Beginning in fall 1993, the examiner staff began to decline because of retirements, buyouts, budgetary constraints, and resignations. Over the next three years, the Examining division lost 26 FTE's, or 38 percent, of its examiner staff. Hiring freezes caused by the Copyright Office budget constraints, and the development of the new Library of Congress hiring system prevented the Office from replacing examiners until 1997. Today, there are 52 examiners on staff, only 80 percent of 1993 levels. To compensate for reduced staff, the Examining Division has held facilitative sessions with staff, offered overtime, cross-trained and utilized staff from other divisions, initiated the use of email and fax correspondence with applicants, streamlined correspondence with frequent applicants, networked correspondence preparation, and initiated better use of technician staff to process uncomplicated claims.

Although these measures are effective in reducing more backsliding, they are not sufficient to recoup the losses. Sixteen new examiners have been hired and are becoming productive; however, the arrearage remains at 125,000 claims. While the division may be able to hold the arrearage at the current level when the new hires are fully trained, there are not enough examiners to reduce the backlog and achieve currency.

To build a cadre of copyright examiners sufficient to ensure the issuance of timely copyright registration certificates will require the funding to hire eight additional examiners (GS-7) which is requested in the fiscal year 2000 budget.

We are also seeking authority to reimburse the National Records Center ($268,204) for storage of Copyright Office records.

Restructuring the Registration Process in Fiscal Year 2000

To effectively serve the public and the copyright community in the new Millennium, the Copyright Office must restructure and streamline the registration and recordation processes. Funding for this effort is included in the fiscal year 2000 budget request. Restructuring will improve public service, enhance operational efficiency and security, contain costs, respond to the need to acquire and process works fixed in new formats, and meet the demands of the copyright community for a reduction in the claims arrearage and the speedier processing of claims.

This initiative entails: hiring eight additional copyright examiners (GS-7) to achieve and maintain currency in registration of copyright claims and one automation specialist (GS-13) and increasing digital storage capability for CORDS, as stated earlier; hiring a project manager, (GS-15) NTE 5 years, who is an expert in Copyright Office procedures, to oversee and coordinate the restructuring project throughout the planning and implementation phases, work with the contractors, head up a task force of Copyright Office staff, communicate with and collect input from management, staff, unions, and customers, and evaluate the statutory impact, if any, of restructuring; and hiring a consultant to conduct a process redesign study to develop and implement a restructuring plan for the Office's major registration processing operations and associated functions to enhance operational efficiency and reduce handling of materials.

There are numerous benefits to restructuring the registration process. The value of our records is greatest when up-to-date information on new works is expeditiously made available to the public. Increased staff and more efficient operations will maximize the timeliness of additions to and public accessibility of our records. Office restructuring and electronic filing via CORDS for a growing percentage of applicants are needed to maintain reasonable operating costs in future years and keep user fees, which are based on cost, from escalating to levels unacceptable to the Congress and beyond the means of copyright owners, particularly individual authors. Restructuring will permit better control over material and result in fewer opportunities for misplacement and pilferage. Increasing the use of electronic filing via CORDS will reduce the quantity of materials that require physical handling and storage. Security Program

The Library of Congress has embarked on a major security effort with regard to its collections. The Copyright Office with the Library of Congress has developed a multi-year plan to improve security. In fiscal year 1998, the Copyright Office conducted five Risk Assessments, that identified control weaknesses and developed plans of action to reduce our vulnerability. In fiscal year 1999, the Copyright Office began implementing these plans. Additionally, the Office received fiscal year 1999 funding to install card readers, institute ownership markings and bar coding systems, and security devices for print and non-print material.

Fee Increases

On February 1, 1999, I submitted to Congress a proposed schedule of fees for filing copyright claims, recording documents and providing related services. These fees would replace the fees specified in section 708(a)(1)-(9) of the copyright law. Our

goal is to implement these and other new fees on July 1, 1999. Our proposal would increase the filing fee for basic (as opposed to supplementary or renewal) registrations from $20 to $30. Other statutory fees, such as those for recording a document, researching our records and providing a report of our results, will increase to levels necessary to recover costs. The new fee structure is expected to provide 70 percent cost recovery for registration and related services. In fiscal year 2000, higher fees are expected to increase the Office's receipts by $4.8 million, fund the budget initiatives and reduce the Office's net appropriation by $2,336,000.

With respect to increasing our fees, I followed the provisions of the Technical Amendments Act, effective November 13, 1997, which require the Register of Copyrights to conduct a study of costs incurred by the Office for the registration of claims, the recordation of documents, and for other related services. On the basis of the study and public policy considerations, and subject to congressional review, registration, recordation and related statutory fees may be raised to recover reasonable costs, including an adjustment for inflation. However, the new fees must be fair and equitable and support the objectives of the copyright system.

The Office worked with two consulting firms. One firm provided cost accounting expertise that produced an in-depth analysis of copyright costs; the other provided expertise in the new federal "Managerial Cost Accounting Standards." In order to address the need for fees to be fair and equitable and to give due consideration to the objectives of the copyright system, I sought information from authors, copyright owners, the general public and from the Library of Congress.

The Office published a notice of proposed fee increases that contained two alternative preliminary fee schedules, each of which would recover the costs for providing registration and other statutory services, and requested written comments on the two fee schedules and offered the public the opportunity to testify orally at a public hearing. The Office received significant input from the intended beneficiaries of the copyright system and users of Copyright Office services. Organizations representing authors and small publishers urged the Office to set fees lower than the amounts required to fully recover basic registration expenses, noting that registration is required for enforcement of a copyright, and that registration before infringement takes place is generally necessary to obtain the crucial remedies of statutory damages and attorneys' fees.

Many commenters mentioned the hardship higher fees would impose on individual authors, noting that the Internet has decreased their ability to regionalize the sale of their works-sales are now global. They urged that the fee be kept at its current level and asserted that the lower fee for individual authors proposed in the second schedule was too high and would result in decreased applications for copyright registration.

I evaluated all testimony and comments and took into account the possibility that a large increase in fees could result in a concomitant decline in registrations which would jeopardize the stability of the registration system and have a long-term effect on user fee revenues. It would also erode the Office's receipt of valuable deposits, which form the underpinning of the Library's Americana collections. The schedule of fees sent to Congress proposes increasing the basic registration fee by 50 percent; however, some other fee services would increase by as much as 225 percent. Justification

Determining an exact figure for an appropriation reduction in fiscal year 2000 is an extremely difficult task because of the uncertainties related both to the precise fees to be assessed and the impact on demand for services. Further, a fee increase carries its own costs, including handling claims arriving with insufficient fees, which, during the first several months, may represent nearly half of all submissions. History demonstrates that any fee increase negatively affects demand for services for at least the first year following the increase. The Office's income projections are based on an expected 20 percent decline in demand for registrations, the fee service which provides the largest amount of revenue.

Since income in fiscal year 2000 depends on an unpredictable decline in demand and the possibility that our proposed fees might not meet with Congressional approval, and thus might not be implemented at all, the Office believes it is essential to adopt a conservative approach and request a moderate net appropriation reduction and a moderate Offsetting Collections Authority increase for fiscal year 2000. If, as is hoped, income exceeds expenditures, the Office can apply that income toward an appropriation reduction for fiscal year 2001, a year where income projections can be calculated with more certainty based on a half year's experience under the new fee structure.

Summary

In its fiscal year 2000 budget request, the Office is seeking authority to fund new initiatives. They include the funding to hire eight examiners (GS-7), one project manager for our restructuring efforts (GS-15) and one automation specialist (GS13) and funding to increase our digital storage capacity ($70,000), and to conduct a process engineering study ($400,000) to restructure our processes plus equipment and software ($16,000) for the project manager. We are also seeking authority to reimburse the National Records Center ($268,204) for storage of Copyright Office records.

Funding our operational improvements, including increasing our digital storage space for claims that are submitted through CORDS, would support our efforts to become more efficient, to improve public service, and to transition to the global networked society of the 21st century. Approval of our request would still allow you to reduce the Office's net appropriation by $2,336,000.

Senator BENNETT. Thank you very much.

I have a few questions, some of which I will submit to you in writing. But first I think the thing we should do now is this.

Mr. Mulhollan, since we are also going to focus on your budget as an independent part of the overall Library budget, perhaps we ought to have you make a few comments before I get into questions. Then the questions can go back and forth.

OPENING REMARKS BY DANIEL P. MULHOLLAN

Mr. MULHOLLAN. Thank you, Mr. Chairman.

It is a pleasure to appear before you and Senator Feinstein to discuss the fiscal year 2000 budget request for CRS. I want to thank this subcommittee for the support it has given to CRS in the past, for the confidence you have shown in us, and for the close working relationship that you have made possible.

As the shared resource of Congress, I believe our request will continue to permit CRS to provide the highest level of legislative assistance both economically and efficiently.

Our budget request contains only those funds necessary to maintain services to the Congress now and into the future.

CRS REQUEST FOR FUNDING

Our request for funding has two components. The first is to cover mandatory costs of personnel, which constitute 90 percent of CRS's total operating budget. The other 10 percent of costs are allocated for the tools required to perform research and analysis.

We are also asking that the fiscal year 2000 appropriation cover cost increases due directly to the effects of inflation.

CRS SUCCESSION PLAN

A second component of the request is to fund the second year of our 3 year succession plan for maintaining research capability, one of a number of steps we have taken to preserve institutional memory and to insure continuity of service.

The plan is designed to insure this analytic expertise for Congress by enabling current staff to transfer to new staff their institutional memory, knowledge of the legislative process, and commitment to confidentiality, objectivity, timeliness, accuracy and responsiveness.

As in the past, we have made every effort to hold down costs and, at the same time, insure continued Congressional access to our expertise and high productivity. Let me assure you that we re

main committed to work with our fiscal year 1999 budgeted fulltime equivalent positions.

Mr. Chairman, Senator Feinstein, in the past year we have taken steps to insure that CRS remains a cost effective shared resource to the Congress. Our activities are designed to secure our research and analytic capacity and to facilitate access to our services.

Some examples include: a large-scale realignment of our staff resources, which entails clustering experts and their subject responsibilities around major public policy issues, thereby broadening the policy context of research units; refining the focus on the current legislative agenda of the Congress; and streamlining research management.

CRS HOME PAGE

We have also been enhancing the CRS home page to meet Congressional needs, including making all CRS products available electronically-more than 2,800-and piloting a new service, which we call electronic briefing books, as well as expanding our capacity to link CRS products to legislation.

Further, as part of our continuing efforts, we are developing and testing a more sophisticated legislative planning system and continuing our professional development details for CRS staff.

In terms of support for the research process, I would like to bring you up to date on three activities.

CRS Y2K COMPLIANT

First, as a result of early planning, all of CRS's mission critical computer systems, for which we are directly responsible, are now Y2K compliant.

A second activity, support for the Legislative Information System, is also progressing on track. In 1998, CRS, with the Library, completed the major tasks approved by the oversight committees and in 1999, our primary focus is on insuring that the requirements for Y2K are fully addressed.

The major task now is to complete the work for exchanging legislative data between the Library and each chamber.

The target date for completion of this work is the end of June.

CRS SECURITY ISSUES

Information security issues also remain a high priority because of our technical link to Congressional systems and our own confidential relationship with you. We are implementing recommendations that arose from a 1997 National Security Agency study and our own continuing review of the security of all CRS systems.

PUBLIC DISSEMINATION OF CRS PRODUCTS

Finally, as the subcommittee is aware, legislation has once again been introduced to make the entire inventory of CRS products on the CRS home page directly available to the public via the Internet.

We appreciate the sponsors' expression of the high regard for our products and the usefulness of these products in informing the public's understanding of the legislative issues. We also appreciate

that this year the sponsors have sought to address some of the concerns previously identified which would adversely affect our ability to service Congress if this proposal is implemented.

However, I consider myself obligated to call to the committee's attention certain unintended consequences still presented by the current version of these proposals. With the committee's permission, I would like to submit for the record analyses which focus on the legal issues, costs, and other implications of these bills.

Senator BENNETT. Without objection.

Mr. MULHOLLAN. Thank you.

[The statement follows:]

PREPARED STATEMENT OF DANIEL P. MULHOLLAN

Mr. Chairman and Members of the Subcommittee: It is a pleasure to appear before you today to discuss the fiscal year 2000 budget request for the Congressional Research Service. I first want to thank this Subcommittee for the support it has given to CRS in the past and to express my gratitude for the confidence you have shown in the Service and the close working relationship which you have made possible.

My testimony presents the CRS budget request for your consideration, outlines briefly how your continued support will allow us to offer improved services to the Congress, and describes ways in which CRS is meeting the changing needs of the Congress by efficient and effective use of staff and other resources.

Mr. Chairman, as we at CRS meet the challenges of the new year and take advantage of the opportunities arriving in the new millennium, we remain focused on meeting the many needs of the Congress and we remain committed to supporting your policy deliberations throughout the legislative process. We are dedicated to the values imbued in the Service's charter-namely, to provide the Congress with comprehensive research, analysis, and information services that are on-time, objective, non-partisan, and confidential. We also remain vigilant to ensure that we provide cost-effective services to the Congress. As a shared resource serving all Members and committees, I believe that CRS provides the highest level of legislative assistance economically and efficiently.

CRS BUDGET REQUEST

The budget request I submit today contains only those funds necessary to maintain CRS services to the Congress, now and into the future. Our request for fiscal 2000 is $71,255,000, an increase of $4,131,000 over fiscal 1999. This requested increase has two objectives: (1) to sustain current services and cover the increased cost of our current staff and nonpersonals, and (2) to fund the second year of our three year succession plan for maintaining research capacity, preserving the institutional memory, and ensuring continuity of service over the next few years, as half of our staff become eligible to retire.

We have made every effort to hold down costs and at the same time ensure continued congressional access to our expertise and high productivity. Our request for maintaining current services covers mandated increases in compensation, namely cost-of-living increases ($3,424,148) and price level increases in nonpersonals ($147,800).

The second part of the request will help us ensure that we can maintain our research capacity and services to the Congress at a time when many of our most expert and experienced staff will retire. The funding requested, $559,052, will permit CRS to continue to hire entry level staff in anticipation of this large number of retirements. Let me assure you that we remain committed to work within our fiscal 1999 budgeted full-time equivalents.

MAINTAINING CURRENT SERVICES

Analytic and Information Research Expertise

CRS is the only resource available to the Congress that is dedicated to providing balanced, nonpartisan, and confidential policy analysis to Members and congressional staff at all stages of the legislative process. We have worked hard to ensure that we offer these services in the most efficient and effective manner possible. In fiscal 1998, CRS responded to more than 560,000 congressional requests for research, analysis, and information, assisting every Member and committee of the