WEDNESDAY, APRIL 13, 1988. DEPARTMENTAL MANAGEMENT WITNESSES BRUCE M. CARNES, DEPUTY UNDER SECRETARY FOR PLANNING, BUDGET AND EVALUATION LeGREE S. DANIELS, ASSISTANT SECRETARY FOR CIVIL RIGHTS JAMES B. THOMAS, JR., INSPECTOR GENERAL THOMAS P. SKELLY, DIRECTOR, BUDGET SYSTEMS DIVISION, BUDGET SERVICE, OFFICE OF PLANNING, BUDGET AND EVALUATION Mr. NATCHER. At this time we take up the budget request for the fiscal year 1989 for Departmental Management of the Department of Education. Dr. Carnes, as you know, and those sitting at the table with you know, we completed vocational and adult education this morning. We are delighted to have you ladies and gentlemen back before the committee. Before you give us your statement, tell us who you have with you there at the table. Mr. CARNES. Thank you very much, Mr. Chairman. As always, it is a great pleasure for me to appear before this committee. On my immediate left I would like to present to you LeGree Daniels who is our Assistant Secretary for Civil Rights. To her left, Jim Thomas, who is, I am sure, familiar to you, our Inspector General, and to my right Tom Skelly, Director of the Budget Systems Division in my office. Mr. Chairman, Ms. Daniels, Mr. Thomas and I each have statements which we would appreciate having included in the record. Mr. NATCHER. They will all be included in the record. IRS OFFSET Mr. CARNES. I am going to dispense with opening statements then. If you will just give me one second, I would like to revisit a point that we brought up yesterday in our hearing on IRS offset. We are hoping to get $133,000,000 from the IRS offset in 1989, but the authority for us to do that expires this June 30. We need to have that authority extended by the end of this summer or we are not going to be able to initiate the 1989 offset. A consequence of that will be that we will have to have additional appropriations to meet expenses in the student aid program. I mention it only because although it is included in a couple of pieces of legislation up here, it seems pretty stalled. With that I think, Mr. Chairman, I have nothing more to add, and we would welcome your questions. Mr. NATCHER. Thank you, Dr. Carnes. [The prepared statement of Mr. Carnes and attachments follow:] DEPARTMENT OF EDUCATION Statement by Bruce M. Carnes Deputy Under Secretary for Planning, Budget and Evaluation on Departmental Management Mr. Chairman and Members of the Committee: I am pleased to appear before you to present our 1989 budget request for Departmental Management. The Department of Education administers some 180 major Federal education programs which total over $20 billion annually and which span virtually every level and area of education. Large formula grant programs, such as Chapters 1 and 2, Education for the Handicapped, Vocational Education, Impact Aid, and Drug-Free Schools and Communities, affect almost all our 17,000 local education agencies and 46 million elementary and secondary students. Student aid programs, including Pell Grants, Guaranteed Student Loans, WorkStudy and Graduate Fellowships impact on 6 million college students, over 8,000 postsecondary institutions, including proprietary schools, and nearly 13,000 commercial lending institutions. Almost 3 million adults are served under the Adult Education Act, and another one million adults who are disabled receive vocational rehabilitation. The Library Services and Construction Act over the years has leveraged support for most of our Nation's public libraries. A variety of discretionary programs address such diverse areas as teacher training, research and development education statistics, magnet schools, bilingual education, school dropouts, homeless children and adults, international education, and higher education facilities contruction. In addition to adminstering these programs, the Department is responsible for enforcing numerous civil rights laws affecting the recipients of Federal aid and for conducting audits and investigations. The fiscal year 1989 costs associated with the Department's administrative responsibilities total $314.7 million, or about 1.5 percent of the Department's total budget request of $21.2 billion. Overview We are requesting $255.4 million for Program Administration, an increase of $15.0 million above the 1988 operating level; $41.3 million for the Office for Civil Rights, an increase of $965,000; and, $17.9 million for the Office of the Inspector General, an increase of $540,000 above the 1988 operating level. In Our request supports an employment level of 4,439 full-time equivalents (FTE), a reduction of 6 from our 1988 ceiling. addition, 50 FTE will be funded by the Indian Education appropriation, bringing the total for the Department in 1989 to 4,489 FTE. The FTE levels for each office remain constant with one exception: a decrease of 6 FTE in the Office of Management, reflecting the completion of the transfer of the Regional Office Facilities Engineering and Construction function to the Department of Health and Human Services. The number and complexity of our programs have grown dramatically in recent years and appear likely to grow even more if new programs in H.R. 5 are funded. However, we do not believe we need additional funds and staff to administer programs already funded in 1988. During the past several years, we have been able to administer new programs such as Dropout Prevention, Drug-Free Schools and Communities Education, Magnet Schools, and Science and Mathematics, without additional resources, by setting priorities, managing effectively, and increasing the productivity of employees, particularly through increased use of automated data processing. At this time, I will address only the Program Administration portion of our Departmental Management request. Separate testimony will be provided for the Office for Civil Rights and the Office of the Inspector General. Program Administration In 1989, over 57 percent of our Program Administration request of $255.4 million is budgeted for employee salaries and benefits, 24 percent for automated data processing expenses associated primarily with the student financial assistance programs and other contracts for Departmental services, and 10 percent for rent, communications, and utilities expenses. Other items, such as travel, supplies and equipment, account for the remaining 9 percent of the budget. Of our requested net increase of $15 million for 1989, approximately 10 percent reflects the combined full-year effect of the January 1988 pay raise, the proposed January 1989 2 percent pay raise, and the effects both pay raises have on the new Federal Employee Retirement System (FERS). FERS costs are estimated to increase by 2 percent in FY 1989 to $6.2 million. Almost 40 percent of our requested increase--the $5.6 million proposed for later transmittal--is contingent upon enactment of proposed legislation for the National Student Loan Data System. The System is not needed for program management or research purposes, and is only justifiable if it can be used as a default prevention tool. Our proposed legislative changes would make the Data System an effective means for curbing default and repayment abuses under the Federal student aid programs. The proposed changes will allow us to require that guaranty agencies, lenders, and institutions verify information before making loans, thereby eliminating loans to borrowers who have either defaulted on prior loans or exceeded loan limits. A properly constituted National Student Loan Data System can be an effective tool in addressing the growing costs of defaults that are eating up $1.6 billion a year in funds that could be used for other education priorities. Without these proposed changes, however, the Department will not request funds for implementing the System. Approximately 50 percent of our requested FY 1989 increase for Program Administration is for fixed costs and expanded services, offset by a number of built-in and program decreases. A $10.5 million increase, for example, is budgeted for ADP services to finance fully both GSL and Pell Grant data processing contracts under the Program Administration account. Likewise, we propose to fund all field reader costs under this account in FY 1989, requiring a $1.0 million increase. Some of these costs have previously been funded on a reimbursable basis from program accounts with authority for administrative support. These increases are partially offset by a rent reduction of $1.7 million through our space consolidation efforts in 1987 and 1988. Another decrease of $2.6 million will result from funding the second cycle of the Student Aid Survey out of the Education Research and Statistics program account. Student Loan Default Reduction and Collection Initiatives In addition to an estimated $5.6 million in our 1989 budget for the National Student Loan Data System, we are taking other steps in 1988 and 1989 to reduce defaults and collect more on the defaults that do occur. Our efforts include: Improving and Strengthening Program Monitoring. In FY 1988, we are redirecting travel funds from areas of lower priority to increase monitoring of the guaranty agencies, lenders and institutions participating in the student aid programs. This is especially critical in the case of proprietary institutions which have expanded their program participation as well as increased their default rates. If FY 1989, we are requesting an increase of 30 percent, or We are also giving priority to hiring a larger student financial assistance monitoring staff. We believe we can accomplish this without increasing our overall FTE ceiling by not filling less critical vacancies. 0 Providing More Training Workshops and Materials with emphasis on preventing fraud, abuse and default. For instance, in 1988, we are providing training in student aid program administration for student aid program administrators and fiscal officers by using case studies from the programs. Our FY 1989 request includes $1.2 million to provide training and materials on due diligence and debt counseling for State agencies and guaranty agencies. In addition, in 1988, we will be conducting a default reduction workshop for historically black colleges and universities to provide guidance and solutions for dealing with default problems. This workshop will highlight effective GSL management techniques and cover recent program changes designed to prevent defaults. Reassessing Our Debt Collection Methods. In order to continue Continuing the Federal Employee Salary Offset. The second round 0 Extending the Authority for the IRS Tax Refund Offset. The Debt Collection and Other Management Accomplishments The Department has also recorded some impressive debt Our private sector debt collection contractors increased receipts in FY 1987. Some $60 million in outstanding student aid program debts was collected. We project that another $86 million will be collected by private contractors in FY 1988. In 1987, we collected $137 million in student loan defaults through the IRS offset of debtors' income tax refunds. Over 277,000 defaulters had refunds withheld. The total collected through FY 1987 was $259 million. |