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BUDGET

BUDGET OF THE UNITED STATES GOVERNMENT

Fiscal Year 2001

THE BUDGET DOCUMENTS
Budget of the United States Government, Fiscal Year 2001
contains the Budget Message of the President and information on
the President’s 2001 budget proposals. In addition, the Budget includes the Nation’s third comprehensive Government-wide Performance Plan.
Analytical Perspectives, Budget of the United States Government, Fiscal Year 2001 contains analyses that are designed to highlight specified subject areas or provide other significant presentations
of budget data that place the budget in perspective.
The Analytical Perspectives volume includes economic and accounting analyses; information on Federal receipts and collections; analyses
of Federal spending; detailed information on Federal borrowing and
debt; the Budget Enforcement Act preview report; current services
estimates; and other technical presentations. It also includes information on the budget system and concepts and a listing of the Federal
programs by agency and account.
Historical Tables, Budget of the United States Government,
Fiscal Year 2001 provides data on budget receipts, outlays, surpluses or deficits, Federal debt, and Federal employment covering
an extended time period—in most cases beginning in fiscal year 1940
or earlier and ending in fiscal year 2005. These are much longer
time periods than those covered by similar tables in other budget
documents. As much as possible, the data in this volume and all
other historical data in the budget documents have been made consistent with the concepts and presentation used in the 2001 Budget,
so the data series are comparable over time.
Budget of the United States Government, Fiscal Year 2001—
Appendix contains detailed information on the various appropriations and funds that constitute the budget and is designed primarily
for the use of the Appropriations Committee. The Appendix contains
more detailed financial information on individual programs and appropriation accounts than any of the other budget documents. It
includes for each agency: the proposed text of appropriations language, budget schedules for each account, new legislative proposals,
explanations of the work to be performed and the funds needed,
and proposed general provisions applicable to the appropriations of

entire agencies or group of agencies. Information is also provided
on certain activities whose outlays are not part of the budget totals.
A Citizen’s Guide to the Federal Budget, Budget of the
United States Government, Fiscal Year 2001 provides general
information about the budget and the budget process for the general
public.
Budget System and Concepts, Fiscal Year 2001 contains an
explanation of the system and concepts used to formulate the President’s budget proposals.
Budget Information for States, Fiscal Year 2001 is an Office
of Management and Budget (OMB) publication that provides proposed
State-by-State obligations for the major Federal formula grant programs to State and local governments. The allocations are based
on the proposals in the President’s budget. The report is released
after the budget and can be obtained from the Publications Office
of the Executive Office of the President, 725 17th Street NW, Washington, DC 20503; (202) 395–7332.
AUTOMATED SOURCES OF BUDGET INFORMATION
The information contained in these documents is available in
electronic format from the following sources:
CD-ROM. The CD-ROM contains all of the budget documents and
software to support reading, printing, and searching the documents.
The CD-ROM also has many of the tables in the budget in spreadsheet format.
Internet. All budget documents, including documents that are
released at a future date, will be available for downloading in several
formats from the Internet. To access documents through the World
Wide Web, use the following address:
http://www.gpo.gov/usbudget
For more information on access to the budget documents, call (202)
512–1530 in the D.C. area or toll-free (888) 293–6498.

GENERAL NOTES
1.
2.

All years referred to are fiscal years, unless otherwise noted.
Detail in this document may not add to the totals due to rounding.

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON 2000
For sale by the U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, D.C. 20402–9328

1

TABLE OF CONTENTS
Page

I.

The Budget Message of the President .............................................................

3

II.

Building on the Success of Our Fiscal Discipline ........................................

13

III.

Sustaining Our Economic Prosperity ..............................................................

21

IV.

Strengthening Our Nation in the 21st Century
1.

41

2.

Supporting Working Families ..............................................................

57

3.

Strengthening Health Care ..................................................................

69

4.

Protecting the Environment .................................................................

83

5.

Promoting Research ..............................................................................

95

6.

Enforcing the Law .................................................................................

107

7.

Strengthening the American Community ...........................................

121

8.

Advancing United States Leadership in the World ............................

139

9.
V.

Investing in Education and Training ..................................................

Supporting the World’s Strongest Military Force ..............................

149

Improving Government Performance
10.

Restoring Trust in Government ...........................................................

161

11.

National Defense ...................................................................................

171

12.

International Affairs .............................................................................

177

13.

General Science, Space, and Technology .............................................

181

14.

Energy ....................................................................................................

187

15.

Natural Resources and Environment ..................................................

195

16.

Agriculture .............................................................................................

205

17.

Commerce and Housing Credit ............................................................

213

18.

Transportation .......................................................................................

219

19.

Community and Regional Development ..............................................

227

20.

Education, Training, Employment, and Social Services ....................

233

21.

Health ....................................................................................................

245

22.

Medicare .................................................................................................

251

23.

Income Security .....................................................................................

255

24.

Social Security .......................................................................................

261

25.

Veterans Benefits and Services ............................................................

267

26.

Administration of Justice .....................................................................

273

27.

General Government .............................................................................

279

28.

Net Interest ...........................................................................................

285
i

ii

TABLE OF CONTENTS—Continued
Page

29.

Allowances .............................................................................................

289

30.

Undistributed Offsetting Receipts .......................................................

291

31.

Improving Performance through Better Management .......................

293

32.

Detailed Functional Tables ..................................................................

309

VI.

Summary Tables ....................................................................................................

389

VII.

List of Charts and Tables ....................................................................................

423

VIII.

OMB Contributors to the 2001 Budget ............................................................

429

I.

THE BUDGET MESSAGE
OF THE PRESIDENT

1

2

THE BUDGET FOR FISCAL YEAR 2001

The Federal Government Dollar
Fiscal Year 2001 Estimates
Where It Comes From...
Receipts $2,019 billion
Corporate
Income
Taxes
10%

Social
Insurance
Receipts
34%

Other
4%

Excise
Taxes
4%
Individual
Income
Taxes
48%

Where It Goes...
Outlays $1,835 billion

91%
On-Budget
Surplus
5%

9%

Defense
Discretionary
16%

Medicare
Solvency
8%

Social
Security
23%

Medicare
12%

Non-Defense
Discretionary
19%

Net
Interest
11%

Social Security
Solvency Lock-Box
87%

Medicaid
7%
Other
Means-Tested
Entitlements
6%

Debt Reduction
$184 billion

Table I–1.

Other
Mandatory
6%

Budget Totals

(In billions of dollars)
1999
Actual 2000

Estimates
2001

2002

2003

2004

2005

2006

2007

2008

2009

Total
2010 2001–2010

Receipts ..........................
Outlays ...........................

1,827
1,703

1,956
1,790

2,019
1,835

2,081
1,895

2,147
1,963

2,236
2,041

2,341
2,125

2,440
2,185

2,559
2,267

2,676
2,362

2,785
2,456

2,917
2,553

24,202
21,683

Total unified budget
surplus ........................

124

167

184

186

185

195

215

256

292

314

329

363

2,519

224

239

250

260

272

2,169

26

47

57

61

80

299

4
1

5
1

7
*

8
*

11
*

35
16

256

292

314

329

363

2,519

Debt Reduction:
Social Security solvency lock-box ........
124
148
160
172
184
195
214
Medicare solvency
transfers ................. ............ ............
15
13 ............ ............ ............
Reserve for catastrophic prescription drug coverage
............ ............ ............ ............ ............ ............ ............
On-Budget surplus ...
1
19
9
1
*
*
2
Total debt reduction

* $500 million or less.

124

167

184

186

185

195

215

THE BUDGET MESSAGE OF THE PRESIDENT
To the Congress of the United States:
The 2001 Budget, which I am submitting
to you with this message, is the fourth
balanced budget of my Administration. This
budget upholds my policy of fiscal discipline
and promises new opportunity for our Nation.
We have made great progress in the last
seven years, rejecting the fiscal disarray of
an earlier era and in its place, asserting
a steadfast commitment to live within our
means, balance the budget, and uphold fiscal
discipline. As a result, we have created
the conditions for unprecedented prosperity.
The longest peacetime economic expansion
in American history has produced more than
20 million new jobs. Unemployment has hit
its lowest level in a generation. Today, more
Americans own their own homes than ever
before in our Nation’s history.
Our success in reversing what once seemed
to be uncontrollable growth in the Federal
budget deficit has created more than prosperity. We have restored to America a spirit
of purpose and confidence. This is a rare
moment in history. Few nations are blessed
with a combination of economic prosperity
and social stability at home and with the
security of a relatively peaceful world. It
is time to make the most of this moment
of promise to extend prosperity to all corners
of our Nation.
My first budget of the new century is
built upon a commitment to expanding opportunity, promoting responsibility, and building
community. It includes my New Markets
Initiative, which relies on public and private
sector cooperation to spur economic development in areas of our Nation that have
not yet fully benefited from this wave of
prosperity. It includes an expansion of the
Earned Income Tax Credit to lift more hardpressed working families out of poverty. It
expands health insurance coverage to more

uninsured low-income children and extends
this coverage to their hard-working parents.
Because education is fundamental to creating opportunity, my budget contains resources to prepare the next generation for
the future with new and expanded efforts
to improve the quality of our schools, prepare
our students for college, and make college
more accessible. It includes efforts to narrow
the digital divide, the gap that separates
those who have access to information technology and those who do not, so that all
will be equipped with the technological tools
they need to succeed. It also includes a
science and technology initiative to lay the
foundation for new scientific breakthroughs.
This budget responds to the pressing needs
of today and builds an America of the
future by making our Nation debt free by
2013. To be prepared for the retirement
of the baby boom generation, my budget
also provides a framework to extend the
life of the Social Security and Medicare
trust funds, while modernizing Medicare with
a needed prescription drug benefit.
This budget uses the same straightforward
approach of relying on conservative assumptions, as have all the budgets of my Administration. This conservative approach has built
confidence in our budgets, because when
unforeseen results have materialized, an inevitable development in forecasting, they have
always brought good news. In turn, reversing
recent trends, my 2001 Budget builds on
the tradition of straightforward budgets to
meet the pressing needs of today in a balanced
plan that adheres to the principles of fiscal
discipline and debt reduction. This budget
also maintains a strict set of budget rules
upholding our long commitment to fiscal
discipline, which has sustained the conditions
for our economy to flourish.

3

4
The 2001 Budget continues to project that
the Federal budget will remain in surplus
for many decades to come, provided that
a responsible fiscal policy holds course, to
foster sustained economic growth. Our challenge now, in this era of surplus, is to
make balanced choices to use our resources
to meet the pressing needs of today, and
the needs of generations to come.
Building on the Success of Our Fiscal
Discipline
When I took office in 1993, the current
strength of our economy seemed beyond possibility. At that point, both the Federal budget
deficit and the national debt had exploded,
threatening our economic future. The costs
of massive Federal borrowing drove interest
rates up, incomes were stagnant for all
but the most well off, and the economy
had barely grown during the prior four
years. The Nation needed a new course,
and we worked hard to secure the passage
of legislation, with the support of Democrats
in Congress, to get the economy moving
again.
My three-part economic strategy, built upon
reducing the deficit, investing in the American
people, and engaging the international economy yielded results. The budget deficit quickly
began to drop from its peak of $290 billion,
and in 1997, we pressed ahead with our
deficit reduction efforts as Congress passed
the Balanced Budget Act on a bipartisan
basis to finish the job. Four years ahead
of schedule, the budget reached balance and
is projected this year to produce its third
surplus in a row. We have started to pay
down the national debt and are on a path
to make the Nation debt free by 2013 for
the first time since 1835.
Throughout the past seven years, my Administration has been committed to creating
opportunity for all Americans, demanding
responsibility from all Americans, and
strengthening the American community. The
crime rate, which had tripled during the
previous three decades, continues to fall and
crime is down in every region of the Nation.
We have reformed the welfare system, and
more than seven million Americans in the

THE BUDGET FOR FISCAL YEAR 2001

past seven years have made the transition
from welfare to work.
Most of all, the prosperity and opportunity
of our time offers us a great responsibility—
to take action to ensure that Social Security
is there for the elderly and the disabled,
while ensuring that it not place a burden
on our children, that the life of Medicare
is extended for future generations, and that
we modernize Medicare with a needed prescription drug benefit. If we continue to
follow sound fiscal policy, we can provide
for the future, produce a balanced tax cut
and meet the needs of today, while sustaining
the conditions that have brought us this
current wave of prosperity. All this can
be done, but balanced and sound fiscal policy
is the key.
Improving Performance Through Better
Management
At the start of this Administration, the
Vice President and I set out to create a
Government that works better, costs less,
and gets results Americans care about. We
believe that with better stewardship, the
Government can better achieve its mission
and improve the quality of life for all Americans. The success of these efforts is reflected
in the significant changes of the past seven
years in the way Government does business.
We have streamlined Government, cutting
the civilian Federal work force by 377,000,
giving us the smallest work force in 39
years. We have done more than just reduce
or eliminate hundreds of Federal programs
and projects. We have also empowered government employees to cut red tape, and used
partnerships to get results.
While we have made real progress, there
is still much work to do. We are forging
ahead with new efforts to improve the quality
of the service that the Government offers
its customers. My Administration has identified its highest priorities—24 Priority Management Objectives listed in this budget, that
will receive heightened attention to ensure
positive changes in the way Government
works. It is a mark of our success that
in early 2000, we were able to remove
last year’s number one objective from the
list: Manage the Year 2000 (Y2K) Computer

THE BUDGET MESSAGE OF THE PRESIDENT

Problem. Due largely to the efforts of Federal
employees and the leadership provided by
my Council on Year 2000 Conversion, the
Federal Government’s Y2K efforts were, beyond all expectation, remarkably trouble free.
We will continue to move ahead to address
other priorities, including modernizing student
aid delivery, implementing IRS reforms, and
strengthening the management of Health Care
Financing Administration, which oversees
Medicare.
I believe the steps we have taken to
change and improve the way Government
works have also changed the way Americans
view their Government, increasing the confidence and trust of the American public.
It is our job to keep at this task, so
that the Federal Government continues to
improve its performance and the American
public is better served. I am determined
that we will do more to solve the very
real management challenges before us.
Strengthening our Nation in the 21st
Century
Education, in our competitive global economy, has become the dividing line between
those who are able to move ahead and
those who lag behind. For this reason, I
am committed to ensuring that we have
a first-rate system of education and training
in place for Americans of all ages. Over
the last seven years, we have worked hard
to ensure that every boy and girl is prepared
to learn, that our schools focus on high
standards and achievement, that anyone who
wants to go to college can get the financial
help to attend, and that those who need
another chance at education and training,
or a chance to improve or learn new skills,
can do so. My budget builds on the commitment to make college more affordable by
expanding the tax credits for higher education
and increasing Pell Grants and other college
aid beyond the record levels already reached.
It promotes smaller learning environments
in high schools and invests in reducing
class size by recruiting and preparing thousands more teachers and building thousands
more classrooms, as well as providing for
urgent and essential school repairs.

5
My budget includes significant increases
to expand access to after-school and other
extended learning time opportunities, a central
element of my accountability agenda to help
children, especially in the poorest communities, reach challenging academic standards
while supporting efforts to demand more
from schools and support them in return.
It promotes efforts to recruit teachers in
high-poverty areas and includes a peer review
initiative to help school districts raise teacher
standards and teacher pay. The budget proposes improving school accountability by holding States, districts and schools accountable
for results by providing resources to identify
and turn around the worst-performing schools,
and incentives to reward States that do
the most to improve student performance
and close the achievement gap. It invests
in programs to help raise the educational
achievement of Latino students. And my
budget supports efforts to narrow the digital
divide by expanding resources for technology
centers to make computers accessible in lowincome community areas.
During the past seven years, we have
taken many steps to help working families,
and we continue that effort with this budget.
We cut taxes for 15 million working families,
provided a tax credit to help families raise
their children, ensured that 25 million Americans a year can change jobs without losing
their health insurance, made it easier for
the self-employed and those with pre-existing
conditions to get health insurance, provided
access to health care coverage for up to
five million uninsured children, raised the
minimum wage, and provided guaranteed time
off for workers who need to care for a
newborn or to address the health needs
of a family member.
I am proposing a significant expansion
of the Earned Income Tax Credit to provide
support to America’s hard working, low-income
families, especially larger families who are
more likely to be poor than families with
only one or two children. My budget also
significantly increases 21st Century Learning
Community Centers and expands after-school
learning time. It makes child care more
affordable by expanding tax credits for middleincome families and for businesses that provide child care services to their employees,

6
by assisting parents who want to attend
college meet their child care needs, as well
as making a child care tax credit available
to parents who choose to stay at home
to raise a young child. My budget proposes
to create an Early Learning Fund and builds
on our expansion of the successful Head
Start program to help meet the goal of
serving one million children by 2002. And
it promotes responsible fatherhood by proposing tough new measures to ensure that
all parents who can afford to pay child
support do so, while providing support to
increase the employment earnings and child
support payments of low-income fathers. My
budget includes efforts to increase access
to food stamps for the working poor, in
part by proposing that low-income working
families, who need efficient transportation
to get to work, be permitted to own a
modest vehicle and retain food stamp eligibility. And, it proposes resources to provide
health care to legal immigrant children, to
restore Supplemental Security Income benefits
to legal immigrants with disabilities, and
to restore food stamp benefits to legal immigrants in families with eligible children.
We have continued to improve health care
for millions of Americans. Since the establishment of the State Children’s Health Insurance
Program in 1997, two million children have
enrolled in programs across all 50 States.
I am proposing a significant expansion of
this successful program to extend health
coverage to more children in hard working,
low-income families. My budget also extends
this coverage to their parents, low-income
working adults who lack health insurance,
which will help increase the enrollment of
their children by enabling entire families
to receive coverage through the same program.
My budget contains other significant incentives
to increase access to affordable health care,
including tax credits for small businesses
and a provision to allow hundreds of thousands of Americans aged 55 to 65 to purchase
Medicare coverage.
My budget puts forth a plan that extends
Medicare solvency to at least 2025, respects
fiscal discipline, and eliminates the national
debt. My plan will modernize Medicare with
a needed drug benefit, expand access to
preventative benefits, and improve Medicare

THE BUDGET FOR FISCAL YEAR 2001

management. I intend to keep pressing ahead
and working with Congress to enact essential
patient protections including emergency room
access and the right to see a specialist.
By Executive Order, I have extended these
rights to 85 million Americans covered by
Federal health plans, including Medicare and
Medicaid beneficiaries and Federal employees.
Most Americans are enjoying the fruits
of our strong economy, yet we must do
more to bring this prosperity to all corners
of our great Nation. We must use this
moment of promise to spread the values
of community, opportunity, and responsibility,
and to help create the conditions for all
to share in our prosperity. My New Markets
Initiative, an expanded approach built upon
the same public-private cooperation at the
center of last year’s plan, will provide tax
credit and loan guarantee incentives to stimulate tens of billions of dollars in new private
investment in distressed rural and urban
areas. It will build a network of private
investment institutions to funnel credit, equity, and technical assistance into businesses
in America’s untapped markets, and provide
the expertise to targeted small businesses
that will allow them to use investment to
grow. I am also proposing to expand the
number of Empowerment Zones, which provide
tax incentives and direct spending to encourage the kind of private investment that
creates jobs, and to provide more capital
for lending through my Community Development Financial Institutions program. My
budget also includes significant funding increases for Native American communities to
help this generation and future generations
receive greater opportunities. It provides additional funds to enforce the Nation’s civil
rights laws, and strengthens the partnership
we have begun with the District of Columbia.
In addition, my budget proposes an $11
billion package for farmers in need and
to help mend the farm safety net by providing
assistance when crop prices are low.
Our anti-crime strategy is working. Serious
crime has fallen without interruption, and
the murder rate is at its lowest point in
three decades. Building on our successful
community policing (COPS) program that is
helping communities fund 100,000 cops on
the beat, the 21st Century Policing initiative

THE BUDGET MESSAGE OF THE PRESIDENT

was enacted last year to put us on track
to fund new anti-crime technology and 50,000
more police. This year, I am launching the
largest gun enforcement initiative ever, adding
funds to hire 500 new ATF agents, 1,000
State and local gun prosecutors and funds
for smart gun technology. The budget also
provides funds to prevent violence against
women, and to address the growing law
enforcement crisis on Indian lands. To boost
our efforts to control illegal immigration,
the budget provides resources to strengthen
enforcement, particularly on the Southwest
and Northern borders, and to remove illegal
aliens. To combat drug use, particularly among
young people, my budget expands programs
that stress treatment and prevention, law
enforcement, international assistance, and
interdiction.
During the past seven years, I have sought
to strengthen science and technology investments in order to serve many of our broader
goals for the Nation in the economy, education,
health care, the environment, and national
defense. Building on the balanced portfolio
of basic and applied research in the 21st
Century Research Fund, my budget includes
a Science and Technology Initiative which
places special emphasis on high-priority, longterm basic research, including nanotechnology,
the manipulation of matter at the atomic
and molecular level, which offers the promise
that medical science may one day be able
to detect cancerous tumors when they are
comprised of only a few cells. My budget
also increases resources for the Information
Technology research and development program
to invest in long-term research in computing
and communications. It will accelerate development of extremely fast supercomputers to
support civilian research, enabling experts
to develop life-saving drugs, provide earlier
tornado warnings, and design more fuelefficient, safer automobiles. The budget provides strong support for the Nation’s two
largest sources of civilian basic research funding for universities: the National Science
Foundation and the National Institutes of
Health.
The Nation does not have to choose between
a strong economy and a clean environment.
The past seven years are proof that we
can have both. We have set tough new

7
clean air standards for soot and smog that
will prevent up to 15,000 premature deaths
a year. We have set new food and drinking
water safety standards and have accelerated
the pace of cleanups of toxic Superfund
sites. We expanded our efforts to protect
tens of millions of acres of public and private
lands, including Yellowstone National Park,
Florida’s Everglades, and California’s redwoods. Led by the Vice President, the Administration reached an international agreement
in Kyoto that calls for cuts in greenhouse
gas emissions. My budget significantly expands support for the environment, by establishing dedicated funding and increasing resources for the historic interagency Lands
Legacy initiative to preserve the Nation’s
natural and historic treasures. My budget
also supports the Clean Energy initiative
to reduce the threat of global warming,
and the Greening the Globe initiative to
save tropical and other forests around the
globe. It provides resources to support farm
conservation to upgrade water quality, the
Clean Water Action plan to clean up polluted
waterways, and climate change technology
efforts to increase energy-efficient technologies
and renewable energy to strengthen our economy while reducing greenhouse gases.
In the past year, America’s leadership was
essential to the success of the NATO alliance
in halting the ethnic cleansing of Kosovo’s
ethnic Albanians and containing the risk
of wider war at the doorstep of our allies.
The United States has played a critical
role in the strides made toward lasting
peace in Northern Ireland, the Middle East,
and Sierra Leone. The United States has
worked to detect and counter terrorist threats
and continue efforts with Russia and other
former Soviet nations to halt the spread
of dangerous weapons materials. My budget
seeks to build on these efforts, proposing
funding to build a democratic society and
stronger economy in Kosovo, initiatives to
further protect our men and women overseas,
and a 2000 emergency supplemental to provide
critical assistance to the Government of Colombia in its fight against narcotics traffickers.
My budget also proposes funding to promote
international family planning, contain the
global spread of AIDS, promote debt forgiveness to help people in the world’s poorest

8
countries join the global economy, and promote
trade by opening global markets.
The Armed Forces of the United States
serve as the backbone of our national security
strategy. As it did successfully last year
in Kosovo, the military must be in a position
to protect our national security interests
and guard against the major threats to
U.S. security. These include regional dangers,
such as cross-border aggression; the proliferation of the technology of weapons of mass
destruction; transnational dangers, such as
the spread of illegal drugs and terrorism;
and, direct attacks on the U.S. homeland
from intercontinental ballistic missiles or other
weapons of mass destruction. To ensure that
the military can fulfill this mission, I made
a major commitment last year to maintain
our military readiness, which this budget
builds upon with additional resources to ensure that the services can meet required
training standards, maintain equipment in
top condition, recruit and retain quality personnel, and procure sufficient spare parts
and other equipment. To help improve the
quality of life and strengthen the Department’s
ability to attract and retain quality individuals, this budget includes a major initiative
to reduce servicemembers’ out-of-pocket costs
for off-base housing. In addition, this budget
provides resources for the Department of
Defense and other agencies to combat emerging threats, including terrorism and weapons
of mass destruction, and to provide for critical
infrastructure protection. It provides funds
to support counter-narcotics efforts, including
a 2000 supplemental to increase assistance
to the Government of Colombia in their
fight against narcotics traffickers. It also

THE BUDGET FOR FISCAL YEAR 2001

provides additional funding for contingency
operations in Southwest Asia, Bosnia, and
Kosovo.
Building Prosperity for the Future
This is a rare moment in American history.
Never before has our Nation enjoyed so
much prosperity, at a time when social
progress continues to advance and our position
as the global leader is secure. Today, we
are well prepared to make the choices that
will shape our Nation’s future for decades
to come.
By reversing the earlier trend of fiscal
irresponsibility, balancing the budget, and
producing a historic surplus, we have restored
our national spirit and produced the resources
to help opportunity and prosperity reach
all corners of this Nation. We have it within
our reach today, by making the right choices,
to offer the promise of prosperity to generations of Americans to come. If we keep
to the path of fiscal discipline, we can
build a foundation of prosperity for the
Nation’s future.
My plan to extend the solvency of Social
Security and Medicare allows the United
States to become debt-free in the next 13
years, for the first time since 1835. Eliminating the debt will strengthen our economy,
devote resources to Social Security, and prepare us to meet the challenges of the aging
of America. Through fiscal discipline and
wise choices we can extend the life of Social
Security to the middle of the century, extend
the solvency of Medicare until 2025, and
modernize Medicare with a needed prescription drug benefit.

9

THE BUDGET MESSAGE OF THE PRESIDENT

By continuing to maintain discipline, we
can provide for the aging of America and
for the investments of the future—including
education, the environment, research and development, and defense—which are central
to our economic growth, health, and national
security. By making choices that respect
fiscal discipline, we can make room to provide

both for a balanced tax cut and for investments that will help this Nation stay strong
in the future.
This new century is filled with promise,
for we live at a remarkable time. By making
wise choices, we have it within our power
to extend the same promise and prosperity
to generations to come.
WILLIAM J. CLINTON

February 7, 2000

II. BUILDING ON THE SUCCESS
OF OUR FISCAL DISCIPLINE

11

II.

BUILDING ON THE SUCCESS OF OUR
FISCAL DISCIPLINE

We made the tough choices to reduce the deficit and balance the budget the right way. Year
in and year out, we have resisted politically attractive, but economically unwise tax cuts that
would have abandoned this commitment and taken us in the wrong direction . . . And in the last
two years alone, we had paid down our Nation’s debt by $140 billion, the largest debt reduction
in our Nation’s history. We have closed the book on deficits and opened the door on a new era of
economic opportunity . . . Debt reduction really means a tax cut, and a sizeable one, for America’s
families. It proves that putting our fiscal house in order helps every American household.
President Clinton
October 1999

The dawn of this new century has brought
with it extraordinary opportunities for the
American people. Today, our economic success
is unparalleled and we are poised to enter
the longest economic expansion in our Nation’s
history. From the largest Federal budget
deficit in history only seven years ago we
have produced the largest surplus in history.
Moreover, with our fiscal house in order,
we have started to pay down the national
debt held by the public, and if we maintain
sound fiscal policy, we can eliminate the
debt in the next 13 years, making the
United States debt free for the first time
since 1835.
When President Clinton took office seven
years ago, the Federal budget deficit had
exploded. It dominated the Government’s ability to make policy and imposed an insidious
burden on our economy. In 1992, the $290
billion deficit—the largest in American history—was projected to continue spiraling upward without restraint. The economy suffered,
interest rates were high, and job creation
stalled. Capital that should have been used
for productive investments to create new
jobs instead was used to finance the Government’s massive deficit-driven borrowing.
We can now look back with pride at
our progress and ahead with confidence as
we consider the success of our fiscal discipline

and the opportunity we have to build upon
it. Today, we have lower interest rates,
a higher level of investment, and unprecedented prosperity. Our economy has added
more than 20 million new jobs. The unemployment rate is the lowest in 30 years, the
welfare rolls are down by more than 50
percent since 1993, the core inflation rate
is the lowest in 35 years, and more Americans
own their own homes than at any time
in our history.
Tomorrow holds even greater promise. The
President’s deficit reduction policy has produced historic surpluses and has put us
on a path to pay down and eliminate the
debt. Compare that to the record of the
past. In the 12 years before the President
came to office, the debt had quadrupled
and equaled nearly 50 percent of the Nation’s
annual production, draining funds that could
have been devoted to other uses in order
to pay the interest costs on the debt. If
the President had not adopted the policy
of aggressive deficit reduction the debt was
projected to double again, nearing 70 percent
of the Nation’s economy by 2001 and imposing
nearly $400 billion in interest costs next
year. Instead, as the debt begins to reverse
course and head downward, we have an
extraordinary opportunity to make America
debt free by 2013.
13

14
The President’s plan to save Social Security
would protect the entire Social Security surplus and dedicate it to debt reduction, and
would extend the solvency of the program
to mid-century. The President also proposes
to extend the solvency of Medicare until
at least 2025, and to modernize the program
with a needed prescription drug benefit. Paying down the debt will improve the Nation’s
ability to uphold existing commitments to
Social Security, freeing resources that would
have gone to interest costs and devoting
them instead to extending the solvency of
the program. The President’s sustained commitment to saving Social Security already
has produced agreement that it is essential
to protect the Social Security trust fund.
It is time to meet the challenges of this
new century to ensure that we extend the
solvency of Social Security and uphold our
commitments to generations to come by investing in the future.
The President’s Agenda: The Path to
Prosperity
The President has achieved one of his
first and most important goals: to get the
economy moving again. He did this by spearheading a controversial and courageous program to revive the Nation’s economy. His
economic strategy was built upon three elements: fiscal discipline; investing in policies
that strengthen the American people; and,
engaging in the international economy, including expanding global trade.
The President’s 1993 economic plan, which
he worked with the Congress to enact, was
the centerpiece of this strategy. It cut spending, slowed the growth of entitlements, and
raised taxes on only the very wealthiest
Americans. At the same time, this plan
cut taxes for 15 million working families
and made 90 percent of small businesses
eligible for tax relief. And, it began an
ongoing effort to invest in education and
training and in research to boost productivity
and, thus, promote higher living standards.
His three-pronged plan of deficit reduction,
international engagement, and targeted investments provided resources for the American
people. The plan both ensured that key
investments for the American people strength-

THE BUDGET FOR FISCAL YEAR 2001

ened their prospects for the future, and
took broader fiscal measures to put the
Nation’s economy on the right track.
Despite critics’ predictions that this strategy
would fail, causing recession and even larger
deficits, the President’s plan built the foundation for the great prosperity that is America’s
today. In the summer of 1997, the President
and the Congress joined together in an historic
agreement to finish the job of balancing
the budget. The results of this bipartisan
action, the Balanced Budget Act (BBA), provided the final push, bringing the budget
to balance a full four years earlier than
projected. Like the President’s 1993 plan,
the BBA also provided for strategic investments in the American people.
The Record of Fiscal Discipline and
Targeted Investments
The 2000 Budget maintained fiscal discipline, protected the surplus, forged a path
of debt reduction, and did so while providing
resources for a strategy of targeted investments to maintain economic growth and provide for the future needs of the Nation.
The President worked with Congress to establish and build upon significant investments
in education and training, the environment,
law enforcement, and other priorities. For
example, last year the President’s commitment
has:
• Provided the second year’s investment to
reduce class size by hiring 100,000 new
teachers. Smaller classes ensure that students receive more individual attention, a
solid foundation in the basics, and greater
discipline in the classroom. In its second
year, the class size initiative has already
reduced class size in participating schools
by an average of five students. The proposed investments in this area will reduce
class size in the early grades to a national
average of 18 students.
• Increased Head Start’s ability to provide
greater opportunities for disadvantaged
children to participate in a program which
prepares them for grade school. In 2000,
a boost in Head Start funding will put
880,000 children into the program, making
further progress toward the President’s

II.

BUILDING ON THE SUCCESS OF OUR FISCAL DISCIPLINE

goal of putting a million children in Head
Start by 2002.
• Established the 21st Century Policing Initiative, which builds upon the success of
the President’s Community Oriented Policing Services (COPS), that added 100,000
police officers to local beats and has contributed to the Nation’s lowest crime rate
in 25 years. The 21st Century Policing Initiative provides funding for up to an additional 50,000 officers by 2005, provides
significant funds for the latest anti-crime
technologies, and engages communities in
fighting crime by funding new communitybased prosecutors and partnerships with
parole officers, school officials, and faith
based organizations.
• Created Lands Legacy, an historic interagency initiative, which strengthens efforts at the local, State, and Federal levels
to preserve our national heritage by protecting the Nation’s natural treasures and
historic places for Americans today and tomorrow. Funding for Federal land acquisition will protect for future generations precious natural and historic sites, including
parks, forests, wildlife refuges, and environmentally sensitive lands throughout
the Nation.
• Protected and restored some of the Nation’s most treasured lands, such as Yellowstone National Park, the Everglades,
and California’s redwoods, provided the
funds to conserve many others, and accelerated toxic waste clean-ups.
• Advanced cutting-edge research with an
increase last year for the National Institutes of Health of $2.3 billion—a total of
$7.5 billion since 1993—an increase of 73
percent by 2000, to support a portfolio of
research including intensified work on diabetes, cancer, genetic medicine, and the
development of an AIDS vaccine.
Last year, the President also proposed
a budget that respected fiscal discipline, met
the Nation’s needs of today, and planned
to uphold our commitments for the future.
In his 2001 Budget, the President maintains
the course of fiscal discipline, proposes a

15

plan to extend the solvency of Social Security
and Medicare and provides the resources
for targeted investments to keep our Nation’s
economy and its people strong. The budget
offers balanced tax relief and provides for
the pressing needs of today, including expanding health care coverage for America’s hard
pressed working families. The budget does
so in a way that balances these essential
needs, and upholds fiscal discipline now and
in the future.
Improving Performance Through Better
Management
A key element in the Administration’s ability to expand strategic investments and keep
the budget balanced is improving performance
through better management. Improved stewardship of the Government can help it better
achieve its mission and improve the quality
of life for all Americans. To this end, the
President and Vice President have streamlined
Government, reducing its work force by
377,000, and eliminated obsolete or duplicative
programs.
The Administration, however, is working
to create not just a smaller Government—
but a better one, a Government that provides
services and benefits to its ultimate customers,
the American people. When Government works
for the people—when citizens receive good
basic services and have faith in the Government that provides them—their trust in Government can be restored.
Therefore, the Administration is forging
ahead with new and additional efforts to
improve the quality of the service that the
Government offers its customers. It has identified its highest priorities—24 Priority Management Objectives (PMOs) that will receive
heightened attention to ensure positive
changes in the way Government works. These
PMOs include modernizing student aid delivery, implementing IRS reforms, and strengthening the management capacity of the Health
Care Financing Administration, which oversees Medicare. (For a full discussion of the
Administration’s management agenda, see Section V, ‘‘Improving Government Performance.’’)

16

THE BUDGET FOR FISCAL YEAR 2001

Investing in the Future to Save Social
Security and Medicare

raise the standard of living and quality
of life of Americans.

President Clinton, through his sustained
commitment to save Social Security, has
lead the way and has built support for
general agreement that it is essential to
protect the Social Security trust fund. The
next challenge in saving Social Security is
to secure and dedicate resources to extending
the solvency of Social Security. The President
has proposed a framework for saving Social
Security; it builds upon our successful fiscal
discipline and the resources it has provided
to the Nation. The President proposes to
devote the entire Social Security surplus
to paying down and eliminating more than
$3 trillion of debt held by the public by
2013. This will produce substantial interest
savings that can be used to strengthen and
extend the solvency of the program. The
President’s plan commits a portion of the
benefits that have resulted from the successful
strategy of fiscal discipline by dedicating
the interest savings to the Social Security
trust fund, extending its solvency to the
middle of the century.

The President is proposing major initiatives
that will continue his investments in highpriority areas—from expanding access to
health care for more low-income children
and their hard working parents through the
SCHIP health insurance program; to allowing
Americans from 55 to 65 to buy into Medicare;
to expanding the Earned Income Tax Credit
for hard working, low-wage families and helping with their child care expenses, to helping
States and school districts recruit and prepare
thousands more teachers and build thousands
more classrooms; and, to making every effort
to fight gun violence in our society.

It is essential that the Nation uphold
its existing commitments to the Medicare
program, upon which elderly Americans depend, while modernizing its prescription drug
benefits. The President’s plan extends the
solvency of the Medicare program by relying
on the benefits of debt reduction to strengthen
and extend the life of the program, and
dedicates $299 billion of the budget surplus
over 10 years. This will extend the solvency
of Medicare to at least 2025, preserving
access to, and quality of, the program’s
benefits that are an essential part of our
Nation’s commitment to aged Americans.
While preparing for the demographic
changes of the future, this budget also builds
upon efforts to invest in the American people,
to meet the pressing needs of today, and
to lay the foundation to meet those of the
future. The budget continues this policy of
helping working families with their basic
needs—raising their children, sending them
to college, and expanding access to health
care. It also invests in education and training,
the environment, science and technology, law
enforcement, and other priorities to help

Families and Children: For seven years,
the President has sought to help working families balance the demands of work and family.
In this budget he proposes a major effort to
expand the Earned Income Tax Credit to help
lift up hard working, low-wage families, to
make child care more affordable, accessible,
and safe by expanding child care tax credits
for middle-income families and for businesses
to expand their child care resources, and increasing funds with which the Child Care and
Development Block Grant can help more poor
and near-poor children. The budget proposes
to create the Early Learning Fund, which
would provide grants to communities for activities that improve early childhood education
and the quality of child care for those under
age five. It also promotes responsible fatherhood both with measures to encourage child
support and to help fathers enter and stay
in the work force to meet their responsibility
to their families.
Health Care: The President has worked
hard to expand health care coverage and improve the Nation’s health. His budget proposes
a plan to extend the solvency of Medicare to
2025, while modernizing the program with a
needed prescription drug benefit. The budget
gives new insurance options to hundreds of
thousands of Americans aged 55 to 65. In addition, it proposes an expansion of the successful
SCHIP program to reach additional low-income
children and their hard working parents.
The President’s budget proposes initiatives
to help patients, families, and care givers
cope with the burdens of long-term care.

II.

BUILDING ON THE SUCCESS OF OUR FISCAL DISCIPLINE

The budget also enables more Medicare recipients to receive promising cancer treatments
by participating more easily in clinical trials.
Education: The President has worked to
enhance access to, and the quality of, education and training. The budget takes the next
steps by continuing to help States and school
districts reduce class size by recruiting and
preparing thousands more teachers and building and repairing thousands more classrooms.
The President proposes improving school accountability and supporting student achievement by promoting high standards and providing the support to meet them, including
funding additional education hours through
programs like the 21st Century Community
Learning Centers. The budget also proposes
further increases in the maximum Pell Grant
to help low-income undergraduates complete
their college education.
Environment: The Administration proposes
building upon the historic interagency Lands
Legacy initiative to both preserve the Nation’s
natural and historic treasures and advance
preservation of open spaces in every community. This budget provides significantly increased funding for this effort, and establishes
a dedicated and protected source of funding
to continue these efforts in the years ahead.
This initiative will give State and local governments tools for orderly growth while protecting
and enhancing green spaces, clean water, wildlife habitats, and outdoor recreation. The Administration also proposes a Livable Communities initiative to further creation of open
spaces in urban and suburban areas, ease traffic congestion, improve water quality, and
clean up abandoned industrial sites. In addition, the budget proposes funding to accelerate
efforts to address the threat of global warming,
including energy-efficient technologies and tax
credits for the purchase of energy-efficient
cars; to restore and rehabilitate national
parks, forests, wildlife refuges, and other public lands and facilities; to expand efforts to
restore farmland and protect the water quality
of rivers and lakes; to continue efforts to increase the number of Superfund cleanups; and,
to protect endangered species.
International Affairs and Defense: The
President has worked to bring peace to troubled parts of the world. He stood firm in the

17

fight against the vicious campaign of ethnic
cleansing in Kosovo, and now is working to
restore peace, stability, and democracy there.
The United States has played a leadership role
in Northern Ireland, Bosnia, and the Middle
East. This budget also provides critical assistance to the people of Colombia whose democratically elected Government has developed a
multi-year strategy to fight narcotics traffickers.
The 2001 Budget also supports debt relief
as a way to help lift up the poorest nations
of the world, thereby advancing stability,
economic growth and, in turn, promoting
global trade. Attacks on U.S. embassies abroad
have shown there are inherent dangers in
the work of diplomacy. This budget builds
on last year’s multi-year plan, with increased
funding to ensure the continued protection
of American embassies, consulates and other
facilities, and the valuable employees who
work there. It also supports significant increases in funding for State Department
programs to address the threats posed by
weapons of mass destruction. The budget
also increases funding for programs that
support U.S. manufacturing exports and continues our long standing policy of opening
foreign markets.
The mission of our Armed Forces has
changed in this post-Cold War era, and
in many ways it is more complex. Today,
the U.S. military must guard against major
threats to the Nation’s security, including
regional dangers like cross-border aggression,
the proliferation of the technology of weapons
of mass destruction, transnational dangers
like the spread of drugs and terrorism, and
direct attacks on the U.S. homeland from
intercontinental ballistic missiles or other
weapons of mass destruction. The U.S. Armed
Forces are well prepared to meet this mission.
This budget builds upon last year’s sustained
increase in funding for military readiness
by providing additional resources, and builds
for the future through programs for weapons
modernization, and to support military personnel and their families by enhancing the
quality of life, thereby increasing retention
and recruitment.

18
Looking Ahead
At the start of this new century, the
Nation is blessed with prosperity and a
renewed spirit of confidence. There is much
to be proud of in America today. We have
not simply put our fiscal house in order
by balancing the budget; we have left behind
an era in which the budget deficit constrained
the Government’s ability to make wise choices
about the future.
Today, our prosperity, purpose, and renewed
confidence have prepared us to meet new
challenges—spreading opportunity to all corners of our Nation, continuing to invest
in the American people, and holding fast
to the strategy of fiscal discipline that has
been critical to our success. We must make
efforts to reach those who have not yet
been touched by this current wave of prosperity, giving all Americans the chance to
share the values of community, opportunity,
and responsibility. We must continue to invest
in the American people—by preparing them
through education and training to compete
in the global economy, by funding the research
that will lead to the technological tools of
the next generation, by helping working parents balance the twin demands of work
and family, and by providing investment
to our distressed communities in order to
bridge the opportunity gap. And, while we
pursue and meet these challenges, we must

THE BUDGET FOR FISCAL YEAR 2001

not lose sight of the critical element that
has been the source of so much success—
our firm commitment to fiscal discipline.
We now have an opportunity to meet
the pressing needs of today and provide
for the needs of the future. Our strategy
of fiscal discipline means that with a continuation of sound fiscal policy, we will be
able to eliminate the debt and extend the
solvency of Social Security and Medicare
while modernizing the Medicare program with
a needed prescription drug benefit. We can
do so while meeting the need for targeted
investments to keep our economy growing
in the future and while addressing the pressing needs of today. We are prepared to
keep the Nation strong by continuing to
invest in the American people.
This is truly an exceptional moment in
America—the economy is prosperous, the
budget is in balance, and we have a unique
opportunity to plan for the future. Seven
years ago, at the start of this Administration,
few would have imagined that our Nation
would enjoy such prosperity and opportunity.
Today, as we measure and acknowledge the
remarkable progress of the past seven years,
it is our obligation to look forward to future
generations and to make the best choices
possible so that they too can share in the
extraordinary opportunity and prosperity of
America.

III. SUSTAINING OUR
ECONOMIC PROSPERITY

19

III.

SUSTAINING OUR ECONOMIC
PROSPERITY

In 1993, Vice President Gore and I took office determined to change our course, to follow a new
economic strategy founded on fiscal discipline, investment in our people, and expanded trade.
Today the success of that strategy is very much in evidence . . . America has come a long way in
the last seven years—from recession to recovery; from economic disorder to a fiscal house finally
in order. We have even begun to pay down our debt. By putting first things first, by saving Social
Security and strengthening Medicare, our Nation can actually become debt free for the first time
since 1835, when Andrew Jackson was President.
President Clinton
August 1999

When President Clinton took office in 1993,
his greatest priority was to get the economy
moving again and, in turn, restore prosperity
and purpose to our Nation. To reach this
goal, it was essential to reverse the unrestrained growth of the Federal budget deficit.
In the previous 12 years, the budget deficit
had exploded, sapping resources from productive investment and undermining confidence
in the Government’s ability to help shape
our economic future for the better.
The President confronted a Federal budget
deficit that had grown enormously since
1981—at $290 billion dollars in 1992, the
deficit was the largest in the Nation’s history.
During the same period, the string of annual
budget deficits added to the national debt
held by the public.1 The debt grew by $2.3
trillion in 12 years to reach a total of
$3 trillion dollars in 1992. The publicly
held debt was so large that it required,
on an annual basis, almost 15 cents of
every Federal dollar to provide for the interest
costs to finance it. The Government’s massive
borrowing also imposed costs on the private
sector; higher interest rates made it more
expensive for Americans to finance home
mortgages and other borrowing, and for American businesses to finance investments upon
1 National debt held by the public (or publicly held debt) means
funds that the Government has borrowed from—and owes to—the
public.

which the Nation’s job creation and economic
expansion depend.
Seven years later, the economy is strong,
the budget is balanced, the publicly held
debt is declining and can be eliminated
in 2013. There are many measures of the
economy’s success: during this Administration,
the economy has grown at an average inflation-adjusted rate of 3.8 percent; there are
more than 20 million new jobs; and, the
unemployment rate is at its lowest point
in 30 years. The Administration’s fiscal policy
produced a profound reversal of course from
the largest Federal budget deficit in history
to the largest surplus in history, resulting
in a total of $1.8 trillion in deficit reduction
in the course of seven years. We have
begun to reduce the publicly held debt, paying
down $140 billion of debt and saving $8
billion in annual debt service costs. This
turnaround in the national debt can continue.
If we keep the course of a sound fiscal
policy, we will eliminate publicly held debt
by 2013, making the United States a debtfree Nation for the first time since 1835.
The Path to Prosperity
Immediately after taking office, the President moved to set the Nation’s economic
path right by introducing his three-part economic plan. This strategy was based upon:
fiscal discipline, making Government more
efficient, controlling the growth in spending,
21

22
and taking measures to cut significantly the
Federal budget deficit; targeted investments,
including education and research and development; and, engagement in the international
economy, including expansion of global trade,
and opening markets for American exports.
Several months later, after tireless efforts
by the President, his Administration, and
Democrats in Congress, Congress passed the
Omnibus Budget Reconciliation Act (OBRA)
of 1993 with its deficit reduction plan to
cut the deficit in half as a percentage of
the economy in five years. To finish the
job of eliminating the deficit, the President
and Congress joined in a bipartisan effort
to pass the 1997 Balanced Budget Act (BBA),
which reached its goal four years ahead
of schedule, producing the first budget surplus
in a generation in 1998. In six years, after
inheriting the largest deficit in history, a
$290 billion deficit, the President and his
successful strategy produced the largest surplus in history, a $69 billion surplus, and
proceeded to build on that accomplishment
with another historic surplus, $124 billion,
in the seventh year of the Administration.
The turnaround in the budget under President Clinton is the largest deficit reduction
in dollar terms in our history; and relative
to the economy, the improvement is the
greatest since the years immediately following
the massive deficits of World War II. Last
year, 1999, marked the second year in a
row that the budget was in surplus—the
first back-to-back surpluses since the postwar economic boom of the mid-1950’s.
The surplus has allowed the Government
to turn the corner and to retire some of
the publicly held debt, reducing the accumulated obligations from past deficits and bringing down the Government’s ongoing interest
costs. Because we have paid down the debt
by $140 billion, while the economy has grown,
debt service costs have declined almost to
12 cents on every Federal dollar, which
produced a savings of $8 billion due to
lower interest payments. By adhering to the
path of fiscal discipline, the publicly held
debt can be eliminated by 2013, which in
turn will eliminate massive interest payments
to finance the debt. In 1999, such interest
payments amount to $230 billion.

THE BUDGET FOR FISCAL YEAR 2001

These results are all the more remarkable
when compared with the projected results
if this Administration had not tackled the
difficult problem of deficit reduction. If the
Clinton Administration had not changed the
inherited policy, with the same trajectory
of growth, in 2001, the publicly held debt
would exceed $6 trillion, or 67 percent of
Gross Domestic Product (GDP), draining 17
cents from each Federal dollar to cover interest
costs. Instead, the publicly held debt is
now projected to be $3.3 trillion, or 33
percent of GDP, and declining. Under the
President’s long-term plan to meet the demographic changes of the Nation by strengthening Social Security and Medicare, to which
debt reduction is central, debt held by the
public can be reduced to zero by 2013.
The President’s fiscal policy soon yielded
changes in the economy that are so broad
and enduring that February 2000 marks
the achievement of the longest economic expansion in this Nation’s history. At the
very start of the President’s deficit reduction
strategy, financial markets responded to the
prospect of meaningful deficit reduction by
substantially reducing long-term real interest
rates (that is, actual market rates minus
expected inflation). These lower real interest
rates reduced the cost of borrowing, prompting
more business investment, which resulted
in faster economic growth, increased job creation, rising productivity, and higher real
wages.
The numbers confirm this story of economic
success. Long-term real interest rates under
President Clinton have been lower than those
of the previous 12 years by an average
of 11⁄4 percentage point. The rate of real
economic growth in this Administration has
averaged 3.9 percent per year—compared with
an average growth rate of 2.8 percent per
year in the previous 12 years. In the past
seven years, more than 20 million new jobs
were created. At 4.1 percent in December,
1999, the unemployment rate is at its lowest
rate in three decades and has fallen by
more than three percentage points since 1992.
Productivity has risen by 2.7 percent annually
in the last four years. As a result, after
two decades of stagnant wages, real wages
have grown during this Administration, for
a total of 6.5 percent growth. The number

III.

23

SUSTAINING OUR ECONOMIC PROSPERITY

of people in poverty has dropped by 4.8
million, and 7.2 million Americans have left
the welfare rolls.

since the 1960s. (The index combines the
unemployment and inflation rates.)

The economy continues to thrive, in part
because price inflation has dropped. While
the economy has continued its expansion,
strong productivity growth, reflecting the payoffs of public and private investments in
people and business, has helped keep inflationary pressures in check while supporting
solid real wage gains. The underlying core
rate of inflation was 1.9 percent in 1999,
the lowest rate in more than 30 years.
Slower inflation is not characteristic of previous economic booms and has contributed
to the longevity of this expansion. The decline
in the inflation rate and falling unemployment
have produced the lowest ‘‘misery index’’

Budgetary Performance
Deficit Reduction has Far Exceeded Projections: In the 12 years of spiraling budget
deficits before President Clinton took office,
the national debt held by the public quadrupled, growing by $2.3 trillion.
In dollar terms, this was the largest buildup
of Federal debt in the Nation’s history. The
President’s program, enacted by Congress
in 1993, OBRA, was a crucial step toward
fiscal responsibility. The Administration expected OBRA to reduce the deficit significantly; but the actual improvement in the
budget has been more than twice what was
originally projected.

Economic Growth and Fiscal Discipline Benefit the American People
President Clinton’s economic program has concentrated on changes that benefit the American
people in their daily lives and their prospects for the future. The success of this strategy is clear:
• The economy has created more than 20 million jobs since January 1993, nearly all of them
in the private sector, most of them full-time, and in sectors that pay good wages.
• The unemployment rate is the lowest it has been in 30 years; for African Americans and
Hispanics, unemployment is lower than at any time in the quarter-century for which separate statistics have been kept.
• Work has begun to pay more, reversing a two-decade trend of declining real wages—hourly
wages have grown a cumulative 6.5 percent, boosting household incomes throughout the
economy.
• Median family income, adjusted for inflation, has increased by $5,046 in 1998 dollars, rising from $41,691 in 1993 to $46,737 in 1998.
• After two decades of income decline and stagnation, Americans at the lower end of the income scale—those in the poorest 20 percent of households—have seen a rise in their real
incomes. Since 1993, their incomes have risen by almost $900 per household (in 1998 dollars), a 10-percent increase.
• In the past seven years, 7.2 million people have left the welfare rolls, a 51-percent decline.
Welfare recipients now account for the lowest percentage of the U.S. population since 1967.
Meanwhile, 1.5 million people who were on welfare in 1997 are now working, and all
States have met the work requirements imposed by the 1996 welfare reform law.
• From 1993 to 1998, the number of poor people in America declined by 4.8 million, and
there are 2.1 million fewer poor children. The poverty rate has declined sharply from 15.1
percent to 12.7 percent, the lowest it has been since 1979.
• Crime rates are at the lowest level in over 25 years.
• A record number of Americans now own their own homes, which was made possible by
lower real interest rates and larger real incomes. More than eight million additional households are homeowners since the President took office.

24

THE BUDGET FOR FISCAL YEAR 2001

To finish the job of eliminating the budget
deficit, the President worked with the Congress to enact the bipartisan BBA in mid1997, which set a goal of reaching a balanced
budget by 2002. Because of fiscal discipline
and unexpectedly good economic performance,
the budget went into surplus in 1998, four
years sooner than projected. Upon OBRA’s
enactment, the Administration had projected
that it would reduce the accumulated deficits
from 1994 to 1998 by $505 billion. In fact,
the back-to-back surpluses in 1998 and 1999,
combined with reduced deficits from 1993
through 1997, were responsible for $1.8 trillion
of deficit reduction (see Chart III–1). The
total deficit reduction from 1993 to 2005
will be approximately $6.7 trillion.
The Clinton Economic Policy has Reversed the Debt Buildup of the 1980s: When
the Government runs a deficit, it must borrow
from the public to finance the excess outlays,
in turn accumulating what is known as publicly held debt. For much of our Nation’s his-

tory, the accumulation of debt was traditionally associated with the need to provide for
wartime expenses. For example, compared
with the size of the economy as measured by
GDP, publicly held Federal debt accumulated
to a sum even greater—peaking at 109 percent
at the close of World War II in 1946. For many
years after that, the economy grew faster than
the debt, and the ratio of debt to GDP gradually fell to about 25 percent in the 1970s. The
exploding deficits of the 1980s sent it back
up; debt held by the public peaked at 50 percent of GDP in 1993. Since then, the Administration’s policy of deficit reduction has steadily
reduced this ratio. The back-to-back surpluses
of 1998 and 1999 have even cut into the dollar
amount of publicly held debt, driving down the
size of the debt relative to the economy still
faster. Publicly held debt is expected to fall
to 21 percent of GDP by 2005, and to be eliminated by 2013.
Without a change in policy, both OMB
and the Congressional Budget Office (CBO)

Chart III-1. Unified Budget Surpluses Follow Years Of Deficits
Surplus (+) / deficits (-) in billions of dollars

300
200
Reserve Pending Reform
2000-2005
$1.1 Trillion

100
0

Total Deficits
1981-1992 $2.3 Trillion

-100

Total Savings
1993-1999 $1.8 Trillion

-200
-300
-400
-500
1980

Pre-OBRA 1993 Baseline

1983

1986

1989

1992

1995

1998

2001

2004

III.

25

SUSTAINING OUR ECONOMIC PROSPERITY

had projected publicly held debt would have
approached $7 trillion, or 75 percent of
GDP, by 2002, and would have reached
even higher levels thereafter. Instead, because
of the Clinton economic program, at the
end of 1999, the ratio of publicly held debt
to GDP had already fallen about 22 percentage
points below projections made just before
the Administration began pursuing its concerted policy of deficit reduction (see Chart
III–2).
There is a Surplus by any Measure: Until
recently, the unified budget has been the most
commonly used framework for tallying the
Federal Government’s deficits and surpluses.
The unified budget includes all Government
receipts and spending, including Social Security contributions and benefits. This measure
is the most appropriate to use in evaluating
the effect of the Federal Government’s operations on the economy; obviously, for that purpose, it is essential to leave nothing out.

Because contributions to Social Security
have been greater than the benefits paid
out, the Social Security trust funds have
been accumulating surpluses. In the unified
budget, these Social Security surpluses are
counted toward the unified surplus. Without
the Social Security surplus, the unified budget
would not have been balanced in 1998.
Recently, attention has been focused on
the budget surplus or deficit excluding Social
Security trust fund surpluses—the so called
‘‘on-budget’’ surplus or deficit (which also
excludes the relatively small surplus or deficit
in the U.S. Postal Service fund). Within
this budget framework there has also been
a large reduction in the deficit over the
past seven years (see Chart III–3). The
on-budget deficit has fallen from $340 billion
in 1992, to a $1 billion surplus in 1999.
In 2000, it is expected that the surplus
will be larger, at $19 billion. The improvement
in the unified budget for the past seven

Chart III-2. Publicly Held Debt has been Brought Under Control
Percent of GDP

90
80
Pre-OBRA 1993 Baseline

70
60
50
Actuals

40
30

Clinton Achievement
in Reducing Debt

20

2001 Budget Policy

10
0
1980

1983

1986

1989

1992

1995

1998

2001

2004

26

THE BUDGET FOR FISCAL YEAR 2001

years is due primarily to the decline in
the on-budget deficit.
Government Expenditure as a Share of
the Economy has been Reduced: Federal
spending reached a higher share of the economy during the previous two Administrations
than at any other time since the end of World
War II; it was still near its peak, at 22.2 percent of GDP, in 1992. The defense buildup in
the early part of the 1980s, higher Federal
interest payments because of increased debt
plus high interest rates, and large increases
in the cost of Federal health programs overwhelmed all efforts to reduce spending. This
pattern has been reversed under President
Clinton, while, at the same time, this Administration has made investments in education,
the environment, and other priorities. During
the last five years, the ratio of Federal spending to GDP has steadily declined, and in 1999
it was only 18.7 percent, a smaller percentage
of the economy than at any time in a quarter
century.

Economic Prosperity has Spurred Receipts: A healthy economy and a booming
stock market have led to a surge of Federal
tax receipts. In the past seven years, receipts
have generally been higher and spending lower
than projected in the budget, leading to more
deficit reduction than expected. Most recently,
the surprisingly strong growth in receipts has
been especially important in bringing the
budget into surplus well ahead of schedule,
in turn starting the reduction of the national
debt.
The United States is a World Leader in
Budgetary Performance: In the 1980s, the
United States was criticized by world leaders
for its large budget deficits, which were seen
as driving up worldwide interest rates and
threatening global economic growth. The Clinton Administration’s fiscal policies have put an
end to this criticism. The United States can
now point proudly to its fiscal policy as a
model for other countries. The United States
is a leader among the G–7 nations; only Can-

Chart III-3. On-Budget Deficits Have Been Turned Into Surpluses

Surplus (+) / deficits (-) in billions of dollars

200

167
124

Unified Surplus

100
69
1

0

19

-22
-30

-108

-100
-164

-103

On-Budget Surplus

-203

-200

-174

-255
-226

-290
-259

-300

-300
-340

-400
1992

1994

1996

1998

2000

III.

27

SUSTAINING OUR ECONOMIC PROSPERITY

ada runs a larger surplus as a percentage of
its GDP, and four of the other five nations
are in deficit (see Chart III–4). The reason
for this outstanding U.S. performance is comparatively low public spending. The share of
GDP devoted to taxes is lower in the United
States than in any other leading country, even
though the United States supports a much
larger defense establishment than the other
G–7 countries and maintains a balanced budget.
Economic Performance
The Administration’s strategy of reducing
the Federal budget deficit while investing
in people and opening foreign markets has
helped to unleash a powerful surge of private
economic activity. Eliminating the deficit has
freed savings to finance private investment
in business and housing, and enabled the
Federal Reserve to maintain generally lower
interest rates for the past seven years; in
turn, that has helped maintain and strengthen

the economic expansion. Businesses have been
able to borrow for capital improvements at
favorable interest rates. New home buyers
have been drawn into the housing market
because of the lower interest rates, while
current homeowners have been able to refinance their mortgages. The strong economy
has fostered confidence among consumers and
businesses, reinforcing the effects of the fiscal
and monetary policy. The surge in business
and residential investment since the early
1990s shows that the Administration’s fiscal
policy is working; and with the budget now
balanced and producing a surplus, prospects
for continued economic progress are excellent.
The Expansion Sets a New Record: This
February, the economic expansion enters its
107th month, setting a new record as the longest expansion in U.S. history (statistics go
back to the middle of the 19th Century). Earlier post-World War II expansions have generally been curtailed when rising inflation has
forced the Federal Reserve to raise interest

Chart III-4. Among the Other G-7 Countries Only
Canada had a Larger Budget Surplus in 1999
Percent of GDP

4
2

1.6

1.0

0.7

0
-2

-1.6
-2.2

-2.3

-4
-6
-8

-7.6

-10
CANADA

U.S.

U.K.

GERMANY FRANCE

ITALY

Source: Organization for Economic Cooperation and Development Economic Outlook, December 1999

JAPAN

28
rates to curb demand. Demand has grown very
rapidly in the United States, but inflation has
generally drifted downward, so monetary policy has been able to accommodate the growing
economy. Such a moderate inflation performance this long into an expansion is unique in
post-war economic history.
The Administration’s Fiscal Policy has
Helped Extend the Expansion: Federal
budget
deficits
that
were
ultimately
unsustainable helped stimulate the two other
lengthy post-World War II economic expansions—the one in the 1960s and the other in
the 1980s. In those earlier instances, an expanding Government dragged the private sector along—but those stimulative policies could
not continue indefinitely, because they caused
rising inflation and Federal debt. When the
stimulus ended, the expansions lost their
underpinnings.
In the expansion of the 1960s, the deficit
was restrained at first, but it grew sharply
after 1965 because of spending for the war
in Vietnam, which helped bring on the inflation that marked the end of the decade,
and with it the expansion. In the early
1980s, the ‘‘structural budget deficit’’ (the
deficit that would remain even if the economy
were at high employment) was pushed to
almost five percent of GDP by large tax
cuts and expanded military spending. 1 Though
the actual deficit declined after the deep
1981–1982 recession was over, the ‘‘structural
deficit’’ did not. The Government’s failure
to curb the structural deficit once the 1980s
recovery was under way held up interest
rates, contributing to the financial problems
that marked the end of that decade and
helped to bring on the recession of 1990–1991.
In contrast, during the current expansion,
the Federal budget deficit has been eliminated;
and that shift in fiscal policy has facilitated
the rise in private investment that propelled
the economy forward.
This Expansion has been Led by a
Strong Private Sector: Since President Clinton took office in 1993, the economy has grown
1 The structural deficit is the budget gap that would remain after
removing the effects of the business cycle on spending and receipts
(along with purely temporary factors, such as the annual budgetary effects that arose from the crisis in the Savings and Loan industry).

THE BUDGET FOR FISCAL YEAR 2001

at an average rate of 3.9 percent per year after
adjustment for inflation, compared with an average growth rate of 2.8 percent over the previous 12 years. Recent growth has been driven
by increased demand for private goods and
services. The Federal Government’s direct
claim on GDP (mainly defense and other discretionary spending, not counting transfer payments) has actually shrunk over the past 63⁄4
years at an average real rate of 0.6 percent
per year, while the private sector of the economy has grown at a 4.2 percent annual rate.
Meanwhile, 92 percent of the more than 20
million jobs created during this Administration
have been in the private sector (and Federal
Government employment has shrunk by
377,000, as described in Chapter 10, ‘‘Restoring Trust in Government’’).
Business
Investment
has
Spurred
Growth: The ratio of real business equipment
investment to real GDP has reached record
levels: 11.2 percent in the fourth quarter of
1999. Since the beginning of 1993, inflationadjusted equipment investment has grown at
an annual rate of 12.1 percent, more than 21⁄2
times its annual rate of growth from 1980
through 1992 (see Chart III–5).
Investment growth is important for two
reasons:
• Investment adds to the economy’s productive capacity by providing more capital
goods.
• New equipment added to the capital stock
contains the latest technology; so the more
we invest, the faster we adopt new production techniques.
Both additions to capacity and the adoption
of new technology make workers more productive, and have helped to restore productivity
growth to its fastest pace since the 1960s.
Increases in productivity are the only way
to raise real wages and average living standards over the long term, because employers
cannot pay workers more unless they are
producing more. Increased productivity also
helps curtail inflation by allowing business
to pay workers more without increasing prices
because the workers’ additional output pays
for the higher wages.

III.

29

SUSTAINING OUR ECONOMIC PROSPERITY

Chart III-5. Equipment Spending has led the Expansion

Average annual percent change

14
12.1
12
10
8
6

5.2
3.8

4
2
0
1981 - 1988

1989 - 1992

1993 - 1999

Chart III-6. Productivity Growth has Revived
Output per hour in the Nonfarm Business Sector

Average annual percent change

3.0

2.7

2.6

2.5

2.0
1.5
1.5

1.0

0.5

0.0
1959 - 1973

1974 - 1995

1996 - 1999

30
Productivity Growth has Revived: In the
1970s, productivity growth (the average annual growth rate in output per hour in the
nonfarm business sector) fell sharply, from 2.7
percent per year to 1.5 percent. Lower productivity growth meant a slowdown in real wage
growth and stagnating living standards. With
productivity growing at nearly three percent
per year, living standards double every generation. With productivity growing at only 1.5 percent per year, each generation sees only a 50
percent improvement in living standards, and
many within each generation can find themselves falling behind the living standards of
their parents (see Chart III–6).
For 20 years following the 1970s slowdown,
productivity growth stayed at the new slower
rate. Since then, however, productivity growth
has staged a remarkable recovery. On average,
in the four years since the third quarter
of 1995, output per hour in nonfarm business
has been rising by 2.7 percent per year.
This is the same growth rate as before
the slowdown.
It is still too soon to know for sure
if the earlier trend has returned permanently.
Some of the extra growth could be due
to temporary factors that will be discernable
only with the passage of time but the fact
that the higher trend has endured for four
years makes it more likely to persist. This
is welcome news, not only for businesses
seeking to hold down costs and maintain
a competitive pricing structure, but also for
American workers and their families, who
once again see real improvements in their
standard of living.
The Lowest Misery Index in 30 Years:
Both unemployment and inflation have continued to fall even as the expansion finishes its
ninth year. Last year, unemployment fell to
4.2 percent, the lowest annual average since
1969; inflation, at 1.9 percent (as measured
by the core CPI, excluding volatile food and
energy prices), was the lowest since 1965. The
misery index—the combination of the inflation
rate and the unemployment rate—is lower
than at any time since the 1960s (see Chart
III–7).
Unemployment Rates and Interest Rates
are Both Low: The combination of interest
rates and unemployment is at its lowest in

THE BUDGET FOR FISCAL YEAR 2001

decades. Generally, since President Clinton
took office, interest rates have been below the
average levels of the 1980s. It is noteworthy
that real interest rates have remained low despite sustained economic growth and low unemployment, which increase the demand for
credit and might normally send rates higher.
Even with the recent increase in interest rates
in the face of sustained strong economic
growth, the combination of interest rates,
growth, and unemployment remains the best
in decades.
The Economic Outlook
Conservative Forecasts Call for Continued Growth and Low Inflation: Continuing
its prudent economic forecasts, the Administration projects that growth will moderate somewhat. Last year’s unemployment rate was the
lowest in three decades, and is projected to
rise somewhat over the next few years; inflation is also projected to increase slightly. Special factors including the strong dollar, low oil
prices, and the economic slowdown abroad
have held inflation down over the last several
years, but they are not expected to be permanent.
Still, if macroeconomic policies remain
sound, the economy could well continue to
outperform this conservative forecast, as it
has for the past seven years. The Administration expects that the record-setting expansion
will continue for the foreseeable future, and
will sustain many of the economic gains
of the last few years. Ultimately, the Administration believes the economy can return to
its long-run potential growth rate of approximately three percent per year 3 on a sustainable basis by the middle of the new decade,
accompanied by low levels of inflation and
unemployment.
The longer-term economic and budget outlook also is favorable—even more so than
only a few years ago. With prudent fiscal
policy, the budget could remain in surplus
for many decades. Still, there are foreseeable
challenges that will threaten budgetary stability in the 21st Century. In less than
3 In October, a major statistical revision adjusted real GDP upwards. The revision added about 0.4 percentage point to the recent
growth rate of real GDP. That adjustment is reflected in this estimate. The revision is discussed in more detail in Chapter 1 of Analytical Perspectives.

III.

31

SUSTAINING OUR ECONOMIC PROSPERITY

Chart III-7. The Misery Index is at its Lowest Level
in Thirty Years
Percent

Misery Index

30
25
20

Core CPI, 12-month
Percent Change

15
10
5
Unemployment Rate
0
1960

1965

1970

1975

10 years, the ‘‘baby-boomers’’—the large generation born between 1946 and 1964—will
become eligible for early retirement under
Social Security. In the space of two decades,
the elderly’s share of the U.S. population
will jump from around 13 percent to 21
percent. This demographic bulge will put
intense pressure on the Federal budget
through Social Security and the Federal health
programs, Medicare and Medicaid. Reforms
will be needed to preserve the affected programs; and budgetary restraint will be needed
to preserve this Administration’s fiscal
achievements.
The Near-Term Economic Outlook: The
Administration expects economic growth to
moderate from its average pace of 4.3 percent
per year during the past four years to 2.9 percent over the four quarters of 2000, and to
an average of 2.5 percent in 2001–2003. Inflation should remain low. Recent growth has
been much faster than mainstream forecasters
have believed to be sustainable without higher

1980

1985

1990

1995

inflation. The Administration projects that the
more moderate pace of growth will keep inflation low.
After more than a year of worldwide financial turmoil, most of the affected countries
in South East Asia and Latin America appear
to have turned the corner toward recovery,
or at least to have arrested their declines.
Korea, one of the countries where the crisis
began in 1997, has been recovering rapidly
in 1999. Other East Asian economies are
also beginning to emerge from recession.
Europe, which suffered stagnant growth for
much of the 1990s, has begun to grow
more rapidly in the past year. Among the
major industrial countries, Japan alone is
still in the very early stages of recovery.
The worldwide economic crisis in 1997–1998
had very little effect on the overall U.S.
economy. In 1999, growth continued at an
average rate of 4.2 percent. Despite an adverse
trade balance, strong consumer and invest-

32
ment demand kept the economy healthy.
Looking ahead, mainstream forecasts, like
the Administration’s, expect some moderation
in the growth of domestic demand in 2000.
Consumer spending has been outpacing income
growth, and cutting into personal saving;
with the household saving rate at a record
low, consumption may grow more slowly
in the future. Business profits, which had
been growing at double-digit rates from 1993
through 1997, have been rising more moderately since then. Profits are expected to
continue to increase, but the unusually rapid
growth is not projected to return. Furthermore,
the rate of capital utilization is below its
long-run average, which suggests that there
could be some moderation in the rate of
business investment as business finds less
need to add to capacity (though businesses
will continue to invest for modernization
and to increase productivity). Though these
developments could lead to more moderate
economic growth, the longest economic expansion in history is expected to continue.
As the recent rapid increase of productivity
growth moderates, the Administration estimates potential growth will moderate to 2.8
percent by 2007. Beginning in 2008, potential
growth is expected to slow gradually as
the retirement of the baby-boomers begins
to cut into the growth of the labor supply.
Beginning later this year, as economic
growth moderates, the unemployment rate
is projected to rise gradually, stabilizing at
5.2 percent in 2003. Mainstream privatesector economic forecasters generally agree
that inflation would be expected to accelerate
when unemployment is under five percent.
The modest anticipated increase in unemployment is expected to keep price inflation
under control.
After rising by 1.6 percent in 1998, the
Consumer Price Index (CPI) has picked up
somewhat in 1999, rising at an annual rate
of 2.7 percent. Just as falling energy prices
held down the average inflation rate in

THE BUDGET FOR FISCAL YEAR 2001

1998, rising energy prices drove it up in
1999. Economists often recompute the CPI
excluding the volatile food and energy prices
to get a clearer picture of the underlying
(or core) rate of inflation. On this basis,
inflation continued to decline in 1999; core
CPI inflation, excluding food and energy,
was only 1.9 percent. This was the lowest
core rate of inflation since 1965, and it
indicates that the faster inflation in energy
prices was not passed through to other goods
and services. The chain-weighted price index
for GDP also increased somewhat faster in
1999 following an extremely low rate of
increase in 1998. After rising 1.1 percent
over the four quarters of 1998, it has increased
at an average rate of 1.6 percent during
1999. It is projected to rise 1.9 percent
in 2000 and 2.0 percent per year thereafter.
Interest rates on Treasury debt fell to
extremely low levels—under five percent—
during the world financial crisis of 1997–1998.
Since then, they have increased somewhat.
Short-term rates—following three interest rate
hikes by the Federal Reserve during 1999—
are back to pre-crisis levels, while 10-year
rates are also approaching their pre-crisis
average. The Administration projections are
close to the levels at the end of last year,
when the forecast was completed, with the
91-day Treasury bill rate at 5.2 percent
and the yield on 10-year notes at 6.1 percent.
The medium-term projections shown in
Table III–1 should be thought of as the
average behavior expected for the economy,
not a precise year-to-year forecast. In some
years, growth could be faster than assumed;
in other years, it could be slower. Similarly,
inflation, unemployment, and interest rates
could fluctuate around the projected values.
But these assumptions, taken on average,
provide a prudent basis for projecting the
budget. In recent experience, the economy
has outperformed the consensus forecast, and
the Administration believes that it can continue to do so if fiscal policy remains sound.

III.

Table III–1.

Economic Assumptions 1

Actual
1998
Gross Domestic Product (GDP):
Levels, dollar amounts in billions:
Current dollars ..............................................
Real, chained (1996) dollars .........................
Chained price index (1996 = 100), annual
average .......................................................
Percent change, fourth quarter over fourth
quarter:
Current dollars ..............................................
Real, chained (1996) dollars .........................
Chained price index (1996 = 100) .................
Percent change, year over year:
Current dollars ..............................................
Real, chained (1996) dollars .........................
Chained price index (1996 = 100) .................
Incomes, billions of current dollars:
Corporate profits before tax .........................
Wages and salaries .......................................
Other taxable income 2 ..................................
Consumer Price Index (all urban): 3
Level (1982–84 = 100), annual average ........
Percent change, fourth quarter over fourth
quarter ........................................................
Percent change, year over year ....................

Projections
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

8,760
8,516

9,232
8,850

9,685 10,156 10,621 11,105 11,644 12,236 12,847 13,477 14,118 14,777 15,471
9,142 9,393 9,629 9,870 10,146 10,451 10,758 11,064 11,360 11,655 11,958

102.9

104.3

105.9

108.1

110.3

112.5

114.8

117.1

119.4

121.8

124.3

126.8

129.4

5.9
4.6
1.1

5.2
3.8
1.4

4.8
2.9
1.9

4.6
2.6
2.0

4.6
2.5
2.0

4.5
2.5
2.0

5.0
3.0
2.0

5.1
3.0
2.0

4.9
2.9
2.0

4.9
2.8
2.0

4.7
2.6
2.0

4.7
2.6
2.0

4.7
2.6
2.0

5.5
4.3
1.2

5.4
3.9
1.4

4.9
3.3
1.6

4.9
2.7
2.0

4.6
2.5
2.0

4.6
2.5
2.0

4.9
2.8
2.0

5.1
3.0
2.0

5.0
2.9
2.0

4.9
2.8
2.0

4.8
2.7
2.0

4.7
2.6
2.0

4.7
2.6
2.0

782
4,186
1,990

845
4,470
2,088

842
4,711
2,161

828
4,942
2,231

827
5,161
2,293

824
5,388
2,356

852
5,629
2,431

892
5,892
2,518

933
6,176
2,609

971
6,458
2,703

1,001
6,747
2,802

1,034
7,039
2,904

1,062
7,342
3,015

163.1

166.7

171.0

175.1

179.6

184.3

189.1

194.0

199.0

204.2

209.5

215.0

220.6

1.5
1.6

2.7
2.2

2.3
2.6

2.5
2.4

2.6
2.6

2.6
2.6

2.6
2.6

2.6
2.6

2.6
2.6

2.6
2.6

2.6
2.6

2.6
2.6

SUSTAINING OUR ECONOMIC PROSPERITY

(Calendar years; dollar amounts in billions)

2.6
2.6

Unemployment rate, civilian, percent:
Fourth quarter level ......................................
Annual average .............................................
Federal pay raises, January, percent:
Military 4 ........................................................
Civilian 5 .........................................................

4.4
4.5

4.1
4.2

4.3
4.2

4.7
4.5

5.1
5.0

5.2
5.2

5.2
5.2

5.2
5.2

5.2
5.2

5.2
5.2

5.2
5.2

5.2
5.2

5.2
5.2

2.8
2.8

3.6
3.6

4.8
4.8

3.7
3.7

3.7
3.7

3.2
3.2

3.2
3.2

3.2
3.2

NA
NA

NA
NA

NA
NA

NA
NA

NA
NA

Interest rates, percent:
91-day Treasury bills 6 ..................................
10-year Treasury notes .................................

4.8
5.3

4.7
5.6

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

5.2
6.1

33

NA = Not Available.
1 Based on information available as of late November 1999.
2 Rent, interest, dividend and proprietor’s components of personal income.
3 Seasonally adjusted CPI for all urban consumers.
4 Beginning with the 1999 increase, percentages apply to basic pay only; adjustments for housing and subsistence allowances will be determined by
the Secretary of Defense.
5 Overall average increase, including locality pay adjustments.
6 Average rate (bank discount basis) on new issues within period.

34
The Budget Outlook
The Administration projects budget surpluses in 2000 and throughout the customary
10-year budget window. The unified surplus
should reach $167 billion in 2000 and $184
billion in 2001, while the on-budget surplus
remains in surplus.
The Long-Term Budget Outlook: All budget projections contain elements of uncertainty,
which are compounded as they extend further
into the future. However, long-run budget projections are both valuable and necessary to
identify future problems, thereby allowing policy makers to devise solutions on a timely
basis. In the 1980s and before, budget projections were extended for no more than five
years. In the 1990s, attention has increasingly
focused on the outlook for 10 years and even
longer, especially when it has been necessary
to consider longer-term issues such as the
aging of the population and possible reforms
to Social Security.
The swift reduction of the budget deficit
and the appearance of the surplus since
the passage of OBRA in 1993 and the
BBA in 1997 bodes well for the long run.
Without the changes enacted in OBRA, the
Federal deficit was projected to spiral out
of control. Following the changes in OBRA,
projections in the 1997 Budget showed a
unified budget surplus beginning in 2002
and lasting for about 20 years; but the
budget was projected to return to deficit
in the long run. Since then, however, the
economy and the budget have performed
much better than projected, reducing the
accumulated debt at the start of the longrun projections and thereby extending the
projected surpluses for many decades. The

THE BUDGET FOR FISCAL YEAR 2001

current budget projection shows surpluses
lasting until mid-century (see Chart III–8).
However, such projections are inherently
uncertain, because, while prudent fiscal policy
can safeguard our hard-earned prosperity,
so too can reckless choices dissipate the
benefits of the budget discipline that is
responsible for our ongoing success. Strengthening Social Security and Medicare will lay
a strong foundation to safeguard our hardwon fiscal stability and rid the United States
of debt for the first time since 1835. Preserving
fiscal discipline must include strategic investments and reform of these essential agerelated entitlement programs. It must also
include budget tools that have been essential
to enforcing discipline, and the 2001 Budget
proposes spending caps and PAYGO rules
that work. The favorable long-term results
shown in these projections will require prudent
policy—choosing continuing reductions in outstanding debt over expensive tax cuts or
spending increases—and avoiding adverse economic shocks that could knock the projections
off track. However, ordinary business cycles
should not affect the projections if economic
assumptions prove on average accurate over
time. (For more details on the long-run
budget projections see Analytical Perspectives,
Chapter 2, ‘‘Stewardship.’’)
The Clinton Administration’s policy initiatives extend the solvency of Social Security
and Medicare, protect current and future
beneficiaries, and eliminate the publicly held
debt. Restoring confidence in these vital programs is an Administration priority. The
improvements in the long-term budget outlook
illustrated here will offer the opportunity
to get the job done.

III.

35

SUSTAINING OUR ECONOMIC PROSPERITY

Chart III-8. The Long-Run Budget Outlook is Much Improved

Unified surplus (+) / deficits (-) as a percent of GDP

50
40
30
20
2001 Budget Extended

10
0
-10
-20

Pre-OBRA Baseline

-30
-40
-50
1990

2000

2010

2020

2030

2040

2050

2060

2070

Investing in Federal Statistics
Our democracy and economy demand that public and private leaders have unbiased, relevant,
accurate, and timely information on which to base decisions. Data on population, real GDP, the
CPI, and the trade deficit, for example, are critical inputs to monetary, fiscal, trade, and regulatory policy. They also have a major impact on Government spending, budget projections, and
the allocation of Federal funds. Taken together, statistics produced by the Federal Government
on demographic, economic, and social conditions and trends are essential to inform decisions
that are made by virtually every organization and household.
Rapid changes in our economy and society, including the unprecedented growth of e-commerce, have meant that the current funding levels of the Government’s statistical agencies have
not kept pace with the need for good statistics. The relevance and accuracy of some of our Nation’s key statistics are in question. Without the improvements proposed in this budget, it will
become more difficult for our statistical system to mirror our economy and society accurately,
which, in turn, could undermine core Government activities, such as the accurate allocation of
scarce Federal funds. Fortunately, the most serious shortcomings of our statistical infrastructure could be substantially mitigated by proposals set forth in the Administration’s budget.
These initiatives are documented in greater detail in Chapter 11 of Analytical Perspectives,
‘‘Strengthening Federal Statistics.’’

36

THE BUDGET FOR FISCAL YEAR 2001

Saving Social Security
For more than 60 years, Social Security has formed the bedrock of income security for millions
of Americans. For individuals who grow old after a lifetime of work, who become disabled, or
who suffer the death of a family breadwinner, Social Security represents America’s promise to
stand by them.
The pending retirement of 76 million baby boomers will put significant pressure on the Social
Security system, which is self-financed through payroll taxes and income taxes on Social Security benefits. These dedicated revenues go into the Old-Age and Survivors Insurance (OASI) and
Disability Insurance (DI) trust funds. Currently, the revenues to these trust funds exceed the
benefit payments going out. The surplus is invested in Treasury securities, which generate interest income for the trust funds. However, the system is not in balance over the 75-year period
traditionally used by the Social Security Trustees to evaluate the financial status of the program. Under the Trustees’ current projections, Social Security benefit payments will exceed
dedicated tax revenues starting in 2014. By 2022, benefits paid out will exceed total tax revenues plus interest income—without any policy changes, the trust funds will have to draw on
their reserves to meet benefit obligations. By 2034, those reserves are projected to be exhausted.
At that time, payroll taxes are projected to cover only 71 percent of currently promised benefits.
Two key demographic factors affect Social Security’s financial status: the baby boomers and subsequent generations are living longer, and they are having fewer children. Consequently, they
will spend more time in retirement, and there will be fewer younger workers paying into the
system relative to the number of retirees.
The President’s Plan
Restoring the Social Security trust funds to long-range solvency is one of the President’s top priorities. He led the way in 1998 with a series of regional bipartisan forums to build public awareness of the problem, and to build public consensus for solutions. In 1999, the President proposed
a framework built on the principle of maintaining long-term fiscal responsibility—ensuring that
the benefits of fiscal discipline be used to extend the life of Social Security while also making
prudent investments in activities that enhance the Nation’s economic performance. Such a
framework is crucial, because the Government’s ability to pay future Social Security benefits is
tightly linked to the long-term economic and budgetary outlook.
This year, the President urges the Congress to adopt his program to save Social Security
through a commitment to sustained fiscal responsibility. Rather than dissipate all of the currently projected on-budget surpluses on new spending or tax cuts, the President proposes a balanced approach to prepare the Nation for the challenges ahead by paying down the entire debt
held by the public by 2013 and encouraging economic growth.
• Extend Social Security Solvency through Debt Reduction: The President’s sustained commitment to saving Social Security has led to an acceptance of the vital importance of protecting
the Social Security surplus. However, the next step in saving Social Security is to truly protect Social Security by dedicating the resources needed to extend the solvency of the program.
The President proposes to devote the entire Social Security surplus to paying down and eliminating the debt held by the public. Creating a debt-free United States will eliminate debt
service costs and result in substantial interest savings. Devoting Social Security surpluses to
debt reduction will reduce interest payments from $230 billion in 1999 to zero in 2013 and
will dedicate interest savings to extend Social Security solvency to 2050. Paying down the
publicly held debt will improve the Nation’s ability to respond to Social Security’s future
needs.

III.

SUSTAINING OUR ECONOMIC PROSPERITY

Saving Social Security—Continued
• Transfers to Extend Social Security Solvency: The President proposes to devote the rewards of
fiscal discipline to extending the life of Social Security. The substantially lower interest burden on the Federal budget will free up on-budget resources that can be transferred to the
trust funds to extend their solvency. The President proposes to transfer part of the on-budget
surplus to the trust funds from 2011 through 2050—fully justified by the annual interest savings attributable to dedicating the Social Security surpluses to debt reduction. The annual
transfer would be $100 billion in 2011, growing through 2015, after which it would stay level
at $211 billion. The framework includes an added safeguard to ensure that the transfers will
not exceed the currently projected on-budget surpluses.
The President also proposes to invest half of the transferred amounts in corporate equities.
The share of trust funds invested in equities will be limited to 15 percent. The transfers of interest savings alone would extend the solvency of the trust funds from 2034 to 2050, investment in equities would extend solvency to 2054.
• Promote Long-Term Fiscal Responsibility: The President proposes to extend existing budget
enforcement laws from their current scheduled expiration date in 2002 to 2010. These laws
control discretionary spending levels and require new permanent spending increases or tax
cuts to be offset fully by other spending cuts or revenue increases. The President also proposes
to prohibit legislation that would cause or increase an on-budget deficit relative to the current
baseline. These budget enforcement protections promote the fiscal discipline that is a critical
feature of the President’s program.
• Reforms to the Social Security program: The President encourages Congress to work with him
in a bipartisan fashion to close the rest of the 75-year solvency gap through sensible reforms
to the Social Security system. As part of a larger reform plan, the President is committed to
improve income protections for elderly women who experience high poverty rates relative to
the overall elderly population. In addition, the President believes that an overall Social Security solvency agreement should remove the barriers to work that result from the current Social Security earnings test. Social Security’s rules discourage retired individuals from working,
because their benefits are reduced when their earnings exceed a certain level.
The best way to ensure our ability as a Nation to meet future Social Security benefit obligations
is to increase national income, thereby improving the Government’s fiscal position. This can be
accomplished by paying down and eliminating the Nation’s publicly held debt, which frees up resources for private investment and reduces Federal interest payments, and by making targeted
investments in areas such as education and research where there is a high payoff in increased
productivity.
The President believes it is critical to address Social Security’s financing shortfall now. The
healthy American economy and the budget surplus provide a rare opportunity to tackle this
problem from a position of strength. Addressing the issue now expands the number of options
available for dealing with the problem and allows sufficient time to engage in careful deliberation and develop a well-thought-out plan that protects vulnerable populations. And making decisions now will allow individuals sufficient time to adjust their retirement planning, if necessary.
The President believes that, working together, the Administration and Congress can fulfill
America’s long-standing promise to future generations.

37

IV. STRENGTHENING OUR
NATION IN THE 21st CENTURY

39

1.

INVESTING IN EDUCATION AND
TRAINING

At the edge of a new century and an increasingly competitive global economy, we know that our
children’s futures will be determined in large part by the quality of the education they receive ...
Our Administration has made education a high priority, focusing on standards, accountability
and choice in public schools, and on making a college education available to every American ...
Because of these efforts, more young people have the chance to make the most of their God-given
abilities, and take their place in the high-tech world of the 21st Century.
President Clinton
August 1999

President Clinton took office committed to
providing the education and job training
that Americans need to succeed in the new
global economy. Investing in people and improving our Nation’s educational system was
a central element of his 1993 economic program. In the past seven years, the President
has consistently worked to further the goal
of a first-rate education for every child,
starting with programs to expand learning
opportunities for pre-schoolers to those that
encourage students to attend and complete
college. The President’s education strategy
is simple and straightforward—we must invest
more and demand more in return.
To strengthen elementary and secondary
education, the Clinton Administration proposed, and worked with Congress, to enact
new laws in 1994 and succeeding years
to help students, especially in high-poverty
schools, meet challenging educational standards put in place by States and school
districts.
Accountability—holding
schools,
teachers, and students alike to these high
standards—is essential to turning low-performing schools into institutions of quality.
To help these underperforming schools rise
to higher standards, the Administration is
committed to providing needed support,
through programs such as:
• 21st Century Community Learning Centers, first funded in 1997 and expanded
dramatically since 1998, the ‘‘after-school’’
program of grants to public schools and

community-based organizations to establish and expand extended learning time
opportunities;
• the Reading Excellence Act, enacted in
1998, to provide resources to high-poverty
schools to help ensure that all children
can read well and independently by the
end of third grade;
• the Class Size Reduction program, enacted
in 1998, to hire qualified teachers and to
reduce the number of students per classroom in the early grades, which, studies
show, can lead to improved student
achievement; and,
• the Technology Literacy Challenge Fund,
first funded in 1997, offering grants to provide computers, software, and Internet access to schools and technology-related professional development.
The Administration is committed to making
a postsecondary education both attainable
and affordable for every American, from recent
high school graduates and dropouts to adult
learners and displaced workers. The President
has proposed and supported programs that
prepare students for postsecondary education
and that help make college affordable. For
example, in response to the President’s initiative, Congress enacted and funded in 1999
the GEAR-UP program, which helps lowincome students in middle and high school
prepare for college. The Administration has
also worked to increase the Pell Grant max41

42
imum award by 43 percent from 1993 to
2000, and proposes a $200 increase in 2001;
established new tax credits for college costs;
created the Direct Student Loan program
to increase benefits to borrowers (including
the option to repay the loan on an income
contingent basis); and, proposed and saw
enacted significantly lower interest rates for
borrowers on student loans.
In the past seven years, the Clinton Administration has significantly strengthened the
Federal Government’s commitment to education by increasing by nearly $12 billion,
or 50 percent, Federal discretionary funding
for the Department of Education. The 2001
Budget builds upon these increases, continuing
the President’s education agenda with new
and sustained efforts to close the gap in
educational opportunity and offer the tools
to help all Americans take part in the
Nation’s prosperity (see Table 1–1).
The President’s initiatives in K–12 education, most of which are in the Administration’s proposal for the reauthorization of the
Elementary and Secondary Education Act
(ESEA), include: increasing accountability and
fixing failing schools; improving teacher quality; acquiring better technology and preparing
teachers to use it effectively; constructing
and repairing schools; and, encouraging innovation and excellence. Other initiatives specifically target efforts toward improving the
educational outcomes of Latino students and
students from disadvantaged backgrounds,
who face disproportionately high dropout rates
and low enrollment trends in postsecondary
schools, as part of the Administration’s commitment to help all students acquire the
education and skills critical to their success
in the future. These initiatives are coupled
with a significant expansion of Head Start
and the creation of an Early Learning Fund
to ensure pre-school aged children from lowincome families have quality early learning
experiences to prepare them effectively for
school (see Chapter 2, ‘‘Supporting Working
Families’’).
In postsecondary education, the President’s
proposals maintain his focus on helping lowincome students prepare for and pay for
college and include a new tax program to
help middle-income families afford higher edu-

THE BUDGET FOR FISCAL YEAR 2001

cation. In workforce development, the President proposes initiatives to advance opportunity by ensuring that all workers can
find and hold good jobs with good wages,
improve their skills, and work in safe and
healthy environments.
ELEMENTARY AND SECONDARY
EDUCATION
Ensuring Accountability and Fixing
Failing Schools
The cornerstone principle of the Administration’s education initiatives since 1993 has
been to give States and districts increased
flexibility to coordinate and combine program
activities in exchange for greater accountability for school and student performance.
Today, all 50 States and many school districts
have begun to put in place accountability
systems that identify schools in which students
are not meeting challenging State academic
standards and establish consequences, holding
schools accountable for improving their performance.
These reforms—integrating established academic standards, tests to reflect these standards, teacher training, and consequences for
failing to meet standards—are beginning to
show results, as measured by improved student test scores and other factors. But while
the achievement of even the most disadvantaged students is improving, the learning
gap between the less and the more fortunate
is closing at too slow a pace. We cannot
afford to leave any child behind. Nationwide,
there are currently about 8,000 schools in
dire need of improvement, in which a majority
of students struggle to achieve to high academic standards. The Administration’s budget
proposes a package of programs that will
help turn around failing schools and ensure
that all students have the opportunities to
succeed academically.
Title I Accountability Fund: It is essential
that States and localities identify and turn
around schools that are not helping children
reach rigorous academic standards. The budget
provides $250 million in the Title I (Education
for the Disadvantaged) program to help States
hold districts and schools accountable for raising student achievement. States will use funds

1.

43

INVESTING IN EDUCATION AND TRAINING

TABLE 1–1. THE BUDGET INCREASES RESOURCES FOR SELECTED EDUCATION
AND TRAINING PROGRAMS BY $7.8 BILLION, OR 16 PERCENT OVER 2000, AND
BY A TOTAL INCREASE OVER 1993 OF 122 PERCENT
(Dollar amounts in millions)
Dollar Percent
1993
2000
2001
Change: Change:
Actual Enacted Proposed 2000 to 1993 to
2001
2001
TAX EXPENDITURES:
Hope Scholarships Credit ...............................................................................
Lifetime Learning Credit/College Opportunity Tax Cut ..............................
Student Loan Interest Deduction ..................................................................
School Construction .........................................................................................
Total, Tax Expenditures .............................................................................
MANDATORY OUTLAYS:
Welfare-to-Work Grants ..................................................................................
Early Learning Fund (see Chapter 4) ...........................................................
DISCRETIONARY PROGRAM LEVELS:
Preschool: Head Start (see Chapter 4) ........................................................
Elementary and Secondary Education:
School renovation loans and grants ...........................................................
Education Technology ..................................................................................
Class Size Reduction ...................................................................................
Title I—Education for the Disadvantaged/Accountability ........................
21st Century Community Learning Centers .............................................
Teacher Recruitment and Training ............................................................
Bilingual and Immigrant Education ..........................................................
Safe and Drug-Free Schools and Communities .........................................
Charter Schools ............................................................................................
Indian Education .........................................................................................
Special Education ........................................................................................
High School Reform/Small Schools ............................................................
Postsecondary Education:
Pell Grants ...................................................................................................
Pell Grant maximum award (non-add, in dollars) ....................................
Federal Work-Study ....................................................................................
Supplemental Educational Opportunity Grants .......................................
GEAR-UP .....................................................................................................
TRIO .............................................................................................................
Workforce Development:
Dislocated Worker Assistance .....................................................................
Fathers Work/Families Win ........................................................................
Responsible Reintegration for Young Offenders .......................................
Youth Opportunity Grants ..........................................................................
Job Corps ......................................................................................................
Adult Education ...........................................................................................
Vocational Rehabilitation State Grants .....................................................
Total, Discretionary Program Levels .....................................................

............
4,925
............
2,375
............
265
............ ..............

5,125
2,815
333
36

+200
+440
+68
+36

NA
NA
NA
NA

............

7,565

8,309

+744

NA

............
860
............ ..............

920
402

+60
+402

NA
NA

5,267

6,267

+1,000

+126%

............ ..............
23
769
............
1,300
6,709
8,701
............
453
435
793
237
406
598
600
............
145
81
77
2,966
6,036
............
45

1,300
903
1,750
9,150
1,000
1,000
460
650
175
116
6,369
120

+1,300
NA
+134 +3,826%
+450
NA
+449
+36%
+547
NA
+207
+130%
+54
+94%
+50
+9%
+30
NA
+39
+43%
+333
+115%
+75
NA

2,776

6,462
2,300
617
583
NA
388

7,640
3,300
934
631
200
645

8,356
3,500
1,011
691
325
725

+716
+200
+77
+60
+125
+80

+29%
+52%
+64%
+19%
NA
+87%

517
1,589
............ ..............
............ ..............
............
250
966
1,358
305
470
1,880
2,339

1,771
255
75
375
1,393
556
2,400

+181
+255
+75
+125
+35
+86
+61

+243%
NA
NA
NA
+44%
+82%
+28%

25,543

40,648

47,192

+6,544

+85%

TOTAL RESOURCES FOR SELECTED PROGRAMS (tax expenditures,
mandatory outlays, and discretionary program levels) .................................

25,543

49,073

56,823

+7,750

+122%

STUDENT LOANS (face value of loans issued):
Direct Loans ......................................................................................................
Guaranteed Loans ............................................................................................
Consolidated Loans ..........................................................................................

............
15,993
1,487

10,605
20,959
8,831

11,211
22,157
9,148

+606
+1,198
+317

NA
+139%
+615%

17,480

40,395

42,516

+2,121

+243%

DEPARTMENT OF EDUCATION:
Discretionary Program Level ...........................................................................

Total, Student Loans ...............................................................................

23,851

35,605

40,088

+4,483

+68%

DEPARTMENT OF LABOR:
Discretionary Budget Authority .....................................................................

9,920

11,224

12,263

+1,039

+24%

NA = Not applicable.

44
to fix their lowest-performing schools through
a variety of approaches, including bringing in
new curriculum, management, or teachers.
Funds will also be used to provide public
school choice options to students in failing
schools. In total, the budget includes $8.36 billion for Title I grants to support the Administration’s ESEA reauthorization proposal to
help students in low-income schools meet high
academic standards.
Small, Safe, and Successful High
Schools: Research confirms what many parents intuitively believe: that smaller schools
are safer and more productive because students feel they are in a community more connected to caring adults, and teachers feel that
they have more opportunity to get to know
and support their students. Smaller schools
also have better attendance records, lower
dropout rates, and fewer discipline problems.
The Administration proposes $120 million for
a high school reform initiative, an expansion
of the Small Schools program funded in 2000
at $45 million, to create smaller and safer
learning environments in which all students
can achieve to higher academic standards. The
program will offer competitive grants to school
districts to create smaller schools or to break
up larger schools by funding innovative strategies such as autonomous schools-withinschools, career academies, restructured school
days, and other reforms to ensure that every
student receives personal attention and academic support.
Rewards for High Performance and
Closing the Achievement Gap: The budget
includes a $50 million initiative to build on
the President’s Elementary and Secondary
Education Act reauthorization proposal and reward States that make significant statewide
progress in improving student performance
and closing the achievement gap between different demographic groups of students. States
would be eligible for high performance bonuses
based on substantial overall improvements in
student performance tests and significant narrowing of the achievement gap as indicated
by the National Assessment of Educational
Progress. States receiving the bonuses could
use the funds for educational purposes allowed
under the Elementary and Secondary Education Act but not to supplant current efforts.

THE BUDGET FOR FISCAL YEAR 2001

Class Size Reduction: The budget provides
$1.75 billion, $450 million over 2000, for the
third installment of the President’s initiative
that began in 1999 to reduce class size in the
primary grades. Research suggests that children, particularly those from disadvantaged
backgrounds, benefit from the additional attention they receive in small classes. The program’s goal is to hire 100,000 qualified teachers by 2005, and reduce class size in the early
grades to an average of 18 students. The budget increase will support an expansion that attains almost half of the 100,000 goal. Every
State and nearly all school districts participate
in the program. In schools that received funds
under this program, primary grades have been
reduced by an average of five students per
classroom. In addition, to improve the conditions and students’ ability to learn while at
school, the budget supports new tax incentives
and spending to construct, repair, and improve
classrooms and schools. (For more information,
see the discussion under ‘‘Acquiring Better
Technology and Constructing and Repairing
Schools,’’ later in this chapter.)
21st Century Community Learning Centers: The budget includes $1 billion, more than
double the 2000 level, for the ‘‘after-school’’
program of grants to public schools and community-based organizations to establish or expand after-school and other extended learning
time opportunities. These centers are part of
a comprehensive approach to fix failing schools
by providing low-achieving students the extra
help they need to meet challenging academic
standards. From a $1 million demonstration
program in 1997, this program grew to $453
million in 2000, serving over 850,000 students.
The budget expands this program dramatically
to provide more high quality extended learning
opportunities for all children and to make
after- or summer-school programs universally
available to help turn around all Title I schools
identified as low-performing.
Special Education: The budget includes
$6.4 billion for Special Education, an increase
of $333 million, to expand on the President’s
commitment to improving educational results
for children with disabilities. Included in this
total is an additional $290 million for grants
to States to help ensure that all students with
disabilities receive a free appropriate public
education, and a $9 million increase for grants

1.

INVESTING IN EDUCATION AND TRAINING

to infants and families to provide essential
intervention services to children with disabilities as early as possible. The budget also includes $8 million for States to help schools
comply with special education laws and correct
deficiencies found through Federal and State
monitoring, and $10 million to help schools
implement research-based practices to serve
young children with disabilities who have
reading problems and/or exhibit behaviors that
may lead to discipline problems as they get
older.
Enhancing Teacher Quality
Because trained and skilled classroom teachers are essential to a child’s success in
school, high-quality professional development
is crucial to improving public schools. In
the next decade, 2.2 million new teachers
will be needed to fill the shortage created
by teacher retirement and population growth,
with high-poverty schools facing the greatest
shortages. In the budget, the President builds
on his commitment to teacher recruitment
and training programs to ensure schools have
the highly qualified teachers needed to improve student performance.
Title II: Teacher Quality and Recruitment: The budget requests $1 billion for the
new Title II program, a component of the Administration’s Elementary and Secondary Education Act (ESEA) reauthorization proposal,
that consolidates the Goals 2000 and Eisenhower Professional Development programs.
The State grant program will assist States and
districts in coordinating and developing sustained, content rich teacher professional development with challenging standards. The budget also proposes several new initiatives under
Title II to address the most pressing teacher
quality needs.
• Hometown teachers: In order to increase
the number of skilled teachers serving
high-poverty school districts, the budget
proposes $75 million in competitive grants.
These grants would fund comprehensive
teacher recruitment strategies that incorporate both long-term, pipeline-style programs as well as short-term strategies.
Hometown Teachers would encourage districts to create programs to cultivate stu-

45
dents’ interest in teaching beginning as
early as middle school.
• Early childhood educator professional development: Research has demonstrated
that effective early childhood education
programs can help eliminate reading problems, as well as improve cognitive and social competence. The budget provides $30
million to offer competitive grants to partnerships, including school districts, institutions of higher education, Head Start
programs, and child care programs. Approximately 15,000 early childhood educators would receive training in literacy
development, English language instruction, and instructional methods for students with disabilities.
• School leadership: The budget includes
$40 million for competitive grants to nonprofit, public-private partnerships to develop State and regional School Leadership Centers for principals, superintendents, and other school leaders. These
training centers will help school leaders
develop critical skills to improve school
performance and will help attract qualified
candidates into school leadership positions.
• Transition to Teaching: Troops to Teachers: The budget proposes $25 million to
build on the Troops to Teachers program
in high need areas to recruit and train
retiring military personnel and other midcareer professionals to serve as new teachers in public schools.
• Teacher quality incentives: This $50 million initiative would reward districts for
making exceptional progress toward teacher quality improvement goals set forth in
the Administration’s Elementary and Secondary Education Act reauthorization bill,
such as increasing certification rates and
the percentage of teachers working infield.
• Higher standards and higher pay for
teachers: The budget includes a $50 million teacher peer review initiative to encourage school districts to pay teachers
more and increase the quality of their
teaching force. Peer review programs, by
which expert teachers evaluate other

46

THE BUDGET FOR FISCAL YEAR 2001

teachers and help them improve, have
proven to help improve teacher quality by
rewarding excellence, helping low-performing teachers become more effective,
and when necessary, removing low-quality
teachers from the classroom.
Preparing Tomorrow’s Teachers to Use
Technology: While many schools have access
to technology, some teachers are not prepared
to use this technology effectively. The budget
includes $150 million, double the 2000 level,
to provide pre-service teacher training for
400,000 teachers in technology so that teachers
can help students make the most of tools that
are critical to their education and their future.
Teacher Quality Enhancement: The budget provides $98 million for the Teacher Quality
Enhancement Grants program. Created in
1999, this program supports: State grants to
improve teacher licensing and certification;
partnerships of exemplary teaching colleges
and universities with urban and rural schools;
and recruitment grants, including scholarships, to help attract teachers to high priority
areas.
Teachers Serving Special Populations:
To meet professional development needs of
teachers serving populations with special
needs, the budget proposes $100 million for
Bilingual Education Professional Development,
$116 million for Special Education professional
development, $10 million for the American Indian Teacher Corps, and $5 million to create
a new American Indian Administrator Corps.
Acquiring Better Technology and
Constructing and Repairing Schools
Many of the Nation’s schools need to be
brought into the 21st Century, both by equipping them with new and modern technology,
and by making essential repairs to fix the
inevitable problems in aging and neglected
buildings.
The Administration’s commitment to educational technology has greatly increased the
percentage of schools connected to the Internet. Since 1993, the number has almost
tripled so that nearly 90 percent of the
Nation’s schools are connected; however, some
high-poverty schools still lack Internet access.

At the same time, about one-third of our
Nation’s schools have critical renovation needs,
including repairs to roofs, climate control
systems, and plumbing. School districts also
face the cost of upgrading schools to accommodate computers and modern technology, and
of constructing new classrooms and schools
to meet expected record enrollments over
the next decade.
The budget proposes a set of new initiatives
and program increases to help States and
school districts meet the need for better
technology and adequate learning facilities.
These will complement existing activities put
in place under this Administration, including
the E-rate established by the Telecommunications Act of 1996 to provide discounts
to schools and libraries for high-speed Internet
access, internal wiring, and telecommunications services, and Qualified Zone Academy
Bonds, which encourage investors to make
school modernization capital available to certain communities in need.
School Construction and Modernization
Bonds: The President’s budget reaffirms his
support for creation of a new tax incentive that
would support $22.4 billion in new bonds for
school modernization, and $2.4 billion in additional Qualified Zone Academy Bonds.
Urgent School Renovation: To ensure that
the school districts with great need have access to low-cost financing for essential repairs,
the budget requests $1.3 billion for a new
school renovation program that would provide
loans and grants to school districts. Within
this total, $50 million in grants will be directed to schools with high concentrations of
Native American students.
Community Technology Centers: As part
of a broad initiative to address the ‘‘digital
divide’’ between wealthy communities where
access to technology is common and poorer
communities that lack such access, the budget
requests $100 million for Community Technology Centers, an increase of $68 million over
2000 (see Chapter 7, ‘‘Strengthening the American Community’’). Grants will help low-income communities establish computer centers
available to those who cannot afford home
computers. Begun in 1999, this program supports activities including technology-based
adult education, after-school activities, literacy

1.

INVESTING IN EDUCATION AND TRAINING

training, and ESL instruction in community
centers. The budget level would provide support to approximately 1,000 centers in low-income communities.
Technology Literacy Challenge Fund:
Enacted in 1997, this program offers grants
to States to fund technology-related professional development, provide multimedia computers to schools, and provide software and
Internet access to students. The budget requests $450 million, an increase of $25 million
over 2000.
Next Generation Technology Innovation:
The budget requests $170 million for Next
Generation Technology Innovation, which consolidates the Technology Innovation Challenge
Grants and Star Schools programs, to support
technological innovation for education. Included in this program is funding to develop
and field-test state-of-the-art education technology applications and $10 million for a new
initiative to support development of challenging courses such as AP courses and ESL
courses for use online.
Other Programs Supporting Innovation
and Excellence
Throughout his Administration, President
Clinton has aimed to ensure that every
child is provided with the highest quality
education and challenged to achieve to his
or her full potential. The President continues
that commitment with several important investments for 2001.
Public School Choice: The Administration
supports expanding public school choice
through charter schools and other public school
options. These efforts strengthen the public
education system by giving it the support it
needs to fulfill its mission of providing equal
educational opportunities for all while providing children a choice of schools to best meet
their needs.
When the President first took office, there
was but one charter school in the Nation,
and citizens who wanted to create new charter
schools faced considerable financial barriers.
First funded in 1995, the Public Charter
Schools program addresses this problem by
providing startup funding. The budget includes
$175 million for this program, an increase

47
of $30 million, to support the start-up of
1,700 charter schools in 2001. By 2001,
this program will have helped nearly 2,400
charter schools since its inception, supporting
the President’s goal of creating 3,000 charter
schools by 2002. The budget also includes
$20 million for Opportunities to Improve
Our Nation’s Schools (OPTIONS), a new
ESEA initiative that will spur further innovation by supporting new approaches, such
as locating public schools at work sites and
college campuses and interdistrict choice programs.
Safe and Drug-Free Schools and Communities: In 1999, as part of the Governmentwide Safe Schools/Healthy Students initiative,
54 communities received over $100 million in
competitive grants from the Departments of
Education, Health and Human Services, and
Justice to implement comprehensive, researchbased, drug and violence prevention programs.
In 2001, these agencies will combine resources
with the Department of Labor and expand Safe
Schools/Healthy Students to nearly $250 million, vastly increasing funding for communitywide interventions that address education,
mental health, juvenile justice, and public
safety, and expanding services to include outof-school youth. The budget also includes $10
million for a new activity, Project SERV
(School Emergency Response to Violence), to
help schools and communities address violent
deaths or other crises.
Safe Schools/Healthy Students and Project
SERV represent just a sampling of the Administration’s broad efforts to address youth
violence. The budget includes roughly $8.9
billion, an increase of more than $900 million
over the 2000 level, for programs that specifically target youth violence or generally support
the healthy development of young people.
Other notable initiatives include: $1 billion
in the Department of Education for afterschool and summer-school programs; $75 million in the Department of Labor to reintegrate
young offenders into society; and, $70 million
in the Department of the Treasury to expand
efforts to crack down against those supplying
guns to youths. To coordinate youth violence
prevention programs across the Federal Government, President Clinton established a
White House Council on Youth Violence,
which will also seek to make these programs

48
more accessible to American families and
examine best practices in addressing the
problem.
America Reads/Reading Excellence Act:
In response to the President’s America Reads
Challenge, the Reading Excellence Act was enacted in 1998 to provide resources to high poverty schools to help ensure that all children
can read well and independently by the end
of third grade. The budget requests $286 million for this program, an increase of $26 million, to support literacy services to an estimated 1.1 million students.
Arts in Education: The budget doubles
funding for this program to $23 million, including $11.5 million in new funds to supplement
teaching resources, integrate arts into the regular curriculum, and provide intensive professional development to teachers. The Department of Education and the National Endowment for the Arts will continue and expand
upon the collaboration formed in 2000 to make
competitive grants to local arts education programs and undertake additional activities to
address issues of youth at risk.
Indian Education: The budget includes
$116 million for the Indian Education program, an increase of $39 million over 2000.
This total includes $93 million to the Grants
to Local Educational Agencies program, an increase of $31 million, to address significant
growth in the Indian student population and
ensure that Indian students have the resources
to succeed academically. The budget also includes $50 million for the urgent school renovation program in public schools with high
concentrations of Native American students, as
part of the Administration’s $1.3 billion urgent
school renovation initiative. The budget includes $300 million ($167 million over 2000
enacted) for the Bureau of Indian Affairs to
fund the replacement of at least six elementary and secondary schools and for numerous
repair,
improvement,
and
maintenance
projects.
Improving Educational Outcomes for
Hispanic-Americans
Raising the educational achievement of
Latino students continues as a high priority.
The high school dropout rate for Latinos
is very high: in 1996, 29 percent of Latinos

THE BUDGET FOR FISCAL YEAR 2001

aged 16 to 24 were high school dropouts,
compared to seven percent of non-Hispanic
whites and 13 percent of non-Hispanic blacks.
About 32 percent, or 3.6 million, of the
students served by Title I are Latino. Latinos
are the fastest growing segment of our Nation’s population.
For the third year in a row, the budget
targets new funding to programs that are
part of the Administration’s Hispanic Education Action Plan. The budget proposes $823
million in funding increases, including:
• $416 million for Title I Grants to Local
Educational Agencies;
• $85.5 million for Adult Education, of
which $75 million is for the President’s
English as a Second Language (ESL)/
Civics. Civics initiative to help recent immigrants learn English, fully navigate
public institutions, and be involved in
their communities;
• $125 million for GEAR-UP;
• $80 million for TRIO;
• $25 million for Title I Migrant Education;
• $48 million for Bilingual Education;
• $20 million for Hispanic Serving Institutions;
• $5 million for the Labor Department’s Migrant and Seasonal Farmworker Youth
Opportunities Program;
• $10 million for research on the education
of language minority children; and,
• $8 million for the High School Equivalency
Program and College Assistance Migrant
Program.
POSTSECONDARY EDUCATION
Preparing for College
As our economy depends increasingly on
workers with analytical and reasoning skills,
access to a quality education beyond high
school becomes even more important to maintaining and increasing income, productivity,
and the Nation’s competitiveness. The opportunity to attend college is also crucial in
encouraging hardworking families and lowincome children to aspire to improve their

1.

49

INVESTING IN EDUCATION AND TRAINING

lives through education. This budget provides
significant increases to student financial assistance programs to help low- and middleincome students pay for college; however,
not all of the barriers to college are financial.
Too many young people reach college age
without the skills, knowledge, and preparation
they need to apply for, enroll in, and succeed
in college. The Administration is committed
to making a postsecondary education both
attainable and affordable for every American,
from recent high school graduates and dropouts to adult learners and displaced workers.
GEAR-UP: The budget provides $325 million, an increase of $125 million, for the early
intervention program first funded in 1999 that
is based on an initiative proposed by the President. This program provides funds for States
and local partnerships to help low-income students prepare for college, starting in the 7th
grade. In 2001, 1.4 million students would receive services, 644,000 more than in 2000.
TRIO: The budget includes $725 million, an
increase of $80 million, for TRIO programs,
which fund postsecondary education outreach
and support services to prepare disadvantaged
students to enter and complete college and doctoral study. Nearly half of the increase would
be dedicated to strengthening the Student
Support Services (SSS) program, while another
$35 million would establish a new College
Completion Challenge Grant (CCCG) component within SSS. Under CCCG, competitive
grants to institutions of higher education
would support grant aid and summer orientation programs for low-income students in their
first years of college, with the goal of increasing college completion rates.

Alaska Native and Native Hawaiian Serving
Institutions—and partner institutions such as
major research universities. The program
would allow students at minority-serving institutions to earn two degrees in five years: one
from their home institution, and the other
from a partner institution in a subject area
that is not offered by the home institution and
in which minorities are traditionally underrepresented. The program will increase academic
opportunities for students at minority-serving
institutions, improve their postgraduate access, and promote their workforce participation
in fields in which minorities are underrepresented.
Paying for College
The economic returns to a college education
have never been higher. But at a time
when the dividends of a college education
make college essential, the cost of education
has been rising dramatically. In addition
to helping every child prepare for college,
this budget maintains the Administration’s
commitment to ensuring financial access to
higher education by requesting significant
increases for core student aid programs and
providing tax incentives to make higher education more affordable.

SAT/ACT Preparation: The budget provides $10 million in competitive grants to create partnerships to offer test preparation services to low-income students preparing for the
SAT and ACT college admissions tests. Grantees would offer rigorous and sustained preparation based on program curriculum.

Tax Incentives: The Taxpayer Relief Act of
1997 included the President’s Hope Scholarship and Lifetime Learning tax credits, the
largest investment in higher education since
the G.I. Bill, to help make college more affordable for about 13 million Americans. Hope
Scholarships provide tax credits of up to
$1,500 for tuition and fees during the first two
years of postsecondary training. Under the
Lifetime Learning tax credits, students beyond
the first two years of college, or those taking
classes part-time to improve or upgrade their
job skills, receive up to a 20 percent tax credit
for the first $5,000 of tuition and fees each
year through 2002, and for the first $10,000
thereafter.

Minority-Serving Institutions Dual-Degree Program: The budget provides $40 million for a new program to promote dual-degree
programs between minority-serving institutions—including Historically Black Colleges
and Universities, Hispanic Serving Institutions, Tribal Colleges and Universities, and

The budget expands the Lifetime Learning
Tax Credit with a 10-year, $30 billion College
Opportunity tax cut that will, when fully
phased in, provide up to $2,800 in tax
relief for millions of families struggling to
pay for college. The President’s proposal would
give families the option of taking a tax

50

THE BUDGET FOR FISCAL YEAR 2001

deduction or claiming a 28 percent credit
for tuition and fees to pay for college and
other higher education. The proposal would
cover up to $5,000 of educational expenses
in 2001 and 2002 and $10,000 of educational
expenses from 2003 forward.

the District of Columbia by providing tuition
benefits to D.C. residents attending public colleges in Maryland, Virginia, and other States
under certain circumstances, and private colleges in the D.C. area. The budget requests
$17 million for D.C. College Access in 2001.

In addition, the budget provides tax-free
treatment for employer-provided graduate education and increases deductibility of student
loan interest.

WORKFORCE DEVELOPMENT

Pell Grants: The President proposes to increase the maximum Pell Grant by $200 to
$3,500. Nearly four million needy undergraduates will receive Pell Grants in 2001. When
President Clinton took office in 1993, the Pell
Grant maximum award was $2,300—the same
as it was when President Bush took office in
1989. Under President Clinton’s leadership,
the maximum award increased $1,000, or 43
percent, by 2000. With the 2001 request, the
Pell maximum award will have increased by
52 percent during this Administration.
Work-Study: The budget provides $1.011
billion for Work-Study, an increase of $77 million over 2000, to maintain the President’s
promise to give one million students the opportunity to work their way through college.
Funding for Work-Study increased 51 percent
from 1993 to 2000; this request would bring
the increase since 1993 to 64 percent.
Supplemental Educational Opportunity
Grants: The budget requests a total of $691
million, $60 million over 2000, for Supplemental Educational Opportunity Grants to
provide more low-income undergraduate students with need-based grant aid.
Federal Student Loan Programs: An estimated 6.5 million people will borrow almost
$43 billion through the Federal student loan
programs in 2001. In the Higher Education
Amendments of 1998, the President’s proposal
to significantly lower interest rates for borrowers on student loans was adopted, easing
the burden of repayment for borrowers. The
budget also proposes net savings of $3.8 billion
over five years from reforms to the guaranteed
loan system.
D.C. College Access: In response to the
President’s 2000 proposal, Congress approved
a $17 million initiative to equalize postsecondary education opportunities for residents of

Building on accomplishments made since
1993, the Administration seeks to advance
opportunity by ensuring that all workers
have the opportunity to find and hold secure
jobs with good wages, improve their skills,
and work in safe and healthful places.
Promoting the New Opportunity Agenda
for America’s Workforce
Committed to ensuring that America’s workforce has the education and training necessary
to compete in the 21st Century, the Administration has been working to reform the
Nation’s workforce development system and
increase education, training, and job skills
development. Specifically, this Administration
has accomplished the following:
• In 1998, the President signed the bipartisan Workforce Investment Act (WIA)—
reforming America’s job training system to
empower individuals, streamline services
through One Stop Career Centers, enhance accountability, and increase flexibility.
• Tripled funding for dislocated workers—
more than tripling program enrollment as
part of a universal program that will help
every displaced worker who wants and
needs training or reemployment services.
• Increased the number of Job Corps centers
from 109 to 122, increasing year-round
training opportunities by over 10 percent.
• Developed and authorized the Youth Opportunity Grants program.
• Signed the historic Ticket to Work and
Work Incentives Improvement Act of 1999
that removes barriers to work for people
with disabilities.

1.

INVESTING IN EDUCATION AND TRAINING

Increasing Opportunities for Youth: The
budget provides enhanced support to help lowincome, at-risk youth prepare for college and
careers.
Youth Opportunity Grants: Youth Opportunity Grants address the special problems
of out-of-school youth, especially in inner
cities and other areas with high jobless
rates. This program is consistent with the
Administration’s New Markets Initiative to
provide resources to communities with potential. The budget includes $375 million for
Youth Opportunity Grants to fund the third
year of competitive grants to 25 to 30 highpoverty areas and the first year of competitive
grants to 12 to 15 additional communities.
Included in this funding is $20 million for
Rewarding Achievement in Youth, a program
that provides comprehensive employment
training, counseling and education services
to over 9,000 academically high-achieving,
low-income youth. The program encourages
school completion by providing students who
excel academically with extended summer
employment opportunities.
Job Corps: The Job Corps provides intensive
vocational skills training, integrated with academic and social education, and support services to severely disadvantaged young people
in a structured residential setting. The budget
proposes $1.4 billion, a $35 million increase
over the 2000 level.
Youth Activity Formula Grants: The WIA
consolidated the funding streams of DOL’s
year-round and summer jobs programs—providing increased flexibility to local Youth
Councils and enabling them to develop pathways for career opportunities. Funded at
$1 billion, $22 million above the 2000 level,
this program will continue to provide essential
job and learning opportunities to roughly
612,000 disadvantaged youth.
Responsible Reintegration for Young Offenders: The budget includes $75 million for
a new DOL initiative to link offenders under
age 35 with essential services that can help
make the difference to their choices in the
future, such as education, training, job placement, drug counseling, and mentoring.
Through competitive grants, this program
would establish partnerships between the
criminal justice system and workforce invest-

51
ment systems created under the WIA to
reintegrate offenders into the mainstream
economy, complementing a similar program
in the Department of Justice (DOJ) focused
on community supervision of ex-offenders.
To maximize the impact of these initiatives,
the DOL and DOJ funds will be targeted
to the same communities and populations
served, while improving public safety. At
the same time, DOJ also will earmark $5
million of its funds to focus on aftercare
programs for juvenile offenders to build on
existing collaborations between DOL and DOJ.
Preparing Workers for the 21st Century:
The budget provides resources to help workers
succeed in a changing economy.
Reemployment Services for All Who Need
Them: In 2000, the President proposed a
major initiative to help working and laidoff Americans get the information and training
they need to succeed in a rapidly changing
labor market. The 2001 Budget continues
progress toward the goals of: providing all
dislocated workers who need and want them
with the resources to train for or find new
jobs; expanding and improving the employment services available to all job seekers
and enhancing them for individuals receiving
unemployment compensation; and ensuring
that One-Stop services are universally available, either in person or electronically. The
budget includes increases totaling $285 million
to build on last year’s achievements toward
the goal of a ‘‘universal system.’’
• Dislocated worker training: The budget
proposes $1.8 billion—an increase of $181
million and over three times the amount
available when the President took office—
to provide readjustment services, job
search assistance, training, and related
services to help dislocated workers find
new jobs quickly. Among the workers assisted by the program, and the proposed
increase, are those displaced by trade,
technology, defense downsizing, and other
causes.
• Reemployment services: The budget proposes $50 million to expand services to ensure that Unemployment Insurance beneficiaries receive help finding new jobs.
Total funding for grants to the State Employment Service, operating within the

52

THE BUDGET FOR FISCAL YEAR 2001

One-Stop system recently expanded in the
WIA, is $856 million.
• One-Stop Career Centers: The budget includes $174 million—an increase of $54
million—for new methods of providing employment and related information through
America’s Labor Market Information System, including America’s Job Bank, America’s Talent Bank, and America’s Learning
Exchange under the One-Stop system. Efforts to improve access to One-Stop information and services include mobile service
centers for rural areas, a toll-free number
for easier access to information on services
and locations, and enhanced technology for
serving individuals with disabilities. Included in the proposal is $10 million for
the new America’s Agricultural Labor Network, an information system that connects
growers seeking workers with workers
seeking employment. Also included is $20
million to help individuals with disabilities
return to work (discussed later in this
chapter).
Incumbent Workers: To boost the skills
and wages of the U.S. workforce, the budget
includes $30 million for competitive grants
to States to train and upgrade the skills
of incumbent workers. Applicants would be
required to provide non-Federal matching resources, and employers that received grant
assistance would be expected to demonstrate
that training increased participants’ earnings.
Trade Adjustment Assistance (TAA): The
budget proposes to consolidate, reform, and
extend the TAA and NAFTA-Transitional Adjustment Assistance (NAFTA-TAA) programs
for workers who lose their jobs due to
trade. The proposal would expand eligibility
for TAA benefits to cover workers who lose
jobs when plants or production shifts abroad;
raise the statutory cap on training expenses;
and add a contingency provision to ensure
that the Federal Government has sufficient
funds to finance any unexpected increase
in benefit costs for eligible workers. The
budget proposes to increase funding for the
TAA programs by $31 million in 2001, for
a total of $459 million over five years.
Unemployment Insurance: These programs
are the major source of temporary income
support for laid-off workers. An estimated

7.8 million people will draw benefits in
2001. The Administration is working with
the States, employers, and workers’ representatives to reform these programs to ensure
that they continue to meet the needs of
a dynamic American economy. The Administration is committed to working with stakeholders and the Congress to develop a comprehensive legislative proposal of system reforms, developed with the overarching goal
of budget neutrality and based on the following
principles: expanding coverage and eligibility
for benefits, streamlining filing and reducing
tax burden where possible, emphasizing reemployment, combating fraud and abuse, and
improving administration.
Removal of Barriers to Employment: To
advance the ability of all people to reap
the benefits of a growing economy, the budget
builds on recent successes in providing enhanced work incentives, while proposing innovative ways to tap our Nation’s human resources.
Assistance For Individuals to Move From
Welfare to Work: To help reach the Temporary
Assistance for Needy Families program’s employment goal for severely disadvantaged welfare recipients, the Administration sought,
and Congress provided to DOL, a total of
$3 billion in 1998 and 1999 for the Welfareto-Work program (WTW). The budget provides
for a two-year extension of the time period
WTW grantees have to spend their funds
to continue their efforts and provide longterm recipients and non-custodial parents
of children on welfare the work and employment services they need to help support
their children. (For further discussion of the
Administration’s efforts to help low-income
families, including the new Fathers Work/
Families Win initiative, see Chapter 2, ‘‘Supporting Working Families.’’)
Employment of Individuals with Disabilities:
Although unemployment is at a 29-year low,
the unemployment rate among working-age
adults with disabilities remains unacceptably
high. The budget builds on the Administration’s commitment to ensuring that individuals
with disabilities have full opportunity to
participate in, contribute to, and reap the
benefits of a growing economy. The budget
accomplishes this by establishing a new office

1.

INVESTING IN EDUCATION AND TRAINING

for disability policy within the Department
of Labor; improving individuals with disabilities’ access to employment and training programs; and, enhancing current programs for
individuals with disabilities.
Ticket to Work and Work Incentives Improvement Act: In 1999, the President signed
the Ticket to Work and Work Incentives
Improvement Act, landmark legislation that
begins reducing the institutional barriers that
have limited the employment opportunities
of individuals with disabilities.
• Health insurance protections for working
people with disabilities: People with disabilities who want to return to work may
face the loss of Medicaid or Medicare coverage or incur prohibitive work-related
costs, such as personal assistance and assistive technology. The Act seeks to remove these barriers by creating new options and incentives for States to offer a
Medicaid buy-in for disabled workers and
extending Medicare coverage for Disability
Insurance beneficiaries who return to
work.
• Ticket to Work and Self-Sufficiency: The
Act establishes a new program to enhance
employment-related services to help Disability Insurance and Supplemental Security Income disabled beneficiaries re-enter
the workforce, giving individuals more
choice in their selection of vocational rehabilitation service providers.
Office on Disability Policy, Evaluation, and
Technical Assistance: The budget reconstitutes
the President’s Committee on Employment
of People with Disabilities as the Office
on Disability Policy, Evaluation, and Technical
Assistance (ODPET). Headed by an Assistant
Secretary, this new office will bring a permanent focus to the significant employment
obstacles faced by individuals with disabilities
and provide a forum for addressing those
obstacles. The Presidential Task Force on
Employment of Adults with Disabilities will
work with the ODPET to ensure interagency
policy coordination.
Assistive Technology: To help individuals
with disabilities overcome obstacles to employment, the budget also provides $41 million
for the Department of Education’s Assistive

53
Technology program to help make assistive
technology devices and services available.
Within this total is $15 million to help
States establish low-interest loan programs
to help individuals with disabilities purchase
assistive technology. In addition, the budget
includes $18 million in the National Institute
of Disability and Rehabilitation Research and
the National Science Foundation for research,
demonstrations, and technical assistance on
how to make technology more accessible.
Lastly, to increase employment of people
with disabilities in the Federal Government,
the budget also includes $3.5 million for
the General Services Administration to make
assistive technology available to Federal employees.
Work Incentive Grants: The budget continues
competitive grants enacted in 2000 (totaling
$20 million a year) to be awarded by DOL
to partnerships of organizations in every
State, including organizations of people with
disabilities, to help One-Stop Career Centers
and Workforce Investment Boards provide
a range of high-quality services to people
with disabilities working or returning to work.
Limit on Medicare Coverage in the Ticket
to Work and Work Incentives Improvement
Act: In the compromise on the Act, its
Medicare benefit was limited to an additional
four and a half years. Because of this limit,
the provision postpones rather than eliminates
the disincentive to work since Medicare provides the necessary coverage that is often
unavailable or unaffordable on the job. The
budget proposes to remove this limit and
extend Medicare coverage indefinitely.
Tax Credit for Workers with Disabilities:
The budget proposes a $1,000 tax credit
for workers with disabilities or their spouses
to defray additional work-related costs such
as personal assistance services.
In addition, the budget continues to invest
in other programs which help disabled individuals prepare for the workforce, including
$6.4 billion for Special Education programs,
described earlier in this chapter, which serve
individuals with disabilities up to age 21;
and $2.8 billion for Vocational Rehabilitation.
The budget also supports other important
disability programs, including the Committee
for Purchase From People Who are Blind

54
or Severely Disabled, the National Technical
Institute for the Deaf, Gallaudet University,
and programs to encourage the development
of technology that is accessible to people
with disabilities.
Improving Labor Standards for All
Workers: In addition to expanding employment opportunities, the budget affirms the Administration’s commitment to improving labor
standards for all workers. Here at home, the
Administration’s commitment has helped to
produce the lowest occupational fatality and
injury and illness levels in the United States
on record. Abroad, the Administration’s commitment has made the United States a world
leader in efforts to ensure that globalization
helps to raise up labor conditions around the
world.
International Child Labor: In his 1999
Budget, the President proposed to increase
the U.S.’s annual support for the International
Labor Organization’s International Program
for the Elimination of Child Labor (IPEC)
tenfold, resulting in a five-year investment
of $150 million dollars. However, in order
to respond to the need for IPEC’s comprehensive strategies to eliminate abusive and exploitative child labor, this budget increases
the U.S. annual contribution another 50 percent to $45 million per year, enabling IPEC
to expand its work to more countries and
industries. In addition, the budget includes
a new initiative designed to help eliminate
child labor by expanding access to basic
education. Evidence suggests that poor access
to affordable, effective, basic education is
a major contributor to child labor and that
effective strategies to combat child labor
include increasing access, lower costs, and
improving the quality of basic education.
The President’s budget includes $55 million
a year to help developing countries with
high levels of abusive child labor to enroll
and retain these children in basic education
as part of a comprehensive strategy to eliminate child labor. The President also seeks
to double, from $5 million to $10 million,
U.S. Customs resources to enforce the ban
on the importation of goods made with forced
or indentured child labor.

THE BUDGET FOR FISCAL YEAR 2001

Domestic Child Labor Activities: The budget
continues $13 million for DOL, including
$8 million to help eliminate violations of
domestic child labor laws, particularly in
the agriculture sector, and $5 million for
demonstration programs to provide alternatives to field work for migrant youth.
In addition, the budget includes $5 million
for a new program in the Department of
Agriculture to teach farm safety to children
who work on farms, including migrant youth.
The budget also proposes $2 million for
DOL to implement targeted enforcement tools,
including ‘‘strike teams,’’ in the agriculture
and garment industries to increase compliance
with labor standards, including child labor.
International Labor Standards: The budget
sustains $20 million for the International
Labor Organization’s (ILO’s) multilateral technical assistance program to help developing
countries implement ILO core labor standards
and $20 million, an increase of $10 million,
for DOL to help countries with which the
U.S. has important bilateral relationships
develop and administer labor standards and
strengthen social safety net programs. The
budget includes $10 million for a joint State
Department, DOL, and Environmental Protection Agency initiative to improve our ability
to assess the institutional capacity of developing countries to administer labor and environmental laws as part of an effort to
improve the mobilization and targeting of
U.S. and international technical assistance.
In addition, the budget provides $10 million
for a new Global HIV/AIDS Workplace Initiative targeted at providing multilateral assistance through the ILO to support health
education and HIV prevention in the workplace. The budget also provides $7 million
for State Department support of innovative
partnerships aimed at eliminating sweatshops
around the world. The budget also includes
$1 million for an independent evaluation
unit to ensure that the array of DOL programs
aimed at promoting core labor standards,
increasing global AIDS awareness, and eliminating the worst forms of child labor achieve
their intended results.

1.

INVESTING IN EDUCATION AND TRAINING

Workplace Safety and Health: The budget
includes approximately $670 million to promote safe and healthful conditions for over
100 million workers through DOL’s Occupational Safety and Health Administration and
Mine Safety and Health Administration.

55
Through a combination of targeted enforcement, compliance assistance, and regulatory
approaches, these agencies protect workers
from illness, injury, and death caused by
occupational exposure to hazardous substances
and conditions.

2.

SUPPORTING WORKING FAMILIES

In this era of unprecedented prosperity, we still have some work . . . to do to make sure that we
embrace all Americans in this prosperity and to give every American the chance to succeed at
work and at home . . . America is a better place because our families are stronger, our children are
growing up in more stable homes, and every adult American who is willing to work has a chance
to do so.
President Clinton
August 1999

While the surge of economic growth in
the past seven years has presented a wealth
of opportunities, this new economy also means
that parents work harder than ever. Many
face a constant struggle to fulfill their obligations as workers and the even greater responsibility of doing a good job in raising their
children.
From the start, President Clinton has advanced policies to strengthen the family,
in large part by helping Americans balance
the twin demands of work and parenthood.
The first bill he signed into law, two weeks
after taking office, was the Family and Medical
Leave Act, granting workers the right to
12 weeks unpaid leave to care for a newborn
child, or a sick child or parent, or attend
to their own serious health needs. The President has expanded after-school programs and
funding for child care and early childhood
learning including, in the past seven years,
increasing funding for Head Start by 90
percent, moving toward the goal of serving
one million children by 2002.
In the course of this Administration, the
President has sought to encourage and support
work and responsibility, pillars of the family
structure. A central goal of his 1993 economic
package was to make work pay. The President’s economic plan expanded the Earned
Income Tax Credit (EITC), helping 15 million
low-income working families. In 1998, the
EITC lifted 4.3 million people out of poverty,
more than twice as many as in 1993. In
1996, he proposed, and signed into law an
increase in the minimum wage, followed in
1997 by the child tax credit of $500 per

child and the State Children’s Health Insurance Program (SCHIP), which provides health
insurance to the children of low-income working parents who otherwise would not be
able to afford it.
The President believes that individuals have
a responsibility to work to support their
families, and government has a responsibility
to reward work. In 1996, he signed legislation
to reform the Nation’s welfare system into
one that requires and rewards work and
responsibility. There is now increased flexibility for States to administer work-focused
welfare programs. In order to provide support
for those entering the work force, this legislation expanded funds for child care. Significant
steps have been taken to ensure that eligible
working families retain access to food stamps
and Medicaid, and to increase participation
in the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).
Welfare reform has also placed additional
responsibility on non-custodial parents for
financial responsibility in child rearing by
strengthening child support provisions. In
order to support at-risk families and individuals, this Administration has advanced policies
to provide support for those at-risk, which
can prevent a slide into dependency.
In this budget, the President builds upon
these policies that are central to his agenda
of work, responsibility, and family. The budget
expands the EITC to provide marriage penalty
relief to two earner couples, reduce marginal
tax rates, and provide a higher credit to
larger families, who face a child poverty
rate twice as high as families with one
57

58
or two children. This budget promotes early
learning and improves child care quality.
It makes child care more affordable by expanding subsidies and the Child and Dependent
Care Tax Credit, including making it refundable in order to help defray child care
costs for low- and moderate-income families.
The budget expands 21st Century Learning
Community Centers, increases support for
education of disabled children, and expands
Head Start. It also expands resources for
WIC and proposes to restore food stamps,
Medicaid, and Supplemental Security Income
for certain legal immigrants. It continues
efforts to move people from welfare to work.
It includes a major initiative to help former
welfare recipients and other low-income families succeed on the job and move up the
career ladder. This initiative provides competitive grants to States and local communities
that build partnerships to maximize the use
of existing resources to provide work supports
and skill training. The budget promotes responsible fatherhood, proposing tough new
measures to ensure that all parents who
can afford to pay child support do so, making
sure more support goes directly to families,
and making sure that unemployed fathers
who owe child support go to work and
provide that support. This new initiative
is targeted at increasing the employment,
earnings, and child support payments of lowincome fathers.
Increasing the Earned Income Tax Credit
The Federal Government is committed to
helping those who work meet the cost of
raising their children. The EITC helps to
meet this goal by supplementing the earnings
of working families. In his 1993 economic
program, the President proposed, and Congress enacted, legislation to substantially expand the credit, helping 15 million lowincome working families. The expansion contributed to reducing the poverty rate to
12.7 percent in 1998, the lowest rate since
1979. Having implemented a series of EITC

THE BUDGET FOR FISCAL YEAR 2001

error-reduction initiatives, including the provisions in the Taxpayer Relief Act of 1997,
the President is proposing another increase
in the EITC.
The budget includes a 10-year, $23.6 billion
proposal to expand the EITC to provide
tax relief for 6.8 million working families
by increasing the credit received by larger
families and married couples. The poverty
rate for children in families with three or
more children is more than twice that of
children in smaller families. This proposal
would increase the maximum credit for families with three or more children by approximately $500 in order to help roughly 2.1
million low- and moderate-income families.
Approximately 5.4 million families with two
or more children would also benefit from
a slower phaseout rate, so parents could
keep more of what they earn even as their
earnings increase. The proposal would also
provide an average credit increase of $250
for married two-earner couples by allowing
them higher combined earnings; a two-earner
couple with children could earn up to $14,480
and still receive the maximum credit. In
addition, the proposal would simplify the
rules for measuring earned income.
Expanding Child Care Resources
The President’s 2001 proposal builds on
the successes of last year’s budget in which
the Administration obtained $173 million to
help States improve the quality of child
care, $10 million for child care research,
and an increase of $254 million for the
Education Department’s after-school/summerschool program.
The budget proposes a range of further
increases and new policies to expand the
accessibility, affordability, and quality of federally-funded child care. The 2001 child care
initiative would increase spending and tax
incentives by $3.3 billion over 2000 (see
Table 2–1).

2.

59

SUPPORTING WORKING FAMILIES

Table 2–1.

The Budget Supports a $3.3 Billion Increase in Resources
for Child Care, 36 Percent Over 2000
(Budget authority, in millions of dollars)
1993
Actual

Spending:
Discretionary and Mandatory Budget Authority:
Child Care and Development Fund 1 .........
Child Care and Development Block
Grant .....................................................
Child Care Entitlement to States ...........
Head Start ...................................................
Early Learning Fund ..................................
21st Century Community Learning Centers ............................................................
College Campus-Based Child Care ............
Child Care Apprenticeship Program ..........
Developmental
Disabilities
Special
Projects, State Support Systems ............

1999
Actual

2000
Estimate

2001
Proposed

Change:
1993 to
2001

Change:
2000 to
2001

2 1,753

3,167

3,550

4,567

+2814

+1,017

893
..............
2,776
..............

1,000
2,167
4,660
..............

1,183
2,367
5,267
..............

2,000
2,567
6,267
600

+1,107
NA
+3,491
+NA

+817
+200
+1,000
+600

..............
..............
..............

200
5
4

453
5
5

1,000
15
5

+1,000
+15
+5

+547
+10
..............

..............

4

4

4

+4

..............

Total Spending ......................................

4,529

8,040

9,284

12,458

+7,329

+3,174

Changes in Tax Expenditures:
Expansion and Simplification of Child and
Dependent Care Tax Credit 3 .....................
Tax Credits for Private Employers ................

..............
..............

..............
..............

..............
..............

121
42

NA
NA

+121
+121

..............

..............

..............

163

NA

+163

4,529

8,040

9,284

12,621

+7,329

+3,337

Total Changes in Tax Expenditures
Total .........................................................

NA = Not applicable.
1 Includes discretionary Child Care and Development Block Grant and mandatory Child Care Entitlement to States.
2 Includes AFDC/JOBS, Transitional, At-risk, and discretionary child care programs that were consolidated into the Child
Care and Development Fund beginning in 1997.
3 Includes tax expenditures and effect on outlays.

To make child care more affordable, the
budget proposes an expansion of resources
for the Child and Dependent Care Tax Credit,
tax credits for private employers, the Child
Care and Development Fund, and college
campus-based child care. In addition, it continues the existing child tax credit and exclusion of employer contributions for child care
expenses.
Child and Dependent Care Tax Credit
(DCTC): The DCTC helps approximately six
million families cover their child care costs
each year. This proposed expansion will gradually make the credit refundable so it will be
available to low-income working families for
the first time. The expansion will also increase
the amount of the credit for middle-income
families who are struggling to afford child
care. The budget also proposes further expansion of this tax credit to help parents who

choose to stay home to raise a young child.
These proposals would provide tax credits
worth $7.5 billion over five years.
Tax Credits for Private Employers: To encourage businesses to provide child care services to their employees, the budget proposes
a new tax credit for private employers that
expand or operate child care facilities, train
child care workers, contract with a child care
facility to provide child care services to employees, or provide child care resource and referral services to employees. This proposal
would provide tax credits worth over $500 million over five years.
Child Care and Development Fund: Federal funding for child care has more than doubled under this Administration, providing child
care services for 1.75 million children from
low-income working families or families mov-

60
ing from welfare to work in 1999. The budget
would further increase funds for the Child
Care and Development Fund by $817 million,
enabling the program to provide child care
subsidies for nearly 150,000 additional poor
and near-poor children in 2001. These new
funds will bring the Child Care and Development Fund to a level of $4.6 billion, with $2
billion in the Child Care and Development
Block Grant and $2.6 billion in the Child Care
Entitlement to States. When combined with
the child care funds provided in welfare reform
beginning in 1997, the new funds will enable
the program to serve 2.3 million children by
2003, an increase of over one million since
1997.
College Campus-Based Child Care: To
encourage low-income parents to pursue higher
education, the budget includes $15 million for
the Child Care Access Means Parents in
School program to establish and support child
care services on college campuses. States may
also use a share of the Child Care and Development Fund for this purpose.
Exclusion of Employer Contributions for
Child Care Expenses: The 2001 Budget continues this measure, consistent with current
law, permitting parents to exclude up to
$5,000 of employer-provided child care expenses from their taxable income and Social
Security earnings. The exclusion from income
tax will provide nearly $4 billion in benefits
over five years.
Tax Credit to Help Meet the Cost of Raising a Child: The Child Credit, which the
President proposed and Congress enacted as
part of the 1997 Taxpayer Relief Act, helps
working parents raise their children by providing $500 per child for all children under
age 17. The credit, which will provide over
$93 billion in tax benefits over the next five
years, will help 26 million families with over
44 million children in 2001.
Strengthening Early Childhood Learning
The budget provides new funds to improve
the safety and development of young children,
including the new Early Learning Fund,
and continued expansion of the highly successful Head Start program.

THE BUDGET FOR FISCAL YEAR 2001

Head Start: Head Start, one of the President’s highest priorities, is America’s premier
early childhood development program. It supports working families by helping parents get
involved in their children’s educational lives
and providing services to the entire family.
Since 1993, the President has worked with
Congress to increase annual Head Start funding by 90 percent. In 2000, Head Start will
serve 880,000 low-income children, including
up to 44,000 children under age three in the
Early Head Start component that the President launched in 1995.
The budget proposes to expand Head Start
funding by $1 billion in 2001 and add
approximately 60,000 Head Start pre-school
slots and 10,000 Early Head Start slots,
bringing the total number of children in
Head Start to approximately 950,000. The
Administration intends to increase participation by underrepresented groups in specifically
targeted areas with recent influxes of immigrants and limited English proficient children,
including seasonal farmworkers. The proposed
increase invests in program quality improvement measures and makes further progress
toward the President’s goal of enrolling a
million children in Head Start by 2002,
including doubling the number of infants
and toddlers in Early Head Start.
Early Learning Fund: Scientific research
on reading compiled by the National Academy
of Sciences shows that children participating
in quality early childhood programs have significantly higher reading achievement from
third grade through eighth grade, have fewer
behavior problems, are less likely to be required to repeat a grade or to be referred to
special education, and are more likely to graduate from high school. The White House Conference on Early Child Development and
Learning in 1997 highlighted the importance
of experiences in the early years of life to
school readiness. In response, the Administration proposed the Early Learning Fund to help
improve early childhood education for children
under five years old. The budget proposes to
establish the Early Learning Fund at a level
of $3 billion over five years to provide community grants for activities that foster cognitive
development. Activities would focus on language acquisition, emergent literacy, reading
development, numeracy, and other early child-

2.

SUPPORTING WORKING FAMILIES

hood education, health, and emotional development activities aimed at improving child care
quality and readiness for school. Resources
could be used to help providers obtain certification, facilitate licensing or accreditation of
child care programs, enhance provider training
and retention, and reduce child-to-staff ratios—quality factors associated with positive
developmental outcomes for young children.
Grants to States would be contingent on reporting on progress toward child care quality
goals and on children’s progress toward educational goals. A Federal evaluation would assess improvements in outcomes that result
from the Fund.
21st Century Community Learning Centers: First funded in 1997 and expanded dramatically in 1998, this program provides
grants to public schools, in partnership with
community-based organizations, to establish
and expand extended learning time opportunities.
This year, the budget proposes to more
than double funding for this program to
$1 billion, in order to reach over 10,000
schools and 2.5 million students. The 21st
Century Community Learning Centers are
part of a comprehensive approach to fix
failing schools by providing low-achieving students the extra help they need to meet
challenging academic standards. The budget
provides sufficient funds for this program
to make after- and/or summer-school programs
universally available to help turn around
all Title I schools identified as low-performing,
while also offering high quality after-school
opportunities to others.
Continuing Support for other Key
Programs that Assist Families
Investments in Child Care Quality: In response to the President’s request for 2000,
Congress provided an additional $173 million
for child care quality activities, which supplements the $135 million that would already
have been available for these activities in
2000. Congress has also advance appropriated
another $173 million for quality activities for
2001. States invest these dollars in improving
child care quality through activities such as
resources and referrals for parents, scholarships and training for child care providers,

61
monitoring and inspection of providers, networks for family day care providers, and linkages with Head Start. The budget also requests a continuation in 2001 of the $50 million reserved in 2000 for activities to improve
the quality of child care for infants and toddlers.
Research on Child Development and
Child Care: Research on child care, and dissemination of its findings, is critical to support
State and local policy makers in their decisionmaking about child care and to help parents
learn how to evaluate and where to find quality child care. At the President’s request, Congress provided $10 million for new research
activities in 2000 to expand our knowledge of
good policies and practices—including the
types of child care settings, parent activities,
and provider training that most benefit the
early development of children—and to demonstrate effective consumer education programs and hotlines. This budget requests $10
million in continued research funding for 2001.
National Crime Prevention and Privacy
Compact: Last year, the President and Congress worked together to pass legislation,
based on a proposal from the White House
Conference on Child Care, to help build a new
electronic information sharing partnership
among Federal and State law enforcement.
This legislation makes background checks on
child care providers (and other non-criminal
justice checks) more efficient and accurate by
eliminating some of the barriers that have
made it difficult for States to share information about the criminal backgrounds of job
seekers.
Services for Families of Children with
Disabilities: Children with disabilities and
their families face a broad range of obstacles
to achieving educational success. Ensuring
that the educational needs of the youngest
children with disabilities are fully met is critical to the Administration. (For a discussion
of the Administration’s work incentives initiative for individuals with disabilities and investments in special education programs, see
Chapter 1, ‘‘Investing in Education and Training.’’)
The budget continues a $4 million program
proposed two years ago by the President
and funded by Congress to help the families

62

THE BUDGET FOR FISCAL YEAR 2001

of children with disabilities. This program
provides grants to States to expand and
modify their State-wide support systems to
help these families address such problems
as inadequate child care options, missed job
training and job opportunities, the loss of
medical assistance, and teen pregnancy.

support their children is working. In 1998, the
number of paternities established rose to nearly 1.5 million, and child support collections
have nearly doubled since the President took
office, to an estimated $15.5 billion in 1999.
In 1999, net Federal costs for child support
enforcement were $1.7 billion.

Promoting Self-Sufficiency

The budget builds on this success by taking
important, additional steps to increase child
support collections and to direct more of
these payments to low-income families. The
budget expands the Administration’s Family
First policy enacted under welfare reform
by allowing States to adopt simplified child
support rules under which all collections
made on behalf of former welfare families
would be paid to the family. This proposal
would result in an additional $815 million
in child support paid to these families over
five years, improving their chances of staying
off the welfare rolls.

Improving Access to Food Stamps: For
many low-income working families, access to
food stamps can keep them out of poverty.
However, between 1995 and 1997, food stamp
participation fell five times faster than the
poverty rate, suggesting that some working
families have left the program though they remain poor. Last year, the President took a series of actions to ensure working families who
need food stamps know how to get access to
them. These steps included launching a nationwide public education campaign and toll-free
hotline to help working families know they are
eligible for food stamps, allowing States to
make it easier for working families receiving
Temporary Assistance to Needy Families
(TANF) to own a car and still be eligible for
food stamps, and simplifying food stamp reporting rules to reduce bureaucracy and encourage work.
The budget will build upon such efforts
by providing funds to improve outreach and
nutrition education to individuals who are
eligible for food stamps. The budget also
proposes to help the many working poor
families for whom owning a vehicle is the
one item that makes them ineligible for
food stamps. For many of these families,
a car is necessary in order to get to jobs
or job training, as well as to access essential
services, such as child care, that allow them
to work. The budget proposes to make it
easier for 245,000 individuals in working
families to own vehicles and receive food
stamps by allowing States to conform their
food stamps vehicle policy with a more generous TANF program.
In addition, the budget provides $565 million
in food stamp benefits for legal immigrants
(see discussion later in this chapter).
Increasing
Parental
Responsibility
Through Child Support Enforcement: The
President’s campaign to ensure that parents

The budget also proposes to provide Federal
matching funds for child support that States
distribute to families on welfare above States’
current efforts. Matching funds would only
be available for child support which does
not reduce the family’s cash benefit, resulting
in an estimated $388 million more in child
support income for families on welfare over
five years. In addition, the budget would
require States to review child support orders
for these families every three years, increasing
the Federal share of child support collections
by $262 million through 2005.
The budget includes several new measures
to increase child support collections from
parents who owe past-due child support.
The budget proposes to intercept the gambling
winnings of these parents, and to offset
their Social Security and other Federal benefits to collect past-due support. The budget
would also add vehicle booting to the set
of enforcement tools available to States to
bring delinquent non-custodial parents into
compliance. The budget would also deny passports to delinquent non-custodial parents with
more than $2,500 in child support arrears,
lowering the threshold from $5,000 under
current law, and prohibit them from enrolling
as a Medicare provider. These proposals would
result in $669 million more paid to families

2.

63

SUPPORTING WORKING FAMILIES

through 2005, and would provide Federal
savings of $362 million.
The budget stabilizes State and Federal
funding of the child support program. The
budget improves the methodology for awarding
incentive payments to States to make these
payments a more reliable funding stream
for States. The budget also conforms the
Federal match rate for paternity testing with
the lower administrative match rate, resulting
in $41 million in Federal savings over five
years.
Supporting Children Leaving Foster
Care: An estimated 20,000 children leave foster care each year having reached the age of
18 without being adopted or finding another
permanent relationship. Without the financial,
as well as social and emotional support that
families provide, many of these youth find
themselves inadequately prepared for life on
their own. Studies that examined former foster
youth two to four years after leaving care
found that only half had completed high
school, less than half were employed, and only
about 40 percent had held a job for one year
or more. Of these young adults, one-fourth had
been homeless at least one night, 60 percent
of the females had given birth, and fewer than
one in five were completely self-supporting. In
November 1999, working together with Congress, the President secured a 50-percent increase in funds to help former foster youth
transition to adulthood, and new authority giving States the option of providing Medicaid
coverage to these youth up to age 21. The
budget proposes to increase 2000 funding for
this program to $140 million, the full amount
authorized and double the amount provided in
1999, and to maintain this higher level in
2001.
Working to End Violence Against
Women: Since 1993, funding for services to
victims of domestic and sexual violence has
grown by over $400 million and the passage
of the Violence Against Women Act of 1995
expanded the Government’s role in supporting
services and providing scientific knowledge to
prevent and treat violence against women. The
budget proposes an increase of over $20 million to further strengthen and increase the
availability of battered women’s shelters and
counseling services, increase culturally appro-

priate services in under-served populations,
and expand resources for research and prevention activities aimed at changing the social
norms that allow this violence to occur. These
new funds will allow programs addressing violence against women to serve an additional
30,000 women and children.
Assisting Impoverished Border Communities: The budget provides $5 million in assistance for rural, impoverished communities
along the United States/Mexico border. Almost
all of the residents in these communities are
poor, and one-third receive no food assistance.
These funds will help to build partnerships
that will improve the delivery of nutrition assistance, health, and other programs to these
impoverished areas.
Restoring Equity in Benefits for Legal
Immigrants
The President believes that legal immigrants
should have the same economic opportunity,
and bear the same responsibility, as other
members of society. Upon signing the 1996
welfare law, he pledged to work toward
reversing the unnecessary cuts in benefits
to legal immigrants that were unrelated to
the goal of moving people from welfare to
work. As part of the 1997 Balanced Budget
Act, the President worked with Congress
to restore Medicaid and Supplemental Security
Income (SSI) to hundreds of thousands of
disabled and elderly legal immigrants. The
next year, the Noncitizens’ Benefit Clarification and Other Technical Amendments Act
restored eligibility to additional legal immigrants. In response to the Administration’s
request, the 1998 Agricultural Research Act
restored food stamp benefits to 225,000 elderly,
disabled, and other needy immigrants, including 70,000 children who lawfully resided
in the United States as of August 22, 1996.
Despite these gains, many legal immigrants,
including disabled individuals and families
with children, remain ineligible for nutrition
assistance, health, and disability benefits.
The budget provides $2.5 billion over five
years to let States provide health care to
legal immigrant children and pregnant women,
to restore SSI eligibility to legal immigrants
with disabilities, and to restore food stamp
eligibility to certain aged immigrants and

64
to legal immigrants in families with eligible
children. The SSI and related Medicaid benefits in the budget that apply to immigrants
who entered the country after August 1996,
and became disabled thereafter, would only
start after five years of residence.
Health Care: As described in Chapter 3,
‘‘Strengthening Health Care,’’ the budget
would let States provide health coverage to
legal immigrant children and pregnant women
under Medicaid and, in the case of children,
SCHIP. Currently, States can provide health
coverage to legal immigrants who entered the
country before the welfare law was enacted.
But, immigrants who entered after the law
was enacted cannot get benefits for five years.
Under these proposals, States could provide
health coverage to those children and pregnant
women through Medicaid or through SCHIP.
In addition, parents of legal immigrant children who have coverage restored would also
be covered by the Medicaid/SCHIP family coverage policy described in Chapter 3, ‘‘Strengthening Health Care.’’
Supplemental Security Income (SSI): The
budget would provide approximately $1.2 billion over five years to restore SSI and related
Medicaid to legal immigrants who entered the
country after August 22, 1996, lived in the
United States for more than five years and
became disabled after entry. Currently, only
legal immigrants who entered the country before August 22, 1996, can be found eligible
for SSI disability benefits.
Food Stamps: As mentioned earlier in this
chapter, the budget provides $135 million over
five years to ensure that legal immigrants in
the United States as of August 22, 1996, who
are eligible for food stamp benefits may receive
them once they reach age 65. In addition, the
budget builds on the progress made in the Agricultural Research Act by providing $430 million over five years to restore benefits to adult
legal immigrants who were residing in the
United States before August 22, 1996, and are
currently living with eligible children.
Continuing Support for Working Families
The Administration is committed to policies
that encourage the transition from welfare
to work, and, once that transition has been
made with success, supporting the efforts

THE BUDGET FOR FISCAL YEAR 2001

of working families so that they will stay
in the work force and move forward (see
Table 2–2).
Helping Families Move from Welfare to
Work: The President has led successful efforts
to help millions of families make a successful
transition from welfare to work.
Temporary Assistance for Needy Families
(TANF): The President signed the Personal
Responsibility and Work Opportunity Reconciliation Act (PRWORA) in 1996, and States
have refocused their welfare systems to support work. Welfare caseloads have fallen
by over five million since President Clinton
signed the welfare reform law, and by over
50 percent since he took office, to their
lowest level in 30 years. Moreover, recent
data from the Census Bureau’s Current Population Survey show an 82-percent increase
in the rate of employment for individuals
leaving welfare since 1992.
Welfare-to-Work (WtW) Grants: Because of
the President’s leadership, the 1997 Balanced
Budget Act included $1.5 billion in 1998
and 1999 for a new Welfare-to-Work grants
program. WtW provides grants to States
and local communities to help long-term,
hard-to-employ welfare recipients, and certain
non-custodial parents, secure lasting, unsubsidized employment. Grantees may spend their
funds for up to three years after receipt.
Funds are used for job creation, job placement, job retention, training, and other postemployment support services. Working closely
with Congress, the Administration secured
critically needed changes to WtW’s eligibility
requirements. The streamlined eligibility criteria will allow WtW to use existing resources
to more effectively help long-term welfare
recipients and non-custodial parents of lowincome children work and support their children. To allow grantees to fully implement
these program improvements, the budget proposes a two year extension of the period
of time in which existing funds can be
spent.
To build on the investments and partnerships begun under the Welfare-to-Work program and the Workforce Investment Act,
this budget proposes an additional $255 million for Fathers Work/Families Win, including

2.

65

SUPPORTING WORKING FAMILIES

Table 2–2.

The Budget Includes $290 Billion Over Five Years in Support for Families
with Children Through the Tax System
(In millions of dollars)
1993
Actual

Tax Expenditures
Existing Law: 1
Earned Income Tax Credit 2, 3 ..................................
Child Tax Credit 2 ...................................................
Child and Dependent Care Tax Credit ..................
Exclusion of Employer Contributions for Child
Care Expenses .......................................................
Proposed Legislation:
Expand and Simplify the Earned Income Tax
Credit 2, 5 ................................................................
Expand and Simplify the Child and Dependent
Care Tax Credit 2, 6 ...............................................
Tax Credits for Private Employers for Child Care
Expenses ................................................................

Estimate
2001

2002

2003

2004

2005

12,400 29,935 31,193 32,162 33,445 34,746
............ 20,000 19,475 18,615 17,985 17,275
4 2,559
2,360 2,330 2,305 2,275 2,250

Total
2001–2005

161,481
93,350
11,520

............

700

725

765

805

850

3,845

............

2,308

2,240

2,281

2,318

2,340

11,487

............

121

589

922

2,715

3,144

7,491

............

42

88

121

140

148

539

Total ...................................................................... ............ 53,270 56,640 57,171 59,683 60,753 289,713
1 Does

not include interaction effects between provisions.
tax expenditures and effect on outlays.
3 Excludes credit for workers who do not live with children.
4 Calendar year actual for 1993.
5 Includes an expansion of the credit for families with three or more children, a slower phaseout of the credit for families
with two or more children, marriage penalty relief for two-earner couples, and simplification of the earned income definition.
6 Includes an expansion of the credit for families with earnings below $60,000, a phase-in of refundability, and assistance
for stay-at-home parents of infants.
2 Includes

a $10 million set aside to provide grants
to Indians.
Fathers Work/Families Win: This initiative
includes $125 million for Fathers Work to
put non-custodial parents (mainly fathers)
who owe child support to work and help
engage them in the lives of their children.
As part of this effort, States will need
to put in place procedures to require more
non-custodial parents—whether their child is
on welfare or not—to pay child support
or go to work. The remaining $120 million
will be dedicated to Families Win to help
low-income parents stay in their jobs, move
up the career ladder, and remain off cash
assistance. Competitive grants would be
awarded to business-led State and local work
force boards who demonstrate strong partnerships with community based organizations,
faith based organizations, public entities such
as Medicaid, food stamps, child support enforcement, TANF, and child care resources,
transportation agencies, public housing authorities, and postsecondary schools. Families
Win will provide resources for case manage-

ment and skill training for low-income families
to ensure retention, advancement, and longterm success in the work force through
improved access to training and food stamps,
Medicaid, child care, and other critical support
for eligible working families. Families Win
includes $5 million to finance improved information and access for low-income families
through the One-Stop delivery system to
the range of existing work supports and
services such as food stamps, Medicaid, and
the EITC.
Welfare-to-Work Transportation: One of the
biggest barriers facing people who move from
welfare to work—in cities and in rural areas—
is finding transportation to get to jobs, training
programs and child care centers. The President’s leadership on this issue helped secure
funding through 2003 to assist States and
localities in developing flexible transportation
alternatives, such as van services, for welfare
recipients and other low-income workers. The
budget proposes to double funding to $150
million for this program in 2001.

66
Welfare-to-Work Housing Vouchers: In the
1999 Budget, the President proposed $283
million for 50,000 new housing vouchers for
welfare recipients who need housing assistance
to get or keep a job, and Congress approved
full funding for this new initiative. Families
will use these housing vouchers to move
closer to a new job, to reduce a long commute,
or to secure more stable housing to eliminate
emergencies that keep them from getting
to work every day on time. The budget
proposes $183 million for an additional 32,000
vouchers, bringing the total number of welfareto-work vouchers to 82,000 in 2001.
Individual Development Accounts (IDAs):
Since 1992, President Clinton has supported
the creation of IDAs, savings accounts to
help low-income workers buy a first home,
finance postsecondary education, or start a
new business. The President signed into law
in 1998 legislation providing $10 million
to get the program off the ground. The
budget provides $25 million for IDAs. The
Administration will propose legislation to allow
low-income workers’ families to use IDAs
to save for a car that helps them get
or keep a job.
Social Services Block Grant (SSBG): SSBG
supports an array of critical services to
more than nine million low-income children
and adults. The budget proposes to fund
the SSBG at $1,775 million in 2001, an
increase of $75 million over the authorized
level to maintain funding at the 2000 level.
Of this amount, $25 million will be available
to support second chance homes for unmarried
teen parents and their children who cannot
live at home or with other relatives. The
basic SSBG grant provides funding to States
to support a wide range of programs including
child protection and child welfare, child care,
and services focused on the needs of the
elderly and the disabled. The inherent flexibility of this grant permits States to target
funds to meet the specific needs in their
communities.
Special Supplemental Nutrition Program for
Women, Infants, and Children (WIC): The
Administration has continued to target resources to low-income infants and children.

THE BUDGET FOR FISCAL YEAR 2001

WIC, for example, reached over 7.3 million
persons each month in 1999. Funding in
2000 is sufficient to serve 7.4 million women,
infants, and children, and the budget proposes
$4.1 billion to serve 7.5 million people by
the end of 2001, fulfilling the President’s
goal of full participation in WIC. (See Chapter
3, ‘‘Strengthening Health Care’’, for more
information on WIC.)
Providing Better Benefits in the Workplace: The President has led successful efforts
to ensure a living wage for all American workers while expanding their ability to care for
their families and protect their health care
benefits. In addition, the President has proposed an innovative way to allow States to
provide partial wage replacement for parents
who need to take leave to care for a newborn
or recently adopted child.
Expanding the Family and Medical Leave
Act (FMLA): In early 1993, the President
proposed, and Congress enacted FMLA, which
allows covered workers to take up to 12
weeks of job-protected, unpaid leave to care
for a newborn or adopted child, attend to
their own serious health needs, or care for
a seriously ill parent, child, or spouse making
it less likely that employees will have to
choose between work and family. The President continues to support expansion of FMLA
to reach workers in firms with 25 or more
employees, extending coverage to almost 12
million more workers.
Making family leave more affordable: Many
workers face barriers to taking advantage
of unpaid leave. A 1996 Study found that
loss of wages was the most significant barrier
to parents taking advantage of unpaid leave
following the birth or adoption of a child.
To address the existing barriers, the President’s budget provides $20 million for competitive planning grants to States and other
entities to explore ways to make parental
leave and other forms of family leave more
affordable and accessible for American workers. This initiative would enable States and
others to identify the workers who need
financial assistance to take parental leave
or other forms of family leave and to evaluate
and develop options to aid these workers.

2.

SUPPORTING WORKING FAMILIES

Ensuring equal pay: The budget includes
$27 million for the President’s Equal Pay
Initiative, an increase of $12 million over
2000. The initiative requests $10 million
for the Equal Employment Opportunity Commission (EEOC) to provide training and technical assistance to about 3,000 employers
on how to comply with equal pay requirements
and to launch a public service announcement
campaign on wage issues. The initiative also
dedicates $10 million in the Department
of Labor (DOL) to train women in nontraditional jobs including high-tech jobs and other
skill shortage occupations. Lastly, the initiative provides $7 million for DOL to help
employers assess and improve their pay policies, support public education efforts, provide
for projects in nontraditional apprenticeships,
and implement industry partnerships.

67
Increasing the minimum wage: In 1996,
the President successfully sought a minimum
wage increase that gave a big financial
boost to full-time, full-year minimum wage
workers, raising the pay of each by approximately $1,800 a year. In November 1999,
the President reiterated his support to further
raise the minimum wage to $6.15 an hour
by the beginning of 2001. Increasing the
minimum wage by one dollar in two equal
steps simply restores the real value of the
minimum wage to what it was in 1981.
More than 10 million workers would benefit
under this proposal. This increase will help
ensure that as costs continue to increase,
parents who work hard and play by the
rules can bring up their children out of
poverty. The President remains strongly committed to increasing the minimum wage and
will work with Congress to ensure the enactment of this vital increase.

3.

STRENGTHENING HEALTH CARE

We must also keep fighting to extend affordable health care to Americans who lack it. This is a
continuing problem in our Nation, as all of you know. Still there are too many children who lose
their hearing because an ear infection goes untreated, or wind up in the emergency room because
they couldn’t see a doctor in a more regular way. Too many patients skimp on their own health to
provide coverage for their children; too many missed chances to prevent illness and prepare
young people to lead healthy lives—all these the product of the fact that tens of millions of Americans still don’t have affordable health care.
President Clinton
January 2000

From the first days of his Administration,
President Clinton has worked to expand access
to affordable quality health care for all Americans. When he took office in 1993, workers
feared that taking leave from work to care
for an ill family member could cost them
their jobs. There were no Federal protections
to assure the portability of health benefits
for workers who changed or lost their jobs
or to protect workers from discrimination
by health plans based on their health status.
Individuals with disabilities were not able
to return to the workforce without losing
their Medicare or Medicaid health coverage.
At that time, the ability of the Nation’s
health care system to deliver high quality
care was in question. The public health
delivery system was in badly need of repair:
half of two-year-olds did not receive immunizations they needed against deadly diseases;
cigarette use among youth was increasing;
teenage pregnancy rates were high; the number of new HIV/AIDS infections and deaths
was spiraling; and, Federal support for mental
health was a low priority. Health care costs
were rising at a rapid rate while the number
of uninsured—especially uninsured children—
was growing. Fraud, abuse, and inefficiency
plagued the Medicare and Medicaid programs.
Moreover, the strains on the Medicare program
meant that it was projected to enter bankruptcy in 1999.
There are still many challenges, but in
the past seven years, there has been significant progress in improving the Nation’s health

care system. Largely through reforms enacted
in the Balanced Budget Act of 1997, success
in curbing fraud, waste, and abuse in the
Medicare program, and a sound fiscal policy,
the Federal Government’s success in constraining the growth of Medicare and Medicaid
has freed resources to expand coverage and
extend the life of the Medicare trust fund
to at least 2015, while pursing a responsible
and balanced fiscal policy that will eliminate
the national debt.
There are other key measures of this
progress: today childhood immunization rates
for the most critical vaccines are at over
80 percent; the rate of increase in youth
smoking slowed over the past two years
and experts predict that the slowing will
continue; teenage pregnancy is at an all
time low; and, Federal funding for mental
health has increased by 90 percent.
The enactment of the Health Insurance
Portability and Accountability Act means that
today Americans who change jobs can maintain their health insurance coverage while
insurers are now limited in their ability
to deny coverage due to pre-existing conditions.
Last year’s enactment of the Ticket to Work
and Work Incentives Improvement Act enables
people with disabilities to enter the workforce
without losing their critically important health
coverage. The President continues to vigorously pursue efforts to pass a Patients’ Bill
of Rights before leaving office to extend
essential patient protections to all Americans,
including guaranteed access to needed health
69

70
care specialists and emergency room services.
By Executive Order last year, the President
extended these and other essential patient
protections to the more than 85 million
Americans enrolled in Federal health plans.
The State Children’s Health Insurance Program (SCHIP) was created in 1997 to provide
coverage for the uninsured children of hardworking, low-income parents. SCHIP has doubled its enrollment in the past year to
two million uninsured children. The success
of SCHIP illustrates that it is possible, working in partnership with the States, to formulate and implement policies to significantly
expand coverage to millions of uninsured
Americans. Support for and the expansion
of SCHIP to include parents are among
the President’s key initiatives in the 2001
Budget.
The budget builds on these accomplishments
with initiatives that include:
• Preparing for the aging of America: The
budget includes the President’s Medicare
reform proposal, which strengthens and
modernizes the program by extending the
life of the Medicare trust fund to at least
2025 and provides for the provision of a
long overdue and optional prescription
drug benefit. The budget also addresses
the Nation’s growing long-term care needs
by expanding the President’s long-term
care initiative.
• Improving access to affordable health care:
The budget includes a major new initiative
to decrease the number of uninsured that
includes: expanding coverage to the uninsured parents of children eligible for Medicaid and SCHIP; accelerating enrollment
of uninsured children in Medicaid and
SCHIP; offering 55 to 65 year old Americans the option to buy into the Medicare
program; encouraging small businesses to
offer health insurance; providing a tax
credit for the purchase of health insurance
for employees in transition; restoring Medicaid eligibility to legal immigrants; and,
extending transitional Medicaid programs
for the working poor.

THE BUDGET FOR FISCAL YEAR 2001

• Assuring and improving quality of care:
The budget includes investments to improve the quality of care for patients Nation-wide, including new efforts to prevent
medical errors and improve the quality of
care through improvements in information
technology. It also includes a new initiative to protect patients purchasing prescription drugs over the Internet. These
initiatives complement the Administration’s support of a strong, enforceable Patients’ Bill of Rights. The Norwood-Dingell
legislation is representative of such a policy, which has received broad, bipartisan
support in the House of Representatives.
• Supporting biomedical research: Building
on recent funding increases for the National Institutes of Health (NIH) and investing almost $19 billion at NIH in 2001,
this budget includes a $1 billion increase
for biomedical research. The Federal investment in biomedical research continues
to yield dramatic medical advances that
improve health and quality of life. These
additional resources will build on existing
research in such areas as genomic medicine and bioengineering, that combine
knowledge of basic biology with technological advances to produce new, life-saving therapies.
• Safeguarding and improving public health
through disease prevention and health promotion: To protect and advance public
health, the budget invests in: a stringent
tobacco control policy; expanded efforts to
combat HIV and AIDS both domestically
as well as overseas; food safety programs;
additional efforts to combat emerging infectious diseases; a new cancer clinical
trials demonstration project for Medicare
beneficiaries; family planning efforts Nation-wide; efforts to promote childhood immunizations; mental health and substance
abuse prevention activities; improving the
public health response to the threat of bioterrorism; a strong Food and Drug Administration (FDA); and, providing quality
care for Native Americans and veterans.

3.

STRENGTHENING HEALTH CARE

The budget provides significant increases
to address global public health challenges,
such as HIV/AIDS, polio, and infectious diseases.
• Ensuring the fiscal integrity of the Medicare and Medicaid programs: The budget
proposes aggressive efforts to reduce Medicare fraud, waste, and abuse, and to improve the management of Medicare and
Medicaid.
Preparing for the Aging of America
Since its creation in 1965, Medicare has
provided medical care for tens of millions
of older and disabled Americans, extending
and saving lives in the process. Medicare
is an essential part of American life—elderly
Americans can be secure in knowing their
medical needs will be treated while their
adult children are not forced to make the
difficult choice between their parent’s medical
costs and the needs of their own children.
However, the demographic changes ahead,
associated with the aging of America, mean
that unless we make the right decisions
today, the future of Medicare is at risk.
Moreover, an aging society will strain our
current long-term care system—which is already fragmented and not meeting the needs
of many Americans.
At the start of a new century, all Americans
can take great pride in the legacy of the
Medicare program. In its 35-year history,
Medicare has helped to lift elderly Americans
out of poverty, while offering health care
that has extended and improved the quality
of their lives. During this time, the average
life expectancy of Americans at age 65 has
increased by 20 percent. Poverty among the
elderly has dropped by nearly two-thirds,
and access to care has increased by onethird.
However, this new century will present
Medicare with serious challenges. With Americans living longer, the number of Medicare
beneficiaries is rising much faster than the
number of workers paying into the system.
By about 2015, the Medicare trust fund
will be insolvent just as the baby boom
generation begins to retire and become eligible
for Medicare. Since Medicare’s creation, the
world of medicine has changed, including

71
increased reliance on prescription drugs to
treat illness and extend lifespan. If we are
to keep the promise of Medicare for future
generations, the program designed for the
1960s must be modernized and strengthened
to meet the challenges of the 21st Century.
The budget includes a comprehensive plan
to reform and modernize this vitally important
program. This historic plan will: (1) modernize
Medicare’s benefits; (2) make the Medicare
program more efficient and competitive; and,
(3) extend the solvency of the Medicare
Hospital Insurance Trust Fund.
Modernizing Medicare’s Benefit Package:
• Creating a prescription drug benefit: The
centerpiece of the President’s plan is an
outpatient prescription drug plan that
would be available to all Medicare beneficiaries. The drug plan would have no deductible and pay half of all beneficiaries’
prescription drug costs up to $2,000 in
2003 and $5,000 when fully phased-in by
2009. The benefit would be administered
by private sector pharmaceutical benefit
managers (PBMs) or other qualified entities, who rely on market competition to
ensure access and quality for Medicare
beneficiaries while obtaining lower prices
on drugs. Low-income beneficiaries with
incomes below 135 percent of poverty
would not pay premiums or share in the
cost of drug coverage and those with incomes between 135 and 150 percent of
poverty would receive premium assistance.
The plan also proposes to give financial
incentives to employers who currently
offer retiree prescription drug benefits to
encourage the private sector to maintain
its important coverage.
• Expanding access to preventive benefits:
This plan creates incentives to encourage
Medicare beneficiaries to monitor their
health and get medical care early, if necessary, which can save lives and minimize
the need for more extensive medical treatment later. It would eliminate existing coinsurance and the deductible for Medicarecovered preventive benefits, including
colorectal cancer screenings, bone mass
measurement, pelvic exams, prostate cancer screening, diabetes self management

72

THE BUDGET FOR FISCAL YEAR 2001

benefits, and mammographies. The plan
also proposes a three-year demonstration
to provide smoking cessation services to
Medicare beneficiaries.
• Rationalizing cost sharing and Medigap:
To help offset the costs of benefit improvements, the President’s plan proposes to
add new cost-sharing requirements for
clinical laboratory services and to adjust
the Part B deductible by indexing for inflation. It has been fixed at $100 since 1991.
The plan also proposes to improve the
Medigap market by expanding opportunities and options for individuals to enroll
in Medigap plans.
• Reserving additional funds for protections
against catastrophic drug costs: The budget includes a reserve fund of $35 billion
in on-budget surplus money over 10 years.
This funding is reserved for debt reduction
or, in the event that the President and
Congress agree, a policy that provides for
protections against catastrophic drug costs
for Medicare beneficiaries, or policies that
otherwise strengthen the Medicare program.
Making Medicare More Efficient and
Competitive:
• Fee-for-Service (FFS) modernization: The
budget proposes to give the traditional feefor-service Medicare program new purchasing tools to leverage volume discounts
from health care providers and improve
quality of care. These proposals build on
prior successful Medicare demonstrations,
and management tools commonly found in
the private sector, such as disease management services, which have been found
to improve health care outcomes while reducing health care costs.
• Competitive defined benefit proposal:
Under current law, Medicare+Choice plans
are paid through a complicated administrative pricing structure that sets Government payments to private plans based on
the costs of the traditional FFS program.
For the first time, beneficiaries will be
able to choose their managed care plan
based on price and quality. The President’s plan proposes to require plans to

bid on a defined set of benefits and gives
beneficiaries an incentive to choose lower
cost plans in the form of lower premiums.
• Medicare management improvements: The
President’s plan continues its initiative to
improve the Health Care Financing Administration’s (HCFA’s) management of
the Medicare program through a continuing reform process that will increase
HCFA’s flexibility while also increasing accountability.
Extending the Solvency of the Medicare
Program: At a time when America’s prosperity is strong, we need to prepare for the
coming demographic boom, and strengthen
Medicare for future generations. The President’s plan dedicates part of the budget surplus to Medicare solvency—$299 billion over
10 years. This will extend the solvency of the
Medicare Hospital Insurance Trust Fund to at
least 2025, and will eliminate the need to radically cut access to and quality of Medicare benefits for America’s elderly that would be inevitable in the absence of new resources. At the
same time, by paying down the debt, this will
ensure that the Government and the Nation
are soundly positioned to meet the challenge
of the retiring baby boomers.
Improving Long-term Care: The budget
proposes a $3,000 tax credit to provide support
for Americans who care for a disabled or elderly relative. The budget also proposes group
long-term care insurance for Federal employees, annuitants, and their families. Employees
would pay the full cost of insurance premiums,
which, at group rates, are expected to be 15
to 20 percent lower than the individual rates
otherwise available. The budget invests $100
million in an innovative housing initiative to
integrate assisted living facilities and Medicaid
home and community-based long-term care
and $140 million in a new Medicaid option
to equalize eligibility for people with long-term
care needs in community settings. The budget
includes $125 million for a new national program to provide assistance to families who
care for disabled elderly relatives by supporting local efforts to provide respite care and
counseling, information, and other support
services.

3.

STRENGTHENING HEALTH CARE

Improving the Quality of Nursing Home
Care: The budget invests an additional $15.9
million for continuing Nursing Home Initiative
activities, a 29-percent increase over the 2000
funding level. The initiative will help States
strengthen nursing home enforcement tools to
ensure facilities meet Federal quality standards, and increase Federal oversight of nursing
home quality and safety standards. The initiative includes funding to improve and target
nursing home inspections and respond to resident and family complaints in a timely and
effective manner. Funding will be provided for
more frequent surveys of repeat offenders and
improving surveyor training, handling increased legal advice, litigation, and hearings
on nursing home enforcement cases and addressing the backlog of nursing home appeals.
Improving Access to Affordable Health
Care
The President remains strongly committed
to expanding access to health care, particularly
to vulnerable groups such as children, the
near-elderly who are not yet eligible for
Medicare benefits, families who cannot afford
health insurance, and legal immigrants. His
2001 Budget proposal to expand access to
affordable health insurance to working Americans represents the most significant investment in health coverage in recent years.
This proposal addresses the continued rise
in the number of uninsured, one of the
few indicators that has not improved in
this strong economy. These policies to expand
access to affordable insurance would be complemented by an investment of an additional
$175 million in community-based efforts to
strengthen the health care safety net.
Increasing Children’s Enrollment in
SCHIP: The President proposed the creation
of a State Children’s Health Insurance Program in 1997. Passed by Congress the same
year, the program provides health insurance
to uninsured, low-income children, increases
their access to early preventive medicine (including immunizations), and enhances their
chances of becoming healthy adults. Administered by the States, either through Medicaid
or a separate SCHIP program, SCHIP has already successfully reached two million uninsured, low-income children. Despite the suc-

73
cess of initial enrollment efforts, however,
more must be done to provide health insurance
coverage to uninsured, low-income children.
This initiative accelerates enrollment of
uninsured children in Medicaid and SCHIP
by expanding efforts in schools and simplifying
eligibility. This initiative promotes enrollment
in the SCHIP program and in Medicaid
through schools by: enabling school lunch
programs to share eligibility information with
Medicaid and SCHIP for outreach programs;
and, allowing additional sites, such as schools,
child care referral centers, and homeless
programs to determine presumptive eligibility.
The initiative would also simplify the enrollment process by requiring states to make
Medicaid applications no more complicated
than their SCHIP applications. Finally, it
creates an one-time $10 million competitive
grant program for State demonstrations to
coordinate programs and increase enrollment
of homeless children and families in Medicaid,
SCHIP, and other social service programs.
Covering the Uninsured Parents of Children in Medicaid or SCHIP: At the center
of the President’s 2001 health insurance coverage initiative is a proposal to allow States
to cover the parents of children eligible for
Medicaid and SCHIP. Many of the parents of
the children eligible for Medicaid and SCHIP
are themselves uninsured. Expanding Medicaid and SCHIP eligibility to parents will help
reduce the growing number of low-income
adults who are without health insurance and
increase the enrollment of their children by
enabling entire families to receive coverage
through the same programs.
The budget proposes to expand SCHIP
to
become
the
FamilyCare
program.
FamilyCare would:
• Provide higher Federal matching payments
for expanding coverage to parents.
States that raise their eligibility levels for
parents would receive higher Federal
matching payments for coverage provided
to these parents. Funding for these payments will be provided through increased
State allotments.

74

THE BUDGET FOR FISCAL YEAR 2001

• Enroll the parents in the same program
as their children.
Parents would be insured in the same program as their children to improve efficiency and continuity of care. Priority
would be given to parents at the lowest
end of the income eligibility scale just as
lower income children are given priority
in SCHIP. States would also be required
to show that they are successfully enrolling children below 200 percent of the Federal poverty level in SCHIP before accessing additional funds for adults. Given the
experience of SCHIP and the strong State
support to extend SCHIP to parents, it is
likely that many States will take up this
option. If, after five years, however, some
States have not expanded coverage of parents to at least 100 percent of poverty
($16,000 for a family of four), a failsafe
mechanism would be triggered to require
States to go to at least that level of coverage.
Providing Medicare Buy-In for Certain
55 to 65 Year Olds: The fastest growing
group of uninsured are those ages 55 to 65.
Between 1997 and 1998, the proportion of people in this age group who were uninsured increased by seven percent. As the baby boom
generation enters this age group, this problem
will only get worse. This initiative expands the
health options available for older Americans
by: enabling Americans aged 62 to 65 to buy
into Medicare; providing a similar Medicare
buy-in for vulnerable displaced workers ages
55 and older; and providing COBRA to Americans ages 55 and older whose companies
reneged on their commitment to provide retiree health benefits. To help people afford the
Medicare buy-in, a new tax credit of 25 percent
of the cost of the premium would be created.
It would be available to both people ages 62
to 64 and displaced workers ages 55 to 65.
Those in this group accessing COBRA would
qualify for the 25 percent credit for COBRA
(described below).
Encouraging Small Businesses to Offer
Health Insurance: Workers in small businesses are more likely to be uninsured. This
initiative would encourage small businesses to
offer health insurance through: a new tax credit for small businesses who join coalitions; tax-

exempt status for foundation contributions to
create coalitions; and, technical assistance. It
would be different from last year’s proposal
because the credit would be increased to 20
percent of the employer contribution, and the
credits would be available for eight years.
Providing a Tax Credit for COBRA Continuation Coverage: Currently, employers
must offer departing employees the option of
buying into their health plan at a premium
of 102 percent. Intended to ensure coverage
during the transition to new jobs, this policy
has proven unaffordable to some people and
burdensome to some employers. To address
these concerns, the new proposal would provide a tax credit of 25 percent for this coverage
to departing employees who take this option.
Extending Transitional Medicaid Extension: The budget proposes to extend and improve the transitional Medicaid program,
which provides up to one year of coverage to
those in transition, including welfare recipients who get jobs. This eases the transition
to work and removes a critical disincentive—
the immediate loss of Medicaid coverage. Without this extension, the program would end in
October 2001.
Providing a New Medicaid Option to
Cover Certain Low-Income Uninsured
Women with Breast or Cervical Cancer:
The budget includes a proposed State option
to provide Medicaid coverage to low-income,
uninsured women who screen positive under
the CDC Breast and Cervical Cancer Early Detection Program.
Expanding State Options to Insure Children Through Age 20: Nearly one in three
people ages 18 to 24 are uninsured, mostly
because they are no longer dependents but
often do not have jobs that offer affordable
coverage. The budget would allow States to
cover people ages 19 and 20 in Medicaid and
SCHIP.
Restoring Medicaid Eligibility for Legal
Immigrants: The budget would restore Medicaid benefits to three vulnerable groups of
legal immigrants: children; pregnant women;
and, disabled immigrants whose eligibility for
SSI would also be restored. In addition, parents of legal immigrant children who have benefits restored would also be covered under the

3.

STRENGTHENING HEALTH CARE

Medicaid/SCHIP family coverage policy described above. As the President has pledged,
and has achieved for other groups so affected,
this would reverse an inequity enacted in welfare reform.
Reinforcing the Nation’s Safety Net: To
continue to address the health care needs of
people who remain uninsured, the Administration’s budget strengthens funding for the direct
delivery of health care services and improves
access to the health care system. The budget
proposes $125 million, a 400-percent increase,
to improve health care access for the uninsured by coordinating systems of care, increasing the number of services delivered, and establishing accountability in the system to assure adequate patient care. Additionally, the
budget proposes an increase of $50 million for
a total of over $1 billion to support and enhance the network of community health centers that serve millions of low-income and uninsured Americans.
Assuring and Improving Quality of Care
President Clinton has forcefully advanced
efforts to promote patients’ rights and ensure
the delivery of high quality health care.
Last year, the House of Representatives passed
the Norwood-Dingell legislation which provides
a strong enforceable Patients’ Bill of Rights.
The President encourages Congress to finish
this job and pass legislation that includes
critical patients protections such as: guaranteed access to needed health care specialists;
access to emergency room services when and
where the need arises; continuity of care
protections so that patients will not have
an abrupt transition in care if their providers
are dropped; access to a fair, unbiased and
timely internal and independent external appeals process to address health plan grievances; and, an enforcement mechanism that
ensures recourse for patients who have been
harmed as a result of a health plan’s actions.
These protections are now guaranteed for
the 85 million Americans in Federal health
plans. In the budget, the President has
included a number of initiatives to improve
health care quality.

75
Preventing Medical Errors and Improving Quality of Care: As many as 90,000
Americans die each year as the result of medical errors. The budget includes new funding
at HHS, VA, and DOD to develop new avenues
for the prevention of medical errors, including
new funding to increase medical errors prevention, patient safety research, and information
dissemination. In addition, in 2001, the Office
of Personnel Management (OPM) will require
Federal Employees Health Benefits Program
participating carriers to institute initiatives to
improve health care quality through the prevention of medical errors and enhancements
in patient safety. The budget will also take
steps to improve health care quality and reduce medical errors by investing in the development of information technology in the health
care system, one of the most effective ways
to improve the quality and efficient delivery
of healthcare. This initiative will also ensure
a coordinated Federal focus on health information confidentiality and security data standards.
Protecting Patients Purchasing Prescription Drugs Over the Internet: This initiative will invest $10 million in new funds
in the investigation, identification, and prosecution of websites selling unapproved new
drugs, counterfeit drugs, prescription drugs
without a valid prescription, expired or illegally diverted pharmaceuticals, and the marketing of products based on fraudulent health
claims. It will also establish new Federal certification requirements for all Internet pharmacy sites, increase current civil penalties,
and provide FDA with new administrative subpoena authority.
Improving Health Care Quality: The
budget proposes a $51 million increase for the
Agency for Healthcare Research and Quality
to enhance research on the uses and tools of
health information technology, conduct clinical
prevention research in the area of medical
error reduction, expand research on worker
safety issues, and otherwise enhance research
on health care services, outcomes, effectiveness, cost, and quality.

76
Supporting Biomedical Research
Biomedical research is a foundation for
combating disease and providing new technologies, from the eradication of smallpox
to the disappearance of polio in the Western
Hemisphere. Funding for biomedical research
at NIH has increased by 73 percent since
the beginning of the Clinton Administration.
To underscore the Administration’s commitment to this important research, the President
made a commitment in 1999 to increase
the NIH budget by nearly 50 percent in
five years. Since that time, the NIH budget
has increased by over $4.3 billion. If the
Congress provides full funding for the President’s new $1 billion investment, the Administration will be one year ahead of schedule
in reaching the 50 percent goal and will
have increased by over 80 percent since
1993. NIH now supports the highest levels
of research ever for cancer, diabetes, heart
disease, and nearly all types of disease and
health conditions.
The knowledge gained from investing in
biomedical research has already yielded a
powerful information base that is steadily
growing and paving the way for concrete
advances. For example, major clinical studies
have demonstrated that if people with diabetes
can control their blood sugar levels very
carefully, they can reduce or prevent development of complications of the disease. A sustained investment in NIH will enable scientists to seize emerging research opportunities in diabetes and other diseases that
are a tremendous burden on health in the
United States and abroad.
This year, the budget proposes an additional
$1 billion for NIH, for a total funding level
of nearly $19 billion. These resources will
allow NIH to continue to support new and
expanded research that will lead to new
medical advances such as those referenced
in the Diabetes Research Working Group
study. In addition, the budget proposes to
repeal the provision enacted for 2000 which
would delay the availability of 2000 funds
for NIH and other HHS programs.
Using Genetic Discoveries to Improve
Health Care: The Human Genome Project is
scheduled to complete a working draft of the
genome sequence by the spring of 2000, consid-

THE BUDGET FOR FISCAL YEAR 2001

erably ahead of schedule. New funds included
in the budget will be used to explore the genetic factors associated with:
• Complex chronic diseases: Over the past
year, researchers supported by NIH have
discovered a number of genes associated
with hearing loss, Alzheimers disease, and
epilepsy. New funds will be used to continue this research and investigate the genetic causes of complex chronic diseases,
including diabetes, heart disease, retinal
disorders, and Parkinson’s disease.
• Individual response to medical therapies:
Genetic discoveries often reveal new strategies for the development of more effective
pharmaceuticals because we are able to
determine exactly how certain chemicals
interact with human cells. New funds will
be used to research how an individual’s
genetic makeup determines the effectiveness of medications, as well as what side
effects are likely to occur.
Translating Research into Practice: Over
the past year, researchers supported by NIH
have discovered a simple, affordable drug to
prevent transmission of HIV in infants, which
could potentially prevent the infection of up
to 400,000 newborns, and a tissue engineering
method to grow new arteries, key to the development of new therapies for heart disease.
Funds will be used to develop new clinical
trials evaluating therapies for cancer, stroke,
diabetes, and mental illness and disseminate
information on the clinical application of
scientific breakthroughs to the public.
Eliminating Health Disparities: Racial
and ethnic minorities face disproportionately
high infant mortality, low rates of childhood
vaccination, high prevalence of cardiovascular
disease and diabetes, and shorter lifespans
than the population as a whole.
In addition, NIH will establish within the
Office of the Director a Coordinating Center
that will lead NIH’s efforts to develop multidisciplinary approaches to reducing health
disparities. In addition, NIH will seek legislative authority for the Coordinating Center
to award grants for health disparities research
under exceptional circumstances. The budget
includes a $20 million increase for health
disparities research conducted by NIH Insti-

3.

STRENGTHENING HEALTH CARE

tutes and the Office for Research on Minority
Health that will be an integral part of
the new center.
Fostering Interdisciplinary Research:
New funds will be used to: develop and expand
competitive grant programs to encourage researchers in fields such as mathematics, physics, and computer science to contribute to medical research and develop new ways to effectively manage data to maximize the scientific
discoveries that will spring from new biological
information.
Safeguarding and Improving Public
Health Through Disease Prevention and
Health Promotion
The budget affirms the Administration’s
commitment to improving public health, with
renewed emphasis on measures to combat
smoking, especially among young people. The
budget also makes additional investments
in: expanded efforts to combat HIV and
AIDS both domestically and internationally;
food safety programs; efforts to combat emerging infectious diseases; efforts to determine
the environmental causes of disease; family
planning efforts nationwide; efforts to promote
childhood immunizations; supports pediatric
physician training; a Medicare demonstration
project on cancer clinical trials; mental health
and substance abuse prevention activities;
asthma treatment for low income children;
improving the public health response to the
threat of bioterrorism; a strong FDA; and,
providing quality care for Native Americans
and veterans.
Fighting Infectious Diseases Overseas:
The budget dedicates $50 million to purchase
vaccines for diseases that ravage poor nations,
including hepatitis B, certain forms of meningitis, and yellow fever, helping to save millions
of children. Purchasing existing vaccines is the
first step toward accelerating the development
and delivery of vaccines for AIDS, malaria, TB,
and other diseases disproportionately affecting
the developing world. Funds will be invested
in the Global Alliance for Vaccines and Immunizations, a new, collaborative effort of
UNICEF, the World Bank, the World Health
Organization, and other governments and private organizations around the world. In addition, a new tax credit will encourage the devel-

77
opment of vaccines for diseases that occur primarily in the developing world (e.g., HIV/
AIDS, malaria, TB, and other infectious diseases).
Stopping Youth Smoking: Almost 90 percent of adult smokers began smoking by age
18 and today, 4.1 million children aged 12 to
17—37 percent of all high school students—
smoke cigarettes. Tobacco is linked to over
400,000 deaths a year from cancer, respiratory
illness, heart disease, and other problems. To
end this public health crisis, the budget supports a focused public health effort to reduce
youth smoking. The 1998 State tobacco settlement was an important step in the right direction. The Administration believes additional
steps must be taken at the national level to
reduce youth smoking.
• Cut youth smoking in half by holding the
tobacco industry accountable: Public
health experts agree that the single most
effective way to cut youth smoking is to
raise the price of cigarettes. To build on
the momentum of the increases already
agreed to between the tobacco companies
and the States and those already legislated by Congress, the budget includes a
combination of excise tax increases and
youth smoking assessments. The cigarette
excise tax would be increased 25 cents per
pack beginning October 1, 2000, and the
already legislated increases would be
moved to that date. In addition, beginning
in 2004, tobacco companies would pay a
youth smoking assessment, at twice the
estimated lifetime profit per underage
smoker each year that underaged smoking
has not been reduced by 50 percent.
• Reaffirm FDA’s full authority to keep cigarettes out of the hands of children: The
Administration will continue to support
full FDA authority to regulate tobacco
products in order to halt advertising targeted at children, and to curb minors’ access to tobacco products.
• Support efforts to prevent youth smoking:
To support tobacco prevention in States
and local communities, the budget includes $39 million for FDA tobacco enforcement activities. The budget also provides $106 million for the Centers for Disease Control and Prevention’s (CDC) to-

78

THE BUDGET FOR FISCAL YEAR 2001

bacco control efforts—a tenfold increase
from $10.3 million in 1993 to $106 million
in 2001.
• Require States to cover smoking cessation
drugs under Medicaid: The budget includes a proposal to require States to cover
prescription and non-prescription smoking
cessation drugs for Medicaid beneficiaries
at the standard Federal match. This proposal furthers the Administration’s goal of
reducing the incidence of smoking-related
diseases and ensures that Medicaid beneficiaries have access to important smoking
cessation drugs.
• Protect farmers and farming communities:
The Administration fully supports the $5
billion settlement to compensate tobacco
farmers, which was agreed to by the
States and the industry in 1998, and is
committed, as Federal litigation proceeds
to judgement or settlement, to ensuring
funds are set aside for tobacco farmers and
their communities.
• Dedicate tobacco recoveries to strengthening Medicare and Social Security, farmers, veterans, and other Federal health programs: Tobacco-related health problems
have cost Medicare and other Federal programs billions of dollars each year. To recover these losses, the Department of Justice has brought suit against the tobacco
industry, and the budget contains ample
resources to pay the necessary legal costs.
The Administration will propose that, in
addition to any remedies imposed by the
court to advance public health, $5 billion
of any judgement or settlement be used
to assist tobacco farmers and their communities, and to support the Department of
Veterans Affairs health programs and
other Federal health programs. One hundred percent of the remaining recoveries
would be dedicated to the Medicare and
Social Security trust funds, two-thirds to
Medicare and one-third to Social Security,
to enhance the security of these programs
for future generations.
Preventing HIV Transmission: The budget includes an additional $50 million in community-based prevention interventions and
education in the United States to reduce the
rate of new HIV infections through expanded

community prevention planning, with a special
emphasis on racial and ethnic minorities,
women, injection drug users and their partners, and young gay men. The budget also proposes a $125 million increase in Ryan White
treatment grants to increase access to quality
medical care for individuals living with HIV/
AIDS including expanded access to life saving
pharmaceuticals. The budget continues the initiative to reduce the spread of HIV/AIDS in
racial and ethnic minority communities.
The Administration secured, in 2000, $100
million to begin a Global HIV/AIDS initiative
to help prevent the spread of HIV and
AIDS in the developing world. This year,
the budget will invest a total of $342 million
in HIV prevention around the world to build
on that commitment, adding $100 million
to last year’s allocation. Funds will be targeted
to the countries where the disease is most
widespread and where our efforts will have
the greatest impact. Activities include: increasing primary prevention efforts; providing care
and treatment for individuals infected with
HIV; caring for children orphaned by AIDS;
strengthening the public health infrastructure;
assisting armed forces in preventing the
spread of HIV within military organizations;
and, initiating HIV prevention programs in
the workplace.
Enhancing Food Safety: The budget proposes a $68 million, or 19-percent, increase
over the 2000 level for the Administration’s
interagency food safety initiative (FSI), for a
total of $422 million in FSI funding in 2001.
This includes an additional $30 million to:
allow the FDA to conduct annual inspections
of 100 percent of high-risk food establishments;
expand the number of imported food exams;
complete the National Antimicrobial Resistance Monitoring System; increase laboratory
testing capacity; improve research and risk assessment (particularly in the areas of antimicrobial resistance in animals and animal
feeds and in the development of methods for
predicting risk associated with foodborne
pathogens); and, expand surveillance and education activities. A $10 million increase would
allow CDC to enhance the national network
of public health laboratories capable of subtyping foodborne pathogen DNA for rapid response to disease outbreaks (PulseNet), as well
as enhance public education efforts. USDA’s

3.

STRENGTHENING HEALTH CARE

$28 million increase would extend risk assessment modeling and data collection to include
the pre-harvest phase for all foods, expand
education activities, and support bioscience research to develop effective methods of handling
and treating agricultural products to minimize
microbial contamination. Funding is also included for HHS and USDA to begin implementation of the Egg Safety Action Plan, adopted
by the President’s Council on Food Safety in
December 1999.
Preventing Infectious Diseases: This initiative will dedicate an additional $20 million,
a 45-percent increase over the 2000 funding
level, to create a consistent national architecture for infectious disease surveillance to link
public health clinics, hospitals, and health care
providers. A standardized national system for
collecting and analyzing epidemiological data
on infectious diseases will also help address
problems, such as West Nile-like encephalitis
and influenza.
Determining the Environmental Causes
of Disease, Including Breast and Prostate
Cancer: This initiative will invest an additional $10 million, a 56-percent increase over
the 2000 funding level, for CDC’s environmental health laboratory to: evaluate the exposure of men, women, and children to toxic substances that may cause breast and cervical
cancer, birth defects, or other diseases; develop
new and improved methods of measuring
human exposure to toxic substances; and, assist State and local public health officials to
rapidly evaluate the impact of public health
emergencies, such as chemical spills and
groundwater contamination, on local residents.
Increasing Family Planning Efforts Nationwide: The budget will invest an additional
$35 million, a 15-percent increase over the
2000 funding level, for grants to family planning clinics providing reproductive health services and clinical care to roughly five million
low income clients. Family planning funding
has contributed to the lowest teenage pregnancy in 20 years, the decline in teenage sexual activity, and the prevention of over a million unintended pregnancies each year by improving the delivery of comprehensive reproductive health services. In addition, these clinics provide STD and cancer screening and prevention; HIV prevention, education and coun-

79
seling; educational programs that encourage
adolescents to postpone sexual activity; access
to contraceptive counseling and services as
well as access to effective contraceptives for
those in need; and, partnerships with other
community based providers to conduct outreach to adolescents at risk. The budget also
continues the requirement that health plans
in FEHBP offer the full range of contraceptive
options.
Promoting Childhood Immunizations:
The budget proposes almost $1 billion for the
childhood immunizations initiative, including
the Vaccines for Children program and CDC’s
discretionary immunization program. The incidence of vaccine-preventable diseases among
children, such as diphtheria, tetanus, measles,
and polio, is at an all-time low.
Eradicating Global Polio: The budget includes funds in CDC and the U.S. Agency for
International Development to continue efforts
to eradicate polio globally, and provides an additional $15 million through CDC in 2000 to
expedite and intensify global polio eradication
activities in those countries where polio still
exists.
Increasing Access to Cancer Clinical
Trials Through a Demonstration for Medicare Beneficiaries: The budget increases access to cutting-edge cancer treatments by establishing a $750 million demonstration program. Medicare beneficiaries who participate
in certain cancer clinical trials will have their
routine patient care costs reimbursed by the
Federal Government.
Expanding Substance Abuse Activities:
The budget includes an $82 million increase
for the prevention and treatment of substance
abuse, a 50-percent increase from the 1993 enacted level. These new funds continue the Administration’s commitment to expand substance abuse treatment for thousands of
under-served Americans. To help communities
address gaps in substance abuse services for
emerging areas of need, the budget proposes
an additional $54 million for Targeted Capacity Expansion grants, approximately $10 million of which will be used for services to exoffenders, complementing similar proposals in
the Departments of Justice and Labor budgets.
With this increase and an additional $31 million in funding for the Substance Abuse Block

80
Grant, the budget will provide treatment for
over 15,000 additional individuals. This additional $97 million is funded through a combination of new resources and redirecting existing resources. In addition, in January 2001,
the FEHBP’s benefit structure will, for the
first time, provide for parity in the provision
of benefits for mental health and substance
abuse, which have long been given less favorable treatment by the health care industry.
Increasing Federal Support for Improving the Mental Health of All Americans:
According to the December 1999 Surgeon General’s Report on Mental Health, one in five
Americans is living with a mental health disorder. This report states that the fundamental
components of effective service delivery are
broadly agreed upon, but in short supply. The
budget provides $731 million, an increase of
$100 million for mental health services, a $349
million, 90-percent increase from 1993. This
includes a $60 million increase for the Mental
Health Block Grant, which provides integral
support to States for services for people with
severe mental illnesses. The budget also proposes $30 million for new Targeted Capacity
Expansion grants to assist those with mental
illnesses that the Mental Health Block Grant
is not authorized to serve.
Improving Asthma Treatment for LowIncome Children: The budget proposes $100
million in demonstration grants to States to
test innovative asthma disease management
techniques for children enrolled in Medicaid
to help these children receive the most appropriate care, and keep their asthma in check.
This program serves as an example of how
core entitlement programs can help to accomplish critical public health goals—keeping children with asthma out of emergency rooms
through appropriate environmental and pharmaceutical disease management.
Supporting a Strong FDA: The budget
proposes an increase of 13 percent, or $163
million, over the 2000 program level to ensure
the timely review of important drugs, medical
devices, and food additives; expand inspection
coverage of facilities under their jurisdiction;
and, improve the quality of information on injuries and medical errors associated with FDAregulated products.

THE BUDGET FOR FISCAL YEAR 2001

Improving the Public Health’s Response
to the Threat of Bioterrorism: The budget
proposes an increase of $18.5 million, seven
percent after reductions are taken for one-time
activities, for medical and public health response and preparedness related to potential
terrorist use of biological and chemical weapons. The proposed increase would support 25
new local health care response systems for a
total of 97 systems by the end of 2001. These
activities are part of a broader multi-agency
effort to address counter-terrorism.
Promoting Full Participation in the
Women, Infants, and Children (WIC) Program: Last year, WIC reached over 7.3 million
low-income women, infants, and children, providing vouchers for nutritional food packages,
nutrition education and counseling, and health
and immunization referrals. Due in large part
to expansion during this Administration, funding has grown by over 40 percent, and the
program now helps nearly half of America’s
infants. Funding for 2000 is sufficient to serve
7.4 million women, infants, and children. This
budget proposes $4.1 billion to serve 7.5 million people by the end of 2001 in order to
fulfill the President’s goal of full participation,
making sure that all who are eligible may take
part in WIC.
Providing Quality Health Care to Native
Americans: The budget proposes an investment of $2.6 billion, an increase of $230 million, or 10 percent, over the 2000 funding level,
that reflects a five-pronged funding strategy
for the Indian Health Service (IHS) (see Chapter 7, ‘‘Strengthening the American Community’’). This initiative includes new efforts to:
expand preventive services designed to reduce
the need for acute medical care; expand patient access to clinical services and treatment
to help decrease health disparities; improve
emergency medical services in remote locations
common on American Indian and Alaska Native reservations; address the environmental
conditions in American Indian and Alaska Native homes and communities by constructing
safer water and waste disposal facilities; expand programs that provide substance abuse
treatment and mental health services; enhance
surveillance capabilities; provide preventive
and corrective dental care and water fluoridation to reduce tooth loss; maintain, improve,
and construct IHS’ health delivery infrastruc-

3.

STRENGTHENING HEALTH CARE

ture; and, help meet the IHS’ Government Performance and Results Act goals of providing
an additional 20,000 screening breast cancer
mammographies, increasing access to dental
care to an additional 25,000 patients, and enabling 25 new community-based public health
nurses to provide an additional 25,000 homebased counseling, monitoring, and case management services.
Caring for Veterans: Building on its commitment to veterans, the Administration proposes $20.9 billion for the Department of Veterans Affairs medical care system, an increase
of $1.4 billion. This funding, which includes
$0.6 billion in collections, will ensure that the
Department can aggressively reduce waiting
times, provide high quality care, and test and
treat Hepatitis C.
The budget provides for the full implementation of expanded benefits authorized by the
recently passed Millennium Bill including:
expanded nursing home care for the most
disabled veterans and coverage of emergency
care at non-VA facilities for certain enrolled
veterans.
Ensuring the Fiscal Integrity of the
Medicare and Medicaid Programs
The budget proposes improvements to Medicare and Medicaid to improve the efficacy
and strength of these programs.
Strengthening Medicare Program Integrity: The budget includes several policies to
further reduce Medicare fraud, abuse, and
overpayment. The budget proposes efforts to
strengthen our commitment to eliminate fraud
and abuse, ensure that Medicare payments to
hospitals and other providers are reasonable,
and promote competitive pricing. In addition,
the budget will eliminate overpayments that
facilities receive for drugs used to treat anemia, reform outpatient mental health benefits,
and require insurance companies to provide information that will ensure that private insurers pay claims for which they are legally responsible.
The budget also proposes a new Medicare
contractor oversight initiative. This initiative
will invest $48 million in a comprehensive
program to improve Medicare contractor internal controls and financial accounting, enhance

81
Federal performance measuring and monitoring, and establish a structure for overall
Federal oversight. The initiative will fund
additional contractor staff to establish and
implement financial controls. The initiative
will also develop new evaluation protocols
and management information systems to assess contractor performance. The budget also
funds new staff to monitor and oversee
contractor operations and financial management and allows HCFA to contract out to
test and evaluate contractors internal controls.
This initiative was developed in response
to a GAO report critical of a number of
inappropriate practices by some Medicare contractors. In a closely related effort, the budget
invests $7 million to implement a new integrated financial ledger system at the contractors to improve financial accountability.
Maintaining Fiscal Responsibility in
Medicaid: The budget includes four provisions
that will strengthen fiscal integrity and accountability in the Medicaid program:
• Ensure appropriate allocation of Medicaid
costs: The budget treats shared Medicaid
and Temporary Assistance for Needy Families (TANF) administrative costs similar
to the way the Agricultural Research Act
of 1998 addressed common Food Stamp
and TANF costs. The budget proposes a
State-by-State approach and retains State
flexibility in the use of TANF block grant
funds.
• Strengthen HHS’ authority to enforce compliance with Medicaid requirements: Separately, the budget also gives the Secretary
of Health and Human Services modest
new enforcement authority when States
fail to comply in a non-substantial manner
with Federal requirements.
• Improve Medicaid payment for prescription
drugs: The Medicaid rebate statute currently requires brand-name drug manufacturers to pay an additional dollar-for-dollar rebate to the Medicaid program if they
increase the prices of their brand-name
drugs in excess of the Consumer Price
Index (CPI–U). This same requirement
does not apply to generic drugs. However,
the Administration has found that some
generic drug prices have increased rapidly
in the past few years. The budget proposes

82

THE BUDGET FOR FISCAL YEAR 2001

to extend to generic drugs the same
CPI–U adjustment to the Medicaid rebate
that currently applies to brand-name
drugs.
• Share the Medicaid prescription drug average manufacturer price (AMP) with States:
HCFA has found that prescription drug
companies often inflate the prices charged
to States on prescription drugs covered by
the Medicaid prescription drug program.

The prices are inflated relative to the
AMP, a measure that must be reported
by drug companies to HCFA but may not
be shared with States. Since many States
use other less accurate information made
to set Medicaid reimbursement rates, they
often overpay for prescription drugs. The
budget proposes to allow HCFA to share
the AMP with States so that States can
use this data to more accurately set Medicaid drug reimbursement rates.

4.

PROTECTING THE ENVIRONMENT

From our inner cities to our pristine wild lands, we have worked hard to ensure that every
American has a clean and healthy environment. We’ve rid hundreds of neighborhoods of toxic
waste dumps, [and] taken the most dramatic steps in a generation to clean the air we breathe . . .
We have made record investments in science and technology to protect future generations from the
threat of global warming. We’ve worked to protect and restore our most glorious natural resources, from the Florida Everglades to California’s redwoods . . . to Yellowstone. And we have, I
hope, finally put to rest the false choice between the economy and the environment.
President Clinton
January 2000

From the start, President Clinton and Vice
President Gore have firmly believed that
we must expand the economy and we must
protect and preserve the environment. The
record of the past seven years is a clear
example that we can do both with success.
Today, as Americans enjoy the cleanest environment in a generation, the Administration
continues to pursue its vigorous agenda to
protect America’s land, air, and water while
our economy continues to set new records.
In the past seven years, the Administration
has permanently enhanced the conservation
of tens of millions of acres of ecologically,
culturally, or historically significant lands;
tripled the pace of cleaning up Superfund
hazardous waste sites; enacted rules to reduce
emissions from autos and small trucks by
75 to 95 percent; and, made America’s drinking water significantly safer.
The Administration has protected millions
of acres of fragile lands by: creating the
Grand Staircase-Escalante National Monument in Utah, which provides enhanced protection for 1.7 million acres of spectacular
red rock canyonlands and artifacts from three
cultures; protecting Yellowstone National Park
by halting the massive New World Mine
in Montana, which posed a severe environmental threat to Yellowstone’s unique landscape and wildlife resources; reaching an
historic agreement, in partnership with the
State of California, to purchase the Headwaters ancient redwood forest in northern
California; and, placing 57,000 acres of the

last free-flowing stretch of the Columbia
River into the national wildlife refuge system.
It is also negotiating the purchase of the
majestic 95,000 acre Baca Ranch in New
Mexico in order to preserve its unique ecosystem. In addition, the President has designated three new monuments and expanded
a fourth, protecting unique and fragile Federal
lands from the rocky coast of California
to the north rim of the Grand Canyon,
creating the Grand Canyon Parashant National Monument and Agua Fria National
Monument in Arizona, and the California
Coastal Monument.
In its efforts to make day-to-day life safer
for children and families, the Administration
has recently set tough new clean air standards
for cars, trucks, and gasoline that will improve
the lives of millions of Americans who suffer
from respiratory illnesses. The President has
signed legislation to strengthen food and
water safety, so American families will know
their children have safe food to eat and
have healthy and clean tap water to drink.
The Administration has also greatly accelerated the pace of cleaning up Superfund
hazardous waste sites, completing more than
three times as many in the past seven
years as were completed in the previous
twelve. The United States has negotiated
an international treaty, the Kyoto Protocol,
to reduce greenhouse gas emissions, which
contribute to global warming, in an environmentally strong and economically sound way.
83

84
In the future, our Nation will continue
to face a host of environmental challenges—
to provide cleaner air, safer water, and
an environment free of toxic chemical threats,
while preserving our grand natural wonders,
and the small, simple green and open spaces
closer to home. This budget is designed
to build on the Administration’s past successes
and meet the challenges of the future by
developing creative solutions and forming partnerships with affected stakeholders to meet
our Nation’s environmental challenges in innovative ways.
The 2001 Budget will target resources to
new or expanded environmental initiatives:
Lands Legacy, which includes a dedicated
stream of funding to protect America’s natural
and historic treasures; Clean Energy, an
effort to help reduce the threat of global
warming; Greening the Globe, to save tropical
and other forests around the world; and,
an action plan to combat pollution in the
Great Lakes. In addition, the budget provides
additional resources to support: Farm Conservation to protect farmland and upgrade
water quality; the Clean Water Action Plan
to strengthen efforts cleaning up polluted
waterways; and, Climate Change Technology
efforts to continue research and development
(R&D) on technologies to combat global warming.
Approaches for Environmental Success
Preserving Our National Treasures: We
have the valuable opportunity today to make
choices that will determine what is preserved
for future generations. Just as we now are
grateful for the far-sighted efforts of the last
century to protect Yellowstone and Yosemite,
so will Americans in the next century appreciate the measures taken by this Administration to conserve our natural treasures, including the fragile landscapes of the California
Desert, the red-rock canyons of Utah, and the
ancient redwood trees of the Headwaters Forest, as well as the Administration’s ongoing
efforts to acquire the majestic Baca Ranch in
New Mexico. The Administration is also working to preserve important places that are central to America’s history, including well-known
sites such as Gettysburg and Independence
Hall. It also seeks to commemorate more recent contributions to this Nation’s history, in-

THE BUDGET FOR FISCAL YEAR 2001

cluding the birth home of Martin Luther King,
Jr., in Atlanta. The budget proposes to help
protect these natural and historic treasures—
large and small—through a set of programs
that provide resources, including land acquisition under the Lands Legacy initiative.
Protecting Roadless Areas and Improving the Forest Road System: There are more
than 50 million acres of roadless areas within
the Department of Agriculture’s (USDA’s) National Forest System, which are both vital havens for wildlife, critical to the survival of endangered and other species; and the source of
clean, fresh water for numerous communities.
Last year, the President directed the Forest
Service to develop, and propose for public comment, regulations to provide long-term protection for these roadless areas in the National
Forest System. The Forest Service expects to
adopt a final roadless rule following full public
debate and comment in late 2000.
For national forest roaded areas, the Forest
Service is preparing regulations designed to
make the existing road system safe for forest
visitors, responsive to public needs, environmentally sound, and efficient to manage.
Restoring Ocean Resources: The National
Oceans Conference, held in June 1998, drew
together for the first time a full array of ocean
interests, from government to industry, science
to conservation. The Conference resulted in
many new initiatives, including new steps to
restore coastal reefs, rebuild marine fisheries,
preserve freedom of the seas, provide public
access to military data and technology, enhance the competitiveness of America’s ports,
and protect our national marine sanctuaries
from oil drilling. A follow-up report to the
President and Vice President on the National
Oceans Conference was issued in September
1999, which highlighted the importance of preserving the oceans’ complex and delicate balances. The budget provides $50 million in response to goals and commitments established
at the Conference.
Conserving the Everglades: The Administration has provided an unprecedented level
of funding to restore the Everglades—the most
extensive ecosystem restoration effort ever undertaken in the United States. Since 1993, the
Administration has directed $1.5 billion to
land acquisition, water projects, and scientific

4.

PROTECTING THE ENVIRONMENT

research for Everglades restoration. Of this
total, about $500 million—including $200 million from the 1996 Farm Bill—has funded the
purchase of land in south Florida to help preserve the Everglades in perpetuity. A significant portion of these funds resulted from the
Vice President’s 1996 Everglades restoration
plan, which proposed $100 million annually
over four years for the land acquisition effort.
In 1999, the Vice President presented the
Administration’s
long-term
comprehensive
plan for Everglades restoration, known as
the Central and Southern Florida Comprehensive Review Study, known as the Restudy.
This effort relies upon Federal-State-Tribal
partnerships, an innovative interagency task
force, and the work of private, corporate,
and governmental stakeholders who have
joined together to restore the Everglades.
The Restudy proposes a comprehensive response that would store water for critical
uses; manage water to improve the timing
and quantity of flows to the Everglades;
improve wildlife habitat; and, create wetlands
to filter runoff. The Federal Government
and Florida will each pay half of the cost
of implementing the plan, estimated at $7.8
billion over the next 20 years once it is
authorized. The Administration will submit
authorizing legislation to implement the Restudy this year.
The budget continues the Administration’s
support for Everglades restoration, even in
advance of new legislation. For this effort,
the budget proposes about $334 million for
the Army Corps of Engineers, Department
of the Interior, and other agencies—$50 million more than Congress approved for 2000—
including $135 million for Corps of Engineers
water project infrastructure and $80 million
for land acquisition.
Improving Park Management: The Administration is committed to improving national park management so that available
funds are most effectively targeted at top priority needs. Last year, the Administration initiated reforms in park construction management and capital asset planning. This year,
the Administration proposes a new senior-level
manager to enhance National Park Service
(NPS) partnership efforts and manage increasingly complex cooperative agreements, leases,

85
and concessions contracts. NPS has an unmatched potential to tap into the broad public
support for our parks, as demonstrated by recent partnerships to restore Crissy Field in
San Francisco and footpaths in Acadia National Park, Maine. This new effort will help
other parks in negotiating similar agreements
with partners and friends groups. It will also
coordinate efforts within NPS to improve operational efficiency, business planning, and returns from leases and concessions contracts.
As the Smithsonian Institution, military services, and others have learned, an organization
without a business background often needs the
input of specialized expertise to best handle
business activities. This becomes increasingly
important in a continuing era of constrained
appropriations.
Targeting the Conservation Reserve Program (CRP): This USDA program encourages
landowners to adopt long-term conservation
practices on environmentally sensitive and
erodible land by providing cost-share assistance and annual rental payments. The Administration’s farm safety net proposal expands
the CRP from 36.4 million to 40.0 million cumulative acres. In 1999, CRP enrolled 4.7 million of the most environmentally beneficial
acres bid, bringing cumulative enrollment to
30.2 million acres. A related program, the Conservation Reserve Enhancement Program
(CREP), addresses conservation issues of State
and national significance through cost-sharing
and targeting of Federal CRP and State funds,
with a plan to help meet the State’s specific
conservation goals. By 2000, eight States (Oregon, Washington, Maryland, Illinois, Minnesota, New York, North Carolina, and Delaware) had signed CREP cost-sharing agreements totaling about 611,000 acres and $1.1
billion over several years. USDA estimates
that 20 States will have CREP agreements by
the end of 2001.
Empowering Citizens with Knowledge:
Requiring industries to share information
about chemicals released into the air and
water helps empower citizens to fight back,
creating a powerful incentive for industry to
pollute less. In the decade since the public’s
right to know about chemical releases became
law of the land, industry’s toxic pollution has
fallen nearly 50 percent. The Administration
has expanded the public’s right to know by

86
doubling the number of chemicals subject to
reporting requirements and by increasing by
30 percent the number of facilities that must
report.
The Administration has also established
the Chemical Right to Know Initiative, which
includes a highly successful, innovative, voluntary partnership with industry to develop
and provide the public with basic health
data on chemicals released into the environment in high volume. The Environmental
Protection Agency (EPA) has also greatly
expanded the amount of environmental data
available to the public through an initiative
to provide the Nation’s 86 largest metropolitan
areas with real-time environmental information.
Providing Safe Drinking Water: Today,
America’s drinking water is significantly safer
than six years ago. Administration efforts to
strengthen drinking water safety, including
amending the Safe Drinking Water Act in
partnership with Congress, mean that 89 percent of Americans now get tap water from
drinking water systems that meet these tough
Federal standards, an increase of six percentage points since the standards went into effect
in 1994. The Administration has also issued
regulations requiring water systems to improve filtration and monitoring to protect
against contamination by harmful microbes,
and issue annual reports to their customers
on the safety of their drinking water.
Reducing Air Pollution: During the last
seven years, the Administration has taken
major steps to improve the quality of the air
we breathe and has helped cut the number
of metropolitan areas not in compliance with
Federal ozone standards from 98 metropolitan
areas in 1993 down to 38 such areas today.
Late last year, EPA established new rules
for the sulfur content of gasoline and emissions
from new car and light duty trucks that
will result in vehicles that are 77 to 95
percent cleaner than those of today. These
measures, to be phased in from 2004 to
2009, may prevent thousands of premature
deaths, tens of thousands of cases of respiratory illness, and hundreds of thousands
of lost work days. In past years, EPA has

THE BUDGET FOR FISCAL YEAR 2001

also issued rules to reduce toxic air pollution
from chemical plants by 90 percent and
put in place a program to clear the haze
and restore pristine skies to our national
parks.
Cleaning Up Toxic Waste Sites: EPA’s
Superfund program to clean up abandoned
hazardous waste sites has become faster, fairer, and less expensive. At the end of 1999,
a total of 670 Superfund sites had been
cleaned up—515 of these cleanups have been
completed since 1993, while only 155 of the
sites were cleaned up during the previous 12
years.
The Administration proposes to clean up
an additional 230 Superfund sites within
the next three years. This plan would mean
that some two-thirds, or 900, of the Nation’s
worst toxic waste dumps would be cleaned
up by the end of 2002 (see Chart 4–1).
EPA’s Superfund administrative reforms are
responsible for saving more than $1 billion
in future costs by updating cleanup remedy
decisions (to determine whether the same
level of protection could be provided at lower
cost) at more than 290 sites, while streamlining the liability allocation process to reach
settlement with more than 18,000 small parties at Superfund sites. The budget proposes
$1.45 billion to enable the Administration
to meet its 900-site cleanup goal in 2002.
Redeveloping Contaminated Land: The
Brownfields National Partnership is bringing
together the resources of more than 20 Federal
agencies to clean up and redevelop former industrial sites in economically disadvantaged
areas. Communities have reported that the initial two-year investment of $385 million has
already created over 5,000 jobs and leveraged
$1.8 billion in private investment, as well as
helped to preserve existing uses of undeveloped land. The brownfields tax incentive, enacted as part of the 1997 Taxpayer Relief Act
and extended by the 1999 Tax Relief Extension
Act, will leverage another $4 billion in private
investment by allowing businesses to deduct
certain cleanup costs on environmentally contaminated lands. The Administration proposes
to make permanent this tax incentive, which
otherwise expires at the end of 2001.

4.

87

PROTECTING THE ENVIRONMENT

Chart 4-1. Major Progress in Superfund Cleanups
Cumulative Completions

1000

900

900

830
755

800
670

700
585

600

498

500

410
346

400
278

300
200

217
155

100
0

Through
Calendar
Year
1992

1993

1994

1995

1996

Making the Endangered Species Act
(ESA) Work: Administration reforms have increased the flexibility of the ESA, furthering
its ability of the ESA to provide earlier protection for at-risk species so, with these earlier
efforts, the species will not have to be listed
as endangered at a later point. These reforms
include voluntary conservation agreements
(Candidate Conservation Agreements-CCAs)
between the Fish and Wildlife Service and private or public parties to implement conservation measures and monitoring activities to prevent the need to add species to the Endangered Species list. In 1999, the Federal Government entered into 10 CCAs with private
landowners or State and local governments
that, together with other efforts, allowed seven
species to be approved for removal from the
Candidate list. In addition, early intervention
processes implemented by the National Marine
Fisheries Service to identify species before
they become endangered and immediately implement protection strategies will effectively
eliminate the need to list five threatened species.

1997

1998

1999

2000

2001

2002

The Administration also has supported the
use of Habitat Conservation Plans (HCPs)
to address potential conflicts between development and protection of listed species. HCPs
give the private sector and State, local,
and Tribal governments the flexibility to
propose solutions that permit the protection
of endangered species and conservation of
habitat, while allowing for development. HCPs
will cover an estimated 325 species by the
end of 2000.
Improving Public Lands Management:
Interior’s Bureau of Land Management (BLM)
has been reforming and improving grazing
management to protect riparian and upland
habitat by implementing regional and local
standards and guidelines to establish the condition, health, and uses of lands it administers
for grazing. The new standards and guidelines
have been developed in concert with innovative
consensus-building public Resource Advisory
Councils. BLM will now begin a process of reviewing, renewing, updating, and improving its
overall land use and resource management
plans, many of which are over 20 years old.

88
Just as with the standards and guidelines development, this process will seek input from
the public, including recreationists, ranchers,
miners, timber companies, environmentalists,
hikers, campers, anglers, State and community
leaders, and experts in land management.
Environmental and Natural Resource
Investments
The budget proposes to boost funding for
high-priority environmental and natural resource programs by 11 percent, compared
to 2000 levels (see Table 4–1).
Preserving Our Natural Heritage: As we
enter a new century, our Nation continues to
face new challenges to preserve the natural
heritage, historic sites, and green spaces that
Americans have come to treasure. The budget
again proposes a Lands Legacy initiative, to
protect natural treasures and historic places
and provide the tools for States, localities, and
Tribes to plan for smart growth (see Table
4–2). The initiative also provides funding for
States and other entities to conserve important
lands for recreation, open space, and wildlife
habitat, plus preserve forests, farmland, and
coastal areas.
The budget includes $1.4 billion in discretionary funding for Lands Legacy ($673 million
over 2000), and proposes a new budget category to provide dedicated and protected
funding for the programs included in the
initiative. Funds not appropriated to programs
within the proposed cap of $1.4 billion will
be unavailable to offset spending under other
discretionary funding caps.
Lands Legacy comprises three components:
• The first component provides $450 million
for Federal land acquisition of precious
natural and historic sites, including national parks, national forests, refuges, and
environmentally sensitive lands throughout the Nation.
• The second component provides $521 million targeted to State, local, and Tribal
governments throughout the Nation for
planning and for open space acquisition;
habitat and wildlife conservation; and
preservation of forest lands, urban and
suburban parks and greenways, riparian
areas, and wetlands. A new non-game

THE BUDGET FOR FISCAL YEAR 2001

wildlife conservation grant program will
be developed to help States promote and
protect indigenous non-game wildlife
through land acquisition, habitat conservation, and non-game recreation projects. A
new open space planning program to support State, regional, and local planning for
smart growth (which integrates open space
conservation planning with other economic, transportation, and development
planning) will be coordinated with similar
activities being proposed under the Livable Communities Initiative. Also, while a
continuing part of Lands Legacy, USDA’s
Farmland Protection Program will be proposed at $65 million in mandatory funding
within the Farm Conservation initiative.
(For more information, see the Farm Safety Net discussion.)
• Land Legacy’s third component directs
$429 million specifically to coastal and
Great Lakes areas to protect their unique
and fragile resources, which are faced with
threats due to population growth, economic development, and pollution and
other potential damage from both inland
and outer continental shelf (OCS) oil and
gas development. In addition to significant
increases for existing Coastal Zone Management Act programs, the budget proposes new funding for grants directed to
States having OCS oil and gas development off their shores. These special grants
would be available for environmental monitoring, mitigation, and enhancement of
coastal areas affected by existing OCS activity. Lands Legacy also includes funds
to restore the Pacific northwest salmon,
enhance the National Marine Sanctuaries
and Estuarine Reserves systems, and expand coral restoration efforts.
Promoting Clean Energy at Home and
Abroad: Both at home and abroad, there are
urgent environmental needs and significant
economic opportunities in accelerating the shift
to clean and efficient energy technologies and
practices. To this end, the budget proposes a
new Clean Energy for the 21st Century initiative. The initiative provides a $103 million increase over 2000 for new and expanded demonstration and export promotion measures to
accelerate the development and deployment of
clean energy technologies in developing coun-

4.

89

PROTECTING THE ENVIRONMENT

Table 4–1.

An 11-Percent Increase For High-Priority Environmental and Natural Resource
Programs
(Budget authority, in millions of dollars)
1993
Actual

1999
Actual

Change: Change:
2000
2001
Estimate Proposed 1993 to 2000 to
2001
2001

Lands Legacy Initiative (DOI, USDA, NOAA) ...............................................
380
1,584
Farm Conservation Initiative (USDA) (mandatory) 1 .................................
Clean Energy Initiative (DOE, USDA, AID, DOC, TDA, EX–IM) ...............
251
Greening the Globe Initiative (AID, Treasury, USDA, DOI) .....................
82
Great Lakes Initiative (EPA) .............................................................................
18
Climate Change Technology Initiative (DOE, EPA, USDA, HUD) ........... ................
Clean Water Action Plan (EPA, USDA, DOI, NOAA, Corps) ...................... ................
Salmon Habitat Restoration (NOAA, Corps) ................................................. ................
Endangered Species Act (DOI, NOAA) ............................................................
75
Department of Transportation (DOT):
Mass Transit .....................................................................................................
3,774
Congestion Mitigation and Air Quality (CMAQ) ...........................................
601
Environmental Enhancements; Preservation Pilots ......................................
114

473
1,797
286
65
18
1,021
1,871
95
129

727
1,851
294
80
17
1,099
1,998
151
152

1,400
3,099
490
150
67
1,432
2,426
251
170

+1,020
+1,515
239
+68
+49
+1,432
+2,426
+251
+95

+673
+1,248
196
+70
+50
+333
+428
+100
+18

5,389
1,408
646

5,785
1,509
720

6,321
1,557
771

+2,547
+956
+657

+536
+48
+51

Subtotal, DOT (Select programs) .............................................................
Department of the Interior (DOI):
National Park Service Operating Program ....................................................
Bureau of Land Management Operating Program ........................................
Fish and Wildlife Service Operating Program ...............................................

4,489

7,443

8,014

8,649

+4,160

+635

984
638
531

1,286
716
660

1,364
743
703

1,454
819
762

+470
+181
+231

+90
+96
+59

Subtotal, DOI (Select programs) ..............................................................
Department of Agriculture (USDA):
Forest Service Operating Program ..................................................................
Natural Resources Conservation Service Operating Program ......................
Water/Wastewater Grants and Loans ............................................................

2,153

2,662

2,810

3,035

+882

+225

1,319
577
508

1,595
641
645

1,668
661
631

1,790
747
648

+471
+170
+140

+122
+86
+17

Subtotal, USDA (Select programs) ...........................................................
2,404
2,881
2,960
Environmental Protection Agency (EPA):
Operating Program ...........................................................................................
2,767
3,496
3,532
Clean Air Partnership Fund ............................................................................ ................ ................ ................
Superfund Orphan Share (mandatory) ........................................................... ................ ................ ................

3,185

+781

+225

3,917
85
150

+1,150
+85
+150

+385
+85
+150

Subtotal, All EPA ......................................................................................
Department of Energy (DOE):
Energy Conservation and Efficiency (gross) ...................................................
Solar and Renewable Energy R&D (net) ........................................................
Federal Facilities Cleanup (Environmental Management Program) ...........

6,923

7,589

7,563

7,407

+484

–156

592
249
6,396

692
336
5,843

745
315
5,878

851
410
6,318

+259
+161
–78

+106
+95
+440

Subtotal, DOE (Select programs) .............................................................
Department of Defense (DOD):
Cleanup .............................................................................................................
Environmental Compliance/Pollution Prevention/Conservation ...................

7,237

6,871

6,938

7,579

+342

+641

1,604
2,227

1,962
2,434

1,634
2,337

2,178
2,139

+574
–88

+544
–198

Subtotal, DOD (Select programs) .............................................................
National Oceanic and Atmospheric Administration (NOAA):
Fisheries and Protected Species ......................................................................
Ocean and Coastal Management .....................................................................
Ocean and Atmospheric Research ...................................................................

3,831

4,396

3,971

4,317

+486

+346

232
121
202

350
178
287

396
188
301

431
314
303

+199
+193
+101

+35
+126
+2

Subtotal, NOAA (Select programs) ..........................................................
555
Partnership for a New Generation of Vehicles (DOE, DOC, NSF, EPA,
DOT) ..................................................................................................................... ................
U.S. Global Change Research (NASA, DOE, NSF, DOC, USDA, others)
1,323
GLOBE—Global Environmental Education (NOAA, NASA, EPA, NSF) .. ................
Montreal Protocol (State/EPA) .........................................................................
25
Global Environment Facility (Treasury) ........................................................ ................
Multilateral and Bilateral Assistance (International Programs/AID) ....
329

815

885

1,048

+493

+163

235
1,657
10
45
168
278

226
1,701
11
40
36
279

255
1,740
13
49
176
301

+255
+417
+13
+24
+176
–28

+29
+39
+2
+9
+140
+22

37,685

38,404

42,527

+11,301

+4,123

Total 2 .......................................................................................................................

31,226

1 Increase
2 Total

over 2001 authorized level is $1.3 billion; includes funding for the Conservation Reserve Program (CRP).
includes mandatory spending and is adjusted to eliminate double counts.

tries. Energy use by developing countries is
expected to double between 1990 and 2020,
and quadruple by 2050, accounting for threefourths or more of the increase in global en-

ergy use. Clean energy technologies can provide energy services in these countries efficiently and cost-effectively, with reduced emission of pollutants or greenhouse gases. U.S.

90

THE BUDGET FOR FISCAL YEAR 2001

Table 4–2.

A Doubling of the Lands Legacy Initiative

(Discretionary budget authority, in millions of dollars)
1993
Actual
Federal Land Acquisition:
Federal Land Acquisition (DOI) .............................................
193
Federal Land Acquisition (FS/USDA) ....................................
62
Baca Ranch (NM) One-time Acquisition (FS/USDA) ............ ................

1999
Actual

211
78
40

Change: Change:
2000
2001
Estimate Proposed 1993 to 2000 to
2001
2001

264
320
95
130
61 ................

+127
+68
NA

+56
+35
NA

450

+195

+30

150
100
50

+122
+100
+50

+110
+100
+50

65
30
20

+58
+21
+20

+42
+15
+18

80

415

+371

+335

Forest Legacy Program (FS/USDA) ........................................
10
7
30
Urban and Community Forestry (FS/USDA) ........................
25
31
31
Smart Growth Partnership (FS/USDA) ................................. ................ ................ ................

60
40
6

+50
+15
+6

+30
+9
+6

Total, Federal Land Acquisition ........................
255
329
420
DOI/USDA State Conservation Programs:
LWCF State Conservation Grants (NPS/DOI) ......................
28 ................
40
State Non-Game Wildlife Grants (FWS/DOI) ........................ ................ ................ ................
Cooperative State Planning (USGS/DOI) .............................. ................ ................ ................
Cooperative Endangered Species Conservation Fund (FWS/
DOI) .......................................................................................
7
14
23
North American Wetland Conservation Fund (FWS/DOI) ...
9
15
15
Urban Parks and Recreation Recovery Grants (NPS/DOI) .. ................ ................
2
Subtotal, DOI ..................................................................

44

29

Subtotal, USDA ..............................................................

35

38

61

106

+71

+45

Total, State Conservation Programs .................
NOAA/DOC Coastal Programs:
National Marine Sanctuary Program .....................................
Coastal Zone Management Act (CZMA) Program .................
Coastal Impact Assistance Grants .........................................
Pacific Northwest Salmon Fund .............................................
National Estuarine Research Reserves System ....................
Coral Restoration .....................................................................
Dredging and other NOAA Programs ....................................

79

67

141

521

+442

+380

7
14
26
35
+28
35
58
59
159
+123
................ ................ ................
100
+100
................ ................
58
100
+100
3
4
12
20
+17
................ ................
6
15
+15
................
2
5 ................ ................

+10
+99
+100
+42
+8
+9
–5

Total, Coastal Programs ..............................................
Total, Lands Legacy Discretionary Funding ........................

46
380

78
473

165

429

+383

+263

727

1 1,400

+1,020

+673

NA = Not applicable
1 In addition, while part of the overall Lands Legacy initiative, USDA’s Farmland Protection Program will be funded in
2001 at $65 million in mandatory funding within the Farm Conservation initiative. The 2000 request was $50 million in discretionary funding; none was appropriated.

firms could capture a significant portion of the
$10 trillion worldwide market for energy supply technologies over the next 20 years. The
budget also provides $289 million ($93 million
over 2000) in discretionary spending in 2001
and $976 million in tax incentives over five
years to support Executive Order 13134 and
to help meet the President’s goal of tripling
U.S. use of biobased products and bioenergy
by reducing the cost of converting crops, trees,
and biological wastes into fuels, electric power,
chemicals, and consumer goods.

low-carbon energy sources, and reduce greenhouse gas emissions. Led by the Department
of Energy (DOE) and EPA, the effort also includes USDA, the Department of Housing and
Urban Development, and the National Institute of Standards and Technology. Of the
amount proposed, $1.4 billion is for R&D
spending on energy efficiency and renewable
energy technologies, and $0.2 billion is for tax
credits to stimulate use of energy efficient
technologies in buildings, industrial processes,
vehicles, and power generation.

Addressing Global Climate Change
Through Technology: The budget proposes
$1.6 billion for the third year of the Climate
Change Technology Initiative (CCTI), which is
designed to promote energy efficiency, develop

Conserving Forests Around the Globe:
The Greening the Globe initiative seeks to increase the conservation of tropical and other
significant forests around the world. The budget includes an increase of $70 million for this

4.

91

PROTECTING THE ENVIRONMENT

initiative. The Agency for International Development will work with host countries and partners to expand the conservation of and improve the management of biologically significant areas. Environmental damage in developing countries is often driven by poverty and
food insecurity. In an effort to address these
causes of deforestation, the Treasury Department will work with developing countries to
develop debt-for-nature swaps that will provide
local currency resources to conserve globallysignificant tropical forests. The Forest Service
and the Fish and Wildlife Service will use
their expertise to help developing countries
conserve their forests through technical assistance and disaster coordination.
Restoring the Great Lakes: The Great
Lakes are the largest system of fresh surface
water on earth, and one of the Nation’s most
valuable natural resources. Although significant progress has been made, the Great Lakes
still have serious pollution problems, particularly from toxic pollutants that have contaminated sediments. As a result of these toxic pollutants, advisories have been issued to not consume fish caught in many areas in the Great
Lakes. The budget includes a $50 million increase for new competitive grants to help restore polluted ‘‘areas of concern’’ in the Great
Lakes, as defined in the bi-national Great
Lakes Water Quality Agreement. These funds
will be used to implement specific actions identified in restoration plans for each area of concern, including remediating contaminated sedi-

Table 4–3.

ments, controlling storm water pollution, and
restoring wetlands.
Strengthening the Farm Safety Net
Through Conservation: The Administration
recognizes the importance of providing assistance to farmers and ranchers who practice environmentally sound land management, particularly when they are faced with financial
hardship. The Administration’s Farm Safety
Net proposal includes the Farm Conservation
Initiative, helping farmers and ranchers continue to protect the environment from agricultural pollution while providing them with economic help. The initiative will allow the
USDA’s Wetlands Reserve and Conservation
Reserve Programs to enroll 250,000 annual
acres and 40 million cumulative acres, respectively; fund the Farmland Protection Programs
at $65 million annually; provide $50 million
annually for the Wildlife Habitat Incentives
Program; increase authorized annual funding
for the Environmental Quality Incentives Program by $125 million, to $325 million; and,
propose $600 million in annual funding for a
new Conservation Security Program. Through
these programs, participants will receive costshare assistance, technical assistance, and in
many cases, annual payments for high-priority
activities including wetlands restoration, farmland protection, and comprehensive nutrient
management (see Table 4–3).

$1.3 Billion Increase for the Farm Conservation Initiative
(Mandatory budget authority, in millions of dollars)

2000
Estimate

2001
Authorized
Level

Conservation Security Program ...................................... ...................... ......................
Environmental Quality Incentives Program ..................
174
200
Wetlands Reserve Program .............................................
165
46
Farmland Protection Program ........................................ ...................... ......................
Wildlife Habitat Incentives Program ............................. ...................... ......................
Conservation Reserve Program (CRP) Continuous
Sign-up Bonuses ...........................................................
10
13
Conservation Technical Assistance .................................
35 ......................
Total, Farm Conservation Initiative 1 ..............
1 This

384

259

2001
Proposed

Change:
Authorized
Level to
Proposed

600
325
259
65
50

+600
+125
+213
+65
+50

138
110

+125
+110

1,547

+1,288

initiative would also increase cumulative CRP enrollment to 40 million acres, allowing an additional
1.2 million acres to sign up annually in 2001 through 2003. The first payments for these additional acres
would be made in 2002.

92
Making America More Livable through
Better America Bonds: As part of the Livable
Communities initiative, the Administration is
again proposing a new financing tool to preserve green space for future generations and
provide attractive settings for economic development. The proposal would provide authority
for State, local, and Tribal governments to
issue $2.15 billion in Better America Bonds
in 2001 and $10.8 billion over five years. Investors in these 15-year bonds will receive
Federal tax credits in lieu of interest payments
from State and local governments over the life
of the bonds, thereby significantly reducing the
cost to States and local governments of preserving green spaces. The estimated revenue
loss to the Treasury is about $0.7 billion over
five years. Better America Bonds will be available to help State, local, and Tribal governments finance a range of environmental
projects such as: enhancing green space (urban
parks, suburban green spaces, farmland, forests, and wetlands); protecting water quality
(including measures on publicly owned land to
control runoff or erosion or to protect endangered species); and, cleaning up brownfields
(environmental assessment and remediation of
contaminated property).
Recovering Pacific Salmon: In June 1999,
the United States and Canada signed the historic U.S.-Canada Pacific Salmon Agreement,
providing for international cooperation, new
and necessary fishing regimes, further science
and research, and other projects designed to
better understand the causes for decline of atrisk salmon species. These efforts are aimed
at stemming the decline of the at-risk salmon
species in the Pacific Northwest. The budget
proposes a total of $60 million, an increase
of $35 million, to implement this agreement
in 2001.
In addition, the budget continues the Federal Government’s broad interdepartmental
Pacific Coastal Salmon Recovery Initiative
to assist in the conservation and recovery
of at-risk Pacific salmon runs in the western
States of California, Oregon, Washington, and
Alaska. In 2001, this initiative will be included
as part of Lands Legacy and the new discretionary budget cap. The initiative responds
to the proposed listings of these runs under
the ESA by forming lasting partnerships
with State, local, and Tribal efforts for saving

THE BUDGET FOR FISCAL YEAR 2001

Pacific salmon and their important habitats.
To finance this initiative, the budget proposes
$100 million, an increase of $42 million
over 2000, for the Pacific Coastal Salmon
Recovery Fund to continue to help share
the costs of State, Tribal, and local conservation initiatives in California, Oregon, Washington, and Alaska in recovering severely
at-risk salmon.
These two efforts are in addition to ongoing
Columbia and Snake River (Washington, Oregon, Idaho) salmon restoration activities,
including $91 million requested for the Army
Corps of Engineers in 2001, a $23 million
increase over 2000.
Rewarding Early Pollution Reductions:
The budget proposes $85 million in 2001 for
the new Clean Air Partnership Fund to finance
projects that achieve innovative and early air
pollution and greenhouse gas emission reductions. This fund will provide the opportunity
for State, local, and Tribal governments to
partner with other parties and the Federal
Government to demonstrate the most creative
ideas for cleaning the air. The goal of this
program is to help implement environmental
protection in a common sense, flexible, and
cost-effective manner, encouraging the development of smart multi-pollutant strategies to reduce greenhouse gases, air toxics, soot, and
smog to protect our climate and our health.
Implementing the Clean Water Action
Plan (CWAP): To mark the 25th anniversary
of the Clean Water Act, the President and Vice
President announced the Clean Water Action
Plan (CWAP) in February 1998. The CWAP
focuses on three remaining challenges for restoring and protecting the Nation’s waterways:
preventing polluted runoff; protecting public
health; and, ensuring community-based watershed management.
The budget provides $2.4 billion in discretionary funding for the third year of this
multi-agency initiative, a 21-percent increase
over the 2000 level, as well as a $151
million, or 87-percent, increase in mandatory
funding for USDA’s Environmental Quality
Incentives Program, to help farmers prevent
polluted runoff. An increase of $45 million,
or 39 percent, is provided to help States
develop water pollution allocation plans
(known as TMDLs), and an increase of $50

4.

PROTECTING THE ENVIRONMENT

million, or 25 percent, is provided to reduce
polluted runoff through EPA State grant
programs. The budget also includes increases
for the Forest Service to better address
water quality problems on Federal lands;
the National Oceanic and Atmospheric Administration to help States and local communities
protect their coasts from the pollution that
leads to degradation; and, $20 million for
the Army Corps of Engineers to begin an
initiative—Challenge 21—to restore riverine
ecosystem functions while providing flood hazard mitigation for communities.
To support the joint State-Federal CALFED
initiative addressing environmental and water
management problems associated with the
California Bay-Delta, the budget proposes
$60 million for the Bureau of Reclamation’s
Bay-Delta Program. In addition, the budget
includes continued funding for a number
of ongoing Federal activities that support
CALFED’s long-term goals.
Enhancing the Stewardship of National
Treasures: The Administration continues to
invest in national parks, wildlife refuges, national forests, and other public lands to ensure
that future generations are afforded the opportunity to enjoy these national treasures. It will
again work with Congress to target resources
to high-priority projects that maintain and restore facilities in national parks, forests, refuges, and public lands. The budget also supports permanent authorization of the recreation fee demonstration program, which provides almost $200 million annually in revenue
for land management agencies to reinvest in
visitor facilities and services. To provide for
stewardship of newly acquired treasures, the
Administration is studying ways to address
transitional start-up cost requirements for
newly acquired lands, such as stabilizing historic structures, cleaning up hazardous wastes,
and inventorying newly acquired resources.
This could help to ensure that the near-term
costs for newly acquired lands do not divert
funds needed for the long-term maintenance
of existing facilities.
Funding the EPA Operating Program:
The budget proposes $3.9 billion, an 11-percent
increase over 2000, for EPA’s operating program, which includes most of EPA’s research,
regulatory, and enforcement programs, and

93
partnership grants with States and Tribes.
The operating program, which has grown 42
percent during this Administration, represents
the backbone of the Nation’s efforts to protect
public health and the environment through
sound science, standard setting, enforcement,
and other means, ensuring that our water is
pure, our air clean, and our food safe.
Within the operating program, the budget
fully funds the third year of EPA’s part
of the CCTI ($227 million) and the CWAP
($762 million). The budget also provides $30
million for a major multi-year environmental
initiative to better integrate and enable substantially greater use of EPA and State
environmental data systems.
Financing Water Quality Infrastructure:
The budget proposes $825 million ($5 million
over 2000) in EPA capitalization grants for
Drinking Water State Revolving Funds (SRFs),
which make low-interest loans to help municipalities meet the requirements of the Safe
Drinking Water Act Amendments. These funds
will help ensure that Americans have a safe,
clean drinking water supply—our first line of
defense in protecting public health. Every
State has now successfully established a
Drinking Water SRF and begun disbursing
loans to its communities.
The budget also proposes $800 million
in capitalization grants to Clean Water SRFs
to help municipalities comply with the Clean
Water Act, thus helping to reduce beach
closures and to keep our waterways safe
and clean. Those levels for the two SRFs
will keep the programs on track toward
achieving the Administration’s goal of providing sufficient capital for the two SRFs
to offer $2.5 billion a year in financial
assistance to municipalities over the long
run. The Clean Water SRFs are on schedule
for reaching that goal in 2005.
Accelerating Endangered Species Act Efforts: The budget proposes a 12-percent increase, an additional $18 million, for a total
of $170 million, in Interior’s Fish and Wildlife
Service and Commerce’s National Marine Fisheries Service, for the endangered species program. These funds will support the Administration’s efforts to encourage private landowners to protect species, and recover salmon
in the Pacific Northwest. The Endangered Spe-

94
cies program increases are designed to encourage cooperative partnerships between the Federal Government and States, localities, Tribes,
and private parties to recover listed species
and prevent the need to list more.
Supporting the Global Environment Facility (GEF): U.S. participation in the GEF
is a cornerstone of our foreign policy on the
environment. The GEF has become the world’s
leading institution in aiding developing countries in protecting the global environment by
working to prevent global climate change, massive extinction of valuable species, and the collapse of the oceans’ fish population. The $176
million proposal for 2001 includes $107.5 million for the 2001 contribution to the GEF’s
second four-year replenishment program, from
1999 to 2002, and $68.5 million for contributions previously due. U.S. funding for this program is crucial if the United States hopes to
continue influencing GEF’s policies and lending strategies.
Expanding Federal Facilities Cleanup
and Compliance: The Federal Government
continues to address the huge challenge of
cleaning up Federal facilities contaminated
with radioactive or hazardous waste. DOE
faces the most complex and costly problems
from over 50 years of research, production, and
testing of nuclear weapons and reactors, which
resulted in thousands of areas of known contamination and buildings requiring decontamination and decommissioning. At the beginning of 1993, of the 113 DOE sites to be

THE BUDGET FOR FISCAL YEAR 2001

cleaned up, only 23 were complete. By the end
of 2001, an additional 51 DOE sites will have
been cleaned up.
The budget proposes $6.3 billion for DOE’s
Environmental Management program, including $1.2 billion to clean up quickly and
return excess Federal property to beneficial
use in local communities. The budget also
proposes $515 million to continue to privatize
waste remediation at such sites as the Hanford, Washington and Idaho facilities, for
which DOE pays for the delivery of treated
waste that meets approved specifications. Privatization will help speed cleanups, reduce
health risks, and cut costs at these sites.
The Department of Defense (DOD), which
operates one of America’s most diverse environmental programs, is focusing its efforts
on reducing relative risk at its active and
closing installations. DOD is in the process
of conducting restoration studies or cleanups
at 678 military installations and over 2,000
formerly-used properties. Moreover, it has
determined that over 16,000 sites require
no further action. DOD also is making
progress in its compliance and pollution prevention, conservation, and environmental technology programs. The budget proposes $4.3
billion for all DOD environmental activities,
an amount that reflects a commitment to
consistent and wise stewardship of DOD
lands. The Administration is committed to
making all current and former DOD property
safe and clean.

5.

PROMOTING RESEARCH

We have to have a balanced research portfolio, because the research enterprise is increasingly
interdependent. Advances in health care, for example, are often dependent on breakthroughs in
other disciplines—such as the physics needed for medical imaging technology, or the computer
science needed to develop more drugs more rapidly, or to continue the mapping of the human genome.
President Clinton
December 1999

Investments in scientific discovery and technological development—both public and private—have driven economic growth and improvements in the quality of life in America
for as long as our Nation has existed. In
the last 50 years, developments in science
and technology have generated at least half
of the Nation’s productivity growth, creating
millions of high-skill, high-wage jobs and
leading to advances in the economy, national
security, the environment, transportation, and
medical care. Federal Government support
for science and technology has helped put
Americans on the moon, boosted agricultural
productivity, harnessed the atom, devised more
effective treatments for cancers, tracked
weather patterns and earthquake faults, and
deciphered the chemistry of life.
Because technological advances are key to
progress and economic growth, in 1993 President Clinton took office committed to expanding investment in civilian research and development. The President’s economic strategy
relied upon the critical element of investing
in people and proposed targeted investments
to help the Nation compete in the global
economy and improve our quality of life.
In his first year, the President proposed
and secured passage of a research tax credit
to spur additional basic and applied research
as well as significant investments to fund
research and development (R&D) in a range
of fields. In 1999, the President established
the 21st Century Research Fund for America,
relying upon a coordinated and balanced
investment strategy to provide resources for
basic research at the National Institutes

of Health (NIH), the National Science Foundation (NSF), and the Department of Energy
(DOE) and a wide range of applied research
activities in areas such as the environment,
agriculture, energy, computers, communications, and transportation.
The Administration’s support for R&D has
been essential to the flow of innovative
ideas, which have resulted in everything
from the discovery of the first multi-planet
system beyond our own, to unraveling human,
plant, and microbial genomes, a critical step
in understanding the function of genes and
in turn, potentially treating and curing diseases now beyond the reach of medical science.
Investments in science and technology can
bring us breakthroughs in the areas of the
environment, health, national security, and
more, including, for example: fuel economies
that are double those of today; radical new
surgical techniques that will make procedures
far less invasive; a strong defense that continually hones its technological edge; and, fundamental research that may provide answers
to key basic questions—why cells age and
die, how human beings learn and remember
information, and whether there is life on
other planets.
The interdependence of disciplines upon
which today’s and tomorrow’s scientific breakthroughs rely means that the balanced allocation of resources is all the more important
to research in the 21st Century. With this
budget, the Administration builds significantly
upon its ongoing strategy of balanced investments in science and technology as established
in the 21st Century Research Fund. Today,
95

96

THE BUDGET FOR FISCAL YEAR 2001

are funded consistent with a balanced portfolio
of research activity.

balance is often key to scientific discovery,
it is increasingly true that scientific advances
in a broad range of areas build upon each
other, with developments in one field providing
the building blocks for others, which in
turn serve as the foundation for discoveries
in still other areas. For example, breakthroughs in the field of health often stem
from advances, or a combination of advances,
in the fields of engineering, mathematics,
and the physical sciences.

The Science and Technology Initiative provides a $2.9 billion, or seven-percent, increase
over the 2000 Research Fund total. The
goal of the initiative is to accelerate our
scientific progress toward meeting long-term
economic, medical, and national security
needs. It supports major new investments
in existing and new research areas. The
initiative will sustain U.S. economic and
scientific leadership through key investments
across many fields of science and technology;
increase investments in fundamental, longterm research; help maintain the balance
between health care research and other scientific disciplines; emphasize university-based
research; and increase support for strategic
research priorities.

The Science and Technology Initiative: A
Bold Course of Strategic Growth
The President’s new Science and Technology
Initiative builds upon the Administration’s
21st Century Research Fund, a balanced
set of investments in basic and applied research in areas throughout the Federal Government (see Chart 5–1). In addition to
allocating resources in a balanced manner,
the Research Fund serves as an effective
tool to ensure that complementary disciplines

The Science and Technology Initiative puts
special emphasis on high-priority, long-term
basic research, including funding to support

Chart 5-1. Funding for Programs in the 21st Century Research Fund
Budget authority in billions of dollars

50

40

42.9
45%
Change

40.0
37.0

30
29.7

30.6

31.2

30.9

1993

1994

1995

1996

32.5

33.9

20

10

0
1997

Note: The President first proposed the 21st Century Research Fund in 1999.

1998

1999

2000

2001

5.

97

PROMOTING RESEARCH

Table 5–1.

21st Century Research Fund

(Budget authority, dollar amounts in millions)
1993
Actual

1999
Actual

Health and Human Services:
National Institutes of Health .........................

10,335

National Science Foundation .......................

2,750

National Aeronautics and Space Administration (NASA):
Space Science ..................................................
Earth Science ..................................................
Aerospace Technology .....................................
Life and Microgravity Sciences ......................

Percent
Change:
1993 to
2001

Percent
Change:
2000 to
2001

2000
Estimate

2001
Proposed

15,612

17,813

18,813

+82%

+6%

3,672

3,897

4,572

+66%

+17%

1,770
996
884
408

2,119
1,414
1,199
264

2,193
1,443
984
275

2,399
1,406
1,058
302

..............
..............
..............
..............

..............
..............
..............
..............

NASA Total ..................................................

4,058

4,996

4,895

5,165

+27%

+6%

Department of Energy (DOE):
Science Programs ............................................
Solar and Renewable R&D .............................
Energy Conservation R&D .............................

3,066
249
346

2,721
336
526

2,788
315
577

3,151
410
660

..............
..............
..............

..............
..............
..............

DOE Total ....................................................

3,661

3,583

3,680

4,221

+15%

+15%

Department of Defense (DOD):
Basic Research ................................................
Applied Research ............................................

1,314
3,549

1,068
3,052

1,167
3,415

1,217
3,144

..............
..............

..............
..............

DOD Total ....................................................

4,863

4,120

4,582

4,361

–10%

–5%

Department of Agriculture (USDA):
CSREES Research and Education .................
Economic Research Service ............................
Agricultural Research Service .......................
Forest Service Research .................................

433
59
661
183

486
54
794
197

487
53
830
203

469
55
894
231

..............
..............
..............
..............

..............
..............
..............
..............

USDA Total ..................................................

1,336

1,531

1,573

1,649

+23%

+5%

Department of Commerce (DOC):
Oceanic and Atmospheric Research ..............
National Institutes of Standards and Technology 1 .........................................................

202

287

301

303

..............

..............

364

540

534

559

..............

..............

DOC Total ....................................................

566

827

835

862

+52%

+3%

Department of Transportation (DOT):
Highway Research ..........................................
Aviation Research ...........................................

221
230

468
150

490
156

715
184

..............
..............

..............
..............

DOT Total ....................................................

451

618

646

899

+99%

+39%

Department of the Interior: U.S. Geological Survey ......................................................

750

797

813

895

+19%

+10%

Environmental Protection Agency (EPA):
Office of Research and Development .............
Climate Change Technology programs ..........

517
..............

562
109

561
103

531
227

..............
..............

..............
..............

EPA Total .....................................................

517

671

664

758

+47%

+14%

Department of Education: Research programs ..............................................................

162

289

319

379

+134%

+19%

Department of Veterans Affairs: Medical
Research ........................................................

232

316

321

321

+38%

..............

21st Century Research Fund ........................
Science and Technology Initiative ..........

29,681
..............

37,032
..............

40,038
..............

42,895
2,857

+45%
..............

+7%
..............

1 Does

not include the Manufacturing Extension Partnership.

98
the development of nanotechnology, which
is based upon the manipulation of matter
at the atomic level that could result in
new technologies as significant to our economy
as was the development of the transistor
and the Internet. For example, nanotechnology
offers the promise that medical science may
one day be able to perform surgery with
minimally invasive techniques or detect cancerous tumors when they are only a few
cells in size.
The initiative also funds the development
of biobased products and bioenergy to develop
new technologies for products to compete
with transportation fuels and other products
made from fossil energy resources. In addition,
it provides significant funding increases for
the ongoing Information Technology R&D program to supplement fundamental research
and advanced supercomputing applications.
The initiative also boosts many new initiatives
and on-going programs, including biocomplexity and work force education at NSF,
basic energy sciences at DOE, solar system
exploration and space launch technology at
the National Aeronautics and Space Administration (NASA), critical infrastructure protection at the Department of Defense (DOD),
and the advanced technology program at
the Department of Commerce (DOC).
In keeping with the Administration’s emphasis on civilian R&D activities, the budget
provides an increased share for civilian R&D
investments, now 51 percent of the total
and a substantial increase from 42 percent
in 1993. (For total Federal R&D funding,
see Table 5–2; for Science and Technology
Initiatives highlights, see Table 5–3.) Many
of the key features of the Science and
Technology Initiative are described below.
Strengthening Basic Research and Balancing the Federal Research Portfolio:
Over the last several years, private industry
has expanded its support for research and development, but most of these efforts focus on
bringing new products to market rather than
funding the basic research that can lead to
breakthrough applications in a wide range of
fields. By supporting basic research that can
provide the foundation for tomorrow’s technologies, the Federal Government can act as
a catalyst for these breakthroughs. Federal in-

THE BUDGET FOR FISCAL YEAR 2001

vestment in basic research increased by nearly
45 percent from 1993 to 2000, with emphasis
on health research. The budget proposes $20.3
billion to advance a balanced portfolio in basic
research, an increase of $1.3 million, or seven
percent, over 2000.
This initiative builds upon recent gains
for the NIH and furthers the President’s
commitment to sustained increases in NIH
funding. It provides double the largest annual
dollar increase ever for NSF, to increase
support for Administration research priorities
and university-based research. With this initiative, NIH will have grown 82 percent
since 1993 and NSF by 66 percent. This
initiative also provides an increase of $363
million for DOE’s science portfolio, providing
a much needed increase for the physical
sciences and the user facilities that serve
the entire science community. NASA’s space
science program would increase $206 million—
nine percent for important basic research
programs that probe the universe and explore
nearby planets.
Strengthening
University-Based
Research: University-based basic research plays
a special role in the development of scientific
advances. The competitive grants process upon
which university research relies fosters innovation and expands scientific frontiers. At the
same time, these research grants provide a
training ground for the next generation of scientists and engineers.
Funding support for universities, provided
primarily through NSF, NIH, and DOD, has
grown to roughly $16.5 billion, a 42-percent
increase, since 1993 (see Chart 5–2). The
budget proposes $17.8 billion for universitybased research, an increase of $1.3 billion
over 2000. NSF represents nearly four percent
of Federal R&D funding, but supports over
50 percent of the Federal non-health basic
research conducted at colleges and universities. By significantly increasing the number
and size of new awards available for nonhealth university researchers in 2001, the
NSF budget also creates incentives to encourage promising students to pursue careers
in science and technology.

5.

99

PROMOTING RESEARCH

Table 5–2.

Research and Development Investments

(Budget authority, dollar amounts in millions)
1993
Actual

1999
Actual

Funding by Agency:
Defense ............................................................
Health and Human Services ..........................
National Aeronautics and Space Admin .......
Energy ..............................................................
National Science Foundation .........................
Agriculture .......................................................
Commerce ........................................................
Transportation ................................................
Environmental Protection Agency .................
Veterans Affairs ..............................................
Interior .............................................................
Education .........................................................
Other ................................................................

38,898
10,472
8,873
6,896
2,012
1,467
793
613
511
253
649
200
1,055

Total .............................................................
Funding by R&D Type:
Basic Research ................................................
Applied Research ............................................
Development ....................................................
Equipment .......................................................
Facilities ..........................................................
Total .............................................................
Funding by Civilian Theme:
Basic Research ................................................
Applied Research ............................................
Development ....................................................
Equipment .......................................................
Facilities ..........................................................
Subtotal ............................................................
Funding by Defense Theme:
Basic Research ................................................
Applied Research ............................................
Development ....................................................
Equipment .......................................................
Facilities ..........................................................

Percent
Change:
1993 to
2001

Percent
Change:
2000 to
2001

2000
Estimate

2001
Proposed

38,850
15,797
9,715
6,992
2,702
1,645
1,084
786
670
644
500
205
752

38,719
18,063
9,753
7,091
2,903
1,773
1,073
585
648
655
584
233
664

38,640
18,998
10,035
7,655
3,464
1,825
1,152
731
679
655
590
271
638

–1%
+81%
+13%
+11%
+72%
+25%
+45%
+19%
+33%
+159%
–9%
+36%
–40%

..............
+5%
+3%
+8%
+19%
+3%
+7%
+25%
+5%
..............
+1%
+16%
–4%

72,692

80,342

82,744

85,333

+17%

+3%

13,362
13,608
42,795
2,727

17,468
15,915
44,302
1,045
1,612

19,027
17,193
44,071
1,026
1,427

20,328
18,026
44,321
1,137
1,521

+52%
+32%
+4%
NA
–3%

+7%
+5%
+1%
+11%
+7%

72,492

80,342

82,744

85,333

+18%

+3%

11,951
9,130
7,269
1,979

16,340
11,551
8,522
745
1,135

17,808
12,405
8,818
743
976

19,054
13,274
8,981
852
1,112

+59%
+45%
+24%
NA
–1%

+7%
+7%
+2%
+15%
+14%

30,329

38,293

40,750

43,273

+43%

+6%

1,411
4,478
35,526
748

1,128
4,364
35,780
300
477

1,219
4,788
35,253
283
451

1,274
4,752
35,340
285
409

–10%
+6%
–1%
NA
–7%

+5%
–1%
..............
+1%
–9%

1

1

1

Subtotal ............................................................

42,163

42,049

41,994

42,060

..............

..............

Funding by R&D Share:
Civilian ............................................................
Defense ............................................................

30,329
42,163

38,293
42,049

40,750
41,994

43,273
42,060

+43%
..............

+6%
..............

Total .............................................................

72,492

80,342

82,744

85,333

+18%

+3%

Civilian (percent) ............................................

42%

48%

49%

51%

..............

..............

R&D Support to Universities .......................

11,674

15,118

16,547

17,831

+53%

+8%

Merit (Peer) Reviewed R&D Programs .....

NA

23,812

26,021

28,157

NA

+8%

NA = Not Applicable
1 Equipment and facilities data were not collected separately in 1993.

100

THE BUDGET FOR FISCAL YEAR 2001

Table 5–3.

Science and Technology Initiative Highlights
(Budget authority, dollar amounts in millions)
1999
Actual

2000
Estimate

2001
Proposed

Dollar
Change:
2000 to
2001

Percent
Change:
2000 to
2001

National Science and Technology Council Initiatives:
National Nanotechnology Initiative ................................
Information Technology R&D ..........................................
Information Technology Initiative (IT2) .....................
Next Generation Internet ............................................
Clean Energy: Biobased Products and Bioenergy ..........
Climate Change Technology Initiative ............................
Partnership for a New Generation of Vehicles ...............
Integrated Science for Ecosystem Challenges ................
U.S. Global Change Research Program ..........................
Interagency Education Research Initiative ....................
Critical Infrastructure Protection R&D ..........................
Weapons of Mass Destruction Preparedness R&D ........

247
1,301
..............
105
195
1,021
235
630
1,657
30
450
320

270
1,721
309
86
196
1,099
226
657
1,701
38
461
473

495
2,315
823
89
289
1,432
255
747
1,740
50
606
501

+225
+594
+514
+3
+93
+333
+29
+90
+39
+12
+145
+28

+83%
+35%
+166%
+3%
+47%
+30%
+13%
+14%
+2%
+32%
+31%
+6%

National Science Foundation:
Biocomplexity in the Environment ..................................
Work Force in the 21st Century ......................................

12
..............

50
72

136
155

+86
+83

+173%
+115%

National Aeronautics and Space Administration:.
Space Launch Initiative ...................................................
Solar System Exploration ................................................

392
683

231
801

290
940

+59
+139

+26%
+17%

Department of Energy:
Spallation Neutron Source (SNS) ....................................
National Scientific User Facilities (excluding SNS) ......

130
1,124

118
1,124

281
1,191

+163
+67

+138%
+6%

Department of Commerce:
Advanced Technology Program (New Awards) ...............
E-Commerce Research ......................................................

40
7

51
7

65
11

+14
+4

+27%
+57%

Department of Agriculture:
Climate Change Programs ...............................................
National Research Initiative ............................................

52
119

53
119

109
150

+56
+31

+107%
+26%

Department of Transportation:
Intelligent Transportation System Initiative .................
Highway Vehicle Crashworthiness ..................................

177
27

184
22

338
43

+154
+21

+84%
+95%

R&D Support to Universities .........................................

15,118

16,547

17,831

+1,284

+8%

Promoting Major Multiagency Research
Initiatives: The Science and Technology Initiative also supports multiagency investments,
including two critical new activities: the National Nanotechnology Initiative and Biobased
Products and Bioenergy, while significantly increasing funding for Information Technology
and continuing support for other key areas.
Nanotechnology Research: The budget proposes
a
new
multiagency
National
Nanotechnology Initiative at $495 million—
nearly doubling the level of effort in 2000.
The initiative focuses on the manipulation
of matter at the atomic and molecular level,
allowing us an unprecedented chance to study
new properties, processes, and phenomena

that matter exhibits at a scale between
atoms and molecules and giving us an unprecedented ability to create new classes of
devices as small as or smaller than a human
cell. This research could lead to continued
improvement in electronics/electro-optics for
information technology; higher-performance,
lower-maintenance materials for manufacturing, defense, space, and environmental
applications; and, accelerated biotechnical applications in medicine, health care, and agriculture. Its application in medical science
could lead to radical new surgical techniques
that are far less invasive, and the detection
of cancerous tumors when they are only
a few cells in size.

5.

101

PROMOTING RESEARCH

Chart 5-2. Federal Research and Development Funding to Universities
Budget authority in billions of dollars

20

17.8

15

53%
Change

16.5
15.1
13.7

11.7

11.7

1993

1994

12.4

12.6

12.7

1995

1996

1997

10

5

0

Clean Energy—Biobased products and bioenergy: The budget proposes $289 million—
a $93 million increase—for a new initiative
established to meet the goal of tripling U.S.
use of biobased products and bioenergy as
stated by the President in Executive Order
13134 and Memorandum on Promoting
Biobased Products and Bioenergy. The program provides funds for the research and
development of technology that can produce
feedstocks for chemical manufacturing, transportation fuels, and electricity that would
compete with equivalent products made from
fossil energy resources. It also funds advanced
technology development for improving crop
productivity and harvesting technologies to
produce these raw plant materials from farm
and forestry operations at an acceptably low
cost. These new cash crops can boost farm
incomes and add good jobs to rural economies
while offsetting oil imports and reducing
pollution and greenhouse gas emissions.

1998

1999

2000

2001

Information Technology (IT) R&D: The IT
R&D program funds long-term research in
computing, information, and communication
that will result in the development of increasingly powerful high performance computing
systems, global-scale networking technologies
with advanced capabilities, advances in software development technologies and applications software, advances in managing and
accessing vast distributed knowledge repositories, and advances in human interface technologies. Federal investments for these programs are critical to ensuring America’s leadership in an industry that accounts for one
third of our economic growth, creates hightech, high-wage jobs, and improves our quality
of life. The budget proposes $2.3 billion
for this program, which now formally merges
the former High Performance Computing and
Communications (HPCC) program (including
the Next Generation Internet) with the Information Technology initiative (IT2). HPCC is
a 10-year old program to research better

102
supercomputers and networks. IT2, introduced
in 2000, builds on the recommendations of
the President’s Information Technology Advisory Committee to significantly increase investments in long-term, fundamental research
and advanced computing applications. The
merged IT R&D program provides a $594
million increase above 2000, to build on
the fundamental research proposed in IT2.
Climate
Change
Technology
Initiative
(CCTI): The budget proposes $1.6 billion
for the third year of this effort to promote
energy efficiency, develop low-carbon energy
sources, and demonstrate technologies to reduce greenhouse gas emissions. Of the amount
proposed, $1.4 billion is for R&D on energy
efficiency and renewable energy technologies,
carbon sequestration, extension of the useful
life of existing nuclear plants, and development of highly efficient fossil fuel technologies.
The remainder, $0.2 billion, funds tax credits
to stimulate the adoption of energy-efficient
technologies in buildings, homes, industrial
processes, vehicles, and power generation.
Partnership for a New Generation of Vehicles
(PNGV): The budget proposes $255 million—
$29 million more than in 2000. This costsharing partnership with industry aims to
produce attractive, affordable vehicles capable
of meeting all applicable emission and safety
requirements while achieving a fuel economy
up to three times higher than today’s cars.
Current priorities include development of highly efficient fuel cells and direct injection
engines that meet stringent new air quality
standards, efficient energy storage systems,
power electronics, batteries, and lightweight
materials.
Integrated Science for Ecosystem Challenges
(ISEC): The budget proposes $747 million—
$90 million more than in 2000—to support
environmental research to improve our understanding of factors that result in ecosystem
decline and biodiversity loss and to design
more effective options to prevent further
decline. In 2001, ISEC will address four
priority areas: invasive species, biodiversity
and species decline; harmful algal blooms,
hypoxia and eutrophication; habitat conservation and ecosystem productivity; and information management, monitoring, and integrated
assessments.

THE BUDGET FOR FISCAL YEAR 2001

Fundamental Health Research: The budget
reflects the Administration’s continued focus
on R&D to protect human health. (See Chapter
3 ‘‘Strengthening Health Care’’ for more detail.) It funds research programs at NIH
that have made the United States the world’s
leader in medical research. It also supports
the development of vaccines for diseases like
AIDS, malaria, and tuberculosis, which kill
more than seven million people each year,
research on cancer and diabetes, efforts to
reduce the demand for illicit drugs, a food
safety initiative, and the fight against emerging infectious diseases. To implement the
President’s Directive on emerging infectious
diseases, we have stepped up research, surveillance, and response by calling for a nearly
15-percent increase for the Centers for Disease
Control and Prevention’s emerging infections
programs.
Weapons of Mass Destruction (WMD) Preparedness and Critical Infrastructure Protection R&D: The budget provides $501 million,
a $28 million increase, for WMD preparedness
R&D to enhance our efforts in preventing,
detecting, and responding to the release of
weapons of mass destruction, and to more
effectively manage the health, environmental,
and law enforcement consequences should
such an incident ever occur. The budget
also includes $606 million, a $145 million
increase, for Critical Infrastructure Protection
R&D to improve the safety and security
of the Nation’s Critical Infrastructure—the
power, communications, information, transportation, and other systems on which our
economy and quality of life depend. These
funds will both increase Federal research
and also establish the Institute for Information
Infrastructure Protection to work collaboratively with industry, non-profit research
institutions and academia on key information
infrastructure protection technologies that private corporations would not otherwise address.
Education Technology and the Interagency
Education Research Initiative: As part of
the Administration’s commitment to bridge
the digital divide, the budget proposes $903
million—$137 million more than in 2000—
for education technology, to ensure that America’s classrooms are equipped with modern
computers and connected to the Internet,
that educational software is effectively inte-

5.

PROMOTING RESEARCH

grated in the curriculum, and that teachers
are ready to use and teach with technology
(see Chapter 9, ‘‘Strengthening the American
Community’’). This includes Next Generation
Technology grants to develop education technology for the next century such as computer
use of speech understanding to help every
student learn to read, or interactive simulations that allow students to ‘‘learn by doing.’’
Federal R&D investments such as the Interagency Education Research Initiative (IERI)—
a Department of Education, NSF, and NIH’s
National Institute of Child Health and Human
Development effort to support research to
improve student learning and the development
and promotion of the use of best practices
in our schools. IERI is funded at $50 million,
a $12 million increase above 2000.
U.S. Global Change Research Program
(USGCRP): The budget proposes $1.7 billion
for the USGCRP in 2001. This program
will expand our understanding of changes
in the Earth’s environment, humanity’s influence upon global change, and the impact
of change upon society and the environment.
USGCRP provides useful information for making decisions on environmental issues such
as climate and ecosystem change, ozone depletion, and land use planning. In 1999, the
program increased attention on the role of
vegetation in the processes by which carbon
moves between the atmosphere, the oceans,
and the land.
Investments at Federal Agencies
National Institutes of Health (NIH): The
budget continues its commitment to biomedical
research by providing an increase of $1 billion
over the 2000 level for NIH. This funding level
will support research on diabetes, brain disorders, cancer, genetic medicine, disease prevention strategies, biomedical information and
technology—including
nanotechnology—and
development of an AIDS vaccine. NIH’s highest priority continues to be investigator-initiated, peer-reviewed research project grants. In
the last year, NIH-supported researchers, who
are leading the international effort to sequence
the human genome, achieved a scientific milestone by unraveling for the first time the genetic code of an entire human chromosome.
This achievement is the first step in the genetic revolution which could profoundly alter

103
our approaches to preventing, treating, and
curing disease.
National Science Foundation (NSF): The
budget provides $4.57 billion—17 percent more
than in 2000—for NSF, whose broad mission
is to promote science and engineering research
and education across all fields and disciplines.
In 1999, NSF-funded scientists reported the
first complete DNA sequence of a plant chromosome, which will provide new information
about
chromosome
structure,
evolution,
intracellular signaling and disease resistance
in plants. The budget provides $740 million
for NSF’s lead role in IT R&D, focusing on
long-term computer science research and providing scientists access to world-class supercomputers. The budget also provides $217 million for the National Nanotechnology Initiative. The budget increases funding for biocomplexity research by $86 million, or 173 percent,
over 2000 to promote understanding of the
complex biological, physical, chemical, and social interactions within and among the Earth’s
ecosystems. The budget also increases funding
for the agency’s 21st Century Work Force initiative by $83 million or 115 percent over
2000, focusing on the science of learning and
enhancing educational performance and broadening participation in the science, mathematics, engineering, and technology enterprise.
Department of Energy (DOE): The budget
provides $3.15 billion, a 13-percent increase
over 2000, for DOE’s research programs in
physics, chemistry, biology, materials, environmental, and computer sciences. The budget
provides for the construction of new scientific
facilities, including the Spallation Neutron
Source and the Large Hadron Collider (in partnership with other countries), and an additional $30 million to increase support for
DOE’s National User Facilities. During this
Administration, DOE-funded research has produced more than 5,000 new Ph.D. scientists.
In 1995, researchers at Fermilab announced
their discovery of the top quark, the last fundamental particle to be discovered. In the last
seven years, 10 scientists have won Nobel
Prizes in Chemistry or Physics for their DOEsupported research. In 2001, the budget will
further strengthen the DOE research community by increasing support for research in materials science, the life sciences, and computational sciences, along with increased support

104
for the scientific user facilities that serve the
entire community supported by the 21st Century Research Fund.
National Aeronautics and Space Administration (NASA): The budget provides $14.0
billion for new and ongoing NASA activities,
a three-percent increase over 2000. NASA’s
budget includes a 48-percent increase for space
transportation, including $290 million for a
five-year, $4.5 billion Space Launch Initiative
to support a competition in 2005 that will enable NASA to more safely meet its human
space flight needs at lower cost on commercial
launch vehicles. This initiative fulfills a 1994
National Space Transportation Policy guideline
calling for government and private sector decisions by the end of this decade on development
of an operational, next-generation reusable
launch system. The budget provides $2.4 billion, a nine-percent increase over 2000, for
Space Science. This includes $940 million, a
17-percent increase, for enhanced solar system
exploration, which supports revolutionary technologies and systems for a sustained presence
at key research sites in our solar system that
will greatly enhance the science return and
resiliency of future missions. The budget also
includes $256 million for investments to help
ensure continued safe Space Shuttle operations, a 37-percent increase over 2000. Finally, the budget supports a wide range of
other investments, including: continued deployment of the International Space Station
within cost guidelines, ongoing development of
the first series of Earth Observing System satellites for Earth Science, and key Aero-Space
Technology goals to improve aviation safety,
air traffic congestion, and aircraft noise and
emissions.
Department of Defense (DOD): The budget funds $1.2 billion in basic research, $3.1
billion in applied research, and $3.2 billion in
advanced technology development, providing
options for new defense strategies and laying
the groundwork for procuring next-generation
defense systems. With its emphasis on the
physical sciences, DOD’s research and development investments are vital to the Nation’s engineering, mathematics, and computer science
efforts. The budget proposes $116 million to
conduct Advanced Concept Technology Demonstrations, which bring technology experts
and military operators together early in tech-

THE BUDGET FOR FISCAL YEAR 2001

nology system development to eliminate communication barriers, improve management of
development programs, and address key
warfighter challenges. The budget also supports a major role in Information Technology
R&D,
the
Nanotechnology
Initiative,
counterproliferation R&D and protecting
against 21st Century threats. Recent DOD
technological accomplishments include two developments with life-saving potential: a hemostatic dressing developed for containing previously uncontrollable hemorrhages and a
method to extend the shelf life of stored blood
to 10 weeks.
Department of Agriculture (USDA): The
budget provides $894 million for the operating
programs of the Agricultural Research Service,
$64 million more than in 2000, and $55 million
for the Economic Research Service, which together conduct a broad range of food, farm,
and environmental research programs. The
budget also provides $469 million for grants
for the research and education programs of the
Cooperative State Research, Education, and
Extension Service (CSREES), including $150
million for the National Research Initiative
(NRI), a 26-percent increase over the 2000
level. CSREES provides grants for agricultural, food, and environmental research, and
for higher education. NRI competitive research
grants improve the quality and increase the
quantity of USDA’s farm, food, and environmental research. The USDA budget includes
increases for high-priority research in areas
such as bioenergy and bioproduct human nutrition, food safety, climate change, air and
water quality, food quality protection, agricultural genomes and genetics, sustainable ecosystems, carbon sequestration, and ISEC activities, including invasive species, emerging
and exotic diseases, and the Forest Service’s
Forest and Rangeland Research program.
Under the Agricultural Research Extension
and Education Reform Act of 1998, $120 million in mandatory funding also will be available in 2001.
Department of Commerce: In the National
Institute of Standards and Technology (NIST),
the budget provides $176 million—a 23-percent
increase over 2000—for NIST’s Advanced
Technology Program to promote rigorously
competitive, cost-shared R&D partnerships
that develop high-risk technologies promising

5.

PROMOTING RESEARCH

105

widespread economic benefits. The budget provides $331—a 17-percent increase over 2000—
for research at NIST’s Measurement and
Standards Laboratories. The NIST labs work
with industry to develop and apply technology,
measurements and standards. In 1999, NIST
built upon its previous breakthroughs in quantum physics and discovered a new type of matter by chilling atoms and manipulating them
into a novel formation. This eventually may
lead to a better understanding of superconductivity, resulting in new electronic devices and
enormous reductions in the cost of producing
and transmitting electricity. In 2001, NIST
will
conduct
additional
research
on
nanotechnology and information technology,
and will support a new institute to develop
technologies to protect our national information infrastructure protection. For the National
Oceanic and Atmospheric Administration, the
budget provides $303 million for research to
improve understanding of climate change, air
quality, and stratospheric ozone depletion, as
well as research to promote economic growth
through efforts in marine biotechnology and
environmental technologies.

Environmental Protection Agency (EPA):
The budget provides $531 million, a five-percent decrease from 2000, which contained numerous one-time congressional earmarks, for
EPA’s Office of Research and Development
(ORD). ORD performs the majority of EPA’s
research and provides a sound scientific and
technical foundation for environmental policy
and regulatory decision-making. The budget
funds research in all environmental media,
and includes funding for EPA’s participation
(either by ORD or the Office of Air and Radiation) in crosscutting initiatives such as
USGCRP, CCTI, PNGV, and ISEC, as well as
funding for valuable research projects such as
Environmental Technology Verification (ETV)
and the Environmental Monitoring and Assessment Program (EMAP). Established by the
Administration in 1995, the ETV program has
verified 55 environmental technologies and 105
are currently in testing. In the last year,
EMAP has verified annual declines in sulfate
levels in the 1990s of up to six percent in
the Nation’s streams and lakes as a result of
environmental regulations to curb emissions
that cause acid rain.

Department of the Interior’s U.S. Geological Survey (USGS): The budget provides
$895 million—a 10-percent increase over
2000—for science that supports natural resource management and environmental decision-making. In 1999, USGS scientists developed effective techniques to control certain
invasive species while reducing impacts to native species. The 2001 budget supports research and technical assistance on the needs
of land managers and local land-use planners.
USGS will use its mapping, remote sensing,
and natural resources monitoring capabilities
to develop new ways to analyze and improve
the availability of natural hazard, earth
science, and biological information. This information will promote local planning and conservation efforts to protect the most valuable
open spaces and critical habitats. The USGS
will also begin to operate the seventh Landsat
Earth observing satellite launched in April
1999. The budget also continues to support research to enhance understanding of ecosystems, invasive species, and coral reefs.
Work in 2001 contributes to the multi-agency
ISEC initiative.

Department of Transportation: The budget proposes a total of $715 million for the
Highway Research and Deployment Initiative—a $225 million increase over the 2000
level. These increases will address activities
such as improving the technology for traffic
operations and design, the durability of pavement and bridges, and reducing transportation
crashes and incidents. The budget includes
$338 million for the Intelligent Transportation
System (ITS) initiative—a package of technologies to enhance the safety and efficiency
of surface transportation infrastructure. This
ITS total includes an additional $120 million
for continued deployment of integrated ‘‘intelligent infrastructure,’’ such as interactive traffic signals, traveler information systems, and
advanced electronic motor carrier toll clearance systems in urban and rural areas and
the commercial vehicle industry. The budget
also provides $184 million for aviation research and development, a $28 million increase over the 2000 level. These increases will
address key aviation safety, air traffic congestion, aircraft noise, and emissions goals in the
National R&D Plan for Aviation.

106
Department of Veterans Affairs’ Medical
Research: The budget provides $321 million—
about a third of the Department’s overall $1
billion research program—for clinical, epidemiological, and behavioral studies across a
broad spectrum of medical research disciplines.
Among the agency’s top research priorities are
improving the translation of research results
into patient care, geriatrics (including end-oflife care and Alzheimer’s disease), and treatment of Parkinson’s disease and Persian Gulf
Veterans’ illnesses.
Department of Education: The budget proposes a $60 million increase above 2000 for
Department of Education reserach programs,
including a $30 million increase for research,
development, and dissemination activities

THE BUDGET FOR FISCAL YEAR 2001

under the proposed National Institute for Education Research. This includes a $10 million
increase, for a total of $20 million, for the
agency’s contribution to the third year of the
IERI, a collaborative effort with NSF and the
NIH’s National Institute of Child Health and
Human Development. This innovative initiative will continue to support large-scale research focused on identifying the best approaches to raising pre-K–12 student achievement and effectively applying the latest educational technologies. The proposed increase
for education research will also support national research and development centers, fieldinitiated studies, ongoing research on comprehensive school reform models, and new research on the education of language–minority
children.

6.

ENFORCING THE LAW

Crime has been dropping, now, for seven straight years. This is the longest continuous decline
in the crime rate ever recorded in our country. In part, that is because all of us, from the grassroots to Washington, D.C., have intensified our support for common-sense strategies to fight crime
and to prevent crime . . . . [but] I doubt if there is . . . . a person in our country who thinks the
crime rate is low enough.
President Clinton
October 1999

When President Clinton took office in 1993,
the violent crime rate in America had more
than tripled during the previous three decades.
Today, with the rate of violent crime continuing to fall each and every year since
1993, the President’s crime-fighting program
has made our streets safer and our communities stronger (see Chart 6–1). The Nation’s
overall crime rate is now at a 25-year
low, the murder rate is its lowest in 31
years, and crime is down in every region
of the Nation.

authorities to fight and prevent crime. By
1999, COPS achieved the goal of funding
100,000 additional officers for our streets—
ahead of schedule and under budget—helping
to make communities safer.

The President has described to leaders
from the law enforcement community his
clear-cut and effective anti-crime philosophy—
‘‘We think there ought to be more police
and fewer guns on the street.’’ Combined
with stepped-up efforts to fight drugs, combat
youth violence, and control illegal immigration,
this multi-front fight against crime has significantly improved the lives of all Americans.
By extending and expanding such efforts,
as proposed in this budget, these anti-crime
strategies can continue to make Americans
safer and more secure for years to come.

Building on the success of the COPS program, the President proposed, fought for,
and secured passage of the next step in
his anti-crime strategy—the 21st Century
Policing Initiative. This initiative, also known
as COPS II, maintains the Administration’s
commitment to keep the number of officers
on the beat at an all-time high by funding
up to an additional 50,000 officers by 2005.
It also builds on the COPS program in
two key ways. First, it provides significant
new funds to give law enforcement access
to the latest crime-fighting and crime-solving
technologies. Second, the initiative engages
entire communities in the hard work of
preventing and fighting crime by funding
new community-based prosecutors and partnerships among law enforcement and probation and parole officers, school officials, and
faith-based organizations.

The President’s Community Oriented Policing Services (COPS) went into force at the
start of his first term. An ambitious plan
to add 100,000 police officers to local beats,
the COPS program has increased resources
for State and local law enforcement, expanded
community policing to thousands of police
departments Nation-wide, and brought stability and security to many crime-ridden
neighborhoods. COPS has encouraged citizens
to work closely with their local community
police officers and with other criminal justice

In 1993, the Clinton Administration also
began a sustained effort to reduce gun crime.
The Administration proposed and secured
passage of a series of new laws—the Brady
Act, which created the National Instant Criminal Background Check System (NICS) to
require background checks of all purchasers
of firearms from federally-licensed dealers;
reforms in the Federal firearms dealer licensing system to ensure that gun dealers comply
with State and local laws and respond to
crime gun trace requests; the assault weapons
107

108

THE BUDGET FOR FISCAL YEAR 2001

Chart 6-1. Crime Index
Percent change from 1992

0
Number of Offenses

-5

-10
Rate per 100,000 Population

-15

-20
1992

1993

1994

ban and the ban on large capacity ammunition
feeding devices to reduce access to lethal
weapons primarily designed for battle; and,
the Youth Handgun Safety Act, prohibiting
juveniles under 18 from possessing handguns.
These laws have been instrumental in dramatically reducing violent gun violence, which
has declined by more than 35 percent in
the past seven years. In the same time
frame, the number of juvenile gun homicide
offenders has dropped by 57 percent.
To strengthen enforcement of these laws
and further expand the Administration’s comprehensive efforts to combat gun violence
in our society, the budget proposes the largest
gun enforcement initiative in history: $70
million for upgrades to State and local criminal history records to improve the speed
and accuracy of Brady background checks;
$53 million for 500 new Bureau of Alcohol,
Tobacco, and Firearms (ATF) agents and
inspectors, and Nation-wide expansion of crime
gun tracing and ballistics imaging systems;
$150 million for grants to hire 1,000 State
and local gun prosecutors; $10 million for

1995

1996

1997

1998

smart gun technology research; $15 million
for over 100 Department of Justice (DOJ)
prosecutors and 20 enforcement coordination
teams; $10 million for local media campaigns
on gun safety and gun violence; and, $10
million to help law enforcement end the
practice of re-selling used police firearms
and seized guns on the civilian market.
These additional resources will further the
decline of gun crime by stepping up Federal,
State, and local law enforcement efforts
against armed criminals and those who traffic
in firearms to criminals and juveniles.
While expanding resources to combat gun
crime, the Administration will continue to
urge Congress to pass common sense gun
legislation to require background checks of
prospective purchasers at gun shows, require
child safety locks for handguns, ban the
importation of large capacity ammunition magazines, and provide tougher penalties against
gun traffickers and gun dealers who target
and do business with those who are ineligible,
including juveniles.

6.

109

ENFORCING THE LAW

The Clinton Administration’s Anti-Crime Strategy
Expanded local policing and fewer guns on the street are the cornerstone of the Administration’s three-part strategy to make Americans safer and more secure for years to come:
• putting more police on the street and promoting community policing while taking measures to
deter violent offenders and gun violence;
• controlling illegal immigration into the United States, including organized smuggling of aliens
and other accompanying illegal activities, through reliance on stepped-up border enforcement
and the use of technology; and,
• fighting drug abuse on all fronts, especially among children, by vigorously enforcing the Nation’s drug laws and developing prevention programs which give children an alternative to
crime and drugs and a chance for a positive future.

Fighting Crime
The budget proposes $29.0 billion to control
crime, $2.4 billion—or 8.8 percent—more than
enacted for 2000 (see Chart 6–2). While
enhancing Federal anti-crime efforts, the budget seeks to empower States and communities,
which play the central role in controlling
crime, particularly violent crime.
21st Century Policing Initiative: The
budget includes $1.3 billion for this initiative,
$422 million more than was provided in 2000.
This initiative includes:
• More police on the streets: $650 million will
be used to hire and redeploy more law
enforcement officers, with an effort to target new police officers to crime ‘‘hot spots.’’
In addition to the 100,000 police officers
already funded by the COPS program, this
will place up to 50,000 officers on the
street by 2005. A portion of the funds will
also be used to help economically distressed communities retain new police
hires, and for other programs to recruit,
train, and educate law enforcement officers.
• Crime fighting technology: $350 million
will be used to help State and local law
enforcement agencies improve police communication systems, crime mapping, forensic laboratories, and other operations. In
particular, this funding, together with efforts at the Treasury and Justice Departments, will ensure that the Nation’s public
safety workers can communicate with each
other securely, swiftly and effectively.

• Over 1,000 new Federal, State, and local
gun prosecutors: $200 million will be used
for State and local prosecutors, including
$150 million for prosecutors, and $50 million for community-based prosecutors dedicated to local crime problems and quality
of life issues. This will fund 1,000 new
State and local prosecutors to combat gun
crime and violence, over 100 new Federal
gun prosecutors, and new gun enforcement
teams to coordinate efforts with local law
enforcement to put gun criminals behind
bars.
• Community crime prevention: $135 million
will be used for community-based crime
prevention programs. These funds will be
used to form partnerships with probation
and parole officers in supervising released
offenders, local school officials in adopting
community-wide crime prevention plans,
and faith-based organizations to address
youth crime problems. Funds also will be
used to promote police integrity and hate
crimes training and to establish citizens’
academies that teach neighborhood residents problem-solving skills.
Firearms Enforcement: When the President took office seven years ago, he put into
place a comprehensive strategy focused on
keeping guns out of the wrong hands and deterring and incarcerating gun criminals. The
Brady Act has prevented more than 472,000
felons, fugitives, and stalkers from purchasing
firearms while prosecutions of gun criminals
are up and gun crime has dropped by more
than 35 percent. However, despite this
progress, far too many Americans, especially

110

THE BUDGET FOR FISCAL YEAR 2001

Chart 6-2. Discretionary Anti-Crime Budget History
Budget authority in billions of dollars

29.0

30
26.5
25

22.9

26.6

5.7

4.4

4.7

18.3

20

20.8

2.4
15.9

18.2

1993

15

14.6

1995

1997

22.2

10
5
0

Crime Trust Fund

children, lose their lives as a result of gunfire.
The budget will build on the Administration’s
efforts to reduce gun violence with the largest
national gun enforcement initiative in history.
• 500 new ATF agents and inspectors: The
budget funds the largest increase ever in
ATF agents and inspectors, including 300
new agents to support local enforcement
efforts throughout the country in making
cases against armed criminals and against
illegal firearms traffickers at gun shows,
gun stores, and on the streets, and 200
new inspectors to target gun manufacturers, distributors, and dealers who supply
firearms to criminals and juveniles.
• Comprehensive crime gun tracing: To move
toward tracing every crime gun in America, the budget proposes funds to provide
250 local law enforcement agencies with
training and software to facilitate comprehensive tracing, and to expand the Administration’s Youth Crime Gun Interdiction Initiative from 38 to 50 cities across
the country.

1999

2000

2001

General Appropriations

• New National Integrated Ballistics Information Network: The Administration proposes to triple current funding for ballistics testing programs to launch the first
national ballistics network. This initiative
will support the deployment of 150 new
ballistics imaging units to law enforcement
to trace bullets and shell casings to the
criminals who fired them.
• Local anti-gun violence media campaigns:
The budget provides $10 million in matching grants from DOJ to support local
media campaigns highlighting penalties
for breaking gun laws, proper storage of
firearms, and preventing child access to
guns.
• Strengthened Brady background checks:
The budget provides $70 million, double
the current funding level, to improve State
criminal history records and improve the
speed and accuracy of Brady background
checks. In addition, $5 million will fund
a National Instant Notification system to
help police apprehend criminals attempt-

6.

ENFORCING THE LAW

ing to illegally purchase firearms in those
States not acting as a point of contact for
NICS.
• Smart gun technology: The budget proposes $10 million for expansion, testing,
and replication of ‘‘smart’’ gun technologies. These state-of-the-art gun safety
precautions can limit a gun’s use to its
owner or other authorized users—preventing gun deaths and injuries.
• Keeping used police guns out of the hands
of criminals: To end the resale of used
police guns and seized firearms, $10 million is provided for one-time grants to law
enforcement agencies on the condition that
they halt such practices.
Youth Violence: A total of $8.9 billion is
included in the budget for Government-wide
programs to address youth violence. One example of this cross-agency effort is the Safe
Schools/Health Students program, which
brings together the Justice, Education, and
Labor Departments to create colloborative solutions to youth violence. Also included in this
effort is $289 million for DOJ programs to
fight juvenile crime, including support for local
community prevention programs such as mentoring, truancy prevention, and gang intervention.
Safe Streets Task Forces: The budget proposes $128 million to continue the Safe Streets
program, which blends the efforts of the FBI
and other Federal law enforcement agencies
with those of State and local police departments to investigate street crime and violence.
A complementary initiative, the Weed and
Seed Program, provides $42 million for multiagency efforts to ‘‘weed out’’ crime from targeted neighborhoods, then ‘‘seed’’ the sites with
a wide range of crime and drug prevention
programs.
Community Supervision of Released Offenders—Project Reentry: The budget proposes a new $60 million community supervision initiative to address community safety
concerns, lower recidivism rates, and promote
responsible fatherhood for the nearly 500,000
inmates who will leave prison or jail this year
and reenter local communities. The need for
greater supervision is significant: two-thirds of
all prisoners are arrested for new offenses

111
within three years of release. The initiative
is comprised of reentry partnerships and reentry courts. Reentry partnerships will team
up police and corrections agencies with local
service providers and non-profit groups (including faith-based, victims, and fatherhood
groups) to regularly monitor released offenders. Grants will fund partnerships to help hire
additional corrections staff to supervise offenders and impose graduated sanctions, target resources such as drug testing and treatment
and job training, and require responsibility for
child support and other obligations. Reentry
courts will employ the drug court model of judicial supervision to oversee offenders on conditional release—with regular court appearances, graduated sanctions to establish accountability, and targeted services such as
drug testing and treatment. The initiative will
be complemented by job training grants from
the Department of Labor’s Responsible Reintegration for Young Offenders initiative, and
targeted substance abuse and mental health
grants from HHS.
Crime in Public Housing: The budget proposes $345 million to support anti-crime, antidrug, gun safety, and violence reduction programs in public housing, including Operation
Safe Home and a new $3.0 million Community
Gun Safety and Violence Reduction initiative.
The Department of Housing and Urban Development’s Office of Public Housing and Office
of the Inspector General jointly administer Operation Safe Home, which brings together residents, managers, and various Federal and
local law enforcement agencies to rid public
housing communities of crime. The Community
Gun Safety and Violence Reduction initiative
will support gun violence reduction programs
to complement existing community safety programs and will fund state-of-the art computerized gun-violence tracking and gun-tracing efforts to assist communities and law enforcement agencies in planning gun-violence reduction efforts.
Violence Against Women: Violence against
women is a continuing problem. Nearly a third
of all women murdered in the United States
are killed by a current or former spouse or
intimate partner. Studies show that child
abuse occurs in 30 to 60 percent of domestic
violence cases involving families with children.
Studies also show that law enforcement inter-

112
vention often breaks the cycle of domestic violence, preventing subsequent incidents. The
budget proposes a record high $516 million to
maintain efforts to combat gender-based crime,
$33 million more than 2000. These funds are
used to support grants to develop and
strengthen the criminal justice system’s response to violence against women and to support and enhance services for victims, to fund
the National Domestic Violence hotline, to
fund battered women’s shelters, and to expand
outreach to under-served rural, Indian, and
minority populations.
Hate Crimes: The President has urged Congress to pass the Hate Crimes Prevention Act,
which would strengthen the existing Federal
hate crimes law by expanding the situations
in which DOJ can prosecute defendants for
violent crimes based on race, color, religion,
or national origin. Further, it would expand
existing law to cover cases of hate crimes
based on sexual orientation, gender, or disability. The budget includes $20 million for
training for Federal, State, and local law enforcement to prevent and respond to hate
crimes and police integrity.
Law Enforcement on Indian Lands:
Homicide and violent crime rates on Indian
lands are rising, even as crime rates in the
rest of the country fall. According to DOJ,
American Indians are the victims of violent
crimes at more than twice the rate of all U.S.
residents. The Administration proposes $439
million for the third year of this joint Justice
and Interior Departments initiative, an increase of $103 million over the 2000 level. The
money is used to increase the number of fully
trained and equipped police officers in Indian
country, improve the quality of the criminal
justice system, including courts and detention
facilities, enhance substance abuse programs,
and combat tribal youth crime.
State Criminal Alien Assistance: The
budget proposes $600 million to reimburse
State and local governments for the cost of
incarcerating criminal illegal aliens. This is a
$15 million increase over the 2000 level.
Financial Crime: The budget provides a
$15 million increase to the Treasury Department to develop and implement initiatives as
part of the national strategy for combating
money laundering and financial crime. This

THE BUDGET FOR FISCAL YEAR 2001

strategy relies on the efforts of a number of
Treasury Department bureaus, including the
U.S. Customs Service and the Internal Revenue Service, which identify, disrupt, and dismantle criminal organizations that launder the
proceeds generated by smuggling, trade fraud,
export violations, and a range of other illegal
activities. In addition, the Financial Crimes
Enforcement Network provides money laundering case support through its regulatory
partnerships and technology enhancements
that allow for strategic analysis of trends and
patterns in money laundering and related financial crimes.
Terrorism: Acts of domestic terrorism have
resulted in deaths and injuries to American
citizens, while terrorism overseas has taken
an even heavier toll. While it is true that our
Nation has had fewer incidents of domestic
terrorism than many others, we must remain
vigilant against terrorist threats on domestic
soil and overseas.
Over the past years, the Administration
has consistently sought additional resources
to enhance the safety of the public and
the Government from these violent and devastating criminal acts. The budget provides
over $11 billion to combat terrorism, weapons
of mass destruction, and cyber crime, $1.3
billion more than provided in 2000. Of the
total, $632 million would support law enforcement activities in the Departments of Justice
and the Treasury and other domestic agencies.
Chapter 9, ‘‘Supporting the World’s Strongest
Military Force,’’ describes the Federal Government’s efforts to combat terrorism and protect
our national security.
Federal Crime Fighting Technology: The
budget includes major increases for two technology programs that will significantly enhance the capabilities of Federal law enforcement. Court-authorized wiretaps are a major
investigative tool of Federal law enforcement.
However, as the telecommunications industry
converts from an analog to digital environment, the ability of law enforcement to use
this tool is diminished unless the digital equipment contains certain features. The Communications Assistance for Law Enforcement Act
of 1994 authorizes the Federal Government to
reimburse telecommunications manufacturers
and carriers for the costs of ‘‘retrofitting’’

6.

113

ENFORCING THE LAW

equipment installed before January 1, 1995,
in order that court-authorized wiretaps can be
conducted. Funding for this purpose would be
increased from $15 million in 2000 to $240
million in 2001. Manufacturers and carriers
are responsible for including the necessary features in telecommunications equipment installed after January 1, 1995.
In addition, the budget proposes increases
to support upgrades in Federal wireless communications systems, including improved efficiency in the use of telecommunications spectrum assigned to law enforcement and promoting compatibility with communications
equipment of public safety agencies at all
levels of government. DOJ’s budget for wireless systems would increase from $103 million
to $205 million, which would support radio
systems for the FBI, the Drug Enforcement
Administration (DEA), the Immigration and
Naturalization Service (INS), and the U.S.
Marshals Service. DOJ’s planning and infrastructure efforts also would support other
agencies’ wireless efforts. Treasury’s budget
includes $55 million to establish an Integrated
Treasury Network for wireless communications, which would primarily support Treasury’s law enforcement bureaus, including the
U.S. Customs Service, the U.S. Secret Service,
and the ATF. Increased costs in Justice,
Treasury, and other agencies would be offset
by $200 million in proposed fees on commercial
television broadcasters’ use of the analog
spectrum.
Corrections: The number of inmates in the
Federal Prison System has more than doubled
since 1990 as a result of tougher sentencing
guidelines, the abolition of parole, minimum
mandatory sentences, and significant increases
in Federal law enforcement spending. This
growth rate is projected to continue into the
21st Century. The budget provides $4.4 billion
for the Federal Bureau of Prisons, $736 million
over the 2000 level, to reduce the current level
of overcrowding and to accommodate this future growth. The budget also supports an effort to increase inmate enrollment in literacy
programs.

Meeting the Challenges of Immigration
The United States is a Nation of immigrants. While we have always welcomed legal
immigrants, the United States is also a
Nation of laws and must act to combat
illegal immigration. This Administration has
done more to control illegal immigration than
any before. Working through the INS, the
Administration has reversed decades of neglect
along the Southwest border and has added
technology along the Northern border. Since
1993, this strategy has added over 5,400
new Border Patrol agents—over 130 percent
higher than the 1993 level. And while the
INS continues to recruit and train qualified
new Border Patrol agents aggressively, it
is also extending its enforcement efforts
through the use of state-of-the-art technology,
border barriers, and infrastructure to enhance
the rule of law along the border. However,
we must do more. The budget continues
to fund this bipartisan effort to gain control
and effectively manage our Nation’s borders.
(See Table 6–1 for INS funding by program.)
While the Federal Government takes steps
to curb illegal immigration, it must also
be responsive to those who seek to immigrate
to this country by legal means, and to
those who have emigrated and now seek
to become U.S. citizens.
Over the past year, the Administration
has made steady progress in reforming the
naturalization process which, since 1995, has
seen a dramatic upsurge in demand for
naturalization and other immigration benefits.
After two years of a growing application
backlog and longer wait times, in 1999,
the first year of a two-year naturalization
program reform effort, INS reduced the pending application backlog by nearly 500,000
applications. In total, INS completed over
1.2 million applications for new citizens and
reduced the average application processing
times from 27 months in 1998 to 12 months
in 1999. INS intends to reduce average
processing times further, to just six months,
by the end of 2000. This will be accomplished
while completing 1.3 million applications for
citizenship. The Administration is committed

114

THE BUDGET FOR FISCAL YEAR 2001

Table 6–1.

Immigration and Naturalization Service
Funding by Program
(Budget authority, in millions of dollars)
1993
Actual

2000
Estimate

2001
Proposed

Dollar
Change:
1993 to
2001

Dollar
Change:
2000 to
2001

Appropriated Funds:
Border Patrol ...............................................
Investigations and intelligence ..................
Land border inspections .............................
Immigration support ...................................
Detention and deportation .........................
Program support and construction ............

354
142
83
..............
161
227

1,055
308
182
124
728
594

1,208
328
218
35
828
649

+854
+186
+135
+35
+667
+422

+153
+20
+36
–89
+100
+55

Subtotal, Appropriated Funds ................

967

2,991

3,266

+2,299

+275

Fee Collections and Reimbursements:
Citizenship and benefits .............................
Detention and deportation .........................
Air/sea inspections and support .................
Immigration support/enforcement .............

308
..............
255
..............

754
69
487
..............

807
110
529
98

+499
+110
+274
+98

+53
+41
+42
+98

Subtotal, Fee Collections and Reimbursements ............................................

563

1,310

1,544

+981

+234

Total, Immigration and Naturalization
Service .........................................................

1,530

4,301

4,810

+3,280

+509

to a streamlined naturalization program that
provides high quality and timely customer
service for the most important and valuable
benefit the Federal Government can bestow—
citizenship. In addition, the INS has established completion goals and developed a multiyear plan to address application backlogs
in other immigration services programs. The
budget provides additional funds to reduce
these backlogs and expand process reinvention
to ensure that all immigration benefits and
services are provided in an efficient and
timely manner.
Border Control and Enforcement: The
budget proposes support for a combination of
Border Patrol agents and technology to control
specific border crossing areas. Previous investments have lead to successful efforts to control
and manage the border near urban areas with
a high level of illegal entry, such as San Diego,
California, and El Paso, Texas. Continuing this
border control strategy, the budget funds 430
new Border Patrol agents and $20 million in

‘‘force-multiplying’’ technology. The current
focus is to gain control of the border around
Douglas, Arizona. Once an acceptable level of
control has been achieved here, the agents and
technology proposed in the budget will be used
to improve Border Patrol control over border
areas in and around Laredo, McAllen, and Del
Rio, Texas. With the new agents to be added
by the end of 2001, it is estimated that over
9,800 Border Patrol agents will be deployed
along the Nation’s Northern and Southern borders—nearly 150 percent more than the 3,965
agents in 1993. An additional $20 million will
fund high resolution color and infrared cameras and state-of-the-art command centers as
force multipliers to supplement the new agents
and provide continuous monitoring of the border from remote sites. In test locations in Arizona and New Mexico, this technology has had
a dramatic effect on border control and management and is increasing the safety of officers
who must respond to incursions. The proposed
combination of surveillance technology and

6.

ENFORCING THE LAW

Border Patrol agents will permit INS to enforce the rule of law and enhance border management over larger portions of the border.
The budget also supports the INS border safety initiative to dissuade migrants from illegal
crossings, particularly in areas that could lead
to their injury or death.
The budget provides funds for compensation
and overtime reform for Border Patrol agents
and inspectors. It also provides funds to
expand, renovate, and construct Border Patrol
stations, border barriers and fencing, install
permanent lighting, and construct support
roads along the borders. These deterrents
help control the border by increasing the
abilities of Border Patrol agents to apprehend
those trying to enter illegally. Since 1993,
INS has added over 233 night scopes, 7,299
ground sensors, 82 miles of fencing, and
22 miles of border lighting. It has also
added or improved over 1,500 miles of roads.
The budget provides funds for another 18
miles of border lighting and fencing, and
for maintaining border deterrents now in
place.
Detention and Removal of Illegal Aliens:
The Administration is committed to removing
those who have entered the country illegally
and to detain criminal aliens. Since 1993, INS’
detention budget has increased by over 407
percent and over 13,600 detention beds have
been added. The budget expands on this commitment by adding another 1,000 detention
beds and 38 juvenile beds—bringing total INS
detention capacity to nearly 20,000 beds. It
also funds INS detention and deportation staff
and increases resources to remove criminal
and illegal aliens swiftly. With the resources
provided over the past few years, INS has targeted its efforts primarily on removing deportable aliens held in Federal, State, and local
facilities to ensure these criminal aliens are
not allowed back on the street. In 1999, INS
removed 178,168 aliens, including 62,838
criminal aliens. At the same time, the budget
provides funding to implement detention
standards to ensure those detained, particularly those who have pending asylum cases,
are treated fairly.
Border and Port-of-Entry Coordination:
The Departments of Justice and Treasury have
initiated a five-year Border Coordination Ini-

115
tiative with a goal of achieving a comprehensive, integrated border management strategy
that provides for increased cooperative efforts
to interdict illegal aliens, drugs, and other contraband. It will result in a seamless process
of travel and trade facilitation and border enforcement at and between the land ports of
entry, especially along the Southwest Border.
During the past year, the Customs Service and
INS have made strides in fostering a culture
of cooperation that enables them to act in concert for improved results. These cooperative efforts include expansion of multi-agency intelligence units to coordinate intelligence gathering and dissemination among agencies and
the establishment of a timetable to implement
compatible and secure communications systems.
Citizenship and Benefits: The Administration is committed to building and maintaining
a naturalization and immigration service system that ensures integrity and provides service
and benefits in a timely manner. The surge
of citizenship applications, growing from approximately 340,000 in 1993 to a peak of nearly 1.6 million in 1997, resulted in an unacceptable backlog and has required the INS to redesign its decentralized process which had been
built for a far smaller application volume. The
record number of applications, antiquated INS
processes, and complex automation and redesign efforts contributed to an unacceptable citizenship application backlog that exceeded 1.8
million cases in 1999. As a result of a concerted and ongoing effort, this backlog has
since been significantly reduced.
Over the past two years, the Administration,
working with Congress, has provided $300
million to supplement INS examinations fee
revenue in a successful effort to reduce
naturalization backlogs and to initiate reforms
in the processing of immigration service programs. Ongoing initiatives include:
• centralization of immigrant records into a
National Records Center with automated
query and retrieval capability to ensure
accurate and complete records and to
speed service delivery;
• establishment of a National Customer
Service Center for telephone service, with
access throughout the United States and
Puerto Rico in 2000;

116
• centralization of application and medical
waiver reviews from INS field offices to
Service Centers to maximize application
and file quality and integrity, thereby ensuring that INS adjudicators receive cases
that can be processed properly; and,
• quality assurance audits and reviews of
the benefits processing system and benefits applications.
The budget provides $35 million to address
backlogs in other immigration benefit programs and establishes an Immigration Services Capital Investment Account to provide
funding for ongoing backlog reduction efforts
in all immigration benefit programs and for
major capital acquisitions. This account will
be further capitalized with an estimated $93
million from two new fees, including a premium processing fee of $1,000 for expedited
adjudication of business-related services. Payment of this voluntary fee will ensure INS
action on applications within 15 days through
direct business-INS liaison, and permits INS
to target additional resources at fraud prevention in business applications. The second
proposal would re-authorize the 245(i) adjustment of status penalty provision. This provision, which expired in 1998, permits certain
migrants, upon payment of a $1,000 penalty,
to adjust their immigration status while remaining in the United States.
An INS Structure for the Future: Over
the past few years, the Administration has
worked in a close and bipartisan manner with
Congress to improve INS’ operations. In the
same vein, the Administration remains committed to addressing systemic problems, particularly those related to INS’ dual missions
of service and enforcement. These systemic
problems include: competing priorities; insufficient accountability between field offices and
headquarters; overlapping organizational relationships, and, lack of consistent operations
and policies.
The Administration’s principles for a successful restructuring are that immigration
enforcement and service missions must have
separate and clear lines of authority at
all levels, from the field to headquarters,
and that the immigration agency must be
led by a single executive who can integrate
immigration policy, standards, and manage-

THE BUDGET FOR FISCAL YEAR 2001

ment operations. This single executive, appointed by the President and confirmed by
the Senate, is essential to maintain balance
between enforcement and services, while ensuring a coherent and coordinated national
immigration policy. To be effective, this official
must have the statutory authority to direct
operations and supervise key integrating and
oversight functions, such as legal counsel,
financial management, policy, and communications.
The Administration will work with Congress
to enact legislation that will fundamentally
improve the way immigration operations are
conducted, building on the progress already
made to reform the INS. The Administration
considers it critical to meet this challenge
and enact responsible restructuring legislation
this year.
Reducing Drug Use, Trafficking, DrugRelated Crime, and Its Consequences
Drug use and its damaging consequences
cost our society more than $110 billion a
year and poison the schools and neighborhoods
where our youth strive to reach their full
potential. Illicit drug trafficking thrives on
a culture of crime, violence, and corruption
throughout the world. Drug use is a major
contributing factor in the spread of AIDS
and other deadly diseases. All Americans,
regardless of economic, geographic, or other
position in society, feel the effects of drug
use and drug-related crime.
The results of the most recent National
Household Survey on Drug Abuse show that
the rate of use in the past month of any
illicit drug among 12 to 17 year olds declined
from 11.4 percent in 1997 to 9.9 percent
in 1998, a 13-percent decrease. This change
is complemented by the 1999 Monitoring
the Future Study finding that over the past
three years, youth viewed marijuana use
with greater risk. Youth use of other drugs,
including alcohol, cigarettes, cocaine, and heroin, either declined or remained stable over
this period. These results suggest that America’s youth are receptive to the Government’s
‘‘no use’’ message.
The budget proposes $19.2 billion for drug
control programs, an $1.7 billion increase
over the 2000 enacted level. The budget

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117

ENFORCING THE LAW

supports increases for key elements in the
effort to reduce drug use and its consequences,
such as drug treatment; prevention, especially
for children and adolescents; domestic law
enforcement; and, other supply reduction programs, including significant support for antidrug efforts in Colombia. (For more information, see Chart 6–3, and Chapter 23, ‘‘Federal
Drug Control Funding’’ in Analytical Perspectives.)
Colombia: The budget proposes $1.6 billion,
of which $1.3 billion is new 2000 and 2001
funding, for counternarcotics efforts in the Andean Region, primarily in Colombia. An estimated 80 percent of the cocaine that enters
the United States originates in or passes
through Colombia. Colombia also produces up
to six metric tons of heroin annually, and is
a major supplier of heroin to the United
States. Cultivation of coca, the raw material
for cocaine, has nearly tripled in Colombia
since 1992. In addition, Colombian traffickers
and coca farmers have recently adopted new
cultivation and processing techniques, increas-

ing the amount of drugs processed from each
acre of crop. Colombia now cultivates more
than half of the coca leaf grown in the world.
If unchecked, the rapid expansion of coca crops
and cocaine production in Colombia threatens
to increase significantly the global supply of
cocaine over the next several years.
The Government of Colombia’s efforts to
attack the drug trade are hampered by
the fact that guerrillas and paramilitary
groups dominate key drug-producing regions.
In addition to these illegal armed groups,
organized drug mafias continue to control
the international aspects of Colombia’s drug
trade. The money flowing to these outlaw
groups from the drug trade generates violence
and corruption and threatens Colombia’s
democratic institutions. The drug threat, violence, and insecurity are compounded by
the worst economic recession in Colombia
in almost 70 years.
The democratically elected government of
Colombian President Andres Pastrana has
devised a comprehensive, integrated strategy,

Chart 6-3. Drug Control Funding
Budget authority in billions of dollars

20

17.7

18.5

19.2

15

12.2
10

5

0
1993 Actual

1999 Actual

Requested Plan Colombia Supplemental

2000 Estimate
Supply Reduction

2001 Proposal*
Demand Reduction

*2001 Proposal for supply reduction includes $318 million for Plan Colombia, part of the $1.3 billion 2000-2001
anti-drug initiative.

118
Plan Colombia, to address Colombia’s drug
and interrelated social and economic troubles.
The budget proposes $1.6 billion in assistance
for Plan Colombia, including an increase
of $1.3 billion over two years—a 2000 supplemental appropriation of $954 million and
$318 million in 2001.
Since there is no single solution to Colombia’s difficulty, the program is an integrated
combination
of
funds
for
Colombian
counterdrug efforts and for other programs
to help President Pastrana strengthen democracy and promote prosperity. The proposal
would enhance alternative development,
strengthen the justice system and other democratic institutions, and provide counterdrug
equipment, training, and technical assistance
to Colombian police and military forces. The
Administration is also encouraging U.S. allies
and international institutions to assist Colombia in implementing President Pastrana’s Plan
Colombia. The budget proposal would also
provide
additional
funding
to
support
counterdrug regional interdiction and alternative development programs to preserve and
advance gains against drug production in
Peru and Bolivia and prevent the traffickers
from simply moving their operations to avoid
law enforcement. It is in the national interest
of the United States to stem the flow of
illegal drugs into the United States and
to promote stability and strengthen democracy
in Colombia and the Andean Region.
Stop Drugs—Stop Crime: In order to break
the cycle of drug use and its consequences,
drug-abusing offenders in local, State, and
Federal correctional systems should be subject
to vigorous drug testing and treatment. The
budget includes $215 million, including $112
million in new funding, to help break this
cycle. The initiative includes: $100 million of
new funding to help States and localities implement or expand tough systems of drug testing, treatment, and graduated sanctions for
prisoners, parolees, probationers, and ex-offenders re-entering society; $50 million, a 25percent increase over 2000, for drug courts
that work to break non-violent offenders of
their drug addiction; and, $65 million, three
percent above 2000, to provide intensive drug
treatment to hardcore drug users before and
after they are released from prison.

THE BUDGET FOR FISCAL YEAR 2001

Drug Treatment: The budget proposes $3.8
billion to treat drug abuse, $256 million more
than in 2000, including $1.2 billion, two percent above 2000, for the Substance Abuse
Block Grant and $163 million, a 43-percent
increase over 2000, for the Targeted Treatment
Capacity Expansion Grants. The Administration realizes that an effective treatment system must confront drug abuse where the challenge is the greatest—in the streets of urban,
suburban, and rural drug markets, and in the
criminal justice system. It is a top priority to
close the gap between the number of persons
wanting treatment and the number receiving
it. These chronic drug users consume a disproportionate amount of the illicit drugs used
and inflict a disproportionate share of drugrelated costs on society.
National Youth Anti-Drug Media Campaign: The Office of National Drug Control
Policy, in conjunction with other Federal,
State, local, and private experts, is implementing a $2 billion, multi-year national
media campaign, including paid advertisements. The campaign targets youth, their parents, and other influential adults on the consequences of illicit drug use. The anti-drug
media campaign is fully integrated Nationwide, including utilization of the Internet,
radio, newspapers, and other media outlets.
This campaign will continue in 2001 with $195
million in Federal funds, matched by private
sector contributions.
Community-Based Prevention: The budget
proposes $2.5 billion for drug prevention programs, an increase of $75 million over 2000.
The budget also includes $35 million, a 17percent increase over 2000, for activities of the
Drug-Free Communities Support program that
promotes citizen participation in efforts to reduce substance abuse among youth and help
community anti-drug coalitions carry out their
important missions.
Safe and Drug-Free Schools and Communities Program: Students can reach their
full potential only in safe, disciplined, and
drug-free learning environments. The Safe and
Drug-Free Schools and Communities program
helps 97 percent of all school districts implement anti-drug and anti-violence programs.
The budget proposes $650 million for this program, including $40 million in new funding

6.

ENFORCING THE LAW

to expand the interagency Safe Schools/
Healthy Students initiative, which supports
comprehensive, community-wide school safety
and violence prevention plans. The budget also
includes $50 million for the Coordinator Initiative, which will enable over 1,300 of the Nation’s middle schools to have a knowledgeable
director for drug and violence prevention programs to ensure that local programs are effective and that school-based prevention programs are linked to community-based efforts.
Domestic Drug Law Enforcement: The
budget proposes $9.8 billion for drug-related
domestic law enforcement, $774 million more
than in 2000, to bolster community-based law
enforcement efforts, shield the Southwest border from illicit drugs, and enhance coordination among Federal, State, and local law enforcement agencies. The budget proposes an
increase of $65 million for DEA, most of which
is to increase staff productivity through an improved information, telecommunications, and
technology infrastructure. The Federal Govern-

119
ment will continue its focus on providing leadership and training; facilitating multi-agency
cooperative efforts through the High Intensity
Drug Trafficking Areas program, the Southwest border initiative, and other efforts; and,
offering incentives to States and localities to
use the most effective drug control methods.
Southern Tier of the United States: The
Administration remains committed to shielding the Nation’s Southern tier from the drug
threat. The budget supports the addition of
inspectors and new technology at additional
ports of entry along the Southwest border. The
Customs Service will continue to deploy technology, such as the use of x-rays in the air
passenger and outbound environments, to detect illicit contraband and currency. The budget further solidifies the INS interdiction effort
by providing additional staff and force-multiplying technology. An increase of $46 million
will expand Coast Guard interdiction operations nine percent above the 2000 level.

7.

STRENGTHENING THE AMERICAN
COMMUNITY

We need to provide the same encouragement to invest in Appalachia, Native American reservations, the Mississippi Delta, and the inner cities that we provide today to invest in new markets
overseas ... It’s good for business, it’s good for America’s growth, and it’s the right thing to do.
President Clinton
August 1999

President Clinton took office in 1993 determined to rebuild the American economy.
In February of 2000, the economy is poised
to enter the longest period of economic expansion in recorded history. For many Americans,
the past seven years have meant opportunity
and prosperity: more than twenty million
new jobs have been created; real wages
have continued to rise and the number of
people who own homes has reached an alltime high. However, there are still some
communities which have not been lifted up
by this historic wave of economic expansion.
In these areas, unemployment is still too
high, economic development is still too weak,
and the opportunity to build a better life
is limited.
Because the President believes that ‘‘a
Nation that lives as a community must
value all its communities,’’ he is committed
to new and renewed efforts to promote an
agenda of opportunity and responsibility and
generate growth in these areas. The guiding
principle is that the public sector can provide
incentives to attract private sector investment,
creating partnerships that tap the potential
for growth, profit, and economic opportunity
in distressed areas. Proposals to expand both
the New Markets and the Empowerment
Zone/Enterprise Community Initiatives serve
as the centerpieces of this year’s Administration efforts to foster the economic development
of America’s neediest communities.
At the start of his first term, the President
proposed, and worked with Congress to pass,
legislation creating Empowerment Zones (EZs)
and Enterprise Communities (ECs) to encour-

age private sector investments in underserved
areas. These efforts also established the Community Development Financial Institutions
Fund to build a network of institutions
to facilitate lending, including mortgage financing to first-time home buyers and commercial loans to small businesses.
The New Markets Initiative in its expanded
form will leverage even more private sector
investment as part of the President’s overall
community development effort. Using tax credits, loan guarantees, private investment institutions, universities, and technical expertise
for small business, this initiative offers the
potential to connect residents of distressed
neighborhoods to the jobs and opportunities
of the regional marketplace, and replace economic distress with opportunity.
In addition to the New Markets Initiative,
the Administration has been committed to
strengthening America’s communities through
the Empowerment Zone/Enterprise Community Initiative. Along with more private investment, the Empowerment Zone/Enterprise Community Initiative has helped create thousands
of jobs that are now filled by those who
have traditionally lacked access to economic
opportunity. The initiative has also provided
job training and educational opportunities
for nearly 45,000 residents of EZs/ECs. Additionally, the program has helped create more
affordable housing opportunities; allowed communities to address important public safety,
infrastructure and environmental concerns;
provided social services including affordable
health care, child care, and youth development
121

122
programs; and, encouraged investment in New
Markets areas.
Many Native American communities have
not taken part in this wave of economic
prosperity. High unemployment, lack of physical infrastructure, remote locations, and lack
of access to technology all contribute to
the challenges facing Indian Country. The
Administration will work with Tribes, on
a government-to-government basis, to help
this generation and future generations of
Native Americans receive greater opportunities. With these goals in mind, the budget
includes significant funding increases for Native American communities in areas including
health care, education, economic development,
and law enforcement.
Jobs and Economic Development
The budget builds upon ongoing efforts
to encourage economic growth in America’s
distressed communities through three complementary efforts: the New Markets Initiative; the EZ/EC program; and, the Community
Development Financial Institutions Fund
(CDFI).
The New Markets Initiative: The New
Markets Initiative, for which Congress expressed a measure of support last year by
funding $39.5 million (contingent upon authorization) of the Administration’s request, is expanded to a total of $248 million. It includes
three new elements: a $15 million microenterprise initiative for investments and support of
microentrepreneurs, Program for Investment
in Microentrepreneurs; a $5 million university
partnerships initiative; and, $30 million to
make banking more affordable and accessible
to low-income communities. Qualifying Tribes
or Tribal consortia are eligible for these programs.
• The New Markets Tax Credit: To help spur
$15 billion in new equity capital for a
range of private investment vehicles serving distressed communities, a 25-percent
tax credit is proposed, more than doubling
last year’s proposal, at a cost of $5 billion
over 10 years. Eligible entities will include
community development banks, community-oriented equity funds, and other new
investment programs created by this initiative. A wide range of businesses can be

THE BUDGET FOR FISCAL YEAR 2001

financed by these investment funds, including inner-city shopping centers and retail stores, small technology firms, manufacturing facilities and incubators, and
data management facilities.
• America’s Private Investment Companies
(APICs): APICs will encourage private investment in this country’s untapped markets by providing loan guarantees to the
debt issued by these funds, administered
by the Department of Housing and Urban
Development (HUD) in consultation with
the Small Business Administration (SBA).
Private investment companies that target
portfolios of larger businesses relocating to
or expanding in economically distressed
inner-city and rural areas will be eligible
for loan guarantees. To be licensed, APICs
must raise a substantial amount of private
capital managed by staff with a balance
of experience in private investing and in
community development. Last year, APICs
received $20 million subject to enactment
of authorizing legislation. The budget proposes $37 million.
• New Markets Venture Capital (NMVCs):
New Markets Venture Capital Firms invest in smaller growth companies that can
also benefit from expert management assistance. NMVCs match equity of private
investors with Government-guaranteed
debt and technical assistance funding to
cultivate the growth of smaller firms. Last
year, NMVCs received $15 million in appropriations. The budget proposes $52 million.
• Program for Investment in Microentrepreneurs (PRIME): This initiative will provide $15 million to provide technical assistance grants to microenterprise intermediaries to assist low-income and disadvantaged entrepreneurs. Microenterprises are very small businesses that typically have fewer than 10 employees and
generally lack access to conventional
loans, equity, or other banking services.
• BusinessLINC: The Vice President, along
with a number of CEO’s, launched
BusinessLINC in December 1998 to encourage learning, investment, networking,
and collaboration between large and small
businesses, in order to accelerate the

STRENGTHENING THE AMERICAN COMMUNITY

123

growth of businesses in economically distressed areas. The budget proposes $6.6
million in additional funding for local
BusinessLINC coalitions that match large
and small firms, and provide supportive
services. Of this amount, $1.25 million will
be
used
to
develop
appropriate
BusinessLINC connections in Indian
Country.

7.

Investment in EZ/ECs is available in many
forms. The Federal Government provides tax
benefits for businesses and flexible grants
to communities for job training, day care,
and other purposes. EZ/ECs can apply for
waivers from Federal regulations, enabling
them to better address local needs. Special
set-asides from Department of Agriculture
rural development programs are also available
to rural EZ/ECs.

• University Partnerships: Another new element of the New Markets Initiative includes $5 million, from HUD, for a pilot
project to provide grants to 10 to 12 business and law schools to institutionalize
their role in local economic development,
through a range of activities including convening discussions on community needs,
identifying local assets, formulating strategies, and organizing new efforts. In addition, these grants will be used by schools
to foster business development and serve
businesses and community development
corporations in low- to moderate-income
areas.
• Financial Services: The New Markets Initiative also includes $30 million to provide
increased access to financial and banking
services for the approximately 10 million
unbanked households who do not have access to the mainstream banking system.
The initiative will encourage the creation
of low-cost bank accounts and the placement of Automated Teller Machines
(ATMs) in post offices and other locations
in low-income neighborhoods where access
to ATMs is limited. It will also promote
financial education for low-income families.
Empowerment Zones (EZs)/Enterprise
Communities (ECs): While the New Markets
and CDFI programs address capital access and
credit, the EZ/EC Initiative is the foundation
of the Administration’s empowerment agenda
for communities with high unemployment and
poverty rates. This initiative challenges qualified urban and rural areas to develop comprehensive strategic plans for revitalization,
with input from residents and community
partners. The program selects communities
with the most innovative plans and significant
local commitments.

Round I EZ/ECs: Designated in 1994,
these EZ/ECs are showing promising results.
The Baltimore, MD, EZ, for instance, has
created approximately 2,860 new jobs as
a result of Title XX funding and other
leveraged investments, and 3,250 Zone residents have been placed directly into jobs
through various work force placement partners. Through June 1999, Empower Baltimore
Management Corporation (EBMC) has spent
more than $18.4 million across four components of Baltimore’s strategy: business development for job creation; work force development; quality of life, and, community-capacity
building. The Kentucky Highlands Rural EZ
has used its $11 million venture capital
fund to assist 30 new businesses or business
expansions, leveraging almost $66 million
in capital that created 2,319 jobs and expects
to create over 1,000 more in the next few
years. Since this EZ was designated in December 1994, unemployment in the area has
dropped by more than half.
Round II and Round III EZ/ECs: In January 1999, the Administration designated a
second round of 15 urban EZs, five rural
EZs, and 20 rural ECs, selected on a competitive basis, from applications of more than
250 communities. The budget proposes $1.4
billion in mandatory grant funding for the
remaining nine years for urban EZs and
$120 million for the remaining eight years
for rural EZs, as the Administration proposed
in 1999 and 2000. These grants would allow
communities to implement comprehensive
long-term strategies to address their local
needs.
The budget also proposes a series of tax
measures to extend and improve economic
growth in the 31 existing Round I and
Round II EZs and also proposes to create
a Third Round of 10 new EZs (eight urban

124
and two rural). The total cost of these
tax expenditure proposals is approximately
$4.4 billion over 10 years. To encourage
employment and growth, the budget proposes
to create and extend a 20-percent wage
credit for all existing and proposed EZs
through 2009 (under current law, only Round
I EZs have the credit and it is scheduled
to expire in 2004.) To enhance the incentives
for small businesses in EZs, the budget
proposes to allow them to deduct an additional
$35,000 in investments above the normal
small business investment deductions. The
proposal will also increase access to capital
through tax exempt financing by allowing
local governments to issue tax-exempt bonds
on behalf of EZ businesses. The President’s
proposal would permanently extend the
Brownfields Tax Incentive in EZs.
Community Development Financial Institutions Fund (CDFI Fund): Complementing the New Markets Initiative and EZ/
EC initiatives, the Fund uses the provision of
Federal resources as the foundation for
leveraging significant private sector resources.
CDFIs include a broad range of institutions—
community development banks, credit unions,
venture capital funds, business loan funds, and
microenterprise loan funds—that provide a
wide range of products and services, such as
mortgage financing to first-time home buyers,
commercial loans for small businesses, and
other basic financial services. By creating and
expanding a diverse set of CDFIs, the Fund
helps develop new private markets, create
healthy local economies, promote entrepreneurship, restore neighborhoods, generate tax
revenues, and empower residents in distressed
urban and rural communities.
Every CDFI that receives financial assistance from the Fund must provide at least
a one-to-one match with funds from nonFederal sources. To date, the CDFI Fund
has awarded over $215 million in financial
and technical assistance to CDFIs. In addition,
the Fund has awarded over $90 million
to traditional banks and thrifts for increasing
their activities in economically distressed communities and investing in CDFIs. The budget
proposes $125 million for the CDFI Fund.

THE BUDGET FOR FISCAL YEAR 2001

Other programs that promote economic development and provide services to underserved
families, individuals and markets include:
HUD’s Community Empowerment Fund
(CEF): The CEF/EDI, working in tandem
with the Section 108 loan guarantee program,
will work with a new pilot program beginning
in 2000 to create loan pools to improve
the securitization of Section 108 loans.
HUD’s Continuum of Care: This program
promotes comprehensive systems to address
the needs of homeless individuals and families.
The Administration proposes $1.2 billion in
HUD homeless assistance, an increase of
18 percent over 2000. This funding level
includes $105 million for rental assistance
vouchers to help the homeless move to permanent housing with supportive services. The
Administration also proposes to expand access
to mainstream health, social services, and
employment programs for which the homeless
may be eligible through a new $10 million
program administered by the Department
of Health and Human Services, States, and
large counties. The initiative includes expanding access to Medicaid, State Children’s Health
Insurance Program, Temporary Assistance for
Needy Families, Food Stamps, and services
funded through the Mental Health and Substance Abuse Block Grant, Workforce Investment Act, and the Welfare-to-Work grant
program.
Department of Agriculture’s (USDA) Rural
Development Programs: Because their needs
can vary widely, no single approach will
help both urban and rural communities. The
Administration once again proposes to give
States, localities, and Tribes more flexibility
in their use of USDA’s Rural Development
grants and loans for businesses, water and
wastewater facilities, and community facilities
such as day care centers and health clinics.
The 1996 Farm Bill authorized this approach
through a new Rural Community Advancement Program (RCAP), combining 12 separate
USDA programs into a Performance Partnership that can tailor assistance to the unique
economic development needs of each rural
community. The budget proposes $3.4 billion
in loans and grants for RCAP, 29 percent
more than in 2000, and the full flexibility

STRENGTHENING THE AMERICAN COMMUNITY

125

that the 1996 Farm Bill envisioned. It also
reproposes Partnership Technical Assistance
(PTA) grants to assist rural communities
in developing strategic plans for economic
development, and grants for early-warning
weather systems in areas prone to tornadoes.
As part of the Administration’s multi-agency
initiative for the Mississippi Delta Region
(MDR), $2 million of the $7 million in
PTA grants are targeted to MDR counties
(the 219 counties of the region as defined
by P.L. 100–460). In addition, there is a
set-aside of $8 million in Intermediary Relending Program Loans for the MDR.

land and protect their farms from urban
and suburban sprawl while increasing farm
income. To help diversify farm families’ income
sources, the budget also includes funding
to enable farmer cooperatives to build commodity processing facilities that will channel
value-added profits back to producers, and
supports greater crop use for bioenergy production.

7.

Farm Safety Net proposal: Many rural
communities depend significantly on the economic health of the farm sector. In addition
to helping these communities diversify their
economic base, through the New Markets
and other economic and community development initiatives in the budget, the Administration is proposing an $11 billion package
to enhance the farm safety net through
2002, when the next farm bill will be enacted
(see Table 7–1).
It has become painfully clear that the
1996 Farm Bill fails to support farm family
incomes when prices fall or natural disasters
strike. Even with $15 billion in emergency
funding appropriated for distressed farmers
and ranchers in the last two years, assistance
remains inadequate because the 1996 Farm
Bill is fundamentally flawed. While we cannot
rewrite all farm policy this year, we can
provide relief to those in need through the
life of the current farm bill.
The budget proposes to mend the farm
safety net by providing counter-cyclical income
assistance when crop prices are low, to make
up a portion of farmers’ lost revenue relative
to a five-year average, freezing the USDA
marketing loan rates for the 2000 crops
at their 1999 levels, and increasing Federal
crop insurance subsidies so farmers are better
protected from natural disaster losses.
The budget also proposes major increases
in USDA conservation programs, such as
the new Conservation Security Program and
the existing Conservation and Wetlands Reserve and Farmland Protection Programs,
which would enable farm families to conserve
and enhance environmentally sensitive farm-

Appalachian Regional Commission (ARC):
The Administration continues support for ARC
to help 406 economically distressed counties
in the 13 State Appalachian region. The
ARC’s Federal-State partnership is a proven
economic development model of balanced fiscal
decision-making that has helped improve the
economic viability of this region over the
past 35 years. Furthermore, the Administration is doubling the ARC’s Entrepreneurship
Initiative, which seeks to fund innovative
economic development projects in the region,
from $5 million to $10 million in 2001,
a significant increase to ARC’s total funding
of $71 million.
Rural Alaskan Economic Development: The
Denali Commission, which focuses on the
economic development challenges of rural Alaska, will provide resources to improve the
basic infrastructure of this region. Thirty
million of new funding will address water
and sewer and leaking fuel storage tanks
in Alaska. Funds will also be used to create
job training programs to provide the sustainable economic development opportunities for
these remote Alaskan communities.
Delta Regional Authority (DRA): The budget
includes $153 million to create the new
DRA to assist the Lower Mississippi Delta
Region. This proposal includes $30 million
in new resources to create this new authority.
Modeled after other economic development
agencies, the DRA will target its funding
and resources to economically distressed counties throughout the Delta. The remaining
$123 million will be targeted to these counties
from existing programs at the Departments
of Housing and Urban Development, Commerce, Transportation, Agriculture, Labor,
Education, and Health and Human Services.
Livable Communities Initiative: The Livability Communities initiative encourages the
creation of livable communities and regions

126

THE BUDGET FOR FISCAL YEAR 2001

Table 7–1.

$5.7 Billion Increase in 2001 for the Farm Safety Net
(Mandatory funding, in millions of dollars)
Actual
1993

Proposed Authorizations:
Crop insurance reform ........................

2001
2000
Estimate

1999

Authorized
Level

Proposed

Change:
Authorized
Level to
Proposed

BA
OL

868
726

1,674
1,588

742
1,967

1,759
2,015

2,669
2,560

+910
+545

BA
OL

..............
..............

54
54

185
185

86
86

196
196

+110
+110

BA
OL

..............
..............

..............
..............

..............
..............

..............
..............

2,464
2,464

+2,464
+2,464

BA
OL

120
120

242
242

250
250

107
107

257
257

+150
+150

Total, Income assistance ..............

BA
OL

120
120

242
242

250
250

107
107

2,721
2,721

+2,614
+2,614

Conservation programs 2 .....................

BA
OL

..............
..............

335
323

355
417

246
300

1,409
1,124

+1,163
+824

BA
OL

..............
..............

15
..............

15
5

..............
..............

15
..............

+15
................

Cooperative development ....................

BA
OL

..............
..............

..............
..............

..............
..............

..............
..............

80
80

+80
+80

Subtotal, Proposed Authorizations

BA
OL

988
846

2,320
2,207

1,547
2,824

2,198
2,508

7,090
6,681

+4,892
+4,173

BA
OL

..............
..............

..............
..............

20
20

..............
..............

500
500

+500
+500

Bioenergy (ethanol) Incentive Payments:
Conservation
Reserve
Program
(CRP):
Continuous sign-up bonus ..................

BA
OL

..............
..............

..............
..............

100
100

..............
..............

150
150

+150
+150

BA
OL

..............
..............

2
2

110
110

13
13

138
138

+125
+125

Farm storage facility loans .................

BA
OL

..............
..............

..............
..............

..............
..............

..............
..............

10
10

+10
+10

BA
OL

..............
..............

2
2

210
210

13
13

798
798

+785
+785

BA
OL

988
846

2,322
2,209

1,796
3,059

2,211
2,521

7,888
7,479

+5,677
+4,958

Non-insured Crop Disaster Assistance: Remove area-loss trigger .......
Income assistance:
Guarantee 92 percent of five-year
average 1 ........................................
Extend dairy price-support program to 2002 .................................

Empowerment Zones/
Enterprise Communities 3 ...............

Existing Authorization:
Marketing loan rates frozen ...............

Subtotal, Existing Authorization

Total, Farm Safety Net Initiative ....................................
1 The

income assistance proposal would also generate $600 million in 2000 outlays.
initiative would also increase cumulative CRP enrollment to 40 million acres, allowing an additional 1.2 million
acres to sign up annually in 2001 through 2003. The first CRP payments for these additional acres would be made in 2002.
3 1999 and 2000 amounts are classified as discretionary spending.
2 This

by aligning and dedicating new and existing
Federal resources in support of locally determined livability initiatives. The programs included in the Livable Communities initiative
will help accelerate and strengthen the devel-

opment of regional capacities to address the
problems of making America’s metropolitan
and rural areas good places to live, work,
play and raise a family. The budget proposes

STRENGTHENING THE AMERICAN COMMUNITY

127

four investments as part of the Livable
Communities initiative.

Asian economy and other factors beyond their
control. This initiative will double the funding
for the Economic Development Administration’s Economic Adjustment program to better
assist communities that experience sudden
and severe economic distress due to adverse
global market conditions. It will provide the
tools and resources to get direct technical
assistance to communities in need, as have
similar intensive, inter-agency efforts in the
past which have successfully engaged industry,
communities, and workers to address situations prompted by a downturn in economic
conditions, like base closings. Additionally,
the initiative will support efforts to promote
the use of electronic commerce for trade
promotion activities by large and small manufacturers. Increased funding of $15.5 million
for the Department of Commerce will provide
the resources to support enhanced trade compliance activities, by adding trade and compliance officers to monitor unfair trade practices
and by reducing the time it takes to prepare
dumping and countervailing duty cases. This
enhanced monitoring and preparing trade
cases in a quicker time frame will better
provide effective relief to trade-injured industries and workers.

7.

This initiative includes an unprecedented
request for a $6.3 billion mass transit transportation initiative, a $1.6 billion congestion
relief and air quality improvement program,
$468 million for the Expanded Passenger
Rail Fund, $719 million to implement the
enhancements program; and, $52 million for
the Transportation and Community and System Preservation pilot. In addition, the Better
America Bonds program, administered by the
Environmental Protection Agency, will provide
Federal tax credit bonds enabling local, State
and Tribal governments to issue $10.8 billion
over five years for green space preservation,
water quality enhancement, and clean up
of abandoned industrial sites. HUD’s $25
million Regional Connections Initiative will
promote regional ‘‘smart growth’’ strategies
and complement the Administration’s other
regional efforts. Regional Connections’ matching grants will help local partnerships design
and pursue smarter growth strategies across
jurisdictional lines. As a part of the Livable
Communities Initiative, the budget also proposes $125 million for the Department of
Justice’s Crime-Solving Technologies to improve community safety.
Also included in the budget is the continuation of the Lands Legacy initiative, which
will complement the Administration’s Livable
Communities initiative, by emphasizing land
conservation; smart growth planning; and
partnerships with State, local, and Tribal
governments and non-profit groups to preserve
open spaces in urban, suburban, rural, and
coastal areas (see Chapter 4, ‘‘Protecting
the Environment’’). This year’s Lands Legacy
initiative includes $50 million for the Interior
Department’s new State Planning Partnerships of which $30 million is for the Community/Federal Information Partnership (C/FIP).
The funding will provide grants, contracts,
technical assistance, information, and analytical tools to communities to manage resources
and future growth while preserving environmentally sensitive land.
The Administration is proposing a manufacturing initiative to assist industry, workers,
and communities that have been adversely
impacted in part by the slowdown in the

Housing Needs of American Communities
The Administration’s efforts to create the
National Partners in Homeownership—a coalition of 66 key public and private housing
organizations—and to form a National Homeownership Strategy have led more families
to homeownership than at any time in American history. Along with a strong economy
and low interest rates, the Administration’s
policies have helped boost homeownership
to 67 percent—a new all-time high. Under
this Administration, 8.7 million Americans
have become homeowners, including record
numbers of minorities.
The Administration’s efforts to increase support for housing for low-income families resulted in an increase in 2000 of 60,000
new housing vouchers. The budget seeks
to build on this progress and proposes to
double the number of new housing vouchers,
providing $690 million for 120,000 new vouchers Nationwide.

128
Federal Housing Administration (FHA):
The Administration’s successful 1999 proposal
to increase the FHA mortgage limit has allowed FHA to help 50,000 more families purchase their first homes, especially large families and families in high cost areas. Building
on this success, the budget proposes to further
increase the FHA mortgage limit to allow an
additional 55,000 families to purchase homes
in 2001. The budget also authorizes FHA to
offer new adjustable-rate mortgage (ARM)
products, opening homeownership to more
than 40,000 families in 2001. These new products will offer a sound mortgage product to
borrowers who do not qualify for a fixed-rate
mortgage or cannot afford fixed-rate pricing,
but who want to avoid the volatility associated
with traditional ARMs.
Low-Income
Housing
Tax
Credit
(LIHTC): The budget proposes to expand the
LIHTC to spur the private sector to develop
more affordable low-income rental housing in
high poverty areas. The proposal will cost $1.0
billion over the next five years and help develop another 75,000 to 90,000 units per year.
Assisted Housing: The Administration proposes $690 million for 120,000 housing vouchers, including 32,000 for families seeking to
move from welfare to work, and 18,000 to help
the homeless move to permanent housing with
supportive services. Under the HUD Welfareto-Work voucher program, local housing agencies that work in partnership with State and
local welfare agencies will get the flexibility
to design programs serving welfare families for
whom housing assistance is critical to getting
and retaining jobs. In addition, the budget continues to reduce poverty concentrations by providing $625 million in HOPE VI grants to local
housing authorities to demolish approximately
28,000 dilapidated non-viable public housing
units over the next three years, and replace
them with portable subsidies or newly constructed mixed-income housing. These funds
provide sufficient resources to surpass the Administration’s goal of demolishing 100,000 of
the most severely distressed units by 2003.
USDA’s Rural Housing Service (RHS) offers
direct and guaranteed loans and grants to
help very low- to moderate-income rural residents buy and maintain adequate, affordable
housing. One of the RHS goals is to reduce

THE BUDGET FOR FISCAL YEAR 2001

the number of rural residents living in substandard housing. The RHS direct loan program provides subsidized loans to very low
and low-income rural residents. Its single
family guaranteed loan program guarantees
up to 90 percent of a private loan for
buying new or existing housing. Together,
the two programs will provide $5 billion
in loans and loan guarantees in 2001, providing 68,000 decent, safe, affordable homes
for rural Americans. This level of funding
includes a legislative proposal increasing the
single family housing guarantee program loan
fee from one percent to two percent, which
permits the Administration to provide higher
loan levels at less cost.
RHS’s section 515 program, which generally
lends to private developers, finances both
the construction and rehabilitation of rural
rental housing for low- to moderate-income,
elderly, and handicapped rural residents. The
budget provides $120 million in direct loans,
providing over 1,400 new units for very
low-income tenants in rural America. RHS
also provides section 538 multifamily housing
guaranteed loans, and the budget provides
a loan level of $200 million, which funds
3,200 new units for low to moderate income
tenants. Additional multifamily housing funding includes $45 million in the farm labor
housing program level—an increase of 20
percent over 2000—that serves almost 100
percent minority populations.
In addition, the budget contains $20 million
as a new set-aside within the HUD CDBG
program in competitive grants for targeted
technical assistance to increase the role of
non-profit (including community-based and
interfaith) organizations in supplying and
maintaining affordable housing, creating economic opportunity, and participating in a
wide range of HUD programs that assist
low-income people in high poverty areas.
New Opportunity Agenda through
Volunteerism
The budget includes numerous programs
to narrow disparities and to increase economic
opportunity in our Nation so that we may
achieve the goal of strengthening the American
community.

STRENGTHENING THE AMERICAN COMMUNITY

129

National Service: The President has consistently supported and encouraged community
service and volunteerism through such programs as AmeriCorps and other programs supported through the Corporation for National
and Community Service. Volunteerism and
community service have been a strong and important tradition in America ever since its
founding. In 1994, President Clinton signed
the King Holiday and Service Act making this
national holiday a day of service to bring people together, promote racial cooperation, and
help solve problems through citizen action.

solve problems in their communities, such as
youth violence; and $7.5 million to support
America’s Promise: The Alliance for Youth to
help all children grow into healthy, strong, and
productive adults.

7.

The Corporation for National and Community Service: This agency and its programs
encourages Americans of all ages and backgrounds to help solve community problems and
provides opportunities to engage in community-based service. The budget proposes $851
million for the Corporation, a 16-percent increase over 2000.
AmeriCorps: Over 150,000 individuals will
have participated in the Corporation’s
AmeriCorps in its first five years. The program
helps young Americans of all backgrounds to
serve in local communities through programs
sponsored by local and national nonprofits.
Participants serve full- or part-time, generally
for at least a year. In return, they earn a
minimum living allowance, set at about the
poverty level of a single individual and, when
they complete their service, they earn an education award to help pay for postsecondary
education or repay student loans. Building
upon the Administration’s commitment to national service, the budget proposes to increase
annual AmeriCorps participation to 100,000 by
2004. As the first step on that path, the budget
adds 9,000 Americorps participants in 2001 for
a total of 62,000. In addition, the budget provides $5 million for an AmeriCorps Reserves
Program, modeled after the military reserves,
to re-engage AmeriCorps alumni in service to
their communities on weekends and in times
of natural disasters.
Service Opportunities for Youth: The
budget includes $15.5 million in the Corporation for New Youth Initiatives, including $5
million for a Community Coaches program to
increase service-learning opportunities for
youth; $3 million for Youth Empowerment
Grants to support youth-focused projects that

The National Senior Service Corps: This
Corporation program provides opportunities for
citizens age 55 and older to use their time
and talents to meet community needs. The
budget includes $193 million for the Retired
and Senior Volunteer Program, the Foster
Grandparent Program, and the Senior Companion Program, enabling more than half a
million older Americans to help others of all
ages.
From Digital Divide to Digital
Opportunity
Access to computers and the Internet and
the ability to use this technology are becoming
increasingly important for full participation
in America’s economic, political, and cultural
life. In the face of strong evidence of a
digital divide—a gap between those who have
access to information technology and those
who do not—the Administration proposes an
initiative to help close the digital divide
and ensure that every American benefits
from the opportunities created by information
technology.
Community Technology Centers (CTCs):
CTCs are designed to provide access to and
training for information technology in a community-based setting within traditionally underserved areas. The budget provides $100
million in 2001 to support the creation of up
to 1,000 CTCs.
Broadband Communities: Grants and
loans to communities by the Department of
Commerce’s Economic Development Administration (EDA) and the USDA’s Rural Utilities
Service (RUS) will help ensure that underserved rural, urban, and Native American communities can build the infrastructure necessary to promote economic development
through broadband (high-speed Internet) technology and electronic commerce. The Administration proposes $23 million for EDA to provide grants to distressed communities to plan
for and install broadband infrastructure, and
a RUS pilot program consisting of $2 million
in grants and $100 million in loans to finance

130

THE BUDGET FOR FISCAL YEAR 2001

installation of broadband transmission capacity to and through rural communities.
Internet Home Access Program: The Administration proposes $50 million for a new
grant program that would provide low-income
individuals and families with connections,
training, and support necessary for full participation in today’s increasingly online society.
The National Telecommunications and Information Administration within the Department
of Commerce will encourage community-based
partnerships between local organizations, academia, and private industry to devise solutions
that address the needs of low-income populations in gaining access to technology and online resources at home. In order to demonstrate the local and private sector commitments, applicants will be required to provide
matching funds.
Technology Opportunities Program: Increased economic opportunity for all Americans
hinges not only upon access to information
technology tools but also upon content and applications that help empower low-income
households and underserved communities. The
budget proposes increasing funding for the Department of Commerce’s Technology Opportunities Program (formerly the Telecommunications and Information Infrastructure Applications Program) to $45 million to expand its
successful program of replicable, communitybased grants into areas such as on-line support
for microenterprise development and distance
learning.
Civil Rights Enforcement
The Administration is committed to expand
efforts to help ensure that no American
is denied a job, a home, or an education
because of their race, ethnicity, gender, religion, or disability; we will help ensure equal
opportunity for all Americans. The budget

includes $698 million for funding civil rights
enforcement agencies, an $81 million, or 13percent, increase over the 2000 level of
$617 million.
The budget proposes a total of $322 million
for the Equal Employment Opportunity Commission (a 15-percent increase) to support
the agency’s effort to reduce the backlog
of private sector cases to 28,000 by the
end of 2001; $98 million for the Department
of Justice’s Civil Rights Division (a 19-percent
increase) to expand investigations and prosecutions of criminal civil rights cases (including
hate crimes), promote compliance with the
Americans with Disabilities Act and handle
more police misconduct cases; $76 million
for the Department of Education’s Office
of Civil Rights (a seven-percent increase)
which includes funds to support staff training
and technological improvements to ensure
a viable civil rights compliance and enforcement program; $76 million for the Department
of Labor’s Office of Federal Contract Compliance Programs (a four-percent increase) to
continue the President’s Equal Pay Initiative;
and, $50 million for HUD’s fair housing
activities (a 14-percent increase) to reduce
housing discrimination by working with public
and private fair housing groups to assist
in enforcement of the Fair Housing Act.
Additionally, $21 million will be used by
USDA to improve civil rights enforcement
and program outreach to under-represented
customers. (See Table 7–2 for the civil rights
enforcement funding summary.) The budget
also includes a $27 million Equal Pay Initiative to educate employers and the public
about wage issues, to provide training to
women for non-traditional jobs, and to help
employers assess and improve their pay policies.

Public Television in the Digital Age
The budget provides a total of $393 million for 2001 through 2003 for the public broadcasting
system’s transition to digital technology. Digital broadcasting will allow greatly expanded educational, community service, and cultural programming through innovative applications, including high-definition and interactive television. Funding through the Department of Commerce
will be devoted to promoting digital transmission, while funding for the Corporation for Public
Broadcasting will be for digital program production and development capabilities.

7.

131

STRENGTHENING THE AMERICAN COMMUNITY

Table 7–2.

Civil Rights Enforcement Funding

(Budget authority, in millions of dollars)
1999
Actual

Change:
2000 to
2001

2000
Estimate

2001
Proposed

16
66

18
71

21
76

+3
+5

21

22

24

+2

40

44

50

+6

Department of Agriculture: Civil Rights Programs .............................
Department of Education: Office for Civil Rights ...............................
Department of Health and Human Services:
Office for Civil Rights .........................................................................
Department of Housing and Urban Development:
Fair Housing Activities ......................................................................
Department of Justice:
Civil Rights Division ..........................................................................
Department of Labor:
Office of Federal Contract Compliance Programs ............................
Civil Rights Center .............................................................................
Department of Transportation: Office of Civil Rights .........................
Environmental Protection Agency: Office of Civil Rights ...................
Commission on Civil Rights ..................................................................
Equal Employment Opportunity Commission .....................................

69

82

98

+16

65
5
7
4
9
279

73
6
7
4
9
281

76
6
9
5
11
322

+3
..............
+2
+1
+2
+41

Total ................................................................................................

581

617

698

+81

Commitment to Native Americans
The relationship between the U.S. Government and Native Americans is a historical
one founded on a trust responsibility. The
Administration continues to honor its government-to-government relationship with Tribes
by supporting critical programs serving Indian
reservations, and by bringing together Tribal
leaders and resources across the Government
to address priority Tribal concerns, such
as health care, education, economic development, infrastructure development, and other
basic services. Within the total funding to
address the unique relationship with Native
Americans, the Administration includes a Government-wide initiative increase of $1.2 billion
to address these crucial issues comprehensively and systematically. The Domestic Policy
Council Interagency Work Group, chaired by
the Interior Secretary, will coordinate agency
efforts to implement the initiative.
The budget reflects the Administration’s
commitment to Native Americans, proposing
$9.4 billion, 14 percent more than in 2000
and 75 percent over 1993, for Federal programs addressing basic Tribal needs and
encouraging self-determination (see Table 7–3).
The Health and Human Services Department’s
Indian Health Service (IHS) at $2.6 billion
(10 percent over 2000) and the Interior

Department’s Bureau of Indian Affairs (BIA)
at $2.2 billion (18 percent over 2000) make
up more than half of total Federal funding
for Native American programs and services.
In addition, BIA and IHS will continue
to promote Tribal self-determination through
local decision-making. Tribal contracting and
self-governance compact agreements now represent 41 percent of BIA’s operations budget,
and over 42 percent of IHS’ budget.
The Government-wide initiative will substantially expand existing services and create
new opportunities for Native Americans in
four principal areas:
• Health Care: For IHS, the budget proposes
an investment of $2.6 billion, a 10-percent
increase over the 2000 level. This increase
will enable IHS to continue expanding accessible and high-quality health care to its
Native American service users, through
IHS’ existing network comprised of over
543 direct health care delivery facilities.
This increase reflects a five-pronged approach for IHS: a substantial funding increase in 2001, better access to health
grants, Medicare and Medicaid reimbursements, achievement of medical efficiencies
by ensuring that health care procedures
are done only when they are necessary
and are done in a cost-effective manner,

132

THE BUDGET FOR FISCAL YEAR 2001

Table 7–3.

Selected Components of the Native American Initiative
(Budget authority, in millions of dollars)
Actual
1993

Health Care:
Indian Health Service (IHS/HHS) ................................
IHS program level, including receipts ......................
Education:
BIA School Construction, Repair, Maintenance (BIA/
DOI) .............................................................................
School Construction For Public Schools Serving High
Concentrations of Native Americans (Ed Dept) .......
BIA School Operations (BIA/DOI) ................................
Indian Education Assistance for Public and BIA
Schools Serving Native Americans (Ed Dept) ..........
Support of Tribal Community Colleges (Multiagency)
Economic Development:
New Markets and Other Activities—Economic Development Administration (Commerce) .........................
Digital Opportunity and Other Activities (NSF) .........
Small Business Development (SBA) .............................
Community Development Financial Institutions
(Treasury) ...................................................................
Rural Community Advancement Program/RCAP
(USDA) ........................................................................
Commercial Code Implementation and Other Activities—Administration on Native Americans (HHS)
Infrastructure and Other Basic Services:
Indian Reservation Roads and Bridges:
Road/Bridge Construction (DOT) ..............................
Road/Bridge Maintenance (BIA/DOI) ......................
Indian Housing:
Housing and Urban Development .............................
Housing Improvement Program (BIA/DOI) .............

1999

Change: Change:
2000
2001
Estimate Proposed 1993 to 2000 to
2001
2001

1,858
2,022

2,240
2,650

2,391
2,830

2,620
3,060

+762
+1,038

+230
+230

90

60

133

300

+210

+167

4
343

5
476

5
467

55
507

+51
+164

+50
+40

82
24

66
44

77
52

116
67

+34
+43

+39
+15

3
3
3
.............. .............. ..............
..............
*
*

49
10
6

+46
+10
+6

+46
+10
+6

.............. .............. ..............

5

+5

+5

12

24

+24

+12

.............. ..............
35

35

35

44

+9

+9

202
30

284
26

250
26

375
32

+173
+2

+125
+6

401
20

693
16

693
16

725
32

+324
+12

+32
+16

Joint Indian Country Law Enforcement:
Department of Justice ................................................
BIA/DOI .....................................................................

4
9

182
98

195
141

279
157

+275
+148

+84
+16

Subtotal, Law Enforcement ...................................

13

280

336

439

+426

+103

Capacity Building & Other Basic Services:
Environmental Protection Agency ............................
Improved Trust Services (BIA/DOI) .........................
Operation of Indian Programs (BIA/DOI) ................

38
85
1,363

159
74
1,584

170
73
1,640

188
108
1,795

+150
+23
+432

+18
+35
+155

5,361

7,806

8,201

9,380

+4,019

+1,178

Total Government-wide
American Programs

Funding

for

Native

* $500 thousand or less.

and vigilance on fraud and abuse. (Additional detail is provided in Chapter 3,
‘‘Strengthening Health Care.’’)
The budget also supports access to health
services and improves the health status of
Native American by ensuring that IHS’ health
facilities are adequately maintained. Within
the increase, IHS will continue the construction of the Navajo Fort Defiance (AZ) Hospital,
the Parker Health (AZ) Clinic, and the Winne-

bago (NE) Hospital. In addition, the $30
million a year in diabetes-related funding
that IHS receives under the Children’s Health
Insurance Program will help alleviate complications from diabetes.
• Education: The Administration is continuing its commitment to Native American education by systematically funding
school repair and replacement needs on
Indian reservations. The budget proposes

STRENGTHENING THE AMERICAN COMMUNITY

133

$300 million (more than double the 2000
level) for BIA to fund the replacement of
six elementary and secondary schools and
numerous health and safety improvement
and repair projects across Indian Country.
Within BIA’s school construction funds, up
to $30 million may be used by Tribes or
tribal consortia to defease the principal on
bonds authorized under the Administration’s school construction bonding proposal. In addition to school construction,
BIA will provide $507 million (nine percent over 2000) for elementary and secondary school operations, early childhood
development, and early intervention partnerships by establishing therapeutic pilots
at six BIA boarding schools to provide students with services ranging from education to mental health and substance
abuse treatment.

7.

fessor training, research capacity-building, and
tribal outreach.

The Education Department will provide
$1.7 billion (eight percent over 2000) in
direct and indirect support for the education
of Native Americans. This includes $116
million ($39 million over 2000) for the Indian
Education program to fund grants to local
educational agencies and continue the second
year of in-service and pre-service training
for the American Indian Teacher Corps initiative. This amount also provides $5 million
for a new initiative, the American Indian
Administrator Corps, that will support the
recruitment, training, and in-service professional development of American Indian professionals to become effective school administrators in schools with high populations of
Native American students. The Department
will also set aside $50 million in its $1.3
billion national School Renovation initiative
for public schools with high concentrations
of Native American students and provide
an additional $5 million for the schools
under Impact Aid Construction.
Across the Government, agencies contribute
to Native American postsecondary education
through financial support of Tribal colleges.
For example, the Interior, Agriculture, Education, Housing and Urban Development, and
Transportation Departments propose a total
of $67 million (29 percent over 2000) for
activities related to curriculum development,
student recruitment, student services, pro-

• Economic Development: The 2001 Budget
proposes $54 million in Tribal funding
(nearly nine times the 2000 level) for the
Department of Commerce. In keeping with
last year’s efforts to expand New Markets
to underserved areas, $49 million of the
total amount will further the Economic
Development Administration’s infrastructure, planning, and public works projects
on Indian Reservations. These projects will
focus on technology, business development,
and Tribal economic development activities.
The Administration proposes a new initiative for Tribal colleges to encourage Native
Americans to pursue information technology
and other science and technology fields as
areas of study, as well as to increase the
capacity of these institutions to offer relevant
courses. The budget provides $10 million,
to be administered by the National Science
Foundation, for course and program development, and for teacher professional development activities at feeder schools.
The budget also proposes $6 million for
the Small Business Administration (SBA) to
fund the Office of Native American Affairs
and to establish two initiatives for improving
economic
development
on
reservations:
BusinessLinc and Native American Small
Business Development Centers (SBDC). The
SBA will expand the successful BusinessLINC
program to Indian Country by establishing
mentor/protege relationships between large
and small businesses. In addition, the budget
proposes new funding to expand the SBDC
program into Indian Country to provide business and technical assistance to Native American entrepreneurs. A set-aside of $5 million
from the Treasury Department’s Community
Development Financial Institutions Fund will
also be used to promote New Markets on
reservations by establishing a training and
technical assistance program addressing
human capital development needs in Indian
Country.
The budget includes $229 million (16 percent
over 2000) for Agriculture Department programs serving Indian reservations, of which
$26 million ($14 million over 2000) is targeted

134

THE BUDGET FOR FISCAL YEAR 2001

to Tribes through Rural Community Advancement Program (RCAP) and other economic
development activities. This funding will provide low-interest loans and grants to construct
and improve Tribal water and wastewater
systems, and community facilities like health
clinics and child care centers on Indian
reservations, and to diversify and expand
economic opportunities.

rental and homeownership opportunities, as
well as develop the regulatory and legal
framework necessary to facilitate economic
revitalization and homeownership on Tribal
lands. The budget establishes a new information hotline for Government-wide Native
American programs funded out of the Indian
Community Development Block Grant program.

In addition, the Health and Human Services
Department’s Administration on Native Americans will allocate $2 million of its $9 million
increase over 2000 to support additional efforts
to develop Tribal legal codes. This funding
will support Tribal efforts to develop environmental and tax codes, as well as codes
addressing the areas of business, commercial,
zoning, land use, hunting, fishing, and juvenile
and child welfare.

The third year of the Interior and Justice
Departments’ joint law enforcement initiative,
for which the budget proposes $439 million
in 2001 (31 percent over 2000), will continue
to address high crime rates in Indian Country
by providing more resources for officer hiring
and retention, drug control and youth crime
prevention programs, law enforcement equipment, construction of detention facilities, and
crime reporting surveys.

• Infrastructure and Other Services: The Department of Transportation’s (DOT) 2001
proposed level of $375 million (50 percent
over 2000) will improve roads, bridges,
highway safety and transportation services
on Indian reservations. Within this total,
$349 million for the Indian Reservation
Roads Program, (a 50-percent increase
over 2000) will allow Tribes to address the
estimated backlog of $4 billion in needs
on these roads and bridges. In addition,
a $5 million set-aside for Indian tribes
within DOT’s Access program will increase
mobility and access to employment opportunities on reservations. To ensure that
Native Americans have the skills to compete for transportation jobs, $1 million will
be dedicated for construction skills training. In addition, total funding to improve
highway safety on Indian reservation
roads will double with an additional $1
million.

The Environmental Protection Agency (EPA)
will continue to provide technical assistance
to Tribes on such activities as hazardous
and solid waste removal, leaking underground
storage tanks, and water protection. The
budget increases the Tribal share of the
Clean Water State Revolving Fund appropriation from 0.5 to 1.5 percent. Part of EPA’s
proposed $188 million Tribal budget would
also be used for increased Tribal general
assistance grants to build institutional capacity for implementing Tribal environmental
programs on Indian lands.

Of the BIA’s total funds, $32 million (20
percent over 2000) will be used to supplement
DOT’s funds by maintaining BIA and Tribal
roads on reservations across the country,
and $32 million (more than twice the 2000
level) will be used to repair or replace
dilapidated homes across Indian Country,
to prevent family displacement.
The budget includes $725 million (five
percent over 2000) in HUD to enable Tribes
and Tribal housing entities to create affordable

The Administration is committed to improving trust services and management through
its trust reform efforts at the Interior Department. The budget proposes $108 million (48
percent over 2000) for improved trust services
in the BIA, for activities such as probate,
real estate appraisals and other services,
and cadastral surveys.
In addition, the Administration is committed
to resolving disputed Indian trust fund account
balances through informal dispute resolution
and supports the unique government-to-government relationship that exists in Indian
trust land management issues. After Tribal
consultations, BIA submitted its recommendations to Congress in November 1997. Legislation reflecting these recommendations was
proposed in 1998, but not enacted. The Department will continue efforts to resolve trust
fund account balances.

STRENGTHENING THE AMERICAN COMMUNITY

135

The budget provides $83 million for the
Interior Department’s (DOI’s) Office of Special
Trustee, including the trust management improvement project. Current activities include
verifying the remaining individual Indian account data and converting these data to
a commercial-grade accounting system. Ownership, lease, and royalty information related
to the underlying trust assets will also be
verified and converted to a recently acquired
commercial asset management system.

the District of major financial burdens and
laid the groundwork to restore the District’s
fiscal health. Due to prudent fiscal management and on-going efforts to build private
investment, the District—facing bankruptcy
only six years ago—produced budget surpluses
in 1997 and 1998 and projects a third
budget surplus in 1999. To maintain a balanced budget in the future, the District
has launched major management reforms,
cut spending, and directed a portion of budget
surpluses to eliminate its accumulated deficit
by 2000. If the District continues to balance
its budget through 2000, it can regain full
home-rule.

7.

As part of DOI’s commitment to resolving
trust land management issues, DOI worked
with Congress in 1999 to repropose legislation
to establish an Indian Land Consolidation
program to address the ownership fractionation of Indian land. DOI began implementing
three pilot projects in Wisconsin, in cooperation with Tribes, to purchase small ownership
interests in highly fractionated tracts of land
from willing sellers. In the nine months
of this effort, more than 8,000 small ownership
interests have been consolidated. The budget
proposes $13 million in 2001 for this program
and DOI will work with Congress to get
legislation enacted in the 106th Congress,
limiting future fractionation.
Firefighter Health and Safety Initiative
Firefighters play a critical role in protecting
the health and safety of the community,
and in order to further protect their own
health and safety, the Administration is proposing a new $25 million pilot grant program
that will assist needy communities in obtaining necessary health and safety equipment
for their firefighting personnel. This program,
administered by the Federal Emergency Management Agency, will help communities reduce
firefighter injuries and fatalities, and improve
their ability to effectively respond to fire
emergencies.
Commitment to the District of Columbia
The Administration strongly supports the
District of Columbia’s right of self-governance
and continues to work with the District
to promote economic well-being and to advance
the interests of the District. As part of
the 1997 balanced budget agreement, the
President proposed, and Congress enacted,
a comprehensive financial restructuring plan
for the District of Columbia. It relieved

The budget includes $486 million to implement the President’s plan for District courts
and corrections, including $224 million to
house the District’s sentenced felon population.
By December 2001, all adult-sentenced felons
will be in the custody of the Federal Bureau
of Prisons.
The Administration—through its departments and agencies—will continue to provide
technical help and other assistance to the
District in such areas as education and
law enforcement. In addition, the Administration continues to assist the District in spurring
neighborhood revitalization and economic development and in bolstering the District’s
long-term fiscal stability. In 2000, the Federal
Government provided $17 million to launch
a college tuition program for District residents.
This budget proposes to continue to fund
the program at $17 million.
For 2001, the budget provides $38 million
for economic development and infrastructure
investments, including $10 million for environmental remediation and site preparation of
property to be used in an economically distressed neighborhood slated for economic development, $3 million for the study and
designs for a National Museum of American
Music, and $25 million for the Federal share
of construction of a Metrorail station at
the intersection of New York and Florida
Avenues, in Northeast DC. This $25 million
will be matched by city and private funds
to create an improved gateway into the
Nation’s Capital and revitalize the distressed
neighborhoods surrounding the Metrorail site.

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THE BUDGET FOR FISCAL YEAR 2001

Building One America for the 21st Century
The President’s vision of One America in the 21st Century is a diverse, democratic community
in which we respect and celebrate our differences, while embracing the shared values that
unite us. The President envisions an America based on opportunity for all, responsibility from
all, and one community of all Americans. To reach that goal, he has asked all Americans to
join him in a national effort to deal openly and honestly with our racial differences. Americans
must improve their understanding of the history of race, and how this history contributes to
conflicting views on race and racial progress held by Americans of color and white Americans.
The President recognizes that, even as America rapidly becomes a truly multi-racial democracy, race relations remains an issue that too often divides our Nation and keeps the American dream from becoming a reality for everyone who seeks to take part through hard-work
and responsibility.
In February 1999, the President established his Initiative for One America, the first White
House office dedicated to ensuring a coordinated and focused strategy to close the opportunity
gap that exists for many minorities and the underserved. The One America office builds on
the important work done by the President’s Initiative on Race in 1997 and 1998 by promoting
the President’s goals of educating the American public about race; encouraging racial reconciliation through a national dialogue on race; identifying policies that can expand opportunities for racial and ethnic minorities; and ensuring common access to health care and the broad
enforcement of laws against discrimination. The Initiative for One America coordinates the
work of the White House and Federal agencies to carry out the President’s vision of One
America and partners with non-government entities to increase private sector commitment,
investment and action to increase opportunity.
The One America Initiative has hosted discussions and public forums on diversity and opportunity to a wide range of organizations, educational institutions, and communities all across
the country. For example, it launched the Presidential Call to Action to the American Legal
Community in a joint effort with Department of Justice officials and professionals to implement a nationwide strategic plan to increase opportunity and promote racial diversity in the
legal profession. It also worked with the Department of Education to promote a Campus Days
Dialogue program to discuss a variety of educational challenges and the importance of faculty
leadership on the issue of diversity. This year, 620 educational institutions participated in the
Campus Dialogue program. The Initiative also worked with local elected officials and advocacy
organizations to develop a proactive strategy to address the sometimes volatile relationship
between communities of color and law enforcement agencies.
The Administration has made progress in a range of program areas, including those listed
below. Many others are listed throughout the budget.
For example:
• Eliminating Racial and Ethnic Disparities in Health. In February 1998, the President committed the Nation to an ambitious goal by the year 2010: eliminate disparities in six health
areas where racial and ethnic minorities are disproportionately affected, while continuing
the progress we have made in improving the overall health of the American people. As a
key part of this effort, the budget includes $35 million, a 17-percent increase over 2000, for
demonstration projects (begun in 1999) to better address racial disparities in health.

7.

STRENGTHENING THE AMERICAN COMMUNITY

Building One America for the 21st Century—Continued
• Closing the Education Opportunity Gap. Increases in funding for major education initiatives, including school construction and class size reduction, will significantly benefit minority groups. Other targeted programs also receive generous funding increases, including a
$823 million increase in the Hispanic Education Action Plan and a $20 million increase in
funding for Historically Black Colleges and Universities.
As these efforts continue, many other programs included by the President in the budget and described in these chapters will advance these goals to realize the potential of One America in
the 21st Century.

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8.

ADVANCING UNITED STATES
LEADERSHIP IN THE WORLD

Of course, international engagement costs money. But the costliest peace is far cheaper than
the cheapest war.
President Clinton
August 1999

At the start of a new century, the United
States has reached new heights of influence
in the world. At the same time, the new
challenges posed by rapid advances in technology and the opening of borders have
increased our need to exercise this influence—
more and more, what happens overseas affects
our security, health, and prosperity at home.
Our Nation now has the greatest opportunity in its history to advance American
interests and values while building a better
and more peaceful world. However, doing
so requires leadership and engagement. We
need to work with others to prevent war
and defuse crises, combat terrorism and
counter the spread of weapons of mass destruction, deepen democracy and the rule of law,
strengthen free market economies, protect
the global environment, and fight poverty
and diseases. For if the United States can
do this, using its resources effectively and
wisely, our citizens will be safer, our economy
stronger, our world more stable, and our
freedoms more secure.
In the past year, America’s leadership was
essential to the success of the NATO alliance
in halting the ethnic cleansing of Kosovo’s
ethnic Albanians and containing the risk
of wider war at the doorstep of our allies.
Nearly a million Kosovars who fled in terror
have returned to their homes and with our
support, they have begun the difficult work
of building a tolerant democratic society and
a new economy. The United States has played
a critical role in the strides made toward
lasting peace in Northern Ireland and SierraLeone and ending the bloodshed in East
Timor. Our support has also been crucial

as Israelis, Palestinians, and others in the
Middle East have taken brave steps toward
forging a lasting peace there. The United
States has worked to detect and counter
terrorist threats, as well as to continue
efforts with Russia and other former Soviet
republics to halt the spread of dangerous
weapons materials. We have also taken actions
to advance global prosperity—bringing China
into the global trading system and launching
a new debt reduction initiative to help the
world’s most impoverished nations eliminate
crushing debt burdens and reform their economies.
As we seek to build on these efforts,
the 2001 Budget proposes several initiatives
to further America’s leadership in the world
and address these and other challenges. During the coming year, the Administration intends to seek 2000 emergency supplemental
appropriations to provide critical assistance
to the people and Government of Colombia
in their fight against narcotics traffickers.
The supplemental, which is included in this
budget, will help finance a multi-year strategy
known as Plan Colombia, developed by the
democratically-elected Government of Colombia. With this budget, the Administration
is also requesting 2000 emergency supplemental appropriations for renewed initiatives
to promote economic growth, stability, and
democracy in Kosovo and across Southeast
Europe.
For 2001, the budget requests increased
funding for several priorities. Funding for
international family planning assistance will
total $541 million, with added funding from
several accounts amounting to an increase
139

140
of $169 million above 2000. Funding for
U.S. Government efforts to contain the global
spread of HIV/AIDS has been increased by
$100 million, more than double the amount
spent in 1999. These initiatives will respond
to pressing prevention, health infrastructure,
and treatment needs, but will also be used
to leverage increased funding from other
donors, and from developing countries themselves, for these critical objectives. Increased
funding for urgent humanitarian and refugee
assistance programs is also proposed in the
budget.
Another 2001 priority is the $1.1 billion
proposed for enhanced security in our diplomatic posts, which includes a $500 million
increase over the 2000 level for initiatives
that will further protect the men and women
who serve America in our missions overseas.
This request builds on last year’s long-term
proposal and is an essential step in the
multi-year plan that is necessary to meet
the Administration’s commitment to the construction of secure diplomatic and consular
facilities worldwide.
The budget also proposes an increase of
$241 million over the 2000 level to support
UN peacekeeping missions around the world.
U.S. funding for these missions is critical
to the success of diplomatic efforts to end
destructive and costly conflicts in Africa and
elsewhere.
This chapter describes these and other
initiatives in more detail, linking the budget
resources of 2001 to our international policies
and the Administration’s commitment to protecting our national security, promoting prosperity, and advancing our values.
Protecting American Security by
Promoting Peace and Democracy Abroad
The budget proposes a substantial increase
for counter-narcotics efforts in Colombia. Colombia supplies an estimated 80 percent
of the cocaine in the United States. Colombia’s
role in the world heroin and cocaine market
is growing rapidly as the production of cocaine
in Colombia has more than doubled between
1997 and 1999. The Colombian drug trade
is controlled largely by paramilitary groups
and insurgents who are engaged in a 30

THE BUDGET FOR FISCAL YEAR 2001

year old civil war against the Government
of Colombia.
Colombia President Andres Pastrana has
devised a comprehensive, integrated plan,
Plan Colombia, to address Colombia’s narcotics
and related political and economic troubles.
As noted earlier, the budget proposes to
increase assistance programs through 2000
emergency supplemental appropriations of
$954 million and 2001 new funding of $318
million in the international affairs and other
budget areas. Funds will be used for Colombia’s counter-drug efforts and for other programs to help President Pastrana deepen
democracy and promote prosperity. The proposal will enhance alternative development,
strengthen civil justice and democratic institutions, and provide military assistance to the
counter-narcotics effort. The Administration
will also encourage U.S. allies and the international financial institutions to assist Colombia in implementing President Pastrana’s Plan
Colombia strategy. Strengthening stability and
democracy in Colombia, and fighting the
drug trade, is in America’s national interest.
Kosovo: The budget proposes $175 million
to help the people of Kosovo build a democratic
society and a stronger economy. The members
of the European Union will bear the bulk of
these costs, but the United States must also
contribute. In May 1999, shortly after the conflict ended and peace was reestablished in
Kosovo, the United States pledged $556 million to address humanitarian needs, such as
the provision of shelter, health care, and food
aid for returnees and other urgent requirements. On November 17, 1999, the international community pledged a total of $1.056
billion towards peace implementation, reconstruction and recovery, budget support, and
humanitarian assistance, of which the U.S.
Government pledged $156.6 million, or 14.8
percent.
In 2001, resources will be used to help
rebuild Kosovo’s economy and society. A growing economy, with new employment opportunities, is critical if Kosovo is to overcome
problems of crime and ethnic violence. Such
assistance will create jobs for former refugees
and provide incentives for segments of the
population to lay down their arms. To address
these issues, this assistance will help create

8.

ADVANCING UNITED STATES LEADERSHIP IN THE WORLD

jobs and build a more stable and peaceful
society. In conjunction with other donors,
U.S. resources will provide working capital
to stimulate economic activity. The budget
also proposes 2000 emergency supplemental
appropriations of $624 million to address
pressing requirements for Kosovo and Southeast Europe. The funds will be used for
economic and democratic reform activities
in Kosovo, Croatia, and Montenegro, as well
as to provide additional assistance of the
democratic opposition in Serbia. The additional
funding will also be used to provide critical
support needed in 2000 for the UN Mission
in Kosovo (UNMIK), and to build secure
U.S. diplomatic facilities in Kosovo, Bosnia,
and Albania.
Southeast Europe Initiative (SEI): Central to lasting peace in Europe is the political
and economic integration of the Balkans into
Europe and the global community. The budget
requests $428 million for this important initiative. Also critical to a peaceful future for Europe is the replacement of the Milosevic regime. For that reason, about $96 million will
help promote the democratic opposition in Serbia and provide assistance to Montenegro.
About $6 million of U.S. assistance is
intended to accelerate the integration of Southeast Europe’s countries into the global trading
system by breaking down barriers to trade
and investment. U.S. assistance will encourage
economic reform, the rule of law, deepening
of democracy, and adoption of international
standards governing trade.
UN Reform and Contributions to International Peacekeeping: Peace and security
operations of the United Nations directly support U.S. national interests. Peacekeeping has
the capacity to separate adversaries, maintain
cease-fires, facilitate the delivery of humanitarian relief, enable refugees and displaced
persons to return home, demobilize combatants, and create conditions under which political reconciliation may occur and free elections
may be held. In so doing, it can help nurture
new democracies, lower the global tide of refugees, and prevent small wars from growing
into wider regional conflicts which would be
far more costly in terms of lives and resources.
The budget proposes an increase of $241 mil-

141

lion above the 2000 level of $498 million for
UN peacekeeping.
In recent years, there have been significant
improvements in the management, efficiency,
and effectiveness of the UN and other international organizations. UN Secretary General
Kofi Annan has carried out numerous restructuring and consolidation measures, many
closely conforming to U.S. proposals, and
there have been solid advances within major
specialized agencies to improve management.
The Administration is strongly committed
to work with the Congress on a bipartisan
basis to further advance the UN reform
process. The Congress, with Administration
support, has linked UN reform measures
to U.S. payment of specific arrearage amounts
in 2000. We will continue to use our influence
to push for management improvements, organizational streamlining, and the necessary
budget discipline to ensure zero nominal
growth in UN and specialized agencies’ budgets. We are also committed to working with
other UN members to revise the scale of
assessments—including a reduction in the
rate at which the United States is charged
for the UN regular budget, UN peacekeeping,
and the large specialized agencies.
Expanded Threat Reduction Initiative
(ETRI): The effort launched seven years ago,
spurred by the bipartisan Nunn-Lugar legislation, to contain the spread of weapons of mass
destruction (WMD) from the former Soviet
Union and promote stability, has produced important results, helping to: deactivate nearly
5,000 nuclear warheads; eliminate nuclear
weapons
from
Ukraine,
Belarus,
and
Kazakhstan; strengthen the security of nuclear
weapons and materials at over 100 sites; tighten export controls and detect illicit trafficking;
and, engage over 30,000 former Soviet weapons scientists in productive civilian research.
The recent conclusion of agreements between
Georgia and Russia and between Moldova and
Russia for the withdrawal of Russian troops
creates the opportunity to help these countries
address some of the costs associated with Russian force reductions, thereby strengthening
the sovereignty of Georgia and Moldova and
the stability of the region.
But more work needs to be done. The
two major economies in the Newly Inde-

142
pendent States—Russia and Ukraine—continue to require substantial external support
to sustain the necessary infrastructure to
protect against the diversion of WMD nuclear,
biological, and chemical—and related technology. Scientists, facilities guards, customs
officers, and technical experts are underpaid,
vulnerable to temptations for illicit trafficking
of WMD and related materials—clearly a
threat to our interests.
The $974 million 2001 request for ETRI
programs includes $469 million in programs
administered by the Department of Defense,
$364 million in those administered by the
Department of Energy (DOE), and $141 in
those administered by the Department of
State, a total that is $85 million above
the 2000 level of $889 million. ETRI programs
address nuclear security for existing weapons
and delivery systems, protection and disposition of fissile materials, destruction of chemical
weapons, military relocation and regional stabilization. Among the critical programs funded
under ETRI are science centers and other
programs to finance civilian research by
former Soviet weapons experts, enhanced border control assistance to decrease the likelihood that critical weapons technologies or
materials can be smuggled to other Nations,
and programs to enhance regional security
efforts in Georgia, Armenia, Azerbaijan, and
Moldova. The proposed DOE request for ETRI
includes a $100 million initiative in Russia
to expand protection of fissile material; accelerate closure of nuclear weapons production
facilities; and, provide an alternative to continued plutonium reprocessing in Russia.
Middle East Peace: The 2001 requests for
the Economic Support Fund (ESF) of $2.3 billion and Foreign Military Financing (FMF)
grants of $3.5 billion will continue to support
our efforts to promote progress and stability
around the world, particularly the progress
made recently in negotiations between Israel
and its neighbors on a comprehensive peace
for the Middle East. In emergency legislation,
$1.9 billion was provided in 1999 and 2000
to Israel, Jordan, Egypt, and the West Bank
to support the Wye River and Sharm-el-Sheikh
interim accords between the Israelis and Palestinians. For 2001, ESF levels for Israel continue the declining path started last year and
levels of FMF military assistance increase, as

THE BUDGET FOR FISCAL YEAR 2001

agreed to by the Administration and the Congress. The 2001 request of $1.8 billion in ESF
and $3.4 billion in FMF programs for the Middle East will provide a strong supporting base
for the next phase of negotiations between
Israel and its neighbors.
Democracy Initiatives: In addition, the
budget proposes increases for countries outside
of the Middle East in both ESF and FMF.
These funds will support the transitions to democracy that are emerging in Africa, including
Nigeria, and in Indonesia, and will continue
to support ongoing democratic reforms in Latin
America. They will also support military modernization and increased civilian control over
the military in eastern Europe, the states of
the former Soviet Union, and Africa. Helping
these nations build stable democracies will enhance America’s own security and prosperity.
Transnational Threats: The proliferation
of weapons of mass destruction, the
globalization of drug trafficking, and the
spread of crime and terrorism on an international scale present a continuing threat to
United States and global security. U.S. diplomacy and law enforcement play a key role in
stemming the spread of weapons of mass destruction to countries such as Libya, Iraq,
Iran, Syria, and North Korea.
The Administration is strengthening its
fight against terrorism by, among other things,
increasing funding for the construction of
new embassies overseas and continuing the
ongoing worldwide program of physical security upgrades to our most at-risk posts.
The budget also proposes a new initiative
for the destruction of small arms abroad,
which might otherwise be used by terrorists
or others to foment local wars.
America must continue to lead against
the spread of weapons of mass destruction.
The Comprehensive Nuclear Test Ban Treaty
(CTBT) remains an important element of
the global nuclear nonproliferation regime.
The Administration is committed to working
to create the conditions for a successful
vote to approve the CTBT in the Senate
at the earliest possible date. We will continue
to adhere to our long-standing moratorium
on nuclear tests and urge other Nations
to do the same.

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ADVANCING UNITED STATES LEADERSHIP IN THE WORLD

The budget proposes $194 million from
the Congress to support multi-national efforts
to combat the spread of weapons of mass
destruction: the International Atomic Energy
Agency’s (IAEA’s) safeguards regime, the Organization for the Prohibition of Chemical
Weapons, and a global network of sensors
to detect nuclear explosions. The budget includes funding for the Korean Peninsula
Energy Development Organization, which has
just signed contracts to construct two proliferation-resistant nuclear power reactors in North
Korea. Before key components are shipped,
North Korea will have to come into full
compliance with its commitments to the IAEA
and the Nuclear Non-Proliferation Treaty.
Promoting Prosperity to Advance
Stability
Debt Forgiveness: The United States is
committed to helping people in the world’s
poorest countries join the global economy and
implement economic reform by expanding debt
relief. At the Cologne Summit, the G-8 expanded the Heavily Indebted Poor Country
(HIPC) initiative to: include more countries;
provide deeper debt relief (up to 90 percent
of bilateral debt); increase participation by the
international financial institutions; and, increase the focus of the resources freed by debt
reduction on economic reform, health, education, and other human needs. The President
led this effort with a proposal that was largely
adopted and remains at the forefront on the
issue with his commitment to forgive 100 percent of debt owed to the United States by the
poorest countries, a majority of them in subSaharan Africa. To fulfill the U.S. commitments, the Administration is requesting $600
million for the HIPC program in 2001, 2002,
and 2003: $75 million to forgive about $450
million in bilateral debt of the poorest countries; $150 million for the HIPC trust fund,
which will allow for further debt relief through
the multilateral organizations; and, $375 million in advance appropriations. The budget
also includes $37 million for the Tropical Forest Initiative to use debt relief mechanisms
in support of conservation. In order to fund
HIPC trust fund requirements for the remainder of 2000, the Administration is also proposing a fully offset 2000 supplemental appropriation of $210 million.

143

Multilateral
Development
Banks
(MDBs): The MDBs play a prominent role in
bringing developing and transition countries
into the global economy through financial and
technical assistance. Such a process not only
helps lift people oversees from poverty and toward prosperity—it also creates new opportunities for U.S. businesses and workers and
helps promote stability and enhance our security. As the largest shareholder in the World
Bank and a significant shareholder in the
other MDBs, the United States exercises considerable influence over the organizations’ external lending policies and internal governance. The United States has been able to
maintain this position despite lower levels of
commitments, which have been reduced by
forty percent since the mid-1990s. Beginning
in 1998, the Administration and the Congress
reached bipartisan agreement to reduce the
level of MDB arrears. However, much of the
progress in clearing MDB arrears was reversed
by the 2000 appropriations process, with the
overall arrears level rising from $335 million
at the end of 1999 to an expected $451 million
by the end of 2000. Increasing arrears limit
the Administration’s ability to engage other donors and gain agreement on important new
policy measures and institutional reforms during new replenishment negotiations. The budget proposes to clear all MDB arrears by the
end of 2003, with $167 million in 2001 arrears
payments. The budget also proposes $1.2 billion for scheduled payments to these institutions, meeting all current commitments.
Trade Agreements: The Administration is
committed to opening global markets and integrating the global economic system, which has
become a key element of continuing economic
prosperity here at home. The budget proposes
significant increases for efforts by our trade
negotiators to pursue open markets and fair,
rules-based trading systems. The Administration will work within the World Trade Organization (WTO) to pursue the negotiating mandate for agriculture and services that were
built into the Uruguay Round, develop consensus on the negotiating agenda for a new
round of multilateral negotiations, work for
China’s membership in the WTO on the foundation of the historic bilateral agreement
reached last November to open the Chinese
market, and also pursue the accession to the

144
WTO of a number of other important trading
partners. In doing so, the Administration will
work to ensure that the benefits of trade are
shared broadly across all sectors of society and
do not come at the expense of core labor standards or the environment.
A key priority of the Administration, in
addition to securing passage of permanent
Normal Trade Relations with China, is to
assure the enactment of the trade legislation
that passed in the House and Senate addressing trade benefits for Africa, extending the
Generalized System of Preferences (GSP), and
enhancing the Caribbean Basin Initiative
(CBI). The Administration has also submitted
legislation that would extend new benefits
to the Balkan countries. The budget supports
a 10-year initiative for Africa, five-year initiatives for the CBI and Balkan proposals,
and for GSP, a 33-month extension is proposed
to be added to the 27-month extension that
passed in the first session of the 106th
Congress.
Trade and Investment Promotion: The
budget proposes an increase of over $200 million in 2001 for the Export-Import Bank. To
a large extent, this increase will enable the
Bank to continue to increase the level of U.S.
exports it supports given the upward revision
in the cost of U.S. Government international
lending in the wake of the recent global financial crisis. Some of this increase will also provide additional resources for the Export-Import
Bank to finance the export of clean energy
technologies. Finally, the budget proposes an
increase in Export-Import Bank administrative
expenses, part of which will finance a modern
information system critically necessary to improve the delivery of the Export-Import Bank’s
insurance product to U.S. exporters.
The budget also proposes increased resources for the Overseas Private Investment
Corporation (OPIC) and the Trade and Development Agency (TDA). An additional $4 million in administrative resources for OPIC
will help modernize critical information systems, and improve vital portfolio, environmental, and worker rights monitoring. An
additional $10 million for TDA will expand
its capacity to conduct feasibility studies
on international projects that can lead to

THE BUDGET FOR FISCAL YEAR 2001

U.S. exports, including clean energy projects
and increased feasibility studies in Africa.
Providing Humanitarian Assistance
The budget continues America’s tradition
of responding generously to address and mitigate human suffering caused by natural and
man made crises. The budget increases funding for both the State Department’s migration
and refugee assistance programs and the
U.S. Agency for International Development’s
(USAID’s) international disaster assistance
and food aid programs. The budget provides
increases of $33 million for the migration
and refugee assistance programs and $18
million for USAID’s international disaster
assistance programs over 2000 levels. These
increases are justified given continued humanitarian needs as a result of crises in Sudan,
Burundi, Angola, Afghanistan, the North
Caucasus and elsewhere, and forecasting that
indicates increasing numbers of natural disasters with devastating human consequences.
The budget also funds bilateral demining
efforts to reduce the dangers to civilians
caused by land mines in areas of former
conflict.
Developing Global Programs that Help Us
by Helping Others
In our increasingly interconnected world,
it has become clear that many of the problems
faced by the developing world are actually
global problems that threaten the health
and well being of all people, including our
own. That is why the budget includes a
number of foreign assistance initiatives, under
the auspices of USAID and other Federal
agencies, that are aimed at problems that
directly affect the United States.
International Family Planning: It is estimated that 34,000 children under age five in
developing countries die every day, and that
over 580,000 women die each year of causes
related to pregnancy and childbirth. By helping women bear their children at the healthiest times for both mother and baby, family
planning helps prevent the deaths of children
and mothers; it also prevents unintended pregnancies and abortion. By helping countries improve the health and prosperity of their citizens and stabilize their population growth,
U.S. international family planning assistance

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ADVANCING UNITED STATES LEADERSHIP IN THE WORLD

also helps to ensure that we have increasingly
stable and prosperous partners in the developing world. Therefore, the budget funds an
increase of $169 million for international family planning assistance programs, bringing
total resources for these programs to $541 million. It also removes unnecessary and harmful
restrictions that were imposed on the implementers of this assistance during the 2000 appropriations process.
HIV/AIDS: The budget provides a second
consecutive $100 million Government-wide increase for programs that address the scourge
of AIDS, which has become one of the most
deadly diseases in the developing world.
USAID will implement $54 million of this increase, almost doubling USAID’s global AIDS
effort since 1999. The bulk of this initiative
will address the spread of HIV/AIDS in Africa,
where AIDS has become the number one cause
of death, and where infection rates in some
countries exceed 30 percent. However, the initiative will also address AIDS in other countries where increasing infection rates are of
particular concern. This significant increase in
resources over the past two years should leverage additional resources from other donors and
from the governments of developing countries.
(See Chapter 3, ‘‘Strengthening Health Care,’’
for additional details on the Global HIV/AIDS
Initiative.)
Vaccines for Developing Countries: In his
September 1999 address to the UN General
Assembly, President Clinton called for a concerted effort to make vaccines more widely
available in the developing world, where more
than three million children die each year from
vaccine-preventable diseases. As an important
first step, the budget proposes a $50 million
contribution to the newly-established Global
Alliance for Vaccines and Immunizations
(GAVI). These funds will be used to purchase
existing vaccines for Hepatitis B, Haemophilus
influenzae type B, and Yellow Fever, and to
ensure their safe delivery. The U.S. contribution to GAVI is expected to leverage additional
resources from other donors. This initiative
will be complemented by increased funding for
the National Institutes of Health to accelerate
the development of vaccines for major infectious diseases. In addition, the budget proposes
a new tax credit that will encourage the development of vaccines for diseases that occur pri-

145

marily in the developing world. (See Chapter
3, ‘‘Strengthening Health Care,’’ for further details on this tax credit.)
Clean Energy and Tropical Forests: The
budget includes $50 million for international
affairs agencies to promote the use of clean
energy overseas. Of this total, USAID will use
$30 million for technical assistance for legal
and regulatory reform, and to expand training
programs for energy sector policy makers and
regulators. The Export-Import Bank intends to
use $15 million to assist in the financing of
clean energy technology exports, especially renewable energy exports, while TDA will use
$5 million to fund feasibility studies and other
project planning activities to promote U.S. exports of clean energy technology.
The budget includes $45 million for international affairs agencies to increase U.S.
support for the preservation of tropical forests
and other biologically-significant areas. Of
this amount, $33 million will be added to
USAID biodiversity resources (for a total
of $100 million), allowing USAID to increase
the work it does with host countries. The
other $12 million will be added to Treasury
Department resources (for a total of $37
million) for the budget cost of debt swaps
and debt reduction agreements that require
beneficiary countries to devote a portion of
their own resources to tropical forest conservation.
Peace Corps: The volunteer programs of the
Peace Corps promote mutual understanding
between Americans and the people of developing nations, while providing technical assistance in education, health, the environment, agriculture, and small business development.
The agency also responds to humanitarian crises and natural disasters through its Crisis
Corps program. The budget proposes $275 million, a 12-percent increase over the 2000 Budget for the Peace Corps. This increase will provide opportunities for 4,200 Americans in 2001
to enter service as new volunteers. With these
levels, the Peace Corps can continue toward
its goal of placing a total of 10,000 volunteers
early in the next century.
Development Foundations: The African
Development Foundation (ADF) and the InterAmerican Foundation (IAF) fund indigenous
grassroots development efforts. The ADF’s as-

146
sistance helps generate new jobs, protect Africa’s environment, and strengthen basic democratic values and civil society. The budget proposes to increase funding for the ADF to support new initiatives for Nigeria and for AIDS/
HIV awareness programs. The IAF provides
social investment grants to local private sector
partners, conducts joint ventures with Latin
American corporate foundations, and promotes
philanthropy and corporate social responsibility. The budget reverses the 2000 congressional appropriations action to phase out U.S.
Government funding of the IAF by proposing
to restore funding for the IAF to pre-2000 levels. This action is based on the significant reforms that have been adopted by the IAF, including: improved capabilities to effectively
monitor projects and identify quality grant
proposals; a greater emphasis on corporate and
business involvement in the development process; and, increased involvement, including
final approval authority, of U.S. embassies in
grant making decisions.
Rightsizing and Protecting our
Representation Abroad
Advisory Panel on Overseas Presence: In
the aftermath of the embassy bombings in
Nairobi and Dar Es Salaam in 1998, and in
response to recommendations of Admiral
Crowe’s Accountability Review Boards, the
Secretary of State established an expert panel,
chaired by Lewis Kaden, to recommend improvements with respect to the U.S. presence
abroad. The panel released its report in November 1999. Among other recommendations,
the panel reiterated the need for a sustained,
multi-year program of investment in overseas
facilities and security measures. The Administration has initiated a thorough review of recommendations contained in the Kaden panel’s
report including an examination of the U.S.
Government’s overseas presence needs and the
current structure of financing and management for overseas facilities. The Administration will continue to work with Congress in
a bipartisan manner to address the continuing
challenge of making our overseas posts secure.
The budget supports a strong U.S. presence
at over 250 embassies and other posts overseas, promoting U.S. interests abroad and
protecting and serving Americans by providing
consular services. This work will be aided

THE BUDGET FOR FISCAL YEAR 2001

by an Administration review of the overseas
presence of all agencies as recommended
in the report of the Advisory Panel on
Overseas Presence.
Effective diplomacy is the foundation of
our ability to meet foreign policy goals.
The work of the Department of State and
U.S. missions supports the aims of American
foreign policy, and anticipates and helps
to prevent threats to our national security.
Overseas posts serve as the administrative
platform for more than 30 other U.S. agencies
with personnel abroad, including USAID and
the Departments of Defense, Justice, Commerce, Agriculture, and the Treasury.
Facility Vulnerability: Protection of American and foreign national employees who work
abroad in U.S. Government facilities remains
a top priority in the 2001 Budget. The budget
proposes a total of $1.1 billion for embassy
security initiatives, including $500 million for
new State Department and USAID diplomatic
facility construction, $200 million for additional steps to protect existing buildings from
terrorist attack, and $400 million for maintenance of security readiness, including construction of a new Center for Anti-terrorism and
Security Training. In total, this represents an
increase of over $500 million, nearly doubling
the 2000 enacted level for enhanced security
measures. The budget continues the Administration’s commitment to a long-term program
of overseas facility construction including additional resources in future years necessary to
fulfill the Administration’s strategy to effectively and efficiently meet America’s security
needs.
State Department Operations: The budget
proposes $3.2 billion in 2001 for the State Department, including public diplomacy and
arms control activities. This funding level will
maintain the Department’s worldwide operations, continue efforts to upgrade information
technology and communications systems, and
accommodate increased security and facility
requirements at posts abroad. It will also provide for additional technology and training investments as recommended by the Overseas
Presence Advisory Panel.

8.

ADVANCING UNITED STATES LEADERSHIP IN THE WORLD

USAID Operating Expenses: The budget
proposes $520 million for USAID operating expenses. This is a $16 million increase over the
2000 level (excluding the $15 million for the
new mission in Dar Es Salaam). The 2001 increase is partly for information technology, including full implementation of the ‘‘off-theshelf’’ financial management system. These re-

147

maining information technology improvements
are critical to USAID’s plan to fully comply
with all Government-wide financial management requirements in 2001. This funding level
will also help maintain work force levels necessary to effectively manage USAID’s overseas
programs.

9.

SUPPORTING THE WORLD’S STRONGEST
MILITARY FORCE
The more we ask of our Armed Forces, the greater our obligation to give them the support,
training, and equipment they need. We have a responsibility to give them the tools to take on new
missions while maintaining their readiness to defend our country and defeat any adversary; to
make sure they can deploy away from home, knowing their families have the quality of life they
deserve; to attract talented young Americans to serve; and, to make certain their service is not
only rewarding, but well rewarded from recruitment to retirement.
President Clinton
October 1999

At the dawn of this new century, our
Nation is in many ways safer and more
secure than ever before. The Cold War is
over and the once-constant threat of global
warfare continues to recede. In this time
of relative stability, the United States is
strengthening its partnerships with countries
that only a decade ago were our sworn
adversaries. Yet, despite these remarkable
events, the United States still faces enemies
who would strike against this Nation using
traditional military force or with emerging
and increasingly complex weapons of terrorism.
The U.S. military remains the foundation
of the Nation’s security and defense strategy.
As the global leader of the international
community, the United States must keep
its military ready and modernize its forces
to maintain technological advantage. As a
Nation, we must provide our military with
the necessary support to carry out each
mission.
In the past year, President Clinton took
significant steps to ensure that our Nation’s
military is fully prepared to meet the challenges of this new century. He initiated

a long-term, sustained increase in defense
spending by providing additional resources
of $112 billion over six years to protect
our high level of military readiness and
to procure modern and effective weapons
systems.
Recently, the U.S. military demonstrated
its superior readiness and capability by successfully completing operation Allied Force/
Noble Anvil in Kosovo. Our triumph in Kosovo
put an end to the vicious ethnic cleansing
in Kosovo, forced the withdrawal of all Serbian
military, paramilitary, and police forces from
the province, permitted the safe and free
return of all refugees, and established an
international presence to secure freedom and
peace within the province.
The 2001 Budget will ensure that military
capability remains first rate for years to
come. It also provides significant resources
to ensure that we keep pace with the latest
advances to protect against and prepare for
new and emerging threats, including the
potential use of chemical and biological weapons, other weapons of mass destruction, and
efforts to weaken the critical infrastructure
of the Nation.

149

150

THE BUDGET FOR FISCAL YEAR 2001

The Quadrennial Defense Review
The military’s responsibilities have become more complex and diverse in the post-Cold War
era. In 1997, the Department of Defense’s Quadrennial Defense Review (QDR) embraced a defense strategy designed to respond to the following threats:
• regional dangers, such as coercion and large-scale cross border aggression, as well as military
challenges created by failed states, as in the case of Yugoslavia;
• the proliferation of advanced conventional weapons and nuclear, biological, and chemical
weapons technologies and their delivery systems, which can be used by the military forces of
other nations or by terrorists;
• transnational dangers, such as the spread of illegal drugs, organized crime, terrorism, uncontrolled refugee migration, and threats to the environment; and,
• direct attacks on the U.S. homeland from weapons of mass destruction, including nuclear,
chemical, and biological weapons, terrorism, and information warfare.
The Department’s next QDR in 2001 is an opportunity to develop long-term national security
planning in this more complex and diverse threat environment. Planners must think broadly
about how to maintain and advance our capabilities and take full advantage of rapid technological advances. The next QDR offers a vehicle for updating doctrine, force structure, and weapons systems by investing in quantum-leap capabilities and technologies.

This budget sustains the current high levels
of military readiness; increases procurement
of modern, effective weapons systems; and,
provides pay, benefits, and quality of life
improvements for our servicemen and women,
including a major initiative to reduce
servicemembers out-of-pocket housing costs.
In doing so, it also fully supports the goals
set forth in the Department of Defense’s
(DOD) most recent Quadrennial Defense Review (see Table 9–1). In particular, it provides
significant resources for four critical areas:
• enhancing the military’s ability to respond
to crises with robust funding for training,
spare parts, and weapons maintenance activities critical to unit readiness;
• building for the future by acquiring advanced weapons such as the F–22 fighter
aircraft;
• investing in research, equipment and
training to prepare the military to deter
and respond to emerging threats such as
weapons of mass destruction; and,
• supporting military personnel and their
families by enhancing their quality of life,
thereby strengthening recruitment and retention.

As the Nation’s Armed Forces prepare
to meet the many challenges of tomorrow,
it is equally vital to ensure that resources
enable our military forces to meet the missions
of today. For this reason, the President
has determined that additional resources are
necessary to cover the costs of contingency
operations in Bosnia, Kosovo, and Southwest
Asia. In addition, the Administration is proposing additional resources to mitigate the
impact of higher fuel costs.
Providing the Necessary Funding
The Administration has carefully calibrated
the defense budget to respond to evolving
military needs. In fact, since 1993, the President has consistently increased the defense
budget to meet these needs. Last year’s
defense budget request included an increase
of $112 billion for the 2000–2005 period
to enhance these capabilities.
For DOD this year, the budget proposes
discretionary funding of $292.2 billion in
budget authority and $278.6 billion in outlays
for 2001. This represents an increase of
$11.3 billion over the proposed 2000 level
(see Table 9–2), and $4.8 billion over the
2001 level assumed in the 2000 Budget.
During the 2001–2005 period, funding for
DOD will total $1,516.6 billion, an increase

9.

151

SUPPORTING THE WORLD’S STRONGEST MILITARY FORCE

Table 9–1.

Military Force Trends
1990

2001

QDR Target

Army:
Divisions (active/National Guard) ..........................

18/10

10 1/ 8 2

10 1/ 8 2

Air Force:
Fighter wings (active/reserve) ...............................

24/12

12+/7+

12+/8

Navy:
Aircraft carriers (active/reserve) ...........................
Air wings (active/reserve) ......................................
Total battle force ships 4 ........................................

15/1
13/2
546

12/0 3
10/1
316

11/1
10/1
306

Marine Corps:
Divisions (active/reserve) .......................................
Wings (active/reserve) ............................................

3/1
3/1

3/1
3/1

3/1
3/1

Strategic nuclear forces:
Intercontinental ballistic missiles/warheads ........
Ballistic missile submarines ..................................
Sea-launched ballistic missiles/warheads .............

1,000/2,450
31
568/4,864

550/2,000
Not over 18
432/3,456

Heavy bombers .......................................................

324

96 6

500/500 5
14 5
336/not over
1,750 5
92 6, 7

Military personnel:
Active .......................................................................
Selected reserve ......................................................

2,069,000
1,128,000 8

1,381,600
865,700

1,367,600
837,200

1 Plus

two armored cavalry regiments.
18 separate brigades (15 of which are at enhanced readiness levels).
3 The JFK was redesignated as an active duty carrier to meet forward presence commitments and to stabilize rotation plans to meet active duty OPTEMPO and PERSTEMPO requirements.
4 Includes active and reserve ships of the following types: aircraft carriers, surface combatants, submarines, amphibious warfare ships, mine warfare ships, combat logistics force, and other support ships.
5 Upon entry-into-force of START II.
6 Does not include 95 B–1 bombers dedicated to conventional missions.
7 Does not include five additional attrition reserve B–52s added by the Air Force in 1999.
8 Does not include 25,652 Selected Reserve personnel called to active duty under Title 10 U.S.C. Section
6736 for Operation Desert Shield/Storm.
2 Plus

of $11.8 billion above the levels assumed
for these years in the 2000 Budget. These
additional resources allow DOD to meet its
critical readiness, personnel, and modernization needs. The budget also proposes emergency supplemental appropriations totaling
$2.3 billion to cover 2000 Kosovo operations,
purchase a support aircraft for the Foreign
Emergency Support Team, fund DOD’s portion
of increased assistance to Colombia, support
U.S. operations in East Timor, and repair
buildings damaged by Hurricane Floyd.
Enhancing Military Readiness and
Operations
Ensuring Adequate Resources: Maintaining the current high levels of readiness is our

top defense priority. Building on the major increases contained in the President’s defense
funding plan of last year, the budget provides
a $5.4 billion increase in 2001 and an $11.0
billion increase over five years, as compared
to 2000 Budget funding levels for the same
time period. These resources will enable the
Services to support unit operations and joint
exercises, meet their required training standards, maintain their equipment in top condition, recruit and retain quality personnel, and
procure sufficient spare parts and other equipment.
DOD continues to monitor its current and
future military readiness through the Senior
Readiness Oversight Council and the Joint
Monthly Readiness Review process, which

152

THE BUDGET FOR FISCAL YEAR 2001

Table 9–2.

Department of Defense Funding Levels
(Budget authority, in billions of dollars)
1993
Actual

Defense Discretionary Program
Level .........................................

262.4

1999
Actual

274.6

2000
Estimate

2001
Proposed

280.9

292.2

Change:
1993 to
2001

+29.8

Change:
2000 to
2001

+11.3

ensure that the senior DOD leadership remains well informed about force preparedness
issues.

begin negotiation of further strategic arms reductions following Russian ratification of
START II.

Ensuring Successful Contingency Operations: The budget proposes $4.4 billion in
2001 for ongoing contingency operations—limited military operations in conjunction with
our allies—in Southwest Asia, Bosnia, and
Kosovo. Congressional approval for this funding is essential to preserve DOD’s core operation and maintenance programs. In the absence of congressional approval, DOD would
have to redirect funds from core programs,
running the risk of undermining the readiness
of our fighting forces.

Furthermore, the Administration is discussing with Russia modifications to the
Anti-Ballistic Missile Treaty that would support the possible deployment of a limited
national missile defense system to counter
threats from hostile rogue nations without
undermining strategic stability or deterrence.
In addition, the Administration will work
with members of the Senate to gain ratification of the Comprehensive Test Ban Treaty
and maintain its leadership in international
arms control issues. The Administration also
is committed to seeking a Protocol that
will enhance transparency and help strengthen
compliance with the Biological Weapons and
Toxins Convention.

Improving Military Recruitment: Sustained effective recruiting is essential for the
U.S. military to maintain a force with the appropriate distribution of skills and experience.
Funding for active duty recruiting and advertising has been increased to all-time highs to
ensure that the Armed Forces achieve their
recruiting goals in 2000 and 2001. These increases are necessary to attract qualified applicants at a time when the economy is growing,
unemployment is low, and the number of high
school graduates attending college is on the
rise.
Shaping
the
Strategic
Landscape
Through Arms Control and Cooperative
Threat Reduction: The President remains
firmly committed to reducing the threat from
weapons of mass destruction (WMD) through
arms control and cooperative threat reduction
efforts. To that end, the Strategic Arms Reduction Treaty (START) process remains a high
priority of U.S. foreign, security, and non-proliferation policy. While implementing START
I, the Administration continues its work to
bring the START II treaty into force and to

In addition, the Administration continues
its substantial threat reduction assistance
programs in Russia and other states of the
former Soviet Union to mitigate the danger
posed by WMD, the proliferation of their
fissile material components, and the scientific
expertise behind them. The budget proposes
nearly $1.0 billion for programs managed
by DOD and the Departments of Energy
(DOE) and State for this comprehensive and
aggressive program. The DOD portion of
this effort totals $469 million.
Countering Asymmetric Threats: The
budget increases funding to enhance the Department’s capability to counter asymmetric
threats such as terrorism, proliferation and
use of WMD, and threats to our critical infrastructure. Adversaries are expected to rely increasingly on these unconventional strategies
to offset U.S. military superiority. The budget
provides over $5 billion for programs to combat

9.

SUPPORTING THE WORLD’S STRONGEST MILITARY FORCE

terrorism. Enhancements include improved
awareness and training programs, worldwide
vulnerability assessments, parallel standards
for force protection, and increased resources
for offensive means to deter, defeat, and respond to terrorist attacks wherever they may
occur. Funding of nearly $1 billion for
counterproliferation and defense against WMD
programs improves our ability to locate and
destroy chemical and biological weapons before
they can be used and to defend against and
manage the consequences of a WMD attack.
The budget also proposes increased resources
to protect critical infrastructures that support
national security requirements, bringing this
funding to almost $1.5 billion.
Executing Counter-drug Programs: DOD
participates in the National Drug Control
Strategy to stem the flow of illegal drugs into
the country and to reduce demand. DOD’s primary missions are: assisting domestic and foreign law enforcement in eliminating drug supply sources, detecting and monitoring aerial
and maritime transit of illegal drugs, collecting
and analyzing foreign intelligence, and supporting the activities of the National Guard
under State counter-drug programs. Also, DOD
continues to fight illegal drug use in the military through prevention, education, and testing. The budget proposes $1.1 billion for DOD’s
counter-drug efforts. In particular, DOD is actively contributing to a program to help the
Colombian government combat the growing
threat of drug production and trafficking.
DOD’s assistance will significantly reinforce
President Andres Pastrana’s democratically
elected government’s efforts to eliminate the
narcotraffickers’ threats to local and regional
stability.
Providing Humanitarian and Disaster
Assistance: The budget increases funding for
DOD to respond to international humanitarian
crises and disasters. U.S. military forces’ global presence and unique capabilities enable it
to provide needed assistance at the request
of the President, the Secretary of State or regional commanders, and in coordination with
other Federal agencies and non-governmental
organizations. DOD’s quick response in Central and South America to Hurricane Mitch
saved thousands of lives and helped our neighbors to the South recover their livelihoods, ultimately contributing to the stability of the re-

153

gion. The proposed $64.9 million for the Overseas Humanitarian, Disaster, and Civic Aid account will fund humanitarian activities carried
out by military personnel; transportation and
distribution of relief supplies and equipment;
and, humanitarian demining and mine awareness training programs in 26 countries.
Maintaining the Nation’s Nuclear Deterrent: Nuclear weapons serve as a bulwark
against an uncertain future, a guarantee of
our security commitments to allies, and a disincentive to those who would contemplate developing or otherwise acquiring their own nuclear weapons.
The budget proposes $4.7 billion for DOE
to maintain the safety and reliability of
the nuclear weapons stockpile without nuclear
testing. As part of this program, DOE is
building non-nuclear test facilities and developing computer codes to simulate nuclear
explosions to predict the performance of the
weapons and help assure their safety and
reliability.
In October 1999, Congress reorganized DOE,
creating the National Nuclear Security Administration (NNSA) to administer the Department’s national security functions. The budget
adopts a new account structure to reflect
this reorganization. However, much work remains to transfer specific projects, programs,
and assets to the new NNSA, and the
Administration will continue to work on this
implementation and will inform the public
and Congress of progress in this area in
accordance with the 2000 National Defense
Authorization Act.
Modernizing the Force to Win Future
Wars and Successfully Execute
Contingency Missions
Preparing Our Armed Forces Through
Modernization: Maintaining the military
forces that are necessary to deter and win
wars and to successfully execute all contingency missions that may arise requires a
healthy modernization program combined with
a concerted effort to take advantage of the
emerging Revolution in Military Affairs
(RMA). In the 1970s and 1980s, the Nation
invested heavily in a wide range of equipment,
including fighter aircraft, attack submarines,
surface ships, helicopters, and armored vehi-

154
cles. This investment enabled us to reduce
weapons purchases and total defense spending
in the early 1990s as the Cold War ended.
But the equipment bought in those prior two
decades—the backbone of today’s forces—is approaching the end of its anticipated service life
and must be replaced. As these systems age,
keeping them combat-ready becomes more difficult and costly, while their ability to dominate the battlespace with ease has decreased.
Therefore, weapons system modernization—
both in the form of upgrades to existing systems and in research, development, and procurement of completely new systems—continues to be a high Administration priority.
An integral part of our modernization program is a long term effort to transform
the military. This transformation will capitalize on the emerging RMA made possible
by rapid advancements in technology. The
RMA’s goal is to effectively exploit technological advances through innovative operational concepts and new organizational arrangements, thereby allowing U.S. forces to
be smaller, faster, more agile, more precise,
more lethal, and better protected.
The last QDR determined that the Department needs roughly $60 billion per year
in weapons procurement funding, beginning
in 2001, to modernize U.S. forces and maintain
the decisive advantage manifested by equipment already in the force. The budget achieves
that goal by providing $60.3 billion for the
2001 procurement program, $6.1 billion more
than the 2000 level.
In addition, the budget provides $7.5 billion
(as part of a total Research, Development,
Test and Evaluation, or RDT&E, funding
level of $37.8 billion) to fund basic and
applied research and development of advanced
technologies. The Science and Technology
(S&T) program will lay the groundwork for
fielding next-generation systems and will help
U.S. forces avoid technological surprise from
future adversaries. S&T funding supports
several interagency initiatives, including Critical Infrastructure Protection, support to civil
authorities for preparedness against WMD,

THE BUDGET FOR FISCAL YEAR 2001

Nanotechnology, and Information Technology.
The Administration has supported these S&T
programs strongly in the past seven years,
providing funding comparable to that during
the Cold War. S&T activities—and the educational activities that they support directly
and indirectly—also are vital to the Nation’s
strength in engineering, mathematics, and
computer science.
Modernizing Ground Forces: Army modernization efforts will address the need to
maintain a force capable of accomplishing a
wide range of missions from contingencies,
such as operations in Kosovo and Bosnia, to
its primary mission of defeating adversaries
in a major theater war. To that end, the budget supports the initial year of a plan to implement a fundamental transformation of units
so that they can deploy more easily than heavy
tank and mechanized infantry divisions, yet
possess greater lethality than light infantry divisions. Lessons learned from experiments in
the next year will dictate the scope and pace
of the transformation. During 2001, the Army
plans to award the initial contract for the Medium Armored Vehicle (MAV), the cornerstone
of the transformed units. The budget proposes
$542 million in 2001 and $4.3 billion over the
2001–2005 period for the MAV.
Another key element of this transformation
includes modernization programs to incorporate digital communications equipment into
weapons systems to strengthen battlefield
planning and execution. This and other upgrades to existing combat equipment will
allow our ground forces to maintain a clear
advantage over potential opponents. Furthermore, the Army will extend the useful life
and improve battlefield performance of primary combat systems by integrating new
navigation and data transfer technology, improving weapons and targeting systems, and
augmenting vehicle protection systems. For
example, the budget proposes $513 million
to upgrade the Abrams tank, $381 million
to improve the Bradley Fighting Vehicle,
and $744 million to procure Apache Longbow
helicopters.

9.

SUPPORTING THE WORLD’S STRONGEST MILITARY FORCE

155

Combating Emerging Threats
Emerging threats such as weapons of mass destruction (WMD) and cyberattack challenge traditional concepts of national security. Although the Department of Defense plays a key role in
protecting the Nation from these asymmetric threats, a comprehensive defense demands the expertise and participation of many agencies throughout the Government. The Administration has
worked to strengthen and coordinate each agency’s contribution to this effort. Funding to combat terrorism overall has steadily increased over the past four years—up by 40 percent—while
funding for new missions such as WMD preparedness and critical infrastructure protection has
doubled in that time. The 2001 Budget proposes increases in each of these areas:
Terrorism: Both domestic and international terrorism continue to threaten the security of
American citizens. The budget provides $9 billion to combat terrorism, of which $5 billion would
support the Defense Department’s terrorism-related and force protection efforts; $1 billion would
fund ongoing law enforcement activities in the Department of Justice; $1 billion would fund security initiatives for our embassies overseas; and, $100 million would support recommendations
of the White House Commission on Aviation Safety and Security for explosives detection equipment.
Weapons of mass destruction preparedness: The budget sustains the Administration’s commitment to programs to deter terrorist incidents involving chemical, biological, radiological, or nuclear weapons and to manage the consequences should such an incident occur. Of the total for
combating terrorism, the budget proposes $1.4 billion, including $300 million for programs to
train and equip first responders to manage a WMD incident; $140 million to prepare for the
health and medical consequences of an incident; and, $145 million for specialized Federal response teams in the Departments of Defense, Health and Human Services, Energy, and others.
The budget also expands research and development (R&D) efforts for tools and techniques to
prevent, detect, and respond to the release of a WMD. Initiatives include $30 million for the Department of Agriculture to protect the security of the Nation’s food supply and $127 million for
expansion of laboratory infrastructure at the Centers for Disease Control and Prevention.
Critical infrastructure protection/cyber crime: The budget proposes over $2 billion for critical
infrastructure protection. These funds support a national effort to assure the security of infrastructures in both the Government and the private sector that are necessary to ensure our national security, economic security, and public health and safety. The proposed funding for 2001
represents a 15-percent increase over 2000 funding, including a 30-percent increase for R&D
programs to develop the tools needed for effective infrastructure protection. Of the total, $1.7
billion protects Federal systems and ensures our ability to provide essential Government services to the public. About $300 million funds agency efforts to provide assistance to the private
sector, where most of the Nation’s critical infrastructure resides. New efforts include $50 million
to establish an R&D institute, the Institute for Information Infrastructure Protection, to work
collaboratively with industry on new infrastructure protection technologies and a $25 million
program to ensure availability of highly-trained information security personnel in Federal agencies.

The centerpiece of the Marine Corps modernization program is the V–22 tilt-rotor
aircraft that will replace aging helicopters
now used to transport troops and equipment.
The budget provides $1.2 billion to procure
16 V–22s, which will have increased range,
payload, and speed to significantly enhance
Marine Corps tactical operations.
The budget also funds critical development
programs which will be procured in the
middle of this decade, including $614 million

for the Army’s Comanche helicopter for armed
reconnaissance, and $138 million for the
Marine’s Advanced Amphibious Assault Vehicle.
Modernizing Naval Forces: The budget
continues procurement of several ship classes,
including $3.1 billion for three DDG–51 Aegis
Destroyers, and $1.5 billion for two LPD–17
Amphibious Transport Dock ships. The Navy
budget funds modernization of the nuclear aircraft carrier fleet by providing $4.1 billion to

156
procure the tenth Nimitz-class nuclear aircraft
carrier and $700 million to fund the first phase
of refueling and modernization efforts for the
second Nimitz-class carrier. This overhaul will
enable the ship to stay in service for another
25 years. The budget also provides funds to
procure the third Virginia-class nuclear attack
submarine. In addition, the Navy is undertaking long-term development efforts to design
the next generation of destroyers and aircraft
carriers, to be procured in the middle of this
decade. Both of these new ship classes will
take advantage of innovative technologies and
will be less expensive to operate than their
predecessors.
To defend against missiles and aircraft,
the budget continues procurement of the
Standard Missile. The budget also supports
the development of the Tactical Tomahawk,
an improvement to the current Block III
version of the Nation’s premier sea-based
land attack missile. The budget supports
investments in ship self-defense to provide
close anti-air defense for surface ships, and
in gun and missile technologies to improve
the Navy’s delivery of fire support to Marines
and soldiers ashore.
Modernizing Air Forces: For the United
States to maintain its ability to dominate battles, substantial investment in new tactical
combat aircraft is necessary. The budget supports three new aircraft programs. First, it
provides $3.1 billion for production of 42
F/A–18E/F Super Hornets, which will become
the Navy’s principal fighter/attack aircraft.
Second, it funds procurement of the first production lot of 10 F–22 Raptors, the Air Force’s
new air superiority fighter, at a cost of $2.5
billion. Full-rate production of the F–22 should
be achieved early in this decade. Third, $857
million is provided to start advanced development and to continue research into new materials and manufacturing processes for the
Joint Strike Fighter (JSF). The JSF is DOD’s
largest, most ambitious tactical aircraft program and is designed to produce a family of
aircraft for the Air Force, Navy, and Marine
Corps. It is scheduled to start replacing about
3,000 aging aircraft (F–16s, F/A–18C/Ds and
AV–8Bs) in 2005.
Joint missile procurement programs include
the Advanced Medium Range Air-to-Air Mis-

THE BUDGET FOR FISCAL YEAR 2001

sile and the Joint Standoff Weapon. Procurement continues for the Joint Direct Attack
Munition—an inexpensive guidance kit which
transforms unguided bombs into accurate munitions. In addition, the Navy’s program to
upgrade the guidance and ordnance sections
of its Standoff Land Attack Missiles continues.
The budget also funds RDT&E for various
joint munitions programs of the future, such
as the AIM–9X Sidewinder air-to-air missile
and the Joint Air-to-Surface Standoff Missile.
Defending Against Strategic Ballistic
Missiles: The Administration intends to determine in 2000 whether to deploy a limited National Missile Defense (NMD) against ballistic
missile threats to the United States from rogue
nations. This decision will be based on an assessment of four factors: (1) whether the threat
is materializing; (2) the status of the technology based on an initial series of rigorous
flight tests, and the proposed system’s operational effectiveness; (3) whether the system
is affordable; and, (4) the implications that
going forward with NMD deployment would
hold for the overall strategic environment and
our arms control objectives, including efforts
to achieve further reductions in strategic nuclear arms under START II and START III.
The budget proposes $1.9 billion in 2001 for
development, procurement, and construction of
a NMD system to defend all 50 States against
a limited ballistic missile attack. The budget
includes sufficient funding so that if the Administration decides in 2000 to proceed with
deployment of a limited system, the resources
will be available to quickly proceed toward a
2005 initial capability. The Administration’s
long-range defense plan now provides a total
of about $10.4 billion in 2001–2005 for NMD.
This plan includes additional funding to expand the NMD capability to counter the expected rogue threat.
Developing Missile Defense Technologies
and Defending Against Theater Ballistic
Missiles: The budget proposes $2.8 billion for
other missile defense technologies and systems, including $1.9 billion for theater systems
to defend against missiles that directly threaten deployed U.S. and allied forces. While the
funding is primarily for research and development of advanced systems to meet future
threats, it includes $0.4 billion in procurement,

9.

SUPPORTING THE WORLD’S STRONGEST MILITARY FORCE

most of which will be used to purchase an
advanced version of the Patriot missile.
Modernizing Space Systems: The budget
provides funding for improved space-based
communications and strategic and theater missile warning and defense. It also provides
funding to support positioning and navigation,
weather monitoring, and launch systems that
will meet the needs of both military and civilian users. For example, DOD is funding upgrades to the Global Positioning System navigation satellites to allow the United States to
maintain a military advantage while providing
enhanced navigation capabilities to civilian
users worldwide. In addition, DOD and its industry partners are developing the Evolved
Expendable Launch Vehicles to provide more
efficient, economical access to space.
Establishing Information Dominance:
America’s preeminence in using information on
the battlefield has helped us establish the
world’s strongest military. Commanders who
can better observe and analyze the battle
while disseminating highly accurate information to their forces have a powerful advantage
over the adversary. Joint Vision 2010, DOD’s
vision for the future, focuses on the continued
development of command, control, communications, computers, intelligence, surveillance,
and reconnaissance capabilities. This effort
will enhance the accuracy of weapons and
allow more effective use of forces. The Army
plans to ‘‘digitize’’ a corps by calendar year
2004—that is, equip it so that accurate, timely
information about the battle can be transferred
rapidly among U.S. forces. The budget includes
funding for Navy and Air Force automated
command and control systems, and land and
space-based communications networks. It also
includes funds for battlefield surveillance assets, such as unmanned aerial vehicles for all
military departments, and national sensors to
help our leaders better anticipate, monitor,
and respond to crises. Finally, the budget
funds initiatives that will improve the production and dissemination of information by coalescing disparate sets of data. These initiatives
will play a key role in improving both military

157

operations and national security decision-making, and will enable commanders to direct the
battle and respond to threats more effectively.
Taking Care of Military Personnel and
Their Families
Enhancing Pay and Compensation:
Members of our Armed Forces are called upon
continually to make personal sacrifices for the
Nation’s security. It is essential that the Nation show support for their service by enhancing their quality of life and that of their families. Therefore, the budget proposes a 3.7 percent pay raise, effective January 2001—as authorized in law—to ensure that military compensation remains competitive with private
sector pay and the military services may continue to attract and retain high-quality personnel.
Improving Other Quality of Life Programs: The budget includes substantial funding to improve the quality of health care, military housing, and dependents’ programs. Enhancements to these family support programs
aim to reduce the stresses associated with
military life, such as frequent family separations. The budget includes a major initiative
to reduce servicemembers’ out-of-pocket costs
for housing, making local community housing
more affordable. The budget increases educational funding in order to accelerate the implementation of full-day kindergarten in DOD
schools overseas and the reduction of the
pupil-to-teacher ratio to 18:1 in grades one to
three in all domestic and overseas DOD
schools.
Supporting Our Nation’s Youth: The National Guard’s Youth ChalleNGe program is
a civilian youth opportunity program that provides military-based training, including supervised work experience in community service
and conservation projects, to young people who
have left secondary school prior to graduation.
This activity provides life skills and experiences that enhance the employment potential
of those participating in the program. For
2001, the budget sustains funding for this program at a level of $63 million.

158

THE BUDGET FOR FISCAL YEAR 2001

Managing Our Defense Resources More
Efficiently

going program to demolish unneeded infrastructure.

Pursuing Competitive Sourcing: DOD is
implementing an aggressive competitive
sourcing program for its infrastructure and
support activities, including base utility services, general base operations, family housing,
logistics support, training, property maintenance, and distribution depots. These functions, if retained by the government after competition, can be performed by both civilian and
military personnel. Even after DOD exempts
certain functions from competition for national
security purposes, competitive sourcing will
produce estimated savings of $11.6 billion from
1999 to 2005, with savings thereafter of more
than $3.4 billion annually.

Improving Financial Management: DOD
is continuing the vigorous transformation of
its financial management processes and systems. Both finance and accounting systems are
being consolidated and overhauled. Internal
controls are being strengthened to reduce and
then eliminate problems matching disbursements to obligations, reform the contractor
payment process, improve computer security
and fraud detection, and to implement Federal
accounting standards. Such steps will provide
managers with more accurate and timely financial information.

Privatizing Military Family Housing:
DOD has made a great deal of progress under
the Military Housing Privatization Initiative,
having privatized over 1,000 housing units by
1998 and nearly 2,700 units in 1999. DOD is
working on privatizing an additional 21,600
units in 2000, and expects to privatize a cumulative total of more than 31,500 housing units
by the end of 2001.
Eliminating Excess Infrastructure: Because infrastructure reductions have lagged
behind force reductions, DOD has facilities
that it no longer needs. These excess facilities
drain resources that could otherwise support
modernization, readiness, and quality of life.
For three years in a row, DOD has submitted
to Congress legislation to close additional
bases in order to reduce the excess infrastructure. Unfortunately, Congress has failed to approve this legislation despite data that additional base closures will generate savings that
can be applied to high priority defense programs. Nonetheless, DOD again will submit
legislation this Spring for new base closure
rounds in 2003 and 2005. Additionally, DOD
will continue to explore new ways to reduce
infrastructure costs wherever possible. For example, the budget supports an aggressive on-

Streamlining the Civilian Work Force:
Since 1993, DOD has cut its civilian work force
by over 27 percent, or more than 250,000 fulltime equivalent (FTE) positions, and it will
continue to streamline while maintaining quality. DOD plans to implement further reductions of 35,000 civilian FTE positions. During
this drawdown, DOD will provide transition
assistance for affected employees.
Implementing the Information Technology Management Reform Act (ITMRA):
Also known as the Clinger-Cohen Act, ITMRA
is designed to help agencies improve mission
performance by effectively using information
technology. One example is the Global Command and Control System, which supports
U.S. forces by improving their ability to process and transfer critical military information
quickly and accurately. The DOD Chief Information Officer Council manages DOD’s annual
$16 billion information technology budget and
$19 billion command, control, and communication budget, and provides advice on ITMRArelated issues. In addition, DOD continues to
restructure its work processes while applying
modern technologies to maximize the performance of information systems, achieve a significant return on investments, cut costs, and
produce measurable results.

V.

IMPROVING GOVERNMENT
PERFORMANCE

159

10.

RESTORING TRUST IN GOVERNMENT

When I became President, I knew we had to change old policies and old ways of doing
things . . . the American people had a very low level of confidence in the Government . . . We wanted to change all that. We knew it was important for our economy . . . We knew it was important
for the integrity of our democracy.
President Clinton
January 1999

Americans believe that Government can
deliver better results and improve their quality
of life and the lives of their families. A
generation ago, when the University of Michigan’s Institute for Social Research asked
‘‘Do you trust the Federal Government to
do the right things most of the time?’’
76 percent of Americans expressed confidence
in the Federal Government. By 1994, that
number had declined to only 21 percent.
Analyses of the underlying causes of distrust
of Government by The Pew Charitable Trusts,
the Council for Excellence in Government,
leading universities and other groups suggest
there is a key link between confidence in
Government and Government’s performance.
President Clinton and Vice President Gore
recognized this and set about improving the
responsiveness and performance of the Federal
Government. The success of these efforts
is reflected in the significant changes in
the way Government does its business and
the new confidence on the part of the American public. In the second term of this
Administration, public trust in the Federal
Government nearly doubled in the course
of only four years, reaching 40 percent when
last measured by the University of Michigan
in 1998 (see Chart 10–1).
Recent studies show that many people
base their decisions about how much they
trust their Government on their assessment
of how well they believe Federal agencies
perform. When Governments work for the
people—when citizens receive good basic services and have faith in the Government that
is providing them—a large measure of stability
and community naturally follows. In the

past seven years, President Clinton and Vice
President Gore have made substantial efforts
to improve Government performance with
demonstrable results.
Any organization that seeks to perform
at a high level must have clear expectations,
along with the necessary resources, the flexibility, and the management capacity to improve performance and get results. In 1993,
Congress passed the Government Performance
and Results Act (GPRA) which established
a framework to set expectations, measure
the progress toward meeting these goals,
and report on results. For the first time
this year, agencies will report upon these
results in light of the performance goals
they established in their 1999 plans. Later
in 2000, agencies will update their strategic
plans to cover activities for the next three
to five years. Each year, agencies are more
and more making performance measures a
key part of their basic decisions, resulting
in better budgeting and better programs.
The Administration’s Stewardship is
Making a Difference
In 1993, President Clinton and Vice President Gore launched the longest running management reform effort in the Federal Government’s history, the Reinventing Government
initiative. This effort has created a Government that works better, costs less, and gets
results Americans care about. In the past
seven years, the Administration has streamlined the work force, eliminated obsolete
programs and agencies, empowered its employees to cut red tape, and used partnerships
to get results.
161

162

THE BUDGET FOR FISCAL YEAR 2001

Chart 10-1. Americans' Trust in the Federal Government
Percent
80

76%

70
60
50

40%
40
30

21%
20
10
0
1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
Source: University of Michigan, National Election Studies, 1964-98

Between 1993 and 1999, the Administration
reduced the size of the Federal civilian work
force by 17 percent, or 377,000 full-time
equivalent employees. As Chart 10–2 shows,
this is the smallest Federal work force in
39 years. This reduction has been accomplished almost entirely through voluntary
separations. Almost all of the 14 Cabinet
Departments and large independent agencies
have reduced their work force (see Chart
10–3). For example, the Office of Personnel
Management reduced its work force by 55
percent during this period. And the growth
in the Justice Department’s work force, running contrary to the overall trend, specifically
reflects the Administration’s commitment to
expanding the fight against crime and drugs,
while the Commerce Department has hired
additional employees on a temporary basis
to meet the demands of the decennial census.
To enable agencies to downsize and restructure so that they can better achieve their
overall goals and missions, the Administration
proposed and Congress enacted legislation
in 1999 authorizing agencies to target offers

of voluntary, early retirement to particular
segments of the work force. The Administration will seek Government-wide authority to
offer such voluntary separation incentives
(buyouts) where justified through cost benefit
analysis and will also continue to support
agencies needing separate buyout authority
to restructure their work force.
The Administration is Improving
Performance
While reducing costs and cutting red tape
are important management objectives, the
highest priority objective is for Federal agencies to deliver results that Americans care
about. Studies show that high performing
organizations use a balanced set of measures
to determine how they are doing in achieving
‘‘bottom line’’ mission results, maintaining
strong employee morale, and satisfying their
customers. These three elements are related.
Research shows that when employee satisfaction grows, so too does the satisfaction of
the customers they serve. This, in turn,
contributes to improved mission (or operational) results. Together, such results-ori-

163

RESTORING TRUST IN GOVERNMENT

Chart 10-2. Actual Civilian Employment in the Executive Branch
1960 - 1999
(Excluding Postal Service)
Employees in millions
2.4

2.3

2.2

2.1

2

1.9

1.8

0
1960
1963
1966
Note: Data is end-of-year count.

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

Chart 10-3. Civilian FTE Changes on a Percent Basis, 1993-2001
Cabinet Departments and Selected Independent Agencies
Percent

-60

FTEs
(in thousands)

-50

1993

2001

Reduction

Percent
Reduction

-40

Cabinet
Depts.

1,880

1,547

-333

-17.7

-30

All Other
Agencies

275

215

-60

-21.8

2,155

1,762

-393

-18.2

-20

Exec.
Branch
Total

-10
0
10
20
30

Notes: The Executive Branch total excludes Postal Service. The 1993 base, which is the starting point for calculating the 272,900 FTE reduction required
by the Federal Workforce Restructuring Act, is 2.2 million.

Justice

EPA

Commerce

SSA

HHS

Labor

Education

Treasury

Transportation

Interior

Smithsonian

Veterans Affairs

State

Agriculture

Corps of Engnrs

Exec. Branch Avg

HUD

Energy

NASA

TVA

DOD--Military

GSA

OPM

40
All Other

10.

164

THE BUDGET FOR FISCAL YEAR 2001

ented measures give a more comprehensive
picture of how programs are performing and
prevents managers from making improvements
in one area at the expense of another.
Customer satisfaction: In 1999, the Administration sponsored the first-ever Government-wide survey of the customers of agencies
that deal the most with the public. The Government-wide American Customer Satisfaction
Index was 68.6 on a 100-point scale. With an
index of nearly 72, private sector services are
in a similar range. In fact, certain Federal
agencies do as well or better than the private
sector in a number of areas. For example, Federal customers receiving earned benefits rated
their agencies at 77 while the comparable private sector area had the same rating. Similarly, Veterans Health Administration outpatient services ranked 79; private sector hospitals ranked 70. As might be expected, there
is considerable variation between agencies that
provide benefits or services and those that collect taxes or regulate. The activities of regulatory agencies benefit the public at large, but

may not be perceived as benefiting those subject to the regulation. Chart 10–4 shows customer satisfaction with selected Federal services compared to average satisfaction for private sector services. For details, see the
website www.npr.gov. In addition, 60 percent
of those surveyed thought service had improved in the past two years. Each participating agency has committed to improve its
customer satisfaction in the coming year. The
agency plans are available at the website
www.customersurvey.gov. In 2000 and 2001,
agencies will repeat the survey and expand
the services covered.
Employee satisfaction: A second 1999 Government-wide survey—of the Federal work
force—showed that job satisfaction in Federal
agencies is similar to the private sector. It also
showed a dramatic leap in the number of Government employees who see customer service
as an essential component of their jobs. Today,
this is true for 72 percent of Federal Government employees. Less than a decade ago,
shortly before this Administration came to of-

Chart 10-4. Customer Satisfaction for Selected Federal Services Compared to
Average Satisfaction for Private Sector Services
Percent
Private Sector Services

71.9

Individuals Receiving Federally-Funded
Services Delivered by Local & State Gov'ts

80.3

Individuals Receiving Earned Benefits

77.2

Individuals Receiving
Public Information

74.9

Recreational Land Users

72.1

Applicants For Grants
and Users of Products

71.1

International Travelers

67.9

Household Consumers

63.2

Tax Filers

56.5

Individuals & Businesses
Affected by Regulations

54.6

0
Source: National Quality Research Center, University of Michigan Business School,
American Customer Satisfaction Index Scores (0-100 scale), 1999

10

20

30

40

50

60

70

80

10.

RESTORING TRUST IN GOVERNMENT

fice, only 36 percent of supervisors considered
customer service to be important. In addition,
the survey showed that employees in organizations where reinvention has been a priority
were twice as satisfied with their jobs, felt
they were more empowered to serve their customers, and faced less red tape than other employees.
To recognize that Federal employees are
the key to effective Government performance,
and to enable the Government to attract
and retain a high-quality work force, the
President proposes to enhance the current
compensation package. First, the President
proposes a 3.7 percent pay raise for civilian
employees, an increase greater than the recent
wage growth in the private sector. Second,
the Administration will request that Congress
reverse action taken last year to delay into
2001 the last 2000 paycheck of many Federal
employees and to repeal, effective January
2001, the higher retirement contributions required of Federal employees by the Balanced
Budget Act of 1997. Third, the President
will enable Federal employees to pay their
annual health insurance premiums out of
pre-tax income, a benefit already available
to most employees in the private sector
and State and municipal Governments.
Getting Results: The commitment of the
President and the Congress to balance the
budget—and keep it in balance—has rightly
prompted increased focus on the allocation of
resources to programs that advance each agency’s mission. Therefore, agencies are increasingly justifying funds for programs in terms
of performance. The Executive Branch and the
Congress are asking the key questions: ‘‘What
are we getting for what we are spending?’’ and
‘‘How will we know if we are successful?’’
The bottom line for Government organizations is their mission: the goals and outcomes
that can indicate success. For example, a
major performance goal for the Environmental
Protection Agency is to reduce air toxics
emissions. The Department of Education’s
Student Financial Assistance Program has

165
a major goal to ensure that low- and middleincome students will have the same access
to post- secondary education that high-income
students do. The Social Security Administration seeks to deliver customer-responsive
world-class service.
Often performance is examined only across
single organizational units, such as a Department or agency. In Chapters 11 (National
Security) through 27 (General Government)
that follow, program performance is described
according to budget functions. The functional
presentation reflects comprehensive coverage
of the major accounts in the budget, grouping
together similar programs to show the interrelationships among their goals. The chapters
include illustrative accomplishments in 1999
and other recent years, and also highlight
performance goals for 2001. Additional detail
will be available when the agencies distribute
their 2001 performance plans and their firstever annual performance reports assessing
operational results for 1999.
The material that follows, together with
Section III, ‘‘Sustaining Our Economic Prosperity,’’ constitutes the third comprehensive
Government-wide Performance Plan. Together
these sections, which highlight fiscal performance and operating performance, contain an
integrated view of the measures and descriptions of program activity contemplated by
the GPRA.
In addition, OMB is separately submitting
its third Report to Congress on the Costs
and Benefits of Federal Regulations. This
report is required by Section 638(a) of the
1999 Omnibus Consolidated and Emergency
Supplemental Appropriations Act. The report
updates information on the costs and benefits
of Federal regulations in the aggregate, by
agency and agency program, and by major
rule. It also presents an analysis of impacts
of Federal regulation on State, local, and
Tribal governments, small business, wages,
and economic growth. Finally, the report
provides recommendations for reform of specific regulations.

166

THE BUDGET FOR FISCAL YEAR 2001

Table 10–1. FEDERAL RESOURCES BY FUNCTION
(In billions of dollars)
Category
NATIONAL DEFENSE:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
INTERNATIONAL AFFAIRS:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
GENERAL SCIENCE, SPACE, AND
TECHNOLOGY:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Tax Expenditures:
Existing law ....................................
ENERGY:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
NATURAL RESOURCES AND ENVIRONMENT:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
AGRICULTURE:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................

Estimate

1999
Actual

2000

2001

2002

2003

2004

2005

288.1

294.1

306.3

310.1

316.4

324.1

332.4

–0.6

–0.5

–0.9

–0.8

–0.8

–0.7

–0.7

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

.................
*

*
*

.................
.................

2.1

2.1

2.2

2.2

2.2

2.2

2.2

41.5

23.9

22.8

23.2

23.5

24.1

24.6

–4.3

–4.8

–4.1

–3.7

–3.7

–3.7

–3.7

2.8
9.5

1.8
12.8

1.4
12.5

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

15.6
0.1

16.7
0.2

17.0
0.1

17.6
*

18.8
–*

20.1
–*

18.8

19.2

20.8

21.2

21.5

22.1

22.5

*

0.1

0.1

*

*

*

*

3.6

2.9

5.2

5.7

5.1

4.8

3.9

2.9

2.6

2.9

3.3

3.1

3.2

3.3

–2.2

–4.5

–3.8

–3.9

–3.7

–4.0

–4.0

1.1
*

1.7
0.1

1.6
0.2

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1.9
0.2

2.0
0.4

1.3
0.7

1.4
1.1

1.4
1.6

24.9

25.1

25.4

26.0

26.5

0.3
0.5
................. .................

0.6
–0.2

0.7
–0.1

0.9
–0.5

0.8
–0.4

0.8
–0.3

*
*
................. .................

*
0.1

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1.5
1.5
................. .................

1.6
*

1.6
*

1.7
0.1

1.8
0.2

1.8
0.3

4.5

4.6

4.6

4.5

4.7

4.7

26.1
0.7

14.3
3.4

9.8
3.3

12.2
6.6

10.6
6.6

N/A
N/A

14.4
.................

1.9
1.9
................. .................

23.8

4.5
18.4
.................
10.0
2.6

24.0

9.7
7.6
6.6
................. ................. .................
N/A
N/A

N/A
N/A

N/A
N/A

10.

167

RESTORING TRUST IN GOVERNMENT

Table 10–1. FEDERAL RESOURCES BY FUNCTION—Continued
(In billions of dollars)
Category
Tax Expenditures:
Existing law ....................................
COMMERCE AND HOUSING
CREDIT:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
TRANSPORTATION:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
COMMUNITY AND REGIONAL DEVELOPMENT:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL
SERVICES:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
HEALTH:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Guaranteed loans ............................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

0.9

0.9

1.0

1.0

1.0

1.1

1.1

3.8

7.2

3.5

3.3

3.3

3.2

3.3

–0.8
–0.1

–1.0
–0.1

–1.5
–0.1

–1.3
–0.1

–0.7
–0.1

2.0
273.9

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

247.1
0.3

255.3
0.5

264.4
0.5

274.7
0.7

284.4
0.8

14.5

14.5

15.0

15.6

16.3

2.1
*

1.6
*

2.0
*

1.9
*

1.9
*

–0.9
–1.6
................. .................
2.1
306.6

1.8
264.0

227.9
235.6
................. .................

13.7

13.3

1.9
2.4
................. .................
0.2
1.8

1.0
2.8

0.9
0.9

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1.9

2.0

2.1

2.2

2.3

2.5

2.6

11.0

11.5

12.3

12.3

12.5

12.8

13.1

–0.6
–0.1

–0.8
*

–0.9
0.1

–0.9
0.2

–1.1
0.2

2.8
2.9

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1.5
0.1

1.4
0.5

1.2
1.0

1.1
1.3

1.1
1.6

44.4

61.5

61.6

62.3

63.4

64.6

11.3
–0.1

15.4
–2.8

14.0
–0.2

15.5
–0.2

16.2
–0.2

17.2
–0.2

14.7
25.3

15.8
26.5

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

36.0
0.1

37.6
1.4

38.7
3.7

41.2
3.8

42.4
5.0

44.7
5.5

33.8

35.0

34.8

35.2

36.1

36.8

132.3
1.1

143.2
2.8

155.1
5.3

167.5
8.1

181.3
9.8

0.1

N/A

N/A

N/A

N/A

–*
–0.5
................. .................
1.7
1.6

2.1
2.4

1.3
1.4
................. .................

46.6
11.3
.................
18.1
21.9
34.1
.................

30.2

114.1
123.3
................. .................
.................

0.1

168

THE BUDGET FOR FISCAL YEAR 2001

Table 10–1. FEDERAL RESOURCES BY FUNCTION—Continued
(In billions of dollars)
Category
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
MEDICARE:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
INCOME SECURITY:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................
SOCIAL SECURITY:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Tax Expenditures:
Existing law ....................................
VETERANS BENEFITS AND
SERVICES:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
Tax Expenditures:
Existing law ....................................
ADMINISTRATION OF JUSTICE:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
GENERAL GOVERNMENT:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Tax Expenditures:
Existing law ....................................
Proposed legislation ........................

Estimate

1999
Actual

2000

2001

82.9
89.3
................. .................

2.8

197.8
.................
*
*
140.3
.................

3.2

2003

2004

2005

95.2
0.1

101.7
1.3

107.4
2.8

114.2
3.9

122.0
4.7

3.0

3.0

3.0

3.1

3.2

218.3
–0.7

223.7
2.6

241.9
–2.7

255.4
6.5

277.5
6.1

29.8

41.3

41.3

41.8

42.9

43.8

207.4
2.2

217.2
–1.6

229.7
0.9

240.9
1.5

251.1
3.0

263.3
3.1

*
0.1

*
0.1

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

147.7
*

153.1
2.6

159.3
4.6

165.6
7.9

172.1
10.4

178.8
16.4

3.2

3.5

3.5

3.5

3.6

3.7

443.0
0.1

465.3
0.1

489.7
0.1

516.2
0.2

3.1

187.7
199.5
................. .................

32.7

2002

387.0
403.3
422.2
................. ................. .................
23.3

24.5

25.8

27.3

29.0

30.8

23.3

19.3

20.9

22.1

22.1

22.3

22.9

23.4

25.1
1.8

25.6
–1.5

26.3
0.8

27.6
1.0

28.4
1.5

31.0
2.0

1.7
43.1

2.0
32.1

0.7
29.5

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

3.1

3.3

3.4

3.5

3.7

3.9

4.1

26.5

26.6

29.0

30.0

30.1

30.3

30.9

2.1
–1.5

2.2
–1.5

23.8
.................

0.9
1.5
1.5
0.8
0.7
................. ................. ................. ................. .................

13.7

12.6

14.7

14.5

14.6

14.8

15.0

3.3
.................

1.7
*

1.4
*

1.3
0.4

1.3
0.4

1.6
0.4

1.4
0.4

.................

*

*

N/A

N/A

N/A

N/A

68.3
*

70.8
0.3

73.8
0.3

77.0
0.3

80.3
0.4

63.0
65.8
................. .................

10.

169

RESTORING TRUST IN GOVERNMENT

Table 10–1. FEDERAL RESOURCES BY FUNCTION—Continued
(In billions of dollars)
Category
NET INTEREST:
Spending:
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Tax Expenditures:
Existing law ....................................
ALLOWANCES:
Spending:
Discretionary Budget Authority ....
UNDISTRIBUTED OFFSETTING
RECEIPTS:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
FEDERAL GOVERNMENT TOTAL:
Spending:
Discretionary Budget Authority ....
Mandatory Outlays:
Existing law .................................
Proposed legislation ....................
Credit Activity:
Direct loan disbursements .............
Guaranteed loans ............................
* $50 million or less.
N/A Not available.

1999
Actual

Estimate
2000

229.7
220.3
................. .................

2001

2002

2003

2004

2005

208.3
*

198.6
*

189.2
0.1

177.4
0.1

163.6
0.1

1.1

1.2

1.2

1.3

1.4

................. .................

–0.2

–0.2

–0.3

–0.3

–0.3

................. .................

–0.2

–0.2

–0.2

–0.2

–0.2

–40.4
–43.1
................. .................

–45.7
0.3

–49.1
0.3

–47.3
0.3

–46.9
0.3

–48.6
0.3

574.7

622.2

627.7

637.5

652.1

667.5

1,167.4
4.6

1,203.2
–2.1

1,233.5
10.7

1,292.3
5.3

1,342.3
18.1

1,404.2
20.0

37.3
348.3

35.8
354.1

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1.0

583.1
1,128.1
.................
37.7
388.2

1.1

11.
Table 11–1.

NATIONAL DEFENSE

Federal Resources in Support of National Defense
(In millions of dollars)

Function 050

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................

Estimate

1999
Actual

2000

2001

2002

2003

2004

2005

288,117

294,068

306,287

310,069

316,438

324,051

332,364

–590

–519

–884

–839

–792

–665

–672

..............
5

11
37

..............
..............

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

2,120

2,140

2,160

2,180

2,200

2,220

2,240

N/A = Not available.

The Federal Government will allocate more
than $306 billion in 2001 to defend the
United States, its citizens, its allies, and
to protect and advance American interests
around the world. National defense programs
and activities ensure that the United States
maintains strong, ready, and modern military
forces to promote U.S. objectives in peacetime,
deter conflict, and if necessary, successfully
defend our Nation and its interests in wartime.
Over the past half-century, our defense
program has deterred both conventional and
nuclear attack on U.S. soil, brought a successful end to the Cold War, and successfully
executed numerous contingency operations.
Today, the United States is the sole remaining
superpower in the world, with military capabilities unsurpassed by any nation. As the
world’s best trained and best equipped fighting
force, the U.S. military continues to provide
the strength and leadership that serve as
the foundation upon which to promote peace,
freedom, and prosperity around the globe.
Department of Defense (DOD)
The DOD budget provides for the pay,
training, operation, basing, and support of
U.S. military forces, and for the development
and acquisition of modern equipment to:

Shape the international environment by
sustaining U.S. defense forces at levels sufficient to undertake our strategy of engagement,
and conducting programs to reduce weapons
of mass destruction, prevent their proliferation, and combat terrorism;
Respond to the full
by stationing well-trained
overseas and maintaining
lize and rapidly deploy
U.S. soil;

spectrum of crises
and equipped forces
capabilities to mobiforces stationed on

Prepare for an uncertain future by giving
U.S. forces the military hardware that employs
the best available technologies and by recruiting, training and retaining quality personnel;
Ensure that the U.S. military remains
the world’s most prepared and capable force
by sustaining force readiness levels and reengineering business practices to improve operations.
To achieve these objectives, DOD sustains
the following capabilities.
Conventional Forces: Conventional forces
include ground forces such as infantry and
tank units; air forces such as tactical aircraft;
naval forces such as aircraft carriers, destroyers, and attack submarines; and Marine Corps
171

172
expeditionary forces. The Nation needs conventional forces to deter aggression and, when
that fails, to defeat it. Funds to support these
forces cover pay and benefits for military personnel; the purchase, operation, and maintenance of conventional systems such as tanks,
aircraft, and ships; the purchase of ammunition and spare parts; and training.
Mobility Forces: Mobility forces provide the
airlift and sealift that transport military personnel and materiel throughout the world.
They play a critical role in U.S. defense strategy and are a vital part of America’s response
to contingencies that range from humanitarian
relief efforts to major theater wars. Airlift aircraft provide a flexible, rapid way to deploy
forces and supplies quickly to distant regions,
while sealift ships allow the deployment of
large numbers of heavy forces together with
their fuel and supplies. The mobility program
also includes prepositioning equipment and
supplies at sea or on land near the location
of a potential crisis, allowing U.S. forces that
must respond rapidly to crises overseas to
quickly draw upon these prepositioned items.
Strategic Nuclear Forces: Strategic nuclear forces are also important to our military
capability. Within treaty-imposed limits, they
include land-based intercontinental ballistic
missiles, submarine launched ballistic missiles,
and long-range strategic bombers. The primary
missions of our strategic forces are to deter
nuclear attack against the United States and
its allies, and to convince potential adversaries
that they will never gain a nuclear advantage
against our Nation.
Supporting Activities: Supporting activities include research and development, communications, intelligence, training and medical
services, central supply and maintenance, and
other logistics activities. In particular, the Defense Health Program provides health care
through DOD facilities as well as through
TRICARE—its contracted, civilian network
companion program.
DOD Performance
DOD’s corporate goals derive from the
key tenets of the U.S. national security
strategy and form the basis of the performance
goals and measures presented here.

THE BUDGET FOR FISCAL YEAR 2001

Shaping the International Environment
and Responding to the Full Spectrum of
Crises: DOD’s first corporate goal is to shape
the international environment by participating
in international security organizations, such as
NATO, and improving our ability to work cooperatively with our friends and allies. Such efforts are designed to promote regional stability
and security, and reduce the threat of war.
Their failure could lead to a major conflict affecting U.S. interests.
Also, DOD must be able to respond to
the full spectrum of crises, from small-scale
contingencies to two nearly simultaneous
major theater wars.
Evaluating DOD’s performance in this area
includes an assessment of the ability of
U.S. forces to:
• Enhance and sustain security relationships with friends and allies, enhance coalition warfighting capability, promote regional stability and support U.S. regional
security objectives, deter aggression, and
prevent or reduce the threat of conflict.
One measure of this is DOD’s ability to
conduct joint exercises. In 2001, DOD will
conduct 204 joint and combined overseas
military exercises.
DOD’s current force structure (which was
derived from the Quadrennial Defense Review
(QDR)) was designed to respond to the full
spectrum of crises, up to and including two
major-theater wars. DOD acknowledges the
impact of a high rate of operation on unit
readiness. Thus, it has set goals for limiting
operational tempo to levels which do not
adversely impact overall quality of life for
service members and their families. DOD
will closely monitor the pace of peacetime
operations across the forces using these goals
as a guide.
• The Army will maintain four active corps
headquarters, 18 active and National
Guard divisions, two active armored cavalry regiments, and 15 National Guard enhanced readiness brigades. The Army will
minimize the number of units deploying
more than 120 days per year.
• The Navy will maintain 11 aircraft wings,
12 amphibious ready groups, 12 aircraft
carriers, 55 attack submarines, and 116

11.

NATIONAL DEFENSE

surface combatants. Compared to 1999,
the number of aircraft carriers and amphibious ready groups remain at 12, surface combatant ships (active and reserve)
remain at 116, and there are 2 fewer attack submarines. In addition, the Navy
will minimize the number of units not
meeting its personnel tempo goal.
• The Air Force will maintain 20.2 Air Force
fighter wing equivalents, four air defense
squadrons, and around 190 bombers. The
Air Force will hold unit deployments in
excess of 120 days to a minimum.
• The Marine Corps will maintain three marine expeditionary forces, three active and
one reserve divisions, three active and one
reserve air wings, and three active and
one reserve force service support groups.
This keeps the Marine Corps forces at the
same level as recent years. The Marine
Corps will minimize the number of units
deploying more than 180 days per year
over a 36-month scheduling period.
Overseas presence, mobility, and the sustaining of a capable force structure are also
key to DOD’s ability to respond effectively
to crises. DOD thus maintains forces ‘‘forward
deployed’’ (that is, on-site around the world
and at U.S. bases) that are capable of
rapidly converging at the scene of a potential
conflict to deter hostilities and protect U.S.
citizens and interests in times of crisis.
• The Army will maintain, as it did in 1999,
one mechanized division in the Pacific region and two divisions with substantial
elements in Europe.
• The Navy will maintain an overseas presence, defined by the percentage of time
regions are covered by an aircraft carrier
battle group, at 100 percent in the Pacific,
75 percent in Europe and 75 percent in
Southwest Asia. Carrier battle groups will
continue to shift, as necessary, from these
notional assignments to respond to real
world events. In 1999, carrier battle
groups were on station for a lesser percentage of time in the Pacific and Europe
than planned, while Southwest Asia deployments increased to 100 percent coverage. Coverage in 1999 for all three regions exceeded that achieved in 1998.

173
• The Air Force will continue maintaining
two fighter wing equivalents in the Pacific,
two in Europe and one in Southwest Asia.
• The Marine Corps will cover the Pacific
region with a Marine expeditionary unit
or amphibious ready group 100 percent of
the time, Europe eighty percent of the
time, and Southwest Asia 50 percent of
the time. Amphibious Ready Groups will
continue to shift, as necessary, from these
notional assignments to respond to cover
real world events. In 1999, for example,
Marine Expeditionary Units covered Europe 100 percent of the time, and total
coverage in all three regions was 30 percent greater than planned.
Remaining the world’s most ready and
capable force depends on six elements: ensuring the readiness of military units; maintaining a robust research and development program; procuring appropriate military equipment; recruiting and retaining high-quality
personnel; strengthening and enhancing quality of life programs for military members
and their families; and, providing equal opportunity throughout the armed services.
DOD has identified specific milestones to
measure progress and to monitor readiness
levels across the forces, such as the amount
of training that individual units accomplish,
the availability and operability of equipment,
and the achievement of recruiting and retention goals.
• Several factors determine overall unit
readiness, such as training, quantity and
condition of equipment, and the number
and experience of personnel. In 2000 and
2001, DOD will ensure that all of its units
meet their specified readiness goals.
• On average for active forces, the Army will
strive to attain 800 tank miles a year; the
Air Force will strive to maintain its 2000
program of 17.2 active fighter/attack flying
hours per crew a month; the Marine Corps
plans to execute its mission training syllabus fully; and, the Navy plans to execute
50.5 deployed and 28.0 non-deployed ship
steaming days per quarter.
Finally, the amount of sealift and airlift
capacity must be sufficient to meet deployment
time lines for deterring and defeating large-

174
scale, cross-border aggression in two distant
theaters in overlapping time frames, and
to sustain U.S. forces engaged in two major
theater wars.
• In 2001, DOD will maintain its 1999 organic strategic airlift capability of 26 million ton miles a day and will attain a
surge sealift capacity of 9.2 million square
feet. In 1999, the surge sealift capability
was 7.7 million square feet.
Preparing Now for an Uncertain Future:
To achieve DOD’s second corporate goal, U.S.
forces must maintain a qualitative superiority
over potential adversaries by pursuing a focused procurement and research and development program, and by recruiting, training, and
retaining quality personnel. DOD must transform the force by exploiting the revolution in
military affairs, and reengineering the Department to achieve a 21st century infrastructure.
Achieving this goal depends on ensuring that:
• DOD will acquire modern and capable
weapon systems and will deliver them to
U.S. forces in 97 months or 25 percent
less time than the 132 months it previously took, while (1) ensuring that costs
do not grow more than one percent a year
in the years 2000 and 2001, and (2) meeting required performance specifications.
• DOD will recruit more than 200,000 new
members for the active armed services in
2001. At least 90 percent of these recruits
will have a high school diploma and 60
percent will be in AFQT mental categories
I-IIIA. Recruitment funding will be increased in 2000 and 2001 to ensure that
the Services are successful in achieving
their recruiting goals and meet the challenges of a booming economy and lower
youth unemployment rates. The 2001 recruitment goal for new recruits is slightly
above the average number of enlisted recruits during the 1997–9 period.
As part of meeting this goal, DOD will
follow the strategy of Joint Vision 2010,
developed by the Chairman of the Joint
Chiefs of Staff, to transform U.S. forces
for the future, and it exploit emerging communication, information and associated technologies to reshape the way it fights and
prepares for war.

THE BUDGET FOR FISCAL YEAR 2001

• Defense Technology Objectives (DTOs)
guide both basic research and focused investment. In 2000 and 2001, DOD will
maintain 70 percent of DTOs on track as
determined by peer review. For the past
three years, well over 90 percent of the
DTOs have been judged to have shown
satisfactory progress.
Joint experimentation is an aggressive new
program designed to give insights into new
operational concepts and validate their ability
to meet future battlefield requirements. In
2001, DOD will conduct 24 joint experiments.
This program was newly established in 1999.
DOD must also develop new, innovative
approaches to manage infrastructure costs
and capitalize on the revolution in business
affairs. Given its importance, DOD will again
submit legislation this Spring for new base
closure rounds in 2003 and 2005. In addition,
DOD will continue to explore new ways
to reduce infrastructure costs wherever possible. The budget also supports an aggressive
ongoing program to adopt innovative management techniques and technological practices.
As part of this effort, DOD must also
transform its support functions. Therefore,
DOD has identified specific measures around
which to focus the reform of acquisition
and business affairs.
By 2001, DOD will strive to:
• Ensure that U.S. forces can achieve immediate visibility (for example, information
on location and status) of 94 percent of
DOD materiel assets, while resupplying
military peacekeepers and warfighters and
reducing the 1997 average order-to-receipt
time of 35 days by more than 55 percent.
Last year, DOD exceeded its interim goal,
reducing delivery time to 18 days.
• Demolish and dispose of more than 57 million square feet of excess and obsolete facilities. DOD is planning to demolish and
dispose of more than 80 million square
feet by 2003.
• Develop a request-for-proposal to privatize
appropriate DOD utility systems. Of the
total 2,744 DOD utility systems, more
than 200 already have been privatized or
are no longer DOD systems. All eligible,

11.

175

NATIONAL DEFENSE

feasible systems are planned for privatization before October 2003.
• Dispose of $427 million in excess National
Defense Stockpile inventories and $180
million in unneeded Government personal
property, while reducing supply inventory
by $3 billion. In 1999, these initiatives reduced excess inventory by over $6 billion.
• Dispose of 57.7 million cumulative square
feet of excess real property. Cumulative
disposals through 1998 amounted to 16
million square feet.
• Initiate competitions for more than
200,000 positions under OMB Circular
A–76 (public-private sector competitions)
and the new strategic sourcing processes.
Savings will be around $11 billion by
2005.
• Limit the cost growth of major acquisition
programs to less than one percent.
• Simplify purchasing and payment by continuing to use purchase card transactions
for at least 90 percent of all DOD micropurchases, while reengineering the requisitioning, funding, and ordering processes. DOD reached 90 percent purchase
card usage for the first time in 1999.
• Perform 90 percent of acquisition transactions through electronic commerce and
electronic data interchange.
• Eliminate layers of management by
streamlining processes, while cutting
DOD’s acquisition-related work force by 22
percent from its 1997 level.
DOD’s management goals address necessary
improvements to the finance, accounting, and
information systems.
By 2001, DOD will strive to:
• Reduce the number of finance and accounting systems that do not comply with
applicable Federal accounting standards
from 17 in 1999 to three in 2001. This
continues an improvement effort that has
reduced the total number of finance and
accounting systems from 324 in 1991. Last
year alone, DOD reduced noncompliant
systems from 109 to 17.

• Achieve unqualified audit opinions on two
additional financial statements.
Department of Energy (DOE)
Performance
DOE contributes to our national security
mainly by reducing the global danger from
nuclear weapons and other weapons of mass
destruction. DOE is committed to maintaining
confidence in the nuclear weapons stockpile
without testing to strengthen the nuclear
nonproliferation regime; to work with states
of the former Soviet Union to improve control
of nuclear materials; to develop improved
technologies to detect, identify, and respond
to the proliferation of weapons of mass destruction and illicit materials trafficking; and
to clean up aggressively the environmental
legacy of nuclear weapons programs.
The budget proposes $13.0 billion to meet
DOE’s national security objectives, of which
$6.7 billion is for ongoing national security
missions and $6.3 billion addresses environmental cleanup activities.
DOE will achieve the following performance
goals:
National Security
• Meet all scheduled nuclear weapons alterations and modifications and certify to the
President that standards for safety, reliability, and performance of the nuclear
weapons stockpile are met. In 1999, DOE
met all milestones for weapons alterations
and certification, and DOE selected a primary tritium production technology.
• Provide scientific understanding of the nuclear package of weapon systems to sustain our ability to certify the nuclear
weapon stockpile without underground nuclear testing. In 1999, DOE conducted two
subcritical experiments that provided valuable scientific information about the implosion phase of a nuclear weapon and
demonstrated a three trillion operations
per second computer system.
• Produce and deliver three satellite nuclear
explosion detection sensor systems per
year to provide continuous worldwide monitoring for nuclear explosions occurring in
the atmosphere or space. In 1999, DOE

176

THE BUDGET FOR FISCAL YEAR 2001

demonstrated autonomous operations of
the next-generation space-based radio frequency monitoring sensor.
• Continue to implement a bilateral agreement with Russia for disposing of surplus
weapons plutonium. In 1999, DOE issued
a Record of Decision for the U.S. surplus
plutonium disposition program and initiated negotiations with Russia on the bilateral agreement.
• Begin consolidation of weapon-usable material into fewer buildings and fewer sites
in Russia and eliminate 200 kilograms of
weapons-grade material by converting it
to non-weapons grade form, thereby improving security and reducing overall cost.
In 1999, DOE integrated and improved
technology practices, facilities and training
for eventual material protection, control
and accounting for 650 metric tons of
weapons-usable material at more than 40
locations in Russia.
Environmental Quality
DOE is making significant progress in
reducing contamination and decommissioning
facilities no longer needed at former nuclear
weapons production installations. However,
the following performance measures may show
slower progress as DOE addresses more difficult and long-term cleanup projects.
• Complete 90 release site assessments. A
release site is a specific location where
hazardous, radioactive, or mixed waste
has or is suspected to have occurred. In
1999, DOE completed 288 release site assessments.
• Clean up 160 release sites, bringing the
number completed to more than 4,900 of
a total inventory of approximately 9,700
release sites. In 1999, DOE completed
cleanup of 161 release sites.
• Complete 40 facility decommissioning assessments. Decommission 30 facilities, in-

creasing the number completed to more
than 660 out of a total inventory of approximately 3,300 facilities. In 1999, DOE
decommissioned 92 facilities.
Other Defense-Related Activities
Other activities that support national defense and are implementing performance
measurement include programs involving the:
• Coast Guard, which supports the defense
mission through overseas deployments for
engagements with friends and allies, port
security teams, boarding and inspection
teams for enforcing UN sanctions, training, aids to navigation, international
icebreaking, equipment maintenance, and
support of the Coast Guard Reserve;
• Federal Bureau of Investigation, which
conducts counterintelligence and surveillance activities;
• Maritime Administration, which helps
maintain a fleet of active, military useful,
privately owned U.S. vessels that would
be available in times of national emergency. By July 1999, 93 percent of the
strategic commercial port facilities designated as necessary to meet national security requirements were ready;
• Arlington National Cemetery, which is developing a capital investment plan for
using contiguous land sites that will be
vacated by the Services, including the
Navy Annex and portions of Fort Meyer.
A review is underway of the demographics
of the four million annual visitors to this
national historic shrine; and,
• Selective Service System, which is modernizing its registration process to promote
military recruiting among registrants, and
in cooperation with the Department of Defense, is reducing active duty and reserve
force officers to reflect the readiness requirements, and to fund additional automation.

12.
Table 12–1.

INTERNATIONAL AFFAIRS
Federal Resources in Support of International Affairs
(In millions of dollars)

Function 150

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

41,509

23,910

22,755

23,193

23,500

24,076

24,569

–4,276

–4,769

–4,089

–3,735

–3,735

–3,689

–3,709

2,781
9,513

1,813
12,754

1,419
12,467

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

14,415
..............

15,595
80

16,685
168

17,015
102

17,615
46

18,790
–10

20,065
–27

N/A = Not available.

The Administration proposes $22.8 billion
for International Affairs programs in 2001.
By fully funding these programs, the United
States can continue to provide critical international leadership to accomplish key strategic
goals, such as enhancing national security,
fostering world-wide economic growth, supporting the establishment and consolidation
of democracy, improving the global environment and addressing other key global issues
such as dealing with AIDS.
In many cases, the performance goals that
follow are from agency performance plans.
In addition to the goals identified below,
agencies have established other performance
goals for themselves to ensure that they
fulfill their legislative mandates in ways
that also contribute to U.S. national interests.
National Security
U.S. security depends on active diplomacy,
steps to resolve destabilizing regional conflicts,
and vigorous efforts to reduce the continuing
threat of weapons of mass destruction. A
strong, active United Nations enhances U.S.
diplomatic efforts, and the budget proposes
to fund assessed contributions to this and
other international organizations, as well as

annual assessed and voluntary peacekeeping
contributions.
Economic and reconstruction assistance and
police training are critical to our effort to
support a new, democratic society in Kosovo
and funding under the FREEDOM Support
Act helps foster the transition to market
democracies in the former Soviet Union.
The State Department will implement a
broad program of security enhancements in
response to continued threats of terrorist
bombings and related violence directed at
U.S. diplomatic and consular facilities overseas
in 2001. Achieving global upgrades and maintaining that readiness at the Department’s
overseas posts poses a significant management
challenge. The budget also includes significant
investments in overseas facilities to ensure
continued protection of U.S. Government employees. Long-range capital planning, including
a review of how the U.S. Government staffs
and manages overseas facilities, will ensure
that these investments meet cost, schedule,
and performance goals of the program.
Relevant agencies will meet the following
goals in 2001:
177

178

THE BUDGET FOR FISCAL YEAR 2001

• The State Department will avert or defuse
regional conflicts where critical national
interests are at stake through bilateral
U.S. assistance and UN peacekeeping activities.

liberalization, and strengthens and extends WTO rules; negotiate cuts in specific
identified barriers to U.S. and global
trade; and effectively enforce international
trade agreements.

• The State and Defense Departments will
ensure that the armed forces of NATO’s
‘‘candidate countries’’ can operate in a
fully integrated manner with other NATO
forces upon their planned entry into
NATO.

• The Export-Import Bank will develop new
mechanisms to expand the availability of
financing for U.S. exports by pioneering
joint ventures with the private sector, as
well as innovative financing programs that
will increase the Bank’s support for small
and medium-sized exporters.

• The State Department will achieve full
compliance with, and verification of, treaties regarding weapons of mass destruction and, if necessary, combat suspected
development programs.
Economic Prosperity
International affairs activities increase U.S.
economic prosperity in several ways. First,
the U.S. Trade Representative (USTR), supported by the State Department and other
agencies, works to reduce barriers to trade
in U.S. goods, services, and investments by
negotiating new trade liberalizing agreements
and strictly enforcing existing agreements.
Second, the Export-Import Bank and the
Trade and Development Agency (TDA) provide
grant and credit financing to correct market
distortions that can put U.S. exports at
a competitive disadvantage. The Overseas
Private Investment Corporation (OPIC) provides investment insurance and financing for
development projects in support of U.S. business large and small.
Third, development assistance from the Multilateral Development Banks (MDBs) and
USAID, along with debt reduction, help increase economic growth, openness, and market
orientation in developing and transitioning
countries. This creates new markets for U.S.
goods and services and reducing the economic
cause of instability in these regions.
Relevant agencies will meet the following
performance goals in 2001:
• USTR will work with parties to the World
Treaty Organization (WTO) to launch an
inclusive new negotiating round that covers trade in agriculture and services,
achieves further effective market access

• OPIC will increase, from 1999 levels, the
amount of private U.S. investment that
supports American, foreign policy and development goals and benefits the U.S.
economy.
• TDA will increase, from 2000 levels, the
ratio of TDA-supported exports to TDA expenditures and the percentage of TDA
projects that ultimately yield U.S. exports.
• U.S. Agency for International Development (USAID), through bilateral assistance, and the Treasury Department,
through its contributions to the MDBs,
will provide assistance that helps to increase the real annual per capita GDP
growth rate from 1999 levels in developing
countries.
American Citizens and U.S. Borders
The State Department, through the U.S.
passport office and the network of embassies
and consulates overseas, helps and protects
Americans who travel and reside abroadmost directly through various consular services, including citizenship documentation and
help in emergencies. The Department also
helps to control how immigrants and foreign
visitors enter and remain in the United
States by effectively and fairly administering
U.S. immigration laws overseas and screening
applicants, in order to deter illegal immigration and prevent terrorists, narcotics traffickers and other criminals from entering
the United States.
The State Department will meet the following performance goal in 2001:

12.

179

INTERNATIONAL AFFAIRS

• Improve U.S. passport security by issuing
all passports produced in the United
States with a digitized passport photo.
Law Enforcement
The expansion and rising sophistication
of transnational crime, international drug
trafficking and terrorism represent direct
threats to our national security. The State
Department has broad responsibility for Federal law enforcement policy and program
coordination in the foreign arena. The budget
funds the State Department’s diplomatic efforts to convince other countries to work
cooperatively to address international criminal
threats; it also funds add distance and training
that helps other countries combat corruption,
terrorism, and illegal narcotics, and provides
the developing countries with economic alternatives to narcotics cultivation and export.
The State Department, working with the
Departments of Justice, the Treasury, and
Defense, will meet the following performance
goals in 2001:
• Increase, from 1999 levels, the number of
foreign governments that enact and enforce legislation to combat corruption,
money
laundering,
and
other
transnational criminal activities.
• Reduce from 1999 levels, the hectares of
coca and opium poppies being cultivated
in producing countries.
• Increase, from 1999, levels, criminal justice section training, providing equipment,
and technical assistance to local and federal law enforcement organizations.
Democracy
Advancing U.S. interest in the post-Cold
War world often requires efforts to support
democratic transitions, address human rights
violations, and promote U.S. democratic values. The budget funds the State Department
efforts that are intended to discourage other
nations’ interference with basic democratic
activities, that helps countries develop the
institutions and legal structures for the transition to democracy. Finally, the budget funds
exchange and training programs of the State
Department, as well as international broadcasting programs that seek to the world

and ensure that Americans understand and
value the peoples and cultures of other nations.
Relevant agencies will meet the following
performance goals for 2001:
• USAID, State Department public diplomacy programs, and international broadcasting programs will provide assistance
that lead to the improvement of Freedom
House ratings of countries in which the
United States is assisting the transition
to democracy.
• As a result of State Department diplomacy
and direct assistance, the instances of
human rights abuses as reported by the
State Department in the annual U.S. Report on Human Rights will be reduced
from 1999 levels.
• Public diplomacy activities will increase,
from 1999 levels, the support for democracy, democratic institutions, and human
rights in selected countries that participate in the programs, as measured
through polling.
Humanitarian Response
U.S. values demand that we help alleviate
human suffering from foreign crisis whether
man-made or natural, even in cases with
no direct threat to U.S. security interests.
The budget provides the necessary funds
to address and, where possible, try to prevent,
humanitarian crises through USAID’s Foreign
Disaster Assistance and Transition Initiatives
programs, the State Department’s Migration
and Refugee Assistance program, and food
aid provided under Public Law 480 authorities.
The budget also funds U.S. bilateral demining
efforts to address the growing humanitarian
crisis caused by land mines in areas of
former conflict.
Relevant agencies will meet the following
performance goals for 2001:
• USAID, in conjunction with other public
and private donors, will provide humanitarian assistance that will maintain the
nutritional status of children aged five or
under living in regions affected by humanitarian emergencies.

180
• The State Department will reduce refugee
populations, from 1999 levels, through
U.S.-sponsored integration, repatriation,
and resettlement activities.
• The State Department will increase, from
1999 levels, the amount of land returned
to productive economic activity by clearing
mines and other unexploded ordnance.
Over time, this will also result in a reduction of innocent casualties.
Global Issues
The global problems of environmental degradation, population growth, and the spread
of communicable diseases directly affect future
U.S. security and prosperity. Increased funding
for international family planning efforts, prevention of the global spread of HIV/AIDS,
and protection of the world’s dwindling tropical
forests, represent new or expanded initiatives
to address the causes of these problems.
In addition, continued funding of bilateral
efforts to address global climate change in
developing countries, as well as funding of
current commitments and arrears to the
Global Environment Facility, remain critical
to the effort to reduce global environmental
degradation.
Finally, the volunteer programs of the Peace
Corps serve U.S. national interests by promoting mutual understanding between Americans and the people of developing nations
and providing technical assistance to interested countries.
Relevant agencies will meet the following
performance goals in 2001:

THE BUDGET FOR FISCAL YEAR 2001

• USAID, working with the Departments of
Health and Human Services, Defense and
Labor, and with other donors and national
governments, will provide assistance that
will reduce, from 1999 levels, HIV transmission and impact of the HIV/AIDS pandemic in the developing countries in which
the Administration’s global HIV/AIDS initiative is implemented, as measured by
the incidence of HIV among 15 to 24 yearolds.
• USAID will provide assistance, in conjunction with other donors, that will reduce
unintended and mistimed pregnancies, as
measured by a reduction in the Total Fertility Rate from 1999 levels in countries
in which USAID provides family planning
assistance.
• USAID, working with the Department of
the Treasury and other agencies and donors, will provide assistance that improves
conservation of biologically significant
habitat as measured by an increase in nationally protected areas over 1999 levels.
• USAID, working with the Department of
State and other agencies and donors, will
provide assistance that will reduce the
threat of global climate change, as measured by reduced carbon dioxide industrial
emissions compared to 1999 levels.
• The Peace Corps will provide opportunities
for 4,200 Americans in 2001 to enter service as new volunteers, assisting countries
with their development needs and increasing cultural awareness.

13.

GENERAL SCIENCE, SPACE, AND
TECHNOLOGY

Table 13–1.

Federal Resources in Support of General Science, Space,
and Technology
(In millions of dollars)

Function 250

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Tax Expenditures:
Existing law ...................................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

18,793

19,192

20,761

21,179

21,471

22,094

22,495

42

102

66

34

34

34

34

3,595

2,875

5,245

5,675

5,060

4,850

3,915

Science and technology are principal agents
of change and progress, with over half of
the Nation’s economic productivity growth
in the last 50 years attributable to technological innovation and the science that supported it. Appropriately enough, the private
sector makes many investments in technology
development. The Federal Government, however, also plays a role—particularly when
risks are too great or the potential return
for companies is too long-term.
Within this function, the Federal Government supports areas of cutting-edge science,
through the National Aeronautics and Space
Administration (NASA), the National Science
Foundation (NSF), and the Department of
Energy (DOE). The activities of these agencies
contribute to greater understanding of the
world in which we live, ranging from the
edges of the universe to the smallest imaginable particles, and to new knowledge that
may or may not have immediate applications
to improving our lives. Because the results
of basic research are unpredictable, developing
performance goals for this area presents
unique challenges.
Each of these agencies funds high-quality
research and contributes to the Nation’s cadre
of skilled scientists and engineers. To continue
this tradition, and as a general goal for

activities under this function, at least 80
percent of the research projects will be reviewed by appropriate peers and selected
through a merit-based competitive process.
In 1999, 94 percent of the project funds
awarded through grants by NSF, 82 percent
by NASA, and 91 percent by DOE were
reviewed by appropriate peers and selected
through a merit-based competitive process.
Because these percentages are based on data
that do not reflect the entire research activity
at all agencies, the Administration will need
to reform the definitions in next year’s report.
Another important Federal role is to construct and operate major scientific facilities
and capital assets for multiple users. These
include telescopes, satellites, oceanographic
ships, and particle accelerators. Many of
today’s fast-paced advances in medicine and
other fields rely on these facilities. As general
goals, agencies will keep the development
and upgrade of these facilities on schedule
and within budget, not to exceed 110 percent
of estimates. In 1999, NASA development
and upgrades were within 113 percent of
cost estimates and 108 percent of schedule
estimates, and those within DOE were within
100 percent of cost and schedule estimates.
In operating the facilities, agencies will keep
the operating time lost due to unscheduled
181

182
downtime to less than 10 percent of the
total scheduled possible operating time, on
average. In 1999, NASA developed a baseline
for loss of scheduled operating time due
to scheduled downtime of 5.6 percent to
enable them to report next year on unscheduled downtime. DOE user facilities kept unscheduled downtime to nine percent. NSF
is in the process of developing a database,
and will report in next year’s budget.
One of the specific areas in which the
Federal Government has invested is the Internet, which has changed the lives of millions
of Americans. Previous Federal investments
helped to establish the Internet, and current
investments are making the Internet faster
and available to more Americans. Since 1998,
the Federal Government has invested in
the Next Generation Internet Initiative, which
focuses on a variety of ways to improve
the operation of the network. For example,
it is focusing on how to make the Internet
operate at speeds 100 to 1,000 times faster
than the current Internet to allow a typical
user to view routinely highly-detailed pictures
and to explore complex data bases. In 1999,
the testbed connected over 100 sites to a
network that will deliver speeds 100 times
faster than the 1998 Internet, and over
10 sites to a second network that will deliver
speeds 1,000 times faster. This initiative
is also examining ways to ensure that information transferred over the Internet is used
only by the intended user for its intended
purpose, and to make the Internet as reliable
as local telephone service while greatly reducing the effort required to administer and
manage the network.
The budget proposes $20.76 billion to conduct activities in support of general science,
space, and technology. The Government also
stimulates private investment in these activities through over $5 billion a year in tax
credits and other preferences for research
and development (R&D).
National Aeronautics and Space
Administration
The budget proposes $13.1 billion for NASA
activities in this function. NASA serves as
the lead Federal agency for research and
development in civil space activities, working

THE BUDGET FOR FISCAL YEAR 2000

to expand frontiers in air and space to
serve America and improve the quality of
life on Earth. NASA pursues this vision
through balanced investment in four enterprises—Space Science, Earth Science, Space
Transportation Technology, Human Exploration and Development of Space—and mission
support to carry out these activities.
NASA’s achievements in 1999 included direct and independent confirmation of the
existence of extrasolar planets; production
of a global, three-dimensional map of Mars;
successful launch and operation of the
Chandra X-ray Observatory, which is now
returning unprecedented images of neverbefore-seen objects beyond our galaxy; improvement in measuring global rainfall from
an uncertainty of 50 percent to 25 percent;
and, the first successful docking of the Space
Shuttle to the International Space Station.
Space Science programs, for which the
budget proposes $2.4 billion, are designed
to enhance our understanding of how the
universe was created, what fundamental rules
govern its evolution, how stars and planets
evolve and die, how space phenomena affect
Earth, and the possible existence of life
beyond Earth. In 1999, NASA developed
and launched seven spacecraft with an average
3.8 percent cost overrun, although two Mars
missions failed to return data. The NASA
Advisory Council indicated that eight of the
eight NASA performance plan objectives for
Space Science have been successfully met.
In 2001,
• NASA will successfully launch at least
four of its six planned spacecraft—the
Mars Surveyor—01 Orbiter, the Genesis
mission, the Galaxy Evolution Explorer,
the Microwave Anisotropy Probe, Cooperative Astrophysics and Technology Satellite,
and Gravity Probe B—within 10 percent
of their schedules and budgets. For those
spacecraft already successfully launched,
NASA Space Science will meet expected
operations performance for at least 80 percent of its operating missions;
• NASA’s Advisory Council will rate the
Space Science performance plan objectives
as being successfully met. Examples of objectives include: investigate the composition, evolution and resources of Mars, the

13.

183

GENERAL SCIENCE, SPACE, AND TECHNOLOGY

Moon, and small solar system bodies such
as asteroids and comets; identify planets
around other stars; and observe the evolution of galaxies and the intergalactic medium; and,
• NASA will continue and expand the integration of education and enhanced public
understanding within its research and
flight mission programs. Space Science
funded education and outreach activities
will be in planning or implementation in
at least 34 States.

began testing of the liquid hydrogen tank
and the aerospike engine resulting in a
decision to redesign the tank. The X–34
program initiated hotfire testing of the Fastrac
engine and completed delivery roll out and
systems verification review of the first flight
vehicle. In 2001,
• the X–34 program will complete assembly
of the third experimental test vehicle; and,
• the X–37 program will commence vehicle
assembly.

Earth Science programs, for which the
budget proposes $1.4 billion, focus on the
effects of natural and human-induced changes
on the global environment through longterm, space-based observation of Earth’s land,
oceans, and atmospheric processes. In 1999,
NASA launched two spacecraft, Landsat–7,
and the Quick Scatterometer. Users have
routinely received earth science data products
within five days of receipt or production
of the requested data product. The NASA
Advisory Council indicated that 29 of 35
performance targets were successfully met.
In 2001,

Human Exploration and Development of
Space programs, for which the budget proposes
$5.5 billion, focus on the use of human
skills and expertise in space. In 1999, the
space shuttle achieved a 60 percent increase
in predicted reliability over the 1995 levels,
observed an average of 4.75 anomalies per
flight, achieved an on-time launch rate of
67 percent, and achieved a 12-month flight
preparation cycle. The International Space
Station program delivered the first two elements of the orbiting laboratory to space,
and conducted successful operations throughout the year. In 2001,

• NASA will successfully launch and operate
at least two of three planned spacecraft—
Aqua, IceSat, and Triana—within 10 percent of their schedules and budgets;

• NASA will successfully complete no less
than 85 percent of planned operations
schedules and milestones for 2001 for the
International Space Station. For example,
NASA will conduct permanent on-orbit operations with an estimated 8,000 crew
hours dedicated to assembly, vehicle operations, and payload operations; and

• NASA will increase by 20 percent the volume of climate data it archives over the
2000 target of 368 terabytes, increase the
number of products delivered from its archives by 10 percent over 2000, and make
the data available to users within five
days; and,
• NASA’s Advisory Council will rate all
near-term Earth Science objectives as
being met or on schedule. Examples of objectives include: observe and document
land cover and land use change and impacts on sustained resource productivity;
and understand the causes and impacts
of long-term climate variations on global
and regional scales.
Aero-Space Technology programs, for which
the budget proposes $616 million, work with
the private sector to develop and test experimental launch vehicles that reduce the cost
of access to space. In 1999, the X–33 program

• NASA will ensure that Space Shuttle safety, reliability, availability and cost will improve, by achieving seven or fewer flight
anomalies per mission, successful on-time
launches 85 percent of the time, and a
12-month manifest preparation time.
NASA will complete the checkout launch
and control system application for the Orbiter Processing Facility.
National Science Foundation
The budget proposes $4.5 billion in 2001
for NSF in this function. While NSF represents just three percent of Federal R&D
spending, it supports nearly half of the
non-medical basic research conducted at academic institutions, and 30 percent of Federal
support for mathematics and science edu-

184
cation. In 1999, NSF-funded scientists uncovered the structural basis that explains a
virus’ ability to force host cells to manufacture
the virus’ own proteins. This is important
for understanding retroviruses, which are responsible for causing many cancers in
vertebrates. In addition, the May 3, 1999,
tornado outbreak in Central Oklahoma was
used to test a regional forecast system developed at an NSF-funded center. The stormscale forecast showed improved predictive
ability and increased precision. As this forecasting capability is further developed, it
will become a critical tool in determining
which areas will be most severely hit by
storms, allowing sufficient and timely warnings to be issued to persons in affected
areas.
NSF research and education investments
are made in three primary areas:
Ideas: Approximately one-half of NSF’s resources support research projects performed
by individuals, small groups, and centers.
In 2001,
• an independent panel will judge whether
research results in the period demonstrate
sufficient progress toward achieving a robust and growing fundamental knowledge
base; important discoveries; partnerships
connecting discovery to innovation, learning and societal advancement; and research and education processes that are
synergistically coupled; and,
• NSF will maintain the 2000 goal of having
a minimum of 30 percent of competitive
research grants go to new investigators.
In 1999, 27 percent of competitive research grants went to new investigators.
Tools: NSF investments provide state-ofthe art tools for research and education,
such as instrumentation and equipment,
multi-user facilities, accelerators, telescopes,
research vessels and aircraft, and earthquake
simulators. In addition, resources support
large databases as well as computation and
computing infrastructures for all fields of
science, engineering, and education. Nearly
a quarter of NSF’s budget provides the tools
required for cutting-edge research. In 2001,

THE BUDGET FOR FISCAL YEAR 2000

• NSF facilities will continue to meet the
function-wide goals to remain within cost
and schedule, and to operate efficiently.
People: Activities to facilitate development
of a diverse and talented work force of
scientists, engineers, and well-prepared citizens account for about 25 percent of NSF’s
budget. NSF supports formal and informal
science, mathematics, engineering, and technology education at all levels, including multidisciplinary education and training for graduate students. In addition, resources support
projects to develop curriculum, enhance teacher training and professional development, and
provide educational opportunities for students
from pre-K through postdoctoral. In 1999,
40 NSF-sponsored projects implemented mathematics and science standards-based curricula
in over 81 percent of participating schools,
and provided professional development for
more than 156,000 teachers. All participating
educational systems demonstrated some level
of improvement in student achievement in
mathematics and science on a battery of
system-selected
assessment
instruments.
Moreover, in 1999, systemic initiatives and
related teacher enhancement programs provided intensive professional development to
a total of 82,400 teachers, exceeding the
goal of 65,000. For 2001, NSF will continue
to adhere to the following goal:
• Over 80 percent of schools participating
in a systemic initiative program will: 1)
implement a standards-based curriculum
in science and mathematics; 2) further
professional development of the instructional work force; and, 3) improve student
achievement on a selected battery of tests,
after three years of NSF support.
Department of Energy
The budget proposes $3.2 billion in 2001
for DOE science programs and supporting
activities. DOE operates major scientific facilities including particle accelerators, magnetic
plasma confinement reactors for fusion research, synchrotron light sources, neutron
sources, supercomputers, and high-speed networks that researchers use in fields ranging
from the physical and materials sciences
to the biomedical and life sciences. These
facilities are available, on a competitive basis,

13.

185

GENERAL SCIENCE, SPACE, AND TECHNOLOGY

to scientists and engineers in universities,
industry and other Federal agencies.
In 1999, an international team of nuclear
scientists at DOE’s Lawrence Berkeley National Laboratory added three new elements
to the periodic table. Elements 116 and
118 are the heaviest yet created and confirm
physicists’ long-standing prediction of an ‘‘island’’ within the Periodic Table of the elements
where heavier nuclei become increasingly stable. In addition, DOE-funded university researchers have developed a new class of
organic magnets that are stable in air. For
some of these materials, their magnetism
can be switched on or off using light, a
process found only in molecular or polymerbased magnets. The potential applications
of these new materials are only beginning
to be explored.
The budget proposes $1.02 billion for Basic
Energy Sciences (BES), which supports basic
research in the materials, chemical and engineering sciences, geosciences, and plant and
microbial biosciences. As part of its mission,
BES plans, constructs, and operates major
scientific user facilities. In 1999, DOE redesigned the Spallation Neutron Source to have
a more defensible cost and schedule baseline.
In 2001,
• DOE will meet the cost and schedule milestones for upgrade and construction of scientific user facilities, including the construction of the Spallation Neutron Source,
as confirmed by regular external independent reviews.
The budget proposes $182 million for Advanced Scientific Computing Research, which
supports applied mathematics, computer
science, and networking research and operates
supercomputer, networking and related facilities to enable the analysis, simulation, and
prediction of complex physical phenomena.
In 1999, DOE-funded computer scientists developed a technique that reduces the time
it takes to process a three-dimensional xray image from overnight to less than 20
minutes. This advance will greatly improve
the productivity of the Nation’s synchrotron
light sources. By the end of 2001,

• the National Energy Research Scientific
Computing Center will deliver 3.6 Teraflop
capability to support DOE’s science mission.
The budget proposes $445 million for Biological and Environmental Research (BER),
which supports basic research to identify,
understand, and anticipate the long-term
health and environmental consequences of
energy production, development, and use. In
1999, BER-funded scientists determined the
complete gene sequence of three microbes:
the radiation-resistant Deinococcus radiodurans, the pollutant-eating Shewanella putrefaciens, and the carbon-fixing Chlorobium
tepidum. In 2001,
• DOE, through its Joint Genome Institute,
will meet its commitment to sequence
three of the 24 human chromosomes as
part of an international effort to sequence
the entire human genome. DOE will sequence and submit to public databases at
least 10 percent of the human genome
with an accuracy of 99.9 percent.
The budget proposes $1.08 billion for High
Energy and Nuclear Physics, which strives
to understand the nature of matter and
energy in terms of the most elementary
particles and forces and to more completely
explain the structure and interactions of
atomic nuclei. In the third quarter of 1999,
construction of the Relativistic Heavy Ion
Collider was completed on schedule and within
budget. In 2001,
• DOE will make progress in achieving luminosity and operational efficiency goals
for the B-factory at the Stanford Linear
Accelerator Center, and begin Fermilab’s
Tevatron Extended Run II, which has the
potential to discover a new class of elementary particles.
The
Office
ducts
fusion

budget proposes $247 million for DOE’s
of Fusion Energy Sciences, which conresearch to advance plasma science,
science, and fusion technology. In 2001,

• DOE will deliver the first physics results
from the radio-frequency driven Electric
Tokamak.

186
Tax Incentives
Along with direct spending on R&D, the
Federal Government has sought to stimulate
private investment in these activities with
tax preferences. The current law provides
a 20-percent tax credit for private research
and experimentation expenditures above a
certain base amount. The credit, which expired
in 1999, was retroactively reinstated for five
years, to 2004, in the Tax Relief Extension
Act of 1999. The credit will cost $3.4 billion

THE BUDGET FOR FISCAL YEAR 2000

in 2001 and $14.2 billion from 2001 to
2005.
A permanent tax provision also lets companies deduct, up front, the costs of certain
kinds of research and experimentation, rather
than capitalize these costs. This tax expenditure will cost $1.9 billion in 2001. Finally,
equipment used for research benefits from
relatively rapid cost recovery. The cost of
this tax preference is calculated in the tax
expenditure estimate for accelerated depreciation of machinery and equipment.

14.
Table 14–1.

ENERGY

Federal Resources in Support of Energy
(In millions of dollars)

Function 270

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

2,863

2,569

2,943

3,342

3,142

3,219

3,311

–2,217

–4,473

–3,759

–3,924

–3,699

–4,012

–3,971

1,128
16

1,719
133

1,623
176

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1,880
..............

1,930
..............

1,940
198

1,955
371

1,305
652

1,350
1,143

1,380
1,561

N/A = Not available.

Federal energy programs contribute to energy security, economic prosperity and environmental protection. Funded mainly through
the Energy Department (DOE), they range
from protecting against disruptions in petroleum supplies, to conducting research on
renewable energy sources, to cleaning up
DOE facilities contaminated by years of nuclear-related research activities. The Administration proposes to spend $2.9 billion for
these programs. In addition, the Federal
Government allocates about $1.9 billion a
year in tax benefits, mainly to encourage
development of traditional and alternative
energy sources.
The Federal Government has a longstanding
and evolving role in energy. Most Federal
energy programs and agencies have no State
or private counterparts and clearly involve
the national interest. The federally-owned
Strategic Petroleum Reserve, for instance,
protects against supply disruptions and the
resulting consumer price shocks, while Federal
regulators protect public health and the environment and ensure fair, efficient energy
rates. DOE’s applied research and development (R&D) programs in fossil, nuclear, solar/
renewable energy and energy conservation
speed the development of technologies, fre-

quently through cost-shared partnerships with
industry. The programs not only open new
opportunities for American industry, but reach
beyond what the marketplace demands today,
putting the Nation in a better position to
meet the demands of tomorrow.
Energy Resources and R&D
Strategic Petroleum Reserve (SPR): DOE
maintains SPR and invests in R&D to protect
against petroleum supply disruptions and reduce the environmental impacts of energy production and use.
SPR was authorized in 1975, in response
to the oil embargoes of the early 1970s.
The Reserve now holds 567 million barrels
of crude oil in underground salt caverns
at four Gulf Coast sites. SPR helps protect
the economy and provide flexibility for the
Nation’s foreign policy in case of a severe
energy supply disruption.
• In 2001, DOE will maintain its capability
to reach a SPR drawdown rate of about
four million barrels a day within 15 days
and to maintain that rate for at least 90
days.
187

188
Applied R&D: DOE’s energy R&D investments cover a broad array of resources and
technologies to make the production and use
of all forms of energy—including solar and renewables, fossil, and nuclear—more efficient
and less environmentally damaging. These investments not only lay the foundation for a
more sustainable energy future but also open
major international markets for manufacturers
of advanced U.S. technology and enhance our
nation’s energy security.
DOE’s energy efficiency, renewable energy,
and electric energy systems programs form
a major part of the Administration’s Climate
Change Technology Initiative, which is intended to find ways to reduce emissions
of carbon dioxide and other greenhouse gases
in ways that benefit our economy rather
than constrain it. (For more details, see
Chapter 5, ‘‘Promoting Research.’’)
Energy Conservation
Energy conservation programs, for which
the budget proposes $851 million, are designed
to improve the fuel economy of various transportation modes, increase the productivity
of our most energy-intensive industries, and
improve the energy efficiency of buildings
and appliances. They also include grants
to States to fund energy-efficiency programs
and low-income home weatherization. Each
of these activities benefits our economy and
reduces emissions of carbon dioxide and other
greenhouse gases, and many rely on partnerships with the private sector for cost-sharing
and commercialization.
Past Results: Energy-efficiency technologies
that have already come to market include
heat-reflecting windows, high-efficiency lights,
geothermal heat pumps, high-efficiency electric
motors and compressors, and software for
designing energy-efficient buildings. These five
technologies alone have saved consumers and
industry over $33 billion in energy costs.
In 1999, commercialization efforts were completed for geothermal heat pumps, and fullsize electrochromic windows (which darken
electrically) and spectrally-selective windows
(which block ultraviolet and infrared light)
were demonstrated.
In 2000:

THE BUDGET FOR FISCAL YEAR 2001

• Daimler-Chrysler, Ford, and General Motors have recently shown the concept cars
that represent the first major results of
the Partnership for a New Generation of
Vehicles.
In 2001:
• The Federal Energy Management Program
(FEMP) will exceed the original Energy
Policy Act of 1992 goal of a 20-percent
reduction in the Government’s energy use
per square foot of office space (relative to
1985) by reaching a 22-percent reduction.
(In 1999 FEMP nearly reached that goal
a year ahead of schedule, achieving a 19.6
percent reduction.)
• Industry will produce 45,000 vehicles that
incorporate light-weight materials whose
development was supported by DOE’s Office of Transportation Technologies.
• Alcohol-fuel companies will produce six
million gallons of cellulose-derived ethanol, based on DOE technologies.
• The Office of Industrial Technologies will
see 10 of their technologies commercialized, bringing the total to 144. Annual
energy savings to the U.S. economy from
technologies they have supported will
reach 170 trillion Btu, with another 90
trillion Btu saved annually from their industry assessment and technology-transfer
programs.
• Local recipients of DOE grant funds will
weatherize 76,000 low-income homes.
Solar and Renewable Resources: Solar
and renewable resources programs, for which
the budget proposes $334 million, focus on
technologies that will help the Nation use its
abundant renewable resources such as wind,
solar, and biomass to produce low-cost, clean
energy that contributes no net carbon dioxide
to the atmosphere. The United States is the
world’s technology leader in wind energy, with
a growing export market and production costs
that have fallen dramatically. In addition,
photovoltaics are becoming more useful in remote power applications, and new biofuels
plants are being constructed. DOE also is coordinating the President’s Million Solar Roofs
initiative, whose goal is to facilitate the installation of one million solar roof installations

14.

189

ENERGY

(a mixture of solar heat/hot water and
photovoltaics) by 2010. Two programs that
were formerly presented as part of Solar and
Renewable Energy are now presented separately: electric energy systems ($48 million)
and hydrogen R&D ($23 million). Departmental energy management is a new line-item
($5 million).
Past Results: The DOE wind energy program
developed a new generation of airfoil designs
for wind turbine blades, which have been
incorporated into U.S.-made wind turbines
in the 1990s, resulting in up to 30 percent
better efficiency. The cost of wind-generated
electricity has dropped from 35 cents per
kilowatt-hour (kWh) in 1980 to less than
five cents per kWh in 1999. (The program
has set a very ambitious goal of reducing
those costs to 2.5 cents by 2002.) From
1990 to 1999, the production cost per watt
of photovoltaic (PV) panels has dropped by
a factor of six, and shipments of PV panels
have roughly tripled. The cost of geothermal
electricity dropped by half from 1980 to
1990 (from 12 to six cents per kWh), and
has dropped another one-third between 1990
and 1999, to less than four cents per kWh.
States, cities, and Federal agencies to date
have pledged 912,000 ‘‘solar roofs’’ over the
next eight years, including 200,000 new
pledges in 1999.
In 2001, DOE’s Solar and Renewable Resources program will:
• support the President’s Million Solar Roofs
initiative through partnerships and technical assistance so that at least 40,000
solar roofs will be installed in 2001 (51,000
installations have been completed, an increase of 26,400 in 1999).
• aid in the expansion of non-hydropower renewable energy capacity in the U.S. to
10.9 gigawatts.
• continue pushing the technological stateof-the-art:
— achieve 14 percent stable efficiency in
a thin-film photovoltaic module;
— complete a second commercial-scale test
of co-firing switchgrass with coal; and,
— reduce the cost of geothermal power
from ‘‘binary’’ plants to 3.5 cents/kWh.

Electric Energy Systems: The budget proposes $48 million for these activities, which
in previous years have been described as part
of the solar and renewable energy budget.
These programs focus on technical advances
in electricity transmission and storage and on
the efficiency and reliability of the nation’s
electrical grid. The largest activity is in hightemperature superconductivity R&D, which
can greatly increase the efficiency of generators and heavy electrical machinery, and which
can dramatically increase the carrying capacity
of high-voltage transmission lines.
In 1999, for the first time in the world,
a high-temperature superconducting cable provided commercial grid electricity to a manufacturing plant—enough electricity to power a
small town.
• In 2001, DOE will make available ‘‘second
generation’’
high-temperature
superconducting wires in continuous lengths.
Fossil Energy R&D: Fossil fuel energy
R&D programs, for which the budget proposes
$376 million, help industry develop advanced
technologies to produce and use coal, oil, and
gas resources more efficiently and cleanly. Federally-funded development of clean, highly-efficient gas-fired and coal-fired generating systems aim to reduce greenhouse gas emission
rates, while reducing electricity costs compared
to currently available technologies. These programs also include efforts to discover effective,
efficient, and economical means of sequestering carbon dioxide. The programs also help
boost the domestic production of oil and natural gas by funding R&D projects with industry to cut exploration, development, and production costs.
Past Results: In 1999, DOE demonstrated
a more efficient and less costly drilling and
completion technology that could ultimately
add six trillion cubic feet (TCF) of domestic
gas reserves; demonstrated four advanced
oil production enhancement technologies that
contributed to adding 46 million barrels of
incremental domestic oil reserves; and began
full-scale component testing of two advanced,
utility-scale turbines that are more efficient
and less polluting than current technologies.
In 2001, DOE will:

190
• Demonstrate the feasibility of effectively
separating hydrogen and CO2 from synthetic gas using both high-temperature hydrogen separation membranes, and lowtemperature CO2 hydrate technology to
meet the long-term goals of providing lowcost hydrogen for high-efficiency fuel cells
and for concentrating CO2 into forms that
can be ‘‘sequestered,’’ e.g., buried or otherwise kept out of the atmosphere;
• Complete evaluation of the results of an
international collaborative research project
on CO2 injection into deep, unmineable
coal seams for sequestration; and
• The advanced research materials program
will test a high gas flux oxygen separation
device that promises more efficient, less
expensive gas separation techniques that
can improve powerplant efficiency, and
can aid carbon sequestration efforts.
Nuclear Energy R&D: Nuclear fission
power is a widely used technology, providing
about 19 percent of the electric power consumed in the United States and about 17 percent worldwide without generating greenhouse
gases. If fossil plants were used to produce
the amount of electricity generated by these
nuclear plants, more than 300 million additional metric tons of carbon would be emitted
each year. Continued R&D addressing the
issues that threaten the acceptance and viability of nuclear fission in the United States will
help determine whether nuclear fission can
continue to supply increasing amounts of economically-price energy while reducing greenhouse emissions.
In 2001, DOE will:

THE BUDGET FOR FISCAL YEAR 2001

cility (FFTF) at Hanford to operation and
issue a record of decision; and,
• initiate design of two facilities for processing depleted uranium hexafluoride
(DUF6) at Paducah, Kentucky and Portsmouth, Ohio.
Environmental Quality
Environmental Management: In the NonDefense Environmental Management and Uranium Enrichment Decontamination and Decommissioning Fund, the budget proposes $589
million to manage the Nation’s most complex
environmental cleanup program, the result of
more than five decades of research and production of nuclear energy technology and materials. (For information on DOE’s Defense Environmental Management program, see Chapter
11, ‘‘National Defense.’’) This will reduce environmental risk and manage the waste at: (1)
sites run by DOE’s predecessor agencies; (2)
sites contaminated by uranium and thorium
production from the 1950s to the 1970s; (3)
DOE’s inactive uranium processing plant; and,
(4) the gaseous diffusion plants operated by
the now-private United States Enrichment
Corporation.
Past Results: In 1999, DOE completed remediation of three sites: Ames Laboratory in
Iowa, Sandia National Laboratory in California, and Princeton Plasma Physics Laboratory in New Jersey. Through 1999, a total
of 69 sites have completed remediation.
In 2000:
• DOE plans to complete remediation of two
geographic sites.

• complete identification of feasible and important new reactor and fuel cycle concepts to help improve the cost, performance, safety, or proliferation-resistence of
civilian nuclear power for continued development;

In 2001, DOE will:

• maintain the advanced radioisotope power
system program and facility operations
and capabilities for current and future
space and national security missions;

• fill five canisters with high-level waste at
the West Valley Demonstration Project in
New York for long-term storage.

• complete the National Environmental Policy Act review of the environmental impacts of returning the Fast Flux Test Fa-

• complete remediation at three geographic
sites;
• increase the total number of geographic
sites completed to 74 of 113; and,

Radioactive Waste: DOE’s Civilian Radioactive Waste Management Program oversees
the management and disposal of spent nuclear
fuel from commercial nuclear reactors and

14.

191

ENERGY

high-level radioactive waste from
cleanup sites. In 2001, DOE will:

Federal

• conduct public hearings on the Secretary’s
consideration of the possible recommendation of the Yucca Mountain, Nevada site
for development as a repository;
• complete a review of the Site Recommendation Report that will provide the
technical bases for a Site Recommendation
Statement;
• complete a Site Recommendation
ment for the Secretary to submit
President and then the Congress,
Secretary and the President decide
ommend the site; and,

Stateto the
if the
to rec-

• if the President and Congress approve the
Site Recommendation, work on completing
a License Application to the Nuclear Regulatory Commission.
Energy Production and Power Marketing
Power Marketing Administrations: The
Federal Government is reshaping programs
that produce, distribute, and finance electric
power. The four Federal Power Marketing Administrations, or PMAs, (Bonneville, Southeastern, Southwestern, and Western) market
electricity generated at 127 multi-purpose Federal dams and manage 33,000 miles of federally-owned transmission lines in 34 States.
The PMAs sell about five percent of the Nation’s electricity, primarily to preferred customers such as counties, cities, and publiclyowned utilities. The PMAs face growing challenges as the electricity industry moves toward
open, competitive markets.
• In 2001, each PMA will operate its transmission system to ensure that service is
continuous, reliable, and balanced—that
is, that the system achieves a ‘‘pass’’ rating each month under the North American
Electric Reliability Council performance
standards. Each PMA received a ‘‘pass’’
rating every month during 1999. These
measures are used industry-wide and indicate the reliability and quality of power
provided by utilities.
Tennessee Valley Authority (TVA): TVA
is a Federal Government corporation and the
Nation’s single largest electric power gener-

ator. It generates four percent of the electric
power in the country and transmits that power
over its 17,000 mile transmission network to
159 municipal utilities and rural electric cooperatives that serve some eight million customers in seven States.
TVA is responding to changes that are
bringing greater competition to the electric
power industry by taking steps to maintain
its ability to supply power at competitive
prices. The agency is now engaged in a
major effort to cut its debt. TVA has cut
its debt by $1.3 billion in the past three
years.
• In 2001, TVA will reduce its debt by over
$750 million.
(For information on TVA’s non-power activities, see Chapter 19, ‘‘Community and Regional Development.’’)
Rural Utilities Service: In 2001, the Agriculture Department’s Rural Utilities Service
(RUS) will make $1.6 billion in direct loans
to rural electric cooperatives, public bodies,
nonprofit associations, and other utilities in
rural areas for generating, transmitting, and
distributing electricity. Its main goal is to finance modern, affordable electric service to
rural communities. Included within this funding amount is $400 million for private sector
guarantees, which will help rural utility borrowers position themselves to be viable in a
competitive, deregulated environment. RUS
borrowers continue to provide service in the
poorest counties in rural America and to the
majority of counties suffering the most from
population out- migration.
• In 2001, RUS will upgrade 169 rural electric systems, which will benefit over 1.8
million customers and create or preserve
approximately 40,250 jobs.
Energy Regulation
The Federal Government’s regulation of
energy industries is designed to protect public
health, achieve environmental and energy
goals, and promote fair and efficient interstate
energy markets.
Appliance Efficiency Rules: DOE improves the Nation’s use of energy resources
through its appliance energy efficiency pro-

192
gram, which specifies minimum levels of energy efficiency for major home appliances, such
as water heaters, air conditioners, and refrigerators, and for commercial-scale heating and
cooling components. The initial efficiency
standards were established in legislation, and
DOE periodically issues rules to revise those
standards or to create standards for new categories of equipment.
Past Results: In 1999, DOE issued six
new proposed rules. In previous years DOE
has issued eight final rules. As a result
of the appliance efficiency rules that DOE
administers, consumers are saving approximately $4.7 billion annually in reduced energy
costs. In 2001:
• DOE will issue one final rule and three
proposed rules and determinations on different categories of appliances.
Federal Energy Regulatory Commission
(FERC): FERC, an independent agency within
DOE, regulates the transmission and wholesale prices of electric power, including nonFederal hydroelectric power, and the transmission of oil and natural gas by pipeline in
interstate commerce. FERC promotes competition in the natural gas industry and in wholesale electric power markets. Recent FERC reforms to give consumers competitive choices
in services and suppliers will cut consumer energy bills by $3 to $5 billion per year.
In 2001, FERC, in order to promote competitive, well-functioning energy markets, will
measure the response of prices to external
conditions in natural gas and electricity,
the level of price volatility and changes
in price volatility in electricity and gas,
and the correlation of commodity prices across
regions.
DOE Corporate Management
Program and contract management at DOE
is a Priority Management Objective of the
Administration because more than 90 percent
of the Department’s budget is spent on contracts to operate its facilities (see Chapter
31, ‘‘Improving Government Performance
through Better Management.’’)

THE BUDGET FOR FISCAL YEAR 2001

All DOE programs may be affected by
a proposed consolidation of its security activities within one departmental budget account.
The Administration anticipates transmitting
a budget amendment to propose this consolidation in early 2000.
Nuclear Regulatory Commission (NRC)
NRC, an independent agency, regulates the
Nation’s civilian nuclear reactors and the
medical and industrial use of nuclear materials and their safeguards, and the disposal
of nuclear waste in order to ensure public
health and safety and to protect the environment. NRC international activities also promote adequate protection of U.S. interests
in nonproliferation and the safe and secure
use of nuclear materials in other countries.
To meet the challenges of a restructured
and deregulated electric utility industry, NRC
is committed to adopting a more risk-informed
and performance-based approach to regulation.
This regulatory framework will focus NRC
and licensee resources on the most safetysignificant issues, while providing flexibility
in how licensees meet NRC requirements.
Past Results: In 1999, NRC and the U.S.
nuclear industry achieved the same goals
as listed below for 2001: zero radiationrelated deaths or illnesses from the operation
of civilian reactors or the use and disposal
of nuclear materials, and zero significant
adverse impacts on public health and safety
and the environment from the recovery, cleanup, and disposal of radioactive wastes.
In 2001:
• NRC’s nuclear reactor safety goal is for
there to be zero radiation-related deaths
and illnesses in connection with the operation of civilian reactors.
• NRC’s nuclear materials safety goal is for
there to be zero radiation-related deaths
and illnesses in connection with the use
of nuclear materials.
• NRC’s nuclear waste safety goal is for
there to be zero significant adverse impacts to the current and future public
health and safety and the environment
from radioactive wastes.

14.

ENERGY

Tax Incentives
Federal tax incentives are mainly designed
to encourage the domestic production or use
of fossil and other fuels, and to promote
the vitality of our energy industries and
diversification of our domestic energy supplies.
The largest incentive lets certain fuel producers cut their taxable income as their
fuel resources are depleted. An income tax
credit helps promote the development of certain non-conventional fuels. It applies to
oil produced from shale and tar sands, gas
produced from a number of unconventional
sources (including coal seams), some fuels
processed from wood, and steam produced
from solid agricultural byproducts. Another
tax provision provides a credit to producers
who make alcohol fuels—mainly ethanol—
from biomass materials. The law also allows
a partial exemption from Federal gasoline
taxes for gasolines blended with ethanol.
The direct funding in the Climate Change
Technology Initiative is complemented by a
$4 billion, five-year package of tax incentives

193
that will help reduce greenhouse gas emissions
by spurring the purchase of energy-efficient
products and the use of renewable energy.
For homes and buildings, the incentives provide tax credits for the purchase of new
energy-efficient homes; for purchase of highly
energy-efficient equipment like heat-pump
water heaters, natural-gas heat-pumps, and
fuel cells; and, for purchases of rooftop photovoltaic and solar hot-water systems. For vehicles, the incentives extend the current tax
credit for electric and fuel-cell vehicles, and
create a new system of tax credits for hybrid
vehicles. To promote renewable energy, the
provisions extend the current tax credits
for power produced from wind and ‘‘closed
loop’’ biomass, and create new credits for
certain ‘‘open loop’’ biomass projects, methane
from landfills, and co-firing of biomass with
coal in existing powerplants. To encourage
more industrial use of distributed power
generation, a uniform 15-year cost-recovery
period is proposed for distributed-power property.

15.

Table 15–1.

NATURAL RESOURCES AND
ENVIRONMENT
Federal Resources in Support of Natural Resources and
Environment
(In millions of dollars)
1999
Actual

Function 300

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

Estimate
2000

2001

2002

2003

2004

2005

23,812

24,041

24,940

25,086

25,354

25,957

26,463

313
..............

467
..............

600
–218

734
–69

883
–461

816
–363

756
–277

26
..............

30
..............

34
100

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1,480
..............

1,500
..............

1,585
8

1,645
41

1,710
112

1,755
214

1,820
315

N/A = Not available.

The Federal Government spends over $24
billion a year to protect the environment,
manage Federal land, conserve resources, provide recreational opportunities, and construct
and operate water projects. The Federal Government manages about 700 million acres—
a third of the U.S. continental land area.

• restoring and maintaining the health of
federally-managed lands, waters, and renewable resources; and,
• providing recreational opportunities for
the public to enjoy natural and cultural
resources.

Federal efforts focus
and water, conserving
cleaning up environThe major goals in-

The Federal Government made significant
progress to achieve these goals in 1999.
For example, 85 Superfund site cleanups
were completed; over three million acres
of mined lands, refuges, park lands, and
forests and 128 ‘‘at risk’’ cultural sites on
public lands were restored and protected;
and, 95 percent of national park visitors
and 93 percent of Bureau of Land Management (BLM) recreational users reported being
satisfied with their visits, which meets or
exceeds goals set for customer satisfaction
for 1999.

• protecting human health and safeguarding
the natural environment—air, water, and
land—upon which life depends;

Federal lands include the 379 units of
the National Park System, the 156 National
Forests; the 521 refuges in the National
Wildlife Refuge System; and the 264 million

The Natural Resources and Environment
function reflects most Federal support for
natural resources and the environment, but
does not include certain large-scale environmental programs, such as the environmental
clean-up programs at the Departments of
Energy and Defense. (See chapter 11, ‘‘National Defense’’ and Chapter 14, ‘‘Energy’’).
Within this function,
on providing cleaner air
natural resources, and
mental contamination.
clude:

195

196

THE BUDGET FOR FISCAL YEAR 2001

acres managed by the BLM mainly in Alaska
and 11 Western States (see Chart 15–1).
Lands Legacy
In 2001, the $1.4 billion Lands Legacy
initiative will allocate $600 million from the
Land and Water Conservation Fund (LWCF)
to acquire Federal lands and interests and
provide grants to States to conserve their
open space. In addition, Lands Legacy will
support: (1) conservation and restoration of
lands to preserve wildlife habitat, natural
resources, and historic sites; (2) planning
assistance for States and local governments
to protect local green space, urban parks,
and greenways; and, (3) Federal and State
efforts to restore ocean and coastal resources.
• In 2001, Interior will acquire approximately 180,000 acres in the California
Desert region to complete the Wildlands
Conservancy acquisition, 3,300 acres to expand refuges in the Everglades of South
Florida, over 400 acres of prime habitat

in two national park units on the Virgin
Islands, and key tracts within the boundaries of six Civil War battlefields.
• In 2001, USDA’s Forest Legacy program
will support permanent easements for
183,000 acres, up from 158,000 acres in
2000.
• In 2001, USDA’s Farmland Protection Program, which remains part of the Lands
Legacy initiative but will be funded
through the Administration’s mandatory
farm safety net proposal at $65 million
annually, will protect approximately
130,000 acres of farmland threatened by
development through permanent easements.
• The National Oceanic and Atmospheric
Administration (NOAA) will increase the
number of restored acres of coastal habitat
by 15,000 acres in 2001.

Chart 15-1. Federal Land Management by Agency
Millions of acres
300

264

192
200

94
100

84
56
16

0

Bureau of
Land
Management
(DOI)

Forest
Service
(USDA)

Fish &
Wildlife
Service
(DOI)

National
Park
Service
(DOI)

Department
of
Defense

Tribal
Trust

15.

197

NATURAL RESOURCES AND ENVIRONMENT

As a complement to the Lands Legacy
initiative, the Administration will propose
the Livable Communities initiative that includes, among other components, Better America Bonds, a financing tool funded through
federal tax credits, that will generate $10.8
billion in bond authority over five years
for investments by State, local, and Tribal
governments. Better America Bonds will be
used to preserve green space, create or restore
urban parks, protect water quality, and clean
up brownfields and other contaminated lands.

• Help State and local governments through
NPS partnerships to add an additional 500
miles of recreational trails, 750 miles of
recreational river corridors, and 24,800
acres of recreational parkland, compared
to 1,380 trail miles, 420 river miles, and
11,530 parkland acres added in 1999.
• Complete 768 data sets for natural resource inventories in 2001 out of 2,287 required, compared to 223 completed
through 1999.
Conservation and Land Management

National Parks
The Federal Government spends over $2
billion a year to maintain a system of
national parks that covers over 83 million
acres in 49 States, the District of Columbia,
and various territories. Discretionary funding
for the National Park Service (NPS) has
steadily increased (almost five percent a year
since 1986) and fee receipts have grown
from $93 million in 1996 to about $180
million in 1999. Yet, the popularity of national
parks has generated even faster growth in
the number of visitors, new parks, and additional NPS responsibilities. Over the past
30 years, the number of national park units
has grown by 50 percent and the number
of national park visits has increased from
164 million to almost 300 million today.
With demands growing faster than available
resources, NPS is taking new, creative, and
more efficient approaches to managing parks
and has developed performance measures
against which to gauge progress. NPS and
other Department of the Interior bureaus
are systematically addressing facility maintenance and construction needs through newly
established five-year lists of priority projects.
The bureaus will update these lists annually
to track progress in addressing top priorities
and completing funded projects on time and
at cost.
In 2001, NPS will:
• Maintain the percentage of park visitors
that summarize their experience as good
or very good at 95 percent—the 1999 results of a new survey using an enhanced
methodology and covering over 300 parks.

The 75 percent of Federal land that makes
up the National Forests, National Grasslands,
National Wildlife Refuges, and the BLMadministered public lands also provides significant public recreation. BLM provides for
nearly 75 million recreational visits a year,
while over 35 million visitors enjoy wildlife
each year at National Wildlife Refuges. With
its 133,000 miles of trails, the Forest Service
is the largest single supplier of public outdoor
recreation, providing 341 million recreational
visitor days last year.
Federal lands also provide other benefits.
With combined annual budgets of about $5
billion, BLM and the U.S. Forest Service
(USFS) manage lands for multiple purposes,
including outdoor recreation, range, timber,
watershed, wildlife and fish, and wilderness.
BLM, USFS, and NPS have been identified
by the Vice President’s National Partnership
for Reinventing Government as High-Impact
Agencies. As part of the efforts to cut red
tape and streamline processes, these agencies
produced an integrated nationwide outdoor
recreation information system that gives all
Americans quick and easy electronic access
to information about recreation use, permits,
and reservations on Federal lands.
Some high-priority reinvention projects include:
‘‘Service First’’: Proposed in the 1996 Reinventing Government report, USFS and BLM
are working together to deliver seamless
service to customers and ‘‘boundaryless’’ care
for the land. This began as two pilot projects
in Colorado and Oregon to: improve customer
service with one-stop shopping; achieve efficiencies in operations to reduce or avoid

198
costs; and, take better care of the land
by taking a landscape approach to stewardship
rather than stopping at the traditional jurisdictional boundaries. USFS and BLM are
also looking to streamline major business
processes to make them work better for
both employees and customers.
Financial Management: USFS is implementing a new general ledger system and
re-engineering its budget process to better
align budget planning and execution with
the agency’s strategic goals. The 2001 Budget
will be presented to Congress using a clear,
redesigned budget structure that connects
funding categories to performance measures.
In this way, forest managers are given the
resources to manage the forests with increased
accountability in achieving defined goals.
In 2001, the USFS, along with BLM,
will propose to decouple their mandatory
programs from timber receipts. In 2000, the
level of funding for USFS staff to carry
out timber stand improvement depends upon
the volume of timber harvested. This system
has the potential to create an incentive
for staff to increase timber production in
order to increase payments—an effect that
is often times at odds with a desire to
manage the national forests according to
scientifically determined criteria. The revised
policy would restore management and increase
accountability, by severing the linkage between program spending and timber harvest
volumes, and thereby eliminate concerns that
the funds influenced management decisions
and financed organizational costs. The new
mandatory account structure will preserve
funding at known, fixed, and dependable
amounts and display budget information more
visibly, allowing the agency, Congress and
the public an expanded role in funding priority
and allocation decisions.
BLM and USFS concentrate on the longterm goal of providing sustainable levels
of multiple uses while ensuring and enhancing
ecological integrity. Their performance measures include:
• USFS in 2001 will target increased funding to needed watershed restoration work
by increasing acres of watershed restoration work by 25 percent (to 25,000 acres)
over 2000 levels of 20,0000 acres; increas-

THE BUDGET FOR FISCAL YEAR 2001

ing the acres of noxious weed control by
52 percent (to 85,000 acres) over 2000 levels of 56,000 acres; maintaining the pace
of obliterating existing roads at the 2000
level (2,500 miles), as compared to 1,200
miles in 1998; and increasing the number
of acres treated for fire hazard reduction
to a minimum of 1.5 million, compared to
a 2000 planned level of 1.3 million.
• For priority watersheds, BLM will enhance the ecological integrity of an additional 2,000 miles of riparian areas and
135,000 acres of wetlands in 2001, compared to 1,700 miles and 128,000 acres
enhanced in 1999; BLM will also treat
300,000 acres for fire hazard reduction by
prescribed fire and mechanical means,
compared to 1997 levels of 70,000 acres.
The Interior Department’s Fish and Wildlife
Service (FWS), with a budget of $1.75 billion,
manages 94 million acres of refuges and,
with the Commerce Department’s National
Marine Fisheries Service (NMFS), protects
species on Federal and non-Federal lands.
• In 2001, FWS will again ensure that the
refuge acreage is protected, of which 3.5
million acres will be enhanced or restored.
In 1999, FWS met its goal of enhancing
or restoring 3.3 million acres of refuge
land.
• FWS will also increase by one million
acres the number of protected, non-Federal
acres in Habitat Conservation Plans up
from 2.5 million in 1999; keep 20 more
species off the endangered species list,
compared to a 1998 baseline of seven species kept off the list; and, improve or stabilize the populations of 37 percent of species listed a decade or more, over a 1998
baseline of 36 percent.
• NMFS will implement programs in 2001
to reduce the number of overfished fisheries from 95 to 74 out of the 286 overfished stocks.
Half of the continental United States is
crop, pasture, and rangeland. Two percent
of Americans manage this land—farmers and
ranchers. The Department of Agriculture’s
(USDA) Natural Resources Conservation Service provides technical assistance to them
to improve land management practices.

15.

199

NATURAL RESOURCES AND ENVIRONMENT

Under USDA’s Wetlands Reserve Program
(WRP), the Federal Government buys longterm or permanent easements from landowners that take the land out of production
and restore it to wetlands. Landowners receive
up to 100 percent of the fair market agricultural value for the land and cost-share assistance to cover the wetland restoration expenses.
At the end of 2000, cumulative acreage
in the WRP will total 935,000.
• In 2001, WRP acreage enrollment activity
will reach the authorized cap of 975,000
acres. In support of the Administration’s
farm safety net proposal and the Clean
Water Action Plan, the 2001 budget proposes to increase enrollment to 250,000
acres annually through 2010.
• USDA will use a number of programs to
address the goals outlined in the Clean
Water Action Plan’s Animal Feeding Operations Strategy, resulting in the installation of 15,000 animal waste management
systems to protect water from agricultural
pollution, an increase of 64 percent over
2000.
• Through several programs, USDA will also
implement resource management systems
to control erosion and improve habitat on
6.0 million acres of grazing lands, compared to 5.8 million acres in 2000.
USDA’s Environmental Quality Incentives
Program (EQIP), which provides funds to
farmers and ranchers to adopt sound conservation practices, will again target funds in
2001 to conservation priority areas such as
Maine’s Penobscot Nation and Texas’s Edwards Aquifer. These areas use EQIP funds
to address problems ranging from erosion
to threatened and endangered species to
water quality. The budget proposes $325
million in mandatory funding for EQIP, a
$151 million increase above 2000, in support
of the farm safety net proposal and the
Clean Water Action Plan. For more information on conservation and USDA’s investment
in land management, see Chapter 18, ‘‘Agriculture.’’

Everglades and California Bay-Delta
Restoration
Federal and non-Federal agencies are carrying out long-term restoration plans for
several nationally significant ecosystems, such
as those in South Florida and California’s
Bay-Delta. The South Florida ecosystem is
a national treasure that includes the Everglades and Florida Bay. Its long-term viability
is critical for the tourism and fishing industries, and for the water supply, economy,
and quality of life for South Florida’s six
million people. Economic development and
water uses in California’s San Francisco BaySan Joaquin Delta watershed have diminished
water quality, degraded wildlife habitat, endangered several species, and reduced the
estuary’s reliability as a water source for
two-thirds of Californians and seven million
acres of highly productive agricultural land.
The Vice President announced the completion of the comprehensive plan to restore
the Everglades on July 1, 1999. This plan
will also accommodate other demands for
water and related resources in South Florida.
The Administration will submit legislation
to authorize this plan in 2000. By September
30, 2002, five of the 68 currently known
federally endangered and threatened species
in South Florida will be able to be ‘‘downlisted’’ or removed from the list.
The Bay-Delta program expects during 2000
to select the preferred long-term plan to
solve critical water-related problems in the
California Bay-Delta. The plan will contain
specific, measurable performance goals for
levee protection, ecosystem restoration, and
water conservation, storage, and conveyance.
• In 2001, as part of implementing that
plan, participating agencies expect to
make up to 200,000 acre-feet of water
available to Federal water project contractors that would not otherwise have been
available.

200
Scientific Support for Natural Resources
The management of lands, the availability
and quality of water, and improvements in
the protection of resources are based on
sound and objective natural resources science.
Interior’s U.S. Geological Survey (USGS) provides research and information to land managers and the public to better understand
ecosystems and species habitat, land and
water resources, and natural hazards. In
1999, USGS provided impartial scientific information by delivering results from more than
900 investigations to natural resource managers, other decision-makers, and the public
to assist sound natural resource management.
In 2001, the USGS will participate in
the Lands Legacy initiative with a budget
that includes $50 million for this initiative,
including $30 million to the Community/
Federal Information Partnership, an interagency effort to provide communities with
the geospatial information and GIS technological assistance they need to make sound
planning decisions and preserve open space.
Communities will also receive earth science
data to improve mapping, data analysis, and
planning capabilities.
The Commerce Department’s NOAA manages ocean and coastal resources in the
200-mile Exclusive Economic Zone and in
12 National Marine Sanctuaries. Its National
Ocean Service and NMFS manage 201 fish
stocks, 163 marine mammal populations, and
their associated coastal and marine habitats.
NOAA’s National Weather Service (NWS),
using data collected by the National Environmental Satellite and Data Information Service,
provides weather forecasts and flood warnings.
Its Office of Oceanic and Atmospheric Research provides science for policy decisions
in areas such as climate change, air quality
and ozone depletion.
• In 2001, NWS’ ongoing modernization will
increase the lead time of flash flood warnings to 57 minutes and the accuracy of
flash flood warnings to 70 percent; increase the lead time of severe thunderstorm warnings to 21 minutes and the accuracy of severe thunderstorm warnings to
86 percent, and increase the accuracy of
heavy snowfall forecasts to 65 percent.
Since 1986, lead times for severe thunder-

THE BUDGET FOR FISCAL YEAR 2001

storm and tornado warnings has improved
significantly. For example, in 1986 the
lead time for severe thunderstorm warnings was 12 minutes versus 21 minutes
lead time in 2001.
Pollution Control and Abatement
The Federal Government helps achieve the
Nation’s pollution control goals by: (1) taking
direct action; (2) funding actions by State,
local, and Tribal governments; and, (3) implementing an environmental regulatory system.
The Environmental Protection Agency’s (EPA)
$7.3 billion in discretionary funds and the
Coast Guard’s $140 million Oil Spill Liability
Trust Fund (which funds oil spill prevention
and cleanup) finance the activities in this
subfunction. EPA is an NPR High Impact
Agency whose discretionary funds have three
major components—the operating program,
Superfund, and water infrastructure financing.
EPA’s $3.9 billion operating program provides the Federal funding to implement most
Federal pollution control laws, including the
Clean Air, Clean Water, Resource Conservation and Recovery, Safe Drinking Water,
and Toxic Substances Control Acts. EPA
protects human health and the environment
by developing national pollution control standards, largely enforced by the States under
EPA-delegated authority. For example, under
the Clean Air Act, EPA works to make
the air clean and healthy to breathe by
setting standards for ambient air quality,
toxic air pollutant emissions, new pollution
sources, and mobile sources.
• In 2001, EPA will certify that five of the
estimated 38 remaining nonattainment
areas have achieved the one-hour National
Ambient Air Quality Standard (NAAQS)
for ozone (see Chart 15–2).
• In 2001, air toxic emissions nationwide
from stationary and mobile sources combined will be reduced by five percent from
2000 (for a cumulative reduction of 35 percent from the 1993 level of 4.3 million
tons).
Under the Clean Water Act, EPA works
to conserve and enhance the ecological health
of the Nation’s waters, through regulation
of point source discharges and through multi-

15.

201

NATURAL RESOURCES AND ENVIRONMENT

Chart 15-2. Air Quality Trends
Number of nonattainment areas for one-hour ozone NAAQS

120
99

98
93

100

78

80

69
59

60
38

38

38
33

40

20

0
1992

1993

1994

1995
Actual

agency initiatives such as the Administration’s
Clean Water Action Plan.
• In 2001, water quality will improve on a
watershed basis such that 550 of the Nation’s 2,150 watersheds will have greater
than 80 percent of assessed waters meeting all water quality standards, up from
500 watersheds in 1998.
Under the Federal Insecticide, Fungicide,
and Rodenticide Act and the Federal Food,
Drug, and Cosmetic Act, EPA regulates pesticide use, grants product registrations, and
sets tolerances (standards for pesticide residue
on food) to reduce risk and promote safer
means of pest control. EPA also seeks to
reduce environmental risks where Americans
reside, work, and enjoy life, through pollution
prevention and risk management strategies.
• In 2001, EPA will reassess an additional
1,200 of the 9,721 existing pesticide tolerances to ensure that they meet the statutory standard of ‘‘reasonable certainty of
no harm’’ (for a cumulative 60 percent),
including an additional 208 of the 848 tol-

1996

1997

1998

1999

2000

2001

Estimates

erances having the greatest potential impact on dietary risks to children (for a cumulative 66 percent).
• In 2001, the quantity of Toxic Release Inventory pollutants released, disposed of,
treated, or combusted for energy recovery
(normalized for changes in industrial production) will be reduced by 200 million
pounds, or two percent, from 2000 reporting levels.
• In 2001, EPA will initiate safety reviews
on chemicals already in commerce by obtaining data on an additional 10 percent
of the 2,800 high-production volume
chemicals on the master testing list, as
part of the implementation of a comprehensive strategy for screening, testing,
classifying, and managing the risks posed
by commercial chemicals.
Under the Resource Conservation and Recovery Act, EPA and authorized States prevent
dangerous releases to the environment of
hazardous, industrial nonhazardous, and municipal solid wastes by requiring proper facility

202

THE BUDGET FOR FISCAL YEAR 2001

management and cleanup of environmental
contamination at those sites.

greenhouse gases, air toxics, soot, and
smog.

• In 2001, 106 more hazardous waste management facilities will have approved controls in place to prevent dangerous releases to air, soil, and groundwater, for
a total of 70 percent of 2900 facilities.

The $1.45 billion Superfund program pays
to clean up hazardous spills and abandoned
hazardous waste sites, and to compel responsible parties to clean up. The Coast Guard
implements a smaller but similar program
to clean up oil spills. Superfund also supports
EPA’s Brownfields program, designed to assess, clean up, and re-use former industrial
sites.

EPA’s underground storage tank (UST) program seeks to prevent, detect, and correct
leaks from USTs containing petroleum and
hazardous substances. Regulations issued in
1988 required that substandard USTs (lacking
spill, overfill and/or corrosion protection) be
upgraded, replaced or closed by December
22, 1998.
• In 2001, 93 percent (an estimated 651,000)
of active USTs will be in compliance with
these requirements, which improves upon
the 65 percent (approximately 553,800) of
then-active USTs in compliance as of the
December 22, 1998, deadline. Over the
past decade, more than 1.4 million substandard USTs have been permanently
closed.
In October 1997, the President announced
immediate actions to begin addressing the
problem of global climate change, and included
the Climate Change Technology Initiative
(CCTI) in the 1999 Budget. This budget
provides $227 million for the third year
of EPA’s portion of CCTI, much of which
focuses on the deployment of underutilized
but existing technologies that reduce greenhouse gas emissions. The partnerships EPA
has built with business and other organizations since the early 1990s will continue
to be the foundation for reducing greenhouse
gas emissions in 2001 and beyond.
• In 2001, greenhouse gas emissions will be
reduced from projected levels by approximately 66 million metric tons of carbon
equivalent per year through EPA partnerships with businesses, schools, State and
local governments, and other organizations. This reduction level will be an increase of eight million metric tons over
2000 reduction levels.
• In 2001, EPA will develop the infrastructure to implement the Clean Air Partnership Fund, which will demonstrate smart
multi-pollutant approaches that reduce

• In 2001, EPA will complete 75 Superfund
cleanups, continuing on a path to reach
900 completed cleanups by the end of
2002; it completed 85 cleanups in 1999.
• In 2001, EPA Brownfields funding will result in 200 site assessments (for a cumulative total of 2,100), 500 jobs generated
(for a cumulative total of 5,400), and the
leveraging of $100 million in cleanup and
redevelopment funds (for a cumulative
total of $1.8 billion).
• In 2001, the Coast Guard will reduce the
rate of oil spilled into the Nation’s waters
to 4.62 gallons per million gallons shipped
from a statistical baseline of 5.25 gallons
in 1998.
EPA water infrastructure funds provide
capitalization grants to State revolving funds,
which make low-interest loans to help municipalities pay for wastewater and drinking
water treatment systems required by Federal
law. The $1.625 billion in the 2001 Budget
is consistent with the Administration’s plans
to capitalize these funds to the point where
the Clean Water State Revolving Funds
(CWSRF) and the Drinking Water State Revolving Funds (DWSRF) provide a total of
$2.5 billion in average annual assistance.
The $74 billion in Federal assistance since
passage of the 1972 Clean Water Act has
dramatically increased the portion of Americans enjoying better quality water; nearly
181 million people now receive the benefits
of secondary treatment of wastewater. Ensuring that community water systems meet
health-based drinking water standards is supported by both the DWSRF and operating
program resources.
• In 2001, 500 CWSRF projects will initiate
operations, including 300 projects pro-

15.

203

NATURAL RESOURCES AND ENVIRONMENT

viding secondary treatment, advanced
treatment, CSO correction (treatment),
and/or storm water treatment. A cumulative total of 6,200 projects will have initiated operations since inception of the
program.
• In 2001, 91 percent of the population
served by community water systems will
receive drinking water meeting all healthbased standards in effect as of 1994, up
from 83 percent in 1994.
USDA gives financial assistance to rural
communities to provide safe drinking water
and adequate wastewater treatment facilities
to rural communities. The budget proposes
$1.6 billion in combined grant, loan, and
loan guarantees for this assistance, a 24percent increase over the 2000 program level.
Part of those funds will go toward the
Water 2000 initiative to bring indoor plumbing
and safe drinking water to under-served rural
communities. Since 1994, USDA has invested
almost $2.1 billion in loans and grants on
high-priority Water 2000 projects Nation-wide.
The Administration proposes continuing the
Water 2000 initiative into 2001, based on
its successful five year record of targeting
funds to underserved communities, leveraging
resources from other public and private
sources, and maintaining the strong loan
repayment record of the Water and Waste
Disposal program.
• In 2001, USDA will fund 350 high-priority
water 2000 projects.
The Office of Surface Mining (OSM), in
partnership with States, reclaims abandoned
coal mines and restores the lands to productive
use for communities using funds from the
Abandoned Mine Lands Reclamation Fund.
• In 2001, OSM will reclaim 9,100 acres of
abandoned coal mine lands, 1,000 acres
more than in 2000.
Water Resources
The Federal Government builds and manages water projects for navigation, flooddamage reduction, environmental purposes,
irrigation, and hydropower generation. The
Army Corps of Engineers operates Nationwide, while Interior’s Bureau of Reclamation
operates in the 17 western States. The budget

proposes $4.9 billion for the agencies in
2001—$4.1 billion for the Corps, $0.8 billion
for the Bureau. The budget includes a proposal
to create a new Harbor Services Fund to
increase funding for the Corps’ operations,
maintenance, and construction activities at
our Nation’s ports and harbors and help
ensure a safe and economically competitive
port system. The budget also includes $135
million for Everglades infrastructure projects
and $20 million for Challenge 21, an initiative
to restore riverine ecosystems while providing
flood hazard mitigation for communities. While
navigation and flood damage reduction remain
major missions of the Corps, its responsibilities
increasingly have expanded to include the
restoration of aquatic and wetland ecosystems.
In 2001, the Corps will:
• Maintain controlled commercial navigation
and flood damage-reduction facilities in a
fully operational state at least 95 percent
of the time.
• Achieve ‘‘no net loss’’ of wetlands by creating, enhancing, and restoring wetlands
functions and values that are comparable
to those lost when the Corps issues permits to allow wetlands to be developed.
The Bureau of Reclamation manages, develops, and protects water and related resources
in an environmentally and economically sound
manner in the interest of the American
public.
Over the past few years, the Bureau has
continued to supply water and power efficiently throughout the West. In 1999, the
Bureau delivered or released 30.7 million
acre-feet of water to Reclamation-owned and
operated facilities, 3.7 million over the minimum contracted amounts due. It also generated power needed to meet contractual
commitments and other requirements 100
percent of the time.
• In 2001, the Bureau will deliver or release
the amount of water contracted for from
Reclamation-owned and operated facilities,
expected to be no less than 28 million
acre-feet, and generate power needed to
meet contractual commitments and other
requirements 100 percent of the time, depending upon water availability.

204
Tax Incentives
The tax code offers incentives for natural
resource industries, especially timber and mining. The timber industry can deduct certain
costs for growing timber, pay lower capital
gains rates on profits, take a credit for
investments, and quickly write-off reforestation costs—in total, costing about $610 million in 2001. The mining industry benefits
from percentage depletion provisions (which

THE BUDGET FOR FISCAL YEAR 2001

sometimes allows deductions that exceed the
economic value of resource depletion) and
can deduct certain exploration and development costs—together, costing about $265 million in 2001.
In 2001, Better America Bonds will provide
tax incentives for State and local governments
to protect local green spaces, improve water
quality, and clean up abandoned industrial
sites.

16.
Table 16–1.

AGRICULTURE

Federal Resources in Support of Agriculture
(In millions of dollars)

Function 350

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

4,503

4,462

4,586

4,583

4,544

4,652

4,749

18,447
..............

26,100
710

14,259
3,384

9,824
3,290

9,725
..............

7,598
..............

6,635
..............

10,038
2,593

12,165
6,584

10,630
6,631

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

885

915

960

995

1,050

1,100

1,140

N/A = Not available.

The Federal Government helps to increase
U.S. agricultural income by boosting productivity, ensuring that markets function fairly,
and providing a safety net for farmers and
ranchers who often face unreasonable market
forces, financial risk and natural disasters.
Agriculture Department (USDA) programs disseminate economic and agronomic information,
ensure the integrity of crops, inspect the
safety of meat and poultry, and help farmers
finance their operations and manage risks
from both weather and variable export conditions. The results are found in the public
welfare that Americans enjoy from an abundant, safe, and inexpensive food supply, free
of severe commodity market dislocations. Agriculture, food, and its related activities account
for 15 percent of the total U.S. personal
consumption expenditure.
Conditions on the Farm
Economic conditions facing U.S. agriculture
in 1999 again highlighted the need for a
Federal role. Supplies of farm commodities
continued to exceed demand, and some record
high market prices of the mid-1990s fell
to their lowest levels in years. While farmers
and ranchers in many areas suffered crop
production losses due to weather, disease,

and pests in 1998 and 1999, these crop
losses did not offset production increases
in other regions of the country. Gross cash
receipts fell three percent to $192 billion,
still 11 percent above the average level
for 1990–95. Net cash income rose $4 billion
above 1998 to nearly the 1993 record of
$59.3 billion, emergency with the Government
payments. Forecasts for 2000 put net cash
income (without a Government aid package)
below the 1990–95 average of $53.6 billion.
Farmers are expected to earn slightly less
from 2000 crop sales than last year due
to lower feed grain prices. Livestock prices
in 1999 began to recover from recent lows,
and receipts are slightly above the record
level of $96.6 billion in 1997. Beef cattle
and hog prices are expected to strengthen
modestly in 2000, but remain low for many
other commodities.
Macro-economic agricultural conditions in
1998–99 were nearly the reverse of conditions
that led to record farm income and prices
earlier in the decade. Growth in crop yields
and a fourth year of generally fine weather
led to robust world-wide production of major
grains, which flattened export demand for
U.S. crops. These conditions prompted the
Federal Government to expand spending on
205

206
agriculture for a second year, including $9.1
billion in emergency disaster relief enacted
in the 2000 Agriculture Appropriations Act
and the 2000 Consolidated Appropriations
Act. Overall, Federal Government farm payments reached a record $22.7 billion in
1999 (from $12.2 billion in 1998).
Despite generally low commodity prices,
farm assets and equity continue to rise.
Farm sector assets increased slightly in value
in 1999, to $1.04 trillion. Farm asset values
are forecast to remain at historic high levels
in 2000, as farm real estate values increase
for the twelfth straight year. In 1999, farmers’
debt burden was only about 40 percent of
their repayment capacity, comparable to the
1997 level of record economic performance.
Farmer loan delinquencies are at a low
and flat level. However, a continuation of
low commodity prices may cause increasing
financial stress for many producers.
Exports remain key to future U.S. farm
income. The Nation exports 35 percent of
its farm production, and agriculture produces
the greatest balance of payments surplus,
for its share of national income, of any
economic sector. Agricultural exports reached
a record $60 billion in 1996. By 1999, with
export volume flat, lower world market prices
reduced exports to $49 billion in value terms.
In 2000, export growth is likely to be minimal.
Pacific Asia, including Japan, is the most
important region for U.S. farm exports, accounting for 36 percent of total U.S. export
sales in 1999.
The 1996 Farm Bill
The 1996 Farm Bill, effective through 2002,
fundamentally redesigned Federal income support and supply management programs for
producers of wheat, corn, grain sorghum,
barley, oats, rice, and cotton. It expanded
the market-oriented policies of the previous
two major farm bills, which had gradually
reduced the Federal influence in the agricultural sector, at the same time, however,
it frayed significantly the existing farm net.
Under previous laws dating to the 1930s,
farmers who reduced plantings could get
income support payments when prices were
low, but farmers had to plant specific crops
in order to receive such payments. Even

THE BUDGET FOR FISCAL YEAR 2001

when market signals encouraged the planting
of a different crop, farmers had limited
flexibility to do so. By contrast, the 1996
Farm Bill eliminated most such restrictions
and, instead, provided fixed, but declining
payments to eligible farmers through 2002,
regardless of market prices or production
volume. This law decoupled Federal income
support from planting decisions and market
prices. The law brought changes in the crop
acreage planted in response to market signals.
In 1997, wheat acreage fell by six percent,
or about five million acres, from the previous
year, while soybean acreage rose by 10 percent, or over six million acres.
The Farm Bill’s freedom from planting
restrictions meant greater potential volatility
in crop prices and farm income. Not only
can USDA no longer require farmers to
grow less when supplies are great, but the
size of farm income-support payments no
longer varies as crop prices fluctuate. The
previous farm bills were not perfectly countercyclical: participants in USDA commodity programs whose crops were totally ruined when
prices were high got no income-support payment then, but would now through fixed
payments. The 1996 Farm Bill also provides
additional marketing loan payments to farmers when commodity prices fall below a
statutorily set loan rate. These reached the
historic high level of nearly $7 billion in
1999, before being supplemented by the second
straight year of emergency aid to producers.
Nonetheless, the market conditions in 1998
and 1999 raised the issue of whether the
Federal farm income safety net was sufficient,
and how it should be improved. Specifically,
many crop prices greatly decreased in
1997–1999 from previous years, but the farm
bill’s decoupled income assistance did not
adjust upward to compensate. Because commodity prices remain low, the budget includes
through the end of the Farm Bill an $11
billion package to enhance the farm income
safety net. It includes counter-cyclical income
assistance when farm revenues are low, a
freeze on USDA marketing assistance loan
rates for the 2000 crop, and major increases
in new and existing USDA conservation programs, among other things.

16.

AGRICULTURE

The 1999 crop experience also highlighted
problems with the crop insurance program,
which is intended to be the foundation of
the farm safety net. Farmers who experience
multi-year losses are left with insufficient
coverage at higher cost; there is no coverage
available for many commodities including livestock; and, most fundamentally, coverage that
provides adequate compensation is simply
not affordable for many farmers. The Administration’s safety net package, therefore, includes
funds to increase crop insurance subsidies.
Federal Programs
USDA seeks to enhance the quality of
life for the American people by supporting
production agriculture; ensuring a safe, affordable, nutritious, and accessible food supply;
conserving agricultural, forest, and range
lands; supporting sound development of rural
communities; providing economic opportunities
for farm and rural residents; expanding global
markets for agricultural and forest products
and services; and working to reduce hunger
in America and throughout the world. (Some
of these missions fall within other budget
functions and are described in other chapters
in this Section.)
Farming and ranching are risky. Farmers
and ranchers face not only the normal vagaries
of supply and demand, but also uncontrollable
risk from nature. Federal programs are designed to accomplish two key economic goals:
(1) enhance the economic safety net for
farmers and ranchers; and, (2) open, expand,
and maintain global market opportunities
for agricultural producers.
The Federal Government mitigates risk
through a variety of programs:
Federal Farm Commodity Programs:
Since most Federal income support payments
under the 1996 Farm Bill are now fixed, farm
income can fluctuate much more from year to
year due to supply and demand changes.
Farmers must rely more on marketing alternatives, and develop strategies for managing
financial risk and stabilizing farm income.
However, in response to unprecedented crop/
livestock price decreases and regional production problems, Congress included as part of
the $9.1 billion in emergency disaster relief
in 2000 a doubling of the 1996 Farm Bill’s

207
fixed $5 billion in income-support payments.
In addition, the Federal Government continues
to provide other safety-net protections, such
as the marketing assistance loans that guarantee a minimum price for major commodities,
which paid producers $7 billion in 1999 and
will pay them a similar amount in 2000.
Insurance: USDA helps farmers manage
their risks by providing subsidized crop insurance, delivered through the private sector,
which shares the insurance risk with the Federal Government. Farmers pay no premiums
for coverage against catastrophic production
losses, and the Government subsidizes their
premiums for higher levels of coverage. Over
the past three years, an average 65 percent
of eligible acres have been insured, the highest
in the program’s 60-year history. USDA now
targets an average indemnity payout of $1.08
for every $1 in premium, down from the historical average indemnity of $1.40 for every $1
in premium. Crop insurance costs the Federal
Government about $1.5 billion a year, including USDA payments to private companies for
delivery of Federal crop insurance.
Early in 2000, as part of the $9.1 billion
in emergency disaster relief the President
signed into law, nearly $1.4 billion in crop
loss payments was paid to producers to
compensate for natural disasters in 1999.
Payments also were made to uninsured farmers, but with the requirement that those
farmers purchase insurance in the 2000 and
2001 crop years. Moreover, $400 million was
provided in 2000, as it was in 1999, to
help farmers pay insurance premiums. Consequently, crop insurance participation, and
therefore subsidy costs, are expected to be
above average in these years, due to eligible
acres insured rising toward 70 percent and
current policyholders taking advantage of reduced premiums to increase their coverage.
Both increased participation and higher coverage have the effect of enhancing the farm
safety net, and reducing the need for disaster
assistance legislation. USDA also continues
to develop crop insurance policies on new
crops and expand several insurance products
that mitigate revenue risk—price and production risk combined. These revenue insurance
pilots have shown that farmers generally
want these types of products, and USDA

208
will continue to expand their application
and availability.
Trade: The trade surplus for U.S. agriculture declined by about 30 percent in 1999
to $11.6 billion, after experiencing faster
growth in recent decades than any other sector
of the economy. This is largely the result of
the drop in commodity prices rather than a
loss of export volume. The Foreign Agriculture
Service’s efforts to negotiate, implement, and
enforce trade agreements play a large role in
creating a strong market for exports.
In 2001, USDA will:
• take action to overcome 650 new trade
barriers, up from 400 in 1993; and,
• generate 4,500 trade leads for U.S. agricultural export sales, 10 percent greater
than in 1993.
USDA is authorized to spend over $1
billion in 2001 on export activities (not counting funds for overseas donations of farm
commodities), including subsidies to U.S. firms
facing unfairly-subsidized overseas competitors, and loan guarantees to foreign buyers
of U.S. farm products. USDA also helps
firms overcome technical requirements, trade
laws, and customs and processes that often
discourage the smaller, less experienced firms
from taking advantage of export opportunities.
USDA outreach and exporter assistance activities help U.S. companies address these problems and enter export markets for the first
time.
USDA programs also help U.S. firms, especially smaller-sized ones, export more aggressively. Their high-value products now account
for more than half of agricultural export
value even as total U.S. farm exports have
been declining recently. By participating in
the Market Assistance Program (MAP) or
USDA-organized trade shows, firms can more
easily export different products to new locations on their own. Small and mediumsized firm recipients (those with annual sales
of under $1 million) now represent all of
the MAP branded-promotion spending, up
from 60 percent in 1993.

THE BUDGET FOR FISCAL YEAR 2001

In 2001, USDA will:
• assist 2,000 U.S. firms to establish export
activities and overseas marketing distribution channels, 750 more than in 1993; and,
• increase the number of new firms that the
MAP supports in establishing marketing
and distribution channels for a total of 625
participants, up from 525 in 1994.
Agricultural Research: In 2001, the Federal Government expects to spend $2.2 billion
for agricultural research, education, economics
and statistics programs whose goals are to
make U.S. agriculture more productive and
competitive in the global economy.
The Agricultural Research Service (ARS)
is USDA’s in-house research agency. In 2001,
ARS’ $950 million proposed funding level
will increase emphasis in high-priority areas,
such as improving human nutrition, food
safety and food quality protection; combating
emerging and exotic animal and plant diseases
and invasive species; improving the understanding of agriculture’s role and response
to climate change issues; increasing available
genetic resources and improving the ability
to identify useful properties of organisms;
and, using biotechnology to find new products
and energy sources from existing and converted crops, as well as to fund needed
facility construction.
During 1999, ARS developed new procedures
to reduce crop losses due to post-harvest
decay of stored commodities; initiated a cooperative project to sequence, map and analyze
publicly available DNA clones for crop
genomes; and, determined the role of various
nutrients in providing maximum health benefits to the public, including children and
the elderly.
The Cooperative State Research, Education
and Extension Service (CSREES) provides
grants, mainly through open competition or
legislative formula. The largest recipients of
these grants are land grant universities and
State agricultural experiment stations. In
2001, CSREES’ $1.1 request billion (including
$120 million for mandatory programs) will
increase funding for competitive grants for
several programs, mainly through the National

16.

AGRICULTURE

Research Initiative—USDA’s major source of
competitive research grant funding—as well
as integrated research, education and extension grants, and mandatory authority provided
in 1998. CSREES also will provide increased
support in areas such as pest management
and control, sustainable agriculture, biotechnology, food quality protection, small
farms programs and gleaning. It also will
provide support to minority institutions of
higher education, and a large increase has
been requested for Native American programs.
USDA economics and statistics programs,
which are funded at $150 million, improve
U.S. agricultural competitiveness by reporting
and analyzing information. The Economic Research Service (ERS) provides economic and
other social sciences information and analysis
for decision-making on agriculture, food, natural resources and rural development policy.
The National Agricultural Statistics Service
(NASS) provides estimates of production, supply, price and other aspects of the farm
economy, providing information that helps
ensure efficient markets.
• In 2001, NASS will include over 95 percent of national agricultural production in
its commodities reports, up from 92 percent in 1997.
Inspection and Market Regulation: The
Federal Government spends a half-billion dollars a year to secure U.S. cropland from pests
and diseases and make U.S. crops more marketable. The Animal and Plant Health Inspection Service (APHIS) inspects agricultural
products that enter the country, searching for
goods or commodities that could harbor potential infestations; monitors the disease status
of agricultural plants and animals; controls
and eradicates diseases and infestations; helps
control damage to livestock and crops from
animals; and uncovers cruel treatment of
many domesticated animals. The Agricultural
Marketing Service (AMS) and the Grain Inspection, Packers and Stockyards Administration (GIPSA) help market U.S. farm products,
ensure fair trading practices, and promote a
competitive, efficient market place.
In 2001, APHIS will provide increased
funding to stop the importation of goods
and commodities that could endanger U.S.
agriculture; monitor the potential for infesta-

209
tions; use discretionary funding to respond
to ongoing emergencies such as Medfly, citrus
canker and scrapie; improve the inspection
of plants and animals; and, take actions
to respond to the threat of invasive plant
and animal species. APHIS resources also
will significantly increase animal welfare activities (for which a $5 million increase
is requeted for 2001). The amounts requested
will fund more inspectors to help ensure
that licensed or regulated wholesalers, certain
pet stores, zoos, circuses and other public
displays and research facilities follow regulations for the humane treatment of animals.
Examples of performance in 2001 are:
• APHIS expects to reduce the number of
Medfly infestations in Chiapas, Mexico,
that could threaten the U.S., from 239 in
1998 to 50; and,
• APHIS will increase the number of animal
welfare inspections from 10,000 in 1998
to 17,000 in 2001.
AMS will increase funding a microbiological
surveillance program on domestic fruits and
vegetables through the President’s Food Safety
Initiative, and fund the recently authorized
program to provide the public with daily
information on livestock transactions.
• AMS will increase the number of markets
covered by its market news program from
1,681 in 1998 to 1,831 in 2001.
Conservation: The Farm Bill was the most
conservation-oriented farm bill in history, enabling USDA to provide incentives to farmers
and ranchers to protect the natural resource
base of U.S. agriculture. Farmers can now use
crop rotations, which earlier price support programs had severely limited. Also, the bill created several new programs. The Environmental Quality Incentives Program (EQIP),
provides cost-share and incentive payments to
encourage farmers to adopt new and improved
farming practices or technology, and reduce
the environmental impact of livestock operations. Farmers may use different nutrient
management or pest protection approaches,
with USDA offering financial assistance to offset some of the risk. Another new Farm Bill
program was the Farmland Protection Program (FPP), which provides cost-share funds
for agricultural easements to State, local, and

210

THE BUDGET FOR FISCAL YEAR 2001

tribal governments to preserve farmland and
prevent its conversion to other uses.

scribed in Chapter 19, ‘‘Community and Regional Development.’’

The Administration’s farm safety net proposal expands several conservation programs
and their mandatory funding, increasing the
financial and technical assistance available
to farmers and ranchers who wish to implement costly but environmentally-sound land
management practices or those who want
to permanently protect their farmland from
development. (see also, Chapter 4, ‘‘Protecting
the Environment’’). The safety net proposal
removes the Wetlands Reserve Program’s
(WRP) cumulative 975,000 acre cap to allow
enrollment of 250,000 acres per year, as
outlined in the Clean Water Action Plan,
and increases the Conservation Reserve Program’s (CRP) enrollment cap by 3.6 million
acres, to 40 million. Both of these programs
remove land from agricultural use and restore
natural habitats. The safety net proposal
also provides $65 million for the FPP, which
remains part of the Administration’s Lands
Legacy initiative, and $50 million for the
Wildlife Habitat Incentives Program (WHIP),
which helps landowners establish fish and
wildlife habitat on their land. The EQIP’s
annual authorized funding level is also increased by $125 million to $350 million.
Also included in the proposal is $600 million
for a new Conservation Security program,
which will provide varying levels of payments
to producers based on the conservation practices they implement.

Agricultural Credit: USDA provides about
$700 million a year in direct loans and over
$3 billion in guaranteed loans to finance farm
operating expenses and farmland purchases.
Direct loans, which carry interest rates at or
below those on Treasury securities, are targeted to beginning or socially disadvantaged
farmers who cannot secure private credit.

In 2001 USDA will:
• increase the number of acres enrolled each
year for riparian buffers and filter strips
to 2.9 million, from an estimated 2.0 million acres in 2000;
• Develop resource management systems for
12.3 million acres of cropland and grazing
land, and,
• protect approximately 130,000 productive
farmland acres through the FPP from
being permanently lost to development.
For more information on conservation, and
USDA’s investments in public land management, see Chapter 15, ‘‘Natural Resources
and Environment.’’ USDA programs also help
to maintain vital rural communities, as de-

In 2001, USDA will:
• increase the proportion of loans targeted
to beginning and socially-disadvantaged
farmers to 18 percent, from an estimated
16 percent in 2000 and nine percent in
1996 when USDA first began measuring
this activity; and,
• reduce the delinquency rate on farm loans
to 14 percent, from an estimated 16 percent in 2000 and over 24 percent in 1994.
The Farm Credit System and Farmer Mac—
both Government-Sponsored Enterprises—enhance the supply of farm credit through
ties to national and global credit markets.
The Farm Credit System (which lends directly
to farmers) has recovered strongly from its
financial problems of the 1980s, in part
through Federal help. Farmer Mac increases
the liquidity of commercial banks and the
Farm Credit System by purchasing agricultural loans for resale as bundled securities.
In 1996, Congress gave the institution authority to pool loans as well as more years
to attain required capital standards, which
Farmer Mac has now achieved.
Personnel, Infrastructure, and the Regulatory Burden: USDA administers its many
farm, conservation, and rural development programs through 2,500 county offices with over
17,000 staff. The increasing costs of maintaining the current delivery system and the investment in new information technology have
prompted the Department to re-examine its
staff-intensive field office-based infrastructure.
In 2001, USDA will: (1) consolidate information technology staff of the Farm Service Agency, the Natural Resources Conservation Service, and Rural Development into one staff to
service all three agencies under USDA’s Chief
Information Officer; (2) identify centers of investment to allocate limited technology invest-

16.

AGRICULTURE

ments and reduce the number of free-standing
county offices; and, (3) continue to streamline
its collection of information from farmers and
better disseminate information across USDA
agencies.
In 2001, USDA will utilize county-office
pilot sites to test new management structures
and program delivery options that improve
customer service and collectively reduce operating costs. USDA will also merge all of
the non-information technology administrative

211
support staffs for its field office agencies
(Farm Services Agency, Natural Resources
Conservation Service, Rural Development),
consistent with the cost-benefit analysis done
to support the investment in modern technology by providing more efficient and coordinated support services. Efficiency savings of
$21 million from sharing common administrative processes and staff were delayed past
2001 due to postponement of this initiative
in 2000 by Congress.

17.

COMMERCE AND HOUSING CREDIT

Table 17–1.

Federal Resources in Support of Commerce and Housing
Credit
(In millions of dollars)

Function 370

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

3,838

7,226

3,456

3,311

3,279

3,193

3,262

–862
..............

–1,613
..............

–767
–96

–1,010
–105

–1,507
–118

–1,299
–129

–657
–143

2,125
306,630

1,780
263,988

2,041
273,937

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

227,870
..............

235,565
..............

247,145
330

255,305
533

264,400
531

274,725
631

284,435
790

N/A = Not available.

The Federal Government facilitates commerce and supports housing through many
diverse activities. It provides direct loans
and loan guarantees to ease access to mortgage and commercial credit; sponsors private
enterprises that support the secondary market
for home mortgages; regulates private credit
intermediaries; protects investors when insured depository institutions fail; promotes
exports and technology; collects our Nation’s
statistics; and, offers tax incentives.
Mortgage Credit
The Government provides loans and loan
guarantees to increase homeownership, and
to help low-income families afford suitable
apartments. Housing credit programs of the
Departments of Housing and Urban Development (HUD), Agriculture (USDA), and Veterans Affairs (VA) supported $177 billion
in loan and loan guarantee commitments
in 1999, helping nearly two million households
(see Table 17–2). All of these programs
have contributed to the success of the President’s National Homeownership Initiative
which, along with a strong economy, has
helped boost the national homeownership rate

to 67 percent—its highest ever (see Chart
17–1). An additional 8.7 million families have
become homeowners during this Administration.
• In 2001, the national homeownership rate
will be 67.5 percent.
HUD’s Mutual Mortgage Insurance
(MMI) Fund: The MMI Fund, run by the Federal Housing Administration (FHA), helps increase access to single-family mortgage credit
in both urban and rural areas. In 1999, the
MMI Fund insured over $113 billion in mortgages for over 1.2 million households. Over 80
percent of FHA home purchase mortgages
went to first-time home buyers.
• The share of FHA mortgage insurance for
first-time home buyers will increase by
one percentage point in 2001.
• In 2001, the homeownership rate among
households with incomes less than median
family income will increase by 0.5 percentage point to 52.5 percent.

213

214

THE BUDGET FOR FISCAL YEAR 2001

Chart 17-1. Historical Homeownership Rates
Percentage of households owning their homes

68
66.8
65.6

66

67.0

1998

1999

66.0

65.0
64.1

64

62

0
1994

1995

1996

USDA’s Rural Housing Service (RHS):
RHS offers direct and guaranteed loans and
grants to help very low- to moderate-income
rural residents buy and maintain adequate, affordable housing. The single family direct loan
program provides subsidized loans to very lowincome rural residents, while the single family
guarantee loan program guarantees up to 90
percent of a private loan for moderate-income
rural residents. Together, the two programs
provided $4 billion in loans and loan guarantees in 1999, providing 60,261 decent, safe affordable homes for rural Americans. The Administration proposes to provide higher loan
levels at lower cost by increasing the single
family housing guarantee program loan fee
from 1 percent to 2 percent. This change, along
with RHS’ successful efforts in leveraging, will
allow more lending per dollar.
• In 2001, RHS will further reduce the number of rural residents living in substandard housing by providing $5 billion
in loans and loan guarantees for 68,000
new or improved homes.

1997

Veterans’ Affairs (VA): VA recognizes the
service that veterans and active duty personnel provide to the Nation by helping them
buy and retain homes. The Government partially guarantees the loans from private lenders, providing $43 billion in loan guarantees
in 1999. One of VA’s key goals is to improve
loan servicing to avoid veteran foreclosures.
• In 2001, VA will be successful in intervening to help veterans avoid foreclosure
40 percent of the time, an increase from
the 1998 level of 37 percent. (See Chapter
25, ‘‘Veterans Benefits and Services,’’ for
more information.)
Ginnie Mae: Congress created Ginnie Mae
in 1968 to support the secondary market for
FHA, VA, and RHS mortgages through
securitization. To date, Ginnie Mae has helped
22.7 million low- and moderate-income families
buy homes.
• In 2001, Ginnie Mae will continue to
securitize 95 percent of FHA and VA
loans, enhancing mortgage market effi-

17.

215

COMMERCE AND HOUSING CREDIT

Table 17–2.

Selected Federal Commerce and Housing Credit Programs:
Credit Programs Portfolio Characteristics
(Dollar amounts in millions)

Numbers of housDollar volume of ing units/small
direct loans/
business financed
guarantees
by loans/
written in 1999
guarantees
written in 1999
Mortgage Credit:
HUD/FHA Mutual Mortgage Insurance Fund .........................................
HUD/FHA General Insurance and
Special Risk Insurance Fund ..........
USDA/RHS single-family loans ..........
USDA/RHS multifamily loans ............
VA guaranteed loans ...........................

Dollar volume of
total outstanding
loans/guarantees
as of the end of
1999

113,217

1,219,928

411,474

16,924
3,969
141
43,091

247,943
60,261
10,087
396,399

92,597
25,373
11,925
195,868

Subtotal, Mortgage Credit ...........

177,342

1,934,618

737,237

Business Credit:.
SBA Guaranteed Loans ......................
SBA Direct Loans ................................

13,906
40

45,629
34

41,132
48

Subtotal, SBA Loans ....................

13,946

45,663

41,180

Total Assistance ........................

191,288

1,980,281

778,417

ciency and lowering financing costs for
home buyers.
Rental Housing
The Federal Government provides housing
assistance through a number of HUD and
USDA programs in the Income Security function. HUD’s rental programs provided subsidies for over 4.7 million very-low-income
households in 1999. In addition, USDA’s
RHS rental assistance grants to low-income
rural households provided $583 million to
support 42,000 new and existing rental units
in 1998. RHS’s multifamily housing programs,
which generally lends to private developers,
finances both the construction and rehabilitation of rural rental housing for low- to
moderate-income, elderly, and handicapped
rural residents as well as farm laborers.
The Budget provides $365 million in direct
loans, providing over 7,500 new units for
very-low income tenants in rural America.
For 2001, these agencies intend to meet
the following performance goals:

• Increase the percentage of families with
children assisted by HUD’s tenant-based
Section 8 voucher program that live in
low-poverty census tracts from 61 percent
in 1999 to 64 percent in 2001.
• The share of families that move from welfare to work while assisted by tenantbased Section 8, will increase from 32 percent in 1999 to 34 percent in 2001.
• Increase to 78 percent the ratio of affordable units actually available to extremelylow-income renters, from 76 percent in
1997.
• RHS will make new and continued rental
assistance commitments to fund 43,800
rental assistance units.
Public Housing and Other Assisted
Housing Programs
The Federal Government funds capital and
management improvements of public housing
authorities, as well as supportive services
for public housing residents. These programs
support the housing needs of particular popu-

216

THE BUDGET FOR FISCAL YEAR 2001

lations, such as the elderly and disabled,
in addition to low-income families.

a performance-based organization to better
serve America’s entrepreneurs and innovators.

• Public Housing Authorities demolished,
46,237 units of dilapidated public housing
from 1993 through 1999 with an additional 14,800 scheduled for demolition in
2000. During 2001, 12,000 more units will
be demolished, moving the Administration
toward the goal of demolishing 100,000 of
the worst public housing units by 2003.

• In 2001, PTO will issue over 185,000 patents, reduce the average processing time
for inventions from the 1999 average of
10.9 months to an average of 10.0 months,
and attain an 80 percent favorable customer satisfaction rating.

Housing Tax Incentives
The Government provides significant support for housing through tax preferences.
The two largest tax benefits are the mortgage
interest deduction for owner-occupied homes
(which will cost the Government $61 billion
in 2001 and $331 billion over five years)
and the deductibility of State and local property tax on owner-occupied homes (costing
$23 billion in 2001 and $125 billion over
five years).
Other tax provisions also encourage investment in housing: (1) capital gains of up
to $500,000 on home sales are exempt from
taxes (costing $101 billion from 2001 to
2005); (2) States and localities can issue
tax-exempt mortgage revenue bonds, whose
proceeds subsidize purchases by first-time,
low- and moderate-income home buyers; and,
(3) installment sales provisions let some real
estate sellers defer taxes. Finally, the lowincome housing tax credit (LIHTC) provides
incentives for constructing or renovating rental
housing that helps low-income tenants (costing
approximately $3.2 billion in 2001). The President proposes to raise the volume cap on
the LIHTC and index the cap to inflation
starting in 2002.
Commerce, Technology, and International
Trade
Technology Policy: The Commerce Department advocates sound technology policies to
promote technology development. Commerce’s
Patent and Trademark Office (PTO) protects
U.S. intellectual property rights around the
world through international treaties. In 1999,
the patent and trademark system was
strengthened with the passage of legislation
to reform patent law and make the PTO into

• In 2001, PTO will register 151,000 trademarks, reduce the average time required
for processing trademark applications from
the 1999 average of 15.5 months to an
average of 13.8 months, and attain an 80
percent favorable customer satisfaction
rating.
Commerce’s National Institute of Standards and Technology (NIST): NIST works
with industry to develop and apply technology,
measurements, and standards to promote
American competitveness. NIST administers
the Manufacturing Extension Partnership
(MEP), which makes technological information
and expertise available to smaller manufacturers.
• In 2001, NIST laboratories will produce
over 2,200 technical publications and offer
1,315 standard reference materials.
• In 2001, MEP will serve more than 33,600
clients, increase their sales by $678 million and generate $607 million in additional capital investment.
Commerce’s International Trade Administration (ITA): ITA strives to promote an
improved trade posture for U.S. industry and
develop the export potential of U.S. firms in
a manner consistent with U.S. foreign and economic policy.
• In 2001, ITA will service over 159,000
small to medium sized businesses, an increase of over 3,000 from the level in 2000.
Commerce’s Bureau of Export Administration (BXA): The BXA is a regulatory agency that enforces U.S. export controls.
• In 2001, BXA will issue 12,000 licenses
for dual use commodities (military or civilian use), 1,600 more than in 1999.

17.

217

COMMERCE AND HOUSING CREDIT

Commerce’s Census Bureau and Bureau
of Economic Analysis (BEA): The Census
Bureau collects, tabulates, and distributes a
wide variety of statistical information about
Americans and the economy, including the constitutionally-mandated decennial census. In
addition, BEA prepares and interprets U.S.
economic accounts, including the Gross Domestic Product (GDP).
• In 2001, the Census Bureau will complete
the decennial census and deliver State apportionment totals to the President by December 31, 2000, and adjusted data for
redistricting purposes and the distribution
of nearly $200 billion in Federal funds to
States and localities by March 31, 2001.
• BEA and Census will develop new methods to measure the significant structural
changes in the economy introduced by rapidly growing E-business activity.
Small Business Administration (SBA):
SBA assists and promotes small business by
expanding access to capital through guaranteed private sector loans — SBA guaranteed
over $11.5 billion in small business loans in
1999 — that carry longer terms and lower interest rates than those for which small businesses would otherwise qualify. SBA also provides technical assistance and venture capital.
• A key component of the Administration’s
economic development strategy is to increase access to capital and credit for
women and minorities owned firms. The
Administration’s programs will increase
the number of small business loans to
women owned firms from 13,500 in 1995
to 18,500 in 2001 and the number of loans
to minority owned firms from 10,000 in
1995 to 13,750 in 2001.
• Complementing loan programs are technical assistance programs, which increase
the borrower’s probability of success. To
date, SBA has not experienced any defaults on the direct microloan program,
suggesting that the technical assistance
has had a positive impact. The Administration intends to increase the number of
small businesses receiving counseling and
training to 1.2 million, a four-percent increase over the estimated 2000 level and
an increase of 300,000 since 1993.

Federal Trade Commission (FTC): The
FTC enforces various consumer protection and
antitrust laws that prohibit fraud, deception,
anti-competitive mergers, and other unfair and
anti-competitive business practices in the marketplace.
• In 2001, the FTC will save consumers
$250 million by stopping fraud and other
unfair practices, and another $500 million
by stopping anti-competitive behavior.
Federal Communications Commission
(FCC): The FCC works to encourage a fully
competitive market place in communications
and to promote and support every American’s
access to current and future communications
services. Through introduction of more efficient
licensing the FCC will ensure a more rapid
introduction of new services and technologies.
Through policy, economic analysis, and the
rulemaking process, the FCC promotes competition in the public interest. The FCC ensures efficient spectrum management; enforces
commission rules, regulations and authorities;
and promotes consumer information and
awareness of communications options and providers through the dissemination of Commission decisions and actions so that all Americans have access to communication services domestically and worldwide.
• In 2001, the FCC will achieve 85 percent
of licensing and enforcement activities
within established deadlines.
Commerce Tax Incentives
The tax law provides incentives to encourage
business investment. It taxes capital gains
at a lower rate than other income. This
will cost the Government $42 billion in
2001 and $222 billion over five years. In
addition, the law does not tax gains on
inherited capital assets that accrue during
the lifetime of the original owner. This will
cost $153 billion from 2001 to 2005. The
law also provides more generous depreciation
allowances for machinery, equipment, and
buildings. Other tax provisions benefit small
firms generally, including the graduated corporate income tax rates, preferential capital
gains tax treatment for small corporation
stock, and write-offs of certain investments.
Credit unions, small insurance companies,
and insurance companies owned by certain

218
tax-exempt organizations also enjoy tax preferences. Tax benefits for other kinds of
businesses are described in other chapters
in this section.
Financial Regulation
Federal Deposit Insurance: Federal deposit insurance protects depositors against
losses when insured commercial banks, thrifts
(savings institutions), and credit unions fail.
From 1985 to 1995, this insurance protected
depositors in over 1,400 failed banks and 1,100
failed thrifts, with total deposits of over $700
billion. Five agencies regulate federally-insured depository institutions to ensure their
safety and soundness: the Office of the Comptroller of the Currency regulates national
banks; the Office of Thrift Supervision regulates thrifts; the Federal Reserve regulates
State-chartered banks that are Federal Reserve members; the Federal Deposit Insurance
Corporation (FDIC) regulates other State-chartered banks; and, the National Credit Union
Administration (NCUA) regulates credit
unions.
• In calendar year 2000, the FDIC will perform 2,788 safety and soundness examinations.

THE BUDGET FOR FISCAL YEAR 2001

• The NCUA will reduce the percentage of
federally insured credit unions with net
capital of less than six percent of assets
to three percent of operating credit unions.
Securities and Exchange Commission
(SEC) and Commodity Futures Trading
Commission (CFTC): SEC regulates U.S.
capital markets and the securities industry
and facilitates capital formation. The CFTC
regulates U.S. futures and options markets.
Both regulators protect investors by preventing fraud and abuse in U.S. capital markets and ensuring adequate disclosure of information.
• The SEC will examine every investment
company complex and every investment
advisor at least once during each five-year
examination cycle.
• The CFTC will review every designation
application and rule change request, except for stock index futures (which require
SEC approval) within 10 to 45 days and
respond to trading exchanges (e.g., Chicago Board of Trade) with an approval or
deficiency letter.

18.
Table 18–1.

TRANSPORTATION

Federal Resources in Support of Transportation
(In millions of dollars)

Function 400

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

13,673

13,286

14,525

14,464

14,952

15,581

16,344

1,945
..............

2,362
..............

2,061
13

1,630
13

1,954
14

1,885
15

1,858
15

159
1,767

1,002
2,825

868
927

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1,870

1,970

2,080

2,200

2,330

2,460

2,605

N/A = Not available.

A transportation system is an indispensable
component of every economy and society.
It can increase the value of goods by moving
them to locations where they are worth
more. The system allows people to commute
to places of employment where their time
has higher value. By extending the spatial
boundaries of commodity and labor markets,
transportation encourages competition and
production. Our transportation system is vital
to America’s standard of living. An intermodal
transportation system that serves best, must
offer accessability, efficiency, reliability, safety,
security, and be environmentally friendly.
In 2001, the Federal Government will invest
over $54 billion on transportation. This compares with $35 billion spent on transportation
in 1993. In the past eight years, Federal
transportation spending has increased by 30
percent in constant dollars. This increase
has been necessary to keep the Nation’s
infrastructure in good condition, thereby facilitating the movement of goods and people,
and to ensure that the Air Traffic Control
System is able to keep pace with the increasing demands of growing air traffic.

Safe Operations
Improving transportation safety is the number one Federal Government transportation
objective. The Federal Government works with
State and local governments and private
groups to minimize the safety risks inherent
in transportation. It regulates motor vehicle
design and operation, inspects commercial
vehicles, educates the public regarding safety,
directs air and waterway traffic, rescues mariners in danger, monitors railroad safety and
conducts safety research.
A range of Federal programs and activities
help reduce the number of deaths and injured
persons from highway crashes, which number
about 42,000 and over three million a year,
respectively. Federal programs reach out to
State and local partners, industry and health
care professionals to identify the causes of
crashes and develop new strategies to reduce
deaths, injuries, and the resulting medical
costs. These partnerships yield results—in
1998 the Nation’s safety belt use reached
an all-time high of 70 percent. Alcohol related
highway fatalities reached a new low in
1998, at 38 percent of all highway deaths.
Along with coordinating such national traffic
safety efforts, the National Highway Traffic
219

220
Safety Administration (NHTSA) regulates the
design of motor vehicles, investigates reported
safety defects, and distributes traffic safety
grants to States. The budget proposes $499
million for NHTSA, a 33-percent increase
over 2000. This Administration supports programs designed to reduce drunk and drugged
driving, along with new initiatives that focus
on reducing injuries and fatalities among
minority, youth and rural populations. Research efforts include developing advanced
technologies to reduce the likelihood of vehicle
rollovers. Additionally, a new program will
target unsafe driving practices in an effort
to reduce the incidences of aggressive driving.
In partnership with the highway community,
the Federal Highway Administration (FHWA)
works to identify top roadway safety issues
and countermeasures. In 2001, efforts will
focus on run-off-road and pedestrian/bicycle
crashes, since these safety problems contributed 36 percent and 15 percent respectively
of total highway fatalities in calendar year
1997. In 2001, safety construction programs
will contribute $760 million to correct unsafe
roadway design and remove roadway hazards.
Federal funding for the new Federal Motor
Carriers Safety Administration (FMCSA) is
proposed at $279 million in 2001, an increase
of 54 percent over 2000. The Administration’s
goal is to reduce motor carrier fatalities
by 50 percent in 10 years. The FMCSA
will increase motor carrier enforcement, improve data, and expand roadside inspections.
In addition, States will be provided dedicated
funding to heighten enforcement of commercial
drivers (e.g., truck and bus drivers) licenses
in an effort to keep improperly registered
vehicles and drivers off our Nation’s highways.
FMCSA develops uniform standards that improve motor vehicle and driver safety, helps
coordinate law enforcement activities, and
aligns interstate trucking safety requirements.
Grants to States to enforce Federal and
compatible State standards for commercial
motor vehicle safety inspections, traffic enforcement, and compliance reviews are proposed to increase 78 percent over 2000 to
$187 million in 2001.
All of these programs will help reach
the Administration’s safety goals, including
reducing the rate of highway-related fatalities

THE BUDGET FOR FISCAL YEAR 2001

per 100 million vehicle miles traveled (VMT).
In 1998, the highway related fatalities and
injured persons reached all time record lows.
The fatalities per 100 million vehicle miles
traveled were 1.6. The injured persons per
100 million miles traveled were 122. The
2001 target rates are 1.5 for fatalities and
113 for injured persons.
Perhaps the Federal Government’s most
visible transportation safety function involves
air traffic control and air navigational systems.
The Federal Aviation Administration (FAA)
handles about two flights a second, moving
1.5 million passengers safely each day. In
2001, the FAA will perform nearly 320,000
safety related inspections. To meet safety
needs, the Administration plans to spend
$9.1 billion, 14.4 percent over the 2000
level, on FAA operations and capital modernization. The FAA will seek to:
• Reduce the fatal aviation accident rate for
commercial air carriers from a 1994–1996
baseline of 0.037 fatal accidents per
100,000 flight hours. In 1998, the fatal
aviation accident rate for commercial air
carriers was .006 per 100,000 flight hours.
This rate puts the Department on target
to reaching the White House Commission
on Aviation Safety and Security goal of
reducing fatal accidents by 80 percent by
2007 and ahead on achieving the 2001 target of 0.031 per 100,000 flight hours.
The Federal Government also plays a key
safety role on our waterways, where the
Coast Guard saves one life every two hours,
24 hours a day, 365 days a year. The
Coast Guard operates radio distress systems,
guides vessels through busy ports, operates
reliable and safe navigation systems, regulates
vessel design and operation, enforces U.S.
and international safety standards, provides
boating safety grants to States, and supports
a 35,000-member voluntary auxiliary that
provides safety education and assists regular
Coast Guard units. The Coast Guard is
recognized as the world leader in maritime
search and rescue. The budget proposes $3.7
billion for Coast Guard operations and capital,
a 12-percent increase over the current level.
The Coast Guard seeks to:

18.

TRANSPORTATION

• Reduce the number of recreational boating
fatalities from a 1998 baseline of 793 fatalities. In 1998, recreational boating fatalities were down from 821 in 1997. The
2001 target is at or below 720 fatalities.
The Federal railroad safety program is
also expanding. The Administration’s budget
proposes $117 million in 2001, five percent
over the 2000 level. The program works
in partnership with the rail industry. The
Safety Assurance and Compliance program
brings together rail labor, management and
the Federal Government to determine root
causes of safety problems. This partnership
has produced results: from 1994 to 1998,
the railroad-related fatality rate, on-the-job
casualty rate, and train crash rate fell by
twenty-one, thirty-five, and one percent, respectively. The Federal Railroad Administration has made steady progress towards its
multi-year safety goals. For example, its plans
are to:
• Reduce the rate of rail-related crashes
from a 1998 baseline of 3.77 per million
train-miles to 3.29 or less in 2001; and
to reduce the rate of rail-related fatalities
from a 1998 baseline of 1.48 per million
train miles to 1.23 or less in 2001. The
1998 level of fatalities (the 1.48 rate) was
the lowest level in a decade.
• Reduce the grade crossing accident rate
in 2001 to 1.39 per the product of million
train-miles times trillion highway vehiclemiles-traveled. The 1998 accident rate was
1.98, a significant decline from the 1997
rate of 2.27.
Similarly, the Federal pipeline safety program has implemented several risk management projects to improve the targeting and
effectiveness of regulations while reducing
or minimizing their costs. The Federal Government also develops regulations and standards
for hazardous materials shipping, and enforces
those standards for every mode of transportation. The Administration seeks to:
• Reduce the number of serious hazardous
materials incidents in transportation to
401 or fewer in 2001, from a peak of 428
in 1998. The 1998 record is not as positive
as those of most of the other modes of
transportation—there were 10 more inci-

221
dents in 1998 than there were in 1997.
The Administration is giving this area special attention.
Infrastructure and Efficiency Investment
In 1996, the U.S. transportation system
served 265 million people and six million
businesses and supported 4.4 trillion passenger-miles and 3.7 trillion cargo ton-miles.
The Federal Government helped develop large
parts of the system, with funding supported
by user fees and transportation taxes. Investment is targeted to maintaining and improving
the condition of the existing system while
at the same time advancing safety, quality,
efficiency, and the intermodal character of
transportation infrastructure. This investment
ensures the Nation will meet commerce needs,
and enhance its efficiency, which leads to
advanced economic growth as well as international competitiveness.
Innovative Financing: Since 1994, the Administration has introduced a number of financing innovations designed to streamline
procedures, improve existing programs, and
implement new ideas for improving the Nation’s transportation infrastructure. In total,
these initiatives are helping advance nearly
200 projects, representing a total capital investment of more than $20 billion. For example, there is the Transportation Infrastructure
Finance and Innovation Act (TIFIA) program,
authorized by TEA–21. TIFIA provides Federal
credit assistance to major transportation investments of critical national importance, such
as: intermodal facilities; border crossing infrastructure; highway trade corridors; and transit
and passenger rail facilities with regional and
national benefits. In 2000, $90 million of
TIFIA funding supported $1.8 billion in credit
assistance. In 2001, a funding level of $96 million will be provided to continue this program
Highways and Bridges: About 957,098
miles of roads and all bridges are eligible for
Federal support, including the National Highway System (NHS) and Federal lands roads.
In 2001, the Federal Government plans to
spend $30 billion to maintain and expand
these roads with funding from motor fuels
taxes, mainly the gasoline tax. This is close
to $2 billion more than was provided in 2000,
and is $12 billion more than was provided in

222
1993. The Federal gas tax is 18.4 cents per
gallon, of which 15.4 cents goes to the Highway Trust Fund’s highway account to finance
grants to States and local governments for
highway-related repair and improvement.
In aggregate, State and local governments
provide 56 percent of highway and bridge
infrastructure spending, most of which they
generate through their own fuel and vehicle
taxes. The average State gasoline tax was
19.8 cents per gallon in 1998. State and
local governments accelerate their infrastructure projects through debt financing, such
as bonds and revolving loan funds. The
Federal Highway Administration will work
with State and local governments to:
• Increase the percentage of miles on the
NHS that meet pavement performance
standards for acceptable ride quality—
from 90.4 percent in 1996 to 91.9 percent
in 2001. In 1998, the percentage was 91.8
percent.
• Reduce delays on Federal-aid highways
from 9.0 hours of delay per 1,000 vehicle
miles traveled in 1998 to 8.9 in 2001.
• Reduce the percentage of bridges on the
NHS that are deficient—from 23.1 percent
in 1998 to 22.3 percent in 2001. Between
1993–1998, bridges on the NHS that are
deficient decreased by 3.6 percent, from
26.7 percent to 23.1 percent.
Transit: As with highways, the Federal
Government assists State and local governments to improve mass transit. Of the Federal
motor fuels tax, 2.86 cents a gallon goes to
the Highway Trust Fund’s Mass Transit Account, which funds transit grants to States
and urban and rural areas. Federal capital
grants comprise about half of the total spent
each year to maintain and expand the Nation’s
6,000 bus, rail, trolley, van, and ferry systems.
Together, States and localities invest over $3
billion a year on transit infrastructure and
equipment.
Federal funding growth has been substantial. In 2001, the Federal Government plans
to spend $6.1 billion on transit infrastructure.
This compares with $5.8 billion in 2000
and $2.6 billion in 1993. The Federal role

THE BUDGET FOR FISCAL YEAR 2001

is especially important in financing new urban
bus and rail transit systems, as well as
rural bus and van networks. Millions of
Americans use transit for their daily commute,
easing roadway congestion and reducing air
pollution. Many riders depend on public transportation due to age, disability, or income.
Transit can also provide economic opportunity.
For example, the Job Access and Reverse
Commute program will help to provide transportation services in urban, suburban and
rural areas to assist welfare recipients and
low income individuals reach employment
opportunities. The Federal Transit Administration seeks to:
• Increase transit ridership from 39 billion
passenger miles traveled in 1996 to 42.86
billion in 2001. In 1998, transit ridership
was 41.6 billion passenger miles traveled.
Passenger Rail: The Federal Government
will invest $521 million in 2001 to support
Amtrak’s capital improvements and equipment
maintenance. The combination of Federal and
private sector investment in the Northeast
Corridor is expected to soon show results, with
the beginning of high-speed rail service between Boston and New York which is estimated to reduce trip times by 35 percent.
The Administration proposes to invest $468
million in capital in 2001 to enhance intercity passenger rail service. This new program
will provide matching grants to enhance or
expand inter-city rail service nationwide. This
initiative will contribute to the goals of
improving the overall financial health of
Amtrak, thus ensuring the long-term stability,
and expanding intercity rail passenger service.
These investments will be targeted to projects
which make good financial sense for Amtrak
and also generate substantial benefits for
the general public. Rail service can play
an important role in improving mobility and
offers an environmentally sound alternative
to simply adding highway capacity in congested corridors. Enhancing rail service by
improving average speed can provide the
foundation for the introduction of high speed
rail service.

18.

TRANSPORTATION

The Federal Railroad Administration seeks
to:
• Increase Amtrak’s intercity ridership from
21.1 million passengers per year in 1998
to the 2001 target (based on the introduction of high-speed rail service) of 25.3 million. In 1999, AMTRAK ridership was 21.5
million passengers. Improving ridership is
important to AMTRAK’s efforts to achieve
self-sufficiency.

223
existing legislative authorities to create a
performance-based organization for air traffic
control services to be funded through direct
user fees. These combined efforts will allow
the FAA to operate more like a business,
modernize more quickly, and be more responsive to customers. The Administration seeks
to:
• Reduce the rate of air travel delays from
the 1998 baseline of 190 delays per
100,000 activities to 171 in 2001. To accomplish this goal, the requested 2001
budget for FAA operations will increase
by 12 percent or $699 million, and the
FAA budget for capital modernization for
capital acquisition, to upgrade air traffic
control, will increase by 22 percent, or
$450 million, compared with the 2000
level.

Aviation and Airports: The Federal Government seeks to ensure that the aviation system is safe, reliable, accessible, integrated, and
flexible. In 2001, the Administration will continue aggressive modernization of FAA air
traffic control equipment, including both development of new technologies and improvements
to existing systems to decrease air traffic
delays. The Free Flight Phase I program is
implementing air traffic automation aids that
allow controllers to use runway capacity at
busy airports more efficiently. In addition,
FAA is developing controller pilot data link
and Global Positioning System (GPS) technologies to improve efficiency in handling aircraft. Ongoing replacement of airport surveillance and beacon radar systems will improve
the reliability of equipment used for air traffic
control. Finally, about 3,300 airports throughout the country are eligible recipients of Airport Improvement Program funding. This program helps enhance airport capacity, safety,
security, and noise mitigation. These funds
augment other airport funding sources, such
as bond proceeds, State and local grants, and
passenger facility charges which airports are
permitted to impose on their passengers. With
98 percent of the population living within 20
miles of an airport which supports commercial
carriers, most citizens have excellent access to
air transportation.

Maritime Transportation: For our Nation’s commercial shipping infrastructure, Federal loan guarantees issued by the Maritime
Administration make it easier to build and
renovate vessels in U.S. shipyards, while the
Coast Guard establishes and operates radio
and visual aids-to-navigation infrastructure
that enables the safe movement of shipping.
Port development is left largely to State and
local authorities, which have invested over $16
billion in infrastructure improvements over the
past 50 years. The Maritime Administration
and the Coast Guard are co-leading a new effort to develop more comprehensive coordination, leadership, and cooperation among Federal, State, and local agencies and private sector owners and operators of the Marine Transportation System (MTS). The MTS is faced
with growing levels of demand, shifting and
competing user requirements, and safety and
information system improvements. The Administration seeks to:

To ensure the effective and efficient use
of its resources, the FAA is continuing implementation of acquisition, financial and personnel reforms. Procurement reform has enabled the FAA to pre-screen contractors ensuring that firms have the capabilities and
experience to deliver technology systems that
improve air traffic control. Personnel reform
will result in a new pay-for-performance system that focuses employees on key agency
goals. In addition, the FAA will use its

• Attain a stable commercial shipbuilding
order book in U.S. shipyards of 530,000
gross tons by 2001. Between 1997 and
1998, U.S. commercial shipbuilding order
book fell from 506,000 gross tonnage to
407,312. The Maritime Administration is
focused on reversing this trend. In 1999,
Title XI loan guarantees were awarded for
the construction of two large cruise passenger vessels, the first to be built in the
United States in 50 years.

224
• Reduce the percentage of U.S. ports reporting landside impediments to the flow
of commerce from 41 percent in 1998 to
37 percent in 2001.
Research and Development
The Federal Government has a role in
developing transportation technology. Federal
research helps build stronger roads and
bridges, design safer cars, reduce human
error in operations, and improve the efficiency
of existing infrastructure.

THE BUDGET FOR FISCAL YEAR 2001

impact issues that are key to the continued
growth of the U.S. aviation system.
Using technology, the Federal Government
seeks to balance new physical capacity with
the operational efficiency and safety of the
Nation’s existing transportation infrastructure.
The Administration will seek to:
• Increase the number of metropolitan areas
with integrated ITS infrastructure from 34
in 1997 to 56 in 2001. In 1998, there were
46 communities with these systems.

The Department of Transportation’s (DOT’s)
Intelligent Transportation Systems (ITS) program is developing and deploying technologies
to help States and localities improve traffic
flow and safety on streets and highways.
ITS provides cost-effective ways to improve
the management of our infrastructure, boosting efficiency and capacity. The private sector,
which works closely with the ITS program,
will deploy many of the technologies developed
jointly with Federal funding.

DOT, NASA, DOD, and private industry
will work together on research to reduce
the fatal aviation accident rate for commercial
air carriers by a factor of five in 10 years
(from a 1994–1996 baseline of 0.037 per
100,000 flight hours). Research will focus
on preventing equipment malfunctions, reducing human error, and ensuring the separation
between aircraft and potential hazards.

The FAA’s research, engineering, and development programs help improve safety, security, capacity, and efficiency in the National
Airspace System. For example, the development of improved weather forecasting and
modeling tools will help reduce delays and
prevent accidents and injuries caused by
aircraft icing and turbulence. In 2001, the
budget includes work on the impact of fatigue
on performance and determining the causes
of human error that lead to accidents. Work
will continue on aircraft safety and fire
protection methods that explore new methods
for reducing the risk of aircraft fires and
developing new inspection techniques to detect
flaws in aging aircraft. Security and explosive
detection systems research will develop machines that process baggage more rapidly
and provide new technology for passenger
and cargo screening. Research will continue
on reducing aircraft noise and emissions.

Federal rules greatly influence transportation. In the past two decades, economic
deregulation of the railroad, airline, and interstate and intrastate trucking industries has
reduced costs for consumers and shippers,
while improving service.

The National Aeronautics and Space Administration’s (NASA’s) Aero-Space Technology
Enterprise funds partnerships with the FAA,
the Department of Defense (DOD), aircraft
manufacturers, and airlines to address aviation safety, air traffic, and environmental

Regulation of Transportation

The Federal Government also issues regulations that promote safer, cleaner transportation. The regulations—of cars, trucks, ships,
trains, and airplanes—have substantially cut
the number of transportation-related deaths
and injuries, improved the safe handling
of hazardous materials shipments, and helped
reduce the number of oil spills.
Where regulations are used to meet our
transportation safety, security, and environmental goals, the government aims for
rulemakings that are cost-effective and make
common sense. For example, in establishing
security standards for passenger vessels and
associated terminals, the Coast Guard listened
to public comments and tailored the rulemaking to be consistent with international
standards while giving operators the flexibility
to customize their plans and choice of equipment.

18.

TRANSPORTATION

Tax Expenditures
Employees do not pay income taxes on
what their employers pay for parking and
transit passes. These tax expenditures cost
the Treasury about $2 billion in 2001 and
almost $12 billion from 2001 to 2005. To

225
finance infrastructure, State and local governments issue tax-exempt bonds. The Federal
costs in lost revenues are included in the
calculations for Function 450, ‘‘Community
and Regional Development,’’ and Function
800, ‘‘General Government.’’

19.

Table 19–1.

COMMUNITY AND REGIONAL
DEVELOPMENT
Federal Resources in Support of Community and Regional
Development
(In millions of dollars)

Function 450

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

11,027

11,493

12,327

12,327

12,472

12,781

13,062

–18
..............

–523
..............

–637
–54

–774
44

–851
125

–942
151

–1,086
157

1,715
1,606

2,064
2,439

2,762
2,946

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

1,260
..............

1,415
..............

1,505
66

1,370
487

1,150
1,000

1,125
1,341

1,100
1,648

N/A = Not available.

Federal support for community and regional
development helps build the Nation’s economy,
and helps economically distressed urban and
rural communities secure a larger share of
America’s prosperity. The Federal Government
spends over $11 billion a year, and offers
about $1.4 billion in tax incentives to help
States and localities create jobs and economic
opportunity, and build infrastructure to support commercial and industrial development.
Federal programs have stabilized and revitalized many of these communities allowing
them to expand their economic base and
support their citizens, particularly those in
need. Communities hard hit by natural disasters receive Federal assistance to rebuild
infrastructure, businesses, and homes. States
and localities also use these Federal funds
to leverage private resources for their community revitalization strategies.
Department of Housing and Urban
Development (HUD)
HUD provides communities with funds to
promote commercial and industrial develop-

ment, enhance infrastructure, and develop
strategies for providing affordable housing
close to jobs. HUD also provides grants
and sponsors research to reduce the hazards
created by lead-based paint in housing.
Community Development Block Grants
(CDBG) provide funds for various community
development activities directed primarily at
low- and moderate-income persons. CDBG
funds go to improving housing, public works
and services, promoting economic development,
and acquiring or clearing land. Seventy percent of CDBG funds go to over 980 central
cities and urban counties, and the remaining
30 percent go to States to award to smaller
localities. The Section 107 set-aside within
CDBG, the University Partnerships Program,
provides grants to academic institutions including Historically Black Colleges and Universities, Hispanic Serving Institutions, New
Magnets University Partnerships, and Tribal
Colleges. The Indian CDBG, also a setaside within the CDBG program, focuses
mainly on public infrastructure, community
facilities, and economic development on res227

228
ervations. The 2001 Budget establishes a
new information hotline for Government-wide
Native American programs funded out of
the Indian CDBG program.
HUD’s HOME Investment Partnership Program supports construction of new housing,
rehabilitation of existing homes, acquisition
of standard housing, assistance to home buyers, and tenant-based rental assistance.
The 2001 goals for the CDBG, HOME
and Lead Hazard programs include:
• Increasing the number of CDBG grantees
who incorporate milestones with timetables in Consolidated Plans that demonstrates progress in improving locally defined conditions in their neighborhoods
and communities;
• Decreasing unemployment rates among
young entry-level job seekers in central
cities by 0.5 percent annually to 17.5 percent by 2001 through the creation of jobs
through investment in entitlement communities and Youthbuild;
• Assisting 102,947 households, supporting
construction of 22,258 new units of affordable housing, rehabilitating 44,924 units,
and acquiring 24,884 units through
HOME, helping to increase by eight percent the number of households receiving
assistance through the HOME program;
• Increasing the homeownership rate of first
time minority homeowners in inner city
areas by .5 percent in 2001 through the
HOME program and other HUD programs;
• Providing housing assistance to over
210,000 households though the CDBG program in 2001 and at least 241,000 by
2003; and,
• Assuring that at least 92 percent of entitlement community funding and at least
98 percent of funds for the State portion
of CDBG are used for activities that benefit low to moderate income persons.
By 2010, HUD, in cooperation with other
Federal agencies, will eliminate elevated lead
blood levels and lead poisoning in children.
By the end of 2001, HUD will establish
baseline measures that will help evaluate
the contributions these programs make to

THE BUDGET FOR FISCAL YEAR 2001

community development and affordable housing.
Empowerment Zones (EZs) provide tax incentives and grants to carry out 10-year,
community-wide strategic plans to revitalize
designated areas. In 1994, the Administration
designated nine Round I EZs, two Supplemental EZs (which were designated full EZs
in 1998) and 95 Enterprise Communities
(ECs). These Round I EZs and related ECs
leverage private investment, expand affordable
housing and homeownership opportunities,
and help create jobs. In January 1999, the
Administration designated 15 new urban EZs
and five new rural EZs (administered by
the Department of Agriculture) from more
than 268 distressed areas that applied for
new designations. These EZs, along with
the 20 new rural ECs have begun initial
implementation of their comprehensive strategies to redevelop their areas.
In the budget, the Administration proposes
a series of tax measures to extend and
improve economic growth in the 31 existing
Round I and Round II EZs and also proposes
to create a Third Round of 10 new EZs.
To encourage employment and growth, the
Budget proposes to extend until 2009 the
wage credit currently available only for Round
I Zones through 2004, and to make the
wage credit also available in Round II and
Round III EZs through 2009. To lower the
cost of investment for small businesses in
EZs, the budget proposes to allow them
to deduct an additional $35,000 in investments
above the normal small business investment
deductions. The proposal also will allow local
governments to issue tax-exempt bonds on
behalf of EZ businesses. Finally, the President’s proposal would permanently extend
the Brownfields Tax Incentive in EZs.
The 2001 goals for the EZ and EC program
include:
• Increase to 95 percent the share of urban
EZs and ECs that show satisfactory
progress toward locally defined benchmarks. Examples of benchmarks include:
In Baltimore, MD, in the 2000–2001 period, reduce crime by an additional two
percent and increase the homeownership
rate in that EZ of 39.6 percent by 0.5 percent. In Chicago, IL, complete 100 of the

19.

229

COMMUNITY AND REGIONAL DEVELOPMENT

300 low-income housing units remaining
to be constructed. In Los Angeles, CA, increase from 41 percent to 46 percent the
number of youths obtaining jobs through
the Youth Opportunities Program. In Detroit, MI, increase the number of permanent housing units constructed for the disabled by 10 from 20 units to 30.
Department of Commerce
The Economic Development Administration
(EDA) provides assistance to communities
to help build capacity and address longterm economic challenges through its nationwide program delivery network. EDA’s public
works grants help build or expand public
facilities to stimulate industrial and commercial growth, such as industrial parks, business
incubators, access roads, water and sewer
lines, and port and terminal developments.
Between 1992 and 1999, EDA awarded 1,456
public works grants, totaling $1.4 billion,
to economically distressed communities for
infrastructure projects. In 2001, there will
be two new initiatives at EDA, an E-commerce
program and a Community Economic Adjustment program. These programs will create
equitable access to new technologies and
the broadband networks necessary to support
full access to E-commerce in all communities
and help distressed communities recover from
sudden and/or severe economic downturns.
EDA’s revolving loan fund (RLF) program
enhances communities’ capacity to invest in
locally identified commercial development that
creates jobs. Since 1976, when the RLF
program was implemented, EDA has provided
initial capital for over 800 local RLFs.
These RLF funds have made more than
17,000 loans to private businesses and have
leveraged more than $1.5 billion in private
capital that upon repayment has tended to
stay in the community for re-lending and
further economic development activity.
The 2001 goals for EDA include:
• Creating or retaining of a total of 56,789
jobs.
Department of the Treasury
The Community Development Financial Institutions (CDFI) Fund seeks to promote

economic revitalization and community development in distressed areas by increasing
the availability of capital and leveraging
private sector funds. The CDFI Fund provides
financial and technical assistance to a diverse
set of specialized, private, for-profit and nonprofit financial institutions known as community development financial institutions. CDFIs
have a primary mission of community development and include community development
banks, credit unions, loan funds, venture
capital funds, and microenterprise loan funds.
The 2001 goals for the CDFI Fund include:
• Increasing the number of States with at
least one CDFI Fund awardee from 46 in
1999 to 49 in 2001; and
• Increasing the number of awards to CDFIs
from 158 in 1999 to 160 in 2001.
Department of Agriculture (USDA)
USDA gives financial assistance to rural
communities and businesses to boost employment and further diversify the rural economy.
The Rural Community Advancement Program’s grants, loans, and loan guarantees
help build rural community facilities, such
as health clinics and day care centers, and
create or expand rural businesses. USDA
also provides loans through the Intermediary
Relending Program (IRP), which provides
funds to an intermediary such as a State
or local government agency that, in turn,
provides funds for economic and community
development projects in rural areas.
The 2001 goals for these USDA programs
include:
• Retaining and creating 115,000 new jobs,
compared to 82,000 in 1999, through the
Business and Industry loans, IRP, and
community facilities programs.
Department of the Interior (DOI)
The Interior Department’s Bureau of Indian
Affairs (BIA), for which the budget proposes
$2.2 billion in 2001, helps Tribes and Native
American individuals develop resources to
improve their communities and economies
through various programs and technical assistance. BIA assists Tribes in such areas as
agricultural and rangeland resource management to manage and generate revenues from

230
mineral, agricultural and forestry resources.
The Department will strengthen its Tribal
resource management programs by facilitating
more prudent land management and maintaining approximately 150 Tribal management
plans, projects, co-management programs and
fishing access sites; supporting 18 major
irrigation projects; managing lands for farming
and grazing; and, funding 18 water rights
negotiations teams. In addition, the budget
will enable BIA to continue and to expand
efforts to improve trust services activities,
reduce crime, and expand community development activities. The budget includes $630
million, a substantial increase ($20 million)
over 2000, to improve trust service activity
within BIA—in support of the Administration’s
efforts to improve Tribal trust management.
BIA and the Department of Justice seek
to lower crime rates on the 56 million
acres of Indian lands, through the expansion
of its joint law enforcement initiative begun
in 1998. BIA maintains over 7,000 buildings,
including 185 schools and 3,000 housing units;
over 100 high-hazard dams; and, (with the
Departments of Transportation and State and
local governments) about 50,000 miles of
roads and 770 bridges.
The 2001 goals for DOI include:
• Generating nearly $82 million in federallyguaranteed commercial loans on reservations. These loans, supported by a $5.5
million appropriation, will foster growth
and development in Indian Country;
• Obtaining about $328 million in timber
sales revenue by helping Tribes manage
16.2 million acres of forest land;
• Reducing crime rates on Indian lands by
increasing the number of police officers
per 1,000 citizens; and,
• Replacing the final three schools on BIA’s
existing replacement priority list and at
least three schools from a new list. These
schools are BIA’s oldest, most dilapidated
schools. In addition, BIA will complete
major improvement and repair projects
(including a joint demonstration project
with the Department of Energy utilizing
energy-efficient construction materials). As
part of the Administration’s commitment
to renovating schools across the Nation,

THE BUDGET FOR FISCAL YEAR 2001

the budget proposes $300 million ($167
million over 2000) to replace, repair, and
improve educational facilities; up to $30
million may be used by Tribes and tribal
consortia to defease the principal on school
construction bonds.
Tennessee Valley Authority (TVA)
TVA operates integrated navigation, flood
control, water supply, and recreation programs. Along with TVA’s electric power program, these programs contribute to the economic prosperity of the seven-State region
it serves. TVA plans to pay for most of
these programs in 2001 as it did in 2000,
using proceeds from the agency’s $6.8 billion
power program, user fees and sources other
than appropriations.
The 2001 goals for TVA include:
• Maximizing the percentage of time the
Tennessee River is open to commercial
navigation from Knoxville, Tennessee to
Paducah, Kentucky. In 1999, TVA kept
the river open 82 percent of the time.
TVA’s target is 93 percent in 2000 and
95 percent in 2001.
• Minimizing flood damage by operating the
river system with flood control as a priority. In 1999, TVA’s actual performance
for ‘‘flood storage availability’’ was 94 percent. TVA’s target is 80 percent in 2000
and 2001.
Appalachian Regional Commission (ARC)
ARC targets its resources to highly distressed areas, focusing on critical development
issues on a regional scale, and making strategic investments that encourage other Federal, State, local and private participation
and dollars. From 1988 to1996, Appalachian
employment grew at the national rate of
10.6 percent.
The 2001 goals for ARC include:
• 22,000 people will retain or get jobs, compared to 8,700 in 1999;
• 25,000 households will have access to new
or improved water, sewerage and waste
management systems, compared to 20,000
in 2000;

19.

231

COMMUNITY AND REGIONAL DEVELOPMENT

• 7,000 people will benefit from business development services; and,
• 100 physicians will be placed in the region’s health professional shortage areas
to provide another 460,000 patient office
visits a year.
Disaster Relief and Insurance
The Federal Government provides financial
help to cover a large share of the Nation’s
losses from natural disasters. Since 1993,
the two major Federal disaster assistance
programs—the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund
and the Small Business Administration’s
(SBA) Disaster Loan program—have provided
over $31.4 billion in emergency assistance.
The Federal Government shares the costs
with States for infrastructure rebuilding;
makes disaster loans on uninsured losses
to individuals and businesses; and provides
grants for emergency needs and housing
assistance, unemployment assistance, and crisis counseling.
In addition to its disaster response activities,
FEMA is working with 118 ‘‘disaster resistant
communities’’ across the country as of the
end of 1999 and plans to add up to 47
more during 2000. Participating communities
assess their risks from earthquakes, floods,
hurricanes and other disasters, and adopt
prioritized mitigation plans.
Communities participating in FEMA’s flood
insurance program, which provides the only
source of affordable flood insurance to property
owners, must mitigate future losses by adopting and enforcing floodplain management
measures that protect lives and new construction from flooding. FEMA is also modernizing
its inventory of flood plain maps, and will
be taking measures to mitigate properties
experiencing repetitive flood damages.
The 2001 goals for FEMA include:
• Providing incentives and support to the
public sector to increase the disaster resistance of communities;
• Improving disaster response and customer
satisfaction by processing disaster declara-

tions within eight days, making 50 percent
of funding for emergency work projects
available to States within 30 days of application approval, making 80 percent of public assistance funding determinations, on
average, within 180 days, and processing
disaster housing applications from individuals within five to eight days of receipt;
and,
• Increasing the number of flood insurance
policies in force by five percent to a total
of 4,600,000 in 2001.
The 2001 goals for the SBA Disaster Loan
Program include:
• Increasing the number of disaster loan applications processed within 21 days of receipt from 65 percent in 1999 to 70 percent in 2001; and,
• Establishing an effective field presence at
the disaster site within three days of a
disaster, for 98 percent of declared events.
Tax Expenditures
The Federal Government provides tax incentives to encourage community and regional
development activities, including: (1) tax-exempt bonds for airports, docks, high-speed
rail facilities, and sports and convention facilities (costing $3.8 billion from 2000 to 2004);
(2) tax incentives for qualifying businesses
in economically distressed areas that qualify
as EZs—including an employer wage credit,
higher up-front deductions for investments
in equipment, tax-exempt financing, and accelerated depreciation—as well as capital gains
preferences for certain investments in the
District of Columbia and incentives for firsttime buyers of a principal residence in the
District; (3) a 10-percent investment tax credit
for rehabilitating buildings that were built
before 1936 for non-residential purposes (costing $150 million over the five years); (4)
tax exemptions for qualifying mutual and
cooperative telephone and electric companies
(costing $325 million over the five years);
and, (5) up-front deductions of environmental
remediation costs at qualified sites (costing
$140 million over the five years).

20.

EDUCATION, TRAINING, EMPLOYMENT,
AND SOCIAL SERVICES
Table 20–1.

Federal Resources in Support of Education, Training,
Employment, and Social Services
(In millions of dollars)

Function 500

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

46,648

44,390

61,543

61,582

62,288

63,447

64,570

11,281
..............

11,294
–100

15,401
–2,764

13,978
–246

15,536
–158

16,168
–195

17,183
–230

18,080
21,914

14,662
25,261

15,785
26,472

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

34,070
..............

36,030
66

37,565
1,363

38,745
3,654

41,240
3,821

42,350
4,970

44,740
5,470

N/A = Not available.

A wide variety of Federal programs assist
States and localities in providing essential
education, training, employment and social
services. These programs help educate America’s youth; offer training and employment
services to all Americans, especially those
who are low-skilled and jobless; assist youth
and adults overcome financial and other barriers to postsecondary education and training;
are an essential part of the safety net
for poor Americans; and work with employers
and employees to maintain safe and stable
workplaces.
The President proposes to spend over $67.5
billion in 2001 on: grants to States, localities
and non-profit organizations; grants, loans,
and scholarships to individuals; direct Federal
program
administration;
and,
subsidies
leveraging over $42 billion in loans to individuals. The budget also allocates approximately
$41.3 billion in 2001 in tax expenditures
for programs in this function.

Department of Education
Elementary and Secondary Education:
Federal spending for elementary and secondary education targets important national
needs, such as equal opportunity and the use
of challenging academic standards, to improve
student achievement. Most low-performing
children in high-poverty schools receive extra
educational assistance through the Title I
(Education for the Disadvantaged) program.
Other programs provide related support for
children with disabilities and limited English
proficiency; support teacher and administrator
training; help finance and encourage State,
district, and school reforms; help reduce class
size; and support research and technical assistance. The Administration’s long-term goal is
to help all children, especially low-income and
minority children, raise their levels of achievement so that they can meet challenging academic standards.

233

234
The Federal focus began to change in
1994 from supporting individual programs
to emphasizing school-wide and school system
reforms, through the President’s Goals 2000
Educate America Act and Improving America’s
Schools Act (IASA), including Title I. These
laws support State and local standards-based
reform efforts and promote the use of technology in education to improve learning. These
new approaches have freed States and schools
from unnecessary Federal process restrictions,
providing greater flexibility while requiring
more accountability for results. Early results
show that the new approaches are having
a significant impact: for example, all but
one State has content standards in at least
reading and math, compared to only 19
States before Goals 2000 and IASA. By
1997, over 70 percent of all Title I schools
reported using standards to guide reading
and math curricula, with a goal of 100
percent in 2000.
Title I: Minority students have made substantial gains in science, math, and reading
since the 1970s, narrowing the gap between
minority and non-minority student achievement by about a third. Citing Title I, as well
as Head Start and child nutrition programs,
a 1994 RAND study found that ‘‘the most plausible’’ way to explain big education gains of
low-income and minority children in the past
30 years is ‘‘some combination of increased
public investment in education and social programs and changed social policies aimed at
equalizing educational opportunities.’’ More recently, a 1998 RAND study on rapid achievement gains in North Carolina and Texas found
that the most probable explanation for the
gains, including those of disadvantaged students, stemmed from policies of high standards
for all students, aligned assessments, accountability with consequences, and targeting highpoverty schools. These are all core principles
of Title I. The budget provides $9.14 billion
for Title I, including $8.36 billion for grants
to local education agencies. In 2001, Title I
grants to school districts will provide educational services to over 12.2 million students
in high-poverty communities, 400,000 more
children than in 2000.
The 1994 reauthorization of Title I set
in motion a series of new requirements
on States for improving educational results

THE BUDGET FOR FISCAL YEAR 2001

for disadvantaged children, as a condition
for receipt of Title I funds. Implementation
has been uneven. For 2001, the Administration
proposes a stronger emphasis on accountability
for improved education results in Title I,
financed with an Accountability Fund and
reinforced in its reauthorization proposal for
the Elementary and Secondary Education Act.
Within Title I, the budget provides $250
million for this Fund to help accelerate
States’ implementation of accountability provisions in the Title I program, nearly doubling
the amount available in 2000. The Accountability Fund will help States identify their
lowest performing schools, intervene with effective strategies to improve student outcomes,
and report on their results.
Title I is helping to improve student achievement. The most recent study of Title I
schools shows progress in the percentage
of students that meet State standards for
proficiency in math and reading, regaining
ground lost in the late 1980s and early
1990s. Results from the 1998 National Assessment of Educational Progress, a series of
tests considered to be the Nation’s ‘‘report
card,’’ show that among the lowest-achieving
4th graders—those most likely to be served
by Title I—there were fairly substantial improvements in reading between 1994 and
1998. Those in the lowest 10 percent gained
an average of nine points and those in
the bottom 25 percent gained five points,
compared with the stable performance of
the other groups.
Title I is also helping schools provide
extended learning time, a practice that tends
to improve student achievement. Over 60
percent of Title I schools now have afterschool programs to provide extra learning
time for tutoring rather than taking students
out of the regular classroom for assistance,
compared to less than 10 percent before
1994.
Teacher Quality and Professional Development: The budget provides $1 billion to help
States and districts provide sustained, contentrich professional development, recruit teachers, and support State efforts to align curricula
and assessments with content standards.

20.

EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES

21st Century Community Learning Centers/After School Programs: The budget proposes to more than double this program to $1
billion, as part of a comprehensive approach
to fix failing schools by providing children in
these schools the extra help they need to meet
challenging academic standards. Grants to
public schools and community-based organizations support the establishment or expansion
of after-school, summer school and other extended learning opportunities. The budget provides sufficient funds to make after- or summer-school programs universally available to
help turn around failing schools, defined as
schools identified under Title I as in need of
improvement.
In 2001, over 10,000 schools will receive
21st Century Community Learning Centers
grants. Most of these schools are in districts
that commit to use these funds as part
of a comprehensive effort to improve learning
in low-performing schools. In future years,
grantees will report their progress and receive
continuation grants if they meet program
terms.
Reading Excellence: A student’s most basic
skill to master is reading. Although reading
problems are particularly severe for disadvantaged students, students with reading difficulties represent a cross-section of American children. On the 1998 National Assessment of
Educational Progress, 68 percent of all fourthgrade students in high poverty schools scored
below the basic reading level. The President
launched the America Reads Challenge to provide extra help to meet the goal that every
child will read well and independently by the
end of the third grade, and obtained enactment
of new legislation that began funding local programs on July 1, 1999. The budget provides
$286 million for the Reading Excellence program.
The Department of Education’s objective
for the Reading Excellence program is to
significantly improve students’ achievement
in participating schools and classrooms. By
2001, participating students will increase their
reading scores significantly compared to nonparticipants. Furthermore, by the end of
2001, at least 15 States will have revised
their State in-service training and guidelines

235

for reading certification of teachers to reflect
scientifically-based reading research.
Education Technology: The Administration’s education technology programs serve to
make modern computers and technologies accessible to all students; connect classrooms to
the Internet; make high-quality educational
software an integral part of the curriculum;
and enable teachers to effectively integrate
technology into their instruction. The budget
provides $903 million for education technology.
• The Administration’s goal is that by 2001,
all schools will be connected to the Internet. This compares to an actual level of
65 percent in 1996 and 89 percent in 1998.
• In 2001, a higher percentage of teachers
than in 1996 will integrate high-quality
technology-based instruction into their
curriculum. In Fall 1996, 20 percent of
public school teachers used advanced telecommunications for teaching. In 1994, 40
percent of the fourth graders and 17 percent of the eighth graders had teachers
reporting use of computers to teach reading. In 1996, about 75 percent of fourth
grade students and 46 percent of eighth
grade students had teachers reporting use
of computers for math instruction.
Special Education: Under the Individuals
with Disabilities Education Act (IDEA), the
Education Department works with States to
ensure that children with disabilities receive
a ‘‘free appropriate public education’’ that prepares them for employment and independent
living, and that all schools are held accountable for the educational results of special education children. As of July 1, 1998, all States
were required to have performance goals and
strategies in place for students with disabilities aged three to 21, and to report their
progress toward meeting those goals on a biennial basis. Moreover, by July 1, 2000, all
States will be required to include special education children in State and district-wide regular assessments or provide alternate assessments to measure educational performance.
The budget provides $6.4 billion for IDEA, a
$333 million increase.
One measure of success is the increase
in the percentage of students with disabilities
who are graduating from high school with

236
a regular diploma and the reduction in the
number who are dropping out.
• In the 1995–96 school year, 53 percent of
students with disabilities left school by
graduating with a regular diploma and 34
percent dropped out of school. The Administration’s goal for school year 2000–01 is
that 58 percent of students with disabilities will graduate with regular diplomas
and that no more than 29 percent will
drop out.
Bilingual Education: The budget provides
$296 million for this program in 2001, an increase of $48 million over 2000. The population
of limited English proficient (LEP) students
has grown dramatically over the last two decades. Between school years 1992–93 and
1996–97, the LEP population in 10 states (Alabama, Alaska, Florida, Idaho, Nebraska, Nevada, North Carolina, Oregon, South Carolina,
Tennessee) grew by more than 50 percent. The
Bilingual Education program provides funds to
school districts to teach English to LEP students and helping them meet the same challenging state standards required of all other
students. Likewise, through the Professional
Development authority, the program provides
funding to address the critical shortage of
highly trained Bilingual Education and
English as a second language (ESL) instructors.
• In 2000, Federal funds will support the
training of nearly 5,700 teachers. In 2001,
funds will support training of about 8,000
teachers to specialize in teaching LEP children.
Class Size Reduction: The budget proposes
$1.75 billion, an increase of $450 million over
2000, as the third installment of the President’s plan to help schools recruit, hire, and
train 100,000 new teachers by 2005 and reduce
class size in the early grades.
States will annually reduce the average
class size in grades one through three so
that by 2005, the average class size nationally
in the targeted grades is 18 students per
classroom. In 1993–1994, the average number
of students in a grade one to three classroom
was 22. In 1999–2000, the first year of
the program, school districts met their goals
and hired 29,000 teachers. As a result, class

THE BUDGET FOR FISCAL YEAR 2001

sizes in grades in which teachers were hired
decreased from an average of about 23 to
18.
Public School Choice: The budget includes
several initiatives to expand the availability
of choice in public schools, such as Opportunities to Improve our Nation’s Schools (OPTIONS), a proposed new program that would
fund innovative approaches to public school
choice like public schools located at work sites
or on college campuses. Funding is also provided to continue the inter-district magnet
school program initiated in 2000. The largest
public school choice program is Charter
Schools.
Charter schools introduce innovation and
choice into public schools. In 1992, there
was one charter school in operation, funded
locally. Thanks in part to startup funding
provided through the Public Charter Schools
program, that number has grown to over
1,700 schools in 2000. The budget provides
$175 million for charter schools. At this
level, by 2001, the program will have helped
nearly 2,400 charter schools since its inception,
supporting the President’s goal of 3,000 charter schools by 2002.
Safe and Drug-Free Schools and Communities: Since 1993, this program has provided a total of $4.3 billion to help 97 percent
of all school districts implement anti-drug and
anti-violence programs. The budget proposes
$650 million for this program, including $122
million in competitive grants under the interagency Safe Schools/Healthy Students initiative in conjunction with contributions from the
Departments of Health and Human Services,
Justice, and Labor; $50 million for the newly
established Coordinator Initiative to ensure
that over 1,300 middle schools have a director
of drug and violence prevention programs to
monitor local programs and link school-based
programs to community-based programs; and,
$10 million for Project SERV, a resource for
responding to school violence incidents.
In 1997, the rate of alcohol use in schools
was five percent for eighth graders and
eight percent for 10th and 12th graders;
the 1997 rate of marijuana and other drug
use in schools was five percent and 11
percent for eighth and 10th graders, respec-

20.

EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES

tively, and the rate of marijuana use was
10 percent for 12th graders.
• The Administration’s performance goal is
that by 2001, rates of annual alcohol use
in schools will decline to four percent for
eighth graders and seven percent for 10th
and 12th graders; rates of annual marijuana and other drug use in school for
the same time period will decline to three
percent and 10 percent for eighth and 10th
graders respectively, and the rate of annual marijuana use will decline to nine
percent for 12th graders.
Postsecondary Education: The economic
returns to a college education are dramatic.
Males working full time who are over 25 years
old and have a bachelor’s degree earned 56
percent more in 1997 than workers with just
a high school degree. Moreover, the benefits
of college extend beyond the college graduates
themselves. The resulting higher socioeconomic
status of parents with college degrees leads
to greater educational achievement by their
children.
Since the GI Bill was enacted following
World War II, the Federal Government has
played a growing role in helping Americans
go to college. Since 1964, Federal postsecondary programs have helped nearly triple
college enrollment, increasing by a third the
share of high school graduates who attend
college.
• In 2001, the Education Department will
provide financial aid to approximately
nine million students.
Hope Scholarships and Lifetime Learning Tax Credits: These tax benefits for postsecondary education were proposed by President Clinton in 1996 and enacted in 1997.
They have helped make college more affordable for many American families.
In the 2000 tax year, 5.6 million students
will be eligible for over $5 billion in Hope
tax credits, and 7.2 million students will
be eligible for almost $2.4 billion in Lifetime
Learning tax credits.
Pell Grants: When President Clinton took
office in 1993, the Pell Grant maximum award
was $2,300—the same as it was when President Bush took office in 1989. Over the next

237

six years, from 1994 to 2000, the maximum
award increased 43 percent to $3,300. In fiscal
year 1998, an estimated 76 percent of Pell
Grant funds were awarded to students below
150 percent of the poverty level. The budget
provides for a program level of $8.5 billion for
Pell Grants.
• An estimated 3.9 million needy students
will receive Pell Grants in 2001, for which
the budget proposes a maximum award of
$3,500, an increase of $200 over 2000.
Work-Study: The Work-Study program
helps needy undergraduate and graduate students finance postsecondary education through
part-time employment. In 1996, the President
set a goal of supporting one million work-study
students each year by 2000. This goal was
achieved. The budget includes $1.011 billion,
an increase of $77 million over 2000, to maintain this commitment.
GEAR-UP: The budget proposes increasing
funding for GEAR-UP, the early intervention
program based on the President’s High Hopes
proposal, to $325 million in 2001. GEAR-UP
provides funds for States and local partnerships to help students in high-poverty schools
prepare for and attend college. The Department of Education aims to have GEAR-UP program participants successfully complete high
school and enroll in postsecondary education
programs at higher rates than comparable
non-participants.
Student Aid Delivery System Modernization: The Education Department manages the
delivery of student aid benefits to nearly nine
million students in approximately 5,300 postsecondary schools, and oversees the direct and
guaranteed loan systems affecting 37 million
individuals, 4,100 lenders, and 36 guarantee
agencies. The Department has made modernization of student financial aid management one of its highest priorities. Through the
Higher Education Amendments of 1998, the
Administration and Congress authorized the
Department to establish the Government’s
first ever Performance-Based Organization
(PBO). This new organization has unprecedented flexibility in procurement, operations
and management of Federal student financial
assistance programs. Major parts of the effort
include improving customer service at lower
cost through better contracting practices and

238

THE BUDGET FOR FISCAL YEAR 2001

use of new information technology. For example, students can now apply for student financial aid electronically and access their direct
student loan information over the Internet.
The PBO is one of the Administration’s High
Impact Agencies. The three primary goals of
the PBO are:
• Improving customer satisfaction: The PBO
has established the goal of increasing the
satisfaction of ‘‘customers’’ of the student
financial assistance programs to a level
commensurate with private sector financial service firms. Under the national survey conducted by the University of Michigan in 1999, the PBO scored 63 in satisfaction. The goal is to increase this rating
to 74 out of 100 by 2002.
In 2000, the PBO has committed to improving customer satisfaction in at least
six of 10 core functions, as measured
through detailed surveys.
• Reducing cost: The PBO has set a target
to reduce the 2004 projected unit cost of
delivering each student aid dollar by 19
percent.
In 2000, the PBO has committed to reduce
unit costs by $18 million and re-invest this
amount in further information systems
modernization. These investments will
produce even greater future unit cost reductions.
• Improving employee satisfaction: Recognizing that employee satisfaction is essential to modernizing the delivery of student
financial assistance and achieving the
aforementioned goals, the PBO has committed to raising employee satisfaction, as
measured by the Office of Personnel Management (OPM), to the top five of all Government agencies by 2002. In 1999, the
PBO ranked 33rd out of 50 in the OPM
survey.
As a down-payment in 2000 on the longrange commitment, the PBO’s management has committed to making demonstrable progress on five issues identified
by the Labor-Management Partnership
Council.
Student Aid Income Verification: In
2000, in accordance with the Higher Education

Amendments of 1998, the Departments of Education and Treasury will conduct a test match
of income data provided on the student aid
application against IRS data. This test match
will provide important information for the development of a full scale match, which would
enable the Department of Education to reduce
fraud and improve eligibility determinations.
Adult Education: For many disadvantaged
adults, Federal adult education programs provide the only opportunity to gain literacy skills
and obtain the knowledge and skills necessary
to attain employment and self-sufficiency, to
learn English, and to complete their secondary
education. The new Adult Education and Family Literacy Act places a strong emphasis on
performance and accountability, and States
must now establish annual performance targets for the educational achievement of participating adults. States that meet or exceed their
targets in adult education and other Federal
workforce development programs are eligible
to receive special incentive grants. The budget
proposes $555.5 million for adult education, an
increase of $85.5 million over 2000.
• The Administration’s goal is that by 2001,
40 percent of the adults in beginning level
adult basic education, adult secondary
education, and English as a second language (ESL) programs will achieve basic
skill proficiency, earn a diploma or General Educational Development (GED) credential, or achieve basic English proficiency. In 1999, 31 percent of the adults
in basic education, 33 percent of those in
secondary education, and 28 percent of
those in ESL programs achieved basic skill
proficiency, earned a diploma or GED, or
achieved basic English proficiency.
Vocational Rehabilitation Services: The
Vocational Rehabilitation (VR) program provides funds to States to help individuals with
disabilities prepare for and obtain gainful employment to the extent of their capabilities.
In 1998, the program helped 223,668 individuals with disabilities secure employment, and
88 percent of these individuals obtained competitive employment. The budget includes $2.8
billion for Vocational Rehabilitation. In 1999,
all States started to develop challenging Statespecific goals based on a comprehensive assessment of the vocational rehabilitation needs of

20.

EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES

individuals with disabilities and to describe
the strategies that will be used to address
those needs. State agencies will begin reporting progress made toward meeting the goals
in 2000.
• In 2001, 63 percent of all individuals with
disabilities served in the VR program will
obtain employment, up from 61 percent in
1999. Of those achieving competitive employment, 85 percent will maintain employment and earnings 12 months after
their case is closed.
Labor Department
Elementary, secondary, and postsecondary
investments enable Americans to acquire the
skills to get good jobs in an increasingly
competitive global economy. In addition, most
workers acquire more skills on the job or
through billions of dollars that employers
spend each year to enhance worker skills
and productivity. However, some workers also
need special, targeted assistance. In addition
to Pell Grants, student loans, and tax credits,
the Federal Government spends some $7
billion a year on Department of Labor (DOL)
programs that finance job training and related
services. Workers who want to learn about
job openings can use the State Employment
Service and One-Stop Career Center System
and DOL’s popular America’s Job Bank (AJB)
website, which currently lists 1.5 million
job vacancies daily and has over eight million
job searches each month, an increase over
the 900,000 job vacancies and six million
job searches reported last year.
The Workforce Investment Act (WIA) of
1998: The WIA takes full effect on July 1,
2000, as the Job Training Partnership Act is
repealed and all States fully implement the
WIA requirements. The WIA reflects the principles the President sought in his GI Bill for
America’s Workers proposal including: streamlining services through One-Stop Career Centers; empowering individuals with the information and resources they need to choose the
training that is right for them; providing universal access to a core set of employment services such as job search assistance; increasing
accountability; ensuring a strong role for the
private sector and the local boards who develop and oversee programs; facilitating State

239

and local flexibility; and improving the quality
of youth job training services.
DOL has launched several longitudinal evaluations of its job training programs over
the past two decades, including a major
impact evaluation of the Job Corps program.
Past studies have found generally positive
results.
While impact evaluations are the best measure of program effectiveness, DOL also sets
annual performance goals for its major job
training programs. Beginning in July 2000,
each State will implement an accountability
system to measure performance. The goal
of this system is to optimize the return
on investment of Federal funds directed to
State and local workforce activities. This
accountability system will assess the effectiveness of States and local areas in achieving
positive outcomes and ensuring continuous
improvement of their workforce investment
systems. The WIA establishes core performance indicators for all adult, dislocated worker,
and youth programs that help people find
and retain unsubsidized jobs, increase earnings, or lead to further education and attainment of credentials or employable skills.
DOL is working with each State to establish
appropriate baselines and challenging performance goals. The goals and measures indicated
here and in DOL’s performance plan were
established using programmatic data from
the predecessor job training program as a
baseline.
The WIA establishes strong ties between
performance and funding. If a State fails
to meet its expected levels of performance
in any year, it can request technical assistance
from DOL. If a State continues to fail
to meet its agreed-upon performance levels
for a second year, or if a State fails to
report its performance information in any
year, its funding may be reduced by up
to five percent.
Reemployment services: In the 2000 Budget, the President proposed a major initiative
to help working and laid-off workers to get
the information and training they need to succeed in a dynamic labor market. This budget
includes increased funding for new initiatives
to ensure that: (1) all displaced workers would
receive the training they want and need; (2)

240
individuals who lose their job due to no fault
of their own could get improved re-employment
services; and, (3) every American would have
access to One-Stop Career Center services.
WIA’s Dislocated Worker Employment
and Training Activities: This program will
provide training and employment services to
about 984,000 displaced workers in 2001. The
budget proposes $1.8 billion for dislocated
workers, an increase of $181 million over 2000,
when the program will serve 836,000 participants. While new performance measures will
be developed for the WIA beginning in 2001,
in 2000, 80 percent of participants are expected to be employed six months after leaving
the program in jobs that replace, on average,
98 percent of their pre-dislocation earnings.
The budget also includes a legislative proposal
to consolidate and reform the Trade Adjustment Assistance and NAFTA Transitional Adjustment Assistance programs.
One-Stop Career Centers/Employment
Service: The Employment Service provides a
free labor exchange for all job seekers and employers, and is growing more effective through
implementation of a One-Stop delivery system.
The budget proposes $1.010 billion for a range
of information and services, including self-service access to job and labor market information,
either through the Internet or in local offices,
as well as staff-assisted services for those
needing more help.
• In 2001, DOL and the States will work
to increase the number of employers listing jobs with the AJB website by 10 percent over the 2000 level while expanding
information on local labor markets to help
workers make informed career decisions.
Continued efforts in 2001 to improve access
to the information and services of the OneStop system will include a toll-free number,
mobile One-Stops, and on-line job information
made available at community-based organizations. In addition, DOL will have the lead
in a new Administration initiative called
Access America for Workers. This initiative
envisions a consolidated website that will
serve as a single point of contact for American
workers and their families to access a wide
range of Internet-based services, information,
and transactions.

THE BUDGET FOR FISCAL YEAR 2001

Work Incentive Grants: To enhance the
employment prospects of individuals with disabilities, the budget includes $20 million for
competitive grants to partnerships or consortia
in each State to provide new services and information for individuals with disabilities who
want to return to work. These partnerships
would work with the One-Stop system to augment its capabilities to provide timely and accurate information that people with disabilities
need to get jobs and learn about the benefits
available to them when they return to work.
In addition, the partnerships would improve
local service delivery by coordinating the State
and local agencies and disability organizations
that help individuals with disabilities prepare
to enter or reenter the workforce. In 2001,
DOL’s goal for grantees is a three-percent increase in the number of individuals with disabilities served and a three-percent increase
in unsubsidized employment outcomes over the
2000 level.
Incumbent Workers: To boost the skills,
productivity, and wages of the U.S. work force,
the budget includes $30 million for competitive
grants to States for training and upgrading
the skills of currently employed workers. Applicants would be required to provide non-Federal matching resources, and employers that
received grant assistance would be expected
to demonstrate that training increased participant earnings.
Responsible Reintegration for Young Offenders (RRYO): The budget includes $75
million for this new initiative to establish partnerships between the criminal justice system
and local one-stop delivery systems created
under the WIA. Young offenders up to age 35
would be able to access a comprehensive array
of services—including education, training, drug
treatment and support services—that would
help them successfully reenter the community.
• In 2001, the RRYO will provide competitive grants to serve almost 19,000 young
ex-offenders.
Youth Opportunity Grants (YOG): The
YOG initiative addresses the special problems
of out-of-school youth, especially in inner-cities
and other areas where unemployment rates
are high. The budget provides $375 million for
the third year of five-year competitive grants
to 25–30 communities and the first year of

20.

EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES

five-year competitive grants to an additional
12–15 communities.
• By 2001, 75 percent of YOG participants
placed in employment, the military, advanced training, postsecondary education,
or apprenticeships will be retained at six
months.
Job Corps: The Corps provides skill training, academic and social education, and support services in a structured, residential setting to approximately 73,000 very disadvantaged youth per year at 122 centers.
Performance data indicate that, in program
year 1998, 82 percent of Job Corps graduates
enrolled in education or entered employment
after leaving the program.
• By 2001, 85 percent of Job Corps graduates will be enrolled in education or get
jobs with an average starting wage of
$7.25 per hour. In addition, 70 percent will
still be enrolled in education or employed
six months after their initial placement.
Workplace Protections: DOL regulates
compliance with various laws that protect individuals in the workplace—a minimum wage
for virtually all workers, prevailing wages and
equal employment opportunity for workers on
government contracts, overtime pay, restrictions on child labor, and time off for family
illness or childbirth. (For discussion of workplace safety programs, see Chapter 21,
‘‘Health.’’) In these areas, the Federal Government is working to increase industry’s compliance with labor protections through voluntary
compliance initiatives coupled with continued
strong enforcement, outreach to new and small
business, and targeted enforcement in specific
industries. DOL measures the success of these
efforts against specific measurable goals:
• In 2001, DOL will increase compliance by
five percent among employers who were
previously violators and the subject of repeat investigations in targeted health care,
garment, and identified agricultural commodities industries.
Bureau of International Labor Affairs
(ILAB): The budget provides $167 million for
ILAB to continue the Administration’s commitment to help developing countries establish

241

core labor standards and reduce exploitative
child labor internationally. The budget includes $55 million for the School Works programs to help developing countries with high
levels of abusive child labor to enroll and retain these children in basic education as a primary strategy in the elimination of child labor.
• In 2001, ILAB will increase by 50 percent
the number of countries signing memoranda of understanding with the International Labor Organization’s Program on
the Elimination of Child Labor, adding 20
new countries to the IPEC membership
list. In addition, in 2001 ILAB will focus
its efforts to support projects on the worst
forms of child labor and continue to raise
public awareness and international support for the progressive elimination of
child labor.
Welfare-to-Work: Moving people from welfare to work is a primary goal of Federal welfare policy. In addition to the $16.5 billion per
year provided through the Temporary Assistance for Needy Children Program, the President obtained $1.5 billion to help achieve this
goal through Welfare-to-Work (WtW) grants in
1998 and 1999. These grants provide welfare
recipients with the job placement services,
transitional employment, and job retention and
support services they need to achieve economic
self-sufficiency. Working closely with Congress,
the Administration secured critically needed
changes to WtW’s eligibility and reporting requirements. These streamlined criteria will
allow WtW, within existing resources, to better
serve the eligible population and report program results with minimal burden. The budget
includes a proposal to extend by two years the
time period in which grantees may spend their
existing WtW funds.
Fathers Work/Families Win: The budget
includes $255 million to put non-custodial parents who own child support to work so they
can support their children; and help low-income custodial parents stay in their jobs, move
up the career ladder, and remain off cash assistance. DOL will develop with each successful applicant a goal to increase the employment, earnings, and retention of program participants.

242
Department of Health and Human
Services
Head Start: Head Start gives low-income
children a comprehensive approach to child development, stressing language and cognitive
development, health, nutrition, and social competency. Head Start is administered by the Administration for Children and Families (ACF),
one of the Vice President’s High Impact Agencies. The budget provides $6.3 billion for Head
Start, a $1 billion increase over the 2000 level.
• In 2001, Head Start will serve approximately 70,000 additional children, for a
total of 950,000 children. The Head Start
program goal established by the President
is to serve one million children annually
by 2002.
• Within the overall total of children served,
in 2001 approximately 10,000 more children under age three will participate in
the Early Head Start component, for a
total of nearly 54,000. The President established the goal of doubling the number
of children below age three served in Head
Start by 2002, within the goal of one million total children.
National evaluation studies of both the
regular Head Start program and the Early
Head Start component are under way to
improve outcomes for Head Start families,
including child growth and development.
• In 2001, the Head Start program will increase the average improvement in literacy skills of Head Start children from
66 to 77 percent. Head Start will also increase the percentage of participating children whose parents read to them at least
three times per week.
Foster Care and Adoption Assistance:
The Administration for Children and Families
(ACF) administers a number of programs that
focus on preventing maltreatment of children,
protecting children from abuse and neglect,
and finding permanent placements for children
who cannot safely return to their homes. The
budget proposes a $5 million pilot initiative
to support Indian Tribes’ management of their
own child welfare systems. Currently, tribal
child welfare agencies must operate within
state systems to be eligible for Federal support
of foster care and adoption assistance activi-

THE BUDGET FOR FISCAL YEAR 2001

ties. Under the pilot initiative, participating
tribes would receive direct Federal funding,
improving their ability to meet the needs of
eligible Native American children.
• Decrease the number of children with substantiated reports of abuse with a repeat
report of maltreatment within 12 months
from 12 percent in 1997 to 10 percent in
2001.
• Provide children permanency and stability
in their living situations by reducing the
median length of time between placement
and adoption for all children from 38
months in 1997 to 37 months in 2001.
Aging Services Programs: The Administration on Aging (AoA) administers information and assistance, home and communitybased support services for older people, and
programs that protect the rights of vulnerable,
at-risk older people. In 2001, the budget proposes $1.1 billion for AoA programs, including
$125 million to assist families who are caring
for frail elderly relatives. The goal of care-giver
services is to help sustain the efforts of family
care givers by providing information, education
and counseling, and respite services. AoA will
develop performance measures for these activities. The budget also includes $325 million,
an increase of $15 million, for the core Supportive Services program.
• In 2001, AoA will increase the number of
meals served under the Home-Delivered
Meals Program to 166 million, compared
to 119 million meals in 1996.
National Service
The Corporation for National and Community Service supports programs providing service opportunities Nation-wide for Americans
of all ages and backgrounds. Through Corporation-supported projects, over 1.5 million participants work to address the Nation’s unmet,
critical needs. The Corporation organizes its
programs into three streams of service, with
various annual performance goals.
AmeriCorps: Building upon the Administration’s commitment to shape and strengthen the
role of national service, AmeriCorps’ goal is
to expand service opportunities to 100,000 participants by 2004.

20.

EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES

• In 2001, AmeriCorps will engage 62,000
Americans in community service, and provide education awards in return for such
service.
Learn and Serve America: This program
provides young people with opportunities to
serve by connecting community service with
academic learning, personal growth and civic
responsibility.
• In 2001, 15,000 high school students who
have provided outstanding community
service will receive Presidential Service
Scholarships—compared with 10,000 students in 2000.
National Senior Service Corps: The
Corps, which includes over 500,000 people age
55 and older, encourages seniors to use their
experience, skills and talents while serving as
Foster Grandparents, Senior Companions, and
the Retired and Senior Volunteers.
• In 2001, Foster Grandparents and Senior
Companions will serve 160,000 specialneeds youth and frail elderly, while retired
senior volunteers and volunteer leaders
will work to further the goals of America’s
Promise and the America Reads Challenge.
Cultural Agencies
The Smithsonian Institution and Other
Cultural Agencies: The Smithsonian Institution, the National Gallery of Art, the U.S. Holocaust Memorial Museum, and the John F.
Kennedy Center for the Performing Arts all
have as part of their missions the advancement of knowledge and sharing that knowledge with the American public. To accomplish
its mission, each institution must maintain its
physical infrastructure and provide access to
its unique assets.
In 2001, each agency will provide new
and updated exhibits and performances, including, for example, major traveling exhibitions from the Smithsonian’s National Museum of American Art and National Portrait
Gallery to cities nationwide. In 2001, each
agency will protect its unique assets by
implementing its comprehensive plans for
repair and renovation, including completion
of repairs of the National Gallery of Art’s
Mall steps and initiating repairs on the

243

Gallery’s West Building facade and connecting
link expansion joints.
In 1999, the National Gallery of Art had
6.7 million visitors, the highest total since
1988, due primarily to the success of the
special exhibitions program that included the
critically and publicly acclaimed Van Gogh
exhibition. The U.S. Holocaust Memorial Museum hosted two million visitors and had
1.3 million visitors to its website while attendance at traveling exhibitions increased by
29 percent over 1998. In 1999, the Kennedy
Center completed a comprehensive upgrade
of its building automation system and began
work on an energy conservation plan.
The National Endowment for the Arts
and the National Endowment for the Humanities: The budget proposes $150 million
each for the National Endowment for the Arts
and the National Endowment for the Humanities to provide support for important cultural,
educational and artistic programs for communities across America. The budget also proposes $206 million for the Institute of Museum
and Library Services (IMLS) to support museums and libraries. In 2001, the Endowments
and IMLS will fund education and life-long
learning as well as projects to increase public
access to performances, exhibitions, and our
Nation’s cultural treasures held by museums,
libraries, archives, and historical organizations. Special attention will be given to underserved areas and to the use of the arts and
humanities to strengthen community and family life.
• In 2001 the NEA’s proposed Challenge
America program will award more than
1,100 grants, directly or in partnership
with States, to communities across America for Arts Education, Access to the Arts,
Youth-at-Risk, Cultural Heritage and
Preservation, and Community Arts Partnerships.
• In 2001, the NEH will help improve the
quality of humanities education offered to
hundreds of thousands of American school
children and college students; provide opportunities for citizens from all walks of
life to engage in a lifetime of learning
about the Nation’s history and culture;
preserve and democratize access to millions of brittle books and other important

244

THE BUDGET FOR FISCAL YEAR 2001

cultural and intellectual resources; and
dramatically expand access to humanities
programming for millions of citizens in
rural areas and cities nationwide.
• In 2001, IMLS will promote access to
learning and information resources held by
museums and libraries through electronic
linkages, helping all 55 State library agencies expand electronic access to materials
and increase Internet access. IMLS will
help museums develop and support regional electronic networks, providing technical support to thousands of museums in
putting collection information on-line and
supporting after-school programs located
in museums.
Tax Incentives
The Federal Government helps individuals,
families, and employers (on behalf of their
employees) plan for and buy education and
training through numerous tax benefits, which
under current law will cost an estimated
$59 billion in 2001, and $307 billion from
2001 to 2005. Along with the Hope Scholarship
and Lifetime Learning tax credits for college
costs, the tax code provides other ways to
pay for education and training. State and
local governments, for instance, can issue
tax-exempt debt to finance student loans
or to build the facilities of non-profit educational institutions. Interest from certain
U.S. Savings Bonds is tax-free if the bonds
go solely to pay for education. Many employers

provide education benefits that do not count
as income. Since 1998, many taxpayers have
been able to deduct the interest on student
loans. Finally, the tax code gives employers
a Work Opportunity Tax Credit and a Welfareto-Work Tax Credit, letting them claim a
tax credit for part of the wages they pay
to certain hard-to-employ people who work
for them for a minimum period.
In 2000, the Administration secured an
extension through December 2001 of the
current exclusion from employee income of
employer-provided
educational
assistance,
known as section 127 of the Internal Revenue
Code. New education tax provisions in the
budget include proposals to provide tax credits
to support public school construction and
rehabilitation; expand the Lifetime Learning
tax credit by giving families the option of
taking a tax deduction or claiming a 28
percent tax credit for postsecondary tuition
and fees; eliminate the 60-month limit on
the student loan interest deduction to provide
longer-term relief to low-and middle-income
taxpayers with large educational debt; eliminate the tax owed when certain student
loans are forgiven after 25 years of repayment;
and, provide a tax credit for employer-provided
workplace literacy and basic education programs. In addition, the budget proposes exclusion from income for repayment or cancellation
of a student loan under the AmeriCorps
Education Award Program.

21.
Table 21–1.

HEALTH

Federal Resources in Support of Health
(In millions of dollars)

Function 550

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

30,209

33,803

34,951

34,765

35,247

36,058

36,833

114,139
..............

123,265
..............

132,310
1,119

143,204
2,756

155,051
5,275

167,539
8,104

181,349
9,847

..............
..............

..............
100

..............
51

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

82,880
..............

89,290
..............

95,150
128

101,690
1,333

107,365
2,809

114,180
3,909

122,015
4,681

N/A = Not available.

In 2001, the Federal Government will spend
about $167 billion and allocate about $95
billion in tax incentives to provide direct
health care services, promote disease prevention, further consumer and occupational safety,
conduct and support research, and help train
the Nation’s health care work force. The
results of these Federal activities include
significant improvements in the health of
Americans as evidenced by recent 1997 statistics that indicate that since 1980, life expectancy has risen steadily from 73.7 years
to 76.5 years of age and the infant mortality
rate decreased from 12.6 deaths per 1,000
births to 7.2 deaths per 1,000 births. Furthermore, Federal programs made significant
strides in preventing and eliminating infectious diseases, such as reducing Hepatitis
B infection from 8.5 per 100,000 people
in 1990 to 3.8 cases per 100,000 people
in 1998, as well as in improving treatment
and quality of care, and improving the quality
of life for individuals suffering from chronic
diseases and disability. The Department of
Health and Human Services (HHS) is the
Federal Government’s lead agency for health.

Health Care Services and Financing
Of the estimated $167 billion in Federal
health care outlays in 2001, 87 percent
finances or supports direct health care services
to individuals.
Medicaid: This Federal-State health care
program served about 33 million low-income
Americans in 1999. States that participate in
Medicaid must cover several categories of eligible people as well as several mandated services. The Federal Government spent $108 billion, 57 percent of the total, on the program
in 1999 while States spent $81 billion, or 43
percent. Medicaid covers a fourth of the Nation’s children and is the largest single purchaser of maternity care as well as of nursing
home services and other long-term care services; the program covers almost two-thirds of
nursing home residents. The elderly and disabled made up less than a third of Medicaid
beneficiaries in 1997, but accounted for almost
two-thirds of spending on benefits. Medicaid
serves at least half of all adults living with
AIDS (and up to 90 percent of children with
AIDS), and is the largest single payer of direct
medical services to adults living with AIDS.
Medicaid pays for over one-third of the nation’s
245

246
long-term care services. Medicaid spends more
on institutional care today than it does for
home care, but the mix of payments is expected to be almost equal in 10 years.
Because the Health Care Financing Administration (HCFA) and States jointly administer
Medicaid, HCFA has worked with State Medicaid agencies to develop and test national
performance goals for Medicaid. These efforts
will continue in 2001. With respect to the
goal of increasing immunization rates among
needy children, HCFA will continue to collaborate with states to develop individualized
state immunization goals. The first group
of 16 states began determining their baselines
in 1999, and will complete them and set
performance targets in 2000. All States will
have established their baselines and targets
by 2002. HCFA’s goal complements the Centers for Disease Control and Prevention’s
(CDC’s) broader 2001 goal of helping States
ensure that at least 90 percent of all U.S.
children by age two receive each recommended
basic childhood vaccine.
State Children’s Health Insurance Program: More than 11 million American children lack health insurance. To decrease the
number of uninsured children, the State Children’s Health Insurance Program (SCHIP) was
established in 1997 in the Balanced Budget
Act to provide $24 billion over five years for
States to expand health insurance coverage to
low-income, uninsured children. SCHIP provides States with broad flexibility in program
design while protecting beneficiaries through
basic Federal standards.
Each State’s SCHIP plan describes the
strategic objectives, performance goals, and
performance measures used to assess the
effectiveness of the plan. HCFA has been
working with the States to develop baselines
and targets for the SCHIP/Medicaid goal
of decreasing the number of uninsured children by enrolling children in SCHIP and
Medicaid. At the end of 1999, two million
children were enrolled in SCHIP.
• In 2001, HCFA’s goal is to increase the
number of children who are enrolled in
regular Medicaid or SCHIP by one million
over the previous year.

THE BUDGET FOR FISCAL YEAR 2001

Other Health Care Services: HHS administers a number of other programs in addition
to Medicare and Medicaid, each with its own
performance goals, to support health services
for low-income or specific populations. Selected
health-related performance achievements and
2001 goals are highlighted below.
• Indian Health Services (IHS): IHS is committed to addressing the major health
problems afflicting Native American Indian and Alaska Native people and has
targeted diabetes because of the high prevalence of this disease in this population.
The percent of diabetics who met the clinically defined criterion of ‘‘good glycemic
control (i.e., blood sugar control)’’ increased from 29 percent in 1996 to 35 percent in 1998. In 2001, IHS will demonstrate a continued trend in improved
glycemic control in the proportion of Native American clients with diagnosed diabetes.
• Substance Abuse and Mental Health Services Administration (SAMHSA): The percent of youths age 12 to 17 who reported
current use of illicit drugs decreased from
11.4 percent in 1997 to 9.9 percent in
1998. In 2001, SAMHSA will aim to cut
monthly marijuana use in this population
by 25 percent, from the 1998 baseline of
8.3 percent to 6.2 percent by the end of
2002.
• Services for the Mentally Ill: The Surgeon
General’s 1999 report on mental health
states that one in five Americans is living
with a mental health disorder. Increased
mental health services funded in SAMHSA
will advance the goal of increasing the percent of adults with serious mental illness
who are employed, are living independently, and have had no contact with the
criminal justice system.
• Access to Health Insurance: Increased
funding for the Health Care Access for the
Uninsured (HCAFU) initiative will develop
networks and coordinate services to increase the number of uninsured people receiving primary care, mental health, substance abuse, and other health services
and expand the number of services supported.

21.

HEALTH

• Health Resources and Services Administration (HRSA): Funds provided throughout
the 1990s enabled the network of 4,600
family planning clinics to serve roughly
4.4 million clients each year. Through reproductive health care and counseling,
these clinics helped achieve the lowest
teenage pregnancy rate since recording
began in 1976. The budget establishes the
goal of serving 500,000 additional clients.
Youth Smoking Cut in Half: HHS will
continue its efforts to reduce underage smoking. The Administration will take steps to cut
youth smoking by 50 percent compared with
1999 levels. These steps will include a combination of excise tax increases and a youth
smoking assessment, as well as conducting
education campaigns, funding and technical
assistance to state programs, and cooperation
with nongovernmental entities.
Consumer Product Safety Commission
(CPSC): Each year, there are an estimated
650,000 product-related head injuries to children under 15 years old. As a part of CPSC’s
effort to reduce head injuries by 15 percent
by 2006, this independent agency recalled or
took corrective actions on 12 products in 1998
that presented a substantial risk of head injury. In 2001, CPSC will increase the number
of these recalls or corrective actions to 15.
Bioterrorism: HHS’ Office of Emergency
Preparedness will work with localities to establish 25 new Metropolitan Medical Response
Systems, which develop and link local public
health, public safety, and health services capabilities to respond to a chemical/biological/nuclear terrorist incident, for a total of 97 systems in various stages of development by the
end of 2001.
HHS’ Response to the HIV/AIDS Epidemic: Since 1993, HHS has taken significant
steps to prevent the spread of AIDS and provide appropriate treatment to those living with
HIV/AIDS. In 2000, the Administration established a new initiative to stem the rising tide
of HIV/AIDS internationally: this is being expanded in 2001. HRSA’s Ryan White CARE
Act and the Centers for Disease Control and
Prevention (CDC) efforts have successfully decreased the rate of newly reported HIV/AIDS
cases in children due to perinatal transmission
by 73 percent from 1992 to 1998.

247
• CDC financed prevention activities will reduce the actual incidence of new HIV infections in the United States five percent
by the end of 2001 from the 1999 level
of 40,000 new HIV infections.
• Working with other countries, USAID and
international and U.S. government agencies, CDC will reduce the number of new
infections among 15 to 24 year-olds in subSaharan Africa from an estimated two million, by 25 percent by 2005.
• HRSA will increase the number of AIDS
Drug Assistance Program (ADAP) clients
receiving appropriate anti-retroviral therapy (consistent with clinical guidelines)
through State ADAPs during at least one
month of the year, to a projected monthly
average of 84,500 by 2001. This would constitute a 31-percent increase over the 1999
baseline of 64,500.
Health Research: The National Institutes
of Health (NIH) supports and conducts research to gain knowledge to help prevent, detect, diagnose, and treat disease and disability.
NIH supports over 50,000 grants to universities, medical schools, and other research and
research training institutions while conducting
over 1,200 projects in its own laboratories and
clinical facilities. In 1999, NIH-supported research led to numerous scientific advances in
the prevention and treatment of disease and
disability. For example, scientists demonstrated the safety and effectiveness of the
anti-AIDS viral drug nevirapine for preventing
mother-to-child
transmission
of
HIV.
Nevirapine is 70 times less expensive and
much easier to administer than AZT, the
standard of care in the United States. It offers
new hope for reducing maternal-child HIV
transmission in developing countries and may
be useful for further reducing mother-to-child
transmission of AIDS in the U.S. NIH performance goals include:
• Increasing the pace and progress of genome sequencing by completing one-third
of the human genome sequence with 99.9
percent accuracy by the end of 2001; by
1999, 442 million base pairs, roughly 15
percent, of the human genome sequence
had been completed.

248

THE BUDGET FOR FISCAL YEAR 2001

• Developing by the end of 2001 a comprehensive, public database of Federally
and privately-sponsored clinical trials for
serious or life threatening diseases to ensure that patients, providers, and researchers have access to and are aware
of cutting-edge and potentially lifesaving
therapies.
Additionally, NIH continues to lead the
national effort to meet the President’s goal
of developing an AIDS vaccine by 2007.
Health Informatics Initiative: The budget
includes a new investment in Health
Informatics (HI) to allow HHS to improve integration of the broad range of available health
information and data. The HI Initiative will
also allow HHS to take a leadership role in
the establishment of health data standards to
improve the uniformity and ease of transmission of healthcare data while strengthening
the confidentiality of health information. The
ultimate goal of the initiative is to improve
patient care and health outcomes through the
efficient and effective use of health informatics
data. This initiative will complement the initiative to reduce medical errors mentioned in
Chapter 3, ‘‘Strengthening Health Care.’’
Public Health Regulation and Safety Inspection: The Food and Drug Administration
(FDA) spends over $1 billion a year to promote
public health by ensuring that foods, drugs,
biological products, and medical devices are
safe. It leads Federal efforts to review new
products and ensure that regulations enhance
public health without unnecessary burden. The
FDA also supports important research and
consumer education.
To allow
devices, and
able to the
has set the
2001:

innovative new drugs, medical
other products to be made availpublic more quickly, the FDA
following performance goals for

• review and act on 90 percent of standard
original new drug application submissions
within a year of submission, while handling a new drug application workload
that grows annually;
• complete first action on 90 percent of new
medical device applications (known as premarket applications) within 180 days,
compared to 79 percent in 1998; and,

• complete first action on 50 percent of food
and color additive petitions within a year
of submission, compared to the goal of 30
percent in 1999.
The Food Safety and Inspection Service
(FSIS) in the U.S. Department of Agriculture
spends $650 million annually to inspect the
Nation’s meat, poultry, and egg products,
ensuring that they are safe, wholesome, and
not adulterated. In 1996, FSIS began implementing a modernized inspection system, Hazard Analysis and Critical Control Point
(HACCP) system, that has begun shifting
responsibility for ensuring meat and poultry
safety from FSIS to the industry. USDA
and HHS have the following food safety
goals:
• By 2001, 99 percent of federally-inspected
meat and poultry plants will comply with
the HACCP system;
• Currently, approximately 45–50 percent of
high-risk domestic food establishments are
inspected annually. FDA will increase this
coverage rate to 100 percent;
• CDC will expand State health department
capacity to subtype DNA and rapidly exchange information using PulseNet for
E.coli and Salmonella Typhimurium, from
40 labs each in 2000 to 45 labs each by
2001, and for Listeria from 20 labs in 2000
to 30 labs by 2001.
Workplace Safety and Health
The Federal Government spends approximately $620 million a year to promote safe
and healthy conditions for over 100 million
workers in six million workplaces, mainly
through the Department of Labor’s (DOL)
Occupational Safety and Health Administration (OSHA) and Mine Safety and Health
Administration (MSHA). Through a combination of enforcement, compliance assistance,
and regulatory approaches, these agencies
protect workers from illness, injury, and death
caused by occupational exposure to hazardous
substances and conditions. According to 1998
DOL data, occupational fatalities and injuries
and illness have fallen to the lowest level
on record.
• In 2001, OSHA will: (1) reduce injury/illness rates 20 percent in at least 75,000

21.

249

HEALTH

of the most hazardous workplaces where
the agency initiates an intervention; (2)
reduce injuries and illnesses by 15 percent
at work sites engaged in voluntary, cooperative relationships with OSHA; and (3) initiate an investigation of 95 percent of
worker complaints within one working day
or conduct an on-site inspection within five
working days.

tive surgery, contraceptives, and guaranteed
length of stay for maternity and mastectomy.

• In 2001, MSHA will reduce fatalities and
lost-workday injuries in all mines to below
the average number recorded for the previous five years. From 1994 to 1998, there
was an average of 92 fatalities and 4.07
lost-workday injuries.

In 2001, OPM will increase the number
of plans in the FEHBP with above average
customer satisfaction ratings to 40 percent,
an increase over the 33 percent so rated
in 1998. In addition, the FEHBP’s benefit
structure will provide parity in the provision
of mental health and substance abuse benefits
and FEHBP carriers will institute initiatives
to improve health care quality through the
prevention of medical errors and enhancements in patient safety.

These efforts are complemented by an additional $10 million in HHS to fund worker
safety research at the Agency for Healthcare
Research and Quality.
Federal Employees Health Benefits
Program (FEHBP)
Established in 1960 and administered by
the Office of Personnel Management (OPM),
the FEHBP is America’s largest employersponsored health benefit program, providing
over $18 billion in health care benefits a
year to about nine million Federal workers,
annuitants, and their dependents. About 85
percent of all Federal employees participate
in the FEHBP, and they select from about
300 health plans.
Since 1993, OPM has made improvements
in the quality and quantity of health plan
information provided to enrollees, consumer
protections, and the scope of health benefits
covered by the program. In 1993, the annual
health benefits open season guide provided
program enrollees little more than cost information regarding the program’s participating
carriers. By 1999, these materials had been
enhanced to provide accreditation, performance, and customer satisfaction information
in plain language consumers can easily understand. Between 1993 and 1999, FEHBP benefits were expanded to provide coverage for
bone marrow transplants, breast reconstruc-

In 2000, the FEHBP became fully compliant
with the President’s Patients’ Bill of Rights,
providing enrollees even stronger rights of
information disclosure, choice of providers
and plans, rights of complaint and appeal,
and other consumer protections.

In addition, the Administration will propose
legislation that will help control the future
rate of growth of FEHBP premiums by
leveraging the purchasing power of the federal
government. If enacted, this initiative will
enable OPM to develop a comprehensive
dental insurance benefit that would be available to Federal employees, annuitants, and
their families.
Tax Expenditures
Federal tax laws help finance health insurance and care. Most notably, employer contributions for health insurance premiums are
excluded from employees’ taxable income. In
addition, self-employed people may deduct
a part (60 percent in 2000, rising to 100
percent in 2003 and beyond) of what they
pay for health insurance for themselves and
their families. Total health-related tax expenditures, including other provisions, will reach
an estimated $95 billion in 2001, and $540
billion from 2001 to 2005. The exclusion
for employer-provided insurance and related
benefits (including deductions by the self
employed) accounts for most of these costs
($81 billion in 2001 and $456 billion from
2001 to 2005).

22.
Table 22–1.

MEDICARE

Federal Resources in Support of Medicare
(In millions of dollars)

Function 570

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

2,803

3,067

2,977

2,977

3,012

3,087

3,156

187,694
..............

199,475
..............

218,251
–690

223,676
2,610

241,888
–2,730

255,403
6,543

277,452
6,075

Created by the Social Security Amendments
of 1965, and expanded in 1972, Medicare
is a Nation-wide health insurance program
for the elderly and certain people with disabilities. The program, which will spend an
estimated $218 billion in 2001 on mandatory
benefits (net of beneficiary premiums) and
administrative costs, consists of two complementary but distinct parts, each tied to
a trust fund: (1) Hospital Insurance (Part
A); and, (2) Supplementary Medical Insurance
(Part B).
Approximately 35 years ago, Medicare was
designed to address a serious, national problem in health care—the elderly often could
not afford to buy health insurance, which
was more expensive for them than for other
Americans because they had higher health
care costs. Medicare was expanded in 1972
to address a similar problem of access to
insurance for people with disabilities. Through
Medicare, the Federal Government created
one insurance pool for all of the elderly
and eligible disabled individuals while subsidizing some of the costs, thus making
insurance much more affordable for almost
all elderly Americans and for certain people
with disabilities.
Medicare has very successfully expanded
access to quality care for the elderly and
people with disabilities, but at an increasing
cost. The Balanced Budget Act (BBA) of
1997 improved Medicare’s financial outlook

for the near future, yet its trust funds
face financing challenges as the Nation moves
into the 21st Century. The Balanced Budget
Refinement Act (BBRA) of 1999 corrected
some of the unintended consequences of the
BBA. Along with legislative proposals discussed elsewhere in the budget, the Health
Care Financing Administration (HCFA), which
runs Medicare, is working to reform and
modernize the Medicare program.
Part A
Part A covers almost all Americans age
65 or older, and most persons who are
disabled for 24 months or more and who
are entitled to Social Security or Railroad
Retirement benefits. People with end-stage
renal disease (ESRD) also are eligible for
Part A coverage. Part A reimburses providers
for the inpatient hospital, skilled nursing
facility, home health care related to a hospital
stay, and hospice services provided to beneficiaries. Part A’s Hospital Insurance (HI)
Trust Fund receives most of its income from
the HI payroll tax—2.9 percent of payroll,
split evenly between employers and employees.
Part B
Part B coverage is optional, and it is
available to almost all resident citizens age
65 or older and to people with disabilities
who are entitled to Part A. About 94 percent
of those enrolled in Part A have chosen
to enroll in Part B. Enrollees pay monthly
251

252
premiums that cover about 25 percent of
Part B costs, while general taxpayer dollars
subsidize the remaining costs. For most beneficiaries, the Government simply deducts the
Part B premium from their monthly Social
Security checks. Part B pays for medically
necessary physician services; outpatient hospital services; diagnostic clinical laboratory
tests; certain durable medical equipment (e.g.,
wheelchairs) and medical supplies; home
health care; physical and occupational therapy;
speech pathology services; and outpatient mental health services. Part B also covers kidney
dialysis and other services for ESRD patients.
Fee-for-Service vs. Managed Care
Beneficiaries can choose the coverage they
prefer. Under the traditional fee-for-service
option, beneficiaries can go to virtually any
provider in the country. Medicare pays providers primarily based on prospective payment, an established fee schedule, or reasonable costs. About 83 percent of Medicare
beneficiaries now opt for fee-for-service coverage.
Alternatively, beneficiaries can enroll in
a Medicare+Choice plan, and the 17 percent
who do are concentrated in several geographic
areas. Generally, enrollees receive care from
a
network
of
providers,
although
Medicare+Choice plans may offer a pointof-service benefit, allowing beneficiaries to
receive certain services from non-network providers. Medicare+Choice provides beneficiaries
access to additional kinds of managed care
plans, including Provider Sponsored Organizations and Preferred Provider Organizations.
Most managed care plans receive a monthly,
per-enrollee capitated payment that covers
the cost of Part A and B services. At
the start of 2000, 69 percent of all Medicare
beneficiaries lived in a county served by
at least one Medicare managed care plan.
Successes
Medicare has dramatically increased access
to health care for the elderly—from slightly
over 50 percent of the elderly in 1966 to
almost 100 percent today. According to a
recent Medicare Payment Advisory Commission report, 97 percent of Medicare feefor-service beneficiaries (94 percent for managed care) reported no trouble obtaining care.

THE BUDGET FOR FISCAL YEAR 2001

Further, 88 percent of fee-for-service Medicare
beneficiaries (92 percent for managed care)
reported having a physician or physician’s
office as a usual source of care. Medicare
beneficiaries have access to the most upto-date medical technology and procedures.
Under the BBA and other recent legislation,
Medicare beneficiaries now have expanded
access to many important preventive care
services including mammographies, prostate
and colorectal cancer screening, bone mass
measurements and diabetes self-management
services. These benefits will help prevent
or reduce the complications of disease for
millions of beneficiaries.
In addition, Medicare is working to protect
the integrity of its payment systems. Building
on the success of Operation Restore Trust,
a five-State demonstration aimed at cutting
fraud and abuse in home health agencies,
nursing homes, and durable medical equipment suppliers, Medicare is increasing its
efforts to root out fraud and abuse. Recent
legislation provides mandatory Federal funds
and greater authority to prevent inappropriate
payments to fraudulent providers, and to
seek out and prosecute providers who continue
to defraud Medicare and other health care
programs. In 1996, in the first ever comprehensive audit of the Medicare program,
the Medicare error rate was an estimated
14 percent of all Medicare fee-for-service
payments, or about $23.2 billion. In 1998,
the error rate fell to an estimated 7.1 percent,
or about $12.6 billion.
Spending and Enrollment
Federal spending on Medicare benefits will
rise by an estimated average annual rate
of 7.1 percent from 2001 to 2005—from
$240 billion to $309 billion. 1 Part A outlays
will grow by an estimated 28 percent over
the period—from $140 billion to $179 billion—
or an average of 6.7 percent a year. Part
B outlays will grow by an estimated 30
percent—from $100 billion to $130 billion—
or an average of 7.5 percent a year.
Medicare enrollment will grow slowly until
2010, then rapidly increase as the baby
1 These figures cover gross Federal spending on Medicare benefits, and do not include spending financed by beneficiaries’ premium payments or administrative costs.

22.

253

MEDICARE

boom generation begins to reach age 65
in 2011. From 1995 to 2010, enrollment
will grow at an estimated average annual
rate of 1.4 percent, from 37.4 million enrollees
in 1995 to 46.3 million in 2010. But after
2010, average annual growth will more than
double, with enrollment reaching an estimated
61.0 million in 2020.
The Two Trust Funds
Hospital Insurance (HI) Trust Fund: As
noted earlier in this chapter, the HI Trust
Fund is financed by a 2.9 percent payroll tax,
split evenly between employers and employees.
In 1995, HI expenditures began to exceed the
annual income to the Trust Fund and, as a
result, Medicare began drawing down the
Trust Fund’s accounts to help finance Part A
spending. Prior to the BBA, the Government’s
actuaries predicted that the HI Trust Fund
would become insolvent in 2001. The Medicare
Trustees currently project that the HI Trust
Fund will remain solvent until 2015, mostly
due to the BBA changes and improved efforts
to combat fraud and abuse.
Medicare Part A still faces a long-term
financing challenge. Since current benefits
are paid by current workers, Medicare costs
associated with the retirement of the baby
boomers starting in 2010, will be borne
by the relatively small number of people
born after the baby boom. As a result,
only 2.3 workers will be available to support
each beneficiary in 2030—compared to today’s
four workers per beneficiary. The President
plans to work with Congress to develop
a long-term solution to this financing challenge.
Supplementary Medical Insurance (SMI)
Trust Fund: The SMI Trust Fund receives
about 75 percent of its income from general
Federal revenues and about 25 percent from
beneficiary premiums. Unlike HI, the SMI
Trust Fund is really a trust fund in name
only; the law lets the SMI Trust Fund tap
directly into general revenues to ensure its annual solvency.
Balanced Budget Act Implementation
HCFA continues to implement the many
changes in Medicare payment methodologies
and provider options that were mandated

in the BBA and then modified in the BBRA.
Although HCFA was forced to delay some
provisions to enable a smooth transition of
systems to the year 2000 (Y2K) computer
problem, the agency has issued major rules
that implement the new Medicare + Choice
program, PSO solvency standards, an interim
payment system for home health services
and a prospective payment system for skilled
nursing facilities.
A Plan to Strengthen HCFA’s
Management Capacity
HCFA faces the formidable challenge of
modernizing its administrative infrastructure,
meeting pressing statutory deadlines for program change from the BBA, the BBRA and
the Health Insurance Portability and Accountability Act, and perhaps most important,
the need to be highly responsive to its
customers. The budget continues initiatives
first proposed in 2000 to increase HCFA’s
flexibility to operate as a prudent purchaser
of health care while also increasing accountability, as discussed in Chapter 31, ‘‘Improving
Performance through Better Management’’.
Performance Plan
HCFA has developed a set of performance
goals to measure its progress in ensuring
that Medicare beneficiaries receive the highest
quality health care. HCFA’s performance goals
relate to four critical areas: quality assurance;
access to care for the elderly and disabled;
administrative efficiency; and, a reduction
in fraud and abuse. HCFA’s 2001 goals
include:
• Increasing the percentage of Medicare
beneficiaries who receive a mammogram
once every two years from 45 percent in
1998 to 51 percent in 2001.
• Decreasing the one-year mortality rate
among Medicare beneficiaries hospitalized
for heart attacks from 31.4 percent in 1995
to 27.4 percent in 2001.
• Determining and reducing the prevalence
of pressure ulcers (bed sores) in long-term
care facilities. Pressures ulcers are a good
indicator of the quality of care provided
by nursing homes, a major concern of the
Administration’s Nursing Home Initiative.
This goal is still developmental, and

254

THE BUDGET FOR FISCAL YEAR 2001

HCFA is working to establish a baseline
during 2000.
• Increasing the percentage of Medicare
beneficiaries 65 and over receiving vaccinations for influenza from 59 percent in
1994 to 72 percent in 2001 and those receiving lifetime pneumococcal vaccinations
from 25 percent in 1994 to 55 percent in
2001. This latter goal was developed to
further address diseases that have resulted in more deaths per year than all
other vaccine-preventable diseases combined, as HCFA has achieved and surpassed its 2000 flu immunization performance measure.
• Reducing the payment error rate under
Medicare’s fee-for-service program from 14

percent in 1996 to seven percent in the
year 2000 and five percent by the year
2002, as noted above. The Administration
has made great strides over the last few
years to reduce improper Medicare payments to hospitals, doctors, and other
health care providers.
• Sustaining the percentage of laboratories
regulated under the Clinical Laboratory
Improvement Amendment that are properly enrolled and participating in proficiency (accuracy) testing at 95 percent.
HCFA will also sustain the current percentage of the total scores reported from
laboratories enrolled in proficiency (accuracy) testing that contain no failures at
90 percent.

23.
Table 23–1.

INCOME SECURITY

Federal Resources in Support of Income Security
(In millions of dollars)

Function 600

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

32,741

29,844

41,332

41,332

41,825

42,864

43,804

197,753
..............

207,357
2,190

217,157
–1,603

229,744
899

240,925
1,474

251,069
3,046

263,282
3,148

17
17

14
95

20
83

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

140,290
..............

147,665
5

153,085
2,648

159,305
4,605

165,585
7,876

172,115
10,363

178,850
16,389

N/A = Not available.

The Federal Government provides about
$257 billion a year in cash or in-kind benefits
to individuals through income security programs, including those generally defined as
part of the ‘‘social safety net.’’ Since the
1930s, these safety net programs, plus Social
Security, Medicare, Medicaid, and housing
assistance (each discussed in other chapters
in this Section), have grown enough in size
and coverage so that even in the worst
economic times, most Americans can count
on some form of minimum support to prevent
destitution.
The income security programs also include
retirement and disability insurance (excluding
Social Security, which is described in Chapter
24), Federal activity related to private pensions, and Federal employee retirement and
disability programs.
Major Public Benefit Programs
The largest means-tested income security
programs are Food Stamps, Supplemental
Security Income (SSI), Temporary Assistance
for Needy Families (TANF), and the Earned
Income Tax Credit (EITC). The various kinds
of low-income housing assistance are discussed
in Chapter 17, ‘‘Commerce and Housing Cred-

it.’’ These programs, along with
compensation (which is not
form the backbone of cash and
net’’ assistance in the Income
tion.

unemployment
means-tested),
in-kind ‘‘safety
Security func-

The major income security programs are
managed by four agencies that broadly interact
with the American people and businesses.
These agencies are the Food and Nutrition
Service, the Administration on Children and
Families, the Social Security Administration,
and the Internal Revenue Service.
Nutrition Assistance
Federal nutrition assistance programs are
managed by the Department of Agriculture’s
Food and Nutrition Service (FNS). The largest
of these programs is the Food Stamp Program.
In addition, FNS administers the Special
Supplemental Nutrition Program for Women,
Infants, and Children, and the National School
Lunch and School Breakfast Programs.
Food Stamps: Food Stamps help most lowincome people get a more nutritious diet.
In an average month in 1999, 18.2 million
people, or 7.7 million households, received
255

256
benefits and in that year, the program provided total benefits of $15.8 billion.
• In 2001, the program will provide an average projected benefit of $77 to 18.6 million
persons each month. Food Stamps is the
only Nation-wide, low-income assistance
program available to essentially all financially-needy households that does not impose non-financial criteria, such as whether households include children or elderly
persons. (The 1996 welfare law limits the
eligibility of non-citizens, as well as the
number of months that childless, able-bodied individuals can receive benefits while
unemployed.)
• In 2001, FNS will expand the number of
States using Electronic Benefits Transfer
to issue 82 percent of Food Stamp benefits,
compared to 69 percent in 1999, improving
the delivery of benefits, and increasing the
ability to track benefits redemption as a
fraud prevention tool.
Special Supplemental Nutrition Program for
Women, Infants, and Children (WIC): WIC
provides vouchers for nutritious supplemental
food packages, nutrition education and counseling, and health and immunization referrals
to low-income women, infants, and children.
The program reached an average of over
7.3 million people each month in 1999. Funding in 2000 is sufficient to serve 7.4 million
women, infants, and children monthly, and
the budget proposes $4.1 billion to serve
7.5 million people by the end of 2001, fulfilling
the President’s goal of full participation in
WIC. Results of the National Partnership
for Reinventing Government’s first Government-wide customer satisfaction survey show
that WIC was one of the top-scoring Government programs, receiving especially high
scores for the eligibility determination process.

THE BUDGET FOR FISCAL YEAR 2001

• In 2001, the programs will serve an estimated 27.8 million lunches daily. By 2005,
FNS aims to reduce the average percent
of calories from saturated fat in school
lunches to 10 percent, down from 15 percent in 1993.
Income Assistance to Aged, Blind, and
Disabled Individuals
The SSI program, administered by the
Social Security Administration (SSA), provides
benefits to needy aged, blind, and disabled
adults and children. In 1999, 6.3 million
individuals received $28.1 billion in benefits.
In 2001, an estimated 6.4 million individuals
will receive a total of $30.5 billion in SSI
benefits. Eligibility rules and payment standards are uniform across the Nation. In 1999,
average monthly benefit payments ranged
from $247 for aged adults to $444 for blind
and disabled children. Most States supplement
the SSI benefit.
• In 2001, SSA will process 66 percent of
initial SSI claims by individuals over age
65 within 14 days of the filing date. In
1999, almost 63 percent of these claims
met this goal, a substantial increase from
54 percent in 1998. In future years, the
agency’s goal is to continue to increase the
proportion of these SSI claims processed
within 14 days.
• In 2001, SSA will improve the SSI payment accuracy rate to 95.5 percent, up
from 94.8 percent in 1999.
Income Assistance to Families

• In 2000, FNS, together with State public
health agencies, will increase the incidence of breast-feeding among WIC mothers to 42 percent, compared to 34 percent
in 1996.

Major income assistance for low-income families is provided through the TANF program,
administered by the Department of Health
and Human Services Administration for Children and Families (ACF) and the Earned
Income Tax Credit, administered by the Internal Revenue Service. In addition, ACF administers the Child Support Enforcement Program
and the Child Care and Development Fund.
Other income security programs run by ACF
include refugee assistance and low-income
home energy assistance.

Child Nutrition Programs: The National
School Lunch and School Breakfast Programs
provide free or low-cost nutritious meals
to children in participating schools.

Temporary Assistance for Needy Families
(TANF): In the 1996 welfare reform law,
the President and Congress enacted TANF
as the successor to the 60-year-old Aid to

23.

INCOME SECURITY

Families with Dependent Children (AFDC)
program. TANF, for which the Federal Government allocates about $16.8 billion each year,
is designed to meet the President’s goal
of dramatically changing the Nation’s welfare
system into one that requires and rewards
work in exchange for time-limited assistance.
The TANF program gives States broad flexibility to set eligibility criteria and to determine
the types of assistance they provide. With
fewer families receiving cash assistance, States
can use the flexibility in TANF to help
low-income working families retain and advance in their jobs.
• The strong work focus of welfare reform
and the economy enabled ACF to meet its
goal of moving one million welfare recipients into new employment before its 2000
goal date. In 1997, States reported an average earnings increase of 23 percent for
former welfare recipients over a period of
two quarters. In 2001, ACF will work with
States to increase earnings for former welfare recipients by 30 percent.
• In 2001, ACF, in coordination with the
Health Care Financing Administration
(HCFA), will increase the percentage of eligible individuals who remain enrolled in
Medicaid or the Children’s Health Insurance Program (CHIP) six months after
leaving TANF.
Individual Development Accounts (IDAs):
The budget includes $25 million in grants
for IDAs, to empower low-income individuals
to save for a first home, postsecondary education, or to start a new business. ACF
selected sites to administer this program
in late 1999.
Child Support Enforcement: The Child Support Enforcement Program establishes and
enforces the support obligations owed by
noncustodial parents to their children. In
1998, the number of paternities established
rose to nearly 1.5 billion, and child support
collections have nearly doubled since the
President took office, to an estimated $15.5
billion in 1999. In 1999, the Federal Government provided $3.0 billion to State and
local governments to help them run the
program. The Federal Government retained
$1.3 billion in TANF-related collections from
the States, making the net cost of this

257
program to the Federal Government $1.7
billion. In 2001, estimated Federal costs net
of TANF collections will be $2.2 billion.
The budget includes several proposals to
increase child support collections and to direct
more of these payments to low-income families.
The budget proposes new measures to collect
child support from parents who owe pastdue support, and to bring delinquent noncustodial parents into compliance. The budget
would allow States to pay all child support
collected on behalf of former welfare families
directly to the family, and would provide
Federal matching funds for child support
that States pass-through to families receiving
welfare, above States’ current efforts. (For
a discussion of this budget’s child support
proposals, see Chapter 2, ‘‘Supporting Working
Families.’’)
• In 2001, ACF will increase the child support collection rate to 71 percent, compared to 51 percent in 1998.
Child Care: The Child Care and Development Fund provides grants to States for
the purposes of providing low-income families
with financial assistance for child care, improving the quality and availability of child
care, and establishing, expanding, or conducting early childhood development programs
and before- and after-school programs. Federal
child care funding has more than doubled
under this Administration, providing child
care services in 1999 for approximately 1.75
million children from low-income working families or whose parents are moving from
welfare to work.
The budget proposes a 2001 increase of
$817 million for child care subsidies as well
as a new $600 million Early Learning Fund
to provide grants to communities to improve
school readiness by fostering the cognitive,
physical, social, and emotional development
of children under five years old. For the
proposed Early Learning Fund, ACF will
evaluate the range of school readiness activities funded and will work with the Department
of Education and the States to establish
performance goals and indicators that focus
on educational outcomes and quality factors,
such as provider training and low childto-staff ratios, that are associated with enhanced school readiness.

258
Access to high-quality, affordable child care
is critical to the achievement of self-sufficiency
by TANF recipients and low-income working
families. Over the past year, ACF has worked
with States to develop a new set of performance measures and ACF will continue to
collect baseline data for the program’s goals
of increasing access to affordable care and
improving the quality of care to promote
children’s development. For example, in order
to increase access to affordable care, ACF
aims to decrease the average percentage
of family income spent on child care copayments by families receiving Federal subsidies. In order to improve the quality of
care, ACF will increase the number of facilities
that are accredited by a nationally recognized
early childhood development professional organization.
• In 2001, the Child Care and Development
Fund, including new funds, will provide
child care assistance to an estimated
300,000 additional low-income children
over the 1.92 million children estimated
to receive assistance in 2000.
Child and Dependent Care Tax Credit
(DCTC): The DCTC helps approximately six
million families cover their child care costs
each year. Under current law, taxpayers
may receive a nonrefundable tax credit for
a percentage of certain child care expenses
they pay in order to work. The budget
proposes to increase the credit amount for
middle-income families and to make the DCTC
refundable beginning in 2003 so that for
the first time low-income working families
will be able to receive the maximum credit.
In addition, this proposal would provide assistance to parents who care for their infants
themselves and would simplify eligibility by
eliminating the household maintenance test.
Earned Income Tax Credit (EITC): The
EITC, a refundable tax credit for low-income
workers, has two broad goals: (1) to encourage
families to move from welfare to work by
making work pay; and (2) to reward work
so parents who work full-time do not have
to raise their children in poverty. In 1999,
the EITC provided $30.5 billion in credits
for low-income tax filers, including spending
on both tax refunds and reduced tax receipts.
For every dollar that low-income workers

THE BUDGET FOR FISCAL YEAR 2001

earn—up to certain limits—they receive between seven and 40 cents as a tax credit.
In 1999, the EITC provided an average
credit of nearly $1,600 to 19 million workers
and their families. In 2001, an estimated
19 million families will receive an average
credit of $1,680.
This budget includes a 10-year, $23.6 billion
proposal to expand the EITC to provide
tax relief for 6.8 million working families
by increasing the credit received by larger
families, providing marriage penalty relief,
and reducing marginal tax rates. This proposal
would increase the maximum credit for families with three or more children by approximately $500 in order to help roughly 2.1
million low- and moderate-income families.
Approximately 5.4 million families with two
or more children would also benefit from
a slower phaseout rate, so parents could
keep more of what they earn even as their
earnings increase. The proposal would also
provide marriage penalty relief for two-earner
couples in the form of an average credit
increase of $250. In addition, the proposal
would simplify the rules for counting nontaxable earned income. (For a more detailed
description of the proposal, see Chapter 2,
‘‘Supporting Working Families.’’)
Unemployment Compensation
Unemployment Compensation, overseen by
the Department of Labor’s Employment and
Training Administration, provides benefits to
individuals who are temporarily out of work
through no fault of their own and whose
employer has previously paid payroll taxes
to the program. The State payroll taxes
finance the basic benefits out of a dedicated
trust fund. States set benefit levels and
eligibility criteria; benefits are not meanstested and are taxable. Regular benefits are
typically available for up to 26 weeks of
unemployment. In 1999, about 7.2 million
persons claimed unemployment benefits that
averaged $202 weekly. In 2001, an estimated
7.8 million persons will receive an average
benefit of $219 a week.
• In 2001, DOL’s goal is that all States will
meet the Secretary’s standard for promptness in paying worker claims by providing
92 percent of initial intrastate payments

23.

259

INCOME SECURITY

and 81 percent of interstate payments
within 14 days in States with a waiting
period and within 21 days in States without a waiting period. In 1999, 90 percent
of States met the intrastate standard and
78 percent met the interstate standard.
Effects of Income Security Programs
Federal safety net programs have a major
effect on reducing poverty. Chapter 24, ‘‘Social
Security,’’ explores the impact of Social Security alone on the income and poverty of
the elderly. This section looks at the cumulative impact across the major programs.
For purposes of this discussion, Government
benefits includes both means-tested and social
insurance benefits. Means-tested benefits include TANF, SSI, certain veterans pensions,
Food Stamps, child nutrition meals subsidies,
rental assistance, and State-funded general
assistance. Medicare and Medicaid greatly
help eligible families who need medical services during the year, but experts do not
agree about how to value Medicare or Medicaid
coverage as additional income to beneficiaries.
Consequently, those benefits are not included
in the analysis that follows. Social insurance
benefits include Social Security, railroad retirement, veterans compensation, unemployment compensation, Pell Grants, and workers’
compensation. The definition of income for
this discussion (cash and in-kind benefits),
and the notion of pre- and post-Government
transfers, do not match the Census Bureau’s
definitions for developing official poverty statistics. Census counts income from cash alone,
including Government transfers.
Reducing Numbers of People in Poverty:
Based on special tabulations from the March
1999 Current Population Survey (CPS), 54.5
million people were poor in 1998 before
accounting for the effect of Government programs. After accounting for Government transfer programs and taxes, the number of poor
fell to 28.4 million, a drop of nearly 50
percent.
Reducing
gap is the
of all poor
line. Before
the poverty

the Poverty Gap: The poverty
amount by which the incomes
people fall below the poverty
counting Government benefits,
gap was $200 billion in 1998.

Benefits from Government programs cut it
by $134 billion, or 67 percent.
Employee Retirement Benefits
Railroad Retirement Benefits: The Railroad
Retirement Board administers retirement, survivor, unemployment and sickness insurance
benefits for qualified railroad workers and
their families. In 1999, about $8.2 billion
in retirement-survivor benefits were paid to
about 748,000 individuals, while about $95
million in unemployment and sickness benefits, net of current-year recoveries, were paid
to some 33,800 individuals. At the end of
1999, the average monthly benefit paid to
a retired employee was $1,344; the maximum
biweekly rate for unemployment and sickness
benefits was $460.
Rail employment is not covered under the
Social Security program, though some beneficiaries may have other employment that
makes them eligible for benefits under the
Social Security Old Age, Survivor and Disability Insurance programs. While the railroad
retirement system has remained separate from
the Social Security program, the two systems
are similarly structured and closely coordinated with regard to earnings credits, benefit
payments, and taxes. (For a discussion of
the Social Security program, see Chapter
24, ‘‘Social Security.’’)
Federal Employee Retirement Benefits: The
Civil Service Retirement and Disability Program provides a defined benefit pension for
1.9 million Federal civilian employees and
800,000 U.S. Postal Service employees. In
1999, the program paid $44 billion in benefits
to 1.7 million retirees and 630,000 survivors.
Along with the defined benefit, employees
can participate in a defined contribution
plan—the Thrift Savings Plan (TSP). Employees hired since 1983 are also covered by
Social Security. The budget proposes to repeal
the higher employee retirement contributions
required by the Balanced Budget Act of
1997, and again proposes to allow Federal
employees to participate immediately in, and
to roll over private sector accounts into,
the TSP.
• From 1993 to 1999, customer service and
satisfaction with the retirement program
have improved significantly. For example,

260

THE BUDGET FOR FISCAL YEAR 2001

average processing times have been cut
from nine days to three days for interim
annuity payments, from 51 days to 32
days for CSRS final annuity payments,
and from 31 days to 14 days for CSRS
survivor annuity payments. Annuitant satisfaction with various services has improved from the 70 to 80 percent range
to nearly 90 percent or greater. The goal
is to maintain or improve each of these
performance goals in 2001.
Private Pensions: The Department of Labor’s
Pension and Welfare Benefits Administration
(PWBA) establishes and enforces safeguards
to protect the roughly $4.3 trillion in pension
assets. Private pension plans currently list
more than 91 million participants, including
both workers and retirees. Also at the Department of Labor, the Pension Benefit Guaranty
Corporation (PBGC) protects the pension benefits of about 42 million workers and retirees
who earn traditional (i.e., ‘‘defined benefit’’)
pensions. Through its early warning program,
PBGC also works with solvent companies
to more fully fund their pension promises,
and has protected the benefits of more than
two million people since its inception eight
years ago. The budget proposes a new, simplified defined benefit plan for small businesses that PBGC will insure. The budget
also proposes an initiative whereby PWBA
will intercede to protect pension benefits
for employees whose employers file for bankruptcy. In 2001:
• PWBA will recover more benefits through
customer assistance—an estimated $54

million compared to $15 million in 1995.
Also, PWBA will more speedily process the
exemptions that allow certain financial
transactions that are needed by pension
plans, reducing the time taken to 200
days, a 17-percent improvement from the
1999 average of 242 days.
• PBGC will more quickly complete setting
dollar levels for benefits in the pension
plans it takes over. These benefits must
be calculated differently for different
former employees. (Retirees receive an estimated amount until the process is complete.) The time taken for final calculation
will drop to between three and four years,
down from an average of six years in 1997.
Tax Treatment of Retirement Savings: The
Federal Government encourages retirement
savings by providing income tax benefits.
Generally, earnings devoted to workplace pension plans and to many traditional individual
retirement accounts (IRAs) receive beneficial
tax treatment in the year earned and ordinarily are taxed only in retirement, when
lower tax rates usually prevail. Moreover,
taxpayers can defer taxes on the interest
and other gains that add value to these
retirement accounts. For the newer Roth
IRA accounts, contributions are made from
after-tax earnings, with no tax deduction.
However, account earnings are free from
tax when the account is used in retirement.
All the pension and retirement-saving tax
incentives amount to $115 billion in 2001—
decidedly the largest set of preferences in
the income tax system.

24.
Table 24–1.

SOCIAL SECURITY

Federal Resources in Support of Social Security
(In millions of dollars)

Function 650

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Tax Expenditures:
Existing law ...................................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

3,156

3,175

3,451

3,452

3,492

3,580

3,658

386,991
..............

403,332
..............

422,167
..............

442,982
64

465,299
113

489,685
144

516,232
153

23,300

24,505

25,765

27,295

28,990

30,760

23,290

The Old-Age, Survivors, and Disability Insurance (OASDI) programs, commonly known
as Social Security, are crucial to the economic
well-being of tens of millions of Americans.
Social Security will spend $426 billion in
2001 to provide 45 million beneficiaries with
comprehensive protection against loss of income due to the retirement, disability or
death of a wage earner.
Social Security provides monthly benefits
to retired and disabled workers who gain
insured status and to their eligible spouses,
children, and survivors. The Social Security
Act of 1935 provided retirement benefits,
and the 1939 amendments provided benefits
for survivors and dependents. These benefits
now comprise the Old Age and Survivors
Insurance (OASI) program. Congress provided
benefits for disabled workers by enacting
the Disability Insurance (DI) program in
1956 and added benefits for the dependents
of disabled workers in 1958. Nearly one
third of Social Security beneficiaries are disabled workers and their families, or survivors
of deceased workers (see Table 24–2).
DI provides income security for workers
and their families when workers lose their
capacity to work due to disability. Before
DI, workers often had no such protection,
although in some cases employees whose
injuries were job-related may have received

State worker’s compensation benefits. Congress enacted DI to protect the resources,
self-reliance, and self-respect of those suffering
from non-work-related disabilities. DI protection can be extremely valuable, especially
for young families who are unable to sufficiently protect themselves against the risk
of the worker’s disability.
The Government will collect $508 billion
in Social Security taxes in 2001. These taxes
will be credited to the OASI and DI trust
funds, along with $68 billion of interest
on Treasury securities held by the trust
funds.
In 1999, Social Security paid out a total
of $383 billion to more than 44 million
beneficiaries. These payments included $257
billion in benefits to 31 million retired workers
and their families and about $75 billion
in benefits to seven million survivors of
deceased workers. Through the DI program,
Social Security paid $50 billion in benefits
to more than six million disabled workers
and their families.
Many beneficiaries would face a high risk
of poverty without the income protection
provided by Social Security. When President
Roosevelt signed Social Security into law,
most seniors were poor. Since then, Social
Security benefits have significantly improved
the well-being of the Nation. The poverty
261

262

THE BUDGET FOR FISCAL YEAR 2001

Table 24–2.

Millions Benefit from Social Security
(Thousands of OASDI Beneficiaries)
2001
Estimate

Retired workers and families:
Retired workers .........................................................................................................................................
Wives and husbands .................................................................................................................................
Children .....................................................................................................................................................

28,174
2,797
442

Survivors of deceased workers:
Children .....................................................................................................................................................
Widowed mothers and fathers with child beneficiaries in their care ...................................................
Aged widows and widowers, and dependent parents ............................................................................
Disabled widows and widowers ...............................................................................................................

1,899
202
4,799
194

Disabled workers and families:
Disabled workers ......................................................................................................................................
Wives and husbands .................................................................................................................................
Children .....................................................................................................................................................

5,158
172
1,496

Total .............................................................................................................................................................

45,333

rate among the elderly declined from 29.5
percent in 1967 to 10.5 percent in 1998,
in large part due to Social Security.
Social Security was founded on two important principles: social adequacy and individual
equity. Social adequacy means that benefits
will provide a certain standard of living
for all contributors. Individual equity means
that contributors receive benefits directly related to the amount of their contributions.
These principles still guide Social Security
today.
Before Social Security, about half of those
over 65 depended on others, primarily relatives
and friends, for all of their income. The
same was often true for people with disabilities. Today, nearly two thirds of those over
age 65 get at least half of their income
from Social Security (see Chart 24–1). Social
Security benefits account for 38 percent of
all income that goes to the elderly population.
For an average-wage worker retiring in 1999,
Social Security replaced about 40 percent
of his or her pre-retirement earnings. With
Social Security, the vast majority of those
over age 65 and those with disabilities can
live relatively independent lives. Moreover,
their families no longer carry the sole responsibility of providing their financial support.
Social Security is especially important for
women, who make up nearly 60 percent

of all Social Security beneficiaries, and 72
percent of all beneficiaries over age 85.
Many women beneficiaries are entitled as
spouses of retirees or survivors of deceased
workers. Social Security plays a larger role
in women’s retirement income than men’s
in part because women live longer on average,
and the inflation-indexing of Social Security
benefits protects their buying power over
time. Women also tend to have lower lifetime
earnings than men, and the progressive nature
of the Social Security benefit formula enhances
the role of these benefits in women’s retirement income. Finally, women are less likely
than men to retire with private pensions.
While the differences between men’s and
women’s work patterns and earnings are
expected to shrink in the next few decades,
they are not expected to disappear entirely.
For all of these reasons, Social Security
makes up a larger share of retirement income
for women than it does for men, and women
are more likely to rely on Social Security
for all of their retirement income (see Table
24–3).
The Long-Range Challenge
Social Security is designed to be selffinanced; its most important revenue source
is the payroll tax. Right now, the Social
Security trust funds are expected to run
a cash surplus until 2014. Current economic
and demographic forecasts indicate, however,

24.

263

SOCIAL SECURITY

Chart 24-1. Share of OASI Beneficiaries Who Relied on
Social Security for a Given Portion of Their Income, 1998

100% of Income
(18% of Beneficiaries)

Less than 50% of Income
(37% of Beneficiaries)

90-99% of Income
(12% of Beneficiaries)

50-89% of Income
(33% of Beneficiaries)

Table 24–3.

Social Security is Crucial to Retirement Income

(Percentage of those over age 65 who relied on Social Security for their entire
income, 1996)
Social Security is
sole income source

Unmarried women ...........................................................................................
Unmarried men .................................................................................................
Married couples .................................................................................................

that cash revenues will fall short of expenditures after that time, and the trust funds
will exhaust their assets in 2034 unless
corrective action is taken. After 2034, payroll
taxes are projected to cover 71 percent of
benefits. Social Security is largely ‘‘pay-asyou-go,’’ meaning current retirement benefits
are financed by current payroll contributions.
However, pressure on the financing system
is growing due to two demographic factors:
members of the baby boom and subsequent
generations are having fewer children and

25%
20%
9%

are predicted to have longer life spans than
previous generations. The consequence of these
trends is that the ratio of workers paying
into the system for each beneficiary will
decline—from 3.4 workers per beneficiary in
2000 to a projected two workers per beneficiary in 2034 (see Chart 24–2). Another
source of pressure on the trust funds is
the rapid growth of the DI program, which
is expected to accelerate as baby boomers
reach the age at which they are increasingly
prone to disabilities.

264

THE BUDGET FOR FISCAL YEAR 2001

The President proposes to ensure the longrange viability of Social Security through
a combination of bipartisan reforms and by
transferring new resources to the Social Security trust funds. For further discussion of
the long-range issues facing Social Security
and the President’s plan for addressing them,
see Section III, ‘‘Sustaining Our Economic
Prosperity.’’
Social Security Administration (SSA)
To operate a program of this magnitude,
both in terms of the dollar amounts involved
and the size of the population served, requires
an efficient and responsive administrative
structure. SSA, which administers the OASI
and DI programs, touches the lives of millions
of Americans every year. SSA also runs
the Supplemental Security Income (SSI) program for low-income aged and disabled individuals, which is part of the Income Security
function (see Chapter 23). In addition, the
agency provides services that support the

Medicare program on behalf of the Health
Care Financing Administration, which is part
of the Medicare function (see Chapter 22).
SSA undertakes a variety of activities in
administering its programs. These activities
include issuing Social Security numbers, maintaining earnings records for wage earners
and self-employed individuals, taking claims
for benefits and determining eligibility, updating beneficiary eligibility information, educating the public about the programs, combating fraud, and conducting research, policy
analysis and program evaluation. These activities are largely integrated across the various
programs, allowing the agency to minimize
duplication of effort and provide one-stop
service to customers. SSA has also undertaken
significant automation initiatives, which has
enabled the agency to handle growing workloads even as its full-time equivalent staff
declined by 19,000 between 1983 and 2000.

Chart 24-2. Covered Workers per Social Security Beneficiary
Worker/Beneficiary Ratio
4
3.5
3
2.5
2
1.5
1
0.5
0
1999

2005

2011

2017

2023

2029

2035

2041

2047

2053

2059

2065

2071 2075

24.

SOCIAL SECURITY

SSA has consistently earned high marks
for management of its programs. In 1999,
SSA earned an overall ‘‘A’’ grade in a comprehensive study of government management
conducted by the Maxwell School of Citizenship and Public Affairs at Syracuse University
and Government Executive magazine. The
study graded all 50 State governments and
15 Federal agencies on the management systems critical to effective public service. SSA
was awarded the highest marks among Federal agencies surveyed.
SSA’s Performance Plan for 2001 includes
a number of performance indicators that
reflect the agency’s goals of responsive programs, good customer service, efficiency and
program integrity, and strengthening public
understanding of Social Security. Like the
agency’s administrative activities, these goals
cut across programs. SSA’s broad goals and
related performance measures for 2001 are
described below.
Promoting responsive programs: SSA recognizes that its programs must reflect the interests of beneficiaries and society as a whole.
Programs must evolve to reflect changes in the
economy, demographics, technology, medicine,
and other areas. Many DI and SSI beneficiaries with disabilities, for example, want to
be independent and work. Many of them can
work, despite their impairments, if they receive the support they need. Yet less than one
percent of disabled beneficiaries in any given
year actually leave SSA’s programs due to
work. One of SSA’s strategic objectives is to
shape the disability program in a manner that
increases self-sufficiency.
• In 2001, the number of DI beneficiaries
entering a trial work period will increase
to 19,200, which is 20 percent more than
the 1997 baseline of 16,000.
Last year, the President’s budget included,
and Congress enacted, the Ticket to Work
and Work Incentives Improvement Act to
help disabled beneficiaries enter or re-enter
the workforce. This new law expands beneficiaries’ choice of employment service providers, allows persons with disabilities to
keep or obtain Federal health benefits when
they enter, re-enter, or remain in the workforce, and authorizes SSA to carry out demonstration projects to identify effective ways

265
to help DI beneficiaries return to work.
SSA began implementation of the new law
in 2000, and the budget includes funding
to continue and build on these activities
in 2001.
Improving customer service delivery:
Roughly three-quarters of SSA’s total administrative budget is devoted to the day-to-day
work generated by requests for service from
the general public. Much of this work takes
the form of determining eligibility for benefits.
The time required to process benefit claims
is affected by the design of the eligibility determination procedure, as well as by the level
of resources earmarked for claims-processing
activities and the number of claims received.
• In 2001, the average processing time for
initial disability claims will be 117 days,
an increase from an estimated 104 days
in 1999.
Improving SSA’s disability claims process
is one of the Administration’s Priority Management Objectives for 2001. SSA is operating
a streamlined disability eligibility determination process on a prototype basis in 10
States. In the prototype, SSA eliminated
a repetitive second step in the process and
used the resulting administrative savings to
improve the initial step of the process.
While initial claims are expected to take
a little longer in the new process, the elimination of the second step will substantially
shorten the overall process for most claimants.
The accuracy rate of initial decisions is
also expected to improve. SSA’s Office of
Hearings and Appeals is also implementing
changes to improve efficiency and reduce
case processing times.
• In 2001, the average processing time for
all types of hearings will be 208 days,
down from 316 days in 1999.
In combination, the changes at the initial
and hearings stages are expected to improve
service and decision accuracy, and reduce
overall processing times for disability claimants. Because the new disability claims process
will not be fully implemented in 2001, further
improvements in agency performance are expected in future years.

266
• SSA will maintain its current performance
level of processing 83 percent of OASI
claims by the time the first regular payment is due or within 14 days from the
effective filing date, if later.
• SSA will ensure that callers gain access
to the toll-free 800 number within five
minutes of their first call 92 percent of
the time, which is equivalent to the projected access rate for 2000.
Increasing operational efficiency and
program integrity: The budget includes approximately $1.7 billion for activities undertaken by SSA to ensure the integrity of records
and payments. These activities include reviewing claimants’ eligibility for continued benefits,
collecting debt, detecting overpayments, and
investigating and deterring fraud.
• In 2001, SSA will maintain its current
performance level of a 99.8 percent accuracy rate for OASI payments.
SSA is in the midst of a seven-year plan
to eliminate the backlog of Continuing Disability Reviews (CDRs) that built up prior
to 1996. SSA expects to complete 63 percent
of its plan by the end of 2000. This concentrated effort helps increase public confidence in the integrity of SSA’s disability
programs by ensuring that only people who
continue to be disabled receive benefits. Over
the life of the plan, SSA expects to realize
program savings of about $6 for each $1

THE BUDGET FOR FISCAL YEAR 2001

spent conducting CDRs. The budget includes
the funds necessary to keep the plan on
schedule.
• By the end of 2001, SSA will have completed 83 percent of its plan for eliminating the backlog of Continuing Disability Reviews. SSA expects to eliminate
the backlog entirely in 2002.
Strengthening public understanding of
Social Security programs: The budget includes more than $100 million for the development, production and distribution of products
to educate the public about Social Security
benefits and Social Security’s larger impact on
society. SSA conducts an annual survey to
measure public understanding of Social Security programs and issues and undertakes a variety of activities to increase public awareness.
• In 2001, 70 percent of the public will be
knowledgeable about Social Security programs, an increase of 15 percentage points
above the 1999 baseline of 55 percent.
Tax Expenditures
Social Security recipients pay taxes on
their Social Security benefits only when their
overall income, including Social Security, exceeds certain income thresholds. The exclusion
of Social Security income below these thresholds reduces total income tax revenue by
$26 billion in 2001 and $136 billion from
2001 through 2005.

25.

VETERANS BENEFITS AND SERVICES

Table 25–1.

Federal Resources in Support of Veterans Benefits and
Services
(In millions of dollars)

Function 700

Spending:
Discretionary Budget Authority 1
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

19,261

20,913

22,061

22,061

22,328

22,878

23,382

23,838
..............

25,075
1,800

25,589
–1,484

26,292
772

27,641
1,020

28,395
1,490

30,989
1,951

1,660
43,091

2,003
32,136

659
29,548

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

3,120

3,265

3,405

3,545

3,710

3,880

4,065

N/A = Not available.
1 VA’s total available discretionary resources for 2001 will be $380 million higher than shown because of
discretionary changes in mandatory accounts.

The Federal Government provides benefits
and services to veterans and their survivors
of conflicts as long ago as the SpanishAmerican War recognizing the sacrifices of
war- and peacetime veterans during military
service. The Federal Government spends over
$46 billion a year on veterans benefits and
services, including medical care to low-income
and disabled veterans and education and
training for veterans reentering civilian life.
In addition, veterans benefits provide financial
assistance to needy veterans of wartime service and their survivors, and over $3 billion
in tax benefits to compensate veterans and
their survivors for service-related disabilities.
About seven percent of veterans are military
retirees who can receive either military retirement from the Department of Defense (DOD)
or veterans benefits from the Department
of Veterans Affairs (VA). Active duty military
personnel are eligible for veterans housing
benefits, and they can contribute to the
Montgomery GI Bill (MGIB) program for
education benefits that are paid later. VA
employs 21 percent of the Federal Government’s non-DOD work force—approximately

220,000 people, about 195,000 of whom deliver
or support medical services to veterans.
VA’s mission is ‘‘to administer the laws
providing benefits and other services to veterans and their dependents and the beneficiaries of veterans. To serve America’s veterans and their families with dignity and
compassion and be their principal advocate
in ensuring that they receive medical care,
benefits, social support, and lasting memorials
promoting the health, welfare and dignity
of all veterans in recognition of their service
to this Nation.’’
The veteran population continues to decline
and age (see Chart 25–1). The types of
benefits and services needed by veterans
likely will change as the population ages.
Further, as the veteran population shrinks
and technology improves, access to, and the
quality of service should continue to improve.
Medical Care
VA provides health care services to 3.3
million veterans through its national system
of 22 integrated health networks, consisting
267

268

THE BUDGET FOR FISCAL YEAR 2001

of 172 hospitals, 691 ambulatory clinics, 140
nursing homes, 87 domiciliaries, and 206
vet centers. VA is an important part of
the Nation’s social safety net because almost
half of its patients are low-income veterans
who might not otherwise receive care. It
also is a leading health care provider for
veterans with substance abuse problems, mental illness, HIV/AIDS, and spinal cord injuries
because private insurance usually does not
fully cover these conditions.
Millennium Act
The President signed the Veterans Millennium Health Care and Benefits Act (Public
Law. 106–117) on November 30, 1999. This
comprehensive legislation improves a broad
array of health services for our Nation’s
veterans. It firmly establishes a high priority
for nursing home care to the most severely
disabled veterans and those needing nursing
home care for a service-connected disability,
and enhances VA’s home and community

based extended care programs. The legislation
authorizes VA to reimburse certain veterans
as payor of last resort for emergency care,
expands programs for homeless veterans and
sexual trauma counseling, expands enhanceduse leasing authority, and enhances other
VA medical programs.
VA’s core mission is to meet the health
care needs of veterans who have compensable
service-connected injuries or very low incomes.
By law, these core veterans are the highest
priority for available Federal dollars for health
care. VA may provide care to lower-priority
veterans if resources allow after it meets
the needs of higher-priority veterans. Since
1997, VA has pursued its ‘‘30/20/10’’ goal
to reduce the cost per patient (inflation
adjusted) by 30 percent from the 1997 level
of $5,458; to increase the number of patients
treated by 20 percent from the 1997 level
of 3,142,075; and, to increase resources from
outside sources to 10 percent of the total

Chart 25-1. Estimated Veteran Population
Veterans in millions

28

27.3
26.5
25.2

26

23.5

24

21.8
22

20
20

18

0
1990

1994

1998

2002

2006

2010

25.

VETERANS BENEFITS AND SERVICES

operating budget from less than one percent
in 1997.
In recent years, VA has reorganized its
field facilities from 172 largely independent
medical centers into 22 Veterans Integrated
Service Networks (VISNs), charged with providing veterans the full continuum of care.
Recent legislation eased restrictions on VA’s
ability to contract for care and share resources
with DOD hospitals, State facilities, and
local health care providers.
Veterans Health Administration
VA’s efforts in reengineering its health
care program have resulted in significant
reductions in the cost per patient treated
over the last five years (1994–1999) while
quality of care increased. Reengineering efforts
within the Veterans Health Administration
(VHA) included restructuring veterans’ health
care (to include the organizational, financial
and management change associated with the
VISNs), shifting care to more appropriate
care settings (with an emphasis on primary
care) and implementing clinical and administrative efficiencies including consolidations and
integrations. More specifically, since 1993/
1994:
• patients treated per year increased by over
29 percent (from 2.8 to 3.6 million—includes veterans and non-veterans). Further, 83 percent more homeless patients
were treated in 1999 compared to 1993;
• annual inpatient admissions decreased 35
percent (317,688 fewer admissions) by
1999 while ambulatory care visits increased by 50 percent to 37.7 million (12.6
million increase);
• approximately 1,300 sites of care delivery
have been organized under 22 Veterans
Integrated Service Networks; and,
• over 250 new community-based outpatient
clinics have been established.
Because of VHA’s increased emphasis on
service delivery and access, the following
specific performance goals have been developed:

269
• Increase the percentage of patients who
receive an initial or first-time appointment
with their primary care or other appropriate provider within 30 days (baseline
will be 2000; strategic goal is 95 percent).
• Increase the percentage of patients who
receive a specialty appointment when referred by a primary care provider within
30 days (baseline will be 2000; strategic
goal is 95 percent).
• Increase the percentage of patients who
are seen within 20 minutes of their scheduled appointment to 79 percent in 2001
from a l997 baseline of 55 percent (to 75
percent in 2000; strategic goal is 90 percent).
Also, VA formed partnerships with the
National Committee on Quality Assurance,
the American Hospital Association, the American Medical Association, the American Nurses
Association, and other national associations
to ensure quality patient care. The Chronic
Disease Care Index measures VA physicians’
adherence to established industry practice
guidelines for key diseases affecting veterans.
Similarly, the Prevention Index measures adherence to disease prevention and screening
guidelines. VA plans to:
• increase the scores on the Chronic Disease
Care Index to 95 percent by 2001 from
the 1997 level of 76 percent; and,
• increase the scores on the Prevention
Index to 90 percent by 2001 from the 1997
level of 67 percent.
Medical Research: VA’s research program
provides $321 million to conduct basic, clinical,
epidemiological, and behavioral studies across
the spectrum of scientific disciplines, seeking
to improve veterans medical care and health
and enhance our knowledge of disease and disability. If all funding sources are included, VA
spends more than $1 billion on research. In
2001, VA will focus its research efforts on
aging, chronic diseases, mental illness, substance abuse, sensory loss, trauma-related impairment, health systems research, special
populations (including Persian Gulf War veterans), and military occupational and environmental exposures.

270
• In 2001, VA will maintain its standard
that at least 99 percent of funded research
projects will be reviewed by appropriate
peers and selected through a merit-based
competitive process.
Health Care Education and Training:
The Veterans Health Administration (VHA) is
the Nation’s largest trainer of health care professionals. About 91,000 students and residents a year get some or all of their training
in VA facilities through affiliations with over
1,200 educational institutions. The program
trains medical, dental, nursing, and related
health professionals to ensure an adequate
supply of clinical care providers for veterans
and the Nation. The program will continue to
realign its academic training and update its
curriculum, focusing more on primary care to
meet more effectively the needs of the VHA
and its patients, students, and academic partners.
• By 2001, 48 percent of VA’s residents will
be trained in primary care from the 1997
level of 39 percent.
Veterans Benefits Administration (VBA)
VBA processes veterans’ claims for benefits
in 58 regional offices across the country.
As the veteran population declines, generally
the number of new compensation and pension
claims and appeals from veterans is expected
to decline. VBA anticipates a slight increase
in new claims from survivors and claims
for burial benefits. Since 1993, VBA has
realigned 58 regional offices into nine service
delivery networks. It has established nine
Regional Loan Centers and four Regional
Processing Offices for education claims in
an effort to improve efficiency and quality
of services to its customers. VBA has also
taken steps to integrate information technology into claims processing to improve
timeliness and quality of service delivery.
It has also implemented a ‘‘balanced scorecard,’’ a tool that has helped management
to weigh the importance of and measure
progress toward meeting VBA’s strategic goals,
which include:
• improving responsiveness to customers’
needs and expectations;

THE BUDGET FOR FISCAL YEAR 2001

• improving service delivery and benefit
claims processing; and,
• ensuring best value for the available taxpayers’ dollar.
VBA monitors its performance in deciding
disability benefits claims through measures
of accuracy, customer satisfaction, processing
timeliness, and unit cost. The following key
measures have been established for disability
claims requiring a rating:
• In 2001, VA will process rating-related disability claims in 142 days (from 166 days
in 1999; strategic goal is 74 days).
• In 2001, VA will improve its rating accuracy (for core rating work) to 85 percent
(from 68 percent in 1999; strategic goal
is 96 percent).
Income Security
Several VA programs help veterans and
their survivors maintain their income when
the veteran is disabled or deceased. The
Federal Government will spend over $23
billion for these programs in 2001, including
the funds the Congress approves each year
to subsidize life insurance for veterans who
are too disabled to get affordable coverage
from private insurers. Veterans may receive
these benefits in addition to the income
security benefits available to all Americans,
such as Social Security and unemployment
insurance. VBA is developing outcome goals
for the compensation and pension programs.
Compensation: Veterans with disabilities
resulting from, or coincident with, military
service receive monthly compensation payments based on the degree of disability. The
payment does not depend on a veteran’s income or age or whether the disability is the
result of combat or a natural-life affliction. It
does depend, however, on the average fall in
earnings capacity that the Government presumes for veterans with the same degree of
disability. Survivors of veterans who die from
service-connected injuries receive payments in
the form of dependency and indemnity compensation. Compensation benefits are indexed
annually by the same cost-of-living adjustment
(COLA) as Social Security, which is an estimated 2.5 percent for 2001.

25.

VETERANS BENEFITS AND SERVICES

The number of veterans and survivors
receiving compensation benefits will total an
estimated 2.6 million in 2001. While the
veteran population will decline, the compensation caseload is expected to remain relatively
constant due to changes in eligibility and
better outreach efforts. COLAs and increased
payments to aging veterans will increase
compensation spending by about $3 billion
from 2001 to 2005.
Pensions: The Government provides pensions to lower-income, wartime-service veterans or veterans who became permanently
and totally disabled after their military service. Survivors of wartime-service veterans may
qualify for pension benefits based on financial
need. Veterans pensions, which also increase
annually with COLAs, will cost over $3 billion
in 2001. The number of pension cases will continue to fall from an estimated 616,000 in 2001
to less than 555,000 in 2005 as the number
of veterans declines.
Insurance: VA has provided life insurance
coverage to service members and veterans
since 1917 and now directly administers or supervises eight distinct programs. Six of the
programs are self-supporting, with the costs
covered by policyholders’ premium payments
and earnings from Treasury securities investments. The other two programs, designed for
service-disabled veterans, require annual congressional appropriations to meet the claims
costs. Together, these eight programs will provide $447 billion in insurance coverage to over
4.4 million veterans and service members in
2001. The program provides insurance protection to veterans who cannot purchase commercial policies at standard rates because of their
service-connected disabilities. The program is
designed to provide disbursements (e.g., death
claims, policy loans, and cash surrenders)
quickly and accurately, meeting or exceeding
customers’ expectations.
Veterans’ Education, Training, and
Rehabilitation
Several Federal programs support job training and finance education for veterans and
others. The Department of Labor runs several
programs for veterans. In addition, several
VA programs provide education, training, and
rehabilitation benefits to veterans and military

271
personnel who meet specific criteria. These
programs include the Montgomery GI bill—
which is the largest—the post-Vietnam-era
education program, the Vocational Rehabilitation and Employment (VR&E) program, and
the Work-Study program. Spending for all
these VA programs will total an estimated
$1.7 billion in 2001. One of the program’s
goals is:
• In 2001, VA will increase to 70 percent
the number of VR&E participants who acquire and maintain suitable employment
and are considered to be rehabilitated
(from the 1999 level of 53 percent; strategic goal of 70 percent will be achieved
in 2001).
The Montgomery GI Bill (MGIB): The
Government originally created MGIB as a test
program, with more generous benefits than the
post-Vietnam-era education program, to help
veterans move to civilian life and to help the
Armed Forces with recruitment. Service members who choose to enter the program have
their pay reduced by $100 a month in their
first year of military service. VA administers
the program and pays basic benefits once the
service member becomes eligible. Basic benefits available now total over $19,000 per recipient.
MGIB beneficiaries receive a monthly check
based on whether they are enrolled as fullor part-time students. They can get 36 months
worth of payments, but they must certify
monthly that they are in school. DOD may
provide additional benefits to help recruit
certain specialties and critical skills. Nearly
310,000 veterans and service members will
use these benefits in 2001. The MGIB also
provides education benefits to reservists while
they are in service. DOD pays these benefits,
and VA administers the program. In 2001,
over 70,000 reservists will use the program.
Over 90 percent of MGIB beneficiaries use
their benefits to attend a college or university.
VA has set the following goal:
• In 2001, VA will increase the usage rate
of eligible veterans in the MGIB to 60 percent (from 53 percent in 1997; strategic
goal is 70 percent).

272
Veterans’ Housing
• In 2001, VA will guarantee an estimated
250,000 loans totaling $29.5 billion. Approximately 80 percent of these loans will
have no downpayment, with over half
going to first-time homebuyers. The Federal Government will spend an estimated
$332 million in 2001 on this program. This
represents the subsidy necessary to help
offset costs due to foreclosures, as well as
administrative expenses.
Avoiding foreclosure is critical to VA and
veterans. VA’s goal is to reduce the likelihood
of foreclosure through aggressive intervention
actions when loans are referred to VA as
a result of three payments in default. Costs
to the government are reduced when VA
is able to pursue an alternative to foreclosure.
Veterans are helped either by saving their
home or avoiding the expense and damage
to their credit rating caused by foreclosure.
• In 2001, of the loans headed for foreclosure, VA will be successful 40 percent
of the time in ensuring that veterans retain their homes (from the 1998 level of
37 percent). (See Chapter 17, Commerce
and Housing Credit for more information
on mortgage credit).
As part of a continuing effort to reduce
administrative costs, in addition to restructuring and consolidations, VA is conducting
a study of the property management function
to determine whether it would be more
cost effective to contract this activity. The
study will be complete at the end of fiscal
year 2000.
National Cemetery Administration (NCA)
VA provides burial in its national cemetery
system for eligible veterans, active duty military personnel, and their dependents. VA
manages 119 national cemeteries across the
country and will spend over $110 million
in 2001 for VA cemetery operations, excluding

THE BUDGET FOR FISCAL YEAR 2001

reimbursements from other accounts. Over
77,700 veterans and their family members
were buried in national cemeteries in 1998.
In addition, VA has jointly funded 45 State
veterans cemeteries through its State Cemetery Grants Program (SCGP). In 1999, VA
provided 345,389 headstones and markers
for eligible veterans, who were buried in
national, state, and private cemeteries. Since
1993, NCA has expanded service by opening
three new national cemeteries, providing
grants to states to build 14 new state veteran
cemeteries, and acquiring 3,000 acres of land
to meet burial demands. In addition, NCA
improved service by installing 14 information
kiosks and by encouraging non-VA national
and state veterans cemeteries to place headstone orders on-line. VA has established this
measure:
• In 2001, VA will increase the percentage
of veterans served by a burial option within a reasonable distance of the veteran’s
place of residence to 76 percent (from the
1999 level of 67 percent; strategic goal is
82 percent).
Related Programs
Many veterans get help from other Federal
income security, health, housing credit, education, training, employment, and social service programs that are available to the general
population. A number of these programs
have components specifically designed for veterans. Some veterans also receive preference
for Federal jobs.
Tax Incentives
Along with direct Federal funding, certain
tax benefits help veterans. The law keeps
all cash benefits that VA administers (i.e.,
disability compensation, pension, and MGIB
benefits) free from tax. Together, these three
exclusions will cost about $3.4 billion in
2001, and about $18 billion between 2001
and 2005.

26.
Table 26–1.

ADMINISTRATION OF JUSTICE
Federal Resources in Support of Administration of Justice
(In millions of dollars)

Function 750

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

26,488

26,648

29,000

29,956

30,121

30,291

30,938

937
..............

1,491
..............

1,504
..............

794
..............

657
..............

2,111
–1,460

2,169
–1,524

In 2001, the Federal Government will spend
$29 billion on the administration of justice—
including law enforcement, litigation, judicial
and correctional activities—doubling the
amount spent in 1993. Total Federal, State,
and local resources devoted to the administration of justice are estimated to grow from
$98 billion in 1993 to an estimated $175
billion in 2001—a 79-percent increase (see
Chart 26–1).
Representing the lowest annual serious
crime count since 1985, the 1998 Crime
Index total was estimated at approximately
12.5 million offenses. Down 14 percent from
1992, this total represented the seventh consecutive annual decline in the Crime Index.
And continuing this success, the number
reported in the first six months of 1999,
the most recent period for which figures
are available, was ten percent lower than
in the same period in 1998.
While States and localities bear most of
the responsibility for fighting crime, the Federal Government plays a critical role, both
in supporting State and local activities and
investigating and prosecuting criminal acts
that require a Federal response. Although
crime is affected by varying factors, the
fact that the national crime rate has dropped
at the same time that Federal anti-crime
spending has increased points to a causal
relationship. The budget builds upon this

record by continuing to provide substantial
funding for proven anti-crime programs.
Funding for the administration of justice
function includes: (1) law enforcement, which
includes investigation, litigation and judicial
activities; (2) correctional activities; and, (3)
assistance to State and local entities (see
Chart 26–2). In 2001, 68 percent of these
funds will go to the Justice Department
while the majority of the remaining funds
will go to the Treasury Department and
the Judicial Branch.
Law Enforcement
Department of Justice (DOJ): Within
DOJ, the Federal Bureau of Investigation
(FBI) and the Drug Enforcement Administration (DEA) enforce diverse Federal laws dealing with violent crime, terrorism, white collar
crime, drug smuggling, and many other criminal acts. These agencies also work with State
and local law enforcement agencies, often
through joint task forces, to address drug,
gang, and other violent crime problems. The
United States Attorneys Offices then prosecute
those cases investigated by the law enforcement agencies in which perpetrators have been
apprehended for Federal crimes. Along with
prosecuting cases referred by Federal law enforcement agencies, the U.S. Attorneys work
with State and local police and prosecutors in
their efforts to bring to justice those who have
violated Federal laws.
273

274

THE BUDGET FOR FISCAL YEAR 2001

Chart 26-1. Administration of Justice Expenditures
Dollars in billions
180
160
140
120

100

Local
80
60

State

40
20

Federal
0
1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Note: Federal data includes discretionary expenditures only.

DOJ also contains six legal divisions specializing in specific areas of criminal and civil
law. These divisions—the Civil, Criminal, Civil
Rights, Environment and Natural Resources,
Tax, and Antitrust Divisions—work with the
U.S. Attorneys to ensure that violators of
Federal laws are brought to justice.
• In 2001, the Federal Government will continue its commitment to reduce the incidence of violent crime. In 1994, the FBI
reported 714 offenses per 100,000 population; in 1998, the number was down to
566 offenses per 100,000.
• DOJ will also increase the number of dismantled violent gangs affiliated with the
FBI’s seven national target groups. In
1999, DOJ dismantled 30 of these violent
gangs and plans to dismantle 50 more in
2001.
DOJ’s Immigration and Naturalization Service (INS) protects the U.S. borders from
illegal immigration while providing services

to legal aliens. Since 1993, INS has added
over 5,400 new Border Patrol agents, more
than 130 percent of the 1993 level, and
intends to add 430 additional agents in
2001.
• As part of its comprehensive enforcement
strategy, INS removed 178,168 illegal
aliens pursuant to final removal orders
from the United States in 1999, up from
172,515 in 1998, and plans to increase
that number to 195,000 in 2001, of which
over 70,000 will be criminal aliens.
• DOJ, in conjunction with the Treasury and
Agriculture Departments, plans to increase the percent of air passengers
cleared through primary inspection in 30
minutes or less from 61 percent in 1998
to over 70 percent in 2001.
• INS has reduced the average time between
application receipt and naturalization decisions of qualified candidates from 27
months in 1998 to 12 months in 1999 and

26.

275

ADMINISTRATION OF JUSTICE

Chart 26-2. Federal Justice Expenditures
Dollars in billions
30

25

Criminal Justice
Assistance
20

Corrections
15

Litigation/Judicial
10

Law Enforcement
5

0
1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Note: Data includes discretionary expenditures only.

intends to reduce the time to six months
in 2001 and maintain this standard in the
future.
Within DOJ, the U.S. Marshals Service
protects the Federal courts and their officers;
apprehends fugitives; and maintains custody
of prisoners involved in judicial proceedings.
• In 2001, the U.S. Marshals intends to continue to improve its performance, apprehending 80 percent of violent offenders
within one year of a warrant’s issuance,
and reducing the fugitive backlog by five
percent from 1999 levels. At the end of
1999, there were 8,642 outstanding fugitive warrants.
• In addition, the U.S. Marshals will strive
to ensure that no judge, witness, or other
court participant is the victim of an assault stemming from his or her involvement in a Federal court proceeding. This
is an ongoing standard of zero tolerance
related to court security.

Treasury Department: Within the Treasury Department, the U.S. Customs Service,
Bureau of Alcohol, Tobacco and Firearms
(ATF), United States Secret Service, and other
bureaus enforce laws related to drug and contraband at our borders; commercial fraud; firearms trafficking; arson and explosives crimes;
and financial crimes, including money laundering, counterfeiting, and credit card fraud.
In addition, the Customs Service regulates the
importation and exportation of goods; ATF regulates the alcohol, tobacco, firearms, and explosives industries; and, the Secret Service
protects the President, Vice President, and visiting foreign dignitaries. The Federal Law Enforcement Training Center provides basic and
advanced training to Treasury and other law
enforcement personnel. In 2001, the Treasury
Department will:
• help solve violent crimes and reduce firearms trafficking by tracing up to 240,000
firearms used in criminal activities, compared to 188,299 in 1998;

276
• ensure the physical protection of the President, Vice President, visiting foreign dignitaries, and others protected by the Secret Service;
• have at least 50 percent of Secret Service
financial crime cases accepted for federal
prosecution, up from 49 percent in 1996;
• maintain or improve upon its 99 percent
collection rate for trade revenue (duties,
taxes, and user fees); and,
• improve importers’ compliance with trade
laws (e.g., quotas, trademarks, classification, etc.) from 81 percent in 1997 to 90
percent in 2001.
Federal Drug Control Activities: The Office of National Drug Control Policy has led
the Federal drug control agencies in the development of a comprehensive set of aggressive
societal goals for anti-drug programs, recognizing that achieving National Drug Control
Strategy Objectives depends critically on the
actions of not only the Federal Government,
but of State, local, and foreign governments,
the private sector, religious institutions and
not-for-profit agencies, and on the behavior of
individuals. At the core of these crosscutting
goals are 12 Impact Targets that define what
the drug control community is trying to
achieve by 2002 and 2007. Following are three
of these goals for 2002:
• Reduce the overall rate of illegal drug use
in the United States by 25 percent, from
the 1996 baseline of 6.1 percent to 4.6 percent. In 1998, the overall rate of illegal
drug use was 6.2 percent, statistically unchanged from the 6.4 percent reported in
1997.
• Reduce the rate of crime associated with
drug trafficking and use by 15 percent
from the 1996 baseline. (The rate of violent crime, regardless of cause, from the
Uniform Crime Reports will be used as
a proxy measure. In 1998, the violent
crime rate was 566 per 100,000 U.S. inhabitants, compared to 636 in 1996, an
11 percent decline.)
• Reduce by 10 percent from the 1996 baseline the health and social costs associated
with drug use.

THE BUDGET FOR FISCAL YEAR 2001

Civil Rights Laws: Federal responsibility
to enforce civil rights laws in employment and
housing arises from Titles VII and VIII of the
Civil Rights Act of 1964, as well as more recent legislation, including the Age Discrimination in Employment Act and the Americans
with Disabilities Act. The Department of Housing and Urban Development (HUD) enforces
laws that prohibit discrimination on the basis
of race, color, sex, religion, disability, familial
status, or national origin in the sale or rental,
provision of brokerage services, or financing
of housing. The Equal Employment Opportunity Commission enforces laws that prohibit
employment discrimination on the basis of
race, color, sex, religion, disability, age, and
national origin. DOJ’s Civil Rights Division
and the U.S. Attorneys enforce a variety of
criminal and civil statutes that protect the constitutional and statutory rights of the Nation’s
citizens. In 2001, DOJ will devote increased
attention to criminal civil rights violations
with the Civil Rights Division, FBI and U.S.
Attorneys working to improve the Federal response to hate crimes, police misconduct and
involuntary servitude matters, including worker exploitation, church arson and discrimination and violence directed against health care
providers.
• In an effort to serve the public better, the
Equal Employment Opportunity Commission will reduce the backlog of private sector complaints from 40,225 at the end of
1999 to 28,000 at the end of 2001. The
backlog was reduced from 57,000 to 40,225
during 1999.
• In the final year of a three year initiative,
HUD will ensure that grantees in an additional 20 communities (for a total of 60)
undertake fair housing audit-based enforcement to develop local indices of discrimination, identify and pursue violations
of fair housing laws, and promote new fair
housing enforcement initiatives at the
local level.
Legal Services Corporation: The Federal
Government, through the Legal Services Corporation (LSC), also promotes equal access to
the Nation’s legal system by funding local organizations that provide legal assistance to the
poor in civil cases.

26.

ADMINISTRATION OF JUSTICE

• In 1998, LSC assisted 1.1 million people;
the 2001 requested funding level will allow
for assistance to be provided to 1.3 million
people.
Judicial Branch: The Judiciary’s growth
in recent years arises from increased Federal
enforcement efforts and expansion of the Federal courts’ jurisdiction. Accounting for 14 percent of total administration of justice spending,
the Judiciary comprises the Supreme Court
and 12 circuit courts of appeals, 94 district
courts, 90 bankruptcy courts, 94 Federal probation offices, the Court of Appeals for the
Federal Circuit and the Court of International
Trade. The Federal Judiciary is overseen by
2,201 Federal judges and nine Supreme Court
justices.
Correctional Activities
The budget proposes $4.4 billion for corrections activities. As of December 1999, there
were over 136,000 inmates in the Federal
Prison System, more than double the number
in 1990. This growth, which is expected
to continue, is due to tougher sentencing
guidelines, the abolition of parole, minimum
mandatory sentences, and significant increases
in law enforcement spending. This increase
has been felt most by drug offenders, who
now account for approximately 60 percent
of inmates in the Federal system. The total
U.S. inmate population, of which the Federal
Prison System represents less than one tenth,
has increased as well and is expected to
reach two million during 2000. State inmate
populations have grown, in part, due to
sentencing requirements tied to Federal prison
grant funds.
• Due to the increase in the Federal inmate
population, the prison system is currently
operating at 32 percent over capacity, up
from 22 percent at the end of 1997. To
reverse this trend, the 2001 budget includes significant new funding to add prison bed capacity and expand the prison
construction program, thus reducing system wide overcrowding to approximately
30 percent by the end of 2001 and to 28
percent by 2006.

277
• The 2001 budget also provides additional
funding to ensure the Federal Bureau of
Prisons continues to enroll at least 34 percent of all inmates in one or more educational program, the percent enrolled in
1998.
Criminal Justice Assistance for State and
Local Governments
Providing Community Policing and Preventing Gun Violence: The budget proposes
$4.4 billion to help State and local governments fight crime, including $550 million to
assist crime victims. The 2001 Budget builds
on the success of the Community Oriented Policing Services (COPS) program and includes
$1.3 billion for the second year of the 21st
Century Policing Initiative. This program expands the concept of community policing to
include community prosecution, law enforcement technology assistance, and prevention.
• In 2001, DOJ will continue providing
States and localities with funds to hire additional officers in order to reach the goal
of up to 150,000 additional police officers
by 2005. As of the end of 1999, DOJ provided funding to place 103,720 more officers on the street.
To address the continuing problem of gun
violence, the Administration continues to support an effort under the Brady Law to
keep guns out of the hands of criminals
and to make America’s streets safer. As
part of this effort, DOJ, working with the
States, is now conducting computerized background checks on all firearm purchases. The
instacheck system has been used to block
more than 100 illegal gun sales a day
since the program was implemented. Since
1993, the number of crimes committed with
firearms has declined and has now fallen
to levels last experienced in the mid 1980’s.
• In 1999, 62,189 people with criminal
records were prevented from purchasing
firearms. To continue to ensure that felons, fugitives, stalkers and other prohibited purchasers are prevented from buying
guns, over 12 million prospective gun sales
will be reviewed in 2001.

278
Stopping Violence against Women: To
combat the significant problem of violence
against women, the budget proposes $504 million to enhance the States’ abilities to respond,
and to further expand access to previously
under-served rural, Indian, and other minority
populations.
• As a result of grants that encourage arrests, DOJ will seek to increase by 145
percent over the 1997 baseline estimate
of 50, the number of grantees reporting

THE BUDGET FOR FISCAL YEAR 2001

a decrease in domestic violence calls in
2001.
Combating Juvenile Delinquency: To prevent young people from becoming involved in
the juvenile justice system, the budget includes
$289 million for juvenile justice programs, including those that provide supervised afternoon and evening activities for youth.
• In 2001, compared with 2000 levels, DOJ
will seek to reduce the incidence of juveniles illegally carrying guns and reduce
the number of juvenile gun-related crimes.

27.
Table 27–1.

GENERAL GOVERNMENT
Federal Resources in Support of General Government
(In millions of dollars)

Function 800

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Credit Activity:
Direct loan disbursements ............
Guaranteed loans ..........................
Tax Expenditures:
Existing law ...................................
Proposed legislation ......................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

13,702

12,586

14,669

14,505

14,596

14,840

15,019

3,346
..............

1,737
32

1,385
22

1,340
370

1,332
401

1,606
394

1,370
404

..............
..............

28
..............

5
..............

N/A
N/A

N/A
N/A

N/A
N/A

N/A
N/A

63,005
..............

65,805
..............

68,265
35

70,775
259

73,830
308

77,035
342

80,275
375

N/A = Not available.

The General Government function encompasses the central management activities of
the executive and legislative branches. Its
major activities include Federal finances (tax
collection, public debt, currency and coinage,
Government-wide accounting), personnel management, and general administrative and property management.
Four agencies are responsible for these
activities: the Treasury Department (for which
the budget proposes $14.0 billion), the General
Services Administration ($942 million), the
Office of Personnel Management ($214 million), and the Office of Management and
Budget in the Executive Office of the President
($69 million).
Department of the Treasury
Treasury is the Federal Government’s financial agent. It produces and protects the
Nation’s currency; helps set domestic and
international financial, economic, and tax policy; enforces economic embargoes and sanctions; regulates financial institutions and the
alcohol, tobacco, and firearms industries; manages the Federal Government’s financial accounts; and, protects citizens and commerce
against those who counterfeit money, engage

in financial fraud, violate our border, and
threaten our leaders. Treasury’s law enforcement functions are discussed in Chapter
26, ‘‘Administration of Justice’’.
In 2001 Treasury will seek to collect an
estimated $1.96 trillion in tax and tariff
revenues due under law; issue $2 trillion
in marketable securities and savings bonds
to finance the Government’s operations and
promote citizens’ savings; and, produce nine
billion Federal Reserve Notes, 15 billion postage stamps, and 17.9 billion coins.
Internal Revenue Service (IRS): The IRS
is the Federal Government’s primary revenue
collector. The IRS’ mission is to provide America’s taxpayers with top quality service by
helping them understand and meet their tax
responsibilities and by applying the tax law
with integrity and fairness to all. To carry out
its customer service-oriented mission, the IRS
is engaged in a multi-year effort to modernize
its technology infrastructure and organize into
four operating divisions, each focused on serving groups of taxpayers with similar needs
(i.e., wage and investment earners, small business and self-employed, middle and large cor279

280
porate, and tax exempt and government entities).
As it implements this technological and
organizational modernization, the IRS is working to improve its work processes in order
to enhance productivity and customer satisfaction. A critical component of this effort is
the introduction of a new performance measurement system which balances business results (including quality and quantity measures), customer satisfaction, and employee
satisfaction for each business unit. The IRS
also is engaged in a long-term study to
improve its understanding of taxpayer compliance burden so that this burden can be
minimized. While this new measurement system is not yet fully in place, 2001 targets
for several critical measures include the following:
• improve customer satisfaction (based on
random surveys with a seven-point scale)
to 6.3 for toll-free assistance (6.2 in 1998),
6.5 for walk-in customer service (6.4 in
1998), and 4.5 for field examination (4.1
in 1998), and 4.1 for field collection (3.9
in 1998);
• continue to improve customer service
through its toll-free assistance, answering
60 percent of calls, (53.3 percent in 1999),
with an accuracy rate of 84 percent for
tax law questions (74.1 percent in 1999);
• receive 29.5 percent of individual returns
filed electronically, up from 23.4 percent
in 1999 (working toward a legislative goal
of 80 percent of all returns and information documents by 2007), with over six
million using Telefile, which allows taxpayers to file a simple tax return on the
telephone in 10 minutes;
• receive 75.2 percent of tax revenues electronically (72.1 percent in 1999); and,
• continue to process 99 percent of refunds
for electronic returns within 21 days and
for paper returns process 85 percent within 40 days (99.6 percent for electronic and
83.2 percent for paper in 1999).
Financial Management Service (FMS):
The FMS mission is to improve the quality
of Federal Government financial management
by providing financial services, information

THE BUDGET FOR FISCAL YEAR 2001

and advice to Federal program agencies and
other clients. FMS has been working toward
an all electronic Treasury by promoting its
electronic payment and collection programs.
FMS has also been providing debt collection
and debt management services to all Federal
agencies to aid in its implementation of the
Debt Collection Improvement Act. In 2001,
FMS will:
• increase the percentage of Federal payments and associated information transmitted electronically from 68 percent in
1999 to 79 percent in 2001;
• increase electronic collections as a percentage of total collections from a level of 72
percent in 1999. FMS achieved its 2001
target of 72 percent two years ahead of
schedule and is re-evaluating the program
and will establish a new target; and,
• increase the percentage of eligible delinquent debt that is referred to Treasury
for collection from 68 percent in 1999 to
75 percent in 2001.
Bureau of Public Debt (BPD): BPD conducts all public debt operations for the Federal
government and promotes the sale of U.S. savings-type securities. Funding for 2001 will
allow BPD to maintain its current level of
service and will enable it to continue to meet
the following baseline performance goals:
• issue at least 95 percent of over-thecounter bonds within three weeks of their
purchase (99 percent in 1999);
• as in 1999, conduct all marketable securities auctions without error; and,
• announce auction results within one hour
95 percent of the time (100 percent in
1999).
U.S. Mint: The U.S. Mint produces the Nation’s coinage and manufactures numismatic
products for the public. In 2001, the U.S. Mint
will:
• introduce the 35 State series in the 50
States Commemorative Quarter Program;
and,
• maintain high levels of customer service
by shipping commemorative coins within
four weeks and recurring coins within
three weeks of order placement.

27.

GENERAL GOVERNMENT

In 1999, the Mint received a high customer
satisfaction rating from buyers of numismatic
and commemorative coins. Exceeding the
scores of many private sector firms in the
American Customer Satisfaction Index (ACSI),
the Mint scored among the highest of the
29 ‘‘high impact’’ Federal agencies evaluated
by ACSI.
Bureau of Engraving and Printing
(BEP): BEP produces all U.S. currency, about
half of U.S. postage stamps, and other Government securities. In 2001, BEP is expected to
have a stable production year, with currency
and postage production remaining at 2000 levels, thus allowing BEP to continue to achieve
the following goals:
• meet all Federal Reserve and United
States Postal Service orders as requested;
and,
• prevent more than 0.05 notes per million
from being returned by the Federal Reserve because of counterfeit deterrence defects.
General Services Administration (GSA)
GSA provides policy leadership and expertly
managed space, products, and services to
support the administrative needs of Federal
agencies. In 2001, revenues from GSA’s various business lines will exceed $14 billion.
GSA is responsible for more than $50 billion
a year in Federal spending for property
management and administrative services, and
management of assets valued at $466 billion.
In recent years, GSA has worked to develop
a new Federal management model, focusing
on performance measurement, accountability
for agencies and employees, and the effective
use of technology in changing work environments. GSA has established inter-agency
groups to advise it on the policies, best
practices, and performance benchmarks appropriate for each administrative service and
information system. GSA’s ultimate goal is
a Federal Government in which agencies
receive the administrative services they need,
according to the best known practices and
at the least cost.
As a provider of many administrative services, GSA seeks to exceed all Governmentwide performance goals and industry bench-

281
marks for these services, as these benchmarks
are developed or identified. Its overall goals
as a service provider are to exceed its
customer agencies’ expectations for price, service, and quality. In 2001:
• the Public Buildings Service will deliver
81 percent of its construction, and 84 percent of its repair projects on schedule and
within budget, up from 78 and 81 percent
in 1999, respectively;
• the Federal Technology Service projects a
35-percent reduction from 1994 rates in
monthly line charges for local telephone
service;
• the Federal Supply Service will reduce its
costs of operations in the Supply and Procurement Business Line by 45 percent of
1999 costs; and,
• the volume of purchases made with Federal purchase cards will total $18.8 billion,
a 27 percent increase over 1999.
Because GSA provides services on a reimbursable basis, agency budgets fund most
of GSA’s activities. In 2001, for example,
the budget proposes an appropriation of $871
million for GSA, primarily for the Office
of Government-wide Policy, the Office of the
Inspector General, and the construction and
repair of Federal buildings. However, the
budget projects obligations over $14 billion
through GSA’s revolving funds. GSA also
affects Federal spending through its delegation
of authority for property disposal, building
operations, and the procurement of pharmaceuticals. In addition, GSA will administer
contracts through which agencies will purchase
more than $27 billion in goods and services
outside of GSA’s revolving funds.
Office of Personnel Management (OPM)
OPM provides human resource management
leadership and services, based on merit principles, to Federal agencies and employees.
It provides policy guidance, advice, and direct
personnel services and systems to the agencies;
operates USAJOBS, a worldwide job information and application system; and provides
fast, friendly, accurate, and cost-effective retirement, health benefit, and life insurance
services to Federal employees, annuitants,
and agencies. Several OPM programs and

282
related performance measures are discussed
elsewhere in the budget. For example, see
Chapters 5 and 23 for a discussion of the
health benefits program and Chapter 25 for
a discussion of the retirement program.
OPM provides oversight of the Federal
civil service merit systems, covering nearly
1.8 million employees. In 1993, OPM was
only conducting sporadic reviews at local
level installations. In 2000 and 2001, OPM
will conduct 15 to 16 Nation-wide agency
oversight reviews each year, including reviews
of agencies whose personnel in the Executive
Branch are not covered by Title 5 of the
U.S. Code, and a number of small agencies.
OPM promotes programs and personnel
flexibilities that enable employees to successfully balance work and family issues, such
as quality child care and family friendly
programs. In 2001, OPM will continue to
conduct programs promoting lifelong learning
(e.g., Individual Learning Accounts), diversity
in the workplace, employment of persons
with disabilities, and alternative dispute resolution, to foster effective labor-management
relationships.
In 2001, OPM will:
• Continue to expand access to Federal employment information by all Americans by
increasing usage of USAJOBS by five percent from the 1999 high of 14.8 million
(usage which has tripled since 1993), and
maintain a 90 percent or better (up from
60 percent in 1993) customer satisfaction
level with USAJOBS users by implementing a student employment job search
feature and email notification of job
matches to job seekers.
• The Office of the Inspector General will
initiate program performance audits of
OPM mission-critical programs, beginning
with the retirement and investigations
programs.
• The Office of Executive and Management
Development will establish a minimum of
twelve strategic partnerships with high
impact agencies, emphasizing custom-designed programs to meet their strategic
needs in promoting organizational effectiveness of the agencies’ partners.

THE BUDGET FOR FISCAL YEAR 2001

• The Office of Investigations will continue
to work with its contractor to further improve the quality of casework, reduce the
cost of a standard background investigation to the agencies (reducing it from
$2,795 to $2,695 in 2000), and to meet
new business requirements from the Drug
Enforcement Administration and the Department of Defense.
Office of Management and Budget (OMB)
OMB assists the President in policy development relating to the budget, regulations,
information, and legislation; and in the management of the Executive Branch. OMB also
provides the President with high quality
analysis and advice on a broad range of
topics.
OMB prepares the Federal budget and
oversees its execution in the departments
and agencies by helping to formulate the
President’s spending plans, reviewing the performance of agency programs, and the effectiveness of policies and procedures; assessing
competing funding demands among agencies;
and, providing policy options. OMB works
to ensure that proposed legislation, and agency
testimony, reports, and policies are consistent
with Administration policies, leveraging use
of interagency programs and Councils. On
behalf of the President, OMB often presents
and justifies major policies and initiatives
related to the budget and Government management before Congress.
OMB has a central role in developing,
overseeing, coordinating, and implementing
Federal procurement, financial management,
information, and regulatory policies. OMB
helps to strengthen administrative management, develop better performance measures,
and improve coordination among Executive
Branch agencies.
In 2000, OMB will use a state-of-the art
off-site secure data center to produce the
annual budget. In 2001, OMB will invest
in additional information technology applications to improve efficiency and effectiveness
of the OMB’s staff. In addition, OMB staffing
will be increased to permit completion of
more thorough technical and analytical work
in key functional areas such as financial
management, procurement, regulatory anal-

27.

GENERAL GOVERNMENT

ysis, economic forecasting, and technology
systems investment analyses.
Tax Incentives
The Federal Government provides significant tax incentives that benefit State and
local governments. It permits tax-exempt borrowing for public purposes, costing $23.4
billion in Federal revenue losses in 2001
and $118 billion over five years, from 2001
to 2005. (The budget describes tax-exempt
borrowing for non-public purposes in the
chapters on other Government functions.) In

283
addition, taxpayers can deduct State and
local income taxes against their Federal income tax, costing $44.7 billion in 2001 and
$239 billion over five years. Corporations
with business in Puerto Rico and other
U.S. possessions receive a special tax credit,
costing an estimated $2.6 billion in 2001
and $13 billion over five years. This tax
credit is phasing out and will expire at
the end of 2005. Finally, up to certain
limits, taxpayers can credit State inheritance
and estate taxes against Federal estate taxes,
costing $35 billion over five years.

28.

NET INTEREST
Table 28–1.

Net Interest

(In millions of dollars)
Function 900

Spending:
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................
Tax Expenditures:
Existing law ...................................

Estimate

1999
Actual

2000

2001

2002

2003

2004

2005

229,735
..............

220,314
..............

208,308
4

198,605
21

189,244
57

177,445
85

163,634
134

965

1,015

1,065

1,115

1,175

1,235

1,295

The Federal Government pays large
amounts of interest to the public, mainly
on the debt it incurred to finance the excess
of past budget deficits over surpluses. Net
interest closely measures these Federal interest transactions with the public.
The Government also pays interest from
one budget account to another, mainly because
it invests its various trust fund balances
in Treasury securities. Net interest does not
include these internal payments.
In 2001, Federal outlays for net interest
will total an estimated $208.3 billion, declining
to $163.6 billion in 2005. The amounts shown
for the mandatory outlay effects of proposed
legislation in the table at the beginning
of this chapter are interest payments to
Government revolving funds, and therefore
have no net effect on the Government finances.
The Interest Burden
As noted above, the amount of net interest
depends on the amount of debt held by
the public, as well as on the interest rates
on the Treasury securities that comprise
that debt. Debt held by the public is the
total of all deficits that have accumulated
in the past—minus the amount offset by
budget surpluses. Large deficits in the 1980s
and early 1990s sharply increased the ratio
of debt held by the public to the Gross
Domestic Product (GDP)—from 26.1 percent

in 1980 to 49.5 percent in 1993. Partly
due to the huge rise in debt, interest rates
on Treasury securities also rose sharply.
The combination of much more debt and
higher interest rates caused a substantial
increase in Federal interest costs—from 1.9
percent to 3.3 percent of GDP between 1980
and 1991 (see Chart 28–1).
As budget deficits were gradually eliminated, and as interest rates declined, the
ratio of net interest to GDP fell from 3.3
percent in 1991 to 2.5 percent in 1999.
The combination of budget surpluses starting
in 1998, and continued moderate interest
rates, is projected to reduce the ratio further,
to an estimated 1.4 percent in 2005. Thus,
the interest burden is projected to fall by
one-half in just over a decade. As shown
in the table above, net interest started to
decline in 1999.
Components of Net Interest
Net interest is defined as gross interest
on the public debt, minus the interest received
by on-budget and off-budget trust funds,
and minus all activities that fall under ’’other
interest’’ (discussed later in this chapter).
Gross Interest on the Public Debt: Gross
interest on the public debt will total an estimated $360.0 billion in 2001 and $372.4 billion
in 2005. At the end of 1999, the gross Federal
debt totaled $5.606 trillion, of which $3.633
285

286

THE BUDGET FOR FISCAL YEAR 2001

Chart 28-1. Net Interest
Percent of GDP

4

3

Projected
2

2005
1.4%

1

0
1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

trillion was held by the public. The debt held
by the public accounted for 21.7 percent of the
total credit-market debt owed by the non-financial sector of the U.S. economy. This proportion peaked at 26.7 percent in 1994 and
has trended down over the last few years, as
Federal Government borrowing diminished
with the declining deficits and recent surpluses
(see Table 12–1 in Analytical Perspectives).

ance (DI) trust fund are excluded from the
budget. Social Security, however, is a Federal
program. Thus, the net interest of the Federal
Government as a whole includes the off-budget
interest earnings. Because Social Security will
accumulate large surpluses over the next several years, its interest earnings will rise from
an estimated $68.1 billion in 2001 to $110.5
billion in 2005.

The Treasury Department plans to buy
back outstanding U.S. notes and bonds as
part of its efforts to manage efficiently the
reduction of the publicly held debt. The
budgetary treatment of the premiums and
discounts on these repurchases is discussed
in detail in Chapter 24 of Analytical Perspectives, ‘‘Budget System and Concepts and Glossary’’.

The other trust funds are on-budget. The
interest earnings of the civil service retirement
and disability fund will rise from an estimated
$35.8 billion in 2001 to $40.1 billion in
2005, and the interest of the military retirement fund will rise from $13.0 billion to
$14.0 billion. The Medicare Hospital Insurance
(HI) trust fund will receive $12.5 billion
in 2001. Together with Social Security, these
account for most of the interest received
by trust funds.

Interest Received by Trust Funds: Under
current law, the receipts and disbursements
of Social Security’s old-age and survivors insurance (OASI) trust fund and disability insur-

28.

NET INTEREST

Other Interest: Other interest includes both
interest payments and interest collections—
much of it consisting of intra-governmental
payments and collections that arise from Federal revolving funds. These funds borrow from
the Treasury to carry out lending or other
business-type activities.
Budgetary Effect, including the Federal
Reserve
The Federal Reserve System buys and
sells Treasury securities in the open market

287
to implement monetary policy. The interest
that Treasury pays on the securities owned
by the Federal Reserve is included in net
interest as a cost, but virtually all of it
comes back to the Treasury as ‘‘deposits
of earnings of the Federal Reserve System.’’
These budget receipts will total an estimated
$29.5 billion in 2001 and $33.8 billion in
2005.

29.

ALLOWANCES

Table 29–1.

Allowances

(In millions of dollars)
Function 920

Spending:
Discretionary Budget Authority ...

Estimate

1999
Actual

2000

..............

..............

Adjustments to Certain Accounts
This allowance provides for growth in the
budgets of certain agencies at rates closer
to historical levels.
Purchase of Martin Luther King, Jr.
Papers

2001

–161

2002

–250

2003

–321

2004

–324

2005

–329

Effect of Proposed Repeal of Pay Delay
Enacted in P.L. 106–113, non-defense
This allowance is a proposal to reverse
the pay date delay enacted in the 2000
Appropriations Acts for non-defense agencies.

This allowance provides for acquisition of
the papers of Martin Luther King, Jr., by
the Library of Congress.

289

30.

UNDISTRIBUTED OFFSETTING
RECEIPTS
Table 30–1.

Undistributed Offsetting Receipts
(In millions of dollars)

Function

Spending:
Discretionary Budget Authority ...
Mandatory Outlays:
Existing law ...............................
Proposed legislation ...................

Estimate

1999
Actual

2000

..............

..............

–200

–200

–200

–200

–200

–40,445
..............

–43,061
..............

–45,721
305

–49,084
299

–47,303
302

–46,894
313

–48,608
317

Offsetting receipts, totaling $45.6 billion
in 2001, fall into two categories: (1) the
Government’s receipts from performing business-like activities, such as proceeds from
the sale of Outer Continental Shelf leases
or a Federal asset; and, (2) the amounts
that the Government shifts from one account
to another, such as agency payments to
retirement funds.
Rents and Royalties on the Outer
Continental Shelf (OCS)
The Interior Department’s Outer Continental Shelf lands leasing program, which
began in 1954, currently generates about
26 percent and 21 percent of U.S. domestic
oil and natural gas production, respectively.
Since its inception, it has held 129 lease
sales, covering areas three to 200 miles
offshore and generating over $128 billion
in rents, bonuses, and royalties—mainly for
the Treasury Department.
OCS revenues provide most funding for
the Land and Water Conservation Fund.
The OCS program will generate more than
$3.5 billion in receipts in 2000. In 2001,
the Administration will continue the leasing
moratoria
for
environmentally
sensitive
areas—offshore California, Oregon, and Washington; the Eastern Seaboard; the southwestern coastline of Florida, including the
Everglades; and, certain parts of Alaska.

2001

2002

2003

2004

2005

Employee Retirement
In 2001, Federal agencies will pay an
estimated $38.2 billion on behalf of their
employees to the Federal retirement funds, 1
the Medicare health insurance trust fund,
and the Social Security trust funds. As civilian
employee pay rises, agencies must make
commensurate increases in their payments
to recognize the rising cost of retirement.
Other Undistributed Offsetting Receipts
In 1993, the President and Congress gave
the Federal Communications Commission authority to assign spectrum licenses through
competitive bidding, which has proven to
be an extremely efficient and effective way
to allocate this finite public resource. The
budget reflects the continued policy of assigning licenses by auction, as authorized by
the 1997 Balanced Budget Act. The Government will auction spectrum made available
from the transition to digital broadcast technology as well as other additional reallocated
spectrum—raising an estimated $14.4 billion
over the next eight years, and compensating
the public for the use of this valuable resource.

1 The major programs are the Military Retirement System, the
Civil Service Retirement System, and the Federal Employee Retirement System.

291

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IMPROVING PERFORMANCE THROUGH
BETTER MANAGEMENT

We made a decision that was profoundly important, that the way Government works matters,
that we could not maintain the confidence of the American people and we could not have ideas
that delivered unless the Government was functioning in a sensible, modern, and prudent way.
President Clinton
December 1998

In the past two years, the Administration
has tackled the Government’s biggest management challenges, which are designated Priority
Management Objectives (PMOs), through a
coordinated, sustained and intensive effort
with the agencies to achieve significant improvements in these areas. This year, the
Administration is targeting 24 Governmentwide and agency-specific management issues
for heightened attention (see Table 31–1).
Four are new: ‘‘Use capital planning and
investment control to better manage information technology;’’ ‘‘Streamline and simplify
Federal grants management;’’ ‘‘Align human
resources to support agency goals;’’ and, ‘‘Capitalize on Federal energy efficiency.’’
Last year, the Administration successfully
advanced several of our management goals
(which therefore are no longer on the PMO
list). In particular, the Administration resolved
its first and foremost management objective,
‘‘Manage the year 2000 (Y2K) computer problem’’ with impressive results. Y2K posed
the single largest technology management
challenge in history. The Federal Government’s acknowledged success through the date
change was the direct result of the commitment, long hours, and exceptional efforts
of Federal employees in every agency. Due
largely to the efforts of these employees
and the leadership provided by the President’s
Council on Year 2000 Conversion, the Federal
Government’s Y2K efforts were, beyond all
expectation, remarkably trouble-free. Under
the direction of the President’s Council, the
Federal Government also worked with the
private sector, State, and local governments,

and international organizations to raise awareness and encourage work on the problem.
Again, the results were uniformly acclaimed.
In the Spring of 2000, the Conversion Council
will prepare a final report which will include
lessons learned from this challenge.
Two other objectives were successfully accomplished in 1999. First, to meet the goal
‘‘Better manage real property,’’ the General
Services Administration developed a draft
legislative proposal to increase agency incentives to dispose of unneeded real property—
making it available for more productive public
or private use, in turn providing resources
for agencies to fund needed capital investments. Second, to ‘‘Improve management of
the decennial census,’’ the Bureau of the
Census in the Department of Commerce established and tested the necessary support structure—which includes opening data capture
centers, regional census offices, and local
census offices, printing forms, establishing
a telephone questionnaire assistance program,
printing language assistance guides, and recruiting and training temporary census workers—and it is now ready for operation. Finally,
in 1999, all agencies identified activities performed by Federal employees that could be
opened to competition potentially resulting
in contracts with either private firms or
with a more efficient public sector operation.
Since such competitive reviews are an important element of the effort to ‘‘Revolutionize
DOD business affairs,’’ the objective ‘‘Use
competition to improve operations’’ has been
incorporated into the Department of Defense
(DOD) objective.
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THE BUDGET FOR FISCAL YEAR 2001

Table 31–1.

Priority Management Objectives

Strengthening Government-Wide Management
1.

Use performance information to improve program management and budget decisionmaking.
2. Improve financial management information.
3. Use capital planning and investment control to better manage information technology.
4. Provide for computer security and protect critical information infrastructure.
5. Strengthen statistical programs.
6. Implement acquisition reforms.
7. Implement electronic Government initiatives.
8. Better manage Federal financial portfolios.
9. Align Federal human resources to support agency goals.
10. Verify that the right person is getting the right benefit.
11. Streamline and simplify Federal grants management.
12. Capitalize on Federal energy efficiency.
Improving Program Implementation
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.

Modernize student aid delivery.
Improve DOE program and contract management.
Strengthen HCFA’s management capacity.
Implement HUD reform.
Reform management of Indian trust funds.
Implement FAA management reforms.
Implement IRS reforms.
Streamline SSA’s disability claims process.
Revolutionize DOD business affairs.
Manage risks in building the International Space Station.
Improve security and management of overseas presence.
Reengineer the naturalization process and reduce the citizenship application backlog.

The PMOs are coordinated by OMB with
assistance from the National Partnership for
Reinventing Government (NPR) and the interagency working groups, thus assuring senior
management attention. Managers in the agencies have the primary responsibility to achieve
the agreed-upon objectives—they must effectively implement detailed action plans to
ensure that they make progress toward meeting their goals. Periodic reporting and review
provide an opportunity for corrective action
as necessary throughout the year.
Strengthening Government-wide
Management
1. Use performance information to improve
program management and budget decisionmaking: The Government Performance and
Results Act (GPRA) requires agencies to meas-

ure performance and results—not just funding
levels—so that we can better track what
taxpayers are getting for their dollars. Agencies are not only working to develop and
use performance measures in program management but also are working to integrate
this information into budget and resource
allocations, so that we can better determine
the cost of achieving goals. The task is
not simple. The agencies must define their
specific goals, determine the proper level
of resources, assess which programs are working, and fix those that are not. Progress
will depend on GPRA becoming more than
a paper exercise. Over the next year, OMB
will work with all agencies to better integrate
planning and budgeting and systematically
associate costs with programs.

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IMPROVING PERFORMANCE THROUGH BETTER MANAGEMENT

2. Improve financial management information: Just a decade ago, the Federal Government lagged far behind private industry in
its ability to offer assurances of financial
integrity. The Administration recognized and
immediately began to address this weakness.
Today, Government agencies have a strong
financial management infrastructure supported by a comprehensive set of Federal
financial accounting standards. Chief Financial
Officers (CFOs) in the 24 largest Federal
agencies integrate financial management agency-wide and produce annual audited financial
statements. As validation of our progress,
in October 1999, the American Institute of
Certified Public Accountants recognized Federal Accounting Standards Advisory Board
statements as ‘‘generally accepted accounting
principles’’ (GAAP). This independent acknowledgment by the internationally recognized
organization that designates GAAP standardsetting bodies marks a significant milestone
in improving public confidence in Federal
financial management. Also, in 1999, 12 of
24 CFO agencies received clean opinions
on their 1998 statements, double the number
of clean opinions received in 1996 and in
sharp contrast to 1993 when agencies did
not routinely issue financial statements. In
1999, the Federal Government also issued
its second audited Government-wide financial
statement. Auditors noted specific accounting
difficulties at DOD, and the complexity of
identifying and reporting transactions between
Federal Government entities (intra-Governmental transactions). DOD has invested significant contractor support resources to address its problems, and OMB, the Treasury
Department, and the General Accounting Office are working with the CFOs to develop
short-and long-term solutions to the intraGovernmental transactions issue. Almost all

Table 31–2.

agencies also face the daunting task of upgrading or replacing financial management systems
to provide the accurate, timely, and useful
information that is the cornerstone of both
financial integrity and performance measurement.
3. Use capital planning and investment
control to better manage information technology: The Government spends in excess
of $38 billion each year on information technology, and this number will continue to
grow as virtually all functions of Government
take advantage of efficiencies provided by
information technology (IT). Well selected,
controlled, and managed IT projects can ensure that agencies fulfill their missions with
the lowest costs and greatest benefit to
the American people. The Administration will
issue general guidance and will work with
agencies on specific systems to ensure that
IT capital planning is integrated with agency
budget, acquisition, financial management,
and strategic planning processes, and that
agencies properly assess benefits, risks, performance goals and accomplishments of their
IT portfolios. Chapter 22 of Analytical Perspectives highlights program performance benefits
from major IT investments throughout the
Federal Government.
4. Provide for computer security and protect
critical information infrastructure: Protecting
information systems that the Federal Government depends on and that are critical to
the economy is growing in importance as
society’s use of technology and reliance on
interconnected computer systems increases.
The Y2K remediation underscores the fact
that, along with increased productivity and
efficiency of system interconnections, there
comes increased risk. However, if the risks
are identified and addressed in light of secu-

CFO Agency Financial Statement Performance Goals

Financial Statements

Audits Completed ................................................
Agencies with Unqualified Opinion ...................
Agencies with Unqualified and Timely Opinion

1998
Actual
24
12
7

Estimate
1999

2000

2001

24
18
16

24
21
21

24
22
22

296

THE BUDGET FOR FISCAL YEAR 2001

rity issues, they are manageable. Such risk
management requires that we incorporate
security into the architecture of each system,
promote security controls that support agency
business operations, and ensure that security
funding is built into life-cycle budgets for
information systems. Protecting Government
information systems is a key component of
the broader imperative to protect the Nation’s
critical infrastructure—namely such vital assets as banking and finance, transportation,
energy, or water, whose incapacity would

have a debilitating effect on national security,
national economic security, or national public
health and safety. Each Federal agency has
the responsibility to protect its own critical
infrastructures and ensure its ability to provide essential services to the public. In addition, because most of the Nation’s critical
infrastructures are owned and operated by
the private sector, Government agencies must
follow the Y2K example in reaching out
to private industry to assist and encourage
sensible infrastructure protection efforts.

Protecting Personal Privacy
As information technology transforms our Government and our economy, a growing challenge
is how to gain the benefits from the new technology while preserving one of our oldest values—privacy. In the online world, the Administration has encouraged self-regulatory efforts
by industry. For especially sensitive information—such as medical, financial, and children’s
online records—legal protections are required. To coordinate privacy policy, the Administration created the position of Chief Counselor for Privacy within OMB’s Office of Information
and Regulatory Affairs.
This year has seen historic progress:
• In the online world, under steady prodding by the Administration, the portion of
commercial websites with privacy policies rose from 15 percent to over 65 percent
from 1998 to 1999. A public workshop last fall challenged industry to address concerns about ‘‘online profiling,’’ in which companies collect data, in ways few people
would suspect, about individuals surfing the Internet.
• When children go online, parents should give their consent before companies gather
personal information. Websites aimed at children must get such consent under the
Children’s Online Privacy Protection Act of 1998 and rules issued last year.
• In new regulations, the Administration has emphasized its full support for the use of
strong encryption to provide privacy and security to law-abiding citizens in the digital age. Continuing programs to strengthen Government computer security also provide new privacy safeguards for personal information held by the Government.
Progress on privacy will continue:
• For medical records, this year will see historic, final rules that will legally guarantee
key privacy protections: notice of data uses; consent before records are used for nonmedical purposes; patient access to records; proper security; and, effective enforcement. The Administration will continue to support legislation that would include
broader scope and enforcement authority.
• The financial modernization bill signed by the President in November 1999 included
important privacy protections. Notably, consumers will have an absolute right to
know if their financial institution intends to share or sell their personal financial
data, as well as the right to block sharing or sale outside the institution’s corporate
family. Last year, the Administration will seek further protections for consumers in
financial information, including choice about sharing within a corporate family.
• The Federal Government will continue to build privacy protections into its own activities. Last year, for instance, all Federal agencies successfully posted clear privacy
policies on their websites. This year, among other initiatives, the Administration
plans to make ‘‘privacy impact assessments’’ a regular part of the development of
new Government computer systems.

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IMPROVING PERFORMANCE THROUGH BETTER MANAGEMENT

5. Strengthen Statistical Programs: The Government spends more than $3 billion each
year to produce statistical measures for decision makers in both the public and private
sectors. These data are used for everything
from monitoring the Nation’s progress in
the dynamic global economy, to spotting important trends in public health, to projecting
the impact of future demographic shifts on
the Social Security System. In 1999, the
Administration: (1) actively supported House
passage of a bill to permit limited sharing
of confidential data among selected agencies
solely for statistical purposes; (2) significantly
enhanced FedStats (www.fedstats.gov) services;
and (3) published innovative inter-agency thematic reports, including America’s Children:
Key National Indicators of Well-Being and
Health, United States. The Administration
will now seek Senate passage of the legislation
for statistical data sharing, begin use of
the recently revised Standard Occupational
Classification, publish a new thematic report
on statistics related to the aging population,
and continue the phased implementation of
the American Community Survey to provide
comparable demographic, economic, and housing data for small geographic areas for use
in distributing nearly $200 billion annually.
In 2001, the Administration will work to
improve the measurement of income and
poverty; address key education, health, and
welfare data needs; and, strengthen measures
of capital equipment, services expenditures,
and E-business.
6. Implement acquisition reforms: The Federal Government is the Nation’s largest buyer
of goods and services, purchasing roughly
$200 billion each year. In the past seven
years, the Congress and the Administration
have implemented numerous acquisition reforms to streamline the buying process and
maximize the Government’s buying power.
For example, agencies are using credit cards
for small dollar purchases instead of processing paper purchase orders to save administrative expense and time. In 1999, the Government met its goal of using credit cards
for 60 percent of all purchases below $2,500.
For 2000, the goal was increased to 80
percent, and all agencies are on track to
meet this goal. Agencies are also selecting
contractors based on past performance to

297

save money and get better results. In 1999,
15 agencies established and are using contractor performance evaluation systems to
select high-performing contractors. In 2000,
all major agencies will have evaluation systems in place. Further, to obtain desired
performance and reduce cost overruns and
schedule slippages on the annual expenditure
of $70 billion for capital assets (e.g., buildings,
satellites, information technology), agencies
are implementing a rigorous capital programming process. Finally, agencies are being
encouraged to use performance-based service
contracts which improve performance and
reduce price by describing desired outcomes
in measurable terms while leaving the ‘‘how’’
to the contractors’ ingenuity.
7. Implement electronic Government initiatives: New information technologies can make
Government easier to use. In December 1999,
the President articulated a vision for electronic
Government. The Administration will pursue
three related strategies to increase access
to Government information, ensure privacy
and security, increase agency use of automation to transact services, and adopt crosscutting electronic Government initiatives.
First, citizens, businesses, and governments
need to trust that when they communicate
electronically as part of a Federal activity,
their messages will be safe from interference
and fraud. By December 2000, agencies will
issue at least 100,000 secure digital signatures
to individuals to enable them to exchange
information with the Government in a private
and tamper-proof manner. Second, the Federal
Government will develop a new clearinghouse
for Government information on the Web to
demonstrate how common standards can dramatically improve access to government information at far less cost than current approaches. And third, agencies will create
new computer applications to allow citizens
to transact more government services electronically, beginning with the 500 most common Government services and forms.
8. Better manage Federal financial portfolios:
The Federal Government currently underwrites more than $1 trillion in loans, primarily
to students, homebuyers, and small businesses. The Government can better serve
these customers and at the same time protect
its interest in obtaining efficient and timely

298
repayment. At the end of 1998, $60 billion
of this Federal portfolio was delinquent—
an increase of $8 billion from 1997. However,
as the Department of the Treasury implements
its new statutory authorities under the Debt
Collection Improvement Act, collections are
beginning to increase. For example, in 1999,
Treasury collected $2 billion through ‘‘offsets’’
of tax refunds and other payments—with
more than $1 billion representing delinquent
child support obligations. In addition, the
Department of Justice collected more than
$1 billion of delinquent debt through its
litigation program. In 2000, agencies should
increase collections and further reduce delinquencies by full implementation of the Treasury debt collection offset and cross-servicing
tools, by increasing loan sales for delinquent
debt, and by writing-off uncollectible debt.
9. Align Federal human resources to support
agency goals: Recognizing that people are
critical to achieving results Americans care
about, the Administration will undertake a
strategic approach to human resources management. First, the Office of Personnel Management (OPM) will help agencies strategically
assess their human resources to ensure a
quality Federal work force in the 21st Century.
Among other things, in 2000, OPM will
complete the design of a prototype work
force planning model that will allow line
managers to analyze their current work force
and prepare ‘‘what-if’’ scenarios under a variety of recruitment, restructuring, or mission
change models. Second, OPM will work with
agencies to ensure labor-management initiatives to empower executives, line managers,
and especially employees to improve customer
service and get mission results. Third, OPM
will encourage agencies to make better use
of flexibilities in existing human resource
policies, systems, and available tools. OPM
will also submit legislative proposals, where
necessary, consistent with these human resource management strategies.
10. Verify that the right person is getting
the right benefit: The Administration will
expand its focus on ensuring that administrative and program payments are made correctly
and on time. The Government-wide strategy
is first and foremost to make payments
correctly up-front and, secondly, to measure
the extent of improper payments through

THE BUDGET FOR FISCAL YEAR 2001

the annual financial and performance reporting process. The strategy also calls for strong
privacy and security protections in carrying
out these goals. In 2000, OMB will issue
guidance to agencies to ensure that the
right person is getting the right benefit,
including, for example, principles for authenticating identity, keeping address information
up-to-date, and verifying eligibility criteria.
The Administration will also assist Federal
agencies in estimating the extent of, and
addressing the underlying causes of, improper
payments. The Administration will work with
the Congress where legislation is needed
to provide agencies the ability to share information within the framework of the Privacy
Act and Computer Security Act.
11. Streamline and simplify Federal grants
management: The Administration will work
to make it easier for State, local, and tribal
governments and nonprofit organizations to
apply for and, as recipients, report their
progress on Federal grants. The inter-agency
Electronic Grants Committee and their Federal Commons initiative will be central to
a Government-wide effort to use electronic
processing in the administration of agencies’
grant programs. OMB and the agencies are
also working to develop common applications
and reporting systems for grant programs,
including consolidation of payment systems.
We will also identify statutory impediments
to grants simplification and encourage flexible
legislation, like the Workforce Investment
Act, which allows Federal agencies to streamline the delivery of grants.
12. Capitalize on Federal energy efficiency:
The Federal Government is the largest single
consumer of energy in the world. Every
year, the Government spends more than
$4 billion to heat, cool, and power 500,000
Federal buildings. With this distinction comes
the opportunity to save energy, save taxpayers
dollars, and protect the environment from
harmful greenhouse gases. Under the leadership of this Administration, the agencies
have already cut their energy use 17 percent
from 1985 levels. In 1999, the President
issued E.O. 13123, Greening the Government
through Energy Efficient Management, setting
tough new goals for energy efficiency and
giving agencies the tools they need to achieve
those goals. In 2000, agencies will take

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IMPROVING PERFORMANCE THROUGH BETTER MANAGEMENT

steps to markedly improve energy efficiency
by maximizing use of contracting tools, such
as energy savings performance contracting;
purchasing energy efficient office products;
taking advantage of cost-effective renewable
technologies and power from clean (or ‘‘green’’)
sources; and, using sustainable designs for
new Federal construction. By 2010, agencies
will cut energy use by 35 percent and
reduce greenhouse gas emissions by 30 percent—saving taxpayers over $750 million a
year.
Improving program implementation
13. Modernize student financial aid delivery:
The Higher Education Amendments of 1998
created the Government’s first performancebased organization in the Department of
Education’s Office of Student Financial Assistance (OSFA) to significantly improve the
annual delivery of $50 billion in financial
assistance to nearly nine million students.
In 1999, the new results-oriented organization
hired a chief operating officer, assessed customer needs, developed a systems modernization blueprint, issued a five-year performance
plan, and reorganized the staff into three
service-oriented channels for students, schools
and financial institutions. It successfully field
tested its application software with ten schools
and multiple Federal agencies in the first
phase of its pilot program. In 2000 and
2001, working with other agencies, schools,
students, and the commercial banking industry, OSFA will focus on implementing critical
areas of the systems modernization plan,
completing the personnel reorganization, expanding electronic access to benefits and
services, and simplifying data exchanges with
partners and customers.
14. Improve Department of Energy (DOE)
program and contract management: Because
more than 90 percent of DOE’s budget is
spent through large, long-term management
contacts, good acquisition planning and better
project management after contract award are
essential. For example, DOE contracts with
universities and other organizations to operate
and maintain facilities to clean up nuclear
material and waste sites, and with private
sector firms to design, build, and operate
treatment, storage, and disposal facilities.
The Administration is emphasizing more cost-

299

efficient, performance-based, fixed-price contracts over reliance on cost reimbursement
contracts, which have few incentives for contractors to adhere to cost, schedule, and
performance goals. In 1999, DOE increased
the number of contracts it competed and
added performance measures and incentives
to others. It also created a high-level project
management office to track and review all
projects valued at $20 million or more; those
that cannot meet cost, schedule or performance
goals will be placed on a ‘‘Watch List’’
to be monitored more closely by the Deputy
Secretary. In 2001, DOE will award 70
percent of its support service requirements
as performance based service contracts. By
2003, two-thirds of DOE’s facility maintenance
contracts will have been awarded competitively.
15. Strengthen the Health Care Financing
Administration’s (HCFA’s) management capacity: HCFA faces the formidable challenge
to modernize and operate as a prudent purchaser of health care in the fast-changing
health care marketplace, while also, and
perhaps most important, increasing accountability to its customers. The initiative has
five components: (1) management flexibilities
(e.g., evaluation of personnel needs and flexibilities); (2) increased accountability to constituencies (e.g., creation of an outside advisory committee); (3) program flexibilities (e.g.,
new authorities and greater use of existing
authorities to pay for services at market
rates, enter into selective contracts, and engage in competitive bidding); (4) structural
reforms (e.g., reengineering relationship between HCFA’s central and regional offices
and between HCFA and HHS); and, (5)
contracting reform (e.g., promoting competition
in Medicare claims processing, improving contractor oversight). In 1999, HCFA established
a Management Advisory Committee, which
will include individuals with a wide range
of private sector, public sector, and academic
experience. The bipartisan committee will
begin meeting in 2000 to provide guidance
on ways to improve HCFA’s management,
performance, and accountability. HCFA is
also in the process of assessing its current
and ideal workforce skills mix, and developing
and validating a long-term human resources
strategic plan. HCFA drafted and sent to

300
Congress its contracting reform legislative
proposal, which is designed to introduce competition into the Medicare contracting environment and allow HCFA to select contractors
from a wider pool. The President’s 2001
Budget includes a new contractor oversight
initiative to ensure that contractors have
appropriate controls in place. Other areas
of focus for 2000 and 2001 include improving
communications and coordination between
HCFA central and regional offices and HHS,
and developing strategies for making better
use of HCFA’s vast data resources.
16. Implement Department of Housing and
Urban Development (HUD) reform: In the
mid-1990s, chronic problems at HUD led
some to consider abolishing the Department.
Congress, the General Accounting Office, and
private agencies criticized the agency as unresponsive, having too much red tape and
little accountability, and plagued with unreliable data and various systems that could
not communicate with one another. HUD’s
comprehensive reforms, begun in June 1997,
are designed to realign agency operations
for results, including assuring that HUDsubsidized tenants live in safe and wellmanaged housing. To date, HUD has
downsized staff to 60 percent of 1980 levels,
and clarified the mission of each employee;
surveyed every public and HUD-assisted multifamily project and advised owners of any
documented deficiencies; cleaned up much
of the data in existing management and
financial systems, integrating many of the
disparate systems where possible; and begun
to monitor subsidized tenants’ eligibility and
the correct amount of tenant rental payments
through cross checks with Social Security
and other data bases. By the end of 2001,
HUD will reduce the share of public and
assisted housing with severe physical deficiencies by 10 percentage points, reduce the
share of units managed by poorly performing
public housing agencies by five percentage
points, and will promptly complete most enforcement actions on troubled privately owned
subsidized housing within 120 days of referral.
HUD will begin surveying its customers (e.g.,
Mayors, local HUD partners, public housing
residents and other customers) to determine
how well HUD is doing and advise HUD
on where to improve. In 2000, HUD will

THE BUDGET FOR FISCAL YEAR 2001

save $200 million in overpayments of HUD
rental and operating subsidies by cross checking with Social Security and other data
bases for tenant income levels which determine both eligibility and tenants’ rent levels.
17. Reform management of Indian trust
funds: The Department of the Interior (DOI)
is responsible for managing about $3 billion
of funds that the Federal Government holds
in trust for Indian tribes and individual
American Indians, as well as the underlying
land, timber, and mineral assets from which
these funds are derived. At the end of
1999, nearly all of the roughly 300,000 financial account jacket files managed by DOI
for individual Indians had been cleaned up
and 45 percent of these were successfully
converted to a commercial grade accounting
system. This effort is on track to meet
the goal of converting all remaining accounts
by May 2000. All Tribal accounts have been
managed in a commercial grade system since
1995. In June 1999, DOI began piloting
its Trust Asset and Accounting Management
System in Billings, Montana, which will provide DOI field staff with the tools needed
to properly manage tribal and individual
Indians’ land and natural resources. At this
pilot site, trust asset data has been converted
to the new system and the results are
being evaluated. The current goal is to convert
the remaining 213 sites to the new commercial
system by December 2001. While initial success in DOI’s Indian Land Consolidation
pilot program will help sustain these management improvements by easing the paperwork
burden of administering trust fund accounts,
enactment of legislation to make this consolidation effort permanent is vitally important.
18. Implement Federal Aviation Administration (FAA) management reforms: The safety
of the flying public depends upon the FAA—
its air traffic controllers, safety and security
inspectors, and information technology. There
are three major management reform initiatives
which will help the FAA improve its use
of technology and prepare for future challenges: acquisition; financial; and, personnel
reform. With respect to acquisition reform,
FAA is in the process of implementing an
effective, systematic process for selecting, controlling, and managing capital investments.
On the financial reform side, the FAA con-

31.

IMPROVING PERFORMANCE THROUGH BETTER MANAGEMENT

tinues to implement phases of a cost-accounting system which, when fully utilized, will
provide information to both itself and its
users about the value of the FAA’s services
and allow the agency to operate more like
a business. Finally, the FAA continues to
evaluate the success of its personnel reform
efforts. In 2000, the FAA will link pay
scales to market rates and implement a
system which ties pay to the achievement
of individual and agency performance targets.
The agency will use its existing legislative
authority to create a performance-based organization for Air Traffic Control (ATC) services;
while the Administration calls upon Congress
to provide the additional authority it needs
to operate ATC as a business.
19. Implement IRS reforms: The IRS is
modernizing its technology and organizational
structure, in part as mandated by the IRS
Restructuring and Reform Act of 1998, in
order to ensure the fairness of tax administration and improve the IRS’s customer service,
productivity, and financial management. By
the end of 2001, the IRS will be restructured
around four major customer groups with
similar filing and compliance characteristics
(i.e., those with only wage and investment
income, small businesses and self employed,
large and mid-sized businesses, and tax exempt and government entities). Over time,
this will enable the IRS to tailor staff
expertise, services, and enforcement techniques to specific taxpayer groups. This will
be the most significant restructuring of the
IRS’s organization and work practices since
1952. The IRS is also undertaking a technology
modernization program which is designed to
replace the IRS’s 1960s era core databases
with modern systems. This will enable significant improvements in technology support to
customer service and compliance employees.
It will also prepare the IRS for the wholesale
transition to electronic filing and data exchange. The IRS is also implementing a
series of initiatives to provide immediate
customer service improvements. For example,
it has expanded the hours when toll-free
assistance is offered, set up four local citizen
advocacy panels to ensure taxpayer input
to local IRS officials, offered new electronic
filing and payment options, and strengthened
its taxpayer advocate service (which gives

301

taxpayers an option outside of normal IRS
processes to resolve difficult issues). Its electronic filing system earned a 74 American
Consumer Satisfaction Index (ACSI) score,
placing it above the average customer satisfaction score for private sector services. During
2000, the IRS will build on these efforts
with new initiatives directed at improving
the responsiveness of customer service representatives, expanding Spanish language tollfree assistance, and enhancing outreach to
new small businesses to help them better
understand and meet their tax obligations.
20. Streamline the Social Security Administration’s (SSA’s) disability claims process: SSA
is in the midst of a multi-year project to
improve service delivery for the millions of
individuals filing for, or appealing decisions
on, claims for disability benefits. To increase
accuracy and consistency in decision-making,
the agency has provided all of its adjudicators
uniform training and instructions clarifying
complex policy areas, as well as instituting
an improved quality assurance process. SSA
is also testing a redesigned disability claims
process on a prototype basis in 10 States.
The new process will eliminate repetitive
steps and increase claimant interaction with
SSA at both the initial claim and hearing
levels. If the prototype proves successful at
providing claimants with the correct decision
earlier in the process, nationwide implementation will occur beginning in 2002. Finally,
management improvements scheduled to be
fully implemented at the Office of Hearings
and Appeals in 2001 are expected to reduce
hearing processing times from an average
of 316 days in 1999 to 208 days in 2002.
The combined effect of all of these changes
will be to improve the accuracy of initial
decisions and provide a quicker and more
user-friendly process for those claimants who
pursue appeals.
21. Revolutionize DOD business affairs: Following the end of the Cold War, the United
States began a major reduction in military
forces. DOD’s cuts in infrastructure costs,
however, have not kept pace. To make further
cuts, DOD plans to change the way it does
business. The 1997 Defense Reform Initiative
provided a strategic blueprint of how to
adopt better business processes, pursue commercial alternatives, consolidate redundant

302
functions, and streamline organizations. Since
the Defense Reform Initiative report, significant effort and progress has been made.
Examples include:
• Competition forces organizations to improve quality, reduce costs, and focus on
customers’ needs. DOD employees perform
many commercial activities which could
benefit from competitive bidding. DOD expects its competitive sourcing process will
save approximately $11.2 billion from
1997 to 2005. These savings are reallocated to other defense priorities, including
force
modernization
throughout
the
2001–2005 period.
• The vast majority of official purchases are
made with a special credit card—rather
than wasting time and money writing a
paper contract. From just less than
800,000 purchases made with the purchase card in 1994 to 7.5 million during
1998, the card truly has become the preferred method of obtaining goods and services costing less than $2,500.
• Today, paper is still part of DOD’s business systems and culture. The Department’s goal is to make all contracting (i.e.,
weapons systems, spare parts, and installation level maintenance) paperless by
2001. Sixty-seven percent of the Department’s
transactions
are
currently
paperless and the Department is well on
its way to achieving its goal of 90 percent
in the year 2000.
• In 1991, DOD was operating 324 separate
finance and accounting systems. Through
the summer of 1999, that number dropped
to 102 systems; a 69-percent decrease. By
2003, the Department expects to reduce
the number of systems to 32, representing
the largest financial system overhaul ever
undertaken by DOD.
22. Manage risks in building the International Space Station: The United States
has the lead role in building the International
Space Station, one of the most complex
international projects ever undertaken in
peacetime. The recent trend of annual budget
growth has been curbed in the 2001 budget—
a major success—but NASA must continue
to manage the risks of completing assembly

THE BUDGET FOR FISCAL YEAR 2001

and reduce the potential for future cost
growth. In 1999, the first elements of the
Space Station had a year of successful inorbit operation, and the program made good
progress, albeit slower than planned, in preparing many other key elements for launch.
The year 2000 is critical for the Space
Station—with plans for the beginning of permanent human presence in space, and the
initiation of research aboard the orbiting
laboratory. The program also continues the
transition from development activities to orbital operations and research. The program
will control cost growth by balancing requirements within available resources, and will
continue to address cost and schedule performance problems in its key contracts, strengthen
contract management and cost controls, and
further reduce risks from potential Russian
shortfalls.
23. Improve security and management of
overseas presence: Since the end of the Cold
War, the world’s political, economic, and
technological landscape has changed dramatically, but our country’s overseas presence
has not adequately adjusted to this new
reality. Thirty Federal agencies now operate
internationally, yet the condition of U.S.
posts and missions abroad is unacceptable.
In 1999, in the aftermath of the African
embassy bombings, the Administration formed
the Overseas Presence Advisory Panel to
consider the future of our Nation’s overseas
representation, to appraise its condition, and
to develop recommendations on how best
to organize and manage our overseas posts.
In 2000, the Administration will be working
to ensure the thorough review and implementation, as appropriate, of the Panel’s recommendations, including an examination of
the U.S. Government’s overseas needs and
the current structure of financing and management for overseas facilities. We will also
assess the need for additional security enhancements, including physical security upgrades, sound capital planning for the construction of new diplomatic and consular
facilities, and begin to move toward a common
information technology platform for all of
our agencies abroad.
24. Reengineer the naturalization process
and reduce the citizenship application backlog:
Immigration and Naturalization Service (INS)

31.

IMPROVING PERFORMANCE THROUGH BETTER MANAGEMENT

is reengineering the naturalization process
to streamline and automate operations, while
simultaneously reducing a backlog of more
than 1.8 million applications for citizenship.
In 1999, INS reduced the backlog by more
than 500,000 applications and the average
processing time between application and naturalization of qualified candidates has been
reduced from 27 months in 1998 to 12
months in 1999. The goal is to reduce
processing time to six months by the end
of 2000.
Using Inter-Agency Groups to Get the Job
Done
To achieve the Administration’s goal of
making fundamental change in the operations
of Government, inter-agency groups have been
used extensively to lead crosscutting efforts.
These groups draw together operational, financial, procurement, integrity, labor-relations,
and systems technology experts from across
the Government. The groups establish Government-wide goals in their areas of expertise,
and they marshal the resources within individual agencies to meet these goals. Several
of these groups were formed for the first
time by this Administration, including the
National Partnership for Reinventing Government, the President’s Management Council,
and the National Partnership Council (see
Table 31–3).
The National Partnership for Reinventing
Government (NPR): President Clinton created
the NPR in March 1993 to create a Government that works better, costs less, and gets
results Americans care about. He asked Vice
President Gore to lead this inter-agency task
force. In 2000, NPR will continue its work
to make agencies that have the most contact
with the public to be more performancebased, results-oriented, and customer-driven.
In doing this, NPR will partner with agencies
to achieve the following outcomes:
• Customer satisfaction with Federal services equal to or better than the business
services sector, as measured by the ACSI.
• An infrastructure to enable Americans to
have access to all Government information
and be able to conduct all major service
transactions on line by 2003.

303

NPR will also work with local and State
governments and the private sector to:
• achieve dramatic reductions in gun violence;
• help States achieve their goals of universal
health insurance for children; and,
• provide all Americans a seamless learning
and employment system to get the job
skills they need to be successful in the
21st Century.
More information on NPR is available at
its website, www.npr.gov.
The President’s Management Council (PMC):
The PMC consists of the Chief Operating
Officers of all Federal departments and the
largest agencies. The PMC provides leadership
for the most important Government-wide reforms. Council priorities include: supporting
labor-management
partnerships;
leading
GPRA implementation; identifying criteria and
recommending methods for agency restructuring; supporting electronic commerce and
performance-based contracting; facilitating development of customer service standards; and,
improving Federal energy efficiency.
The National Partnership Council (NPC):
President Clinton established the NPC in
October 1993 to enlist the Federal labor
unions as allies to reinvention and to shift
Federal labor relations from adversarial litigation to cooperative problem solving. Members
of the NPC include: representatives of Federal
employee unions and Federal managers and
supervisors; the Federal Mediation and Conciliation Service; the Federal Labor Relations
Authority; the Office of Personnel Management; OMB; DOD; and the Department of
Labor. In 1999, the Council continued to
sponsor training conferences aimed at helping
unions and agencies build the skills they
need to establish effective and successful
partnerships. The Council also sponsored a
major research project involving eight Federal
agencies to study the connection between
labor-management partnership and bottomline improvements in agency performance.
In 2001, the Council will continue to build
on the findings of its research project and,
through its training programs, focus on strategies that will both stimulate best practices
and overcome barriers to partnership. More

304

THE BUDGET FOR FISCAL YEAR 2001

information on the NPC can be found on
its website, www.opm.gov/npc.

Table 31–3. Major Inter-Agency Groups
Council Names/Membership
Chief Financial Officers (CFO)
Council: The CFOs and Deputy
CFOs of the 24 largest Federal
agencies and senior officials from
OMB and Treasury. The Council,
through its Committees, addresses such issues as financial statements and standards; financial
systems; grants; human resources; debt management; and
entrepreneurial Government.
http://www.financenet.gov

Recent Activities/Future Priorities
Significant accomplishments include: a steady increase in the
number of CFO Act agencies receiving clean opinions on their financial statements; timely issuance of the Government-wide audited financial statements for the second year in a row; the establishment of a Program Management Office under the Joint
Financial Management Improvement Program to develop financial systems requirements and testing vehicles; and the development of qualification and classification standards for certain
Federal financial positions based on core competencies and, the
completion of a comprehensive review of the Franchise Fund
pilot program.
In 2000 and beyond, the Council intends to build on these accomplishments, continuing to seek clean audit opinions on agency, department and Government-wide financial statements; improvements in security and proficiency of financial management
systems; and improvement in professional education and development of the Federal financial workforce. The Council also will
support Administration efforts to seek permanence for the Franchise Fund pilot program.

Chief
Information
Officers
(CIO) Council: The CIOs and
Deputy CIOs for 28 major Federal agencies, two CIOs from
small Federal agencies, senior officials from OMB and representatives from two information technology boards. The CIO Council
develops recommendations for information technology management policy, procedures, and
standards; identifies opportunities to share information resources; and assesses the Federal
Government’s needs for an information technology work force.
http://cio.gov

In 1999, Council accomplishments included the successful transition of Federal systems to year 2000; improved capital planning
capabilities; efforts to further enterprise interoperability; pilots
to implement work force core competencies; and, increased security awareness.
In 2000, the Council intends to build on its progress promoting
infrastructure to provide common access solutions; expand and
explore opportunities for increased interaction and outreach with
the worldwide IT community to disseminate and share information; support service delivery by working on security and privacy
approaches that advance appropriate information access, exchanges, and protection, and support electronic commerce; develop and implement strategies for recruitment, retention, and
development of IT professionals; and, promote the effective integration of IT management with agencies’ missions and processes.

31.

IMPROVING PERFORMANCE THROUGH BETTER MANAGEMENT

305

Table 31–3. Major Inter-Agency Groups—Continued
Council Names/Membership
President’s Council on Integrity
and Efficiency (PCIE): The
Presidentially appointed Inspectors General (IGs), senior officials
from OMB, and other key integrity officials.
Executive Council on Integrity
and Efficiency (ECIE): The 30
IGs appointed by agency heads,
OMB, and other key integrity officials. http://www.ignet.gov

Recent Activities/Future Priorities
1999 accomplishments include: identification of billions of dollars
of Federal funds that could be reallocated to better use by Government managers; investigations resulting in successful prosecutions of thousands of wrongdoers; investigative and civil recoveries of more than $1 billion; and, disqualification of thousands of unscrupulous businesses or individuals from receiving
Government contracts or participating in Government programs.
The IG’s also collaborated on efforts to address emerging issues
with systems security, to enhance financial management practices to enable clean opinions of audited agency financial statements, to continue to foster GPRA principles, bring to successful
completion intensive year 2000 activities, and to strengthen and
enhance inter-agency training academies for auditors and criminal investigators.
Priorities for 2000 include developing a strategic plan to focus
the Council’s efforts on major crosscutting issues to better leverage IG resources across the Government.

Electronic Processes Initiatives
Committee (EPIC): Senior policy officials from DOD, GSA,
Treasury and OMB. EPIC’s role
is to further the use of electronic
technologies and processes within
Government to improve service
delivery and program efficiency.
http://policyworks.gov/org/
main/me/epic/

In 1999, EPIC helped implement the Government’s strategic
plan for electronic purchasing and payment. EPIC sponsored
user groups to help resolve challenges in the implementation of
the Government’s SmartPay purchase and travel card program.
EPIC also continued the development of a card-based approach
for processing intra-governmental payments at lower cost.

Federal Credit Policy Working
Group (FCPWG): Representatives from the major credit and
debt collection agencies and
OMB. The FCPWG provides advice and assistance to OMB,
Treasury, and Justice in formulating and implementing Government-wide credit policy.
http://www.financenet.gov/
financenet/fed/fcpwg

In 1999, the FCPWG completed revisions to Government-wide
policies to implement the Debt Collection Improvement Act, including a revision to Federal program write-off policy. With the
support of the FCPWG, SBA completed its first loan asset sale
program and HUD began centralizing its sale program. The GSA
portfolio management schedule awarded over 50 contracts for
work in asset valuation, due diligence, and loan sales.

In 2000, EPIC will continue to monitor implementation of the
Access America for Students initiative, which provides a onestop shopping and information site for student loans. EPIC will
also sponsor an effort to expand use of the Government’s Central
Contractor Registration, through which vendors can, in one
place, register payment information and other data necessary to
do business with the Federal Government.

In 2000, the FCPWG will focus on Internet applications to improve customer access and modernize program financial systems,
continue to build a government-wide loan asset sales program,
and monitor the implementation of the Debt Collection Improvement Act, in particular referral of debt more than 180 days past
due to the Treasury Department for collection.

306

THE BUDGET FOR FISCAL YEAR 2001

Table 31–3. Major Inter-Agency Groups—Continued
Council Names/Membership

Recent Activities/Future Priorities

Procurement Executives Council (PEC): Senior procurement
executives from major Federal
agencies and senior OMB officials. The PEC serves as a forum
to improve Federal acquisition by
leveraging procurement influence
and knowledge.

In 1999, specific accomplishments include: establishing a Government-wide Acquisition Intern Program; developing an inventory of desired skills and attributes of contracting professionals;
and, developing draft guides for rotational assignments of contracting officers to industry organizations.

Inter-agency Alternative Dispute
Resolution
Working
Group (ADR): The Attorney
General, representatives of the
heads of all Cabinet Departments, and others with significant interest in Federal dispute
resolution. President Clinton established the ADR Working
Group in May 1998 to assist Government agencies in making
greater use of consensual methods for resolving disputes, including mediation, neutral evaluation, arbitration, and other processes.
http://www.financenet.gov/
financenet/fed/iadrwg

In 1999, the Working Group conducted more than 50 Government-wide training sessions, meetings, and colloquia to promote
and encourage the use of ADR in agencies.

Joint Financial Management
Improvement
Program
(JFMIP): A joint effort of GAO,
OMB, Treasury, and OPM, with a
rotating representative from another agency. JFMIP was established 50 years ago to encourage
and promote government-wide
sharing and exchange of information concerning good financial
management
techniques
and
practices.
http://www.financenet.gov.
financenet/fed/jfmip/

In 1999, JFMIP published financial system requirements for
Core Financial Management, Human Resources and Payroll, Direct Loans, and Travel, and prepared drafts for Seized Property
and Forfeited Assets, Guaranteed Loans, Grants, and Property;
established a testing and certification process for commercial offthe-shelf (COTS) software supporting core financial management
functions; established a website that supports the testing process, including system requirements, the test, and information on
tested and certified qualified COTS software; and issued guidance on core competencies in financial management.

By 2001, the PEC intends to improve the intern program; use
the inventory of contracting officer skills and the rotational assignment guides to improve training; establish a set of agency
acquisition system performance measures; improve small business procedures; and develop a single point on the Web that
makes Government solicitations freely available to any interested entity.

In 2000, the ADR Working Group will produce a detailed report
on agency success stories, lessons-learned, best practices and
recommendations, and it will continue to mentor agencies in the
development of ADR programs.

2000 priorities are to: prepare financial system requirement publications for financial management systems where publications
do not exist or are outdated; continue testing COTS software
supporting core financial management functions; offer testing for
Federal agency systems that are used to provide core financial
servicing for other agencies; incorporate new requirements in
the core financial management software test; and share information on financial management systems and best practices
through the web-based knowledge base.

31.

IMPROVING PERFORMANCE THROUGH BETTER MANAGEMENT

307

Table 31–3. Major Inter-Agency Groups—Continued
Council Names/Membership

Recent Activities/Future Priorities

Small Agency Council (SAC):
Principal management officials
from 81 agencies with less than
5,000 FTE. The group was chartered to improve management effectiveness through education, exchange of information, self-help,
and cooperation.
http://www.sac.gov

It speaks for the member agencies on a variety of issues and
proposals with OMB, OPM, and GSA. It annually sponsors a
comprehensive training program open to all member agencies,
covering matters of current interest, such as Y2K, preparing annual performance reports, and alternative dispute resolution. In
1999 more than 1,500 attended these sessions.

Human Resources Technology
Council (HRTC.) Under the
sponsorship of OPM, the HRTC
consists of human resources, information technology and Federal
financial decision makers. The
HRTC operates as a guiding body
on government-wide information
technology issues affecting personnel and payroll matters.
http://www.opm.gov/hrtc

In 1999, projects completed include an Official Personnel Folder
Data Dictionary, and a Government-wide Human Resources Information Study (now formalized as a JFMIP Financial Systems
Standard).
In 2000 the HRTC will lead an effort to design and develop a
Human Resources Data Network, recommended in the study
noted above, which will facilitate the movement, storage and retrieval of HR data on employees, and will eliminate any future
need for paper-based official personnel records.

32.

DETAILED FUNCTIONAL TABLES

Table 32–1. BUDGET AUTHORITY BY FUNCTION, CATEGORY AND
PROGRAM
(In millions of dollars)
Function and Program
050 National defense:
Discretionary:
Department of Defense—Military:
Military personnel ....................
Operation and maintenance .....
Procurement ..............................
Research, development, test
and evaluation .......................
Military construction ................
Family housing ..........................
Revolving, management and
trust funds .............................
Total, Department of Defense—Military ...........

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

70,649
104,777
50,920

73,692
104,646
54,208

75,801
109,064
60,272

78,449
107,264
63,021

80,390
108,891
66,710

83,085
112,009
67,652

85,585
114,559
70,931

38,290
5,406
3,591

38,357
4,794
3,597

37,863
4,549
3,484

38,371
4,275
3,708

37,564
3,805
3,863

37,452
4,576
3,983

36,361
5,368
4,085

937

1,624

1,136

778

741

450

459

274,570

280,918

292,169

295,866

301,964

309,207

317,348

12,909

12,994

13,252

13,589

13,735

17

17

17

18

18

Atomic energy defense activities:
Department of Energy ..............
12,443
11,990
Proposed Legislation (nonPAYGO) .............................. ................... ...................
Subtotal, Department of
Energy .............................

12,443

11,990

12,926

13,011

13,269

13,607

13,753

140

150

140

140

142

145

148

17

17

18

18

18

19

19

Total, Atomic energy defense activities ............

12,600

12,157

13,084

13,169

13,429

13,771

13,920

Defense-related activities:
Discretionary programs ............

947

993

1,034

1,034

1,045

1,073

1,096

Total, Discretionary .................

288,117

294,068

306,287

310,069

316,438

324,051

332,364

Mandatory:
Department of Defense—Military:
Revolving, trust and other DoD
mandatory ..............................
Offsetting receipts .....................

4,822
–994

358
–1,352

322
–1,404

341
–1,410

342
–1,374

342
–1,259

341
–1,274

Total, Department of Defense—Military ...........

3,828

–994

–1,082

–1,069

–1,032

–917

–933

Defense-related activities:
Mandatory programs ................

202

209

216

228

239

252

261

Total, Mandatory .......................

4,030

–785

–866

–841

–793

–665

–672

Total, National defense ............

292,147

293,283

305,421

309,228

315,645

323,386

331,692

Formerly utilized sites remedial action ..............................
Defense nuclear facilities safety board ..................................

309

310

THE BUDGET FOR FISCAL YEAR 2001

Table 32–1. BUDGET AUTHORITY BY FUNCTION, CATEGORY AND
PROGRAM—Continued
(In millions of dollars)
Function and Program
150 International affairs:
Discretionary:
International development,
humanitarian assistance:
Development assistance and
operating expenses ................
Multilateral development
banks (MDB’s) .......................
Assistance for the New Independent States .......................
Food aid .....................................
Refugee programs .....................
Assistance for Central and
Eastern Europe ......................
Voluntary contributions to
international organizations ..
Peace Corps ...............................
Central America and Caribbean emergency disaster recovery fund .............................
Other development and humanitarian assistance ...........

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

1,719

1,765

2,012

2,012

2,035

2,087

2,133

1,529

1,446

1,624

1,901

1,814

1,732

1,768

587
1,011
1,099

836
800
634

830
837
678

830
837
678

840
847
686

861
868
703

880
887
718

436

728

610

610

617

633

646

308
256

294
244

356
275

356
275

360
278

369
285

377
291

592

–10 ................... ................... ................... ................... ...................

1,440

1,805

1,340

1,346

1,362

1,396

1,425

Total, International development, humanitarian assistance .........

8,977

8,542

8,562

8,845

8,839

8,934

9,125

International security assistance:
Foreign military financing
grants and loans ....................
Economic support fund .............
Other security assistance .........

3,400
2,608
409

4,820
2,792
423

3,538
2,313
501

3,538
2,313
501

3,581
2,341
508

3,669
2,399
520

3,749
2,451
531

Total, International security assistance .........

6,417

8,035

6,352

6,352

6,430

6,588

6,731

3,035
1,062

2,928
978

3,198
1,079

3,198
1,229

3,237
1,379

3,317
1,529

3,389
1,529

934

880

946

946

957

981

1,003

219

605

739

739

748

766

783

475
168

351 ................... ................... ................... ................... ...................
121
138
138
139
143
147

Conduct of foreign affairs:
State Department operations ...
Foreign buildings ......................
Assessed contributions to international organizations ..........
Assessed contributions for
international peacekeeping ...
Arrearage payment for international organizations and
peacekeeping ..........................
Other conduct of foreign affairs
Total, Conduct of foreign
affairs ..........................
Foreign information and exchange activities:
International broadcasting .......
Other information and exchange activities ....................
Total, Foreign information and exchange activities ..........................

5,893

5,863

6,100

6,250

6,460

6,736

6,851

397

404

448

448

453

465

474

808

262

283

283

286

292

300

1,205

666

731

731

739

757

774

32.

311

DETAILED FUNCTIONAL TABLES

Table 32–1. BUDGET AUTHORITY BY FUNCTION, CATEGORY AND
PROGRAM—Continued
(In millions of dollars)
Function and Program
International financial programs:
Export-Import Bank .................
Special defense acquisition
fund ........................................
IMF new arrangements to borrow ..........................................
Other IMF .................................

Estimate

1999
Actual

2000

812
–8

2001

796

2002

1,010

2003

1,015

2004

1,032

2005

1,061

1,088

8 ................... ................... ................... ................... ...................

3,450 ................... ................... ................... ................... ................... ...................
14,763 ................... ................... ................... ................... ................... ...................

Total, International financial programs ........

19,017

804

1,010

1,015

1,032

1,061

1,088

Total, Discretionary .................

41,509

23,910

22,755

23,193

23,500

24,076

24,569

Mandatory:
International development,
humanitarian assistance:
Credit liquidating accounts ......
Receipts and other ....................

17
–19

–407
–121

–419
–56

–450
–16

–465
–16

–457
–16

–441
–16

Total, International development, humanitarian assistance .........

–2

–528

–475

–466

–481

–473

–457

International security assistance:
Repayment of foreign military
financing loans ......................
Foreign military loan reestimates ......................................
Foreign military loan liquidating account .......................

–367 ................... ................... ................... ................... ................... ...................
5

189 ................... ................... ................... ................... ...................

–186

–590

–506

–403

–345

–275

–276

–548

–401

–506

–403

–345

–275

–276

14

3

3

3

3

3

–1
2

–1
2

–1
2

–1
2

–1
3

–1
3

3

3

3

3

3

3

3

18

7

7

7

8

8

–2,912

–1,490

–30

150

180

70

200

–175

–906

–254

–67

–80

–81

–87

Total, International financial programs ........

–3,087

–2,396

–284

83

100

–11

113

Total, Mandatory .......................

–3,634

–3,307

–1,258

–779

–719

–751

–612

Total, International affairs .....

37,875

20,603

21,497

22,414

22,781

23,325

23,957

Total, International security assistance .........

Foreign affairs and information:
Conduct of foreign affairs .........
–2
U.S. Information Agency trust
funds ....................................... ...................
Miscellaneous trust funds ........
2
Japan-U.S. Friendship Commission ...................................
3
Total, Foreign affairs
and information ..........
International financial programs:
Foreign military sales trust
fund (net) ...............................
Other international financial
programs ................................

312

THE BUDGET FOR FISCAL YEAR 2001

Table 32–1. BUDGET AUTHORITY BY FUNCTION, CATEGORY AND
PROGRAM—Continued
(In millions of dollars)
Function and Program
250 General science, space, and
technology:
Discretionary:
General science and basic research:
National Science Foundation
programs ................................
Department of Energy general
science programs ...................

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

3,612

3,834

4,510

4,515

4,566

4,677

4,779

2,721

2,788

3,151

3,170

3,136

3,126

3,157

Total, General science
and basic research ......

6,333

6,622

7,661

7,685

7,702

7,803

7,936

Space flight, research, and
supporting activities:
Science, aeronautics and technology .....................................
Human space flight ...................
Mission support .........................
Other NASA programs .............

4,885
5,480
2,075
20

4,918
5,468
2,164
20

5,352
5,500
2,226
22

5,785
5,387
2,299
23

6,375
4,938
2,432
24

6,951
4,817
2,498
25

7,298
4,686
2,550
25

Total, Space flight, research, and supporting
activities ......................

12,460

12,570

13,100

13,494

13,769

14,291

14,559

Total, Discretionary .................

18,793

19,192

20,761

21,179

21,471

22,094

22,495

Mandatory:
General science and basic research:
National Science Foundation
donations ................................

64

75

66

35

34

34

34

Total, General science, space,
and technology .......................

18,857

19,267

20,827

21,214

21,505

22,128

22,529

1,125

918

989

1,380

1,158

1,186

1,211

270 Energy:
Discretionary:
Energy supply:
Research and development .......
Naval petroleum reserves operations ......................................
Uranium enrichment activities
Decontamination transfer ........
Nuclear waste program ............
Federal power marketing .........
Rural electric and telephone
discretionary loans ................
Non-defense environmental
management and other .........

14 ................... ................... ................... ................... ................... ...................
220
260
291
291
295
302
308
–398
–420
–420
–420
–425
–436
–445
168
236
326
326
330
338
345
238
209
179
179
180
185
191
73

41

57

57

57

59

60

406

229

319

320

323

331

361

Total, Energy supply ......

1,846

1,473

1,741

2,133

1,918

1,965

2,031

Energy conservation and preparedness:
Energy conservation .................
Emergency energy preparedness .........................................

619

745

850

850

860

882

901

160

146

151

158

160

164

167

779

891

1,001

1,008

1,020

1,046

1,068

Total, Energy conservation and preparedness

32.

313

DETAILED FUNCTIONAL TABLES

Table 32–1. BUDGET AUTHORITY BY FUNCTION, CATEGORY AND
PROGRAM—Continued
(In millions of dollars)
Function and Program
Energy information, policy,
and regulation:
Nuclear Regulatory Commission (NRC) ..............................
Federal Energy Regulatory
Commission fees and recoveries, and other ......................
Department of Energy departmental administration, OIG,
and EIA administration ........

1999
Actual

Estimate
2000

2001

2002

2003

2004

2005

26

23

34

34

35

35

36

–25

–21

–28

–28

–28

–29

–30

237

203

195

195

197

202

206

Total, Energy information, policy, and regulation ............................

238

205

201

201

204

208

212

Total, Discretionary .................

2,863

2,569

2,943

3,342

3,142

3,219

3,311

Mandatory:
Energy supply:
Naval petroleum reserves oil
and gas sales ..........................
Federal power marketing .........
Tennessee Valley Authority .....
Proceeds from uranium sales ...
Nuclear waste fund program ...
Rural electric and telephone
liquidating accounts ..............
Rural electric and telephone
loan subsidy reestimates ......

–18
–6
–6
–6 ................... ................... ...................
–556
–549