National Commission on Fiscal Responsibility and Reform meeting

>> Senator Alan Simpson: Thanks to all the members for their
hard work and total dedication, and the Bruce Reed and Company
staff, deeply appreciate it.
And to Erskine Bowles, my foxhole buddy when the shells
were raining down on my poor old bald dome, these are shocking
things that I couldn't believe it.
No. Where were we?
No, moving on, we will get something done in this
commission, and I think the American people will be proud of it.
Not to be said that the long-term denizens of D. C.
will feel as much enthused as they might be, maybe even abused
in the process.
But just a word about this remarkable village by the
Potomac, 36 square miles surrounded by reality.
It's an interesting place.
A note about our fine friend, Andy Stern, now the subject of
anonymous allegations and retribution from former union --
fellow union members who use the electronic fog machine to shower
material upon us all to spread their venom, I felt the fang in
their legs for about 35 years, but still walking.
To say quite clearly that I think any person who uses an
anonymous blog, say it quite clearly, is a jerk or a bonehead
or a boob, just a personal opinion.
If you have something to say, say it.
And tell who you are.
Don't whimper and hide out.
Democracy is not a spectator sport, but it's not a license to
demean and denigrate and belittle those of us who are in
the fray, while the creep who sneaks into the national debate
by the subterfuge of anonymous and often bilious babble
commands the allegiance of only the cynical, the disgusted and
the alienated in society, and the fellow zealot, of course, is
also one who sits about, while the rest of us, like this
18-member commission and millions of Americans try to
make things work, and lend their actual names to every cause as
patriots and citizens, and not just nameless detractors.
The only place in America for any democracy for the private
and anonymous expression of a strongly and sincerely held view
is the ballot box, that's the one, the only one.
So take part or get taken apart, but do it up front the American way.
Thank you, Colonel, if you will proceed.
>> Speaker: I'm doing --
>> Senator Alan Simpson: [Inaudible] to do with
it, but got a lot off my chest.
>> Speaker: If I could pick one partner, I'd pick Al Simpson.
And for those of you here today that want to save Social
Security, I can assure you that the one thing Alan Simpson talks
about is simply making Social Security solvent for 75 years,
you don't have to worry about Alan Simpson.
I want to thank all of you all for coming this morning and for
the time and effort that all of you have put into this.
It's taken a lot of time, it's taken a lot of energy over the
last five months, and you all have really been supportive, and
I deeply appreciate that.
What I appreciate more than anything else is you have
checked your party credentials at the door and you've come in
here in a totally nonpartisan manner to try to come up with
some solid recommendations to bring this deficit down,
something that we must do for this country, it is critically important.
I think everyone that we've had testify agrees with that.
We had the fed chairman come in, we've had six CBO directors,
we've had leading economists from both the right and the
left, and we've heard from experts in every field over the
last six months, and all have agreed that we must address this
and we must address it now.
All believe we have a fragile economy we must protect, but we
have to bring down this deficit in the not too distant future.
All have recommended to us that we reduce cost and spending
across the board, whether we call it a tax expenditure,
defense or nondefense spending or mandatory spending of any kind.
It's not going to be easy, it's not going to be fun, and in many
cases, it's also not going to be popular.
It is going to require sacrifice on the part of all Americans to get there.
So when you get back in November from the work you're going to be
doing in your home districts, we've got some very tough
decisions to make, so please keep your calendars open.
This morning, we're going to have three presentations, the
first dealing with performance budgeting, something that all of
us in the private sector are certainly familiar with, and so
are you in government.
And we're going to talk about secondly reducing the overlap
and duplication that exists in government.
Our speakers this morning are Paul Posner who is Director of
Public Affairs programs at George Mason, he'll discuss the
opportunities we have to integrate performance
information into the budget process.
Before going to George Mason, he spent many years at the GAO, the
Governmental Accounting Office, where he was a managing director
for federal budget and inter-governmental issues.
He will be followed by Pat Dalton and by Janet St. Laurent.
Ms. Dalton is managing director of GAO's natural resources and
environmental team,
and Ms. St. Laurent is a managing director of GAO's defense capabilities
and management team.
We thank all three of you for coming and testifying today.
And we'll start with Dr. Posner.
>> Dr. Paul Posner: Thank you, Mr. Chairman.
And I want to thank the Comission for conducting this
hearing today and recognizing that performance and budgeting
are not oxymoronic, that in fact, there are windows of
opportunities that we have when we have major fiscal challenges
like we're facing today to come to grips, not only with the
fiscal challenges we face, but with some of the performance
challenges we face in government.
And I think the idea was best expressed by one former budget
director who said budgeting should be about going after weak
claims, not weak claimants.
And I always thought that was a got motto for budgeteers to
follow, regardless of party.
I think performance has become more prominent in our national
debates, and certainly here inside the beltway in
Washington, and in states and in local governments and around the
world, partly because of the growth of government.
Government has become more important, it doesn't matter
which administration, which party, there's been a veritable
agenda explosion that brings issues to Washington's doorstep
with amazing speed.
Private troubles increasingly become public problems to solve,
whether it's distracted driving, out of wedlock births or
educating children for a future workforce.
These are things that are dumped on your doorsteps and you have to face.
In doing so, we've transformed government.
Government is no longer about delivering the mail and even
delivering the Social Security checks on time, those seem easy
by comparison.
Now it's about cleaning up the Chesapeake Bay, protecting the
ports from threats to homeland security, solving vexing traffic
congestion problems, investing, making sure that all of us use
low carbon energy more than we're doing.
To solve these problems requires not just government bureaucrats,
but a whole range of people and sectors in our society, state
local governments, nonprofit private sector.
When you think about cleaning up the bay, you're talking about
the problems are distributed so widely, it's not just the big
polluters, it's the farmers, it's the people who build
shopping centers, it's the people who build new homes and
new development, it's population growth that's really causing the
bay to be choked off.
And while these problems are widely distributed, you know,
it's government's burden in some sense to be accountable for
solving them, even though it doesn't have all the tools at
its means or many of the tools in its means.
So this is why we have a set of problems where the solution to
problems is highly decentralized, but the blame is
highly centralized.
And that gives rise to, you know, questions, well, if you're
going to be managing or if you're going to be in the
Congress, you got to focus on how can we improve the value
that we are getting for our money.
Increasingly we're holding leaders accountable, and as this
slide shows, leaders of both parties have kind of articulated
the same basic objective, whether it's President Obama or
President George W. Bush, they've all pledged before they came into office to ferret
out these weak claims and to really examine the performance
of government and make sure that we kind of take this
responsibility seriously.
And I think in some ways what I'm going to talk about and run
through some slides here with you today is one of the success
stories in government.
We don't talk about many of our success stories, we talk more
about the problems.
But, in fact, in the past 20 years, we have, regardless of
party, increasingly focused on performance, collecting better
information, holding agencies accountable, and increasingly
thinking about the way we make decisions in performance terms,
and I think that's something that has penetrated throughout
our government, as it has, as I say, throughout the world.
In some ways when you look at the history of what we've done
here, it breeds cynicism, it seems like we've -- keeps
pushing this rock up the hill and we can't quite get it right,
we have one initiative after the other, starting with the Hoover
Commission, planning, programming, budgeting,
management by objectives, et cetera.
And it certainly is a checkered history, if you will, kind of a
zigzag, but nonetheless, the trend is up, and the fact is
that national leaders are not willing to just let a single
effort kind of fall by the wayside, they want to strengthen this.
And so I think there's a movement upwards and there's
something compelling about --
>>Speaker: Dr. Posner, could --
>>Dr. Paul Posner: Yes, and, yeah, I'm sorry, I should have said
feel free to interrupt.
I know you will, but.
>> Speaker: Just a -- these sort of things have been talked about
for a long time, correct?
>> Dr. Paul Posner: Um-hmm.
>> Speaker: Decades, maybe scores of years.
>> Dr. Paul Posner: Absolutely.
>> Speaker: In the private sector to Erskine's earlier
point, this happens all the time, it's just the normal
course of activity, every year you say how do I do more with less.
>> Dr. Paul Posner: Right.
>> Speaker: All right, it's just the way it works.
But it never happens here.
Despite all the discussion we have about increasing the
effectiveness of government, it always seems like -- here's the
description I would use, in the private sector, if somebody had
a thousand people today and they to do ten percent more next
year, they come in and say I need a 1,000, budget for a
1,000, I need 100 more people, and I need the inflation for all 1,100.
Whereas in the private sector, we would say, okay, that's a
1,000, you have 100, so that's 1,100, I need 150 worth of
productivity, so now you have 950 people to get this all done.
That just doesn't seem to happen here.
Why is that?
>> Dr. Paul Posner: Well, there are several reasons.
One is that, you know, the private sector has a pretty
strong compelling goal, which is to improve net income and
profit, that's a bottom line that is understood, there's a
metric that you can buy into when you can understand how all
the investments play into that.
And government, if you take a single program, we have many
conflicting objectives, and we want the IRS to collect as much
revenue as possible but not bother tax payers.
We want the forest service to cut down lumber to feed the wood
industry and protect the spotted owl and protect the God-given
right of every American to ski on federal land.
I mean, how do you balance those objectives?
And moreover, if we're talking about some of the things that
we're increasingly taking responsibility for, it's not
clear whether adding 20 people or 100 people is going to solve
the problem, because you're not essentially responsible for the
problem, you're trying to incentivize people throughout the country.
You know, state and local governments, homeowners and the like.
You think about how do you prevent wild fires, you say
you're the forest service, you know, that's not a simple
production function, it's not an input/output equation, you know,
it's getting people to kind of start locating their homes in
different places, in possibly less attractive places.
It's fireproofing and changing the way we build homes.
And it's getting insurance companies to start penalizing
people if they put their homes in harm's way.
There are some communities in this country that put a big X on
the driveway if the homeowners have not fire-safed their homes.
And they literally, at least they say, they don't offer the
same level of fire protection.
I mean, that's the level that we're talking about here.
National government has responsibility, political
leaders here in Washington, the question is it's a very complex
set of problems we're taking on here.
So I think that gets to part of it.
We don't agree on all of the different goals we have and we
really sometimes don't know how to do it.
>> Speaker: If I could just build on that a little bit, even
in the private sector, for example, I would never tell
people that you need to cut costs, be more productive, and
that's at the expense of quality, delivery or anything else.
The point we always make is a success is achieving two
seemingly incompatible goals.
All right, so, yes, I want lower inventory, but I expect better
delivery, I expect lower costs, I expect better quality.
>> Dr. Paul Posner: Right.
>> Speaker: That just doesn't seem to happen here.
And even with all of your suggestions, which I had a
chance to go through, all good, but how are they ever going to happen?
What do we need to change in terms of the dynamics of the
budgeting process, how the executive branch executes, what
do we have to fundamentally change to make any of this stuff
ever happen?
>> Dr. Paul Posner: Right.
Well, those are excellent questions, and I think you're
right, the world is not simple in the private sector either,
and I understand there are tradeoffs there.
But I think part of it is just getting better at knowing what
we're trying to do and measuring it.
I mean, so there's a supply problem.
And then once you've built that bridge, getting decision-makers to use it.
And frankly, that's been some of the problem, because we have
different things we want from government, and reducing costs
is only one of them.
That's why I think windows of opportunity like you're dealing
with provide in some ways that discipline, you know, that a
private corporation faces when they're facing competition, I
mean, that's what really motivates private -- to keep
their -- keep on their toes.
I think we're at that point in government now.
Certainly we're at that point in state government and local
government, and now I think that storm is coming here, that we
now face that same -- those same set of pressures.
I think that could possibly, as we've seen in other countries,
provide the source of motivation.
>> Speaker: Doctor, we have [Inaudible]
and then Senator Conrad.
>> Speaker: Well, just two other points.
Private sector people, like Dave, tend to think of the
government as though it were one thing, and somebody, like a CEO
was sitting there making decisions.
Two points really.
One is sometimes that's true, and actually if you look at what
happened to the government workforce over time as it took
on more and more jobs as Paul was saying, the government
workforce has not increased.
And it is doing more with less people, partly because of
contracting out.
But the other point is there is the Congress, and if you really
-- one of the conflicting objectives is we want this plane
that will do all these things for the least cost, but we also
wanted to make jobs in a lot of people's districts, and those
are incompatible objectives.
>> Speaker: Senator Conrad.
>> Senator Conrad: You know, I remember having a professor in
business school who said you can't manage what you can't measure.
And we have a real lack of metrics.
And just in going through some of your material and knowing
your work, you're very into metrics.
And that's what we need.
And, you know, we were having a conversation in one of our last
meetings, Senator Coburn and I got into an exchange on the
defense department.
You literally do not have an accounting system that allows
you to manage that department, because they, as we heard from
our defense expert who was here several weeks ago, they can't
tell you how many contractors they have.
In fact, we asked them for a range, you may recall, and they
told us the range was 1 to 9 million.
That's a pretty big range.
>> Dr. Paul Posner: I think that's -- that's right.
I mean, there's two sides to this equation, one is the
benefits we're trying to deliver, which are often very
difficult to measure, and we've seen the debates on no child
left behind, what do we want -- what are we trying to measure in
school performance, well, that's a big debate, there is no
national agreement on that, certainly not at the top.
The second is costs.
I mean, federal agencies, you know, spend what they're
budgeted, but unlike the private sector, there's very little
attempt to do cost accounting where you take, you know, all of
the indirect costs and all of the fringe benefits and you
associate that with a program, you say, here's the total cost
of achieving these objectives.
We generally don't do business that way in government.
Those costs are segregated in different budget accounts, and
then you leave it to some poor analyst to try to kind of pull
it all together in a spreadsheet, but we don't really
budget and provide incentives for managers to manage that way.
>> Speaker: Senator Baucus.
>> Senator Baucus: You know [Inaudible] like a lot of
challenges, you know, and I think Alice [Inaudible] kind of
put her finger on it a little bit, we tend to take on the
whole subject at once, instead of dividing it up into discrete
parts and portions.
Some of those discrete parts we can deal with more
easily than some others.
Tied into it, Senator Conrad said about lack of metrics, I do
believe that there are some areas that you can measure where
metrics do work, other areas where metrics is really tough,
because this is public policy as opposed to making more
Honeywell projects or products.
And one for me is -- that I pushed on finance committee is
the Administration's pledge to reduce -- to increase, to double
exports over the next five years.
The goal is to double exports over the next five years.
Well, you can measure exports and you can measure five.
So I've been pushing the Administration whenever they
come up before the finance committee to give me benchmarks,
give me a timeline to show us the degree to which we're
accomplishing that objective, this year, next year, the
following year.
And I have found that at hearings that I run into
resistance even there, without naming names, I asked them
what's your -- what are your benchmarks, what are your --
quantify measures that would show the degree to which we're
going to double exports in the next five years, and they don't know.
So I force them to, I say I want you to come back before our
committee, you know, every six months to tell us what they are,
and next year six months later and so forth.
My main point being there are some areas I think we can
quantify and measure, and should be in federal government, and
that will help, but it's tough to do it everywhere.
>> Dr. Paul Posner: Well, if I can -- I think what you just
said, Senator Baucus, is exactly how we make progress, it's
getting oversight up here that, you know -- and one reason we
don't -- many agencies, certainly ten years ago, GAO
would go knocking on the door of the Department of Energy or at
NASA, and how many federal employees do you have, you know
that to the person, how many contractors, well, gee, it could
be anywhere -- it got to the point where GAO had to try to
estimate it, and the reason is nobody asked them, there was no
-- you have to have a count of employees because you have FTE
limits in your appropriations, appropriators hold you
accountable for your on-board strength.
They don't hold you accountable, and nobody really budgets for
contractors that way.
So until the kinds of questions change and we really understand
how we're doing business and Congress gets into the game,
which is the theme of my bottom line here ultimately, I think
Congress needs to get more into this game of performance.
>> Speaker: My experience having managed in the private sector
and the public sector and having managed at both the state and
the federal level, that there is less emphasis here on goals,
objectives and time lines and real accountability, there's
more emphasis on the incremental spending rather than on the
continuation budget, which is the big part of what you're
really spending, and third, the definition of what is a cut is
very different here in the state government than it is in the private sector.
Here if you get an inflationary increase, if you're spending a
trillion dollars, you get a five percent inflationary increase
and you cut it back $25 billion, you had a cut, whereas we would
consider that an increase in the private sector.
So a lot of it is cultural and a lot of it is a different focus
here than in the private sector, two very, very different places
to manage, I assure you.
>> Dr. Paul Posner: And I started my career in the New York City
budget office, and we were the home for performance
measurement where we spawned a lot of it, and one of the things
you learn at the local level is you're responsible for
delivering the garbage and you have total control over that
function, that's pretty easily measured.
You know how often you can do it and what the quality should be.
When you're at this level, you're sometimes five or six
steps removed, you have many different hands in the pie, and
with very ambitious and difficult goals, that's a big
part of why there's a difference here than there is down there.
>> Speaker: If I could, I'd like to build on a point that both
Senator's Baucus and Conrad made, and that's on the service
metric of some kind.
Because I would say even in business, we don't just run into
the what's the quality of the product, there are more
subjective things that you have to try to measure, and I'm a big
believer, and we have this discussion all the time, it's
not just about cost, you also have to measure effectiveness.
So just to give you an example, and something that I think is a
concept that's probably usable here, our HR people, our human
resources people, they used to measure the speed in which they
filled a new job, that seems like it makes sense, because you
want jobs filled more quickly if you have an open position, but
then you start the discussion about, well, wait a minute, how
do you know that's a quality person, all right, because at
the end of the day what you're really looking for is very good people very fast.
And then you enter the conversation, well, you know,
how do you measure that, that's impossible to measure.
Well, what we came up with is a survey at the three-month and
12-month point after a new hire where you survey the manager and
say, are you happy with the person that we helped you get.
Now you end up with a quality metric, a performance metric on
something that was considered unmeasurable before, and what
you end up doing is saying, yes, that actually does get better
over time, and people start focusing on both.
So I think there may be more opportunities, even if it's
surveying your customer base, somebody's unhappy with their
postman, if you just do a statistical sample, for example,
of an electronic survey of people who want to participate,
are you happy with your guy.
With the firefighters, maybe you survey fire departments and say,
what do you think of these guys.
I can't imagine there isn't a way to start coupling
effectiveness with cost in a way that we don't today.
>> Dr. Paul Posner: And I think that's the spirit of this
movement is to start focusing not on the inputs and what you
do when you come to work every day, it's what outcomes are you achieving.
And I have a couple of examples a little bit later.
On the Coast Guard, for example, that maritime safety is their
responsibility, an all they used to collect data on is how many
inspections they did, then they realized we don't have any idea
of how many deaths we're averting, you know, what's the
rate of death in the maritime industry, and when they started
collecting that data, they realized, my God, we're not
going after this in a smart way, we need to start training rather
than inspecting, because it's people not knowing what they're
doing is causing the big problem with tugboat accidents and
things like that.
They had a huge reduction in accidents and death as a result of that.
>> Speaker: This is a hot button for me, so, but Einstein I
thought said it pretty well, is that not everything that's
important is measured and not everything that's measured is important.
And when you think about it, if you're measuring number of
inspections, that's really irrelevant to what it is you're
trying to get done.
And putting some thought into whatever cost you're putting in,
what objective are you trying to achieve and find a way to
measure that no matter how difficult, that's where the opportunity is.
>> Dr. Paul Posner: Right. Okay. I'll go on here.
I'm not going to cover every single slide, this pretty much
reiterates the point that it's been a historic shift in
budgeting from a focus on inputs, dollars, people and
accounts to a focus on outputs and outcomes as government has
become more critical to the national life, and this is true
at all levels of government.
A little bit about what do we mean by performance budgeting
and why are we even talking about performance budgeting.
And I think one of the things that we've learned from the past
is that if President Johnson waves a wand in 1967 and says
every agency shall do a performance plan and do benefit
cost analysis, and it wasn't linked to the budget, after
about ten weeks, the bureaucrats don't pay attention.
The same with Nixon's MBO, management by objectives, great
high-minded programs, good government, it's not linked to
the one process that people pay attention to, and if people up
here don't buy in, those two things are critical, these
things become one-year wonders, but if you get it linked to the
budget and you have it anchored in a Congressional statute with
strong oversight, then you can have something like we've had
the past 20 years, which is performance becomes a
sustainable part of the management agenda.
So that's why we started realizing we have to link
performance and budgeting partly to better budget, as well as to
improve the sustainability of these initiatives.
And this kind of starts to put a little bit of meat on the bones,
what do we mean by performance budgeting.
And when you look across the country and other nations,
there's kind of a -- kind of graduation of degree of
difficulty, if you will, in what we're talking about.
The easy thing to do is presentations, and we have, if
you look at the huge volumes of federal budgets and documents,
we have lots of performance data in those documents.
That's kind of almost a no-brainer.
The next question is what is -- what basis are you going to used
to make decision, what's the fundamental orientation of your
budget and appropriation accounts, are they salaries and
expenses in construction and number of field offices or are
they some kind of results.
That's much more difficult.
And we haven't really made much progress in this country, at
least at the national level.
Other countries like France, Italy have significantly
overhauled their budget accounts to focus on performance.
>> Dr. Paul Posner: We haven't done that yet.
Then you talk about the next stage would be setting targets
for managers and I have a slide here.
That I am going to -- I am going backwards. Okay.
It is -- well, I am going to -- I am getting a little ahead of myself.
Great Britain has for many years had something called Public
Service Agreements with it's agency managers.
And this is an example of what their health department public
service agreement was.
And so here what they are seeing is we are going to give you a
budget, for certain you know dollar amount and we are going
to expect these kind of improvements and life expectancy
for the next three years.
Agencies get a three year budget in great Britain and we are
going to expect real changes and improvements and death rates
from disease et cetera.
Those are laid out in the contract.
And theoretically if you don't achieve it, obviously you have a
lot of explaining to do.
Now, a lot of that is not controllable by government, but
they should be given credit because they reach for these
outcomes and they really tried to change the basis of accountability.
Well, that is performance targeting.
We don't do that by and large in this government.
We don't set budgets based on links to targets and hold people
accountable for those targets.
But getting back to the previous slide here, which I'll get to in a minute.
So -- so that is -- we haven't reached that.
Performance link funding.
That is the probably the biggest challenge and maybe the most
difficult, which is you know can I make my budget figures linked
to performance in some performance like way.
In other words if I improve performance, I am going to give you more money.
If I reduce performance, I am going to give you less money.
That is a much more challenging concept.
And it may work in the private sector.
If I have K Mart for example has opportunities to expand and they
have a new business that is thriving he been BURKE,
Virginia, then you want to put more money into that.
That becomes a profit center.
You want to reduce the costs.
In government it doesn't work that way.
In government often if we have problems with a program, the
number of drug abusers go up, we don't cut drug treatment programs.
We usually increase them.
Government has a very different model for how it budgets than
the private sector.
And the last manifestation for performance budgeting is
assessments which I'll talk about in a few minutes.
Going back and looking as you said Mr. Chairman about the
base, what are we really getting for our money and doing some
organized systematic assessment.
So I am going to talk about what I think is the -- are the keys
to making this if we were to do performance budgeting how would we do it.
There are four basic success factors, one is defining expectations.
Two, is addressing the structural alignment.
In other words making the budgets and performance plans
align with each other.
Three is increasing the supply of credible measures and outcomes.
And four is promoting demand.
Those four things is what it is going to take to really
institutionalize performance budgeting.
And I think we have a long way to go in all of them. Basically.
Expectations is something that very frequently public officials
particularly up here think we can take politics out of
budgeting by doing performance budgeting.
That is the furthest thing from the truth. Furthest thing.
Actually once I start budgeting for performance, conflicts can
get much more intense.
I mean you are only going to achieve this much infant
mortality reduction versus this much.
I mean you are -- but the point is many people are kind of
believe that once we have performance measures, we should
automatically budget.
So when your program is improved you should get more money.
I just illustrated with drug abuse that is not a realistic
model for government.
Budgets are really a function of performance and needs and equity
and a lot of other judgments and they inherently will always be that way.
So I think it is more realistic to say can we make performance
be part of the discussion.
Not the driving decision rule.
But can performance become part of the way we think about budget choices.
I think that is the choice we have.
And then to do that, we have a couple of task we have to do.
One is what I call building the supply chain.
Creating plans and measures and outcomes that are credible.
And that are linked to the budget accounts.
And there I think we are part of the way there.
But with government performance and results act.
And we started in 1993 and really that is the basis for
everything we have done since.
And that has been sustained at the agency level and it is again
I think one of the success stories in government.
And as I illustrate with these examples just because of GPRA,
there has been real significant changes at the agency level.
Not in congress.
Up here not much attention has been paid to the performance plans.
But the agencies have used these performance metrics to improve
the way they manage.
I talked about the coast guard, before reducing marine accidents
by being more systematic about the outcomes they are trying to achieve.
Veterans health networks.
That is another good example.
They have health networks throughout the country.
They were able to pilot best practice in cardiac surgery and
use and apply those practices to all of their health networks and
achieve significant reduction in cardiac morbidity.
Now what was important was they first had to measure cardiac
morbidity across their hospitals.
They hadn't done that before.
That is the first step.
Having done that they were then able to kind of research and
analyze what works, evaluate.
And then apply that to the way they manage.
And we really got some improvements.
So GPRA has not only produced a pile of reports and plans, it
has actually improved performance in selective areas.
>> Speaker: Another question. For you.
These are some good examples.
One of the things that that if this were occurring in
Honeywell for example, is something I wanted to do.
I would look for a business or plant that had comprehensively
done it well and look at that as best practice and just
kind of a measure everybody against.
How closely are you getting to that.
As you look through all of this, is there any agency or sub
agency or whatever we would call it, that you would point to and
say these guys get it and they have really been doing this.
If we could have the rest of the government doing it the same way
these guys are, we would have something.
Do we have something like that best practice place?
>> Dr. Paul Posner: Well, we don't have a best practice
institution that systematically analyzes these things.
GAO does some work like that.
But particularly I think the coast guard and VA have really
and MITSVA have really lead the way in some sense for federal agencies.
They take it seriously.
They use it to manage their employees.
And their programs.
I mean there is other examples too throughout government that
we could point to, but I mean -- the park service for example for
years never collected data on it a's three hundred and some parks.
As a result of this, they started collecting data on
visitors and on environmental issues and what not and now for
the first time they are managing parks centrally, rather than
having fiefdoms in each park.
That is a significant accomplishment, so I think there
is not one place and not a shining star.
I think there is a number of places that have done different things.
>> Speaker: I just -- there is an example in the federal
government in the administration of grants where it is done well.
And that is a library grants, museum grants.
Those people follow to a tee best practices.
There isn't a grant that goes out that doesn't get followed up.
Every one of them -- they have hundred percent follow-up.
They according to the grant, they withhold money if people aren't.
In other words they are actually actively managing grants.
And it is the only place in the federal government where we
actually do it.
There is a best practice that is happening right now where they
are infinitely better than everybody else who administers grants.
If they can do it, everybody else can do it.
But we are not making them do it.
>> Dr. Paul Posner: Okay. Now, we GPRA built the bridge, the supply chain.
The question is who is going to walk across that bridge and use the information.
And that is the real problem.
The Bush administration to it's credit, developed this PART
tool, program assessment rating tool, it rated every major
program in the federal budget.
And it raised the salience of this issue and as a result
almost forcibly injected performance in the executive
formulation process, not the congress, executive formulation process.
So they changed performance from a tool for agencies to manage to
a tool for OMB to use in budget formulation.
That wasn't a significant achievement.
But had some side consequences.
One is, you know it really wasn't information that congress
it accessible to it and congress didn't feel they were in that game.
Congress never felt engaged and in fact actively resisted in some cases.
You know, that became a significant problem as well as
you know collecting, doing performance on individual budget accounts.
They kind of didn't look at the bigger picture cutting across
some of these budget accounts.
Where we are trying to achieve job training, across 80 programs
or whatever it is.
You know, the part tool wasn't really well suited for that.
But nonetheless it continued to move the ball forward.
And this is just an example of the part scores, that gradually improved overtime.
Some people say they improved because agencies got better at
taking the test.
The question is did it improve really the way programs were managed.
I think one of the things you can say there was a tremendous
fear on the agencies of being shamed.
Shame is a powerful inducement in government and else where.
And as a result, agencies devoted more resources to
getting their act together particularly on evaluation than
they ever did before.
Now at the Obama administration, they backed off in part.
They have been much more selective.
They have what they call a high priority performance goals.
Agency has select, select number of goals.
Examples are up there on the screen.
These goals are then monitored quarterly by OMB.
One of the important things that is just happening is that the
house has passed legislation and the Senate is marking up
legislation today in the governmental affairs Homeland
Security committee, that would institutionalize, that would put
this high priority goals into law.
And require agencies to do these.
And require OMB to establish a set of federal government wide
priority goals which I think is very important.
Our experience here with this kind of long lasting focus on
performance just to give you a little insight on the other countries.
OACD has some studies.
That shows many nations have been at this for many many years.
More than ten years. Just like us.
And just like us, the use of performance -- I apologize.
This chart a little vague to read.
For the most part, most agency offices say they use performance
to inform but not to mechanically determine budget allocations.
I think it is the right answer.
And as this chart shows, hardly any governments throughout the
world the advanced world are using performance data to eliminate programs.
By and large. I have already gone over this.
Let me just -- one of the exceptions to that is when
nations are in fiscal trouble.
Canada, Netherlands, Australia, they turn to something called program review.
Which is what I want to get back to in a minute.
When I go at the end.
And program review, they do that base line review you were talking about.
They take groups of programs and they examine those weak claims
they look for performance and they look for opportunities for savings.
Going forward, what are the challenges?
Well, basically I have listed some of them there.
I mean we talked about some of them already.
You know, to really make performance a -- more a part of
the way we budget.
We have to first of all get support and agreement on the goals.
We have to find better way to link what government does to outcomes.
We have to fundamentally build support among non federal actors
because they are critical to achieving anything we do in government.
And most importantly we have to get congress in the game.
And I want to just show this one slide which I developed when I
was at GAO, which illustrates the performance cube that we call it.
That really most programs these days are managed in a three part way.
One is management and performance delivery are a
function of how well the agency is managed.
That is the right-hand side.
How well is the agency bureaucracy managed?
But then two, what kind of partner are they relying on?
And how well do the partners buy into the federal goals and the like?
And we have seen some significant cases where they don't.
We tried to implement real ID across the states and most
states said not on my block you are not.
And then the tools that we use.
We use a range of tool, direct spending, grants, contracts,
loans, tax expenditures and the like, regulations.
And all of that goes into making a well managed program.
Very difficult to pull off.
I am going to talk now just a bit about the -- it was kind the final point.
How can we work here in the congress to build a more
strategic focus where we -- you know we look more at budgets
across program areas as they effect broader mission goals.
And I call this a strategic approach to budgeting.
The way we are structured here in congress inhibits trade offs
across programs to achieving common goals.
Whether it is higher education which I'll show you an example
or food safety or variety of other things.
I know my colleagues at GAO are going to talk about.
We don't do that very well in our government.
And certainly in the congress.
And yet we certainly don't have much incentive to examine at the base.
We do at the margins.
And so the question is, can we as either part of your process
or going forward in the future, create a part of our budget
process if you will that focuses on the higher level of what we
are trying to achieve and all the different tools we are using
to achieve those goals?
Part of that is not only talking about spending programs but tax
expenditures which this chart shows.
And the red line now exceeds discretionary spending.
Total revenues we lose from tax expenditures now exceed
discretionary spending.
And for the most part, these tax expenditures are functionally
equivalent to out lays.
We achieve common goals through subsidies.
Sometimes we administer them, sometimes we provide them
through the tax cuts.
An example of this is housing portfolio from a CBO report and
you can see just the tax expenditures for home ownership
far outweigh the spending for home ownership.
On the other hand, spending for rental housing outweighs tax expenditures.
So these ratios differ.
Most programs are -- most policy areas are portfolios of programs.
I am going to skip over some detail here.
The same is true with the education budget function which
is a rich array of different tools.
Discretionary, mandatory loans and tax expenditures.
And when we look at one area and drill down, the federal higher
education subsidies, we are throwing a lot of things at
higher education to promote affordability and accessibility.
And GAO has done some work that shows these things are not only
not thought through together, coordinated but they create
significant problems for the consumer.
27 percent for example of Americans don't take the tax
credit for which they are eligible for.
And there is offsets.
You can be -- if you take the tax credit, you have to count
that against the income you are eligible for the pell grants for example. And vice versa.
So there is tremendous kind of leakage that happens in the system.
To make matters more importantly there has been no evaluation
done of the higher education portfolio or even major programs
to understand how do they effect accessibility to higher education.
How do they effect graduation rates.
How do they effect employment ultimately.
Those are the goals we should be achieving.
We don't collect that kind of data, we don't do those kind of
studies and we also have found that while we are providing
higher education assistance at the front door, at the back
door, universities are raising tuition as a result of this.
So in some case we are undermining our goals because
the actors we're using don't necessarily share our goals.
I am at a university.
I understand how that works now. I didn't before.
So what I think what we might be looking for.
I will end here.
Is a way for congress to kind of develop a leadership agenda if
you will where either as part of the budget process or possibly
separately you take a portfolio whether it is housing, higher
education, several a years, this is what we have seen other nations do.
And you drill down and you look at all of the tools that are in
part of that portfolio and you try to drive that through the
congressional budget process which requires a more
centralized budget committee admittedly.
And you try to do some kind of a process where you get all of the
committees to do a joint kind after set of oversight hearings
coming up with recommendations and possibly even a
reconciliation bill that is performance based.
This is the kind of thing that Arizona did in the early part of
the 2000's where they took a couple of areas every year.
One year it was juvenile justice.
And they had all their committees focus on that area,
how can we improve performance in that area?
And there was a leadership push to get that done.
And I think that is what we need from the congress, you know, to
start driving performance at the level that it really matters
which is at these broad missions.
>> Speaker: The State should be enforced to do that because of
the budget situations.
As an example in North Carolina no longer do you get funding for enrollment growth.
You have to meet specific retention and graduation goals.
You have to meet goals of the number of baccalaureate per cost
of producing a baccalaureate compared to what your peers are doing.
And are you making progress or not making progress.
And again, historically what they did, if you were -- it was
all access and nothing about productivity and outcomes.
>> Dr. Paul Posner: Right.
I know that must be interesting process having been in the university.
How that plays out. But that is exactly right.
I think the point you are making is fiscal necessity sometimes
forces you to do things to change the way the game is played.
>> Speaker: In my experience it is almost no different than a
leveraged buy out.
As another example, you know I had two universities come to me
and they both wanted to additional classrooms.
I asked the question, well, what is your current utilization and
we actually as Dave was just saying.
We collected that data but nobody ever looked at it.
And when we looked at the data we saw that one was 20 percent
utilization and one was at 60 percent utilization.
Neither got the money.
But you have to -- you know we were forced to make because we
had to look at through put just like any other organization does
before we awarded the resources.
>> Speaker: Right. Yeah.
>> Dr. Paul Posner: Okay.
I think I am going to stop there in the interest of time because
I know we have a lot of things you want to get done.
I don't know if there is other questions or issues to talk
about with performance.
>> Speaker: If I can go back to the beginning because --
>> Dr. Paul Posner: Yeah.
>> Speaker: -- because personally I like everything you
had to say about this.
This whole idea of looking at what are you measuring outcomes
and not outcomes that are easily measure but rather what are you
actually trying to get done.
I like the whole idea.
If I could though, getting to your last pages on making it an
agenda all the different sub functions that kind of things.
>> Dr. Paul Posner. Yeah.
>> Speaker: What would you suggest that all of us, we
actually do here?
What has to fundamentally change?
How do we change it so it becomes a part of -- you can't
just tell everybody, okay, now do it.
It doesn't work that way.
Especially when you have got this institutional inertia that
has been built up over decades.
How do you -- what should we actually do or recommend to make
something like this happen?
Beyond saying everybody needs to have a performance objective.
>> Dr. Paul Posner: All right. Right.
>> Dr. Paul Posner: All right.
basis, taking a couple of areas and this is what we learned in
other countries really works is when you have fiscal heat on and
incentive to do this, taking a couple of policy areas, whether
it is higher education or whether it is housing or
whatever kinds of issues are important to the congress and
having the budget committee kind of become -- just because they
cover the whole waterfront, You know in some sense -- and organize a review.
Like a program review like we have seen in other nations of
those areas in concert with the other committees of the congress.
And possibly setting some kind of targets for spending cuts and
tax expenditure cuts in those areas as well that would then be
enforced through reconciliation, like a performance based
reconciliation process.
I mean, I have long thought that we ought to think about moving
toward a performance resolution for the congress on top of a
budget resolution or as part of the budget resolution.
>> Speaker: Senator Conrad?
>> Senator Conrad: You know, with the budget committee
function, I have often thought we should stick with annual budgeting.
But the more I am exposed to what actually happens here, I am
increasingly of the view we should go to budgeting every two
years, and spend the other year on performance and oversight.
And I think that is a recommendation if we did it
thoughtfully could carry a lot of weight from this commission.
And look I will confess, I have been opposed to it.
I have thought -- I don't know of any institution of any
significant size that doesn't budget annually.
But the reality is we have fallen into a pattern into which
we are only doing a budget every other year in any event.
(Laughter).
You know, I was successful in getting one in an election year.
You go back to 2000, we have only done it once where we have
gotten a budget in election year. I was able to do that in 2008.
But you know you look before and after, it doesn't matter which
party is control, in the election year we tend not to do a budget.
So let's do a two year budget in the off year and let's spend
that other year drilling down.
And doing oversight. And doing performance.
I think it would help change the whole culture of budgeting in this institution.
And I do think that is something we should think carefully about.
Obviously there are others we would have to visit with other
than those who are around this table in order to get this adopted.
But I think it could make a meaningful change in the way we operate.
>> Speaker: Congressman Ryan, don't you agree?
>> Congressman Ryan: I agree with that.
I have been a supporter of biannual budget for a number of years.
Congressman Hensley and I have it as one of the corner stones
of our budget process reform bill and Ken, it is the exact
same point.
Do your budgeting and appropriating in the off year
and spend your time doing oversight to see how well the
money is being spent in the election year.
All we do is appropriate money around here these days.
Once we are done appropriating, we go to new years, then we
start appropriating again.
So we just spend our time spending money.
We don't spend our time finding out how well the money is being spent.
So I -- that is one of the reasons that I am a buying into the budget man.
Other reason is, if we do budgeting or deeming on
discretionary spending in the election year, we really up the
levels and that throws our Baseline way off.
So that if anything, you have got to obviously have an off
ramp for emergencies in the off in the even year.
Because things will happen.
That is why the emergency set aside is appropriate and so
those two proposals, a set aside for emergencies that is tightly
defined with a biannual budgeting, along with
discretionary spending caps, I think gets us kind of where we
out -- where we ought to go.
>> Speaker: I just wanted to reinforce this.
I have been in for -- I have been in buying and budgeting for a long time.
I think it has a couple of advantages in addition to those
that have been mentioned.
Namely that the agencies get more planning time.
Because now often they don't get their budget until after the
fiscal year has started and it is all very Helter Skelter.
If they plan for two year budget and actually get it on time.
It is a lot better.
The defense department was converted to this at one point.
And did submit two year appropriation requests on the
grounds this would be better for management of defense resources.
The congress resisted it and on the grounds that they thought it
was a loss of control over what happened.
Actually, I think you gain control.
Because you can make more changes if you are doing it in a
two year frame than you can on a very short time horizon.
>> Senator Conrad: You know if I can just say, problem on defense
is they went to a practice of supplementals that really hid
the ball from congress.
So you know, you got to find ways to guard against, what is
the way to get around this.
And we are geniuses here getting around our own rules.
And you know you have a circumstances in which you then
have an endless supply of supplementals coming through here.
And that defeats the whole purpose.
>> Speaker: Congressman Hensley.
>> Congressman Hensley: I agree with Ken on many matters,
including never under estimate the creativity of the elected
official -- (laughter) -- to get around statutes that they have helped write.
I do believe though that it is important to recognize that
biannual budgeting and performance base budgeting in many respects go hand in hand.
I mean, as we know, what we do around here, is we measure the
inputs to a program and we don't measure the outputs.
So if you want to show you care about the veteran, if you want
to show you care about the elderly, it is all measuring the
inputs regardless of what the performance is.
And I will say this also, you know, the only time we ever get
any type of oversight around here is when we have bifurcated
government, when we have one party in charge of congress and
the other party is in charge of the White House.
That is the only time.
You know, it should not be used as a political tool.
It ought to be institutionalized regardless of who occupies the
administration, congress has to do the oversight if we want to
get a grip on our budget.
But I just wanted to add my voice and Dee, Paul and I, I
think we worked on this for eight years, so far to no avail. But hope springs eternal.
>> Speaker: Thank you very much.
And we'll go to Ms. Dalton now. Congresswoman.
>> Congresswoman Dalton: Yes. I just wanted to say that I think the big gorilla in the
room really is the defense budget which accounts for 55
percent of the discretionary spending and we have so much
work to do in order to make sure that performance meets the
expenditures which they don't even know at all and we have
discussed this at length.
But you know I think we need to especially focus on that.
I was on the government efficiency sub committee of the
government reform committee and the GAO helped us but every
single place that we would shine the light on that defense
budget, be it credit cards or airline tickets or whatever it
was, there was incredible abuse that the department didn't seem
to know about at all.
>> Speaker: In the range of contractors you have somewhere
between one and nine million, you know you don't have very good accounting.
Thank goodness, we do have Senator Coburn who has provided
us a great look into the defense budget and it is going to be
enormously helpful to us when we get done to doing our job. Ms. Dalton.
>> Ms. Dalton: Thank you.
First of all, thank for the opportunities to be here today
to discuss GAO's work on duplication and overlap in
federal programs and other cost savings opportunities that we
have identified.
I head up GAO's defense team and Pat and I will be sharing this presentation.
She'll be coming in the later part.
But I'm going to go through the first set of slides with you.
If we could move to the next slide, please.
The commission's role is very, very, important.
And we believe that GAO's work has demonstrated the need for this effort.
For the past decade we've been doing a lot of work looking at
long-term fiscal simulations, and all of this analysis has
shown that the federal government is on an
unsustainable path.
We also produced a report back in 2005 that we called 21st
Century challenges and this called for the executive branch
in Congress to work together in examining the base of the federal government.
We noted that this effort was needed for multiple reasons.
One, demographic transcending national security threats,
homeland defense threats, global interdependence, and also
involving threats in other areas.
>> Speaker: I'm sorry, I know I keep interrupting, but building on
Paul's presentation, how can in your view, how could -- I
actually saw you had some great recommendations in here.
How can GAO help to implement that point of how do you measure
outcomes and not just inputs.
So you get more of a sense for effectiveness of spending.
>>Ms. Dalton: Right.
>> Speaker: How can GAO help?
>> Ms. Dalton: I think there's many ways.
As you know, we cover the federal government in looking at
programs all of the time.
But it's a multipronged problem in that it starts in many cases
with the pro-quality of the data to begin with.
So we point that out. We make recommendations.
For example the Department of Defense which is the area I work on.
And the day-to-day basis still has significant financial
management problems and issues that have been pointed out.
And it's going to be at least several more years before they
get some of their financial management systems updated and
their data more accurate.
It's still a very, very, long-term challenge.
That's only a piece of this.
The other thing that we can of course assist with pointing out
and continuing to comment on the quality of the metrics and plans
that agencies produce to guide them.
There are significant weaknesses there.
And then of course we go back in and look at how well programs
performing against either of those goals or the metrics that
have been established and find additional problems, and make
recommendations to improve there.
But going even a little bit further, the work that we hope
to be doing, looking more on duplication and overlap, we also
want to look at options in some cases for perhaps restructuring
or taking some of these issues further than we have taken them in the past.
Speaker: And the same question for you that I asked Paul earlier, is
there any agency that GAO would look at and say when you're
trying to combine the input, the cost and your also measuring
quality outcomes, is there anyone that you would look at
and say they are the best of the bunch?
I mean, you can argue that they are not perfect, nobody ever is,
but these guys really seem to be doing something and we really
ought to try to spread that approach, that best practice
across the board.
>> Ms. Dalton: I don't think we could identify a particular agency at
this point.
I think we have seen maybe pockets and programs.
Paul gave a couple of good examples.
But, I think we have seen more pockets.
But we also see a lot of challenges in a lot of areas,
where the quality of the data and nature of the metrics and
the focus on measuring against performance needs to be
dramatically improved.
To continue, as you know --
>> Speaker: I do think that's a big deal, that
she came forward to a single agency that's a best practice.
>>Ms. Dalton: Again moving forward.
Congress says part of the Pay-As-You-Go Act of 2010
mandated that GAO identify and report annually on duplicative
goals and activities across the government.
Senator Coburn is key sponsor from this effort.
And this mandate will enable us to build on our past work on
duplication overlap and identify additional opportunities for
achieving great efficiencies.
Could you move to the next slide, please?
We would like to cover a few topics today.
First we'll provide some examples of GAO's past work on
duplication and overlap and fragmentation in federal programs.
We would also like to summarize some of the other key cost
savings opportunities that we have identified in your work
over the past several years.
We'd also like to discuss some of the key challenges that
agencies and the government as a whole face in trying to reduce
or eliminate duplication.
One of the problems here is of course the increasing inner agency nature.
A lot of the challenges that government faces because
agencies more and more have to work together to solve key
national issues.
And then finally we'd like to talk a little bit about our
planned approach to address mandate on duplication included
in the Pay-As-You-Go Act.
Would you go to the next slide, please?
During the past two decades we have completed over 200 reports,
rough estimate that highlights the potential for duplication
overlap and fragmentation in federal programs.
Our work has shown that redundancy in some areas can be
beneficial if it's thereby designed and if it's to either
foster competition or provide emergency back-up in some areas
like defense or critical infrastructure where a single
point of failure could be catastrophic.
>>Speaker: I just want to ask you a question.
I've asked for a lot of those reports and they are excellent.
Here's the question.
You all put out a report that's highly accurate, unbiased.
Sometimes challenged by what's been -- have you studied your
out versus the response by Congress in eliminating the problem?
[laughter] It is an important question because what happens is
we ignores what the GAO says and don't fix the problems.
And the reason -- have you all ever done analysis to say here's
is all of the recommendation we made over the last two years?
What did Congress do to respond to it?
>>Ms. Dalton: I think and Pat would want to chime in on this for sure also,
but we have been going through that process as part of figuring
out what additional work we need to do under this new mandate?
And I think again it's a multipronged answer.
In some cases executive agencies may not have taken action.
Some of these problems of duplication overlap may actually
be more just an inattention to good management practices and
senior level attention.
So there's room for improvement there as well.
In other cases it is more complex --
>>Speaker: [inaudible]
comment on how responsible Congress has been to the
recommendations GAO --
>>Ms. Dalton: I want you know continue on that also
because I think in several areas the problems have continued or
the issues of overlap have continued.
Because they can also involve policy changes.
As we talked.
Paul mentioned the area of federal, higher education,
grants, assistance, et cetera.
It would take legislative reform to address some of those issues.
Involves multiple commitees with different jurisdictions in many cases.
So it would really take an integrated effort among the
Congress to perhaps prioritize and take on a few of these issues.
>> Speaker: I think a lot of our follow-up has really been on the
executive branch as opposed to the Congress.
On specific issues we will comment at times.
But we have never done it in total.
At times through our regular reporting, for example, every
two years, we issue a high risk report to the Congress.
We will look comprehensively at an issue and say what's happened?
It's a high risk area for a variety of reasons.
In that case we may in fact point out that there's been
action by Congress or there's not.
Or in fact it's gotten worse.
>> Speaker: [inaudible] largest at risk money we have outside of the
Defense Department.
A portion of that is in the Defense Department.
Over 50% of those projects failed.
And yet has Congress responded to that? No.
And so the issue -- one of the issues people don't want to talk
about it, is we get great recommendations.
But we don't act on them.
And the problem is Congress.
It's not the agencies.
It's not the people who work and civilian federal employees, it's Congress.
And I think it would be very interesting to see from GAO
here's the recommendations we've made the last three years,
here's how many got followed.
That's a report card on Congress by the GAO and I would love to
see that data come.
I think it would be helpful and that's really fixing the
problems that ail us.
>> Speaker: Can I comment on that?
Having requested and been at hearings where the GAO has done
incredible work, I agree, except to one extent.
I think sometimes the work of the GAO exposed in that
committee hearing does force some action by the agencies.
But I think it would be wonderful to see when there's
been recommendations for Congress to make changes, how
many have we really done.
I think that would be very, very, helpful.
Because the work that you do, the product is so incredibly useful.
The findings and the recommendations are always so
helpful if they were implemented. Thank you.
>> Ms. Dalton: Moving on.
As I mentioned there are cases in which duplication overlap may
be appropriate.
But our work has shown that fragmentation and overlap are
often the result of an adaptive federal government.
And what typically happens is as new needs are identified, it the
common response has been to layer on new programs,
activities, and this of course leads to proliferation of rows (phonetic)
responsibilities and lower lapse among federal agencies.
Next slide, please.
What we would like to do next is just talk about a few of the
examples from our wide body of work where we have discussed and
identified examples of duplication and overlap.
And I think these examples illustrate the range of issues
that could be included as part of a government wide process to
examine the base of federal spending.
First, GAO added food safety to our high risk list in 2007.
Because 15 agencies collectively administer over 30 food related laws.
This has led to ineffective coordination, and then efficient
use of resources.
In addition, more integrated planning and coordination, we
have recommended that alternative structures for the
oversight of food safety be explored and examined.
Another example is federal food assistance programs.
We typically spend about $60 billion a year in this area and
we have noted that this is, 18 programs that have emerged
piecemeal over the past several decades.
We have made recommendations to the Secretary of Agriculture to
identify and develop methods for addressing some of these inefficiencies.
However, this is an area where our work has also recognized
that there are trade-offs sometimes in targeting services
to specific populations being served, such as the elderly or children.
Some of these programs are not, again food assistance in
general, but are more targeted.
So these may raise issues again for the Congress and to the
extent that consolidation may need to occur.
>> Speaker: What happens?
I mean, you know if there are 18 programs, we are spending $60
billion and you also make these recommendations that can make
these more efficient, more effective and still meet the
needs that Congress has specified.
What happens when you make these recommendations?
Do they just go up on the shelf or --
>> Ms. Dalton: Well, we do have an
active process to follow-up in terms of what the agencies are
doing with the recommendations.
And, over time, we report that a fairly high level of the
recommendations get implemented.
I think one of the things though is that we often tailor our
recommendations to the kinds of things that executive branch
heads can do and prove their strategic planning, better
coordination, taking care of some of the better business
practice issues that repeat inefficiencies.
And the more challenging recommendations we make again
may be where agencies heads either have to work together.
And that's much more difficult to insure that actually happens
or again when there are matters for Congressional consideration.
>> Speaker: She's actually being way too nice.
Let me give you an example. The Census.
GAO said the Census is in trouble.
Census has a no bid contract of a device they could buy for
one-fifth of what they contracted it for.
The device never met parameters.
They spent $500 million on a device that failed to meet its mission.
And then paid a performance bonus on top of that.
They recognize that problem two years before it was going to be a problem.
And it was denied that it was a significant problem by the
leadership of the Census Bureau.
And the commerce secretary under the Bush Administration.
So they're giving us the information; it's we don't act on
it and the administration doesn't act on it.
And I can give you 100 other examples just like that of
recommendations that they have recognized, here a problem is
coming, they are going to get worse, it's just like IT.
They keep telling us about IT. We don't fix it.
>> Speaker: Is it a lack of time for you all to follow-up?
I mean, one of the things that you all talked about, is buying
or budgeting, you have the time to do follow-up, follow-up, follow-up.
But again, if this happened in Dave's company, and they didn't
follow-up, those people would be out the door.
And you get some people in there who would do the job.
>>Speaker: What is the follow-up mechanism here?
>>Speaker: The follow-up mechanism is members of Congress routinely
don't like to do the hard work of oversight.
And there's a couple of reasons for it.
One is they don't get the "that a boy credit" at home.
They didn't pass a bill to take care of somebody's problem.
So it's much harder work to do effective oversight, because you
have to understand the issue as well as GAO does, as well as the agency does.
Otherwise you end up with a pie on your face.
So there's a general reticence to not do effective oversight.
It seems to me with a $1. 6 trillion deficit and with the build up of debt we have, and
that we have got to operate more effectively or the nation as a
whole is going to go broke, that there be every incentive to
actually follow up, follow up and make sure the money we are
spending is at least being spent wisely.
>> Speaker: I'll tell you what, we don't prioritize spending.
I mean we just throw more money on top.
That's what Congress does every year.
A lot of this is discretionary.
And so, clearly, Congress has the ability on an annual basis
these days to actually address these issues.
But when you're just throwing more money on top of every other
program, growing everything when you consider a cut, in a
decrease in the increase of growth, you don't prioritize.
Therefore you don't use these reports and use these metrics to
prioritize, you know, functioning programs versus
nonfunctioning programs.
If we do caps on spending and force Congress to actually
prioritize and use performance metrics to do that, I would
think we would get somewhere.
Without spending caps and where we just actually raised
discretionary spending every single year and we don't open up
mandatory accounts but for every six or seven years, that's the
kind of government you get.
And that's what we have got.
>> Speaker: Mr. Chairman, I want to agree, but also disagree with
what I've just heard.
I don't think the issue is so much run-away spending, I don't
think it's so much that we don't follow the words of GAO and
others who do the oversite, it's so we have particular
interests, each and every one of us.
And when it comes time to take on your interests, I'm okay.
But when it's time to take on my interest, no way.
And so that's what happens.
Think of BRAC, the base closure process, where we finally had to
downsize the size of the military.
There was not one community that had a base that felt its base
should close. I don't blame them.
It's in their community.
They don't want to see that base closed or all of the shops that
provided services to all of those folks, all that military
personnel was based on those military grounds.
Same thing occurred with regard to the health care bill.
We had every type of interest group come in to talk to us
about how they were too important to cut.
And it's going to happen again.
I hope the GAO has an opportunity to go through the
report because they make some very good recommendations that
they also identify areas where we need to cut.
To Paul's point, Paul, the last ten years the size of the
education budget grew about 1%.
The size of the defense department's budget grew by over 100%.
Now, most of those costs came as a result of --
>> Speaker: That's not the case, Xavier.
>> Speaker: I'm looking at the numbers right now.
>> Speaker: Are you talking about DOE's, budget?
Department of Education's budget?
>> Speaker: Department of Education, 2001, 40 billion --
>> Ten years.
>>Speaker: The Department of Education's budget in 2010, 46 billion
dollars, over ten years it grew $6 billion.
Department of Defense budget, 316 billion in 2001.
Department of Defense budget in 2010, $693 billion.
The difficulty is this, Mr. Chairman.
>> Speaker: Xavier, they have got triple digit increases in their budget
last year alone in stimulus bill.
>> Speaker: But, Paul, what we are talking about is the cuts that
have been taking place within certain education programs and
increases it in others.
When you take a look at the whole budget of the Department
of Education -- if you take a look -- well, take a look at the
numbers in the budget.
By the way as we found out a couple of weeks ago, DOD's
budget does not include everything we spend on the military.
My point is this, Mr. Chairman, we are all going to use the
numbers as we wish.
I think GAO which I think everyone in this room would
consider an credible agency to tell us where we could do some
good accounting has identified I think some areas where we can
really do some true investigation to see where we
could try to make this government far more efficient.
The reality is that we are going to have everyone who's got a
particular interest, who will speak up.
That's the nature of a democracy which isn't bad.
But let's not fool ourselves into believing that Head Start
programs have caused this federal government to go into massive deficit.
Where we have the major spending as I think Congresswoman
(inaudible) just mentioned is an area like DOD which are
very important Homeland Security veterans.
So it becomes very difficult for us to make some of the changes
that will give us the savings that we wish to see and provide
the efficiencies.
But that's why we have to have these very open and transparent conversations.
Because at the end of the day we get the accountability from the
agencies that can do the oversight.
It's whether we in the political process have the courage to make
the decisions that those people have identified.
>> Speaker: Senator Coburn.
>> Senator Coburn: Yes, I think Xavier has identified the problem.
And the word is parochialism.
Nobody up here when they take their oath mentions Illinois,
Oklahoma, North Dakota, Montana, Wisconsin, California.
This is an oath.
And our problem is we put parochial concerns ahead of the
best long-term interest of the country.
He didn't say it that way, but that's really what's happened
and how we have gotten out of control.
And, the American people smell that.
And that's why it's really important what we do in this commission.
We can actually start a trend that would stop that so that we
would all be dedicated even with our own political biases and our
own philosophical differences to try to be doing the best right
thing in the long-term for the country as a whole.
And the paradox of that is that that gets recognized at home
based on the vallard (phonetic) that what it is.
And it's not a negative. It becomes a positive.
Except we too often are worried about the next election cycle,
to really think in the long-term.
So I think you're on to something explaining what's
actually going.
>> Speaker: We lack the courage of our conviction to do what the
American people want us to do.
>> Speaker: And it's really interesting.
Every single witness we have had has said that what we are doing
now is unsustainable.
You know so it's not like we don't get it.
But we are going to have to put some of these parochial
interests aside and really step up to the real problem. Jeff?
>>Speaker: We may be talking apples and oranges here.
I don't have a Department of Education number.
I've got an OMB table that says that function 50 national
defense over ten years has increased 136%, and budget function 500.
The education function has increased 149%.
I know that's not the Department of Education, per se, it's kind
of cross agency.
And again, we may be speaking apples to oranges here.
An let's face it, we zero out both the Department of Defense
and zero out the Department of Education and we still have a
massive structural debt that we have barely made a dent in.
So, I mean this is a very useful conversation.
And I would love for us to move to any facet of performance based budgeting.
But Chairman, if I could address one of your issues, and to some
extent echo Senator Coburn here.
Why doesn't Congress accept some of these changes?
Again, it is a cultural focus on the metrics of input.
I mean, perversely, if I go and I accept a GAO report or maybe
an inspector general report, I may end up actually saving money
for the agency, and then I become liable in the body
politic for cutting their funding.
The culture does not reward efficiency.
The culture rewards inefficiency.
So part of this is changing the culture.
And the American people are going to have to help change the
culture of Congress.
But, I do think that's turning, but I've seen it over and over.
I mean all of a sudden as we know, I mean, just look at when
we are speaking of IT, in every aspect of the private market you
know, IT, the cost has gone down.
It's become more efficient.
But if I found a more effective computer system or IT system for
the Department of Education, and it was more effective and I
saved 10%, again I'm liable for cutting their budget 10%.
So that's the answer to the question.
>> Senator Alan Simpson: Let me add a note.
You often here me come up with a remarkable anecdote.
First of all, if you torture statistics long enough,
eventually they will confess.
I learned that in the law practice.
If you torture statistics long enough eventually they will confess.
You're all right. You're correct.
But remember the golden fleece award.
Bill Proxmire, wonderful guy, really is a splendid man, and a
great friend, I go home and they would say hey, Sampson, what are
you doing with the Golden Fleece Award, grazing feeds or
whatever, corn, wheat.
So I came back to old Bill and I looked up how much dairy money
he had brought to Wisconsin over his entire tour of duty.
We are in the elevator, I said, Bill, old pal, the Golden Fleece
Award is popular.
He said, they love it.
I said I have a figure here that you brought this much dairy
money back to your state of Wisconsin over your entire time here.
But he said Al, you don't understand, these are little towns.
These are towns of 400 or 800 people we have to keep them going.
I said, yeah, but I'm getting fleeced on that one, old Bill.
He said, I guess I could quit using the phrase.
I said, well, don't use it on me in Wyoming, because we are all
in this huge, huge, bring home the bacon and the pig is dead.
I said it before.
And people now who are getting thrown out or will be thrown out
are appropriators.
What an interesting concept?
That's where you want it to be, the high purple.
The Crown's Royalty, House and Senate to be the appropriators,
well, I think that game is coming to an end.
>> Speaker: Senator, in Wisconsin, we say that milk is thicker than blood.
So he's just living that out.
>>Speaker: Senator Conrad.
>> Senator Conrad: You know, this conversation to me as I listened to it, I
think this has been a very good conversation because you're
really getting to the heart of the culture.
Some or all of this is true.
Some or all of it.
Congressmen Basera, I think really put his finger on it.
Look, as a budget committee chairman, I can testify, Paul can testify.
There's an interest behind every dime that's in the federal budget.
And most them are well motivated.
And, the problem is the way it works, you know, let's take education.
We all know what is happening.
We got a proliferation of programs, all well intended.
And there's almost no coordination.
It's probably actually hurting people's uptake and use of the
programs because it's so convoluted, so complicated.
There's so many contradictions between the application of the
program, who qualifies, what are the income tests, what are the
asset limitations?
I tell you, I think if we as a Commission tried to simplify,
recommend a simplification and went right through education,
had a consistent set of standards for what it takes to
apply and qualify, we would not only save money, because I've
often wondered how much is in the administration of these
programs, how much of the money actually gets out there into the country side.
How much of the money gets stuck right here in an agency, in Washington?
Tom, you are right to raise the issue.
We don't know.
I've asked the question repeatedly on education programs
how much of this money actually gets out there and how much gets
locked up in bureaucracy here, how much gets locked under in
bureaucracy at the state level.
Because they take a haircut.
When we send them money for their distribution.
I tell you some time I've been shocked to find out the state
taking a 20% haircut to administer federal money.
I mean, there's a tremendous opportunity for us to make a big
contribution here.
>> Speaker: I would like to actually hear the
rest of the GAO presentation.
Can we move to that?
>> Speaker: Absolutely.
I do think before we leave this, I just think it's important to
say that the recommendations that this Commission ends up
making are going to be relatively easy for people like
Al and I to vote for, because we're going to go at everyone's.
It's going to be tough, it's going to be painful, and it's
not going to be particularly short-term popular.
But we've got to count on those of you who run for public office, too.
And that means you're going to have to set some of those
parochial interests aside and do what's in the best interest of
the country, because what we're doing today is simply not sustainable. Thank you.
>> Ms. Dalton: Thank you very much.
We have other examples in our presentation, but I'd like to
turn for a minute to national security issues, if I could have
the next slide, and just point out a couple of examples from
our work we've we've identified duplication and potential overlap.
First, I wanted to focus on, some of our work on unmanned
systems that's shown that there's potential for a greater
commonality in sensors, payloads, and that could lead to.
potential better use of resources.
In addition -- pardon?
>> Speaker: What page?
>> Speaker: Page 7 -- 6. Sorry, 6.
For example, also in our work in the intelligence, surveillance,
and reconnaissance area, we found that DOD is planning to
procure a wide array of different types of platforms and improvements.
And as we've looked over their plan for managing this effort,
which is into the hundreds of pages, we've seen that it's not
often well integrated and doesn't necessarily make it
apparent what the highest priority efforts are.
One of the issues here is that DOD has been investing in a lot
of platforms, but there is also the need to consider the
processing capabilities that DOD may need to make good use of the
information that they're collecting.
Moving on to another area, DOD healthcare.
I'm sure you all know that DOD healthcare costs have been rising rapidly.
Each of the services still has its own major medical command.
Although, DOD is pursuing some limited consolidation as part of
this latest based closure round, it decided not to pursue more
fundamental restructuring in 2007.
They had looked at a series of options to include moving to a
total unified medical command approach, but there are other
options on the table at that point.
So, again, in light of the rising costs, we're taking a
look now at their progress in implementing the more modest
recommendations, but this may be an area that
warrants further analysis. Yes?
>> Speaker: This is relevant but it's not particularly on point.
Do you know about the HEAT Program where the Justice
Department and HHS found about $60 billion of Medicare fraud annually?
So they're working together, justice is and HHS is, and they
try to root out this fraud.
And I'm wondering if you're aware of that, and if you are
aware, how that's working, and so forth?
>> Speaker: I know we've done a wide, quite a bit of work
in the Medicaid area.
My area tends to be more defense, so I'm not familiar
with the details of that work.
Do you have anything, Pat?
>> Speaker: Yeah, I don't have anything specific.
As Jan had said, we have been doing quite a bit of work in
that area, along with improper payments, fraudulent payments,
across the government.
>> Speaker: But anyway, they estimate 60 billion paid out
fraudulently every year.
And there's been about 460 -- it's a task force, and they've
charged 465 defendants with fraud in the last -- I do not
know a period of time.
My sense is that that's an area in which we could be much more aggressive.
>> Ms. Dalton: Yeah, we've done quite a bit of work, and we have identified
a fairly significant potential for, you know, inefficiencies
and in some cases fraud in that area.
We can provide some reports on that.
>> Speaker: And the more we do, that's going to also create a better,
overworked word, culture.
Once there's a sense that you can't get away with this stuff
and you're going to be caught if you try to defraud the
government, I think that's going to have a salutary affect on a
lot, in a lot of other areas.
>> Speaker: Right.
>> Speaker: Thank you.
>> Speaker: Erskine, if I could build on a point that both Senators
Baucus and, I think, Coburn have been making, as we're looking
for suggestions, could GAO just pull together a list of
recommendations over the last five years and what those
suggestions are worth and were they done or not?
That might be an interesting list for us to have, because
everybody comes out saying, things can't be done, or we're
perfectly administered, our process is perfect today, and
that's kind of what's implied is you say, I just need inflation.
It might be interesting to just have that list of over the last
five years, here's the recommendation, here's how much
it was worth, was it done or not.
>>Speaker: We certainly could do that.
>> Speaker: Okay, thanks.
Actually, I thought you'd argue with me.
So I was fully prepared.
That was very helpful. Thank you.
(laughter)
>> Speaker: Actually, on an annual basis we follow up on all
of our recommendations so that we do know exactly what action
had been taken or not taken on each of the recommendations.
>> Speaker: (inaudible)
>> Speaker: Right.
>> Speaker: Start that up.
(laughter)
>> Speaker: Actually, if we can get into the presentation
(inaudible).
>> Speaker: Yes.
>> Ms. Dalton: And again, these are really selective examples of some of
the issues we've raised in our reports.
Moving on, also, not only DOD, but we've also, if you turn to
the next slide, have found instances where the Department
of Homeland Security also administers multiple security assessments.
They're always looking for vulnerabilities and various
transportation assets.
They do assessments of ports, assessments of roads, and
trucking, and things like that, and we found that other agencies
also perform very similar assessments and that these types
of assessments are not well coordinated.
So, again, that is an overview of just some of the issues we've
identified in national security.
If you turn to slide 8, we wanted to spend a little bit of
time also talking about some of the other work that doesn't
necessarily just relate to duplication and overlap, but
we've gone through a process, and we've actually posted on a
website over 30 other areas where we think there's potential
to achieve cost savings over time in government through the
use of better business practices and more efficiencies.
So if I could just highlight a couple and then turn it over to Pat.
First of all, again, in the defense area, DOD spends over
$300 billion annually on the procurement of goods and services.
DOD acquisition practices and contract oversight has been on
our list of high risk issues for many years because of the
potential for waste and inefficiency.
The administration has focused on this.
Secretary Gates has a set of initiatives that could help deal
with some of these challenges, but in our assessment, closer
review and prioritization of requirements, use of a
knowledge-based approach to managing technology risks and
cost schedule and performance issues, and then increased use
of competition and better contract oversight could lead to
significant cost savings within the Department of Defense.
Next, if you turn to slide 9, we believe similar opportunities
for improved outcomes also exist regarding Department of Homeland
Security acquisitions and grant programs.
In addition to improving its oversight of contractors and
demonstrating sound acquisition practices, DHS can improve its
management of grants through greater streamlining of some of
its programs and standardization of grant administration.
So, with that, I'd like to turn to Pat.
>> Speaker: If we could turn to slide 10, our work has also pointed to
potential opportunities on the revenue side of the house.
For example, tax expenditures, preferential treatment in the
tax code, account for almost $1 trillion in 2009.
We list a number of examples of tax expenditures on this slide,
and I'll just talk about a couple of them.
The first one, the research tax credit, that credit totaled $6
billion in 2005.
It's the latest information that we have on that particular credit.
About a billion or about half of that went to corporations that
had receipts of over a billion dollars a year.
In addition to looking at the tax credit, though, you also
have to look at all of the other expenditures that the government
makes on research across the board.
We have direct expenses, grant programs, loan programs, loan
guarantee programs.
We don't look at these tools of government in total.
They're spread across many agencies.
As I said, they have very -- in some cases, they have very
specific uses and intended outcomes, but they're not looked
at in total and they are not looked at in conjunction with
what other spending is occurring by the government.
And the tax credits are a form of spending by the government.
We're giving tax breaks to encourage particular activities.
Another one on this list is the ethanol tax credit, which is the third one.
That credit was instituted, we believe, to encourage the
development of the ethanol industry in this country.
At this point the ethanol -- the conventional ethanol industry is fairly mature.
The intent was to also encourage the use of renewable fuel.
Another program that is doing that is the renewable fuel
standards that require a certain percentage of renewable fuel be
included in gasoline and other products in the country.
So, we have serious questions about the merits of that tax
credit at this point.
The revenue foregone is projected to be $6.75 billion by 2015.
If I could have the next slide, please.
The tax gap is also, we believe, an opportunity for additional savings.
Approximately 84% of taxpayers pay their taxes voluntarily and on time.
The IRS's estimate, and this is the latest one, in 2001 was this
tax gap, which is noncompliance with the tax code, costs about
$345 billion each year.
>> Speaker: More than that.
>> Ms. Dalton: Okay.
>> Speaker: But it was in' 01.
>> Ms. Dalton: Right.
And we -- the information we have is the IRS is now going to
estimate it again until 2013.
It's something that might be, congress may want to consider
having done more frequently.
We list a number of opportunities that potentially
could improve -- close the tax gap through increased
enforcement, as well as education of taxpayers.
The tax code is very complex, and it can be difficult to
comply with. Slide 12.
>> Speaker: No, I don't really care (inaudible).
>> Speaker: It is.
>> (inaudible)
>> Speaker: Right.
>> Speaker: Expenditures, I think tax expenditures are just spending
by another name.
>> Speaker: It is, and that was to the point of trying to look at one
of the things that happens is the layering of programs,
layering of tools, and not looking at them in their totality.
And when you start looking at tax credits versus direct
spending, the tax credits may go through the tax writing
committees of the congress; whereas, the spending is going
through the oversight committees and the authorizing committees.
On slide 12 we also talk about -- this is another potential for
revenue enhancement, I would say, on oil and gas royalties.
What we have found through our work is that the Department of
Energy may not be collecting all that the federal government is entitled to.
The monitoring and inspection of production of the federal leases
could definitely be improved.
Last year we collected $9 billion in revenue.
That does change from year to year.
The prior year was about $22 billion.
That reflects the price of oil and gas.
In addition, congress may want to consider looking at the
royalty rates and our lease terms.
Our work in 2008 pointed to that the United States charges some
of the lower lease rate -- royalties and lease rates in
terms compared to other countries and even some state governments.
>> Speaker: Do you have any estimate on how much money we
could have in addition?
>> Speaker: We don't at this point, but we certainly could
work on that for you.
Part of trying to make an estimate is, what are the
alternatives that you would want to assume?
We know what we're collecting.
We know what other countries do.
We could make some hypothetical assumptions to give you some ideas.
>> Speaker: On slide 12 we talk about the farm payment programs.
GAO's work over the years has found a number of problems --
or, I'm sorry, slide 13 -- GAO's work in the farm programs has
found a number of issues over the years and, in fact, congress
and the administration have acted on several, on many of them.
For example, our work on payments being made to
high-income farmers, how disaster insurance is paid for
for crop disasters.
And, as I said, the administration and the congress
have taken some actions, but there are other programs.
We spend about $6 billion per year on farm programs.
An example of an area where there may be some layering here
and a need to revisit what a program is doing is the Direct
Farm Payment Program.
This program -- we spend about $5 billion a year on this program.
This program was established in 1996 in the Farm Bill.
It was intended to provide temporary payments that would end in 2002.
The purpose at the time was to transition from the dependence on subsidies.
It has been reenacted.
It is still a current program.
Like I said, this really points to one of the things that
happens of layering program on top of program and not
revisiting an area in total, whether it's education, whether
it's farm programs, whether it's, you know, any program in
the government, any area in the government you could point to
and look at seeing the layering of programs. Slide 14.
We talk a little bit here about federal improper payments.
And this is really direct spending by the federal government.
The estimate for 2009 fiscal year was that there were $99
billion in improper payments.
Clearly, a reduction of just 10% --
>> Speaker: Do you have a breakdown?
Do you have a breakdown of where those improper payments --
>>Speaker: We can try to get that for you.
>> Speaker: It's going to be very, very important to this commission.
That's a, obviously, a very big number, and if we could get your
breakdown of where you think it's occurring.
>> Speaker: Okay.
And clearly, just in the total, just a 10% reduction would
result in some considerable savings for the federal government.
We do point out a number of things here on terms of
opportunities to reduce the amount of improper payments
through improved internal controls, improved program
design, as well as a number of legal reforms.
>>Speaker: What do you mean by an improper payment?
>> Speaker: An improper payment would be a payment that has been made
that is not in accordance with the regulations of that
particular program.
So it could be, for example, someone received a benefit, they
did not meet the eligibility requirements.
>> Speaker: Yeah, Jan (inaudible) --
>> Speaker: I can't hear you.
>> Speaker: We've had people get financial aid at the university,
they weren't really eligible for it.
That would be improper.
>> Speaker: If I could have slide 15, please.
This is another area that you may want to consider looking at
in terms of revenue enhancements, how are user fees
being used.
It's based on the principle of the user should be paying for
the benefit they receive.
There's been an increased use of user fees across the government.
There may be other opportunities to employ user fees to offset,
to be used in place of general fund spending.
One point -- we list a number of opportunities where federal
revenue could be enhanced through user fees.
For example, periodically revisiting what the fee is,
possibly on a bi-annual basis so it is appropriate, changing it
with inflation, not having it static, and also looking at what
the full cost of government is and trying to recoup that.
Oftentimes when we set user fees, they're based on direct
costs as opposed to both the direct and indirect costs to government.
>> Speaker: Can I just point out --
>> Speaker: Sure.
>> Speaker: -- that Immigration, we just raised the fees significantly.
There's a question in some minds whether that yields the results
that we want.
But, certainly, I don't know why that would be on the list here.
>> Speaker: I think congress has been changing things,
as well as the administration.
That may be slightly out of date.
I apologize for that.
I'd now like to on slide 16 try to address some of the
challenges that we see in addressing duplication, overlap,
fragmentation, across the government.
I'll run through these fairly quickly, because I know we're
running short of time.
There are a number of challenges that make this task extremely difficult.
First of all, definitions.
We have differing views on what the degree of duplication is and
the extent to which it exists.
For example, we do not have an agreed upon definition of a
program in the government.
We all define that slightly differently.
We've talked a lot already about developing baseline data.
We don't in many cases have good data for many reasons.
We lack comparable data, the reliability of the data is
questionable, and there's difficulties conducting data
analysis across agencies, across activities.
Oftentimes, when you're looking at overlap and duplication, it
will be not just in the department of education, but the
other programs will be in the Department of Labor, the
Department of Veterans Affairs, and try to gather information
across those agencies that you can compare and that you can
feel that is reliable and sufficient to make decisions.
And also to have outcome-based information - what programs are
working, what are not working, as opposed to inputs and
process, which we can gather fairly quickly, and we do on a
regular basis, but often are missing
solid outcome information.
Slide 17, please.
Another challenge is identifying potential savings versus
realized actual savings.
Our previous work has shown that program consolidations can lead
to increased efficiency and improved performance.
For example, program consolidations offer
opportunities to reduce federal spending in terms of
administrative costs, program costs, or both.
However, there are challenges.
For example, if you're combining programs and don't eliminate the
administrative costs, what have you really saved?
Oftentimes, we will just combine programs as opposed to truly
consolidate them in a financial sense and integrate the systems,
the management, the processes of agencies.
And this takes a long time to do, and we often have very short
attention spans and think it can be done in a year.
It often takes much longer than that. Slide 18.
Identifying specific solutions can also be a very large challenge.
Agencies encounter a range of challenges in addressing duplication.
Their missions may not be mutually reinforcing.
They may even conflict.
Inter-agency coordination is often hindered, as I've said, by
incompatible procedures, processes, data, computer systems.
And then you've got this third bullet, sub-bullet here, which I
would call turf problems.
You've talked a lot here today about turf problems within the congress.
Well, there's also turf problems in the agencies, and the
agencies are going to be protecting their programs, their
resources, and it's important to be conscious of that.
While significant gains can be achieved by restructuring,
outmoded organizations and programs, restructurings can be
immensely complex, and clearly they're politically charged.
In addition, we have to be conscious of the implementation costs.
Oftentimes, as you're consolidating a program, it's
going to cost more in the short run to get the long-term
benefits, which means that it's important to have an agreement
on what's going to be done -- and could I have slide 19,
please -- as well as a very detailed implementation plan.
An example of some of the difficulties the government has
gone through in the last decade has been the Department of
Homeland Security, as it was consolidated from 20 plus
agencies in trying to integrate numerous systems, processes, cultures.
It is still a work in process, I would say, and we need to
recognize that and develop the agreements on the front-end, as
well as the detailed long-term implementation plans for success
if consolidation is --
>> Speaker: Let me just add that I'm on the
Intelligence Committee in the House.
We're hoping to get the help of the GAO, which because of
national security issues has not, but we think we can deal with that.
And one of the things we need to look at, I think, is that in
having created a new department -- the director of national
intelligence, the office of the director, are we really
achieving the kind of coordination and cost savings,
et cetera, or have we just set up yet another office in the
effort to do that?
We need, definitely need, your help.
Sixteen intelligence agencies and.
>> Speaker: Right.
And one of the issues with coordination is what is an
agency going to gain out of it and structuring something so
that there's a mutual interest in ensuring success and ensuring
coordination and that there's value to all of the parties.
It's going to take sustained leadership, commitment,
monitoring, and oversight.
They're keys to success with holding organizations and people
accountable both in the short-term and in the long-term.
Consolidations, elimination of duplication, overlap, and
fragmentation is not easy.
It takes time.
And so, therefore, it's critical to have that sustained
leadership oversight and accountability for people.
>> Speaker: Really, this is a place where having been on the executive
side, I can say that congress really needs to grab the ball,
because you have a turnover in leadership every, about every 18
months of these agencies.
And the new head comes in and they've got their whole new way,
their reforms, and basically the agency just says, I'll wait this
guy out until the next guy comes in.
And it's not like having Dave Cody who you know is going to be
there for 10 years or 15 years, and you really have to do what they say.
And so if you're going to make these recommendations, making
sure congress has some mechanism to really follow up and make
sure that the changes you want made done, regardless of who is
running that agency every two years, I think, would make a big difference.
>> Speaker: You know, Erskine, one of the problems that oversight
committees have is that change.
The new person comes in to testify, we ask the same
questions, and they say, well, I'm new here, and I'm going to
make those changes, and by the time we come back and check on
it, there's another person there saying, well, yeah, I'm going to
make those reforms, and they don't get done.
So, you're right.
>>Speaker: If I could just -- I'm kind of piling on but building on the
point that the two of you made.
You look at Honeywell, $35 billion company, there's no way
you could institute changes and get them done over the course of a couple years.
Just being there for eight years and being able to just regularly
have that drum beat, you keep measuring the same stuff, keep
driving it, is what over the course of five to ten years
really gets you somewhere.
If you look at the size of these agencies, they dwarf Honeywell,
and the idea that somebody can come in and in 18 months make it
happen, ain't no way.
I think you put your finger on something important on this.
How do you make sure that that continuity of purpose, the
metrics, that that continues to stay and you don't just keep
redoing stuff every 18 months?
Otherwise, you do run into exactly that phenomenon, I
think, that says, well, we can wait this guy out too.
>> Speaker: If I could make a comment on that issue, that was one of the
reasons that GAO originally recommended that at the
Department of Defense there be a chief management officer with
about a seven-year term or so.
That would extend beyond administrations.
Now, congress in passing legislation did establish the
chief management officer and a deputy chief management officer at DOD.
The chief management officer is also the deputy secretary of defense.
So he wears two hats there.
And so that term would be the normal term.
But it was precisely because, I think, our recognition that DOD
had eight of the 30 high risk areas across GAO, and then there
was a need for sustained focus on some of these issues over
time that we made that recommendation.
>>Speaker: If I could have our next slide, slide 20, I'd like to
talk just very briefly about the work that we're doing under the
mandate that was in the Pay-Go legislation that Senator Coburn introduced.
We are -- this mandate requires GAO to annually report on
duplication across the government, including spending,
credit, regulatory, and tax programs.
If I could have the next slide, I'd like to talk just a little
bit about what that work is entailing this year.
Our first annual report will be -- we will be reporting to the
congress in February of 2011.
We are timing it to be available for the budget cycle,
for each budget cycle.
And the slide addresses the main things that we will be talking
about in the first report.
We're focusing primarily on federal programs receiving
discretionary funds for this report.
We are going to be relying on a lot of our past work, as well as
some of the work that's ongoing, in pulling this report together.
We will also be including major cost savings.
As I've talked about here, there will be some updated information.
We are in the process of updating what we consider are
some of the major cost saving opportunities across the government.
We will also be introducing in the report our future work of
where do we think -- where will we be going in the following report.
We recognize that we can't cover the entire government in any one year.
So we are selecting targets of opportunity that we think will
have significant savings potential, and we will be
reporting them on a regular basis.
>>Speaker: I think you will have a target rich environment.
>> Speaker: I think we do.
And we are talking with many of the committees of congress and
constructing the areas of targeting, and have welcomed
input from all the committees of congress, and certainly would
welcome any insights you all have. Thank you very much.
>> Sentor Alan Simpson: Well, I really appreciate it, and after the years here,
nothing has changed, and I was part of it.
In fact, you've hit a nerve right here, and it's going to
hit every nerve.
It's going to hit me hard, and that's oil and gas, royalties, computation.
I mean, you know, you don't think I'll get boulders at my
ball dome, but I'll tell you, if anybody in here believes they're
going to get out of this unscathed, we're wrong and we're
not really doing our job.
So this is powerful stuff, because oil and gas in my state
is our bread and butter. It's bigger than milk.
(laughter)
>> Senator Alan Simpson: And, furthermore, we have taxed the industry with
a severance tax on coal and oil and gas, because we knew that
when the product was gone, they'd be gone.
So, we have now about 4.2 billion in a permanent minerals trust fund, and when
they are gone, we hardy 500,000 people will be living on that.
But how many times I was here in the 18 years we cited you, the
GAO, as the gold standard.
GAO tells us this, GAO tells us this, or we have a GAO report,
you give that to your constituents, and then we never
do anything that you suggest, nothing, ever.
But we have a hearing that the GAO has said this, and everybody perks up.
And improving collection of royalties, doing these things --
Max has spoken about that tax gap several times -- these are
real things, and the real problem is congress, but there
is this other problem of down in deep in the bureaucracy, you can
outwit them, but you can't out wait them.
You can outwit them by humiliating them, but they'll
out wait you.
They'll just say, here comes a new guy, just as we've all said here.
But I notice this Pay-As-You-Go statute says the word "shall".
That's a different language than I've seen before.
And when you get through with the word shall, instead of may
or hopefully or whatever, I think this first report in
February while they're still mulling around in what we've
done is going to get things off the dime.
I thank you very much.
Very impressive.
>> Speaker: Thank you.
>> Speaker: I'm also -- I thought Dave Cody made a terrific
recommendation.
If we could get your recommendations for the last
five years, and as we look at ways to reduce the budget, you
know, that ought to be the first place we go, not the last place we go.
Other comments for the, or other questions? Yes, sir?
>> Speaker: If I could just ask a question about
the tax expenditure slide.
I don't know which one it was.
>> Speaker: I believe it was slide 10 or 11.
>> Speaker: I don't quite recall what GAO's -- one, I don't believe
there's an accepted definition of tax expenditure.
I want to know -- I don't recall what the GAO definition is, but
a trillion dollars is even real money by Washington standards.
So, what -- is this all encompassing of all exemptions, deductions, credits?
>> Speaker: Yes, it is.
>> Speaker: Okay.
So, of this, what -- a number of these tax expenditures would
probably come under the heading of transfer payments, like the
unearned income tax credit.
>> Speaker: Right.
>> Speaker: What percentage, then, of the tax expenditures could be
categorized as transfer payments?
>> Speaker: I don't have that number.
I can go back to our tax experts and see if we can get that for you.
>> Speaker: And then clearly --
>> Speaker: Itemized, too.
>> Speaker: Okay.
>> Speaker: And then clearly out of this trillion dollars, I would expect
two of the more popular exemptions are going to be the
mortgage deduction and the charitable.
Do you know out of this $1 trillion what that universe is?
>> Speaker: I don't have those numbers, but we certainly
can get those for you.
>> Speaker: It is relatively easy to get there.
About 179 of them, and we have them -- Al carries them with him
all the time.
>> Speaker: (inaudible)
>> Speaker: It's a very distinct list.
>> Speaker: Well, if it's 179, it's not that little of a list.
>> Speaker: If I could -- I mean, there's the top 10, and you know the
exclusion for health and pensions is the top, and then
mortgage interest, those three constitute a good share of
those, and --
>> Speaker: State/local.
>> Speaker: Yeah, and state/local deduction.
One of the issues is not just the magnitude, but whether
there's any thought of coordination.
For example, low income housing tax credit is over $10 billion
for low income housing.
The HUD doesn't even include that in their annual performance
plan, because that's not their responsibility.
That's the Treasury Department's responsibility.
So it's partly the fiscal thing and it's partly just the sheer
lack of coordination.
>> Speaker: I think the other thing you all did quite well is you, as an
example, you took housing and you grouped all of the programs
that affect housing, and what people should do is really look
at which ones are the most effective to accomplish the
goals we want to accomplish.
And the mortgage interest deduction is one of the things we do.
Is that the best way to really meet our need?
>>Speaker: That was one of the things, exactly, that we were trying to
point out, of trying to look at these programs and what they
were trying to accomplish by, in looking that way and looking
across the government, because you will find programs
supporting a particular goal in many different places and also
using many different tools -- tax credits, as well as grant
programs, direct spending, loan guarantees, and you can -- it
starts housing is one, research is another, energy programs you
will find across the government.
>>Speaker: If I could, Chairman, sitting on the House Financial Services
Committee dealing with over 90 different housing programs in
the HUD jurisdiction, many of which have proven to either been
ineffective or demonstrated no results, I would welcome you as
a witness to our committee some day to make the point you just made.
>>Speaker: Since I plan to be retired very soon, I can't wait.
(laughter)
Are there other comments?
We thank you for coming.
>>Speaker: Thank you.
>>Speaker: When the committee members get back in November, we've got
some tough decisions to make.
Please keep your calendars open, and we thank you for coming today.
>> Speaker: Thank you.