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OVERSIGHT OF UNITED STATES COAST GUARD EXPENDITURES
Thursday, February 4, 1999
House of Representatives, Subcommittee on Coast Guard, Committee on Transportation and Infrastructure, Washington, D.C.
The subcommittee met, pursuant to notice, at 10:11 a.m., in Room 2253, Rayburn House Office Building, Hon. Wayne T. Gilchrest [chairman of the subcommittee] presiding.
Mr. GILCHREST.Good morning everybody. The subcommittee will come to order. Our hearing today is general assessment or an overview of the Coast Guard operations and then the resources necessary to achieve those objectives and those goals.
So without further adieu, Admiral Allen, welcome this morning. We look forward to your testimony. We have a series of, I hope will prove to be, interesting questions. So you may begin, sir. Thank you.
TESTIMONY OF REAR ADMIRAL THAD W. ALLEN, DIRECTOR OF RESOURCES, U.S. COAST GUARD
Admiral ALLEN. Thank you, Mr. Chairman. And thank you for the opportunity to meet with the committee here this morning. I have some prepared testimony. With your permission, I will submit that for the record and make some very brief opening remarks, sir, because I would really appreciate the chance to engage in a dialogue this morning regarding resource issues and the U.S. Coast Guard, sir.
What I would like to talk about this morning is the mechanics of the Coast Guard budgeting process and funds execution. Not a very glamorous topic and rather arcane in some instances, but extremely important to the Coast Guard and our ability to maintain services for the American public.
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I would like to paint a picture for you this morning of an internal budgeting and funds execution system that in many ways represents the evolution of the Coast Guard organization and the very nature of the way we conduct operations. There are a lot of ways to view an agency. This morning we are going to view the Coast Guard through the lens of how we acquire and spend money. In that manner, we hope to provide you information on how the Coast Guard operates and how the resources that are provided to us by the Congress are translated into services for the American public.
I would like to provide just a short historical context, make a couple of comments about the structure of funds management in the Coast Guard, and then go to whatever questions you might have, sir.
I think the best way to get a handle on how we obtain and manage money in the Coast Guard is to look at how we have evolved over the history of the service. As you know, we are a collection of agencies, some of which pre-date the establishment of the Government of the United States, especially the Lighthouse Service and some of our search and rescue operations. We have a tradition of operating in isolated places with unit commanders, whether they be in cutters or small-boat stations, that have a lot of autonomy, a lot of responsibility. This is anywhere from isolated lighthouses in the past, to isolated search and rescue stations, or even to the initial patrolling of Alaska after we obtained it in the 19th century.
The requirements of those operations required that our local operating commanders had the ability to do procurements, pay their crews, and basically carry on the purpose of the Coast Guard. Because of that, over the history of the Coast Guard, what we have seen is what I would call an evolution of decentralized funds execution and centralized management of funds. In other words, I don't think you will find many organizations in the Federal Government where you have funds execution authority or the ability to procure goods and services to spend money at such a low level as we do in the Coast Guard. It is required for us to conduct our daily operations.
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The Officer in Charge of Station Coos Bay has the ability to go downtown with a Government credit card and buy some of the things that he needs to operate the station. The commanding officer of a Coast Guard cutter calling at Rodman Naval Station in the Canal Zone while making an Eastern Pacific deployment to interdict drugs has to have the capability to carry out logistics, take on stores. You have to have the ability to pay your crewmen when you are away from port.
So, over the years, there has always been authority allocated to local unit commanders to expend funds. Up until 1986, we actually accounted for those funds and managed those funds at the District level, which are our major field commands, as you know. Each District office had its own accounting shop. They basically managed all the funds in the Coast Guard within their District, did reconciliation reports, and basically sent financial management data up to Headquarters, but then rolled them all together to balance the books, if you will, for the Coast Guard.
In 1986, we streamlined the Coast Guard and moved most support functions to the Maintenance and Logistics Commands, which support our operating units and Districts. And since that time, we have gone to a very centralized way to manage funds and account for funds. We have a consolidated Coast Guard Finance Center in Chesapeake, Va., that basically tracks all the financial transactions. So what we have are dispersed units spending money, but having those financial transactions reported back to a central finance center, keeping track of the financial data so it can be obtained from one location. And the overall management of Coast Guard funds taking place at Coast Guard Headquarters through a structure that I will talk about in a minute called our Allotment Fund Code.
So in general, what you have in the Coast Guard is centralized funds management and accounting and decentralized funds execution.
That is key to what I am going to talk about later when I explain how we put our budget together because you have to start with the building blocks on how we spend money for us to be able to ask you what we need and how we need it, and the translation of our local needs into a budget request and then how that is translated into appropriations, I think, will be up for the Committee to understand.
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Mr. GILCHREST. Excuse me.
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Before I lose it, I just had a question.
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Which I am not sure how to formulate into words, but you have centralized management and decentralized execution?
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Now, I would assume that this is only for certain kinds of things.
Admiral ALLEN. Yes, sir, it is. There are thresholds.
Mr. GILCHREST. Which would be for, you said pay, if you need some extra.
Admiral ALLEN. I will give you a couple of examples, sir. If you are going to order things through the general supply system of the Federal Government, you are going to make a requisition. Most units have the ability to do that. They make a requisition.
Mr. GILCHREST. So they don't go to a local hardware store?
Admiral ALLEN. Sometimes you do. It depends on what the nature of the request is, if there is any urgency required in the repairs you might have to undertake.
Mr. GILCHREST. Do you have a percentage of your budget for military pay, for vessel maintenance, for military readiness, shore facilities.
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Is that part of the budget in a certain percentage the part that is actually spent by this little credit card at all the different facilities? Or does that fall into all the various diverse categories?
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Admiral ALLEN. Yes, sir, we are going to talk about that a little later on. And I will tell you right up front, it can be very confusing because there are many, many ways to look at the Coast Guard's operating base. You can look at how we spend money, and I am going to go over that in just a second. And then how we are required to ask for money through the Federal budgeting process, and they are not quite the same in the required translation. But the basic issue is that the way we spend money is not generally the way money is appropriated. And I am going to go over that with you this morning, sir.
Mr. GILCHREST. Thank you.
Admiral ALLEN. But getting back to your first question. There are thresholds of authority, what you can procure in the field. Most units have what is called simplified acquisition authority, and that is to be able to procure, say, less than $25,000. They are warranted by the head of a contracting authority at the cognizant Maintenance and Logistics Command to certify that they have a certain level of training to make sure they can carry out the fiduciary responsibilities associated with making those Government purchases.
Formal Government contracting is done at a higher level and the specifications have to be provided to a Contracting Officer. There is a higher level of oversight for that. But in general, most of the day-to-day expense of operating a coastal search and rescue station or a patrol boat are within the purview of the Officer in Charge or the Commanding Officer to expend the funds to obtain the materials he needs to operate his unit, sir.
Mr. GILCHREST. Thank you.
Admiral ALLEN. Yes, sir.
If I could, I would like to point to the chart on the right here. For lack of a better term, we have decided to call this a life cycle of a dollar, Mr. Chairman. And what I would like to take you through is the sequence from the idea that the Coast Guard needs to buy something until we actually buy it. Maybe this will put into focus your earlier comments, sir.
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When we decide that we need a piece of equipment or to develop an initiative in the Coast Guard, somebody in Coast Guard Headquarters writes what we call a Resource Change Proposal. All it is is a proposal for a budget initiative. And as you know, we carry an enacted level forward each year and we either increment or decrement our budget based on initiatives that are put forward under the oversight of the Congress.
The proposals we put forward every year have to first be formatted within the way we spend money in the Coast Guard because that's the way it will ultimately be spent when we get the appropriation. We spend money in the Coast Guard in two ways, sir. All the money the Coast Guard gets internally is distributed into what we call Allotment Fund Codes. Those are functional classifications of what the money is going to be spent on. It will be things like military pay, vessel maintenance, training, civilian pay, permanent change of station, and so forth. There is a listing of those AFCs in the background material that I have provided to the committee.
When we put our request together, we have to disaggregate the money we need to carry out a certain initiative. We have to decide how many of those AFCs need to be sourced for us to be successful in carrying out that function. Once that is done, then we know how much money that we need to carry out that particular initiative.
We then have to take that funding proposal and translate it into budget presentation language, if you will, a different set of numbers to be presented to the Congress. The requirement for budget formulation in the Federal Government requires that our entire budget each year be submitted by object class. That is a general breakdown of goods and services that is used throughout the Federal Government. It characterizes a particular procurement, whether you are buying services or certain types of equipment. It is another way to look at our budget request, and we develop it using object class.
We also, at the request of the Appropriations Committee, break down our request into what we call PPAs: programs, projects, and activities. Those are subdivisions within the Operating Expenses appropriation that generally categorize what the money is going to be spent on in the three general categories that we use right now. One is funding related to personnel, compensation, and personnel support. The other one is general maintenance categories, and that would be either shore maintenance, vessel maintenance, aircraft maintenance, and so forth. The final is general operations for field and staff units. So there are three PPAs.
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What happens when we submit a budget up, we have to take our budget request and submit it across all those different dimensions. That leads me to when I was talking to your staff a couple weeks ago, sir. I created a training aid inside Coast Guard Headquarters that I brought with me this morning. And my folks all call it the Magic Cube, and it is right there, sir.
Mr. GILCHREST. This is new?
Admiral ALLEN. No, sir, it is a way to help us understand how we manage the base of the Coast Guard.
Mr. GILCHREST. This training aid, it is just new to us?
Admiral ALLEN. We have been using it about two years in the Coast Guard, sir. I guess it is an Allen invention, sir.
[Laughter.]
Mr. GILCHREST. The Allen?
Admiral ALLEN. Yes, sir.
If you could characterize our operating base in spatial sense, then we have a certain lump of money, if you will. What I have tried to characterize here, and you have them in the handouts in front of you there, there are different ways to view our Operating Expenses appropriation against the different kind of categories in either how we spend it or how we are supposed to ask for it in terms of budget submission.
If I could walk you through a few of those, it might be helpful. The front panel, which is coded green on the chart and green in your handouts there, is the breakdown of our 1999 appropriation by Allotment Fund Code. What that means is when we get our Operating Expenses appropriation for 1999, we distributed it into those fund codes for further distribution to the field. So that is where we took the money appropriated to the Coast Guard and put it into accounts so we could spend it inside the Coast Guard, sir.
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The white panel around to the side is the object classification. We have to classify our expenditures within the Federal definition of object classifications for submission with the budget. It is a requirement. So the panel, the white panel, represents the breakdown of our 1999 Operating Expenses appropriation by object classification. That is a general accounting classification the entire Federal Government uses, sir. There are some similarities to the AFCs, but there are some differences, as you can see.
And finally, the blue panel at the top is a representation of the Operating Expenses appropriation subdivided into the PPAs that are required by our appropriations committees for us to present the budget. Each one of those panels is divided into the percentage that that particular item takes in the budget. So we see military pay for the Allotment Fund Code. We call it AFC zero-one in Coast Guard vernacular. That is the percentage of our budget, and it is the largest percentage of our budget as you will see. Nearly two-thirds of our operating budget is salaries. That is where we distribute it for execution within the Coast Guard, sir.
Mr. GILCHREST. Is retirement on here?
Admiral ALLEN. Retired pay is a mandatory appropriation, a separate appropriation from the Operating Expenses appropriation, sir. That is mandatory, not discretionary, and it is carried in a separate appropriation. For the purpose of the discussion here this morning, I am focusing on the Operating Expenses appropriation because it is the largest.
Mr. GILCHREST. So when you go to OMB, you don't have to worry about the retirement pay?
Admiral ALLEN. On occasion we do because if our actuarial estimates, if there is a change in the basis for our estimates and we need more funding in that year than we have appropriated for retired pay, we have had an occasion and had to go back and request supplemental funding. But it has always been granted because it is mandatory, but we have on occasion.
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Mr. GILCHREST. But there is no competition between 47-footers and retirement?
Admiral ALLEN. No, sir. No, sir. It's mandatory. It's fenced off from discretionary, yes, sir.
Mr. GILCHREST. If you had a question, while we're going along.
Admiral ALLEN. The point I would like to make, sir, is that we have to take how we spend money in the Coast Guard and then reformat it for the budget submission. What happens then is as we go through the oversight with the committees on the Hill in looking at the annual appropriations, we respond to questions and we provide technical information in regards to the Coast Guard's Operating Expenses appropriation under any one of those categories, sir.
Once the conference has acted and we have an enacted appropriation, then we go to what we call the operating stage of the budget. And we take the money that has been appropriated and then we distribute it back into the Allotment Fund Codes based on the money that Congress has given us. Sometimes it is not exactly what we requested because you know there are changes. So we have to make a decision on how to distribute those funds back so then they can be executed in the Coast Guard.
What happens then is at Coast Guard Headquarters, for each one of the Allotment Fund Codes that you see up there on the green panel, we have what is called an AFC manager. That is a staff responsibility at Headquarters to manage that particular sub-account of the Operating Expenses appropriation. For example, we have somebody that is specifically responsible for managing vessel maintenance. They would look at that entire program, and when we get our appropriation from Congress, they then would distribute those vessel maintenance funds to the field based on requests coming from the field, maintenance backlogs, and other technical information.
So once the AFC managers have the appropriation, within the slot that they are responsible for managing, they then distribute those funds to the field for execution. And that could be to a Maintenance and Logistics Command, to fund vessel availabilities and drydockings. For AFC 30, which you will see is probably the next largest in the AFC panel, operations and maintenance, that is the day-to-day operating for our field units. Those funds are distributed down to the District and the Area offices. In finance vernacular, we call those Administrative Target Units. That is the arcane label for a regional bank that supervises the money locally, sir.
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Within those regional banks, they establish accounts for each operating unit, which we call a program element, which you could see as a ship or an air station. And then they take the money in accordance with spend plans that they have previously provided as part of the budget preparation, and execute the funds, sir. That would result in the outlay.
Mr. GILCHREST. I never could do the Rubik's Cube or whatever you call it.
[Laughter.]
Admiral ALLEN. Sir, I am severely challenged by it myself. I could think of no better way to try and explain to our folks the different ways we have to look at and manage our budget.
There are two issues I have left out that I have got at the bottom of the chart in your handout. As you well know, and I think we are probably going to talk about this later on, we also take the cost of operating the Coast Guard and allocate it into mission areas for the purpose of being able to provide you information on the level of effort in terms of resources that it takes, say, for the counterdrug mission in the Coast Guard. So what you see in the orange panel is a percentage breakdown of the 1999 Operating Expenses appropriation roughly distributed by mission areas, sir.
And where you see ELT, that means enforcement of laws and treaties. That is the aggregate of counterdrugs, alien migration interdiction, domestic foreign fisheries, and other law enforcement activities that we carry out. As you see, it constitutes the largest general portion of our mission area, although we subdivide that into those categories that I just named for further management.
Now, the other thing that I have there, sir, kind of push it in from the side, again this a mental construct, if you will, are the emerging strategic goals under the Government Performance and Results Act, and the need that we have to be able to link our resources into the performance goals that have been developed under the Results Act.
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A little later on, if you would like, I could talk to you about the drug goal in relation to the allocation of program hours and the cost of those program hours for the counterdrug effort, because I know you are interested in that, sir.
Mr. GILCHREST. Admiral, what's A-T-O-N?
Admiral ALLEN. Excuse me, sir?
Mr. GILCHREST. ATON?
Admiral ALLEN. Oh, aids to navigation, sir. Yes, we have acrononymized there, sir. I apologize. Let me go through. M-E-P is marine environmental protection, search and rescue of course, and aids to navigation. There are some smaller categories, but we couldn't make the print fit on the sheet there. They are provided. If you will look at the sheets behind the cube there, they are color coded to show you how we present them in the budget to match the part of the cube that I am talking about, sir. Those are actual extracts from our budget submission to show you the crosswalk between how we have to present in the budget and how I have displayed it on the visual, sir. I thought it might be a handy desk reference for the Committee, sir.
Mr. GILCHREST. Thank you.
Admiral ALLEN. With that, maybe I will stop there, sir. I don't want to sit here. I know you are a teacher and you appreciate the classroom environment, but I don't want to get into a position where I am lecturing you this morning, sir. So I would be happy to engage in a dialogue or respond to your questions at this point, sir.
Mr. GILCHREST. Thought that was very well done. I have a few questions, which I think will help me put a lot of this into perspective. I know Mr. Baird, and Mr.--did I pronounce that right? DeFazio,? No, DeFazio. Is it Oregon or Oregon?
[Laughter.]
Okay. We will go over that. We will go over that later. Okay.
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Just a couple things real quick, Admiral. I guess you pretty much answered my question as far as the retirement pay not competing with the overall budget of the Coast Guard, but the retirement pay is this year is I guess $684 million?
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. And the military pay is $1.289 billion and change?
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Are these two, is the retirement pay rising so that some time in the future it will match the military pay?
Admiral ALLEN. Sir, it's rising, but I don't think as far as our actuarial estimates go, that it will ever approach the size of the active duty pay in the Operating Expenses appropriation, sir. The work force is aging. We have more retirees. There is some growth there, sir.
Mr. GILCHREST. I see. So in 20 years from now, do you make predictions 2 years out, 10 years out, 20 years out?
Admiral ALLEN. Yes, sir. We basically have an actuarial model that allows us to model what we think based on the demographics of our retired population, how much we need to estimate for the Retired Pay appropriation. I would be glad to provide an overview of how that is done for the record if you like, sir.
[The information received follows:]
[Insert here.]
Mr. GILCHREST. But right now that is not considered to be a problem? The entitlement of retirement pay is not considered to be a problem?
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Admiral ALLEN. No, sir. Only to the extent that if the actuarial estimates don't come in exactly right, we do have to from time to time request supplemental funding. Again, that hasn't been a problem, sir.
Mr. GILCHREST. Okay. The unobligated funds that the Coast Guard has on an annual basis, is there an average figure for that amount? The reason I guess I ask is because we hear sometimes from the appropriators that the Coast Guard has so much money left over. When we are pushing for a certain budget, they are pushing to cut dollars, and they see a certain amount of money in the Coast Guard budget. Can you give me some fairly accurate figure of an annual unobligated fund amount, and do you see that as a problem? Is there some way to be more efficient in spending those dollars?
Admiral ALLEN. Yes, sir. I would like to chunk the responses down, if I could.
First of all, we have more than one appropriation in the Coast Guard, and each one of those appropriations has a slightly different profile when it comes to how the money is obligated and when it is actually expended. Let me go through a couple of them for you as an example. I think it will probably explain the situation.
The Operating Expenses appropriation provides budget authority to the Coast Guard, which means that funds are available for obligation for one year. And that authority to obligate money lapses on the 30th of September. Beyond the 30th of September of that particular year, I can't write a procurement request, cut a set of travel orders, or enter into a contractual relationship with anybody that would obligate the Government to spend funds.
There is a chain of events that occurs in government finance that ultimately results in an outlay of money from the Treasury. It is usually what we call commitments. That is, they plan to spend money, and then create what is called an obligation. That is actually by issuing a purchase order, issuing travel orders to somebody, or putting in a request for supplies. The money is not spent from the Treasury until the bill has been presented and validated, at which point there is either an electronic funds transfer or a check is cut to the vendor. At that point, that results in an outlay.
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The limitation on using the Operating Expenses appropriation is on obligations. So when the fiscal year ends, you cannot enter into any more obligations that would result in an outlay.
Here is where it gets a little arcane, sir.
Mr. GILCHREST. So that is in the area of operating expenses?
Admiral ALLEN. Yes, sir. Our outlay rate for the Operating Expenses appropriation in particular, I believe, is 80 percent.
Mr. GILCHREST. So the operating expenses is one thing, but the AC&I is different?
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. And I think that is what I am talking about.
Admiral ALLEN. Yes, sir. There is a much different approach to AC&I.
Mr. GILCHREST. Does the Coast Guard see a $200 million unobligated amount of money in the AC&I account as a problem as being difficult?
Admiral ALLEN. Sir, I don't think it is a problem, sir.
Mr. GILCHREST. Okay.
Admiral ALLEN. I think it requires some explanation, but I think the explanation probably will tell you why I don't think it is a problem. The AC&I appropriation is a multiyear appropriation. The funds which are appropriated within the AC&I line item are available for different periods of time, anywhere from two years if it requires administrative and personnel costs, to three to five years, depending on whether you are spending money on vessels, aircraft, or equipment. It is acknowledged that an engineering project has some design work up front, a period to award a contract, a period for contract execution, and then maybe settlement of any claims that might arise as a result of contract execution. That is the reason this is multiyear money.
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That means that in a particular year we need a certain amount of cash to continue the project, and you may have to carry over funds from one year to the other to finish out the project. There is always going to be an unobligated balance in AC&I accounts that is carried over to the next year.
Mr. GILCHREST. So to a certain extent, the explanation, I don't want to sound arcane here, but the explanation that is given to the appropriators, who fund all these programs, can be laid out as far as the requirement for contractual relationships and bidding process is concerned? We might have $200 million unobligated here, but it is actually contracted? There is something working here?
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Do you ever have money left over where there are no contracts signed yet?
Admiral ALLEN. Yes, sir. We do. And generally those funds are reprogrammed to other projects and not allowed to lapse and the money lost, in other words. There are certain thresholds within a small dollar value if a project has ended. Say there is $500,000 left in a construction project; we can, within that same category in the AC&I appropriation, apply those funds to another project to make sure they are not lost.
Once we exceed a certain percentage of that category or a certain dollar value, we have to a request reprogramming authority from the Appropriations Committee before that money can be moved because when the financial transaction gets to a certain amount, they want to have visibility of it.
Mr. GILCHREST. I see.
Admiral ALLEN. In regards to your earlier statement, there is a valid need to carry over money between years for the AC&I appropriation, but there is also a limit regarding good management on how much that level should be. In other words, you should have enough for contractual obligations, but you shouldn't have excessive funds sitting there that you don't have a spend plan for that might be used for other priorities. In other words, there is a reason to carry the money over. What is subject to oversight, and legitimate oversight in my view, and good management practiced by the Coast Guard, is what that level of carryover should be, sir.
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Mr. GILCHREST. This will be my last question for now. Do you feel the procurement process that the Coast Guard has is about as efficient as it can be?
Admiral ALLEN. Well, I don't think any process in government is ever as efficient as it can be, sir. I think we are doing real good, and I think we have improved dramatically in the last 10 years in the Coast Guard. We have got a ways to go. A lot of it has to do with the accounting systems and the information technology we use to manage funds. The implementation of the CFO Act and some of the upgrades that we are making in the Coast Guard right now, bringing our--our unit financial system is being converted to Windows NT to bring financial desktop data available to our funds managers, all helps us manage that to a finer line on those funds carryovers.
So, can we improve? I think we can always improve, sir. I think we are on a real good slope.
Mr. GILCHREST. When you go about to improve the procurement process, who do you reach out to to help that happen, to make that happen?
Admiral ALLEN. It depends on the size of the procurement and the nature of the contract. We have what I call small purchase authority in the Coast Guard. Those are basically purchases that are authorized at the local level that don't require a warranted contracting officer to carry out. The way we improve that is through the training of the people that do it, the professional competency requirements we have for them to obtain those certifications. I think we are doing very good there.
When you move to the next level up in formal contracting, where you have to enter into negotiations, and the Federal Acquisition Regulations apply, there is a higher level of competency that is required and a higher level of certification that is done by the Coast Guard's head of contracting authority, which is our CFO, Mr. Campbell. And each one of those areas, we are not only moving to improve training and the competency of those folks, but also to improve the financial information available to the people that are managing the funds so we can manage closer to the line on these unobligated balances. As a result of the Clinger-Cohen legislation and some other recent initiatives in Government over the last four to five years, they have actually raised the bar on the requirements for the people that carry out these duties, in some cases, requiring the equivalent of college credits or certification for folks that are involved in these procurements, sir.
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Mr. GILCHREST. I see. Thank you very much, Admiral.
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Mr. DeFazio?
Mr. DEFAZIO. Well, Mr. Chairman, I think this is all, you know, I don't want to say it's totally apparent, but I mean I am following it as much as I need at the moment. I guess I just, sir, my question here is getting background. Have we had concerns expressed by the Appropriations Committee about the amount of the unobligated balance?
Mr. GILCHREST. One of the more difficult things for us to do is to convince almost the rest of Congress that there is a Coast Guard, that the Coast Guard is important, that they increase their responsibilities almost on an annual basis. Well, at least in my last two years, this is a silent service that needs some recognition. And when we look to the appropriators, yes, it often is a problem with the fiscal perspective that Congress has operated under over the last four years. We want to go loaded for bear when we talk to other Members about the need to raise the amount of money, the basic, fundamental operating expenses of the Coast Guard. And we fought tenaciously over the last two years.
Then you generally will find Members that want to increase the drug budget, but reduce the fisheries budget. We are moving into an area, and part of this is that we are moving into a rather enormous, complicated area known as ''deepwater,'' which has to some extent changed the focus the Coast Guard has in areas that are 50 miles offshore or more. So to answer your question simply, there has been some difficulty in the past trying not only to convince the Congress that the Coast Guard needs more money, but probably our biggest challenge is to convince OMB, and quite honestly the administration, that the Coast Guard needs more money up front. So, that is my brief explanation.
Mr. DEFAZIO. Okay. Well I guess what I am getting at here is, if we are talking about $200 million in this account for acquisitions, and I mean I think a better way of expressing it, and I mean I know there are certain terminologies we use in Federal accounting, I mean unobligated balance. This would be funds that are committed but not yet expended. Is that right?
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Admiral ALLEN. That is correct, sir.
Mr. DEFAZIO. Would be a better way of explaining them? So as long as there is a tremendous discrepancy between the anticipated commitments and the actual commitments on an annual basis showing that you overbudgeted that account. I assume that has not been a problem. You have been fairly close?
Admiral ALLEN. Yes, sir. What happens from time to time is that there may be a project delay where the commitment schedule may have slowed down and therefore it appears that the unobligated balance may be larger. And there are cases where, for whatever reason, there is non-performance or something, a contract is canceled and there are legitimate reasons to report those funds, and either reprogram within the Coast Guard to use them for other purposes in the appropriations process.
Mr. DEFAZIO. Right. But that would just reflect generally on the size of your budget and the size of this unobligated balance, and the size of the Pentagon budget and much larger percentage which their unobligated balance represents, and the fact that their unobligated balance for the most part in many cases cannot be directly linked to future expenditures, and is a little more--there have been some very large reprogrammings in that account. So it sounds pretty efficient to me. I think it sounds very defensible.
Mr. GILCHREST. It think it is efficient and probably defensible, but when you are dealing with--part of this is to for us to begin to understand the process better than we have in the past. And when you are dealing with other Members that might discuss with you on an annual basis for about 60 seconds why the Coast Guard needs more money, then we need a very efficient 60-second response. Where if you have a long conversation with another Member of Congress about the needs of the Coast Guard, it could be three minutes, a lengthy conversation. So this is trying to dot our I's and cross our T's here.
Admiral ALLEN. Sir, we would be happy to provide for the record some of the history of our unobligated balances and give you some data on that, if you like, sir.
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Mr. DEFAZIO. I think that would be helpful, showing that this is not due to overbudgeting with the hope of reprogramming, which is the one indefensible practice that we could get in trouble for.
Admiral ALLEN. Yes, sir.
[The information received follows:]
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Mr. GILCHREST. Mr. Baird?
Mr. BAIRD. Admiral, I appreciated your remarks. I had two quick questions.
As I looked at the budget a while back, I believe I saw that there was a reduction in the available funds for fish enforcement. Some of that, if I am correct, had been shifted to drug enforcement. So it is a two-part question. To what extent do monies allocated for drug enforcement, can they effectively be involved for fish enforcement. My premise being, if you have got a boat out there or helicopter, you can find people who are dealing drugs, or transporting drugs, or catching fish where they ought not to be. This is obviously important to my district and the coastal communities. So to what extent are they able to do the same mission, and is there any suffering of the fish enforcement due to increased drug-enforcement activities?
Admiral ALLEN. Yes, sir. You have just asked what I think is the most seminal management and financial management question in the Coast Guard today. In the past I have had conversations with the Chairman regarding our allocation of funds for fisheries and other missions. If it is okay, sir, at this time I would like maybe to go into a more in-depth discussion of that. That's okay with you, sir?
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Mr. BAIRD. Yes.
Admiral ALLEN. Mr. Chairman, when our budget comes up every year, we have a pie chart. We have what we call a Budget in Brief, a small brochure, and there is a pie chart there that breaks out our mission areas by percentages of our operating base. It is the same percentages that are portrayed in the orange panel at the bottom of the cube that we were talking about earlier.
What I would like to do is talk for a minute about how we allocate costs to missions in the Coast Guard, the current state of that, and where we think we are going in the future because we think we need to get much better at this. And that is what I would like to talk about right now.
In any particular year in the Coast Guard, there is a fixed amount of effort that is available to be expended on missions. In other words, there is a finite amount of Coast Guard cutter operating hours, aircraft hours, and on the human side, if you are talking about marine inspectors, people that man our strike teams, there is a certain amount of human effort that is available to be applied to missions. In the early 1980's, in response to questions from the Congress, we developed a model to allocate all the costs of the Coast Guard for a particular year to our mission areas. I am going to go through the evolution of that and how that's put together, and I am going to tell you why it may be good and why we may need to look to improving it in the future and what we are doing to improve it.
What we do is we keep track of all the asset hours in the Coast Guard on an annual basis. Every operating unit, whether it is a coastal search and rescue station, a Coast Guard cutter, or a Coast Guard air station, is required to log the employment of that asset for every hour for the entire year that it is used. So we can go back for a particular Coast Guard cutter or an aircraft and find out the percentage of hours in that year that it was employed on drug enforcement, on marine environmental protection, alien migration interdiction, and so forth.
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We are then able to roll all of that up and come up with a total for the entire service for that year. So at the end, we have what we call an Abstract of Operations of the Coast Guard, which is a breakdown by hour of how we employed our assets for that year.
On the human side, it is a little more difficult because we have people at marine safety offices that are inspecting waterfront facilities, doing what we call port-state control boardings to make sure that there are no unsafe foreign flagships coming in. We have come up with an estimating model on that human effort that allows us to do the same thing. I will talk later on about how we are trying to improve that.
Once we come up with that aggregate amount, we come over to what I call plan-mission allocation. If you go over to mission hours, then we can come up with a percentage of our effort for that particular year arrayed against those mission areas.
We use that then as a basic algorithm to distribute the operating costs of the Coast Guard. We do it in three chunks, and those are on top. Where we know there is a direct cost associated with an asset and we can apply it to it, we do that. Where we know there are support costs that can be applied, we do that too. Then on top of that, we put what in accounting terms would be the full burden rate, and that is including the Commandant's salary and mine, which has to be allocated somewhere as a percentage basis across our mission areas. That allows us to come up with a spread of costs for a particular year allocated to Coast Guard missions. All it is is a reflection of the distributed cost for operating the Coast Guard based on the actual employment of those operating units for a particular year.
In the past, there has been some discussion about the migration of hours between different employment categories. Let me speak to that real quick. First, let me address something you said earlier, sir. One thing that our system is not good at is accounting for the value of a Coast Guard unit that is in a readiness posture while it is prosecuting another mission. A Coast Guard cutter that is doing a law enforcement boarding off Clatsop Spit is available to respond to marine environmental protection incidents, to respond to search and rescue, and so forth. So, we have an accounting problem. It is called a multiple-costing problem, on how you aggregate costs to a readiness posture if the unit is employed. And that is something we are going to be working on in the future. I will talk about that in a minute. But as it stands right now, we have the cost of actually allocating that particular mission area.
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The decision on how an asset is employed in the Coast Guard is within the purview of the field commander. One of the things we don't ever try and do in Headquarters is give rudder commands to coxswains on the Columbia River Bar or trying to cross the bar at Coos Bay like I did many times and curled what hair I had left. We have a long tradition of letting the person on scene make the call.
So we come up with an estimate of how we think these hours, based on historical trends, are going to be applied in a particular year. Then we submit that with our budget. We say given what has been going on the last couple of years, given the capability that's come online in the last year, given the policy decisions where we think we want to go in drug interdiction, or fisheries, or whatever, this is the spread of operating hours we think the Coast Guard is going to try and do in the next year. And then, these are the projected allocated costs associated with that spread of hours by mission.
And here is where it gets a little tough. We then throw all the money out in the field and we tell our operational commanders to go do their job. And they have to make judgment calls. We don't know from year to year if there is going to be a TWA 800, or three successive massive migrations from Haiti, Cuba, and then back to Haiti. We don't know if we are going to have to respond to the shoot-down of a Korean Airlines jet that happened 10 or 12 years ago where there was a massive search and rescue case in the Northwest, we may have a major issue with a cruise ship, or so forth. But we come up with a target, what we would like to do as far as the spread of the hours.
Our field commanders then have to respond to the local threats and manage their resources to the threats in their areas of responsibility as best they can. That results in some variance. What we have tried to do in the last couple years is increase our understanding of variance and being able to analyze that in order to be responsive to our oversight committees on the Hill.
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Last year, there was a tremendous amount of pressure as part of the appropriations process to, quote, ''migrate'' effort from fisheries and polar ice-breaking into drugs to be able to increase our counterdrug effort within the existing resource base. In other words, this is to change the allocation of hours that you have available, rather than creating extra capability that you would then apply to the mission. So we have got to understand whether or not we are talking about a slice of the pie or the diameter or the pie. No matter what you are talking about, whether it is a slice of the pie or the diameter of the pie, we have an algorithm that allocates cost to those mission areas. Sooner or later, everything we do in the course of a year has to absorb some of the costs in this model.
So last year, there was some debate about whether or not we could migrate, and last year they were looking at the 1999 budget that we are executing right now. There was some discussion that we should take hours devoted to fisheries enforcement and icebreaking and shift that to drug interdiction in the Caribbean. There are a couple of structural problems with that, as we tried to explain last year.
There is a limit to how much you can increase the existing assets on scene in the Caribbean. You are limited by personnel tempo and operations tempo, how far you can run the units. You can't take 25 percent of the fisheries hours of a cutter in Oregon and beam those to the Caribbean and enhance their capability. So the case we tried to make was, if you tell us to do that, you are actually telling us to take the capability and totally remove it to augment the capability in the Caribbean. And that is going to require a relocation of assets, total ceasing of a mission in certain areas, and an inability to make it up out of the base.
Our premise was that there is a constant current demand for Coast Guard services across all mission areas, and the proper way to respond to the counterdrug threat is to sustain the basic services the public expects of the Coast Guard, increase the diameter of the pie, and then within that a slice associated with counterdrugs will grow, and we will be more effective in serving the American public.
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That was a little lengthy, but hopefully that answers your question, sir.
Mr. BAIRD. That's spot on. That was precisely the concern I had, and I think you answered it very well.
Let me ask you one other question. When I speak with Guardsmen, corps men out there in the field, one of the issues that is raised is the retirement benefit. Do we have some empirical data or survey data? To what degree and what evidence do we have to support it, that raising retirement might help us with our recruitment and retention efforts, because I know service-wide that is an issue? Do we have some data that would help us understand how the proportion allocated to retirement impacts retention and recruitment?
Admiral ALLEN. If I could, I would like to submit an answer for the record on that one because our chief of human resources is not here today. I can give you a couple of general comments on that. I would be happy to provide you whatever information we have for the record.
The Coast Guard is experiencing difficulties in recruiting and retaining work force right now, similar to the other Armed Forces. There are some differences in percentages, but as we sit here today, we are probably about 900 people below strength against a total work force of around 35,000. So, like the other Armed Forces, we have somewhat of a readiness issue in regards to our personnel retention and our personnel strength. We are redoubling our efforts to recruit and retain quality people.
There is no doubt that the current retirement package impacts that because there is a comparability between the benefits package of the Department of Defense and the Coast Guard. We have the same retirement system. So the new retirement system that was introduced in 1986 is the same system that our people are using in the Coast Guard. I consider, and probably tell you intuitively or anecdotally, that one would have to take that into account in making career choices. We know from across the river that DOD thinks it is a significant factor. We believe it is, too. I just can't cite this morning any particular statistics that would support it. We are in full agreement that there needs to be another look at the retirement system.
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Mr. BAIRD. The anecdotal stuff is surely what I hear. I just want to see what we can work with in terms of gathering data. Thank you.
Admiral ALLEN. Yes, sir.
[The informations received follows:]
[Insert here.]
Mr. DEFAZIO. Just for a moment. Admiral, to go back to the point that Mr. Baird was making. There is some point at which you make an irrevocable decision which does mandate a shift in emphasis over a longer term.
Admiral ALLEN. Yes, sir.
Mr. DEFAZIO. In terms of either a movement, which is not irrevocable because you can move the equipment back, but perhaps an acquisition of something. You know, I mean you buy an ice-breaker, you are not going use it in the Caribbean. But you could be buying assets that are specifically designated for the Caribbean. I remember having this discussion with Admiral Kramek a number of years ago about why we couldn't get a larger replacement for the CITRUS, and he said, well, because those assets are being programmed for the Caribbean.
So I mean there are those sorts of decisions that are being made that do bring about some longer term diminution or, at least restriction, in your capability of doing fisheries and other law-enforcement activities versus drug interdiction, and those are mandated by the Congress.
Admiral ALLEN. Yes, sir.
Mr. DEFAZIO. Right.
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Admiral ALLEN. And I think you are raising a very good point, sir. There is a tactical execution issue associated with the allocation of hours, and there is a longer term strategic issue in how you are going to invest in capability because, as I said earlier, you can't migrate that easily.
So I think there is probably a two-level discussion. One is, how do you employ the resources you have at hand in the total inventory of asset and human hours that you have got in a particular year against those threats, and then what flexibility do you have to manage within that base? And then, over a number of years, what are the public policy concerns about the total operating capability of the Coast Guard that might require further investment, reinvestment, or a shift in emphasis? Over time we have done all of those, at one particular time or another.
Our high-endurance fleet is much smaller than it was after World War II. Part of that reason is that as we got better at taking meteorological data from buoys and transmitting it by satellite, we didn't need Coast Guard cutters out there taking weather samples.
So over time you make public policy decisions on how to invest or disinvest in infrastructure that raises those capabilities, the number of hours you have available in the year.
I think the dialogue that we engaged in last year was the following. What are the limits of reprogramming within the base, within current capability, and then is there a public policy question about whether or not the Coast Guard's capability should be increased to focus on a particular area? And the issue, last year, of course, as it is this year, is counterdrugs.
Our position is that we are fully subscribed in all of our mission areas right now. When we migrate cutter operating hours or aircraft operating hours south in the war on drugs, there is an opportunity cost. It may not be apparent right now, but there is somebody not on the beat some place and there are tradeoffs that our operational commanders have to make. That is a form of risk management against the threats in their area of operations.
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So there is this constant, I wouldn't call it tension, but a constant balancing act between allocating the base resources you have and then making the case when public policy supports it to increase the overall capability so you can be more focused in one particular area. In this case, to support the President's national drug control strategy.
Mr. GILCHREST. Thank you, Mr. Baird. I have just a couple more questions sort of in a line of the topic that is now being discussed. During the next year or two, I am hoping that nothing happens to create another situation like we had in Haiti and all the resources that were expended upon that, and what happened in Cuba, the Korean shoot-down, and the whole range of other things. But when those things happen, when the Haiti situation occurred, there was no, it is my understanding, supplemental appropriation pumped into the Coast Guard to replace the funds that were expended for the Haitian migration situation.
Now, when that happens, on a small scale or a large scale, I would like to engage in a conversation with the Coast Guard, with whether it is in the Northwest or the Caribbean or in the Bering Sea or whatever, to see the physical strain on the Coast Guard's ability to do a particular mission because the mission, let's say, off Kodiak is different to a large extent than the mission off Puerto Rico. How much of a strain in a physical sense the Coast Guard has to carry out those particular missions when there are these incidents that occur.
Two other quick things. This has to do with--I know it is not a lot of money I am talking about, but if we can save a dime some place, it is a dime we have to spend in another place. It is my understanding, and I think I am fairly close to the number of what they refer now as ''station small.''
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. Or the small stations that were at least looked at for downsizing or closing. I believe there are about 23 of them.
Admiral ALLEN. Yes, sir.
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Mr. GILCHREST. And I know you didn't come to testify specifically about each one of those stations or about those stations at all. You have about the cost to operate those 23 stations in their present status, and are they now being looked at for further downsizing or closing?
Admiral ALLEN. Yes, sir. I will give you a couple of ranges because some of these stations are different sizes. But particularly you might be referring to Station Stillpond, and I have got some numbers on that. I would like to just use that as an example, if that's okay, sir.
Mr. GILCHREST. Sure.
Admiral ALLEN. There are currently six personnel assigned to Station Stillpond. The annual recurring personnel cost of that operation is about $366,000 a year. We call that standard personnel costs. That's salary and other things that are needed to put the compensation package together.
Mr. GILCHREST. Is that the maintenance of the facility?
Admiral ALLEN. No, sir. No, sir. The annual AFC 30--this is really handy to use sometimes. The 30-slice for Station Stillpond, which is the AFC 30 operating and maintenance, right now is $21,000 a year. The AFC 43, which you will see is the civil engineering, and you have got the guide in front of you there, sir, is about $4,000 a year. That would be like maintenance to roofs, major repairs that are the on-unit capability. So what you are looking at is the total cost of operating that unit to be around $400,000 a year, sir.
Mr. GILCHREST. So if that station were closed, how much of that $400,000 would be recouped? All of it?
Admiral ALLEN. That becomes a decision that is somewhat brokered, I guess is the right way to say that, sir. If the Coast Guard thought that there was better use for those resources.
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Mr. GILCHREST. If the Stillpond Station were to close, you wouldn't save any of the dollars for salaries and those kinds of things. But how much money would you save that could be used some place else from Stillpond?
Admiral ALLEN. There are two ways that we would generally approach it. One way would be an internal reprogramming, to go find some place in the Coast Guard that is under-resourced and that would allow us to add six people and then an incremental amount for operational maintenance money and the civil engineering support money for a particular unit. In other words, we could go to an area that may be, as a result of changes in fishing patterns or drug interdiction patterns or something like, might have a higher usage rate and we could reinvest that where needed in the Coast Guard.
Mr. GILCHREST. Okay, I guess you answered.
Admiral ALLEN. The other way would be to, if you are in a constrained budget environment and you are having to pay cost-of-living increases, pay raises and maintain parity with DOD compensation packages, and you are unsuccessful in getting that in the appropriations process, we have in the past achieved internal savings in the Coast Guard to be able to maintain the readiness of the troops that we have, sir.
Mr. GILCHREST. Well what I would like to do over the next six months to a year, is take a look at some facilities that the Coast Guard feels that they can do without. Now I don't know if all 23 small stations need to be closed. Some of them, perhaps, should stay open, depending on their situation. But if they were all put on--I think it was 1995, they were all targeted, it is my understanding, for closure. Now all 23 are still open in some capacity. We are always looking for a few dollars. So if we could very academically, objectively take a look at those stations, leave some of them open, continue to downsize others, or eliminate some, in my judgment, I think that would be a big help to the Coast Guard. Now if you say otherwise, then we will move in another direction.
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The other thing I would like to ask, unless you have a question about small stations, Peter?
Mr. DEFAZIO. I have some reflections on that, Mr. Chairman.
Mr. GILCHREST. All right. Go ahead.
Mr. DEFAZIO. As we discussed a little bit yesterday in your office, I have considerable experience with this, and I believe perhaps before the chairman was on the subcommittee, I wasn't on the subcommittee then, but had extensive dealings with the Coast Guard when they were developing the criteria for small-boat station closures. And it became in my mind, I mean obviously, you are trying to take a process which is ultimately subjective and make it totally objective, but it has to do with the inputs or the assumptions you make in your criteria as they went through this very complicated grid process and formula, and certain things fell on and off the list.
You know, I mean, the situation which the chairman relates to me where there is a station five miles across the water from Stillpond, which has the same capabilities, and you have extensive contracting for routine rescue services and those sorts of things in the Chesapeake, I think that raises interesting questions as a need to maintain or continue that facility.
But unfortunately, the way they overlaid this grid and a number that came onto the criteria in my region were small boat stations which were essentially a minimum of 60 miles of open ocean away from the next small boat station. So the anticipation was the need would be met instead by the alternate of care in an area where often during the prime boating season we have very low and dense fog and still have very cold water. The water doesn't warm up like the Chesapeake. So your survival times don't change during the year, and I had very heated discussion with Admiral Kramek regarding the issue of, you know, the survivability of water temperatures and how those really fit into the criteria, and the assumptions about substituting air for people on the spot and also the preventative aspect of having Coast Guard on the spot to educate boaters who are about to go over a bar that they shouldn't go over in their little boats and/or on that day they shouldn't be going over the bar.
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I mean I am very concerned about sort of your reopening the issue generally as opposed to much more discretely identifying stations where you can clearly see, you know, overlap, which you can see apparently virtually from your house. But in my district, when you talk about overlap, you get two stations within 50 miles of one another, with the cold Pacific in between, and they got small boats that they couldn't transit that 60 miles in anyway, and we are going to instead substitute an air resource from 100 miles away for 30-minute rescue times. It doesn't work.
So I mean if this becomes again sort of, we push them into another grid exercise with these criteria, you know, the criteria take a lot of review, as opposed to perhaps, substituting some sort of, you know, request from the Chair with some common sense factor in the various districts of people looking at overlap and capability of true service and substitution. I think that would be a different issue. That, I would be more open to. But if we go back to this other exercise, I--
Mr. GILCHREST. If the gentleman would yield?
Mr. DEFAZIO. Yes.
Mr. GILCHREST. No one has asked me to go through this exercise. So if we do, I would like to proceed with the exercise. But certainly, Mr. DeFazio, you would be intimately involved in the process that we would undertake to consider any closing or further downsizing of any of these small stations.
My county would like to have the Stillpond facility. But they know that there is, like we discussed yesterday, there are a full range of vehicles out there, search and rescue boats that can respond, and have responded in a quite successful way over the years, which were not there when they built the Stillpond Station.
So, as we proceed with this, maybe the only one we will look at is Stillpond.
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[Laughter.]
Peter, you're going to be part of everything we do in this process. I am looking to make the Coast Guard improve its capability, not diminish its capability. But in the process, we can spend the dollars where they really need to be spent.
Mr. DEFAZIO. Well, Mr. Chairman, and I agree with that. Given limited resources, I support that. But again, I mean the point I want to make is even if you do down to using like SARs as a criterion, even you don't have so many SARs, well we should close that station. It may be that these small boat stations on the south coast of Oregon only conduct one SAR a year. It is not that small, but say they only do one a year. That one a year was a difference between life and death. Whereas, you know, there may be 100 SARs in one week, except for this private contract, in the Chesapeake where someone who can swim could tread water for several days waiting for rescue, because, you know, they are not--
Mr. GILCHREST. Or they can walk ashore.
Mr. DEFAZIO. Right. They are not going to die of exposure or they can thumb a ride on any of the hundred boats that are going to go by in the next 10 minutes. So, these are things that I think that need to be taken into account. But in terms of the Stillpond or other clearly observable sorts of questions about overlap, I certainly would support the Chairman.
I just think rather than trying to have the Coast Guard go through a nationwide exercise again with some sort of formula criteria as opposed to just applying some common sense rule, like the Commandant saying to the seven regions, okay, you know, we have got limited resources. We are not giving anybody a quota or anything else, we want you to just look and see if you think there are any stations, trusting the admirals in the various regions to come back in the interest of their own budgetary concerns with some common sense.
Mr. GILCHREST. If the gentleman would yield. My purpose in doing this is for the committee, myself and yourself, and any other member, that we are going to look at these stations. I was not going to ask the Coast Guard to go through a whole process and create a mechanism to determine which ones were necessary. But I wanted us, as Members of Congress, just to take a look at each one of those 23 stations over a period of time. Then we could engage the Coast Guard in helping them become more efficient, save a few dollars, or maybe in some of the cases these things could be adequately closed, and in others, certainly, maybe they ought to have a few more resources put in there.
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Mr. DEFAZIO. I would be happy to invite the Chairman out to the coast of Oregon. We will go through that exercise and you can meet with some of the local community about the issue.
Mr. GILCHREST. I would like to be out there in Oregon. Did I say that right? Oregon. Oregon.
[Laughter.]
And while we are out there, we will look for Big Foot.
[Laughter.]
It is not in our jurisdiction?
[Laughter.]
We could figure out a way.
Another area. When I was looking at the funding profile for Fiscal Year 1999, the number jumped out for military transfers at $67.496 million as a fairly large amount until to a certain extent it was explained to me, how that amount is arrived at, and the need for travel expenses and transfers and two-year cycles of things like that.
My question is, is it reasonable or unreasonable to look at a Coast Guard commitment, instead of being two years, put it to be three years? I guess the other part of that question, is there any way that the amount of money that is put into military transfers could be trimmed somewhat?
Admiral ALLEN. You have hit on a very complex topic. I would like to hit a couple of factors that bear on it, if I could, Mr. Chairman.
The main driver in the transfer process in the Coast Guard is the need to rotate people off arduous duty stations.
Mr. GILCHREST. To rotate off what?
Admiral ALLEN. Arduous duty stations. This might be our Loran Station in the Pribilof Islands.
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Mr. GILCHREST. For the Polar Star, would that be?
Admiral ALLEN. Afloat duty, yes sir, on long deployments away from home.
Now some people like that type of lifestyle and extend on units. Generally, there is a limit because of family considerations and personal considerations that people are basically willing to tolerate in terms of that arduous duty. We have people in overseas tours where they are limited in length. The real driver in the cost of transferring people comes from the requirement to move people from these locations where they have to be moved. It is non-discretionary. That then sets off a chain reaction to have them replaced, and is a trickle through the organization. That is one factor.
The other factor is, when you are below strength like we are right now in the Coast Guard by about 900 people, you are in a constant state of flux when you have attrition that is higher than normal. You have people that are either leaving the service or retiring before they would complete a normal tour of duty. That then sets off a chain to have them replaced, and the person that is coming in has to be replaced, and so forth.
So I think that the normal drivers of the assignment process that would create a cost profile that we could predict are being somewhat stressed right now because of the dynamics of the work force, the fact that we are bringing people in as fast as we can recruit them, and we have people leaving in different rating areas, whether it is because there is a solid demand in information technology skills or aviation ratings and things like that. Those are forcing us to move people also.
We are acutely aware of it and we are trying to address it through where we can have back-to-back assignments in the same geographical region that would not require a transfer, where we can lengthen tours to do that. Over the last couple of years, we have taken a look at the aviation ratings and have actually taken some of those positions and made them civilian. That obviates the need for transfers. So you kind of have a multi-prong approach at this. We realize it is an issue, but in the dynamics we are experiencing right now in terms of the work force shortages, the demands on what we would call the AFC 20 account are exacerbated, sir.
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Mr. GILCHREST. I see. The Coast Guard cutter TAHOMA, when it was in the Baltic Sea, and I guess DOD asked for a good-will tour up there to give those folks some idea of the Navy's and Coast Guard's operations and procedures. Who paid for the cost of that cruise? And does the Coast Guard do those on a routine basis? Does DOD pay for that kind of thing?
Admiral ALLEN. Again, it is a couple part answer, if I could, sir.
TAHOMA is part of that total operating capability of the Coast Guard that is available in one year. The deployment of the TOHOMA to the Mediterranean or the deployment of a Coast Guard cutter to the Middle East to support the embargo of Iraq would all be decisions made by the operational commanders in response to gauging the various demands on their mission with the current asset hours available. So the deployment of the TOHOMA to the Mediterranean would be one use of that total asset base of the Coast Guard for the year.
There are some incremental expenses associated with that that are above the operating base where we might seek reimbursement from DOD or Department of State if we were doing training, things that are above and beyond what be normally part of the Coast Guard mission profile.
But because we have responsibilities to the Joint Chiefs of Staff as part of the planning and to be interoperable with the DOD in times of conflict, there is a baseline level of operations that we need to do with DOD to maintain competency and currency and interoperability with the Navy.
But we also carry out a role that goes beyond defense for the country. The Commandant likes to refer to us as a 'unique instrument of national security.' There are current places in the world where in carrying out the President's national security strategy, specifically I am talking about the terms engagement and enlargement, where you are trying to deal proactively with emerging democracies to prohibit problems later on. There is immense value to having a port visit by a Coast Guard cutter, maybe even in lieu of a Navy ship. The reason is the following.
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If you had a Navy destroyer pull into a Baltic port in Europe, you would likely be met by the defense minister of that country and those folks that had an interest in national defense matters. There would probably be a cultural exchange, there would be, maybe some joint operations and some discussion.
When a Coast Guard cutter makes a port call over there, and we throw the lines on and put the gangway over, we get the same people coming from the defense ministry, but in addition to that we get the transport ministry, the people that are responsible for environmental programs, the people that are trying to deal with enforcing customs laws, scarce fisheries stocks, people that are trying to maintain the sovereignty of these new emerging borders. We have found out that the multimission nature of the Coast Guard is a real force multiplier in dealing with emerging nations around the world. And we are becoming a platform of choice of the CINCs around the world as an engagement tool to proactively engage some of these countries.
Mr. GILCHREST. A platform of choice for?
Admiral ALLEN. Engagement and enlargement, sir.
Mr. GILCHREST. I see.
Admiral ALLEN. And the term we like to use is, there's a niche that we occupy that we call being a 'unique instrument of national security.' There are certain things that a Coast Guard cutter can do. We are less threatening. We can engage in different types of dialogue with some of these countries. And in some cases even beyond that, the Coast Guard has created what we call a model maritime code. That is a system of model statutes and regulations, that we go in and make an assessment of a country, say like a country on the coast of Africa. We then can provide them model statutes on how to create the legal framework for a Coast Guard-like organization, and how to create the statutory framework to protect our natural resources and to come up with a framework to enforce customs laws and exert sovereignty. In many cases, they need that much more than they need a navy, sir.
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Mr. GILCHREST. Well, Admiral, thank you very much. In closing, first of all, your testimony here this morning has been extremely helpful to give us some baseline understanding about how this budget operates. I think next week we have a budget hearing. That budget hearing will be more beneficial to us having gone through this exercise this morning. So I appreciate your time and your effort and your contribution. I also want to wish you all the luck in the world in the seventh district. Congratulations on that new appointment.
Admiral ALLEN. Thank you, sir. If I could, I had one final comment I would like to make.
Mr. GILCHREST. Sure.
Admiral ALLEN. Knowing your background as a teacher, sir. What we have talked about here today, I have a copy of the Federalist Papers. I would like to tell you that Alexander Hamilton presaged the existence of the Coast Guard in Federalist Paper 12. I would like to read you three sentences, sir, if I could.
Mr. GILCHREST. Absolutely. This doesn't have anything to do with what is going on in the Senate right now, does it?
[Laughter.]
Admiral ALLEN. No, sir. This has to do with protection of the revenue, which was a real problem for the New Republic. ''Vessels arriving directly from foreign countries laden with valuable cargoes would rarely choose to hazard themselves to the complicated and critical perils which would attend attempts to unlay prior to their coming into port.'' That is smuggling, sir.
''They would have to dread both the dangers of the coast and of detection, as well as after as before of their arrival at places of their final destination. An ordinary degree of vigilance would be competent to the prevention of any material infraction on the rights of the revenue. A few armed vessels judiciously stationed at the entrances of our ports might at small expense be made useful sentinels of the law.''
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We in the Coast Guard would hope that we are being good stewards of the money entrusted to us by the Congress and that we will continue to be useful sentinels of the law, sir.
Mr. GILCHREST. Admiral, thank you very much. If we could get a copy of that?
Admiral ALLEN. Yes, sir.
Mr. GILCHREST. In our office, we would really appreciate it.
[The information follows:]
A copy of Federalist Paper number 12 was provided to the Subcommittee staff on March 31, 1999.
Mr. GILCHREST. Joining us is a gentleman from Virginia, Mr. Bateman. We have just been given some instruction from the Federalist Papers, Mr. Bateman, from the Coast Guard, which was very timely and informative.
But we are about to conclude here, Herb, but if you have any questions or comments for Admiral Allen. We just congratulated him on his new appointment to the commander of the seventh district and we wish him well down there. We also would like to go down there occasionally for a visit to see the operation.
But I yield to the gentleman from Virginia.
Mr. BATEMAN. Well, I thank you, Mr. Chairman. I didn't mean to come in and delay or disrupt, but unfortunately could not get here earlier to evidence my interest in the activities of this subcommittee because of a little committee called Armed Services doing an extensive hearing that was very important. And so consequently I am late.
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But Admiral Allen, I am delighted to see you and best wishes to you and the Coast Guard.
Admiral ALLEN. Thank you, sir.
Mr. GILCHREST. Thank you, Mr. Bateman, for coming to the hearing.
Admiral, good luck and God's speed.
Admiral ALLEN. Thank you, sir.
Mr. GILCHREST. Thank you. The hearing is adjourned.
[Whereupon, at 11:27 a.m., the subcommittee was adjourned.]
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