address remaining national water quality impairments and promote flexibility in implementing the CWA. These changes were not final when the 1995 budget process was complete. Therefore, the budget reflects only the increased Clean Water SRF capitalization. For additional Drinking Water SRF capitalization, $700 million is requested, a $101 million increase over 1994 enacted. The budget also includes $150 million for wastewater infrastructure to control municipal sewage along the Mexico border in support of NAFTA; and a $100 million grant in targeted clean water assistance for cities that meet stringent need and user-charge criteria established last year by the Administration. Rural Water and Wastewater Infrastructure Investment The Department of Agriculture's new Rural Utilities Service funds the construction, repair, and improvement of rural water and wastewater disposal systems through direct loans and grants. These loans and grants are awarded to low-income, rural communities with populations of less than 10,000. The budget requests $977 million in loan authority, a 17-percent increase over 1994, and $525 million in grants, a 5-percent increase over 1994, for these programs. Within the amount proposed for grants, $25 million is targeted to the colonias along the U.S./Mexico border. Southern California Water Reclamation/Reuse Pilot Program The budget proposes $10 million in 1995 for a Bureau of Reclamation water reclamation/reuse pilot program in Southern California. The pilot provides Federal funds for several projects in the Los Angeles area that will contribute to efforts to improve water quality in Santa Monica Bay; reduce dependence on water imports from Mono Lake, the San Francisco Bay/Sacramento-San Joaquin Delta, and the Colorado River; and create jobs as part of the Rebuild L.A. effort. Air Quality EPA's operating program request includes an increase of $56 million for carrying out the Administration's commitment to implement the 1990 Clean Air Act (CAA) Amendments effectively. Included in this funding is $24 million, a $14 million increase, for assistance through the Montreal Protocol Facilitation Fund to help developing countries reduce their emissions of ozone-depleting chemicals. Coupled with a similar amount being provided through the State Department, this funding will enable the U.S. to meet its current commitments under the Montreal Protocol and eliminate the current payment arrearage over two years. In addition, the budget for the Department of Transportation includes estimated obligations of $718 million (a 5-percent increase over 1994) in Federal highway funds designed to improve air quality through projects to mitigate congestion. The Congestion Mitigation and Air Quality (CMAQ) Improvement Program, which is one of several sub-programs funded by the Federal-aid highways grant program, directs funds toward transportation projects in CAA non-attainment areas for ozone and carbon monoxide. The projects funded by the program must help areas make progress toward the CAA standards. Examples of projects that may be funded through this program include any Transportation Control Measure (TCM) in the CAA, construction of pedestrian and bicycle facilities, transit programs, and advanced traffic management systems that help reduce vehicle emissions. Climate Change National Action Plan On Earth Day 1993, the President announced an ambitious but achievable goal--to reduce U.S. greenhouse gas emissions to their 1990 level by the year 2000. To meet this commitment, the President announced last October the Administration's Climate Change National Action Plan comprising 50 new and expanded initiatives. The budget provides $283 million in 1995, a $238 million, or 529-percent increase, over 1994. The Action Plan is comprehensive, targeting all significant greenhouse gases--carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons--and all emitting sectors of the economy. It will foster partnerships with business to solve environmental problems and stimulate investments in the technologies of the future. The Action Plan will encourage individuals and firms to invest in cost- and energy-efficient equipment or other technologies--over $60 billion in private investment and energy savings between 1994 and 2000, with additional energy savings of over $200 billion by the year 2010. These investments will create new jobs in the sectors and industries that produce, market, or install technologies that save energy or reduce greenhouse gas emissions. Between 1994 and 2000, the Administration is committed to spending approximately $1.9 billion (generally from existing Federal resources) on the Action Plan. Enhanced Natural Resource Protection of Federal Lands The budget reflects the President's Earth Day commitment to "...set our course by the star of age-old values, not short-term expediencies; to waste less in the present and provide more for the future; to leave a legacy that keeps faith with those who left the Earth to us." The foundation for the environmental legacy that today's Americans will leave to future Americans is the beauty and wonder embodied in the Nation's national parks, forests, wildlife refuges, marine sanctuaries, and other public lands and waters. The Administration is committed to enhancing these national treasures and managing them into the future for their long-term environmental and sustainable economic value, not for short-term gain. For those areas set aside for natural resource preservation, Interior's National Park Service and Fish and Wildlife Service, and Commerce's National Oceanic and Atmospheric Administration (NOAA) will increase their efforts to protect our Nation's unique natural places found in the national parks, wildlife refuges, and marine sanctuaries. The budgets of the Agriculture Department's Forest Service and Interior's Bureau of Land Management show significant increases for efforts to manage the landscape as integrated ecosystems on a sustainable basis, rather than as unrelated fragments to be exploited and depleted separately. The budget acknowledges that these multiple-use lands can continue to provide our Nation with wealth only if they are managed with future generations in mind. Part of our Nation's legacy includes the diversity of life. The Fish and Wildlife Service, the National Biological Survey, and the National Oceanic and Atmospheric Administration will make major strides in 1995 not only to protect the Nation's endangered species, but also to prevent more of our biological heritage from becoming endangered in the future. National Park Service The President's priority investments expand funding for enhanced protection of our national parks (a total of $1.1 billion, 6 percent over 1994). Beyond additional funds for basic operating requirements and specific resource protection needs in selected parks, the budget proposes an additional $23 million for improving the professionalism of park rangers and other Park Service employees. Improving Entrepreneurial Management of National Parks To implement the National Performance Review's recommendations on promoting entrepreneurial management by the National Park Service, the budget seeks expanded authority to increase park entrance and other recreation user fees. In addition, funding is included to cover the costs of collecting these fees. This legislative proposal will raise an additional $32 million in revenues in 1995 and create a new, mandatory National Park Renewal Fund, which will receive half of the additional revenues, net of fee collection costs, and return them to the collecting parks for direct expenditure in 1996. To ensure accountability, expenditures will be held to strict performance standards based on demonstrated results in program output and project execution. Managing and Conserving Marine and Coastal Resources and Habitat The budget for the Department of Commerce's National Marine Fisheries Service (under NOAA) provides a total of $281 million to strengthen the Federal role in marine fisheries and protected species management and conservation. This is a 22-percent increase over 1994, and reflects the Administration's commitment to reversing declining marine populations, particularly commercially important fish species. The budget supports the restoration of marine species through implementation of improved fishery management practices, information, and science. Improved fishery management will help restore jobs in the depressed commercial fishing industry, as well as provide for the sustainable use of our marine resources. In addition, the budget for the National Ocean Service (NOAA) provides $12 million (a 31-percent increase over 1994) for the designation and operation of national marine sanctuaries. Sanctuaries, the marine equivalent of our treasured national parks, define areas of the marine or Great Lakes environment of special resource or human-use values. During 1995, NOAA will improve the management, research and educational aspects of twelve designated national marine sanctuaries. Three additional sanctuaries will be in development during 1995. Implementation of the Administration's Wetlands Plan In August 1993, the Administration announced a comprehensive wetlands plan to protect natural resources without impeding economic growth. The plan was developed after consultation with Congress, State and local governments, the development community, and environmental organizations. The budget provides additional resources to implement the plan, improve the wetlands regulatory process, encourage voluntary wetlands restoration on private lands, and enhance State capacity to assume a larger share of the effort to protect wetlands. The budget requests nearly $1 billion in total spending (a 41-percent increase over 1994) for wetlands restoration, acquisition, protection, research, mapping, monitoring, and education; and improved non-Federal capabilities for wetlands management. This includes $283 million (322 percent over 1994) in mandatory spending for USDA's Wetlands Reserve Program, which in 1995 will retire, on a willing-seller basis, up to 300,000 acres of current or former wetlands from agricultural production. EPA's budget includes a $5 million (50-percent) increase to its wetlands grants program, primarily to assist State governments in operating their delegated Clean Water Act Section 404 programs for regulating activities in wetlands. An enhanced non-Federal role in wetlands management is a key tenet of the Administration's wetlands policy. The budget also incorporates a legislative proposal authorizing an increase in Section 404 wetlands regulatory permit fees charged by the Army Corps of Engineers. The increased fee revenue will total $6 million in 1995, and $12 million in each subsequent year. Commercial applicants may be assessed fees on a sliding scale based on the degree of the proposed development's impact on the affected wetland and the amount of effort required to conduct the permit review. Energy Conservation The Department of Energy (DOE) conservation program funds research and development (R&D) and commercialization activities to improve energy efficiency and reduce the generation of waste and pollutants in virtually all sectors of the U.S. economy: transportation, buildings, industry, and utilities. The program also includes funding for grants to States for low-income home weatherization and State-level energy efficiency programs. The environment-related activities are concentrated in the R&D component of the program. Energy conservation activities are funded at $978 million, up $288 million (42 percent) from 1994. This increase reflects both Energy Policy Act and Climate Change National Action Plan initiatives. Major components include: a doubling of funds for R&D and commercial promotion of advanced building, heating/cooling, and appliance technologies ($179 million, up $98 million, or 120 percent over 1994); expanded R&D on electric and hybrid vehicles and other transportation technologies ($228 million, up $49 million, or 28 percent); increased outreach, demonstration, and commercialization efforts for industrial energy efficiency and waste minimization ($181 million, up $56 million, or 44 percent); improved utility planning ($13 million, up $6 million or 86 percent); and an increase in weatherization and State energy conservation grants ($325 million, up $71 million or 28 percent). These energy conservation activities will save 4 percent of the energy consumed in the U.S. by the year 2000, resulting in savings of $25 to $30 billion for consumers. These conservation efforts will also achieve a 50 million metric ton reduction in carbon dioxide (CO2) gas emissions. Solar and Renewable Energy The solar and renewable energy program within the Department of Energy funds research and development and commercialization activities to enhance the use of renewable energy sources in all sectors of the economy. These sources include photovoltaics, solar thermal, wind, and biomass energy. The program also funds research and development on high temperature superconductivity, electric transmission, and energy storage, including hydrogen. For 1995, the solar and renewable program is funded at $390 million, up $50 million or 15 percent over 1994. The 1995 program includes significant increases in areas such as photovoltaics, biomass use for utility electric generation, wind, and health effects of electric and magnetic fields. Grazing Fees The Administration supports reforms in the management of public rangelands and is committed to bringing Federal grazing fees closer to market value in order to improve the long-term health of America's rangelands. While discussions continue with Western Governors, interested groups, and the general public to refine the Administration's grazing fee proposal, the budget assumes reforms and fees announced by the Secretary of the Interior in August 1993. Hardrock Mining The Administration is committed to comprehensive reform of the Mining Law of 1872 to bring Federal policy on public land hardrock mining into the twentieth century, and do so without threatening the health of the domestic mining industry. The budget assumes fee levels and reforms consistent with H.R. 322, the House-passed version of hardrock mining law reform. Royalties are assumed at 8 percent on a "pre-smelter" basis; additional user fees to cover the costs of implementation are also assumed. The royalties and increased fees will finance a new abandoned mine restoration fund and the increased costs of implementing hardrock mining reform. Acquisition Strategies for the Conservation and Protection of Land and Water The Administration proposes several means to protect our natural and cultural assets. A primary tool is the Land and Water Conservation Fund (LWCF) administered by the Departments of the Interior (DOI) and Agriculture (USDA), funded at $254 million (same as the 1994 enacted level). LWCF funding finances land acquisition to preserve nationally important natural and historic resources and incorporate them into the Nation's national park, forest, refuge, and public land systems. It also finances State grants supporting outdoor recreation activities. The budget also includes $18 million (a $2 million, 11-percent increase over 1994) for DOI's Partners in Wildlife Program. This voluntary Federal-private partnership administered by the Fish and Wildlife Service implements fish and wildlife habitat restoration on private land. From revenues generated from Duck Stamps and other sources, DOI's Migratory Bird Conservation Fund is used by the Fish and Wildlife Service to acquire important waterfowl habitat. The Administration proposes $41 million in mandatory spending for Migratory Bird Conservation Fund acquisition in 1995. The Fish and Wildlife Service will also spend approximately $14 million in 1995 (17-percent increase over 1994) from the North American Wetlands Conservation Fund to acquire additional wetland habitat consistent with the North American Waterfowl Management Plan. ECOSYSTEM MANAGEMENT AND BIODIVERSITY The Administration is reinventing the way the Federal Government uses and cares for the environment. Several agencies have issued new or revised statements and policies supporting "ecosystem management" to maintain the sustainability and biodiversity of ecosystems, as well as economies and communities. The human component is fundamental. To ensure Federal efforts are comprehensive and efficient, the National Performance Review recommended a coordinated ecosystem management policy be established across the Federal Government. The Administration is considering the following principles for ecosystem management: o Manage along ecological rather than political or administrative boundaries. o Ensure coordination among Federal agencies, and increased collaboration with State, local, and tribal governments, the public, and Congress. o Use monitoring, assessment, and the best science available. o Consider all natural and human components and their interactions. The budget accelerates implementation of selected, on-going interagency ecosystem management efforts. Each effort described below will entail better management of existing activities. Modest savings may be possible as conflicts and the need for remediation are reduced. Ecological and Economic Sustainability: The Pacific Northwest Forests Following the April 1993 Forest Conference in Portland, Oregon, the President directed a Federal inter-agency team to develop a comprehensive, integrated approach to managing old-growth forests and their biological diversity west of the Cascade Range in Washington, Oregon, and Northern California. The Forest Plan that the President subsequently approved offers such a new approach, based on sound science and a commitment to existing law. It identifies and protects key watersheds, old-growth forests, and scores of species--such as the northern spotted owl, the marbled murrelet, and salmon--as well as the region's drinking water. Regional economic and social needs were integrated into the Forest Plan. The Administration proposed new assistance for local workers, businesses, and communities to diversify the region's economy. Implementation has already begun with oversight by an inter-agency team and participation from State and local agencies. $372 million in proposed 1995 funding (a 23-percent increase over 1994) will be used for worker retraining, business loans, watershed analysis, and ecosystem restoration. Looking at the "Big Picture": South Florida Ecosystem Restoration The natural systems from the Kissimmee River, south of Disney World, to the coral reefs off the Florida Keys are an interdependent landscape and seascape. Historically, however, these systems have been managed as if they functioned in isolation from one another. Half of the Everglades have been drained and converted to agriculture or urban development. As a result, populations of wading birds have declined by more than 90 percent, and South Florida has 56 threatened or endangered species. Florida Bay, which in the past supported huge commercial and recreational fisheries, is in a State of ecological collapse. The Administration is developing a comprehensive restoration approach to better manage the South Florida Ecosystem as a whole, working closely with State, tribal, and local governments. To support this effort, a regional working group will develop an integrated, long-term budget. This budget proposes $59 million in 1995, a 51-percent increase over 1994 enacted funding for restoration activities. A preliminary restoration plan has been developed and is being reviewed. In addition, issues of water quality, water quantity, and the effect of water delivery on the natural systems central to the restoration effort are being analyzed. Using Available Resources More Effectively: The Restoration of Prince William Sound (Alaska) In the past year, significant strides have been made to restore the natural and economic resources of Prince William Sound, which were heavily damaged by the March 1989 Exxon Valdez oil spill--the largest in U.S. history. The Administration committed $25 million to acquire environmentally sensitive lands, worked closely with the State of Alaska to hire an Executive Director for joint Federal/State restoration, and published a draft restoration plan outlining the use of the restitution and settlement payments that are being made by the Exxon Corporation into the next century (a total of $1.1 billion). In 1995, the Administration will continue leadership in the acquisition of environmentally sensitive habitat, and the development of a comprehensive research and monitoring program in the spill zone. The budget includes $90 million in mandatory spending for these activities. Restoring a Forgotten River: The Anacostia (Maryland and the District of Columbia) The Anacostia River watershed covers 170 square miles in Maryland and the District of Columbia. The river flows through some of the most densely populated and economically depressed areas of the Nation's capital. Once covered with forest and wetlands, the watershed is now highly urbanized, the natural river flow has been altered, and the river is best known for its extremely poor water quality. Until recently, little attention was given to the Anacostia in contrast to the Potomac River. In fact, while over $1 billion has been spent to bring Lyndon Johnson's dream of a fishable, swimable Potomac to pass, less than 1 percent of that sum has been spent on restoration of the Anacostia. As a result, the Anacostia has been rated among the Nation's 10 most threatened rivers. In 1987, the District of Columbia, the State of Maryland, and two Maryland counties signed a landmark restoration agreement for the Anacostia, and established a committee of local governments and regional organizations to develop a comprehensive restoration plan. The role of the Federal Government in the Anacostia is different than in the Pacific Northwest and South Florida. Rather than being a primary organizing force, it is a participant in an effort developed and led by State and local governments. The budget proposes $2.3 million in Federal funding for river basin restoration efforts in 1995. Participating Federal agencies include the Army Corps of Engineers, EPA, the National Park Service, the Forest Service, and the Fish and Wildlife Service. An example of the Administration's leadership in addressing urban watershed issues, the Anacostia River restoration effort is well underway. A recently completed restoration project that doubled the amount of wetlands in the tidal Anacostia and a soon to be completed Corps of Engineers' feasibility study of restoration alternatives are two projects jointly funded by the Federal Government, the District of Columbia, the State of Maryland, and local governments. The National Biological Survey In his Earth Day speech, the President announced his intent to create a new agency in the Department of the Interior, the National Biological Survey (NBS), to avoid the costly and unnecessary economic and environmental "trainwrecks" of the recent past. The new agency will provide better, more reliable, objective scientific information in advance of problems that might threaten animal and plant species with extinction. Inadequate science has led to poor decisions that years later have posed a false choice between jobs and the environment. By identifying potential problems early, while society still has flexibility to address them, the NBS will make it easier to continue economic growth in harmony with the environment. The budget includes $177 million for the NBS, a 6-percent increase over 1994. The increase will accelerate world-class research and monitoring of key U.S. ecosystems, such as the Northwest forests and the Everglades. The Bottom Line The Administration will better manage natural resources by bringing together all interested parties, with a focus on natural systems (rather than bureaucracy) to make informed decisions for the long run. The ecosystem management efforts and the NBS will improve the way decisions are made on the ground across the Nation. CLEANUP AND COMPLIANCE Midwest Flood Response/Recovery, and Alternatives to Levee Construction The 1993 Midwest floods were unmatched in U.S. history in property damage, environmental harm, disrupted business, and personal tragedy. To assist States and localities meet this unique challenge, the Administration proposed, and Congress enacted, an emergency supplemental bill totalling $5.7 billion to fund the Federal share of the relief effort. This budget proposes additional emergency supplemental funding totalling $411 million for the Army Corps of Engineers and the Department of Agriculture's Soil Conservation Service (SCS) for levee repairs that could not be addressed within the amounts in the 1993 supplemental. Over 450 levees should be repaired by the end of the 1994 construction season. The Administration's first priority after the floods was to return people's lives to normal as quickly as possible. At the same time, however, the Administration reviewed existing flood recovery and floodplain management policies and practices to reduce future damages and disruption of lives, and restore the environment and the natural functions of the floodplains: o In August 1993, the Administration promulgated procedures to ensure that non-structural levee repair alternatives were considered. o In November, the Administration published a list of Federal programs offering floodplain management alternatives to States, localities, and private citizens. o In the emergency supplemental, the Administration requested, and Congress provided, language to allow the SCS, under certain circumstances, to fund wetland restoration in lieu of levee repair if local landowners agreed. With the additional SCS funding requested in the budget, this new authority should result in over 100,000 acres of restored, protected wetlands. For example, levees in Louisa County, Iowa, protecting 3,000 acres of land, 2,000 acres of which are cropland, have received Federal repair funds 14 times in 60 years, totalling $3.5 million in 1993 dollars. The local levee district has applied to restore the lands to wetland condition through SCS's Emergency Wetland Reserve Program--an opportunity for a major change from the wasteful flood/repair cycles of the past. o The Administration also supports new approaches to recovery and long-term mitigation of flood hazards in urban areas. Hundreds of communities have requested assistance to relocate damaged homes, businesses, and facilities out of harm's way. Not simply reacting to the Midwest floods, the Administration also commissioned a study by Federal agency experts to ensure that the assets of the floodplain are used to the fullest extent compatible with economic and environmental values. The views of State and local governments and the private sector should be carefully considered and addressed in this study, to be released in the spring of 1994. Department of Energy Federal Facility Cleanup and Compliance The Department of Energy (DOE) faces one of the Nation's most complex environmental challenges. Its Office of Environmental Restoration and Waste Management (EM) must safely manage the generation, handling, treatment, storage, transportation, and disposal of DOE nuclear and hazardous waste (including waste management, environmental restoration, facility transition, and technology development). The budget provides $6.28 billion, an increase of 2 percent over 1994, for these key programs. Additionally, DOE has been authorized to convert 1,200 contractor positions to Federal positions through 1994 and 1995. This conversion will enable DOE to strengthen its management and improve EM effectiveness and efficiency. Waste Management activities (47 percent of the EM budget) include the minimization, characterization, transportation, treatment, storage, and disposal of radioactive, hazardous, mixed, and sanitary wastes generated by past and ongoing operations. The Environmental Restoration program (33 percent of the budget) manages assessment and cleanup at surplus and inactive sites. DOE implements 93 cleanup and compliance agreements with State regulators and EPA. These agreements include specific activities and schedules required to meet environmental laws and regulations. Facility Transition (14 percent of the budget) coordinates and oversees the transition of DOE surplus contaminated installations, facilities, and materials into the EM program for deactivation, decommissioning, or disposition. Technology Development (6 percent of the budget) is the applied research and development arm of the EM program, supporting new technologies for environmental restoration and waste management. Department of Defense Federal Facility Cleanup, Compliance, Research and Development, and Conservation Programs The Department of Defense (DOD) continues to make significant progress in environmental cleanup, compliance and pollution prevention, research and development, and conservation. The budget provides a total of $5.7 billion for these programs, an increase of 6 percent above 1994. DOD plans to spend $2.7 billion, a 5-percent increase over 1994 (including the defense environmental restoration and base closure accounts) for environmental cleanup--the identification, investigation, and cleanup of past contamination from hazardous substances and wastes. Since 1984, DOD has been engaged in cleanup at about 1,800 military installations and 8,000 formerly used defense locations, including over 60 installations scheduled for closure or realignment under the President's Fast Track Cleanup Program. In addition to cleaning up past contamination, DOD plans to spend nearly $2.6 billion for environmental compliance and pollution prevention (a 10-percent increase over 1994)--meeting current standards in air and water permits, maintaining and repairing environmental treatment facilities, and undertaking construction to meet new environmental standards. This allows DOD to comply with all applicable Federal, State, and local environmental laws. Pollution prevention includes activities designed to eliminate or reduce pollution at its source. DOD provides $353 million for research and development in 1995. This will accelerate development and deployment of dual-use technologies for environmental cleanup, waste minimization, and substitutes for hazardous waste materials. It also provides funding for research on global environmental change. Finally, funding for the DOD conservation program is $108 million in 1995. DOD is the steward for over 25 million acres of public lands. Its conservation program ensures that the biological, cultural, and historical resources on these lands are managed in balance with the Department's military mission. Superfund The Administration is proposing legislation to reform the Superfund program. Reforms to the current liability system will reduce litigation and related transaction costs for the private sector of our economy, enhance the program's fairness, speed site cleanups, and promote economic development. Reforms to the existing remedy selection process will reduce cleanup costs without sacrificing human health or the environment, while increasing community involvement. Because the Administration was still finalizing its Superfund legislative reforms when the 1995 budget data base was locked, the current request does not reflect the budgetary impact of these reforms. Pesticide Use Reduction Initiative The Administration is committed to reducing pesticide use and promoting sustainable agriculture practices. In June 1993, it announced a series of food safety legislative, regulatory, and administrative initiatives. These initiatives were designed to maintain and enhance food safety for all Americans; address recommendations of a 1993 National Academy of Sciences report on ways to protect children from pesticide risks; and strengthen Federal regulatory agency authority to make and enforce sound, timely, science-based decisions for protecting both public health and the environment. The budget supports the pesticide use reduction initiative (total funding of about $160 million, 35 percent over 1994) by increasing support for research and extension activities such as Integrated Pest Management, biological and cultural pest and disease control systems, and other sustainable agriculture systems. The budget also includes substantial increases for USDA's food intake surveys to include more information on small children, and to expand USDA's chemical use surveys and restricted use pesticide surveys to include more States and crops and post-harvest chemical use. The budget also reinstates fees on pesticide manufacturers to cover EPA's costs of issuing new pesticide registrations; and extends and increases existing fees to support EPA's program to re-evaluate the safety of pesticides already in use and re-register those determined to be safe. INTERNATIONAL COOPERATION North American Free Trade Agreement (NAFTA) Environmental Support The budget includes $300 million in support of NAFTA and the U.S.-Mexico Border Environmental Plan. This represents a $152 million (103-percent) increase over 1994 that will continue existing anti-pollution activities and provide additional resources targeted along the border with Mexico. The budget continues construction of the new Tijuana sewage treatment plant near San Diego and expands treatment capacity at the plants in Nogales, Arizona, and Mexacali, Mexico. These projects will dramatically improve water quality along the Mexico border. The budget also includes $50 million in EPA State grants to address wastewater treatment needs in colonias (unincorporated sub-divisions) along the border in Texas. These border communities lack the health and environment infrastructure enjoyed by other areas of the country. In addition, the budget requests $25 million in new resources for USDA grants for colonias to improve the quality of drinking water by installing necessary infrastructure. This will bring total EPA/USDA colonias funding to $186 million since 1993. NAFTA's environmental side agreement and related agreements between the United States and Mexico established three new institutions--the Commission for Environmental Cooperation (CEC), the Border Environment Cooperation Commission (BECC), and the North American Development Bank (NADBank). The EPA budget includes $5 million as the U.S. share for a permanent, independent CEC Secretariat to facilitate cooperation among the United States, Mexico, and Canada on environmental and conservation issues. $3 million is requested in the State Department budget for BECC operations, assisting U.S. and Mexico border States and communities design and finance wastewater treatment, drinking water, and municipal waste projects. The NAFTA Implementation Act provided Treasury with $56 million as the first of four payments to capitalize NADBank (a total U.S. share of $225 million over 1995-98). NADBank will backstop shortfalls in private-sector financing for border environmental projects. Finally, the Interior Department budget includes $11 million to enhance endangered species protection along the border, and invest more funding in national wildlife refuges and fisheries habitat restoration in the border area. U.S. Global Change Research Program (USGCRP) The Administration is committed to support a series of international agreements and national policies that address environmental changes that can have significant impacts on the world's society and economy (global warming, ozone depletion, and biodiversity). The USGCRP's goal is to support the development and implementation of these policies by continually improving our knowledge of the natural and anthropogenic processes and forces that influence these changes. In 1995, $1.8 billion is being proposed for this interagency research effort, a $349 million or 24-percent increase over 1994. The budget proposes a special research emphasis on improving our understanding of the dynamics between human behavior, the economy, and environmental change; terrestrial ecology; international ground-based data campaigns; and climate change modeling. The budget also funds the continued development of a comprehensive space-based data collection system (NASA's Mission to Planet Earth). International Environmental Funding Global Environment Facility The Global Environment Facility (GEF) was created in 1991 as a three-year pilot collaboration among the World Bank, the United Nations Development Program, and the United Nations Environment Program. Originally capitalized with approximately $1.3 billion from both direct contributions to the Global Environment Trust Fund of the GEF and co-financing arrangements, the GEF provides concessional financing to developing countries to address the problems of global warming, ozone depletion, loss of biodiversity, and pollution of international waters. The pilot phase of the GEF expires in 1994. International negotiations are underway to restructure the GEF as a permanent entity. The Administration is committed to the successful conclusion of these negotiations and the creation of a transparent, accountable GEF that can serve as the funding source for achieving global environmental benefits, including those related to the Climate Change and Biodiversity conventions. Montreal Protocol The EPA and State Department budgets provide a total of $48 million to replenish the Montreal Protocol multilateral fund, a $23 million (92-percent) increase over 1994. This will both meet the second year of a three-year U.S. commitment (1994-96) totalling $114 million, and pay down over a two-year period amounts not paid from previous years. The multilateral fund helps developing countries finance ozone-protection training, research, investments, and projects (chlorofluorocarbon (CFC) recycling/recovery equipment and devices; and retooling of manufacturing facilities for non-CFC alternatives). Global Environmental Education The budget provides a total of $12 million in 1995 for the "Global Learning and Observations to Benefit the Environment" (GLOBE) initiative. NOAA and NASA began this effort in 1994 with a total commitment of $1 million from existing resources. EPA will also participate in the initiative, beginning in 1995. Students around the world will take part in an environmental observations program designed by educators and scientists to enhance awareness of the environment and the impacts of human activities, and collect environmental data for increased scientific understanding of the earth. Although the United States would take the lead, GLOBE's long-term goal is a global partnership. Over 1,000 schools will participate globally by the spring of 1996, with a target of 100,000 by the year 2000. Multilateral and Bilateral Assistance The budget requests an increase of $49 million (an increase of 18 percent over 1994) for bilateral and multilateral environment assistance. Bilateral assistance comprises Agency for International Development (AID) activities to improve climate change, biodiversity, tropical forests, urban and industrial pollution, coastal zones and water resources, environmentally sound energy use, and sustainable agriculture in developing countries. Multilateral assistance funds U.S. voluntary contributions to the United Nations environment system and other international organizations that address a wide range of international environment activities, including the United Nations Environment Program (UNEP), Convention on International Trade in Endangered Species (CITES), and the World Meteorological Organization (WMO). Green GDP and Economic/Environmental Accounting The Department of Commerce's Bureau of Economic Analysis (BEA) has an ambitious plan to improve understanding of the interaction between the economy and the environment. BEA's three-phase plan calls for the development of a comprehensive, integrated set of economic and environmental accounts. By Earth Day 1994, BEA will present prototype estimates of the economic value of nonrenewable natural resources (including oil and gas, coal, uranium, and nonfuel minerals with a scarcity value) and a measure of gross domestic product (GDP) adjusted for the depletion of these resources. The prototype estimates will utilize a range of alternative methods for measuring the stocks of natural resources, new discoveries and extensions, and depletions. In addition, BEA will present an integrated economic and environmental accounting framework for renewable natural resources and a broader range of environmental assets. Subsequently, BEA will extend the nonrenewable natural resource accounts to renewable natural resources such as forests, soil, water, water aquifers, and fish stocks. BEA ultimately will value a broader range of environmental assets, such as clean air and the environment as a recreational resource. These final estimates will be more difficult because they must be based on less well-developed concepts and data sources. Although significant advances will be required in data as well as methods, BEA will move from near ground zero to the forefront of world efforts in integrated economic and environmental accounting. To carry out these activities, the budget proposes $1.9 million, an increase of $1.5 million over 1994. OPENING MARKETS OVERSEAS ---------------------------------------------------------------------- The truth of our age is this and must be this: Open and competitive commerce will enrich us as a Nation. President Bill Clinton ---------------------------------------------------------------------- Opening overseas markets to U.S. exports increases employment and incomes in the United States, and gives foreign consumers the same range of choices of products and services that U.S. consumers have in our open market. This Administration made great progress last year, and has a full agenda for the future. URUGUAY ROUND The Uruguay Round represents the largest, most comprehensive set of trade agreements since the GATT's inception in 1947, involving 117 countries and directly affecting approximately 85-90 percent of global trade. At the insistence of the United States, the Round not only involved traditional trade liberalization by reducing tariffs, but also, more importantly, it opened trading opportunities for many sectors of the American economy, including services, that had never previously benefitted from multilateral trade agreements. The Council of Economic Advisors tentatively estimates that, once the Uruguay Round is fully implemented in 2004, it will add $100 to $200 billion to U.S. annual GDP per year (1.5-3.0 percent of current GDP) as a direct result. The Uruguay Round will: o Reduce tariffs by an average of one-third. Significant reductions or eliminations of tariffs will occur in such sectors as construction, medical and agricultural equipment, steel, beer, pharmaceutical goods, paper, toys, furniture, and certain electronics. Chemical tariffs will be set at low rates. o Cover trade in agriculture in a comprehensive way for the first time. Countries must permit a minimum level of agricultural imports (e.g., rice imports by Japan), must cut agricultural export subsidies by 36 percent and reduce the quantity of exports subsidized by 21 percent over 6 years for developed countries (10 years for developing countries). Domestic subsidies to agriculture must be at levels 20 percent below their 1986-90 base. The United States has already achieved the required reductions in domestic subsidies. Efficient U.S. producers of farm commodities will realize significant benefits from freer markets. o Eliminate the current trade regime for textiles and apparel over a 10-year period. American consumers will pay lower prices for clothing as a result of this part of the Round. At the same time, the agreement provides a mechanism to cushion the impact on U.S. producers from sudden increases in imports. o Provide new coverage of trade in services and intellectual property. The achievement of this major U.S. objective will create a framework for the liberalization of the $900 billion worth of cross-border trade in services and approximately $3 trillion of international activity that has not traditionally been regarded as trade such as some forms of legal services. o Prohibit many export subsidies. Government subsidies generally provided for domestic purposes (e.g., for industrial research) that might give a commercial advantage to a benefitting firm are allowed, but only under certain prescribed circumstances. o Reduce other non-tariff barriers to trade. A wide range of other barriers to trade, such as unfair licensing procedures and trade-related investment measures, have been made less restrictive or removed entirely. North American Free Trade Agreement (NAFTA) NAFTA creates a $6.5 trillion market with 370 million people and eliminates most restrictions on trade between the U.S. and Mexico, our third largest and fastest growing export market. Since Mexico began to open its markets in 1986, U.S. merchandise exports to Mexico have risen by 228 percent, reaching $40.6 billion in 1992. NAFTA locks in this liberalization and eliminates the remaining Mexican barriers to U.S. exports, which are 2.5 times larger that current U.S. barriers to Mexican exports. As of January 1, 1994, 50 percent of all U.S. exports to Mexico enter Mexico duty-free, including some of our most competitive products, such as semiconductors and computers, aerospace equipment, telecommunications equipment, electronic equipment, and medical devices. NAFTA has opened Mexico's markets to U.S. service exports (e.g., telecommunications services, insurance, and banking) and eliminated numerous Mexican requirements on U.S. investment. Service trade with Canada will also be further liberalized. Unlike previous trade agreements, the NAFTA text also explicitly provides for the consideration of environmental standards and concerns, such as discouraging a NAFTA country from weakening its environmental protection to attract investment. Provisions of the NAFTA also ensure that the U.S. can maintain and enforce its existing environmental standards as well as international treaty obligations to limit trade in controlled products such as endangered species. A consensus of the economic studies of NAFTA have found that it will increase U.S. GDP, employment, and probably wages. Most studies suggest that the U.S. GDP will increase by approximately one-quarter to one-half a percentage point once NAFTA is fully implemented. Export-related jobs are expected to rise. Currently, the number of American workers producing merchandise exports to Mexico is estimated to be 700,000. With NAFTA, employment related to exports to Mexico is projected to increase by another 200,000 by 1995. This adds to the 1.5 million U.S. jobs that are already supported by merchandise exports to Canada. Real wages may also benefit, since the wages of U.S. workers in jobs related to exports to Mexico are 12 percent higher than the national average. Although NAFTA's net effect on U.S. jobs will be positive, it is also likely to lead to some job displacement. To assist those workers who may face job loss, the Administration has in place a transitional program until the Administration's comprehensive workforce security program has been enacted. Key to NAFTA's effective implementation are the side agreements negotiated by the Administration on labor, the environment and import surges. Both the labor and environment agreements obligate each NAFTA partner to enforce its domestic laws. Each of these agreements also creates a commission charged with monitoring progress under the agreements. An additional side agreement between the U.S. and Mexico will address the serious environmental problems in the border region and ensure that the environmental consequences of increased trade with Mexico will be affirmatively managed. The side agreement on import surges creates an "early warning" mechanism to identify sectors where explosive trade growth may occur and significantly harm domestic industry during the transition period. THE TRADE AGENDA The Administration has an ambitious agenda to continue market opening and export promotion. It will implement NAFTA's side agreements and other provisions such as transitional support for workers adversely affected by NAFTA and environmental cooperation between the United States and Mexico. Once the Uruguay Round of trade agreements is signed, the Administration intends to submit legislation to implement the Uruguay Round agreements for Congressional approval under the fast track procedures. The Administration will also examine the prospects for future bilateral and multilateral trade negotiations, with the latter focused on the relationship between trade and the environment, competition policy and worker rights. In addition, the Administration is engaged in comprehensive negotiations with Japan, through the U.S.-Japan Framework, in order to improve market access. The end of the Cold War has changed the nature of the requirement for export controls on critical military technologies. The Administration is relieving unnecessary burdens on U.S. business by eliminating unilateral dual-use export controls unless they are essential to national security and foreign policy interests. The Administration has significantly liberalized control levels for computers, and is negotiating with our allies to liberalize control levels for supercomputers and telecommunications. These actions carry out the President's pledge at the United Nations to "work with our partners to remove outdated controls that unfairly burden legitimate commerce and unduly restrain growth opportunities all over the world." On other issues also on the legislative agenda, the Administration will seek the renewal of the Generalized System of Preferences (GSP), a program that provides duty-free treatment to selected items from eligible, less developed countries that meet certain worker rights and other criteria. The agenda also includes a decision on whether to seek a renewal of Most Favored Nation (MFN) trade status for China. The Administration has conditioned MFN renewal on China's progress in the human rights area. Consistent with the Budget Enforcement Act, the Administration will seek bipartisan agreement on offsets for the budgetary cost of any trade legislation that reduces tariff revenues. Finally, the Administration recognized the need for a unified review of the budgets of U.S. agencies that promote trade and for the creation of a unified export provision budget as mandated by the Export Enhancement Act of 1992. The Administration is committed to strengthening the country's trade promotion efforts because exports play a vital and increasing role in creating high skill, high wage jobs for our economy. In a report published last September by the Trade Promotion Coordination Committee (TPCC) Toward a National Export Strategy, the Administration lays out a set of initiatives to enhance coordination and to consolidate federal export promotion efforts. In furthermore of this goal, and the statutory mandate, the TPCC will shortly issue a companion document which details the allocation of Federal resources across agencies involved in export promotion efforts. One focus of the review was how best to promote higher technology, U.S. exports, and ensure that budget resources went to high priority programs. The Trade Promotion Coordination Committee made several recommendations to OMB that were used in planning the 1995 budget: 1. Costs of Trade Negotiations. The five agencies with the most direct responsibility--the Departments of Commerce, State, Treasury and Agriculture, as well as the U.S. Trade Representative--expect to spend about $190 million in 1995 in negotiating and implementing trade agreements. 2. Providing Credit to Less Developed Countries. Eximbank and other agencies provide loans, insurance and guarantees to developing countries to purchase U.S. exports. The 1995 budget will request $1.4 billion to pay for this credit. 3. Helping Correct Market Imperfections. The Commerce Department and other agencies provide assistance, such as market information, to U.S. exporters. The budget will request about $290 million for these services. 4. Matching Foreign Export Subsidies. Eximbank and the Agriculture Department provide subsidies to U.S. exporters to counter foreign export subsidies. The most significant development in this area is the $150 million "tied-aid fund" that Eximbank will administer. The budget will request $682 million for matching U.S. subsidies. 5. Other Trade Related Subsidies. The Agriculture and State Departments provide subsidies to foreign importers of U.S. goods, both for business and foreign policy reasons. These subsidies will decline from about $1.0 billion in 1994 to about $0.5 billion in 1995. The review revealed that export-related expenditures total about $3.4 billion in the 1995 budget as Table 3B-13 shows: Two caveats about these figures should be borne in mind. First, the primary contribution the U.S. Government can make to promote U.S. exports is to reduce the deficit, which constricts resources for the exporters and the economy as a whole. Second, budget resources are measures of inputs not outcomes, such as increased U.S. exports. The major determinants of U.S. exports, which totalled $592 billion in 1992 for merchandise trade and services, are underlying competitiveness, foreign exchange rates and open trade regimes, not U.S. Government budget support for a limited number of U.S. exporters. Table 3B-13. EXPORT-RELATED EXPENDITURES BY CRITERIA (In millions of dollars) ---------------------------------------------------------------------- 1993 Actual 1994 Estimated 1995 Proposed ------------ -------------- ------------- Budget Budget Budget Author- Author- Author- ity Outlays ity Outlays ity Outlays ---------------------------------------------------------------------- (1) Credit problems in LDC markets. a. These programs provide credit-worthy emerging markets with otherwise unavailable credit so that they can purchase U.S. goods Department of Agriculture--Mandatory.... 752 534 403 368 394 396 Department of Agriculture--Discretionary 346 324 330 419 280 297 Export-Import Bank......... 647 259 944 458 694 555 ---------------------------------------- Subtotal................... 1,745 1,117 1,677 1,246 1,368 1,248 b. These programs provide credit and/or grant assistance to U.S. companies interested in investing in or exporting to less-developed countries. Trade and Development Agency.................... 36 23 36 32 40 39 Department of Energy....... ..... ..... ..... ..... 20 8 Overseas Private Investment Corporation............... 18 11 17 13 20 21 ---------------------------------------- Subtotal................... 54 34 53 45 80 68 ---------------------------------------- Total...................... 1,799 1,151 1,730 1,291 1,448 1,316 (2) Negotiating open markets and lowering/removal of trade barriers. These programs negotiate to open markets to U.S. goods and services. Department of Agriculture--Discretionary 11 11 12 12 12 12 Department of the Treasury. 7 7 7 7 7 7 Department of State........ 62 61 65 64 66 66 Department of Commerce..... 78 68 77 75 81 119 Office of the U.S. Trade Representative............ 20 20 21 22 21 21 ---------------------------------------- Total...................... 178 167 182 180 187 225 (3) Costs of exporting that small- and medium-sized firms cannot fully bear. These programs provide market information, matching services, trade events, etc. Department of Agriculture--Mandatory.... 50 57 33 43 26 26 Department of Agriculture--Discretionary 17 17 19 19 18 18 Export-Import Bank......... 1 1 1 1 1 1 Trade and Development Agency.................... 4 3 4 4 5 4 Department of Energy....... 4 4 9 6 13 12 Department of Commerce..... 161 142 187 178 199 210 Small Business Administration............ 19 19 10 10 15 15 Department of State........ 12 12 13 13 14 13 ---------------------------------------- Total...................... 268 255 276 274 291 299 (4) Matching foreign export subsidies. These programs attempt to combat foreign export subsidies. Department of Agriculture--Mandatory.... 567 504 563 563 532 532 Department of Agriculture--Discretionary 1 1 1 1 1 1 Export-Import Bank......... 27 3 100 13 150 44 ---------------------------------------- Total...................... 594 507 663 576 682 576 (5) Other trade related expenditures (e.g., direct subsidies) that serve objectives other than those listed above. Department of Agriculture--Mandatory.... 665 637 631 673 582 582 Department of Agriculture--Discretionary 52 52 53 53 43 43 Department of State/Commodity Import Program................... 223 223 325 325 125 125 ---------------------------------------- Total...................... 940 912 1,009 1,051 750 750 ======================================== Grand Total................ 3,779 2,992 3,860 3,372 3,358 3,166 ----------------------------------------------------------------------