As prepared for delivery
WASHINGTON - Chairman
Lautenberg, Ranking Member Johanns, members of the Subcommittee, thank you for
giving me the opportunity to speak about the Treasury Budget.
I would like to turn to the current state of economic
The United States economy has made substantial progress
toward recovering from the worst financial crisis since the Great
Depression. Despite significant headwinds – both as a result of the
crisis and from other temporary shocks – the economy has grown at an average
annual rate of just over 2 percent over the last three and a half years.
We have seen steady improvement in the labor market, where private sector
employers have added 6.8 million jobs since the trough of the labor market in
February 2010. The housing market, which had been a significant drag on
economic growth throughout the recession and into the early stages of the
recovery, is now gaining upward momentum.
While our economy is stronger today, more work must be done
to help create jobs and accelerate growth. Even though the unemployment rate,
at 7.5 percent, is at its lowest level in four years, it is still too
high. Too many Americans are still struggling to find work. Despite
recent improvements in the housing market, many families remain underwater on
their mortgages and credit-worthy borrowers continue to have trouble getting
the financing they need to buy homes or refinance existing mortgages.
Although corporate profits are at an all-time high, America’s middle class
continues to struggle.
The President has laid out a strategy to address these
challenges. His path forward strengthens the economic recovery by making
important investments in manufacturing, innovation, infrastructure, education,
and worker training while taking a balanced approach to bringing our deficits
down to a sustainable level. This balanced approach includes entitlement
reform, targeted spending cuts, and increased revenue through tax reform.
And it is based on the conviction that we can both get our fiscal house in
order and lay a foundation for long-term growth at the same time. We do
not have to choose one over the other.
Treasury plays a vital role in helping to shape and
implement the President’s economic policies, promoting a carefully balanced
fiscal policy, driving reform of the financial system, encouraging lending to
small businesses, working to reform the tax system, promoting economic
prosperity, and monitoring risk in the financial system.
It is important to note that Treasury continues to implement
the comprehensive financial reforms included in the Dodd-Frank Act. These
reforms place tougher limits on risk-taking by financial institutions in order
to stabilize the financial system and protect American taxpayers. Our
financial institutions have boosted their level and quality of capital and are
stronger and more stable than before the crisis. These developments have
made our financial system safer and stronger and better able to support lending
and economic growth.
We are also supporting small business growth through our
Small Business Lending Fund (SBLF) and State Small Business Credit Initiative
(SSBCI). As of September 30, 2012, SBLF participants have increased their
small business lending by $7.4 billion over a $36.5 billion baseline and by
$740 million over the prior quarter. In 2012, Treasury approved $137
million for disbursement to states under the SSBCI. Treasury estimates
disbursing cumulative totals of approximately $1.1 billion by the end of FY
2013 and the remaining $360 million by the end of FY 2014.
Treasury’s FY 2014 Budget supports the President’s strategy
to meet our economic and fiscal goals by focusing on key priorities that will
strengthen growth and lower costs to the taxpayer. Our Budget does this
by reducing waste, increasing efficiency, and making investments to accomplish
our core missions and achieve future savings.
Our request includes substantial investments in improved
taxpayer service and enforcement and in technology at the Internal Revenue
Service (IRS), which will drive efficiencies in the future. The proposal
also reflects Treasury’s contribution to protect our national security
interests and prevent illicit use of the financial system.
Reducing Taxpayer Costs, and Streamlining Operations
The FY 2014 Treasury Budget reflects a decrease of 2.3
percent from FY 2012 enacted levels, excluding the IRS. The request for
the IRS includes a $1 billion increase, of which $412 million is financed by a
program integrity cap adjustment for enforcement initiatives that provide a
high return on investment. This cap adjustment, which also includes $5
million for enforcement activities at the Alcohol and Tobacco Tax and Trade
Bureau (TTB), funds strategic investments that will help close the tax gap and
will return $6 for every dollar invested, once fully implemented. The
proposed cap adjustment will yield more than $32 billion in net savings to
reduce the deficit over the next 10 years.
Treasury’s request also includes funding for initiatives
that are critical to full and effective IRS implementation of the Affordable
Care Act (ACA), which lowers the forecast budget deficit by more than $1
trillion over the next two decades. The ACA is helping to slow the growth
of healthcare costs, and continued implementation of the ACA will improve the
quality and efficiency of the healthcare system. Nevertheless, in order
for the IRS to carry out its obligations as mandated by Congress under the
healthcare law, it needs the appropriate resources. Beginning in 2014,
millions of Americans will receive unprecedented tax benefits that will make
buying health insurance affordable. The IRS must have the necessary
funding to assist Americans as important provisions of the law go into
effect. For instance, the IRS must invest in new technology and modify
existing IRS tax administration systems. These efforts will facilitate
prompt and accurate application of the premium tax credits while protecting
The sequester has taken a toll on Treasury, but we are doing
everything we can to absorb these cuts without reducing services. We have
scaled back training, delayed contracts, and limited purchases. Even with
these measures, the brunt of the cuts is being felt by Treasury’s hard-working public
servants. At the IRS, workers will have to stay at home without pay for
as many as seven days between now and September. The FY 2013 IRS
operating plan is almost $1 billion below the FY 2011 enacted level, and as a
result, the IRS has 8,000 fewer full-time employees than just two years
ago. Sequestration hurts not only Treasury employees, but taxpayers as
well. The cuts imposed by sequestration erode our ability to provide
quality service by forcing the IRS to answer fewer calls and creating unexpected
delayed in responding to taxpayer questions. It will also lead to fewer
enforcement actions and reduced revenue collection.
The Treasury Budget builds on our commitment over the past
four years to deliver core services more efficiently and at a lower cost to the
taxpayer. Our request identifies $354 million in efficiency savings and
$29 million in program reductions.
Key savings proposals include space optimization and
infrastructure efficiencies for the IRS, manufacturing support systems and
spoilage reduction for the Bureau of Engraving and Printing (BEP), rent and
data center savings for the Bureau of the Fiscal Service, and numerous
administrative and personnel efficiencies across multiple bureaus.
We are also continuing to achieve savings from our ongoing
paperless initiative. Treasury has implemented a multi-pronged effort to
expand the use of electronic transactions in conducting the business of
government, including through electronic payroll savings bonds, electronic
benefit payments, and electronic tax collection.
Treasury’s paperless initiatives are estimated to save $500
million over the five years from FY 2011 to FY 2015. In addition to these
savings, our efforts have resulted in improved customer service and decreased
susceptibility to fraud. The IRS’s e-file program has proven highly
successful, saving the Department millions of dollars every year. For
example, in 2012, it cost 23 cents to process an e-filed return – a fraction of
the $3.36 it takes to process a paper return. With e-file, taxpayers get
their refund faster, with fewer data processing errors. The individual
e-file rate is now above 80 percent.
In FY 2014, Treasury will implement a number of initiatives
to improve operational efficiency and effectiveness across government.
For example, Treasury is continuing to consolidate its two fiscal bureaus to
create a stronger, more effective and efficient Fiscal Service organization
that can take the lead in improving financial management throughout the
government. The consolidation will also save up to approximately $96
million over 10 years. In addition, we are pleased that the Government
Accountability Office (GAO) has recognized our progress improving the
management of IRS information technology by removing our Business Systems
Modernization from their high-risk list this year.
The FY 2014 Budget also includes additional funding for the
Office of Financial Innovation and Transformation (FIT), which is working in
coordination with the Government-wide CFO Council to improve financial
management, reduce costs, increase transparency, and improve delivery of
agencies’ missions within Treasury and across the federal government.
Treasury also proposes to transfer FIT from the Departmental Offices (DO) to
the Bureau of the Fiscal Service to allow closer collaboration with the bureau
that most closely aligns with its mission.
The Budget also includes resources to administer the
Resources and Ecosystems Sustainability, Tourist Opportunities, and Revived
Economies of the Gulf Coast States Act of 2012 (RESTORE Act), which established
the Gulf Coast Restoration Trust Fund to provide for the economic and
environmental restoration of the Gulf region after the Deepwater Horizon
Spill. Treasury will serve administrative, compliance, and audit roles to
ensure that funds are disbursed as required by the RESTORE Act.
Under the leadership of my predecessor, Treasury
demonstrated creativity and resolve to find the most efficient ways to
accomplish the important work that we do to serve the American public. As
Secretary, I will make sure the efforts to reduce costs and increase
effectiveness continue across the Department.
Investing in Economic
Growth and Job Creation
Treasury supports economic growth for local communities and
small businesses by funding projects that encourage job creation, attract
investment, and increase financial access and capability.
Our $225 million request for the Community Development Financial
Institutions (CDFI) Fund focuses on providing funding to promote economic
development investments in low-income and underserved communities. Up to
$35 million of that request will go to the Healthy Food Financing Initiative
(HFFI), which will support increased availability of affordable, healthy food
alternatives in these communities.
The Budget requests $300 million in capped mandatory funding
for Pay for Success, a new program that will reward nonprofits and other groups
that finance preventive social programs that create savings for the federal
government while achieving better outcomes for their target populations.
The Budget also proposes $5 million for the new Financial
Capability Innovation initiative, which will help low- and moderate-income
people get the support and services they need so they can save more and manage
their finances more effectively.
The Treasury Budget includes $3 million for research and
evaluation efforts that will allow us to make better budget and policy decisions
on programs designed to encourage economic growth and opportunity.
National Security Interests and Preventing Illicit Use of the Financial System
Treasury’s financial intelligence and enforcement activities
play a significant role in protecting our financial system from threats to our
national security. Our funding request for the Office of Terrorism and
Financial Intelligence (TFI) reflects our continued efforts to target rogue
nations, terrorist facilitators, transnational criminals, money laundering, and
other threats to our financial system and our nation’s security.
Treasury has led the Administration’s efforts in isolating
Iran from the global economy and cutting off vital sources of revenue that
could be used to support Iran’s nuclear program and support for
terrorism. This work has resulted in what is now widely regarded as the
toughest sanctions regime in history.
The FY 2014 Treasury Budget reflects a careful balance of
savings proposals and targeted investments.
The proposed savings will be achieved through a combination
of efficiency improvements and increased streamlining of operational processes,
making Treasury a stronger organization that continues to provide indispensable
services across the country efficiently and effectively. Our investments
are aimed at reaching goals we all share: an economy that is expanding, a
private sector that is robust, and a job market that is full of
Treasury’s work is carried out by a team of public servants
that I am proud to represent here today. And on behalf of those
hard-working men and women, I want to say how much we appreciate the support of
this Committee over the past several years.