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savings. Most activities, including tobacco, diabetes and arthritis prevention, are funded at essentially the same level as last year. There are nominal reductions targeted at internal CDC management improvements.

The Fiscal Year 2003 funding includes increases of $14 million in cancer prevention and health promotion activities for,

• Breast and Cervical Cancer Screening: $203 million, an increase of +$9 million, to provide 29,000 mlore mammographies and pap smears; and

• Healthy Communities: $5 million for a new public education campaign to promote exercise and physical activity, with a focus on families.

The $71 million in program and administrative savings in the Fiscal Year 2003 funding reductions are for discontinuing the Youth Media Campaign (a savings of $68 million) and management reforms that reflect consolidation of certain job functions and workplace restructuring (a savings of $3 million). With regard to the Youth Media Campaign, we note that:

• Congress reduced this program in Fiscal Year 2002 from $125 million to $68 million;

The Fiscal Year 2003 budget proposes eliminating the remaining funds;

Because the initial projects planned for this major media activity have not yet begun, we are hesitant to invest future resources until there is a full assessment of the benefit and effectiveness of this approach; and

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The paid advertising campaign will begin in May 2002; Campaign events in fifteen cities will begin in October 2002.

Question: "Mr. Secretary, TANF reauthorization and welfare reform is one of the major issues the Senate and your agency will have to address this year. I believe your experiences and record in this area as Governor will prove a valuable asset during the debate. At the same time, I think it is important to note that not every Governor is afforded the same opportunities that you were. I still remember what you said last year during your confirmation hearing that welfare reform "can't be done on the cheap", yet that is what the current law expects many of our States to do-welfare reform on the cheap.

"To the point, you received more than three times the TANF funding per poor person than my Governor received. I would challenge anyone to prove that welfare recipients are three times as poor in Wisconsin as they are in South Carolina. Mr. Secretary, do you feel that [sic] is fair and just for States like South Carolina to receive a fraction of the TANF funding than [sic] States like Wisconsin, New York, California, and Connecticut receive?"

Answer: As Congress enacted the welfare reform legislation, the TANF block grant amount for each State was based on the highest Federal dollars it received for the AFDC, Emergency Assistance, Job Opportunities and Basic Skills (JOBS) and related child care programs in FYs 1992-1994 (annual average), FY 1994 (adjusted), or FY 1995 (estimated). This funding distribution among States closely relates to the spending patterns that States lexercised under the former, matching AFDC program, because these benefits largely dwarf other prior program funding. Under AFDC, in FY1994 State expenditures for benefits were Federally matched from 50 to 79 percent, based on the inverse ratio of average per capita income of a State. To illustrate, in that year, South Carolina had a matching rate of 71.08 percent, Wisconsin's was 60.47 percent and New York, California and Connecticut were all matched at 50 percent. Stated differently, for each dollar of State investment in FY 1994, South Carolina received $2.46, Wisconsin received $1.53 and the others each received one Federal dollar. By providing a higher match rate, the formula attempted to compensate for a reduced ability of low per capita income States to raise funds.

But, as you have noted, the differential matching rate did not eliminate the historical disparity in State spending per eligible child. Under the funding formula designed by Congress and widely supported by Governors, the prior, disparate spending pattern of each State determines the amount of the annual block grant.

Congress made an effort to address these disparities in funding per poor child among States through supplemental grants to States that had both substantial population growth and low per capita welfare spending. $800 million was available for fiscal years 1998 through 2001. But, South Carolina failed to qualify for supplemental grant funding.

In our reauthorization listening sessions with States and in response to our request for written comments, there were very few comments recommending a change in the current funding formula. Both our budget and the President's recently released welfare reform proposal retains the existing block grant formula and asks Congress to restore and fund supplemental grants at $319 million annually. We

want to work closely with you and other Members on the reauthorization to promote work and strengthen families working toward independence.


Question: What are your views on the importance of the FDA consolidation and the Administration's commitment to this project?

Answer: FDA consolidation at the White Oak, Maryland site remains a high priority for the Administration. FDA Headquarters currently occupies approximately 39 buildings in more than 16 locations. It is important for an Agency, entrusted with protecting the Nation's food supply and approving pharmaceuticals, biologic products and medical devices, to have modern facilities and be able to work effectively and efficiently.

Assistant Secretary for Administration and Management, Edward Sontag, has already attended one of the local community's Labquest meetings at White Oak and has seen first hand the local support the FDA consolidation project has gained. Hopefully, any further delays to this important project can be minimized.

Question: FDA's Fiscal Year 2003 budget justification includes $159 million for counter terrorism which would fund almost 900 new employees. I am advised that for those assigned to the Washington area, one possibility for housing them would be to quickly renovate the existing main building at White Oak, which was formerly the Navy headquarters building. If funds could be made available for that purpose, would HHS support such an initiative?

Answer: We understand from GSA, that in the revised master plan for White Oak, Building One (the existing main building) takes on a more prominent role. Building One has been designated as the "front door" of the FDA campus. This structure would be revitalized and an architectural forecourt, consisting of two flanking buildings and a circular pedestrian plaza, would be established. Providing funds for Building One's renovation would be beneficial to the long-term development of the site, and could accommodate increased review staff and new counter terrorism personnel being employed by FDA's Center for Drug Evaluation and Research. The new FDA counter terrorism employees are spread among the headquarters organizations and the Office of Regulatory Affairs; therefore co-locating all of these new employees in a single building may not be the most efficient deployment of these personnel.




Washington, D.C.

The committee met, pursuant to notice, at 10:01 a.m., in room SD-608, Dirksen Senate Office Building, Hon. Kent Conrad (chairman of the committee) presiding.

Present: Senators Conrad, Murray, Domenici, and Bond.

Staff Present: Mary Ann Naylor, staff director; Bonnie Galvin, analyst; Sarah Kuehl, analyst; and Shelley Amdur, senior analyst. For the minority: G. William Hoagland, staff director; Margaret Stewart, senior analyst; James O'Keeffe, senior analyst; and Walter Hearne, junior analyst.

OPENING STATEMENT OF CHAIRMAN CONRAD Chairman CONRAD. The committee will come to order.

We want to welcome the witnesses who are here with us today to share their expertise. Today we are going to look at the President's budget and its impact on three major areas of the Federal Government: highway and bridge-building programs, the construction projects of the Corps of Engineers, and education.

We have two panels this morning, and, unfortunately, the Senate is scheduled to vote at 10 o'clock. That vote is now underway, but my intention is to make my opening statement, and then recess briefly so we can vote. I apologize to the witnesses, but this is part of what has happened in the Senate when votes are scheduled at the last moment.

I would just start with this chart. We have all said what a difference a year makes. Last year we were all told that we were going to see budget surpluses as far as the eye can see, and now we see budget deficits as far as the eye can see, certainly trust fund deficits that continue throughout the next decade. And there are very large deficits.

Let's go to the next chart. Last year we were told that outside the trust funds we would have some $2.7 trillion of surpluses over the next decade. Now we see, instead of surpluses outside the trust funds, deficits of $2.2 trillion.

That means $2.2 trillion will be coming out of the trust funds of Social Security and Medicare. Many of us think that is unwise given the fact the baby boomers start to retire in just 6 years. But that is the factual circumstance we face.

The areas that we are going to examine today include the construction programs for highways and bridges. We see in the President's budget about a 27 percent cut from last year. Last year we provided roughly $32 billion. This budget will be roughly $23 billion, so about a $9 billion cut-actually, something a little bit less than that. It is a 27 percent reduction, and we will go into some of the reasons for that.

Earlier this month, the OMB Director said that these proposed highway cuts were not a policy decision, but the results of a simple calculation based on the law. The fact is there is nothing in TEA21 and nothing in the Budget Act that prevents the President or the Congress from providing additional funding for the highway and bridge program beyond the funding levels that are guaranteed in TEA-21.

We can add, the President could have added, so that we would be reducing the level of cut that is before us. I am concerned that the President's proposed highway and bridge-building budgets will force a loss of over 300,000 jobs across the country, just as the economy is starting to rebound.

In addition, the President's budget will significantly reduce Federal funding for highway construction and maintenance at the same time as nearly 40 States are being forced to scale back their State budgets in light of their constitutional requirements to run balanced budgets.

The second area that we will examine is how the President's budget would reduce the Army Corps of Engineers' ability to carry out and complete crucial water and flood control projects across the country. Within the total for the Army Corps, the budget provides $1.4 billion for the primary project construction account, and this is roughly $300 million less, or an 18 percent cut from the 2002 enacted level of $1.7 billion.

Now, what does that mean? For people in the community of Grand Forks, North Dakota, in my home State, it means they will have to wait an additional 2 to 3 years to be safe from floods. That is not a result any of us wants, and we need to work together to see if we can't do better.

I am afraid that my State's story is not unique. Projects from Texas to Missouri to Washington State will also be funded substantially below what is needed to get the job done in a cost-efficient way. Not only are projects being delayed, but in order to stay within the proposed 2003 funding level, the Corps may actually have to terminate ongoing construction contracts at a cost of up to $190 million to taxpayers.

So, again, we have got to find a way to work together here to address these challenges.

In education, which is the third area that we will examine today, the President's education budget promises to leave no child behind. At a time when more is being demanded from our schools, more accountability, more testing, better results, I was particularly disappointed to find that just one month after the President signed

into law the landmark education reform bill, No Child Left Behind, his budget actually cuts funding for these programs by $90 million. Again, I want to thank our witnesses for being here to testify. I will go to my colleague, Senator Bond, for any opening statement that he would like to make.


Senator BOND. Well, thank you very much, Mr. Chairman, and welcome to our witnesses today.

Mr. Chairman, I would agree with you on the first part of your macroeconomic analysis. It looked a year ago that we were going to be running surpluses. But, frankly, we have now found that the recession that started back early in the year 2000 has continued. Certainly it took an even greater dip with the tragedies of September 11th. And it is clear that we are going to be running a deficit. But when we are in a recession like this, I think that for the long-term health of our trust funds, the Social Security fund and everything else, we have got to restore economic growth. Economic growth is far more important right now than trying to be Herbert Hoover and run a surplus when we are in a recession.

You and I, Mr. Chairman, started out with the Deficit Reduction Caucus when we first got here in 1987, a lonely little group, and all of a sudden we found that we were getting spending under control. We happened to disagree a little bit on how we got there. You think it was tax increases; I think it was budget cuts. But we got to where we wanted to be.

Now, with an economic downturn, it is time to put our foot back on the accelerator, not the brake. And I share the concerns-I know Senator Domenici is going to talk about highway funding. I was very proud in TEA-21 to be the author with the late Senator John Chafee. We call it the Bond-Chafee proposal in Missouri. I guess elsewhere it is called the Chafee-Bond proposal in the other 49 States and Washington. It said that what we get in ought to be paid out, and we have been for many years suffering from deficits in that trust fund.

Now, because of the wild swings, we potentially suffer significant disruption in highway construction. Frankly, I can think of nothing more important to helping get our economy to grow than to continue with investments in highways and water transportation. And that brings me to Secretary Parker. I was going to say some really nasty things about this budget, and I felt bad about it, until I was told by my staff that Secretary Parker in his previous transmogrification had similar and stronger things to say when totally ineffective and inadequate budgets were proposed for the Corps.

So I am emboldened by that, Mr. Secretary. I was just going to lay out some questions, and you can think about them. I don't think you would be permitted to answer them. But knowing how injurious the budget requested by OMB is to the Corps of Engineers, if Congress actually passed the Administration's budget for the Corps-and I guarantee you it will not-would you recommend the President veto it? You might think about that one.

And let me ask you to consider some things. I think you know, but I don't think the people at OMB know. Am I wrong to say the

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