Another provision of the new law allows for a percentage of our prepaid fees to be invested in U.S. securities and the interest earned can be used to improve the Office's operational efficiency. We are implementing this, and it will be operational in fiscal year 1999. The potential annual interest is between $30,000 and $50,000. The Office is also in the process of raising its discretionary fees for existing special services and imposing several new fees. These services are varied and include, for example, expedited handling and first and final appeals of refusals to register. We anticipate that we might receive as much as $1,000,000 in additional receipts from these fees; however, we are reducing our request for spending authority by $1,340,000 because of reduced GATT receipts. In 1995 and thereafter the Office sought additional spending authority in anticipation of an unknown but potentially large increase in work brought about by the GÅTT Uruguay Round Agreements Act, Public Law 103-465, 108 Stat. 4809 (1994). Authors from World Trade Organization countries and countries that are members of the Berne Convention for Literary and Artistic Works had copyright protection restored for many of their works that were in the public domain in the United States. During a specified two year period owners of such works can file notices of intention to enforce their rights with the Copyright Office. For most countries, the filing period was January 1, 1996 to December 31, 1997; consequently, it has expired. The Office requested spending authority for fiscal years 1996, 1997, and 1998 based on potential filings that in fact never materialized; thus, the Office had higher spending authority than what proved necessary. Since few will be eligible to file notices of intent to enforce their copyright, any future GATT filings will have little effect on the budget. The bottom line is that due to higher fees but reduced anticipated GATT receipts, we are requesting spending authority of only $16,000,000.

Let me conclude with the provision in the technical amendments act that authorizes the Copyright Office to pay arbitrators directly. As you know, the Office oversees Copyright Arbitration Royalty Panels (CARP's), which handle distribution proceedings of royalties collected under certain statutory licenses. In distribution proceedings, the Copyright Office is now empowered to pay the arbitrators directly with funds from the relevant royalty pool. Previously, the parties were billed by the arbitrators, and the parties paid the arbitrators. Because of this change we will need the authority Congress initially approved in fiscal year 1998 to expend up to $1.8 million from offsetting collections to pay the arbitrators engaged in distribution proceedings in fiscal year 1999.

Thank you, and I welcome your questions which I would be pleased to answer now or more fully in writing.

OPENING REMARKS BY GEN. DONALD SCOTT

Senator BENNETT. Thank you.

General SCOTT. Thank you, Mr. Chairman, for the opportunity to appear with Dr. Billington to present our fiscal year 1999 budget request.

This committee's approval of our fiscal 1997 and 1998 funding levels helped us to establish better management practices and to develop our work force so that they will be more efficient and effective in the new millennium. Mr. Chairman, I would like to highlight a few of those accomplishments that we had last year.

LIBRARY'S ACCOMPLISHMENTS

First, we were able to take Dr. Billington's vision, and the guidance provided by Congress, and to come up with a strategic plan that takes us out to and through the year 2004. As you saw in the video, we have made the Library's holdings more available through electronic means, and we will continue to migrate our systems, so that they can be more compatible with the information age and technology in that regard.

The legislative information system that we put online at the beginning of the 105th has dramatically improved communication between the Congress and other legislative branch agencies. We also managed to educate most of the 560 managers and supervisors that

we have in the Library of Congress. We provided them techniques on how they can get better results and improve the work environment at the same time.

We are currently offering a class for our staff. This is a 1-day class. They will have access to the same information that we hope will help us to better prepare them to do the job for now and the 21st century.

And in the area of financial management, we are very, very pleased to announce that the Library achieved its first ever unqualified, clean audit opinion on our consolidated financial statements from an independent firm. This has been a lot of work, but it helps us show that we are more accountable for the funds that are entrusted to our care, whether appropriated or gift or trust funds. We will work very hard to try to stay in that elite fraternity. We also managed to cut the arrearage by another 1 million items during last year.

So, in short, Mr. Chairman, we have realized several goals last year that helped our management practices. We think it will continue to improve and modernize our work force so that they can render better service to the Congress and to the American people.

PRIORITY BUDGET ITEMS

Now, as Dr. Billington pointed out, we will continue to need the support and assistance of this committee. Included in this budget request, we have five items that we believe are critical if we are to continue to make progress in this area. First and foremost, we have placed at the highest priority our effort to make sure that all of our automated systems are year 2000 compliant. In that regard, the integrated library system that this committee approved for us last year, which is year 2000 compliant, is scheduled to be installed by the 1st of October, 1999.

That is going to help us improve our collection security. It is also going to help us have a better inventory and help us connect the other operational processes throughout the Library.

Also, we have formed an integrated library system project team that is headed up by a noted and respected librarian, who understands computers. That system is moving ahead. We are currently reviewing requests for proposals. We will present, within the next month, an implementation plan for the Congress to approve prior to us going out to purchase this system.

To complete our year 2000 compliance needs, we have also included in this budget a request for $2 million, that will purchase computers. The computers that we purchase will replace a like number that we have assessed as not economically feasible to fix. So we are asking for $2 million to help with this effort.

We have four other items that we are asking for, that we think are very important. In the area of security, we are asking for $2.5 million to fund key elements in our security plan. In the area of offsite storage, we are asking for $1.3 million to begin operations at two offsite collection and storage facilities. And for talking books, we have reduced our request from $1,250,000 to $450,000. We would like your approval to apply the $800,000 in rental savings toward the purchase of additional talking book machines for the blind and physically handicapped.

Finally, in the area of congressional staff succession, we are asking for $872,000 for the Congressional Research Service, to support our staff succession plan, which we believe is very necessary to provide the same high level of service that the Congress now receives and has grown to expect from the Congressional Research Service. In total, we are asking for a 6.2-percent net increase, which is $21.6 million over what we asked for last year. Now, 57 percent of that number is for wage and price increases, which continues to be the largest portion of our budget.

Further details that you might ask for, Mr. Chairman, are in Dr. Billington's formal statement and in our budget justification. So my colleagues and I would welcome any questions.

Senator BENNETT. Thank you.

Mr. Mulhollan.

OPENING REMARKS BY DANIEL P. MULHOLLAN

Mr. MULHOLLAN. Thank you, Mr. Chairman, Senator Dorgan. I am pleased to be here to discuss the fiscal year 1999 budget request for CRS. First and foremost, I want to assure you that we will continue to focus our efforts on offering support for the legislative work of the Congress within the fiscal decisions you make. I know your time is short; I will be brief.

CRS MISSION

Mr. Chairman, Senator Dorgan, the CRS statutory mission is to provide Congress with, and I quote, "analysis, appraisal, and evaluation of legislative proposals in estimating the probable results of such proposals." In other words, what are the unanticipated consequences of the measure?

To fulfill that mission, it is vital that we maintain without further diminution our analytic and research capacity. Crucial to that purpose, our budget has two requests. First and most importantly, is our request for funding to cover our mandatory costs for personnel, which constitutes 90 percent of the service's total operating budget. The other 10 percent of those costs are allocated for the tools required to perform research and produce analysis. We are also asking that the fiscal year 1999 appropriations cover cost increases due directly to the effects of inflation.

Second, we are asking that the Congress help us to implement part of our succession initiative. Let me stress here that we are not asking the Congress to support the full initiative. We are undertaking most of the activities in support of succession within our current resources. What we are asking, however, is that the Congress assist us for a limited time to add 20 staff in each of the fiscal years, 1999 to 2001, and allow us to use the subsequent 5 years to reduce staff back to current levels.

We seek this assistance because, by 2006, one-half of CRS's current staff will be eligible to retire. Nearly two-thirds of those, about 250 staff, plan to leave in that timeframe. These losses pose a major challenge to our ability to ensure the continuation of our analytic services to you. Some of the losses are right around the corner. By 2000, expert staff who cover such areas as monetary affairs, crime and criminal justice, congressional committee operations, global climate, and defense policy and budget, will leave.

These losses will accelerate, affecting such areas as tax policy, Social Security, and pensions, legislative and budget procedures and processes, and Asian affairs.

By 2006, virtually all areas of legislative support that CRS now provides will be in jeopardy.

Finally, as my written statement emphasizes, we are taking full advantage of the efficiencies and opportunities that existing and emerging technologies provide. As we do, we are concentrating CRS resources on direct service to the Congress. It is, therefore, my responsibility to call to your attention the possible consequences of legislation introduced in both the Senate and the House that, if adopted, could divert our focus away from the immediate legislative needs of Members.

CRS ISSUE BRIEFS AND REPORTS ONLINE

This legislation would require CRS to make all of its issue briefs and reports, which appear on our congressional web site, directly available to the public. Now, we appreciate the compliment inherent in the proposals. CRS has traditionally played an important role in assisting Members in providing their constituents with relevant information and analysis on public policy, and remains committed to doing so.

Last year, 749,000 CRS reports and issue briefs were distributed to Members and committees. A good portion of those were used to inform constituents. Developments in web technology make it possible for CRS to further assist Members and committees in the electronic distribution of CRS products at your election. I believe that the direct disclosure of the information residing on the CRS home page could have significant congressional, operational, and legal implications both for the service and the Congress.

To briefly summarize this concern: First, the proposal may affect your relationship with your constituents, who have historically gone directly to you when they have questions on legislation. Second, it may also change the way CRS frames and analyzes legislative issues. Third, the proposal raises legal questions, such as those related to protection of confidentiality under speech and debate, and copyright obligations. Finally, the proposal could have significant operational costs for CRS.

Mr. Chairman, I would have similar concerns if we were discussing direct public access to the legislative information system. I would like to submit for the record and your consideration, additional materials considering the estimated cost of implementing the legislation, the history of congressional actions on this issue, and legal and constitutional issues involved for CRS and the Congress.

PREPARED STATEMENT

I would be pleased to discuss further any part of our budget request, as well as answer any questions you may have.

Thank you.

[The statement follows:]

PREPARED STATEMENT OF DANIEL P. MULHOLLAN

Mr. Chairman and Members of the Subcommittee: I am very pleased to appear here today to discuss the fiscal year 1999 budget request for the Congressional Re

search Service. I would like to outline briefly the accomplishments of the Service, to discuss the challenges facing us in the near future, and to assure you that we have and will continue to focus our efforts on supporting the legislative work of the Congress in an effective manner within the fiscal decisions you make.

SUSTAINING THE QUALITY AND SCOPE OF CRS SERVICES

The budget we submit for your consideration today is based on our statutory mission to assist the Congress in the analysis of legislative proposals. To fulfill that mission, it is vital that we maintain, without further diminution, our analytic and research capacity. To do this, we seek funding for three purposes: first, to cover mandatory personnel costs; second, to begin a succession initiative to address the likely loss of a large number of CRS experts between now and 2006; and third, to fund the price level increases which support the conduct of our research and the delivery of our products.

Ninety percent of the CRS budget funds personnel; therefore, the most significant item in our request is for mandatory personnel costs. As part of a legislative civil service, we are required, by law, to make mandated pay raises and to provide within-grade increases and promotions when staff meet the standards of their position plans. As you know, since 1992, CRS staffing has decreased by nearly 100 people due to funding constraints. If these costs are not fully funded, we will have no choice but to reduce our staff further. While we have striven to manage reductions in the past so as to avoid dramatic cuts in service, the cumulative effect of less than full funding for all mandatories is a systematic reduction in our capacity to provide analysis on legislative proposals. In short, further cuts to staff threaten our ability to fulfill our statutory mission.

Succession initiative

Our budget request also seeks funding to assist us in carrying out our succession initiative, which is designed to address an additional threat to our analytic capacity. As I stated in my testimony before this Committee last year, by 2006, half of CRS's current staff will be eligible to retire. Nearly two-thirds of those eligible, about 250 people, have told us that they indeed plan to leave during that time frame. These losses pose a major challenge to our ability to ensure the continuation of our analytic services to the Congress.

The risk CRS faces today is the result of two circumstances. First, the Legislative Reorganization Act of 1970 expanded the statutory mission of the Congressional Research Service to provide the Congress with “analysis, appraisal, and evaluation of legislative proposals" in order to assist the Congress in: (A) determining the advisability of enacting such proposals; (B) estimating the probable results of such proposals and alternatives thereto; and (C) evaluating alternative methods for accomplishing those results; and, by providing such other research and analytical services * appropriate for these purposes, otherwise to assist in furnishing a basis for the proper evaluation and determination of legislative proposals and recommendations

*

Based on an underlying belief that the Congress needed this expertise, and that it could most effectively and efficiently meet that need through a nonpartisan, shared pool of experts, the Congress subsequently provided funding for a significant increase in CRS staff capacity to implement the Act. Many of the staff hired to fulfill these responsibilities have stayed to make CRS what it is today and are now, or will soon become, eligible to retire.

The second circumstance is the one which has prevented us from fully addressing this demographic situation before now. As a result of the budget constraints we have experienced since 1992, the Service has been unable to fill behind most of the resignations, deaths or retirements of analysts and specialists. Therefore, CRS does not have sufficient staff ready to take over many of the complex areas of analysis as our most experienced staff leave. But for this downsizing, CRS would now have on its staff a greater number of junior and mid-level analysts and information specialists developing their subject expertise, analytic skills, and knowledge of the legislative process and congressional environment. If we had been able to replace staff who left as a result of normal attrition over this time period, we would be in a better position to sustain our analytic capacity even as our most senior people retired. Our first step in managing such a wholesale loss of senior experts was to develop and implement a continuous process to assess the risks associated with this lossa risk that is particularly threatening at a time when the Congress faces relatively high turnover in staff and Members, and the complexity of public policy debates increases. We conducted a staff survey to determine the scope of the problem, and undertook a subsequent assessment of the impact of each individual's retirement plan on the Service's overall analytic capacity, by subject area, between now and 2006.