3B. INVESTING FOR PRODUCTIVITY AND PROSPERITY INVESTING IN PEOPLE ---------------------------------------------------------------------- Our national economic strategy for America will put people first at every stage of their lives. We will dramatically improve the way parents prepare their children for school, give students the chance to train for jobs or pay for college, and provide workers with the training and retraining they need to compete in tomorrow's economy. President Bill Clinton ---------------------------------------------------------------------- This discussion highlights significant Administration investments that follow through on the President's commitment to "put people first." These investments play a dual role. In a global economy where a nation's only unique resources are the skills and knowledge of its workforce, these investments are the key to prosperity. Further, because many of these investments are targeted to our youngest and least fortunate citizens, they also help break the cycle of poverty and open success to all. The Administration is committed to producing real change in people's lives. To do so within existing budget constraints requires choosing investments with records of success or the ability to leverage other resources. It requires reforming programs to make them more effective. And it requires combining opportunity with an emphasis on responsibility. Table 3B-1. MAJOR INVESTMENTS IN PEOPLE (Discretionary budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Young children................ 5,977 7,064 8,054 +990 +14% Education..................... 7,278 7,539 9,089 +1,550 +21% Workforce Investments......... 5,010 5,474 6,480 +1,006 +18% National Service.............. 279 575 850 +275 +48% ---------------------------------------------------------------------- Each section of this discussion addresses an important aspect of Investing in People: o Investing in Young Children will ensure that children start out healthy, are prepared to enter school, and receive good parenting. o Improving Education will raise the achievement of all children, and help reach the National Education Goals. o Investing in the Workforce will aid students' transitions from school to work, train the disadvantaged and retrain workers who lose their jobs in a changing economy. o Encouraging National Service will provide opportunities for young Americans to serve their communities and earn educational benefits in return. o Reforming Welfare will hold parents responsible for their children and provide them with the skills they need to support themselves and their families through work. o Redirecting Housing Assistance for families will provide better neighborhoods for raising children and expand opportunities for work. INVESTING IN YOUNG CHILDREN As early as the fourth century B.C., the philosopher Plato stressed the importance to a just and prosperous society of investing in children from an early age. In The Republic, he discusses the type of poetry youth should learn, physical exercise they should undertake and diets they should follow to prevent diseases. He observes "... the first step, as you know, is always what matters most, particularly when we are dealing with those who are young and tender. That is the time when they are taking shape and when any impression we choose to make leaves a permanent mark." Several millennia later, numerous scientific studies confirm Plato's suppositions about the importance of investing in our children. Research on early, high-quality children's education programs shows gains that may last into adulthood, including higher earnings, lower unemployment rates, and lower crime rates. Supplementing the diets of pregnant women and infants, and immunizing children against early childhood diseases, also save lives and improve health. As Chart 3B-1 shows, these investments both enhance the life prospects of children and save money for the taxpayer over the long run. Insert chart: CHRT3B_1 Programs such as Head Start, childhood immunization and the Special Supplemental Food Program for Women, Infants and Children (WIC), with demonstrated success in stretching the minds and strengthening the bodies of children, ought to reach more of their target population. Other programs like Family Support and Preservation can teach parenting skills, help families with children at risk of abuse and neglect to stay together, and avoid foster-care placements. Accordingly, the Administration is committed to expanding resources for such programs. These and other programs for children and families also need to be integrated in ways that insure seamless services to recipients, as recommended by the National Performance Review. Working with the Congress, the Administration has already increased funding for these programs by 19 percent. For 1995, the budget proposes an additional 21 percent increase for a total increase exceeding $2.6 billion (or 44 percent) over the two years it has been in office (See Table 3B-2). Table 3B-2. PROGRAMS INVESTING IN YOUNG CHILDREN (Budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Immunization Funds\1\......... 341 528 888 +68% +54% Children Receiving Immunization (000s)\2\....... N/A N/A 13,186 N/A N/A Head Start Funds.............. 2,776 3,326 4,026 +21% + 246% Head Start Slots (000s)....... 714 750 840 +12% +53% Percent of Target Population Reached\3\................... 51% 54% 60% N/A N/A WIC Funds..................... 2,860 3,210 3,564 +11% +54% WIC Recipients (000s)......... 5,920 6,510 7,220 +11% +28% Percent of Target Population Reached\4\................... 79% 85% 95% N/A N/A Family Preservation and Support Funds\5\............. -- 60 150 +150% N/A Individuals Served (000s)..... -- N/A N/A N/A N/A Percent of Target Population Reached...................... -- N/A N/A N/A N/A Mandatory Programs............ -- 60 574 +857% N/A Discretionary Programs........ 5,977 7,064 8,054 +14% +96% Total......................... 5,977 7,124 8,628 +21% +209% ---------------------------------------------------------------------- \1\1995 funding shows a combined $464 million (current discretionary immunization program) and $424 million (new entitlement program). Specific goals will be established after survey data become available. \2\Data is for all children up through age 18. \3\Target population is 1.4 million Head Start eligible children. \4\Target estimate is based on a 1993 CBO study estimating that 84 percent of all WIC eligibles will apply for WIC. \5\Since Family Preservation and Support is a new entitlement program, participation estimates have not yet been developed. N/A: Not applicable ---------------------------------------------------------------------- Childhood Immunization Children should be immunized against at least nine diseases. Most inoculations should be received by age two. Through grants to State and local health agencies, the Centers for Disease Control and Prevention (CDC) currently finance about a quarter of all childhood immunizations. State, local, and other Federal programs finance an additional quarter. The remainder is financed through the private sector. Investments in childhood immunizations have high returns in averted medical costs, hospitalization and deaths. According to one study, the combined measles, mumps and rubella vaccine saves more than $14 for every dollar invested. Increasing childhood immunization keeps our children healthy, prevents tragic, avoidable losses of life, and reduces future medical costs. While countries such as Belgium, Denmark and Spain had immunization rates at or above 80 percent for measles, polio, diphtheria and tetanus by the mid-1980s, the United States had immunized only 55 to 65 percent of its pre-school children. A survey of nine cities in 1991 found a median measle, mumps and rubella immunization rate of 38 percent for children under two years. In some inner-city areas, the vaccination rate may be as low as 10 percent. For 1992, data indicate higher vaccination rates, but 71-72 percent of children at or below the poverty level were still in need of at least one vaccine. In the past, drops in vaccine use have caused dramatic increases in the incidence of preventable childhood diseases such as measles and mumps. Reported measles cases, for example, rose from a record low of 1,497 in 1983 to 46,000 between 1989 through 1991, before dropping again. One barrier to childhood immunization has been the high cost of vaccine. To eliminate that barrier, the President sponsored an initiative, enacted in OBRA 1993, to establish a new Federal vaccine entitlement program by October, 1994. The new program, called the Vaccines for Children Program, will buy free vaccine for underinsured and certain low-income children. With the new program underway, health officials have set a target of bringing vaccination rates for all two-year olds nationwide up to 90 percent by the year 2000. Another barrier to childhood immunization has been access to services. In 1995, the Administration will request $46 million in added discretionary funds for extended clinic hours, mobile vaccination units, vaccine purchases, publicity campaigns about the importance of vaccinating young children and other outreach activities. Combined funding levels for the new entitlement program and the current discretionary program represent about a 68 percent increase over the past year's funding level. Ultimately, the President's health reform plan will have universal coverage for childhood immunization as part of a comprehensive benefit package available to all. The Administration will continue to explore linkages between participation in federally assisted programs for child care and immunization, along the lines of school immunization standards. When children are in group settings like child care, infectious diseases are the most dangerous. Immunizing children in child care programs can prevent the spread of communicable illnesses. Preventing childhood diseases by early immunization makes good sense. These measures also help children enter pre-school programs (such as Head Start) and elementary school healthy and ready to learn. Head Start Head Start is a $3.3 billion program offering comprehensive social services for pre-school children. The 2,000 local Head Start centers provide early childhood development services such as education, health care, and nutritious meals. The program helps disadvantaged preschoolers aged 3 to 5, 90 percent of whom must be from families below the poverty line, prepare to succeed in school. In addition, virtually all of Head Start families receive social services directly or through referral from Head Start, and 36 percent of paid Head Start staff are current or former Head Start parents. Evaluations of Head Start children have found short-term gains in IQs, better reading and math skills, higher socio-emotional test scores, and improved health status. Former Head Start children are more likely to be promoted to the next grade and less likely to be assigned to special education classes. Long-lasting positive effects are harder to prove. One long-term study, which followed a group of participants in a high-quality pre-school program through age 27, found that it returned $7.16 for every dollar invested because it halved participants' crime rates, significantly increased participants' earnings and property wealth as adults, and increased their labor-force participation. Unfortunately, not all Head Start programs deliver the high-quality services needed to produce such results. For these reasons the Administration is committed not only to a major expansion of Head Start, but also to improvements in quality. To address both issues, the Administration appointed a bipartisan Advisory Committee in June 1993 to review Head Start and make recommendations for its improvement and expansion. This panel has identified three principles to guide Head Start: o Excellence.--We must strive for excellence in serving both children and families. This means more emphasis on improvements in staffing, in financial management, in facilities, and in Federal oversight and research. o Expansion.--We must expand the number of children served and the scope of services provided in a way that is more responsive to the needs of children and families. This means more full-day, full-year programs, more targeting of resources to high concentrations of poverty, and a possible expansion to younger children. o Partnerships.--We must encourage Head Start to develop partnerships with key community and State institutions and programs with similar objectives. The Administration has embraced this framework in its vision of Head Start for the 21st century. For 1994, it obtained a 20 percent increase over the past year's funding level; and it requests a 21 percent funding increase for 1995. As Chart 3B-2 shows, the proposed number of Head Start slots for children increases by about 18 percent from 1993 to 1995. Insert chart: CHRT3B_2 The budget supports significant and sustained increases to continue expansion of Head Start services, to ensure quality in all aspects of the program, and to provide local flexibility to respond to family and community needs. Program quality set-asides of one quarter of the annual increase in funding will be spent on higher staff salaries, upgrades to facilities and teaching tools, and transportation (such as new buses for the children). For the children of working parents, the Administration plans to offer about 100,000 all-day program slots by 1995 (See Chart 3B-2) and about 290,000 by 1999. These expansions and quality improvements invest not only more, but also more wisely, in the future of our most vulnerable children and families. To maintain their intellectual and social gains, Head Start alumni must enter stronger, more challenging schools. The Administration's reauthorization proposal for Title I is an essential element in reforming and restructuring schools attended by poor children, and for providing continuity between pre-school and elementary school education (See the following "Education" section). Special Supplemental Food Program for Women, Infants, and Children (WIC) The WIC program, established in 1972, improves the nutrition of eligible low-income pregnant, breastfeeding or post-partum women, and their children under age five. The program provides supplements such as eggs, cereal, milk, juice, and cheese--foods often lacking in low-income diets--as well as nutrition counselling and referrals to other services such as health care. To be eligible, participants must have incomes below 185 percent of the poverty line (about $22,000 for a family of three in 1993) or receive Medicaid, Food Stamps, or Aid to Families with Dependent Children, and be found to be at medical or nutritional risk. The program is fully federally funded. Today, about four in every ten babies born in America participate in WIC. Recent studies of WIC suggest the program improves the health status of pregnant women and reduces by 25 percent adverse birth outcomes such as low birthweight among Medicaid beneficiaries. Chart 3B-3, for instance, shows that in five States WIC mothers consistently had lower percentages of babies born with very low birthweights than non-WIC mothers. (Low birthweight causes health and development problems--and is present in 61 percent of all U.S. infant deaths.) Insert chart: CHRT3B_3 WIC also improves nutrition and prenatal care, and lowers fetal mortality. One study concluded that every dollar spent on WIC for pregnant women saves $1.77 to $3.13 in Medicaid costs in the first 60 days after birth. WIC has also been found to reduce iron deficiencies in infants and improve vitamin and mineral intakes in young children. Recognizing the role of WIC in children's health, the 1994 budget provided a 15 percent increase, or $427 million above the previous year. The budget proposed that by the end of 1996, States should have the funds to serve the 7.5 million post-partum women, infants and children who meet current eligibility requirements and want to participate in WIC. In this year's budget, the President seeks to increase WIC spending by another 11 percent. This will expand the program to serve about 7.2 million women and children in 1995--up from 6.5 million in 1994--and maintain the funding needed to achieve the participation targets in the 1994 budget. Because participation in WIC is so closely linked with improved health, the Administration further addresses WIC in the Health Security Act, the President's health care reform proposal. The Act includes a special fund to supplement annual WIC appropriations, and thus ensure that the program's participation targets for 1996 will be met. Parenting and Family Support Although government can improve the health, nutrition, and education of children, even more important to their welfare is good parenting and strong families. Yet some parents receive almost no help in learning to raise the next generation, and new babies do not come with easy-to-read instructions. The Home Observation for Measurement of the Environment scale, which measures conditions like the quality of the physical environment, the availability of intellectual stimulation, and the degree of emotional support provided by parents, suggests that 11 percent of all children aged 3 to 5 years have deficient home environments. Among low-income households, this rate more than doubles. Today, parenthood is all the more difficult because of the dual burdens of so many working mothers, parents who are trying to raise children alone, and the gradual decline in informal sources of information and support, such as extended families. Substance abuse, community violence, poverty, and homelessness have touched too many families, making the challenge of raising healthy children even greater. Most families can raise their children with only a little extra help, but some need more intensive services, and a few have such serious problems that there is no alternative to out-of-home placement. From 1981 to 1991, child abuse and neglect reports increased two-fold to about 2.7 million (Chart 3B-4), and the foster care caseload increased by roughly 60 percent, to nearly 430,000 children. By 1990, there were approximately six children per thousand in foster care, the highest measured rate since 1962. Aside from the trauma of being removed from their parents, children in foster care also may face frequent shuttling between foster homes and interminable waiting periods before permanent placement (a phenomenon known as "foster care drift"). Insert chart: CHRT3B_4 To meet the needs of families for both preventive services, like parenting education, and more intensive crisis services, community-based programs have sprung up across the country. But such services reach too few families. Recognizing this, the President proposed a major new program, Family Preservation and Support, in 1993. This new law, the most significant change in over a decade, will provide services such as family counselling, respite care of children, stress management and parenting skills training. The new program: o provides community-based services that help and support parents to raise their children more effectively; o prevents abuse and neglect before they occur; and o helps children in foster care to return to their families as quickly as possible. Family Preservation and Support, which will provide over $900 million over five years, has a 75 percent Federal funding match rate. Families with children at risk of placement in substitute care and parents opting to improve their parenting skills are eligible, without regard to income levels. Using the new funds, States could expand home visiting programs like the Home Instruction Program for Preschool Youngsters in Arkansas and the Parents as Teachers program in Missouri, which have been replicated in almost every State. Home visiting programs, which are provided nationwide in countries such as the United Kingdom and Denmark, can teach parents about child development, provide developmentally appropriate activities for parents and children to complete together, and ensure developmental screening of participating children. Longitudinal studies have found lasting benefits from some targeted home visiting programs in the United States, including less welfare dependency, a lower incidence of abuse and neglect, and higher IQ scores. States will also provide services such as intensive family preservation. Such programs employ caseworkers to work intensively with troubled families in their homes for a short time. Caseworkers provide referrals for problems such as substance-abuse treatment where needed, and help families cope with stress and other factors that may lead to child abuse and neglect. In conjunction with the Family Preservation and Support program, the Administration also obtained changes to the cluster of programs that provide child welfare services: o States receive three years of enhanced (75 percent) Federal funding matches to develop automated child welfare management information systems. Such systems provide regular and timely status updates for each child in the child welfare system, allaying long-time concerns that many States do not have adequate information about the children they have in foster care. o An estimated $35 million of the Family Preservation and Support funds will be awarded as grants to State court systems to determine more effective, streamlined ways to handle foster care cases and to otherwise apply child welfare laws judiciously. Overcrowded court dockets make it difficult to adjudicate child welfare cases swiftly and contribute to foster care drift. o The Independent Living program, which provides transitional support to foster children who "age out" of the foster care system, was permanently reauthorized. Independent Living teaches teenagers basic skills such as how to budget their income, keep house, and find a job. The program will continue at its current annual level of $70 million. o $26 million of the authorized funding for Family Preservation and Support is set aside for evaluation, research, demonstration, training and technical assistance. Because the Family Preservation and Support program is new, it is important to monitor how well it works. Evaluation grants will help to determine which types of services best help families of at-risk children and teach good parenting skills. Millions of parents struggle to raise children with little assistance or support from the community. New and inexperienced parents may lack the knowledge to raise a child. Families may not get services until they are reported for abuse or neglect, and sometimes not even then. Family preservation and support services help communities deliver parenting training and assistance to troubled families before crises erupt. The Administration pledges to seek significantly greater resources for programs such as childhood immunization, Head Start, WIC, and Family Preservation and Support. Such programs can improve the life prospects for children, especially those from low-income families, and help ensure that they enter the school system ready to learn. EDUCATION A world-class education for all children is one of the Administration's highest priorities. The American education system is a partnership of States, communities, educators, and parents, but national leadership is essential. With enactment of the Administration's legislative and budget proposals, the Federal Government will become a full partner in the nationwide effort to raise the educational achievement of all children and reach the National Education Goals. The Administration has proposed new education legislation and seeks increased resources to improve the education system. The discretionary budget authority increase for the Department of Education--seven percent, or $1.7 billion, over 1994--is one of the largest increases for any department. The Administration is not just proposing to invest more. It is also proposing to reinvent the Federal role in elementary and secondary education to raise faltering educational achievement. The new role would change the whole system, through high standards and accountability for results; new flexibility for States, communities and schools; and new Federal funding to support them. ---------------------------------------------------------------------- LEGISLATION PROPOSED AND ENACTED: The Student Loan Reform Act of 1993 National Service Trust Act of 1993 LEGISLATION PROPOSED AND PENDING IN CONGRESS: The Goals 2000: Educate America Act The Improving America's Schools Act The Safe Schools Act The School-to-Work Opportunities Act ---------------------------------------------------------------------- Table 3B-3. FUNDING OF SELECTED INVESTMENTS TO RISE 23 PERCENT IN 1995 (Budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Goals 2000.................... ...... 105 700 +595 +567% School to Work (Education and Labor)....................... ...... 100 300 +200 +200% Title I Education for Disadvantaged................ 6,696 6,912 7,579 +667 +10% Safe and Drug-Free Schools.... 582 472 660 +188 +40% Head Start.................... 2,776 3,326 4,026 +700 +21% National Service.............. 279 575 850 +275 +48% -------------------------------------- Total....................... 10,333 11,490 14,115 +2,625 +23% ---------------------------------------------------------------------- Elementary and Secondary Education Insert chart: CHRT3B_5 The elementary and secondary education system is in serious trouble, and has been for many years. Government at all levels, business groups, and others have documented low educational performance relative to other nations, declining college entrance test scores, weak educational preparation of teachers, substantial numbers of adults without the literacy skills to get a driver's license or read a ballot, and inefficiencies in school management. Federal, State and local spending for elementary and secondary education has soared during this period--rising 33 percent in constant dollars from 1982 to 1992--without comparable nationwide improvement in student achievement. Few States or school districts have established challenging performance standards for their students; most measure progress with tests that are not related to the material taught. Parents can rarely obtain information to hold their children or the schools accountable for performance. There are many examples of individual schools, teachers, and States changing their systems and achieving good results. But there are too few such examples to improve educational performance nationwide. The Nation's Governors and the Federal Government agreed in 1990 to the National Education Goals. ---------------------------------------------------------------------- THE NATIONAL EDUCATION GOALS. By the Year 2000: 1. All children will start school ready to learn. 2. High school graduation rate at least 90 percent. 3. Competency in challenging academic subjects. 4. First in the world in science and mathematics. 5. Literacy for all adults. 6. Safe and drug-free schools. ---------------------------------------------------------------------- National goals are the first step. Still needed are: challenging academic standards; curricula designed around those standards; teachers trained in helping children learn the curricula; and assessments that fairly and accurately measure progress so that there will be accountability to students and parents. Systemic Reform.--The centerpiece of the Administration's education reform agenda is the Goals 2000: Educate America Act. Sent to Congress by the President on April 21, 1993, Goals 2000 will provide the national framework to coordinate Federal, State, and local efforts into an integrated strategy for effective education reform. Goals 2000 will disseminate reforms throughout the education system. In 1993, about half of the States were planning for one or another of the components of systemic reform, but only one or two had fully developed plans and timetables for reform. School reform has to move more rapidly and more consistently in all school districts in order to achieve dramatic improvement in educational achievement. Educators, business leaders, and parents are beginning to learn what works; these findings must now be used to improve schools in much larger numbers and in approaches designed by each community to meet its needs. New resources and national assistance under Goals 2000 will encourage communities and States to focus their efforts and sharply accelerate the pace of reform. States and communities will receive new Federal funds and other assistance to change whichever parts of their systems stand in the way of world-class performance. Some States need to plan and test new ideas. Others need funds for teacher training and technical assistance to implement reforms in all schools. Still others need to replace outmoded tests with multi-faceted assessment systems linked to the new standards and curricula. For 1995, the Administration seeks $700 million for Goals 2000, an increase of $595 million over the 1994 appropriation. Beginning in 1996, the budget calls for annual appropriations of $1 billion. With this major commitment, every State and as many as 20,000 public schools (about one-fifth of all schools in the nation) would receive financial assistance to implement reforms by 1996, with more schools added every year thereafter. Goals 2000 would also establish an independent National Education Goals Panel, consisting of governors, State legislators, Congressional leaders, and Administration officials. The Panel would monitor the Nation's progress toward the education goals and report annually on accomplishments and remaining problems. The Act would also create: a National Education Standards and Improvement Council to certify voluntary national and voluntary student performance standards; and a National Skill Standards Board, to work with business, labor and schools to develop standards for what students should know to enter different careers. State and local participation would be voluntary, in keeping with this Nation's tradition of local and State control of education. However, these groups will provide much-needed models of world-class standards toward which reformers can aim. The Improving America's Schools Act.--Goals 2000 would provide the new educational setting in which over $10 billion would be spent under the Administration's proposal to reauthorize and restructure the Elementary and Secondary Education Act (ESEA). The proposal was transmitted to Congress on September 13, 1993 as The Improving America's Schools Act. Particularly in the largest ESEA program, Chapter 1 (1994 funding: $6.9 billion), Federal law and policy since the mid-1960s have stressed discrete and separate services for children with low educational achievement. Unfortunately, that approach has too often failed to improve the overall education they received. Emphasis has been on compliance with resource tracking rules, not on improved educational performance. Constant testing is required, using tests that stress mastery only of low-level basic skills, not challenging subject matter. Little has been done to improve the training of teachers or the quality of curriculum. National evaluation studies by independent groups and the Department of Education document that Chapter 1 and other ESEA programs have had little impact on the educational progress of the five million children served, despite expenditure of tens of billions of dollars over the years. Furthermore, studies provide stark evidence that the educational achievement of children in schools with the highest levels of poverty is very low. Over half the children in schools with the highest concentrations of poverty are low achievers, compared to only 15 percent in schools with the least poverty. ESEA programs need to be restructured to produce better results. The Administration's reauthorization proposal is based on five principles: o High standards for all children.--This is the essential starting point for improving student and school performance. Federal programs, particularly those for at-risk children, have generated low expectations for students, focusing instruction on low-level basic skills. To receive funding under the new proposal, schools would set challenging performance standards for all students, including those at most risk of failure, and design curricula based on those standards. o Focus on teaching and learning.--Opportunities for professional development of teachers and other school staff have been haphazard, short-term and ineffective. An expanded "Eisenhower Professional Development Program" would support quality pre-service and in-service training and education for teachers and administrators. These would be tied to the high standards. A system of regional technical assistance centers would coordinate Federal programs and would assist States and communities implementing educational improvements. A new education technology program would support innovation to raise educational achievement for all students. o Flexibility to stimulate local initiative, coupled with responsibility for improved student performance.--Flexibility and responsibility would replace compliance with administrative process regulations as the hallmark of ESEA programs. The proposal would give schools and communities greater flexibility by simplifying the law and providing a broad waiver authority to remove Federal obstacles to State and community success. More schools with the highest concentrations of poor children could use Federal funds to raise educational improvement throughout the whole school rather than for selected grades or groups of students. A public "charter schools" initiative would encourage teachers, parents and others to create their own high-performance schools, "schools within schools," or clusters of schools, operated outside restrictive rules and regulations. Funding for the proposal's Title I (successor to Chapter 1) could help extend the school day or school year. Under Title I, schools and school districts would be sanctioned for failure to make progress toward State performance standards, and would be rewarded for outstanding performance. o Link schools, parents, and communities.--Schools alone, particularly in high poverty communities, cannot ensure that all students reach high standards. The new Act will encourage and enable parents to work in partnership with teachers and administrators to improve learning, and help schools forge strong ties with community social services. Parents would be encouraged to help their children do well in school. o Resources targeted to greatest needs and in amounts sufficient to make a difference.--Federal resources are currently spread too thinly across too many schools. Academic performance tends to be lowest in schools with high concentrations of poor children. Under the new Act, Title I funds would be better targeted to the poor children in the schools and school districts serving areas with the highest concentrations of poverty. In the Migrant Education program, funds would be targeted to the children with the greatest need for additional services: those children who have moved within the previous 24 months. Thirty percent of resources distributed by States to school districts under the Safe and Drug-Free Schools and Communities program would be targeted on a limited number of high-need school districts. Overall, spending on ESEA programs would increase more than $900 million over 1994. State and local programs under the restructured ESEA Title I would be funded at $7.6 billion, an increase of $667 million, or 10 percent, over comparable activities in 1994. Safe and Drug-Free Schools.--Violence and drug and alcohol abuse in many schools make effective teaching and learning impossible. On May 25, 1993, the Administration proposed the Safe Schools Act to help schools reduce violence by adding security personnel, finding and removing weapons, and teaching alternative approaches to dispute resolution. Congress appropriated $20 million for 1994 contingent upon enactment; the budget includes $100 million for 1995. In addition, the Administration proposes to expand the current "Drug-Free Schools and Communities Act" into a new Safe and Drug-free Schools and Communities program that would add violence prevention activities. The budget requests $560 million for the new Act, an increase of $108 million, or 24 percent, over comparable activities in 1994. Beginning in 1996, the separate Safe Schools Act would be phased out as comprehensive State and local violence and drug abuse prevention strategies take over. (See also Chapter 5, "Personal Security: Crime, Illegal Immigration, and Drug Control.") School-to-Work Opportunities Act.--In contrast to those in other industrialized nations, few of our Nation's schools work with businesses to prepare students for the workplace or further skill training. The School-to-Work Opportunities Act, sent to Congress on August 4, 1993, provides a framework to help States implement such strategies, and increases funding to $300 million, $200 million more than Congress appropriated for comparable activity in 1994. (See the following "Workforce Investment" section.) Improving literacy.--Findings from the National Adult Literacy Survey indicate that over 40 million adults can function only at the lowest literacy proficiency level--unable to do even simple tasks, such as locating a meeting time and place on a form. Literacy must be addressed at all age levels. Even Start in the Education Department and Head Start in the Department of Health and Human Services both address inter-generational literacy by working with young children and their parents together. Grants to States under the Adult Education program would be funded at $267 million, an increase of $12 million, or 5 percent over 1994, to help States provide basic literacy improvement and high school equivalency degrees for disadvantaged adults. Workplace literacy grants would be funded at $24 million, $5 million, or 26 percent above 1994 to help businesses work with educational institutions to raise the literacy levels of workers. Head Start.--The budget provides $4 billion for Head Start in 1995, an increase of $700 million, or 21 percent over 1994. Head Start is the key program in the Federal Government's strategies to help the Nation reach the first National Education Goal of all children entering school ready to learn. The Administration's Title I proposal calls for coordination with Head Start in each Title I school district. (See the previous section, "Investing in Young Children.") Postsecondary Education Increasingly, the economy demands, and high-paid jobs require, education or training beyond the high school level. Yet without grants or loans, higher education is beyond the reach of many families. The Federal Government is the largest provider of need-based student aid. The major Federal programs are Pell grants and student loans. The loan programs have become very costly, difficult to administer, and subject to abuse. The growing use of loans to finance postsecondary education and training overburdens increasing numbers of borrowers, who often make career decisions based more on the income needed to pay off debt than on real career desires. In response, the President sent to Congress two bills: The National Service Trust Act and The Student Loan Reform Act. Both were enacted in 1993. (See the "National Service" section below.) The Student Loan Reform Act.--The guaranteed loan system that has evolved since 1965 is riddled with administrative complexities; provides high subsidy payments to banks, intermediary guaranty agencies and secondary markets; confuses students and schools; and has default costs in excess of $2 billion per year. It has been the subject of repeated Congressional investigations and GAO and Inspector General criticisms. Insert chart: CHRT3B_6 The Administration's Student Loan Reform Act replaces guaranteed lending with Federal direct lending. Direct lending, plus the Act's reductions in the cost of the guaranteed program during the phase-in period, saves taxpayers $4.3 billion (CBO estimate) over the first five years. The Act lowers charges and interest rates paid by borrowers and increases fees on banks, guaranty agencies and secondary markets. Direct lending simplifies administration, over time eliminating from new lending the 8,000 banks, 46 guaranty agencies and the secondary markets. The Act phases in direct lending over several years, so that by 1998, at least 60 percent of lending will be direct lending--or more if the schools ask for it. The direct and guaranteed loan programs together provide about $20 billion per year in loan capital to 5.5 million borrowers. The new Act creates income-contingent repayment options for direct loan borrowers. Instead of repaying on fixed or other amortization schedules over ten years or less, regardless of earnings, borrowers may repay loans as a small percentage of income over an extended period. Borrowers may also suspend repayment during times of low family earnings, to avoid defaults. All borrowers who now have loans, or will take out guaranteed loans during the phase-in period, can convert those loans to Federal direct loans to take advantage of income-contingent repayment. Through this repayment option, borrowers may take volunteer or low-paying community service jobs and still meet their loan obligations. Program management.--The rapid growth in size and complexity of the postsecondary grant and loan programs through the 1980s, accompanied by inadequate Federal management, led to substantial abuses by some schools and default costs exceeding $2 billion per year. Laws enacted since 1989, especially the Higher Education Amendments of 1992, give the Education Department many new tools to improve the integrity of the programs, protect students, and reduce defaults. In particular, the new State Postsecondary Review Program, for which the budget seeks $35 million, $14 million--or 65 percent--over 1994, reviews schools with indications of program abuses and helps remove unscrupulous schools from student aid programs. The Student Loan Reform Act, when fully implemented, will further simplify loan program administration. The budget provides new staff and resources to manage student aid programs. Pell grants.--The 1995 budget provides $6.5 billion for the Pell grant program for school year 1995-1996. Of this amount, $118 million would complete the retirement of the current estimate of the funding shortfall from prior years. For school year 1995-1996, $6.4 billion would provide grants to 4.1 million individuals, the most ever. The Administration also proposes to increase the maximum award by $100 to $2,400. Table 3B-4. EDUCATION DEPARTMENT BUDGET INCREASES 7 PERCENT OVER 1994 (Discretionary budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Goals 2000.................... -- 105 700 +595 +567% School to Work (Education share)....................... -- 50 150 +100 +200% Title I....................... 6,696 6,912 7,579 +667 +10% Safe and Drug-Free Schools.... 582 472 660 +188 +40% Impact aid.................... 840 798 750 -48 -6% Professional Development...... 711 650 800 +150 +23% Bilingual and Immigrant Education.................... 213 227 254 +27 +12% Education of the Disabled..... 2,966 3,109 3,295 +186 +6% Vocational and Adult Education 1,474 1,481 1,447 -34 -2% Pell Grant Program............ 5,788 6,304 6,393 +89 +1% Pell Grant Shortfall.......... 671 250 118 -132 -53% Work-Study; Supplemental Grants....................... 1,200 1,200 1,300 +100 +8% Other Student Aid Programs.... 253 245 18 -227 -93% Historically Black Colleges... 98 101 106 +5 +5% Other Higher Education Programs..................... 735 793 783 -10 -1% Research and Statistics....... 189 202 226 +24 +12% All Other..................... 1,278 1,455 1,481 -26 -2% -------------------------------------- Total....................... 23,694 24,354 26,060 +1,706 +7% ---------------------------------------------------------------------- The Department of Education Budget Discretionary budget authority for the Department of Education in the 1995 budget is $26.1 billion, an increase of $1.7 billion, or 7 percent over 1994. Although a number of programs would receive increased funding, not all of Education's 230 current programs should be funded or have funding increased. Many are too small to have any significant impact. Others address lower-priority issues, are ineffective, or have long since accomplished their original purpose. The National Performance Review (NPR) cited 34 such programs. Seven of these were terminated by Congress in 1994. The remaining 27 NPR programs, plus another six programs, would be ended by the 1995 budget. Thus, 33 programs, funded for a total of $639 million in 1994, would receive no funding in 1995. For example, the budget provides no funding for the Impact Aid "b" program, funded at $123 million in 1994. Impact Aid generally compensates schools for educating children who live on, or whose parents work on, Federal property. Funding is continued for children who both live on and have parents who work on Federal property. WORKFORCE INVESTMENTS Economic change has challenged America throughout its history, and successfully meeting this challenge has long set America apart from less flexible societies. But in recent years, advancing technological developments, defense downsizing, corporate restructuring, and intensifying global competition have altered the nature of our challenge. Many Americans are anxious about economic change and fearful about their economic security. Current training and unemployment programs were designed in a different time to suit a different economy. When the existing system was established, a much larger number of low-skill, entry-level jobs awaited high-school graduates. Today's typical eighteen-year-old needs a higher level of skill to compete in the emerging global economy. A large share of the unemployed cannot expect to return to their old jobs, and must seek new work. Gaining entry to the labor market requires a higher level of skill. Finally, maintaining membership in the workforce requires greater flexibility. This means fundamentally rethinking government's role in the labor market. The transition from school to work is at once more important and more difficult to manage. As skill requirements rise, the transition from one job to the next is more hazardous and, for some, more common. To preserve Americans' historical adaptability and openness to change, government must help citizens equip themselves to negotiate these workforce transitions. To boost productivity growth and create a better-prepared workforce, the Administration has proposed new investments in working people, and a shift in policy from simply buffering the pain of unemployment to actively promoting re-employment. Despite the extraordinary budget constraints facing all discretionary programs, the 1995 budget includes $6.5 billion in budget authority for employment and training programs, an increase of $1.0 billion, or 18 percent, from the 1994 level. (See Table 3B-5.) Table 3B-5. WORKFORCE PROGRAMS (Budget authority; dollar amounts in millions) ---------------------------------------------------------------------- Percent 1993 1994 1995 Change: Actual Enacted Propos- 1994 to ed 1995 ---------------------------------------------------------------------- Grants for Training the Disadvantaged. 1,692 1,647 1,729 +5.0% Dislocated Worker Assistance.......... 651 1,118 1,465 +31.0% Job Corps............................. 966 1,040 1,157 +11.3% Summer Youth Employment............... 1,025 888 1,056 +19.4% School-to-Work (DOL Share)............ -- 50 150 +200.0% One-Stop Career Shopping.............. -- 50 250 +400.0% Other Employment and Training......... 676 681 673 -1.1% ------------------------------ Total............................... 5,010 5,474 6,480 +18.4% ---------------------------------------------------------------------- The Clinton Administration's three-pronged workforce investment strategy will finance initiatives that promote: (1) first jobs for people just entering the workforce; (2) new jobs by easing access for workers in transition from one job to the next; and (3) better jobs for all Americans as the economy continues to evolve. First Jobs The Administration's budget request includes targeted increases in high-payoff measures to ensure all young Americans a solid start in the working world. Building a National School-to-Work System.--Too few young Americans possess the skills they need to qualify for entry-level jobs in high-wage careers. The proposed School-to-Work Opportunities Act, passage of which is anticipated in 1994, will provide students with on-the-job experience tightly integrated with classroom training, leading to a school diploma and, for most students, a degree or diploma certifying successful completion of at least one year of postsecondary education, and an industry-recognized credential with currency in the job market. The proposed legislation contains special provisions for serving poor and at-risk youth. The program operated as a demonstration in 1994. For 1995, the budget requests $150 million each for the Departments of Labor and Education for expanded activities. Under the proposed legislation, a nationwide system would be established in waves, with states competing--on the basis of innovative program designs--to join earlier waves. All States would have the opportunity to implement school-to-work systems by the end of 1997. In the long run--once Statewide systems are in place--the Federal role will be limited to information dissemination and program evaluation. Expansion of the Job Corps.--The Job Corps is America's oldest, largest, and most comprehensive residential training and education program for young, unemployed, and undereducated youth. Designed for severely disadvantaged youth ages 14 through 24, the program breaks the cycle of poverty and welfare dependence by providing the vocational training and job placement that youths need to become taxpaying citizens. The $1.2 billion program boasts a proven track record and is administered through a network of 109 centers, located in 45 states, Puerto Rico, and the District of Columbia. The budget requests $100.5 million to expand this proven program. An additional $30 million is requested to address a backlog of needed repairs. The expansion funds would launch six new centers in addition to the eight initiated last year. When the current expansion is completed over the next decade, the number of centers will have increased to 162 and the number of slots from 42,500 to 62,500--a 50 percent increase in capacity. Summer Youth Employment.--Title II-B of the Job Training Partnership Act authorizes the Summer Youth Employment and Training program, which provides temporary summer jobs and academic enrichment for disadvantaged youth ages 14-21. Internal audits and external reviews show that the young people involved in the program are well-supervised, perform useful work for the community, and often receive substantial education benefits. The increased funding will maintain approximately the same participation level in the summers of 1994, 1995, and 1996 as were supported in the summer of 1993. The Administration's request for programs helping youth into their first job does not reflect an automatic, across-the-board increase in all programs. Indeed, while proven or promising approaches are expanded, $60 million less is being sought for one major program--Title II-C of the Job Training Partnership Act--until the Administration can remedy problems it has identified in the program. New Jobs Each year, about 27 percent of all U.S. workers move to new jobs, whether to advance careers or rebound from job loss. Countless others fear job loss and feel insecure about their employment outlook. The Clinton Administration's "new jobs" investment initiative will help experienced workers move from one job to the next, and ease fears about job change. Proposed for this purpose are a $1.5 billion comprehensive worker adjustment program for displaced workers and $250 million to continue work on a network of one-stop career centers with improved labor market information and services for all job-seekers, as well as a small but strategic investment in a national network of occupational skills standards. The "new jobs" initiative also builds on the recently mandated program for "profiling" claimants for unemployment benefits. Profiling identifies workers likely to have difficulty finding new jobs and refers them to intensive job search assistance programs early in their period of unemployment. While the Federal Government spends more than $1 billion annually for worker adjustment assistance, existing programs often are rigid and ineffective, and serve only a fraction of the 2 million workers permanently displaced each year. A patchwork of categorical programs targets subsets of the dislocated worker population--such as workers displaced by trade, defense downsizing, or environmental initiatives--raising serious concerns about equity and efficiency. The Administration will propose legislation to consolidate, expand, and improve existing programs under a comprehensive Workforce Security program. The 1995 budget includes $1.5 billion for the new program, a 31 percent increase from the 1994 level. Serving some 750,000 workers in its first year of operation, the Workforce Security program is projected to serve 1.3 million dislocated workers or virtually all of those estimated to need and want services upon full implementation. Program expansion would refine and build on growth already begun with the Administration's 1994 dislocated worker investment proposal. In 1994, the $1.1 billion in budget authority for dislocated worker assistance was a 72 percent increase over the prior year, and the corresponding number of participants is estimated to rise 43 percent, reaching 500,000. The Administration's Workforce Security program emphasizes services with proven effectiveness, and those that displaced workers find most valuable. Early outreach is the critical first step in helping dislocated workers. Thus, the new program will improve State rapid-response activities and refer UI applicants who have been identified as at risk of long-term unemployment to early reemployment services. In addition, all dislocated workers will have access to basic reemployment services, including (1) information on job openings, labor market trends, and the quality of education and training providers; (2) referral to appropriate programs, including student financial aid; (3) individual assessment; (4) job counseling; and (5) job search assistance, including job clubs. Dislocated workers who need more intensive services can choose long-term training, in the form of occupational skills training (both classroom and on-the-job), basic skills training, and entrepreneurial training. Most importantly, the new program will hold training providers accountable for their results. Potential trainees will be armed with information on the track record of training providers, including their success in keeping participants enrolled, placing them in jobs, and securing higher earnings and licensure rates for their graduates. Unscrupulous or unsuccessful training providers whose curricula fail to meet these--and other--quality standards will be barred from program participation. Finally, under the legislation, qualified long-term trainees will receive supportive services and be eligible for income support to allow them to complete training and launch new careers. As another part of the "new jobs" investment strategy, the Administration proposes to establish a network of user-friendly One-Stop Career Centers to provide a single point of entry into the employment and training system. Growing from a 1994 budget of $50 million, the proposed 1995 funding of $250 million will provide Federal "seed money" to help States plan and implement programs that streamline access to the full range of employment and training services--aided, where necessary, by waivers of Federal requirements. Eventually, the Administration's One-Stop Shopping initiative will provide all jobseekers with easy access to jobs, career information, and Federal training and employment programs. Finally, one title of the Administration's "Goals 2000" initiative (discussed under "Education" above) is pivotal to the "new jobs" agenda. The Administration requests $12 million for Title IV of Goals 2000, which authorizes a National Skill Standards Board. This program would create a national system of voluntary skill standards and certification. These standards will introduce real accountability to the training system and insure that workers make the investments that firms value. Better Jobs The Administration is pursuing three tactics to create an environment for better jobs. The first tactic focuses on the economy in general, stimulating investment through low deficits; investing in new technologies; expanding retraining programs; and opening global markets to American made products. The second and third focus on the job site, promoting the high performance workplace and enhancing enforcement of workplace laws. Toward the second goal, the Secretary of Labor is initiating a new mission of promoting high performance workplace practices such as employee training, performance-based pay, and front-line decision-making. This is an innovation with important practical consequences for companies and workers, but one that, by design, has few Federal budgetary consequences. To meet the third goal, the Department of Labor is launching new efforts to enforce workplace rules that protect both workers and responsible employers and that will total 355 staff and $66.7 million. These additional resources would address new responsibilities under recent laws such as the Family and Medical Leave Act and new regulations. Also included are initiatives addressing new workplace hazards, inspection of small mines and mine health issues, review of the periodic roll in the Federal Employees' Compensation Act program, and coordinated, high-profile enforcement interventions that focus on repeated and egregious violations of key labor laws. In addition, the Administration will work with Congress to improve occupational safety and health. Reforms could include: a decentralized worksite-based approach to workplace safety and health, such as written health and safety programs and worksite health and safety committees; extension of OSHA coverage to Federal, State, and local government employees not now covered by the Act's provisions; increased employee participation in workplace safety and in OSHA inspections and accompanying protection measures; and targeting those that historically have been egregious violators of Federal laws and regulations. Included in the amounts referenced above are 132 staff and $18 million for improved oversight of workplace safety and health. While seeking additional resources for some purposes, the Administration also will reinvent its enforcement practices to be more efficient, more strategic, more outcome-based, and fairer. This involves fairness to both workers and firms. When irresponsible companies seek competitive advantage by illegally underpaying wages and taking shortcuts to health and safety, it undermines the position of responsible companies that comply with workplace laws. Good corporate citizens, as well as workers, benefit from efficient and even-handed enforcement of workplace rules. NATIONAL SERVICE National service enhances educational opportunity, rewards responsibility, rebuilds local communities and fosters a sense of national community. Signed into law on September 21, 1993, the National and Community Service Trust Act will provide Americans of all ages and backgrounds with opportunities to serve their country addressing educational, public safety, human needs, and environmental problems. The Act established the new Corporation for National and Community Service and a new "AmeriCorps," under which participants will receive an education award of $4,725 per year in return for service for up to two years. These awards may be used for post-secondary education, approved training, or to pay off education loans. The 1995 budget for the Corporation totals $850 million, a $275 million (48 percent) increase over 1994. This includes financing to expand the new programs started in 1994, as well as to continue existing programs formerly operated by ACTION and the Commission on National and Community Service. With this funding, the Corporation will provide opportunities for more than three-quarters of a million Americans to engage in service. AmeriCorps is the heart of the President's vision of national service. Through formula and competitive grants, local communities will develop and implement programs to fund 20,000 service positions by the end of 1994. The 1995 request will finance 33,000 service positions (over three times the size of the Peace Corps and VISTA combined in 1995). WELFARE REFORM Our current welfare system violates two core American values: work and responsibility. Instead of giving people the education and training they need to work, it encourages dependence. Instead of encouraging teenagers to defer parenthood and insisting that absent parents support their children, it allows both to act irresponsibly. Instead of assisting parents who are working hard to support their families, it devotes most of its resources to those who are not. The Administration will forward to Congress in late spring a detailed, comprehensive, deficit-neutral welfare reform plan. In the interim, the Administration will consult extensively on a bipartisan basis to finalize the plan and the entitlement reforms which finance it. From Welfare to Work Fundamental reform of the welfare system will require four major steps: 1. Promoting parental responsibility to help prevent the need for welfare in the first place. 2. Rewarding people who go to work by insuring that families have the tax credits, the health insurance, and the child care they need to make work pay. 3. Substituting work for welfare by providing job search, education, and training to those who need it, and expecting them to work at the end of two years. 4. Reinventing government assistance to reduce administrative bureaucracy, combat fraud and abuse, and give states greater flexibility within a system focused on work. These reforms cannot be considered in isolation. The Administration has undertaken many closely linked initiatives to spur economic growth, improve education, expand opportunity, restore public safety and rebuild a sense of community: worker training and retraining, parenting education, family preservation and support, educational reform, Head Start, National Service, Empowerment Zones, community development banks, community policing, violence prevention, and more. Welfare reform is one piece of a larger whole, but it is an essential piece. Two important steps in the Administration's welfare reform have already been taken: expansion of the Earned Income Tax Credit (EITC) as part of the Omnibus Budget Reconciliation Act of 1993; and introduction of The Health Security Act in September 1993. Both will help to make work pay, as described in more detail below. The Current Welfare System Currently, there are about 9.5 million children on Aid to Families with Dependent Children (AFDC). This is 14 percent of all children, up from 9 percent in 1970. Government at all levels spent $23 billion for this aid in 1993, and more than twice that amount when noncash benefits (like Food Stamps and Medicaid) for the same families are included. Yet, the system left most of its families still poor. In 1993, AFDC benefits for a mother with two children and no other income ranged from a low of $120 per month in Mississippi to $923 per month in Alaska. The median for all states was $367 per month. Combined with Food Stamps, the total was $652, about 70 percent of the poverty level. Worst of all, the system discourages work and marriage. Under current welfare rules, a recipient who goes to work or marries often sees little increase in income. This system serves no one well. It is anti-work; it is anti-family; and it leaves children in poverty. Promoting Parental Responsibility Poverty (especially long-term poverty) and welfare dependency are increasingly associated with growing up in one-parent families. Although most single parents do a heroic job of raising their children, the fact remains that welfare dependency could be significantly reduced if more young people delayed childbearing until they were ready to assume the responsibility of raising children. Insert chart: CHRT3B_7 Increasingly, single-parent families are headed by an unwed mother. Further, between 1983 and 1992, cases headed by unwed mothers accounted for about four-fifths of the growth in the welfare rolls. These mothers typically have little education or other resources with which to raise children. About three-fourths receive AFDC. Only one in six receives any financial help from the child's father. Given these trends, rebuilding an ethic of parental responsibility is fundamental. No one should bring a child into the world until he or she is prepared to support and nurture that child. Government does not raise children; families do. To encourage parental responsibility, the Administration's plan will: o Require absent parents to support their children by strengthening paternity establishment and collecting child support. o Reduce the number of teenagers having children through family planning and other measures. o Require unwed teens with children to live with their parents in order to receive benefits, except in exceptional circumstances. The first step in promoting parental responsibility will be to ensure that both parents support their children. Welfare reform will expect parents who go on welfare to work to support their children. Noncustodial parents should be held equally accountable. Unfortunately our current system of child support enforcement sends the opposite message. Almost two-thirds of single women with children receive little or no child support; and the gap between what absent parents could pay and what they do pay was an estimated $34 billion in 1990. Insert chart: CHRT3B_8 To improve on the current system, the Administration is considering: o A universal and simplified paternity establishment process at time of birth; o A strict requirement that mothers applying for welfare cooperate with the authorities in establishing paternity; o Periodic updating of child support orders to reflect the current income and circumstances of the noncustodial parent; o Greater penalties for nonpayment combined with more help for noncustodial parents who need education, training, or other support to stay involved in their children's lives; and o More streamlined establishment of paternity, better record-keeping at the state and national level, and other measures to insure that those who should pay, do pay. Better child support enforcement will not only add to the incomes of single-parent families but may also deter some men from fathering children they are not prepared to support. The problem of irresponsible childbearing is particularly acute among teenagers. Teenage birth rates, after dropping in the 1970s and early 1980s, have been rising since 1987. By one estimate, about 40 percent of all women will experience at least one pregnancy before age 20. Most teen mothers do not intend to get pregnant; most teen fathers do not intend to start a family. Unfortunately, the majority of the mothers end up on welfare. The Nation paid about $34 billion in 1992 to assist families begun by a teenager. To remedy this situation, the Administration will: o Encourage and support more responsible family planning; o Work with community leaders, educators, and the media to foster more responsibility; and o Experiment with programs to reduce teen pregnancy and other high risk behavior among youth, especially in distressed communities. Making Work Pay Even full-time work can leave a family poor--especially as real wages have declined significantly over the past two decades. In 1974, some 12 percent of full-time, full-year workers earned too little to keep a family of four out of poverty. By 1992, the figure was 18 percent. To support the efforts of parents to work their way off the welfare rolls, the President has already launched an expansion of the EITC. Unlike welfare, the EITC is available only for people who work. Because the EITC is refundable, an eligible family may receive any portion of the credit not needed to offset tax liability through a direct payment from the Department of the Treasury. When the expansions enacted last year are fully implemented, a parent with two children may qualify for an EITC totalling more than $3,500. Combined with the current federal minimum wage of $4.25 per hour, the maximum EITC increases the effective wage for a worker with two children to about $6.00 per hour. The expanded EITC brings such a family up to the poverty level, even if the parent is working at a low-wage job. However, we must find better ways to deliver the EITC on a timely basis throughout the year. Insert chart: CHRT3B_9 Ensuring that all Americans can count on health insurance coverage is also essential. Non-working poor families on welfare often have better coverage than working families. Enactment of the Health Security Act will end this inequity. Health reform is necessary to make work better than welfare so that no parent need sacrifice his or her children's health by going to work. With the EITC and health reform, the major missing element to make work really pay is child care. For this reason, the Administration's plan will include: o Expanded child care and Head Start for the working poor and public assistance recipients moving toward independence. o Coordinated child care programs and requirements that States ensure seamless coverage for persons who leave welfare for work. Providing Education and Training, Imposing Time Limits, and Expecting Work The Family Support Act of 1988 provided a new vision of mutual responsibility and work. Government would provide welfare recipients access to the education and training they need to find employment, and recipients would be expected to take advantage of these opportunities to move from welfare to work. This legislation created the Job Opportunities and Basic Skills (JOBS) program to deliver the services for recipients to become economically independent. The Administration's plan will build on the Family Support Act. As an architect of that effort, the President is committed to building on its vision. Unfortunately, the site visits and hearings of the President's Welfare Reform Working Group over the past year indicated that this vision is largely unrealized at the local level. The primary function of welfare offices is still writing checks while conforming to all the myriad administrative rules concerning eligibility and the calculation of benefits. The Administration seeks to transform the culture of the welfare bureaucracy and fulfill the promise of the Family Support Act. We do not need a welfare program built around "income maintenance;" we need a program built around work. The Administration's goal is to establish a welfare system in which people are asked to move toward work and independence. Welfare recipients will be required to look for work from day one. If none is available, they will enter into a social contract to help develop and then follow a plan for self-sufficiency, if the State provides the services in the plan. After two years, people still on welfare who can work but have not found a private sector job will be required to search for a job and work in community jobs to support their families while they are searching. The Administration's plan will transform the current welfare system: Expanded Access to Education and Training Services Through the JOBS Program.--The current JOBS program serves only 7 percent of adult welfare recipients. The plan will expand the JOBS program to give many more recipients the services they need to find lasting employment, and many more recipients will be required to participate. A More Integrated Education and Training System.--Under reform, the JOBS program will not be a completely separate education and training system for welfare recipients, but will provide access to, and information about new job search and placement, training and education programs, including National Service, School-to-Work, One-Stop Shopping and income-contingent student loans. The plan will also serve as a link to such existing programs as Pell grants, JTPA, and Job Corps. A Time Limit for Cash Benefits.--Limiting the length of time employable persons can receive cash assistance to two years is part of the effort to shift the welfare system from issuing checks to promoting work and self-sufficiency. The two-year time limit will guide both the recipient and welfare agency toward continuous efforts to find a job. Making Work Available to Those Who Have Reached the Time Limit.--Persons who have reached the time limit for cash assistance will have to work, preferably by finding regular work in the private sector. The goal is for participants to find lasting employment outside the program. States will likely have discretion in the work programs to achieve this end. For example, a State could subsidize short-term private sector jobs or positions in not-for-profit agencies, in the expectation that many of these positions would become permanent. Reinventing Government Assistance The current welfare system is enormously complex, with multiple programs with different rules and requirements that confuse and frustrate recipients and caseworkers alike. The welfare reform plan, in keeping with the Administration's commitment to reinvent government, will rationalize, consolidate and simplify the existing social welfare system. It will: o Establish performance measures which emphasize moving people from welfare to work, while giving States and localities flexibility to design their programs for the task. o Use technology to prevent waste, fraud and abuse. o Streamline AFDC application, budgeting and redetermination processes by simplifying and eliminating rules and reporting requirements, particularly those concerning earnings. o Make AFDC rules more consistent with those in the Food Stamp program. The above measures are a fundamental change in direction, from a system based on welfare, to support for work and family. Welfare reform means more independence, control, and security for America's families. It means government helping people to help themselves. Ultimately, it means fewer people on welfare, a more productive citizenry, and lower costs for the taxpayer. MOVING TO INDEPENDENCE: HOUSING AND THE HOMELESS The 1995 budget also includes initiatives to expand and reform low-income housing and aid to the homeless in ways that better support families and work. These proposals will redirect housing and homeless programs to complement the Administration's proposals for welfare reform. Reforming Housing Assistance for Families Housing assistance can and should support those who work at low-paying jobs or who are struggling to grow from dependency to economic independence. Too often, however, it has trapped families in poor neighborhoods and increased their dependency. Timely housing assistance, combined with other services, should instead encourage transitions. A mother or father can use a housing voucher to move to an area offering greater job opportunities, better schools for the children, and safety. A young resident of public housing can gain skills and job experience rehabilitating the apartments where he or she lives. Homeless families and individuals can have shelter and stability, appropriate transitional services, and rent subsidies, to allow them to live independently, with dignity. All this can be done with: o Faster expansion of housing assistance to help program beneficiaries live in safe neighborhoods with job opportunities; o Redirection of some family housing assistance to the homeless and those working or moving toward work to emphasize and reward transitions from dependency to independence; and o Changes in Federal program organization and administration to link programs for the homeless with existing mainstream programs to provide a "continuum of care;" The cost can be paid with careful trimming of many existing Federal housing subsidies and other money-saving reforms. Moving to Independence.--The budget redirects the Department of Housing and Urban Development's (HUD's) housing assistance for families to provide stronger support for economic transitions. The Moving to Independence initiative combines housing certificates with counseling and apartment search assistance to ensure that all certificate holders can truly choose where they will live. Some families, particularly those in high-poverty communities, may choose to move to neighborhoods where they will have more housing choices, better access to jobs, and less concern about their safety and the quality of schooling. Too many assisted tenants have been housed in distressed neighborhoods. These families pay lower rents, but lack some basic amenities: community services, safety from violence, neighbors who work and serve as positive role models for children, and access to good jobs. Experience with housing assistance in combination with support for wider apartment search suggests that it has long-term benefits for low-income families, especially the children. Metropolitan area-wide assisted housing.--In addition, the Administration proposes a three-year demonstration ($24 million in 1995) to improve social and economic opportunities for low-income families who live in highly segregated neighborhoods. Such neighborhoods are often particularly isolated from good schools, social services, and employment opportunities. This initiative would establish pilot programs in three locations around the country. Each pilot would be operated by a private non-profit organization. Each organization would be charged with expanding housing opportunities for low-income families by coordinating the region's tenant selection, assignment, and counseling services. This approach to housing assistance would reduce the concentration of families by race, ethnicity, and income and link them to opportunities for sustained self-sufficiency. Other reforms affecting families.--To emphasize that housing assistance supports transitions to independence, working families who cannot afford adequate housing will be selected ahead of similar welfare-dependent families from the waiting lists for public and other assisted housing. As working poor families increase their incomes and no longer need housing subsidies, those funds will be freed to serve additional families. As another support for economic transitions, the budget also proposes expanded use of public housing modernization and other Federal resources to create jobs for public housing residents, especially youth. Other public housing initiatives include an expanded Tenant Opportunity program to help residents organize and conduct job training, and develop businesses; and continued support for Family Investment Centers, to expand access to education and jobs. The budget also expands support for Family Self-Sufficiency Coordinators to link housing with other social services for families in transition. To meet the housing needs of families in rural areas, the budget proposes to double the amount of guaranteed loans for single-family housing and maintain direct loans at the 1994 level. These loans are for very low-, low-, and moderate-income rural households who otherwise cannot secure mortgage financing. Interest rates on the direct loans vary by recipients' income and can be as low as one percent. In 1995, the budget proposes to conform to other Federal housing standards the amount of income loan recipients contribute to their direct loan mortgage payments; recipients would pay 30 rather than 20 percent of their income. To aid rural renters, the Administration proposes to continue funding for rural housing vouchers, which received their first appropriation last year, at the 1994 level. These vouchers provide a flexible source of housing assistance, especially in areas with a surplus of rental units. Homeless Assistance Homelessness is one of the most disturbing products of the failure of society to provide adequate opportunity and care for all of its citizens. Communities, States, and the Federal Government have expanded their efforts. Annual Federal appropriations have surpassed $1 billion. Most of the funds for aid to the homeless were authorized in the 1987 Stewart B. McKinney Homeless Assistance Act--with HUD and HHS receiving the largest share of funds. To date, these responses do not appear to have substantially reduced the numbers of people with no place to call home. One problem is a lack of coordination both across Federal agencies and at the local level. Federal homeless funds often do not link with mainstream Federal programs for which the homeless may be eligible, or with other homeless programs in the locality. Providers are heroes battling on the front lines, but they cannot succeed unless programs properly diagnose the needs of the homeless, give them appropriate transitional services, and graduate them from shelters to relatively independent, stable housing. Increases in 1994.--In 1994, the Administration made homeless assistance a top priority, proposing more than $1.4 billion for assistance targeted to homeless families and individuals. Congress provided more than $1.3 billion--about 25 percent above the 1993 level. Federal Plan.--Federal assistance aims to break the cycle of existing homelessness and prevent future homelessness. To advance these goals, President Clinton signed an Executive Order on May 19, 1993, calling for the Interagency Council on the Homeless, chaired by HUD Secretary Cisneros, to develop a Federal plan to break the cycle of homelessness. This plan, which will be completed in February 1994, will review the distribution of funding and the way current programs work together. The Interagency Council is now compiling and analyzing information from Federal sources, States and localities, nonprofit providers, advocates, and homeless persons through the Domestic Policy Council. 1995 overall proposed increase.--The 1995 budget proposes more than $2.1 billion in funding for programs specifically targeted to aid homeless families and individuals--an increase of 60 percent over 1994 and almost double the 1993 appropriation. This increase is in addition to the mainstream Federal assistance provided to the homeless (e.g., through programs like Food Stamps and AFDC) and surplus Federal equipment, food and real property provided to homeless persons. For HUD alone, the budget proposes $1.76 billion, more than 85 percent over the 1994 level. Components of the HUD funding include: --$1.12 billion to reorganize the HUD McKinney Act programs. Under the proposed reorganization, funds would support activities to form a "continuum of care" to assist homeless persons and prevent future homelessness. Grant funds would initially be allocated to communities that can demonstrate a comprehensive plan to address homelessness; forge partnerships with local, private, and nonprofit providers; and improve participants' access to mainstream services and income-support programs. In subsequent years, awards may be phased out as mainstream programs take over. Some of the funds could be used for the Secretary's Innovative Homeless Initiative, which also promotes comprehensive homeless systems through local partnerships: --$514 million for 15,000 rental vouchers for five years to help previously homeless families pay the rent in private apartments that they select. These vouchers provide a vital last link of the "continuum of care" that moves families from homelessness through shelter and transitional housing to relative independence. --$130 million to continue the Emergency Food and Shelter program authorized under Title III of the McKinney Act and previously administered by FEMA. Focus on mainstream programs.--In addition to the increases in funding targeted to homeless persons, the President's budget also links homeless assistance with mainstream programs providing services and income support, to help homeless people to break the cycle of homelessness. The mainstream Job Training Partnership Act program has been modified to focus more funding on persons with the greatest need, including the homeless population. Similarly, HHS' mainstream Community Services Block Grant program, along with existing HHS targeted programs, helps states and localities to provide health and substance abuse treatment services to the homeless. Finally, HUD's reorganization of its McKinney Act programs also increases linkages with mainstream sources, with some grants initially allocated to communities that have demonstrated efforts to improve access by homeless persons to mainstream services and income-support programs. INVESTING IN KNOW HOW SCIENCE AND TECHNOLOGY ---------------------------------------------------------------------- Investing in technology is investing in America's future: a growing economy with more high-skilled, high-wage jobs for American workers; a cleaner environment ... Scientific advances are the wellspring of the technical innovations whose benefits are seen in economic growth, improved health care, and many other areas. President Bill Clinton February 1993/October 1993 ---------------------------------------------------------------------- Investment in science and technology (S&T) is essential to build a prosperous economy, create high quality jobs, improve health care and education, and maintain national security. Federal programs can play a key role in supplementing private research in areas where returns on research investments are too distant or uncertain for private firms to bear. During the Cold War era, Federal S&T programs were dominated by investments in space, defense, and basic research; civilian technology benefited primarily by serendipitous spin-off. The end of the Cold War and sharp increases in international competitive pressure on U.S. industries demand a new approach. The Administration's response was outlined in `Technology for America's Economic Growth, A New Direction to Build Economic Strength' (February, 1993), including three main goals: o Reaffirming our commitment to fundamental science, the foundation upon which all technical progress is built. o Improving the contribution of federally sponsored S&T innovation to economic growth and environmental protection by forging closer working partnerships among industry, Federal and state governments, workers, and universities. o Coordinating federally supported S&T investments across the Federal Government. The major progress made toward these goals during 1993 was reported in "Technology for Economic Growth: President's Progress Report" (November, 1993). Programs proposed for the 1995 budget are designed to sustain this momentum. S&T Highlights National Science and Technology Council (NSTC).--In responding to a key recommendation of the National Performance Review, the cabinet-level NSTC was created in November 1993 (Executive Order 12881) to coordinate Federal S&T investments and policies. While we are imposing strict limits on Federal spending to reduce our Federal budget deficit, the NSTC will ensure that taxpayers receive the maximum benefit for their investment. The Committee of Advisers on Science and Technology was established along with the NSTC to serve as a private sector advisory group to the President and the NSTC. The NSTC will spend the next year examining how to improve the integration of S&T activities in a broad range of areas, including information technology, manufacturing, health, transportation, environment, fundamental science and education. This more comprehensive review process should be ready for the 1996 budget. Research and Development (R&D) Investments.--While there are some sophisticated technologies that are not included in the Federal R&D budget (e.g., the Space Shuttle, operational weather satellites, technical information services, etc.), the R&D budget has traditionally been considered the most comprehensive summary of Federal S&T activities. The Administration is proposing $71 billion in R&D investments (excluding facilities) in 1995, a $2.5 billion or four percent increase over 1994 (Table 3B-6). Civilian R&D will increase over $1 billion or four percent to $32 billion. The combination of continued annual growth for civilian R&D, anticipated decreases in defense R&D after 1995, and the inclusion of dual-use defense R&D is likely to cause the civilian share of the R&D budget to exceed 50 percent earlier than the 1998 date predicted in the 1994 budget. Much of this increase will be focused on cost-shared and competitively selected projects that are industry-defined and industry-led (i.e., consortia, cooperative R&D, etc.). In 1995, university-based research will increase to $12 billion, a $437 million or four percent increase over 1994. University-based research continues to provide an important contribution to the creation of knowledge, technological innovation, and the training of scientists and engineers. Research Grant Overhead Payments.--The Federal Government awards over $17 billion in research grants each year to universities and other non-profit institutions, including substantial amounts (over $3 billion) for reimbursement of overhead costs. In a year in which total discretionary spending is being frozen, and government administrative costs are being aggressively reduced, it is necessary to ask universities and other non-profit institutions to participate in this restraint. Instead of a permanent cut or cap on overhead payments, the 1995 budget proposes a one year pause that instructs grantee institutions not to seek additional payments for overhead above the amounts claimed in 1994.(See the Supplemental Proposals section of the Budget Appendix for specific implementation language.) The yearlong pause will provide time for the Council of Economic Advisers, the Office of Science and Technology Policy, and the Office of Management and Budget--with advice from representatives of affected institutions--to conduct a comprehensive review with the goal of improving the incentives that govern overhead reimbursement for a wide range of federal research grantees and contractors. Putting S&T to Work for America's Future. Expand Cost-shared R&D Partnerships/Technology Transfer.--Partnerships ensure that federally sponsored research is relevant and efficiently put to use in private markets. The Federal agencies (including Defense, Energy, Health and Human Services, NASA, Transportation, EPA, and Agriculture) play a key role in building these partnerships with industry and the university community, including the use of cooperative research and development agreements (CRADAs). There will be over 3,200 CRADAs in 1995, a 453 or 16 percent increase over 1994, with public and private cash and non-cash investments exceeding $1.5 billion. The Federal agencies will also invest $865 million in 1995 on technology transfer activities, a $314 million or 57 percent increase over 1994. Expand the Commerce Department's National Institute for Standards and Technology (NIST) R&D Programs.--The Advanced Technology Program (ATP), Manufacturing Extension Partnerships (discussed latter), and in-house research on measurements, standards, data verification, and test methods form the core of the NIST activities. The $451 million budget more than doubles the ATP in 1995. The budget will support roughly 200 ATP projects, with 100 new projects in strategic program areas chosen in cooperation with industry. Funding for in-house research increases to $316 million in 1995, with major new increases in advanced manufacturing ($18 million), biotechnology ($4 million), environmental technology ($5 million), advanced materials ($17 million), information infrastructure ($38 million), international standards ($5 million), and math and science post-doctoral education. Table 3B-6. FUNDING FOR SCIENCE & TECHNOLOGY HIGHLIGHTS (Budget authority; dollars amounts in millions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Enacted Proposed 1994 1994 to to 1995 1995 ---------------------------------------------------------------------- Research & Development (R&D): Civilian: Basic........................ 11,951 12,578 12,880 +301 +2% Applied & development........ 16,384 17,770 18,621 +850 +5% -------------------------------------- Total....................... 28,335 30,349 31,500 +1,152 +4% Defense: Basic........................ 1,411 1,212 1,232 +20 +2% Applied & development........ 40,004 36,923 38,296 +1,373 +4% -------------------------------------- Total....................... 41,415 38,136 39,528 +1,393 +4% Total R&D (without facilities) 69,750 68,484 71,029 +2,544 +4% Total R&D (with facilities)... 72,478 71,073 73,045 +1,972 +3% Civilian share of R&D\1\...... 43 47 47 NA NA Defense share of R&D.......... 57 53 53 NA NA R&D by agency (without facilities): Defense...................... 38,617 35,538 36,971 +1,433 +4% Health & Human Services...... 10,336 11,033 11,484 +451 +4% National Aeronautic and Space Administration.............. 8,090 8,493 8,597 +105 +1% Energy....................... 5,827 6,054 6,052 -2 -* National Science Foundation.. 1,882 2,026 2,220 +194 +10% Agriculture.................. 1,335 1,393 1,394 +1 +*% Other........................ 3,664 3,948 4,310 +362 +9% -------------------------------------- Total R&D................... 69,750 68,484 71,029 +2,544 +4% R&D support to university researchers.................. 11,674 11,719 12,156 +437 +4% Cost-Share R&D Partnerships/Technology Transfer Technology Transfer.......... 384 551 865 +314 57% Number of CRADAs............. 2,230 2,758 3,211 +453 16% Public/Private Cash and Non-cash value of CRADA Investments................. 813 1,176 1,504 +328 28% NIST R&D programs............. 366 490 874 +384 +78% National Science Foundation... 2,734 3,018 +3,200 +182 +6% NASA's new technology investments.................. ...... 42 67 +25 +60% Health research............... 10,336 11,033 11,484 +451 +4% (National Institutes of Health)..................... 9,891 10,486 10,994 +508 +5% Human genome project: National Institutes of Health 106 129 152 +23 +18% Energy....................... 63 70 89 +19 +27% International space station... 2,262 2,104 2,121 +17 +1% Civilian industrial technologies: Manufacturing technologies... NA 1,841 2,000 +159 +9% NIST manufacturing extension partnership................. 18 30 61 +31 +103% National information infrastructure: National Telecomunications Information Administration.. ...... 26 100 +74 +285% National Technical Information Service......... 8 ...... 18 +18 +* High performance computing and communications: Defense..................... 298 341 397 +56 +16% National Science Foundation. 225 267 329 +62 +23% Energy...................... 100 123 125 +2 +2% National Aeronautics and Space Administration....... 82 113 125 +12 +11% National Institutes of Health..................... 47 58 82 +24 +42% Commerce.................... 12 29 82 +53 +183% EPA......................... 8 7 14 +7 +92% -------------------------------------- Total HPCC................. 772 938 1,154 +216 +23% Transportation: Federal Aviation Administration research..... 230 254 267 +13 +5% New generation of vehicles (Energy only)............... 107 141 175 +34 +24% Alternative fuel vehicles.... 29 44 69 +25 +57% Intelligent vehicles/highway systems..................... 155 214 289 +75 +35% Next generation high-speed rail........................ 5 4 33 +29 +725% NASA aeronautics research.... 129 287 347 +60 +21% U.S. Global Change Research Program National Aeronautics and Space Administration........ 932 1,022 1,236 214 +21% National Science Foundation.. 125 142 208 +66 +46% Energy....................... 87 93 126 +33 +35% Commerce..................... 67 63 84 +21 +34% Agriculture.................. 48 49 58 +8 +19% Environmental Protection Agency...................... 25 27 31 +4 +14% Interior..................... 38 33 33 -1 -1% Smithsonian.................. 7 7 8 * +3% Defense...................... 7 6 6 * +*% National Institutes of Health 3 3 4 * +13% Tennessee Valley Authority... * * 1 +1 +233% -------------------------------------- Total USGCRP................ 1,338 1,446 1,794 +348 +24% ---------------------------------------------------------------------- \1\Includes Defense Dual-Use Activities. *Less than $500 thousand. NA: Not applicable. ---------------------------------------------------------------------- National Science Foundation (NSF).--The budget proposes $3.2 billion for NSF, a $182 million or six percent increase over 1994. The NSF supports peer-reviewed, university-based science and engineering research, including interagency research efforts in global change research, high performance computing, and manufacturing. NASA's New Technology Investments (NTI).--The budget proposes $67 million for the second year of the NASA NTI program (a $25 million or 60 percent increase over 1994). The NTI is focused on industry-led projects, including industry-defined advanced technologies and small satellite technologies Health Research.--The budget proposes roughly $11.5 billion for health-related R&D activities funded through the Department of Health and Human Services, a $451 million or four percent increase over 1994. Of these funds, roughly $11 billion is for the National Institutes of Health, $508 million or 5 percent over 1994. NIH supports biomedical and behavioral research. Human Genome Project.--The budget proposes 241 million in Energy and NIH, a $42 million or 21 percent increase over 1994, for this multi-year effort to decode the information locked in the chemical building blocks that form human genetic inheritance. New Facilities for Fundamental Science and Applied Research.--The budget includes $40 million to begin constructing the Advanced Neutron Source (ANS) research reactor project at the Oak Ridge National Lab, a $23 million increase over 1994. In addition, $116 million is included for the B-meson research facility at Stanford ($46 million) and the Tokamak Physics Experiment (TPX) facility at Princeton ($70 million). The ANS will replace aging neutron sources and supports research on disease and human genetics, high-temperature superconductivity, nuclear medicine, and advanced materials. The B-meson facility will explore the dynamics of matter in the Universe's earliest moments, a central question in science. The TPX will advance the development of an economically attractive fusion energy reactor. International Space Station.--The budget includes $2.1 billion for the redesigned space station and Russian participation. The space station will be a premier orbital research facility for life science and materials research. NASA also plans a number of Shuttle flights to the Russian Mir space station. This collaborative project on the Mir will provide valuable information for the construction and operation of the international space station. Moving Manufacturing Technologies to the Global Marketplace. Accelerate Investments in Civilian Technologies.--Federal programs aimed at increasing competitiveness of civilian industries while improving the environment will be coordinated by the NSTC's Committee on Civilian Industrial Technology. Working closely with the private sector, the Committee will develop a government-wide plan for improving manufacturing technologies that are broadly applicable to U.S. industries and of special importance to our nation's economy. In 1995, nine agencies propose to spend over $2 billion for R&D in manufacturing technologies, a $159 million or 9 percent increase over 1994. Defense, Energy, Commerce, NASA, and NSF are the primary contributors. Deployment of Civilian Industrial Technologies.--The Federal Government's effort to deploy technologies includes NIST's Manufacturing Extension Partnerships (MEP). The budget funds NIST's MEP at $61 million, a $31 million increase or doubling over 1994. This partnership will help small- and medium-sized manufacturers to tap into regional and national sources of information, knowledge, and assistance in the use of modern manufacturing and production technologies. The Administration anticipates more than 100 manufacturing extension centers by 1997. The Technology Reinvestment Project in Defense and programs in industrial extension in Energy will complement the NIST MEP program. Realizing the Opportunities of the Information Age Improve the National Information Infrastructure (NII).--All Americans have a stake in the construction of the communications network, computers, databases, and consumer electronic products that constitute the NII. While the private sector will build the NII, the Federal Government has a key role to play by investing in research and advanced communications applications, and by becoming a leading-edge adopter of information technologies. Federal NII projects are coordinated by the Information Infrastructure Task Force chaired by Commerce. In January, the Vice President challenged the private sector to connect all our classrooms, libraries, hospitals and clinics to the NII by 2000. High Performance Computing and Communications (HPCC).--The HPCC, which will become part of the NSTC Committee on Information and Communications, funds research programs to create more powerful computers, faster computer networks, and more sophisticated software; and to address complex scientific and engineering computing problems known as `Grand Challenges,' such as weather forecasting, designing life-saving drugs, and modeling aircraft. For 1995, the budget proposes $1.2 billion for HPCC, a $216 million or 23 percent increase over 1994. The HPCC program also includes a component called Information Infrastructure Technologies and Application (IITA) which applies HPCC technologies in a broad range of applications with large societal impacts, including health care, education, libraries, and manufacturing. National Telecommunications and Information Administration's (NTIA) Networking Pilot and Demonstration Projects.--The NTIA funds competitively selected grants to connect schools, clinics, hospitals, libraries, and other non-profit entities to existing computer networks. The budget proposes $100 million for this activity, a $74 million or 285 percent increase over 1994. National Technical Information Service (NTIS).--The NTIS proposes a one-time $18 million pool of investment capital to help support the electronic dissemination of data generated by the Federal Government. Transportation and the Economy A transportation system that can move people, goods, and services quickly and efficiently needs technologies to minimize the maintenance of existing transportation infrastructure, and lead to the next generation of transportation modes. Federal Aviation Administration (FAA) Research, Engineering, and Development (RE&D).--The budget includes $267 million for FAA RE&D, a five percent increase above 1994. FAA conducts research in improving the safety, security, productivity, and capacity of the air traffic control system, including the use of satellite-based navigation and communications technologies. Partnership for a New Generation of Vehicles.--President Clinton, Vice President Gore, and the CEOs of General Motors, Ford, and Chrysler agreed to an ambitious set of research goals to enhance the competitiveness of the U.S. automobile industry and to improve the environment. This agreement, which involves Commerce, Defense, Energy, Transportation, NASA, EPA, and NSF, will target advanced manufacturing processes, technologies for near-term improvements in fuel economy, and up to three-times improvement in fuel economy in about a decade. While the interagency budget will be fully developed during 1994, Energy alone is proposing $175 million for these activities, a 24 percent increase over 1994. Energy's efforts focus on advanced lightweight and ceramic materials, fuel cells, more efficient engines, electric vehicles, and hybrid vehicles. Another $69 million is proposed in 1995 by Energy for alternative fuel vehicle development and purchases of alternative fuel vehicles for the Federal fleet, a $25 million or 57 percent increase over 1994. Intelligent Vehicles/Highway Systems.--The Department of Transportation (DOT) is conducting research on improving highway safety, increasing highway automation and productivity. The 1995 budget proposes $289 million, an increase of $75 million or 35 percent over 1994. Next Generation High-Speed Rail.--The objective of this DOT program is to promote private industry investments in futuristic, cost-effective rail technologies through the use of existing infrastructure. The program will be funded at $33 million in 1995, a $29 million increase over 1994. Where possible, the program will be administered in conjunction with Commerce's Advanced Technology Program and Defense's Technology Reinvestment Project. NASA Aeronautics Research.--The aviation industry employs nearly 1 million people, generates almost $100 billion in annual sales, and produces tens of billions of dollars in exports. In collaboration with industry, NASA is sponsoring high-speed research (HSR), advanced subsonic technologies (AST), and the HPCC activities mentioned above. Industry concepts envision a high-speed civil transport that could carry 300 people overseas at Mach 2.4 (arriving in roughly half the current subsonic transport time and at comparable subsonic fares). The AST program will increase subsonic aircraft productivity and lower operating costs through the development of lightweight engines and airframes, optical flight systems, and integrated wing designs, and other technologies. For 1995, the budget proposes $347 million for HSR and AST, a $60 million or 21 percent increase over 1994. In addition, most of the $74 million of 1994 funding is available in 1995 for the definition of requirements and design, in collaboration with industry, for new or drastically modified U.S. wind tunnels. Energy and Environment: New S&T for Environmentally-Safe Economic Growth Energy and environment S&T activities can help balance economical growth with lower energy use and environmental protection. The Administration is developing a comprehensive energy and environment approach, including the U.S. Global Change Research Program to improve knowledge of our planet's climate, the Climate Change National Action Plan to curb greenhouse emissions, and the development of environmental and energy conservation technologies (for more details, see the Investing in the Quality of Life section). Defense Technology: The Payoffs for Economic and Military Security For 1995, $9.3 billion is proposed for defense S&T programs. This includes $4.2 billion for basic and applied research, as well as $5.1 billion for advanced technologies. These efforts form the foundation for advanced military capabilities--such as stealth aircraft and precision weapons convincingly demonstrated during Operation Desert Storm. In addition, in the post-Cold War era defense technology investments can provide for national security requirements and contribute to economic growth. In 1995, Defense dual-use S&T activities will total $2.1 billion, which includes both established programs and initiatives such as the Technology Reinvestment Project, an effort jointly funded by the Federal Government and private sources (for more details, see the next section on Defense Reinvestment and Conversion). DEFENSE REINVESTMENT AND CONVERSION ---------------------------------------------------------------------- Clearly, defense conversion can be done and can be done well, making change our friend and not our enemy. But in order to do it we must act, act decisively, act intelligently and not simply react years after the cuts occur. President Bill Clinton March 11, 1993 ---------------------------------------------------------------------- The end of the Cold War provides an opportunity to reinvest some defense industrial, technological and work force capabilities to contribute to our Nation's economic competitiveness: those who helped us win the Cold War can help us compete globally. The Administration's five-year, multi-agency Defense Reinvestment and Conversion program, unveiled in March 1993, capitalizes on this opportunity through the President's investment priorities of worker retraining, community redevelopment, and advanced technology investments. For workers, the Department of Labor's (DOL) workforce security initiative provides retraining and job search assistance. In 1995, an estimated $195 million of the overall initiative could be expected to be used to assist displaced defense workers. SWAT teams of labor program experts respond to layoff announcements or base closures to provide quick-reaction job-search services and assistance information. For Department of Defense (DOD) civilian and military personnel, the conversion program provides funding for separation and transition programs, including the Troops-to-Teachers program which provides financial incentives to local school districts to hire separating military personnel. DOD also provides early retirement incentives to manage the personnel drawdown and ease the transition for those leaving military service. For communities, DOD's Office of Economic Adjustment (OEA) is often the first Federal agency on the scene after the announcement of intended military base closures or defense contract cutbacks. The $39 million requested in 1995 ensures access to redevelopment and diversification planning grants. The Department of Commerce's Economic Development Administration (EDA) funds long-range economic planning, construction of infrastructure and development facilities, and management and technical assistance. For 1995, $140 million is requested for EDA's defense conversion activities, a $60 million increase over 1994. In response to the July 1993 round of military base closure announcements, the Administration developed a five-point plan for revitalizing affected communities. The plan, distinct from the overall conversion program, promotes redevelopment through the transfer of base property to communities at low or no cost, rapid environmental cleanup, and improved access to Federal programs and funding. For industry, the defense conversion program reflects a two-pronged strategy: invest in civilian high-technology conversion opportunities for defense firms, and promote dual-use technologies that have both a commercial and military application. Table 3B-7. DEFENSE REINVESTMENT AND CONVERSION\1\ (Budget authority in millions of dollars) -------------------------------------------------------------------------------- Proposed Total 1993 1994 ---------------------- ------- Actual Estimate 1995 1996 1997 1993-97 -------------------------------------------------------------------------------- Department of Defense Personnel Assistance and Community Support........ 1,020 1,265 1,192 \2\1,192 \2\1,192 5,861 Department of Energy Worker and Community Transition Program....... 92 200 125 100 100 617 Department of Labor Workforce Security Program.................. \3\ \4\125 \4\195 \4\195 \4\195 710 Department of Commerce Community Diversification Assistance (EDA)......... \5\ 80 140 140 140 500 ---------------------------------------------------- Total: Worker and Community Assistance Programs................ 1,112 1,670 1,652 1,627 1,627 7,688 Department of Defense Dual-Use Technology...... 882 1,441 1,429 1,454 1,479 6,685 Technology Reinvestment Project (TRP)........... \6\465 554 625 650 675 2,969 Other Dual-use Initiatives............. 417 887 804 \2\804 \2\804 3,716 New Federal High Technology Investments (Conversion Opportunities)\7\........ ....... 907 1,734 2,054 2,444 7,139 Other Industry Assistance Programs................. ....... \8\50 \8\50 ....... ....... 100 ---------------------------------------------------- Grand total: Programs that will assist defense workers, communities and firms.. 1,994 4,068 4,865 5,135 5,550 21,612 -------------------------------------------------------------------------------- \1\This program reflects funding above 1993 levels plus that portion of existing programs re-directed to conversion efforts. \2\This is the 1995 level. Specific estimates for 1996 and 1997 are not yet available. \3\$75 million was transferred in 1993 from the Department of Defense to the Department of Labor. \4\This is the portion of the overall investment increase that could be expected to be used to assist displaced defense workers. \5\In addition, $80 million was transferred in 1993 from the Department of Defense. \6\In addition to $465 million of TRP funding, the 1993 TRP solicitation included $7 million in separately budgeted Small Business Innovative Research funds for a total of $472 million. \7\This includes investment programs that provide direct conversion opportunities (e.g., NASA's aeronautics initiative) and 50 percent of programs that provide some conversion opportunities (e.g., Department of Commerce program for Information Highways.) \8\ This reflects the National Shipbuilding Initiative which the Congress funded in 1994 in the defense budget. Funding for 1995 loan subsidies is provided in the Department of Transportation budget. -------------------------------------------------------------------------------- Civilian Technology Investment. The multi-agency conversion program provides more than $7 billion over five years for civilian high-technology investments. For example, NASA's aeronautics initiative helps defense firms and workers use defense expertise in civilian aircraft technology development. The Department of Commerce's Information Highways use defense-related software and hardware. These investments leverage the talents and resources of defense workers and firms, diversify the economy, and build overall competitiveness. Dual-Use Technologies. The defense technologies that make us the strongest military power can also promote industrial competitiveness. At the same time, dual-use technology increases national security because the unprecedented advances in civilian technology benefit military systems. For 1995, the defense conversion program provides $1.4 billion for dual-use programs including the Technology Reinvestment Project (TRP), a multi-agency effort administered by DOD's Advanced Research Projects Agency to promote commercial-military technology integration. 1995 funding for the TRP has been increased to $625 million, over $70 million more than the 1994 level. Coordination of the Defense Reinvestment and Conversion program is within the Executive Office of the President, to ensure that resources are delivered effectively, fairly and in keeping with the goals of the program. Funding. As shown in Table 3B-7, the conversion program brings together activities from across the Federal Government. In almost all cases, increased funding has been requested for 1995. These increases, when combined with additional 1993 and 1994 spending in key conversion programs, bring the defense conversion program to about $22 billion over five years--$2 billion over the $20 billion level announced in March 1993. INVESTING IN PHYSICAL CAPITAL IMPROVING THE NATION'S INFRASTRUCTURE ---------------------------------------------------------------------- To build a twenty-first century economy, America must revive a nineteenth century habit--investing in the common, national economic resources that enable every person and every firm to create wealth and value. The only foundation for prospering in the global economy is investing in ourselves. President Bill Clinton ---------------------------------------------------------------------- Americans have come to expect public infrastructure investments that are safe, dependable, and well maintained. Investments in transportation, water resources, and the environment: o promote growth of production, employment, productivity, and living standards; o make the Nation more competitive in the world economy; o contribute to a clean environment; and o create jobs. This Administration is committed to increasing funding to improve the infrastructure and to targeting resources to projects that provide the greatest benefits. Therefore, this budget: o fully funds core highway investments at the congressionally authorized level, but eliminates funding for selected so-called "demonstration projects"; o increases formula capital grants for mass transit and proposes an urban congestion initiative, but waits for a revised evaluation process to fund additional discretionary "new starts;" o increases funds for air traffic control improvements, and maintains the current level of airport grants; and o increases funds for water treatment and supply facilities, and funds ongoing water resources development projects. The 1995 budget proposes $34.4 billion for infrastructure spending. (See the summary Table 3B-8 below and the detailed Table 3B-9 at the end of this section.) This is $0.5 billion, or 2 percent, more than proposed for 1994. Chart 3B-10 displays the percent of 1994 spending for types of infrastructure. Highway spending accounts for 60 percent of the total. Table 3B-8. SUMMARY OF INFRASTRUCTURE INVESTMENT (Discretionary program level; dollar amounts in billions) ---------------------------------------------------------------------- Dollar Percent 1993 1994 1995 Change: Change: Actual Pro- Pro- 1994 1994 to posed\1\ posed to 1995 1995 ---------------------------------------------------------------------- Highways...................... 18.0 20.3 20.3 -* -*% Other Transportation.......... 7.1 7.5 8.3 +0.7 +10% Water Treatment and Supply.... 3.1 3.1 3.3 +0.3 +9% Water Resources Development... 2.2 2.1 1.6 -0.5 -22% Other Infrastructure Investment................... 0.8 0.9 0.9 -- -- -------------------------------------- Total Infrastructure........ 31.3 33.9 34.4 +0.5 +2% ---------------------------------------------------------------------- Note: Program level is budget authority, obligations, or obligation limitation. *$50 million or less or 0.5 percent or less. \1\Includes proposed supplementals and rescissions for 1994. ---------------------------------------------------------------------- Insert chart: CHT3B_10 Federal, State, and local governments all have important roles in infrastructure investment. Infrastructure investment by all levels of government totaled $65.9 billion in 1990. State and local governments financed $40.2 billion or 61 percent of this amount (according to a recent study by the Congressional Budget Office (CBO); latest data available). The Federal Government financed the remaining $25.7 billion, of which $21.4 billion was grants to State and local governments. In order to improve the Nation's infrastructure, the Administration seeks not only greater investment, but also more effective investment. Toward this end, the President recently issued an Executive Order setting forth principles for Federal infrastructure investments. The Order instructs agencies to conduct systematic economic analysis of these investments. Because the benefits from infrastructure facilities depend in part on how well they are managed, the Order also requires periodic reviews of management practices, including operation and maintenance activities, contracting practices, and pricing policies. Economic Growth.--Many recent studies (such as How Federal Spending for Infrastructure and Other Public Investments Affects the Economy, CBO, 1991) have documented the important contribution of infrastructure investment to economic growth. Transportation and other infrastructure systems can reduce costs and increase productivity, helping the private sector compete in the international arena. However, public investment financed at the expense of more productive private investment can hinder economic growth. Thus, increased public investment is important, but only the most effective investments merit funding, and there must be a balance between public and private investment. Clean Environment.--Selective infrastructure investments also protect the environment. Because pollution crosses State lines, there is an important Federal role in investments in water and wastewater treatment systems. Job Creation.--Infrastructure investment also contributes to job creation. Estimates indicate that $1 billion of Federal highway construction generates as many as 26,000 jobs and, by increasing the productivity and competitiveness of the economy generally, aids job creation and retention in the private sector. Addressing Infrastructure Problems in the 1995 Budget Highways The Administration proposes full funding of the Intermodal Surface Transportation Efficiency Act (ISTEA) authorized level for the core highway programs, which are the categorical grants distributed to the States under the Federal-aid highway programs. These grants help finance the preservation of 900,000 miles of major highways, including the 43,000 miles of the Interstate Highway System. Individual projects are selected by the States. For these core programs, the Administration requests $19.8 billion in budgetary resources for 1995, $0.7 billion or 4 percent more than in 1994. This funding permits the States to address a wide range of priorities from Interstate preservation to congestion mitigation and air quality improvement. Full funding also permits the States to take maximum advantage of the flexibility provisions of ISTEA. ISTEA provides States the discretion to transfer funding between highway and transit uses. The Administration has submitted to Congress recommendations for the National Highway System. The proposed system includes nearly 159,000 miles of Interstate highways, major arterials and defense support roads, and key corridors. If enacted as proposed, the System would include highways that carry about 40 percent of total vehicle miles travelled and 75 percent of interstate truck traffic. The National Highway System will provide the focus for major State highway investment decisions. Elimination of Funding for Low Priority Highway Projects.--To "free up" limited funding for the core highway programs, the Administration pr