CRS Updates Report on 2007 Transportation, Treasury Appropriations

This report is a guide to one of the regular appropriations bills that Congress considers each year. It is designed to supplement the information provided by the Subcommittee on Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia of the House Committee on Appropriations, and by the Subcommittee on Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies of the Senate Committee on Appropriations. It summarizes the current legislative status of the bill, its scope, major issues, funding levels, and related legislative activity. The report lists the key CRS staff relevant to the issues covered and related CRS products.

This report is updated as soon as possible after major legislative developments, especially following legislative action in the committees and on the floor of the House and Senate.

The Bush Administration requested $138.5 billion (after scorekeeping adjustments) for these agencies for FY2007, an increase over the $136.2 billion provided in their FY2006 appropriations act (after a 1.0% across-the-board rescission that was included in the FY2006 Department of Defense Appropriations Act, P.L. 109-148). The total FY2006 funding (after scorekeeping adjustments) for the agencies in this bill was $146.3 billion, due to emergency supplemental funding provided to deal with the effects of the Gulf Coast hurricanes of 2005.

The House-passed version of H.R. 5576, the FY2007 Departments of Transportation, Treasury, and Housing and Urban Development, The Judiciary, District of Columbia, and Independent Agencies appropriations bill, provides a net total of $139.6 billion for FY2007, $3.4 billion (2%) over the amount provided in the FY2006 Act and $1.1 billion (less than 1%) over the Administration's request (after scorekeeping adjustments). The House provided significant increases over the requested levels of funding for aviation programs and Amtrak, for a number of programs under the Department of Housing and Urban Development, and for the Executive Office of the President.

Other provisions in the House-passed bill include provisions directing Amtrak to achieve operating improvements, prohibiting the Internal Revenue Service from using private collection agencies to collect overdue taxes, providing the same pay increase to civilian federal employees as to military personnel for calendar year 2007 (2.7%), restricting outsourcing of federal work, prohibiting the Department of Transportation (DOT) from allowing increased foreign control of U.S. airlines, and easing restrictions on U.S. agricultural exports to Cuba.

The Senate Committee on Appropriations reported out H.R. 5576 on July 26, 2006. The Committee recommended a net total of $141.2 billion, $3.6 billion (3%) over the amount provided in the FY2006 Act and $2.6 billion (2%) over the Administration request. The Committee recommended significant increases over the requested levels of funding for aviation programs and Amtrak, for a number of programs under the Department of Housing and Urban Development, and for the Executive Office of the President.

The Committee also recommended several provisions, including one barring Amtrak from outsourcing work to foreign countries and one barring the DOT from finalizing or implementing a rule that might allow increased foreign control of U.S. airlines. This report will be updated.

                                Key Policy Staff

On June 14, 2006, the House of Representatives passed H.R. 5576. The House approved an overall funding level of $139.6 billion (after budgetary scorekeeping adjustments), a $2 billion (1%) increase over the amount in the FY2006 Act² and a $1 billion (less than 1%) increase over the Administration's request. The House approved the Appropriations Committee's recommendations to provide the same pay raise (2.7%) to federal civilian workers as that provided for uniformed military personnel for calendar year 2007, to impose performance requirements on Amtrak, to prohibit the Internal Revenue Service from using private collection agencies to collect taxes, and to restrict the outsourcing of federal work. The House approved several amendments to the bill, including ones increasing funding for Amtrak and for selected programs in the Department of Housing and Urban Development, and to ease restrictions on U.S. agricultural exports to Cuba (the Administration has threatened to veto the bill if it contained provisions weakening sanctions on Cuba³).

The President's FY2007 budget request proposals included:

• funding Amtrak, the provider of intercity passenger rail service, at $900 million, down from $1.2 billion in FY2006;

• reducing funding for the Federal Aviation Administration's (FAA) Airport Improvement Program (AIP) to $2.8 billion, $700 million below its 'guaranteed' authorization level, which would make the entire appropriations bill subject to a point of order. The proposed level is also below the AIP formula threshold of $3.2 billion, which could result in a halving of most AIP formula distributions;

• reducing funding for community and economic development programs under the Department of Housing and Urban Development (HUD) to $6.8 billion, $815 million below the amount provided in the FY2006 Act;

• reducing funding for housing for elderly and disabled persons under HUD by $307 million (32%), from $971 million for FY2006 to $664 million for FY2007;

• eliminating the annual $29 million payment to the United States Postal Service for revenue forgone, as well as the absence of any funding requested for Postal Service security measures.

H.R. 5576, as reported out by the Senate Committee on Appropriations, also does not support most of the changes proposed by the Administration. The Committee recommended $141.2 billion (plus $597 million for the District of Columbia in a separate bill), a total of $3.3 (2%) over the Administration request. The Committee recommended increases over the Administration request for aviation, Amtrak, housing, the Internal Revenue Service, and drug control programs in the Executive Office of the President. Among the provisions recommended by the Committee was one easing restrictions on agricultural trade with Cuba, similar to the provision that had drawn a veto threat against the House-passed bill.

Different Appropriations Subcommittee Structures. In early 2005, the House and Senate Committees on Appropriations reorganized their subcommittee structures. The House Committee on Appropriations reduced its number of subcommittees to ten. This change combined the Transportation, Treasury, and Independent Agencies subcommittee with the District of Columbia subcommittee; to the resulting subcommittee, in addition, jurisdiction over appropriations for the Department of Housing and Urban Development and the Judiciary as well as several additional independent agencies was added.

The Senate Committee on Appropriations reduced its number of subcommittees to 12. The Senate also added jurisdiction over appropriations for the Departments of Housing and Urban Development, and the Judiciary, to the Transportation, Treasury, and Independent Agencies subcommittee; the Senate retained a separate District of Columbia Appropriations subcommittee. As a result, the area of coverage of the House and Senate subcommittees with jurisdiction over this appropriations bill are almost, but not quite, identical; the major difference being that in the Senate the appropriations for the District of Columbia originate in a separate bill.

Table 1 notes the status of the FY2007 Transportation et al. appropriations bill.

                Table 1. Status of FY2007 Departments of

           Table 2. Transportation/Treasury et al. Appropriations, by

           Table 3. Funding Trends for Transportation/Treasury et al.

The Administration's budget for DOT identified three agency-specific goals influencing the budget request: improving aviation and surface transportation safety through increased funding for safety programs, improving transportation mobility through investments in additional infrastructure and through investments in technology to increase the effective capacity of the transportation systems, and restraining spending and managing for results by, among other initiatives, restructuring federal intercity passenger rail policy and its provider, Amtrak, and eliminating the Railroad Rehabilitation and Improvement Financing Program.⁵

The House Committee on Appropriations recommended $64.7 billion for DOT, $287 million (less than 1%) more than the Administration request and $2.4 billion (4%) above total FY2006 funding. The primary changes from the President's request were additional funding for the Federal Aviation Administration ($1.5 billion), bringing the Airport Improvement Program and Facilities and Equipment Program up to their FY2007 authorized funding levels. The Committee also recommended an increase of $100 million (7%) for the Federal Transit Administration's Capital Grants (New Starts) Program. The House supported the Committee's recommendations regarding transportation funding, except that the House voted to add another $214 million (24%) for Amtrak (discussed below) and $6.7 million for the National Highway Traffic Safety Administration's Operations and Research Program, for the Office of Fuel Economy to study how best to promote an increase in the corporate average fuel economy (CAFÉ) by the auto industry.

The Senate Committee on Appropriations recommended $65.0 billion for DOT. Compared to the Administration request, the Committee recommended increased funding for airport grants-in-aid, for the Essential Air Services program, and for Amtrak; compared to the House bill, the Committee recommended increased funding for Amtrak and for DOT's new headquarters building but less funding for FAA's facilities and equipment account and FTA's New Starts program.

Amtrak. Amtrak is a quasi-governmental corporation that operates and maintains rail infrastructure in the Northeast and operates passenger rail service throughout the country. It operates at a deficit and requires federal support to continue operations. Amtrak's authorization expired at the end of FY2002. Reauthorization efforts have been stalled by fundamental disagreements between Congress and the Administration over the future shape of federal intercity passenger rail policy.

The Administration, which has appointed all the current members of the Amtrak Board of Directors, has sought to force changes in intercity passenger rail policy over the past several years by requesting less funding for Amtrak than is needed to maintain the status quo, arguing that "only a constrained budget will force Amtrak to change the way it conducts business."⁶ Congress has responded by providing more funding for Amtrak than requested by the Administration, while imposing conditions on Amtrak in the appropriations bills.

The Administration requested $900 million for Amtrak for FY2007. The Administration's proposal received bipartisan criticism in both the House and the Senate. The Administration has asserted in the past that it would support increased funding for intercity passenger rail if significant reforms are enacted. Some Members of Congress have questioned where that additional money would come from, given the competing demands from other transportation modes and from other agencies in the appropriations bill that funds DOT.

The House Committee on Appropriations recommended $900 million for grants to Amtrak for FY2007. The Committee also recommended a number of requirements for Amtrak, including that Amtrak be required to submit a comprehensive business plan and a detailed plan for improving its managerial cost accounting system; to cut system overhead expenses by 10% annually; and to achieve savings through operating efficiencies in its food and beverage service, and first class service, resulting in these services breaking even by the end of FY2007.

In its consideration of H.R. 5576, the House approved an amendment 266-158 to increase Amtrak's FY2007 appropriation by $214 million, from $900 million to $1.114 billion. This is $180 million less than the $1.294 billion Amtrak is receiving in FY2006 (after the 1.0% across-the-board rescission), and significantly less than the $1.4 billion the DOT IG testified Amtrak needed in FY2007.⁷ The funding is divided into two parts: $629 million for capital grants and debt service, and $485 million for efficiency incentive grants. None of the funding goes directly to Amtrak; Amtrak must apply to the Secretary of DOT to receive grants.

The Senate Committee on Appropriations recommended $1.4 billion for Amtrak. As with the House, this funding is divided between capital grants and debt service ($750 million) and efficiency incentive grants for operating costs; in both cases, Amtrak must apply to the Secretary of DOT to receive funding. The Committee asserts that this arrangement provides increased oversight of Amtrak. The Committee also recommended several requirements for Amtrak similar to the provisions in the House bill, such as requiring Amtrak to reduce the cost deficits on its first-class service and food and beverage service. The Committee also included a provision forbidding Amtrak from outsourcing work to foreign countries, and one creating a pilot program to see if a state can operate passenger rail service at lower cost than Amtrak does now.

Aviation. The Federal Aviation Administration's (FAA) budget provides both capital and operating funding for the nation's air traffic control system, as well as providing federal grants to airports for airport planning, development, and expansion of the capacity of the nation's air traffic infrastructure. The President's budget requested $12.8 billion in net funding for FY2007, $937 million less than was enacted for FY2006. The President's request included $18 million to hire 1,136 air traffic controllers in FY2007. This was expected to result in a net gain of around 132 controllers after retirements expected in FY2007.

The House Committee recommended $15.2 billion for FY2007, $1.4 billion over the level enacted for FY2006 and $2.4 billion over the Administration request. The increases brought the FAA's capital programs up to their FY2007 authorized funding levels. The House supported this recommendation.

The House also adopted, 291-137, an amendment restricting foreign control over the business decisions of U.S. airlines. The DOT has proposed a rule whose stated purpose is to promote foreign investment in U.S. airlines.⁸ In response to concerns raised about the implications of this proposed rule for national security, the House adopted an amendment prohibiting the use of any funds provided in the FY2007 appropriations bill to finalize or implement the proposed rule. The Senate Committee on Appropriations also recommended a similar provision.

The Senate Committee on Appropriations recommended $14.2 billion for FY2007. The Committee recommended more funding that the Administration requested, but less funding than the House provided; significant differences with the House levels were for the Facilities and Equipment account ($2.55 billion to the House's $3.11 billion) and the Airport Improvement Program ($3.52 billion to the House's $3.7 billion).

Airport Improvement Program. The President's budget proposed a cut to the Airport Improvement Program (AIP), from $3.5 billion in FY2006 to $2.8 billion for FY2007. The House provided $3.7 billion, the FY2007 authorized level; the Senate Committee on Appropriations recommended $3.5 billion.

AIP funds are used to provide grants for airport planning and development, and for projects to increase airport capacity (such as building new runways) and other facility improvements. Some Members of Congress have expressed concern at proposed cuts in the AIP program in the face of forecasts of renewed growth in aviation traffic.

Essential Air Service. The President's budget proposed a $59 million (54%) reduction in funding for the Essential Air Service program, from $109 million (FY2006) to $50 million. The House Committee on Appropriations recommended $117 million. The House-passed bill provided $117 million. The Senate Committee on Appropriations also recommended $117 million.

This program seeks to preserve air service to small airports in rural communities by subsidizing the cost of that service. Supporters of the Essential Air Service program contend that preserving airline service to rural communities was part of the deal Congress made in exchange for deregulating airline service in 1978, which was expected to reduce air service to rural areas. Some Members of Congress expressed concern that the proposed cut in funding for the Essential Air Service program could lead to a reduction in the transportation connections of rural communities. Previous budget requests from the Current Administration, as well as budget requests from previous Administrations, have also proposed reducing funding to this program.

Surface Transportation. The President's budget requested $39.8 billion for federal highway programs for FY2007, an increase of $3.5 billion (10%) over the comparable level of $36.3 billion provided in FY2006.⁹ The budget also requested $8.8 billion for federal transit programs for FY2007, an increase of $342 million (4%) over the $8.5 billion provided in FY2006. These increases reflect the authorized level of funding provided (and "guaranteed") for surface transportation programs by SAFETEA (P.L. 109-59), except that the request was $100 million less than the authorized level for transit. The authorized level of FY2007 highway funding included an increase of $842 million as a result of higher-than-expected revenues to the Highway Trust Fund, an adjustment provided for in SAFETEA known as Revenue-Aligned Budget Authority, or RABA.

The House approved the requested (authorized) level for highway programs¹⁰ $37.0 billion for federal highway programs and added $100 million to the Capital Grants (New Starts) transit program to bring the transit funding up to its authorized level of $8.9 billion. The Senate Committee on Appropriations recommended the same level for federal highway programs and the requested level for transit programs (thus, $100 million less than the House provided).

The Administration requested $517 million (a 6% increase) for the Federal Motor Carrier Administration (FMCSA) and $815 million (a 1% increase) for the National Highway Traffic Safety Administration (NHTSA). The House Committee on Appropriations recommended the requested level for FMCSA and recommended an additional $6 million to the amount requested for NHTSA. The House concurred with these recommendations. The Senate Committee on Appropriations also recommended the requested level for FMCSA and $8 million less than requested for NHTSA.

Maritime Administration (MARAD). The Administration requested $299 million for the Maritime Administration for FY2007, $7 million (2%) below the $306 million enacted for FY2006. As in its FY2006 budget, the Administration did not request any new funding for National Defense Tanker Vessel Construction Program, and requested that $74 million Congress appropriated in FY2005 for this program be rescinded (bringing its net request down to $223 million, assuming this rescission). The House provided $300 million, and supported the request to rescind the $74 million for the National Defense Tanker Vessel Construction Program. That rescission, plus a $2 million rescission of administrative expenses for the Maritime Guaranteed Loan Program, brought the net total funding down to $224 million.

The Senate Committee on Appropriations recommended $344 million for MARAD, significantly above the request and the House level. The additional funding was for subsidies for the Title IX loan program ($30 million) and a new program to assist small shipyards ($15 million). The Committee also recommended the requested $74 million rescission for the National Defense Tanker Vessel Construction Program (thus bringing the net total funding to $270 million).

The National Defense Tanker Vessel Construction Program is intended to decrease the Department of Defense's reliance on foreign- flag oil tankers by supporting the construction of up to five privately-owned product-tanker vessels in the United States. It would provide up to $50 million per vessel for the construction, in U.S. shipyards, of commercial tank vessels that are capable of carrying militarily useful petroleum products and that would be available for the military's use in time of war.

The Treasury Department performs a variety of crucial governmental functions. Heading the list are protecting the nation's financial system against illicit activities such as money laundering, collecting tax revenue, enforcing tax laws, managing and accounting for federal debt, administering the federal government's finances, regulating financial institutions, and producing and distributing coins and currency.

At its most basic level of organization, Treasury consists of departmental offices and operating bureaus. In general, the offices are responsible for formulating and implementing policy initiatives and managing Treasury's operations, while the bureaus perform specific duties assigned to Treasury, largely through statutory mandates. In the past decade or so, the bureaus have accounted for over 95% of the agency's funding and work force.

With one possible exception, the bureaus can be divided into those engaged in financial management and regulation and those engaged in law enforcement. In recent decades, the Comptroller of the Currency, U.S. Mint, Bureau of Engraving and Printing, Financial Management Service (FMS), Bureau of Public Debt, Community Development Financial Institutions Fund (CDFI), and Office of Thrift Supervision have undertaken tasks related to the management of the federal government's finances or the supervision and regulation of the U.S. financial system. By contrast, law enforcement has been the central focus of the work done by the Bureau of Alcohol, Tobacco, and Firearms; U.S. Secret Service; Federal Law Enforcement Training Center; U.S. Customs Service; Financial Crimes Enforcement Network (FinCEN); and the Treasury Forfeiture Fund. Since the advent of the Department of Homeland Security in 2002, Treasury's involvement in law enforcement has shrunk considerably. The single possible exception to this simplified dichotomy is the Internal Revenue Service (IRS), whose main duties embrace both the collection of tax revenue and the enforcement of tax laws and regulations.

Funding for many bureaus comes largely from annual appropriations. Such is the case for the IRS, FMS, Bureau of Public Debt, FinCEN, Alcohol and Tobacco Tax and Trade Bureau, Office of the Inspector General, Treasury Inspector General for Tax Administration, and the CDFI. But there are more than a few exceptions to this funding mechanism. The Treasury Franchise Fund, U.S. Mint, Bureau of Engraving and Printing, Office of the Comptroller of the Currency, and the Office of Thrift Supervision finance their operations largely from the fees they collect for services and products they provide.

In FY2006, Treasury is receiving $11.554 billion in appropriated funds -- after allowing for an across-the-board 1% rescission -- or $341 million more than it received in FY2005. Most of this money is being used to finance the operations of the IRS, whose budget totals $10.545 billion. The remaining $1.0 billion is divided among Treasury's other bureaus and departmental offices in the following amounts: departmental offices (which includes the Office of Terrorism and Financial Intelligence -- or TFI -- and the Office of Foreign Assets Control), $195 million; department-wide systems and capital investments, $24 million; Office of Inspector General, $17 million; Treasury Inspector General for Tax Administration (TIGTA), $132 million; Air Transportation Stabilization program, $3 million (to be available until spent); CDFI, $55 million (to be available until September 30, 2007); Treasury building and annex repair and restoration, $10 million; FinCEN, $73 million; FMS, $234 million; Alcohol and Tobacco Tax and Trade Bureau (ATB), $90 million; and Bureau of the Public Debt, $175 million.

   Table 5. Title II: Department of the Treasury Appropriations,

Under the Administration's budget proposal, total full-time employment at Treasury would decline from an estimated 112,520 in FY2005 to 110,261 in FY206.¹² An anticipated loss of 2,241 full-time jobs at the IRS in FY2007 would explain most of this decline.

According to budget documents and recent congressional testimony by senior Treasury officials (including former Secretary John Snow), the proposed budget for FY2007 is intended to support five strategic objectives: (1) promote economic growth and security; (2) strengthen national security; (3) enforcing tax laws fairly and efficiently; (4) managing the federal government's finances; (5) strengthening financial institutions; and (6) managing Treasury's operations efficiently.¹³

One significant policy issue raised by the budget proposal is the extent to which it would support or promote these objectives, and at what budgetary cost. The Bush Administration claims that the proposal promotes the first objective by giving Treasury's Office of Tax Policy $500,000 to construct more reliable computer-based models for analyzing the dynamic economic effects of revenue proposals, reorganizing the CDFI, and expanding the budget for the Office of International Affairs by $9.4 million. It maintains that the proposal would support the second objective by increasing the budget for TFI by about $8 million. TFI collects and analyzes financial intelligence, develops and implements measures to combat money laundering, administers the provisions of the Bank Secrecy Act enforced by Treasury, enforces economic sanctions against foreign entities, and conducts criminal investigations of alleged financial crimes. The Administration contends that its proposal would support the third objective by adding $137 million to the IRS's FY2006 budget for tax law enforcement and giving the ATB the authority to assess user fees for claims for drawbacks of excise taxes paid on alcohol used in the production of non-beverage products and applications to approve the content of labels for alcoholic beverages. To support the fourth objective, the Administration is seeking an additional $2.4 million to pursue a variety of initiatives, including improving the securities services offered to retail customers, streamlining collections and payments processes through the increased use of e- commerce technologies, and strengthening accounting operations through use of FedDebt and Debt Check. And in support of the sixth objective, the Administration wants to invest $1.8 million in Treasury-wide management training and $34 million in ongoing projects aimed at modernizing Treasury's information technology infrastructure, such as the Treasury Foreign Intelligence Network.

Congressional consideration of the Administration's FY2007 budget request for Treasury commenced in the House with a series of hearings held by the House Appropriations Subcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary, and District of Columbia in March and April 2006. On June 9, the House Appropriations Committee favorably reported (H.Rept. 109-495) by voice vote a measure (H.R. 5576) to provide funding for Treasury and certain other federal agencies in FY2007. The Committee considered 18 amendments and adopted four of them, one of which would bar the IRS from proceeding with a plan to hire private debt collectors to assist in the collection of certain delinquent individual tax debt. Following the consideration of 49 amendments spread over two days of floor debate, the House approved the measure on June 14 by a vote of 406 to 22 and sent it to the Senate. On July 20, the Senate Appropriations Committee favorably reported (S.Rept. 109-293) by a vote of 28 to 0 an amended version of H.R. 5576.

As passed by the House, H.R. 5576 would grant the Treasury Department $11.528 billion in funding in FY2007 -- or $53 million less than the amount enacted for FY2006 (before the rescission of $29 million) and $78 million less than the level of funding requested by the Bush Administration. The IRS would receive $10.487 billion -- or $58 million less than its budget in FY2006 and $105 million less than the amount requested by the Administration. As recommended by the Appropriations Committee in its report on H.R. 5576, the House endorsed a new account structure for the IRS. The bill would also prohibit the IRS from using any appropriated funds to implement a plan to hire private debt collectors. In addition, H.R. 5576 would increase funding in FY2007 relative to FY2006 for the following accounts: departmental offices, +$29 million; FinCEN, +11 million; department-wide systems and capital investments, +$10 million; TIGTA, +$4.5 million; Bureau of Public Debt, +$3 million; ATB, +$2 million; and Office of Inspector General, +$0.5 million. Two accounts would be funded at lower levels than in less in FY2006: CDFI, -$14 million; and FMS, -$0.2 million. And two accounts would receive no funding in FY2007: the Air Transportation Stabilization program and Treasury building and annex repair and restoration fund. The House rejected requests by the Administration to shift control of most of the programs managed by CDFI to the Commerce Department and to establish a set of user fees to defray the cost of some of the regulatory functions performed by the ATB.

As reported by the Senate Appropriations Committee, H.R. 5576 would grant Treasury $11.706 billion in funding for FY2007 -- or $124 million more than the amount enacted for FY2006, $100 million more than the amount requested by the Bush Administration, and $178 million more than the amount approved by the House. The IRS would receive $10.656 billion -- or $111 million more than it is receiving in FY2006, $64 million more than the Administration requested, and $168 million more than the amount endorsed by the House. In addition, the Committee gave its approval to the same new account structure for the IRS that the House accepted but withheld its support for the provision in the House-passed bill barring the IRS from proceeding with its private debt collection initiative in FY2007. Besides the IRS, the version of H.R. 5576 reported by the Committee would increase funding in FY2007 relative to FY2006 for the following accounts: departmental offices, +$27 million; department-wide systems and capital investments programs, +$10 million; TIGTA, +$4.5 million; FinCEN, +$4.4 million; Bureau of the Public Debt, +$2.6 million; ATB, +$2.4 million; Office of Inspector General, +$1.5 million; and CDFI, +$50,000. One account would be funded at a lower level in FY2007 than in FY2006: FMS, -$227,000. And as in the case of the House-passed version of H.R. 5576, two accounts would receive no funding in FY2007: the Air Transportation Stabilization program and the Treasury building and annex repair restoration fund. The Committee also agreed with the decision made by the House to keep management of the programs administered by CDFI at the Treasury Department and to finance all the regulatory functions performed by ATB through annual appropriations.

Internal Revenue Service (IRS). To finance its operations and many spending programs, the federal government levies individual and corporate income taxes, social insurance taxes, excise taxes, estate and gift taxes, customs duties, and miscellaneous taxes and fees. The federal agency responsible for administering and collecting these taxes and fees (except for customs duties) is the Internal Revenue Service (IRS). In discharging this responsibility, the IRS receives and processes tax returns and related documents and tax payments, disburses refunds, enforces compliance through audits and other procedures, collects delinquent taxes, and provides a variety of services to taxpayers to help them understand their rights and responsibilities under the federal tax code and resolve problems. In FY2005, the agency collected $2.287 trillion before refunds, the largest component of which was individual income tax revenue of $1.107 trillion.

The IRS relies on three sources for the funds it needs to operate: appropriated funds, user fees, and so-called reimbursables, which are payments the IRS receives from other federal agencies and state governments for services it provides. Nearly the entire budget is derived from appropriated funds: in FY2006, these funds are expected to account for about 98% of IRS's operating budget, with user fees and reimbursables each adding another 1%. Appropriated funds are distributed among five accounts: (1) processing, assistance, and management, which provides resources for pre-filing taxpayer assistance, filing and account services, administrative services for IRS employees, and senior IRS management; (2) tax law enforcement, which covers the cost of compliance services, research and statistical analysis, and administration of the earned income tax credit; (3) information systems, which addresses the improvement and maintenance of the agency's information and management systems; (4) business systems modernization (or BSM), which provides funds for developing new information systems for tax administration and acquiring the hardware and software needed to integrate them into IRS's operations; and (5) health insurance tax credit administration, which covers the cost of administering the refundable tax credit for health insurance established by the Trade Adjustment Assistance Reform Act of 2002.

In FY2006, the IRS is receiving $10.545 billion in appropriated funds -- or $309 million more than it received in FY2005. Of this amount, $4.095 billion is intended for processing, assistance, and management; $4.678 billion for tax law enforcement; $1.583 billion for information systems management; $197 million for the BSM program; and $20 million to administer the health insurance tax credit. These amounts reflect an across-the-board rescission of 1% for all discretionary non-defense spending, but they do not take into account a $29 million rescission of unobligated balances in the accounts for processing, assistance, and management and the health care tax credit. Certain restrictions apply to the use of these funds. Specifically, the IRS may not reorganize or reduce its workforce in FY2006 without the consent of the House and Senate Appropriations Committees. In addition, the IRS is barred from entering the market for tax return preparation software, and no reductions in taxpayer service can be implemented in FY2006 until TIGTA completes a report on the effects of such reductions on taxpayer compliance. Finally, the IRS must develop, in consultation with the IRS Oversight Board and the National Taxpayer Advocate, a five-year plan for improving taxpayer services without undermining efforts to reduce the tax gap through improved tax law enforcement and submit it to the Committees no later than April 14, 2006.

The Bush Administration is asking Congress to appropriate $10.592 billion for IRS operations in FY2007 -- or $47 million more than the amount enacted for FY2006 (including the 1% rescission). Of this amount, $4.045 billion (or $50 million less than in FY2006) would be used for processing, assistance, and management; $4.762 billion (or $84 million more than in FY2006) for tax law enforcement; $1.602 billion (or $19 million more than in FY2006) for maintaining and upgrading information systems; $167 million (or $30 million less than in FY2006) for the BSM program; and $15 million (or $5 million less than in FY2006) for administering the health insurance tax credit. Under this budget proposal, total full-time employment at the IRS would drop from an estimated 96,736 individuals in FY2006 to 94,495 individuals in FY2007.¹⁴

According to budget documents issued by the Administration, the FY2007 budget request for the IRS is intended to support three key objectives in the agency's current five-year strategic plan: (1) improving taxpayer service; (2) strengthening enforcement of the tax laws; and (3) modernizing IRS's management of its resources to achieve its service and enforcement objectives.¹⁵ The proposed budget also strives to strike what it calls an "appropriate balance between enforcement and taxpayer service." Two important issues raised by the request for lawmakers are how it would support these objectives and what the appropriate allocation of resources is between enforcement and service to taxpayers.

It appears that the proposed budget continues a trend several years in the making of putting greater stress on enforcement at the expense of the modernization effort and, to a lesser extent, taxpayer service. From FY2003 to FY2006, the proportion of appropriated funds devoted to processing, assistance, and management (most of which pays for the cost of assisting and educating taxpayers) edged downward from 40% to 39%; the proportion going into tax law enforcement rose from 39% to 44%; and the proportion funneled into the BSM program dropped from 4% to 2%. If the Administration's budget request were to be enacted as submitted, the proportion of appropriated funds going to processing, assistance, and management would fall to 38%; the proportion devoted to tax law enforcement would rise to 45%; and the proportion funneled into the BSM program would drop below 2%.

A primary force driving this shift in IRS priorities is the Administration's avowed intention to reduce the federal tax gap, which is the difference between what taxpayers owe and what they pay on time. According to the latest estimate by the IRS, the net gap in 2001 was between $257 billion to $298 billion.¹⁶ The budget proposal would rely on a combination of changes in tax law, improvements in IRS's "administrative procedures," and the development of a "sound technological infrastructure" to reduce the tax gap.¹⁷ Among the proposed changes in tax law are a clarification of the liability of employee leasing companies and their clients for federal employment taxes and an expansion of information reporting requirements for payment card issuers, as well as for payments made by federal, state, and local governments to acquire goods and services.¹⁸

Under a measure (H.R. 5576) providing appropriations in FY2007 for Transportation, Treasury, and a handful of other federal agencies passed by the House on June 14, 2006 by a vote of 406 to 22, IRS would receive $10.482 billion in appropriated funds. This amount is $63 million less than the agency is receiving in FY2006 and $110 million less than the amount requested by the Bush Administration.

More specifically, the bill would revise the IRS budget by creating three new accounts -- taxpayer services, enforcement, and operations support -- while retaining the current accounts for BSM and the health insurance tax credit. Under this structure, the IRS would receive $2.059 billion for taxpayer services, $4.757 billion for enforcement, $3.438 billion for operations support; $212 million for the BSM program; and $15 million for administration of the health insurance tax credit. Of the funds for taxpayer services, at least $8 million would be reserved for low-income taxpayer clinic grants and at least $4 million for the tax counseling for the elderly program. No restrictions would be placed on the IRS's ability to close taxpayer assistance centers (TACs), with one exception: the IRS would be required to notify the House and Senate Appropriations Committees of any decision to close one or more TACs at least 30 days before making a public announcement. Of the funds for enforcement, $55 million would be used to support IRS activities related to the Interagency Crime and Drug Enforcement program. H.R. 5576 would also allow the IRS to transfer up to 20% of appropriated funds among the accounts for taxpayer services, enforcement, and operations support after giving the House and Senate Appropriations Committees 30 days advance notice.

One of the more controversial provisions in H.R. 5576 dealing with the IRS's budget in FY2007 concerns the agency's current program to hire private firms to collect individual income tax debt. Under the program, which was authorized by the American Jobs Creation Act of 2004 (P.L. 108-357) and begun in 2005, the IRS plans to hire as many as 12 contractors to assist in the collection of certain delinquent individual tax debt under a set of stringent rules intended to protect taxpayer rights and the confidentiality of taxpayer information.¹⁹ In early March 2006, the agency awarded collection contracts to three firms but was forced to suspend them a short time later after two unsuccessful bidders filed a formal protest. In early June, the Government Accountability Office denied the protest, clearing the way for the program to resume.²⁰ Section 208 of Title II of H.R. 5576 would prohibit the IRS from using any of the funds appropriated by the bill to "enter into, renew, extend, administer, implement, enforce, or provide oversight of any qualified collection contract."

On July 20, 2006, the Senate Appropriations Committee favorably reported by a vote of 28 to 0 an amended version of H.R. 5576. Under the measure, the IRS would receive $10.656 billion in appropriated funds in FY2007 -- or $111 million more than it is receiving in FY2006, $64 million more than the amount requested by the Administration, and $168 million more than the amount approved by the House.

More specifically, the Committee adopted the same new account structure for the agency that the House approved, with one exception: it added a separate account for the IRS Oversight Board. As passed by the Committee, H.R. 5576 would give the IRS $2.110 billion for taxpayer services (or $51 million more than the amount endorsed by the House), $4.797 billion for enforcement (or $40 million more than the amount endorsed by the House), $3.487 billion for operations support (or $28 million more than the amount endorsed by the House), $2 million for the IRS Oversight Board (no equivalent in the House- passed version of H.R. 5576), $245 million for the BSM (or $48 million more than the amount endorsed by the House), and $15 million for the administration of the health insurance tax credit (the same amount endorsed by the House). Of the funds appropriated for taxpayer services, at least $4.5 million would be reserved for the tax counseling program for the elderly and at least $9 million for low- income taxpayer clinics.

Although the version of H.R. 5576 passed by the Committee does not include a provision barring the IRS from proceeding with the implementation of its private taxpayer debt collection initiative in FY2007, it does direct the IRS to prepare a "detailed strategic plan that demonstrates how it will achieve and how it will measure" a voluntary compliance rate for taxpayers of 85% by 2009.²¹ No deadline is set for submitting the plan to the House and Senate Appropriations Committees. Such a rate would signify that 85% of taxes owed by individual and business taxpayers are paid voluntarily and in a timely manner. The IRS estimates that the current compliance rate is about 84%. Raising the rate is akin to reducing the net federal tax gap.

The President's FY2007 budget proposes to fund the Department of Housing and Urban Development (HUD) at approximately $34.1 billion, just over HUD's $33.6 billion budget for FY2006 (not including FY2006 supplementals related to Hurricane Katrina). Although the overall request appears to be an increase, the amount requested actually results in a slight decrease, with a number of HUD programs slated for funding cuts. This seeming contradiction results from a decrease in the amount of offsetting receipts available to subsidize the HUD budget. As can be seen in Table 6, appropriations would decline by more than $200 million and offsetting receipts would decline by more than $1 billion.

On June 14, 2006, the House passed its version of the FY2007 Transportation, Treasury, and Housing and Urban Development (HUD), the Judiciary, District of Columbia and Independent Agencies (TTHUD) Appropriations bill (H.R. 5576), providing $35.3 billion for HUD. Floor amendments increasing funding for Section 8 vouchers, lead- based paint hazard control, HOPE VI, supportive housing for the elderl, and Brownfields redevelopment were added to the bill. On July 27, 2006, the Senate Appropriations Committee approved its version of H.R. 5576, providing $36.6 billion for HUD. (FOR MORE details on the proposed HUD budget, see CRS Report RL33344, The Department of Housing and Urban Development (HUD): Fiscal Year 2007 Budget.)

Community Development Fund/Block Grants. For the second consecutive year, the Administration included in its budget request a proposal that would eliminate and/or replace a number of federal economic and community development programs. Last year, the Administration's FY2006 budget recommendations included a proposal that would have consolidated the activities of at least 18 existing community and economic development programs, including the Community Development Block Grant program (CDBG), into a two-part grant proposal called the "Strengthening America's Communities Initiative" (SACI). (For more information on SACI, see CRS Report RL32823, An Overview of the Administration's Strengthening America's Communities Initiative.) The CDBG formula grant would be funded at just under $3 billion in the Administration's budget of FY2007, compared to $3.7 billion in FY2006. The FY2007 budget would eliminate funding for Brownfields redevelopment, Section 108 loan guarantees, Rural Housing and Economic Development.

The House-passed bill, H.R. 5576, includes about $4.2 billion for the Community Development Fund, $1.2 billion more than the Administration request. The funding level recommended by the House includes about $3.9 billion for the CDBG formula program, $57.4 million for Indian tribes, $250 million for Economic Development Initiative earmarks, and $20 million for Neighborhood Initiative earmarks. Although the bill as reported provided no funding for the Brownfields Redevelopment program or Section 108 loan guarantees, funding for both programs was provided through floor amendments ($3 million for Section 108 and $15 million for Brownfields). No funding was included for Rural Housing and Economic Development.

The Senate committee-passed version of H.R. 5576 provides the same level of funding for the Community Development Fund as the House-passed bill, about $4.2 billion. The Senate committee recommends about $3.9 billion for the CDBG formula program, $58 million for Indian tribes, $250 million for Economic Development Initiative earmarks, and $30 million for Neighborhood Initiative earmarks. The Rural Housing and Economic Development program would be funded at $20 million and Section 108 loan guarantees would receive $3 million under the Senate committee-passed bill. No funding is provided for the Brownfields Redevelopment program.

Housing Programs for the Elderly and the Disabled. The Administration's budget proposed to reduce funding for the Section 202 housing for the elderly program from $734.6 million in FY2006 to $545.5 million in FY2007, a cut of almost 26%. However, the House- passed bill would fund the program at approximately $746.6 million, about $12 million more than FY2006. A floor amendment (H.Amdt. 1020) added $12 million for the Section 202 program to the $734.6 million included in the committee-reported bill. The Senate committee-passed bill recommends $750 million for Section 202.

For the second year in a row, the Administration's budget proposed to halve funding for the Section 811 housing for the disabled program, to $118.8 million from $236.6 million in FY2006. As passed by the House, H.R. 5576 would increase funding to nearly $240 million. A floor amendment (H.Amdt. 1020) added $3 million for the Section 811 program to the $236.6 million included in the committee- reported bill. The Senate committee-passed bill would provide $240 million for Section 811.

Public Housing/HOPE VI. The President proposed almost $2.2 billion for the public housing Capital Fund, an 11% reduction from the FY2006 funding level of about $2.4 billion. As in FY2006, the President has asked Congress to provide no new money for the HOPE VI program for FY2007, and to rescind the funding that Congress provided in the previous year before the Department awards it to grantees. The House Appropriations committee-reported bill would have funded the Capital Fund and HOPE VI at the President's request. A floor amendment (H.Amdt. 1016) offered by Representative Artur Davis added $30 million to the Capital Fund, although his floor statements indicated it was intended for the HOPE VI program. Language was not added to the bill directing the funds to be used for HOPE VI, so it is unclear whether the additional $30 million will be distributed via the Capital Fund formula or though the competitive HOPE VI program. The House-passed version of the FY2007 funding bill would not rescind FY2006 HOPE VI funds. The Senate committee-passed bill would fund the Capital Fund at $2.4 billion (a slight increase over FY2006) and would fund HOPE IV at $100 million. It would not rescind FY2006 funding.

As a co-equal branch of government, the Judiciary presents its budget to the President, who transmits it to Congress unaltered. Table 7 shows the FY2006 enacted amount, the FY2007 request, the House-passed amount, and the Senate committee-approved amount.

          Table 7. Title IV: The Judiciary Appropriations,

Chief Justice Roberts also expressed concern that judicial pay has not kept pace with inflation over the years, and attributed increasing numbers of judges leaving the bench to this pay issue. On February 10, 2006, Senator Dianne Feinstein (for herself, Senator Patrick J. Leahy, and Senator John F. Kerry) introduced S. 2276, the Federal Judicial Fairness Act of 2006, to increase federal judges' salaries by 16.5%. In addition, S. 2276 would end the current linkage between congressional and judicial salaries, which has prevented increases in judicial salaries when Congress takes action to withhold annual cost of living increases from its Members. S. 2276 was referred to the Senate Judiciary Committee. On March 28, 2006, Representative Adam B. Schiff (for himself and Representative Judy B. Biggert) introduced H.R. 5014, the Federal Judicial Fairness Act, a companion bill to S. 2276, which was referred to the House Judiciary Committee. Both bills are pending in the respective Judiciary committees.

Judicial security, the safe conduct of court proceedings and the security of judges in courtrooms and off-site, continues to be an issue of concern. The Chief Justice noted that the violence directed at judges in 2005 had shocked the nation, and that "we must take every step to ensure that our own judges, to whom so much of the world looks as models of independence, never face violent attack for carrying out their duties." At the House Appropriations Subcommittee on Transportation, Treasury, Housing and Urban Development, the Judiciary, District of Columbia, and Independent Agencies hearings held on the judiciary budget request on April 4-5, 2006, Chairman Joseph Knollenberg expressed his view that court security was a "top priority."²⁵

Appropriations for the Judiciary -- about two-tenths of 1% (0.2%) of the entire federal budget -- are divided into budget groups and accounts. Two accounts that fund the Supreme Court (the salaries and expenses of the Supreme Court and the expenditures for the care of its building and grounds) together make up about 1.2% of the total judiciary budget. The structural and mechanical care of the Supreme Court building, and care of its grounds, are the responsibility of the Architect of the Capitol. The rest of the Judiciary's budget provides funding for the "lower" federal courts and for related judicial services. The largest account, about 75% of the total budget -- the Salaries and Expenses account for the U.S. Courts of Appeals, District Courts, and Other Judicial Services -- covers the salaries of circuit and district judges (including judges of the territorial courts of the United States), justices and judges retired from office or from regular active service, judges of the U.S. Court of Federal Claims, bankruptcy judges, magistrate judges, and all other officers and employees of the federal Judiciary not specifically provided for by other accounts; and the necessary expenses of the courts. The Judiciary budget does not fund three "special courts" in the U.S. court system: the U.S. Court of Appeals for the Armed Forces, the U.S. Tax Court, and the U.S. Court of Appeals for Veterans Claims. Federal courthouse construction also is not funded within the Judiciary's budget.

FY2007 Request. For FY2007, the Judiciary requested $6.26 billion in total appropriations, a 9.4% increase over the $5.72 billion enacted for FY2006. The FY2007 budget request includes funding for 33,631 full-time-equivalent (FTE) positions -- an increase of 417 FTEs or 1.3% above the FY2006 estimate of 33,214 FTEs. The requested additional positions are a continuation of efforts to restore some positions lost in previous years as well as to provide for expected workload increases. Of the total budget request increase of $540.1 million, $461.8 million (86%) would fund pay adjustments and other inflation-related increases needed to maintain current services. The remaining $78.3 million (14%) of the $540.1 million increase is for expected workload changes and program enhancements.

House Action. On April 4, 2006, the House subcommittee held a hearing on the Supreme Court budget request for FY2007, and heard testimony from Supreme Court Justices Anthony Kennedy and Clarence Thomas. Another hearing was held the following day to hear testimony on the overall judiciary budget request from Judge Julia Smith Gibbons, United States Circuit Judge for the Sixth Circuit Court of Appeals and Chair of the Budget Committee of the Judicial Conference of the United States, and then-Director of the Administrative Office of the U.S. Courts (AOUSC) Leonidas R. Mecham. Among issues raised at the hearings were judicial pay, televising the Supreme Court proceedings, rent paid to GSA, the Supreme Court building modernization project, and workload.

On May 26, 2006, the subcommittee held a markup on the bill and approved a total of $6.1 billion for the Judiciary. By voice vote, on June 6, 2006, the House Appropriations Committee approved the recommended $6.1 billion funding level --a $342.8 million (6.0%) increase over the FY2006 level, but $197.3 million (3.2%) less than the FY2007 request. Three days later, on June 9, 2006, the committee reported H.R. 5576. On June 14, 2006, the House passed H.R. 5576 to provide the Judiciary with the same level of funding the committee had approved.

The House committee expressed concern over the Judiciary's practice of including "one-time windfalls of offsetting collections and prior year carryover funds in the FY2007 funding base,"and urged the Judiciary to discontinue the practice in developing its FY2008 budget submission.

Senate Action. On July 18, 2006, the Senate Appropriations Subcommittee on Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies held a markup on the bill, and approved a total of $6.1 billion for the Judiciary. Two days later, on July 20, 2006, the Senate Appropriations Committee held a mark up, and approved the $6.1 billion funding level -- a $378 million (6.6%) increase over the FY2006 level, but $162.1 (2.6%) less than the FY2007 request. In the committee report, the committee expressed its concerns about several issues; among them are the following:

• Staffing: The committee recommended that the Judicial Conference make the retention of personnel a top priority. The committee also expressed concern about workload and staffing needs of the district courts along the U.S. southwest border, resulting from due to increased immigration funding law enforcement activities. It directed AOUSC to provide a hiring plan (in its FY2007 financial plan) for positions that would be funded for magistrate judges and staff, and to keep the committee apprised as the positions are filled. It also directed AOUSC to examine staffing formulas to ensure that they reflect changing trends, and report to Congress

• Courthouse construction. Noting that the self-imposed courthouse construction moratorium will end in September 2006, the committee urged the Judiciary to carefully weigh its space needs with concerns about the rent it pays to GSA. It also called for adequate checks and balances to ensure that future construction needs and requests are "subjected to the highest standards of cost-effectiveness." It directed AOUSC to report to the committee, no later than 120 days after enactment of this bill, on the steps that have been and are being taken for more efficient use of space in the district and circuit courts. Further, it encouraged the Judiciary to continue working with GSA on fair and accurate rent charges, and also to correct any inequities.

• Carryover funds: The committee directed that carryover funds be used to meet current and projected needs before enhancing any program. The AOUSC is to submit separately in future financial plans, for House and Senate appropriations committees' approval, all sources of carryover funds and their desired application.

Supreme Court. For FY2007, the total request for the Supreme Court (salaries and expenses plus buildings and grounds) is $76.4 million, a 16.2% increase over the FY2006 appropriation of $65.7 million. The total request comprises two accounts: (1) Salaries and Expenses -- $63.4 million was requested, compared with the FY2006 enacted amount of $60.1 million; and (2) Care of the Building and Grounds -- $13.0 million was requested, compared with $5.6 million enacted for FY2006. Most of the requested increase in salaries and expenses was to fund increases in salary and benefit costs, inflationary fixed costs, and five new positions. The Buildings and Grounds account increased by $7.4 million (132.7%), including the Supreme Court Building roofing system repairs, maintenance of the building, and grounds operations, and continuation of the building modernization project. The House approved the full amount requested for this account. The Senate committee also approved the full amount.

U.S. Court of Appeals for the Federal Circuit. The FY2007 request for this account is $26.3 million -- a $2.5 million (10.6%) increase over the $23.8 million appropriated for FY2006. The request provides for pay and other inflationary adjustments, increased health benefit costs, and increased rental costs related to space for senior judges. The requested increase also includes $926,000 for information technology upgrades, infrastructure requirements for a disaster recovery plan, and the implementation of courtroom technology in two of this circuit's three courtrooms. The House approved $26.0 million for this account -- a $2.2 million increase over the FY2006 level, but $0.3 million less than the FY2007 request. The Senate committee recommended $25.3 million -- a $1.5 million increase over the FY2006 level, but $1.0 million less than the FY2007 request.

U.S. Court of International Trade. The FY2007 request is for $16.2 million -- a $0.9 million (5.5%) increase over the FY2006 appropriation of $15.3 million that the judiciary budget submission ascribes largely to increases in pay and benefits. The House approved the full amount requested for this account. The Senate committee also approved the full amount.

Courts of Appeals, District Courts, and Other Judicial Services. This budget group includes 12 of the 13 courts of appeals and 94 district judicial courts located in the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the territories of Guam and the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands. Making up about 95% of the judiciary budget, the four accounts in the group -- salaries and expenses, court security, defender services, and fees of jurors and commissioners -- fund most of the day-to-day activities and operations of the federal circuit and district courts.

Salaries and Expenses. The FY2007 Salaries and Expenses request for this budget group is $4,691.2 million -- a $361.0 million (8.3%) increase over the FY2006 level of $4,330.2 million. According to the budget request, about 99% of this increase is required for pay increases and other adjustments needed to maintain the courts' current services. For example, of the $361.0 million increase requested, $106.7 million is requested for pay and benefit adjustments for court personnel. Another $46.9 million of the increase is for increased rent to GSA and related costs, such as equipment.²⁶ In addition, $42.6 million is requested for the Judiciary Technology Fund to support existing and newly installed information technology systems, and to continue the implementation of new information systems. Another increase of $22.1 million would fund 257 FTEs -- additional support staff needed to address the courts' anticipated workload increase during the year (as a result of an expected increase in the number of immigration-related cases along the southwest border with Mexico).²⁷ Finally, according to the judiciary budget request, to maintain the same level of services provided in FY2006, a $115.1 million increase is needed in this account for FY2007 because of an anticipated shortfall of funds from fee collections and carryover funds from previous years. In addition to appropriated funds, this account receives other funds, including current year fee collections, carryover of fee balances from the prior year, and no-year appropriation balances. In FY2007, these non-appropriated funds are projected to total $285.9 million. The House approved $4,560.1 million²⁸ for this account -- a $229.9 million increase over the FY2006 level, but $131.1 million less than the FY2007 request. The Senate committee recommended $4,587.3 million -- a $257.1 million increase over the FY2006 level, but $103.9 million less than the FY2007 request.

Court Security. This account provides for protective guard services, security systems, and equipment for courthouses and other federal facilities to ensure the safety of judicial officers, employees, and visitors. Under this account, a major portion of the funding is transferred to the U.S. Marshal Service for administering the Judicial Facility Security Program to pay for court security officers. The FY2007 request is $410.3 million -- a $42.1 million (11.4%) increase over the FY2006 appropriation of $368.3 million. This increase is reportedly driven by pay and benefit adjustments and other adjustments needed to maintain current services. The increase would also cover the costs for 34 additional court security officers expected to be needed during FY2007. Payment to the Federal Protective Service (FPS) is also covered under this account. The FY2007 request for FPS is $67.9 million -- a $7.4 million increase over the FY2006 appropriation of $60.5 million. In addition, $16.8 million is requested for security systems, perimeter (outside the building) security, and equipment for court security and for probation and pretrial service offices. An additional $6.6 million is requested to replace VCRs with digital video recorders. The House approved $400.3 million for this account -- a $32.0 million increase over the FY2006 level, but $10 million less than the FY2007 request. The Senate committee recommended $397.7 million for this account -- a $29.4 million increase over the FY2006 level, but $ 12.6 million less than the FY2007 request.

Defender Services. This account funds the operations of the federal public defender and community defender organizations, and the compensation, reimbursement, and expenses of private practice panel attorneys appointed by the courts to serve as defense counsel to indigent individuals accused of federal crimes. The FY2007 request is $803.9 million -- a $94.1 million (13.3%) increase over the FY2006 appropriation of $709.8 million. The increase requested is reportedly to provide for pay increases and other inflationary adjustments, and to fund workload increases arising from Supreme Court rulings. The request also provides for the startup of new federal defender organizations scheduled to open in FY2007. Currently, five judicial districts are not served by a Federal Defender Office: Alabama (Northern), Georgia (Southern), Kentucky (Eastern), Mississippi (Northern), and the Commonwealth of the Northern Mariana Islands. The requested funding would provide for 80 FTEs to cope with the projected caseload increase of 5,500 cases. The House approved $750 million for this account -- a $40.2 million increase over the FY2006 level, but $53.8 million less than the FY2007 request. The Senate committee recommended $761.1 million for this account -- a $51.3 million increase over the FY2006 level, but $42.8 million less than the FY2007 request.

Fees of Jurors and Commissioners. This account funds the fees and allowances provided to grand and petit jurors, and the compensation of jury and land commissioners. The FY2007 request is $63.1 million -- a $2.4 million (3.9%) increase over the FY2006 appropriation of $60.7 million. The increase is due mainly to inflationary costs associated with expenses paid to jurors. The House approved the full amount requested for this account. The Senate committee also approved the full amount.

Administrative Office of the U.S. Courts (AOUSC). As the central support entity for the Judiciary, the AOUSC provides a wide range of administrative, management, program, and information technology services to the U.S. courts. The AOUSC also provides support to the Judicial Conference of the United States, and implements conference policies and applicable federal statutes and regulations. The FY2007 request for this account is $75.3 million -- a $5.7 million (8.3%) increase over the FY2006 level of $69.6 million. The increase is reportedly for pay increases and other inflationary adjustments and for the anticipated reduction in non- appropriated funds. The AOUSC also receives non-appropriated funds from fee collections and carryover balances to supplement its appropriation requirements. The House approved $73.8 million for this account -- a $4.2 million increase over the FY2006 level but $1.5 million less than the FY2007 request. The Senate committee recommended $74.3 million for this account -- a $4.7 million increase over the FY2006 level, but $1.0 million less than the FY2007 request.

Federal Judicial Center. As the Judiciary's research and education entity, the center undertakes research and evaluation of judicial operations for the Judicial Conference committees and the courts. In addition, the center provides judges, court staff, and others with orientation and continuing education and training. The center's FY2007 request is $23.8 million -- a $1.7 million (7.5%) increase over the FY2006 appropriation of $22.1 million. The increase is reportedly to fund adjustments to pay and other expenses due to inflation, and also to restore staff to the FY2005 level (nine additional FTEs). The House approved $23.5 million for this account -- a $1.4 million increase over the FY2006 level, but $0.3 million less than the FY2007 request. The Senate committee recommended $23.4 million for this account -- a $1.3 million increase over the FY2006 level, but $0.4 million less than the FY2007 request.

United States Sentencing Commission. The commission promulgates sentencing policies, practices, and guidelines for the federal criminal justice system. The FY2007 request is $15.7 million -- a $1.4 million (10.4%) increase over the FY2006 appropriation of $14.3 million. According to the budget request, the increase would provide for pay increases and other inflationary adjustments, and five FTE positions in the research and data collection area for one year. Supreme Court decisions and recent legislation have reportedly increased the commission's workload, and the need for data collection and analytical requirements. The House approved $15.5 million for this account -- a $1.2 million increase over the FY2006 level, but $0.2 million less than the FY2007 request. The Senate committee recommended $ 15.3 million for this account -- a $1.0 million increase over the FY2006 level, but $0.4 million less than the FY2007 request.

Judiciary Retirement Funds. This mandatory account provides for three trust funds that finance payments to retired bankruptcy and magistrate judges, retired Court of Federal Claims judges, and spouses and dependent children of deceased judicial officers. The FY2007 request is for $58.3 million -- a $17.7 million (43.6%) increase over the FY2006 appropriation of $40.6 million. The requirements for this account are calculated annually by an independent actuary company. The large increase reflects a change in methodology that a new actuary company has adopted to more accurately project future liabilities that had not been taken into account in the past. (The new methodology included a larger population of people who are likely to join the retirement system.) The House approved the full amount requested for this account. The Senate committee also recommended the full amount.

Administrative Provisions. Some administrative provisions continue language that has appeared in previous years. The House- passed bill includes the following provisions, which apply to the Judiciary only:

President's Request. The Administration's proposed FY2007 budget includes $597.2 million in federal payments to the District of Columbia. The courts and criminal justice system (court operations, defender services, offender supervision and criminal justice coordinating council) represent $456 million, or 76%, of the request.

District Budget. On May 9, 2006, the District's city council approved the city's $9.2 billion operating budget for FY2007, and $2.6 billion in capital outlays including $63 million to finance a new baseball stadium. The District's budget also includes a request for $634 million in special federal payments, which is $37 million more than the $597 million proposed by the President and recommended by the Senate Committee on Appropriations, and $59 million more than the amount that was passed by the House.

House Bill. The House provided $575.2 million for the District, $22 million less than the Administration requested and $24 million less than enacted for FY2006. The House approved the $479 million in FY2007 court and criminal justice funding. This is $23 million more than the $456 million requested by the Administration. The House would also provide $76 million in special federal payments in support of elementary, secondary, and post-secondary education initiatives, as requested by the Administration. This includes $13 million in special federal assistance to improve the city's public schools, $13 million in support of public charter schools, $14.8 million in assistance in support of scholarships to private and religious schools, and $35.1 million for the District's college tuition assistance program, which is $2.2 million more than appropriated in FY2006.

The House also provided $5 million in special federal payments to the District's Chief Financial Officer for various education, economic development, health and social service activities, and $7 million in federal payments to the District Water and Sewer Authority. The House bill does not include a provision appropriating $20 million to fund improvements and expansion of the Navy Yard Metro Station, which would service the new major league baseball stadium and the expanding federal presence in the Federal Center Southeast area. Instead, the House bill would provide the requested $20 million elsewhere in the bill as an earmark under the Department of Transportation's capital investment account.

In addition to recommending $599 million in special federal payments to the District of Columbia, the bill also contains a number of general provisions, including a number of so-called "social riders." Consistent with provisions included in previous appropriations acts, the bill would prohibit the use of federal and District funds to finance or administer a needle exchange program intended to reduce the spread of AIDS and HIV; or provided abortion services except in instances of rape, incest, or the health of the mother is threatened. The bill would also prohibit the city from decriminalizing the use of marijuana for medical purposes, and limit the city's ability to use District funds to lobby for congressional voting representation or statehood.

Senate Bill. On July 13, 2006, the Senate Appropriations Committee approved and ordered reported the District of Columbia Appropriations Act for 2007, S. 3660 (S.Rept. 109-281). The bill would appropriate $597 million in special federal payments. This is $21.8 million more than recommended by the House and approximately the same amount as appropriated in FY2006. There are several differences between the Senate bill and provisions included in the House-passed version of H.R. 5576. The Senate bill recommends $33.2 million for the city's college tuition assistance program, $1.9 million less than recommended by the House bill and $332,000 less than appropriated in FY2006. The bill also includes $206.6 million in special federal payments for court operations, which is $13 million less than recommended by the House and it recommends funding several activities not included in the House version of H.R. 5576, including:

• $4.5 million for bioterrorism preparedness activities and a forensic laboratory for the District;

• $5 million for the construction of a nature trail along the Anacostia River;

• $2 million for improvements in the city's foster care system;

• $4 million for marriage development accounts; and

• $15 million for improvements to the city's public library system.

The bill, as reported by the Senate Appropriations Committee, awaits approval of the full Senate. Senate leadership must decide whether to incorporate the Senate's stand alone version of the District of Columbia Appropriations Act for FY2007, S. 3660, into H.R. 5576, the TTHUD bill. The Senate version of H.R. 5576, unlike the House version, does not include provisions appropriating funds for the District. Conversely, the House could remove the relevant District provisions from H.R. 5576 and create a stand alone counterpart to the Senate bill, S. 3660.

All but three offices in the Executive Office of the President (EOP) are funded in the same appropriations act, entitled the Departments of Transportation, Treasury, Housing and Urban Development, the Judiciary, District of Columbia, and Independent Agencies.³⁰

The Office of Administration (OA) and the Council of Economic Advisers (CEA) are the only accounts under the EOP (not including the federal drug control programs) for which increased funding was requested for FY2007. The $14 million OA increase primarily results from the movement of funds from other EOP components to the OA for enterprise services (discussed in more detail below). The CEA increase is 0.05%. For the Unanticipated Needs account, the budget requested $11.789 million, which is then offset by the requested rescission of $11.789 million from the Unanticipated Needs for Natural Disasters account. As for the remaining accounts, except for that on Compensation of the President, which is unchanged, decreased appropriations are requested for all other accounts under the EOP in FY2007. The OMB and ONDCP accounts have the largest reductions -- 9.7% and 12.5%, respectively -- from their FY2006 appropriation levels after the rescission. The reductions primarily result from the movement of funds from these accounts to the Office of Administration for the continued centralization of enterprise services. OMB also would lose 11 FTEs (full-time equivalent employees).

The FY2007 budget, like the FY2006 budget, proposed to transfer the HIDTAP to the Department of Justice and to fund the program at $207.6 million. For FY2006, the conference committee continued to fund the program under the EOP.

For the sixth consecutive fiscal year, the President's FY2007 budget proposed to consolidate and financially realign several salaries and expenses accounts that directly support the President into a single annual appropriation, called "The White House." This consolidated appropriation would total $184.252 million in FY2007 for the accounts proposed to be consolidated, an increase of 7.0% from the $172.249 million appropriated in FY2006 (after the 1.0% rescission).³¹ The increase primarily results from the Enterprise Services Initiative discussed below. The nine accounts included in the consolidated appropriation would be the following:

• Compensation of the President,

• White House Office,

• Executive Residence at the White House,

• White House Repair and Restoration,

• Office of Policy Development,

• Office of Administration,

• Council of Economic Advisers, and

• National Security Council.³²

The FY2007 budget requested a general provision in Title VI to continue and expand the authority for the EOP to transfer 10% of the appropriated funds among several accounts under the EOP. The authority would cover the following accounts in FY2007:

• The White House,³⁴

• Office of Management and Budget (OMB),

• Office of National Drug Control Policy (ONDCP),

• Special Assistance to the President and the Official Residence of the Vice President (transfers would be subject to the approval of the Vice President),

• Council on Environmental Quality and Office of Environmental Quality,

• Office of Science and Technology Policy,

• Office of the United States Trade Representative.³⁵

The Consolidated Appropriations Act for FY2005 (Section 533, Title V, Division H) authorized transfers of up to 10% of FY2005 appropriated funds among the accounts for the White House Office, OMB, ONDCP, and the Special Assistance to the President and Official Residence of the Vice President. For FY2006, P.L. 109-115, the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006 (Section 725) authorized transfers of up to 10% among the accounts for the White House and the Special Assistance to the President and Official Residence of the Vice President.

An enterprise services initiative is included in the FY2007 budget request to make the administration of certain services simpler and more efficient. Services included in the initiative would be expanded to include burn bag pickup costs, employee transportation subsidies, and Flexible Spending Account administrative fees. The budgets for these services in the WHO, Executive Residence at the White House, OPD, NSC, CEA, OMB, ONDCP, Office of Science and Technology Policy, United States Trade Representative, and the Council on Environmental Quality would be moved into the OA. In order to "be consistent with other EOP components," the budgets for health unit services, space-related rent costs, and rent-based Federal Protective Service in OMB and ONDCP also would be included in the OA.³⁷

As reported by the House Committee on Appropriations and as passed by the House, the FY2007 TTHUD appropriations bill continues separate appropriations for the EOP accounts. The provision authorizing the transfer of up to 10% of funds within the EOP also is continued. Notable among the appropriations for the EOP accounts are the following.

• An appropriation of up to $1.5 million for the Privacy and Civil Liberties Oversight Board, an account under the White House Office, was recommended by the House committee. Under an amendment (No. 1025) offered by Representative Christopher Shays and agreed to by the House by voice vote on June 13, 2006, funding for the Board would be increased by $750,000.

• An appropriation of $91.4 million is provided for the OA, $11 million less than the FY2007 budget request. Funding for the OMB and ONDCP rental payments to GSA, $7.4 million and $3.6 million, respectively, is continued under salaries and expenses for those respective accounts.

• An appropriation of $26.9 million is provided for ONDCP. The increase of $3.6 million over the FY2007 budget request is accounted for by continuing the funding for rental payments to GSA under this account rather than transferring it to the OA.

• An appropriation of $19.6 million is provided for the CTAC, $10 million more than the FY2007 budget request. The increase is for the Technology Transfer Program whose termination was requested by the Administration.

• An appropriation of $227 million, $2.3 million above the FY2006 enacted level after the rescission, for the HIDTAP (High Intensity Drug Trafficking Areas Program) was recommended by the House committee. Increased funding is recommended for the Appalachian, Central Valley, and Lake County HIDTAs (High Intensity Drug Trafficking Areas). The program is continued under the EOP, rather than under the Department of Justice as the FY2007 budget requested. Under an amendment (No. 1026) offered by Representative Darlene Hooley and agreed to by the House on a 348 to 76 (Roll No. 273) vote on June 13, 2006, funding for the HIDTAP would be increased by $8 million.

• An appropriation of $194 million is provided for Other Federal Drug Control Programs, $18.2 million less than the FY2007 budget request. The Drug Free Communities initiative is funded at $80 million (rather than at $79.2 million, as requested), the National Drug Court Institute is funded at $1 million (rather than at $990,000, as requested), the National Alliance for Model State Drug Laws is funded at $1 million (no funding was requested), and the National Youth Anti-Drug Media Campaign is funded at $100 million (rather than at $120 million, as requested).

• An appropriation of $1 million is provided for unanticipated needs. The rescission of $11.8 million in emergency funds (from the Unanticipated Needs for Natural Disasters Account) to offset non-emergency appropriations, as requested in the FY2007 budget, is not included.

The report notes the committee's "concern that the ONDCP has resisted focusing its programs to fighting the alarming rise in domestic methamphetamine production, trafficking and abuse" and states that future funding of the office's priorities cannot be ensured if Congress continues to be ignored. The Director of the ONDCP is directed to include "an analysis of options and recommendations for the future course of counterdrug technology research" in the office's budget submission for FY2008. The committee directs the ONDCP Director to submit a financial plan, which will be updated every six months, to the House and Senate Committees on Appropriations prior to the initial obligation of funds provided for FY2007. The first plan is due within 30 days of the act's enactment. Any new projects and changes in the funding of ongoing projects must receive the prior approval of the appropriations committees.³⁹

In a statement of administration policy on H.R. 5576, OMB urged that the White House accounts be consolidated, the authority to transfer up to 10% of budgetary resources within EOP accounts be expanded, and the Enterprise Services initiative be expanded, as requested in the FY2007 budget. The Administration expressed concern about the House action to reduce funding for the National Youth Anti-Drug Media Campaign by $20 million.⁴⁰

As reported by the Senate Committee on Appropriations, H.R. 5576 continues separate appropriations for the EOP accounts, with one exception discussed below. The provision authorizing the transfer of up to 10% of funds within the EOP also is continued. According to the report accompanying the bill, the committee rejected "a single, consolidated account" because "it would undermine the ability of the Congress to exercise adequate oversight" of the expenditure of funds. The committee incorporated the responsibilities of the Office of Policy Development (with its $3.4 million appropriation) into the White House Office salaries and expenses account "to allow the White House to better manage its resources."⁴¹ The committee expressed its belief that oversight of the use of the OPD funds will be adequate under this merger. Among the committee's directives and funding recommendations for the EOP accounts are the following.

• The EOP is encouraged to submit its FY2008 budget justification within a few days of the transmittal of the President's budget to Congress. The justification is to include detailed budget information for the Privacy and Civil Liberties Oversight Board.

• A separate appropriation of $1.5 million is provided for the Privacy and Civil Liberties Oversight Board. (The House-passed bill funds the Board as part of the appropriation for the White House Office.)

• Under the Executive Residence at the White House account, restrictions on reimbursable expenses for use of the residence, enacted for FY2004, are continued.

• An appropriation of $91.4 million is provided for OA, the same amount as passed by the House, but some $11 million less than the FY2007 budget request. The committee report states that OA "receives reimbursements for information management support and general office services."⁴²

• An appropriation of $76.2 million is provided for OMB, the same amount as passed by the House and $7.4 million more than the FY2007 budget request. The committee report directs the OMB Director, assisted by appropriate federal agencies, to report to the Senate and House Committees on Appropriations on "the administration's and OMB's plans to monitor, measure, and increase Federal agency performance and participation in energy and environmental management." Possible statutory obstacles to meeting energy savings goals should be addressed in the report which must be submitted within 120 days of the act's enactment. "[P]roducts and services that guarantee energy and taxpayer savings, that measure performance, and that involve public/private partnerships" are of particular interest to the committee.⁴³

• An appropriation of $11.5 million is provided for ONDCP, $11.8 million less than the FY2007 budget request and $15.4 million less than the House-passed funding. The committee report states that the appropriation has been reduced "to more closely reflect actual performance." Funding of $1.5 million is provided for a study of ONDCP's organization and management to be conducted by the National Academy of Public Administration and to begin within 60 days of the act's enactment. "Quarterly reports on travel expenditures, summarized by office, program, and individual, including dates and purpose of travel" are to be provided by the ONDCP Director to the Senate and House Committees on Appropriations.⁴⁴ The ONDCP Director is further directed to provide quarterly staffing reports, including plans to hire additional staff, to the Appropriations Committees. The office, position, title, salary, and job classifications of all ONDCP staff, including contractors, should be included in the report.

• An appropriation of $227 million is provided for HIDTAP, $8 million less than the House-passed funding. The FY2007 budget proposed to transfer the HIDTAP to the Department of Justice. In providing funding for the HIDTAP, the committee report stated that the program is an important function of ONDCP. Among the directives for the office are these: that the ONDCP Director "take appropriate steps to ensure that the HIDTA funds are transferred to the appropriate drug control agencies expeditiously" and the entities receiving the resources apply them "strictly for implementing the strategy for each HIDTA, taking into consideration local conditions and resource requirements" and that ONCDP "hold back all HIDTA funds from a State" until the State or locality meets its financial obligation.⁴⁵

• An appropriation of $214.5 million is provided for other federal drug control programs, $2.3 million more than the FY2007 budget request and $20.5 million more than the House-passed funding. The appropriation is allocated as shown in Table 10 below. Of the $120 million provided for the National Youth Anti-Drug Media Campaign, $15 million is to fund continued advertising against the use of methamphetamine. No more than 10% of the campaign's appropriation can be used for administrative costs. The Committee directs that $2 million of the $80 million provided to the Drug-Free Communities Support Program is a direct grant to the Community Anti-Drug Coalitions of America for the National Community Anti-Drug Coalition Institute. In providing membership dues for the World Anti-Doping Agency, "the Committee directs ONDCP to use its voice and vote as the United States' representative ... to ensure that all countries' athletes are subject to fair and equal standards and treatment."⁴⁶

• An appropriation of $20 million is provided for the CTAC, $10.4 million more than the FY2007 budget request and $400,000 more than the House-passed funding. The funding is allocated as $10 million each for the demand reduction program and the Technology Transfer Program. With regard to the former program, the committee again directs that the FY2006 ONDCP operating plan, which has not been received by the committee, be submitted within 30 days after the act's enactment. The plan is to "include an accounting of the use of the FY2006 CTAC R&D appropriated funds and an accounting of all FY2006 funds that are unobligated and unexpended and the rationale for inaction." A spending plan for FY2007 must be submitted to the committee that includes "technology development projects that would provide researchers with the tools to conduct more advanced . . . drug addiction and scientific studies." Within 45 days of the act's enactment, FY2007 "funds with expenditure project execution authority [must] be completed and transferred to other Federal departments and agencies." As for the technology transfer program (TTP), the FY2008 budget request for CTAC must include "the total number of TTP applications received and the number awarded in the previous year" to permit the committee to "have a true understanding of CTAC's ability to meet demand."⁴⁷

     Table 11. Title VII: Independent Agencies Appropriations, FY2006 to

The President's fiscal 2007 budget proposed an appropriation of $57.1 million for the FEC, a 5.5% increase above the fiscal 2006 appropriation of $54.2 million. Of this amount, at least $4.7 million was proposed to be designated for internal automated data systems and $5,000 for representational and reception expenses. Both the House Appropriations Committee and the full House accepted the overall amount proposed by the Administration but raised the $4.7 million minimum for automated data systems to $6.5 million. The agency was further authorized to collect registration fees for conferences, with such fees credited to the agency to help defray costs of such conferences. In addition, the Committee report commended the FEC on the implementation of its Administrative Fine Program, which allows the agency to assess fines for reporting violations, but it expressed concern that the program had not yet been authorized beyond December 31, 2008. The Committee urged the FEC to work with the authorizing committee to achieve permanent authorization of the program prior to the FY2008 appropriations request. The Senate Appropriations Committee matched the House appropriation of $57.1 million for FY2007. The Senate Appropriations Committee report did not comment on the Administrative Fine Program or provide additional instructions to the FEC.

Federal Labor Relations Authority (FLRA). The FLRA, to the extent feasible, will continue to implement the five government-wide goals of the President's Management Agenda during FY2007. Under the strategic management of human capital goal, the FLRA plans to implement cost savings measures to address projected changes in workload resulting from the implementation of the BRAC (Base Realignment and Closure) decisions and new personnel systems at the Departments of Defense (DOD) and Homeland Security (DHS). The FLRA reports that its regional workload has declined by 32% between 2001 and 2004, and that this trend may continue because of the DOD and DHS reforms. The agency also plans to streamline and consolidate the FLRA's training functions and implement additional workforce flexibilities through OPM. H.R. 5576, as passed by the House and reported by the Senate Committee on Appropriations, would increase the appropriation for the FLRA by $5,000 over the FY2006 funding, as requested in the FY2007 budget.

General Services Administration (GSA). The General Services Administration administers federal civilian procurement policies pertaining to the construction and management of federal buildings, disposal of real and personal property, and management of federal property and records. It is also responsible for managing the funding and facilities for former Presidents and presidential transitions. Typically only about 1% of GSA's total budget is funded by direct appropriations.

As shown in Table 12, for FY2007, the President requested $52.5 million for government-wide policy and $83 million for operating expenses; $44 million for the Office of Inspector General; $3 million for allowances and office staff for former Presidents; and $16.9 million to be deposited into the Federal Citizen Information Center Fund. H.R. 5576, as reported and passed in the House, mirrors these figures. Likewise, as reported in the Senate, the requested amounts were recommended.

Federal Buildings Fund (FBF). Most GSA spending is financed through the Federal Buildings Fund (FBF). Rent assessments from agencies paid into the FBF provide the principal source of its funding. Congress may also provide direct funding into the FBF. Congress directs the GSA as to the allocation or limitation on spending of funds from the FBF in provisions found accompanying GSA's annual appropriations.

     Table 12. General Services Administration Appropriations, FY2006 to

As reported in the Senate, the Committee on Appropriations recommended a total limitation for the FBF in FY2007 of $8,065 million, which constitutes $884 million more than allowed by the House; $708.2 million for new construction, more than $496 million above the House passed version; and new obligational authority of $866.2 million for repairs and alterations, nearly $388 million more than approved by the House.

For FY2007, the President had requested that an additional amount of $245 million be deposited in the FBF and that the total limitation for the FBF be set at $8,047. The President's budget further provided that $690 million would remain available until expended for new construction projects from the FBF, and. $866 million would remain available until expended for repairs and alterations.

Electronic Government Fund (E-gov Fund). Originally unveiled in advance of the President's proposed budget for FY2002, the E-gov Fund and its appropriation has been a somewhat contentious matter between the President and Congress. The President's initial $20 million request was cut to $5 million, which was the amount provided for FY2003, as well. Funding thereafter was held at $3 million for FY2004, FY2005, and FY2006. Created to support interagency e-gov initiatives approved by the Director of OMB, the fund and the projects it funds have been subject to close scrutiny by, and accountability to, congressional appropriators. The President requested $5 million for FY2007 and Senate appropriators concurred, but the House approved the usual $3 million, as recommended in the House Appropriations Committee report.

Merit Systems Protection Board (MSPB). The MSPB request for increased funding for FY2007 is to cover pay raises, performance management training for staff, and higher space rental rates. Additionally, $495,000 of the amount requested is to relocate the San Francisco office to a building which is fully compliant with current earthquake standards. The MSPB will continue to adjudicate appeals, but with faster processing times, under the new personnel systems currently being implemented at DOD and DHS. The Board also is in the process of hiring the additional staff authorized by Congress in FY2006 and needed to meet the increased demands of DOD and DHS. The Senate committee's recommendation for MSPB salaries and expenses is $19,000 more than the FY2007 budget request and the House-passed funding.

Office of Personnel Management (OPM). Funding for the following projects is included in OPM's FY2007 request for salaries and expenses: Enterprise Human Resources Integration ($6.9 million) and Human Resources Line of Business ($1.4 million). A priority of the agency during 2007 will be the implementation of reforms to the position classification, pay, and performance management systems included in the Working For America Act draft legislative proposal submitted to Congress in July 2005 (not yet introduced). OPM also will give priority to the issues of recruitment, the hiring process, training, career and professional development, dental and vision benefits, and health benefits options. The agency's Inspector General will continue to develop a prescription drug audit program, which includes pharmacy benefit managers, to assist in recovering inappropriate expenses charged in previous years and negotiating more favorable contracts.

The House bill as passed provides the same appropriation for OPM salaries and expenses as requested by the President (albeit down $10 million from FY2006), but the allocation of the funding is changed. An increase in funds is denied for pay and performance modernization, and instead, the Management Services Division account is increased. The bill does not fund an increase for the retirement systems modernization project and therefore, reduces the amount authorized to be transferred from trust funds. The Committee report accompanying the bill directs the Government Accountability Office (GAO) to continue to monitor implementation of the retirement modernization program and update the House and Senate Committees on Appropriations by March 1, 2007, "as to OPM's progress in converting the agency's paper personnel file system into a secure digital system." It includes several directives for OPM:

• to continue implementing and refining the new human resources management systems at the Departments of Homeland Security and Defense before expanding such systems to other departments and agencies.

• to submit to the House and Senate Committees on Appropriations an operating plan for FY2007 signed by the OPM Director. The plan must be submitted within 60 days of the act's enactment. It must include "funding levels including an identification of carryover funds for the various offices, centers, programs, and initiatives covered in the budget justification and supporting documents referenced in the House and Senate appropriations reports and the statement of the managers."

• to include changes -- dollars requested broken out between trust fund and general funds for specific programs or activities within organizations, a total that includes reimbursements, and a breakout of direct appropriation and reimbursement -- in future budget justifications.

• to continue efforts to include "clear, detailed, and concise information on how the programs will be funded and how they will be measured" in the budget justification.

• to report to the committee within 120 days of the act's enactment on its human resources products and services and actions taken to respond to the committee's concerns that OPM is not allowing federal agencies "the flexibility to contract as they see fit, including contracting with private companies to provide online employment applications and processing services, as well as choice in selecting service providers and human resource systems."

• to report on progress in implementing any recommendations in the forthcoming OPM and GSA survey and report on the child care needs of executive, legislative, and judicial branch employees within six months after the report is issued, and to include in the report any further measures that may be taken. OPM is also directed "to continue its efforts to provide information and education to agencies and employees on promotion of the subsidy for child care expenses for lower income employees."⁴⁸

• to continue to give GAO's recommendations on modernization of the retirement system -- especially related to progress, costs, and risks -- careful consideration and to closely consult with GAO in the future.

• submit its FY2008 budget justification on the first Monday in February and to "include highly detailed data and explanatory statements to support the appropriations requests, including tables that detail OSC's programs, activities and staffing levels for fiscal years 2007 and 2008." The agency is directed to coordinate with the committee "well in advance on its planned budget submission."

• submit to Congress, with the FY2008 budget request, "a comprehensive strategy addressing capital needs and case processing in order to prevent any future backlog of cases."⁴⁹ The agency is also directed to provide quarterly staffing reports from the Special Counsel to Congress.

• communicate with the committee 45 days prior to any organizational change that would cause the agency's staffing to vary above or below these levels: 70 to 75 FTEs (headquarters), 6 to 8 FTEs (Detroit), 9 to 11 FTEs (Dallas), 8 to 10 FTEs (San Francisco Bay area), and 9 to 12 FTEs (District of Columbia field office). The OSC's total number of FTEs should not be less than 102 or greater than 116.

Under the Revenue Forgone Reform Act of 1993, Congress is authorized to reimburse USPS $29 million each year until 2035, for services provided below cost to non-profit organizations at congressional direction in the 1990s, but not paid for at the time. For the past 13 years, the Postal Service appropriation has consisted of that amount, plus an estimate of the amount needed to pay for mail for the blind and overseas voters for the current year.

In its FY2007 Budget, the Administration proposed an appropriation of $79.9 million, including $60.7 million for revenue forgone in FY2007 and a reconciliation adjustment for underestimated mail volume in FY2004 of $19.2 million. The Postal Service, which submits its own request as an independent entity, estimated that the FY2007 amount needed for the blind and overseas voting would be $80.1 million, or $19.4 million more than OMB requested, and asked Congress to appropriate that amount. Both proposals would supplement the FY2007 amount with a $19.2 million reconciliation adjustment reflecting that actual use of the subsidy in FY2004 was underestimated by that amount. The Postal Service's request also includes a reconciliation adjustment of $24.4 million reflecting the amount by which actual expenditures for FY2005 exceeded the amount appropriated that year. Thus the Postal Service's request for FY2007 is $152.7 million: including $80.1 million for FY2007 revenue forgone, $43.6 million as a reconciliation adjustment for two years, and $29 million as the annual payment under the Revenue Forgone Reform Act of 1993.

The Administration's FY2007 budget not only estimates a lower usage figure for mail for the blind than does the Postal Service, it also proposes to eliminate the usual $29 million annual payment for revenue forgone in past years that is set forth in the Revenue Forgone Reform Act. It also proposed termination of the payment in FY2005 and FY2006, but Congress chose to provide the funding. USPS argues that cancelling the payment could result in the whole 28-year obligation, totaling $841 million, being written off as a bad debt and charged to current postal ratepayers. The Administration's budget also proposed that the $79.9 million it requests would not be available for obligation until October 1, 2007, which is in FY2008, following a practice for the postal appropriation established several years ago.

The House bill, as reported by committee and passed by the House, adopted the Administration's recommendation by providing $79.9 million for the current year's revenue forgone, as an advance appropriation, but departed from it in once again approving the annual $29 million for revenue forgone in the past. The Committee report (H.Rept 109-495) commented that the method OMB uses to estimate revenue forgone expenditures, which is to take an average of past expenses, is "inaccurate" compared to the Postal Service's estimate which is based on current audits of mail volume. The Senate Committee mirrored the action of the House, providing $108.9 million for the Postal Service Fund. Its report (S.Rept. 109-293) also "directed" the Postal Service not to implement mail processing center consolidations in Iowa, South Dakota, and Washington until GAO has issued a report on decision-making criteria used in such consolidations.

• Section 809, which prohibits payment to political appointees who are filling positions for which they have been nominated, but not confirmed. Included as Section 909 of the House bill and Section 809 of the Senate bill.

• Section 819, which prohibits the obligation or expenditure of appropriated funds for employee training that (1) does not meet identified needs for knowledge, skills, and abilities bearing directly upon the performance of official duties; (2) contains elements likely to induce high levels of emotional response or psychological stress in some participants; (3) does not require prior employee notification of the content and methods to be used in the training and written end of course evaluation; (4) contains any methods or content associated with religious or quasi-religious belief systems or "new age" belief systems; or (5) is offensive to, or designed to change, participants' personal values or lifestyle outside the workplace. Included as Section 919 of the House bill and Section 819 of the Senate bill.

• Section 820, which prohibits the use of appropriated funds to implement or enforce employee non-disclosure agreements if they do not contain whistleblower protection clauses. Included as Section 920 of the House bill and Section 820 of the Senate bill.

• Section 823, which requires that the Committees on Appropriations approve the release of any "non-public" information, such as mailing or telephone lists, to any person or any organization outside the federal government. Included as Section 923 of the House bill and Section 823 of the Senate bill.

• Section 834, which states that Congress recognizes the United States Anti-Doping Agency as the official anti-doping agency for Olympic, Pan American, and Paralympic sports in the United States. Included as Section 934 of the House bill and Section 834 of the Senate bill.

• Section 836, which prohibits the use of appropriated funds to implement or enforce restrictions or limitations on the Coast Guard Congressional Fellowship Program or to implement OPM's proposed regulations limiting the detail of executive branch employees to the legislative branch. Included as Section 936 of the House bill and Section 836 of the Senate bill.

• Section 837, which requires agencies to report to Congress on the amount of the acquisitions made from entities that manufacture the articles, materials, or supplies outside the United States. Not included in the House bill. Included as Section 845 of the Senate bill.

• Section 839, which requires appropriate executive department and agency heads either to transfer funds to, or reimburse, the Federal Aviation Administration to ensure the uninterrupted, continuous operation of the Midway Atoll airfield. Not included in the House bill. Included as Section 838 of the Senate bill.

• Section 840, which provides certain requirements for conducting a public-private competition for the performance of an activity that is not inherently governmental for executive agencies with less than 100 full-time employees. Not included in either the House bill or the Senate bill.

• Section 842, which prohibits the use of funds to convert an activity or function of an executive agency to contractor performance if more than 10 federal employees perform the activity, unless the analysis reveals that savings would exceed 10 percent of the most efficient organization's personnel-related costs for performance of the activity or function by federal employees, or $10 million, whichever is lesser. Included as Section 939 of the House bill and Section 840 of the Senate bill.

• Section 845, which precludes contravention of the Privacy Act. Included as Section 942 of the House bill and Section 843 of the Senate bill.

Cuba Sanctions⁵³

Since the early 1960s, U.S. policy toward Communist Cuba under Fidel Castro has consisted largely of efforts to isolate the island nation through comprehensive economic sanctions, including prohibitions on U.S. financial transactions -- the Cuban Assets Control Regulations (CACR) -- that are administered by the Treasury Department's Office of Foreign Assets Control (OFAC). Restrictions on travel have been a key and often contentious component of U.S. efforts to isolate the Cuban government. The regulations have not banned travel itself, but have placed restrictions on any financial transactions related to travel to Cuba. In June 2004, the Bush Administration significantly tightened restrictions on travel, and there was considerable negative reaction to the Administration's tightening of restrictions for family visits and educational travel.

Some U.S. commercial agricultural exports to Cuba have been allowed since 2001 under the terms of the Trade Sanctions Reform and Export Enhancement Act of 2000 or TSRA, but with numerous restrictions and licensing requirements. Exporters are denied access to U.S. private commercial financing or credit, and all transactions must be conducted in cash in advance or with financing from third countries. Since late 2001, Cuba has purchased about $1.2 billion in agricultural products from the United States. Overall U.S. exports to Cuba amounted to about $7 million in 2001, $146 million in 2002, $259 million in 2003, $400 million in 2004, and $369 million in 2005, the majority in agricultural products.⁵⁴

In February 2005, the Administration tightened U.S. economic sanctions against Cuba by further restricting how U.S. agricultural exporters may be paid for their sales. OFAC amended the CACR to clarify that the term "payment of cash in advance" for U.S. agricultural sales to Cuba means that the payment is to be received prior to the shipment of the goods. This differs from the practice of being paid before the actual delivery of the goods, a practice that had been utilized by most U.S. agricultural exporters to Cuba since such sales were legalized in late 2001. U.S. agricultural exporters and some Members of Congress strongly objected that the action constituted a new sanction that violated the intent of TSRA, and could jeopardize millions of dollars in U.S. agricultural sales to Cuba. OFAC Director Robert Werner maintained that the clarification "conforms to the common understanding of the term in international trade."⁵⁵ In July 2005, OFAC clarified that, for "payment of cash in advance" for the commercial sale of U.S. agricultural exports to Cuba, vessels can leave U.S. ports as soon as a foreign bank confirms receipt of payment from Cuba. OFAC's action would reportedly ensure that the goods would not be vulnerable to seizure for unrelated claims while still at the U.S. port. Supporters of overturning OFAC's February 2005 amendment, such as the American Farm Bureau Federation, were pleased by the clarification but indicated that they would still work to overturn the February rule.⁵⁶

Since 2000, either one or both houses have approved provisions in the annual Treasury Department appropriations bill that would ease U.S. economic sanctions on Cuba (especially on travel and on U.S. agricultural exports) but none of these provisions have ever been enacted. This year, both the House-passed and Senate Appropriations Committee-reported versions of the FY2007 Transportation-Treasury-Housing appropriations bill, H.R. 5576, include a provision that would prevent Treasury Department funds from being used to implement the February 2005 amendment to the Cuba embargo regulations that tightened restrictions on "payment of cash in advance" for U.S. agricultural exports to Cuba.⁵⁷ The Administration's Statement of Policy on the bill maintains that the President would veto the bill if it contained any provision that would weaken current sanctions on Cuba.

In the House version of the bill, the Cuba provision is in Section 950, which was added on June 14, 2006, when the House approved H.Amdt. 1049 (Moran, Kansas) by voice vote. On the same day, the House rejected two additional Cuba amendments: H.Amdt 1050 (Rangel), that would have prohibited funds from being used to implement the economic embargo of Cuba, was rejected by a vote of 183-245; H.Amdt. 1051 (Lee), that would have prohibited funds from being used to implement the Administration's June 2004 tightening of restrictions on educational travel to Cuba, was rejected by a vote of 187-236. An additional Cuba amendment, H.Amdt. 1032 (Flake), that would have prohibited the use of funds to amend regulations relating to travel for religious activities in Cuba, was withdrawn from consideration.

In the Senate version of the bill, the Cuba provision is in Section 846. It was added to the bill on July 20, 2006, when the Senate Appropriations Committee approved an amendment offered by Senator Dorgan by voice vote during the committee's markup of the bill. The committee subsequently reported the bill (S.Rept. 109-293) with the Cuba provision on July 26, 2006.

For additional information, see CRS Report RL32730, Cuba: Issues for the 109^th Congress, by Mark P. Sullivan; CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation, by Remy Jurenas; and CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances, by Mark P. Sullivan.

² FY2006 funding for some agencies funded in this act, notably the Departments of Transportation, and Housing and Urban Development, was increased in supplemental appropriations acts to deal with the effects of the hurricanes that struck Florida and the Gulf Coast in 2005. Total enacted FY2006 funding, including supplemental funding, after scorekeeping adjustments, was $151.0 billion.

³ U.S. Executive Office of the President, Office of Management and Budget, Statement of Administration Policy, H.R. 5576 -- Transportation, Treasury, Housing, the Judiciary, and the District of Columbia Appropriations Bill, FY2007, June 14, 2006, p. 6.

⁴ U.S. Executive Office of the President, Office of Management and Budget, Statement of Administration Policy, H.R. 5576 -- Transportation, Treasury, Housing, the Judiciary, and the District of Columbia Appropriations Bill, FY2007, June 14, 2006.

⁵ Office of Management and Budget, Budget for Fiscal Year 2007, pps. 216-224.

⁶ Office of Management and Budget, Budget for Fiscal Year 2007, p. 222.

⁷ Mark R. Dayton, Senior Economist, Office of the Inspector General, United States Department of Transportation, "Intercity Passenger Rail and Amtrak," Testimony before the Subcommittee on Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies Committee on Appropriations, United States Senate, March 16, 2006, p. 1.

⁸ Notice of proposed rulemaking published in the Federal Register on November 7, 2005 (70 Fed. Reg. 67389); supplemental notice of proposed rulemaking published in the Federal Register on May 5, 2006 (71 Fed. Reg. 26425). For more information, see CRS Report RL33255, Legal Developments in International Civil Aviation, by Todd B. Tatelman.

⁹ In addition to the $36.3 billion in funding for federal-aid highways and exempt contract authority provided in FY2006, the DOT also received $3.5 billion in emergency relief funding to respond to the effects of the Gulf Coast hurricanes.

¹⁰ $39.1 billion in obligation limitations and $739 million in exempt obligations. A $2.2 billion rescission of contract authority brings the net total after score-keeping adjustments down to $37.7 billion.

¹¹ For more details on the FY2007 budget proposal for the Treasury Department, see CRS Report RL32898, Appropriations for the Treasury Department and the Internal Revenue Service in FY2007: Issues for Congress, by Gary Guenther.

¹² U.S. Department of the Treasury, Budget in Brief FY2007 (Washington: 2006), p. 11.

¹³ Ibid., pp. 3-7.

¹⁴ Ibid., p. 11.

¹⁵ Ibid., p. 60.

¹⁶ The net gap is the estimated amount of overdue or unpaid taxes after the IRS has received late tax payments and exhausted its efforts collect overdue taxes through enforcement action. See Internal Revenue Service, New IRS Study Provides Preliminary Tax Gap Estimates, IR-2005-38 (Washington, March 29, 2005).

¹⁷ Treasury Department, Budget in Brief FY2007, p. 60.

¹⁸ Ibid., p. 68.

¹⁹ For more details on the program, see CRS Report RL33231, The Internal Revenue Service's Use of Private Debt Collection Agencies: Current Status and Issues for Congress, by Gary Guenther.

²⁰ Heidi Glenn and Dustin Stamper, "House Agrees to Eliminate IRS Debt Collection Program," Tax Notes, June 19, 2006, p. 1335.

²¹ U.S. Congress, Senate, Committee on Appropriations, Transportation, Treasury, Housing and Urban Development, the Judiciary, and Related Agencies Appropriations Bill, 2007, report to accompany H.R. 5576, 109^th Cong., 2d sess., S.Rept. 109- 293 (Washington: GPO, 2006), p. 114.

²² For more details on the proposed HUD budget, see CRS Report RL33344, The Department of Housing and Urban Development (HUD): Fiscal Year 2007 Budget, by Maggie McCarty, Libby Perl, Bruce Foote, Eugene Boyd, and Meredith Peterson.

²³ For a more detailed examination of judiciary funding, see CRS Report RL33339, Judiciary Appropriations for FY2007, by Lorraine H. Tong.

²⁴ See [http://www.supremecourtus.gov/publicinfo/year- end/2005year-endreport.pdf] for the Chief Justice's report.

²⁵ For an examination of judicial security issues and legislation, see CRS Report RL33464, Judicial Security: Responsibilities and Current Issues, by Lorraine H. Tong, and CRS Report RL33473, Judicial Security: Comparison of Legislation in the 109^th Congress, by Nathan James.

²⁶ The Judiciary's FY2007 request for rent paid to GSA is $997.8 million -- a $32.4 million (3.3%) increase over the $965.5 million FY2006 appropriation.

²⁷ Workload increases are expected from cases created by an additional 1,500 border patrol agents, positions for whom have recently been funded. The additional FTEs are reportedly needed for additional probation and pretrial service officers and clerks' office staff.

²⁸ This amount includes $4.0 million for the Vaccine Injury Trust Fund.

²⁹ Prior to the reorganization of House and Senate Committee on Appropriations subcommittee structures at the beginning of the 109^th Congress, both houses of Congress had a separate Appropriations Subcommittee for the District of Columbia appropriations. Appropriations for the District of Columbia are now included in the responsibilities of the House Committee on Appropriations Subcommittee on Transportation, Treasury, and Housing and Urban Development, The Judiciary, District of Columbia, while in the Senate, there is still a separate Appropriations Subcommittee on the District of Columbia.

³⁰ Of the three exceptions, the Council on Environmental Quality and Office of Environmental Quality are funded in the House Interior, Environment, and Related Agencies Act and the Senate Interior and Related Agencies Act. The Office of Science and Technology Policy and the Office of the United States Trade Representative are funded under the same appropriations act entitled Science, State, Justice, and Commerce, and Related Agencies (House) and Commerce, Justice, and Science (Senate).

³¹ P.L. 109-148, the Department of Defense Appropriations Act, 2006, at Division B, Title III, § 3801(a), required a 1.0% government-wide across-the-board rescission in discretionary spending accounts. The FY2006 appropriation for the EOP accounts proposed to be consolidated totaled $173.983 million before the rescission.

³² U.S. Executive Office of the President, Office of Management and Budget, Budget of the United States Government Fiscal Year 2007, Appendix (Washington: GPO, 2006), pp. 1039- 1048. (Hereafter referred to as FY2007 Budget, Appendix.)

³³ U.S. Executive Office of the President, Fiscal Year 2007 Congressional Budget Submission (Washington: [Feb. 2006]), p. EOP-11. (Hereafter cited as EOP Budget Submission.)

³⁴ The accounts under the White House are Compensation of the President, White House Office, Executive Residence at the White House, White House Repair and Restoration, Council of Economic Advisers, Office of Policy Development, National Security Council, and the Office of Administration.

³⁵FY2007 Budget, Appendix, p. 1040.

³⁶EOP Budget Submission, p. EOP-12.

³⁷EOP Budget Submission, p. EOP-13.

³⁸ H.Rept. 109-495, p. 181.

³⁹ Ibid., pp. 182 and 185.

⁴⁰ U.S. Executive Office of the President, Office of Management and Budget, Statement of Administration Policy, H.R. 5576 -- Transportation, Treasury, Housing, the Judiciary, and the District of Columbia Appropriations Bill, FY2007, June 14, 2006, pp. 3-4. (Hereafter referred to as Administration Policy on H.R. 5576.)

⁴¹ S.Rept. 109-293, p. 185.

⁴² Ibid., p. 188.

⁴³ Ibid., p. 188.

⁴⁴ Ibid., p. 190.

⁴⁵ Ibid, p. 192.

⁴⁶ Ibid., p. 194.

⁴⁷ Ibid., p. 191.

⁴⁸ S.Rept. 109-293, p. 220.

⁴⁹ Ibid., p. 224.

⁵⁰ Also see CRS Report RS21025, The Postal Revenue Forgone Appropriation: Overview and Current Issues, by Nye Stevens.

⁵¹FY2007 Budget, Appendix, pp. 9-14. The 800 section numbers refer to the provisions as they were enacted in P.L. 109-115, the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006.

⁵² U.S. Executive Office of the President, Office of Management and Budget, Statement of Administration Policy, H.R. 5576 -- Transportation, Treasury, Housing, the Judiciary, and the District of Columbia Appropriations Bill, FY2007, June 14, 2006, p. 4.

⁵³ Prepared by Mark P. Sullivan, Specialist in Latin American Affairs, Foreign Affairs, Defense, and Trade Division.

⁵⁴ World Trade Atlas. Department of Commerce Statistics.

⁵⁵ U.S. Department of the Treasury, Testimony of Robert Werner, Director, OFAC, before the House Committee on Agriculture, March 16, 2005.

⁵⁶ Christopher S. Rugaber, "Treasury Clarifies Cuba Farm Export Rule, and Baucus Relents on Nominees," International Trade Reporter, August 4, 2005.

⁵⁷ A similar provision was included in both the House-passed and Senate-passed versions of the FY2006 Transportation appropriations bill, H.R. 3058, but it was dropped in the conference report to the bill (H.Rept. 109-307). The Administration had threatened to veto the measure over the provision.