Filed under authority of the order of the Senate of August 2 (legislative day, January 3), 1989

Mr. HOLLINGS, from the Committee on Commerce, Science, and Transportation, submitted the following

REPORT

[To accompany H.R. 1486]

The Committee on Commerce, Science, and Transportation, to which was referred the bill (H.R. 1486) to authorize appropriations for fiscal year 1990 for the Maritime Administration, and for other purposes, having considered the same reports favorably thereon with an amendment in the nature of a substitute and recommends that the bill do pass.

PURPOSE OF THE LEGISLATION

The bill as reported would authorize funds for the activities of the Maritime Administration (MarAd) and make changes in the operations of programs within that administration.

BACKGROUND AND NEEDS

MarAd is responsible for all federally-funded promotional activities to maintain and enhance the U.S. merchant marine. The principle activities and programs conducted by MarAd include the Operating Differential Subsidy (ODS) program; Research and Development; Manpower, Education and Training; Operating Programs; National Security Support Capabilities; and the Ocean Freight Differential program.

In preparing the reported bill, the Committee reviewed a fiscal year (FY) 1990 budget proposal from the administration, as well as a proposed authorization measure. The administration's budget re

Key: [ J's Proposed reform legislation, non-add. ( )'s Negative amounts. The appropriation request is partly from transfer of $2,250,000 from the expired Ship Construction account for one time costs of major USMMA repairs and start-up costs for ship sharing ($400,000).

The administration also proposed changes in the operations of programs within MarAd. The first proposal would eliminate the Student Incentive Program (SIP), which provides Federal support to students at State maritime academies. In place of the SIP payments, the administration would provide direct payments to the maritime institutions.

A second proposal would require that all graduates of the State institutions pass the Coast Guard licensing exam and apply for

commissions in the U.S. Naval Reserve. Also, the legislation proposed by the administration would institute a ship sharing program among the State academies in place of the current system in which each school maintains its own dedicated training ship.

Finally, the administration requested no funding to support or conduct research and development activities. Despite a consensus among the ship building and operating industries on the need to conduct research and development activities and the inability within those industries to fund such activities entirely from private sources, the administration remains opposed to the expenditure of Federal funds for this type of activity. In the absence of a direct legislative mandate, there would be no research and development activities other than the ongoing "technical studies," in FY 1990. MarAd has been operating without an authorization enacted into law since 1985. H.R. 1486, as reported would provide the statutory and budgetary direction to MarAd that is necessary to continue its operation in FY 1990.

LEGISLATIVE HISTORY

H.R. 1486 was approved by the House of Representatives on May 2, 1989, and referred to the Committee on May 3, 1989. On June 1, 1989, the Subcommittee on Merchant Marine conducted a hearing to consider this legislation. The Subcommittee received testimony from administration witnesses and outside parties. On June 20, 1989, the Committee met in open executive session and without objection ordered H.R. 1486 reported with an amendment in the nature of a substitute.

SUMMARY OF MAJOR PROVISIONS

As reported, H.R. 1486 would:

1. Authorize appropriations of any amounts that are necessary to liquidate obligations under ODS contracts;

2. Authorize to be appropriated additional sums for research and development activities; manpower, education, and training programs, including funds for the U.S. Maritime Academy and the State maritime academies; and national security support programs;

3. Change some of the requirements of the SIP programs for the State maritime academies; prohibit any ship sharing programs among those institutions pending congressional review; provide funding for the Great Lakes Maritime Academy; and initiate a study on various proposals to provide training opportunities for students at State maritime academies;

4. Clarify the existing relationship between the Department of Defense and the Department of Transportation (DOT) with respect to the National Defense Reserve Fleet (NDRF) and limit authority of the Secretary of Transportation (Secretary) to require bonding from contractors who repair or maintain that fleet; and

5. Authorize the Secretary to designate National Maritime Enhancement Institutes, and authorize grants for the operation of such Institutes.

ESTIMATED COSTS

In accordance with paragraph 11(a) of rule XXVI of the Standing rules of the Senate and section 403 of the Congressional Budget Act of 1974, the Committee provides the following cost estimate, prepared by the Congressional Budget Office:

Hon. EARNEST F. HOLLINGS,

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, July 21, 1989.

Chairman, Committee on Commerce, Science, and Transportation, U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the attached cost estimate for H.R. 1486, an act to authorize appropriations for fiscal year 1990 for the Maritime Administration, and for other purposes.

If you wish further details on this estimate, we will be pleased to provide them.

Sincerely,

ROBERT D. REISCHAUER,

Director.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

1. Bill number: H.R. 1486.

2. Bill title: An act to authorize appropriations for fiscal year 1990 for the Maritime Administration, and for other purposes.

3. Bill status: As ordered reported by the senate Committee on Commerce, Science and Transportation, June 20, 1989.

4. Bill purpose: H.R. 1486 would authorize fiscal year 1990 appropriations to the Maritime Administration (MARAD). Specific funding levels would be provided for research and development ($3.75 million) and for operations and training activities ($59.17 million). In addition, the act would authorize the appropriation of whatever sums are necessary for national security programs (including the Ready Reserve Force) and to liquidate 1990 obligations under operating differential subsidy contracts.

Section 2 of the act would amend provisions in the Merchant Marine Act relating to Student Incentive Payments (SIPs). The amendment is intended to reduce federal losses incurred when students drop out of the program before graduation but after stipends have been awarded.

Section 7 would permit the Secretary of Transportation to designate eligible nonprofit institutes of higher learning as "national maritime enhancement institutes." The Secretary would be permitted to make research grants to the new institutes from any funds made available in appropriation acts. No sums would be authorized specifically for this purpose.

H.R. 1486 would also require new studies and would amend or reauthorize various sections of the Merchant Marine Act.

5. Estimated cost to the Federal Government:

The costs of this act fall within budget function 400.

Basis of estimate: For purposes of this analysis, it is assumed that the entire estimated authorization level will be appropriated for fiscal year 1990. Authorization levels for research and development, ongoing operations, and educational programs are those specified in Section 1. For national security programs, authorizations have been estimated at baseline levels for 1990-i.e., the 1989 levels adjusted for inflation. These amounts include $115 million for the Ready Reserve Force and $8 million for other related activities. (The President's budget for 1990 includes $247 million for these purposes.) Outlays have been estimated on the basis of historical spending patterns for these programs. No sums for liquidation of operating differential subsidy obligations have been included as part of the authorization level or estimated outlays in the above table because such spending is the result of previously provided contract authority.

Section 2 would restructure the SIP program to reduce losses incurred when state maritime cadets who have received the $1,200 annul stipend drop out of the program before they have signed any commitment to the federal government. If participation levels were reduced to reflect the proposed change, potential savings would be between $0.5 million and $1 million a year at current program levels, but much less in the first two or three years. However, any savings realized would depend on annual appropriations actions; if these are not reduced to reflect the lower requirements, no savings would be realized. No budget impact has been included in this estimate for any potential savings under Section 2, because the bill specifies the authorization level for this program.

Other provisions of this act are expected to have no significant impact on the federal budget, including the five-year reauthorization of the war risk insurance program now set to expire on June 30, 1990.

6. Estimated cost to State and local governments: None.

7. Estimate comparison: None.

8. Previous CBO estimate: On April 25, 1989, CBO prepared an estimate for H.R. 1486, as ordered reported by the House Committee on merchant marine and Fisheries on April 18, 1989. For provisions that are the same in both bills, our present estimates are identical to those contained in the earlier submission. Differences in estimated authorization levels and outlays reflect the Senate bill's indefinite authorization for national security programs, in contrast to the House's specific authorizations. This estimate assumes authorizations for those programs equal to CBO's February baseline, which is considerably lower than the house's authorizations.

9. Estimate prepared by: Deborah Reis.