You are on page 1of 344

BUDGET

BUDGET OF THE UNITED STATES GOVERNMENT

Fiscal Year 2006


THE BUDGET MESSAGE OF THE PRESIDENT

Over the previous four years, we have acted to restore economic growth, win the War on Terror,
protect the homeland, improve our schools, rally the armies of compassion, and promote ownership.
The 2006 Budget will help America continue to meet these goals. In order to sustain our economic
expansion, we must continue pro-growth policies and enforce even greater spending restraint across
the Federal Government. By holding Federal programs to a firm test of accountability and focusing
our resources on top priorities, we are taking the steps necessary to achieve our deficit reduction
goals.
Our Nation’s most critical challenge since September 11, 2001, has been to protect the American
people by fighting and winning the War on Terror. Overseas and at home, our troops and homeland
security officials are receiving the funding needed to protect our homeland, bring terrorists to justice,
eliminate terrorist safe havens and training camps, and shut down their financing.
In Afghanistan and Iraq, we are helping establish democratic institutions. Together with our coali-
tion partners, we are helping the Afghan and Iraqi people build schools, establish the rule of law,
create functioning economies, and protect basic human rights. And while the work is dangerous and
difficult, America’s efforts are helping promote societies that will serve as beacons of freedom in the
Middle East. Free nations are peaceful nations and are far less likely to produce the kind of terrorism
that reached our shores just over three years ago.
To ensure our security at home, the 2006 Budget increases funding for anti-terrorism investiga-
tions; border security; airport and seaport security; nuclear and radiological detection systems and
countermeasures; and improved security for our food supply and drinking water.
This Budget also promotes economic growth and opportunity. We must ensure that America
remains the best place in the world to do business by keeping taxes low, promoting new trade
agreements with other nations, and protecting American businesses from litigation abuse and
overregulation. To make sure the entrepreneurial spirit remains strong, the Budget includes
important initiatives to help American businesses and families cope with the rising cost of health
care. This Budget funds important reforms in our schools, and promotes homeownership in our
communities. In addition, the 2006 Budget supports the development of technology and innovation
throughout our economy.
The 2006 Budget also affirms the values of our caring society. It promotes programs that are effec-
tively providing assistance to the most vulnerable among us. We are launching innovative programs
such as Cover the Kids, which will expand health insurance coverage for needy children. We are
funding global initiatives with unprecedented resources to fight the HIV/AIDS pandemic, respond
to natural disasters, and provide humanitarian relief to those in need. The 2006 Budget continues
to support domestic programs and policies that fight drug addiction and homelessness and promote
strong families and lives of independence. And in all our efforts, we will continue to build working
relationships with community organizations, including faith-based organizations, which are doing so
much to bring hope to Americans.

1
2 THE BUDGET MESSAGE OF THE PRESIDENT

In every program, and in every agency, we are measuring success not by good intentions, or by
dollars spent, but rather by results achieved. This Budget takes a hard look at programs that have
not succeeded or shown progress despite multiple opportunities to do so. My Administration is press-
ing for reforms so that every program will achieve its intended results. And where circumstances
warrant, the 2006 Budget recommends significant spending reductions or outright elimination of
programs that are falling short.
This Budget builds on the spending restraint we have achieved, and will improve the process by
which the Congress and the Administration work together to produce a budget that remains within
sensible spending limits. In every year of my Administration, we have brought down the growth
in non-security related discretionary spending. This year, I propose to go further and reduce this
category of spending by about one percent, and to hold the growth in overall discretionary spending,
including defense and homeland security spending, to less than the rate of inflation. I look forward
to working closely with the Congress to achieve these reductions and reforms. By doing so, we will
remain on track to meet our goal to cut the deficit in half by 2009.
Our greatest fiscal challenges are created by the long-term unfunded promises of our entitlement
programs. I will be working with the Congress to develop a Social Security reform plan that strength-
ens Social Security for future generations, protects the benefits of today’s retirees and near-retirees,
and provides ownership, choice, and the opportunity for today’s young workers to build a nest egg for
their retirement.
In the past four years, America has faced many challenges, both overseas and at home. We have
overcome these challenges not simply with our financial resources, but with the qualities that have
always made America great: creativity, resolve, and a caring spirit. America has vast resources, but
no resource is as abundant as the strength of the American people. It is this strength that will help
us to continue to prosper and meet any challenge that lies before us.

GEORGE W. BUSH
February 7, 2005
OVERVIEW OF THE PRESIDENT’S 2006 BUDGET

The 2006 Budget builds on the progress the President and the Congress achieved in meeting the
priorities of the Nation during the first term. We are funding efforts to defend the homeland from
attack. We are transforming our military and supporting our troops as they fight and win the Global
War on Terror. We are helping to spread freedom throughout the world. We are promoting high
standards in our schools, so that our children gain the tools they need to succeed. We are promoting
the pro-growth policies that have helped to produce millions of new jobs and restore confidence in
our economy. And we are taking additional action to enforce spending discipline.
During his first term, the President worked with the Congress to respond to a stock market
collapse, recession, the terrorist attacks of September 11, 2001, and the revelation of corporate
scandals. To meet the economy’s significant challenges, in each year the President proposed and
signed into law major tax relief that fueled recovery, business investment, and job creation.
To rebuild and transform our Armed Forces, the President raised spending for our military by
more than a third, the largest increase in defense spending since the Reagan Administration. To
make our homeland safer, the President created the Department of Homeland Security and nearly
tripled funding for homeland security activities.

These actions had significant consequences for our Spending Restraint


Nation, and for the Budget. The President committed Non-Security Discretionary Spending
Percent change
to spend what was needed to win the War on Terror 20

and protect the homeland and committed to enforce +15


Final Year
of Prior
restraint elsewhere. The President and the Congress 15
Administration
succeeded in bringing down the rate of growth in
non-security discretionary spending each year of his 10
----------- Budget Years of First Term -----------
first term. In the last Budget year of the previous +6
+5
5 +4
Administration, non-security discretionary spending
grew by 15 percent. In 2005, such spending will rise +1
0
only about 1 percent.
-1
Because of this increased spending restraint, -5
deficits are below what they otherwise would have 2001 2002 2003 2004 2005 2006

been. Last year’s Budget projected a deficit of 4.5


percent of Gross Domestic Product (GDP) in 2004, or $521 billion. The President set out to cut
that deficit in half by 2009. Largely because economic growth generated stronger revenues than
originally estimated, and because the Congress adhered to the spending restraint called for in the
President’s Budget, the 2004 deficit came in $109 billion lower than originally estimated. At 3.6
percent of GDP, the actual 2004 deficit, while still too large, was well within historical range and
only the 10th biggest deficit in the last 25 years. With continuation of the President’s pro-growth
economic policies and responsible spending restraint, we will remain on track to cut the deficit in
half by 2009, to a level that is well below the 40-year historical average deficit of 2.3 percent of GDP.
With a growing economy, tax receipts are rising, which is helping to bring down the deficit as a
percentage of GDP. In order to sustain our economic expansion, however, we must exercise even
greater spending restraint than in the past. When the Federal Government focuses on its priorities,

3
4 OVERVIEW OF THE PRESIDENT’S 2006 BUDGET

and limits the resources it takes from the private sector, the result is a stronger, more productive
economy.
When achieved through spending restraint rather than through tax increases, deficit reduction
bolsters confidence in America’s economy. This confidence of global capital markets in America brings
important advantages to our economy in the form of lower real interest rates and lower borrowing
costs, which in turn lead to more investment and more jobs. Keeping America’s fiscal house in order,
while holding taxes down, sustains growth and justifies investors’ confidence in the U.S. economy.
The Administration proposes to tighten spending further this year by limiting the growth in
overall discretionary spending, even after significant increases in defense and homeland security,
to 2.1 percent—less than the projected rate of inflation. In other words, under the President’s
2006 Budget, overall discretionary spending will see a reduction in real terms. In non-security
discretionary accounts, the President proposes to cut spending by nearly 1 percent—the tightest
such restraint proposed since the Reagan Administration.
The Budget also proposes more than 150 reductions and eliminations in non-defense discretionary
programs, saving about $20 billion in 2006, and an additional set of reforms in mandatory programs,
saving about $137 billion over the next 10 years.
In restraining spending in the 2006 Budget, the Administration was guided by three major criteria:
First: Does the program meet the Nation’s priorities? The Budget increases funding to strengthen
our Armed Forces, improve our homeland defenses, promote economic opportunity, and foster
compassion.
Second: Does the program meet the President’s principles for appropriate use of taxpayer
resources? If an appropriate Federal role could not be identified in a program’s mission, the Budget
proposes to reduce or eliminate its funding.
Third: Does the program produce the intended results? The President’s Management Agenda
(PMA) has been in existence for nearly four years. As a part of the PMA’s Budget and Performance
Integration Initiative, the Program Assessment Rating Tool (PART) measures the success of
programs in meeting goals and identifies which are achieving their intended results and which are
not. The PART can help determine when two programs that perform similar tasks produce starkly
different results—and helps the Administration to reward only those that succeed, thus reducing
redundancies in the Federal Government. For programs that have achieved their desired results,
and do not merit continued funding, the Administration has recommended eliminations.
A Declining Budget Deficit The Budget forecasts that the deficit will continue to
Percent of GDP decline as a percentage of GDP. In 2005, we project a
5
deficit of 3.5 percent of GDP, or $427 billion. And if we
February 2004
4
4.5
Projection maintain the policies of economic growth and spending
3.6
restraint reflected in this Budget, in 2006 and each of
3.5 40-year Historical
3 Average the next four years, the deficit is expected to decline.
3.0
By 2009, the deficit is projected to be cut by more than
2
2.3 half from its originally estimated 2004 peak—to just 1.5
1.7
1.5 percent of GDP, which is well below the 40-year histor-
1.3
1 ical average deficit, and lower than all but seven of the
last 25 years.
0
2004
Final
2005 2006 2007 While the Budget projects steady and solid
2008 2009 2010
--------------------------- Projections --------------------------
improvement over the five-year budget window, the
Nation faces substantial deficit challenges about
a decade from now. At that point, when the major effects of the retirement of the Baby Boom
generation begin to be felt, deficits are projected to rise indefinitely. That is why it is necessary to act
THE BUDGET FOR FISCAL YEAR 2006 5

this year to strengthen Social Security. While the program can deliver promised benefits to today’s
seniors, it has made promises to young workers that it cannot keep. Social Security’s unfunded
obligations total more than $10 trillion, and that figure grows by hundreds of billions of dollars
with every year of inaction. This year, the President will work with the Congress on Social Security
reform that includes personal accounts and fixes the problem permanently. Such reforms are
much-needed, both to provide young workers the opportunity to build a nest egg for retirement, and
to take a major step in confronting the long-term fiscal danger posed by the unfunded obligations of
our entitlement programs.

Highlights of the President’s Budget


• Overall discretionary spending rises by just 2.1 percent, lower than the rate of expected inflation.
• Non-security discretionary spending falls by nearly 1 percent, the tightest such restraint proposed since
the Reagan Administration.
• The deficit is forecast to fall to 3.0 percent of GDP in 2006, compared with 3.5 percent in 2005.
• The deficit is forecast to fall to 1.5 percent of GDP by 2009, well below the 40-year historical average
of 2.3 percent of GDP.
6 OVERVIEW OF THE PRESIDENT’S 2006 BUDGET

HIGHLIGHTS OF PROGRAM INCREASES AND NEW INITIATIVES

(All figures depicting increases are above the 2005 enacted levels.)

Defense, Foreign Assistance, and Homeland Security


• Raises overall Defense spending by 4.8 percent, or 41 percent since 2001.
• $35 billion more between now and 2011 to reorganize the total Army forces and increase the number
of active Army combat brigades by 30 percent.
• $3.5 billion more between 2006 and 2011 to implement the Global Posture Initiative, which will increase
U.S. responsiveness and allow for the return of 70,000 U.S. troops from Cold War bases.
• $1.7 billion for unmanned vehicles, which perform hazardous tasks without risking the lives of soldiers,
sailors, airmen, and Marines.
• $3 billion, an increase of $1.5 billion, to expand the Millennium Challenge Account for foreign
assistance, to encourage sound economic and governance policies in the developing world.
• $4.2 billion for the Department of Health and Human Services (HHS), a $154 million increase, to
address the threat of bioterrorism.
• $600 million for a Targeted Infrastructure Protection Program in the Department of Homeland Security
(DHS) to assist State and local governments in reducing the vulnerability of critical infrastructure, such
as chemical facilities, ports, and transit systems.
• $581 million, a 45-percent increase, for research and development of radiological and nuclear detection
systems and countermeasures at DHS, the Department of Energy, and HHS.
• An increase of $555 million for the Federal Bureau of Investigation, an 11-percent increase over 2005
levels, and a 76-percent increase since 2001.

Economic Opportunity and Education


• $10 billion over 10 years in tax incentives to create economic Opportunity Zones in areas transitioning
to new and emerging industries.
• $3.7 billion for a new economic and community development program that consolidates 18 ineffective
or duplicative programs into a flexible and targeted program.
• $200 million to provide home purchase downpayment assistance to 40,000 low-income families.
• $28 billion increase for student aid programs through 2015, including the retirement of the Pell Grant
shortfall, an increase in the maximum Pell award by $500 over five years, and additional benefits to
student borrowers, helping more than 10 million needy students cover the costs of college.
• $1.5 billion for the President’s High School Initiative to extend No Child Left Behind (NCLB) reforms
into high schools through improved testing and programs for at-risk youth.
• $11.1 billion for IDEA special education grants to States, an increase of $508 million, taking the total
increase in Federal funding for IDEA grants to $4.8 billion, or 75 percent, since 2001.
• $603 million more for Title I to provide grants to improve education in low-income communities and
support NCLB reforms, a total increase of $4.6 billion, or 52 percent, for Title I since 2001.
• $500 million for schools and teachers to close the achievement gap and attract high-quality teachers
to high-need schools.
THE BUDGET FOR FISCAL YEAR 2006 7

Health and Compassion


• $74 billion over 10 years for health-insurance tax credits for low-income individuals and families that
will ultimately help 15 million families purchase affordable health insurance.
• $4 billion in grants to States to establish health insurance purchasing pools, through which people who
qualify for the tax credit and others can obtain coverage.
• $28.5 billion over 10 years for tax deductions for premiums for high deductible insurance, which will
ultimately help six million Americans save for their health care costs in tax-free accounts.
• $19.2 billion over 10 years for tax rebates for small businesses that contribute to their employees’ health
savings accounts, encouraging more small employers to offer health benefits.
• $2.0 billion for Health Centers in medically underserved areas, a $304 million increase, fulfilling the
President’s commitment to create or expand 1,200 center sites by 2006 and begin the commitment to
establish a health center in every high-poverty county that can support one.
• $1 billion in grants over two years for Cover the Kids, a new campaign to enroll millions more
low-income children in Medicaid and the State Children’s Health Insurance Program.
• $125 million for Health Information Technology to help achieve the President’s goal that most
Americans have electronic health records by 2014.
• $3.2 billion, an increase of $382 million, to continue to expand the President’s Emergency Plan for
AIDS Relief.
• $1.2 billion for international food aid, including a new initiative to provide $300 million as cash
assistance, allowing emergency food aid to be provided more quickly to address the most urgent
needs.
• $4 billion, an increase of 8.5 percent, for Federal housing and social programs for the homeless,
including $1.4 billion for Homeless Assistance Grants.
• $100 million to fund competitive grants for States to develop innovative approaches to promote healthy
marriages.
• $3.1 billion over 10 years in tax incentives to promote donations to charitable organizations from
individual retirement accounts.

Science and Environment


• $27 billion through 2010, to make permanent the Research and Experimentation tax credit, a critical
element in our innovation economy.
• $5.6 billion for the National Science Foundation’s vital science, education, and basic research
programs, an increase of $132 million.
• $511 million to advance new and cutting-edge nuclear energy technology to provide reliable,
affordable, and emissions-free sources of energy.
• $260 million for the President’s Hydrogen Fuel Initiative, to help reduce our dependence on foreign
sources of oil and create a new generation of hydrogen-powered vehicles.
• $286 million for the President’s Clean Coal Research Initiative to research, develop, and demonstrate
clean coal technologies, including the FutureGen Initiative to create the world’s first zero-emissions
coal-based power plant.
• $485 million, an added $34 million, or 7.5-percent increase, for the core fundamental research and
facilities of the National Institute of Standards and Technology.
• $210 million, an increase of $46 million, for assessment and clean-up of about 600 brownfields sites,
spurring development in former manufacturing areas in our inner cities.
• $144 million increase to continue upgrading National Park Service facilities to an acceptable condition.
PROMOTING ECONOMIC OPPORTUNITY AND
OWNERSHIP

Supported by the pro-growth policies


President Bush and the Congress adopted
during his first term, the U.S. economy is
strong and its fundamentals point to contin-
uing prosperity and expansion. The economy
is creating new jobs; the unemployment rate
is lower than the average of the 1970s, 1980s,
and 1990s; previously discouraged workers
are re-entering the workforce and American
businesses are investing for the future in new
equipment and technology.
The economy’s expansion has been steady
and broad-based, with new investment and job
President George W. Bush participates in a conversation about
growth in virtually all major industries, and homeownership at the Carpenters Training Center in Phoenix, Arizona,
across all regions of the country. There are March 26, 2004.
several aspects of this expansion that merit
special attention, including: the current features of our expansion that suggest long-term economic
health; the policies that restored growth to the economy; and the economic policies needed to keep
our economy on a healthy economic path.

The Economy’s Current Condition

As of the fourth quarter of 2004 the Strong Sustained Real GDP Growth
economy had grown 13 straight quarters, and Percent change from year earlier
production and income had grown more than 5
4.5
10 percent. The economy generated over 2.6 4.4
--------------Projections---------------
million new jobs from August 2003 through 4 3.7 3.6 3.5
December 2004, the unemployment rate fell 3.3 3.2 3.1 3.1
by almost a full percentage point, and a wide 3
3.0

range of indicators point to continued strong


economic growth and improving labor markets 2 1.9
in 2005.
The Administration is forecasting 3.6 1 0.8

percent real GDP growth in 2005 and 3.5


percent growth in 2006, which approximates 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
the consensus of private-sector forecasters. A Note: GDP growth for 2004 is an estimate.
wide range of indicators support this forecast.

9
10 PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Strong Productivity Growth For example, labor productivity rose at an


Percent change average rate of 2.5 percent from the beginning
5 of 1996 to the end of 2000, significantly faster
4.2% Average
4 2001-2004 than productivity growth over the previous
20 years. Since the business cycle peak in the
3
first quarter of 2001, productivity has risen
2
---Projections--- even faster, at a robust 4.2 percent average
2.5% Average
1996-2000
annual rate. Productivity growth has, as
1
expected, slowed somewhat in 2004, but at
1.4% Average
0 1974-1995 3.1 percent growth over the past 12 months
it continues to grow at historically high levels
-1
that help restrain price pressures, increase
-2 the standard of living, and sustain economic
1973 1979 1985 1991 1997 2003 2009 momentum.
Note: Productivity growth for 2004 is an estimate.
Strong productivity growth means more competitive companies and
higher paid workers.

Price stability is also an important factor Low Interest Rates and Low Inflation
for strong growth in the economy. Even with a Have Helped Restore Strong Growth
recent spike in energy prices, overall inflation Percent
20
remains subdued, helping to sustain business
30-Year Conventional Mortgage Rate
and consumer confidence in the economy.
Historically low interest rates, in part made 15
possible by low inflation, also create a positive 10-Year Treasury Note Yield
environment for growth by helping individuals
10
make large-scale purchases, such as homes,
or to refinance old loans at lower cost. Low
interest rates have also allowed businesses 5
to achieve substantial interest cost savings,
strengthen their balance sheets for the future, CPI-U (Percent Change)
0
and take better advantage of new investment
1980 1984 1988 1992 1996 2000 2004
opportunities.

Major Stock Indexes The news on labor markets, output, produc-


October 2002 = 100 tivity, inflation, and interest rates all suggest
180 the economy has moved to a higher plane of
S&P 500
170 long-term, sustainable expansion. This good
Dow Jones
160 Industrials news is reflected in the performance of the
150 Nasdaq equity markets: stock prices rose sharply
140
Composite in 2003, and again in the closing months of
2004. All the major stock indices are at or
130
near their highest levels since September
120 11, 2001. Increases in equity markets have
110 added $4 trillion to household wealth since
100 September 2002, restoring much of the losses
90 that followed the stock market decline of
Dec Apr Aug Dec Apr Aug Dec
2000-2002. Combined with gains in housing
2002 2003 2004 prices, household net worth has risen $8.5
trillion since the third quarter of 2001.
THE BUDGET FOR FISCAL YEAR 2006 11

Data released in the final days of 2004 and in early 2005 reinforce expectations for continued eco-
nomic strength. Industrial production, which started to slide in mid-2000, began to recover again by
the end of 2001 and reached a new high in December of 2004. Oil prices have fallen from their highs.
And business optimism, as measured by a periodic survey released by the National Federation of
Independent Business, reached a 20-year high in December, driven especially by business plans for
new hiring.

Tax Relief: Why it Worked

The recent economic performance is remarkable considering that the U.S. economy was in a
recession by early 2001, faced a major national emergency in September 2001, and endured the
revelation of major corporate scandals and two wars. Yet the recession of 2001 was relatively
short-lived and shallow, and it gave way to a robust expansion largely because the Congress
responded to the President’s call and enacted tax relief in 2001, 2002, and 2003.

Lower tax rates enacted in 2001 reduced ob- Contributions to Growth in Real Per Capita
stacles to growth by increasing the incentives Disposable Income
to work, save, invest, innovate, and start new Average annual percent change
6
businesses. In 2002, the President worked with Taxes
the Congress to improve investment incentives, 5 Gov't Transfers
Total: 2.8
which reversed a two-year downward trend in 4
Capital Income
Labor Income
business investment; as of the fourth quarter of
3
2004, business investment had increased seven Total: 1.7
consecutive quarters. 2
Total: 0.8
In 2003, the President worked with the Con- 1

gress to accelerate the 2001 tax relief. Also in 0


2002, an improvement in the tax treatment of
-1
small business investment helped many entre-
preneurs put more of their capital to work in -2
1991-1995 1996-2000 2001:2-2004:3
growing their firms. And the President won sig- Taxes went from being an extra drag on the economy in the 1990s to
nificant reductions in the tax rate on dividends becoming a powerful stimulus through the President’s program.
and capital gains. This added tax relief reduced
distortions arising out of the tax code that unfairly and unwisely subjected some forms of invest-
ment income to excessively high tax rates, and fundamentally improved the investment and saving
climate in the United States. Lower dividend and capital gains tax rates also significantly reduced
the incentives that previously drove businesses to rely unduly on debt financing.

POLICIES FOR A STRONGER ECONOMY

The economy has rebounded from its period of weakness, and even with a recent spike in energy
prices and continued weak economic growth among our trading partners, it appears poised for con-
tinued strength. An extended economic expansion is far from assured; however, the Administration
will continue to advance policies that promote growth, opportunity, and ownership. These steps will
help America remain the world’s best place to do business and create jobs.

Tax Policy

As outlined above, tax relief was a primary reason for the economy’s rebound. In 2004, the
President signed into law the fourth tax cut in as many years to maintain that tax relief, including
12 PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

the new 10-percent tax bracket, the marriage penalty relief, the increase in the child tax credit,
dividend tax relief, and other provisions that will continue at their current levels in most cases
through 2010. The President has called on the Congress to make this tax relief permanent so that
families and businesses can invest and plan with confidence.
Even with all the positive changes the President has signed into law, the Federal income tax code
still discourages economic growth in many ways. For example, the income tax continues to discourage
saving for many taxpayers, and so the President has proposed Retirement Savings Accounts, which
would replace the complex array of retirement saving incentives currently in the tax code, such as
IRAs, Roth IRAs, and similar saving vehicles. The President has also proposed Employer Retirement
Savings Accounts to simplify the saving opportunities individuals have through their employers.
The President also proposed Lifetime Savings Accounts that would, for the first time, allow indi-
viduals to save on a tax-preferred basis for any purpose. While important to all Americans, Life-
time Savings Accounts are especially important to low-income individuals and families who need to
save, but cannot afford to lock up funds for retirement that may be needed for an emergency in the
near-term. The President also proposed Individual Development Accounts that would give extra fi-
nancial incentive to certain low-income families to set aside funds for major purchases, such as a first
home.
For generations, the tax code has encouraged Americans to spend first and save second. These
proposals would level the incentives to save and consume, thereby promoting a culture of saving in
America that is essential to future prosperity.
These saving proposals would help address one of the tax code’s many flaws, but they cannot ad-
dress all the problems the tax code presents for the economy. Therefore, the President has called for a
fundamental reform of the Federal income tax system to make it simpler, fairer, and more pro-growth.
The Federal income tax code is not just a complicated mess; it is also a maze of special-interest loop-
holes that cause America’s taxpayers to spend more than six billion hours every year on paperwork.
Work, entrepreneurship, investment, ownership, and even education are discouraged by our tax sys-
tem. Businesses routinely make decisions about the deployment of capital not on economic merits
alone, but also on the relevance of certain chapters of our tax code.
The President appointed a bipartisan Advisory Panel on Fundamental Tax Reform to report to the
Secretary of the Treasury by July 31, 2005, on options to reform the tax code. These options will form
the basis of efforts to enact reforms that meet the President’s objectives of simplification, fairness,
and a more pro-growth tax system, while recognizing the importance of homeownership and charity
to American society.

Litigation Reform

The costs of litigation per person in the United States are far higher than in any other major indus-
trialized nation in the world. Lawsuit costs have risen substantially over the past several decades,
and a significant part of the costs go to paying lawyers’ fees and transaction costs—not to compen-
sating the injured parties. The litigation explosion is clogging our civil courts and threatening jobs
across America. Businesses with $10 million or more in revenue bear an average annual cost of
$150,000 from litigation. Small businesses with less than $10 million in revenue bear 68 percent of
business tort liability costs, even though they only take in 25 percent of business revenue.
The President is pushing the Congress to pass legislation that reduces the burden of frivolous
lawsuits on our economy. The President supports enactment of medical liability reform, class ac-
tion lawsuit reforms, and asbestos litigation reform to expedite fair resolutions and curb the costs of
lawsuits for all Americans.
THE BUDGET FOR FISCAL YEAR 2006 13

Frivolous lawsuits and excessive jury awards are driving many health care providers out of commu-
nities and forcing doctors to practice defensive medicine. This reduces access to medically necessary
services and raises the costs of health care for all. The President has proposed proven reforms, such
as common-sense limits on non-economic damages, to make the medical liability system more fair,
predictable, and timely.
The President’s proposed class action reforms seek to limit the abuse of large, nationwide class
action cases and provide justice to the truly injured parties. Class actions are an important and
intrinsic part of the U.S. legal system. However, class actions are heavily abused, which in turn
harms affected parties and undermines the American judicial system. In particular, injured parties
often receive awards of little or no value while lawyers receive large fees. The proposed class action
reform legislation recognizes that large interstate class actions require Federal court jurisdiction
because they typically affect more citizens, involve more money, and raise more interstate commerce
issues than any other type of lawsuit. In addition, the President wants to end the practice of “judge
shopping,” where trial lawyers file cases only in jurisdictions likely to favor plaintiffs. These reforms
do not alter the right of a plaintiff to bring a legitimate claim, or change controlling substantive law,
but provide additional protection and information to class members.
Asbestos cases have generated the longest-running mass tort litigation in U.S. history and have led
to the bankruptcies of at least 74 companies and to more than 50,000 lost jobs. Within the past few
years, there have been sharp increases in the number of asbestos claims filed annually. The current
system is costly to administer, with total projected costs estimated at between $200 and $265 billion.
These costs have driven exposed defendants into bankruptcy and may leave little or no funds to pay
future asbestos victims. The President has stressed the need for reform and urged the Congress to
find a fair and permanent solution.

Regulatory Reform

Excessive regulations can prevent the creation and growth of new small businesses and the jobs
they create; in the first term, the Administration slowed the growth of new rules by 75 percent. The
President wants to streamline regulations further and reduce paperwork to alleviate the burdens
that unduly handicap America’s entrepreneurs and job creators. The Administration is taking action
in several areas to streamline Federal regulations, while still moving forward with crucial safeguards
for homeland security, human health, investor and environmental protection. Regulations should be
analyzed based not just on their benefits, but also on their costs. When regulations are proposed, the
scientific research supporting their enactment must be sound, and subject to careful scrutiny. And
when regulations are out of date, they must be reviewed for relevancy, and to make sure the benefits
they produce are at least equal to their costs.

Health Care Costs

The rapid pace of health care inflation slows job growth, reduces the growth rate of worker wages,
and makes health care less accessible and less affordable for consumers. When employers have to
pay more for health coverage for their workers, they can afford less for worker paychecks. Ultimately,
the increase in overall labor costs to U.S. employers, as a result of rising health care costs, damages
our economy’s global competitiveness.
Some employers, especially small businesses, struggle to provide even basic health insurance
for their employees. State and national rules often prevent small businesses from banding
together to purchase health coverage at the same rates paid by large companies. The President
proposes to address this problem through Association Health Plans, which would permit cross-State
health-purchasing alliances of small businesses and other organizations. In addition, the President
14 PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

would make health care more affordable by offering tax credits for employer contributions to Health
Savings Accounts. These accounts allow employees to save tax-free for their out-of-pocket health
costs, and are paired with high-deductible insurance policies that cover hospitalization and other
major health care costs.
Among the drivers for health care inflation are the out-of-control costs that come from unneces-
sary medical liability lawsuits. As mentioned previously, the President has an aggressive plan to
reform our medical liability system. These reforms are critical because frivolous lawsuits have al-
ready chased many doctors out of the practice of medicine and make health care less accessible for
millions of Americans. And for the doctors who remain, these lawsuits are an ever-present fear. Doc-
tors wary of getting sued practice defensive medicine, ordering more laboratory tests or examinations
than are medically necessary, which ultimately drives up health care costs for everyone. And because
of the number of lawsuits—even those that are dismissed—insurers for doctors and hospitals raise
premiums, and these higher costs of practicing medicine are passed on to consumers. Even if your
doctor has never been sued, and even if you rarely visit the doctor, your health care has become far
more expensive because of the abuse of our medical liability laws. Those States that have adopted
common-sense reforms, such as caps on punitive damages and limits on non-economic damages, have
seen smaller and more manageable increases in doctor’s liability insurance premiums. The President
intends to work with the Congress this year to adopt similar reforms nationally.
The President also supports investments in and accelerated deployment of health information tech-
nology that will further help to control rising health care costs. These technologies can reduce medi-
cal errors, improve patient care, and save doctors and nurses time, ultimately saving our health care
system dollars.
Another way to control rising health care costs is by closing loopholes that slow the movement
of more affordable generic drugs to the marketplace. The Administration has taken action to im-
prove access to generic drugs by: limiting the time a drug company can delay the marketing of a
generic competitor; instituting rule changes to prevent drug companies from blocking the marketing
of generic versions by using patents on minor features; and tightening the rules on patent applica-
tions so that false statements to get a patent result in criminal charges. These actions are bringing
generic drugs to the market more quickly, and will save American consumers $35 billion over 10
years—savings that go not only to the consumers, but also to Medicare and Medicaid programs ad-
ministered by the States.

Trade

President Bush’s top economic priority is the creation of more jobs for American workers. Free and
fair trade helps create more higher-paying jobs for American workers by opening new markets for
American products and services, expanding choices for American consumers, and attracting foreign
companies to invest and hire in the United States. America is economically stronger when we par-
ticipate fully in the worldwide economy because 95 percent of the potential customers for American
products live outside the United States.
Trade agreements like the North American Free Trade Agreement and the World Trade Organiza-
tion (WTO) have generated benefits—lower prices and more choices—totaling $1,300 to $2,000 an-
nually for the typical U.S. family. Lowering barriers to trade by even one-third will boost the world
economy by as much as $613 billion—and the U.S. economy by $144 billion a year. To the typical
family of four, that means an additional $2,000 or more a year in savings.
Exports have reached record levels during the Bush Presidency. President Bush, working closely
with the Congress, won Trade Promotion Authority to enable quicker passage of trade agreements.
This was the first time the Congress approved Trade Promotion Authority in eight years. Using this
THE BUDGET FOR FISCAL YEAR 2006 15

authority, the Bush Administration has completed free trade agreements with 12 countries, including
Australia, Morocco, Bahrain, Chile, Singapore, and Jordan, and is negotiating free trade agreements
with 10 others. In addition, the Administration is in the process of forming a Free Trade Area of the
Americas, which will become the world’s largest free trade area.
The Administration also played a critical leadership role in successfully launching a new round
of global trade negotiations at the WTO, and has developed an aggressive plan to open interna-
tional markets for U.S. farmers—which helped generate a 10-percent increase in agricultural exports
between 2000 and 2003.
The President recognizes that some communities and some industries face adjustments in the
global economy. That is why he signed a major expansion of assistance to help workers acquire new
skills and find new jobs. The Trade Act of 2002 nearly tripled the Trade Adjustment Assistance pro-
gram. In 2003 it provided some $1.3 billion in training and income support, with nearly 200,000
workers eligible for assistance. President Bush is ensuring that U.S. trading partners abide by their
international commitments by aggressively enforcing U.S. trade laws. For example, the Administra-
tion brought the first-ever WTO case against China for its discriminatory tax treatment against U.S.
semiconductor makers. In July 2004, China agreed to end this unfair practice.

Energy

It is critical to our economy to have affordable, re-


liable, and secure energy supplies. President Bush
in his first term put forward the first comprehensive,
long-term energy policy in a decade to meet this goal
through conservation, investment in new technology,
and development of new domestic sources of energy.
The Bush Administration has completed, or is in the
process of implementing, nearly 75 percent of the 106
recommendations contained in the President’s com-
prehensive National Energy Policy, such as filling the
Strategic Petroleum Reserve to capacity.
President Bush also proposed modernizing the A hydrogen refueling station at Los Angeles International
Airport.
electricity grid by reforming outdated laws, opening
access to the transmission grid, establishing regional
planning and coordination, and establishing mandatory reliability standards to prevent blackouts.
The President has advocated funding for clean coal research, including FutureGen, and increasing
use of clean coal technology; funding for nuclear energy research and development; new efficiency
standards for consumer products; tax incentives for use of renewable sources of energy like wind and
solar power; and the opening of a small area (less than one percent) of the Arctic National Wildlife
Refuge for environmentally responsible oil and gas exploration. The Arctic National Wildlife Refuge
has the potential to provide over one million barrels of oil a day and provides access to one of the
largest known reserves of natural gas in the United States.
President Bush launched a groundbreaking initiative to develop technologies and infrastructure
to produce, store, and distribute hydrogen for use in fuel-cell vehicles, electricity generation, and
other applications. Hydrogen-powered fuel cells hold the potential to power cars, trucks, homes, and
businesses while producing virtually no pollution or greenhouse gases.
16 PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Innovation and Ownership

In virtually every industry, American


companies and entrepreneurs are exercising
the power of innovation to meet 21st Century
challenges. Invention, commercialization, and
diffusion of new ideas into new products and
services directly affect the pace of productivity
growth and the quality of peoples’ lives.
Innovation lowers costs to consumers and
brings new products to the market.
The greatest incentive for innovation is a
healthy economy that rewards the inventor
and investor. The Administration supports
strong protection of patent rights and research
President Bush talks with an employee at U.S.A. Industries in Bay Shore,
and development, as well as the enforcement N.Y., March 11, 2004.
of anti-trust laws so that new competition is
always welcomed. The President has laid the foundation for healthy innovation with tax relief that
rewards those who create jobs and invest capital in new ideas. He has also proposed many other
policies to build on this base:
• The President has proposed to make the Research and Experiment tax credit permanent to
encourage technological discovery.
• The President proposes to increase Federal spending on new research and development to $132
billion, an increase of one percent over 2005 and an all-time high.
• He has established programs to accelerate the adoption of hydrogen fuel technology, a new and
promising energy source, which has the potential to reduce our dependence on foreign sources
of energy.
• His proposals would transform health care through the rapid application of new health infor-
mation technology, thereby reducing medical errors and health care costs.
• The President has called for universal, affordable access for broadband technology by the year
2007.
• The President has placed a priority on nanotechnology, information technology, and scientific
and technological standards.
As our economy continues to expand, the Federal Government will help communities respond to
and prepare for changing conditions, particularly as some industries restructure and new industries
appear. To help workers in poor communities, the President is proposing Opportunity Zones and
other initiatives to provide tax relief, and attract new business, and improve housing and job train-
ing. In addition, he has signed legislation and increased funding to support the cleanup of former
industrial sites, which are known as brownfields.
A key element of the Administration’s policy is to promote ownership in America. The Administra-
tion has promoted and will continue to support policies that allow individuals to take greater control
over their lives through private ownership. When families have assets, they have a foundation of
stability to help them through difficult periods. A family that saves, owns a home, or invests through
a retirement, health, or education fund is building toward a brighter future and contributing to our
economy’s long-term economic health.
The best place to see these effects is where people live. More Americans own their own homes than
ever before, and the value of those homes is rising at a steady pace. Our strong housing market is
THE BUDGET FOR FISCAL YEAR 2006 17

a testament to the faith that Americans place in their homes as a long-term investment. The Pres-
ident has placed a high priority on promoting further gains in homeownership, particularly among
minorities. Already, minority homeownership is at a record high, and in 2002 the President set an
ambitious goal to add 5.5 million minority homeowners through 2010. Through downpayment assis-
tance programs, financial literacy efforts, tax incentives for building affordable homes, and Individ-
ual Development Accounts, the President is promoting the kinds of policies that will strengthen our
neighborhoods and communities and provide more Americans a chance to call something their own.
The same principle applies to other Presidential policies. Health Savings Accounts provide a bet-
ter way for Americans to control and spend their health care dollars. Lifetime Savings Accounts will
provide a better way for Americans to save for college tuition and other goals. Personal Retirement
Accounts under Social Security will provide a better way for Americans to save for their own retire-
ment, using a portion of their payroll taxes. In all these proposals, personal ownership is the common
feature, because it is the best way to achieve financial independence and prosperity.
During the past four years, this Nation experienced significant economic challenges that tested the
resolve of the American people. But as is now clear, that resolve was never in question. The economic
recovery has now become a strong expansion that is bringing prosperity to more communities across
America. Yet the on-going weakness in other nations’ economies serve as a reminder that the United
States cannot afford to take a strong economy for granted. Effective tax, monetary, labor, regulatory,
environmental, education, trade, and national security policies are all necessary for a strong and
growing economy.
At the same time, all these policies merely complement the effort, ingenuity, and strength of in-
dividual workers and companies that comprise our $12 trillion economy. Through the pursuit of
pro-growth policies, our economy is once again growing at a strong and sustainable pace. Through
a growing economy, Federal receipts are once again rising at a steady rate. Combined with spend-
ing restraint, rising revenues will reduce the near-term budget deficit. By addressing the near-term
deficit and the long-term imbalances in entitlement programs, America will further reinforce our
prospects for a strong economy in the years ahead.
THE NATION’S FISCAL OUTLOOK

Over the past four years, the Administration and the Congress have responded to the challenges
posed by recession, terrorist attacks, corporate scandals, and the War on Terror. The responses
included enacting tax relief, reducing regulatory burdens, promoting trade, supporting entrepreneur-
ship, and making a substantial investment in our homeland security and defense. Working with the
Congress, this Administration took steps to help generate and fuel the economic recovery.
Sustaining economic expansion now requires additional action, especially strong Federal
spending discipline. While the Administration and the Congress succeeded in slowing the growth
in non-security discretionary spending during the President’s first term, more needs to be done to
ensure Federal spending growth does not place unsustainable demands on our economy.
When the Federal Government focuses on its priorities and limits its claim on resources taken
from the private sector that helps sustain a stronger, more productive economy. When it is achieved
through spending restraint rather than through tax increases, deficit reduction bolsters confidence
in America’s economy. This confidence in global capital markets brings important advantages to
America’s economy in the form of lower interest rates and lower borrowing costs, which in turn lead
to more investment and more jobs. Keeping America’s fiscal house in order, while holding taxes down,
sustains growth and justifies investors’ confidence in the U.S. economy.
A strong economy and a strong fiscal condition are mutually reinforcing goals. Just one year ago,
the Nation’s economy was still emerging from the effects of multiple shocks. Last year’s Budget es-
timated a deficit of 4.5 percent of Gross Domestic Product (GDP) in 2004, or $521 billion. Private
and other forecasters had similar deficit expectations. Largely because economic growth generated
stronger revenues than originally estimated, and because the Congress adhered to the spending re-
straint called for in the President’s Budget, the 2004 deficit came in $109 billion lower than expected,
at $412 billion, or 3.6 percent of GDP.
The 2005 Budget, while providing needed increases for overall homeland security and defense
spending, still held overall discretionary spending growth to 4 percent for the second year in a row.
Non-security discretionary spending growth declined for the fourth year in a row, down from a high
of 15 percent in the final budget year of the prior Administration to about one percent in 2005.
The President’s 2006 Budget demonstrates even greater restraint: it is the first Budget to propose
a cut in non-security discretionary spending since the Reagan Administration. Even with significant
increases in security-related spending, the 2006 Budget holds overall discretionary spending to 2.1
percent growth, which is just below the projected rate of inflation. In other words, after providing
substantial increases for protecting America at home and abroad, overall discretionary spending will
still be reduced in real terms.
In the area of non-defense discretionary spending, this Budget proposes more than 150 program
reductions and eliminations, saving a total of about $20 billion dollars in 2006 alone. Discretionary
spending is subject to the annual appropriations process and is therefore easier to control because
legislation must generally be enacted each year for programs to continue.
Spending on mandatory programs is more difficult to restrain because these programs generally
operate based on formulas that are not subject to annual review. Consequently, when these programs
grow faster than originally envisioned, which is often the case, there is no automatic mechanism to

19
20 THE NATION’S FISCAL OUTLOOK

impose restraint. The only way to constrain the growth of mandatory spending is by enacting new
laws that change the rules governing spending. The 2006 Budget proposes significant reforms in
mandatory programs, saving a total of $137 billion over a 10-year period.
Among the many reforms the Budget proposes are changes to Federal high school funding pro-
grams, which have for years focused on narrow purposes that have not proven effective in improving
student academic achievement or job prospects. The Budget proposes to consolidate the funding for
these programs, and use that funding for more testing, intervention programs for struggling read-
ers, and other reforms. The Budget also creates a new economic development program that will
replace the current system of duplicative efforts that often do not show positive results. By focusing
resources on the creation of jobs and economic opportunity, and on private partnerships, this reform
will improve accountability and results. And the Budget proposes reforms in Medicaid to reduce in-
efficiencies and overpayments, while extending to States more flexibility in determining Medicaid
eligibility and how benefits are delivered.
When evaluating the Nation’s fiscal outlook, it is important to consider two different time frames:
what happens in the near-term, and what happens thereafter with the retirement of the Baby
Boom generation. With continued pro-growth policies and responsible spending restraint, the fiscal
condition of the Federal Government shows steady and solid improvement over the five-year budget
window. This period of relative success will end roughly a decade from now when the retirement
of Baby Boomers begins in earnest, and the costs of the Nation’s entitlement programs explode.
At that point, the Federal Government’s deficits are expected to begin a dramatic rise, and the
entitlement programs that are currently manageable will eventually overwhelm the rest of the
Federal budget—unless appropriate and effective reforms are enacted.

THE NEAR-TERM FISCAL OUTLOOK


The best way to compare annual deficit levels is by analyzing their size relative to the overall size of
the economy, as measured by GDP. Such a comparison gives the most meaningful measure of the size
and scale of deficits, spending, and revenue. After all, a deficit of $100 billion is less than 1 percent
of our $12 trillion economy. But $100 billion would have represented 10 percent of the $1 trillion
economy of 1970.
A Declining Budget Deficit Near-term budget projections show a trend of
Percent of GDP steady decline in deficits as receipts grow and the
5
spending restraint in this Budget is enforced. The
February 2004
4
4.5
Projection Administration, like private forecasters, projects that
3.6
the economy will grow at a strong and steady pace in
3.5 40-year Historical
3 Average coming years. Fueled by the President’s pro-growth
3.0
policies, the Administration projects tax receipts to
2
2.3 grow faster than outlays in each of the next five years.
1.7
1.5 From 2005 to 2010, receipts are projected to rise by
1.3
1 an average of nearly 7 percent annually, more than
two percentage points faster than average growth in
0
2004 2005 2006 2007 2008 2009 2010 spending.
Final --------------------------- Projections --------------------------
Last year, the Administration’s Budget projected a
deficit of 4.5 percent of GDP in 2004. But by the end of
the year, the deficit had shrunk to 3.6 percent of GDP, which while still too large, was only the 10th
largest deficit in the last 25 years. Even with renewed economic growth and current and past spend-
ing restraint measures, the Administration expects that deficits for 2005 and 2006 will be higher
than projected last year. The 2005 deficit estimate in last year’s Budget did not include the costs
THE BUDGET FOR FISCAL YEAR 2006 21

of 2005 supplemental appropriations to fund continuing operations in Afghanistan and Iraq. Since
that Budget was released, the Congress enacted $25 billion in additional appropriations to support
military operations. The Administration intends to submit a supplemental appropriations request
of approximately $81 billion primarily to support operations for the remainder of the fiscal year. The
2006 Budget’s spending and deficit projections fully reflect the outlay effects of these two supple-
mental requests. However, the Budget does not reflect the effect of undetermined but anticipated
supplemental requests for ongoing operations in Iraq and Afghanistan beyond 2005.

While the 2005 deficit rises in nominal dollar Declining Federal Debt
terms to $427 billion, it falls to 3.5 percent of Debt held by the public as a percent of GDP
GDP. And in 2006, the deficit is expected to 120
fall further still, to 3.0 percent of GDP, which 110
would be only the 15th largest in 25 years. All 100
these projections assume both the continued 90
economic growth we have seen, as well as the 80
spending restraint included in this Budget. If 70
we maintain these policies, we cut the deficit 60
by more than half from its originally estimated 50
2004 peak—to just 1.5 percent of GDP, which 40
is well below the 40-year historical average of 30
2.3 percent. 20
10
Financial markets look at deficits using 1940 1950 1960 1970 1980 1990 2000 2010
additional methods. One important measure
is the ratio of all publicly-held Federal debt to GDP. This ratio, which has varied between 34 percent
and nearly 50 percent over the past 20 years, is projected to be 40 percent at the end of 2007, and to
fall to 39 percent in 2010. This decline is expected to occur because projected deficits as a share of
GDP are modest, and because economic growth is projected to be strong over this period.

THE LONG-TERM FISCAL CHALLENGE: A CALL FOR REFORM

As discussed above, the Federal Government’s near-term fiscal outlook is expected to improve
steadily over the next several years. The same cannot be said of the long-term deficit picture as
a result of long-standing imbalances between what major entitlement programs currently promise
in benefits and the resources expected to be available to meet those promises. Due to a combination
of demographic and cost pressures, Social Security’s and Medicare’s unfunded obligations pose the
real fiscal danger to the Federal budget and to our economy in general.

Social Security

Social Security today operates on what is known as a “pay-as-you-go” basis, in which current worker
payroll taxes are used immediately to pay for the benefits of current retirees and other beneficiaries.
However, demographic trends indicate that the ratio of workers to beneficiaries will continue to de-
cline. In 1950, there were about 16 workers paying for every beneficiary. Today, there are slightly
more than three—and by the time today’s young workers retire, there will be only two workers to
support each person on Social Security. Despite multiple efforts in the past to patch the system with
cuts in benefits and increases in the payroll tax and the retirement age, the Social Security system
remains on a clear path to fiscal failure.
A snapshot of the Social Security system today gives no hint of the trouble to come because it shows
Social Security with a cash surplus estimated to be $76 billion in 2006. However, this surplus begins
22 THE NATION’S FISCAL OUTLOOK

to decline in 2008 as the first wave of Baby Boomers retire. In 2018, the Social Security system
will collect less in taxes than it pays in benefits and will shift into a permanent cash deficit. In
2042, Social Security will exhaust its Trust Fund assets and will be bankrupt. If Social Security’s
problems are left unresolved, today’s young workers will see their benefits sharply and suddenly cut,
their children’s payroll taxes raised, or both.
Another measure of Social Security’s long-term fiscal condition comes from the long-run net present
value of its future income and promised benefits. Looking out over the next 75 years, Social Security
is carrying a deficit of $3.7 trillion, a figure that includes its existing Trust Fund balances of $1.5
trillion.
The picture is actually worse, because the 75-year window takes credit for the payroll taxes paid
by the next generation of workers while failing to count benefit payments owed to them beyond
the 75-year timeframe. A more accurate way to describe Social Security’s financial jeopardy is by
calculating how much it would cost to fix the problem permanently. An analysis that captures the
net present value of all Social Security tax collections and promised benefits shows Social Security
facing a deficit of $10.4 trillion, allowing for the present value of Social Security’s Trust Fund bal-
ance. That figure is estimated to rise by around $600 billion in 2005, and by increasing amounts each
year thereafter, if no reforms are enacted.
The long-term fiscal imbalance in Social Security is well known to investors at home and abroad.
Failure to rectify Social Security’s finances could cause financial markets to question the Federal
Government’s commitment to sustainable fiscal policies. Such a conclusion would at some point find
its expression in steadily rising real borrowing costs to the Federal Government, a drop in confidence
in the American economy that would lead to less business investment, and slower overall economic
growth.
Only significant changes in policy can prevent Social Security from driving the Federal Govern-
ment to debt levels that are unsustainable. The sooner necessary policy changes are made, the less
disruptive they will have to be. The President’s Commission to Strengthen Social Security presented
three options as the basis for reform in its 2001 report. Many other proposals have been advanced in
the intervening period as well.
The President has made clear that in 2005, he will pursue legislation that permanently fixes Social
Security, building on recent reform efforts and following these guiding principles:
• Benefits for today’s retirees or those near retirement should not be changed. Americans who
have already put in an entire working career are counting on Social Security benefits. We must
continue to honor the commitments we have made to our seniors.
• Payroll taxes must not be increased. Past shortfalls in Social Security have been addressed by
repeatedly raising payroll taxes on current workers and employers. These efforts have never
corrected the problem. Moreover, higher taxes would hurt economic growth, which is vital to
both near-term and long-term deficit reduction.
• Social Security reform must also include the creation of voluntary personal accounts so that
younger workers can have greater control over and actual ownership of their payroll tax dollars.
These accounts will enable American workers to build a nest egg for retirement.
Voluntary personal accounts under Social Security involve financing the transition from today’s
unsustainable “pay-as-you-go” system. The creation of these accounts would therefore have impor-
tant consequences for Federal finances in both the near-term and in the long-run, but these effects
do not have the same impacts on the economy as traditional debt financing.
The effect of creating personal accounts would be to protect some portion of worker payroll taxes
from the reach of the Federal Treasury. The Federal Government might therefore have to increase its
borrowing in the private capital markets by an amount equal to the annual flow of payroll taxes into
THE BUDGET FOR FISCAL YEAR 2006 23

the personal accounts. While the creation of personal accounts would increase Federal borrowing,
they would also reduce the Federal Government’s future spending obligations by an equal amount.
Both effects must be shown and understood together—both the size of near-term investments in
personal accounts, under reasonable participation assumptions, and the corresponding amount by
which reform would reduce future unfunded obligations. It is misleading to measure only the near-
term impacts.

Social Security: The Need for Action


In 2008—just four years from now—the first cohort of the Baby Boom generation will reach 62, the earliest
age at which Social Security retirement benefits may be claimed and the age at which about half of prospec-
tive beneficiaries choose to retire; in 2011, these individuals will reach 65 and will thus be eligible for Medi-
care. At that time, under the intermediate assumptions of the OASDI trustees, there will still be more than
three covered workers for each OASDI beneficiary; by 2025, this ratio is projected to be down to 2–1/4. This
dramatic demographic change is certain to place enormous demands on our nation’s resources–demands
we almost surely will be unable to meet unless action is taken. For a variety of reasons that action is better
taken as soon as possible.

Alan Greenspan, Chairman of the Federal Reserve


Testimony, House Budget Committee
February 25, 2004
Even under a wide range of assumptions, CBO’s projections point to a financial imbalance in the Social
Security system over the long run. Changes in economic growth can affect the system’s finances. But
because the initial benefits paid to new recipients are indexed to the overall growth of earnings, the effect of
such changes is muted. For the most part, the future financial status of Social Security will be driven not by
economic conditions but by long-term demographic shifts–most notably, the aging of the population. That
trend is generally predictable, because anyone who will receive retirement benefits during the next 62 years
has already been born.
Congressional Budget Office
“The Outlook for Social Security”
June 2004
Our Social Security challenge is more urgent than it may appear. Failure to take remedial action will, in com-
bination with other entitlement spending, lead to a situation unsustainable both for the federal government
and, ultimately, the economy.
General Accounting Office
“Social Security: Analysis of Issues and Selected Reform Proposals”
January 15, 2003
The fundamentals of the financial status of Social Security and Medicare remain problematic under the in-
termediate economic and demographic assumptions. Social Security’s current annual cash surpluses will
soon begin to decline and then turn into rapidly growing cash deficits toward the end of the next decade
as the baby-boom generation retires. . . . As the reserves in Social Security and [the Medicare Hospital
Insurance Trust Fund] are drawn down and [Medicare Supplementary Medical Insurance Fund] general rev-
enue financing requirements continue to grow, the pressure on the Federal budget will intensify. We do not
believe the currently projected long run growth rates of Social Security and Medicare are sustainable under
current financing arrangements.
Social Security and Medicare Boards of Trustees
“Status of the Social Security and Medicare Programs”
2004
24 THE NATION’S FISCAL OUTLOOK

Under most circumstances in which the Federal Government borrows funds, it is because the
Government is spending more on goods, services, and transfer payments than it is taking in. In the
case of personal accounts, however, the reduction in national savings from the Federal Government’s
increased borrowing exactly matches the increase in private saving that occurs through the personal
accounts. There is no net reduction in national saving arising from this arrangement, nor is there
any reduction in the flow of saving available to the private sector. For this reason, the creation
of personal accounts is not expected to have any detrimental effect on financial markets or on the
overall economy.
Comprehensive reform that includes personal accounts would permanently eliminate the
unfunded obligations of the current system. Ultimately, that is the standard by which any legisla-
tion to strengthen the Social Security system must be held. To achieve this, the long-term growth in
annual Social Security outlays cannot be greater than the long-term growth in program-generated
receipts.
Projections regarding various proposals’ fiscal effects and their impact on beneficiaries will be
based on analyses provided by the non-partisan actuaries and other technical experts at the Social
Security Administration.

Medicare and Other Entitlement Programs

Medicare’s financial problems are in part driven by the same demographics we see in Social
Security, but Medicare’s problems are compounded by the rising cost of health care. This suggests
that effective solutions to Medicare’s long-term financial shortfall may differ significantly from the
solutions for Social Security. For example, policies that foster a strong economy will tend to reduce
Medicare’s shortfall because a strong economy produces additional receipts without generating
additional promised benefits. By comparison, an increase in Social Security payroll tax receipts
arising from a strong economy produces commensurate increases in promised benefits.
In 2003, the President signed into law the Medicare Modernization Act (MMA), which added a pre-
scription drug benefit to the program and created the Medicare Advantage program, in which private
health plans compete for seniors’ business by providing enhanced benefits. Seniors and other ben-
eficiaries will now have access to prescription drugs and more preventive services under Medicare.
And importantly, the legislation lays the foundation for addressing Medicare’s long-term financing
challenge by dramatically increasing beneficiary choices and introducing market-based competition,
which are the essential ingredients for greater efficiency and quality in our health care system.
Among its reforms, the MMA created new tax-favored Health Savings Accounts (HSAs). These
accounts allow workers to save tax-free for their out-of-pocket health costs, and are paired with low-
premium, high-deductible health plans that cover hospitalization and other major health care costs.
HSAs represent an innovation in health care coverage with improved incentives.
HSAs make basic health insurance more affordable, and promote health care decisions that are
more effective for both patients and the entire health care system. For example, people with HSAs
have a financial incentive to stay healthier, since fewer doctor visits mean more dollars left over in
the savings accounts. When consumers use their accounts to pay for out-of-pocket expenses, they are
more likely to seek out the best quality and the lowest price. This should drive health care providers
to become more efficient and more cost-conscious, to the benefit of all health care consumers.
Individuals and families with HSAs are less likely to be dependent on employment or the insurance
policies of a single employer for their health coverage. The President has proposed extending the
benefits of HSAs in two important ways: he has proposed giving small business owners a refundable
tax credit for contributions made to employees’ HSAs; and he has proposed increasing the availability
of HSAs for low-income families by providing a $1,000 direct contribution to their HSA in conjunction
THE BUDGET FOR FISCAL YEAR 2006 25

with a refundable tax credit of up to $2,000 toward the purchase of a low-premium, high-deductible
health care plan.
The President has also advanced policies to accelerate the integration of the latest information
technologies into health care. He has set a goal that most Americans have electronic health records
within the next 10 years. Electronic health records are already making a difference in our health
care system, making patient records available to doctors in emergency situations and routine visits,
promoting accurate medical notations and prescriptions, and helping to prevent avoidable medical
errors, all while protecting patient privacy. By improving efficiency and reducing errors, we will see
health care savings, making all health care in America more affordable and accessible.
The President is also proposing medical liability reforms. The costs of medical liability insurance
are driving doctors out of practice, or are being passed on to patients and their employers in higher
insurance rates. In addition, the pressure of medical liability lawsuits is causing more doctors to
practice medicine defensively and order more lab tests or exams than is necessary, which is driving
up health care costs even further. By enacting national medical liability reform we will be able to
address the problem of junk lawsuits against doctors, clear our court system of unnecessary litigation,
and help to control health care inflation.
These policies will increase competition and individual choice in the health care marketplace, drive
the industry toward much greater efficiency, and eliminate some of the pressures that are lifting
health care costs. Taken together, they will slow the rate of health care inflation, slow the rate of
increases in Medicare costs, and thereby diminish Medicare’s unfunded obligations.
Much can also be done within Medicare itself to bring down its unfunded obligations. For example,
to help address the program’s long-term fiscal challenges, the MMA requires the Medicare Trustees
in their annual report on the program’s financial soundness to analyze the combined fiscal status of
the two Medicare Trust Funds and warn the Congress and the President when Medicare’s reliance on
general revenue funding will exceed 45 percent. If the Trustees determine that general revenue fund-
ing will exceed 45 percent in two consecutive years, a Medicare Funding Warning is issued, which
makes available special legislative procedures to allow the President and the Congress to address
the shortfall in the Medicare Trust Funds. This new fiscal safeguard will alert the Congress and
the President should Medicare’s dedicated revenues fall below adequate levels. The Administration
supports efforts to integrate Medicare’s financing structure and monitor the program’s reliance on
general revenue funding, such as a unified Medicare Trust Fund.
Other entitlement programs pose similar challenges to the long-term fiscal condition of the Federal
Government. For example, the Medicaid program, which was created in 1965 to help States provide
health care benefits to low-income families with children, has evolved into an extremely complicated
program that emphasizes institutional settings, when home and community-based settings could be
more appropriate. And the program is growing rapidly. Counting the States’ share of costs, it is
now larger than Medicare. Total Medicaid expenditures will reach a projected $338 billion in 2006.
Medicaid has become the largest expenditure in many State budgets, surpassing even primary and
secondary education. Yet, because of the program’s cumbersome structure, there are many very low-
income Americans who are not helped by Medicaid.
Over the long term, Medicaid is not only a serious fiscal challenge for both Federal and State gov-
ernments, but its current structure is not the most efficient way to deliver modern medical care to
the poor. The Administration proposes to restore Medicaid’s original promise to protect and promote
the health of the least financially fortunate among us, while fostering a more balanced Federal-State
partnership that improves the program’s long-term financial stability. The program’s open-ended
finance structure encourages efforts by States to draw down Federal matching funds, sometimes in-
appropriately. These financing practices undermine the Federal-State partnership required by the
Medicaid statute and jeopardize the financial stability of the program. The 2006 Budget proposes
26 THE NATION’S FISCAL OUTLOOK

several program integrity measures to reduce inappropriate use of Federal commitments under Med-
icaid. Also, the Administration proposes to apply lessons learned from the successful State Children’s
Health Insurance Program by giving States more flexibility to provide needed care to larger num-
bers of the uninsured, while reducing needless overhead and waste. Together with his package of
proposals to help the uninsured, this reform will focus on increasing health insurance coverage for
low-income families while also promoting more efficient and rational ways of delivering care, such as
community-based care alternatives for persons with disabilities. (For a more complete description of
reforms in the Medicaid program, please see the Department of Health and Human Services chapter.)

BUDGET ENFORCEMENT AND PROCESS REFORM

To enforce spending discipline in the 2006 Budget, as well as maintain spending discipline over
the long-term, the Administration proposes several budget process reforms.
The Administration supports the establishment of overall discretionary spending caps and pay-as-
you-go (PAYGO) rules for mandatory spending. To further this goal, the Administration transmitted
in April of last year the Spending Control Act of 2004. The Administration plans to repropose that
legislation, including appropriate updates and revisions.
In addition, this Budget proposes that the Congress adopt the Administration’s discretionary cap,
PAYGO requirement, long-term unfunded obligations controls, and associated reforms as part of its
2006 Budget Resolution.
The Administration’s proposals are based largely on the lapsed Budget Enforcement Act (BEA).
From 1991 to 2002, the BEA set statutory budget authority and outlay limits on discretionary
spending and a PAYGO requirement for all other legislation that were enforced by across-the-board
spending reductions. Until budget surpluses surfaced in 1998, the BEA proved to be an effective
brake on the growth in spending.
Discretionary Spending Limits. The Administration proposes annual statutory limits on
discretionary spending through 2010 that would be adhered to throughout the budget process. The
President’s proposal would require a three-fifths vote of the Senate for an appropriations bill that
caused these limits to be exceeded. If an appropriations bill was enacted that caused these limits to
be exceeded, OMB would be required to make across-the-board cuts to eliminate the excess spending.
Currently, there are inadequate incentives in budget scoring rules to fund program integrity activ-
ities to ensure that taxes owed to the Government are collected, eliminate the estimated $40 billion
in improper payments, and combat other fraud and abuse in Government programs. For example,
if the Budget allocates $100 million for the collection of $500 million in delinquent tax payments,
the savings of $400 million are not counted as a form of savings. Thus, neither the Congress nor
the Administration has a budget scoring incentive to provide for such program integrity activities.
The Administration proposes an incentive for funding these activities by adjusting discretionary caps
upward to allow additional funding for continuing disability reviews, health care fraud detection, un-
employment insurance integrity, and Internal Revenue Service delinquent tax collections.
Mandatory Spending Controls. Mandatory spending constitutes spending that is not generally
under the discretion of the Congress in the annual appropriations process. When President Kennedy
was in office, mandatory spending represented one-third of the budget. Today, it amounts to nearly
two-thirds of the budget.
The Administration’s proposal would modify the PAYGO mechanism that was in existence from
1991-2002 to require legislative proposals that increase mandatory spending to be offset by reduc-
tions in other mandatory spending. Budget enforcement mechanisms should be focused on controlling
spending, not on raising taxes on America’s workers and families. Under the proposal, tax increases
THE BUDGET FOR FISCAL YEAR 2006 27

could not be used to offset mandatory spending increases; nor would tax relief legislation be subject
to PAYGO procedures. Like the discretionary spending enforcement mechanism, this proposal would
require a three-fifths vote of the Senate for legislation that violated this requirement. If legislation
was enacted that caused a net increase in mandatory spending, OMB would be required to make
across-the-board reductions in non-exempt programs.
Long-term Unfunded Obligations. The real fiscal danger is posed by the long-term unfunded obli-
gations of the Social Security, Medicare, and other entitlement programs. Spending decisions on enti-
tlements often have ramifications on the budget outlook far beyond the conventional 10-year window
used to score changes in policy. Enforcement mechanisms are needed to address the long-term impact
of entitlement spending expansions. The Budget proposes to establish a new measure to analyze the
long-term impact of legislation on unfunded obligations of major entitlement programs. If legislation
caused an increase in these obligations, it would require a three-fifths vote of the Senate.
Line-Item Veto Authority. A perennial criticism of the Federal Government is that spending and tax
legislation contain too many provisions, or earmarks, that would likely not become law if considered
as a stand-alone bill. The persistence of these items in the Budget diverts resources from higher
priority programs.
The President proposes that the Congress address this issue by providing him and future
Presidents with a line-item veto that would withstand constitutional challenge. From the Nation’s
founding, Presidents have exercised the authority not to spend appropriated sums. However, the
Congress sought to curtail this authority in 1974 through the Impoundment Control Act, which
restricted the President’s authority to decline to spend appropriated sums. The Line-Item Veto
Act of 1996 attempted to give the President the authority to cancel spending authority and special
interest tax breaks, but the U.S. Supreme Court found that law unconstitutional. The President’s
proposal would correct the constitutional flaw in the 1996 Act.
Specifically, the President proposes a line-item veto linked to deficit reduction. This proposal would
give the President the authority to defer new spending whenever the President determines it is not an
essential Government priority. All savings from the line-item veto would be used for deficit reduction,
and could not be applied to augment other spending.
The Budget proposes other budget process reforms, including proposals to give the budget resolu-
tion the force of law, move to a biennial budget and appropriations process, and prevent Government
shutdowns through an automatic continuing resolution.
In addition to these legislative proposals, the Administration plans on augmenting its own controls.
To contain the cost of administrative decisions that can increase the cost of mandatory spending, the
Office of Management and Budget plans to establish an internal review process that requires agen-
cies, when proposing substantial administrative decisions that increase mandatory spending, to also
propose other offsetting administrative decisions that reduce mandatory spending. This “administra-
tive PAYGO” approach would complement congressional adoption of PAYGO for legislated increases
in mandatory spending.
The reductions and reforms in the 2006 Budget will contribute to an even stronger near-term out-
look for the Federal budget. And they will help strengthen the Federal Government’s long-term fiscal
outlook. Federal programs that place a large and rising claim on current tax dollars represent a real
danger to our current and future fiscal health, and to our economy as a whole. It is critical that we
take steps to confront these rising costs, and promote responsible reforms that place our entitlement
programs on a path towards balance.
PROTECTING AMERICA

The 2006 Budget helps meet the primary responsibility of the Federal Government: To defend our
Nation from attack. The Budget meets this commitment by increased funding for the Department of
Defense, international diplomatic and security efforts, and homeland security functions.
The Budget raises defense spending by 4.8 percent and raises homeland security spending by 8
percent, including fee funded activities. Since 2001, the Administration will have raised defense
spending by more than 40 percent and more than tripled funding for homeland security. These funds
help protect America by supporting our all-volunteer forces with higher pay and better equipment
as they fight and win the Global War on Terror. These funds are helping our military transform to
meet the emerging threats of the 21st Century. And these funds are supporting our efforts to defend
against terror threats at home.
In the War on Terror, the Bush Administration’s primary strategy is to take the fight to the en-
emy. Our ability to do so depends on steady support for our troops and their mission in Iraq and
Afghanistan. Working with a broad coalition, our troops have liberated these nations from the rule
of tyrannical regimes that actively supported terrorist organizations. With the continued support of
the Congress, our troops will help these nations develop the capability to defend their own democrat-
ically elected governments, which will promote freedom and reform throughout the region. Fighting
terror is not just a matter of killing or capturing terrorists. Fighting terror requires a steady com-
mitment to spreading liberty and democracy, because free nations are peaceful nations.
While fighting this war, the Administration is also transforming our military so that it has the
training and weapons to meet the challenges of the 21st Century. By restructuring our overseas bases
to enhance access to potentially unstable areas of the world—rather than remaining in large far-away
bases built for the needs of the Cold War—we will enable our troops to surge quickly to deal with
unexpected threats. By taking advantage of 21st Century military technologies, America’s combat
power can be rapidly deployed with greater precision, stealth, and success. By building modular
Army brigades, we will create a more flexible fighting force able to match the needs of the mission.
These steps will help meet the threats of the 21st Century, including the war in which we are
currently engaged. They will strengthen our alliances around the world, while we build new part-
nerships to better preserve the peace and promote freedom. And they will reduce the stress on our
troops and our military families.
In addition to these steps, the Administration has reorganized the Nation’s military commands
to address the new challenges. These efforts include creating a new Northern Command to better
defend the homeland; the Joint Forces Command focused on transformation; and a new Strategic
Command responsible for early warning of, and defense against, missile attack. The Administration
is also negotiating new strategic relationships that would have been unimaginable just a decade ago
with nations in Central Asia, the Caucasus, and other critical areas of the world.
The 2006 Budget provides substantial resources to increase our ability to prevent terrorist at-
tacks, as have prior budgets since September 11, 2001, by increasing funding for the Federal Bureau
of Investigation’s counterterrorism efforts and focusing resources on the most vulnerable domestic
targets: airports and seaports; the food supply and water systems; major transportation systems;
information networks and critical infrastructure. With the creation of the Department of Homeland

29
30 PROTECTING AMERICA

Security, the Nation has a better coordinated, focused, and funded system to protect America from
terrorist attack.

WINNING THE WAR ON TERROR

Three years ago, Afghanistan was ruled by


the brutal Taliban regime and was the home
base from which al-Qaida was able to plan
the September 11th attacks. American and
coalition troops liberated the Afghan people.
In October, 2004, Afghanistan held its first
free and fair democratic Presidential election,
giving new hope to some 25 million people.
Likewise, three years ago, Iraq was ruled by a
tyrant who provided a safe haven for terrorists,
invaded his neighbors, had used weapons of
mass destruction against his own people, and
defied the will of the world by failing to disclose
his plans to develop such weapons again in the
future. The Iraqi people are now confronting
many challenges, but are creating in the heart of the Middle East an example of freedom and
democracy. Iraqi security forces are fighting alongside coalition troops to defeat insurgents and
foreign fighters. The Iraqi people have taken the first steps toward freedom and self-government.
Ensuring security in Iraq and Afghanistan requires dedication and sacrifice. The 2006 Budget,
and the 2005 supplemental request, will ensure that our Armed Forces have the resources to get the
job done. The Administration’s 2005 supplemental request will provide funding for military capabil-
ities, troop support, force protection, repair of damaged equipment, the training of Iraqi and Afghan
security forces, and increased intelligence support.

Security in Iraq and Afghanistan

Our goal is to ensure Iraqis and Afghans are


fully capable of defending themselves and their
new societies against the forces of terrorism.
The Department of Defense (DOD) and the
Department of State have devoted substantial
resources to train and equip security forces in
Iraq and Afghanistan.
The coalition faces difficult challenges in
training and equipping Iraqi security forces,
as these forces continue to face targeted
attacks by insurgents. However, despite these
challenges, coalition forces had trained nearly
127,000 Iraqi security forces as of mid-January and continue training the Iraqi army, police, and
other security forces, such as border enforcement personnel, to provide for their own country’s
security. The 2005 supplemental request will allow us to accelerate the work we have started.
Similarly in Afghanistan, DOD is training the Afghan National Army (ANA). The ANA is now
fighting terrorism and maintaining security with a force of 16,000 troops, including soldiers from all
THE BUDGET FOR FISCAL YEAR 2006 31

of Afghanistan’s ethnic groups. DOD will accelerate training to help the Afghans develop their own
military capabilities.

Along with other nations, the United States is also making long-term investments in both Iraq
and Afghanistan. Key infrastructure projects in Iraq will create jobs and provide millions of Iraqis
with greater access to basic services, such as clean water, electricity, and reliable telecommunications
systems. In both Iraq and Afghanistan, U.S. aid coordinated by the State Department and the Agency
for International Development, will continue to build the local capacity to deliver healthcare and
other basic services, collect revenues, and develop the framework necessary for a modern and open
economy.

The Budget also devotes resources to protect Afghanistan’s democratic and economic development
from the drug trade by providing funding to eradicate poppy crops; develop alternative cash crops;
interdict the drug flow; prosecute drug traffickers; and build Afghanistan’s counter-narcotics capa-
bilities.

The Commander’s Emergency Response Pro-


gram (CERP) provides the funds for U.S. troops
to assist Iraqis and Afghans with critical recon-
struction and assistance projects. Commanders
on the ground are able to provide assistance
in a streamlined fashion, which means money
is available to respond to needs right away.
CERP has helped troops on the ground build
goodwill with Iraqis, which in turn supports the
overall mission. Since the inception of CERP,
commanders have spent almost $250 million to
directly improve education, healthcare, electric-
ity, water, and security. The 2006 Budget and
2005 supplemental propose to continue the authority for CERP. The Budget requests authority for
an additional $300 million and the supplemental will request additional 2005 funds and authority.

Strengthening Our National Guard and Reserves

During 2005, the Administration expects to have more than 163,000 National Guard and Reservists
mobilized across all services supporting the Global War on Terror. In recognition of the burdens
placed on our mobilized Guardsmen and Reservists, the President proposed and signed into law in-
creases to their Montgomery GI Bill education benefits, if mobilized for 90 days or more. In addition,
Guardsmen and Reservists have benefited from enhanced compensation, including a new bonus for
conversion to a different military specialty; revised enlistment and reenlistment bonuses; and en-
hanced health benefits, including better pre- and post-mobilization coverage. Guardsmen and Re-
servists who have been deployed also benefited from active-duty compensation increases.

Blocking Terrorist Financing

The United States continues to work with friends and allies to disrupt the financing of terrorism
by identifying and blocking the sources of funding, freezing the assets of terrorists and those who
support them, denying terrorists access to the international financial system, protecting legitimate
charities from being abused by terrorists, and preventing the movement of assets through alternative
financial networks.
32 PROTECTING AMERICA

The Budget commits over $100 million to


the Department of the Treasury’s efforts to
protect America by detecting and stopping
financial crimes, money laundering, and ter-
rorist financing. The Office of Terrorism and
Financial Intelligence safeguards financial
systems against illicit use by rogue nations,
terrorist facilitators, money launderers, drug
kingpins, and other national security threats.
One of the most visible and effective tactics
of the comprehensive strategy has been
public designation of terrorists and terrorist
organizations. Since September 2001, the
United States and our allies have designated
397 terrorist-related entities and frozen nearly $147 million in terrorist assets worldwide.

Intelligence Reform

The recently enacted Intelligence Reform and Terrorism Prevention Act of 2004 builds on the
reforms implemented by these agencies and by executive orders on information sharing, intelligence
community management, and the National Counterterrorism Center (NCTC). The new Director of
National Intelligence (DNI) is empowered to set funding, collection, and analytic priorities across
the national intelligence program in consultation with appropriate Department and agency heads.
In addition, the DNI will spearhead efforts to improve information sharing within the intelligence
community.
The recently created NCTC has already become a critical player in the war on terror. The NCTC
expands on the analytic mission of the former Terrorist Threat Integration Center by serving as the
primary organization in the U.S. Government for analyzing and integrating intelligence pertaining
to terrorism and counterterrorism; serving as the central and shared knowledge bank on known and
suspected terrorists and international terror groups; and ensuring that agencies, as appropriate,
have access to and receive the all-source intelligence support needed to execute their counterterror-
ism plans or perform independent, alternative analysis. The NCTC will improve our ability to mount
coordinated, strategic operations against terrorism.

Fighting Terror by Promoting Democracy

The best hope for achieving peace in our world is the expansion of freedom. The 2006 Budget
funds initiatives to promote democracy and reform, particularly in the Middle East, North Africa,
and other majority Muslim countries. For example, the Budget includes $80 million for the National
Endowment for Democracy to enhance its efforts to strengthen democratic institutions, the rule of
law, human rights, civic education, and independent media.
The Budget also includes $120 million for the Middle East Partnership Initiative, a cornerstone
of the State Department’s approach to supporting political and economic reform in the region. All
these activities promote long-term reforms by advancing democratic and economic freedom, which
diminishes terror organizations’ ability to recruit.
To promote better understanding of America and American ideals, the Budget includes $180 mil-
lion in 2006 for exchange programs in countries with significant Muslim populations, including the
Near East, South Asia, Indonesia, and parts of Africa and Europe. Public diplomacy in the region
will support the continuation of several priority programs, including American Corners—locations
THE BUDGET FOR FISCAL YEAR 2006 33

around the world that provide access to information about America through the Internet, guest speak-
ers, and other events for non-Americans in a neutral setting. The 2006 Budget for the Broadcasting
Board of Governors includes an increase to significantly expand television broadcasting to Iran, Pak-
istan, and Afghanistan in 2006, following the successful launch of its Arabic news satellite television
channel, al-Hurra, in 2004.
The successful presidential election held by the Palestinian Authority is an important step toward
the building of democratic institutions needed for realization of the President’s vision of two states,
Israel and Palestine, living side by side in peace and security. The United States will take a leading
role in helping Palestinians build a viable economy and democratic institutions, and the security
institutions they need to fight and defeat terror. The Budget contains $150 million for projects aiding
the Palestinians in infrastructure and democracy building.

Fighting Terror with Development

Persistent poverty and oppression can lead to the kind of despair and failed states that become
havens for terror. The United States is the world’s leader in providing development and humani-
tarian assistance, opening up our markets for trade, and providing peacekeeping assistance to re-
gions where peace and stability are needed. In 2002, the President pledged that the United States
would lead by example and increase its core development assistance by 50 percent, or $5 billion, by
2006. The 2006 Budget exceeds this commitment—the request for core development assistance is
$8.2 billion above the amount appropriated in 2002. Moreover, President Bush has increased official
development assistance more than at any other time since the Marshall Plan, reversing decades of
decline in assistance as a percentage of GDP. This positive trend will continue in future years as two
of the President’s main foreign policy initiatives—the fight against HIV/AIDS and the Millennium
Challenge Account—disburse more funds to promote development and reform and fight suffering and
poverty.

TRANSFORMATION OF OUR MILITARY

Even as our men and women in uniform continue to wage the War on Terror in Iraq and
Afghanistan, DOD is adapting to face new and emerging threats. Much of the increase in defense
budgets has been devoted to transforming our Nation’s military capabilities and laying the founda-
tion for winning the War on Terror. This process is dynamic and requires an ongoing adjustment of
national security priorities. DOD has begun a strategic analysis that will form the basis of the 2005
Quadrennial Review. This review will further refine the Nation’s long-range security requirements
and assessment of needed capabilities.

Global Posture Initiative

To be better prepared to respond rapidly to the threats of the 21st Century, the Administration is
committed to transforming all aspects of the U.S. global defense posture, including our infrastruc-
ture, personnel, and equipment. In August 2004, the President announced the most comprehensive
restructuring of U.S. military forces overseas since the end of the Korean War. The Global Posture
Initiative entails working with more partners around the world to use our military capabilities more
effectively. As a first step, the initiative repositions U.S. forces from Cold War bases to areas of strate-
gic importance today. Such new basing strategies will provide the United States rapid access to areas
where contingency operations may arise but where a large permanent presence is not required. In
the next decade, 70,000 military personnel, and 100,000 family members and other civilians, are ex-
pected to return to the United States as part of this effort. The initiative will be implemented over
34 PROTECTING AMERICA

the next 10 years. To begin this effort, the Administration has added $416 million in the 2006 Bud-
get, and plans to request $3.5 billion more through 2011.

Tools of Transformation

The Department is working on a wide range of new technologies, especially those that can protect
military personnel while allowing them to perform their mission more effectively. The Department’s
research and development efforts in this area are broad in scope. They range, for example, from the
development of new materials for troop clothing to provide better camouflage and improved comfort
and health, to new ways of detecting and neutralizing improvised explosive devices, chemical and bi-
ological agents, and radioactive materials. Developments in advanced materials have dramatically
improved soldier body armor, providing unparalleled protection in combat. These and other technolo-
gies of the future are transforming how the United States will fight in future conflicts. Advances in
new sensors, hypervelocity missiles, low-observable materials, and smart weapons will enable U.S.
forces to fight smarter, more efficiently, and with greater precision than ever before.
DOD continues to make major investments in the development and procurement of unmanned ve-
hicles for ground, underwater, aerial, and combat use. Small unmanned aerial vehicles, for example,
can provide information during ground combat to reduce casualties. Underwater vehicles are being
developed for mine detection and avoidance operations. Ground vehicles are being used to identify
and explode improvised explosive devices remotely. The ground and air vehicles are a central part
of the Army’s Future Combat System and will provide a wide range of functions, including armed
reconnaissance, fire support, autonomous logistics, and mine detection. Some of the forerunners of
these new systems are being used today in Iraq and Afghanistan. The 2006 Budget provides $1.7
billion for these efforts.
The 2006 Budget supports the Navy’s Littoral Combat Ship (LCS) and its associated weapons sys-
tems by providing $613 million for continued development. The LCS, now in acquisition and testing,
is a fast, small, and low-cost surface warship capable of operating in littoral (near-shore) waters. The
primary missions of the LCS are anti-small-boat warfare, mine countermeasures, and anti-subma-
rine warfare. Secondary missions will include intelligence, surveillance and reconnaissance, home-
land defense, maritime interdiction, and support for Special Operations forces.
The President’s Budget supports substantial investments in advanced technology, particularly in
remote sensing and high performance computing, to give our military additional advantages over
our enemies. U.S. intelligence agencies and elements are employing advanced technology systems
to acquire, process, and produce information from enemy signals, imagery, and human and other
sources. Investments in communications will improve the effectiveness of troops in the field and
their commanders in carrying out their missions. These technological developments are improving
our ability to detect and counter the broad range of threats facing the United States.

MAKING THE HOMELAND MORE SECURE

Since the terrorist attacks of September 11, 2001, America has engaged in a broad and determined
effort to identify and pursue terrorists abroad and secure our citizens and interests at home. Working
with the Congress, the President signed legislation to: break down the walls between law enforce-
ment and terrorist investigations; reorganize the Federal Government by reforming and improving
intelligence gathering and analysis; acquiring biological weapons countermeasures; enhancing se-
curity at our borders, airports, and in our communities; and strengthening America’s preparedness
and response capabilities.
THE BUDGET FOR FISCAL YEAR 2006 35

This Administration’s commitment to securing the homeland is reflected in this and past budgets:
non-Defense homeland security spending has more than tripled since 2001. But homeland security
is not simply a Federal responsibility; rather it requires a national effort with cooperation among all
Government levels, the private sector, and individual citizens. The President’s 2006 Budget supports
these partnerships in areas as diverse as researching and deploying radiological and nuclear detec-
tion systems; developing detectors for chemical agents; augmenting mass casualty care capabilities;
and protecting our food supply and drinking water.

Identifying Terrorists and Preventing Their Entry

The 2006 Budget places special focus on programs that seek to detect suspicious individuals or
materials before they enter the country. Just as important are efforts to share information about
suspicious individuals and materials with multiple levels of law enforcement.
The FBI has transformed itself to make counterterrorism its top priority and has established a
comprehensive intelligence program to prevent terrorist attacks, an effort that has been accelerated
by the passage of the Intelligence Reform and Terrorism Prevention Act of 2004. The President’s
Budget supports the FBI’s counterterrorism priorities by providing $294 million for counterterror-
ism and counterintelligence initiatives and $117 million in new funding to bolster the intelligence
program. This Budget boosts FBI funding by 11 percent, or $555 million, resulting in an overall FBI
budget increase of 76 percent since 2001.
To enhance information sharing on international travelers and to screen for terrorists, the Pres-
ident also issued a directive that called on the Department of Homeland Security (DHS) and other
agencies to improve and better coordinate screening of people, cargo, and conveyances. The Bud-
get reflects a new coordination of offices to oversee screening efforts and set screening standards.
This office will consolidate several major initiatives within the Border and Transportation Security
Directorate, including: US-VISIT, the Secure Flight Program, and the Transportation Worker Iden-
tification Credential Program. The 2006 Budget also increases funding for these programs by $344
million, including $50 million to accelerate the deployment of US-VISIT and $49 million to imple-
ment Secure Flight, a program that will improve security checks of airline passengers names through
a more effective and efficient automated process.
The 2006 Budget provides $104 million for the multi-agency Terrorist Screening Center (TSC), a
$75 million increase over 2005, to enable TSC to meet its increasing responsibilities in developing
and managing a consolidated terror screening watch list, particularly in support of Secure Flight.
To date, TSC has received approximately 17,000 calls, of which 8,500 were a positive match with
the database. TSC staff currently fields nearly 100 calls per day from Federal, State, and local law
enforcement representatives.
The Budget also provides a $21 million increase for DHS’ IDENT fingerprint system and fund-
ing for increased interviews, screening, and information sharing between Federal agencies on visa
applicants; the development and production of new machine-readable biometric U.S. passports; and
for increased interoperability of border security and counterterrorism systems for various agencies.
The State Department is also leading a U.S. effort to collect biometric information on known and
suspected terrorists from foreign governments.

Defending Against Catastrophic Threats

The Administration has made unprecedented investments to counter possible terrorist threats.
The 2006 Budget supports deployment of existing counterterrorism technology and focuses America’s
scientific and technical expertise on new solutions.
36 PROTECTING AMERICA

Threats to Food and Agriculture. The 2005 Budget contained significant funding to protect the
safety of the Nation’s food system from contamination by terrorists. The 2006 Budget continues this
commitment by including $596 million, an increase of $143 million, to improve our ability to detect
and contain contamination. The 2006 Budget also includes $58 million to support the establishment
and maintenance of laboratories to analyze samples of potentially contaminated food as quickly as
possible. For example, the Food Emergency Response Network (FERN) links strategically located
State and Federal laboratories that analyze food samples in the event of a biological, radiological, or
chemical terrorist attack in this country. FERN laboratories will be participating in the Electronic
Laboratory Exchange Network (eLEXNET), an integrated information network, which is designed to
allow health officials across the Nation to compare, share and coordinate laboratory analysis findings
and potentially identify contaminated foods. The Budget also includes funding for border inspections
of imported foods, research on new methods to prevent food contamination, and expansion of labora-
tories to rapidly identify human and animal disease pathogens of concern.

Radiological, Biological, and Chemical


Threats. The 2006 Budget significantly
increases funding to prevent nuclear terrorism
by securing nuclear materials at their source
and by detecting and interdicting the mate-
rials in transit. DOD’s Cooperative Threat
Reduction program will spend $416 million to
help dismantle weapons of mass destruction
infrastructure in the former Soviet Union to
prevent the proliferation of nuclear weapons.
The Department of Energy’s National Nuclear
Security Administration (NNSA) will spend
$343 million in Russia and other regions of
concern to secure vulnerable nuclear weapons
and weapons-usable material, and to install
EPA scientist sorting spores of an anthrax surrogate to evaluate
detection equipment at overseas border cross- sampling methods that will confirm decontamination of structures.
ings and ports to prevent and detect the illicit
transfer of nuclear material. The Megaports program, which has been enthusiastically received by
our overseas partners since its inception in 2003, equips overseas ports with radiation detection
equipment and provides training to foreign law enforcement officials so that they can better detect,
deter, and interdict illicit trafficking in radioactive materials. In 2006, NNSA will increase funding
for Megaports by 450 percent, as more countries join this U.S.-led international effort.
A new Domestic Nuclear Detection Office (DNDO) is being created to develop and deploy a compre-
hensive domestic system to detect and report any attempt to import, assemble, or transport a nuclear
explosive device, fissile material, or radiological material intended for illicit use. The DNDO will be
responsible for developing a comprehensive national nuclear detection architecture. The DNDO will
also work with State and local grant recipients to ensure that their radiation detection assets work
in concert with Federal detection efforts.
Since 2001, more than $5 billion has been provided to the National Institutes of Health for research
and development of advanced medical countermeasures against the most dangerous biological threat
agents. The 2006 Budget builds on this investment with an additional $1.7 billion to support both the
basic research that leads to breakthroughs in scientific knowledge, and applied research and develop-
ment that converts that knowledge into effective countermeasures such as vaccines and treatments.
In 2004, the Congress provided $5.6 billion for the President’s Project BioShield initiative that will
provide the funding to acquire these countermeasures to protect America.
THE BUDGET FOR FISCAL YEAR 2006 37

The DHS Biological Countermeasures Office budget request is $385 million in 2006, a $22 million
increase that will help develop vaccines to defend our food supply from intentional or accidental in-
troduction of animal diseases into the country. These vaccines will help protect the Nation from the
catastrophic economic consequences a major disease outbreak would cause to the agricultural sector.
The Budget also requests funding for a Next Generation Animal Disease Center that will be able to
analyze pathogens from large animals.
The 2006 Budget doubles the spending for chemical agent research and development conducted by
DHS, to $107 million, including $36 million in new spending on countermeasures to non-traditional
chemical agent threats. This funding level includes the creation of a state-of-the-art materials test-
ing facility that will be housed within DOD’s chemical countermeasures programs. The Budget also
provides NIH with $50 million to research medical countermeasures to chemical agents.
DOD has increased funding by $223 million to boost efforts in the areas of agent detection, early
warning, decontamination, and medical countermeasures for chemical and biological threats. The
Budget proposes funding to modernize and upgrade laboratories belonging to the U.S. Army Medical
Research Institute of Infectious Diseases and the U.S. Army Medical Research Institute of Chemical
Defense, which provide world-class scientific research and technical expertise on biological agents,
emerging infectious disease agents, and chemical agents. The funding will help these agencies inte-
grate into the interagency National Biodefense Campus, thereby improving our scientific efforts to
defend against biological warfare.
Launched in 2005, the National Biosurveillance Initiative directed Federal agencies to enhance
biosurveillance capabilities to reduce the detection time following an attack, confirm the size and
characteristics of the attack, and initiate a response. The initiative establishes a National Biosurveil-
lance Integration System at DHS to combine and analyze information collected from human, animal
and plant health, food and environmental monitoring systems. Such an analysis, combined with
evolving threat and intelligence information, will provide greater context for those making critical
homeland defense decisions.
Project BioWatch is designed to detect the release of dangerous biological or chemical agents into
the environment. The BioWatch program operates in more than 30 major metropolitan areas, and
is designed to provide early warning of a large-scale biological weapons attack and accelerate the
distribution of life saving treatment and preventative measures before the development of serious
and widespread illnesses.
Threats to Aviation. DHS is creating a new Explosives Office to identify the best way to protect
against explosives, especially at high-threat venues. The Department’s Science and Technology Di-
rectorate will spend more than $150 million on aviation explosives detection research, and will con-
tinue to deploy more advanced equipment and systems at airports. The Transportation Security
Administration will ensure improved explosives detection screening of airline passengers by spend-
ing a total of $100 million in 2005 and 2006 to deploy new technologies at airport checkpoints. The
Office of State and Local Government Coordination and Preparedness will designate explosives de-
tection and mitigation as a national initiative for 2006 grant awards.
In addition, the DHS Science and Technology Directorate proposes to spend $110 million in 2006
to continue research on the viability of countermeasures for commercial aircraft against the threat
of shoulder-fired missiles known as Man-Portable Air Defense Systems.
38 PROTECTING AMERICA

Threats to Other Infrastructure. The 2006 Budget


provides over $2 billion to ensure the security of our
Nation’s ports. Funding will primarily support the Coast
Guard’s ports, waterways, and coastal security program
($1.9 billion in discretionary funding), and the U.S. Customs
and Border Protection (CBP) container security initiatives.
In addition, the Budget includes $600 million for Targeted
Infrastructure Protection (TIP) grants to be allocated by
the Secretary to address the unique requirements of ports
and other critical infrastructure.
CBP screens 100 percent of cargo entering our seaports,
and all cargo that is identified as a potential threat is in-
spected using large x-ray and radiation detection equipment.
The CBP strategy is to rule out potential threats before ar-
rival at our borders and ports. This year, 6 percent of to-
tal cargo containers were identified as potential threats and
were physically inspected immediately upon arrival. CBP
manages both the Container Security Initiative and the Cus-
toms Trade Partnership Against Terrorism. Both programs
The Beagle Brigade checks passengers for illegal
aim to secure containers in the early stages of shipping, be- food products.
fore they arrive in the United States. The 2006 Budget in-
cludes an additional $14 million to support continued expansion of these programs.
EPA coordinates protection of the Nation’s drinking water and water treatment systems. The
2006 Budget proposes $44 million to support the initial deployment in five cities of an early warning
system, called Water Sentinel, to detect terrorist attacks on drinking water systems and a laboratory
network to support water surveillance and emergency response.

DHS’ Information Analysis and Infrastruc-


ture Protection Directorate (IAIP), identifies
the critical infrastructure that if attacked
and destroyed could cause catastrophic health
effects or mass casualties. With site visits and
data collection, IAIP develops site security
guidelines for nuclear power plants and chemi-
cal facilities. Security guidelines are also being
developed for spent nuclear fuel, petroleum
refineries, natural gas facilities, and railroads.
While private owners remain responsible for
security, the $600 million TIP program will
A 25-foot Defender class security boat from Coast Guard Maritime Safety
be available to supplement critical protection
and Security Team 91106 keeps watch over passenger vessels and high efforts. To increase collaboration among all
profile landmarks in New York Harbor. levels of government, IAIP is improving the
sharing of information by expanding the Homeland Security Information Network to all States and
at-risk infrastructure sites across the Nation. The 2006 Budget provides $530 million for IAIP’s
infrastructure protection activities.
THE BUDGET FOR FISCAL YEAR 2006 39

Preparedness and Response

Decontamination Strategic Planning and Research. The Budget requests $31 million in new fund-
ing for EPA planning and research for decontamination events. Of this funding, $12 million would
be dedicated to the development of an Environmental Laboratory Preparedness Response (ELPR)
program, which will fund the initial planning and development of a nationwide laboratory network
for surveillance and surge purposes in the event of a terrorist attack. Led by the EPA, collaborative
research efforts are underway to produce risk assessment methods, models, and guidance documents
for first responders and decision makers responsible for containment, decontamination, and remedi-
ation in response to chemical, biological, or radiological attacks. EPA’s National Homeland Security
Research Center works closely with DHS to ensure that decontamination research supports DHS
priorities. As directed by the President, research continues in development and validation of envi-
ronmental sampling and analysis methods for known and emerging biological threat agents.

Catastrophic Response/Medical Surge Capacity. The 2006 Budget includes $20 million to continue
DHS’ catastrophic incident response planning initiative that coordinates with Federal, State, and
local government agencies. Building on past DHS efforts to integrate multiple response plans into
the National Incident Management system to support the National Response Plan, this initiative
encourages greater State and local involvement. Planning for mass casualty events will be a major
focus area for DHS homeland security grants.

In the event of a large-scale mass casualty attack in one or more cities, existing health care
providers could be overwhelmed. While DHS will remain responsible for immediate medical
response capabilities, Department of Health and Human Services will support additional mass
casualty capabilities, including the purchase and storage of deployable care units consisting of
beds and medical supplies in order to provide care for days or weeks, if necessary. The Budget also
supports pre-event licensure and credentialing of qualified health care providers to ensure that they
will be ready in the case of a mass casualty incident.

Restructuring State and Local First-Re-


sponder Preparedness Funding. Over the
last four years, Federal agencies have
awarded more than $17 billion in grants
to assist State and local homeland security
efforts. Many high-risk jurisdictions need
to enhance their capabilities to prevent
and respond to potential terrorist attacks.
The 2006 Budget restructures DHS grant
programs to ensure funds are targeted to
address the greatest risks, vulnerabili-
ties, and needs. Over $2 billion in State
and regional grants previously awarded
through formulas will instead be allocated
Emergency responders in Texarkana, Texas, participate in a full-scale through a discretionary process based on
exercise of the community’s preparedness for responding to terrorism the House-approved Faster, Smarter, First
incidents involving weapons of mass destruction. The exercise was
conducted by the National Emergency Response and Rescue Training
Responder Act. States and eligible regions
Center, which is part of the National Domestic Preparedness Consortium. will gain more flexibility to request the
funding they need, while the Secretary
of Homeland Security will have greater authority to allocate funds based on need, risk, and the
achievement of national preparedness goals.
40 PROTECTING AMERICA

Conclusion

In protecting America, the Federal Government must defeat terrorism before it reaches our shores.
We are attacking terrorists where they train, and cutting off their resources throughout the world.
We are also promoting a forward strategy of freedom and reform, so that the terrorists’ message
increasingly loses its force and appeal. And because terrorists do not choose military targets, we
are preparing our homeland to detect and deter attacks on civilians, and to respond if necessary
to emergencies. The 2006 Budget significantly increases resources to the continuing challenge of
protecting America’s freedom and promoting the freedom of the world.
SUPPORTING A COMPASSIONATE SOCIETY

America’s great strength is found in the armies of compassion who comfort the sick, honor the aged,
welcome the immigrant, protect the weak, mentor the at-risk, and bring healing to those who suffer
from addiction. America is a prosperous country, and Americans are generous and caring. President
Bush has placed a special emphasis on proposals that build on these efforts, and on working with the
tens of thousands of Americans whose charitable and volunteer organizations, and community- and
faith-based groups make America a more compassionate and hopeful place.

One of the efforts central to the President’s


support for the compassionate spirit of America
has been his establishment of the White
House Office of Faith-Based and Community
Initiatives. This office is dedicated to helping
faith-based and community groups participate
in Government-supported social service pro-
grams that help Americans escape poverty,
hopelessness, addiction, and despair. One of
the most useful tools in this effort has been the
Compassion Capital Fund, which was created
in 2002 to provide critical infrastructure
and technical assistance to faith-based and
A representative of the Federal Emergency Management Agency
community organizations. The fund has been places hurricane victims in temporary housing.
used by these groups to provide social services,
expand their good work, and find new funding sources. Since 2002, a total of $149 million has been
granted to more than 300 organizations and sub-grants were given to more than 3,000 grass-roots
organizations.
Together with faith-based groups and other partners, the Federal Government is improving the
effectiveness and reach of federally-sponsored social services, including: disaster relief, home loan
assistance, hunger programs, shelter for the homeless, and addiction recovery efforts. Faith-based
and community organizations are playing greater roles in assisting Federal agencies and State and
local governments to help those in need. More than 20 States and more than 100 cities established
faith-based and community offices, a clear endorsement of the work done by faith-based and commu-
nity organizations.
During his first term, President Bush challenged Americans to dedicate at least two years, or 4,000
hours over their lifetimes, to volunteer service. He created the USA Freedom Corps office at the White
House to help Americans find ways to answer his call. He has also supported increased funding for
service programs such as the Peace Corps and AmeriCorps. These efforts contributed to a significant
increase in American volunteerism: an additional 5.7 million Americans gave time to public service
during the two-year period ending in September 2004.
Government funding can help promote lives of dignity and promise. The 2006 Budget’s pursuit
of compassionate goals can be seen in four areas: supporting America’s families and communities;
promoting accessible health care; providing shelter; and upholding our values in the world.

41
42 SUPPORTING A COMPASSIONATE SOCIETY

Supporting America’s Families and Communities

The American family remains one of our Nation’s greatest


strengths. The 2006 Budget supports families in several ways.
The Administration promotes healthy marriages and strong
families through programs that help fathers and mothers
develop parenting skills and encourage community- and
faith-based organizations to support families. The Budget
proposes to direct $240 million in mandatory funds to new ef-
forts to support healthy marriages and responsible fatherhood.
Of this amount, $100 million, plus dollar for dollar matching
contributions from States, would fund competitive grants for
States, territories, and tribal organizations to develop inno-
vative approaches to promote healthy marriages. The Budget
includes $100 million for research, demonstration projects, and
technical assistance, primarily focusing on family formation
and healthy marriage activities. To support these programs,
funds would be redirected from the Temporary Assistance for
Needy Families High Performance Bonus ($100 million) and
the Illegitimacy Reduction Bonus ($100 million). In addition,
the 2006 Budget provides $10 million in discretionary funds to
increase support of community-based maternity group homes,
President Bush speaks at the National Summit
on Fatherhood. where young, pregnant, and parenting women can receive
access to faith- and community-based coordinated services.
More than 25 million children live in homes without fathers. In response to this problem, the Ad-
ministration proposes to create a $40 million per year grant program to faith-based and community
organizations to help non-custodial fathers become more involved in their children’s lives.
In addition, the 2006 Budget provides support for programs that encourage responsible choices
before parenthood. President Bush’s Abstinence Initiative provides grants to States and communities
to develop, implement, and evaluate programs for adolescents that promote abstinence and healthy
choices. Activities also advance parent education and outreach, media campaigns, and research
related to abstinence education. Since 2001, 102 grantees have provided abstinence-only education
services in communities nationwide. The Budget provides more than $206 million for abstinence-only
activities this year.
To help older foster care children make the transition to adulthood, the 2006 Budget commits $60
million to the Foster Care Independent Living Program. This program provides vouchers of up to
$5,000 for education or vocational training to help youths who are close to leaving foster care develop
job-related skills and lead independent and productive lives.
Some families experience hardship as a result of having a parent in prison. As a group, the nearly
two million children with parents in prison have more behavioral, health, and educational problems
than the population at large and these children are more likely to become incarcerated. Mentoring
by caring adults can improve the long-term outcomes for children whose parents are incarcerated.
In 2004, the Department of Health and Human Services awarded $8.9 million in continuation grants
and $37 million in new grants to programs that provide mentoring services to these children. This
Budget includes $50 million for competitive grants. Since 2003, this program has worked toward
providing 70,000 new mentors for children with a parent in prison.
Once a parent has been released from prison, they should be given every opportunity for a fresh
start. The Budget includes $75 million for the Prisoner Re-entry Initiative, which brings faith-based
THE BUDGET FOR FISCAL YEAR 2006 43

and community organizations together with Federal agencies to help recently released prisoners
make a successful transition into society and long-term employment. Through the collaborative
efforts of the Departments of Labor, Housing and Urban Development, and Justice, this four-year
initiative will provide job training and placement, transitional housing assistance, and mentoring
to 50,000 non-violent ex-offenders. The first grants under this program will be awarded by August
2005.
One of the most pressing needs for those trying to build lives of dignity is escaping from the down-
ward spiral of drug addiction. The Administration focuses on increasing access to effective substance
abuse treatment through programs that allow those suffering from addiction to choose treatment
plans that best suit their needs. Under the Access to Recovery program, individuals with vouch-
ers may access treatment and support services from a range of providers, including faith- and com-
munity-based providers. The Access to Recovery initiative offers a flexible approach to a difficult
problem—and the 2006 Budget supports this effort by including $150 million, which will sustain the
existing 15 grants while expanding access to additional States or tribal organizations. States will
hold providers accountable for results and reward those providers most effective at helping individ-
uals to recover from addiction.

Promoting Accessible Health Care

America’s health system provides high-quality, leading-edge care to those who need it. But rising
costs can put health care coverage out of reach for many Americans, imposing a burden on families
and businesses. That is why the President’s health care policies focus on making health care more
affordable and accessible, especially for low-income Americans.

Despite the availability of health care cover-


age through Medicaid and the State Children’s
Health Insurance Program (SCHIP), millions
of eligible children in lower-income families
have not enrolled. The 2006 Budget proposes
Cover the Kids, a national outreach campaign
that will provide $1 billion in grants over
two years to promote increased enrollment
in Medicaid and SCHIP. By combining the
resources of the Federal Government, States,
schools, and community organizations, Cover
the Kids aims to enroll as many Medicaid- and
SCHIP-eligible children as possible.
The President visits with health care providers at Inova Fair Oaks
Hospital, Fairfax, Virginia.
This Budget emphasizes ways to improve
access to health care for Americans in need
without resorting to government control of the delivery of medicine. The Budget reproposes a tax
credit that will help lower-income individuals purchase health insurance and health care. This
year’s proposal has been modified so that eligible individuals now have more insurance choices and
can save for future health expenses.
The Administration also proposes providing $4 billion in Federal grants to States to set up health
insurance purchasing pools. By combining the purchasing power of millions of low-income individ-
uals and families, these pools would offer tax-credit recipients an additional option for affordable
health insurance and would make it easier and faster to shop for coverage.
For those who still cannot get affordable coverage, President Bush proposes to further enhance the
network of health centers that provide access to quality primary and preventive health care. Health
44 SUPPORTING A COMPASSIONATE SOCIETY

Centers now provide care to nearly 14 million patients at 3,740 sites across the United States each
year. One in six of the Nation’s low-income individuals receive health care at these sites, which treat
anyone regardless of ability to pay. These centers keep patients from using more expensive care in
hospital emergency rooms, and provide care when illnesses and injuries can be treated quickly and
without long hospitalization.
The 2006 Budget completes the President’s commitment to create 1,200 new or expanded health
center sites to serve an additional 6.1 million people by 2006. Almost 2.4 million additional individu-
als will receive health care in 2006 through 570 new or expanded sites in rural areas and underserved
urban neighborhoods. The Budget builds on the success of the President’s Health Centers Initiative
by including $26 million to fund 40 health center sites in high-poverty counties that lack health cen-
ters and support more faith-based and community organizations in providing these services.
The Nation’s seniors and disabled with access to Medicare will continue to benefit from the intro-
duction of Medicare Drug Discount cards. These cards provide real savings to seniors of all income
levels, and added savings to low-income seniors. Roughly six million Medicare beneficiaries have
enrolled since June 2004, when the cards first became available. Independent studies have shown
savings of 20 percent or more off the retail price of most brand-name drugs and 30 to 60 percent off
generic drugs. In addition, over 1.7 million beneficiaries began receiving the $600 annual low-income
transitional assistance. These beneficiaries can save up to 90 percent off the average retail price of
brand-name drugs when they combine the drug card savings with the $600 transitional assistance.
Beginning January 1, 2005, Medicare beneficiaries became entitled to new preventive benefits in-
cluding screenings for diabetes and heart disease, as well as a Welcome to Medicare physical for new
beneficiaries.
Also beginning January 1, 2006, Medicare beneficiaries will be eligible for a voluntary prescrip-
tion drug benefit. They will have their choice of prescription-drug-only plans or Medicare Advantage
plans that offer a full array of physician, hospital, and prescription drug coverage. Medicare will take
steps to encourage employers to continue offering drug and other health care benefits to millions of
seniors. The new drug coverage will be particularly beneficial for low-income beneficiaries. Those
with incomes below 135 percent of poverty will pay no monthly premium, no deductible, and very
small co-payments per prescription.
The 2006 Budget includes several proposals that promote home- and community-based care op-
tions for people with disabilities. These proposals build on the President’s New Freedom Initiative,
which is part of a nationwide effort to integrate people with disabilities more fully into society. Under
a five-year demonstration project, the Budget would pay for Medicaid services for individuals moving
from institutions to the community. This would encourage home- and community-based care, which
is both less expensive and more effective than the care provided in institutions.

Providing Shelter

The Administration recognizes that the problem of homelessness is often tied to other major chal-
lenges: delivering mental health and substance abuse treatment to those who need it most, providing
opportunities for work, and giving hope and comfort to those who are escaping abuse or neglect. The
Bush Administration is working to end chronic homelessness by funding prevention and intervention
programs.
Research indicates that chronically homeless people may comprise less than 10 percent of the home-
less population but consume over half of emergency homeless services because their needs are not
comprehensively addressed. The Samaritan Initiative will provide up to $200 million in 2006 by pro-
viding housing and social services to treat the chronically homeless properly. Across the country, 46
THE BUDGET FOR FISCAL YEAR 2006 45

States and over 170 localities, along with the private sector, have joined the Federal effort to move
chronically homeless individuals from the streets into permanent supportive housing.

The Budget provides record resources for


the Nation’s homeless. The Budget for the
Department of Housing and Urban Devel-
opment includes $1.4 billion for Homeless
Assistance Grants, $200 million more than
in 2005. The Department of Veterans’ Affairs
(VA) estimates that one-third of the adult
homeless population are veterans. VA’s home-
less assistance programs now constitute the
largest integrated network of services in the
United States and serve approximately 40,000
homeless veterans annually. The Budget
provides $231 million to support directly the
VA’s efforts to combat homelessness among President Bush visits with volunteers at a center for homeless adults and
the Nation’s veterans—and an additional $1.5 children.

billion for medical care to homeless veterans.

Upholding Our Values in the World

The Administration supports compassionate programs overseas as well. America leads the world
in providing hunger relief and medicine, as well as support and manpower to deliver aid to those af-
flicted by the ravages of war, persecution, natural disasters, and disease. President Bush has brought
international scrutiny to human trafficking networks. And he has led a global effort to treat those
with HIV/AIDS and prevent the spread of this disease, which claimed the lives of more than three
million people in 2003.
The effort against HIV/AIDS starts at home. Domestically, the President has requested record lev-
els of funding to combat HIV/AIDS. The 2006 Budget requests a total domestic HIV/AIDS budget of
$17.4 billion. He has also stated his support for the reauthorization of the Ryan White Comprehen-
sive AIDS Resources Emergency (CARE) Act based upon the principles of focusing Federal resources
on life-extending care; ensuring flexibility to target resources to address areas of greatest need; and
ensuring accountability and results.
Overseas, President Bush has launched an ambitious $15 billion, five-year Emergency Plan for
AIDS Relief. Since the President announced the Emergency Plan in his 2003 State of the Union
Address, the United States has provided $5.2 billion for the fight against global HIV/AIDS. The 2006
Budget requests an additional $3.2 billion for this effort. The U.S. Government has made remark-
able progress during the Emergency Plan’s first year of implementation. In the first eight months
of President Bush’s Emergency Plan for AIDS Relief, the United States supported training for more
than 312,000 service providers and supported more than 14,000 sites where prevention, treatment,
and care services are provided in 15 countries in Africa, Asia, and the Caribbean.
Under the Emergency Plan, the Administration is committed to preventing seven million new
HIV-infections; treating two million HIV-infected people; and caring for 10 million people affected by
HIV/AIDS, including orphans.
As part of these efforts, the United States is also working with international organizations like
UNAIDS, the World Health Organization, and the Global Fund to Fight AIDS, Tuberculosis, and
Malaria. The Bush Administration provided the founding contribution to the Global Fund, and the
United States remains the world’s largest donor.
46 SUPPORTING A COMPASSIONATE SOCIETY

While the United States response to the


HIV/AIDS crisis is an outstanding example,
this Nation has always been a world leader
in providing hunger, disaster, and other
humanitarian relief. When an earthquake
and tsunami struck the Indian Ocean basin
in December 2004, the United States led
recovery efforts with a coordinated response
with our armed forces deployed to the region.
Assistance included food aid, medical assis-
tance, water filtration, temporary shelter,
airlift support, and long-term development
assistance.
The United States has traditionally been
the most generous of the donor governments in
Indonesians affected by the December 2004 tsunami receive food aid providing humanitarian assistance in disaster
from the United States. relief, and this recent display of assistance
was no different. The Department of Defense
and the United States Agency for International Development conducted one of the largest relief
efforts in the agency’s history to save lives, to lessen suffering, and to reduce the economic effect of
the disaster.
The United States, which comprises roughly 25 percent of the world’s economic output, provides
more than 40 percent of the world’s food aid. In 2004, U.S. food aid protected vulnerable populations
around the world, with more than $700 million donated to the food emergencies in the Darfur
region in Sudan, as well as crises in Ethiopia and southern Africa. In 2004, the United States
led the world—both in timeliness and funding levels—in assisting more than one million inter-
nally-displaced persons in the Darfur region of Sudan and 200,000 Sudanese refugees in Chad. The
2006 Budget continues this strong level of support, addressing food and non-food needs of victims of
the conflict in Darfur. The 2006 Budget supports the Administration’s continuing efforts to prevent
widespread famine and proposes major new efforts to make food aid more effective by requesting a
portion of it as cash assistance, which allows emergency food aid to be provided more quickly and
more flexibly.
In 2002, the President proposed the Millennium Challenge Account (MCA) to provide new incen-
tives for developing nations to pursue successful economic growth policies and democratic reforms.
Through MCA, contributions are linked to responsible actions by developing nations. MCA rewards
nations that root out corruption, respect human rights, adhere to the rule of law, invest in better
health care, better schools, and broader immunization, and have more open markets and sustainable
budget policies. Using funds in the MCA, the Millennium Challenge Corporation (MCC) works with
eligible countries to support proposals with clear objectives to help those countries’ poorest citizens
lift themselves out of poverty. While the President’s proposal has not received the funding initially
envisioned, the Budget would keep it on track to reach $5 billion in annual funding by 2007. The
Congress increased MCA funding from $1 billion in 2004 to $1.5 billion in 2005. The 2006 Budget
provides $3 billion to help participating countries help themselves become prosperous democratic
states. These investments aid our national security by helping nations avoid becoming havens for
terrorists, who thrive in failed states. But these investments also respond to the humanitarian needs
of people who have known only poverty and dependence.
The 2006 Budget also reinforces the Administration’s commitment to finding durable solutions for
the more than 12 million refugees worldwide in need of protection. The United States continues
THE BUDGET FOR FISCAL YEAR 2006 47

offering permanent resettlement to the most vulnerable among these populations. Refugee admis-
sions rose by more than 80 percent in 2004. The United States is the world’s largest donor to the
United Nations High Commissioner for Refugees and the world’s leader for accepting them . The
2006 Budget provides a funding increase of $85 million to support the growing number of refugees
being resettled in the United States.

President Bush is committed to increasing


American volunteerism overseas and, accord-
ingly, has asked for increases over prior year’s
appropriations in Peace Corps’ budget every
year since taking office. The Administration’s
budget request of $345 million continues that
support. Peace Corps volunteers—7,733 strong
in 2004—are at their highest level in 29 years.
These dedicated individuals reflect the best of
American values and compassion by working
in such diverse fields as education, health,
information technology, business development,
the environment, and agriculture. The 2006
The President and Mrs. Bush speak to students attending nature
Budget will help Peace Corps open at least two classes at the Modolodi Nature Reserve near Gaborone, Botswana.
new posts and maintain the existing number of
volunteers.
The 2006 Budget funds the Volunteers for Prosperity initiative, coordinated by USA Freedom Corps
and USAID. This program provides America’s highly skilled professionals new opportunities to serve
abroad in the countries of their choice. Additionally, organizations that become Volunteers for Pros-
perity participants are given priority for Federal funding in select Federal development assistance
programs. Since its inception, Volunteers for Prosperity has recruited nearly 200 non-profit and for-
profit organizations representing a pool of 34,000 skilled American professionals from fields such as
health care, business, banking, information technology, education, and public administration. These
organizations have deployed nearly 7,000 volunteers to help reduce poverty and promote economic
growth.

Conclusion

In all these areas—supporting the family, caring for the poor and sick, protecting the vulnerable,
and upholding our values—the 2006 Budget supports the efforts of millions of people who by their
actions are making a difference in the lives of their fellow Americans and others around the world.
In this Budget, we have focused our resources on programs that show promise and success and
have shifted away from efforts that have proven less effective. We support those programs that do
more than offer good intentions. They deliver results. The programs supported in the 2006 Budget
serve the purposes for which they were designed. They feed the hungry, heal the sick, and save
the addicted from despair. They promote caring and compassion and bring those they serve from
dependence to lives of dignity. They uphold the principle that taxpayer dollars must be spent where
they can do the most good for the greatest number, and that the Federal Government should welcome
the participation of faith-based and community organizations in the delivery of such services. All of
our efforts succeed not by the sheer size of budgets, but by the care and talent brought to help those
who once seemed beyond help.
MAKING GOVERNMENT MORE EFFECTIVE

The Federal Government has a responsibility to ensure that taxpayers’ money is spent wisely on
priority needs. The 2006 Budget emphasizes the goal of achieving the results the American people
expect at a reasonable cost. This effort is critical to implementing President Bush’s aggressive plan to
halve the deficit by 2009. Achieving this plan will require continued pro-growth economic policies and
sound spending restraint. Throughout the 2006 Budget, the Administration maintains that focus.
Spending restraint can take many forms. Rather than achieve fiscal discipline by cutting programs
across the board, this Administration has employed a strategic approach that emphasizes results and
efficiency.
To make the Federal Government more effective, the Administration is working to:
• Control spending and be a good steward of taxpayer dollars;
• Set clear goals and achieve them;
• Accomplish more with less;
• Focus Federal resources on programs that work; and
• Bring reform to entitlement programs.
Since taking office, the President has addressed these important aspects of a more effective Govern-
ment. His Budgets have dramatically reduced the growth in discretionary spending for non-security
programs. This year’s Budget calls for a reduction in that category of spending. With the Presi-
dent’s Management Agenda, the Administration has made good management a priority throughout
the Federal Government. The President initiated Medicare reforms, and will be proposing significant
reforms of our Social Security system this year. Through sustained and dedicated effort, the Federal
Government is showing that it can respond to the pressing needs of the Nation, while remaining
responsible with taxpayer dollars.

ACHIEVING RESULTS

The President is committed to disciplined spending and ensuring Federal funds achieve the best
results for the American people. Throughout the Budget, there are proposals to eliminate or reduce
spending for programs that are not producing results, to limit long-term spending growth, and to
reform programs to achieve better results.
Some examples of these budgetary proposals include:
Better high school intervention programs. To provide funding for States under a High School
Intervention Initiative, the Administration proposes to consolidate narrow-purpose programs, most
of which have not proven effective in improving our secondary students’ academic achievement or
ability to obtain a job. The President’s new High School Intervention Initiative will provide $1.2
billion to help States implement a high school accountability framework and a wide range of effective
interventions. In return for a commitment to improve academic achievement and graduation
rates for secondary school students, States will receive the flexibility to choose which intervention
strategies will be most effective in serving the needs of their at-risk high school students.

49
50 MAKING GOVERNMENT MORE EFFECTIVE

Better management of student loan programs to maximize Pell Grants. The Budget proposes a
comprehensive package of reforms to make the student loan programs more efficient and more cost
effective. These reforms will link subsidy payments to lenders and guaranty agencies more closely
to their costs and modify interest rates for borrowers who are no longer in school and who have
consolidated their loans. The Budget achieves $34 billion in savings over 10 years by reducing unnec-
essary subsidies and payments to lenders, guaranty agencies, and loan consolidators, and by placing
a larger share of the loan risks on lenders. A portion of these savings will be used to increase the Pell
Grant maximum award by $500 over a five-year period, pay off the current $4.3 billion Pell shortfall,
improve benefits to students in school by increasing loan limits for first-year students, and extend
the current favorable interest rate framework, while still reducing overall costs to the taxpayer.
Better programs to enhance community economic development. The Budget creates a new economic
development program within the Department of Commerce, called the Strengthening America’s Com-
munities Grant Program. The President’s proposal replaces the current duplicative set of Federal
community and economic development programs spread throughout multiple agencies with a more
consolidated approach that focuses resources on the creation of jobs and opportunities, encourages
private sector investment, and includes rigorous accountability measures and incentives. This Pro-
gram is a targeted, results-oriented approach that will encourage innovation and economic opportu-
nity. And by streamlining the delivery of Federal economic development programs, taxpayers will see
administrative savings. The President’s Budget includes $3.7 billion for the Strengthening America’s
Communities Grant Program to provide economically distressed communities with a source of fund-
ing for planning, infrastructure development, and business financing to achieve long-term economic
stability and growth.
Better job training programs. The Budget merges the Department of Labor’s four major Federal
job training and employment grant programs into a single $4 billion grant program and allows Gov-
ernors to supplement this consolidated grant with their State’s resources from a menu of several
other Federal job training and employment programs. This proposal would establish increasingly
rigorous performance standards each year, leading to a goal in the tenth year that States place in
employment 100 percent of the workers trained with grant resources. To ensure that individuals are
placed in high-quality jobs, States would also be required to show improvements in earnings and job
retention. States’ performance would be ranked and published each year. These reforms, along with
the President’s $250 million Community College job training initiative, will result in the training of
400,000 workers—twice as many as are trained under the current system.
Better research programs benefiting commerce. The Budget proposes termination of the Advanced
Technology Program (ATP) at the Department of Commerce. This proposal is consistent with the 2005
Consolidated Appropriations Act, which did not provide funding for new awards from ATP. Other ini-
tiatives, such as those at the National Institute of Standards and Technology and the extension of
the research and experimentation tax credit, are more effective in supporting needed research and
technological development for U.S.-based businesses, American workers, and the domestic economy.

MANAGING FOR RESULTS

Government should always strive to serve the people with the best programs while making the most
efficient use of public tax dollars. Launched in August 2001, the President’s Management Agenda
(PMA) set out to strengthen management practices and foster accountability so that Government
managers and their employees could better focus on and produce results. Federal managers now
routinely ask themselves if the programs they manage are achieving results at a reasonable cost. If
the answer is “no” or “we don’t know,” managers find out what the problem is and work to fix it. If the
answer is “yes,” they pursue ways to increase efficiency by replicating their success in new areas. The
THE BUDGET FOR FISCAL YEAR 2006 51

Administration’s efforts to improve Government effectiveness and efficiency will allow Departments
and agencies to serve the American people better and with fewer resources. In each area of the PMA,
the Administration has established markers of success and goals for future progress.

Strategic Management of Human Capital

The Strategic Management of Human Capital Initiative of the PMA helps agencies ensure they
have high-performing employees with the right skills at the right time. Through this initiative,
agencies are identifying the critical skills their employees need to fulfill the agency’s mission. The
agencies then work to close any gaps through directed hiring and training. This effort is driving
agencies to improve performance appraisal systems to distinguish accurately among different levels
of performance. These updated appraisal systems also make clear how each employee’s contributions
affect the agency’s overall effectiveness. Managers are responsible for making performance expecta-
tions clear to each employee.
While the Human Capital Initiative is helping agencies establish strong management practices,
the Federal Government needs additional tools if it is to make the greatest use of its personnel. The
Departments of Homeland Security (DHS) and Defense (DOD) are currently developing and imple-
menting modern systems that provide flexibility to compensate personnel appropriately given the
nature of their contributions and performance, as well as quickly hire personnel with needed skills.
These flexibilities are critical for DHS and DOD because these agencies must anticipate and respond
quickly to the Nation’s changing needs. It is also important that these flexibilities be granted to all
agencies so that they can make the greatest use of their personnel to achieve their own important
missions. The Administration will be working this year to extend similar personnel reforms to other
Federal agencies.
To help taxpayers get their money’s worth, the Administration should reward employee
performance based on contributions to the accomplishment of agency missions and goals. The
improvements in the performance appraisal systems—better distinguishing among different levels
of performance, tying individual performance to organizational goals, and training managers to
make clear to employees their expectations and give constructive feedback—are establishing the
foundation for performance-based pay. The Administration is currently implementing a system in
which pay is more closely linked to performance for members of the Senior Executive Service, the
top executive cadre of the Federal Government. Tying pay to performance instead of longevity will
yield improved results.

Competitive Sourcing

Competitive sourcing through public-private competition is helping agencies become more results-
oriented and effective. Through competition with private providers, Federal employees who perform
commercial activities are given the opportunity to develop plans for restructuring their organizations
to optimize efficiency and eliminate waste. And private contractors have the chance to offer new and
innovative solutions to meet the pressing needs of the Federal Government. These efforts have ac-
celerated the implementation of long-overdue reengineering efforts and cost-savings measures, and
have produced impressive results.
Competitions completed in 2003 and 2004 will save taxpayers more than $2.5 billion over the next
five years. Most of the cost savings associated with competitive sourcing comes without the need for
large scale reductions in Federal employment.
DOD projects cost savings of more than $6 billion as a result of competitions completed between
2001 and 2006. These reductions are enabling the Department to focus its resources on core activi-
ties.
52 MAKING GOVERNMENT MORE EFFECTIVE

Competition at the Internal Revenue Service (IRS) has triggered transformational changes at
centers that process tax returns and those that inventory and warehouse forms and publications.
In-house personnel will continue to provide these services, but under restructured organizations
that are expected to save IRS more than $185 million over a five-year period.
These results confirm that competitive sourcing is a critical tool that can help agencies improve
performance while reducing costs by 10 to 40 percent. The Administration will continue to work with
the Congress to remove legislative restrictions on competitive sourcing so that all Federal agencies
have full use of this important management tool.

Improved Financial Performance

This past November, a record 22 Federal agencies prepared their Performance and Accountabil-
ity Reports within 45 days of the end of the fiscal year. When the Administration first set this new
goal, agencies typically took five months to prepare these financial reports. Of the 24 major Federal
agencies, 18 received unqualified audit opinions this past fiscal year. These important achievements
demonstrate that agencies were able to maintain the high levels of financial management of previ-
ous years while accelerating their financial reporting dramatically. These achievements were pos-
sible because of the year-round financial management disciplines that agencies established. They
implemented systematic and automated improvements to reconciliation and analysis processes, as
well as improved coordination and communication with the agencies’ Inspectors General, external
auditors, and operating partners. Demonstrating fiscal accountability and achieving unqualified fi-
nancial statements are good first steps. Ultimately, agency leadership must use this more accurate,
precise, and timely financial information in their day-to-day management.
Some agencies are now regularly using more timely financial information for decision-making
and working to expand their use of this information to make their organizations more effective.
For example, the Social Security Administration (SSA) uses detailed performance and cost data to
monitor workloads throughout its nationwide organization of field offices, hearing offices, and State
Disability Determination offices. Real-time access to work and workload information has enabled
SSA to achieve productivity gains of more than five percent in 2002, and more than two percent in
2003 and 2004.

Electronic Government

The E-Government initiative focuses on ensuring that the Federal Government’s $60 billion annual
investment in information technology (IT) is well spent. Agencies are working to ensure that all ma-
jor IT investments are justified with strong business cases that detail cost, schedule, and performance
goals, and explain how each investment fits into a larger IT investment strategy. Agencies are work-
ing to ensure that all projects are completed within 10 percent of cost, schedule, and performance
goals.
Federal agencies are also working to ensure that all IT systems are properly secured and data is
appropriately protected. Currently, 77 percent of Government systems have been certified as secure,
up from 26 percent three years ago.
The E-Government initiative emphasizes the customer—the general public. In 2001, the Admin-
istration proposed 24 solutions for providing E-Government services to the public. Federal agencies
work together to implement E-Government projects to improve and streamline services for citizens,
businesses, and Federal workers and reduce redundancy of investments. For instance, Federal job ap-
plicants can now access a central on-line source for all Federal job postings through www.usajobs.gov.
Citizens no longer need to submit multiple 20-page applications, but can instead submit a single three
to five page resume to apply for Federal jobs. Agencies are also working to place their rulemaking
THE BUDGET FOR FISCAL YEAR 2006 53

docket contents online, at www.regulations.gov, to facilitate effective public review and comment on
proposed rules.
Interagency cooperation is also a vehicle for increasing the efficiency of the Government’s
management practices. The consolidation of 26 Federal payroll systems into two—an initiative
this Administration launched in 2001—is expected to save $1.1 billion over 10 years. Building on
this experience, agencies are pursuing consolidation opportunities in other areas, such as financial
management, grants management, and human resources management. Federal agencies will
compete with one another and with private providers to be designated shared service providers
that will provide specific administrative services on a Government-wide basis, reducing the need
for individual agencies to invest in these administrative systems individually. The Administration
will continue to work with the Congress to remove legislative restrictions on E-Government so all
Federal agencies can fully implement this important management tool.

Budget and Performance Integration

The overall goal of the Budget and Performance Integration Initiative is to have all programs
achieve their expected results and continue to improve performance, which is central to effective
Government.
The Administration is systematically assessing every program using the Program Assessment Rat-
ing Tool (PART). The PART requires us to ask whether a program has a clear definition of success,
uses strong management practices, and produces results. The PART drives improvements in the
quality of performance information and makes agencies accountable for the performance of their
programs.
A key principle of the PMA is that performance should significantly influence policy-making. The
PART provides valuable performance information that informs decisions about how to invest limited
budgetary resources. All programs receive close scrutiny. Low priority and low performing programs
are generally proposed for reduction or elimination, and the funding is redirected to higher per-
forming alternatives. Programs that are high priorities, but that need improvement are subjected
to reforms that will produce better results. For instance, as a result of PART analyses, the Budget
proposes to consolidate the Community Development Block Grant and the Economic Development
Assistance programs into a more targeted, unified program that sets accountability standards in ex-
change for flexible use of the funds to support communities’ economic development and community
revitalization efforts.
The PART is also being used to drive performance improvements so that taxpayers get more for
their money. Each assessment requires follow-up steps designed to ensure the agency improves its
programs. For instance, in response to an assessment completed two years ago, the Citizenship and
Immigration Services (USCIS) in DHS has begun implementing significant IT and process improve-
ments. Since May 2003, more than 182,000 immigration benefit applications have been filed online,
reducing processing time and errors. One USCIS field office is piloting a green card replacement
project. USCIS is accepting e-filed applications at this office and to date the pilot program has re-
duced the average renewal processing time from over eight months to approximately 10 business
days. E-filed applications have risen from an average of 650 per month prior to implementation of
the pilot program to about 1,650 per month.
The Budget and Performance Integration Initiative is changing the usual debates about budget
policy. Instead of asking agencies only “how much” they need, agencies are being asked “how well”
they are performing with the dollars they receive. To reinforce this shift in approach, the agencies
are preparing performance budgets that display clearly the level of performance expected with the
requested funding level.
54 MAKING GOVERNMENT MORE EFFECTIVE

The Administration has assessed 60 percent of Federal programs, and has plans to assess the
remaining 40 percent over the next two years. Because the potential for savings and productivity
are great, the Administration is proposing two mechanisms for realizing these opportunities in a
systematic and expedited fashion.

First, the Administration is proposing the establishment of a Sunset Commission to provide reg-
ular scrutiny of Federal programs. This bipartisan commission would review each Federal program
on a schedule established by the Congress to determine whether it is producing results and should
continue to exist. Programs would automatically terminate according to the schedule unless the Con-
gress took action to continue them.

The second proposal is to establish Results Commissions to review Administration plans to


consolidate or streamline programs that cross departmental or congressional committee jurisdic-
tional lines to improve performance and increase efficiency. Ordinarily, programs that cross such
boundaries often are not subject to the usual performance review process, resulting in inefficiencies,
lost opportunities, or redundancies. Results Commissions, made up of experts in relevant fields,
would be established as needed to review consolidation proposals. The Congress would consider the
Commission’s recommendation through expedited review authority.

The PMA also includes several program initiatives to improve the management of Federal agencies
in targeted areas. Some of these initiatives have begun to generate significant savings and efficiency.
Two are highlighted below.

Eliminating Improper Payments

Federal agencies make more than $2 trillion in payments to individuals and a variety of other en-
tities each year. An improper payment occurs when the funds go to the wrong recipient, the recipient
receives the incorrect amount of funds, or the recipient uses the funds in an improper manner. By
strengthening financial management controls so that Federal agencies can better detect and prevent
improper payments, the Federal Government can better ensure the taxpayer dollar is put to the use
the Congress intended.

In 2004, Federal agencies identified 60 percent of Federal outlays ($1.4 trillion) as at risk for sig-
nificant improper payments. In response, agencies now annually measure the extent of improper
payments in these outlay categories. They have established aggressive targets to reduce improper
payments and are implementing plans to meet those targets. The Eliminating Improper Payments
Initiative is holding agencies accountable for effectively carrying out these activities by regularly
reporting on improper payment rates.

Agencies that correctly gauge improper payments estimate a total of $45.1 billion in improper
payments in 2004. Approximately 92 percent of the improper payments in these programs were
overpayments—a number that reveals the full potential for reducing costs and saving taxpayer
dollars. Setting aside expected growth in outlays for these programs, agencies expect the 2004
improper payments total to decrease by approximately $5.1 billion in 2005, $8.3 billion in 2006, and
$12.8 billion in 2007.

While many reductions in improper payments depend on strengthening management controls,


these efforts would be bolstered by expanded legislative authorities for Federal agencies to share
information. The Administration will work with the Congress to develop appropriate information
sharing legislation that allow programs to verify income and other eligibility criteria with data
already in the Government’s possession, while ensuring that recipients’ privacy is protected.
THE BUDGET FOR FISCAL YEAR 2006 55

Real Property Asset Management

The PMA is also helping agencies ensure that they efficiently manage the hundreds of billions
of dollars in real property that the Federal Government owns. The Federal Real Property Council
has developed standards for how Federal agencies should initiate improvements to property
management. Among the standards is: using timely and accurate inventory data and performance
measures in evaluating property acquisition, maintenance, and disposal decisions. To facilitate
these efforts, the Budget proposes to expand disposal authorities for the Department of Agriculture,
General Services Administration, and the National Aeronautics and Space Administration—three
of the largest property-holding agencies. The proposed authorities streamline the disposal process,
allowing these agencies to take a more timely and cost-effective approach to right-sizing their
property inventories.

The Scorecard

To ensure that Federal agencies are accountable for improving their management, the Adminis-
tration established a scorecard that rates agency efforts green, yellow, or red. Each PMA initiative
has specific long-term goals intended to establish management practices and disciplines that foster a
more effective and results-oriented Government. These goals are known as the Standards for Success
and can be found at www.whitehouse.gov/results/agenda/standards.pdf. Green status represents
full achievement of all of the goals for a particular initiative; yellow represents an intermediate level
of achievement; and red indicates that agency has at least one deficiency. Agencies have action plans
to achieve the goals of the PMA, and each quarter receive progress ratings of their adherence to their
implementation plans and the quality of their work. While the Federal Government has had man-
agement improvement goals in the past, the scorecard and detailed action plans give unprecedented
emphasis to holding the Government accountable for achieving its goals.
The agency chapters provide an update on each agency’s implementation of the PMA.
A scorecard reflecting status and progress scores as of December 31, 2004 follows. Each quarter
an updated scorecard is available at www.whitehouse.gov/results/agenda/scorecard.html.
56 MAKING GOVERNMENT MORE EFFECTIVE

Executive Branch Management Scorecard


Current Status as of Progress in Implementing President’s
December 31, 2004 Management Agenda
Com- Budget/ Com- Budget/
Human Human
petitive Financial E-Gov Perf. petitive Financial E-Gov Perf.
Capital Perf. Capital Perf.
Sourcing Integration Sourcing Integration
Agriculture

Commerce

Defense

Education

Energy

EPA

HHS

DHS

HUD

Interior

Justice

Labor

State

DOT

Treasury

VA

AID

Corps

GSA

NASA

NSF

OMB

OPM

SBA

Smithsonian

SSA

Arrows indicate change in status since evaluation on September 30, 2004.


THE BUDGET FOR FISCAL YEAR 2006 57

Program Initiative Scorecard

Initiative Status Progress

Faith-Based and Community Initiative:


Agriculture .....................................................................

Education .......................................................................

HHS .................................................................................

HUD .................................................................................

Justice .............................................................................

Labor ...............................................................................

AID ...................................................................................

Real Property Asset Management:


Agriculture .....................................................................

Defense ..........................................................................

Energy ............................................................................

HHS .................................................................................

DHS .................................................................................

Interior.............................................................................

Justice .............................................................................

Labor ...............................................................................

State ................................................................................

DOT .................................................................................

VA .....................................................................................

Corps ..............................................................................

GSA .................................................................................

NASA ..............................................................................
58 MAKING GOVERNMENT MORE EFFECTIVE

Program Initiative Scorecard—Continued

Initiative Status Progress

Eliminating Improper Payments: 1


Agriculture .....................................................................

Defense ..........................................................................

Education .......................................................................

HHS .................................................................................

HUD .................................................................................

DHS .................................................................................

Labor ...............................................................................

DOT .................................................................................

Treasury .........................................................................

VA .....................................................................................

EPA ..................................................................................

NSF ..................................................................................

OPM ................................................................................

SBA..................................................................................

SSA..................................................................................

Privatization of Military Housing ................................

R&D Investment Criteria ...............................................

Elimination of Fraud and Error in Student Aid


Programs and Deficiencies in Financial
Management ................................................................

Housing and Urban Development Management


and Performance ........................................................

Broadening Health Insurance Coverage through


State Initiatives ............................................................

A “Right-Sized” Overseas Presence ........................

Coordination of VA and DOD Programs and


Systems .........................................................................
1
Because this is the first quarter that agency efforts in the Eliminating Improper Payments Initiative
were rated, progress scores were not given.
DEPARTMENT OF AGRICULTURE

AT A GLANCE:
2006 Discretionary Budget Authority: $19.4 billion
(Decrease from 2005: 10 percent)
Major Programs:
• Agriculture Commodities Support
• Conservation
• Food and Nutrition Service
• Forest Service
• Food Safety, Animal and Plant Health, and Marketing Programs
• Rural Development

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Ensuring an economically sound future for American agriculture by providing a financial safety
net for farmers and promoting free and fair trade, while promoting more efficient production
decisions and reducing agricultural subsidies.
• Supporting rural telecommunications with broadband loans.

Protecting America

• Protecting the food supply by ensuring enforcement of food safety and security standards at
meat, poultry, and egg products plants and protecting agriculture from pest infestations and
disease.
• Maintaining the commitment to protect the agriculture and food system against intentional or
unintentional contamination.

Supporting a Compassionate Society

• Providing important nutrition programs, including the Food Stamp, School Lunch, School Break-
fast, and Child and Adult Care Food programs, and the Special Supplemental Nutrition Program
for Women, Infants, and Children.
• Helping tenants displaced from traditional rural multifamily housing units.

59
60 DEPARTMENT OF AGRICULTURE

MEETING PRESIDENTIAL GOALS—Continued

Making Government More Effective

• Improving the Crop Insurance program by proposing reforms to reduce the need for ad hoc
disaster assistance.
• Improving accountability through significant reform of the Forest Service including significantly
reducing its indirect costs, and addressing maintenance needs for our national forests by selling
unneeded facilities and establishing a working capital fund for facilities.
• Eliminating or phasing out conservation programs, such as the Resources Conservation and
Development Program and Watershed and Flood Prevention Operations Program, that do not
effectively target Federal resources on need or performance in order to refocus funding to high-
priority conservation programs.
• Initiating the process to close the public/private Rural Telephone Bank because of insufficient
demand for its privatization and because the Government is able to provide the Federal financial
assistance through other programs in a more cost-effective manner.

Agency-specific Goals

• Ensuring that eligible, low-income individuals have access to food stamps and improving
program accountability.
• Managing National Forests and Grasslands and assisting private landowners in managing lands
in a productive, sustainable way.
• Redirecting funding from lower priority conservation programs in order to fund national-level
resource priorities, such as helping animal feeding operations comply with environmental
regulations and helping ranchers fight and control invasive species.
THE BUDGET FOR FISCAL YEAR 2006 61

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Enhancing economic opportunities for agricultural producers

Farm Income The cornerstone of the U.S. Department of


Billions of dollars (gross) Agriculture (USDA) is the assistance it provides
Net farm income, billions of dollars
290 90 to improve the U.S. farm economy. By any
Gross Farm- Gross Cash standard, the farm economy is quite healthy.
Related Income Receipts
270
Gross Government Net Cash Farm
75 Net cash income of U.S. farmers in 2004 is
Payments Income forecast to exceed the 2003 record level of $68.6
250 60
billion by 13 percent (see accompanying chart).
Two consecutive years of exceptionally large
230 45
crop harvests and very high livestock prices,
210 30 as a result of strong demand, have benefited
the farm sector. This is only the fourth time
190 15 since 1990 that the value of both crop and
livestock production is expected to increase.
170
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
0 The combined value of production for crop and
Source: USDA. livestock commodities is expected to increase
by $27.6 billion in 2004, a 13-percent increase,
following a $20.7 billion (10.8 percent) increase in 2003. The value of farm sector production,
including income from forestry and services earned on farm assets, rose $50.1 billion in just two
years. The farm sector contributes significantly to U.S. national economic output. In 2004, it is
estimated that the sector contributed a record $118.9 billion in net value added, up $17.5 billion,
or 17 percent, from 2003.
Given this success, the Administration believes that it is appropriate to adjust current levels of
assistance to farmers under the 2002 Farm Bill (Farm Security and Rural Investment Act of 2002).
The 2002 Farm Bill provided a total of $176 billion in farm-related assistance, a 74-percent increase
over the assistance the previous Farm Bill would have provided in the absence of any additional
emergency assistance. Not all of this assistance is appropriately targeted, and many of the programs
may need to be reformed as a result of any new multilateral long-term trade agreements. Therefore,
the Administration is proposing the following legislative changes to reduce agricultural subsidies,
promote more efficient production decisions, and extend expiring programs:
• Reducing the payment limit cap for individuals to $250,000 for commodity payments, including
all types of marketing loan gains, while removing the three-entity-rule.
• Basing marketing loans on historical production.
• Reducing crop and dairy payments to farmers by five percent. Payments to farmers from all
commodity programs (e.g., marketing loans, direct and counter-cyclical payments) would be
calculated and payments would be reduced by five percent.
• Requiring the dairy price support program to minimize expenditures.
• Imposing a sugar marketing assessment to be paid by sugar processors on all processed sugar.
• Extending the Milk Income Loss Compensation program for two years.
62 DEPARTMENT OF AGRICULTURE

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

Opening New Markets to U.S. Farmers and Ranchers

U.S. export revenues have accounted for 20 to 30 percent of U.S. farm income over the past 30 years
and also generate significant off-farm income. Trade also provides U.S. consumers access to a wider
variety of foods, and provides fresh produce at reasonable prices in the winter months. The Adminis-
tration is determined to work toward the elimination of trade barriers and trade distortions through
the World Trade Organization, as well as a number of regional and bilateral trade agreements, such
as the Central American Free Trade Agreement and the recently passed free trade agreements with
Australia and Singapore. As a result of U.S. negotiations with China on soybean and cotton trade,
U.S. exports of soybeans to China reached an all-time high in 2003 of $2.9 billion, and cotton exports
were $733 million, up 431 percent over 2002.
Following the discovery of a cow that tested positive for Bovine Spongiform Encephalopathy (BSE)
in Washington State in December 2003, many beef-importing nations refused to import U.S. beef.
The Administration has been working tirelessly to re-open markets to U.S. beef. Most significantly,
the Administration is working with the government of Japan to pave the way for a resumption of beef
trade. Exports are very important to our cattle and beef industry, accounting for 10 percent of total
production. Sales to Japan alone exceeded $1.7 billion in 2003, prior to trade being halted due to the
discovery of the BSE-positive cow in the United States.

Increasing Opportunities and Improving Quality of Life in Rural America

Rural America is home to one-fifth of the Nation’s population. The needs of this population are
as diverse as those of the populations in large towns and cities. Communities in rural America rely
upon many of the same things as urban areas, including good paying jobs, access to critical services
like education, healthcare, and technology, and strong and safe communities. One specific utility that
many growing businesses are relying on for further growth is broadband, which allows high-speed
data transmission.

In 2004, President Bush announced


Broadband Helps Rural Businesses Succeed an initiative to make access to broad-
band technology available to every
Using services provided by a long-time Rural Utilities Ser- American by 2007. While broadband
vice borrower, Paul Bunyan Rural Telephone Cooperative,
has begun to penetrate rural America,
Northwoods DNA in Minnesota was able to increase test
rural areas still lag behind urban
results reporting from two to three per day to over 50 per
day. This global DNA sequencing and genotyping busi-
centers. The Rural Utilities Service
ness, which brings high-paying, high-technology jobs to delivers one of the Department’s
rural America, is able to have a more viable business by programs designed to increase access to
using broadband. broadband for rural residents and busi-
nesses. This program provides loans to
companies that are willing to provide
broadband in rural communities. Since
the beginning of this program in February 2003, USDA has approved over $658 million in loans.
The 2006 President’s Budget provides funding that will support an additional $359 million in loans.
THE BUDGET FOR FISCAL YEAR 2006 63

PROTECTING AMERICA

Because the agriculture and food systems are vulnerable to disease, pest, or poisonous agents that
occur naturally or are introduced externally, USDA works to detect potential plant and animal dis-
eases and pests, and carries out the inspection of meat, poultry, and egg products before they are sold
to consumers. The 2005 Budget requested funds to increase USDA’s ability to detect and respond
to potential contaminations of the agriculture and food system. The 2006 Budget maintains this
commitment by including approximately $376 million for food and agriculture defense activities, a
$78 million increase over the amount enacted by the Congress for 2005. Excluding funding for the
state-of-the-art animal research and diagnostic facility at Ames, Iowa, for which the Administration
requests full funding, the Budget proposes increases of $140 million above the 2005 enacted level.

To improve the safety and security of the food supply, the


Food Safety and Inspection Service (FSIS), in coordination
with the Food and Drug Administration, is working to create
a nationwide food laboratory network that will have the ability
to test many different types of food for potential biological,
chemical, and radiological contaminants. This laboratory
network will have sufficient capacity to respond to emergency
needs. Funding of $19 million is provided for FSIS to purchase
testing equipment, train staff, and analyze samples at up to 26
State laboratories. These labs will be interconnected through
an electronic network that allows labs to rapidly report and
exchange data. In addition, $23 million is requested for the
Agricultural Research Service to address food safety issues,
including early detection of pathogens and bacterial toxins.
This research will increase the speed of detection to reduce any
negative consequences of the threat.
To improve the health of animals and plants and protect the
agriculture system from plant and animal diseases and infesta-
tions, the Animal and Plant Health Inspection Service (APHIS)
is increasing pest detection and animal health monitoring. The
Budget requests $166 million for surveillance and monitoring by APHIS for the early detection of
infected plants and animals. In addition, $148 million in funding is provided for the continuation
of other important agriculture defense activities started in 2005, including: a National Veterinary
Stockpile to establish a strategic stockpile of vaccines and other therapeutics in case of an animal
disease outbreak; a National Plant Disease Recovery System to respond to and recover from a disease
affecting a major crop; the expansion of the Regional Diagnostic Network to aid in the rapid analysis
of potentially diseased material; research into emerging and exotic diseases of livestock and crops
to inform rapid identification and response to an attack on our agriculture or food systems; and the
completion of the Ames facility.
64 DEPARTMENT OF AGRICULTURE

SUPPORTING A COMPASSIONATE SOCIETY

From nutrition assistance to housing assistance to international food and education assistance,
USDA works to improve the lives of people across the Nation and throughout the world. USDA is
also bringing expertise to school feeding programs in 25 countries throughout the world. The McGov-
ern Dole International Food for Education and Child Nutrition program was permanently authorized
in the 2002 Farm Bill with the objective of using U.S. commodities and financial assistance to jump-
start school feeding programs in poor countries. Results from the program show improvement in
student enrollment, attendance, and performance. In 2005, over 2.2 million women and children will
receive meals under this program. The 2006 Budget expands the program to reach over 2.5 million
recipients.
The Special Supplemental Nutrition Program for Women, Infants, and Children, more commonly
known as the WIC program, serves the nutritional needs of low-income pregnant and post-partum
women, infants, and children up to their fifth birthday. The Budget provides $5.5 billion for WIC
services, full funding for all those estimated to be eligible and seeking services. On July 30, 2004,
President Bush signed the Child Nutrition and WIC Reauthorization Act of 2004. This law makes
many important improvements to the National School Lunch Program that affect the 29 million
children participating in the program on an average school day. The Administration is implement-
ing these changes to increase access to nutrition for vulnerable children, help States and schools
fight childhood obesity, improve the integrity of the school meals programs, and strengthen WIC cost
containment efforts.

Multifamily Housing

In September 2004, the Supreme Court


ruled that owners of USDA financed multi-
family housing projects have a right to prepay
pre-1989 loans. This ruling put the tenant
population served by those properties at
risk of potential displacement (an estimated
1,648 properties with 45,933 units, or about
10 percent of the portfolio, will be affected).
The 2006 Budget provides $214 million for a
voucher program for these displaced tenants.
In addition, the Administration is developing
a proposal to provide for the revitalization of
USDA-financed multifamily housing projects.
Collectively, these proposals will ensure that
USDA continues to provide decent, safe, affordable housing to those who need it. The 2006 Budget
also reflects the Administration’s preference for loan guarantees and vouchers as a way to promote
private ownership and individual control in providing low-income, tenant-based housing in rural
America. The multifamily housing guarantees are doubled to $200 million, while no funding has
been provided for new construction in the direct loan program.
THE BUDGET FOR FISCAL YEAR 2006 65

MAKING GOVERNMENT MORE EFFECTIVE

USDA is striving to improve its program delivery so that it can provide better, more efficient ser-
vices. Through Program Assessment Rating Tool (PART) analyses, audits, and other management
reviews, USDA has determined that there are many program and management gains that can be
made. What follows are several examples that are designed to show the breadth of changes USDA
is undertaking.

Crop Insurance

Crop insurance was designed to be the


primary risk management tool for all farmers.
Such insurance helps farmers cope with
natural disasters, such as flood and drought,
so they do not have to leave farming. In
addition, the widespread use of crop insurance
was meant to eliminate the need for ad hoc
natural disaster payments. However, even
though the farmer’s subsidy for crop insurance
was raised in 2000, the Government continues
to make large disaster payments on top of
the insurance payouts. Since 2000, four ad
hoc disaster programs have been authorized
covering six crop years for a total cost of $10
billion.
The pressure for supplemental disaster payments is often driven by anecdotal stories of suddenly
destitute family farmers without crop insurance, or with minimal crop insurance. Part of the prob-
lem stems from the low coverage level of catastrophic crop insurance (CAT), which was designed
primarily to encourage widespread participation by charging farmers only a $100 fee. However, as
CAT provides a maximum of 27.5 percent of the crop value for a total crop loss, the low coverage can
result in tremendous pressure from farmers to obtain more relief.

While the cost to assist just these farmers Farm Revenue as Crop Loss Increases
might not be large, the Congress does not want Thousands of dollars
farmers who bought adequate crop insurance 120
Disaster Payments Crop Insurance
to be put at a disadvantage or to discourage Sales Revenue
100
their purchasing insurance. Consequently,
disaster payments are structured to ignore 80
crop insurance payments in determining el-
igibility for assistance. As a result, the income 60
of farmers with crop insurance increases
40
with the size of crop loss, once the 35 percent
threshold for receiving disaster payments is 20
met. Ultimately, taxpayers pay the bill for
this system. The chart shows how a farmer’s 0
revenue varies as crop loss increases, when 0 20 40 60 80 100
the farmer is receiving disaster payments on Source: USDA. Percentage Crop Loss

top of crop insurance that prevents a loss greater than 35 percent.


66 DEPARTMENT OF AGRICULTURE

MAKING GOVERNMENT MORE EFFECTIVE—Continued

In continuing the Administration’s efforts to more effectively budget and administer disaster in-
surance programs, the 2006 Budget includes a proposal to require a higher minimum coverage level
and compel farmers to purchase insurance by tying the receipt of Federal commodity payments to
the purchase of crop insurance. This change will ensure that the farmer’s revenue loss would not
be greater than 50 percent. Other changes include modifications to the fee for catastrophic coverage
to make the program more equitable in its treatment of both large and small farms, restructuring
premium rates to better reflect historical losses, and reductions in delivery costs. The combination of
changes being proposed is expected to save the Federal Government approximately $140 million per
year. In total, this change should ensure that farmers of major commodity crops have crop insurance
with a minimum coverage level that is sufficient to sustain most farmers in times of loss.

Improving the National Forest System

The Forest Service has improved its manage-


ment and performance in recent years through
implementation of the President’s Management
Agenda. Through competitive sourcing studies
and administrative reforms, the Forest Service
is consolidating upwards of 1,400 information
technology, financial management, and human
resources jobs from around the United States
and is locating them in a consolidated single
services center located in Albuquerque, New
Mexico. These efforts will save taxpayers more
than $115 million over three years.
Even with these improvements, however, in-
efficiencies are impeding Forest Service performance. The Budget includes additional reforms to
enhance ongoing Forest Service efforts to improve its accountability and focus on measurable results
in the management of our national forests. These reforms will:
• Significantly reduce overhead, business management, and other indirect costs to improve effi-
ciency and program delivery; and
• Establish a working capital fund for facilities and allow the sale of unneeded facilities, with
receipts being devoted to maintenance or replacement of needed existing facilities.

Research

USDA provides more than $2 billion in funding for research, including over 1,000 ongoing projects
by USDA scientists at over 100 locations, and more than $1 billion through grants and other support
to individuals, as well as to institutions such as land grant universities and State agricultural exten-
sion agencies. It is important that these funds be used as effectively as possible. For that reason, the
Administration supports research funding that is provided on a competitive, peer-reviewed basis,
to ensure that the Government funds only the highest quality research targeted primarily toward
national concerns.
The Budget proposes to expand the use of competitive research grants by increasing the National
Research Initiative by $70 million, to $250 million, and establishing a new $75 million program to
provide research grants targeted to regional, State, and local priorities. Funding for these programs
THE BUDGET FOR FISCAL YEAR 2006 67

would come from reductions in formula-based research programs, which are generally allocated to
institutions on a non-competitive basis rather than allocating based on performance.

Prioritizing Resource Conservation and Development Funding

Currently, the Resource Conservation and Development (RC&D) Program provides assistance to
local communities to develop strategic plans that address their locally identified natural resource
and economic development concerns. The program’s long-term goal is to improve the capability of
local communities to plan and deliver improvement projects.
A PART assessment of the program, however, found that it is duplicative of other USDA and Fed-
eral resource conservation and rural development programs. Also, the RC&D Program does not pri-
oritize and target funding based on need or performance. Accordingly, the 2006 Budget proposes a
new policy for the RC&D Program that phases out Federal support for the local planning areas after
20 years of support. At that point, these local communities should have the experience and capacity
to identify, plan, and address their priorities. This policy would cancel Federal support for 189 RC&D
areas in the 2006 Budget.
In addition, the Budget proposes to eliminate funding for watershed and flood prevention opera-
tions. The resulting savings would be redirected to other high-priority conservation activities within
the Natural Resources Conservation Service budget, most notably to accelerate technical assistance
to help agricultural producers meet regulatory challenges, particularly in the areas of managing live-
stock and poultry waste.

Dissolving the Rural Telephone Bank

The Rural Telephone Bank (RTB) was designed to provide a commercial source of financing once
it was privatized after 1985. Though RTB has been moving towards privatization for 20 years, the
Bank is still controlled by the Federal Government. When RTB was created in 1972, there were
limited options for rural telecommunications providers to obtain financing outside the Government.
However, a recent analysis estimated that 50 percent of the rural telecommunications capital needs
each year are provided from internal funding, 10 percent from the Rural Utilities Service, seven
percent from RTB, and the remainder (33 percent) from other sources, including the Rural Telephone
Finance Cooperative (private) and the Government-run Universal Service Fund. In addition, funding
for RTB has significantly exceeded demand for financing of rural telecommunications investments.
Currently, there is over $1.3 billion in undisbursed loans.
The Administration proposes to establish the process and terms to implement a dissolution of the
Bank. Dissolution will allow RTB to close as the demand for private lenders has been fulfilled through
other sources. In addition, the stock holders will obtain a cash payout for their stock while removing
this cumbersome program from the Government. This proposal avoids the privatization of a bank
that will either fail or need continued Government support to remain in operation.
68 DEPARTMENT OF AGRICULTURE

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Update on the President’s Management Agenda

The table below provides an update on USDA’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Over the past year USDA updated and refocused its Strategic Human Capital Plan. Under the Plan, USDA
implemented a new Performance Management System for 60 percent of its employees that ties individual
performance to accomplishment of USDA’s strategic goals and effectively differentiates among performers.
USDA has strengthened its workforce planning which will help avoid significant gaps in mission critical
occupations through aggressive recruiting for new employees and development of current employees. In
addition, the newly launched online learning system expands training opportunities for employees and provides
better human resource tools for managers. While USDA initially had difficulty with competitive sourcing, in 2004
USDA completed several studies estimated to yield $174 million in savings. USDA made significant progress
on financial management. This past year, USDA submitted its third clean audit opinion on November 15, two
months earlier than last year, and resolved six material weaknesses. USDA completed security certifications on
98 percent of its information technology systems up from zero last year. USDA continues to make progress in the
Budget and Performance Integration initiative by developing meaningful performance measures and reducing
the number of programs that are rated as Results Not Demonstrated.

Initiative Status Progress


Faith-Based and Community Initiative

Real Property Asset Management

Eliminating Improper Payments

Since 2004, USDA has raised its status for the Faith-based and Community Initiative from Red to Yellow. USDA
published Department-wide regulations affirming the ability, rights, and responsibilities of faith-based and
community-based organizations to participate in USDA programs, initiated pilot projects and related evaluations
to encourage greater involvement by such organizations, and enhanced outreach and technical assistance
capabilities. As part of the Real Property Asset Management Initiative, USDA is improving its management of its
vast resources (total asset value of $8 billion, consisting of 22,000 buildings and facilities and 3,600 leases)
by completing a draft framework asset management plan; development of an automated inventory database
system; and establishment of a department-wide council to oversee implementation of asset management
performance measures. USDA currently has nine programs, representing 68 percent of total outlays, that are
at risk of or susceptible to improper payments. Efforts include developing measurement plans and beginning
statistical sampling. (Because this is the first quarter that agency efforts in the Eliminating Improper Payments
Initiative were rated, progress scores were not given.)
THE BUDGET FOR FISCAL YEAR 2006 69

AGENCY-SPECIFIC GOALS

Nutrition and Health

Food stamps alleviate hunger and malnutrition among low-income individuals. In 2006, the Food
Stamp Program will provide approximately $33.1 billion in benefits to 29.1 million people. The Bud-
get proposes to tighten overly broad waivers from the program’s eligibility criteria. Households which
receive Supplemental Security Income or Temporary Assistance for Needy Families cash assistance
would continue to be automatically eligible for food stamps, while all other individuals would apply
under regular program rules. Additionally, the Administration proposes to work with the Congress to
rename the Food Stamp Program to better represent the Program’s mission of providing nutritional
support to low-income families.
The Administration is committed to improving integrity in the Food Stamp program with the goal
of reducing the national average error rate from 6.64 percent for 2003, to 6.20 percent for 2006. This
improvement is projected to eliminate $146 million in over- and under-paid food stamp benefits in
2006. The Budget provides a new tool for program integrity by allowing States to use the National
Directory of New Hires to verify employment and wage information on food stamp applications and
reports.

Protecting the Nation’s Environment

Healthy Forests Initiative. The President’s Healthy Forests Initiative is reducing the risk of cata-
strophic wildfires by restoring forest and rangeland health. The Budget funds activities that advance
the goals of the Healthy Forests Initiative that will thin overcrowded forests, protect forests from
unnatural insect and disease infestation, and improve wildlife habitat and air and water quality.
The Budget provides $281 million for USDA’s Forest Service and $211 million for the Department
of the Interior for high-priority brush removal and other projects that provide the greatest reduc-
tion of risk posed by catastrophic wildfires. The Budget also includes $167 million to monitor the
environmental effects of these and other projects on our national forests. By supporting watershed
enhancements, vegetation management, and forest health research, the Budget improves forest and
rangeland health to protect communities, wildlife habitats, and municipal watersheds from cata-
strophic fires.
Focusing Conservation Dollars on High Priorities. To help meet scientific, regulatory, and finan-
cial challenges, the Department’s primary conservation agency, the Natural Resources Conservation
Service (NRCS), provides assistance to agricultural producers. The 2006 Budget targets funding
to national-level conservation priorities and provides new resources to enhance NRCS’s cooperative
efforts as envisioned in the President’s August 2004 Executive Order. Cooperative conservation en-
sures that Federal agencies collaborate with their State, local, tribal, and non-governmental partners
to enhance natural resources and protect the environment.
Specifically, the Budget includes an increase of $37 million to provide more conservation technical
assistance to livestock producers to comply with environmental regulations. With this additional
funding, NRCS will work with farmers to develop 3,800 comprehensive nutrient management plans
and apply nutrient management on over 470,000 acres of agricultural land.
70 DEPARTMENT OF AGRICULTURE

AGENCY-SPECIFIC GOALS—Continued

To help ranchers fight and control invasive


species, the 2006 Budget includes an increase
of $10 million. The National Invasive Species
Council has identified several invasive species
that heavily impact western range lands, such
as the yellow star thistle, leafy spurge, and
tamarisk.
In the 2006 Budget, the Administration is
requesting $274 million for the Conservation
Security Program (CSP), a 35-percent in-
crease. During the first year of enrollment in
2004, the Department signed long-term CSP
contracts with 2,200 farmers and ranchers in
18 priority watersheds around the country. In
2005, the USDA will enlarge the program by
offering enrollment opportunities in about 200 watersheds, and in 2006, the Budget anticipates that
USDA will continue to expand the program by delivering it in an additional 200 watersheds. The
CSP rewards farmers and ranchers for their existing levels of conservation and provides incentives
for them to enhance their environmental stewardship.

Department of Agriculture
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Commodities and International........................................................................ 3,060 2,858 2,837
Rural Development .............................................................................................. 2,449 2,407 2,454
Forest Service ........................................................................................................ 4,723 4,278 4,063
Conservation .......................................................................................................... 1,177 982 814
Food and Nutrition Service ............................................................................... 4,930 5,578 5,858
Research ................................................................................................................. 2,478 2,667 2,320
Marketing and Regulatory Programs ............................................................ 1,820 1,752 1,849
Central Administration ........................................................................................ 525 551 627
Subtotal, excluding items below ...................................................................... 21,162 21,073 20,822
Receipts ................................................................................................................... 49 55 62
Additional Wildland Fire Suppression ........................................................... — 394 —
Mandatory savings proposals .......................................................................... — — 1,394
Total, Discretionary budget authority ................................................................. 21,113 21,412 19,366

Memorandum: Budget authority from enacted supplementals ............... 400 553 —

Total, Discretionary outlays ................................................................................... 22,079 21,828 21,238


THE BUDGET FOR FISCAL YEAR 2006 71

Department of Agriculture—Continued
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Mandatory Outlays:
Food and Nutrition Service ............................................................................... 39,814 46,364 50,064
Commodity Credit Corporation ........................................................................ 10,668 24,074 19,288
Crop Insurance ...................................................................................................... 3,198 3,297 3,640
Natural Resources Conservation Service ................................................... 1,396 1,754 1,949
Agriculture Marketing Service .......................................................................... 1,013 1,285 985
Forest Service ........................................................................................................ 664 848 947
Loan liquidating accounts and reestimates ................................................. 5,049 3,620 3,131
Receipts and all other programs ..................................................................... 2,012 916 387
Total, Mandatory outlays ........................................................................................ 49,692 73,086 73,355

Total, Outlays .............................................................................................................. 71,771 94,914 94,593

Credit activity
Direct Loan Disbursements:
Farm Loans ............................................................................................................. 899 962 937
Commodity Credit Corporation ........................................................................ 9,150 11,944 10,106
Rural Utilities Service .......................................................................................... 3,787 4,579 4,542
Rural Housing ........................................................................................................ 1,393 1,369 1,029
Rural Community and Economic Development ......................................... 274 431 496
P.L. 480 ..................................................................................................................... 411 100 42
All other programs ................................................................................................ 62 73 79
Total, Direct loan disbursements ......................................................................... 15,976 19,458 17,231

Guaranteed Loan Commitments:


Farm Loans ............................................................................................................. 2,347 2,579 2,510
Commodity Credit Corporation ........................................................................ 2,758 4,528 4,396
Rural Utilities Service .......................................................................................... 19 1,179 30
Rural Housing ........................................................................................................ 3,420 2,837 2,824
Rural Business and Community Development .......................................... 1,063 613 925
Total, Guaranteed loan commitments ................................................................ 9,607 11,736 10,685
DEPARTMENT OF COMMERCE

AT A GLANCE:
2006 Discretionary Budget Authority: $9.4 billion
(Increase from 2005: 49 percent)
Major Programs:
• Economic Development
• International Trade
• Patent and Trademark Office
• Scientific and Technological Standards
• Census Bureau
• Oceanic and Atmospheric Science and Management

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Promoting economic growth and entrepreneurship in economically distressed areas by proposing


the new Strengthening America’s Communities Grant Program.
• Growing the economy by expanding access to foreign markets by helping nearly 900 U.S. firms
export for the first time and facilitating over 6,000 transactions to new markets.
• Advancing science and technological leadership by improving the quality and processing times
for patents and trademarks and enhancing standards research on emerging technologies.

Protecting America

• Efficiently protecting U.S. national security through programs that control the export of sensi-
tive goods by ensuring up-to-date export control lists and timely processing of export licenses.

Making Government More Effective

• Improving fishery management and the accuracy of weather, climate, and ocean-conditions
forecasts through targeted investments and improved program design.

73
74 DEPARTMENT OF COMMERCE

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Enhancing Economic Development and Trade

The President’s 2006 Budget creates a new economic development program within the Department
of Commerce, the Strengthening America’s Communities Grant Program. The President’s proposal
replaces the current duplicative set of Federal community and economic development programs with
a more consolidated approach that focuses resources on the creation of jobs and opportunities, en-
courages private sector investment, and includes rigorous accountability measures and incentives.
The Strengthening America’s Communities Grant Program is a targeted, results-oriented approach
that will encourage innovation and economic opportunity. By streamlining the delivery of Federal
economic development programs, taxpayers will see administrative savings. The President’s Budget
includes $3.7 billion for this program to provide economically distressed communities with a source
of funding for planning, infrastructure development, and business financing to achieve long-term
economic stability and growth (see table below).

Promoting Results-Oriented Economic Development


The 2006 Budget proposes a new approach, the Strengthening America’s Communities Grant Program,
for targeting assistance to needy communities and focusing on achieving tangible results for low-income
persons and economically distressed areas:

Old Model New Approach


Clear Purpose Programs lack clarity in purpose and Clear objectives focusing on: job
overlap in mission and function. creation, homeownership, commercial
development, reducing blight, and
private sector investment.
Targeted to Need 38 percent of Community Development Target resources only to communities
Block Grant funds go to States and that need assistance, based on poverty
communities with poverty rates that are and job loss.
lower than the national average.
Efficiency The sprawling bureaucracy at Streamline Federal programs to
the Federal level has duplicated eliminate inconsistent criteria and
bureaucracies at the local level with reduce administrative burdens and red
funding provided to over 3,000 grantees tape.
a year. As a result, funding is spread
thinly across the Nation with very little to
demonstrate relative to total investment.
Leverage Private Too little focus on whether economic Work with the private sector to identify
Sector and community development projects opportunities for economic growth in
lead to sustained economic growth and distressed areas.
opportunity.
Results and Focus on short-term outputs rather than Hold grantees accountable for achieving
Accountability long-term outcomes that demonstrate results and make continued funding
improvement toward community contingent upon demonstrating
self-sufficiency. progress.
THE BUDGET FOR FISCAL YEAR 2006 75

Our changing economy presents challenges for certain communities where traditional industries,
such as manufacturing, do not employ as many workers as they did a generation ago. The President
has proposed a new Opportunity Zone Initiative that will help these local economies adapt and diver-
sify by targeting Federal resources and encouraging new and existing businesses to invest in these
areas. The Commerce Department will have the lead role in managing this initiative. These efforts,
combined with the President’s tax relief packages and initiatives to increase homeownership and re-
duce regulatory burdens, will help more communities participate in our growing national prosperity.
The Minority Business Development Agency (MBDA) also strives to improve economic opportunity.
In 2004, MBDA programs provided assistance and improved access to financial and procurement
opportunities to over 25,000 clients nationwide. In the spring of 2004, the President, by Executive
Order, renewed the Advisory Commission on Asian Americans and Pacific Islanders. The 2006 Bud-
get supports increases for the Commission’s efforts to improve economic opportunities.
Enhancing the growth of export businesses and reducing barriers to trade help strengthen the
economy. The Budget provides a program level of $409 million for the International Trade Admin-
istration (ITA) for trade promotion and compliance activities. This level of funding will expand the
U.S. exporter base by increasing the number of U.S. exporters entering new markets and the number
of U.S. firms exporting for the first time, and by supporting efforts to ensure compliance with trade
agreements.
China is our third largest trading partner. Currently, there are almost 13,000 U.S. small- and
medium-sized enterprises that export to China. Nevertheless, trade with China continues to present
a number of challenges for U.S. companies. ITA, together with other Federal agencies, has worked
to help U.S. companies overcome these barriers. Recently, ITA has increased staff working on mar-
ket access problems in China, created a China Business Information Center to better advise small
and medium-sized companies on doing business with China, increased its staff at our Embassy and
Consulates in China, and created a China office in the Import Administration to better focus re-
sources on China anti-dumping cases. To help ensure that China honors its World Trade Organiza-
tion commitments, the United States continues to engage China on specific trade issues in a number
of forums, including the Joint Commission on Commerce and Trade (JCCT). The first meeting of the
ministerial-level JCCT, held in mid-2004, achieved progress on several important issues, including
technical standards and distribution services, and strengthened commitments to improve intellec-
tual property right protections.

Building the Infrastructure for Innovation

The 2006 Budget includes increases for Commerce programs that support and enhance innovation
and technological advancement—creating the conditions for economic growth.
The Patent and Trademark Office (PTO) issues patents, registers trademarks and works to protect
U.S. intellectual property rights holders through international treaties and enforcement training pro-
grams. The 2006 Budget requests a program level of $1.7 billion for PTO, a 10-percent increase from
2005. This program level provides PTO full access to its fee collections in 2006. PTO developed an
aggressive strategic plan and proposed legislative changes to restructure patent and trademark fees
to modernize and improve its operation. This included initiatives to improve the quality and the pro-
cessing times of patents and trademarks, and initiatives to improve electronic filing and processing
of applications. The Congress enacted many aspects of the modernization bill in the 2005 Consoli-
dated Appropriations Act. The increase in the 2006 Budget should enable PTO to continue to make
progress in achieving its performance goals, increasing the percentage of patents and trademarks
processed electronically to 100 percent by 2006, and achieving complete review of patent applica-
tions in an average of 31 months and trademark applications in an average of 15 months by 2010.
76 DEPARTMENT OF COMMERCE

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

Protecting Intellectual Property Rights Abroad


Together with ITA and other Federal agencies, PTO is participating in the Administration’s Strategy Target-
ing Organized Piracy (STOP!) Initiative, launched in October 2004. This initiative targets the global trade
of pirated and counterfeit goods that threatens America’s innovation economy. PTO has developed a com-
prehensive guide, and telephone hotline available at www.stopfakes.gov to help American innovators and
businesses safeguard their ideas and inventions. In addition, PTO is enhancing its Office of Enforcement to
better assist foreign countries in the enforcement of intellectual property rights.

The National Institute of Standards and Technology (NIST) develops technical standards neces-
sary to support existing industries and to enable development of emerging technologies. The Budget
provides $485 million, a 7.5-percent increase over 2005, for measurement and standards research re-
lated to nanotechnology, biosciences, manufacturing, computing and networking systems, and public
safety, and for the renovation and repair of NIST labs. With these resources, NIST will be able to ad-
dress a broad array of national scientific and technical infrastructure needs by building intramural
capacity and leveraging complementary external research efforts through collaboration and partner-
ships.
Telecommunications and information-related industries are an increasingly important and grow-
ing part of the economy. The National Telecommunications and Information Administration (NTIA)
works to bring the benefits of advanced telecommunications technologies to millions of Americans
and promotes the efficient use of the Federal radio spectrum. In response to a Presidential directive,
NTIA has taken a lead role in the Government-wide effort to implement the Spectrum Policy for the
21st Century. The 2006 Budget supports this initiative to improve domestic and international spec-
trum management.

Providing Key Information about the Population


and Economy

Information about the economy and population is essential for moni-


toring and improving the Nation’s economic and social conditions. The
Bureau of Economic Analysis (BEA) calculates the gross domestic prod-
uct and related essential economic measures. The 2006 Budget requests
increases for BEA to continue to improve the timeliness and quality of
its economic data.
The Census Bureau conducts surveys and censuses that measure
changing demographics and the economic condition of the Nation. The
2006 Budget provides increases for the Census Bureau to continue its
reengineering efforts for the 2010 Census. This includes early planning
and testing to contain costs and to improve the efficiency of data
collection activities.
The Census Bureau plans to use
hand-held computing devices with
global positioning system capability
during the 2010 Census to improve
the efficiency of data collection and
processing.
THE BUDGET FOR FISCAL YEAR 2006 77

PROTECTING AMERICA

The Bureau of Industry and Security (BIS) helps protect against the export of goods and technolo-
gies sensitive to U.S. national security and economic interests. Export controls on sensitive dual-use
commodities are necessary to stem the proliferation of weapons of mass destruction, to halt the spread
of weapons to terrorists or countries of concern, and to further important U.S. foreign policy objec-
tives. BIS also assists other countries in developing and strengthening their national export control
systems. The Budget requests an additional $10 million for initiatives to improve BIS’ ability to
maintain an up-to-date export control list and enhance enforcement activities to ensure sensitive
goods and technologies do not fall into the wrong hands.
78 DEPARTMENT OF COMMERCE

MAKING GOVERNMENT MORE EFFECTIVE

Improving Environmental Stewardship

Through targeted investments and improved program design, the 2006 Budget will provide
resources to enhance effective management of ocean and coastal resources, and observation
and prediction of changes in the earth’s environment by the National Oceanic and Atmospheric
Administration (NOAA). The release of the final report from the U.S. Commission on Ocean Policy
last fall highlighted the importance of sound management of ocean resources. In addition, the recent
hurricanes in the southeastern United States and tsunami in the Indian Ocean demonstrated the
value of accurate prediction and warning networks for atmospheric and oceanic systems.
The U.S. Commission on Ocean Policy, a council mandated to conduct a comprehensive review of
national ocean policy, released its final report in 2004, which called for changes to increase the effec-
tiveness of oceans programs. The Budget provides support for the U.S. Ocean Action Plan that was
developed in response to the Commission’s report. New investments and program improvements
within NOAA are aimed at strengthening our knowledge and management of ocean resources. For
example, funding for effective fisheries management, including a new fishery research vessel, will
enable NOAA to better assess the status of fish stocks and increase the number of stocks that are
harvested at sustainable levels. Funds are also provided to assist in adoption of individual fish-
ing quota (IFQ) systems, consistent with the Administration’s important proposed reforms to the
Magnuson-Stevens Fishery Conservation and Management Act. IFQ systems offer a market-based
approach that moves fisheries management away from more cumbersome and inefficient regulatory
policies.

Winter Flounder, Georges Bank Stock Atlantic Cod, Georges Bank Stock
Biomass in thousands of metric tons Biomass in thousands of metric tons
12 250
Rebuilt Level
Rebuilt Level
10
200

8
150

6 Overfished Level
Overfished Level
100
4

50
2

0 0
1990 1992 1994 1996 1998 2000 2002 2004 1990 1992 1994 1996 1998 2000 2002 2004
Source: NOAA. Source: NOAA.

Populations of New England groundfish species, including Georges Bank Winter Flounder and Atlantic Cod,
reached record lows in the 1990s due to overfishing. Management measures aimed at rebuilding these
stocks were introduced by NOAA and the New England Fishery Management Council in 1994. Some stocks,
such as Winter Flounder, have responded quickly. However, for other species, such as Atlantic Cod, man-
agement challenges remain.
THE BUDGET FOR FISCAL YEAR 2006 79

Management of marine resources will also be enhanced through funding to implement local ac-
tion plans to protect coral reefs based on strategies developed with State and local governments and
stakeholders.

Restoration of threatened and endangered salmon stocks


is important for environmental quality, Native American
communities, commercial and recreational fishermen, and
the economic vitality of the Pacific Northwest. The aim of
the Pacific Coastal Salmon Recovery Fund is to help restore
these stocks through improvement and expansion of habitat.
However, a 2004 Program Assessment Rating Tool analysis
found that the program was not able to allocate funding
according to the recovery needs of sensitive salmon populations.
The Administration continues support for the Recovery Fund
and proposes improvements to help ensure funds are allocated
to high priority activities.
The Commission on Ocean Policy also commended the work
of NOAA’s Sea Grant program, highlighting its capability to
gather local and State input on research priorities. The Budget
continues support for Sea Grant, which will focus this valuable
capability on important regional ocean and coastal ecosystem
concerns.
Accurately predicting storm and other weather events and
As part of the U.S. National Tsunami Hazard
tracking changes in the climate over time are important to Mitigation Program, NOAA maintains the Deep
public safety and for averting economic losses. The 2006 Ocean Assessment and Reporting of Tsunamis
Budget provides planned increases for continued development (DART) Project, a moored buoy system that
provides accurate and timely tsunami warning
and acquisition of weather satellites. In addition, the Budget information. DART helps scientists better
supports increases within the climate program, specifically predict tsunami behavior, which will ultimately
save lives and property. The 2006 Budget
focusing on the strategic programs of the President’s Climate includes $9.5 million to improve U.S. tsunami
Change Research Initiative. warning capabilities.

The Budget also supports progress towards the goals of the U.S. Integrated Earth Observation
System, which will provide improved coordination, capability and data management for weather
prediction, natural disaster management, climate research, and ocean resources management. The
devastating impact of the recent tsunami in South Asia demonstrates the potential value of this
effort.

Improving Effectiveness by Realigning Other Commerce Programs

Consistent with the Administration’s emphasis on shifting resources to reflect changing needs, the
2006 Budget proposes to terminate the Advanced Technology Program. This proposal is consistent
with the 2005 Consolidated Appropriations Act which did not provide funding for new awards. The
Administration believes that other NIST programs are more effective and important in supporting
the fundamental scientific understanding and technological needs of U.S.-based businesses, Ameri-
can workers, and the domestic economy.
The 2006 Budget proposes to fund the Hollings Manufacturing Extension Partnership Program
at $47 million, a 50-percent reduction from the 2005 grant level. The Administration’s approach
will maintain a strong national network of centers while focusing funding based on centers’ perfor-
mance in providing information and consulting services to small manufacturers. The program has
also augmented funding through expanding partnerships with other agencies and institutions. Given
80 DEPARTMENT OF COMMERCE

MAKING GOVERNMENT MORE EFFECTIVE—Continued

this new operating environment, the Administration believes the program has evolved to a stage at
which less reliance on direct appropriations is required.
To reduce duplication within Government services, the Budget also proposes to terminate the Pub-
lic Telecommunications Facilities, Planning and Construction program. This program has recently
targeted funding toward the purchase of digital transmission equipment by public broadcasting sta-
tions; the 2006 Budget proposes that a portion of the Corporation for Public Broadcasting’s already
enacted 2006 funding be made available for this purpose.
To improve efficiency, the Budget also streamlines administrative layers within the Economics and
Statistics Administration and the Technology Administration.

Update on the President’s Management Agenda

The table below provides an update on the Department of Commerce’s implementation of the
President’s Management Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrows indicate change in status since evaluation on September 30, 2004.


During 2004, Commerce made significant progress in reducing workforce skill gaps in mission critical areas
and reducing average hiring times. Commerce also resolved remaining areas of financial management
non-compliance and developed a plan for expanding the use of its financial reporting systems to improve
operations in additional key business areas; actively contributed to several E-Government initiatives, including
Export.gov to improve potential exporters’ access to trade information; and completed Program Assessment
Rating Tool evaluations on over two-thirds of its programs.
THE BUDGET FOR FISCAL YEAR 2006 81

Department of Commerce
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Departmental Management:
Salaries and Expenses .................................................................................. 49 47 54
Emergency Guaranteed Loan Program accounts................................ 52 — 50
Headquarters Renovation ............................................................................. — — 30
Office of the Inspector General ................................................................... 21 21 23
Subtotal, Departmental Management ........................................................... 122 68 57
Economic Development Administration ........................................................ 308 284 27
Economic Development Challenge ................................................................ — — 3,710
Bureau of the Census ......................................................................................... 609 745 877
Economic and Statistics Administration ....................................................... 73 79 85
International Trade Administration .................................................................. 336 398 396
Bureau of Industry and Security ..................................................................... 67 67 77
Minority Business Development Agency...................................................... 29 30 31
National Oceanic and Atmospheric Administration (NOAA):
Operations, Research and Facilities ......................................................... 2,697 2,852 2,608
Procurement, Acquisition and Construction ........................................... 961 1,038 965
Other accounts .................................................................................................. 11 18 11
Subtotal, NOAA ..................................................................................................... 3,669 3,908 3,584
Patent and Trademark Office (PTO):
Program Level ................................................................................................... 1,221 1,555 1,703
Offsetting Collections ...................................................................................... 1,321 1,563 1,703
Subtotal, PTO......................................................................................................... 100 8 —
Technology Administration ................................................................................ 6 6 4
National Institute of Standards and Technology (NIST):
Scientific and Technical Research and Services.................................. 336 379 426
Industrial Technology Services ................................................................... 208 244 47
Construction of Research Facilities ........................................................... 64 73 59
Subtotal, NIST ....................................................................................................... 608 696 532
National Telecommunications and Information Administration ............ 48 38 23
Total, Discretionary budget authority ................................................................. 5,775 6,311 9,403

Memorandum: Budget authority from enacted supplementals ............... — 21 —

Total, Discretionary outlays ................................................................................... 5,704 6,122 6,383

Total, Mandatory outlays ........................................................................................ 151 161 124

Total, Outlays .............................................................................................................. 5,855 6,283 6,507

Credit activity
Direct Loan Disbursements:
Fisheries Finance Direct Loan Financing account ................................... 98 14 12
Total, Direct loan disbursements ......................................................................... 98 14 12
DEPARTMENT OF DEFENSE

AT A GLANCE:
2006 Discretionary Budget Authority: $419.3 billion
(Increase from 2005: 5 percent)
Major Programs:
• Defense of the Nation and its interests
• Training and equipping of military personnel
• Operation and maintenance

MEETING PRESIDENTIAL GOALS

Protecting America

• Leading the Global War on Terror by eliminating sanctuaries for terrorism, capturing or killing
al-Qaida’s most senior leaders and al-Qaida associated individuals.
• Supporting democratic elections in Afghanistan and Iraq.
• Enabling field commanders in Iraq to fund reconstruction projects quickly.
• Transforming the way wars are fought, with both new organizational strategies and weapons
systems and equipment:
— Executing new strategies to improve the way the Army and Navy deploy their forces;
— Moving troops from their Cold War footing to new strategic locations and approaches through
the Global Posture Initiative; and
— Pursuing an aggressive strategy of “spiral” development to ensure that new technologies are
deployed sooner.

Supporting a Compassionate Society

• Supporting our troops and their families to enable accomplishment of the Department of
Defense’s mission and to recognize the sacrifice they make on a daily basis:
— Providing quality medical care to uniformed service members and their families; and
— Providing excellent educational opportunities to troops, particularly those serving in Iraq and
Afghanistan, and quality housing through a nearly complete privatization program.

83
84 DEPARTMENT OF DEFENSE

MEETING PRESIDENTIAL GOALS—Continued

Making Government More Effective

• Implementing a program that converts military positions to civilian positions to free up troops
for more high-priority warfighting missions.
• Transferring the background investigation section of the Defense Security Service to the Office
of Personnel Management, enabling the Department to focus on its core mission.
• Focusing resources and forces where they are most needed through the Base Realignment and
Closure initiative.
• Instituting new management practices in manufacturing and repair facilities to improve
efficiency and increase production.
THE BUDGET FOR FISCAL YEAR 2006 85

PROTECTING AMERICA

Under this Administration, the Department of Defense (DOD) has received the largest increases in
funding since the Reagan Administration, and this Budget builds upon that record. The 2006 request
represents a 41-percent increase over 2001, and a 4.8-percent increase over 2005. The Department
has used these resources to transform our Nation’s military capabilities to meet future threats, to
improve the quality of life for our troops and their families, and to fight the Global War on Terror.
To ensure the most cost-effective use of its resources, the Department has recently examined its
programs carefully. As a result, DOD has changed some of its spending priorities in this year’s Bud-
get and will continue to refine these in the 2005 Quadrennial Review, the Department’s strategic
review of defense requirements and spending priorities. This Budget continues the Administration’s
commitment to our troops by providing a 3.1 percent pay raise and additional bonuses to support
recruiting and retention. The Budget includes additional funding in the outyears for the Army to
change from a division-based structure to one based on new, more agile "modular" brigades better
tailored to both ongoing operations in Iraq and Afghanistan and future conflicts. It also improves
DOD’s capabilities against weapons of mass destruction, including new laboratory facilities, detec-
tion systems, and protective measures against advanced biological and chemical weapons. This Bud-
get moves funding for critical intelligence activities essential to success in the long-term Global War
on Terror, including language proficiency training, to the base intelligence budget. This move sig-
nificantly reduces the reliance of the Intelligence Community on supplemental funding, which has
been a source of insecurity in intelligence program planning and a source of criticism from the 9/11
Commission. In addition, the Budget increases by 1,400 the number of special operations personnel,
whose capabilities have contributed significantly to the War on Terror.
One of the key tenets of transformation is the ability to evolve rapidly and adjust future planning
to account for changes in the global environment. Because of the continuing need to reexamine pri-
orities, DOD has reviewed its management processes and weapons systems. As a result, this Budget
proposes management savings such as a reduction in Navy end-strength and overall defense contrac-
tor support. It also reduces major systems over the next few years based on their cost-effectiveness
and/or potential to counter future threats. Examples of these reductions include slower production
rates for the V-22, the Expeditionary Fighting Vehicle, the F/A-22, and several classes of large war-
ships (including retiring one aircraft carrier early). DOD has also terminated some programs whose
cost-effectiveness no longer warrants their continuation, such as the C-130J and the Joint Common
Missile. While proceeding with the above changes, DOD continues to support new transformational
capabilities, such as Unmanned Aerial, Underwater, and Land Vehicles; the Littoral Combat Ship,
the Army’s Future Combat System; and many other programs with a high potential to meet current
and future threats.

The Global War on Terror

DOD is fighting the Global War on Terror by:


• taking the fight to the enemy;
• working with allies to isolate and eliminate terror cells; and
• supporting emerging democracies.
Since the precise costs of ongoing operations could not be estimated at the time the 2005 Budget
was proposed or enacted, the Administration plans to request, in addition to the 2006 Budget pro-
posals, an emergency supplemental to fund continuing military operations in 2005. The 2006 Budget
86 DEPARTMENT OF DEFENSE

PROTECTING AMERICA—Continued

and 2005 supplemental funding request reinforce the United States’ unwavering commitment to en-
suring that our men and women in uniform have what they need to protect our homeland, defeat
terrorism around the world, and support new democracies in Iraq and Afghanistan.

In 2005, the United States expects to


maintain substantial force levels in Iraq to
ensure security and help the Iraqi government
defeat the insurgency. In 2005, the United
States also expects to maintain a significant
force in Afghanistan. The 2005 supplemental
will help to fund these deployments, including
equipment, force protection, and intelligence
support.
Together the 2006 Budget and 2005 supple-
mental will increase the ability of the Army to
support the Global War on Terror by accelerat-
Soldiers with the Iraqi Armed Forces and U.S. Marines with the 5th ing their transformation into more lethal, more
Marine Regiment, 1st Marine Division, patrol the streets while clearing capable units. Further, these funds will provide
buildings during Operation Al Fajr (New Dawn) in Fallujah, Iraq.
the resources to train Iraqi and Afghan security
forces to assure greater responsibility for the se-
curity of their countries. In order to build upon the military successes in Iraq and Afghanistan, and
in order to continue to lay the foundation for stable democracies, the United States is committed to
building up the security forces of these new governments. As of January 2005, U.S. and allied forces
had trained 127,000 Iraqi security forces and will continue to work with the Iraqi Government to
improve the capabilities and performance of these forces.

Similarly, in Afghanistan the coalition has


trained over 16,000 troops for the Afghan
National Army (ANA). The ANA has been so
successful that the rate of training has been
increased and funds to accelerate that effort
will be requested in the 2005 supplemental.
Another key element of the U.S. strategy to
bolster democracy in Iraq and Afghanistan is
providing aid to the people there. To advance
freedom and stability, the United States is
funding a variety of long- and short-term
initiatives designed to support national
infrastructure and projects of immediate value
to hundreds of towns and villages. Members of the U.S. Marines 7th Regiment walk the city streets of Al
Anbar, Iraq and hand out gifts as gestures of goodwill.
The 2006 Budget and 2005 supplemental
propose to continue the authority for the Commander’s Emergency Response Program (CERP).
The Budget requests authority for an additional $300 million, and substantial additional 2005
supplemental funding will be requested. Since the inception of CERP, commanders have spent
almost $250 million to directly improve education, healthcare, electricity, water, and security. Each
major command has been allocated CERP funds based on the geography, population, and needs
of their respective region. CERP projects help local commanders quickly deal with short-term
THE BUDGET FOR FISCAL YEAR 2006 87

needs and are conducted along with large-city


and nationwide projects headed by the U.S.
Agency for International Development and the
Corps of Engineers. CERP is successful because
it is administered by local commanders who live
and interact with local citizens. Commanders
work directly with local communities, through
civil affairs experts, to identify and respond to
immediate needs with low-cost, high-impact
projects. A testament to the program’s success
is the fact that the Iraqi Interim Government
has added millions of dollars of its own funding
to the program. Members of the U.S. Army’s 21st Infantry Regiment provide school
supplies and visit classes at Al Nidhal public school in Amel Shabi,
Iraq.
Transforming Our Fighting
Capabilities

Transforming the way the U.S. military is organized and equipped is one of the highest security
priorities for President Bush. To support the President’s goals, the 2006 Budget and 2005 supple-
mental fund:
• a wide variety of unmanned vehicles;
• the continued development of a reconfigurable warship that can be effective in multiple missions;
• the realignment of Army units to make them more flexible and more easily deployable;
• the Global Posture Initiative that optimizes the deployment of U.S. forces around the world; and
• the development of new communications and computer systems.

Unmanned vehicles are well suited to the


dangerous missions that U.S. troops often
undertake at great risk. The Department
continues to make major investments in the
development and procurement of unmanned
ground vehicles (UGVs), unmanned underwater
vehicles (UUVs), unmanned aerial vehicles
(UAVs), and unmanned combat aerial vehicles.
DOD has only begun to exploit the potential
of these vehicles. For example, while current
operational UAVs like the Predator and Global
Hawk are well known, many other UAVs have
been, or are being, developed by the Department A soldier with the 1st Infantry Division operates and maintains a
in a wide variety of shapes and sizes. And Shadow 200 Unmanned Aerial Vehicle at Forward Operating Base
Warhorse in Iraq.
while the current generation of UAVs have been
mainly used in the reconnaissance role, the Department is exploring the feasibility of using UAVs
in entirely new ways that will help to transform how U.S. forces fight. An example of this is the use
of armed robots to assist in the clearing of buildings occupied by insurgents. This capability has the
potential to transform urban combat operations. UUVs are also being developed for mine detection
and avoidance operations, and the range of missions for UGVs is expanding from examining
improvised explosive devices to exploring caves. The Department’s funding for these efforts reflects
the importance the Administration places on this area of technology development. The 2006
88 DEPARTMENT OF DEFENSE

PROTECTING AMERICA—Continued

Budget provides $1.7 billion for unmanned vehicles. Unmanned vehicles will provide a significant
advantage for U.S. forces on the battlefield of the future by reducing the risks to our troops.

The Littoral Combat Ship (LCS), now in


development and testing, is a fast, small, and
low-cost surface warship capable of operating
in littoral (near-shore) waters. The Navy
will use the LCS in environments where it is
impractical to employ larger, multi-mission
ships. The LCS has an innovative hull form
and propulsion systems and is capable of high
speeds reaching 40 to 50 knots. This capability
will enable it to perform many different
missions such as anti-small-boat warfare,
mine countermeasures, and anti-submarine
warfare. Secondary missions will include
intelligence, surveillance and reconnaissance,
homeland defense, maritime interdiction, and
A computer-generated depiction of a LCS design.
support for Special Operation forces support.
The 2006 Budget supports the LCS and associated weapons systems by providing $613 million for
acquisition, which is an increase of $156 million from 2005.
The 2006 Budget supports substantial investments in advanced technology to provide advantages
over our enemies, particularly in remote sensing and high-performance computing. U.S. intelligence
capabilities are employing advanced technology systems to exploit, process, and produce information
from enemy signals, imagery, and human and other sources. Investments in communications are
improving connectivity between troops and their commanders well beyond the field of battle. These
developments are improving our ability to detect and counter the broad range of threats facing the
United States, reaping benefits for both U.S. forces and homeland security.
The 2006 Budget also supports the Department’s efforts on a wide range of technologies that can
protect military personnel, while allowing them to perform their mission more effectively. For exam-
ple, the Budget funds research into new materials for troop clothing that provides better camouflage,
helps to maintain comfort and health, and still stands up to harsh conditions. Other research and
development is proceeding on the detection of improvised explosive devices, chemical and biological
agents, and radioactive materials. Additional work is being supported on aerial sensors, hyperveloc-
ity missiles, and other smart weapons that will reduce the time from the appearance of a battlefield
threat to the time that the threat is destroyed.

Organizational Transformation

Transformation requires more than pursuing next-generation weapons systems. Transformation


also requires changing the way we organize our troops to address new threats. An example of this is
the Army’s effort to “modularize” its combat and support units into more effective and useable forma-
tions. The new modular combat brigades are more self-contained than current brigades because they
include their own artillery, engineers, military police, and supply capabilities. This makes them more
deployable and flexible than current brigades. Once the reorganization into modular units is com-
plete, Reserve and Active units will be more interchangeable, reducing the frequency of deployment
THE BUDGET FOR FISCAL YEAR 2006 89

of high-demand units and providing stability for soldiers and their families. The Administration
plans to request an additional $35 billion for the Army for modularity between 2005 and 2011.

Global Posture Initiative

In August 2004, the President announced


the most comprehensive restructuring of U.S.
military forces overseas since the end of the
Korean War. This will require the shifting of
our military presence from Cold War needs to
one reflecting the strategic realities of the 21st
Century. Once the Global Posture Initiative is
implemented, our forces will be better able to
contend with new threats, such as those posed
by terrorism and the proliferation of weapons
of mass destruction. Another benefit of this
initiative is that it will enable fewer overseas
moves for service members, providing more
stability for military families. Forward basing for B–2 Bombers is addressed by the Global Posture
Initiative.

This initiative is expected to be imple-


mented over the next 10 years. Over that
time, 70,000 military personnel—and 100,000
family members and other civilians—are
expected to return to the United States as a
result of this effort. The United States’ over-
seas presence will be reduced from 850 sites to
550. To begin this effort, the Administration
has added $416 million in the 2006 Budget
and $3.5 billion through 2011. Furthermore,
Paratroopers in Italy board a plane before a night drop into Germany as
the Administration expects the decisions on part of an exercise.
global posture will help inform base closing
decisions under the Base Realignment and
Closure (BRAC) process in 2005.

Spiral Acquisition

One of DOD’s key initiatives for improving how it procures new weapon systems is the use of “spiral
acquisition,” in which new technologies and capabilities are tested and added to the inventory in
carefully planned and limited increments. In the past, many new weapon systems were designed
from a “clean sheet” to achieve a dramatic leap forward in capability. This often led to pushing the
use of very young technologies, coupled with very complex designs and system engineering. The
result was often large cost increases and schedule delays. This inevitably resulted in troops having
to continue using older equipment, which was not upgraded because the new weapons’ program cost
over-runs were absorbing funding. The Administration is committed to solve this problem.
A good example of spiral acquisition is the Army’s Future Combat System (FCS), which this Budget
supports with a $3.4 billion request, an increase of $200 million from 2005. FCS will provide 18 new
systems (ranging from UAVs, new sensors, unmanned ground systems, and new armored fighting
vehicles) to re-equip the Army for the highly mobile, network-centric warfare of the 21st Century.
90 DEPARTMENT OF DEFENSE

PROTECTING AMERICA—Continued

FCS had been structured as a classic large, complex acquisition where everything was planned to
come together (all 18 systems plus a network to link them) into the first, completely re-equipped
brigade in 2010. The acquisition risk and cost of this approach was formidable. Recognizing the
problem, the Army restructured FCS development and procurement into a spiral acquisition where
subsets of the new systems are delivered in four “spirals” beginning in 2008. This approach allows
the Army to deploy those elements of FCS that are ready first, while providing enough time to test
and develop the more challenging components for introduction in later spirals. The new strategy will
provide more capability to the troops sooner, while effectively managing cost and technical risk.

Strengthening Intelligence

Policymakers require timely, accurate, and insightful information on the capabilities and inten-
tions of foreign powers, including terrorist groups. Military commanders need such information and
real-time battlefield intelligence to wage war successfully. The agencies of the U.S. intelligence com-
munity have the responsibility to meet the full range of U.S. intelligence needs from the national level
to the tactical level. The 2006 Budget devotes substantial resources to U.S. intelligence capabilities
and continues a commitment to transform them to more effectively meet the challenges of the 21st
Century.
THE BUDGET FOR FISCAL YEAR 2006 91

SUPPORTING A COMPASSIONATE SOCIETY

Military Housing

The President is committed to providing


members of the military and their families
quality housing whether they live on- or
off-base. The 2006 Budget is the first in which
members of the military and their families
living off-base will have their total average
housing costs fully paid.
One of the goals of the 2006 Budget is to
eliminate 67,000 inadequate housing units
(out of a total of 136,000 Government-owned
units) by 2007. A proven method to eliminate
inadequate housing, and to improve the quality
of housing over the long-term, is to privatize
A military family moves into their new house on Ford Island, Hawaii.
Government-owned family housing—so that
private sector professionals best able to refurbish, build, and supply housing for our troops do so,
allowing the Department to focus on its core warfighting mission.

Defense Health

DOD’s expert medical care teams continue


to save lives in Iraq and Afghanistan due
to advanced battlefield medical techniques,
rapid patient transportation systems, and
state-of-the-art medical equipment. Battlefield
health care has been enhanced with field surgical
and medical care teams that provide front-line,
life-saving medical attention within minutes
after injury and are integrated with a responsive
medical system. The specialized aero-medical
evacuation system quickly moves patients from
the battlefield to military hospitals for follow-on
care in Germany and the United States, some A member of the 105th Military Police Battalion, North Carolina
within 36 hours. The wounded survival rate National Guard, cradles his seven-week old daughter before
boarding a plane to deploy to Iraq at Pope Air Force Base, North
is 98 percent, and families see firsthand the Carolina.
importance of the swift, high-quality, and
compassionate care delivered. DOD has also made far-reaching improvements in its development of
automated records to support quick access to critical healthcare information. In 2006, the Budget
requests $19.8 billion, an increase of $1.6 billion over 2005, to continue providing our troops and
their families with comprehensive and quality health care.
This Administration has expanded access to medical care for reservists and their family members
before, during, and after mobilization. For those reservists, retirees, and families not using DOD’s
own medical care system, DOD provides an insurance program called TRICARE. This program has
made significant changes to its nationwide contracts to improve portability for families and eliminate
regional administrative differences. Enrollment is now automatically transferred when beneficiaries
92 DEPARTMENT OF DEFENSE

SUPPORTING A COMPASSIONATE SOCIETY—Continued

move to a new region. The network of civilian


physicians has also expanded, and other
customer-focused improvements have been
made to increase the quality of care, access, and
claims payments. DOD’s new TRICARE website
provides more beneficiary information on
enrollment and network providers, procedures
to file claims, customer support, and the ability
for a patient to view his or her claims online.
In addition, the website includes programs to
provide beneficiaries with information that
allows them to make better healthcare decisions.
An Air Force Pharmacy Technician fills a prescription in the clinic at
Davis-Monthan Air Force Base, Arizona.

Education Assistance

In keeping with his commitment to improve benefits and quality of life for the Nation’s citizen-
soldiers, President Bush proposed and recently signed into law a new education assistance program
for members of the Guard and Reserve who are mobilized in the War on Terror. Members of the
National Guard and Reserve mobilized for more than 90 consecutive days and less than one year
will receive, in addition to the current $288 benefit, an additional $114 per month, or 40 percent
increase, for a total of $402 per month in 2005 for education. Members mobilized between one and
two consecutive years will receive an additional $314 per month, or 109 percent more, for a total of
$602 per month in 2005. Members mobilized over two consecutive years will receive an additional
$515 per month, or 179 percent more, for a total of $803 per month in 2005. The 2006 Budget funds
this initiative with $203 million.
DOD also provides a full range of transition services to members leaving service. These services in-
clude information on education, training, employment assistance, Guard and Reserve opportunities,
medical benefits, financial assistance, and public and community service. DOD also offers a vari-
ety of tools to help departing service members write resumes and maintains databases of jobs from
many employers, including employers specifically seeking applicants with service members’ skills.
DOD works closely with the Department of Veterans’ Affairs and the Department of Labor to ensure
departing members receive all the benefits and assistance to which they are entitled.
THE BUDGET FOR FISCAL YEAR 2006 93

MAKING GOVERNMENT MORE EFFECTIVE

Transfer of Background Checks to the Office of Personnel Management

DOD and the Office of Personnel Management (OPM) signed a Memorandum of Agreement for the
permanent transfer of approximately 1,800 DOD employees to OPM, in early 2005. The employees
will augment OPM’s contractors to perform the personnel background investigations required for
Federal employment and granting security clearances for Federal civil servants, military personnel,
and contractor personnel. With these additional personnel, OPM will be able to aggressively move
to reduce the backlog in these investigations—a critical step to strengthen national and homeland
security. Moving this function to OPM allows DOD to focus its resources on warfighting, while allow-
ing OPM to use its expertise in personnel matters.

Military to Civilian Conversions

Beginning in 2004, DOD converted over 7,600 military positions to civilian positions, to relieve
strain on the military force and to free up our troops to meet high-priority military missions. The De-
partment plans to convert an additional 12,000 military positions in 2005, and over 5,800 additional
positions in 2006. This program is an essential part of the Department’s efforts to ensure all military
personnel are performing military essential activities in support of the Global War on Terror.

National Security Personnel System

In November 2003, the Congress passed landmark legislation adapting an Administration proposal
to grant authority to DOD to establish a new civilian personnel management system, the National
Security Personnel System (NSPS). Since that time, the Department has worked with its employees,
OPM, and various union representatives to develop a personnel system that will provide the Depart-
ment the flexibility to hire, assign, pay, evaluate, advance, and remove DOD civilian employees based
on current national security requirements. The system will protect employees’ rights by continuing
the use of merit system principles, accommodation of veterans’ preference, and respect for bargain-
ing. DOD plans to roll out the first phases of NSPS at the end of 2005 and beginning of 2006. Once
fully implemented, NSPS will cover over 700,000 civilian DOD employees.

Adopting Best Practices

DOD depots are adopting best practices from the


private sector to save money and improve their
ability to maintain our military’s equipment. The
implementation of new initiatives has helped military
depots to identify wasteful practices and eliminate
tasks that do not add value. Depot managers have
reorganized workspaces to be more ergonomic, helping
DOD personnel to spend more time repairing military
equipment and less time looking for their tools or spare
parts.
A tank at the Marine Corps Logistics Base in Albany,
As a result, military depots have decreased the turn- Georgia undergoes depot maintenance.
around time it takes to repair critical equipment. For ex-
ample, increased efficiency enabled the Oklahoma City
Air Logistics Center to reduce the number of days needed to maintain KC–135s from 440 to 230 days.
94 DEPARTMENT OF DEFENSE

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Base Realignment and Closure

The maintenance of excess infrastructure diverts resources from where they can best be used to
support the military. The 2006 Budget will allow the Department to implement the recommendations
of the 2005 BRAC round that, in conjunction with the Global Posture Initiative, will allow it to match
its infrastructure spending to new national security imperatives. BRAC will start realizing over $7
billion in estimated annual savings by 2012. These savings will allow DOD to allocate funds to higher
priority requirements, such as efforts to modernize weapons, enhance quality of life and improve
readiness. However, the 2006 Budget does not prejudge any particular closures or realignments.
Decisions regarding closures or realignments are made through the BRAC process.

Update on the President’s Management Agenda

The table below provides an update on DOD’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrow indicates change in status rating since evaluation as of September 30, 2004.
Over the past year, the Department has worked to develop and begin implementing the new National Security
Personnel System that will give DOD the tools it needs to manage its workforce more strategically. In addition,
DOD has made solid progress identifying and strengthening management competencies. While DOD has
effectively used A-76 competitions to achieve general savings in the past, the pace of announcements has
slowed significantly causing DOD to fail to meet its goals. Competition announcements under the revised A-76
Circular have lagged. With new announcements coming, DOD expects the Competitive Sourcing Initiative to
reduce costs to the Military Services and Defense Agencies by more than $6 billion by 2006 and by almost
$16 billion by 2009. The Department is engaged in a major, long-term effort to modernize its financial and
business systems. This effort is helping DOD to better understand the root causes of its financial management
weaknesses, target improvement efforts, and identify best practices going forward. For E-Gov, DOD certified and
accredited 72 percent of all its systems to ensure they meet information technology security requirements, and it
is moving forward with architecture efforts to improve information flow to the battlefield. As part of the Budget
Performance and Integration Initiative, DOD continues to implement the new Program, Planning, Budgeting and
Execution System to emphasize the integration of performance metrics into the budget process.
THE BUDGET FOR FISCAL YEAR 2006 95

Initiative Status Progress


Real Property Asset Management

Privatization of Military Housing

Eliminating Improper Payments

Arrow indicates change in status since evaluation on September 30, 2004.


DOD is well positioned to make significant advancements in real property management. The Department’s
Asset Management Plan incorporates best practice solutions that assist DOD managers in making capital
investment decisions that help advance mission critical objectives. The Department has employed effective
controls to maintain low improper payment rates in the military retirement and health programs. DOD is also
taking aggressive steps to address improper payments to contractors, recovering $86.3 million of such payments
in 2003. (Because this is the first quarter that agency efforts in the Eliminating Improper Payments Initiative were
rated, progress scores were not given.) The Department has privatized 74,153 housing units and is on track to
eliminate all inadequate housing units by 2007. The 2006 Budget supports the elimination of all inadequate
housing in the continental United States by 2007. DOD is making significant progress this year in privatizing
military housing, thereby achieving Green for status and progress.

Department of Defense
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Military Personnel ................................................................................................. 97,048 104,022 108,943
Operation and Maintenance ............................................................................. 128,104 137,024 147,828
Procurement ........................................................................................................... 76,090 78,119 78,043
Research, Development, Test, and Evaluation .......................................... 64,309 68,797 69,355
Military Construction ............................................................................................ 5,634 5,950 7,809
Family Housing ...................................................................................................... 3,799 4,055 4,243
Revolving Funds and Other .............................................................................. 681 2,091 3,120
Subtotal................................................................................................................ 375,665 400,058 419,341

Budget authority from enacted supplementals 1 .......................................... 92,810 1,074 —

Total, Discretionary budget authority ................................................................. 468,475 401,132 419,341

Total, Discretionary outlays ................................................................................... 436,934 443,232 424,415

Total, Mandatory outlays ........................................................................................ 182 836 1,900

Total, Outlays .............................................................................................................. 437,116 444,068 426,315


1
2004 includes repeal of $1.8 billion rescission and inclusion of $983 million for CPA.
DEPARTMENT OF EDUCATION

AT A GLANCE:
2006 Discretionary Budget Authority: $56.0 billion
(Decrease from 2005: 1 percent)
Major Programs:
• Title I grants to States and local school districts
• Special education
• Pell Grants
• Research and statistics

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Creating a new high school initiative to extend No Child Left Behind (NCLB) into the upper
grades through improved accountability and effective interventions to help at-risk youth
complete high school successfully, and through testing in grades 9–11.
• Providing grants to improve education in low-income communities and support NCLB reforms.
• Supporting reforms in special education to improve services for students with disabilities.

Making Government More Effective

• Reforming the student loan programs by reducing unnecessary subsidies to lenders and other
financial intermediaries, and redirecting these funds to the Pell Grant program to help low-
income students pay for college.

97
98 DEPARTMENT OF EDUCATION

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Building a Strong Foundation: Leaving No Child Behind

At the center of the President’s commitment to education is his promise to “leave no child behind.”
When President Bush launched his No Child Left Behind initiative, he said, “The Federal role in
education is not to serve the system. It is to serve the children.” No Child Left Behind (NCLB) is
making a difference for every child, in every public school. It is no longer acceptable for any child to
slip through the cracks or fail to receive the challenging education he or she deserves. Schools are
held accountable for ensuring that all children, including those who are disadvantaged or disabled,
become proficient in reading and math. Parents receive detailed information about the performance
of their schools. Students who attend low-performing schools have the option to attend a better public
school or, if their schools do not improve, to receive tutoring funded by the school district. And all
this is guided by a commitment to support practices that rigorous research shows to be effective.
It is far too soon to know the full impact of NCLB as school districts have set ambitious goals for
ensuring that all children are proficient in reading and math by 2014. Nonetheless, there are early
signs of success. An October 2004 report by the Education Trust analyzed student achievement data
from the 24 States that had three years of comparable test scores. It found that in 23 of them, overall
achievement had improved. States are making gains in closing the achievement gap between stu-
dents from disadvantaged backgrounds and their peers from more advantaged backgrounds, while
also improving achievement generally. The majority of the 24 States analyzed reported a narrowing
of the achievement gap between African Americans, Latinos, and Native Americans and their white
peers in both reading and math. Compared to a year ago, the percentage of schools meeting their
student performance targets on State assessments has increased significantly in several States.

Student Achievement Results for States That Have at Least Three Years of Data
Disaggregated by Race and Ethnicity
In Reading In Mathematics
The African American-white gap narrowed in 16 States The African American-white gap narrowed in 17
and grew wider in three. States, grew wider in two, and remained the same in
one.
The Latino-white gap narrowed in 14 States, grew The Latino-white gap narrowed in 16 States, grew
wider in three, and remained the same in two. wider in three, and remained the same in one.
The Native American-white gap narrowed in 13 States, The Native American-white gap narrowed in 14 States,
grew wider in two, and remained the same in two. grew wider in two, and remained the same in two.
The gap between poor and non-poor students The gap between poor and non-poor students
narrowed in nine States and grew wider in one.* narrowed in all 10 States examined.*
* Only 10 States provided data for both poor and non-poor students.
Source: Education Trust, "Measured Progress," October 2004

The 2006 Budget continues the President’s support for the major components of NCLB, on top of the
dramatic funding increases for key K–12 programs since 2001. While education remains principally
the responsibility of the States, the Federal Government will continue its aggressive leadership in
the education of America’s children.
THE BUDGET FOR FISCAL YEAR 2006 99

Title I Grants to Local Educational Agencies. Title I provides funds to schools in low-income com-
munities and is the foundation for the NCLB accountability, school improvement, and parental choice
reforms. The Budget requests $13.3 billion for Title I, a $603 million, or 4.7-percent increase over
the 2005 level, and a 52-percent increase since 2001, to help schools implement the No Child Left
Behind Act.
Reading First and Early Reading First. The Budget includes $1.1 billion for the President’s sig-
nature literacy programs to help students in preschool and elementary school improve their reading
skills. Reading First supports high-quality, scientifically proven reading practices in grades K–3 to
ensure that all children can read at grade level by third grade. The Budget proposes $1.0 billion,
fulfilling the President’s commitment to provide $5 billion for reading over five years. The Budget
includes $104 million for Early Reading First to develop model childhood literacy and pre-reading
programs for schools serving high-poverty communities.
State Assessments. The Budget provides $412 million to help States implement current NCLB
testing requirements. This includes $400 million for formula grants to States and $12 million for
competitive grants to help States tackle some of the most difficult testing issues including assess-
ments for special populations.

Beating the Odds


Students in schools in large cities often face the most difficult odds and need the most help to reach academic
excellence.
When President Bush first took office, two-thirds of inner-city fourth graders could not read at a basic level.
The most recent Council of Great City Schools’ report, "Beating the Odds IV," showed that many schools
in large cities are meeting the challenge and have made important gains in reading and math scores on
2003 State assessments. In addition, achievement gaps may be narrowing between urban areas and the
population as a whole, between African Americans and whites, and between Hispanics and whites. Findings
show that:
• 84.6 percent of all grades included in the Great City Schools report showed gains in math scores.
• 72.1 percent of all grades tested showed gains in reading scores.
• In 73.1 percent of fourth grades tested, the gap in reading scores between whites and African American
students narrowed.
• In 60.0 percent of fourth grades tested the gap in reading scores narrowed between whites and
Hispanics.
Districts in the Council of Great City Schools enroll 15 percent of the Nation’s public school students and 30
percent of the Nation’s African American, Hispanic, limited English proficient, and poor students.
Source. http://www.cgcs.org/reports/beat_the_oddsIV.html.

Teachers. Recognizing that well-trained, highly qualified teachers are critical to student learn-
ing, the Budget provides $500 million in funding for the President’s new Teacher Incentive Fund.
This program would reward teachers and schools making great progress in closing the achievement
gap between students of different socio-economic backgrounds, recruit the most effective teachers
to teach in high-need schools, and provide support for school districts to link teacher compensation
more closely to growth in student achievement. The Budget also provides $2.9 billion for the Teacher
Quality State Grants program to support teacher training and recruitment. In addition, $40 million
is requested for the Adjunct Teacher Corps initiative to create opportunities for professionals with
100 DEPARTMENT OF EDUCATION

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

extensive knowledge in the core academic sub-


jects to teach middle and high school courses,
particularly in mathematics and science.
Choice. To support and enhance school
choice reforms, the Budget provides $50
million in new funding for the Choice Incentive
Fund to support development of innovative
school choice programs, $219 million for
Charter Schools Grants, $37 million for Credit
Enhancement for Charter School Facilities,
and $15 million through the District of
Columbia budget for scholarships to help
The new Teacher Incentive Fund will help place more high-quality
low-income students in Washington, D.C.,
teachers in low-performing schools and reward teachers who improve attend higher-performing schools.
student achievement.

Finishing the Job: Bringing NCLB to High Schools

The vast majority of NCLB reforms affect K–8 education, as only five percent of Title I funds go to
high schools. In the 2006 Budget, the Administration is building on NCLB with an aggressive, com-
prehensive high school initiative. The $1.5 billion high school initiative gives States the support they
need to upgrade the quality of secondary education and ensure that every student graduates from
high school prepared to enter college or the workforce with the skills to succeed. The need for this
initiative is great. For example, according to the latest results from the Program for International
Student Assessment, America’s 15-year-olds performed below the international average in mathe-
matics literacy and problem-solving, placing 28th out of 39 industrialized countries.
High School Intervention Initiative. This initiative provides $1.2 billion to help States implement
a high school accountability framework and a wide range of effective interventions. In return for a
commitment to improve academic achievement and graduation rates for secondary school students,
States will receive the flexibility to choose which intervention strategies will be most effective in serv-
ing the needs of their at-risk high school students. Allowable activities would include vocational ed-
ucation programs, mentoring programs, and partnerships between high schools and colleges, among
other approaches. A portion of the funding will be used for randomized trials and evaluations to iden-
tify the most effective intervention strategies to enable school administrators to make better choices
on what educational strategies to adopt.
To provide funding for States under the High School Intervention Initiative, the Administration
proposes to consolidate narrow-purpose programs that support a particular high school interven-
tion strategy. These include Vocational Education, Upward Bound, Talent Search, GEAR UP, and
Smaller Learning Communities. Most of these programs have not proven effective in improving our
secondary students’ academic achievement or ability to obtain a job. Under the Administration’s
Program Assessment Rating Tool (PART), Vocational Education was rated Ineffective because it has
produced little or no evidence of improved outcomes for students despite decades of increasing Fed-
eral investment.
The PART found that Upward Bound was not serving the high-risk students who were most likely
to benefit from the program. Under the new High School Intervention Initiative, States will have the
option of continuing activities funded under these programs if they will help States improve student
outcomes.
THE BUDGET FOR FISCAL YEAR 2006 101

High School Assessments. Building on the


accountability framework of NCLB, the high
school initiative would require testing in
grades 9–11 in language arts and math. States
and school districts would have the flexibility
to align the testing system with their existing
instructional program, but be held accountable
for improving student achievement. The
Budget provides $250 million to help States
implement this aspect of the new initiative.
Other aspects of the President’s high school
program include: Three out of ten students who enter 9th grade won’t complete high
school. For African American and Hispanic students, it’s nearly five
out of ten. Without a diploma, students are likely to face a lifetime of
Striving Readers. This Presidential ini- low-skill, low-paying jobs. The President’s High School Initiative will
tiative, first funded in 2005, complements help all students complete high school successfully.
the Administration’s reading initiatives in
elementary school. The Budget provides $200 million, an increase of $175 million—or eight times
the 2005 level—to develop and implement research-based interventions that will improve the
reading skills of high school students who read below grade level.
Math-Science Partnerships. The Budget continues the President’s efforts to improve math and
science education, providing $269 million for this Department of Education program, a $90 million
increase over the 2005 level. Of this amount, $120 million would support direct Federal competitive
grants to partnerships between secondary schools and colleges to increase achievement in math for
struggling secondary students.
State Scholars. Studies show that high school students who take rigorous courses are more likely
to succeed in college. The President proposes $12 million to help States establish State Scholars
programs that encourage students to complete a rigorous curriculum that includes at least three
years of math and science, three and one-half years of social studies, four years of English, and two
years of foreign language courses. In addition, the Budget provides $33 million to give low-income
high school students up to $1,000 in additional Pell Grant aid for the first two years of college if they
complete the State Scholars curriculum.

Strengthening Performance and Accountability: Reforming Special Education

On December 3, 2004, the President signed into law the Individuals with Disabilities Education
Improvement Act of 2004, reauthorizing the Individuals with Disabilities Education Act (IDEA). The
reauthorized IDEA makes several adjustments to align special education to NCLB’s accountability
systems. Together, these landmark laws provide the framework for high hopes and expectations that
all students, including the 6.9 million children with disabilities, can succeed in school. This law is
fully consistent with the Administration’s principles for IDEA reauthorization, and with the 2002
recommendations of the President’s Commission on Excellence in Special Education.
Over the next year, the Administration will provide guidance and technical assistance to States,
schools, and parents so that they can be partners with the Department in implementing the myriad
regulatory and paperwork changes required by the law, many of which will take effect in July 2005
(see box for the most significant provisions). The President’s 2006 Budget complements the law and
provides $12.2 billion for all IDEA programs, including $83 million for special education research,
studies, and evaluations funded under the Institute for Education Sciences, and $11.1 billion for
IDEA Grants to States, a 75-percent increase since 2001. These increases, along with the law’s local
102 DEPARTMENT OF EDUCATION

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

flexibility provisions, will improve the State and local special education systems, and produce real
benefits for students served by IDEA.

Special Education Reforms Achieved through the 2004 Reauthorization of the


Individuals with Disabilities Education Act (IDEA)

Accountability for Results. Aligns provisions on assessments and the contents of the individualized education
programs (IEPs) with NCLB.
Quality Teachers. Strengthens requirements for special education teachers to be highly qualified in their core
subjects, with some flexibility for States, school districts, and new teachers of multiple subjects.
Paperwork Reduction Pilots. Includes option of multiyear IEPs for 15 States and gives the Secretary authority
to waive paperwork requirements for up to 15 States for up to four years to reduce paperwork burden for
teachers and to increase their time for instruction.
Parental Choice. Lets parents choose early intervention services for their pre-school children.
Research-Based Practices. Places new emphasis on using evidence-based information for all aspects of special
education, creates the new Center for Special Education Research and places it in the Institute of Education
Sciences, which coordinates all education research and will help inform special and regular education practices.
Local Flexibility on Use of Funds. 1) Allows States to establish funds that help school districts pay for high-cost
services received by a small number of children with severe disabilities. 2) Allows local educational agencies
to use 15 percent of IDEA Grants to States to provide “early intervening services” to K–12 students who
have not been identified as children with disabilities. 3) Allows States to use IDEA Grants to States to provide
supplemental education services to children with disabilities in schools that are in need of improvement,
consistent with NCLB.

The 2006 Budget also continues the Administration’s focus on results for children with disabilities.
For example, based on the 2004 PART findings that IDEA’s early childhood programs do not have
annual or long-term performance measures to judge program effectiveness, the Department of Edu-
cation will continue to work with States to identify measures and to pilot-test State data systems.

Future Reforms in Elementary and Secondary Education

The President’s commitment to “leave no child behind” is matched by his commitment to achieve
results. If Federal programs are not working or if they do not give State and local administrators
the flexibility they need to achieve results, they should be reformed. In the coming months, the Ad-
ministration will work with the Congress to achieve a number of program consolidations to create
streamlined, flexible, performance-based grants in the areas of improving reading and math instruc-
tion, safe schools, teacher training, education innovation, and school choice. This will allow States
and schools to better tailor Federal dollars to best meet the needs of students.

Creating Opportunity: Higher Education

The Administration is committed to providing equal access to higher education and life-long
learning through such important programs as expanded loan options and increased grant awards.
College costs are rising significantly. As a result, student aid is increasingly important to ensure
that students have an opportunity to go to college.
THE BUDGET FOR FISCAL YEAR 2006 103

Increasing Pell Awards. This year, the Increases in Pell Grant Recipients Since 2001
Administration will be working with the Millions of recipients Billions of dollars
Congress to enhance opportunity for students 6 15
Federal Costs
by expanding the Pell Grant program. Pell 14
Recipients
Grants are the single largest source of grant 13
12
aid for postsecondary education, and help 5
11
nearly one-third of all undergraduates afford
10
the cost of college education. To help students
9
keep up with the rising cost of college, the
8
Budget proposes to increase the $4,050 4
7
maximum award by $100 in 2006, and $500 6
over five years, lifting the maximum award to 5
$4,550. The Budget also retires the $4.3 billion 3 4
Pell Grant shortfall, which has been a major 2001 2002 2003 2004 2005 2006
Source: Department of Education.
obstacle preventing increased awards for the
more than five million Pell-eligible students. In addition, the Budget proposes to make larger Pell
awards available both to students who accelerate their studies by attending school year-round and
to many active duty military personnel. The Budget’s Pell Grant proposal is part of a larger package
of reforms intended to modernize and improve the Federal student aid system.
Reforming Student Loans. The Administration is strongly committed to the lender-based guaran-
teed Federal Family Education Loan program and expects it to continue as the primary source of
loans to students in the years ahead. In addition, the Administration will continue to maintain a
strong Direct Loan program to ensure that no eligible student is denied access to student loans in
the event a student or school cannot find a suitable lender.
However, problems in the structures of the current student loan programs prevent them from meet-
ing all their policy and program objectives. Specifically, the Federal Government assumes almost
all of the risk for the loans, while Federal subsidies to intermediaries—lenders and guaranty agen-
cies—are set high enough to allow the less efficient ones to generate a profit. These problems lead to
unnecessary costs for taxpayers and prevent the program from achieving the efficiencies the market
is designed to provide.
The Budget proposes a comprehensive package of reforms to make the student loan programs more
efficient, cost-effective vehicles for helping students finance their postsecondary educations. These
reforms will link subsidy payments for lenders and guaranty agencies more closely to their costs
and modify interest rates for borrowers who are no longer in school and who have consolidated their
loans. The Budget achieves $34 billion in savings over 10 years by reducing unnecessary subsidies
and payments to lenders, guaranty agencies, and loan consolidators and by placing a larger share of
the loan risks on lenders. These savings will be used to increase the Pell Grant maximum award,
pay off the current $4.3 billion Pell shortfall, and improve benefits to students in school by increasing
loan limits for first year students and extending the current favorable interest rate framework. This
package will also include budget scoring rules to ensure that the Pell Grants program is fully funded
and shortfalls will not be created in future years. In addition, $10 billion in savings over ten years
will be set aside to reduce the Federal budget deficit.
104 DEPARTMENT OF EDUCATION

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

Improving Access to Community Colleges.


The Budget provides $125 million to establish
a new Community College Access Grants
Fund designed to boost college enrollment and
completion, in particular among low-income
students. The initiative offers incentives to
community colleges to provide dual-enrollment
programs, which ease the transition to college
by allowing high school students to earn
college credit, and encourages States to create
policies to make it easier for students to
transfer credits earned at community colleges
to four-year institutions.
New Loans for Short-term Training. The
According to 2003 Census data, the median annual income of
President has proposed a new loan program to
Americans aged 25 or older with a bachelor’s degree is 61 percent
higher than those who pursued no further education beyond a high
help students, the unemployed, transitioning
school diploma. The President’s proposals to increase Pell Grants and
workers, and older workers acquire or upgrade
raise student loan limits will help remove financial barriers that prevent
many Americans from completing a postsecondary education.
specific job-related skills through short-term
training programs. The program will be
market-oriented and use an industry-driven approach with risk-sharing by lending institutions to
ensure that the loans are targeted at real jobs projected both now and for the future.
THE BUDGET FOR FISCAL YEAR 2006 105

MAKING GOVERNMENT MORE EFFECTIVE

Improving Program Performance

The Department of Education used the Program Assessment Rating Tool (PART) to analyze the
performance of 23 of its programs in the 2006 Budget; the Department has assessed 56 programs
since 2004. The PART reviewed each program’s purpose and design, management, and achieve-
ments; determined its level of effectiveness; and led to recommendations for program improvements.
Of the programs that have been analyzed using the PART, two are Effective, 14 are Adequate, 15
are Ineffective, and 35 do not have sufficient data to determine a rating. PART analyses contributed
to the development of the High School Intervention Initiative; helped determine which programs
should be funded, reduced, or terminated; and identified inefficiencies in the student loan programs
that will be addressed by the proposed legislative reforms described above.

Program Terminations and Reductions

At a time of constrained Federal discretionary spending, achieving the goals of academic excellence
and expanded access to higher education requires that every education dollar be spent wisely. Fund-
ing for programs that do not perform well, duplicate other programs at the Federal or State level, or
have completed their mission must be re-directed toward programs that have either been proven to
work or those that hold the promise of reaching the Department’s goals more effectively. The 2006
Budget proposes the termination of 48 programs, including many that the PART has shown to be
ineffective (Even Start, Safe and Drug-Free Schools State Grants, and Vocational Education) and
many that are unable to demonstrate results. In addition, funding for 16 programs will be reduced.
As a result, $4.7 billion will be redirected toward such programs as Title I, IDEA, the High School
Intervention Initiative, and improving teacher quality.

Update on the President’s Management Agenda

The table that follows provides an update on the Department of Education’s implementation of the
President’s Management Agenda as of December 31, 2004.
106 DEPARTMENT OF EDUCATION

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

The Department of Education’s management improvement efforts achieved significant results in the past year.
Not only has the Department achieved critical financial operational goals such as receiving an unqualified
opinion for the third year in a row and meeting early reporting deadlines, but the Department has also begun
implementing enhanced reporting capabilities to improve risk management, compliance with laws and
regulations, and overall organizational governance. Education also completed key competitions with anticipated
savings of $53 million over the next five years that will improve performance in payment processing and human
resources management. In addition, the Department is participating in critical E-Government initiatives that will
simplify and expand the public’s access to Education programs through Grants.gov and e-loans. Finally, the
Department continues to collect performance information and measure outcomes to focus budget, program,
grant making, and policy initiatives on improving the effectiveness of Education programs.

Initiative Status Progress


Faith-Based and Community Initiative

Eliminating Improper Payments

Elimination of Fraud and Error in Student Aid Programs and Deficiencies


in Financial Management
The Department has eliminated barriers to faith- and community-based organization (FBCO) participation in
relevant education programs and is implementing extensive outreach and technical assistance efforts. As a
result, FBCO applications for specific Federal education programs have increased by 87 percent since 2002.
To eliminate improper payments, the Department has developed a risk model that identifies risk-susceptible
grant programs. Initial assessments in 2004 indicate that relative risk is low in those programs. The Department
will assess risk in other programs in 2005 with an emphasis on student aid programs. (Because this is the
first quarter that agency efforts were rated in the Eliminating Improper Payments Initiative, progress scores
were not given.)
The Department has demonstrated improvements monitoring key areas as needed to improve performance
and reduce fraud and error in Student Aid Programs. For example, student loan default rates have dropped
and collections on defaulted loans have increased. In addition, the Department is beginning a new project to
integrate its front-end business lines to streamline the process of applying for and awarding student loans.
THE BUDGET FOR FISCAL YEAR 2006 107

Department of Education
(In millions of dollars)

2004 Estimate
Actual 2005 2006

Spending
Discretionary Budget Authority:
Elementary and Secondary Education:
Title I Grants to LEAs 1 ................................................................................. 12,342 12,740 13,342
Reading First and Early Reading First ..................................................... 1,118 1,146 1,146
State Assessments .......................................................................................... 390 412 412
Teacher Incentive Fund.................................................................................. — — 500
Adjunct Teacher Corps................................................................................... — — 40
Teacher Quality State Grants ...................................................................... 2,930 2,917 2,917
Charter Schools programs............................................................................ 256 254 256
Choice Incentive Fund ................................................................................... 50
Impact Aid ........................................................................................................... 1,230 1,244 1,241
Safe and Drug Free Schools Programs 2 .............................................. 674 672 317
21st Century Community Learning Centers ........................................... 999 991 991
English Language Acquisition ..................................................................... 681 676 676
IDEA Part B State Grants 3 ......................................................................... 10,068 10,590 11,098
High School Programs:
High School Intervention ............................................................................... — — 1,240
High School Assessments ............................................................................ — — 250
Striving Readers ............................................................................................... — 25 200
Mathematics and Science Partnerships .................................................. 149 179 269
Advanced Placement ...................................................................................... 24 30 52
Vocational Education ...................................................................................... 1,195 1,194 —
TRIO Upward Bound ...................................................................................... 280 280 —
TRIO Talent Search ......................................................................................... 145 145 —
GEAR UP ............................................................................................................ 298 306 —
State Scholars Capacity Building ............................................................... — — 12
Higher Education:
Community College Access Grants .......................................................... — — 125
Pell Grants—Discretionary Funding (legislative proposal) ............... 12,007 12,365 13,232
Pell Grants—Mandatory Funding (non-add, legislative proposal) — — 4,721
Enhanced Pell Grants for State Scholars (non-add) .......................... — — 33
Historically Black Colleges and Graduate Institutions ........................ 276 297 299
Research and Statistics 4 ................................................................................. 335 338 338
All other .................................................................................................................... 10,265 9,776 7,046
Total, Discretionary budget authority 5 ............................................................. 55,662 56,577 56,049

Total, Discretionary outlays ................................................................................... 52,542 56,901 56,894


108 DEPARTMENT OF EDUCATION

Department of Education—Continued
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Mandatory Outlays:
Federal Direct Student Loans (legislative proposal) ................................ 3,246 1,335 39
Federal Family Education Loans (legislative proposal) .......................... 4,800 10,193 5,346
All other .................................................................................................................... 2,228 2,524 1,993
Total, Mandatory outlays ........................................................................................ 10,274 14,052 7,378

Total, Outlays .............................................................................................................. 62,816 70,953 64,272

Credit activity
Direct Loan Disbursements:
Federal Direct Student Loans (FDSL)........................................................... 12,506 13,598 14,681
FDSL Consolidations .......................................................................................... 7,649 9,064 7,615
Loans for Short-Term Training ......................................................................... — — 85
Subtotal, FDSL disbursements:
Other Direct Loans ............................................................................................... 54 31 46
Total, Direct loan disbursements ......................................................................... 20,209 22,693 22,427

Guaranteed Loan Commitments:


Family Federal Education Loans (FFEL) ..................................................... 37,712 41,934 45,362
FFEL Consolidation ............................................................................................. 36,119 34,785 25,319
Loans for Short-Term Training ......................................................................... — — 198
Total, Guaranteed loan commitments ................................................................ 73,831 76,719 70,879
1
Program level. Budget authority is $600 million less than program level in 2004 and $195 million less in 2006.
2
Program level. Budget authority is $330 million more than program level in 2004 and 2005.
3
Program level. Budget authority is $259 million more than program level in 2004 and $791 million less in 2006.
4
Includes special education research and studies funding.
5
Program level. Budget authority is $11 million less than program level in 2004.
DEPARTMENT OF HEALTH AND HUMAN SERVICES

AT A GLANCE:
2006 Discretionary Budget Authority: $67.2 billion
(Decrease from 2005: 1 percent)
Major Programs:
• Medicare
• Medicaid
• State Children’s Health Insurance Program
• Health Centers
• Marriage and Healthy Family Development
• Bioterrorism
• Health Care Information Technology

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Promoting national health care information technology, with the goal of most Americans having
an electronic health record with proper medical privacy protection by 2014.
• Proposing a comprehensive, consumer-driven plan to address the problems of rising health care
costs and the uninsured. This plan includes: Health Savings Accounts; Association Health
Plans; tax credits; and medical liability reform.

Protecting America

• Strengthening the Nation’s preparedness against bioterrorism, through biodefense research and
development, biosurveillance early warning systems, hospital and public health preparedness,
and defense against intentional contamination of the Nation’s food supply.
• Improving the ability to respond to bioterrorism through a new initiative to improve mass
casualty care after a catastrophic incident, and augmenting the Strategic National Stockpile
of pharmaceuticals and other medical supplies.

Supporting a Compassionate Society

• Ensuring access through Health Centers to high-quality primary and preventative health care
for low-income individuals.

127
128 DEPARTMENT OF HEALTH AND HUMAN SERVICES

MEETING PRESIDENTIAL GOALS—Continued

• Helping healthy families through initiatives that support marriage, provide assistance to par-
ents, and encourage the development of family-support programs run by community organiza-
tions.
• Strengthening and modernizing health care and offering drug coverage for approximately 42
million senior citizens and persons with disabilities through the Medicare program.
• Providing quality health care in a cost-efficient manner to over 46 million low-income individu-
als, elderly individuals, and individuals with disabilities through the Medicaid program.
• Providing health care coverage to a total of approximately 5.8 million low-income, uninsured
children through the State Children’s Health Insurance Program.
• Proposing a health insurance tax credit so that millions of Americans will have access to afford-
able health care.
• Enrolling as many uninsured, eligible children as possible into Medicaid and the State Chil-
dren’s Health Insurance Program through the President’s Cover the Kids proposal.

Making Government More Effective

• Developing additional decision support tools at the National Institutes of Health to improve the
management of its large and complex scientific portfolio and to better integrate research across
its 27 Institutes and Centers.
• Strengthening Medicare program integrity by preventing overpayments, accelerating contractor
reform, and rationalizing payments for bad debt.
• Increasing efficiency and lowering costs for Medicaid prescription drugs.
• Proposing to build on past efforts to improve efficiencies and the fiscal integrity of Medicaid and
State Children’s Health Insurance Program.
THE BUDGET FOR FISCAL YEAR 2006 129

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Health Information Technology

The Administration is strongly committed to advancing quality, consumer-driven health care and
encouraging collaboration and productivity in the medical services sector. The newly created Office of
the National Coordinator for Health Information Technology (HIT) at the Department of Health and
Human Services (HHS) coordinates Federal efforts across many initiatives and activities, including:
• Advancing the adoption of HIT by physicians, hospitals, and other providers;
• Implementing electronic prescriptions as mandated by the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003;
• Developing models for the exchange of Electronic Health Records (EHRs) and other health data
nationally and with proper medical privacy protection; and
• Identifying standards and the mechanisms for broad adoption of EHRs.

The 2006 Budget includes $125 million to continue progress in this area, including $75 million in
the Office of the Secretary to foster collaboration and develop the conceptual framework and infra-
structure for a nationally interoperable HIT network that would interconnect clinicians, personalize
care, and improve public health surveillance.

Promoting Affordable Health Care

Rising health costs are an impediment to job and wage growth. When health care costs rise, em-
ployers have less to spend on new employees, or on salaries for their existing employees. Rising
health care costs impose a burden on families and small businesses and put coverage out of the reach
of many Americans. Many businesses—particularly small firms—are struggling with these rising
costs. According to the Census Bureau, 45 million people lacked health insurance coverage in 2003,
including 8.4 million children.

The President has proposed a comprehensive, consumer-driven plan to address the problems of
rising health care costs and the uninsured. His plan includes: Health Savings Accounts (HSAs); As-
sociation Health Plans (AHPs) for small businesses, civic groups, and community organizations; tax
credits for low-income families; medical liability reform; and electronic health records for all Ameri-
cans within 10 years.

The President’s plan will help reduce the rising cost of health care while improving quality and
safety. It will provide new and affordable health coverage options for all Americans—targeted to
those who need it most: low-income children and families; employees of small businesses; and the
self-employed.

Health Insurance Tax Credit. The President proposes a tax credit that will help individuals pur-
chase health insurance and health care. The proposal provides greater choice of insurance products
and encourages saving for future health expenses. Individuals under age 65 who are not enrolled
in public or employer-sponsored health plans would be eligible. The credit would be refundable and
could be paid in advance directly to the health plan. The amount of the credit would depend on an
individual’s income level. The credit would phase out at incomes of $30,000 for an individual and
$60,000 for a family.
130 DEPARTMENT OF HEALTH AND HUMAN SERVICES

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

• Traditional Health Insurance Tax Credit. With this


option, the credit would pay for 90 percent of the
cost of the premium of standard coverage, up to a
maximum of $1,000 for an individual, and $3,000
for a family of four.
• Health Insurance Tax Credit with HSA. This mod-
ification would allow individuals to use a portion
of the credit (up to $2,000 for a family of four; $700
for an individual) to purchase a high-deductible
health plan while putting the remaining portion
of the credit (up to $1,000 for a family of four; $300
for an individual) in an HSA. The money in the
HSA belongs to the individual and can be used to
pay for medical expenses. Unspent funds from one
year would roll over for use in the following year.
State Purchasing Pools. To help low-income individ-
uals purchase coverage with the health insurance tax
credit, the Administration proposes providing $4 billion in grants to States to establish purchas-
ing pools. By combining the purchasing power of individuals and families, these pools would offer
tax-credit recipients an additional affordable health insurance option and would make it easier and
faster to shop for coverage.
Cover the Kids. Despite the availability of health care coverage through Medicaid and the State
Children’s Health Insurance Program (SCHIP), millions of children eligible for these programs have
not enrolled. The 2006 Budget proposes Cover the Kids, a national outreach campaign that will
provide $1 billion in grants over two years. By combining the resources of the Federal government,
States, schools, and community organizations, Cover the Kids aims to enroll as many Medicaid- and
SCHIP-eligible children as possible.
Above-the-Line Deduction for Certain Health Insurance Premiums. Under this proposal, all indi-
viduals who purchase a high-deductible health plan in conjunction with a health savings account
would be allowed to deduct the amount of the health plan’s premium from their taxable income even
if they do not itemize their deductions. This new deduction would make high-deductible health plans
more affordable.
Rebate to Small Employers Contributing to Employees’ HSAs. To encourage small employers to
contribute to their employees’ health savings accounts, the Administration proposes a refundable tax
credit. Small employers would receive a tax credit of up to $500 per employee with family coverage
and $200 per employee with individual coverage.
Association Health Plans (AHPs). The Administration proposes creating AHPs to make available
new affordable health insurance policies. Under this proposal, small employers, civic groups, and
community organizations can band together and use their purchasing power to negotiate lower-priced
coverage for their employees, members, and their families. Previous proposals have limited AHPs to
small businesses. This proposal applies not only to small businesses but also to private, non-profit,
multi-State entities outside the workplace.
THE BUDGET FOR FISCAL YEAR 2006 131

Medical Liability Reform. Reforms to medical liability law


will increase access to quality, affordable health care for all
Americans, while reducing frivolous and time-consuming legal
proceedings against doctors and health care providers. The
lawsuit burden is driving good doctors out of local communities
across the country and raising health care costs for all.
Reforming the medical liability system and providing a fair,
predictable, and timely medical liability process will improve
access to quality health care and reduce health care costs.
National Marketplace for Health Insurance. Because
individuals can purchase health insurance only in the State in
which they live and cannot shop for more affordable coverage
in other States, competition among insurers is limited by
State boundaries. The Administration proposes creating a
competitive marketplace across State lines that maintains
strong consumer protections. This new marketplace would
allow individuals the freedom to shop for the best buy on health
coverage that most effectively meets their needs, and would
increase the availability of affordable health coverage.
132 DEPARTMENT OF HEALTH AND HUMAN SERVICES

PROTECTING AMERICA

Armed with a single vial of a biological agent small groups of fanatics, or failing states, could gain the power
to threaten great nations, threaten the world peace. America, and the entire civilized world, will face this
threat for decades to come. We must confront the danger with open eyes, and unbending purpose.
President George W. Bush
February 11, 2004

Strategic National Stockpile

The Strategic National Stockpile contains


drugs, vaccines, and other medical supplies
and equipment that can be delivered anywhere
in the country within 12 hours of a request for
assistance. The Stockpile currently contains
enough smallpox vaccine for every American,
treatments for anthrax, countermeasures for
injuries following a chemical, radiological,
or nuclear incident, and treatments for
conventional explosive attacks. The 2006
Budget provides additional funding to improve
the Nation’s ability to respond to biological
and chemical weapons attacks with life-saving
treatments and supplies, including additional
antibiotics to treat anthrax, nerve agent
treatments, and chemical countermeasures
through the Chempack program. The Budget also includes increased funding for the storage and
maintenance of next-generation countermeasures, including a new anthrax vaccine purchased
through the President’s newly enacted Project BioShield.

Biodefense Research and Development

The Budget continues to invest heavily in research and development that will lead to new coun-
termeasures against the most dangerous threat agents, including those that have been genetically
manipulated. Within the 2006 Budget’s nearly $29 billion for the National Institutes of Health
(NIH), the Administration will continue to fund biodefense research and development activities at
$1.8 billion. This includes $50 million for chemical countermeasure development and $47 million for
radiological and nuclear countermeasure development. NIH supports basic research, which leads to
breakthroughs in scientific knowledge, and applied research and development that converts knowl-
edge into products that can be manufactured in large quantities. Project BioShield can then be used
to acquire these countermeasures that will be safer and more effective in protecting Americans.
THE BUDGET FOR FISCAL YEAR 2006 133

Medical Surge Capacity

In the event of a large-scale attack in one or more cities, existing medical capacity could be over-
whelmed quickly. The President designated HHS as the lead for coordinating Federal support of
State and local medical and public health response to mass casualty events. The Budget includes
$70 million to improve emergency health care by allowing the Federal Government to purchase and
store deployable medical care units, including medical supplies and equipment that can be delivered
to an affected area. This initiative will also enhance the Medical Reserve Corps and provide prior
training and verification of credentials to ensure the availability of health care providers during such
an emergency.
The Budget also proposes nearly $1.3 billion in investments to bolster hospital preparedness and
State and local biodefense preparedness. Included in the total for hospital preparedness is $25 mil-
lion for a targeted, competitive demonstration program to establish a state-of-the-art emergency care
capability in one or more metropolitan areas. These emergency care centers will be designed to meet
the demands of a terrorist attack or other incident requiring mass casualty care and containment of
infectious agents.

Biosurveillance and the National Biosurveillance Initiative

Unlike in conventional attacks, the use of biological weapons may not be immediately apparent.
Reducing the time it takes to detect an attack can save many lives. Last year, the President pro-
posed a new biosurveillance initiative to provide earlier indication that an attack has occurred, and
to better determine accurately its nature and scope by monitoring human, animal, and plant health,
the food supply, and the environment. The 2006 Budget will build on this progress with continued
investments in the gathering and analysis of this information.

Defending the Nation’s Food Supply

Building upon significant investments in 2005, the President is committed to improving the safety
and security of the food and agriculture supply. In 2006, the Food and Drug Administration (FDA) will
continue to work with the U.S. Department of Agriculture (USDA) and the Department of Homeland
Security to improve protection of the Nation’s food supply from intentional or natural contamination.
The Budget requests a $30 million increase for the FDA to develop strategies to prevent and mitigate
food contamination, as well as testing methods to identify the presence of contamination quickly and
accurately. The Nation’s food laboratory network will work to analyze food samples more rapidly,
which will better help to identify outbreaks and be able to quickly process a surge of samples follow-
ing a terrorist incident. Each of these activities will be coordinated with USDA, which will receive
an increase of $145 million in 2006 to protect the food and agriculture supply from terrorist attacks.
134 DEPARTMENT OF HEALTH AND HUMAN SERVICES

PROTECTING AMERICA—Continued

Protecting the Nation from Influenza and the Threat of an Influenza Pandemic

HHS Influenza Vaccine and Every fall and winter, influenza poses a
Preparedness Funding threat to public health, especially for seniors
Millions of dollars and others vulnerable to complications from
450 CDC Vaccine Purchase 419 430 influenza. If a new influenza virus for which
400 CDC Surveillance and we have no immunity or vaccine takes a
Preparedness form that is easily spread, an influenza
350
FDA Research and Licensing
300
pandemic could develop and cause terrible
NIH Research and 255
250 Development damage to public health. The Administration
Pandemic is committed to improving influenza vaccine
200 Preparedness
supply, preventing another influenza vaccine
150
101 shortage, and helping prepare for a possible
100
41 53 pandemic. HHS is enhancing global influenza
50
surveillance to provide an earlier warning
0
2001 2002 2003 2004 2005 2006 of the viruses’ emergence; increasing the
Source: HHS. supply of influenza vaccine; stockpiling large
quantities of antiviral drugs; promoting the development of new technologies to produce vaccine
more quickly and securely; and investigating promising ways to safely and effectively extend the
supply of vaccine doses, especially in a pandemic.
The Budget builds on this progress, maintains a childhood influenza vaccine stockpile, includes a
$20 million increase for influenza vaccinations for children and other vulnerable populations, and
proposes $30 million to expand the Nation’s vaccine supply. The Budget also includes an increase
to enhance global disease surveillance and a $21 million increase to work with manufacturers to
increase the availability of additional U.S.-licensed vaccine to meet increased supply needs, especially
during an influenza pandemic.

Strengthening the Safety of Medical Products

FDA works to ensure the safety of medical products, including prescription and over-the-counter
drugs. Before being made available to consumers, medical products undergo a rigorous review by
FDA scientists for safety and effectiveness. After approved medical products are made available to
consumers, FDA staff review adverse events and respond to any concerns. This system has succeeded
in providing American consumers with safe and life-improving medical products for decades.
FDA continues to evaluate its systems and processes to refine its oversight and further improve
the safety of medical products. FDA is sponsoring a study by the Institute of Medicine on the effec-
tiveness of the U.S. drug safety system, with an emphasis on the continued safety of medical products
already approved for use by FDA. The Institute of Medicine study will examine FDA’s role within the
health care delivery system and recommend measures to enhance the confidence of Americans in the
safety and effectiveness of their drugs. In addition, the 2006 Budget proposes a 24-percent increase
for the FDA Office of Drug Safety to enable FDA to continue its track record of success in providing
safe and effective medical products to American consumers.
THE BUDGET FOR FISCAL YEAR 2006 135

SUPPORTING A COMPASSIONATE SOCIETY

Improving Medicare

The Medicare Prescription Drug, Im-


provement, and Modernization Act of 2003
(MMA) created improvements to the Medicare
program, providing beneficiaries with more
choices and enhanced benefits. Seniors and
individuals with disabilities will have access
to more modernized, higher quality health
care. Funding for the Medicare program is
projected to be $340 billion in 2006. Medicare
consists of four parts:
• Part A: hospital insurance, which
provides coverage for hospitals, skilled
nursing, hospice, and other related
services;
• Part B: supplementary medical insurance, which provides coverage for outpatient hospital,
physician, home health, laboratory services, durable medical equipment, and other related
services;
• Part C: Medicare Advantage, which finances the full Medicare benefit through private plans;
and
• Part D: the new prescription drug benefit.
Advancing Medicare Advantage. The MMA created the Medicare Advantage program (Part C) to
offer more choices and better benefits to Medicare beneficiaries through competition among private
health insurance plans. Beginning in 2006, Preferred Provider Organizations (PPOs) will begin to
serve beneficiaries on a regional basis. These regional plans will compete with existing local Medicare
Advantage plans to provide health services to beneficiaries. HHS has identified 26 regions across the
Nation in which PPO plans will compete to provide services. HHS established these regions to ensure
all Medicare beneficiaries, including those in small States and rural areas, have the opportunity to
enroll in a PPO and to encourage plans to participate. In 2006, 16 percent of beneficiaries are ex-
pected to be enrolled in Medicare Advantage plans, and by 2009, this number is projected to increase
to 24 percent.
Medicare Prescription Drug Benefit. The MMA created a new prescription drug benefit (Part D)
that will begin in 2006. In the interim, the MMA authorized the Centers for Medicare and Medicaid
Services (CMS) to offer Medicare beneficiaries a prescription drug discount card. Around six million
beneficiaries have signed up for the card since June 2004. Independent studies have shown savings
of 20 percent or more off the retail cost of brand name drugs and 30 to 60 percent off generic drugs.
In addition, over 1.7 million low-income beneficiaries have begun to receive $600 annually in transi-
tional assistance provided by the Act. These beneficiaries can save up to 90 percent off the average
retail price of name-brand drugs when they combine the drug card savings with the $600 transitional
assistance.
136 DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUPPORTING A COMPASSIONATE SOCIETY—Continued

Beginning January 1, 2006, Medicare beneficiaries will be


eligible for a subsidized prescription drug benefit that helps
lower their drug costs. They will have their choice of enrolling
in either prescription drug-only plans or Medicare Advantage
drug plans. HHS will conduct extensive outreach efforts to
help seniors understand their new choices. Expanded efforts
through 1–800–Medicare, community based organizations,
and media outreach will ensure that seniors have adequate
information to benefit from the new options under the MMA.
The drug plans will receive subsidies from Medicare to help
keep premiums and cost-sharing low. Additional subsidies will
be paid to employers to encourage them to continue to offer
retiree health benefits to millions of seniors. This will assist
beneficiaries in retaining the employer sponsored coverage to
which they have grown accustomed.
In addition, Medicare will provide generous additional
assistance to low-income beneficiaries. For those beneficiaries
with incomes below 135 percent of poverty, they will pay no
monthly premium, no deductible, and very small co-payments
per prescription. Beneficiaries with incomes between 135 and
150 percent of poverty will pay reduced premiums, a $50 deductible, and reduced cost-sharing.

Improving Health Centers

Health Centers deliver high-quality, af- Completing the President’s


fordable primary and preventive health care Health Centers Initiative
New and Expanded Sites Since 2001
to nearly 14 million patients, regardless of
ability to pay, at 3,740 sites across the United 1,350
States annually. In 2006, Health Centers will Goal: 1,200 by 2006
serve an estimated 16 percent of the Nation’s
population at or below 200 percent of Federal
Poverty Line. 772
619
The Budget will complete the President’s
490
commitment to create 1,200 new or expanded
Health Center sites to serve an additional 6.1 302
million people by 2006. Almost 2.4 million
additional individuals will receive health care
in 2006 through over 570 new or expanded 2002 2003 2004 2005 2006
Source: HHS.
sites in rural areas and underserved urban
neighborhoods. The President has established a new goal to create a Health Center in every poor
county that lacks a Health Center and can support one. The Budget includes $26 million to fund
40 new Health Center sites in high-poverty counties. Faith-based and community programs will be
encouraged to compete for these grants.
THE BUDGET FOR FISCAL YEAR 2006 137

Modernizing Medicaid and SCHIP Coverage

Medicaid was created nearly 40 years ago to provide access to health care for individuals on wel-
fare, based on health care available at that time. Over that time span, Medicaid has grown far faster
than most Federal entitlement programs. The Budget calls for specific reforms to Medicaid that pro-
mote better care for low-income Americans, more local control for States, fair payments to providers,
and better accountability measures so that Medicaid’s fiscal condition will improve.
In 2006, funding for Medicaid is projected to be $338 billion, about $193 billion of which is paid by
the Federal Government. Since 1998, SCHIP has made available approximately $40 billion over 10
years for States to provide health care coverage to targeted low-income, uninsured children. Since
the beginning of the Administration, enrollment in SCHIP has grown by over one million children to
a total of approximately 5.8 million in 2003.
Even though Medicaid will serve more than 46 million Americans in 2006, it operates under out-
dated rules. Medicaid excludes millions of individuals who are well below the Federal poverty level
because program rules remain tied to welfare eligibility categories. While the President’s Health
Centers Initiative has provided access to health care for many uninsured individuals, many are still
left with the choice of seeking health care through hospital emergency rooms, contributing to the
growing burden of uncompensated care among hospitals.
Instead of helping these individuals get better coverage, States often reluctantly decline to expand
coverage because Medicaid rules do not easily support many up-to-date, efficient approaches to ex-
panding coverage. Moreover, millions of senior citizens and individuals with disabilities in need of
long-term care are provided only with the choice of leaving their homes for institutional care to get
the support they need. There is now widespread evidence that updating Medicaid to keep pace with
the people it serves, and better coordinating it with SCHIP, can lead to better coverage, better health
care, and a more sustainable cost structure for the States and the Federal Government.
Medicaid and SCHIP Modernization. In addition to proposing an increase in Federal resources
for covering the uninsured (the elements of which were outlined in the Promoting Economic Oppor-
tunity and Ownership section of this chapter), the Administration proposes to provide States with
additional flexibility in Medicaid to further increase coverage among low-income individuals and
families without creating additional costs for the Federal Government. This proposal would build
on the success of SCHIP to provide acute care for children and families, as well as current efforts to
reduce the number of uninsured individuals.
States generally regard the complex array of Medicaid laws, regulations, and administrative guid-
ance as overly burdensome, with the result being higher costs for covering fewer beneficiaries. In
response, the Administration has granted waivers that allow States to extend Medicaid coverage
to higher income and non-traditional populations, such as childless adults. For example, in 2001,
the Administration introduced the Health Insurance Flexibility and Accountability (HIFA) demon-
stration initiative. This initiative emphasizes the coordination of currently available Medicaid and
SCHIP funding with private insurance. Through these waiver programs and the HIFA initiative,
States have found that they can provide health care to more beneficiaries with the same amount of
funding by changing delivery systems and using mainstream coverage, including managed care and
coordination with employer plans.
SCHIP provides States with more flexibility than Medicaid, allowing States to cover targeted pop-
ulations, incorporate private sector insurance options, provide appropriate benefit packages, and
maximize public dollars.
A modernized Medicaid system will give States greater flexibility without the need for burden-
some waiver applications. Principles that are employed in SCHIP and emphasize innovation will be
expanded to Medicaid beneficiaries, while long-term care reforms will build on successful programs
138 DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUPPORTING A COMPASSIONATE SOCIETY—Continued

that use consumer direction and home- and community-based care to improve satisfaction and lower
costs. A modernized Medicaid system will continue to grow at a robust rate to accommodate increases
in health care spending.

Enhancing Medicaid and SCHIP Coverage

Apart from program modernization, the following proposals will enhance coverage under both Med-
icaid and SCHIP.
SCHIP Reauthorization. The authorization for the SCHIP program expires at the end of 2007.
Due to its success at enrolling millions of low-income uninsured children, the 2006 Budget proposes
to reauthorize this program early. The Administration will seek authority to better target SCHIP
funds in a more timely manner.
Transitional Medical Assistance (TMA). TMA provides Medicaid coverage for former welfare
recipients after they enter the workforce. The Budget proposes to extend TMA for one year with
certain statutory modifications, including a State option to eliminate TMA reporting requirements
and provide 12 months of continuous eligibility regardless of changes in families’ financial status.
In addition, the Budget proposes a waiver of the TMA requirement for States that currently provide
health benefits for families at 185 percent of the Federal poverty level, which is the statutorily
mandated income eligibility level. These changes will allow for consistent enrollment of TMA
beneficiaries while easing the administrative burden on States.
Medicare Premium Assistance. The Administration proposes to continue Medicare Part B premium
assistance for Medicare beneficiaries between 120 and 135 percent of the Federal poverty level for
one year. In 2005, these premiums will be $78.20 per month. States receive 100 percent Federal
funding for these benefits.
Vaccines for Children (VFC). VFC provides all recommended childhood vaccines, free of charge, to
four categories of eligible children: Medicaid beneficiaries, American Indians/Alaskan Natives, the
uninsured, and the underinsured (those without coverage for a particular vaccine). The Adminis-
tration proposes to improve vaccine access by allowing underinsured children to receive VFC-funded
vaccines at State and local health clinics, rather than only at Federally Qualified Health Centers and
Rural Health Centers.
Health Insurance Portability and Accountability Act (HIPAA). Since enacted in 1996, HIPAA has
increased the continuity, portability, and accessibility of health insurance. To ensure that Medic-
aid and SCHIP beneficiaries receive the benefits of HIPAA coverage, the Administration proposes
two legislative changes. Under this proposal, eligibility for a Medicaid/SCHIP Employer-Sponsored
Insurance (ESI) Program would be a qualifying event, which would allow families to enroll in ESI
immediately through special enrollment. This proposal also would require SCHIP programs to issue
certificates of creditable coverage, which promote portable health coverage by verifying the period of
time an individual was covered by a specific health insurance policy.
Improving Options for People with Disabilities. The Budget includes several policies that promote
home- and community-based care options for people with disabilities. These policies build on the
President’s New Freedom Initiative, which is part of a nationwide effort to integrate people with
disabilities more fully into society.
• Money Follows the Person Rebalancing Demonstration. This five-year demonstration would
finance Medicaid services for individuals who transition from institutions to the community.
Federal grant funds would pay the full cost of home and community-based waiver services for
THE BUDGET FOR FISCAL YEAR 2006 139

one year of a beneficiary’s care, after which the State would agree to continue this care at the
regular Medicaid matching rate.

• Home and Community-based Care Demon-


strations and Programs. The Budget includes
proposals to encourage home and commu-
nity-based care for children and adults with
disabilities, such as demonstrations to provide
respite care for caregivers of adults and children.
Another demonstration will test the effective-
ness of providing home and community-based
alternatives to psychiatric residential treatment
for children enrolled in Medicaid. States will
have the option to continue Medicaid eligibility
for spouses of individuals with disabilities who
return to work. States will also have the option
to provide Medicaid presumptive eligibility for institutionally qualified individuals who are
discharged from hospitals into the community.
• Long-Term Care Insurance. The 2006 Budget would promote the use of long-term care (LTC)
insurance by eliminating the Federal legislative ban on new LTC Partnership Programs, which
are a proven approach to lowering Medicaid costs while giving consumers and families more
control and involvement in their long-term care services. Through these programs, consumers
who purchase and use Partnership-approved insurance can become eligible for Medicaid services
after their insurance coverage is exhausted without having to divest all of their assets, as is
typically required.

Faith-Based and Community Initiative

Compassion Capital Fund. To advance the efforts of community-based, charitable organizations,


including faith-based organizations, the President’s 2006 Budget provides $100 million for the Com-
passion Capital Fund, to enhance their ability to provide social services, expand their organizations,
diversify their funding sources, and create collaborations to better serve those in need. Among the
priorities within the 2006 proposal is an emphasis on supporting anti-gang efforts through commu-
nity and faith-based organizations. Since 2002, a total of $149 million has been given directly to more
than 300 organizations and sub-grants to more than 3,000 grass-roots organizations.
Mentoring Children of Prisoners. As a group, the more than two million children with parents
in prison have more behavioral, health, and educational problems than other children. Mentoring
by caring adults can improve the long-term outcomes for children whose parents are incarcerated.
In 2004, HHS awarded $8.9 million in continuation grants and $37 million in 169 new grants to
programs that provide mentoring services to these children. The Budget includes $50 million for
competitive grants. Since 2003, this program has been working toward providing over 70,000 new
mentors for children with a parent in prison.
Maternity Group Homes. The 2006 Budget also provides $10 million to increase support to
community-based maternity group homes by providing young pregnant mothers with access to
community-based coordinated services.
Access to Recovery. In 2004, HHS awarded Access to Recovery (ATR) grants to 14 States and one
tribal organization to create substance abuse treatment voucher programs. ATR is designed to give
addicted individuals the ability to choose from a range of effective treatment and recovery support
options, including faith-based and community providers. The 2006 Budget includes $150 million
140 DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUPPORTING A COMPASSIONATE SOCIETY—Continued

Wisconsin issued the first Access to Recovery voucher to Kimberly


Washington (left), a 41-year old mother from Milwaukee, Wisconsin
whose addiction and related felony convictions are a barrier to em-
ployment and to raising her children. Ms. Washington chose Meta
House because the agency provides residential treatment and re-
covery support services, and it will allow her one-year old baby to
live with her in treatment once she is ready for re-unification. She
and her Access to Recovery coordinator (right) developed a Recov-
ery Support Team, including her service providers, probation officer,
church, family, and others to help her achieve and sustain recovery
post-treatment. Ms. Washington said that “...knowing there’s some-
one, or something, like an angel on my shoulder gives me hope, and
motivation, that I will not fail this time—someone will be there.”

to maintain existing commitments and expand access to effective treatment in additional States.
States will hold providers accountable for results and reward those providers most effective at help-
ing clients to achieve recovery from addiction.

Marriage and Healthy Family Development

The Administration’s initiatives to promote marriage and healthy family development are built
around four strategies:

1) Support marriage and families;


2) Provide tools to parents;
3) Teach children how to be good family members and citizens; and
4) Encourage community organizations, including faith-based organizations, to support families.
Supporting Healthy Marriages and Responsible Fatherhood. The Budget proposes to direct $240
million to new efforts to support healthy marriages and responsible fatherhood. Of this amount,
$100 million, plus dollar for dollar matching contributions from States, would fund competitive
grants for States, territories, and tribal organizations to develop innovative approaches to promote
healthy marriages. The Budget includes $100 million for research, demonstration projects, and
technical assistance, primarily focusing on family formation and healthy marriage activities. To
support these programs, funds would be redirected from the Temporary Assistance for Needy
Families High Performance Bonus ($100 million) and the Illegitimacy Reduction Bonus ($100
million).
The Administration also proposes to create a $40 million per year grant program, through faith-
and community-based organizations, that helps non-custodial fathers become more involved in their
children’s lives. More than 25 million children live in homes without fathers.
Abstinence Only Education. Last year, President Bush announced the expansion of the initiative
to educate teens and parents about the health risks associated with early sexual activity and to help
THE BUDGET FOR FISCAL YEAR 2006 141

teens make healthy choices. As part of this initiative, the President directed the Department as
follows:
• Develop research-based standards for abstinence education curricula;
• Conduct a review of the consistency of messages in all federal programming for youth addressing
teen pregnancy prevention, family planning, and STD and HIV/AIDs prevention;
• Develop a public education campaign designed to help parents communicate with their children
about the risks associated with early sexual activity; and
• Provide grants to communities and States to develop and implement abstinence-only programs
and for Federal evaluation of these programs.
In support of this initiative, by 2008 funding for these programs will increase to a total of $270
million.

Refugee and Entrant Assistance

Refugees come to the United States for protection from persecution and in search of freedom, peace,
and opportunity. The Office of Refugee Resettlement provides programs to help refugees, asylees,
trafficking victims, and other beneficiaries achieve economic self-sufficiency and social adjustment.
The Budget includes $552 million, or an increase of $68 million, to assist States and faith-based
and community organizations in resettling the growing number of refugees, and for the care and
placement of unaccompanied alien minors in safe and appropriate environments.

Carlos, a 15-year old Guatemalan who never knew his parents and was raised by relatives, journeyed to
the United States through Mexico with an older cousin in search of his mother and a better education. His
journey was mostly by foot and bus. While residing in shelter care in Phoenix, Carlos exhibited develop-
mental and physical delays. With the help of intensive services from the Unaccompanied Refugee Minor
(URM) program in the Office of Refugee Resettlement, the child’s mother and grandmother were advised
of the child’s exceptional needs and thus were more prepared to handle his serious medical issues. The
URM program completed a home suitability assessment, confirmed that the mother was prepared to care
for Carlos, prepared Carlos to join his mother, and worked aggressively to complete family reunification.

Reforming Welfare

Temporary Assistance for Needy Families (TANF). The Administration continues to pursue its plan
to reauthorize the TANF program, which provides grants to States for programs that assist needy
families with children. TANF grants also promote work and the formation of married-parent families
in order to reduce dependence on government benefits. The Administration’s plan maintains funding,
strengthens work requirements, supports healthy marriages and family formation, and increases
State flexibility.

Strengthening Programs for Children

Early Childhood (Good Start, Grow Smart). Because it is important for children to enter school
ready to learn, the Administration has worked to improve early childhood programs through the
Good Start, Grow Smart initiative. The goals of this initiative are:
• Strengthening Head Start;
142 DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUPPORTING A COMPASSIONATE SOCIETY—Continued

• Working with states to improve early childhood learning; and


• Providing parents, teachers, and caregivers with information on early learning.
Head Start. The Budget supports reauthorization of Head Start and provides $6.9 billion, including
$45 million to support State implementation of a demonstration authority to promote better coordi-
nation of existing programs, improve services for families and children, and achieve better results
with the resources already being used.
Independent Living Education and Training Vouchers. The Budget commits $60 million to the
Foster Care Independent Living Program to help older foster care youth transition to adulthood and
self-sufficiency after leaving foster care. This program provides vouchers of up to $5,000 for education
or vocational training to help youth aging out of foster care develop skills and lead independent and
productive lives.
Child Welfare Program Option. The 2006 Budget seeks legislation to introduce an option for all
States so they can choose an alternative system for foster care. Flexible financing will allow States to
design programs with a stronger emphasis on child-abuse prevention, family support, and increased
flexibility in providing services.

Battling HIV/AIDS

Global AIDS. The President’s Emergency Plan for AIDS Relief is a bold strategy to combat the
global HIV/AIDS pandemic. Under the President’s five-year, $15 billion plan, the Administration
has moved quickly and efficiently to mobilize the scientific and programmatic expertise, leadership,
and resources of HHS and other Federal government agencies and their partners. The goals of the
plan are to prevent seven million new HIV infections, treat two million HIV-infected people, and pro-
vide care for 10 million people affected by HIV/AIDS by 2008. The 2006 Budget will continue progress
toward meeting these goals by preventing 3.8 million infections, treating 860,000 HIV-infected peo-
ple, and providing care for 4.3 million people affected by HIV/AIDS.
Domestic AIDS. The Budget invests over $17 billion for domestic AIDS treatment, prevention, and
research, including almost $2.1 billion for the Ryan White program and its comprehensive approach
to address the health needs of persons living with HIV/AIDS. Through this program, low-income
individuals living with HIV/AIDS receive medical care, counseling and testing, and other support
services. The Budget provides for a continued investment in the AIDS Drug Assistance Program
that helps provide life-saving antiretroviral drug treatments to those who otherwise could not afford
them.

Reforming Community and Economic Development Programs

The Budget proposes a $3 billion program within the Department of Commerce to support com-
munities’ efforts to meet the goals of improving their economies and quality of life. This initiative
will consolidate programs across the Federal Government into a more targeted, unified program that
sets accountability standards in exchange for flexible use of the funds. HHS programs consolidated
into this initiative are the Community Services Block Grant, Community Economic Development,
and Rural Community Facilities. (See the Department of Commerce chapter for more details.)
THE BUDGET FOR FISCAL YEAR 2006 143

MAKING GOVERNMENT MORE EFFECTIVE

The National Institutes of Health

The National Institutes of Health (NIH) will receive nearly $29 billion. Overall, NIH’s research
program has rated well in its Program Assessment Rating Tool (PART) performance assessments
and is an effective mechanism for promoting biomedical breakthroughs. To better integrate research
across its 27 Institutes and Centers, NIH is developing additional decision support tools to improve
the management of its large and complex scientific portfolio. This will allow NIH to more efficiently
address important areas of emerging scientific opportunities and public health challenges. The Ad-
ministration is committed to this new effort, which will stimulate accelerated investments in research
involving multiple Institutes and Centers, thereby helping improve the Nation’s health.

Medicaid and SCHIP

Program Integrity. Medicaid’s complexity and open-ended fi-


nance structure encourages efforts by States to draw down Fed-
eral matching funds, sometimes inappropriately. These financ-
ing practices undermine the Federal-State partnership required
by the Medicaid statute and jeopardize the financial stability of
the Medicaid program. The 2006 Budget proposes to build on
past efforts to improve efficiencies and the fiscal integrity of Med-
icaid and SCHIP—and even with these reform efforts, Medicaid’s
future spending is expected to increase at a robust 7.2 percent
growth rate over 10 years.
The Administration proposes to further improve the integrity
of the Medicaid matching rate basis of funding by proposing steps
to curb financing arrangements that have been used by a number
of States to avoid the legally determined State matching funds
requirements. Through various mechanisms, Federal funds are
returned from providers back to the State and “recycled” to draw
additional Federal dollars.
• Recovering Federal Funds Diverted From Providers. Some
States keep a portion of Federal payments intended for
providers. The Budget proposes to build on CMS efforts to identify and recover diverted
payments that are not used for their intended purpose.
• Capping Payments to Government Providers. Under current law and regulation, States continue
to have ample opportunities to make excessive payments to individual government providers
above their costs for the purpose of leveraging additional Federal dollars. The 2006 Budget pro-
poses to limit Federal reimbursement to no more than cost to curb excessive payments and still
preserve a State’s ability to pay reasonable rates to providers.
• Reforming Provider Taxes. Under certain conditions, States may use the proceeds of taxes
collected from a certain class of health providers to help finance the State’s share of Medicaid
expenses. Under current rules, the tax cannot exceed six percent of revenues and must be ap-
plied uniformly across all health care providers in the same class (e.g., all hospitals). The 2006
Budget proposes to phase down the allowable tax rate from six percent to three percent and
144 DEPARTMENT OF HEALTH AND HUMAN SERVICES

MAKING GOVERNMENT MORE EFFECTIVE—Continued

require that managed care organizations be treated the same as other classes of health care
providers with respect to provider tax requirements.
• Strengthening Reimbursement Policies for Selected Medicaid Services. The 2006 Budget pro-
poses: 1) clarifying allowable services that can be claimed under targeted case management
(TCM), and rehabilitation services; 2) aligning Federal reimbursement for TCM services with
administrative matching rate of 50 percent; and 3) codifying in regulation CMS reimbursement
policies for services provided free of charge to the public.
• Strengthening Medicaid Requirements for Questionable Asset Transfers. To qualify for Medicaid
long term care services, an individual may only retain nominal assets. Applicants who transfer
assets at less than fair market value are subject to delays in Medicaid eligibility. With estate
planning, however, Medicaid applicants can retain their assets and qualify for Medicaid without
any delays. In conjunction with the long-term care partnership proposal, the Budget proposes to
strengthen existing requirements for questionable asset transfers as part of an effort to promote
personal responsibility and planning for long-term care expenses.
• Medicaid Administrative Claims. The Administration proposes establishing individual State
allotments for Medicaid administrative claims. Medicaid administrative claims operate under
an open-ended financing framework, which does not encourage States to administer the pro-
gram as efficiently as possible. In some instances, there is evidence that States have attempted
to shift administrative costs associated with other social service programs to Medicaid. For
these reasons, the Administration proposes to create new incentives for program administra-
tion by establishing administrative claim allotments that will encourage cost-effective methods
for operating the program.
• Medicaid and SCHIP Financial Management. In 2006, HHS will continue to devote more re-
sources to Medicaid and SCHIP financial management. This effort will include increasing the
number of audits and evaluations of State Medicaid programs, and elevating the importance of
financial management oversight at HHS. The Budget proposes to allocate $25 million from the
Health Care Fraud and Abuse Account to finance this initiative.
Medicaid Prescription Drugs. The Budget makes several proposals to increase efficiency and lower
costs in Medicaid prescription drugs, one of the fastest growing segments of the Medicaid budget.
• Amend Medicaid Drug Rebate Formula. All drug manufacturers must pay a rebate to States in
order to have their drugs covered by Medicaid. Part of the rebate formula is the lowest private
market price, also called best price. Best price effectively acts as a price floor, preventing man-
ufacturers from negotiating deep discounts with large purchasers such as hospitals and HMOs.
The Administration proposes to replace best price with a budget neutral flat rebate, allowing
private purchasers to negotiate lower drug prices.
• Restructure Pharmacy Reimbursement. The House Energy and Commerce Committee recently
held a hearing that documented substantial and rising Government overpayment for prescrip-
tion drugs in Medicaid. The Administration proposes moving to a system that more closely aligns
pharmacy reimbursement with pharmacy acquisition cost, while providing adequate payment
for dispensing prescriptions.
• Pharmacy Plus Demonstrations. Pharmacy Plus Medicaid demonstrations provide a drugs-only
Medicaid benefit to certain aged and disabled beneficiaries not otherwise eligible for Medic-
aid. Pharmacy Plus was intended as a placeholder program in the absence of a universal drug
benefit under Medicare. With the introduction of the Medicare drug benefit, Pharmacy Plus
has achieved its goal. CMS will continue to work closely with States that have Pharmacy Plus
THE BUDGET FOR FISCAL YEAR 2006 145

programs to enable them to provide comparable coverage to their beneficiaries under the new
Medicare drug benefit at the same or lower cost to the States.

Medicare Financial Enhancements

Medicare Expenditures and Strengthening Medicare’s Long-Term Fi-


Non-Interest Income nancial Security. Medicare is financed by two
Percent of GDP separate trust funds, the Hospital Insurance
14
Expenditures Trust Fund and the Supplementary Medical
12 General Revenues Insurance Trust Fund. This bifurcated
Premiums
10 trust fund structure finances Medicare as if
Payroll
Other
the program offers two separate, unrelated
8
benefits, instead of recognizing that Medicare
6 provides integrated, comprehensive health
4 insurance coverage. The MMA took steps
to address this problem, and requires the
2
Medicare Trustee’s Report to include a new,
0 comprehensive fiscal analysis, the Combined
2000 2010 2020 2030 2040 2050 2060 2070 2080 Medicare Trust Fund Analysis. This analysis
Source: 2004 Annual Report of the Board of Trustees for the Federal Hospital
Insurance and Federal Supplementary Medical Insurance Trust Funds. examines the program’s financing as a whole,
and provides the President and the Congress
with a warning if Medicare’s dedicated revenues are projected to fall below adequate levels in seven
years. The Administration supports a unified trust fund for Medicare, which would provide an
integrated financing structure for the program’s comprehensive benefit package.
Improving Quality. Medicare currently pays all health care providers equally for the same service,
regardless of the efficiency or the quality of services furnished. The Administration has promoted
accountability for quality, creating initiatives to collect data from Medicare providers on quality mea-
sures and making them publicly available. Better measures of efficiency and quality in health care
suggest that Medicare can improve payments for high-quality care. The Administration will take
further steps to encourage excellence in care by exploring provider payment reforms that link qual-
ity to Medicare reimbursement in a cost neutral manner. Such payment reforms should be flexible
enough to support innovations in health care delivery.
Administrative Improvements. In the coming years, HHS will make changes to rationalize several
components of the payment system. Specialty hospitals, which tend to be physician-owned and focus
on patients with specific medical conditions or who need surgical procedures, are a small but growing
segment of the health care industry. MedPAC, the congressional advisory committee for Medicare
issues, conducted extensive research and found that there are problems in physician ownership of
hospitals and in the way Medicare pays for hospitals. The Administration will seek to refine the in-
patient hospital payment system and related provisions of regulations to ensure a more level playing
field between specialty and non-specialty hospitals.
With regard to Medicare Advantage, the Budget will phase in over four years the savings from the
full implementation of risk adjustment payments to account for different health status of beneficia-
ries in Medicare Advantage plans. The phase-in will begin in 2007 and will be completed by 2010,
and is projected to produce savings to the extent that Medicare Advantage plans serve healthier ben-
eficiaries, on average, compared to fee-for-service. The Budget also proposes to improve payment
accuracy for patients who are transferred from inpatient hospitals to post-discharge acute settings,
such as nursing facilities. Lastly, HHS will refine the Skilled Nursing Facility Prospective Payment
System in 2006 to ensure appropriate payments for certain high-cost cases.
146 DEPARTMENT OF HEALTH AND HUMAN SERVICES

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Program Integrity. Medicare program integrity efforts have


yielded billions of dollars in savings. The Budget continues
this effort with $1.1 billion from the Health Care Fraud and
Abuse Control Account to fight improper Medicare payments.
The Budget requests $75 million for efforts to protect the new
Medicare prescription drug program and Medicare Advantage
against fraud, waste, and error, and these funds will be included
in a Government-wide proposal to fund program integrity
activities through a discretionary cap adjustment.
Additionally, HHS will strengthen program integrity by pre-
venting overpayments, accelerating contractor reform and ratio-
nalizing payments for bad debt. HHS will institute several data
processing improvements that will reduce overpayments. The
Budget provides funding to continue the modernization of Medi-
care’s data systems to this end. HHS will also accelerate imple-
mentation of a new process for awarding contracts to adminis-
trative contractors, which will enhance Medicare’s ability to hold
contractors accountable for their program integrity performance.
Lastly, the Budget proposes to rationalize the reimbursement of
bad debt to promote efficiency and ensure equitable treatment
across providers.

MMA Implementation

CMS Operations and Efficiencies. HHS has initiated an extensive effort to implement the many
provisions of the MMA. In 2004, CMS reorganized to improve the oversight and administration of
Medicare Advantage and the prescription drug benefit and provide more support for improving qual-
ity and efficiency in Medicare. HHS has begun outreach efforts to ensure that beneficiaries can get
the most out of their new choices, and develop new procedures to enroll beneficiaries and employers
in the new benefit. In 2005 and 2006, HHS will also implement other provisions of the MMA, such
as contractor reform for Medicare’s administrative contractors and changes to payments for Part B
Covered Drugs.

Update on the President’s Management Agenda

The following table provides an update on HHS’ implementation of the President’s Management
Agenda as of December 31, 2004.
THE BUDGET FOR FISCAL YEAR 2006 147

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

HHS successfully consolidated its human resources personnel into four centers and achieved greater
accountability through its employee appraisals and its Strategic Management System. Additionally, it has
implemented a number of initiatives to improve the skills and abilities of its workforce including HHS University
and its Emerging Leaders Program.
HHS’ strategic approach to competitive sourcing is facilitated by the use of evaluation factors such as mission,
outcomes, and commercial market-place composition to identify commercial activities available for competition.
In 2004, HHS completed a total of 33 streamlined studies of 365 FTEs and five standard studies of 351 FTEs.
The average time for completion was 69 days for streamlined studies and 285 days for standard competitions.
As a result, HHS estimates gross savings of over $250 million for completed 2003 studies and $55 million for
completed 2004 studies, as they are fully implemented over a five-year period.
In E-Gov, HHS is implementing Earned Value Management to track and manage information technology
investments. More than 95 percent of HHS’ information systems have certified and accredited security plans.

Initiative Status Progress


Faith-Based and Community Initiative

Real Property Asset Management

Eliminating Improper Payments

Broadening Health Insurance Coverage through State Initiatives

To improve the overall management of its real property assets, HHS has a three-part strategy: 1) develop an
asset management plan; 2) maintain a real-time inventory of owned, leased, and otherwise managed properties;
and 3) track performance measures, which are consistent with the Federal Real Property Council’s guidance.
HHS plans to complete these activities by December 2005.
HHS’ annual Performance and Accountability Report (PAR) includes an annual estimated improper payments
error rate and amount for Medicare, which accounts for nearly 50 percent of improper payments that have been
measured. For 2004, the Medicare error rate was 10.1 percent, or $21.7 billion. For the first time, HHS reported
improper payments for Head Start in the 2004 PAR, with an estimated error rate of 3.9 percent, or $255 million.
HHS is working to reduce improper payments, expand the number of programs reporting estimated improper
payment estimates, and improve the accuracy of these estimates. (Because this is the first quarter that agency
efforts in the Eliminating Improper Payments Initiative were rated, progress scores were not given.)
The Administration has developed several model Medicaid demonstrations to foster State innovation in reducing
the number of uninsured. To date, the Administration has approved 23 demonstrations and the Urban Institute
is conducting a study to assess the impact of Health Insurance Flexibility and Accountability demonstrations
on rates of uninsurance.
148 DEPARTMENT OF HEALTH AND HUMAN SERVICES

Department of Health and Human Services


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Food and Drug Administration ......................................................................... 1,362 1,433 1,487
Program level (non-add) ............................................................................... 1,695 1,801 1,881
Health Resources and Services Administration ........................................ 6,677 6,806 5,982
Program level (non-add) ............................................................................... 7,323 7,373 6,541
Indian Health Service .......................................................................................... 2,921 2,984 3,048
Program level (non-add) ............................................................................... 3,639 3,774 3,846
Centers for Disease Control and Prevention 1 ......................................... 4,440 4,584 4,017
Program level (non-add) ............................................................................... 6,062 6,312 5,901
National Institutes of Health.............................................................................. 27,733 28,444 28,590
Program level (non-add) ............................................................................... 27,896 28,650 28,845
Substance Abuse and Mental Health Services Administration ........... 3,234 3,268 3,215
Program level (non-add) ............................................................................... 3,351 3,392 3,336
Agency for Healthcare Research and Quality ............................................ — 3 —
Program level (non-add) ............................................................................... 304 321 319
Centers for Medicare and Medicaid Services 2 ........................................ 2,579 2,666 3,178
Program level (non-add) ............................................................................... 2,358 3,445 3,999
MedPAC/OCR/GDM/AHRQ Administration ................................................ 19 19 19
Discretionary HCFAC .......................................................................................... — — 80
Administration for Children and Families ..................................................... 13,288 13,537 13,127
Program level (non-add) ............................................................................... 13,292 13,599 13,187
Administration on Aging ..................................................................................... 1,374 1,393 1,369
Office of the Secretary ........................................................................................ 393 405 385
Program level (non-add) ............................................................................... 497 508 517
Health Information Technology ........................................................................ — — 75
Office of Medicare Appeals 3 .......................................................................... 58 58 80
Program Support Center: Medicare eligible retiree accrual ................. 27 33 34
Office of the Inspector General ....................................................................... 39 40 40
Public Health and Social Services Emergency Fund .............................. 2,164 2,269 2,428

Subtotal, Discretionary budget authority .......................................................... 66,308 67,942 67,154


Medicare Reform Administrative Expenses 2 ............................................ 1,000 — —
Total, Discretionary budget authority ................................................................. 67,308 67,942 67,154

Memorandum: Budget authority from enacted supplementals ............... — 350 —

Total, Discretionary outlays ................................................................................... 64,520 67,095 69,002


THE BUDGET FOR FISCAL YEAR 2006 149

Department of Health and Human Services—Continued


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Mandatory Outlays:
Medicare:
Existing law ........................................................................................................ 264,890 290,310 340,217
Legislative proposal 4 .................................................................................... — — 195
Medicaid/SCHIP:
Existing law ........................................................................................................ 180,838 193,615 197,996
Legislative proposal ........................................................................................ — 225 955
All other programs:
Existing law ........................................................................................................ 32,255 33,144 33,561
Legislative proposal ........................................................................................ — 38 565
Total, Mandatory outlays ........................................................................................ 477,983 517,332 573,489

Total, Outlays .............................................................................................................. 542,503 584,427 642,491


1
For comparability, the 2004 budget authority level reflects the creation of the Global AIDS Coordinator and program levels reflect a childhood
immunizations legislative proposal.
2
Amounts appropriated to the Social Security Administration (SSA) from the Hospital Insurance and Supplementary Medical Insurance accounts
are included in the corresponding table in the SSA chapter.
3
Reflects comparable Medicare Appeals funding levels for 2004 and 2005.
4
Medicaid proposal to subsidize Medicare cost sharing.
DEPARTMENT OF HOMELAND SECURITY

AT A GLANCE:
2006 Discretionary Budget Authority (gross): $34.2 billion
(Increase from 2005: 7 percent)
Major Programs:
• Border and Transportation Security
• Coast Guard
• Emergency Preparedness and Response
• Information Analysis and Infrastructure Protection
• United States Citizenship and Immigration Services
• United States Secret Service
• Science and Technology

MEETING PRESIDENTIAL GOALS

Protecting America

• Protecting and enforcing our borders, including expansion of the America’s Shield program and
the continuation of the Arizona Border Control Initiative.
• Supporting port security activities, including Coast Guard port security programs and Customs
and Border Protection container security programs.
• Creating a new Screening Coordination and Operations Office to enhance security screening of
people, cargo, and conveyances.
• Concentrating Federal funds for State and local homeland security assistance programs on the
highest threats, vulnerabilities, and needs.
• Improving the Nation’s ability to detect and rapidly characterize a potential bioterrorist attack
by collecting and analyzing disease surveillance data from people, animals, and plants.
• Improving detection of, and countermeasures for, the threat posed by nuclear and radiological
weapons.
• Enhancing detection of, and countermeasures for, the threat posed by chemical agents.
• Strengthening aviation security by upgrading explosives detection technology, deploying new
baggage-screening systems, and improving the monitoring of performance by airport screeners
and screening systems.

151
152 DEPARTMENT OF HOMELAND SECURITY

MEETING PRESIDENTIAL GOALS—Continued

Supporting a Compassionate Society

• Supporting response and recovery to major disasters and emergencies.


• Achieving a six-month processing standard for immigration applications by the end of 2006.

Agency-specific Goals

• Providing continued support for the United States Secret Service’s protection and investigation
programs.
• Supporting all Coast Guard missions including security of ports, waterways and coastlines, drug
and migrant interdiction, and fisheries enforcement.
THE BUDGET FOR FISCAL YEAR 2006 153

PROTECTING AMERICA

Securing the Nation’s Border, Ports, and Transportation Systems

The President’s 2006 Budget will continue to ensure the security of the Nation’s borders, ports,
and transportation systems with enhanced screening of goods and people through programs such as
the new Screening Coordination and Operations Office; increases to the United States Visitor and
Immigrant Status Indicator Technology (US-VISIT) system; additional radiological and nuclear in-
spection equipment; and expansion of the Container Security Initiative. The President’s 2006 Budget
will strengthen enforcement, border, and port security with increases to the Border Patrol; continued
execution of the Arizona Border Control Initiative (ABCi); improvements to the Coast Guard; and
new, threat-focused State and local assistance grants.

Improving Enforcement, Border, and Port Se-


curity. The primary mission of the Border Pa-
trol is to detect and apprehend illegal aliens and
smugglers of aliens at or near our land border.
The Border Patrol is specifically responsible for
patrolling the 6,000 miles of Mexican and Cana-
dian international land borders and 2,000 miles
of coastal waters surrounding the Florida Penin-
sula and the island of Puerto Rico.
Funding for the Border Patrol in 2006
includes $37 million for 210 additional Border
Patrol agents, and $20 million for the acqui-
sition and replacement of aging Border Patrol The Border Patrol uses horses in difficult terrain to secure the Nation’s
aircraft. Since September 11, 2001, Border border.
Patrol staffing has grown by nearly 1,200
agents (11-percent increase). The President’s Budget also enhances the America’s Shield Initiative,
an integration of many surveillance, video, and detection systems along the border.

Arizona Border Control Initiative


In April 2004, DHS announced a joint initiative
between Immigration and Customs Enforce-
ment and Customs and Border Protection.
The Arizona Border Control Initiative strives to
deter illegal crossing, disrupt smuggling orga-
nizations that transport illegal aliens into the
United States, and reduce the overall number
of deaths of migrants crossing the desert into
Arizona from Mexico. The President’s Budget
includes $50 million for enhanced personnel,
technology, and aviation assets.
154 DEPARTMENT OF HOMELAND SECURITY

PROTECTING AMERICA—Continued

Detaining and removing illegal aliens is critical to effective enforcement of our immigration laws.
The 2006 Budget continues the Administration’s commitment to enforcing our Nation’s immigration
laws and increases funding by $176 million for the detention and removal of illegal aliens. It pro-
vides $90 million for increased detention beds and additional detention and removal officers. It also
provides $39 million for the detention and repatriation costs of the ABCi, which aims to deter illegal
crossings of the desert. The Budget also includes $8 million to apprehend alien fugitives and $5.4
million to ensure that aliens convicted of crimes in the United States are deported directly from cor-
rectional institutions after their time is served, preventing their release into the community. The
Budget also includes $3.5 million for additional Department of Homeland Security (DHS) attorneys
to prosecute immigration cases.
Alternatives to conventional detention methods are essential to improving performance. In the
case of non-criminal aliens, particularly asylum seekers, officials are using alternative custody
arrangements to ensure their appearance at immigration proceedings. These pilot programs have
been successful and the Budget requests $5.4 million in additional funding to expand them. This
will allow DHS to focus resources on the most serious alien criminals.

The Budget includes $6.9 billion for the


Coast Guard, an 11.4-percent increase over the
comparable 2005 level. Within these levels,
$1.9 billion is for the Coast Guard’s Port,
Waterways, and Coastal Security mission.
This will fund a variety of high-priority Coast
Guard initiatives like armed, high-speed boats
in ports with liquefied natural gas terminals,
further implementation of the Automatic Iden-
tification System to track sea-going vessels
and enhance Maritime Domain Awareness,
new weapons systems for the Coast Guard’s
helicopter fleet, and implementation of the
Coast Guard security escorts the Liquified Natural Gas Tanker Common Operating Picture to enable Coast
MATTHEW in Boston Harbor.
Guard assets to work better together.
Ports and other transportation facilities where people and cargo enter the United States will be
a major priority for the $600 million Targeted Infrastructure Protection grant program, which will
enhance State, local, and private efforts to secure our Nation’s critical infrastructure.
Effective Screening of Goods and People. Following enhancements since September 11, 2001, and
the recommendations of the 9/11 Commission, on August 27, 2004, the President issued guidance
that directed DHS, in coordination with other departments and agencies, to enhance terrorist-related
screening of people, cargo, and conveyances, and implement a coordinated and comprehensive ap-
proach to terrorist-related screening in immigration, law enforcement, intelligence, counterintelli-
gence, border and transportation systems, and critical infrastructure. This Budget meets these goals,
and reinforces actions already accomplished to augment our existing screening programs.
A new DHS organizational structure that consolidates existing programs will substantially im-
prove internal coordination, operations, and efficiency of screening roles and missions. This new
Screening Coordination and Operations Office will manage DHS major screening programs, includ-
ing: the United States Visitor and Immigrant Status Indicator Technology Program (US-VISIT),
THE BUDGET FOR FISCAL YEAR 2006 155

which will screen international travelers arriving


at our ports of entry; and the Secure Flight
program, which will conduct automated screening
of all domestic commercial aviation passengers.
In addition, the management structure of at least
nine other existing programs will be combined,
including the Free and Secure Trade and the
Transportation Worker Identification Card
programs. This office will also strive to better
coordinate the screening processes and activities
operated by other Federal agencies by leading
ongoing interagency review and communications
on screening policy and practices.
US-VISIT is central to the Federal Government’s
screening of international visitors. US-VISIT expe-
dites the clearance of legal and safe travelers, while A Customs and Border Protection officer processes a traveler
focusing on blocking those intending to do harm. In through US-VISIT.
2004 and 2005 the first phases of US-VISIT were
successfully deployed. The 2006 Budget includes a $50 million increase for accelerated deployment
of US-VISIT at land border ports of entry and for enhanced access for border personnel to immigra-
tion, criminal, and terrorist information. Under the President’s proposal, the Administration will
commit over $1.4 billion to support this initiative through 2006.
In order to secure our borders while remaining open to trade and travel, DHS must use technol-
ogy to establish layered, risk-based security programs. In tandem with supporting efforts to ensure
effective screening, the President’s Budget provides $125 million in new funding for improved radio-
logical and nuclear screening equipment at our borders. U.S. Customs and Border Protection (CBP)
will continue to deploy these screening systems to cover all ports of entry. CBP will also work with
the Science and Technology Directorate at DHS to initiate a pilot program to deploy next-generation
radiation detectors.
Another example of this layered, risk-based security approach is seen in the Container Security
Initiative (CSI), which pre-screens cargo before it reaches our shores. Phase I of CSI implemented
the program at the top 20 foreign ports, which ship approximately two-thirds of the containers to
the United States. Phase II expanded the program to additional ports based on volume, location,
and strategic concerns. This Budget continues support for both Phase I and Phase II, as well as
Phase III—capacity building at several higher-risk ports of entry. The Budget provides $5.4 million
in additional funding for CSI over the 2005 level.
Also essential to cargo security are partnerships with some of the biggest American importers as
part of the Customs Trade Partnership Against Terrorism (C-TPAT). To date, over 4,500 importers,
1,700 carriers, and 1,300 brokers and freight forwarders are participating in C-TPAT. The $8.2 mil-
lion in additional funding over the 2005 level for C-TPAT will be used for supply chain specialists
and increased supply chain security validations.
Aviation screening operations continue to be a high priority of the Administration. The Budget
proposes more than $4.5 billion for aviation screening operations, an increase of approximately $0.4
billion from the 2005 level. Funding will ensure sufficient resources for 45,000 Federal screeners and
10,000 screening devices nationwide. The Administration expects innovative and secure contract
screening operations to expand between this year and 2006, beyond the five airports currently using
contract screeners.
156 DEPARTMENT OF HOMELAND SECURITY

PROTECTING AMERICA—Continued

The Budget includes funding to significantly upgrade


detection of explosives at our Nation’s airport check-
points, a recommendation of the 9/11 Commission. In
total over 2005 and 2006, the Administration proposes
to invest more than $100 million in new technology
to strengthen explosives screening. The Budget also
provides a $26 million increase for the Federal Air Mar-
shals to protect our Nation’s airplanes and passengers.

Restructuring of State and Local Assistance


Grants

Over the last four years, DHS agencies have provided


$11.3 billion to State and local governments to prevent,
prepare for, and respond to acts of terrorism. An A truck passes through a radiation portal monitor at the port
additional $3.2 billion in grants and other assistance of Newark, New Jersey.
provided by other Federal agencies has also gone
to State and local responders. Yet, nearly half of these funds have been allocated according to
congressionally-mandated formulas that bear little relation to need and risk. Recognizing this, the
Intelligence Reform and Terrorism Prevention Act of 2004 included a call for the Congress to pass
legislation reforming the system for distributing State and local terrorism preparedness grants.
The Budget proposes to restructure $2.6 billion in grants for States, urban areas, and infrastructure
protection, so that DHS will target grants to fill critical gaps in State and local terrorism prevention
and preparedness capabilities, taking into consideration their threats and vulnerabilities. Major
grant initiatives within the 2006 Budget include:
• Faster, better-allocated State Homeland Security grants would provide $1 billion for discre-
tionary grants to States and territories. Funds would be awarded to meet national preparedness
goals and priorities identified in State homeland security plans. This approach replaces the cur-
rent State funding formula, which does not target funds for high-risk States or specific needs.
• The Urban Area Security Initiative would provide $1 billion in discretionary grants to urban
areas and regions. Funds would be linked to national preparedness goals and specific gaps iden-
tified in regional homeland security plans. As in the past, DHS will define eligibility criteria to
encourage coordinated planning and avoid duplication. The requested funding level assumes
that no more then 50 regions will receive funding, with each required to coordinate their grant
applications with surrounding States.
• The Targeted Infrastructure Protection program would provide $600 million in integrated
grants, enabling DHS to supplement State, local, and private infrastructure protection
efforts, especially for deployment of nuclear and chemical detection capabilities and security
investments at ports and other transit facilities. Rather than providing arbitrary amounts
for particular sectors, priorities and projects would be determined based on relative risk,
vulnerability, and need.
• The Assistance to Firefighters Grants program would provide $500 million in competitive grants
to fire departments and emergency medical providers. These funds would pay for vehicles,
equipment, and training that these responders need to better protect the public, especially from
potential terrorist attacks and other mass casualty events. The Administration will continue
THE BUDGET FOR FISCAL YEAR 2006 157

its efforts to remove bureaucratic obstacles to the participation of large fire departments in this
program.

Fostering Communications Between First Responders

In the event of a national emergency, it is crucial that first responders, State and local govern-
ments, and the Federal Government are able to communicate with each other. The 2006 Budget
recognizes the importance of this goal and includes initiatives to strengthen such communications
capabilities. The Administration is dedicated to ensuring that adequate radio frequency spectrum
exists for public safety. It also has supported a number of steps to expand public safety access to
spectrum, including proposing an analog spectrum fee on broadcasters to encourage faster return of
analog television spectrum, so that a portion of it may be allocated for public safety use.
The Science and Technology Directorate has
established a new Office of Interoperability and
Compatibility (OIC), which includes the Safe
Communications program that was created
to coordinate public safety communications to
achieve national wireless interoperability. This
office is charged with creating standards, in
partnership with the public safety community,
for communications, equipment, and training, to
enable first responders from different jurisdictions
to share information.
During 2004, OIC helped first responders in 10
First responders practice extricating a victim during a weapons of
urban areas to communicate with each other in the mass destruction training exercise at the DHS Center for Domestic
event of a large emergency incident, including a ter- Preparedness in Anniston, Alabama.
rorist attack. In 2004 alone, over $830 million was
allocated to State, regional and local interoperability efforts through State and local grant programs.
During 2005 and 2006, these efforts will be expanded to other cities participating in the Urban Area
Security Initiative. Interoperability will continue to be a major focus of State and local homeland
security grants in the 2006 Budget.

Citizen Involvement

Citizen Corps, a component of the USA Freedom Corps, brings together local leaders, citizen vol-
unteers, and a network of first-responder organizations in local preparation and response efforts.
Federal funding has led to the establishment of more than 1,400 local Citizen Corps Councils across
the United States. The 2006 Budget request includes $50 million in grants to State Citizen Corps
activities.

Protecting Critical Infrastructure

The Department’s Information Analysis and Infrastructure Protection (IAIP) Directorate


is charged with coordinating the Federal Government’s efforts to protect the Nation’s critical
infrastructure, including: commercial assets (e.g., stock exchanges), Government facilities, dams,
nuclear power plants, national monuments and icons, chemical plants, bridges, and tunnels. DHS,
other Federal agencies, and State and local governments use a risk-management approach to reduce
the vulnerability of critical infrastructure and protect them against terrorist threats. The 2006
Budget includes $530 million for IAIP’s infrastructure protection activities.
158 DEPARTMENT OF HOMELAND SECURITY

PROTECTING AMERICA—Continued

Since its establishment in 2003, IAIP


activities include identifying, assessing, and
securing critical infrastructures. IAIP has de-
veloped a national inventory of infrastructures
that could be terrorist targets. This database
is used by IAIP to determine which sites pose
public health or economic risks if attacked. As
most critical infrastructures are not Federally
owned or operated, IAIP must work with
State homeland security advisors, owners
and operators of critical infrastructure, public
safety personnel, and other Federal agencies.
These relationships serve to reinforce Federal,
State, and local protection strategies. For
example, IAIP works closely with local law
The Homeland Security Operations Center operates 24 hours a day to
enforcement to protect infrastructures through help deter, detect, and prevent terrorist acts.
the use of “buffer zone protection plans”. These
plans are implemented at key sites to expand the zone of protection around facilities. IAIP has
helped develop buffer zone protection plans and security plans for chemical sites, dams, nuclear
power plants, and water facilities.
Cyber security is another key element of infrastructure protection. The consequences of a cyber
attack could cascade across multiple infrastructures and imperil public safety. The 2006 Budget pro-
poses $73 million to enhance ongoing programs for IAIP’s National Cyber Security Division (NCSD).
NCSD serves as a national focal point for the public and private sectors to address cyber security
issues. As such, NCSD established the U.S. Computer Emergency Response Team (US-CERT), a
partnership among NCSD and its public and private partners to coordinate cyber security, increase
public awareness of cyber threats, and improve computer security preparedness and response to cy-
ber attacks. US-CERT also supports watch and warning capability, which helps track incidents and
trend data, ranks associated severity, and generates real-time alerts.
Monitoring activities and access to current information at nuclear power plants, chemical man-
ufacturers, and other sites is essential in the coordination of infrastructure protection. IAIP oper-
ates the Homeland Security Operations Center (HSOC) to monitor current threats against key sites.
It is the national-level hub for information sharing, situational awareness, and domestic incident
management. Federal, State, local, tribal, and private sector organizations are connected to the
HSOC. The 2006 Budget continues to support the HSOC by improving monitoring and communica-
tions capabilities.
Information Sharing. In meeting its mandate to disseminate information to help prevent terrorist
attacks, IAIP communicates timely and valuable threat-related information to State and local offi-
cials, Federal agencies, and the private sector as is appropriate. Recipients of IAIP’s analysis use
this information to respond to specific threats. In the past year, all 50 States and major urban areas
have been connected to the Homeland Security Information Network (HSIN). In 2006, county-level
governments will begin to be connected to HSIN. HSIN is the main information sharing portal for
DHS.
IAIP is also involved in the efforts to improve information sharing within the intelligence commu-
nity. DHS continues to be a partner with other intelligence agencies, such as the recently-established
National Counterterrorism Center (NCTC). IAIP analysts staff the NCTC 24 hours a day. Working
THE BUDGET FOR FISCAL YEAR 2006 159

as partners, this type of collaboration ensures the analysis done between IAIP or the NCTC comple-
ments each other in the best interest of the Nation’s security.
Increased information sharing has also resulted in an improved capability to detect and rapidly
characterize a potential bioterrorist attack. For example, the Department has established the Na-
tional Bio-Surveillance Integration System (NBIS) within IAIP. NBIS will collect and analyze disease
surveillance information from people, animals, plants, food, and the environment. This information
will be monitored continuously, in the context of intelligence information, to rapidly identify and char-
acterize suspicious patterns of illness, and to support response activities by providing improved “sit-
uational awareness.” The surveillance information to support this activity will come from expanded
and enhanced systems across the Federal Government and international sources.

Emergency Preparedness

An effective response to a major terrorist incident or natural disaster depends on adequate prepa-
ration. The Federal response to the hurricanes of 2004 demonstrated the value of proactive and
aggressive response measures. The Budget continues to build on these capabilities and supports
critical preparedness, response, and recovery efforts at all levels of Government.
In 2004, the Federal Government developed the National Response Plan (NRP), a comprehensive
approach to domestic management of emergencies. DHS also led the development of a National Inci-
dent Management System (NIMS). Released in July 2004, NIMS establishes a standard framework
for Federal, State, tribal, and local governments to respond to incidents and emergencies. The Bud-
get provides $15 million to support the implementation of NIMS through the DHS NIMS Integration
Center.
The Budget provides an additional $20 million to augment our response capabilities for the most
catastrophic terrorist attacks. DHS will continue an initiative to plan and build emergency response
capability, working closely with State and local venues as well as other Federal agencies. Additionally,
the Budget includes $10 million for DHS to continue to develop and maintain mobile medical treat-
ment facilities that could be deployed to a community after a large-scale event that would otherwise
overwhelm a community’s medical system.

Science and Technology

New technologies to detect and counter terrorist threats are critical to preventing and minimizing
the damage from terrorist attacks. The 2006 Budget includes several major initiatives to achieve
this important goal.
Unifying Federal Nuclear Detection Efforts. A new Domestic Nuclear Detection Office (DNDO) is
being created that will develop and deploy a comprehensive domestic system to detect and report
any attempt to import, assemble, or transport a nuclear explosive device, fissile material, or radio-
logical material intended for illicit use. The DNDO will be responsible for interagency coordination
of a comprehensive national nuclear detection architecture. One major DNDO responsibility will be
oversight of all transformational research and development for detection, identification, and report-
ing of radiological and nuclear materials.
Nuclear and Chemical Detection Architecture Transformational Research and Development. Under
the 2006 Budget, the Science and Technology Directorate will devote $262 million for advanced de-
tection devices to minimize the likelihood of a radiological or nuclear device entering into the United
States, more than double the amount spent in 2005. This research is part of a broader effort to focus
the Nation’s resources toward countering the threat of nuclear or radiological materials being used
against the American people. This research and development (R&D) program will be integrated
160 DEPARTMENT OF HOMELAND SECURITY

PROTECTING AMERICA—Continued

with our overseas non-proliferation efforts to create a seamless strategy for preventing terrorists
from acquiring radiological and nuclear devices and detecting one on our shores. This program will
also be integrated with U.S. Customs and Border Protection, which will work with the Science and
Technology Directorate on a pilot program to deploy next-generation radiation detectors to ensure
that these materials do not cross the borders into the United States. The Budget also doubles the
amount of spending on chemical agent R&D to $107 million, including $36 million in new spending
on non-traditional chemical agent threats.
BioWatch Program for Environmental Monitoring and Detection. The 2006 Budget will enhance
and expand the BioWatch environmental monitoring program, which samples and analyzes air in
over 30 metropolitan areas to check for dangerous biological agents. The program is designed to
provide early warning of a large-scale biological weapon attack, thereby allowing the distribution of
life-saving preventive treatment.
Countering the Threat of Shoulder-fired Missiles Against Commercial Aircraft. The Science and
Technology Directorate will continue to research the viability of technical countermeasures for com-
mercial aircraft against the threat of shoulder-fired missiles. The Directorate will invest $110 million
to test these systems on air-cargo Civilian Reserve Aircraft Fleet planes for safety and reliability.
THE BUDGET FOR FISCAL YEAR 2006 161

SUPPORTING A COMPASSIONATE SOCIETY

Response and Recovery

In 2004, DHS responded to 65 major disaster


declarations and seven emergencies. Within
six weeks during the months of August and
September, four large hurricanes made landfall
in the Southeast. The Federal Government’s
support during and after these storms was
among the largest response and recovery
undertakings ever. The Federal Emergency
Management Agency (FEMA) coordinated this
massive response effort, which included the
delivery of over 10 million gallons of water,
163 pounds of ice, 14 million Meals Ready to
Eat, and 14,000 mobile homes or trailers to
Orlando, Florida, September 12, 2004—Cots and hospital beds are set
displaced families. Additionally, FEMA medical up in the Orange County Convention Center.
teams treated nearly 10,000 people.
The 2006 Budget provides $3.3 billion for disaster relief—a level of funding consistent with the
average annual disaster costs over the past five years, not including large and rare events, such as
the attacks of September 11, 2001. This includes more than $2 billion in new resources and funds
available from prior years.

U.S. Citizenship and Immigration Services

The Administration is committed to making sure America continues to welcome the contributions
of immigrants. Within DHS, the United States Citizenship and Immigration Services (USCIS) con-
tinues to improve systems to provide immigrants information and services in a timely, accurate,
consistent, courteous and professional manner, while also guaranteeing national security.
Backlog Reduction. The 2006 Budget continues funding for the President’s multi-year $540 million
initiative enabling USCIS to reduce the backlog of applications, and ensure a six-month processing
standard for all applications by the end of 2006. In 2004, USCIS has continued the focus on quality
improvements and expanded national security checks, such as performing background name checks
on all applications before approval. Although the checks have initially meant longer processing times,
enhanced security will ensure that only eligible applicants are given the right to enter the United
States. In addition, USCIS began implementing significant information technology improvements
including electronic filing (e-filing) for certain immigration applications.
Over the coming year, the Department will focus on transforming the application process with
a greater focus on customers. DHS will establish clear performance milestones, actively monitor
progress towards these milestones, and ensure integrity by establishing comprehensive quality
assurance measures.
162 DEPARTMENT OF HOMELAND SECURITY

SUPPORTING A COMPASSIONATE SOCIETY—Continued

Temporary Worker Program. The Administration is committed to achieving significant immigra-


tion reform. Such reform would better control security at our borders, match willing foreign workers
with U.S. employers who can not find U.S. workers to fill certain jobs, provide incentives for temporary
workers to return to their home countries and families, and protect the rights of legal immigrants
while not rewarding illegal immigrants. The 2006 Budget proposes to more than double the funding
dedicated to worksite investigations performed by Immigration and Customs Enforcement relative
to 2004. The 2006 Budget provides an additional $18 million above the 2005 level.
THE BUDGET FOR FISCAL YEAR 2006 163

MAKING GOVERNMENT MORE EFFECTIVE

Coast Guard Polar Icebreaking

The Program Assessment Rating Tool (PART) assessment of the Coast Guard Polar Icebreaking
Program yielded an outcome of Results Not Demonstrated, due to a combination of poor alignment
of the program with the user community and inadequate performance measures. By contrast, the
National Science Foundation’s Polar Tools, Facilities, and Logistics program received an Effective
PART score.
The Budget proposes to transfer funding for the Polar Icebreaking Program to the National Science
Foundation to better align resources with those who benefit from the program. While the Coast
Guard will continue to operate the polar icebreaking fleet on a reimbursable basis, the National Sci-
ence Foundation will ultimately be responsible for the long-range planning required to refurbish or
replace the ships, as necessary, which are nearing the end of their serviceable lives.

Improving Management of Aviation Security

The Department will also work to expand airport contract screening opportunities at those airports
wishing to opt out of Federal screening operations. Preliminary analysis of five contract screening
airports in place after the September 11th attacks found there was no detrimental effect on security
by having contract screeners, and that many functions could be undertaken more efficiently and ef-
fectively through contractor-led operations. Given the importance of effective screening operations
on airlines, airports, and passengers, finding the best way to undertake airport screening is our high-
est aviation security priority. The Department will be working to ensure its contracting program is
an attractive, beneficial screening system option for airports while maintaining or improving secu-
rity outcomes. Ultimately, efficient and effective screening operations can only be achieved through
a strong partnership with local airports. The contracting program will provide options for strength-
ening this partnership.
Aviation security is a shared responsibility of the Federal Government, airports, airlines, and the
traveling public. Airport screening, one element of aviation security, benefits passengers and air
carriers by protecting them from threats. These costs should be borne by the beneficiaries of these
services. In 2004, aviation security fees covered less than half the cost of core Federal airport screen-
ing operations. The Budget proposes to increase passenger fees by $3.00 starting in 2006, raising the
fee on a typical one-leg ticket from $2.50 one way to $5.50. For passengers traveling multiple legs
on a one-way trip, that fee would rise from the current maximum of $5.00 to $8.00. Total security
fees will rise from an estimated $2.6 billion this year, to $4.1 billion in 2006, allowing near full cost
recovery of spending on Federal aviation screening operations.

Reforming Human Capital

In creating DHS, the Homeland Security Act provided an historic opportunity to design a mod-
ern human resources management system that is mission-centered, fair, effective, and flexible. DHS
launched an ambitious, collaborative effort in 2003 that may be used as a model for future Gov-
ernment reform. The collaboration involved input from managerial and non-managerial employees
at all levels, employee unions, academia, and Government service reform experts. This endeavor
will culminate with the publication of final regulations establishing the system. The 2006 Budget
specifically provides resources that will be used for training supervisory personnel to administer a
164 DEPARTMENT OF HOMELAND SECURITY

MAKING GOVERNMENT MORE EFFECTIVE—Continued

performance-based pay system and to create the information technology framework for the new sys-
tem. There will be a phased rollout of the new system scheduled to begin later this year.

Update on the President’s Management Agenda

The table below provides an update on the DHS’ implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrows indicate change in status since evaluation on September 30, 2004.


The Department continues implementing a human resources system that provides flexibility to rapidly react to
emerging threats, protects workers rights, and ties pay to employee performance. It also continues its efforts to
develop a department-wide approach to manage its personnel that will strengthen coordination and erase the
boundaries that used to delineate the 22 components that merged to create the Department.
DHS continues to struggle in its Electronic Government and information technology efforts and has been unable
to demonstrate consistent progress and results. While the Department has made notable improvements in IT
security, in the coming year it will increase its focus on strengthening management and implementation of
the IT and E-Gov investments of the Department.
In support of budget and performance integration, the Department is using the Program Assessment Rating Tool
results to improve program performance, developing and using efficiency measures, and utilizing performance
data to inform and justify budget decisions.
DHS met the 2004 accelerated audit deadline and initiated its three-year reform program to unify, streamline,
and integrate the Department’s legacy financial management systems.

Initiative Status Progress


Real Property Asset Management

Eliminating Improper Payments

For the Real Property Asset Management initiative, DHS has developed an Operating Entity Data Elements
Matrix. The structure of this real property database incorporates Federal Real Property Council standards for
data elements and performance metrics. The next critical step in this initiative is to draft and implement an
Asset Management Plan. With respect to improper payments, DHS is undertaking a comprehensive statistical
sampling program early this year to identify any potential problem areas along with focused assessments by
a recovery audit contractor in select major agencies such as U.S. Immigration and Customs Enforcement.
(Because this is the first quarter agency efforts in the Eliminating Improper Payments Initiative were rated,
progress scores were not given.)
THE BUDGET FOR FISCAL YEAR 2006 165

AGENCY-SPECIFIC GOALS

United States Secret Service

The United States Secret Service is organized into two major components, one focused on protec-
tion and the other focused on investigation. PART assessments of two protective programs found
that both are highly effective, receiving some of the highest evaluations across Government. The
Protective Intelligence program provides Secret Service law enforcement personnel with the infor-
mation needed to carry out their protective operations. The Foreign Protectees and Foreign Missions
program exercises the Service’s unique authority and capability to coordinate logistics, advanced se-
curity surveys, intelligence analysis and dissemination, and other planning activities preceding visits
from foreign heads of state and other dignitaries. The Budget includes $1.2 billion for the Secret Ser-
vice to provide continued support for its protection and investigation programs, $28 million higher
than the 2005 enacted level.

Federal Law Enforcement Training


Center

The Federal Law Enforcement Training


Center provides training to personnel from
more than 80 law enforcement agencies. An
additional $3 million will be used to teach
officers how to avoid collisions and reduce the
dangers associated with pursuit driving.
The Federal Law Enforcement Training
Accreditation program creates accreditation
standards for the training programs used by
law enforcement agencies. This effort will
The Secret Service ensures the safety of the President.
encourage the adoption of best practices and
standards among law enforcement agencies.

Coast Guard Search and Rescue

The Coast Guard is responsible for minimizing the loss of life and property on the seas, and its
Search and Rescue (SAR) program is one of its oldest missions. Coast Guard employees spend hun-
dreds of hours annually training for and executing SAR missions, and Coast Guard rescue swimmers
are recognized as some of the best in the world. To help improve the Coast Guard’s SAR program, the
Budget continues implementation of the Rescue 21 system (a state-of-the-art maritime distress and
response communications system) and includes funds to start recapitalization of the Coast Guard’s
High-Frequency distress-call monitoring system.
166 DEPARTMENT OF HOMELAND SECURITY

Department of Homeland Security


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Gross Discretionary Budget Authority:
Border and Transportation Security ............................................................... 13,508 14,642 16,099
U.S. Coast Guard ................................................................................................. 5,668 6,321 6,947
Emergency Preparedness and Response .................................................. 2,886 3,082 3,257
Science and Technology .................................................................................... 913 1,116 1,368
Information Analysis and Infrastructure Protection .................................. 834 894 873
Office of State and Local Government Coordination ............................... 4,193 3,985 3,565
Other Department of Homeland Security .................................................... 1,888 1,950 2,043
Total, (gross) ............................................................................................................... 29,890 31,990 34,152
Less Fee-Funded Activities .......................................................................... 1,994 2,994 4,810
Total, Discretionary budget authority (net) ....................................................... 27,896 28,996 29,342
Project Bioshield ............................................................................................. 885 2,508 —

Memorandum: Budget authority from enacted supplementals ............... 2,448 6,533 —

Total, Discretionary outlays ................................................................................... 26,931 32,771 33,600

Mandatory Outlays (gross) .................................................................................... 4,906 6,712 6,730


Less Mandatory Receipts and Flood Insurance Collections ................ 5,300 6,224 7,046
Total, Mandatory outlays (net) .............................................................................. 394 488 316

Total, Outlays (net).................................................................................................... 26,537 33,259 33,284

Credit activity
Direct Loan Disbursements:
Disaster Assistance ............................................................................................. — 25 25
Total, Direct loan disbursements ......................................................................... — 25 25
DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT

AT A GLANCE:
2006 Discretionary Budget Authority: $28.5 billion
(Decrease from 2005: 11 percent)
Major Programs:
• Section 8 Rental Assistance
• Federal Housing Administration
• Public Housing
• HOME Improvement Partnerships Program
• Homeless Assistance Programs
• Housing for the Elderly and Disabled

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Supporting the President’s ambitious agenda for expanded homeownership by assisting approx-
imately 40,000 low-income families with the downpayment on their first home.
• Preparing families for homeownership, identifying predatory lending practices, and helping
current homeowners avoid default.
• Proposing two new mortgage programs that would help more than 250,000 families achieve
homeownership.
• Supplying tax credits to increase the supply of single family affordable homes.

Supporting a Compassionate Society

• Working to end chronic homelessness through innovative local strategies to move chronically
homeless individuals from the street to permanent supportive housing.
• Helping ex-offenders get a second chance at employment.

Making Government More Effective

• Reforming Housing Vouchers to improve results and better serve two million low-income house-
holds.

167
168 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

MEETING PRESIDENTIAL GOALS—Continued

• Expanding outreach to faith-based and community organizations to level the playing field for
the Department of Housing and Urban Development’s formula and competitive grants.
• Reducing improper payments in rental assistance programs.
THE BUDGET FOR FISCAL YEAR 2006 169

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

More Americans have achieved the dream of homeownership than at any time in our Nation’s his-
tory: Sixty-nine percent of households own their homes. For the first time ever in 2004, a majority
of minority households own their own homes. The 2006 Budget supports ambitious goals to:
• Add 5.5 million new minority homeowners by 2010 (goal set in 2002)—1.9 million new minority
homeowners were added by 2004; and
• Increase the supply of affordable homeownership units by seven million over the next 10 years
(goal set in 2004).

American Dream Downpayment Initiative

Saving enough cash for the downpayment and closing costs is the greatest obstacle to homeowner-
ship for many. To help overcome this obstacle, the President proposed new Department of Housing
and Urban Development (HUD) funding to help low-income families purchase their first homes. On
December 16, 2003, President Bush signed the American Dream Downpayment Act. Six months
later, HUD distributed $161.5 million in downpayment funds to over 400 State and local Govern-
ments. These funds have already helped over 4,000 families purchase their first homes; 50 percent
of those families are minorities. The 2006 Budget provides $200 million to continue this initiative.

On December 16, 2003, President Bush signed the American Dream Downpayment Act. As a result of this
initiative, on October 29, 2004, Taryn Ramos was able to purchase her first home with the downpayment
assistance grants administered by Fresno, California.

Housing Counseling

The Budget proposes $40 million for Housing Counseling to prepare families for homeownership,
identify predatory lending practices, and help current homeowners avoid default. In 2006, HUD will
assist approximately 800,000 families to become homeowners or avoid foreclosure, using faith-based
and community organizations in this effort.
170 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

Ensuring Government-Sponsored Enterprises Promote Affordable Housing

New Affordable Housing Goals Government-sponsored enterprises (GSEs)


were chartered to help low- and moderate-in-
Percent of GSE-financed units
60 come families secure mortgages. HUD recently
2001-2004 published a rule that requires Fannie Mae and
50 2005 Freddie Mac to increase their purchases of
2006
2007
mortgages for low- and moderate-income house-
40
2008 holds and underserved communities. These
30 new goals will push the GSEs to genuinely
lead the market in creating homeownership
20 opportunities for less advantaged Americans.
10 In addition to increasing the annual housing
goals through 2008 (see accompanying chart),
0
Low/Moderate Special Affordable Underserved HUD’s rule establishes new home purchase sub-
Source: HUD. goals in each of the three goal areas. This is in-
tended to focus the GSE’s efforts on purchases of
homes rather than refinancings. HUD projects
that over the next four years, the GSEs will purchase an additional 400,000 home loans that meet
these new and more aggressive goals as a result of the new rule.

FHA Zero Down Payment and Payment Incentives

To remove two large barriers to homeownership—the down payment and impaired credit—the
Budget proposes two mortgage programs. The Zero Down Payment mortgage allows first-time buy-
ers with a strong credit record to finance 100 percent of the home purchase price and closing costs.
For borrowers with limited or weak credit histories, a second program, Payment Incentives, initially
charges a higher insurance premium and reduces premiums after a period of on-time payments. In
2006, these new mortgage programs would assist more than 250,000 families achieve homeowner-
ship.

Single Family Homeownership Tax Credit

The President proposes a new Single Family Homeownership Tax Credit that will increase the
supply of single family affordable homes by up to an additional 50,000 homes annually. Under the
President’s plan, builders of affordable homes for middle-income purchasers will receive a tax credit.
State housing finance agencies will award tax credits to single family developments located in a
census tract with median income equal to 80 percent or less of area median income and will be lim-
ited to homebuyers in the same income range. The credits may not exceed 50 percent of the cost of
constructing a new home or rehabilitating an existing property. Each State would have a homeown-
ership credit ceiling adjusted for inflation each year and equal to the greater of $1.75 times the State
population or $2 million. In total, the tax credit will provide $2.5 billion over five years.

Homeownership Vouchers

The Homeownership Voucher program, while still new, has successfully paved a path for low-in-
come Americans to become homeowners. Strong and committed collaboration among public housing
THE BUDGET FOR FISCAL YEAR 2006 171

agencies, local non-profits, and lenders, as well as pre- and post-homeownership counseling for fam-
ilies has proven essential in making the program work. The greatest challenge to the success of the
program is finding lenders who are willing to participate.
Although the Homeownership Voucher program is voluntary, a Program Assessment Rating Tool
analysis completed on the program shows that it has over-achieved its annual goals consistently since
the program began. In its first four years, the program helped over 2,000 low-income families that
were renting through the Section 8 program to become homeowners. In 2006, the program plans to
assist 5,000 families achieve homeownership.

Neighborhood Reinvestment Corporation

The Budget increases funding for the Neighborhood Reinvestment Corporation to $118 million.
The Corporation, a public nonprofit organization chartered by the Congress in 1978 and independent
of HUD, is also working to expand minority homeownership. The Corporation is pledging to provide
direct assistance to over 170,000 families in 2006 through affordable mortgage and rehabilitation
lending, comprehensive homebuyer education, and counseling services.
172 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUPPORTING A COMPASSIONATE SOCIETY

Ending Chronic Homelessness

The Administration remains committed to the goal of ending chronic homelessness. Chronically
homeless individuals who have disabling conditions and live on the streets and in shelters for long
periods comprise less than 10 percent of the homeless population, yet they consume over half of
emergency homeless services. Housing this population will free Federal, State, and local emergency
resources for families and individuals who need shorter-term assistance.
In 2004, the Federal Collaborative Initiative to End Chronic Homelessness, through HUD, and the
Departments of Health and Human Services (HHS) and Veterans Affairs (VA), funded 11 grantees
across the country. Building on the success of this initiative, in 2006, the Samaritan Housing Ini-
tiative will provide up to $200 million through HUD in new housing subsidies paired with case
management specifically targeted to this population.
Across the country, 46 States and 170 localities, along with the private sector, have joined the
Federal effort to move chronically homeless individuals from the streets to permanent supportive
housing, and to prevent additional individuals from becoming chronically homeless.
The Budget provides more resources than ever for permanent supportive housing for homeless in-
dividuals who have been on the streets or in shelters for long periods. The 2006 Budget includes
$1.4 billion for Homeless Assistance Grants, $0.2 billion more than in 2005. Altogether, the Admin-
istration requests $4 billion in 2006 for Federal housing and social programs for the homeless, an
8.5-percent increase.

In its second year, the Federal Collaborative Initiative


to End Chronic Homelessness in 11 communities
continues its progress. Already, it has helped place
438 formerly homeless persons in permanent hous-
ing. This group had been homeless for a cumulative
2,873 years. One study suggests that similar cases of
homelessness cost the public an average of $40,000
a year in shelter, emergency room visits, and other
public services. Without the help of this initiative,
these individuals would have cost the public $115
million, over the average seven-year period they were
homeless.
Coming Out of the Cold: Providing permanent housing for
chronically homeless individuals. Consider the case of Wayne, a 44 year old veteran who
had been homeless off and on for five years. In De-
cember 2003, after living in the woods for 18 months, Wayne, with a serious infection and substance abuse
issues, sought shelter during a bad snowstorm. After stays in a local shelter and a detox program, he was
treated at the local VA hospital, which referred him to the newly funded Collaborative Initiative project in
Portland, Oregon led by Central City Concern. As part of the Federal support for that project, VA provides
case management services for eligible veterans. Wayne received permanent supportive housing in March
2004. He has remained housed and wants to work. His goal is to work on disaster relief for the American
Red Cross. The Portland Collaborative Program has assigned him to an employment specialist to help him
to reach his goal.
THE BUDGET FOR FISCAL YEAR 2006 173

Local Plan to End Chronic Homelessness


Through the Federal Collaborative Initiative, the U.S. Interagency Council on Homelessness has worked
with over 200 States and localities to develop plans to end chronic homelessness. The plans detail current
Federal, State, and local resources available to combat homelessness and additional public and private
resources they will invest toward this specific initiative. Below is an example of a local plan that addresses
both chronic homelessness and the prevention of homelessness.

Chattanooga, Tennessee:
The Chattanooga Blueprint for Ending Chronic
Homelessness
Goal: • To develop 1,400 additional targeted housing subsidies to end chronic
homelessness.
Direct Federal • $2.6 million in 2003 from HUD Homeless Assistance and Emergency
Investments: Shelter grants.
• $2.2 million from the HUD/HHS/VA Collaborative Initiative to End Chronic
Homelessness that will house and provide services for 50 individuals for
five years.
State Investments: • State earmarks 10 percent of its Low-Income Housing Tax Credit
allocation to support housing for persons with special needs.
Local Investments: • 2005 City budget sets aside first-time funds of $400,000 for supportive
housing.
• Chattanooga Housing Authority’s bonding authority.
• $681,500 in city and county funds in 2003 for homeless services.
Private Investments: • 43 percent of the annual $7.3 million spent on homelessness is secured
from private sector sources (philanthropy, faith-based organizations,
foundations, United Way).
• Portion of $20 million in Home Loan Bank funds.
Progress to Date: • 49 chronically homeless individuals are now living in supportive housing
through the Collaborative Initiative.
• New Regional Interagency Council on Homelessness created. Comprised
of Federal, State, county, and city governments, plus faith-based
organizations, and formerly homeless persons.

Housing for Special Populations

Housing Opportunities for Persons with AIDS (HOPWA) provides formula grants to States and
localities to provide housing to ensure persons with AIDS can continue to receive health care and
other needed support. The program also provides competitive grants to nonprofit organizations.
HOPWA funding will assist over 67,000 households with housing assistance across 124 jurisdictions
and through 25 competitive grants.
174 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUPPORTING A COMPASSIONATE SOCIETY—Continued

Housing for Returning Ex-offenders

More than 600,000 offenders are released from prisons each year and face multiple barriers upon
their return to society, including inadequate job skills and housing. Approximately two-thirds of pris-
oners are re-arrested within three years of their release, and half return to prison during that same
period. To confront this problem, the President announced in the 2004 State of the Union Address
a four-year $300 million Prisoner Re-entry Initiative to help individuals leaving prison make a suc-
cessful transition to community life and long-term employment. Drawing on the collaborative efforts
of the Departments of Labor, HUD, and Justice, and harnessing the experience of faith-based and
community organizations, the program will offer a range of job training, housing, and mentoring ser-
vices, that will help reduce recidivism and ensure that former prisoners are reintegrated into society.
The President’s Budget provides $75 million for this initiative in 2006, including $25 million within
HUD.
THE BUDGET FOR FISCAL YEAR 2006 175

MAKING GOVERNMENT MORE EFFECTIVE

Reform Low-Income Housing Assistance

The Housing Choice Voucher program provides two million low-income families with subsidies to
help them afford a decent place to live. Participants contribute 30 percent of their income toward
rent; the Government pays the rest. In the past, funds have been appropriated for a specific number
of units each year. These funds were then given to public housing agencies (PHAs) based on the
number of vouchers they were awarded. HUD is concerned that voucher costs have increased at a
rate of more than double the average increase in the private rental market for the past several years.
This rate of increase, combined with an extremely complex set of laws and rules that govern the
program, has limited its effectiveness.
The Administration proposes to simplify the program and give more flexibility to PHAs to admin-
ister the program to better address local needs. Building on changes in the 2005 Consolidated Ap-
propriations Act, the Administration proposes expanding the “dollar-based” approach. PHAs would
continue to receive a set dollar amount as in 2005, but they would have the freedom to adjust the
program to the unique and changing needs of their community, including the ability to set their own
subsidy levels based on local market conditions. These changes would provide a more efficient and
effective program to help low-income families more easily obtain decent, safe, and affordable housing.

Housing for the Elderly

The Housing for the Elderly (Section 202) program provides capital grants and operating subsidies
to non-profit sponsors to construct new apartment units for very low-income elderly people. The
2004 PART found lengthy and delayed construction, unexpected cost increases, and an inability to
demonstrate program performance results.
The Administration will investigate ways that Housing for the Elderly can be reformed to address
these performance shortcomings. In doing so, it will be guided by successful models of housing assis-
tance vouchers and the HOME block grant, both of which provide housing efficiently and quickly. The
following table compares and contrasts the approach of the existing Housing for the Elderly capital
grant program with that of the HOME program.

Section 202 Elderly Housing has Higher Federal Costs and is Slower to Complete than
HOME Assistance

202 Capital Grants HOME Program


Delivery System Competitive grant to nonprofit HUD formula grant to cities and
sponsors for all capital costs and States for capital and operation.
operating subsidy.
Approximate Federal Grant Share $100,000 $30,000
per Unit
Other Sources per Unit $0 $70,000
Years to Occupancy 5 years 2¼ years
176 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Improving the Targeting of Public Housing Assistance

HUD allocates annual subsidies to local PHAs to support their operations and maintain 1.2 mil-
lion units of locally owned low-income housing. The current operating subsidy allocation formula,
which dates from the 1970s, has been almost universally criticized as obsolete and inaccurate in esti-
mating local needs. In 2000, the Congress directed HUD to commission a cost study by the Harvard
Graduate School of Design to establish the basis for a new, fairer allocation. HUD has negotiated
with representatives of the PHAs and others on the terms of a possible new formula based on the
Harvard study’s findings. The right formula would help ensure that funds are distributed equitably.
Accompanied by other rules changes, including project-by-project cost accounting, it would reward
PHAs that manage their housing assets more effectively and thereby encourage them to do so. A
rule drafted with the advice of the negotiating group is now under review. A revised version will be
published later this year for public comment and could be the basis for operating funds allocation
beginning in 2007.

Reforming Community and Economic Development Programs

The Budget proposes a new program within the Department of Commerce to support communities’
own efforts to meet the goals of improving their economies and their quality of life. This initiative
will consolidate programs such as Community Development Block Grants into a more targeted, uni-
fied program that sets accountability standards in exchange for flexible use of the funds. (See the
Department of Commerce chapter for more details.)

HUD Reforms its Consolidated Planning Process


To receive funds from four formula programs, grantees must submit a Consolidated Plan to HUD. In many
communities, the plan has become a burdensome paperwork exercise, often prepared by consultants. HUD
has worked with its stakeholders and communities to slim the document down to a manageable size that
will be more useful for local communities. Grantees can now use a new, easy-to-use online software tool to
submit their plans. Here is some of the initial reaction:
• Des Moines, Iowa: Reduced their Consolidated Plan submission from over 200 to 107 pages, nearly
a 50-percent paperwork reduction, with HUD’s new tool.
• Auburn, New York: “I am extremely impressed with the new tool. It combines the strategy, action plan,
and reporting under one umbrella while complying with the regulations. It’s also a great management
tool.” — Jennifer Haines, Planning and Economic Development Program Manager, Auburn, NY

Improving FHA’s Single Family Mortgage Program

The program was rated Adequate because it meets its statutory objective to serve predominantly
first-time and minority homeowners and maintain an adequate capital reserve. However, the
program lacks quantifiable annual and long-term performance goals; its credit model does not
accurately predict losses to the insurance fund; and it cannot demonstrate its ability to reduce fraud
in the program. FHA will establish quantifiable annual and long-term performance goals for the
percentage of FHA Single Family insured loans for first-time and minority homeowners. FHA will
continue current efforts to develop a credit model that more accurately and reliably predicts defaults.
THE BUDGET FOR FISCAL YEAR 2006 177

Update on the President’s Management Agenda

The table below provides an update on HUD’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

HUD has begun to overcome chronic weaknesses in its human capital as cited by the Government Accountability
Office. HUD has revamped its hiring practices to fill jobs in an average of 38 days instead of 96 days; is
developing a new managerial cadre through recent hiring and executive training programs; and synchronized
managers’ goals and performance plans with the overall aims of the agency. HUD’s year-long effort to develop
a workforce plan sets the stage for more improvement in closing skill gaps over the next year. HUD’s first
competition is now in progress and HUD is working to expand competitive sourcing to generate savings in
commercial activities. While still suffering from internal control weaknesses, HUD met the accelerated timetables
for producing its performance and accountability report, and improved the reliability, accuracy, and timeliness
of financial systems. HUD is continuing efforts to reduce its internal control weaknesses from 10 to 7 by next
year. HUD completed security reviews for all of its information systems in calendar year 2004, and plans are
in place to eliminate security defects by next year. HUD set achievable long-term goals on reducing chronic
homelessness and increasing minority homeownership. HUD will expand this strategic approach to other budget
areas and use them to focus its resources and programs on achieving those goals.

Initiative Status Progress


Faith-Based and Community Initiative

Eliminating Improper Payments

HUD Management and Performance

HUD expanded its outreach to community organizations, including faith-based organizations, attempting to
level the playing field for its formula and competitive grants. HUD has removed all discriminatory barriers to
participation by such organizations. HUD’s technical assistance has helped these organizations understand the
application process as well as the responsibilities for implementation. These organizations are beginning to
compete more widely and effectively as shown in their success in increasing the number of grants from 659
to 765 (increase of 16 percent) from 2002 to 2003.
178 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

MAKING GOVERNMENT MORE EFFECTIVE—Continued

At the beginning of the President’s first term, HUD committed to working with its stakeholders to reduce the
improper payment in rental subsidies by one-half by 2005. At that time, over 60 percent of rental subsidies were
computed incorrectly because of administrative processing errors. Other errors resulted from inadequate
verification of tenants’ self-reported incomes. Four years later, HUD has achieved exactly what it committed to
do. Processing errors are down to 30 percent and improper payments are lower by half, a reduction of $1.6
billion in payment errors (see accompanying chart). HUD does not plan to stop there. Beginning in 2005,
HUD will expand the verification of tenant self-reported incomes to include recent wage data. This has the
dual benefit of both improving accuracy and providing more privacy because income data will be matched
electronically whereas current procedures require a paper verification letter to the tenant’s employer. These
stewardship efforts improve confidence that the right person is getting the right benefit in a timely, dignified, and
private manner as intended under law. (Because this is the first quarter that agency efforts in this initiative were
rated, progress scores were not given.)
Today, public and assisted housing residents reside in better quality housing with fewer safety violations than four
years ago. HUD increased the percentage of projects meeting its physical condition standards in public housing
by nine percentage points (from 83 percent in 2002 to 92 percent in 2004) and in subsidized private housing by
eight percentage points (from 87 percent in 2002 to 95 percent in 2004). HUD now turns around at least 45
percent of public housing authorities classified as “troubled” within 12 months rather than the two years allowed
by regulation. New rules and procedures have virtually eliminated property flipping fraud from the FHA insurance
programs, and close monitoring will continue to prevent such abuses. New rules and procedures have forced out
bad appraisers from the FHA program and an effort called Credit Watch will continue to bar other individuals
who improperly raise the risk of loss in these programs. Since 2001, HUD has worked with stakeholders to
streamline their Consolidated Planning process into an easy-to-use and helpful tool for communities.

Reduction of $1.6 Billion in Improper HUD


Rental Payments
Millions of dollars
HUD has responded with successful ini-
3,500
tiatives to reduce the chronic overpayment
3,000 problems in its rental assistance programs,
Over Payments
as cited by the Government Accountability
2,500
Under Payments Office and others. HUD has reduced
2,000 improper payments by 50 percent, from $3.2
billion in 2000 to $1.6 billion in 2003. Further
1,500 efforts in the future will improve the accuracy
1,000 of these payments, ensuring that eligible
households received the correct payment
500 under the rules of the program.
0
2000 2003
Source: HUD.
THE BUDGET FOR FISCAL YEAR 2006 179

Department of Housing and Urban Development


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Community Development Fund ........................................................................... 4,933 4,703 —
HOME Investment Partnerships .......................................................................... 2,006 1,900 1,941
American Dream Downpayment Initiative (non-add) ............................. 87 50 200
Homeless Assistance Grants ............................................................................... 1,260 1,241 1,440
Housing Opportunities for Persons with AIDS................................................ 295 282 268
Tenant-based Rental Assistance ......................................................................... — 14,766 15,845
Project-based Rental Assistance ........................................................................ — 5,298 5,072
Housing Certificate Fund ....................................................................................... 16,413 1,557 2,500
Public Housing ........................................................................................................... 6,275 5,017 5,734
Native American Housing Block Grant .............................................................. 650 601 583
Revitalization of Severely Distressed Public Housing (HOPE VI) ........... 149 143 143
Housing for the Elderly ............................................................................................ 773 741 741
Housing for Persons with Disabilities ................................................................. 249 238 120
Federal Housing Administration (FHA) ............................................................. 2,941 2,311 2,224
Lead Hazard Reduction .......................................................................................... 174 167 119
All other HUD programs ......................................................................................... 1,798 979 1,514
Total, Discretionary budget authority ...................................................................... 32,034 32,208 28,510

Memorandum: Total, excluding programs consolidated into new


Commerce program 1 ........................................................................................ 27,575 27,972 28,510

Memorandum: Budget authority from enacted supplementals ............... — 150 —

Total, Discretionary outlays ........................................................................................ 39,197 41,063 42,122

Total, Mandatory outlays ............................................................................................. 5,822 1,551 1,937

Total, Outlays................................................................................................................... 45,019 42,614 40,185

Credit activity
Direct Loan Disbursements:
FHA............................................................................................................................ — 53 54
Total, Direct loan disbursements ......................................................................... 53 54

Guaranteed Loan Commitments:


FHA............................................................................................................................ 132,080 137,063 136,220
All other programs ................................................................................................ 419 353 359
Total, Guaranteed loan commitments ................................................................ 132,499 137,416 136,579
1
See Department of Commerce chapter for details.
DEPARTMENT OF THE INTERIOR

AT A GLANCE:
2006 Discretionary Budget Authority: $10.6 billion
(Decrease from 2005: 1 percent)
Major Programs:
• Bureau of Indian Affairs
• Bureau of Land Management
• Bureau of Reclamation
• Fish and Wildlife Service
• National Park Service
• U.S. Geological Survey

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Developing the Nation’s energy resources efficiently and responsibly to reduce the Nation’s
reliance on energy imports.
• Supporting local economies through recreation on Federal lands.
• Helping local economies find self-sustaining ways to manage historical properties and promote
heritage tourism through the Preserve America Initiative.
• Including local communities in stewardship and decision-making on Federal lands through the
Cooperative Conservation Initiative.

Supporting a Compassionate Society

• Supporting the replacement and renovation of Indian schools to create a safe learning environ-
ment for Indian schoolchildren.

Making Government More Effective

• Assessing the condition of National Park Service facilities and setting performance goals to
prioritize repair and replacement projects.
• Expediting the removal of existing Abandoned Mine Land dangers within 25 years.
• Enabling the sale of public lands in Nevada while ensuring taxpayers are compensated fairly.
• Shifting certain costs of the Pick-Sloan Missouri Basin Program to power customers.

181
182 DEPARTMENT OF THE INTERIOR

MEETING PRESIDENTIAL GOALS—Continued

• Proposing or modifying fees related to land and mineral use to shift $27 million in costs to those
directly benefiting from the resources.
• Terminating $90 million in State recreation grants that support activities that are not Federal
responsibilities.

Agency-specific Goals

• Reforming and reorganizing tribal trust programs and activities to provide greater accountabil-
ity to the beneficiaries.
• Promoting outcome-based performance by setting goals of establishing healthy, sustainable fish
and wildlife populations.
• Improving water management and restoring ecosystems in California’s Central Valley through
the collaborative California Bay-Delta program.
• Preventing water crises and reducing conflict over water in the West through the Water 2025
program.
THE BUDGET FOR FISCAL YEAR 2006 183

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

The Arctic National Wildlife Refuge (ANWR)

Reducing the Nation’s dependence on foreign Oil and Gas Development Area in ANWR
energy sources is a top Administration priority. Millions of acres
20
The United States imports approximately half Entire Arctic National Wildlife Refuge
of its daily oil consumption of 20 million barrels. Dedicated Wilderness
Although the United States produces almost all 15
1002 Area
Development Area
of the natural gas it uses, it will have to import
more natural gas in the future because of grow-
ing demand and restrictions on developing en- 10
ergy resources on public lands.
The Administration supports authorizing
the limited exploration of the region with 5
the most promising oil reserves—commonly
referred to as the “1002 Area”—within ANWR,
using the strictest environmental standards. 0
Source: Department of the Interior.
The Department of the Interior (DOI) esti- Note: For presentation purposes, the Development Area is shown
mates that the 1002 Area holds between 5.7 oversized so that it is visable on the chart.
billion and 16 billion barrels of recoverable
reserves, or, at peak production, up to one million barrels per day of new domestic oil supply. In
addition, the development footprint from production would only cover about one-tenth of one percent
of the 1002 Area. (See accompanying chart.)

Outdoor Recreation on Public Lands

Millions of people each year visit our national parks, forests, refuges, and public lands. These areas
offer unparalleled outdoor recreational opportunities, ranging from exploring mangrove thickets at
Ten Thousand Islands National Wildlife Refuge in Florida to hiking on the Appalachian National
Scenic Trail. DOI manages an array of natural and cultural wonders, including 388 national parks
or park units, 546 national wildlife refuges, and 261 million acres of public land administered by the
Bureau of Land Management (BLM).
The American Recreation Coalition estimates that outdoor recreation generates $250 billion of
economic activity annually. Americans pursuing recreation opportunities on Federal lands support

Preserve America
American history comes alive in historic buildings, cultural sites, and communities that celebrate their his-
toric settings. Thousands of historic and cultural sites are the pride of local communities everywhere. Many
of these communities have the opportunity to use historical sites to promote heritage tourism and economic
development. The President’s Preserve America initiative provides $12.5 million in 2006 for upfront planning
and associated assistance to communities looking for ways to preserve their local heritage in a self-sustain-
ing manner. For example, Virginia City, Montana, attracts visitors with one of the best-preserved gold mining
towns in the West. As Americans travel, they seek to reconnect with our Nation’s rich history and diverse
culture; the Preserve America initiative will help communities meet this growing demand for heritage tourism.
184 DEPARTMENT OF THE INTERIOR

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

travel-related industries, equipment makers National Park Service Funding and


and suppliers, and many “gateway communi- Visitor Satisfaction
ties” adjacent to public lands, from Bar Harbor, Visitor satisfaction Funding in millions
100% 2,500
Maine to Moab, Utah. Access to these Federal
lands does more than just generate tourist Visitor Satisfaction
2,000
80%
dollars; it also attracts new investments and
industries and fosters healthier and more 60% 1,500
active communities. Operations Funding

To better serve these visitors and protect the 40% 1,000

resources that attract them, the 2006 Budget


20% 500
continues to support operational funding for Backlog Funding

Interior’s land management agencies. Oper-


0 0
ational funding for parks, refuges, and public
1998 2000 2002 2004 2006
lands will be 20 percent higher than in 2001. Source: Department of the Interior.

The result of this support has been consistently


satisfied visitors. Every year since 1998, about 95 percent of park visitors have rated the overall
quality of services in national parks as good or very good. In addition, 97 percent of visitors to BLM
public lands in 2003, and 90 percent of visitors to wildlife refuges in 2002, were satisfied with their
experience.

Cooperative Conservation Initiative

The Administration wants to promote conservation and


stewardship of our Nation’s lands and other natural resources.
Local involvement is critical to enduring, successful, effective
and long-lasting conservation results and was emphasized
in the President’s recent Executive Order on the Facilitation
of Cooperative Conservation, E.O. 13352. The Department’s
Cooperative Conservation Initiative (CCI) consists of a
variety of volunteer, partnership, and cost-share conservation
programs in the Fish and Wildlife Service (FWS), Bureau
of Land Management (BLM), and the National Park Service
(NPS). The CCI embodies the purpose of the Executive
Order by promoting collaborative actions that support the
use, enhancement, and enjoyment of natural resources. In
addition, the CCI allocates $126 million in Federal matching
funds for resource conservation and restoration projects,
ranging from FWS coastal habitat restoration to BLM grazing
The humpback chub and other native fish in management improvements and wetlands restoration. The
Grand Canyon National Park struggle to compete
with trout previously brought to the area by
use of matching funds improves cooperative relationships
humans. To help the native fish recover, NPS is with local stakeholders and increases the impact of conserva-
working with partners to remove non-native fish tion efforts. As partners invest time, money, and energy into
from Colorado River tributaries. The Arizona
Game and Fish Department, Glen Canyon Dam projects, the CCI gives landowners and communities a stake
Adaptive Management Program, the Navajo in local conservation efforts.
nation, and other partners have matched Federal
funds almost three to one, helping to restore
another key link in the national park’s ecosystem.
THE BUDGET FOR FISCAL YEAR 2006 185

SUPPORTING A COMPASSIONATE SOCIETY

Supporting Indian Schools

Quality education is critical for the future of tribal governments and individual Indians. The Bu-
reau of Indian Affairs (BIA) serves approximately 48,000 students and resident-only boarders (about
seven percent of all Native American children) in 184 elementary and secondary schools and dormi-
tories located in 23 States. In April 2004, the President signed Executive Order 13336, which estab-
lishes an Interagency Working Group, including representatives from the Departments of Education
and the Interior, to assist American Indian and Alaska Native students in meeting the challenging
academic standards of the No Child Left Behind Act of 2001 in a manner that is consistent with tribal
traditions, languages, and cultures. In 2006, BIA will continue aggressively implementing this law
through its partnership with the Department of Education, and through its efforts to establish lead-
ership programs and rehabilitate additional reservation schools.

In 2000, the President committed to spend Bureau of Indian Affairs


nearly $1 billion to address the then-backlog School Facility Condition Index
of Indian school construction projects. The Percent of schools
Administration has met this commitment, 70

and has provided more funding for BIA school 60


construction and repairs in just four years 50
than the previous Administration did in eight Percent of schools
years. In 2001, only 35 percent of BIA schools 40 receiving good or fair rating

were in good or fair condition. With the efforts 30


funded in the 2006 Budget, over 65 percent 20
of all schools, or almost double the amount in
2001, will be in good or fair condition. The 10

overall Facility Condition Index (FCI), a tool for 0


assessing the condition of a building, will have 2002 2003 2004 2005 2006
Source: Department of the Interior.
improved from a poor rating (0.266) to a fair
rating (0.101), keeping BIA on target to reach
its FCI goal of .10 in 2008.

The new Wingate Elementary School is a K–8th


grade facility located southeast of Gallup, New
Mexico. The school can accommodate more than
825 students, including boarding students housed
in brand new dorm facilities. The campus design
embodies the elements important to the Navajo
culture. An elementary and middle school connected
by an administration wing with media center and a
hogan-shaped Navajo culture room are the major
components of the school. In keeping with Navajo
tradition, all entrances to the buildings face east. The
school is scheduled to be occupied in February 2005.
186 DEPARTMENT OF THE INTERIOR

MAKING GOVERNMENT MORE EFFECTIVE

Maintaining our National Parks

Over the past four years, NPS has devel-


oped a way to measure its performance in
maintaining national park facilities. This
measurement framework enables the Park
Service to prioritize funding and demonstrate
results more effectively. Using its new
management system and regular facility
assessments, NPS has developed a Facility
Condition Index (FCI) to show results. This
industry standard provides the starting point
for determining what investments are needed
to achieve acceptable conditions and how to
measure progress towards reaching that goal.

With passage of the 2006 Budget and the Ad-


ministration’s surface transportation reautho- Mount Rainier National Park proposes major investments in 2006 to
improve visitor services.
rization bill, national parks will have received
$4.9 billion over five years for maintenance and
construction, which is a 40-percent increase in annual funding from 2001 to 2006. With the funds
expected through 2009, NPS assets such as park buildings will be brought to acceptable condition
overall, as measured by the FCI average. Park roads, however, remain a concern, underscoring the
need to increase park roads funding, as proposed in the Administration’s surface transportation au-
thorization bill.

Abandoned Mine Land (AML) Restoration

The Congress passed the 1977 Surface Mining Control and Reclamation Act (SMCRA) to reclaim
abandoned coal mine lands. The AML program pays for the reclamation through coal fees, which
expire in June 2005. More than $3 billion in unfinished health and safety work remains, potentially
affecting more than 3.5 million Americans who live less than one mile from abandoned coal mines.

A 2004 Program Assessment Rating Tool (PART) assessment found the Office of Surface Mining
effectively manages the program and coordinates with coal-mining States, although the program’s de-
sign hinders the timely cleanup of abandoned coal mine lands. SMCRA’s funding allocation formula
distributes grants to eligible States and Tribes even if they have no high priority sites remaining.

AML Goals and Accomplishments

Current Budget
Program Proposal
Acres Reclaimed Annually ................................................. 6,900 8,200
Years to Eliminate Health and Safety Problems ........ 47 25
Corrects SMCRA Allocation Problem ............................ No Yes
THE BUDGET FOR FISCAL YEAR 2006 187

This delays clean-up in some areas and contributes to poor water quality and other health and safety
problems.
The Administration proposes to extend the coal fee and to modify SMCRA in a way that both cor-
rects the diversion of dollars away from the most serious problems and pays the certified States and
Tribes only their share of AML fund balances over 10 years.

Southern Nevada Public Land Management Act (SNPLMA)

SNPLMA Revenues SNPLMA, passed in 1998, sets aside funds


Millions of dollars from the sale of public lands around Las Vegas
1,400
for specific uses in Nevada. Under SNPLMA,
1,200 15 percent of revenues are provided directly to
State and local entities, and the remainder of
1,000
Actual Receipts the proceeds are devoted to both Federal and
800 local projects in Nevada without further con-
sideration by the Congress. This situation re-
600
Original CBO duces accountability in the programs funded by
Scoring
400 public land sales.
200 The program was established with the
0
understanding that a substantial portion
1999 2000 2001 2002 2003 2004 2005
of the revenues generated would be spent
Source: Department of the Interior and the Congressional Budget Office.
to acquire and conserve other lands around
Note: Data through 2004 are actuals. Projected peak in 2005 is due in Nevada. In fact, a 2006 PART review found
part to a lag in receipt of payments from 2004 land sales. that as SNPLMA land sale receipts have
risen dramatically in the last few years, the
available funding has outpaced land acquisition needs, and these excess funds are increasingly being
diverted to other activities. Only eight percent of funds approved for the latest round of projects are
dedicated to land acquisition. Meanwhile, 67 percent of these funds have been dedicated to purely
local projects, which do not reflect the highest priorities of the Nation. For example, $16 million of
land sale receipts were earmarked for the first phase of a recreational shooting range outside Las
Vegas.
When SNPLMA was originally passed, the Congressional Budget Office (CBO) estimated that pro-
ceeds from land sales under the bill would be roughly $70 million per year; receipts will be 17 times
that level in 2005. The 2006 Budget proposes to amend SNPLMA to redirect 70 percent of all receipts
to the Treasury, where land sale receipts have historically been deposited. This proposal serves the
general taxpaying public while still providing roughly four times the level of spending in Nevada
than originally anticipated in 1998. The proposal would not change the amount of revenue currently
provided to State and local entities, only the portion dedicated to Federal spending in Nevada.

Pick-Sloan Missouri Basin Program

The Administration proposes to redistribute costs of this multi-State project to power customers
who are using the dams and power plants, originally built during the 1950s and 1960s, in part to
support irrigation. Much of the planned irrigation is technically impractical or economically unjusti-
fied, and will never be developed. Approximately $500 million of unpaid construction and operation
costs could be recovered from power customers who benefit from the finished facilities.
188 DEPARTMENT OF THE INTERIOR

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Recovering Costs for Energy Permitting

To ensure the Government receives fair compensation for the use of the Nation’s land and minerals,
the Budget proposes and modifies several fees related to mineral development, including expanded
permit processing fees for onshore minerals and a new permitting fee for Outer Continental Shelf
(OCS) leases. In addition, OCS rental rates, which have not increased in 10 years, will rise with the
rate of inflation. These fees support the Administration’s efforts to charge for Government services
where the direct beneficiary can be identified. This will shift the costs from taxpayers and allow DOI
to better process lease or permit applications as demand increases. The proposed fees are expected
to generate approximately $27 million in 2006, thereby reducing the cost to taxpayers for operating
these programs.

State Recreation Grants

The 2006 Budget terminates funding for Land and Water Conservation Fund State recreation
grants. These grants support improvements to State and local parks that are more appropriately
funded through State funding or bonds than Federal resources. A PART review found the current
program could not measure performance or demonstrate results.
THE BUDGET FOR FISCAL YEAR 2006 189

Update on the President’s Management Agenda

The table below provides an update on DOI’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

DOI has made progress in many areas. The Department developed and received provisional certification for a
new five-level Senior Executive Service performance management system, incorporated diversity strategies into
bureau workforce plans, and began to incorporate goals into performance plans of all employees. Competitive
sourcing reviews project savings of $3 million annually for at least five years, and, to date, only one permanent
Interior employee of the 5,032 reviewed has been involuntarily separated. In financial performance, however,
DOI continues to face challenges in Indian trust reform. DOI also must continue efforts to implement the new
Financial and Business Management System. In addition, Interior certified and accredited over 80 percent of
its information technology systems (up from 10 percent in 2003); received the E-Gov Institute’s Excellence in
Enterprise Architecture Award for leadership in government transformation; and matured its Investment Review
Board. Finally, the Department expanded implementation of Activity Based Costing and continued tracking the
costs of achieving performance goals.

Initiative Status Progress


Real Property Asset Management

Interior has completed comprehensive condition assessments for most assets and is on schedule to finish them
all by the end of 2006. DOI now uses a Facility Condition Index to monitor asset conditions and determine
funding priorities.
190 DEPARTMENT OF THE INTERIOR

AGENCY-SPECIFIC GOALS

Reforming Management of Indian Trust Responsibilities

DOI has responsibility for the investment of, and disbursement and reporting to individual Indi-
ans and Tribes on, financial assets generated from leasing and other commercial activities on Indian
lands. DOI developed a Comprehensive Trust Management Plan to guide trust reform, undertook
a reengineering effort, and adopted a targeted strategic plan as part of its efforts to improve perfor-
mance and provide greater accountability to its beneficiaries.
A key step to reform is the American Indian Probate Reform Act of 2004, which the President signed
into law in October 2004. The Act provides a clearer method to pass down individual Indian land
ownership from one generation to the next; creates a uniform Federal Indian probate code; and facil-
itates the consolidation of Indian land ownership to restore economic viability to the land. The 2006
Budget includes funding to help eliminate a backlog of 23,000 probate cases, as well as to process the
projected 4,500 new probate cases that will occur each year. This will help to make sure that no new
cases are added to the current backlog. The Administration continues to support the Indian Land
Consolidation Program as an additional way to help address the fractionation of individual Indian
land interests. The 2006 Budget proposes $34.5 million for the program. In addition, the Budget
includes $135 million for the Office of Historical Trust Accounting to continue an accounting in ac-
cordance with the five-year plan filed with the U.S. District Court. This amount may be revised as
legal issues pending before the Courts are resolved.

Reforming Tribal Priority Allocation Funding

Tribal Priority Allocation (TPA) funds provide basic tribal services, such as Tribal Courts, social
services, adult vocational training, child welfare, and natural resources management. TPA gives
Tribes the opportunity to further Indian self-determination by establishing their own priorities and
moving Federal funds among programs.
Indian Tribes are becoming more business-oriented and are seeking more control over their lands
and economic and cultural decisions. In addition, BIA is helping to expedite key energy and mineral
resource development opportunities through the timely processing of joint-venture development and
lease agreements.
The Administration believes TPA could be improved by targeting funding to the areas of greatest
need. The funding process used today is a formula allocation based on historical funding levels estab-
lished in the early 1970s, and has remained essentially unchanged. To improve program accountabil-
ity, DOI will consult with Tribes on how best to focus program funds on areas of need, considering the
incentive effects of any such reallocation. The Administration will continue to support Tribes that
continue to strive for self-determination with funding and technical support.

Effective Fish and Wildlife Service Programs

The Migratory Bird Management and the National Fish Hatch-


ery programs of FWS exemplify the Department’s efforts to improve
program performance and become more results-based. The Migra-
tory Bird Management program developed new goals during the 2006
PART process, including a new measure that examines the percent of
migratory birds that are at healthy and sustainable levels. This out- Salmon eggs: a result of the FWS Fish
come-oriented goal, along with targeted annual measures, will help Hatchery Program.
THE BUDGET FOR FISCAL YEAR 2006 191

ensure the program achieves what is expected:


healthy, sustainable migratory bird populations. The
President’s 2006 Budget proposes an increase of $5.7
million to help achieve this and other program goals.
Similarly, the Budget includes an increase of $2.3
million for National Fish Hatchery operations to
increase the percent of threatened and endangered
aquatic species populations that become self-sustain-
ing in the wild; the number of priority recovery tasks
implemented for listed or threatened species; and the
number of restoration tasks implemented for native
aquatic species.

Whooping Cranes at Arkansas National Wildlife Refuge.

California Bay-Delta Restoration

The Administration requests $35 million for


the Bureau of Reclamation to fund a newly-au-
thorized ecosystem restoration, water quality,
water supply, and flood protection program
known as CALFED. The overall Federal
request for CALFED is over $150 million for
seven agencies. This adaptive management
program in California’s Central Valley and the
San Francisco Bay-Delta assists California
in proactively addressing conflicts over water.
The program, operated in conjunction with
the State of California and local entities, will
ensure that all project partners pay a share
of project costs according to the benefits they
receive. The CALFED program has many
different components; the program will be
As part of the new CALFED partnership, people who benefit from
projects, such as potentially raising Shasta Dam, would share in the managed to ensure that progress for these
costs along with the State and Federal governments. components is achieved in a balanced manner.

Water 2025

Water is the scarcest resource in some of the fastest growing areas of the country. Water 2025
proactively addresses potential future water conflicts in areas of the West where such conflicts are
likely to occur. The program focuses resources on high-risk areas, emphasizing improvements in
water efficiency, conservation, and water markets. It promotes collaboration, improves technology,
and removes institutional barriers. The 2006 Budget requests $30 million for Water 2025, allocating
competitive grant funds equally among the Bureau of Reclamation’s five regions.
192 DEPARTMENT OF THE INTERIOR

Department of the Interior


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Bureau of Land Management .......................................................................... 1,776 1,699 1,737
Minerals Management Service ........................................................................ 171 174 167
Office of Surface Mining ..................................................................................... 296 297 299
Legislative proposal ........................................................................................ — — 58
Bureau of Reclamation/CUPCA ...................................................................... 954 966 907
US Geological Survey ......................................................................................... 938 935 934
Fish and Wildlife Service ................................................................................... 1,303 1,292 1,323
National Park Service ......................................................................................... 2,259 2,315 2,249
Bureau of Indian Affairs ...................................................................................... 2,306 2,296 2,187
Office of the Special Trustee ............................................................................ 209 228 304
All other .................................................................................................................... 485 465 478
Subtotal, excluding item below ........................................................................ 10,696 10,667 10,643
Additional Wildland Fire Suppression ........................................................... — 99 —
Total, Discretionary budget authority ................................................................. 10,696 10,766 10,643

Memorandum: Budget authority from enacted supplementals ............... 100 98 —

Total, Discretionary outlays ................................................................................... 10,542 11,101 11,072

Mandatory Outlays:
Existing law ........................................................................................................ 2,599 2,569 1,703
Legislative proposal ........................................................................................ — 6 417
Total, Mandatory outlays ........................................................................................ 2,599 2,563 2,120

Total, Outlays .............................................................................................................. 7,943 8,538 8,952

Credit activity
Guaranteed Loan Commitments:
Indian guaranteed loan program ..................................................................... 88 67 67
Total, Guaranteed loan commitments ................................................................ 88 67 67
DEPARTMENT OF JUSTICE

AT A GLANCE:
2006 Discretionary Budget Authority: $20.3 billion
(Increase from 2005: 1 percent)
Major Programs:
• Combating terrorism
• Drug enforcement
• Firearms and explosives enforcement
• Federal detention programs
• Prosecuting corporate fraud, and other criminal and civil legal
activities

MEETING PRESIDENTIAL GOALS

Protecting America

• Combating terrorism and strengthening the Nation’s intelligence.


• Reducing illegal drugs by targeting the 42 most significant drug organizations.
• Combating gun violence in the Nation’s communities through Project Safe Neighborhoods.
• Providing additional Federal prison and detention capacity.

Supporting a Compassionate Society

• Fighting child exploitation and maintaining support for missing children’s initiatives.
• Supporting local law enforcement efforts to combat violence against women, provide victims’
services, and expand the use of DNA to fight crime and to protect the innocent.
• Assisting communities by helping ex-offenders re-enter and reintegrate into society.
• Fighting human trafficking.

Making Government More Effective

• Achieving $2 billion of savings from reduction and elimination of programs that fail to demon-
strate results.

193
194 DEPARTMENT OF JUSTICE

PROTECTING AMERICA

Combating Terrorism

The President’s highest priority for the Department of Justice (DOJ) continues to be the detection,
prevention, investigation, and prosecution of terrorist attacks against U.S. citizens and interests.
In the past year, the Department made 1,428 counterterrorism-related arrests, and prosecuted and
obtained convictions in 497 terrorism-related and anti-terrorism cases. The 2006 Budget further
strengthens these counterterrorism efforts, and proposes significant funding increases for the Federal
Bureau of Investigation (FBI), the lead agency within DOJ for combating terrorism, to hire additional
agents and intelligence analysts, as well as provide increased support to its counterterrorism mis-
sion.
The FBI has received significant resource increases in recent years, with funding rising from $3.3
billion in 2001 to $5.1 billion in 2005. The Budget proposes $5.7 billion for the FBI in 2006, an
increase of 11 percent over 2005. This level would support 2,945 counterterrorism agents and 2,746
intelligence analysts at the Bureau.

FBI Funding Increases At the President’s direction, since Septem-


Budget authority in billions ber 11, 2001, the FBI has undergone a
6 transformation in its priorities, as well as its
Supplemental Appropriation
Regular Appropriation
organization. First, the President set clear
5 goals to ensure that protecting the United
States from terrorist attacks was the FBI’s
4
top concern. Second, the FBI has utilized the
vital tools of the USA PATRIOT Act to break
3
down the wall separating law enforcement
2 and intelligence functions, greatly improving
coordination and information sharing within
1 the Bureau. Third, the FBI established
a comprehensive intelligence program to
0 prevent terrorist attacks, an effort that
2001 2002 2003 2004 2005 2006
has been accelerated by the passage of the
Intelligence Reform and Terrorism Prevention Act of 2004. The 2006 Budget supports the FBI’s
priorities and intelligence reform by providing new funding of $294 million for counterterrorism and
counterintelligence initiatives, and $117 million to bolster the intelligence program. These funding
initiatives will:
• Increase the resources and agents dedicated to terrorism investigations.
• Double the size of the FBI’s Hostage Rescue Team.
• Hire 500 additional intelligence analysts to assist in the war on terrorism.
• Add $75 million for the Terrorist Screening Center, which consolidates terror screening watch-
lists and supports Federal screeners worldwide, in addition to State and local law enforcement.
• Increase the Foreign Language Program by $26 million to enhance the FBI’s language transla-
tion capability, especially for anti-terrorism efforts.
• Expand the Legal Attaché program to augment the FBI’s presence in other countries, especially
for counterterrorism efforts.
THE BUDGET FOR FISCAL YEAR 2006 195

The 2006 Budget provides $3.1 billion in


homeland security-related funding for DOJ
programs. In addition to the counterterrorism
programs of the FBI and the Terrorist
Screening Center, the Budget also includes
funding for terrorism-related prosecution
and detention, funds for converting older
technology mobile radio and other systems to
digital, narrowband communications, as well
as State and local assistance programs such
as the Regional Information Sharing System,
USA Freedom Corps, and State and Local
Anti-Terrorism Training.
The FBI’s Hostage Rescue Team (HRT) is an elite special
Targeting Drug Traffickers counterterrorism tactical unit trained to respond in extraordinary
situations, such as hostage rescue, high-risk arrests and searches, and
weapons of mass destruction events. Recent HRT deployments have
included Iraq, Afghanistan, the 2004 Summer Olympic Games, and the
In March 2002, the Attorney General Presidential Inauguration. The 2006 Budget provides $24 million in
announced a comprehensive six-part drug new funding to address HRT’s growing tactical responsibilities in crisis
enforcement strategy for DOJ. The strategy response situations. It also provides an additional $10 million for the
FBI to begin planning a new facility for HRT and its assets.
deploys numerous Federal law enforcement
agencies to identify and target the most
significant drug supply organizations and their related components. The central element of the
strategy was the development of the first national list of priority drug trafficking targets, the
Consolidated Priority Organization Targeting (CPOT) list, a unified list of international “command
and control” drug traffickers and money launderers. These organizations and their related
components, including the financial infrastructure supporting those enterprises, are targeted for
investigations. Of the 58 organizations targeted during 2003 to 2004, 14 have been dismantled and
eight others have been severely disrupted. Currently, there are 730 active investigations linked to
the 42 targets on the 2005 List. DOJ also has established a comprehensive benchmark for the most
prevalent illicit drugs, including marijuana and cocaine, and intends to reduce their availability and
use by 10 percent between 2001 and 2008.

The Department’s Drug Enforcement Administration (DEA) is responsible for investigating drug
trafficking organizations in tandem with the other Federal agencies participating in the Organized
Crime and Drug Enforcement Task Force (OCDETF) program. During 2004, DEA and OCDETF suc-
cessfully dismantled 36 organizations linked to those on the CPOT List, and significantly disrupted
the activities of 159 others. The 2006 Budget provides $38 million for enhancements in intelligence
sharing and priority targeting, $14 million for the operation and maintenance of the Drug Intelligence
Fusion Center, and $58 million for additional OCDETF agents, attorneys, and deputy marshals. In
addition, a total of $22 million has been provided in support of the Administration’s Afghanistan

Growth of the High-Intensity Drug Trafficking Area (HIDTA) Program


In 1990, Federal funds were appropriated to five areas of the United States that were considered the most
critical high-intensity drug trafficking area “gateways” for drugs entering the Nation. The five regions included
specific designated areas in Los Angeles, Houston, New York/New Jersey, South Florida, and the Southwest
Border. Today, the program is no longer well focused. From a small targeted program in 1990, HIDTAs now
include 60 percent of the population of the United States.
196 DEPARTMENT OF JUSTICE

PROTECTING AMERICA—Continued

counter-narcotics initiative, which is needed to help promote the long-term stability of the country,
as well as stem the supply of heroin to the global narcotics market.
The 2006 Budget also proposes transferring the High-Intensity Drug Trafficking Area (HIDTA)
Program, operated by the Office of National Drug Control Policy, to DOJ in order for this drug control
program to be better coordinated with OCDETF. The program has grown well beyond its intended
scope from when it was first funded at $25 million in 1990 for only five regions experiencing high
levels of drug trafficking. It now spends $227 million on 28 areas that include much of the populated
United States. Efforts to focus the HIDTAs on the President’s National Drug Control Strategy prior-
ity of targeting high-level organizations such as the CPOT List have failed and have been hindered by
the practice of funding individual HIDTAs at the same level year after year. As a result, the Budget
proposes reducing HIDTA funding to create a better-focused, more effective $100 million program
that gives Justice greater leeway to determine how funds will be targeted.

Detaining Violent Criminals

The Bureau of Prisons (BOP) and the Office of the Federal Detention Trustee (OFDT) ensure
that Federal criminals are appropriately detained and incarcerated to assure public safety. Taken
together, the cost of Federal incarceration and detention activities now accounts for over a third
of DOJ’s annual budget. At present, there are over 182,000 inmates in Federal custody, of which
approximately 25 percent represent immigration-related arrests. In addition, the number of Federal
detainees has experienced record growth, up almost 200 percent over the past decade with the largest
increases occurring along the U.S. Southwest border due to Department of Homeland Security (DHS)
and DOJ border enforcement and protection initiatives.

The 2006 Budget includes $85 million to


open three new prisons (one high-security,
one medium-security, and one secure women’s
prison) and to expand two other facilities.
When fully activated, these prisons will add a
total of 3,164 beds to help meet BOP’s growing
inmate capacity needs. In addition, $37
million is provided to pay for the added costs
for food, security, medical care, and clothing
of almost 4,300 inmates in existing BOP
facilities, and $20 million in initial funding
is included for 1,600 new private contract
beds. While additional prison space is being
added, the Budget continues a moratorium
on additional new prison construction until
the bureau completes an evaluation of its
No one is exempt from correctional officer training at BOP. Responding
to emergencies is the first and most important job of every single BOP existing low- and minimum-security prison
employee from the Director of the Bureau to the budget office and from facilities for potential modification to house
the warden to the physician—everyone, no matter the rank, profile, or
job is a correctional officer first. Rigorous correctional officer training for
higher security inmates. BOP also has begun
everyone instills a sense of security, competence, and camaraderie in to institute several management initiatives
the BOP ranks that is essential to maintaining prison safety and security. to streamline operations and reduce costs,
including consolidating correctional officer
training, centralizing prisoner sentence and
THE BUDGET FOR FISCAL YEAR 2006 197

inmate designation functions, relocating human resource and employee development functions, and
transferring inmates with the most critical medical needs to dedicated BOP medical centers. For
2006, $1.2 billion is provided to OFDT to support an average daily detainee population in excess
of 60,000.
The aggressive enforcement of the Administration’s law enforcement initiatives, and the result-
ing detainee population increase, has continued to challenge detention planning and forecasting.
The Department is committed to enhancing its forecasting models, which requires balanced coor-
dination among DOJ and DHS components. OFDT will improve forecasting by considering DOJ
and DHS policy decisions, along with information received from the Administrative Office of the
United States Courts. DOJ law enforcement policies—for example, those relating to gun and drug
initiatives—affect the number of Federal arrests and criminal prosecutions. The size and scope of
DHS border control and protection initiatives—including putting more border patrol agents on the
borders—influences the Federal prisoner and detainee populations and affects detention costs.

Prosecuting Corporate Fraud and Violent Crime

The United States Attorneys prosecute violators of Federal law including corporate criminals.
Criminal penalties assessed by the Federal courts, mostly for U.S. Attorney criminal fraud prose-
cution efforts, increased by 30 percent in 2004. The 2006 Budget supports these ongoing activities
with $1.6 billion. In addition, the Department’s litigating divisions are combating corporate fraud
and other cases. And, in the past four years, this Administration has increased Federal prosecutions
of the criminal misuse of firearms by 76 percent. In 2004, the Justice Department filed 11,067
Federal firearms cases, the highest number of such cases on record for a single year.

Assisting State and Local Law Enforcement

The 2006 Budget includes $2.4 billion for State and local assistance programs, including Project
Safe Neighborhoods, the DNA Initiative, USA Freedom Corps, State and Local Anti-Terrorism Train-
ing, and the Regional Information Sharing System. These and other programs funded within DOJ
enhance the capability of State and local governments to reduce crime in our communities, as well
as our vulnerability to terrorism.
Today crime, including violent crime, is at a 30-year low. The Project Safe Neighborhoods (PSN)
initiative, announced by the President and the Attorney General in 2001, is a comprehensive strategy
that brings together Federal, State, and local agencies to continue the record reduction in the violent
crime in our communities. Working with the Department, each community tailors the program to tar-
get problems associated with the criminal misuse of firearms and to build on local capacities. Since
2001, the Administration has dedicated $1.3 billion in Federal resources to PSN, including grants to
State and local task forces through the Office of Justice Programs (OJP), increased Federal prosecu-
tors within U.S. Attorneys Offices, and additional agent and training resources within the Bureau
of Alcohol, Tobacco, Firearms and Explosives (ATF). For 2006, the Budget requests $363 million for
PSN, an increase of $138 million, or 61 percent, over the 2005 enacted level. The program increase
will:
• Provide $74 million in grant assistance for State and local prosecution of criminal misuse of
firearms;
• Increase funding for States to update criminal history records, which are needed to deter illegal
firearms purchases, by $34 million, which is more than double the 2005 enacted level; and
• Augment Project ChildSafe, which distributes gun locks to prevent misuse of guns by children
and youth, by $29 million over the 2005 enacted level.
198 DEPARTMENT OF JUSTICE

PROTECTING AMERICA—Continued

The 2006 Budget continues funding for the President’s DNA initiative, Advancing Justice Through
DNA Technology, a plan to devote more than $1 billion over five years to help realize the full potential
of DNA technology in the criminal justice system. The initiative advances the use of DNA to solve
crimes and exonerate the innocent. The initiative will help clear the backlog of unanalyzed DNA
samples from the most serious violent offenders, invest in DNA analysis technology for crime labs,
train criminal justice professionals to make better use of DNA evidence, and promote the use of DNA
to identify missing persons. The Administration proposes $236 million in 2006 for the initiative, an
increase of over $68 million over the 2005 enacted level.
Through the efforts of the FBI, DEA, ATF, U.S. Marshals, and State and local assistance, the Ad-
ministration is committed to further reducing the violent crime rate in the Nation. In June 2004, the
Attorney General announced a targeted effort to deploy teams of Federal law enforcement agents and
prosecutors to 15 cities to work with local law enforcement to curb the rate of violent crime in some
of the communities not sufficiently benefiting from the overall reduction in the crime rate. DOJ will
continue to support the deployment of these Violent Crime Impact Teams as part of this initiative in
2006.
THE BUDGET FOR FISCAL YEAR 2006 199

SUPPORTING A COMPASSIONATE SOCIETY

Protecting Our Children

DOJ is committed to fighting child pornography and obscenity, and to protecting children from traf-
ficking and other forms of exploitation. The Department works with other law enforcement agencies
to target, dismantle, and prosecute predatory child molesters and those who traffic in child pornogra-
phy. The Criminal Division’s High-Tech Investigative Unit (HTIU) is staffed with computer forensic
experts, who work with Federal agents and prosecutors and use their technological expertise against
Internet-based child pornographers and adult obscenity offenders. The HTIU receives and reviews
more than 100 tips per month from the Federal Trade Commission and organizations such as the
National Center for Missing and Exploited Children. The Budget increases funding by $13 million
for the Justice Department’s efforts to fight child pornography and obscenity, including the Criminal
Division programs, the FBI’s Innocent Images Initiative, which investigates sexual predators who
use the Internet to prey on children, and the Internet Crimes Against Children Task Forces, which
links Federal, State, and local law enforcement efforts.

Child abductions, especially by strangers, Protecting Our Children from


are among the most tragic of crimes. Yet, with Exploitation and Obscenity
the help of the growing AMBER (America’s Budget authority in millions
Missing: Broadcast Emergency Response) 60

Alert network, more children are being found 50


and returned to their homes. AMBER Alerts
are emergency alerts broadcast by local 40
authorities when law enforcement discovers
that a child has been abducted and is in 30

imminent danger of harm. Since the President


20
announced an Administration effort to expand
and coordinate the AMBER Alert network in 10
October 2002, AMBER Alert has been credited
with the recovery of over 150 children, or over 0
2001 2002 2003 2004 2005 2006
80 percent of all 188 recoveries since AMBER
Alert began in Texas in 1996. Today, there are 96 AMBER plans operating across the country,
including 30 local, 17 regional, and 49 statewide plans. The Budget includes $5 million for the
continued development of the successful AMBER Alert network across America.
More than 600,000 incidents of domestic violence were committed in the United States in 2003.
Approximately one-third of women who are murdered each year are killed by their current or former
husband or partner. Children who are subjected to domestic violence often grow up to inflict violence
on others, creating a cycle of violence that must be stopped. In the 2002 Budget, the President re-
quested and secured a $100 million increase in funding for Violence Against Women Act programs
and has continued to provide similar levels of funding in every Budget since then. In an effort to
combat this problem, the Administration has obtained over $1.8 billion in funding since 2001 for pro-
grams that combat violence against women. The Budget requests $386 million for Violence Against
Women Act programs that target domestic violence and strengthen services for victims and their
dependents, which are funded primarily through DOJ’s Office on Violence Against Women.
200 DEPARTMENT OF JUSTICE

SUPPORTING A COMPASSIONATE SOCIETY—Continued

Helping Prisoners and Ex-Offenders Reintegrate into Society

More than 600,000 offenders are released from prisons each year and face multiple barriers upon
their return to society, including inadequate job skills and housing. Approximately two-thirds of pris-
oners are re-arrested within three years of their release, and half return to prison during that same
period. To confront this problem, the President announced in his 2004 State of the Union Address
a four-year $300 million Prisoner Re-entry Initiative to help individuals leaving prison make a suc-
cessful transition to community life and long-term employment. Drawing on the collaborative efforts
of the Departments of Labor, Housing and Urban Development, and Justice, and harnessing the ex-
perience of faith-based and community organizations, the program will offer a range of job training,
housing, and mentoring services that will help reduce recidivism and ensure that former prisoners
are reintegrated into society. The President’s Budget provides $75 million for this initiative in 2006,
including $15 million within DOJ.
Many in America’s prisons are struggling with substance abuse problems that hinder their suc-
cessful reintegration into society. The President’s Budget provides $44.1 million for the Residential
Substance Abuse Treatment (RSAT) Program. RSAT helps States and local governments implement
drug treatment programs in correctional facilities so that offenders can reenter society free of addic-
tion.

Fighting Human Trafficking

The Administration is committed to ending trafficking in human beings, which is a modern day
form of slavery and an affront to human dignity. According to some estimates, each year at least
700,000, and as many as four million people, primarily women and children, are trafficked around
the world and exploited for sexual purposes or for labor without compensation. Of these, 14,500
to 17,500 people are trafficked annually into the United States. In 2002, President Bush signed
Executive Order 13257 to establish a Cabinet-level Interagency Task Force to Monitor and Combat
Trafficking in Persons, in which the Department actively participates. The FBI and the Criminal
Section of the Civil Rights Division investigate cases of human trafficking in conjunction with DHS
immigration and customs enforcement agents. From 2001 to 2003, the Department opened 210 new
human trafficking investigations, more than double the number opened in the previous three years,
and the Civil Rights Division and the U.S. Attorneys initiated 111 trafficking prosecutions. In 2004,
alone, the Department opened 130 trafficking investigations and undertook 51 prosecutions.
THE BUDGET FOR FISCAL YEAR 2006 201

MAKING GOVERNMENT MORE EFFECTIVE

Reducing or Eliminating Non-performing Programs

The President’s Budget reduces or eliminates a number of programs that do not have a record of
demonstrating results, including:
• General purpose State and local law enforcement programs, such as the Community Oriented
Policing Services (COPS) Hiring Grants and the Byrne Justice Assistance Grants that are not
able to effectively demonstrate an impact on reducing crime. A 2004 Program Assessment Rat-
ing Tool (PART) assessment rated the COPS Hiring Grants as Results Not Demonstrated with
respect to reducing crime, notwithstanding the program’s funding of over 100,000 police offi-
cers, exceeding the program’s original commitment. Elimination of these programs will save
$635 million a year.
• State Criminal Alien Assistance Program (SCAAP) grants, which serve as a form of revenue
sharing rather than assistance targeted to a particular need. A 2005 PART assessment rated
SCAAP as Results Not Demonstrated. Ending this program will save $301 million a year.
• Juvenile Accountability Block Grants (JABG), which provide a variety of non-focused juvenile
justice grants to States and localities. A 2004 PART assessment rated JABG as Ineffective.
Terminating this program will save $54 million a year.
• Programs like the Byrne Discretionary Grants and the COPS Law Enforcement Technology
Grants, which are earmarked in their entirety by the Congress, prevent targeting of assistance
based on need or priority. Eliminating these programs will save $305 million a year.

Update on the President’s Management Agenda

The table that follows provides an update on DOJ’s implementation of the President’s Management
Agenda as of December 31, 2004.
202 DEPARTMENT OF JUSTICE

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Over the past year, the DOJ has made strong progress in implementing most areas of the President’s
Management Agenda. DOJ developed a human capital plan that is guiding its implementation of individual
performance plans that tie to strategic goals, and has assessed management competencies for skills gaps.
DOJ completed one standard competition of FBI vehicle maintenance that will yield $10.5 million in net savings
over the next five years. By 2008, DOJ will have competed 55 percent of suitable commercial positions. DOJ
continues to address weaknesses in its financial systems with a goal of achieving substantial Federal Financial
Management Improvement Act compliance during 2005. The Department is also addressing the weaknesses in
OJP’s grant accounting that caused DOJ to receive a disclaimer on its 2004 financial statements. DOJ continues
IT improvements in support of the 24 E-Government initiatives (including reviewing all planned IT investments for
duplication of E-Gov initiatives and submitting plans for implementing E-Gov initiatives for human resources and
financial and grant management). DOJ also has addressed security issues for most systems, although serious
inadequacies remain in protecting critical cyber infrastructure. The Department also has made improvements in
budget and performance integration by incorporating performance information into managers’ appraisals and
using PART reviews to justify budget requests and direct program improvements.

Initiative Status Progress


Faith-Based and Community Initiative

Real Property Asset Management

DOJ has strengthened its outreach to community organizations, including faith-based organizations, as well as
implementation and planning for new pilot initiatives. In the coming year DOJ will be giving special attention
to improving the quality of data collection in support of the initiative, as well as improving planning and goal
achievement. In support of the Real Property Initiative, the Department developed a draft asset management
plan and updated policy guidance for DOJ components.
THE BUDGET FOR FISCAL YEAR 2006 203

Department of Justice
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Federal Bureau of Investigation ...................................................................... 4,569 5,145 5,701
Drug Enforcement Administration .................................................................. 1,648 1,631 1,694
Federal Prison System 1 .................................................................................... 4,768 4,754 4,755
United States Marshals Service ...................................................................... 727 748 790
Bureau of Alcohol, Tobacco, Firearms, and Explosives:
Existing law ........................................................................................................ 826 878 804
Legislative proposal (fee-funded activity) ................................................ — — 120
Detention Trustee ................................................................................................. 841 874 1,222
United States Attorneys ..................................................................................... 1,527 1,542 1,626
General Legal Activities ..................................................................................... 614 626 680
Office of Justice Programs, COPS, Office on Violence Against
Women ................................................................................................................. 3,024 2,796 1,504
Organized Crime and Drug Enforcement Task Force ............................. 548 554 662
All other .................................................................................................................... 449 633 780
Subtotal, Discretionary budget authority .......................................................... 19,541 20,181 20,338
Less Crime Victims’ Fund Rescission........................................................... — — 1,267
Total, Discretionary budget authority ................................................................. 19,541 20,181 19,071

Memorandum: Budget authority from enacted supplementals ............... 81 25 —

Total, Discretionary outlays ................................................................................... 21,048 19,738 21,223

Mandatory Outlays:
Bureau of Alcohol, Tobacco, Firearms, and Explosives:
Legislative proposal ........................................................................................ — — 120
All other 2 ................................................................................................................. 7,921 1,448 2,293
Total, Mandatory outlays ........................................................................................ 7,921 1,448 2,173

Total, Outlays .............................................................................................................. 28,969 21,186 23,396


1
Net of $314 million rescission of unobligated balances.
2
2004 mandatory outlays include completion of funding associated with the September 11th Victim Compensation Fund.
DEPARTMENT OF LABOR

AT A GLANCE:
2006 Discretionary Budget Authority: $11.5 billion
(Decrease from 2005: 4 percent)
Major Programs:
• Job training and employment
• Unemployment insurance
• Pension protection
• Labor law enforcement
• Employment statistics

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Training more workers by giving Governors and individuals more flexibility and setting higher
performance standards for job training and employment programs.
• Improving workers’ access to health benefits by allowing small businesses to band together to
offer health insurance for their workers and their families.
• Giving working families more flexibility by offering them the options of compensatory time off
and flex-time.
• Safeguarding workers’ pensions by restoring the solvency of the Pension Benefit Guaranty
Corporation.
• Protecting workers’ safety, health, pay, and benefits through strong enforcement of our Nation’s
labor laws and compliance assistance for employers.
• Helping veterans to return to civilian life by enforcing their re-employment rights.
• Matching employers to willing workers through an electronic search engine and more efficient
foreign labor certification process that protects American jobs.

Supporting a Compassionate Society

• Helping troubled communities by giving ex-offenders a second chance.

205
206 DEPARTMENT OF LABOR

MEETING PRESIDENTIAL GOALS—Continued

Making Government More Effective

• Preventing and recovering overpayments of Unemployment Insurance benefits.


• Refocusing the International Labor Affairs Bureau on its original mission of research, analysis,
and advocacy.
• Improving Federal workers’ compensation programs by strengthening return-to-work incen-
tives, adopting effective State practices, and restoring the solvency of the Black Lung Disability
Trust Fund.
• Eliminating the duplicative and ineffective Migrant and Seasonal Farmworkers program.
THE BUDGET FOR FISCAL YEAR 2006 207

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Expanding Access to Job Training

In April 2004 the President proposed significant reforms to the Department of Labor’s (DOL’s) job
training programs to double the number of workers trained and to give workers more choice about
their training and career paths. The 2006 Budget builds on that proposal by:
• Giving Governors more flexibility. The President’s proposal would merge the four major DOL
Federal job training and employment grant programs into a single $4 billion grant program.
In addition, Governors would be able to supplement this consolidated grant with their State’s
resources from a “menu” of several other Federal job training and employment programs.
• Eliminating unnecessary overhead. In exchange for more flexibility, the proposal would place
strict limits on overhead costs. This would free resources to allow more workers to be trained.
• Giving workers more choice. The President’s proposal would give workers greater control over
their training through the use of personal Innovation Training Accounts.
• Demanding greater accountability. The proposal would establish increasingly rigorous perfor-
mance standards each year, leading to a goal in the tenth year that States place in employment
100 percent of the workers trained with grant resources. To ensure that individuals are placed
in high-quality jobs, States would also be required to show improvements in earnings and job
retention. States’ performance would be ranked and published each year.
These reforms, together with the President’s $250 million Community College job training initia-
tive, will train 400,000 workers annually—twice as many as are trained under the current system.

Improving Workers’ Access to Health Benefits

The Nation’s eight million small business employers are only half as likely as large employers to of-
fer health benefits. More than half of the Nation’s uninsured are small business employees and their
families. To help these small businesses and give more working families access to health coverage,
the President wants to allow small businesses to join together through industry and professional as-
sociations to purchase affordable health benefits for their workers. These Association Health Plans
(AHPs), which would also be available to a broad range of civic, faith-based, and community organi-
zations, would give small businesses and groups the same kind of purchasing power and options that
large firms and unions provide, expanding health coverage and saving participants as much as 25
percent on their health insurance premiums. DOL would be charged with oversight and regulation
of AHPs, and would ensure that they meet strict solvency and other requirements.
208 DEPARTMENT OF LABOR

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

Giving Working Families More Flexibility

Many labor laws are outdated,


designed generations ago when It seems that Americans are getting stretched in every direction
few women worked outside the these days. It’s hard to work 40 hours or more a week, find time
home. In 2003, almost 61 per- to make dinners, take your father to a doctor’s appointment,
cent of two-parent families had attend a school play and go to a parent-teacher conference.
both parents working, versus 49 . . . There is no doubt that Americans need more time. The
percent in 1976. The President President wants to work with Congress to make flex time and
has called on the Congress to comp time more widely available, so that people can work a
give private-sector workers the flexible schedule and have more control over how they spend
same flexible scheduling options the hours of their day.
that Federal employees now enjoy.
September 14, 2004
Offering choices like whether to
First Lady Laura Bush
receive overtime pay as cash or
as paid time off will help workers
successfully juggle the demands of
the workplace with the needs of their families.

Safeguarding Workers’ Pensions

The Pension Benefit Guaranty Corporation PBGC Has Gone from Accounting
(PBGC) insures the defined-benefit pensions Surplus to Deficit
of 44 million Americans against employer Billions of dollars
bankruptcy or other plan failures. Nearly 1 10
million individuals now receive, or are owed, 9.7
7.7
5
benefits under plans that have been taken
over by the PBGC. At the end of 2004, PBGC’s 0
-3.6
liabilities exceeded its assets by more than $23 -5
billion—more than double the $11.2 billion
-10 -11.2
deficit recorded a year earlier—due to the Assets minus Liabilities
termination and anticipated termination by -15
U.S. businesses of a number of large pension -20
plans. -23.3
-25
2000 2001 2002 2003 2004
The Administration is committed to address- Source: PBGC.

ing this problem as part of its comprehensive


strategy to strengthen the retirement security of America’s workers. Although no payments for work-
ers who currently receive PBGC benefits are threatened, the defined-benefit pension system must be
reformed or future worker benefits will be at risk. The 2006 Budget proposes comprehensive reforms
designed to protect workers’ pensions and stabilize the defined-benefit pension system by updating
the 30-year-old legislation that created the PBGC. The proposals contained in the 2006 Budget would:
• Require employers to fund their plans responsibly. PBGC estimates that private-sector sin-
gle-employer defined-benefit plans are underfunded by more than $450 billion. The Adminis-
tration’s proposals would require companies to make up their funding shortfall within a reason-
able period of time. In addition, the Administration would give companies greater flexibility to
THE BUDGET FOR FISCAL YEAR 2006 209

contribute funding above their current liabilities and would reduce volatility in plans’ required
contributions.
• Estimate plan liability more accurately and simply. Under current law a variety of statutory
provisions determine a company’s pension plan liability. This makes it difficult to know whether
a company is funding its plan adequately, thereby allowing companies to minimize their pension
contributions and understating PBGC’s exposure. The Administration’s proposals would pro-
vide a better measure of liabilities and establish appropriate funding targets based on a plan’s
risk of termination.
• Set insurance premiums based on cost and risk. Defined-benefit plans pay premiums to PBGC
in return for coverage. Current premiums do not properly reflect the plan’s risk of insolvency
and are inadequate to cover losses to PBGC. The President’s proposals would reform the current
premium structure to restore PBGC to a sound financial state by increasing the share of pre-
mium income tied to the plan’s risk of termination. The risk-based premium would reflect the
new funding targets and be re-examined on a periodic basis to ensure PBGC’s solvency. Flat-rate
premiums would be adjusted to reflect wage growth. These reforms would provide PBGC with
the assets needed to pay future benefits and would strengthen companies’ incentives to ensure
adequate funding.
• Prevent companies from making empty promises to workers. Currently companies may promise
future benefits to their workers (in lieu of immediate compensation) that they fail to provide for
and in many cases can neither keep nor pay insurance premiums to cover. This places the burden
of these increased benefits on PBGC and the financially healthy companies that fund it. The
Administration’s proposals would require companies to pay for additional benefits immediately
if they are financially weak or have a significantly underfunded pension plan.
• Make pension plans more transparent. Current law does not require adequate disclosure to
workers, retirees, investors, and policymakers about a plan’s funding status. As a result, work-
ers are surprised when promised benefits are lost, and investors and policymakers are unable
to make informed decisions. The Administration’s proposals would require plans to provide
workers with timely information on the true financial health of pension plans and make such
information publicly available.
For further information on these proposals, please see www.dol.gov/ebsa.

Protecting Workers

The 2006 Budget includes the resources DOL needs to fulfill its responsibilities under more than
180 worker protection laws, providing $1.4 billion for labor law enforcement. DOL will continue
to meet its responsibilities to workers through a combination of enforcement and compliance assis-
tance and will continue to update its regulations so they make sense, protect workers, and minimize
unnecessary burdens on employers. The 2006 Budget will:
• Ensure safe and healthy workplaces. The Occupational Safety and Health Administration
(OSHA) and Mine Safety and Health Administration (MSHA) are responsible for assuring the
safety and health of the Nation’s workers. From 2002 to 2003, the occupational injury and
illness rate declined from 5.3 to 5 cases per 100 full-time workers and the number of injuries
and illnesses fell by 7.1 percent. The 2003 workplace fatality rate of 4 per 100,000 workers was
also a record-low level. The 2006 Budget provides $747 million for OSHA and MSHA to allow
these agencies to maintain a strong enforcement presence and work with employers to ensure
the physical well-being of their workers. Included in this amount is $1 million to improve
OSHA’s ability to get timely data on worker injuries and illnesses, based on a recommendation
in OSHA’s Performance Assessment Rating Tool (PART) review.
210 DEPARTMENT OF LABOR

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

• Protect union members. In col-


laboration with DOL’s Office Safeguarding Union Members’ Dues
of Inspector General and other
Federal agencies, the Office of Even relatively small embezzlements can have a devastating
impact on the resources available to union members and their
Labor-Management Standards
locals. For example, a routine OLMS audit in Wisconsin re-
(OLMS) ensures that labor
vealed payments to a union’s former business manager for
unions remain financially mileage and meals totaling more than $30,000. The subse-
secure and free from fraud and quent OLMS criminal investigation confirmed fraudulent pay-
corruption. The 2006 Budget ments over a number of years and led to a conviction for em-
includes a $7 million (17-per- bezzlement of $135,198 (an amount representing more than
cent) increase to reinvigorate one-third of the union’s assets), a 25-month prison sentence,
OLMS audit and compliance and full restitution to the union. To strengthen Labor-Manage-
assistance programs. The ment Reporting and Disclosure Act protections, OLMS is re-
Budget includes $5 million building an effective audit program and enhancing its compli-
to help OLMS hire 48 new ance assistance efforts. OLMS will also place a renewed em-
auditors and investigate and phasis on auditing large international unions, some of which
have never been audited in the 45-year history of the Act.
combat embezzlement of union
funds and $1 million to create
a new, contractor-operated
unit to advise unions on how
to comply with the law. This funding would help restore critical capacity lost during the 1990s.
• Protect workers’ pensions and benefits. The Employee Benefits Security Administration (EBSA)
protects the integrity of pensions, health plans, and other employee benefits for more than 150
million people, and works with the three million employers who offer benefits to ensure their
compliance with the law. In 2004, EBSA’s work resulted in the recovery of $3.1 billion in re-
tirement, health, and other benefits for American workers and their families—a 121-percent in-
crease over the previous year. In addition EBSA closed 4,500 criminal and civil investigations,
nearly 70 percent of which resulted in correction of violations under the Employee Retirement
Income Security Act. EBSA also received a record 474 applications to participate in its program
that helps employers and plan officials voluntarily correct specific violations. The 2006 Budget
includes $137 million for EBSA.
• Boost penalties for non-compliance. In some cases, employers’ compliance with Federal require-
ments hinges on the threat of enforcement and monetary sanctions. Some of DOL’s current civil
monetary penalties have not been raised in decades (other than for inflation) and are not high
enough to deter repeated or egregious offenses. To strengthen the deterrence, the Administra-
tion again calls for an increase in civil monetary penalties for violations of laws administered
by the Employment Standards Administration and MSHA. Penalties for the death or serious
injury of youths caused by child labor violations would increase from $11,000 to $50,000, and
to $100,000 for repeat or willful violations. MSHA proposes to raise the maximum penalty for
egregious violations from $60,000 to $220,000, bringing its penalties more in line with those
assessed by OSHA. The 2006 Budget also supports allowing OLMS to impose civil monetary
penalties on unions, employers, and others that fail to file their required financial reports on a
timely basis. These new penalties would strengthen DOL’s ability to enforce labor laws when
cooperative approaches are not enough.
THE BUDGET FOR FISCAL YEAR 2006 211

Honoring Our Commitment to the Nation’s Veterans

The Administration is taking steps to help safeguard the employment rights and benefits of the
Nation’s servicemembers as they return to civilian life. For the first time since the passage of the Uni-
formed Services Employment and Reemployment Rights Act of 1994, DOL has proposed regulations
that spell out the rights and responsibilities of employers to honor veterans’ service. Under the Pres-
ident’s leadership, DOL will back up these regulations with aggressive outreach and enforcement
to ensure the job security of returning veterans. The 2006 Budget includes $224 million to support
the Veterans Employment and Training Service by expanding its transition assistance efforts to help
service men and women reintegrate into the workforce, raising awareness in the employer commu-
nity of the skills that veterans can provide, and ensuring that our military members are secure in
the knowledge that their jobs will be protected when they return from their service to our Nation.

Helping Employers Find Willing Workers

To help employers who, despite their best efforts, cannot find willing Americans to meet their
needs, the 2006 Budget supports a new Temporary Worker Program. On January 7, 2004, the Presi-
dent outlined this proposal and significant reforms to the current immigration system. As part of this
initiative, DOL will develop a quick and simple way for employers to search for American workers,
building on America’s Job Bank, DOL’s Internet-based labor exchange system.
The Administration also has improved the process for employers to permanently hire foreign work-
ers when U.S. workers are not available. Employers wishing to hire foreign workers on a permanent
basis must receive from DOL a certification that qualified U.S. workers are not available for the job
being offered to the foreign worker and that such hiring would not hurt the wages and working con-
ditions of similarly employed U.S. workers. As of the end of 2004 there was a backlog of more than
300,000 applications, and employers waited up to six years for a certification. DOL recently finalized
major reforms to this process that will drastically reduce application processing time, prevent future
backlogs, and strengthen anti-fraud protections. To help implement the new program and purge the
backlog remaining from the old program, the Administration is proposing a cost-based employer fee
for new permanent program applications (including applications re-filed by those waiting in the old
program’s queue).
212 DEPARTMENT OF LABOR

SUPPORTING A COMPASSIONATE SOCIETY

Strengthening Communities by Helping Ex-Offenders with Transition Assistance

Each year more than 600,000 inmates leave State and Federal detention facilities and return to
their communities and families, many without the skills or support necessary to enter and compete
in the workforce. Without help, a majority of these individuals probably will return to criminal ac-
tivity. A 1994 Department of Justice study following almost 300,000 former State prisoners found
that approximately two-thirds were re-arrested within three years of their release, and more than
half had been re-incarcerated.
The 2006 Budget includes a total of $75 million for the second year of funding for the President’s
four-year Prisoner Re-entry Initiative, which teams Federal agencies with faith-based and
community organizations to help recently released prisoners make a successful transition back to
society and long-term employment. Given their close connection to the communities they serve,
faith-based and community organizations are well situated to help returning prisoners. Many
are already serving this population with promising results. Through the collaborative efforts of
the Departments of Labor, Justice, and Housing and Urban Development, the Prisoner Re-entry
Initiative will provide job training, transitional housing assistance, and mentoring to tens of
thousands of non-violent ex-offenders.
THE BUDGET FOR FISCAL YEAR 2006 213

MAKING GOVERNMENT MORE EFFECTIVE

Preventing and Recovering Overpayments of Unemployment Insurance Benefits

The Unemployment Insurance (UI) program provides monetary benefits to eligible workers who
are unemployed through no fault of their own. UI is a Federal-State partnership, in which the Federal
Government pays for administrative expenses and States levy taxes to pay UI benefits and determine
eligibility and benefits. Despite States’ efforts to reduce improper UI payments, in 2003 improper
payments accounted for $3.8 billion, or more than nine percent of the nearly $41 billion in State UI
payments. The 2006 Budget proposes a package of legislative changes that would reduce improper
payments, saving an estimated $4.7 billion over 10 years. The legislation would:
• Boost States’ incentives to go after benefit overpayments by permitting them to use a portion of
recovered funds on fraud and error reduction. Currently, all recoveries of overpayments must
be used to pay UI benefits. Allowing States to retain a small percentage of recovered funds
to further reduce improper payments would reward them for taking aggressive steps to reduce
fraudulent and erroneous payments, give them the resources they need to continue their efforts,
and save $229 million over 10 years.
• Impose a penalty for UI fraud. The proposal would require States to impose a minimum 15-per-
cent penalty on fraudulent overpayments, and require the proceeds to be used only for improper
payment reduction. The State of Washington has imposed such a penalty, and has seen a dra-
matic increase in overpayment collections as a result. This proposal would save an estimated
$798 million over 10 years.
• Enlist private collection agencies in the recovery of overpayments and delinquent employer taxes.
Several States have explored using private collection agencies, but balked at paying excessive
fees, which can be as much as 25 percent of collections, from UI administrative funds. The Ad-
ministration would permit States to allow collection agencies to retain a limited portion of the
amounts they recover, resulting in recoveries totaling $369 million over a 10-year period. To
guard against collectors’ use of abusive or unfair tactics to recover funds, the proposal would
require that any contract entered into by the State explicitly follow the Fair Debt Collection
Practices Act.
• Charge employers when their actions lead to overpayments. Employers sometimes fail to respond
to State queries about worker separations (like whether claimants were fired), which can lead to
improper UI payments. Despite the costs associated with these mistakes, States do not always
penalize employers when their actions contribute to overpayments. The Administration would
require States to charge employers for any UI benefits improperly paid in such cases, thereby
encouraging employers to respond promptly to State requests for information about their former
workers’ UI eligibility and generating 10-year savings of $227 million.
• Collect delinquent UI overpayments through garnishment of tax refunds. Each year an estimated
$500 million in UI overpayments go unrecovered. Under current law, individuals’ Federal tax
refunds are used to offset delinquent child support obligations, debts owed to Federal agencies,
and State income tax debts. The Administration reproposes to add delinquent UI debts to the
list of debts that can be offset by tax refunds. This proposal would recover overpayments of $3.1
billion over 10 years.
214 DEPARTMENT OF LABOR

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Refocusing the Bureau of International Labor Affairs

As noted by the PART assessment, the Bureau of International Labor Affairs (ILAB) has a broad
and ill-defined mission. ILAB had historically played a research, analysis, and advocacy role, but has
evolved to include a large and duplicative grantmaking function. Between 1996 and 2003, ILAB’s
funding rose by 1,500 percent, and now covers a host of activities that are already addressed by
larger international grants programs run by the State Department and the Agency for International
Development. The 2006 Budget provides $12 million for ILAB and returns the agency to its original
mission of research, analysis, and advocacy.

Improving Federal Workers’ Compensation Programs

DOL administers a number of Federal workers’ compensation programs designed to provide eco-
nomic stability to families that have been affected by occupational injury, illness, or death. The 2006
Budget proposes critical reforms to improve the operation and stability of two of these programs.
• The Federal Employees’ Compensation Act (FECA). FECA, which pays workers’ compensation
to Federal civilian employees, has not been substantially updated since 1974. The Budget re-
proposes reforms that would adopt “best practices” of State workers’ compensation programs,
encourage individuals to return to work as early as possible, streamline claims processing, and
update benefit levels. These proposals would save the Federal Government more than $720 mil-
lion over 10 years.
• The Black Lung Benefits program. The Black Lung Benefits Act provides benefits to coal min-
ers who have been totally disabled by occupational black lung disease. Benefits in some cases
are paid from the Black Lung Disability Trust Fund, which is financed through an excise tax on
coal. Although excise tax revenues have been sufficient to finance the program’s benefit and ad-
ministrative costs for the past decade, they have not been enough to cover ever-growing interest
costs on the Trust Fund’s debt. As a result, DOL has had to borrow more just to pay interest on a
debt that now approaches $9 billion. DOL’s Inspector General has repeatedly identified the debt
as a threat to the Black Lung program’s financial stability and integrity. To fix this problem,
the Administration will repropose legislation to refinance the Trust Fund’s debt and eventually
retire it.

Eliminating the Migrant and Seasonal Farmworkers Program

The 2006 Budget reproposes ending the Migrant and Seasonal Farmworkers training program,
which was rated ineffective in a PART assessment. The assessment found that the services provided
under this program duplicate Federal efforts in other programs administered by DOL and other agen-
cies (such as the Departments of Health and Human Services, Agriculture, and Housing and Urban
Development) and primarily consist of supportive services like emergency cash assistance, rather
than job training and employment services to help participants secure more stable and permanent
employment. The PART also noted the program’s poor performance accountability and limited use
of competition to award funding. These workers can be served better through the Nation’s system of
One-Stop Career Centers.
THE BUDGET FOR FISCAL YEAR 2006 215

Update on the President’s Management Agenda

The table below provides an update on DOL’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

In the past year, DOL has earned status upgrades on each of the five initiatives and attained green status
in four of the Government-wide initiatives. In Human Capital, DOL adopted: competency models to assess
and improve employee skills; multi-faceted, well-targeted staff development and mentoring programs; and
well-planned systems to evaluate rank-and-file performance and strengthen managerial accountability. In 2004
DOL completed six streamlined competitions and one standard competition that will yield savings of more than
$3 million. DOL showed that program managers use financial information to improve operations and that
it has a plan to expand the use of financial data to increase efficiency. In E-Government, DOL established a
new management system to ensure the efficient and effective management of all its E-Government and IT
projects. DOL also uses performance information to make operational decisions, evaluate employees, and
establish long-term and annual goals. DOL is able to provide full and marginal costs for key program areas and
continues to improve program efficiency measures.

Initiative Status Progress


Faith-Based and Community Initiative

Real Property Asset Management

Eliminating Improper Payments

DOL has made significant progress in providing outreach and technical assistance to enhance opportunities
for faith-based and community organizations (FBCOs) to compete for Federal funding. In 2004, DOL awarded
170 grants totaling $71 million to FBCOs. To support the Real Property initiative, DOL is developing an asset
management plan. The Department has assessed its programs to determine which are susceptible to significant
improper payments and has plans to measure and reduce improper payments. (Because this is the first quarter
that agency efforts in the Eliminating Improper Payments Initiative were rated, progress scores were not given.)
216 DEPARTMENT OF LABOR

Department of Labor
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Training and Employment Services ............................................................... 5,129 5,319 5,844
Unemployment Insurance Administration .................................................... 2,619 2,674 2,633
Employment Service/One-Stop Career Centers 1 .................................. 964 963 84
Community Service Employment for Older Americans .......................... 438 436 437
Bureau of Labor Statistics ................................................................................. 518 529 543
Occupational Safety and Health Administration ........................................ 458 464 467
Mine Safety and Health Administration ........................................................ 269 279 280
Employment Standards Administration ........................................................ 392 401 416
Employee Benefits Security Administration ................................................ 124 131 137
Veterans’ Employment and Training .............................................................. 219 223 224
Bureau of International Labor Affairs ............................................................ 110 93 12
Office of Disability Employment Policy ......................................................... 47 47 28
All other .................................................................................................................... 500 475 396
Total, Discretionary budget authority 2 ............................................................. 11,786 12,034 11,501
Memorandum: Budget authority from enacted supplementals ............... 1 — —

Total, Discretionary outlays ................................................................................... 12,281 11,873 11,173

Mandatory Outlays:
Unemployment Insurance Benefits:
Existing law ........................................................................................................ 42,525 35,461 36,891
Legislative proposal ........................................................................................ — — 281
Trade Adjustment Assistance ........................................................................... 699 880 966
Black Lung Benefits Program: 3
Existing law ........................................................................................................ 1,433 1,428 1,405
Legislative proposal ........................................................................................ — — 3,343
Federal Employees’ Compensation Act:
Existing law ........................................................................................................ 127 230 234
Legislative proposal ........................................................................................ — — 6
Energy Employees Occupational Illness Compensation Program ..... 380 1,209 931
Pension Benefit Guaranty Corporation: 4
Existing law ........................................................................................................ 247 543 315
Legislative proposal ........................................................................................ — — 2,195
All other 4 ................................................................................................................ 401 447 408

Total, Mandatory outlays .................................................................................... 44,516 38,218 40,545

Total, Outlays .............................................................................................................. 56,797 50,091 51,718


1
2006 reflects the transfer of Employment Service Grants to Training and Employment Services.
2
2004 and 2005 rescissions of mandatory funding are now reflected in mandatory outlays.
3
2006 reflects the Black Lung debt refinancing, which includes a one-time payment to Treasury. There is no Government-wide budgetary effect
until 2014, when the excise tax rates would be extended.
4
Net mandatory outlays are negative when offsetting collections exceed outlays.
DEPARTMENT OF STATE AND INTERNATIONAL
ASSISTANCE PROGRAMS

AT A GLANCE:
2006 Discretionary Budget Authority (State): $13.3 billion
(Increase from 2005: 18 percent)
2006 Discretionary Budget Authority (International Assistance
Programs): $18.5 billion
(Increase from 2005: 14 percent)
Major Programs:
• Diplomatic activities and operations of embassies
• International assistance, including economic
development, child health, and military financing
• U.S. contributions to international organizations

MEETING PRESIDENTIAL GOALS

Protecting America

• Supporting Iraq and Afghanistan as they continue their transition to democracy and rule of law.
These activities will contribute to the long-term security of America and the world.
• Assisting key partners in the War on Terror, including Turkey, Jordan, Pakistan, Indonesia, and
the Philippines.
• Improving peacekeeping capabilities through the Global Peacekeeping Operations Initiative and
strengthening reconstruction and stabilization capabilities.
• Stemming the flow of illegal drugs around the world through counternarcotics activities in the
Andean region of South America and in Afghanistan.
• Fostering democracy and freedom throughout the world through bilateral programs as well as
through the activities of the National Endowment for Democracy and the Broadcasting Board
of Governors.

Promoting Economic Opportunity and Ownership

• Stimulating economic growth and development in countries which honor basic human rights,
invest in the education and health of their citizens, and promote free markets, through the
Millennium Challenge Account.

217
218 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

MEETING PRESIDENTIAL GOALS—Continued

• Working with the Multilateral Development Banks to pool the contributions of many donors to
assist developing countries with positive growth policies.
• Providing keys to economic growth and lasting democracy in the developing world through
education initiatives.
• Bringing developing countries out of poverty while creating job opportunities for Americans by
reducing barriers to free trade. The Budget anticipates implementation in 2006 of free trade
agreements with five countries of Central America and the Dominican Republic, Bahrain, and
Panama, as well as continued progress on free trade agreements with countries in Asia, Africa,
and the Americas.

Supporting a Compassionate Society

• Continuing to expand the President’s Emergency Plan for AIDS Relief with an unprecedented
effort to prevent the spread of AIDS, treat infected individuals, and care for those affected by
HIV/AIDS, including orphans.
• Providing for vulnerable populations around the world, through food aid and other humanitar-
ian assistance such as shelter, health care, water, sanitation, and disaster and reconstruction
assistance.
• Maintaining a generous refugee resettlement program while providing needed humanitarian
assistance to those awaiting return to their homeland.

Making Government More Effective

• Ensuring that the composition of U.S. Government agencies and personnel overseas is
appropriately aligned with our foreign policy priorities, security concerns, and overall resource
constraints, through the President’s initiative to “rightsize” the U.S. Government’s presence
overseas.
THE BUDGET FOR FISCAL YEAR 2006 219

PROTECTING AMERICA

Winning the War on Terror is the highest


foreign policy priority of this Administration.
In support of that objective, programs in the
Department of State and related international
affairs agencies are directed at assisting the de-
velopment of freedom, democracy, and economic
opportunity in Iraq and Afghanistan; providing
support to our coalition partners; improving
the peacekeeping capabilities of other nations;
and encouraging the spread of democracy
and freedom necessary to thwart terrorism’s
advance.

Promoting Global Democracy


With critical funding from the United States, voter registration and
elections are conducted in Afghanistan.
Promoting democracy and freedom around the
world is fundamental to peace and security at home. The Budget includes a further expansion of our
current bilateral programs to strengthen democratic institutions worldwide and new efforts, such as
a contribution to the United Nations Democracy Fund, which was announced by President Bush at
the United Nations General Assembly in September 2004. The Fund will provide technical assistance
to nations adopting democratic reforms.
In particular, the United States is committed to supporting the peoples of Iraq and Afghanistan in
their historic quest for freedom and democracy. Our mission in these sovereign nations is to promote
stability, security, and prosperity to ensure that they never again are ruled by regimes that oppress
their citizens and support terrorism.
Creating a Stable Iraq. Iraqis, with help from the Coalition and many partners, are rebuilding
their country and offering freedom, new opportunities, and much needed services to their people.
While security problems remain a major challenge for the Iraqi people and for development in various
parts of the country, significant progress has been made in many key areas.
The Iraqi Interim Government, led by Prime Minister Allawi, demonstrated resolve and a clear
commitment to Iraq’s transition to democracy, including free and fair elections to establish a more
representative government. The new Iraqi currency is stable and has appreciated against other cur-
rencies. Oil revenues for the Iraqi people since June 2003 are estimated at over $20 billion. Iraq’s
own security and police forces are being rapidly expanded, trained, and equipped so that Iraq can
protect its own people and its borders.
Assistance from the United States and other countries will continue to have an impact. With key
infrastructure projects underway across Iraq, millions of Iraqis will benefit from greater access to
basic services. The United States will continue to help the Iraqi government deliver basic services to
its people, collect revenues, and develop a free market system capable of joining the global economy.
The 2006 Budget provides $360 million for economic assistance to Iraq for these activities.
220 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

PROTECTING AMERICA—Continued

Supporting Democracy in Afghanistan. On


December 7th, 2004, the first democratically
elected Afghan President was inaugurated,
following the first free and fair election in
Afghanistan’s history. The economy grew 16
percent during the last Afghan fiscal year,
2003–2004, and the new Afghan currency
has remained strong. The lives of Afghans,
especially those of women and children,
continue to improve, and 2.4 million refugees
have returned home. Today over 40 percent
of primary school students are girls, up from
virtually zero under the Taliban, and overall
The paving of the Kabul Kandahar road in Afghanistan. enrollment for boys and girls has increased
by over 300 percent. The new Afghan National Army is now fighting terrorism and maintaining
security with a force of 16,000 soldiers and support personnel that includes all of Afghanistan’s
ethnic groups, and over 33,000 Afghan police that have been trained and equipped.
With U.S. aid and the contributions of other nations, the Afghan government will continue to build
the necessary capacity to deliver health services, collect tax and customs revenue, and develop the
legal and regulatory framework for a modern, open economy.
The 2006 Budget requests nearly $1.1 billion to build on the positive momentum in Afghanistan.
This Budget will provide funds to invest in the health, education, clean water, and free market in-
frastructure that create conditions for sustained growth and stability; and eradicate poppy crops,
develop alternative livelihoods, interdict drug flows, and prosecute narco-traffickers to ensure that
the drug trade does not threaten Afghanistan’s democracy or undermine economic development.
Border Security. The Department of State continues to work with the Department of Homeland
Security (DHS) to secure America’s borders against those who threaten our security, and at the same
time, the Department works to promote legitimate travel for commerce, education, and tourism.
The Department of State is improving the visa and passport systems to make America safer.
The State Department, working jointly with DHS, is developing secure visas and passports, which
will provide reliable ways to link travel documents to their owner. In addition, the Departments
of State and Homeland Security are gathering biometric identifiers—such as digital photos and
fingerprints—from visa applicants and conducting security checks to verify travelers’ identities
when they enter and exit the United States.
The State Department is a key player in the effort to integrate databases as well as an important
contributor to the Terrorist Screening Center and the National Counter Terrorism Center. These
centers integrate and analyze terrorist threat information, collected both domestically and abroad,
to detect, identify, and interdict people who may pose a threat to America.
The Broader Middle East and Muslim Outreach Initiatives. Expanding democracy, supporting po-
litical, economic, and social reform, and improving access to education, information, and jobs are
critical to eradicating international terrorism. The 2006 Budget continues to enhance diplomatic
and assistance activities in the Middle East, North Africa, and other majority Muslim countries.
The Budget includes $120 million for the Middle East Partnership Initiative, a cornerstone of the
President’s strategic approach to supporting economic, political, and social reform in the region.
THE BUDGET FOR FISCAL YEAR 2006 221

Broadcasting to the Middle East


In 2006, the Broadcasting Board of Governors (BBG) will have nearly quadrupled the number of broad-
casting hours to the broader Middle East from approximately 13,000 hours per year in 2001 to over 50,000
hours per year. In particular, the BBG established two 24/7 Arabic-language television channels (al-Hurra
and al-Hurra Iraq) in 2004 that complement the success that Radio Sawa has had in attracting a significant
audience for U.S.-developed broadcasts in the region. Surveys from 2004 show that 25 percent of adults
in nine Middle Eastern countries tune into Radio Sawa and/or al-Hurrah television each week, and approxi-
mately 75 percent consider their news reliable. In 2006, the BBG will continue local and live news coverage
through satellite and land-based transmission of Radio Sawa and al-Hurra television.

The Budget also includes $80 million for the National Endowment for Democracy (NED), an
increase of $20 million over 2005 levels. NED provides grants to private groups and organizations
that build and strengthen democratic institutions, and promote the rule of law, human rights, civic
education, and a free press.
A wide range of public outreach, diplomacy, and broadcasting initiatives are being pursued at the
State Department and at the Broadcasting Board of Governors (BBG) in the 2006 Budget. Fund-
ing in 2006 will support the development of libraries and information centers in the Muslim world
called American Corners; support the TV Co-Op program, which brings foreign journalists to the
United States and facilitates their professional development and assists in the production of their
own programming related to American culture; encourage an expansion of Foreign Journalist Tours;
translate more Western books into Arabic; increase scholarships and visiting fellowships; upgrade
the American government Internet presence; and train more Arab speakers, public relations spe-
cialists, and experts in Arab matters. The Voice of America will increase the number of hours it
broadcasts to countries in the broader Middle East, with significantly increased television program-
ming in languages such as Persian, Dari, Pashto, and Urdu.

The Administration is expanding funding for


public diplomacy and exchange efforts by 21
percent in general and specifically in the broader
Middle East. For example, the 2006 Budget
includes $100 million for the Partnerships for
Learning (P4L) Initiative, which provides schol-
arships and exchange opportunities to students
in the Muslim world. P4L was created to reach
an audience younger and more diverse than that
addressed by existing programs. In 2006, the
P4L Initiative, including the Youth Exchange
and Study program, will specifically focus its
outreach programs on underserved communities
A view inside the BBG Middle East Broadcasting Networks
in non-urban areas with a focus on high school newsroom.
students and females in the Muslim world.
This Administration continues to provide accurate and balanced news and information to audiences
in the Middle East, through the Middle East Broadcasting Network, which receives $79.3 million in
the 2006 Budget.
222 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

PROTECTING AMERICA—Continued

Managing Threats Abroad

Support for Our Coalition Partners. The United States and our allies have shown great resolve
in the War on Terror. The Budget supports the front-line states that have joined us in the cam-
paign against global terror. The President’s request includes over $640 million for Pakistan to help
advance security and economic opportunity for Pakistan’s citizens; over $450 million for Jordan to
accelerate economic growth opportunity and strengthen border controls; and over $550 million to
support Colombia’s unified campaign against drugs and terrorism.

The Global War on Terror


U.S. assistance continues to result in unparalleled military, law enforcement, and intelligence cooperation
that has successfully destroyed terrorist cells, disrupted terrorist operations, and prevented attacks. Over
the last year, there have been many counterterrorism successes in cooperating countries and international
organizations. For example:
• More than three-quarters of al-Qaida’s known key leaders and associates have been detained or killed,
with major successes in Afghanistan, Pakistan, Indonesia, the Philippines, and Saudi Arabia;
• Indonesia, the world’s largest Muslim country, has taken new steps to move against Jemaah Islamiah
operatives, an al-Qaida-linked Islamic terrorist organization;
• The United States has trained and advised Philippine forces in their counterterror operations, such as
those against the Abu Sayyaf terrorist group;
• Yemeni authorities have moved against al-Qaida in their own territory, hosted Army Special Forces to
train and advise Yemeni troops in counterterrorism, and increased contacts with key U.S. agencies;
and
• Saudi Arabia is working to shut down the facilitators and financial supporters of terrorism, and has
captured or killed many leaders of the al-Qaida organization in Saudi Arabia.

Building Peace Support Capabilities. Global peacekeeping capabilities, with a particular focus on
Africa, are critical to bringing security and stability to troubled regions. The 2006 Budget includes
$114 million for the second year of the Global Peace Operations Initiative. This Initiative, being
implemented in cooperation with the G-8, pledges to:
• Train and equip 75,000 troops by 2010 to increase global capacity to conduct peace support
operations with a focus on Africa;
• Create a “clearinghouse” function to exchange information and coordinate G-8 efforts to enhance
peace operations training and exercises in Africa;
• Develop a transportation and logistics support arrangement to help provide transportation for
deploying peacekeepers and logistics support to sustain units in the field; and
• Establish a Gendarme (Constabulary) Center of Excellence in Italy to increase capabilities and
interoperability of military police forces for peace support operations, and to support other
existing centers dedicated to that purpose.
THE BUDGET FOR FISCAL YEAR 2006 223

In addition to this initiative, the Admin-


istration has established an Office of the
Coordinator for Reconstruction and Stabiliza-
tion within the Department of State. This office
was created to enhance the U.S. Government’s
planning and response capabilities to address
conditions in failed, failing, and post-conflict
states and put in place a foundation for lasting
peace, good governance, and economic and
social development. In the absence of effective
engagement, such states pose risks to the secu-
rity of the world. They often become breeding
grounds for terrorism, communism, organized
crime, trafficking, humanitarian catastrophes,
and other threats to U.S. national interests.
The 2006 Budget proposes a significant
expansion in the Office of the Coordinator to President George W. Bush meets with Presidents Hamid Karzai of
Afghanistan and Pervez Musharraf of Pakistan at the United Nations.
strengthen its ability to lead U.S. planning
efforts for countries and regions of most
concern, and coordinate the deployment of U.S. resources when needed. In addition, the 2006
Budget proposes a $100 million Conflict Response Fund to quickly address emerging needs. This
funding will help the United States deploy trained and experienced civilian personnel immediately
to an unstable region. These teams would lead interagency efforts and come ready with plans to
achieve stability and begin reconstruction.
Counternarcotics Activities. The U.S. Government is committed to rolling back the drug trade and
severing the ties between narco-traffickers, terrorists, and other international criminal organiza-
tions. The 2006 Budget includes $734.5 million for the Andean Counterdrug Initiative to consolidate
gains made in recent years in the areas of eradication, interdiction, and alternative development.
This past year, almost 120,000 hectares of Colombian coca were aerially eradicated, and 12,845 fam-
ilies received alternative development assistance. In 2004, the government of Colombia established
a law enforcement presence throughout the entire country for the first time in history. Nearly 150
Colombian narco-traffickers, terrorists, and money launderers have been extradited to the United
States in the past two years.
The United States is applying lessons learned from the successes under Plan Colombia to other
parts of the world, including Afghanistan. In 2004 the Administration moved quickly to make coun-
ternarcotics a central pillar of its reconstruction assistance in Afghanistan. It proposed to begin an
ambitious anti-poppy campaign, working with the newly elected President, Hamid Karzai, and our
international partners including Great Britain. The 2006 Budget includes $437 million for opera-
tions to continue the fight against drugs in Afghanistan.
224 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

In 2002, President Bush called for “a new U.S. Core Development Assistance*
compact for global development, defined by President Exceeds Commitments with the 2006 Request
new accountability for both rich and poor Budget authority, billions of dollars
20
nations alike. Greater contributions from 19.8
developed nations must be linked to greater
responsibility from developing nations.” The 17.0
15
15.2
President pledged that the United States
13.3
would lead by example and increase its core 12.1 11.6
10 11.0
development assistance by 50 percent over
the next three years, resulting in an annual
increase of $5 billion by 2006. The President’s 5
original 2002 pledge called for these new
funds to go into a new Millennium Challenge
Account (MCA). The Administration did not 0
2000 2001 2002 2003 2004 2005 2006
receive its full requests for MCA in 2004 and * Does not include Iraq Relief and Reconstruction Fund.

2005. Therefore, this Budget adjusts MCA’s


ramp-up period to more accurately reflect Congressional action to date, reaching the $5 billion figure
by 2007. Nonetheless, this Budget still substantially exceeds the President’s 2002 commitment for
overall growth in core development assistance by requesting a total of $19.8 billion, $8.2 billion
more than in 2002.

Millennium Challenge Account

MCA is an innovative program that focuses only on those countries, among the poorest in the world,
that have met independent criteria with respect to ruling justly, investing in their people, and pro-
moting economic freedom. This common-sense approach uses measurable indicators to select coun-
tries best able to effectively use assistance. Once selected, countries develop their own proposals and
enter into partnership agreements—called Compacts—with the Millennium Challenge Corporation
(MCC). MCC will fund only those proposals with clear objectives, a sound plan for implementation
and financial accountability, and specific indicators demonstrating results. This innovative process
is beneficial because it gives countries the responsibility for their own development, in some cases
for the first time. However, it is also time intensive. MCC has identified 17 eligible countries in 2004
and 2005. In recent months, 15 of those countries have submitted Compact proposals.
By providing incentives for countries to reform, MCA has strengthened the resolve of some states
to break down the barriers to economic growth and a better quality of life for their citizens. The
impact of these reforms extends even to those countries that are not currently eligible, as they adopt
policy reform agendas in an attempt to become eligible.
The Congress appropriated $1.5 billion for MCA in 2005, $1 billion short of the President’s request.
The 2006 Budget request of $3 billion for MCC’s third year will help countries help themselves be-
come more prosperous, democratic states. In 2006, MCC will expand its list of potentially eligible
countries to some 110 states with per capita incomes of up to about $3,000 per year, an increase from
the current number of roughly 80 states with a per capita level of up to about $1,500 per year. The
2006 funding request will support those countries deemed eligible for funding in 2006 by the MCC
Board of Directors, as well as the 17 countries currently eligible.
THE BUDGET FOR FISCAL YEAR 2006 225

Given that MCC was established in 2004, has only recently selected MCA eligible countries, and the
time required for countries to develop their own proposals that meet MCC requirements for demon-
strating results, the funding request for 2006, combined with the amounts appropriated in 2004 and
2005, provides enough resources for those countries ready to proceed with Compacts in 2006.

Multilateral Economic Assistance Programs

More traditional multilateral economic assistance


programs continue, with new emphasis on account-
ability of performance. When countries implement
sound economic and governance policies, they create
greater growth, stability, and a better future for their
citizens. To ensure the effectiveness of international
assistance, donors should focus resource assistance
on countries that adopt positive growth policies
and clear, measurable goals and targets for the
assistance they receive. The United States has been
instrumental in getting the Multilateral Development
Banks (MDBs), such as the World Bank, to institute
allocation systems that ensure more assistance goes
New bakeries bring work opportunities to rural women in
to better performing countries and less goes to weaker Guatemala and provide food security for their families.
performers. With strong U.S. leadership, the MDBs
are instituting results-oriented management, as recommended in Program Assessment Rating Tool
reviews of a number of MDBs, and increasing transparency to bolster development outcomes and
enhance accountability.

The United States has led efforts to help the poorest countries to make more productive invest-
ments without incurring greater debt by pressing the World Bank and other MDBs to increase the
share of assistance provided as grants rather than loans. The United States recently concluded
replenishment negotiations for the World Bank’s International Development Association and the
African Development Fund, which will increase the share of new funding disbursed to the poorest
countries through grants, rather than loans, to about 45 percent from approximately 25 percent and
20 percent, respectively. The United States also recently completed replenishment negotiations for
the Asian Development Fund, which established, for the first time, a grant window where 21 percent
of total assistance will be in the form of grants. The 2006 Budget will support these agreed-upon
reforms through its request of $1.34 billion for U.S. contributions to these institutions and the other
Multilateral Development Banks.

The United States continues to support 100 percent debt reduction under the Enhanced Heavily
Indebted Poor Countries (HIPC) Initiative. Coupled with prudent economic policies, debt reduction
allows these countries to channel resources they would have used to pay interest and other debt
service costs into critical programs, such as health and education. The 2006 Budget requests $100
million to continue to support HIPC and other debt reduction programs.

Promoting the Gains from Trade

A strong worldwide economy is critical for creating job opportunities for Americans, and liberaliz-
ing trade is the single most effective tool in strengthening the global economy. Free and fair trade
creates high-paying jobs for American workers, businesses, farmers, and ranchers, while increasing
the living standards of Americans through lower prices and more choices.
226 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

In 2004, free trade agreements with Chile and Singapore were signed and implemented, and the
President concluded free trade agreements with Australia, Bahrain, and Morocco, in addition to the
agreement with five Central American Countries (CAFTA) and the Dominican Republic. The Pres-
ident also initiated free trade negotiations in 2004 with Panama, Thailand, and three countries of
the Andean region (Colombia, Peru, and Ecuador) and notified the Congress of his intention to begin
free trade negotiations with Oman and the United Arab Emirates.
These agreements achieve strong intellectual property and investment protections for U.S. com-
panies, as well as enforcement of domestic environmental and labor rules. The President will build
on this success with completion in 2005 of the Andean Free Trade Agreement and with continued
progress towards a Free Trade Area of the Americas agreement, as well as an agreement with the
Southern African Customs Union. The President has also called for a Middle East Free Trade Area
by 2013 to spur economic growth and expand opportunity in this critical region of the world. The
2006 Budget provides for the implementation of free trade agreements with Bahrain, Panama, the
Dominican Republic, and CAFTA. The Office of the U.S. Trade Representative will continue to pur-
sue aggressive trade agreements with other nations.

The United States is working with 148


member economies in the World Trade Or-
ganization (WTO) to reach an agreement that
will open markets to U.S. businesses, promote
worldwide growth, and enhance economic
development in some of the poorest countries
of the world. Having played a key role in
launching the current WTO Doha Develop-
ment Agenda, the United States has proposed
elimination of all global tariffs on consumer
and industrial goods by 2015, substantial cuts
in farm tariffs and trade-distorting subsidies,
and broad opening of services markets.
Students from a secondary girl’s school in Baghdad with new school
supplies.
Investing in Tomorrow’s Leaders

Education enables people to be more productive, improve their standard of living, and contribute
to the growth of their nations. Unfortunately in much of the world, access to basic education is still
extremely limited, and illiteracy, especially among women, is very common.
The Administration has launched several education initiatives since 2002 to focus more resources
on improving educational quality across the globe. The Africa Education Initiative is providing schol-
arships for girls, distributing 4.5 million textbooks and training over 400,000 teachers. The innova-
tive Centers for Excellence in Teacher Training in Latin America and the Caribbean are focused
on improving the quality of schools and their curricula. Significant new resources for education
in the Muslim world, in countries such as Pakistan, Indonesia, Morocco, Yemen, Jordan, Iraq, and
Afghanistan, have expanded opportunities for millions of girls and boys. Under the G-8’s Broader
Middle East and North Africa Initiative, the United States and its allies are seeking to train 100,000
teachers in the region by 2009. Worldwide, President Bush has more than doubled funding for State
Department-funded basic education programs, from $126 million in 2001 to $322 million in this Bud-
get. In addition to funding for basic education, the Budget includes $167 million for higher education
and training worldwide.
THE BUDGET FOR FISCAL YEAR 2006 227

SUPPORTING A COMPASSIONATE SOCIETY

America’s compassion for the world’s most vulnerable citizens is manifested in the international
programs that provide humanitarian and other assistance. The President’s Budget reflects this
continued commitment.

Emergency Plan for AIDS Relief—Caring for the World’s Most Vulnerable Citizens

The President’s Emergency Plan for AIDS Relief Saves Lives


One person benefiting from the Emergency Plan is Buse Banga of Zambia. When she arrived at the Mother
Teresa Hospice in Lusaka, Zambia, Buse lay in a coma. Her neighbors had given her up for dead. But after
just two weeks receiving antiretroviral treatment in a U.S.-supported clinic, Buse opened her eyes. Several
days later, she returned home, standing tall and full of life, to the joyful astonishment of her friends and
family. By 2008, the Emergency Plan will help two million more people in similar ways.

The President’s Emergency Plan for AIDS Relief continues in its third year to fight the global
HIV/AIDS epidemic, which resulted in almost 3.1 million deaths in calendar year 2004 alone.
The Administration is committed to prevent seven million new HIV infections by 2008; treat two
million HIV-infected people; and care for 10 million individuals affected by HIV/AIDS, including
orphans. The Emergency Plan uses prevention funds for methodologies that are effective in helping
people avoid behaviors that place them at risk of contracting HIV. One such program is called
“ABC”—Abstinence, Be faithful, and, as appropriate, correct and consistent use of Condoms—and
was proven successful in Uganda, Zambia, Senegal, and elsewhere. The Emergency Plan maintains
bilateral, regional, and volunteer HIV/AIDS programs in over 100 countries around the world with
a focus on some of the hardest hit nations: Botswana, Cote d’Ivoire, Ethiopia, Guyana, Haiti, Kenya,
Mozambique, Namibia, Nigeria, Rwanda, South Africa, Tanzania, Uganda, Zambia, and Vietnam.

Since the President announced the Emergency Plan for AIDS Relief Reaching the
Emergency Plan—a five-year, $15 billion Target impact,
2008 2-7-10 Goal
Global AIDS funding,
commitment—in his 2003 State of the Union millions of people billions of dollars
5 3.5
Address, the United States has provided Global AIDS Funding
$5.2 billion for the fight against global AIDS, Treatment 3.0
4 Prevention
and the 2006 Budget requests an additional
Care 2.5
$3.2 billion for this effort. Starting with $2.4
3
billion in 2004, the U.S. Government has made 2.0
remarkable progress during the Emergency 1.5
2
Plan’s first year of implementation and has
already made a significant impact on the 1.0
lives of those living with AIDS. For example, 1
0.5
with $350,000 in Emergency Plan funding
for Botswana, UNICEF has been able to 0 0
2003 Baseline 2004 2005 2006
improve service delivery in care and support of Source: Department of State.
orphans and vulnerable children; strengthen
faith-based organizations’ institutional capacities; and ensure orphans and vulnerable children
have access to essential services and protection from abuse and exploitation.
228 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

SUPPORTING A COMPASSIONATE SOCIETY—Continued

In addition to bilateral programs, the


United States is helping other nations deepen
their commitment to stemming the spread of
HIV/AIDS through our role in international
organizations like UNAIDS, WHO, and the
Global Fund to Fight AIDS, Tuberculosis, and
Malaria. This Administration provided the
founding contribution to the Global Fund,
and the United States remains by far the
world’s largest donor to it. The President’s
Emergency Plan is working with UNAIDS
and other international organizations to
implement the “three ones” in countries that
A peer educator in Zambia explains the process of voluntary counseling receive assistance: one national plan, one
and testing for HIV/AIDS.
national coordinating authority, and one
national monitoring and evaluation system. In this way, nations are building a more coordinated
and effective global effort to fight HIV/AIDS.

Humanitarian and Food Assistance

The United States, through its support of international and non-government organizations, will
continue to be the world’s most generous provider of food aid and non-food humanitarian assistance,
including shelter, health care, water, and sanitation. The 2006 Budget also reinforces the Admin-
istration’s commitment to finding durable solutions for refugees around the world, and provides an
increase in funding to support assistance abroad and resettlement in the United States.

In 2004, the United States led the interna-


tional community—both in terms of timeliness
and funding levels—in assisting over 1.6
million internally-displaced persons in the
Darfur region of Sudan, and 200,000 Sudanese
refugees in Chad. The 2006 Budget continues
this strong level of support, addressing both
the food and non-food needs of victims of
the conflict in Darfur. The Administration
continues to support the Sudanese people
through humanitarian assistance as the
country works toward a peace settlement for
Darfur that will allow refugees and other
displaced persons to return to their homes.

The United States also supports refugee re- Sudanese refugee women mixing the corn soy blend provided by the
United States.
settlement and assistance in this country. In
2004, the United States admitted more than
50,000 of the world’s refugees for resettlement, nearly doubling the previous year’s total. President
Bush continues to advocate for a generous resettlement program, and the 2006 Budget provides a
significant increase in funds to support the growing number of refugees being resettled in the United
THE BUDGET FOR FISCAL YEAR 2006 229

States. Millions more will be assisted through humanitarian assistance programs in countries where
they first seek asylum as they await repatriation opportunities.

In 2004, U.S. food aid protected vulnerable


populations around the world, with over $700
million donated to the food emergencies in
Sudan, Ethiopia, Angola, and southern Africa,
which helped feed over 14 million people. The
2006 Budget supports the Administration’s
continuing efforts to prevent widespread
famine as well as major new efforts to make
food aid more effective by requesting a portion
of it as cash assistance, which allows emer-
gency food aid to be provided more quickly
and more flexibly to address the most urgent
needs. The analysis of food assistance through
the Program Assessment Rating Tool supports
this decision to give assistance in cash.
Child immunization saves lives in Ghana.

Human Rights and the Rule of Law

Human rights and the rule of law are core values of the American people and a key element of U.S.
foreign policy. The United States will continue to challenge governments to meet their obligations
under international treaties and work to reform and strengthen the Office of the United Nations
High Commissioner for Human Rights and United Nations Commission on Human Rights. The 2006
Budget includes over $115 million in funding for support, training, and assistance programs to aid
people and strengthen institutions that promote freedom and human rights and help establish the
rule of law. In 2004, the United States provided approximately $38.5 million in FREEDOM Support
Act funds to strengthen democracy, human rights, and the rule of law in Central Asia, including
assistance with legislative drafting; training judges, prosecutors, and public defenders; and providing
advisors for judicial and prison reform.

Abolishing Trafficking in Humans

The United States is committed to abolishing the trafficking of human beings, which is a modern
day form of slavery and an affront to human dignity. According to some estimates, each year at least
700,000 and possibly as many as four million people, primarily women and children, are trafficked
around the world and exploited for sexual purposes or for labor without compensation.
In 2002 President Bush established a Cabinet-level task force to monitor and combat this
trafficking. The following year he announced a $50 million U.S. Government initiative to combat
this growing problem. Agencies are using these funds to prevent human trafficking, protect and
reintegrate victims, and build the capacity to investigate, prosecute, and convict traffickers in
Brazil, Cambodia, India, Indonesia, Mexico, Moldova, Sierra Leone, and Tanzania. The 2006 Budget
continues support for the anti-trafficking program. In addition, the Administration has established
a Human Smuggling and Trafficking Center to coordinate interagency efforts to share information
and prevent trafficking in persons, migrant smuggling, and terrorist travel, and is working to
identify and assist trafficking victims domestically.
230 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

SUPPORTING A COMPASSIONATE SOCIETY—Continued

Service

President Bush is committed to increasing American service overseas and, accordingly, has asked
for increases in the Peace Corps’ budget every year since taking office. The number of Peace Corps
volunteers—7,733 in 2004—is at its highest level in 29 years. These dedicated individuals reflect
the best of American values and compassion by working in such diverse fields as education, health,
HIV/AIDS education and prevention, information technology, business development, the environ-
ment, and agriculture. The Budget requests $345 million for the program, allowing it to open at
least two new posts and maintain the existing number of volunteers.
In addition, in 2003, President Bush announced a new initiative coordinated by USA Freedom
Corps and USAID called Volunteers for Prosperity that provides America’s professionals new oppor-
tunities to serve abroad on specific development initiatives in countries of their choice. Organizations
that become Volunteers for Prosperity participants and deploy volunteers are given priority for Fed-
eral funding in select Federal development assistance programs. Since its inception, Volunteers for
Prosperity has recruited nearly 200 non-profit and for-profit organizations, representing a pool of
34,000 skilled American professionals. These organizations have deployed nearly 7,000 volunteers
to help reduce poverty and promote economic growth.
THE BUDGET FOR FISCAL YEAR 2006 231

MAKING GOVERNMENT MORE EFFECTIVE

Capital Security Cost Sharing for Diplomatic Facilities

Protection of U.S. Government personnel assigned abroad is a top priority. In response to the 1998
bombings of two U.S. embassies in East Africa, the State Department embarked on several ambitious
initiatives to improve physical security overseas. Many posts require additional work to withstand
terrorist attacks and other dangers. In 1999, the State Department launched a security upgrade and
construction program to begin to address requirements in more than 260 embassies and consulates.
In 2003 and 2004, the State Department completed construction of several new embassy com-
pounds, including compounds in: Tunis, Tunisia; Zagreb, Croatia; Abu Dhabi, United Arab Emirates;
Istanbul, Turkey; and Sofia, Bulgaria. In addition, the State Department has 22 projects under con-
struction and has awarded contracts for 12 new projects.
In 2005, the Administration initiated a
plan to dramatically expedite construction of
secure facilities worldwide, called the Capital
Security Cost-Sharing Program. Under this
program, each agency with staff overseas
contributes annually towards construction
of the new facilities based on the number of
authorized positions and the type of space
they occupy. In 2006, non-State agencies
A view of the new embassy compound in Istanbul, Turkey.
will contribute approximately $203 million to
the program and State will contribute $810 million. This cost-sharing plan will enable the State
Department to replace 150 embassies and consulates over 14 years for a total cost of $17.5 billion.
Capital security cost sharing is a major component of the President’s Management Agenda initia-
tive on “rightsizing” that stresses that agencies should consider all implications—including mission,
cost, and security—when they choose to place or retain staff overseas. Cost-sharing among agencies
for U.S. diplomatic facilities abroad reflects the recognition that the facilities represent the entire
Nation, and not just facilities of the Department of State.

Rightsizing the U.S. Government Presence Overseas

The President emphasizes the importance of safety, efficiency, and accountability in U.S. Govern-
ment staffing overseas by making sure that the composition of Government agencies is consistent
with our foreign policy goals, security needs, and overall fiscal condition. There are more than 57,000
permanent American and local staff overseas under the authority of Chiefs of Mission. The average

Overseas Staffing Under Chief of Mission (COM) Authority

Total Personnel Overseas Under


COM Authority (Including American Total America Direct Hire Personnel Average Cost of a U.S. Direct Hire
and Locally Engaged Staff) Overseas Under COM Authority Overseas Estimated for 2006
Projected for 2005 Projected for 2005
57,128 14,659 $430,000
232 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

MAKING GOVERNMENT MORE EFFECTIVE—Continued

cost of putting an American direct hire position overseas in 2006 will be approximately $430,000.
With our foreign policy priorities demanding increased support to meet new homeland security, coun-
terterrorism, and global AIDS requirements, it is important that we use overseas staff resources
carefully.
In 2004, the Department of State established the Office of Rightsizing the U.S. Government
Overseas Presence. It also started an initiative called MOMS (Model for Overseas Management
Support), which provides support activities for the new Embassy in Baghdad and will be expanded
to assist other embassies in 2005 and 2006. In 2005, the Department of State plans to open the
new Frankfurt Regional Center, and implement a shared-services model at its Florida Regional
Center. These centers will take on certain work now being done at overseas posts. Beginning in
2005, formal rightsizing reviews are required for all new embassy construction projects and every
U.S. mission worldwide on a five-year basis. And in 2006, the Administration will continue to build
on the achievements that support the Rightsizing Initiative through expanded shared-services and
regionalization models, rigorous post level reviews, and an accurate accounting of overseas staffing
and costs that produce rightsizing results.

Update on the President’s Management Agenda

The table below provides an update on the State Department’s implementation of the President’s
Management Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrows indicate change in status since evaluation on September 30, 2004.


The State Department is aggressively implementing human capital improvements including implementation
in 2005 of a revised Civil Service appraisal system that better differentiates performance and that ties the
work of all employees to achieving the strategic goals of the Department. For competitive sourcing, the State
Department announced its first standard competition for Multi-Media Services and numerous streamlined
competitions. The State Department has developed efficiency measures for each of its programs and is using
them to drive down cost while achieving performance. For instance, the Refugee Admissions Program has
decreased the per-person cost of admitting refugees to the United States from nearly $4,500 in 2002 to $3,500
in 2004, while exceeding the goal of admitting 50,000 refugees.
THE BUDGET FOR FISCAL YEAR 2006 233

Initiative Status Progress


Real Property Asset Management

A “Right-Sized” Overseas Presence

In support of the Real Property Initiative, the Department of State is working to integrate its domestic and
overseas real property operations into a unified asset management plan.
As noted earlier in the narrative on rightsizing, this PMA initiative seeks to ensure that our overseas presence
is aligned with overall mission priorities, security, and costs. The Office of Management and Budget, working
closely with the Department of State and other interagency rightsizing partners, has made progress in putting
in place mechanisms that support accountability, transparency, and new alternatives for overseas staffing. In
the coming year, efforts will focus not only on strengthening these new processes, but on demonstrating real
results of positions being moved in response to regionalization efforts following formal rightsizing reviews, and
on streamlining and consolidation of support services.

The table below provides an update on the U.S. Agency for International Development’s (USAID’s)
implementation of the President’s Management Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

USAID has successfully implemented a new financial management system in Washington, D.C., and is in the
process of rolling that system out to missions around the world. The Agency has received its second clean
audit opinion and reduced auditor material weaknesses from three to one. The Agency has developed a
comprehensive human capital strategy and accountability system, and is in the process of implementing that
system. The Agency is also undertaking an ambitious review of its current business model, and is considering
moving to regional or Washington-based provision of certain assistance functions to improve efficiency and
effectiveness. Together with the State Department, the Agency is developing a comprehensive Enterprise
Architecture, which will help to more effectively target information technology investments and business process
improvements. In the last year, USAID created, and used to inform certain budget decisions, a new strategic
budgeting model, and developed a set of agency-wide and regional performance measures that will be used
across regional bureaus and programs.

Initiative Status Progress


Faith-Based and Community Initiative

The Faith-Based and Community Initiative just completed its first year at USAID and is actively engaged in
removing barriers to participation by community organizations, including faith-based organizations, as well as
intensifying outreach and information dissemination to make USAID competitive grant opportunities more
accessible to a broader population of potential grantees.
234 DEPARTMENT OF STATE AND INTERNATIONAL ASSISTANCE PROGRAMS

Department of State and International Assistance Programs


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Department of State:
Diplomatic and Consular Programs .......................................................... 4,185 4,172 4,473
Embassy Security, Construction, and Maintenance ............................ 1,376 1,504 1,526
International Organizations and Conferences ....................................... 1,449 1,649 2,332
Global HIV/AIDS Initiative ............................................................................. 488 1,374 1,970
All other programs ........................................................................................... 2,455 2,561 3,012
Subtotal, Department of State ......................................................................... 9,953 11,260 13,313

International Assistance Programs:


Foreign Military Financing ............................................................................. 4,258 4,745 4,589
Nonproliferation, Anti-Terrorism, Demining and Related
Programs ........................................................................................................ 336 399 440
Development Assistance ............................................................................... 1,364 1,448 1,103
Economic Support Fund ................................................................................ 1,947 2,481 3,036
Child Survival and Disease Programs ...................................................... 1,823 1,538 1,252
Millennium Challenge Corporation ............................................................ 994 1,488 3,000
Peace Corps ...................................................................................................... 308 317 345
Conflict Response Fund (legislative proposal) ...................................... — — 100
All other programs ........................................................................................... 4,057 3,788 4,595
USDA International Food Aid (non-add) ................................................. 1,185 1,173 885
Subtotal, International Assistance Programs ............................................. 15,087 16,204 18,460

Other International Affairs Activities:


Export-Import Bank ......................................................................................... 30 77 211
Broadcasting Board of Governors ............................................................. 552 591 652
All other programs ........................................................................................... 74 183 87
Subtotal, Other International Affairs Activities ........................................... 656 851 950

Total, Discretionary budget authority ................................................................. 25,696 28,315 32,723

Memorandum: Budget authority from enacted supplementals ............... 3,155 193 —

Discretionary Outlays:
Department of State ............................................................................................ 9,953 11,260 13,414
International Assistance Programs ................................................................ 16,837 16,724 17,778
Other International Affairs Activities .............................................................. 1,167 1,233 1,086
From Supplementals ........................................................................................... 380 112 104
Total, Discretionary outlays ................................................................................... 28,337 29,329 32,382

Total, Mandatory outlays ........................................................................................ 5,032 2,524 561

Total, Outlays .............................................................................................................. 23,305 26,805 31,821


THE BUDGET FOR FISCAL YEAR 2006 235

Department of State and International Assistance Programs—Continued


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Credit activity
Direct Loan Disbursements:
Department of State ............................................................................................ — 1 1
International Assistance Programs ................................................................ 511 791 551
Export-Import Bank.............................................................................................. 928 277 144
Total, Direct loan disbursements ......................................................................... 1,439 1,069 696

Guaranteed Loan Commitments:


International Assistance Programs ................................................................ 3,037 5,609 560
Export-Import Bank.............................................................................................. 10,928 11,092 11,787
Total, Guaranteed loan commitments ................................................................ 13,965 16,701 12,347
DEPARTMENT OF TRANSPORTATION

AT A GLANCE: TRAN
NT OF SP
2006 Discretionary Budgetary Resources: $57.5 billion E

OR
TM
(Decrease from 2005: 1 percent)

TAT
DEPAR
Major Programs:

ION
• Aviation system
• Interstate highway system

IC A
UN
• Rail system

IT

ER
• Highway safety programs D

E
ST M
A T ES O F A

MEETING PRESIDENTIAL GOALS

Agency-specific Goals

• Improving aviation and surface transportation safety.


• Improving transportation mobility.
• Improving passenger rail service between cities.

Making Government More Effective

• Implementing recently released Federal Aviation Administration air traffic controller workforce
plan to ensure appropriate staffing.
• Developing Federal highway grant management techniques to reduce cost and schedule over-
runs.
• Improving oversight of all Department of Transportation loan programs.
• Improving research coordination and oversight of pipeline and hazardous materials safety
programs.

237
238 DEPARTMENT OF TRANSPORTATION

AGENCY-SPECIFIC GOALS

Aviation Safety

The United States has the largest, most Severe Runway Incursions are Decreasing
complex aviation system in the world. The
70
Nation’s airspace system includes 14,934 air
traffic controllers, 3,364 airports, and 315 60
air traffic control facilities. Yet despite this
complexity and size, commercial aviation 50
continues to be the safest form of trans-
40
portation—the United States has seen only
one commercial accident since 2002. The 30
Federal Aviation Administration (FAA) has
established strategic goals to reduce the rates 20
of commercial and general aviation fatal
10
accidents, reduce the risk of potential runway
collisions, and reduce cabin injuries caused by 0
turbulence. 1999 2000 2001 2002 2003 2004
Source: Department of Transportation.

FAA, working with industry, academia, and


other Federal agencies, conducts aviation research for improving safety. For example, in 2006, FAA
will continue its research into technologies, procedures, and practices that help ensure the continued

FAA Delivers New Technology

The FAA’s Airport Surface Detection Equip-


ment—Model X (ASDE-X) increases airport
safety. ASDE-X uses advanced technology to:
• Determine the position of ground traffic
by using a three dimensional display,
which is particularly useful during periods
of poor weather;
• Prevent potential runway collisions by
providing visual and audio alerts to air
traffic controllers; and
• Reduce taxi time and delays by eliminat-
ing unnecessary communications.
At the four sites where this new technology
is deployed, it has reduced the risk of runway
incursions by 66 percent and reduced taxi-out
FAA’s ASDE-X technology provides General Mitchell International time delays by 2.6 percent, meaning less
Airport in Milwaukee, Wisconsin with a new tool to more efficiently
manage runway traffic. time waiting for departures. The 2006 Budget
provides $24 million to deploy ASDE-X at nine
additional airports.
THE BUDGET FOR FISCAL YEAR 2006 239

airworthiness of older aircraft. FAA will also develop and implement airport design standards and
surface movement procedures to lower the risk of runway collisions.
The 2006 Budget supports FAA’s continuing safety efforts. The Budget request for FAA is nearly
$11 billion, excluding grants for airport development. The Budget provides $8.2 billion in operational
and personnel costs, $2.4 billion in information technology investments, and $130 million for aviation
research. In 2006, FAA plans to hire approximately 600 new air traffic controllers and 97 safety
inspectors to ensure that FAA maintains high standards of aviation safety and efficiency.

Surface Transportation Safety

In calendar year 2003, the vehicle fatality rate Highway Fatalities Remain Constant in
reached a record low—1.48 deaths per 100 mil- Fatalities in thousands Recent Years Per 100 million miles
lion vehicle miles traveled, while the number of 70 3.5
Total Annual Fatalities
vehicle miles traveled increased by 24 million 60 Fatality Rate Per 100 million 3.0
miles. Despite this improvement, the total num- Vehicle Miles Traveled
ber of surface fatalities has remained essentially 50 2.5

unchanged since calendar year 2001. An esti- 40 2.0


mated 42,643 lives were lost in traffic accidents
in calendar year 2003, approximately 117 peo- 30 1.5

ple per day. 20 1.0

Two major contributing factors to vehicle 10 0.5


fatalities are alcohol-impaired driving and the
failure to use safety belts. In both of these 0
1980 1983 1986 1989 1992 1995 1998 2001
0

areas, the statistics are improving. Alcohol-re- Source: Department of Transportation.


lated traffic deaths decreased by three percent
in calendar year 2003, to the lowest level since calendar year 1999. In calendar year 2004, safety
belt use reached an all-time high of 80 percent, but thousands died or were injured because they
failed to buckle up. Approximately 59 percent of those killed in motor vehicle crashes were not using
any type of occupant restraints.
To build on safety gains, the Administration’s surface transportation reauthorization proposal
Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2003 (SAFETEA) would
combine several safety programs administered by the National Highway Traffic Safety Admin-
istration (NHTSA) into a consolidated grant program. States would have greater flexibility to
use safety program funds for occupant protection, impaired driving countermeasures, and other
safety programs if they develop performance-based highway safety plans. SAFETEA also proposes
a safety belt incentive program to encourage States to enact tough safety belt laws and achieve
substantially higher safety belt usage rates. The Budget requests $231 million for NHTSA safety
operations and research programs and $465 million for grants to States for targeted highway safety
programs, which is $23 million more than enacted for 2005. Funding increases are also directed
toward improving the Fatalities Analysis Reporting System, the Department of Transportation’s
(DOT’s) database used to measure and analyze trends in vehicle fatalities.
In addition, the Administration proposes more than doubling funding for highway safety improve-
ments over levels in the previous six-year authorization law, the Transportation Equity Act for the
21st Century (TEA 21). SAFETEA dedicates approximately $7.5 billion over six years to help States
eliminate hazardous roadway conditions.
240 DEPARTMENT OF TRANSPORTATION

AGENCY-SPECIFIC GOALS—Continued

Motor carriers (commercial trucks and buses)


represent about four percent of registered vehi-
cles, eight percent of vehicle miles traveled, and
11 percent of all fatal vehicle crashes. While
fatality rates have decreased, the Federal Mo-
tor Carrier Safety Administration (FMCSA) fell
short of meeting its target levels for calendar
year 2003, but will continue working to reduce
the rate from 2.8 per 100 million truck-miles
traveled in calendar year 1996 to 1.65 by cal-
endar year 2008.
Consistent with the SAFETEA proposal,
Motor carrier grants are used by States to hire and train safety
the President’s Budget requests $232 million
inspectors. for aggressive State enforcement of interstate
commercial truck and bus regulations, and
$233 million to support oversight of hazardous materials transportation, Federal safety enforcement
programs, and border safety inspections. These funds will support commercial vehicle safety and
research to enhance the quality, stability, and uniformity of State commercial vehicle safety and
enforcement programs. Additional funding in 2006 will support motor carrier safety grants to
States, and improvements to FMCSA’s safety database.
SAFETEA expands and improves safety auditing of new motor carriers. Studies show that new
motor carriers are less likely to comply with safety regulations and are more likely to be involved in
crashes than well-established motor carriers. FMCSA is implementing a safety auditing initiative
for every new commercial motor carrier company that applies to operate within the United States.
New entrants will be subjected to a safety audit in the first 18 months of operation before they receive
a permanent safety decal.
To improve rail safety, the Budget includes an additional $14 million to substantially complete the
National Differential Global Positioning System (NDGPS) broadcast station network in the conti-
nental United States. NDGPS, which relays GPS coordinates at one to three meter accuracy, will
enable railroads to use Positive Train Control (PTC) technology to track the location and speed of
trains on crowded tracks more accurately. Employing PTC systems should reduce the likelihood of
collisions between trains, casualties to roadway workers, and speed-related accidents. The National
Transportation Safety Board has named PTC as one of its "most-wanted" initiatives for national
transportation safety.

Improving Transportation Mobility

Relieving congestion continues to be a major challenge. To address this problem, and to enhance
infrastructure conditions, the Department proposes investing in system improvements and smart
technology. Initiatives supported in this Budget include expanding “intelligent” highway system tech-
nology and modernizing the airspace control system. DOT’s total requested spending for improving
mobility is approximately $38 billion for 2006.
THE BUDGET FOR FISCAL YEAR 2006 241

Air Mobility. The demand for air transporta-


tion is outpacing increases in capacity in some
U.S. airports. FAA forecasts that air traffic de-
mand has the potential to triple by 2025. This
growth has been fueled by the airline industry’s
ability to offer safe, affordable, and fast service.
The 2006 Budget proposes $3 billion for
the Grants-in-Aid for Airports program (AIP),
which provides funding to airports for safety
and capacity-enhancement projects. AIP
funding assists airports in constructing new
Over the next 20 years, many airports will need additional capacity to runways or taxiways, extending existing
meet growth in air traffic demand. runways, and constructing and improving
terminal buildings. Providing additional
runways and deploying improved technology will help meet future customer needs and reduce flight
delays. FAA will continue to use its authority to work with airlines at selected airports to ease
airline delays. It will also expand the Free Flight program which provides air traffic controllers
with air traffic management tools to direct planes to their destinations more efficiently. These tools
reduce air traffic congestion, delays, and the cost of flying.
In addition, the 2006 Budget requests $18 million for the FAA to begin to integrate the Govern-
ment’s disparate air traffic enhancement efforts; leverage investments in civil aviation, homeland
security, and national security; and build upon current air traffic management initiatives.
Surface Mobility. Highway and road congestion is an aggravating problem in all parts of the coun-
try. Congestion is also a growing problem at intermodal freight transfer facilities, like sea ports and
rail yards. Despite localized congestion problems, the condition and quality of the Nation’s highways
have improved in recent years.

To ease gridlock, the Budget proposes Highway Congestion is Worsening


highway and transit infrastructure spending Percent of highway miles traveled under congested conditions
of $283.9 billion over six years. This marks a 40
Actual Projected Target
35-percent increase over the TEA 21 six-year 35
spending totals. This figure reflects the emerg-
30
ing consensus in Congress that was developed
in a conference committee in 2004, and the 25

Administration looks forward to working with 20


the Congress to complete action on legislation
15
to improve the surface transportation system.
10
In addition to relying on new construction
5
to reduce congestion, SAFETEA would fund
research and development to increase the ca- 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
pacity of the existing highway system. Through Source: Department of Transportation.
advanced traffic management techniques, we
can improve the performance and operation of existing transportation systems.
SAFETEA would facilitate private investment in transportation projects. Encouraging private par-
ticipation is a critical step in the improvement of the surface transportation system. SAFETEA also
envisions new methods to achieve better use of our highways. For example, SAFETEA would allow
States to permit Single Occupancy Vehicles in High Occupancy Vehicle lanes, as long as time-of-day
variable charges are assessed on lone drivers for such access.
242 DEPARTMENT OF TRANSPORTATION

AGENCY-SPECIFIC GOALS—Continued

Just as our highways are becoming increas- Highway Pavement Quality has Improved
ingly crowded, so are our ports and freight
Percent of vehicle miles traveled on acceptable quality pavement
facilities. In response, SAFETEA would 95
dedicate a portion of National Highway System Actual Target

funds to intermodal freight facilities. Likewise,


SAFETEA sets aside funds for publicly owned
intermodal freight transportation projects
that address economic, congestion, security, 85
safety, and environmental issues. Many
freight transfer facility projects also would be
eligible for DOT innovative financing loans
and tax-exempt private activity bonds.
75
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: Federal Highway Administration.

Reforming Intercity Passenger Rail Service

Amtrak's Debt Payments Have More The current model for providing intercity
Millions of dollars
Than Doubled... passenger rail service—Amtrak—can and
400 must be significantly improved. Amtrak is
350
almost 35 years old, and the cost to taxpayers
Debt Payments
since its inception has been approximately
300
$29 billion. It requires hundreds of millions
250 of dollars in operating subsidies annually,
200 particularly for its long distance trains, to
remain solvent. Amtrak’s World War II-era
150
route system goes through nearly every State,
100 but in terms of intercity passenger miles the
50 commercial bus industry is seven times larger;
0
the air carrier industry is larger by a factor of
1997 1999 2001 2003 2005 2007 2009 92.
Source: Department of Transportation.
Amtrak is currently saddled with a growing
stream of debt service payments. The railroad also has several billion dollars of deferred capital
projects that continues to grow. Along the Northeast Corridor, which Amtrak owns, major bridges
and tunnels date to the 1860s. As Amtrak’s infrastructure ages and as it continues to defer capital
investment, service has deteriorated and safety is at risk. From 2003 to 2004, Amtrak’s on-time
performance dropped from 74.1 percent to 70.7 percent. Looking ahead, Amtrak faces increasing
risks of a major infrastructure failure because it has spread its capital funds thinly between the
heavily-used Northeast Corridor and long-distance passenger trains that run on its nationwide route
network.
THE BUDGET FOR FISCAL YEAR 2006 243

Highlights of the Passenger Rail Investment Reform Act:


• Amtrak would split into a private infrastructure company and train operating company, effectively sep-
arating the Northeast Corridor (NEC) infrastructure from long-distance train operations.
• DOT would lease the NEC infrastructure to a compact of States that would be responsible for managing
the infrastructure and train operations along the corridor.
• Outside the Northeast where Amtrak does not own track, individual States and interstate compacts
could negotiate with the freight rail companies to develop new routes. This should lead to the devel-
opment of short-corridor routes between major population centers.
• After a transition period, States would bid contracts for infrastructure maintenance and train operations
among the former Amtrak companies and other private companies. States would cover train operating
subsidies. Federal matching grants would help pay for infrastructure, which is similar to the Federal-
State cost sharing arrangement of other DOT transportation programs.

This has occurred at the same time as Federal funding for Amtrak has increased substantially. For
2001, Amtrak received $520 million in Federal funding. For 2005, Amtrak received $1.2 billion.
In 2003, the Administration proposed the Passenger Rail Investment Reform Act, which built
on the successful State-Federal partnerships that are hallmarks of other transportation programs.
Ultimately, States and localities would have the freedom to develop custom rail services demanded
by their citizens. The Federal Government’s role would be to assist in funding capital investments.

Until such reforms are enacted, the Admin- ...While Amtrak's Losses Continue to Grow
istration will not propose continued Federal Millions of dollars
subsidies for Amtrak. On its current course, 1,500
Operating Loss
Amtrak’s performance will decline and its
Cash Loss
infrastructure will deteriorate even with well
over $1 billion in annual Federal appropri-
1,000
ations. With no subsidies, Amtrak would
quickly enter bankruptcy, which would likely
lead to the elimination of inefficient operations
and the reorganization of the railroad through 500
bankruptcy procedures. Ultimately, a more
rational passenger rail system would emerge,
with service on routes where there is real
0
ridership demand and support from local 1997 1998 1999 2000 2001 2002 2003 2004
governments—such as the Northeast Corridor. Source: Department of Transportation.

The 2006 Budget proposes $360 million for the


Surface Transportation Board to maintain existing commuter services and freight traffic along the
Northeast Corridor and elsewhere.
The Administration would endorse increased funding in subsequent years for intercity passenger
rail, on the condition that real legislative reforms are enacted. This amount could fund the reforms
envisioned in the Administration’s restructuring proposal, including addressing the Northeast Cor-
ridor deferred maintenance backlog, and investing in new state-sponsored capital projects.
244 DEPARTMENT OF TRANSPORTATION

MAKING GOVERNMENT MORE EFFECTIVE

Aviation Transportation

The FAA’s newly created Air Traffic Organ- FAA Projects Dramatic Increase in Retiring
ization (ATO) has improved the management Air Traffic Controllers
of the FAA through several initiatives. The 1,400

ATO finalized a comprehensive workforce plan 1,200


to address the upcoming wave of air traffic
controller retirements. This plan helps ensure 1,000
that the FAA will have the right people to fill 800
open positions as they develop. In addition,
the ATO has launched an initiative to increase 600
worker productivity by 10 percent over the
400
next five years. The ATO will increase the
productivity of its staff by decreasing the time 200
and expense taken to hire and train new air
0
traffic controllers, establishing flexible staffing 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Department of Transportation.
standards to better use the existing workforce,
and by better managing other compensation costs such as sick leave, disability claims, and time
spent on union activities. The ATO will also improve productivity by handling expected air traffic
increases through 2009 using existing staffing levels and automation programs. Consolidation of
some facilities and a possible expansion of the contract tower program will also help the Department
become more productive.

Surface Transportation

For 2005, grants for highway construction, public transit, and highway safety programs—the De-
partment’s largest program—must be reauthorized by the Congress. The reauthorization will define
federal highway policy, and also set funding levels for upcoming projects. The Budget updates the
Administration’s proposed reauthorization legislation—Safe, Accountable, Flexible, and Efficient,
Transportation Equity Act (SAFETEA)—by supporting reauthorization at a level of $283.9 billion
through 2009.
The Budget supports improved organizational performance and productivity for all DOT surface
transportation programs. For example, through its oversight program, the Federal Transit Admin-
istration (FTA) helps transit agencies develop disciplined cost estimates, focusing on best practices
and better metrics, emphasizing risk assessment practices, and evaluating procurement practices.
Currently, all of FTA’s major capital projects are within 10 percent of baseline cost estimates and
most of the projects are within 5 percent. Likewise, the Federal Highway Administration (FHWA) is
more closely monitoring progress of large construction projects over $1 billion.
Nevertheless, DOT needs to improve its oversight of the tens of billions of dollars in highway and
transit grants made to States and localities each year. DOT field staffers are focusing on making
sure grant recipients control project costs and schedules. To help meet this goal, DOT is implement-
ing an action plan to ensure that Federal grant dollars are properly accounted for by grantees and
sub-grantees. For example, the Budget includes funds for additional personnel to provide oversight of
large highway construction projects, such as the “mixing bowl” project in Springfield, Virginia. Addi-
tionally, SAFETEA would strengthen FHWA’s stewardship while respecting States prerogatives by:
THE BUDGET FOR FISCAL YEAR 2006 245

• Having States submit project management plans for all Federal aid projects costing $1 billion
or more.
• Requesting States to prepare annual financial plans for all projects receiving $100 million or
more in Federal aid funds.
• Establishing cost-estimate standards to provide more reliable and consistent project cost expec-
tations.
• Strengthening the Department’s suspension and debarment policies to prevent contractors from
continuing to defraud the Government.
• Allowing States to share in monetary recoveries from Federal fraud cases.
SAFETEA would also establish a new highway pilot program where States could manage as a
block grant funds from the following programs: Interstate Maintenance, National Highway System,
Surface Transportation (except for the Transportation Enhancement funds), Highway Safety Im-
provement, Highway Bridge, and Minimum Guarantee. Under the pilot program, States would work
with the Department to develop and meet specific system performance measures.

Credit Programs

DOT operates loan programs that provide substantial financing for rail, highway, maritime, and
multimodal projects that improve mobility and safety, and enhance the environment. Over the past
year, DOT has established a process to better manage its loan portfolio and limit its credit risk. DOT
uses a standardized process for reviewing loan applications, regardless of the loan program, and top
agency management make final recommendations. DOT also employs independent financial advisors
to assess the financial viability of applicants. The result is consistent standards and better decision-
making. On a related issue, the 2006 Budget proposes to de-authorize the Railroad Rehabilitation
and Improvement Financing loan program because recent tax law changes will better advance rail
infrastructure investment.

Research and Special Programs Administration Reorganization

The recent enactment of the Research and Special Programs Improvement Act will permit the
Administration to improve coordination and strengthen oversight by realigning the Department’s
research, pipeline safety, and hazardous materials safety programs. The restructuring will create
two new operating administrations in place of the existing Research and Special Programs Admin-
istration. The new Research and Innovative Technology Administration will focus on research and
development activities, transportation analysis, and statistics. Inspection and policy responsibilities
for pipeline and hazardous materials transportation safety programs will be placed within the other
newly established operating administration: the Pipeline and Hazardous Materials Safety Adminis-
tration.

Managing for Results

The Administration continues to assess the management and performance of DOT programs using
the Program Assessment Rating Tool (PART). Last year, nine programs were assessed using PART,
which reviews each program’s design and purpose, strategic planning, internal management, and
whether they are generating positive results for taxpayers. For example, the PART review of FAA’s
Facilities and Equipment program found that, despite appropriate long-term goals, projects consis-
tently experience large cost and schedule overruns. In response to the PART recommendations, FAA
will focus on increasing the use of performance-based contracts as a means of controlling costs. Eval-
uations of the Maritime Administration’s Maritime Security Program found a need for a new measure
246 DEPARTMENT OF TRANSPORTATION

MAKING GOVERNMENT MORE EFFECTIVE—Continued

of the program’s contribution to the total commercial sealift capacity requirement. This new mea-
sure will help DOT, which is working with the Department of Defense, evaluate whether the current
mix of vessel types in the Maritime Security Program fleet are appropriate to meet the needs of the
Department of Defense.

Update on the President’s Management Agenda

The table below provides an update on DOT’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Through the Human Capital initiative, DOT has established a new strategic plan for managing its human
capital and is progressing toward implementing multi-tier employee evaluation systems for each of its operating
administrations. DOT completed its first two standard competitions in August 2003, with expected savings
of $9 million over 10 years. DOT has implemented a Department-wide integrated financial system to make
the Department’s accounting practices more streamlined and accurate. The Department still faces several
challenges relating to financial management, including a need to improve the oversight of highway and transit
grants. DOT has created an Enterprise Architecture that focuses on information technology (IT) investments and
plans to address “at risk” programs in the Department. Over the next year, DOT will work towards achieving the
challenging goal of securing all of its IT systems. DOT’s 2006 Budget submissions incorporated PART findings
and are structured to show full costs by strategic goal.

Initiative Status Progress


Real Property Asset Management

Eliminating Improper Payments

FAA holds over 98 percent of the DOT property and leads the Department’s Real Property Initiative. There are
many challenges ahead, including a gap analysis between the FAA asset management plan, inventory system,
and performance measures and the Federal Real Property Council standards. FAA will use this assessment to
determine an aggressive strategy for addressing deficiencies. For its Improper Payment Initiative, DOT’s major
challenge is to gain insight into how grantees and subgrantees spend DOT funds. Currently, DOT has limited
information for its major grant programs. (Because this is the first quarter that agency efforts in the Eliminating
Improper Payments Initiative were rated, progress scores were not given.)
THE BUDGET FOR FISCAL YEAR 2006 247

Department of Transportation
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budgetary Resources:
St. Lawrence Seaway Development Corporation
Existing law ........................................................................................................ 13 15 7
Legislative proposal to collect user fees .................................................. — — 8
Federal Aviation Administration ........................................................................... 13,841 13,834 13,779
FAA Obligation Limitation (non-add) ................................................................. 3,379 3,472 3,000
Rescission of 2005 and 2006 unused contract authority ...................... — — 1,069
Federal Highway Administration .......................................................................... 33,919 33,734 34,700
Federal-Aid Highway Obligation Limitation (non-add) ........................... 33,949 34,263 34,700
Federal Motor Carrier Safety Administration (Obligation limitation) ....... 364 443 465
National Highway Traffic Safety Administration (Obligation limitation) .. 298 452 696
Federal Transit Administration .............................................................................. 7,264 7,647 7,781
FTA Obligation Limitation (non-add) ............................................................. 5,813 6,691 6,825
Federal Railroad Administration .......................................................................... 1,450 1,425 552
Amtrak (non-add) ................................................................................................ 1,218 1,207 360
Maritime Administration .......................................................................................... 220 304 295
Rescission of unused balances .......................................................................... — — 74
Pipeline and Hazardous Materials Safety Administration 1 ....................... 112 112 116
Research and Innovative Technology Administration 2 ............................. — 4 6
Surface Transportation Board ............................................................................... 18 20 23
All other programs (includes offsetting collections) ...................................... 163 1 216
Total, Discretionary budgetary resources 3 .................................................... 57,662 57,991 57,501

Total, Surface Obligation Limitation (non-add) .............................................. 40,420 41,849 42,686

Memorandum: Budget authority from enacted supplementals ............... — 1,227 —

Total, Discretionary outlays ................................................................................... 53,387 57,235 59,388

Mandatory Outlays:
St. Lawrence Seaway Development Corporation:
Legislative proposal to collect user fees .................................................. — — 8
Federal Highway Administration...................................................................... 946 1,296 1,330
Office of the Secretary ........................................................................................ 8 117 51
All other (including offsetting receipts) .......................................................... 206 433 176
Total, Mandatory outlays ........................................................................................ 1,160 980 1,197

Total, Outlays .............................................................................................................. 54,547 58,215 60,585


248 DEPARTMENT OF TRANSPORTATION

Department of Transportation—Continued
(In millions of dollars)

2004 Estimate
Actual 2005 2006
Credit activity
Direct Loan Disbursements:
Transportation Infrastructure Finance and Innovation Program .......... 65 396 818
Railroad Rehabilitation and Improvement Program ................................. 227 250 —
Total, Direct loan disbursements ......................................................................... 292 646 818

Guaranteed Loan Commitments:


Transportation Infrastructure Finance and Innovation Program .......... — — 200
Maritime Guaranteed Loans (Title XI)........................................................... 212 140 —
Minority Business Resource Center .............................................................. 8 18 18
Total, Guaranteed loan commitments ................................................................ 220 158 218
1
To be transferred to the Surface Transportation Board.
2
Reflects reorganization of programs under the Research and Special Programs Improvement Act.
3
Includes both discretionary budget authority, obligation limitations, and rescissions.
DEPARTMENT OF THE TREASURY

AT A GLANCE:
2006 Discretionary Budget Authority: $11.6 billion
(Increase from 2005: 4 percent)
Major Programs:
• Collecting taxes
• Managing and accounting for the public debt
• Administering Federal finances
• Combating financial crime and terrorist financing
• Regulating and supervising financial institutions
• Producing coins and currency

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Reforming the tax code to make it simpler and fairer for average taxpayers.
• Ensuring a safe and sound banking system through regulation and supervision of banks and
thrifts.
• Promoting and coordinating efforts of Federal agencies and the private sector to increase finan-
cial literacy for all Americans.

Protecting America

• Combating terrorist financing and financial crime, especially through efforts of the new Office
of Terrorism and Financial Intelligence, which will provide a comprehensive approach to
Treasury’s contribution to the War on Terror.

Agency-specific Goals

• Producing the world’s most accepted coins and currency and ensuring the integrity of the U.S.
dollar.

Making Government More Effective

• Providing new tax enforcement initiatives to promote fair and equitable tax enforcement and
increase revenue.

249
250 DEPARTMENT OF THE TREASURY

MEETING PRESIDENTIAL GOALS—Continued

• Reducing paper processing as more people file electronically with the Internal Revenue Service.
• Consolidating the Community Development Financial Institutions Fund with other community
and economic development programs.
• Focusing Internal Revenue Service customer service on telephone and Internet and away from
walk-in service centers.
THE BUDGET FOR FISCAL YEAR 2006 251

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

President Bush has brought tax relief to Americans in each year since 2001 and is working on mak-
ing this tax relief permanent while reforming the complex tax system. The President has appointed
a bipartisan panel to advise the Secretary of the Treasury on options to reform the tax code. The re-
port that the panel will present this year should help move the Nation toward a simpler, fairer, more
pro-growth system, which recognizes the importance of home ownership and charity to American
society. Meanwhile, the Internal Revenue Service (IRS) is working to make it easier for taxpayers
to comply with Federal income tax rules. Taxpayers used the IRS.gov website 739 million times in
2004 to download forms and publications, up 32 percent from 2003. Electronic filing, which is faster,
easier, and far less prone to error than paper filing, increased by 16 percent in 2004 to more than 61
million individual tax returns. IRS estimates that 68 million, or half of all individual returns will be
electronically filed in 2005.

Need Customer Assistance?


Treasury’s Office of the Comptroller of the Currency (OCC) as-
sists consumers in resolving complaints about national banks and
the credit cards issued by those banks. By resolving consumer
complaints, OCC returned $4.4 million in fees and charges to
national bank customers last year. You can contact OCC’s Cus-
tomer Assistance Group toll-free by telephone, 1–800–613–6743,
or by e-mail at Customer.Assistance@occ.treas.gov. For more
information about the OCC’s Customer Assistance Group,
including information on how to file a formal complaint against
a national bank, visit OCC’s Customer Assistance web page at
www.occ.gov/customer.htm.

A healthy banking system is fundamental to a strong national economy. Treasury maintains the
health of the national banking and thrift system through the Office of the Comptroller of the Cur-
rency (OCC) and the Office of Thrift Supervision (OTS). OCC and OTS conduct on-site examinations
and regulate financial institutions to ensure that institutions are properly capitalized and soundly
managed. In addition, OCC and OTS ensure that bank and thrift customers have fair access to
financial services by examining banks and thrifts for compliance with consumer banking laws. Fi-
nally, OCC and OTS act in conjunction with the Financial Crimes Enforcement Network (FinCEN)
to enforce laws and regulations that prevent banks and thrifts from allowing criminals to launder
252 DEPARTMENT OF THE TREASURY

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

money through their institutions. In the next few years, the banking regulators will work on updat-
ing international uniform safety and soundness standards for banking institutions.
The Administration will again propose broad reform of the supervisory system for Government-
sponsored enterprises (GSEs) in the mortgage market: Fannie Mae, Freddie Mac, and the Federal
Home Loan Bank System. Part of this reform includes establishing a new safety and soundness
regulator for the housing GSEs with powers comparable to other world-class financial regulators,
and with the stature and resources necessary to carry out its responsibilities. The Budget places this
new regulator in the Department of the Treasury. The Administration’s proposal promotes a strong,
resilient financial system and increased opportunities for affordable homeownership. (See the Credit
and Insurance chapter in the Analytical Perspectives volume for a background discussion.)
Treasury’s Office of Financial Education contributes to the Administration’s pro-growth agenda
by equipping Americans with the knowledge needed to improve management of their finances. The
2006 Budget continues its commitment to the Office of Financial Education, which facilitates private
sector efforts to raise the level of financial literacy of Americans. Treasury coordinates the financial
education efforts of 20 Federal agencies.
THE BUDGET FOR FISCAL YEAR 2006 253

PROTECTING AMERICA

The Power of Sanctions: The Commercial Bank of Syria

In 2004, analysts and investigators from the Financial


Crimes Enforcement Network, the Office of Foreign
Asset Control, and the Internal Revenue Service Criminal
Investigation division identified the Commercial Bank of
Syria as an acute financial threat. The Commercial Bank
of Syria served as a haven for the laundering of proceeds
generated from violations of United Nations (UN)
sanctions against the Saddam Hussein regime in Iraq
and the UN’s Oil For Food program in Iraq, and retained
these proceeds in contravention of international law.
Moreover, terrorists and their supporters used the bank
and suspicious transactions were processed without
oversight. On May 11, 2004, Treasury designated the
Commercial Bank of Syria a “primary money laundering
concern” under the USA PATRIOT Act. This designation
exposed the bank to potentially serious countermea-
sures, including cutting the bank off entirely from the U.S.
financial system. Since May, the Government of Syria
has sought to avert such countermeasures by entering
into negotiations with Treasury aimed at bringing the
country into compliance with international anti-money
laundering standards.

The President’s Budget commits over $100 million to Treasury’s efforts to protect America through
detecting and stopping financial crimes, money laundering, and terrorist financing. The Office of
Terrorism and Financial Intelligence (TFI) fully integrates the operations and assets of the Office
of Terrorist Financing and Financial Crime (TF/FC), the Office of Foreign Assets Control (OFAC),
the Financial Crimes Enforcement Network (FinCEN), the Office of Intelligence and Analysis (OIA),
and the Treasury Executive Office for Asset Forfeiture (TEOAF). The aims of the consolidated TFI
organization are safeguarding the financial system against illicit use and wielding Treasury’s array
of economic tools against rogue nations, terrorist facilitators, money launderers, drug kingpins, and
other national security threats. TFI is divided into two functional areas: intelligence and enforce-
ment. OIA provides focused and operable intelligence in support of the Department’s mission and
policies. TFI’s enforcement responsibilities—executed by the TF/FC, OFAC, and FinCEN—include
designating and freezing the accounts of terrorists, drug kingpins, and their support networks; im-
plementing U.S. sanctions policy; administering and enforcing the Bank Secrecy Act (BSA); linking
law enforcement agencies with financial institutions to uncover illegal activities and schemes; and
helping strengthen U.S. and international standards to prevent money laundering and terrorist fi-
nancing. Finally, TFI provides policy guidance for IRS’ Criminal Investigation’s expert investigators
in their anti-money laundering, terrorist financing, and financial crimes cases.
254 DEPARTMENT OF THE TREASURY

PROTECTING AMERICA—Continued

One of the most visible and effective tactics


of the comprehensive strategy has been
public designation of terrorists and terrorist
organizations. Since September 2001, the
United States and our allies have designated
397 terrorist-related entities and frozen nearly
$147 million in terrorist assets worldwide.
IRS’ special agents are experts at gathering
and analyzing complex financial information
from numerous sources and applying the
evidence to tax, money laundering, and BSA
violations. These agents apply their training,
skills, and expertise to support the national
effort to combat terrorism and participate in
the Joint Terrorism Task Forces and similar Internal Revenue Service Criminal Investigation (IRS-CI) division
interagency efforts focused on disrupting and special agents display possible hawala symbols found stamped on U.S.
currency seized from Saddam Hussein upon his capture. Hawala is an
dismantling terrorist financing. informal funds-transfer system sometimes used by money launderers
and terrorist financiers.
THE BUDGET FOR FISCAL YEAR 2006 255

AGENCY-SPECIFIC GOALS

The U.S. Mint (Mint) and the Bureau of Engraving and Printing
(BEP) are responsible for ensuring that our Nation continues to pro-
duce the world’s most accepted coin and currency. At the end of 2005,
the Mint will end its highly successful production of nickels in com-
memoration of the bicentennials of the Louisiana Purchase and the
Lewis and Clark expedition. All nickels issued in 2006 will bear the
likeness of Thomas Jefferson on one side, and an image of Monticello
on the other side. During 2006, the Mint will also roll out the next
installment of the popular 50 State quarters program, with quarters
for Nevada, Nebraska, Colorado, North Dakota, and South Dakota.
During 2006, BEP will continue to focus its resources on produc-
In 2005, there will be a new face on the
ing the most secure currency for the Nation. BEP will pursue the
Nation’s nickel. It will still be President
redesign of the $100 note as part of its current multi-year initiative
Thomas Jefferson, but unlike we have
ever seen him before.
to implement the most ambitious currency redesign in U.S. history.
The planned redesign of the $100 note follows successful redesigns of the $20 and $50 notes with
subtle background colors and other counterfeit deterrence features. A redesigned $10 note will be in
production and introduced into circulation in 2005.
256 DEPARTMENT OF THE TREASURY

MAKING GOVERNMENT MORE EFFECTIVE

Treasury is working to reduce duplicative programs and maximize the efficiency of all its bureaus.
For example, IRS officials are working to increase the effectiveness of their programs by helping to
bring about fairer and more efficient tax compliance at a lower cost. The Budget invests $265 mil-
lion in new initiatives for these programs. This investment will provide additional audits, collection
efforts, and tax fraud enforcement to increase revenue and promote compliance.

Enforcement Revenue To attack tax evasion most effectively, IRS


Billions of dollars is targeting its enforcement resources on
50 high-risk taxpayers such as those potentially
-----Projection-----
45.9
involved in abusive trusts or offshore tax
40 43.1 43.3 evasion schemes. This focus on higher risk
37.6 taxpayers has resulted in increased audits
30 33.8 34.1 on higher income individuals and businesses.
Audits of high-income taxpayers—those
20
earning $100,000 or more—topped 195,000 in
2004, a 40-percent increase from 2003 and a
74-percent increase from 2002. Audits of the
10
largest businesses—those corporations with
assets of $10 million and over—climbed to
0
2001 2002 2003 2004 2005 2006 9,560, up 34 percent from 2003. One in six of
Source: IRS. these large corporations were audited in 2004.
One sign of the success of this crackdown on
tax evasion is the increase in revenue resulting from enforcement actions, which reached a record
$43 billion in 2004 (see accompanying chart).
The American Jobs Creation Act of 2004 included an important new tax enforcement tool. Like
many States and other Federal agencies, IRS will now be able to hire private collection contractors
to supplement its own collection staff’s efforts to ensure that all taxpayers pay what they owe. The
legislation ensures contractors respect taxpayer rights. Treasury estimates these contractors will
increase delinquent tax collections by at least $1.4 billion over the next 10 years.
IRS has already achieved impressive successes in productivity improvements. Since 2002, IRS
has improved its productivity in tax collection (by telephone and mail) and correspondence audits
by more than 15 percent. The Budget proposes to streamline IRS’ taxpayer service programs by
reducing dependence on walk-in service centers and increasing reliance on more efficient telephone
and Internet service. This proposal was developed, in part, as a result of a 2004 Program Assessment
Rating Tool analysis of taxpayer service.
The Federal Government is working with the States to make filing taxes easier by providing more
forms that can be filed electronically. The Budget funds the Modernized E-File Project at an esti-
mated $56 million, which has demonstrated success over the past several years.
Electronic filing also benefits the Government through reduced processing costs. The Budget in-
cludes a legislative proposal to increase the Secretary of the Treasury’s authority to mandate elec-
tronic filing from businesses and tax exempt organizations. This measure will assist the IRS in
THE BUDGET FOR FISCAL YEAR 2006 257

moving to its goal of receiving 80 percent of The Number of Individuals Filing


all tax returns electronically. A corresponding Electronically Has Steadily Increased
decrease in the cost of paper processing is re- 60%
-----Projection-----
flected in the Budget. In addition to improving
55%
efficiency, access to electronic tax data will 50%
51%
improve IRS’s ability to track organizations 47%
40%
that finance terrorism. 40%
36%
The IRS is also continuing its efforts to 30%
31%
improve operations and lower costs by adapting
20%
best practices from the private sector. By
successfully competing against contractor 10%
offers, teams of IRS employees found better and
cheaper ways to do their jobs, which will save 0
2001 2002 2003 2004 2005 2006
the Government and taxpayers $185 million Source: IRS.
over five years.
In addition to easing the filing burden on taxpayers, the Department of the Treasury is improving
its payments and collections processes and moving toward an “all-electronic Treasury.” Treasury ad-
ministers the Government’s payments and collections systems through the Financial Management
Service (FMS). In 2004, FMS issued over 705 million electronic payments and 235 million paper
checks. FMS annually issues over 940 million non-Defense payments, valued at $1.5 trillion, includ-
ing Social Security benefits, tax refunds, and veterans’ benefits. Streamlining the payments and col-
lections processes and continually investing in state-of-the-art technology is integral in processing
these payments and collections accurately, timely, and more safely and securely for the taxpayer.

The high-tech laser printers (shown above) FMS uses at its Regional
Financial Centers to print benefit and tax refund checks are capable of
producing more than 60,000 checks per hour. Still, there’s no comparison
to the efficient, safe, and secure transfer of funds capable with the push
of a button, as shown in the photo on the right. The Federal Government
saves 62 cents for every check converted from paper to electronic format.
258 DEPARTMENT OF THE TREASURY

MAKING GOVERNMENT MORE EFFECTIVE—Continued

The Budget provides funding for FMS’ electronic initiatives, such as: Pay.gov, which is a Govern-
ment-wide web portal to collect non-tax revenue electronically; Paper Check Conversion, which con-
verts checks into electronic debits thereby moving funds more quickly; and Stored Value Cards, which
directly support military operations overseas. FMS also collects the Government’s non-tax delinquent
debt such as: loans owed to the Government, fines or penalties assessed by an agency, and overpay-
ments made by Federal agencies. FMS collected $3 billion in non-tax delinquent debt in 2004.
In 2006, The Bureau of Public Debt (BPD) will continue its efforts to improve the efficiency of the
securities services it offers to retail investors. The cornerstone of this effort is BPD’s new Treasury-
Direct system, which, when fully implemented, will enable investors to purchase and manage all of
their Treasury securities holdings online through a single portfolio account. The system currently
offers both Series I and EE savings bonds in electronic form and holds more than $1.3 billion in more
than 250,000 accounts.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible for the regulation of the al-
cohol and tobacco industries, and the collection of approximately $15 billion annually in alcohol,
tobacco, firearms, and ammunition excise taxes. TTB protects the consumer by ensuring that alcohol
beverages are labeled, advertised, and marketed in accordance with the law, facilitates the import
and export trade in beverage and industrial alcohols, promotes voluntary tax compliance, and en-
forces the provisions of the Federal Alcohol Administration Act. In 2006, TTB anticipates receiving
and screening more than 100,000 label applications, more than 400,000 tax returns and operational
reports, and more than 4,000 applications for permits to enter the alcohol and tobacco industries. In
2006, TTB will process an estimated 16 percent of its label applications electronically, up from just
three percent in 2003. The Budget proposes to establish user fees to cover the costs of TTB’s regula-
tory functions under its Protect the Public line-of-business. The new user fees include filing fees for
Certificate of Label Approvals, proposed formulas, and permit applications. The industry should pay
for the benefits it receives from TTB’s regulatory efforts.
The 2006 Budget proposes to consolidate the Community Development Financial Institutions Fund
into a new economic and community development program to be administered by the Department of
Commerce. The new program would be designed to achieve greater results and focus on communities
most in need of assistance. Treasury will continue to oversee the New Markets Tax Credit program.
THE BUDGET FOR FISCAL YEAR 2006 259

Update on the President’s Management Agenda

The table below provides an update on the Department of the Treasury’s implementation of the
President’s Management Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrow indicates change in status since evaluation on September 30, 2004.


Treasury has strengthened its management and is working to achieve results at all its bureaus. Treasury
implemented a new Department-wide comprehensive human capital strategic plan and accountability system,
setting the stage for continued progress in narrowing skills gaps, establishing leadership succession strategies,
and ensuring that employees are held accountable for results. As a result of competitive sourcing studies, the
Treasury Department anticipates savings of $185 million over the next five years. IRS employees developed an
efficient organization plan. The Department has a strong competitive sourcing plan to generate more savings
over the next year. In financial performance, Treasury received a clean audit opinion on its financial statements
for the fifth year in a row, performed monthly three-day closes, and for the past three years, completed its
accountability report in just 45 days after the end of the fiscal year. In addition, the Department has improved
the security of its information technology systems and is improving its capital planning process. This year the
Department will focus its efforts on developing an Enterprise Architecture and ensuring that its information
technology projects are within 10 percent of cost, schedule, and performance goals. Finally, the Department
improved its budgeting by reporting the full cost of program performance.

Initiative Status Progress

Eliminating Improper Payments


In 2005, an estimated 22 million families will receive $39 billion in Earned Income Tax Credit (EITC) payments to
reward work and lift them out of poverty. Unfortunately, due to mistakes and fraud, more than one EITC dollar in
four is paid in error. The IRS is piloting new strategies, such as qualifying child certification, to target the most
significant causes of error. (Because this is the first quarter that agency efforts in the Eliminating Improper
Payments Initiative were rated, progress scores were not given.)
260 DEPARTMENT OF THE TREASURY

Department of the Treasury


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Internal Revenue Service .................................................................................. 10,185 10,236 10,679
Financial Management Service ....................................................................... 228 229 236
Departmental Offices .......................................................................................... 240 220 232
Bureau of Public Debt ......................................................................................... 174 174 177
Inspectors General ............................................................................................... 140 144 150
Tax and Trade Bureau:
Existing law ........................................................................................................ 80 82 62
Legislative proposal ........................................................................................ — — 29
Financial Crimes Enforcement Network ....................................................... 58 72 74
Community Development Financial Institutions Fund ............................. 63 56 8
All other .................................................................................................................... 497 6 5
Total, Discretionary budget authority ................................................................. 10,671 11,207 11,642

Total, Discretionary outlays ................................................................................... 10,591 11,412 11,755

Mandatory Outlays:
Payment where earned income exceeds liability for tax:
Existing law ........................................................................................................ 33,134 33,790 34,132
Legislative proposal ........................................................................................ — — 81
Payment where child credit exceeds liability for tax:
Existing law ........................................................................................................ 8,857 13,516 13,180
Legislative proposal ........................................................................................ — — 34
Payment where health care credit exceeds liability for tax:
Existing law ........................................................................................................ 82 91 103
Legislative proposal ........................................................................................ — — 99
Interest payments on advances to the black lung disability fund
trust fund:
Existing law ........................................................................................................ 651 675 696
Legislative proposal ........................................................................................ — — 3,343
User fees Tax and Trade Bureau:
Legislative proposal ........................................................................................ — — 29
Continued Dumping and Subsidy Offset Act:
Existing law ........................................................................................................ 214 293 1,608
Legislative proposal ........................................................................................ — — 1,608
Internal revenue collections for Puerto Rico:
Existing law ........................................................................................................ 336 404 303
Legislative proposal ........................................................................................ — — 56
All other .................................................................................................................... 2,672 2,160 2,354
Total, Mandatory outlays ........................................................................................ 44,644 45,259 41,336

Total, Outlays .............................................................................................................. 55,235 56,671 53,091

Credit activity
THE BUDGET FOR FISCAL YEAR 2006 261

Department of the Treasury—Continued


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Direct Loan Disbursements:
Community Development Revolving Loan Fund ....................................... 7 7 —
Total, Direct loan disbursements ......................................................................... 7 7 —

Guaranteed Loan Commitments:


Air transportation stabilization fund ............................................................... 30 — —
Total, Guaranteed loan commitments ................................................................ 30 — —
DEPARTMENT OF VETERANS AFFAIRS

AT A GLANCE:
2006 Discretionary Budget Authority (with collections):
$33.4 billion (Increase from 2005: 3 percent)
Major Programs:
• Health care for veterans
• Disability compensation
• Pensions for low-income veterans
• Vocational rehabilitation training and employment services
• National cemeteries

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Providing timely compensation and job assistance to veterans with disabilities.


• Helping veterans and active-duty members own a home.

Supporting a Compassionate Society

• Providing health care to veterans with service-related injuries.


• Serving veterans through homeless assistance programs in all 50 States.

Making Government More Effective

• Providing health care services in more convenient locations, using information technology to
serve patients more quickly and more accurately.
• Working with the Department of Defense to help service members gain access to veteran services
and benefits.

263
264 DEPARTMENT OF VETERANS AFFAIRS

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Replacing Lost Income for Disabled Veterans

Veterans’ disability compensation is a monthly benefit payment to veterans who are disabled as a
result of their military service. It is the workers’ compensation program for military members, which
complements retired pay and disability annuities provided by the Department of Defense (DOD). In
2006, 2.7 million veterans will receive $26 billion of these tax-free benefits from the Department of
Veterans Affairs (VA), 57 percent more than when the President came to office.
When President Bush took office, the number of claims waiting to be processed had risen to more
than 600,000. As a result, many veterans were waiting an average of over 230 days for a claim to
be processed. One of the President’s top priorities was to significantly reduce this processing time.
VA trained nearly 1,800 employees in proper claims processing procedures and created specialized
teams to process claims for those veterans who had been waiting the longest. Uniform measurement
tools were established to evaluate quality and timeliness, and employee evaluations were re-designed
to hold VA personnel accountable for meeting the President’s goal. Further, VA worked with both
DOD and the National Records Center in St. Louis to expedite the exchange of information needed
to process claims. As a result, the number of days to process a claim will drop from 230 when the
President took office to an average of 145 days in 2006—an improvement that the Department is
committed to continuing in the years ahead.

Providing Education Opportunities to Veterans

The Vocational Rehabilitation and Employ-


ment (VR&E) program helps disabled veterans
find suitable employment, so they can live inde-
pendently. The program provides comprehensive
services and assistance, such as tuition, books,
vocational counseling, and assistive technology.
In March 2004, a comprehensive review of
the VR&E program was completed which led to
several changes now underway. For example,
instead of waiting for veterans to contact
the VR&E program, counselors visit service
members at military and VA hospitals and
also call recently discharged veterans to offer
their services. In 2004, 11,000 veterans were Vocational rehabilitation counselors visit patient.
successfully rehabilitated with approximately
8,300 veterans employed and the remaining 2,700 achieving independent living goals, an increase
of approximately 1,500 veterans above those successfully rehabilitated in 2003.
For almost 20 years, the Montgomery GI Bill has provided education benefits to help members of
the Armed Forces adjust to civilian life after leaving active service. On December 27, 2001, President
Bush signed into law the Veterans Education and Benefits Expansion Act. The Act contained sev-
eral improvements to the Montgomery GI Program, including an increase in the maximum monthly
benefit amount of more than 46 percent by 2003 (see accompanying chart), a broader choice of edu-
cation opportunities, and an expansion of education programs paid for by the scholarships to include
THE BUDGET FOR FISCAL YEAR 2006 265

non-traditional educational settings such as Maximum Education Benefit has Increased


software certification programs and distance Dollars per person
learning courses. As a result, approximately 40,000
421,000 veterans, service members, and 35,000
reservists used their benefits in 2004 to
30,000
obtain degrees, certifications, and licenses, an
increase of five percent since the President 25,000
took office. In 2004, President Bush requested 20,000
legislation to increase monthly education bene-
15,000
fits for reservists mobilized for 90 days or more
in response to a war or national emergency 10,000
declared by the President or the Congress. 5,000
Veterans are also receiving faster service.
0
Since 2001, claims processed have increased 2000 2001 2002 2003 2004
from 89,000 to 105,000 per month and the Source: Department of Veterans Affairs.

maximum monthly benefit has increased by


almost 50 percent. In the same period, the average processing time for education benefits dropped
from 50 days to 26 days for original claims. The 2006 Budget provides almost $3 billion to assist
veterans, active duty members, and reservists for educational benefits.

Promoting Home Ownership Among Veterans

The Veterans Housing Benefit Program provides guaranteed home loans to veterans, active-duty
service members, and reservists. In addition to the loan guarantee program, the Veterans Housing
Benefits Program also includes assistance to veterans living on Indian Reservations and veterans
needing wheelchair accessible homes that are specially adapted to their needs.
There is no limit to the number of loans issued in a year. In 2006, VA expects to issue 300,000
guaranteed loans for nearly $46.2 billion, including 183,000 no down payment loans. The program
also offers options with 5-percent and 10-percent down payments.
266 DEPARTMENT OF VETERANS AFFAIRS

SUPPORTING A COMPASSIONATE SOCIETY

Providing Medical Care to Veterans

Treating veterans with military disabilities, low incomes, and special needs (such as substance
abuse or spinal cord injury) has historically been VA’s core medical care mission and its highest pri-
ority. The President is fulfilling his promise to deliver high-quality, accessible health care to these
veterans. As shown in the accompanying chart, the President’s 2006 VA medical care budget is more
than 47 percent greater than when he took office, and VA will treat about 950,000 more patients in
2006 than it did in 2001. The Budget assumes that most new veterans enrolling in the VA medical
care system will fall under VA’s core medical care mission, and that all other veterans will pay an
annual enrollment fee and increased prescription drug co-payments that are still low but more in
line with other public and private health care programs.

Medical Care Budget Increasing The best way to guarantee that veterans un-
Billions of dollars derstand the benefits to which they are entitled
35 is with outreach and education. VA instituted
Collections
a program to provide information on all veter-
30 Appropriations
ans’ benefits—not just medical care—to service
25 members as they leave military service, espe-
cially those with service-related special needs.
20
This outreach effort includes a special empha-
15 sis on Reserve and National Guard personnel
called to active duty.
10
To date, about 32,000 returning service
5
members from Iraq and Afghanistan have re-
0 ceived medical care from VA, and all returning
2001 2002 2003 2004 2005 2006 service members receive a day of orientation
Source: Department of Veterans Affairs.
on VA benefits and programs. At the major
DOD hospitals, injured service members are assigned a VA case worker (stationed at the hospital),
who assists them in accessing their VA benefits and easing their transition to VA hospitals if needed.
Case workers also assist the families of injured service members. VA and DOD now electronical-
ly share medical information, thus providing these patients with better, more timely care.
VA has been a leader in implementing health information technology to improve patient care. Pa-
tients have benefited from innovative safety and quality systems implemented by VA. For example,
VA has developed a bar-code drug dispensing system—similar to that used in most stores today.
This system assures that patients receive the correct drugs at the right times, and prevents them
from receiving potentially dangerous drug combinations. In addition, VA has implemented a patient
safety program that encourages physicians, nurses, and other providers to report problems or errors
in care. As a result of the many innovative programs that were introduced in recent years, in 2003
the Institute of Medicine recognized VA as a leader in assuring patient safety and providing quality
and cited VA as one of the best Government programs based on a 2004 national survey of customer
satisfaction.
To assist and complement the work of VA staff, the Department coordinates a large volunteer
program. Last year, 133,000 Americans donated about 14 million hours of their time to volunteer at
VA facilities, providing transportation to and from VA hospitals, delivering mail and medical records,
and visiting patients.
THE BUDGET FOR FISCAL YEAR 2006 267

VA’s research program is known worldwide


for its work in areas such as prosthetics,
spinal cord injuries, and diseases such as
Parkinson’s and diabetes. Care provided at VA
facilities also helps patients have the medical
equipment and understanding they need to
live independently. For example, many VA
hospitals have rooms set up similar to an
apartment to prepare veterans to live on their
own.

Helping Homeless Veterans

VA estimates that there are more than VA prepares patient for independent living.
250,000 homeless veterans in the Nation, or
one-third of the adult homeless population. VA’s homeless assistance programs now constitute
the largest integrated network of services in the United States and serve approximately 40,000
homeless veterans annually. The Budget provides $231 million to directly support VA’s homeless
network and an additional $1.5 billion for medical care to homeless veterans.
Almost three-fourths of homeless veterans suffer from a mental illness and/or substance abuse
problem, making it difficult for them to keep a job and live independently. VA’s programs provide a
continuum of services including mental health care, substance abuse counseling, and employment
training. These comprehensive programs often require VA cooperation with Federal, State, and local
governments, and the private sector.
VA has expanded community grants to all 50 States and the District of Columbia to improve access
to housing and health care for homeless veterans. In addition, VA has created partnerships with the
Departments of Health and Human Services and Housing and Urban Development to support new
initiatives that provide permanent housing, a full range of medical care, and support services for
chronically homeless veterans. VA, in partnership with States, continues to support transitional,
community-based housing in a program that emphasizes stronger collaboration with community
organizations, including faith-based organizations.

National Cemeteries

In 2006, approximately 100,000 veterans and eligible family members will be buried in the national
cemetery system. From 2001 to 2006, there is estimated to be a 21-percent increase in the number of
burials due to the advancing age of our World War II, Korean War, and Vietnam War veterans. In the
next 20 years, one-third of our veterans will pass away. To make sure these veterans are accorded
a proper burial, VA continues to evaluate the national cemetery system to make sure we have the
appropriate number and location of national and State cemeteries. The 2006 Budget provides over
35 percent more funding for burial services and national cemeteries than five years ago. The 2006
Budget provides funding to acquire land to build six new cemeteries, including one each in Alabama,
Pennsylvania, California, South Carolina, and two in Florida. VA has also expanded its partnership
with States over the last four years to give veterans more burial options. Grants for construction and
equipment are provided to establish or improve State cemeteries in areas where national cemeteries
do not exist. In return, these States agree to adhere to VA standards of eligibility and maintenance.
The Department takes pride in the service provided to the families of our veterans; a recent survey
of family members and funeral directors showed 95 percent rated the service they received from our
national cemeteries as excellent.
268 DEPARTMENT OF VETERANS AFFAIRS

MAKING GOVERNMENT MORE EFFECTIVE

Providing More Convenient and Timely Medical Care

Many veterans have moved to the South and Southwest, yet VA maintains underused hospitals
throughout the northern and eastern regions of the country where fewer veterans live. VA com-
pleted a nationwide study of its facilities in 2004 to better align resources with patient needs by
increasing services where veterans live, and converting large underused hospitals to more efficient
clinics. Construction decisions were completed, and VA will spend $1.5 billion in 2004 and 2005 on
this effort. The 2006 Budget includes an additional $750 million for this purpose.
When President Bush took office, waiting lists for new patients were six months or longer. At one
point, the number of patients waiting for care peaked at 300,000. There was no system in place
to ensure that veterans with military disabilities, low incomes, and special needs received prompt
treatment unless they were facing a medical emergency. VA moved to prioritize those waiting for
appointments and implemented a temporary program to fill non-VA prescriptions for the first time.
This year, the list of veterans waiting more than six months for an appointment for basic medical
care has been essentially eliminated.
VA is a leader in developing electronic medical records to ensure that critical patient information
is not stored in a paper file somewhere but is accessible easily to all providers that may see a vet-
eran, while appropriately protecting medical privacy. When a veteran receives care at VA, the doctor
or nurse quickly enters all important information into a computer system and reads information on
the patient’s test results, drugs, and other vital information. As a result of these and other improve-
ments, in most situations veterans can go to any facility for care and know that the medical staff
can immediately access their records. They also receive drugs more quickly, safely, and easily. For
example, after having an exam, a patient can go directly to the pharmacy and pick up any needed
drugs that were electronically ordered by the physician.

Increasing Coordination Between DOD and VA

President Bush has placed a great emphasis


on improving cooperation between DOD and
VA in providing care to our veterans. Both
Departments have made significant progress
in meeting this goal. VA and DOD established
a high-level Executive Council to develop and
implement significant collaborative efforts. The
council has focused on three major system-wide
issues: 1) sharing “real-time” computer infor-
mation on the enrollment and eligibility status
for services and benefits; 2) continually placing
all critical medical information for each patient
in computer files that can be shared by DOD
and VA; and 3) increasing the number of places
where DOD and VA share medical facilities and DOD medical staff treat veteran patient.
staff.
Sharing information and technology speeds up service, ensures safer healthcare, and informs vet-
erans of earned entitlements and services—such as eligibility and enrollment status for medical care,
THE BUDGET FOR FISCAL YEAR 2006 269

disability benefits, home loans, life insurance, burial benefits, vocational rehabilitation, and educa-
tion benefits.

The Departments are aggressively moving towards electronic patient medical records so both DOD
and VA doctors and nurses have rapid access to patients’ records. Since all veterans start out in the
military system and almost 700,000 use both systems annually, this coordinated effort is critical. The
first phase was implemented in June 2002 with an electronic exchange of former military members’
patient health information available at VA. The next step, expected in 2005, is the two-way sharing
of this information.

DOD and VA are working together to solve mutual problems in the Greater Chicago area, where
five VA hospitals and one DOD hospital are located. DOD originally planned to build a new hospital
within walking distance of an underutilized VA hospital. DOD now plans to share VA’s hospital—en-
suring military members, their families, and veterans will have access to quality care in a fiscally
responsible way. In addition, the two Departments have made progress in sharing personnel. In
some locations, such as Albuquerque, New Mexico and Chicago, Illinois, they share many personnel.
In other smaller areas, one or two shared staff may be key to maintaining critical capacity. For exam-
ple, the Air Force Base in Grandforks, North Dakota needed a doctor for its family practice clinic. An
agreement was reached for a VA doctor to provide care to service members at the military hospital.
This lowered overall cost to taxpayers and improved access to care at the military hospital.

DOD and VA are working together to ensure that all separating service members who file a VA
disability claim at discharge sites receive a discharge physical that meets requirements of both the
VA and the Services, prior to separation. This allows one physical examination that saves time later.

Update on the President’s Management Agenda

The table below provides an update on VA’s implementation of the President’s Management Agenda
as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrow indicates change in status since evaluation on September 30, 2004.


While VA continues to make progress on many aspects of each of the initiatives, its overall status in
implementing the President’s Management Agenda has remained largely unchanged over the past year. VA
developed a comprehensive human capital plan, completed testing of an on-line self-evaluation program,
and redesigned an appraisal system for many of its employees. Ongoing negotiations with the labor union
have resulted in some delays in implementing the new performance appraisal system for all employees.
Improvements in financial performance and E-Government were delayed due to serious failures in the rollout of
a new financial management information technology system. VA is assessing its options for next steps but has
halted implementation of this massive system and has reverted back to its old system. VA has been unable
to use Competitive Sourcing to achieve efficiency improvements since under law it is not able to carry out
any such comparisons. The Administration is working with the Congress to find a solution so that resources
can be better spent on direct services to veterans.
270 DEPARTMENT OF VETERANS AFFAIRS

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Initiative Status Progress


Real Property Asset Management

Eliminating Improper Payments

Coordination of VA and DOD Programs and Systems

Arrow indicates change in status since evaluation on September 30, 2004.


In regard to the Real Property Initiative, VA has an Asset Management Plan where it has inventoried and
proposed changes to right-size its massive network of buildings across the Nation to ensure that veterans are
treated in the most convenient places for the veteran. The total dollar value at risk of Improper Payments at
VA is approximately $43.6 billion. After its initial assessment, VA determined that six high-risk programs exist.
Of those six programs, four have completed remediation plans that are actively being implemented and the
remaining two plans are likely to be completed in the second quarter of 2005. (Because this is the first quarter
that agency efforts in the Eliminating Improper Payments Initiative were rated, progress scores were not given.)
As discussed earlier, VA and DOD have taken numerous steps to improve the coordination of medical care and
transition of injured service members to VA for healthcare and other benefit programs.
THE BUDGET FOR FISCAL YEAR 2006 271

Department of Veterans Affairs


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Medical Programs ................................................................................................ 27,365 28,784 28,903
Medical Services .............................................................................................. 18,468 19,764 19,789
Medical Services Collections (non-add)
Existing law ................................................................................................... 1,708 1,953 2,164
Legislative proposal ................................................................................... — — 424
Medical Administration ................................................................................... 4,027 4,377 4,439
Medical Facilities .............................................................................................. 4,004 3,858 3,888
Medical Research ............................................................................................ 866 784 786
Benefit Programs .................................................................................................. 1,429 1,453 1,548
Disability Compensation ................................................................................ 659 652 701
Pension ................................................................................................................ 143 138 148
Education ............................................................................................................ 76 90 100
Vocational Rehabilitation and Employment ............................................ 124 139 147
Housing ................................................................................................................ 157 156 157
Insurance ............................................................................................................ 4 4 5
Burial Benefits ................................................................................................... 265 272 290
Departmental Administration ............................................................................ 343 371 401
General Administration .................................................................................. 280 301 330
Inspector General ............................................................................................ 62 70 71
Total, Discretionary budget authority (no collections) .................................. 29,137 30,607 30,852
Total, Discretionary budget authority (with new collections) ..................... 29,137 30,607 31,274
Total, including all collections .............................................................................. 30,845 32,560 33,440

Total, Discretionary outlays ................................................................................... 28,497 28,408 30,428

Mandatory Outlays:
Medical Programs:
Existing law .................................................................................................... 29 33 35
Legislative proposal .................................................................................... — — 424
Benefit Programs and Receipts:
Disability Compensation ................................................................................ 26,297 31,153 30,643
Pension ................................................................................................................ 3,334 3,674 3,470
Education ............................................................................................................ 2,137 2,454 2,579
Vocational Rehabilitation and Employment ............................................ 551 604 632
Housing ................................................................................................................ 218 1,904 65
Insurance ............................................................................................................ 1,260 1,298 1,330
Burial Benefits ................................................................................................... 153 168 171
Other Receipts and Transactions ............................................................... 2,771 1,650 648
Departmental Administration ............................................................................ 151 — —
Total, Mandatory outlays ........................................................................................ 31,057 39,638 37,853

Total, Outlays .............................................................................................................. 59,554 68,046 68,281


272 DEPARTMENT OF VETERANS AFFAIRS

Department of Veterans Affairs—Continued


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Credit activity
Direct Loan Disbursements:
Vocational Rehabilitation Loans ...................................................................... 3 4 4
Native American and Transitional Housing Loans .................................... 6 9 26
Vendee and Acquired Loans ............................................................................ 123 915 1,675
Total, Direct loan disbursements ......................................................................... 132 928 1,705

Guaranteed Loan Commitments:


Veterans Home Loans ........................................................................................ 35,315 43,802 46,173
Total, Guaranteed loan commitments ................................................................ 35,315 43,802 46,173
CORPS OF ENGINEERS—CIVIL WORKS

AT A GLANCE:
2006 Discretionary Budget Authority: $4.3 billion
(Decrease from 2005: 7 percent)
Major Programs:
• Commercial navigation
• Flood and storm damage reduction
• Aquatic ecosystem restoration

MEETING PRESIDENTIAL GOALS

Making Government More Effective

• Establishing clear, performance-based guidelines for allocating funds among construction


projects in order to increase the net economic and environmental return of the Army Corps of
Engineers’ (Corps) construction program.

Agency-specific Goals

• Prioritizing construction funding for projects with the highest net economic and environmental
return.
• Reducing the large backlog of construction work, by providing $114 million in the Budget to
complete 20 projects by the end of 2006, yielding an average return of $6.64 per dollar invested.
• Using innovative means to strengthen partnerships with local stakeholders to improve the
quality of Corps recreation services through a Recreation Modernization Initiative.
• Restoring aquatic ecosystems, with an emphasis on the Florida Everglades, the Louisiana
coastal area, and the Upper Mississippi River; and assisting recovery efforts for endangered
and threatened fish and wildlife on the Columbia and Missouri Rivers.
• Protecting the Nation’s waters and wetlands.

273
274 CORPS OF ENGINEERS—CIVIL WORKS

MAKING GOVERNMENT MORE EFFECTIVE

A Performance Budgeting Initiative for Construction

The 2006 Budget proposes an initiative that improves the performance of the Corps construc-
tion program. The initiative establishes objective, performance-based guidelines for developing the
Corps construction budget, which will maximize the overall net economic and environmental return
from the construction program. These funding guidelines are based on sound financial management
principles similar to those used by private industry to rank and select investments. The initiative
would improve the program’s overall performance and benefit to the Nation by redirecting funds from
low-performing to high-performing construction projects.
The 2006 Budget provides $1.4 billion for the Corps construction program, with an additional $0.2
billion available for the highest performing projects contingent upon congressional adoption of this
initiative. The President’s Budget directs resources to construction projects based on guidelines sum-
marized below.

The Performance Budgeting Initiative: Guidelines for Making Better, Smarter Construction
Investments
1. Budgeting by mission area. Projects compete for funding in each of the Corps’ three main mission
areas: commercial navigation, flood and storm damage reduction, and aquatic ecosystem restoration.
2. Performance-based project rankings. Projects are ranked based on objective performance criteria.
• In all mission areas except aquatic ecosystem restoration, projects are ranked based on their remaining
benefits, relative to their remaining costs.
• Aquatic ecosystem restoration projects are ranked based on the extent to which they use resources
effectively to address a significant regional or national ecological problem.
3. Performance-based funding allocations. The performance rankings will determine what level of fund-
ing projects will receive. Projects ranking at, or near, the top will be funded at very high levels, while
low-performing projects will receive reduced funding levels, and in some cases, may be suspended.
• Highest ranking projects will receive at least 80 percent of the amount that the Corps can efficiently
spend.
• Low-ranking projects that do not meet baseline performance thresholds will be considered for deferral.
4. Limitations on multiyear contracts. The Budget proposes appropriations language to repeal the Corps’
continuing contract authorities. The proposal will reduce out-year funding commitments, while allowing the
Corps to issue multiyear contracts where appropriate.

Reducing the Construction Backlog. Between 2000 and 2005, funding for the Corps construction
program increased by 30 percent in nominal terms. Much of this increase was for work on projects
with relatively low benefits or outside of the Corps’ three main mission areas: 1) facilitating commer-
cial navigation; 2) reducing damages caused by floods and storms; and 3) restoring aquatic ecosys-
tems. During the same period, the Corps construction workload grew at an unmanageable rate
and more projects faced construction delays, as additional projects were authorized without fund-
ing for timely completion. This growth trend has resulted in a $50 billion cost to complete authorized
THE BUDGET FOR FISCAL YEAR 2006 275

projects, of which only $15 billion is for projects that are both within the Corps’ main mission ar-
eas and meet current economic and environmental performance standards. Funding new projects
further stresses the Corps’ workload as these projects inevitably compete for funding with ongoing
projects that offer much greater benefits, relative to their costs. As a result, some projects cost more
than they need to, and most projects are completed many months—and sometimes years—later than
they could.

The Administration’s performance budgeting initiative will reduce the construction backlog over
time by placing a higher priority on completing high-return projects and limiting the start of new
projects to the highest performing projects that are consistent with long-term fiscal management
goals. In addition, the Administration’s principles for improving program performance, which were
in the President’s 2004 Budget, will contribute significantly to achieving this objective. Those princi-
ples emphasize the need for using sound economic analysis in the formulation and design of proposed
projects, funding only those new projects that have a very high net economic and environmental re-
turn and developing a process for de-authorizing projects that are inactive, have low return, or fall
outside the Corps’ mission areas.

Priority Funding for High-Ranking National Projects. Based upon the performance rankings
within each mission area, the Budget focuses funding on the highest-performing projects, including
nine projects that are national priorities.

2006 Budget
Authority
Priority Projects Project Purpose
(in millions
of dollars)
Sims Bayou, Houston (TX) .................................................................... 18 Flood Damage Reduction
West Bank, New Orleans (LA) ............................................................. 28 Flood/Storm Damage Reduction
New York/New Jersey Harbor (NY, NJ)............................................. 101 Commercial Navigation
Oakland Harbor (CA)............................................................................... 48 Commercial Navigation
Olmsted Locks and Dam, Ohio River (IL, KY)................................ 90 Commercial Navigation
Missouri River Fish and Wildlife Recovery (IA, NE, KS, MO) . 83 Hydropower, Flood Damage
Reduction, Commercial
Navigation/Mitigation
Upper Mississippi River Restoration (IL, IA, MN, MO, WI) ........ 34 Commercial Navigation/
Mitigation
Columbia River Fish Recovery (OR, WA, ID) ................................. 102 Hydropower, Commercial
Navigation/ Mitigation
Everglades (FL) ......................................................................................... 137 Aquatic Ecosystem Restoration

A Five-Year Plan for Corps Investments

The Corps is developing a comprehensive five-year budget plan for future spending that meets the
goals set by the Administration’s performance budgeting initiative. This effort will encourage greater
fiscal discipline by requiring current budget decisions to be made in light of their long-term funding
implications. It also will establish an important link between Corps spending projections and the
agency’s annual and long-term performance targets. The plan will include a summary of projected
civil works funding by both appropriation and program area, disaggregated to the individual project
level.
276 CORPS OF ENGINEERS—CIVIL WORKS

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Program Performance

Several Corps programs were assessed this year using the Program Assessment Rating Tool
(PART). The PART analyses helped shape the Budget by reviewing the programs’ design, purpose,
and strategic planning efforts; how well they are managed; and whether they are generating positive
returns for taxpayers. The PART analysis of the storm damage reduction program, for example,
concluded that the Budget should continue to limit funding for long-term beach re-nourishment,
and the Corps should better coordinate its beach nourishment activities with Federal, State and
local plans for hazard mitigation, to reduce overall storm damages more cost-effectively. In addition,
the reassessment of the Corps hydropower program concluded that in response to deficiencies cited
in the initial PART, the Corps has since developed an overall asset management plan for plant
and program managers to use in making risk-based hydropower investment decisions and setting
regional and national hydropower investment priorities.

Update on the President’s Management Agenda

The table below provides an update on the Corps’ implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

The Corps is assessing implementation of its 2012 Reorganization Plan to determine whether organizational
changes are achieving intended results. The Corps also developed a leadership guide to focus leadership
training and development efforts. The Corps has ensured the security of 87 percent of its Information Technology
(IT) systems and expects to be fully accredited by 2005. The Corps has two ongoing competitions for IT and
Facilities Management and has completed plans for three more. To address problems identified in its financial
audit, the Corps is aggressively working to correct past audit deficiencies. To advance Budget and Performance
Integration, the Corps revised the Civil Works strategic plan and is using performance measurement to guide
budget and management decisions, such as in the wetlands permitting program.

Initiative Status Progress


Real Property Asset Management

The Corps has completed its initial assessment of its Real Estate Management Systems and has made
important progress in developing its real property inventory analysis and asset management plan.
THE BUDGET FOR FISCAL YEAR 2006 277

AGENCY-SPECIFIC GOALS

Facilitating Commercial Navigation

The Corps manages nearly 11,000 miles of commercial waterways and about 300 ports and harbors,
typically through lock and dam operations and dredging. In allocating operation and maintenance
funds, priority is given to maintaining key infrastructure, which yields the highest economic returns.
The average return on investment from completing the construction of ongoing commercial naviga-
tion projects included in the 2006 Budget is 6.4 to one.

Ports and Harbors. The Budget provides


$921 million for ports and harbors, including
$588 million for maintaining existing channels
and $260 million for continuing construction.
The Budget also includes funding for high-re-
turn harbor deepening projects, such as New
York/New Jersey Harbor and Oakland Harbor.
Inland Waterways. The Budget provides
$932 million for inland waterway navigation,
including $369 million to continue progress on
high performing inland projects such as Olm-
sted Locks and Dam, Illinois and Kentucky;
Marmet Lock, West Virginia; and McAlpine
The Port of Oakland in California is a priority navigation project in the
Locks and Dam, Illinois and Kentucky. 2006 Budget.

Flood and Storm Damage Reduction

Flood Damage Reduction. The 2006 Budget provides $390 million to continue construction on
highly cost-effective flood damage reduction projects, such as Sims Bayou, Texas and West Bank,
Louisiana. Upon completion, both ownership and maintenance responsibility for such projects will
be turned over to local sponsors. In addition, the Budget proposes a new flood damage reduction
project in Washington, D.C., for which the estimated benefits are 4.1 times greater than the costs.
Storm Damage Reduction. The Budget also provides $54 million to continue progress on beach
nourishment projects based on the degree to which they will reduce storm damage. Similar to the
President’s 2005 proposal, the Budget funds the initial construction phase of those projects, while
local sponsors will have the responsibility for financing long-term follow-up re-nourishment. The
Budget includes $14 million for beach nourishment and re-nourishment to mitigate the impacts of
Federal navigation projects.

Aquatic Ecosystem Restoration

The 2006 Budget provides $510 million for aquatic ecosystem restoration work, focusing resources
on nationally significant projects such as the Florida Everglades and Coastal Louisiana.
278 CORPS OF ENGINEERS—CIVIL WORKS

AGENCY-SPECIFIC GOALS—Continued

Everglades. The Administration


continues its commitment to re- A Budgetary Priority: Implementing the Missouri River
store the fragile Florida Everglades Master Manual
ecosystem in partnership with
the State of Florida. Specifically,
the Budget provides $137 million
for restoration of the Everglades,
including $68 million for the Com-
prehensive Everglades Restoration
Plan (CERP). Under CERP, the
Corps will support the State’s
decision to use its own funds to
accelerate certain work on the
restoration project. In addition,
the Corps will broaden its role
in the Modified Water Delivery
The Budget provides funds to create sand bar habitat along the Missouri
Project, which will make more River.
water available for the Everglades
In the Missouri River basin, a series of Corps actions over more
National Park and is a prerequisite
than a century contributed to the economic growth of the re-
for CERP. The Corps will share gion, but also dramatically altered the natural ecosystem.
funding responsibilities with the
Department of the Interior while Three Missouri River species are of particular concern: two
continuing to manage construction birds, the interior least tern and the piping plover, which nest
along the river; and a large fish called the pallid sturgeon. The
efforts.
2006 Budget requests $83 million—an increase of $64 mil-
Louisiana Coast. Over the past lion above 2005—to enable the Corps to manage the flow of
75 years, more than one million the river as provided in recent revisions to the Missouri River
acres of the Louisiana coastal Master Manual, without jeopardizing the continued existence
plain have submerged into the of these species. The Administration is committed to invest
Gulf of Mexico. Another third of these funds to improve the environment in a manner that will
reflect the best available science, consistent with commercial
a million acres could be lost by
navigation and other needs. These investments include:
2050. The affected area supports a
coastal wetlands and barrier island • Creating side channels that provide shallow water habi-
ecosystem that is an environmental tat under a range of river conditions and support healthy
forage fish and insect populations;
resource of national significance.
The Corps is continuing to work • Purchasing low-lying land from willing sellers to re-es-
closely with the State of Louisiana tablish a hydrologic connection between the river and its
to address its coastal problems. The floodplain and improve the biological productivity of the
side channels;
2006 Budget provides $20 million,
an increase of $11.5 million over the • Assisting pallid sturgeon recovery below Fort Peck Dam
2005 level, with emphasis on the and on the Yellowstone River;
science and technology program; a • Establishing sand bar habitat for the nesting birds; and
long-term hydrodynamic study of • Collecting baseline and annual biological data.
the Mississippi River; and studies
and design work on one or more
significant restoration projects.
THE BUDGET FOR FISCAL YEAR 2006 279

Regulating Development that Affects Wetlands

The Corps manages a permitting program that plays an important role in the status of our Nation’s
wetlands. It requires real estate developers and builders of roads, bridges, and shopping centers to
avoid, minimize or mitigate any damage they cause to aquatic resources, including wetlands. The
agency processes some 80,000 permits annually. In 2003, developers received permits for projects
that will adversely affect 21,300 acres of wetlands nationwide, in return for which they were required
to create or restore 43,400 acres (roughly the size of the District of Columbia) of wetlands. The 2006
Budget proposes $160 million for the agency’s regulatory program, an increase of 11 percent over
the 2005 level, which will help improve the speed and quality of permit processing and increase the
Corps’ mitigation and compliance activities.

Maintaining Key Infrastructure

The 2006 Budget provides $2.0 billion for the operation and
maintenance of existing Corps projects, including funding for
continued security improvements at Corps facilities to reduce
their vulnerability to terrorist threats. In order to allow more
timely maintenance at Corps hydropower facilities, the Budget
proposes that the Corps’ hydropower-related operation and
maintenance expenses be directly financed by the Department
of Energy’s Power Marketing Administration receipts, which
are generated by the sale of power from these Corps facilities.
This will enable the Corps to reduce downtime and increase
the reliability of power generation. In addition, the 2006
Budget proposes to create an emergency maintenance reserve
fund—managed directly by the Assistant Secretary of the Army
for Civil Works—to meet high-priority, unexpected, and urgent
maintenance needs at key Corps facilities each year. Under the
proposed arrangement, the Assistant Secretary for Civil Works
will be able to respond to these emergency situations promptly, The Corps maintains navigation infrastructure
without interfering with other program commitments. in Illinois.

Recreation Management that Draws on Local Resources and Local Leadership

The Corps is one of the largest Federal providers of outdoor recreation services, managing 4,300
recreation areas at 465 projects in 43 States. The Corps spends about $268 million each year to
support this popular program.
The 2006 Budget proposes a Corps recreation modernization initiative, based on a promising model
now used by other major Federal recreation providers such as the National Park Service and the
Forest Service. The agency would use a portion of the recreation fees that it collects (such as entrance
fees) to upgrade the site where the fees are collected. In addition, the Corps will seek legislative
authority to conduct a limited number of demonstration projects such as lake improvement districts.
These public/private partnerships encourage local community leaders and property owners to work
with the Corps to maintain and upgrade Corps recreation facilities. The work would be performed
in a collaborative manner, similar to the approach taken in the President’s cooperative conservation
efforts. The demonstration projects could be expanded subsequently if they prove to be an effective
way to pay for and improve the program.
280 CORPS OF ENGINEERS—CIVIL WORKS

Corps of Engineers—-Civil Works


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority by Program:
Construction ................................................................................................................ 1,730 1,782 1,637
Operation and Maintenance .................................................................................. 1,955 1,943 1,979
Flood Control, Mississippi River and Tributaries............................................ 322 322 270
Flood Control and Coastal Emergencies ......................................................... 3 — 70
General Investigations............................................................................................. 116 143 95
Regulatory Program ................................................................................................. 139 144 160
Formerly Utilized Sites Remedial Action Program ........................................ 139 164 140
General Expenses .................................................................................................... 159 166 162
Office of Assistant Secretary (Civil Works)...................................................... — 4 —
Subtotal, Discretionary budget authority .......................................................... 4,563 4,668 4,513
Reclassification of PMA Receipts, Operation and Maintenance ............. — — 181
Total, Discretionary budget authority ................................................................. 4,563 4,668 4,332

Memorandum: Budget authority from enacted supplementals ............... — 372 —

Total, Discretionary outlays ................................................................................... 4,696 4,909 4,625

Mandatory Outlays:
Existing law ............................................................................................................. 142 18 27
Legislative Proposal, Recreation Program User Fee .............................. — — 9
Total, Mandatory outlays ........................................................................................ 142 18 18

Total, Outlays .............................................................................................................. 4,838 4,891 4,643


ENVIRONMENTAL PROTECTION AGENCY

AT A GLANCE:
2006 Discretionary Budget Authority: $7.6 billion
(Decrease from 2005: 6 percent)
Major Programs:
• Superfund
• Clean Water and Drinking Water State Revolving Funds
• Brownfields
• Air, Water, and Hazardous Waste Regulatory Programs
• Homeland Security

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Encouraging business investment and job creation in local communities by increasing funding
to continue brownfields clean-up.
• Using market forces to protect public health and support economic growth through the
President’s Clear Skies Initiative and the related Clean Air Interstate Rule and Clean Air
Mercury Rule.

Protecting America

• Improving lab coordination and expanding research for the Environmental Protection Agency’s
(EPA’s) homeland security decontamination program.
• Implementing a new water security monitoring pilot program in five major cities and providing
emergency training to the operators of large drinking water systems.

Making Government More Effective

• Providing competitive grants to States and Tribes for projects that can demonstrate environ-
mental and public health benefits.
• Establishing more stringent accountability measures and reforms for the Alaska Native Villages
Program to address systemic financial and programmatic deficiencies.

281
282 ENVIRONMENTAL PROTECTION AGENCY

MEETING PRESIDENTIAL GOALS—Continued

Agency-specific Goals

• Preventing the emission of an estimated 1,200 tons of particulate matter annually by supporting
diesel engine retrofits, rebuilds and replacements, anti-idling measures, clean fuel infrastruc-
ture projects, and other activities.
• Working with partners to clean up contaminated sediments at approximately six sites in the
Great Lakes region, two to three more sites than in 2005.
THE BUDGET FOR FISCAL YEAR 2006 283

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Brownfields Clean-up

Vibrant, healthy communities encourage business investment and job creation. However, many
communities’ revitalization efforts are hindered by abandoned industrial properties that blight the
landscape and pose the threat of contamination. The EPA’s Brownfields programs help States, Tribes,
and local communities redevelop these sites and make them productive, vital parts of the neigh-
borhood. Brownfields grants support revitalization efforts by funding environmental assessment,
cleanup, and job training activities, eventually allowing the property to be used for business, parks,
or housing. From 1995 through mid-2004, program participants have reported that more than 6,000
brownfields sites have been assessed and over 2,100 properties have been made ready for reuse. The
President’s Budget provides $210 million, $46 million more than 2005, funding brownfields work at
about 600 sites.

EPA Brownfields Grant Spurs Redevelopment in Minnesota


The city of Virginia, Minnesota has a long history of iron ore and taconite mining that has created potential
contamination and redevelopment issues in some areas. To help address these problems, the city used an
EPA Brownfields grant to assess a former mine waste dumping site known as the Oneida Addition property.
The city found minimal contamination that was easily addressed, spurring developer interest. The city even-
tually sold a portion of the property to a firm that constructed an Alzheimer’s patient care unit and assisted
living complex. This redevelopment provided a needed care and retirement facility and leveraged $12 million
in clean-up and redevelopment funding, as well as 115 new jobs.

Clear Skies

Often the most cost-effective way to protect the environment and public health while encouraging
economic growth lies with market forces. The Acid Rain program, enacted in 1990, is a highly suc-
cessful illustration of the value of flexible solutions. With a compliance rate of nearly 100 percent,
the Acid Rain program reduced the electric power industry’s nitrogen oxides (NOX) and sulfur dioxide
(SO2) emissions by 37 and 32 percent, respectively, from 1990 levels. In recognition of the program’s
284 ENVIRONMENTAL PROTECTION AGENCY

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP—Continued

accomplishments, the Administration proposed the Clear Skies Act. The Clear Skies legislation ex-
pands the Acid Rain program to dramatically reduce nationwide power plant emissions of SO2, NOX,
and, for the first time ever, mercury emissions from power plants.

While significant progress has been made Pollutant Emissions Decline


under the existing Clean Air Act, further Under Clear Skies
health benefits could be achieved faster, with Emissions (units as specified)
more certainty, and at less cost to consumers 12
through Clear Skies. Clear Skies would SO2 (millions of tons)
10 NOX (millions of tons)
reduce SO2, NOX, and mercury emissions by Mercury (tens of tons)
nearly 70 percent. The legislation would set 8
national caps on these three pollutants and
distribute allowances to emitters that total 6
the cap amounts. Clear Skies would encourage
innovation and the deployment of cleaner, more 4
cost effective technologies by requiring that the
2
emissions caps decline over time and allowing
emitters the flexibility to choose whether to 0
reduce their emissions or purchase allowances 2000 2010 2020
Source: EPA.
from other sources. By 2020, Clear Skies could
result in the avoidance of up to 14,000 premature deaths annually, virtual elimination of chronic
acidity in northeastern lakes, and noticeable air visibility improvements in a large portion of the
Midwest and East.
Clear Skies was submitted to the Congress in 2002 and the Administration continues to promote
its enactment. Although the legislation is the strongly preferred solution, the Administration is pur-
suing a regulatory path that would achieve many of the same health and clean air benefits. EPA
has proposed the Clean Air Interstate Rule (CAIR), which uses a market-based system to reduce SO2
and NOX emissions by up to 70 percent, the steepest emissions cuts in more than a decade. CAIR,
together with EPA’s clean diesel rules and other clean air programs, will ultimately bring 278 addi-
tional counties into compliance with the ozone and particulate matter National Ambient Air Quality
standards. This will result in cleaner air for the Nation as a whole, and especially for the 120 million
people currently living in those counties.
EPA also has proposed the Clean Air Mercury Rule, which will require the first ever reduction of
mercury emissions from power plants. Reductions will be obtained by using one of two approaches.
One approach requires coal-fired power plants to install currently available pollution controls known
as “maximum achievable control technologies.” The second, more flexible approach, sets a manda-
tory cap on the total mercury emissions allowed from coal-burning power plants nationwide. This
approach would reduce mercury emissions by nearly 70 percent from current levels. Altogether, the
Clean Air rules, like the Clear Skies legislation, would create a multi-pollutant strategy to improve
air quality throughout the United States. The proven, market-based approach of emissions caps and
allowance trading will make emissions reductions further, faster, cheaper, and more effective than
current Clean Air Act regulations.
THE BUDGET FOR FISCAL YEAR 2006 285

PROTECTING AMERICA

Protecting Water Systems

EPA is the lead Federal agency for coordi-


nating security of America’s water systems.
Since the enactment of the Bioterrorism Act
of 2002, EPA has provided assistance to water
utilities, including over 9,000 drinking water
systems, to help them complete vulnerability
assessments and update their emergency
response plans. For 2006, the Administration
proposes the Water Sentinel Initiative to
further protect the Nation’s water supply.
Water Sentinel will develop an operational
water monitoring and surveillance system for
dangerous contaminants. The program will
An EPA scientist prepares to test real-time, online sensors for water
distribution systems. The sensors detect changes in water quality that demonstrate a standardized, cost-effective
would result from the intentional release of chemical and biological approach that States can implement to
contaminants.
enhance water security. These efforts will
help protect hundreds of thousands of miles of
drinking water systems and provide an early chemical and biological terrorism warning mechanism
for millions of drinking water consumers. The Administration requests $44 million to fund Water
Sentinel as a pilot program in five major cities. Lessons learned from this program will be used in
future State and local water system protection efforts.

Detection of Terror Attacks

The agency also has responsibility for


managing the decontamination of buildings,
equipment, and the environment in the event
of a chemical, biological, or radiological attack.
For 2006, the Administration requests $19
million to develop the necessary capabilities
for detection and decontamination of threat
agents. This investment in decontamination
will advance the Federal Government’s role
from solely response to being more prepared
for emergencies. With this funding, EPA
will be able to better respond following a EPA’s Environmental Response Team provides technical and scientific
expertise in air, soil, and water monitoring and sampling to deal with the
contamination event. Additionally, $12 million human health and environmental impacts of terror attacks.
is dedicated to the Environmental Laboratory
Preparedness and Response program to
develop a network to standardize analytical testing methods, provide surge capacity, and establish
connectivity between laboratories. This laboratory capability will ensure that we can monitor water
systems and the environment quickly and accurately. The Budget maintains resources of $107
million to continue support for investigation and training activities, technical assistance to States,
cooperative research, and EPA’s national response teams. In total, the President’s Budget requests
$185 million for EPA’s homeland security activities, a 73-percent increase over 2005.
286 ENVIRONMENTAL PROTECTION AGENCY

MAKING GOVERNMENT MORE EFFECTIVE

Accountability in Environmental Programs

To assist States and Tribes in protecting the environment,


the Budget includes $23 million for a new State and Tribal Per-
formance Fund. This program will award competitive grants
to States and Tribes for projects that can demonstrate envi-
ronmental or public health benefits. The Performance Fund
will allow States and Tribes to receive additional funding for
their highest priority, most beneficial projects, while ensuring
accountability and results. Eligible projects will include activi-
ties such as air quality assessments, wetlands restoration, and
hazardous waste management.
To help evaluate programs’ results and accountability,
the President implemented the Program Assessment Rating
Tool (PART). A PART analysis of the Alaska Native Villages
Program rated the program Ineffective. In particular, the
PART found poor program management had resulted in
significant contracting, accounting, and performance prob-
lems. To address these problems, the 2006 Budget reduces
funding to $15 million, a $30 million reduction from 2005, and Through the State and Tribal Performance Fund,
additional funds will be awarded on a competitive
recommends the program develop regulations that will provide basis for projects that can demonstrate public
a framework for improved management and innovation. The health and environmental benefit. Wetlands and
funding reduction may be reconsidered once the program can habitat restoration projects, such as the one
pictured above, are among eligible activities.
demonstrate improved effectiveness and management.
EPA’s Ecosystem Research Program was evaluated during the development of the 2005 Budget.
The PART scored the program Results Not Demonstrated and noted that it did not coordinate effec-
tively within EPA and with other Federal agencies. It also lacked appropriate performance measures
to track the program’s progress. EPA is working to address these findings but has not yet imple-
mented any changes. As a result, the 2005 Budget proposed, and the Congress supported, funding
the program at $94 million, $22 million less than the 2004 level. The 2006 President’s Budget pro-
poses to fund it at $84 million in order to fund higher priority programs such as homeland security
and the Great Lakes Legacy Act.
The Administration is also taking other steps to improve program performance and accountability.
The President’s Budget includes $24 million for a water quality monitoring initiative that will
provide grants to States to implement statistically valid, probabilistic monitoring programs.
Probabilistic monitoring would allow States to develop a statistically valid sampling methodology
that would provide consistent water quality information across States. EPA will award these
additional funds to States ready to adopt probabilistic monitoring programs to help them and
EPA better target Federal, State, and local resources and make scientifically-defensible decisions
regarding water quality.
THE BUDGET FOR FISCAL YEAR 2006 287

Update on the President’s Management Agenda


The table below provides an update on EPA’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

EPA’s focus on management reforms has resulted in strong performance in financial management
and E-Government (E-Gov). EPA has linked financial and performance information to aid in day-to-day
decision-making, and has also submitted a timely and clean financial audit. In E-Gov, EPA has acceptable
business cases for its major systems and has demonstrated, using Earned Value Management or operational
analysis, that overruns and shortfalls average less than 10 percent for all major information technology projects.
EPA is also establishing a Government-wide electronic regulatory docket which, when fully implemented, will
increase public participation and access to Government information. To support the Human Capital initiative,
EPA is implementing a multi-level performance appraisal system, and identifying mission critical occupations;
however, further work is needed to implement its workforce planning strategy at the local level and reduce
skill gaps in mission critical areas. EPA announced its first standard competition and has an accelerated
timeline for additional competitions so that it can achieve savings in commercial activities. For Budget and
Performance Integration, EPA continues to focus on demonstrating results and improving programs based on
recommendations from PART evaluations. Approximately 89 percent of programs that were reassessed for the
2006 Budget showed improvements and received a higher rating, and over 80 percent of assessed programs
have been able to demonstrate results.

Initiative Status Progress


Eliminating Improper Payments

EPA identified two programs at risk for improper payments and completed a preliminary measurement plan
and corrective action plan for reducing improper payments to primary recipients. They initiated an enhanced
measurement strategy to better detect improper payments in all recipient transactions. (Because this is the first
quarter that agency efforts in this Initiative were rated, progress scores were not given.)
288 ENVIRONMENTAL PROTECTION AGENCY

AGENCY-SPECIFIC GOALS

The Great Lakes

The Great Lakes are the largest system of fresh surface water on Earth, and the basin is home
to more than one-tenth the population of the United States, one-quarter the population of Canada,
and heavy concentrations of industry. Over the years, industrial development has contaminated
sediments throughout the lakes with toxic pollutants such as polychlorinated biphenyls (PCBs) and
heavy metals, putting large populations and the tremendous water resource at risk. Currently, the
Great Lakes States have among the highest number of fish consumption advisories in the country
due to the accumulation of toxics in fish tissue.

In recognition of the Great Lakes’ national


significance and the extent of its contaminated
sediment problem, President Bush signed an
Executive Order in May 2004, establishing a
Great Lakes Interagency Task Force. Chaired
by the EPA Administrator, one of the primary
assignments of the Task Force is to convene a
regional collaboration of States, local communi-
ties, Tribes, regional bodies, and other groups
regarding policies, strategies, and priorities for
the environmental health of the Great Lakes.
EPA formally launched the collaboration on
December 3, 2004, convening over 400 regional
The Great Lakes form the largest surface freshwater system on Earth,
leaders and stakeholders that publicly pledged but their health is threatened by contaminated sediments and other
to support an intergovernmental partnership environmental problems.
to protect the Great Lakes ecosystem.
The Great Lakes Legacy Act, signed by the President in 2002, is one of the primary means of pro-
tecting the ecosystem. This program authorizes EPA to clean up contaminated sediments, protecting
water quality and keeping toxic pollutants from entering the food chain. For 2006, the President’s
Budget funds sediment clean-up activities under the Great Lakes Legacy Act at its fully authorized
level of $50 million, an increase of $28 million over 2005 levels.

Clean Diesel

Uncontrolled exhaust from old diesel engines can exacerbate the symptoms of people suffering from
serious respiratory illnesses, and can negatively impact the environment. During President Bush’s
first term, the Administration issued strict new rules to significantly reduce air pollutant emissions
from diesel fuel and engines so that the black puff of smoke from diesel tailpipes will become a thing
of the past. These rules will ensure that the next generation of trucks, buses, and offroad equipment
will be cleaner, quieter, more powerful, and more fuel efficient. The new engine and fuel standards,
which begin to take effect in 2007, are expected to reduce harmful emissions by as much as 95 percent
when the rules are fully implemented.
THE BUDGET FOR FISCAL YEAR 2006 289

To achieve more immediate air quality improvements,


the Budget provides $15 million for a Clean Diesel
Initiative to support diesel engine retrofits, rebuilds
and replacements, anti-idling measures, clean fuel
infrastructure projects, and other activities to reduce
emissions. The Clean Diesel Initiative will maximize
Federal resources and achieve significant environmental
results by working collaboratively with State, local,
non-profit, and private sector partners to leverage
additional support. EPA estimates that the program will
generate $360 million in health benefits by preventing
1,200 tons of particulate matter emissions.

Clean-up Programs

In 1980, the Comprehensive Environmental Response,


Compensation, and Liability Act, also known as Super-
fund, was enacted to address abandoned hazardous waste
sites. Since Superfund’s inception, over 46,500 sites have
been assessed and 33,500 that do not require Federal ac- Innovative emission control technology can reduce
tion have been removed from EPA’s waste site inventory emissions from existing diesel engines, such as the one
above, by as much as 90 percent. EPA’s Clean Diesel
to help promote economic redevelopment of these prop- Initiative will fund diesel retrofit and replacement projects
erties. Over 8,200 clean-up actions have been taken to that deliver immediate air quality improvements.
reduce immediate threats to health and safety at the re-
maining sites. By the end of 2004, clean-up projects were underway or completed at 82 percent of the
sites on the National Priorities List (NPL). For 2006, the Administration is proposing $1.3 billion for
the Superfund program, $32 million over the 2005 level.

Clean-Up Construction Completed The remaining sites on the NPL are large,
at 900 Listed Superfund Sites complex sites that present more challenges.
NPL sites
1,800 Cleaning up these sites, which generally cost
NPL Sites $50 million or more, requires an innovative
1,600
Construction Completions approach. In 2003, funding needs for eight
1,400
such sites (out of a total of 94 such sites re-
1,200 ceiving funding) accounted for approximately
1,000 50 percent of the money available for Super-
800
fund-led remedial actions. EPA estimates that
clean-up at an average site costs $18 million,
600
while a large site costs $132 million. The
400 Administration will work with the Congress,
200 communities, and citizens over the upcoming
0 year to find ways to effectively and efficiently
1990 1992 1994 1996 1998 2000 2002 2004 address this growing challenge.
Source: EPA.
290 ENVIRONMENTAL PROTECTION AGENCY

AGENCY-SPECIFIC GOALS—Continued

Remaining Work Declines as LUST Program In 2004, EPA and States reduced the
Cleans Up Contaminated Sites number of leaking underground storage
350,000 tank sites requiring remedial action to fewer
Clean-ups Completed (Cumulative)
300,000 Clean-ups Underway than 130,000—the lowest level since 1992.
Releases Awaiting Clean-up Preventative measures, State inspections, and
250,000 increased training of underground storage
200,000
tank owners and operators contributed to over
4,000 fewer leaks reported in 2004. Coupled
150,000 with the effectiveness of the program’s
100,000
preventative measures, EPA expects to reduce
the backlog of sites requiring remedial action
50,000 to below 120,000 by the end of 2006. The
Administration proposes $73 million in 2006
0
1992 1995 1998 2001 2004
for the Leaking Underground Storage Tank
Source: EPA. (LUST) Program, $4 million above the 2005
enacted level.

Community Action for a Renewed Environment

Many cities and towns have expressed concerns about exposure to toxic pollutants. EPA’s Commu-
nity Action for a Renewed Environment (CARE) program is geared to help address these concerns.
Through cooperative agreements, the CARE program provides communities with technical support
and assistance in implementing local solutions that reduce exposures to toxic pollutants. In 2006,
EPA will increase the scope of the program by establishing cooperative agreements with up to 80
communities while still achieving much of the risk reduction through application of existing success-
ful voluntary programs. CARE empowers communities to reduce exposure risks and encourages the
formation of self-sustaining community-based partnerships that will continue to improve local envi-
ronments.

Clean and Safe Water

The Clean Water State Revolving Fund 2006 Budget Meets Capitalization Goal
(CWSRF) provides grants to States to capitalize for Clean Water State Revolving Fund
their municipal wastewater State revolving
Billions of dollars (cumulative)
funds. States provide matching funds and then 7 6.8
make loans to communities at below-market
6
rates for wastewater infrastructure projects
such as sewer rehabilitation and treatment 5
plant expansion. Loan repayments and interest 4
are recycled back into the program.
3
The 2006 Budget funds the CWSRF at $730
2 2004 Budget
million. Due to significant additional funds
2006 Budget, adjusted for enacted
provided by the Congress in 2004 and 2005, 1
at this funding level, the total capitalization 0
provided between 2004-2011 will remain the 2004 2005 2006 2007 2008 2009 2010 2011
same as committed to in the 2004 Budget. This
THE BUDGET FOR FISCAL YEAR 2006 291

will ensure communities have access to capital to finance their wastewater infrastructure needs. Ad-
ditionally, the program will meet its long-term revolving level target of $3.4 billion. The revolving
level is the amount of loans available annually over the long term after Federal capitalization ends
and an indicator of the CWSRF’s financial stability.
EPA has made the protection of drinking water a priority since enactment of the initial Safe Drink-
ing Water Act (SDWA) in 1974, and continues to work to improve its drinking water programs. Sta-
tistics show that drinking water quality is improving, and the Centers for Disease Control and Pre-
vention recently estimated that 31 drinking water-related waterborne disease outbreaks occurred in
2001-2002, down from 39 outbreaks in 1999-2000. The 1996 SDWA amendments created the Drink-
ing Water State Revolving Fund (DWSRF) which, like the CWSRF, provides grants to States to help
capitalize revolving loan funds. Communities use these funds to finance drinking water systems and
infrastructure improvements, including compliance with regulatory drinking water requirements.
The Budget provides $850 million to fund the DWSRF in 2006.

Environmental Protection Agency


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Operating Program .............................................................................................. 4,325 4,268 4,439
Clean Water State Revolving Fund ................................................................ 1,342 1,091 730
Drinking Water State Revolving Fund ........................................................... 845 843 850
Brownfields cleanup funding ............................................................................ 93 89 121
Diesel School Bus Retrofit Program .............................................................. — 7 10
Targeted water infrastructure funding ........................................................... 429 408 69
Requested (non-add) .................................................................................... 98 94 69
Unrequested (non-add) ................................................................................ 331 314 —
Superfund ................................................................................................................ 1,258 1,247 1,279
Leaking Underground Storage Tanks ........................................................... 76 69 73
Total, Discretionary budget authority ................................................................. 8,368 8,023 7,571

Memorandum: Budget authority from enacted supplementals ............... — 3 —

Total, Discretionary outlays ................................................................................... 8,429 7,928 8,315

Mandatory Outlays:
Superfund Recoveries ........................................................................................ 74 60 60
All other .................................................................................................................... 21 6 53
Total, Mandatory outlays ........................................................................................ 95 66 113

Total, Outlays .............................................................................................................. 8,334 7,862 8,202


NATIONAL AERONAUTICS AND SPACE
ADMINISTRATION

AT A GLANCE:
2006 Discretionary Budget Authority: $16.5 billion
(Increase from 2005: 2 percent)
Major Programs:
• Exploration and science
• Space Shuttle and Space Station operations
• Aeronautics

MEETING PRESIDENTIAL GOALS

Agency-Specific Goals

• Pursuing a bold vision for sustained and affordable human and robotic exploration of space, with
the Moon as a first step toward human missions to Mars and beyond.
• Developing a new space vehicle to transport humans to the Moon.
• Focusing research and technology development activities, including those conducted on the
International Space Station, on enabling human and more productive robotic exploration of the
solar system.
• Returning the Space Shuttle safely to flight, completing construction of the International Space
Station, then retiring the Shuttle.
• Exploring the universe to understand its origin, structure, evolution, and destiny.
• Improving lives through Earth science and aeronautics research and education programs.

Making Government More Effective

• Improving the reliability of the National Aeronautics and Space Administration’s financial
management system.
• Implementing new agency-wide policies and processes to increase the accuracy of program cost
estimates and, in turn, improve program management.
• Reformulating or eliminating programs that do not directly advance the President’s space
exploration vision or other agency priorities, have not performed as well as others, or are
unsustainable given their high projected costs.

293
294 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

AGENCY-SPECIFIC GOALS

The National Aeronautics and Space Administration’s (NASA’s) activities center on four major
areas: exploration, science, Space Shuttle and Space Station operations, and aeronautics research.

Gearing Up for Exploration

Recognizing the need to reinvigorate the Nation’s civil space program and keep NASA focused on
compelling and inspiring goals, President Bush outlined a bold, new vision for human and robotic
space exploration on January 14, 2004. NASA will develop the necessary capabilities to move humans
beyond Earth orbit, where we have been confined for more than 30 years, and on to the Moon, Mars,
and destinations beyond. Both human and robotic explorers will help broaden scientific understand-
ing of the universe and the possible existence of life beyond Earth.

With work on some needed sys-


tems already underway, the agency Inspired by all that has come before, and guided by clear ob-
is taking action on many of the jectives, today we set a new course for America’s space pro-
recommendations of the President’s gram. We will give NASA a new focus and vision for future
Commission on Implementation of exploration. We will build new ships to carry man forward into
United States Space Exploration the universe, to gain a new foothold on the moon, and to pre-
Policy, a commission the President pare for new journeys to worlds beyond our own.
assembled to help guide the vision’s President George W. Bush
implementation. In keeping with
January 14, 2004
those recommendations, NASA
has undergone an organizational
transformation and has initiated
studies and discussions with industry and academic stakeholders to better understand the agency’s
options and opportunities for achieving the vision’s goals. The agency is also paying close attention
to the Commission’s call to engage private industry and other nations in space flight operations and
exploration activities.
New Vehicles and Technologies. To reach the Moon, Mars, and destinations beyond, NASA must
develop technologies and perform research that will sustain human and advanced robotic explorers
far from Earth. Among the key systems NASA must acquire is a vehicle that will transport crews in
a safe and reliable manner. The agency has identified the major requirements for a Crew Exploration
Vehicle to carry astronauts to the Moon and has asked industry to propose designs. NASA plans to
perform flight tests in 2008 and stage its first crewed flight in 2014.
Still other technologies will play vital roles in the success of the President’s vision. NASA will
continue to work with industry, academia, and other Government agencies to develop nuclear tech-
nologies to provide energy sources for tools and instruments, lunar and planetary surface roving
vehicles, and extended human stays on the Moon and Mars. While high costs and technical concerns
prompted NASA to defer a nuclear-powered mission to study Jupiter’s icy moons, the agency will
start on a new nuclear technology demonstrator with direct applications to exploration. In addition,
NASA will pursue technologies such as optical communications and radiation shielding. Following
the model of the privately-run X Prize competition that led in 2004 to a small company successfully
launching its own piloted rocket into suborbital space, NASA’s new Centennial Challenges program
will offer cash prizes to spur companies to compete to make several of the technology breakthroughs
necessary for exploration.
THE BUDGET FOR FISCAL YEAR 2006 295

Understanding the effects of space on humans.


Equally important to the agency’s technology
efforts is improving our understanding of how
long-duration space flight may affect human
health and physiology. NASA will engage in
research on the International Space Station
and on Earth to learn about and develop ways
to improve human tolerance of the space envi-
ronment. The agency is currently reevaluating
its biological and physical research activities to
determine how they can best serve exploration
needs.

Making Scientific Sense of Space and


Earth
In an artist’s rendering, a lunar exploration team attaches an inflatable
laboratory to its landing vehicle.
Building on a strong performance record, the
agency will continue to launch probes to improve
scientific understanding of our planet and universe. Among the questions NASA’s space and Earth
science missions are helping to answer are: What scientific processes shaped the universe, stars, and
planets? Could life exist beyond Earth? How is Earth’s climate changing? NASA has combined its
space and Earth science organizations to facilitate data exchanges among scientists and maximize
technological investments in spacecraft that will study the Earth, Sun, planets, stars, and cosmos.
Unlocking Secrets of the Solar System and Universe. The President’s 2006 Budget provides NASA
with resources to pursue a program of exploration of the solar system and worlds beyond that not only
will broaden scientific understanding of the Sun, Earth, and planets but also will inform decisions
of where in the solar system human explorers should travel, the conditions they will endure, and
the technologies necessary to support them. NASA’s recent successful robotic investigations of Mars
and Saturn will soon be followed by spacecraft bound for the planets Mercury and Pluto, asteroids,
comets, and still other locations that have yet to be decided. The agency also will build on its legacy
of revolutionizing the science of astronomy. NASA will continue to operate prolific space telescopes
such as Hubble, Chandra, and Spitzer while planning for the next generation of spacecraft that will
enhance our ability to find planets around other stars, peer deep into the history of the universe, and
improve our understanding of its structure.
A Focus on the Moon and Mars. The President’s vision for space exploration calls for a series of
robotic spacecraft to explore the Moon starting in 2008 to advance lunar science, provide detailed
maps of the Moon’s physical geography and natural resources, and identify the best locations for
humans to visit. NASA plans to return humans to the Moon by 2020 to learn how to live and work
over the long periods of time that will be required for human visits to more distant locations. All
the while, NASA will build on the success of spacecraft currently orbiting Mars as well as the Spirit
and Opportunity rovers to develop and launch a series of increasingly capable spacecraft to orbit,
land, and travel on Mars to sharpen our scientific understanding and test many of the technologies
necessary to support future human exploration of the planet.
296 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

AGENCY-SPECIFIC GOALS—Continued

Studying Earth and the Sun. The 2006 Budget


continues to fund NASA’s critical investments
in Earth science satellites, technologies, and
research. NASA plays a major part in the
interagency Climate Change Science Research
Program, contributes to the international
initiative on the Global Earth Observing System
of Systems, and has pioneered new methods to
improve forecasting of the weather, monitoring
of forest fires, and tracking of the spread of
pollutants. The agency will also continue to
develop space probes to study the Sun’s influence
on Earth and the space environment.

Saturn and its rings, as imaged by NASA’s Cassini spacecraft, which


is currently in orbit around the planet.

Capitalizing on Existing Space Infrastructure

The Space Shuttle has served as the centerpiece of the Nation’s human space flight program for
more than two decades. This vehicle is instrumental to the continued assembly of the International
Space Station, the unique in-space laboratory shared by multiple international partners. NASA is
committed to returning the Shuttle safely to flight for this purpose. Having worked diligently for
more than a year to address the safety recommendations of the Columbia Accident Investigation
Board, NASA anticipates that the Shuttle will resume operations during 2005.
NASA will retire the Space Shuttle once its role in Space Station assembly is complete. On January
14, 2004, the President said in announcing his Vision:
The Shuttle’s chief purpose over the next several years will be to help finish assembly
of the International Space Station. In 2010, the Space Shuttle—after nearly 30 years
of duty—will be retired from service.
International Space Station assembly will be completed by the end of the decade. NASA is examin-
ing configurations for the Space Station that meet the needs of both the new space exploration vision
and our international partners using as few Shuttle flights as possible. This assessment is critical to
allowing NASA to continue work on Space Station assembly safely and retire the Shuttle as planned
to make way for the Crew Exploration Vehicle.
In concert with the new exploration vision, NASA will refocus U.S. Space Station research on ac-
tivities that prepare human explorers to travel beyond low Earth orbit, such as developing counter-
measures against space radiation and understanding the long-term physiological effects of reduced
gravity.
THE BUDGET FOR FISCAL YEAR 2006 297

Keeping America at the Forefront of Safe, Secure, Environmentally Sound Flight

In 1903, the Wright brothers initiated the


era of aviation with their breakthrough flight
at Kitty Hawk, North Carolina. Since 1917,
when it was established as the National Ad-
visory Committee for Aeronautics, NASA has
led the world in the development of advanced
aeronautics technologies that have improved
the Nation’s aircraft and air transportation
system. Most recently NASA has focused on
ways to improve the safety and security of
aircraft and the National Airspace System
while reducing airport congestion, aircraft
noise, and air pollution.
Today, NASA is transforming its aeronau-
tics program to emphasize development and
NASA’s X-43A research craft set a speed record when its air-breathing demonstration of technologies critical to the
engine propelled the vehicle to nearly Mach 10, or 7,000 miles per hour, Nation’s future aviation requirements, in
in November 2004.
areas where NASA has unique capabilities.
NASA will continue working closely with other Government agencies, academia, and industry to
modernize equipment, software, and procedures for significant improvements in air traffic and its
management both in the air and on the ground.
298 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

MAKING GOVERNMENT MORE EFFECTIVE

NASA is undergoing a major transformation into a stronger, better managed Federal agency. As
its high ratings on several initiatives of the President’s Management Agenda show, the agency has
taken much-needed actions, such as improving the security of its computer systems, better managing
of its human capital needs, and justifying budget requests in terms of the results the agency expects
its programs to achieve. NASA is working toward improving the reliability of its financial manage-
ment system while strengthening the processes it uses to estimate its program and project costs.
In addition, the agency has addressed several of the management challenges uncovered by program
analyses using the Program Assessment Rating Tool. For example, the Space Station program has
improved management of its budget reserves and has developed new measures with which to gauge
its performance, while the Mars exploration program has begun to examine the technical feasibility,
potential schedules, and estimated costs associated with mission options for the next decade of Mars
exploration.

Update on the President’s Management Agenda

The table below provides an update on NASA’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

NASA remained strong in Human Capital by rolling out a multi-level employee performance appraisal system
and beginning to address workforce need changes resulting from its organizational transformation to focus on
the exploration vision. In support of Competitive Sourcing, the agency received and began to evaluate proposals
under standard competitions for business functions agency-wide and testing and machining services at the
Langley Research Center. NASA advanced E-Government by migrating from agency-specific information
technology (IT) systems to more efficient, Government-wide IT solutions, including ePayroll, and supported
Budget and Performance Integration by releasing new cost management standards to increase the accuracy of
project cost forecasting. NASA’s 2004 financial statements received a disclaimer. Embracing the challenge of a
financial management overhaul that began with the implementation of a new, integrated financial management
system, the agency will strive to improve in Financial Performance by developing a plan with credible milestones
to strengthen its financial management.

The 2006 President’s Budget includes $16.5 billion for NASA to make progress toward realizing the
President’s vision for space exploration and other agency priorities in a fiscally responsible manner.
In support of the President’s goal to make Government spending more effective, some programs that
are not directly relevant to the vision or other agency priorities, have not performed as well as others,
or are unsustainable given their high projected costs will be reformulated or terminated to allow for
greater focus on the vision’s high-priority programs, as discussed previously in the chapter.
THE BUDGET FOR FISCAL YEAR 2006 299

Initiative Status Progress


Real Property Asset Management

NASA is an active participant on the Federal Real Property Council, which helps inform and develop
Government-wide best practices. The agency is currently developing a comprehensive asset management plan
to guide planning, acquisition, operation, and disposal of real property.

National Aeronautics and Space Administration


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Science, Aeronautics, and Exploration ......................................................... 7,873 7,681 9,661
Science (non-add) .......................................................................................... 5,600 5,527 5,476
Aeronautics (non-add) .................................................................................. 1,057 906 852
Biological Sciences Research (non-add) ............................................... 986 1,004 —
Exploration Systems (non-add) ................................................................. — 25 3,165
Education (non-add) ...................................................................................... 230 217 167
Exploration Capabilities ...................................................................................... 7,478 8,358 6,763
Space Operations (non-add) ...................................................................... 5,890 6,704 6,763
Exploration Systems (non-add) ................................................................. 1,588 1,654 —
Inspector General ................................................................................................. 27 31 32
Total, Discretionary budget authority ................................................................. 15,378 16,070 16,456

Memorandum: Budget authority from enacted supplementals ............... — 126 —

Total, Discretionary outlays ................................................................................... 15,188 15,718 15,743

Total, Mandatory outlays ........................................................................................ 1 1 1

Total, Outlays .............................................................................................................. 15,189 15,719 15,744


NATIONAL SCIENCE FOUNDATION

AT A GLANCE:
2006 Discretionary Budget Authority: $5.6 billion
(Increase from 2005: 2 percent)
Major Programs:
• Research and related activities
• Education and human resources
• Major research equipment and facilities construction

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Fostering innovations that will yield significant long-term economic benefits, especially in areas
such as nanotechnology and information technology research and development.

Protecting America

• Supporting research and training in cyber security to respond to threats to information technol-
ogy systems and infrastructure.

Agency-specific Goals

• Underwriting science and engineering research.


• Strengthening a diverse, competitive U.S. workforce of scientists and engineers.
• Providing broadly accessible, state-of-the-art science and engineering facilities, tools, and other
infrastructure.

Making Government More Effective

• Using automated systems to promote effectiveness and efficiency in the agency’s grant-making
process.
• Promoting the quality, relevance, and performance of research and development programs by
maintaining practices that are consistent with the Administration’s research and development
investment criteria.

301
302 NATIONAL SCIENCE FOUNDATION

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

The 2006 Budget provides a 2.4-percent increase for the National Science Foundation’s (NSF’s)
investments in science and engineering. Similar investments in the past have yielded important
scientific discoveries, which boost economic growth and enhance Americans’ quality of life. NSF sup-
ports a broad portfolio of fundamental research, ranging from the behavioral and social sciences to
mathematics and the physical sciences. This research keeps our Nation at the scientific forefront,
providing opportunities for growth in both small and large technologically based companies.
The Administration is reinforcing NSF investment in areas that will link discovery to inno-
vation. NSF leads two Administration priority research areas that are particularly likely to
further strengthen the economy: the National Nanotechnology Initiative and the Networking and
Information Technology Research and Development (NITRD) program. NSF-funded nanotechnology
research, funded at $344 million in 2006, a 1.6-percent increase over 2005, has advanced our
understanding of materials at the molecular level and has provided insights into how innovative
mechanisms and tools can be built atom by atom. This emerging field holds promise for a broad
range of developing technologies, including higher-performance materials, more efficient manu-
facturing processes, higher-capacity computer storage, and microscopic biomedical instruments
and mechanisms. NSF’s investments in NITRD, funded at $803 million in 2006, a one-percent
increase over 2005, support all major areas of basic information technology (IT) research. NSF also
incorporates IT advances into its scientific and engineering applications, supports using computing
and networking infrastructure for research, and contributes to IT-related education for scientists,
engineers, and the IT workforce.
THE BUDGET FOR FISCAL YEAR 2006 303

PROTECTING AMERICA

NSF funding for research related


to cyber security is critical to Security from Imperfection
staying ahead of threats to IT
infrastructure. Growing concerns Determining whether a given message has originated from a
specific computer is an important but difficult security chal-
about the vulnerability of com-
lenge. NSF-funded research at the Massachusetts Institute of
puters, networks, and information
Technology (MIT) addresses this challenge by exploiting a de-
systems have prompted increased vice’s manufacturing irregularities. Imperfections and minute
NSF investments in cyber security characteristics of a computer’s components can provide a
research, education, and training. unique “fingerprint” that can be used to let others confirm they
The 2006 Budget provides $94 are communicating with that computer. MIT researchers have
million for these activities. Basic developed protocols that use these fingerprints to establish
research in this area is motivated two-way secure connections between remote computers, an
by broad interest in information innovation relevant to a wide range of secure applications,
security and reliability, but it has such as improving email security and protecting software
applications including encryption, copyrights.
intrusion detection, and network
security.
NSF’s Cybercorps program funds grants for graduate and undergraduate education in cyber secu-
rity that will strengthen the future IT security workforce. Cybercorps’ scholarships require commit-
ments for a period of Government service, ensuring that Federal agencies have access to these skilled
workers. For Cybercorps, the 2006 Budget provides $10 million, which will support 660 students.
Other areas of NSF research have potential relevance to homeland security, including research on
diverse topics such as: microbes and the ecology of infectious diseases; sensor networks; threat antic-
ipation and behavioral response; mathematical algorithms for extracting information from massive
data sets; and organization and disruption of social networks.
304 NATIONAL SCIENCE FOUNDATION

AGENCY-SPECIFIC GOALS

Underwriting Science and Engineering Research

The 2006 Budget provides $4.3 billion in research and related activities to sustain the Nation’s
leadership in science and engineering, an increase of $113 million. Increased funding for “core” re-
search will also increase the share of well-rated grant proposals NSF can fund. The agency considers
three factors in evaluating the productivity of its research portfolio: award size, award duration, and
the share of proposals funded. In 2006, NSF will place greater emphasis on increasing its share of
proposals it can fund while striving to maintain recent gains in award size and duration.
NSF provides sustained funding to accelerate progress in areas that hold exceptional promise
for advancing knowledge and addressing national interests. In 2006, investments are focused in
four interdependent NSF priority areas: Biocomplexity in the Environment; Nanoscale Science and
Engineering; Mathematical Sciences; and Human and Social Dynamics.

Strengthening the U.S. Science and Engineering Workforce

The 2006 Budget will continue NSF’s efforts


to prepare U.S. students for the science and
engineering workforce, with a focus on broad-
ening participation in these fields. NSF funding
for basic research at U.S. academic institutions
supports the education of future U.S. scientists
and engineers. NSF also makes strategic invest-
ments in K–12, undergraduate, graduate, and
postdoctoral education. The President’s Budget
will fund graduate fellowships and traineeships
for approximately 4,600 graduate students across
the country.
NSF’s programs support participation in The Nanobiotechnology Center, an NSF-funded Science and
Technology Center led by Cornell University, created a traveling
science and engineering by individuals and by museum exhibition to explain nanotechnology to the public in an
institutions that serve significant numbers of interactive and entertaining way. About 800,000 visitors toured the
exhibition in its first six months.
underrepresented students and communities. An
increasing emphasis on educational programming and outreach by NSF-supported investigators is
expanding the resources available to the Nation’s K–12 and postsecondary institutions to develop
and strengthen programs in science, technology, engineering, and mathematics.
The President’s Budget seeks to attract the most promising U.S. students into science and engi-
neering programs by providing more competitive graduate stipends. NSF provides annual stipends of
$30,000 for fellowship and trainee programs, which is significantly higher than the average stipend
of $18,000 just five years ago.

Producing Tools for Science and Engineering

NSF invests in research tools critical to scientists and engineers, including instruments, equip-
ment, facilities, databases, and large surveys. NSF makes awards primarily to universities and non-
profit organizations to construct, manage, and operate large scientific and engineering facilities. The
President’s Budget enhances science infrastructure in a wide range of fields, including astronomy,
earthquake research, and environmental research.
THE BUDGET FOR FISCAL YEAR 2006 305

The Budget provides $509 million for NSF’s targeted investments in cyberinfrastructure—the ad-
vanced computing, networking, and information tools and resources intended to broadly benefit sci-
ence and engineering. Examples of these technologies include: supercomputers, advanced networks,
techniques to visualize complex phenomena, massive data repositories, modeling and simulation,
and advanced digital sensor technologies. Because these investments support science and engineer-
ing broadly, rather than a single facility or project, they increase productivity across the Nation’s
entire science and engineering community.
The Budget continues support for facilities initiated in 2005, including the National Ecological
Observatory Network (NEON), the Scientific Ocean Drilling Vessel, and the Rare Symmetry Violat-
ing Processes (RSVP) installation. NEON is a proposed national network of observatories that will
transform ecological research and environmental forecasting. The Scientific Ocean Drilling Vessel
will provide a new resource to examine geological and biological processes beneath the ocean floor.
RSVP will address important questions in particle physics that have the potential to transform our
basic understanding of the universe, such as the nature of dark matter.

Other continuing facility-construction


efforts include the Atacama Large Millimeter
Array (ALMA), EarthScope, and the IceCube
Neutrino Observatory. ALMA is a telescope
composed of as many as 64 antennas, each
12 meters across. ALMA’s imaging qualities
and its ability to change the configuration of
its antennas will make it astronomy’s most
versatile imaging instrument. EarthScope is
planned as a distributed, multi-purpose array
of seismic and other geophysical instruments
that will allow researchers to make major
advances in our knowledge and understanding
of the structure and dynamics of the North
Each year, heavy icebreakers plow through thick ice to provide access
American continent. IceCube is a neutrino to NSF’s Antarctic stations, which support research on the continent.
observatory buried in the Antarctic ice sheet NSF also employs research icebreakers such as the Nathaniel B. Palmer
that will provide hitherto unseen insights on (shown here) to support research in Antarctic waters.

the most active and energetic astrophysical


objects, such as supermassive black holes.
In order to most effectively and efficiently support the Nation’s polar research activities in Antarc-
tica, funding for three polar icebreakers is being transferred from the U.S. Coast Guard to NSF. In
the future, this will permit NSF to define the options for refurbishment or replacement of two of
the ships (30-year old heavy icebreakers), which have been critical to maintaining access to NSF’s
Antarctic research stations, as well as operational options for the third (Arctic) icebreaker.
306 NATIONAL SCIENCE FOUNDATION

MAKING GOVERNMENT MORE EFFECTIVE

NSF ensures quality in its funding programs by using a competitive awards process based on the
merit of individual grant proposals, coupled with periodic external review of its programs that ap-
prove those grants. The President’s Management Agenda recognizes the importance of external re-
view and competition for funding; all eight NSF programs assessed using the Program Assessment
Rating Tool in the last two years have been rated Effective. These practices also help ensure qual-
ity, relevance, and performance, which are key components of the Research and Development (R&D)
Investment Criteria.

NSF Proposals Increased 54 Percent in 5 Years The 2006 Budget enhances the tools NSF
Full-time equivalents (FTEs) Proposals in thousands uses to solicit, process, and review, as well as
2,000 50 monitor its awards. The number of research
proposals the agency receives has grown
Proposals Received
1,600 40 significantly in recent years, while the agency’s
staffing level has remained relatively flat.
1,200 30 The agency has accommodated the increase in
FTEs funding and responsibilities through effective
800 20 use of information technology. NSF’s FastLane
grants-processing system enables NSF to
400 10 electronically process virtually all of the more
than 45,000 proposals the agency receives
0 0 each year. Over 200,000 scientists, engineers,
1999 2000 2001 2002 2003 2004 educators, and research administrators use
Source: NSF. this system to submit and review proposals
and report project results. But while the information technology investments of recent years have
provided impressive gains in efficiency, dramatic increases in both the number and complexity of
proposals submitted to NSF pose increasing administrative challenges. To address these challenges,
NSF continues to enhance existing systems, while also rethinking fundamental agency processes
to pursue an integrated approach to human capital, competitive sourcing, and E-Government. The
2006 Budget requests funds to improve information technology to further modernize and coordinate
the systems and processes NSF uses for merit review and grant management.
THE BUDGET FOR FISCAL YEAR 2006 307

Update on the President’s Management Agenda

The table that follows provides an update on NSF’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrow indicates change in status since evaluation as of September 30, 2004.


NSF continues to improve its management of human capital, recently documenting that it had significantly
reduced gaps in skills that are critical to NSF’s mission. The agency receives virtually all of its research
proposals electronically, has a comprehensive plan for continued improvement of its information technology
security program, and continues as an active partner in several interagency E-Gov initiatives, including
grants.gov and E-authentication. NSF prepared its 2004 audited financial statements in 45 days and earned
an unqualified opinion in its 2004 audits. NSF can report the full cost of achieving its performance goals. NSF
delayed developing a competitive sourcing strategy until it completed its human capital plan, but expects
to move forward with competitive sourcing in 2006.

Initiative Status Progress


Eliminating Improper Payments

NSF has an improper payment rate of less than one percent to its awardees (typically colleges and universities),
but NSF will have to demonstrate that its methods are adequate to ensure that colleges and universities that
receive funding exercise fiscal responsibility consistent with Government-wide standards. (Because this is
the first quarter that agency efforts in this initiative were rated, progress scores were not given.) NSF is one
of 12 major R&D agencies that strive to plan, manage, and assess their R&D programs consistent with the
R&D Investment Criteria, which are discussed in detail in the chapter on Research and Development in the
Budget’s Analytical Perspectives volume.
308 NATIONAL SCIENCE FOUNDATION

National Science Foundation


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Research and Related Activities ..................................................................... 4,263 4,221 4,334
Education and Human Resources ................................................................. 939 841 737
Major Research Equipment and Facilities Construction ........................ 155 174 250
Salaries and Expenses....................................................................................... 219 223 269
National Science Board ...................................................................................... 4 4 4
Inspector General ................................................................................................. 10 10 12
Total, Discretionary budget authority ................................................................. 5,590 5,473 5,605

Total, Discretionary outlays ................................................................................... 5,028 5,492 5,540

Mandatory Outlays:
H–1B Fee Programs ............................................................................................ 1 100 100
All other .................................................................................................................... 89 49 26
Total, Mandatory outlays ........................................................................................ 90 149 126

Total, Outlays .............................................................................................................. 5,118 5,641 5,666


SMALL BUSINESS ADMINISTRATION

AT A GLANCE:
2006 Discretionary Budget Authority: $593 million
(Decrease from 2005: 3 percent)
Major Programs:
• Small Business Loans
• Small Business Development Centers
• Disaster Loans

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Guaranteeing small business loans in 2006 through the 7(a) program.


• Providing fixed-rate loans for land, equipment, and buildings through the Section 504 program.
• Assisting and training approximately 700,000 entrepreneurs in 2006 through Small Business
Development Centers.
• Helping more than 410,000 business owners receive counseling and mentoring from business
executives under the SCORE program.
• Streamlining Federal regulations and reducing paperwork burdens, reducing the growth of
regulatory costs for small businesses by nearly $6 billion.

Supporting a Compassionate Society

• Issuing approximately 25,000 low-interest loans to businesses and homeowners under the
Disaster Loan program to cover uninsured losses resulting from natural disasters.

309
310 SMALL BUSINESS ADMINISTRATION

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Small businesses account for more than half of existing private sector jobs, two-thirds of net new
private sector jobs, and more than half of the United States’ Gross Domestic Product. The Small Busi-
ness Administration’s (SBA’s) mission is to promote small business development and entrepreneur-
ship through business credit and technical assistance programs. In addition, SBA works with other
Federal agencies to reduce regulatory and paperwork burdens.
In order to meet the demand of the growing small business sector, the Budget supports more than
$25 billion in small business lending. The 7(a) program, which received an Adequate rating under
the Program Assessment Rating Tool, is being increased to support $16.5 billion in guaranteed loan
volume in 2006, the largest level in the history of the program. This will provide financing to en-
trepreneurs who could not obtain affordable loans without a Government guarantee. A 10-percent
increase in the Section 504 program, to $5.5 billion in loan volume, will increase borrower access
to fixed-rate financing for fixed assets such as land, equipment, and buildings. SBA will also sup-
plement the capital of Small Business Investment Companies with $3 billion in long-term loans for
venture capital investments in small businesses.

Economic Opportunity
For more than 20 years Beth Harshfield worked for prominent marketing and advertising companies. In June
of 2000, she formed a small business of her own, Exhibit Arts LLC, providing exhibit design and fabrication,
and conference and event management services
As an American Indian, she received her 8(a) certification in the fall of 2003. With this assistance, her once
part-time and home-based business now occupies a 7,000-square foot facility in downtown Wichita, Kansas.
Her clients include the Air Force, Army, and Environmental Protection Agency, in addition to numerous
commercial customers.

SBA and its partners provide technical assistance programs, including training, counseling,
mentoring, and information services to more than four million existing and potential entrepreneurs
annually. SBA also provides guidance to the new Urban Entrepreneurs Partnership, announced
by President Bush in July 2004. SBA provides grants to a network of over 1,100 Small Business
Development Centers; 389 SCORE chapters, which match executives with entrepreneurs for
business counseling; and 84 Women’s Business Centers. The Budget requests nearly $108 million
for technical assistance programs in 2006.
Regulatory and paperwork requirements are especially cumbersome on small businesses. SBA’s
studies have found that small businesses with fewer than 20 employees spend an average of $6,975
per employee complying with regulations as compared to $4,463 per employee for firms with more
than 500 employees. SBA works with Federal agencies to minimize the burden of regulations. As a
result of the Administration’s efforts since 2001, SBA estimates that the growth of regulatory costs
for small businesses has been reduced by over $50 billion. In 2006, SBA efforts are expected to reduce
such cost growth by an additional $5.6 billion.
In addition to SBA’s programs, the Administration is championing small business interests through
tax cuts and health care reform. As a result of the Jobs and Growth Tax Relief Reconciliation Act
of 2003 (JGTRRA), 25 million small businesses and their owners received tax relief averaging more
THE BUDGET FOR FISCAL YEAR 2006 311

than $3,000 each in 2004. JGTRRA quadrupled the expensing provision to $100,000, raised the ex-
pensing phase-out threshold to $400,000, and increased the first year “bonus” depreciation deduction
from 30 to 50 percent. The first two provisions were extended through 2007 by the American Jobs
Creation Act of 2004. The Administration also supports legislation enabling creation of Association
Health Plans, which will allow small businesses to band together and purchase insurance at lower
rates, and making insurance premiums associated with Health Savings Accounts tax deductible. In
addition, the proposed comprehensive reform of the Nation’s medical liability laws will make insur-
ance costs more affordable and reasonable for small businesses.

Procurement Policy

The Federal Government annually buys over $200 billion in goods and services, and has a statutory
goal of awarding at least 23 percent of its purchases to small businesses. The Federal Government
maintains its strong commitment to achieving and exceeding this goal.
As part of this effort, SBA assists agencies by negotiating agency-specific procurement goals,
monitoring performance, and encouraging use of small business sources. In addition, as part of
the President’s commitment to help small businesses, the Administration implemented a strategy
to minimize the adverse effects of inappropriate contract bundling—the grouping of separate and
often unrelated purchasing activities into a single contract, a practice that increased among Federal
agencies in the 1990s.
312 SMALL BUSINESS ADMINISTRATION

SUPPORTING A COMPASSIONATE SOCIETY

SBA’s disaster loans help homeowners,


renters, businesses of all sizes, and non-
profit organizations finance rebuilding and
recovery efforts. Working primarily with the
Department of Homeland Security’s Federal
Emergency Management Agency, SBA sets
up temporary field offices in disaster areas
to help issue low-interest construction and
economic-assistance loans.
As a result of the four hurricanes in the
southeastern United States in August and
September 2004, SBA received supplemental
Florida building damaged by Hurricane Charlie.
appropriations adequate to issue approxi-
mately 80,000 loans totaling about $4 billion
in 2005. These loans will assist homeowners and businesses in repairing their damaged property
and provide businesses with operating funds during the recovery period. The 2006 Budget requests
funding to support $810 million in disaster loans based on the five-year average demand under the
program, excluding large scale events such as the recent hurricanes in the Southeast.
THE BUDGET FOR FISCAL YEAR 2006 313

MAKING GOVERNMENT MORE EFFECTIVE

Consistent with the President’s Management Agenda, SBA is administering its programs more
efficiently to improve customer service and reduce program costs. Building upon its success in con-
solidating loan liquidation functions from 69 district offices to a single location, SBA is also working
to consolidate other loan origination and management functions. While providing administrative
cost savings, these changes ensure that loans are managed more consistently and efficiently. The
consolidation of loan liquidation activities in 2004 reduced agency costs for this function from $32
million to $16 million per year.
SBA seeks to target assistance more effectively to credit-worthy borrowers who would not get loans
from the commercial markets in the absence of a Government guarantee. SBA is actively encouraging
financial institutions to increase lending to start-up firms, low-income entrepreneurs, and borrowers
in search of financing below $150,000. Preliminary evidence shows that SBA’s outreach for the 7(a)
program has been successful. Average loan size has decreased from $241,000 in 2000 to $167,000 in
2004, while the number of small businesses served has grown from 43,748 to 81,133 during the same
time.
SBA has also begun monitoring and managing its portfolio risk through the Loan Monitoring Sys-
tem. The implementation of this system enables the agency to track the performance of lenders
relative to the credit scores of borrowers in their guaranteed loan portfolio. This provides the agency
with a tool to identify lenders that pose the greatest risk to Federal taxpayers for similar types of
borrowers, and to suggest intervention when necessary to avoid further risk.
The 2006 Budget proposes termination of the Microloan program, which has been excessively
expensive relative to other programs. The 7(a) program is capable of serving similar clientele
through the Community Express program at a much lower cost to the Government.
The 2006 Budget supports $3 billion in new guaranteed venture capital investments for small
businesses through the Small Business Investment Company Debenture program, which provides
credit financing. However, with realized and projected losses exceeding $2 billion in the Participating
Securities program, which provides equity-type venture capital financing, the 2006 Budget does not
support new guaranteed investments in this program. Rather than make new investments through
this program, SBA will continue to improve efforts to monitor and mitigate risk in the outstanding
$9 billion Participating Securities portfolio.
314 SMALL BUSINESS ADMINISTRATION

MAKING GOVERNMENT MORE EFFECTIVE—Continued

Update on the President’s Management Agenda

The table below provides an update on SBA’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrow indicates change in status since evaluation on September 30, 2004.

SBA has made solid progress in most areas of the President’s Management Agenda. To improve service to the
public, the agency assessed its staff’s skills, contracted for training, increased accountability of managers, and
conducted competitive sourcing competitions in 2004. As the leader of the Business Gateway, SBA has launched
the website www.Business.gov, which helps small business owners easily find, understand, and comply with
Federal regulations. SBA is working with other Federal agencies to reduce the paperwork burden on businesses.
In the area of Budget Performance and Integration, SBA is making progress by improving its ability to measure,
monitor, and mitigate risk in its loan portfolio. SBA has also made progress in developing new estimation models
to improve financial management and more accurately measure the cost of providing credit to small businesses.

Initiative Status Progress


Eliminating Improper Payments

SBA developed targets for the Disaster Loan and Small Business Investment Company programs and is in the
process of developing new ones for the 7(a) General Business Loan program. (Because this is the first quarter
that agency efforts in this Initiative were rated, progress scores were not given.)
THE BUDGET FOR FISCAL YEAR 2006 315

Small Business Administration


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Total, Discretionary budget authority ................................................................. 757 610 593
Memorandum: Budget authority from enacted supplementals ............... 30 929 —

Total, Discretionary outlays ................................................................................... 796 1,373 823

Total, Mandatory outlays ........................................................................................ 3,279 1,663 33

Total, Outlays .............................................................................................................. 4,075 3,036 790

Credit activity
Direct Loan Disbursements:
Direct Disaster Loans .......................................................................................... 467 2,900 1,100
Direct Business Loans ........................................................................................ 21 15 5
Total, Direct loan disbursements ......................................................................... 488 2,915 1,105

Guaranteed Loan Commitments:


Guaranteed Business Loans ............................................................................ 14,067 21,000 21,000
Total, Guaranteed loan commitments ................................................................ 14,067 21,000 21,000
SOCIAL SECURITY ADMINISTRATION

AT A GLANCE:
2006 Discretionary Budget Authority: $9.5 billion
(Increase from 2005: 8 percent)
Major Programs:
• Old-Age and Survivors Insurance
• Disability Insurance
• Supplemental Security Income

MEETING PRESIDENTIAL GOALS

Promoting Economic Opportunity and Ownership

• Helping people with disabilities make the transition to work.

Supporting a Compassionate Society

• Providing Supplemental Security Income payments, Social Security Disability Insurance


benefits, and Survivor Insurance benefits to eligible individuals.
• Assisting in the administration of the new Medicare prescription drug benefit by determining
eligibility for low-income subsidies.
• Extending eligibility for Supplemental Security Income for roughly 4,000 refugees and asylees
who have not yet become U.S. citizens.

Making Government More Effective

• Converting from paper to electronic disability application folders to speed decision-making and
reduce administrative costs.
• Providing access to video hearings for some people who live a long distance from a hearing office,
allowing them to have hearings scheduled sooner when they appeal decisions made by the Social
Security Administration.
• Ensuring that more than 99 percent of benefits are paid correctly.

Agency-specific Goals

• Improving the timeliness and accuracy of the Social Security Administration’s disability
decision-making process while continuing to improve productivity.

317
318 SOCIAL SECURITY ADMINISTRATION

PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

Demonstrations to Help Transition from Disability to Work

Individuals with disabilities face many barriers in making the transition to work. The Social Secu-
rity Administration (SSA) has launched two demonstrations: one to support adults with disabilities
who want to enter the workforce and one to support children with disabilities making the transition
from school to work.
Under the Ticket to Work and Work Incentives Improvement Act of 1999, SSA is exploring ways to
more gradually reduce Disability Insurance (DI) benefits as beneficiaries enter the workforce. Under
current law, DI beneficiaries who exhaust their nine-month trial work period and three-month grace
period have their DI benefits completely stopped if they earn more than $830 per month. Under the
DI Benefit Offset Demonstration, such beneficiaries would be able to earn more than $830 per month
and still receive a portion of their DI benefits. This change would encourage them to return to work
by allowing a more gradual transition.
SSA is also testing approaches to support the successful transition of youth with disabilities from
school to post-secondary education and/or employment. Under the Youth Transition Demonstration
projects, California, Colorado, Iowa, Maryland, Mississippi, and New York have created service-deliv-
ery systems that blend education, rehabilitation, health care, and employment services. Each project
is different, but all show how communities can blend services and resources from Federal, State, and
local partners to support youth with disabilities as they progress through high school and go on to
work or post-secondary education. Services include mentoring, skills training, career planning, and
job search and placement services. The Budget includes $9 million for these demonstration projects.

Patrick’s Story
Patrick was an outgoing young man working
on his cosmetology license. That was in
1994—the year his life took a drastic turn.
Patrick began to feel weak, lost a lot of
weight, and had constant headaches. His
doctor diagnosed him with end-stage renal
disease. For the next seven years, Patrick
underwent kidney dialysis. He abandoned
his career goals and was approved for
Social Security disability benefits. His days
were long and unfulfilling. Then, in 2001,
he became eligible for a kidney transplant.
“After all this time, I couldn’t believe my good
fortune,” said Patrick. “Finally, a kidney was
Patrick has successfully returned to work through SSA’s Ticket to Work available, and all I could think of was going
program.
back to living a normal, healthy life.”
After the transplant, Patrick had some problems with his health, but finally began regaining his strength. It
was around that time that his Ticket to Work came in the mail from Social Security. He found out that he
could use his Ticket to go back to work without risking the loss of his Medicare benefits. Patrick started
working as an interim accountant, and now has a permanent position as a buyer for a manufacturer.
THE BUDGET FOR FISCAL YEAR 2006 319

The Budget proposes to require full-time school attendance as a condition of entitlement for Social
Security child’s benefits for children beginning at age 16. Current policy allows eligible children to
receive Social Security benefits up to the month they reach age 18, regardless of school attendance.
School attendance is required for children ages 18 and 19 to continue receiving benefits. Changing
the policy to age 16 will further encourage eligible children to remain in school.
SSA has put a priority on helping people get back to work, as evidenced by the new performance
measure it developed for the Supplemental Security Income (SSI) program. SSA is committed to
increase the number of SSI and DI beneficiaries with “tickets” who go to work, relative to 2003,
by 20 percent in 2004, 40 percent in 2005, and 60 percent in 2006. Tickets allow beneficiaries to
choose employment services, whether from a more traditional vocational rehabilitation agency or
other participating public and private providers.
320 SOCIAL SECURITY ADMINISTRATION

SUPPORTING A COMPASSIONATE SOCIETY

SSA will pay nearly $40 billion in SSI payments to needy elderly and disabled people in 2006
and about $90 billion in Social Security disability benefits. In addition, SSA will pay $68 billion in
Survivors Insurance benefits to widows and surviving children. In 2006, more than 20 million bene-
ficiaries will receive benefits from the SSI, DI, and Survivors programs.

Discounted Drugs for Seniors

The Medicare Prescription Drug Improvement and Modernization Act of 2003 includes a major
role for SSA in administering the new Medicare prescription drug benefit. Starting in the summer
of 2005, SSA will determine whether Social Security and Medicare beneficiaries are eligible for the
additional low-income prescription drug assistance that is part of the drug benefit.
Senior citizens and individuals with disabilities who have income less than 135 percent of the
poverty level and who have resources equal to or less than $6,000 will be eligible in 2006 for Medi-
care drug coverage with no premium and limited cost-sharing. Other beneficiaries—those with in-
come between 135 and 150 percent of poverty and somewhat higher resources—will be eligible for
Medicare drug coverage with a reduced premium and cost-sharing. Individuals will have the option
of applying for assistance through the Internet, telephone, mail, or at a local Social Security office.
SSA employees will also be on-site at many local community associations to assist individuals with
the filing of applications. The Budget continues funding for processing low-income prescription drug
assistance applications and related activities.

Online Benefit Application

To meet increasing public demands, SSA allows the public to apply


for Social Security retirement, spousal, and disability benefits online in
addition to applying in person or by phone. The online services provide
opportunities for the public to conduct SSA business electronically in
a private and secure environment. In 2004, 217,000 claimants sub-
mitted applications for Social Security benefits online, an increase of
47 percent over the previous year. Other online services allow current
beneficiaries to check their benefits, enter changes to their address or
direct deposit information, and obtain replacement 1099s and proof of
income letters. These services can be accessed through SSA’s website,
www.socialsecurity.gov. SSA’s online services provide greater conve-
nience to the public while allowing the Agency to process its workloads
SSA now makes it possible for
more efficiently. claimants to apply for benefits online.

Assisting Low-Income Refugees

The Budget would allow refugees and asylees to receive SSI for eight years after entry into the coun-
try. Currently, refugees and asylees who have not become citizens can only receive SSI for seven years
after entry. Consistent with the President’s goals for immigration reform, this measure would pro-
vide legal asylees and refugees a greater opportunity to achieve citizenship. Funding for SSI comes
from general Government revenues—not from the Social Security trust funds. The policy would con-
tinue through 2008. Beginning in 2005, SSA will send letters annually to those refugees and asylees
receiving SSI reminding them of the requirement to become a citizen for continued benefits.
THE BUDGET FOR FISCAL YEAR 2006 321

MAKING GOVERNMENT MORE EFFECTIVE

Electronic Disability Folder


Electronic Disability (eDib) Process Becoming a Reality
Starting in January 2004,
Speedier service of disability claims is proving to be a reality.
SSA began implementation of an In January 2004, the Mississippi Disability Determination Ser-
electronic disability file folder. This vice (DDS) received a premature baby boy’s SSI claim, along
increased use of technology will with medical evidence from the local children’s hospital. This
replace a paper-driven process with baby weighed less than 1,200 grams and had serious med-
a more efficient one, resulting in ical complications. The formal SSA application was submit-
significantly reduced processing ted electronically and the medical evidence was scanned into
times and improved decisional a document repository. The disability examiner had access to
accuracy for initial disability all documents on her computer screen and made an allowance
claims and hearings. So far, SSA that same day. Social Security expects eDib to be used in all
has implemented the electronic DDSs by June 2005.
disability folder in 25 States and
plans to complete implementation
in 2006. Once fully implemented,
SSA will have the largest repository of medical records in the world, and will see greater progress
in eliminating avoidable delays in the disability claims process.

Performance Evaluation of Select Programs

SSA assessed for 2006 the


SSI program using the Program Stopping Fraud
Assessment Rating Tool (PART).
The PART found that SSI has a Another challenge faced by SSA is weeding out fraudulent
claims of disability among the applications it gets every year.
clear purpose and addresses a
specific need. SSA is working to The Federal Government filed suit last year against a woman
ensure that the correct benefits who had received $190,000 in disability payments. In January
are paid to the right persons on a 1999, she claimed that even lifting a gallon of milk caused her
timely basis. SSA evaluated the to suffer migraines that prevented her from reading and writing,
DI program previously and is con- and that she was unable to walk more than 10 minutes without
experiencing debilitating pain. In March 1999, she competed
verting from using a paper folder to
and won the “Mrs. Minnesota International” pageant in which
an electronic one for the disability
she engaged in stage walking, a production number, and com-
claims process, as discussed above. peted in the aerobic and evening gown competitions.
The PART evaluation cited a need
to implement an improved claims A Federal jury convicted her in August 2004 on nine counts of
process. defrauding SSA.
Source: U.S. Department of Justice, Office of the U.S. Attorney, District of
Minnesota, Press Release.
Stewardship and Program
Integrity

A crucial aspect of good management in income support programs is ensuring that only eligible
individuals receive benefits, and that they receive the correct benefits. SSA undertakes a variety
of program integrity activities to minimize improper payments by verifying beneficiaries’ eligibility
status, collecting debt, investigating and deterring fraud, and other methods.
322 SOCIAL SECURITY ADMINISTRATION

MAKING GOVERNMENT MORE EFFECTIVE—Continued

The Budget proposes to improve payment accuracy by requiring that SSA review at least 50
percent of favorable SSI disability and blindness decisions before starting payments. Further, the
Administration will conduct more continuing disability reviews (CDRs) in 2006. This is a proven,
sound investment since SSA generates savings of approximately $10 for each $1 spent on such
activities. SSA’s 2003 CDRs are expected to yield over $5 billion in program savings.

Improved Productivity and Efficiency

Processing Time for Initial Disability Claims SSA is committed to improve its productivity
Number of Days and efficiency in providing services to citizens.
110 SSA performs a variety of tasks for citizens,
such as processing applications for retirement
105 and disability benefits, answering questions
Average Processing Time through its 1–800 number, and conducting
100 hearings for people who have appealed the
decision SSA makes on their application for
95 benefits. SSA measures its productivity in
conducting all of these transactions, and pushes
90
for greater efficiencies through increased use of
technology and changes in business processes.
85
SSA, for example, measures the number of
1999 2000 2001 2002 2003 2004 2005 2006
applications for disability benefits the average
Source: SSA.
worker processes each year, and strives to
increase this number. Using these kinds of measures, SSA has documented that the agency
increased productivity by an annual average of nearly three percent from 2000-2004. In addition,
SSA has reduced average processing time for initial disability claims by over 10 percent since 2001
(see accompanying chart).

Video Hearings Save Time and Money

In 2004, individuals who were initially denied disability


benefits and who appealed to an Administrative Law Judge
(ALJ) had to wait over a year before a final decision was
made. Wait times can be especially long for individuals liv-
ing long distances from major cities; ALJs may only visit
rural areas a few times per year since they need to sched-
ule enough hearings to justify the expense of their travel.
Also, it can be difficult obtaining the appropriate expert wit-
nesses outside major cities.
Video hearings can benefit claimants in two ways. Their
hearings may be scheduled sooner than if they choose face-
to-face hearings, and there may be a broader range of expert
witnesses available. For example, a claimant in Sioux City,
Iowa, can go to a video hearing location in his or her local
A claimant and representative (not shown) watch from
community, rather than traveling nearly 200 miles to the a remote hearing site as expert witnesses are sworn
hearing office in West Des Moines or waiting many months in for a video hearing.
before an ALJ could travel to Sioux City. Video hearings
THE BUDGET FOR FISCAL YEAR 2006 323

save travel expenses and time for both the claimant and the ALJ. In 2006, SSA plans to schedule
30,000 hearings via video.

Update on the President’s Management Agenda

The table that follows provides an update on SSA’s implementation of the President’s Management
Agenda as of December 31, 2004.

Budget and
Competitive Financial
Human Capital E-Government Performance
Sourcing Performance
Integration
Status

Progress

Arrow indicates change in status since evaluation on September 30, 2004.

SSA has achieved some significant milestones in its effort to implement the President’s Management Agenda.
The agency now has a multi-tiered performance appraisal system for executives and managers that effectively
differentiates between different levels of performance. SSA is working to include all employees under such a
system. Further, SSA is able to determine full and marginal cost of achieving performance goals and uses that
information to make decisions. In the area of Financial Performance, SSA is improving the quality, consistency,
and timeliness of data so managers can drive better results such as reducing the administrative costs of SSA’s
benefit programs. In Competitive Sourcing, SSA completed it first full competition, the Systems Help Desk
(covering 68 positions). The estimated savings from this competition is $35 million over a five-year period. In
addition, SSA identified a number of challenges involved in completing small competitions, and proposed an
alternate study approach to better address these competitions that was approved as a limited pilot.

Initiative Status Progress


Eliminating Improper Payments

SSA measures improper payments for its three major benefit programs: Old Age and Survivors Insurance
(OASI), Disability Insurance, and Supplemental Security Income (SSI). SSA has a corrective action plan and
reduction targets in place. The OASI program consistently has a very low improper payment rate. SSA did not
meet its target for improper payments for SSI in 2003. SSA is working to meet future targets with initiatives that
would allow for quicker and more accurate eligibility determinations. (Because this is the first quarter that agency
efforts in the Eliminating Improper Payments Initiative were rated, progress scores were not given.)
324 SOCIAL SECURITY ADMINISTRATION

AGENCY-SPECIFIC GOALS

SSA sets goals to provide high-quality service, which is reflected in the Agency’s commitment to
increase productivity, timeliness, and accuracy in processing applications for disability benefits. With
this Budget, SSA expects to achieve the performance targets outlined in the table below.

Goal
2004
Goal
Actual 2005 2006
Productivity:
Disability Decisions, Per Worker Per Year 1 ........................................................ 273 278 284
SSA Hearings Decisions, Per Worker Per Year ................................................. 100 103 105
Timeliness (in days):
Average Processing Time for Initial Disability Claims ...................................... 95 93 91
Average Processing Time for Hearing Decisions .............................................. 391 442 442
Accuracy:
Disability Determination Services Accuracy Rate ............................................. NA 97% 97%
Accuracy Rate for Hearing Decisions .................................................................... NA 90% 90%
1
In 2004, an SSA worker on average made 273 disability decisions. A higher number in a given year represents greater productivity.

Social Security Administration


(In millions of dollars)

2004 Estimate
Actual 2005 2006
Spending
Discretionary Budget Authority:
Limitation on Administrative Expenses (LAE) Base 1 ............................ 8,313 8,733 9,083
Office of the Inspector General ....................................................................... 88 90 93
Research and Development ............................................................................. 40 28 20
Subtotal ............................................................................................................................. 8,441 8,851 9,196
Medicare Reform Administrative Expenses 1 ..................................................... 500 — 320
Total, Discretionary budget authority ...................................................................... 8,941 8,851 9,516

Mandatory Outlays:
Old-age, Survivors, and Disability Insurance ............................................. 491,623 515,126 540,121
Supplemental Security Income........................................................................ 33,725 39,027 38,314
Special Benefits for Certain World War II Veterans ................................. 10 11 10
Offsetting Collections .......................................................................................... 2,583 2,613 2,727
Undistributed Offsetting Receipts ................................................................... 10,601 10,911 11,357
Legislative proposals ...................................................................................... — — 13
Total, Mandatory outlays ........................................................................................ 512,174 540,640 564,374
1
The LAE account includes funding from the Hospital Insurance and Supplementary Medical Insurance trust funds for services that support the
Medicare program, including implementation of Medicare Reform.
OTHER AGENCIES

COMMODITY FUTURES TRADING COMMISSION

The Commodity Futures Trading


Commission (CFTC) protects the Price Manipulation in Energy Markets
integrity and effectiveness of the
U.S. futures and options markets. Since December 2002, CFTC filed charges against a total of
30 companies and individuals and assessed over $267 million
It protects investors by preventing
in civil monetary penalties for illegal activity in the energy
fraud and abuse and ensuring
markets. In 2004, CFTC actions resulted in a $35 million civil
adequate disclosure of information. monetary penalty against Enron. Among other claims, the
Major activities of the agency CFTC alleged that Enron and a natural gas trader engaged in
include: promulgating regulations a manipulative scheme to buy an extraordinarily large amount
governing commodities futures of natural gas in a short period of time. The complaint alleged
markets; detecting and prosecuting Enron’s actions had a direct and adverse effect on the New
investor fraud; and monitoring the York Mercantile Exchange natural gas futures contract, in-
markets in order to prevent illegal cluding causing prices to become artificial. In announcing the
price manipulation efforts. In penalty, Gregory G. Mocek, the Director of Enforcement for
2004, CFTC filed 83 enforcement the CFTC stated, “This settlement demonstrates the CFTC’s
actions against suspected violators exhaustive efforts to identify and root out manipulation of the
natural gas and energy markets.”
of commodity trading laws. The
2006 Budget provides $99 million
to fund CFTC’s activities.

CONSUMER PRODUCT SAFETY COMMISSION

The Consumer Product Safety Commission


(CPSC) is the Federal agency responsible
for protecting families from hazards related
to consumer products under its jurisdiction.
CPSC collects data to monitor injuries and
deaths resulting from consumer products,
works with industry to develop voluntary
standards to make products safer, and
educates consumers on potentially dangerous
products. Where these steps are insufficient
to protect Americans from unnecessary risks,
CPSC develops mandatory rules and conducts
product recalls. The President’s Budget
Safety helmets are one of 15,000 types of consumer products under
CPSC’s jurisdiction.
includes $62 million for CPSC to sustain
existing safety efforts and continue providing
national consumer product safety leadership.

325
326 OTHER AGENCIES

CORPORATION FOR NATIONAL AND COMMUNITY SERVICE


Each year, the Corporation for National and Community Service (CNCS) engages more than 2.5
million Americans in service opportunities. Through AmeriCorps, Senior Corps, and Learn and Serve
America, CNCS helps Americans answer the President’s Call to Service. The 2006 Budget proposes
$921 million for CNCS to support 75,000 AmeriCorps members, provide service opportunities for
some 500,000 Senior Corps members, and engage over one million youth in service learning through
Learn and Serve America. The Corporation’s programs work with community- and faith-based orga-
nizations to meet local needs. Its programs support activities ranging from tutoring and mentoring
children, assisting the elderly, preserving the environment, building homes for low-income families,
and mobilizing volunteers to respond to disasters.

Strengthening AmeriCorps for the Future

Launched 10 years ago, the


AmeriCorps program has enabled Helping the Hurricane-weary
more than 400,000 Americans to
address pressing community needs Reeling from one of the worst hurricane seasons in its history,
Florida needed a rapid, flexible response. In 2004, more than
while earning an education award
700 AmeriCorps, Senior Corps, and Learn and Serve America
to help finance college or re-pay
members were deployed to help Floridians survive the storms
student loans. In 2003, AmeriCorps and repair the damage. For example, teams of AmeriCorps
members tutored nearly a half National Civilian Community Corps members from all five cam-
million children, helped build puses were deployed to cover approximately 1,500 roofs with
and rehabilitate more than 3,300 plastic sheeting to protect storm-damaged homes in Tallahas-
homes for low-income families, see from the weather until permanent repairs could be made.
and helped restore and conserve Senior Corps volunteers worked with Orlando’s Emergency
more than 41,000 acres of public Operations Center and the Red Cross to create a volunteer
lands. In 2004, CNCS launched reception center to help special needs residents who did not
a comprehensive rulemaking evacuate during the storms.
process to implement AmeriCorps
grantmaking reforms, program
management improvements, and
long-term financial sustainability. The final rule will be published in 2005 and will promote
long-term growth as well as sustainability of national service programs by local communities and
the private sector. The 2006 Budget requests $421 million to support the President’s goal of 75,000
AmeriCorps members, including $146 million in the National Service Trust to support member
education awards.

Fostering a Culture of Service

In conjunction with the USA Freedom Corps, a White House office created by President Bush
following the attacks of September 11th, CNCS is helping Americans of all ages and backgrounds
answer the President’s Call to Service to dedicate at least 4,000 hours, or two years, of their lives in
service. The 2006 Budget will enable an estimated 500,000 older Americans to volunteer through the
Senior Corps program. The Budget proposes $220 million for the Senior Corps program, which meets
a wide range of community needs such as helping seniors live independently in their homes, men-
toring children of prisoners, and tutoring children. The Budget also proposes $40 million for Learn
and Serve America to engage more than 1 million American youth in service learning education. In
THE BUDGET FOR FISCAL YEAR 2006 327

addition, the Budget includes $10 million for


the Points of Light Foundation to connect
Americans, businesses, and community-based
nonprofits to increase volunteering across
America and $5 million for America’s Promise
to support a network of Communities of
Promise that build the character and com-
petence of young people. Finally, the Budget
proposes $4 million to support Teach for
America, a national organization supporting
a professional teacher corps that serves in
low-income, rural, and urban communities.
Senior Corps members building homes with Habitat for Humanity.

DISTRICT OF COLUMBIA

The 2006 President’s Budget provides $103 million for the District of Columbia (D.C.). This in-
cludes $75 million for D.C. school children, as well as $28 million in funding for other D.C. programs.
The 2006 Budget continues the 2004 and 2005 investment in the D.C. School Choice program, with
$15 million. This program helps increase the capacity of the District to provide parents—particu-
larly low-income parents—more options for obtaining a quality education for their children who are
trapped in low-performing schools. As part of the Administration’s commitment to improving educa-
tion in D.C., the Budget continues funding for D.C. public schools and D.C. charter schools, with $27
million. The Budget also continues to support the D.C. Resident Tuition Assistance program, with
$33 million. This program was started in 1999 and allows District residents to attend public colleges
nationwide at in-State tuition rates.
The President’s Budget continues support to help improve the Anacostia River for D.C.’s residents
and visitors. The 2006 Budget proposes $5 million to continue design and construction work on the
Anacostia trailwalk. The trailwalk will create pedestrian and bicycle trail systems from the Potomac
River to the District’s border with Maryland.
The 2006 Budget continues to support D.C.’s public safety response to events directly related to the
Federal Government’s presence in the District, with $15 million to defray the cost of events such as
protection for the annual World Bank and International Monetary Fund meetings.
The 2006 Budget supports funding for a bioterrorism and forensics laboratory in the District, with
$7 million. The present situation, in which the District relies on the laboratory facilities of Federal
agencies, does not allow the District to keep up with the demand of its current workload. Initial
planning and design work on the lab began in 2005. The 2006 funds will allow the District to move
forward with early construction phases, and will be matched by $1.5 million in local capital funds
from the District.
The 2006 Budget also proposes an increase in the amount of Federal funding the District receives
for child welfare services, specifically foster care and adoption assistance. The 2006 Budget would
increase the District’s reimbursement rate under Title IV-E of the Social Security Act from 50 to
70 percent. Title IV-E is the primary Federal funding source that provides foster care and adoption
subsidy payments, which enable families to adopt special needs children from foster care. This ad-
justment will bring the Title IV-E Federal match rate in line with the District’s Medicaid match rate,
as it is in other States.
328 OTHER AGENCIES

In 2006, the Administration will also work with the District to review the current portfolio of
Federal lands in the District of Columbia to determine whether any of these parcels would be bet-
ter utilized by the District. In addition, the Administration continues to support enactment by the
Congress of a law to allow the D.C. government’s proposed local budget to take effect without a
separate annual appropriations bill, subject to limitations imposed by the Congress by law.

DISTRICT OF COLUMBIA COURTS


The District of Columbia (D.C.) Courts continue to work on capital improvements necessary for the
Family Court Division of the D.C. Superior Court. The President’s Budget provides $267 million to
the Courts, which includes $83 million for significant capital improvements in the Judiciary Square
area. Judiciary Square is the center of many criminal justice functions in the District and is the home
of the D.C. Superior Court, as well as a variety of other city and Federal criminal justice agencies.
Improvements planned for the area include a full restoration of the city’s Old Courthouse. The Old
Courthouse was originally built between 1821 and 1881 and is listed on the National Register of
Historic Places. Restoration work on the Old Courthouse began in early 2005. In addition, the Courts
completed renovation work on Building B in December 2003. This allowed the Small Claims and
Landlord courts to move from the H. Carl Moultrie Courthouse to Building B. As a result of this
move, an interim Family Court facility opened in the H. Carl Moultrie Courthouse in the Fall of
2004. The D.C. Courts will continue to undertake significant design and renovation work on the
H. Carl Moultrie Courthouse in preparation for opening a permanent Family Court.

ELECTION ASSISTANCE COMMISSION


The Election Assistance Commission provides funding to States to improve election equipment
and the administration of Federal elections. Since enactment of the Help America Vote Act of
2002, the Federal Government has provided approximately $3.1 billion to upgrade voting systems,
develop electronic voter registration lists, assure access for individuals with disabilities, and train
election officials for all 50 States, the District of Columbia, and four territories (Puerto Rico, Guam,
American Samoa, American Virgin Islands). The 2006 President’s Budget proposes $17.6 million for
the Commission to develop voluntary standards and initiate an accreditation program for electronic
voting machines.

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION


The Equal Employment Opportunity Commission (EEOC) enforces Federal laws that prohibit
employment discrimination based on race, color, sex, religion, national origin, age, and disability.
EEOC also seeks to prevent discrimination through outreach, education, and technical assistance
that promote employers’ voluntary compliance with the law. One of EEOC’s responsibilities is to
hold hearings and resolve appeals related to Federal employees. During 2004, EEOC reduced the
inventory of pending hearings and appeals requests from about 12,300 at the end of 2003 to 9,600
at the end of 2004.
The 2006 Budget provides $331 million for EEOC, which is $4 million, or one percent, more than
the level in the 2005 Consolidated Appropriations Act. The Budget would allow EEOC to continue
its outreach to workers and employers, and to reposition the agency for improved service. To support
the President’s New Freedom Initiative—a strategy to integrate people with disabilities fully into
the Nation’s life—EEOC will continue its project to identify States’ best practices for removing em-
ployment barriers faced by people with disabilities. The agency will publish a final report in 2006.
THE BUDGET FOR FISCAL YEAR 2006 329

Teaching Teens about Equal Opportunity


EEOC’s Youth@Work Initiative promotes equal employment opportunity for the next generation of workers.
The Youth@Work website (www.youth.eeoc.gov) explains job discrimination that young workers may en-
counter and suggests strategies to respond to it. In addition, the New York District Office’s T.E.A.C.H. (Teen
Education, Assistance, Compliance and Help) program has taught students of several local universities and
high schools about their rights and responsibilities as potential employees and employers.

EXECUTIVE OFFICE OF THE PRESIDENT

The Executive Office of the President (EOP) includes a number of organizations dedicated to serv-
ing the President. As part of the 2006 Budget, the Administration requests a three-part financial
restructuring initiative, which would:
• Consolidate the annual appropriations in the Departments of Transportation, Treasury, Inde-
pendent Agencies, and General Government appropriations bill for EOP components that most
immediately serve the presidency—the White House Office, the Office of Policy Development,
Executive Residence, the Office of Administration, White House Repair and Restoration, Privacy
and Civil Liberties Oversight Board, National Security Council, and the Council of Economic Ad-
visers—into a single appropriation called The White House.
• Extend the general provision for limited transfer authority in section 533 of the Departments
of Transportation, Treasury, Independent Agencies, and General Government Appropriations
Act, 2005 (Division H of Public Law 108-447), to provide for a 10-percent transfer authority
among all of the following accounts: The White House, Special Assistance to the President and
Official Residence of the Vice President, Office of Management and Budget, United States Trade
Representative, Office of National Drug Control Policy, Council on Environmental Quality, and
Office of Science and Technology Policy. Transfers from the Special Assistance to the President
and the Official Residence of the Vice President account are subject to the approval of the Vice
President.
• Continue centralization of rent, after-hours utilities, and health unit funding for the EOP into
the Office of Administration program.
This initiative provides enhanced flexibility in allocating resources and staff in support of the
President and the Vice President, and permits more rapid response to changing national needs and
priorities.
Resources requested for the EOP, and for executive functions and official residence of the Vice
President (see 3 U.S.C. 106 and Public Law 93-346), in 2006 total $329 million, or 1.7 percent, below
the 2005 appropriated level. These resources will support approximately 1,840 personnel, as well as
information technology and other infrastructure needs to serve the President and the Vice President.

FEDERAL COMMUNICATIONS COMMISSION

The President’s 2006 Budget proposes $304 million for the Federal Communications Commission
(FCC), of which $299 million would be offset directly by regulatory fees. This funding provides infla-
tionary increases and supports the Commission’s ongoing work to ensure that Americans have rapid
and efficient communications services.
330 OTHER AGENCIES

Recent years have witnessed


Demanding that Government Programs Demonstrate enormous growth in advanced commu-
Results nications technologies. Following the
FCC decision to deregulate broadband,
The Telecommunications Development Fund (TDF) was
companies announced over $6 billion in
created by the Congress in 1996 with the mandate to
planned investment to bring broadband
finance small businesses in the telecommunications
sector, help develop new technologies, and promote uni-
to an additional 20 million homes,
versal service. It started operations in 1998 as an equity supporting the Administration’s goal
investment venture capital fund focusing on early-stage of universal, affordable access to
companies. Over the years, the firm has been capitalized broadband by 2007. The FCC plans
by the Federal Government; it retains the interest earned to auction 90 MHz of spectrum for
on deposits made by bidders in FCC spectrum auctions. advanced wireless services, half of
Between 1998 and 2003, TDF received nearly $50 million which represents spectrum moving
in interest on these deposits. from Federal to private use. This spec-
Through the end of calendar year 2003, TDF had in- trum will allow multiple companies
vested a total of $14.5 million in about 14 companies. the opportunity to become broadband
TDF has already written off more than $10 million of providers—stimulating vigorous com-
these investments. TDF spent approximately $9 million petition and bringing lower prices and
on salaries and other administrative expenses during the improved services to consumers.
same period. As of December 2003, TDF also held $29
million in cash equivalents. Spectrum auctions have proven to
be an effective mechanism to assign
Over the same period, private markets provided billions of
dollars in early-stage venture capital to the telecommuni- licenses for certain spectrum-based
cations sector. Also, the Universal Service Fund provides services. Since 1994, communications
over $6 billion annually to promote universal service. service providers have won over
25,000 licenses and paid over $14
As a result of TDF’s disappointing performance, lack of im-
billion into the Treasury through FCC
pact, and high administrative costs, the Budget proposes
auctions. The Administration supports
terminating the fund and returning remaining assets to the
Treasury. legislation to extend indefinitely the
FCC’s auction authority, which expires
in 2007.

To continue to promote efficient


spectrum use, the Administration also supports granting the FCC authority to set user fees on
unauctioned spectrum licenses based on public-interest and spectrum-management principles. Fee
collections are estimated to begin in 2007 and total $3.1 billion in the first 10 years.

To encourage the digital transition, the Administration seeks to create incentives for television
broadcasters to vacate the analog spectrum, as required by law, in a timely fashion. The Administra-
tion supports authorizing legislation for the FCC to establish an annual lease fee for analog spectrum
use by commercial broadcasters starting in 2007. Individual broadcasters would be exempt as they
return their analog spectrum, and collections would decline.

FEDERAL DEPOSIT INSURANCE CORPORATION AND NATIONAL


CREDIT UNION ADMINISTRATION

The purpose of deposit insurance is to maintain stability and public confidence in the Nation’s
banking system. Federal deposit insurance, offered by the Federal Deposit Insurance Corporation
(FDIC) and the National Credit Union Administration (NCUA), is designed to protect depositors from
losses due to failures of insured commercial banks, thrifts (savings institutions), and credit unions.
THE BUDGET FOR FISCAL YEAR 2006 331

Individual deposits of up to $100,000 are covered in most U.S. banks, savings associations, and credit
unions.
Currently, the Federal Government, through FDIC and NCUA, insures $4 trillion in deposits at
more than 18,000 institutions. These agencies maintain insurance reserves to reimburse depositors
at failed institutions. FDIC and NCUA fund these reserves through assessments on insured institu-
tions, recoveries of assets liquidated from failed institutions, and interest credited to these reserves
from U.S. Treasury securities. At the end of 2004, the insurance reserves at the FDIC exceeded $46
billion, while the insurance fund balance at the NCUA was over $6 billion. In 2004, 27 commercial
banks and credit unions, worth approximately $300 million in combined assets, failed. This compares
to 2003, when 12 institutions with $1.2 billion in assets failed.
While the deposit insurance system for banks and thrifts is generally sound and well managed, it
has structural weaknesses that, in the absence of reform, could deepen over time. The Administra-
tion supports reforms that would strengthen the deposit insurance system managed by FDIC. The
Administration supports the proposal submitted by the Treasury Department and Federal banking
regulatory agencies to the Senate in 2003 that would accomplish this objective. The proposal drew
on a framework outlined by the FDIC and discussed in congressional testimony and elsewhere by
the Department of the Treasury officials.
• FDIC has been prohibited from charging premiums to well-capitalized and well-run institutions
since 1996. Therefore, under the current pricing structure, fewer than 10 percent of banks and
thrifts pay regular insurance premiums. The proposal would restore the FDIC’s ability to levy
premiums for the benefit of deposit insurance, and to vary those premiums according to the
relative risks to the insurance fund posed by each institution. It also would enable the FDIC to
ensure that institutions compensate the fund for insured deposit growth.
• Under the current system, FDIC is required to maintain a designated reserve ratio (DRR), the
ratio of insurance fund reserves to total insured deposits, of 1.25 percent. When the reserve
ratio falls below the DRR, the FDIC must charge premiums that are sufficient to restore the
reserve ratio to the DRR within one year. If the reserve ratio remains below the DRR for more
than one year, FDIC must charge premiums that average no less than 23 basis points. Such a
premium increase could occur when the banking system, and probably the economy, are under
serious stress. The proposal would permit FDIC to alter the DRR within a range and give FDIC
broad discretion in managing reserves within this range. This flexibility will enable reserves
to grow when economic conditions are good, in order to enable the fund to better absorb losses
under adverse conditions without sharp premium increases.
• The Administration supports merging the bank and thrift insurance funds, which offer an iden-
tical product. A single merged fund would be stronger and better diversified than either fund
alone, and, therefore, would improve the system’s ability to withstand future losses.

FEDERAL ELECTION COMMISSION

The Federal Election Commission (FEC) administers the Federal laws governing financing of can-
didates for the Presidency, Vice Presidency, the U.S. Senate, and the U.S. House of Representatives.
FEC requires candidate disclosure of campaign finance information, enforces financing and contribu-
tion limits, and oversees the public funding of Presidential elections. The President’s Budget proposes
$54.6 million to fund these activities in 2006.
332 OTHER AGENCIES

FEDERAL TRADE COMMISSION


The Federal Trade Commission (FTC) enforces consumer protection laws that prevent fraud, de-
ception, and unfair business practices, and promotes consumer choice and public understanding of
free markets. The Commission also enforces Federal antitrust laws, which prohibit anticompeti-
tive mergers and other business practices that restrict competition and harm consumers. The 2006
President’s Budget proposes $212 million for the FTC, which will be partially offset by fee collections
from businesses for merger filings, and from telemarketers for access to the Do-Not-Call list in order
to avoid calling registered phone numbers.
The Budget includes funding for the FTC to continue enforcing the National Do-Not-Call Registry,
in partnership with States and the Federal Communications Commission. Since its inception, more
than 73 million numbers have been signed up for the Do-Not-Call Registry, which has stopped over
835 million unwanted telemarketing calls each month.
Experts estimate that unsolicited email (spam) costs U.S. businesses between $10 billion and
$87 billion annually. The FTC currently is pursuing cases under the Controlling the Assault of
Non-Solicited Pornography and Marketing Act (CAN-SPAM Act), which the President signed in
December 2003 to provide the FTC with new tools to address the negative economic and social
impacts of unsolicited email.
Identity theft has affected the lives of more than 27 million victims over five years and has resulted
in billions of dollars in losses for businesses and consumers. As part of its continued efforts to stem
identity theft and increase consumer credit protection, the FTC is establishing new rules pursuant
to the Fair and Accurate Credit Transactions Act, including a rule to allow certain servicemembers
to place an alert on their credit report to help protect them from identity theft while deployed.
As part of its efforts to monitor the marketplace for anticompetitive mergers and practices, FTC
pursues administrative remedies in antitrust cases regarding a variety of consumer issues, such as
high technology, health care, and oil and gasoline.
The Budget supports the FTC’s continued work to help ensure that American businesses and
consumers reap the full benefits of our free market.

GENERAL SERVICES ADMINISTRATION


The General Services Administration (GSA) assists Federal agencies in operating more efficiently
and effectively by providing superior workplaces, expert information technology solutions, and best
value acquisition services.
GSA owns approximately 1,600 buildings, accounting for about 180 million square feet of space.
GSA continues its efforts to assess the financial and physical condition of its existing inventory and
is restructuring its real estate portfolio to focus primarily on those income-producing properties that
meet capital reinvestment needs. Since 2001, GSA has completed 30 construction projects and 32 ma-
jor repair and alteration projects. In 2006, the Budget proposes funding for 12 construction projects
and 10 major repair and alteration projects. The most sizable project is funding for a new Federal
courthouse in San Diego, California ($231 million).
In 2006, GSA will significantly advance the President’s Management Agenda. GSA will spend
$45 million on E-Government projects that use improved Internet-based technology to make it easy
for citizens and businesses to interact with the Government, save taxpayer dollars, and streamline
citizen-to-Government contact. Furthermore, GSA has begun to make greater use of performance
information in management by developing a performance-based budget request and implementing a
THE BUDGET FOR FISCAL YEAR 2006 333

new performance appraisal system that holds employees accountable for their contributions to over-
all agency performance.
The 2006 President’s Budget also proposes changes to the funding mechanism and organization of
the Federal Technology and Supply Services. First, the Budget proposes to establish a new General
Services Fund by merging the Information Technology Fund and the General Supply Fund. This
action will improve accountability by bringing oversight of the Fund under the agency’s Chief Fi-
nancial Officer. Due to the evolution of how information technology is acquired—buying solutions
that are a mix of products and services rather than stand-alone hardware or services—two separate
Supply and Technology organizations are no longer needed. Therefore, the Budget proposes break-
ing down these artificial barriers by merging the two services into a Federal Supply and Technology
Service. The result of this restructuring includes increasing organizational efficiencies, improving
coordination by streamlining functions, and achieving savings for customer agencies by modifying
fee structures. GSA will develop an aggressive action plan to achieve these objectives by July 2005.
Also, in January 2006, GSA will reduce the fee agencies pay when using Government-wide contracts
to procure commercial services and products.

INSTITUTE OF MUSEUM AND LIBRARY SERVICES

The Institute of Museum and Library Services (IMLS) is established within the National Founda-
tion on the Arts and Humanities. Through its grant programs and leadership activities, IMLS assists
museums and libraries in sustaining their contributions to educating our citizens and strengthen-
ing our communities. The Administration continues to support the important role of libraries and
museums with a 2006 Budget proposal of $262 million, including nearly $22 million in increases for
priority programs and activities. The request does not continue support for the nearly $40 million in
unrequested, noncompetitive projects that were funded in 2005.
The Budget proposes a $10 million increase for the Library State Grants program, which supports
State efforts to promote access, for individuals of all ages, to learning and information resources at
all types of libraries. The Administration is requesting $26 million for the Librarians for the 21st
Century program, a $3 million increase, to support partnerships between libraries and institutions of
higher education for the recruitment and education of a new generation of library professionals who
are prepared to tackle the technological challenges of the information age. In addition, the Budget
proposes $15 million in increases for IMLS museum programs to support initiatives that enhance
the educational and technological linkages between museums and their communities, and to foster
better evaluation of the impact of these programs on the communities they serve.

NATIONAL ARCHIVES AND RECORDS ADMINISTRATION

The National Archives and Records Administration (NARA) safeguards records of all three
branches of the Federal Government and ensures ready access to records documenting the actions
of Government officials and agencies. In 2006, the Budget proposes $314 million for NARA. Of this
funding, $36 million will go toward development of the initial deployment of the Electronic Records
Archives project, a comprehensive means for preserving and providing access to the Government’s
electronic records. The Budget level also includes $3 million to improve the security of NARA’s
holdings.
334 OTHER AGENCIES

NATIONAL ENDOWMENT FOR THE ARTS


The National Endowment for the Arts (NEA) supports excellence in the arts, brings the arts to
all Americans, and provides leadership in arts education. In 2006, the Budget requests $121 mil-
lion for programs and associated costs, including Challenge America: Reaching Every Community
grants and national initiatives such as American Masterpieces: Three Centuries of Artistic Genius.
Funds in the Budget will expand the American Masterpieces Initiative to celebrate our Nation’s
great artistic achievements with special touring programs in dance, visual arts, and music; local pre-
sentations; in-school arts education programs; and student visits to exhibitions, presentations, and
performances. NEA will support projects that extend the reach of the arts by supporting works of
artistic excellence and promoting projects in communities that have not had access to quality arts
programming. These projects will be supported with public and private partners, including State
arts agencies and regional arts organizations.

NATIONAL ENDOWMENT FOR THE HUMANITIES


The National Endowment for the Human-
ities (NEH) serves and strengthens our Nation
by promoting excellence in humanities and
conveying the lessons of history to all Amer-
icans. NEH supports research, education,
preservation, and public programs in the
humanities. In 2006, the Budget requests
$138 million for NEH. Of this, $11 million is
for the continued support of the agency’s We
the People Initiative, which is strengthening
the teaching, study, and understanding of
our Nation’s history and culture. NEH
funding also will support partnerships with
State humanities councils; the enrichment
NEH Chairman Bruce Cole congratulating winners of the 2004 The Idea of humanities education; efforts to preserve
of America essay contest for high school students, a new We the People
program. and increase access to important reference
materials; and museum exhibitions, television
and radio documentaries, and reading programs in the humanities that reach millions of Americans.

NATIONAL LABOR RELATIONS BOARD


The National Labor Relations Board (NLRB) regulates private-sector employer and union relations
to minimize interruptions to commerce caused by strikes and worker-management discord. NLRB
supervises elections in which employees determine whether to be represented by a union. The Board
is also authorized to prevent and remedy unlawful acts, called unfair labor practices, by unions or
employers. In 2006, NLRB expects to receive 29,000 unfair labor practice cases and 5,100 represen-
tation cases.
Fair and expeditious case resolution is NLRB’s highest priority. The agency is more effective when
it can achieve a voluntary resolution of meritorious cases, thereby reducing the need for time-con-
suming and costly litigation. NLRB will continue its goal of settling 95 percent of its unfair labor
practice cases before they require a decision by the five-member Board; in 2004, the settlement rate
THE BUDGET FOR FISCAL YEAR 2006 335

was 96.1 percent. Through its performance goals, NLRB will continue to place a high priority on
reducing its case backlog, especially on the oldest pending cases.
The 2006 Budget provides $252 million for NLRB’s primary activities, including $208 million for
pay and benefits, which make up 82 percent of the agency’s budget. This amount also includes $8
million for information technology projects, such as automated case management, and the mainte-
nance of key administrative systems.

NATIONAL TRANSPORTATION SAFETY BOARD

The National Transportation Safety Board (NTSB) is charged with determining the probable
causes of transportation accidents and promoting transportation safety. The Board investigates
accidents, conducts safety studies, issues recommendations, and evaluates the effectiveness of other
Government agencies in preventing transportation accidents. The agency also coordinates Federal
assistance to the families of victims of catastrophic domestic transportation accidents. The 2006
Budget provides funding for NTSB to investigate more than 2,500 accidents.
The 2006 Budget provides $77 million for salaries and expenses for the NTSB to fulfill its role of
improving the Nation’s transportation safety.

NUCLEAR REGULATORY COMMISSION

The Nuclear Regulatory Commission (NRC) regulates the commercial use of nuclear material in
the United States. Its programs facilitate the Nation’s safe and effective use of nuclear materials for
civilian purposes. Consistent with the National Energy Policy (May 2001), the Budget provides NRC
with the funds it needs to keep pace with the industry’s interest in the renewal of nuclear power re-
actor licenses and the possible construction of new nuclear power plants. To date, NRC has renewed
the operating licenses for 26 of the existing 104 nuclear power plants, and at least 18 more plants
are under review or anticipated through 2005. NRC will continue to improve the effectiveness and
efficiency of its review of designs for advanced reactors and to prepare for potential combined license
applications. In addition to licensing, NRC also performs inspections on all existing nuclear power
plants to ensure that safety issues are identified and resolved before they affect safe plant operation.
Since September 2001, NRC has strengthened its regulatory programs in support of the Nation’s
efforts to enhance homeland security and preparedness, including actions to improve security at the
Nation’s civilian nuclear power plants, nuclear fuel facilities, and other licensed users of radioactive
materials. These efforts will continue in 2006.
NRC also expects to receive from the Department of Energy in 2005 an application to build a
high-level waste repository at Yucca Mountain, Nevada. Upon receipt of the application, NRC’s
workload will expand significantly. This first-of-a-kind undertaking will involve conducting thorough
safety and security evaluations, performance assessments, adjudicatory hearings, and site inspec-
tions. NRC will complete its review and reach a license decision in a timely manner.
To carry out these and other activities, the Budget proposes $702 million in 2006 for NRC. User
fees from NRC licensees will recover approximately 90 percent of NRC’s budget. Appropriations from
the Nuclear Waste Fund will cover the costs of the high-level waste repository effort.
336 OTHER AGENCIES

OFFICE OF PERSONNEL MANAGEMENT

The Office of Personnel Management (OPM) is the central human resources agency for the Federal
Government and the primary policy agency supporting the President as he carries out his responsi-
bilities for managing the Federal workforce. OPM oversees and safeguards merit system principles
and veterans’ preference and leads Federal agencies in the strategic management of their human
capital. It also proposes and implements human resources management policy, and provides agen-
cies with ongoing advice and technical assistance for implementing these policies and initiatives.
Furthermore, OPM administers Federal employee benefits programs and manages personnel secu-
rity and background checks for suitability and national security clearances.

The 2006 Budget requests $242 million to finance OPM’s efforts to continue its leadership in the
management and oversight of Government-wide human capital systems, initiatives and strategies,
and administration of the Federal employees’ benefit trust funds (retirement, health benefits, and
life insurance).

Through the Strategic Management of Human Capital, one component of the President’s Manage-
ment Agenda, OPM is leading efforts to transform the way agencies manage the Federal workforce
and enhance the value of the civil service. In this capacity, OPM provides agencies the tools to man-
age their workforce and implements new human resources management policies. In 2006, it will
further streamline the Federal hiring process, decrease the time agencies use to hire new Federal
employees, and change how Federal employees are paid and how their job performance is evaluated.
Many of these new policies will be informed by lessons being learned from OPM’s partnerships with
the Departments of Homeland Security and Defense in setting up new human resources manage-
ment systems in these two large agencies.

In addition, OPM is the managing partner for the Human Resources Line of Business, which in-
cludes five projects under the President’s E-Government initiative: Recruitment One Stop, E-Train-
ing, E-Clearance, Enterprise Human Resources Integration, and E-Payroll. These initiatives will
save the Government about $2.7 billion dollars over the next 10 years. For example, Recruitment
One Stop reduces the complexity of Federal hiring and decreases the cost per hire. To date, the
USAJOBS website has received over 100 million visits by citizens to locate and apply for Federal
jobs. In addition, the E-Training project offers the convenience of web-based training to the Federal
workforce, leading to savings in tuition and travel costs and by compressing learning time. Over
440,000 users have registered on the GoLearn.gov site and completed over 310,000 courses, since its
inception. The E-Clearance project will reduce the time to process clearances and reduce duplicative
investigative efforts, while the E-Payroll project alone will save the Government $1.1 billion dollars
over the next decade by consolidating civilian payroll processing. The Enterprise Human Resources
Integration project will reduce the need for paper personnel documents and improve the currency and
accuracy of Federal human resources data. Recruitment One Stop and E-Clearance are funded fully
now by user fees paid by agencies. The Administration anticipates that in 2006, E-Payroll will be
completed and that E-Training will mature to a level that will allow it to operate on a fully fee-funded
basis in 2007.

OPM will pay out $94 billion in benefits in 2006: $59 billion to more than 2.5 million Federal re-
tirees, survivor annuitants, and other beneficiaries; $33 billion in health benefits for about 8 million
enrollees and dependents; and about $3 billion in life insurance claims from policy holders. OPM will
enhance the competitiveness and value of these programs in 2006 as it implements dental and vision
coverage. These new offerings will join other recent additions to the suite of employee benefits, includ-
ing Health Savings Accounts, Flexible Spending Accounts, and long-term care insurance, ensuring
THE BUDGET FOR FISCAL YEAR 2006 337

that the Federal Government continues to be a competitive and model employer that balances work
and family needs and offers choices to employees as consumers.
OPM will continue its internal emergency preparedness planning and maintain its leadership in
this arena Government-wide. It will continue to be a strong advocate for such planning in all Federal
agencies.

POSTAL SERVICE

The Administration continues to support the enactment of comprehensive postal reform legislation
that is consistent with the report of the President’s Commission on the United States Postal Service
and is guided by the principles of Best Governance Practices, Transparency, Flexibility, Accountabil-
ity, and Self-Finance, as expressed by the President on December 8, 2003. The Postal Service provides
an important service to the American people and the economy, and the Administration believes that
the Postal Service should continue providing affordable and reliable universal service, while limiting
exposure to taxpayers and operating appropriately in the competitive marketplace.
The Administration is committed to working with the Congress and postal stakeholders in early
2005 to bring about needed reforms that ensure that we have a healthy Postal Service for future
generations. To this end, the Budget proposes to use the pension savings provided to the Postal
Service by the Postal Civil Service Retirement System Funding Reform Act of 2003 (P.L. 108-18) that
would otherwise be held in escrow in 2006 and beyond, to put the Postal Service on a path that fully
funds its substantial retiree health benefits liabilities.

REGIONAL ECONOMIC DEVELOPMENT AGENCIES

The President’s 2006 Budget proposes $78 million for three regional economic development
agencies: the Appalachian Regional Commission, the Delta Regional Authority, and the Denali
Commission. The President’s proposal recognizes the constructive role of the regional economic
development agencies in coordinating, planning, and fostering partnerships among the Federal,
State, local, and private sectors. This coordination has a positive impact on the effectiveness and
efficiency of Federal activities targeted to improve the quality of life and remedy severe and chronic
economic distress within Appalachia, the Mississippi Delta area, and Alaska.

SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission (SEC) protects investors and works to maintain fair,
honest, and efficient markets. SEC’s activities are critical to the health of our securities markets,
which in turn are a vital part of our national economy. In calendar year 2004, the dollar volume of
shares traded on the New York Stock Exchange and the Nasdaq Stock Market was almost $19 trillion.
SEC oversees key participants in the securities world, including stock exchanges, broker-dealers, in-
vestment advisors, mutual funds, and public companies. During that year, SEC oversaw roughly
5,330 broker-dealers with approximately 96,000 branch offices and 664,100 registered representa-
tives. SEC also oversaw an estimated 5,000 investment companies with 36,500 portfolios and $8.1
trillion in assets, and 8,550 investment advisers with $23 trillion in assets under management. In
2006, the President’s Budget makes available $888 million for SEC.
338 OTHER AGENCIES

Protecting Investors

SEC is the preeminent enforcement agency in investor markets. SEC works to prevent fraud and
manipulation in securities markets by reviewing corporate disclosure data, investigating investor
complaints, and monitoring exchanges for unusual activities. In addition, SEC recently created a
new Office of Risk Assessment designed to improve the agency’s ability to anticipate potential prob-
lem areas across the securities industry by focusing on early identification of new or resurgent forms
of fraud and illegal or questionable activities. In 2004, SEC opened 973 investigations and initiated
an estimated 610 enforcement actions against individuals and companies for violations of securities
laws. Through these efforts, SEC was able to halt fraudulent activities quickly, seek civil penalties,
and order violators to disgorge ill-gotten gains. Major enforcement actions in 2004 included:
• Seventeen actions against a variety of persons associated with mutual funds, including invest-
ment advisers, fund directors and brokers, and registered investment advisors. These actions
involved late trading of mutual fund shares, abusive market timing arrangements, or both. As
a result, SEC ordered $477 million in disgorgement and $457 million in penalties in abusive
market timing and late-trading cases to be distributed to injured investors.
• Charges against former Enron and WorldCom executives whose allegedly fraudulent activities
contributed to the collapse of the two companies and resulted in losses of billions of investor
dollars.
• More than $246 million in penalties and disgorgements against New York Stock Exchange spe-
cialist trading firms for profiting from improperly executing customer trading orders. These
activities resulted in customers receiving inferior prices or having orders that went unexecuted
altogether.
The SEC is also an active participant in the President’s Corporate Fraud Task Force, an intera-
gency working group, led by the Department of Justice, designed to aggressively pursue joint civil
and criminal actions against corporate wrong-doers.

Improving Transparency

SEC works to ensure that all investors have access to certain basic facts about an investment and
to prevent fraud and misrepresentation of those facts in securities markets. SEC requires that public
companies submit detailed financial information, which it makes available to the public through its
website (www.sec.gov/edgar.shtml).
SEC focuses on making sure that rules and regulations are clear for market participants, especially
small business and individual investors. It is important to the health of the economy and the role
that public companies play in job creation that the benefits of securities regulation outweigh the
costs. SEC recently established the Advisory Committee on Smaller Public Companies to examine
the benefits and costs of the Sarbanes-Oxley Act and other Federal securities laws on smaller public
companies. For example, the advisory committee will review the impact of new internal control rules,
financial reporting regulations, and corporate governance requirements to evaluate the net benefits
to investors. Its members will also make recommendations to SEC to ensure that smaller companies
are able to grow and succeed by accessing capital in the public markets.
THE BUDGET FOR FISCAL YEAR 2006 339

SMITHSONIAN INSTITUTION

In 1829, James Smithson, a British scientist, bequeathed his estate to the American people for the
“increase and diffusion of knowledge.” Today, the Smithsonian Institution supports that goal through
its operation of National museums and research institutes. Approximately two-thirds of the Smith-
sonian’s funding is from direct Federal appropriations; the remainder comes from its endowment
fund, private donations, business activities, and grants from other Federal agencies. In September
2004, the Smithsonian opened its eighteenth museum, the National Museum of the American Indian,
dedicated to celebrating the culture of the Native peoples of the Western Hemisphere.

The 2006 Budget provides $615 million


in Federal funding for the Smithsonian.
Funds are provided to prepare for the July
2006 reopening of the newly renovated
Patent Office Building, continue a major
revitalization project at the National Museum
of American History and continue ongoing im-
provements at the National Zoo. The Budget
also accommodates lease costs, maintenance
requirements and inflation-related adjust-
ments across the Institution. Addressing
these increases in a time of fiscal constraint
requires that the Smithsonian continue to
prioritize and seek out innovative cost-saving
mechanisms. The National Museum of the American Indian.

The Smithsonian continues to receive low ratings in many of the President’s Management Agenda
initiative areas, in part due to its long history of decentralization and unique management struc-
ture. However, the Institution continues to implement management reforms and best practices and
has made marked progress in coordinating its information technology portfolio, assessing its future
workforce needs, and linking its budget and senior staff compensation to performance measures.

TENNESSEE VALLEY AUTHORITY

The Tennessee Valley Authority (TVA) is a wholly owned agency of the United States Government
created in 1933 by the TVA Act. TVA serves the people of the Tennessee Valley by providing power
to the Tennessee Valley region, and supports navigation, flood control, and economic development
in the area. TVA operates the largest public electric power system in the United States. It serves a
population of more than eight million customers throughout most of Tennessee, northern Alabama,
northeastern Mississippi, southwestern Kentucky, and small portions of Georgia, North Carolina,
and Virginia. TVA is the exclusive wholesale power provider within this geographic region.

TVA’s 2004 operating revenues totaled approximately $7.7 billion and its receipts and expendi-
tures are included in the Federal Budget. TVA uses its internally generated proceeds to fund power
generation and transmission operations as well as its resource stewardship programs. Annual ex-
penditures of $87 million are devoted to TVA’s resource stewardship program, which includes recre-
ational activities, river stewardship, and navigation services. The remaining funds are devoted to
power generation and transmission services.
340 OTHER AGENCIES

TVA faces several operating and financial challenges posed by the


dynamic business environment and changing electricity market in
which it functions. Some of these challenges were addressed by the
Consolidated Appropriations Act of 2005, which includes reforms
that will assist TVA in moving toward a more efficient management
and business structure. It also requires TVA to file statements with
the Securities and Exchange Commission (SEC) to allow for more
transparency of its business operations.
The 2006 Budget proposes additional reforms for TVA that will help
position it for a more competitive market in the future, strengthen its
financial position, and better serve its customers and investors. Pro-
posals include legislation that would require TVA to register its debt
securities with the SEC to provide investors with greater insight into
the characteristics and risks inherent in TVA securities. In addition,
the Budget proposes granting the Federal Energy Regulatory Com-
mission (FERC) jurisdiction over TVA’s transmission system, similar
to that which FERC has over public utilities. TVA transmission lines.

TVA continues to be burdened by its excessive debt level, currently estimated at $26 billion. The
2005 Budget included a goal endorsed by the TVA Board of reducing TVA’s debt by $3 billion to $5
billion over the next 10 to 12 years. In order to increase TVA’s financial flexibility and minimize its
risk exposure, the Budget maintains that goal. In addition, fulfilling a commitment in the President’s
2005 Budget, the 2006 Budget includes specific legislative language that clarifies the definition of
TVA’s debt. Some agency transactions, such as equipment lease/leasebacks and long-term power pre-
payment agreements, result in liabilities that make a claim on future agency resources and have risk
similar to traditional debt, and therefore constitute a form of debt which should be counted toward
TVA’s statutory debt limitation. To ensure the integrity and usefulness of TVA’s debt cap, the Ad-
ministration is proposing legislation to ensure that these types of debt-like transactions are treated
as debt and counted toward TVA’s $30 billion statutory debt limit.
In 2000, TVA’s Inspector General (IG) became Presidentially-appointed. TVA’s IG funding level is
subject to TVA Board approval and is derived directly from TVA revenues. All other Presidentially-
appointed IGs are funded through annual appropriations. The Budget reproposes to appropriate
funds for TVA’s IG out of TVA’s revenues beginning in 2006.
SUMMARY TABLES
THE BUDGET FOR FISCAL YEAR 2006
Table S–1. Budget Totals
(Dollar amounts in billions)

2004 2005 2006 2007 2008 2009 2010

Budget Totals:
Receipts ....................................................... 1,880 2,053 2,178 2,344 2,507 2,650 2,821
Outlays ......................................................... 2,292 2,479 2,568 2,656 2,758 2,883 3,028
Deficit ..................................................... 412 427 390 312 251 233 207

Gross Domestic Product (GDP) .............. 11,553 12,227 12,907 13,617 14,349 15,111 15,906

Budget Totals as a Percent of GDP:


Receipts ....................................................... 16.3% 16.8% 16.9% 17.2% 17.5% 17.5% 17.7%
Outlays ......................................................... 19.8% 20.3% 19.9% 19.5% 19.2% 19.1% 19.0%
Deficit ..................................................... 3.6% 3.5% 3.0% 2.3% 1.7% 1.5% 1.3%

343
344
Table S–2. Discretionary Totals
(Net budget authority; dollar amounts in billions)

Actual 2005–2006
2005 2006
Enacted Request Dollar
2001 2002 2003 2004 change

Discretionary budget authority:


Department of Defense ................................................................................ 303 328 365 376 400 419 19
Homeland Security (non-Department of Defense) ............................. 10 13 24 28 31 32 1
Other Operations of Government.............................................................. 331 351 370 386 391 389 3
Total, Discretionary budget authority .................................................... 644 691 758 790 823 840 18
Percent change by category:
Department of Defense ............................................................................ 5% 8% 11% 3% 6% 5%
Homeland Security (non-Department of Defense)......................... 14% 21% 85% 21% 10% 3%
Other Operations of Government ......................................................... 15% 6% 5% 4% 1% 1%
Total, Percent change.................................................................................... 10% 7% 10% 4% 4% 2%
Enacted supplemental and emergency funding:
Defense and Other Global War on Terror .............................................. 14 18 80 114 1 —
Homeland Security (non-Department of Defense) ............................. 3 12 6 * * —
Non-Defense, Non-Homeland .................................................................... 3 14 5 3 11 —
Allowance for anticipated 2005 supplemental ...................................... — — — — 81 —
Total, Supplemental and emergency funding .................................... 20 44 91 117 93 —
Memorandum:
Budget authority enacted for Project BioShield .................................. — — — 1 3 —

2006 2007 2008 2009 2010


Discretionary Outyears by Category:
Department of Defense ................................................................................ 419 443 462 482 492
Homeland Security (non-Department of Defense) ............................. 32 34 35 37 39
Other Operations of Government.............................................................. 389 389 389 389 389
Total, Discretionary budget authority .................................................... 840 866 887 908 920

SUMMARY TABLES
Percent change by category:
Department of Defense ............................................................................ 6% 4% 4% 2%
Homeland Security (non-Department of Defense)......................... 5% 5% 5% 5%
Other Operations of Government ......................................................... 0% 0% 0% 0%
Total, Percent change.................................................................................... 3% 2% 2% 1%

*$500 million or less.


THE BUDGET FOR FISCAL YEAR 2006
Table S–3. Growth in Discretionary Budget Authority by Major Agency
(Net budget authority; dollar amounts in billions)

Growth
Actual Estimate 2005–2006 Average Cumulative
Agency 2001 2002 2003 2004 2005 2006 Change Percent 2001–2006 2001–2006

Agriculture................................................... 19.2 20.1 21.7 21.1 21.4 19.4 2.0 9.6% 0.1% 0.7%
Commerce .................................................. 5.1 5.4 5.6 5.8 6.3 9.4 3.1 49.0% 13.0% 84.5%
Defense ....................................................... 302.5 327.8 365.3 375.7 400.1 419.3 19.3 4.8% 6.7% 38.6%
Education .................................................... 40.1 48.5 53.1 55.7 56.6 56.0 0.5 0.9% 6.9% 39.8%
Energy .......................................................... 20.0 20.9 22.0 23.4 23.9 23.4 0.5 2.0% 3.2% 17.1%
Health and Human Services ................ 54.0 59.5 65.7 69.2 69.2 68.9 0.3 0.5% 5.0% 27.5%
Homeland Security .................................. 14.0 15.7 21.9 27.9 29.0 29.3 0.3 1.2% 16.0% 109.7%
Housing and Urban Development ...... 28.4 29.4 30.1 32.0 32.2 28.5 3.7 11.5% 0.1% 0.5%
Interior .......................................................... 10.3 10.5 10.5 10.7 10.8 10.6 0.1 1.1% 0.7% 3.7%
Justice .......................................................... 18.4 18.6 19.0 19.5 20.2 19.1 1.1 5.5% 0.8% 3.9%
Labor............................................................. 11.9 12.1 11.8 11.8 12.0 11.5 0.5 4.4% 0.7% 3.6%
State and International Assistance
Programs ................................................ 20.3 21.7 22.8 25.0 27.5 31.8 4.3 15.7% 9.4% 56.4%
Transportation............................................ 14.6 12.8 13.5 13.9 12.7 11.8 0.9 6.7% 4.1% 18.8%
Treasury ....................................................... 10.3 10.5 10.7 10.7 11.2 11.6 0.4 3.9% 2.4% 12.7%
Veterans Affairs......................................... 22.4 23.8 26.4 29.1 30.6 31.3 0.7 2.1% 6.9% 39.8%
Corps of Engineers ................................. 4.7 4.5 4.6 4.6 4.7 4.3 0.3 7.2% 1.6% 7.6%
Environmental Protection Agency ...... 7.8 7.9 8.1 8.4 8.0 7.6 0.5 5.6% 0.7% 3.4%
Executive Office of the President ....... 0.3 0.3 0.3 0.3 0.3 0.3 0.0 1.7% 4.6% 25.5%
Judicial Branch .......................................... 4.0 4.3 4.6 4.8 5.1 5.6 0.5 9.9% 7.1% 41.0%
Legislative Branch.................................... 2.8 3.0 3.4 3.6 3.6 4.1 0.5 13.7% 8.2% 48.1%
National Aeronautics and Space
Administration ....................................... 14.3 14.8 15.3 15.4 16.1 16.5 0.4 2.4% 2.9% 15.5%
National Science Foundation ............... 4.4 4.8 5.3 5.6 5.5 5.6 0.1 2.4% 4.8% 26.5%
Social Security Administration............. 6.0 6.4 6.7 7.2 7.5 7.7 0.2 2.8% 4.9% 27.3%
Other Agencies ......................................... 8.1 7.7 10.0 9.0 8.4 6.6 1.7 20.8% 4.0% 18.4%
Total, Discretionary Spending ............ 643.8 691.0 758.5 790.1 822.7 840.3 17.6 2.1% 5.5% 30.5%
Note: Supplementals are excluded.

345
346
Table S–4. Discretionary Proposals By Appropriations Subcommittee
(Net budget authority in billions of dollars)

2004 2005 2006 Change


Appropriations Subcommittee
Actual Enacted Request 2005–2006

Agriculture and Rural Development ................................................................ 17.8 18.3 16.9 1.4


Commerce, Justice, State and the Judiciary................................................ 39.2 40.8 44.1 3.2
Defense ..................................................................................................................... 366.4 390.4 407.6 17.3
District of Columbia ............................................................................................... 0.5 0.6 0.6 *
Energy and Water Development....................................................................... 27.4 28.3 27.2 1.0
Foreign Operations ................................................................................................ 17.5 19.5 22.8 3.3
Homeland Security ................................................................................................ 27.9 29.0 29.3 0.3
Interior and Related Agencies ........................................................................... 20.2 20.2 19.7 0.5
Labor, Health and Human Services, and Education ................................. 140.9 142.4 141.0 1.4
Legislative Branch.................................................................................................. 3.5 3.5 4.0 0.5
Military Construction ............................................................................................. 9.4 10.0 12.1 2.0
Transportation, Treasury, and General Government ................................. 27.7 26.3 25.0 1.4
Veterans Affairs, Housing and Urban Development .................................. 91.6 93.5 90.5 3.0
Allowances ............................................................................................................... — — 0.4 0.4
Total, excluding supplemental and emergency funding ............ 790.1 822.7 840.3 17.6
*$500 million or less.

SUMMARY TABLES
THE BUDGET FOR FISCAL YEAR 2006
Table S–5. Homeland Security Funding By Agency
(Budget authority in millions of dollars)

2004 2005 2006


Actual Enacted Request
Homeland Security Funding:
Department of Agriculture .......................................................................................................... 411 600 704
Department of Commerce .......................................................................................................... 125 167 183
Department of Defense-Military (DOD) ................................................................................. 7,024 8,570 9,513
Department of Energy ................................................................................................................. 1,364 1,562 1,666
Department of Health and Human Services........................................................................ 4,062 4,230 4,407
Department of Homeland Security.......................................................................................... 22,834 24,871 27,331
Department of the Interior .......................................................................................................... 83 65 57
Department of Justice .................................................................................................................. 2,165 2,678 3,104
Department of State ..................................................................................................................... 696 824 938
Department of Transportation ................................................................................................... 284 182 192
Department of the Treasury ....................................................................................................... 90 101 111
Department of Veterans Affairs ................................................................................................ 271 280 299
Corps of Engineers ....................................................................................................................... 102 89 72
Environmental Protection Agency ........................................................................................... 131 107 184
General Services Administration ............................................................................................. 79 65 80
National Aeronautics and Space Administration ................................................................ 207 218 205
National Science Foundation .................................................................................................... 340 342 344
Smithsonian Institution ................................................................................................................ 78 75 87
Social Security Administration .................................................................................................. 143 159 178
Other Agencies............................................................................................................................... 239 813 288
Total, Homeland Security Funding, excluding Project BioShield 1 ...................... 40,728 45,998 49,943
Less, Department of Defense-Military (DOD) ..................................................................... 7,024 8,570 9,513
Total, Homeland Security Funding, excluding DOD and Project BioShield ...... 33,704 37,428 40,430
Less, Mandatory Homeland Security Funding 2 ............................................................... 1,940 2,225 2,302
Less, Discretionary Fee-Funded Activities 3 ...................................................................... 3,289 3,941 5,890
Net Non-DOD Discretionary Homeland Security, excluding Project BioShield 28,475 31,262 32,238
Plus, Department of Homeland Security Project BioShield ........................................... 885 2,508 —
Net Non-DOD Discretionary Homeland Security, including Project BioShield 29,360 33,770 32,238
1
Excludes $107 million in supplemental appropriations in 2004 and $16 million in supplemental appropriations in 2005.
2
Mandatory homeland security programs include Agriculture Quarantine and Inspections, Border Protection, and Immigration Enforcement.
3
Discretionary fee-funded homeland security programs include Visa Processing, Airport Security, and Social Security physical and computer
security measures.

347
348
Table S–6. Mandatory Proposals
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015
Programmatic Reforms:
Agriculture:
Commodity Credit Corporation:
Limit Loan Deficiency Payments to historical
production........................................................................ — 432 509 106 4 2 1,053 1,054
Tighten payment limits .................................................... — 200 190 175 150 130 845 1,200
Cut Crop Payments by 5 percent ................................ — 383 629 468 351 309 2,140 3,641
Sugar marketing assessment 1.2 percent ............... — 42 43 43 43 43 214 437
Tilt adjustment requirement........................................... — 130 80 50 50 50 360 610
Extend Milk Income Loss Compensation ................. — 600 600 — — — 1,200 1,200
Crop insurance coverage change.................................... — — 140 140 140 140 560 1,260
Forest Service:
Facilities working capital fund ....................................... — 5 1 1 — — 7 7
Enhanced facilities disposal authority ....................... — 9 — — 5 — 14 14
Limit Food Stamp categorical eligibility ......................... — 57 113 112 111 114 507 1,124
Allow State Food Stamp Agencies to use the
National Directory of New Hires (NDNH) ................. — — 2 2 2 2 8 18
Subtotal, Agriculture .................................................... — 658 1,107 1,097 856 790 4,508 8,165
Education:
Reform the Federal Student Aid Programs:
Payoff Pell Shortfall (non-add BA only) .................... — (4,301) — — — — (4,301) (4,301)
Increase the Pell Grant Maximum Award by $500
over Five Years .............................................................. — 101 509 915 1,321 1,734 4,580 14,959
Increase Borrowing Limits and Other Benefits to
Students ........................................................................... — 221 660 762 811 866 3,320 7,658
Recall Federal Perkins Loan Revolving Funds ...... — 580 642 675 735 697 3,329 5,987
Increase Lender Risk Sharing and Improve

SUMMARY TABLES
Program Efficiency ....................................................... — 171 601 785 838 902 3,297 8,749
Adjust Guaranty Agency Reinsurance and Default
Retention Rates ............................................................ — 43 116 152 168 187 666 1,788
Reform Federal Consolidation Loans ........................ — 269 610 544 484 503 2,410 3,769
Extend the Taxpayer-Teacher Extension Act .......... — 254 411 449 459 485 2,058 4,945
Other Student Loan Reforms........................................ 557 178 790 824 783 811 3,386 8,043
Subtotal, Education ...................................................... 557 1,172 2,001 1,752 1,337 986 7,248 10,667
THE BUDGET FOR FISCAL YEAR 2006
Table S–6. Mandatory Proposals—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015

Energy:
Allow Power Marketing Administrations to Charge
up to Market Rates ........................................................... — 40 157 446 1,145 1,406 3,194 12,434
Bonneville Power Administration borrowing
authority ................................................................................ — — — — — 140 140 200
Subtotal, Energy ................................................................ — 40 157 446 1,145 1,266 3,054 12,234
Health and Human Services:
Medicaid and State Children’s Health Insurance
Program Proposals ........................................................... 225 1,112 1,549 3,699 4,214 4,417 12,767 44,637
State grants and demonstrations ..................................... — 400 500 594 605 618 2,717 5,000
Temporary Assistance for Needy Families
Reauthorization.................................................................. 100 277 329 352 361 357 1,676 3,450
Child Support Enforcement: Increase Collections
and Improve Program Effectiveness .......................... — 63 1 54 31 32 55 122
Healthy Marriage and Fatherhood Initiative ................. 71 21 37 23 40 40 119 319
State-Based Abstinence Grants ....................................... 9 30 46 50 50 50 226 476
Foster Care Clarify Statutory Eligibility Definition ...... — 72 74 77 79 81 383 834
Foster Care Modify DC FMAP Rate ............................... — 7 7 8 8 8 38 85
Child Welfare Program Option .......................................... — 7 67 135 3 164 48 49
Subtotal, Health and Human Services ...................... 263 1,677 636 2,560 3,195 3,557 8,271 35,970
Housing and Urban Development:
Repeal Federal Housing Administration’s General
and Special Risk Insurance Authorities .................... — 60 100 100 100 100 460 960
Interior:
Southern Nevada Land Sales ........................................... — 227 418 636 641 642 2,564 5,783
Arctic National Wildlife Refuge, lease bonuses:
State of Alaska’s share:
Receipts ........................................................................... — — 1,201 1 101 1 1,304 1,588
Expenditures .................................................................. — — 1,201 1 101 1 1,304 1,588
Federal share:
Receipts ........................................................................... — — 1,201 1 101 1 1,304 1,588
Royalties Conservation Fund Outlays ................... — — — — — — — 115

349
Pick-Sloan Project Cost Repayment .............................. — 33 33 31 31 29 157 299
350
Table S–6. Mandatory Proposals—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015
Eliminate Bureau of Land Management Range
Improvements Fund ......................................................... — 7 10 10 10 10 47 97
Subtotal, Interior............................................................ — 267 1,662 678 783 682 4,072 7,652
Labor:
Pension Benefit Guaranty Corporation Reform .......... — 2,195 3,702 3,495 3,226 2,916 15,534 26,521
Unemployment Insurance Integrity ................................. — — 65 134 141 148 488 1,341
Unemployment Insurance Overpayment
Recoveries ........................................................................... — 281 282 284 288 288 1,423 3,082
Federal Employees’ Compensation Act Reforms ...... — 6 12 20 17 17 72 172
Subtotal, Labor................................................................... — 2,482 4,061 3,933 3,672 3,369 17,517 31,116
Treasury:
Continued Dumping and Subsidy Offset repeal ......... — 1,608 1,615 1,624 855 865 6,567 11,035
Eliminate 10–year Statute-of-Limitations on
Non-Tax Debt ...................................................................... — 11 6 6 6 6 35 65
Extend the Rum-Carryover for Puerto Rico ................. — 56 19 — — — 75 75
Subtotal, Treasury ............................................................. — 1,563 1,602 1,630 861 871 6,527 11,025
Federal Communications Commission (FCC):
Extend Spectrum Auction Authority ................................ — — — 1,083 2,156 3,239 4,312 5,112
Close Telecommunications Development Fund ......... — 2 2 3 3 4 14 34
Subtotal, FCC ..................................................................... — 2 2 1,080 2,159 3,243 4,326 5,146
Federal Deposit Insurance Corporation:
Merge Bank Insurance Fund and Savings
Association Insurance Fund .......................................... — — — 1 377 855 1,231 1,063
Social Security Administration (SSA):
Supplemental Security Income (SSI)
Pre-Effectuation Reviews and Other

SUMMARY TABLES
Technical Adjustments .................................................... — 4 18 40 64 92 218 1,133
Extend SSI Eligibility to Refugees and Asylees
to Eight Years after Entry ............................................... — 65 77 84 — — 226 226
Subtotal, SSA................................................................. — 61 59 44 64 92 8 907

Total, Programmatic Reforms ................................. 820 4,506 11,269 11,073 13,795 14,101 54,744 122,779
THE BUDGET FOR FISCAL YEAR 2006
Table S–6. Mandatory Proposals—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015
User Fee Proposals:
Agriculture:
Animal Plant and Health Inspection Service * ............ — 11 11 11 12 12 57 121
Food Safety and Inspection Service * ............................ — 139 142 145 148 151 725 1,529
Grain Inspection, Packers and Stockyards
Administration * .................................................................. — 25 26 26 27 27 131 276
Agricultural Marketing Service Standardization * ...... — 3 3 3 3 3 15 30
Justice:
Bureau of Alcohol, Tobacco, Firearms and
Explosives’ Explosives Regulation * .......................... — 120 120 120 120 120 600 1,200
Transportation:
St. Lawrence Seaway Development Corporation * ... — 8 17 17 17 17 76 170
Treasury:
Tax and Trade Bureau Regulatory Activity * ................ — 29 29 29 29 29 145 297
Veterans Affairs:
Annual Medical Fees for higher income veterans
with non-service-connected disabilities * ................. — 248 248 248 248 248 1,240 2,480
Drug Copay Increase * ........................................................ — 176 178 180 181 183 898 1,842
Total Medical Services (illustrative discretionary
spending authority—non-add) ..................................... — (424) (426) (428) (429) (431) (2,138) (4,322)
Environment Protection Agency:
Premanufacture Notification Fee Cap Removal * ...... — 4 8 8 8 8 36 76
Pesticide Tolerance * ............................................................ — 20 20 21 21 22 104 221
Pesticide Registration * ....................................................... — 26 27 27 28 28 136 288
Federal Communications Commission:
Authorize Spectrum License Fees .................................. — — 50 150 300 300 800 3,125
Analog Spectrum Lease Fees .......................................... — — 500 500 480 450 1,930 2,580

Total, User Fees ............................................................. — 809 1,379 1,485 1,622 1,598 6,893 14,235

Total, Programmatic Reforms and User Fee


Proposals ............................................................................... 820 5,315 12,648 12,558 15,417 15,699 61,637 137,014

351
352
Table S–6. Mandatory Proposals—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015
Outlay Effects of Tax Proposals: 1
Health tax credits ....................................................................... — 99 3,757 5,762 6,934 7,638 24,190 69,138
Earned income tax credit ........................................................ — 81 105 118 137 181 622 1,569
Child tax credit ............................................................................ — 34 45 50 59 77 265 670
Total, Outlay effects of tax proposals ............................. — 16 3,607 5,594 6,738 7,380 23,303 66,899

User Fee Proposals with Mandatory Spending:


Immigration Examination Fees.............................................. — 6 — — — — 6 6
Increase Indian Gaming Commission Fees 1 .................. — — 4 4 5 5 18 43
Foreign Labor Certification User Fees ............................... — — — — — — — —
Army Corps of Engineers:
Additional Recreation User Fees and Contributions. — 9 9 1 — — 19 19
Total, User fee proposals with mandatory
spending .......................................................................... — 15 5 3 5 5 7 18

Other Mandatory Proposals:


Black Lung Disability Trust Fund debt refinancing:
Black Lung Disability Trust Fund ...................................... — 3,343 459 452 448 449 1,535 1,419
Interest receipts on repayable advances ...................... — 3,343 459 452 448 449 1,535 1,419
Use Escrow Account for USPS Retiree Health
Benefits:
On-budget effect .................................................................... — 3,081 3,398 3,716 3,888 4,174 18,257 43,238
Off-budget effect .................................................................... — 3,081 3,398 3,716 3,888 4,174 18,257 43,238
Unified budget effect ........................................................ — — — — — — — —

SUMMARY TABLES
THE BUDGET FOR FISCAL YEAR 2006
Table S–6. Mandatory Proposals—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015
Full-time School Attendance Required for Child’s
Social Security Benefits at Age 16 (off-budget) ......... — 10 75 135 140 145 505 1,326
Correct trust accounting deficiencies in individual
Indian money investments (non-paygo) ........................ 6 — — — — — — —
Third scorecard effects............................................................. — 31 31 32 32 33 159 334
Total, Other mandatory proposals............................... 6 21 44 103 108 112 346 992

Grand Total (including outlay costs of tax proposals)


.......................................................................................................... 826 5,325 9,090 7,064 8,782 8,426 38,687 71,089

Memorandum:
Paygo .............................................................................................. 820 5,346 9,046 6,961 8,674 8,314 38,341 70,097
Non-Paygo .................................................................................... 6 21 44 103 108 112 346 992

* The Administration will work with the Congress to reclassify the enacted fees as discretionary beginning in 2007. Once reclassified, the Administration
proposes to offset these fees against discretionary spending. Discretionary totals in those years will be reduced by these fees.
1
Affects both receipts and outlays. Only the outlay effect is shown here.

353
354
Table S–7. Effect of Proposals on Receipts
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015

Make Permanent Certain Tax Cuts Enacted in 2001


and 2003 (assumed in the baseline):
Dividends tax rate structure ............................................... 309 509 547 537 16,725 568 15,700 102,905
Capital gains tax rate structure......................................... — — — 5,268 7,473 5,076 17,817 59,016
Expensing for small business............................................ — — — 3,402 5,417 4,073 12,892 21,897
Marginal individual income tax rate reductions .......... — — — — — — — 502,228
Child tax credit 1 ................................................................... — — — — — — — 96,777
Marriage penalty relief 2 ..................................................... — — — — — — — 36,029
Education incentives ............................................................ — — — — — 3 3 8,687
Repeal of estate and generation-skipping transfer
taxes, and modification of gift taxes ........................... 4 557 910 1,514 1,847 2,192 7,020 256,057
Modifications of pension plans ......................................... — — — — — — — 2,323
Other incentives for families and children ..................... — — — — — 5 5 3,594
Total make permanent certain tax cuts
enacted in 2001 and 2003................................ 313 48 363 9,647 31,462 11,901 53,421 1,089,513

Tax Incentives:
Simplify and encourage saving:
Expand tax-free savings opportunities .......................... — 3,709 7,151 4,069 1,693 199 16,821 1,461
Consolidate employer-based savings accounts ......... — 224 335 357 382 411 1,709 14,816
Establish Individual Development Accounts (IDAs) .. — — 134 286 326 300 1,046 1,763
Total simplify and encourage saving...................... — 3,485 6,682 3,426 985 512 14,066 15,118
Invest in health care:
Provide a refundable tax credit for the purchase of
health insurance 3 ............................................................ — 19 1,435 1,543 1,370 1,241 5,608 9,897
Provide an above-the-line deduction for
high-deductible insurance premiums ......................... — 200 2,029 2,316 2,636 2,876 10,057 28,495

SUMMARY TABLES
Provide a refundable tax credit for contributions of
small employers to employee HSAs 4 ...................... — 61 304 834 1,545 2,025 4,769 17,760
Improve the Health Coverage Tax Credit 5 ................. — — 3 4 5 5 17 49
Allow the orphan drug tax credit for certain
pre-designation expenses .............................................. — — — — — — 1 3
Total invest in health care .......................................... — 280 3,771 4,697 5,556 6,147 20,452 56,204
THE BUDGET FOR FISCAL YEAR 2006
Table S–7. Effect of Proposals on Receipts—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015
Provide incentives for charitable giving:
Permit tax-free withdrawals from IRAs for charitable
contributions........................................................................ 70 335 318 318 313 304 1,588 3,095
Expand and increase the enhanced charitable
deduction for contributions of food inventory .......... 42 87 96 106 116 127 532 1,388
Reform excise tax based on investment income of
private foundations ........................................................... — 148 98 105 111 119 581 1,321
Modify tax on unrelated business taxable income of
charitable remainder trusts ............................................ 6 5 6 6 6 7 30 69
Modify basis adjustment to stock of S corporations
contributing appreciated property ............................... 4 20 21 25 28 32 126 354
Repeal the $150 million limitation on qualified
501(c)(3) bonds ................................................................. 3 6 10 11 10 10 47 92
Repeal certain restrictions on the use of qualified
501(c)(3) bonds for residential rental property ....... — 2 5 9 16 24 56 278
Total provide incentives for charitable giving ...... 125 603 554 580 600 623 2,960 6,597
Strengthen education:
Extend, increase, and expand the above-the-line
deduction for qualified out-of-pocket classroom
expenses .............................................................................. — 27 267 279 282 285 1,140 2,630
Encourage telecommuting:
Exclude from income the value of employer-provided
computers, software, and peripherals ....................... — 29 50 50 55 65 249 767
Provide assistance to distressed areas:
Establish Opportunity Zones ............................................. — 433 806 853 899 912 3,903 9,594
Provide disaster relief:
Provide tax relief for FEMA hazard mitigation
assistance programs ........................................................ 20 40 40 40 40 40 200 400
Increase housing opportunities:
Provide tax credit for developers of affordable
single-family housing ....................................................... — 7 84 342 815 1,425 2,673 17,370

355
356
Table S–7. Effect of Proposals on Receipts—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015

Protect the environment:


Extend permanently expensing of brownfields
remediation costs .............................................................. — 138 215 203 195 184 935 1,743
Exclude 50 percent of gains from the sale of
property for conservation purposes ........................... — 47 92 105 60 — 304 304
Total protect the environment ................................... — 185 307 308 255 184 1,239 2,047
Increase energy production and promote energy
conservation:
Extend the tax credit for producing electricity from
wind, biomass, and landfill gas and modify the tax
credit for electricity from biomass ............................... 48 144 321 260 160 163 1,048 1,779
Provide tax credit for residential solar energy
systems................................................................................. 5 11 19 24 34 16 104 104
Modify treatment of nuclear decommissioning funds 47 166 162 170 177 183 858 1,881
Provide tax credit for purchase of certain hybrid and
fuel cell vehicles 6 ............................................................ 13 260 447 614 680 23 2,024 2,532
Provide tax credit for combined heat and power
property ................................................................................ 17 109 84 105 114 36 448 394
Total increase energy production and promote
energy conservation................................................ 130 690 1,033 1,173 1,165 421 4,482 6,690
Restructure assistance to New York City:
Provide tax incentives for transportation
infrastructure ....................................................................... — 200 200 200 200 200 1,000 2,000
Repeal certain New York City Liberty Zone
incentives ............................................................................. — 200 200 200 200 200 1,000 2,000
Total restructure assistance to New York City .... — — — — — — — —

SUMMARY TABLES
Total tax incentives .............................................. 275 1,191 230 4,896 8,682 10,614 23,232 117,417

Simplify the Tax Laws for Families:


Simplify adoption tax benefits................................................ — 4 40 42 43 45 174 426
Clarify eligibility of siblings and other family members
for child related tax benefits 7 .......................................... 11 51 78 77 60 40 306 536
Total simplify the tax laws for families ........................ 11 47 38 35 17 5 132 110
THE BUDGET FOR FISCAL YEAR 2006
Table S–7. Effect of Proposals on Receipts—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015

Strengthen the Employer-Based Pension System:


Ensure fair treatment of older workers in cash balance
conversions and protect defined benefit plans ........... — 57 62 78 92 104 393 1,096
Strengthen funding for single-employer pension plans — 151 1,432 869 2,699 1,762 3,747 12,735
Reflect market interest rates in lump sum payments .... — — 3 8 15 20 46 241
Total strengthen the employer-based pension
system .............................................................................. — 208 1,491 799 2,622 1,678 3,400 11,880

Close Loopholes and Improve Tax Compliance:


Combat abusive foreign tax credit transactions .............. 1 2 2 2 2 3 11 26
Modify the active trade or business test ............................ 2 6 8 8 8 8 38 87
Impose penalties on charities that fail to enforce
conservation easements ..................................................... 3 8 8 8 9 9 42 96
Eliminate the special exclusion from unrelated
business taxable income for gain or loss on the sale
or exchange of certain brownfields ................................. 1 4 12 23 37 49 125 242
Apply an excise tax to amounts received under certain
life insurance contracts ........................................................ 2 7 12 17 23 28 87 323
Limit related party interest deductions ............................... 74 128 134 141 148 155 706 1,607
Clarify and simplify qualified tuition programs ................. — 4 12 13 14 20 63 222
Total close loopholes and improve tax compliance 83 159 188 212 241 272 1,072 2,603

Tax Administration, Unemployment Insurance, and


Other:
Improve tax administration:
Implement IRS administrative reforms and initiate
cost saving measures 8 ................................................. — — — — — — — —
Strengthen financial integrity of unemployment
insurance:
Strengthen the financial integrity of the
unemployment insurance system by reducing
improper benefit payments and tax avoidance 6 ... — — 6 6 129 530 659 2,856

357
358
Table S–7. Effect of Proposals on Receipts—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015
Other proposals:
Modify pesticide registration fee....................................... — — — — — — — 152
Increase Indian gaming activity fees .............................. — — 4 4 5 5 18 43
Total tax administration, unemployment insurance,
and other.......................................................................... — — 10 2 124 525 641 2,965

Reauthorize Funding for the Highway Trust Fund:


Extend excise taxes deposited in the Highway Trust
Fund 6 ........................................................................................ — 10 11 11 11 11 54 65
Allow tax-exempt financing for private highway
projects and rail-truck transfer facilities ......................... 5 22 47 75 92 97 333 601
Total reauthorize funding for the Highway Trust
Fund .................................................................................. 5 12 36 64 81 86 279 536

Promote Trade:
Implement free trade agreements with Bahrain,
Panama and the Dominican Republic 6 .................... — 56 84 91 97 102 430 976

Extend Expiring Provisions:


Research & Experimentation (R&E) tax credit ........... — 2,097 4,601 5,944 6,889 7,669 27,200 76,225
Combined work opportunity/welfare-to-work tax
credit ...................................................................................... — 131 166 65 16 5 383 383
First-time homebuyer credit for DC ................................. — 1 18 — — — 19 19
Authority to issue Qualified Zone Academy Bonds ... — 3 8 13 18 20 62 162
Deduction for corporate donations of computer
technology ........................................................................... — 73 49 — — — 122 122
Disclosure of tax return information related to

SUMMARY TABLES
terrorist activity 8 ............................................................... — — — — — — — —
LUST Trust Fund taxes 6 .................................................... 74 152 77 — — — 229 229
Abandoned mine reclamation fees.................................. — 304 312 318 322 323 1,579 3,230
Excise tax on coal 6 .............................................................. — — — — — — — 479
Total extend expiring provisions .............................. 74 1,849 4,453 5,704 6,601 7,371 25,978 72,973
THE BUDGET FOR FISCAL YEAR 2006
Table S–7. Effect of Proposals on Receipts—Continued
(In millions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015

Total budget proposals, including proposals


assumed in the baseline ................................................ 201 360 3,439 20,956 49,411 32,010 106,177 1,293,547
Total budget proposals, excluding proposals
assumed in the baseline ................................................ 112 312 3,076 11,309 17,949 20,109 52,756 204,034
1
Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $37,319 million for 2006–2015.
2
Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $7,491 million for 2006–2015.
3
Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $78 million for 2006, $3,660 million for 2007, $5,514 million for 2008, $6,529 million for 2009,
$7,035 million for 2010, $22,816 million for 2006–2010 and $64,078 million for 2006–2015.
4
Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $18 million for 2006, $87 million for 2007, $237 million for 2008, $392 million for 2009, $589
million for 2010, $1,323 million for 2006–2010 and $4,930 million for 2006–2015.
5
Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is $3 million for 2006, $10 million for 2007, $11 million for 2008, $13 million for 2009, $14 million
for 2010, $51 million for 2006–2010 and $130 million for 2006–2015.
6
Net of income offsets.
7
Affects both receipts and outlays. Only the receipt effect is shown here. The outlay effect is -$115 million for 2006, -$150 million for 2007, -$168 million for 2008, -$196 million for 2009,
-$258 million for 2010, -$887 million for 2006–2010 and -$2,239 million for 2006–2015.
8
No net budgetary impact.

359
360
Table S–8. Receipts By Source—Summary
(In billions of dollars)

2004 Estimate
Source
Actual 2005 2006 2007 2008 2009 2010

Individual income taxes............................... 809.0 893.7 966.9 1,071.2 1,167.2 1,245.1 1,353.3
Corporation income taxes .......................... 189.4 226.5 220.3 229.8 243.4 252.4 257.6
Social insurance and retirement
receipts ......................................................... 733.4 773.7 818.8 866.2 911.7 959.1 1,016.2
(On-budget) ................................................ (198.7) (212.4) (225.6) (237.0) (247.2) (258.4) (273.0)
(Off-budget) ................................................ (534.7) (561.4) (593.2) (629.2) (664.6) (700.7) (743.2)
Excise taxes .................................................... 69.9 74.0 75.6 77.2 79.0 81.0 82.9
Estate and gift taxes .................................... 24.8 23.8 26.1 23.5 24.3 26.0 20.1
Customs duties .............................................. 21.1 24.7 28.3 30.6 31.9 33.9 35.3
Miscellaneous receipts................................ 32.6 36.4 41.6 45.6 49.5 52.6 55.4
Total receipts .......................................... 1,880.1 2,052.8 2,177.6 2,344.2 2,507.0 2,650.0 2,820.9
(On-budget) ............................................ (1,345.3) (1,491.5) (1,584.4) (1,715.0) (1,842.4) (1,949.3) (2,077.7)
(Off-budget) ............................................ (534.7) (561.4) (593.2) (629.2) (664.6) (700.7) (743.2)

SUMMARY TABLES
THE BUDGET FOR FISCAL YEAR 2006
Table S–9. Comparison of Economic Assumptions
(Calendar years)

Projections Average
2005 2006 2007 2008 2009 2010 2005–2010
GDP (billions of current dollars):
2006 Budget ........................................................... 12,392 13,083 13,797 14,537 15,306 16,112
CBO January.......................................................... 12,396 13,059 13,766 14,486 15,210 15,940
Blue Chip Consensus January 1 .................... 12,398 13,066 13,763 14,496 15,265 16,098
Real GDP (chain-weighted): 2
2006 Budget ........................................................... 3.6 3.5 3.3 3.2 3.1 3.1 3.3
CBO January.......................................................... 3.8 3.7 3.7 3.4 3.1 2.9 3.5
Blue Chip Consensus January 1 .................... 3.6 3.4 3.2 3.2 3.1 3.3 3.3
Chain-weighted GDP Price Index: 2
2006 Budget ........................................................... 1.9 2.0 2.1 2.1 2.1 2.1 2.0
CBO January.......................................................... 1.8 1.5 1.7 1.8 1.8 1.8 1.7
Blue Chip Consensus January 1 .................... 2.0 2.0 2.1 2.1 2.1 2.1 2.1
Consumer Price Index (all-urban): 2
2006 Budget ........................................................... 2.4 2.3 2.4 2.4 2.4 2.4 2.4
CBO January.......................................................... 2.4 1.9 2.1 2.2 2.2 2.2 2.2
Blue Chip Consensus January 1 .................... 2.5 2.3 2.4 2.4 2.4 2.4 2.4
Unemployment rate: 3
2006 Budget ........................................................... 5.3 5.2 5.1 5.1 5.1 5.1 5.2
CBO January.......................................................... 5.2 5.2 5.2 5.2 5.2 5.2 5.2
Blue Chip Consensus January 1 .................... 5.3 5.2 5.1 5.1 5.1 5.1 5.1
Interest rates: 3
91–day Treasury bills:
2006 Budget ........................................................... 2.7 3.5 3.8 4.0 4.1 4.2 3.7
CBO January.......................................................... 2.8 4.0 4.6 4.6 4.6 4.6 4.2
Blue Chip Consensus January 1 .................... 3.0 3.8 4.1 4.3 4.2 4.2 3.9
10–year Treasury notes:
2006 Budget ........................................................... 4.6 5.2 5.4 5.5 5.6 5.7 5.3
CBO January.......................................................... 4.8 5.4 5.5 5.5 5.5 5.5 5.4
Blue Chip Consensus January 1 .................... 4.7 5.3 5.6 5.6 5.6 5.6 5.4
Sources: Congressional Budget Office; Blue Chip Economic Indicators, Aspen Publishers, Inc.
1
January 2005 Blue Chip Consensus forecast for 2005 and 2006; Blue Chip October 2004 long-run extension for 2007—2010.
2
Year-over-year percent change.
3
Annual averages, percent.

361
362
Table S–10. Budget Summary by Category
(In billions of dollars)

2004 2005 2006 2007 2008 2009 2010

Outlays:
Discretionary:
DOD military........................................... 436 443 424 426 445 466 483
Non-DOD ................................................ 459 487 497 491 488 486 488
Total, Discretionary ......................... 895 930 922 917 932 952 971
Proposed Supplemental......................... — 35 25 18 2 1 —
Mandatory:
Social Security ...................................... 492 515 540 567 596 630 665
Medicare .................................................. 265 290 340 381 407 433 460
Medicaid and SCHIP .......................... 181 194 199 209 225 245 266
Other ......................................................... 299 337 331 319 324 328 351
Total, Mandatory .............................. 1,237 1,337 1,410 1,476 1,551 1,635 1,743
Net Interest ................................................. 160 178 211 245 272 294 314
Total Outlays ................................................... 2,292 2,479 2,568 2,656 2,758 2,883 3,028
Receipts............................................................ 1,880 2,053 2,178 2,344 2,507 2,650 2,821
Deficit ............................................................ 412 427 390 312 251 233 207

On-budget deficit ........................................... 567 589 560 506 466 463 460
Off-budget surplus ........................................ 155 162 170 194 215 230 252

SUMMARY TABLES
THE BUDGET FOR FISCAL YEAR 2006
Table S–11. Current Services Baseline Summary by Category
(in billions of dollars)

2004 2005 2006 2007 2008 2009 2010

Discretionary:
DOD military .................................................. 436 443 417 416 428 439 453
Homeland security ...................................... 25 30 33 34 34 35 36
Other ................................................................ 434 457 464 473 480 487 497
Total, Discretionary ................................. 895 930 914 923 942 961 986
Mandatory:
Social Security .............................................. 492 515 540 567 596 630 666
Medicare ......................................................... 265 290 340 381 407 433 460
Medicaid and SCHIP .................................. 181 194 198 211 229 249 271
Other ................................................................ 299 337 337 327 327 333 355
Total, Mandatory ...................................... 1,237 1,336 1,416 1,485 1,558 1,645 1,752
Net Interest ......................................................... 160 177 209 242 269 291 310
Total Outlays ...................................................... 2,292 2,443 2,539 2,650 2,770 2,897 3,048
Receipts............................................................... 1,880 2,053 2,178 2,347 2,518 2,668 2,841
Surplus/deficit ............................................... 412 390 361 303 251 229 207

On-budget deficit ......................................... 567 552 534 500 469 462 462
Off-budget surplus....................................... 155 162 173 197 218 233 256

363
364
Table S–12. Impact of Budget Policy
(In billions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010

Current Services Baseline Deficit .......... 390 361 303 251 229 207 1,351

Proposals:
Discretionary policy:
Department of Defense..................... — 8 11 18 29 34 99
Homeland security .............................. — 1 * 1 2 2 5
Other spending .................................... * 1 16 29 41 52 138
Subtotal, discretionary ........................... * 8 5 10 10 16 34

Proposed supplemental ........................ 35 26 21 6 5 4 62

Revenue proposals 1 ............................. * * 7 18 26 30 82

Mandatory proposals ............................. 1 5 13 14 17 18 68

2006 Budget Deficit ..................................... 427 390 312 251 233 207 1,393

*$500 million or less.


Note: Each line includes debt service.
1
Includes outlay impact of revenue proposals.

SUMMARY TABLES
THE BUDGET FOR FISCAL YEAR 2006
Table S–13. Baseline Adjustments
(In billions of dollars)

Total
2005 2006 2007 2008 2009 2010
2006–2010 2006–2015

Budget Enforcement Act Baseline Deficit............................... 391 369 315 256 213 212 1,364

Extend certain tax provisions:


Permanently extend individual income tax rate cuts ...... — — — — — — — 502
Permanently extend estate and tax gift changes ............ * 1 1 2 2 2 7 256
Extend other provisions of the 2001 and 2003 tax
acts 1 .......................................................................................... * 1 1 8 30 10 46 376
Subtotal, tax extenders ......................................................... * * * 10 31 12 53 1,134

Assume all emergencies are one-time only ........................... — 5 9 11 12 13 50

Adjust pay factors to more accurately reflect changes


in pay costs ................................................................................... — 2 2 3 3 3 12

Remove special rule for administrative expenses for


certain benefit programs........................................................... — * * * 1 1 2

Debt service related to all changes .......................................... * * 1 1 1 1 3

Current Services Baseline Deficit .............................................. 390 361 303 251 229 207 1,351

*$500 million or less.


1
Table S–7 provides a detailed listing of expiring tax provisions in the baseline.

365
366
Table S–14. Federal Government Financing and Debt
(In billions of dollars)

Actual Estimate
2004 2005 2006 2007 2008 2009 2010

Financing:
Unified budget deficit ( ) ....................................................................................... 412 427 390 312 251 233 207

Financing other than the change in debt held by the public:


Net purchases ( ) of non-Federal securities by
the National Railroad Retirement Investment Trust ............................. 3 1 1 1 * * 1
Changes in: 1
Treasury operating cash balance ............................................................... 1 1 — — — — —
Compensating balances 2 ........................................................................... 22 — — — — — —
Checks outstanding, etc. 3 .......................................................................... 7 — — — — — —
Seigniorage on coins ........................................................................................... 1 1 1 1 1 1 1
Less: Net financing disbursements:
Direct loan financing accounts .................................................................... 5 9 13 20 21 20 21
Guaranteed loan financing accounts ........................................................ 9 9 2 2 2 3 3
Total, financing other than the change in debt held by the
public ........................................................................................................... 30 1 10 21 22 22 22
Total, requirement to borrow from the public ............................ 382 426 400 333 273 255 230

Change in debt held by the public....................................................................... 382 426 400 333 273 255 230

Changes in Debt Subject to Limitation:


Change in debt held by the public....................................................................... 382 426 400 333 273 255 230
Change in debt held by Government accounts .............................................. 213 251 277 309 326 340 364
Change in other factors .......................................................................................... 1 13 * 1 1 3 2
Total, change in debt subject to statutory limitation ................................. 596 663 676 643 599 598 596

SUMMARY TABLES
Debt Subject to Statutory Limitation, End of Year:
Debt issued by Treasury ......................................................................................... 7,328 8,005 8,682 9,325 9,924 10,519 11,114
Adjustment for discount, premium, and coverage 4 .................................... 6 8 8 8 8 6 5
Total, debt subject to statutory limitation 5 ................................................. 7,333 7,997 8,673 9,316 9,915 10,513 11,109
THE BUDGET FOR FISCAL YEAR 2006
Table S–14. Federal Government Financing and Debt—Continued
(In billions of dollars)

Actual Estimate
2004 2005 2006 2007 2008 2009 2010
Debt Outstanding, End of Year:
Gross Federal debt: 6
Debt issued by Treasury .................................................................................... 7,328 8,005 8,682 9,325 9,924 10,519 11,114
Debt issued by other agencies ........................................................................ 27 26 26 26 25 24 24
Total, gross Federal debt ............................................................................... 7,355 8,031 8,708 9,350 9,949 10,544 11,137
Held by:
Debt held by Government accounts .............................................................. 3,059 3,310 3,587 3,896 4,222 4,562 4,926
Debt held by the public 7 .................................................................................. 4,296 4,721 5,121 5,454 5,727 5,982 6,212
As a percent of GDP ....................................................................................... 37.2% 38.6% 39.7% 40.1% 39.9% 39.6% 39.1%

* $500 million or less.


1
A decrease in the Treasury operating cash balance or compensating balances (which are assets) is a means of financing a deficit and therefore has a positive sign. An increase in
checks outstanding (which is a liability) is also a means of financing a deficit and therefore also has a positive sign.
2
Compensating balances were non-interest bearing Treasury bank deposits that Treasury mainly used to compensate banks for collecting tax and non-tax receipts under financial agency
agreements. Most of the balances at the end of 2003 were required to be invested in nonmarketable Depositary Compensation Securities issued by the Treasury; the rest of the balances,
and the entire amount in previous years, was invested in the way that the banks decided. The use of compensating balances was discontinued in 2004, and the amounts were drawn
down to zero.
3
Besides checks outstanding, includes accrued interest payable on Treasury debt, uninvested deposit fund balances, allocations of special drawing rights, and other liability accounts;
and, as an offset, cash and monetary assets (other than the Treasury operating cash balance and compensating balances), other asset accounts, and profit on sale of gold.
4
Consists mainly of Federal Financing Bank debt (which is not subject to limit), the unamortized discount (less premium) on public issues of Treasury notes and bonds (other than
zero-coupon bonds), and the unrealized discount on Government account series securities.
5
The statutory debt limit is $8,184 billion.
6
Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost all measured at sales price plus amortized discount or less amortized premium.
Agency debt securities are almost all measured at face value. Treasury securities in the Government account series are otherwise measured at face value less unrealized discount (if
any).
7
At the end of 2004, the Federal Reserve Banks held $700 billion of Federal securities and the rest of the public held $3,595 billion. Debt held by the Federal Reserve Banks is not
estimated for future years.

367
GLOSSARY

Accrual Method of Measuring Cost


This accounting method records cost when the liability is incurred. As applied to Federal
employee retirement benefits, cost is recorded when the benefits are earned rather than when
they are paid at some time in the future.

Appropriation
An appropriation provides legal authority for Federal agencies to incur obligations and to make
payments out of the Treasury for specified purposes. Thirteen regular appropriations bills are
considered every year by the Congress and supplemental appropriations are considered from
time to time.

Authorization
An authorization is an act of the Congress that establishes or continues a Federal program or
agency and sets forth the guidelines to which it must adhere.

Balanced Budget
A balanced budget occurs when total receipts equal total outlays for a fiscal year.

Budget Authority
Budget authority is the authority provided by law to incur financial obligations that will result
in outlays.

Budget Enforcement Act (BEA) of 1990


The BEA is a recently expired law that was designed to limit discretionary spending while
ensuring that any new entitlement program or tax cut did not increase deficits. It set annual
limits on discretionary spending.

Budget Resolution
The budget resolution is Congress’ annual framework that sets targets for total budget authority,
total outlays, total revenues, and the deficit (on-budget), as well as discretionary and mandatory
allocations within the spending targets. These targets guide the committees’ deliberations. A
budget resolution does not become law and is not binding on the Executive Branch.

Cap
A “cap” is a legal limit on annual discretionary spending.

Continuing Resolution
A continuing resolution provides for the ongoing operation of the Government in the absence of
enacted appropriations, usually at the same spending rate as the prior year.

369
370 GLOSSARY

Debt
Debt Held by the Public—The cumulative amount of money the Federal Government has
borrowed from the public and not repaid.
Debt Held by Government Accounts—The debt the Treasury Department owes to other
accounts within the Federal Government. Most of it results from the surpluses of the Social
Security and other trust funds, which are required by law to be invested in Federal securities.
Debt Limit—The maximum amount of Federal debt that may legally be outstanding at any
time. It includes both the debt held by the public and the debt held by Government accounts.
When the debt limit is reached, the Government cannot borrow more money until the Congress
has enacted a law to increase the limit.

Deficit
A deficit is the amount by which outlays exceed receipts in a fiscal year.

Discretionary Spending
Discretionary spending is what the President and the Congress decide to spend through annual
appropriations bills. Examples include spending for such activities as the FBI, the Coast Guard,
education, space exploration, highway construction, defense, and foreign aid. (See Mandatory
Spending.)

Entitlement
An entitlement program is one in which the Federal Government is legally obligated to make
payments or provide aid to any person who meets the legal criteria for eligibility. Examples
include Social Security, Medicare, Medicaid, and Food Stamps.

Fiscal Year
The fiscal year is the Federal Government’s accounting period. It begins on October 1st and
ends on September 30th. For example, fiscal year 2006 begins on October 1, 2005, and ends on
September 30, 2006.

Full-time Equivalents (FTEs)


Civilian employment in the Executive Branch is measured on the basis of full-time equivalents.
One FTE is equal to one work year or 2,080 non-overtime hours. Thus, one full-time employee
counts as one FTE, and two half-time employees also count as one FTE.

Gross Domestic Product (GDP)


GDP is a measure of the market value of goods and services produced within the United States.
It is the standard measure of the size of the economy.

Mandatory Spending
Mandatory spending is provided by permanent law rather than annual appropriations. Exam-
ples are Social Security and the Student Loan Program. The President and the Congress can
change the law with respect to the eligibility criteria or the payment formula, and thus change
the level of spending on mandatory programs, but they don’t have to take annual action to ensure
the continuation of spending. (See Discretionary Spending.)
THE BUDGET FOR FISCAL YEAR 2006 371

Obligations
Obligations are binding agreements that result in outlays, immediately or in the future.

Offsetting Collections and Offsetting Receipts


Offsetting collections and offsetting receipts are income that are deducted from outlays, rather
than counted on the receipts side of the budget. They result from business-like activities such
as the sale of stamps by the Postal Service.

Off-Budget
By law, Social Security and the Postal Service are accounted for separately from all other
programs in the Federal Government and amounts are designated as “off-budget.”

On-Budget
Those programs not legally designated as off-budget.

Outlays
Outlays are the amount of money the Government spends, minus business-like collections, in a
given fiscal year.

Program Assessment Rating Tool (PART)


The PART is an analytical device used to evaluate program effectiveness and inform budget,
management, and legislative decisions aimed at improving performance. It consists of a series
of questions about program purpose and design, strategic planning, management, and results.
Answers to PART questions require specific evidence to prove program effectiveness.

Pay-As-You-Go (PAYGO)
Created by the Budget Enforcement Act, PAYGO refers to requirements that new mandatory
spending proposals or tax reductions must be offset by cuts in other mandatory spending or by
tax increases. The purpose of these rules is to ensure that the deficit does not rise or the surplus
does not fall because of policy changes to mandatory spending and taxes.

President’s Management Agenda


A strategy to improve the management and performance of the Federal Government. The Agenda
includes five Government-wide initiatives and multiple program-specific initiatives. The five
Government-wide initiatives are defined below.
Strategic Management of Human Capital—having processes in place to ensure that the right
person is in the right job, at the right time, and is performing well.
Competitive Sourcing—regularly examining commercial activities performed by the Govern-
ment to determine whether it is more efficient to obtain such services from Federal employees
or from the private sector.
Improved Financial Performance—accurately accounting for the taxpayers’ money and giv-
ing managers timely and accurate program cost information to inform management decisions
and control costs.
Expanded Electronic Government—ensuring that the Federal Government’s information
technology investments significantly improve the Government’s ability to serve citizens, and
that information technology systems are secure, and delivered on time and on budget.
372 GLOSSARY

Budget and Performance Integration—ensuring that performance is routinely considered


in funding and management decisions, and that programs achieve expected results and work
toward continual improvement.

Receipts
Governmental receipts (often simply “receipts”) are the collections of money that primarily result
from taxes and similar Government powers to compel payment. Examples of governmental re-
ceipts include income taxes, payroll taxes, excise taxes, and customs duties. They do not include
offsetting receipts or collections from the Federal Government’s business-like activities, such as
the entrance fees at national parks, or collections by one Government account from another.

Surplus
A surplus is the amount by which receipts exceed outlays in a fiscal year.

Trust Funds
Trust funds are Federal Government accounts designated as “trust funds” by law and
which record receipts for spending on specified purposes.

Unified Budget
The unified budget includes receipts from all sources and outlays for all programs of the Federal
Government, including both on- and off-budget programs. It is the most comprehensive measure
of the Government’s finances.

Unobligated Balance
Funding that has been approved or is available, but not yet obligated for any particular purpose.
OMB CONTRIBUTORS TO THE 2006 BUDGET

The following personnel contributed to the preparation of this publication. Hundreds, perhaps
thousands, of others throughout the Government also deserve credit for their valuable contributions.
Note: This list has been modified to add several names that were unintentionally omitted from the
printed document.

A Amy Bassano Robert A. Burton Francis R. Crumlish


Robert Batson Nancy S. Bushi Craig Crutchfield
Rein Abel Richard B. Bavier Mark Bussow J. Anthony Curcio
David Abraham Jennifer Wagner Bell Edna Falk Curtin
Andrew Abrams Stuart Bender C William P. Curtis
Marsha D. Adams Meredith Benson
Brenda Aguilar Shalini Benson Basilio Cabradilla D
Ricardo Aguilera Elizabeth Bernhard Kathleen Cahill
Michele Ahern Evett F. Best Steven Cahill
Josie R. Dade
Steven D. Aitken Pamela L. Beverly Patricia L. Cain
Philip R. Dame
Jameela Raja Akbari Terrence Blackburne Christa Capozzola
J. Michael Daniel
David Alekson Mathew C. Blum Karyn Carson
Elizabeth Flanigan
Susan Alesi James Boden Michael Casella
Davis
Tyrone P. Alion Joshua B. Bolten Mary I. Cassell
Brandon Davisson
Victoria Allred Melissa B. Bomberger Michael J. Cassidy
Arline P. Dell
Stephanie Alonzo David S. Bortnick Alejandra O. Ceja
Jun De Leyos
Lois E. Altoft Evangelia Bouzis Jeffrey Chamberlin
Bruce Deng
Vickie Alvo Constance J. Bowers Edward H. Chase
Carol R. Dennis
Robert B. Anderson Thomas A. Bowman Richard Chasez
Yvette M. Dennis
Bill Apgar James Bradford, Jr. Anita Chellaraj
Mary Derr
Donald R. Arbuckle Betty I. Bradshaw Joanne W. Chow
Aurelia A. DeRubis
Katherine T. Astrich Irene T. Brahmakulam Margaret B. Davis
Melissa Dettmer
Lisa L. August Denise M. Bray Christian
Shivani Desai
Renee Austin Anna M. Briatico Evan W. Christman
Howard Dickenson
Patrick Aylward Genefer Brice Dean F. Clancy
Monique Dilworth
Derwin Bronson Sally Clark
Anthony S. Dobbins
B Dustin S. Brown Toni M. Claud
Clare C. Doherty
James A. Brown Barry T. Clendenin
Angela Donatelli
Peter Babb Jennifer E. Brown Robin Cleveland
Kevin Douglas
Paul W. Baker Ruby Brown Norris Cochran
Catherine DuRant
Matthew Balazik Thomas M. Brown Debra M. Collins
Louise Dyer
Lesia M. Banks Joanne Buenzli Daniel Costello
Jorge Barcia Paul Bugg Siobhan Crawford
Mary C. Barth Andrew S. Burnett Susan G. Crawford E
Adrienne N. Bartlewitz Benjamin Burnett Dennis Craythorn
John Bartrum John D. Burnim Joseph Crilley Jacqueline A. Easley
Juliana Basile John Burton Michael F. Crowley Eugene M. Ebner

373
374 LIST OF CONTRIBUTORS AND IMAGE CREDITS

Jeanette Edwards Michael D. Gerich Edith D. Hopkins Carole Kitti


Stephen G. Elmore Alexandra Gianinno Libby Horan Eva Kleederman
Rocco Emelio Brian Gillis Sarah Horrigan Brian S. Kleinman
Richard P. Emery Jr. Ursula Gillis Patrick Hough John Knepper
Noah Engelberg Adam Goldberg Emily A. House Nathan Knuffman
Michelle A. Enger Barbara Goldberg Kathy M. Hudgins Jack Koller
Elizabeth Erickson Robert Goldberg Eric Hunn Chad Kolton
Dinee Eriksen Jeffrey Goldstein Alexander T. Hunt Elissa Konove
Danny A. Ermann Oscar Gonzalez James C. Hurban Emily M. Kornegay
Diana Espinosa Susana Gonzalez Jaki Mayer Hurwitz John Kraemer
Catherine H. Chauncey Goss Lawrence W. Hush Lori A. Krauss
Evangelisti John D. Graham Toni S. Hustead Jennifer Kron
Karen Evans Megan A. Grasso James M. Kulikowski
Rowe Ewell Jason Gray I Sara E. Kuncaitis
Tye Gray Ross M. Kyle
F Arecia A. Grayton
Danilo Ibanez
Pierre Green L
Chris Fairhall Richard E. Green
Aron Greenberg J
Lisa B. Fairhall Brian Labonte
Robert S. Fairweather Hester Grippando Joseph F. Lackey Jr.
Michael Falkenheim Adam Grom Andrea E. Jacobson
Christina Lagdameo
William (Dick) Feezle Laurence R. Jacobson
Leonard L. Lainhart
Chad Ferguson H Dana M. James
Kristy L. LaLonde
John Ferrari Don Jansen
James C. Langdon
Patricia A. Ferrell Carol D. Jenkins
Kelli A. Hagen Adam H. Langton
Jennifer N. Field Christopher S. Johns
Curtis Hamlin Daniel LaPlaca
Lesley A. Field Clay Johnson III
Eric V. Hansen Lauren Larson
E. Holly Fitter Kim A. Johnson
Jennifer Hanson- Justin B. Latus
Darlene B. Fleming Kim I. Johnson
Kilbride Jackie Lawson
Joseph A. Fleming Sandy F. Johnson
Linda W. Hardin Karen Lee
Ellen Fletcher-Shields James F. Jordan
Dionne M. Hardy Sarah S. Lee
Keith Fontenot James J. Jukes
David Harmon Susan Leetmaa
Jennifer M. Forshey Craig Harper Wayne Leiss
J. D. Foster Ken Haskins K Daniel A. Lerner
Wanda J. Foster Erin Hassing Derrick Lett
Katherine Fox David J. Haun Natasha Kallay Sheila D. Lewis
Rusty Francisco Donald Hawkins Derek Kan Richard A.
Steve Francisco Hans Heidenreich Joel D. Kaplan Lichtenberger
Sara Frankfurt Gregory G. Henry Stanley Kaufman Tung-Yen Lin
Jason Freihage Michael Hickey James B. Kazel Susanne D. Lind
Vivian C. Hickman John W. Kelly Constance Lindsay
G Stacie Higgins Kenneth S. Kelly Lin C. Liu
Mary Lou Hildreth Karyn Kendall Lauren C. Lobrano
Anne Gable Andrew Hire Ann H. Kendrall Patrick G. Locke
Pat Galvin Joanne Cianci Hoff Virginia M. Kennamer Richard C. Loeb
Marc Garufi Adam Hoffberg Marc L. Kesselman Aaron M. Lopata
Darlene O. Gaymon Marilyn Holland James Keston Carolyn L. Lovett
Kimberly A. Geier James S. Holm Irene Kho Adrienne C. Erbach
Cindy George Christine P. Holmes Robert W. Kilpatrick Lucas
Jennifer Gera Rebecca Hooper Robin Kitterman Vernell Lucas
THE BUDGET FOR FISCAL YEAR 2006 375

Kimberley Luczynski John B. Moore Jacqueline M. Peay David Rostker


Sarah Lyberg John F. Morrall III Robert J. Pellicci Jason Rothenberg
Randolph M. Lyon Mike Morris Jack Pennington David Rowe
Delphine C. Motley Kathleen Peroff Mario D. Roy
M Jennifer C. Andrea M. Petro
Moughalian Nicole S. Petrosino S
Debbie Macaulay Jane T. Moy John R. Pfeiffer
Lisa Macecevic Kevin Murphy Stacey Que-Chi Pham David Safavian
Robert Mahaffie Chris Music Carolyn R. Phelps Robert L. Sandoli
Paul Mahoney David L. Muzio Elizabeth C. Phillips Narahari Sastry
Mikko Makarainen Anthony R. Piccininno Ruth D. Saunders
Margaret A. Malanoski N Candice Pinder Susan Schechter
Paul Mamo Joseph G. Pipan Suzanne K. Scheele
Dominic J. Mancini Pamela L. Piper Glenn Schlarman
Larry J. Nagl
Karen A. Maris James Michael Pippin Andrew M. Schoenbach
Melany Nakagiri-
Brendan A. Martin Douglas Pitkin Carrie A. Schroeder
Yeung
Christopher J. Martin Meera V. Popat Ingrid M. Schroeder
Mateo Naldo
James R. Martin Benjamin Powell Kenneth L. Schwartz
Barry Napear
Kathryn Martin Clifford Preston Mark J. Schwartz
Robert J. Nassif
Kate Massey Sharon Price Nancy Schwartz
Chandra Navneeta
Larry R. Matlack Jamie Price-O’Donnell Ardy Diann Scott
Kim Nelson
Brian Matteson Larry Proctor Londa L. Scott-Forte
Noam Neusner
Kathryn Thompson Jason Pugh Jasmeet K. Seehra
Kimberly A. Newman
Maxwell Jennifer G. Newstead Melissa Seeley
Shelly McAllister Kevin F. Neyland R Dedra Seibel
Erin McCartney Teresa Nguyen Paul Shawcross
Alexander J. Paul Noe David P. Radzanowski Robert J. Shea
McClelland S. Aromie Noe Latonda G. Raft Christopher P. Sheedy
Anthony W. McDonald Douglas A. Norwood Terrill W. Ramsey Maiselle (Mary D.)
Christine McDonald Lorenzo Rasetti Shortley
Katrina A. McDonald O Beatrice A. Reaud Mary Jo Siclari
Andrew McIlroy Francis S. Redburn Leticia Sierra
Matthew McKearn Thomas M. Reilly Ronald Silberman
Kathleen E. O’Connell
Stephen S. McMillin Rosalyn J. Rettman Garrette Silverman
Lewis W. Oleinick
Erin McNeece Alan B. Rhinesmith Pamula L. Simms
Marvis G. Olfus
William J. McQuaid Keri Rice Diana Simpson
Sandera D. Oliver
Inna L. Melamed Sarah B. Richardson Jack A. Smalligan
Derek J. Orban
Mark David Menchik Renee P. Richburg Bryan Smith
Richard A. Mertens Shannon Richter Augustine T. Smythe
Steven M. Mertens P Nancy S. Ridenour Joanne Snow
Keith Mertz Antonio Rivers Silvana Solano
P. Thaddeus William D. Palmer Crystal Roach Scott Sorensen
Messenger Max J. Pangborn Lara Robillard Linda M. Springer
James D. Mietus Anna K. Pannell Donovan O. Robinson Lillian S. Spuria
Julie L. Miller Kristy Park Rod Robinson Kathryn B. Stack
Ken Miller Sangkyun Park Marshall Rodgers Norman H. Starler
Kimberly Miller Sera H. Park Justine F. Rodriguez Margaret B. Stewart
Neile Miller Joel R. Parriott Kathleen Romig Gretchen Stiers
Daniel Moncada John Pasquantino Timothy A. Rosado Carla B. Stone
Joe Montoni Marcus Peacock Elizabeth L. Rossman Jackie Strasser
376 LIST OF CONTRIBUTORS AND IMAGE CREDITS

Bobby Strickland Sara Meadows Joyce M. Wakefield Ora L. Whitman


Robert Strickland Tolleson Richard W. Walker Amber Wichowsky
Shannon Stuart Gilbert Tran Katherine K. Wallman Debra L. Williams
Stephen Suh Maurice C. Travers Maureen Walsh Gary Willis
Kevin J. Sullivan Darryl Trent Elizabeth Ward Philip Ryan Wilson
Levin C. Sullivan Jr. David Trinkle Lisa Ward Jennifer Winkler
Tony Summerlin Donald L. Tuck LaTonya R. Ware Emily Woglom
Thomas Super Phillip Turner Sharon A. Warner Adam Wright
Talisa Sutton Mark A. Wasserman Lauren Wright
Adrian Swann U Iratha H. Waters Erin Wuchte
Amy Sweeney Gary Waxman Amber Wurz
Carolyn Swinney Lauren Uher Rebecca A. Wayne
Amy Synder-Kaminski Darrell J. Upshaw Mark A. Weatherly Y
Bessie M. Weaver
T V Tawana F. Webb Fumie Yokota
Jeffrey A. Weinberg Louise D. Young
Sahar Taman Matthew J. Vaeth Jason Weller Tim Young
Teresa A. Tancre Ofelia M. Valeriano Dianne M. Wells Julia E. Yuille
Myra L. Taylor Cynthia A. Vallina Philip R. Wenger Kathryn Yurkanin
Judy Thomas Elizabeth VanDersarl Daniel Werfel
LaTina Thomas Areletha L. Venson Arnette C. White
Mark Vinkenes Kamela White Z
Jeanette Thornton
Courtney B. Kim S. White
W Matt White David M. Zavada
Timberlake
Sherron R. White Jackie Zeiher
Thomas Tobasko
Wendell Waites Gail S. Zimmerman

Image Credits

Jocelyn Augustino
Jim Beer, Meta House
Louai Beshara/AFP/Getty Images
Peter Bishop
Terrence Blackburne, Office of Management and Budget
Matthew Cavanaugh, Middle East Broadcasting Networks
TSGT Brian Christiansen
SSGT Shane A. Cuomo
Melissa Dettmer, Office of Management and Budget
Sonja Ervin, Central City Concern
CPL Paula M. Fitzgerald
Bob Flynn, City of Fresno
Bud Force, Texas Engineering Extension Service
John Frassanito & Associates/NASA
SGT Jose L. Garcia
Photographer’s Mate 1C William R. Goodwin
TSGT Lee Harshman
Thomas Hartwell
Al Hickey, National Science Foundation
Steve Hillebrand, U.S. Fish and Wildlife Service
Monique Holiday, Financial Management Service
THE BUDGET FOR FISCAL YEAR 2006 377

John and Karen Hollingsworth


A1C Christina D. Kinsey
Bob Koteff, Army Corps of Engineers
Maxwell Mackenzie
PA3 Kelly Newlin
TSGT Michael R. Nixon
TSGT Justin D. Pyle
Michael Quinn, National Park Service
Noel Sills
SPC James B. Smith Jr.
James Tourtellotte
Dave Uberuaga, National Park Service
LCPL James J. Vooris
SFC Sandra Watkinskeough
Crawford Welch, Department of Homeland Security
Steve Young, Centers for Disease Control and Prevention
Agricultural Research Service, Department of Agriculture
Corporation for National and Community Service
Department of Commerce, U. S. Census Bureau
Department of Energy
Department of Homeland Security
Department of Housing and Urban Development
Department of State
Department of Transportation
Department of Veterans Affairs
Environmental Protection Agency
Federal Bureau of Investigation
General Dynamics
Getty Images
Internal Revenue Service Criminal Investigation
NASA
NASA/Jet Propulsion Laboratory/Space Science Institute
National Oceanic and Atmospheric Administration
Natural Resources Conservation Service, Department of Agriculture
Oak Ridge National Laboratory
Reclamation’s Mid-Pacific Region, Department of the Interior
Social Security Administration
U.S. Agency for International Development
U.S. Air Force
U.S. Army Corps of Engineers
United States Mint

You might also like