Let me once again express my appreciation for having the opportunity to appear before the Senate Commerce, Science and Transportation Committee to discuss the future of the Department of Commerce. I have had a very constructive dialogue with you and members of the Commerce Committee on this subject. I continue to welcome your thoughts on this matter, and I hope that our dialogue can continue in the same open fashion as it has in the past.

I was particularly pleased to have the opportunity to explain what I see as the synergy within the Department of Commerce. All of the units within the Department fit well together and support each other in a common mission to enhance economic opportunity for all Americans by assuring economic growth and job creation. As my testimony stated, it would clearly be contrary to our Nation's interest to break up this winning team.

As you requested, I have enclosed responses to several post hearing questions. I have also enclosed the transcript from the hearing which has been edited for clarity.

Post Hearing Questions for the Record

Senate Committee on Commerce, Science, and Transportation

Hearing on the Future of the Commerce Department

Submitted by Chairman Larry Pressler

General.

Question 1. The legislative proposals to abolish the Commerce Department claim it would save the taxpayers $7.8 billion over five years. Do you agree with this assessment, and, if not, in what specific ways is this estimate flawed?

Answer:

As OMB Director Rivlin noted when the Abraham/Chrysler bill was introduced, she doubted that savings would occur from dismantling Commerce if implemented. We concur with her assessment. By using the FY 1995 CBO baseline from which to calculate savings, the bill is more than $5 billion short of minimum expenditures that must be made for continuing programs. This is so because:

There are errors and omissions in the Abraham/Chrysler estimates;

The Abraham/Chrysler bill failed to include as an offset to savings the costs associated with dismantling the Department such as RIF costs, dislocation costs, disposal of facilities and operation of a Commerce Programs Resolution Agency;

There is no ability to achieve the proposed across the board cut of 25 percent below FY 1994 levels for remaining Commerce programs; and,

Savings that are already built into the President's budgets will occur without the Abraham/Chrysler bill.

OMISSIONS AND ERRORS

The Abraham/Chrysler estimates, as scored by CBO, make several substantial omissions and errors in their assumptions.

The largest is the CBO baseline that does not include an estimate for
the decennial census in the year 2000. The five year total decennial
shortfall from 1996 to 2000 is $3.6 billion, and for all Census
programs exceed $4.3 billion. Also the Abraham/Chrysler bill had
claimed $.8 billion from Decennial Census improvements with the
$7.765 billion saving estimate. However, since no funds are in the
CBO baseline for the Decennial, the funds cannot be saved.

2

Within NOAA, the bill estimates omit funds to pay for continuation of weather satellite systems and completion of the Congressionally approved Weather Service Modernization program. The costs for procuring additional satellites and Weather Service contracts alone exceed $1.5 billion above the CBO baseline. These costs are required to ensure future continuity of weather forecasts and warnings nationally.

The Abraham/Chrysler bill makes two substantial errors in PTO. The Omnibus Budget Reconciliation Act of 1993 requires $325 million to be appropriated from the PTO Surcharge Fund. The bill would make those funds directly available to PTO, but does not identify an offset. Therefore, in terms of the deficit, the savings are overstated by $325 million. Further, PTO collects 100 percent of costs in fees now. If PTO must reduce costs 25 percent, or $375 million, as called for in the bill, no reduction will accrue to the deficit because PTO already obtains these fees directly.

The funding for the budget of the United States Trade Representative
(USTR) is $21 million annually. In FY 1995 alone, ITA is providing
USTR direct assistance of $12.1 million from Trade Development and
International Economic Policy. These two activities are terminated by
the Abraham/Chrysler bill. The FY 1996 termination costs for ITA
under the bill would be $106 million or 500 percent of the USTR
budget, but are not included in the Abraham/Chrysler estimate.

The Abraham/Chrysler bill assumes that Treasury, at no additional cost, will monitor the EDA portfolio of grants. We estimate the three year cost of closing out EDA at $26 million plus RIF costs regardless of organization location.

Establishment of a Commerce Programs Resolution Agency is assumed in the Abraham/Chrysler bill, and would operate for three years. We believe that it would cost approximately $150 million for that period, about the same as the Office of the Secretary and Inspector General currently cost.

UNFUNDED COSTS IN THE CHRYSLER BILL

The Abraham/Chrysler bill does not reflect the costs of closing
agencies, terminating employees, dislocation and operating a Commerce
Programs Resolutions Agency. We estimate these costs at $2 billion,
and they are shown in Table 1.

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A total of 12,685 FTE would be eliminated under the bill assumptions, 35 percent of existing staff, in the first year after enactment. The closeout costs, RIF costs and dislocation costs would total $1.526 billion for all of Commerce. The balance of the $2.001 billion is $325 million for an offset to PTO appropriations requirements under OBRA of 1993 and $150 million for a three year Commerce Programs Resolution Agency.

ABILITY TO ACHIEVE 25 PERCENT SAVINGS FROM OVERHEAD

The basis for the Abraham/Chrysler 25 percent cut below FY 1994 funding totals is not stated in the legislation or the press release. Congressman Chrysler indicated on July 24 that the cut was related, at least in the case of PTO, to an overhead rate Commerce now charges bureaus.

Commerce does not charge its bureaus any overhead rate. While Commerce sells services through the Working Capital Fund, bureaus purchase an average of 1.4 percent of their available funding in services. See bureau Working Capital Fund estimates in Table 2. All Commerce oversight is funded through the General Administration account, $36 million in FY 1995 or about .7 percent of the Commerce total appropriation.

The only way to achieve a savings of 25 percent in programs not
terminated would be through further program reductions.

SAVINGS IN PRESIDENT'S BUDGET

The budget President Clinton submitted for FY 1996 already contained savings built into the budgets for FY 1996 - FY 2000 that would have occurred without the Abraham/Chrysler proposals. These savings total $1.483 billion for the period and are shown in Table 3.

Savings are shown for program terminations, program reductions,
FTE/Administrative reductions and the President's Reinventing
Government program. The individual program terminations and
reductions proposed in the FY 1996 President's budget are listed in
Table 4. The FTE and Administrative savings result from the order to
reduce FTE by 272,900 by FY 1999 and to reduce administrative
expenses by 14 percent by FY 1997.

Two reinventing government savings estimates are shown for increasing
Census data sales and for privatizing specialized weather services. The
President is considering additional Commerce reinvention proposals
which are not included in these totals.

COMPARISON OF S. 929 AND H.R. 2076 "SAVINGS"

The Abraham/Chrysler Bill saves $5.370 billion from program terminations, $78 million from privatization and $2.317 billion from the 25 percent across the board cut provision for remaining programs. A breakout of the reductions shown by Commerce bureau is in the attached Table 5. The reductions result from program terminations, not from dismantling Commerce.

The major savings is from the elimination of the Office of the Secretary, $250 million over five years. Sixty percent of this amount provides procurement, general counsel, accounting, budget, security and building support which would have to be replicated in the agencies receiving Commerce program transfers.

Therefore, actual savings from eliminating Executive Direction at Commerce would be no more than $20 million per year. These savings would not be realized until the Commerce Program Resolution Agency is dissolved, three years after Abraham/Chrysler enactment.

SUMMARY OF ABRAHAM/CHRYSLER BILL SAVINGS

Abraham/Chrysler savings are overstated for the five year period,
1996-2000, as follows:

Congress needs to carefully evaluate the components of the Joint Budget Resolution. For example, in Commerce alone, more than $5 billion in costs for the decennial census and Weather Service contracts