CRS Reports

United Kingdom Votes to Leave the European Union

Leave Campaign Wins Referendum on EU Membership Nearly 52% of British voters in the June 23 referendum on European Union (EU) membership answered that the United Kingdom (UK) should leave the EU. The vote on a British exit from the EU (often referred to as “Brexit”) took place after four months of intense campaigning. Among a complex pattern of supporters and opponents of Brexit, the vote pitted Prime Minister David Cameron, who led the campaign to remain, against many members of his own Conservative Party. Prime Minister Cameron subsequently announced that he will step down by October 2016. The vote was the culmination of a decades-long debate in the UK about the country’s EU membership. The UK joined the precursor to the modern EU in 1973, but has long been considered one of the most “euroskeptic” members, having “opted out” of several major elements of European integration, such as the euro currency and the passport-free Schengen Zone. One of the central arguments made by the Leave campaign was that the EU had steadily eroded the UK’s national sovereignty by shifting control over many areas of decisionmaking from Parliament to Brussels. Analysts also attribute the result to the prevalence of concerns about high levels of immigration to the UK, which the Leave campaign linked to the EU requirement for the “free movement of people” among member states. Leave campaigners further argued that EU bureaucracy and regulations held back the UK’s economy, and that in the long term the country would be better off economically outside the EU. Aftermath and Uncertainty Although technically the referendum is only advisory for Parliament, the government asserted at the start of the campaign that it “would have a democratic duty to give effect to the electorate’s decision” and that it would do so quickly. There is no precedent for a country withdrawing from the EU, so a high degree of uncertainty exists about how the separation might work. EU leaders are scheduled to meet for a European Council summit on June 28-29, which might bring some initial clarification about how the process is to proceed. The vote does not force the UK out of the EU immediately. Under its treaty framework, a member country may withdraw from the EU by invoking Article 50 of the Treaty on European Union, opening a two-year period in which the two sides would attempt to negotiate a withdrawal agreement. There is no pre-set timeframe for the notification that begins this process. The timing of the notification is a political decision that could be delayed by holding a Parliamentary debate on the exit beforehand, for example, or by seeking a period of informal talks before triggering Article 50. The main purpose of the withdrawal agreement would be to settle transition arrangements in policy areas, such as the single market, that are covered by the EU treaties. Until the negotiation is concluded, the UK remains a member of the EU and subject to its rules. Details about the future arrangement of the relationship between the UK and the EU are likely to be negotiated as a separate agreement. Many observers believe that the process of negotiating these agreements could take considerably longer than two years to complete. As expressed prior to the referendum by the UK government itself, “a vote to leave the EU would be the start, not the end, of a process. It could lead to up to a decade or more of uncertainty.” In addition to uncertainties about the process and timeline for withdrawal, analysts have speculated on the possible broader consequences of Brexit. Many economists have expressed concerns that Brexit could cause an economic shock that leaves the UK facing weaker economic growth, higher inflation, job losses, and depreciation of the pound (which has already happened), with potentially significant negative consequences for the U.S. and global economies. Advocates of Brexit have maintained that such economic fears are greatly exaggerated. Meanwhile, observers have noted growing unease among some of the many multinational corporations that have chosen the UK as their EU headquarters, who now face a period of uncertainty about UK’s trade and economic arrangements and the corresponding legal and regulatory frameworks. The UK may now also face a period of political instability, with an upcoming contest for the leadership of the Conservative Party and the possibility of an early election (the next general election is not due until 2020). The Brexit vote has begun fueling a renewed push by Scottish leaders for Scotland (where 62% of voters supported remaining in the EU) to separate from the UK and could raise questions for Northern Ireland (where nearly 56% voted to remain). Many have concerns that Brexit could prompt a wider unraveling of the EU. At a time of growing skepticism toward the EU in many member countries, the UK’s departure could lead to more calls for special membership conditions or referendums on membership in other countries. U.S. Views President Obama and other U.S. officials had conveyed a preference for the UK to remain in the EU, a view firmly reiterated during the President’s April 2016 visit to the UK. With the UK commonly regarded as one of the strongest U.S. partners in Europe and one that frequently shares U.S. views, U.S. officials have been concerned that Brexit could reduce U.S. influence in Europe, weaken the EU’s position on free trade, and make the EU a less reliable partner on security and defense issues. The UK is a major trade and investment partner of the United States. Given the degree of interlinkages and wider importance of the UK economy (the world’s fifth largest), a significant post-Brexit downturn in the UK could have negative knock-on effects for the U.S. economy, including investment markets. The U.S.-UK defense and security relationship is deep and long-established, and many aspects of that relationship can be expected to continue. The UK will remain a leading member of NATO, and the bilateral intelligence and counterterrorism relationship is likely to remain close. At the same time, experts assert that Euro-Atlantic cooperation on a range of security concerns may not be immune to the effects of Brexit. Broadly speaking, some suggest that Brexit undermines the notion of “Western unity” in the face of threats such as terrorism and Russian aggression, weakening the collective ability of the United States and Europe to deal with such threats.

Jun 24, 2016

Mileage-Based Road User Charges

A mileage-based road user charge would involve assessing owners of individual vehicles on a per-mile basis for the distance the vehicle is driven. Currently, federal highway and public transportation programs are funded mainly by motor fuel tax receipts that flow into the Highway Trust Fund (HTF). The tax rates, set on a per-gallon basis, have not been raised since 1993, and receipts have been insufficient to support the transportation programs authorized by Congress since FY2008. The long-term viability of motor fuels taxes is also questionable because of increasing vehicle fuel efficiency and the wider use of electric vehicles. Economists have favored the use of mileage-based user charges as an alternative to motor fuels taxes to support highway funding. Congress, in Section 6020 of the Fixing America’s Surface Transportation Act (FAST Act; P.L. 114-94), provided $95 million to fund large-scale pilot studies by states or groups of states to demonstrate “user-based revenue systems” to maintain the solvency of the HTF. Under this user charge concept, motorists would pay based on distance driven and, perhaps, other costs of road use, such as wear and tear on roads, traffic congestion, and air pollution. Mileage-based road user charges could range from a flat cent per mile charge based on a simple odometer reading to a variable charge based on a global positioning system (GPS). Other proposals envision mileage-based road user charges that would mimic the way Americans now pay their fuel taxes by collecting the charge at the pump. Most road user charge systems would require electric vehicle users to pay for their use of the roads. Charging by the mile could in itself provide an incentive to drive less. Such a reaction would reduce revenue, however. Implementation of a mileage-based road user charge would have to overcome a number of potential disadvantages relative to the motor fuels tax, including public concern about personal privacy; the higher costs to establish, collect, and enforce (estimates range from 5% to 13% of collections); the administrative challenge of the billing process given the size of the private vehicle fleet (estimated at roughly 256 million vehicles or points of collection); and the setting and adjusting of the road user charge rates, which would likely face as much opposition as increasing the motor fuels taxes. Experiments with road user charges have been conducted in the United States. Although useful, most of these have been small-scale experiments done at the state or local level. Other countries have implemented full-scale road user charge systems that offer more information on the potential costs and benefits. These include road user charges on trucks in Germany, Switzerland, and Austria, as well as charges on both trucks and automobiles in New Zealand.

Jun 22, 2016

The Pesticide Registration Improvement Act of 2022 (PRIA 5; Division HH, Title VI of P.L. 117-328): Authority to Collect Fees

Jun 22, 2016

Phase 2 Greenhouse Gas Emissions and Fuel Efficiency Standards for Heavy-Duty Vehicles

This report briefly discusses the second phase of greenhouse gas (GHG) emissions and fuel efficiency standards for medium- and heavy-duty vehicles jointly proposed by the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) on July 13, 2015.

Jun 22, 2016

Trade-Based Money Laundering: Overview and Policy Issues

Trade-based money laundering (TBML) involves the exploitation of the international trade system for the purpose of transferring value and obscuring the true origins of illicit wealth. TBML schemes vary in complexity but typically involve misrepresentation of the price, quantity, or quality of imports or exports. Financial institutions may wittingly or unwittingly be implicated in TBML schemes when such institutions are used to settle, facilitate, or finance international trade transactions (e.g., through the processing of wire transfers, provision of trade finance, and issuance of letters of credit and guarantees). TBML activity is considered to be growing in both volume and global reach. Although TBML is widely recognized as one of the most common manifestations of international money laundering, TBML appears to be less understood among academics and policymakers than traditional forms of money laundering through the international banking system and bulk cash smuggling. Nevertheless, TBML has emerged as an issue of growing interest in the 114th Congress, especially as Members and committees examine tools to counter terrorist financing. The U.S. government has historically focused on TBML schemes involving drug proceeds from Latin America, particularly the Black Market Peso Exchange (BMPE). Although a number of anecdotal case studies in recent years have revealed instances in which TBML is used by known terrorist groups and other non-state armed groups, including Hezbollah, the Treasury Department’s June 2015 National Terrorist Financing Risk Assessment concluded that TBML is not a dominant method for terrorist financing. The United States is combating TBML in a number of ways: The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issues advisories and geographic targeting orders and applies special measures to jurisdictions determined to be of primary money laundering concern. The United States is also an active participant in the intergovernmental Financial Action Task Force (FATF), created in 1989 to develop and promote guidelines on anti-money laundering and combating the financing of terrorism (AML/CFT). FATF has addressed TBML methods and best practices to combat TBML in periodic reports and mutual evaluations of its members. The U.S. Department of Homeland Security (DHS), through its Immigration and Customs Enforcement’s Homeland Security Investigations (ICE/HSI) unit, maintains a Trade Transparency Unit (TTU) in Washington, DC. The TTU has U.S. Department of State funding and Treasury Department support. DHS has since developed a network of counterpart TTUs in almost a dozen countries abroad. The TTUs examine trade anomalies and financial irregularities associated with TBML, customs fraud, contraband smuggling, and tax evasion. This report discusses the scope of the TBML problem and analyzes selected U.S. government policy responses to address TBML. It includes a listing of hearings in the 114th Congress that addressed TBML.

Jun 22, 2016

Statements of Administration Policy

Presidents communicate their views on pending legislation in a variety of ways. The Office of Management and Budget (OMB) formally communicates the Administration’s views by way of Statements of Administration Policy. Statements of Administration Policy, or SAPs, are designed to signal the Administration’s position on legislation scheduled on the House and Senate floor. SAPs are often the first public document outlining the Administration’s views on pending legislation and allow for the Administration to assert varying levels of support for or opposition to a bill. While Administrations vary as to how frequently and how many SAPs are released, a SAP’s value comes in its ability to speak for the coordinated executive Administration as a whole. SAPs grant the Administration the opportunity to go on record with its reasons for opposing and potentially vetoing legislation. SAPs also enable the Administration to identify key provisions of the legislation that it objects to or finds particularly favorable. SAPs may also provide Congress insights into the Administration’s position towards possible bill implementation. When a SAP indicates that the Administration may veto a bill, it appears in one of two ways: (1) a statement indicating that the President intends to veto the bill, or (2) a statement that agencies or senior advisors would recommend that the President veto the bill. These two types indicate degrees of veto threat certainty. Statements of Administration Policy have generally adhered to the same structure from Administration to Administration. SAPs are released concurrent with action in the House Rules Committee, or on the floor of the House or the Senate. A SAP is released at such a time in the legislative process so as to maximize the Administration’s influence in the policy outcome.

Jun 21, 2016

Judiciary Appropriations, FY2017

Funds for the judicial branch are included annually in the Financial Services and General Government (FSGG) Appropriations bill. The bill provides funding for the Supreme Court; the U.S. Court of Appeals for the Federal Circuit; the U.S. Court of International Trade; the U.S. Courts of Appeals and District Courts; Defender Services; Court Security; Fees of Jurors and Commissioners; the Administrative Office of the U.S. Courts; the Federal Judicial Center; the U.S. Sentencing Commission; and Judicial Retirement Funds. The judiciary’s FY2017 budget request of $7.58 billion was submitted on February 9, 2016. By law, the President includes the requests submitted by the judiciary in the annual budget submission without change. The FY2017 budget request represents a 3.3% increase over the FY2016 enacted level of $7.34 billion provided in the Consolidated Appropriations Act, 2016 (P.L. 114-113 ), Division E, Title III, enacted December 18, 2015. The House Appropriations Committee held a markup (H.R. 5485) on June 9, 2016, and recommended a total of $7.55 billion. The Senate Appropriations Committee held a markup (S. 3067) on June 16, 2016, and recommended a total of $7.58 billion. Appropriations for the judiciary comprise approximately 0.2% of total budget authority. This report will be updated as events warrant.

Jun 21, 2016

The Orlando Mass Shooting: CRS Experts

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Jun 21, 2016

Stafford Act Assistance and Acts of Terrorism

This insight provides a brief overview of Stafford Act declarations under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (hereinafter the Stafford Act—42 U.S.C. 5721 et seq.) and the types of assistance they could authorize in response to terrorist incidents. This report also provides examples of Stafford Act declarations that have been issued for previous terrorist attacks. Overview The Stafford Act authorizes the President to issue two types of declarations that could provide federal assistance to states and localities in response to a terrorist attack: a “major disaster declaration” or an “emergency declaration.” Major Disaster Declarations Major disaster declarations authorize a wide range of federal assistance to states, local governments, tribal nations, individuals and households, and certain nonprofit organizations to recover from a catastrophic event. Major disaster declarations must be requested by the state governor or tribal leader. The Stafford Act defines a major disaster as: any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of states, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby (P.L. 93-288, 42 U.S.C. §5122(2)). The list of events that qualify for a major disaster declaration is specifically limited. Consequently, a terrorist incident that does not involve a fire or explosion (such as a mass shooting) may not meet the definition of a major disaster. Assistance Provided Under Major Disaster Declarations Assistance generally takes three forms: Public Assistance (PA), Individual Assistance (IA) and Hazard Mitigation Assistance (HMA). PA addresses essential needs of the state or tribe but concentrates on repairing damage to infrastructure (public roads, building, etc.) IA represents help to families and individuals. IA can be in the form of temporary housing assistance and grants to address post-disaster needs (such as replacing clothing and furniture) as well as crisis counseling and disaster unemployment benefits. HMA provides the state with grant funding for mitigation projects. HMA does not necessarily need to mitigate risks from the type of disaster declared. Rather, HMA can be used for mitigation projects identified before the declaration was issued. Emergency Declarations Emergency declarations are issued by the President to protect property and public health and safety and to lessen or avert the threat of a major disaster. Emergency declarations can be issued before an incident when a threat is detected (for example, before a hurricane makes landfall) to supplement and coordinate local and state efforts such as evacuations and the protection of public assets. The Stafford Act defines an emergency as: any occasion or instance for which, in the determination of the President, federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States (P.L. 93-288, 42 U.S.C. §5122(1)). In contrast to the proscribed definition of events that qualify as a major disaster, an emergency is defined more broadly—which arguably could make a wide range of terrorist incidents eligible for federal assistance. While in most cases the state governor or tribal leader must request an emergency declaration, the President has the authority to issue an emergency declaration without a gubernatorial or tribal request under Section 501(b) of the Stafford Act when the President: determines that an emergency exists for which the primary responsibility for response rests with the United States because the emergency involves a subject area for which, under the Constitution or laws of the United States, the United States can exercise exclusive or preeminent responsibility and authority (P.L. 93-288, 42 U.S.C. §5191(b)). Assistance Provided Under Emergency Declarations Emergency assistance can include two forms of PA; debris removal and emergency protective measures. However, permanent construction work for infrastructure repairs cannot be authorized under an emergency declaration. Most forms of IA can be made available through an emergency declaration. HMA assistance is not available under an emergency declaration. Selected Examples of Stafford Act Assistance for Terrorist Incidents Oklahoma City Bombing An emergency declaration was issued by President Clinton to Oklahoma on April 26, 1995, in response to the bombing of the Alfred P. Murrah Federal Building in Oklahoma City. The assistance included extensive crisis counseling assistance for the community as well as repairs to public infrastructure damaged by the blast. September 11th Terrorist Attacks Major disaster declarations were issued by George W. Bush to New York and Virginia on September 11, 2001, in response to the September 11th terrorist attacks. The assistance included a large amount of infrastructure repair for southern Manhattan as well as a crisis counseling program, disaster unemployment benefits, and temporary rent and mortgage assistance. Boston Marathon Attacks An emergency declaration was issued by President Obama to Massachusetts on April 17, 2013, in response to the Boston Marathon bombing. The assistance included repayments to public agencies and nongovernmental organizations that aided the response efforts. Orlando Mass Shooting On June 13, 2016, Florida Governor Rick Scott made a request to the President to issue an emergency declaration in response to the mass shooting at Pulse nightclub in Orlando, Florida on June 12, 2016. The governor’s request is the first instance of a request being made for a mass shooting event. The President denied the request for assistance. As of the date of publication, emergency declarations have not been issued for mass shootings. Federal assistance under the Stafford Act was not requested for the Virginia Tech, San Bernardino, or Sandy Hook shootings, among others. For More Information See CRS reports R43784, FEMA's Disaster Declaration Process: A Primer; and R42702, Stafford Act Declarations 1953-2014: Trends, Analyses, and Implications for Congress, for a complete background and details about Stafford Act Declarations.

Jun 21, 2016

Qatar: Governance, Security, and U.S. Policy

The state of Qatar, a member of the Gulf Cooperation Council (GCC: Saudi Arabia, Kuwait, Qatar, United Arab Emirates, Bahrain, and Oman), has employed its ample financial resources to try to “punch above its weight” on regional and international affairs. Qatar has intervened, directly and indirectly, in several regional conflicts—sometimes in partnership with the United States and sometimes as part of a separate initiative of like-minded GCC states. It has also sought to establish itself as an indispensable interlocutor on some issues, such as those involving the Palestinian Islamist organization Hamas and the Taliban insurgent group in Afghanistan. Qatar’s leaders have also sought to promote what they assert are new models of Arab governance and relationships between Islam and the state—in both cases causing strife and dispute with Qatar’s GCC allies. The voluntary relinquishing of power in 2013 by Qatar’s former Amir (ruler), Shaykh Hamad bin Khalifa Al Thani, departed sharply from GCC patterns of governance in which leaders remain in power until they die or are removed by rivals in their ruling families. Qatar’s support for regional Muslim Brotherhood organizations caused significant diplomatic confrontations with Saudi Arabia and the UAE, in particular, which assert that the Brotherhood is a threat to regional security and to the internal security of the GCC states themselves. On Iran, Qatar has generally struck a middle ground within the GCC by supporting efforts to limit Iran’s regional influence while at the same time maintaining consistent channels of communication to Iranian leaders. As do the other GCC leaders, Qatar’s leaders apparently view the United States as the ultimate guarantor of Gulf security. Qatar hosts substantial numbers of U.S. forces at its most sensitive military facilities, including the forward headquarters for U.S. Central Command (CENTCOM). The United States and Qatar have had a formal Defense Cooperation Agreement (DCA) since 1992, which provides for the hosting and other aspects of U.S.-Qatar defense cooperation, including sales of U.S. arms to Qatar. U.S. forces in Qatar are involved in operations all over the region, including against the Islamic State organization in Iraq and Syria. At the same time, organizations such as the Islamic State and Al Qaeda profess ideologies that are apparently attractive to some in Qatar, particularly hardline Islamists and Arab nationalists, and there have been frequent accusations by international observers that some Qataris have contributed funds and services to these groups. Members of Congress generally have taken into account these and all the other aspects of Qatar’s policies in consideration of U.S. arms sales to Qatar. Even though Qatar’s former Amir stepped down voluntarily, U.S. and international reports criticize Qatar for numerous human rights problems, most of which are common to the other GCC states. A recent Gulf-wide trend also apparent in Qatar has been a crackdown on dissent against the ruling establishment on social media networks. Qatar is also the only one of the smaller GCC states that has not yet formed a legislative body, although reportedly such a body, and elections for it, are planned. Qatar is wrestling with the downturn in global crude oil prices since 2014, as are the other GCC states, Qatar appeared to be better positioned to weather the downturn than are most of the other GCC states because of its development of a large natural gas export infrastructure and its small population. However, natural gas prices are also down, and Qatar shares with virtually all the other GCC states a lack of economic diversification and reliance on revenues from sales of hydrocarbon products. For more, see CRS In Focus IF10351, Qatar, by Christopher M. Blanchard.

Jun 20, 2016

Carl D. Perkins Career and Technical Education Act of 2006: An Overview

The Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV; P.L. 109-270) is the main federal law supporting the development of career and technical skills among students in secondary and postsecondary education. Perkins IV aims to improve academic outcomes and preparedness for higher education or the labor market among students enrolled in career and technical education (CTE) programs, previously known as vocational education programs. The federal government has a long history of supporting programs to develop students’ career and technical skills, dating back to the 19th century. Perkins IV, the most recent federal law targeting CTE, was passed in 2006 and authorized through FY2012. The authorization was extended through FY2013 under the General Education Provisions Act, and Perkins IV has continued to receive fairly constant appropriations through FY2016. The total appropriations for Perkins IV in FY2016 were approximately $1.1 billion. This report provides a summary of Perkins IV. The largest program authorized by Perkins IV is the Basic State Grants program. Key features of this program include the following: formula grants to the states to develop and improve CTE programs at the secondary and postsecondary levels; a state allocation formula that allocates money based on population and per capita income factors; a distribution of at least 85% of the funds from the states to the local level; state flexibility in deciding the allocation of state funds between secondary and postsecondary local CTE providers; requirements for states to develop and implement programs of study, which are nonduplicative sequences of courses that span the secondary and postsecondary levels and lead to an industry-recognized credential, certificate, or postsecondary degree; core indicators of performance for accountability purposes, with target levels of performance negotiated between each state and the Secretary of Education; disaggregation of performance data by special populations and subgroups defined in Title I of the Elementary and Secondary Education Act of 1965, as amended by the Every Student Succeeds Act of 2015; and the requirement for states to prepare and implement program improvement strategies if the target levels on core indicators of performance are not met. Perkins IV also authorizes additional programs: Tech Prep, National Programs, Tribally Controlled Postsecondary Career and Technical Institutions (TCPCTI), and Occupational Employment Information. Of these, only National Programs and TCPCTI received funding for FY2011-FY2016.

Jun 20, 2016

Child Welfare: The Family First Prevention Services Act of 2016

The Family First Prevention Services Act of 2016 (H.R. 5456 and S. 3065) would amend the child welfare programs authorized in the Social Security Act to allow states to receive open-ended federal support under Title IV-E for time-limited services and programs that are intended to prevent the need for children to enter foster care by allowing children to remain safely at home with parents, or with kin. This change would respond to longstanding concern by state administrators, child welfare advocates, and some policymakers that federal child welfare support is largely available only after a child is placed in foster care and that little resources are provided to strengthen and stabilize families to prevent children’s removal to foster care. At the same time, the bill would restrict the ability of states to claim support for children in foster care who are placed in group settings rather than in foster family homes. With limited exceptions, this change would restrict Title IV-E foster care maintenance payment support for children in foster care to those otherwise eligible children placed in foster family homes or those placed in a “qualified residential treatment program” that offers a “treatment model” designed to address the clinical or other needs of children with emotional or behavioral disorders. In its 2015 report on use of “congregate care” in child welfare, the federal Children’s Bureau concluded that while there is an “appropriate role for congregate care placements in the continuum of foster care settings” a child’s placement in such a setting “should be based on the specialized behavioral and mental health needs or clinical disabilities of children.” Additionally, the bill would extend funding authority for the child and family services programs authorized in Title IV-B of the Social Security Act and it would revise the purposes of, and eligibility for, the Chafee Foster Care Independence Program (CFCIP) to make them more consistent with the goal of helping all youth who experience foster care at an older age make a successful transition to adulthood. H.R. 5456 was introduced on June 13, 2016, and was ordered reported by the House Ways and Means Committee (unanimous voice vote) on June 15, 2016 (with amendment). A companion to the bill was introduced in the Senate (S. 3065) on June 16, 2016. Programs authorized in Title IV-B and Title IV-E of the Social Security Act are administered by the Children’s Bureau, which is an agency within the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF), Administration on Children, Youth, and Families (ACYF).

Jun 20, 2016

Spending and Tax Expenditures: Distinctions and Major Programs

Spending programs and tax expenditures are the two primary ways that the federal government provides benefits to the public. Though each type of intervention represents a transfer from the government to individuals and firms, differences in the budget process, saliency, and targeting may have ramifications for usage across different types of services. This report briefly describes spending programs and tax expenditures, observes a few ways that they differ, and discusses how those distinctions may inform the relative use of each policy across the government portfolio. Federal expenditures (spending) are transfers from the federal government to individuals, firms, or institutions that do not draw directly from individual or corporate tax liability. Federal spending programs fall into three broad categories: (1) discretionary spending, (2) mandatory spending, and (3) net interest payments. The Congressional Budget Office (CBO) estimates that federal resources devoted to spending programs will total $3.897 trillion in FY2016, or 21.1% of annual gross domestic product (GDP). Tax expenditures are revenue losses attributable to federal tax provisions. There are three main types of tax expenditures: (1) exclusions, exemptions, and deductions from gross personal or corporate income; (2) preferential tax rates for certain programs; and (3) refundable and nonrefundable tax credits. The Joint Committee on Taxation (JCT) estimates the revenue losses attributable to certain programs. As of December 2015, projected revenue losses due to tax expenditures in FY2016 summed to $1.521 trillion, or 8.2% of GDP. Holding other activities constant, an increase in spending programs or tax expenditures will increase net budget deficits. However, differences in the characteristics and composition of spending and tax expenditures may have implications for the way each is used across major sectors of the federal budget. Federal spending programs may be better able to target groups that are unlikely to file federal tax returns, like low-income and elderly households. Tax expenditures may be more likely than spending programs to utilize targeting and enforcement services already undertaken by the federal government. Other differences important to federal usage occur within certain types of federal spending and tax expenditures. Discretionary spending and, in some cases, expiring tax expenditures typically involve more frequent legislative action than mandatory spending and permanent tax expenditure programs. Discretionary spending programs also provide increased budget certainty to Congress through the use of budget authority, while mandatory spending and tax expenditure resources depend on the participation and benefit choices of program recipients. This report identifies the largest spending and tax expenditures across eight major categories of federal activity: (1) defense and international affairs; (2) general science, space and technology, natural resources and the environment, and agriculture; (3) commerce and housing, community and regional development, and transportation; (4) education, training, employment, and social services; (5) health, including Medicare; (6) income security; (7) Social Security and veterans’ benefits; and (8) administration of justice and general governance.

Jun 17, 2016

The Terrorist Screening Database: Background Information

The Federal Bureau of Investigation (FBI, the Bureau) has acknowledged that it had been investigating the shooter who killed 49 people at an Orlando nightclub on June 12, 2016. The gunman has been identified as Omar Mateen, a 29-year-old security guard in Florida who was born in New York. Reportedly, Mateen was watchlisted while under FBI investigation. This report provides background information on the watchlisting process. The Terrorist Screening Database (TSDB, commonly referred to as the Terrorist Watchlist) lies at the heart of federal efforts to identify and share information about identified people who may pose terrorism-related threats to the United States. It is managed by the Terrorist Screening Center (TSC) and includes biographic identifiers for those known to have or those suspected of having ties to terrorism. It stores hundreds of thousands of unique identities. Portions of the TSDB are exported to data systems in federal agencies that perform screening activities such as background checks, reviewing the records of passport and visa applicants, and official encounters with travelers at U.S. border crossings. The TSC, a multi-agency organization administered by the FBI, maintains the TSDB. The TSC was created by Presidential Directive in 2003 in response to the terrorist attacks of September 11, 2001. Before the TSC consolidated federal watchlisting efforts, numerous separate watchlists were maintained by different federal agencies. The information in these lists was not necessarily shared or compared. The efforts that surround the federal watchlisting regimen can be divided into three broad processes centered on the TSDB: Nomination, which involves the identification of known or suspected terrorists via intelligence collection or law enforcement investigations. The U.S. government has a formal watchlist nomination process. Verification of identities for the TSDB and export of data to screening systems, which involves the creation and maintenance of the TSDB, as well as the compiling and export of special TSDB subsets for various intelligence or law enforcement end users (screeners). Screening, which involves end users—screeners—checking individuals or identities they encounter against information from the TSDB that is exported to screening databases.

Jun 17, 2016

FY2017 Defense Appropriations Fact Sheet: Selected Highlights of H.R. 5293 and S. 3000

This Fact Sheet summarizes selected highlights of the FY2017 Defense Appropriations Act passed by the House on June 16, 2016 (H.R. 5293), and the version reported by the Senate Appropriations Committee on May 26, 2016 (S. 3000). Congressional action on the FY2017 defense appropriations act has been fundamentally shaped by the legally binding caps on discretionary spending for defense programs and for non-defense programs, which were established by P.L. 114-74, the Bipartisan Budget Act of 2015 (BBA). A central issue before Congress is the extent to which Congress and the President approve Department of Defense (DOD) funding for FY2017 that (1) exceeds the relevant BBA cap; and (2) is also exempt from that spending cap because it is classified as funding for so-called Overseas Contingency Operations (OCO). The 2015 BBA increased binding caps on defense and non-defense discretionary appropriations for FY2016 and FY2017, which originally had been codified by the Budget Control Act (BCA) of 2011 (P.L. 112-25). Those spending caps are enforced by a process of “sequestration.”

Jun 17, 2016

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; H.R. 5278)

Representative Duffy introduced H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), on May 18, 2016. This bill is a revised version of H.R. 4900, which Representative Duffy had introduced on April 12, 2016. The House Committee on Natural Resources marked up H.R. 5278 on May 25, 2016. Amendments agreed to include technical corrections and extensions of certain studies on the Puerto Rico government and economy, among others. The major provisions of the bill, however, were unaffected. An amended version of H.R. 5278, which is organized into seven titles, was passed by the House on June 9, 2016, by a 297-127 vote. The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; H.R. 5278) would create a structure for exercising federal oversight over the fiscal affairs of territories. PROMESA would establish an Oversight Board with broad powers of budgetary and financial control over Puerto Rico. Other territories, through normal political processes, could request establishment of an Oversight Board. PROMESA also would create procedures for adjusting debts accumulated by the Puerto Rico government and its instrumentalities and potentially for debts of other territories. Finally, PROMESA would expedite approvals of key energy projects and other “critical projects” in Puerto Rico. The current version of PROMESA (H.R. 5278) differs from the previous version (H.R. 4900) in several ways, although most sections are similar or identical. Many changes clarified or modified existing provisions, although some provisions were added or altered and others were dropped. The structure and appointment process for the board was modified to allow the President to select one board member at his sole discretion. The process by which congressional leaders would submit lists of potential board members was specified in more detail. H.R. 5278 also specifies that the board could only begin to establish bylaws and take other major actions once all members were appointed. In H.R. 4900, by contrast, the board could act in certain ways, such as setting a schedule for formulation of Fiscal Plans, once four members were appointed. The powers of the board were also modified in some ways and the independence of the board was strengthened. Other changes include a new provision that empowers the Chief Justice of the U.S. Supreme Court to appoint a presiding judge for Title III debt adjustment cases in which the territory is a party, while the chief judge of the applicable Court of Appeals would appoint the presiding judge for cases involving only the instrumentalities of the territory. The relationship between Title VI collective action procedures to reach debt modification agreements and the Title III debt adjustment process was also modified. A provision to allow a transfer of certain federally controlled parts of Vieques Island to Commonwealth control was dropped. The time period that the Puerto Rico governor could propose, subject to board approval, to set a training wage below the usual federal minimum wage but above a $4.25/hour floor, was shortened from five to four years, or when the Oversight Board terminates, if sooner. A public comment period provision was added to the Title V expedited approval process. Mandates for reports from a congressional task force and the Government Accountability Office (GAO) were also added. The report presents a brief description of Puerto Rico, its relationship with the federal government, and its fiscal challenges. A short overview of the bill, along with a comparison with previous legislation involving control boards, follows. The body of the report provides a section-by-section description of H.R. 5278. Appendix A gives a background on Puerto Rico’s fiscal situation and aspects relevant to H.R. 4900. Appendix B contains a summary of provisions of the federal Bankruptcy Code cited in H.R. 5278.

Jun 16, 2016

Unemployment Compensation: The Fundamentals of the Federal Unemployment Tax

The Federal Unemployment Tax Act (FUTA) of 1939 specifies the financing arrangement for the Unemployment Compensation (UC) program. Revenue for the program is provided through payroll taxes levied by both the federal government and the states on a portion of wages paid by covered employers. Total UC expenditures include benefit payments and administrative costs. Federal unemployment taxes are deposited with the U.S. Treasury and credited to the federal accounts within the Unemployment Trust Fund (UTF). Federal unemployment taxes pay for state administrative costs, half the cost of Extended Benefits (EB), and loans to insolvent state UC programs. State unemployment taxes are deposited into the UTF and credited to the corresponding state account. State unemployment tax revenue is limited to paying each state’s regular UC benefits and the state’s half of EB costs. In budgetary terms, UC benefits are mandatory spending because the underlying law authorizes the Treasury to transfer funds to the states for UC benefit payments without the need for further appropriation. FUTA imposes a gross federal payroll tax on employers of 6.0% on the first $7,000 paid annually to each employee. As an incentive to comply with the framework, FUTA lowers the net federal unemployment tax to 0.6% if the state UC program follows the federal requirements. States must follow FUTA guidelines on what types of employment must be covered by UC; and state unemployment taxes on employers must meet FUTA’s parameters. All states comply with these guidelines. Because most employees earn more than the $7,000 taxable wage ceiling in a year, the federal unemployment tax paid by an employer is typically no more than $42 per worker per year. Federal unemployment tax revenue for FY2016 is projected to be $5.8 billion, whereas state unemployment tax revenue is projected to be $41.4 billion. The federal unemployment tax financed expenditures are projected to be approximately $4.2 billion—approximately 12% of all UC expenditures. In comparison, state financed UC expenditures are projected to be $32.2 billion—approximately 88% of all UC expenditures. There remains significant state independence within the broad parameters set by FUTA. States generally determine individual qualification requirements, disqualification provisions, eligibility, weekly benefit amounts, potential weeks of benefits, and the state tax structure used to finance all of the regular state UC benefits and half of the EB. Since 1940, Congress has increased the FUTA wage base three times: from $3,000 to $4,200 in 1972; from $4,200 to $6,000 in 1978; and from $6,000 to $7,000 in 1983. Congress has permanently increased the net FUTA tax rate three times: from 0.3% to 0.4% in 1965, 0.5% in 1970, and 0.6% in 1983. There also have been three temporary (surtax) tax rate increases of short duration (from 0.4% to 0.8% in 1962, from 0.4% to 0.65%; in 1963, and from 0.5% to 0.58% in 1973). In addition to these short-term changes, a temporary 0.2% surtax began in 1977 and was continually reauthorized (nine times) until finally lapsing at the end of June 2011—a span of over 34 years. The combination of increases in the wage base and the doubling of the tax rate has not kept pace with inflation or wage growth, and the proportion of total revenue to total covered wages continues to decline. By 2015, the net federal unemployment tax revenue was equivalent to an effective tax rate of 0.1% on the total wages in covered employment.

Jun 16, 2016

Trends in Child Care Spending from the CCDF and TANF

The Child Care and Development Fund (CCDF) is the main source of federal funding dedicated primarily to child care subsidies for low-income working families. The term “CCDF” was coined in regulation by the U.S. Department of Health and Human Services (HHS) to encompass multiple child care funding streams, including federal discretionary child care funds authorized by the Child Care and Development Block Grant (CCDBG) Act, federal mandatory child care funds authorized by Section 418 of the Social Security Act (sometimes referred to as the “Child Care Entitlement to States”), state maintenance-of-effort (MOE) and matching funds associated with the Child Care Entitlement to States, and federal funds transferred to the CCDF from states’ Temporary Assistance for Needy Families (TANF) block grants. Mandatory and discretionary CCDF funds are appropriated separately and are allocated to states using different formulas. Although these funds are allocated to states in different ways, federal law generally directs states to spend these dollars according to the same CCDBG Act rules. TANF funds transferred to the CCDF are also subject to CCDBG Act rules. States spent roughly $8.6 billion from these combined federal and state funding streams in FY2012, the most recent year for which data are fully available. Separate from the CCDF, states may spend federal TANF funds and state TANF MOE on child care services directly within state TANF programs. However, these “TANF-direct” child care expenditures are not subject to CCDBG Act rules. In FY2012, states spent roughly $2.8 billion in TANF-direct child care programs, when counting expenditures of federal TANF funds and certain state TANF MOE funds. Because of this complex set of underlying funding streams, federal appropriations are not always the best measure of total spending on child care. This report reviews the legislative history behind these different funding streams, with particular emphasis on the relative importance of federal- and state-level decisions in setting spending levels and establishing basic program rules. In addition, the report presents historical data on child care spending from the CCDF and TANF over the course of FY2000-FY2012. Highlights during this period include the following: Total combined CCDF and TANF spending on child care (federal and state) increased by 12% in nominal dollars, but decreased by 17% in constant dollars (i.e., dollars adjusted for inflation). Federal spending accounted for roughly 70% of all expenditures, with state contributions making up the remaining roughly 30%. Spending from the CCDF (federal and state, including TANF transfers) accounted for about three-quarters of all expenditures on child care. TANF-direct child care (federal and state) accounted for the remaining expenditures. When including amounts transferred from TANF programs to the CCDF, total child care spending originating in TANF programs represented more than one-third (between 36% and 48%) of all child care expenditures in each year.

Jun 16, 2016

The Department of the Interior's Final Rule on Offshore Well Control

This report discusses regulations regarding blowout preventer systems and well control for oil and gas operations on the U.S. outer continental shelf (81 Fed. Reg. 25887). The regulations aim to reduce the risk of an offshore oil or gas blowout that could jeopardize human safety and harm the environment.

Jun 16, 2016

Orlando Nightclub Mass Shooting: Gun Checks and Terrorist Watchlists

This report discusses the policy climate surrounding gun control in the wake of the attack in an Orlando, Florida nightclub. On June 12, 2016, an armed assailant killed 49 people and wounded over 50 others in the club.

Jun 16, 2016

Fannie Mae and Freddie Mac in Conservatorship: Frequently Asked Questions

Fannie Mae and Freddie Mac are chartered by Congress as government-sponsored enterprises (GSEs) to provide liquidity in the mortgage market and to promote homeownership for underserved groups and locations. They purchase mortgages, guarantee them, and package them in mortgage-backed securities (MBSs), which they either keep as investments or sell to institutional investors. In addition to the GSEs’ explicit guarantees, investors widely believe that MBSs are implicitly guaranteed by the federal government. In 2008, the GSEs’ financial condition had weakened and there were concerns over their ability to meet their obligations on $1.2 trillion in bonds and $3.7 trillion in MBSs that they had guaranteed. In response to the financial risks, the federal government took control of these GSEs in a process known as conservatorship as a means to stabilize the mortgage credit market. The GSEs accepted going into conservatorship, and Treasury agreed to provide up to $200 billion each to keep them solvent. The GSEs agreed to pay Treasury a 10% cash dividend on funds received. If the GSEs do not have sufficient cash, they can pay Treasury a 12% dividend in special stock. Dividends were suspended for all other stockholders. If the GSEs had enough profit at the end of the quarter, the dividend came out of the profit. When the GSEs actually did not have enough cash to pay their dividend to Treasury, they asked for additional cash to make the payment instead of issuing additional stock. In August 2012, the 10% dividend was replaced with a “profit sweep” dividend. Under the profit sweep, Treasury received all of the profits above a declining capital reserve, but if there was no profit, there was no dividend. The GSEs have paid dividends totaling $246 billion to Treasury. The majority of this sum—$191 billion—has been paid under the profit sweep. Paying the federal government all profits earned in a quarter prevents the GSEs from accumulating funds to redeem the senior preferred stock, which is held only by Treasury. The GSEs have not taken a draw on their support from Treasury since the second quarter of 2012. Congressional interest in Fannie Mae and Freddie Mac has increased in recent years, primarily because of the federal government’s continuing conservatorship of these GSEs. Uncertainty in the housing, mortgage, and financial markets has raised doubts about the future of the enterprises and the potential cost to the Treasury of guaranteeing the enterprises’ debt. Since more than 60% of households are homeowners, a large number of citizens could be affected by the future of the GSEs. Congress exercises oversight over the Federal Housing Finance Agency (FHFA), which is both regulator and conservator of the GSEs, and is considering legislation to shape the future of the GSEs.

Jun 15, 2016

Declining Dynamism in the U.S. Labor Market

Many observers have noted that certain measures of the U.S. labor market “dynamism” or “fluidity”—including job reallocation, worker churn, and geographic labor mobility—have been declining for the past 20 years or more. The ability of U.S. workers to flow between jobs has been a defining feature of the economy since the end of World War II, and a reduction in labor market fluidity could have negative implications for unemployment, wage growth, and productivity. Economists have proposed several possible explanations for the decline in labor market dynamism, but the effect of these potential factors is unclear. Evidence of Decline Decreasing rates of gross job gains and gross job losses are often cited as evidence of a decline in U.S. dynamism. Jobs are continually reallocated across companies and industries, as they are created by new or growing companies and are destroyed in contracting or closing ones. These gross job gains and losses are related to the widely reported net job change. Whereas the net change—the difference between gains and losses—shows how many more or less jobs are available between two time periods, gross gains and gross losses capture additional detail on the creation of new jobs, the loss of existing jobs, and the economy’s ability to respond to changing conditions. The net change has increased and decreased as economic conditions have changed. However, rates of gross job gains and losses in the United States have experienced a steady decline beginning in the late 1990s and have recently stabilized at a level only slightly higher than the trough reached during the 2007-2009 recession. Newly created jobs accounted for 7.9% of all jobs on average between 1993 and 2003, but just 6.3% between 2011 and the third quarter of 2015. Similarly, the gross job loss rate started to decline at about the same time, and (after temporarily spiking during the recession) has also settled at a relatively low level (see Figure 1). Figure 1. Quarterly Job Gains and Losses Rates First Quarter of 1993 to Third Quarter of 2015 / Source: Bureau of Labor Statistics, Business Employments Dynamics data. Hiring and separation rates are also meaningful indicators of labor market dynamics that capture the movement of workers across jobs. If a worker leaves a job and is replaced by another worker, no job has been created or destroyed. Instead, workers have been moved within an existing job, and this “churn” will be counted as a hire and a separation. Hire and separation rates have recovered very slowly since the recession, and they are still below pre-recession levels. Official government data only goes back to 2001, but academic estimates of the rates going back to 1990 suggest that they are also in long-term decline. As of March 2016, the rates remain low relative to pre-recession norms (see Figure 2). Figure 2. Quarterly Hires and Separation Rate Second Quarter of 2001 to First Quarter of 2016 / Source: Bureau of Labor Statisics, Job Openings and Labor Turnover Survey. Geographic labor mobility is also declining. U.S. workers have traditionally been very willing to move their residence, allowing them to move to areas with more job openings or to expand their job search to several markets. In the 1980s, the proportion of Americans that changed county or state from one year to the next fluctuated between 6.0% and 6.7%. A steady decline began in the mid-1990s, and the proportion was 3.8% in 2015 (see Figure 3). Figure 3. Percentage of Population to Move Across Counties, 1981-2015 / Source: Census Bureau, Current Population Survey. Potential Causes Recent trends in job creation and movement of workers are closely interrelated and likely affected by many factors. One common explanation is that the decline is the result of an aging workforce. Workers nearing retirement age may be less likely to change jobs or move. Another possible cause is a decrease in business dynamism. Young companies usually start with a small number of employees, but can grow quickly and add many new jobs. The rate of business establishment births is in long-term decline. New business establishments accounted for 15.4% of all businesses in 1987, but the proportion steadily declined to 10.2% by 2013. Several possible explanations for this trend have been put forward, including rising economic and political uncertainty and globalization, but it is an issue that could be further examined. In addition, regulatory and legal changes—including a decline in the employment-at-will doctrine and increased occupational licensing requirements—may be inhibiting labor market fluidity because they raise barriers to job and worker reallocation. A single cause is unlikely to be wholly responsible for the long-term decline in labor market dynamism. However, with many possible contributing factors, including structural changes, such as an aging workforce, the decline may continue. Potential Implications The reduction in job creation, worker churn, and geographic mobility could have negative implications for unemployment, wage growth, and productivity. Less job creation and worker churn may increase the likelihood that workers, including the unemployed, get locked into their current employment situation, potentially resulting in longer durations of unemployment. Long, unsuccessful job searches could then cause more potential workers to become discouraged and leave the labor force, lowering the labor force participation rate. Productivity and wage growth could also be hindered. Leaving one job for another has traditionally been an important method for workers to make better—more productive—job matches, raise their wages, and advance their careers. Fewer job openings and less movement of workers between jobs could close off one path to wage growth for many workers. Young workers, whose skills are less job-specific and have less knowledge about where they will be most productive, might be disproportionately affected by lack of opportunity to change jobs.

Jun 15, 2016

EU Agricultural Support: Overview and Comparison with the United States

The European Union (EU) is one of the United States’ chief agricultural trading partners but also a major competitor in world markets. Historically, both the United States and the EU have provided significant government support for their agricultural sectors. In the United States, federal farm policy has traditionally focused on price and/or income support programs concentrated on row crops including grains, oilseeds, and cotton as well as sugar and dairy. In contrast, the EU provides more extensive support to a broader range of farm and food products—including livestock products and fresh and processed fruits and vegetables. Significant structural differences in their respective farm sectors have helped to shape differences in farm policy. The United States has double the farmland base (over 1 billion acres versus about 457 million acres), while the EU has five times the number of farms at 10.8 million with an average size of 47 acres, compared with 2.1 million U.S. farms at an average size of 441 acres. As a result, EU outlays per acre appear much larger than in the United States, whereas U.S. outlays per farm appear much larger. In general, the small size of EU farm holdings, their substantially larger number of farms relative to the United States, and the larger share of rural population (25% versus 18%) has played a strong role in the formation of EU farm policy as compared to the United States. The EU tends to have a stronger rural development emphasis and allows frequent exemptions for identifiably small farming units from certain cross compliance restrictions and payment limitations. Since the mid-1990s, both regions have reoriented their domestic agricultural policy toward less market-distorting policies in response to both internal budget pressures and international trade commitments. EU policymakers have faced additional pressures to reform domestic agricultural policy, due to the EU’s steady growth to 28 European nations and 508 million people by 2013—including the agriculturally intensive but economically poorer countries of Eastern Europe. Several policy trends have emerged in both the EU and United States, including the following: Traditionally, the United States uses less trade-distorting support than the EU, although the EU has made substantial reductions in the volume of its trade distorting support. When measured as a share of total gross farm receipts, support for market-distorting commodity programs has decreased for both the EU and United States, but the EU’s share remains about double the U.S. share. In both the EU and United States, support for less distorting non-commodity-type programs (e.g., conservation, rural development, agro-forestry, and nutrition) has increased substantially and now accounts for a majority of total farm support. U.S. consumers have received net benefits from agriculture-based support programs, whereas EU consumers have generally transferred more support to agricultural producers than they have received in off-setting benefits (i.e., the EU’s consumer subsidy estimate is negative), although the net transfer has been declining over time as a share of gross farm receipts. Because the United States and the EU figure prominently in the development and use of global agricultural policy, information comparing their farm support programs will likely be of interest to Congress as the United States prepares for another round of domestic farm bill negotiations and engages in international trade negotiations on several fronts, including the Transatlantic Trade and Investment Partnership (T-TIP) with the EU, the Trans-Pacific Partnership (TPP) with Pacific Rim nations, and within the WTO’s multilateral negotiating forum.

Jun 14, 2016

Overseas Contingency Operations Funding: Background and Status

The Department of Defense (DOD) estimates that Congress has appropriated $1.6 trillion for war-related operational costs of the DOD since the terror attacks of September 11, 2001. When combined with an estimated $123.2 billion in related State Department and Foreign Operations appropriations, the DOD, Department of State (DOS), and U.S. Agency for International Development (USAID) have received an estimated $1.7trillion for activities and operations in support of U.S. response to the 9/11 attacks. Funding for these activities has been largely provided through supplemental appropriation acts or has been designated as an “emergency” or “Overseas Contingency Operation/Global War on Terror” (OCO/GWOT) requirement in annual agency budget requests—or both. Funds designated as such are not subject to procedural limits on discretionary spending in congressional budget resolutions or to the statutory discretionary spending limits established by the Budget Control Act of 2011 (BCA). While there is no overall statutory limit on the amount of emergency or OCO/GWOT-designated spending, both Congress and the President have a fundamental role in determining how much OCO/GWOT and emergency spending is provided each fiscal year. Congress must designate any such funding as OCO/GWOT in statute on an account by account basis. The President is also required to designate it as such after it is appropriated in order for it to be available for expenditure. Definitions of what constitutes emergency or OCO/GWOT activities and expenses have shifted over time, reflecting differing viewpoints about the extent, nature, and duration of the wars in Iraq and Afghanistan. Funding designated OCO/GWOT has also been recently used to fund base budget requirements of the DOD and DOS and to provide funding to prevent or respond to crises abroad, including armed conflict, as well as human-caused and natural disasters. The first use of an OCO/GWOT designation in budgetary law was in the 2011 BCA. Prior to the BCA, the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) only allowed “emergency” requirements to be excluded from budget control limits. The BCA added the designation “Overseas Contingency Operation/Global War on Terror” to the BBEDCA exemption, thereby providing Congress and the President with an alternate way to exclude funding from the BCA limits without using the “emergency” designation. The Bipartisan Budget Act of 2015 (BBA) raised the BCA discretionary spending limits for Fiscal Year (FY) 2016 and FY2017 for both the defense and nondefense categories, and also specified an expected level for OCO spending for those years. The President’s FY2017 OCO budget request of $58.8 billion for defense activities matches BBA-directed levels. DOD’s OCO budget primarily pays for deploying and supporting U.S. troops, conducting and supporting military operations, repairing war-worn equipment, and transporting troops and equipment to and from the war zone. In addition, OCO funding finances training for the Afghan and Iraqi security forces and other counterterrorism and partnership-building activities with key foreign partners around the world. The DOD Comptroller has indicated that the majority of the FY2017 OCO request centers on supporting Operation Freedom’s Sentinel in Afghanistan; Operation Inherent Resolve in Iraq and Syria; and increased efforts to support European allies and deter Russian aggression—all while supporting what is referred to as a “partnership-focused approach to counterterrorism” and complying with the BCA funding caps. However, the President’s FY2017 DOD OCO request also includes $5.2 billion for base budget activities—normal military operations and procurement that could not be funded in the DOD’s base budget due to the BCA statutory limits. The $14.9 billion in FY2017 OCO funds for the State Department is requested to “provide support to, respond to, recover from, or prevent crises abroad, including armed conflict, as well as human-caused and natural disasters.” Specifically, the DOS request includes funding to contribute to peacekeeping missions and special political missions, increase efforts to destroy the Islamic State, and sustain security programs and embassy construction at high risk posts. In its FY2017 budget justification documents, DOS included a request that the BCA caps be further increased, stating that “the FY2017 President’s Budget assumes that further adjustments to the Budget Control Act’s discretionary spending limits will be needed to sustain these activities in FY2018.” In marking-up the National Defense Authorization Act for FY2017, the House Armed Services Committee (HASC) moved an additional $18.0 billion in requirements from the President’s DOD base budget request to the OCO budget. If enacted, the combined actions proposed by the Administration and the HASC would effectively exempt $23.1 billion in FY2017 funding for defense from the spending caps set by the BCA—without providing an equivalent increase in spending for nondefense programs. The Administration and the minority leadership in both congressional chambers have objected to allowing an increase in defense spending by raising the defense cap—or adding OCO spending for defense—without providing a comparable increase for nondefense spending in the overall federal budget. For that reason, the authorization and appropriation of OCO funding for FY2017 looms large over the policy debate as Congress considers the FY2017 federal budget. For additional information on related FY2017 budget issues see CRS Report R44428, The Federal Budget: Overview and Issues for FY2017 and Beyond, by Grant A. Driessen, CRS Report R44454, Defense: FY2017 Budget Request, Authorization, and Appropriations, by Pat Towell and Lynn M. Williams, and CRS Report R44391, FY2017 State, Foreign Operations and Related Programs Budget Request: In Brief, by Susan B. Epstein, Marian L. Lawson, and Alex Tiersky.

Jun 13, 2016

A Patent/Innovation Box as a Tax Incentive for Domestic Research and Development

A patent box provides a lower tax rate on income from patents, and in some cases, from other intellectual property. A number of countries, including the U.K., France, the Netherlands, and China, have adopted a patent box. Rates generally range from 5% to 15%. Patent boxes are in some cases referred to as innovation boxes because they cover income from non-patented as well as patented intellectual property. Patent boxes can have narrow coverage (providing a lower tax rate on royalties and licenses from patents) or broadly cover income attributable to intellectual property, including that used directly by the firm in production. The purpose of a patent box is to encourage research and development, and, in some cases, to encourage the location of profits from intellectual property in the country. Proposals for a patent box in the United States include a draft proposal by Representatives Boustany and Neal, the Innovation Promotion Act of 2015; proposed legislation in the 112th Congress by Senator Feinstein; and a bill introduced by Representative Schwartz in the 113th Congress (H.R. 2605). The Feinstein proposal provided a 15% tax rate on income from patents developed and used for manufacture in the United States, whereas the Boustany-Neal proposal and H.R. 2605 allowed a 71% deduction of income, which produces an effective 10% rate for corporations. The Boustany-Neal draft proposal would allocate profit between the ordinary tax rate (35% for corporations) and the patent box rate, based on the share of (research and development) R&D spending in total spending. Current tax law contains incentives for investment in research and development. One is the option to expense certain R&D costs (deduct immediately) rather than deduct them over the life of the investment. Expensing is the equivalent of a zero effective tax rate on the return to investment. The tax code also contains a research tax credit. R&D subsidies are justified because the average company is likely to invest less in R&D than the amount warranted by the social returns from the investment. There may be disagreement over whether tax subsidies are the best method. The expected effectiveness of a patent box on R&D depends on its design, and particularly whether it applies to net profit, where the tax rate on the up-front deductible cost is the new, lower patent box rate, or to gross investment, where the deductible cost is still valued at the higher regular statutory rate. The Boustany-Neal draft proposal applies to net profit, which means that lower statutory rate has no effect on the incentive to invest in R&D. The effective rate is still zero under expensing regardless of the statutory tax rate, and the credit is not driven by the tax rate. Moreover, if part of the revenue cost for the lower patent box rate is offset by slower recovery of costs, the effective tax rate rises. Similarly, the R&D credit, which was recently made permanent, is more valuable in reducing effective tax rates than a lower rate applied to net profit. It is possible to design a patent box where the lower rate applies to gross rather than net profit. This approach would produce large subsidies for R&D that could lead to negative pre-tax returns, which might be justified depending on the size of R&D spillover effects. A global economy also raises a number of policy issues. To the extent that a patent box has been adopted to discourage profit shifting to low-tax foreign jurisdictions, the Boustany-Neal patent box proposal may not be very effective. For an additional dollar of profit, the rate is a weighted average of the regular 35% rate and the 10% patent box rate; estimates suggest that the rate would still be relatively high. The effect of a patent box when part of profits are already shifted to a low-rate country is an increase in effective rate domestic R&D, for a patent box that applies the rate to net income rather than gross income.

Jun 13, 2016

The Islamic State’s Acolytes and the Challenges They Pose to U.S. Law Enforcement

Analysis of publicly available information on homegrown violent jihadist activity in the United States since September 11, 2001, suggests that the Islamic State (IS) and its acolytes may pose broad challenges to domestic law enforcement and homeland security efforts. Homegrown IS-inspired plots can be broken into three rough categories based on the goals of the individuals involved. The first two focus on foreign fighters, the last on people willing to do harm in the United States: The Departed—Americans, often described as foreign fighters, who plan to leave or have left the United States to fight for the Islamic State. The Returned—American foreign fighters who trained with or fought in the ranks of the Islamic State and come back to the United States, where they can potentially plan and execute attacks at home. The Inspired—Americans lured—in part—by IS propaganda to participate in terrorist plots within the United States. At least two other categories of IS foreign fighters pose some threat to U.S. interests: The Lost—Unknown Americans who fight in the ranks of the Islamic State but do not plot terrorist attacks against the United States. Such individuals may come home after fighting abroad and remain unknown to U.S. law enforcement. Additionally, some American IS fighters will never book a trip back to the United States. Finally, some American IS supporters will perish abroad. The Others—Foreign IS adherents who radicalize in and originate from places outside of the United States or non-American foreign fighters active in the ranks of the Islamic State. These persons could try to enter the United States when done fighting abroad. Federal law enforcement has numerous approaches to go after each of these categories of terrorist actors. These include the following: Watchlisting—the federal counterterrorism watchlisting regimen effectively attempts to shrink “the lost” category described above. Preemption—efforts geared toward preemption of terrorist activity can be broadly described in terms of interdiction (stopping a suspected terrorist from entering the United States, for example), law enforcement investigation, and government activities aimed at keeping radicalized individuals from morphing into terrorists, also known as countering violent extremism.

Jun 13, 2016

The FDA Medical Device User Fee Program: MDUFA IV Reauthorization

The Food and Drug Administration (FDA) is responsible for regulating medical devices. Medical devices are a wide range of products that are used to diagnose, treat, monitor, or prevent a disease or condition in a patient. A medical device company must obtain FDA’s prior approval or clearance before marketing many medical devices in the United States. The Center for Devices and Radiological Health (CDRH) within FDA is primarily responsible for medical device review and regulation. CDRH activities are funded through a combination of appropriations from Congress and user fees collected from device manufacturers. Congress first gave FDA the authority to collect user fees from medical device companies in the Medical Device User Fee and Modernization Act of 2002 (P.L. 107-250). Congress reauthorized medical device user fees for five years (FY2013-FY2017) via the Medical Device User Fee Amendments of 2012 (MDUFA III, Title II of Food and Drug Administration Safety and Innovation Act, FDASIA, P.L. 112-144). The purpose of the user fee program is to reduce the time necessary to review and make decisions on medical product marketing applications. Lengthy review times affect the industry, which waits to market its products, and patients, who wait to use these products. The user fee law provides revenue for FDA. In exchange for the fees, FDA and industry negotiate performance goals for the premarket review of medical devices. The Federal Food, Drug, and Cosmetic Act (FFDCA) requires premarket review for moderate- and high-risk devices. There are two main paths that manufacturers can use to bring such devices to market. One path consists of conducting clinical studies and submitting a premarket approval (PMA) application that includes evidence providing reasonable assurance that the device is safe and effective. The other path involves submitting a 510(k) notification demonstrating that the device is substantially equivalent to a device already on the market (a predicate device) that does not require a PMA. The 510(k) process results in FDA clearance and tends to be less costly and less time-consuming than the PMA path. Substantial equivalence is determined by comparing the performance characteristics of a new device with those of a predicate device. Demonstrating substantial equivalence does not usually require submitting clinical data demonstrating safety and effectiveness. In FY2015, FDA approved 98% of PMAs accepted for review and 85% of 510(k)s accepted for review were determined to be substantially equivalent. On July 13, 2015, FDA held a public meeting on the reauthorization of the medical device user fee program. In September 2015 the agency began a series of negotiation sessions with industry on the reauthorization agreement as well as meetings with patient and consumer stakeholders on the status of the reauthorization process. If and when an agreement between FDA and industry is reached, the draft MDUFA IV package would likely consist of proposed statutory language and any agreement on FDA performance goals and procedures. The MDUFA IV draft agreement would be posted on the FDA website; after a public meeting and a 30-day comment period on the draft, a final MDUFA IV recommendation would be submitted to Congress. Since medical device user fees were first collected in FY2003, they have comprised an increasing proportion of FDA’s device budget. All user fees (as enacted) accounted for 43% of FDA’s total FY2016 program level. Medical device user fees accounted for 28% of the device and radiological health program level, which is $450 million in FY2016, including $107 million in medical device user fees and $20 million in other fees. Over the years, concerns raised about user fees have prompted Congress to consider issues such as which agency activities could use the fees, how user fees can be kept from supplanting federal funding, and which companies should qualify as small businesses and pay a reduced fee.

Jun 6, 2016

PROMESA (H.R. 5278) and Puerto Rico

Overview Representative Sean Duffy introduced Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA—which means promise in Spanish; H.R. 5278) on May 18, 2016, which is a revised version of H.R. 4900, which Representative Duffy had introduced on April 12, 2016. The House Natural Resources Committee held a hearing on the bill’s provisions and Puerto Rico’s fiscal condition on May 19, 2016. The committee marked up H.R. 5278 on May 25, 2016, and agreed to amendments including those making technical corrections and extending the focus of certain studies on the Puerto Rico government, among others. Other amendments that would have altered debt restructuring processes were not agreed to. The committee approved H.R. 5278 on a 29-10 vote, with one abstention. PROMESA would establish an Oversight Board that would exercise federal oversight over the fiscal affairs of Puerto Rico. Other territories, through normal political processes, could also request the establishment of a board. PROMESA also would create processes for adjusting debts accumulated by the Puerto Rican government and its subunits. Finally, PROMESA would expedite approvals of key energy projects and other “critical projects.” Provisions of H.R. 5278 mostly resemble those of H.R. 4900, although the appointments process was modified, debt adjustment processes were altered in some ways, new studies were commissioned, and an option to transfer parts of Vieques Island was dropped, among other changes. Oversight Board Title I of PROMESA would set up a Financial Management and Oversight Board with broad fiscal oversight powers. The President would appoint six members from lists provided by congressional leaders along with one member appointed in his sole discretion. The governor of the territory would serve as an additional, but nonvoting, ex officio member of the board. Title II charges the Oversight Board with powers to approve or develop a fiscal plan, as well as to approve public sector budgets. Separate fiscal plans and budgets could also be developed for public corporations. The Oversight Board resembles the District of Columbia Financial Responsibility and Management Assistance Authority, more commonly known as the DC Control Board, which was set up by the District of Columbia Financial Responsibility and Management Assistance Act of 1995. The PROMESA Oversight Board, however, differs from the DC Control Board in many important aspects. Adjustment of Debts Title III of PROMESA sets up a process for adjustment of debts by a territorial government or an instrumentality, such as a public corporation or a municipal government. Eligibility for the restructuring process would require approval of at least five of the seven voting members of the Oversight Board to issue a “restructuring certificate.” The Oversight Board, if it so chose, would file petitions to restructure debt on behalf of a territory government or instrumentality. Title VI creates a voluntary process for creditor collective actions, which resemble collective actions clauses (CACs) commonly used in sovereign debt contracts. CACs typically allow some subset of creditors holding a supermajority of the face value of a given debt category to enter into agreements that would bind remaining creditors within that category. Remaining creditors under PROMESA, however, would retain certain rights. Other Provisions in H.R. 5278 Title IV of PROMESA includes several diverse provisions, including an affirmation of Puerto Rico’s right to determine its future political status (Section 402) and an option for the governor to set a reduced minimum wage for most workers in Puerto Rico under the age of 25 for a four-year period (Section 403). Title IV would also put a stay on litigation (Section 405). A provision to allow a transfer of certain federally controlled parts of Vieques Island included in H.R. 4900 was omitted in H.R. 5278. Title V would accelerate processes for the review and permitting of infrastructure projects designated as “Critical Projects.” A previous Puerto Rico governor invoked similar authorities in 2010 and 2011. Some contend that Puerto Rico has had difficulty in completing major infrastructure projects in the past. Others argued that environmental consequences of those projects were not evaluated with sufficient care. Puerto Rican Government Declares Fiscal Emergency Calls for congressional action have become more urgent as the capacity of Puerto Rico’s public sector to meet its financial obligations weakens. In August 2015, Puerto Rico defaulted on debt service payments for “moral obligation” bonds issued by the Public Finance Corporation, an arm of the island’s Government Development Bank (GDB), which has been the island government’s fiscal agent. On May 1, 2016, Governor García Padilla declared a moratorium on certain debt payments, including debt service the GDB was due to pay the next day. Governor García Padilla stated that, “faced with the inability to meet the demands of our creditors and the needs of our people ... I decided that essential services for the 3.5 million American citizens in Puerto Rico came first.” Whether the island government can pay $1.9 billion in debt service due on July 1, 2016, remains in doubt. The ratings agency Standard & Poors indicated that it considered government default as “virtually certain.” Figure 1. GDB and PRIFA Bond Prices Since 2011 (Par=100) / Source: Electronic Municipal Market Access, Municipal Securities Rulemaking Board. Notes: GDB bond has CUSIP 745177FF7. PRIFA bond has CUSIP 745220EJ8. First vertical line indicates appearance of Barron’s article (August 20, 2013); second vertical line at enactment of Act 71 (July 28, 2014). Third vertical line is at June 29, 2015, when Governor García Padilla stated that “the debt is not payable.” Last vertical line is April 6, 2016, when Puerto Rico enacted a fiscal emergency measure (Act 21 of 2016).

Jun 3, 2016

Legislative Branch: FY2017 Appropriations

The legislative branch appropriations bill provides funding for the Senate; House of Representatives; Joint Items; Capitol Police; Office of Compliance; Congressional Budget Office (CBO); Architect of the Capitol (AOC); Library of Congress (LOC), including the Congressional Research Service (CRS); Government Publishing Office (GPO); Government Accountability Office (GAO); Open World Leadership Center; and the John C. Stennis Center. The FY2017 legislative branch budget request of $4.659 billion was submitted on February 9, 2016. By law, the President includes the legislative branch request in the annual budget submission without change. The House and Senate Appropriations Committees’ Legislative Branch Subcommittees held hearings in March to consider the FY2017 legislative branch requests. On April 20, 2016, the House Appropriations Committee Legislative Branch Subcommittee held a markup of the draft bill. The bill was ordered reported to the full committee by voice vote. On May 17, the House Appropriations Committee held a markup of the bill. Seven amendments were considered: two were adopted, four were not adopted, and one was withdrawn. The bill was ordered reported by voice vote. It would provide $3.481 billion, not including Senate items (H.R. 5325, H.Rept. 114-594). On May 19, the Senate Appropriations Committee held a markup of its version of the FY2017 bill. It would provide $3.021 billion, not including House items. The bill was reported by a vote of 30-0 (S. 2955, S.Rept. 114-258). The House- and Senate-proposed totals for legislative branch activities (including all House and Senate items) differ by $37.0 million, with the House proposing $4.436 billion for FY2017 and the Senate proposing $4.399 billion. Legislative branch funding peaked in FY2010, and the FY2016 enacted level of $4.363 billion (P.L. 114-113) remains below the FY2009 level of $4.501 billion. The FY2016 level represented an increase of $63 million (+1.5%) from the FY2015 level of $4.300 billion, and the FY2015 level represented an increase of $41.7 million (+1.0%) from the FY2014 funding level of $4.259 billion. The FY2013 act funded legislative branch accounts at the FY2012 enacted level, with some exceptions (also known as “anomalies”), less across-the-board rescissions that applied to all appropriations in the act, and not including sequestration reductions implemented on March 1. The FY2012 level represented a decrease of $236.9 million (-5.2%) from the FY2011 level, which itself represented a $125.1 million decrease (-2.7%) from FY2010. The smallest of the appropriations bills, the legislative branch comprises approximately 0.4% of total discretionary budget authority.

Jun 2, 2016

Medicare’s Skilled Nursing Facility (SNF) Three-Day Inpatient Stay Requirement: In Brief

Medicare beneficiaries are generally entitled to coverage for care they receive in a skilled nursing facility (SNF). However, Medicare beneficiaries can be liable for substantial cost sharing related to the care they receive in an SNF if that care is not preceded by a hospital inpatient stay of at least three days. On an increasing basis, however, Medicare beneficiaries are failing to meet this three-day inpatient stay requirement because they are receiving shorter inpatient hospital stays and overnight observation care as hospital outpatients, often for days at a time, which does not qualify for Medicare Part A-covered SNF care. key terms: Medicare, SNF, hospital, outpatient observation, three day, three day inpatient, skilled nursing facility, post-acute care, 3-day inpatient stay requirement, Medicare Part A, Medicare Catastrophic Coverage Act (MCCA; P.L. 100-360), NOTICE Act (P.L. 114-42).

Jun 2, 2016

Video Broadcasting from the Federal Courts: Issues for Congress

Members of Congress, along with the legal community, journalists, and the public, have long considered the potential merits and drawbacks of using video cameras to record and/or broadcast courtroom proceedings. The first bill to propose video camera use in the federal courts was introduced in the House of Representatives in 1937, and since the mid-1990s, Members of Congress in both chambers have regularly introduced bills to expand the use of cameras in the federal courts and have sometimes held hearings on the subject. Video cameras are commonly used in state and local courtrooms throughout the United States to record and broadcast proceedings. All 50 state supreme courts in the United States allow video cameras under certain conditions, and cameras are allowed in many states for trial and appellate proceedings. Yet video cameras are not widely used in federal circuit and district courts, and they are not used at all in the Supreme Court. While Rule 53 of the Federal Rules of Criminal Procedure has banned photography and broadcasting of any federal criminal proceedings since 1946, the Judicial Conference of the United States conducted pilot programs from 1991 to 1994 and from 2011 to 2015 to study the use of video cameras in federal courtrooms in civil proceedings. As a result of their participation in these pilot programs, two federal circuit courts and 14 federal district courts presently allow video cameras in their courtrooms under certain circumstances. Yet even as the use of cameras in courts has become more widespread during the past few decades, many of the fundamental questions about the use of video cameras in the courts remain relatively unchanged. The debate regarding video cameras in federal courtrooms revolves around these and other issues: the appropriate degree of congressional involvement in matters related to the operation of the federal judiciary; the degree of access the public and media should have to the federal courts; the advantages and disadvantages of additional judicial transparency; the potential effects of cameras in the courtroom on ensuring a fair trial and protecting participants’ privacy; and the possible ways in which cameras may alter the way courts conduct business and affect judicial integrity. Addressing these issues often involves balancing one consideration against another. For example, protections to make sure the accused receives a fair trial might lead to more restricted public or media access to the courts. Generally, while Congress may legislate in this area, to date, considerable deference has been given to the Supreme Court Justices and other officials within the federal judiciary in determining if and how video recording and broadcasting should be implemented in the federal courts. A study based on the Judicial Conference’s 2011-2015 pilot program is expected later this year and may alter considerations in this policy debate.

Jun 1, 2016

Federal Research and Development Funding: FY2017

President Obama’s budget request for FY2017 includes $152.333 billion for research and development (R&D), an increase of $6.195 billion (4.2%) over the estimated FY2016 enacted R&D funding level of $146.138 billion. The request represents the President’s R&D priorities; Congress may opt to agree with part or all of the request, or it may express different priorities through the appropriations process. In particular, Congress will play a central role in determining the growth rate and allocation of the federal R&D investment in a period of intense pressure on discretionary spending. Budget caps may limit overall R&D funding and may require movement of resources across disciplines, programs, or agencies to address priorities. Funding for R&D is concentrated in a few departments and agencies. Under President Obama’s FY2017 budget request, seven federal agencies would receive 95.6% of total federal R&D funding, with the Department of Defense (47.8%) and the Department of Health and Human Services (21.5%) accounting for nearly 70% of all federal R&D funding. In dollars, the largest increases in agency R&D funding in the President’s request would go to the Department of Energy (up $2.755 billion, 19.1%), the Department of Defense (up $1.953 billion, 2.8%), and the Department of Health and Human Services (up $772 million, 2.4%). The President’s FY2017 request continues support for a number of multiagency R&D initiatives: the National Nanotechnology Initiative, Networking and Information Technology Research and Development program, U.S. Global Change Research Program, Brain Research through Advancing Innovative Neurotechnologies (BRAIN) initiative, Precision Medicine Initiative, Cancer Moonshot, Materials Genome Initiative, National Robotics Initiative, and National Network for Manufacturing Innovation. In recent years, continuing resolutions and sequestration have resulted in the annual appropriations process being completed after the start of the fiscal year. This can affect agencies’ execution of their R&D budgets, including the delay or cancellation of planned R&D activities and acquisition of R&D-related equipment.

Jun 1, 2016

Kurds in Iraq and Syria: U.S. Partners Against the Islamic State

Since 2014, the United States and members of a coalition it leads have partnered with a politically diverse set of Kurdish groups to combat the Islamic State organization (IS, also known as ISIS/ISIL or by the Arabic acronym Da’esh). For background information on these groups and their relationships in the region, see CRS In Focus IF10350, The Kurds in Iraq, Turkey, Syria, and Iran, by Jim Zanotti and Bolko J. Skorupski. Existing legal authorities enacted by Congress and the President permit the Administration to provide some arms and some Iraq/Syria anti-IS-related funding to Kurdish groups under certain conditions. In April 2016, the Defense Department announced that it would provide more than $400 million in assistance to pay and otherwise sustain Iraqi Kurdish fighters as part of an ongoing partnership that delivers U.S. assistance to Iraqi Kurds with the consent of the Iraqi national government. Some Members of Congress have proposed legislation in the 114th Congress that would extend or expand U.S. cooperation with Kurdish groups under certain conditions. This report examines: the roles played in U.S. and coalition efforts to defeat the Islamic State by Iraqi Kurdish groups affiliated with the Kurdistan Regional Government (KRG) and by the Syrian Kurdish Democratic Union Party (PYD)/People’s Protection Units (YPG); interactions Iraqi and Syrian Kurds have with other actors; various benefits and challenges the Kurdish actions and aspirations present for U.S. interests in the region; the outlook for military operations (such as against Mosul in Iraq and Raqqa in Syria) and political outcomes; humanitarian concerns regarding displaced persons in Kurdish-controlled areas, and human rights concerns regarding Kurdish forces’ treatment of civilians in areas they capture; specific U.S. policy questions as they relate to assessments of and plans for U.S.-Kurdish cooperation; and the broader trajectory of the U.S.-Kurdish partnership. U.S. military trainers and advisors have been based in KRG-controlled areas (along with other areas in Iraq) since 2014, and the U.S. government has acknowledged that advisors have periodically engaged in direct action missions in both Iraq and Syria. Since late 2015, U.S. officials have announced additional “advise and assist” deployments in Iraq and Syria. U.S. officials appear to have embraced the benefits Kurdish ground forces provide in ongoing anti-IS operations. At the same time, U.S. officials seem to be seeking ways in which Kurds’ success might help empower non-Kurdish forces that can command political legitimacy among local populations in predominantly Sunni Arab areas such as Mosul and Raqqa. Another apparent goal of U.S. officials is to avoid having cooperation with Kurds significantly disrupt U.S. relations with other partners.

Jun 1, 2016

Substance Abuse and Mental Health Services Administration (SAMHSA): Agency Overview

In recent years, Members of both chambers have introduced legislation that would reauthorize, amend, add, or eliminate programs and activities undertaken by the Substance Abuse and Mental Health Services Administration (SAMHSA). This report briefly summarizes SAMHSA’s major programs and activities and describes the agency’s organizational structure. The Appendix provides an overview of SAMHSA’s budget. SAMHSA’s two biggest programs are the Community Mental Health Services Block Grant (MHBG, $533 million in FY2016) and the Substance Abuse Prevention and Treatment Block Grant (SABG, $1.9 billion in FY2016). Both block grant programs distribute funds to states (including the District of Columbia and territories) according to a formula. The states, in turn, may distribute funds to local government entities and non-profit organizations. The SABG also distributes funds to one tribal entity. SAMHSA’s Programs of Regional and National Significance (PRNS) encompass numerous grants and activities within each of three areas: Mental health ($407 million in FY2016): for example, suicide prevention activities, some of which are separately authorized under the Garrett Lee Smith (GLS) Memorial Act (P.L. 108-355). Substance abuse treatment ($334 million in FY2016): for example, the Pregnant and Postpartum Women program, which supports residential substance use disorder treatment services for pregnant and postpartum women. Substance abuse prevention ($211 million in FY2016): for example, SAMHSA’s oversight of the Federal Drug-Free Workplace Program and the related National Laboratory Certification Program. SAMHSA has three other grant programs: Children’s Mental Health Services ($119 million in FY2016), Projects for Assistance in Transition from Homelessness (PATH, $65 million in FY2016), and Protection and Advocacy for Individuals with Mental Illness (PAIMI, $36 million in FY2016). In addition, SAMHSA conducts surveillance and data collection, statistical and analytic support, performance and quality information systems activities, and agency-wide initiatives. SAMHSA is organized in four centers: (1) the Center for Mental Health Services (CMHS, $1.2 billion in FY2016); (2) the Center for Substance Abuse Treatment (CSAT, $2.2 billion in FY2016); (3) the Center for Substance Abuse Prevention (CSAP, $211 million in FY2016); and (4) the Center for Behavioral Health Statistics and Quality (CBHSQ, $120 million in FY2016). The work of the four centers is supported by headquarters offices, regional administrators, and advisory councils and committees. SAMHSA estimates that it will support 665 full-time employee equivalents in FY2016 and FY2017.

May 27, 2016

Social Media in Congress: The Impact of Electronic Media on Member Communications

The mediums through which Members and constituents communicate have changed significantly over American history and continue to evolve today. Whereas most communications traditionally occurred through the media, via postal mail, or over a telephone, the adoption and use of electronic communications via email and social media technologies (e.g., Twitter, Facebook, YouTube, and other sites) changes how Representatives and Senators disseminate and gather information, who they communicate with, and what types of information they share and receive from the general public, many not residing in their district or state. In less than 20 years, the entire nature of Member-constituent communication has been transformed, perhaps more than in any other period in American history. Over the last several years, the number of Representatives and Senators adopting social media and the number of different services being utilized has increased. In 2009, for example, Members of Congress were just beginning to adopt social media and only a small number were actively using Twitter, mostly as a dissemination tool. Today, all 100 Senators and almost all Representatives have adopted Twitter, Facebook, and other social media tools as a way to supplement their overall office communication strategies and disseminate information. Electronic communication and social media differ from traditional Member-constituent communication in three key ways. Electronic communication is inexpensive. Members can reach large numbers of constituents for a fixed cost, and constituents can reach Members at virtually zero cost. Electronic communication is fast. The relay of information from Capitol Hill to the rest of the country (and vice versa) has been reduced, time-wise. As soon as something happens in Congress, it can be known everywhere in real time. Electronic communication reaches a wide audience. Members can reach large numbers of citizens who are not their own constituents. The cost, speed, and reach of social media have wide-ranging implications for the work of Congress. When Members choose to use electronic communication, they must consider many issues, including office operations (communications expectations and staff allocation); communications strategies (gathering and evaluating constituent opinions, content, interactivity, policies for posting and responding to content); and consequences for representation, including whether the office will respond to postings and, if so, how often. How an office evaluates and manages its social media presence varies from Member to Member.

May 26, 2016

Status of the Ebola Outbreak in West Africa: Overview and Issues for Congress

The 2014-2015 outbreak and spread of Ebola Virus Disease (EVD, or Ebola) in West Africa became an international public health emergency that, in no small part due to international intervention, abated significantly by the end of 2015 and early 2016. The issue remains of interest toward the end of the 114th Congress for a number of reasons, including ongoing concerns about the status of disease and risks of future outbreaks, and interest in the disposition of funds appropriated by Congress in response to Ebola, especially in view of the more recent health challenge posed by the Zika virus. This report discusses ongoing efforts to control Ebola in West Africa, analyzes persistent challenges in fighting the spread of the disease, and tracks Ebola emergency funds. Key milestones in the Ebola outbreak include the following: In March 2014, the World Health Organization (WHO) announced that a “rapidly evolving outbreak of Ebola virus disease (Ebola)” had begun in Guinea, West Africa. Retroactive studies indicated that the virus had likely begun to spread in late December 2013, but that weak disease detection and surveillance systems had failed to identify the outbreak. From Guinea, the disease spread to Liberia and Sierra Leone and continued to infect thousands in the three countries until mid-2015, when a coordinated, high-level response by the international community began to slow the rate of new infections. In August 2014, WHO declared Ebola a Public Health Emergency of International Concern (PHEIC) and one month later, United Nations Secretary-General Ban Ki-moon established the United Nations Mission for Ebola Emergency Response (UNMEER) to coordinate the U.N. response to the outbreak. WHO came under some broad criticism for what was viewed as a late designation for the emergency. Following the PHEIC declaration, the United States and other actors exerted a concerted effort to contain the disease, and cases began to decline rapidly. By the end of December 2015, the fight against the West Africa Ebola outbreak reached a pivotal point. On December 29, WHO declared that human-to-human Ebola transmission had ended in Guinea, marking the first time all three countries had stopped the original chains of transmission at the same time. By this time, WHO had reported over 28,000 confirmed, probable, and suspected Ebola cases worldwide, including more than 11,000 deaths. On March 29, 2016, WHO declared that the West Africa Ebola outbreak was no longer a PHEIC, although the disease was still in a phase that could experience infrequent flare-ups. In addition, Guinea, Liberia, and Sierra Leone continue to face considerable infrastructural constraints. Congress appropriated $5.4 billion in FY2015 emergency supplemental appropriations for domestic and international responses to the Ebola outbreak (in Consolidated and Further Continuing Appropriations Act, 2015, P.L. 113-235, December 2014). Of the funds appropriated for international responses (in Title IX, Division J), roughly half were for the Department of State and the U.S. Agency for International Development (USAID). These funds, which totaled more than $2.5 billion, were limited for Ebola responses, although the law permitted funds from some accounts to be used for preparedness efforts in countries “at risk of being affected by” the outbreak. With some Ebola supplemental funds still unobligated, some in the 114th Congress have looked to these funds as a potential source for responses to the emergent Zika virus. The Obama Administration has requested new funds to support a Zika response and has also reprogrammed some Ebola funds for Zika. The House and Senate have considered legislation in response to the request (S. 2843 and H.R. 5044, respectively. For more information, see CRS Report R44460, Zika Response Funding: Request and Congressional Action). Some Members of the House Appropriations Committee have called on the Administration to expend unobligated Ebola funds before considering the Zika request. Other Members oppose this idea and maintain that remaining Ebola funds should be preserved and used to strengthen the still weak health systems in West Africa that initially failed to detect and contain the outbreak.

May 25, 2016

Fact Sheet: FY2017 National Defense Authorization Act (NDAA) DOD Reform Proposals

This fact sheet is intended to offer Members information on extant Department of Defense (DOD) reform proposals being considered during the FY2017 National Defense Authorization Act debates. As such, it includes key provisions incorporated in H.R. 4909, the FY2017 National Defense Authorization Act (NDAA) reported by the House Armed Services Committee on May 4, 2016 (H.Rept. 114-537), and S. 2943, the FY2017 National Defense Authorization Act reported by the Senate Armed Services Committee on May 18, 2016 (S.Rept. 114-255). Wherever possible, it also includes the Administration’s views. For more information on the Defense Reform debates, see CRS Report R44474, Goldwater-Nichols at 30: Defense Reform and Issues for Congress, by Kathleen J. McInnis.

May 25, 2016

Federal Flood Risk Management Standard (FFRMS)

A Flood Resilience Standard for Federally Funded Projects The Federal Flood Risk Management Standard (FFRMS) is the principal mechanism for accomplishing the flood risk management policies established by President Obama in Executive Order (E.O.) 13690. E.O. 13690 aims to improve the resilience of communities and federal assets against the impacts of flooding. The FFRMS is a flood resilience standard that is required for “federally funded projects.” The October 2015 FFRMS defines federally funded projects as “actions where Federal funds are used for new construction, substantial improvement, or to address substantial damage to a structure or facility.” A structure is defined as a walled or roofed building; a facility is a man-made or man-placed item other than a structure. FFRMS Floodplain Determination For FFRMS compliance, the floodplain for federally funded projects is determined using one of three currently available approaches: freeboard value (i.e., 2 feet above Base Flood Elevation [BFE], where BFE is the 1% annual chance floodplain [BFE+2]); 500-year floodplain; or climate-informed science. Collectively, these approaches are referred to herein as the “FFRMS floodplain.” The FFRMS floodplain in most cases will be wider than the BFE floodplain. The BFE and the freeboard value approach are illustrated in Figure 1. For “critical actions,” the freeboard value approach is BFE+3. A critical action is an activity for which even a slight chance of flooding would be unacceptable (e.g., prisons). Figure 1. Illustration of FFRMS Floodplain Determination Using 2-Foot Vertical Increase Above Base Flood Elevation / Source: CRS. Notes: Topography will largely determine the difference in the horizontal width of the BFE floodplain and the FFRMS floodplain. FFRMS Requirements The FFRMS requires the following for federally funded projects: identification of the FFRMS floodplain and design and construction of structures and facilities located in the FFRMS floodplain to be flood resilient. The FFRMS does not include a requirement to elevate a structure or facility. Instead, the required resilience can be achieved by a variety of means including, but not limited to, structural elevation. The FFRMS also requires, consistent with E.O. 13690, that federally funded projects use where possible natural systems, ecosystem processes, or nature-based approaches (i.e., designs that mimic natural processes) during development of project alternatives. Consistent with E.O. 13690, the FFRMS provides that an agency or department may exempt particular activities and facilities from the FFRMS requirements for national security, emergency actions, and federal facilities for which the requirements are demonstrably inappropriate. Public Comments and Agency Clarifications A FFRMS was first published with E.O. 13690 in January 2015; it was superseded by the October 2015 version. Public comments collected in early 2015 on the implementing guidelines for E.O. 13690, which reflected the January 2015 version of the FFRMS, included concerns regarding the potential impact on the National Flood Insurance Program (NFIP) of the Federal Emergency Management Agency (FEMA) and the regulatory programs of the U.S. Army Corps of Engineers (USACE), including its Clean Water Act permits. FEMA released a fact sheet stating that “The FFRMS will not change the minimum floodplain management criteria ... that communities must adopt in order to participate in the NFIP for flood prone areas, FEMA’s flood mapping standards, or the rating and claims practices of the NFIP.” However, other aspects of the NFIP or other FEMA programs, such as public assistance and hazard mitigation grants that may qualify as federally funded projects under the FFRMS, will be altered to comply with E.O. 13690 and the FFRMS. USACE clarified the applicability of E.O. 13690 and the FFRMS in a fact sheet by stating that regulatory program activities “are not subject to Section 2(i) of E.O. 13690” and that USACE will “continue to review applications by applying the area subject to the base flood’ as the relevant floodplain.’” FFRMS Implementation While broad federal implementing guidelines were finalized in October 2015, individual agencies must develop or update procedures and regulations tailored to their programs before the FFRMS would affect federally funded projects. Although no general benefit-cost analysis of the FFRMS was released, benefit-cost analyses generally are part of the development of agency-specific regulations. (See CRS Report R41974, Cost-Benefit and Other Analysis Requirements in the Rulemaking Process, coordinated by Maeve P. Carey.) Given the FFRMS definition of federally funded projects, numerous agencies may have to update their procedures and regulations to reflect new FFRMS requirements. These include the activities of the Departments of Agriculture, Defense, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, the Interior, and Transportation; the Environmental Protection Agency; and the General Services Administration. Congress has provided direction on the implementation and development of the FFRMS through provisions in appropriations acts. Section 749, Division E, of P.L. 113-235, prohibited the expenditure of FY2015 funds to implement the FFRMS until input was solicited and considered from stakeholders. In the explanatory statement accompanying FY2016 appropriations legislation (P.L. 114-113), Congress mentioned concerns over the development process for the FFRMS; it identified both a “lack of clarity as to which specific programs and activities will be affected, and the uncertainty related to how each agency will implement the new standard.” For FY2016, Section 750, Division E, of P.L. 114-113 prohibits, among other activities, the implementation or enforcement of E.O. 13690 and the FFRMS on nongrant components of the NFIP, and any changes in the “floodplain” considered for USACE regulatory programs. Except for the activities prohibited, such as making any changes to flood insurance purchase requirements, agencies could proceed with FFRMS implementation in FY2016. Provisions related to FFRMS implementation are being debated as part of the FY2017 appropriations process. The discussion has included whether to congressionally mandate additional agency actions before implementation of E.O. 13690 and before the FFRMS could proceed (e.g., analyses of costs and benefits and public hearings). Congressional direction in appropriations acts or other legislation may affect the requirements for, pace of, and cost of FFRMS implementation during FY2017 and beyond.

May 25, 2016

The Bureau of Ocean Energy Management’s Five-Year Program for Offshore Oil and Gas Leasing: History and Proposed Program for 2017-2022

The Bureau of Ocean Energy Management (BOEM), within the Department of the Interior (DOI), is preparing a program for offshore oil and gas leasing on the U.S. outer continental shelf (OCS) for the five-year period from mid-2017 through mid-2022. Currently, BOEM is implementing a previous five-year leasing program for the 2012-2017 period. BOEM prepares five-year leasing programs under Section 18 of the Outer Continental Shelf Lands Act, as amended (OCSLA; 43 U.S.C. §1331 ff). The law requires the Secretary of the Interior to prepare and maintain forward-looking plans that indicate proposed public oil and gas lease sales in U.S. waters. In doing so, the Secretary must balance national interests in energy supply and environmental protection. BOEM’s development of a five-year program typically takes place over two or three years, during which successive drafts of the program are published for review and comment. All available leasing areas are initially examined, and the selection is then narrowed based on economic and environmental analysis to arrive at a final leasing schedule. At the end of the process, the Secretary of the Interior must submit each program to the President and to Congress for a period of at least 60 days, after which the proposal may be approved by the Secretary and may take effect with no further regulatory or legislative action. BOEM also develops a programmatic environmental impact statement (PEIS) for the leasing program, as required by the National Environmental Policy Act (NEPA; 42 U.S.C. §4321). The PEIS examines the potential environmental impacts from oil and gas exploration and development and considers a reasonable range of alternatives to the proposed plan. On March 15, 2016, BOEM published the second draft of its 2017-2022 offshore oil and gas leasing program, known as the proposed program (PP). The PP schedules 13 lease sales, including 10 in the Gulf of Mexico and 3 in the Alaska region. No sales are scheduled for the Atlantic or Pacific regions, and an Atlantic sale proposed in an earlier draft (known as the draft proposed program or DPP) was removed from the PP. The proposed Atlantic sale, if held, would have been the first in the Atlantic region since 1983. BOEM will next publish the final version of the program, to be submitted to Congress and the President. Because the program is developed through a winnowing process, the final program (published under the title “proposed final program” to reflect the need for congressional and presidential review) may remove sales proposed in the PP but will not include any new sales. Congress has typically been actively involved during the planning phases of BOEM’s five-year leasing programs. Although Congress has a role under the OCSLA of reviewing BOEM’s final program, the act does not require that Congress directly approve the program for it to be implemented. However, Members of Congress may convey their views on the Administration’s proposals by submitting public comments on draft versions of the program during formal comment periods, or they may evaluate the program in committee oversight hearings. More directly, Members may introduce legislation to set or alter a program’s terms. The 114th Congress has exercised all these types of influence with respect to the proposed program for 2017-2022. Congressional legislation, including H.R. 1487/S. 791, H.R. 1663, H.R. 3682, H.R. 4749, S. 1276, S. 1278, S. 1279, and S. 2011, would alter the program by adding or removing certain lease sales or making other programmatic changes.

May 23, 2016

United States Lifts Remaining Restrictions on Arms Sales to Vietnam

Overview From May 22 to 25, President Obama is visiting Vietnam, his first trip to that country as President. During his tenure, U.S.-Vietnam relations have expanded, fueled partially by shared concerns about China’s increased assertiveness in the South China Sea, where Hanoi and Beijing have competing territorial and exclusive economic zone (EEZ) claims. (See CRS In Focus IF10209, U.S.-Vietnam Relations.) While in Hanoi, the President announced the removal of remaining U.S. restrictions on sales of lethal weapons and related services to Vietnam. U.S. officials and some observers have argued that such an action could help improve Vietnam’s capacity to respond to China in the South China Sea and solidify the growing strategic partnership between Washington and Hanoi. Others, however, have called the move premature without improvements in human rights conditions in Vietnam. Background During the Vietnam War (1955-1975), the United States imposed a complete embargo on arms sales to North Vietnam, and then expanded it to cover the entire country after Communist forces defeated U.S-backed South Vietnamese government in 1975. In 2007, the Bush Administration eased the ban by allowing non-lethal defense items and defense services to be exported on a case-by-case basis. In October 2014, as relations continued to deepen, the Obama Administration partially relaxed U.S. restrictions on the transfer of lethal weapons and articles to Vietnam to permit “future transfer of maritime security-related” defense articles, again on a case-by-case basis. U.S. firms reportedly are exploring opportunities to export to Vietnam maritime and naval patrol aircraft, coastal radar, and maritime surveillance and communication technology. Many human rights advocates criticized the Administration’s 2014 decision, as well as the May 2016 move, arguing that Hanoi’s continued suppression of dissenters and protestors demonstrates the lack of fundamental changes to the country’s human rights situation, and that the United States had given up leverage to convince Vietnam to make additional improvements. Vietnam is a one-party, authoritarian state ruled by the Vietnamese Communist Party (VCP), which suppresses individuals and organizations that it deems a threat to the party’s monopoly on power. In 2015, Secretary of State John Kerry stated that additional relaxation of the arms sales restrictions would be “tied to further progress” on human rights. Speaking in Hanoi in April 2016, Deputy Secretary of State Antony Blinken commended the Vietnamese government for making “some progress” in human rights, including agreeing to allow independent labor unions as part of the Trans-Pacific Partnership (TPP) free trade agreement. The near-term impact of removing the restrictions on Vietnam’s military capability is unclear. Since the 2014 easing of the arms export ban, it appears that few, if any, lethal defense articles have been sold or transferred to Vietnam from the United States. Some observers note, however, that removing all restrictions arguably could help consolidate support within Vietnam’s political system for continuing to expand relations with the United States. For years, Vietnamese leaders have described the restrictions as barriers to achieving a fully normal relationship. The United States has expanded its military assistance to Vietnam over the past several years. In 2013, for instance, the Administration announced it would provide Vietnam with $18 million in maritime assistance, including several high-speed patrol boats. In 2015, to help Vietnam’s maritime agencies boost their command and control capabilities, the Administration identified Vietnam as one of five recipients of assistance under its $425 million Southeast Asian Maritime Security Initiative, which is designed to “[increase] the maritime security capacity of our allies and partners.” Congressional Oversight The President has the authority to lift arms export restrictions without approval from Congress, though Members could pass legislation to prohibit such a move. If the Obama Administration removes the restrictions on Vietnam, Congress will have oversight of some exports of military items pursuant to Section 36(b) of the Arms Export Control Act (AECA; P.L. 90-629). That law requires the executive branch to notify the Speaker of the House, the Senate Foreign Relations Committee, and the House Foreign Affairs Committee before the Administration can take the final steps to conclude either a government-to-government or commercially licensed arms sale. For potential sales to Vietnam, the Administration is required to notify the congressional committees and leadership 30 calendar days before concluding sales of major defense equipment, defense articles, defense services, or design and construction services meeting certain value thresholds. Certain articles or services listed on the Missile Technology Control Regime are subject to a variety of additional reporting requirements. The President has the authority to waive this review period if the President notifies Congress that “an emergency exists,” which requires the sale to proceed immediately “in the national security interests of the United States.” The President must provide Congress at the time of this notification a “detailed justification for his determination, including a description of the emergency circumstances” that necessitate this action and a “discussion of the national security interests involved.” The Department of State submits to the committees an informal notification of prospective arms sales subject to AECA reporting requirements between 20 and 40 days prior to providing formal notification to the committees and leadership. Section 36(b) of the AECA provides a mechanism for Congress to prohibit a proposed arms sale. Pursuant to that section, the Administration may issue a letter of offer and acceptance (for a proposed government-to-government sale) or an export license (for a proposed commercial sale) unless Congress enacts a joint resolution “prohibiting the proposed sale.” Congress must enact such a resolution within 30 calendar days after receiving notification of the proposed sale, depending on the sale’s destination. Otherwise, the executive branch is free to proceed with the sale. The AECA provides for expedited congressional consideration of such a resolution. Congress has never prohibited a proposed arms sale by use of a joint resolution of disapproval. Congress also has the option of adopting legislation prohibiting or modifying a sale or delivery of a defense-related item. (For more, see CRS Report RL31675, Arms Sales: Congressional Review Process, by Paul K. Kerr.)

May 23, 2016

Public Health Service Agencies: Overview and Funding (FY2015-FY2017)

Within the Department of Health and Human Services (HHS), eight agencies are designated components of the U.S. Public Health Service (PHS). The PHS agencies are funded primarily with annual discretionary appropriations. They also receive significant amounts of funding from other sources including mandatory funds from the Affordable Care Act (ACA), user fees, and third-party reimbursements (collections). The Agency for Healthcare Research and Quality (AHRQ) funds research on improving the quality and delivery of health care. For several years prior to FY2015, AHRQ did not receive its own annual appropriation. Instead, it relied on redistributed (“set-aside”) discretionary funds from other PHS agencies for most of its funding, with supplemental amounts from the ACA’s mandatory Patient-Centered Outcomes Research Trust Fund (PCORTF). In FY2015 and FY2016, AHRQ received its own discretionary appropriation in lieu of set-aside funds, with the FY2016 level of $428 million below the FY2015 level of $443 million. The Centers for Disease Control and Prevention (CDC) is the federal government’s lead public health agency. CDC obtains its funding from multiple sources besides discretionary appropriations. The agency’s funding level has fluctuated in the past few years, with the FY2016 level of $11.8 billion above the FY2015 level of $11.2 billion. The Agency for Toxic Substances and Disease Registry (ATSDR) investigates the public health impact of exposure to hazardous substances. ATSDR is headed by the CDC director and included in the discussion of CDC in this report. The Food and Drug Administration (FDA) regulates drugs, medical devices, food, and tobacco products, among other consumer products. The agency is funded with annual discretionary appropriations and industry user fees. The FDA’s funding level in FY2016 was $4.7 billion—above the FY2015 level of $4.5 billion—with user fees accounting for about 43% of FDA’s total funding. The Health Resources and Services Administration (HRSA) funds programs and systems that provide health care services to the uninsured and medically underserved. HRSA, like CDC, relies on funding from several different sources. The agency’s funding increased from $10.6 billion in FY2015 to $10.8 billion in FY2016. The Indian Health Service (IHS) supports a health care delivery system for Native Americans. IHS’s funding, which includes discretionary appropriations and collections from third-party payers of health care, increased between FY2015 and FY2016 from $5.9 billion to $6.2 billion. Appropriations and collections both increased during that period. The National Institutes of Health (NIH) funds basic, clinical, and translational biomedical and behavioral research. NIH gets more than 99% of its funding from discretionary appropriations. Recent increases in NIH’s annual appropriations have boosted its funding level to a new high of $32.3 billion in FY2016, compared to $30.3 billion in FY2015. The Substance Abuse and Mental Health Services Administration (SAMHSA) funds mental health and substance abuse prevention and treatment services. SAMHSA’s funding, about 95% of which comes from discretionary appropriations, was approximately $3.6 billion in FY2015 and $3.7 billion in FY2016. This report is a new edition of an earlier product, which remains available: CRS Report R43304, Public Health Service Agencies: Overview and Funding (FY2010-FY2016). It will be updated with information on PHS agency funding for FY2017 once legislative action on appropriations for the new fiscal year is completed.

May 19, 2016

Federal Student Aid: Need Analysis Formulas and Expected Family Contribution

This report describes the need analysis formulas used to calculate the Expected Family Contribution (EFC) for federal student aid applicants. The formulas are codified in Title IV of the Higher Education Act (HEA), as amended. The Free Application for Federal Student Aid (FAFSA) is the data collection instrument through which students submit the information that is used to calculate the EFC. The HEA has three EFC formulas: one for dependent students and one each for independent students with and without dependents. A student’s dependency status is determined by the student’s age and other characteristics. The dependent student formula considers the financial resources of the student and the student’s parents. The independent student formulas consider the financial resources of the student and, if applicable, the student’s spouse. The financial resources considered by the EFC formulas are divided into income and assets. The EFC formulas’ definition of a family’s income is fairly inclusive and includes many forms of taxable and nontaxable income. The EFC formulas’ definition of assets includes balances of qualified bank accounts, investments, business equity, and real estate. There are substantial exemptions in the calculation of assets, including a family’s primary residence, retirement accounts, and a family-owned small business. The EFC formulas provide a number of allowances against income and assets (also known as “protections”). Only income and assets in excess of these allowances (“available” income and assets) are considered when calculating the EFC. If the family’s income is below the allowance level, the family will have no available income and therefore no contribution from income. Similarly, if the family is required to report assets and the amount of assets is below the asset protection allowance, the family will have no available assets and therefore no contribution from assets. Assessment of available income and/or assets is the calculation of the actual EFC or components thereof. The assessment rate is the portion of available income or available assets that contribute to the EFC. For example, the assessment rate for available income of an independent student without dependents is 50%, meaning that each dollar of income in excess of the income allowances increases the family’s expected contribution by 50 cents. Assessment rates vary by dependency status and type of financial resource (i.e., income or assets). Generally speaking, additional available income is assessed at a higher rate than additional available assets. In cases where an applicant’s income is below statutorily specified levels, the family may be eligible for a simplified needs test (SNT) in which the family is not required to report information on assets. Thus, the EFC of applicants who are eligible for the SNT is based entirely on the family’s income. In cases where an applicant qualifies for the SNT and meets certain additional income criteria, the applicant may be eligible for an “automatic zero” EFC. The HEA contains provisions that allow for adjustments for families in specified circumstances. For example, a family with multiple students enrolled in postsecondary education has its EFC divided among the enrolled students. The HEA also contains provisions that allow an individual school’s financial aid administrator to exercise professional judgment and adjust certain data used to calculate the EFC to reflect unusual circumstances like job loss, atypically high medical expenses, or other exceptional situations.

May 18, 2016

Department of Housing and Urban Development (HUD): FY2017 Appropriations

Most of the funding for the activities of the Department of Housing and Urban Development (HUD) comes from discretionary appropriations provided each year in the annual appropriations acts, typically as a part of the Transportation, HUD, and Related Agencies appropriations bill (THUD). HUD’s programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. On May 12, 2016, the full Senate began its consideration of FY2017 appropriations for HUD as a part of a substitute amendment to H.R. 2577 that incorporates both the committee-passed version of the THUD bill (S. 2844) and the committee-reported version of the Military Construction, Veterans Affairs, and Related Agencies bill. It would provide $48.4 billion in gross discretionary appropriations for HUD’s programs and activities, which is a 3% increase from the FY2016 level. After accounting for savings from offsets and rescissions, the bill includes $39.2 billion in net discretionary budget authority, which is a 2% increase from the FY2016 level. The bill’s largest funding increases would be provided to the tenant-based rental assistance (TBRA) account and project-based rental assistance (PBRA) accounts, largely to maintain current services for the roughly 3 million low-income families who receive housing assistance through the Housing Choice Voucher program and the project-based Section 8 program. On May 18, 2016, the Transportation, HUD and Related Agencies subcommittee of the House Appropriations Committee marked-up its version of a FY2017 THUD appropriations bill. The subcommittee’s draft bill includes $38.7 billion in net discretionary budget authority for HUD. Congressional action followed the release of the Obama Administration’s FY2017 budget request to Congress on February 9, 2016. The request included $48.9 billion in gross discretionary appropriations for HUD (4% increase from FY2016) and $39.6 billion in net discretionary budget authority (3.5% increase from FY2016). Like S. 2844, the largest funding increases proposed were for the PBRA and TBRA accounts, the largest accounts in HUD’s budget.

May 18, 2016

Senate Medical Innovation Bills: Overview and Comparison with the 21st Century Cures Act (H.R. 6)

Both the House and the Senate are considering legislation to support medical innovation, primarily through reforms to the National Institutes of Health (NIH) and changes to the drug, biologic, and device approval pathways at the Food and Drug Administration (FDA). On February 3, 2015 Senators Lamar Alexander and Patty Murray, chairman and ranking Member of the Committee on Health, Education, Labor and Pensions, announced the start of a bipartisan initiative to “examine the process for getting safe treatments, devices and cures to patients and the roles of the [FDA] and the [NIH] in that process.” This initiative culminated in a package of 19 bipartisan bills that were reported out of the Senate Health, Labor, Education, and Pensions (HELP) Committee in a series of three executive sessions held on February 9, 2016; March 9, 2016; and April 6, 2016. The Senate’s medical innovation package is that chamber’s companion effort to the House’s 21st Century Cures initiative, which culminated in the House passage of H.R. 6, the 21st Century Cures Act, on July 10, 2015, on a vote of 344 to 77. H.R. 6 is the result of a series of hearings and roundtable meetings hosted by the House Energy and Commerce Committee dating back to spring 2014. While consisting of many different provisions, H.R. 6 is primarily focused on efforts to increase strategic investments in medical research at NIH and change some aspects of how the FDA executes its regulatory oversight mission with regard to the review and approval of new drugs, biologics, and medical devices. This report provides for each of the bills in the Senate medical innovation package (1) background on the issue, or issues, addressed by the bill, including a summary of relevant current law; (2) a summary of the bill’s provisions; and (3) where applicable, identification of comparable provisions in H.R. 6 that address the same topic. For a summary of all the provisions in H.R. 6, as passed by the House, including an explanation of how the bill would change current law, see CRS Report R44071, H.R. 6: The 21st Century Cures Act.

May 17, 2016

Fiscal Accountability Requirements That Apply to Title I-A of the Elementary and Secondary Education Act (ESEA)

May 16, 2016

Currency Exchange Rate Policies and the World Trade Organization Subsidies Agreement

May 16, 2016

Department of Transportation (DOT): FY2017 Appropriations

In February 2016, the Obama Administration proposed a $96.9 billion budget for the Department of Transportation (DOT) for FY2017. That is approximately $22 billion more than was provided for FY2016. The budget request reflected the Administration’s call for significant increases in funding for highway, transit, and rail programs. On May 12, 2016 the full Senate began its consideration of FY2017 appropriations for HUD as a part of a substitute amendment to H.R. 2577 that incorporates both the committee-passed version of the THUD bill (S. 2844) and the committee-reported version of the Military Construction, Veterans Affairs, and Related Agencies bill. The DOT appropriations bill funds federal programs covering aviation, highways and highway safety, public transit, intercity rail, maritime safety, pipelines, and related activities. Federal highway, transit, and rail programs were reauthorized in the fall of 2015, and their future funding authorizations were somewhat increased. There is general agreement that more funding is needed for transportation infrastructure, but Congress has not been able to agree on a source that could provide the additional funding. The federal excise tax on motor fuel, which is the primary funding source for federal highway and transit programs, has not been increased in over 20 years, and does not raise enough revenue to support even the current level of spending. To address this shortfall, Congress periodically transfers money from the general fund to keep the programs going. The annual appropriations for DOT are combined with those for the Department of Housing and Urban Development in the Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. The Senate Committee on Appropriations has reported out S. 2844, which would provide FY2017 appropriations for THUD. The committee recommended $76.9 billion in new budget authority for DOT, $1.8 billion more than the comparable figure in FY2016 but roughly $20 billion less than the Administration request. The increase in spending over FY2016 is not clear in budget tables due to a proposed rescission of $2.2 billion of contract authority, which makes the net FY2017 amount $344 million less than the comparable FY2016 appropriation. The major changes from FY2016 levels in the Senate-reported bill are $905 million more for the federal highway program, $575 million more for the federal public transportation program, and $85 million for new federal grant programs for intercity passenger rail. The Senate-reported bill also includes a provision that would amend a provision included in the FY2016 DOT appropriations act suspending certain hour-of-service-related safety restrictions on commercial drivers pending the results of a study of their impact. Commercial drivers are generally limited to working 60 hours in a seven-day period, but have the option of starting a new seven-day period after a break of 34 hours (known as the 34-hour restart provision); a federal regulation issued in 2013 restricted use of the restart mechanism. The provision in the FY2016 act suspended enforcement of the 2013 restrictions. The provision in the current bill would also limit the total amount of time a commercial driver could work in any seven-day period to 73 hours; in the absence of the 2013 restrictions, a commercial driver can work up to 82 hours in a seven-day period.

May 16, 2016

Transportation, Housing and Urban Development, and Related Agencies (THUD): FY2017 Appropriations

The House and Senate Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations Subcommittees are charged with providing annual appropriations for the Department of Transportation (DOT), Department of Housing and Urban Development (HUD), and related agencies. THUD programs receive both discretionary and mandatory budget authority; HUD’s budget generally accounts for the largest share of discretionary appropriations in the THUD bill, but when mandatory funding is taken into account, DOT’s budget is larger than HUD’s budget. Mandatory funding typically accounts for around half of the THUD appropriation. The Administration requested net budget authority of $134.5 billion (after scorekeeping adjustments) for the agencies funded by the THUD bill for FY2017, an increase of $20.6 billion (18%) over FY2016. Most of this increase was for highway, transit, and passenger rail programs in DOT. Customarily, appropriations bills originate in the House of Representatives, but the House has not been able to pass a budget, delaying the consideration of appropriations bills. The Senate Committee on Appropriations has begun the appropriations process. For the THUD bill (Senate-reported S. 2844, now Division A of H.R. 2577), the committee recommended $114.2 billion in net budget authority ($121.2 billion in new budget authority before scorekeeping adjustments), an increase of $244 million (less than 1%) over FY2016. On May 12, 2016, the full Senate began consideration of FY2017 appropriations for THUD as part of a substitute amendment to H.R. 2577 that incorporates both the Senate-reported THUD bill (S. 2844) and the Senate-reported Military Construction, Veterans Affairs, and Related Agencies bill. DOT: The Administration requested a $96.9 billion budget for DOT for FY2017. That is about $22 billion more than was provided for FY2016. The budget request called for significant increases in funding for highway, transit, and rail programs. The Senate Committee on Appropriations largely rejected the proposed increases and recommended $76.9 billion in new budget authority for DOT, $1.8 billion more than the comparable figure in FY2016. After a $2.2 billion rescission of unused contract authority from previous years, the committee’s net FY2017 appropriation for DOT is $344 million less than the FY2016 level. The major changes from FY2016 levels in the Senate-reported bill are $905 million more for the federal highway program, $575 million more for the federal transit program, and $85 million for new federal grant programs for intercity passenger rail. HUD: The President requested $39.6 billion in net new budget authority for HUD for FY2017, $1.3 billion more than provided in FY2016 ($38.3 billion, excluding $300 million in disaster funding). The Senate-reported bill recommends $39.2 billion in net new budget authority, representing $1.5 billion more in appropriations for HUD’s programs and activities than was provided in FY2016 and $600 million more in savings from offsets. More than three-quarters of the increase in appropriations is attributable to funding increases to largely maintain current services in HUD’s primary rental assistance programs, the project-based Section 8 rental assistance program and Housing Choice Voucher program. Related Agencies: The Administration requested a total of $350 million for the agencies in Title III (the Related Agencies). This was about $33 million less than the comparable figure for FY2016, as the Administration request included funding for an agency that was not in the Related Agencies title in FY2016, the Surface Transportation Board. The major change in funding from FY2016 levels in the request was a cut of $35 million (20%) for the Neighborhood Reinvestment Corporation (NRC). The Senate-reported bill recommended $339 million, cutting another $5 million from the NRC.

May 16, 2016

The Sentencing Reform Act of 2015 (H.R. 3713): A Summary

H.R. 3713, the Sentencing Reform Act of 2015, addresses the sentences that may be imposed in various drug and firearms cases. It proposes amendments to those areas of federal law that govern mandatory minimum sentencing requirements for drug and firearm offenses; the so-called safety valves which permits court to impose sentences below otherwise required mandatory minimums in the case of certain low-level drug offenders; and the retroactive application of the Fair Sentencing Act. Related reports include CRS Report R44246, Sentencing Reform: Comparison of Selected Proposals, by Jared P. Cole and Charles Doyle.

May 16, 2016

National Security Space Launch at a Crossroads

The United States is in the midst of making significant changes in how best to pursue an acquisition strategy that would ensure continued access to space for national security missions. The current strategy for the EELV (Evolved Expendable Launch Vehicle) program dates from the 1990s and has since been revised a few times. The program has been dogged by perennial concerns over cost and competition. Those same concerns are a major impetus for change today. The EELV program stands at a crossroads today. Factors that prompted the initial EELV effort in 1994 are once again manifest—significant increases in launch costs, procurement concerns, and concerns about competition. In addition, a long-standing undercurrent of concern over U.S. reliance on a Russian rocket engine (RD-180) for critical national security space launches on one of the primary EELV rockets was exacerbated by the Russian backlash over U.S. sanctions against Russian actions in Ukraine. Moreover, significant overall EELV program cost increases and unresolved questions over individual launch costs, along with legal challenges to the Air Force EELV program by SpaceX, have contributed to Congress recently taking legislative action that has significantly affected the EELV program. Efforts by the Obama Administration and the Air Force to work with Congress on changing the EELV strategy have been deemed insufficient by those in Congress eager to proceed more quickly and definitively. The Air Force and the Department of Defense (DOD) have argued for a slower, more measured transition to replace the RD-180. Although some in Congress have pressed for a more flexible transition to replace the RD-180 and possibly allow for development of a new launch vehicle, others in Congress have sought legislation that would move the transition process forward more quickly with a focus on developing an alternative U.S. rocket engine. This debate over how best to proceed with NSS launch has been a leading legislative priority in the defense bills over the past few years and is likely to continue to be so throughout the coming year. Transitioning away from the RD-180 to a domestic U.S. alternative would likely involve technical, program, and schedule risk. A combination of factors over the next several years, as a worst-case scenario, could leave the United States in a situation where some of its national security space payloads would not have a certified launcher available. Even with a smooth, on-schedule transition away from the RD-180 to an alternative engine or launch vehicle, the performance and reliability record achieved with the RD-180 to date would not likely be replicated until well beyond 2030 because the RD-180 has had 68 consecutive successful civil, commercial, and NSS launches since 2000.

May 13, 2016