Congress appropriated $587 million for these purposes in 2002, and we spent or committed $42 million of that amount. In 2003 we spent or committed an additional $366 million. A majority of the spending this year continued to go toward facility restoration in Washington, DC and Hamilton, New Jersey. During 2003, the Board of Governors approved the Biohazard Detection System and the Ventilation and Filtration System, which totaled $573 million. We have scheduled deployment of these systems to begin in early 2004 and to be completed by mid-2005.

     To support these various detection, protection and decontamination systems, we have requested a $350 million Congressional appropriation for 2004, which has not yet been authorized.

Expense Growth

     We estimate that total expenses in 2004 will be $66.8 billion, which is 2.9% more than our 2003 total expenses of $64.9 billion.

     We expect personnel expense, including workers' compensation and all other employee and retiree benefits, to increase by $1.8 billion, or 3.6% driven by the full year implementation of PL 108-18, contractual salary and benefits increases and health benefits inflation. We also estimate that health insurance premiums will increase by 10.6% in January 2004. In addition, 2004 is a leap year, and the one additional delivery day will add $170 million to 2004 personnel expenses.

     We estimate that non-personnel expense will increase by $577 million, or 4.2%, due to investments to update and improve our information technology capabilities, improve customer access and service and upgrade our administrative support and logistics infrastructure.

     In addition to the absence of debt refinancing costs, we estimate that interest expense on borrowing will decrease $304 million in 2004. We also estimate interest expense on the CSRS deferred retirement costs to increase by $161 million to a total of $277 million due to a full year of operation under the Act.

     Our expenses in 2004 would be 2.8% more than in 2003 if the effects of debt refinancing and the Act were excluded. While interest expense savings of $336 million from debt refinancing reduces expense growth in 2004 to 2.4%, total expenses increase by 2.9% because the CSRS reform savings in 2004 are less than 2003.

     From 1971 through 1999, we had annual expense growth of less than 4.0% only twice. We expect that 2004 will be the fourth year out of the last five that expense growth will be less than 4.0%.

     Our discussion in the Management Discussion and Analysis represents our best estimate of the trends we know about, the trends we anticipate and the trends we think are relevant to future operations. However, actual results may be different from our estimate.