Step 1: Eliminate What We Don't Need

After World War II, a British commission on modernizing government discovered that the civil service was paying a full-time worker to light bonfires along the Dover cliffs if a Spanish Armada was sighted. The last Spanish Armada had been defeated some years before--in 1588, to be precise.

This story may be apocryphal. But not all such stories are. In Brooklyn, New York, there is a Federal Tea Room where a federal employee sips imported tea to test its quality. See Note 3 For one hundred years, taxpayers paid for the position. It was not until press coverage angered enough members of Congress that things were changed: now, tea importers pay to have their tea tested--although the taster remains a government employee.

These stories capture an essential truth about governments; they rarely abandon anything. Like the FAA that employed Bruce Bair to check the weather, federal agencies do many things not because they make sense, but because they have always been done that way. They become like the furniture: They are simply there.

Other programs are not so much obsolete as duplicative. When confronted with new problems, we instinctively create new programs. But we seldom eliminate the old programs that have failed us in the first place. Still other programs were never needed in the first place. They were created to benefit influential industries or interest groups. The National Performance Review has targeted several programs in each of these categories for immediate elimination.

Although we make specific recommendations in the pages that follow, we believe the government must tackle the problem systematically. The single best method would be to give the President greater power to eliminate pork that creeps into federal budgets.

Action: Give the President greater power to cut items from spending bills.

See Note 4

Today, the President's powers to cut spending are limited--more limited than most of the nation's fifty governors. He can either sign or veto appropriations bills; he can't veto individual items--a power most governors have. For the President to cut wasteful spending, he needs the power of what is called, in Washington, "expedited rescission." Under current law, the President can submit proposed rescissions to Congress, which then has 45 legislative days to act. If Congress does not act, proposals are rejected. The President should have greater authority to reject individual items.

Broader rescission powers were envisioned in HR 1578, which the House passed in late April 1993. This bill would force Congress to vote on the President's proposals to cancel funding, rather than let it kill those requests by ignoring them, as under current procedures. If enacted, the new procedure would, as President Clinton wrote in a letter to House Speaker Thomas S. Foley, "provide an effective means for curbing unnecessary or inappropriate expenditures without blocking enactment of critical appropriations bills."

Eliminate the Obsolete

Not all employees of useless programs act with Bruce Bair's forthrightness. But that doesn't mean their offices or programs are any more useful. The vast nationwide network of 30,000 federal government offices, for example, reflects an era when America was a rural country and the word "telecommunications" was not yet in the dictionary. While circumstances have changed, the government hasn't. As a result, workloads are unevenly distributed--some field offices are underworked, others are overworked, some are located too far from their customers to serve them well, and few are connected to customers through modern communications systems.

Action: Within 18 months, the President's Management Council will review and submit to Congress a report on closing and consolidating federal civilian facilities.

See Note 5

All agencies will develop strategies to cut back or consolidate their field office systems in ways that are compatible with our principle of better services to customers. The President's Management Council will submit the report to Congress within 18 months showing which offices may be closed, which can be consolidated and which can be slimmed. We urge Congress to act quickly on this package.

This is a precious opportunity to make fundamental change in government. I look forward to working together on areas of mutual agreement.

U.S. Rep. William F. Clinger (R. Penn.)

We are confident that the savings will be large because several agencies are already committed to far-reaching reforms in their field office systems. Their efforts will be models for those that haven't moved as quickly as they prepare their plans for the President's Management Council.

Action: The Department of Agriculture will close or consolidate 1,200 field offices.

See Note 6

The Department of Agriculture (USDA) operates the most elaborate and extensive set of field offices--more than 12,000 across the country. Under Secretary Mike Espy's leadership, the department is planning dramatic reforms. USDA runs 250 programs in such vital but diverse areas as farm productivity, nutrition, food safety, and conservation. Its focus has shifted dramatically since the 1930s, when its present structure evolved: 60 percent of its budget now deals with nutrition; less than 30 percent with agriculture.

As the basis for reorganization, USDA will concentrate its activities on six key functions: commodity programs, rural development, nutrition, conservation, food quality, and research. This focus will allow it to consolidate from 42 to 30 agencies and from 14 to six support staffs, cutting administrative costs by more than $200 million over five years.

As part of this process, USDA will consolidate or close about 1,200 field offices within the Agricultural Stabilization and Conservation Service, the Soil Conservation Service, the Farmers Home Administration, the Cooperative Extension System, and the Federal Crop Insurance Corporation. Some of these offices now serve suburban counties, others have few rural customers left. In 1991, the General Accounting Office reported that in Gregg County, Texas, the Agricultural Stabilization and Conservation Service office served only 15 farmers; in Douglass County, Georgia, two USDA programs served a total of 17 farmers. See Note 7

Field office closings will be determined by a six-part scoring system developed to evaluate each office. Once in place, this restructuring will save more than $1.6 billion over five years and eliminate the equivalent of 7,500 full time employees. Customers will be better served because operations will be combined in multi-purpose USDA field service offices.

Action: The Department of Housing and Urban Development will streamline its regional office system.

See Note 8

The Department of Housing and Urban Development (HUD) has also developed a strategy to close offices without cutting customer services. Roughly 10,000 of HUD's 13,500 employees work in field offices, but their workloads vary: the New York regional office monitors 238,000 federal public housing units, the Seattle office only 30,000 units. Management restructuring, described in the previous chapter, will streamline HUD's field operations. See Note 9 Under a five-year plan, HUD will eliminate all regional offices, pare down its 80-field office system, and cut its field staff by 1,500 people.

Action: The Department of Energy will consolidate and redirect the mission of its laboratories, production, and testing facilities to meet post-Cold War national priorities.

See Note 10

For the first time in 50 years, the United States is not engaged in producing or testing nuclear weapons. Significant reductions in funding for these programs are already underway--$1.25 billion in fiscal year 1994 alone. Yet, the Department of Energy's weapons laboratories and production plants represent an irreplaceable investment in world-class research and development, intellectual, and computing capabilities, carefully cultivated over five decades. As the department redirects its facilities, the challenge is to eliminate unnecessary activities, while shifting appropriate resources to meet non-defense objectives.

Under Secretary of Energy Hazel O'Leary's leadership, DOE will review its labs, weapons production facilities, and testing sites in the context of its mission--and will recommend the phased consolidation or closure of obsolete or redundant facilities. The secretary will also identify facilities that other government agencies may find useful, encourage laboratory managers to bid on contracts with other agencies, and increase cooperation with the private sector.

Action: The U.S. Army Corps of Engineers will reduce the number of regional offices.

See Note 11

The U.S. Army Corps of Engineers, too, has a plan: it will cut its divisional offices from 11 to 6. It cannot, however, close district offices because Congress prevented such actions by law--an example of costly congressional micro-managing. The Corps has carried out the nation's largest civil works projects. But its role is changing: Fewer large projects, more complex environmental projects.

Action: The Small Business Administration will reduce the number of field offices and consolidate services.

See Note 12

The Small Business Administration is developing criteria for consolidating field offices based on the customer load. It has already demonstrated in pilot programs how to cut local office staff by providing routine loan servicing for several local SBA offices and by adopting automated procedures for processing applications for the agency's many different loan programs.

Action: The U.S. Agency for International Development will reduce the number of its overseas missions.

See Note 13

With the dramatic changes in U.S. foreign policy, agencies with overseas operations are rethinking their responsibilities. J. Brian Atwood, administrator for the U.S. Agency for International Development (AID), believes the number of countries in which his agency operates missions can be cut from 105 to perhaps 50. Cuts will be made in the number of missions in developed countries so that the agency's efforts can focus on those nations that can't absorb or manage assistance or on truly underdeveloped countries.

Action: The United States Information Agency will cut the number of libraries and reference centers it pays for overseas.

See Note 14

Savings are also possible in overseas facilities maintained by the United States Information Agency. USIA maintains libraries and other facilities in many developed countries, as well as in emerging countries. While facilities in the latter are often crowded, those in developed countries attract few customers: In Canada, for example, a USIA library attracted only 568 walk-in visitors in a year. Eliminating some of these facilities or turning them over to their host countries could save an estimated $51.5 million through 1999.15

We'll challenge the basic assumptions of every program, asking does it work, does it provide quality service, does it encourage innovation and reward hard work. If the answer is no, or it there's a better way to do it or if there's something that the federal government is doing, it should simply stop doing, we'll try to make the changes needed."

President Bill Clinton

Announcement of initiative to streamline government March 3, 1993

Action: The Department of State will reduce by 11 the number of Marine Guard detachments it employs.

See Note 16

By consolidating the storage of top secret documents in overseas missions, the Department of State can reduce the need for Marine Guard detachments. The Bureau of Diplomatic Security has identified 11 posts where the Marine Security Guard program could be eliminated simply by moving documents to other places.

Action: Pass legislation to allow the sale of the Alaska Power Administration.

See Note 17

The federal government once played a crucial role in financing, developing and operating the Alaska Power Administration (APA). No longer. APA was created to encourage economic development in Alaska by making low-cost hydro-power available to industry and to residential customers. The project has succeeded and can now be turned over to local ownership.

The federal government retains four other Power Marketing Administrations (PMAs) which own hydropower facilities and sell the power they generate to public, private, and cooperative utilities at cost. These PMAs serve customers spread throughout many states, so the facilities cannot easily be sold to a local entity. APA, on the other hand, is unique: Its facilities and customers are located in a single state. Various public agencies have already urged the federal government to sell the APA facilities. APA signed purchase agreements to do so before 1993.

The sale is supported by state and local officials, Alaska's congressional delegation, the Energy Department, the Office of Management and Budget and the House Appropriations Committee. But Congress has yet to pass the necessary authorizing legislation. We urge it to do so. The sale would bring $52.5 million into the U.S. Treasury and save millions more in yearly operating costs.

Action: Terminate federal grant funding for Federal Aviation Administration higher education programs.

See Note 18

Success has rendered two FAA federal subsidies obsolete. They have met the objectives for which they were established and can now be terminated. For example, in 1982, the Federal Aviation Administration (FAA) launched a program to improve the development and teaching of aviation curricula at universities and other post-secondary schools. The goal was to produce graduates better prepared for jobs in the industry.

So far, the FAA has spent about $4 million on consultants to upgrade schools' programs and another $100 million was appropriated--most at Congress' insistence not at FAA's request--to be given out in grants so that the schools could buy better facilities and equipment. Many schools now offer high quality aviation training programs without support from the FAA. Since $45 million of the appropriation remains unspent, stopping the program now can save this money.

Another program we no longer need is the Collegiate Training Initiative for Air Traffic Controllers. It was set up to determine whether other institutions could offer the same quality training for controllers as the FAA Academy does. If they could, it would save the government the $20,000 it costs to train each new controller at the academy. The answer is clearly yes. Five schools participating in the program are producing well-qualified controllers, although only two are receiving government subsidies. It is now time to phase out these remaining subsidies.

Action: Close the Uniformed Services University of the Health Sciences.

See Note 19

The Department of Defense once faced shortages of medical personnel, particularly of physicians. So, in 1972, Congress created the Uniformed Services University of the Health Sciences (USUHS). Today, USUHS provides less than 10 percent of the services' physicians at a cost much higher than other programs: USUHS physicians cost the federal government $562,000 each, while subsidies under the Health Professionals Scholarship Program cost only $111,000 per physician. Closing the facility and relying on the scholarship program and volunteers would save DOD $300 million over five years.

Action: Suspend the acquisition of new federal office space.

See Note 20

Over the next 5 years, the federal government is slated to spend more than $800 million a year acquiring new federal office space and courthouses. Under current conditions, however, those acquisitions don't make sense.

The federal workforce is being reduced, the Resolution Trust Corporation is disposing of real estate once held by failed savings and loans at 10 to 50 cents on the dollar, commercial office vacancy rates are running in the 10 to 25 percent range, and U.S. military bases are being closed. All of these factors suggest that the government has many potential sources for office space without buying any more buildings.

The GSA administrator will place an immediate hold on GSA's acquisition--through construction, purchase, or lease--of net new office space. The administrator will begin aggressive negotiations for existing and new leases to further reduce costs. And GSA will reevaluate and reduce the costs of new courthouse construction. These actions should save at least $2 billion over the next 5 years.

Eliminate Duplication

Government programs accumulate like coral reefs--the slow and unplanned accretion of tens of thousands of ideas, legislative actions, and administrative initiatives. But, as a participant at the Vice President's HUD meeting told us, "There isn't always a rational basis for the way we are set up in this organization. Over the years, branches have developed; they have been taken over by divisions; and we don't look at the organization as a whole." Now we must clear our way through these reefs.

The National Performance Review has looked at government as a whole. We have identified many areas of duplication. What follow are recommendations for the first round of cuts and consolidations.

Action: Eliminate the President's Intelligence Oversight Board.

See Note 21

No branch of government--including the Executive Office of the President--is free of duplication. We will begin the streamlining process in the EOP, where there are two groups intended to oversee intelligence--tripping over each other and allowing some issues to fall through jurisdictional cracks. The President, by directive, should terminate the President's Intelligence Oversight Board and assign its functions to a standing committee of the President's Foreign Intelligence Advisory Board.

Action: Consolidate training programs for unemployed people.

See Note 22

Government's response to changing circumstance often creates duplication. As the economy has evolved, for example, we have created at least four major programs to help laid-off workers: the Economic Dislocation and Worker Adjustment Assistance Act (EDWAA), which spends $517 million annually for those who lose their jobs through plant closings or major layoffs; the Trade Adjustment Assistance program (TAA), which distributes $170 million through State Employment Security Agencies for those who lose jobs due to increased imports; the Defense Conversion Adjustment program, which dispenses $150 million for those unemployed because of defense cuts; and a program that allocates $50 million for those unemployed due to the enforcement of new clean air standards. Even more programs are in the pipeline.

But multiple programs aimed at common goals don't work well. Administrative overhead is doubled and services suffer. Because each training program is intended to help people rendered jobless for different reasons, people seeking work must wait for help until the government determines which program they are eligible for. The process is slow. The General Accounting Office estimates that less than one-tenth of TAA-eligible workers receive any benefits within 15 weeks of losing their jobs, for example. See Note 23

The unemployed care less about why they lost their jobs than about enrolling in training programs or finding other jobs. Labor Secretary Robert Reich is proposing legislative changes to consolidate programs for workers who lose their jobs, regardless of the cause. His bill would also allow more funds to be used before workers lose their jobs. In Chapter 1, we recommend the consolidation of 20 education, employment, and training programs. We urge Congress to support both initiatives.

Action: Consolidate the Veterans' Employment and Training Service and the Food Stamp Training Program into the Employment and Training Administration.

See Note 24

Several training programs offer similar services through the same offices--sometimes even using the same employees--but requiring separate management and reporting systems. We can cut bureaucracy and paperwork while improving services to the customer by merging these programs.

Consider the case of the Veterans' Employment and Training Service (VETS) in the Department of Labor (DOL). Another operation in DOL, the Employment and Training Administration (ETA), funds local Employment Services, which, in turn, house staff dedicated to providing veterans with advice on training programs. But these staff are legally prohibited from serving non-veterans. So, if a local office is crowded with non-veterans, these specialists cannot help out--even if they have no veterans to serve. Moving VETS into the ETA will generate much greater efficiency in the use of staff, leading to shorter lines and better service.

We also recommend moving the Food Stamp Training Program into the ETA. Most training under the program is already performed under contract by ETA staff, by the Employment Service, or by local education institutions. Overall, ETA can offer poor people a much more comprehensive range of job-search and training services than can the Food Stamp Training Program.

Action: Reduce the number of Department of Education programs from 230 to 189

See Note 25

The nation's concern with education has led to an explosion of programs at all levels of government. The Education Department now funds 230 programs, many of which overlap. Since many are grants to state and local governments, we face duplication in triplicate--multiple administrative systems at all levels of government.

Of these 230 programs, 160 will award money through 245 different national competitions this year. The cumbersome administrative systems divert money from activities more central to the department's mission. These programs should be reduced in number and their procedures streamlined.

The department has begun reforming and streamlining programs, particularly those under the Elementary and Secondary Education Act. This will make it easier for schools to get the money without jumping through so many bureaucratic hoops. We propose to eliminate and consolidate more programs that have served their original purpose or would be more appropriately funded through non-federal sources. The savings, as much as $515 million over 6 years, can be better used for other departmental priorities. For example:

The department administers two programs--the National Academy of Space, Science, and Technology program and the National Science Scholars program--that give scholarships to post-secondary math, science, and engineering students. These two should be combined.

State Student Incentives Grants were created to encourage states to develop needs-based student aid programs. Since all states now have their own programs, the federal program is no longer needed.

The Research Libraries' program funds research libraries to build their collections. University endowments could and should support these efforts, without federal subsidy.

Action: Eliminate the Food Safety and Inspection Service as a separate agency by consolidating all food safety responsibilities under the Food and Drug Administration.

See Note 26

Sometimes duplication among federal programs can make us ill--even kill us. Take the way we inspect food for contamination. Several agencies are involved, each operating under separate legislation, with different standards, and with staff trained in different procedures. In 1992, the Food and Drug Administration (FDA)--part of the Department of Health and Human Services--devoted about 255 staff years to inspecting 53,000 food stores, while the Food Safety and Inspection Service (FSIS)--part of the Department of Agriculture--devoted 9,000 staff years to inspecting 6,100 food processing plants.

But this duplication doesn't mean that we cover all sources of contamination thoroughly. Meat and poultry products must be inspected daily, while shellfish, which have the same risk of causing food borne illness, are not required by law to be federally inspected. Too many items fall through the bureaucratic cracks. Not only that, enforcement powers vary among the different agencies. If the FDA finds unsanitary plant conditions or contaminated products, compliance is usually voluntary because the agency lacks FSIS's powers to close plants or seize or detain suspect or known contaminated products. And if one agency refers a problem to another, follow up is at best slow and at worst ignored. See Note 27

With no fewer than 21 agencies engaged in research on food safety, often duplicating each other's efforts, we aren't progressing fast enough in understanding and overcoming life-threatening illness. As recent and fatal outbreaks of food-borne illness attest, multiple agencies aren't adequately protecting Americans.

Under our recommended streamlining, the FDA would handle all food safety regulations and inspection, spanning the work of the many different agencies now involved. The new FDA would have the power to require all food processing plants to identify the danger points in their processes on which safety inspections would focus. Where and how inspections are carried out, not the number or frequency of inspections, determines the efficiency of the system.

The FDA would also develop rigorous, scientifically based systems for conducting inspections. Today, we rely, primarily, on inspection by touch, sight, and smell. Modern technology allows more reliable methods. We should employ the full power of modern technology to detect the presence of microbes, giving Americans the best possible protection. Wherever possible, reporting should be automated so that high-risk foods and high-risk food processors can be found quickly. Enforcement powers should be uniform for all types of foods, with incentives built in to reward businesses with strong safety records.

Action: Consolidate non-military international broadcasting.

See Note 28

The U.S. government funds several overseas broadcasting services--including those operated by the United States Information Agency's Bureau of Broadcasting, which accounts for one-third of the agency's $1.2 billion budget, and services such as Radio Free Europe and Radio Liberty, which have budgets totalling $220 million a year. All non-military international broadcasting services should be consolidated under the USIA. Part of this was propsed in the President's budget request for fiscal year 1994.

Action: Create a single civilian polar satellite system.

See Note 29

Collecting temperature, moisture, and other weather and environmental information from polar satellites is a vital task, both for weather forecasting and for global climate studies. But we have two different systems, one run by the Department of Defense and the other by the National Oceanic and Atmospheric Administration. On top of this, the National Aeronautics and Space Administration is planning a third. Over the next ten years these three systems will cost taxpayers about $6 billion. Congress should enact legislation requiring these agencies to consolidate their efforts into a single system, saving as much as $1.3 billion over the same period.

Action: Transfer the functions of the Railroad Retirement Benefits Board to other agencies.

See Note 30

The government can operate with fewer pension management systems. In 1934, Congress set up the Railroad Retirement Board to protect railroad workers in the face of financial problems, to allow workers to transfer among railroads, and to encourage early retirement to create jobs for the millions of younger workers. In those days, the huge national public pension system, Social Security, was not yet in place; neither were the state-federal unemployment insurance systems nor Medicare.

Today, it makes no sense for a separate agency to administer benefits for a single industry. Social Security Administration can administer social security benefits for railroad workers as it administers them for everyone else; unemployment insurance systems can serve unemployed railroad workers as well as it serves other unemployed people; and the Health Care Financing Administration can incorporate railroad workers' health care benefits into the Medicare system. See Note 31

Action: Transfer law enforcement functions of the Drug Enforcement Administration and the Bureau of Alcohol, Tobacco, and Firearms to the Federal Bureau of Investigation.

See Note 32

More than 140 federal agencies are responsible for enforcing 4,100 federal criminal laws. Most federal crimes involve violations of several laws and fall under the jurisdiction of several agencies; a drug case may involve violations of financial, firearms, immigration and customs laws, as well as drug statutes. Unfortunately, too many cooks spoil the broth. Agencies squabble over turf, fail to cooperate, or delay matters while attempting to agree on common policies.

The first step in consolidating law enforcement efforts will be major structural changes to integrate drug enforcement efforts of the DEA and FBI. This will create savings in administrative and support functions such as laboratories, legal services, training facilities, and administration. Most important, the federal government will get a much more powerful weapon in its fight against crime.

When this has been successfully accomplished, we will move toward combining the enforcement functions of the Bureau of Alcohol, Tobacco and Firearms (BATF) into the FBI and merge BATF's regulatory and revenue functions into the IRS. BATF was originally created as a revenue collection agency but, as the war on drugs escalated, it was drafted into the law enforcement business. We believe that war would be waged most successfully under the auspices of a single federal agency.

Eliminate Special Interest Privileges

Some programs were never needed. They exist only because powerful special interest groups succeeded in pushing them through Congress. Claiming to pursue national objectives, Congress, at times, funds programs that guarantee profits to specific industries by restricting imports, raising prices, or paying direct and unnecessary subsidies.

Special interest groups come in all shapes and sizes and their privileges are as diverse. Producers of crops, residents of certain areas, and holders of some occupations have all succeeded in persuading Congress that their needs are special and their claim on special treatment is deserving.

Action: Eliminate federal support payments for wool and mohair.

See Note 33

During World War II and the Korean conflict, the U.S. was forced to import about half the wool needed for military uniforms. To cut dependence on foreign suppliers, Congress in 1954 passed the National Wool Act, providing direct payments to American wool producers. The more wool a producer sold, the greater the government subsidy. In 1960, the Pentagon removed wool from its list of strategic materials. But the Wool Act remained in effect--a tribute to adept lobbying.

Between 1994 and 1999, wool subsidies will cost an estimated $923 million. About half the payments will go to ranchers who raise Angora goats for mohair--a product that is 80 percent exported. So American taxpayers will subsidize the price of mohair sweaters overseas! In some years, subsidies provide more income than sales. The 1990 mohair checks, for example, totalled $3.87 for every dollar's worth of mohair sold.

Today, about half the beneficiaries receive only $44 a year each. But the top one percent of sheep raisers capture a quarter of the money--nearly $100,000 each. The national interest does not require this program. It provides an unnecessary subsidy for the wealthy.

Action: Eliminate federal price supports for honey.

See Note 34

World War II also brought us federal subsidies for honey production. During the war, honey was declared essential because the military used bees' wax to wrap ammunition, and citizens replaced rationed sugar with honey. When honey prices dropped after the war, the federal government began subsidizing honey production.

The program was intended to be temporary--to last until there were enough honeybees available for pollination. But more than 40 years later, every bee keeper in the U.S. is eligible for federal loans. In 1992, the federal government paid 7 cents a pound more to borrow money than it charged bee keepers. Taxpayers paid the difference. If it were to scrap the program, Congress would save taxpayers $15 million over the next six years.

Action: Rescind all unobligated contract authority and appropriations for existing highway demonstration projects.

See Note 35

The practice of directing federal highway funds toward spending on specific demonstration projects--and away from regular state-level allocations--is increasing. This is not, for several reasons, a good trend.

In 1991, the General Accounting Office (GAO) examined the contributions of demonstration projects--which range from paving a gravel road to building a multi-lane highway--to the nation's overall highway needs. Looking specifically at the $1.3 billion authorized to fund 152 projects under the 1987 Surface Transportation and Uniform Relocation and Assistance Act, GAO found that "most of the projects...did not respond to states' and regions' most critical federal-aid needs." Indeed, in more than half the cases, the projects weren't even included in regional and state plan--typically because officials believed the projects would provide only limited benefits. GAO also discovered that 10 projects--worth $31 million in demonstration funds--were for local roads not even entitled to receive federal highway funding. In other words, many highway demonstration projects are little more than federal pork.

Perhaps even worse, there's no guarantee that all these highway demonstration projects, once started, will ever be finished. GAO noted that project completion costs will greatly exceed authorized federal and state contributions, and that state officials are uncertain where they will find more funding. Further, only 36 percent of the project funds GAO reviewed had even been obligated by the beginning of fiscal year 1991, even though they were authorized in 1987. Some projects with no activity since 1987 may never use their funds. Finally, no federal provisions allow for canceling or redirecting funds, nor can states redirect demonstration funds to other transportation projects. See Note 36

We urge Congress to rescind all unobligated authority and appropriations for highway demonstration projects. Some of the savings would go to the taxpayers. We recommend that all highway projects be forced to compete for any remaining savings through the normal allocation and planning processes set up in more recent legislation.

Action: Cut Essential Air Service subsidies.

See Note 37

Sometimes, to push through controversial changes, Congress grants affected groups special privileges. This was the case when airlines were deregulated in 1978. Because people living in small towns feared the loss of air service, Congress created the Essential Air Service program. The program guaranteed continue services for a decade--with federal subsidies if necessary. The purpose was to allow these communities to learn to live in a deregulated environment. But the program didn't end in 1988 as scheduled. Quite the opposite. Congress extended it for another ten years and its budget has grown- -from $30.6 million in 1988 to $38.6 million in 1993.

The program is unneeded: 25 subsidized communities are less than 75 miles from hub airports. It is also costly: nine locations, receiving $3 million in subsidies in 1992, carried five or fewer passengers a day--one community, only 60 miles from a hub airport, received subsidies averaging $433 per passenger.

Opposition to the program is rising. The Transportation Department's Inspector General has concluded that the program's costs outweigh its benefits. And after many years of resistance, a Congressional subcommittee agreed this year that the program lacks merit-based criteria. It's time to prune these subsidies. We recommend eliminating subsidies to locations in the 48 contiguous states within 70 miles of a hub airport; limiting subsidies to no more than $200 a passenger, and giving the Transportation Department authority to establish more restrictive criteria over time. This would save $13 million a year.