[House Hearing, 104 Congress]
[From the U.S. Government Publishing Office]
THE NEED FOR REGULATORY REFORM
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
NATURAL RESOURCES, AND REGULATORY AFFAIRS
OF THE
COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
FIRST SESSION
__________
APRIL 17, 1995
__________
Printed for the use of the Committee on Government Reform and Oversight
U.S. GOVERNMENT PRINTING OFFICE
37-344 CC WASHINGTON : 1997
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
WILLIAM F. CLINGER, Jr., Pennsylvania, Chairman
BENJAMIN A. GILMAN, New York CARDISS COLLINS, Illinois
DAN BURTON, Indiana HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
STEVEN SCHIFF, New Mexico MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
WILLIAM H. ZELIFF, Jr., New JOHN M. SPRATT, Jr., South
Hampshire Carolina
JOHN M. McHUGH, New York LOUISE McINTOSH SLAUGHTER, New
STEPHEN HORN, California York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
PETER BLUTE, Massachusetts GARY A. CONDIT, California
THOMAS M. DAVIS, Virginia COLLIN C. PETERSON, Minnesota
DAVID M. McINTOSH, Indiana KAREN L. THURMAN, Florida
JON D. FOX, Pennsylvania CAROLYN B. MALONEY, New York
RANDY TATE, Washington THOMAS M. BARRETT, Wisconsin
DICK CHRYSLER, Michigan GENE TAYLOR, Mississippi
GIL GUTKNECHT, Minnesota BARBARA-ROSE COLLINS, Michigan
MARK E. SOUDER, Indiana ELEANOR HOLMES NORTON, District of
WILLIAM J. MARTINI, New Jersey Columbia
JOE SCARBOROUGH, Florida JAMES P. MORAN, Virginia
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
MICHAEL PATRICK FLANAGAN, Illinois CARRIE P. MEEK, Florida
CHARLES F. BASS, New Hampshire FRANK MASCARA, Pennsylvania
STEVEN C. LaTOURETTE, Ohio CHAKA FATTAH, Pennsylvania
MARSHALL ``MARK'' SANFORD, South ------
Carolina BERNARD SANDERS, Vermont
ROBERT L. EHRLICH, Jr., Maryland (Independent)
James L. Clarke, Staff Director
Kevin Sabo, General Counsel
Judith McCoy, Chief Clerk
Bud Myers, Minority Staff Director
------
Subcommittee on National Economic Growth, Natural Resources, and
Regulatory Affairs
DAVID M. McINTOSH, Indiana, Chairman
JON D. FOX, Pennsylvania COLLIN C. PETERSON, Minnesota
JOHN M. McHUGH, New York HENRY A. WAXMAN, California
RANDY TATE, Washington JOHN M. SPRATT, Jr., South Carolina
GIL GUTKNECHT, Minnesota LOUISE McINTOSH SLAUGHTER, New
JOE SCARBOROUGH, Florida York
JOHN B. SHADEGG, Arizona PAUL E. KANJORSKI, Pennsylvania
ROBERT L. EHRLICH, Jr., Maryland GARY A. CONDIT, California
Ex Officio
WILLIAM F. CLINGER, Jr., Pennsylvania CARDISS COLLINS, Illinois
Mildred Webber, Staff Director
Karen Barnes, Professional Staff Member
David White, Clerk
Bruce Gwinn, Minority Professional Staff
C O N T E N T S
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Page
Hearing held on:
April 17, 1995, Indianapolis, IN............................. 1
April 17, 1995, Muncie, IN................................... 83
Statement of:
Anderson, Robert, plant manager, Delphi Interior and Lighting
Systems.................................................... 148
Applegate, Malcolm, president and general manager,
Indianapolis Newspapers.................................... 18
Baird, Warren, farmer........................................ 8
Bartlett, Gary, president, G.W. Bartlett Co.................. 132
Baumgartner, Jerry, president, Tri-County Bank and Trust..... 50
Black, Paul, EENC Poultry Association........................ 71
Bowe, Jeff, president, Benham Press.......................... 22
Brand, Myles, president, Indiana University.................. 39
Brannum, George, MD, Pathologists Associated................. 172
Brodhead, Robert, president, Ball Memorial Hospital.......... 122
Brown, Richard, sales manager, Beckett Bronze................ 139
Bryan, Mark, territory manager, National Federation of
Independent Business....................................... 176
Conaway, Dan, Abate of Indiana PAC........................... 169
Currier, James, MD, radiation oncologist..................... 120
Devoe, Betty, executive director, Westminster Village........ 84
Dye, Bart, farmer............................................ 5
Fenney, Nancy, member, Indianapolis City Council............. 70
Grunwald, John, president and CEO, Endeburg, IN.............. 71
Harcourt, Jean Ann, president, Harcourt Outlines, Inc........ 14
Hyde, Chris.................................................. 174
Keach, John, Jr., president, Home Federal Savings Bank....... 43
Kemper, Alan, farmer......................................... 3
Kersey, Robert, president, Rochester Metal Products.......... 143
Kleber, Katherine, Abate of Indiana PAC...................... 167
Lunsford, Mike, realtor...................................... 159
Miller, Thomas, vice president, commercial lending, American
National Bank.............................................. 101
Morgan, Willard.............................................. 185
Probst, Edward, physician.................................... 68
Quinter, Terri, Rose View Transit............................ 166
Roach, Dr. Eugene, medical director, Anderson Center of St.
John's..................................................... 114
Robinson, Jeff, director of water quality, Indiana American
Water Co................................................... 56
Russell, Joe, farmer......................................... 92
Sargent, Bob, mayor.......................................... 60
Sham, Michael, resident, Delaware County..................... 186
Sullivan, Richard, vice president and division manager, New
Venture Gear............................................... 155
Townsend, Wayne, farmer...................................... 97
Van Middlesworth, Gary, Van's Restaurant Service, Richmond,
IN......................................................... 177
Wheatley, John, Delta Faucet Co., Greensburg, IN............. 177
Williams, Lowell, senior vice president, First Merchants Bank 106
Letters, statements, etc., submitted for the record by:
Anderson, Robert, plant manager, Delphi Interior and Lighting
Systems, prepared statement of............................. 150
Bartlett, Gary, president, G.W. Bartlett Co, prepared
statement of............................................... 136
Baumgartner, Jerry, president, Tri-County Bank and Trust,
prepared statement of...................................... 52
Bowe, Jeff, president, Benham Press, prepared statement of... 26
Brodhead, Robert, president, Ball Memorial Hospital, prepared
statement of............................................... 123
Brown, Richard, sales manager, Beckett Bronze, prepared
statement of............................................... 141
Currier, James, MD, radiation oncologist, prepared statement
of......................................................... 121
Devoe, Betty, executive director, Westminster Village,
prepared statement of...................................... 86
Dye, Bart, farmer, prepared statement of..................... 6
Keach, John, Jr., president, Home Federal Savings Bank,
prepared statement of...................................... 46
Kersey, Robert, president, Rochester Metal Products, prepared
statement of............................................... 145
Lunsford, Mike, realtor, prepared statement of............... 161
Miller, Thomas, vice president, commercial lending, American
National Bank, prepared statement of....................... 103
Roach, Dr. Eugene, medical director, Anderson Center of St.
John's, prepared statement of.............................. 115
Russell, Joe, farmer, prepared statement of.................. 94
Sargent, Bob, mayor, prepared statement of................... 62
Wheatley, John, Delta Faucet Co., Greensburg, IN, prepared
statement of............................................... 180
Williams, Lowell, senior vice president, First Merchants
Bank, prepared statement of................................ 108
THE NEED FOR REGULATORY REFORM
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MONDAY, APRIL 17, 1995
House of Representatives,
Subcommittee on National Economic Growth, Natural
Resources, and Regulatory Affairs,
Committee on Government Reform and Oversight,
Indianapolis, IN.
The subcommittee met, pursuant to notice, at 10 a.m., at
the War Memorial, 431 North Merridian, Indianapolis, IN, Hon.
David M. McIntosh (chairman of the subcommittee) presiding.
Present: Representatives Gutknecht and Peterson.
Staff present: Mildred Webber, staff director; Karen
Barnes, professional staff member; David White, clerk; and
Bruce Gwinn, minority professional staff.
Mr. McIntosh. The Subcommittee on National Economic Growth,
National Resources, and Regulatory Affairs, is called to order.
As chairman of the House Subcommittee on Regulatory Affairs, I
would like to welcome you all to our subcommittee's first field
hearing.
Congressman Collin Peterson of Minnesota, the ranking
member of the subcommittee, and Congressman Gil Gutknecht, also
of Minnesota, join me today in this hearing. Let us give them a
great big Hoosier welcome.
Thank you. I would like to also acknowledge my wife,
Ruthie, who has been kind enough to come down.
The mission of our subcommittee is to cut back on
unnecessary, burdensome and sometimes just plain stupid
regulations. Red tape and excessive regulation are a hidden tax
on the American middle class. They are choking America's
competitiveness, cost workers their jobs, force families to pay
more for everything from cars to food, causing farmers to lose
their property, and forcing local taxpayers to foot the bill.
Congress is committed to putting a hold on new regulations
and cutting back on unnecessary red tape. We will force the
bureaucracies to consider the loss of jobs and competitiveness,
use good science, and protect private property rights.
It is fitting today that we are meeting in the Patton Room.
The view of this subcommittee on Federal regulations is a lot
like General Patton's view on fighting a war. Take no prisoners
and go until you have won the battle. So, I am pleased that we
were able to be here today.
In last November's election, Hoosiers and Americans
everywhere made it clear that they want to change the way
business is done in Washington. In the first 100 days of this
Congress, my colleagues and I made this message our mission.
Our subcommittee, working in a bipartisan fashion with Mr.
Peterson and Mr. Gutknecht, introduced a bill to put a freeze
on new regulations.
We are also committed to working with the rest of Congress
in changing the way we write regulations. Your suggestions
today will be particularly useful as we identify regulations
which need to be addressed through Corrections Day. Corrections
Day is Speaker Newt Gingrich's plan to convene the House of
Representatives once every other week specifically to repeal
onerous rules and regulations. He has appointed me to be on a
steering committee to help implement this new process.
By holding field hearings, as Members of Congress, we will
be able to hear directly about regulations that have posed the
greatest burdens on you and take them to Washington, so that we
can address them in the Corrections Day process.
Significant regulatory reform is needed to stop the growth
of big government. Currently, there are over 110 agencies with
over 130,000 employees, who issue, write and enforce
regulations everyday. In 1994, alone, the Federal Register was
nearly 65,000 pages, the largest it has been since 1979. It has
increased every year during the current administration from
57,000 in 1992 to the 65,000 pages today.
Further, the cost of regulations has skyrocketed. The
Clinton administration's National Performance Review stated
that compliance cost by Federal regulations on the private
sector were at least $430 billion a year, 9 percent of the
gross domestic product.
Other economists have estimated that the burden is even
higher, between $600 and $800 billion a year. That is $6,000
for every family in Indiana.
The burden of regulation does represent a tax on the middle
class. Companies are forced to comply with regulations and
raise their prices in doing so, passing along the cost to the
consumer. In fact, about 10 percent of the average grocery bill
can be attributed to the cost of regulations.
Moreover, regulations cost jobs and economic growth. Time
and time, I hear from Hoosier businessmen and businesswomen
about lost opportunities being forced to reduce or scale back
on their plans to expand their businesses. The bottom line is
that we have fewer good paying jobs in Indiana as a result.
Let me thank you again for coming and participating in this
hearing. Your views are what will become part of the official
record in Congress. Also, let me again thank the members of the
subcommittee who have traveled from their homes, both in
Minnesota. I would like to take a moment to thank the staff,
who have worked very hard to put this together, Mildred Webber,
David White, Karen Barnes, who are all from the subcommittee
and from my staff in Washington, Chris Jones. From here in
Indiana, Steve Austin, David Holt, Kim Orlaski, and I believe,
Scott Bauers is here. So, we have a lot of folks working on
your behalf to cut back these regulations.
Also, before we continue, let me apologize that we do not
have more time to hear your views at length. I may ask you to
end up summarizing your proposals, but any written documents
you have will become a full part of the record. Our goal today
is to allow as many people as possible to come forward and
testify before us.
Now, before we start with the official panel, although if
you want to start coming forward, let me pause a moment and ask
all of you to join me in taking an oath. The chairman of the
full committee, Mr. Clinger, has asked that we swear in
witnesses, but rather than do that for each witness, I think I
will just ask everyone to join me in doing that.
[Witnesses sworn.]
Mr. McIntosh. Thank you. Let the record show that all of
the witnesses were sworn in.
Our first panel of witnesses are Mr. Kemper, Mr. Baird and
Mr. Dye, all of them reflecting the views of the farming
community here in Indiana. Mr. Kemper, if you could lead off
for us.
STATEMENT OF ALAN KEMPER, FARMER
Mr. Kemper. Thank you, Congressman. I believe you have a
tremendous task ahead in reforming regulations that negatively
affect the very productivity of which this country was founded.
I am Alan Kemper, a fourth generation farmer and agri-
businessman and owner of Kemper Farms, a 1,700 acre grain and
livestock farm near Lafayette in West Central Indiana.
Mr. Chairman, today I want to address my thoughts to the
areas that affect everyone in this room, and that area is
regulations. Regulations relate to everything we do, from
breathing to eating to the clothes we wear. I want to share
only about the ones I have to directly deal with as a farmer
and an agri-businessman.
Let me start by mentioning some of the Federal and State
agencies and departments I must deal with to stay in business.
The U.S. Department of Agriculture, the Environmental
Protection Agency, the Food & Drug Administration, the Internal
Revenue Service, Department of Transportation, Federal Aviation
Administration, Department of Commerce and others.
It would not be so bad if you just had one or two
regulations, or one or two people at each agency to deal with,
but a farmer has a multitude of different staff and regulations
to deal with. Take the USDA, for example. You have the
Consolidated Farm Service Agency, which used to be the
Agricultural Stabilization & Conservation Service, which as a
Commodity Credit Corporation which puts out dozens of
regulations and forms to comply with each year.
Also in USDA, you have the Natural Resources Conservation
Service, which used to be the Soil Conservation Service, the
U.S. Forestry Service, Food Safety & Inspection Service,
Federal Grain Inspection Service, which has more forms to
complete, most of them written only so a lawyer could
understand them.
The Natural Resources Conservation Service must sign off on
all repairs. For example, I have a field which has been
continuously farmed since the 1800's, when my grandfather put
in a drainage tile. He put it in in the 1920's and it is a 4-
inch tile. This spring, I noticed a small hole in it. To
legally repair this tile, I had to go to the Farm Service
Agency, get a proper form, fill it out, take it to the National
Resources Conservation Agency, where the staff must make a
determination and then recommend to the National Resources
Conservation Committee to approve the small repair.
The committee then approves and sends in writing to me the
approval. This process can take up to a month or more. Once I
get the approval, I can take a shovel, and in 30 minutes to an
hour, fix the tile. Once again, I get the approval.
This is one example why productivity is falling in the
United States. Another example of over-regulations is in the
drying field part. In the drying process, part of the corn
plant called ``bees wings'' come off the kernels. For this, Mr.
Congressman, I have a sample of ``bees wings.'' As I mentioned,
it is part of the corn plant that comes off in the drying
process.
As you can see, they are small red pieces of the corn
plant. They are no more dangerous than grass clippings from
your own yard. They are not nuclear waste, but the
Environmental Protection Agency regulations say these ``bees
wings'' must be contained. This is not realistically or
economically possible on the farm.
It seems to me that when regulations are written for even
the best laws, like the Clean Air Act, which the above example
was from, common sense was left out.
I could go on with several other examples of overburdening
regulations, but I must move on. There must be some reform in
the respective agencies. It seems to us in small business and
agriculture that these agencies have an agenda of their own,
not the public wishes. You can build a strong case that the
regulations are out of control.
Let me at this point name a few acts that need refining:
Clean Air Act, Endangered Species Act, Worker Protection Safety
Act, American Disabilities Act, Clean Water Act, Wetland
Provisions and Conservation Provisions of the National Food
Security Act, referred to as Farm Belt, Planning and Community
Right to Know Act, the Federal Insecticide, Fungicide Act.
It is my belief when it comes to regulations, most
businessmen, including myself, are running on information
overload. Federal regulators and policymakers must realize that
a highly productive modern agriculture cannot be turned on and
off on a day's notice with often conflicting regulations and
the lack of common sense in the decisionmaking process.
Federal, State and local governmental officials must allow
the latitude in the decisionmaking process for their field
staff. On my farm, I did a small study and found out that it
takes 28 to 32 hours a month of my office time to comply with
all Federal, State and county regulations. These hours are
really non-productive time for me.
Farmers and small businessmen need to once again feel
comfortable when a Government car pulls in the driveway, that
the Government is here to help them find solutions, not find
violations and impose fines and give more mandates.
Mr. Chairman, in summary, I have only three
recommendations. Have less regulations, or at least slow down
the pace of new ones; keep regulations small business/farmers'
regulations to regulations that are easily understood; and keep
common sense as one of the first priorities of all regulations.
Thank you, Mr. Chairman.
Mr. McIntosh. Thank you, Mr. Kemper. I appreciate you
coming today. I might add, when we get to the question period,
that you bring up that notebook that you had earlier. I will
tell people about it.
Mr. Dye, I have read about your case in some of the
testimony that was coming before us when we were considering
regulatory reform. Could you share with us your experience of
Federal regulation?
STATEMENT OF BART DYE, FARMER
Mr. Dye. Yes, sir, I would be very happy to, and I
appreciate the opportunity to be here with you gentlemen today.
I will be brief, and I would endorse Mr. Kemper's remarks, in
that those are the same ones that I have to contend with, also,
but I would extend mine in this respect.
In 1984, Farmers Home Administration, a governmental
agency, came in and illegally seized my farm, despite
congressional laws, court orders and FMHA regulations. They
kept me from that farm for 7 years, and destroyed it. I finally
got the place back, but only with Fish & Wildlife and Corps of
Engineers' and everybody else's regulations on it, that took
300 acres of my 1,000 acre. That will prevent me from farming
the rest of the farm.
Because of those regulations, I cannot get an operating
loan, or I cannot get a market loan. So, I cannot get my farm
back.
The total extent of those regulations are one, they say
that I have potential habitat. I do not have any endangered
species on my part. One of the potential habitats is for bats.
Their reference is that they are some place in southern
Indiana, so therefore, they need to take my farm for habitat
for those bats. They might want to land there sometime in the
next 100 years.
The other one is for eagles. I do not have any eagles.
Again, it is potential habitat. They also want it for mussels
that are in the river.
Now, White River, that goes by my farm, north of Shoals,
the upper watershed of that covers 16 counties and over 1,200
miles of stream banks, and all of that has to come back past my
farm. I do not feel that my farm is the total problem of the
mussels.
Congressman, these inane regulations have just totally
devastated my family, and we need some help. We appreciate the
opportunity to be here. It is not only the regulations, but the
arrogant, belligerent attitude that the agencies involved in
this use. We do not have any appeal process to these people or
anything.
I have been told that if I complain, they are going to come
back and do something else. I am a combat veteran, sir, and we
did not go to combat to have to come back to this kind of
stuff. We need some help.
[The prepared statement of Mr. Dye follows:]
Mr. McIntosh. You wonder what happens to freedom when that
starts happening in this country.
Mr. Dye. It is gone.
Mr. McIntosh. Thank you for sharing that with us, Mr. Dye.
We will come back at the end for some questioning.
I would like to now ask Mr. Warren Baird to share with us
his testimony.
STATEMENT OF WARREN BAIRD, FARMER
Mr. Baird. Thank you. I am a farmer from Tipton County and
also a member of the Soil & Water Conservation Districts,
supervisor in that, and I would like to share with you my
concerns about some of the regulations that face farmers and
private property owners in my county, which is Tipton.
The Drainage Board has been trying to do reconstruction on
what they call the Round Prairie Ditch, and I believe you have
probably heard of this project before. But, the drainage ditch
is one of many ditches in central Indiana farming community
that are so vitally important for crop production.
Many of these ditches were installed in the 1800's and
early 1900's by farmers who had the wisdom to realize that by
draining the excess water from the rich soils, crop production
would be much improved. These drainage ditches were not natural
drains but were put in by local farmers. These open drains are
part of a network, including tile drains, that are very
successful in draining the soils.
This particular project has been through several delays
that have been imposed by many agencies that are issuing
permits and regulations. It used to be that the local drainage
boards and land owners could get together and agree on what
should be done and get the project done, without all the red
tape and permits.
These delays in permits cost the land owner by one, not
having improved drain for use, and two, the additional
maintenance fund required to do the project. Today, we have the
U.S. Army Corps of Engineers, U.S. Fish & Wildlife, IDEM and
the IDNR all serving authority of various degrees on these
small, man-made drains.
I suggest at most we need only to have Federal and State
regulations that controls the quality of these waters that flow
downstream, and may be used by others for drinking water and so
forth. I question why the Corps has jurisdiction of these
small, man-made drains. It would seem to me that they should
concentrate their efforts on the larger, natural drains. All
these drains should be identified and labelled as to whom has
the jurisdiction of them.
I suggest that this can best be done on a drain per drain
assessment by Federal, State and local people, as the
determination is made, the maps can be labelled, and in the
future, there will be no question where the responsibility
lies.
Requirements should be realistic and make sense. In other
words, do not impose requirements that have nothing to do with
the objective of draining the land. When these drains were
first installed, there were no trees and shrubs along either
side of the ditch. Why should that be a requirement now? This
should be an alternative that is determined by the local
drainage board and the landowners. The landowner should have
the right to determine whether he has trees or shrubs or grass
drip along the ditch on his property, as long as it meets the
requirements of plain water.
It makes no sense to require trees to be planted along a
ditch during reconstruction, if it is not required that they be
retained after the project is completed. How the dredge
material is handled, on what side of the drain the work is
done, and the design of the project is once again something
that can best be determined by the local drainage board, the
Salt Water Conservation District, the contractor and the
landowners.
When these drains were first installed, wildlife and
aquatic life were not a primary objective, but a secondary
benefit that developed over the years. Why is it now important
to go to the extra expense and pretense that these drains are
the major supporter of wildlife and aquatic life? Many of these
drains are bone dry in the summer, fall and in times of low
rainfall. After the reconstruction is completed, in a short
time, wildlife will take their place along the drains as the
supporting habitat develops.
Some of the requirements imposed by these agencies may even
prevent these drains from functioning properly, especially if
trees and shrubs are left in the slope of the channel of the
ditch. Another concern I have as a landowner is the wetland
restrictions and the delineations that have been imposed at
various times.
I currently do not know who or what agency has control, and
I am not sure anyone else knows. I class this as one of the
most wasteful and confusing issues to face area farmers that
fall under some of the concerns that need to be addressed.
I am not opposed to preserving wetlands that are truly
wetlands, and are serving a significant purpose. However, I do
not believe that the areas that have been farmed, whether you
call them farm wetlands or prior converted wetlands, should be
considered as wetlands, or have any restrictions placed on
them.
I suggested using what I call ``common sense'' would many
times solve these issues. If early settlers had never drained
the central Midwest wetlands, food production as we know it
today would not be possible, and the consumer would no doubt be
spending more of their income for food. Many farmers have
farmed these areas with the intention that as finances became
available, they would improve the drainage to make a more
profitable and efficient operation. Farmers should not be
denied this opportunity.
Small, insignificant wetlands under 2 acres should not be
regulated. This allows a farmer flexibility in making a more
efficient operation.
Developers can mitigate wetlands. The farmer should have
the same option available.
My last comment has to do with the Endangered Species Act,
and I see it as a wolf in sheep's clothing. Let me ask, what is
the Government's role? I say it is to provide a healthy, safe
and economically sound place for a man to live and raise his
family. Protection of plants, animals and other creatures of
God's creation can best be served by the private sector whose
interest is at stake. Government tax money should not be used
to force the saving or protection of an endangered species,
unless there is scientific proof that protecting a species is
beneficial to all mankind.
Species that have become extinct will not be a detriment to
society. If society believes strongly enough that an area of
species needs to be protected, then the ones that are
interested should buy the area and compensate the owner of the
area for the protection right.
Government officials should not have free access to one's
property without permission. This right is protected by the
fourth amendment to the Constitution.
Things change over time, and the needs of man changes also.
I have noticed lately that there are no dinosaurs. However, I
am also aware that I have no immediate need for one. In fact,
if one was to show up, I am not sure what I would do with it.
In the future, there will be other examples of species that
have served their purpose and will no longer exist. Do not
misunderstand me. I am a true believer that we should do all
that is in our ability to preserve the existing species as long
as it does not interfere with the management of man's own
quality of life. There are examples in other parts of the
country where operations have been shut down for the protection
of a species, and we just heard of one a while ago, without any
compensation for the loss of value or income. This is not
right.
In some cases, the species that are being protected are in
conflict with the farmer's management, and may inflict loss of
crops. I would like to take this opportunity to express my
gratitude to Congressman McIntosh and his very efficient staff
for the invitation to express some of the concerns of the
farmers and private property owners in this great United
States, in particular, the State of Indiana. Thank you.
Mr. McIntosh. Thank you very much, Mr. Baird. Before we
start questioning, let me just point out a book that Mr. Kemper
brought in earlier. It was a copy of one that was given to me
by the Farm Bureau in Washington, and it is a list of all the
different regulations that farmers have to live under in this
country and it is not the entire regulation. It is a common
sense summary of a couple pages for each one.
It was impressive to me that there was this degree of
regulation that if somebody was trying to earn their living
farming their land, they had to become familiar with and make
sure they were on the right side of all of these conflicting
and often counterproductive regulations. So, thank you for
bringing that copy with you.
I want to go on with the questioning but first--to my
colleagues--I did not give them a chance to have an opening
statement and I apologize for that. But, if you would like to
make any comments, please go forward.
Mr. Peterson.
Mr. Peterson. Thank you, Mr. Chairman. I appreciate the
invitation to come to Indiana. I think it is the second time or
third time I have been here. I want to tell the folks here in
Indiana that I found the chairman is someone I have been able
to work with.
We have a group of what are now referred to as Blue Dog
Democrats in the House. He has read about us in the Wall Street
Journal, who agree with a lot of what Mr. McIntosh and some
others are doing. Our group was formed to try to end some of
the partisanship that goes on in Washington, and you cannot
believe some of the stuff that goes on. It is this kind of
attitude that if the Republicans are for it, the Democrats have
to be against it and vice versa.
The truth of the matter is that neither side is right all
the time. In fact, most of the time, one side or the other is
wrong, and we are just trying to put aside all of this
partisanship and try to get down to doing what we think makes
sense and not worry about who gets credit, who gets blamed, and
just try to move things ahead.
So, we have worked, and I have worked a number of different
areas, but particularly on the Regulatory Affairs Subcommittee
here. We did not get everything we wanted, but I think we did
improve legislation as it moved along, and we have been able to
work together. We look forward to doing that in the future.
I would just say that there are a number of Democrats who
feel like this regulatory process has gotten out of control. I
think we had, what, somewhere between 50 and 75 Democrats that
supported most of the regulatory reform issues, and we hope
that we are successful in halting the successive regulation.
I represent a farming area in northwestern Minnesota. My
district runs 300 miles long from north of the Twin Cities up
to Canada. We have, we like to think, the most productive
agricultural land in the world. I am sure you think you have it
down here in Indiana. But, my farmers have the same problems
that you folks do, and we sympathize, and we have been trying
to work on these issues--wetlands.
Last week the Transportation Committee passed a clean water
bill that is going to start to address the 404 parts of the
wetlands law and some other areas. I think we had 60 to 65
percent of the Democrats on that committee supported those
changes.
The farm bill, which we are going to start having hearings
tomorrow traveling the country--I serve on the Agriculture
Committee, we are going to be looking at the wetlands and other
issues in the farm bill, and hopefully, we are going to get
some common sense brought to some of these things.
Frankly, if we are not able to resolve this, I think you
are going to see a lot of producers who are just going to drop
out of the farm program and go their own way. We are hoping
that this time we can move some of this stuff back the other
direction.
Do I have time to ask?
Mr. McIntosh. Yes.
Mr. Peterson. Mr. Dye, I was just curious how you got into
this? You probably like my position, because I have been saying
for the last couple of years that we should abolish the
Farmers' Home Administration. You probably support that, I
would say?
Mr. Dye. Yes, sir.
Mr. Peterson. I was just wondering why you were not able to
get an appeal?
Mr. Dye. We were never even advised we had an appeal.
Mr. Peterson. So, the time ran before you knew you could--
--
Mr. Dye. They just backed up to the door and loaded
everything up and went down the road with it.
Mr. Peterson. Were you in some kind of a conflict on
payments with them?
Mr. Dye. Yes, sir. They had messed me up the year before. I
needed a little money to dry some corn, and they went to the
banks and told the banks not to loan me any money, so I could
not get the gas to dry the corn. So, the corn stayed in the bin
while the river came out and the river took the whole corn crop
down the river. So, I lost a whole year's crop, and they could
not understand why I could not pay the bill.
Then, the next year we had a drought, in 1983, and you do
not raise much in a drought, as you are well aware. So, I was
very much behind that year. I asked for a year that we could
get something worked out. They said, that was fine, then they
switched personnel and the next guy came in and backed up and
loaded everything up and went down the road with it.
Mr. Peterson. You never got to appeal?
Mr. Dye. No, sir.
Mr. Peterson. They were never willing to open it up?
Mr. Dye. No, sir. Well, the other reason that they put
these on, I was told, I sued Farmers' Home because of their
contempt of court and this sort of thing. They said, one was
because I sued them, two was how I voted, and there is a whole
litany of reasons. Every time you talk to them, there is a
different reason.
Mr. Peterson. They do have the right under the way the law
is constructed to go in and they have first right to buy these
wetlands and so forth, which is something I think we need to
look at.
Mr. Dye. Yes, sir. In my particular case, they held my farm
back from me for 7 years. They took out 14 farms in the county
that 1 year, and by their own documentation, they excepted me
personally, and would not lease that farm back to me until they
put the easements on.
Mr. Peterson. Yes, I have had similar situations. When
people call my office and ask for my help to get a Farmers'
Home loan, the first thing I ask is if they are currently
involved with Farmers' Home, and if they are not, I tell them,
absolutely, under no circumstances, should you get involved
with those people, because what is going to happen to you is
this sort of thing.
They tie you up, tie your collateral up, and if you get on
the wrong side of them, you are just out of business, is
apparently what happened to you.
Mr. Dye. Right.
Mr. Peterson. Well, we are going to work on that and see
what we can do.
Mr. Dye. We appreciate it very much, sir.
Mr. McIntosh. Thank you, Collin. Another example where the
private sector can do a better job.
Let me also now recognize one of my colleagues in the
freshman class on the Republican side of the committee. Mr. Gil
Gutknecht is from Minnesota, and I am delighted you are able to
join us.
Mr. Gutknecht. Thank you, Chairman McIntosh. It is a
pleasure to be here. I have been to Indiana before, but I have
never been here when it is so warm. I usually come through in
the winter. I have never been to Indianapolis before.
I just want to say that in the long light of history, I
think the work that this subcommittee and the full committee do
in terms of regulatory reform may have more of an impact on the
general economy than most people would ever give it credit for.
As the chairman mentioned in his opening remarks, and I
have been astonished at the overall costs of regulations to the
American economy, we have had some interesting discussions in
the full committee with some of our colleagues, like
Representative Waxman from the State of California. There are
other Members that have completely different viewpoints. I
would have to say that among the three of us, we are generally
in agreement that historically, and what has happened over the
last several years, is the Federal Government has begun to
impose more and more $50 solutions to $5 problems.
I love the comments of Mr. Kemper relative to having more
farmer friendly type regulations that relate to farming. I had
not seen this, and I do hope that I get my own copy of the
environmental laws. I must say that we had a hearing in my
district, and my district, as well, is very dependent on
agriculture in southeastern Minnesota. We had a farm forum
about a couple of months ago. I really expected the people who
had come to testify to talk mostly about farm price support
programs and the milk program and a lot of the other things the
Federal Government was doing.
But, I must say, as I mentioned to several of you before
the hearing, at least two-thirds of the time was taken up by
farmers talking about the unbelievable mountain of regulations
that they have to deal with everyday. If you tend to be a
relatively large farm operation, it is manageable. But, if you
are trying to run a 300 acre dairy operation in southeastern
Minnesota and you have to deal with all these regulations, day
by day and month to month, and you are dealing with attorneys
and bureaucrats from Washington or St. Paul, it becomes just
almost impossible, particularly to the small operators.
We talked about wanting to help the small family farmer,
but in many respects, I think regulations alone are making it
next to impossible for them to stay in business.
So, I appreciate the opportunity to come to Indianapolis. I
appreciate this testimony and I am doubly appreciative of the
fact that we led off the hearing with some of the people in
agriculture.
Mr. McIntosh. Thank you very much, Mr. Gutknecht. I will
forego any further questioning. Mr. Kemper, did you have one
other statement you wanted to make?
Mr. Kemper. Just one other, Mr. Congressman. I appreciate
the book that you gentlemen have held up. It only addresses,
however, the environmental regulations.
Let me suggest to you that a lot of farmers, small
businesspeople and other people in this country deal with
financial, taxing and other regulations that could equal
mountains of regulations.
Mr. McIntosh. So, there is another book out there?
Mr. Kemper. The only other thing I would suggest to you is
that there is the old adage out in agriculture that taxes could
put you out of business someday, but regulations could put you
out of business by lunchtime. So, that is a fear that not only
agriculture, but a lot of the business community lives with
when they wake up in the morning, as well as when they go to
sleep at night. Thank you, Mr. Congressman.
Mr. McIntosh. Thank you. Thank you all for joining us
today. I appreciate hearing from you.
I am going to try to keep this on a tight schedule, so we
get a chance to have the open mic at the end. Let me call
forward the next witness. Ms. Jean Ann Harcourt is president of
Harcourt Outlines, and I have known Jean Ann for a good while
now, and want to say that she is one of the most dynamic
businesswomen that I have had a chance to meet. I was excited
when she offered to come and testify today.
I have been through her facility in Milroy, and I can tell
you, they have one of the sharpest operations around. No wasted
time there and every effort to be productive and do a good job
and have a good record on safety and environmental issues. So,
it is a privilege to be able to welcome you here today, Jean
Ann.
As we were driving in from the airport, Mr. Gutknecht told
me that he used to sell school supplies. So, perhaps this is
going to do some good for business.
Mr. Gutknecht. Matter of fact, Mr. Chairman, I sold
crayons, mats and globes. I think they are here in
Indianapolis.
Mr. McIntosh. That is great.
Welcome, Jean Ann. Thank you.
STATEMENT OF JEAN ANN HARCOURT, PRESIDENT, HARCOURT OUTLINES,
INC.
Ms. Harcourt. Mr. Chairman and distinguished panel members,
thank you for traveling to Indiana to hear our concerns about
business.
I am Jean Ann Harcourt, and I am the co-owner of two small
family businesses located in rural Rush County, or Milroy,
which is approximately 50 miles from here. Harcourt Outlines
was established in 1956 by my parents and the primary purpose
was to manufacture and distribute school supplies. The No. 1
product, as I have put on the table for you, are the wood case
pencils. I have also given you a brochure of our family
business.
In 1993, my brother, Joe Harcourt, and I started a pencil
manufacturing facility in order to better serve Harcourt
Outlines. Today I offer testimony about the burden of over-
government regulation. However, I first wish to preface that we
do not consider all Government regulation bad. Regulations
requiring employees in the pencil factory to wear headgear,
that is good, because it is very loud. Regulations that require
when you are cutting the magnesium slugs to print the pencils
to wear eye goggles, that is very good. So, we are not totally
negative on Government regulation.
However, we do object to the volume of regulation, the cost
of these regulations and we question the necessity of some of
these regulations. I submitted to you last week a clever satire
published in the June 1993, Indiana Policy Review entitled,
Pencils, Killers of the 1990's. It is humorous. It is very
humorous, but it is not far from the truth about the over-
government regulation.
Since 1981, there have been volumes of regulations placed
on small business. The number provided to me by the Indiana
Manufacturer's Association has over 80,000 regulations. I
actually brought one volume here today to show you. It is not
as big as the other volume you have there, but this is only one
of many volumes. I wanted to point out that we use this book.
It is highlighted. We look at the regulations. We try to follow
the regulations. We have all those pages marked in there of
things to comply with.
However, the regulations are too numerous for small
businesses to track, or even understand what they mean, if you
look in here. It would take several full time employees to
catalog and track, let alone implement, all these regulations.
With my limited time today, I wish to concentrate on only
two areas involved in our new, 1993 pencil manufacturing
company. The No. 1 area is the Title V Operating Permit
Program, which is part of the 1990 Clean Air Act. The other is
the Building Inspection Programs, however, administered by the
State, it is still a major regulation we have to comply with.
Back to the Clean Air Act and the permitting program. The
Government, or you gentlemen, are requiring us at our pencil
company to calculate our annual emission rate for the lacquer
fumes which we are emitting into the air after we have painted
the pencils. All the paints and lacquers that we are using now
are non-toxic. They are safe for children. Children can chew on
these pencils. We are selling directly to schools. I have here
just a few of the binders that have the MSDS sheets in them
that covers every single lacquer and any type of raw material
that comes into our facility, that documents everything and
everything is non-toxic.
Therefore, that is where the confusion comes in. If we
already have documentation that the paint is non-toxic when it
is being applied to the pencils, I cannot understand how it
becomes so dangerous when we are taking the fumes and emitting
them out in the air. It just really has us confused.
The other point we need to talk about today, too, is that
we have to prove to the State that we are emitting less than 25
tons of regulated pollutant into the air in a single year. I
readily admit that I do not understand this program. So, I
instructed our Safety Director, Jay Evans, to get advice from
an environmental consulting firm, because we do not have in our
facility a technical staff person or do we have the equipment
required to test emissions of paint fumes going in the air.
Well, the quote came back from a Columbus, IN, company, and
it would cost us up to $5,000 to provide the documentation to
the State. We believe that with our purchase records of the
paints and lacquers that we bring in and the raw materials,
that we are not going to be anywhere near that 25 ton level.
Therefore, we do not understand how emissions could possibly be
much greater than what the raw material is that we are putting
on the pencils. Therefore, we feel that this is a very
unnecessary expense, and would be very time consuming for us to
calculate. But, we do not see anyway around it, and we are
going to have to comply.
The last thing I would like to talk about in my opinion is
the excessive burden in the building industry. We built a brand
new facility in rural Rush County for a pencil factory, 6,100
square feet. It is a metal building, just like this here. We
had 13 inspections on this building. We thought that was a
little excessive.
When business was good in the pencil industry, we turned
around in 1994, we doubled the size, built another full
building identical to it, designed to add onto it, and had
another five inspections. We felt like 18 inspections on this
type of facility was just an overburden. We felt like it was a
harassment, and it cost our maintenance man up to $500 in labor
time. I did submit to you last week the documentation of how I
did arrive at that figure, using his benefit sheet.
So, I would just like to wrap up today and say I am very
frustrated. I join the farming community in saying that we
appreciate you being here. It is nice to have somebody listen
to us. Hopefully, we can get something done. I feel real
positive with my Congressman, David McIntosh, in Washington
doing that, that we could do that.
I would just like to say that this regulation, it is
hurting our business and it is hurting our employees. A lot of
their raises for the next couple of years are going to be tied
up in trying to comply with some of these regulations. So,
again, thank you very much for being here today.
Mr. McIntosh. Thank you very much, Jean Ann. Let me ask you
a question about your MSDS, material safety data sheets, which
has come up in other context. Are those ones that you have to
keep on file there in the plant for materials that you use?
Ms. Harcourt. Yes, and we are in violation today, cause
they are here. I am going straight home from here. [Laughter.]
Mr. McIntosh. You better get there before OSHA does, right?
Ms. Harcourt. That is right.
Mr. McIntosh. Let me ask you this. How often do you have
employees come in and ask to read through those for a concern
about safety?
Ms. Harcourt. In 20 years that I have been running the
company, I have had one employee ask to see one of these, but
safety is No. 1 with us, and we train them about it. I have
never been asked to see it.
Mr. McIntosh. All of that paperwork does not help you
increase your safety or healthiness of the employees at all in
your plant, because they do not look at that?
Ms. Harcourt. That is right, absolutely.
Mr. McIntosh. I have heard a lot of complaints about those
sheets. Do you send any out with your pencils, as well?
Ms. Harcourt. No.
Mr. McIntosh. That would be next step on disclosure on
pencils.
Ms. Harcourt. Yes.
Mr. McIntosh. I was impressed by your statement on the safe
fumes that are from paints that can be chewed by children, and
yet they are worried about them being toxic if they are
released into the air.
Ms. Harcourt. Right. We have an elaborate venting system
that pulls the fumes, what limited fumes there are.
Mr. McIntosh. You keep them away from the employees?
Ms. Harcourt. Right.
Mr. McIntosh. Vent them out into the atmosphere?
Ms. Harcourt. Right. They do have a little odor to them
outside.
Mr. McIntosh. Thank you. I appreciate you coming today. I
think your statement is exactly on point.
Let me ask any of my colleagues if they have any questions
for you?
Mr. Peterson. Thank you, Mr. Chairman. Has anybody ever
looked at those sheets?
Ms. Harcourt. Our safety director looks at these sheets.
Mr. Peterson. No, I mean, has OSHA ever looked at them?
Ms. Harcourt. Not recently.
Mr. Peterson. Are they required----
Ms. Harcourt. Yes, they are required. We have not seen OSHA
recently, knock on wood.
Mr. Peterson. But, when they come in, do they look at them?
Ms. Harcourt. Yes, it is part of the inspection process.
Mr. Peterson. Just to see if they are there?
Ms. Harcourt. Yes, and they were there.
Mr. Peterson. We are so hung up in this country on quality
process and filling out forms. I do not know how we change that
mentality, but it does not seem like we are accomplishing a
whole lot.
Maybe the Governor of Florida had the best idea. He is
going to eliminate all the regulations I read about a month
ago. He is going to abolish all the rules and regulations and
he is just going to have guidelines and his commissioners are
going to use common sense. Now, I do not know how it is going
to work, but it sounds like a good idea.
Ms. Harcourt. I think that is what we need, a little more
common sense.
Mr. Peterson. Thank you.
Mr. McIntosh. Thank you, Mr. Peterson.
Mr. Gutknecht, do you have any questions?
Mr. Gutknecht. I do not have a question, just if I might
add to that. I think I sent a note to Mildred, if she has not
received it yet, request that this subcommittee go together and
buy a bunch of reprints of the Reader's Digest from about a
month ago, which is a shortened version of a book that is out
now called The Death of Common Sense, and there are some great
examples. I think this subcommittee ought to make them
available to more people.
I had not heard about the Governor of Florida, but I think
that is a great idea. I think that is all the American people
want. I think, as you said, not all regulations are bad, and I
think most businesspeople want to do the right thing. Most
businesspeople, whether they are farmers or in the pencil
business or whatever business they are in, want to do the right
thing, and they do appreciate some guidelines, I think, from
the Government regulators, but it just seems like we have gone
from the ridiculous to the sublime in the last 10 or 15 years.
Somehow, we have to slow that whole process down and get back
to common sense.
Ms. Harcourt. That is all we are asking today.
Mr. McIntosh. Thank you very much for joining us. I
appreciate that.
I will also share the satire that Jean Ann brought with, at
some point, Gil, and I will send it around to all the different
committee members, because it points out the ridiculousness of
some of the lengths to which we go at regulation.
Let me call the next witness for our panel, Mr. Malcolm
Applegate, who is the president and general manager of the
Indianapolis Newspapers. Mr. Applegate, we appreciate your
input. You work with the side of the newspapers that the
general public does not get to see as often, how they are
produced and some of the problems that you have to deal with in
the regulatory side.
STATEMENT OF MALCOLM APPLEGATE, PRESIDENT AND GENERAL MANAGER,
INDIANAPOLIS NEWSPAPERS
Mr. Applegate. We are out there everyday for everybody to
critique, as a matter of fact.
Chairman McIntosh and members of the subcommittee, I do
appreciate the opportunity to appear before you this morning,
to give the views of the Indianapolis Star and the Indianapolis
News on over-burdensome regulations that affect the newspaper
business.
Believe me, we appreciate and applaud your subcommittee's
mission, as you clearly stated, Congressman McIntosh.
Given the brief amount of time I have before you today, I
am going to limit my statement to the proposed rules recently
published by the Federal Trade Commission related to
telemarketing fraud. First, the outcome of this rulemaking is
absolutely critical to the newspaper business in several ways,
not only us, but newspapers around the country.
Newspapers, on average, obtain about 50 percent of their
subscriptions from telemarketing, much of which includes simple
reminders to subscribers to renew their subscriptions. The
Indianapolis Star, for example, secures 39 percent of its home
delivery subscribers from telemarketing. Our afternoon paper,
the News, 52 percent, and the Sunday Star, 29 percent. These
percentages represent only starts from our sales operation. We
have about as many through a voluntary kind of restart.
Telemarketing really has become central to building and
maintaining our circulation, the lifeblood of our newspaper
business. Mr. Peterson, I think my friend in St. Cloud, Sonja
Sorenson, the publisher there, would support these remarks.
Likewise, we use telemarketing to sell classified
advertising, both for new runs, as well as to elicit continuous
ad runs. Classified advertising comprises about 30 to 40
percent of our total advertising revenue.
The last Congress, as you know, passed telemarketing fraud
legislation and ordered the Federal Trade Commission to write
regulations to prevent fraud and abuse in telemarketing. The
intent was to prevent con artists from scamming senior citizens
and unsuspecting victims, and then packing up shop before law
enforcement officials would catch up with them.
We certainly support the thrust of this law. But, the FTC's
proposed rules would virtually label all telemarketing
practices as deceptive or abusive. Contrary to the clear intent
of Congress, we do not believe that that is necessarily the
case. Let me give you a few examples of how the FTC's proposed
rules would cripple two core functions of our business,
circulation and advertising.
First, the definition of telemarketing as proposed by the
FTC would include inbound calls, calls made by the public to
the business in response to advertising. There is just no
evidence that Congress intended these types of calls to be
covered.
It hits newspapers in two ways. Any advertisement in the
newspaper that receives a call from the public in response to
an ad could be deemed by those proposed rules to be a
telemarketer. If the unsuspecting advertiser, who had merely
placed a telephone number in his or her ad, arranges a sale
during the course of that phone call, he or she must then make
a litany of disclosures to the caller that are both unnecessary
and a nuisance. The advertiser must comply with a host of
recordkeeping requirements that make no sense whatsoever.
It should be rather obvious what this rule would do to
newspaper advertising of virtually any kind. This rule also
would affect our efforts to build and maintain circulation.
There is no way to know for sure whether or not an incoming
call is the result of one of our ads. We get hundreds of
voluntary subscriptions and to comply with the proposed
regulations, would have to treat all inbound calls as
telemarketing.
Therefore, if the newcomer to Indianapolis phones the paper
to request a home delivery subscription, we have to treat that
as a telemarketing call, although we did not solicit the
subscription. Let me tell you what that would entail. A host of
disclosures involving total cost, terms and material
restrictions, limitations or conditions of receiving any goods
or services, quantity of goods or services, and material terms
and conditions of refunds, cancellations, exchanges or
repurchase policies.
This is probably a 2 or 3 minute recitation that is nothing
but a nuisance to the caller. The Commission's proposed rules
would also require these disclosures repeated during a
subsequent verification of the sale, even if it takes place in
the same phone call. These disclosures would also apply to us
when we answer telephone advertising calls.
In addition to oral disclosures, we would have to maintain
records for 2 years of who took the call, including name,
address and title, even after they had left our employment, the
date the goods or services were purchased and the date the
goods or services were delivered. With respect to our regular
advertisers, this becomes an absolute recordkeeping nightmare.
Please understand that almost everything I have described
to you does not involve what most people consider
telemarketing, where a business calls a potential customer. All
of this would happen when the customer, on their own, calls us
or the advertiser.
The proposed rules would also bar us from calling our
subscribers for renewal reminders until their subscription had
actually lapsed. I can only hope that this is not an
intentional prohibition, because that is no way to run a
business.
Some of our subscribers depend upon us for reminder calls
prior to their subscription expiring. What the FTC calls abuse,
we simply call customer service.
Likewise, we would be prohibited from calling classified
advertisers to see if they would like to extend the run of
their ad until it had expired. The result is missed opportunity
for both the advertiser and the newspaper. Another portion of
the FTC's proposed rules with unintended yet disastrous
consequences for the newspaper industry is a prohibition on
sending a courier to pick up a payment which would prevent your
newspaper carrier from collecting on the route. Delivery route
collections are a longstanding and worthy service we offer our
subscribers. This method of payment is most frequently used by
and particularly useful to home bound individuals, inner city
residents and the elderly. We want to make it easier for our
readers to obtain the newspaper, not more difficult.
Another practice that would be off limits if the proposed
rules are adopted is a prohibition on calling a resident more
than once in a 3-month period, without the called party's
consent. This prohibition would wreak havoc on the time tested
tradition of selling newspapers in 8 week packages. It is bad
customer service to leave new subscribers hanging for weeks
without calling to see if they are enjoying their subscription,
have had any delivery problems, have any questions, or would
like to continue receiving the newspaper.
Even the fact that we already maintain company wide do not
call lists pursuant to rules enforced by the Federal
Communications Commission in which we support, the FTC's
proposed 3 month rule is unnecessary. There is already a
mechanism in place to accommodate persons that object to
telephone solicitations from newspapers or anyone else. The FCC
rule stems from another telemarketing law passed by Congress in
1991, the Telephone Consumer Protection Act.
Mr. Chairman, members of the committee, the bottom line is
that the Congress charged the Federal Trade Commission with
stopping fraudulent schemes and abusive practices in
telemarketing. But, the FTC has responded by proposing rules
that make telemarketing virtually impossible for every
business, large or small, in this company. Telemarketing is the
way newspapers compete with each other, with magazines, with
billboards, with radio, television and cable TV. Telemarketing
is relied upon for the circulation for advertising by the
Indianapolis Star and the Indianapolis News, and papers such as
the Muncie Star and the smaller market Noblesville Daily
Ledger.
No business will survive today unless it takes marketing
and customer service seriously. In our business, we try to do
much of it by phone.
Our industry is so concerned about what these rules could
do to us that we have asked the FTC for an exemption for
newspapers when final rules are issued in August, but we have
no reason to believe or to be encouraged by FTC actions to
date.
I want to be very clear. Our industry and hundreds of other
businesses, large and small, believe it is wrong for Congress
to allow a Government agency to effectively eliminate a
legitimate business practice, especially when we follow the
present rules of the road, and there is no record of anything
approaching fraud or abuse. I appreciate the opportunity to
present our views and I will look forward to working with you
and the subcommittee in the future to make sure that
rationality becomes a part of this process and common sense, we
hope. I will be happy to answer any of your questions.
Mr. McIntosh. Thank you very much, Mr. Applegate. Let me
just say in listening to your testimony today, I had heard a
little bit about this rule, but not very many of the details,
and it seems like an excellent example of something we should
consider for Corrections Day. It is a case where the agency has
gone way beyond the intended mandate of Congress.
As Mr. Gutknecht pointed out, they came up with a $50
solution to a $5 problem, and it is causing enormous headaches
in your industry, and I am sure, others.
One quick question. The exemption you referred to for
newspapers, would it not make sense for us to perhaps go
through and change the program for all businesses that are
legitimate users of the telemarketing?
Mr. Applegate. I am sure there are a lot of businesses out
there that would make equally as strong a statement, and would
indicate that it would hurt them as much as it would us, yes.
Mr. McIntosh. I appreciate you coming today and I
appreciate you coming forward. I really do think it would be a
great example of something to correct on Corrections Day.
Any quick questions?
Mr. Peterson. Well, I am inclined to get to the point where
I do not dare vote for anything anymore that goes through
Congress. I voted for this particular bill and I was promised
that we were not going to get into this kind of situation. It
seems like every time we vote for one of these ideas, we end up
with a regulation that is way beyond what anybody supports or
makes sense, and it happens time and again with cable TV or
whatever it is we are trying to regulate.
I do not know what we do about this sort of taking away the
regulatory power of the agencies and doing it ourselves. I am
not so sure whether that would work, either.
I think the one thing, if we could get the moratorium bill
through, that would put a hold on this regulation until
December, and we could maybe talk some sense into them, or the
45 day legislative veto that passed through the Senate. The
best idea, I think, would be to put those two together, and
give us some kind of ability to get at this.
I mean, we were promised--I mean, I specifically asked the
author of the bill before this passed if we were going to get
into this kind of situation. No, we were just going to go after
these bad apples in telemarketing, selling time shares and
doing some of this stuff that I think all of us agree needs to
be controlled. It seems like every time we turn around, we get
off in some other antic.
By the way, your colleagues in Minnesota have been in
contact with me and have done their work.
Mr. Applegate. I bet they have.
Mr. Peterson. I am with you all the way and we are going to
do what we can.
Mr. Applegate. Great. We certainly recognize that there is
some deception and some fraudulent telemarketing going on out
there. But, on the other hand, there is a lot of business that
is done in a very legitimate way through telemarketing, and a
lot of businesses, as you have pointed out, Congressman
McIntosh, that literally would be crippled in many ways, if
these restrictions were approved.
Mr. McIntosh. I appreciate that. Gil, would you have
anything?
Mr. Gutknecht. Mr. Chairman, I would just say, and this has
been excellent testimony, and it is kind of interesting to see
that some of the people in the media are caught in the net this
time, as well. I would say that I hope we would not give
exemptions to this, because I think, in fact, rather than
granting exemptions, I think we ought to be more inclusionary.
As a matter of fact, I think there is one group that is
excluded from this law, and it is politicians. Frankly, I think
if we had to live by some of the telemarketing rules and
regulations, my suspicion is, we would probably have much more
reasonable regulations. We were involved in the very first day
of this Congress, passing the Congressional Accountability Act,
which makes Congress abide by most of the employment laws that
everybody else has to abide by. I think this is one that we may
have escaped.
Perhaps rather than giving exclusions for your group, maybe
we ought to offer an amendment that would make certain Members
of Congress abide by some of these, because telemarketing is a
big part of politics today.
Mr. Applegate. We certainly would not prefer to be an
exempt group, as a matter of fact, and we realize that
certainly there are businesses that would be affected as much
as we, but we certainly are also concerned about our businesses
if these regulations are passed. Thank you very much.
Mr. McIntosh. Thank you. I like that idea a lot, Mr.
Gutknecht. Perhaps we will give Congress a choice of either
abolishing the law or applying it to themselves. We will
definitely be able to win on Corrections Day if we do that.
Thank you very much for coming, Mr. Applegate.
Our next witness today is Mr. Jeff Bowe. I appreciate you
coming today. Mr. Bowe is with the Indiana Water Co.--no. I
will let you introduce yourself. The purpose here today is to
give people a chance to testify and then open it up for the
general audience. So, Mr. Bowe, thank you for coming, and let
us hear.
STATEMENT OF JEFF BOWE, PRESIDENT, BENHAM PRESS
Mr. Bowe. Congressman McIntosh and members of the
committee, I would like to welcome you to Indianapolis, also,
and thank you for the opportunity to address you this morning.
I supplied copies of my comments, gave you the background for
my comments, and also gave you a list that I have that I will
be referring to in a minute.
My name is Jeff Bowe and I am president of Benham Press,
Inc. We are a medium sized printing company here in
Indianapolis, producing roughly $5 million worth of customized
printing products a year, employing roughly 45 moderately to
highly skilled employees.
I am also immediate past president of Printing Industries
of Indiana. I am informed that our industry employs almost
20,000 people in this State and about 1,000 companies, making
us an industry of small businesses. Nationally, we employ
around 800,000 people, which makes us the third largest
industry, again, with an average company size of around 12
people, the prototype of a small business industry.
However, small does not mean unaware, nor does it mean
uncaring. I am willing to talk about Government regulations of
environmental matters. While no one in our industry recommends
the abolishment of EPA or the other agencies commissioned to
protect and preserve our delicate environment, we do feel their
goals could be met with less cost, less paperwork and less
confusion.
In 1993, our national association, Printing Industries of
America, conducted a study to determine how many different
Federal reporting requirements might apply to the small
business. We determined upfront that we would not limit our
research strictly to those that would apply to the printing
company, because we felt that first there might not be that
many, and second, we were hoping to supply the study to other
groups.
However, when the study was completed, we were amazed to
find 47 different Federal reporting requirements on
environmental regulations. Those 47 fell primarily into the
following acts, some of which were mentioned earlier: the Clean
Air Act, Emergency Planning and Community Right to Know Act,
Toxic Substances Control Act, Occupational Safety and Health,
which is OSHA, RCRA, Resource Conservation Recovery Act,
CERCLA, Comprehensive Environmental Response Comprehensive and
Liability Act, the Clean Water Act and the Safe Drinking Water
Act.
If some of these acronyms sound familiar and the names
sound repetitive, that is exactly our point. I have included
the results of a study and the corresponding one line
description of each in my comments, and that is eight pages
long. When I reviewed the list, I found more like 65
requirements, but I could not contact the author over the
weekend to clarify 47 versus 65, but either way, it is an
amazing number.
I will not try to mislead you that any one printing company
or any company would be subject to all 47. However, our company
is subject to around 19 of them. The only way to know whether
you are subject to all 47, however, is to read them, evaluate
them and perform the calculations and evaluate those results.
Which leaves the only thing not doing in filing a report,
however, I am not suggesting that I would like to file an
additional 28 reports.
Which brings me to my main point, is how many people,
companies, organizations are actually in compliance with all
these requirements? I really could not say, although I have
repeatedly estimated compliance with the Clean Air Act to be
around 20 percent, because of the difficulty in reading and
applying those regulations, as was testified to by the lady a
few minutes ago.
I would have to claim that we are in compliance, although I
really could not guarantee that, because I am not sure if my
level of technical knowledge would allow me to make such a
judgment. Like most small business people, in addition to
having to be a market guru, human resources specialist,
financial accounting expert, coach, counselor and personal
financial bank to my employees, I now also have to be a process
engineer, chemical engineer, purchasing agent, inventory
control specialist and hazardous waste disposal technician.
I cannot adequately judge or nowhere even expect to know
what some of these chemicals are just by looking at their cast
number or generic chemical name, let alone how these chemicals
interact during our process, whether we can change any of them
or still come up with the same results, or know exactly how
much we purchased when and had on hand at any one time and how
every single drop was disposed of. It is simply an impossible
task.
There are two ways we can try. We use a combination of both
from time to time. First, because my signature is on those
reports, I end up digging out how much we bought, when, how we
used it and how we disposed of it. The problem is, those 47
requirements all want the information in a slightly different
format over different periods of time, and calculated or
tabulated in a slightly different manner, which means that on
average, I spend about 4 work weeks per year learning these
requirements and collecting and evaluating this information.
I work on a committee here in Indiana that is writing the
Clean Air Act statement of notation plan, and have been working
on that committee for 2 years. So, I am more familiar with that
program than probably 60 to 80 percent of the people in
business out there. To you, spending 4 weeks a year might not
seem like a whole lot of time, but it represents 8 percent of
my total time available to my business, and that is time I
cannot spend increasing sales, researching new technology or
creating more jobs by investing that time and money into
increasing our capabilities and output.
As for competitiveness between companies, those who play by
the rules are severely limited and restricted because of doing
what we feel is right. Even though there are penalties and they
are severe for failure to report, it is still not fair that we
would be subject to the same penalties as someone who did not
report at all.
I was talking to a group of fellow printers a few weeks
ago, actually was making a presentation on the Clean Air Act
that is going into effect over the next 18 months, and we were
discussing how to calculate VOC emissions for the permit
applications, which will be due sometime in the next 15 months,
but we do not know when, because EPA has not yet approved our
plan. So, we do not know exactly what timeframe for the
application, even though they are due in the fairly immediate
future.
I made a misstatement during my presentation. However, it
was not because I was unfamiliar with the regulations. I was
familiar with the regulations. What I was not familiar with was
one paragraph in a document prepared by a third party on
another matter, which stated how much of the VOC's are actually
absorbed and retained by the paper. That one paragraph made a
400 percent difference in my calculations.
I estimate that cost of a mistake in my company would be
about $5,000 a year permit fees, and probably would require
about 500 man hours of work per year, depending on how that
calculation went. Again, it is my opinion and the opinion of my
peers that I know these regulations, because I spend time with
them.
One of my suppliers at that meeting said if it takes me 4
hours to fill out the report, it probably takes most of his
customers 25 to 30 hours for each report, and again, I am
subject to 19 of them.
There is, of course, another answer which is mentioned
earlier, to hire a consultant. That is easy to do, and I have
looked at that also. You can pick up a telephone book or call
the trade association or use your law firm, but this is
expensive.
I found, also, that the basic consulting contract, and by
basic, I mean, they quickly review your product, your material
safety data sheets, which I could not carry in here, because I
have four books which are about that tall--that is about
$3,000, just to review the products to see which programs you
might be subject to. If you want them to prepare the reports
for all the programs, including researching your records, to
know in a more definitive manner which ones they think you are
still subject to, the estimates are around 10 times that, or
around $30,000.
That still does not account the man hours to maintain the
reporting records for the next cycle, after you are now subject
to the requirements. As a comparison, most small businesses did
not make $30,000 last year.
As I said earlier, no one thinks this information is
unimportant and certainly, no one is opposed to reasonable
control to protect our environment. But, 47 different
departments on the same information is nothing but replication,
duplication and excess paperwork.
I would like to point out one bright side that our national
trade association is working on two products to address this.
The first is the great printers project being done in
connection with the EPA, and the second is the common sense
initiative. Both projects have the same goal, unified reporting
form, which would be one form per company with the same
information for all projects.
Now, again, that form would be larger and more complex than
any one form we currently produce. However, if I had to mail
one form to 19 or even 47 different places, it would represent
a reduction in paperwork of probably 90 percent, and I have
estimated about 75 percent in time.
So, it is this type of innovative yet simplistic thinking
that is required to free American business and the American
businessmen and women to do what we do best, which is to grow
our business, grow our employee force, and to grow the national
economy.
[The prepared statement of Mr. Bowe follows:]
Mr. McIntosh. Thank you very much, Mr. Bowe. Let me ask you
very quickly on the Clean Air Act, the permitting process,
especially since you spent a lot of time working here in
Indiana on the State implementation plan, is it necessary in
order to get the emissions reductions under the Clean Air Act,
or could we eliminate the permitting requirements, and just
have people abide under the different emissions controls?
Mr. Bowe. In my opinion, the Clean Air Act really does
nothing to reduce emissions. There are, at this point in the
State legislation regulations, no requirements to actually
reduce pollution or emissions. It is just a matter of how much
do you want to pay to be allowed to emit whatever level you
wish.
Mr. McIntosh. So, this regulation does not help us get
cleaner air. It is simply an extra burden, both a fee and
paperwork requirement.
Mr. Bowe. At this point, right, there are no strict
requirements to reduce emissions in the Clean Air Act.
Mr. McIntosh. Under Title V?
Mr. Bowe. Under Title V.
Mr. McIntosh. Thank you very much. Any questions?
Mr. Peterson. Mr. Chairman, I would like to ask--I do not
often quote from news magazines, but there was this article in
Newsweek on April 10 where Robert Samuelson wrote this kind of
editorial, I guess, and he said that, ``The modern
environmental movement is a parable of our times. It is a huge
success that is mainly unrecognized and a source of continuing
alarm which is mainly unjustified.''
He talks about this book that was written by an
environmentalist who basically says that we have vast groups of
problem solvers, Government officials, professional advocates,
scientists and journalists, whose very being requires that they
perpetuate the problems they purport to solve.
The perverse result is to create a false reality in which
almost nothing good ever happens. I think we ought to get a
copy of this book here by Greg Easterbook, A Moment on Earth,
the Coming Age of Environmental Optimism. I think this guy is
right on, and is a lot of what is driving this problem.
We get all wrapped up in the minutiae of these rules and it
drives us nuts on these little points, but if we do not back
off enough and look at the big picture, basically what this
article says is that we are trying to--you know, that they have
looked at who has looked at this, and this guy is an
environmentalist, and he finds dramatic progress and few
impending calamities. They kind of manufacture these crises and
try to come up with solutions to problems that do not exist.
The result is all this stuff that drives you nuts.
We are not really accomplishing anything, other than
keeping all these bureaucrats in business and keeping----
Mr. Bowe. Correct. The thing I would add on top of that is
that we end up trading new program and another set of
regulations for the same situation, before the first one
actually takes effect. So, before the Clean Air Act fully
becomes in effect, which will take anywhere in the next 5 to 8
years, we will see another set of regulations on top of that.
Mr. McIntosh. Thank you.
Mr. Gutknecht, did you have any questions?
Mr. Gutknecht. No, Mr. Bowe has done a great job, and I
know there are a number of other people that want to testify,
so I will let them come up and share with us.
Mr. Bowe. Thank you.
Mr. McIntosh. Thank you. Thank you very much.
For our next witness, we are going to change the order
slightly. Mr. Miles Brand, president, the new president of
Indiana University. I appreciate you joining us today. I know
there are a lot of IU fans in the audience and throughout
Indiana. Thank you for joining us, and please share with us
some of your experience on costs of regulations in providing
higher education.
STATEMENT OF MYLES BRAND, PRESIDENT, INDIANA UNIVERSITY
Mr. Brand. Thank you. I very much appreciate the
opportunity to be here. Thank you, Representative McIntosh, and
also the distinguished panel members. I appreciate the
opportunity.
Before I begin, I would like to personally commend
Representative McIntosh for his leadership in addressing the
problems of over-regulation and the need for bringing prudence
and common sense into the Federal regulatory arena. I thank you
gentlemen, as well.
Regulatory reform is absolutely essential to improve
administrative efficiency within the Federal Government to
streamline regulatory activity outside the Government and
eliminate duplicative process. My comments this morning will
focus primarily on the State Post-Secondary Review Program, or
SPRE, an egregious example of onerous regulation imposed by the
Federal Government.
I have also submitted a 17 page document from Indiana
University that illustrates the areas in which we have
additional strong regulatory concerns. When the SPRE program
was approved, the intent was to control fraud and abuse in the
use of Federal student financial aid moneys. I fully support
the intent of the Congress, but 4 year, degree granting
institutions are adversely affected in a number of areas by the
new regulations issued by the U.S. Department of Education,
which implements the SPREs.
Since Title IV funds are involved, the statute covers all
post-secondary institutions receiving those funds, including
proprietary and 2 and 4 year degree granting institutions. It
is widely agreed that the fraud and abuse in question are found
primarily among proprietary institutions, particularly in
regard to repayment for Federal student loans.
Thus, my colleagues and I believe that the inclusion of a
broad spectrum of colleges and universities in the program
distorts the original intent of Congress. Moreover, regulations
adopted by the Department of Education have broadened the scope
of the SPREs beyond the statutory authorization by intruding
into academic affairs in a way not required by the statute, and
imposing significant and counterproductive burdens in
recordkeeping and reporting, and causing needlessly high
compliance costs. For Indiana University, estimates for
compliance run as high as $500,000 to $1 million a year,
incremental moneys.
Let me illustrate three specific examples of the adverse
effects for 4 year institutions overburdened by SPREs.
First, SPREs receive power to monitor academic matters that
are properly under the jurisdiction of faculty, administrators
and boards of trustees, and that have never been the province
of external Government agencies.
For example, some SPRE standards seek to monitor faculty
credentials, course content and frequency of course offerings.
Second, SPREs require recordkeeping of a magnitude that is
not cost effective, and may in some cases not even be feasible
for 4 year institutions. An illustration is recordkeeping
regarding the rate at which graduates find employment in their
occupationally specific programs.
While we can often, though not always, track initial
employment of our students, once they leave campus, it is
inordinately difficult to follow the career paths of our former
students. Meeting such recordkeeping requirements would require
a financial outlay disproportionate to any potential benefit to
students, the institutions or the government.
Third, SPRE has imposed inappropriate measurements that may
interfere with an institution's ability to serve students of
varied backgrounds and educational objectives, which would
create a potentially false picture of the institution's
quality. Illustrations are the minimum standards and acceptable
percentages for graduation withdrawal rates.
Graduation rates are directly dependent upon the population
that an institution serves. For example, those institutions
with a commuting adult student population will have a lower
graduation rate than one serving tradition 18 to 24 year olds
in a residential setting.
The original intent of Congress is clearly correct in its
effort to curb abuses in student financial aid programs.
However, it is widely held that 4 year institutions such as
Indiana University are generally not guilty of such abuses, and
that existing audit and program review processes in the U.S.
Department of Education are adequate to resolve compliance
problems at such institutions.
I am pleased to note that the U.S. House of Representatives
is taking action on this matter in the recently passed
rescission bill. Unfortunately, the Senate continues to
recommend funding for SPREs that will yield the problem cited
as well as others. The right course, it would seem, is to
forthrightly address the problems with proprietary
institutions, and not cast the regulatory net so wide that it
creates more problems than it solves.
Elsewhere at the college and university level, the burden
posed by over-regulation is tremendous. I have submitted a two
page summary of regulatory challenges we face, and these range
from 60 new regulations issued by the Department of Education
since 1994, alone, to increased encroachment by the Internal
Revenue Service in taxes, income and benefits. Other instances
of over-regulation include myriad environmental, safety and
health regulations and overzealous certification procedures for
research.
I welcome the opportunity to work with you and others to
identify these areas and to propose appropriate remedies. Let
us be clear that my intention is not to absolve colleges and
universities from appropriate oversight, compliance and audit
activities by the Federal Government.
I am simply urging that these regulatory activities not
exceed reasonable bounds in achieving the overall desired
outcomes. I thank you, and I am happy to answer any of your
questions.
Mr. McIntosh. Thank you very much, Dr. Brand. I appreciate
you joining us here today. Two things, really, one fairly
specific on the SPRE and one general.
The specific on the SPRE, if we simply address it as a
funding matter, would you not still have a problem with the
statute being in place and possibly providing an opportunity at
some future date to see these regulations be resurrected or
have a legal mandate to still follow through with many of them?
So, we may need to go in and change the organic statute on
that.
Mr. Brand. I agree entirely. I think that as a stop gap
measure, no funding would be the best course, but I believe
over the long run, you are exactly right, Congressman, that the
regulation itself is overburdening, and suggests
inappropriately to State, as well as Federal agencies, that
this kind of regulation is productive. It is not.
Mr. McIntosh. The other question which is more general and
may be difficult to give us an empirical answer, but as these
regulations are applied to your university and other
institutions of higher education, is the ultimate effect that
tuition needs to be increased, or you have got to find sources
of funding to be able to pay for the overhead to comply with a
lot of these?
Mr. Brand. Congressman, you are exactly right on that
count, as well. As you know, States for various reasons,
understandably, but for various reasons, are backing out of
their commitments to supporting public higher education. As a
result, more of the burden is being shouldered by students.
Here in Indiana, we have gone from about less than a third
or approximately a third of a cost of public education in the
State on students' shoulders up to 43 percent, and that is
increasing. One of the reasons it is increasing is needless
regulation. You are absolutely right, sir.
Mr. McIntosh. So, if we can address this problem of
needless regulation, students can expect to see some benefit in
the amount of tuition they would have to pay?
Mr. Brand. It will decrease the rate of which we have to
increase tuition.
Mr. McIntosh. That is known as a cut in Washington. Thank
you very much, Dr. Brand.
Mr. Brand. Thank you.
Mr. McIntosh. Any questions?
Mr. Peterson. I hesitate to put you on the spot, but we get
put on the spot all the time. You said that the Department of
Education put 60 regulations on you just recently?
Mr. Brand. Yes.
Mr. Peterson. Does your university or the group that you
are associated with have a position on abolishing the
Department of Education?
Mr. Brand. I do not have a position on that, but I should
note in the last couple of years, that the Department of
Education, under the current leadership in the Department of
Education, has accelerated the regulatory burdens, without
question.
Mr. Peterson. Your association of universities has not--I
had not thought about it until we were sitting here----
Mr. Brand. From my own personal view or from Indiana
University's point of view, I do not have a position on that.
Mr. Peterson. You are not aware of whether your overall
group has taken a position on that? You are a land grant
university?
Mr. Brand. Excuse me, sir?
Mr. Peterson. You are a land grant university?
Mr. Brand. No, we are not.
Mr. Peterson. Oh, you are not?
Mr. Brand. No, but we are members of the Association of
American Universities.
Mr. Peterson. Have they taken a position on it?
Mr. Brand. I do not know. Probably, they would support the
Department of Education, but I have not--my guess is, they
would continue to support it.
Mr. Peterson. Even though they are putting 60 new
regulations on you?
Mr. Brand. We have seen in the last couple of years, the
Department of Education, unfortunately, enhance that. I think,
with a much more common sense approach, we can bring things
back to reason.
Mr. Peterson. Thank you.
Mr. McIntosh. Thank you, Dr. Brand. Very well done.
Mr. Gutknecht. I know you want to run and we have other
people to hear from, but I just wanted to commend you for
coming forward and testifying today. I could not help but think
as you were testifying, first we heard from a newspaper
publisher, someone from the media, and now from academia. I
think perhaps now we are finally reaching a critical mass here,
so we can really launch a real offense relative to this over-
regulation.
I think when you have even university presidents saying
enough is enough, then clearly we have reached that point. I
appreciate your coming forward.
I would also echo the comments of Congressman Peterson,
that I think perhaps the University Association should look at
the whole issue, because the Department of Education is a
classic example, in my opinion, of bureaucratic inertia, where
it just continues to grow, where it reaches a point where I
think, my observation is in terms of value added for the
average student, for the average family, it is hard for me to
argue that we are getting real value for the student from that
department. It is one that is high on our list to at least
examine whether or not it should continue to exist. I think the
universities ought to ask themselves that question, are they
really adding value to the students in the long run?
Mr. Brand. Fair enough. We will. I want to thank you and
the entire subcommittee for looking at the issue of over-
regulation. I am pleased to learn it was a critical mass
building to be able to deal with this quite important issue,
and thank you again for the opportunity.
Mr. McIntosh. Thank you. I appreciate that very, very much,
Dr. Brand.
As you can see, the freshman and the Blue Dog Democrats are
stirring things up in Washington, and asking the questions that
heretofore have not been put on the table.
Let me now go back to the order we were in, and call
forward Mr. John Keach and Mr. Jerry Baumgartner. Mr. Keach is
president of Home Federal Savings Bank and Mr. Baumgartner is
president of Tri-County Bank and Trust Co.
Thank you both for joining us today. Many consumers of your
product do not realize the amount of paperwork and cost that
the regulatory process imposes ultimately on them, as they have
to pay for the services that you provide, so I appreciate you
coming forward and sharing that with us.
Mr. Keach, would you like to lead off?
STATEMENT OF JOHN KEACH, JR., PRESIDENT, HOME FEDERAL SAVINGS
BANK
Mr. Keach. I would. I just wish that we could have kept
those binders here probably for the whole day. We could all
just kind of swap them around, because what I am going to talk
about also pertains to that a little bit.
I am John Keach, president of Home Federal Savings Bank,
$570 million savings bank, focusing on consumer and business
banking services in certain markets in south central portions
of Indiana.
The bank does business through 15 full service offices and
one loan production office. Home Federal Bancorp is organized
as a unitary savings and loan holding company, and owns all the
stock of Home Federal Savings Bank.
The Federal Deposit Insurance Corporation Improvement Act
of 1991, FDICIA, is a far reaching regulation that touches on
many facets of the financial industry. My remarks today will
focus on only two pieces of this cumbersome legislation.
Section 112 of FDICIA, the Congress added Section 36, Early
Identification of Needed Improvements in Financial Management,
to the Federal Deposit Insurance Act, as part of the Federal
Deposit Insurance Corporation Improvement Act of 1991, Section
112, which became law in December 1992.
The rule intended to facilitate the early identification of
problems in financial management through annual independent
audits, more stringent reporting requirements and internal
controls. Institutions with assets greater than $500 million
are required to take the following actions: conduct annual
independent audits, appoint independent audit committees of
outside directors, report on and assess management's
responsibilities for preparing financial statements and
establishing and maintaining internal control structure and
procedures for financial reporting and compliance with
designated laws and regulation.
We must also have an independent accountant attest to and
report on the assertions of management's reports concerning
internal controls.
The requirement that an independent accountant must perform
an examination level attestation audit has proven to be
expensive, as I am going to explain. It is time consuming and
in many instances, redundant. I say redundant, because we are
already subject to the Office of Thrift Supervision examination
covering safety and soundness, compliance, data processing and
CRA. Three years ago, we had three of the four of these
examinations going on at the same time.
In addition, we have the FDIC, and of course, our external
auditors coming in annually to oversee our work. We also employ
an internal audit department of four people.
The cost to comply with this attestation requirement is
$47,000 for us in our first year of implementation to the
outside auditors, plus $20,000, which is estimated at about
15,000 man hours in staff time.
This increased the cost of last year's audit by 80 percent
over what it would have been without the FDICIA mandates. Here
is what we received. A four paragraph letter from our auditors,
three paragraphs of which were honestly written by their
attorneys to take them off the hook if they missed something,
and one paragraph that says we comply in all material respects.
That was it. That was the $67,000 worth.
Copies of this letter were sent to the FDIC and OTS. I
assume they were reviewed by someone, although I do not know
for sure, because we have never been asked by the FDIC or the
OTS to comment on this part of the audit.
The point is this. We are audited and examined so much that
it is becoming increasingly difficult for us to find time to
focus on new products and technologies that can truly benefit
our customers and consumers in general.
Another piece of this FDICIA was the Truth in Savings Act,
another integral part, very complex, and it was intended to
provide the consumer with appropriate information to make
informed decisions about accounts at depository institutions.
One important point, though. The brokerage industry remains
exempt from the burdens of truth in savings, as they continue
to offer similar products to the general public, the same
products, some regulated, some not.
One might ask, why is this regulation necessary for one
industry, but not for another? A major part of the legislation
which I had submitted to you in advance as an example had to do
with the changing of the calculation on an annual percentage
rate or annual percentage yield as it is now referred to, and I
did submit this to you. There is an example that is provided by
the Federal Reserve Bank in March 1993, and I would challenge
any of you to attempt this without a cheat sheet, and that is
what the consumer has if they are truly trying to compare rates
of one institution to those of another. While the attempt may
seem simple and good, in reality, it just does not work.
Recent banking publications have indicated that changes are
now in the process of being revised again in this APY
calculation, so from the first standpoint or bank standpoint,
we do the disclosures, we do the advertising, and before we
even get to really see how it works, now they are changing it
again. The cost of these regulations are not so much in
dollars, but in energies that are directed to areas that are
not productive for the company or the economy in general.
There are many cases of dollars invested with no return.
When that happens, we can either increase our product's cost to
consumers to make up for the lost revenues and opportunities,
or simply absorb the expense, which results in reduced capital,
therefore, in conflict with the intentions of FDICIA. So, there
is a cycle that we are dealing with.
One other piece that I would just like to touch on briefly
in closing, RESPA, which was the Real Estate Settlement
Procedures Act started in 1974, was to provide effective
advance disclosures to borrowers, settlement disclosures to
buyers and sellers, eliminate kickbacks and direct escrow
requirements of banks and others who take the payments.
There is some new legislation that is out now pertaining to
this area. The latest change of RESPA, which takes effect this
May, will require banks to use what we call aggregate
accounting for escrow accounts. Aggregate accounting specific
procedures for collecting monthly escrow account deposits,
provides specific arithmetic steps to calculate escrow and
mandates additional disclosure requirements, as you would
expect.
These additional regulatory burdens disincent the community
bank from offering this optional escrow service, therefore
giving the first time or low income home buyer less opportunity
for home ownership. This is required in a lot of the low
downpayment types of programs, which are targeted to first time
home buyers or low income areas.
This scenario would be counterproductive to the Community
Reinvestment Act efforts of most financial institutions.
Additional potential burdens may be borne by municipalities
due to the collection of property taxes currently being
collected by local financial institutions. Needless to say,
this latest change has potential expense ramifications on our
local communities.
According to an April 6, 1995 article in the American
Banker, a bill has been proposed in Congress that would shift
responsibility for the enforcement of RESPA from HUD to the
Federal Reserve Board. While I cannot speak to the benefits of
transferring the oversight responsibilities of RESPA, I would
encourage Congress to insure that any additions to this
regulation are consistent with the original intent of the law.
Just by switching it to another area, I hope they just do not
reinvent the whole wheel.
Last year HUD said 90 percent of the RESPA related
complaints it received about lenders' actions came from other
lenders. Lenders complaining about other lenders is not
benefiting the consumer.
Mr. Chairman, I applaud you and your committee for your
proactive approach in combating the continued onslaught of
government regulations. Thank you for allowing me to be part of
the process.
[The prepared statement of Mr. Keach follows:]
Mr. McIntosh. Thank you very much, Mr. Keach. Mr.
Baumgartner.
STATEMENT OF JERRY BAUMGARTNER, PRESIDENT, TRI-COUNTY BANK AND
TRUST
Mr. Baumgartner. I would like to thank the Subcommittee on
National Economic Growth, Natural Resources, and Regulatory
Affairs for giving me the opportunity to speak to them today
and for coming to the State of Indiana to listen to our
concerns.
I am president of a community bank located in west central
Indiana by the name of Tri-County Bank & Trust Co. with assets
of $86 million. Our earnings last year were $1,191,000 and our
tier one leverage capital to average assets stood at 10.1
percent. We serve communities that are anywhere from 400 people
to 20,000 people in population, with the largest community
being Crawfordsville, IN.
Four years ago, when the FDIC came in to do an exam, they
had six examiners here for a period of 2 weeks. When they came
back in late 1994 to examine us, they had two examiners in for
a period of 3 weeks to do a compliance exam, seven examiners in
for 3 weeks to do a safety and soundness exam, and then in
January, two more examiners came back and spent an additional 4
days doing an EDP exam of the bank.
Generally, whenever an exam team is in, you can assume that
one of our officers and many times it is usually a senior
officer, is tied up talking to one of the examiners for the
entire time the exam team is here. This is almost never
productive time for our shareholders, because we cannot be
providing services to our customers during that time.
In the last exam, one examiner spent approximately 2 days
calculating the tax liability on earnings up in the holding
company to see whether or not the holding company was paying
its quarterly tax assessment to the bank. Total investment
income in the holding company through the first 9 months had
only been $2,161. The examiner then wrote this up as a
violation, as an unsafe and unsound practice, because we had
been making a loan to the holding company according to the
examiner, without a note, a promise to pay, signatures of those
obligated to pay or an interest rate.
Our policy, which had passed all previous exams since 1986,
states that the estimated taxes will be borne on an appropriate
split between the companies, except when an immaterial amount
of $5,000 or less is due on the estimated payment dates. With
total income of only $2,161, we thought we were well within our
policy, and that it was not a significant item, considering
that we had $9 million in capital.
We are a one bank holding company. Regulations need to have
some common sense to them. If it is not a significant amount of
money and it does not materially affect the overall situation
of the bank, why then would anyone spend any time and write up
such an insignificant complaint and waste an hour of my time
discussing it with me?
Also, when the examiners were doing the CRA exam, one of
the comments they made was that CRA really was not expensive to
the bank. It could not have cost the bank more than $7,500 or
$8,000 to maintain this file and do the paperwork. I questioned
this figure in my own mind, and quickly decided that what we
would do would be to keep track of our time and the effort that
would go into putting together the CRA report for the board of
directors for the first quarter of 1995.
In calculating the cost for the quarter, we took all the
time and effort of all of our officers and employees and
multiplied it by a figure of four. Our cost for the year 1995
for CRA will be $79,481. In the CRA Act, it states that the
bank will maintain a file that customers can come in and look
in your CRA report.
Mr. McIntosh. Mr. Baumgarten, can I ask you to just go
ahead and summarize, so we can make sure we can get everybody
in?
Mr. Baumgarten. OK. During that time, in the last 11 years,
we have never had a customer come in and ask whether or not
they could look at our CRA report, and they have never filed a
complaint.
It has become an extremely expensive process, and what we
really need to do is get rid of the CRA. It does not serve our
community, and I would much prefer to take that $80,000 expense
and either pay it out to my depositors in added interest, or
reduce the expense to my borrowers, because they are ultimately
paying the costs.
[The prepared statement of Mr. Baumgartner follows:]
Mr. McIntosh. Thank you. I would appreciate hearing from
both of you. One of the things I noted was that a lot of the
costs are borne by the smaller institutions, much more
disproportionately, and often times, you are the ones who
really serve a lot of our smaller communities and rural areas,
which is where I represent, and all three of us have a lot of
that in our districts.
One thing Mr. Keach mentioned was that sometimes it is your
competitors who end up filing the complaints and reviewing the
process, and you wonder if Government is really being set up to
interfere with the competitive marketplace, and I appreciated
you noting that to us, Mr. Keach.
Thank you for coming. Any questions?
Mr. Peterson. Well, I would just say I am a CPA and I used
to audit banks, but I am also in favor of a flat tax and
abolishing the IRS.
Mr. Keach. We have nothing against our CPAs.
Mr. Peterson. I understand. You must feel, did you go
through the whole debacle with the savings and loan?
Mr. Keach. We did.
Mr. Peterson. And you survived?
Mr. Keach. We did, as did all in Indiana. Indiana is a very
strong State from the capital standpoint.
Mr. Peterson. It is kind of ironic when the Government on
one hand tells you to change your accounting rules so they do
not tell the truth, then they turn around and put all this
burden on top of you. A lot of us also support getting rid of
the CRA. We are trying to get rid of it.
Mr. Keach. Thank you, good.
Mr. McIntosh. Thank you both for coming. I appreciate that,
particularly mentioning the CRA and getting rid of it.
Now, we will get to Mr. Jeff Robinson, who is with the
Indiana American Water Co. Is Mr. Robinson here? Great. I know
because he came in to see me in Richmond, they have a facility
there, but they also have a very effective presentation on a
lot of the work you are doing to make sure we have clean water
and a clean environment, but also the highest standards of
health in our safe drinking water.
I appreciate you coming here today and sharing with us your
company's experience in some of these regulatory areas.
STATEMENT OF JEFF ROBINSON, DIRECTOR OF WATER QUALITY, INDIANA
AMERICAN WATER CO.
Mr. Robinson. I appreciate the opportunity. My name is Jeff
Robinson and I am with the Indiana American Water Co. Indiana
American Water Co. is a water utility serving approximately
500,000 people in the State of Indiana. We are a subsidiary of
the American Waterworks Co., the largest investor owned water
utility in the United States, serving 6 million people in 21
States.
As director of water quality for Indiana American, I am
able to speak personally about the company's commitment to meet
all safe drinking water regulations. We take pride in the
quality and reliability of our operations.
Indiana American is fortunate to have the resources to cope
with the myriad of regulations and requirements set by the U.S.
Environmental Protection Agency. Drinking water regulations are
technically complex. Many public water systems, especially the
small ones, have difficulty meeting the regulations and often
do not know what is required of them.
There is a proposed drinking water legislation that adds
significantly to the cost of treating water, but provides
marginal, if any, benefit to the customer. Proposed regulation
for radionuclides is a very good example of this. There is
widespread agreement among State health and radiation
protection agencies, the scientific community, water suppliers
and other Federal agencies that the EPA has overestimated the
incremental benefits associated with a proposed maximum
contaminant level while underestimating the cost of compliance.
A study published in the American Waterworks Association
Journal estimates the cost of installing and operating radon
removal technologies across the United States will amount to
$2.5 billion per year, with more than two-thirds of those costs
being borne by very small water systems that serve 500 or fewer
people.
A report to the EPA Science Advisory Board in 1993 states
that, ``The overall risks associated with radon in drinking
water are small compared with the average radon exposures due
to indoor air, and the drinking water risks should be placed in
context with other radon risks.'' Setting a maximum contaminant
level of 3,000 pic/L would result in water contributing no more
radon to indoor air than is currently present in outdoor air.
Proposed legislation for arsenic demonstrates another
example of extreme legislation. The USEPA has discussed
lowering the MCL to a point between 2 and 20 parts per billion.
USEPA estimates that the initial compliance cost for a level of
20 parts per billion could run $140 million, while a lower MCL
could run as high as $6.2 billion, and affect 60 percent of all
public water systems.
Furthermore, current technology does not allow us to
accurately quantify arsenic at 2 parts per billion. This is an
example of regulating beyond the capabilities of current
technology.
There are three other rules proposed that concern us. These
are the Disinfectant/Disinfection By-Products Rule, the
Enhanced Surface Water Treatment Rule and the Information
Collection Rule. These three rules address complex and
interrelated issues. They attempt to balance the risk of
microbial disease, such as the Milwaukee Cryptosporidium
outbreak, against the risk associated with disinfectants and
their by-products. I might mention that Cryptosporidium and
Giardia are two of the primary concerns with drinking water
industries throughout the United States. They are microscopic
parasites, and they are of very significant health importance.
At this point, little is known about the occurrence of most
disinfectant by-products and the lack of knowledge regarding
treatment effectiveness for disinfection by-product control
inhibits sound regulatory decisionmaking. For this reason, the
rule is implemented in two stages.
American Water Systems oppose the implementation of stage
two of the Disinfectant/Disinfection By-Product Rule. We
believe that there are not enough health effects data currently
available to justify the levels being proposed. Setting a
disinfection by-product standard too stringent may compromise
the ability of many water systems to effectively treat for
Cryptosporidium and Giardia.
The proposed Information Collection Rule is intended to
provide data to further support regulatory development of the
proposed Disinfectant/Disinfection By-Product Rule and the
Enhanced Surface Water Treatment Rule. This rule is perhaps the
most significant nationwide effort ever proposed to compile
water quality data over a fixed time period.
Public health is better protected by spending resources on
improving water quality than on performing the tests required
by the Information Collection Rule. The test for
Cryptosporidium is poor and cumbersome, and not all labs can
perform it reliably. Utilities using a poor lab may receive
inaccurate results, because finding oocysts is very unlikely
with inaccurate techniques. Testing does not protect public
health. Treatment does. The EPA should concentrate efforts on
developing the proper treatment method, and not proceed with
the Information Collection Rule.
Experience being gained by the American Waterworks Systems
and others reveals that certain treatment changes can improve
removal of Cryptosporidium. American Water subscribes to the
Partnership Program, a voluntary agreement between USEPA and
public water systems throughout the USA. The program is
designed to address concerns surrounding Cryptosporidium and
Giardia. EPA's goal was to enhance the treatment of surface
water provided to a population of 75 million people.
Concerned water utilities serving over 79 million people,
signed on to support the program prior to the public
announcement. This illustrates the commitment of the water
industry to continuously provide the highest quality water
possible to the public without regulatory mandates.
Legislation such as the examples I have cited have a
monetary cost, but there is another cost, as well, the cost of
lost opportunity. Every moment we spend treating, testing or
otherwise complying with unneeded regulations, we lose the
opportunity to direct our time and energy toward efforts which
truly enhance the quality of our water. Thank you very much.
Mr. McIntosh. Thank you very much, Mr. Robinson. Let me
make sure I understand the implication of what you are saying,
because I think it is quite significant. The current
regulations in safe drinking water misdirect much of the cost
that you have, so that it is not spent on addressing one of the
major health threats that we potentially could have in this
country, Cryptosporidium?
Mr. Robinson. That is correct, especially with the
Information Collection Rule, which is a very complex rule. That
is designed to collect data nationwide to address
Cryptosporidium and Giardia, and the point is, there is enough
research available to show that there are Cryptosporidium and
Giardia in all surface waters throughout the United States, and
our treatment and our focus needs to be on what does it take to
effectively treat for Cryptosporidium and Giardia, rather than
do a nationwide, very expensive survey.
Mr. McIntosh. So, a company that might not have as much
resources as your company, more limited resources, would end up
by law having to spend them to comply with that regulation, and
may not do the most effective job they otherwise would be able
to in combating that health threat?
Mr. Robinson. That is exactly right. They will spend their
time and resources toward doing this nationwide survey, and we
know that the Cryptosporidium are there. They need to direct
their attention toward what does it take to treat this
organism.
Mr. McIntosh. So, it is kind of a classic example of where
a Government regulation potentially makes it less safe for the
consumer?
Mr. Robinson. Well, very possibly, especially when there
are inaccurate techniques involved, and even detecting
Cryptosporidium. What you are going to have, you are going to
have a nationwide survey looking at Cryptosporidium in source
waters and finished waters. They are not going to find it,
because of the inaccuracy of the results, and they are going to
gain a false sense of security.
Mr. McIntosh. I really appreciate your coming today,
because we have been attacked a lot in Congress for trying to
cut back on these regulations, and one of the claims was that
we would create unsafe drinking water in the country. I have
always been suspicious that the current Government regulatory
apparatus in that area and in food safety misdirected a lot of
the effort and the resources, and your experience and
information there would be helpful to us in letting the public
know exactly what has been going on.
Mr. Robinson. I appreciate sharing it with you.
Mr. McIntosh. Thank you. Any questions from any of the
other panel?
Mr. Peterson. During the subcommittee hearings on the
moratorium bill, we got into quite a discussion about these
Cryptosporidiums or whatever they are called, and some members
of our subcommittee told us that unless the EPA was able to go
ahead with this rule, and unless the EPA passed the rule, we
were not going to be able to fix the problem.
In other words, if you at the local level could not do
this, that you had to have the EPA do it, and you are disputing
that?
Mr. Robinson. Unfortunately, most of the information that
is being required to be collected by the Information Collection
Rule has already been collected, and we know the occurrence of
Cryptosporidium and Giardia. What we need to do is focus on
what does it take to provide adequate treatment for
Cryptosporidium and Giardia.
Mr. Peterson. I wish you could have been at the hearing and
straightened out Mr. Waxman for us.
Mr. Robinson. I would not mind sharing that information
with you.
Mr. McIntosh. I always suspected that if we could have
these things out of Washington, we would get better
information. Thank you.
Any comments, Mr. Gutknecht? Thank you very much for
coming, Mr. Robinson.
Mr. Robinson. Thank you very much.
Mr. McIntosh. At this point, we are going to turn over to
the next segment in the hearing process, something that I have
been looking forward to and think will be quite valuable. It is
what I think of as the open mic part of our field hearing. I
would like to invite anybody from the audience to come forward
and discuss or address any regulatory issue that you may have
or think that we have forgotten.
Karen Barnes, who is there with the microphone, can come to
you and make sure that you will be heard and recorded, so that
testimony will be taken back with us to Washington. If you
would be sure and let us know what your name is, so that we can
get it for the official record and I might ask you afterwards
to go over and make sure they have spelled it correctly and
everything, so that they can take that back to us.
Mildred tells me that the best thing is just to raise your
hand and Karen can go to you, and if you could stand up as you
are making your statement, I think that will help everybody
hear you.
Yes.
STATEMENT OF BOB SARGENT, MAYOR
Mr. Sargent. My name is Bob Sargent, and I am the mayor.
Mr. McIntosh. How do you do, Mayor? Good to see you.
Mr. Sargent. Good morning. Appreciate your coming here. I
do not know, I guess, what a Blue Dog Democrat is.
Mr. McIntosh. We think a Blue Dog Democrat is one that has
been squeezed till they turn blue. A yellow dog--we feel like
that sometimes.
Mr. Sargent. In the late 1970's and early 1980's, going
into Bramfield, a four county landfill was located out in
Fulton County. We hauled sewage. We had permits to do that. The
landfill was permitted. Then, they decided to close that
facility and then they made us a PHP--potentially harmful----
Mr. McIntosh. Go ahead and explain to everyone else. That
is under the Superfund Act?
Mr. Sargent. Yes.
Mr. McIntosh. You could be potentially held liable for the
entire clean up as a result?
Mr. Sargent. Yes, but they decided that they would do it by
volume, and we put tons of sludge in there, which was really
inert material, used as fertilizer.
So, they wanted us to pay $160,000 a year. We were looking
at over $2 million for the city of Kokomo for closure of this
landfill. We wanted to take the leaching from that landfill,
bring it to Kokomo and run it through our sanitation plant,
which legally you can do under EPA regulations.
In fact, we ran some hazardous material through our
sanitation plant for EPA, when they were cleaning up the--steel
plant. Now, we wanted to take that leaching, run it through our
wastewater treatment plant, which we did have, and they said we
could not do that.
Now, the manhole they wanted to dump it in was offsite the
sewer plant. That would be OK. I mean, it is just absolutely
ridiculous. It would be humorous, really, if it did not cost us
a couple of million dollars and maybe more.
Mr. McIntosh. Let me make sure I have that correct. You
could take that leaching and you could dump it into the manhole
or if it were in the manhole, you could process it?
Mr. Sargent. We do that all the time with the leaching from
the landfill in Rochester, and it helps us offset our costs,
and they say we cannot do that.
Mr. McIntosh. They will not let you take it directly to the
plant to be able to treat it?
Mr. Sargent. No, and we tried just outside the plant, and
they said no----
Mr. McIntosh. Let me ask you this, Mayor, if you have to
comply with the clean up costs in that area, who ends up paying
that bill?
Mr. Sargent [continuing]. Kokomo is the largest employer. I
cannot recall the other PRT's in that.
Mr. McIntosh. If the city has to pay any part of that bill,
then ultimately, it would be the taxpayers of Kokomo?
Mr. Sargent. Sure, we are paying $160,000 a year right now.
A minimum of $2 million, that is less sewers we can build,
police officers we can hire, you know, all the things that
people need. They are taking the leaching from the four county
landfill, putting it in a truck, and hauling it to Ohio, at a
cost of $275,000 a year, and are putting it in a hole in the
ground in Ohio, untreated. We call it the--of Ohio. That is
absolutely ridiculous.
Mr. McIntosh. I will tell you, it makes you a lot more
sympathetic to Senator Coat's proposal to not allow interstate
transportation of this.
Mr. Sargent. Absolutely. Thank you very much.
[The prepared statement of Mr. Sargent follows:]
Mr. McIntosh. Thank you very much, Mr. Mayor. Appreciate
it. Any comments.
Voice One. Thank you. My name is--we currently have 18
sewers and over 3,300 associates and--cardboard bailer. We have
had two instances of hazardous complying by OSHA. One of the
problems I have had is that as a means of their investigation,
what happens, I am visited by a labor representative, a
representative, and they proceed to call the people--even
throwing the boxes away instead of operating the bailer.
Based on the number of responses I get back, they do a
little bit more investigation, then they come to us saying,
these paper or cardboard, we are going to view these as signs
of OSHA violations.
In 1991, the first cite from this 6 of the 14 individuals
that they cited us for were among our employees at that time,
and one of them had--for over 5 months previous to their
investigation. At that time, our fine started at $32,000. We
went to OSHA, had a hearing, and we were fortunate to have it
reduced to $17,000, $1,000 of that for--$16,000 for compliance.
Recently, $1,000 for an occurrence, up to $10,000 for
occurrence. Three months ago, we were cited again and we were
fortunate to be fined only $1,200 a person.
One of the things we do at our company is safety. A lot of
the 16 and 17 year olds we have employed are part of our work
force, employee orientation and all that.
Over 3,300 people, some of them teenagers, there is no way
we can have someone follow them around, check and make sure
they are throwing boxes or not. I really appreciate you coming.
Mr. McIntosh. Thank you very much. Let me just make sure,
if you have somebody who is 18 years or older, then you will
not get fined if they----
Voice One. If they are over 18 and they throw something,
they are not--it is not a violation.
Mr. McIntosh. So, if I were you, I would start not hiring
people who are 16 and 17 year olds, because I would not want to
pay the fines. But, then, our high school kids would not have a
chance to have a job after school. It seems like it is kind of
misdirected in some of the efforts there.
Voice One. Yeah, like I said, we have to keep our doors
open.
Mr. McIntosh. I know Steven Austin who works for me started
out his life as a check boy at one of the stores in Muncie, and
look where he has gotten. But, I think he survived OK, and I am
sure had to operate some of that machinery. I appreciate you
bringing that forward.
I remember reading before we left on break that one of the
Members of Congress had introduced a bill to try to get that
corrected, and I will look into that. Any suggestions or
comments from my colleagues? That is a good example of
something maybe we can take up on Corrections Day. Thank you.
I appreciate all of the enthusiasm, and probably will not
ask too many questions so we can get to as many people as
possible.
Mr. Hedderich. Good morning. My name is Tom Hedderich and I
am currently serving as president of the Indiana Association of
Mortgage Brokers. We are an affiliate of the National
Association of Mortgage Brokers, which is responsible for the
origination of about 49 percent of all home mortgages last
year.
I would like to speak to you about the Home Ownership and
Protection Act, more commonly known throughout the industry as
the act, the rules were published October 1, and it is
written--lending in a high risk market. The act amended the
Truth in Lending Act, the purpose of which is--consumer created
disclosures and not in terms of costs.
This act should be repealed. It obstructs the flow of
credit by--Truth in Lending has specified that this regulation
does not govern charges for consumer credit. Yet, by setting
arbitrary, high cost rates, we have established--many lenders
who have attempted to--disclosure requirements and various--
others will leave the industry and invest their capital
elsewhere.
The makers of this act presume the credit terms found in
federally subsidized conforming programs are the norm.
Government is imposing restrictions on lenders that are willing
to take risks the Government will not take. This act eliminates
the whole recourse status. Mortgage capital flows through the
country by a secondary market. One of the inefficiencies of the
system is--they ask owners--eliminates the whole recourse
status. The result will be the elimination of a majority of
secondary funding sources, increase in the cost of capital, and
a decrease in the funds available to consumers that the act is
intended to protect.
Since Congress amended RESNA in October 1992--and most
mortgages on residential properties, including those that
become high cost. These are now subject to RESNA and the
disclosures that RESNA requires. Additional regulation is
redundant.
Also, this act--standard business practices, such as
balloon mortgages, which will be severely limited by the act.
These have been used in many contracts for many years. They are
commonly used by bridge loans or short term notes to renovate a
financial property, such as stopping a foreclosure, or moving
equity from one property to another for repurchase.
The prohibition of balloon mortgages hinders consumers who
need a short term remedy to accommodate their immediate
financial need. Furthermore, this act is ambiguous. There are
numerous ambiguities in the proposed regulations. These
demonstrate a lack of understanding of the business practices
of the mortgage finance industry and a further reason for
repeal of the program.
I would like to tell you also that our association supports
the following bills currently before Congress. The first one is
House bill 1362 from Congressman Bereuter of Nebraska. The bill
will transfer authority of RESNA from HUD to the Fed,
streamline RESNA and truth in lending. It takes certain--out of
RESNA and lets truth in lending take care of problems. All of
these things are very good for investors.
Second, we support the Senate bill 660, which is the
Chevy--bill dealing with regulatory relief matters of this
magnitude.
Last, we also support House bill 1380, which is sponsored
by Congressmen McCullom and Gonzalez and is a truth in lending
class action of 1995. This act also calls for more--I also
would like to commend you for having your hearings in the
field, and would like to thank you for the opportunity to
speak.
Mr. McIntosh. Thank you very much. Appreciate you bringing
that forward to our attention. It sounds like it is making
homeowners more difficult to be able to get their mortgages.
Mr. Hedderich. Absolutely.
STATEMENT OF EDWARD PROBST, PHYSICIAN
Dr. Probst. Thank you, also, for coming to the field. I am
Edward Probst. I am a physician here in Indiana, and I have
been impacted and you have been impacted adversely by the--
Laboratory Improvement Amendments, and I want to talk just
about four things that we try to do in our offices, which are
for the benefit of our patients.
One is--preps. Preps for fungal diseases, fungal cultures,
and reading slides. I will drop the slides, because those are
prepared and brought back and read. What normally would be
required if a patient came in and had a condition that required
one of these studies, it would be a part of that evaluation, as
an area. We would take a little slide, take it to the
laboratory in the next room, look at it under the microscope,
see what we saw, go back to the room, write in the record, tell
the patient what we found, and give them their therapy.
Under the new act, and I might mention that this is being
administered by the Indiana State Department of Health, and the
administrator said there has never been a single complaint of a
dermatologist on any of these three subjects. Nonetheless, it
is the law, and they will make us subject to it.
So, what we have to do now, we have to create a manual that
would explain everything in detail about how we did this
procedure, how we had changed the light bulb should it burn out
and--we were written up for that because we did not have a
policy manual on what we would do if a light bulb would burn
out. We never worried about it. We had a light bulb in the
drawer for the microscope, but we were written up because we
did not do that.
The American Academy--sent us the booklet, which is--in
order to help us write the manual that we need in order to be
able to perform three studies that are necessary for you to
receive adequate care at the time of your visit.
So, what we now are required to do is that we have to be
registered, we have to have a manual which is over 360 pages
and took over 200 hours of a physician's time to put together,
as well as secretarial time. We estimate probably $6,000 to
$8,000 that we have invested in order to be able to do
procedures that we charge $20 for, and we do not accumulate
more than $2,000 in a year.
Also--$10,000 for taking on compliance. What I have to do
is, in order to do that procedure, I have to write a request to
myself, cause no one else does that, I am required to fill out
the request with specific information, hand it to me, re-enter
the patient's name, identification number, eight sets,
requesting physician, which is me, laboratory, which is me,
date of collection, time of collection, and then receive my
ticket, and clinic location, all written on a separate piece of
paper.
This, then, has to be taken to the laboratory, where there
is a laboratory test requisition and report log, also on each
patient. Every patient who has a laboratory test that is done
by us, which is simply looking under the microscope and writing
this down. Then, we have to rewrite the patient's name, the
doctor, the specimen collected, date and time, patient
identification number, test to be done, laboratory test, when
it was performed, time of receipt and time it was done, at the
same time, and who it was performed by, which is me, and then
the results of the tests and the action I might take.
Then, after I have done that, then I have to fill out the
test request, the second part of this resultant test. Then, I
can go back to the patient and I can then write it in the chart
which I would normally have done, take the extra piece of
paper, stick it in the chart because they require that it be
there, and then I can go ahead and finish my evaluation of the
patient and inform them what I have found they could do.
If I do not decide to be under this regulation, then I have
several choices, and they are all bad for me, they are bad for
the patient. That is to take a sample, send it to the hospital
laboratory where, in the process of straightening of the small
pieces they are diluted and dried out, there is a lag in time,
it can be lost, and there is a greater chance of a negative
result, because of all the time lost and the way the sample is
carried by the hospital.
If the patient takes it there, he will probably get it
there within an hour. If it is sent by courier, it would
probably get there within 4 or 5 hours, which really
complicates the problem.
What then happens is that the pathology department of the
hospital will send a report back to me. I will receive it the
next day. I then have to reschedule the patient back in the
office to go over them with a report of what you found and then
go ahead with your procedure, not necessitating extreme expense
to the patient, frustration for me, any--for general health
care, decreasibility of the likelihood of getting a positive
result, and the correct diagnosis. This is in the area where
there has not been a single complaint ever, based on any of
those three procedures.
We have a law, we abide by the law, it is very difficult.
We have one partner who does a half a day practice in another
community. This regulation does not cover that. He has to redo
all these in the other location. The law makes efficient, less
expensive, better quality and more accurate office care illegal
in Indiana. Please help to repeal this and get us out of this
burner, so we can do what we need to do.
Mr. McIntosh. Thank you very much, Dr. Probst. This was one
thing we had looked at right at the end of my time with Vice
President Quayle at the Competitiveness Council, and because of
a change during the election, we were not able to forestall
that.
It is also a classic example of where we are made less
healthy as a result of these Government regulations. Finally,
this reminded me that we may need to now update the old joke
about how many EPA officials it takes to screw in a light bulb.
Ten--one of them to screw in the bulb, and nine of them to fill
out the environmental impact statement. So, you now have
pointed out another example of how Government just creates busy
work for us.
STATEMENT OF NANCY FENNEY, MEMBER, INDIANAPOLIS CITY COUNCIL
Ms. Fenney. Thank you, Congressman. I am Nancy Fenney, a
member of the Indianapolis City Council, but today I am here--I
do not want to take a lot of time to read all of this, but I
would like to say that we feel regulations backfire on the
intent of the original law, and it is costly and burdensome and
inflexible mandates on the Government.
Something I would like to share is that when you are
looking at funding or past--local level, please remember those
of us at the local level. The local government is the one that
has to do the job, and we are the ones that sometimes never
receive the money. It has to go to the State first, and local
government means different things to different people. So, I
hope you will take that message back, if you do not take any
other message back today. Local government is right here, but
basically, I think we have to keep in mind, if they are going
to get recommended by local government, please send it to us.
May I comment on the flexibility in the regulations? Here
in Indianapolis, we have different scales and cycles of--to put
up with these inflexible regulations, and we think that we
should be encouraged to find the most innovative solution, as
long as we can meet the bottom line. I think that should be the
whole thing right there.
When you are making these regulations, if you would involve
local government in some of the discussion before--for
instance, in some regulations, EPA did listen to a group, a
partnership, and this partnership did make a difference,
because EPA changed the regulations from 1989 to 1994, and we
were able to remain flexible. This is going to make a lot of
difference here in Indianapolis on what we spend. We are
estimating $300 million for combined overflows. We could save
about a tenth of that, if we are allowed to do things that are
bottom line.
Also, the one thing I really would like to decide, before
you do decide on regulations, if you would--and have scientific
evidence that these hazardous fumes, before you come up with
something, sometimes something is hazardous, but it is not
hazardous unless you get a certain amount.
The other part is, we have had great success with--let us
assess the most serious areas to put our dollars, before we do
little things that are popular and leave big rifts untouched. I
think that is terribly important.
Basically, I can just tell you that I wanted to be sure my
testimony is heard, because I--and what is sad is EPA
mandated--our plant for solid waste, reduces--but after this
mandate, many of us felt like we were guaranteed of certain
amounts of--solid waste and flood control. My last question is,
is there any congressional help or do we have--catch 22 between
mandated action and judicial prohibition? I hope you will.
Thanks for listening.
Mr. McIntosh. Thank you. I also want to commend you for
actually traveling out to Washington to bring that flow control
problem to my attention. I appreciate it when local officials
are willing to go that extra effort to try to get what is best
done for the community. I appreciate you coming today.
STATEMENT OF PAUL BLACK, EENC POULTRY ASSOCIATION
Mr. Black. Thank you, Mr. Chairman and members of the
committee. I am Paul Black of the EENC Poultry Association and
I will be very brief. There is a new regulation this year that
relates to us in the meat processing industry. It is known as a
megareg. This is the attempt to regulate the size, taste and
control to insure food quality.
I can see for the poultry industry the same--what we are
concerned about is that the--will be instituted on top of the
current regulations which make it look small. The current
regulations are more public in measure and determinance, to
examine--and so forth.
The science based approach is certainly correct in the way
it should be going, but in terms of sheer volume, we need to
peel off the first layer, first several layers before we
institute the new layer. Thank you.
Mr. McIntosh. Thank you. I appreciate that. Something
called a megareg is scary.
Mr. Gutknecht. Let me just say that coming from Minnesota,
both Collin and I have a lot of turkey processors and
producers, and we have been briefed on some of the influence.
Mr. Peterson. I serve on the Livestock Subcommittee and I
am going to be going to six hearings in the next couple of
weeks, but we held a meat inspection school to try to get other
folks to understand what is going on. We are trying to move on
legislation so what you are saying does not happen. We are
going to try to hold up the finalizing of the rule and try to
see if we can get a legislative solution, so we do not lay one
on top of the other.
Mr. Black. The members will appreciate it.
Mr. McIntosh. We will take your testimony, and I will send
it over to that group who is doing it, so they can put it in
their official records, as well.
Thank you. We have time, unfortunately, for just one more
person. Let me ask everyone else, if you have anything in
writing, we will be able to take that, or if you could give
your names to one of the staff members, we will be sure and
make sure your views get included.
STATEMENT OF JOHN GRUNWALD, PRESIDENT AND CEO, ENDEBURG, IN
Mr. Grunwald. Mr. Chairman, Representative Peterson and
Gutknecht, my name is John Grunwald, and I am the president and
CEO of the--Company in Edenburg, IN, a manufacturer of--and
lumber to be used in manufacturing furniture and
architectural--I would like to talk to you about two mandates,
the reorganization and administration of the Clean Water Act of
1970 and the contradiction between the attempt of the
environmental legislation and the rendition of the law.
On November 29, 1994, the David L. Rek Co. plea bargained
as the U.S. Department suggested, regarding a violation of the
Clean Water Act, because of an illegal discharge of industrial
wastewater into the Big Blue River near Edenburg, Justin
County, IN.
The company denied the violation, but it cannot prove as a
result of laboratory tests, that we did not do any damage to
the river and its ecosystem, as improper discharge was first of
all minuscule in quantity, and second, contained no hazardous
waste whatsoever.
The discharge was caused by an unpermitted connection of
the drain from a long pipe to the storm sewer of the city of
Edenburg. When this charge first caused concern in 1991,
instead of picking up the telephone and directing an inquiry to
top management, he initiated an undercover investigation. As it
turned out, the investigation did nothing but extend the
duration of the unpermitted discharge into the river.
The Conservation Office said the investigation would only
end in Federal criminal charges, surge water and raids on our
facility by FBI and other Federal and State agencies in 1992.
Prior to the raid, top management had no knowledge of the
violation. As soon as top management was informed, the
discharge was stopped, modifications were made to provide the
discharge into the sanitary sewer, and we reached an agreement.
Had the Government agency informed top management upon
discovering the discharge, the entire matter would have been
resolved quickly and effectively. I do not disagree that some
sort of fine was in order, although the people who ordered the
unpermitted connection were not aware of the fact that there
actually was a requirement.
Nevertheless, the combination of fines, restitutions and
probations which resulted in the agreement with the U.S.
Department of Justice--the result of the plea bargain agreement
was $1,100,000, while the company was put on a 2-year
probation. In addition, the company was ordered to pay $2,500
to the United States of America, $250,000 to the Indiana
Department of Environmental Management and $250,000 to the Fish
& Wildlife Division of the Indiana Department of Special
Resources, altogether, payments of $625,000. This is an
inordinately high amount of money for such a small company,
considering the extent of the violation, and the fact that the
violation itself was extended due to the cops and robbers game
played by the Conservation Office, the Indiana Department of
Environmental Management, the Indiana Department of Natural
Resources and the U.S. Justice Department.
I might add that the only reason why the company agreed to
settle was to prevent the possible incarceration of one or more
of its supervisors. The explicit threats made by the Office of
the U.S. Attorney, documented in a letter dated July 1, 1994 by
the Assistant U.S. Attorney----
Mr. McIntosh. Sir, let me just interrupt you there, because
we have to close up. It sounds to me like much of the problem
could have been avoided if the Government had actually been
trying to work with you to solve the problem.
Mr. Grunwald. That is exactly my point. Exactly. Or,
instead of playing cops and robbers, instead of attacking the
problem.
Mr. McIntosh. What would have happened had a requirement to
give you notice and an opportunity to correct the problem
before pursuing criminal sanctions?
Mr. Grunwald. The problem would have been resolved, as it
was resolved after management found out about it.
Mr. McIntosh. I appreciate you coming and sharing that with
us today. If I could ask you to just make the rest of your
testimony available and any summarizing or closing statement.
Mr. Grunwald. Thank you very much.
Mr. McIntosh. Thank you. I appreciate everyone coming
today, and I apologize to those who we were not able to
participate in the session. Please do make your views available
to us and we will include them in the written part of the
record.
To me it is striking that we can be here 2\1/2\ hours and
still have a dozen or so people who have other regulatory
problems that we need to address. It shows the magnitude of the
problem.
We have had everything from pencils to bits of corn to
drinking water, as heavily regulated and often
counterproductive in ways that do not add any safety or health
or environmental protections and in some cases, may detract
from that effort.
So, I appreciate the effort of the public in participating
today, and this subcommittee will stand adjourned.
Your views will be taken back with us to Washington. Thank
you.
[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
[Additional information submitted for the hearing record
follows:]
THE NEED FOR REGULATORY REFORM
----------
MONDAY, APRIL 17, 1995
House of Representatives,
Subcommittee on National Economic Growth, Natural
Resources, and Regulatory Affairs,
Committee on Government Reform and Oversight,
Muncie, IN.
The subcommittee met, pursuant to notice, at 3:05 p.m., in
the Ball Community Room, Ball Corp., 345 South High Street,
Muncie, IN, Hon. David M. McIntosh (chairman of the
subcommittee) presiding.
Present: Representatives Peterson and Gutknecht.
Staff present: Mildred Webber, staff director; Jon Praed,
counsel; Karen Barnes, professional staff member; David White,
clerk; and Bruce Gwinn, minority professional staff.
Mr. McIntosh. The Subcommittee on National Economic Growth,
Natural Resources, and Regulatory Affairs is called to order.
This is our first day of field hearings in what we plan to
have as a national effort to try to gather information from
people around the country about problems of Government
regulations.
We have a big agenda today and a lot of people want to
talk. At the end of the hearing, I want to open it up in an
open mic format and hear from people who do not have prepared
testimony, necessarily, but just are citizens who wanted to
come here today.
And, so, in the interest of time, I am going to dispense
with my prepared statement. There are copies of it which you
can get from the staff.
Let me just quickly say that I want to thank two of my
colleagues for coming here today.
One of them is Collin Peterson who is the ranking
Democratic member of the subcommittee. He is from Minnesota.
The other is--Gil Gutknecht--excuse me, Gil; I owe him one
there. [Laughter.]
He is one of my freshman colleagues, also from Minnesota.
And let us give them a big Hoosier welcome. [Applause.]
I will say that we had a hearing earlier this morning and
found an incredible array of problems with the regulatory
system as citizens came forward. We are going to take these
ideas and use them in Washington as this Congress moves forward
in tackling the regulatory problem.
Newt Gingrich has decided that there will be a new
procedure called Corrections Day, through which Congress has a
chance to undo some of the problems that have been created with
legislation over the past.
The issues that are brought forward today will be
considered by this subcommittee as recommendations to go
forward on that calendar.
We will also pass on the information to other committees
who have jurisdiction and use it in our work in some of the
general regulatory issues such as the bill that we passed out
of committee putting a moratorium on new regulations.
So, thank you for coming. I really appreciate the input and
the ability to hear from American citizens. And all of your
comments will be put on record.
The chairman of the full committee has asked that we swear
in all of the witnesses. Rather than do that one by one, I am
going to ask everybody today to join me in taking the oath. And
then all of the witnesses will be duly sworn in.
So, if you could all stand and raise your right hand.
[Witnesses sworn, en banc.]
Mr. McIntosh. Let the record show that all the witnesses
were duly sworn in. [Laughter.]
And, now, let us proceed with our first witness.
Would you like to testify from there, Betty, or would you
like to come up here?
Ms. Devoe. Whatever you would like me to do.
Mr. McIntosh. I think they would like you up here for the
court record.
By the way, we apologize for the slow start, but the court
reporter here was the same person who was down in Indianapolis
and he had to tear down everything before he could come up
here.
So, he was not, like all of us, where we could leave
immediately and get up here and have a chance for lunch. And I
appreciate your hard work in that area.
Our first witness today is Ms. Betty Devoe, the executive
director of Westminster Village.
Ms. Devoe. Thank you.
Mr. McIntosh. Betty came to me and said, you know, health
care costs are increasing dramatically in this country and we
take care of a lot of people who have Medicare as the means of
payment for their health care. Let me tell you some of the
regulations that increase the cost of the services that we have
been providing.
And I asked her if she would come here today and share some
of those with us.
So, let me turn it over to you. Thank you.
STATEMENT OF BETTY DEVOE, EXECUTIVE DIRECTOR, WESTMINSTER
VILLAGE
Ms. Devoe. David and members of the subcommittee, it is my
pleasure to be here today.
Previous to moving to Indiana, I lived nine----
Unidentified voice. Turn it up.
Ms. Devoe. Previous----
Unidentified voice. Turn it up. We cannot hear.
Mr. McIntosh. Can we turn up the volume? OK.
Ms. Devoe. Try it again? How is that?
Unidentified voice. That is better.
Mr. McIntosh. There is feedback.
Ms. Devoe. OK.
Mr. McIntosh. Thank you.
Ms. Devoe. Thank you for letting me be here today.
Previous to moving to Indiana, I lived 9 years in
Minnesota. So, I know what your weather is like.
My name----
Mr. Gutknecht. It is almost spring. [Laughter.]
Ms. Devoe. Yes, I know. I talked to my daughter yesterday.
Before he begins my time, I do have part of my staff here
in the room and also my board chairman and there may be other
board members.
My name is Elizabeth Devoe. I am the executive director of
Westminster Village, Muncie. We are a continuing care
retirement community serving the needs of approximately 270
elderly citizens.
Two hundred of those residents live and are residing in the
residential apartment complex which is licensed by the State.
We also have a 76-bed Medicare-certified health care unit
or a skilled nursing facility or a SNF, which is what it is
commonly referred to in the industry.
Our clients' needs are important. They eventually are the
people who will pay for the increasing demands of regulatory
reform in our facility.
The Medicare SNF regulations were revised with a nursing
home reform bill known as OBRA, which was passed in 1987. It
was implemented in the Nation in 1990.
And I want to bring to your attention that regulations
passed by the Federal Government have increased the paperwork
and labor costs for paper compliance listed by that reform.
I can only speak for our facility, but we saw the costs of
the health care center increase by $166,000 in 1 year. That was
between 1990 and 1991. Approximately $100,000 of that would
have been additional staff and staff time to implement paper
compliance.
As a licensed health facility administrator of Westminster,
I have watched my staff devote more and more time to computer
programs required by OBRA.
The majority of that time is required--2 minutes
remaining--is required for MDS.
Mr. McIntosh. If you would like to summarize it, we can put
the full written text into the record.
Ms. Devoe. All right. OK. I am asking that you look into
the HCFA requirements for MDS. They are trying to get them
implemented by January 1996 and they will require computer
changing across the Nation and new programs.
Also, I would like you to put a regulatory freeze on
Government regulations, the interpretive guidelines and
enforcement rules that were issued in the Federal Register,
November 10, 1994 and, therefore, the name is the Survey
Certification of Skilled Nursing Facilities and Nursing
Facilities, the Medicare/Medicaid Programs.
Thank you very much.
[The prepared statement of Ms. Devoe follows:]
Mr. McIntosh. Thank you. Betty, if you have a few seconds,
let me see if we have any questions for you.
You mentioned you thought that almost all of that cost
could be avoided and, therefore, lower the cost of your
operations out there?
Ms. Devoe. Well, I do not know that we can stop anything
that has been implemented. You cannot go back and change OBRA,
but they just keep pushing more and more on us and someone has
to say, we cannot participate in this anymore.
And our national not-for-profit association has been
working with HCFA trying to get some of this stopped. And right
now, evidently, the House was ready to go on this, but the
Senate did not consider it a priority.
But we have you gentlemen in town, so I know you can help
us.
Mr. McIntosh. Thank you. Yes, we are discovering that.
Let me just see if my colleagues have any questions for
you.
Mr. Gutknecht. Just one quick question, Mr. Chairman. To
put this in context. You said it would cost about an extra
$100,000?
Ms. Devoe. $100,000, because when----
Mr. Gutknecht. What is your total budget? I just want to--
--
Ms. Devoe. What is our total budget?
Mr. Gutknecht. Yes.
Ms. Devoe. $5 million, but, remember, I am running an
apartment complex and then I am running a health care facility.
So, the total budget for the health care center, that year,
might have been $2.5 million.
Mr. Gutknecht. Thank you.
Ms. Devoe. Mmm-hmm.
Mr. McIntosh. So, quickly, about 4 or 5 percent of your
costs----
Ms. Devoe. Right.
Mr. McIntosh [continuing]. Are directly related----
Ms. Devoe. Right.
Mr. McIntosh [continuing]. To that.
Ms. Devoe. And it was paper compliance. And now they are
going to do it all over.
Mr. McIntosh. OK. Well, thank you.
Ms. Devoe. All right.
Mr. McIntosh. I appreciate you coming. And that will be
very helpful to us in going forward with that. We will share it
with the Senate as well.
Ms. Devoe. All right.
Mr. McIntosh. Our next panel includes two members of the
agriculture community. I would like to call forward Joe Russell
and Wayne Townsend. Is Joe here?
Joe was over to our house the other night telling stories
on his colleagues in the Farm Bureau. We will not have any of
those put on the record, but I appreciate you coming by today,
both of you, and welcome to the subcommittee hearing.
I will let each of you discuss your statements and then see
if we have any questions.
Joe, do you want to go first?
Mr. Russell. OK, thank you.
STATEMENT OF JOE RUSSELL, FARMER
Mr. Russell. I want to thank you for coming to Muncie, IN
where we work. It is not always convenient for us to make it to
Washington to air some of our concerns.
My name is Joe Russell and I farm 1,150 acres of corn and
soybeans near Muncie, IN. My roots in Indiana and agriculture
go back six generations to 1810 when Indiana was still a
territory and my great-great-great-grandfather carved a farm
out of the wilderness.
This will be my 20th year to farm and I have seen an
increasing number of regulations applied to an increasing
number of aspects of my family farming operation. I have
survived weeds, insects, floods and droughts, but probably the
greatest threat to my farming operation is out-of-control
regulations.
As my forefathers planted their crops, they never had to
worry about the impact of wetlands, Endangered Species Act,
Clean Water Act, Clean Air Act, OSDA, NRCS, CFSA, OSHA, EPA,
FDA, FIFRA, the Delaney Clause, Fish and Wildlife Service and
the Army Corps of Engineers. Regulations cost agriculture and
consumers billions of dollars annually.
Production in agriculture employs less than 2 percent of
the people, but utilizes 44 percent of the land. Thus,
agriculture is on the front lines of any regulatory
implementation.
There is a saying that a well-fed nation has many problems
and a hungry nation only has one. The United States is a well-
fed Nation. In fact, we are the best fed nation in the world.
Yet, we worry about every aspect of my farming operation. Not
only do we worry about, but we have a multitude of Government
agencies to regulate those worries.
The recently completed agricultural handbook, Environmental
Laws and Regulations for Indiana, summarizes regulations
governing agriculture. It condenses thousands of pages of rules
and regulations into 20 chapters using layman's terms to better
help today's farms attempt to comply with agricultural
regulations.
It scares me to death to read it. And most of the farmers
are not aware of all the regulations that they are forced to
comply with today.
I jokingly told my children a few years ago that if they
wanted to farm some day, they better get a degree in law to cut
through all the red tape necessary to be a farmer in tomorrow's
world. Today, that joke is becoming a reality.
How do the rules and regulations affect my farming
operation today? I spend more time complying with or learning
about regulations than I spend planning my crops! Compliance
costs time and money, while non-compliance could lead to
expensive fines, criminal charges or putting me out of
business.
As part of the 1985 and 1990 farm bills, all farm land was
re-evaluated using aerial photographs and soil maps to assess
its potential for erosion and identifying wetlands. Several
Government agencies sitting in offices far from my farm made
these determinations.
Some of my land was classified highly erodible and because
of that classification, I had to purchase a no-till planter
costing $13,000.
After several years of urging soil conservation officials
to field verify my highly erodible land, it was determined that
my land was not highly erodible.
The interpretation of one soil conservation official said
it was highly erodible and the other said it was not highly
erodible. Who am I to believe?
A few years ago I took some of Representative Phil Sharp's
legislative assistants around showing them the inconsistencies
of wetland classifications. We saw wetlands that were not even
close to being wet. In fact, two of the wetlands were gravelly
hill tops. Yet, they were classified as wetlands. It restricts
lands use and is a nightmare to get it changed to a proper
classification.
Let me summarize here. If I am to survive in the NAFTA and
GATT world we live in today, I must compete with farmers from
all over the world. Because the cost of land, machinery and
labor is high in this country, we must have access to new
technology.
The United States leads the world in agriculture science
and technology, but I am afraid that unnecessary regulations
may prevent or delay this new technology from reaching my farm.
In summary, regulations are necessary. However, Government,
by regulation, has become the fourth branch of Government.
Unelected regulators make the law, enforce the laws, serve as
judge and jury for the violators of their laws and assess
penalties and fines for the guilty. This is not what the
original framers of the Constitution envisioned.
Regulation needs to be based on good science, not emotions
or the whims of radical environmental groups. Peer review, risk
assessment and cost-benefit analysis should be an integral part
of all regulations.
And I think that I am out of time.
[The prepared statement of Mr. Russell follows:]
Mr. McIntosh. Great. I appreciate that very much. Thank
you, Mr. Russell. We will get back to you with some questions.
Mr. Townsend, I thank you for joining us today.
STATEMENT OF WAYNE TOWNSEND, FARMER
Mr. Townsend. Thank you, Chairman McIntosh. Thank you for
coming to Muncie. I deeply appreciate this. And thank you for
the invitation to appear to discuss the concerns that we have
about regulation and agriculture.
I am Wayne Townsend. I am 68-years-old. I have farmed all
my life in Grant and Blackford Counties near Hartford City. We
raise corn, soybeans and wheat and specialize in hog
production.
Twenty-two of those 68 years, I spent as a State legislator
in Indiana, actively participating in the lawmaking process.
As a legislator, if I fail to respond to the public, they
have an opportunity to pass judgment on me at the ballot box.
My observation of regulation writing and rulemaking is that
it is a bit different. I am not sure what constituents say that
I respond to.
In September 1988, we purchased an adjoining farm of 535
acres at a public auction from a State university. That farm
had been used for 50 years in experimental pasture research.
Although some drainage work had been done in that time,
there were a few trouble areas that were a concern to me
because of an outlet problem that had not had attention. The
previous owner, years before, had ditched the farm, but the
outlet had not been cleaned.
Prior to the purchase in August 1988, I asked a local
office of SCF to come to the farm and assess the potential
wetland problems we might have. And upon that visit, three
areas were noted totaling 4.4 acres, which 2.6 acres were
uncultivated land.
In December 1988, after the purchase, another technician
from the same office officially noted seven areas totaling 14
acres in size and later expanded that to 22\1/2\ acres instead
of the original 4.4.
In the spring of 1989, I began an appeals process through
the area, State and Federal offices of Soil Conservation. A
final determination was made in the summer of 1989. Each level
had a different approach or different findings.
We have had, at this point, one failed litigation procedure
where we offered to develop permanent water pools, but that was
rejected.
Since the final appeal, we have farmed around three spots--
one 2.2 acres in size, one .4 of an acre and another .4 of an
acre in size. These are out in the middle of a 135-acre field.
Now, what is to be learned from this? Well, in the first
place, there has got to be a better way.
There has been no real agreement on what constitutes a
wetland. We thought it took the presence of water. We were
wrong. [Laughter.]
And I quote from the letter from more than one official,
``The water pool, if any, of a wetland does not determine the
boundaries of a wetland. A wetland boundary is determined by
the presence of hydric soils and hydrophilic vegetation.''
Now, if that is the criteria, I have 1,200 acres I am
really concerned about because it is hydric soil and
occasionally you find hydrophilic plants.
Today, 10 years after the passage of the 1985 farm bill,
the first mention to wetland issue, there seems to be no
generally accepted agreement on what a wetland really is among
the EPA, the Corps of Engineers, the Fish and Wildlife,
National Academy of Science and the Natural Resources and
Conservation Service.
The present policy is driving a wedge between the Natural
Resources and Conservative Service and the farm people of this
country. For years, the SCS and farmers have been partners in
progress and worked closely together to accomplish very much in
the way of being better stewards of our soil, but this role
that the SCS has been placed in makes them an unwelcome guest
on many farms.
Finally, we are involved in a very competitive global
economy where it is terribly important that we make wise
decisions in public policy not only in agriculture but
elsewhere as well if we are to be competitive with the rest of
the world.
Too often we have rejected economically sensible ways of
deciding environmental problems. We cannot continue to a $50
benefit for $1,000 costs. We can accomplish what the
environmental community would like with regulations that
farmers could live with if we would try and use a stick--or,
rather, a carrot instead of a stick.
The idea of free market environmentalism is not new. We can
achieve the goal protecting valuable wetlands without the dead
weight of protecting wetlands of no environmental significance.
Gentlemen, we need to bring order out of chaos. We need
your help.
Mr. McIntosh. Thank you. We appreciate that. I appreciate
you also keeping your oral statements brief so we can get to
hear as many people as possible.
We struggled a lot when I was working with Vice President
Quayle on the definition of a wetland and tried very hard to
establish what I thought was a common sense principle that you
had to have water involved with a wetland but the Government
agencies think they know better.
There is legislation that is moving through the committees
and we will be discussing it on the floor in the coming months
that, I think, will greatly improve that situation.
Let me ask you one question. Did you ever receive any offer
of compensation for the lost value of your land when it was
declared to be a wetland?
Mr. Townsend. No.
Mr. McIntosh. Do you think if the agency had to do that,
they would have been more reasonable in defining what a wetland
was?
Mr. Townsend. Well, there has to be some reasonable
judgments in the process. The land in question is of no value
to me. We farm around it. We get no production from it, yet we
pay taxes, we pay interest on the mortgage, we pay the
mortgage, but it sits there.
I doubt that it is of much value to the environmental
community as well. We need to make a judgment between what is
important in this area and what is not. You have not done that.
Mr. McIntosh. I appreciate that. Thank you both very much.
Let me see if my colleagues have any questions.
We have heard a lot of people from the agriculture
community and they both have very large farming interests in
their districts.
Mr. Peterson. Thank you, Mr. Chairman. You think that you
have got wetlands, you ought to come to my district. Now it is
totally under water, just about.
Mr. Townsend. There are about as many wetlands in Minnesota
as there are Petersons.
Mr. Peterson. That is right. [Laughter.]
We are hoping that they all fly over and take pictures
right about now because we will be out of business.
My district, by the way, is from 300 miles along north of
the Twin Cities up to Canada. Part of my district, you have to
go through Canada in order to get there. You cannot get there
through the United States. [Laughter.]
Anyway, it is great fishing up there, if you ever want to.
I serve on the Agriculture Committee and we are going to be
taking up this issue. I want to commend your Congressman and
the chairman here for the work that he has been doing in the
regulatory reform area. We have been working together.
Myself and some of our group of conservative Democrats
agree that are over-regulated, along with some members of the
other party.
But the one thing that I want to say with this wetlands
issue is that we are going to try to change the law; try to do
something about type 1s and try to get some of the nuisance
problems solved.
But, frankly, part of the problem, in my judgment, is with
the folks that are administering the law. And in my area where
I have tons of wetlands and I have been dealing with this when
I was in State legislature and now here in Congress, I have a
county where because of the people that were administering the
law, they worked out every single wetland issue. We had no
problems. They just used common sense and they worked it out.
If you went over to the next county, the same type of land,
the same situation. You have the biggest hornet's nest you ever
saw because the folks that were running it over there did not
want to work it out.
So, to some extent, I mean, with all of the good work that
we are going to do in regulatory reform, part of this problem
is just with the people that are running or that are
administering the law. I am not sure what we do about that
because we have a difference of opinion about what these things
are worth.
But we are looking at some solutions. And one of the things
that we are looking at right now is using the CRP as a way to
maybe try to deal with these issues using a carrot instead of a
stick like you were talking about.
I have been working with your Senator, Senator Luger, on
this. In fact, we have been communicating with his offices last
week. They are putting that CRP stuff together right now and we
are going to send it next to the staff level.
So, we are going to look at some other ways to come at this
and hopefully we can resolve this issue and make it more
workable.
But we have the same kind of problems. I had a gentleman
that had the exact same story that you had. Bought a piece of
property. He had been told there were no wetlands. Right after
he bought it, they came in and found 26 acres of wetlands.
And what happened in my district is we now have 3,500
people on a private property, landowners rights groups, that
are storming the capital because of it.
And that is helping us to change some of this regulation.
So, we appreciate your testimony and, hopefully, we can make
some changes that will take care of some of the problems.
Mr. Townsend. Thank you.
Mr. McIntosh. Thank you very much, gentlemen. Let me check.
Do you have any questions?
Mr. Gutknecht. Mr. Chairman, let me just say that I first
saw this three-ring binder from the Indiana Farm Bureau and I
think that is excellent. And I just want to compliment the Farm
Bureau for putting that together.
I would also say--and as I mentioned in Indianapolis this
morning--I had a farm forum and I represented a farm district
in Southern Minnesota.
We had a farm forum a couple of months ago and I was
surprised. I expected to hear a lot from the farmers about
dairy price supports and the various Government programs, but
they spent fully two-thirds of the time of that hearing talking
about various environmental regulations that they had to deal
with.
And it really has become a big problem, particularly for
small farmers. Now, the big farms, the big chunks of land that
can afford some of the legal work and everything that goes into
it, you know, they complain, but they can deal with it.
But if you are trying to make a living on 300 acres of
hilly land in Southern Minnesota, it is tough.
Mr. Russell. And this is the first time in 10,000 years
that we are approaching sustainability on the farm because of
applied science and technology. Yet, we are so overburdened by
regulations that it may do us in.
And that came because of basic research, not from that
regulatory whip that is held over us.
Mr. McIntosh. Let me mention one thing. We have a hearing
in Washington with our subcommittee on possibly sunsetting
regulations and a colleague of yours--I know you know and work
with her, Joe--Kaye Whitehead came out and testified that for
her facility where she has to dispose of the hog manure that
her pork-producing facility produces as a byproduct, if you
will, that she has two choices. She can spread it on the field
or she can till it into the ground.
One agency has required that she spread it on the field
without tilling it into the ground. And another agency requires
her to till it into the ground. She really does not care which
one she does, but she reported to us that she could not get the
two of them to agree. And, so, she was stuck with a choice of
violating one or the other's dictates under their regulations.
And I was wondering if you all were familiar with those
type of situations where you get conflicting results, depending
on who you talk to.
Mr. Russell. Between the result and the bigger thing, the
interpretation of the law. And you hear both sides of it, just
like as Wayne said and I see it in my operation, too, but who
do you believe.
Mr. Townsend. I had not heard about the hog manure study,
but I am going to satisfy my neighbors first, Congressmen.
Mr. McIntosh. And that is what she said, when I asked her
which one she did. The neighbors had a clear preference on
that. [Laughter.]
Thank you both for coming.
Mr. Townsend. Thank you.
Mr. Russell. Thank you.
Mr. McIntosh. Let me call forward our next group of
witnesses.
Tom Miller is vice president for commercial lending with
American National Bank and Lowell Williams is senior vice
president of First Merchants Bank.
We appreciate you both coming and speaking with us today. I
know that all of us have bank accounts and many of us do not
realize the amount of regulation that you have to contend with
in order to maintain those accounts in your lending operations.
Mr. Miller, do you want lead off?
STATEMENT OF THOMAS MILLER, VICE PRESIDENT, COMMERCIAL LENDING,
AMERICAN NATIONAL BANK
Mr. Miller. Yes, thank you. We appreciate the opportunity
to be here and speak with you, Mr. Chairman.
My name is Thomas Miller. I am vice president of commercial
loans and compliance officer for American National Bank and
Trust Co. in Muncie.
American National Bank is a subsidiary of ANB Corp. with
assets totaling approximately $320 million. The bank has 152
full time equivalent employees and 13 banking centers servicing
Delaware County and the community of Portland in Jay County.
As you may be able to tell by my title, being a compliance
officer is only a portion of the responsibilities that I have
assumed at the bank. My primary function is as a commercial
lender.
The compliance function was bestowed upon me in 1983 when I
was placed in charge of our Consumer Loan Department. In
community banks of our size or smaller, I think you will find
that that is the rule rather than the exception. This is simply
a result of economics.
Hiring in-house legal representation is not practical or
cost effective. As a result, the compliance function becomes
decentralized within most institutions whereby bank supervisors
and officers all become part of the compliance staff,
responsible for administering regulatory guidelines within
their respective departments.
My function is to coordinate and oversee that the bank is
complying with the spirit and the letter of the law.
Approximately 20 percent of my day is dedicated to dealing with
some aspect of regulatory compliance. As a result, that time is
taken away from lending money to prospective customers.
Three specific areas of concern regarding the regulatory
burden by which banks are expected to comply are the cost,
constant change and uniform administration.
A prime example of the added cost burden occurred with the
passage of regulation DD or better known as Truth-In-Savings.
American National Bank incurred approximately $100,000 in
additional software and hardware expenses alone to automate the
new account function just to comply with one regulation's mass
of paper disclosures and mathematical calculations.
This figure does not take into account the man hours for
training, programming or the additional storage allocation
necessary to retain the required information. By implementing
Truth-In-Savings, most community banks had to take a long hard
look at the products offered to the consumers pre-regulation DD
to determine if it was reasonable to continue to offer them
post DD. I suspect fewer products are currently being offered
and marketed due to the additional disclosure burden.
One of the main factors driving the costs of compliance is
the constant change. Each modification or revision to existing
regulations creates additional programming, administration and
training expense. The ultimate result is that somebody has to
pay that expense.
Shifting that cost to the consumers only drives away
individuals that are already utilizing alternative financial
services in record numbers.
Many of them are not subject to the same regulations that
banks must adhere to. Examples include credit unions and
security brokers and dealers.
Absorbing the cost only drives margins down and expenses
up, weakening the profit potential for banks. If regulations
were written so that all financial institutions and those
offering financial products must comply, then banks could
compete on a level playing field.
When we have to invest substantial dollars into compliance
when others offering similar services do not, it places us in
an unfair advantage with our competitors. The continuing cost
associated with implementing and administering new and revised
regulations undermines the stability that the regulations are
attempting to promote and forces unwanted documentation and
expenses on the very people that they are attempting to
protect.
As a community bank, it is imperative that we remain up
front and honest with the public that we serve. These customers
are our friends, neighbors and relatives. We cannot afford to
deceive them when depositing or borrowing funds.
We believe, too, that consumers have a right to know the
true cost of borrowing funds and the interest earned on
deposits. However, constant change and excessive disclosure are
not what our customers want.
Eight 8\1/2\ by 11 sheets of disclosure material are
currently required for a new checking account. That is too much
for the average consumer to digest.
Fifteen to 20 pages of documentation to close a real estate
mortgage does not allow the consumer the freedom to review and
analyze documents. Typically, the consumer only wants to sign
in the appropriate place and to be done with the transaction.
Service and convenience are truly the only distinction
between community banks and large regional conglomerates, but
regulatory burdens have all but eliminated some competitive
advantages in this area.
We ask that consideration be given to the non-mega, non-
super regional banks when new and changing regulations are
debated. Our customers want to trust their local banker, but
find it difficult to not be suspicious when burdened with a sea
of paperwork to accomplish simple transactions.
[The prepared statement of Mr. Miller follows:]
Mr. McIntosh. Thank you very much.
Mr. Williams.
STATEMENT OF LOWELL WILLIAMS, SENIOR VICE PRESIDENT, FIRST
MERCHANTS BANK
Mr. Williams. I would have brought our regulatory manuals
over, but Allied Van Lines did not have a van available today.
[Laughter.]
It is a privilege and a pleasure to appear before you today
and speak on behalf of community banks.
Let me begin by saying that I and community bankers all
over the country appreciate the efforts of this Congress to do
something about the over-regulated banking industry.
Fair Lending has always been a practice of our bank even
before it might have been popular to do so or the attempt to
mandate the practice by the Federal Government.
A community bank's existence depends on people doing
business in that bank. A good loan knows no difference who it
is made to regarding sex, race or national religion. Good loans
are good loans.
I or a member of my staff review every consumer and
mortgage loan made or rejected to see that everyone is being
treated fairly.
A few years ago, a Federal examiner brought me an
application of a minority that had been rejected as it should
have been. The examiner then spent hours going over approved
loans to see if he could find a similar situation of a white
applicant that had been approved. And he found none.
This action by a Federal examiner is very scary after the
Department of Justice's actions against Chevy Chase, Shawmut
and Vicksburg.
Our bank has some 40 loan officers and there will be
isolated instances of loans that could have or maybe should
have been made. If there is not a pattern of violations of Fair
Lending by a bank, the threat of actions by the Department of
Justice should not be held over a bank's head for isolated
instances.
The Home Mortgage Disclosure Act was enacted in June 1976
and was not a large burden until the changes by FIREA in
November 1991.
Until 1991, reporting was rather simple. Since 1991, the
collection of data and reporting of the data has become very
complex and expensive for the banking industry.
I am sure you are aware that the Grant Thornton study
showed that the annual costs to Community Banks as defined by
the Independent Bankers Association of American for HMDA
reporting was $17,463,692. The estimate of our bank, for annual
HMDA compliance, was $200,000 as part of the study.
The form of data reporting has again been changed and we
have just spent $2,200 for new software. The system we
previously used was provided by the Federal Government and our
bank feels the system is no longer adequate to give a proper
and accurate report that the Government requires. I am not sure
the results justify the costs.
The reports are required to be available to the general
public. Since enactment in 1991, our bank has had six requests
for the report. It appears to me the report could easily be
misinterpreted and the total cost for information received is
not justified.
This act is one of the most costly and burdensome on every
banker's list, including mine. And the best answer to the act
is probably to repeal the act. This has even been suggested by
a highly respected former Comptroller of the Currency, Robert
Clark.
The Community Redevelopment Act was first established in
1977. Very little attention was given to the act until the late
1980's when the Federal Government became serious concerning
the act.
It has become the most burdensome and costly of all acts
concerning banking. The Grant Thornton study estimates that the
annual cost for community banks for CRA is $1,032,466,852. The
estimate of our bank on an annual basis is $250,000.
Our bank, like other banks, has file after file of
documents and paper to support our CRA efforts. There is one
person in our marketing department that spends 80 percent of
her time with CRA documentation.
Our bank has long been a lender to the minority churches to
finance new churches in the minority community. This has given
the bank a very good relationship with the minority ministers
who have helped us with the educational programs and many other
good loans in the minority communities. We are extremely proud
of this relationship at our bank.
The Coalition of Concerned Clergy, a group of black
ministers, has presented two of our officers the annual Martin
Luther King Award for outstanding dedication and leadership in
the community.
Our bank does these things not because of CRA, but because
of our concern and dedication to the community. The Federal
Government has painted our bank and other community banks with
the same brush as the larger ``Too big to fail'' metropolitan
banks which is not necessary.
While I support CRA, the system needs to be streamlined.
There should be a tiered system of CRA. For banks under
$250,000 and other banks up to $1 billion should be allowed to
use a streamlined procedure, not to be held to the same CRA
qualifications as our big city brothers.
In conclusion, the banking industry is over regulated.
Other providers of the same financial services that banks offer
such as credit unions, do not work under the same regulatory
burden, nor do they pay any State or Federal taxes. I would
hope this could be another subject at another time.
Thank you for the opportunity for this testimony and I
would be glad to answer any questions.
[The prepared statement of Mr. Williams follows:]
Mr. McIntosh. Thank you very much, Mr. Williams.
Let me ask both of you two questions, really. The first is
what impact do these regulations have upon people who either
borrow money or depositors?
Are you able to or have you seen in the literature any
indication of whether you have to raise the rates or the fees
on both of those?
Mr. Williams. Certainly, you do.
Mr. McIntosh. Do you have any estimate of the magnitude of
that?
Mr. Williams. I do not have an estimate of the fees or
cost, but I do have an estimate of the public's perception of
this. They do not care about it.
They do not care about Truth-In-Lending. They do not care
about Truth-In-Savings. They do not care about the Real Estate
Settlement Procedures Act. They want to get the job done and
they trust you; let us get on with it and give me my money and
we will go on our way.
I cannot tell you the cost, but it is burdensome.
Mr. McIntosh. But you do have to pass on that----
Mr. Williams. Certainly.
Mr. McIntosh [continuing]. In higher fees?
Mr. Williams. Certainly. We are not going to absorb it.
Mr. McIntosh. And the other question, is do these
regulations make it more difficult for locally owned banks to
stay in business?
There has been an increasing tendency toward mergers and I
realize a lot of banks have tried to keep a lot of local
affiliation and guidance and control over the decision, but
would you say that it is harder and harder for the small banks
to stay in business?
Mr. Williams. The big banks have batteries of people to
handle the same regulatory burden that community banks have.
And, certainly, they have got a leg up on us.
Mr. Miller. One of our affiliates has only eight staff
members. If one of those individuals spends all of his time
doing compliance, that leaves the other seven people to carry
on the burden.
So, absolutely. The difference is, as Mr. Williams stated,
the larger banks have people and they can afford to have people
on staff to do it.
Smaller banks have to distribute that throughout the whole
staff.
Mr. McIntosh. And as a result, if you want to have a loan,
you have to go oftentimes to get approval from far away,
depending on the structure----
Mr. Miller. Absolutely.
Mr. McIntosh [continuing]. Of the particular bank.
Mr. Miller. Absolutely.
Mr. McIntosh. Thank you both for coming. Let me see if my
colleagues have any questions for you.
Mr. Peterson. Were you just being nice when you said that
you did not want to repeal CRA?
Mr. Williams. No, I think CRA, properly tiered, properly
structured is not a bad act, as long as it is not so burdensome
and costly. I do not have a problem if we are in a proper tier
reporting.
Mr. Peterson. I thought they were up to trying to get $500
million exempt.
Mr. Williams. Well, I have read and read and read. It has
been $1 billion. It has been $500 million. It has been $750
million. It has been $250. And it has been as low as $50.
I think $250 is right for the low tier. I think maybe $500
billion to $100 billion is a proper tier for a bank with--they
do not need to be under the same regulatory burden as big
banks.
Mr. Peterson. Well, I hear what you are saying, but I just
have a real question that if we keep it in place, whether it is
ever going to get simplified.
Mr. Williams. No.
Mr. Peterson. I mean, I am for getting rid of it because I
agree with you. I do not think that people----
Mr. Williams. I will go along with you.
Mr. Peterson. I do not think--[laughter]--I do not think
people care about it.
Mr. Williams. They do not.
Mr. Peterson. And I do not think that it is accomplishing
anything, that I can see. It is not in my district. It just
causes people to spend a whole bunch of money for no good
reason.
Mr. Miller. I think Mr. Williams made a good point and we
are in the same boat since the act has been enforced. We have
probably had less than a dozen people that have requested the
information that is being garnered on a yearly basis.
Mr. Peterson. You have had more examiners in your office
than you have had----
Mr. Miller. Absolutely.
Mr. Peterson [continuing]. People in there that have been--
--
Mr. Miller. Absolutely.
Mr. Peterson [continuing]. In there asking about it.
Mr. Williams. But there would not be a thing wrong, you
would not break our heart if you repealed it.
Mr. McIntosh. One other quick question. You had mentioned,
Mr. Miller, that you thought a lot of times the problem was
uneven playing fields.
Is it your sense that some of these regulations are in
place in order to give certain institutions an advantage over
the others?
Mr. Miller. I am not sure that they are put in place to
give someone an advantage, but they certainly give the banks a
disadvantage.
Mr. Williams. The results are that.
Mr. McIntosh. You say you do not have an uneven playing
field in terms of the cost of delivering similar services?
Mr. Miller. Certainly not. Based on the regulations that we
have to adhere to, they are more in number than some of the
others.
Mr. Williams. The credit unions do not adhere to the minute
amount of regulations than we do. And as I say again, they do
not pay any Federal or State taxes. It is hard to compete on
that basis.
Mr. McIntosh. Yes, when your competitors have a different
structure.
Thank you both for coming. I appreciate that.
Mr. Miller. Thank you.
Mr. Williams. Thank you.
Mr. McIntosh. Our next panel has to do with regulations in
the health care delivery area. I would like to invite forward
Dr. Eugene Roach who is the medical director at the Anderson
St. John's Hospital; James Currier who is a radiation
oncologist; and Robert Brodhead, the president of Ball
Hospital; and George Brannum who is the head of Pathologists
Associated.
Is George here?
Welcome. I appreciate you all joining us here today. We had
health care issues come up in Indianapolis and, in fact, some
of the people who did not have a chance to provide testimony
were interested in those. So, I am glad that we are able to
hear from all of you today.
Let me just start out with you, Dr. Roach.
STATEMENT OF DR. EUGENE ROACH, MEDICAL DIRECTOR, ANDERSON
CENTER OF ST. JOHN'S
Dr. Roach. Thank you, Mr. Chairman and members of the
committee.
My name is Dr. Eugene Roach and I am a board-certified
psychiatrist. And I am currently medical director of the
Anderson Center of St. John's in Anderson, IN.
I arise today to speak about an issue that has plagued my
ability to render good high-quality medical care to my patients
since 1983.
Under the Medicare and Medicaid guidelines there are two
types of hospitals and units within hospitals. Attached to my
testimony today is a regulation which will be available to you.
For reimbursement there are exempt and non-exempt units
under the DRG prospective payment. Traditionally, psychiatry
units and psychiatric hospitals have been exempt. Reimbursement
issues are not my main concern today, but medical care is.
What is the regulation when a patient is admitted to an
exempt unit and is transferred to a non-exempt unit? The HFCIA
regulations demand that the patient be discharged and re-
admitted.
From a practical standpoint, this means when a patient is
moved from a medical surgical unit to a psychiatric unit or
vice versa the medical record is broken down, a new history and
physical is required, as well as a discharge summary from the
previous unit.
This little process may seem to be no big deal, but let me
share with you some of the horror stories where patient care
and welfare have been compromised by this regulation.
When a patient enters the hospital, there are series of
procedures and processes that are done. The medical record
becomes the major document in guiding and caring for the
patient.
It documents all contact with the patient. It documents all
procedures done and the results; nursing and medical
observations; allergic reactions; and, really, everything that
is known about the patient is contained in that document.
For this data to be separated from the patient and sent to
medical records for processing can be a hazard to the patient
and can be an economic hardship.
I have seen duplication of tests run, failure of allergic
reactions to be transferred with the patient, and, under this
regulation, it deprives the new units the experience of
knowledge of this patient's total care and their response to
previous interventions.
To interrupt the medical chart during a patient's spell of
illness, regardless of what services are needed, I believe is
dangerous. I feel this regulation needs to be revised or to be
rescinded. It is a bureaucratic decision made by someone who
has never cared for a patient within a hospital setting.
Mr. Chairman and members of the committee, I respectfully
submit these comments and will be glad to answer any questions
that you have later.
[The prepared statement of Dr. Roach follows:]
Mr. McIntosh. Thank you, Dr. Roach. That sounds like a
catch-22 situation where you want to provide the best health
care possible, but the regulations will not let you or make it
a lot harder for you to do that.
Let me allow each member of the panel to submit their
testimony before we have questions.
Dr. Currier.
STATEMENT OF JAMES CURRIER, MD, RADIATION ONCOLOGIST
Dr. Currier. I appreciate presenting this to you this
afternoon.
My contention this afternoon is that the Nuclear Regulatory
Commission regulation of the medical use of radioactive
materials is not needed at this time and that much of the $528
million budget for this agency could be better spent.
We now have alternative methods of ensuring the safety of
use of radioactive materials--to a degree, unmatched by other
branches of medicine and most other industries.
Currently, the adversarial method of regulation used by the
Nuclear Regulatory Commission is probably contributing more to
the detriment of quality patient care in the United States than
to protection of the population.
It is also a contributor to the increasing costs of health
care in America. In one study I have read, there are an average
of 60 misadministrations reported each year to the Nuclear
Regulatory Commission. A review of 66 such misadministrations
found only four cases in which there may have been a
significant adverse affect.
In contrast, a study of 1984 New York State
hospitalizations found about 6,900 deaths through negligence. I
find significant the regulatory effort to prevent four injuries
or deaths nationally due to radiation misadministrations
compared with 6,900 deaths in one State due to negligence in
other aspects of patient care.
To support my contention that NRC medical oversight is now
unnecessary, I would like to quote Dr. Ivan Selin, the NRC
chairman, who recently wrote that his successors, ``Should get
the NRC out of the business of regulating the medical use of
radioactive materials.''
There are, of course, many anecdotes one could share. One
of my associates had an experience with one misadministration
in which there was a calculation error. The calculation error
was discovered in time to prevent any injury. The patient was
treated more quickly than prescribed and, therefore, was a
misadministration.
After reporting it to the NRC and after over a year of
effort--including at least 8 days of physician efforts, 9 days
of PhD physicist time, 2 days of hospital administrator time,
in addition to two NRC physician advisor visits and quite a
great deal of paperwork--it finally was agreed that there was
no cause for a fine and they censured the department for
allowing it to happen in the first place.
Other stories could easily be given. And if you are
interested, I would be glad to provide additional names and
phone numbers and such.
Again, I would hope that the advice of the NRC chairman
that the NRC be gotten out of the business of regulating the
medical use of radioactive materials, not be delegated to his
distant successors.
[The prepared statement of Dr. Currier follows:]
Mr. McIntosh. Thank you. I appreciate that very much, Dr.
Currier.
Mr. Brodhead, thank you for joining us today.
STATEMENT OF ROBERT BRODHEAD, PRESIDENT, BALL MEMORIAL HOSPITAL
Mr. Brodhead. You are welcome. Mr. Chairman and
distinguished members of the committee, my testimony is
entitled ``Time Is Up for Peer Review Organizations.''
Peer Review Organizations were created by Congress in 1982
to ensure that services provided to Medicare recipients were
medically necessary, met professionally recognized quality
standards, and were provided in the most suitable setting.
Also with the implementation of the Prospective Payment
System, whereby hospital reimbursement for Medicare was based
on set fees, there was a perception by the Government that
hospitals would discharge patients ``quicker and sicker'' to
protect themselves financially.
Under the PRO system, which, today, includes 54 PROs,
contracts are given at the State level to conduct reviews. At
Ball Memorial Hospital, we feel the PRO system is no longer
effective, nor is it needed.
The PRO is finding utilization problems in only 1 percent
of the cases reviewed at our hospital. You have to ask the
question, is this worth the expense and effort.
In a recent report on results of the PRO system nationwide,
PROs completed more than 4 million hospital reviews over a 2-
year period.
According to the report, only 3,358 quality problems were
found. This is approximately one-half of 1 percent of the cases
reviewed. And it is estimated that the cost of these reviews is
nearly $74 million.
Looking solely at the hospital's cost in providing Medicare
and PRO review services, our direct and indirect expenses are
approximately $116,000 a year. If you take just a portion of
that--let us say $50,000--and multiply it by the 5,000
hospitals nationwide, the price tag to hospitals alone is $25
million.
At Ball Hospital our physicians have internally established
mechanisms to look at quality and utilization on both a case-
by-case and overall basis.
Those of us in health care today agree that recipients are
entitled to oversight to ensure an acceptable level of care,
but we do not believe that the current PRO program and its
multimillion dollar price tag is the most cost effective way to
do it. Thank you.
[The prepared statement of Mr. Brodhead follows:]
Mr. McIntosh. Thank you very, very much. Thank all of you
for joining us here today.
We are hearing a lot about the increasing costs in health
care and one of the proposals that was not talked about very
much during the health care debate was the effort to
standardize the reporting requirements; and, in particular, the
claims report both for the private and government-provided
claims.
Would that be an area where, if we could reach a standard
claim report and use that across-the-board, that that would
save costs?
I think probably, Mr. Brodhead, you deal with that
particularly at the hospital.
Mr. Brodhead. Well, I think it would save significant
costs. And I think, certainly, a goal ought to be to
standardize and eliminate a lot of the paperwork. It would
definitely reduce costs.
And there have been studies done that it is anywhere from
10 to 25 percent of the costs in the health care system.
Mr. McIntosh. Which reaches a magnitude of nearly $1
trillion that are estimated in the next few years. So, 10
percent of that would be $100 billion dollars of savings. That
is phenomenal if we are able to do that.
Do any of my colleagues have any questions?
Mr. Peterson. I do not know if you are aware of it, but
there is, in the last 2 or 3 weeks, a real serious effort
started in trying to do a bipartisan health care reform bill
that takes care of the things that everybody agrees on,
including the one form and that and getting it done, which we
tried to do the last time and were unsuccessful, but I really
feel hopeful that we are going to get something done in short
order here and get part of the things fixed. Hopefully, some of
the regulatory overkill that we are doing.
But it is my judgment, in the long run, that we just have
to look at some other kind of system for Medicare and Medicaid.
It just seems to me that this thing is beyond hope and we have
to look at totally revamping it.
Do you agree with that, No. 1. And, No. 2, do you have a
solution as to what the alternatives should be?
I see you are shaking your head there in the middle, but--
No?
Dr. Roach. It was someone in Indiana who has put forth the
concept of the IRA for medical care. And I think that is very
viable.
Mr. Peterson. Do you think we can replace the whole
Medicare system?
Dr. Roach. Right. Exactly, with an IRA kind of concept. And
you get to keep what you do not spend.
Mr. Peterson. What about the folks that are 65 now and have
never had an IRA? What do we do with them?
Dr. Roach. Well----
Mr. Peterson. You know, that is part of the problem, I
guess, is getting----
Dr. Roach. Yes, right.
Mr. Peterson [continuing]. To a new system. Has anybody
done that within your group?
Dr. Brannum. Well, I think within the State of Indiana,
they have started a managed Medicaid program. That started last
year and I think managed care, the attractiveness of that is
that it tends to drive down costs without impacting quality.
So, my feeling is I do think that the system needs to be
reformed. And my suggestion would be that both for Medicaid and
Medicare, that we look at a managed care type of approach.
Mr. McIntosh. Thank you. Or do you have any questions?
Mr. Gutknecht. Well, yes. Mr. Chairman, health care is a
big issue to me because I represent a little town called
Rochester, MN. Two brothers started a little clinic there a few
years ago and it has grown and grown.
I was curious, though, Dr. Currier, you had talked about
$528 million. Is that the total budget of the NRC or is that
just what they spend to regulate nuclear medicine?
Dr. Currier. The quote I had, it sounded like that was the
total budget. And that is in my papers here that I will be
giving you, but that was my understanding that that is the
total budget.
In 1990 or 1991, I believe, they required, as I understand
it, that the NRC get the funds from those it regulates. And, as
a result, there has been a rather steep increase in the fees
for licensure because a lot of people are dropping out. So,
there is a smaller group supporting the larger bureaucracy.
Mr. Gutknecht. Let me see what you think about this. And we
had a problem with an ice cream maker in Minnesota and a number
of people got sick from eating that ice cream. OK?
But that was in an USDA-inspected plant. The Government
inspectors, everybody was there. And people still got sick.
Nobody went back and sued the Government inspectors; the
regulators. And my suspicion is that if something goes wrong
with any of your machines, that they are not going to go back
to the NRC anyway. They are going to go back to you.
And, ultimately, it is you that bears the responsibility.
And that is where, I think, this whole debate--whether we are
talking about health care reform, whether we are talking about
welfare reform or whether we are talking about regulatory
reform--really gets back to, basically, an issue of
responsibility. Who really is responsible?
And we have an awful lot of people in Washington who think
that they are responsible, but, ultimately, it is those small
business people, it is the doctors, it is the people who we are
hearing testimony from today who bears the responsibility of
guaranteeing whatever it is they do, will do what they say it
will do.
And somehow we have got to get back to that basic notion of
personal responsibility and this idea that somehow you can
protect.
We have had this debate with--and I am sorry that he is not
here today--one of our colleagues, Mr. Waxman, from California.
And I told the story then and I will share it with this group,
too.
Last year I was invited to the Governor's Mansion in
Minnesota. And they served pineapple at this little breakfast
reception. And a bunch of us got violently ill after that.
And I told Mr. Waxman, I said, You know, I got sick; that
was USDA-inspected pineapple and we got sick despite all those
Federal regulations.
In fact, he looked at all the regulations and the
inspections that went on from the time that pineapple came into
the United States.
We got sick in spite of the Federal regulations and,
surprisingly enough, we got well in spite of all the Federal
regulations. [Laughter.]
And I think there is a theory that has persisted and
broadened in Washington over the last 3 or 4 years that somehow
if we have enough Federal regulation and rules and guidelines
and books and all the rest, that you can create a risk-proof
society.
And the truth of the matter is you cannot. Bad things
happen. Sometimes things go wrong despite the best regulations.
And now what we have, more and more--and I am sorry, I am
lecturing now more than asking questions--but I think, as we
have said earlier, and I state often, we create these $50
solutions to a $5 problem.
And yours is the best example, Dr. Currier. I like that. If
those are the numbers and my staff--I will get into this--if it
is $528 million because there were four potential cases where
there may have been danger to the patients----
Dr. Currier. In roughly a year.
Mr. Gutknecht [continuing]. That is a huge cost per
patient. And in spite of regulations, there may have been four
that actually slipped through the cracks anyway. Thank you very
much.
Mr. McIntosh. Thank you all for coming. I appreciate it. It
sounds like we have yet another good idea for Corrections Day.
Thank you for coming.
We will take those materials and go ahead and put them into
the official record.
Let me move on to the next panel. This panel represents
manufacturing concerns and has several individuals on it. One
is Gary Bartlett, president of G.W. Bartlett Co.; Richard
Brown, who is sales manager of Beckett Bronze; Robert Kersey,
president of--they have down here Rochester Metal Products. I
think of it as Indiana--have you changed your name, Robert?
Mr. Kersey. No, we did not. It is another company.
Mr. McIntosh. Another company. Oh, I see. OK. Robert
Anderson, plant manager of Delphi Interior and Lighting Systems
and Richard Sullivan, vice president and division manager of
New Venture Gear.
Thank you all for joining us. Let me kick it off by turning
to Gary Bartlett, who just handed us this thick booklet. I will
let you tell us about this, Gary.
STATEMENT OF GARY BARTLETT, PRESIDENT, G.W. BARTLETT CO.
Mr. Bartlett. Actually, it is a little difficult to squeeze
5 or 6 years of regulatory problems into 5 minutes, so I
thought that I would give you a 5-minute talk and then also
give you just a little idea of some of the problems that we
have run across with regulations, I would give you that.
Thank you for asking me to testify at the House
Subcommittee on National Economic Growth, Natural Resources,
and Regulatory Affairs field hearing.
Unidentified Voice. Cannot hear anything.
Mr. Bartlett. We will try it again. Is that a little better
now?
Mr. McIntosh. Is that mic working? Is the witness' mic----
Unidentified Voice. That is not the mic. This is the mic.
Mr. Bartlett. Oh. There is a difference?
Unidentified Voice. It should pick up the whole thing.
Mr. Bartlett. Unless I can scoot over.
Unidentified Voice. This is the cord for the court
reporter.
Mr. McIntosh. It looks like we can only handle a couple of
problems at a time. [Laughter.]
Unidentified Voice. That is the one.
Mr. Bartlett. OK.
Mr. McIntosh. Thank you.
Mr. Bartlett. We will try it again.
Mr. McIntosh. All right.
Mr. Bartlett. Now, can we hear better back there?
Unidentified Voice. Speak up a little more.
Mr. Bartlett. Still cannot hear.
Mr. McIntosh. Just talk into the flower plant. [Laughter.]
Mr. Bartlett. As I mentioned, it is a little difficult to
squeeze 5 or 6 years of regulatory problems into a 5-minute
talk. So, what I thought I would do would be put together a
book that has more information than I can give you in 5 minutes
about a problem that we have had ongoing for 5 or 6 years. So,
that is what the book is.
Thank you for asking me to testify at the House
Subcommittee on National Economic Growth, Natural Resources,
and Regulatory Affairs field hearing.
I am Gary Bartlett, president of G.W. Bartlett Co. of
Muncie, IN.
I started G.W. Bartlett Company in October 1975, while
working for my dad and uncle at their tire store on Broadway
here in Muncie. Before and after their normal working hours, my
brother and I rented space and equipment from them to perform
the necessary duties for my newly formed company. We did
mechanical work on foreign cars that my dad and Uncle Ed
otherwise would have chosen not to work on.
The new business moved to 1912 Granville Avenue here in
Muncie in October 1976. Although the business started primarily
to work on foreign cars, it has evolved over the years into a
manufacturer of high end interior trim components for use in
the automotive aftermarket and the automotive original
equipment market. Our market place is evenly split between
Europe and America.
We have grown from two people in 1975, to about 100 here in
American and 10 in our office in Kempston, England.
Of the Government created regulatory problems that I have
experienced in the past 9 years--not the 19\1/2\ that I have
been in business, but just the latter part of that--including
frivolous EEOC claims and non-existent OSHA infractions, an EPA
(or IDEM, Indiana Department of Environment Management) problem
that I have has been unsolvable.
The problem started in March 1986 when I received a letter
from the State Board of Health asking me to report any
underground storage tanks that were on my property. And all of
the documenting evidence is in the book as well.
Being a good citizen and a responsible business owner, I
duly reported a partially submerged 275 gallon crankcase waste
oil tank.
When we would change the oil in a car, we would pour used
oil into a big funnel that was inside of the building. The used
oil would go from the funnel through the wall via a three-inch
pipe into this partially submerged 275 gallon tank.
In October 1989, a heavy rain caused the tank to ``float''
up from its position. And this was just a partially submerged
tank. It was only halfway under the ground.
As the tank was no longer used, I made the second mistake.
I decided to have it removed by the book.
At that time, October 6, 1989, I had no idea of the test
procedures and requirements necessary. Subsequent soil testing
required showed hydrocarbon soil contamination around the tank
or waste oil around the tank. Over the years, there were times
that the tank did overfill and oil did escape. These times were
rare and were caught and rectified quickly.
I thought that a minor excavation would correct an
otherwise insignificant problem. After the monitored
excavation, I was instructed to fill in the hole by IDEM field
rep, Phil Eley. I thought that the problem was behind me.
By August 1991 approximately, I had not received a ``No
Further Action Required'' letter from IDEM and discovered that
IDEM would not approve or disapprove my actions to date. And,
again, the letter is in there from Anne Black from IDEM. And
further to my dismay, Phil Eley and the others that I had
worked with were no longer with IDEM.
In February 1992, I needed to expand part of our building
over the contaminationsite. The clean-up process began all over
again.
I hired Ontario Environmental to do a Phase II
Environmental audit to determine the exact location of the
remaining contamination. After numerous calls and letter to
local, State and Federal officials, including President Bush,
Kathy Prosser the Commissioner of IDEM did finally respond and
sent Clean-Up Project Manager Michael Anderson to oversee our
project.
We partially demolished the building in question and
excavated yet more soil.
In May 1994, after rebuilding the partially demolished old
building and building over the contaminationsite, Ashlee Insco
from IDEM misread an engineering report and reclassified as
from ``Special Waste'' to ``Hazardous Waste''. Even with test
results to the contrary, she refused to back off.
Mike Penning from IDEM's Hazardous Waste Compliance Section
drove up to Muncie to inform me that IDEM was in the process of
filing criminal charges against me.
This time, I had to hire another consulting firm,
Hydrotech, of Anderson, to utilize the services, once again, of
Kerimeda Environmental and Barnes and Thornburg to defend
myself against these charges.
Ashlee Insco still refused to back off. And had it not been
for Mike Anderson of IDEM and his intervention, I do not know
where this case might have gone.
We did prevail, but the engineering report is an
engineering report. The results are the contaminated soil is
still there. There is no ground water contamination. It is not
migrating and there are no threats to humans, plants or
animals.
I would guess that the contamination did not come from our
waste oil tank, but, rather, the 1950's and 1960's when a print
shop was in the building.
It will cost me an additional $90,000 to $150,000 to
complete a useless clean up. I have wasted $55,919.11. I have
wasted hundreds of unproductive hours.
And I own this building. I have $400,000 of my own money
invested in the real estate. And at this time, we need to sell
this property to finance construction of a new building, but,
unfortunately, banks will not finance property if you have got
an environmental problem. They will not loan money to anybody
if you have an environmental problem.
The biggest cost to me, though, is now how I view my own
Government. After years of continual attacks, I have come to
look at them as the enemy.
Small business people, like me, have many major obstacles
to constantly overcome. These can include foreign competition,
changing market trends or hundreds of others, but, for me, the
largest impediment to growth is the current adversarial posture
of the Federal Government. Thank you.
[The prepared statement of Mr. Bartlett follows:]
Mr. McIntosh. Thank you very much, Mr. Bartlett.
Let me go all the way through the panel and then we will
ask questions at the end of it.
Mr. Brown, would you like to present your testimony?
STATEMENT OF RICHARD BROWN, SALES MANAGER, BECKETT BRONZE
Mr. Brown. Well, primarily, Beckett Bronze Co. is a small
business, as you know. I know the chairman has visited our
plant and shook the hands of practically everybody in there.
We operate both a foundry and a machine shop. And since we
produce bronze products, including leaded bronze, environmental
laws, rules and regulations are a costly problem for our
company as they are for everyone in our field.
With domestic competition, we are all in the same boat.
With foreign competition, competitiveness can be a serious
problem. However, environmental problems are just a part of the
competitive problem. As a small business, we are faced with all
kinds of rules and regulations from the Federal Government.
I chose to take a look at an inquiry which we received from
the Navy because I think that it sort of indicates the kind of
regulations that are going on.
This inquiry lists 51 applicable FAR and DEFAR clauses or
regulations to which the supplier must conform. These are all
from the bills promoted by the President and/or Members of the
Senate and/or House.
Just attempting to keep up with the regulations is an
almost impossible task for small businesses. We just do not
have the staff and legal departments to do so.
They are sure these bills are introduced to right a
perceived wrong or some ethnic or disadvantaged citizens,
although there are times when we suspect the author may give
some thought to the voting possibilities from their
constituents.
There is one of the FAR regulations that I would like to
read in its entirety. It is FAR 52-215-7:
Unnecessary elaborate brochures or other presentations
beyond those sufficient to present a complete and effective
response to this solicitation are not desired and may be
construed as an indication of the offeror's lack of cost
consciousness. The elaborate artwork, expensive paper and
bindings and expensive visual and other presentation aid are
neither necessary nor wanted.
It is rather ironic that this came in a 49-page request for
a bid on four pieces of bronze. [Laughter.]
I find that the Government might listen to what they write
up.
I think that we have to take a look at competitiveness from
the standpoint of our Nation's ability to compete in the world
market place and our own domestic market. As the national debt
continues to grow, we come closer and closer to the kind of
calamity that Mexico is experiencing.
The major contributor to our problems is government
bureaucracy which is absorbing too much of the Nation's wealth.
Government agencies have a tendency to continue uncontrolled
growth in spite of other needs.
The exponential growth of regulations, protection for any
kind of minority and perceived social problems always seem to
result in new bureaus and programs to correct the problem--no
matter what the cost--and old programs never die. Nor do the
size of the bureaus ever seem to be reduced.
In the meantime, business, which provides the jobs and
income of the working people of the Nation, as are the working
taxpayers taxed for more and more money to carry the
bureaucracy which generates no wealth, but, unfortunately,
supports this maze of rules and regulations which is a serious
problem for the competitiveness of our business and Nation.
The bureaucracy likes to blame programs as social security
for the problems of high Government expenditures. This is the
same group who collected the money withheld for social security
ever since its inception and spent the money for social
security and other purposes.
Somehow, they reason that the Government is giving away
this money, when, in fact, the Government used the money when
the politicians spent it to cover the cost of the bureaucracy
and its other programs.
Had the money been invested outside the Government in
mutual funds, stocks, property or practically any wealth-
producing area, there would be no shortage of funds for social
security.
I will stop at this point.
Mr. McIntosh. If you would like to go ahead and summarize
any other points.
Mr. Brown. Yes. I think I would just present a list of all
these regulations that we are expected to read and study when
we try to quote something to the Government, because the
Government lists them all.
[The prepared statement of Mr. Brown follows:]
Mr. McIntosh. I appreciate that. And thank you for bringing
that.
One of the complaints that we have had in our efforts to
cut back on regulations is that we may be putting the
Government through a few too many hoops in order to write new
regulations.
And I find this highly ironic since they are quite willing
to come up with regulation after regulation for the private
sector, but do not want to have to go through any procedures
themselves.
You often think maybe if they live with many of the things
that they write, then you would have a lot better results.
Thank you very much.
Let me call now on Mr. Kersey representing Rochester Metal
Products. Why not trade places?
STATEMENT OF ROBERT KERSEY, PRESIDENT, ROCHESTER METAL PRODUCTS
Mr. Kersey. Right, Rochester Metal Products. We also make
lawnmowers, but under a different name. This is a foundry
operation that grew out of the lawnmower operation and moved to
Rochester many years ago.
I want to thank you for allowing me to testify. And I am
testifying about Title V, the Clean Air Act.
As president of the Rochester Metal Products Corp., and
also as a director of the Indiana Cast Metals Association that
represents 45 foundries in the State of Indiana, I am
particularly hopeful that what I have to say will be useful.
Title V is, first, overburdensome. In States already having
to comply, such as Wisconsin, foundries are reporting that
permits require 700 to 900 written pages.
Sensing a huge handling and storage problem due to
paperwork, Ohio's Environmental Protection Agency has announced
that it will disallow ``hard copy'' applications, but its ``on-
line'' electronic permitting system is said to consist of 1,400
data screens.
Indiana initially is setting up an electronic system. Our
people attended the first conference and the system did not
work.
Title V is unreasonable in the sense that it requires
foundries to specify ``alternative operating scenarios'' in all
aspects. You have got to predict what you are going to do for
the next 5 years.
Failure to identify the ``right'' alternative will require
filing an amendment to the permit and loss of the valuable
``permit shield''. And isn't that kind of a humdinger of
bureaucratic jargon; we have a bureaucratic permit shield.
We are faced with a no-win situation. We do not want to be
constrained by our permit restrictions from taking advantage of
future economic expansion, so we must assume maximum capacity
for this period, but this will result in higher potential
emissions, higher permitting fees and increased regulations.
Title V is costly. And I am speaking strictly of the
paperwork part of it. This is before anything is ever done
about cleaning up pollution.
Grede Foundries, Inc. in Milwaukee, a large and a well-
respected competitor, estimates that permits will cost them
over $58,000 for each facility. That is over $1,000 a week.
This is a lot of money in our industry. And rather than
being spent on preparing a massive document to satisfy the
act's bureaucratic requirements, should go for better control
equipment.
Our costs would be very close to Grede's and this does not
cover the added permitting fees that are going to be charged by
IDEM to try to control or handle this.
The act is redundant. The States already have permitting
procedures.
And, finally, it is nonsensical in many ways. Let us assume
that every major emission source submits permit applications
completely and timely. We are talking about close to 1,000
pages. How will this information be used? Can it be used?
One of the questions deals with how much ``fugitive dust''
goes airborne when trucks pull into a parking lot. Now, is that
during a rain? Is that during a wind storm? Is that--you know.
They are impossible questions to answer. Environmental
agencies will be required to process unprecedented amounts of
information. Does anyone honestly believe that the governing
agencies will be able to process this information, let alone
put it to good use.
The Ohio EPA could not effectively handle the NPDES--that
is the stormwater permitting--permit submissions because of the
complexity and volume. And we had people waiting around for
rains and timing them to take samples of runoff to do that kind
of work.
As a foundryman, I believe that the Clean Air Act was born
of a good idea, less emissions, but has been transformed into a
bloated administrative nightmare with emphasis on the
permitting process, not on improvement of the environment.
We need help. We need delay and review and cuts in those
requirements. And I am certain that if others who are still
unaware understood what is required, you would be getting
hundreds of letters objecting to this, but many of us--I do not
claim to understand all of it. Thank you.
[The prepared statement of Mr. Kersey follows:]
Mr. McIntosh. Thank you very much, Mr. Kersey. I appreciate
that.
The next witness is Robert Anderson, plant manager at
Delphi Interior and Lighting System. Welcome.
STATEMENT OF ROBERT ANDERSON, PLANT MANAGER, DELPHI INTERIOR
AND LIGHTING SYSTEMS
Mr. Anderson. Good afternoon, gentlemen. My name is Bob
Anderson. I am the plant manager at the Delphi Interior and
Lighting Systems plant in Anderson.
I appreciate the opportunity to briefly address this
audience regarding the growing impact of the Government
regulation on plant operation.
Delphi Automotive Systems is a business sector of the
General Motors Corp. Delphi Interior and Lighting Systems has
been in business in Anderson since 1929.
Our 3,800-person team designs and manufactures exterior
lighting for cars and trucks--including signal lamps, tail
lamps, turn signals, parking lamps and high-mounted stop lamps.
Our plant is actually the largest manufacturer of vehicle
lighting products in the world. Our Anderson team supplies over
95 percent of the signal lighting used in vehicles produced by
General Motors--over 5 million vehicles in 1994 alone.
At Delphi we have persevered over the years to reach our
present position and we are committed to working even harder in
the future to retain our status as the No. 1 producer of
quality lighting products.
There has been great progress made in protecting human
health and safety and the environment and we are pleased to be
a part of that progress. In fact, our lighting business was
started 89 years ago based on products to make cars and trucks
safer.
Now, each and every product we make is totally regulated,
and regulatory requirements facing manufacturing facilities in
the United States today are increasingly complex and costly.
By example, over the last 20 years the number of
environmental regulations with which plants must comply has
grown phenomenally. According to one estimate, the pages of the
Code of Federal Regulations devoted to plant environmental
regulations alone increased from 450 pages in 1972 to 9,200
pages in 1988.
The EPA regulations alone take up 15 volumes similar to
this one (holding up EPA regulations book). One analysis of the
cost of reporting showed that at our plant alone, we spent over
$5.8 million in 1994 to comply just with environmental
regulations.
At our plant we have five professional employees who spend
most of their time on environmental regulation conformance and
reporting. We deal with a number of regulatory agencies at the
national, State and the local level.
Obtaining permits from regulatory agencies is a costly and
time-consuming process. In one case, the process to obtain a
hazardous waste storage permit took 10 years and required
several submissions and revisions due to inefficiencies in the
review system.
Nearly $200,000 was spent to modify a drum storage area to
meet rigid regulations, even though the area was being properly
managed and had no documented releases to the environment.
These stationary source requirements are pervasive and
regulate virtually every phase of manufacturing activity. As
you know, manufacturing plants comply with a myriad of
regulation and reporting requirements generated from laws such
as the Community Right to Know, Resource Conservation and
Recovery, Clean Water and Clean Air Acts.
Today we operate in the increasingly competitive
international lighting market by focusing on producing quality
products at a reasonable price. Our engineers develop
innovative designs that are cost effective as well as providing
an added benefit to the customer in terms of safety and
efficiency.
Delphi Interior Lighting, Anderson Operation, has invested
over $100 million in research and development over the last 5
years and another $40 million in capital improvements in our
plant over the same time period. This included multicolor
molding equipment, toolroom and other production equipment--
19\1/2\ single-spaced pages in this computer printout of
capital improvements in the last 5 years.
These types of expenditures are necessary in order to
improve our ability to compete as we look to expanding our
markets nationally as well as overseas.
We produce lighting not only for the U.S. market, but also
for vehicles exported to other countries. The intense
competition that has developed as our market has become global
means we have to eliminate every bit of waste from our
operations. We have to have the best products in the world, but
we also have to be price competitive to be able to sell them.
It certainly defeats the purpose of and wastes our internal
efforts to be competitive when the Federal Government imposes
regulations which, though well intentioned, have not been
adequately considered from a cost benefit standpoint or which
unnecessarily complicate operations or which require continuous
or detailed compliance which no one is likely even to read.
Although reasonable review of business practices is
beneficial, the Government's regulator role has exploded in the
last 4 years. Regulatory reform, such as the legislation
recently passed by the House, offers a reasonable approach to
begin looking at the cost-benefit ratio of the many
regulations.
Regulations that promote a benefit should be retained.
Those that do not meet the criteria should be flushed out. In
fact, this concept is not different than the scrutiny American
enterprise faces every day in today's global marketplace.
Again, thank you for providing a forum to begin discussions
on the important subject of bringing unnecessary regulation
under control. I assure you, it is one of the keys to our
ability to compete globally. Thank you.
[The prepared statement of Mr. Anderson follows:]
Mr. McIntosh. Thank you very much, Bob. We appreciate it.
Let me turn now to Mr. Richard Sullivan, vice president and
division manager for New Venture Gear. Welcome.
STATEMENT OF RICHARD SULLIVAN, VICE PRESIDENT AND DIVISION
MANAGER, NEW VENTURE GEAR
Mr. Sullivan. Good afternoon. First, I would like to thank
you for the privilege of speaking here this afternoon.
The Muncie Transmission Division of New Venture Gear is a
manual transmission supplier located on the southwest side of
Muncie. We are a joint venture formed and owned by Chrysler
Corp. and General Motors. Our facility has been producing
transmission components at this location since 1919. Throughout
these years, we have been a major provider of jobs for Hoosiers
and a major consumer of goods and services from the area.
During the last few years, competitive pressures have
caused business loses, resulting in downsizing. Our employment
has fallen from a maximum of 3,000 in the early 1980's to its
current level of 1,300.
Our plant lost $52 million last year and will lose about
$40 million this year. Our board of directors have told NVG it
must make the Muncie plant profitable. Obviously, to do that,
we have to have aggressive cost-cutting reduction measures
implemented.
And although our business losses are not a direct result of
the added regulatory burden, they do impact our profit picture.
Environmental and health and safety spending, on a one-time
basis, from 1989 to 1994, was over $3.2 million with ongoing
annual recurring costs of grown to over $1.3 million.
We ask you to consider the financial impact regulations may
have on American competitiveness and that the proposed benefit
be weighed against the cost.
While we acknowledge that the workplace and the environment
are definitely safer and cleaner than ever before, we also
stress the need to be cost competitive. Thank you.
Mr. McIntosh. Thank you very much. I appreciate that.
That leads to one of the general questions that I would
like to ask each of you. And I appreciate you all being here.
We have a good variety of smaller businesses to larger
businesses--GM being a major employer in both Anderson and
Muncie; and the small businesses, really, generating a lot of
the job growth opportunities historically.
But let me ask you to think about the impact of these
regulations and others on the ability to create new jobs or
sustain the existing jobs.
And if you could give me either a quantitative sense of
what the job loss due to regulations is or the job gain, if
there is one--if you have to hire more people for some reason
on the paperwork--that would be helpful to us.
And I would appreciate it also if, as you are thinking
about that, regulations have an impact in particular on
decisions to expand and invest in new equipment.
I noticed Mr. Anderson and Mr. Sullivan both had fairly
large sums of cost of regulation and I did some quick math.
Over at the Delphi plant, if you had employees making $50,000 a
year and taxes and benefits package of another $25,000 in cost,
you could take that $5.8 million and hire an additional 75
people.
And, so, the numbers are significant and do have a
significant impact on employment. Now, obviously, you might not
be able to translate all of that into that many jobs, but that,
I think, gives you an idea that you are spending the salaries
of 75 people to comply with those regulatory costs.
So, let me ask each of you to comment generally on the
impact on jobs of these and other Government regulations. Gary,
do you want to lead off?
Mr. Bartlett. In 1994, we had--at the end of 1993, rather--
we had about 50 employees in our American facility. And through
an aggressive sales program, we doubled our employees over
1994. And we are trying to hire people and train them.
We do our own training--of course, in-house--as fast as we
can, but we have reached the limits that our building will
allow us to grow.
And, certainly, this building in Muncie will continue to be
here and maybe even be our home office, but we have had an
offer from a company in England--since we sell so much in
England--to expand our operation and participate in a joint
venture in England.
And when you are faced with things like that and you work
in the international marketplace, certainly it does make things
like that attractive.
It would be one of the last things I would want to do
because I am an American. I like the idea of selling American
parts in Europe, but, yet, if the Government continues this
type of an approach to small business people like myself, what
do you do when you are faced with something like that?
So, in terms of real jobs, it could, realistically, cost in
1995 and 1996, 100 jobs here; that we would hire foreign
employees.
The jobs that we have here will stay here, but the
expansion will take place somewhere else.
Mr. McIntosh. I appreciate that. That would be a tragedy, I
think, if our Government regulations end up creating incentives
for you to have to expand overseas.
Yes, Mr. Brown?
Mr. Brown. Yes. We employ 50 to 60 employees. It varies up
and down.
Our biggest problem with the regulations is the cost of
ending these problems. In fact, as a small company, we do not
have the people to stay on top of these things. And the
Government just keeps piling them on.
We spend a great deal of money complying with all of the
regulatory issues. Being a foundry, using leaded bronzes, gives
us all kinds of problems. And lead in the air, lead in blood,
water off the roof tops--which is some of our environmental
problems.
I am sure that there is not much lead on the roof top, but
the government is worrying a great deal about it.
So, whether we would expand any great amount? I could not
say, really. That is the management of the company.
Mr. McIntosh. Are you in the marketplace where there is
severe competition from overseas?
Mr. Brown. We are in a marketplace where there is
competition from overseas. Whether I would call it ``severe'';
in some cases, yes. When we lose business to overseas, we
definitely consider it severe.
The majority of our business is still domestic business.
And we are fighting the battle here.
Mr. McIntosh. Do you find that the overseas competitors
have the same concerns with lead on the roof or with regulatory
agencies that are concerned about that?
Mr. Brown. No, I am afraid that most of them do not pay a
bit of attention to these problems.
Mr. McIntosh. Thank you.
Mr. Kersey.
Mr. Kersey. It is very difficult to put a number of people
that you might have hired.
I think one of the aspects that Gary mentioned that needs
to be emphasized and that is as a small business, we really are
all living in fear of having something happen like it happened
again because we, frankly, do not have the people who can
really get their arms around these new regulations.
This Title V is so big that we have nobody in our
organization, so we rely on lawyers and consulting firms to do
that kind of thing.
It takes dollars that we would use for other things and it
generally takes people in our operation, who are really key,
from the important things that they would be doing otherwise.
So, where we lose it is just lack of the kind of growth
that we would get otherwise. And, so, I would say that I do not
know how to put a number to it, but economic growth of our
particular company is definitely much slower because of the
regulatory burdens just because we have to spend so much time
on it.
Mr. McIntosh. Thank you. I appreciate that.
Mr. Anderson.
Mr. Anderson. To try to quantify the magnitude of
regulation and what it can mean to employment in our business--
specifically, in automotive lighting--I touched on just one
small slice of regulation.
We see regulation from all levels of Government dealing
with our people, our products and our processes. Just in my
operation--$5.8 million last year--just dealing with one small
slice of process regulation dealing with the environment.
Not touching health and safety. Not touching
transportation. Just environment. That explodes into a large
number of people. If we look at that whole overall impact, its
tens of millions of dollars.
As I touched on earlier, our business is primarily within
General Motors. So, the opportunity for growth is staggering.
We have our own internal challenges to take waste out, as I
mentioned, but the Government regulation is another opportunity
for us to remove waste from our operation and excess cost from
our business that could give us the opportunity to compete in a
more global basis.
So, the opportunity within just our little piece of
business of signal light--although very, very big within our
company--could be many times as big as it is today if we are
able to be truly globally competitive.
And the effort that you gentlemen are working on is an area
that can help us in that.
Mr. McIntosh. So, if we are able to tackle some of these
regulatory costs, you would foresee the possibility of being
able to expand operations and to increase job opportunities?
Mr. Anderson. Absolutely. We have the capacity. We are just
not globally competitive yet.
Mr. McIntosh. Thank you.
Mr. Sullivan.
Mr. Sullivan. As Delphi mentioned, we probably have six to
seven full-time people to keep up with the regulatory burden.
And, obviously, those are unproductive people in terms of
providing a payback to the company.
So, in our position where we are losing money and we have
got to get profitable, obviously, we want everybody to be
productive.
And if we do not get productive, then we have to what we
call a ``survival mode'' which is maintenance only, which is
going to mean quite a reduction in terms of people at our
plant.
We do not want to get to that point, obviously, but the
thing that this adds to us is cost. When we go out and bid
product, that is part of our cost. We make what we call a
profit that allows us to pay salaries, but we cannot cover all
the burden that a plant our size generates.
And this is one of those contributors to the burden. We
cannot cover these fixed-type costs that are overburdening our
manufacturing operations.
So, we look at it in terms of a cost that is really not
contributing to our being competitive. If we reduce that cost,
we could be more competitive as we go out for new business.
Mr. McIntosh. And did I understand you correctly? In the
case of New Venture Gear, that is critical at this stage
because you have received word that----
Mr. Sullivan. Well----
Mr. McIntosh [continuing]. Perhaps----
Mr. Sullivan [continuing]. We have two divisions. The other
division is extremely profitable. And we are not profitable.
So, obviously, there is a contrast there and the pressure is on
us to get profitable.
Mr. McIntosh. And reducing regulatory costs is one way to
assist in that?
Mr. Sullivan. Well, it is one of the costs for the plant.
Mr. McIntosh. What would you say it is as a percentage of
the costs in the plant?
Mr. Sullivan. Not a big percent.
Mr. McIntosh. Not big?
Mr. Sullivan. Probably 5 percent.
Mr. McIntosh. Five percent? OK. Thank you. I appreciate
that.
Are there any questions from my colleagues? I have one
other for Mr. Barlett.
You mentioned that a lot of this effort is to clean up
waste. What percent of the costs that you have incurred have
gone to actual clean-up activities of removing the waste or
containing it?
And what percent has gone to either legal fees or
consultant fees?
Mr. Bartlett. Probably on waste removal, I would--in fact,
all of the invoices are in your book--but I would say to haul
the material away and construction, probably $25,000 consulting
and legal fees; probably $34,000, $35,000.
Mr. McIntosh. So, well over half of the money has been
spent on things other than actually cleaning up the
environment.
That is typical from what we have seen in a lot of the
Superfund and clean-up activities around the country; that it
is a tremendously wasteful program and ends up not getting us
all the benefits that we would expect from the money being
spent on it.
I appreciate you particularly putting together that book
for us. It will be very helpful.
Mr. Bartlett. I think one of the keys, though, that all of
us hit on while we were here is that we all believe in a clean
environment. We all want clean water. We all want clean air.
But the way that the Government goes about enacting some of
this regulation, I just do not understand what the motive is.
Is the motive to punish people in business? Is the motive
really to clean up the environment because I see some of the
things that they do that really does not clean up the
environment. It just simply is wasteful.
Mr. McIntosh. I hear from people over and over again that
it is simply that business seems to be the enemy and not a real
means for getting a cleaner environment or a safer workplace.
And that is an unfortunate attitude when you encounter that.
Thank you all very much. I appreciate that.
Let me move on to our next witness. He is someone whom all
of you know, if you have watched cable television here in
Delaware County. Mike Lunsford, who is one of our local
realtors, will talk with us a little bit about some of the
regulations that affect his business.
Thank you very much, Mike. I appreciate your appearing with
us here today. Please tell us what your experience has been.
STATEMENT OF MIKE LUNSFORD, REALTOR
Mr. Lunsford. OK, thank you. Thank you very much. I am Mike
Lunsford. My primary business is the real estate business, both
commercial and residential.
And I wanted to speak of three or four issues, a couple of
which have happened and a couple of anticipated regulations
that are coming down the road.
Increasingly, the real estate transaction process has
become a trigger point for imposing a myriad of regulatory
burdens. While many of those are well intentioned,
administratively they are very, very cumbersome, as many people
have shared today.
One example is the Lead-Based Paint Act that was enacted in
1992. It is disclosing the presence of lead-based paint for
sales of any properties pre-1978. For the sales of pre-1978
properties, the seller or agent of any property leased or sold
must provide a lead hazard pamphlet, disclose any known lead
hazards and provide a 10-day or mutually agreement period of
time for a lead paint assessment or inspection.
Just recently, in November 1994, the EPA and HUD issued new
proposed regulations to be sure that this was being complied
with and it included a host of new paperwork requirements
ensuring that compliance.
This would affect, potentially, 2.9 million sales and 9.3
million rental transactions annually at an estimated cost--and
these are EPA and HUD's estimates--of $75 million in the
compliance paperwork in the real estate industry.
It appears to me as though this is largely necessary at the
Federal level because right now there are 25 States that
currently have a property disclosure requirement on sellers.
Indiana enacted one July 1, 1994 and 15 other States are
currently in the process of setting up that kind of a
disclosure requirement already.
In addition, last year the House passed legislation that
would have imposed a similar disclosure requirement for radon.
This would only have exacerbated the regulatory burden.
As an example, radon testing in Muncie, IN, if I want a
radon test today, I have to go to Indianapolis and the cost is
about $150 to get that done.
The test results are, at best, inconsistent. An example is
that if I went up to almost any house sealed up in this area
and took a radon test, that radon test would come back
positive.
If I aired the house out, kept it open and kept a lot of
ventilation in the house, in all likelihood I could provide a
negative report.
The bottom line is that it is so inconsistent, depending on
who takes the test, you never know what the results are going
to be.
If it comes up positive, the remediation costs can be
anywhere from $1,500 to $3,000 as a direct cost to the seller
or the buyer or a combination. Generally, it would be the
seller.
It is a very, very inconsistent test. Does our Federal
Government need to be involved in that? It does not appear to
me as though they need to be.
Coming down the road is computerization in the real estate
transaction. Currently when we have a buyer, they ask for
mortgage rates information and we will give them several
lenders. They will look at that information and they will make
a decision as to where they want to go.
Right now there is currently computerized lending
operations that are now coming into effect whereby in my office
I might have a computer that says that I can pull up a series
of rates. We can do comparisons of those rates and the buyer
can then make a decision as to who they want to use.
Recently, the Clinton administration issued a proposed rule
in 1993 that will increase the Government intrusion. It will
require that a computer system have any 20 lenders that wanted
to be on it.
In addition to that, if anyone used that system, the
origination fees would need to be paid up front. They are
currently paid at the point of closing. A tremendous burden on
the buyer.
The goal of the real estate industry is to provide more
services at less cost. We can do that if we are allowed to
offer some of these services. In the future, we will have
increasingly larger bundling of services that will become very,
very important.
I also was going to touch on environmental rules and
regulations. I think Mr. Bartlett has covered that very, very
well. From my perspective, we run into a lot of testing that
increases cost and the reason it does is because of the fear of
what happened with Gary and some of the superfund clean ups.
Anything that even smells as though there may be a problem
with environmental issues, scares buyers and it scares the
banks and rightfully so. It scares them to death because of the
way in which many of those rules and regulations are enforced.
Thank you very much. I really appreciate your coming to
Muncie and taking some time to talk with us.
[The prepared statement of Mr. Lunsford follows:]
Mr. McIntosh. Thank you very much, Mr. Lunsford. I
appreciate that. And thank you for sharing those examples with
us.
Let me ask you one question from some testimony that was
given earlier today in Indianapolis and you did not have the
benefit of hearing it, but let me summarize it briefly for you.
It essentially had to do with an additional requirement
that borrowers would have if they used a mortgage broker in a
transaction; that they would have to lay over for, I think it
was a period of 3 or maybe 5 days and have an option of
rescinding the loan.
This person essentially said that this would lead to the
elimination of the holder in due course and make many of these
notes unmarketable unless you could demonstrate that that
person had not exercised those rights.
It seemed, at the time, an example of a regulation that was
well intended, giving people a chance to maybe rethink the
process.
But is it your experience that when you are selling
somebody a home or a piece of property that they would, on the
whole, want to have the option of 3 or 5 days later rescinding
the deal--knowing that that might mean that they could not
really close on it for that period of time?
Mr. Lunsford. I think that could create a significant
problem in that right now we do so many things today to
structure our transactions so that the buyer has as much
disclosure as possible.
They have the ability to ask for all the tests, the
inspections, all those kinds of things that they would like to
have to satisfy themselves as to the nature of the property
that they are acquiring.
All the lenders information is disclosed well in advance of
closing--from the closing expenses, the Truth-In-Lending form--
all of those kinds of things.
And by the nature of the transaction with all of the title
work and all of the other things that come together, an
additional 3 days before disbursal of funds, I think would be
very detrimental to the transaction in general. I do not think
that it is necessary because of all the other due diligence
that happens.
Mr. McIntosh. As a result of that. So, the result is that
it would make it more difficult to engage in the transaction.
And, so, although it appears to help people, it may make it
harder for them to buy a home----
Mr. Lunsford. Exactly.
Mr. McIntosh [continuing]. Or actually engage in many of
these transactions.
Mr. Lunsford. I mentioned the seller disclosures that are
occurring now. Indiana used to be a buyer-beware State. And I
think today, disclosure is important in all cases.
It is a fact that whenever you buy a used piece of
property, something is going to happen to it after you close
it.
I mean, it is 10, 15, 20 years old. Some buyers are buying
a property expecting it to be like it was brand new and that it
will last for 5 or 10 years before something happens to it.
That is an impractical expectation.
I think when the Government steps in and continues to try
and make sure that what you and I do with our money and
investments and protects us, I do not think that it is
necessary.
Mr. McIntosh. It sometimes has unintended negative
consequences.
Mr. Lunsford. Absolutely.
Mr. McIntosh. I am getting the stop sign from the timer.
Would any of my colleagues like to ask any questions? OK.
Mr. Lunsford. OK.
Mr. McIntosh. Thank you very much.
Mr. Lunsford. Thank you very much.
Mr. McIntosh. I appreciate that.
Let me call forth our next witness, Terri Quinter, who is
the supervisor of Rose View Transit Co.
Thank you very much, Terri, for joining us.
STATEMENT OF TERRI QUINTER, ROSE VIEW TRANSIT
Ms. Quinter. Thank you Mr. Congressman and panel. It is a
privilege and an honor for me to be here today to represent the
Municipal Government of the city of Richmond, IN.
My name is Terri Quinter and I am currently serving as
supervisor of our Rose View Transit System. I am here to share
with you one instance of many situations that face our
Municipal Government on a regular basis as a result of Federal
regulations.
Our community of 38,000 people operates a public transit
system which is composed of six fixed routes served by nine
buses. In addition, we operate a paratransit system for the
exclusive use of the handicapped and our senior citizens.
This system has five fully equipped vans that provide on-
call service 12 hours a day from 6 a.m. to 6 p.m. 6 days a
week. These vehicles are all equipped with wheelchair lifts and
other amenities to satisfy the requirements of their
constituents: senior citizens and the handicapped.
The 1995 operating budget for this entire system is
$968,000. Based on 350,000 rides this year, the expected
collections from the users is $126,000. This then creates a
subsidy by the Federal Government to operate this system of
$842,000.
In 1993, it became necessary to replace some of the buses
for the fixed routes. As a result of the new Federal
regulations under the Americans with Disabilities Act, the new
buses had to be equipped with wheelchair lifts even though we
were operating fully equipped paratransit system. The
additional cost per bus to provide this equipment was over
$6,500 per unit.
So, far, we have received five buses for an additional cost
of over $32,500 with a sixth bus on order and, ultimately, all
nine buses will be converted for a total cost of over $58,500.
The total cost of all nine buses is $414,900--80 percent of
which is paid by the Federal Government.
So far, one citizen has used the lifts on the fixed route
buses. Even though this is not a tremendous amount of money, it
is an example of an unnecessary expenditure in our community
because of the ``one size fits all'' mentality.
In the future, we will have to modify the sidewalks
wherever the bus stops to allow for a level spot to land the
lift. It makes no sense to spend the great amount of money
necessary to comply to this additional requirement when only
one citizen is unnecessarily using the equipment.
There is no question that we, in our community, could run
this system more effectively with less cost if we had more
freedom to act in a manner that is more appropriate for our
community and our citizens.
Mr. McIntosh. Thank you very much, Ms. Quinter. [Applause.]
I appreciate your coming forward with that. And it is
certainly a classic example of where the Government had tried
to do good and has failed in terms of being cost effective in
its approach.
But that is mind boggling that one citizen used it. Let me
ask you one thing that came to mind. You had mentioned that you
had to change the sidewalks. Is this after recently having to
modify all of the curbs in order to make them slope so that
they would be wheelchair accessible?
Ms. Quinter. Right.
Mr. McIntosh. And, so, now, you have to come back and make
them level so that the lift would work?
Ms. Quinter. That is correct. And above and beyond what our
budget can hold, the city of Richmond will have to pick up the
additional cost. The engineer's department is not very happy
about that.
Mr. McIntosh. Do you sometimes wonder who comes up with
these ideas?
Ms. Quinter. Yes. It is obviously a person who does not
ride on a city bus. [Laughter.]
So, it is just a duplication of services. And the
wheelchair lifts, we have to operate them daily so that the
hydraulics do not freeze up. And the drivers just come in and
let it down and put it back up and then they go on.
Mr. McIntosh. And you are confident that you could fully
satisfy all of the needs of the handicapped community in
Richmond----
Ms. Quinter. Yes, sir.
Mr. McIntosh [continuing]. Through your paratransit
service?
Ms. Quinter. Yes, sir.
Mr. McIntosh. I have no other questions. Thank you very
much for coming.
Ms. Quinter. Thank you.
Mr. McIntosh. Do either of you have any questions?
Mr. Gutknecht. I do not think that there is anything that
we could add to that testimony. [Laughter.]
Ms. Quinter. Thank you so much.
Mr. McIntosh. Thank you. I appreciate that. Believe me,
that will be made known in Washington.
Ms. Quinter. OK, thanks.
Mr. McIntosh. Let me call forward our final scheduled
witness, Katherine Kleber with ABATE and Dan Conaway with ABATE
of Indiana. Welcome.
Dan and I have met here and also in Washington.
I appreciate you coming, Katherine. I have not had a chance
to meet you. I appreciate your coming and sharing with us your
testimony. I will let you lead off.
STATEMENT OF KATHERINE KLEBER, ABATE OF INDIANA PAC
Ms. Kleber. OK. Can you hear me?
Mr. McIntosh. Yes.
Ms. Kleber. OK. Chairman McIntosh, Mr. Peterson and Mr.
Gutknecht, I would like to thank you for this opportunity to
express my concerns before your subcommittee.
My name is Katherine Kleber and I live in Seymour. I
represent ABATE of Indiana which is American Bikers Aimed
Toward Education.
I requested permission to address you today because the
focus of this subcommittee is regulatory issues and I am very
concerned about a matter which is regulatory in nature, yet it
does not focus on one single law or rule. I come to this
committee to request an investigation into the policy and
procedures being practiced in the operation of a Federal
regulatory agency, the National Highway Traffic Safety
Administration.
The laws governing virtually every aspect of the activity
that takes place on our roads--including automobile travel,
bicycles, motorcycles, school buses and pedestrians--depend
heavily on recommendations and information supplied by this
agency. Highway trust fund programs, law enforcement
procedures, road design, safety equipment, educational programs
and skills requirements are only a few of the areas of their
influence. Therefore, every citizen in this country is affected
on a daily basis by this agency known as NHTSA.
The magnitude of the decisions made and the vast influence
represented by this Federal regulatory agency places it in a
position of responsibility that calls for leadership that is
trustworthy and above reproach.
So many daily activities of U.S. citizens are restricted
and regulated that honesty and integrity of the people who are
in positions of control is demanded or no person can be assured
of the fair and equal consideration that is their right as a
citizen of this country.
My request is based on 3 months of personal investigation
into questionable practice and, most recently, having witnessed
firsthand, a blatant attempt to manipulate information which
was requested by the President to help determine a need for
reviewing regulatory practices.
In December 1994, I witnessed a large group of professional
people--including emergency medical services and children's
safety program administrators--use documentation provided by
NHTSA to justify the need for legislative regulation of
bicycles, motorcycles and equestrians.
Most of the documentation was derogatory and renounced by
NHTSA itself as long ago as 1991. Yet, the accusations and
inflammatory statements had proved to be such an effective
tool, not only do they continue to release the information
already confirmed by them to be false, they also provide
instructions explaining how to use this information to give
credibility to their fight for legislative regulation.
On March 29, 1995 an acquaintance of mine from Washington,
DC sent me a notice that, at the request of President Clinton,
the National Highway Traffic Safety Administration would be
holding public hearings to listen to the opinions of the people
regarding regulatory measures which are obsolete or
ineffective. One of the meetings was to be held in
Indianapolis, IN on April 4th at 7:30 a.m. However, this
meeting was not publicized. On the contrary, it was so well
hidden, that the hotel where it was scheduled did not even know
about it.
I arrived with 11 motorcyclists who, at great effort and
personal expense, travelled from all corners of the State to
speak for the 20,000 members of ABATE of Indiana. These 20,000
members of the public are also members of a motorcycle safety
and education organization which did have their voice heard
that day.
However, that voice was heard only because a friend of mine
thought I might be interested. There are many voices and
opinions in Indiana who were not heard and are still unaware
that the hearings took place.
It was obvious to all that the voice that was intended to
be heard at this covert meeting and presented in Washington to
the President of the United States as the voice of the people
was actually the voice of professional speakers skilled at
presenting the recommendations of those same self-acknowledged
regulatory advocates who were at the symposium in Iowa that I
previously mentioned.
Obvious, because the public hearing--unknown to the
public--was a part of the annual safety meeting held by this
same group which is sponsored by NHTSA called Lifesavers 13.
Questionable ethics, manipulation of facts and use of our
Federal tax dollars to promote the lobbying efforts of a
handpicked group of associations representing the monetary
interest of big business and a personal agenda of the
administrator are sufficient reasons for an investigation into
the National Highway Traffic Safety Administration.
I am one person who, in December last year, stumbled into a
culture whose philosophy threatened my values and freedoms. Two
weeks ago, I saw enough to convince me that the agency which
was created to protect our interest and assist us in questions
of highway safety and awareness is not protecting me,
representing me or even interested in hearing the voices who
would speak for me.
Regulatory decision based on this type of practice is a
violation of the trust of the American people and an insult to
the integrity of our country.
I thank you again for this opportunity to speak before this
committee and I wish you success in the endeavors of your
subcommittee.
Mr. McIntosh. Thank you very much. We endeavor to allow
people to know where we are meeting and encourage
participation.
So, I will make those views known back there. I will
transmit them to the President myself.
Mr. Conaway.
STATEMENT OF DAN CONAWAY, ABATE OF INDIANA PAC
Mr. Conaway. Mr. McIntosh, Mr. Peterson and Mr. Gibenich--
--
Mr. Gutknecht. Gutknecht.
Mr. Conaway [continuing]. Gutknecht. That is a hard one,
sir.
Mr. Gutknecht. It means ``good guy''.
Mr. Conaway. ``Good guy'', I believe that. [Laughter.]
I thank you for this opportunity to testify before your
subcommittee to express the views of American Bikers Aimed
Toward Education.
I am here today primarily to ask this subcommittee to
review the effectiveness of regulations created by Section 153
of Title 23 of the U.S. Code enacted by the Intermodal Surface
Transportation Efficiency Act of 1991, which required States to
pass mandatory seat belt and helmet laws by October 1, 1993.
Those States without both laws in effect would face
financial penalties. The first year 1.5 percent of the
Department of Transportation funds would be removed from the
construction budget and transferred to safety programs. The
following year, the percentage would double.
This is nothing short of the Federal Government using
blackmail tactics against the States using the States own tax
dollars.
The authors of Section 153 had the wisdom to foresee
continued reluctance of some States to sell their rights for a
small quantity of highway money. The incentive grant program
provided the States that came into compliance with an
opportunity to apply for grant money available for additional
safety program funding.
These additional funds would be available beginning fiscal
year 1992 and continue through the end of fiscal year 1994 when
the penalties of Section 153 came into effect.
In our opinion, it has been proven these sanctions are not
only ineffective, but have undermined the stated goal which
would implement universal mandatory motorcycle helmet laws.
From 1989 to the summer of 1991, five States--Oregon,
Nebraska, Washington, Texas, and California--passed helmet
laws. Section 153 offered incentive grants without threat of
sanctions until 1993.
In 1992, one State--Maryland--passed a helmet law. So, in
the 4 years before the Federal Government started penalizing
States for not having motorcycle helmet laws, six States passed
helmet law on their own initiative.
But, in the 3 years of being threatened with Federal
sanctions on their highway construction funds, not one State
has passed a helmet law.
Not only have the Section 153 penalties failed to force
more States to pass helmet laws, it has stopped what appears to
have been a trend of States passing helmet laws on their own.
Twenty-five States have stood up to 3 years of sanctions.
We feel this is a significant message from the States that not
only is this type of Federal blackmail unacceptable, but also
the determination of safety issues are the rights of the
individual States.
In support of this subcommittee's goal to overhaul the
Nation's regulatory system, we request elimination of the
penalties in Section 153 of the 23 U.S. Code.
In closing, I would like to thank the three of you for co-
sponsoring H.R. 899 which would repeat these penalties and for
allowing me this opportunity to speak to your committee.
Mr. McIntosh. Thank you very much, Mr. Conaway. As you
indicated, I think you will see a lot of support for allowing
the States to make those determinations from us here.
Let me ask my colleagues if they would like to make any
comments.
Mr. Peterson. Amen. [Laughter.]
Mr. Gutknecht. Well, Mr. Chairman, I would just say that
both Representative Peterson and myself came from the State
legislature.
And I remember a number of years ago when the Federal
Government wanted us to pass a 21-year-old drinking age law, I
sent a letter to President Reagan, who I was a big supporter
of, and reminded him of what he had said many times and that is
that the Federal Government is the creation of the States; not
the other way around.
And, somehow, we have got to re-instill that basic notion
that there has been entirely too much of this nanny states
coming from the Federal Government trying to intimidate and use
blackmail to get the States to do something that they think is
a good idea. Thank you.
Mr. McIntosh. Thank you both for coming. I greatly
appreciate it.
Now, for the remaining period of time, I would like to open
up the microphone to any of the people who have come here
today.
Before we got started, I wanted to ask if either Robert
Marquis or Shelby Upchurch were here. They wrote a letter to
the editor requesting that we hear from dissenting viewers. And
I would be happy to give you the first opportunity in the open
mic.
Let me ask everyone to be sure and give your name and see
the reporter afterwards so we get it spelled correctly. I
appreciate your coming, though.
Mr. Redwine. On behalf of a group of concerned workers from
Muncie, IN we would like to thank the representatives, David
McIntosh and his committee for their attention.
We are citizens who have been neglected by lack of
Government rules and enforcement of existing regulations. A
lack of Government interest and the working citizen has been
overridden by special interest groups who manipulates or
interferes with legislature's ability to represent the best
interest of our country and its people.
The founding fathers of this Nation established this
country and set up our Government through rules and
regulations. We still believe today that the Constitution and
the Bill of Rights are the best set of rules in this world.
The Constitution was written so that it could be improved
upon at later times during the history of this country.
Therefore, it should be done for the improvement of its people
and all of its people--rich and poor.
This country should be governed for the improvements and
safety of the citizen's work place, home and environment.
If the corporations are not governed and commerce by rules
and regulations, they will run rampant to obtain profit with
disregard to life and welfare of the citizens of this country.
We submit to you, as an example, a real story. In the worse
interest of commerce, a list of citizens who, we believe, have
been cheated of their representations. Their numbers and death
is a statistic that should never be accepted.
Chemical exposures to the workers, families and communities
cause injury to mind, body and future generations of America.
And I will leave with this here, sir. And if you have any
questions, I would like for you to type them up and send them
to me and I will gladly answer them for you.
Mr. McIntosh. Good. Let me just ask you one question at
this point.
Many of the folks who testified today indicated that they
saw the regulations as not really accomplishing the stated
goal.
The lady from the Richmond Transit Authority indicated that
they could take care of all of the people who were disabled and
did not have to spend the money to change their buses in order
to serve just one individual.
Do you not think that it would be better to allow local
government and people working in their own work places to
accomplish those goals without some of the counterproductive
regulations that we have heard about today?
Mr. Redwine. Well, if you could keep corrupt politicians
out of it, we could do it.
Mr. McIntosh. Fair enough. [Laughter.]
Thank you for your views. I really appreciate that.
Are there any comments or questions from my colleagues? No?
Thank you. And we will stay in contact.
Be sure and state your name for the microphone and also see
the reporter afterwards to make sure that we have it spelled
right.
Now, I understand that Dr. Brannum is here. He was
scheduled to testify earlier. We will let him speak.
And then, Karen, if you could take the microphone around to
some of the other folks.
You could talk from right there if you would like to, Dr.
Brannum.
STATEMENT OF GEORGE BRANNUM, MD, PATHOLOGISTS ASSOCIATED
Dr. Brannum. Thank you. Hello? It works.
I would like to apologize to this panel. I appreciate the
opportunity to be here. And to my medical cohorts who were here
earlier, I live too close, so it was hard to get here on time.
But I do appreciate this opportunity to share some
experiences which I think would illustrate some need for
regulatory reform.
I would like to skip through some of the ideas that I have
had because of the interest of time and focus on just a couple
of them.
One of them has to do with the factor that laboratories, I
think, are a worry. We have anywhere from two to eight
inspections a year that involve the FDA and the American
Association of Blood Banks, the Indiana State Board of Health,
the Clinical Laboratory Improvement Act of 1967 and 1988, the
College of American Pathologists and the Joint Commission for
the Accreditation of Hospitals organizations. All of these
involve the laboratory to a great extent.
There is a lot of duplication and overlap. And in addition,
we are subject right now to inspections by OSHA where we
occasionally have Medicare.
We estimate the cost of this is roughly around $200,000 a
year, not only in the direct certification and registration
expenses, but in the actual work that is required to meet those
regulations.
Another area is the so-called ``medical necessity
requirements'' which, I understand, are currently under review,
but this is an effort in order to control expenditures for
laboratory work in which they had decided that the laboratory
should be replaced, which, I suggest is an impossible thing
because laboratories have received blood from the doctor's
offices, other hospitals and situations where there is
absolutely no contact with the patient.
And, yet, they are required in the laboratories or they
propose to require the laboratories to document for the payor
or the carrier the medical necessity of the test which has
proved absurd because we do not have access to the patients.
The third thing that I would like to mention is the fact
that the Government has made or are instituting requirements
with respect to cytology proficiency testing. And that involves
the so-called Pap smear--which I think most everybody is
familiar with--to detect cancer of the cervix and the uterus.
And because of the implementation of regulations a few
years ago, the wage for cyber technologists have roughly
doubled from approximately $25,000 to $30,000 to twice that
amount in the span of 6 months because what they did was
require certain things be done that were obviously very
expensive.
On the other hand, they turned around and tell us that they
are not going to pay us anything other than what appears to be
a relatively small amount for the work.
So, we just think basically that the regulatory efforts
that Congress and some of the agencies have imposed upon health
care are ineffective, they interfere with our ability to do a
good job.
I was interested in some of the other comments that people
were making about the burdensome requirement of the
regulations, but now not only are we required to comply with
the regulations, then they tell us what they are going to pay
us.
Mr. McIntosh. The ultimate in regulations--price controls.
Thank you very much, Dr. Brannum. I appreciate that.
Has it been your experience that there are regulations that
sometimes make it either difficult or downright impossible to
offer the best possible health care to people?
Have you ever encountered a regulation that made you choose
an option that was, perhaps, not best for the medical
indication that was needed?
Dr. Brannum. A lot of these regulations come about as a
result of adverse publicity about some isolated events that
serve as a crisis mentality that says, Gosh, we have got to
rush out and protect the public from something.
And when, in fact, they investigate a situation, very often
they will find that there are ways of coping with the problem
that would not impose, on a total field, an enormous cost.
And since they have not done that in some areas, the total
cost is getting to be so much for certain things that I believe
that there will be a diminished access to good quality care.
And I think particularly with respect to laboratories, it
requires that you draw blood or take a specimen from a patient,
examine it, get a report back usually in some timely way and
cost efficient manner.
And I think that, over time, these increasing costs will
diminish significantly the access to that kind of care.
Mr. McIntosh. So, the regulatory costs could have a real
burden, not only on medical costs, but access to good health
care?
Dr. Brannum. I think so.
Mr. McIntosh. All right. I appreciate your coming today and
participating.
Dr. Brannum. Yes, I am sorry that I was late.
Mr. McIntosh. That is all right.
Dr. Brannum. Thank you for asking me.
Mr. McIntosh. Karen, I will let you. Please just raise your
hand and Karen will bring you the microphone.
STATEMENT OF CHRIS HYDE
Mr. Hyde. Thank you gentlemen. I appreciate your patience
today. I know that you have heard a lot of testimony through
the course of the day between Indianapolis and here.
My name is Chris Hyde and I appreciate being given an
opportunity to share with you some of my experiences with
certain Government entities.
Let me briefly state that in the latter 1970's, my father
pioneered in a program of developing subsidized apartment
projects for the U.S. Department of Agriculture, the farmers
owned administration.
The purpose was to provide low to moderate income families
in rural communities decent housing. Back then, the paperwork
requirements were relatively simple.
In the latter 1970's, it took maybe about half a dozen
pages of paperwork to complete the Ag requirements for the
FMHA.
In 1988, there was maybe a dozen pages. And in 1994--and it
is not even complete yet.
Mr. McIntosh. Good grief. Now, is that what has to be
filled out by an individual who wants to take advantage of this
loan?
Mr. HYDE. No. This is an ongoing management--not just the
initial loan arrangements or any of the initial buildings. This
is just an ongoing year-to-year reporting requirements of
existing projects.
Bear in mind that we were one of the original developers in
this State in this program. I do not know when it was actually
initiated, but I think sometime in the latter half of the
1970's.
Over the passing years, the Government attitude has
basically progressed from a trust between the owners, the
agents and the Government to a situation of one complex legal
hurdle after another.
And the general attitude has developed that every move and
every effort that the owners or their agents take in managing
these projects are scrutinized under the auspices of being
fraudulent.
Since 1990 or shortly thereafter, all you hear preached
within the workshops and the communications with the Government
is fraud and waste, fraud and waste.
And I think that the other issue that I want to get on the
record--because I know that I am being asked to stop here--is
the fact that we have come to the resolve that the bureaucracy
and the red tape has become so extreme that the Government
itself cannot even perform the most basic tasks.
In other words, they require reports from us within 30 to
60 days, yet they cannot even get to the reports in the course
of years.
Just 30 days ago I was given a report for 1993. And after
we had already worked through 1993 and then the budgets of
1994, 1993 had been disapproved. Which is absolutely
ridiculous.
Mr. McIntosh. It was long gone, huh?
Dr. Hyde. Right.
Mr. McIntosh. Well, I appreciate that. I am sorry for the
time restrictions. I want to try to get to as many people as
possible.
Dr. Hyde. I appreciate the opportunity.
Mr. McIntosh. And we will put the full written testimony
into the record.
Dr. Hyde. Thank you.
Mr. McIntosh. Mr. Peterson, you had some interesting
comments this morning on that program on how you advised some
of your constituents.
Mr. Peterson. Well, I was talking about the county Farmer
Lender part, although I am pretty familiar, I used to own one
of these buildings.
And one of the good things about being elected to Congress,
they made me sell it. [Laughter.]
That was 1990 before I had to fill out all that paperwork,
but I used to do the books for it. I am also a CPA.
And I guess I would be interested, before I leave, in
seeing what it is they have added to this since I----
Mr. Hyde. May I make on additional comment relative to
that?
I think something you said earlier today hit upon it, was
that a majority of the problem lies with the people that
administer the law. And that is my immediate problem right now.
We have put in for a prepayment on this. And the original
loan agreement stated in one sentence that we were allowed to
prepay it.
When I asked for the request to prepay, they sent me an
108-page----
Mr. Peterson. I tried to do that once, too.
Mr. Hyde [continuing]. A 108-page requirement to prepay
this loan.
Now, this is not a Government project. This is, as you
know, self-owned.
Mr. Peterson. I tried to do that, too.
Mr. Hyde. So, they put in front of you an impossible hurdle
to get out from underneath it, yet they make it an impossible
hurdle to comply. So, it is like you are damned if you do and
you are damned if you do not.
So, right now as it stands, we have been working without
any management plans, any management agreements for the past
several years.
And, of course, they threaten from 1 minute to the next to
withhold the subsidies and what have you. I have got letter
after letter after letter threatening. And I asked----
Mr. McIntosh. And all you want to do is to get out of the
program at this point?
Mr. Hyde. Well, that is what we had come to resolve. That
we just wanted to get out of the program. And, basically, what
it gets down to, after probably another 1,000 pages of
documentation, then they sit down and a Government official
will make a decision whether he is going to let you get out or
not.
Mr. Peterson. Well, Mr. Chairman, there is a lot of
pressure from different forces trying to keep these from being
converted because they want to keep them for low income housing
and so forth.
So, there is a lot of things that play into, and pressure
that comes out of these folks and so forth.
Mr. Hyde. Right. And if somebody thinks that I do not care
about those 46 families that are being subsidized, I certainly
do. The last thing in the world I want to see happen is----
Mr. Peterson. I understand.
Mr. Hyde [continuing]. Is that.
Mr. Peterson. These so-called advocates and legal aid
societies and all of that will end up getting involved.
Mr. Hyde. Yes. This meeting was brought to my attention
because I called Mr. McIntosh.
Mr. McIntosh. I really appreciate that. Thank you, Mr.
Hyde.
Karen, who----
Ms. Barnes. Could we have people sit here so that the court
reporter can get them?
Mr. McIntosh. Oh, OK. A change in the procedure slightly.
If you would come forward.
Mr. Bryan. Thanks.
Mr. McIntosh. Welcome. State your name for the record if
you would.
STATEMENT OF MARK BRYAN, TERRITORY MANAGER, NATIONAL FEDERATION
OF INDEPENDENT BUSINESS
Mr. Bryan. I am Mark Bryan, territory manager for NFIB, the
National Federation of Independent Business. Thank you
Congressman McIntosh and distinguished committee co-members for
having us here today to testify briefly.
And as I mentioned to my new business interviews, I will be
brief.
As you have heard today, the American free enterprise
system is in danger. I hear those comments daily from 10 to 15
business owners that I will personally see on an individual
basis.
You have heard testimony from many of our members today on
many issues. And I wanted to inform this committee that I hear
these words coming from most owners that their biggest fears
are not accounts receivables or sales numbers, but compliance.
State and Federal regulations that are putting them into a
regulatory nightmare.
I have a very wonderful couple that I know from Indiana
that are dry cleaners sitting directly behind me. They are
reaching retirement age and are wondering about selling their
business because they do not know if the people taking over
their business can meet Federal regulations and let them
continue on to a brighter day.
Many business people feel that America's most endangered
species is small business. And the American free enterprise
system is the greatest system in the world if allowed to work.
And when allowed to work, it is successful. Thank you.
Mr. McIntosh. Great. Thank you very much, Mr. Bryan. I
appreciate that.
STATEMENT OF GARY VAN MIDDLESWORTH, VAN'S RESTAURANT SERVICE,
RICHMOND, IN
Mr. Van Middlesworth. Mr. Chairman, members of the panel,
my name is Gary Van Middlesworth. I am the owner of Van's
Restaurant Service in Richmond, a small State inspected meat
processing plant and purveyor, started by my father in 1947.
The business is located just 3 miles from the Indiana/Ohio
State line, but is not permitted to do business in Ohio because
of the 1967 Federal Meat Inspection Act. This act requires
State meat and poultry inspection programs to be at least equal
to the USDA's Federal inspection program, but denies small
processors the right to compete against large corporations and
foreign producers by denying them the right to sell their
products in States other than their own.
Here in Indiana, the State inspection program is more
efficient and less costly than the Federal program for small
processors. Without it, many small family owned meat processing
facilities would go out of business.
Four States--Arkansas, Idaho, Kentucky and Michigan--have
given up their State programs in recent years. According to the
documentation presented to the House Agriculture Subcommittee
on Livestock last year, these plants have lost 947 of the 1,409
plants operating under State inspection at the time of their
State's change to Federal inspection.
With the passage of the North American Free Trade Agreement
and the General Agreement on Tariffs and Trade, meat processors
from Canada, Mexico and other countries can legally sell their
products in all 50 States.
And, yet, as the owner of a State-inspected plant in a
country with the most stringent inspection system in the world
and as a tax paying American and Vietnam era veteran, I am not
permitted to sell my company's products 3 miles away in Ohio.
I urge Members of Congress to show their support for small
business and free enterprise by eliminating the inequities
caused by the outdated 1967 Federal Meat Inspection Act. Thank
you.
Mr. McIntosh. Great. I appreciate that, Mr. Van
Middlesworth.
Let me ask if my colleagues have any questions or comments.
Mr. Peterson. I served on the Livestock Subcommittee and we
are trying to legislatively overhaul that law this year.
There is also a regulation that is pending that is mixed up
in this, but we are going to make a serious attempt. We
understand what the problems are and we are going to try to do
something about it.
Mr. Van Middlesworth. Thank you.
Mr. McIntosh. Thank you very much for coming.
Welcome. Thanks for coming all the way up here.
STATEMENT OF JOHN WHEATLEY, DELTA FAUCET CO., GREENSBURG, IN
Mr. Wheatley. Thank you. My name is John Wheatley and I
represent the Delta Faucet Co. in Greensburg, IN.
In the 20 years that I have worked for Delta, I either
worked at, advised or supervised the environmental services
department.
During that 20-year period of time, I have seen the
regulations at the local, State and Federal levels grow at
almost an exponential rate year after year.
The regulations are usually so lengthy and so complex that
a company's responsibility under any given regulation is often
hard to determine without the help of outside consultants or
lawyers.
Our regulatory system is out of control and needs to be
overhauled. It needs to become more efficient, more effective
and more responsible to the taxpayers.
The American public is under the mistaken impression that
all the government regulations are there to protect and benefit
the country. This is not the case.
Under our present regulatory system, everyone loses. Due to
the high cost of regulations, we have weakened our
international competitiveness. This results is lost jobs and
lower productivity.
Businesses lose because the talent, time and resources of
workers must be spent complying with extensive regulations and
paperwork requirements, rather than doing activities that
create products or services that are beneficial to society.
Consumers lose because businesses are forced to transfer
the cost of compliance to the prices they charge for their
goods and services.
This last point is very interesting. The Clinton
administration recently estimated the cost of Federal
regulations to be $430 billion per year. Private studies have
projected the cost to be even higher; perhaps as much as $600
billion per year or about $5,900 annually for every family in
America.
An example of costly and unneeded regulations are the Metal
Products and Machinery effluent guidelines, also known as
M.P.&M.
These new categorical limitations and standards will cover
facilities that manufacture, rebuild or maintain finished metal
parts, products or machines.
Tens of thousands of indirect water discharges will be
regulated by M.P.&M., including facilities that are covered
under existing categorical standards for metal finishing,
electroplating and 14 other metal effluent guidelines.
M.P.&.M. would nearly double the number of regulated
indirect discharges by adding 10,300 to the 12,000 existing
sources.
While existing effluent guidelines are sector specific,
M.P.&M. would apply across numerous diverse industries that
only have certain unit operations in common.
Delta Faucet would be responsible for compliance under this
new regulation. We think this is unnecessary and an
unreasonable burden since our operations are already covered
under existing regulations.
At Delta, we pride ourselves in being exemplary stewards of
the environment and the communities where we are located. We
have taken a pro-active approach to managing our environmental
affairs, but we do not think the M.P.&M. regulations are in the
best interest of business, the environment or the general
public.
The impact on local industry and local treatment works
would be enormous. According to EPA, the majority of the
M.P.&M. population is estimated to indirectly discharge the
publicly owned treatment works.
This would significantly increase the number of discharge
permits required to be written by publicly owned treatment
works. M.P.&M. could be considered yet another unfunded mandate
and State and local POTWs will be required to bear the cost.
In closing, I would urge the Congress to undertake a
thoughtful, prudent approach to regulations and regulatory
reform so that the American public truly gets the benefits that
they pay for.
Mr. McIntosh. Thank you. I appreciate that.
If we could have the full testimony for the record, that
would be great.
Mr. Wheatley. Sure.
[The prepared statement of Mr. Wheatley follows:]
Mr. McIntosh. You had mentioned when I was at a town
meeting down in Decatur County an example of how the copper
requirements that you have for your wastewater would make it
illegal for you to run a hose from the tap to the wastewater
line because the requirements are so stringent.
Mr. Wheatley. Right. During a period of excessive algae
growth in the Greensburg reservoir, they treated the reservoir
with copper sulfate and it would have been illegal for us to
discharge city tap water into the city sewer. [Laughter.]
Mr. McIntosh. So, you get a completely absurd result as a
result of the regulations that you are working on in your plant
down there.
Mr. Wheatley. Unfortunately, yes.
Mr. McIntosh. Well, I appreciate your coming forward.
Mr. Wheatley. Thank you.
Mr. McIntosh. And, please, please make the rest of your
remarks available and then we will get them into the record.
Mr. Wheatley. Thank you.
Mr. Morgan. Good afternoon.
Mr. McIntosh. Good afternoon. Welcome.
STATEMENT OF WILLARD MORGAN
Mr. Morgan. Mr. McIntosh, my name is Willard Morgan.
Members of the panel, I would like to thank you for having the
opportunity to address you.
I am a retiree from Westinghouse Large Power Transformer
Division. Back in 1992, a reporter from WTTV, Channel 4 in
Bloomington, IN--Wendy Stamp--came to Muncie and interviewed
myself, Wendell Stevens, Dave King, and a Mr. Baker.
I have been diagnosed as having PCBs. This is from being
exposed to polychlorinated biphenyl or PCBs. As you know, in
1979 both Houses banned the use of PCBs unless it was a closed
circuit or system.
But Ms. Stamp came down and interviewed myself and, like I
said, Mr. Baker, Mr. King and Mr. Stevens. The next day, she
was taken off the air.
She called me the next morning and advised me and said, Mr.
Morgan, after today, after tonight's interview, WTTV news will
not be able to report; they are not going to be on the air
anymore.
And she called me back again and related the information
that they would not even be able to do that evenings news.
Westinghouse--now ABB, whichever--has laid off completely
just about everyone. A large number of layoffs. The plant is
being shelled out.
They said on these tapes--and I have them and they are
available to you and your committee at any time--that they had
no toxic chemicals in their plant. Although documents from your
predecessor, Congressman Phil Sharp, were made available to me
and we did not learn of this until 1992 or 1993.
And these documents show that Westinghouse, indeed, had
PCBs in their factory. They had a problem with PCBs. They had
leakage. They had citations issued for records violations.
And this is a case where we have a case pending down in the
southern district of Indiana in Superior Court, District Court
Seven or something like that. And this is a case where, the law
itself, has not been enforced. The Delaware County Board of
Health of Delaware County found out what the problem was and
put a stop to it.
The State of Indiana, why did they not bring it to their
attention. I tried to get them to see Evan Buyh without any
luck whatsoever.
I did not come here to make a speech. I came here to let
you know that I had no funny stories to tell you today, sir. My
daughter has severe pain, joint pain. She has been run through
the MRIs. It is pain that they cannot explain. They do not know
why she is hurting. She cannot move. She crawls up and down the
hall, sir, crying.
And I have worked out there for quite some time. My father
passed away from malnutrition.
As I said, I have proved beyond a shadow of a doubt that
the water out there, some rain water has been tested--well,
some of the parts--well, I will not go into the parts, sir,
because it is in litigation. I will not go into that, but it is
way over the--I think anything over 50 parts per million is
considered a hazardous waste.
Mr. McIntosh. Now, I appreciate your coming forward because
there are, in fact, serious problems.
And although we have heard about a lot of problems in
regulations here, that does not mean that we should not take
seriously when there are hazards that are in there in the work
place.
I do not know the details of the particular facility out
there. As you mentioned, there is a court case that is pending
in that area.
But I do not think that anybody should misunderstand our
effort to say that there are not serious problems that need to
be addressed by these safety and health regulations. We just
want to focus the effort in what we are doing at the Federal
level into those, as you are indicating, that sometimes those
are overlooked in favor of some of the things that maybe are
not as important or pressing because they are easier.
So, I do very much appreciate your coming forward today and
sharing that with us.
Mr. Morgan. I might also say that--I do not know. I agree
that people need to work. We need jobs. But these people need
to be acting in a responsible manner. You cannot just go in and
systematically poison people and walk away with clean hands. I
thank you, gentlemen.
Mr. McIntosh. Thank you very much for coming.
We have time for about one more person--he is letting me
know. I apologize to everybody else.
If you have things in writing, which you could make
available to the staff, we will put it into the record. And,
also, we would be glad to set up a meeting for you later. We
have to get my colleagues back to the airport. Yes, sir?
STATEMENT OF MICHAEL SHAM, RESIDENT, DELAWARE COUNTY
Mr. Sham. I will be as brief as possible. My name is
Michael Sham. I am a resident of Delaware County.
I really applaud you gentlemen for coming in with your
subcommittee hearings. And I think that these hearings and the
subsequent action by the Congress very much is needed, but it
is more of a compos mentis, sort of a competency hearing on our
society.
What I am hearing here today disturbs me a great deal. It
is not that I do not believe in a smaller government. I believe
in a smaller government but also in an effective government.
I think that as we go through time--and just to tell you
something, I am qualified to say this--I look back at the
development of not only this country, but the industry of this
country and the technology and I see that there has been
continually a need for regulation.
These regulations did not come into being by spontaneous
generation. They came in by a reason of need.
Now, I agree that they are, at times, overburdensome. I
believe that many of them could be focused and there could be
many duplications and subsequent reduction of these
regulations, but I am leery not to throw out the baby with the
bath water, folks.
I lived in Muncie at a time when White River was an open
sewer. When it was not safe to have your children play in the
yard because of particulate matter in the air. Now, I have been
here long enough and I am old enough to have seen what the
Clean Air and Water Act has accomplished in this country.
My son is an environmental scientist, so I do understand
the implications of not only national, but international.
What I am finding, this is not a segment to any of the
people on the panel, nor the people who have participated in
the hearing because I know many of these people and find them
to be good and competent people.
But the idea that we take and always use a cost effective
manner, you know, on business, bothers me a great deal. I am
not as concerned--look. You go to Mexico City. Look at the
pollution problems there. Other places in the Third World where
we are sending our manufacturing jobs and bringing the product
back in, that is very good, but we are not getting the benefit
of those cost reductions.
I have not seen the bill of my replacement parts, nor my
other things go down. All I have seen is their countries
becoming the sewer that we do not want ours to become and we
have tried to stop that by regulation.
I think we need to maybe make a little bit more effort in
our ties with other countries, to bring them up to our
standards.
We have the best system in the world for the production and
distribution of goods and services without question. So, let us
help the rest of the world come up to our standards. Let us not
go down to theirs. Thank you very much, gentlemen.
Mr. McIntosh. Thank you. I appreciate that. Let me just say
in general, I think our challenge is to use some of the new
technologies that we now have and new approaches and better
understanding of how markets work that have been successful in
creating economic wealth and now apply these to some of the
regulatory challenges in the environmental and health and
safety areas.
And, so, I welcome your caution that we cannot just throw
out the entire system or return to a completely unregulated
state where these problems would reoccur.
Mr. Sham. How about a little bit of streamlining on
oversight.
Mr. McIntosh. Yes.
Mr. Sham. I think that would help us a great deal.
Mr. McIntosh. I think that is right. Use some market
approaches. Use better technology as we learn more things. Use
good science.
Mr. Sham. But it is not cheap, remember that.
Mr. McIntosh. OK, thank you. I appreciate your coming. I
appreciate everybody coming today and I apologize to those whom
we were not able to get to. We will include your remarks in
this and I will be back. So, I will be able to hear from you
directly.
Let me, before we leave, thank a couple of people. First of
all, let me thank Ball Corp. for letting us use this meeting
facility.
I also want to thank my colleagues, Collin Peterson who is
here and Gil Gutknecht for traveling from Minnesota.
And I want to thank the staff of the subcommittee who have
travelled here today: Mildred Webber, David White, Karen
Barnes, Jon Praed--were all here and were participating in it,
as well as my staff: Steve Austin and Jeff Cox, Kim Orlosky,
Scott Bowers and David Holt. They have worked very hard to make
this happen and I appreciate all of their hard work.
So, thank you all for coming and we will take all of these
back. We have a lot of good ideas for Corrections Day.
[Whereupon, at 5:50 p.m., the subcommittee was adjourned.]