COAST GUARD: ANALYSIS OF THE FY2000 BUDGET

CRS Report for Congress
Coast Guard: Analysis of the FY2000 Budget
Updated October 14, 1999
Martin R. Lee
Specialist in Environmental Policy
Resources, Science, and Industry

Congressional Research Service ˜ The Library of Congress

A^BSTRACT
Congress considers FY2000 appropriations for the Coast Guard as part of the annual
Department of Transportation and Related Agencies bill. CRS Report RL30208,
Appropriations for FY2000: Department of Transportation and Related Agencies, discusses
the many accounts and issues associated with this bill. For the Coast Guard, an expanded role
in high seas-based illegal drug and immigration activities has put pressure on the agency's
resources. Capital replacement needs for replacing aging craft and proposed new user fees to
offset increasing budget pressures are two major issues. The President signed the Department
of Transportation and Related Agencies Appropriations Act on Oct. 9, 1999, P.L. 106-69.
This report will be updated as events warrant.

Coast Guard: Analysis of the FY2000 Budget
Summary
Congress is considering FY2000 appropriations for the Coast Guard as part of
the annual Department of Transportation and Related Agencies appropriations bills.
The Senate and House passed funding in their respective versions of H.R. 2084/ S.
1143. The Senate-approved amount of $4.0 billion was slightly below, and the
House-passed $4.0 billion almost level with, the requested $4.1 billion. The
Conference Committee agreed to $4.024 billion, which Congress passed, and the
President signed into law, P.L. 106-69. An expanded role in high seas-based illegal
drug and immigration activities has put pressure on the Agency’s resources. Capital
replacement needs for replacing aging craft, and proposed new user fees to offset
increasing budget pressures are two major issues.

Contents
Introduction ...............................................1
Operation and Maintenance....................................3
Acquisition, Construction and Improvement........................4
Environmental Compliance....................................5
Alteration of Bridges .........................................5
Retirement ................................................. 5
Reserve Training............................................5
Research, Development, Test and Evaluation.......................6
Oil Spill Liability Trust Fund...................................6
Boat Safety ...............................................6
Key Issues Associated with the Budget Request.....................6
Managing Replacement of Coast Guard Capital Resources.........6
Coast Guard User Fee Proposal.............................7

Coast Guard: Analysis of the FY2000 Budget
Introduction
The Coast Guard appropriation is constrained, and its management challenged,
by increased responsibilities for drug and illegal immigrant interdiction on the high
seas as well as its aging watercraft and aircraft. The Administration requests $4.1
billion for Coast Guard discretionary funds in FY2000; both appropriations
subcommittees have held hearings on the proposal and reported legislation. On June
23, 1999, the House passed the appropriation. Compared to the total $4.5 billion
appropriated in FY1999, the FY2000 request would be $357 million, or 8%, less than
all appropriated FY1999 funds.¹ However, compared to the base appropriation,
excluding the one-time emergency and supplemental FY1999 funds, the request
could be considered an actual increase of about $230 million, or 6%. In addition to
these discretionary funds, there are mandatory funds of $64 million for State Boating
Safety grants. Compared to the $4.1 billion requested, the Senate September 16^th
recommended $4.0 billion in H.R. 2084 (S. 1143, S.Rept. 106-55) and, on June 23,
1999, the House passed $4.0 billion in H.R. 2084 (H.Rept. 106-180). The Conference
Committee agreed to $4.024 billion, which Congress passed and the President signed
into law, P.L. 106-69. Coast Guard programs are authorized every 2 years; see CRS
Report RS20117, Coast Guard FY2000 and FY2001 Authorization Issues for
discussion of current congressional consideration of authorization bills.
The budget request and subsequent appropriations would allow the Coast Guard
to continue its activities against drug smuggling and recapitalize aircraft and vessel
fleets. Table 1 shows the base appropriations, the request and congressional actions.

¹This includes $3.9 billion in the FY1999 Department of Transportation and Related Agencies
Appropriations Act as included in P.L. 105-277; an additional $387 million in emergency
funds in the Omnibus Consolidated and Emergency Supplemental Appropriations Act
(P.L.105-277, Division B); and another $200 million in the FY1999 Supplemental, P.L. 106-
31). The Omnibus Appropriation Act included additional emergency funds for the Coast
Guard for drug interdiction, hurricane relief, and Y2K activities. The $200 million included
in the FY1999 Supplemental may be carried over to FY2000.

Table 1. Coast Guard Appropriations FY1999 Base, FY2000 Request, and
Congressional Actions.
(in millions of dollars)
MajorFY1999FY2000Senate-House-P.L. 106-69
Account Approp. Request passed passed
H.R.2084/ H.R.2084
S. 1143
Operation &3,048.02,941.02,772.22,791.02,781.0
Maintenance
Acquisition, 625.5 350.3 370.4 410.0 389.3
Construction,
Improvements
Environment 21.0 19.5 12.5 18.0 17.0
Compliance
Restoration
Alteration of14.0014.015.015.0
Bridges
Retired Pay684.0721.0730.0721.0730.3
Reserve 74.0 72.0 72.0 72.0 72.0
Training
Research, 17.0 21.7 17.0 21.0 19.0
Test, and
Evaluation
TOTAL 4,483.5^a 4,125.6^b 3,988.2 4048.0 4023.7
a. P.L. 105-277 contained certain additional emergency appropriations for the Coast
Guard counter-drug, hurricane relief and Y2K activities. These totals include include
the emergency funding. P.L. 106-31, the FY1999 Supplemental, includes $200 million
for Coast Guard acquisitions to be carried into FY2000 which may be applied to
several accounts.
b. Total excludes a $41 million offset for proposed user fees rejected by House and
Senate.

The annual Department of Transportation and Related Agencies Appropriation
bill includes Coast Guard funding. (For a discussion of this bill, see CRS Report
RL30208, Appropriations for FY2000: Department of Transportation and Related
Agencies.) Within the Coast Guard appropriation, there are seven major accounts
covering operations, capital projects, environmental activities, alteration of bridges,
retired pay, reserves, and research. Coast Guard funds are included in the roughly
21%, or about $12 billion, of the roughly $55 billion appropriation that is not
firewalled, essentially a fixed appropriation tied to trust funds and thus not under the
annual control of the appropriations committee.² The House Appropriations
Committee explained in its report that the Coast Guard’s requested level was “simply
not possible due to the firewalls.” While the bill enjoyed an 8% increase under the
budget allocation, highway and other needs took most of that increase leaving the
Coast Guard scrambling “for the remaining crumbs,” according to the committee.
Essentially, both reported versions fund most Coast Guard activities at FY1999 base
appropriation levels.
Operation and Maintenance
For the operations and maintenance program (O&M), the budget seeks $3.0
billion in budget authority — $107 million, or 4%, less than FY1999. Representing
about two-thirds of the Coast Guard’s resources, this program account funds seven
central mandates assigned to the agency. These include search and rescue, aids to
navigation, marine safety, marine environmental protection, enforcement of laws and
treaties, ice operations, and defense readiness. Each of these would increase 4%
above FY1999 levels under the proposal. Five hundred twenty-one million dollars of
the total operations budget would be directed to drug interdiction activities, plus $21
million in capital expenses, for a total of $542 million, an amount approved by both
committees. Roughly one-half of the O&M account, or $1.4 billion, is for
compensating personnel. This includes 4,524 civilian and 34,869 military personnel.
In FY1999 emergency and supplemental funding measures, Congress added over
$148 million to this account.
In actions on the FY2000 request for O&M, the Senate approved $2.8 billion;
the House $2.8 billion. The Senate and House marks are at roughly FY1999 levels
for personnel resources, operation and maintenance, for all commands, districts and
headquarters. This level should not negatively affect the operational readiness of the
Coast Guard, according to the Committee. The Senate bill includes legislative
language allowing the Secretary of Transportation to transfer up to $60 million from
Federal Aviation Agency operations to Coast Guard operating expenses “for the
purpose of providing additional funds for drug interdiction activities or activities
related to the Office of Intelligence and Security.”³ The report of the Conference
Committee, H. Rept. 106-355, stated “the Secretary of Transportation may use any
surplus funds that are made available to the Secretary, to the maximum extent
practicable, for drug interdiction activities of the Coast Guard.”

²For additional discussion of this see H.Rept. 106-180, p. 3 and CRS Report RL30208:
Appropriation for FY2000: Department of Transportation and Related Agencies.
³Senate Report 106-55, p.33.

Coast Guard FY2000 Budget Request
Total = $4.1 billion
Operating Expenses

68.9%

Boat Safety
Oil Recovery1.5%

1.4%

Reserves

1.7%

AcquistionRetired Pay17.1%

8.4%

RDT&EEnv. Compliance

0.5%0.5%

A significant part of the request is a proposal to authorize the collection and
spending of a user fee for Coast Guard navigation services to commercial vessels.
The budget anticipates the FY2000 fee collections would be $41 million and future
year collections $165 million per year. Both the Senate- and House-passed bills deny
this proposal and include language restricting the use of FY2000 funds for developing
user fee proposals in the future.
Acquisition, Construction and Improvement
Another major component of the request would allocate funds for acquisition,
construction and improvement; the Administration seeks $350 million, $45 million,
or 13% less than FY1999 base funding⁴, and $275.2 million, or 44%, less than the
total funds appropriated in FY1999. Each of the five main program activities would
decline by about 13%. The Senate approved $370 million and the House $410 million
for this account. The Conference agreed to $389 million.
Both appropriation committees shared concern over how the Coast Guard would
fund the deepwater major vessel replacement in future fiscal years. The Senate would
establish a special new account and both versions would authorize that the proceeds
from the sale of surplus property be deposited into this appropriation account. The
FY2000 request of $44 million is still for planning the replacement. The Senate
approved $45 million and up to $15 million more in discretionary funds for a total of

⁴Base funding, excluding emergency and supplemental funds, was $395.5 million.

$60 million; the House approved $40 million. The Conference approved $44 million
with up to a total of $50 million in FY 2000 with the additional funds derived from
proceeds of sale of surplus property.
Environmental Compliance
To address Coast Guard responsibilities for complying with environmental
provisions ,the budget seeks $19.5 million in budget authority, some 7% less than
current year funding. Much of this — $12.3 million — is targeted to restoring and
mitigating environmental contamination, especially thousands of batteries disposed of
by the Coast Guard in many offshore buoy locations. Also being addressed are
hazardous waste sites at Kodiak, AK, Elizabeth, NC, and Cape Cod, MA. Another
part of the program addresses polychlorinated biphenyl (PCB) -laden cutters and
boats. One-fourth of this account, or $4 million, would be devoted to complying with
environmental provisions and preventing pollution. This includes hazardous waste
minimization, a variety of small compliance projects, and meeting compliance
requirements under the Oil Pollution Act, Clean Air and Clean Water Acts.
Both appropriation committees praised the Coast Guard’s efficient management
of its environmental restoration project. The Senate approved $12.5 million for this
account; the House $18 million; and the Conference agreed to $17 million.
Alteration of Bridges
For four bridge replacement projects, the Senate approved $14 million, the
amount requested, and the House $15 million. The Conference agreement was $15
million.
Retirement
At a level of $730 million, the allocation for retirement pay would be $46 million,
or 7% greater than FY1999. The Senate approved $730 million; the House $721
million. This is scored as a mandatory appropriation. An issue with this account
involved the Administration’s request that this funding be considered indefinite budget
authority and that a set appropriation level be replaced by “such sums as are
necessary.” Both committees denied this overture and continued to require that this
account be subject to appropriations. The Conference approved an appropriation of
$730 million.
Reserve Training
The Administration requested, and both bodies approved, $72 million to train,
support, and sustain a ready military Selected Reserve Force of 7,600 members for
direct support to the Department of Defense and to provide surge capacity for
responses to emergencies such as clean-up operations following oil spills. The
requested level would be $2 million, or 3%, less than current year funding.
With an anticipated strength of 12,853, about 100 less than the current year
level, the Coast Guard Reserve is ready for active duty should a conflict, national

emergency, or disaster occur. This account helps maintain this readiness through
mobilization and other exercises.
Research, Development, Test and Evaluation
Funding for research would increase 27% to a level of $22 million under the
FY2000 proposal. The House approved $21 million and the Senate $17 million, level
with FY1999 funding. The Conference agreed to $19 million. This account funds
various activities to develop techniques, methods, hardware and systems to support
Coast Guard missions. “Priorities for 2000 include drug interdiction surveillance, fuel
cell vessel propulsion, computerized search-and-rescue tools, and more effective oil
spill response techniques,” states the Coast Guard’s budget justification.
Most of the planned increase for FY2000 would be devoted to fuel cell research
with an eye to future use and significant reduction of operating costs and crewing
requirements. The other priority is maritime sensor technology used in drug
interdiction efforts to identify and intercept high speed “go fast” boasts used by drug
smugglers.
Oil Spill Liability Trust Fund
The Coast Guard administers the $1 billion Oil Spill Liability Trust Fund and
annually about one-tenth of the fund is allocated to the Coast Guard for its regular
responsibilities. The budget seeks $48 million for various associated costs including
cleaning up spills .
Boat Safety
No discretionary appropriations are requested for the national recreational
boating safety program which is now a mandatory appropriation. The Transportation^st
Equity Act for the 21 Century (TEA21) includes permanent appropriations of $64
million annually from the Aquatic Resources Trust Fund maintained by a motorboat
fuel tax of 18.4 cents per gallon. This includes $59 million for grants to states and $5
million for the Coast Guard’s coordination activity. Other Coast Guard requested
funding includes $61 million for spill clean-up and initial damage assessment, available
without further appropriation from the Oil Spill Liability Trust Fund.
Key Issues Associated with the Budget Request
The two key issues that have dominated debate over the FY2000 request for the
Coast Guard involve the deepwater replacement program and user fees.
Managing Replacement of Coast Guard Capital Resources. A prominent
issue is the Coast Guard’s management of a major planned replacement of aging and
outmoded high seas vessels and aircraft. Only planning and analysis funds are included
for this in the FY2000 request; actual purchases of nearly $10 billion are anticipated
over a 20-year period beginning in FY2001. At House Transportation and
Infrastructure hearings on February 11, 1999, and at the House Appropriations
Transportation Subcommittee March 16, 1999, the General Accounting Office

criticized the agency’s handling of this vital replacement program. CRS Report 98-
830, Coast Guard Integrated Deepwater System: Background and Issues for
Congress, discusses the issues associated with the program.
Both appropriations committees voiced concern over the deepwater replacement
program. Two things dominate that concern: the budgetary magnitude of the effort
compared to the budgetary limitations affecting the Coast Guard budget, and the
Agency’s management of the replacement program so far. To deal with the capital
needs, the Senate and House have recommended certain account changes. However,
concern persists over how the replacement program is being managed. In March 16
testimony before authorizing and appropriating committees (GAO/T-RCED-99-116,
Strategies for Procuring New Ships, Aircraft, and Other Assets), GAO has criticized
the Coast Guard’s planning to date and raised concerns about how the agency will
manage this complex multi-billion dollar replacement project. Specifically, GAO
maintains that the Coast Guard has not sufficiently justified the project and produced
key data. Further, the GAO sees the need for a new Coast Guard budget strategy
since the costs of this project will outstrip resources. The Senate report stated:
“Committee remains concerned that this maybe too ambitious and unproven for an
agency that has experienced difficulty in managing large and complex acquisition⁵
projects.”
Coast Guard User Fee Proposal. Another issue involves the Coast Guard’s
planned use of user fees. The budget anticipates using $41 million from new user fees
to recapitalize vessels, information management and Coast Guard shore infrastructure
not part of the deepwater replacement effort. The Administration will propose
legislation to authorize user fees for commercial cargo vessels and cruise ships; it
anticipates collecting $41 million in FY2000 and $165 million annually when fully
operational. Proposals for user fees for traditional Coast Guard services such as buoy
placement and vessel traffic regulation have been controversial. Some argue that
these services should be funded from general funds because of their widespread
benefits; others argue that user fees should be assigned in instances where the
beneficiaries can be clearly identified.
Based on Senate and House report language, the current proposal to institute
commercial vessel user fees appears to be defeated. Future planning of such proposals
also would be prohibited under Senate- and House-reported bills which include
legislative language prohibiting the Coast Guard from spending funds on development
of user fee proposals.

⁵S.Rept 106-180, p. 33.