<DOC> [109 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:30092.wais] S. Hrg. 109-908 NOMINATION OF STEPHEN S. McMILLIN ======================================================================= HEARING before the COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS SECOND SESSION ON THE NOMINATION OF STEPHEN S. McMILLIN TO BE DEPUTY DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET __________ JULY 13, 2006 __________ Available via http://www.access.gpo.gov/congress/senate Printed for the use of the Committee on Homeland Security and Governmental Affairs U.S. GOVERNMENT PRINTING OFFICE 30-092 WASHINGTON : 2007 _____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800 Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001 COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS SUSAN M. COLLINS, Maine, Chairman TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas JOHN W. WARNER, Virginia Michael D. Bopp, Staff Director and Chief Counsel Jennifer A. Hemingway, Professional Staff Member Michael L. Alexander, Minority Staff Director Adam R. Sedgewick, Minority Professional Staff Member Trina Driessnack Tyrer, Chief Clerk C O N T E N T S ------ Opening statements: Page Senator Collins.............................................. 1 Senator Bennett.............................................. 7 Prepared statements: Senator Lieberman............................................ 11 Senator Stevens.............................................. 12 WITNESS Thursday, July 13, 2006 Stephen S. McMillin to be Deputy Director, Office of Management and Budget: Testimony.................................................... 3 Prepared statement........................................... 13 Biographical and professional information.................... 15 Responses to pre-hearing questions........................... 20 Letter from U.S. Office of Government Ethics................. 49 Responses to post-hearing questions from Senator Collins..... 50 Responses to post-hearing questions from Senator Lieberman... 54 NOMINATION OF STEPHEN S. MCMILLIN ---------- THURSDAY, JULY 13, 2006 U.S. Senate, Committee on Homeland Security and Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 4:18 p.m., in room 342, Dirksen Senate Office Building, Hon. Susan M. Collins, Chairman of the Committee, presiding. Present: Senators Collins and Bennett. OPENING STATEMENT OF CHAIRMAN COLLINS Chairman Collins. The Committee will come to order. First, let me apologize to the nominee and those present today for the long delay in convening this hearing. Just as we were about to begin the hearing, the Senate began a series of roll call votes. The fourth one is underway right now and that is the cause of the delay. But rather than postpone the hearing to next week, I thought it was important that we try to complete it today, so my apologies to the nominee. Today, the Committee will consider the nomination of Steve McMillin to be the Deputy Director of the Office of Management and Budget (OMB). A key mission of the OMB is to assist the President in preparing the Federal budget and to oversee its execution by Executive Branch agencies. In carrying out this mission, OMB evaluates the effectiveness of the Agency programs, assesses competing funding demands, and sets priorities. The Deputy Director plays a central role in carrying out these missions. This is a demanding job at any time. It is especially demanding in a time of spending imperatives and revenue constraints. Despite the strong growth in Federal revenues this year, the Federal budget remains under considerable pressure. Some of this pressure can be attributed to the war on terrorism and to unprecedented natural disasters, like Hurricane Katrina. But even without these factors, our Nation faces an ongoing structural deficit that will become an increasing challenge in the coming years. While the Administration's latest estimates are that the Federal deficit will decline to $127 billion by the year 2011, total debt is expected to increase to more than $11 trillion that same year. As alarming as this figure is, this level of debt will be reached even before the retirement of much of the baby-boom generation, which will present our Nation with its most serious challenge yet in funding Social Security, Medicare, and other entitlement programs. Our Nation's economy has always shown a remarkable ability to absorb shocks and to overcome even the gravest of challenges. The growth we have seen since the attacks on our country on September 11 is a striking demonstration of this resiliency. That attack deepened the economic downturn we were experiencing at the time, but since the recovery began, our economy has added 5.3 million jobs, 2 million in the past year alone. The strong growth we are now experiencing is yet another sign of the fundamental health of our economy. Earlier this week, the Administration predicted that by the end of 2006, the GDP will expand by 3.5 percent, above the historical average, and unemployment will fall to 4.7 percent, below the historical average. This growth has boosted tax revenues by nearly $250 billion above last year's levels, helping to produce a deficit considerably smaller than the Administration projected just 6 months ago--good news indeed. While this is excellent news, our long-term forecasts remain clouded by the implications of the retirement of the baby-boom generation. We must be mindful that the slightest slowdown in our economic growth rate can present us with an even greater budget challenge than we are predicting today. Given all the extraordinary budget issues we face, never before has it been more important to have experienced, competent, dedicated leadership at OMB. OMB has able leaders in Rob Portman and Clay Johnson. It is important that this Deputy Director position is filled with a similarly strong candidate. Our nominee, I am pleased to say, appears to have the experience and qualifications to be an effective deputy. Since November 2005, Steve McMillin has served as the Deputy Assistant to the President and Advisor to the Chief of Staff. Before joining the White House, he served as Associate Director for General Government Programs for OMB. Prior to joining the Administration, Mr. McMillin served on the staff of the Senate Committee on Banking, Housing, and Urban Affairs for 3 years and on the staff of Senator Phil Gramm for 9 years. I should add that Senator Gramm called me personally to indicate his support for this nominee, describing him as ``brilliant and principled,'' high praise, indeed. I welcome Mr. McMillin to the Committee, and I look forward to his testimony and answers to the questions today. I know that Senator Hutchison hoped to be here to introduce the nominee. Because of the unexpected votes this afternoon, she is unable to join us at this time, but her endorsement does carry great weight with the Committee. Mr. McMillin has filed the responses to a biographical and financial questionnaire, answered pre-hearing questions submitted by the Committee, and has had his financial statements reviewed by the Office of Government Ethics. Without objection, this information will be made part of the hearing record, with the exception of the financial data, which are on file and available for public inspection in the Committee's offices. Our Committee rules require that all witnesses at nomination hearings give their testimony under oath, so Mr. McMillin, if you will please stand and raise your right hand so I can administer the oath. Do you swear that the testimony you are about to give will be the truth, the whole truth, and nothing but the truth, so help you, God? Mr. McMillin. I do. Chairman Collins. Please be seated. Mr. McMillin, it looks to me as if you have family members present, and I would invite you to introduce them to the Committee at this time. TESTIMONY OF STEPHEN S. McMILLIN,\1\ TO BE DEPUTY DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET Mr. McMillin. Thank you, Madam Chairman. First, my wife, Dawn McMillin. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. McMillin appears in the Appendix on page 13. --------------------------------------------------------------------------- Chairman Collins. Hello. Mr. McMillin. And then our two sons, Spencer and Christian. Chairman Collins. We want to particularly thank the boys for their patience. I am sure it was hard waiting almost 2 hours to see your father, but this is a very important position that the President has selected him for, so that is a pretty big deal, and we are glad to have you here. We welcome your wife, as well. Mr. McMillin. We made quite a few paper airplanes downstairs. [Laughter.] Chairman Collins. Mr. McMillin, I would invite you to proceed with your statement. Mr. McMillin. Thank you, Madam Chairman, and thank you for recognizing my family. Obviously, those of us in public service couldn't do the things we do without their help, love, and support. I am forever in their debt for all they have done for me in the past and all they will do for me during my time at OMB. I am also grateful that Senator Hutchison was willing to come and introduce me before the Committee. Unfortunately, she couldn't make it, but I spent enough time here in the Senate to know that predicting votes and keeping a schedule in the afternoon is sometimes a bit of a challenge, but I thank you for pressing ahead with the hearing nevertheless. Chairman Collins, I want to thank you, Senator Lieberman, who also could not attend, and the Members of the Committee for the opportunity to appear today. If I am confirmed as Deputy Director of OMB, I will be assisting Director Portman in dealing with many challenging issues facing the Administration and the Congress. OMB has a unique role in American Government, with responsibilities that cover a broad range of policy, fiscal, and management issues. OMB's most visible role is the preparation of the President's annual budget request, but throughout the year, OMB supports the President and his Administration in a variety of ways. If confirmed, I will work closely with Members of Congress and this Committee from both parties to ensure that we are addressing the tough issues on behalf of the American people and to ensure that their tax dollars are spent wisely. As you are aware, Madam Chairman, I began my government service here in the Senate many years ago, serving as an aide to Senator Phil Gramm and to the Senate Banking Committee. In my nearly 12 years of service, I developed a deep love and respect for the history, traditions, and principles embodied in this great institution. In the Senate, everyone's opinion counts. Everyone has a right to be heard, sometimes to be heard at great length. And everyone has a right to put forward their ideas and have them considered by their colleagues. This is a reflection of the fact that no one person, Administration, Committee, or party has a monopoly on wisdom or good ideas, and it is through dialogue and working together that truly great achievements are often possible. I know this Committee is particularly concerned with many of the management issues faced by OMB. In my view, good management and responsible budgeting are inseparable. When I first joined OMB in late 2001 as an Associate Director, I was struck by the strong concern and emphasis placed on management issues throughout the Administration. If confirmed, I look forward to working with the Members of this Committee to ensure continued progress on the President's management agenda and the execution of OMB's important management responsibilities. Madam Chairman, you made reference to the new figures released earlier this week through the mid-session review, some of the strong economic performance we have seen lately. I won't repeat all of those facts. I will observe, as you have, that to make continued progress on this deficit, we need to continue the policies that helped create the strong economic performance and we need to continue our combined efforts to restrain spending. Working together, Congress and the President have reduced the growth of non-discretionary spending every year the President has been in office, and last year, Congress passed bills that actually cut this type of spending. And earlier this year, Congress passed the first spending reconciliation bill in nearly a decade. In the near term, budget process reforms and tools like the line-item veto can help us control spending growth, eliminate wasteful spending items, and improve accountability. I am encouraged that the House has already passed the line-item veto with a strong bipartisan vote, and that the Senate is actively engaged in considering budget process reform, including the line-item veto. In the long term, as you mentioned, our major entitlement programs are projected to grow faster than inflation, faster than GDP, and faster than our economy's ability to sustain them. Millions of our citizens rely on these important programs, and we have a responsibility to preserve them for future generations. To do so will require sound and innovative reforms, and if confirmed, I would welcome your input, that of your colleagues, and your advice on how we can best achieve them. Again, I appreciate the Committee's consideration of my nomination. I look forward to answering any questions you may have. Chairman Collins. Thank you for your statement. I am going to begin my questioning this afternoon with three standard questions that we ask of all nominees. First, is there anything you are aware of in your background which might present a conflict of interest with the duties of the office for which you have been nominated? Mr. McMillin. Madam Chairman, as I earlier informed the Committee in writing, due to my wife's employment with American Airlines, if confirmed, I would recuse myself as appropriate from matters dealing with American. Other than that, there are no such issues. Chairman Collins. Thank you. Second, do you know of anything, personal or otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities of this office? Mr. McMillin. No. Chairman Collins. Third, do you agree without reservation to respond to any reasonable summons to appear and testify before any duly constituted Committee of Congress if you are confirmed? Mr. McMillin. Yes. Chairman Collins. I would now like to turn to some policy issues. I have had the opportunity to meet with you previously. I will try not to duplicate all of those questions. I want to talk to you this afternoon about the role that OMB could play to help cut down on the incidence of waste, fraud, and abuse in the Federal Government. This Committee has held many oversight hearings that have documented hundreds of millions of dollars--in the case of Hurricane Katrina, over $2 billion in wasted funds, whether the waste was due to outright fraud or whether it was poor contracting decisions that caused the taxpayers to pay more than they should for goods and services. What do you see as OMB's role in helping to curb the wasteful spending of taxpayer dollars? Mr. McMillin. Madam Chairman, I believe one of OMB's most critical functions is to be the watchdog of the Federal Government on those types of questions. I believe that one of the best things OMB can do in leading efforts to deal with waste, fraud, and abuse is to ensure that government-wide, we improve the quality and capability of the financial control systems we have at our agencies. Many times, and I think Hurricane Katrina is an excellent example, the relative lack of sophistication of those systems has made it difficult for CFOs and those responsible in the agencies to get a good feel for where the dollars are going and whether they are being obligated in an appropriate fashion until it is too late. Second, the Deputy Director of Management plays a critical role as the head of the IG community across the agencies. It is very easy, I have learned, in the Executive Branch to come to a view that an IG perhaps is not part of the team--someone who is perhaps antagonistic to the agency. I think it is a mistake to fall into that kind of trap. If you are going to have an independent IG community, clearly, they are going to need to be able to speak their minds freely on occasion, criticize the leadership of our agencies. We need to recognize that they have important duties to perform. They have a perspective and expertise that the folks charged with running the programs themselves don't have. I have seen a number of examples in various agencies where the IG has been seen as a resource who can help the agency perform better, not just in terms of financial management and dealing with waste, fraud, and abuse, but also in exploring the effectiveness of programs and making sure that they can achieve better results on behalf of the American people. Chairman Collins. What do you see as the relationship between the Deputy Director and the Deputy Director for Management? Do you see your role as being exclusively on the budget side of OMB or also as having responsibility for some of the management of the Executive Branch--management policies, I should say? Mr. McMillin. I view the role of the Deputy Director as a true deputy for the entire agency. That means that, if confirmed, I would need to be attuned to not just the budget and policy-related issues, but also the entire scope of OMB's management responsibilities and how those are integrated with the budget and policy side. Obviously, the Congress in creating the Deputy Director for Management position wanted to have a senior person dedicated to those questions full time, and certainly Clay Johnson is a very effective and capable Deputy Director for Management, and like any manager in any organization, I think Director Portman and I, if confirmed, will continue to look to Mr. Johnson to provide the leadership in that area, but certainly not to simply cede responsibility or just leave him off unattended to the side. The issues that Clay is responsible for are very much the responsibility of the Deputy Director and the Director, as well. Chairman Collins. Every 2 years, the Government Accountability Office issues a list of programs or systems in the Federal Government that it views as being at high risk. By high risk, the GAO means that these programs or systems are either at high risk of failing or they are excessively vulnerable to waste, fraud, and abuse. Some of the systems, and programs have been on the list for a decade. What do you think OMB's role ought to be when it comes to improving the performance and reducing the vulnerability of programs or systems on the high-risk list? Mr. McMillin. I think there is an opportunity for OMB to form a partnership of sorts with the GAO on addressing programs on the high-risk list. GAO is another good example of an agency with a very important job to do, where it is important that we not view criticism as antagonism, but rather an opportunity to understand the challenges we face in some of these difficult programs and find some new ideas for solutions. I personally would hate to see an Executive Branch that was so timid that we didn't take on a few high-risk projects from time to time. It is certainly helpful to ensure that both GAO and OMB provide a heightened level of focus on the implementation of those programs and systems and it requires the input of a variety of things that OMB can bring to the table. In some cases, that means using the statutory management offices as a resource to share best practices with some of the agencies that are working on these systems. In some cases, it means the budget side of the House has got to enforce some discipline when the planning or execution of a program is not proceeding as it should be. One of the worst things we can do, having identified a high-risk program, is to basically continue pouring money into it, hoping that will solve the problems when we may or may not have the right plans and management oversight in place to make sure that they are a success. Chairman Collins. I would really encourage you to tackle that list. It is unacceptable to have programs and systems listed year after year on the high-risk list, to have GAO point to these programs as being at risk of failure or excessively vulnerable to waste, fraud, and abuse, and yet no one does anything to improve the management of these programs. I think that is a really obvious list to start with. This Committee has held hearings on some of the programs to try to get the attention of agency leadership. But I really believe OMB could play a critical role in helping us to get programs off the high-risk list due to improved management. Mr. McMillin. That is excellent advice. Chairman Collins. Senator Bennett. OPENING STATEMENT OF SENATOR BENNETT Senator Bennett. Thank you very much, Madam Chairman. I thought we would have a bigger attendance after the vote. I came down before the vote and found out it was postponed. I am old enough, Mr. McMillin, to remember when it was the Bureau of the Budget, and it was during the Nixon Administration that it got renamed the Office of Management and Budget, but the ``M'' has been honored in the breach and the ``B'' has continued to dominate. The change of name hasn't changed the function nearly as much as perhaps it should. I simply add my voice to that of the Chairman to say the more attention we can pay to the management side, the ``M'' in OMB, and make that name change a reality--now I am overstating the case, but we always do that in Congress. We are in the business of overstating. I do recognize that there are a lot of good things that have gone on on the management side, but I think the Chairman's emphasis on focusing on management and not just the creation of a budget is very well placed. I would encourage you in your position to do what you can to look at the management challenges. I have been a supporter of the idea that we have a 2-year budget, which would mean you would have more time. It would probably mean we would have a few more supplementals, but it would presumably mean you would have more time in a 2-year congressional cycle to focus on some of these management issues rather than being constantly consumed with having to put together next year's budget. I congratulate you on your willingness to serve. These are not glamorous kinds of positions, but they are absolutely vital to the function of government, and we are grateful to you for your willingness to accept this assignment. Mr. McMillin. Thank you, Senator. Senator Bennett. Thank you. Chairman Collins. Thank you, Senator. As Senator Bennett was talking, I was thinking about how we often are penny-wise and pound-foolish in our approach to the budget. There are programs that would benefit from a greater up-front investment that would end up saving you a great deal of money in the long run. I want to give you three examples. One we discussed during your courtesy call and that is the Low-Income Heating Assistance Program, known as LIHEAP. If we were to fund this program so that the money were available in the Northeast in the summer months, you would be able to stretch the dollars further because the price of home heating oil is less in the summer months than at the height of the winter. Yet this funding is usually not released until there is an emergency situation at the height of the winter when prices are the highest. The second example is the Deepwater program, an ambitious and much-needed recapitalization of the Coast Guard's assets. The Coast Guard has one of the oldest fleets in the world. Its cutters are aging. Its helicopters and planes are frequently down for maintenance. There is a commitment by the Administration to rebuild its assets, but it is a commitment that the Administration has proposed lengthening over a 20-year period. I have had studies done that indicate that if you were to recapitalize the Coast Guard over a 10-year period instead, not only would you give the Coast Guard the assets it desperately needs much sooner, but you would also literally save billions of dollars. The third example is in naval shipbuilding. In this case, we have uneconomical production rates. You see this with other defense systems, as well. There isn't a question of not needing more ships, but for budget reasons, funding plans are stretched out, and as a result, we are underfunding shipbuilding. The end result is that the shipbuilding yards cannot plan their work effectively--and the Federal Government ends up paying far more per ship than it would if we had a more economical production line. What can we do to encourage a more long-term view to budgeting, realizing that in some cases, an investment up front can save you literally billions of dollars later? Mr. McMillin. Well, Madam Chairman, it often strikes me that as we are budgeting, especially in the discretionary side of the account, there often is a tendency to basically look at last year's level and do percentage adjustments to it. As you extend that sort of mathematical parsing of one big top-line allocation down into individual programs and accounts, it often can be hard for managers of a relatively small program to see how significant capital investments are possible, much less advisable, when they look at some of their near-term operational requirements. I think it is up to folks like OMB and the senior levels of agencies--you look at DOD in particular with an annual base budget of well over $400 billion now--and it should be possible as we are doing our long-term planning in the defense area and some other areas, as well, to be able to step back and say that this particular capital investment is in the Nation's interest. It is appropriate for us to deviate from the everybody gets 3 percent, everybody gets 1 percent type of approach that I believe budgeting can sometimes slip into. So identifying those opportunities up front, ensuring consistent top-level focus throughout OMB, and then working with the senior levels at the agencies, I think that is probably our best opportunity to prioritize those types of investments. Chairman Collins. You talked in your opening statement about the need for a line-item veto to give the President additional tools to control spending. Some of us are concerned about altering the balance of power, if you will, between the Executive and the Legislative Branches. What is your response to that concern? Mr. McMillin. Well, Senator, the version of the line-item veto proposed by the President and under consideration in the Congress now is significantly different from the one given to President Clinton back in the 1990s. That version exercised by President Clinton did not require any further review by the Legislative Branch. It was simply a unilateral act by the Executive Branch. In this case, the line-item veto we are talking about would allow the President to send up a series of rescission proposals, which the Congress would consider under expedited procedures. While there is some diminution of the right of any individual member to amend, delay, or block that particular legislation, it is not a unique situation. There are a variety of situations, whether the Congressional Review Act or Trade Promotion Authority, things of that nature, where Congress has chosen to enact expedited procedures for the consideration of important matters. And so in this case, there is an opportunity for Congress to speak after the President has made a proposal and I think it represents an appropriate respect for Congress' prerogatives. Chairman Collins. Senator Bennett. Senator Bennett. Thank you, Madam Chairman. I supported the line-item veto that we gave to President Clinton, and he disillusioned me really fast. When I saw how it was used, I stood up on the floor of the Senate and said, ``I hereby withdraw my support.'' I was delighted when the Supreme Court struck it down. So I am willing to look at the details of this. I won't say automatically no, but I remember the statement of Pat Moynihan, who probably served more Presidents than any Member of the Senate in history, starting with John F. Kennedy, Lyndon Johnson and Richard Nixon, Gerald Ford, and then he came to the Senate. He said if Lyndon Johnson had had the line-item veto, he would have been an emperor, and we don't want to run that risk. I will look at the details of what you are presenting, but I think it is appropriate that you raise that, Madam Chairman. Chairman Collins. Thank you, Senator. Mr. McMillin, your family has had to wait a very long time today so I am going to ask you just one more question so that they can get home before it gets too late, and then I will be submitting the remainder of my questions for you to answer for the record. We have talked about the line-item veto as being a budget tool. Another budget tool that Congress had at one point was what is known as PAYGO rules, the pay-as-you-go rules. Those are budget enforcement policies. I know you are familiar with them from your time in the Senate. I also asked you a pre- hearing question about this. With respect to the application of PAYGO rules, I have consistently supported rules that would apply equally to new tax cuts and to new entitlement spending. The Administration, however, has a different view and contends that PAYGO rules should not apply to the tax side of the ledger. In your answers to the questions submitted to you prior to the hearing, you indicated agreement with the Administration's position. If we are truly serious about regaining control of the budget, why wouldn't we want to apply PAYGO rules to both sides of the ledger, both the spending and the revenue side? Mr. McMillin. Well, Madam Chairman, as I understand the facts that informed the Administration's position on this, we are in a situation where revenues are now and are projected to be going forward at approximately the historical level as a share of GDP, a little over 18 percent. As we look at the long- term projections going forward, we see that spending, in particular driven by entitlement growth, is projected to grow substantially as a share of the economy. In that sense, I think it is appropriate perhaps to apply further scrutiny on the spending side, but I agree with you, we should not ignore the revenue side of the equation. In my opinion, Section 311 of the Budget Act provides the Congress a good opportunity for exercising that kind of discipline. In the budget resolution, the Congress, a majority of the House and the Senate, can agree upon an aggregate level of revenues that legislation should not cause the Federal Government to go below. That decision can be made in the context of an overall budget so that we can decide what type of revenues we need consistent with our fiscal goals. Then as individual legislation is proposed, Section 311 imposes that super-majority hurdle on proposals that would take our revenue below that level. So there is certainly a need for discipline on both sides of the equation. I think some of the reluctance on PAYGO also derives from the baseline rules, which in some cases treat taxes in particular, the 2001-2003 tax cuts that the President proposed and the Congress enacted, the baseline treats those a little bit differently than they do some spending programs. Many spending programs are assumed in the baseline to go on forever even if that is not current law. So then the question becomes in enforcing a PAYGO requirement, proposals need to be offset compared to what? So that is the basis of my view there. Chairman Collins. Thank you. I want to thank you for appearing before the Committee today and for your patience and that of your family. I will be submitting additional questions for the record. I don't think that the absence of my colleagues indicates a lack of interest in your nomination but rather many competing demands this afternoon. I do expect that we may have some other questions submitted for the record. Without objection, the record will be kept open until 5 p.m. tomorrow for the submission of any written questions or statements for the record. Again, Mr. McMillin, I want to thank you for being here today, for your willingness to serve. It does require a great sacrifice on the part of your family, so I want to thank them, as well. This hearing is now adjourned. [Whereupon, at 4:57 p.m., the Committee was adjourned.] A P P E N D I X ---------- PREPARED STATEMENT OF SENATOR LIEBERMAN Thank you, Madam Chairman, and welcome, Mr. McMillin. I congratulate you on your nomination as Deputy Director of the Office of Management and Budget. Your previous experience at OMB as Associate Director for General Government Programs from 2001 to 2005 should help prepare you for your new post. Before his confirmation as head of OMB, your new boss Rob Portman promised ``to work closely with Congress on a bipartisan basis'' as we try to get our exploding Federal deficit under control. As Deputy Director of OMB, I would hold you to the same promise. President Bush has said: ``A budget is more than a collection of numbers. A budget is a reflection of a Nation's priorities, its needs and its promise.'' I agree, but would add: A budget must also be about delivering on those priorities . . . those needs . . . those promises, or else it really is just a collection of numbers without meaning or mission. Your job will be to assist Director Portman in helping the President prepare the budget and execute it across 14 cabinet agencies and more than 100 executive agencies, boards, and commissions. You will be part of the team that recommends where every dollar of our budget is spent, how each agency's programs are managed, and that oversees the review of vital rules for public health and safety, worker safety, and environmental protection. I have concerns about how these responsibilities have been carried out for the last 5 years. Let's start with the budget. If we are going to get our fiscal house in order, everything has to be on the table, not just entitlement programs and discretionary spending, but our tax policies as well. We recently passed a $70 billion tax package that showers tax breaks on the Nation's wealthiest, who don't need the help, the oil industry, which is enjoying record profits, and increases the already enormous national debt, placing a hidden tax on our children and grandchildren. This also leads to a lack of resources to adequately fund vital programs most of us agree are essential to our Nation's priorities, needs, and promise. For example, I supported No Child Left Behind because I want to ensure a high-quality education for all of our students, regardless of income. I believed it was important to try new ideas. But these ideas demanded additional resources. We have not delivered those resources. Under the President's budget, the NCLB shortfall will be $15.4 billion next year. As a result, the Title I budgets of most school districts across the country will be frozen or cut. In Connecticut, 122 out of 166 school districts will see Title I cuts this year. That is wrong. I fear we are about to repeat the underfunding mistake of No Child Left Behind with the President's recently announced ``National Strategy for Pandemic Influenza Implementation Plan.'' That plan relies heavily on States and localities to carry the burden. But experts tell me these State and local programs are significantly underfunded. Second, Homeland Security also needs more help. Yet, whenever I challenged the Administration's budget for homeland security, officials countered by citing how much spending has grown in recent years. Of course it has grown! We were caught unprepared on September 11, 2001. The question is not whether we are spending more, but whether we are spending enough to meet the government's fundamental obligation to protect its citizens. Too often, the answer is no. We are shortchanging port security, interoperable communications, bioterror preparedness, and more. And as we have learned all too painfully with Hurricane Katrina, we are shortchanging preparedness for catastrophic natural disasters, as well as terrorist attacks. Finally, on an important matter of budget process, we are now more than 3 years into the wars in Iraq and Afghanistan. There is no good reason why the costs of these engagements are still being handled in separate supplemental budget requests. This approach harms us in two ways. First, it hides the true costs of our defense by putting a large part of the costs off budget. That reduces the scrutiny and discipline our defense budgeting needs and adds to the bill our children must pay. Second, it also encourages our military to put core programs into the supplemental. When--not if--the supplementals come to an end, those programs will be unsustainable. I do not agree that the costs of Iraq and Afghanistan are unknowable and that we can't budget for them. I do agree that a budget is a statement of our priorities, needs, and promises. But without proper funding in the beginning--and good execution afterward--it is just numbers with no meaning or mission. And that means it fails the American people. Thank you, Madam Chairman. __________ PREPARED STATEMENT OF SENATOR STEVENS Mr. McMillin, in FY 2003 and FY 2005, Congress--at my request-- appropriated a total of $5 million to the Tribal Partnership Program. It was our intention that this funding would go to the Alaska Village Erosion Tribal Partnership. This partnership was set up to assist the U.S. Army Corps of Engineers in prioritizing the needs of 184 Alaska villages that have been severely damaged by coastal erosion. This joint effort--which is known as the erosion baseline study--is an essential part of our efforts to address the erosion crisis in our Alaska villages. In June, I learned that the Corps of Engineers had reprogrammed $2.168 million of this funding to projects outside of the Alaska District. I sent a letter to Secretary Woodley, Assistant Secretary for Public Works at the U.S. Department of the Army. I told Secretary Woodley that I believe it is improper for the Corps to take funding away from this vital project. I also told him it is unacceptable to continually expect me to restore funding to address this urgent situation. Reprogramming is an important tool which the Corps can use to move projects forward. However, in this case, their decision to reprogram has had the opposite effect--it has ground the erosion baseline study of our villages to a halt. One hundred eighty four of our State's villages have been seriously impacted by coastal erosion and flooding. Four villages are in imminent danger and must relocate. The Corps and the Administration are well aware of this dire situation. Yet, the President's budget this year did not include any funding to address coastal erosion in our State. The coastal erosion crisis in our villages warrants support from OMB. The citizens of rural Alaska deserve the same attention and concern as those impacted by Hurricanes Katrina and Rita. When entire communities are forced to relocate due to erosion, it should be a funding priority. I intend to oppose this nomination as a protest against OMB. OMB must recognize the plight of our villages, which have been severely damaged by storms and some of which have been declared national disaster areas by the President. It is my hope that by opposing this nomination, OMB will finally take the erosion crisis in our villages seriously and provide the funding needed. 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