money in cash outlay, and there will be an additional 4 1/2 million injuries that were preventable that will occur by 1992. In November, OMB staff indicated that the President would propose a rescission of $5,205,000 from the Commission's 1976 appropriation of $41.8 million, leaving $36,595,000

and 890 positions for 1976.

This was described by the Office

of Management and Budget as a sufficient amount to continue the Commission's 1975 level of effort.

At the December rescission hearing before the House Appropriations Subcommittee on HUD-Independent Agencies,

I discussed my view of the President's action. We are willing to abide by the President's decision to constrain Commission

1976 activities to the 1975 level of effort rather than

pursue additional initiatives to increase consumer product

safety. However, the dollars cited by the President made no provision for mandatory increases in costs. These costs include the annualization of partial-year 1975 salary and other expenses, as well as cost increases required to maintain the 1975 level of effort. As a result, we proposed a rescission of $2,246,000 to $39,574,000 to provide the Commission with sufficient funds to continue its 1975 level of effort in 1976 while reflecting net built-in cost increases.

The document before you today contains a description of the planned 1976 activities of the Commission at these two levels, as well as similar estimates for the transition

quarter.

In November, we learned of the President's decision to request for 1977, $37 million and 890 positions. As a matter of fact, we have just received a letter from OMB advising us that the request out to 1981 will be $37 million and 890 positions. This is a minimal increase in funds over the

President's recommendation of $36.6 million for 1976 and

apparently represents the President's view of a continuation

in 1977 of the 1975 and 1976 levels of effort.

As the Chairman and chief executive of a new and struggling agency, I deeply regret the need to alter the plan described in the Commission's September budget request. To repeat myself, there is no question in my mind but that the $54.8 million and 1,226 positions is consistent with the public interest and could have been used effectively by this Commission in meeting our mandate. However, in this period of fiscal restraint and compelling national priorities,

I have reluctantly and pragmatically concluded that in 1977, as in 1976, CPSC must forego plans to build a full Consumer Product Safety agency that would complete its task by 1982 as reflected in its September budget request.

I must, however, point out once again that due to mandatory increases, simply maintaining the 1975 level of effort does not translate to the Administration's 1976 or 1977 dollar level.

The Consumer Product Safety Commission's defense of a 1977 budget of $41.1 million and 890 positions essentially continues the 1975 level of effort, taking into account mandatory increases for the annualization of certain partial-year costs, such as salaries and rent. These built-in increases are partially offset by the savings resulting from reduction in numbers of temporary hires.

With funding reduced below our September 1977 budget estimate, it will be necessary to extend achievement of the 100-rule goal well beyond the 1982 date. Nevertheless, it

is imperative to maintain the momentum already generated in developing mandatory product safety rules. The time frame

is flexible, the ultimate goal, however, is valid and

. achievable.

To maintain regulatory momentum, resources will be reallocated so that critical programs will be maintained at the 1975 and 1976 level, while selected programs will be reduced to levels which will be sufficient to maintain what we anticipate will be a reasonable level of consumer safety. I have, therefore, reduced the near-term compliance

and enforcement effort in 1976 and 1977. I have ordered

a freeze on recruitment or hiring by the field, with a corresponding transfer of positions to headquarters to support the required standard development program and related activities. CPSC is prepared to proceed with a further reduction in the field, should this prove to be necessary.

This approach also emphasizes increasing reliance on voluntary standards and assumes reasonable success of a reduced motivational-compliance strategy.

Already this restructuring has resulted in a net transfer of 15 positions to the Regulatory Development Program from the Compliance and Enforcement Program.

In 1977, at least

an additional seven positions will be moved out of Compliance Surveillance, five to Hazard Strategy Analysis, and two to Information and Education.

In 1977, the Hazard Identification Program will be maintained at the minimum level required to sustain future rule development and to monitor significant hazards. The Hazard Strategy Analysis Program effort will be expanded by internal restructuring to partially offset a loss in momentum from the past involvement in research and the development of rule-making procedures. Over the long term, however, there will be a negative impact on rule development as our reservoir of research is drained. The Information and Education effort

will see slight expansion based on the belief that in the absence of an adequate body of safety standards, informed consumers are better protected.

While the actual dollars

in the Compliance and Enforcement program increase to reflect full-year costs of CPSC's laboratories and other mandatory cost increases, there would actually be a reduction in the Compliance and Enforcement activity in order to provide support for Hazard Strategy Analysis and Information and Education.

A restructured CPSC will be able to maintain rule output for the next two years, but will have to reduce rule output in future years, postponing attainment of the 100 mandatory rule goal. The number of compliance surveillance inspections and sample collections will be reduced and will decrease to a degree the agency's ability to monitor compliance by manufacturers, distributors, and retailers. In the future, as new rules are developed without commensurate growth in the inspection force, the number of inspections per rule will of necessity decrease, predictably reducing the relative effectiveness of the enforcement effort.

In lieu of increased funding, the Congress can assist this Agency in meeting its enforcement responsibilities through passage of proposed amendments to the Consumer Product Safety Act, which would allow the Commission, itself, to litigate strategically selected civil and criminal cases. These amendments, in combination with existing agency procedures which require case preparation, including evidence and pleadings, by headquarters and field compliance personnel, would provide leverage in the enforcement area at virtually no additional cost. Given the size of the Agency and the size of the industry it regulates, if the Commission is to

66-566 (Pt. 3) O 76 2

have any perceivable enforcement impact, it must be in a position to move toward the efficient and effective use of the civil and criminal penalties contained in its enabling

statutes.

In summary, then, I would state that the President's 1977 budget estimate of $37 million and 890 positions is a $2.6 million decrease in absolute numbers from the FY 76 level, but the actual net effect of a $37 million budget is much greater because CPSC must absorb $1.5 million in mandatory increased costs, leaving an actual decrease of $4.1 million to be absorbed in 1977.

CPSC could and would absorb this decrease either by a reduction-in-force of up to 115 positions, or by severely cutting back on funding of extramural contracts. The budget document before you today reflects the decision to make the reductions in extramural contracts and describes the effects of these reductions. Because the impact of these contract reductions upon our future effectiveness is so severe in the long term, we will not discount a reduction-in-force if necessary to preserve certain of these contractual efforts.

As a result, the document we have prepared compares

the CPSC 1977 Budget to the CPSC 1976 Estimate of $39.6 million to show the mandatory increases from one year to the next, and then compares the President's 1977 Budget with CPSC's 1977 Budget to show the impact of this alternative on Commission

programs.

Thank you, Mr. Chairman.

I will be pleased to answer

any questions that you and the Subcommittee may have.