Senator DOMENICI. Could I have just 30 seconds?

Chairman CONRAD. Absolutely.

Senator DOMENICI. I failed to mention in my opening remarks the Corps of Engineers' activities in our State when we had the big fire at Los Alamos. I would tell you that anybody that still harbors the ideas of 15 years ago that the Corps doesn't do their job well, they should have been there and watched that. That was a tremendously difficult public works project and program, and I want to, General, thank you for all the things that were done. They are all working. The remnants of that fire are not-there is nothing that has to do with the water flow and the like. It has all been properly handled, and the Mexicans appreciate it.

Thank you, Mr. Chairman.

Chairman CONRAD. Well, thank you for that. I would echo that. You know, in 1997, we had the worst floods in 500 years in North Dakota. I might tell you the Corps of Engineers did an absolutely superb job, and they won that flood fight up and down the valley. We lost it in one place with the circumstance which nobody could have foreseen what we were up against. In fact, Colonel Kasprisin, who led that fight, was in my office yesterday. He is now a top executive with FEMA and one of the most outstanding people I know, just the kind of person you would want handling any disaster. He helped lead the effort at the Olympic Games to provide security out there. He was the FEMA lead person on that. I just have a very high regard for him.

With that, Mr. Parker, please proceed.

STATEMENT OF MICHAEL PARKER, ASSISTANT SECRETARY OF THE ARMY, CIVIL WORKS, DEPARTMENT OF ARMY, ACCOMPANIED BY LIEUTENATE GENERAL ROBERT B. FLOWERS, CHIEF OF ENGINEERS, UNITED STATES ARMY CORPS OF ENGINEERS

Mr. PARKER. Thank you, Mr. Chairman and members of the committee. I first want to thank you for the opportunity to testify today on the President's fiscal year 2003 budget for the Army Corps. I am accompanied, as you said, by Lieutenant General Robert Flowers, who happens to be the 50th Chief of Engineers of the Corps.

I want to summarize my statement due to time constraints, but with your permission, I would ask that my complete statement be entered into the record.

The President's overall priorities are national defense, protecting the American people from terrorism, and reviving the economy. Funds for the civil works portion of the budget in the Corps are very tight. The President's budget for civil works seeks appropriations of $4.3 billion. After adjusting for changes in financing methods, such as retiree costs, this represents an increase of about 7 percent from last year's President's budget and a decrease of about 7 percent from last year's appropriations.

The Bonneville Power Administration, non-Federal cost-sharing partners, and other sources would provide another $0.5 billion, bringing the total civil works program to $4.8 billion. The budget provides construction funding for the principal civil works missions of commercial navigation, flood damage reduction, and environmental restoration. The budget allocates this funding for ongoing

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construction projects that are known to be consistent with policy, especially 30 projects that are nearing completion, three priority projects, and two projects to meet environmental requirements in the Missouri and Columbia basins.

Also, there is one new start that is required to comply with the Endangered Species Act. There would be no construction funding for non-traditional missions, such as environmental infrastructure. Construction funds are thinly stretch, and there are many construction projects awaiting funds. To reduce the number of projects in the construction pipeline, the budget cuts back the study and design program from recent funding levels.

In the fiscal year 2003 budget, hurricane protection projects are treated comparably with other flood damage reduction projects. For the Mississippi River and tributaries project, the budget emphasizes the flood damage reduction projects on the main stem of the Mississippi River and the Atchafalaya River Basin.

The budget proposes that the Federal Power Marketing Administrations directly fund hydropower operation and maintenance costs at Corps projects. This more reliable funding would lead to more reliable performance at Corps hydropower facilities.

The Corps received $139 million in fiscal year 2001's supplemental appropriations for anti-terror facility protection. We will use those funds for recurring costs, facility assessments and improvements. The fiscal year 2003 budget provides another $65 million for recurring infrastructure protection costs. The budget limits funding for shallow draft harbors and for inland waterways that have low commercial tonnage. The intent is to direct funding from purely recreational harbors and from waterway segments that have high costs per commercial ton mile.

The budget would step up funding for the regulatory program to improve permit turnaround times and improve environmental protection. The Chief of Engineers and I are working to strengthen civil works projects, project planning and review. The chief is focusing on improving planning capabilities and management processes. I am staffing a project planning and review group that will function as part of the Corps' overall vertical planning team. These changes are intended to ensure that technical and policy questions are addressed early in the planning process rather than at the end. Mr. Chairman, we are all proud of the way the Army Corps of Engineers stepped forward on and after September the 11th, demonstrating its emergency response and recovery capabilities and the importance of maintaining the civil works capability within the Army. The Army Civil Works Program is a wise investment in the Nation's economy and way of life, and it is a great pleasure for me to be able to advocate its funding.

Let me just address some of the things that have been stated this morning.

When I was on the Energy and Water Subcommittee of Appropriations in the House, I always looked at OMB and never had those warm, fuzzy feelings toward them. I have found that after being in the Administration and dealing with them, I still don't have those warm, fuzzy feelings. [Laughter.]

Mr. PARKER. The fact of the matter is that OMB, in giving them credit, they do have a problem. They have a situation that they

were forced into. Instead of being able to have surpluses and dealing in an environment where we were determining priorities on spending with surpluses, because of the 9/11 attack we are now caught in a situation where we have these deficits, we have national security as our main goal, and homeland security. I think it would be safe to say that I know the President understands this, and I am hoping that everybody at OMB understands, that this process, we are at the beginning of it, knowing full well that Congress plays a vital role in making the decisions that have to be made to continue the vital work of the Corps.

If the Corps is limited in what it does for the American people, we will see a negative impact on the people of this country. Anyone knows that over the next 20 years, we have to double trade in order to maintain our standard of living. That trade goes over our waterways. And if we don't have the infrastructure in place to make that happen, we will not be able to maintain that.

There have been situations in the past where I have felt sometimes, when I was a member, that OMB sometimes gave low numbers, knowing full well that Congress would plus those numbers up. I wouldn't be so brash as to say this was the case here, that we have to ask OMB as far as what their opinions are.

The fact of the matter is, as Assistant Secretary of the Army for Civil Works, I look forward to working with this Committee, being able to put together a package. In the final analysis that package will go to the President for signature, where we can fulfill our responsibility to the American people within the work of the Corps itself.

Thank you very much, Mr. Chairman.

[The prepared statement of Mr. Parker follows:]

THE PREPARED STATEMENT OF THE HONORABLE MIKE PARKER, ASSISTANT
SECRETARY OF THE ARMY (CIVIL WORKS)

Mr. Chairman and distinguished members of the Committee:

INTRODUCTION

Thank you for the opportunity to testify before this Senate Budget Committee and to present the President's budget for the Civil Works program of the Army Corps of Engineers for Fiscal Year (FY) 2003.

Accompanying me this morning is Lieutenant General Robert B. Flowers, Chief of Engineers.

ARMY CIVIL WORKS PROGRAM FOR FISCAL YEAR 2003

The President's fiscal year 2003 budget confronts a two-front war against terrorism while taking steps to restore economic growth. In order to finance the war against terrorism it moderates spending in the rest of government. This year's budget also takes the significant step of assessing performance in government, and begins to tie what works and doesn't work to spending decisions. This will help ensure that government programs that fail to achieve their purpose can be held accountable and, perhaps, be reformed or ended as a consequence.

The fiscal year 2003 budget for Army Civil Works provides funding to continue the development and restoration of the Nation's water and related resources, the operation and maintenance of existing navigation, flood damage reduction, and multiple-purpose projects, the protection of the Nation's regulated waters and wetlands, and the cleanup of sites contaminated as a result of the Nation's early efforts to develop atomic weapons. The budget includes new appropriations of $4.29 billion. The new appropriations are expected to result in fiscal year 2003 outlays of approximately $4.47 billion.

Three legislative initiatives support the fiscal year 2003 Army Civil Works budget. First, the Administration is proposing government-wide legislation under which the full costs for Federal retirees will be allocated to agency programs instead of the Office of Personnel Management. Under this proposal, $115 million of the $4.29 billion represents retiree costs not previously borne by the Army Civil Works program. Second, the Administration is proposing legislation under which three Federal power marketing administrations will finance hydropower operation and maintenance costs directly, in a manner similar to the mechanism currently used by the Bonneville Power Administration in the Pacific Northwest. This proposal is described below in greater detail.

Third, the Administration is proposing legislation to increase fees at Corps of Engineers lakes and recreation areas and to extend the existing recreation fee demonstration program. This proposal also is described below in greater detail.

The new appropriations, including new funding for retiree costs, will derive an estimated $3.258 billion from the general fund, $764 million from the Harbor Maintenance Trust Fund, $85 million from the Inland Waterways Trust Fund, $34 million from Special Recreation User Fees, and $149 million from three Federal power marketing administrations for hydropower operation and maintenance costs.

Other program funding is estimated at $464 million. This total includes $118 million transferred from the Bonneville Power Administration for operation and maintenance of hydropower facilities in the Pacific Northwest and $272 million contributed by non-Federal interests.

The budget represents an increase from the fiscal year 2002 budget of 7 percent and a decrease from fiscal year 2002 appropriations of 7 percent, including adjustments for the new retiree costs and excluding emergency supplemental appropriations and inflation adjustments.

Priority Missions

PROGRAM HIGHLIGHTS

The budget gives priority to ongoing studies, projects and programs that provide substantial benefits under the principal missions of the Civil Works program, which are commercial navigation, flood damage reduction (including coastal storm and hurricane damage reduction), and environmental restoration. No funds are provided for studies and projects that carry out non-traditional missions that in the view of the Administration should remain the responsibility of non-Federal interests or other Federal agencies, such as wastewater treatment, and municipal and industrial water supply treatment and distribution. In addition, the budget does not fund individual studies and projects that are inconsistent with established policies governing the applicable missions.

Emphasis on Ongoing, Budgeted Construction Projects

The Corps estimates that the balance of funding needed to complete all active construction projects and authorized and unauthorized projects in pre-construction engineering and design is about $44 billion. Of this, about $21 billion is necessary to complete the flood control, navigation and environmental restoration projects funded in the budget in the Corps Construction, General program. This represents 12 years of funding at the level enacted in fiscal year 2002 just to finish funding ongoing Construction, General projects supported in the budget.

More projects have been started than can be prosecuted efficiently, given the limitations on available funding. The budget directs funding to ongoing projects that have been determined to be consistent with policy, in order to quickly realize the benefits that those projects are designed to provide.

Shore Protection

The budget treats projects to protect coastal structures from hurricane and storm damage on a par with other types of flood damage reduction projects. The Administration continues to be concerned about the appropriate level of non-Federal cost sharing for shore protection projects, and is considering proposing legislation to adjust Federal and non-Federal cost shares.

Direct Financing of Hydropower Operation and Maintenance Costs

Historically, each year the Army Civil Works program has financed the operation and maintenance costs of Corps of Engineers hydroelectric facilities, and in the next year Federal power marketing agencies have repaid the Treasury for these costs from the revenues provided by ratepayers. The exception has been in the Pacific Northwest, where under section 2406 of the National Energy Policy Act of 1992, Public Law 102-486, the Bonneville Power Administration has directly financed the

costs of operating and maintaining the Corps hydroelectric facilities from which it receives power.

In 1999, the General Accounting Office found that the Corps hydropower facilities are twice as likely to experience "unplanned outages" as private sector facilities, because the Corps does not always have funds for maintenance and repairs when needed. Corps facilities experience unplanned outages approximately 3.7 percent of the time, compared to the industry average of 2.3 percent.

To address this problem, the budget proposes that the Southeastern Power Administration, the Southwestern Power Administration, and the Western Area Power Administration finance hydropower directly, in a manner similar to the mechanism used by Bonneville. The budget contemplates that these power marketing administrations will make those hydropower operation and maintenance investments that they believe are justified in order to provide economical, reliable hydropower to their customers and that, as a consequence, unplanned outages will decline over time to levels comparable to the industry average.

Protection of Critical Facilities

The Administration sought $139 million in emergency supplemental appropriations to the Operation and Maintenance, General account for the protection of critical Civil Works facilities from terrorist attack. Congress provided these funds in Division B of the fiscal year 2002 Department of Defense appropriations act. The funds will be used to pay recurring facility protection costs and one-time costs to assess the vulnerability of each facility and to initiate "hard" protection of critical facilities. The Corps expects to complete its facility assessments by the end of April 2002.

The Administration is continuing its commitment to facility protection in fiscal year 2003. The budget includes $65 million for recurring security costs ($64 million in Operation and Maintenance, General and $1 million in Flood Control, Mississippi River and Tributaries), not including new retiree costs). The Administration will evaluate the need for additional security measures based on the conclusions of the facility assessments.

Fee Increases at Recreation Areas and Lakes

The Army is undertaking efforts to increase day use fees, camping fees, annual pass fees, and special use permit fees under existing authority. These efforts are expected to help increase annual recreation user fee receipts to $38 million in fiscal year 2002 from less than $34 million in fiscal year 2001. In addition, under proposed legislation, recreation user fees and shoreline permit fees increases would be phased in through fiscal year 2006. The legislation also will extend the existing demonstration program under which recreation user fee receipts over $34 million per year are automatically available to the Corps to spend on operation, maintenance, and improvement of its recreation facilities. We project that annual recreation and shoreline permit fee receipts will grow by $6 million in fiscal year 2003 to $44 million, and an additional $5 million per year in fiscal year 2004 through fiscal year 2006, to a total of $59 million in 2006.

General Investigations

DISCUSSION OF APPROPRIATION ACCOUNTS

The budget for the Civil Works study program is $108 million, including $5 million for new retiree costs. This is a significant reduction from funding levels in the budgets and appropriations for previous years. The reduced funding level for General Investigations is intended to slow the rate at which studies and pre-construction engineering and design efforts are carried out and completed and the rate at which projects with completed studies are added to the existing construction backlog. Cost-sharing sponsors, who are being asked to invest in studies and design, expect timely construction once studies and design are completed and the projects are authorized. This reduced funding level reflects the Administration's priority of completing policy-consistent projects that are under construction before initiating new work.

No new study starts are included in the budget. However, to the extent allowed within available funding, policy-consistent studies that are under way will continue to move seamlessly from the reconnaissance phase to the feasibility phase and from the feasibility phase to pre-construction engineering and design as they receive the necessary levels of review and approval within the Corps and the Army. Coordination, technical assistance, and research activities also will be continued, including continued Army participation in the National Estuaries Council.