old papal states, certainly financed fine art in what is now Italy. And this was a government function also. So I think there is a role for government in the arts. I think there's a very important role for government in the arts. And you have expressed that very, very well.

Selections will not always be perfect. They will not always be desirable. And from time to time, there might be even an outrageous one and one that I would take severe exception to. But there is a very positive role for government in the arts.

And it wasn't the U.S. government or the NEA that started this. Throughout the history of mankind, we find a role of government in the arts, a very positive role, both in Western civilization and in Asian civilization.

My own post office in Flint, Michigan was built in the heart of the Depression under Franklin D. Roosevelt. It has wonderful art works in there which kept artists working during that miserable time when I was growing up. That was very important.

So I think there is a role of government for the arts. We shouldn't let the Philistines beat us down in this, and we should really defend ourselves and say there is a positive role.

I thank you for what you're doing.

Ms. Alexander. Thank you.

Mr. Hoekstra. I want to talk a little bit about some of the administrative portions of the agency. I think there is widespread debate about whether the National Endowment is the catalyst for the growth in the arts industry. And I'm not going to get into that debate at this point in time.

In 1996, the NEA allocated about $25 million to state and regional arts programs. Is that correct?

Ms. Alexander. Would you repeat the

Mr. Hoekstra. In 1996, the NEA allocated about $25 million of its federal appropriation to state and regional arts programs. Is that about correct? Is that a ballpark number, state art agencies?

Ms. Alexander. Yes.

Mr. Hoekstra. That money is distributed by formula?

Ms. Alexander. Yes.

Mr. Hoekstra. Okay. You also reported, I think, a couple of weeks ago to Senator Hutchinson that state art agencies have an average administrative cost of around 21 percent. Is that correct?

Ms. Alexander. Yes.

Mr. Hoekstra. You reported for the NEA that you had about 18.7 million in administrative costs in 1996. Is that about accurate? And you also carried about $11 million forward into 1997. Is that correct? You did not spend all of your funding?

Ms. Alexander. That's correct.

Mr. Hoekstra. We kind of put that together in a chart, and the chart is over here. One of the things that we took a look at with that chart is that we tried to figure out how much of the $99 million is actually going to get to an artist. And it looks like it's about 73 million out of the 99 million will ever get to any artist, which is about 25 percent that is lost in bureaucracy.

We have reviewed the administrative costs of the top ten private foundations. They find that their administrative costs are about ten percent. They manage billion-dollar endowments.

Why are we at 25 percent here total of getting

Ms. Alexander. I don't fully understand how you compute 25 percent when our administrative budget is 18.

Mr. Hoekstra. 18.7. And then you distribute about $25 million directly to the state art agencies.

Ms. Alexander. Those are basic state grants.

Mr. Hoekstra. Basic state grants. You distribute them by formula. I'm assuming that you get the amount, you put it in the formula, and that's one person writing checks for a morning. I'm assuming that there's not much administration with those. But when they get to the state agencies, they have to do their administration, which you said, which was about 21 percent.

Ms. Alexander. But the state arts agencies disseminate the money to artists and arts organizations.

Mr. Hoekstra. At a cost of about 21 percent in bureaucracy according to your numbers. I'm just saying it appears that the system that we have set up, we're losing about 25 percent in bureaucracy.

that.

You can take a look at the numbers. And if you disagree with that, we can go on. You can come back to

Ms. Alexander. Well, excuse me, Mr. Chairman.

Mr. Hoekstra. Yes.

Ms. Alexander. The state appropriations themselves make up 270 million or more. So that has to be factored in as well.

Mr. Hoekstra. We're just talking about the federal appropriations. And on average state arts agencies you said have a administrative overhead portion of 21 percent, which means I'm assuming that when we give them federal dollars, a portion of that federal dollars is going to administration, which is about 21 percent.

Ms. Alexander. It varies from state to state what they do with the money.

Mr. Hoekstra. Right. I know in Michigan, the percentage is down to eight percent, which I think is wonderful. In terms of the administrative cost, I'm taking a look at your computer costs. In 1995, we have numbers. You spend about $810,000 in 1995. Is that correct?

Ms. Alexander. Yes.

Mr. Hoekstra. Eight hundred and ten thousand in 1996?

Ms. Alexander. Yes.

Mr. Hoekstra. Nineteen ninety-seven, 600,000?

Ms. Alexander. Yes.

Mr. Hoekstra. Nineteen ninety-eight, you're asking for another $700,000?

Ms. Alexander. Yes.

Mr. Hoekstra. And how many employees do you have?

Ms. Alexander. We have about 149 now. But, if I may explain, it's not just computer replacements. We

Mr. Hoekstra. This is $21,000 per employee. Yes. Go ahead.

Ms. Alexander. This is our whole information management system and our grants management system. We have been operating with a Wang COBOL system. And Wang filed for Chapter 11 back in 1992. It is not an efficient system. It is not an efficient way to serve the American people. We are overhauling all of it.

And it involves computer replacement as well, but that's a very small part of it. To just call it a computer replacement system does not do justice to what we're trying to do with our new technological system.

Mr. Hoekstra. Does the technological system allow you to have e-mail today?

Ms. Alexander. No, we don't have any e-mail. We don't have any Internet access for most of our employees. I have it personally. A few others in the agency do.

Mr. Hoekstra. And you're asking for more yet. Okay. It just seems like a lot of money.

Ms. Alexander. We don't have it any of it wired up yet, sir. A lot of this is just putting in the facilities and the equipment. And then we have to get off the Wang system.

Mr. Hoekstra. You spent $21,000 or close to $21,000 per employee, and you're not even wired up yet?

Ms. Alexander. That's correct.

Mr. Hoekstra. Whoa. That's a lot of money. When do you expect to be wired up? And how much more money will it take?

Ms. Alexander. Well, we expect very soon that we will have a local area network system, which all our employees will be on. And then migrating from the Wang will be happening in the next two years.

Mr. Hoekstra. Are you looking for another $700,000 or $800,000 in 1999?

Ms. Alexander. That's correct, sir. This is the cost of these things today.

Mr. Hoekstra. Well, if you add another $900,000 on in 1999, you're getting to a lot of dollars. I'm not sure we're getting much value for those yet.

Ms. Alexander. This handles all of our grants, sir. They come in from all over the United States of America, thousands and thousands and thousands of applications for grants. It also handles all of our information systems.

This is not just for each individual employee. I don't think you can look at it that way.

Mr. Hoekstra. I know that. But you're also distributing a good portion of your money just by formula grants, where you don't have to go through the process, where you're giving a good amount to just states and state art agencies and regional art agencies.

I want to ask another question about the-we have some material here. What kind of cooperation,
you have with the Department of Education?

cooperative program do

Ms. Alexander. We have several partnerships with the Department of Education.

Mr. Hoekstra. How would you be involved with direct lending?

Ms. Alexander. With what?

Mr. Hoekstra. With the Direct Lending Program. We have

Ms. Alexander. We're not involved with the Direct Lending Program, to my knowledge.

Mr. Hoekstra. Here's a federal Direct Student Loan Program, "Why direct? Why now?" I'm not sure if it was an arts program that funded that development. We're just confused as to why the application for a federal Direct Student Loan Program, the postage would be paid for the National Endowment for the Arts.

Ms. Alexander. I believe the Design Program helped design the brochure.

Mr. Hoekstra. Why would you be paying for your bulk postage, your bulk rate for an application for the federal Direct Student Loan Program? I haven't seen the documents.

Ms. Alexander. I'd like to respond for the record, sir.

Mr. Hoekstra. If you want to see it, we're just-this is the only copy that we've got, but if you want to take a closer look, we can make copies of that and see exactly what

Mr. Castle. A point of order, Mr. Chairman.

Mr. Hoekstra. Yes?

Mr. Castle. Do we have copies up here for the members? I can't see these charts. Can we put those charts so that we can see them, either one?

Ms. Alexander. I'll have to get back to you on this.

Mr. Castle. Now you need about 40 feet closer. I'd better come down and look at them.

Mr. Hoekstra. Yes. We'll make copies of the actual documents. We'll take that one back. We'll make you copies of those. Could you make copies of that for the members as well?

Ms. Alexander. Yes.