FAS | Military Analysis | GAO |||| Index | Search |


Addressing the Deficit: Budgetary Implications of Selected GAO Work
(Letter Report, 03/11/94, GAO/OCG-94-3).

GAO has consistently stressed the urgent and ultimately unavoidable need
to reduce the deficit. The persistently high deficit levels of the 1980s
and 1990s and the mounting debt burden--now more than $4 trillion--are
hobbling government's ability to meet pressing national needs and are
absorbing savings that could otherwise be used to finance investment.
This report presents options for spending reductions and revenue
increases, which stem from key findings and issues developed in GAO's
audits and evaluations. GAO's deficit reduction framework consists of
three broad strategies: considering whether to end or revise government
services, redefining for whom these services are or should be provided,
and exploring how the services can be delivered more efficiently. The
options in this report cover a host of federal policies and programs,
ranging from the dairy price support system to burden sharing in Korea
to the collection of gasoline excise taxes.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OCG-94-3
     TITLE:  Addressing the Deficit: Budgetary Implications of Selected 
             GAO Work
      DATE:  03/11/94
   SUBJECT:  Budget deficit
             Deficit reduction
             Budget administration
             Program evaluation
             Cost effectiveness analysis
             Economic analysis
             Fiscal policies
             Budget cuts
             Program management
             Beneficiaries

             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to Congress

March 1994

ADDRESSING THE DEFICIT - BUDGETARY
IMPLICATIONS OF SELECTED GAO WORK

GAO/OCG-94-3

Addressing the Deficit


Abbreviations
=============================================================== ABBREV

  ADCAP - advanced capability
  AFDC - Aid to Families with Dependent Children
  AOC - Administrative Office of the U.S.  Courts
  AUM - animal unit month
  BEA - Budget Enforcement Act
  CBO - Congressional Budget Office
  CERCLA - Comprehensive Environmental Response, Compensation and
     Liability Act
  CRP - Conservation Reserve Program
  CVP - Central Valley Project
  DOD - Department of Defense
  DOE - Department of Energy
  EPA - Environmental Protection Agency
  FDIC - Federal Deposit Insurance Corporation
  GAO - General Accounting Office
  GSA - General Services Administration
  HHS - Department of Health and Human Services
  HUD - Department of Housing and Urban Development
  IDB - industrial development bond
  IRS - Internal Revenue Service
  JAST - Joint Advanced Strike Technology
  JCT - Joint Committee on Taxation
  NASA - National Aeronautics and Space Administration
  OBRA - Omnibus Budget Reconciliation Act
  OMB - Office of Management and Budget
  PBGC - Pension Benefit Guaranty Corporation
  QMB - qualified mortgage bond
  RTC - Resolution Trust Corporation
  SINC - Service industry noncompliance initiative
  SSA - Social Security Administration
  TJTC - Targeted Jobs Tax Credit
  USDA - U.S.  Department of Agriculture
  USIA - United States Information Agency
  VA - Department of Veterans Affairs

Letter
=============================================================== LETTER


B-256550

March 11, 1994

The President of the Senate
The Speaker of the House of Representatives

In previous reports,\1 GAO has stressed to the Congress and the
public the urgent and ultimately unavoidable need for deficit
reduction.  The persistently high deficit levels experienced
throughout the 1980s and 1990s and the growing debt burden which now
exceeds $4 trillion constrain the government's ability to meet
pressing national needs and absorb savings that would otherwise be
available to finance investment that is critical to long-term
economic growth. 

The Congress acted to improve the short-term budget outlook through
enactment of the Omnibus Budget Reconciliation Act of 1993, which
amended the Budget Enforcement Act (BEA) of 1990.  Although this
constituted significant progress, the Congressional Budget Office
(CBO) projects that the deficit will resume its upward growth after
1998, due to such factors as the continued growth of federal health
care spending, interest costs to finance the debt, and expiration of
discretionary spending caps.  Moreover, unmet needs and new spending
claims upon the government will place additional strain upon the
federal budget as well.  As a result, the Congress will continue to
face pressure to reduce the deficit over the next several years. 

In the past, GAO has actively supported efforts of the Congress to
address federal spending and revenue issues through our reports,
testimonies, and annual reviews of selected agency budget
submissions.  Our work has contributed to legislative and executive
actions which, in the last decade, have resulted in billions of
dollars of measurable financial benefits, including budget
reductions, costs avoided, appropriation deferrals, and revenue
enhancements. 

On the basis of recent discussions with Members of Congress, we
believe that we can augment our service to the Congress by more
systematically identifying in one report the budgetary implications
of selected policy changes and program reforms discussed in our work,
but not yet implemented or enacted.  In this report, we present some
options for spending reductions and revenue increases, which stem
from key findings and issues developed in our audits and evaluations. 
Some of these options reflect GAO recommendations; most do not, but
rather represent one way to address, in a budgetary context, some of
the significant problems identified in GAO's evaluations of federal
policies and programs.  Clearly, the Congress has many available
options for dealing with the deficit.  Inclusion of a specific option
in this report does not mean that GAO endorses it as the only
feasible approach, or that other spending reductions or revenue
increases are not also appropriate for consideration by the Congress. 

To guide our selection of options, we developed an analytical
framework (See Appendix I) constructed around three broad themes: 

  reassess objectives, that is, reconsider whether to terminate or
     revise services and programs provided;

  redefine beneficiaries, that is, reconsider a program's intended
     audience; and

  improve efficiency, that is, reconsider how a program or service is
     provided. 

We used the framework to review our published work and then to
provide a structure for listing individual options in this report. 
(See Appendices II, III, and IV) This framework can also facilitate
the deficit reduction debate within the Congress by providing a set
of criteria to prompt decision makers to systematically reassess the
goals, beneficiaries, and approaches used to deliver federal policies
and programs. 

To determine budgetary effects, each spending option was discussed
with CBO, and each revenue option was discussed with the Joint
Committee on Taxation (JCT).  Where possible, estimates of budgetary
savings or revenue gains were developed by CBO and JCT.  Where
estimates are not provided, a brief explanation and discussion is
included with the option.  A further discussion of the estimates is
included in Appendix I. 

Under the BEA, as amended, the spending and revenue options included
in this report could be used either to reduce the deficit or to
provide funds for other programs.  Under the "PAYGO" rules of BEA,
savings from direct spending programs (entitlement and mandatory
programs) or revenue options would reduce the deficit unless these
savings were offset by either program expansions or revenue
reductions.  For discretionary spending programs, savings from
changes would contribute to additional deficit reduction only if BEA
caps on discretionary spending were lowered; otherwise, the savings
would be available for use in other discretionary programs. 

Although we derived the options in this report from our existing body
of work, there are similarities, not surprisingly, with other deficit
reduction proposals.  For example, some options contained in this
report were included in the President's Fiscal Year 1995 budget
submission and in 1993 legislation proposed by Senators Robert Kerrey
and Hank Brown, and by Representatives Tim Penny and John Kasich;
some are also referenced in other publications such as: 

  the March 1994 CBO report, Reducing the Deficit:  Spending and
     Revenue Options;

  the September 1993 report by the Vice President's National
     Performance Review, From Red Tape to Results:  Creating a
     Government that Works Better and Costs Less; and

  the September 1993 report by the Concord Coalition, The Zero
     Deficit Plan:  A Plan for Eliminating the Federal Budget Deficit
     by the Year 2000. 

We hope that this report advances and supports congressional debate
on the deficit by providing not only specific examples of possible
savings or revenue gains, but also an overall structure to help focus
discussions about specific programs and activities.  We are sending
copies of this report to appropriate congressional committees and to
other interested parties. 

This report was prepared under the direction of David G.  Mathiasen,
Assistant to the Comptroller General, who may be reached at (202)
512-5528, and Paul L.  Posner, Director for Budget Issues, who may be
reached at (202) 512-9573.  Major contributors to this report are
listed in Appendix V.  Specific questions about individual options
included in the Appendices may be directed to the GAO Contact listed
at the end of each option. 

Charles A.  Bowsher
Comptroller General
of the United States


--------------------
\1 Budget Issues (GAO/OCG-93-1TR, December 1992); Budget Policy: 
Prompt Action Necessary to Avert Long-Term Damage to the Economy
(GAO/OCG-92-2, June 5, 1992); and The Budget Deficit:  Outlook,
Implications, and Choices (GAO/OCG-90-5, September 12, 1990). 


INTRODUCTION
=========================================================== Appendix I


   A FRAMEWORK FOR DEFICIT
   REDUCTION
--------------------------------------------------------- Appendix I:1

The history of deficit reduction efforts suggests that basing
decisions on explicit policy rationales, rather than considering
separate program-by-program assessments, can improve chances for
success.  A consistent and systematic framework can be an effective
means to formulate and package broad-based deficit reduction
proposals.  Additionally, this kind of approach can be used
regardless of any other budgetary control mechanism (e.g.,
discretionary spending limits or sequestration procedures) or any
given level of desired deficit reduction. 

GAO's deficit reduction framework consists of three broad strategies: 
reassess objectives, redefine beneficiaries, and improve efficiency. 
These three fundamental strategies are based on an implicit set of
decision rules that encourage decision makers to think
systematically, within an ever-changing environment, about

  what services the government provides or should continue to
     provide,

  for whom these services are or should be provided, and

  how services are or should be provided. 

By using a policy-oriented framework such as this, choices can be
made more clearly and the results become more defensible. 


      REASSESS OBJECTIVES
------------------------------------------------------- Appendix I:1.1

The first theme within our deficit reduction framework focuses on the
objectives for federal programs or services.  Our premise is that
periodically reconsidering a program's original purpose, the
conditions under which it continues to operate, and its
cost-effectiveness, is appropriate.  Our work suggests three decision
rules which illustrate this strategy. 

  Programs can be considered for termination if the program has
     succeeded in accomplishing its intended objective or if it is
     determined that the program has persistently failed to
     accomplish its objective. 

  Programs can be considered for termination or revision when
     underlying conditions change such that original objectives may
     no longer be valid. 

  Programs can be re-examined when cost estimates increase
     significantly above those associated with original objectives,
     when benefits fall substantially below original expectations, or
     both. 

In Appendix II, we provide several options from our work which
illustrate the theme, "reassess objectives."


      REDEFINE BENEFICIARIES
------------------------------------------------------- Appendix I:1.2

The second theme within our deficit reduction framework focuses on
the intended beneficiaries for federal programs or services.  The
Congress originally defines the intended audience for any program or
service based on some perception of eligibility and/or need.  To
better reflect and target increasingly limited resources, these
definitions can be periodically reviewed and revised.  Our body of
work suggests four decision rules which illustrate this strategy. 

  Formulas for a variety of grant programs to state and local
     governments can be revised to better reflect the fiscal capacity
     of the recipient jurisdiction.  This strategy could reduce
     overall funding demands while simultaneously redistributing
     available grant funds so that the most needy receive the same or
     increased levels of support. 

  Eligibility rules can be revised, without altering the objectives
     of the program or service. 

  Fees can be targeted on individuals, groups, or industries that
     directly benefit from federal programs.  Also, existing charges
     can be increased so that a greater portion of the program's cost
     is shared by the direct beneficiaries. 

  Tax preferences can be narrowed or eliminated by revising
     eligibility criteria or limiting the maximum amount of
     preference allowable. 

In Appendix III, we provide several options from our work which
illustrate the theme, "redefine beneficiaries."


      IMPROVE EFFICIENCY
------------------------------------------------------- Appendix I:1.3

The third theme within our deficit reduction framework addresses how
the program or service is delivered.  This strategy suggests that
focusing on the approach or delivery method can significantly reduce
spending or increase collections.  Our body of work suggests five
decision rules which illustrate this strategy. 

  Reorganizing programs or activities with similar objectives and
     audiences can eliminate duplication and improve operational
     efficiency. 

  Using reengineering, benchmarking, streamlining and other process
     change techniques can reduce the cost of delivering services and
     programs. 

  Using performance measurement and generally improving the accuracy
     of available program information can promote accountability and
     effectiveness and reduce errors. 

  Improving collection methods and ensuring that all revenues and
     debts owed are collected can increase federal revenues. 

  Establishing market-based prices can help the government recover
     the cost of providing services while encouraging more efficient
     use of the government's resources. 

In Appendix IV, we provide several options from our work which
illustrate the theme, "improve efficiency."


   THE STRUCTURE AND CONTENT OF
   THIS REPORT
--------------------------------------------------------- Appendix I:2

The options included in this report cover a wide range of federal
policies and programs, reflecting the breadth of GAO's work
responsibilities.  To aid in using this report, each option is
presented in a standard format.  Spending options, arranged by budget
subfunction, precede revenue options.  Cognizant congressional
committees and subcommittees and the responsible executive department
or agency are indicated for each option.  For spending options, the
affected budget account and subfunction as well as the type of
spending--discretionary or direct--are identified. 

Each option is described in a brief narrative.  Although these
descriptions are intended to synopsize the key issues and problems
developed in our audits and evaluations, readers are encouraged to
refer to the related GAO products, listed at the end of each option,
for a complete discussion. 

Lastly, to determine savings and revenue estimates, each option was
discussed with CBO and JCT.  If specific estimates could not be
provided, a brief discussion is included with the option.  Where CBO
estimates are provided, the following conventions were followed.\2

  For revenue estimates, the increase in collections reflects that
     which would occur, over and above that due under current law, if
     the option were enacted. 

  For direct spending programs, estimated savings show the difference
     between what the program would cost under the CBO baseline,
     which assumes continuation of current law, and what it would
     cost after the suggested modification. 

  For discretionary spending programs, the estimates are based on a
     baseline which assumes a level of appropriations equal to the
     actual fiscal year 1994 appropriations increased for projected
     inflation.  This baseline is commonly referred to as the
     "uncapped" baseline because it does not incorporate the
     discretionary spending limits imposed by the BEA for fiscal
     years 1994 through 1998. 

Subsequent savings and revenue estimates provided by CBO and JCT may
not match exactly those contained in this report.  Differences in the
details of specific proposals, changes in assumptions which underlie
the analyses, and updated baselines can all lead to significant
differences in estimates. 


--------------------
\2 For a complete discussion of the uses and caveats of the CBO
estimates, see CBO's March 1994 report, Reducing the Deficit: 
Spending and Revenue Options.  Estimates included in the March 1994
report are indicated by the source, "Congressional Budget Office,
Reducing the Deficit, March 1994." Other CBO estimates provided to
GAO are sourced, "Congressional Budget Office."


REASSESS OBJECTIVES
========================================================== Appendix II


   OPTION:
   F-22 FIGHTERF-22 FIGHTER
-------------------------------------------------------- Appendix II:1

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense (DOD)

Accounts                Research, Development, Test, and
                        Evaluation, Air Force (57-3600);
                        Aircraft Procurement, Air Force (57-
                        3010)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
The Air Force's F-22 program was initiated in 1981 to meet the
evolving threat projected for the mid-1990s.  Since the F-22 program
entered full-scale development in 1991, the severity of the projected
military threat in terms of quantities and capabilities has declined. 
Instead of confronting thousands of modern Soviet fighters, U.S.  air
forces are now expected to confront potential adversary air forces
that include few fighters that have the capability to challenge the
F-15--the U.S.  front line fighter.  GAO's analysis shows that the
F-15 exceeds the most advanced fighter threat system expected to
exist for many years.  Further, our analysis indicates that the
current inventory of F-15s can be economically maintained in a
structurally sound condition until 2015 or later. 

In addition to a declining need for the F-22, the aircraft has not
been designed to emphasize multiple missions or joint use among the
services.  Although the F-22 has some inherent air-to-ground
capability (as do other aircraft), it is principally designed to
perform one mission--air superiority against opposing fighters. 
Also, the F-22, as designed, will be a land-based fighter not capable
of operating from aircraft carriers. 

The Department of Defense has initiated a Joint Advanced Strike
Technology (JAST) program to define the technologies for
next-generation multimission aircraft.  With 12 to 15 years--or
more--available to develop a new fighter, the Congress could choose
to cancel the F-22 fighter acquisition program and support
development of a next generation fighter aircraft having capabilities
for multiservice use in conducting multiple missions effectively. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority       2,460   2,370   2,510   2,120   2,860
Outlays                1,140   2,030   1,900   1,660   1,710
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix II:1.1

Tactical Aircraft:  Planned F-15 Replacement Is Premature
(GAO/C-NSIAD-94-11, December 8, 1993). 

1994 Defense Budget:  Potential Reductions, Rescissions, and
Restrictions to RDT&E Programs (GAO/NSIAD-93-293BR, September 30,
1993). 

Naval Aviation:  Consider All Alternatives Before Proceeding with the
F/A-18 E/F (GAO/NSIAD-93-144, August 27, 1993). 

GAO Contact Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   MK-48 ADVANCED CAPABILITY
   TORPEDO PROPULSION SYSTEM MK-48
   ADVANCED CAPABILITY TORPEDO
   PROPULSION SYSTEM
-------------------------------------------------------- Appendix II:2

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Accounts                Weapons Procurement, Navy (17-
                        1507); Research, Development, Test,
                        and Evaluation, Navy (17-1319)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
In 1986, the Navy established a requirement to upgrade the propulsion
system on its MK-48 Advanced Capability (ADCAP) torpedo.  The upgrade
was intended to reduce noise levels when the torpedo was fired from
the SSN-21 Seawolf submarine.  In January 1992, the Navy stated that
the Seawolf's requirements could be met by the current ADCAP, without
the upgrade.  The Navy now plans to use the upgraded torpedo on other
submarines and estimates that upgrading new MK-48 torpedoes will cost
about $127 million ($47 million for research, development, test, and
evaluation; and $80 million for incorporation into new production
units).  The Navy also estimates that an additional $200 million will
be needed in future years' weapons procurement funds to upgrade about
1,350 existing MK-48 torpedoes. 

Using the upgraded torpedo on submarines with noise levels higher
than the Seawolf could limit the benefits of the upgrade.  Because
the upgrade is not intended to meet and will not lead to meeting the
Navy's current torpedo noise reduction requirements, nor
significantly contribute to the technology necessary to meet those
requirements, GAO has recommended that the upgrade program be
terminated. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          30      30      30      30      30
Outlays                   20      30      30      30      30
------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCT
------------------------------------------------------ Appendix II:2.1

Navy Torpedo Program:  MK-48 ADCAP Propulsion System Upgrade Not
Needed (GAO/NSIAD-92-191, September 10, 1992). 

GAO Contact Richard A.  Davis, (202) 512-3504



   OPTION:
   ARMY'S COMANCHE
   HELICOPTERARMY'S COMANCHE
   HELICOPTER
-------------------------------------------------------- Appendix II:3

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Account                 Research, Development, Test and
                        Evaluation, Army (21-2040)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
When fielded in 2003, the Comanche helicopter is to replace
Vietnam-era scout and attack helicopters that the Army considers
incapable of meeting existing or future requirements.  The Comanche's
overall program cost has grown to more than $35 billion, with an
estimated unit cost of more than $27 million.  Anticipated cost
increases in its T800 engine and other unresolved technical risks
indicate that future cost growth is likely.  Moreover, projected
operation and support savings for the Comanche, compared with
helicopters it is to replace, appear to have become less probable,
and the Army has not reassessed these estimated savings since their
original projection in 1988. 

Although light attack missions are part of the Army's plan for the
Comanche, its lethality is now expected to rival or surpass that of
the Apache--the Army's premiere attack helicopter.  In addition, as
the Army reduces its total helicopter fleet, it plans to modify many
of those that will remain to increase their combat capabilities.  For
example, the Army plans to arm the Kiowa and to make several planned
improvements to the basic model Apaches, including adding Longbow
modifications to 227 Apaches.  These actions, collectively, tend to
blur the distinction in roles among the Army's helicopter fleet. 

Given real and probable development cost increases, an uncertain
operating and support cost environment, and questions about the role
of the Comanche compared to other Army helicopters, the Congress may
wish to rethink the need to purchase the Comanche.  Terminating the
program will produce the following budget savings. 



                      Five-Year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority         470     370     300     460     670
Outlays                  260     360     320     390     510
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
------------------------------------------------------ Appendix II:3.1

Comanche Helicopter:  Program Needs Reassessment Due to Increased
Unit Cost and Other Factors (GAO/NSIAD-92-204, May 27, 1992). 

GAO Contact Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   C-17 AIRCRAFTC-17 AIRCRAFT
-------------------------------------------------------- Appendix II:4

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Accounts                Aircraft Procurement, Air Force (57-
                        3010); Research, Development, Test,
                        and Evaluation, Air Force (57-3600)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
The C-17 has been a troubled program almost since its inception and
has fallen far short of original cost, schedule, and performance
objectives.  As a result of the program's problems, DOD sponsored a
cost and operational effectiveness analysis to explore alternatives
to the C-17 for meeting planned airlift capacity requirements,
including acquiring additional commercial wide-body derivative
aircraft.  Although the analysis shows that there are cost effective
wide-body alternatives, DOD has not made a final decision on
substituting commercial wide-body aircraft for the C-17. 

Through fiscal year 1994, funds have been appropriated for 26 C-17
aircraft.  Last year, the Air Force planned to request funds for
another 66 C-17's between fiscal years 1995 and 1999.  Canceling the
program at 26 aircraft would result in a 2 million ton mile per day
shortfall in planned airlift capacity by fiscal year 1999.  However,
to avoid falling below planned levels, the Air Force could purchase
additional commercial wide-body derivatives.  GAO's analysis shows
that the Air Force would need to purchase 20 additional wide-body
aircraft between fiscal years 1995 and 1999. 

The Congress may wish to cancel the C-17 aircraft program.  Airlift
capacity would remain stable at the Air Force's projected levels if
the C-17 program were canceled in 1995 and commercial derivatives
substituted, although certain military capabilities such as air drop
could be reduced.  The Air Force estimates that program termination
cost for this option could be approximately $1 billion; however,
final termination costs are as yet undefined.  The Air Force may also
have to settle some claims filed against the government by the
contractor.  Ongoing GAO work is assessing these and other issues
related to the C-17 program. 

The following savings estimate for cancelling the C-17 program at 26
aircraft includes purchasing 20 additional wide-body aircraft, but
does not include program termination costs. 



                      Five-Year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority       2,480   3,530   2,710   2,280   3,220
Outlays                  130     720   1,810   2,460   2,550
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix II:4.1

Military Airlift:  Status of the C-17 Development Program
(GAO/T-NSIAD-93-6, March 10, 1993) and (GAO/NSIAD-93-8, March 18,
1993). 

Defense Industry:  Status of the C-17 Program and Related Issues
Affecting the McDonnell Douglas Corporation (GAO/T-NSIAD-92-4,
November 14, 1992). 

Military Aircraft:  C-17 Wing Flap Requires Additional Testing
(GAO/NSIAD-92-160, July 8, 1992). 

Embedded Computer Systems:  Significant Software Problems on C-17
Must Be Addressed (GAO/IMTEC-92-48, May 7, 1992). 

Military Airlift:  Selected Events in the Development of the C-17
(GAO/NSIAD-92-181FS, May 4, 1992). 

Military Airlift:  Status of the C-17 Development Program
(GAO/NSIAD-92-205BR, April 20, 1992). 

Defense Industry:  Issues Concerning Five Weapon Systems Provided or
Developed by McDonnell Douglas Corporation (GAO/T-NSIAD-92-1, October
3, 1991). 

Military Airlift:  Cost and Complexity of the C-17 Aircraft Research
and Development Program (GAO/NSIAD-91-5, March 19, 1991). 

Status of the Air Force's C-17 Aircraft Program (GAO/T-NSIAD-90-48,
June 19, 1990). 

GAO Contact Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   TV MARTITV MARTI
-------------------------------------------------------- Appendix II:5

----------------------  ------------------------------------
Authorizing committees  Foreign Relations (Senate)
                        Foreign Affairs (House)

Appropriations          Commerce, Justice, State, and
subcommittees           Judiciary (Senate and House)

Primary agency          U.S. Information Agency (USIA)

Account                 Television Broadcasting to Cuba (67-
                        0208)

Spending type           Discretionary

Budget subfunction      Foreign information and exchange
                        activities
------------------------------------------------------------
USIA provides television broadcasts to Cuba through TV Marti.  The
U.S.  Advisory Commission on Public Diplomacy has reported that TV
Marti is not cost-effective and has for several years recommended
that it be terminated.  GAO has criticized program controls, which
had failed to ensure objective and balanced broadcasts.  Available
evidence suggests that very few people in Cuba watch TV Marti.  The
signal is jammed, problems with transmission facilities have, on
occasion, limited potential viewers to the very small Cuban
population with satellite receivers, and broadcast hours are in the
middle of the night. 

The Congress may wish to reconsider the need for TV Marti, given its
persistent problems and its limited ability to achieve its original
goals. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority           2       8       8       8       8
Outlays                    1       6       7       8       8
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix II:5.1

TV Marti:  Costs and Compliance With Broadcast Standards and
International Agreements (GAO/NSIAD-92-199, May 6, 1992). 

Broadcasts to Cuba:  TV Marti Surveys are Flawed (GAO/NSIAD-90-252,
August 9, 1990). 

GAO Contact Joseph E.  Kelley, (202) 512-4128



   OPTION:
   SPACE STATIONSPACE STATION
-------------------------------------------------------- Appendix II:6

----------------------  ------------------------------------
Authorizing committees  Commerce, Science, and
                        Transportation (Senate)
                        Science, Space, and Technology
                        (House)

Appropriations          VA, HUD, and Independent Agencies
subcommittees           (Senate and House)

Primary agency          National Aeronautics and Space
                        Administration (NASA)

Account                 Research and Development (80-0108)

Spending type           Discretionary

Budget subfunction      General science and basic research
------------------------------------------------------------
Since 1985, the space station has been redesigned numerous times and
serious questions have been raised in the scientific community about
the extent to which it is needed for life sciences and microgravity
research.  In early 1993, after about $11 billion and 8 years of
development effort, the administration directed NASA to reassess the
space station program.  The goal was to achieve a design that would
require no more than $9 billion and take no more than five years to
complete. 

Although NASA was unable to meet those goals, the administration
supported the redesign, which now is estimated to cost over $19
billion and take about 10 years to complete.  Then, in an attempt to
reduce the station's cost and accelerate its schedule, the
administration agreed with the Russian government on its increased
participation in the program.  However, as the technical and
management complexities of integrating the Russians into the program
begin to emerge, it is increasingly uncertain what impact significant
Russian participation will have on the space station's cost and
schedule. 

Given the problems experienced to date and the question and
uncertainty that still surround the space station, the Congress may
wish to consider whether, and to what extent, it wants to accept
NASA's latest redesign and attendant cost and schedule.  After
reviewing these issues, the Congress could consider whether to delay
the project, reduce its scope and costs, or terminate it.  Five-year
savings for terminating the space station are shown below. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority       2,150   2,200   2,250   2,350   2,400
Outlays                1,400   2,100   2,250   2,300   2,350
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix II:6.1

Space Station:  Program Instability and Cost Growth Continue Pending
Redesign (GAO/NSIAD-93-187, May 18, 1993). 

NASA:  Large Programs May Consume Increasing Share of Limited Future
Budgets (GAO/NSIAD-92-278, September 4, 1992). 

Space Station:  Status of Financial Reserves (GAO/NSIAD-92-279, July
20, 1992). 

NASA Budget:  Potential Shortfalls in Funding NASA's 5-Year Plan
(GAO/T-NSIAD-92-18, March 17, 1992). 

Questions Remain on the Costs, Uses, and Risks of the Redesigned
Space Station (GAO/T-NSIAD-91-26, May 1, 1991). 

GAO Contact Donna M.  Heivilin, (202) 512-8412



   OPTION:
   MILK MARKETING ORDERSMILK
   MARKETING ORDERS
-------------------------------------------------------- Appendix II:7

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Agriculture (House)

Appropriations          Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agency          U.S. Department of Agriculture
                        (USDA)

Account                 Commodity Credit Corporation Fund
                        (12-4336)

Spending type           Direct

Budget subfunction      Farm income stabilization
------------------------------------------------------------
The major objectives of federal dairy policies have been to ensure an
adequate supply of milk and to support dairy farmers' incomes.  Two
interrelated programs to accomplish these objectives are milk
marketing orders and price supports.  Milk is the only commodity with
both order pricing and price support programs. 

Marketing orders set minimum prices that must be paid for milk for
fluid use, based on the manufacturing grade price plus differentials
that are unique to each of the 40 regional orders.  GAO has reported
that the premise for federal milk marketing orders is outdated.  A
need no longer exists to encourage and maintain a locally produced
supply of milk.  Milk is now produced in all regions of the country,
and technologies are available to transfer it, either as fluid or in
a form to be later reconstituted as fluid, should local shortages
develop. 

Given the change in underlying conditions for this program, the
Congress may wish to consider reducing the federal role in milk
pricing by taking actions such as phasing out the pricing provisions
of the milk marketing orders.  The probable effect of this change
would be reduced purchases under the federal price support program as
farmers cut production in response to reduced prices.  Eliminating
these provisions could also ultimately reduce the price of dairy
products to consumers. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          90     190     230     190     100
Outlays                   90     190     230     190     100
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCT
------------------------------------------------------ Appendix II:7.1

Milk Marketing Orders:  Options for Change (GAO/RCED-88-9, March 21,
1988). 

GAO Contact John W.  Harman, (202) 512-5138



   OPTION:
   DAIRY PRICE SUPPORT
   PROGRAMDAIRY PRICE SUPPORT
   PROGRAM
-------------------------------------------------------- Appendix II:8

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Agriculture (House)

Appropriations          Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agency          Department of Agriculture

Account                 Commodity Credit Corporation Fund
                        (12-4336)

Spending type           Direct

Budget subfunction      Farm income stabilization
------------------------------------------------------------
To ensure long-term viability, the dairy industry will have to
increase its efforts to become more dependent on commercial
markets--particularly international markets.  A major factor that has
impeded the dairy industry's ability to more effectively expand and
compete in global markets has been the Price Support Program, which
encourages the production of dairy products that do not always meet
customers' requirements, and often result in U.S.  market prices that
exceed world prices.  For example, the 1992 U.S.  market price for
cheese was $1.19 per pound, while the world price was $0.81 per
pound.  The cost of dairy support purchases was approximately $395
million in fiscal year 1992 at a support price of $10.10 per
hundred-weight of milk equivalent, which continues to be the support
price today.  Furthermore, the dairy program has influenced the U.S. 
dairy industry to place more emphasis on production rather than
marketing. 

The Congress has taken steps to make the federal dairy program more
responsive to market forces, particularly by reducing the support
price.  However, a recent GAO report showed that U.S.  dairy prices
still exceed world prices, limiting the price competitiveness of U.S. 
dairy products in the world market.  To counteract this situation,
the Congress established the Dairy Export Incentive Program, which
subsidizes exports of dairy products and cost about $140 million in
calendar year 1992. 

GAO has recommended making the dairy program more responsive to
market forces by tying the support price to the market, thereby
effectively reducing the support price.  USDA reported that it has
been estimated that the support price would have to be reduced to
between $6 and $7 per hundred-weight to achieve significant exports
of U.S.  dairy products.  GAO has also advocated that support prices
be lowered gradually to allow producers who have made production
decisions based on the program a period of time to adjust to the new
prices. 

To address these issues, the Congress may wish to reduce the dairy
support price by $0.80 annually over five years, beginning in fiscal
year 1995.  This would eliminate the need for the Dairy Export
Incentive Program and the producer assessments supporting the
program. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          33     236     327     281     183
Outlays                   33     236     327     281     183
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
------------------------------------------------------ Appendix II:8.1

Dairy Industry:  Potential for and Barriers to Market Development
(GAO/RCED-94-19, December 21, 1993). 

GAO Contact John W.  Harman, (202) 512-5138



   OPTION:
   CONSTRUCTION OF VETERANS'
   MEDICAL CARE
   FACILITIESCONSTRUCTION OF
   VETERANS' MEDICAL CARE
   FACILITIES
-------------------------------------------------------- Appendix II:9

----------------------  ------------------------------------
Authorizing committees  Veterans' Affairs (Senate and House)

Appropriations          VA, HUD, and Independent Agencies
subcommittees           (Senate and House)

Primary agency          Department of Veterans Affairs (VA)

Account                 Construction (36-0110)

Spending type           Discretionary

Budget subfunction      Hospital and medical care for
                        veterans
------------------------------------------------------------
Annually, VA spends about $500 million on construction of medical
care facilities.  Currently, VA is planning to build new hospitals in
Honolulu, Hawaii; East Central Florida; and northern California. 
Construction of additional VA capacity would add to the surplus of
hospital beds that already exists in many of the communities where VA
plans to build hospitals.  The administration's health plan would
authorize an additional $3.3 billion in start-up funds to establish
400-800 additional clinics and remodel existing facilities.  If
universal health care coverage is adopted, the demand for VA hospital
care could decrease by about 50 percent, and demand for outpatient
care could decrease by about 40 percent. 

The Congress may wish to limit construction of additional VA health
care facilities until reforms of the nation's health care financing
system and VA eligibility take shape.  If the Congress cuts new major
construction projects by 80 percent, as proposed in the
administration's fiscal year 1995 budget request, the following
savings could be achieved. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority         303     311     320     328     337
Outlays                   14      53     110     171     229
------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix II:9.1

Veterans' Health Care:  Potential Effects of Health Care Reforms on
VA's Major Construction Program (GAO/HRD-T-93-19, May 6, 1993). 

Veterans' Health Care:  Potential Effects of Health Financing Reforms
on Demand for VA Services (GAO/HRD-T-93-12, March 31, 1993). 

Veterans' Health Care:  Potential Effects of Health Reforms on VA
Construction (GAO/T-HRD-93-7, March 3, 1993). 

VA Health Care:  Actions Needed to Control Major Construction Cost
(GAO/HRD-93-75, February 26, 1993). 

Transition Series:  Veterans' Affairs Issues (GAO/OCG-93-21TR,
December 1992). 

GAO Contact David P.  Baine, (202) 512-7101



   OPTION:
   INDUSTRIAL DEVELOPMENT BONDS
   AND QUALIFIED MORTGAGE
   BONDSINDUSTRIAL DEVELOPMENT
   BONDS AND QUALIFIED MORTGAGE
   BONDS
------------------------------------------------------- Appendix II:10

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Department of the Treasury
------------------------------------------------------------
Industrial development bonds (IDB), issued by state and local
governmental authorities, are used to help finance the creation or
expansion of manufacturing facilities.  Qualified mortgage bonds
(QMB), issued by state and local housing agencies, allow home buyers
to receive below-market rates on their mortgages.  Interest earned by
investors on IDBs on QMBs is exempt from federal income taxes. 

In 1993, the Congress extended the authority for state and local
governments to issue new IDBs, and made permanent the authority of
state and local governments to issue QMBs.  However, GAO believes
that the achievement of public benefits from both IDBs and QMBs is
questionable. 

GAO found that (1) job creation attributed to IDB projects would
likely have occurred without issuance of the bonds in the three
states reviewed; (2) there is no evidence to support the contention
that IDBs achieve significant public benefits, such as providing
economic growth to depressed areas; and (3) most developers contacted
said that they would have proceeded with their projects in the
absence of IDBs.  Similarly, GAO found that QMBs (1) do little to
increase home ownership, (2) are usually provided to home buyers who
do not need them to obtain a conventional (unassisted) mortgage loan,
and (3) are not cost-effective. 

Both IDBs and QMBs could be better targeted.  For example, IDBs could
be focused on economically distressed areas or to start-up companies,
and QMBs could be directed toward home buyers who could not
reasonably qualify for unassisted conventional loans.  However,
because of evidence that neither IDBs nor QMBs are achieving their
intended benefits and in view of lost tax revenues, the Congress may
wish to consider repealing both provisions.  Estimated revenues
gained from eliminating IDBs and QMBs are shown in the table below. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain              43     155     277     369     446
------------------------------------------------------------
Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix II:10.1

Industrial Development Bonds:  Achievement of Public Benefits Is
Unclear (GAO/RCED-93-106, April 22, 1993). 

Home Ownership:  Limiting Mortgage Assistance Provided to Owners With
High Income Growth (GAO/RCED-90-117, September 26, 1990). 

Home Ownership:  Targeting Assistance to Buyers Through Qualified
Mortgage Bonds (GAO/RCED-88-190BR, June 27, 1988). 

Home Ownership:  Mortgage Bonds Are Costly and Provide Little
Assistance to Those in Need (GAO/RCED-88-111, March 28, 1988). 

GAO Contact Judy A.  England-Joseph, (202) 512-7631



   OPTION:
   DEDUCTIBILITY OF HOME EQUITY
   LOAN INTERESTDEDUCTIBILITY OF
   HOME EQUITY LOAN INTEREST
------------------------------------------------------- Appendix II:11

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service (IRS)
------------------------------------------------------------
The term home equity borrowing or financing is usually applied to
mortgages other than the original loan used to acquire a home or to
any subsequent refinancing of that loan.  Interest is deductible up
to $100,000 of home equity indebtedness and $1 million of
indebtedness used to acquire a home.  Home equity financing grew at
an average annual rate of about 20 percent between 1981 and 1991. 
Home equity financing is not limited to home-related uses and can be
used to finance additional consumption by borrowers. 

Use of mortgage-related debt to finance non-housing assets and
consumption purchases through home equity loans could expose
borrowers to increased risk of losing their homes should they
default.  Equity concerns may exist because middle- and upper-income
taxpayers who itemize primarily take advantage of this tax
preference, and such an option is not available to people who rent
their housing. 

One way to address the issues concerning the amounts or uses of home
equity financing would be to limit mortgage interest deductibility to
first mortgages only, but a Joint Committee on Taxation revenue
estimate was not available at time of publication.  Another approach
would be to cap the total annual deductible mortgage interest at
$12,000 for a single individual and $20,000 for married couples. 
Assuming an effective date of January 1, 1995, this option would
generate the following revenues. 



                      Five-year Revenues

                    (Dollars in millions)

               FY95         FY96        FY97    FY98    FY99
----------  ----------  ------------  ------  ------  ------
Revenue       2,400        6,700       7,200   7,400   7,600
 gain
------------------------------------------------------------
Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix II:11.1

Tax Policy:  Many Factors Contributed to the Growth in Home Equity
Financing in the 1980s (GAO/GGD-93-63, March 25, 1993). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   TAX TREATMENT OF INTEREST
   EARNED ON LIFE INSURANCE
   POLICIES AND DEFERRED
   ANNUITIESTAX TREATMENT OF
   INTEREST EARNED ON LIFE
   INSURANCE POLICIES AND DEFERRED
   ANNUITIES
------------------------------------------------------- Appendix II:12

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
Interest earned on life insurance policies and deferred annuities,
known as "inside buildup," is not taxed as long as it accumulates
within the contract.  Although the deferred taxation of inside
buildup is similar to the tax treatment of income from some other
investments, such as capital gains, it differs from the policy of
taxing interest as it accrues on certain other investments, like
certificates of deposit and original issue discount bonds. 

Not taxing inside buildup may have merit if it increases the amount
of insurance coverage purchased and the amount of income available to
retirees and beneficiaries.  However, the tax preference given life
insurance and annuities mainly benefits middle- and upper-income
people.  Adequate coverage for low-income people is largely provided
through the Social Security System, which provides both insurance and
annuity protection.  Studies on the adequacy of life insurance
protection are not conclusive. 

The Congress may want to reconsider granting preferential tax
treatment to inside buildup, weighing the social benefits against the
revenue foregone.  The Congress may wish to consider taxing the
interest earned on life insurance policies, and the revenue estimate
below reflects this option. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain           4,200  10,300   9,700   9,000   8,300
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix II:12.1

Tax Policy:  Tax Treatment of Life Insurance and Annuity Accrued
Interest (GAO/GGD-90-31, January 29, 1990). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   TARGETED JOBS TAX
   CREDITTARGETED JOBS TAX CREDIT
------------------------------------------------------- Appendix II:13

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agencies        Department of Labor
                        Department of the Treasury
------------------------------------------------------------
The Targeted Jobs Tax Credit (TJTC) program is intended to increase
employment opportunities for members of the targeted groups by
providing a financial incentive to employers to recruit, hire and
retain target group members.  Over the past 10 years, employers have
claimed an estimated $4.5 billion in tax credits under the program. 
GAO obtained national TJTC program information from the Department of
Labor and the Department of the Treasury.  GAO also gathered
information on employers and workers participating in the program for
13 states, and interviewed officials from 60 companies in 2 states. 
GAO found that over half (55 percent) of the employers in our sample
took advantage of the tax credit without making special efforts to
hire members of the targeted group; the remaining employers in our
analysis (45 percent) appeared to make some special effort to
recruit, hire or retain members of the targeted group.  Moreover,
eligible nonparticipating workers experienced similar increases in
earnings as workers participating in the tax credit program. 

GAO suggested one way to improve the program's impact on the targeted
population would be to require employers to conduct special outreach,
prescreening and training efforts.  On the other hand, the Congress
may decide that this program is no longer justified by an analysis of
the benefits in comparison to its costs and terminate the tax credit. 

The estimate below assumes termination of the credit on July 1,
1994--6 months before its scheduled expiration of December 31, 1994. 
Since the tax credit is removed from the baseline after its
expiration, no further revenue gains can be attributed beyond this
time. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain              54      35      14       6       1
------------------------------------------------------------
Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix II:13.1

Targeted Jobs Tax Credit:  Employer Actions to Recruit, Hire and
Retain Eligible Workers Vary (GAO/HRD-91-33, February 20, 1991). 

GAO Contact Linda G.  Morra, (202) 512-7014


REDEFINE BENEFICIARIES
========================================================= Appendix III


   OPTION:
   COPAYMENTS FOR CARE IN MILITARY
   HOSPITALSCOPAYMENTS FOR CARE IN
   MILITARY HOSPITALS
------------------------------------------------------- Appendix III:1

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Account                 Defense Health Program (97-0130)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
Currently, care received by military beneficiaries in military
hospitals and clinics is free.  However, when care must be obtained
through civilian providers, military beneficiaries share in the costs
of the care they receive.  This uneven system has led to confusion,
uncertainty, and inequity among beneficiaries as to what their health
care benefits are.  Further, research has shown that free care leads
to greater (and unnecessary) utilization and, therefore, greater
costs. 

DOD has suggested a new set of cost-sharing requirements for care
provided by civilian network providers under its health care reform
proposal.  However, the proposal maintains free care to beneficiaries
in military facilities, thereby continuing the inequity and
overutilization problems. 

The Congress may wish to establish beneficiary cost-sharing
requirements for care received in military hospitals similar to the
DOD health care reform proposal for care that beneficiaries will
receive from civilian facilities. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority         350     350     350     360     360
Outlays                  270     330     350     350     360
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:1.1

Defense Health Care:  Lessons Learned From DOD's Managed Health Care
Initiatives (GAO/T-HRD-93-21, May 10, 1993). 

Defense Health Care:  Obstacles in Implementing Coordinated Care
(GAO/T-HRD-92-24, April 7, 1992). 

Defense Health Care:  Implementing Coordinated Care--A Status Report
(GAO/HRD-92-10, October 3, 1991). 

The Military Health Services System--Prospects for the Future
(GAO/T-HRD-91-11, March 14, 1991). 

GAO Contact David P.  Baine, (202) 512-7101



   OPTION:
   AGRICULTURAL INCOME SUPPORT
   PAYMENTSAGRICULTURAL INCOME
   SUPPORT PAYMENTS
------------------------------------------------------- Appendix III:2

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Agriculture (House)

Appropriations          Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agency          Department of Agriculture

Account                 Commodity Credit Corporation Fund
                        (12-4336)

Spending type           Direct

Budget subfunction      Farm income stabilization
------------------------------------------------------------
The Commodity Credit Corporation has supported the incomes of farmers
since the 1930s.  Concerned about large payments to farm operators
and the overall cost of federal farm programs, the Congress
established an annual limit on farm payments of $50,000 per person in
1970.  Persons are broadly defined to be individuals, members of
joint operations, or entities such as limited partnerships,
corporations, associations, trusts, and estates.  Payment limits
again became a significant issue in the mid-1980s when individuals
reorganized their farming operations to receive larger total federal
payments. 

In 1987, legislative amendments allowed a person to receive up to
$100,000 of farm payments per year.  These amendments, intended to
tighten the payment limit requirements and reduce program costs, have
had a very limited effect because

  farmers were allowed to reorganize their operations, within a
     specified time period, to avoid reductions in total payments;

  USDA required only 50 percent of a corporation's ownership to
     provide significant contributions of personal labor or active
     personal management to meet the requirement that the corporation
     be actively engaged in farming; and

  farmers were allowed to qualify for payments from up to three
     eligible entities. 

If the Congress wants to further tighten payment limits as a means to
reduce program costs, one option would be to limit payments to
$50,000 per individual and only provide benefits to individuals
actively engaged in farming.  This limit would apply whether the
payments are earned from the individual's own operations or are
attributed to them as owners in one or more entities.  A higher limit
could be established for specific crops that would not be considered
economically viable if held to the $50,000 per individual limit. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          60     140     150     160     160
Outlays                   60     140     150     160     160
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:2.1

Agriculture Payments:  Number of Individuals Receiving 1990
Deficiency Payments and the Amounts (GAO/RCED-92-163FS, April 27,
1992). 

Agriculture Payments:  Effectiveness of Efforts to Reduce Farm
Payments Has Been Limited (GAO/RCED-92-2, December 5, 1991). 

Farm Payments:  Basic Changes Needed to Avoid Abuse of the $50,000
Payment Limit (GAO/RCED-87-176, July 20, 1987). 

GAO Contact John W.  Harman, (202) 512-5138



   OPTION:
   FEES FOR CHILD SUPPORT
   ENFORCEMENT SERVICESFEES FOR
   CHILD SUPPORT ENFORCEMENT
   SERVICES
------------------------------------------------------- Appendix III:3

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Appropriations          Labor, Health and Human Services,
subcommittees           and Education (Senate and House)

Primary agency          Department of Health and Human
                        Services (HHS)

Account                 Family Support Payments to States
                        (75-1501)

Spending type           Direct

Budget subfunction      Other income security
------------------------------------------------------------
The purpose of the Child Support Enforcement Program is to strengthen
state and local efforts to obtain child support for both families
eligible for Aid to Families with Dependent Children (AFDC) and
non-AFDC families.  The services provided to clients include locating
noncustodial parents, establishing paternity, and collecting ongoing
and delinquent child support payments.  From fiscal year 1984 through
1992, non-AFDC caseloads and costs have risen 247 percent and 435
percent, respectively.  States have exercised their discretion to
charge only minimal application and service fees and, thus, are doing
little to recover the federal government's 66-percent share of
program costs.  In fiscal year 1992, for example, state fee practices
returned $29 million of the $850 million spent to provide non-AFDC
services. 

GAO believes that mandatory application fees should be dropped and
that states should charge a minimum percentage service fee on
successful collections for non-AFDC families.  Application fees are
administratively burdensome, and a service fee would ensure that
families are charged only when the service has been successfully
performed. 

If the Congress wishes to fully recover the administrative costs of
the program, a 15-percent service fee on collections for non-AFDC
families would be necessary.  Savings assume states will be able to
implement this option beginning October 1, 1995. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          --     810     880     960   1,040
Outlays                   --     810     880     960   1,040
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:3.1

Child Support Enforcement:  Opportunity to Defray Burgeoning Federal
and State Non-AFDC Costs (GAO/HRD-92-91, June 5, 1992). 

GAO Contact Joseph Delfico, (202) 512-7215



   OPTION:
   VETERANS' DISABILITY
   COMPENSATION FOR NON-SERVICE
   CONNECTED DISEASESVETERANS'
   DISABILITY COMPENSATION FOR
   NON-SERVICE CONNECTED DISEASES
------------------------------------------------------- Appendix III:4

----------------------  ------------------------------------
Authorizing committees  Veterans' Affairs (Senate and House)

Appropriations          VA, HUD, and Independent Agencies
subcommittees           (Senate and House)

Primary agency          Department of Veterans Affairs

Account                 Compensation (36-0153)

Spending type           Direct

Budget subfunction      Income security for veterans
------------------------------------------------------------
During 1986, VA paid approximately $1.7 billion in disability
compensation payments to veterans with diseases neither caused nor
aggravated by military service.  Current data indicate that more than
390,000 veterans receive VA compensation payments for diseases that
are generally neither caused by nor aggravated by military service. 
GAO's study of five countries shows that they do not compensate
veterans under these circumstances. 

The Congress may wish to reconsider whether such diseases should be
compensated as service-connected disabilities.  If disability
compensation payments to veterans with non-service connected
disease-related disabilities were eliminated in future cases, the
following savings would apply. 



                      Five-year Savings

                   FY95         FY96    FY97    FY98    FY99
-------------  -------------  ------  ------  ------  ------
Budget              39            81     125     173     224
 authority
Outlays             39            72     120     167     218
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:4.1

Disabled Veterans Programs:  U.S.  Eligibility and Benefit Types
Compared with Five Other Countries (GAO/HRD-94-6, November 24, 1993). 

VA Benefits:  Law Allows Compensation for Disabilities Unrelated to
Military Service (GAO/HRD-89-60, July 31, 1989). 

GAO Contact David P.  Baine, (202) 512-7101



   OPTION:
   COST SHARING FOR VETERANS'
   LONG-TERM CARECOST SHARING FOR
   VETERANS' LONG-TERM CARE
------------------------------------------------------- Appendix III:5

----------------------  ------------------------------------
Authorizing committees  Veterans' Affairs (Senate and House)

Appropriations          VA, HUD, and Independent Agencies
subcommittees           (Senate and House)

Primary agency          Department of Veterans Affairs

Account                 Medical Care (36-0160)

Spending type           Discretionary

Budget subfunction      Hospital and medical care for
                        veterans
------------------------------------------------------------
State veterans' homes recover as much as 50 percent of the costs of
operating their facilities through charges to veterans receiving
services.  Similarly, Oregon recovers about 14 percent of the costs
of nursing home care provided under its Medicaid program through
estate recoveries.  In fiscal year 1990, VA offset less than
one-tenth of one percent of its costs through beneficiary copayments. 

Potential recoveries appear to be greater within the VA system than
under Medicaid.  Home ownership is significantly higher among VA
hospital users than among Medicaid nursing home recipients, and
veterans living in VA nursing homes generally contribute less toward
the cost of their care than do Medicaid recipients, allowing veterans
to build larger estates. 

The Congress may wish to consider increasing cost sharing for VA
nursing home care by (1) adopting cost-sharing requirements similar
to those imposed by most state veterans' homes and (2) implementing
an estate recovery program similar to those operated by many states
under their Medicaid programs.  If VA recovered 25 percent of its
costs of providing nursing home and domiciliary care through a
combination of cost sharing and estate recoveries, the following
savings would apply. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority         271     282     293     303     315
Outlays                  270     280     291     302     313
------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:5.1

VA Health Care:  Potential for Offsetting Long-Term Care Costs
Through Estate Recovery (GAO/HRD-93-68, July 27, 1993). 

VA Health Care:  Offsetting Long-Term Care Cost By Adopting State
Copayment Practices (GAO/HRD-92-96, August 12, 1992). 

GAO Contact David P.  Baine, (202) 512-7101



   OPTION:
   FORMULA-BASED GRANT
   PROGRAMSFORMULA-BASED GRANT
   PROGRAMS
------------------------------------------------------- Appendix III:6

----------------------  ------------------------------------
Authorizing committees  Multiple

Appropriations          Multiple
subcommittees

Primary agencies        Multiple

Accounts                Multiple

Spending type           Discretionary/Direct

Budget subfunctions     Multiple
------------------------------------------------------------
GAO has issued many reports over the past decade showing that the
distribution of federal grants to state and local governments is not
well-targeted to those jurisdictions with greatest programmatic needs
or lowest fiscal capacity to meet those needs.  As a result, program
recipients in areas with relatively lower needs and greater wealth
may enjoy a higher level of services than is available in harder
pressed areas, or the wealthier areas can provide the same level of
services at lower tax rates than harder pressed areas. 

At a time when federal domestic discretionary resources are
constrained, better targeting of grant formulas offers a strategy to
bring down federal outlays by concentrating reductions on wealthier
localities with lesser needs and greater capacity to absorb the cuts. 
At the same time, redesigned formulas could hold harmless the hardest
pressed areas who are most vulnerable. 

Cuts in federal grants to states could be targeted by
disproportionately reducing federal funds to states with the
strongest tax bases and lesser needs.  Cuts in federal grants to
local governments could be targeted by either concentrating cuts on
areas with the strongest tax bases or by changing program eligibility
to restrict grant funding only to those places with lower fiscal
capacity or greatest programmatic needs. 

As an example, during the debate in 1986 over the termination of
General Revenue Sharing, GAO reported that a better targeted formula
and restricted eligibility could achieve a 50-percent cut in total
outlays, while maintaining or increasing federal funds to harder
pressed jurisdictions.  Recently, the administration proposed
reducing outlays for the Low Income Home Energy program by over $1.2
billion for fiscal year 1995 by targeting the formula to concentrate
remaining funds on states it views as having the greatest needs. 

To illustrate the fiscal potential for this option, CBO estimated
5-year savings from a 10-percent reduction in the aggregate total of
all closed-ended or capped formula grant programs exceeding $1
billion.  This group includes over 70 percent of the dollars for such
programs, but excludes the major open-ended formula reimbursement
programs, most notably AFDC and Medicaid.  The savings estimate can
serve as a benchmark for overall savings from this approach but
should not be interpreted as a suggestion for across-the-board cuts. 
Rather, the Congress should determine specific reductions on a
program-by-program basis, after examining the relative priority and
performance of each grant program. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Discretionary programs
------------------------------------------------------------
Budget authority       3,320   3,420   3,520   3,610   3,720
Outlays                1,450   3,830   4,890   5,350   5,650

Direct spending
------------------------------------------------------------
Budget authority       2,420   2,420   2,500   2,550   2,610
Outlays                  420     480     490     500     510
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:6.1

Medicaid:  Alternatives for Improving the Distribution of Funds to
States (GAO/HRD-93-112FS, August 20, 1993). 

Remedial Education:  Modifying Chapter 1 Formula Would Target More
Funds to Those Most in Need (GAO/HRD-92-16, March 28, 1992). 

Drug Treatment:  Targeting Aid to States Using Urban Population as
Indicator of Drug Use (GAO/HRD-91-17, November 27, 1990). 

Local Governments:  Targeting General Fiscal Assistance Reduces
Fiscal Disparities (GAO/HRD-86-113, July 24, 1986). 

Highway Funding:  Federal Distribution Formulas Should Be Changed
(GAO/RCED-86-114, March 31, 1986). 

GAO Contact Joseph Delfico, (202) 512-7215



   OPTION:
   TAX TREATMENT OF HEALTH
   INSURANCE PREMIUMSTAX TREATMENT
   OF HEALTH INSURANCE PREMIUMS
------------------------------------------------------- Appendix III:7

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
The current tax treatment of health insurance gives few incentives to
workers to economize on purchasing health insurance.  Employer
contributions for employee health protection are considered
deductible, ordinary, business expenses, and employer contributions
are not included in an employee's taxable income.  Some analysts
believe that the tax-preferred status of these benefits has
contributed to the overuse of health care services and large
increases in our nation's health care costs.  In addition, the
primary tax benefits accrue to those in high tax brackets who also
have above average incomes. 

Placing a cap on the amount of health insurance premiums that could
be excluded--that is including in a worker's income the amount over
the cap--could improve incentives and, to a lesser extent, tax
equity.  Alternatively, including health insurance premiums in income
but allowing a tax credit for some percentage of the premium would
improve equity since tax savings per dollar of premium would be the
same for all taxpayers.  Incentives could be improved for purchasing
low-cost insurance if the amounts given credits were capped. 

One specific option the Congress may wish to consider would be to tax
all employer-paid health insurance, while providing a refundable tax
credit of 20 percent of all premiums, with eligible premiums capped
at $375 and $175 per month for family coverage and individuals,
respectively.  This option recognizes the gain from changing the
treatment of insurance only for the individual income tax, not the
payroll tax. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain          27,200   4,300   7,100  10,300  13,800
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 



      RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:7.1

Tax Policy:  Effects of Changing Tax Treatment of Fringe Benefits
(GAO/GGD-92-43, April 7, 1992). 

GAO Contact Jennie S.  Stathis, (202) 512-5407


IMPROVE EFFICIENCY
========================================================== Appendix IV


   OPTION:
   BURDEN SHARING IN THE REPUBLIC
   OF KOREABURDEN SHARING IN THE
   REPUBLIC OF KOREA
-------------------------------------------------------- Appendix IV:1

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Accounts                Operation and Maintenance, Army (21-
                        2020), Air Force (57-3400), Navy
                        (17-1804)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
The United States expects to spend $686 million in fiscal year 1994,
and spent $711 million in 1993, on operations and maintenance to
support American troops in the Republic of Korea.  Operations and
maintenance costs include salaries of local national employees
working for the U.S.  military, utilities, and services.  In 1994,
won-based national labor costs will amount to an equivalent of about
$289 million, or 42 percent of the total estimated operations and
maintenance costs.  However, in 1993, the Republic of Korea only paid
an equivalent of about $80 million of the won-based labor costs
incurred in that year. 

Currently the United States is negotiating with the Republic of Korea
to increase its support for these costs.  GAO believes that the
United States should seek an agreement with the Republic of Korea to
pay all of the won-based national labor costs.  Attaining this goal
would significantly reduce the costs to maintain the U.S.  presence
in Korea.  However, in the absence of an agreement, the savings
presented in the table below could only be achieved by actually
cutting defense programs in Korea or elsewhere. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority         202     209     216     222     231
Outlays                  152     195     209     218     226
------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:1.1

Military Presence:  U.S.  Personnel in the Pacific Theater
(GAO/NSIAD-91-192, August 20, 1991). 

U.S.-Japan Burden Sharing:  Japan Has Increased Its Contributions But
Could Do More (GAO/NSIAD-89-188, August 15, 1989). 

GAO Contact Joseph E.  Kelley, (202) 512-4128



   OPTION:
   DEFENSE INFRASTRUCTUREDEFENSE
   INFRASTRUCTURE
-------------------------------------------------------- Appendix IV:2

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Accounts                Multiple

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
As DOD realigns and downsizes, it needs to ensure that the remaining
infrastructure is downsized commensurate with the remaining forces. 
As pointed out in DOD's self-initiated Bottom Up Review, there are
numerous opportunities to reduce the defense infrastructure without
affecting readiness.  In fact, reducing the infrastructure could
enhance readiness in that moneys now being spent to maintain unneeded
infrastructure could be applied to readiness enhancement measures. 
Significant budget reductions could be achieved by streamlining the
command structure of the remaining forces; sharing medical facilities
and services; consolidating depots and shipyards; reforming
acquisition processes; consolidating and eliminating research,
development, and training facilities; using simulators for training
and exercises; and reducing dependence on government-owned housing. 

Savings for this option cannot be estimated until a comprehensive
consolidation and downsizing plan is specified.  According to the
Bottom Up Review, infrastructure areas and processes accounted for
$160 billion of the $254 billion fiscal year 1994 Defense budget. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:2.1

1994 DOD Budget:  Potential Reductions to the Operation and
Maintenance Budget (GAO/NSIAD-93-295BR, September 16, 1993). 

Depot Maintenance:  Issues in Management and Restructuring to Support
a Downsize Military (GAO/T-NSIAD-93-13, May 6, 1993). 

GAO Contact Donna M.  Heivilin, (202) 512-8412



   OPTION:
   DEFENSE INVENTORIESDEFENSE
   INVENTORIES
-------------------------------------------------------- Appendix IV:3

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Accounts                Multiple

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
Over 100 GAO reports have pointed out DOD inventory management
problems and have shown that DOD has continuously bought and stored
items that greatly exceeded its operational and war reserve needs. 
Systemic problems in determining requirements and inadequate
financial accountability and control have contributed to poor
inventory management practices.  Further, DOD's culture has
traditionally emphasized overbuying and placed little value on
economy and efficiency, causing unneeded items to pile up in
warehouses.  Force reductions and base closures will only compound
the situation and result in additional unneeded inventory. 

DOD has been slow to implement private sector practices that could
reduce inventory costs.  In this regard, the Defense Logistics Agency
has recently begun conducting pilot programs to demonstrate the
applicability of commercial practices and to tailor changes required
in each of their facilities so that the successful results of the
programs could be applied in supply and distribution. 

Systemic reforms--such as improving the way inventory requirements
are determined, using commercial inventory management practices, and
changing financial management policies and practices--are needed to
achieve further reductions in DOD's budget requirements.  Savings
estimates can not be developed until specific proposals are developed
to address these issues.  However, GAO estimates that, as of
September 1992, only $41 billion of the $80 billion inventory on hand
was needed to support military forces and assure readiness.  Most
recently, GAO work led to a $3 billion reduction in DOD's fiscal year
1993 budget request. 



      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:3.1

Commercial Practices:  DOD Could Save Millions By Reducing
Maintenance and Repair Inventories (GAO/NSIAD-93-155, June 7, 1993). 

DOD Food Inventory:  Using Private Sector Practices Can Reduce Costs
and Eliminate Problems (GAO/NSIAD-93-110, June 4, 1993). 

DOD Medical Inventory:  Reductions Can Be Made Through the Use of
Commercial Practices (GAO/NSIAD-92-58, December 5, 1991). 

Defense Inventory:  Top Management Attention Is Crucial
(GAO/NSIAD-90-145, March 26, 1990). 

GAO Contact Donna M.  Heivilin, (202) 512-8412



   OPTION:
   NAVY'S SOUND SURVEILLANCE
   SYSTEMNAVY'S SOUND SURVEILLANCE
   SYSTEM
-------------------------------------------------------- Appendix IV:4

----------------------  ------------------------------------
Authorizing committees  Armed Services (House and Senate)

Appropriations          Defense (House and Senate)
subcommittees

Primary agency          Department of Defense

Accounts                Operation and Maintenance, Navy (17-
                        1804); Military Personnel, Navy (17-
                        1453); Research, Development, Test,
                        and Evaluation, Navy (17-1319);
                        Other Procurement, Navy (17-1810);
                        Military Construction, Navy (17-
                        1205)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
Because of changes and significant reductions in the operational
patterns of Russian submarines, the Navy can reduce the level of its
underseas surveillance operations.  In a 1992 classified report, GAO
presented three options for reducing unnecessary operations, each
having an increasing level of risk.  GAO recommended that the
Secretary of Defense direct the Secretary of the Navy to review the
sound surveillance system's planned expenditures for fiscal years
1994 through 1998 based on the differences between the Navy's desired
level of operations and the proposed GAO options.  The administration
has proposed a reduction in the sound surveillance system budget for
fiscal year 1995. 

Of the three options GAO presented, fleet officials believed that the
level of risk associated with the second GAO option was acceptable. 
To estimate savings for this option, a 10-percent reduction from the
fiscal year 1994 sound surveillance system budget is shown in the
table below. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          29      30      31      32      33
Outlays                   19      26      29      30      32
------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:4.1

Roles and Functions:  Assessment of the Chairman of the Joint Chief
of Staff Report, (GAO/NSIAD-93-200, July 15, 1993). 

Anti-Submarine Warfare:  Opportunity to Reduce Navy's Sound
Surveillance System, (GAO/C-NSIAD-93-4, May 6, 1993). 

GAO Contact Richard A.  Davis, (202) 512-3504



   OPTION:
   ADMINISTERING DEFENSE HEALTH
   CAREADMINISTERING DEFENSE
   HEALTH CARE
-------------------------------------------------------- Appendix IV:5

----------------------  ------------------------------------
Authorizing committees  Armed Services (Senate and House)

Appropriations          Defense (Senate and House)
subcommittees

Primary agency          Department of Defense

Account                 Defense Health Program (97-0130)

Spending type           Discretionary

Budget subfunction      DOD-Military
------------------------------------------------------------
Each of the three military departments (Army, Navy, and Air Force)
operates its own health care system, providing medical care to active
duty personnel, their dependents, retirees, and survivors of military
personnel.  To a large extent, these systems perform many of the same
administrative, management, and operational functions. 

Since 1949 over 22 studies have reviewed whether a central entity
should be created within DOD for the centralized management and
administration of the three systems.  Most of these studies
encouraged some form of organizational consolidation.  A Defense
health agency would consolidate the three military medical systems
into one centrally managed system, eliminating duplicate
administrative, management, and operational functions. 

No specific budget estimate can be developed until numerous
variables, such as the extent of consolidation and the impact on
command and support structures, are determined. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:5.1

Defense Health Care:  Lessons Learned From DOD's Managed Health Care
Initiatives (GAO/T-HRD-93-21, May 10, 1993). 

Defense Health Care:  Obstacles in Implementing Coordinated Care
(GAO/T-HRD-92-24, April 7, 1992). 

Defense Health Care:  Implementing Coordinated Care--A Status Report
(GAO/HRD-92-10, October 3, 1991). 

The Military Health Services System--Prospects for the Future
(GAO/T-HRD-91-11, March 14, 1991). 

GAO Contact David P.  Baine, (202) 512-7101



   OPTION:
   CONSERVATION RESERVE PROGRAM
   CONTRACTSCONSERVATION RESERVE
   PROGRAM CONTRACTS
-------------------------------------------------------- Appendix IV:6

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Agriculture (House)

Appropriations          Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agency          Department of Agriculture

Account                 Conservation Reserve Program (12-
                        3319)

Spending type           Direct

Budget subfunction      Conservation and land management
------------------------------------------------------------
The Conservation Reserve Program (CRP) was mandated by the Food
Security Act of 1985 to help farmers control soil erosion on
environmentally sensitive cropland, decrease production of surplus
agricultural commodities, and support farmers' income.  To implement
CRP, USDA offered 10- to 15-year contracts for rental payments to
farmers who agreed to replace crop land with a grass cover or other
conserving use.  CRP contracts begin to expire in 1996.  Between
fiscal years 1995-2003, these contracts commit the government to pay
$7.8 billion in annual rental payments. 

From its inception through 1992, about 36.5 million acres have been
enrolled.  For fiscal year 1994, the government's annual rental
payments to farmers are estimated to be $1.8 billion.  Although
enrolling acreage in CRP instead of annual commodity programs reduces
costs in USDA's annual price and income support programs, USDA has
estimated that the CRP has a net government cost between $2 billion
and $6.6 billion over the life of the program. 

Since 1985, several conditions have emerged that may warrant
modifying CRP contracts to provide farmers more flexibility to use
their CRP land for new crop and conservation opportunities.  A
favorable climate for CRP reform now exists due to a general
improvement in the farm economy since the 1980s, potential new market
growth arising from the North American Free Trade Agreement and the
General Agreement on Tariffs and Trade, and the application of more
sustainable practices of the conservation compliance program.  Under
these new conditions, modifying CRP contracts could release suitable
acres for the development of new conservation cropping practices. 

There are numerous options to modify CRP contracts to adjust to new
conditions.  Two options include (1) allowing farmers to terminate
contracts without incurring financial penalty, and (2) permitting
conservation-compatible economic uses on their CRP acres, such as
haying, grazing, and biomass production.  Budget savings under the
first option would depend on assumptions concerning when and how many
farmers participate and the extent to which these farmers participate
in other USDA price and income support programs.  Under the second
option, the contract holder would receive a reduced rental payment in
return for the ability to generate revenues on their CRP land. 

Under both options, there are also non-budget considerations.  If
farmers terminate their CRP contracts early to return to crop
production, it will be necessary to develop alternative means of
sustaining the environmental benefits that have been achieved through
CRP.  If farmers are permitted to return some of their CRP acres to
uses such as haying and grazing, there could be a significant
economic impact on existing livestock producers. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Option: Voluntary contract termination
------------------------------------------------------------
Budget authority         170     170     160     100      60
Outlays                  170     170     160     100      60

Option: Alternative economic uses
------------------------------------------------------------
Budget authority          58      58      56      34      20
Outlays                   58      58      56      34      20
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:6.1

Conservation Reserve Program:  Cost-Effectiveness Is Uncertain
(GAO/RCED-93-132, March 26, 1993). 

Conservation Reserve Program:  Determining Program's Effects on
Production Depends on Assumptions (GAO/RCED-90-201, July 25, 1990). 

Farm Programs:  Conservation Reserve Program Could Be Less Costly and
More Effective (GAO/RCED-90-13, November 15, 1989). 

GAO Contact John W.  Harman, (202) 512-5138



   OPTION:
   FARM LANDS ELIGIBLE FOR
   DEFICIENCY PAYMENTSFARM LANDS
   ELIGIBLE FOR DEFICIENCY
   PAYMENTS
-------------------------------------------------------- Appendix IV:7

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Agriculture (House)

Appropriations          Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agency          Department of Agriculture

Account                 Commodity Credit Corporation Fund
                        (12-4336)

Spending type           Direct

Budget subfunction      Farm income stabilization
------------------------------------------------------------
In the Food, Agriculture, Conservation, and Trade Act of 1990, the
Congress provided farmers with greater ability to respond to market
signals by allowing them to plant crops other than their designated
program crops on up to 25 percent of their base acres.  This
flexibility was one of the principal elements in the overall strategy
of the 1990 farm legislation aimed at improving U.S.  competitiveness
in the international agriculture market.  The Agricultural
Reconciliation Act of 1990 reduced government expenditures for
agriculture programs by providing for the elimination of income
support payments on 15 percent of base acres, even when the
designated program crops are planted on these acres.  Taken together,
these laws enacted provisions which are commonly called "flex acres."

GAO has reported on a number of options for increasing the use of
flex acres, all of which would require legislative change.  Options
include (1) increasing the number of normal flex acres ineligible for
deficiency payments beyond the current 15-percent level, (2)
increasing the number of optional flex acres, with corresponding
decreases in deficiency payments, for those acres planted in
alternative crops, or (3) permitting farmers to grow alternative
crops on more than 25 percent of their base acres while continuing to
receive deficiency payments on 75 percent of the acres.  While the
first option would clearly reduce government costs, the second and
third options could also reduce costs as farmers increase their use
of optional flex acres.  All three options would allow farmers to
participate in USDA's commodity programs while continuing to increase
their incentive to respond to the needs of the marketplace. 

One approach to implement the first option, above, would be to raise
the proportion of each farmer's base acreage ineligible for
deficiency payments from 15 percent to 25 percent.  Savings
associated with this option are shown below. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority         360     790     880     930     980
Outlays                  360     790     880     930     980
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCT
------------------------------------------------------ Appendix IV:7.1

Commodity Programs:  Flex Acres Enhance Farm Operations and Market
Orientation (GAO/RCED-94-76, December 30, 1993). 

GAO Contact John W.  Harman, (202) 512-5138



   OPTION:
   DEPARTMENT OF AGRICULTURE
   ORGANIZATIONDEPARTMENT OF
   AGRICULTURE ORGANIZATION
-------------------------------------------------------- Appendix IV:8

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Agriculture (House)

Appropriations          Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agency          Department of Agriculture

Accounts                Multiple

Spending type           Discretionary

Budget subfunctions     Multiple
------------------------------------------------------------
USDA administers its farm programs and services through one of the
federal government's largest, most decentralized field structures. 
GAO has reported that one or more of the five farm service agencies
maintained a presence in almost every one of the 3,150 counties in
the United States.  The existing structure reflects the era in which
it was established--the 1930s, when communication and transportation
systems were greatly limited by geographic boundaries.  Since then,
the number of farmers has declined sharply, and telephones,
computers, and highways have increased farmers' access to information
and assistance programs.  Yet, the basic USDA field structure has
undergone few major adjustments. 

Reorganizing the USDA headquarters and field office structures,
including the consolidation of current farm agencies, can better meet
agricultural missions and improve customer service.  One option that
might be considered is the administration's proposal to restructure
USDA's headquarters and field operations by closing or consolidating
1,200 field offices and eliminating 7,500 full-time positions over a
5-year period. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          30     110     180     250     330
Outlays                   30     110     180     250     330
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 



      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:8.1

Revitalizing USDA:  A Challenge for the 21st Century
(GAO/T-RCED-93-62, July 21, 1993). 

U.S.  Department of Agriculture:  Revitalizing Structure, Systems,
and Strategies (GAO/RCED-91-168, September 3, 1991). 

U.S.  Department of Agriculture:  Farm Agencies' Field Structure
Needs Major Overhaul (GAO/RCED-91-9, January 29, 1991). 

GAO Contact John W.  Harman, (202) 512-5138



   OPTION:
   HAZARDOUS WASTE CLEANUP COST
   RECOVERYHAZARDOUS WASTE CLEANUP
   COST RECOVERY
-------------------------------------------------------- Appendix IV:9

----------------------  ------------------------------------
Authorizing committees  Environment and Public Works
                        (Senate)
                        Energy and Commerce (House)
                        Public Works and Transportation
                        (House)

Appropriations          VA, HUD, and Independent Agencies
subcommittees           (Senate and House)

Primary agency          Environmental Protection Agency
                        (EPA)

Account                 Hazardous Substance Superfund (20-
                        8145)

Spending type           Discretionary

Budget subfunction      Pollution control and abatement
------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA) prevents EPA from charging polluters hundreds of
millions of dollars in additional interest on the cost EPA incurs to
clean up Superfund sites by setting an interest rate significantly
lower than commercial rates.  The Act also fails to explicitly
authorize EPA to recover indirect costs, such as those for research
and development.  If EPA had been allowed to accrue interest at a
commercial rate from the date funds were expended, GAO estimated that
$105 million in interest could have been accrued in 1990 on the funds
EPA expended in fiscal year 1989 alone.  GAO also estimated that
through fiscal year 1988, EPA did not collect $800 million in
indirect clean-up costs incurred from activities such as
administrative management, research and development on clean-up
approaches, and some enforcement, audit and legal services. 

The Congress should amend CERCLA to allow EPA to recover from
responsible parties more interest on the cost it incurs to clean up
Superfund sites and to explicitly authorize EPA to recover indirect
costs. 

Savings could not be estimated due to the lack of information on
EPA's interest recoveries in prior years and EPA's varying success in
collecting the full amount of current penalty and interest charges. 


      RELATED GAO PRODUCTS
------------------------------------------------------ Appendix IV:9.1

Superfund:  More Settlement Authority and EPA Cost Controls Could
Increase Cost Recovery (GAO/RCED-91-144, July 18, 1991). 

Superfund:  A More Vigorous and Better Managed Enforcement Program is
Needed (GAO/RCED-90-22, December 14, 1989). 

GAO Contact Peter Guerrero, (202) 512-6506



   OPTION:
   SAMPLING FOR NONRESPONSE IN THE
   2000 DECENNIAL CENSUSSAMPLING
   FOR NONRESPONSE IN THE 2000
   DECENNIAL CENSUS
------------------------------------------------------- Appendix IV:10

----------------------  ------------------------------------
Authorizing committees  Governmental Affairs (Senate)
                        Post Office and Civil Service
                        (House)

Appropriations          Commerce, Justice, State, and
subcommittees           Judiciary (Senate and House)

Primary agency          Department of Commerce

Account                 Periodic Censuses and Programs (13-
                        0450)

Spending type           Discretionary

Budget subfunction      Other advancement of commerce
------------------------------------------------------------
GAO believes that the Census Bureau should test sampling techniques
to gather data on those who do not respond by mail to the census
conducted in the year 2000, instead of attempting to contact in
person every household that does not respond.  The Census Bureau has
agreed to test the feasibility and accuracy of sampling
nonrespondents in 1995.  GAO also has recommended that the Bureau
study the use of sampling as soon as possible to analyze the
comparative accuracy of this procedure with traditional census
methods and that any possible legal issues concerning sampling be
resolved as expeditiously as possible. 

Savings estimates would vary according to the initial percentage of
households that respond by mail, the chosen sampling rate, and the
rate of inflation.  However, using the 1990 response rates and a
sample of 10 percent of the nonrespondents, the Census Bureau
estimated that $762 million could have been saved in 1992 dollars;
using a sample of 50 percent of the nonrespondents, as much as $347
million could have been saved. 

CBO did not provide an estimate of budgetary savings for fiscal years
1995-1999 because no specific savings will accrue during that 5-year
planning window.  Any savings that would be achieved would be
realized after the year 2000.  Moreover, specific estimates would
depend on which sampling plan was selected. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:10.1

Decennial Census:  Promising Proposals, Some Progress, But Challenges
Remain (GAO/T-GGD-94-80, January 26, 1994). 

Decennial Census:  Test Design Proposals Are Promising, But
Fundamental Reform Is Still at Risk (GAO/T-GGD-94-12, October 7,
1993). 

Decennial Census:  Focused Action Needed Soon to Achieve Fundamental
Breakthroughs (GAO/T-GGD-93-32, May 27, 1993). 

Decennial Census:  Fundamental Reform Jeopardized by Lack of Progress
(GAO/T-GGD-93-6, March 2, 1993). 

Transition Series:  Commerce Issues (GAO/OCG-93-12TR, December 1992). 

Decennial Census:  1990 Results Show Need for Fundamental Reform
(GAO/GGD-92-94, June 9, 1992). 

GAO Contact William M.  Hunt, (202) 512-8676



   OPTION:
   TEACHING HOSPITALS' MEDICARE
   PAYMENTSTEACHING HOSPITALS'
   MEDICARE PAYMENTS
------------------------------------------------------- Appendix IV:11

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Energy and Commerce (House)
                        Ways and Means (House)

Appropriations          Labor, Health and Human Services,
subcommittees           and Education (Senate and House)

Primary agency          Department of Health and Human
                        Services

Account                 Federal Hospital Insurance Trust
                        Fund Account (20-8005)

Spending type           Discretionary/Direct

Budget subfunction      Medicare
------------------------------------------------------------
Medicare's Prospective Payment System pays hospitals with graduate
medical education programs at higher rates than other hospitals
receive for treating the same conditions.  The higher payments are to
compensate for the higher costs teaching hospitals incur, which are
thought to be due to such factors as increased diagnostic testing,
increased number of procedures performed, and higher staffing ratios. 
The teaching adjustment is based on the ratio of interns and
residents per bed and currently is set at a 7.65-percent increase in
payments for each 0.1 increment in the ratio. 

In 1989, GAO found that the present adjustment factor was too high,
because it did not explicitly consider all relevant teaching hospital
costs and did not accurately measure all cost factors.  Based on its
analysis, GAO found that the adjustment should be no higher than 6.26
percent and could be as low as 3.73 percent.  The 6.26-percent rate
would better measure factors explicitly recognized by the current
formula.  The 3.73-percent rate expands on the current formula to
reflect additional factors that affect teaching hospital costs. 

The President has proposed a reduction in Medicare's indirect medical
education payments as one means of funding his health care reform
proposal.  CBO's more recent analysis of these payments discusses
rates of 6 percent and 3 percent.  Savings for those rates are
reflected in the following table. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Option: Reduce to 6-percent adjustment factor
------------------------------------------------------------
Outlays                  730     890     970   1,050   1,150

Option: Reduce to 3-percent adjustment factor
------------------------------------------------------------
Outlays                2,050   2,500   2,750   3,000   3,250
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:11.1

Medicare:  Indirect Medical Education Payments Are Too High
(GAO/HRD-89-33, January 5, 1989). 

GAO Contact Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   MEDICARE PAYMENTS FOR HIGH
   TECHNOLOGY PROCEDURESMEDICARE
   PAYMENTS FOR HIGH TECHNOLOGY
   PROCEDURES
------------------------------------------------------- Appendix IV:12

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Energy and Commerce (House)
                        Ways and Means (House)

Appropriations          Labor, Health and Human Services,
subcommittees           and Education (Senate and House)

Primary agency          Department of Health and Human
                        Services

Account                 Federal Supplementary Medical
                        Insurance Trust Fund (20-8004)

Spending type           Discretionary/Direct

Budget subfunction      Medicare
------------------------------------------------------------
When new medical technologies first come into use, costs are often
high because of such factors as initial capital expenditures and low
utilization rates.  Medicare payment rates are normally set during
this period.  Over time, the costs related to a particular technology
often go down as equipment is improved, utilization increases, and
experience with the technology results in efficiencies.  However,
Medicare does not have a process for routinely and systematically
assessing these factors and its payment rates often remain at the
original high levels. 

Over the years, the Congress has reacted to the identification of
specific overpaid procedures and services by legislatively reducing
rates.  For example, payments have been reduced for overpriced
surgeries, selected items of durable medical equipment, and
intraocular lenses.  GAO believes that establishment of a systematic
process for periodically evaluating the reasonableness of Medicare
payment rates as technologies mature would result in significant
program savings. 

Savings have not been estimated because this option encompasses all
procedures that are now or will be described as mature.  Any savings
would depend on the particular technologies for which Medicare
payment rates are reduced. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:12.1

Medicare:  Excessive Payments Support the Proliferation of Costly
Technology (GAO/HRD-92-59, May 27, 1992). 

GAO Contact Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   MEDICARE PAYMENT
   SAFEGUARDSMEDICARE PAYMENT
   SAFEGUARDS
------------------------------------------------------- Appendix IV:13

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Energy and Commerce (House)
                        Ways and Means (House)

Appropriations          Labor, Health and Human Services and
subcommittees           Education (Senate and House)

Primary agency          Department of Health and Human
                        Services

Accounts                Federal Hospital Insurance Trust
                        Fund (20-8005); Federal
                        Supplementary Medical Insurance
                        Trust Fund (20-8004); Program
                        Management (75-0511)

Spending type           Discretionary/Direct

Budget subfunctions     Health and Medicare
------------------------------------------------------------
Medicare pays contractors to process claims, and one of the
contractors' responsibilities is to ensure that Medicare only pays
claims for covered services that are medically necessary and
appropriate and for which Medicare is the primary payer.  Such
activities are referred to as program safeguards. 

The funding contractors receive to review each claim has declined by
over 20 percent since 1989.  In response, contractors apply fewer or
less stringent payment controls and claims are paid that otherwise
would not be.  Historically, payment safeguards have returned $10 in
savings for each dollar expended on them.  GAO believes additional
program safeguard funding is necessary to better protect the program
against erroneous payments. 

Although CBO does not disagree that increasing program safeguards can
reduce Medicare outlays, it does not make budget estimates of such
savings.  This is because it is difficult to establish a clear
connection between increases in administrative activities and savings
that might accrue through changes in the operations of the program. 
In addition, even if such a connection can be established, the
magnitude of savings attributable to such changes is not certain
enough for budget scorekeeping purposes. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:13.1

Medicare:  Adequate Funding and Better Oversight Needed to Protect
Benefit Dollars (GAO/T-HRD-94-59, November 12, 1993). 

Medicare:  Further Changes Needed to Reduce Program and Beneficiary
Costs (GAO/HRD-91-67, May 15, 1991). 

Medicare:  Cutting Payment Safeguards Will Increase Program Costs
(GAO/T-HRD-89-06, February 28, 1989). 

Medicare and Medicaid:  Budget Issues (GAO/T-HRD-87-1, January 29,
1987). 

GAO Contact Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   FUNDING THE PENSION BENEFIT
   GUARANTY CORPORATIONFUNDING THE
   PENSION BENEFIT GUARANTY
   CORPORATION
------------------------------------------------------- Appendix IV:14

----------------------  ------------------------------------
Authorizing committees  Labor and Human Resources (Senate)
                        Education and Labor (House)

Appropriations          Labor, Health and Human Services,
subcommittees           and Education (Senate and House)

Primary agency          Department of Labor,
                        Pension Benefit Guaranty Corporation
                        (PBGC)

Account                 Pension Benefit Guaranty Corporation
                        Fund (16-4204)

Spending type           Discretionary/Direct

Budget subfunction      General retirement and disability
                        insurance (excluding social
                        security)
------------------------------------------------------------
PBGC was established to insure guaranteed pension benefits in the
event that defined pension benefit plans were terminated without
being fully funded by the sponsoring company.  At the end of fiscal
year 1992, the PBGC's deficit had grown to $2.7 billion, threatening
the insurance program's long-term financial viability. 

To reduce the exposure of PBGC to risk from ongoing, underfunded
defined benefit pension plans, GAO analyzed whether the additional
contribution rules contained in the Pension Protection Act of the
Omnibus Budget Reconciliation Act of 1987 (OBRA 87) operate to
bolster contributions made by sponsors of underfunded plans.  The
total underfunding in these plans exceeded $50 billion in 1992. 
GAO's analyses show that (1) pension underfunding significantly
increases when PBGC takes over the pension plan of a failed company,
(2) the current additional funding rules are not adding substantially
to pension funding because of offsets that sponsors use to reduce or
eliminate additional contributions, and (3) proposed rules to change
these additional funding rules will not significantly improve pension
funding for many underfunded plans.  GAO believes that OBRA 87 rules
need to be modified to better ensure that plan sponsors will make
additional contributions to underfunded pensions, and variable rate
premiums paid by underfunded plans need to be made more risk related. 

The administration has proposed eliminating the variable rate premium
cap in its fiscal year 1995 budget and has also suggested designing a
risk-based premium system that would consider a company's financial
condition as well as the degree to which the plans are funded.  In
the following chart, savings estimates for two specific proposals are
presented:  (1) eliminating the cap on variable rate premiums by 1997
and (2) raising the variable rate premium from $9 to $18 for each
$1,000 of unfunded vested benefits per participant.  The 5-year
savings for these proposals are net of the federal revenue loss that
will result when companies deduct the higher premiums to compute
their income taxes.  Given the underlying deficit in the PBGC fund,
the Congress may also wish to use these savings to improve the
solvency of the fund rather than for other purposes. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Option: Eliminate the cap on variable rate premiums
------------------------------------------------------------
Outlays                   90     280     460     460     450

Option: Raise the variable rate premium from $9 to $18
------------------------------------------------------------
Outlays                  130     130     130     130     130
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:14.1

Pension Plans:  Hidden Liabilities Increase Claims Against Government
Insurance Programs (GAO/HRD-93-29, March 31, 1993). 

Private Pensions:  Most Underfunded Plan Sponsors Are Not Making
Additional Contributions (GAO/T-HRD-93-16, April 20, 1993). 

Assessing PBGC's Short-Run and Long-Run Conditions (GAO/T-HRD-93-1,
February 1, 1993). 

Pension Plans:  Benefits Lost When Plans Terminate (GAO/T-HRD-92-58,
September 24, 1992). 

Financial Condition of the Pension Benefit Guaranty Corporation
GAO/T-HRD-92-52, August 11, 1992). 

GAO Contact Joseph Delfico, (202) 512-7215



   OPTION:
   SOCIAL SECURITY CONTINUING
   DISABILITY REVIEWSSOCIAL
   SECURITY CONTINUING DISABILITY
   REVIEWS
------------------------------------------------------- Appendix IV:15

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Appropriations          Labor, Health and Human Services,
subcommittees           and Education (Senate and House)

Primary agency          Department of Health and Human
                        Services

Accounts                Federal Disability Insurance Trust
                        Fund (20-8007); Federal Hospital
                        Insurance Trust Fund (20-8005);
                        Federal Supplementary Medical
                        Insurance Trust Fund (20-8004);
                        Federal Old-Age and Survivors
                        Insurance Trust Fund (20-8006)

Spending type           Discretionary/Direct

Budget subfunction      Social Security
------------------------------------------------------------
Between 1987 and 1993, the Social Security Administration (SSA)
completed less than half the disability reviews required by law. 
Such reviews often find that Disability Income beneficiaries are no
longer disabled and may be removed from the rolls.  According to SSA,
the lack of continuing disability reviews in the last 4 years will
cost the trust funds about $1.4 billion through 1997. 

GAO believes that SSA should examine ways to increase the number of
such reviews and to make existing reviews more efficient.  Although
CBO does not disagree that increasing disability reviews can reduce
outlays, it does not make budget estimates of such savings.  This is
because it is difficult to establish a clear connection between
increases in administrative activities and savings that might accrue
through changes in the operations of a program.  In addition, even if
such a connection can be established, the magnitude of savings
attributable to such changes is not certain enough for budget
scorekeeping purposes. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:15.1

Social Security:  Increasing Number of Disability Claims and
Deteriorating Service (GAO/HRD-94-11, November 10, 1993). 

Social Security Disability:  SSA Needs to Improve Continuing
Disability Program (GAO/HRD-93-109, July 8, 1993). 

Social Security:  SSA's Processing of Continuing Disability Reviews
(GAO/T-HRD-93-9, March 9, 1993). 

GAO Contact Joseph Delfico, (202) 512-7215



   OPTION:
   THE 1-DOLLAR COINTHE 1-DOLLAR
   COIN
------------------------------------------------------- Appendix IV:16

----------------------  ------------------------------------
Authorizing committees  Banking, Housing, and Urban Affairs
                        (Senate)
                        Banking, Finance and Urban Affairs
                        (House)

Primary agency          Department of the Treasury
------------------------------------------------------------
Because of its longer life and easier processing than a note, and
because the seignorage recognized reduces the amount of borrowing
needed to finance the deficit, substituting a dollar coin for a
dollar note would yield significant savings to the government.  Other
countries have demonstrated that public resistance to such a change
can be managed and overcome. 

The direct budgetary savings from this option are small during the
CBO five-year estimating period.  These savings, shown in the table
below, result from increases in payments of earnings by the Federal
Reserve Bank into miscellaneous receipts of the Treasury. 

There are other longer term and more substantial savings due to the
effects of seigniorage.  Seignorage is the difference between the
face value of the coin and the coin's cost of production, which
includes the value of the metals contained in the coin and the Mint's
manufacturing and distribution costs.  Seignorage is not considered
part of the budget, but it does substitute for borrowing from the
public and, thus, lowers interest costs to the government.  CBO does
not calculate interest savings for specific options.  However, a May
1992 Federal Reserve study estimated that these indirect savings
would average about $400 million per year over 30 years, but that
level of savings would not be reached until the coin was in use for
14 years. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gains             --      --      12      49      51
------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:16.1

1-Dollar Coin:  Reintroduction Could Save Millions if Properly
Managed (GAO/GGD-93-56, March 11, 1993). 

National Coinage Proposals:  Limited Public Demand for New Dollar
Coin or Elimination of Pennies (GAO/GGD-90-88, May 23, 1990). 

GAO Contact J.  William Gadsby, (202) 512-8387



   OPTION:
   JUDICIARY'S LONG-RANGE SPACE
   PLANNING SYSTEMJUDICIARY'S
   LONG-RANGE SPACE PLANNING
   SYSTEM
------------------------------------------------------- Appendix IV:17

----------------------  ------------------------------------
Authorizing committees  Environment and Public Works
                        (Senate)
                        Public Works and Transportation
                        (House)

Appropriations          Treasury, Postal Service, and
subcommittees           General Government (Senate and
                        House)

Primary agency          Administrative Office of the U.S.
                        Courts (AOC)

Account                 Federal Buildings Fund (47-4542)

Spending type           Discretionary

Budget subfunction      General property and records
                        management
------------------------------------------------------------
In 1988, the AOC, the administrative body for the judiciary,
developed a long-range plan for space needs.  Based on 1992 space
projections by the AOC, GAO estimated that the total space
requirements for courts and related agencies would increase to about
36.9 million square feet over a 10-year period--a 97-percent
increase.  GAO found that AOC's planning process resulted in higher
estimates for court space than is warranted.  Using the judiciary's
$31 per square foot average cost for all court space, GAO showed that
the judiciary could save approximately $112 million annually, or $1.1
billion in constant dollars over a 10-year period, if the errors in
its planning process were corrected. 

The Congress should direct the judiciary to revise its planning
process for identifying long-range space needs.  Specifically, the
process should (1) treat all judicial districts consistently in terms
of assumptions between caseloads, staff and space, (2) establish a
baseline of space needs for each district that reflects current
caseloads, and (3) increase the reliability of its estimates by using
an appropriate statistical methodology to project caseloads and by
reducing the level of subjectivity in the process. 

Because of uncertainty about the nature and extent of changes that
might be made to the planning process, no specific budget savings
estimate was developed for this option. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:17.1

Federal Judiciary Space:  Long-Range Planning Process Needs Revision
(GAO/GGD-93-132, September 28, 1993). 

GAO Contact William M.  Hunt, (202) 512-8676



   OPTION:
   GENERAL SERVICES ADMINISTRATION
   SUPPLY DEPOT SYSTEMGENERAL
   SERVICES ADMINISTRATION SUPPLY
   DEPOT SYSTEM
------------------------------------------------------- Appendix IV:18

----------------------  ------------------------------------
Authorizing committees  Governmental Affairs (Senate)
                        Government Operations (House)

Appropriations          Treasury, Postal Service, and
subcommittees           General Government (Senate and
                        House)

Primary agency          General Services Administration
                        (GSA)

Account                 General Supply Fund (47-4530)

Spending type           Direct

Budget subfunction      General property and records
                        management
------------------------------------------------------------
GSA uses a multimillion dollar supply depot and distribution system
to help meet federal agencies' mission-support needs.  GSA buys and
warehouses some 18,000 common-use supply products and resells and
ships them to federal agencies through a network of five depots.  GSA
also uses direct delivery from suppliers as an alternative method of
supplying products, but during the period of GAO's most recent
review, February 1990 to February 1991, only $68 million of its $1
billion in sales was supplied by this method. 

GAO has reported that GSA's markup for products delivered directly
from suppliers to federal agencies was 10 percent of product cost,
while products stored and shipped from GSA warehouses were marked up
an average of 29 percent.  Recently, GSA increased both mark-ups to
22 percent and 32 percent, respectively.  Although lessened, the
difference between the two delivery options is still significant and
reflects the higher costs associated with maintaining and operating a
large warehouse distribution system. 

GAO's review showed that GSA could have used direct delivery as its
principal method of supplying products for about 80 percent of its
fiscal year 1991 sales.  And, if this had been done, the remaining
sales from the GSA depots would have been for very small dollar value
orders (that is, less than $100).  For this type of order, GSA is no
longer a mandatory source for federal agencies, because of the
emergence of the highly competitive discount office supply industry
and catalog-based delivery services. 

Maintaining a large and costly depot warehouse and distribution
system may no longer be a viable or necessary activity for the
federal government.  As part of its efforts to bring about a
restructuring of the way agencies obtain mission-support services,
the Vice President's National Performance Review also recommended
that agencies should be permitted choice in sources of supply.  One
option the Congress could consider would be to close the GSA depots
and require direct delivery from vendors for high dollar value
supplies. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          15      31      46      47      49
Outlays                   11      27      42      47      48
------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:18.1

General Services Administration:  Increased Direct Delivery of
Supplies Could Save Millions (GAO/GGD-93-32, December 28, 1992). 

Transition Series:  General Services Issues (GAO/OCG-93-28TR,
December 1992). 

GAO Contact J.  William Gadsby, (202) 512-8387



   OPTION:
   EMPLOYMENT AND TRAINING
   PROGRAMSEMPLOYMENT AND TRAINING
   PROGRAMS
------------------------------------------------------- Appendix IV:19

----------------------  ------------------------------------
Authorizing committees  Multiple

Appropriations          Labor, Health and Human Services,
subcommittees           and Education (Senate and House)

Primary agency          Multiple

Account                 Multiple

Spending type           Discretionary

Budget subfunction      Multiple
------------------------------------------------------------
The challenges posed by increased global competition and a changing
economy calls for a renewed commitment to invest in the American
workforce.  The federal government's effort to meet this commitment
has been to increase investment in a wide array of programs that
target people experiencing barriers to employment and to add other
new programs that target particular groups.  GAO has identified a
total of 154 federal programs and funding streams providing
employment and training assistance.  These programs are spread across
14 departments and independent agencies with a total budget of about
$25 billion. 

GAO's analysis of programs that target the economically disadvantaged
showed those programs to have similar goals, often served the same
categories of people, and provided many of the same services using
separate, yet parallel, delivery structures.  This overlap can add
unnecessary administrative costs at each level of
government--federal, state, and local. 

The administration is headed in the right direction with its proposal
to consolidate nine of these programs serving dislocated workers. 
However, this consolidation needs to be part of a larger
restructuring of employment training programs. 

No specific estimate of budget savings can be made.  The amount of
any savings from consolidating programs will depend on how many
programs are included, the degree and kind of reductions, and the
level of federal involvement.  In addition, the amount of savings
will depend on the extent to which administrative cost savings are
used to offset overall program outlays. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:19.1

Multiple Employment Training Programs:  Major Overhaul Is Needed
(GAO/T-HEHS-94-109, March 3, 1994). 

Multiple Employment Training Programs:  Overlapping Programs Can Add
Unnecessary Administrative Costs (GAO/HEHS-94-80, January 28, 1994). 

Multiple Employment Training Programs:  Conflicting Requirements
Hamper Delivery of Services (GAO/HEHS-94-78, January 28, 1994). 

Multiple Employment Programs:  National Employment Training Strategy
Needed (GAO/T-HRD-93-27, June 18, 1993). 

Multiple Employment Programs (GAO/HRD-93-26R, June 15, 1993). 

Multiple Employment Programs (GAO/HRD-92-39R, July 24, 1992). 

GAO Contact Linda G.  Morra, (202) 512-7014



   OPTION:
   FEDERAL AGENCY CREDIT
   MANAGEMENT PROGRAMSFEDERAL
   AGENCY CREDIT MANAGEMENT
   PROGRAMS
------------------------------------------------------- Appendix IV:20

----------------------  ------------------------------------
Authorizing committees  Multiple

Appropriations          Multiple
subcommittees

Primary agencies        Multiple

Accounts                Multiple

Spending type           Discretionary/Direct

Budget subfunctions     Multiple
------------------------------------------------------------
Federal agencies are expected to implement several loan origination,
account servicing, collection, and write-off initiatives specified by
the Office of Management and Budget (OMB) in its nine-point credit
management program. 

However, GAO has reported several times that agencies are not
adequately screening applicants for delinquent federal debt, and, in
some instances, are not using private collection firms in the normal
collection process.  GAO believes that not using these tools
contributes to delinquencies and adversely affects the government's
ability to make collectible loans and to collect on outstanding
loans.  In the fiscal year 1995 budget submission, OMB reported that
in fiscal year 1993, lending agencies wrote off about $2.7 billion of
direct loans and terminated for default over $8.4 billion of
guaranteed loans; in fiscal year 1994, OMB estimates that write-offs
will be about $1.3 billion and terminations about $9 billion. 

Although OMB has established a sound credit management program, and
both OMB and Treasury provide instruction to agencies on the use of
the nine-point credit management program tools, agencies are not
legislatively required to do so.  GAO believes that agencies' credit
management programs would be improved if the Congress required the
use of many of these initiatives. 

This option could be applied to some or all of the loans and debts of
many agencies.  Savings would depend on the extent to which agencies
adopt appropriate credit management tools. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:20.1

Federal Credit and Insurance Programs:  Actions That Could Minimize a
Growing Risk (GAO/T-AFMD-92-1, October 24, 1991). 

Guaranteed Loan Programs Are an Increasing Risk (GAO/T-AFMD-90-29,
September 18, 1990). 

Credit Management:  Deteriorating Credit Picture Emphasizes
Importance of OMB's Nine-Point Program (GAO/AFMD-90-12, April 16,
1990). 

GAO Contact Gregory M.  Holloway, (202) 512-9507



   OPTION:
   ADMINISTRATION OF THE TAX
   DEDUCTION FOR REAL ESTATE
   TAXESADMINISTRATION OF THE TAX
   DEDUCTION FOR REAL ESTATE TAXES
------------------------------------------------------- Appendix IV:21

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
IRS audits show that individuals overstated their real estate tax
deductions by about $1.5 billion nationwide in 1988.  GAO estimates
that this resulted in a nearly $300 million federal tax loss, which
would increase to about $400 million for 1992.  However, this may
understate lost revenues because GAO's review also found that IRS
auditors detected only about 29 percent of $127 million in overstated
deductions in three locations GAO reviewed.  Revenues could be lost
not only for the federal government, but also for the 31 states,
which in 1991 tied their itemized deductions to those used for
federal tax purposes. 

Two changes to the reporting of real estate cash rebates and real
estate taxes could reduce noncompliance and increase federal tax
collections.  First, the Congress could require that states report to
IRS, and to taxpayers on Form 1099s, cash rebates of real estate
taxes.  Second, the Congress could require that state and local
governments conform real estate tax statements to specifications
issued by the IRS that would separate real estate taxes from
non-deductible fees, which are often combined on these statements. 
For estimation purposes, the first proposal would be effective for
rebates issued after December 31, 1994; the second proposal would be
effective for amounts reported on tax bills after December 31, 1995. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain              --       7     139     146     153
------------------------------------------------------------
Source:  Joint Committee on Taxation. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:21.1

Tax Administration:  Overstated Real Estate Tax Deductions Need To Be
Reduced (GAO/GGD-93-43, January 19, 1993). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   INFORMATION REPORTING ON
   FORGIVEN DEBTSINFORMATION
   REPORTING ON FORGIVEN DEBTS
------------------------------------------------------- Appendix IV:22

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
The Internal Revenue Code requires taxpayers to report forgiven debts
as income except under certain circumstances.  GAO reviewed taxpayer
compliance in reporting the Federal Deposit Insurance Corporation's
(FDIC) and Resolution Trust Corporation's (RTC) forgiven debt with
and without information reporting by these corporations to IRS. 

Information reporting increased taxpayer compliance.  For example,
without information reporting, 1 percent of taxpayers voluntarily
reported FDIC forgiven debts.  With reporting, 48 percent voluntarily
reported their forgiven debts.  With the information reports, IRS was
able to detect that another 20 percent had failed to report their
forgiven debts, yielding 68 percent of taxpayers eventually
complying. 

In 1993, the Congress required information reporting on forgiven
debts by FDIC, RTC, the National Credit Union Administration, credit
unions, certain banks, and federal agencies.  The Congress could
consider extending the requirement to other lending institutions,
such as non-bank credit card issuers.  The Joint Committee on
Taxation agrees that this option has the potential for increased
revenue and has developed estimates of revenue gains in the past. 
Updates are currently under development and were not available at
time of publication. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:22.1

Tax Administration:  Information Returns Can Improve Reporting of
Forgiven Debts (GAO/GGD-93-42, February 17, 1993). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   CORPORATE TAX DOCUMENT
   MATCHINGCORPORATE TAX DOCUMENT
   MATCHING
------------------------------------------------------- Appendix IV:23

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
IRS data show that corporate compliance with tax laws has declined to
an alarming degree.  IRS' document matching program for payments to
individuals has proven to be a highly cost-effective way of bringing
in billions of dollars in tax revenues to the Treasury while at the
same time boosting voluntary compliance.  However, unlike payments to
individuals, the law does not require that information returns be
submitted on most payments to corporations. 

Generally using IRS' assumptions, GAO estimated the benefits and
costs for a corporate document matching program that would cover
interest, dividends, rents, royalties, and capital gains.  Assuming
that a corporate document matching program began in 1993, GAO
estimated that for years 1995-1999, IRS' annual costs would be about
$70 million and annual increased revenues about $1 billion.  This
estimate did not factor in compliance costs and changes in taxpayer
behavior.  Given continuing deficits, increased corporate
noncompliance, and declining audit coverage, the Congress may wish to
require a corporate document matching program. 

A previous estimate by the Joint Committee on Taxation has shown that
this option has revenue potential.  Updates are currently under
development and were not available at time of publication. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:23.1

Tax Administration:  Benefits of a Corporate Document Matching
Program Exceed the Costs (GAO/GGD-91-118, September 27, 1991). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   FEDERAL AGENCY REPORTING TO THE
   INTERNAL REVENUE SERVICEFEDERAL
   AGENCY REPORTING TO INTERNAL
   REVENUE SERVICE
------------------------------------------------------- Appendix IV:24

----------------------  ------------------------------------
Authorizing committees  Governmental Affairs (Senate)
                        Finance (Senate)
                        Government Operations (House)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
According to IRS data, corporate tax compliance decreased by 20
percentage points between 1980 and 1987.  Information
returns--reports provided to IRS by payers of interest, dividends, or
other tax-related information--have proven to be highly
cost-effective in generating billions of tax dollars from individual
taxpayers.  However, no such program exists for payments to
corporations.  IRS matches information return data to individuals'
tax returns, which induces individuals to voluntarily report income
and helps to identify those who do not.  Similar results could be
obtained from corporations. 

Federal agencies could help increase corporate tax compliance by
reporting their payments to corporations for services.  Federal
agencies paid corporations about $61 billion for service contracts of
more than $25,000 in 1990. 

The Joint Committee on Taxation has not developed estimates of
revenue gains for this proposal. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:24.1

Tax Administration:  Federal Agencies Should Report Service Payments
Made to Corporations (GAO/GGD-92-130, September 22, 1992). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   INDEPENDENT CONTRACTOR TAX
   COMPLIANCEINDEPENDENT
   CONTRACTOR TAX COMPLIANCE
------------------------------------------------------- Appendix IV:25

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
Common law rules for classifying workers as employees or independent
contractors are unclear and subject to conflicting interpretations. 
While recognizing this ambiguity, IRS enforces tax laws and rules
through employment tax examinations.  Since 1989, 90 percent of these
examinations have found misclassified workers.  From October 1987
through December 1991, the average IRS tax assessment relating to
misclassified workers was $68,000. 

Establishing clear rules is difficult.  Nevertheless, taxpayers
need--and government is obligated to provide--clear rules for
classifying workers if businesses are to voluntarily comply.  In
addition, improved tax compliance could be gained by requiring
businesses to (1) withhold taxes from payments to independent
contractors and/or (2) file information returns with IRS on payments
made to independent contractors constituted as corporations.  Both
approaches have proven to be effective in promoting individual tax
compliance. 

During 1993, the Congress considered an information reporting
requirement related to noncompliance by independent contractors
constituted as corporations.  The proposal--the service industry
noncompliance initiative or SINC--would have required some businesses
to provide information reports on their payments to some corporations
for services.  Thus, to the extent independent contractors were
incorporated, payments to them would have been reported.  A previous
estimate by the Joint Committee on Taxation showed that this proposal
increased revenue by about $400 million over five years.  In
contrast, the Department of the Treasury's Office of Tax Analysis
estimated a 5-year gain of about $5 billion.  A current Joint
Committee on Taxation estimate was not available at time of
publication. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:25.1

Tax Administration:  Approaches for Improving Independent Contractor
Compliance (GAO/GGD-92-108, July 23, 1992). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:  COMPUTING EXCISE TAX
   BASESCOMPUTING EXCISE TAX BASES
------------------------------------------------------- Appendix IV:26

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
Federal excise taxes are sometimes set at a fixed dollar amount per
unit of taxed good.  For example, alcoholic beverages are taxed at a
set rate per gallon or barrel, with the rate varying for different
types of beverages and differing concentrations of alcohol.  When set
in this manner, the real dollar value of the tax falls with
inflation. 

The real dollar value of these taxes can be maintained over time if
the tax is indexed for inflation or set as a percentage of the price
of the taxed product or service.  Tax policy issues would need to be
considered and administrative difficulties may be encountered, but
they are not insurmountable.  Of the five excise taxes GAO studied in
1989, alcohol and tobacco taxes yielded over 99 percent of the
increased revenue that indexing would have generated.  The Congress
may wish to consider indexing excise tax rates for inflation. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain             300     600   1,000   1,300   1,600
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:26.1

Alcohol Excise Taxes:  Simplifying Rates Can Enhance Economic and
Administrative Efficiency (GAO/GGD-90-123, September 27, 1990). 

Tax Policy:  Revenue Potential of Restoring Excise Taxes to Past
Levels (GAO/GGD-89-52, May 9, 1989). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   COLLECTING GASOLINE EXCISE
   TAXESCOLLECTING GASOLINE EXCISE
   TAXES
------------------------------------------------------- Appendix IV:27

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
Although reliable statistical data does not exist to estimate
gasoline excise tax evasion, the Department of Transportation
estimated in a report to the Congress that such evasion amounted to
about $500 million annually.  From a tax administration perspective,
moving the collection point for gasoline excise taxes from the
terminal to the refinery level may reduce tax evasion, because (1)
gasoline would change hands fewer times before taxation, (2) refiners
are presumed to be more financially sound and have better records
than other parties in the distribution system, and (3) fewer
taxpayers would be involved.  However, industry representatives raise
competitiveness and cost-efficiency questions associated with moving
the collection point. 

In a May 1992 report, GAO suggested that the Congress explore the
level of gasoline excise tax evasion and, if it was found to be
sufficiently high, move tax collection to the point at which gasoline
leaves the refinery.  The amount of revenue that would be generated
from moving the collection point for gasoline excise taxes would
depend on the accuracy of the $500 million estimate of evasion and
how well the move curbed such evasion. 

The Joint Committee on Taxation agrees that this option has the
potential for increased revenue but has not developed estimates of
revenue gains. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix IV:27.1

Tax Administration:  Status of Efforts to Curb Motor Fuel Tax Evasion
(GAO/GGD-92-67, May 12, 1992). 

GAO Contact Jennie S.  Stathis, (202) 512-5407



   OPTION:
   POLLUTION FEES AND
   TAXESPOLLUTION FEES AND TAXES
------------------------------------------------------- Appendix IV:28

----------------------  ------------------------------------
Authorizing committees  Finance (Senate)
                        Ways and Means (House)

Primary agency          Environmental Protection Agency
------------------------------------------------------------
User fees, cost reimbursement mechanisms and pollution taxes could
help defray the costs of administering environmental protection
programs, encourage pollution prevention and generate significant
revenue.  Taxes on emissions of pollutants, and on the harmful
substances themselves, could supplement regulatory efforts to meet
the objectives of existing environmental laws.  GAO has identified
several specific areas where fees and taxes might be effective,
including, but not limited to, (1) requiring states to collect permit
fees on industrial and municipal dischargers to surface waters and
(2) establishing a pollution tax on dischargers, based on volume,
toxicity, or both. 

Based on our work, an example of a pollution fee which the Congress
may wish to consider is an excise tax on toxic water pollutants. 
Savings below illustrate a tax on pollution discharges whose rate
increases with the toxicity of the discharge.  Rates range from $0.65
per pound for the least toxic pollutant to $63.40 per pound for the
most toxic pollutant. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain           2,500   3,600   3,600   3,600   3,600
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:28.1

Environmental Protection:  Implications of Using Pollution Taxes to
Supplement Regulation (GAO/RCED-93-13, February 17, 1993). 

Hazardous Waste:  Much Work Remains to Accelerate Facility Cleanups
(GAO/RCED-93-15, January 19, 1993). 

Drinking Water:  Widening Gap Between Needs and Available Resources
Threatens Vital EPA Program (GAO/RCED-92-184, July 6, 1992). 

Water Pollution:  Stronger Efforts Needed by EPA to Control Toxic
Water Pollution (GAO/RCED-91-154, July 19, 1991). 

GAO Contact Peter Guerrero, (202) 512-6506



   OPTION:
   FEDERAL TIMBER SALESFEDERAL
   TIMBER SALES
------------------------------------------------------- Appendix IV:29

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition and Forestry
                        (Senate)
                        Agriculture House)

Appropriation           Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agency          Department of Agriculture

Account                 National Forest System (12-1106)

Spending type           Discretionary/Direct

Budget subfunction      Conservation and land management
------------------------------------------------------------
USDA's Forest Service does not always recover its costs on sales of
timber, resulting in below-cost sales.  Currently, the Service
receives most of its operating funds from receipts from timber sales
and from appropriated funds linked to primarily timber management and
harvest.  Thus, in every national forest, even in those where timber
harvesting is uneconomic and other activities and uses are more
valuable, forest managers are overwhelmingly dependent on timber
sales for funding. 

The Congress may wish to cease all below-cost federal timber sales. 
For example, all future timber sales could be eliminated in three of
the Forest Service's nine regions where, on average over the last
decade, cash expenditures have exceeded cash receipts by a 3-to-1
ratio.  This action would eliminate timber sale receipts but would
also reduce Forest Service outlays for timber management,
reforestation, construction of logging roads, and other program
costs.  Net savings in federal outlays are shown in the following
table. 



                      Five-year Savings

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority          20      40      50      65      80
Outlays                   15      35      50      60      75
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:29.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Comments on Below-Cost Timber Bills (GAO/RCED-92-160R, April 1,
1992). 

Forest Service Needs to Improve Efforts to Reduce Below-Cost Timber
Sales (GAO/T-RCED-91-43, April 25, 1991). 

Forest Service Needs to Improve Efforts to Protect the Government's
Financial Interest and Reduce Below-Cost Timber Sales
(GAO/T-RCED-91-42, April 24, 1991). 

GAO Contact James Duffus, III, (202) 512-7756



   OPTION:
   HARDROCK MINING
   ROYALTIESHARDROCK MINING
   ROYALTIES
------------------------------------------------------- Appendix IV:30

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Energy and Natural Resources
                        (Senate)
                        Agriculture (House)
                        Natural Resources (House)

Primary agencies        Department of the Interior
                        Department of Agriculture
------------------------------------------------------------
The government receives no financial compensation for hardrock
minerals extracted from federal lands.  In 1990, hardrock minerals
worth at least $1.2 billion were extracted from federal lands, while
known, economically recoverable reserves of hardrock minerals
remaining on federal lands were valued at $64.9 billion. 

The Congress may wish to consider receiving financial compensation
for hardrock minerals extracted from federal lands.  The
administration's fiscal year 1995 budget assumes fee levels and
reforms consistent with H.R.  322, the House-passed version of
hardrock mining law reform.  This bill would charge an 8-percent
royalty on gross profits on existing and future claims. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain              --      70      70      70      70
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:30.1

Mineral Royalties:  Royalties in the Western States and in Major
Mineral-Producing Countries (GAO/RCED-93-109, March 29, 1993). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Mineral Resources:  Value of Hardrock Minerals Extracted From and
Remaining on Federal Lands (GAO/RCED-92-192, August 24, 1992). 

GAO Contact James Duffus, III, (202) 512-7756



   OPTION:
   GRAZING FEES ON FEDERAL
   LANDSGRAZING FEES ON FEDERAL
   LANDS
------------------------------------------------------- Appendix IV:31

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Energy and Natural Resources
                        (Senate)
                        Agriculture (House)
                        Natural Resources (House)

Primary agencies        Department of the Interior
                        Department of Agriculture
------------------------------------------------------------
Grazing fees, which are charged ranchers who graze livestock on
public lands, are measured in animal unit months (AUM).  The grazing
fee is currently set at $1.98 per AUM.  Studies by GAO and others
have shown that this fee level does not cover either the government's
cost to manage the grazing program or the cost to better manage and
improve the condition of the lands so that they will remain a
productive public resource in the future.  Thus, the fees may
represent a subsidy for many of the ranchers who graze livestock on
about 268 million acres of public lands. 

On August 9, 1993, the Secretaries of Interior and Agriculture issued
a draft grazing reform proposal that would establish a fee of $4.28
per AUM, phased in over 3 years.  CBO estimates that this proposal
would produce revenues shown below, after deducting the additional
receipts that would be paid to states and counties.  The
administration's fiscal year 1995 budget assumes this increase in
fees, but recently the administration proposed a ceiling of $3.96 per
AUM. 



                      Five-year Revenues

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain               5      13      18      20      20
------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:31.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Rangeland Management:  Interior's Monitoring Has Fallen Short of
Agency Requirements (GAO/RCED-92-51, February 24, 1992). 

Rangeland Management:  BLM's Hot Desert Grazing Program Merits
Reconsideration (GAO/RCED-92-12, November 26, 1991). 

Rangeland Management:  Current Formula Keeps Grazing Fees Low
(GAO/RCED-91-185BR, June 11, 1991). 

GAO Contact James Duffus, III, (202) 512-7756



   OPTION:
   RECREATION FEES AT FEDERAL
   SITESRECREATION FEES AT FEDERAL
   SITES
------------------------------------------------------- Appendix IV:32

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Energy and Natural Resources
                        (Senate)
                        Agriculture (House)
                        Natural Resources (House)
                        Public Works and Transportation
                        (House)

Primary agencies        Department of the Interior
                        Department of Agriculture
                        Department of the Army
------------------------------------------------------------
Improved pricing of user fees at recreational sites could help defray
direct costs to the government, shift the cost burden from the
taxpayers to the beneficiaries of the services, and alleviate
overcrowding at many sites.  Entrance and user fees are charged at
some sites, but the fees generally cover only a small portion of the
costs for services provided to visitors.  For example, in 1993,
Interior's National Park Service spent an estimated $230 million on
services for visitors but recovered only an estimated $90 million in
fees.  Interior's Office of Inspector General reported that the
Service did not collect as much as anticipated because the fees
collected were not returned to the individual parks.  This led to a
lack of incentive, which, together with staffing and funding
shortfalls, resulted in the Service's not collecting an estimated
$105 million during fiscal year 1991. 

Interior's follow-on report to the Vice President's National
Performance Review concluded that reform in the nature, level, and
collection of fees in national parks could generate substantial
revenues.  The administration's fiscal year 1995 budget seeks
expanded authority to increase park entrance and other recreation
user fees.  In addition, this proposal creates a new, mandatory
National Park Renewal Fund, which will receive half of the additional
revenues, net of fee collection costs, and return them to the
collecting parks for direct expenditure in 1996. 

The Congress should consider authorizing and requiring federal
land-managing agencies to charge fees to cover the costs for
services. 



                      Five-year Revenues

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain             140     140     140     150     150
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:32.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Forest Service:  Difficult Choices Face the Future of the Recreation
Program (GAO/RCED-91-115, April 15, 1991). 

GAO Contact James Duffus, III, (202) 512-7756



   OPTION:
   NUCLEAR WASTE DISPOSAL
   FEESNUCLEAR WASTE DISPOSAL FEES
------------------------------------------------------- Appendix IV:33

----------------------  ------------------------------------
Authorizing committees  Energy and Natural Resources
                        (Senate)
                        Energy and Commerce (House)
                        Natural Resources (House)

Primary agency          Department of Energy
------------------------------------------------------------
Utilities pay a fee to the Nuclear Waste Fund to finance the
development of storage and permanent disposal facilities for
high-level radioactive wastes.  The amount of this fee has not
changed since 1983, making the fund susceptible to future budget
shortfalls.  To help ensure that sufficient revenues are collected to
cover increases in cost estimates caused by price inflation, the
Congress should amend the Nuclear Waste Policy Act of 1982 to direct
the Secretary of Energy to automatically adjust for inflation the
nuclear waste disposal fee that utilities pay into the Nuclear Waste
Fund. 



                      Five-year Revenues

                    (Dollars in millions)

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Revenue gain              15      35      50      70      85
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:33.1

Status of Actions to Improve DOE User-Fee Assessments
(GAO/RCED-92-165, June 10, 1992). 

Changes Needed in DOE User-Fee Assessments (GAO/T-RCED-91-52, May 8,
1991). 

Changes Needed in DOE User-Fee Assessments to Avoid Funding Shortfall
(GAO/RCED-90-65, June 7, 1990). 

GAO Contact Victor S.  Rezendes, (202) 512-3841



   OPTION:
   NATURAL RESOURCES REVENUE
   SHARINGNATURAL RESOURCES
   REVENUE SHARING
------------------------------------------------------- Appendix IV:34

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Energy and Natural Resources
                        (Senate)
                        Agriculture (House)
                        Natural Resources (House)

Appropriations          Agriculture, Rural Development, and
subcommittees           Related Agencies (Senate)
                        Interior and Related Agencies
                        (Senate and House)
                        Agriculture, Rural Development, Food
                        and Drug Administration, and Related
                        Agencies (House)

Primary agencies        Department of the Interior
                        Department of Agriculture

Accounts                Multiple

Spending type           Discretionary

Budget subfunction      Conservation and land management
------------------------------------------------------------
The federal government collects fees from private interests for the
sale or use of natural resources on federal lands.  A percentage of
these fees is, under certain conditions, allocated to states and
counties as an offset for tax revenues not received from the federal
lands. 

Federal land-managing agencies typically do not deduct the full costs
of their programs from the gross receipts that the programs' generate
before sharing the receipts with states and counties.  Sharing
federal receipts on a gross, rather than a net, basis often reduces
the federal government's share of the revenues to a level below its
costs. 

According to CBO, changing revenue-sharing from a gross-receipt to a
net-receipt basis would reduce net federal outlays and produce the
savings shown below. 



                      Five-year Savings

                        FY95    FY96    FY97    FY98    FY99
--------------------  ------  ------  ------  ------  ------
Budget authority         170     180     180     190     200
Outlays                  130     180     180     190     200
------------------------------------------------------------
Source:  Congressional Budget Office, Reducing the Deficit, March
1994. 



      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:34.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Rangeland Management:  Current Formula Keeps Grazing Fees Low
(GAO/RCED-91-185BR, June 11, 1991). 

Forest Service Needs to Improve Efforts to Reduce Below-Cost Timber
Sales (GAO/T-RCED-91-43, April 25, 1991). 

Mineral Revenues:  Collection and Distribution of Revenues From
Acquired Lands (GAO/RCED-90-7, August 2, 1990). 

GAO Contact James Duffus, III, (202) 512-7756



   OPTION:
   FEDERAL LAND POLICIESFEDERAL
   LAND POLICIES
------------------------------------------------------- Appendix IV:35

----------------------  ------------------------------------
Authorizing committees  Agriculture, Nutrition, and Forestry
                        (Senate)
                        Energy and Natural Resources
                        (Senate)
                        Agriculture (House)
                        Natural Resources (House)
                        Public Works and Transportation
                        (House)

Primary agencies        Department of the Interior
                        Department of Agriculture
------------------------------------------------------------
The federal government owns and manages more than 700 million
acres--nearly one-third of the U.S.  landmass.  For many years, these
lands have been sold or otherwise made available for a variety of
purposes to private citizens, corporations, and state and local
governments.  In many cases, the rate of return received by the
government for the sale or use of these valuable natural resources
has fallen far below reasonable market-based levels.  Three examples
illustrate this problem. 

The Mining Law of 1872 allows holders of economically minable claims
to obtain all rights and interests to both the land and the minerals
by patenting them for $2.50 or $5.00 an acre--an amount that
approximated the fair market value for western grazing land and
farmland in 1872.  Over the last 122 years, the federal government
has sold about 3.2 million acres of public lands, or an area about
the size of Connecticut, under this patent provision.  As a result,
some patent holders have reaped huge profits at the government's
expense.  At the time of GAO's 1989 study, 265 patent applications
were pending for more than 80,000 acres of public land.  At just 12
of these sites, if all the land applied for was patented, the
government would have received about $16,000 for land appraised in
1988 at between $14.4 million and $47.1 million. 

Under land-use agreements with nonfederal public entities, Interior's
Bureau of Reclamation has agreed to the long-term use of some of its
lands with no compensation to the federal government.  The nonfederal
public entities, in turn, develop and lease the lands to private
commercial operators in exchange for a percentage of their gross
revenues.  For example, the Bureau agreed that the City of
Scottsdale, Arizona, could use for 75 years about 760 acres of its
land for recreation development.  The city developed two major
recreation facilities on the land and subsequently leased them to
private commercial operators.  The operators of these facilities
generated about $24 million in gross revenues from 1988 through 1990,
and the city was entitled to receive about $1.5 million in
compensation.  At the time of the GAO review, Bureau officials were
unable to define the extent to which the agency had used these
agreements; GAO identified three other similar agreements in Arizona
that the Bureau had approved. 

The federal government enters into agreements with concessioners to
serve as the principal operators of parks, forests, and other
recreation areas.  In 1991, GAO reported that concessioners generated
about $1.4 billion in gross revenues and paid the government about
$35 million in concession fees--an average return to the government
of about 2 percent.  Interior's follow-on report to the Vice
President's National Performance Review concluded that receipts from
concession franchise fees must be actively pursued by the National
Park Service, estimating that substantial revenue could be generated
by promoting competition, expediting contract renegotiations, and
boosting the government's return. 

A 5-year estimate of additional receipts cannot be developed at this
time.  The difficulties of estimating the commercial value of federal
holdings, combined with the lack of essential data on those holdings,
inhibits estimation. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:35.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Bureau of Reclamation:  Federal Interests Not Adequately Protected in
Land-Use Agreements (GAO/RCED-91-174, July 11, 1991). 

Federal Land Management:  The Mining Law of 1872 Needs Revision
(GAO/RCED-89-72, March 10, 1989). 

GAO Contact James Duffus, III, (202) 512-7756



   OPTION:
   FEDERAL WATER POLICIESFEDERAL
   WATER POLICIES
------------------------------------------------------- Appendix IV:36

----------------------  ------------------------------------
Authorizing committees  Energy and Natural Resources
                        (Senate)
                        Public Works and Transportation
                        (House)

Primary agency          Department of the Interior
------------------------------------------------------------
Under the Reclamation Reform Act of 1982, as amended, some farmers
have reorganized large farming operations into multiple, smaller
landholdings to be eligible to receive additional federally
subsidized irrigation water.  The act limits to 960 the maximum
number of owned or leased acres that individuals or legal entities,
such as partnerships or corporations, can irrigate with federal water
at rates that exclude interest on the government's investment in the
irrigation component of its water resource projects.  However, due to
the vague definition of the term "farm," the flow of federally
subsidized water to land holdings above the 960 acre-limit has not
been stopped, and the federal government is not collecting revenues
which it is entitled to receive under the act. 

By the end of fiscal year 1990, after receiving water from the
Central Valley Project (CVP) in California's Central Valley Basin for
over 40 years, irrigators had repaid only $10 million, or 1 percent,
of the over $1 billion in construction costs that they owe the
federal government.  In 1986, the Congress required irrigators and
other users to pay their share of the federal investment in the CVP
by 2030.  While construction costs may ultimately be recovered by
2030, the dollars that eventually flow to the Treasury could be worth
much less than if they had been repaid sooner--as inflation decreases
the money's value and as opportunities to use the money for other,
productive purposes, such as reducing the federal debt, are lost. 

Moreover, the use of federally subsidized water to produce federally
subsidized crops results in the government's paying double subsidies. 
Estimates of the cost of federal water subsidies vary but are
substantial.  Interior estimated that irrigation subsidies used to
produce subsidized crops throughout the 17 western states totaled
$203 million in 1986; the Bureau of Reclamation placed the figure at
$803 million. 

CBO has not estimated nationwide revenues and savings for this
option.  It has estimated cumulative 5-year savings of $110 million
based on (1) requiring that farms of more than 960 acres be charged
the full cost of federal irrigation water and (2) allowing those who
grow agricultural commodities that are surplus to receive either crop
support payments or federally subsidized water in the CVP, but not
both. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:36.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Reclamation Law:  Changes Needed Before Water Service Contracts Are
Renewed (GAO/RCED-91-175, August 22, 1991). 

Water Subsidies:  Basic Changes Needed to Avoid Abuse of the 960-Acre
Limit (GAO/RCED-89-72, March 10, 1989). 

GAO Contact James Duffus, III, (202) 512-7756



   OPTION:
   INTERNAL REVENUE SERVICE STAFF
   UTILIZATIONINTERNAL REVENUE
   SERVICE STAFF UTILIZATION
------------------------------------------------------- Appendix IV:37

----------------------  ------------------------------------
Authorizing committees  Appropriations (Senate and House)
                        Finance (Senate)
                        Ways and Means (House)

Primary agency          Internal Revenue Service
------------------------------------------------------------
The allocation of IRS' collection staff has not been based on the
relative productivity of its collection programs.  Some of the more
productive programs, such as IRS automatic call sites, have not
reached their full potential because staff are assigned to less
productive field collection activities.  The productivity of
collection staff also varies greatly among collection locations. 

More emphasis on contacting delinquent taxpayers early using
telephone collection techniques and allocating staff based on
productivity should increase collections.  A rough GAO estimate
indicated that the reassignment of about 1,000 staff from field
collections--the least productive use of staff--to telephone
collections could increase collections by about $1.2 billion per
year. 

Although CBO does not disagree that better utilization of IRS staff
can increase revenues, it does not make budget estimates of such
increases.  This is because it is difficult to establish a clear
connection between changes in staff allocations and revenue gains. 
In addition, even if such a connection can be established, the
magnitude of such revenue gains attributable to reallocation is not
certain enough for budget scorekeeping purposes. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix IV:37.1

Tax Administration:  New Delinquent Tax Collection Methods of IRS
(GAO/GGD-93-67, May 11, 1993). 

Tax Administration:  Improved Staffing of IRS' Collection Function
Would Increase Productivity (GAO/GGD-93-97, May 5, 1993). 

April 21, 1993, letter to the Honorable Steny H.  Hoyer, Chairman,
Subcommittee on Treasury, Postal Service, and General Government,
House Committee on Appropriations. 

Internal Revenue Service Receivables (GAO/HR-93-13, December 1992). 

Tax Administration:  IRS' System Used in Prioritizing Taxpayer
Delinquencies Can Be Improved (GAO/GGD-92-6, March 26, 1992). 

Tax Administration:  Efforts to Prevent, Identify, and Collect
Employment Tax Delinquencies (GAO/GGD-91-94, August 28, 1991). 

GAO Contact Jennie S.  Stathis, (202) 512-5407


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V


   ACCOUNTING AND INFORMATION
   MANAGEMENT DIVISION, WASHINGTON
   D.C. 
--------------------------------------------------------- Appendix V:1

Michael J.  Curro, Assistant Director
Trina V.  Lewis, Evaluator-in-Charge
Laura E.  Hamilton, Auditor
Robert M.  Sexton, Senior Evaluator