Segment 2 Of 2     Previous Hearing Segment(1)

SPEAKERS       CONTENTS       INSERTS    
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THE COAST GUARD AND FEDERAL MARITIME COMMISSION FISCAL YEAR 2000 BUDGETS

Thursday, February 11, 1999
House of Representatives
Subcommittee on Coast Guard and Maritime Transportation
Committee on Transportation and Infrastructure
Washington, D.C.

    The subcommittee met, pursuant to notice, at 2:20 p.m. in room 2325, Rayburn House Office Building, Hon. Wayne T. Gilchrest [chairman of the subcommittee] presiding.

    Mr. GILCHREST. The Subcommittee on Coast Guard and Maritime Issues will come to order. I welcome all the people here this afternoon that will give testimony.
    We look forward to working with the Coast Guard again in this term of Congress. We appreciate the fact that the Administration has requested funding for a number of issues that we have had concerns about over the years.
    We welcome the Federal Maritime Commission here this afternoon. We look forward to their testimony.
    We look forward to asking a number of questions about a number of items related to the Coast Guard's budget, in particular the drug interdiction policy and the supplemental dollars that were infused into the system at the end of the last term.
    We would like to become familiar with the Federal Maritime Commission's ability to deal with the new ocean shipping reforms that are underway and any concerns that they have. We would also like to assure that the funding levels are sufficient enough so that they can adequately meet their new responsibilities.
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    We will have a number of questions on some of the tragedies with fishing fleets on both coasts and the incident that is now ongoing off the coast of Mr. DeFazio's district. So, Admiral and Master Chief, we look forward to your testimony and a couple of good years with the Coast Guard.
    And I will yield to the gentleman from Oregon.
    Mr. DEFAZIO. Well, thank you, Mr. Chairman.
    Mr. Chairman, I have nothing to add to your brilliant opening statement other than I am pleased to be here and learning these issues and will express concerns or questions as we go along.
    I would ask leave, if the Commandant could perhaps, before he gets into his prepared statement and the substance of the hearing, give us a couple minutes on the ongoing problems just north of Coos Bay in the heart of my district in Oregon.
    Mr. GILCHREST. Without objection, we certainly would like to do that. This is the one committee where the representation of quintessential bipartisanship is alive and well and thriving.
    Admiral LOY. To our great advantage, sir.
    [Laughter.]
    Mr. GILCHREST. Yes, sir.
    Admiral Loy?
TESTIMONY OF ADMIRAL JAMES M. LOY, COMMANDANT, U.S. COAST GUARD; AND MASTER CHIEF PETTY OFFICER OF THE COAST GUARD VINCENT PATTON, III

    Admiral LOY. Thank you, Mr. Chairman.
    Just quickly, I just got off the phone within the past hour with Admiral Paul Blayney, who is the 13th District Commander. I know Mr. DeFazio was able to walk the beach here just 2 days ago and at great risk of having him know more about this than I, I will at least try to update you with the latest.
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    This is a Panamanian-flagged, Japanese-owned, Filipino-crewed, wood chip bulk carrier, which initially was at anchor in the designated anchorages off Coos Bay, anticipating entry into port. She picked up her anchor with every intention of meeting the pilot vessel for that entry and was unable, because of the rollers coming in to the beach and the extreme winds that she attempted to get underway in, to keep herself from drifting aground in those weather conditions.
    So, we have initiated an investigation which is always the case immediately after an incident like this. One of the things that is very much on my mind is the prevention end of things. How did this happen and what could or would or should have been in place to keep it from happening?
    At the moment, however, we have not only that investigatory effort to find out those kind of very, very important questions and the answer to them, but the hard reality that in fact it is aground with about 360,000 gallons of fuel oil and in the midst of breaking up. I do not think there is any easier way to put it. We are now seeing significant cracking in hull plating. We are seeing the engine room compartment begin to separate from the cargo compartment.
    So, the decision was taken yesterday by the unified command and the regional response team, which is a group of folks put together nationally, as you know, Mr. Chairman, to deal with these kinds of issues. The National Response Plan and its area contingency plan and all of those wonderful things that we designed and built in the aftermath of OPA 90 are playing out very, very real here.
    A terrific consensus, it appears to me, having spoken with Admiral Blayney, among the Federal and the State and the responsible party. The shipping company, which is the responsible party, has bellied up to the bar, if you will, from the very beginning, has participated in all these decisions, and has been terrifically supportive throughout.
    So, the challenge at the moment really came down to two things: Was there any way at all of getting this oil off the vessel, and what are you going to do if the answer to that first question is no?
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    We have had a couple of tools in the quiver of oil spill issues over the course of the recent past by remediation agents and in situ burning. The decision was taken yesterday with great consensus, including the Governor of Oregon and DEQ offices within the State, to attempt to ignite the fuel and see if using literally the hull of the vessel as the encapsulating boundaries, burn off as much of the fuel as possible. We had some Navy EOD experts associated with just how that was going to happen.
    They attempted to ignite it using gasoline as an igniter yesterday. They had initial fires going. We are convinced that probably most of what burned was the igniter itself as opposed to ever getting the fuel oil lit off. Today they are going to attempt to use napalm. About the time we are speaking, about half an hour from now, Admiral Blaney advises that the second attempt to ignite the fuel will take place.
    [Charts presented.]
    Admiral LOY. The circles that you see on the chart—this is a chart of the west coast of Oregon with the entrance to Coos Bay. The little square is where the motor vessel NEW CARISSA is.
    The larger picture, of course, is just for whatever value a larger picture is.
    The two circles represent if we had a catastrophic loss of the 350,000 gallons, in about a 6-hour window, it would reach the inner circle; in about a 12-hour window, it would reach the outer circle. As I know Mr. DeFazio knows, it is a California current on the west coast that will carry things northbound. It is perhaps a little counterintuitive to some folks who think about Japanese currents and other such things, but it would flow north. The NOAA folks are our scientific advisors in all of these kinds of operations, and they have indicated that would be the trajectory of a catastrophic loss.
    We are, of course, hoping against hope at this point that they are successful this afternoon and we will continue to monitor the situation.
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    Mr. GILCHREST. I yield to Mr. DeFazio.
    Mr. DEFAZIO. Thank you, Mr. Chairman.
    Mr. Chairman, this probably is not necessary to the hearing to get into this, but I am going to be approaching the chair about how we get to this. But when the Admiral opened up at the beginning the issue of prevention—I believe we are doing all we can that is humanly possible at the moment to deal with this. But we are dealing with a situation that should not have happened. That is really a stacked deck against us in winter seas.
    I have had some preliminary discussions with staff, and it is my understanding that certain countries are more rigorous about their crew standards and equipment standards than others.
    Admiral LOY. No doubt about it.
    Mr. DEFAZIO. And apparently the Coast Guard maintains a watch list which is one criteria you use in determining whether or not to inspect or board a vessel.
    I am going to suggest—Mr. Chairman, I am in the preliminary stages on this, but what we want to do is bring everybody up to higher standards as opposed to having a competitive situation where the countries that are willing to degrade the standards get a shipping advantage because they are cheaper. I am going to suggest that we should be looking at legislation that would certainly allow the continued free commerce under international law, but perhaps put additional parameters on those countries on the watch list. One initial idea I have on this is you make them stand off at our international boundary and they have to accept a pilot there because I can imagine another situation—this was one—where if you put a pilot on at the Columbia bar and suddenly they find out that ship has insufficient power or a bad crew, they are in a situation that they cannot get out of before they realize that. So, again, where you have less rigorous standards, it would be prudent perhaps to have the pilots get on a little further at sea so they are accustomed to that ship and they know whether it is seaworthy or capable of navigating or not. But that is the first cut.
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    We have got to learn something from this. This was pretty much incompetence. The ship anchored too close. It may be a designated anchorage, but in a gale force storm, to anchor at that point with what I understand is an underpowered class of ship, the skipper should have known what the potential problems were.
    Admiral LOY. Sir, if I may, all of those questions we would hope would have some additional degree of clarity as a result of the investigation, whether it was in fact underpowered, whether it was a judgment call on the master's part that could have really been the cause here.
    I would be remiss, though, Mr. DeFazio, if I did not mention that over the course of many years, the Coast Guard has led delegations from the United States to IMO with the very singular purpose of raising the bar, if you will, in terms of all of those things you mentioned.
    Our Port State Control efforts, the umbrella that we currently use to inspect such vessels as they approach and to include within them the two most recent efforts on the part of IMO to raise the bar for international standards, those being STCW, the International Convention on Standards of Training, Certification, and Watchkeeping for Seafarers, 1978, and the International Safety Management Code. All of those dimensions are now part of what is checked when Coast Guard inspectors check those vessels.
    The human factors piece, which is probably where we will find ourselves when this is all said and done, is to be captured inside the STCW thought process. If it is inadequately captured, we will be delighted to work with you, sir, and see how we can continue our efforts to raise the international standards.
    Mr. DEFAZIO. Thank you, Admiral. Thank you, Mr. Chairman.
    Mr. GILCHREST. Thank you, Mr. DeFazio.
    I would like to say that the move to continue to raise the quality of seamen on an international basis is a goal worth pursuing.
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    Admiral LOY. Absolutely.
    Mr. GILCHREST. The U.S. delegation to IMO has done I think more than an admirable job of ensuring that the international community has high standards in their training for their seamen whether they are from Pakistan or the Philippines for a lot of good, positive reasons.
    So, we are interested, Admiral, in this particular incident and the standards that the Japanese held their Philippine seamen to, and being flagged in Panama is also built into the equation.
    But the United States has led the world in raising those standards for international seamen, international shipping, international ship design.
    I will make one other comment about the U.S. delegation, which is led by the Coast Guard to the IMO, and that is whenever the U.S. delegation speaks in the IMO chamber where there are 156 countries represented, everyone gets quiet when the U.S. speaks. We are well represented and we have pushed the standards to where they are today.
    Mr. LoBiondo, any questions? Just before the chairman speaks on the budget, we are moving away from the regular order and asking just a few questions about the incident that is happening now in Oregon concerning this ship. So, if you have any questions on that.
    Mr. LOBIONDO. Not on this issue, Mr. Chairman. I have a few opening remarks when we get to the regular hearing order.
    Mr. GILCHREST. Mr. Bateman?
    Mr. BATEMAN. No.
    Mr. GILCHREST. Mr. Coble, any comments about the incident in Oregon?
    Mr. COBLE. I just came in, Mr. Chairman, and I'm not sure what issue is being discussed.
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    Mr. BATEMAN. Mr. Chairman, I am here to listen as long as I can.
    Mr. GILCHREST. Yes, sir, Mr. Bateman. Thank you very much.
    Mr. Baird, any comments before we get started?
    Mr. BAIRD. Yes, indeed. I think it highlights the importance of keeping a ready response unit out on the coast, and that is one of the things that we have been concerned about. If there are shifts in assets to other regions of the country, we could potentially face loss of those assets being readily present for rescue, for oil spill and for environmental protection and for fish enforcement. So, I think it highlights a central concern of keeping a strong guard presence out on the coast.
    Mr. GILCHREST. Thank you very much.
    Admiral, the floor is yours.
    Admiral LOY. Thank you, Mr. Chairman, and I thank the committee for your terrific support over the years and look forward to working with you again this year.
    I wanted to recall, as an opening thought, for all of you a series of Washington Post articles that ran just a couple of weeks ago on the fishing vessel LA CONTE case, and I also just wanted to make certain that you had a sense for your Coast Guard at its very best in the most difficult of circumstances, because in there lies the purity and the integrity of our organization from the keel up. We will leave copies of that terrific set of articles for any of you who have not had a chance to read it.
    My legislative director indicates to me that he has been distributing copies of the Perfect Storm up here over the course of the last couple of weeks, to anyone who does not have a copy. It is a terrific 200-page read that offers, I think without any kind of cloud of nonobjectivity, your Coast Guard at its very best.
    I am honored to be here this afternoon, sir, to discuss Coast Guard budget needs with you and particularly the budget as submitted by the President for this '00 season.
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    The initial point that I would make would be to ask you to watch for and support and engage with us as necessary when the authorization bill finds its way up to you. In there, the President's fiscal challenges for both 2000 and 2001 will initially be dealt with, and those numbers are as enormously important to you and the rest of the committee as they are to me.
    There will also be some personnel, financial management, and property management, and marine safety issues associated with it that I would be remiss by not mentioning just briefly as we go by. I am obviously ready to answer questions, if you have them, sir.
    But perhaps most pointedly I wanted to make certain that you were aware that the authorization bill, when it comes forward, will also carry the Administration's legislative proposal for the navigation user fee as an adjusted approach to this year's congressional session. Again, we look forward to talking about that.
    The year 1998 was an enormously successful year for our organization. I have come to refer to us with three words: multimission, maritime, and military. And in there somewhere is the discipline associated with doing the things that America asks us to do, many of which are putting our people in harm's way, many of which have a great degree of difficulty. But whether it was the Spill of National Significance exercise in Prince William Sound, the LA CONTE case that I just mentioned, our sustained performance in counterdrugs in the aftermath of a heightened effort in 1997, high seas drift net cases in the middle of the Pacific, the motor tanker COMMAND case, the Marine Transportation System, on which you were kind enough to hold a hearing last year, sir, and I understand would like to do so again, the ISM Code as it went into practice on the 1st of July, or Y2K, there are lots of arenas in which I think the Coast Guard has performed enormously well. We are very proud of all of that, and 1998 was a terrific year.
    I would ask you to think about three themes as we answer questions today and attempt to initiate our dialogue through the course of the budget. To some degree, they are represented by these four charts.
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    [Charts presented.]
    Admiral LOY. Basic services is something that we need constantly to keep in mind. The Coast Guard's core of basic services should never be allowed to erode in the instant thought processes associated with doing one particular thing very, very well.
    We have had an awful lot of discussion in town, Mr. Chairman, about readiness this season, beginning perhaps last September when the President met with the five service chiefs at Fort McNair, which has resulted in significant adjustments to the budget, such as the $12.6 billion up-tick for DOD with respect to readiness issues. I will chat a little bit about that in a moment.
    And the last thing, as you mentioned in your opening statement, sir, our counterdrug productivity, to make certain that in 1999 we are doing the bidding of the Congress as it related to the legislation at the end of the year and, of course, the 2000 budget holds the wherewithal to continue those services for the Nation.
    As it relates to basic services, sir, this budget is fully funded and will continue that basic service core, the quality that America expects of its Coast Guard, and I feel very good about that across the board. There are challenges on the horizon that we need to be concerned about, but this budget will take good care of basic services that the Coast Guard provides America in 2000.
    I would ask you to intellectually shift from what has been this conversation around town on readiness, if you will, in the DOD vernacular compared to readiness in the Coast Guard vernacular, and the shift from left to right there where that readiness slide depicts the Coast Guard doing lots of things with our DOD colleagues, and shift to understanding that we can do that 100 percent well, but we never want to do that 100 percent well at the expense of what could end up as a 44-footer crew losing their life or a case off the Pacific Northwest where we did not get to the survivors on time. The edges are beginning to fray on our basic core infrastructure around the Nation that I need to bring your attention to over the course of this budget season.
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    As it relates to the readiness dialogue, sir, people and modernization seem to have been the two dimensions that have come forth to be talked about by the other service chiefs and by Secretary Cohen, and by the President, as he submits this budget.
    In this budget there are about, I would say, a $50 million up-tick associated with the Coast Guard's readiness capabilities. Most of that has to do with people, and in the question and answer period, I will be happy to try to respond to your thoughts about what constitutes that $50 million and what is so important about it for our people, including the very well publicized compensation package.
    Modernization is a different and interesting challenge. But again, to take note of what those two words mean for defense readiness and then extrapolate them to Coast Guard infrastructure capability across the board is something that I would like to be able to do with you today.
    There are red flags, as I mentioned, Mr. Chairman, showing up in that infrastructure capability: the MORNING DEW case down in Charleston; fishing vessel losses not only off the east coast, but off Alaska as well; a National Response System Project, which we can't wait for 2004 and 2005, that will replace communications facilities at our shore stations, groups, and districts that were put together with about a 15-year lifespan in the early 1970s and are now 30-years-old and wearing thin around the edges; a fatigued work force that Master Chief Patton will talk about; and something that I have almost come to call the 'curse of Semper Paratus,' which is to say we are by our reputation expected to say yes when everything comes our way, but I would ask that the Committee give serious attention to, as Mr. Baird mentioned, our having the wherewithal so that we can, in fact, say yes and continue to do those things the Nation asks.
    Lastly, with respect to counterdrugs, sir, I thank the Congress for the terrific support provided by significant plus-ups in last year's supplementals. I believe personally in these things very much, as I have indicated to you many times before. I will be happy to report on the aggressive obligation posture we have taken with respect to those monies that were offered in that supplemental.
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    I would suggest, sir, that if I appear to be defensive once or twice through the course of our discussion on that, it might be something that I would prefer to talk with you in a more closed session because there is OPSEC, operational security, associated with some of these initiatives that we have on the board. If that comes to be the case, Mr. Chairman, it is not because I am trying not to answer the questions. It would only be because I would rather answer them in a bit more private session.
    This budget in 2000 offers the initial follow-on necessary to continue to operate the assets that we will buy in 1999 as it goes along.
    In closing, Mr. Chairman, I have two 'job ones' in 1999 that I would ask you to be aware of as I play towards 2000. They are both jobs that were there for me; I did not go and get them. One of them is a work force that needs to be refilled. It is an enormously important issue for our Coast Guard today. And secondly, Y2K, a significant issue for our Nation. I would be happy to talk to you about our status at the moment and the kinds of things that we are doing for the Nation well beyond Coast Guard circles.
    I look forward to working with the Committee through the course of the congressional stage of the budget season, sir, and thank you very, very much for your attention.
    Mr. GILCHREST. Thank you, Admiral.
    Master Chief, welcome to the Committee. We look forward to your testimony. You may begin.

    Master Chief PATTON. Well, good afternoon, sir, and good afternoon to the members of the Committee.
    As the Commandant's principal advisor on enlisted work force issues, I can sum up in probably three words how I view my job and how I carry out my job in looking out for the needs of some 36,000 enlisted members throughout the Coast Guard: people, passion, and performance.
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    The people side of the house is definitely looking after the needs of our folks. As the Admiral mentioned, we are definitely having some difficult times both with recruiting and with the job that we have to do. Of course, we have a tough time saying no because we have an awful lot of pride in the type of work that we do.
    Passion. I look at the passion side of it as I want to embrace our history, heritage, and tradition in terms of defining our leadership within the Coast Guard. We have a tremendous amount of history of what we have done in our 209 years, and I find that the best way to help build enthusiasm and motivation amongst our folks is to continue to measure that passion with our people out there.
    And performance. Admiral Loy's credo is 'preparation equals performance,' and I subscribe to that. We have to prepare our people well in order for them to perform well. As I travel throughout the Coast Guard, I pay very close attention to ensure our people are being prepared effectively in order to do the jobs that they have so that we do not end up with situations such as the chart that you see there on readiness to where the Quillayute River incident would ever happen again.
    In the almost 9 months that I have been in the job, I have traveled thousand of miles. I sat back the other day as I was writing my prepared statement, and I realized that, wow, I have been to all these places from Maine to southern California, from Alaska to the Caribbean. In fact, the Admiral and I traveled on Christmas day down to the Caribbean to visit our members just to ensure that we know that they are doing okay.
    Three things continually come up as to what I consider to be the number one issue. Given the hour or given the minute, when whoever you talk to is the number one issue, and that is, of course, work force shortages, housing, and health care.
    As far as work force shortages, we definitely are embarking on what I think is a very aggressive recruiting campaign. We have embarked on an 'everyone is a recruiter' approach where everyone throughout the entire Coast Guard, be they active, reserve, retired, civilian, auxiliarists, are very proactive in helping to go out and recruit people into the Coast Guard. We have an active recruiting ad campaign that is starting to get underway, and hopefully that will help bring some folks in.
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    But we share the same kind of recruiting problems that the other services do. I work very closely with my counterparts, the Master Chief of the Navy, the Sergeant Major of the Marine Corps, the Sergeant Major of the Army, and the Chief Master Sergeant of the Air Force, and we all share the same common thread that we have a problem with recruiting, as well as with retention. This, of course, has given us a pretty hollow force. We are making things happen and we are doing it very well, but I am concerned that our backs are to the wall, that we just cannot take on any more than what we are doing.
    Housing. This is an issue that if I were in a different uniform, it probably would not come as a number one issue. It is an issue for the Coast Guard in that we have many of our people stationed in all different parts of the world, particularly in high-cost, resort areas where it is difficult to find decent housing for our people, although we do have the right kinds of allowances comparative to the other services, but we do not have that infrastructure where there are military bases for medical care, military bases for use of commissary and so forth. So, with the bulk of our enlisted work force that are put in positions where they are making no more than $22,000 a year—that is the high end scale—this becomes a problem with being assigned in very high cost areas. So, housing has definitely become an issue.
    And health care kind of falls right into housing. We just do not have that infrastructure to have that nice military treatment facility that allows the TRICARE program to work effectively.
    In my written statement, I use an example of during a trip the Admiral and I made up in Alaska, where health care was one of the biggest problems that we found, a young petty officer 3rd class, an E-4, with a wife and a child who broke his arm. He took the son to the doctor and the bill came out to over $300. The TRICARE payment authorization was $105, of which only 80 percent of that is covered under TRICARE, which meant he had to pay 20 percent out of his pocket, plus the extra expense. This is just an example of some of the places where our people are stationed and are put in situations and it becomes a problem.
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    Those are probably some of the big things that I want to at least bring to your attention as far as issues that I see throughout the Coast Guard.
    But I want to end this on a high note. I want to tell you just how proud I am of the men and women out there who are doing their job, and they really are. It really thrills me to no end when I see letters of commendation and citations that cross my desk of ordinary people doing extraordinary things. I wish I could have a young man to whom we just recently presented a Coast Guard Medal and who I call the one-man rescue machine. The young man saved over 150 people during the Grand Forks flood. The interesting part of this is that this young man was stationed at a remote, isolated LORAN station in La Moure, North Dakota. He looked on television, saw that there was problems 100 miles away, piled in his truck, kissed his wife goodby, and said, honey, I am going down to help. And that young man really did an awful lot. That is just one of the thousands of people that we have that are doing those extraordinary things, and I am very proud of them. And I am very proud to be here and to represent them.
    Thank you.
    Mr. GILCHREST. Thank you very much, Master Chief.
    Is that a vote? I think we could probably start the questioning for 5 or 6 minutes and then go down. If you would not mind, Admiral and Master Chief, if you would not mind waiting.
    Admiral LOY. Sure, be happy to.
    Mr. GILCHREST. I am going to yield my time at this time. Frank, do you have some questions?
    Mr. LOBIONDO. Yes, Mr. Chairman. I had a couple questions, but more importantly, if I could ask your indulgence just to make a few brief opening remarks about the situation with the Coast Guard budget.
    Mr. Chairman, I want to thank you for your continued leadership.
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    Admiral Loy, for you and all the members of the Coast Guard who do such a fabulous job. Master Chief, you are right. We ask you to do more with less.
    But I think there is a stark reality here that we as Members of Congress should face up to and that is about what we are asking you to do with what we are asking you to do it with. I think we now have another sad commentary on the treatment of our Nation's domestic maritime service with a budget that we are facing and what we are asking you to do. We have got shell games going on. We are asking you to do more with less. There are hoops that you are put through, justifications that are not there. We need to change the mind set of the folks who are making these decisions about the budgets.
    From my understanding, the GAO and the OMB have expressed concerns over the justification of the Deepwater program. This program is the future of the Coast Guard. When are we going to realize that the analysts who make these decisions, that they have not watched the news. I mean, they have only to turn on and see what is going on. We have got ships that are World War II era that need to be replaced. We have got equipment that the Coast Guard cannot afford to get for technology budget reasons, and yet you can buy this at Radio Shack, and this equipment could save lives.
    I mean, I think we need to understand what we are asking the Coast Guard to do. The heroic efforts those men and women are making—and they do not know how to say no, and that is part of the problem.
    Admiral, you have done a remarkable job. Everyone has and I think you have been very restrained in your comments.
    But I am willing to speak out, Mr. Chairman. Your leadership has been fantastic. And I think that it is time that we on this committee take the lead to demonstrate to our colleagues the problems that the Coast Guard is encountering, and if we do not do something about it, we will hit a crisis situation. We never know when they have an emergency to deal with, evidenced by what is happening off the west coast right now. We expect them to be there 5 minutes before the accident happens. We expect them to handle it judiciously, expeditiously, all the right things, and yet we keep saying, well, let us make another commission. Let us put another study group together and let us see if in fact we cannot squeeze them a little bit more. And I really think that is wrong.
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    I applaud you for holding this hearing and getting this started, and I appeal to all of my colleagues to do what they can with our fellow members to make this situation aware because we are all at risk. Drug interdiction, readiness, come on down the line. If we are serious about the mission of the Coast Guard, we will be serious about their funding.
    Thank you for indulging me, Mr. Chairman.
    Mr. GILCHREST. Well said, Mr. LoBiondo.
    Mr. BATEMAN. Hear, hear.
    Mr. GILCHREST. I think what we will do, we will break at this point, go vote, and be back here in about 15 minutes. So, the subcommittee stands in recess.
    [Recess.]
    Mr. GILCHREST. The subcommittee will come to order.
    At this point, Mr. LoBiondo, are you done with your questioning?
    Mr. LOBIONDO. I had a couple questions, but I will defer, Mr. Chairman.
    Mr. GILCHREST. We can come back to you.
    Mr. LOBIONDO. Or I can go now.
    Mr. GILCHREST. I will yield to you to ask your questions.
    Mr. LOBIONDO. Thank you, Mr. Chairman.
    Admiral, considering the situation the Coast Guard is facing with assets and the need to replace, can you shed any light for us or have any idea why GAO or OMB may have come to the conclusion they did that there is not a justification to proceed with Operation Deepwater?
    Admiral LOY. Sir, I do not know that they have come to that conclusion at all. I have read the GAO report very, very carefully. I think they tabled for us three or four items that were very important for us to be crystal clear about. We have worked very hard to provide information to the three consortia that are still in competition for the Deepwater Project. It was an opportunity to get a signal, sir, be absolutely certain that we had that covered, and demonstrate that to the satisfaction of those players who are most important, of course, in the project, the folks in industry who are competing for the work. I think we have been able to do that with a good deal of integrity.
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    There are a couple of issues with respect to the GAO report that we do have to grapple with and that has to do with the funding stream associated with the project. Those are legitimate questions to be asked and we need to grapple hard with how we are going to do that. I have had some excellent discussions with Mr. Deich over in OMB in terms of even perhaps addressing this in a little bit different manner, maybe some kind of special fund or special appropriation or special construct that can be used to deal with this particular project as it goes forward.
    In OMB's case, they were very, very good stewards of the taxpayers' dollars through this process. They made it tough on us by asking the questions and having us answer them.
    But at the other end of the day, I think the $44 million line item that is in the President's budget for the Deepwater Project is a terrific statement of support for continuing through concept exploration and functional exploration, and at the other end of the day when we reach Key Decision Point 2 in the A-109 process, we will have lots of cards face up on the table as a result. The investment for each of the teams is, I think, very appropriate to the work that will be done in both functional and concept work. So, at this point I feel very, very good about where we are, sir, in the Deepwater Project.
    One thing I would be remiss without mentioning is that the roles and missions study is underway. We have had two very positive meetings, the latest one last night, again with the idea being that it is an important waypoint in this organization's life where we will be given every opportunity to do good things for America in the future. I have absolutely no qualms that the review of those roles and missions that we currently have, especially as you look at what the future holds for this country. If you look at any dimension of maritime challenge, and that crossroads between military discipline and law enforcement authority, which is the Coast Guard, is all over the map. So, I feel that a review especially looking to the future will challenge us to be doing even more, and then we would fall back, sir, on your comments earlier in terms of being realistic about the funding wherewithal to make that happen.
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    Mr. LOBIONDO. Thank you because I was contemplating whether to respectfully ask through the chair that maybe some of these folks inside the beltway step into the real world and take a physical look-see at the assets. Maybe they do not understand by looking at paper. Something says it was built in a certain year and they just think it is okay. Maybe we need to get these folks to take a look and we will defer that suggestion for a little bit later.
    One last question, Admiral. Concerning the rash of recent sinkings that we have had with commercial fleets, has the Coast Guard given any thought before or possibly giving any thought now to a commercial fishing boat safety training center or something along those lines? Is there any thought that might be worthwhile?
    Admiral LOY. I like that idea, sir. There is a long history, of course, associated with these wonderful, independent guys known as commercial fishermen. I love them all to death as a fellow sailor, but boy, they are hard-nosed as hell when it comes to wanting to be safer at sea and finding ways for us to help them do that.
    Just a brief trace. I think it was in 1985 that an incident involving a fishing vessel lost in Alaska produced what became the Commercial Fishing Vessel Safety Act of 1988. That particular piece of legislation mandated things like EPIRBs, immersion suits, and safety equipment be carried on especially documented vessels.
    It also called for a study to be done to explore licensing and inspection regimes on into the future. We conducted that study with the Marine Board, as I recall, sir, and in the due course of that study, we produced legislative opportunities in both inspection protocols and licensing protocols that over the course of the period from about 1989 or 1990 through 1995 or 1996, never successfully made it through the Congress.
    What we have fallen back on since then is a group of voluntary training activities. We have assembled damage control simulators and taken them out literally to the fishermen on the pier so as to help them understand stability issues better on their vessels. Our Coast Guard Auxiliary and the active Coast Guard do courtesy dockside inspections for fishing vessels when they are in port. Of course, on the high seas, anytime we are aboard for whatever reason, the first instincts are to check safety issues, and we on occasion will terminate a voyage as being manifestly unsafe if that seems to be the conclusion of the boarding officer.
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    But to go to the next step, it is in some kind of a training thought process like you are suggesting. We have done some voluntary orientation to that, and I would be delighted to explore that idea with you, sir.
    Mr. LOBIONDO. I would like to. Thank you, Admiral.
    Thank you, Mr. Chairman.
    Mr. GILCHREST. Thank you, Mr. LoBiondo.
    Mr. DeFazio.
    Mr. DEFAZIO. Thank you, Mr. Chairman.
    Admiral, since we are discussing Deepwater when I came in—I am sorry I was delayed in returning, so I hope I am not asking questions that were previously asked, but I have consulted with the staff and I do not think they were.
    There are certain requirements that the Coast Guard has that are particular to the Coast Guard, and there are other requirements that the Coast Guard has in its dual role that are more particular to the military. In particular, apparently it has been identified that the deepwater ships must be able to operate at a certain speed in order to maintain formation with the fleet. But apparently those are not necessarily day-to-day operational requirements for the Coast Guard in using these ships. It might incur extra costs. There might be other areas that I am not aware of where you would incur extra costs in terms of armaments or something like that.
    Admiral LOY. Yes, sir.
    Mr. DEFAZIO. How are we doing in terms of getting DOD to at least fund some of these additional costs?
    Admiral LOY. We are well along the way towards the thought process there, sir. I am not suggesting that we have identified anything up front that would clearly fall into the 050 locker.
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    Let me suggest that over the course of time, when a major build like this has occurred, each Commandant at the time probably touched a base with his colleague over in the Chief of Naval Operations chair and inquired, as Bob Kramek did 2 years ago of the Chief of Naval Operations, saying as we go forward with the design work associated with the platforms that we will need to meet our domestic responsibilities in the future, we are very much aware of our challenge as an Armed Service, especially as it relates to those kinds of things that are either part of the MOU between DOD and DOT or have to do with good stewardship of the taxpayers' dollar and making certain that we are not redundant in capabilities that the Navy would be asking for funds to build or that I would be asking for funds to build.
    When you recognize first and foremost that there is sort of a low end of the total national fleet because of the multimission nature of our organization, if we can be responsible for this array of multiple missions, including national defense responsibilities at the low end of a capability spectrum, the Nation gets by far the better utilization out of that platform.
    So, Bob Kramek asked the Chief of Naval Operations 2 years ago what would be the characteristics and capabilities you would want in a corvette-level kind of ship and below.
    We have integrated all those kinds of things into the RFP that is on the street now, sir, with respect to Deepwater, and Admiral Jay Johnson and I have intellectually contemplated something called the National Fleet which will guarantee for America that we do not procure things that are redundant, but rather thoughtfully go about the business of procuring the Nation's naval capability to be made up of both the Coast Guard's fleet and the Navy's fleet.
    Beyond that, there are enormous acquisition opportunities there, the same systems on all those ships that will drive unit prices down throughout all of those systems. So, lots of thought has been put into that, sir.
    Mr. DEFAZIO. On another issue which is a joint mission, the operation of the icebreakers. This does not just go to DOD. There are other Federal agencies involved. My understanding is that your operating and maintenance costs last year were $24 million, and yet you only got reimbursed $2.5 million. Do you have authority to assess higher charges against those other agencies, or is this something that is just totally within the purview? Do we have to mandate that on a congressional basis? Or should one of the benefitting agencies undertake operations?
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    Admiral LOY. I think there is discretion at our level, sir, to adjust, for example, the day charge that we charge the National Science Foundation with respect to the research missions that are employed currently on the two Polar class breakers.
    I think what has to be considered, however, first and foremost is that the Nation's capability in the polar regions is what we are really talking about, and it is not just that we do scientific research. Rather, the Nation's capability in the polar regions includes things like Arctic and Antarctic search and rescue, icebreaking services and logistics for Antarctic research--which is very much the National Science Foundation approach--and icebreaking services and logistics for supporting Department of Defense requirements that still exist in Thule, Greenland and, of course, in McMurdo down in Antarctica. We are very much involved with the potential for carrying U.S. interests to the poles vis-a-vis compliance inspections for the Department of State as it relates to anything that might occur with environmental pollution problems in either polar region. Wherever there would be a national contingency that would have polar implications, the Nation needs the capability to get there. So, those are the things that drive the requirement for the Coast Guard, someone, to have the capability to do those things.
    Part of getting our money back, so to speak, for that is the thrust of your question, sir, and if we can get more as opposed to less, that would certainly make me smile, but the last thing I want to do is put America out of the Arctic/Antarctic business by, for example, charging half again as much for day rates which would drive the National Science Foundation perhaps to look for other providers of the service.
    The cutter HEALY, of course, is first and foremost an Arctic research vessel that, oh, by the way, can do an awful lot of heavy icebreaking. The two polar class cutters are heavy icebreakers that, oh, by the way, can do some research. I think there is a distinction there that is worth all of us understanding.
    Mr. DEFAZIO. Okay. I think my time has expired, Mr. Chairman. I will maybe have another round of questions.
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    Mr. GILCHREST. Thank you very much, Mr. DeFazio.
    Mr. Coble.
    Mr. COBLE. Thank you, Mr. Chairman.
    Admiral, Master Chief, good to have you all with us. I used to put those icebreaker questions front and center, Admiral, back in the funding days. But maybe there is another question needed now.
    Admiral, I have been told that the flag ranks at the head of the reserve components of the armed services are codified into law but for the Coast Guard.
    Admiral LOY. That is correct, sir.
    Mr. COBLE. Would you support a provision that would cause the Coast Guard to be on a par with the other services as far as this segment of the Coast Guard is concerned?
    Admiral LOY. Mr. Coble, as you know, that has certainly been our practice, that we have had a flag officer at the front end of our reserve corps for all of these many years. I do not know, as I sit here, any reason why I would be concerned about a codification process. I suppose what you mean is that there is a specific billet designated by law with probably a grade level associated with it.
    Mr. COBLE. Well, I believe it would add to the permanency of the Coast Guard reserve component. It is not going to happen on your watch, but if some guy comes in or some woman comes in and decides that we do not need this billet, this billet could get scrapped.
    Admiral LOYSir, my first instincts are that we would be supportive.
    Mr. COBLE. Okay, good.
    Admiral and Master Chief, I am not an alumnus of the Coast Guard black hull group, never served aboard a buoy tender except for 2-week stints, but I am very high on the Coast Guard's black hull sailors. They are, indeed, the blue collar portion of the outfit. They are unsung heroes.
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    Now, having said that, Admiral, are these new seagoing and coastal buoy tenders as cost effective as I have been told they were projected to be when compared to the operating costs of the buoy tenders that they replaced?
    Admiral LOY. The answer is in the long run, sir, but our projections for those savings are holding pretty strongly. The savings are bound up in about 500 billets that will no longer be a part of the total aids to navigation locker of the organization when all of the new coastal and seagoing tenders are on board, and the BUSLs, the 49-foot buoy boats, are in their respective homes at the other end of the build. So, at that point in time, we will take a real hard look at it, but my expectation, sir, is that we will have generated the advertised savings or very, very close to it.
    Mr. COBLE. Finally, Admiral, there is talk around this Hill about various and sundry topics of interest. One which I have heard floated around from time to time—and this does not come from you, nor from the Master Chief is that the Coast Guard needs a better fit than DOT. Perhaps another agency other than Transportation. I have heard Justice discussed at one time or another, and I have heard DOD. Some folks say that maybe the Coast Guard would do better fiscally as being a component of DOD.
    Any word on that or any idea or thoughts about those rumors that have been circulated, Admiral?
    Admiral LOY. That is one of those rumors that pops back up about every 2 years sort of whether we like it or not, sir. My sense is that we are quite content inside DOT. But again, as Mr. LoBiondo articulated very clearly earlier, there needs to be a recognition that the Coast Guard has extremely important responsibilities in the maritime law enforcement business that are outside the normal Transportation portfolio, and another slug of responsibilities in the national security business, which Mr. DeFazio mentioned, that are outside the ''normal, day in and day out'' portfolio, if you will, of Transportation.
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    Here is the challenge. The multimission nature of the service is the very best plus that we have in terms of doing good things with good stewardship for the American public, but when you flip the coin over, it is also the greatest budgetary challenge that we have, to have those law enforcement and national security responsibilities totally recognized in DOT, not only as the budget goes together in the Administration, but also here on the Hill, because it is just not a perfect fit for either the functional processes here or for the manner in which the budget goes together in the Administration. That offers me my annual challenge to convince the builders of the budget and the receivers of the budget to recognize that and, again to go back to Mr. LoBiondo's comments, do something about it in terms of adequacy of funding.
    But I think we would be a rounding error in DOD, frankly, Mr. Chairman, and I think we had a very comfortable home in Treasury for a long, long time. But I have no thoughts at the moment to do anything other than to be a good tenant.
    Mr. COBLE. Admiral, I was neither supporting or opposing that notion. I was putting no dog in that fight, as it were.
    Admiral LOY. Yes, sir, I understand.
    [Laughter.]
    Mr. COBLE. In conclusion, Mr. Chairman, I want to commend you for the fine job you have done in leading this subcommittee for the past couple terms.
    Admiral and Master Chief, I look in the crowd and see old shipmates and good friends, and I am proud of what you all do.
    Admiral LOY. Thank you, Mr. Coble. We are delighted to have you as not only an alum, but a continuing member.
    Mr. GILCHREST. Thank you, Mr. Coble.
    Mr. Baird.
    Mr. BAIRD. Admiral and Master Chief, thanks for being here.
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    I represent the district in southwest Washington, the mouth of the Columbia River, and had the great pleasure and thrill and a bit of a fear actually going out with your motorized lifeboat crew with waves literally higher than the—we got a good day.
    Admiral LOY. We got you on a good day, did we?
    [Laughter.]
    Mr. BAIRD. Yes, I was thrilled. They would not let me jump out of the helicopter, but I was willing to give it a shot.
    [Laughter.]
    Mr. BAIRD. You have the poster up of readiness. That happened north of my district but on the same coastline.
    My particular concern is one I alluded to earlier. These folks risk their lives every day. I see here in your documentation that you save over 3,800 lives a year. It strikes me that if 3,000 Americans were being held hostage by a foreign power and their lives were at stake, we would spare no expense to rescue them. Yet, you correctly alluded to the fact you might be a rounding error on the DOD budget.
    My real concern is this. If we task you with additional missions without additional funding for that, do we not jeopardize readiness in other parts of the country or in other mission assignments?
    Admiral LOY. Mr. Baird, I think I can unequivocally say that the answer to that question now is yes. This organization, in the aftermath of the contributions that we made as we streamlined our organization from 1994 to 1998, making managerial adjustments and very good contributions to deficit reduction and balancing the budget, we are at a point now that most of the management types call an MEO, most efficient organization, level in the organization. So, to imagine taking on anything more significant without an attendant wherewithal to do so, would be in my mind absolutely the wrong thing for our Nation to do.
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    Mr. BAIRD. How effective are we at communicating that to the budget wonks that crank the numbers out so we look like we have cut expenses, but at the same time we may put some of these 3,000 lives at risk?
    Admiral LOY. Well, I guess we are all budget wonks of one kind or another because I need to articulate well my requirements to all of those folks along the way and, of course, to you all on this committee and, of course, to our appropriators as well, and I will make every effort to do that.
    But I will say, sir, that one of the things that I have taken on at a personal level is the challenge of telling the Coast Guard story better than it has been told before. That is not in a lobbying sense. That is only in an educating sense so that the American public at large understands the terrific value that we offer to this Nation. So, that is a personal challenge that I have taken on and we have done some institutional things to make some adjustments to do that better. We are going to give speeches and write articles and go just about anywhere. If we get two people together, I will be glad to go and talk to them.
    Mr. BAIRD. Well, I just want to share with you for the record that having seen the great work you do with the lives of the fishermen in my communities at stake and rescued frequently by your members and with the quality of our Northwest environment at stake, you will have an advocate here.
    Admiral LOY. Thank you, sir.
    Mr. BAIRD. Thanks for your good work.
    Thank you, Mr. Chairman.
    Mr. GILCHREST. Thank you, Mr. Baird.
    Admiral, we certainly want to work with you throughout this budgeting process right on through the appropriations process to fine tune all of the aspects of your responsibilities to make sure whether it is a small fishing vessel that can get only mayday out twice before they sink so that we have the equipment to discern where that is and make a response to what is happening off the coast of Mr. DeFazio's district today.
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    I have just a few questions. Could you give us some idea, Admiral, what the status is of the Y2K issue as far as the Coast Guard is concerned?
    Admiral LOY. Yes, sir. We have 74 mission-critical systems that we have identified. As you know, the Office of Management and Budget has dictated a set of gates through which we will all pass with successive steps towards being ready at the other end of the day. I have every expectation that all 74 of our systems will be ready, willing, and able to do their jobs.
    Mr. GILCHREST. Do you have a time frame, Admiral?
    Admiral LOY. Yes, sir. It will gradually all gain the final level of compliance, if you will, over the course of this year, but the last date, as I recall, is the 1st of June. Thereafter we should be in pretty good shape. I think we will probably have 10 of those 74 systems lag that June date and be then dealt with properly as the weeks and months go on.
    The thing that I am most concerned about is the vessel traffic service in Valdez, Alaska, where we have been unable to get the current vendor to give us any assurance that the system that is there will be compliant. So, what we are going to do is accelerate the replacement of that system with, if you will, the same PAWSs system that is going into New Orleans such that the VTS in Valdez will also be compliant. That is one of our 74 systems, sir.
    Mr. GILCHREST. Could you give us the current status of the VTS in New Orleans?
    One other question about Y2K.
    Admiral LOY. Yes, sir.
    Mr. GILCHREST. Could you tell us that by September or October all of the 75 compliance issues that you just stated would have been fixed and ready to go?
    Admiral LOY. Yes, sir, I can tell you that.
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    I would be remiss if I also did not mention, we recognized early an outreach challenge to the maritime industry at large that we could serve Mr. Koskinen, who has been designated by the President to be responsible for Y2K—poor guy.
    [Laughter.]
    Admiral LOY. But nonetheless, we have offered to reach out for him into the maritime industry to accelerate whatever challenges around the world. So, my CIO, or my chief information officer, and Y2K expert, Admiral George Nicarra, has made speeches at the United Nations. We have a conference in London in early March that will be an opportunity for us to further that outreach. But it is that classic business, if we can have all of our act together and if the other guy is remiss, we may still very much have challenges.
    Mr. GILCHREST. Well, we maybe have to send Vern Ehlers and Steve Horn up to Valdez.
    Admiral LOY. Yes, sir.
    Mr. GILCHREST. So, the VTS status in New Orleans.
    Admiral LOY. The project is coming along very nicely, sir. We have the transponders distributed to about 50 ships, if I am not mistaken. I might be off by 10 there, sir. I was down and visited the site that will be the control center, if you will, for the system.
    The reception on the part of industry has been terrific, and I think what we are really seeing there is a recognition by the Congress, among other folks, of what VTS 2000 was all about and shifting gears to a system that is far less expensive and frankly far more on target in terms of the needs of adding to the safety threshold of what in my mind is by far the most dangerous port that we have in the United States.
    It is where we go from here, sir, in terms of how many such PAWSs installations around the Nation might be necessary. We are working a national dialogue which establishes what I will call a safety threshold, but it is not just safety, it is security and environmental inferences and facilitating commerce, et cetera. But whatever that multidiscipline threshold is, there is where we need to find truly the understanding of, in any given port, what do you need to get to that threshold. Do you just need a buoy or two, or do you need traffic separation schemes or do you need a PAWSs system? Then do you need to just interact with the locals and perhaps not have this totally be a Federal burden?
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    Mr. GILCHREST. I appreciate that, Admiral. I suppose, as we traverse the course of the months ahead, that a visit to New Orleans would be suitable, and some other sites, and a hearing on that whole system and how it can be continued to be improved.
    Admiral LOY. It is a piece of our MTS, so we may even be able to link those two thoughts, sir.
    Mr. GILCHREST. Thank you.
    Master Chief, you mentioned something interesting about I guess a young Coastie with his family, that one of the children broke their arm and they found it difficult to pay the cost of the medical bills. I was always under the assumption that anybody that was in the military pretty much—at least that is the way it was with me 30 some years ago. You are under this umbrella of protection by the Government at least as far as your health care was concerned.
    This is also a concern, I would imagine, even to some extent as far as the budget is concerned, the rising cost of health care in the country which would include the Coast Guard's budget.
    But this particular incident, somebody broke their arm. They went to the hospital. They have TRICARE. It pays for a certain percentage of the bill. But TRICARE does not consider the cost of medical procedures in different parts of the country when they base their payment, and this young Coastie had to, out of his salary, pay the rest of that medical bill?
    Master Chief PATTON. Yes, sir. TRICARE is set up differently in different parts of the country, but the problem that we have with TRICARE, in my opinion, is that those costs are quite antiquated.
    Earlier this month I spoke at a TRICARE conference and described this similar incident that happened up in Alaska.
    And there are other parts of the United States where not just Coast Guard members, but other military members that are stationed outside the service area of a military treatment facility. Let us use this same example if this member was stationed here in Washington, D.C. and is signed up into what is called the TRICARE Prime program where they can go to Andrews Air Force base or Fort Myer, wherever they signed up in that particular area, the cost for that member taking his or her child in there would come out to $5. It is a cost sharing program.
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    There are medical providers that sign up into TRICARE and agree to accept patients at the TRICARE payment rate. The problem is that that payment is so doggone low that you cannot find providers, or they will sign up and stay in it for 6 months, a year, realize they are losing a lot of money, and then pull out.
    The problem with this particular situation up in Valdez, Alaska, is that they have no providers up there. So, therefore, it is the sky is the limit. So, the TRICARE dollar base figure was where that $105 showed up, but yet—
    Mr. GILCHREST. Who determines the reimbursement rate for TRICARE?
    Master Chief PATTON. This is probably done through—
    Mr. GILCHREST. By HCFA?
    Master Chief PATTON. I beg your pardon, sir?
    Mr. GILCHREST. Health Care Financing Administration.
    Master Chief PATTON. I am not familiar with that term, sir.
    Mr. GILCHREST. There are some heads shaking behind you saying yes.
    Master Chief PATTON. Okay. If my gallery says it, that is correct then.
    [Laughter.]
    Mr. GILCHREST. That is certainly an area that we can take a look at.
    Master Chief PATTON. Yes, sir.
    Like I said, that example is just one of several. I can give you hundreds of examples, including within your own district, that that particular situation could occur. It may not pay that much more out of pocket, but I can assure you that it is much more out of pocket than what a member in the DOD services would probably pay.
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    Mr. GILCHREST. What would be interesting, if you could get to our office three or four examples from around the country with that kind of situation, make one of those examples the eastern shore of Maryland or the 1st Congressional District.
    [Laughter.]
    Master Chief PATTON. You got it, sir.
    Mr. GILCHREST. Thank you.
    [The information received follows:]

    [Insert here]

    Admiral LOY. If I may, Mr. Chairman. The folks over in DOD who run the TRICARE system, when the Master Chief and I came back from Alaska with those stories, with that experience of concern, have been very receptive to the difference in terms of how Coast Guard people are distributed around the country. The real issue in Alaska, if you happen to be living in Anchorage where the marvelous Elmendorf Air Force Base is or if you happen to be living in Fairbanks where the Army is centered, you are in good shape because the military treatment facility is right there and you are okay. It is the Valdezes and the Cordovas and the Homers and the places where the Coasties are in Alaska. They have two choices. They can get in the car and go to Anchorage or to Fairbanks and bear the transportation expenses of getting treated, but their medical care was okay when they get there, or they can pay the outrageous rates of the provider in Valdez or Cordova, wherever they are.
    So, this distribution algorithm is very different from the DOD. Most of the DOD folks find themselves in great concentrations on large bases with all of the attendant services. TRICARE is designed for those kinds of situations.
    They are working with us, sir, and we are hoping to press some solutions out of this.
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    Mr. GILCHREST. Thank you.
    I guess have my own example of a Coastie who was riding a horse on the eastern shore of Maryland and broke his collar bone and had to go to a civilian hospital. But I did not hear anything about the funding, so I guess TRICARE might have covered that.
    [Laughter.]
    Mr. GILCHREST. At any rate, I will yield to Mr. DeFazio. Do you have any further questions?
    Mr. DEFAZIO. Thank you, Mr. Chairman.
    I was tempted to ask the Admiral what activities he had planned for New Year's Eve because the FAA Administrator earlier in a hearing today volunteered that she intended to be flying on New Year's Eve. I said, but I notice you said New Year's Eve. Does that extend to the next day?
    [Laughter.]
    Mr. DEFAZIO. She said she was looking for a flight that would span the time period and invited me to go along. I told her, no, I was going to be at home firing up my generator.
    [Laughter.]
    Admiral LOY. I have offered Jane to reconsider anytime she wants because I will be at sea, and that dimension is already on the surface.
    Mr. DEFAZIO. Thank you, Admiral.
    I have a question. Again, most of these issues are new to me, but I have just perused briefly the GAO report. They are going to say that the Coast Guard could save money—I assume the chair will give you a chance perhaps to respond afterwards or in writing, but I thought I would give you a chance now to precede their testimony.
    They are saying that if you substituted civilian personnel for uniform personnel in a number of support positions that you could achieve significant cost savings. I guess my question would be, are you confident that you would have the proper balance here? Or are there some potential savings, and if so, what efforts are you making to reach those savings?
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    Admiral LOY. Yes, sir. We have worked very hard on the concept of military essentiality, which is the first step you have to take in this choice that you go through to figure out whether this particular position or billet ought to be military or civilian. We have worked that very hard over the course of the last several years, and in the 1998 budget we made some transitions between military to civilian status in a number of positions.
    There were, I believe, some misunderstandings as to the value of any given billet's savings. When we worked those, we found out that advertised savings of significant amounts really were not realized. So, the imagery of saving a lot of money by doing it, first and foremost, I think may not be as straightforward as was offered in the report.
    Secondly, we do feel that we have gone through the wringer pretty well. We have put ourselves through the ringer pretty well on the military essentiality, but we continue to look. Every time Congress convenes, there are opportunities that come along, and we should be ever mindful of trying to make the good choice for the American taxpayer.
    Mr. DEFAZIO. On another issue of personnel, since they are such a large proportion of your budget obviously, apparently GAO has also identified your rotational policy as an area for potential cost saving. I know there are certainly some issues about quality of life where you talk about the fellow at the remote LORAN station in North Dakota and things like that and other places that are even more remote.
    But given those constraints and looking at other duty stations that are less problematic, are there potential savings there?
    Admiral LOY. There are always potential savings there, sir. Just as a bit of context, about 50 percent of the personnel permanent change of station transfers that occur each year are driven by retirements, resignations, new people coming out of boot camp or the Coast Guard Academy or Officer Candidate School. So, their initial assignment has to be one of those permanent change of station issues.
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    Thereafter, about 50 percent of the remaining half are engendered by such things as isolated duty, people coming off shipboard assignments that generate a permanent change of station and, therefore, their replacements on those ships or isolated duty stations.
    So, about 75 percent of these PCSs on an annual basis are sort of not in the discretionary envelope, if you will. They are generated by those kinds of things.
    Thereafter, sir, we have over the last several years adjusted tour lengths at a number of our stations such that they are longer and produce fewer PCSs. We have also offered extensions to people in existing billets so as to elongate their tour there, and even on occasion a multiple year extension, depending on the specific billet. So, we think that we have paid good attention to the rotation policy and at the same time dealt with our career paths for our people as they rise through military ranks.
    Then the last thing I would mention is that when we were given the choice over the last several years, I think we have made some good decisions. For example, when we left Governors Island, the vast majority of the people that were in the Area Command and the Maintenance and Logistics Command there were relocated to the Portsmouth area where we already had a pretty good slug of Coast Guard people, thereby offering homesteading, if you will. I can remember when I was an Ensign and Lieutenant (Junior Grade), homesteading was a bad word in the Coast Guard. It is not any longer. If someone can make a career in one of those areas where we have a significant Coast Guard presence, more power to them. Of course, that saves permanent change of station costs along the way. So, I think we have given good attention to that, sir, but again I will steal somebody else's good idea any time I can.
    Mr. DEFAZIO. Master Chief, I do not want to put you on the spot here, but do you want to vary in any way from what the Admiral said there?
    [Laughter.]
    Admiral LOY. He has never missed a chance to do that so far.
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    [Laughter.]
    Master Chief PATTON. Sir, I would like to add as far as the assignment issue, I want to talk about the present work force shortages that we have. It has become an issue, particularly the gaps in the middle enlisted grades, E-5 through E-7, where transfers are also prevalent as a result of promotions. This now becomes a problem because we do need to have that more senior technician at a particular assignment and so forth. So, when that E-4 or that E-5 gets advanced up into the next grade where the opportunity is, what the Admiral mentioned, where we like to try to use that homesteading rule in order to save on some costs, sometimes that just cannot happen solely because we really need to have that senior technician move off somewhere else.
    As such, it has now become a different work force problem that we have some people who are probably more than qualified to become advanced, but are holding back on the opportunity solely because it means uprooting a lot sooner than the end of their particular tour.
    Mr. DEFAZIO. Okay, thank you.
    Thank you, Mr. Chairman.
    Mr. GILCHREST. Thank you, Mr. DeFazio.
    Mr. LoBiondo, any further questions?
    Mr. LOBIONDO. No.
    Mr. GILCHREST. Just one easy question, Admiral. There are a series of differences of opinions in your ongoing debate with GAO about Deepwater, as I understand it. Is there a point in time—the next few months, the next 6 months—where those differences can be worked out and then we can really aggressively proceed on this process?
    Admiral LOY. Yes, sir. I spoke with John just before we came in, and my thoughts are that, as I mentioned earlier, to have put these three or four very consequential red flags on the table for us and given us an opportunity to—
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    Mr. GILCHREST. Which I understood you accepted as red flags and concurred that there should be a little more work done.
    Admiral LOY. Absolutely. For example, one of them was a concern, as registered in the study, that there was not enough information about our so-called legacy assets, the existing inventory of cutters and planes and C4ISR systems that we have, that might have longer life than perhaps was inferred by the construct of the study overall.
    The beauty of the way this project is put together, sir, is that the respective consortia can recognize legacy assets and include life spans and make judgments along the way in a package deal that eventually gives us the deepwater capability that we need to do our job.
    Mr. GILCHREST. So, there is a possibility that the Coast Guard and GAO can have some consensus on the concept of Deepwater which would give some direction to the contractors.
    Admiral LOY. That has already been done, sir, frankly. In other words, to take the legacy piece and go just a step further, we had a Deepwater off-site, in Arizona, of all places, where all the consortia were gathered and we provided them the information that we currently had pulled together with respect to the legacy assets and gave them every opportunity to ask us any questions that you would like.
    [Chart]
    Admiral LOY. This conceptional design/functional design block in yellow, which is phase one, offers great back and forth opportunities for us and them to get questions answered, so that at the other end of the day, when we are at KDP2 there in May of 2001, the decisions that we will be able to make there will be very well informed decisions. All the cards, so to speak, will be face up on the table.
    In the meantime, issues about how we are going to fund this are absolutely legitimate questions to have on the table. So, frankly, I think we were well served by the GAO report, and it is our challenge to answer those questions well and to pull them back to the table and press on.
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    Mr. GILCHREST. Thank you very much, Admiral. Many of us have many more questions, but we will continue to work with you through further hearings and I am sure meetings in our offices or the Coast Guard headquarters.
    Mr. LOBIONDO. Mr. Chairman, just one quick follow-up to your question and the Admiral's response. I am happy to hear that we are working toward consensus. Please forgive my concern that some folks, after one set of questions are raised, may decide there are a whole other set of questions to be raised. At some point that becomes counterproductive.
    I would hope that in the framework that we are all looking to deal with, that we would have some signal from you or the Coast Guard if we get to the point where there are obstacles being raised that are not valid and just becoming more of an obstruction to moving forward with the program because that is the point that I worry about.
    Admiral LOY. Thank you very much, sir. I will promise you that if I find myself and our organization in that position, I will let you know. This is an organization whose future, as you said earlier, is very much wrapped up with this project, and I have spent 40 years of my life with this organization and I want to make absolutely certain that it has the robust opportunity in the future to serve America as it has for the last 209 years. So, I will let you know, sir.
    Mr. LOBIONDO. Thank you.
    Mr. GILCHREST. Thank you, Mr. LoBiondo.
    Admiral, Master Chief, it has been a pleasure. We look forward to seeing you in a variety of other places on planet Earth. Thank you very much.
    Admiral LOY. Thanks, Mr. Chairman.
    Mr. GILCHREST. Our next panel will be from the Federal Maritime Commission: Mr. Edward Walsh, Managing Director, accompanied by Mr. Thomas Panebianco, General Counsel, and Ms. Karon Douglass, Director, Office of Budget and Finance Management.
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    Mr. Walsh, welcome. We look forward to the renewed vigor in which the Federal Maritime Commission appears to be with the new ocean shipping reform, and we look forward to your testimony and the kinds of things that you bring with your expertise to deal with this new legislation that was passed in the last session.
    Mr. WALSH. Thank you, Mr. Chairman.
    Mr. GILCHREST. You may begin your testimony.
TESTIMONY OF EDWARD P. WALSH, MANAGING DIRECTOR, FEDERAL MARITIME COMMISSION, ACCOMPANIED BY THOMAS PANEBIANCO, GENERAL COUNSEL, AND KARON E. DOUGLASS, DIRECTOR, OFFICE OF BUDGET AND FINANCIAL MANAGEMENT

    Mr. WALSH. Mr. Chairman, members of the subcommittee, thank you for the opportunity to present the President's fiscal year 2000 budget for the Federal Maritime Commission. I am Ed Walsh, Managing Director of the Commission, representing Chairman Harold J. Creel, Jr., who is out of the country. I am submitting his statement for the record and will summarize it here.
    We are aware that this subcommittee will be holding an oversight hearing on the Ocean Shipping Reform Act, OSRA of 1998, in the near future, and the Chairman certainly will be in attendance at that hearing.
    I am accompanied today by our General Counsel, Tom Panebianco, and Budget Director Karon Douglass.
    Let me begin by advising the subcommittee that since fiscal year 1995, the FMC has absorbed significant cuts in funding. For example, in fiscal year 1994, we had an appropriation of $18.9 million and funded 199 FTEs. In fiscal year 1999, our appropriation is $14.150 million to fund only 138 FTEs, 30 percent fewer than in fiscal year 1994. It was only through cost-cutting efforts, including reductions in force, absorbing attrition, and closing district offices, that we were able to carry out our statutory functions at these reduced budget levels.
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    As you know, OSRA will go into effect on May 1st. Until we have operated under the Act for one fiscal year, we will not know the full impact of the legislation on the Commission's resources. However, we have made a good faith effort to provide a reasonable budget request.
    The President's budget for the Commission provides $15.3 million for fiscal year 2000. While this represents a modest increase of $1.15 million, nearly two-thirds is required for the pay increase and other salary and benefit adjustments. As a result, we can fund only 138 FTEs, the same number as in 1999. The largest part of the remainder of the increases is for higher rent costs and there are some increases for computer modernization efforts, including Y2K compliance. This request does not include funding for a fifth Commissioner and staff, just as our fiscal year 1999 budget does not. OMB is aware of this, and the shortfall for fiscal year 2000 is estimated at about $385,000. Official travel has been straightlined at the fiscal year 1999 level.
    Our budget is composed almost entirely of mandatory or essential expenses such as salaries, benefits, rent, guard services, et cetera, the basic expenses of day-to-day operations.
    Mr. Chairman, the Commission supports OSRA and will strive to implement the act consistent with Congressional intent. Rules implementing the act will be in place by March 1st, the statutory deadline. We will issue final rules in three rulemakings this week and will consider the remaining four rulemakings a week from today.
    As a result of OSRA, a program which will require fewer resources than in the past is tariff filing and review. Of course the Commission will terminate ATFI. A minimal staff will be needed to ensure the accessibility and accuracy of privately published tariffs. However, we have readjusted our resources in anticipation of the new legislation and reduced staff by attrition. The Commission has included $350,000 in its request to fund automation efforts required to implement OSRA and to maintain historical tariff data as required by statute.
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    In contrast to its impact on tariff matters, OSRA will require increased resources in our service contract program, where industry sources project a possible 300 percent increase in filings. Additional resources will also be required for the licensing of ocean transportation intermediaries. We expect nearly a 100 percent increase in the number of licensees.
    Mr. Chairman, the Federal Maritime Commission needs its entire fiscal year 2000 budget request in order to effectively fulfill its many statutory duties. Resource requirements of OSRA preclude further reductions in staff. Staffing is already at the minimum level needed to implement the new legislation. We respectfully request favorable consideration of the President's budget.
    That is my statement, Mr. Chairman. Thank you.
    Mr. GILCHREST. Thank you very much. Helen Bentley says hi.
    Mr. WALSH. Thank you, sir.
    Mr. GILCHREST. I do not know if you remember Helen Bentley or know Helen Bentley.
    Mr. WALSH. Oh, yes.
    Mr. GILCHREST. But she is an ardent supporter of your Commission.
    Mr. WALSH. Thank you.
    Mr. GILCHREST. It is $15.2 million did you say?
    Mr. WALSH. It is $15.3 million.
    Mr. GILCHREST. So, $15.3 million and 138 employees?
    Mr. WALSH. Correct.
    Mr. GILCHREST. And there is a fifth Commissioner that has been appointed—that has not been appointed.
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    Mr. WALSH. Not yet.
    Mr. GILCHREST. Oh, a fifth Commissioner has been nominated, not yet appointed.
    Mr. WALSH. We understand there is an intention to nominate a fifth Commissioner.
    Mr. GILCHREST. Intention to nominate. So, we have somebody who is potentially eing employed by the Federal Maritime Commission.
    Could you tell me again? There is a shortfall of $385,000 if that person becomes part of the Commission. What does the $385,000 shortfall represent for that one Commissioner?
    Mr. WALSH. That represents 1 year of salaries for that Commissioner plus two people, some rent costs and some equipment costs.
    Mr. GILCHREST. If there is no extra appropriation for FMC, and that person is nominated and appointed, can you absorb that $385,000 with the $15.3 million?
    Mr. WALSH. I think if we were to begin the fiscal year with a fifth Commissioner on board, we would have to shake our budget from the bottom again.
    Mr. GILCHREST. What does it mean to shake it from the bottom?
    Mr. WALSH. We would look over the past few months to see if there has been any discretionary funding that has developed. If it had, we would use it.
    We would evaluate attrition at that point and, if possible, we would not hire replacements.
    Finally, I think that the staff would present to Chairman Creel for his consideration the option of furloughs. One furlough day for every Commission employee represents $40,000 in savings.
    Mr. GILCHREST. I am not sure what you mean when you say furlough. Unpaid vacation?
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    Mr. WALSH. Unpaid time off. We have faced that prospect in the last three or four years a couple of times. We have never had to exercise it. The Chairman has said he would do everything possible before seriously considering furloughs because the mere mention of them presents a morale problem for the employees. If, in fact, they become implemented, it is then both a morale problem and a financial problem for employees. But we would first look at this budget and see if anything can be reduced. For example, perhaps some of our projections on transition costs for OSRA might be adjusted. We think we are right on target with those, but perhaps after 4 or 5 months, we will be in a better position to re-evaluate them.
    But we advised OMB during the passback process that we could meet the budget at present staffing levels only, and that we could not fund the fifth Commissioner.
    Mr. GILCHREST. Well, that gives me two more questions then from that statement. One is, can you meet your regulatory role with the new Shipping Reform Act with four Commissioners, and are you suggesting that the Chairman recommend that the fifth Commissioner not be appointed this year?
    Mr. WALSH. In answer to your second question, I would not make such a recommendation to the Chairman.
    As far as implementing the Ocean Shipping Reform Act, we feel that we have been prepared for that at the staff level for quite a while. Chairman Creel has seen to it that we anticipated the programs that would come into effect. We think we are ready for it. We can implement that act. We can do that.
    Mr. GILCHREST. You can with four? With the present staff, you can perform your regulatory responsibilities with the new shipping reform responsibilities that you will have with the present staff and the present budget.
    Mr. WALSH. We feel we can implement OSRA with our existing resources.
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    Mr. GILCHREST. But if the new Commissioner is appointed, that creates a cash flow problem.
    Mr. WALSH. Yes, sir.
    Mr. GILCHREST. I see.
    Mr. PANEBIANCO. If I may, Mr. Chairman. We would have to tighten our belts some more, but if the fifth Commissioner came on during the present fiscal year, the cash flow problem would not be $385,000. It would be half of that because we are already half into the fiscal year. So, when we talk about the 2000 budget, that is the period of time in which we are talking about the full problem and the full $385,000 cash flow problem.
    Mr. GILCHREST. So, if he comes on now or if she comes on now, it will be another $150,000-some problem added to the $385,000 problem.
    Mr. WALSH. The $385,000 problem would begin on October 1.
    Mr. GILCHREST. Right, for the fiscal year 2000.
    Mr. WALSH. That is correct, sir.
    Mr. GILCHREST. So, if he comes on sooner, that creates an additional monetary problem.
    Mr. WALSH. Yes, to the degreee that the individual was on board in this fiscal year. We are already almost 6 months into the fiscal year. The costs in this fiscal year would be—
    Mr. GILCHREST. Is OMB aware? Did they have a hearing on this?
    Mr. WALSH. Yes, sir.
    Mr. GILCHREST. Did they have an answer to this?
    Mr. WALSH. I can not speak for OMB. We advised them that the only way we could present the budget that kept us at the same levels as last year without increases would be if we did not fund the fifth Commissioner.
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    Mr. GILCHREST. Do you know when the nomination and then the appointment might happen? Is it imminent?
    Mr. PANEBIANCO. I really cannot speculate. I do not know. At this point there is simply the intent to nominate. It is my understanding that the FBI clearances and processes of investigation are still going on. So, whether it is going to be in the next month or in the next couple of months, we really do not know.
    Mr. GILCHREST. I see.
    Does the FMC plan to charge any new user fees for its services mandated under the new Shipping Reform Act, and what type of user fees does the Commission currently charge?
    Mr. WALSH. We are presently in the rule-writing phase for the new Ocean Shipping Reform Act, and whether we create a new fee structure will be greatly determined by those rules. At the moment we think one particular instance in which we will not be creating a new structure is the licensing of what are now the NVOCCs. We feel that since we have a licensing fee structure for the existing freight forwarders, we could perhaps fold the licensing of NVOCCS into that same structure.
    Mr. GILCHREST. The new scenario does not create any problems with that.
    Mr. WALSH. At this time, until we are finished with our rules, our feeling is we could perhaps fold those two together.
    One area that we are not sure of and which is totally dependent upon how the final rule comes out is the area of service contract filing--whether we would be required to institute new fees or just how we would approach a fee structure. We really think we have to see how the rule comes out before we address that.
    Mr. GILCHREST. How do you make that determination? Is that a legal determination, a determination for an easier—I do not know—collection process?
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    Mr. WALSH. You mean how do we determine a fee structure?
    Mr. GILCHREST. Yes.
    Mr. WALSH. I would ask perhaps Ms. Douglass, our Budget Director, to answer that. There are certain rules that we live under.
    Ms. DOUGLASS. We recently went through a new user fee structure process, did a time and motion study, determined how much time was involved in the different types of services that we provide. The new fees became effective on November 1st. For new fees, we would again have to do this type of procedure, once we had some experience with the workload, and could determine exactly what would be involved under the rules for the Commission's staff.
    Mr. GILCHREST. When will that rulemaking be done?
    Mr. PANEBIANCO. The Commission has a meeting scheduled for next week, and we are going to be finishing up our rules hopefully that week because we need to get them all in place under the statute by March 1st. One of the rulemakings is the service contract rulemaking in which the Commission will be determining how carriers and shippers will be able to submit or file their confidential contracts with the Commission. So, depending on how the Commission determines to set up that system, it will be an electronic system one expects, and then depending on what the Commission's expenses would be and what the benefits for users will be, that all goes into the formula that Ms. Douglass just referred to. When we have that information, we will figure out what kind of fees might be necessary.
    Mr. GILCHREST. Once that is in place and you figure out the fees, how long does that last before you need to do it again? Is that a yearlong thing, every 2 or 3 years? Does inflation impact your budget?
    Ms. DOUGLASS. There is a requirement that that will be done on a biennial basis.
    Mr. GILCHREST. Biannual basis. So, that is what was done in November and it has to be done again by March. Is it efficient to have it done on a biannual basis? Would it be better done annually?
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    Ms. DOUGLASS. That would be every 2 years, sir.
    Mr. GILCHREST. Oh, biannual.
    Who requires you to do that? Is that in the statute?
    Mr. WALSH. The Office of Management and Budget.
    Mr. GILCHREST. Oh, the Office of Management and Budget.
    Now, I thought I saw some heads shaking as to the question, is that efficient to do it biannually. Is it efficient to do it? Would you have any recommendations on how often that should be done?
    Ms. DOUGLASS. To tell you the honest truth, sir, it is quite a process to go through, and it is not easily done. There could perhaps be a little bit more on user fees collected if we did do it on an annual basis because of the pay increases that the employees get. Each of those costs need to be captured in determining the true cost to the Commission for the services that we provide. But, because it is such a process, I think doing it every 2 years gives us a chance to review and make sure that we are providing those services in the most efficient way and that we capture the true costs.
    Mr. GILCHREST. Just so I follow you, you do it now every 2 years?
    Ms. DOUGLASS. That is the requirement, yes, sir.
    Mr. GILCHREST. You are saying because it is such a process. You are saying because it is such a complicated, lengthy process. That is what you mean by that?
    Ms. DOUGLASS. Yes, sir.
    Mr. GILCHREST. So, you are saying you would not want to do it every year?
    Ms. DOUGLASS. No, sir.
    Mr. GILCHREST. You are saying you would want to do it.
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    Ms. DOUGLASS. No, sir. I am saying it is a long process and to do it every year would be quite burdensome.
    Mr. GILCHREST. Oh, I see. So, doing it every 2 years then, you are saying, is fine.
    Ms. DOUGLASS. Yes.
    Mr. GILCHREST. Okay. So, we will leave that one alone then.
    [Laughter.]
    Mr. GILCHREST. Just one other quick question. Could you give the subcommittee an update on the Commission's recent work relating to its efforts to open China's maritime trading practices to reform the Japanese port structure and to prevent restrictive Brazilian ocean trade policies?
    Mr. PANEBIANCO. Yes, I will be glad to. I cannot get too far ahead of my bosses, the Commissioners, who are ultimately collectively responsible for deciding when and how to take action on each of these matters, but I am happy to give you a status report on each of these matters because they are all three very significant.
    In China, last year we issued demands for information to Chinese and U.S. carriers asking them to report on several troubling issues involving U.S./China trade. One of them was licensing requirements in China for carriers, access issues for carriers accessing to Chinese ports, doing business restrictions in China for vessel agents, for branch office operations, also the efforts of Sea Land Service, Inc. to operate a marine terminal at Tianjin.
    We are assessing the information we received from the carriers at this time. An initial review suggests that there appears to be some progress in some of these areas, no progress in other areas, and in some areas things seem to be going from bad to worse.
    We are in constant contact with the Maritime Administration and the Department of State who are attempting on behalf of the Administration to achieve a diplomatic resolution of these matters.
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    The Commission has been staying its hand so far from initiating retaliatory measures, but I expect that sometime after the Commission completes its rulemaking processes, we will be completing our analysis of the reports that we received last year from our information demand orders and we will be assessing the overall situation and our office will be making recommendations to the Commission as to what options are available.
    Mr. GILCHREST. When will the rulemaking process be done?
    Mr. PANEBIANCO. March 1st. We have been updating the Commission on discrete issues that have arisen regarding the U.S./China trade, but we need to present an overall package of all of the issues. We are stretched thin and we just have not been able to do that quite as yet.
    Mr. GILCHREST. The rulemaking process is done March the 1st. Now, that means that your collaborative efforts with the State Department on a variety of these issues—they are all included in the rulemaking process.
    Mr. PANEBIANCO. No, I am sorry. When I referred to our rulemaking process, I was referring to our rulemakings to implement OSRA, the Ocean Shipping Reform Act, which is simply consuming so much of our resources now that we are stretched thin.
    Mr. GILCHREST. Okay. What do you call it? Ocean Shipping Reform Act? You had an acronym for that.
    Mr. PANEBIANCO. OSRA. My computer calls it okra unfortunately.
    [Laughter.]
    Mr. GILCHREST. That is good if you have onions with it I guess.
    [Laughter.]
    Mr. PANEBIANCO. We are a small agency.
    Mr. GILCHREST. So, you are saying that the rulemaking process for the Ocean Shipping Reform Act takes a lot of time even away from some of the restrictive problems with the Chinese trade.
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    Mr. PANEBIANCO. Yes. I would say that for the last 4 months we really have been devoting almost all of our efforts to implementing the rules. This is not a complaint. We are happy to have the reform legislation. We are happy to have the certainty and the clarifications as to—
    Mr. GILCHREST. You are happy to be needed.
    Mr. PANEBIANCO. Happy to be needed, absolutely.
    [Laughter.]
    Mr. PANEBIANCO. But it also means that we simply had to put off addressing certain areas.
    We have always been available in case of any emergency situations, and some of the issues, especially regarding China, did require the Commission's emergency attention. We reviewed it. As I indicated, we stayed our hand. We did not think the time was right. But we really have not had the opportunity to present to the Commission—we meaning my office, General Counsel's Office—the full package with a full set of recommendations on what its overall actions might be regarding China.
    Mr. GILCHREST. So, FMC will make some recommendations, along with the Maritime Administration and the State Department, on what to do with China's restrictive policies regarding licensing, accessing, ports of business restrictions, and what they have done with Sea Land. About when would that recommendation come?
    Mr. PANEBIANCO. The recommendation would come from my office, General Counsel's Office, to the full Commission in consultation with the State Department and the Maritime Administration to find out from them, find out from the Administration, how it assesses what it regards as the chances for a diplomatic or commercial resolution.
    Mr. GILCHREST. About when will that happen?
    Mr. PANEBIANCO. I think that in March or April of this year we should be able to complete our recommendations to the agency.
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    Mr. GILCHREST. And Japanese port structure?
    Mr. PANEBIANCO. There has been some progress in Japan's meeting its commitments to liberalize its port systems. These commitments were made by Japan following the Commission's imposition of sanctions in the fall of 1997. Unfortunately, that progress has been slow and sporadic, and it has been complicated by internal political, labor, and economic problems within Japan.
    Ultimately, we are not fully satisfied with the scope and with the speed of the reforms. Our proceeding, in which we have made findings of unfair practices and collected the sanctioned fees, remains in place, however. It is in the state of suspension right now to keep the pressure on pending fuller implementation of those commitments. We are continuing to consult again with the Administration and also with the carriers and others who have interests there to see how the reforms are being made.
    Mr. GILCHREST. Does the Coast Guard have any role in this at all? Does IMO have any role in this at all?
    Mr. PANEBIANCO. IMO, no, because these are maritime issues and it is not covered there. Coast Guard does not have a direct role in this except the fall before last, when we actually imposed and started collecting sanctions against the Japanese carriers in retaliation for the port system problems in Japan, we worked very closely with the Coast Guard and with Customs because they have a role in stopping Japanese vessels from entering or leaving U.S. ports unless they paid the fees. So, we had a great deal of cooperation with both of those agencies in that regard. The carriers did pay the fees.
    Mr. GILCHREST. How do they pay the fees? Do they have the cash on board? Do they wire it over?
    Mr. PANEBIANCO. We required them to keep monthly tabulations of their vessel calls at each port per month, and at the end of the month, they were responsible for reporting to us how many times they called. Of course, we confirmed all of this information using our own intelligence and using Customs. Then they wrote us a check.
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    Mr. GILCHREST. And then where does that money go when you get the check? Does it go into the budget of FMC?
    Mr. PANEBIANCO. We wish, Mr. Chairman.
    Mr. GILCHREST. We are doing that with the Park Service, a certain percentage of the fees they collect with the Park Service. Maybe we can do that with FMC.
    Mr. PANEBIANCO. We would be glad to work with you on that.
    [Laughter.]
    Mr. GILCHREST. The highway trust fund works that way and the aviation trust fund. The Social Security trust fund does not work that way, though.
    Mr. PANEBIANCO. Ours went right into the U.S. Treasury.
    Mr. GILCHREST. The Brazilian ocean trade policies?
    Mr. PANEBIANCO. Yes, sir. We are real concerned about the seemingly worsening conditions going on in U.S./Brazil trades. There was a bilateral agreement between the U.S. and Brazil to allow U.S. carriers to have access to Brazilian Government controlled cargoes. Brazil has recently repudiated that agreement, and now it is imposing huge tax and duty obligations on shipments of cargo covered by that program that are carried by non-Brazilian vessels. This is obviously a serious problem.
    They have issued a waiver of the assessment of these tax and duty obligations for U.S. vessels, but the waiver is only temporary. First they issued a 2-month waiver. Now we are in the middle of a 6-month waiver.
    Mr. GILCHREST. We are the only country that gets the waiver?
    Mr. PANEBIANCO. Yes. As far as I know, we are. I do not think it is across the board to all non-Brazilian vessels.
    Mr. GILCHREST. What is this to protect inside Brazil? Their shipping industry?
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    Mr. PANEBIANCO. It is basically a revenue collection effort because of their financial situation. This has been going on for some time. I think that is the main impetus for it.
    It is also intended to benefit Brazilian carriers. It is a cargo reservation scheme really to reserve shipments for Brazilian carriers and to make sure—
    Mr. GILCHREST. It is the counterpart of our Jones Act?
    Mr. PANEBIANCO. It is a lot more onerous because it is not a tiny little sliver of percentage of cargo. What they call government cargoes is anything that benefits in any way from any government program. I think it comes to something like 20 to 30 percent of the market. I could be wrong about that. I will correct that if that is not accurate. So, it is a big chunk of the cargoes.
    The waiver that they have given to U.S. carriers sounds nice for us, at least on a temporary basis, but it is really not because carriers like to enter into long-term arrangements with shippers, yearlong service contracts. Well, no shipper is going to want to enter a service contract with a U.S. carrier because there is only a 2-month or 6-month waiver pending. So, we really need to get this resolved on a long-term basis.
    One other problem that we have with Brazil is that they have created a new ship registry they call it the second registry. The customers of these vessels are given hugely favorable tax treatments, and so they are excused from paying large percentages of taxes, which sounds great in the short term for U.S. shippers, but the problem is that this could very possibly drive out other carriers from the trade.
    The Commission met on January 13th to consider these matters and to consider whether to impose sanctions on Brazil. That same morning news reports informed us that Brazil had entered into its current stage of its financial crisis and the devaluation of its unit of currency. The Commission has not taken formal action as yet, but we are continuing to monitor on a daily basis both the maritime issues and the economic issues in Brazil to determine if and when to proceed with possible actions.
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    Also on February 22nd I believe, Administration officials from MARAD and from the State Department are going to go to Brasilia once more to try to resolve some of these issues. So, we always make sure that we advise Mrs. Dye and Mr. Cullather of any action that we take and we will certainly do so here.
    Mr. GILCHREST. Well, thank you very much. We would be very interested in following this issue. Sometime later this year, probably sometime after March 1st—
    Mr. PANEBIANCO. Preferably.
    Mr. GILCHREST. Maybe April 1st, to give you a little leeway there, we would like to have you back to see how the new Ocean Shipping Reform Act is going and your implementation of some of your responsibilities and certainly to find out any further progress with China, Japan, and Brazil.
    Mr. PANEBIANCO. I would just mention that the Act actually goes into effect on May 1st. We just need to get our rules in place so that people in the industry can see what the rules will be so that they can gear up for the effective date of May 1st. But we are happy to come in anytime you want to see us.
    Mr. GILCHREST. Would it be better about the middle of May just to see any reaction from the carriers?
    Mr. PANEBIANCO. Anytime. That would be fine.
    Mr. GILCHREST. Well, Ms. Douglass, Mr. Walsh, and Mr. Panebianco, thank you all very much. Mr. Walsh, you sound like you are from South Carolina.
    Mr. WALSH. That is not Mobile, Alabama talking, Mr. Chairman.
    Mr. GILCHREST. That is not Mobile, Alabama? South Bronx maybe.
    Mr. WALSH. Queens.
    Mr. GILCHREST. Queens, okay.
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    [Laughter.]
    Mr. GILCHREST. Thank you very much.
    Mr. WALSH. Thank you, Mr. Chairman.
    Mr. GILCHREST. Now, I understand we have GAO with us today. I apologize for not mentioning you at the beginning of the hearing. Our third panel is Mr. John Anderson, Jr., Issue Area Director, Transportation Issues, General Accounting Office, accompanied by Mr. Randy Williamson, Assistant Director of Maritime Issues, and Neal Asaba, Senior Evaluator. Gentlemen, welcome to the hearing. We are going to send you a flag that flew over the Capitol for your patience—
    [Laughter.]
    Mr. GILCHREST.—for our appreciation.
    Mr. ANDERSON. Thank you, Mr. Chairman.
    Mr. GILCHREST. We do look forward to your testimony to talk about this issue of Deepwater. Mr. Anderson, will you be testifying?
    Mr. ANDERSON. Yes, I will.
    Mr. GILCHREST. You may begin. Thank you.
TESTIMONY OF JOHN H. ANDERSON, JR., DIRECTOR, TRANSPORTATION ISSUES, RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY RANDY WILLIAMSON, ASSISTANT DIRECTOR, MARITIME ISSUES, AND NEAL ASABA, SENIOR EVALUATOR

    Mr. ANDERSON. Thank you, Mr. Chairman. I am not sure whether to be relieved or a little disappointed that all the other members could not stay in light of the many references to GAO during their statements and during the questions, but I think I am mostly relieved.
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    Mr. GILCHREST. Some of the staff are relieved. It really cuts down on the questions.
    [Laughter.]
    Mr. ANDERSON. We are here today to provide information on budget issues related to the Coast Guard. With me are Randy Williamson on my right, Assistant Director, and Neal Asaba, Senior Evaluator, on my left.
    My testimony is based on recently completed and ongoing work for this subcommittee. I will summarize my statement and I ask that the entire statement be entered in the record.
    Mr. GILCHREST. Without objection.
    Mr. ANDERSON. First I would like to discuss the Deepwater Project which would replace or modernize many of the Coast Guard's ships and aircraft over the next 20 years. This project could cost as much as $9.8 billion, making it one of the largest procurements in the agency's history. Three months ago, we completed a comprehensive review of this program, focusing on whether the Coast Guard had accurately portrayed the need to replace or modernize its ships and aircraft and how it planned to fund the nearly $500 million needed each year, starting in 2002, to pay for it.
    We found that the Coast Guard had significantly overstated when it needed to replace its deepwater aircraft and to a lesser extent its ships. For example, the Coast Guard's 1995 project justification asserted that its aircraft would have to be replaced beginning in 1998 when they had reached the end of their useful service life. However, in an internal study issued in 1998, the Coast Guard itself concluded that with proper maintenance these same aircraft could last until 2010 and likely beyond.
    Mr. GILCHREST. If I could interrupt you just for a second. I am going to ask this question about the airplane.
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    Mr. ANDERSON. Sure.
    Mr. GILCHREST. A year or so ago, I was in the Antarctic in a Navy C-130, and we tried to lift off McMurdo Station to fly to the South Pole three times. Each time the plane came back down. It could not quite get off. And the third time we saw the hydraulic fluid gauge drop completely. We finally got off the ground. We must not have been up but a few feet when we lost all our hydraulic fluid, and then the plane came down and we had to wait a day. I think if my kids were there, they would have found that thrilling and exciting. Most of us found it a little bit less than that.
    Did the Coast Guard feel confident in saying with proper maintenance these planes could last to the year 2010?
    Mr. ANDERSON. Absolutely, Mr. Chairman. We not only reviewed the Coast Guard study that they had done in this regard, but during the course of our review, my staff went out and visited numerous Coast Guard facilities. They looked at a number of these assets. They actually flew on some of them or rode on some of the boats. They talked to the crews. It was this collective knowledge that we had that made us feel that the Coast Guard study was a sound one. That does not mean there are not exceptions, but overall these assets could last longer.
     I think it is because, by and large, the Coast Guard has done a good job over the years in maintaining them. We all know of folks whose cars always look clean and they are always well maintained. They might be pretty old, but if you maintain them properly, you can get a lot more mileage and a lot more years out of some of these assets. I think that is the case here.
    We also found that the agency had not developed reliable data to support its estimates of capability gaps between its current and future deepwater needs. This data is critical for developing usable alternatives for addressing future needs. In our report, we cautioned the Coast Guard about moving too quickly in pursuing alternatives for replacing or modernizing its ships and aircraft without good baseline data about their condition and mission requirements. Delays in obtaining and providing this data to contractors that are now developing these conceptual designs for alternative systems could adversely affect the quality of the proposals that they are developing. We recommended that the Coast Guard gather and provide this data to its contractors as soon as possible.
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    I would like to report that the Coast Guard has kept us apprised of their activities in this area, and they are making good progress. But this is an area, because it is so important, that is going to require continued attention by the Coast Guard and oversight by the Congress to make sure that the contractors have the best data available so that when they develop their proposals, they will be based on good, solid data.
    Mr. GILCHREST. It is my understanding that the consortium of these contractors are moving forward with proposals.
    Mr. ANDERSON. That is correct.
    Mr. GILCHREST. So, you feel that your discussions with the Coast Guard somehow extracting this new or extra data gets to the contractors in a timely manner so the contractors are not out here and the Coast Guard—
    Mr. ANDERSON. Exactly.
    Mr. GILCHREST. So, that is moving along fairly—
    Mr. ANDERSON. That is moving along very well. That is right. They are continuing to do some studies. They have got some ongoing studies of the ships going on right now. We think as soon as that data is available, the Coast Guard needs to expeditiously provide it to the contractors so they have got the absolute best, most current data to use in developing their proposals.
    Mr. GILCHREST. I do not mean to interrupt.
    Mr. ANDERSON. That is okay.
    Mr. GILCHREST. One more question, then you can finish your statement.
    I asked the Admiral if there was some time frame that he felt that some of the recommendations that you made to the Coast Guard, that for the most part they concurred with, that they are now reworking their data—I know this is a complex process. Deepwater is a complex concept. Do you see a time when you and the Coast Guard can, for the most part, agree or come to some type of a consensus on the concept of Deepwater to begin with and then the funding mechanism?
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    Mr. ANDERSON. Mr. Chairman, I would like to just make very clear that I do not think we were ever at a point of not having consensus. This past summer we had extensive meeting with Coast Guard headquarters officials and we expressed our concerns about the lack of this data, and they assured us that they would gather the data and provide it expeditiously.
    We had a decision to make ourselves this past summer. Were we going to recommend that the Coast Guard not go forward? I believe it was in August of 1998 that they awarded the contract to the consortia. We had several briefings with the Coast Guard, and we were convinced that they were moving in the right direction and doing the right thing. We did not recommend that they curtail their efforts. That is how much confidence that we had that they were hearing what we were saying. We concluded, based on what they were doing, and on the things that we had found, that they were headed in the right direction.
    I do not think that there is a lack of consensus at all. In fact, I was very pleased to hear Admiral Loy say publicly that he thought that we had helped the situation. There clearly were some red flags that we put on the table, but they responded.
    Mr. GILCHREST. Was there ever a disagreement about Deepwater itself?
    Mr. ANDERSON. No. We always thought that the overall concept of Deepwater made a lot of sense. I think they refer to it as a system of systems where they will try to get the best mix of assets rather than just replacing their assets one for one. We always thought that that was an excellent concept and overall would result in a more cost effective system.
    Mr. GILCHREST. When you look at Deepwater with the Coast Guard—and I assume it probably is—is it in the context of the overall comprehensive mission of the Coast Guard, including all the small boat stations that are out there, all the small 41-foot cutters, and all those other things that the Coast Guard does?
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    Mr. ANDERSON. Absolutely. I think the Coast Guard is doing the right thing in their concept of looking at this project in terms of a systems approach and trying to make the most of what has always been done given the limited amount of funds that they have. We think that they are headed in the right direction. We have no quarrel whatsoever with the process.
    Mr. GILCHREST. While you are engaged in this process, is there some type of scrutiny as to—your office has stated we have some apprehension about a bump of 500 million extra annual dollars. That is really tough—
    Mr. ANDERSON. That is exactly right.
    Mr. GILCHREST.—if not impossible to happen.
    Mr. ANDERSON. That is right. If I could get back to my statement, that was the next thing I was about to address because that is the next major concern that we had with the project. I still think it is a legitimate concern and I believe the Commandant agrees.
    The agency could face major financial obstacles proceeding with the Deepwater Project because it may need to spend $500 million a year starting in 2002. That was its original plan. If it did that, this project alone could consume more funds than the Coast Guard currently spends for all of its capital projects. Unless the Coast Guard gets some budget relief—and I know the budget situation is looking different today than it did a year ago in terms of surpluses instead of deficits—
    Mr. GILCHREST. Maybe we can get the President to mention it as far as spending part of the surplus.
    Mr. ANDERSON. I think a lot of people have ideas how to spend that surplus. I do not know how much will be left over for the Coast Guard, but obviously the political process will take care of that.
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    But unless the Coast Guard gets some relief from the current budget agreements, it could find such a large project very difficult to undertake, given its other critical capital needs such as improving its shore facilities, replacing buoy tenders, and search and rescue boats. The Coast Guard has recognized the dilemma that it is in and it has begun developing a new plan—I think you heard the Commandant refer to it in his testimony—for addressing its long-term capital needs.
    When we were preparing for this testimony, we wanted to get some current information for you on the long-term budget implications that are also affected by the additional $377 million in emergency funds that the Coast Guard received at the end of 1999. It is being used to increase efforts to interdict illegal drugs entering the United States.
    According to your staff, you wanted us to determine the status of the use of these funds. We found that the Coast Guard plans to spend about $271 million of the $377 million to purchase 15 new 87-foot patrol boats, 8 fast pursuit boats, and new sensors and communications equipment for its cutters and aircraft. It also plans to reactivate six HU-25 jets to be used in surveillance and to reactivate two 225-foot ships to provide command and control and support for antidrug operations.
    Mr. GILCHREST. Would this be mostly in the Caribbean?
    Mr. ANDERSON. Yes.
    The Coast Guard is moving quickly, we found, to put this equipment in place, and it plans to spend or obligate most of the emergency funds by the end of this fiscal year. It should have most of the new equipment in place by the end of 2000.
    Mr. GILCHREST. Are you pleased with the speed at which the Coast Guard was able to utilize those dollars?
    Mr. ANDERSON. Yes. And I think they are planning to have about 78 percent of the money spent or obligated by the end of this year. That is pretty good. Sometimes it lags longer than that.
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    One of the things that we do need to point out and this is a debate that comes up frequently—is that while the additional funds will improve the Coast Guard's ability to fight the drug war, additional funds are going to be needed in the future to sustain this increased effort. Ultimately the long-term impact on whether or not this is going to have a major impact in terms of reducing the flow of illegal drugs into the United States is very difficult to determine because there isn't good information on what the drug supply is and there are inherent difficulties in deciding who do you give the credit to when progress is made.
    Mr. GILCHREST. So, you are saying it would be difficult to—the Coast Guard was bumped up to $300 million and some.
    Mr. ANDERSON. That is right.
    Mr. GILCHREST. They have utilized it apparently in a manner which can meet their present goals, Frontier Shield and those kinds of things, and maybe this concept called Steel Web, at least the beginnings of it.
    Mr. ANDERSON. That is right, but they are going to need additional funds in the future to sustain—
    Mr. GILCHREST. On an annual basis, is there any way to give a relatively accurate figure as to what that might be?
    Mr. ANDERSON. I do not think we know for sure right now. I believe in the 2000 budget request that they are asking for $46 million to sustain this increased effort. But they have got some assets that are not going to be coming on board until later next year so they could need more than that. I do not think we have an idea one way or the other. Randy, do you have a thought?
    Mr. WILLIAMSON. No.
    Mr. GILCHREST. Based on the little experience I have, the $46 million would be almost a drop in the bucket. You would have to quadruple that at a minimum perhaps.
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    Mr. ANDERSON. I think they are going to need considerably more. I just cannot quantify it at this time.
    Mr. GILCHREST. If they are to sustain what they see is the need.
    Mr. ANDERSON. That is right.
    Mr. GILCHREST. But you really could not give us a figure.
    Mr. ANDERSON. Not at this time, and I do not even know if the Coast Guard knows for sure what it is going to take until they get some of these assets out there and get some experience with them.
    Mr. GILCHREST. If they get the assets out there, that is a major feat.
    Mr. ANDERSON. Exactly.
    Mr. GILCHREST. That is a big expense. Now, to operate those assets, would it be reasonable to say—to get the assets in place, at least in part, is this $300 million and some.
    Mr. ANDERSON. That is right.
    Mr. GILCHREST. Now, to operate those assets, you would need $300 million on an annual basis.
    Mr. ANDERSON. No. I believe when they got the emergency funding of that $371 million, about $44 million of it was for the operation of the assets. In 2000 they are asking for $46 million to operate those assets. You can see the magnitude there.
    Mr. GILCHREST. I see.
    Mr. ANDERSON. Finally, I would just like to wrap up my oral statement with a couple of thoughts.
    The cost to sustain its increased antidrug efforts, coupled with the potential funding demands of the Deepwater Project, will present a strong budget challenge for the Coast Guard in the years ahead. In May 1997, we reported to this subcommittee on the budget challenges facing the Coast Guard. We noted that while the Coast Guard had taken a number of actions to reduce its costs, it might need to do more if it did not receive enough funds to carry out its missions.
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    We said that the Coast Guard might have to take further actions to improve its efficiency including, for example—and this was talked about earlier today—reviewing its policies for rotating military personnel every 2 to 4 years, a practice that now costs about $60 million annually. I believe the Commandant pointed out that about half of this is mandatory. It is new recruits and retirees.
    Also, we said that the agency might need to examine controversial issues involving possible closure of unneeded facilities, as unpopular as this might be with local communities. In our 1997 report we suggested that the Congress consider authorizing a base closure commission for the Coast Guard as a way to evaluate potential facility closures.
    To date, there has not been any action done in any of those areas. However, I want to point out that I do not think there are any low-hanging fruit out there that are big dollar savings items that the Coast Guard can achieve. You might be able to do some things here and there and save some money. For me it would be significant if you can save a couple million here and a couple million there, but in terms of the needs that they are facing, it is a drop in the bucket.
    Mr. GILCHREST. It would be significant, though, if you are looking at the amount of money that was reduced for fisheries enforcement or environmental enforcement or utilizing these new assets for drug enforcement.
    Mr. ANDERSON. That is correct.
    Mr. GILCHREST. That is $46 million. I do not know if you could cut the personnel moves in half, but if you started looking at closing facilities, do you have any ball park figure for closing facilities, whether they are unneeded training facilities, unneeded small boat stations, things like that?
    Mr. ANDERSON. With regard to the training facilities themselves, again I believe the Coast Guard has done a study of its own where they concluded that they had some excess capacity and were considering closing Petaluma, California. I believe they estimated they could save $15 million by closing Petaluma.
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    Mr. GILCHREST. You said $15 million?
    Mr. ANDERSON. Yes, $15 million.
    Mr. GILCHREST. Does that take into consideration the closing costs?
    Mr. ANDERSON. That was a net cost, yes.
    Mr. GILCHREST. That is good.
    Mr. ANDERSON. But in 1997, we reported that these types of efficiency improvements might not be enough. We suggested that the Coast Guard pursue some other budget strategies as well, including rethinking its missions and services provided to its customers.
    In this regard, I think there is a good opportunity now with the current presidential commission that is studying the Coast Guard's missions and functions. I think they are going to be able to validate the current missions and functions that need to be continued, and they might also identify some areas that can be modified, changed, eliminated, transferred, done in some sort of a lower cost way.
    Mr. GILCHREST. Have you been asked to give your recommendations on that?
    Mr. ANDERSON. Pardon?
    Mr. GILCHREST. Have you been asked to give your recommendations on rethinking the Coast Guard's mission?
    Mr. ANDERSON. No, we have not. And quite frankly, this is something that we have not done a review on ourselves, but there have been a number of studies—and I think we cited these in our 1997 report to you—that have pointed out that there are a number of areas that could be looked at.
    But I want to emphasize again, Mr. Chairman, that these, relatively speaking are not going to necessarily solve the Coast Guard's budget problem. There are going to be some bigger things that need to be done.
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    That basically concludes my oral statement, and we would be glad to answer any questions you have got.
    Mr. GILCHREST. I think you answered all my questions.
    [Laughter.]
    Mr. ANDERSON. That is good. It makes me feel good.
    Mr. GILCHREST. Well, I do not know if any of the staff have questions. Tim says no.
    Well, Mr. Anderson, Mr. Williamson, Mr. Asaba, thank you very much. I hope to see you again. As we move through the Deepwater process, we would like to have you back sometime in the late spring—
    Mr. ANDERSON. All right, fine.
    Mr. GILCHREST.—to discuss the progress.
    Mr. ANDERSON. All right.
    Mr. GILCHREST. Gentlemen, thank you very much.
    Mr. ANDERSON. You are welcome.
    Mr. GILCHREST. The subcommittee is adjourned.
    [Whereupon, at 4:59 p.m., the subcommittee was adjourned, to reconvene subject to the call of the Chair.]

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