Segment 2 Of 2 Previous Hearing Segment(1)
SPEAKERS CONTENTS INSERTS
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Tuesday, March 31, 1998
EDUCATION RESEARCH, STATISTICS, AND IMPROVEMENT PROGRAMS
WITNESSES
RICKY T. TAKAI, ACTING ASSISTANT SECRETARY FOR EDUCATIONAL RESEARCH AND IMPROVEMENT
PASCAL D. FORGIONE, JR., COMMISSIONER, NATIONAL CENTER FOR EDUCATION STATISTICS, OFFICE OF EDUCATIONAL RESEARCH AND IMPROVEMENT
THOMAS P. SKELLY, DIRECTOR, BUDGET SERVICE, OFFICE OF THE UNDER SECRETARY
CAROL A. CICHOWSKI, DIRECTOR, DIVISION OF SPECIAL EDUCATION, REHABILITATION, AND RESEARCH ANALYSIS, BUDGET SERVICE, OFFICE OF THE UNDER SECRETARY
Introduction of Witnesses
Mr. PORTER. The subcommittee will come to order. We continue our hearings this afternoon on the fiscal year 1999 budget for the Department of Education and we are pleased to welcome Dr. Ricky T. Takai, Acting Assistant Secretary for Educational Research and Improvement. Welcome.
Mr. TAKAI. Thank you.
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Mr. PORTER. If you would introduce the people who are with you and then proceed with your statement, please.
Opening Statement
Mr. TAKAI. Mr. Chairman, on my left is Dr. Pat Forgione, the Commissioner of Education Statistics. To my far right is Tom Skelly, Director of Budget Service. And to my near right is Carol Cichowski, also from the Budget Service.
Mr. Chairman, I am pleased to be here to discuss the President's budget request for the Office of Educational Research and Improvement (OERI). We are requesting a total of $935 million for OERI programs in 1999. Having a knowledge base from research and statistics to support education reform and equity is one of the key objectives of the Department's strategic plan, but, in fact, the activities of OERI support all of the strategic goals and objectives of the Department.
INCREASES REQUESTED FOR OERI
We are requesting increases in 1999 for a few selected OERI activities. For the others, we are requesting continued funding at the 1998 levels.
For research, we are requesting an increase of $50 million. Last year, the President's Committee of Advisors on Science and Technology issued a report that decried the dramatic underfunding of education research and recommended that the Federal investment be increased over the next few years to an annual investment of $1.5 billion. Currently, less than one-tenth of one percent of the total amount spent on K to 12 education each year is spent to determine what educational techniques really work and to find ways to improve them.
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The $50 million we have requested would support a research effort undertaken in partnership with the National Science Foundation (NSF) and the National Institute of Child Health and Human Development (NICHD) and other appropriate agencies, because research from other disciplines offers great promise in addressing major problems in education. A detailed plan for the use of these funds will be developed over the next several months in collaboration with NSF and NICHD, and we plan to consult with scientists and scholars from a wide variety of fields, such as cognitive psychology, computer science, as well as researchers and practitioners from the education community.
NICHD-funded researchers have demonstrated success with various strategies for teaching reading in early grades, implemented in controlled experimental situations, but we need to explore how those strategies might be implemented in regular classroom settings. We need to uncover the best approaches for training and helping teachers use research-based knowledge and strategies in their teaching. Or taking from the recommendations of the recent National Research Council report on reading, we need to study how successful methods for teaching primary language literacy might be adjusted to facilitate the transition to successful English literacy.
In the area of mathematics, we need to know why U.S. students seem to fall further and further behind students in other countries as they advance through grades K to 12. We need to determine how to organize mathematics teaching and learning so that talented students are not discouraged from taking more and more advanced courses in mathematics, and we need to know what approaches will ensure that teachers have the content knowledge and teaching strategies they need.
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In the area of learning technologies, we need to develop new instructional strategies that are possible because of technology, and we need empirical studies to determine which ways of using technology are, in fact, most effective.
In the area of statistics and assessment, we are requesting an increase of $13.5 million. The statistics increase would support a birth cohort in the early childhood longitudinal study so that we have information about the development of children in the earliest preschool years. Our request would also allow us to make the eighth grade math test from the Third International Mathematics and Science Study (TIMSS) available in 1999 to those States and districts that want to use it to benchmark the performance of their students with the performance of students around the world.
The assessment increase would be used to implement a set of enhancements incorporated in the redesign plan approved by the National Assessment Governing Board (NAGB). Funds for NAGB would support its duties related to both the National Assessment of Educational Progress and the voluntary national tests of fourth grade reading and eighth grade mathematics.
For Eisenhower Professional Development Federal Activities, we are requesting an increase of $27 million. Following the release of the eighth grade results from TIMSS, the President directed the Department of Education and the National Science Foundation to develop an action strategy for improving mathematics and science achievement. The increase in funding would support our efforts to implement the action strategy and accelerate a national effort to improve mathematics instruction in elementary and middle schools.
We are requesting an increase of $87 million for educational technology programs, primarily to support professional development for teachers. With the recent gains in the number of classrooms with access to the Internet and in students' access to classroom computers, professional development has been recognized as a critical need.
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The 1999 competition for Technology Innovation Challenge Grants would focus on strategies for in-service professional development in the effective use of educational technology. A separate competition for which we are requesting $75 million would focus on preparing new teachers to use technology effectively. Given the number of new teachers who will be needed over the next decade, we must begin now to develop the strategies that will ensure that new teachers come to classrooms prepared to help students learn with technology.
Our request also includes $10 million for grants to establish computer learning centers in low-income communities. Equitable access to technology is critical as computers and connectivity rapidly become a central part of education and the workplace.
We are requesting $200 million for 21st Century Community Learning Centers. These funds would support almost 4,000 centers and would enable public schools in high-need areas to stay open before and after school to provide extended learning opportunities and related services for children in safe and constructive environments under the supervision of adults. We received nearly 2,000 applications for this year's competition, which just closed yesterday, but we will be able to fund only 300 of them. The funds we are requesting for fiscal year 1999 can help provide these programs for parents and students who need them most.
Mr. Chairman, these are the highlights of our request for 1999. My colleagues and I will be happy to respond to any questions you and members of the committee might have.
[The information follows:]
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"The Official Committee record contains additional material here."
ASSESSMENT AND TECHNICAL ASSISTANCE
Mr. PORTER. Dr. Takai, thank you for that excellent opening statement.
A recent survey of State education officials concerning the implementation of education reform indicated that there was a need for ''a great deal more assistance in the areas of assessment and accountability, as well as in how to provide effective technical assistance to districts and schools not making adequate progress in student performance.''
This committee has, under both Democratic and Republican leadership, provided substantial sums of money for assessment and technical assistance activity and expressed our concern over the effectiveness of the Department in providing this assistance. In spite of protestations by Secretary Riley and others to the contrary, this report makes clear that we still have a long way to go in providing the necessary assistance to States and localities to implement comprehensive reform of our public education system.
What are you doing to address this perceived need by school administrators? What provisions exist within the President's budget request to address this need? And what kinds of outcome measures have you proposed or are you contemplating to focus attention on this failure of your technical assistance efforts?
Mr. TAKAI. Mr. Chairman, I think there are a couple of things which I am prepared to talk about with regards to OERI, but let me first talk about a few things that the Department has done with regard to technical assistance.
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OERI labs provide technical assistance as do other providers that address needs in math and science and technology. Technical assistance is also provided through the comprehensive assistance centers administered by the Office of Elementary and Secondary Education. I agree that there is sort of a patchwork of different kinds of technical assistance provided through Department programs, and there has not in the past been enough communication among those technical assistance providers.
Assistant Secretary Tirozzi last fall convened for the first time a summit of technical assistance providers. It was intended to bring together comprehensive assistance centers, the labs, as well as the ERIC clearinghouses and some of the research centers, to discuss topics such as comprehensive reform and reading, what they were doing, and what they could do in the future to better coordinate their activities.
We plan to follow up on a series of recommendations or suggestions that were raised during that summit, and we are planning to have another summit this summer. So that is one thing we are doing Department-wide.
The second thing is that the labs are required to convene meetings of technical assistance providers on a periodic basis—technical assistance providers in their region—with the purpose of developing technical assistance plans for each State. So each one of the labs is required by contract to do that.
In addition, with the new comprehensive School Reform Demonstration program that you are well aware of, $4 million was provided in the 1998 appropriations bill to provide additional assistance to States and local districts to implement that demonstration program. We have requested the labs to provide in their applications for that money a plan on how they are going to coordinate their activities with the comprehensive assistance centers and with other technical assistance providers. We think we have made a good first step. We recognize that there is a lot more that needs to be done, but we think we are moving in the right direction.
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Mr. PORTER. What about outcome measures?
Mr. TAKAI. I can speak about outcome measures as it relates to the laboratories. The laboratories' primary focus is on comprehensive school reform, and there are a series of measures that the labs, in collaboration with OERI, have developed for which they are currently collecting baseline data. Some of those things are customer satisfaction surveys with end users of the products and services that the labs are providing.
We will be collecting data through annual quarterly reports as well as customer surveys, and are in the process of collecting the first year of that data.
Mr. PORTER. Dr. Takai, several years ago, the Department provided this subcommittee with a list of research, demonstration, and technical assistance activities that I believe totaled approximately $500 million. For the record, will you please update that list for us?
Mr. TAKAI. I would be glad to.
[The information follows:]
RESEARCH DEMONSTRATION AND TECHNICAL ASSISTANCE ACTIVITIES
The material is too lengthy to be inserted in the record, but it will be provided to the committee as requested.
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EVALUATING THE EFFECTIVENESS OF EDUCATIONAL REFORM MODELS
Mr. PORTER. One of my concerns, in addition to the lack of Departmental focus or control on many of these accounts, is that when we need information critical to policy development, it is often not available. Let me quote from your draft guidance for comprehensive school reform.
Ideally, effective evidence exists that would demonstrate theory-based models have been evaluated using classic experimental control group designs in multiple sites for different groups of children, using before and after third party assessment. For a variety of reasons, such data is not available for most educational models.
What is the Department doing with the substantial money we appropriate for demonstrations, technical assistance, and research that results in a statement that you do not have a research base for determining the effectiveness of a series of widely-recognized models of education reform? What can you do to assure that these obvious gaps in research do not continue to exist?
Mr. TAKAI. Many of the models that are listed in the Comprehensive School Reform program were not funded by OERI. Those that were, most prominently, the Success For All program, do have evaluation evidence. For those other models that have not been funded by OERI, there have been very few independent third party evaluations done. We have, through the Northwest Lab, developed a compendium of models that simply provides a directory of what we know and what kind of data is available. Most of the evaluation data is collected by the developers themselves.
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We can do a couple of things in the future and there is something we are doing now. Last year, we had a field-initiated studies competition and one of the large grants awarded was for a study of comprehensive reform models being tried and tested in the Memphis Public Schools. A researcher is going to go in and follow about 10 to 12 of those different kinds of models. That evaluation is funded by OERI, and it is going to look at effectiveness.
The other thing we will do is make effectiveness, and the impacts of these reform models on students, the central focus of the evaluation the Department will be conducting of the comprehensive reform program.
Mr. PORTER. How long will it take us to do that?
Mr. TAKAI. Well, evaluating the end results, the bottom line impact on student achievement, will take at least three or four years. The thing that people will have to understand is that implementation of these models does take time. First, you have to establish some baselines for where students are currently in those schools, and as these reform models become fully implemented, then you begin to understand the impacts of these reform models on student achievement.
Mr. PORTER. Is there any way to take the data that the developers of the programs themselves have developed and analyze that data and see whether it is, in fact, objective and useful?
Mr. TAKAI. We have discussed that. We have no firm plans, but have considered having an independent panel of research experts take a look at the data. A lot of the data that has been collected by the model developers has focused on implementation issues.
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Mr. PORTER. And not on outcomes?
Mr. TAKAI. Not a lot on outcomes. Again, the developers are establishing baselines for where students are and then are tracking them over time to see how student achievement increases or changes as a result of the model.
Mr. PORTER. I can say that our interest in the end is how well it affects students and how they do. All the other measures are secondary to that one, obviously.
ROLE OF NCES IN EVALUATING PROGRAM EFFECTIVENESS
As I have indicated in other hearings, I have a number of concerns with the failure of the Department to provide specific measurable indices of student achievement in Individual Program Results Act measures. What can the National Center for Educational Statistics do to provide meaningful data to measure whether individual programs are or are not achieving their goals of improving student outcomes?
Mr. TAKAI. Mr. Chairman, I would like to turn to my colleague, Mr. Forgione.
Mr. FORGIONE. Thank you. Mr. Porter, the statute that authorizes the National Center for Education Statistics (NCES) calls for us to give leadership in the collecting, analyzing, reporting, and disseminating of information on the condition of education. It is not our mission to evaluate specific programs.
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Our data are useful for addressing important questions that arise so that the country knows how we are doing. For example, with TIMSS, not only did we give the Nation a benchmark on U.S. performance at fourth, eighth and 12th grades versus the rest of the world, but we have given people serious guidance about the need to look at curriculum, the rigor of teaching, and textbooks.
The difference, though, is that to answer the kind of question you just raised, you need a tightly-designed research study. You need to identify the question and collect evaluative information about it, such as NICHD does with its control groups and experimental models. Our mission is to provide a profile of the condition of education, but our data are often valuable in setting a context for program evaluations.
So from our data America cannot determine why our fourth graders did so well. We do not know what program did that. We can tell you the Nation's health at fourth grade compared to that of our international competitors is stronger than at eighth or 12th grade, but we cannot identify the cause. Those kinds of studies would have to be done by evaluation units, and the Department has those components. We are an independent statistical one that wants to give you information that will help you with the long term.
Mr. TAKAI. Mr. Porter, if I could just add on to Mr. Forgione's comments. In my job in the Planning and Evaluation Service, doing program evaluations as well as being involved in the development of the performance indicators plan that was sent up to you, I found that there are a variety of data that NCES collects that really do provide the context for assessing many of the Department's programs.
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The National Assessment of Educational Progress provides a barometer for student achievement among different groups. The National Postsecondary Student Aid Survey and the Beginning Postsecondary Survey provide very valuable information in terms of the effects of student aid on access and completion and selection of university.
So I think that it is true, as Pat said, that in order to look at program impacts, you do need tightly-designed evaluations, but NCES does provide very valuable data that several offices, the Office of Elementary and Secondary Education, the Office of Postsecondary Education, and the Office of Vocational and Adult Education, rely on, in some ways to provide performance indicators for the systems that the Federal government is investing in.
NCES PEER REVIEW
Mr. PORTER. All right. You indicate in your justification that the National Center for Education Statistics includes a review panel to monitor the technical and programmatic aspects of data collection activities. How would you compare the rigor and independence of this method with the concept of peer review as practiced by the science agencies such as NIH?
Mr. FORGIONE. I would say, Mr. Chairman, that our review panels are comparable in their scientific orientation. We have two mechanisms that we use to look at the rigor of our work. We have what we call technical review panels for each of our programs. We also have an internal adjudication process—I call it the eye of the needle—where our chief statistician will not let any report out if it has not been thoroughly reviewed.
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Looking at the first one, the technical review panels, for each of our major surveys, we bring in independent experts from outside to give us critiques on design, development, and implementation. They stay with the whole survey so that we can be assured and I, as Commissioner, can be assured that we are, in fact, asking the right questions, answering them with appropriate methodologies, and having integrity about the data process.
So with that part of it, we get both internal and external expertise. I think it is comparable to the peer reviews I have seen and, in fact, have served on in my previous capacities. When I was Commissioner in Delaware, I often was invited in to have that lens, both as a policy maker and as a person who has a little bit of evaluation expertise.
The second area is the adjudication process. We have a multi-faceted process of reviews before any document can be released. In fact, often the Department is a little disappointed that we cannot be quicker in our releases, but the nature of a statistical agency is to assure you that when the Commissioner releases the school violence data, as we did a week ago, or the TIMSS data, that you can be assured that these are comparable national or relative statistics. So I believe we try to emulate those science agencies and we really want that independent integrity. We also value the timely advice of constituents because we do not have enough funds and we want to make sure any data we collect are really needed.
AFTER-SCHOOL COMMUNITY LEARNING CENTERS
Mr. PORTER. Thank you.
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Dr. Takai, your request for after-school learning centers, we are concerned that you may be requesting funds for a new program, a relatively new program, far in excess of your ability to spend the money and we want to be assured that that is not the case. We increased this program from $1 million to $40 million and the administration now proposes to increase it to $200 million.
You said in your opening statement that we had just determined the allocation of the $40 million, is that correct?
Mr. TAKAI. No, sir. I said that the competition had just closed.
Mr. PORTER. Just closed?
Mr. TAKAI. Just closed, in terms of reviewing the applications.
Mr. PORTER. This program is a currently funded program. How much of the money have you obligated so far? None, I would——
Mr. TAKAI. None, because we have just finished reviewing the applications. There were approximately 2,000 applications that were reviewed at five sites around the country, with the assistance of the labs who helped us set up the logistics for these reviews.
But we expect to make the awards by the beginning of June. So the money will be obligated, we are fairly confident, by the beginning of June.
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Mr. PORTER. All right. So you are going to obligate all $40 million this fiscal year?
Mr. TAKAI. Yes, sir.
Mr. PORTER. OMB scoring indicates that you will actually spend $10 million on projects that are up and running in fiscal year 1998. Will the projects you approve actually spend $10 million, and if not, how much of the $40 million will be expended in fiscal year 1998 and how much in fiscal year 1999? I guess you are saying none of it would be expended in fiscal year 1998.
Mr. TAKAI. I think some of it would——
Mr. PORTER. Some of it may be?
Mr. TAKAI [continuing]. In terms of hiring and getting things up and running for the school year. But I believe that the large majority of the $40 million will be spent in fiscal year 1999.
Mr. PORTER. And how are you going to spend the $200 million then?
Mr. TAKAI. Based on the number of applications received this year, the demand far outstrips the amount of money that we currently have. We would run another competition, and we are fairly confident that the applicants who are not going to win for this round would come in again. A very large number of applications came in from rural and urban sites, and it was clear from the number of applications, and after talking to some of the staff, that the demand was great, but some of the applicants needed some technical assistance in how to put together the application.
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INTERAGENCY RESEARCH INITIATIVE
Mr. PORTER. You have indicated the very high importance that the administration places on your interagency research initiative. According to the justification, ''It will be a critical component of the Department's strategy for providing an up-to-date knowledge base to support education reform and equity.'' If this activity is so critical, why cannot the Department shift funds from lesser priorities to this critical component?
Mr. TAKAI. Well, the $50 million was never intended to rob Peter to pay Paul. The $54 million that we were requesting that would be spent through the institutes, we believe is still a very worthwhile investment, both in terms of the centers that are being funded as well as the field-initiated studies competition.
However, it is clear that there are advances from scientific disciplines outside of education, such as developmental psychology, cognitive science, advances in learning technologies that provide an opportunity for addressing persistent major problems in education in new ways. It is our belief that additional money, on top of the current investment, is needed at this point in time, given those advances.
Our plan is to bring together interdisciplinary teams of scientists from those different areas to focus on these problems. So that is why we have asked for this money for a collaboration with NSF and NICHD. As you know, they fund and have funded researchers who are beginning to provide evidence that has direct applications for improving education.
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I think that the recent National Research Council report is a good example of how you can draw together research from different disciplines to address major problems in education. We think that there is a lot of opportunity, given recent findings in these other disciplines, to focus on these problems in a new way, but we never intended to imply that the current investment was not worthwhile.
Mr. PORTER. Would you shift funds if we waived the statutory allocations, as requested in your budget?
Mr. TAKAI. The request to waive the statutory allocations was intended only to apply to the $50 million, not to the $54 million. Again, by regulation, we are committed to continuing the funding for the centers, and even if we did not have that regulation, I believe that OERI would do that anyway. So that if you waived the statutory allocations for the institute money, we would not shift the money around because that was not our intent.
Our intent was only to waive those statutory allocations for the $50 million because our feeling was that the approach on this $50 million should be first you bring together a cross-disciplinary set of researchers to figure out what the problems are that could be solved by research, what the designs and the methods would be, and then you think about how you would go about funding it.
Our expectation is that the institutes would be heavily involved in this work. However, we did not want to start with those constraints about how the money would be spent; that is, that one-third of the money has to go to centers, one-fourth has to be spent on field-initiated studies, and ten percent of an institute's budget could only be spent on cross-institute projects.
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INTERAGENCY RESEARCH INITIATIVE
It is clear our ability to focus on key problems would be greatly hampered if the initiative were limited by those statutory allocations and we could only spend a certain perentage of the money from the At-Risk Institute and from the Achievement Institute, for example, to focus on a problem.
Mr. PORTER. Was the request for waiver included in OERI's original request to the Secretary and was it included in the Department's submission to OMB?
Mr. TAKAI. The Department did request $50 million for research that brought together a variety of different types of scientists from different disciplines.
Mr. PORTER. In your budget justification, you state, ''Careful research could help us explore the relationships among brain research, cognitive science, and educational practice. It could help us grapple with whole language and phonetics and examine where and when mixed strategies are appropriate or not. It could help us assess the effectiveness and cost effectiveness of specific educational approaches and techniques that make use of technology.'' Why are we not doing this now, and if we are, why do we need a separate program for it?
Mr. TAKAI. We are not thinking of this $50 million as a separate program. Again, we asked for the money outside of the institute structure, simply for the flexibility. But once the plans are set and are developed in collaboration with NSF and NICHD and other appropriate agencies, we expect the institutes to be heavily involved.
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With regard to the first part of the question about why are we not doing it now, I would say that a lot of work has been done, particularly in the area of reading and technology. If I could take early reading as an example, there was a very important report that provided for the first time a consensus about what a group of distinguished scientists believed the research was saying in terms of how to prevent reading difficulties in young children.
However, one of the final chapters in that report listed almost 30 recommendations for research. Neither NICHD nor OERI is currently funding that research or has funded that research, which is not to say that the past investment has been wasted. In fact, I would say that OERI's investment in reading has been fairly significant with NICHD building on that earlier work.
The bottom line is that there is a wide set of research questions that the National Research Council report identified, and I think that set is a very good start to begin thinking about how to spend the $50 million.
FEDERALLY-FUNDED EDUCATION RESEARCH
Mr. PORTER. You state that
Federal support for education research flows through a number of offices in the Department and other Federal agencies. The organization with the broadest mandate in education research is the Office of Educational Research and Improvement.
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Given this role, can you tell me how much money the Federal Government spends on education research, what role your office plays in assuring the research, particularly in the other offices of the Department and other Federal agencies is of high quality and is not duplicative?
Mr. TAKAI. I do not believe that there are very good figures on the total Federal investment in education research. The President's Committee of Advisors on Science and Technology quotes a figure of the research investment at one-tenth of one percent of the total investment in K-12 education. That would work out to about $300 million. The Department's investment in research, including the NIDRR, is about $200 million. So if you were to take money that is spent in NSF, in HHS, it would probably total about $300 million.
In terms of the issue of quality, OERI, in collaboration with the National Education Research Policy and Priorities Board, has just recently published in the Federal Register what we call Phase III standards, which are standards to review the performance and quality of contracts, cooperative agreements, and grants that OERI funds. These are designed to provide guidance, particularly for our peer review process, to assess the quality of different research studies, as well as different grants administered outside of the research institutes.
We are currently using those draft standards as we are beginning to do the interim reviews of the research centers. We have made that guidance widely available to the rest of the Department, particularly OSERS and OVAE, which oversee the other parts of the Department's educational research activity, and it is my understanding that they are looking at that closely to see how that applies to their review of their research projects.
IMPROVING MATH ACHIEVEMENT
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Mr. PORTER. After reading your justification, I am still unclear as to exactly what specific activities will be undertaken in your national campaign to improve math achievement. What specific activities will this entail? Exactly what measurable outcomes do you propose and how will the subcommittee know in fiscal year 2000 whether you are making progress toward them or not?
Mr. TAKAI. I think that there are three or four components, and let me just list them. One is planning, capacity building grant program in collaboration with the National Science Foundation. There would be approximately $17 million that would be spent in competitive grants to districts to help them plan and assess their professional development activities and their curriculum for mathematics education.
I would say that, clearly, the key performance indicator for that program would be a review of the plans for coherent strategic ways of leveraging the variety of different funds that they get—from Eisenhower State grants, from Title I, from State and local funds—of which there is a significant amount, to provide high-quality professional development and curriculum that is benchmarked to world class standards.
The second area is directly related to providing professional development. Some time ago, after the eighth grade TIMSS results came out, the President issued a directive to NSF and the Department of Education to develop an action strategy. Just recently, NSF and the Department published that strategy. Part of that strategy was to develop trainers of trainers, in some ways along the lines of the National Writing Project, where you begin to develop teachers and curriculum developers who can then develop programs in their own districts and other areas. Clearly, the performance indicator for that would be a review of the kinds of professional development they are currently providing.
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The third area is technical assistance. We are asking for a small increase in the Eisenhower National Clearinghouse for Mathematics and Science Education and the Eisenhower National Regional Mathematics and Science Education Consortia, basically to, one, develop model materials, curriculum materials in mathematics education, and two, to disseminate and provide technical assistance to States and local districts.
Mr. PORTER. Thank you, Dr. Takai.
Mrs. Northup.
OERI PEER REVIEW
Mrs. NORTHUP. Yes, thank you. I have a number of questions.
First of all, can you tell me a little bit about your peer review program and how it is established, how it works. Is it a new emphasis on peer review?
Mr. TAKAI. Yes, ma'am. This was something that we are following as a result of the reauthorization of OERI, which called for developing a peer review process, not only for the review of the performance of the grants but also the review of applications. So the Department, OERI, has issued final regulations for the peer review process for the review of applications. Those came out, I think, a couple of years ago.
We currently have in draft a notice in the Federal Register for the criteria of how we would conduct peer review for the performance of any grant, cooperative agreement, or contract that OERI——
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Mrs. NORTHUP. When will you finalize that?
Mr. TAKAI. We are hoping to get comments from the public on the draft standards at the end of April.
Mrs. NORTHUP. So when will you publish the rule?
Mr. TAKAI. We are hoping maybe two months after receiving public comment. It depends on the number of comments we get and the seriousness of the comments. If they are not very serious or there are not very many, then it could be even sooner. It could be a month after that.
Mrs. NORTHUP. How does your peer review process compare to the NIH peer review process?
Mr. TAKAI. I think we are trying to model our peer review process after NIH, particularly with regard to the peer review process that we are applying to the OERI-funded research centers. We are bringing together teams of experts to do intensive reviews on site with the research investigators. We are planning to do two reviews in most cases. One review would probably be at the end of the second year, where we would ask the peer reviewers to recommend and make suggestions about mid-course corrections to the center.
COLLABORATION WITH OTHER AGENCIES
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Mrs. NORTHUP. I guess my concern is why we would add $50 million to research how kids learn to read, how kids learn to do math, when we already have the National Science Foundation and the NICHD doing that research and that seems to be an area that they are very comfortable with. They have peer review for that. I do think what you have described is important and a good process for sort of the applied evaluation of peer review, but the learning concerns me, I mean, how kids learn, sort of the scientific basis research. That is a concern to me.
Mr. TAKAI. I would say that we have had extensive discussions with NICHD staff who are doing research on reading, and, although the discussions are in the preliminary stages, there is a general agreement that in many ways was echoed by the National Research Council's (NRC) report that just came out on reading, that there would be a lot of benefit to having a collaborative effort between NICHD, NSF, and the Education Department.
The NICHD work, as important as it is, was done in a fairly well designed, experimentally controlled setting. I think the one issue that was noted in the NRC report is, can you take those findings that were developed out of these very tightly controlled experiments and put them in a real classroom setting. That is something that a collaboration between the Education Department, who knows a lot about schools and in some ways has entre to the schools, in collaboration with NICHD could do. Another example is bilingual research.
Mrs. NORTHUP. Let me just, because I know my time will run out and I have got a lot of questions, let me just interrupt you with that and say I agree with the collaboration. I noticed that I think you have a collaboration, how much set-aside for the new panel that would be established between NICHD, do you not?
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Mr. TAKAI. Do you mean the $50 million, ma'am?
Mrs. NORTHUP. I am sorry. I am really—oh, it includes $50 million for a new interagency research initiative, is that right? I just wondered what the difference was with the one that we established in the budget bill last year. Senator Cochran and I collaborated on establishing this panel——
Mr. TAKAI. Yes, ma'am.
Mrs. NORTHUP [continuing]. And I wondered why you were proposing another one that seemed almost identical.
Mr. TAKAI. Well, we are not proposing a panel. The panel that has just been formed is a panel more along the lines of the National Research Council panel. It is to build on the recommendations and the findings of the NRC report as well as to review the available evidence on early reading, and that activity is very different from the $50 million that we have requested. One is a panel to review research. Our $50 million is actually to conduct research.
Mrs. NORTHUP. I guess what I thought is that the panel would be a starting point for NICHD to say, this is what we have learned, and for the Department of Education to say, these are the questions we need to ask, and that collaboratively, you would establish sort of what the next questions are and what the next grants would be. It seems to me that that would be the way to sort of collaborate in the direction that the research takes.
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Mr. TAKAI. It is my understanding that the timing of the panel's final recommendations, the panel that you and Mr. Cochran worked to establish, would in some ways coincide with the need for additional money in fiscal year 1999. There is a set of very detailed recommendations in the NRC report that I believe this new panel will want to review and consider. We are, at the same time, reviewing those recommendations along with NICHD to see what the early directions might be. I know that in the charge to this NICHD consensus panel, there is also a charge to develop a research agenda, as well.
I believe that both of those, the results of the panel that just concluded from the National Research Council as well as the upcoming December report to Congress from the panel that you helped to create, basically will provide a very good start.
We are not planning to do something separately from the work of either the NRC or the NICHD panel. My guess, though is that there will be a fairly long list of recommendations that will require a lot of further discussion, both with the research community as well as between Education and NICHD.
EVALUATION OF COMPREHENSIVE SCHOOL REFORM
Mrs. NORTHUP. Could you tell me what sort of evaluation assessment you are going to do for the comprehensive school reform?
Mr. TAKAI. That evaluation is not going to be conducted in OERI. It is going to be conducted in the Planning and Evaluation Service.
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Mrs. NORTHUP. In the what?
Mr. TAKAI. The Planning and Evaluation Service, which is in the Office of the Under Secretary. They are just beginning to make plans for that. I would be glad to send up to you what the current thinking is on it, but right now, I am not quite sure how far along they have gotten.
Mrs. NORTHUP. We were told that the regional laboratories were actually going to do the assessment.
Mr. TAKAI. The regional laboratories are going to provide evaluation assistance to individual States and districts as they implement their own models. However, I think there was a requirement in the Appropriations Act to do a national evaluation. That is what I thought you were talking about.
Clearly, the national evaluation should not duplicate or overlap with the work that is being done with the labs. But often in those cases, the national evaluation relies on the work that is being done through the labs or through independent evaluators, that States and local districts contract with them separately in order to collect the data that they want for the national evaluation.
Mr. PORTER. Thank you, Ms. Northup.
Mr. Wicker.
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Mr. WICKER. Mr. Chairman, I do not have any questions for this witness and I would yield my time to Mrs. Northup.
Mr. PORTER. Fine. Mrs. Northup?
EVALUATING EDUCATION REFORM MODELS
Mrs. NORTHUP. Thank you very much. I am sure it will go the other way some day, Mr. Chairman. Thank you, Mr. Wicker.
Let me just ask you, there are certain models, I believe, that are to be evaluated. That was sort of part of the bill. How would a new model go about getting evaluated? Let us say that somebody puts together or is implementing a model that they believe works. How would they go about becoming one of the sort of model models?
Mr. TAKAI. Well, first, they have to meet those nine elements that are specified in the statute. The first thing you would look at is what is the research basis for it if it is a home-grown model. From that research basis, there are a series of assumptions that need to be tested in terms of its effects on teachers and its effects on students and its effects in terms of student behavior, in terms of discipline and attendance, in terms of teachers, in terms of teaching instruction, use of time——
Mrs. NORTHUP. I guess my question is, will you all be doing that or will they have to produce the essential data and then you will determine whether or not it is a recommendation?
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Mr. TAKAI. I think it can come in a variety of different ways. It could come through the national evaluation, because my feeling is that on the national evaluation, you could not evaluate every program that is being funded through the 3,000 schools. You would have to be selected and you would have to pick certain different types of models. So you would not only just pick the most popular brand-name kinds of models but also models that have been built from scratch or built from different components, and you would pick some of those models and evaluate them. One of the things—
Mrs. NORTHUP. Do you mean in addition to the ones that were named in the bill?
Mr. TAKAI. Right. Right.
Mrs. NORTHUP. Okay.
Mr. TAKAI. The labs are very good at providing assistance on how you set up a credible evaluation design that provides evidence whether the reform model is an effective one that could be used and widely disseminated through other labs.
DISSEMINATION OF EFFECTIVE REFORM MODELS
Mrs. NORTHUP. And how would you disseminate that, through the LEAs or SEAs?
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Mr. TAKAI. From OERI, you can disseminate through the lab network. You could disseminate it through our ERIC system. There are a variety of ways you would want to disseminate that kind of approach. You could also disseminate it through the Blue Ribbon Schools, which in some ways is not really a dissemination avenue, but it actually has a very powerful effect because that kind of recognition gets a lot of attention by other States and local districts.
AFTER-SCHOOL COMMUNITY LEARNING CENTERS
Mrs. NORTHUP. And the before- and after-school program, I am very interested in that. I am from an urban area and in the last couple of years, a number of our faith-based communities that have large minority populations have actually built some centers and provide after-school tutoring and learning and opportunities and have really the confidence of the communities.
This is particularly important in Louisville, because we have busing, and so the children are often far away at school during the day, and I am interested in knowing whether those faith-based communities will be able to fully participate as an after-school learning center.
Mr. TAKAI. Under the current competition, in accordance with the statute, the money is to go to school districts, but those school districts can run before- and after-school programs in collaboration with community-based organizations.
Mrs. NORTHUP. And faith-based organizations? Are you aware of how often that occurs?
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Mr. TAKAI. I am not. I do not know.
Mrs. NORTHUP. Is the legislation, is it passed?
Mr. TAKAI. We are operating under current legislation. We are planning and would like to amend the current statute to provide a ten percent set-aside for community-based organizations, but I do not know about faith-based—
Mrs. NORTHUP. Have we seen that language yet?
Mr. TAKAI. We are not planning to send up separate language. We are hoping to look for opportunities for bills as they are moving through the process.
Mrs. NORTHUP. So currently, right now, you are not aware of any after-school programs that include faith-based communities?
Mr. TAKAI. No.
Mrs. NORTHUP. So all of these wonderful opportunities that have the support of our community for kids that are bused so far from their school but now come back to their neighborhoods and these new buildings, possibly these funds would attract the same kids and, in a sense, leave them without resources or with a student base anymore.
Mr. TAKAI. Yes. We will definitely check and get back to you. I do not know whether or not you had heard, but the competition for the 21st Century Community Learning Center just closed on Monday. We received over 2,000 applications. We can go through those applications and do a quick screen and see whether or not faith-based organizations were in partnership with local school districts. With regard to whether or not they are eligible, we will have to check on that.
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Mrs. NORTHUP. I would not be surprised if a school system would not, for example, include them, because there is almost a competition out there, to be very honest. But it does not mean that the people they are serving would not like to keep their child where they currently are.
It concerns me that what we are going to do is create a system that competes with that nonprofit community that is really the heart and soul and inspiration of many of the kids that are in the program. I have visited these programs. They are very impressive and they certainly could use some Federal funds. But if that is not where we are going, I would really like that information before we get into the appropriations process so we know whether or not we will undo the successful programs that exist.
Mr. TAKAI. Okay.
Mrs. NORTHUP. Thank you, Mr. Chairman.
Mr. PORTER. Thank you, Mrs. Northup.
Dr. Takai, thank you for answering all of our questions. We have lots of additional questions for the record that we would also ask that you answer.
Mr. PORTER. Thank you for appearing here today.
Mr. TAKAI. Thank you, Mr. Chairman.
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Mr. PORTER. The subcommittee will stand briefly in recess.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Tuesday, March 31, 1998.
OFFICE OF INSPECTOR GENERAL
WITNESSES
STEVEN A. McNAMARA, ACTING INSPECTOR GENERAL
ROBERT G. SEABROOKS, ACTING ASSISTANT INSPECTOR GENERAL FOR AUDIT
DIANNE G. VAN RIPER, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS
THOMAS P. SKELLY, DIRECTOR, BUDGET SERVICE
Mr. PORTER. The subcommittee will come to order.
We continue our hearing on the Department of Education's Fiscal Year 1999 budget with the Office of the Inspector General and we are pleased to welcome Steven A. McNamara, the Acting Inspector General.
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Mr. McNamara, why do you not proceed with your statement and introduce the people here with you?
Mr. MCNAMARA. Thank you, Mr. Chairman.
Introduction of Witnesses
With me today are my two colleagues. On my left is Dianne Van Riper. Diane is our Assistant Inspector General for Investigations. On the far right, as you know, is Tom Skelly, who is the Director of our Budget Service. And on my immediate right is Mr. Robert Seabrooks, who is the Acting Assistant Inspector General for Audits.
Mr. Chairman, and members of the committee, I am pleased to have the opportunity this afternoon to discuss the Fiscal Year 1999 budget request for the Department of Education Office of Inspector General.
With your permission, Mr. Chairman, I would like to submit my statement for the record and present a brief summary of it for the subcommittee.
Opening Statement
Mr. Chairman, members of the subcommittee, we are requesting a budget of $31.2 million for 1999. This is an increase of about $1 million from 1998, about half of which is going to be used to take care of pay raises and other things and the balance of which is going to cover small items for rent and contracts and pencils and papers and that sort of thing. So, it is essentially what we got last year adjusted for inflation.
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But we believe that with our goal to add significant value by helping the Congress and the Secretary improve education program delivery, effectiveness and integrity we can use this money effectively.
We will do this through a program of high-impact audits and investigations focused on high-risk areas and critical issues within the Department. Our emphasis is on major systemic program and operations issues that are larger in scope than a traditional single entity focus.
This type of work on the front end will lead to more effective programs with built-in controls rather than relying solely or principally on resource-intensive after-the-fact detection. For example, a number of our investigations have uncovered fraudulent receipt of millions of dollars of SFA funds by students who have misrepresented their family's resources and fraudulent activity by consultants who have advised them in doing so.
Resulting cases have led to large cumulative recoveries. This work has led to major efforts in our investigative area to look at these marketing companies that are providing this type of advice to students and their families.
At the same time, OIG auditors conducted an audit which matched student aid applications with IRS data and concluded that Education was awarding over $100 million annually in Pell Grants to persons who were ineligible. I might add that this audit made the front page of the Wall Street Journal when it was issued.
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The OIG used the results of both these investigations and the audit to recommend a front-end control that is a mandatory match with IRS data and this recommendation is now under serious consideration here in the Congress in connection with HEA reauthorization and elsewhere.
OIG ACCOMPLISHMENTS
Other examples for our accomplishments include the HEA reauthorization proposals that we submitted to Congress, which were designed to greatly improve the integrity of SFA programs and save hundreds of millions of dollars; audits of the Department's oversight of the direct loan program, its implementation of the Government Performance and Results Act, and Year 2000 Initiatives; and finally investigations of trade schools as well as major lenders and servicers, SFA marketing companies and foreign medical schools.
OIG FISCAL YEAR 1999 FOCUS ON SYSTEMIC IMPROVEMENT
We will continue our focus in Fiscal Year 1999 on the student aid programs, the Department's information systems, GPRA and Year 2000 Initiatives and reauthorization of the Elementary and Secondary Education Act.
With our emphasis on systemic improvement in these high-risk or critical areas we believe we will be able to help Congress and the Secretary improve education in the United States.
FINANCIAL STATEMENT AUDIT NOT YET ISSUED
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Mr. Chairman, before I invite any questions I would like to correct some misinformation that appeared in the Washington Post today and in the Wall Street Journal. There was a reference that the Department had received a clean opinion on its financial statement audit. That is premature. That audit is not yet completed and probably will not be issued until May. I think they mixed us up with the Department of Energy. Somebody told them DOE and they got the initials mixed up. So, that was an error that appeared in both of those publications.
Would that it were true, but that completes my comments, Mr. Chairman, and we would be glad to answer any questions.
[The information follows:]
"The Official Committee record contains additional material here."
Mr. SKELLY. Before you get into that, Mr. Chairman, I read the articles, too, and I talked to Steve about it a little. I think that there is another report coming out from the General Accounting Office tomorrow and the articles did not mean to say that our independent audit had given us a clean audited opinion yet. But it appears that there is some other audit report that these stories were talking about.
Mr. MCNAMARA. Well, the GAO report is on the Government-wide audit and to give that opinion they are relying on the individual audits, of the agencies and they commented in the Post article on about 7 or 8 Departments that they said had passed muster and we were in that list.
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Mr. SKELLY. So, we do expect to get a much better opinion than we have had in the past. In the past, the Department could not have an opinion done. Auditors found that the data were not reliable enough. We have done a lot of work with auditors in providing them, particularly, estimates on our student loan losses. And they have indicated to us that as recently as yesterday morning there was no deal-breaking issue or any major problem they had as of yesterday morning.
So, we are looking forward to their opinion, whatever it is.
Mr. PORTER. Thank you, Mr. McNamara.
Mr. Wicker.
Mr. WICKER. Thank you, Mr. Chairman.
ACCOUNTING FOR EARLY CHILDHOOD DEVELOPMENT GRANT FUNDS
First of all, Mr. McNamara, I have a question that you may have to get back to me about. But it involves some information that was provided to our delegation, specifically to Senator Cochran from Judith E. Heumann, Assistant Secretary, Office of Special Education and Rehabilitative Services.
Our delegation had requested some additional funding for an early childhood development project in the Mississippi Delta. The response on behalf of the Secretary was that Mississippi was having trouble spending the money that we had and stated specifically that Mississippi allowed $556,000 or 21.2 percent of its 1995 award to lapse which, of course, sounds awful and that we have in our State 85 percent of our funding remaining.
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The problem is that our own State director of special education disputes these numbers. As a matter of fact she told my staff that only about $30,000 of the 1995 funding was not spent and more than 90 percent of the 1996 funds had already been obligated. I just want you to check on that.
It is my understanding that this subcommittee has had trouble getting this sort of information from the Department of Education and yet some erroneous numbers were provided at least according to our own State officials who administer the program.
And, so, I wish you would look into that. Possibly you could comment now but I doubt if you could.
Mr. MCNAMARA. I do not know anything about it. We will look into it and if it would be all right we would probably like to be in touch with your staff to get all the pertinent details.
Mr. WICKER. Please.
[The information follows:]
MISSISSIPPI SPECIAL EDUCATION FUNDS
At the time of Assistant Secretary Heumann's letter to Senator Cochran, the Department of Education had not received Mississippi's expenditure report for $556,000 in Fiscal Year 1995 funds. Department staff visited Mississippi on November 13, 1998, to work with State staff reviewing expenditure documentation. On February 6, 1998, the Department received Mississippi's expenditure report showing expenditures of $510,102. Therefore, the correct amount of Fiscal Year 1995 funds that lapsed is $45,898.
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Very good. We do have a concern that the Department should be able to keep track of funding in an efficient way and answer requests that the committee has. But I will move on.
Mr. SKELLY. Mr. Wicker, I might add that we have requested funding in another account called Program Administration to implement a new financial management system. And it would track payments against grants to States in a much more efficient and effective manner.
That system is scheduled to go on line in May of this year. We have been a couple of years in getting it up and running. We agree that we have had a problem in getting good data on some of these spending patterns and that is why we have invested money in development of this new system and we hope it will give us the better information faster.
Mr. WICKER. I thank you for that answer.
ASSESSMENT OF SAFE AND DRUG-FREE SCHOOLS AND COMMUNITIES PROGRAM
The area that I would like to touch on during my time concerns drug programs. The Speaker just appointed me recently to a task force on a Drug-Free America. And, so, I have had an opportunity to look into this more deeply than I had previously.
Can you tell me in addition to the Safe and Drug-Free Schools and Communities program, how many other programs do we have in your Department that deal with drug prevention, drug-abuse prevention and that sort of area?
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Mr. MCNAMARA. Mr. Skelly might be in a better position to answer that than I. I am not sure of any others.
Mr. SKELLY. Mr. Wicker, the Safe and Drug-Free School program is our primary vehicle for dealing with school violence and use of drugs and alcohol. We do not have other programs that support that kind of activity.
Mr. WICKER. So, it is not only the primary, it is the sole program?
Mr. SKELLY. It is the sole program that has that purpose, you are correct.
Mr. WICKER. Okay, fine.
Well, let me just ask you, I note that in the Department's justification and estimates on page D–34, it talks about the flexible framework of the Act and the Department's concern that these funds be spent in the most effective manner possible. And then it says this, and I quote, ''The authorizing statute currently is so flexible that recipients of these funds may be using them to support activities that are the most popular or the easiest to implement but not necessarily the most effective at reducing drug use and violence among youth.''
That is certainly a concern that I have. And it is a concern of the people who so far have met with the task force. And I noticed that the Department lists particular goals, but what are we doing within the Department to ascertain that the funds are being used by the States, by the State departments and by the governors as they are intended at this point in the Act and that they are being used effectively?
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Mr. MCNAMARA. Mr. Wicker, we have an ongoing audit right now of the Safe and Drug-Free Schools and Communities Program. We have completed a survey in the State of New Jersey. We currently are looking at Alabama and Texas, and we are going to go to 2 additional States.
As you stated, the Act is very broad and it allows a good degree of latitude. Part of our audit approach is looking at the plans submitted by the State to evaluate them and then going out to the State and looking to see how they had rolled up the results from their LEAs in terms of how they were going to use the funds and see if it seems to make sense and if it flows all the way down.
As you no doubt are aware, those grants are divided into a governor's portion, which I believe is about 20 percent.
Mr. WICKER. Twenty percent.
Mr. MCNAMARA. And the rest goes out to the school districts. We are in the process also of looking at the measures for these plans to try and get a sense of how effective the program is. In the survey work we did a couple of years ago, we were impressed by the fact that you could do anything and there was concern at that time that people were sodding football fields and other stuff. We never did find any of that and we have not found anything like that at this point, but we are in the process right now of auditing this program and we hope to have a report in late summer.
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Mr. WICKER. Do you advocate changes in the statute?
Do you think you might be coming forward with that?
Mr. MCNAMARA. There may be some coming out of the results of our audit but that would be premature right now for us.
Mr. SKELLY. The administration has proposed a change in the statute and instead of having the State grant program we would propose an earmarking of $125 million that would go out on a competitive basis rather than a State formula basis. The funds would be awarded for projects that had demonstrated their effectiveness based on previous research findings.
AUDIT WORK ON FEDERAL SCHOOL DRUG PROGRAMS
Mr. WICKER. Well, I think based on just the overall data about drug use among teens, we would have to conclude that what we are trying to do Government-wide right now is not working.
And I expect that what we are being told by some of the experts is true in that a lot of this money amounts to nothing more than revenue sharing from the Federal Government to the schools to use in a variety of ways. Something is not working in the schools.
What have your audits shown, these 4 audits, I believe?
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Mr. MCNAMARA. Well, we completed our survey work in New Jersey and they look pretty good from the preliminary results that we have gotten. We are just in Alabama and Texas now and I do not have any results on them yet.
Mr. WICKER. They look good from the standpoint of following the plan that they submitted?
Mr. MCNAMARA. Yes, and that the plan was rolled up from the local level and that it seemed to be focused on going to what was perceived by the community to be what they needed.
Mr. WICKER. Do you have——
Mr. MCNAMARA. I can get back to you with more information on that but that was the initial survey that we did to get ready to visit the other States, sort of to get a sense for how things were working, and we did not find significant problems there.
I am aware of your other comment though that I think the DARE program is one that some of the governors are using fairly heavily to put money into and I think that has been the subject of some research in terms of how well that works or does not work.
Mr. WICKER. To your knowledge, has any recipient of these funds ever been sanctioned for improper use?
Mr. MCNAMARA. Not to my knowledge. But at this point we started just recently on the audit and we can follow-up on that and find out.
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Mr. WICKER. I would appreciate that.
[The information follows:]
SAFE AND DRUG FREE SCHOOLS AND COMMUNITIES PROGRAM
Grantees receiving at least $300,000 in Federal funds are required to have a Single Audit performed. The Department of Education prepared a Compliance Supplement, for Elementary and Secondary Education Act programs which is intended to direct auditors' attention to those issues that are most suited to review by an auditor. The Compliance Supplement includes audit steps designed to detect violations of program requirements and includes a separate section on the Safe and Drug Free Schools and Communities (SDFSC) program.
In addition to the Single Audits, States' and the Department's program offices monitor grantees for compliance with the SDFSC program requirements. Audits and program office compliance reviews have identified a number of violations of the SDFSC program requirements and corrective action has been required in many instances. During the audit resolution process, the program office has been very successful in negotiating a voluntary repayment of misexpended or lapsed funds from States. However, noncompliance with SDFSC program requirements, identified during Single Audits and monitoring reviews, does not appear to be more widespread than in other Department programs.
We currently are performing an audit of the SDFSC funds going to State and local education agencies. Our objectives are to determine the flow and use of funds at the Federal, State and local levels and to assess the process used for developing measurable goals and objectives. We plan to visit five States and six local education agencies in each State.
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Thank you, Mr. Chairman.
Mr. PORTER. Thank you, Mr. Wicker.
AUDIT OF YEAR 2000 COMPUTER SYSTEMS READINESS
Mr. McNamara, can you give the committee an update on how the Department is progressing and preparing for the Year 2000 and its impact on the various computer systems?
I understand that a number of Department systems were certified by vendors or contractors as Year 2000 compliant that have proven not to be.
Is this a problem and, if so, what can be done about it? Given that the Department is experiencing substantial systems deficiencies independent of the Year 2000 program, especially in the student financial assistance programs, what specific steps should this subcommittee and the Department take to ensure a smooth transition to the new millennium at the Department?
Mr. MCNAMARA. Mr. Chairman, I brought with me a copy of an audit report that actually we have issued today entitled, ''The Status of the U.S. Department of Education's Readiness for the Year 2000.''
In answer to your question, yes, it is a concern. Yes, there are several systems that initially were thought to be compliant that are not. In a nutshell, the Department is behind. It has moved up rapidly in the last several months but there is still a formidable task. It needs to accelerate its efforts. It needs to complete its Department-wide systems inventory. It needs to develop an estimate of the costs. We had estimated that an industry standard of about $1.00 a line of code it would cost about $30 million. The Department has recently come up with an estimate of about $23 million that they thought it would cost to fix our systems.
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We need to continue and expand our coordination with external providers because it is not just whether we internally in the Department can get our systems in order. We interface with guaranty agencies and a wide range of other people and it is important that our trading partners also be compliant.
We need to enhance our plan for contractor oversight, as you mentioned. There was an indication initially that they were compliant and now we are finding they are not. We have been requested by the Department to look at this. And we will be, in addition to the independent validation and verification contractor that is going out to look at this. The Inspector General is going to be doing work helping validate that these systems truly are compliant.
And finally, our recommendation was that the Department needed a contingency plan if, for example, a large guaranty agency cannot come up on January 3rd of 2000. So, we have issued this report to the Department. Management substantially agreed. I might add that they have a very top level effort led by the Deputy Secretary, and I think they have a meeting about every two weeks on this. They were making up ground fast but there is a lot of ground to cover.
Most recently, the chairperson of this project has left to go and take an important post at another agency. So, that is a little bit of a drawback but the Deputy Secretary has appointed a new project director and we are hopeful that we will not lose too much steam on that.
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SUBCOMMITTEE HEARING ON THE YEAR 2000 ISSUE
Mr. PORTER. Well, Mr. Skelly, let me give you a heads-up because this is not just for you, it is for each of the Departments and agencies under the subcommittee's jurisdiction. But we are very concerned that we are going to get down to the year 2000 and have substantial problems somewhere in the Departments and agencies under our jurisdiction. I do not want that to happen, obviously.
We are going to hold a special hearing later after our regular hearings have been completed and we are going to invite the GAO that has reviewed each of our three Departments, and the Inspectors General of each of the Departments to sit at the table, the three departments and the agencies where the problem might be most critical, and then in the audience all the other agencies under or jurisdiction.
Because I want to make certain that this does not turn up after the year 2000 rolls around as a problem anywhere. I think it is a serious matter that people have not gotten serious enough about early enough and I want to put some serious pressure on all of you to make certain we do not have the kind of problems that we could have if we do not address this.
I know you are working on it. You just said that you were.
Mr. SKELLY. We are and we would welcome your support and appreciate your continuing support over the years. We have requested additional funds in our 1999 budget for year 2000 compliance efforts. And those are based on estimates even before we have done all of our reviews.
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We have retained Booz, Allen, Hamilton to help us work with our systems and people are spending a lot of time on this, particularly the folks in the student financial aid areas where the head of our Program Systems Service, I know, has spent every day last week on the road going to the various contractors in Iowa, Connecticut, Texas, and other places where we have big systems contracts, spending a whole lot of time on it.
Mr. PORTER. I am not very computer literate but it seems to me that it is sort of amazing that along the line nobody contemplated this problem. I mean somebody did but a lot of people did not obviously and we have a problem like this that is going to cost hundreds and hundreds of millions of dollars throughout the Government, maybe billions of dollars throughout the Government, to address.
YEAR 2000 COMPLIANCE OF OUTSIDE ENTITIES
Mr. SKELLY. Well, we have a different problem. It's not just the Department's own systems. Another problem is the systems of schools and colleges that work with us. They are not necessarily compliant. We have tried to publicize the problem quite a bit in the last few months to get their attention. We have information up on the Department's Web page, and we are sending out guidance to all the schools to remind them to get up to speed. It is not just our——
Mr. PORTER. Mr. McNamara raised that, too, with the contractors and we have the same problem with Social Security. The State agencies may not be in compliance even though the Federal agency is. And how do we ensure that the whole system does not back up because of that.
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So, I think it is a serious problem and while we have given it a lot of attention, throughout our hearings, I think a special hearing on this whole question is probably well warranted and I want people to understand how seriously we view the problem in the subcommittee and how much we want to ensure that it does not end up being a practical problem when we reach the year 2000.
Thank you.
ASSESSMENT OF GPRA COMPLIANCE BY EDUCATION
On page 6 of your most recent report to Congress indicates that you began an audit to assess the Department's system for implementing GPRA and for the collection and recording of performance data. Many, but not all, of the programs within the Department of Education have not provided specific measurable standards by which to measure their results and determine how they contribute to the Department's overall performance objectives.
How does your office interact with the rest of the Department to identify and measure such programmatic standards? What is the status of your audit process and what future audit activities are you planning?
Mr. MCNAMARA. The status of the audit is that we expect to have an audit report issued in early summer looking at basically the Department's implementation of GPRA and the systems that it is setting up to track the measures.
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After that we will be moving into looking at specific systems and the accuracy of the information that is being reported. So, we envision years of work in this area, cascading from where we are right now. We have worked with the Department in an advisory capacity during the preparation of the strategic plan and subsequently its performance plan.
The Department got fairly high marks from Congress on the strategic plan. I do not think anybody has given out grades on the performance plan yet. Our role is going to be one of assuring that the information will flow through systems that can be considered to be reliable and that data will be valid and verifiable, and that we will not be using data, say, NCES data, for purposes that they were never intended. We need to ensure that the data that is coming in can be relied on.
One of the recommendations we made to the Department that they did accept was that they would hold their managers responsible for making an assertion that either their systems were capable of providing accurate and reliable data or, if they could not make that assertion, that they would put together some type of a corrective action plan to get it to the point where they could be.
And I am aware that not all of the programs have provided specific measures. I think, just as an observation, you know, you cannot throw a rock and not hit an advertisement for a conference on GPRA any more. I mean they are all over the Internet and everybody is having them.
One of the common threads that has gone through what we have heard is that you have got the beginning of GPRA, which is all the paperwork stuff, the plan and the performance plan and that sort of thing. And one of the speakers at a conference asked this audience full of people to raise their hand if they were actually using GPRA to make management decisions or allocate resources. Not one hand went up.
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So, I think we are at the beginning now, sort of climbing the mountain, and I think we have got the paperwork down and the Department has made a good start at getting its tracking system established. And now, the real effort is going to be in inculcating this into the culture to where we really start working on results-oriented management techniques.
Mr. PORTER. Do not worry, we will work on it very hard here.
Mr. MCNAMARA. I trust you will, Mr. Chairman. [Laughter.]
REPORT ON COLLECTIONS AND FUNDS PUT TO BETTER USE
Mr. PORTER. Two years ago, the subcommittee asked each of the Inspectors General to report to it on the funds actually paid to the Federal Government as a result of fines or forfeitures or the actual use made of funds put to better use as reported by the IGs.
Your office and the Department of Labor office are having some trouble compiling these reports. Can you discuss these problems and how you feel they impact on the overall Federal governmental financial management systems?
I understand that the HHS–IG is not having similar problems. Do you know why? When will you be able to provide the information we are requesting.
Mr. MCNAMARA. Let me take a start at the beginning of that question and then perhaps ask Ms. Van Riper to help me with the particulars on the Department of Justice.
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I do not know why HHS is not having problems. I think our sense of the problem is that the data that the Department of Justice reports to us on court ordered fines and restitution is much lower than what we think it is or ought to be. Some of the reasons for this could be we report them when they are ordered and we also report them when they are collected and those may be different periods.
So, you may have some timing differences. In discussions with members of your staff, I jointly signed a letter with the IG from Labor and sent it to the IG at Justice pointing out that when we consulted with the people in the financial area at Justice, they indicated their systems would not provide us the information in the form that we needed to report to the subcommittee.
This was a heads-up to him that the subcommittee might be talking to his oversight or budget subcommittee. I guess, Diane, can you answer what the specific problems are with Justice in terms of what we think we are not getting?
Ms. VAN RIPER. I think Mr. McNamara has captured the essence of the problem and that is that what we get from the Department of Justice is going to be lower than the amount actually collected. What Justice gives us will be an amount that will not include the court ordered fines, or the damages that have been assessed in a civil complaint.
The other problem is that in many cases the Department of Justice does not have the Department of Education identified as part of the investigative component that actually worked the case. And in those cases, rather than that monetary amount being reported to us, the money is just transferred into the victim protection program and we do not get credit for that amount.
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As an example, we have two cases that are currently in settlement negotiations and we expect settlements in the near future. Those settlements are going to result in excess of $36 million in cash being paid by two entities. In one of those cases, I would expect that the collections that we will report will be half of the amount actually paid because the rest of it constitutes double damages that will go to the Department of Justice.
EDUCATION PROGRESS ON COMPUTER SYSTEMS INTEGRATION
Mr. PORTER. All right. This is a lengthy question. The Higher Education Amendments of 1992 required the Department by January 1, 1994, to integrate its National Student Loan Data System—NSLDS—with other student financial assistance programs. Last July, three-and-a-half years after the statutory deadline for integrating these systems, the GAO and the IG testified before the Education and Workforce Committee regarding this matter. GAO stated that the Department had made only limited progress in integrating NSLDS with the other student financial aid systems. And that, as a result, the process is cumbersome, expensive, and unreliable.
The GAO further testified the Department had not established common identifiers and standardized data reporting formats.
Second, while the 1992 Amendments required common institutional identifiers by July 1, 1993, they testified that the Department's plans now call for their development and implementation for the 1999 to 2000 academic year.
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Third, despite a compelling need for assistance architecture that would enable the eventual integration of all Title IV systems, and despite two years of recommendations by the advisory committee on student financial assistance to move toward integration, the Department continues to acquire multiple stand-alone systems.
The GAO made three recommendations. First the Chief Information Officer should develop and enforce a Department-wide systems architecture by June 30th. All information technology investments made after that date must conform to the architecture. Funding for all projects must be predicated on such conformance, unless a thorough documented analysis supports an exception.
The IG identified four problem areas regarding systems modernization. First, lack technical expertise in information technology to design and manage the large and complex contracts necessary to modernize. Second, poorly designed contracts and monitoring. Third, poor program information systems integration. And, fourth, data integrity problems in the loan system that will undermine the effectiveness of even the best integrated information system.
In a related report the IG recommended that the Department appoint a chief operating officer who possesses experience in managing large computer-based financial services operations. What is the status of the NSLDS today? Do you agree with the GAO recommendations and has the Department adopted and implemented those recommendations?
Mr. MCNAMARA. We agree with GAO's recommendations. Also, today, we just issued a report on the status of the Department's implementation of the Clinger-Cohen Act, and some of the recommendations made by GAO have not yet been completely implemented, most notably the integrated information technology architecture.
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The Department has made one significant change and they have migrated the NSLDS system to what they call a common platform. It was costing us an awful lot of money to get information out of NSLDS because of the way the contract was set up every report we went for was sort of a special item, and we had to spend a lot on it. By moving it, we expect—or the Department has reported they expect—to save millions of dollars over the way they had done it in the past.
Ultimately to integrate the systems, the Department is heading for something called EASI, which you have no doubt heard of, to bring all of the Department's systems together for sort of a seamless delivery system for student aid. That is in the systems development phase right now and that is one of the first systems development life-cycle audits that we plan to do.
In a nutshell, the Department has not fully implemented GAO's recommendations. They are in the process right now of creating a performance-based organization in student aid and, in fact, they have hired a search firm to go out and look for a chief operating officer to head that organization. So, they are taking corrective action on that recommendation that we had made but a lot of work remains.
Mr. PORTER. Are they going to meet the June 30th deadline that the GAO proposed?
Mr. SKELLY. We now have plans to have a Department-wide systems architecture plan completed by June of 1998. That would grow out of the reengineering efforts that Mr. McNamara mentioned called EASI which is supposed to make all the student aid programs simpler, easier to use. So, that is still our goal.
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Mr. PORTER. And how are these systems affected by the Year 2000 problem and will the IG and the GAO recommendations mitigate or exacerbate the Year 2000 transition?
Mr. SKELLY. Most of our 14 critical systems are student financial aid systems. They are separate systems. They are not integrated, so, each of them will have problems.
If we correct some of the problems in the individual systems for Year 2000, it probably will slow us down in getting to an integrated system but I think it has to be done. The systems have a long life cycle of development. You cannot just go out and buy a new system now and have it up and running for the school year that starts July 1, 1998. You have got to have some lead time. That is why the systems people, of which I am not one, will tell you that you have to have this grand architecture plan, systems architecture plan and base your decisions on that to try to integrate things. But, Year 2000 is tough for student aid systems.
There are a couple of our systems which already are Year 2000 compliant and both of those are in the student financial area, the student loan area actually.
Mr. PORTER. Thank you, Mr. Skelly.
REAUTHORIZATION OF THE HIGHER EDUCATION ACT
We expect Congress to reauthorize the Higher Education Act either this year or next year. The House committee has already reported out a bill. The IG made several recommendations regarding reauthorization including limiting the professional judgment of student financial aid administrators to adjust eligibility and eliminating advanced funding of the Pell Grant program.
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Pages 37 and 38 of your report list 17 general recommendations. Please, tell us which of the recommendations you regard as the most critical and whether they are included in the administration reauthorization proposal and the bill reported by the House committee.
Mr. MCNAMARA. In terms of the ones that we consider most important, I think the performance measures would be the most important and that was 70 percent graduation, 70 percent placement was the recommendation that we made.
Mr. Chairman, we spend millions and millions of dollars on student aid every year, as you well know, and we think that the public deserves and should expect to have some measure of whether it is working or not. And that is why we believe very passionately in the need for performance measures for that program.
I do not believe that that one made it through—I think the Department had put it in, for a short one-year program, and I do not believe that it made it. Do you know, Tom?
Mr. PORTER. Can you——
Mr. SKELLY. No, it did not.
Mr. PORTER. Can you take all 17 recommendations and, for the record, indicate whether they are included either substantially or partially in the administration reauthorization proposal and the House committee bill?
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Mr. MCNAMARA. We certainly will.
Mr. PORTER. Why do you not do that for us.
[The information follows:]
"The Official Committee record contains additional material here."
EDUCATION'S AUDITED FINANCIAL STATEMENT
Mr. PORTER. The Chief Financial Officer's Act and the Government Management Reform Act require the Department to prepare consolidated financial statements. Page 19 of the report indicates that the Department finalized its 1996 consolidated financial statements in July 1997 and independent auditors issued their reports the following month.
The outside auditors indicated that they were not able to express an opinion on the statements due to difficulties estimating loan liabilities for loan guarantees, the allowance for uncollectible defaulted loans, the allowance for direct loan subsidiary costs, and the related guarantee and direct loan subsidy expenses.
Two questions. First, why does it take the Department until the fourth quarter of the subsequent fiscal year to finalize its financial statements? And, is this a concern and what recommendations has the IG made to improve efficiency in that regard?
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And, second, in your opinion, how serious are the deficiencies identified by Price Waterhouse and when will these deficiencies be corrected so that the Department can receive a clean audit?
Mr. MCNAMARA. The first part of the question, Mr. Chairman, why so late? The Department relies on information it gets from external entities, most prominently would be the guaranty agencies, to develop the information that goes into its loan loss estimates.
Generally, that information over the years has not been accurate, although the Department and the guaranty agencies have been working very hard in the last year or so to clean that up. That is the primary reason that it has been very difficult to get accurate information that will stand up to an audit.
This year we will be late as well. The report was due on March 1 and, as I mentioned earlier, it will not be out until about May 30th. We have the information. We are currently auditing the model and the other departmental information and at this point until the audit is complete we really do not know whether the numbers are going to work out.
One significant improvement will be the new accounting system once it is implemented. The current accounting is extremely cumbersome. It requires lots and lots of manual intervention and it is just absolutely horrendous to account for and to audit against. And, so, we are very hopeful that when the Department's new system is implemented some of these problems will go away.
We still will rely on the external entities though for accurate information.
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Mr. PORTER. Thank you.
AUDIT OF OFFICE FOR CIVIL RIGHTS
This subcommittee funds a number of agencies that enforce or provide technical assistance regarding compliance with Civil Rights laws. We fund several protection and advocacy agencies, one in developmental disabilities, one in SAMSA and one in rehabilitation services. In addition, we fund offices of Civil Rights in both HHS and Education. We also fund client assistance centers, parental assistance centers, and equity assistance centers, all focusing on technical assistance or the legal enforcement of various Civil Rights laws. Overall, in Fiscal Year 1998, we will spend $176,000,000 on these programs.
Of course, your agency is also one concerned with the enforcement of Federal laws. What role does your agency play in the enforcement of the various Civil Rights laws?
Mr. MCNAMARA. When you say, your agency, do you mean the Office of Inspector General? None. We do not enforce Civil Rights laws. We have occasionally done audits of certain OCR activities, but we do not have a role in that area.
Mr. PORTER. Yes, but you oversee the——
Mr. MCNAMARA. As with any departmental program, yes, we would. And we did an audit a couple of years ago in OCR and right now it escapes me what the particular issue was that we were looking at. We can respond on the record in terms of what it was we did and what we found.
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Mr. PORTER. All right. Why do you not do that, thank you.
[The information follows:]
OIG ROLE IN ENFORCING CIVIL RIGHTS LAWS
The OIG does not have a role in enforcing the civil rights law. However, in our role of ensuring program efficiency and effectiveness, we performed a review of the efficiency and effectiveness of the Department's Office for Civil Rights' (OCR) operations. The OIG report, issued November 22, 1995, disclosed the OCR had made many improvements in its operations. These improvements include employee empowerment, reduced levels of review, a new Complaint Resolution Manual, and a new organizational structure. By making these changes, OCR has improved the way it evaluates and resolves civil rights complaints. The OIG made a number of recommendations to further improve OCR operations in order to meet its mission.
DEFICIENCIES IN EDUCATION'S FINANCIAL AND ACCOUNTING SYSTEMS
Mr. PORTER. Recent conversations with the Department concerning the scoring of appropriations made by this subcommittee have made it clear that the Department's financial and accounting systems do not now provide accurate data on total outlays nor on the exact amount of outlays on a program-by-program basis. Are you aware of the problem and how can it be resolved? Can the agency have a clean financial statement while this problem remains?
Mr. MCNAMARA. Yes. We are aware of the problem. I think it will be resolved by the new system. Under the current system there is something called the pooling concept where entities draw down the money without explaining which grant or program the money is drawn down against. And it may be anywhere from a month to a quarter to perhaps even longer before they come back in and the money can be specifically identified to which bucket it applies to.
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The new system will not permit that. You will have to identify when you draw down as to where the funds are going to be used. It has not been an issue in terms of financial statements. There have been other issues that prevented a clean opinion, but this has not been one of them.
Ultimately, the information came in and was auditable. However, it does not provide for a very timely way to answer Congressional or other requests, and it requires a lot of manual intervention from what I hear.
Mr. PORTER. When will the new system be functional?
Mr. MCNAMARA. As Mr. Skelly mentioned earlier, it is supposed to be deployed mid-May.
Mr. SKELLY. But it might be some years before we would be able to look back at the data and say this is really much better than the old system. It is designed to provide grant-specific information so that we know how much is used for each program in each fiscal year, such as the kind of information Mr. Wicker was asking about. But just based on past experience with systems, I think it is prudent to maybe give us at least a year or two years to look back and see how much better it really is. But it is designed to work a whole lot better.
Mr. PORTER. All right, thank you, Mr. Skelly.
SUPPLEMENT—SUPPLANT RULES
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Mr. McNamara, about a year ago GAO issued a report on the substitution of Federal funds for local funds in spite of various maintenance-of-effort provisions. This report was Government-wide and did not focus solely on the Department of Education funding. Do you feel that the substitution of Federal funds for State and local elementary and secondary funding is a problem? And, if so, what is the magnitude of it?
Mr. MCNAMARA. Mr. Chairman, I am not aware right now. We have not done work in supplement-supplant in quite a few years. So, I do not think we really have any information on that. We would be glad to check and get back to you for the record to see if can find something.
Mr. PORTER. That would be fine.
[The information follows:]
SUBSTITUTION OF FEDERAL FUNDS
The Office of Inspector General has not performed an audit recently that was specifically designed to detect whether grantees are supplanting funds. However, grantees receiving at least $300,000 in Federal funds are required to have a Single Audit performed. The Department of Education prepared a Compliance Supplement, for Elementary and Secondary Education Act programs, which is intended to direct auditors' attention to those issues that are most suited to review by an auditor. The Compliance Supplement includes audit steps designed to detect violations of maintenance of effort, supplement not supplant, and comparability requirements.
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In addition to the Single Audits, States and the Department's program offices monitor grantees for compliance with the maintenance of effort, supplement not supplant, and comparability requirements. Although the Single Audits and State and Federal monitoring have identified some instances of noncompliance with these requirements, the noncompliance does not appear to be widespread. We have no reason to believe it is a significant problem. However, the Department is about to issue new guidance covering supplanting and comparability.
ASSESSMENT OF OIG PERFORMANCE UNDER GPRA
Mr. PORTER. By what specific measurable GPRA standards should we judge the work of the Office of Inspector General?
Mr. MCNAMARA. How to get a value-added is tough with the IGs. We have had our own colloquia to try to figure this out. We have our own performance plan. Basically we have three goals. And we were going to judge our worth on how much the Department and Congress used our reports to make changes.
And some of our measures were the number of significant recommendations that we made; the extent to which we are sustained in the recommendations that we make; whether it is procedural change or recovery of funds. Another key measure is that we would disclose significant fraud, waste and abuse through our investigative and compliance audit efforts.
And some of the measures there were the extent to which our cases were accepted for prosecution, results of some of our prosecutorial efforts, collections of fines.
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We are a little bit leery, given all the problems the IRS has had recently and other IGs, of doing anything that smacks of a bounty system that the more you bring in the better type of thing. And what we are trying to do is find a way to determine how much change we can effect by our audits and investigations.
And when I, in going through these measures, I first saw them I could find problems with all of them but I was hard-pressed to really come up with better ideas. The outcome measures, particularly, we may not know for several years. We had one audit issued on IDEA in terms of changing the funding formula and it took about two or three years and then Congress got a hold of the report and it resulted in a significant change. And, in fact, the report was cited as the catalyst for bringing that about.
Now, I do not know how we would capture that in the current system because it would be a couple of years down the line. It had a significant outcome though.
So, some of these outcome measures may take years to figure out. As a general rule, we are focusing much more now on performance-based work and systemic work, say, Year 2000, you know, so that the Department will be ready. It is hard to quantify those types of results. It is easy to go out and chase proprietary schools and quantify some dollars and really have no systemic change.
So, it is something we are wrestling with and all the other IGs are, as well.
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Mr. PORTER. Mr. McNamara, thank you. You have actually answered every question I have.
Mr. MCNAMARA. Thank you.
Mr. PORTER. And that is very unusual because I never get through all my questions and I appreciate you doing that.
We thank you for the fine job you are doing and for your appearance here today.
Mr. MCNAMARA. Thank you, Mr. Chairman.
Mr. PORTER. Thank you very much.
The subcommittee will stand in recess until 10 a.m. tomorrow morning.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Wednesday, April 1, 1998.
POSTSECONDARY EDUCATION PROGRAMS
WITNESSES
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DAVID A. LONGANECKER, ASSISTANT SECRETARY FOR THE OFFICE OF POSTSECONDARY EDUCATION
MAUREEN A. McLAUGHLIN, DEPUTY ASSISTANT SECRETARY FOR POLICY, PLANNING, AND INNOVATION
CLAUDIO R. PRIETO, DEPUTY ASSISTANT SECRETARY FOR HIGHER EDUCATION PROGRAMS
DIANE E. ROGERS, ACTING DEPUTY ASSISTANT SECRETARY FOR STUDENT FINANCIAL ASSISTANCE PROGRAMS
THOMAS P. SKELLY, DIRECTOR, BUDGET SERVICE
ROBERT H. DAVIDSON, DIRECTOR, POSTSECONDARY ANALYSIS DIVISION, BUDGET SERVICE
Introduction of Witnesses
Mr. PORTER. The subcommittee will come to order.
We continue our hearings on the appropriations for the Department of Education for fiscal year 1999 and are pleased to welcome this morning Dr. David Longanecker, the Assistant Secretary for Postsecondary Education. Welcome.
Mr. LONGANECKER. Good morning.
Mr. PORTER. It is good to see you again. Would you introduce the people that you brought with you and then proceed with your statement, please?
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Opening Statement
Mr. LONGANECKER. I would be glad to. I think you know well Tom Skelly, who is our budget director. With Tom today is Bob Davidson, who works with him.
On my immediate right, your left, is Claudio Prieto, who is the Deputy Assistant Secretary for Higher Education Programs. That is the non-student financial aid part of our shop. To my left, your right, is Maureen McLaughlin, who is my Deputy Assistant Secretary for Policy and Planning. And to her left is Diane Rogers, who is the Acting Deputy Assistant Secretary for Student Financial Assistance Programs.
When I received this invitation for today, I wondered if there was any significance to the fact that this is April Fools' Day, but I presumed that it was just that we were lucky enough to come up on this day.
I want to thank you for the opportunity to be here this morning, Mr. Chairman, to share with you the administration's postsecondary education budget proposals, which this year are dovetailed with our proposals for reauthorization of the Higher Education Act.
I would ask that the full text of my prepared remarks be entered in the record, and I will present somewhat briefer remarks here this morning so that we can get to the dialogue as soon as possible, if that is okay with you.
ADMINISTRATION'S BUDGET AND REAUTHORIZATION PROPOSALS
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The budget and reauthorization proposals that we present to you today are intended to build on the strong postsecondary agenda that the Congress and President Clinton have fashioned together over the past 5 years, an agenda that has included development of the remarkably successful Direct Loan program, historical increases in the Pell Grant program, dramatic improvements in oversight and accountability, creation of the new national service program, expansion of the College-Work Study program combined with blending more of that program into service opportunities for the participants, including a substantial effort in the America Reads program, and last, but certainly not least, the comprehensive tax package of education benefits passed last year that will provide more than $35 billion in tax relief for students and their families over the next 5 years.
We can all be proud of these accomplishments. Not even counting the tax proposals, you and we have nearly doubled the Federal student financial assistance benefits available since our partnership began in 1993.
Now, despite those great accomplishments, however, we still have an unfinished agenda if we are to assure universal access to quality postsecondary education and lifelong learning. The proposals that we are placing before you today address that unfinished agenda. Furthermore, they do so within the framework of a balanced budget, which we continue to believe is very important.
Now, it is that last constraint—the budget constraint—that has led us to offer more modest proposals than you are seeing from some others, including your own authorizing committee. We are proposing an increase in the Pell Grant, for example, from a $3,000 maximum to a $3,100 maximum, which is fundable within the budget constraints that we have, unlike the proposal in the House bill to increase the maximum to $4,500, which would require an increase in Pell Grant funding of nearly $5 billion.
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Likewise, we have proposed substantial changes in the student loan program, changes that will increase access to loans in both the FFEL and the Direct Loan programs, but will do so without reckless increase in shift of costs from lenders to taxpayers of more than $1 billion which are included in the current House committee bill.
In sum, our proposals are intended to be appropriate to the times—that is, they are intended to be responsive to the needs of students and their families, but also responsive to the needs of the taxpayers who we are going to be asking to pay for these programs.
So let me go into our proposals.
COLLEGE PREPAREDNESS PROPOSALS
Remember the national goal that we talked about a few years ago that we still have, that all students should come to school ready to learn? Well, one of our themes this year is to try and do a better job of assuring that all students come from high school to college ready to learn. While we have done much to make college affordable over the past few years, our research shows that many children and their parents, particularly at the critical middle-school years, really do not understand how important college or postsecondary vocational training will be to their future, so they are not preparing adequately, either financially or academically. We are proposing two new programs to replace the unfunded moribund programs in the current Higher Education Act to address this issue.
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HIGH HOPES FOR COLLEGE
The first is the High Hopes for College program, a program similar to the well-known and highly regarded ''I Have A Dream'' program, and we have requested $140 million for that effort, which would create intentional partnerships between colleges, middle schools that serve disadvantaged students, community-based organizations, and businesses to begin working with students as they enter middle school and keep them on track for a positive educational future. We are pleased that the authorizing committee has supported this proposal in the bill that they are likely to be bringing forward.
EARLY AWARENESS INFORMATION
Second, we have proposed a modest $15,000,000 program to conduct an information campaign to raise the awareness of parents, students, teachers, and counselors about the importance of all youth keeping their educational options open.
TRIO INCREASE
To complement these new efforts, we have also requested a 10 percent increase in the TRIO program to bolster its highly successful Upward Bound program, which focuses on assuring that high school students who are at risk stay in school and on a track toward college.
Now, another way in which we can help students to be better prepared to come to college is to assure that they have excellent teachers while they are in elementary and secondary schools. And so we have proposed a two-pronged approach to new teacher development: requesting $37 million for a program to recruit new teachers for high-poverty urban and rural areas, and $30 million for what we refer to as Lighthouse Partnerships, which would support consortium of universities and colleges that support ''best in practice'' professional teacher development programs, programs that would include an integrated curriculum across the entire curriculum of college, not just in the school of education, that would have strong clinical relationships with elementary and secondary schools that provide an induction process for neophyte students after they have completed their academic training.
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PELL GRANT INCREASES
We also seek, in this set of proposals, to continue efforts to reduce the costs of college. I mentioned previously our proposal to increase Pell Grants by $100. We obviously would like to do more, but each $100 increase in the Pell Grant program requires an additional $300 million in appropriation, so budget considerations forced us to be relatively frugal in this request.
STUDENT LOAN PROPOSALS
Perhaps the most substantial proposals we offered in this area were with regard to the student loan programs. To improve efficiency, we have proposed streamlining and simplifying the guaranty agency system in the Federal Family Educational Loan program. Ours is a common-sense business approach—reflecting what guaranty agencies actually provide and paying them on a fee-for-service and performance-based approach, rather than the current one-size-fits-all approach. We have also proposed to use the savings that accrue from this to reduce, and eventually eliminate for needy students, the origination fees currently charged to all borrowers. Obviously, achieving one of those requires achieving both.
We have also offered a very reasonable solution to the much discussed interest rate issue. A recent Treasury report indicated that we can address lenders' legitimate concerns about assuring a reasonably profitable yield and still give students the promised interest rate cut, and that we can do so without further gouging the taxpayers. A study released by CBO just two days ago confirmed that the current profits of banks are excessive, suggesting that reductions in profits can be imposed without eroding access to student loans. We have proposed a solution consistent with those studies. Our proposal will assure a reasonable yield and profit to banks. If banks respond unreasonably to our reasonable proposal and withdraw from the program, we will replace any lost capital in the FFEL program with loans provided directly by guaranty agencies or Sallie Mae, both of which are required by law to act as lenders of last resort, and both of which have indicated a willingness to work with us to continue broad access to the FFEL program. We honestly believe that these proposals strengthen, not weaken, the FFEL program.
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ADMINISTRATION'S COMMITMENT TO GRADUATE EDUCATION
We also propose in our budget to sustain the Federal commitment to encouraging quality and innovation in American higher education through an enhanced consolidated effort to support graduate education; through a slight increase in the exceptionally fine FIPSE program; through substantial expansion of the Title III programs, particularly those that focus on minority serving institutions; through a proposed $30 million Learning Anytime Anywhere program to support development of innovative high-quality distance-learning technology programs; and through continued support for our efforts in international education.
MODERNIZATION EFFORTS
We have proposed a number of other really great ideas in our reauthorization package, most of which have relatively modest appropriations impact, but are nonetheless very important. These include proposals to modernize the administration of Federal student financial assistance through the creation of a performance-based organization; to radically simplify the needs analysis and the Free Application for Federal Student Aid (FAFSA); to move to a differentiated system of institutional oversight that would allow us to reduce the administrative burden on high-performing institutions; to provide incentives for students and families to earn and save more, rather than penalize them as we do today; to remove barriers that artificially constrain colleges and universities in providing distance-learning programs under current law; and to alter the current campus-based student aid distribution formulas so that funds in the future go to where the emerging needs are now, rather than to where those needs were 25 years ago.
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All of these are important initiatives. Some are faring well in the reauthorization actions, others are not. But we believe all are worthy of our concern and yours as well.
With that, I would like to conclude my remarks. What we place before you today is an ambitious but achievable agenda, and an affordable one. I look forward to receiving your advice and counsel and to working with you as we move this agenda forward.
Thanks again for the opportunity to be here. We are at your service.
[The information follows:]
"The Official Committee record contains additional material here."
PELL GRANT AUTHORIZATION
Mr. PORTER. Thank you for your statement, Dr. Longanecker.
I want to go back to something you said that I did not quite understand. You were talking about the authorizing of the Pell Grant program at $4,500.
Mr. LONGANECKER. That is correct.
Mr. PORTER. And how long is that authorization to last?
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Mr. LONGANECKER. The authorization would be—they have a different authorization level for each year in the bill. The authorization for fiscal year 1999 that is in the bill is for $4,500.
Mr. PORTER. I see. So then it rises from that point?
Mr. LONGANECKER. That is correct.
Mr. PORTER. Okay. Of course, that is an authorization and not an appropriation.
Mr. LONGANECKER. Right.
Mr. PORTER. So it is a ceiling rather than a suggested funding level.
Mr. LONGANECKER. Yes. The discipline we placed on ourselves did not allow us to sort of operate in that environment.
Mr. PORTER. Well, the discipline we are going to have to place on ourselves will not, either, I am sure.
Mr. LONGANECKER. Absolutely.
Mr. PORTER. Although we will not know that for a while yet.
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What has been the historic rate of increase in tuition?
SUPPORT FOR SEOG AND PERKINS LOANS PROGRAMS
Mr. LONGANECKER. There has been a substantial—it is difficult to say what the historic rate is. During the late, the mid—from about 1975 to about 1990, there were substantial increases in tuition.
Mr. PORTER. All right, since 1990 then.
Mr. LONGANECKER. Since 1990 we have had increases in the 4 to 6 percent range, about 1 to 2 percentage points above the CPI.
Mr. PORTER. So we are almost assured that if we spend another $100 in the Pell Grant it will be absorbed in higher costs and will not get us any greater access. Is that basically true?
Mr. LONGANECKER. $100 in Pell about keeps us even. That is correct.
Mr. PORTER. We do not make any progress because they just jack up the prices.
Mr. LONGANECKER. Well, I would not reflect it that way. I think there are legitimate forces that drive higher education prices up, just like they do any other business, and that it is really a maintenance of effort rather than a substantial increase.
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Mr. PORTER. Well, it may be a cost push, too, where it simply rises to meet the additional available resources, and that has always bothered me.
Mr. LONGANECKER. Yes.
Mr. PORTER. Let me talk about something else. The budget proposes a $5 million increase for the Supplemental Educational Opportunity Grant program, SEOG program.
Mr. LONGANECKER. Yes.
Mr. PORTER. And $60 million for the Perkins Loan program.
Mr. LONGANECKER. Yes.
Mr. PORTER. As we discussed last year, the President's budgets have variously recommended cutting the program, terminating it, restoring it, and now you are proposing a major reduction in it. An earlier draft of the President's budget indicated that he would propose a $65 million increase for SEOGs and terminate the Perkins program.
Given all of the concern the administration has expressed over the dramatic shift in students' reliance on loans as opposed to grants, why did the administration decide to reduce proposed funding for a low-income grant program in order to fund a loan program which duplicates both FFEL and the Direct Loan program?
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Mr. LONGANECKER. There were a couple of reasons why we shifted from earlier discussions we were having. Let me indicate first, though, that our—we looked at the funding level we have proposed for Perkins somewhat differently. What we did is we looked at the overall package for Perkins, and what our proposal does is it keeps the level of funding constant that would be available to students. That required less appropriation this year, in part, because we have a fund that traditionally went to Treasury that comes back into the program $40 million, and because the combination of four different pockets of funds still brings that up to a little bit over $1 billion, which would be equivalent to what was available last year. That is on the side.
But our rationale for changing from where we were was that, in part, what you are responding to was an idea that was coming out of the Department of Education. It was being shared with the community for response. The higher education community had a very negative response with respect to the proposal that we had taken forward, indicated that they would much prefer to maintain all three programs basically as they were, and this was an area where we felt that to provide leadership, we had to have some followers, and we had no followers. And so we basically found a position that the people we were trying to serve were more comfortable working with us on.
WORK-STUDY PROGRAM
Mr. PORTER. I do not think that is leadership, frankly. I think that is finger in the wind. But the Department has long talked about achieving a goal of serving 1 million students through the work-study program. We appreciate that the administration is now following the lead of Congress with regard to this program, but while Congress has provided large increases for the Work-Study program in the last 2 years, the administration has implemented a policy to waive the institutional matching requirement. This policy actually reduces the number of students which the program can serve.
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During last year's hearing, you testified that the new policy would result in the loss of between $16 million and $247 million in work-study funding. You estimated that the lost dollars would require that between 15,000 and 231,000 students be eliminated from the program.
As a result of that policy, how many students were actually eliminated from the work-study program in fiscal year 1997? And what are your estimates for fiscal years 1998 and 1999?
Mr. LONGANECKER. Mr. Chairman, I do not have those statistics. I will pull those together and provide those to you. Keep in mind we are only proposing to eliminate the match for students who are involved in the America Reads program, which is the mentoring program.
Mr. PORTER. But your estimates were based on that, also.
Mr. LONGANECKER. Yes, correct.
Mr. PORTER. So that we could have the same, we could have experienced a rather substantial loss in fiscal year 1997, and——
Mr. LONGANECKER. It is conceivable, and what I would like to do is to get back to you with the specifics on those. And I apologize for not having that with me.
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Mr. PORTER. When you answer this for the record, let me ask it, then, the way I would ask you to answer it. How many students were actually eliminated in fiscal year 1997? What are your estimates for fiscal year 1998 and fiscal year 1999? And do these estimates take account of the fact that the Department has a GPRA goal of increasing use of the institutional waiver, thereby decreasing the number of students who can participate in work-study?
[The information follows:]
FEDERAL WORK-STUDY RECIPIENTS
The Work-Study program is forward funded. The fiscal year 1997 appropriation supports program activity for the academic year that began on July 1, 1997, and ends on June 30, 1998. Consequently, we do not yet have actual program information for fiscal year 1997. In other words, at this time the Department is only able to provide estimates of the effects of our waiver policy for fiscal years 1997 through 1999.
For fiscal year 1997, we estimate that 945,000 college, university, and proprietary school students will be employed part-time under the Work-Study program. Absent our policy to waive the institutional match for Work-Study students employed as literacy tutors, about 960,000 students would be aided in this program.
For fiscal year 1998, we estimate that 942,000 students will benefit. This number is 18,750 less than would be aided if our policy were not in effect. For the Administration's fiscal year 1999 budget request, our estimates are 1,017,000 and 25,000, respectively.
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One of our goals under the Government Results and Performance Act (GPRA) for the Work Study program is to improve the level of participation in community service under the Work-Study program. One of our strategies for achieving this goal is to provide incentives to participating colleges and universities to encourage them to employ their students as reading tours. One such incentive is to waive the required institutional share of Work-Study wages for students employed as reading tutors. While this policy may reduce slightly the overall number of students participating in the Work-Study program, we believe it will increase the number of students employed in community services activities.
YEAR 2000 COMPLIANCE
Mr. PORTER. Dr. Longanecker, yesterday we discussed the year 2000 issue with the Inspector General. My greatest concern along with Social Security, is the student aid programs. Unfortunately, as we also discussed with the IG, the student aid information and financial management systems have dramatic, substantial deficiencies. Nevertheless, I want to ensure absolutely that the student aid systems, such as they are, will make a smooth transition to the year 2000. As I told the IG, this has got to be on the top of your priority list.
I understand that several of your systems that were initially thought to be year 2000 compliant are, in fact, not. What actions have you taken to address this problem, and what steps will you take during the next 2 years to resolve problems and make it a smooth transition?
Mr. LONGANECKER. I can assure you that this is a high priority. We consider this to be as important, I am sure, as you do. We have a Y2K committee that works regularly, that meets weekly to work on this issue. It is chaired by Mike Smith, the Under Secretary. We are working—we have contracted with KPMG to work with us to make sure that we are fully compliant.
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Our goal is to have our systems compliant, fully compliant and tested, by March of 1999, and we are on schedule to do that. We are doing everything we can before September 30th of 1998. So we are moving as aggressively as we can.
Some of our systems development precludes our being able to do that because new systems will come on during that period of time, but we are working very aggressively. The principal staff for this has been, up until just very recently, done by the Deputy CFO, who just recently took a job as a CFO in another agency. That has been replaced by another SES-level person.
We see this as an extremely important area, not only for ourselves, but we are also trying to do a great deal in outreach to the community, to make sure that their systems are compatible and are Y2K compliant because it is not going to do much good for us to be in good shape and for our customers and our schools not to be. And so we are working very hard to try to make sure that their systems are Y2K compliant as well.
Mr. PORTER. Yes, and I think this is important not only for your areas but for a lot of different areas, at least in the departments under our jurisdiction. I will tell you how seriously we take this matter. We are going to hold a special hearing, have all three Departments come in, have the IGs of those Departments come in, have the GAO come in, and have all the agencies under our jurisdiction that could have that problem come in as well, and really try to address this thing and bring some pressure on all of you, which you are telling me you do not need. But we want to make sure that there are no problems come the year 2000.
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Mr. LONGANECKER. Well, whether we need it or not, I think it is appropriate. It is very important to us; I am sure it is very important to you.
Mr. PORTER. Absolutely.
Mr. Hoyer?
Mr. HOYER. Thank you.
Dr. Longanecker, I want to welcome you to the committee and I want to thank you for coming down to Charles County, Maryland, last weekend to explain to some of my constituents how they can better access the tax benefits that were afforded in 1997. That is assuming they can figure out the forms, which is, from all accounts, pretty difficult. But I wanted to thank you for that. I appreciate it very much.
Mr. LONGANECKER. You are welcome.
HIGH HOPES FOR COLLEGE
Mr. HOYER. Let me ask you about this High Hopes initiative. You refer to it in your statement on page 2. High Hopes, as I understand it from your statement, is to deal with middle schools.
Mr. LONGANECKER. That is correct.
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Mr. HOYER. Or junior high schools.
Mr. LONGANECKER. Right.
Mr. HOYER. Do we have a similar program at the elementary school level?
Mr. LONGANECKER. We do not at the elementary school level, and we could have begun there; but we felt for two reasons that it made sense to start at the middle school. One is that if you look at the test scores, the TIMSS scores and others, clearly where we are doing best in our elementary and secondary system is in the early elementary years. Where we are really starting to lose the students is in the middle schools. That is where American education is really starting to lose students, it would appear. Also, it was sort of an iterative process. We have the Upward Bound program for high school students; and students and their families are making such critical decisions about their future as they move into sixth and seventh grade. They are making decisions about whether they will take algebra or pre-algebra. They are making decisions about whether they are saving for college or not and what they are planning for. They are making decisions about whether they will take consumer math or real math or whether they will take science and physics and such.
Furthermore, what we found in our research is that all the families and the students believe at that point that they should be going on to college. However, there are two disconnects. First is that the families and students do not understand what it takes to be prepared for college, so we have some lessons they need to learn there. Second, is, even though the families and the students believe that there should be some postsecondary education in their future, many of their teachers and counselors do not believe that.
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We therefore wanted a program that—unlike the TRIO program, which really works outside the schools, was an integral part inside the school, working with the faculty of that school and colleges to help provide a very positive image about this. We found some examples out in the community that have already developed along these lines and that are having remarkable success in enhancing the educational futures of their students.
We have received information on some programs. I was on a town meeting with the Secretary a week ago with people from Southern California who have a program where they are working with these students; and the percentage increase in attendance at college is just remarkable, just phenomenal. Houston has a similar program.
Mr. HOYER. Does the program contemplate using college students?
Mr. LONGANECKER. It contemplates using college students, college faculty, college administration, college resources and facilities—all of those things—to really take that institution, that university or college that is involved in the partnership as a total institution. The students would be mentors. The faculty would be working with the faculty of the middle school, all trying to find ways to make sure that the success of those middle school students is enhanced.
Mr. HOYER. I think one of the reasons that we have the finest higher education system in the world, is that our education system is not exclusive. There are other good systems, but our high schools and primary education is not competitive. It is my premise that if you have not reached a child from 0 to 8—and I use that for the third grade—you are in real trouble. You are not going to get to them in junior high. Essentially, you can, but the percentage of success would be small.
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I think there needs to be a greater coordination between colleges. In my own State, Towson State University is one of the outstanding so-called normal schools.
We also got away from practicums, a semester of teaching with a master teacher or something of that nature, all of which I think can be very helpful.
I think that junior high schools do need help. I am all for the 100,000 new teachers, but I really think that we ought to look at this because if you get really discrete education at pre-K through third grade you will do better. And while I think the junior high school level is a real challenge because of what you said in terms of where kids start to lose interest and underperform, I am not sure that if you are going to start a program like this, which I think is a critical program, that middle school is the place to start it.
Mr. LONGANECKER. Obviously, this is our middle school initiative. It is not as though we are unmindful of the needs of other areas. We have the America Reads program which really is focused on trying to bring all students to a reading level by the end of the third grade. That is a major thrust of ours.
We have an afterschool program that we have proposed which we think will substantially enhance learning—we have a number in the elementary and secondary area. My area is higher education so we were trying to focus there.
This is really patterned to some extent after the ''I Have A Dream'' program which has been very successful and which shows very strongly that just providing the assistance, the financial assistance, is not enough. We have to provide the support.
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We also want to get into the school so that the school is changing. We do believe our colleges are the strength of our education system and that engaging those institutions, their faculty, their administration, their students in the reform of elementary and secondary schools will help achieve substantial gains.
YEAR 2000 COMPLIANCE
Mr. HOYER. Doctor, let me reiterate the chairman's concern about Y2K.
I do not think there is a member of the Appropriations Committee, and certainly none who have served on the Treasury Appropriations Committee who have seen IRS struggling with its information systems, that is not concerned about the Y2K problem and does not believe that there are some optimistic projections being made as to when this is going to be done.
So I just want to agree wholeheartedly with the chairman. Ms. Northup sits on the Treasury and Postal Committee with me so we have been through this a lot. It can be a high priority but you have got to make sure that you are in compliance. I think every department needs to talk about how it is going to test its progress.
Mr. LONGANECKER. Diane Rogers is the person who is most responsible for this in our shop. We have a process of both assessing whether our systems are compliant, and then essentially remediating those programs. Then testing to make sure that they are compliant after we have assessed them, we bring them up and test them. We are very dedicated to this. We are putting in very substantial resources, that is hard to find these days. We have been pretty frugal in the last few years.
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Diane, would you like to address that?
Ms. ROGERS. Certainly. We are also checking those systems that we have been told by our contractors that are compliant. We are validating those results as well. So we are not just resting back and taking their word for it. It is a very high level effort being made, chaired by the Acting Deputy Secretary, Mike Smith, as David mentioned, with weekly meetings including myself and our Director of Program Systems Service. And then there is an entire Y2K steering committee team that has a more intensive effort throughout the week and the month, and different meetings with all the different principal offices throughout the Department.
Mr. HOYER. Could I ask you a question that I asked Mr. Rossotti? I would like to have your take on this as well. Mr. Rossotti is the director of the IRS.
Why do you think we have computers that do not know 2000 is coming?
Ms. ROGERS. That is a good question. I would be curious how Mr. Rossotti answered.
Mr. HOYER. Let me put it in context for you. People look at the Government and say, you do not know how to do things. We have been sold an awful lot of computers by the private sector that are not going to work in 18 months. I do not understand that.
Now I can tell you Mr. Rossotti explained it that to purchase the capacity to contemplate 2000 would have been more expensive than replacing that technology with Y2K compatibility. In other words he said, you bought a computer in 1989 and you wanted it 2000 compatible. To add the extra memory on there or capacity on there that you would have needed would have been too expensive and not worth the investment because of the rapid rate of—
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Mr. PORTER. Obsolescence. The gentleman's time has expired.
Mr. HOYER. So I will stop. I would like to at some point—not now—hear your thoughts on that.
Mr. PORTER. We will have a second round.
Mr. HOYER. I will not be here unfortunately.
Mr. PORTER. The subcommittee is proceeding under the eight-minute rule and we will have, as I said, a second round.
Ms. Northup?
AMERICA READS
Mrs. NORTHUP. Thank you, Mr. Chairman. I would like to start with your discussion of your participation with the America Reads program. I am just a little confused about that. First of all, as I read from your statement it says, the Administration has encouraged institutions to use their work study funds to promote community service activities and the community has responded. Students at more than 900 colleges and universities will participate this year in the America Reads Challenge, earning money for college while they are helping ensure that all children can read well and independently by fourth grade.
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First of all, what we know from the research that we have been presented earlier, both the NIH research and elementary research, is that helping kids learn to read who are not in the 60 percent that are going to learn to read easily requires highly trained teachers intervening at about five and-a-half years old, who know what they are doing and can divert that child's reading in the classroom to a different form of instruction. This does not help do that at all.
Mr. LONGANECKER. What it does—and in fact we are providing substantial training for these students. What it does is it provides an additional assistance to the teacher who has that training, to have the resources to be able to sit with that individual and work with them independently one on one. We do not have the results obviously yet from this.
Mrs. NORTHUP. I guess my feeling is that you are trying to put two things that do not fit together in a jigsaw puzzle. First of all, most students that have been involved in work study have a schedule that works around their studies. And as we know, one of the biggest complaints we have from students right on college campuses is that they have a tough enough time graduating in four years because getting the right class at the right time is a very difficult. So they have a 10:00 Monday, Wednesday, and Friday, they have 2:00 Monday, Wednesday, and Friday, and they fit their work study in around that.
To imagine that that would exactly coincide with what the elementary school first grade teacher needs is sort of a long stretch. Most work study that goes on between college students and schools traditionally has gone on after the school day. It is an extended program. So it is not when the student actually most needs it.
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The second thing is—I have so many questions about this. First of all, we have not authorized the America Reads program. We certainly have not authorized it as it was sent up here last year. If it is not authorized by the Senate the way the House passed it last year, it is all going to go to IDEA as of July 1st. So I wonder where you are going to find this money for work study if in fact the money goes to the IDEA program.
WORK-STUDY COMMUNITY SERVICE WAIVER
Mr. LONGANECKER. There is a difference between the money that we have requested for America Reads and the waiver that was provided for students who do community service in America Reads through the Work Study program. Keep in mind, the Work Study program has always had a very strong thrust on community service. In fact, almost all of our colleges in this country have a strong tradition of community service.
What we are trying to do is to embed that and to reengage more young people in community service, and in a particular area where there is an obvious need—in the tutoring of young people to be able to read better. We want to do that as effectively as possible and I am going to use this as an opportunity to come up and spend some more time with you, if you are willing, to both get your ideas and to share ours.
But we do see this activity as very productive and consistent with the purposes of Work Study. There is already a requirement that colleges spend at least 5 percent of their funds in Work Study on community service. This is a voluntary program. Students do not have to do this. If they cannot fit it around their schedule, they do not need to. But if they can and they wish to, then we find this to be very productive.
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TEACHER RECRUITMENT
We also see it as potentially a very valuable way of attracting people into the field of teaching, which we certainly know we need to do. We are going to need 2 million teachers over the next decade. With regular rates, about 1 million out of our colleges and universities. So we are going to have a substantial gap there.
What we are finding is that many students who had not thought about teaching as a profession, when they get a chance to sit down and work as a mentor or a tutor, are finding that that is a very valuable experience to them personally and are thinking about teaching as a profession now that they did not before. So we see some serendipitous effects of what we thought was a good idea in the first place.
Mrs. NORTHUP. To follow up in a slight way. We know from the Bureau of Labor Statistics economists that there are not expected to be any teacher shortages any time in the near future. I realize the President stated that, but I just wondered if you could tell us where the statistics come from, understanding the Bureau of Labor Statistics said there will not be a shortage.
Mr. LONGANECKER. I would sure like to meet the statistician who came up with that. I mean, it is pretty basic here. We know the demographics of the next 10 years. We know how many students there will be.
Just using demographics alone and our current production, and presuming that half of the gap can be filled by people who are currently in the workforce who have some preparedness and could be able teachers, we will have a gap of over 500,000 teachers. We will need 2 million, and we will produce 1 million, and there are roughly 500,000 that we could conceivably bring into the field through alternative certification or who are currently certified and not teaching. Now that is just the national demographics.
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In addition to that, we have in California a proposal to reduce class size, and we have the President proposing a major initiative in that regard also. That is a good goal. Research shows that will help student learning. But to achieve that will require an additional 300,000 teachers. So we have substantial potential gap there.
I can tell you today, in the school district of Oakland, California 87 percent of the teachers are teaching on provisional certifications. Over half the teachers in the Los Angeles School District are teaching on provisional certification. That does not sound like we have an excess or an adequate supply today of prepared teachers.
CLASS SIZE REDUCTION INITIATIVE
Mrs. NORTHUP. It is interesting, there are just so many different ways to go. You said the President's proposal requires to have 350,000 new teachers? So if we reduce the class size——
Mr. LONGANECKER. I do not actually know if that——
Mr. SKELLY. A hundred thousand.
Mr. LONGANECKER. It is 100,000 for the President's. California is——
Mrs. NORTHUP. This is for 100,000, but what we will need to go to 18 is 350,000.
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Mr. LONGANECKER. I am not sure I can back that number up. I should not have used that one.
Mrs. NORTHUP. Actually, I figured it out and I think it is about 254,000 by my estimates. But whatever it is, it is not 100,000.
Mr. LONGANECKER. Yes.
Mrs. NORTHUP. I just think it is interesting that we would even propose something that would require States to move to 18 students per classroom. We are not even funding the 100,000 at full cost; some at 50 percent of the cost. And now these States are going to have to divert even more resources into teachers in order to make up that difference.
The conversation I had with the primary and secondary group is, what if, as we think in Louisville, Kentucky, that reducing class size is not the most essential thing we need to do. We think we need to move into an early childhood program. But what we are really doing at the Federal level is by dangling a little money out there and calling it 100,000 teachers, we are really requiring States to divert resources for 254,000 teachers, and we are taking it away from what they think are the critical needs are in their community. I just had to respond to your 350,000. Whatever it is, it is not 100,000.
Mr. LONGANECKER. Let me also caution you to beware of my lack of knowledge in this area. I am a postsecondary guy and I would encourage you to talk to Jerry Tirozzi when he is up here.
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Mrs. NORTHUP. I do not mean to be overly aggressive about this, but when you say 350,000 and then it is not a fixed number, it invites the question of, is your 2 million a fixed number and do we know that? We do have a Bureau of Labor Statistics. They do say that there is no need for—that there will not be a shortage of teachers.
Thank you.
Mr. PORTER. Thank you, Ms. Northup.
Ms. DeLauro?
Ms. DELAURO. Thank you very much, Mr. Chairman. Welcome to the committee.
Mr. LONGANECKER. Good to see you.
Ms. DELAURO. Very nice to see you. I think it is a laudable goal to think that we can have the opportunity to decrease our class sizes, not for the purpose of just numbers but the fact of the matter is we are creating an environment where we can allow for a better learning experience for our children, and the opportunity for discipline in our schools; something that Congress and we are all crying out for up here. I applaud that effort, and any opportunity that we can provide to youngsters by putting 100,000 teachers in the classroom, the same way we put 100,000 policemen on the beat, to make sure that our neighborhoods are safe and secure.
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AFFORDABLE CHILD CARE FOR STUDENTS
Let me ask you a couple of questions, if I might. Lack of affordable child care is often a barrier which prevents young women from attending or succeeding in college. I was pleased that the Senate Higher Education Reauthorization Act includes a bill sponsored by the senior senator from my State, Senator Dodd, which would be to create a pool to fund campus-based child care for children of Pell Grant students.
Let me ask you your position on this proposal. How could this complement the Administration's efforts to bring former welfare recipients into higher education by changing Pell Grants needs analysis to take dependents into consideration?
Mr. LONGANECKER. Madam Congresswoman, we have not taken a position—the Administration has not taken a position. We did not have that as a part of our reauthorization proposal and we have not taken a position on that. Given the First Lady's strong interest in child care and the focus that we have placed on that, I think it would be very unlikely that we would oppose such efforts and I think we would be glad to work with folks who are interested in that area to see what we could propose ourselves, or work with.
I mean, our proposals have been up there and we did not have that in the package that we put together. But we do not have a license on all the good ideas. Most of ours are pretty good ideas, but there are some other good ideas and we would like to work on those as well.
Ms. DELAURO. It seems that if we are not taking into consideration some of these child care needs and all these kinds of issues, given what is happening, we cannot put our heads in the sand and say the problem does not exist. I think that if we can establish and allow these young women to pursue a career—establish campus-based child care—we can accomplish our goal, which is to make sure that we have an educated workforce that can get paying jobs and take care of themselves and their families ultimately.
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PELL GRANT INCREASE
I applaud your proposal to raise Pell Grants for needy students. Recipients have an average of getting $12,000; $3,100 per year. This would be, as I understand it, the highest ever grant in nominal terms.
I want to get at the issue of, however, even with this increase we do not restore the grants to their 1980 purchasing power. Where do Pell Grants stand in real terms? What about the purchasing power of Pell Grants today? What is the impact of this funding level on students? What is the impact on their families?
Mr. LONGANECKER. To return to the 1980 levels adjusted for inflation, particularly higher education inflation, would require a Pell Grant today of roughly $4,500. That would be consistent with the bill that just came out of the House, and that would cost roughly an additional $5 billion in Pell Grant expenses.
We would like to be much more aggressive than we have been, but we live within a set of budget constraints that realistically limit how much we can do. So we are doing as much as we can within the existing world.
The effect of that is that—and the research is fairly clear, particularly for students from lower income families, price makes a difference, and net price makes a difference. So there is some, depending on which analysis you use, but certainly $1,000 difference in net price would have a reasonably substantial effect on whether students from low income families attend college or not, and some effect on where they attend college as well.
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TEACHER RECRUITMENT
Ms. DELAURO. Let me ask about the minority teacher recruitment program. It is important to get more well-trained teachers into the classroom. I think everybody recognizes that. How are you going to reach out to students to recruit for the program? What kind of support will those teachers have in the first year in the classroom? Do you plan to work with existing non-governmental programs like Teach for America, which trains teachers and places them in under-served areas?
Mr. LONGANECKER. We have actually two components in our teacher recruitment plan; one is maintaining the minority teacher development program which has been a modest program and would be substantially increased. Then the second is a new teacher recruitment program which would try to recruit students who would be willing to return to high poverty rural and urban areas.
We expect that much of that will involve the recruitment of students from those areas as well, particularly paraprofessionals who have been working in the school, as teacher's aides or in other capacities, who have some college education but need some additional education to become certified teachers, and who have a commitment to that school, and that community, and would be logically associated with going back there.
What we intend to do is to work with colleges, universities, and other teacher development organizations that have a history and success in both attracting students who come from those communities and are willing to return to those communities, to fund them, and to provide fellowships so that they can afford to go to college when they might not be able to otherwise.
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Ms. DELAURO. Is there financial incentive to go in to teach in under-served areas?
Mr. LONGANECKER. Generally not, and we can only address via the Federal, via our programs and our rural missions, certain aspects. Unfortunately, many times those school districts pay less than the suburban districts, and that is certainly accounting for part of why the statistics that I mentioned earlier with respect to Oakland and Los Angeles are at issue. As California has tried to reduce its class size, the certified teachers are being hired by the suburban areas, and this is leaving the inner cities to rely on brand new, uncertified teachers, or provisionally certified teachers.
That is a dilemma. We can address some of that at the Federal level. Some of it is our Federal responsibility. All of it is our Federal concern. But we are going to need a strong partnership with the States and local communities to address it totally effectively.
Ms. DELAURO. I am not familiar with the particulars of the program, but when we ask medical professionals, doctors, et cetera, to go into these areas, I do not know what we do with regard to cost of education kinds of incentives, et cetera, in order to provide some sort of a carrot to do this kind of thing. Again, I am not familiar with what the——
Mr. LONGANECKER. We used to have Federal programs. I am not sure if we still have those programs because they are in the Health and Human Services area. When I was in Minnesota we had a State program for doctors to go to rural areas. What we found is that unless they had an inclination to go, they were not likely to stay. They might go to get their loan forgiven, but then they would leave the community after three years.
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So what we are trying to do with this program is to find people who have a proclivity to be a part of that community; they have lived there, they have been there, that is their community. They are more likely to feel a longer term commitment to that community if we can draw them from the community.
Ms. DELAURO. Thank you very, very much, Mr. Secretary.
Mr. LONGANECKER. You are welcome. Thanks.
Ms. DELAURO. Thank you, Mr. Chairman.
Mr. PORTER. The gentlelady has 31 seconds for round two.
Mr. Stokes?
Mr. STOKES. Thank you, Mr. Chairman.
Mr. Secretary, nice to see you again.
Mr. LONGANECKER. Good to see you.
RONALD E. MC NAIR PROGRAM
Mr. STOKES. Thank you. The Ronald E. McNair post-baccalaureate projects, which prepare low income students for doctoral study, are up for competition in fiscal year 1999.
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Mr. LONGANECKER. That is correct.
Mr. STOKES. Can you tell us, Doctor, what the Department's plan is for increasing access to this program?
Mr. LONGANECKER. We have proposed in the TRIO programs in general a 10 percent increase; about a $58 million proposed increase. That would go for basically three things: increases in the Upward Bound program which is scheduled for recompetition in 1999, the McNair program which is scheduled for competition, and inflationary increases in the other programs.
But after one takes care of the inflationary increases, that would allow us about a 20 percent increase in the programs that are up for competition in 1999.
INTERACTION OF HIGH HOPES FOR COLLEGE PROGRAM AND THE TRIO PROGRAM
Mr. STOKES. I notice that you have a this new program called High Hopes. Can you tell us how that program interacts with the TRIO program? Is it complementary to it, or supplementary to it?
Mr. LONGANECKER. No, they are very complementary and they are not redundant. The TRIO program is basically a program that helps students with services outside the school to help provide support to keep them on a positive track toward education, the Upward Bound, the talent search, with the exception of the support services, which is sort of integral to the education in the college itself.
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What we are proposing in the High Hopes program is really a program that brings the college and the school together as integral partners in the education of that child. It is not an outside the school activity. It is an inside the school activity. It really blends those institutions, brings them into partnership. It gives the college and university, we hope and trust, a vested interest in the success of that student, or that class of students, I should say. We intend this to be available to all the students.
TRIO is for, you identify a set of students in each of the programs who most need your help. Here we are trying to reach all the students in a class to change the ethic and the culture of the school in which they are a part so that there is an ethic of higher achievement. It is really more of a systemic reform effort inside elementary and secondary education focused on the school as well as on the students. Whereas TRIO is really focused on making sure those students who have been falling through the cracks, do not fall through the cracks anymore.
We are trying to eliminate the cracks with High Hopes. So we do see those as very complementary programs, not redundant and not competitive.
ADMINISTRATION'S FOCUS ON TRIO
Mr. STOKES. I appreciate your delineating the distinction between the two programs. In your written statement you mention that the Administration has proposed to expand the benefits of TRIO to a larger proportion of the disadvantaged population by adding priority points to applicants proposing projects in under-served geographic areas. In so doing, is it the Department's intent to change the focus of the TRIO programs from access programs that help low income, disadvantaged students to enter and succeed in college to high school retention programs?
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Mr. LONGANECKER. No, the purpose is really to have the monies of the future flow to where the growth in high need students are. As we look to the future, we see the demographics of the country changing, and we think that our Federal programs ought to proportionately go where the populations of greatest need are. As that population of greatest need changes, we think the funds should begin to flow appropriately in those directions.
That would mean that some areas that traditionally had greater need but no longer have as substantial a need would not receive the percentage of funds that areas that were growing were. But we do not see it as a change in the thrust of the program.
We are very interested in programs that enhance persistence. We think that is an important issue and we certainly believe that it is very important for students not only to stay in high school but to succeed in college when they get there. But that was not the purpose of changing the formula. The formula itself was simply changed to have the dollars flow to where the greatest needs are.
TRIO EVALUATIONS
Mr. STOKES. Good. Doctor, during last year's hearing you indicated that the Department was developing new performance reports that can be used to better measure TRIO program successes. What is the current status of this effort?
Mr. LONGANECKER. We have underway performance evaluations of the TRIO programs, and they continue. We continue to fund those and they are coming to closure, and we are gaining some additional value. We also have developed strong performance measures for all of our programs. We have about 230 specific performance measures for the Office of Postsecondary Education. About 200 of those are in the financial aid area and about 30 of those are in the programs that Claudio manages in the higher education programs that are including the TRIO program. So we have specific performance objectives in TRIO as we do in all of our programs now.
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HBCU FUNDING INCREASE
Mr. STOKES. I am encouraged by the increase in funding from $118.5 million to $134.5 million that the Administration has provided for the Nation's Historically Black Colleges and Universities. Tell us why this investment in HBCUs is important, and why we need to strengthen it.
Mr. LONGANECKER. We think we need to do more to strengthen the support for all of the minority-serving institutions, the historically black colleges and universities, the Hispanic-serving institutions, and the tribal colleges. The reason for that is not only the historic nature of the institutions in the case of the HBCUs, which is important to the country all by itself, but the fact that these institutions tend to serve a disproportionately large share of students of color, and they tend to do so more successfully than other institutions in terms of those students staying to completion of the term of their graduation.
So we think it is a good investment, not only to sustain that historic mission of those institutions, but perhaps even more importantly, to provide quality education to students of color who are still not represented to the extent that they should be in American higher education.
FUNDING FOR THE CLASS SIZE REDUCTION INITIATIVE
Mr. STOKES. Mr. Secretary, the Administration's new education initiative to hire 100,000 new teachers over seven years has been well received by the education community. This initiative, however, is to be funded by the tobacco settlement. If a settlement agreement is not reached, does the Administration have any alternatives for funding this new initiative?
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Mr. LONGANECKER. I do not know the answer to that, but maybe Tom does. That is a tough question. Tom?
Mr. SKELLY. Mr. Stokes—it is a tough one—the Administration's position is that it will consider all alternatives offered by the Congress if the tobacco settlement does not result in funding that could be used for the class size reduction initiative.
Mr. STOKES. Good. We will accept that.
Mr. LONGANECKER. I am going to give more to Tom. [Laughter.]
TEACHER RECRUITMENT AND PROFESSIONAL DEVELOPMENT
Mr. STOKES. In light of the current clamor for better teaching for teachers themselves, tell us how quality training and education will be provided in order to prepare so many new teachers.
Mr. LONGANECKER. I mentioned the recruitment side. But equally important to the recruitment is providing strong models of professional development programs in this country. Unfortunately, Title V of the Higher Education Act had 21 programs—they were pretty nice ideas—only one of which was funded.
What we want to do is reduce that to two components, a recruitment piece and a very strong piece that would take the strongest teacher development programs in this country, blend those with other institutions that want to partner with those programs, and develop a much stronger, what we call professional development model—we do not. That is what the community calls it—which really is a clinical experience similar to what we use in medical education where we—in medicine where we have professionals coming out, we would not think of sending them into the medical profession without some internship, some clinical experience. So we think that needs to be a very strong part of this.
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Furthermore, we think that it is very important that the education they are getting in the school of education or the college of education or the Department of Education be intentionally blended with the rest of the education they are receiving while they are in college, that the liberal arts college recognize its responsibility to develop teachers for the future, the liberal arts part. We are trying to blend all of that together, create a consortium of universities working with elementary and secondary schools, fund the best of those in the country so that we have some models out there of good practice, best practices, that can be expanded and shared with others so that there develops, as there did after the Flexner report and after significant Federal involvement in this in the medical education in the early 20th century, that we could provide similar energy and importance around teacher education that would change the nature of the delivery of that in our colleges and universities, improve it substantially so that we can prepare people better to be new teachers.
Now, that does not deal with all of the teachers who are out there. We are trying to do that through the Eisenhower programs. Our unique handle on the Higher Education Act is with the new teachers.
Mr. STOKES. Thank you very much, Doctor. Thank you, Mr. Chairman.
Mr. PORTER. Thank you, Mr. Stokes.
In round two, we will operate under the 10-minute rule, with the exception that if any member who has not had questions in the first round arrives, we will recognize them at the completion of whoever is asking questions.
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GOVERNMENT PERFORMANCE AND RESULTS ACT BASELINE DATA
Dr. Longanecker, the staff has considered your GPRA plans for postsecondary programs. While the Department has chosen some good indicators, in most cases it has not established baselines or targets. Given that GPRA was enacted over three and a half years ago, why haven't you been able to adopt baselines and targets for virtually all postsecondary programs?
Mr. LONGANECKER. Well, I understand and appreciate your concern, and we are moving—we have moved what seems from our perspective to be quite aggressively toward the development of this. But I would tell you, developing a performance-based system in our agency, and I suspect in many others, has been a challenge and a difficult task. We are really changing the culture of the organization to look at things in this way.
Part of the reason we haven't developed baselines in some of these areas is we just have not—we do not have them, and we have to develop them, our benchmarks. So we are working on trying to do that in all of the areas, and logic—I sure hear what you are saying, and it is hard to measure whether we are making success until we have something to measure against.
But it is a much more time-consuming process than we ever anticipated, I think.
Mr. PORTER. I am certain that is true, but I think given the time that has passed and the time it will take once you even have the baselines and targets to get some results that are comparable, we are going to be, you know, in the year 2002 before we are going to know what is actually working and what is not.
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Mr. LONGANECKER. In a number of areas, we have reasonable benchmarks so that we can start to look at progress at the present time. In some of the areas, you are absolutely right. Probably in my lifetime here I will not see the results of some of these activities, even though I have been here longer than anybody.
Mr. PORTER. Let's try to make that not come true.
Mr. LONGANECKER. I hear what you are saying, and we are moving aggressively, and I would tell you that this is also a very high priority for Mr. Smith, who drives us as Assistant Secretaries very hard toward the development of these. It is not for lack of consistency and purpose with you or lack of interest. We have a very strong interest in a high performance system, and it is basically that we—I mean, I do not have a good excuse for that one, sir.
Mr. PORTER. I hope we are not talking about it the same way next year.
Mr. LONGANECKER. I hear you.
TARGETS NEEDED FOR SPECIFIC PERFORMANCE INDICATORS
Mr. PORTER. Dr. Longanecker, your office has established indicators that are general to the Office of Postsecondary Education rather than attached to specific programs. We have discussed with Howard, NTID, and Gallaudet the need to improve graduation rates to maximize the Federal investment in their students. Likewise, we discussed yesterday with the IG the importance of increasing graduation rates at institutions which benefit from Federal student aid.
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Your GPRA plan identifies a goal of increasing graduation rates at Title IV institutions and provides a baseline, but it does not indicate a target. When will you select your targets? And will you have one for fiscal year 1999?
Mr. LONGANECKER. I am trying to remember, without specific—in many cases, where we have not established a target, our goal is continuous improvement, sort of the old total quality management principle that we should be—we may not know precisely what—and that is a good one, I think, in terms of saying I am not quite sure what precisely the right target would be in graduation rates, though I have worked on this at either the State or the Federal level for the last 20 years. But I do know that the graduation rate today is too low and that we have a long way to go and that we ought to be looking for continuous improvement in that. We ought to be very concerned if it is not going up, and we ought to be continually trying to work to get it up.
Mr. PORTER. If you do not know, who does know?
Mr. LONGANECKER. Well, I think it is difficult because it captures averages that—I am not sure you can find the right number, because the number for a community college that is serving students, many of whom may come for purposes other than graduation, is going to be substantially different than for an institution like an Ivy League college where virtually everybody is assured of graduation almost when they come in. So I think it is very difficult.
On the other hand, virtually all of our institutions should be striving to do a better job than they are today.
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Mr. PORTER. Are there any requirements for Title IV participation in the new authorizing bill?
Mr. LONGANECKER. Requirements? Beyond what are current requirements?
Mr. PORTER. Yes.
Mr. LONGANECKER. The one principal change in requirement has——
Mr. PORTER. Graduation rates.
Mr. LONGANECKER. Oh, graduation rates.
Mr. PORTER. Yes.
Mr. LONGANECKER. No, there are not.
Mr. PORTER. There are none. Should there be?
Mr. LONGANECKER. Well, we had some—that was one of the criteria that were in the famous SPREs that came out of the 1992 legislation, was that institutions would have to indicate their graduation rate and achieve rates that would be established by the States. That was a very unpopular portion of the act, and basically this is no longer in existence.
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Mr. PORTER. I suggest to you that responding to your constituency in this case is not always the best policy and is clearly not leadership. You are going to have to drive your constituency if you are going to achieve higher graduation rates.
Mr. LONGANECKER. Well, in that case—and I am sure there are people behind me who could verify this—we did not really respond to the constituency. I have got lots of scars left over from trying to pursue that as vigorously as possible. It really was the current majority leader of the House that terminated that program.
EMPLOYMENT RATES OF STUDENT AID RECIPIENTS AND NONRECIPIENTS
Mr. PORTER. The Department also indicates a goal of ensuring that Title IV recipients are employed at rates at least equal to those of non-Title IV recipients. Why shouldn't we hope and expect that Title IV recipients would have an advantage in the workplace by virtue of their education? Why don't you set a goal of achieving higher rates of employment for Title IV recipients?
Mr. LONGANECKER. Well, actually, that is a very interesting question, and I probably should have answered that. I think our thinking was that because most of them come from more disadvantaged backgrounds economically and educationally because of the correlation between income and education, that that was a fairly aggressive goal as we had established it, simply knowing American society. But you make a good point, and our goal should be to be serving our students as effectively as possible. I think that is a good point.
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DEFAULT RATE GOALS
Mr. PORTER. The Department indicates in its GPRA plan that it will attempt to reduce default rates in the loan programs. The Department has now chosen a target of less than 10 percent by 2002. The most recent actual data shows a baseline of 10.4 percent.
Is reducing defaults by four-tenths of 1 percent over 5 years an ambitious enough goal? Do you have interim goals for fiscal year 1999, 2000, and 2001? How are we going to check up on this before 2003 when the 2002 data will be available?
Mr. LONGANECKER. We annually publish the default rates, and so you will be able to see whether we are moving toward that each year as we move. The 10 percent figure is one that we have been working on for some time. This is one that internally we had as a working goal for some period of time.
It was established—you may remember we started a few years ago with a 22.4 percent default rate, and it seemed like a very ambitious goal when we were first talking about it. We did not actually start it at that point. We started it when we brought it down to 15 percent. It still seemed like a very ambitious goal.
We are certainly approaching that, and one could ask whether that is as ambitious today. We also think that we may be reaching the point where we are not quite sure how much more we can bring it down.
There is in the loan program, where students are accepted, whether they are creditworthy or not, some risk and there will be some default rates. And so I think we ought to continually try to find good ways to improve that, and if we reach that 10 percent goal, then obviously we are going to have to re-establish what our goal is because we would not want one——
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Mr. PORTER. In this area, it seems to me that a lot of this depends upon the economic growth rate and the employment rate and the like.
Mr. LONGANECKER. Yes.
Mr. PORTER. In other words, some economic indicators and maybe your goal should be tied to some kind of economic indicator.
Mr. LONGANECKER. Well, this is a very simple, straightforward algorithm, as you can see, and it may make sense for us to try something that is tied to economic indicators. The reason we chose that is that it is the same metric that we use and impose on the institutions of higher education, and so we wanted to basically have something that was consistent.
Many of those institutions have argued that we ought to have something that is indicative of the economic circumstances they face, and there is some merit to that. I think over time we will have to refine all of these—this is really a first generation of our work in the area of performance measures—and I suspect as we move along, as we learn more, we are going to get much more sophisticated, and that it will lead to much better public policy.
DIRECT LOAN PARTICIPATION RATES
Mr. PORTER. Thank you.
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Education Daily recently reported that satisfaction among schools participating in the Direct Loan program decreased by 25 percent last year. What is the reason for this decline?
Mr. LONGANECKER. Well, we believe, I personally believe, that the major reason for that was the timing of the study that—that was the result of our own internal evaluation which we do annually. And that study was in the field for testing about this time last year. This time last year we were having very significant problems with a new student loan servicing contractor that we had. They were having a very difficult time serving in the institutions.
Now, the students were getting their awards, but the institutions were having a very difficult time reconciling their accounts, and so it does not surprise me. We were not giving them the quality of service they deserved at that period of time. And if I were them, I would have been dissatisfied as well.
We expect that that was a blip and that this year you will see a very substantial increase in the satisfaction because that service has really come around, is providing very high quality. Just to give you an example, in the last 4 months, we delivered 99.7 percent of the student loans within 48 hours of receiving the promissory notes. And the schools are letting us know that they really are quite satisfied now with the nature of the service in that program.
Mr. PORTER. I will start out with that question——
Mr. LONGANECKER. Next year?
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Mr. PORTER [continuing]. On round three. This year.
Mr. LONGANECKER. Okay.
Mr. PORTER. Mrs. Northup?
Mrs. NORTHUP. Thank you.
ADMINISTRATION'S PROPOSAL FOR NEW PROGRAMS
I would like to go back to the question of some of the new programs. I am looking at page 2. You talked about High Hopes, College Awareness Information, recruiting new teachers for underserved areas. How many of the States have programs that mirror that, the emphasis on attracting minority teachers to serve where you have minority populations in particular for the sake of role models and opportunities?
Mr. LONGANECKER. There are different programs. In terms of the teacher development programs, I do not know how many States have funded programs. In general, our approach would to the institutions—it is not a State-based program. It would be an institution-based program. So we are really trying to draw higher education more actively into changing the paradigm of the way in which they prepare teachers.
With respect to the other programs, the High Hopes, there are a number of States that have fairly substantial programs to reach out to younger people. Not surprisingly, those are the States with the highest enrollment rates in postsecondary education. We will certainly want to have efforts that are consistent with those and that are blended and are complementary to rather than redundant with those.
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But we have many other sections of the country and, not surprisingly, this is where enrollment rates tend not to be as robust, where the States really have not done much in this regard. And so we feel there is a Federal concern and a legitimate Federal interest in providing for these models.
Mrs. NORTHUP. So is the Federal money going to be primarily diverted to those States that have not invested their own money in these programs?
Mr. LONGANECKER. No, these are not State-based programs. They will——
Mrs. NORTHUP. They are institution-based programs.
Mr. LONGANECKER. They are institution-based programs, and they will go to those areas that come in with the plans that demonstrate that they will serve the most needy students the most effectively.
Mrs. NORTHUP. First of all, I would like to see a printout of the States that have programs. I know in Kentucky we are always searching for programs. We know where we are underserved. We know what institutions can best meet those needs. We know, for example, we only have a 7 percent minority population, but a great number of that is in my district. And so we focus a lot of the minority recruiting for the teacher programs in my district.
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I am having a hard time figure out why the Federal Government would get into this and why we would duplicate State programs that are tailored to State needs and why we would invest in those States that have been the laggards, if there are, whether every State needs the same kind of program.
You know, I think we do need some investment in higher education. I would like to go back and suggest that you go back and direct and re-think about directing these resources to the elementary education programs in our States and colleges. They are not turning out teachers that know how to teach math and reading in a way that students best learn, according to the latest research. If we are going to make investment in higher education, let's put it where the kids really—where we most need it and not duplicate the State efforts.
LIGHTHOUSE PARTNERSHIPS
Mr. LONGANECKER. Well, that is the focus of our teacher education development piece, the piece that is called Lighthouse Partnerships. It is to try and provide funding for the best practices in the preparation of people to be teachers in elementary and secondary education.
Mrs. NORTHUP. Well, you know, I would just like to point out that it looks to me like the Lighthouse Partners is the least funded of the new programs that I just suggested, so that is not very reassuring.
One of the things that came up a minute ago about why teachers are not choosing to go to underserved areas—say, if we need more teachers in our most high-risk schools—one of the reasons is that our teachers unions insist on a level pay scale so that all first grade teachers get paid the same amount. And so what we find is that our experienced teachers, our best teachers, our teachers that are not on provisional certificate, they choose to go to the suburban schools in that district, and that leaves the most at-risk schools with the worst teachers.
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So I would be surprised if the dynamic in Kentucky is much different than the dynamic across this country where the real problem is that the schools are not given the flexibilities because of the union's contract.
Mr. LONGANECKER. Good point.
Mrs. NORTHUP. Mr. Chairman, that is all. I have exhausted my questions—excuse me.
Mr. PORTER. Thank you——
FINANCIAL RESPONSIBILITY REGULATIONS
Mrs. NORTHUP. I am sorry. Could I ask one more?
I have an institution in my district that is one of the schools—it is a non-profit school in Jefferson County that is very focused on attracting students in the high-risk community and providing teachers and advanced degrees to teachers that serve that community. I talked to them recently, and you all have promulgated new regulations that require colleges to have a certain portion of their funds to be endowment funds or else they are going to be denied financial aid. That will almost shut this college down if you progress with that. Doesn't that seem to run counter to all of your other objectives?
Mr. LONGANECKER. We have recently established some new financial responsibility regulations, and I will come and talk with you about the specific college to make sure how it affects them.
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We worked with KPMG Peat Marwick, to come up with a reasonable rule. The law requires that institutions be financially responsible to participate in the program. The regulation we have traditionally had was a one-size-fits-all, and it did not reflect, the diversity of institutions of higher education that may be responsible financially but that may not have been reflected in the one figure we previously used, which was an assets-to-liabilities ratio.
Now we have worked with KPMG, which were the leaders in the country in assessing the financial health of higher education. They are the company that really has the established industry leaders, establishing financial health for institutions of higher education, and do much of the work that is done for bonding agencies and others to determine. Working with KPMG and with the higher education community, including the National Association of College and University Business Officers and all of the major organizations, we came up with a set of ratios that we think accurately reflects the financial health of an institution. And I would like to work with you on that because it has generally been very highly regarded, I am surprised that someone is complaining. It has been very highly regarded by the higher education community; been highly praised.
Mrs. NORTHUP. Well, let me just say that it is regarded by anybody that has an endowment of that level.
Mr. LONGANECKER. You do not really have to have any endowment whatsoever in this to be financially responsible. You could have zero endowment and, if the rest of your finances were solid, you would be okay.
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Mrs. NORTHUP. Well, I will be happy to talk to you about it. I will say this is an institution that was run by the Sisters of Nazareth for years. It is now a private college. It is in the middle of the downtown area of Louisville, Kentucky. It serves students—it gives students who might never have had an opportunity for higher education that opportunity.
It is no surprise, considering the community it serves, that it does not have a big endowment, and many of our teachers receive their advanced degrees there, and I would just be shocked if your agency would want to promulgate regulations that would close an institution like this down.
Mr. LONGANECKER. Well, I will come and chat with you personally some more about that.
STUDENT AID MANAGEMENT IMPROVEMENTS
Mr. PORTER. Thank you, Mrs. Northup.
Dr. Longanecker, responding to the Department's response to its initial report, the IG report of yesterday indicates that it agrees
That the Department needs to focus on business process improvement and ensuring that its technology investment facilitates that improvement.
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However, we disagree that the Department is now on track to make that happen. The Department still does not have the necessary capital planning and investment control processes in place to ensure that decision-makers get the right information.
Given the disarray in the Title IV program's management systems, what confidence can we have that the dramatic increases we have provided in the last 3 years for student assistance are reaching the students they are intended for? As an example, the IG indicated that he identified in one audit alone $100 million in Pell Grants made to ineligible students.
Mr. LONGANECKER. Well, as you might imagine, our perspective of our management is different than the Inspector General's. We think we are doing a fine job in improving. We have a major overhaul effort called Easy Access for Students and Institutions (EASI), which is intended to radically redesign our systems to provide a more modern approach. We also are encouraging the development of a performance-based organization which will allow us to move in those regards. And we have adopted a number of the recommendations of the Inspector General in moving toward management systems, and management information systems to provide better information.
I suspect the specific reference that they are making with respect to $100 million in lost money was money that was associated with an audit they did of—I am trying to remember—what was it?
Mr. SKELLY. Veterans. People who claimed veterans status.
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Mr. LONGANECKER. People who claimed veterans status. I was actually thinking it might have been students' misreporting of assets, which is roughly the same number in those areas.
We currently do matches with Social Security—I mean, we are radically—we are trying to respond to all of the items that are brought to our attention and, in fact, are discovering most of those ourselves and moving toward changing our system.
Just our National Student Loan Data System alone last year alerted us to not provide over $350 million to students for one form of student financial assistance or another because they were ineligible. That is a system that did not exist for us 4 years ago and that we are using every day now to prevent that. We are using student status confirmation reports from that database to give us a better sense of whether the students are legitimately enrolled or not.
There is a great deal we have done and will continue to do. In general, I think they are correct; we have a lot to do to improve. You can look at the glass as half empty or half full. We think we have done a great deal. We are committed to continuing to try to improve our delivery of student financial aid. We have eliminated about 700 institutions from participation because they had poor records of participation in the program using one indice or another over the last few years. That did not come without some substantial angst from those institutions and the people who represented them, but we moved in that regard nonetheless.
So we think we are on the same team as the IG with the same goals. We have a different perspective on how far we are along the continuum.
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INTEGRATION OF STUDENT AID SYSTEMS
Mr. PORTER. Let's talk for a moment, then, about the Higher Education Act amendments of 1992 which required the Department by January 1, 1994, to integrate its National Student Loan Data System with other student financial assistance programs.
Last July, three and a half years after the statutory deadline for integrating these systems, the GAO and the IG testified before the Education and Workforce Committee regarding this matter. The GAO stated that the Department had made ''only limited progress in integrating NSLDS with the other student financial aid systems'' and that, as a result, ''the process is cumbersome, expensive, and unreliable.''
The GAO made three recommendations: the Chief Information Officer should develop and enforce a department-wide systems architecture by June 30th; all information technology investments made after that date must conform to the architecture; funding for all projects must be predicated on such conformance unless thorough documented analysis supports an exception.
INTEGRATED SYSTEMS ARCHITECTURE
The IG looked at this problem and concurs with the GAO recommendations, and he told us yesterday that the most important issue is the development of an integrated systems architecture. The Department's CIO apparently indicated in November that a preliminary plan for the integrated system would be developed in 100 days, compared to the IG's recommendation, I might add, of 30 days. That plan apparently still has not been completed. To further confuse the matter, the Department's GPRA plan indicates a goal of September 1998 for the integrated systems architecture.
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What is the status of the NSLDS and the integrated systems plan today? And has the Department adopted and implemented the recommendations of both the IG and the GAO?
Mr. LONGANECKER. We have not implemented and adopted all of those. We are in the process of doing so. We certainly agree with them. We have through the project EASI been working with Price Waterhouse to develop the architecture, the systems architecture, and the reason there are two dates—and there really are two dates—is that we will have received that architecture, the plan for that architecture, from Price Waterhouse in June of this year. That has been on the schedule for a long period of time. I do not know why there should have been confusion over that in the Inspector General's office or the CIO's office.
That has been our long-scheduled completion of that project, and then it will be reviewed by what we call the EASI core team and others for a period of 2 to 3 months as we are working it through and will become essentially a fait accompli and amended and adjusted from the Price Waterhouse work by September of this year.
I would tell you, though, that we have a general sense of where we have been heading for some time, and all of our procurements, all of our activities, are dedicated to moving toward a comprehensive, integrated system for some time. So it is not as though we have been not working toward this.
We have been completing the development of the NSLDS, really moving that from a flat data file to a much more robust data system than it was ever originally anticipated to be because of the interest of Congress and our own interest in using that as a more substantial database. We have developed a new institutional database called the PEPS system, and that gives us the capacity to do a lot of risk management work that we were never able to do before.
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There has been very substantial progress in the area of systems. It is the area that Diane is currently in charge of. Both Diane's previous two predecessors worked very diligently on this. This is not a new-found religion for us. It is one that we have been working on aggressively over the last——
Mr. PORTER. So you are no longer acquiring stand-alone systems, but——
Mr. LONGANECKER. We still are—we are moving away from the stand-alone systems. We still have some of those and we have a plan design as the contracts expire to move them into an integrated system. The most significant one of those is what we call the FFEL program, which will be the next one that we either compete as a contract or come up with a different plan for.
Just this February, we moved to what we call band one strategy, which is to put all of our systems on the same hardware platform, which will save us a substantial amount financially, and allow us to manage those more efficiently than we have in the past. So we are very committed to the same goal.
Our time line—I do not know why there should have been confusion over those because those have been our time lines established for the system architecture now for more than a year, and it involves the work of our contractor community.
We are trying to do this so that it is consistent with the needs of the community we serve as well, all of whom provide financial aid in their own world, and all of the lenders. We are trying to move to a system that uses industry standards and establishes those. We are in an industry that did not have established standards, so we are having to work through a standards council to develop all of that. And we think we are moving as aggressively as we reasonably can in that regard.
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PROPOSED TERMINATION OF YOUTH OFFENDER GRANTS
Mr. PORTER. Thank you. Dr. Longanecker, the administration has proposed terminating the new youth offender grants program. As you know, the House did not provide funding for this program in our bill last year. What is the rationale for terminating the program? If the administration believes it ought to be terminated, why did you not recommend rescinding the fiscal year 1998 funding in the supplemental rather than initiating multi-year grants only to terminate them prior to the completion of the funding cycle?
Mr. LONGANECKER. I do not know the answer to that question. I am going to ask Mr. Skelly if he does.
Mr. SKELLY. The administration did not propose any rescission. The administration feels that the supplemental request is based on emergency needs and would not require offsets, particularly offsets from domestic discretionary programs with a separate cap under the Balanced Budget Act for both domestic discretionary programs now and defense programs.
Mr. PORTER. What is the rationale for terminating this program?
Mr. LONGANECKER. I might be able to help in that. As a general rule, in reauthorization of the Higher Education Act, we had a rule that if a program had not been funded and we were not going to propose it as an initiative, we would eliminate the program. I think we have proposed the termination of about four or six programs.
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Mr. PORTER. Would it not make a lot of sense, though, to then—or I can ask this of Mr. Skelly—rescind rather than to begin a multi-year funding program if we were actually going to terminate?
Mr. SKELLY. Again, we did not have an exercise looking at rescissions that we could propose. It is a new program, and we have several new programs that the House or the Senate added to the bill. This is one that perhaps could be funded out of programs authorized under vocational and adult education. We think that is the better place to go. But the vocational adult education reauthorization has not yet passed the Senate. We are still waiting for a bill there, so we do not know quite how that is going to evolve. This program is not in our higher education reauthorization proposal, and we also expect legislation there. But in the meantime, we will carry out all the programs enacted into legislation.
Mr. PORTER. Thank you, Mr. Skelly.
The administration is proposing three new programs to be funded collectively at $65 million: Early Awareness Information, Learning on Demand, and Access and Retention studies. Which of these programs is specifically authorized in law and which is specifically authorized in the bill which just passed the House Education and Workforce Committee, do you know?
Mr. SKELLY. The Early Awareness program we believe is authorized already under existing Title IV legislation. The other two programs, learning on demand or Learning Anytime Anywhere and the Access and Retention Innovations, are not authorized.
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Mr. PORTER. And are they contained in the new bill?
Mr. SKELLY. I do not believe that the House included those.
Mr. LONGANECKER. None of them are.
Mr. PORTER. None of them are?
Mr. LONGANECKER. Right.
Mr. PORTER. But you think the Early Awareness Information program is authorized?
Mr. SKELLY. Under the current Higher Education Act, which would expire this year, it is authorized.
Mr. PORTER. And it would not be under the new proposal as it passed the House Education and Workforce Committee?
Ms. MCLAUGHLIN. It is not in the House committee bill.
Mr. PORTER. Ms. Rogers, when you and Mr. Hoyer were talking about the year 2000 program, you seemed to indicate that the problem is all in the hardware. Isn't it also in software in some cases?
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Ms. ROGERS. Oh, yes. It is in the software.
Mr. PORTER. It is in both; right?
Ms. ROGERS. And if I may, one other thing that we are doing to ensure that we are ready for the year 2000 is diverting any budget resources that we need to, to ensure that we are ready. So there will not be any budgetary concerns.
Mr. PORTER. I have additional questions on the year 2000 problem that I am going to put into the record.
Let me say, Dr. Longanecker, when you and I were talking about SPRE and you were talking about the reporting requirement, obviously you are correct that it was the Congress that killed that entire program, but on the other hand, it contained a great deal more than the reporting requirement.
Mr. LONGANECKER. Yes.
Mr. PORTER. It had a very heavy regulatory hand that many Members of Congress, including this one, thought was inappropriate and counterproductive.
Mr. LONGANECKER. I concur. I actually agree with that statement as well.
Mr. PORTER. So to the extent that you were talking about the reporting requirement and Congress killing it, certainly you were correct.
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CONSISTENCY OF ADMINISTRATION PROPOSALS
This is a statement more than a question, and you can respond to it in the record if you wish. Last year we talked about the inconsistent positions the administration has taken on higher education and student financial assistance programs over the last several years. I read a long list of those varying positions and asked whether there was any programmatic or substantive rationale for the flip-flopping, and the answer, generally speaking, was no.
The administration seems to continue to do the flopping around. I am going to mention one example and ask you a couple of questions that, again, you can answer for the record.
SCHOOL-COLLEGE PARTNERSHIPS
I want to read two excerpts from Department documents regarding the School-College Partnership. The first indicates that the ''program provides grants to institutions of higher education and secondary schools serving low-income students in order to encourage partnerships between these institutions. The grants support projects to improve the academic skills of students to increase their opportunity to continue a program of education after secondary school and to enhance their prospects for employment after secondary school.''
The second excerpt states that the program ''would promote partnerships between colleges and schools in low-income communities to provide children with the support they need through high school graduation. The partnerships would provide information about what it takes to go to college as well as support services to keep children on track.''
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It sounds like the same program.
The first excerpt is from the President's 1993 budget request regarding the school, college, and university partnership program, in which he proposed to eliminate the $4 million program because it was administratively burdensome and duplicated the TRIO program.
The second excerpt is from the Department's Web site describing the current proposal for a $140 million College-School Partnership program. Five years ago, the program was not worth a separate line item funding of $4 million. Today it seems to be a higher $140 million priority. And you can comment on that for the record, if you would like, or you can comment on it now.
Mr. LONGANECKER. Let me do a little bit of both. I would like to respond in more detail for the record, but let me respond now.
The budget that we presented in 1993 was a fairly hastily constructed budget. We had just come to town. Some of us were not even a part of putting that budget together. That budget I do not think reflected our philosophy as much as the 1994 and subsequent budgets.
The school-college-university partnership program is a very sound concept. It was a very good idea. We had a substantial amount of difficulty. It was the creation of the 1992 amendments. As a State person who was involved in Federal policy, I was very supportive of that and really had hoped to see that program take off. I felt that there was a lot to be said for the idea of trying to bring schools, colleges, and universities together. Claudio Prieto, my Deputy for Higher Education Programs, put together such a series of programs in New York City with Lehman College and a series of schools around Lehman College. It is one of the model programs in the country. We believe very strongly that that concept makes sense.
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Out of that, over time evolved the idea of High Hopes, which we think is a really very sound idea, that it is time to do much more to reach down at earlier ages, and that the partnership between schools and colleges and universities is a strong way to do that. We were not able to generate the kind of energy and support for the SCUP program, as it was called, the School-College-University Partnership. Maybe it was because of the acronym. It is not a very attractive one. And so what we did in our own thinking was start to put together that idea with the urban community grants program that also was having difficulty. We thought those had the core of a set of good ideas, worthwhile public policy. And as the idea also evolved in the White House with energy around this, we were able to put together what we think is a much more sound, much more robust idea than the original law, but certainly consistent with that and building on it.
So I would say that our language in 1993 was really crafted by—I do not want to blame folks who were sort of sitting around in seats at that time, but I certainly would have argued strongly for a much more aggressive position for the School-College-University Partnership than is reflected in that language.
Mr. PORTER. Would you say that the administration now has developed a consistent higher education and student financial assistance philosophy that is reflected in your proposals currently?
Mr. LONGANECKER. Yes, I would. And maybe at some point we can sit down together and talk about that. I think there are areas——
Mr. PORTER. No, no. I want you to talk about it now.
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Mr. LONGANECKER. Yes. I think there are areas you can find where there are——
Mr. PORTER. Can you give me kind of a—without going into programs, talk about what your basic philosophy is in these areas.
ADMINISTRATION'S PHILOSOPHY OF POSTSECONDARY EDUCATION POLICY
Mr. LONGANECKER. Our basic philosophy is that the Federal Government has a responsibility to assure that individuals have—has a responsibility to assure that students have access to college and an interest in promoting that they go to college.
Mr. PORTER. And that is all students?
Mr. LONGANECKER. All students. And so our responsibility suggests a very substantial financial commitment to those students who come from families without means.
Our interest suggests a very substantial agenda in terms of encouraging college attendance, encouraging persistence in college attendance, and encouraging families to save for their children, and helping them move on beyond that. I think if you take Direct Lending and the increases in Pell and the tax package, the big ideas that we have put forward, you would find a generally consistent theme.
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You will find some inconsistencies, and some of those were for political and some were for practical reasons and some were lessons learned along the way. But I think generally we have a general theme of providing high-quality education to all students in this country and encouraging them to take advantage of it.
Mr. PORTER. Dr. Longanecker, thank you very much for your good opening statement, your candid answers to our questions. We may not agree on everything, but we agree on a lot.
Mr. LONGANECKER. You bet.
Mr. PORTER. And we appreciate the fine job you are doing there and look forward to seeing you here next year with a lot of the matters that we have raised today cleared up substantially.
Mr. LONGANECKER. You bet. I will look forward to it.
Mr. PORTER. Thank you very much.
Mr. LONGANECKER. Thank you for your service.
Mr. PORTER. The subcommittee will stand in recess until 2:00 p.m.
[The following questions were submitted to be answered for the record:]
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"The Official Committee record contains additional material here."
Wednesday, April 1, 1998
OFFICE FOR CIVIL RIGHTS
WITNESSES
NORMA V. CANTU, ASSISTANT SECRETARY FOR CIVIL RIGHTS
Mr. PORTER. The subcommittee will come to order. We continue our hearings on the budget for the Department of Education for fiscal year 1999. We are pleased to welcome Norma V. Cantu, the Assistant Secretary for Civil Rights.
If you would introduce the people that you have brought with you and then proceed with your statement, please?
Introduction of Witnesses
Ms. CANTU. Good afternoon, Mr. Chairman, members of the committee. If I may introduce, on my far left, Tom Skelly with the Department. He needs no introduction. He has been at every hearing so far. If I may introduce, on my immediate right, Art Coleman, my deputy assistant secretary, originally from South Carolina. And on my left, Mr. Chairman, Raymond Pierce, a deputy assistant secretary as well. He hails from the great State of Ohio. And I am from the home State of Texas.
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Opening Statement
I am pleased to share with you today the 1999 budget request for the Office for Civil Rights in the U.S. Department of Education. I will summarize the opening statement in five minutes and ask that the entire statement be included in the record.
I hope you will find it interesting to hear about our performance measures, what we are doing with the budget we currently have of $61 million, and why we need a modest increase in fiscal year 1999 that will bring us to $68 million. I want to thank you very much for the support you have given us in this year's budget, and I ask for your support for next year.
As you are aware, our budget is funded on its own line item to ensure that the entire budget of the Department of Education, the $37 billion, is spent in a way that does not create discrimination in any classroom in this country. So we are one-fifth of 1 percent of the budget of the Department of Education.
With that budget we seek to meet some very serious performance measures: to increase access for all 66 million students to high quality education, to increase the number of students impacted by our efforts, to increase the number of successful partnerships with educators to prevent discrimination, and to increase the involvement of parents and students as part of our compliance efforts. Those are performance measures we can count.
We expect to examine how we do our job as well. And that is with professionalism, with fairness, with courtesy, and a minimum of disruption to educators. Those results cannot easily be measured, but they are just as important as the results that we can measure. As Albert Einstein has said, ''not everything that matters can be counted, and not everything that can be counted matters.''
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We are not waiting until 1999 when our performance indicators are due to expect accountability and results from ourselves. I am proud to report that we are using this budget already to produce results on behalf of real students and real parents.
For example, we are using this budget to meet face-to-face with educators to solve real problems. As you can see from the chart, the top chart, the top two years have yellow lines that are shorter than the next two years. For the top two years, 1997 and 1996 were years where our budget was cut and our productivity dropped. The yellow lines represent the cases that we resolved. So there is a direct relationship between the level of funding and our ability to serve customers and resolve real civil rights problems.
Two quick examples I want to share with you about real results we have produced: In the New York public schools we reached a voluntary agreement with the entire district that committed the schools to involve parents in the task of identifying instances where African-American students were being inappropriately referred to special education services they did not need, and disproportionately placed in those services in a way that isolated them on the basis of race. That single agreement involves 1 million parent partners in the business of being involved in assuring that their schools are discrimination-free.
The other quick example involves an individual student who complained to our office. As a 12th grader, she was ready to graduate, but she had been notified that the diploma would be mailed to her because she was in a wheelchair and the site for the graduation ceremony did not have a ramp. We were able to work very quickly and very cooperatively with the school district towards an inexpensive solution of putting up a temporary ramp; and, the good news is she graduated with her classmates.
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The sad news is she had been there 12 years and they knew that she had been in a wheelchair for 12 years. But it took our office to be able to work that through. And these are results that do matter.
What will we do with next year's money? We ask for $68 million for next year, which is a 10 percent increase, so we can continue to protect students from discrimination. If funded, we are going to be able to continue our current staffing levels for this year, and that is at 724 staff, to continue to provide one-on-one attention to educators to solve problems. It is staff-intensive. We get 500 calls from educators and parents every week who want to prevent discrimination. They are not calling to file a complaint. They are calling and requesting our office to provide assistance to them.
We do get 100 formal complaints of discrimination every week. And the formal complaints, if you look at chart 2, are distributed in areas that involve disability, gender, and sex. The big yellow part of the circle is disability. That represents the largest amount of the work that we perform in our office.
If funded, we will be able to continue to share best practices about how to avoid discrimination in several key areas, such as the ones I have mentioned, removing barriers to students with disabilities. We will be able to make significant progress toward meeting the ultimate performance measure, and that is providing access to high quality education for all students regardless of race, color, disability, gender, or age. That is why I am very, very proud of our staff and I am very, very proud of the work that our office is performing and will continue to perform.
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I would welcome any questions.
[The information follows:]
"The Official Committee record contains additional material here."
Mr. PORTER. Thank you, Ms. Cantu.
Mr. Bonilla.
BILINGUAL EDUCATION
Mr. BONILLA. Thank you, Mr. Chairman.
Thank you for your testimony today and for appearing before us. I have been concerned, frankly, about certain things that have been reportedly going on in the Office for Civil Rights and I hope that when we conclude the hearing that we have cleared some of these things up. Maybe they are not going on, maybe they are. But I want to ask some very direct questions about it.
The mandate that you have at OCR is to ensure that there is no discrimination in educational programs receiving Federal funds, and that is acknowledged. The concern—and I will be very specific in some questions as I follow up here in a second—is that the Office for Civil Rights is overextending itself into areas, to advocacy perhaps, that the law does not intend you to be involved in.
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Certainly discrimination is something we are all opposed to. I know you were not born in my hometown but you know my hometown of San Antonio. And having been born on the west side and raised on the south side, I do not have to describe the demographics of that area. You can understand that all of us, myself especially, will do everything we can to fight discrimination in this country.
Again, that issue aside, my questions will be along the lines of whether or not there is advocacy in trying to federalize or take away local control of school districts in spite of great opposition in some cases by parents and districts across the country. There is a difference between discrimination and incompetence. Incompetence is something that although we do not welcome that in any area, is not something that can be defined as purposefully and maliciously slighting students of different ethnic backgrounds.
In my old school district, in South San Antonio High School, when I started school in 1968 there was tremendous incompetence that resulted in shortcomings of curriculums and teacher's staffs for students. All the teachers quit when I started high school. We had to go to school half-days because the school board was so incompetent, made up primarily of Mexican-Americans. Not discriminatory, but incompetent, that resulted in tremendous loss of opportunities for students in the school district I went to.
I was never even required to read a single book in my four years of high school in South San Antonio High School. Unfortunately, the curriculum there has not improved greatly. The dropout rate remains at 50 percent, and the level of petty fighting among the locals there has not subsided to any significant degree, as you may have heard over the years. But again, incompetence is one thing and it has nothing to do with discrimination.
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My concern is that over the years that the OCR has a bias in favor of bilingual education in some cases where it has not been effective for local students and where a majority of the classes are taught in the students' native language and only a small—they only devote a small amount of time to learning English, in spite of, in some cases, protests from parents that feel that their students, their Spanish-speaking students should be mainstreamed more quickly.
School districts are forcing children into bilingual education programs in order to protect themselves from facing accusations by your office that they are violating a student's civil rights.
My first question is, are school districts free under Federal law to implement any program for minority language students as long as it is based on sound educational theory and gets results?
Ms. CANTU. Yes. Absolutely, yes. Our office does not mandate any particular type of methodology for instructing children who are limited English proficient. That is a local choice. It has to be a methodology that educators vouch for, but our office does not second-guess that choice. So, absolutely, yes.
OCR'S DEFINITION OF LIMITED ENGLISH PROFICIENT
Mr. BONILLA. How does the Office for Civil Rights define LEP, limited English proficient?
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Ms. CANTU. We follow the Federal standard, and that has been articulated in a variety of cases. What we are told is a student is limited English proficient if the student cannot read, write, understand, and perform in his or her regular curriculum at the same level as their peers. So, it is a read, write, and perform.
Mr. BONILLA. So they, in essence, could speak English, but be inefficient in these areas and then classified as limited English proficient; is that correct?
Ms. CANTU. If it is an older child and his or her peers are reading and writing? A child could come into a system speaking English, but because there is a home language other than English and that child is not reading and writing and able to perform in English—
Let me back up and tell you, I am an English teacher. I taught eighth grade English in San Antonio on the east side. So I totally value having all children learn English.
But a student is identified as needing language assistance services if their peers are performing in English and these children needs support to keep up with their peers.
PRIMARY OR HOME LANGUAGE OTHER THAN ENGLISH
Mr. BONILLA. If a child comes from a home where a language other than English is ever used, would that child be labeled limited English proficient?
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Ms. CANTU. No. The child would need to be evaluated to find out which language services the child needs. A child may come from a home language other than English, but be proficient enough in English that the child does not need any language support. That is my personal example. We spoke both English and Spanish at home. My grandmother looked after me. She was monolingual Spanish speaking. She would read to me every day from the Spanish newspaper.
So I came from a home language, but when I was in school I would keep up in English, so I did not need any kind of language assistance services. So it is an individual determination based on the individual needs of the child.
Mr. BONILLA. What about a child who speaks only English but his parents or grandparents speak Spanish in the home? You almost gave an example of yourself, but if you would like to elaborate.
Ms. CANTU. The child needs an educational program that makes sense for that child, and the child needs to be able to have meaningful participation in the instruction. So the evaluation, if done well, will ask what happens at the end of the class day, and does the child have an adult to work with in English?
But again, the evaluation will decide because the language that is spoken at home is not enough to determine that a child is limited English proficient. A child may, on their own, be communicating in English. I have a little brother who you would talk to in Spanish and he would answer you in English, and he grew up to be a broadcaster in Austin, Texas, in English.
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So each child is going to be different and the evaluation needs to be—we should not stereotype. The evaluation should be individualized to the student.
DETERMINING LIMITED ENGLISH PROFICIENCY
Mr. BONILLA. Does the OCR recommend or require school districts to use standardized English proficiency tests for determining LEP status?
Ms. CANTU. I want to say yes, but it is not the only measure. The Office for Civil Rights requires objective criteria to be used to determine whether and when a student needs to be placed in a language services program, and part of that evaluation could include a standardized achievement test to find out how that student is performing compared to his or her peers.
Mr. BONILLA. But it is only a recommendation?
Ms. CANTU. That is right. We do not tell the campuses how to conduct their assessments. We require that there be an objective evaluation. Then they come back and they tell us what their evaluation systems look like. And if in their evaluation systems they are using standardized tests, they tell us, this is what our evaluation systems look like.
Where we find a problem is if they do not evaluate at all. Just to give you some background, most of the times when we find a problem it is because the campus has not put into place any system for assessing whether the kids need services; do not survey to find out which children are limited English proficient; do not evaluate the children to see what they need; and do not come up with an individualized program for the children. Those are the most frequent kinds of problems that our office finds.
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Mr. BONILLA. Before I move on to my next question, it seems like we are talking here about curriculum development, testing, evaluation, a lot of things that, again, go much beyond what I quoted earlier as to the original mission of the OCR which is to ensure that there is no discrimination in educational programs seeking Federal funds.
I just find it interesting that we are getting into so many details beyond what some—I am not an attorney, but from someone who perceives it, where all these things we are talking about go way beyond just ensuring that people are not discriminated against. I would just make that observation before I would continue with the next question.
Regarding the standardized English proficiency tests, I have a question now about cutoff scores. My understanding is that most of these tests are designed with 30th and 40th percentile cutoff scores. In other words, by design, 30 to 40 percent of students who take these tests score below the cutoff score, even if they speak English fluently, they would score below the cutoff score. In other words, is there a quota involved here?
Ms. CANTU. There is absolutely no quota. And if I can get back to your earlier point. Because I am a teacher I may have been focusing a lot on the educational aspects. Those are local decisions about education. Our office does not second-guess local decisions about which kind of program to offer or what kinds of evaluations. To provide a complete answer, we just ensure that there is a system to evaluate if the program is effective.
As to your question about standardized test scores, there is absolutely no quota, no.
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Mr. BONILLA. What about the 30th or 40th percentile that I referenced?
Ms. CANTU. The district may decide that to achieve high standards they may set some goals that they want to achieve. That is a local decision that a district may make. It may say, we are convinced that a student is proficient in English if the teacher says so and if the student is performing within a certain range on an achievement test. But that is a local decision made by a district.
Mr. BONILLA. Do you encourage it?
Ms. CANTU. We do not encourage that because we want the local districts to make their own local education decisions.
Mr. BONILLA. Does the Office for Civil Rights issue any recommendations or requirements to schools directing which student should be placed in ESL programs versus a bilingual education program?
Ms. CANTU. No, we do not. That is a local decision. They have that flexibility as to which type of program, assuming as you have described, that it was a program that is vouched for by educators as effective.
Mr. BONILLA. What basis does the OCR use to justify placing a student in one program over the other?
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Ms. CANTU. We do not have a preference for one program over the other. We do not have a preference as to whether a district should choose an English as a second language program, or an English language development, or any of the other types of language assistance programs. Those are local decisions made by the school districts. So we do not even offer them some guides as to which would be more appropriate. They make that decision themselves.
Just to offer some information. I went back and checked with our office on how many districts pick certain kinds of programs and found less than one-third of the districts chose bilingual education. They chose a wide array of programs.
PARENTAL INVOLVEMENT
Mr. BONILLA. One of the things I talked about in hearings that we had with many of your colleagues in the Education Department is about the involvement of parents—parental involvement with children. And we have certainly been around long enough to know how significant that is. As I said to Secretary Riley the other day, I am just mind-boggled as to why more parents do not get it.
One of the examples I gave him recently was, a school district not too far from where you were born had a seminar recently for parents in the evening. And a drug counselor was talking at parent's night at my daughter's school recently and told us how they had a seminar there for students. I think they had 5,000 students enrolled in this particular school district, and at 7:00 that night the seminar began, and at 8:15 that night they still just had the counselor and the principal and the assistant principal, which is a very sad indicator of parents' involvement in this day and age.
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On page Y9 in your budget justification and on page 2 of your testimony you discuss OCR standards to work with parents and educators to ensure that all children have equal access to high quality education. While I support this goal wholeheartedly, this is definitely not a story we are hearing about OCR. Could you comment on that, especially in light of the fact that we seem to be agreeing that parental involvement in education is the key.
Ms. CANTU. We have offered as one of our performance measures how we work to be sure that parents are included, because all of the research shows that parental involvement is key to achieving high standards education. There are ways that we strive to do that. We include parents in local groups to find that out what they believe are the most serious problems in their local schools. We include parents in helping us monitor agreements, because it affects their children directly. So we want parents to know what the agreements are that the school districts voluntarily said they would do, and we want parents to have copies of those.
We include parents in having information about best practices. How are other districts deciding which kids get referred to low ability, low track courses? How do other districts decide which kids get access to gifted courses? And we share that kind of information with parents. We believe that America's parents want the best for their children, and we believe that America's educators want to provide that. So our staff keep that philosophy in mind as they work with people to solve real civil rights problems.
Mr. BONILLA. It is interesting to hear this because we seem to be in agreement on parental involvement and involvement of grandparents. The subcommittee has heard testimony from parents and grandparents who have been ostracized at school board meetings and seen their children separated from their peers because these parents spoke out about the unfairness of having their children placed in bilingual education that they do not need. And they were placed in bilingual education programs without the parents' knowledge.
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How is this encouraging parental involvement with the school district if in some cases the Office for Civil Rights, the reports we are hearing are that they are going against what the parents want when they want to be involved in the direction of their child's education?
Ms. CANTU. I am not aware of the particulars of what you are describing. I do not have a sense of when that happened. Can you tell me a little more about that?
Mr. BONILLA. Yes, what we will do is we will provide you with that.
Ms. CANTU. Would you, please?
Mr. BONILLA. It has been a few weeks now since we heard the testimony, but we will provide you with a copy of the testimony which was on the record. Everything we say here is all taken down and is kept on the record, so we will be happy to provide you with that. I would hope that you would take a good look at it to see if what you are saying here conflicts with what is actually happening out there.
Ms. CANTU. It may be that there are just some First Amendment issues happening at a local school board meeting where people are using their First Amendment rights to express their opinions. And we would respect that, that they are using their First Amendment rights. But I am not aware that our office has been involved in any way in the kind of incident you are describing.
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Mr. BONILLA. If you saw a situation like that would you not be incensed when you hear of parents shut out of trying to get involved in determining the direction of the child's education?
Ms. CANTU. I would hold to my original statement that those are local educational matters. Our office would look at the civil rights issues but not at a local educational decision. If what is happening is there is this really rich exchange going back and forth about what the local program should look like, that seems like an education conversation that should happen at the district level. My office would not try to play a role in guiding that conversation.
If what you are describing is they cross a line and there is a civil rights violation—because of their race or because of their national origin people are being mistreated—then certainly our office would be interested in hearing that information, and I hope that you share it with us.
Mr. BONILLA. I absolutely will. We all must keep in mind, of course, that discrimination does not just happen among whites against people of color. In some cases there are people of color discriminating against other groups, and I think that oftentimes people forget that discrimination in some cases does exist out there. You just want to make sure that it is not existing at any level at this time.
The parents that I referenced that I will provide you the testimony of believe that separating Hispanic students from their non-Hispanic counterparts into bilingual education classes creates a separate and unequal situation. In fact, one grandparent who testified before the subcommittee clearly stated,
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OCR is failing to properly supervise the district's programs. OCR is not protecting the rights of Hispanic, Anglo, or limited English proficient students.
This grandparent believes this, and I would ask, how would you respond to this? Because in a sense, again, it is discrimination against these parents that perhaps we should be looking at as well.
Ms. CANTU. I do not have enough particulars to understand fully what the concerns are. I am very much interested in learning more about it and I would be happy to take a look at the situation you are describing.
DENVER'S BILINGUAL EDUCATION PROGRAM
Mr. BONILLA. Okay. We will also have some questions for the record too that relate to this, so I will not continue to ask you about this testimony at this time because you have not seen it.
I understand that the OCR has objected to the changes now being implemented in Denver school district's bilingual education program. Could you explain your objection to the changes now being implemented in the Denver school district's bilingual education program? I have the letter here where the objection is expressed to the superintendent, Mr. Irv Moskowitz, the letter dated roughly last July.
Ms. CANTU. I will ask my deputy to answer that. Raymond Pierce will answer that. I have been recused from the Denver matter for quite a while and have no information that I can share because of my legal recusal from that case.
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Mr. PIERCE. Mr. Bonilla, as you may be well aware, that case was recently referred to the U.S. Department of Justice, Civil Rights Division. It was originally a complaint that was filed by a group of parents from the Denver public schools with the Office for Civil Rights back in 1994, I believe, claiming that the Denver public schools were failing to properly educate students who were of limited English proficiency. The Denver public schools I think are about 63,000 students, of which half of those students are Hispanic students. And of the minority limited English proficient students, the majority of those are Hispanic students.
After a thorough investigation, the Office for Civil Rights found that the Denver public schools were failing in two critical areas: to identify students who had limited English proficiency and then to properly assess them and provide them with the appropriate services.
Again, as Ms. Cantu stated, it is not our intention that we mandate which type of language program the Denver public schools provide, but that it be one that is proven to be sound, that is effectively implemented, and that is continuously evaluated. The Denver public schools' evaluations were failing them in two critical areas, particularly in assessment, in that the format they were using to identify the students failed to capture two critical components.
The four components, of course, are being able to read in English, being able to write in English, being able to speak in English, and being able to understand it, so that the student is actually receiving a curriculum that he or she can understand.
And the assessment, the identification model that the Denver public schools were using was one that asked, what was the primary language that the student speaks? Does the student speak a language other than English? And does the student's parent or primary caregiver speak a language other than English? Well, that alone would not be able to net a student who might not be able to comprehend, or might not be able to write. In our conversations and in discussions with the Denver public schools, we failed to get a change in that.
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The Denver public schools insisted on measuring the students on a curve with students who themselves were also of limited English proficiency. So we were not able to get a true picture of the number of students who may have some need for some language services, whether it was bilingual, alternative language programs, English as a secondary language, whatever.
Yes, I know the letter you are referring to, Dr. Moskowitz' letter. I did sign that. We met with them. Dr. Moskowitz came to Washington, D.C. We sat down and gave him audience. He brought a group of parents with him who expressed in some small degree some of what you talked about. But I think they went away understanding.
We tried one more time and we referred the case to the Department of Justice, where I believe right now negotiations are underway to try to resolve that case.
Mr. BONILLA. I am really kind of flabbergasted by the response that I am hearing on this particular case because, again, an education curriculum decided by local parents and educators where there may be what your office thinks is right or not, how does that affect a person's civil rights? If you are keeping with the original mission of the office, there is an incredible abstract area that your office is getting involved in here that is almost at a micromanagement level of education programs.
I realize that there are arguments that can be made, and if I asked you to elaborate, you would. You would say, considering this criteria that I just outlined, that there probably could be some neglect for a child's education. So I realize what you probably would respond by saying, but I think that the Office for Civil Rights is getting into a tremendous gray area of dictating curriculum and way beyond what we lay people think is a civil rights violation where you are being excluded from a class or they are not treating you fairly based on your ethnic origin or your religious background or your gender or the things that are clearly against the law.
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As you have responded to my question, I am thinking, wow, I did not realize that the Office for Civil Rights was into such details of curriculums in districts around the country.
One more question.
Ms. CANTU. Yes.
CONFLICT OF INTEREST
Mr. BONILLA. You talked about being recused from the Denver case. You were originally involved in litigation against Denver to implement bilingual education when you were an attorney for MALDEF. Do you believe there is a conflict of interest between your current position and involvement with Denver on this issue and your previous involvement with Denver?
Ms. CANTU. As soon as I noted that the same issues and the same parties were involved in the Denver case that I worked on, I voluntarily recused because I did not want even the appearance that there would be any kind of conflict of interest. I take that issue very seriously. I believe that those of us in public office need to avoid even the appearance of a conflict. So I was not involved in the decision to make a finding that Denver was not following the Supreme Court decision or that Denver was not following the appellate law that requires that students be afforded the chance to understand their education.
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I was not involved in the decision to refer it to Department of Justice when the negotiations did not work, and as a last resort, they sent it to Justice. I wanted to avoid even the appearance.
Mr. BONILLA. I thank you for responding to my questions, and I apologize for going on so long, but I do have some concerns about this. Again, there is no doubt at all that anyone on this subcommittee supports strongly our civil rights laws in this country. Again, having grown up in a minority neighborhood, I understand what it is like to be discriminated against. I remember my father telling me stories about how they would not let him sit at a lunch table in some communities that I now represent. In the old days in south Texas, he was not even allowed to sit with the Anglos in certain classrooms in certain grades, and we are all against that. And we are glad we are past some of the atrocities that occurred back then, but, again, I am just concerned that we are not now involved in advocacy into gray areas that wind up micromanaging educational curriculums, and that is my concern. That is what I am asking you about today.
I will have some more questions for the record as well, and I appreciate it if you would answer that.
Ms. CANTU. You have been very courteous, and I do appreciate your wanting to understand this area. It is a very significant area because so many children are being held back in meeting their full potential because appropriate services are not available for them to learn English and not available to support them in learning all their other content areas. I would love to follow up with more information and to clarify our role that we do not make the educational decisions. We simply look at enforcing the civil rights laws.
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Mr. BONILLA. Thank you, and I thank you, Chairman.
BACKGROUND OF THE ASSISTANT SECRETARY
Mr. PORTER. Thank you, Mr. Bonilla.
Ms. Cantu, just as a matter of curiosity, you are a graduate of the Harvard Law School?
Ms. CANTU. Yes, sir.
Mr. PORTER. And you were 22 years of age when you graduated?
Ms. CANTU. Yes, sir.
Mr. PORTER. And you were 18 when you graduated from college?
Ms. CANTU. Yes, sir. I was 19 when I was a high school teacher.
Mr. PORTER. My goodness.
Did you go to public schools?
Ms. CANTU. Yes, sir.
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Mr. PORTER. In Brownsville?
Ms. CANTU. Yes, sir.
Mr. PORTER. How come you moved so fast? Did you skip a lot of grades?
Ms. CANTU. My family valued education very much, sir. My grandfather was completely illiterate and signed with an ''X,'' but he wanted all his children—he wanted my mother to get as much education as possible.
When I speak about assessments and the importance of evaluation, I talk about my grandfather who could not read or write, but had a deal worked out with my mom's teacher that the report cards would be color-coded, and he understood assessments. Blue and black ink meant my mom was doing okay, but red ink meant that he had to have a real serious talk with her about how important education was. So, even my grandfather, a farm worker who was illiterate, understood the importance of education. He passed that on to us.
I love to read. As I told the Congressman, I read in English and Spanish in elementary school. I love to read. I think that parent involvement, reading, everything the Department is doing to secure high standards of education is the right thing to do; and we are glad that our office can play a small role in providing access for everyone to that kind of high-standards education.
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COORDINATION AMONG CIVIL RIGHTS ENFORCEMENT AGENCIES
Mr. PORTER. Thank you.
There are a number of agencies that purport to provide technical assistance or enforce civil rights laws. The subcommittee includes within its jurisdiction several protection and advocacy agencies. We fund one in developmental disabilities, one in SAMHSA, and one in rehabilitation services. In addition, we fund the Offices for Civil Rights in both HHS and Education. We also fund client assistance centers, parent assistance centers, and equity assistance centers.
Overall, in fiscal year 1998, we will spend $176 million on these programs. Many disabled individuals would be eligible for services by many, if not all, of these agencies.
When one of these agencies and an employer, service provider, or other institution reach an agreement on a complaint, what guarantee is provided that another of these agencies will not disagree and bring new actions or another complaint? In other words, what coordination exists among these agencies to ensure that a resolution reached with one is, in effect, a resolution reached with all?
Ms. CANTU. We share that interest in being sure that our tax dollars are not used in a way that creates unnecessary duplication.
The coordination exists in a variety of ways. First of all, Mr. Chairman, our jurisdiction under Section 504 is different from the jurisdiction under IDEA. We look at barriers to discrimination, and that could include that young woman who wanted to graduate from high school. She was talking about a physical barrier. Well, IDEA talks about services to students, but it does not reach the issue of the physical barrier to students with disabilities. So the laws themselves have some distinctions, and there is a reason for different agencies to monitor and hold districts accountable to those laws, but more than that, we do coordinate very closely with our sister agencies.
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We have agreements between ourselves as to how cases are to be divided so that one does not file in both places and then get conflicting responses. Also, our staff in our offices have full discretion to stop—as soon as they learn that this person has filed somewhere else, to stop work and say,
When you come back and tell us that that other avenue was exhausted, if you filed in court, come back and tell us that you could not get anything through court, and then we will see if we can do something, or if you filed with another agency, come back after that one is over, if you still do not believe you have been whole.
But we do not simultaneously ever run two agencies on the same issue, and we do coordinate. We do talk with each other very, very closely.
Department of Justice has a Coordination and Review Section. They bring our people together on the issue of Section 504 to be sure that we are not duplicating, sir.
If there are suggestions as to how we can do our jobs better, too, we are always open to hearing that.
Mr. PORTER. But you have a high degree of confidence that you are not being duplicative?
Ms. CANTU. Yes, sir.
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GIFTED AND TALENTED PROGRAMS
Mr. PORTER. In your testimony, you indicate that your office was involved in the State of Georgia in expanding the definition of gifted and talented children beyond the simple I.Q. definition the State had used. Can you tell the subcommittee what other criteria were included as a part of your agreement? Do other offices within the Department, such as the research offices or the Office of the Assistant Secretary for Elementary and Secondary Education, Dr. Tirozzi, sign off on these expanded criteria as, in fact, a true measure of a gifted and talented child?
Ms. CANTU. Sir, the decision by the State of Georgia to reexamine how they referred children for gifted programs was their decision. They looked at it. We did offer resources to them.
We went to technical assistance centers that were funded by Dr. Tirozzi's office and brought them in free of charge to the State of Georgia as technical experts, educational experts.
So, while Dr. Tirozzi was not personally involved, his coordination made it possible for the best educationally sound decision to be reached, but in the final analysis, it was Georgia's decision and one I highly applaud.
They had a situation they were not really proud of. The white students were seven times more likely to be classified gifted in Georgia than in neighboring States, and I do not think it was the quality of the drinking water. I think they themselves recognized that they were doing things differently than other southern States, even their neighboring States. So they were ready to examine their practices when we showed up in a friendly, cooperative way, and said, ''We are not here to investigate. To the contrary, we are here to suggest some practices that other folk have accepted.'' They looked at a variety of practices. They selected the ones they were comfortable with. It involves some self-nomination. It involves some teacher recommendation. It involves other ways of expanding the pool from which to recruit gifted kids, but the bottom line is that they were maintaining the high quality of the program. They did not water down the definition of ''gifted,'' and the students have to perform at the same core level and to the same strenuous level of work.
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Mr. PORTER. What if they had said we have looked at all your evidence and we want to continue with our definition? What would have happened then?
Ms. CANTU. If we had real information that confirmed the numbers, because we do not just go on statistics, even seven times more likely to be a disparity is an interesting statistic and it would draw our attention. If we had other information that confirmed there was a problem, we might initiate an investigation and go more formal. We do not like going that way. We prefer cooperative, friendly, technical assistance as an approach.
Mr. PORTER. But that always is an option, and that always is a lever when you are dealing in a cooperative and friendly way.
Ms. CANTU. But——
Mr. PORTER. Surely, they realize that you could tie them up and go to court ultimately, perhaps.
Ms. CANTU. I think they realize that we share an interest with them in having all students have access to high-quality programs. So I hope that they realize that we are more interested in being friendly and cooperative than in using a lever, but I want to say that in the time I have been here, we have resolved more than 20,000 cases, and as you saw in our testimony, only in six instances have we used the lever of going to a formal hearing. I think that is an excellent record. It shows that we are serious and committed.
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If, as a last resort, we do need to go to a more formal route, we will do that, but it is also an excellent record that we work through problems. We use tools such as early complaint resolution, mediation, a whole number of tools.
Mr. PORTER. If you went to a formal proceeding, would you have to prove that their category of ''gifted and talented,'' under their State definition, was arbitrary and capricious, or would they have to prove that it was not?
Ms. CANTU. The court would look at the same standard for Title VI. It would be an administrative law judge.
Mr. PORTER. Yes, but who has the burden of going forward with the evidence, is what I mean.
Ms. CANTU. If we are the ones proceeding to a fund termination, we would have to show that there is a basis for that, and the administrative law judge would have to be persuaded that there is a case there.
That is right. I am looking at my lawyers on both sides.
Mr. PORTER. In other words, the burden of proof is on the agency bringing the complaint?
Ms. CANTU. Right.
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Mr. PORTER. Ms. Pelosi.
Ms. PELOSI. Thank you, Mr. Chairman.
Ms. CANTU. Good afternoon.
ASSESSMENT
Ms. PELOSI. Following up on the chairman's line of questioning, I just was interested in the other criteria apart from I.Q. that are acceptable criteria.
Ms. CANTU. Each local district would use the criteria that it seeks to get accurate information to meet its educational purpose.
So, in the Georgia instance, they were trying to identify children that would belong in a gifted, accelerated class. They chose to consider students' grades, their work performance, the teacher recommendations. They chose to look at a variety—an entire student portfolio.
They did not water down the curriculum.
Ms. PELOSI. Where are you talking about, now?
Ms. CANTU. Gifted in Georgia.
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Ms. PELOSI. Oh, I thought Georgia was just I.Q.
Ms. CANTU. They began by only using I.Q. tests, yes.
Ms. PELOSI. And then what?
Ms. CANTU. And then they chose to broaden the indicators of giftedness.
Ms. PELOSI. Would those indicators be more typical of the other surrounding States—grades, teacher recommendation?
Ms. CANTU. Yes. And the designer of the I.Q. test provides some very stern warnings that you may not use the test as a sole measure. They want you to use it with other indicators.
So what Georgia was doing was bringing itself into more accepted practices of using the I.Q. test scores.
ENGLISH-ONLY INITIATIVE
Ms. PELOSI. Thank you.
I had one question, and that is, I wondered if you had reviewed the English-only California ballot measure. Do you think it violates the Supreme Court decision, Lau v. Nichols regarding bilingual education? And then I have a follow-up question to that, a separate question, but related to that.
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Ms. CANTU. We do not have an opinion about UNZ and its legality. We do not offer hypothetical legal opinions.
We have been asked by school districts for what they must do, and we have told them that the Federal law would still require that they provide effective educational programs. As Mr. Pierce said, they must be educationally sound, fully implemented, and evaluated to be effective. That would not be changed.
Ms. PELOSI. If it passes, it will pose an interesting challenge on how that is easier said than done.
I asked the Secretary when he was here about it. I did not ask him—nor was I asking you if you support or oppose. I was just asking if you thought that it violated the Constitution and if you were aware of it.
Ms. CANTU. I am not ready to offer a legal opinion about it. I have had my staff begin research on it. It has not been voted on yet. It would be premature for me to offer a legal opinion, and that is not our core business of our office. We try to hold people to the Federal standards and ask people to understand and follow the Federal standards.
Ms. PELOSI. Well, in California, if you put anything on the ballot, that you have the signatures for—it could be blatantly unconstitutional, but the issue of constitutionality is never addressed until and unless it is passed.
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Ms. CANTU. That is good.
CALIFORNIA'S ASSESSMENT TEST
Ms. PELOSI. As I understand—I have been talking to my superintendent of public instruction—and in our school district in San Francisco, we have filed suit, Federal suit against the State Department of Education to prevent the Department from administering their State-wide Standard Testing and Recording. It is called the STAR assessment test; the suit was filed in part, because the test is potentially discriminatory against limited English-proficient students. So the San Francisco School District is saying that unless the students have x-amount of English language, they are not going to do well in this test, and we are not going to discriminate against them.
What do you anticipate the role of the Office for Civil Rights will be in monitoring the impact that the STAR test has on California?
Now, mind you, the STAR test was not included in the list of requirements when States and local school districts made their application for the Federal funding, nor was the STAR test included in the proposal that was made to the Department of Education here in Washington. So this is sort of an after-the-fact ingredient that now the State is hinting—I am not going to use the word threatening, but there has been an exchange of views that maybe San Francisco would not be able to receive Federal funds because they did not accept the STAR. San Francisco is an area that does support testing, but not this particular testing which they believe is discriminatory against children who are not English-proficient.
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The question is: What do you anticipate the role of the Office for Civil Rights will be in monitoring the impact of the STAR test?
Ms. CANTU. Our office received very recently a complaint regarding the statewide Testing and Assessment system. It would be inappropriate for me to comment about an open complaint. We are evaluating it now, and I just heard, as you did recently, about the lawsuit that has been filed. So I will have to consider both of those before I can give you an answer. I would be happy to follow up with you after this hearing.
Ms. PELOSI. All right. Thank you very much.
Ms. CANTU. Thank you.
Ms. PELOSI. Thank you, Mr. Chairman.
PERFORMANCE INDICATORS
Mr. PORTER. Thank you, Ms. Pelosi.
Ms. Cantu, you have very few measurable standards of programmatic effectiveness or efficiency. As an example, under your first objective, maximize the impact of available resources on civil rights and education, you have included as an indicator the estimated number of students with access to high-quality education will increase. What is high-quality education, and what is the level of increase in access that we could expect?
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Ms. CANTU. Sir, we are holding ourselves to pretty stringent standards of measure. In fact, if I had known when I was taking the job that I was going to hold myself out to these standards, I would have some serious thoughts about it because they are very daunting performance measures.
The high quality of education of students is measured in ways that the whole Department is going to be measuring them. So I would not set out and try to come up with a different definition from the Department's.
By whatever measure the States adopt, we will recognize and defer to those, and just ensure that we will find partners to close gaps between minorities, boys and girls, students with disabilities and students without disabilities. Those measures already exist in many States, and so we already believe that we are making very good progress towards having some very concrete standards.
In addition, there are some soft indicators. I will not dispute with you that not everything can be measured. Some soft indicators will be about how we are going to be doing our job. We are going to be considering feedback we get from you as a member of Congress, from the general public. That will not be quantifiable, but it will matter to us, and it will prompt us to do our job better.
Mr. PORTER. Well, the feedback you can get from us right now is that we expect that measurable standards will be developed; that we expect baselines to be developed and targets to be developed. We want to be able to determine, to the extent that standards do it, how well the office is doing its work from year to year, so we can see whether you are going in the right direction or the wrong one, just like everybody else.
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You were not here this morning, but Mr. Skelly was. We think we have a ways to go within the Department, and do not wait for them. I mean, you are going to have to wait for them, obviously, to some extent, but we think that you need to proceed in developing those standards, and the faster, the better.
Ms. CANTU. Yes, sir.
ORGANIZATIONAL STRUCTURE
Mr. PORTER. The justification indicates, Ms. Cantu, that OCR maintains 12 offices nationwide. We have discussed the value of a national field structure with several of our agencies, and, generally speaking, most of our agencies indicate they would need approximately 40 offices in order to have an effective field structure.
Short of that, they have indicated that between 3 and 5 offices is all that they need to run a national operation without a field service. They have told us generally—and I am thinking of both Republican and Democratic appointees—that anything between 5 and 40 does not seem to make a lot of sense. Are your offices all coordinated with other Department offices? Have you performed or contracted for an evaluation of your office structure, and what is the rationale for maintaining 12 offices?
Ms. CANTU. We do coordinate. As you may have heard, we have a Secretary's regional representative in each of our field offices that ensures that we pool our resources and that we are as efficient as we can be.
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We evaluated our structure, did an internal evaluation. We did not hire an expert, but we did an evaluation and reorganized in 1995, and came up with a division structure that pools 4 divisions composed of 3 offices each. So, when you say 3 to 5, that is actually what we have now. We have 4 divisions that share resources across office lines.
For example, if there is a need to hire a person with a specific educational expertise in the area of testing or assessments, that division will make a single hire as opposed to hiring one for each individual office within the division. So we believe we have a good amount of efficiencies from our divisional structure.
We have also moved field staff from our headquarters into the field because we value having people be there very close, face to face, with the public, the educators that they work with. We do not require educators to travel to us. We incur the travel cost, which is one of the reasons why our appropriation request is larger. Air fares went up. So we travel to folk. We meet with them and try to prevent problems, try to resolve problems, and we believe we have a very efficient structure for making that happen.
TRAVEL COSTS
Mr. PORTER. Air fares went up 53 percent between FY 1997 and the next fiscal year?
Ms. CANTU. No, sir. No, sir. We have requested the travel to be able to do monitoring. Monitoring has gone up, probably close to that figure. By monitoring, that means that when a resolution has been reached, we hold ourselves accountable for going back and verifying that, in fact, what was committed to actually becomes a reality, and we do not take an audit statement, a piece of paper across our desks for that. We have heard from a couple of districts, ''Oh, yes, the bathrooms are accessible, and, yes, the library is wheelchair-accessible,'' and then when we actually have a person go down and check, no part is accessible.
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Mr. PORTER. Don't you have a complainant in each of those cases that filed the complaint originally? Can't they tell you it is fine and they are satisfied?
Ms. CANTU. Sir, yes, and they have, and to be fair, we confirm what we have heard.
We also travel, face to face, to provide technical assistance so people understand the laws and can avoid a complaint from being filed in the first place.
Mr. PORTER. Yes, but you have been doing that continuously. This verification, is that new?
Ms. CANTU. Sir, we have not been doing that. Unfortunately, as the chart will show, there are the years when we were not fully funded, and we have begun to develop some delays in keeping up with our work. So this year and next year, we hope to catch up. So the monitoring is not as current as I would like for it to be.
Timing is very crucial in our office. Unlike Department of Labor, for example, where an employee complains and they can get back-pay and be made whole for lost wages, we are dealing with young people, and you cannot give a second-grader back their second grade. So we must work as quickly as possible, and to do that often means jumping on an airplane or jumping on a train to meet face-to-face with people to resolve things as quickly as possible.
AUTOMATED CASE TRACKING SYSTEM
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Mr. PORTER. All right. Page Y–16 of the justification indicates that you maintain a fully automated case tracking system. We have found across our bill, generally, that such systems can be a powerful tool for improving productivity and for measuring agency performance and improving agency management. The Federal Mediation and Conciliation Service in the Occupational Safety and Health Review Commission have had a particular success in this area. A fully automated case tracking system can be a powerful tool in complying with the GPRA requirements.
Do you use the case tracking system to measure employee and agency productivity?
Ms. CANTU. Yes, sir, we do, and I agree with all of your statements.
Mr. PORTER. What GPRA indicators have you chosen which can be served by the system?
Ms. CANTU. The system we have in place right now does measure the indicators in terms of—not all of them, but the numbers of students that are directly impacted by our work. It measures how quickly we are able to respond to complaints. We will include in it a way of measuring how many partnerships we pull together that can have impact.
We are not asking for partnerships just for the sake that we can have good relations with educators. We want to be able to measure whether we are creating some impact that brings us closer to civil rights compliance, which is our core work.
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CASE PROCESSING TIME
Mr. PORTER. And you would be able to show from this case tracking system the cycling time for disposition of an average case, and wouldn't that be an important measure?
Ms. CANTU. Yes, sir, we can. With the system we have in place now, we flag for our supervisors when a case is—what is it? 180 days? 180 days is one of the early flags. As I said, we try to work timely. For us, our goal is same semester. So, from the time we hear about a concern to the time that we have resolved it—and we are actually meeting our goal. Our average is closer to 125 days. About 125 days is our national average for resolving civil rights concerns.
Mr. PORTER. Is this a goal in your GPRA plan?
Ms. CANTU. Our goal in our plan is to bring that down even more. Our goal, I think, is 180 right now, but we are actually meeting that goal now.
Mr. PORTER. How much is the target, then? How much are you going to bring that down?
Ms. CANTU. We have already met that goal. We are at 125 now. If we continue to be funded, we will be able to stay under the 180, same semester.
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Mr. PORTER. And you are satisfied with 125, but don't you want to continue to reduce that if you can?
Ms. CANTU. We would love to do that, sir.
Mr. PORTER. Shouldn't you set a target?
Ms. CANTU. We could do that, sir.
PRINTING BUDGET
Mr. PORTER. On page Y–3 of the justification, you indicate that your printing budget will increase by over 150 percent in the next fiscal year. What is the purpose of this proposed increase?
Ms. CANTU. The budget is a maintained budget. This is a year that we are sharing a good amount of information about complex issues, and we want to continue doing that in FY 1999. The kinds of information we have been sharing is information about how to comply with Title IX athletics, a user-friendly guide on how to avoid sexual harassment and race harassment problems. We hope to continue providing those kinds of user-friendly publications.
We are also using our web page to hold the costs down, but not everyone has access to the Internet, as you have heard testimony before. So there is still a need in our publications budget to reach out to prevent discrimination.
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Mr. PORTER. What was the requested amount for fiscal year 1999 that you made to the Department and that the Department made to the OMB?
Ms. CANTU. We requested—it was the same, wasn't it? It was 69 or 68?
Mr. SKELLY. Mr. Chairman, it was very close to the amount requested of Congress. It might have been $69—rather than $68 million.
Ms. CANTU. And I think the difference was we had to fine-tune some overhead costs through the Department, and it actually brought the costs down when we fine-tuned it.
Mr. SKELLY. We get different assumptions about pay raises that are to be applied Government-wide, benefits costs, and things like that.
Ms. CANTU. What we estimated that we would want to do, we included in our request. Our full request was approved by the Department. Our full request was approved by OMB.
PRODUCTIVITY MEASURES
Mr. PORTER. Do you use individual productivity measures that you develop from your case tracking system?
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Ms. CANTU. Yes. Yes, we do.
Mr. PORTER. And what would those be like?
Ms. CANTU. Well, we have an evaluation system within our office where everyone goes through a 360-degree evaluation. In those, there are elements that involve not only how well they do their work, but how well they support, in a team structure, other people being able to do their work.
We do not have quotas. We do not have bounties for the numbers of cases that you deliver. We understand that not all cases are the same, just like not all children are the same. So we avoid having strict numerical quotas in our personal evaluation system for our employees.
PERFORMANCE AWARDS
Mr. PORTER. You quadrupled performance awards, however, from 1997 to 1998, and you are saying that those are going to remain level for 1999 at $400,000. What was the reason for the awards increasing so dramatically, and on what basis do you make these awards?
Ms. CANTU. Sir, I am proud to say we had tremendous staff work in 1997 that merit those awards. 1997 was a very dismal budget year for our office. Every month, we would count how many staff had retired or resigned, in order to determine how much salary we would not have to pay them, so we could then figure out how much money we had to do our job.
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When someone would retire, we would miss them, but we would then divide up their salary so we could pay for our work. That included—we had a training budget of $5,000 for close to 700 people. That is $7 per person for the entire year. We had zero for the publications budget. We had zero for the technical outreach and assistance budget. We had zero for so many line items. I did not know if we could get through the whole year. We did. The staff continued to respond to children in a timely way, however, they fell behind because there was not enough staff to do all the work. They continued to produce high-quality work, and we acknowledged that in our award system.
TECHNOLOGY BUDGET
Mr. PORTER. You have got another pretty dramatic increase on page Y–3 of the justification. You indicate that the expenditures for ADP processing will increase by 50 percent, and the expenditures for ADP equipment and software will more than triple in fiscal year 1999. What is the reason for these dramatic increases?
Ms. CANTU. The Department—this fiscal year—well, my part of the Department, because I am committed, will be year 2000 compliant. So I have committed the funds to make that happen.
Next year's budget is simply maintenance to keep in place what we will achieve this year. There is an increase in our budget that is dedicated to automated data processing to be sure that this year we are completely compliant.
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Also, in there is the charge for our elementary and secondary civil rights survey, which is a sizeable commitment. We are redesigning that and hoping some day to bring the cost down on that because we want to be much more efficient. So, we are working quickly on redesigning it.
Part of the redesign is it is going to be user friendly. We are going to have it on CD–ROM so that people can see in this sample that we take how school districts are doing and how we are doing in helping school districts improve. We think that directly relates to performance measures and GPRA.
Technology is vital. It has helped us be able to do our work with fewer staff. We were 850 staff when I started 4 1/2 years ago. We are asking for a budget request that will let us do our work with more complaints than we had when we started and I think better results, but with lots fewer staff; and that is because technology is making it happen for us.
Mr. PORTER. Ms. Cantu, thank you for answering all of our questions so well. I think from what you have said, you are doing a fine job and paying good attention to the standards that we want you to set and meet, and we appreciate you being here today.
Ms. CANTU. Thank you, sir.
Mr. PORTER. Thank you so much.
Ms. CANTU. Thank you.
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Mr. PORTER. The subcommittee will stand in recess for 5 minutes.
[The following questions were submitted to be answered for the record:]
"The Official Committee record contains additional material here."
Tuesday, April 21, 1998.
YEAR 2000 COMPLIANCE
Mr. PORTER. The subcommittee will come to order.
We have called this hearing today to determine how each of the departments and agencies under our jurisdiction is progressing in implementing Year 2000 compliant information systems. In addition to the 5 agencies that will testify today, we have asked all of the other agencies within our jurisdiction to have a representative here.
I want to send the message to everyone that this subcommittee considers the Year 2000 matter to be a top priority, and we collectively expect every agency to be in full compliance so that we do not experience any interruptions in service or compromise the integrity of Federal information systems in the Year 2000.
In the more than 3 years that I have been Chairman, we have had more than 200 annual agency budget hearings. On only 5 occasions have we conducted hearings not directly related to agency budget requests. This is one of them. I believe the Year 2000 problem transition merits such a hearing.
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I think people generally understand the risks we face of not being able to process Social Security checks or student aid payments if we have a failure in our information systems, but beyond the obvious, the public is at substantial risk unless every agency, every government partner, every vendor and every other organization with which the government exchanges data is fully Year 2000 compliant.
We look forward to hearing your statements. Let me suggest that we proceed in the following order: the Inspectors General for Labor, HHS, Education, Railroad Retirement Board and Social Security Administration, followed by the managers from those agencies in the same order for our second panel. I would ask each of you to keep your statements to 5 minutes.
With that, we would proceed with the Inspector General for Labor.
Tuesday, April 21, 1998.
U.S. DEPARTMENT OF LABOR
WITNESS
CHARLES C. MASTEN, INSPECTOR GENERAL ON DEPARTMENT OF LABOR 2000 TRANSITION
Opening Statement
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Mr. MASTEN. Good morning, Mr. Chairman and members of the subcommittee. Thank you for inviting me to discuss the Department of Labor's status in resolving its Year 2000 problem. Specifically, you have asked me to discuss the Department's progress in resolving its Year 2000 problems, the obstacles to achieving compliance, and whether systems will be ready for transition into the new millennium. I would like to emphasize, first of all, that the comments I make today will be as the Inspector General and they may not be the official position of the Department of Labor. I would like to summarize my statement and ask that it be entered in its entirety for the record.
CHALLENGES POSED BY YEAR 2000
Mr. Chairman, the challenges posed by the Year 2000 transition are great and failure to meet these challenges can have far-reaching consequences. DOL has identified 61 mission-critical systems for which it must ensure Year 2000 compliance, or have adequate contingency plans in place. In February of this year, DOL reported that 13 of its 61 mission-critical systems were Year 2000 compliant. However, none have been independently verified or validated as compliant.
OIG MONITORING OF DOL PROGRESS
Over the last year, my office has escalated its monitoring of the Department's progress in addressing the Year 2000 issue. We have reviewed reported information, raised a number of issues internally, and promoted the need for a strong management structure to address this significant problem.
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OIG CONCERNS
I am very concerned about the potential impact inadequate Year 2000 progress may have on the Department's ability to provide services beyond December 31, 1999. I am especially concerned about DOL benefit payment systems for Job Corps students, injured coal miners, longshore and harbor workers, and Federal employees and their families. Also important is the Department's responsibility to help the 53 State Employment Security Agencies to bring into compliance systems that interface with the important departmental programs.
Finally, I am concerned that the Department's insufficient progress in testing and validating systems as Year 2000 compliant may result in additional strain on the Department to ensure contingency plans exist for all mission-critical systems that will not be ready on time.
ENSURING YEAR 2000 COMPLIANCE
Last week, we entered into an agreement with the CIO in which areas of priority were established to ensure Year 2000 compliance. The agreement established that the CIO is responsible for addressing the 6 areas identified in addressing this problem, with the OIG providing audit oversight. Consistent with the agreement, the OIG is beginning an audit to assess the accuracy of the information being reported to the CIO by the agencies of the Department.
DOL'S YEAR 2000 READINESS
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Mr. Chairman, with respect to whether DOL's systems would be ready for transition into the new millennium, given the Department's performance thus far, I must say that I have serious concerns. Signing an agreement is only a small first step. In order for the agreement to have any impact, the Department needs to ensure that each step is accomplished effectively and in a timely fashion.
OBSTACLES THAT HINDER PROGRESS
The Department also needs to address those obstacles under its direct control that have hindered progress in this area; namely, insufficient management and accountability in addressing the Year 2000 problem, as well as difficulty in funding related activities. We support the Secretary's decision to hold the assistant secretaries personally accountable and responsible for ensuring their agency's compliance. However, we believe it is critical for the Department of Labor to: ensure that agencies follow a clear plan with specific milestones to address the areas identified in the agreement; ensure that funding needed to achieve Year 2000 compliance be more realistically estimated; monitor closely the replacement of systems to ensure systems will indeed be compliant and delivered on time, and if not, have appropriate contingency plans in place to guarantee continuity of operations; and, identify and address external factors beyond DOL's control that may impact on program agencies' compliance or interfaces with outside entities. Clearly, DOL has an arduous task ahead. Far more difficult, however, will be dealing with the problems DOL will face in January of 2000, if this problem is not adequately managed in the months ahead.
CONCLUSION
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Mr. Chairman, that concludes my summary, and I will be pleased to answer any questions you or any of the subcommittee Members may have. Thank you.
Mr. PORTER. Thank you, Mr. Masten, for your statement. Obviously, you were right on time.
[The statement of Mr. Masten follows:]
"The Official Committee record contains additional material here."
Tuesday, April 21, 1998.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
WITNESS
THOMAS D. ROSLEWICZ, DEPUTY INSPECTOR GENERAL FOR AUDIT SERVICES
Mr. PORTER. Mr. Roslewicz, representing the Inspector General of the Department of Health and Human Services.
Opening Statement
Mr. ROSLEWICZ. Good morning, Mr. Chairman. I am Tom Roslewicz, Deputy Inspector General for Audit Services at the Department of Health and Human Services, and I am pleased to be here to discuss the Department's readiness for the Year 2000.
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In brief, while the Department has developed an overall strategy to ensure its mission-critical systems are Year 2000 ready, considerable obstacles still exist. I will detail these obstacles in my testimony.
First, I would like to give you some background on the Department OIG's role in the Year 2000 effort. As you know, Health and Human Services is a diverse Department, one whose programs and services affect the health and well-being of virtually every citizen of our country. As such, its data systems software must be Year 2000 compliant, so that when the clock strikes 12:01 on New Year's morning of the year 2000, its systems continue to be able to perform critical functions such as generating payments for Medicare services and generating funds to cancer researchers.
Further, we must be assured of the Year 2000 compliance by our external systems, by those systems that interface with those of our Department—for example, State systems that feed information to HHS, such as Medicaid recipients, service and payment data to the Health Care Financing Administration.
Not only is the Year 2000 effort massive, its scheduling is ambitious. The Office of Management and Budget established a new target date for implementing fixes to all systems of March, 1999. Recognizing the gravity of the Year 2000 challenge, we at the OIG are devoting significant resources to this effort: 50 full-time equivalents for the next 2 years to determine whether HHS is taking all of the steps necessary to be compliant by the Year 2000.
I want to emphasize that our work is continuing in this important area, so our findings and recommendations are necessarily evolving. For the sake of brevity I will focus my remarks on the accomplishments and the obstacles we have identified thus far in our review of HHS's Year 2000 effort.
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Mr. Chairman, HHS has made progress in its Year 2000 effort, including the following significant accomplishments to date. HHS has established Year 2000 compliance as the Department's highest information technology priority, and it has established an organizational structure and reporting mechanism to deal with it. HHS has identified 491 mission critical systems that are targeted for change, and has reported that 40 percent are already compliant. Final refinements to the list of critical systems are underway.
Agency heads, as of November 1997, are required to obtain independent validation and verification on all systems by contractors or separate qualified components within their own organizations. The Department has accelerated schedules for making all mission-critical systems compliant by December 31, 1998. All HHS agencies are required to have a contingency plan to continue business operations in the event of the Year 2000 computer failure. Finally, HHS has requested and received Department-wide authority to retain, reemploy and attract qualified information technology staff necessary to address these issues.
We have also identified the following obstacles to timely completion of this major undertaking: 1. Delays on the part of our critical external partners and contractors. The Department relies heavily on data exchanges with States, health research organizations and contractors who process Medicare payments. HHS needs to ensure that these entities become Year 2000 compliant, or have contingency plans established in the event that they do not; 2. The competition for resources, both dollars and skilled people; 3. The need to devise testing strategies for complex systems is an enormous technical and logistical challenge; 4. Certifying the many systems as Year 2000 compliant, an effort requiring independent third party validation and verification of critical systems; and 5. The scheduling challenge of the December 31st, 1998 target date for completion.
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An example is the interdependence of the Medicare claims processing systems, where completion of remediation for about 70 contractors is dependent on the delivery of shared systems modifications from a handful of software vendors and the Year 2000 readiness 27 operation centers. We note that the Department has requested authority to increase HCFA's contracting flexibility, which would expand the pool of qualified contractors for procurement of high quality Year 2000 remediation services.
The Department has taken a systematic approach to this effort, but as I discussed, considerable obstacles must be overcome to achieve success. While I cannot predict the outcome at this time, we will be reporting quarterly to the HHS Chief Information Officer on the Department's progress. The first of these reports will be issued in May. The Subcommittee can be assured that we will continue our work in this important area.
This concludes my remarks, Mr. Chairman. Thank you very much for this opportunity.
Mr. PORTER. Thank you very much for your good statement.
[The statement of Mr. Roslewicz follows:]
"The Official Committee record contains additional material here."
Tuesday, April 21, 1998.
U.S. DEPARTMENT OF EDUCATION
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WITNESS
JOHN P. HIGGINS, JR., ACTING INSPECTOR GENERAL
Mr. PORTER. Mr. Higgins, Department of Education Inspector General.
Opening Statement
Mr. HIGGINS. Mr. Chairman, thank you for inviting me to testify today about the Department of Education's progress for ensuring that its computer systems are Year 2000 compliant. I would like to offer my written testimony for the record. I have also provided copies of 2 recently issued audit reports which I believe would be of interest to the subcommittee. The first one is on the Department of Education's Readiness for the Year 2000, and the second one is about the Department's implementation of the Clinger-Cohen Act. In light of this recent audit work, I believe I am in a good position to address the subcommittee's 3 questions.
First, how is the Department progressing in resolving its Year 2000 problems? Despite recent efforts and strides taken by the Department, our audit results reflected that the Department's overall progress has not kept pace with government-wide milestone dates developed by OMB and that it must continue to accelerate its effort. The Department has made significant progress in recent months, as OMB noted in its most recent quarterly report. The Department's Year 2000 project has been receiving senior managerial level attention from the Acting Deputy Secretary. He is very involved in the process. He holds weekly status meetings with senior management officials. He has designated a career executive to lead the Year 2000 project and has assigned significant additional staff resources to the project.
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At the time of our audit, the Department had not developed a very comprehensive Year 2000 plan in the time frame provided for under the OMB schedule, and had not completed assessments or prepared renovation and testing plans for mission-critical systems. Since our audit, the Department has completed its systems inventory, made substantial progress in assessing its systems, and initiated renovation in all 14 mission-critical systems. Assessment activities will be continuing as the renovation process proceeds.
The Department now estimates that it will complete its comprehensive management plan for Year 2000 this month; as a matter of fact, I think it is already completed. The Department has also begun the process of developing contingency plans for mission-critical systems.
The second question: what obstacles stand in the way of completion? In my opinion, the greatest area of concern is with the external entities that interface with the Department systems, some of which are guarantee agencies, school districts, schools, secondary schools, lenders and guaranty agencies. If a large or a significant number of entities are not ready and do not have adequate contingency plans, then the Department may not be able to effectively administer its programs, regardless of its own state of readiness.
The Department has initiated significant outreach activities, but lacks a strategy to encourage compliance of these outside data providers and a contingency plan for those who do not become compliant.
Question number 3: will the Department's data systems be ready on January 1, 2000? I cannot say with certainty at this stage. Clearly the Department is behind schedule when measured against the OMB milestones, but in my opinion, the goal of implementation for its mission critical systems by March 31st, 1999 is attainable. Reaching the goal will require continued quality leadership and a concerted effort from all involved. My office will continue to monitor the Department's progress and report our findings and recommendations to management in accordance with the Acting Deputy Secretary's request. We plan to target areas that are critical to achieving Year 2000 compliance.
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Specifically, we will be reviewing testing of renovations to mission-critical systems, monitoring independent verification and validation processes, reviewing contingency plans, verifying the accuracy of quarterly reports to OMB, and providing technical assistance to the steering committee and the project management team.
Mr. Chairman, that concludes my statement.
Mr. PORTER. Thank you, Mr. Higgins.
[The statement of Mr. Higgins follows:]
"The Official Committee record contains additional material here."
Tuesday, April 21, 1998.
RAILROAD RETIREMENT BOARD
WITNESS
MARTIN J. DICKMAN, INSPECTOR GENERAL
Mr. PORTER. Mr. Dickman.
REMARKS BY MR. DICKMAN
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Mr. DICKMAN. Mr. Chairman and members of the subcommittee, the Office of Inspector General has established a special audit group to monitor the Railroad Retirement Board's Year 2000 compliance. On January 30th, 1998, we issued a formal report on the status of the agency's Year 2000 project plan which I would be happy to provide to the committee. Our auditors concluded that project management is adequately directing the implementation of the project and that the current inventory rating of critical and noncritical systems is reasonable. The agency has identified 166 mainframe systems which must be converted and an additional 7 systems which will be replaced or retired.
The Chief Information Officer has reported that conversion of 38 percent of the mission-critical systems has been completed. However, a breakdown of this percentage indicates a majority are personal computer systems. As of March 31st, 1998, the RRB had completed 24 percent of the mainframe systems which are mission-critical and 77 percent of the mission-critical personal computer systems. The remaining conversion activities for mission-critical systems are on schedule and are targeted for completion by December 1998.
Because this date is before the OMB deadline of March 1999, the RRB has elected not to develop any contingency plans. However, if conversion activities fall behind schedule for any mission-critical systems, a contingency plan will be developed in January of 1999. We believe this is a reasonable plan of action.
I would point out that the RRB will not complete conversion of 41 noncritical mainframe systems by March 1999. However, the majority of these systems are scheduled to be completed in September of 1999.
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We are also monitoring the RRB's development of bridge programs for data exchanges with outside parties and the compliance of systems software and building services. These activities are also progressing well.
We plan to conduct independent verification of the agency's validating and testing of systems. We will review 18 of the 166 mainframe systems which require conversion; 16 are mission-critical. We certainly would prefer to review more systems, but our current resources do not permit this. We also plan to review the integration testing for all mission-critical systems, which are scheduled in the calendar year 1999.
The OIG believes that the RRB has established an appropriate plan to ensure its systems are Year 2000-compliant. We will continue to work closely with Mr. Rose and his staff and will ensure that any problems are appropriately reported to OMB.
Thank you. This concludes my remarks.
Mr. PORTER. Thank you, Mr. Dickman.
[The statement of Mr. Dickman follows:]
"The Official Committee record contains additional material here."
Tuesday, April 21, 1998.
SOCIAL SECURITY ADMINISTRATION
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WITNESS
DAVID C. WILLIAMS, INSPECTOR GENERAL
Mr. PORTER. Mr. Williams, the IG of the Social Security Administration.
Mr. WILLIAMS. Chairman Porter and Mr. Stokes, thank you for the opportunity to appear here today to discuss the Year 2000 issue.
The Year 2000 issue will affect all automated systems, such as personal computers, mainframes, and software that uses 2-digit years. The Social Security Administration encountered its first problems with the Year 2000 issue in 1989 when a program that scheduled debt collection could not project dates into the 21st century.
At that time, it became apparent that if SSA did not update its systems to be Year 2000 compliant, on January 1, 2000, beneficiaries would not receive their checks; SSA would not be able to process new claims or issue new Social Security numbers; SSA internal communications would shut down and SSA's teleservice centers would not be able to operate.
To address this situation, SSA developed a strategy to update data space bases for compliance during their scheduled rewrites and modify software as part of its scheduled maintenance.
In 1997, the General Accounting Office reviewed SSA's progress on addressing the Year 2000 issue. GAO stated in a written report that there was still a risk 245 of SSA's 308 mission-critical systems would not be corrected by January 1, 2000. GAO cited 3 areas where SSA needed to improve its systems: Disability Determination Services interface, data exchanges, and contingency planning. SSA is required to provide the Office of Management and Budget a quarterly report on its progress in addressing these areas.
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SSA has stated that it is on schedule for addressing the three areas. First, SSA stated that the target date for full Year 2000 compliance in the DDSs is December 1998. The DDS year 2000 Compliance Tracking Report for April 1998 showed that 21 of the 55 DDS systems have been renovated, tested, and implemented. The remaining DDSs are on schedule for having their software conversion completed by December 1998.
Second, SSA has inventoried all of the data exchanges with Federal agencies, States, and third parties and identified more than 2000 data exchanges. Of those, SSA has targeted the 13 most critical and over 300 mission-critical data sets for priority attention. SSA reported that 65 percent of data exchanges have been made Year 2000 compliant. SSA is negotiating agreements with its exchange partners on how and when the conversion will be complete. SSA's target date for having all of its data exchanges compliant is December 1998.
Finally, SSA's high level Agency Business Continuity and Contingency Plan was completed on March 31, 1998. This Plan will address the continuation of SSA's core business functions if there are disruptions in the conversion activities.
In its most recent quarterly report, SSA appeared to be one of the Federal agencies that is making satisfactory progress in the Year 2000 conversion. SSA has reported that, of its 308 mission-critical systems, 92 percent are Year 2000 compliant.
Although SSA is leading all Federal agencies in its response to the Year 2000 issue, there are three areas that may present obstacles for the timely completion of the planned conversions.
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SSA's partners, which includes other Federal agencies, telephone companies, and banking institutions both in the United States and overseas, could fail to complete their conversions on time. This would make it impossible for SSA to exchange data with external entities.
A recent audit of SSA's financial statements found that the facility where SSA tests software before it is put into production is not comparable to the actual operating environment. SSA has also designed a special Year 2000 test facility that it must ensure mirrors the operating environment.
Twenty percent of SSA's systems analysts and programmers are eligible for retirement between 1997 and 2002. This situation is made worse by the fact that there is a high demand for COBOL programmers in the private sector as consultants. These positions are paying high salaries, which makes early retirement attractive to Federal employees.
The OIG has followed GAO's work in this area. We have initiated the task orders of the FY 1998 Financial Audit, which will evaluate SSA's test facility. We also plan to review SSA's testing and compliance for completeness, accuracy and timeliness.
In conclusion, I believe the significant progress SSA has made in addressing the Year 2000 issue will ensure that SSA is equipped to continue its tradition of exemplary public service into the next millennium. Thank you.
[The statement of Mr. Williams follows:]
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"The Official Committee record contains additional material here."
Mr. PORTER. Thank you, Mr. Williams.
Mr. Dickman, you talked about systems. This is a software as well as a hardware problem, is it not?
RRB DATA EXCHANGE WITH EXTERNAL ORGANIZATIONS
Mr. DICKMAN. Yes.
Mr. PORTER. And you are looking into both the software and the systems themselves?
Mr. DICKMAN. Correct. And we will do independent verification. We will do verification of their verification.
Mr. PORTER. And I would imagine that there are less problems both with Railroad Retirement Board and Social Security Administration with external agencies, but you also have those problems too, do you not?
Mr. DICKMAN. We do. We interface with States as far as wage matching; we interface with Social Security as far as the financial interchange, with HCFA, with the Department of Treasury, banks and railroads.
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Mr. PORTER. And you are looking into all those systems to make certain that they are going to be compliant as well?
Mr. DICKMAN. We are looking into that, and that is why I think the bridge systems, in speaking to Mr. Rose and as far as our oversight, are very important, because they allow us to have the exchange of data with the noncompliant side. If a State is not compliant, even though we are compliant, it allows us to exchange the data without disrupting the flow of information.
Mr. PORTER. Mr. Williams, if you took a poll of Members of Congress and asked them about their greatest Year 2000 fear, you might get a unanimous response: Social Security benefit payments. Since these payments are made both by check and electronic transfer, the agency will have to test its interaction with the Treasury, the Federal Reserve, and thousands of recipient financial institutions.
My question has several parts. Can you tell us generally, are all SSA systems Year 2000 compliant, and if not, what is the schedule for certifying or replacing them?
Mr. WILLIAMS. Presently 92 percent of the systems are compliant. The date for all of the systems to be compliant is December 1998, and to our knowledge, they are on track to meet that schedule.
Mr. PORTER. What is the schedule for testing interaction with Treasury and Federal Reserve?
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Mr. WILLIAMS. The testing for the Treasury began in March, and it is underway. For the Federal Reserve, it is set to begin this summer. Both of those are scheduled for completion in December of 1998.
Mr. PORTER. How many financial institutions receive electronic benefit payments and what is the schedule to begin and complete testing with these institutions?
Mr. WILLIAMS. About 70 percent of all of our direct deposits go to 100 banking institutions. The remainder of our direct deposits could go to as many as 9,000 financial institutions. [CLERK'S NOTE.—Later Corrected to ''23,000''.] The testing for the financial institutions' payment contingency plan will begin this summer, and it also will be completed in December of 1998.
Mr. PORTER. Are you going to test all 9,000 of those institutions?
Mr. WILLIAMS. The Treasury and the Social Security Administration are currently discussing another option, which would involve sampling. We don't know which of those they will select to evaluate sampling as an option. My office would want to hear Treasury's rationale for why sampling would be adequate. We would want to look at how the banking regulatory agencies are testing 2000 compliance in their own financial institutions, whether they are using sampling or 100 percent compliance. We would want to determine whether the number of financial institutions that exist, the 9,000, might be prohibitive to test, or whether that is a viable option. [CLERK'S NOTE.—Later corrected to ''23,000''.]
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We would also want to assure that if we go with sampling, that all types of financial institutions are involved in the sampling test. That would involve international banking institutions and credit unions, savings and loans, and banks themselves. So if they elect that option, we still need to answer the questions as to its adequacy.
Mr. PORTER. This is a question for all of you, but isn't it in the great interest of external agencies to make certain they are in compliance? In other words, isn't there an incentive on their part to make certain that their systems will continue to interface properly with Federal systems, and can't we rely upon their self-interest, if you want to call it that, to make that happen and simply check to make certain that they are making progress?
Mr. MASTEN. It is definitely in their interests to make sure that their systems are in compliance, but we still have to make sure that they are. We can't just take their word for it. So it behooves all of us to do a sample test, as Mr. Williams stated, to make sure that they are in compliance.
Mr. WILLIAMS. I agree with Mr. Masten's cautionary note, but I think you have a very good point, that particularly in the corporate world, companies are going to be rapidly left behind and they know that in order to serve their own customers, they need to do exactly what you said. So we have that working for us, and that is a very strong motivation and source of investment.
Mr. PORTER. Mr. Williams, aside from retirement benefits, SSA maintains 2 major data exchanges for disability caseload processing and wage reporting. You indicated in your written testimony that 21 of the 55 State disability determination services are already Year 2000 complaint. What is the schedule for testing compliance of the DDSs and the wage reporting systems, what contingency plans have you recommended and what contingency plans has the agency adopted to deal with the possibility that some State systems will not be compliant, and are there any States that you currently believe will not or may not be compliant?
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Mr. WILLIAMS. We believe that both the DDS data exchanges and the wage reporting data exchanges are going along well. The testing is currently going on and is scheduled for completion in December 1998. We feel comfortable at this time, as I said, that that is going well.
However, we have contingency plans. The one that exists today, and it will be updated, as I will explain in a moment, but the one that exists today calls for us to transfer workloads from any DDSs that are failing to those that are succeeding, and of course there are 21 compliant today, and we hope that they will all be ready by December 1998. If that fails, though, that is the contingency plan today. We are strengthening that by requiring each of the DDSs to develop their own contingency plans, which we will monitor.
We believe that those contingency plans, which will be a better bridge and a better safety net, will be ready in September of 1998 which will give us a nice long time to examine them. That will also let us concentrate our efforts on any that are failing.
The last question with regard to how the States are doing, we don't anticipate that any will fail and that they will all be compliant in December of 1998.
Mr. PORTER. And what about wage reporting?
Mr. WILLIAMS. Wage reporting, we will primarily be dependent on the IRS for that. That is on the same schedule. For testing, it is already underway and it will be complete by December of 1998. I have a good level of confidence that that will work and the tests then supporting that will begin at that time as well. [CLERK'S NOTE.—Later corrected to ''The wage reporting data exchange will be coordinated with the IRS and testing will be completed on the same schedule''.]
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Mr. PORTER. Thank you, Mr. Williams.
Mr. Masten, let me make a comment on your testimony and then ask some questions.
You stated in the first full paragraph on page 2 of your statement that your activities in this area have been limited by resource constraints. Since your most recent semiannual report does not mention Year 2000 activities, since the fiscal year 1998 appropriation differed from your request by only 1 percent, and since we provided the Department its full request of $200 million in funding for the only Year 2000 initiative which you identified as a Year 2000 problem concern, I am not sure how either the IG or the Department can claim that they have been hampered by resource constraints. You are free to comment on that if you want.
OIG BUDGET REQUEST
Mr. MASTEN. Mr. Chairman, in our initial budget request under information technology, along with the pension initiative, we had requested funds for information technology to address some of the major concerns we anticipated that the Department would have, and at the end of our submission that was not included in our budget.
Mr. PORTER. Well, let me make clear, the purpose of this hearing is not to play some kind of a blame game; we are here to determine what problems we face and how they are going to be resolved. There are many areas in which IG's, agencies, and the Congress are going to have adversarial relationships. This should not be one of them. It is not sufficient for the IGs to come here and tell us that the agencies are doing a poor job. We want to know how the IGs are going to contribute productively to solving the problems that the agencies face, and we will consider future appropriations, in part, on this basis.
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Having said all of that, Mr. Masten, I want to read you a statement from the written testimony that the Department sent to us. The Department, ''would like to assure the Committee that the Department is highly confident that it is on target to achieve its Year 2000 conversion goals.''
Obviously, based on your written statement, you don't consider that to be credible. Would you tell us why you think the IG and the agency have such different opinions of the Department's Year 2000 effort, and then tell us what you are proposing in the way of cooperative activity between your office and the Department to ensure that all of the potential problems you identified are, in fact, averted?
REALLOCATION OF OIG RESOURCES
Mr. MASTEN. All right. Mr. Chairman, first of all, let me address the part about the resources. We are prepared, the Office of Inspector General is prepared to address this issue based on the resources we have. We are not saying that nothing will be done; we have the option of curtailing Audits of grants and contracts in order to get allocate resources to address this issue. That is exactly what we plan on doing, and we will maximize use of those resources in order to validate what the CIO is reporting.
DOL PROGRESS IN ADDRESSING PROBLEM
We are of the opinion that the Department is not on schedule based on a number of factors. We have started monitoring very closely what has been done in the last year, and in addition to OMB's rating of the Department, at one point it had a higher rating as you recall, that rating was lowered when it was compared with the rest of the agencies. I believe Mr. Horn gave the Department an F. Based on all of those things, and what we see, we do not believe that the Department is on schedule.
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Having said that, I am aware that the Secretary has raised this to the level of the Deputy Secretary as the major concern, and she personally addressed this issue with the executive staff last Thursday, and she is holding the Assistant Secretaries accountable, both personally and in writing, to bring these agencies into compliance.
But that is the reason we are of the opinion that we are—that they are not on target based on those factors. However, as I said, they are addressing them.
Mr. PORTER. Well, let me say, Mr. Masten, that I believe, having heard from the Department and from your office on these matters, I think that of all of the agencies at the table, Labor is of greatest concern. It seems to me they have started more slowly and not made as much progress as others, and that concerns me very greatly. So we are going to have to stick with this and make certain that the Department meets its goals and is, in fact, compliant.
Mr. Stokes.
Mr. STOKES. Thank you, Mr. Chairman. I just have a couple of questions.
INTERNATIONAL COLLABORATIVE EFFORTS
Research indicates that most of the rest of the world lags behind the United States in addressing this problem. Is this a matter of concern to any of the agencies here in terms of any international collaborative efforts?
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Mr. WILLIAMS. Mr. Stokes, we have—at Social Security we have direct deposit and of course we make other kinds of banking arrangements overseas to pay our beneficiaries who have retired overseas, or for whatever other reason receive benefits there. It is of concern to us, and part of our testing involves working through Treasury and the Federal Reserve to test whether our direct deposits will work well and to develop contingency plans should they not—should that not connect. So for us it is an issue, and that is how we are addressing it.
Mr. STOKES. Do you have any information, Mr. Williams, in terms of their progress in addressing this matter?
Mr. WILLIAMS. The testing for that will begin this summer, and knowing of your interest, we can make sure we stay in touch with you as to its outcome. But the testing has not yet begun. We know what we want to attempt, and the testing will tell us if it is successful.
Mr. STOKES. Do any of the other agencies in such efforts to address concerns about international colloborative efforts have any input?
Mr. DICKMAN. Mr. Stokes, the Railroad Retirement Board to a much, much lesser extent than Social Security also makes payments to retirees in foreign countries, but as I said, to a much lesser extent than Social Security. So we are concerned about it.
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Mr. STOKES. I know that this has been touched upon, as it relates to the degree of compliance of States, counties, and local governments, but isn't this really a major problem for each of these agencies in terms of their progress relative to compliance? Don't most of you interact with county and State governments and view it as a major problem?
Mr. ROSLEWICZ. Yes. The Department of Health and Human Services, one of the largest programs—Medicaid, for example. Under the Medicaid program, 50 State agencies are processing data and submitting it through HCFA. We also have the Office of Child Support Enforcement and parent locator systems, which locates parents for child support actions. All of those systems are currently being run under the mainframe at SSA, which once was a part of the HHS. These departments do intertwine and intermingle between the various State and local communities. There is a great deal of work that needs to be looked at in terms of the interaction between these systems.
STATES YEAR 2000 COMPLIANCE
Mr. MASTEN. Mr. Stokes, you know, we interact with 53 States with SESA involving unemployment benefits, and that is a real major problem for us. As you know, Congress appropriated, I believe, $200 million for this purpose to help these 53 SESAs to get into compliance, and I believe $160 million of that money has already been distributed to bring them up to compliance, and that is one of the areas that we will be working with the CIO to make sure that that is done.
Mr. STOKES. I would imagine that welfare-to-work is one of the areas of specific concern relative to your agency?
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Mr. MASTEN. Yes, that is correct.
Mr. STOKES. Mr. Higgins?
Mr. HIGGINS. We also share this concern at the Department of Education. We are developing contingency plans, or the Department is in the process of developing contingency plans which hopefully would address some of these shortcomings.
Mr. STOKES. I gather from this that there is no central coordinating agency that is working with the agencies and the State and local units of government?
Mr. WILLIAMS. Actually, I am going to attempt to answer that. The one that comes to mind is the Office of Management and Budget, and Mr. John Koskinen has been brought back, he was an official there, to concentrate just on this issue, and he represents a coordinating force, and of course they have all of OMB to assist in that, but he is the figure that comes to mind as the central area where this is all being coordinated for the White House.
ASSISTING STATES TO ACHIEVE COMPLIANCE
Mr. MASTEN. Mr. Stokes, if I may add, there is a joint project set up between the U.S. Department of Labor, and Maryland's State Department of Labor, Licensing and Regulations to establish a center to support the needs of the 53 SESAs that I mentioned earlier to help them achieve compliance.
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Mr. STOKES. One of my concerns is about the budget submissions from each of the agencies. Is there sufficient funding in the fiscal year 1999 budget request for each of the agencies to do what is necessary to become compliant. Are you able to give us that kind of assurance?
Mr. DICKMAN. Mr. Stokes, we will appear, the Railroad Retirement Board will appear this afternoon before this committee for the appropriation, and both the agency and the Inspector General are asking for some additional funds for that very purpose.
Mr. WILLIAMS. Congress has been very supportive and they have been supportive for a long time, and our level of comfort is good that the appropriation process has worked to support us in a great way.
Mr. STOKES. Do any of the others wish to comment?
Mr. HIGGINS. I will defer to the panel that follows.
Mr. ROSLEWICZ. We have redirected 50 FTE from our routine audits and are comfortable with doing that. The Department has a problem which has been addressed to the Congress, as a matter of fact, to get some assistance with regards to giving them more clout with the Medicare contractors, and I am sure the CFOs—CIOs will be testifying about this later on.
RE-ALLOCATION OF OIG RESOURCES
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Mr. MASTEN. Mr. Stokes, as I have stated, we are redirecting resources that we had for audits of grants and contracts to address this problem with the current resources we have now.
Mr. STOKES. Does that meet the reprogramming request?
Mr. MASTEN. It is a decision that I have to make and I have made that decision to redirect the resources we have in one area to address this other area that I consider a much higher priority.
While I have the mike, I would like to address an issue from earlier—what the IG is doing with the CIO to address this matter. The IG has been instrumental in setting up a structure and an agreement identifying very clearly what the responsibilities are for the CIO and what would be done, I believe in 6 areas that were pointed out. And, in addition to that, the agreement pointed out exactly what our responsibilities would be. This is a collaborative effort, if you will, to address the issue.
Mr. STOKES. Thank you very much.
Thank you, Mr. Chairman.
Mr. PORTER. Thank you, Mr. Stokes.
Let me tell you the way I see things, and this is not a message for the IGs necessarily, it is a message for the departments and agencies, and that is along about September of 1999, or maybe October, the major news magazines, Time, Newsweek and U.S. News and others, are going to have a cover story on this issue, and good news is no news and bad news is news, and I don't want to have any agency or department under the jurisdiction of this subcommittee being any part of that story. That is my goal, and I think it is your goal as well. And we are all going to have to work together and we are going to have to provide you, obviously, the departments and agencies, the resources they need to overcome this. But let's hope that none of these departments or agencies are any part of this story of impending disaster which I am sure will be on the cover of our major news magazines.
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Mr. Roslewicz, a question for you.
How in the world did a problem like this ever happen? There are so many imaginative people working in this way in designing hardware and software. How come they never anticipated the change of the millennium?
Mr. ROSLEWICZ. That is the very question I asked myself when this first came up. Why was this problem not anticipated when we were developing these systems 34 years ago? The answers I keep getting from most people I talk to in this field is that, back then, they were conscious about saving space in the computer programs, and it was cheaper to drop those two digits. You know, instead of putting the full digit 1997, they would just say, well, we will compact that into 2 digits. That seems to be the furthest I can get in coming up with a realistic answer. You know, secondhand, second thought. I would think that it was poor planning back then, in the years when people were first designing systems to not have looked ahead to the Year 2000. But it is easy to now say, as we approach the millennium, we have a problem.
Mr. PORTER. Does it all go back that far, or when did people start recognizing that this would be a problem and start designing hardware and software that wouldn't be?
Mr. ROSLEWICZ. The beginning—we can go back to some of the old systems I was referring to. But currently if there is a system that is being made that is not compliant, I, from my own personal point of view, would think it is almost deliberate.
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Mr. PORTER. Yeah, now. But I mean how many years do we go back to find the systems that weren't designed to be compliant or weren't designed to take that, anticipate the need for compliance?
Mr. ROSLEWICZ. Some of the systems go back very far when the programs were first developed.
Mr. PORTER. I am trying to bring it forward, though.
Mr. ROSLEWICZ. And you know, we have our own systems in the IGs office that had to be updated in order to meet new Congressional requirements. Under Medicare, for example, different things are now allowable that weren't in the past, so the systems are constantly being modified and updated to handle changes. So there is no system that I am aware of that is the same as it was when it was first created. Still, somewhere along the line no one ever had the insight to deal with the millennium problem, and I can't honestly say how far back would have been an appropriate time to have started to consider it.
HCFA SYSTEMS
Mr. PORTER. Mr. Roslewicz, your statement gives me a great deal of concern. You have outlined a process at HCFA that, despite what all parties may say, seems destined for major problems. You declined to provide an opinion as to whether the Department will be able to meet its obligations in this area. Your statement seems to indicate, though it does not directly say so, that work on Year 2000 started much too late, given the complexity of the work. You don't indicate what schedules you have recommended to complete the remaining work and to develop contingencies.
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The Social Security IG told us that 65 percent of that agency's systems are compliant. What percentage of systems and of mission critical systems at the Public Health Service and HCFA have already been certified as compliant? What is the status of contingency planning at HCFA, and what timetables have been recommended for development of contingency plans?
Mr. ROSLEWICZ. There are 491 mission critical systems that have been identified by the Department. Forty percent of those have been determined to be compliant. However, most of those have not had independent verification and validation performed, as of yet.
We have not put forth any timetables. We will be reporting quarterly, working with the Chief Information Officers as to what is happening out there. That is to say, that as we come across issues that are critical or things that look to us like the Department is going down the wrong track, that we will issue what we refer to as an early alert as opposed to waiting until the audit is complete. So our process now is to work on line with the activities that are going on.
We will be making recommendations; we will be reviewing how the testing and validation process is going; we will be pointing out any weak spots we see; we will do some of the look-behind work to make sure that the contingency plans are in place. We will be looking to see if they make sense, and are reasonable.
We are currently—as we undertake this operation, we are out there looking at some of the contractor operations. We are looking at some of the software vendors to see what problems or what delays they are encountering. The HCFA cannot do their part in some of these cases until the software is developed and made Y2K compliant. Then you have the problem of the 75 contractors who use these various shared systems. So there is a lot of work that needs to be done to get these systems into compliance.
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The Part A hospital side of the software package is in pretty good shape—it has been tested, it is now going through validation and verification. That system may very well be operable in a timely manner. Under Part B, there is a different problem. We don't have the shared system up and running yet, which then requires another 7 months for testing and validation. We are just now beginning to put all of this together into quarterly reports that we will be issuing. And we will also be, as I said, issuing early alerts in those cases where we see that there is not progress being made or there is something that needs to be done that we see from our work that we are doing.
Mr. PORTER. You have begun to touch on this, but let me ask the question specifically. The Medicare transaction system encountered tremendous difficulties. The House government management committee's financial management status report indicated that the committee downgraded the Department's effort in that area from an F to an incomplete.
The Congress and the President agreed on 2 major pieces of legislation that may significantly increase HHS information technology workload. Is there any room for hope at this point that HCFA will be able to cope with the Year 2000 demands without a major failure? I don't want you to stand by and not offer an opinion if you believe that a major failure is imminent. At what point do you believe we ought to make the determination that we are not going to be Year 2000 compliant in certain major areas, and then throw all of our effort into contingency planning, and do you believe we are likely to be faced with such a decision?
Mr. ROSLEWICZ. Mr. Chairman, there are several ways to answer that. Let me start with, first of all, the resource issue. As a result the HIPAA legislation and the Balanced Budget Act of 1997, all of these things that have come into play have put new requirements on the Department, and they are competing for the same resources to develop new systems as well as to fix the existing systems. So there lies some of the problems.
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Now, I am a very hopeful person. I always have hope that maybe something, you know, real, if I can say, will occur so that we can get all of this accomplished.
The Department is trying to get the clout it needs with the Medicare contractors by getting more authority over—control over them as to making sure that these systems that they use are in compliance. So the Department is taking action. They have a proposal before the Congress as to how this might be accomplished.
Now, insofar as our work, our work right now is primarily oversight. We haven't really issued any audit reports as of yet, but we do have some coming down the line. These we will be sharing, of course, with the CIOs or the various agencies within the Department, and it is a major task to undertake.
I cannot say with all honesty that the systems will or will not be Y2K compliant by 2000. There is a lot of work that needs to be done, there are a lot of obstacles that need to be addressed. I think the Department is moving in that direction and trying to cope with some of the obstacles. And we, in our organization, are trying to point out to them, you know, problems that we see as we get involved with the contractors in doing our audit work.
As you know, the CFO financial statement audit is a major part of our workload where we actually look at the financial statements of the Department. The Y2K could certainly bring in some concerns there if the systems aren't ready from a financial statement position. We would have other things we would need to do.
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Mr. PORTER. What is the decision point to abandon Year 2000 and go exclusively to contingency planning?
Mr. ROSLEWICZ. At this point I don't have a specific date where that decision would have to be made. But certainly, you know, the contingency plan as such needs to be in place long before the system is actually—long before the January 1st, 2000 date is there. I mean, you would put the contingency plan in place if, in fact, by that date, you are certain that it is not going to work, and then you would rely upon your contingency plan.
The problem that one needs to look at is what will be in these contingency plans. This is what we will be looking at as we move along in our work that we are doing. What is the contingency plan—well, first of all, is there a contingency plan even in place? Secondly, does it make sense and do we think that it will be something that we will be able to put in place come January 1st, 2000?
COMPLIANCE OF THE STUDENT AID SYSTEMS
Mr. PORTER. Thank you, Mr. Roslewitz.
Mr. Higgins, we recently discussed Year 2000 matters at the IG budget hearing. We have 2 great concerns: First, that student aid systems continue to operate efficiently so that students do not experience academic disruption due to financial mishaps caused by the government or schools, and second, we want to limit the potential for losses in the student aid programs due to fraud or inadequate tracking systems.
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What is the potential for fraud or other losses to the student aid systems posed by the Year 2000 failure, particularly in the Direct Loan program? Do we risk losses simply because we lose the ability to track who owes how much?
Mr. HIGGINS. Certainly, if the data exchange partners are not compliant, there is more of an opportunity for fraud, if the contingency plans do not address accountability. I think the Department first would try to pay the recipients what they are entitled to, and then the second part of this comes in and that is how do we account for the money that we give to the recipients.
In regard to the Direct Loan part of the question, the Direct Loan portion of this concern is probably less than the other programs because out of the 1,300 schools in the Direct Loan program, 1,000 of them use software that we will be providing them in January of 1999. So we know that the software they are going to be using is going to be compliant.
There are another 300 schools in the Direct Loan program that are using mainframes, and we are not quite as confident there, although in November of 1997 we did provide them instructions on how to become compliant. I think that answers your question.
Mr. PORTER. Mr. Higgins, you indicated that since 1996, the Department has provided 4 widely varying cost estimates of the Year 2000 initiative. This variance indicates to me that the Department still may not have a good idea of exactly what needs to be done. You heard the testimony of the SSA IG regarding the Year 2000 tests with recipient financial institutions.
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Do you recommend that the Department test data exchange with all of its Title IV schools, and if not, what testing have you recommended and what do you believe is sufficient and achievable—is a sufficient and achievable timetable for such testing?
Mr. HIGGINS. Well, I don't recommend 100 percent testing. Clearly, just the direct loan schools themselves that we are providing them software, we are confident that that software is going to be compliant and that it will not create any problems for us. We also will be monitoring the rest of the schools; we will be dealing with the financial communities of the country; and we also, like SSA, will be monitoring the success of that industry to see how they are doing. The issue here is how well the contingency plans of the Department and also of the data exchange partners address this problem. That is the key to this.
Mr. PORTER. Thank you, Mr. Higgins.
Mr. Dickman, your statement was very short and very positive. We appreciate both aspects. You indicated that you will be independently reviewing 18 of the 166 mainframe systems which require conversion.
Do you believe that there are other systems which are of such critical importance that you ought to independently review them? If so, what are they, and why do you believe they ought to be reviewed?
RRB SYSTEMS TESTING
Mr. DICKMAN. Well, I believe that we will try to expand the 18 mission-critical systems, 16 of them, and expand it to 30. As far as a definite system, mission-critical systems as far as the Railroad Retirement Board will be defined as those systems which relate to the actual payment of benefits to the beneficiaries in various ways.
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By doing a sampling of, if we can expand it to 30, using our resources, none of these systems are what we call stand-alone systems. They are all interrelated. You can get a good idea by doing just 30 or less of these systems, whether the rest of the systems will follow, will be compliant or not.
Mr. PORTER. Mr. Higgins, we had a long discussion with Dr. Longanecker regarding the development of an integrated systems architecture for Title IV programs. The Department ought to have completed this work about 4 years ago but has not done so. It currently plans to develop a comprehensive plan for this initiative by July. Presumably, implementation will begin shortly thereafter. Most agencies are facing the difficult task of bringing their existing systems through the Year 2000 transition. Education not only has to weather the transition, it has to make substantial improvements in its information systems at the same time.
What implications does Year 2000 have for roll-out of an integrated systems architecture and what implications does the new systems have for the overall Year 2000 initiative?
Mr. HIGGINS. Well, of the 14 critical systems that we have, 4 of them are compliant, 2 of them are being replaced, and the remaining 8 are being renovated. The renovation is being done, I assume, in compliance with the Federal Implementation Processing Standards, which is the bible for data processors in the community, and they clearly prescribe how the date field needs to be addressed. It tells you that it has to be 4 digits, it has to be a numeric field and that you have to be able to add and subtract on that field. So there is guidance out there.
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Clearly, if the Department had an overall architectural plan, it would address issues such as that, but I don't believe that the absence of this is going to hinder the Department's progress.
Mr. PORTER. Gentlemen, let me thank each one of you for appearing today. I hope I have impressed upon you the seriousness with which the subcommittee views the Year 2000 problem, and that you will continue to work very closely with the departments and agencies to assure that we don't have a problem in any of the systems when we actually reach that year. Thank you all for appearing this morning.
The subcommittee will be in recess briefly.
—————
Tuesday, April 21, 1998.
U.S. DEPARTMENT OF LABOR
WITNESS
PATRICIA W. LATTIMORE, ASSISTANT SECRETARY FOR ADMINISTRATION AND MANAGEMENT
Mr. PORTER. The subcommittee will come to order.
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We will, for our second panel, keep the same order, and begin with Ms. Lattimore, the Assistant Secretary for Administration and Management of the Department of Labor.
OPENING STATEMENT
Ms. LATTIMORE. Good morning, Mr. Chairman. I am pleased to appear before you today to talk about some of the challenges facing the Labor Department's Year 2000 effort. Last year when we appeared before you, we talked about the challenge of managing 58 mission-critical systems that we thought would require about $15.3 million to make Year 2000 compliant. We have worked diligently on those systems over the past year. We now have some more educated and better informed information. We are now managing a total of 61 mission-critical systems, and we have looked at our costs escalating by almost $10 million in terms of our projections to be able to make them compliant by January of 2000.
Currently, 13 of our systems have been compliant, or we have deemed them compliant. They have not undergone independent verification and validation as yet, but they are scheduled to start through that process shortly. Seven additional systems are scheduled to be compliant by the time our May, 1998 report goes to OMB, and our plan calls for 2 more systems to become compliant in August of 1998, 14 more in November of 1998, with the remaining 25 to be compliant between November and March of 1999.
DOL did get off to a slow start. We did not report our acceleration plans and our progress plans as quickly as we should have when the date for our full implementation was moved from November to March. However, we believe that the management approach we are taking will allow us to achieve our Year 2000 conversion goals.
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SECRETARIAL PRIORITY
One of the greatest challenges facing us was some of our competing program priorities within the Department, and as a management project, Year 2000 was initially competing with some other visible initiatives, such as Welfare-to-Work. This was complicated somewhat by having our systems compliant by March 31 instead of November. The Secretary herself has made it emphatically clear to all of the agency heads and Assistant Secretaries that Year 2000 conversion is not taking a back seat to any project. She has been clear with executive staff both in person and in writing, that if we are not in compliance by January 1, 2000, we will have failed those that we are entrusted to serve. We are inherently clear about our various roles and responsibilities and the expectation for accountable performance.
The management structure includes not only myself as its CIO, working in partnership with our Inspector General, but also working with the Deputy Secretary, who is involved actively with our Assistant Secretaries as part of the overall program management responsibility to ensure that our monthly progress is on target. We have intensified our internal oversight, which, as I said, involves the Deputy Secretary, and we have augmented that with a very detailed and intense monitoring and scrutinizing system that is structured to provide us with early warnings to reduce the risk of any future slippage.
To accelerate our progress, the time line was shortened to March of 1999. We engaged in some active reallocation of resources to ensure that we could put the appropriate technical and support staff in place. We have moved almost $1.3 million to increase contractor assistance on site, to augment our internal IT staff and to ensure that not only are we going to be able to stay consistent with our revised time line for Year 2000 implementation, but that we could engage an independent verification and validation, complete our inventory and get our architecture defined, as well as comport with our departmental IT security plan. All of these projects are on our plate as CIO responsibilities for this fiscal year.
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STATE SYSTEMS
Because of the national scope of our program, our Year 2000 efforts require significant coordination with our 53 State partners in addressing the awareness of the Year 2000 concerns with numerous other constituent groups. We have over 3,000 electronic data exchanges with our State partners, of which almost 2,900 are related to the unemployment insurance program. The first step in dealing with this was when we came before this committee last year to develop the $200 million appropriation to assist the States with their systems. We thank the committee for its support in that effort. $160 million of that money has already been distributed to the States. An additional $40 million is available for State security employment agencies to complete their compliance work by next year. The Employment and Training Administration is currently engaged in a State-by-State assessment and will report to the Secretary by the end of May, 1998 where the States are in converting their systems.
There has been a lot of technical assistance provided, and there has been a lot of on-hands work with the States. There were the original 11 States that were deemed to be at risk based on the State's own assessment when they came in to apply for the money. We will now go back to see whether or not the money we have given them over the past year has been able to help them improve their posture.
CONTINGENCY PLANS
Again, we are still attempting to think globally as we move forward to develop our contingency plans for how we will ensure that we will continue all of our benefit operations and crucial systems. The Secretary will be expected and will have contingency programs for all of the programmatic areas by July 1. Those contingency plans will address how we keep our core business systems moving forward if our Year 2K compliance efforts are not as successful as we anticipate they will be and they also include dates by which we feel we will have to move to an alternative approach.
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We are moving forward with our facilities reviews. As you know, we have 114 job core facility reviews which will also be a part of that. We are a little over 50 percent of the way through that facility review. We are enhancing our outreach activities to our various other constituents and data exchange partners through the pension and welfare benefits area, the Bureau of Labor Statistics, and through some of our enforcement agencies with the businesses that they do work with. We think that we are properly focused on the whole issue of Year 2000 compliance as it impacts the results of our programs. We think we are poised to manage this to a successful conclusion. I will be pleased to answer any questions you may have, sir.
[The statement of Ms. Lattimore follows:]
"The Official Committee record contains additional material here."
Mr. PORTER. Thank you, Ms. Lattimore. John J. Callahan, Assistant Secretary for Management and Budget for the Department of Health and Human Services.
Tuesday, April 21, 1998.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
WITNESS
JOHN CALLAHAN, ASSISTANT SECRETARY FOR MANAGEMENT AND BUDGET, CHIEF FINANCIAL OFFICER AND CHIEF INFORMATION OFFICER
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Mr. CALLAHAN. Good morning, Mr. Chairman. Thank you for allowing us to testify today. I would like to submit my full testimony for the record which details all of our management accomplishments and challenges for 1997. This takes the form of the accountability report which we will submit to you in about 10 days, so we would commend that to the subcommittee.
Let me turn to the issue that is of great concern to you and to the Department, the Year 2000 challenges. Simply put, Year 2000 compliance is job number 1 for the Health and Human Services Department. We have to meet this challenge in order to ensure that our Department's mission is not impaired.
Let me note a few of the steps that we are taking to meet this challenge. First of all, we are requiring that all of our mission critical systems be Year 2000 compliant by December 31, 1998. Second, all Year 2000 staff report directly to their agency chief information officer; all agency chief information officers report directly to their agency heads and to me, and I report directly to the Deputy Secretary and Secretary. There is a clear chain of command and accountability in our Year 2000 effort.
Third, we have taken steps with OPM to get permission to hire retired government Year 2000 computer expertise in our major departments. These personnel can be hired without loss of their government annuity. Fourth, we are also now, as other agencies are, requiring that our systems be subject to independent verification and validation procedures. Finally, and most importantly, we are encouraging all agencies to reallocate existing administrative funds in order to meet the Year 2000 challenge. This should prove helpful in most of our agencies, except in the case of financing Year 2000 efforts for Medicare contractors.
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[The information follows:]
"The Official Committee record contains additional material here."
Let me turn to that issue briefly. As of February 1998, 40 percent of our 491 mission-critical systems were Year 2000 compliant. We have a full report in that regard and we will submit this for the committee's consideration. We feel that the most problematic, however, of all of our mission critical systems are our Medicare contractors. These contractors, 70 external contractors, insurance agencies, process 900 million claims a year for 33 million Medicare beneficiaries. They are the link to all of the health care providers in this country that deal with Medicare fee-for-service claims. Under the leadership of HCFA Administrator Nancy-Ann Min Deparle, HCFA has been very proactive with its contractors and has proposed amendments to contracts that would require millennium compliance.
However, Medicare claims processing contracts are different from standard Federal contracts. These contracts, the ones with providers, can only be negotiated with insurance companies, no other providers, and HCFA is required to reimburse these contractors for all allowable costs. HCFA currently has little, if any, leverage to terminate contracts if these contractors are not Year 2000 compliant. Consequently, we have sent contractor reform legislation to the Congress to remedy these problems. The legislation has been endorsed by John Koskinen, who is the special assistant to the President for the Year 2000 effort, in testimony before the Senate Governmental Affairs Committee. We hope this legislation will be considered in timely fashion by the Congress.
At the same time, and this is of most concern to this subcommittee, the Department is now reestimating the cost of assisting our Medicare contractors to become Year 2000 compliant. We will be working closely with the subcommittee and are now working with OMB to fully identify the costs of making these Medicare contractors compliant and the sources of funds to meet these costs.
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Before closing, I would also like to draw attention to one other Year 2000 effort by the Department, one administered by the FDA. The FDA now maintains a public Internet web site to list information about the Year 2000 compliant biomedical devices. We have asked 16,000 biomedical equipment manufacturers to supply information to this web site. Thus far, about 1,500 replies have been forthcoming with many more in the future. The web site is most useful to hospitals, doctors and DOD, VA and IHS health facilities. It should be helpful in achieving Year 2000 compliance in this vital part of the health industry.
In conclusion, we regard, as you do, Year 2000 compliance as our top information technology challenge. This is a matter that has the full backing of Secretary Shalala, Deputy Secretary Kevin Thurm and myself. We intend to meet this challenge head-on. This concludes my statement. I will be happy to answer any questions.
Mr. PORTER. Thank you, Dr. Callahan.
[The statement of Mr. Callahan follows:]
"The Official Committee record contains additional material here."
Tuesday, April 21, 1998.
DEPARTMENT OF EDUCATION
WITNESS
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MARSHALL S. SMITH, ACTING DEPUTY SECRETARY
Mr. PORTER. Marshall Smith, the Acting Deputy Secretary of the Department of Education.
Opening Statement
Mr. SMITH. Thank you, Mr. Chairman. I thank you for this opportunity to discuss the Department of Education's efforts to address the Year 2000 problem.
I want to make 2 key points up front. First, I believe the Department is doing much better than recent reports suggest; and second, we are taking very seriously the potential disruption that the Year 2000 problem could create, both for the Department and for our many partners and customers throughout the education system.
We are well aware of the poor grade the Department received on the Year 2000 from the House Subcommittee on Government Information and Management Information Technology, as well as placement on OMB's watch list. The Department was among the first Federal agencies to begin addressing the Year 2000 problem. We fell behind during the assessment process, in part because we discovered that 2 major systems initially believed to be Year 2000 compliant actually were not compliant. This discovery increased our assessment workload, both by adding to the number of systems requiring assessment and by highlighting the necessity of a more thorough approach to assessment. It also taught us to assume nothing when dealing with the Year 2000 problem, which is one reason we are taking the extra step of verifying every mission-critical system, even our new systems that were designed and built to be Year 2000 compliant.
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YEAR 2000 PROJECT MANAGEMENT PLAN
The Department has developed a comprehensive Year 2000 project management plan that includes clearly defined roles and responsibilities, and budget plans for the 5-phase strategy recommended by the GAO. We have completed the awareness and initial assessment phases and are moving rapidly through the renovation and validation phases for our mission-critical systems. The awareness phase included the creation of a high level Year 2000 steering committee, which I chair and which includes the chief financial and chief information officer, the Year 2000 project director, principal office coordinators, and contractor support from the outside management firm of Booz-Allen & Hamilton. In addition, we regularly seek the advice of the Inspector General in key elements of our Year 2000 strategy, including the development of a sufficiently independent validation process.
The assessment process involved an agency-wide inventory, using methodology developed by Booz-Allen & Hamilton, which identified 14 mission-critical systems potentially affected by the Year 2000 problem. For your general information, 12 of those 14 are the student financial aid systems.
We have established a careful and systematic schedule for the renovation and validation phases of the project and have contracts in place to support this work. Approximately 25 percent of the renovation work and 15 percent of the validation work has been completed for the 14 mission-critical systems. We expect to complete the vast majority of the renovation work ahead of the September 1998 OMB milestone. That milestone is 9-98. We expect to complete the other 2, the 2 remaining ones in 11-98, so we are 2 months behind. We are behind in part because of the normal scheduling of renovation of the student aid systems. One of the particular systems process is the student financial aid application, and that application goes through changes, the system goes through changes every year as the application changes. So in the context of the changes to the application we will also change the system because of the application, and we will also be updating it for Year 2000. Those 2 things have to go together or we are not going to be sure that we have, in fact, a compliant system for the next school year.
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The Department has hired 2 contractors to perform the critical independent validation and verification tasks for our mission-critical systems. Our schedule calls for completion of validation and implementation by the end of January 1999, thus allowing us at least 11 months to ensure that all renovated systems are running smoothly prior to January 1, 2000. In addition, the Department is developing contingency plans for all 14 mission-critical systems that are determined to be at risk of noncompliance as a precaution against system failures that may occur despite the best efforts of the Department and its contractors. Draft plans will be completed by the end of May detailing alternative systems and their requirements.
YEAR 2000 OUTREACH EFFORTS
Finally, I agree with the Inspector General that our biggest problem is not inside the Department, it is outside. The Department is actively reaching out to its many data exchange partners, including 6,000 postsecondary institutions, 15,000 local education agencies, and 50 State agencies, to raise their awareness of Year 2000 issues. For example, we have contacted, directly contacted, every Chief State School Officer in all of the 50 States and the 7 territories. We are working closely with all of the superintendents of all of the largest cities, many of them having mainframes and being in some danger of noncompliance, and we are working with the school boards organization to send out a letter from us and from the school boards organization to every school board chairperson in the country reminding them of their fiduciary responsibilities and of the responsibility they have for ensuring that their superintendent, who is their employee, in fact makes sure that their systems are compliant.
In the student financial aid area, among other efforts we have sent out technical specifications to all Title IV institutions. We did that in November of 1997. We will provide Year 2000 compliant student financial aid assistance software to all postsecondary institutions by January of 1999. In addition, Department training sessions for student financial aid offices which will reach up to 6,000 participants now include a Year 2000 component.
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I would like to add, Mr. Chairman, that the members of the subcommittee, along with your colleagues in the House and Senate, can help with our Year 2000 outreach efforts by raising the issues whenever you visit school districts and postsecondary institutions back home. We know from anecdotal stories that many institutions are at risk of major disruption when January 1, 2000 arrives. It is critical to raise awareness of the Year 2000 problem across the Nation, and Members of Congress can do much to help in that effort.
In conclusion, much work remains, but I believe the Department has established an achievable set of steps for addressing the Year 2000 problem. I hope the subcommittee will support us by approving the $4 million increase in program administration funds beyond the increase required by pay raises and other built-in costs needed to ensure that all Department systems are Year 2000 compliant.
Thank you. I will be happy to answer any questions you may have.
Mr. PORTER. Thank you, Dr. Smith.
[The statement of Mr. Smith follows:]
"The Official Committee record contains additional material here."
Tuesday, April 21, 1998.
RAILROAD RETIREMENT BOARD
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WITNESS
ROBERT T. ROSE, CHIEF INFORMATION OFFICER
Mr. PORTER. Robert Rose, the CIO of the Railroad Retirement Board.
Mr. ROSE. I am pleased to have this opportunity to testify about the status of our Year 2000 project. I was hired by the RRB just this past November. In that short time I have been impressed by the level of concern and awareness about the Year 2000 issue throughout the agency.
One of the first things I noticed when I was interviewing for the CIO position was that the organizational chart showed a Y2K project leader reporting directly to the CIO. That told me that the agency was taking this issue very seriously.
The RRB has designated the Year 2000 effort as its highest priority project. During fiscal year 1996, our staff conducted a comprehensive assessment to determine what tools were needed, established an overall project schedule, and put various tracking and oversight mechanisms into place. For the most part we have used existing organizational structures and resources to manage this project. The primary responsibility for the project rests with my organization, the Bureau of Information Services. However, our internal customers and the agency's ADP Steering Committee, which I chair, which monitors all information technology projects and automation investments, both share in this responsibility.
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The RRB's primary goal for this project is to complete the implementation of 100 percent of our mission-critical systems by the end of this calendar year, 3 months earlier than the goal established this past February by the Office of Management and Budget. To demonstrate the strength of the agency's commitment to this project, this goal is included as one of our key objectives in the agency's strategic plan. We also have established a goal to complete the implementation of virtually all of our non-mission-critical systems by the end of fiscal year 1999.
At this time, we believe we are making very good progress and we are on track for meeting these goals. The RRB has 124 mission critical systems, of which 48, or 38 percent, are now Y2K compliant. Those 48 include 21 mainframe systems and 27 PC-based systems. Work is currently underway on 56 of the remaining systems, and 20 of those are scheduled to be converted or retired later this year.
In spite of this positive outlook, I want to emphasize that much work still remains between now and the end of the project. And although we are on track and confident of a successful completion, we are well aware that we cannot coast through the next 18 months.
For our information systems, we are planning a series of major integration tests, even after the individual systems have been revised and put into the production environment. These tests will be geared towards ensuring that all interfaces, connections and links between the various systems remain in sync and fully functional. We plan to continue integration testing of the major systems throughout most of calendar year 1999.
We have also developed an inventory of external data exchanges for both mission-critical and non-mission-critical systems. These exchanges are generally conducted with other Federal and State agencies, railroads and financial institutions. In the event that any data received from external sources is not fully compliant before the year 2000, we plan to implement ''bridge'' programs which temporarily reformat the information as required.
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In addition to the application systems being revised, we have also identified 48 proprietary system software packages used in our data center. At this time, 27 of these products have been tested and are compliant. By the end of fiscal year 1999, all will have been fully tested and certified compliant.
In the area of desktop computing, we are testing the agency's entire inventory of personal computers for compliance. The goal is to equip every employee with a compliant desktop PC prior to the end of fiscal year 1999. Equipment funds have been identified in the President's budget for the next fiscal year specifically for this purpose.
Other aspects of this project include office facilities such as telephones and elevators. We have identified all such systems during the assessment phase, and we are now taking follow-up actions on a small number found to be noncompliant. It appears at this time that this will involve a software upgrade to our telephone system, our electronic commerce system and possibly to our security alarm system.
In summary, we are confident in our ability to achieve the agency's goals for the Year 2000 and that our transition to the next century will provide uninterrupted service and continuous high quality operations.
That concludes my remarks. I thank you.
Mr. PORTER. Thank you, Mr. Rose.
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[Statement of Mr. Rose follows:]
"The Official Committee record contains additional material here."
Introduction of Witness
John Dyer, the Principal Deputy Commissioner of the Social Security Administration. Mr. Dyer.
Tuesday, April 21, 1998.
SOCIAL SECURITY ADMINISTRATION
WITNESS
JOHN R. DYER, PRINCIPAL DEPUTY COMMISSIONER OF SOCIAL SECURITY
Opening Statement
Mr. DYER. Chairman Porter, I am pleased to be here today to tell you about the Social Security Administration's efforts to prepare for the Year 2000. SSA became aware of the Year 2000 problem and began planning for it in 1989 to make sure that the payments we make to more than 48 million beneficiaries will not be in jeopardy.
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For SSA, Year 2000 preparation has meant reviewing systems supported by more than 33 million lines of in-house application software, as well as hundreds of vendor products and coordinating efforts with State and Federal agencies and third parties. By the end of fiscal year 2000, we will have spent $42 million on the Year 2000 effort for both in-house and contracted activities. We believe that our early start in addressing the issue has allowed us to manage the Year 2000 effort without requesting additional resources.
How are we progressing in resolving the Year 2000 problem? As of March 31, 1998, SSA has renovated more than 90 percent of the agency's mission-critical systems that support our business critical processes—enumeration, claims, postentitlement and informing the public. We are on schedule to complete testing of all systems by December 31, 1998, and have all systems implemented into production in January of 1999, providing a full year of post-implementation review. Beyond computer software, we have developed plans for Year 2000 problems in the areas of telecommunications, hardware infrastructure, and facilities infrastructure. We have plans in place to upgrade or replace all noncompliant equipment and are working with the vendor community, the General Services Administration and the CIO Council Committee of the Year 2000 to test vendor fixes.
What obstacles stand in the way of us achieving and preparing for the Year 2000? In October of 1997 the General Accounting Office (GAO) issued a report entitled, ''Social Security Administration: Significant Progress Made in Year 2000 Effort, But Key Risks Remain.'' The report was generally very complimentary of SSA's Year 2000 program; however, it identified three concerns: State Disability Determination Services' (DDS) [agency's] systems compliance, data exchanges and contingency planning which we were addressing at the time and continue to be addressed today.
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On the DDS software compliance, SSA has focused increased attention on ensuring that the State DDS systems, which are used in determining the immediate eligibility of disability medical applicants, are made compliant. Each State has developed a plan for DDS Year 2000 conversion, and SSA, working closely with the State, monitors the progress of each State against its project milestones. As of today, 21 of the 55 DDS systems have been renovated, tested and implemented.
Data exchanges. We have been actively addressing this issue of the data exchanges that occur between SSA, Federal agencies, States and other parties. Thus far, 65 percent of our data exchanges have been made Year 2000 compliant and implemented; our target is to have all data exchanges implemented by December 1998.
We are focusing particular attention on our exchanges that affect benefit payments. We are working very closely with the Treasury Department to ensure that Social Security and Supplemental Security Income checks and direct deposit payments for the Year 2000 will be on time. In addition to testing with Treasury, which is already under way, we have agreements to test from SSA, through Treasury and the Federal Reserve's Automated Clearing House for direct deposit payments.
Contingency planning. On March 31, 1998, we issued SSA's Business Continuity and Contingency Plan. The plan addresses the core business functions, including disability claims processing functions supported by the DDSs, which must be supported if Year 2000 conversion activities experience unseen disruptions. The plan identifies potential risks to business processes, ways to mitigate each risk, and strategies for ensuring continuity of operations if planned corrections are not completed or if systems fail to operate as intended.
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We certainly hope there will be no need to activate the contingency plan. However, if there are unforeseen Year 2000 induced disruptions, this contingency plan will be implemented to ensure continuation of SSA's vital service to the public.
Will our systems be ready for transition into the new millennium? Because of the early attention to this challenge, we are confident that our systems will function on and after Year 2000 to ensure that our core business processes proceed smoothly and without disruption as we move into the 21st century. When we open our offices for business on January 1, 2000, we expect to be prepared to provide our full complement of services to the American public with the accuracy and reliability they should expect from Social Security. [CLERK'S NOTE.—Later changed to ''January 3, 2000''.] If there are any unseen problems, we have a contingency plan in place to ensure continuity of our operations.
I would be glad to answer any questions you might have.
[The statement of Mr. Dyer follows:]
"The Official Committee record contains additional material here."
REQUESTS FOR NEW LEGISLATIVE AUTHORITY
Mr. PORTER. Thank you, Mr. Dyer.
Dr. Callahan, you sent up legislation that gives the Department authority to cancel contracts with Medicare contractors if they are not compliant by the Year 2000. Does that indicate that you have a serious concern that they won't be, and this reflects an earlier question that I asked of the first panel.
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Medicare contractors are all proprietary institutions, and while they use different software, at least, and maybe different hardware as well in their own businesses, obviously they have to address this problem in their own businesses as well, do they not, and why do you think they won't be compliant?
Mr. CALLAHAN. Well, I think, Mr. Chairman, they, like all organizations that are dealing with the Year 2000 problem, have begun over time to realize the scope and the complexity of it. I think it is fair to say—I know John Koskinen, the President's assistant, has indicated in some public forums that he does not believe that all businesses will be Year 2000 compliant. So there is a chance of failure among some of the—maybe the less efficient Medicare contractors and their proprietary side.
I think what we tried to do in our legislation here is give HCFA the authority to be able to provide performance measures in the case of contracts and be able to contract with other than just insurance companies for processing Medicare claims.
For example, you probably saw in the Post yesterday the MasterCard advertisement for the contracts that are now being competed for under the new contracts for purchase cards, travel expenses, et cetera. That legislation that we submitted to you would be able—would enable HCFA, for example, to be able to look at major corporations that do large volumes of financial transactions like MasterCard, like American Express, in case they wanted to go to those in terms of handling Year 2000 processing. So that was the intent of the legislation that we have sent up for congressional consideration.
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Let me just say one thing. We want to and we will work very closely with our Medicare contractors to determine the nature of the Year 2000 compliance problem and work very closely and as cooperatively as we can to get them to meet this goal.
Mr. PORTER. Let me ask the other panelists whether they are considering or have a need for similar legislation in the agencies, the outside agencies that they deal with. Have any of you looked into this?
Mr. SMITH. We have looked into it a little bit and we are going to look into it a lot more in the context of our contingency plan. We have a series of exchanges with government organizations, government institutions and hopefully they will all be all right, but if they aren't, we will definitely need some sort of waiver authority in order to allow us to either not make the look-up, let's say for an INS, through the INS, for example, or have some other strategy for gathering that information. It is also possible that we will need some authority to go to third party servicers of some type or other originators or other ways where we can't now in order to ensure that student aid can be delivered to institutions that may not meet Year 2000 compliance on time.
So there are a series of these, and we are keeping a list at some point and figuring out which ones are most important, and we will get back to you and to the Congress sometime shortly.
Mr. PORTER. Dr. Callahan, this legislation is only in reference to HCFA, is that correct?
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Mr. CALLAHAN. Yes.
Mr. PORTER. It seems to me that the administration ought to look at all of the Departments and agencies and see whether there shouldn't be comprehensive legislation that ought to be adopted this year that would deal with any of the needs in respect to this problem, rather than doing it piecemeal. I hope you can suggest that to the administration and perhaps the comprehensive legislation can be even carried in one of the appropriation bills like our own to get it through the process.
Mr. CALLAHAN. We will be seeing Dr. Koskinen tomorrow, so we will pass on that sentiment immediately.
Ms. LATTIMORE. Mr. Chairman, one of the things we have been talking about to Mr. Koskinen in that area is some type of potential relief for agencies in terms of data exchanges and partners that would be some relief from the information collection burden requirements which right now make it a little difficult for you to go out to the numerous data exchange partners. I know that his Council is pursuing whether or not that needs some statutory relief, and that would be one of the things that would be helpful for us with our States.
RRB ELECTRONIC FUNDS TRANSFER
Mr. PORTER. Yes, again, I think it ought to be taken up by all of the agencies and OMB ought to coordinate whatever is needed.
Mr. Rose, let me congratulate you on your statement and on the progress the Railroad Retirement Board is making in dealing with this matter. In many ways, your agency is very similar to the Social Security Administration. What percentage of your retirement, unemployment and disability payments are made electronically, and roughly how many financial institutions are recipients of these transactions? Do you intend to test exchange data with each of these institutions, and if not, what is your plan to ensure that beneficiaries continue to receive timely and accurate payments?
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Mr. ROSE. Mr. Chairman, of our direct deposits, 69 percent of our retirement beneficiaries receive their annuity through electronic direct deposit. In the area of unemployment, it is an amount of 85 percent. We deal with primarily 4 financial institutions. Obviously, checks go to many, many banks, but we deal with the Federal Reserve, with the Mercantile Bank for tax deposits, with First Chicago for HCFA Medicare, and with the Department of Agriculture for our Thrift Savings Plan. So we do have testing that will be ongoing with those 4 to ensure that the Y2K compliance data transfers work.
RRB DATA EXCHANGES WITH THE STATES
Mr. PORTER. Mr. Rose, like many of our other agencies, you rely on electronic interaction with the States to function. Are you confident the States will be fully compliant, how many currently are compliant, are there any that you are concerned about, and what contingency planning have you done to deal with a potential State system failure?
Mr. ROSE. In the area of States, our interaction with the States is fairly minimal. It is for wage matching so that we don't overpay on disability and unemployment benefits. We sent a letter out in January of 1997 to all of the States on just this issue. We are going to conform to their Y2K structure. We are not dictating it to them. So far, we have heard back from very, very few. We are going out again for further communications with them. I can't say at this point that any of them are compliant. We know specifically of 4 or 5 that are close to finished.
In the nature of our exchange, though, the Y2K compliance is minimal because of the matching for wage, but we have plans right now to initiate testing before the end—before the beginning of the summer on all 50 States. Part of it is getting them to respond.
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STATE UNEMPLOYMENT INSURANCE SYSTEMS
Mr. PORTER. All right. Thank you.
Ms. Lattimore, this subcommittee provided $200 million in last year's appropriation act to bring State unemployment insurance and employment service systems into full Year 2000 compliance. How many States today have been independently certified for Year 2000 compliance?
Ms. LATTIMORE. None have been independently certified to date. ETA has engaged in a review and of all of the States, 41 came in and indicated additional needs in backup. We gave $1 million in terms of a base grant to each of the 53 States to help them. That was $53 million of the $200 million. Forty-one States came in and identified additional needs, went through a peer review process and were awarded various levels of funding to address the specific problems they find they were encountering.
ETA is going back out now and is in the process of reviewing those 41 in addition to the others that did not indicate that they have need, so that we can have a baseline to look at in assessing where we will or will not have problems. We are anticipating that a number of those 11 at risk will no longer be at risk. They are receiving direct technical assistance through ETA's technical assistance technology service center along with the University of Maryland partnership we have. So we are expecting that the Employment Training Administration will find some significant progress at the State level, and the Inspector General, under our sort of newly arranged partnership, has agreed to work with ETA to verify that the money is producing the results we anticipated in the States.
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Mr. PORTER. You speak rather quickly. Let me go back and—you gave out 53 $1 million grants of the $200 million. What was the rest?
Ms. LATTIMORE. Fifty-three $1 million grants went to each State. The States were then allowed to come in and identify what their needs were beyond that. Forty-one States came in. They gave varying proposals for money over a varied range of fixing different issues. We put together a technical review group that went through each State's proposal and each State was then awarded additional money, which took us up to $160 million, and the $40 million is still sitting in reserve to be expended to get the last of the States' hopefully that need any assistance over the hump.
INDEPENDENT VALIDATION AND VERIFICATION
Mr. PORTER. All right. I missed what you did with the other $107 million, but now I understand.
What is the Department's schedule for achieving compliance by all States for independently certifying compliance and for testing?
Ms. LATTIMORE. We are hoping that we can get all of the States. They have not all agreed to that level yet, but we are looking for all of the States by late 1998. The May review that is undergoing now will be able to give us that assessment and we will be glad to provide you some follow-up on that once we have completed that review.
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Mr. PORTER. I think you said that—let me ask it again, though. Are there any States that you anticipate will not or may not be in compliance, and what contingency plans has the Department prepared for the possibility of a State failure?
Ms. LATTIMORE. Eleven States, based on their self assessment of that State, we deemed to be at risk when the initial money was granted. The assessment we are going through now will determine whether or not the initial money has moved them any further along, whether they are at less risk or not at risk at all, which is why we are doing the May review. We will be glad to provide you a State by State assessment of that when we complete that this May.
Mr. PORTER. And will there be an independent certification?
Ms. LATTIMORE. Yes.
CONCERNS ABOUT YEAR 2000 COMPLIANCE OF DATA EXCHANGE PARTNERS
Mr. PORTER. Mr. Smith, we obviously have real concerns about your ability to maintain the Title IV programs during the transition. We had long discussions on this and other information systems matters with the IG and with Dr. Longanecker.
You interact with 15,000 local educational agencies and 6,000 postsecondary institutions, according to your testimony. How many of these organizations are currently Year 2000 compliant? How many of these will you test between now and the Year 2000? And how many do you anticipate will not be in fact Year 2000 compliant? What contingency plans have you developed to deal with the possible data transmission failures?
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Mr. SMITH. Well, as of right now, I suspect that fewer than 10 percent are compliant, so I think the really relevant question is the second one you asked, which is how many will be compliant by the Year 2000.
There, we don't have a good fix on that yet. We are planning a survey, a fairly comprehensive survey, and with probes behind the survey to look at places that indicate that they are not compliant or that they are not sure that they are going to be compliant. We want to find out what the problem is. However, we have some good indication of where the problems are going to lie.
At the school system level, some of the school systems in this country, as you know, are rural school systems—7,000, 8,000 of them. They only have small computer systems and so on. We suspect that with sufficient information and a little guidance that most of them will come into compliance fairly easily. It is the larger school systems, the big city school systems with old mainframes, that haven't gotten to work at least by now; many of them are barely even planning work at this point. Those are the ones that are of most concern to us at the elementary and secondary level, and we have been working with the Council of Great City Schools. We are in contact with a number of the systems themselves; we are trying to work with them. This is a tedious process, as you can imagine.
At the college level, there are a lot of mainframe colleges, but many of them are large State institutions with quite a lot of capacity to change, and so we think while they are behind a little bit right now, that they will catch up and be okay in the future. They want to make darn sure they can get their money and they will put their resources into it.
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Again, it is the poorer colleges in this case that need the most attention. We have some special work going with the HBCUs. We are going to take a good look at some of the proprietary schools to find out what the situation is there. So this is a problem, and you can't address it by just going across the board, I think, and sending out a letter to everybody. You have to really have tailored strategies for each of the different parts of the systems.
There is no way I believe that there will be—that everyone will be in compliance by the Year 2000, and we will clearly need contingency plans for the States and the colleges that are the most important. The school systems we can work with on a one-by-one basis, but the States and the colleges, it is important that we have a serious contingency plan that will bring them into compliance.
Mr. PORTER. It seems to me there is a great potential of losing track of who owes what, and this would be in the billions and billions of dollars, would it not?
Mr. SMITH. Oh, yeah. We deliver—counting the federally financed student loan program, it is $35 billion a year, $40 billion a year, yeah.
Mr. PORTER. So this is a very serious matter.
Mr. SMITH. This is a very serious matter.
Mr. PORTER. You testified that the Department may need certain statutory or regulatory waivers to implement certain contingency plans. Can you tell us generally, and answer for the record comprehensively, what programs may need waivers, specifically what requirements may be waived, and what is the implication of such waivers for program integrity? Please give us a full answer for the record. Generally speaking, we will be more receptive to waivers later on if we are notified of the possible need now.
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Mr. SMITH. I understand. We talked a little bit about that before. I think we have some concern about some of the data matching with other Federal Government agencies. We have about 6 or 7 different agencies that we match data on our student aid financial application forms. We are also a little bit concerned about the capacity to deliver the student aid in situations where an institution cannot be compliant. Can we go to a third party servicer and so on? So we will definitely give you a full blown answer to that.
Mr. PORTER. Thank you.
Dr. Callahan, your written statement says that, ''budgetary needs appear manageable, except in the case of HCFA's external Medicare contractors,'' and that you are currently assessing this budgetary question.
Do you believe the administration will send us a budget amendment regarding this matter?
Mr. CALLAHAN. I can't give you a definitive answer on that at the moment, but let me divide my answer into 2 parts.
With regard to our agencies and their internal systems requirements for the Year 2000, we feel that the committee has been most generous and most accurate in their appropriations to us for this purpose. We have instructed our agencies for those internal systems to, in essence, if they find themselves requiring more administrative money, to look within their own resources and to reallocate monies to the Year 2000 effort.
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Medicare contractors again are a larger problem. Given the complexity of what they have to do, the number of transactions they have to make, the complexity of their systems, it is pretty clear that the scale of their problem for getting to be Year 2000 compliant is greater than other parts of the Department.
We are now estimating what those requirements will be in close contact with the Medicare contractors. We are looking at all of our internal resources to determine where we can reprogram money or reallocate money, and if there is, indeed, a need for additional money, as I said, we are working right now with the Office of Management and Budget and we will work with the committee forthwith in that regard. I can't give you a definitive number now, but we are working on that very closely.
Mr. PORTER. Thank you, Dr. Callahan.
IMPACT OF YEAR 2000 ON DISABILITY CASE PROCESSING
Mr. Dyer, the current cycle time for an adminstrative law judge (ALJ) decision in a disability case is about 600 days or nearly 2 years. The agency has not made much progress in decreasing cycle time in the last 5 years.
How is the agency going to ensure that this cycle time does not increase as a result of the Year 2000 transition? Do you anticipate any scenario in which the cycle time could get worse?
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Mr. DYER. Mr. Chairman, we don't see any problems with processing decisions from the system support perspective at all. The kind of software that we are developing to help with that is in place, it is working, and we will have it in Year 2000 compliant. Some of the future initiatives we have really don't take effect until after the Year 2000, so we think that we are okay on that score.
CONTINGENCY PLANS
Mr. PORTER. I understand that the agency is working to ensure that benefit payments will be accurate and on time, but given the sensitive nature of the task, have you established a plan to deal with media and public reaction in the event that payments are held up?
Mr. DYER. Yes. Part of our contingency plan would be that we would figure out how we would get them (or payments) out. We, as you know, now have contingency plans for such events when checks fail to go out or something goes wrong and we are going to be updating those and making sure that they are very current so that if we have to use them, we can put those plans into place.
Mr. PORTER. Well, again, if I can emphasize to all of you as I did with the first panel, we don't want any of you to be in the newspaper, or any of the other agencies who are not at the table but are represented in the room. Obviously, this is a serious problem. We take it seriously. We know that you do. We know the IGs are working with you to ensure that there aren't problems come the Year 2000, and hopefully, with a good deal of pressure to bear on the situation, not only the agencies and departments of the Federal Government, but also the external contractors and agencies that you deal with will also be compliant. Thank you all for appearing here today.
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