Mr. SHIPP. Yes, and that was the idea of setting up a panel of experts. And as I have indicated in my statement, the conclusions and the recommendations and even the language in the report reflect the thoughts and the writing of the panel members to a degree unusual in this kind of work.

The panel set about to gather information by holding public hearings, receiving testimony from 53 separate witnesses. The panel commissioned some consultant reports on various aspects of the independent agency question-issues it was particularly concerned about. An important report was completed by the National Academy of Public Administration, giving recommendations on the kinds of management authorities that a Social Security Administration should be granted. Another contractor was a health care consulting firms on the issues of health care policy and administration, and a third was with a very qualified attorney who had worked extensively on the extent and nature of independence that could be granted in setting up an agency. We wanted to give the panel members a range of options to consider.

At that time, as you know, Mr. Chairman, the Social Security Administration was perceived to suffer from major problems. The trust funds had gone through two major financial crises in the preceding decade. Major changes in program responsibilities had occurred, with the requirement to implement the Supplemental Security Income Program in 1974 and the removal of Medicare from the agency in 1977. There had been problems with SSA's automation plans. At the time this panel met and did its study, 9 commissioners had presided over the agency in the previous 12 years. Four of those nine had been in acting capacities only. And SSA had undergone a series of disruptive reorganizations-three or four in the previous half dozen years. An the survey data, some of which you mentioned earlier, on the decline in public confidence, was available to the panel and to the staff.

The panel's recommendations came in three areas. First, the panel concluded that an independent agency, if it were to be set up, should include only the OASDI and SSI programs. The panel considered carefully the question of Medicare, and decided for a number of reasons that Medicare should not be part of an independent Social Security agency.

There were three major reasons for this: (1) it would make more difficult the task of strong operational management of the Social Security program itself; (2) it would make more difficult a coherent approach to health care policy in the executive branch, and (3) it would leave the Department of Health and Human Services without sufficient responsibilities to merit departmental status.

On the other hand, the panel concluded that with the Health Care Financing Administration-Medicare and Medicaid—still in the Department, it would continue to constitute a coherent Cabinet unit. In fact, the name Department of Health and Human Services would describe the Department's functions even more accurately. At that time SSA included other smaller programs. I guess everything is small compared to Social Security. These other programs-AFDC, Child Support Enforcement, Refugee Assistance, and Low Energy Assistance-were part of the Social Security Administration in 1981. These programs have subsequently been re

moved from the Social Security Administration and set up in a new Department of Health and Human Services agency. The panel's report recommended that an independent agency not include these four programs, and that point is moot, of course, now. Senator MOYNIHAN. I guess I should, of the many, many things I do not know, I did not know that AFDC had been in Social Security technically.

Mr. SHIPP. Yes.

Senator MOYNIHAN. They removed and it has not been seen since. I mean where it went, nobody knows.

Mr. SHIPP. Well, it was out and then it was in, and then it was out again.

Senator MOYNIHAN. Yes.

Mr. SHIPP. The panel recommended a single administrator to be the head of this agency with a nine-member advisory board. The nine-member board would have advisory functions only. The operational responsibility, the management responsibility, would be lodged in a single administrator.

The panel did consider its charge carefully to evaluate the merits of a three-member board and decided against it, I think largely on grounds that a clean and crisp organizational responsibility should be lodged in a single official. Also the fact that the the panel recommended that this administrator have a 4-year term of office, to be consistent with the term of the President. In other words, a new President could appoint a Social Security Administration for a 4year term.

The final set of panel recommendations involved the delegation of management authorities. You have discussed already, Mr. Chairman, some delegation of authorities for personnel matters, for facilities, and for computer acquisitions. The panel's recommendations were consistent with these suggestions and with ideas for management authority delegations that have been developed since 1984.

The panel would have established a transition process for moving from the current system to a new independent agency. The Commissioner of Social Security at the time would be named acting administrator of the new agency. This acting administrator would be charged with responsibility for consulting with the GAO, with the GSA, and with the OPM and agreeing on how these delegations might take place and what kinds of oversight responsibilities still should remain with the regulatory agencies.

With that, Mr. Chairman, let me conclude. If you have any questions, I will be glad to try to respond to them.

[The prepared statement of Mr. Shipp appears in the appendix.] Senator MOYNIHAN. We will hear your colleague, Mr. Delfico. Mr. SHIPP. Yes.

Senator MOYNIHAN. And we welcome you, sir

Mr. DELFICO. Thank you.

Senator MOYNIHAN [continuing]. After that formidable study on the Social Security trust funds, which you did for this Committee and which still echoes and is still unresolved, but you asked the right questions and they remain to be answered.

Good morning again, sir.

STATEMENT OF JOSEPH F. DELFICO, DIRECTOR, INCOME SECURITY ISSUES, HUMAN RESOURCES DIVISION, GENERAL ACCOUNTING OFFICE

Mr. DELFICO. Good morning and thank you, Mr. Chairman.

I would first like to touch on a few key points regarding S. 216the bill to create an independent SSA. Since the National Commission on Social Security Reform advocated independence about 8 years ago, many changes to the agency's operational environment have occurred which could affect the perceived need for independ

ence.

The financial crisis surrounding the Title 2 trust funds, as you know, has subsided. The threat of wholesale automated data processing systems failures has also been reduced, and our work shows there has been major management improvements over the past years at SSA.

What we found is that SSA's longstanding management problems were caused by the lack of, in our view, strong, stable leadership, the lack of adequate management processes, and the lack of sharply focused and consistent priorities within the agency. Corrections to any of these problems, or at least to most of them, can occur whether SSA is independent or continues to be part of HHS. But, in our view success is more likely if a single administrator runs the agency rather than a board.

Under S. 216, as you know, the leadership of SSA is invested in a three-member board which is assisted by an executive director to direct operations. We believe the board structure as envisioned in the legislation would have an advantage of helping to improve the policy development activities within the agency.

However, our work has convinced us that the board structure has significant operational and management weaknesses. We testified in April of this year that we believe that the most effective form of leadership would be a single administrator with a fixed term of office. Our work has shown that boards are not as effective as single administrators, particularly for managing operating agencies like SSA.

Over the years, we compared the board structure with that of a single administrator for several Federal agencies, including the Nuclear Regulatory Commission, the Federal Communications Commission, and the Consumer Product Safety Commission. We concluded that these agencies would have been more effective if they were managed by a single administrator, and we have reports on each one of these agencies.

There is other evidence which suggests that boards are not as effective as single administrators. Studies such as those by the Hoover Commission, the Ash Counsel, and the Railroad Retirement Commission have recommended changes to improve board-run agencies or found little value in the board leadership of agencies and have advocated their abolition.

Given the problems that SSA has experienced in its operation and the frequent need for direct and swift, clear management action, we do not believe that it should have a leadership structure that could result in diffused and sometimes confusing direction over its operations. The best leadership structure, as I mentioned

earlier, for an independent SSA would be a strong single administrator as the head of the agency appointed for, we believe, an 8year fixed term and assisted by an advisory board-

Senator MOYNIHAN. Eight years.

Mr. DELFICO. Yes, with an advisory board for policy matters.

With regard to the personal earnings and benefit statement and the legislation that you have introduced, we stated last year in our testimony before the Subcommittee that we believe there is merit in providing covered workers with better information about their Social Security earnings and benefits as would be required by your legislation.

One of the several advantages is that, in our view, it provides people with the opportunity to verify the accuracy of their earnings records and if necessary, to resolve any discrepancies they may have. The failure to post or to accurately record earnings information could affect both workers' eligibility for and the amount of Social Security benefits.

As we have reported in the past, SSA recorded $58.5 billion less in workers' earnings than the Internal Revenue Service recorded for the period 1978 through 1984. Because of this, 9.7 million individuals could have uncredited earnings and that beneficiaries lost, on the average nearly $17 a month. SSA is currently working though to resolve these discrepancies, and we are working with them to do that.

Since the inception of PEBS, SSA responded to nearly 4.6 million requests for earnings statements from covered workers. In turn, through April 1989, these statements generated about 54,000 cases in which earnings discrepancies were found by the requesters. SSA estimates that 3 percent of all requested earnings would result in follow-up work to clear up discrepancies. In the long run, PEBS may be SSA's most effective tool for assuring the accuracy of earnings records, and we are in much favor of that.

However, before legislatively mandating a personal earnings and benefits statement, the Subcommittee should consider the range of costs for doing so. Along these lines, SSA is currently conducting a pilot test to determine whether it is feasible and useful to periodically send similar statements to all covered workers. This test will also determine the costs and the resource impact, as well as the operational problems. This effort should be done in about a year from now at which time we will be able to and you will be able to determine the alternatives and costs for routinely providing earnings and benefits statements to all covered workers.

Mr. Chairman, that concludes my testimony. We would be happy to answer any questions if you have any at this time.

[The prepared statement of Mr. Delfico appears in the appendix.] Senator MOYNIHAN. Yes.

Listen, the two of you, thank you very much, and I am going to ask you to do something which I know both of you like to do, which is to think. Go away and think about this subject for us a bit.

We have, I believe, something different from a problem in public administration here. I think we have a political problem, and you are, both of you, distinguished public servants and you have learned to make that distinction.

You, Mr. Delfico, say, for example, "given the frequent need for direct, swift and clear management action." I do not think there is a frequent need for direct, clear, and swift management action in Social Security. Why do I think that? Because it works so well in spite of the leadership it has had in the last 20 years. I mean, you know, despite everything government could do at the top, the checks go out. They are never a day late or a dollar short. Thirtynine million people get these checks.

But on the other hand, many do not believe they are going to get them. That is the political problem. We have the big problem that you focused on, which is that we are getting a billion dollars a week in surplus and it comes from a payroll tax-the first penny you earn as a waitress, you pay taxes on it-and that money is being used to finance the current consumption of government.

I mean I do not want to get out of control here, but the Soviet Union has just introduced a graduated income tax and we have just abolished ours, you know. That has got me confused, and we found $28 billion sort of going off in one direction and nobody knew.

My thought about a governing board is simply that there be a minority voice there. You know, if the Democratic party, which is the party of prudence and care and concern, should become too prudent, you know, say maybe a Republican might want to say, "Loosen up a bit, friends and take care of the widows," or vice

versa.

The voice that needs to be heard is the voice of large issues. "Now just wait a minute. Are we saving this money or are we not?" The administrative issues or the management issues are of a kind that can be routinized and, you know, you are not a captain on a bridge where you have to make a quick decision. You know, "What is that over there? Is that a missile coming at me, or are those swallows?" And it can make a difference whether you get it right.

Will you think about that? Because we know and understand and respect advice. But I think it is up to us to perhaps give you the contrary case, and I do not think we have done that well. But do you hear a little bit about what I am saying?

Mr. DELFICO. Mr. Chairman, I do, and we have struggled over this ourselves. Clearly, in the 4 years we have been dealing with this particular issue, the line between politics and operations, policy and operations wavers back and forth, but there is a clear line. We, as you see from our statement, and very concerned about the management and the administration of SSA.

Senator MOYNIHAN. Yes.

Mr. DELFICO. It is the most complex agency, in my view, in government to run. It runs like no other agency, and they have done a marvelous job with a single administrator. Our concern is to change horses in midstream, as far as the management is concerned, with a board. Boards are usually indecisive, slow, and ineffective in running agencies. This gives us some-

Senator MOYNIHAN. Well, in another capacity we have watched that with some considerable concern in the nuclear regulatory body. But we have issues of public confidence.

Mr. DELFICO. I understand.