Kit Bond

Mr. BOND

Mr. BOND. Mr. President, I rise today because this is a special day in our nation's history. On this day in 1944, Harry S. Truman, a proud Missourian and U.S. Senator at the time, authorized the christening of the U.S.S. Missouri. The Missouri is this country's last and most celebrated battleship. Senator Truman's 19-year old daughter, Margaret, christened this great battleship and sent the ``Mighty Mo'' and her crew on missions for our Armed Forces in World War II, the Korean War, and Operations Desert Storm--a time of service spanning nearly half a century. Today she begins a new era of service as a memorial to educate and remind new generations of Americans about the great sacrifices and even greater victories that have occurred during her military service. She is a symbol of American triumph and spirit as she majestically stands watch over the U.S.S. Arizona memorial in Pearl Harbor, Hawaii. Today, in this unstable world, we should re-commit ourselves to honoring lasting symbols of unity and dedication. The 900-foot Battleship Missouri is one such symbol. This era of patriotism, sacrifice, bravery, and duty will not be forgotten, and in fact must be revered, remembered, and taught to our children and grandchildren. For the United States, World War II began with a surprise attack on the naval base at Pearl Harbor on December 7, 1941. It finally ended on the decks of the ``Mighty Mo'' on September 2, 1945. On that day, General Douglas MacArthur, Supreme Commander of the Allied Powers, and Chester Nimitz, Fleet Admiral of the U.S. Navy, signed the Instrument of Surrender on behalf of the Allied Powers and the United States. It is a moment that will now forever be immortalized to America and citizens of the world. Most importantly, we need to remember that the ``Mighty Mo'' would not have played such an important role without the brave and true service of America's servicemen and their families. These men risked their lives at great personal sacrifice, all in the name of our country. They are the backbone of the great history of the U.S.S. Missouri. Many of these veterans are form the State of Missouri, including Seaman John C. Truman, the nephew of our 33rd president. Today, January 29, 1999, is yet another significant day in the service of the U.S.S. Missouri--for today she opens permanently to the public as the Battleship Missouri Memorial. I urge all Missourians and all Americans to go see this great ship and experience her glorious history firsthand. I thank the U.S. Navy and the U.S.S. Missouri Memorial Association for creating such a special memorial for the world to enjoy for generations to come. Congratulations to all involved for getting this memorial up and running. Congratulations to my friend Senator Daniel Inouye, who has been personally involved in this project. Finally, congratulations to the U.S. Navy, the people of Hawaii, the people of Missouri, and all Americans who now have the opportunity to visit and experience a crucial part of our great state's heritage.

Mr. BOND

Mr. BOND. Mr. President, as you know, this year the Miss USA Pageant will be held in my home state of Missouri this Friday. I rise today to recognize the hard work and dedication of the nearly 400 volunteers from Branson, Missouri who have donated multiple hours to ensure that this year's pageant runs smoothly. The volunteer corps is an integral part of the pageant. They operate the entire pageant as well as all of the events leading up to it. It is the tireless effort and the many behind the scenes hours of the volunteers that make this pageant successful year after year. This year will be no different, as the people of Branson have done a wonderful job. This Friday night, as millions of people across the country and around the world look to Branson for the crowning of the next Miss USA, I encourage all Americans to recognize the effort of the citizens of Branson who won't appear on camera and whose names won't scroll across the screen. Mr. President, I now ask the Senate to join me in recognition of these unsung heroes of the Miss USA Pageant.

Mr. BOND

Mr. BOND. Mr. President, I rise today in recognition of Mildred Jamison for her hard work and dedication at The Faith House in North St. Louis, Missouri. The Faith House is a Child Caring/Placement Agency that is committed to helping children with special needs. Children that have been served by the Faith House include those that have been drug exposed, have HIV/AIDS, have been emotionally or sexually abused, are medically fragile (including transplant recipients and burn victims), physically and mentally challenged children, and those that are developmentally delayed. In the six years that The Faith House has contributed to the community, over 500 young lives have been changed by Ms. Jamison's vision. I commend Ms. Jamison for her hard work and tireless dedication. I encourage communities across the nation to look to The Faith House as a model and inspiration for similar programs. It is my sincere hope that Ms. Jamison will continue to change young lives and enrich the community of North St. Louis for many years to come.

Mr. BOND

Mr. BOND. One final item I need to get in. Last year, we worked very hard for a Transportation Equity Act for the 21st century, or TEA 21. I led the fight with Chairman John Chafee and Chairman John Warner to make sure we put the trust back in trust fund; that is, we told the American people that we would send back, for highways, the money in the trust fund as it increased. In this budget he proposes more boutique programs. He wants to go back on the promise we made last year. We have great highway needs and there is absolutely no reason to get more Federal programs when it is the States who need to build the highways. We need to start over again on transportation and education and make some sense out of this budget.

Mr. BOND

Mr. BOND. Mr. President, small businesses today face enormous burdens when it comes to taxes. Each year they pay a growing portion of their revenues on income, employment, and excise taxes. Yet even before they write the tax check, they spend more than 5% of their revenues just to comply with the tax laws. These revenues are spent on accountants, bookkeepers, and lawyers to sort out the countless pages of tax laws, regulations, forms, instructions, rulings, and other guidance published by the IRS. In addition, small business owners must dedicate valuable time and energy on day-to-day recordkeeping and other compliance requirements, all of which keep them from doing what they do best-- running their business. As the Chairman of the Committee on Small Business, I have heard from small business owners in Missouri and across this country that they are more than willing to pay their fair share of taxes. But what they object to is paying high tax bills and vast amounts for professional tax assistance only to end up the victim of an unfair tax code. Mr. President, I rise today to introduce legislation that will eliminate two major sources of that unfairness and provide a level playing field for the millions of men and women who work exceedingly hard to make their small enterprises a success. These bills are common- sense measures that respond to the calls from small businesses for tax fairness and simplicity. My first bill, the ``Self-Employed Health Insurance Fairness Act of 1999,'' will end one of the most glaring inequities that has existed in our tax law--the deductibility of health-insurance costs for the self- employed. For nearly five years, I have been working to see that the self-employed receive equal treatment when it comes to the deductibility of health insurance. During the 105th Congress, we made substantial progress. First, in the Taxpayer Relief Act of 1997, we broke through the long-standing cap on the deduction to provide 100% deductibility. Then, last Fall, we passed legislation that will speed up the date that self-employed persons can fully deduct their health-insurance costs to 2003. We also significantly increased the deductible amounts in the intervening years over the prior law. While I strongly supported these improvements, the self-employed still cannot wait four more years for 100% deductibility when their large corporate competitors have long been able to deduct such costs in full. With the self-employed able to deduct only 60% of their health- insurance costs today, it comes as no surprise that nearly a quarter of the self-employed still do not have health insurance. In fact, five million Americans live in families headed by a self-employed individual and have no health insurance. And those families include 1.3 million children who lack adequate health-insurance coverage. Mr. President, it is time to finish the job once and for all in this Congress. My bill will increase the deductibility of health insurance for the self-employed to 100% beginning this year. A full deduction will make health insurance more affordable to the self-employed and help them and their families get the health insurance coverage that they need and deserve. The ``Self-Employed Health Insurance Fairness Act'' also corrects another inequity in the tax law affecting the self-employed who try to provide health insurance for themselves, their families, and their employees. Under current law, the self-employed lose all of the health- insurance deduction if they are eligible to participate in another health-insurance plan--whether or not they actually participate. This provision affects self-employed individuals like Steve Hagan in my hometown of Mexico, Missouri. Mr. Hagan is a financial planner who runs his own small business. Although he has a group medical plan for his employees, Mr. Hagan cannot deduct the cost of covering himself or his family simply because his wife is eligible for health insurance through her employer. The inequity is clear. Why should he be able to deduct the insurance costs for his employees but not for himself and his family? What if the insurance available through his wife's employer does not meet the needs of their family? Besides being patently unfair, this is also an enormous trap for the unwary. Imagine the small business owner who learns that she can now deduct 60% of her health-insurance costs this year, and with the extra deduction, she can finally afford a group medical plan for herself and her employees. Then later in the year, her husband gets a new job that offers health insurance. Suddenly, her self-employed health-insurance deduction is gone, and she is left with two choices. She can bear the entire cost of her family's coverage, or terminate the insurance coverage for all her employees. The tax code should not force small business owners into this kind of ``no win'' situation when they try to provide insurance coverage for their employees and themselves. My bill eliminates this problem by clarifying that the self-employed health-insurance deduction is limited only if the self-employed person actually participates in a subsidized health insurance plan offered by a spouse's employer or through a second job. It's simply a matter of fairness, and a step we need to take now. The second bill that I introduce today is the ``Independent Contractor Simplification and Relief Act of 1999.'' This bill will provide clear rules and relief for entrepreneurs seeking to be treated as independent contractors and for businesses needing to use independent contractors. As the Chairman of the Small Business Committee, I have heard from countless small business owners who are caught in the environment of fear and confusion that now surrounds the classification of workers. This situation is stifling the entrepreneurial spirit of many small business owners who find that they do not have the flexibility to conduct their businesses in a manner that makes the best economic sense and that serves their personal and family goals. The root of this problem is found in the IRS' test for determining whether a worker is an independent contractor or an employee. Over the past three decades, the IRS has relied on a 20-factor test based on the common law to make this determination. On first blush, a 20-factor test sounds like a reasonable approach--if a taxpayer demonstrates a majority of the factors, he is an independent contractor. Not surprisingly, the IRS' test is not that simple. It is a complex set of extremely subjective criteria with no clear weight assigned to any of the factors. As a result, small business taxpayers are not able to predict which of the 20 factors will be most important to a particular IRS agent, and finding a certain number of these factors in any given case does not guarantee the outcome. To make matters worse, the IRS' determination inevitably occurs two or three years after the parties have determined in good faith that they have an independent-contractor relationship. And the consequences can be devastating. The business recipient of the services is forced to reclassify the independent contractor as an employee and must pay the payroll taxes the IRS says should have been collected in the prior years. Interest and penalties are also piled on. The result for many small businesses is a tax bill that bankrupts the company. But that's not the end of the story. The IRS then goes after the service provider, who is now classified as an employee, and disallows a portion of her business expenses--again resulting in additional taxes, interest and penalties. Mr. President, all of us in this body recognize that the IRS is charged with the duty of collecting Federal revenues and enforcing the tax laws. The problem in this case is that the IRS is using a procedure that is patently unfair and subjective. And the result is that businesses must spend thousands of dollars on lawyers and accountants to try to satisfy the IRS' procedures, but with no certainty that the conclusions will be respected. That's no way for businesses to operate in today's rapidly changing economy. For its part, the IRS has adopted a worker classification training manual, which according to the agency is an ``attempt to identify, simplify, and clarify the relevant facts that should be evaluated in order to accurately determine worker classification * * *.'' There can be no more compelling reason for immediate action on this issue. The IRS' training manual is more than 150 pages. If it takes that many pages to teach revenue agents how to ``simplify and clarify'' this small business tax issue, I think we can be sure how simple and clear it is going to seem to taxpayers who try to figure it out on their own. The ``Independent Contractor Simplification and Relief Act'' is based on the provisions of my Home-Based Business Fairness Act, which I introduced at the start of the 105th Congress. My bill removes the need for so many pages of instruction on the 20-factor test by establishing clear rules for classifying workers based on objective criteria. Under these criteria, if there is a written agreement between the parties, and if an individual demonstrates economic independence and independence with respect to the workplace, he will be treated as an independent contractor rather than an employee. And the service recipient will not be treated as an employer. In addition, individuals who perform services through their own corporation or limited liability company will also qualify as independent contractors as long as there is a written agreement and the individuals provide for their own benefits. The safe harbor is simple, straightforward, and final. To take advantage of it, payments above $600 per year to an individual service provider must be reported to the IRS, just as is required under current law. This will help ensure that taxes properly due to the Treasury will continue to be collected. Mr. President, the IRS contends that there are millions of independent contractors who should be classified as employees, which costs the Federal government billions of dollars a year. This assertion is plainly incorrect. Classification of a worker has no cost to the government. What costs the government are taxpayers who do not pay their taxes. My bill has three requirements that I believe will improve compliance among independent contractors using the new rules I propose. First, there must be a written agreement between the parties--this will put the independent contractor on notice at the beginning that he is responsible for his own tax payments. Second, the new rules will not apply if the service recipient does not comply with the reporting requirements and issue 1099s to individuals who perform services. Third, an independent contractor operating through his own corporation or limited liability company must file all required income and employment tax returns in order to be protected under the bill. In the last Congress, concerns were raised that permitting individuals who provide their services through their own corporation or limited liability company to qualify as independent contractors would lead to abusive situations at the expense of workers who should be treated as employees. To prevent this option from being abused, I have added language that limits the number of former employees that a service recipient may engage as independent contractors under the incorporation option. This limit will protect against misuse of the incorporation option while still allowing individuals to start their own businesses and have a former employer as one of their initial clients. Another major concern of many businesses and independent contractors is the issue of reclassification. My bill provides relief to these taxpayers when the IRS determines that a worker was misclassified. Under my bill, if the business and the independent contractor have a written agreement, if the applicable reporting requirements were met, and if there was a reasonable basis for the parties to believe that the worker is an independent contractor, then an IRS reclassification will only apply prospectively. This provision gives important peace of mind to small businesses that act in good faith by removing the unpredictable threat of retroactive reclassification and substantial interest and penalties. A final provision of this legislation, Mr. President, is the repeal of section 1706 of the 1986 Tax Reform Act. This section affects businesses that engage technical service providers, such as engineers, designers, drafters, computer programmers, and systems analysts. In certain cases, Section 1706 precludes these businesses from applying the reclassification protections under section 530 of the Revenue Act of 1978. When section 1706 was enacted, its proponents argued that technical service workers were less compliant in paying their taxes. Later examination of this issue by the Treasury Department found that technical service workers are in fact more likely to pay their taxes than most other types of independent contractors. This revelation underscores the need to repeal section 1706 and level the playing field for individuals in these professions. In the last two Congresses, proposals to repeal section 1706 enjoyed wide bipartisan support. The bill I introduce today is designed to level the playing field for individuals in these professions by providing the businesses that engage them with the same protections that businesses using other types of independent contractors have enjoyed for more than 20 years. Mr. President, the bills I introduce today are common-sense measures that answer small business' urgent plea for fairness and simplicity in the tax law. As we work toward the day when the entire tax law is based on these principles, we can make a difference today by enacting these two bills. Entrepreneurs have waited too long--let's get the job done! Mr. President, I ask unanimous consent to include in the Record a copy of each bill and a description of its provisions.

Mr. BOND

Mr. BOND. Mr. President, I rise today to pay tribute to the Olive Chapel African Methodist Episcopal Church in Kirkwood, Missouri. Although the congregation is 145 years old, they will celebrate their 100th anniversary in their present building on February 26, 27, and 28. This is especially significant considering the Olive Chapel A.M.E. Church is the second oldest A.M.E. church west of the Mississippi River, and the oldest Protestant church in Kirkwood. I commend Olive Chapel A.M.E. Church for their perseverance throughout the last 100 years and hope they will continue to be a positive influence in the Kirkwood community for many years to come.

Mr. BOND

Mr. BOND. Mr. President, I rise today to introduce the Small Business Year 2000 Readiness Act along with my colleagues Senators Bennett, Snowe, Dodd, Kerry, and Moynihan. This bill provides small businesses with the resources necessary to repair Year 2000 computer problems. Last year I introduced a similar bill that the Committee on Small Business adopted by an 18-0 vote and that the full Senate approved by unanimous consent. Unfortunately, the House of Representatives did not act on the legislation prior to adjournment. I am reintroducing this bill because the consequences of Congress not taking action to assist small business with their Y2K problems are too severe to ignore. Given the effects a substantial number of small business failures will have on our nation's economy, it is imperative that Congress promptly pass legislation that ensures that small businesses are aware of the Y2K problem and have access to capital to fix such problems. Moreover, it is imperative that Congress pass such legislation before the problem occurs, not after it has already happened. It is, therefore, with a sense of urgency that I am introducing the Small Business Year 2000 Readiness Act. The problem is that certain computers and processors in automated systems will fail because such systems will not recognize the Year 2000. In fact, a small business is at risk if it uses any computers in its business, if it has customized software, if it is conducting e- commerce, if it accepts credit card payments, if it uses a service bureau for its payroll, if it depends on a data bank for information, if it has automated equipment for communicating with its sales or service force or if it has automated manufacturing equipment. Last June, the Committee on Small Business, which I chair, held hearings on the effect the Y2K problem will have on small businesses. The outlook is not good--in fact it is poor at best. The Committee received testimony that the entities most at risk from Y2K failures are small and medium-sized companies, not larger companies. The major reason for this anomaly is that many small companies have not begun to realize how much of a problem Y2K failure will be, and many may not have the access to capital to cure such problems before they cause disastrous results. A study on Small Business and the Y2K Problem sponsored by Wells Fargo Bank and the NFIB found that an estimated 4.75 million small employers are subject to the Y2K problem. This equals approximately 82 percent of all small businesses that have at least two employees. The Committee has also received information indicating that approximately 750,000 small businesses may either shut down due to the Y2K problem or be severely crippled if they do not take action to cure their Y2K problems. Such failures will affect not only the employees and owners or failed small businesses, but also their creditors, suppliers and customers. Lenders will face significant losses if their small business borrowers either go out of business or have a sustained period in which they cannot operate. Most importantly, however, is the fact that up to 7.5 million families may face the loss of paychecks for a sustained period of time if small businesses do not remedy their Y2K problems. Given these facts, it is easy to forecast that there will be severe economic consequences if small businesses do not become Y2K compliant in time and there are only 11 months to go. Indeed the countdown is on. A good example of how small businesses are dramatically affected by the Y2K problem is the experience of Lloyd Davis, the owner of Golden Plains Agricultural Technologies, Inc., a farm equipment manufacturer in Colby, Kansas. Like many small business owners, Mr. Davis' business depends on trailing technology purchased over the years, including 386 computers running custom software. Mr. Davis uses his equipment to run his entire business, including handling the company's payroll, inventory control, and maintenance of large databases on his customers and their specific needs. In addition, Golden Fields has a web site and sells the farm equipment it manufacturers over the internet. Unlike many small business owners, however, Mr. Davis is aware of the Y2K problem and tested his equipment to see if it could handle the Year 2000. His tests confirmed his fear--the equipment and software could not process the year 2000 date and would not work properly after December 31, 1999. That is when Mr. Davis's problem began. Golden Fields had to purchase an upgraded software package. That cost $16,000. Of course, the upgraded software would not run on 386 computers, so Golden Fields had to upgrade to new hardware. Golden Fields had a computer on each of its 11 employees' desks, so that each employee could access the program that essentially ran the company and assist filling the internet orders the company received. Replacing all the hardware would have cost Golden Fields $55,000. Therefore, Golden Fields needed to expend $71,000 just to put itself in the same position it was in before the Y2K problem. Like many small business owners facing a large expenditure, Mr. Davis went to his bank to obtain a loan to pay for the necessary upgrades. Because Golden Fields was not already Y2K compliant, his bank refused him a loan because it had rated his company's existing loans as ``high- risk''. Golden Fields was clearly caught in a Catch-22 situation. Nevertheless, Mr. Davis scrambled to save his company. He decided to lease the new hardware instead of purchasing it, but he will pay a price that ultimately will be more expensive than conventional financing. Moreover, instead of replacing 11 computers, Golden Fields only replaced six at a cost of approximately $23,000. Golden Fields will be less efficient as a result. The experience of Mr. Davis and Golden Fields has been and will continue to be repeated across the country as small businesses realize the impact the Y2K problem will have on their business. A recent survey conducted by Arthur Andersen's Enterprise Group on behalf of National Small Business United indicates that, like Golden Fields, many small businesses will incur significant costs to become Y2K compliant and are very concerned about it. The survey found that to become Y2K compliant, 29 percent of small- to medium-sized businesses will purchase additional hardware, 24 percent will replace existing hardware and 17 percent will need to convert their entire computer system. When then asked their most difficult challenge relating to their information technology, more than 54% of the businesses surveyed cited ``affording the cost.'' Congress must ensure that these businesses do not have the same trouble obtaining financing for their Y2K corrections as Mr. Davis and Golden Fields Agricultural Technologies. Moreover, Congress must deal with the concerns that have recently been raised that there may be a ``credit crunch'' this year with businesses, especially small businesses, unable to obtain financing for any purposes if they are not Y2K compliant. In addition to the costs involved, there is abundant evidence that small businesses are, to date, generally unprepared for, and in certain circumstances, unaware of the Y2K problem. The NFIB's most recent survey indicates that 40 percent of small businesses don't plan on taking action or do not believe the problem is serious enough to worry about. The Small Business Year 2000 Readiness Act that I am introducing today will serve the dual purpose of providing small businesses with the means to continue operating successfully after January 1, 2000, and making lenders and small firms more aware of the dangers that lie ahead. The Act requires the Small Business Administration to establish a limited-term loan program whereby SBA guarantees the principal amount of a loan made by a private lender to assist small businesses in correcting Year 2000 computer problems. Each lender that participates in the SBA's 7(a) business loan program is eligible to participate in the Y2K loan program. This includes more than 6,000 lenders located across the country. To ensure that the SBA can roll out the loan program promptly, the Act permits a lender to process Y2K loans pursuant to any of the procedures that the SBA has already authorized for that lender. Moreover, to assist small businesses that may have difficulty sustaining sufficient cash flows while developing Y2K solutions, the loan program will permit flexible financing terms so small businesses are able to service the new debt with available cash flow. For example, under certain circumstances, a borrower may defer principal payments for up to a year. Once the Y2K problem is behind us, the Act provides that the loan program will sunset. To assure that the loan program is made available to those small businesses that need it and to increase awareness of the Y2K problem, the legislation requires SBA to market this program aggressively to all eligible lenders. Awareness of this loan program's availability is of paramount importance. Financial institutions are currently required by Federal banking regulators to contact their customers to ensure that they are Y2K compliant. The existence of a loan program designed to finance Y2K corrections will give financial institutions a specific solution to offer small companies that may not be eligible for additional private capital and will focus the attention of financial institutions and, in turn, their small business customers to the Y2K problem. This loan program is of vital importance and we must ensure that there are sufficient funds to pay for it. Because the Y2K loan program would be part of the existing 7(a) business loan program, funds that have already been appropriated for the 7(a) program for fiscal year 1999 may be used for the Y2K loan program. Nevertheless, I intend to watch the 7(a) loan program carefully to determine whether the Y2K loan program will cause the 7(a) loan program to run short of funds. If the appropriated amount will not support the expected loan volume of the general 7(a) loan program and the new Y2K loan program, I intend to work with my colleagues on the Appropriations Committee to attempt to secure additional funds targeted specifically for the Y2K loan program. The Small Business Year 2000 Readiness Act is a necessary step to ensure that the economic health of this country is not marred by a substantial number of small business failures following January 1, 2000, and that small businesses continue to be the fastest growing segment of our economy in the Year 2000 and beyond. Mr. President, I ask unanimous consent that the full text of the bill be printed in the Record.

Mr. BOND

Mr. BOND. Mr. President, I rise today to introduce the Small Business Year 2000 Readiness Act along with my colleagues Senators Bennett, Snowe, Dodd, Kerry, and Moynihan. This bill provides small businesses with the resources necessary to repair Year 2000 computer problems. Last year I introduced a similar bill that the Committee on Small Business adopted by an 18-0 vote and that the full Senate approved by unanimous consent. Unfortunately, the House of Representatives did not act on the legislation prior to adjournment. I am reintroducing this bill because the consequences of Congress not taking action to assist small business with their Y2K problems are too severe to ignore. Given the effects a substantial number of small business failures will have on our nation's economy, it is imperative that Congress promptly pass legislation that ensures that small businesses are aware of the Y2K problem and have access to capital to fix such problems. Moreover, it is imperative that Congress pass such legislation before the problem occurs, not after it has already happened. It is, therefore, with a sense of urgency that I am introducing the Small Business Year 2000 Readiness Act. The problem is that certain computers and processors in automated systems will fail because such systems will not recognize the Year 2000. In fact, a small business is at risk if it uses any computers in its business, if it has customized software, if it is conducting e- commerce, if it accepts credit card payments, if it uses a service bureau for its payroll, if it depends on a data bank for information, if it has automated equipment for communicating with its sales or service force or if it has automated manufacturing equipment. Last June, the Committee on Small Business, which I chair, held hearings on the effect the Y2K problem will have on small businesses. The outlook is not good--in fact it is poor at best. The Committee received testimony that the entities most at risk from Y2K failures are small and medium-sized companies, not larger companies. The major reason for this anomaly is that many small companies have not begun to realize how much of a problem Y2K failure will be, and many may not have the access to capital to cure such problems before they cause disastrous results. A study on Small Business and the Y2K Problem sponsored by Wells Fargo Bank and the NFIB found that an estimated 4.75 million small employers are subject to the Y2K problem. This equals approximately 82 percent of all small businesses that have at least two employees. The Committee has also received information indicating that approximately 750,000 small businesses may either shut down due to the Y2K problem or be severely crippled if they do not take action to cure their Y2K problems. Such failures will affect not only the employees and owners or failed small businesses, but also their creditors, suppliers and customers. Lenders will face significant losses if their small business borrowers either go out of business or have a sustained period in which they cannot operate. Most importantly, however, is the fact that up to 7.5 million families may face the loss of paychecks for a sustained period of time if small businesses do not remedy their Y2K problems. Given these facts, it is easy to forecast that there will be severe economic consequences if small businesses do not become Y2K compliant in time and there are only 11 months to go. Indeed the countdown is on. A good example of how small businesses are dramatically affected by the Y2K problem is the experience of Lloyd Davis, the owner of Golden Plains Agricultural Technologies, Inc., a farm equipment manufacturer in Colby, Kansas. Like many small business owners, Mr. Davis' business depends on trailing technology purchased over the years, including 386 computers running custom software. Mr. Davis uses his equipment to run his entire business, including handling the company's payroll, inventory control, and maintenance of large databases on his customers and their specific needs. In addition, Golden Fields has a web site and sells the farm equipment it manufacturers over the internet. Unlike many small business owners, however, Mr. Davis is aware of the Y2K problem and tested his equipment to see if it could handle the Year 2000. His tests confirmed his fear--the equipment and software could not process the year 2000 date and would not work properly after December 31, 1999. That is when Mr. Davis's problem began. Golden Fields had to purchase an upgraded software package. That cost $16,000. Of course, the upgraded software would not run on 386 computers, so Golden Fields had to upgrade to new hardware. Golden Fields had a computer on each of its 11 employees' desks, so that each employee could access the program that essentially ran the company and assist filling the internet orders the company received. Replacing all the hardware would have cost Golden Fields $55,000. Therefore, Golden Fields needed to expend $71,000 just to put itself in the same position it was in before the Y2K problem. Like many small business owners facing a large expenditure, Mr. Davis went to his bank to obtain a loan to pay for the necessary upgrades. Because Golden Fields was not already Y2K compliant, his bank refused him a loan because it had rated his company's existing loans as ``high- risk''. Golden Fields was clearly caught in a Catch-22 situation. Nevertheless, Mr. Davis scrambled to save his company. He decided to lease the new hardware instead of purchasing it, but he will pay a price that ultimately will be more expensive than conventional financing. Moreover, instead of replacing 11 computers, Golden Fields only replaced six at a cost of approximately $23,000. Golden Fields will be less efficient as a result. The experience of Mr. Davis and Golden Fields has been and will continue to be repeated across the country as small businesses realize the impact the Y2K problem will have on their business. A recent survey conducted by Arthur Andersen's Enterprise Group on behalf of National Small Business United indicates that, like Golden Fields, many small businesses will incur significant costs to become Y2K compliant and are very concerned about it. The survey found that to become Y2K compliant, 29 percent of small- to medium-sized businesses will purchase additional hardware, 24 percent will replace existing hardware and 17 percent will need to convert their entire computer system. When then asked their most difficult challenge relating to their information technology, more than 54% of the businesses surveyed cited ``affording the cost.'' Congress must ensure that these businesses do not have the same trouble obtaining financing for their Y2K corrections as Mr. Davis and Golden Fields Agricultural Technologies. Moreover, Congress must deal with the concerns that have recently been raised that there may be a ``credit crunch'' this year with businesses, especially small businesses, unable to obtain financing for any purposes if they are not Y2K compliant. In addition to the costs involved, there is abundant evidence that small businesses are, to date, generally unprepared for, and in certain circumstances, unaware of the Y2K problem. The NFIB's most recent survey indicates that 40 percent of small businesses don't plan on taking action or do not believe the problem is serious enough to worry about. The Small Business Year 2000 Readiness Act that I am introducing today will serve the dual purpose of providing small businesses with the means to continue operating successfully after January 1, 2000, and making lenders and small firms more aware of the dangers that lie ahead. The Act requires the Small Business Administration to establish a limited-term loan program whereby SBA guarantees the principal amount of a loan made by a private lender to assist small businesses in correcting Year 2000 computer problems. Each lender that participates in the SBA's 7(a) business loan program is eligible to participate in the Y2K loan program. This includes more than 6,000 lenders located across the country. To ensure that the SBA can roll out the loan program promptly, the Act permits a lender to process Y2K loans pursuant to any of the procedures that the SBA has already authorized for that lender. Moreover, to assist small businesses that may have difficulty sustaining sufficient cash flows while developing Y2K solutions, the loan program will permit flexible financing terms so small businesses are able to service the new debt with available cash flow. For example, under certain circumstances, a borrower may defer principal payments for up to a year. Once the Y2K problem is behind us, the Act provides that the loan program will sunset. To assure that the loan program is made available to those small businesses that need it and to increase awareness of the Y2K problem, the legislation requires SBA to market this program aggressively to all eligible lenders. Awareness of this loan program's availability is of paramount importance. Financial institutions are currently required by Federal banking regulators to contact their customers to ensure that they are Y2K compliant. The existence of a loan program designed to finance Y2K corrections will give financial institutions a specific solution to offer small companies that may not be eligible for additional private capital and will focus the attention of financial institutions and, in turn, their small business customers to the Y2K problem. This loan program is of vital importance and we must ensure that there are sufficient funds to pay for it. Because the Y2K loan program would be part of the existing 7(a) business loan program, funds that have already been appropriated for the 7(a) program for fiscal year 1999 may be used for the Y2K loan program. Nevertheless, I intend to watch the 7(a) loan program carefully to determine whether the Y2K loan program will cause the 7(a) loan program to run short of funds. If the appropriated amount will not support the expected loan volume of the general 7(a) loan program and the new Y2K loan program, I intend to work with my colleagues on the Appropriations Committee to attempt to secure additional funds targeted specifically for the Y2K loan program. The Small Business Year 2000 Readiness Act is a necessary step to ensure that the economic health of this country is not marred by a substantial number of small business failures following January 1, 2000, and that small businesses continue to be the fastest growing segment of our economy in the Year 2000 and beyond. Mr. President, I ask unanimous consent that the full text of the bill be printed in the Record.

Mr. BOND

Mr. BOND. Mr. President, as we start this 106th Congress, I think it is clear that education is going to be one of the top priorities we will address in this session of Congress. We are going to be working on the reauthorization of the Elementary and Secondary Education Act, and I believe all of us, on both sides, are saying that this is a national priority. As my colleague from Massachusetts, Senator John Kerry, said in a speech that he made at Northeastern University, ``Ever since there has been a United States of America, there have been public schools. And there has been a constant debate about how to make them work.'' I know that since I was elected to the United States Senate 12 years ago I have listened and participated in the many debates on public education that have occurred in this institution. I have even had some ideas of my own on how to improve education--some of which have been passed by this body and signed into law. My intentions, like those of my Senate colleagues--have been good intentions. We all share the same goal of providing our children with a great education. We have been trying to do the right thing. Today, however, our good intentions have mushroomed into burdensome regulations, unfunded mandates, and unwanted meddling. Parents, teachers, and local school officials have less and less control over what happens in the classroom. Instead of empowering parents, teachers, and local school officials we have empowered the federal government and bureaucrats. We have slowly eroded the opportunity for creativity and innovation on the local level and have once again established a system where supposedly the Olympians on the hill know what is best for the peasants in the valley. Mr. President, let me give you some examples of what our good intentions have gotten us. We have 760 education programs scattered throughout 39 different federal agencies. Vice President Gore's National Performance Review said that the Department of Education's discretionary grant process lasts 26 weeks and takes 487 steps from start to finish. The General Accounting Office has estimated that there are nearly 13,400 full-time jobs in the 50 states funded by the Department of Education with an additional 4,600 direct Department of Education employees. We have teachers being taken off the task of teaching, preparing lesson plans, taking on after school student activities, etc. and instead are researching for grant opportunities, reading regulations, preparing applications, filling out paperwork requirements, complying with cumbersome rules, and reporting on how they spend the federal money received. Or we have teachers and administrators deciding that the extra federal money is not worth the time and effort that it will take to get and comply with that they do not even bother to go through the process. Most of us are now aware of the Third International Mathematics and Science Study, released last year by the National Center for Education Statistics, that ranked American senior high school students 19th out of 21 industrialized nations in math, and 16th out of the same 21 countries in science. In addition, 40 percent of our Nation's fourth graders do not read at even a basic level. Colleges across this country are spending over $1 billion a year in remedial education. Is this acceptable? Are we satisfied with the status quo? The answer should be--must be--an unequivocal NO. In our business we pay a lot of attention to polls. For several years, the polls across the country have been telling us that we have a problem with public education. This is not new news and the question remains the same: How do we fix public education? Mr. President, before I provide my answer to that question I want to take this opportunity to read from an editorial from a home-state newspaper, the Southeast Missourian. Nearly a decade ago, then-President Bush and the nation's governors set a series of goals for America's schoolchildren in reading, math, graduation rates and other measures. But the national education goals panel says the nation's public schools will fall short of the goals for 2000. We can only hope these continued failures to improve education will result in a overthrow of the so-called experts. These are the people, usually far removed from the classroom, who embrace quick fixes and fads in the face of each hand-wringing report. Unfortunately, the fixes make the problems worse. What's needed is to return America's schools back to the basics and back to local teachers, administrators, school boards, and parents. Without a foundation in the basics, the rest of education just won't take. We must take so-called remedies out of the hands of the federal government. National mandates are meaningless for America's schools. The problem must be addressed one district and one school at a time. Why not let classroom teachers-- instead of bureaucrats and politicians--fashion a plan to improve learning in the classroom? Give more control to the local districts in building reading retention, math skills and graduation rates? Mr. President, the editorial goes on, but it ends with the following: The answer to fixing America's educational woes rests with individual school boards and passionate educators. The bureaucrats must reduce the red tape and mandates that are strangling our schools. Give those who know best the time, talent and incentives to finally fix public education. I agree with the Southeast Missourian. The answer to improving public education does not lie within the halls of Congress or in the granite buildings of the downtown Washington education establishment. As the editorial stated, we are ``far removed from the classroom.'' In my opinion, the real solutions--the laboratories--are local schools when they are given the opportunity to excel and not play the ``Mother, May I?'' game with Washington. Here in Congress we must not be afraid to propose change. But in proposing change we must go directly to those who can provide some answers--the teachers, principals, school administrators, school board members, and parents. For the past couple of years, I have done just that and have developed in conjunction with them the ``Direct Check for Education Act. Quite simply, the purpose of this bill is to consolidate six, primarily competitive grant programs of the Department of Education's programs. The programs are Goals 2000, School-to-Work, Education Technology, Innovative Education Program Strategies, Fund for the Improvement of Education, and the President's 100,000 teachers program. The bill then proposes to return the federal funding by issuing a ``Direct Check'' to the local school district based on the number of students in each district. The result would be a resource of flexible funding that would allow individual schools and parents to determine how best to use the funds, including the hiring of new teachers, additional classrooms, new textbooks, expanded technology initiatives, drug and alcohol prevention programs, etc. The list goes on and on. My ``Direct Check'' proposal is not the ``save-all'' answer. But the ``Direct Check'' will reduce the costly and time-consuming paperwork process that local school districts endure in obtaining federal grants and funding. It will treat children and schools the same by awarding funding to schools based upon the students served instead of rewarding some and penalizing others. My ``Direct Check for Education'' is a first step in simplifying and going ``back to the basics'' of education. Mr. President, there will be those in the Washington education establishment who will oppose this bill. Instead of finding ways to empower those at the local level the opposition will argue that we need even more federal programs, more bureaucracy, more micro management of the classroom. I believe the bottom line is this: Education, while a national priority, is a local responsibility. We must empower parents, teachers, school administrators, school boards, etc. because education decisions can best be made by people at the local schools who know the names and the challenges facing the students in those schools. Let's keep things simple. Let's take off the Federal stranglehold and let local school districts do their jobs. Let's educate our children for a lifetime of achievement. We have burdened it with excessive regulations and red tape. We have once again established a system where supposedly the ``olympians'' on the Hill know what is best for the ``peasants'' in the valley. I agree with my colleagues on both sides of the aisle: Education is and must be a national priority. But the good intentions that we have had in this body have led to the creation of more than 760 Federal education programs. Has that made education better? I don't think so. We added three more last year. And now we gather that the President is going to come up with a grand new Federal scheme. How many people really believe that the 764th Federal education program is going to assure that our kids can read? Is it going to assure that we get our high school students out of the 19th place out of 21 in terms of mathematics? I don't believe so. Our system is not working. If you want to know how well it is working, go back home. Ask the teachers in your local school district. Ask the principals in your local school district. Ask the parents at home. Ask the school board members. If you do that, I believe you will hear what I have heard, time and time again: They are tired of playing ``Mother, May I?'' with the Federal Government. They are tired of spending the time to fill out the forms for the grants, to comply and jump through the hoops that the Federal Government sets out for them, to write the reports and fill out the evaluation forms that are needed, only to have a competitive grant program run out at the end of 3 years. They are tired of playing ``Mother, May I?'' with the Federal Government. We have an opportunity to do something that I think is very significant. Instead of going down the road that is going to be proposed of another new Federal program, we ought to take the remedies out of the hands of the Federal Government. National mandates are meaningless for American schools. The problems must be addressed one school district, one school, at a time. Why not let classroom teachers, the parents, the administrators--instead of bureaucrats and politicians--make the decisions on how to improve the education in their school districts? Give more control back to local districts and let them build reading retention, math skills, and improve graduation rates. Mr. President, I am today introducing a bill we call the direct check for education bill. It takes six of the major Federal competitive grant programs--Goals 2000, School-to-Work, Education Technology, Innovative Education Program Strategies, the Fund for the Improvement of Education, and the President's 100,000 teachers program--and puts them into a pool. That pool is to be divided on the basis of the students--K through 12--on average daily attendance. And it is to be returned to those local school districts on the basis of the number of students they have. Very simple. Cut the Federal red tape. Let them use those education dollars. It starts off with a $3.5-million authorization, because we want to allow schools that already have competitive grants of multiyear tenure to complete those grants. At the end it will rise to $5 billion. It should come out to about $100 per student in every school--and turn the job back to the local schools, the parents, the teachers, the school board members, the administrators. There are those who oppose this approach. They argue that we need even more Federal control. But as I said at the beginning, while it is a national priority, education must be returned to the local school districts as a local responsibility, to empower the people who know the names of the kids, their problems, their challenges, and their opportunities, to make the decision. Let's keep things simple. Let's take off the Federal stranglehold. Let's let local schools do their jobs. Let's educate our children for a lifetime of achievement. Ask your teachers, your principals, your superintendents, your school board members; and then I ask my colleagues to join me in cosponsoring this legislation that Senator Ashcroft and I are introducing today. Mr. President, I ask unanimous consent that the text of the bill and common questions about the direct check for education bill be printed in the Record.

Mr. BOND

Mr. BOND. I thank the Chair. (The remarks of Mr. Bond pertaining to the introduction of S. 52 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'') Mr. DURBIN addressed the Chair.

Mr. BOND

Mr. BOND. Mr. President, as we start this 106th Congress, I think it is clear that education is going to be one of the top priorities we will address in this session of Congress. We are going to be working on the reauthorization of the Elementary and Secondary Education Act, and I believe all of us, on both sides, are saying that this is a national priority. As my colleague from Massachusetts, Senator John Kerry, said in a speech that he made at Northeastern University, ``Ever since there has been a United States of America, there have been public schools. And there has been a constant debate about how to make them work.'' I know that since I was elected to the United States Senate 12 years ago I have listened and participated in the many debates on public education that have occurred in this institution. I have even had some ideas of my own on how to improve education--some of which have been passed by this body and signed into law. My intentions, like those of my Senate colleagues--have been good intentions. We all share the same goal of providing our children with a great education. We have been trying to do the right thing. Today, however, our good intentions have mushroomed into burdensome regulations, unfunded mandates, and unwanted meddling. Parents, teachers, and local school officials have less and less control over what happens in the classroom. Instead of empowering parents, teachers, and local school officials we have empowered the federal government and bureaucrats. We have slowly eroded the opportunity for creativity and innovation on the local level and have once again established a system where supposedly the Olympians on the hill know what is best for the peasants in the valley. Mr. President, let me give you some examples of what our good intentions have gotten us. We have 760 education programs scattered throughout 39 different federal agencies. Vice President Gore's National Performance Review said that the Department of Education's discretionary grant process lasts 26 weeks and takes 487 steps from start to finish. The General Accounting Office has estimated that there are nearly 13,400 full-time jobs in the 50 states funded by the Department of Education with an additional 4,600 direct Department of Education employees. We have teachers being taken off the task of teaching, preparing lesson plans, taking on after school student activities, etc. and instead are researching for grant opportunities, reading regulations, preparing applications, filling out paperwork requirements, complying with cumbersome rules, and reporting on how they spend the federal money received. Or we have teachers and administrators deciding that the extra federal money is not worth the time and effort that it will take to get and comply with that they do not even bother to go through the process. Most of us are now aware of the Third International Mathematics and Science Study, released last year by the National Center for Education Statistics, that ranked American senior high school students 19th out of 21 industrialized nations in math, and 16th out of the same 21 countries in science. In addition, 40 percent of our Nation's fourth graders do not read at even a basic level. Colleges across this country are spending over $1 billion a year in remedial education. Is this acceptable? Are we satisfied with the status quo? The answer should be--must be--an unequivocal NO. In our business we pay a lot of attention to polls. For several years, the polls across the country have been telling us that we have a problem with public education. This is not new news and the question remains the same: How do we fix public education? Mr. President, before I provide my answer to that question I want to take this opportunity to read from an editorial from a home-state newspaper, the Southeast Missourian. Nearly a decade ago, then-President Bush and the nation's governors set a series of goals for America's schoolchildren in reading, math, graduation rates and other measures. But the national education goals panel says the nation's public schools will fall short of the goals for 2000. We can only hope these continued failures to improve education will result in a overthrow of the so-called experts. These are the people, usually far removed from the classroom, who embrace quick fixes and fads in the face of each hand-wringing report. Unfortunately, the fixes make the problems worse. What's needed is to return America's schools back to the basics and back to local teachers, administrators, school boards, and parents. Without a foundation in the basics, the rest of education just won't take. We must take so-called remedies out of the hands of the federal government. National mandates are meaningless for America's schools. The problem must be addressed one district and one school at a time. Why not let classroom teachers-- instead of bureaucrats and politicians--fashion a plan to improve learning in the classroom? Give more control to the local districts in building reading retention, math skills and graduation rates? Mr. President, the editorial goes on, but it ends with the following: The answer to fixing America's educational woes rests with individual school boards and passionate educators. The bureaucrats must reduce the red tape and mandates that are strangling our schools. Give those who know best the time, talent and incentives to finally fix public education. I agree with the Southeast Missourian. The answer to improving public education does not lie within the halls of Congress or in the granite buildings of the downtown Washington education establishment. As the editorial stated, we are ``far removed from the classroom.'' In my opinion, the real solutions--the laboratories--are local schools when they are given the opportunity to excel and not play the ``Mother, May I?'' game with Washington. Here in Congress we must not be afraid to propose change. But in proposing change we must go directly to those who can provide some answers--the teachers, principals, school administrators, school board members, and parents. For the past couple of years, I have done just that and have developed in conjunction with them the ``Direct Check for Education Act. Quite simply, the purpose of this bill is to consolidate six, primarily competitive grant programs of the Department of Education's programs. The programs are Goals 2000, School-to-Work, Education Technology, Innovative Education Program Strategies, Fund for the Improvement of Education, and the President's 100,000 teachers program. The bill then proposes to return the federal funding by issuing a ``Direct Check'' to the local school district based on the number of students in each district. The result would be a resource of flexible funding that would allow individual schools and parents to determine how best to use the funds, including the hiring of new teachers, additional classrooms, new textbooks, expanded technology initiatives, drug and alcohol prevention programs, etc. The list goes on and on. My ``Direct Check'' proposal is not the ``save-all'' answer. But the ``Direct Check'' will reduce the costly and time-consuming paperwork process that local school districts endure in obtaining federal grants and funding. It will treat children and schools the same by awarding funding to schools based upon the students served instead of rewarding some and penalizing others. My ``Direct Check for Education'' is a first step in simplifying and going ``back to the basics'' of education. Mr. President, there will be those in the Washington education establishment who will oppose this bill. Instead of finding ways to empower those at the local level the opposition will argue that we need even more federal programs, more bureaucracy, more micro management of the classroom. I believe the bottom line is this: Education, while a national priority, is a local responsibility. We must empower parents, teachers, school administrators, school boards, etc. because education decisions can best be made by people at the local schools who know the names and the challenges facing the students in those schools. Let's keep things simple. Let's take off the Federal stranglehold and let local school districts do their jobs. Let's educate our children for a lifetime of achievement. We have burdened it with excessive regulations and red tape. We have once again established a system where supposedly the ``olympians'' on the Hill know what is best for the ``peasants'' in the valley. I agree with my colleagues on both sides of the aisle: Education is and must be a national priority. But the good intentions that we have had in this body have led to the creation of more than 760 Federal education programs. Has that made education better? I don't think so. We added three more last year. And now we gather that the President is going to come up with a grand new Federal scheme. How many people really believe that the 764th Federal education program is going to assure that our kids can read? Is it going to assure that we get our high school students out of the 19th place out of 21 in terms of mathematics? I don't believe so. Our system is not working. If you want to know how well it is working, go back home. Ask the teachers in your local school district. Ask the principals in your local school district. Ask the parents at home. Ask the school board members. If you do that, I believe you will hear what I have heard, time and time again: They are tired of playing ``Mother, May I?'' with the Federal Government. They are tired of spending the time to fill out the forms for the grants, to comply and jump through the hoops that the Federal Government sets out for them, to write the reports and fill out the evaluation forms that are needed, only to have a competitive grant program run out at the end of 3 years. They are tired of playing ``Mother, May I?'' with the Federal Government. We have an opportunity to do something that I think is very significant. Instead of going down the road that is going to be proposed of another new Federal program, we ought to take the remedies out of the hands of the Federal Government. National mandates are meaningless for American schools. The problems must be addressed one school district, one school, at a time. Why not let classroom teachers, the parents, the administrators--instead of bureaucrats and politicians--make the decisions on how to improve the education in their school districts? Give more control back to local districts and let them build reading retention, math skills, and improve graduation rates. Mr. President, I am today introducing a bill we call the direct check for education bill. It takes six of the major Federal competitive grant programs--Goals 2000, School-to-Work, Education Technology, Innovative Education Program Strategies, the Fund for the Improvement of Education, and the President's 100,000 teachers program--and puts them into a pool. That pool is to be divided on the basis of the students--K through 12--on average daily attendance. And it is to be returned to those local school districts on the basis of the number of students they have. Very simple. Cut the Federal red tape. Let them use those education dollars. It starts off with a $3.5-million authorization, because we want to allow schools that already have competitive grants of multiyear tenure to complete those grants. At the end it will rise to $5 billion. It should come out to about $100 per student in every school--and turn the job back to the local schools, the parents, the teachers, the school board members, the administrators. There are those who oppose this approach. They argue that we need even more Federal control. But as I said at the beginning, while it is a national priority, education must be returned to the local school districts as a local responsibility, to empower the people who know the names of the kids, their problems, their challenges, and their opportunities, to make the decision. Let's keep things simple. Let's take off the Federal stranglehold. Let's let local schools do their jobs. Let's educate our children for a lifetime of achievement. Ask your teachers, your principals, your superintendents, your school board members; and then I ask my colleagues to join me in cosponsoring this legislation that Senator Ashcroft and I are introducing today. Mr. President, I ask unanimous consent that the text of the bill and common questions about the direct check for education bill be printed in the Record.

Mr. BOND

Mr. BOND. I thank the Chairman for the clarification.

Mr. BOND. I rise to engage the chairman of the committee in a colloquy to clarify a provision of the bill. Mr. Chairman, Section 8 of S. 2116 requires the Secretary of Agriculture to transfer up to 10 percent of the information technology or information resource management funds from each office or agency to the account of the Chief Information Officer. Some of my constituents have expressed concern that this transfer of funds may cause a reduction in the number of employees in an office or agency. A scenario has been brought forth where an office or agency finds it necessary to reduce the number of its employees, using a variety of methods, to facilitate the transfer of funds. Would the chairman address this point?

Mr. BOND

Mr. BOND. Mr. President, I thank the Senator from Delaware, Mr. Roth, for attempting to bring some resolution to the home health crisis before the end of this session and making much needed revisions to the Medicare home health interim payment system (IPS). I fully support delaying the automatic 15 percent reduction for one year, raising the cost limits to 110 percent of the median, and raising payments for new agencies. However, I still have serious reservations about a blend approach which reshuffles the deck chairs on the Titanic. It is imperative that we restore access to home health care for medically complex patients, and I look forward to working with my colleagues to address this issue in conference. At this time my distinguished colleague from Mississippi, Mr. Cochran, and I would like to engage the able Chair of the Senate Finance Committee, Mr. Roth, in a discussion about the problems that have resulted from IPS, and further action that the Senate must take to complete the work begun this year in this important area. Mr. President, there is not a single Member of the Senate or House of Representatives who has not become painfully aware of the serious problems that have arisen within the home health program over the last year. These problems stem from enactment of a temporary payment system that was recommended to us by the Health Care Financing Administration. The fact is that the so-called interim payment system (IPS) was untested, and, as we have found, made such swift and deep cuts in reimbursements, thereby hampering the ability of home care providers to serve needy patients and affecting access to care for some of the most frail, oldest, and poorest of our seniors and disabled. The IPS is the worse case of false economy that I've ever seen. If the elderly and disabled cannot get care at home, it's clear where they will go for care. Emergency room costs will rise, patients will go into more expensive institutionalized care, or patients simply won't get any care at all. In addition to increasing Medicare costs, there will be an explosion in Federal and State Medicaid budgets. I believe the Senator from Mississippi would agree that the problems brought about by IPS are significant.

Mr. BOND. Mr. President, I might add at this time that despite the fact that HCFA is responsible for this draconian system, HCFA has only offered technical assistance to address this crisis. HCFA must beheld accountable for this insane and inequitable system and face up to the fact that its system is wreaking havoc throughout our country. Clearly the program cannot continue under this scenario and continue to provide quality services to eligible individuals. Some of my colleagues may wonder how this all came about. Perhaps the Senator from Mississippi can provide some insight into this. Mr. Cochran. Mr. President, I thank my colleague. In addition to HCFA imposing an untested payment system with the home health IPS, the scoring mechanism used by CBO to estimate savings resulting from IPS included a \2/3\ behavioral offset. What this means is that CBO presumed that for every $3 saved under IPS, agencies would find some way, through expanding the number of beneficiaries they serve, to make up $2 of every $3 lost under IPS. What has become clear, as was indicated by the Senator from Missouri, CBO's behavioral assumptions about agencies increasing the number of beneficiaries served have not come to pass. Instead, we are seeing a near dismantling of the home care program as the result of IPS. We have already seen the devastating effects of the interim payment system in my state of Mississippi. While I applaud the Senate for its efforts to reform the interim payment system, we must commit ourselves to continuing this work as soon as the Senate reconvenes. I am particularly concerned that we must address the problems that will be created by the automatic 15% reduction in payment limits which we have agreed to delay one year. It took this distinguished body that long to reach the temporary solutions which we have before us today and we cannot put off deliberations on this additional cut until the last moment. Prudence dictates that we find ways to insure that any additional cuts in reimbursement not adversely affect efficient providers nor burden patients in their access to necessary home care services. Mr. Bond. Thank you for those insights Senator cochran. I fully agree that this must be a priority of the Senate to address as soon as possible. There are additional issues which also need to be addressed at that time, particularly how to reimburse those agencies which serve our nation's most medically complex patients. We have a moral obligation to ensure that our nation's seniors and disabled are provided the quality and comfortable care they deserve. In addition, we must look at provisions which require that the payment limits are prorated where a patient is served by more than one agency. It is my understanding that the Health Care Financing Administration is not capable of administering this provision, yet it is having impact on patient's access to care. The problem centers around the inability of a home health agency to properly manage its business when it does not know the ultimate payment limitation which it must budget. The home health agency has no way of knowing whether a patient has received services from another home health agency during the year and cannot possibly figure out whether its breaking even or going broke. While we do not want home health agencies to abuse the system through schemes that allow them to circumvent the limits by transferring patients, we also do not want to penalize patients and providers from the appropriate management of home care services. Another issue is the elimination of the periodic interim payment methodology scheduled for October, 1999. That termination date was chosen to coincide with implementation of prospective payment system, which we now know, will not be in operation at that stage. This Congress should recognize the need to continue that system until such time as a Prospective Payment System is in place. Mr. Cochran. Mr. President, I too am very concerned about the delay in the development and implementation of a PPS system. It is the only clear solution to deal with those complex patients who are having increasing difficulty in gaining access to home care services. If we cannot have PPS soon, we must find a way to better reimburse agencies which care for these high cost patients. Home health agencies in Mississippi report to me that this is one of the most important problems that must be addressed. At the same time, putting together a PPS program will do no good if we destroy the foundation of our home health services delivery system. As the result of IPS, I am told that home health agencies across the country will find some time in the middle of next year that they have likely been over paid by the Medicare program even though they delivered appropriate services to patients at a reasonable cost. This Congress must find a way to deal with that pending crisis in order to protect those home health agencies that met patient's needs yet still incurred costs beyond the arbitrary limits which were developed under IPS. Mr. Roth. Senator Bond and Senator Cochran, I thank you for your leadership within the Senate of these crucial issues affecting Medicare beneficiaries across the country. Through your assistance we hope to ensure that home health care is readily available where the needs arise. We will continue to explore fully those issues which you have raised. We will also draw on the resources of Medpac, HCFA, the GAO, and representatives from home care patients and providers to determine whether more work is required. Home health care is a crucial part of our health care system and the elderly and disabled protected by the Medicare program deserve the attention of this Congress to insure that we not disrupt this important benefit without a full and accurate understanding of the consequences. Once again, I thank Senator Bond and Senator Cochran for the guidance that they have offered to this body in addressing these important issues.

Mr. BOND

Mr. BOND. Mr. President, I rise today to pay tribute to Fontbonne College in St. Louis, Missouri. On October 15, 1998, Fontbonne College will celebrate its 75th anniversary. Fontbonne has served more than 10,000 graduates in pursuit of academic excellence. As Fontbonne moves toward the 21st century, it is looking to continue the ministry of higher education begun by the sisters of St. Joseph of Carondelet. Fontbonne's history goes back to seventeenth century France, the beginning of the Sisters of St. Joseph. In LePuy, France in 1647, six women under the direction of Jesuit priest Father Jean Pierre Medaille were brought together to dedicate their lives to the spiritual and material needs of the people. The order was publicly recognized as the Sisters of St. Joseph on October 15, 1650. Around 1778, Jeanne Fontbonne entered the congregation, received the name of Sister St. John Fontbonne, and later became the Mother Superior at Monistrol. With the violence of the French Revolution, the sisters were forced to disband. Several were imprisoned and executed. After the death of Robespierre, the day before Mother St. John was to be executed, she was released and asked to reform the congregation. In 1807, 12 women celebrated the rebirth of the Sisters of St. Joseph. Bishop Joseph Rosati of St. Louis asked Mother St. John to send sisters to the area to teach the deaf. Six sisters set sail for America and established its current home in Carondelet, on the southern border of St. Louis. A log cabin built on a bluff overlooking the Mississippi River became the ``cradle of the congregation of the Sisters of St. Joseph of Carondelet.'' The sisters opened a day school in the area, a school for deaf and a girl's high school. With these successes, the sisters discussed a new twentieth century idea--higher education of women. Fontbonne College was chartered on April 17, 1917, but the entrance of the United States in World War I in that year precluded the beginning of classes. Construction at the Clayton location started in 1924. The first Fontbonne class began in 1923 at St. Joseph's Academy. New buildings were ready for the fall term of 1925. On June 18, 1927, Fontbonne conferred its first bachelor of arts degree on eight women. Since its beginnings in 1923, Fontbonne has changed with and been ahead of the times, but has also kept its identity. Fontbonne admitted African American students in 1947, eight years before the Supreme Court's school desegregation decision. Male students were admitted in selective majors in 1971, then in 1974 all classes were opened to men and women. In the 1980s, Fontbonne created degree programs with flexible scheduling to meet the needs of working students. Now Fontbonne has its first male president. Today Fontbonne is deeply rooted in the tradition and values-- quality, respect, diversity, community, justice, service, faith and Catholic presence--of the Sisters of St. Joseph of Carondelet. I commend Fontbonne College staff and students for their dedication and perseverance throughout the college's many years of existence and hope they continue to enrich the St. Louis community for years to come.

Mr. BOND

Mr. BOND. Mr. President, I rise today to pay tribute to Elizabeth ``Bettie'' Mohart for her outstanding service to the United States Senate. Bettie was the Chief Clerk on the Senate Committee on Small Business, of which I am Chair. In the three and a half years that she was with the Committee, she helped to make it run smoothly and efficiently. When Sam Rayburn said ``you cannot be a leader, and ask other people to follow you, unless you know how to follow too,'' he could have been talking about Bettie Mohart. She started her service in 1969 with Senator Stuart Symington as a Staff Assistant, and then went to work for Senator Robert Byrd as a Staff Assistant in 1972. In 1974, Bettie left the Senate to pursue other endeavors, only to return in 1985 to work for Senator Jack Danforth. She was hired as a Staff Assistant for Senator Danforth's personal office and was later moved to the Senate Committee on Commerce, when he became Chair. He then asked Bettie to return to his personal office, as Office Manager, where she stayed until his retirement. In 1994, I was fortunate enough to be able to hire her for the Committee on Small Business where she remained until her departure. By the time Bettie came to work for me she had worked in just about every capacity, in the Senate, with the exception of Chief of Staff and Senator, which no doubt she could have handled. This experience made her, not only an asset to my Committee, but it also gave her the wisdom to manage the Small Business Committee office with a just hand. I thank Bettie for her many years of service to myself and to the United States Senate, and wish her the best of luck in the future.

Mr. BOND

Mr. BOND. Mr. President, I ask unanimous consent that the distinguished Senator from Maryland have an additional minute. I ask for an additional 3 minutes on this side to afford 2 minutes to my colleague from Ohio and a minute for myself to close.

Mr. BOND. I yield 7 minutes 30 seconds to the Senator from Florida. I will ask my colleague, if there is additional time remaining, if he might have 2\1/2\ minutes.

Mr. BOND. Mr. President, I concur with the statement by Senator D'Amato, the Chairman of the Senate Banking Committee. The conferees were mindful of the existing situation in New York City and have fully protected existing practice in the VA-HUD Appropriations Conference Report. No provision of the Act is intended in any way to interfere with or abrogate existing contracts for the use of assistance in New York City.

Mr. BOND. I am well aware that the New England region has had to make significant reductions in health care costs, in part because of the VA funding formula.

Mr. BOND. Yes, the Chair is aware of the financial constraints in New England.

Mr. BOND. I thank my colleague for his comments and have appreciated his input on worthwhile projects in Pennsylvania. I agree with his understanding that the conferees intend that Universal Community Homes is the appropriate applicant for the funds provided for a job training and business center Central and South Philadelphia. new england health system

Mr. BOND. Mr. President, I yield 2 minutes to the distinguished Senator from Ohio.

Mr. BOND. The Senator from Vermont is correct. All networks will receive some part of these additional funds, and these funds will help New England and all regions address some critical funding issues.