[Senate Hearing 109-]
[From the U.S. Government Publishing Office]



 
  DEPARTMENTS OF TRANSPORTATION, TREASURY, THE JUDICIARY, HOUSING AND 
URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 
                                  2006

                              ----------                              


                        THURSDAY, APRIL 14, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:30 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Christopher S. Bond (chairman) 
presiding.
    Present: Senators Bond, Stevens, Murray, and Leahy.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

STATEMENT OF ALPHONSO JACKSON, SECRETARY
ACCOMPANIED BY:
        KENNETH M. DONOHUE, INSPECTOR GENERAL
        JOHN C. WEICHER, ASSISTANT SECRETARY FOR HOUSING

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. The Senate Appropriations Subcommittee on 
Transportation, Treasury, the Judiciary, HUD, and Related 
Agencies will come to order.
    We welcome Secretary Alphonso Jackson for appearing before 
us today to testify on the Department of Housing and Urban 
Development's fiscal year 2006 budget request.
    Last year, we did not have the benefit of a complete 
statement from you, having been newly confirmed as Secretary 
the night before the hearing. This year, I look forward to your 
comments after a year on the job.
    I think I may have cautioned you about taking the job, but 
you do it so well, and we appreciate very much your expertise 
and commitment to the program.
    The budget request proposes some $28.5 billion, a decrease 
of some $3.38 billion or almost 11 percent from the 2005 
funding level of $31.9 billion.
    Unfortunately, the overall 2006 funding level does not 
accurately reflect the requested overall spending for HUD's 
many programs. The budget numbers are distorted through a 
budget rescission request of $2.5 billion as well as by how FHA 
receipts are treated for purposes of the 2006 budget. In fact, 
the overall funding for HUD programs is far worse than OMB has 
indicated.
    Proposed reductions to individual HUD programs include, 
among others, some $4.67 billion from CDBG funding, $118 
million from Housing for Persons with Disabilities, $14 million 
from Housing for Persons with AIDS, $24 million from Rural 
Housing and Economic Development, $24 million from Brownfields, 
almost $286 million from HOPE VI, $226 million from Section 8 
Project-Based Assistance, and $252 million from the Public 
Housing Capital Fund.
    In addition, the Lead Hazard Reduction Program that Senator 
Mikulski and I started has been totally eliminated. This 
program is one of the most important things we can do to stop 
the lead poisoning of our children in low-income housing in 
many major cities.

                          PROPOSED RESCISSIONS

    I also am especially troubled by a proposed $2.5 billion 
rescission for which neither HUD nor OMB has been able to or 
willing to identify the source of funding. I sincerely doubt 
there is adequate money to rescind from HUD programs without 
jeopardizing their mission.
    These program cuts are even more disturbing because of 
reductions and shortfalls in other programs within the 
jurisdiction of the subcommittee.
    Mr. Secretary, I know you have an obligation to defend the 
administration's budget and policy decisions no matter how 
problematic. I also understand and support the need for the 
administration to make difficult funding decisions in order to 
contain and reduce the Federal budget deficit.
    Unfortunately, I believe that the President has been 
getting some very bad advice from OMB about the housing and 
community development needs of the Nation. The HUD budget as 
well as a number of other proposed legislative and policy 
initiatives reflect this bad advice.
    Unfortunately, these problems go beyond HUD, leaving the 
subcommittee to confront huge challenges in trying to balance 
funding decisions among the many programs and priorities within 
the entire THUD fiscal year 2006 Appropriations Bill.
    As always, HUD represents one of our largest challenges. 
Unfortunately, the administration's overall budget for domestic 
discretionary spending will make reversing many of these 
recommendations impossible or compel Congress to eliminate 
funding from other important and necessary programs.
    There is a little bit of good news, Mr. Secretary. I 
applaud you for fighting the good fight in attempting to 
preserve Section 8 tenant-based vouchers at a level that will 
sustain current voucher use. And while I am disappointed over 
public housing capital and operating funding levels, I know you 
also staved off much larger reductions as proposed by OMB. In 
addition, home ownership is at its highest level in history 
with some 73.7 million homeowners.

                           PREDATORY LENDING

    I also applaud your efforts to stem the abuses of predatory 
lending, something that this subcommittee, with Senator 
Mikulski leading, has been championing by banning flipping, by 
increasing home ownership counseling, and by putting in place 
more stringent appraisal requirements. Unfortunately, this is 
the good news, but the list is too short for an agency as 
important as HUD.

                                  SACI

    For the bad news, I am very disappointed that the 
administration has proposed to dismantle the CDBG program along 
with some 17 or more other programs and replace these programs 
with a new block grant in the Department of Commerce called 
Strengthening America's Community Initiative.
    The administration also is proposing to fund this 
initiative at $3.7 billion, which is an overall reduction of 
almost $2 billion or 34 percent from the 2005 level for all 
these programs. The proposed elimination of CDBG is a tragedy, 
but the reduction in funding makes this proposal a double 
tragedy.
    Communities across the Nation rely on CDBG to fund critical 
housing and community development programs. This program works. 
However, without these funds, many local programs will falter 
and even fail. Equally important, CDBG is a critical component 
of HUD's mission. CDBG helps to make HUD's housing mission 
successful. Without CDBG, it is the Department of Housing. And 
with all of the changes proposed, HUD would just be about home 
ownership and a few rental housing block grants. HUD would no 
longer merit cabinet status.
    Moreover, the use of CDBG consolidated plans helps to 
ensure that communities tie together CDBG, housing funds, and 
other Federal and State resources into a comprehensive approval 
to local housing and community authorities. As history tell us, 
successful community development programs rely on a 
comprehensive approach to housing and community development. 
Without CDBG, HUD is like a one-armed pitcher trying to field a 
bunt.
    I know CDBG has problems. CDBG funds are not always used 
well or effectively. Even Kansas City, Missouri, with a vibrant 
and progressive nonprofit community, recently identified 
significant abuses within the CDBG program. However, these 
problems are being addressed and resolved. The key is to fix 
the problems in good programs, not dismantle the programs.
    Moreover, HUD, OMB, and certain interested parties recently 
ratified a consensus document to address weaknesses in the CDBG 
program by creating an Outcome Measurement System to establish 
new benchmarks and better oversight. Since the document 
addresses many of OMB's concerns, I am puzzled by the 
administration's effort to dismantle a program that has been 
redesigned to become more effective according to administration 
requirements.

                                HOPE VI

    I am also very much concerned about the administration's 
approach to public housing. The administration is seeking to 
eliminate HOPE VI as well as rescind the HOPE VI fiscal year 
2005 funding of $143 million.
    As an alternative, the administration has issued a proposed 
regulation that will authorize PHAs to demolish the remaining 
obsolete public housing.
    As you may know, I set the stage for HOPE VI by including a 
demonstration project in the 1990 National Affordable Housing 
Act that allowed the demolition and replacement of the Pruitt-
Igoe public housing in St. Louis with vouchers and new housing.
    Before this demonstration, PHAs could not be demolished 
without a one-for-one hard unit replacement. Because of the 
cost of this policy, public housing programs were limited to 
the warehousing of the poor in obsolete and deteriorating PHA 
high-rises.
    HOPE VI provided for the demolition of this obsolete 
housing along with the creation of mixed-income, private and 
public housing. This program also leveraged private investment 
and promoted the revitalization of entire communities.
    While HOPE VI is not a perfect solution to all the woes of 
obsolete public housing, it has transformed many PHAs and 
communities, including many in Missouri, which is now, I 
believe, a shining example of how it can work, by replacing 
obsolete public housing with mixed-income, public and private 
housing. In many cases, HOPE VI housing has leveraged new 
investment in communities. This means new business, an 
increased tax base, better schools, and safer communities. It 
is unfortunate that the budget rules do not recognize these 
very tangible economic and social benefits. However, I think 
you and I know from personal experience that these benefits are 
real and significant.

                         NEGOTIATED RULE-MAKING

    The administration has also broken a promise to develop a 
new operating fund formula by negotiated rule-making. Over the 
last 5 or more years, HUD has worked with PHAs through 
negotiated rule-making to develop a new budget-based operating 
plan formula to ensure a more equitable system of allocating 
operating subsidies to PHAs. Millions of dollars have been 
spent on the process. Nevertheless, a negotiated rule went into 
OMB's rule-making review process and came out a much different 
flavor of sausage.
    One expects OMB to make modest changes to a regulation 
under review but one does not expect wholesale revisions in 
violation of the spirit of legislation that required the 
negotiated rule-making. I have not yet had an opportunity to 
review the rule. But to highlight my concerns, I am advised 
that under the negotiated rule, 62 Missouri PHAs would have 
gained operating subsidies while 41 PHAs would have lost 
subsidies. Under OMB's changes, only 13 Missouri agencies would 
gain and 91 would lose funding. There is something wrong here.

                      PUBLIC HOUSING CAPITAL FUND

    Equally troubling, HUD's 2006 budget request includes a 
$252 million reduction in the Public Housing Capital Fund 
despite an estimated $20 billion backlog in modernization 
needs.

     BLOCK GRANT SECTION 8 VOUCHER ASSISTANCE AND HOMELESS FUNDING

    HUD also is proposing new legislation to block grant both 
Section 8 voucher assistance and homeless funding. I have not 
yet seen the proposal to block grant homeless assistance 
funding. I support the approach assuming it is adequately 
funded and includes meaningful oversight. Nevertheless, the 
process needs sunshine.
    I have seen the Section 8 voucher block grant proposal and 
it fails on a number of levels. First, the proposal fails to 
allow jurisdictions with real flexibility to use these funds 
for project-based assistance even in areas of the Nation where 
vouchers do not work because of tight rental markets. This 
means the administration only wants to provide flexibility on 
its own terms and not based on local needs and conditions.
    More disturbing, the Section 8 proposal would eliminate the 
requirement that 75 percent of all vouchers go to extremely 
low-income families, those at or below 30 percent of median 
income. This is a critical requirement that ensures those with 
worst case housing needs receive priority in the award of 
scarce Section 8 housing assistance. Without the requirement, 
the number of homeless will continue to grow without real 
housing alternatives. This runs counter in my view to the 
administration's promise to end chronic homelessness within 10 
years. This will promote homelessness rather than end it.

                  ZERO DOWNPAYMENT HOME OWNERSHIP PLAN

    Finally, I am very troubled by the proposed FHA Zero 
Downpayment Home Ownership plan. As with last year, the 
proposal continues to pose substantial financial risks over 
time to the FHA Single Family Mortgage Insurance program, the 
Mutual Mortgage Insurance Fund. Without downpayments, new home 
buyers will have no stake in their new homes and will have 
limited ability to pay for any substantial repairs like a 
failed furnace or a leaky roof. As we discussed last year, FHA 
was close to bankruptcy in the late 1980's due to defaults from 
assisting families to purchase homes with high loan-to-value 
ratios. These houses were often in marginal neighborhoods. And 
once the homeowners defaulted, the housing would often remain 
unsold and thus drive down the housing values throughout a 
neighborhood. Some of the neighborhoods are still trying to 
recover from the foreclosures. Also, families in default have 
their credit ruined.
    According to HUD's IG audit of FHA's financial statements 
for 2004 and 2003, the Mortgage Insurance Program suffers 
increasing default rates and claims. Over the last 5 years, 
defaults have increased from 3 percent in fiscal year 2000 to 
almost 7 percent in 2004. Claims have risen from $5.5 billion 
in 2000 to $8.5 billion in 2004.
    Clearly, FHA has effectively become the lender of last 
resort, taking on the most risky mortgages with greatest risk 
of default. A new zero downpayment program will only enhance 
that risk.
    I have been working on housing and community development 
since I was governor of Missouri. And despite my continuing 
efforts to reform HUD and support housing and community 
developments, HUD continues to remain in decline, characterized 
by failed programs and policy. I still believe this trajectory 
of failure can be stopped, but I am dismayed at the lack of 
support from OMB.
    And I know, Mr. Secretary, you face an uphill battle with 
an administration that seems to have little interest or 
commitment to HUD's programs and seems to be committed to 
dismantling the modest success that HUD has achieved.
    I do not understand. When housing and community development 
investments work well, everyone benefits through more jobs, an 
increased tax base, better schools, and improved communities. 
Where we fail to create the right programs or fail to invest in 
these programs, neighborhoods deteriorate and the quality of 
peoples' lives suffer. It is that simple.
    I am not looking for big increases in HUD programs. I 
believe that we need to preserve existing programs and try to 
build on successes where possible. We may not agree on 
everything, but I know you believe in the importance of HUD's 
mission and the need for HUD to be a leader and partner in 
housing and community development across the Nation.

                           PREPARED STATEMENT

    I look forward to continuing to work with you. However, we 
need to revitalize and rebuild the public's confidence in HUD, 
and I look forward to hearing your vision for the department's 
future.
    Now, with apologies for the length of the statement, I had 
to get it off my chest, and I now turn to my ranking member, 
Senator Murray.
    [The statement follows:]

           Prepared Statement of Senator Christopher S. Bond

    The Senate Appropriations Subcommittee on Transportation, Treasury, 
the Judiciary, HUD and Related Agencies will come to order. We welcome 
Secretary Alphonso Jackson for appearing before us today to testify on 
the Department of Housing and Urban Development's fiscal year 2006 
budget request. Last year we did not have the benefit of a complete 
statement from you, having been newly confirmed as Secretary the night 
before the hearing. This year I especially look forward to your 
comments after a year on the job.
    The administration's budget request for HUD for fiscal year 2006 
proposes some $28.5 billion, a decrease of some $3.38 billion, or 
almost 11 percent, from the fiscal year 2005 funding level of $31.9 
billion. Unfortunately, the overall fiscal year 2006 funding level does 
not accurately reflect the actual requested overall spending for HUD's 
many programs. Instead, the overall budget numbers are distorted 
through a budget rescission request of $2.5 billion as well as by how 
FHA receipts are treated for purposes of the fiscal year 2006 budget. 
In fact, the overall funding for HUD programs is far worse than the 
administration has indicated.
    Proposed reductions to individual HUD programs include, among 
others, some $4.67 billion from CDBG funding, $118 million from Housing 
for Persons with Disabilities, $14 million from Housing for Persons 
with AIDS, $24 million from Rural Housing and Economic Development, $24 
million from Brownfields, almost $286 million from HOPE VI, $226 
million from Section 8 Project-Based Assistance, and $252 million from 
the Public Housing Capital Fund. I also am especially troubled by a 
proposed $2.5 billion rescission for which neither HUD nor OMB has been 
able or willing to identify the source of funding.
    These program cuts are even more disturbing because of proposed 
reductions and shortfalls in other programs within the jurisdiction of 
this subcommittee. Mr. Secretary, I know you have an obligation to 
defend the administration's budget and policy decisions no matter how 
problematic. I also understand and support the need for the 
administration to make difficult funding decisions in order to contain 
and reduce the Federal budget deficit. Unfortunately, I believe that 
the President has been getting some very bad advice about the housing 
and community development needs of the Nation.
    The HUD budget as well as a number of newly proposed HUD 
legislative and policy initiatives reflect this bad advice. 
Unfortunately, these problems go beyond just HUD, leaving this 
subcommittee to confront huge challenges in trying to balance funding 
decisions among the many programs and priorities within the entire 
TTHUD fiscal year 2006 Appropriations bill in an extraordinary tight 
funding year. As always, HUD represents one of the largest challenges. 
Unfortunately, the administration's overall budget for domestic 
discretionary spending will make reversing many of these administration 
recommendations impossible or compel the Congress to eliminate funding 
from other important and necessary programs.
    To start with the good news, Mr. Secretary, I applaud you for 
fighting the good fight in attempting to preserve section 8 tenant-
based vouchers at a level that will sustain current voucher use. And 
while I am disappointed over the public housing capital and operating 
fund levels, I know you also staved off much larger reductions, as 
proposed by OMB. In addition, home ownership is at its highest level in 
history with some 73.7 million homeowners. I also applaud your efforts 
to stem the abuses of predatory lending by banning flipping, increasing 
home ownership counseling and putting in place more stringent appraisal 
requirements. Unfortunately, this is the good news but the list is much 
too short for an agency as important as HUD.
    Now for the bad news. First, I am very disappointed that the 
administration has proposed to dismantle the CDBG program along with 
some 17 or more other programs and replace these programs with a new 
block grant in the Department of Commerce called the Strengthening 
America's Communities initiative. The administration also is proposing 
to fund this initiative at $3.7 billion which is an overall reduction 
for all these programs from the fiscal year 2005 level of almost $2 
billion or 34 percent.
    The proposed elimination of CDBG is a tragedy, but the reduction in 
funding makes this proposal a double tragedy. Communities across the 
Nation rely on CDBG to fund critical housing and community development 
programs. Without these funds, many local programs will falter and even 
fail. Equally important, CDBG is a critical component of HUD's mission; 
CDBG helps to make HUD's housing mission successful. Moreover, the use 
of CDBG consolidated plans helps to ensure that communities tie 
together CDBG, housing funds and other Federal and State resources into 
a comprehensive approach to local housing and community development 
needs. Without CDBG, HUD's mission will be reduced to almost solely 
housing. As history tells us, successful community development relies 
on a comprehensive approach to housing and community development. 
Without CDBG, HUD will be like a one-armed pitcher trying to field a 
bunt.
    I know CDBG has problems; CDBG funds are not always used well or 
effectively. Even Kansas City, Missouri, with a vibrant and progressive 
nonprofit community, recently identified some significant abuses within 
its CDBG program. However, these problems are being addressed and 
resolved. The key is to fix problems in good programs, not dismantle 
the programs.
    Moreover, recently, HUD, OMB and certain interested parties 
recently ratified a consensus document to address weaknesses in the 
CDBG program by creating an Outcome Measurement System to establish new 
benchmarks and better oversight. Since this document addresses many of 
OMB's concerns, I am puzzled by the administration's efforts to 
dismantle a program that has been redesigned to become more effective 
and successful according to administration requirements.
    I also am very concerned over the administration's approach to 
public housing. The administration is seeking to eliminate HOPE VI as 
well as rescind the HOPE VI fiscal year 2005 funding of $143 million. 
As an alternative, the administration has issued a proposed regulation 
that will authorize PHAs to demolish the remaining obsolete public 
housing.
    As you may know, I set the stage for HOPE VI by including a 
demonstration project in the 1990 National Affordable Housing Act that 
allowed the demolition and replacement of Pruitt-Igoe Public Housing in 
St. Louis with vouchers and new housing. Before this demonstration, 
PHAs could not be demolished without a one-for-one hard unit 
replacement. Because of the cost of this policy, the public housing 
program dictated the warehousing of the poor in obsolete and 
deteriorating PHA high-rises. HOPE VI allowed for the demolition of 
this obsolete housing and the creation of mixed income private and 
public housing that anchored private investment and the revitalization 
of entire communities.
    While HOPE VI is not a perfect solution to all the woes of obsolete 
public housing, it has transformed many PHAs and communities, including 
many in Missouri, by replacing obsolete public housing with mixed 
income public and private housing. In many cases, HOPE VI housing has 
leveraged new investment in these communities. This means new 
businesses, an increased tax base, better schools and safer 
communities. It is unfortunate that the budget rules do not recognize 
these very tangible economic and social benefits.
    The administration also has broken a promise to develop a new 
operating fund formula by negotiated rulemaking. Over the last 5 or 
more years, HUD has worked with PHAs through negotiated rulemaking to 
develop a new budget-based operating plan formula to ensure a more 
equitable system of allocating operating subsidies to PHAs. Millions of 
dollars have been spent on this process. Nevertheless, a negotiated 
rule went into OMB's rulemaking review process and came out a much 
different flavor of sausage. One expects OMB to make changes to 
regulations under review; one does not expect wholesale revisions in 
violation of legislation that required negotiated rulemaking. I have 
not yet had an opportunity to review the rule. But to highlight my 
concerns, I am advised that, under the negotiated rule, 62 Missouri 
PHAs would have gained operating subsidies while 41 PHAs would have 
lost subsidies. Instead, under the OMB's changes, only 13 Missouri 
agencies would gain while 91 would lose funding. There is something 
wrong here. Equally troubling, HUD's fiscal year 2006 budget request 
includes a $252 million reduction in the Public Housing Capital Fund 
despite an estimated $20 billion backlog in modernization needs.
    HUD also is proposing new legislation to block grant both section 8 
voucher assistance and homeless funding. I have not yet seen the 
proposal to block grant homeless assistance funding but I support the 
approach assuming it is adequately funded and includes meaningful 
oversight.
    I have seen the section 8 voucher block grant proposal. Once again, 
the proposal fails on a number of levels. First, the proposal fails to 
allow jurisdictions with real flexibility to use these funds for 
project-based assistance even in areas of the Nation where vouchers do 
not work because of tight rental markets. This means the administration 
only wants to provide flexibility on its own terms.
    More disturbing, the section 8 proposal would eliminate the 
requirement that 75 percent of all vouchers go to extremely low-income 
families--those at or below 30 percent of median income. This is a 
critical requirement that ensures those with the worst case housing 
needs receive priority in the award of scarce section 8 housing 
assistance. Without this requirement, the number of homeless will 
continue to grow without real housing alternatives. This runs counter 
to the administration's promise to end chronic homelessness within 10 
years.
    Finally, I am very troubled by the proposed FHA Zero Downpayment 
Homeownership program. As with last year, this proposal continues to 
pose substantial financial risks over time to the FHA Single Family 
Mortgage Insurance program and the Mutual Mortgage Insurance Fund--
without downpayments, new homebuyers will have no stake in their new 
homes and will have limited ability to pay for any substantial repairs 
such as a failed furnace or leaky roof.
    As we discussed last year, FHA was close to bankruptcy in the late 
1980's due to defaults from assisting families to purchase homes with 
high loan-to-value-ratios. These houses were often in marginal 
neighborhoods, and once these homeowners defaulted, the housing would 
often remain unsold and, thus, help drive down housing values 
throughout a neighborhood. Some of these neighborhoods are still trying 
to recover from those foreclosures, and the families in default often 
ruined their credit.
    According to the HUD IG's audit of the FHA's financial statements 
for fiscal years 2004 and 2003, the FHA mortgage insurance program 
continues to suffer increasing default rates and claims. Over the last 
5 years, defaults have increased from 2.99 percent in fiscal year 2000 
to 6.9 percent in fiscal year 2004. Moreover, claims have risen from 
some $5.5 billion in fiscal year 2000 to some $8.5 billion in fiscal 
year 2004, a 54 percent increase while insurance-in-force has decreased 
13 percent to $430 million during the same period. Clearly, FHA has 
effectively become the lender of last resort, taking on the most risky 
mortgages with the greatest risk of default. A new zero downpayment 
program will only enhance this risk.
    I have been working on housing and community development issues for 
most of my career from the governor's office in Missouri to my current 
position on the Appropriations Committee in the Senate. Unfortunately, 
despite my continuing efforts to reform HUD and support housing and 
community development initiatives, the Department of Housing and Urban 
Development remains in decline, characterized by failed programs and 
policies. I still believe that this trajectory of failure can be 
stopped, but I am dismayed by the lack of progress.
    Mr. Secretary, I know that you face an uphill battle with an 
administration that seems to have little interest or commitment to 
HUD's programs and instead seems committed to dismantling the modest 
successes that HUD has achieved. I do not understand--when housing and 
community development investments work well, everyone benefits, jobs 
are created, taxes are collected, and schools and communities improve. 
Where we fail to create the right programs or fail to invest in these 
programs, neighborhoods deteriorate and the quality of peoples' lives 
suffer. It is that simple.
    I am not looking for big increases in HUD programs. I do, however, 
believe that we need to preserve existing programs and try to build on 
these modest successes where possible. We may not agree on everything, 
but I know you believe in the importance of HUD's mission and the need 
for HUD to be a leader and partner in housing and community development 
initiatives throughout the Nation. I look forward to continuing to work 
with you on making the Department a strong leader and partner. However, 
we need to revitalize and rebuild the public's confidence in HUD, and I 
look forward to hearing your vision for the Department's future.
    Thank you. I turn now to my Ranking Member, Senator Murray.

                    STATEMENT OF SENATOR TED STEVENS

    Senator Stevens. Mr. Chairman and Senator Murray, I have to 
Chair the Commerce Committee markup, but would you permit me 
just 3 minutes.
    Senator Bond. Senator Stevens.
    Senator Stevens. I am here to ask you to meet me in Alaska 
this year before this bill is marked up, before this bill is 
reported to the floor.

                         IHBG FUNDING IN ALASKA

    There have been developments in your Department that affect 
our State that are staggering. Our field office is down in 
Stockton, California. Your Department has recognized now what I 
call rogue villages and taken away from a regional housing 
authority the jurisdiction over housing and given it to--in one 
instance to a group that calls themselves a village, but their 
traditional village is 200 miles from where they say they have 
the right to conduct housing.
    And they have taken some 55 villages away from the existing 
housing authority and turned it over to this rogue group and 
they are not building housing. They are just employing their 
own people.
    What is going up our way now is just staggering as far as 
the activities of your Department. And if we cannot get 
together on some understanding of what is going to happen, I am 
going to offer a series of amendments to this bill to mandate 
that these practices be changed.
    We cannot exist this way. Your people, who never come to 
Alaska, sit down in the field office in California and decide 
what is right in Alaska. Now, that just cannot go on.
    The relationships with the State are so strained that the 
people down there reduced the housing allowance for operations 
in Alaska, the highest in the Nation, a 53 percent cut in 
Alaska compared to an average 20 percent throughout the 
country.
    Now, we have some people who are really in need for housing 
in the villages. But people sitting down in California, I do 
not know what they are doing down there. But these decisions 
are--I did not know it till just recently, and they are 
staggering.

                           PREPARED STATEMENT

    I would urge you to come up and let us go out and look at 
these things and you meet the people that claim to be--that 
have the right to build these houses in an area they never 
lived in, they do not represent, and the people in the area 
oppose them. That is other than a few people that are off the 
reservation, so to speak.
    But I do think this has to be changed. And I ask that my 
statement appear in the record. I appreciate your courtesy.
    [The statement follows:]

               Prepared Statement of Senator Ted Stevens

    Good morning Secretary Jackson--I am pleased to see you here this 
morning.
    I must leave this hearing shortly to chair a markup session of the 
Commerce Committee, but I would like to ask for your help on some 
matters within your agency that are causing problems for us in Alaska.
    The first is the matter of how HUD allocates its Indian Housing 
Block Grant funding. Within the State of Alaska, we now have some 231 
federally-recognized ``tribes,'' some with no or only a few members. 
This was a policy promulgated by the previous administration and is one 
with which I do not agree. In Alaska, our Native housing programs were 
traditionally operated by regional Native housing organizations which 
were large enough to bring economies of scale to housing programs 
across our vast State. Since the passage of the Native American Housing 
and Self Determination Act in 1996, and especially since the 2000 
census, HUD has been moving to transfer some of this funding away from 
regional housing authorities and put it into the hands of small 
villages and ``tribes'' in Alaska. The most egregious example of this 
misguided policy has occurred in the Cook Inlet Region, which includes 
Anchorage. The Cook Inlet Housing Authority has been stripped of a 
substantial portion of its Indian housing funds. Those funds have been 
awarded to a so-called tribe called Kanatak to cover the entire Mat-Su 
Valley part of the Cook Inlet region. However, Kanatak's traditional 
lands are located hundreds of miles away on the Western coast of 
Alaska, and have not been occupied since 1956. As a result, the Cook 
Inlet Housing Authority's funding now covers only 8 communities in the 
region, down from the 55 communities it has traditionally covered and 
should be covering right now.
    I hope you will agree to help resolve this situation in the near 
future--it is making it very difficult to provide economical housing 
for our Alaska Native population.
    On another matter, I have heard from our Alaska Housing Finance 
Authority that your department is proposing to cut the operating 
subsidy it receives to operate public housing across Alaska by 53 
percent the largest cut proposed for any housing authority in the 
Nation. I also understand that changes in the operating subsidies--the 
so-called ``Allowable Expense Levels'' are being proposed as a result 
of a study done by Harvard University. However, that study did not 
examine the particular conditions in Alaska, but still proposed a cut 
almost twice as large as the next largest cut. The AHFC has told my 
staff that they will not be able to continue to operate public housing 
in Alaska if a cut of this magnitude is allowed to go forward.
    I believe a number of these problems stem from the Department's 
senior management not being familiar with Alaska. We used to have a HUD 
Field Office in Alaska, but that was closed about 10 years ago, and now 
our field office is located in Santa Ana, California--a place that has 
little in common with Alaska. I hope you will give some consideration 
to establishing more of a presence in my State, which covers an area 
one-fifth the size of the entire lower 48.
    Mr. Secretary, I invite you to bring your senior staff and come to 
Alaska to see for yourself what our housing problems look like and how 
they differ from those in most lower-48 communities. I hope you will do 
that and will work with me to solve these and other problems.

    Senator Bond. Thank you, Senator Stevens.
    And, Mr. Secretary, you have only been in this position 
about a year, but I would suggest to you that those suggestions 
are ones which you should adopt.
    I will explain to you later if you have any questions.
    Now I turn to Senator Murray.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Well, thank you very much, Mr. Chairman, 
and I will join with you welcoming Secretary Jackson to our 
subcommittee this morning.
    Mr. Secretary, you have had a distinguished career serving 
in the public housing field in Dallas, St. Louis, and 
Washington, DC. Your expertise and your commitment are needed 
as families throughout our country are really struggling with 
the high cost of housing.
    Unfortunately, Mr. Secretary, you have been handed a very 
difficult budget to defend. I have always said that a budget is 
a statement of priorities. In looking at this budget, it is 
hard to reach any other conclusion than that housing is not a 
priority for this administration.
    And we are not just talking about numbers. The cuts and 
problems in this budget will affect the lives of some of our 
most vulnerable neighbors.
    I wish the Bush Administration valued them more and was 
willing to give us a budget that does make housing a priority. 
But sadly this appears to not be the case.
    So we will do our best with the budget the administration 
has sent us. But I do want to note that the situation is 
actually worse than some of the figures we are going to be 
hearing today.
    In looking at the budget before us, some might see a 12 
percent cut from last year. But when you take a closer look at 
the numbers, you see the cuts are actually closer to 20 
percent. And that is because this budget calls for a large 
number of rescissions, $2.65 billion.
    I know last year before HUD came under the jurisdiction of 
our subcommittee, the administration sought approval to cut 
about $1.5 billion that were appropriated but never spent. Now 
the administration wants to go into the current year's budget 
and cut an additional $2.65 billion.
    So when you add in the rescissions on top of the regular 
budget cuts, the size of the administration's proposed cuts to 
HUD grows to almost $6.5 billion or a 20 percent cut from last 
year.
    That is a very dark picture for American families and for 
cities and for communities that are really trying to help and 
develop distressed areas.
    As I look at these rescissions, what I see is troubling. 
But what I do not see is even more troubling. I do not see a 
detailed explanation specifying where $2.5 billion of the 
proposed rescission is coming from.
    It is like the administration is asking us for a 
sledgehammer and then telling us not to worry about where they 
are going to use it. Well, I want you to know I am worried.
    Under these proposed rescissions, HUD is granted the 
blanket authority to take away the funding from any program in 
the agency. That means that additional cuts can come from 
programs serving the homeless or the disabled or individuals 
living with HIV and AIDS. They can eliminate housing vouchers 
for the working poor or cut back on locally based Meals on 
Wheels programs.
    All that is in addition to the administration's proposal to 
eliminate the Community Development Block Grant Program and the 
variety of support programs and services it funds.
    So the administration is saying not only are we going to 
cut funding for HUD programs, but we are asking to open up a 
previous appropriations act and cut another $2.5 billion 
however we see fit. That could have a very painful impact on 
many of our neighbors.

                                HOPE VI

    The only part of the rescission that the administration has 
provided any information about concerns the HOPE VI program. So 
let us look at what the administration proposes.
    The HOPE VI program has the worthy goal of tearing down 
old, dilapidated public housing units and replacing them with 
affordable housing units for mixed-income populations. The 
President plans to eliminate that program for next year.
    But it gets worse. The administration also wants us to go 
back and rescind the $143 million that we already appropriated 
for this program for this current year.
    So it is not enough just to kill it for next year, they 
want us to gut it this year and undo Congress' work of the past 
year. Together these proposals represent the elimination of 
some $300 million in HOPE VI grants.
    This idea of unaccountable, undefined, blanket rescissions 
really concerns me deeply, Mr. Chairman. I have served on the 
Appropriations Committee for the great majority of my almost 13 
years in the Senate and I believe we have a responsibility when 
we appropriate taxpayer dollars to know where they are going.
    And by the same measure, when we are asked to take funds 
away from agencies that have already received them, I want to 
know precisely what projects or grants or services that we 
already funded will now be cut.
    So I hope to use a portion of the hearing this morning to 
get a clear and precise answer from Secretary Jackson as to the 
likely impacts of this budget proposal and what will result if 
he is required to cancel more than $4 billion in funding 
already appropriated to his agency over the course of this year 
and next.
    The challenges that are facing the Department of Housing 
and Urban Development are daunting and the administration's 
proposed budget cuts make it even worse.

                           PREPARED STATEMENT

    I cannot make the administration treat housing like a 
priority, but I can do everything possible to make sure we do 
not make things worse. I want to give the Secretary the 
resources he needs to protect and expand housing opportunities 
for the poor and community development programs for local 
communities.
    Thank you, Mr. Chairman.
    [The statement follows:]

               Prepared Statement of Senator Patty Murray

    Thank you, Mr. Chairman.
    I want to welcome Secretary Jackson to the subcommittee this 
morning.
    Mr. Secretary--you have had a distinguished career serving in the 
public housing field in Dallas, St. Louis, and Washington, DC.
    Your expertise and your commitment are needed as families 
throughout the country struggle with the high cost of housing.
    Unfortunately, Mr. Secretary, you've been handed a very difficult 
budget to defend.
    I've always said that a budget is a statement of priorities, and 
looking at this budget it's hard to reach any other conclusion than 
that housing is not a priority for this administration.
    And we're not just talking about numbers. The cuts and problems in 
this budget will affect the lives of some of our most vulnerable 
neighbors.
    I wish the Bush Administration valued them more--and was willing to 
give us a budget that makes housing a priority.
    But sadly that is not the case, so we will do our best with the 
budget the administration has sent us.
    But I do want to note that the situation is actually worse than 
some of the figures we'll hear today.
    In looking at the budget before us, some might see a 12 percent cut 
from last year.
    But when you take a closer look at the numbers--you see that the 
cuts are actually closer to 20 percent.
    That's because this budget calls for large number of rescissions--
$2.65 billion.
    I know that last year--before HUD came under the jurisdiction of 
this subcommittee--the administration sought approval to cut about $1.5 
billion dollars that were appropriated but never spent.
    Now the administration wants to go into the current year's budget 
and cut an additional $2.65 billion.
    So when you add in these rescissions--on top of the regular budget 
cuts--the size of the administration's proposed cuts to HUD grows to 
almost $6.5 billion, or a 20 percent cut from last year.
    That is a very dark picture for American families and for cities 
and communities that are trying to develop distressed areas.
    As I look at these rescissions, what I see is troubling--but what I 
don't see is even more troubling.
    I don't see a detailed explanation specifying where $2.5 billion of 
the proposed rescission is coming from.
    It's like the administration is asking us for a sledgehammer and 
then telling us not to worry about how they'll use it. Well I am 
worried.
    Under these proposed rescissions, HUD is granted the blanket 
authority to take the funding from any program in the agency.
    That means additional cuts can come from programs serving the 
homeless, the disabled, or individuals living with HIV/AIDS.
    They can eliminate housing vouchers for the working poor or cut 
back on locally-based meals-on-wheels programs.
    All that is in addition to the administration's proposal to 
eliminate the Community Development Block Grant program and the variety 
of support programs and services it funds.
    So the administration is saying not only are we going to cut 
funding for HUD Programs, but we're asking to open up a previous 
appropriations act and cut another $2.5 billion however we see fit.
    That could have a painful impact on many of our neighbors.
    The only part of the rescission that the administration has 
provided any information about concerns the HOPE VI program--so let's 
take a look at what the administration proposes.
    The HOPE VI program has the worthy goal of tearing down old, 
dilapidated public housing units and replacing them with affordable 
housing units for mixed income populations.
    The President plans to eliminate this program next year.
    But it gets worse.
    The administration also wants us to go back and rescind the $143 
million that we already appropriated for this program for the current 
year.
    So it's not enough to kill it next year--they want to gut it this 
year and undo Congress's work in this area.
    Together, these proposals represent the elimination of some $300 
million in HOPE VI grants.
    This idea of unaccountable, undefined blanket rescissions concerns 
me deeply.
    I have served on the Appropriations Committee for the great 
majority of my almost 13 years in the Senate.
    I believe we have responsibility when we appropriate taxpayer 
dollars to know where they are going.
    By the same measure, when we are asked to take funds away from 
agencies that have already received them, I want to know precisely what 
projects, grants or services--that we already funded--will now be cut.
    So, I hope to use a portion of our hearing this morning to get 
clear and precise answers from Secretary Jackson as to the likely 
impacts of this budget proposal and what will result if he is required 
to cancel more than $4 billion in funding already appropriated to his 
agency over the course of this year and next.
    The challenges facing the Department of Housing and Urban 
Development are daunting. And the administration's proposed budget cuts 
make it even worse.
    I can't make the administration treat housing like a priority, but 
I can do everything possible to make sure we don't make things worse.
    I want to give the Secretary the resources he needs to protect and 
expand housing opportunities for the poor and community development 
programs for local communities.
    Thank you, Mr. Chairman.

    Senator Bond. Thank you very much, Senator Murray. Senators 
Durbin and Leahy have submitted written statements which will 
also be made a part of the record.
    [The statements follow:]

            Prepared Statement of Senator Richard J. Durbin

    Mr. Jackson, thank you for testifying before this subcommittee 
today. I am very concerned about the housing cuts that have been 
proposed for HUD. These cuts could severely hinder HUD's ability to 
address community development needs in cities, towns, and communities 
across the country. They jeopardize housing for low-income individuals, 
families, the elderly, and the disabled.
    I remain troubled about the President's proposal to eliminate the 
Community Development Block Grant (CDBG) program and replace it with a 
new initiative within the Department of Commerce. CDBG has supported 
State and local governments' community development and neighborhood 
revitalization activities for over 30 years. It has provided more than 
just economic opportunities. The funds have been used to conserve and 
expand affordable housing, improve access to public water and sewer 
facilities, create jobs, and improve lives. These are the building 
blocks for our neighborhoods.
    Communities across Illinois, like Pekin, a town with approximately 
34,000 people, or Cooksville, a village with slightly over 200 people, 
received CDBG funds for revitalization efforts. In Chicago, a community 
group received a CDBG grant to start a ``Safe Passages'' program--a 
shuttle service for children in the neighborhood tutoring program. It 
provided students with free transportation--a safe passage--from 
tutoring programs, through some of the toughest gang territories in 
Chicago, to a Boys and Girls Club where the children can swim, play 
sports, and eat a snack or a meal. Before ``Safe Passages'' and the 
CDBG grant, kids in this neighborhood stayed home after school or hung 
out on the corner and were recruited by gangs. Today, they have a way 
out.
    I am also concerned about the President's request for $268 million 
for the Housing for Persons with AIDS (HOPWA) program, a cut in funding 
from the $282 million appropriated last year. Of the 15,000 people in 
Chicago who may be homeless on any given night, 8 percent have HIV. 
Nationwide, the Centers for Disease Control estimates that there are 
886,575 people living with HIV/AIDS, and approximately 50 percent need 
some form of housing assistance. HOPWA provides this vital assistance 
and creates access to medical care and support services. In 2005, HOPWA 
provided support for 122 jurisdictions eligible for formula 
allocations. HUD announced that two additional jurisdictions will be 
eligible for funds in 2006, but overall funding for the program 
continues to decrease. Senator Martinez and I are currently circulating 
a letter that will be sent to this committee urging $385 million for 
fiscal year 2006. I hope this committee will take the request into 
consideration.
    I have concerns about several other programs that are slated for 
cuts. For instance, this is the third consecutive year that the 
President has proposed eliminating HOPE VI. This funding has been 
crucial for several Illinois communities.
    In fiscal year 2002, the Winnebago County Housing Authority 
received a HOPE VI revitalization grant for $18.8 million. The funding 
was granted to demolish Champion Park Apartments, 61 subsidized low-
rise apartments, and replace them over the next 2 years with 156 homes 
throughout the neighborhood.
    I was pleased to see an increase in the President's budget for 
Homeless Assistance Grants. Last year, 20 of my colleagues and I sent a 
letter to this committee urging funding for renewals of expiring grants 
to permanent supportive housing serving the homeless. Although our 
request was not granted, the committee and the administration have 
acknowledged the importance of permanent supportive housing in the 
fight against chronic homelessness.
    If the administration is going to continue to live up to its 
commitment to end chronic homelessness, we must also ensure that the 
proper infrastructure is in place. The Housing Choice Voucher Program 
has been a large part of that infrastructure. But, with formula changes 
and funding shortfalls, the wait lists are growing and families with 
vouchers are being told that they are losing their assistance. We must 
ensure that funding for vouchers is made available so that those in 
need of subsidized housing don't add to the number of people on the 
streets.
    Finally, Mr. Jackson, you have spoken about home ownership as part 
of the President's vision of an ``ownership society''--that it ``is the 
key to financial independence, the accumulation of wealth, and, 
stronger, healthier communities.'' I agree that home ownership is often 
a key to achieving the American dream. However, in light of the 
proposed HUD budget cuts, we must not lose sight of those who will be 
left alone--those who cannot achieve home ownership. We must continue 
to focus attention and funding on community development and on 
increasing our supply of decent, safe and affordable housing for all.
    I appreciate the opportunity to speak with you today. I look 
forward to hearing your testimony.
                                 ______
                                 
             Prepared Statement of Senator Patrick J. Leahy

    Secretary Jackson, I would like to welcome you today in your first 
appearance before our newly reconstituted and renamed subcommittee. 
It's a new name, but I think you will see some familiar faces. Mr. 
Secretary, Senator Bond and Senator Murray--I look forward to working 
with you all as we tackle this new bill in the upcoming fiscal year.
    This is my first hearing as a member of the subcommittee and I have 
to say that I wish it could start on a more positive note. 
Unfortunately the President's proposed budget for the work of your 
department is one that again invites disappointment and even 
incredulity, not praise.
    For the fifth year in a row the President has sent up a budget that 
ratchets down affordable housing among our budget priorities, and that 
would increase, not lessen, the burden put on the shoulders of our 
Nation's struggling low-income families.
    The budget before us signals a substantial retreat in our 
commitment to help provide access to safe and affordable housing for 
all Americans. The public housing operating fund has been reduced by 10 
percent, funds for housing for persons with disabilities have been cut 
in half, HOME formula grants have been reduced, fair housing programs 
have been slashed and lead-based paint grants have been cut.
    Most egregious is the complete elimination of the Community 
Development Block Grant program--a proposal that has been met with what 
can be mildly described as skepticism by most members for the United 
States Senate. When all is said and done, the HUD budget is reduced by 
12 percent. One of the few programs to see an increase in this budget 
proposal is the Section 8 program, and even that increase will only be 
enough to restore half of the cuts that were made this year as a result 
of inadequate funding in fiscal year 2005.
    If a budget is a reflection of priorities, and of course it is, the 
message being sent here is that the people who struggle in our society 
and who need the helping hands offered by these programs to put decent 
shelter over their heads do not matter. Our Nation's core affordable 
housing and community development programs are being chipped away, year 
after year. I hope to hear from you today about the vision you have for 
the Department of Housing and Urban Development and how you expect to 
run efficient and effective programs like these, when they are slowly 
being starved to death.

    Senator Bond. And now, Secretary Jackson, we welcome your 
statement. The full statement will be made a part of the record 
as always and we would appreciate your advising us orally of 
the things that you think should be especially highlighted.

                     STATEMENT OF ALPHONSO JACKSON

    Mr. Jackson. Thank you. Chairman Bond, Ranking Member 
Murray, and distinguished members of the subcommittee, thank 
you for inviting me here this morning.
    And I am honored to outline the 2006 budget proposed by 
President Bush for the United States Department of Housing and 
Urban Development. And I appreciate you letting me submit the 
whole record to the committee.

                             HOME OWNERSHIP

    Over the past 4 years, HUD has expanded home ownership, 
increased access to affordable housing, fought housing 
discrimination, tackled homelessness, and renewed its 
commitment to those most in need.
    HUD's $28.5 billion budget for 2006 seeks to build on our 
success and lend a compassionate hand to individuals in need, 
while also using taxpayers' money more wisely.
    In June 2002, President Bush challenged the Nation to 
create 5.5 million new minority homeowners. In 2004, more 
Americans achieved the dream of home ownership than at any 
other time in our Nation's history. Today, nearly 70 percent of 
all American families own their homes, an all-time record.
    Since the President challenged us in August of 2002, 2.2 
million more minority families have become homeowners. This 
represents about 40 percent of the goal. As a result, for the 
first time in the history of minority home ownership, it is 
over 51 percent.
    Despite this progress, we have a long ways to go. For many 
families, high down payment and closing costs represents the 
greatest barrier of home ownership.
    Since President Bush signed the American Dream Downpayment 
Act into law in December of 2003, HUD has distributed $162 
million in funds to over 400 State and local governments.
    These funds have already helped thousands of families 
purchase their first home and more than 50 percent of the 
buyers were minorities.
    The 2006 budget requests $200 million to fully fund the 
program and help an estimated 40,000 homeowners. The budget 
also proposed $40 million for housing counseling to assist some 
700,000 families to become homeowners.

                            SECTION 8 REFORM

    The fiscal year 2006 budget will make government a better 
steward of the taxpayers' money. Reform of the Section 8 
Housing Choice Voucher Program is important.
    In fiscal year 2001, HUD's three Section 8 programs 
consumed 43 percent of the annual budget. That percentage has 
increased to 57 percent in 2005.
    The rate of increase combined with the extreme complex set 
of laws and regulations has resulted in a program that is 
difficult to sustain.
    In the past, funds were distributed to the public housing 
authority for a specific number of vouchers based upon the 
number of units leased. Congress recently converted the unit-
based allocation system to a budget-based system.
    However, for the budget-based system to work, program 
requirements must be simplified and PHAs must have greater 
decision-making flexibility.
    Chairman Allard, who is on the Appropriations Committee, 
has introduced and authorized legislation to implement the 
Section 8 reform. Section 8 programs will fill an important 
component of HUD's mission and I am committed to it and its 
success.

                              HOMELESSNESS

    Throughout the budget, we will strengthen the assistance to 
the most needy. That is children from low-income families, the 
elderly, those physically and mentally disabled, victims of 
predatory lending, and families living in housing contaminated 
by lead-based paint.
    The administration is committed to ending homelessness and 
has aggressively pursued the policy to move more homeless 
families and individuals to permanent housing.
    The budget provides a record-level resource of permanent 
and supported housing for the homeless. This budget provides 
$1.4 billion for homeless assistance grants. Twenty-five 
million will go to the present Re-entry Initiative.
    The budget also proposes $39 million in funds for HUD's 
Fair Housing Programs to ensure that everyone has access to 
suitable living conditions, and a suitable living environment 
that is free from unlawful discrimination.
    All of us share the goal of creating housing opportunities 
for America. And we have done a great job in the past 4 years. 
We should be proud of a lot of the things that we have done, 
but we should not be satisfied because there is an awful lot to 
be done.
    I look forward to the challenges ahead and will seek the 
open communications to new home ownership, affordable housing 
opportunities, economic growth, and prosperity.

                           PREPARED STATEMENT

    I would like to thank you, Mr. Chairman, and the ranking 
member of the subcommittee for your support and for your 
continued support in the future. And I will look forward to 
your guidance.
    [The statement follows:]

                 Prepared Statement of Alphonso Jackson

    Chairman Bond, Ranking Member Murray, distinguished members of the 
subcommittee, thank you for the invitation to join you this morning. I 
am honored to outline the fiscal year 2006 budget proposed by President 
Bush for the U.S. Department of Housing and Urban Development (HUD).
    Over the past 4 years, HUD has expanded home ownership, increased 
access to affordable housing, fought housing discrimination, tackled 
homelessness, and made a new commitment to serving society's most 
vulnerable. The Department has implemented innovative solutions to 
address our Nation's housing needs, and our results have been 
impressive and measurable.
    HUD's $28.5 billion in new net budget authority for fiscal year 
2006 seeks to build on our success and lend a compassionate hand to 
individuals in need, while also using taxpayer money more wisely and 
reforming programs in need of repair. The HUD budget proposed by the 
President reflects this intent through three broad, yet focused 
strategic goals: promoting economic opportunity and ownership, serving 
society's most vulnerable, and making government more effective.
    In his February 2 State of the Union Address, the President 
underscored the need to restrain spending in order to sustain our 
economic prosperity. As part of this restraint, it is important that 
total discretionary and non-security spending be held to levels 
proposed in the fiscal year 2006 budget. The budget savings and reforms 
in the budget are important components of achieving the President's 
goal of cutting the budget deficit in half by 2009 and we urge the 
Congress to support these reforms. The fiscal year 2006 budget includes 
more than 150 reductions, reforms, and terminations in non-defense 
discretionary programs, of which eight affect HUD programs. The 
Department wants to work with the Congress to achieve these savings.
    The funding reductions, reforms, and terminations contained within 
HUD's fiscal year 2006 budget represent difficult choices in an era of 
significantly diminished resources for all domestic discretionary 
programs. These decisions were made thoughtfully, following an analysis 
of each program's current funding levels and an assessment of future 
needs.

              PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP

    The President's vision of an ``ownership society'' has been a 
central theme of his administration. Ownership--and home ownership in 
particular--is the key to financial independence, the accumulation of 
wealth, and stronger, healthier communities.
    Home ownership creates community stakeholders who tend to be active 
in charities, churches, and neighborhood activities. Home ownership 
inspires civic responsibility, and homeowners are more likely to vote 
and get involved with local issues. Home ownership offers children a 
stable living environment, and it influences their personal development 
in many positive, measurable ways--at home and at school.
    Home ownership's potential to create wealth is impressive, too. For 
the vast majority of families, the purchase of a home represents the 
path to prosperity. A home is the largest purchase most Americans will 
ever make--a tangible asset that builds equity, good credit, borrowing 
power, and overall wealth.
    In 2004, more Americans achieved the dream of home ownership than 
at any time in our Nation's history. Today, nearly 70 percent of 
American families own their homes--an all-time record--and minority 
home ownership has surpassed 51 percent for the first time in history.
    That figure, however, points to a significant home ownership gap 
between non-Hispanic whites and minorities. In June 2002, the President 
challenged the Nation to create 5.5 million new minority homeowners by 
2010. Since the President's challenge, 2.2 million minority families 
have joined the ranks of homeowners, and we are on track to meet the 
5.5 million goal.
    The administration is working to make home ownership more 
affordable and more accessible. Government should do everything it can 
to help families find the security, dignity, and independence that come 
with owning a piece of the American Dream.
    For many Americans, high downpayments and closing costs represent 
the greatest barrier to home ownership. To help overcome this obstacle, 
the President proposed the American Dream Downpayment Initiative to 
provide low- and moderate-income families with the funds and support 
needed to purchase their first home. On December 16, 2003, President 
Bush signed the American Dream Downpayment Initiative into law, and 
since then, HUD has distributed $162 million in downpayment funds to 
over 400 State and local governments. These funds have already helped 
over 3,500 families purchase their first homes--of which more than 50 
percent were minorities. The 2006 budget requests $200 million to fully 
fund the Initiative.
    Helping families learn about the loan products and services 
available to them and how to identify and avoid predatory lending 
practices is critical to increasing home ownership. Housing counseling 
has proven to be an extremely important element in both the purchase of 
a home and in helping homeowners keep their homes in times of financial 
stress. The fiscal year 2006 budget proposes $40 million for Housing 
Counseling to assist over 700,000 families to become homeowners or 
avoid foreclosing on their homes. This effort will fully utilize faith-
based and community organizations.
    To remove two of the largest barriers to home ownership--high 
downpayment costs and impaired credit--the budget proposes two mortgage 
programs. The Zero Downpayment Mortgage allows first-time buyers with a 
strong credit record to finance 100 percent of the home purchase price 
and closing costs. For borrowers with limited or weak credit histories, 
a second program, Payment Incentives, initially charges a higher 
insurance premium and reduces premiums after a period of on-time 
payments. In 2006, these new mortgage programs will assist more than 
250,000 families achieve home ownership.
    The President is also proposing a new Single Family Homeownership 
Tax Credit that could increase the supply of single-family affordable 
homes by an additional 50,000 homes annually. Under the President's 
plan, builders of affordable homes for moderate-income purchasers will 
receive a tax credit. State housing finance agencies will award tax 
credits to single-family developments located in a census tract with 
median income equal to 80 percent or less of area median income and 
will be limited to homebuyers in the same income range. The credits may 
not exceed 50 percent of the cost of constructing a new home or 
rehabilitating an existing property. Each State would have a home 
ownership credit ceiling adjusted for inflation each year and equal to 
the greater of 1.75 times the State population or $2 million. In total, 
the tax credit will provide $2.5 billion over 5 years.
    As you know, tax legislation is the responsibility of the Treasury 
Department, but we will be working with Treasury's Office of Tax Policy 
to ensure that the credit legislation addresses issues such as 
disclosures, so that the credit operates smoothly.
    The Homeownership Voucher program, while still new, has 
successfully paved a path for low-income Americans to become 
homeowners. Together with pre- and post-home ownership counseling, 
strong and committed collaboration among Public Housing Authorities 
(PHAs), local non-profits, and lenders has proven to be essential in 
making the program work for families across the country. The greatest 
challenge to the success of the program is finding lenders who are 
willing to participate.
    Government-sponsored enterprises were chartered to help low- and 
moderate-income families secure mortgages. HUD recently published a 
rule that requires Fannie Mae and Freddie Mac to increase their 
purchases of mortgages for low- and moderate-income households and 
underserved communities. These new goals will push the GSEs to 
genuinely lead the market in creating home ownership opportunities for 
those traditionally underserved by the mortgage markets, particularly 
first-time homebuyers.
    In addition to increasing the housing goals annually from 2005 
through 2008, HUD's rule establishes new home purchase subgoals in each 
of the three goal areas. This is intended to focus the GSEs' efforts on 
the purchase of home mortgages, not refinancings. HUD projects that 
over the next 4 years, GSEs will purchase an additional 400,000 home 
purchase loans that meet these new and more aggressive goals as a 
result of the new rule.
    As the primary Federal agency responsible for the administration of 
fair housing laws, HUD is committed to protecting the housing rights of 
all Americans, regardless of race, color, national origin, religion, 
sex, familial status, or disability. This commitment is reflected in 
HUD's budget request for fiscal year 2006.
    The goal of HUD's fair housing programs is to ensure that all 
families and individuals have access to a suitable living environment 
free from unlawful discrimination. HUD contributes to fair housing 
enforcement and education by directly enforcing the Federal fair 
housing laws and by funding State and local fair housing efforts 
through two programs: the Fair Housing Assistance Program (FHAP) and 
the Fair Housing Initiatives Program (FHIP).
    The fiscal year 2006 budget will provide $23 million through FHAP 
for State and local jurisdictions that administer laws substantially 
equivalent to the Federal Fair Housing Act. The budget also provides 
$16 million in grant funds for non-profit FHIP agencies nationwide to 
directly target discrimination through education, outreach, and 
enforcement.
    The fiscal year 2006 budget requests $583 million to fund Native 
American Block Grants (NABG). These grants are used by tribes and 
tribally designated housing entities to develop new housing units to 
meet critical shortages in housing. Although NABG funding has been 
reduced in fiscal year 2006, HUD expects that all program requirements 
will be met, including new housing development, housing assistance to 
modernize and maintain existing units; housing services, including 
direct tenant rental subsidy; guaranteed lending; crime prevention; 
administration of the units; and certain model activities.

                   SERVING SOCIETY'S MOST VULNERABLE

    Ending Chronic Homelessness.--The administration is committed to 
the goal of ending chronic homelessness, and has aggressively pursued 
policies to move more homeless families and individuals into permanent 
housing. A chronically homeless person suffers from a disabling 
developmental, physical, or mental condition or a substance abuse 
addiction. They have been homeless for a year or more, or they have had 
repeated periods of extended homelessness. They may occasionally get 
help and leave the streets, but they soon fall back to a life of 
sidewalks and shelters.
    Research indicates that although just 10 percent of the homeless 
population experiences chronic homelessness, these individuals consume 
over half of all emergency homeless resources. Housing this population 
will free Federal, State, and local emergency resources for families 
and individuals who need shorter-term assistance.
    In July 2002, the President reactivated the Interagency Council on 
Homelessness for the first time in 6 years, bringing together 20 
Federal entities involved in combating homelessness. Since its 
inception, the Interagency Council has helped State and local leaders 
across America draft plans to move chronically homeless individuals 
into permanent supportive housing, and to prevent individuals from 
becoming chronically homeless. Today, 47 States and more than 200 
county and city governments have joined the Federal effort.
    The budget provides a record level of resources for permanent 
supportive housing for homeless individuals who have been on the 
streets or in shelters for long periods. The 2006 budget provides $1.44 
billion for Homeless Assistance Grants ($25 million of which is for the 
Prisoner Re-Entry Initiative), $200 million more than in 2005. 
Altogether, the administration requests $4 billion in 2006 for Federal 
housing and social service programs for the homeless, an 8.5 percent 
increase.
    Housing for Special Populations.--Housing Opportunities for Persons 
with AIDS (HOPWA) provides formula grants to States and localities to 
provide housing to ensure persons with AIDS can continue to receive 
health care and other needed support. The program also provides 
competitive grants to nonprofit organizations. In fiscal year 2006, 
HOPWA will fund an estimated 25 competitive grants and will provide 
formula funding to an estimated 124 jurisdictions and in total will 
provide an estimated 67,000 households with housing assistance.
    The fiscal year 2006 HOPWA funding request represents a 5 percent 
decrease from the fiscal year 2005 funding level. The reduction was one 
of a number of difficult choices the administration made in formulating 
the fiscal year 2006 budget, but one which is in consistent with the 
goal of restraining spending in order to sustain economic prosperity. 
HUD is seeking changes in the HOPWA formula that will improve the 
targeting of the program, so that HOPWA better supports those whom it 
was created to serve--the most vulnerable persons, and individuals who 
are homeless or with very low incomes--ahead of other low-income 
households.
    The fiscal year 2006 budget proposes to fund grants of $119.9 
million for Supportive Housing for Persons with Disabilities (Section 
811). Section 811 provides assistance to expand the supply and the 
availability of affordable housing for persons with disabilities. The 
administration is proposing the elimination of the program's new 
construction component, resulting in a $118.2 million funding decrease 
from fiscal year 2005. The Section 811 program will continue to support 
all previously funded housing subsidies under the program and up to 
1,000 new housing vouchers. The administration intends to undertake a 
study of the Section 811 program to determine the most efficient use of 
the limited funding available for it.
    HUD's Office of Lead Hazard Control and its Healthy Homes 
Initiative work to eradicate childhood lead poisoning and prevent other 
housing-related childhood diseases and injuries. The fiscal year 2006 
budget proposes $119 million to fund these two programs, a net decrease 
of $47.6 million from the fiscal year 2005 appropriation. The Lead 
Demonstration Project accounts for $46.6 million of this decrease. 
Areas with high incidence of lead poisoning have now developed greater 
capacity, and therefore activities previously funded under the 
Demonstration program will be addressed through the regular grant 
program.

                    MAKING GOVERNMENT MORE EFFECTIVE

    Reforming Community and Economic Development Programs.--The budget 
proposes a new program within the Department of Commerce to support 
communities' efforts to meet the goals of improving their economic 
opportunity and ownership. This initiative will consolidate programs 
such as Community Development Block Grants into a more targeted, 
unified program that sets accountability standards in exchange for 
flexible use of the funds.
    Reforming Low-Income Housing Assistance.--Another way in which the 
fiscal year 2006 budget will make government a better steward of 
taxpayer money is through reform of the Section 8 Housing Choice 
Voucher Program.
    HUD has three major rental assistance programs that collectively 
provide rental subsidies to approximately 4.8 million households 
nationwide. The major vehicle for providing rental subsidies is the 
Section 8 program, which is authorized in Section 8 of the U.S. Housing 
Act of 1937. Under this program, HUD provides subsidies to individuals 
(tenant-based) who seek rental housing from qualified and approved 
owners, and also provides subsidies directly to private property owners 
who set aside some or all of their units for low-income families 
(project-based).
    The Housing Choice Voucher Program, the best known of the Section 8 
rental assistance programs, provides approximately 2 million low-income 
families with subsidies to afford decent rental housing in the private 
market. Generally, participants contribute up to 30 percent of their 
income towards rent, and the government pays the rest.
    In the past, funds have been appropriated for a specific number of 
vouchers each year. These funds were then given to PHAs based on the 
number of vouchers they awarded and at whatever costs were incurred.
    In 2001, the Housing Certificate Fund, under which both the 
project-based and tenant-based Section 8 programs are funded, consumed 
43 percent of HUD's annual budget. That had risen to 57 percent in 
fiscal year 2005, and the trend line continues to increase dramatically 
in the Department's fiscal year 2006 budget. This rate of increase, 
combined with an extremely complex set of laws and rules that govern 
the program, has resulted in a program that increasingly is difficult 
to sustain.
    In response to rapidly increasing costs, Congress recently 
converted this ``unit-based'' allocation system to a ``budget-based'' 
system. This made sense, but for the budget-based system to work, 
program requirements need to be simplified and PHAs need to be provided 
with greater flexibility.
    The administration proposes to simplify Section 8 and give more 
flexibility to PHAs to administer the program to better address local 
needs. Building on changes in the 2005 Consolidated Appropriations Act, 
the administration will shortly submit authorizing legislation to this 
committee that expands the ``dollar-based'' approach. PHAs will 
continue to receive a set dollar amount as in 2005, but they would have 
the freedom to adjust the program to the unique and changing needs of 
their communities, including the ability to set their own subsidy 
levels based on local market conditions rather than Washington-
determined rents. Local PHAs will be able to design their own tenant 
rent policies, and in turn, reduce the number of errors that are made 
and create incentives to work. The administration's plan will eliminate 
many of the complex forms that are currently required to comply with 
program rules, saving both time and money. Furthermore, the 
administration's proposal will reward PHAs for good management through 
performance-based incentives. These changes would provide a more 
efficient and effective program, which helps low-income families more 
easily obtain decent, safe, and affordable housing.
    Human Capital.--After many years of downsizing, HUD faces a large 
number of potential retirements and the loss of experienced staff. 
HUD's staff, or ``human capital,'' is its most important asset in the 
delivery and oversight of the Department's mission. HUD has taken 
significant steps to enhance and better use its existing staff 
capacity, and to obtain, develop, and maintain the staff capacity 
necessary to adequately support HUD's future program delivery. HUD has 
revamped its hiring practices, and now fills jobs in an average of only 
38 days, instead of the 96-day average originally cited by the 
Government Accountability Office. Moreover, HUD has synchronized the 
goals and performance plans of its managers with the overall aims of 
the agency, and is developing a new managerial framework through recent 
hiring and executive training programs.
    Competitive Sourcing.--In April, HUD announced its first public-
private competition, focusing on the contract administration and 
compliance monitoring functions associated with its assisted 
multifamily housing properties. Through this competition and others 
that are being considered, HUD hopes to realize cost efficiencies and 
significantly improve performance.
    Improved Financial Performance.--HUD has striven to enhance and 
stabilize its existing financial management systems operating 
environment to better support the Department and produce auditable 
financial statements in a timely manner. While still suffering from 
internal control weaknesses, HUD met the accelerated timetables for 
producing its performance and accountability report, and improved the 
reliability, accuracy, and timeliness of financial systems. HUD is 
continuing efforts to reduce its internal control weaknesses from 10 to 
7 by next year.
    E-Government.--HUD completed security reviews for all of its 
information systems in calendar year 2004, and plans are in place to 
eliminate security defects by next year. HUD awarded its large contract 
for core IT infrastructure, successfully resolving a protest that 
lasted for 2 years.
    HUD Management and Performance.--Today, public and assisted housing 
residents live in better quality housing with fewer safety violations 
than 4 years ago. HUD increased the percentage of projects meeting its 
physical condition standards in public housing by 9 percentage points 
(from 83 percent in 2002 to 92 percent in 2004) and in subsidized 
private housing by 8 percentage points (from 87 percent in 2002 to 95 
percent in 2004). HUD now turns around at least 45 percent of public 
housing authorities classified as ``troubled'' within 12 months rather 
than the 2 years allowed by regulation. New rules and procedures have 
virtually eliminated property flipping fraud from the FHA insurance 
programs, and close monitoring will continue to prevent such abuses. 
New rules and procedures have forced out bad appraisers from the FHA 
program and our ``Credit Watch'' lender monitoring initiative will 
continue to bar other individuals who improperly raise the risk of loss 
in these programs. Since 2002, HUD has worked with stakeholders to 
streamline their Consolidated Planning process into an easy-to-use and 
helpful tool for communities.
    Faith-Based and Community Initiative.--HUD expanded its outreach to 
community organizations, including faith-based organizations, 
attempting to level the playing field for its formula and competitive 
grants. HUD has removed all discriminatory barriers to participation by 
such organizations. HUD's technical assistance has helped these 
organizations understand the application process as well as the 
responsibilities for implementation. These organizations are beginning 
to compete more widely and effectively as shown in their success in 
increasing the number of grants from 659 in 2002 to 765 in 2003, a 16 
percent improvement.
    Improper Payments Initiative.--At the beginning of the President's 
first term, HUD committed to working with its stakeholders to reduce 
the improper payment in rental subsidies by one-half by 2005. At that 
time, over 60 percent of rental subsidies were incorrectly calculated 
by program sponsors due to improper interviews, inadequate income 
verifications, misunderstood program rules, and computational errors. 
Other errors resulted from inadequate verification of tenants' self-
reported incomes. Four years later, HUD has achieved exactly what it 
committed to do. There has been a 27 percent reduction in improper 
subsidy determinations by program sponsors over the past 4 years. More 
importantly, there has been a 50 percent reduction in improper payments 
amounting to $1.6 billion.
    Beginning in 2005, HUD will expand the verification of tenant self-
reported incomes to include recent wage data. This has the dual benefit 
of both improving accuracy and providing more privacy because income 
data will be matched electronically whereas current procedures require 
a paper verification letter to the tenant's employer. These stewardship 
efforts improve confidence that the right person is getting the right 
benefit in a timely, dignified, and private manner as intended under 
law. Because this is the first quarter that agency efforts were rated, 
progress scores were not given.
    All of us share the goal of creating housing opportunities for more 
Americans. We have done great work over the past 4 years, and we should 
be proud of everything we have accomplished together. But we should not 
be satisfied, because our work is far from being finished.
    I look forward to the work ahead, as we seek to open the American 
Dream to more families and individuals, and open our communities to new 
opportunities for growth and prosperity.
    I would like to thank all the members of this subcommittee for your 
support of our efforts at HUD. We welcome your guidance as we continue 
our work together.
    Thank you.

    Senator Bond. Thank you very much, Mr. Secretary.

                      CDBG AUDIT OF PROGRAM ABUSE

    Mr. Secretary, you are probably well aware, as we are all 
too well aware in Missouri, of a recent audit conducted for the 
City of Kansas City that revealed that a not-for-profit agency 
has billed for some $1.1 million in Federal housing funds for 
just two homes on Tracy Avenue. The audit found the contracts 
may have violated Federal regulations.
    As you know, there is great concern in Kansas City over 
misuse of dollars. I have visited there. I have called on the 
IG to investigate. I visited the area with HUD officials 
because we understand that the abuse of taxpayer dollars cannot 
be tolerated.
    While I understand this is an ongoing investigation, I 
would like to know what you can tell me directly about it and 
what HUD is doing to prevent possible abuses from happening 
again as well as your assurance that there will be continued 
attention to this matter.
    Mr. Jackson. First, Mr. Chairman, I want to thank you for 
bringing the matter to our attention. We quickly began the 
process of evaluating exactly what has taken place.
    We are in the process of finding out and we will, when it 
is finished, make our findings to you. We will also take the 
appropriate action.
    As you know, we allocate the funds to the cities and the 
cities have the responsibility to make sure that there is 
checks and balances. But that does not in any way relieve us of 
our responsibility. I take that responsibility greatly.
    So I will tell you that, as you know, we sent a General 
Deputy Assistant Secretary out with you to make the finding----
    Senator Bond. Right. We appreciate that.
    Mr. Jackson [continuing]. We will continue to do that. We 
are going to make every effort to make sure that that does not 
happen again. I will report to you as soon as we have the final 
findings.
    Senator Bond. Thank you very much, Mr. Secretary.
    Is Mr. Ken Donohue, the HUD IG, available?
    Mr. Jackson. Yes.
    Senator Bond. Mr. Donohue, could you come up to the 
microphone. You know I asked you to review the use of CDBG 
funding as it pertains to the rehabilitation of the two houses 
on Tracy Avenue. I know that you have been reviewing the city's 
use and I would like to know what your views are or what you 
can tell us at this time.
    Mr. Donohue. Yes, Mr. Chairman. Thank you very much.
    As you know, we did conduct a series of audits with regard 
to the Kansas City housing programs. The most recent being the 
HEDFC Program.
    And I really do appreciate the chairman's interest with 
regard to the Tracy Avenue project. You agree an expensive 
amount of rehabilitation was spent on those two single-family 
homes.
    I want to assure you that we are continuing to review this 
matter and follow-up on your concerns. I can report out to you 
today that based on these audits, the Department has issued a 
limited denial of participation on the HEFDC and some of its 
officials.
    This will require the City of Kansas City to assume control 
of the $50 million to $80 million with regard to the portfolio 
administered by HEFDC. And I believe the city is currently in 
negotiations to award a contract.
    Senator Bond. We thank you and we look forward to your 
final report.
    When I was there with the representative of Secretary 
Jackson and the Mayor of Kansas City, the City Manager 
expressed a strong commitment to take over the administration 
of the program and to deal with those abuses.
    I know there are many more steps, but we appreciate your 
role in undertaking that.

                  REVIEW OF HOMELESS ASSISTANCE GRANTS

    Mr. Secretary, another, if you will permit me, another 
parochial interest, very important to the City of St. Louis. I 
recently sent a letter March 11 asking HUD to review the award 
of only $4.2 million in homeless assistance grants to the City 
of St. Louis.
    The City was eligible to receive $10.8 million if it scored 
82 points on a continuum of care application. It scored 81 
points and gets $4.2 million instead of $10.8 million.
    This funding is critically important. And I know that there 
are difficulties in reviewing and sometimes they are 
subjective.
    I would like to know the status and would also like to know 
what steps HUD takes to ensure the results in the reviews are 
just, especially when the loss of funds by the narrowest 
margins is such a large magnitude.
    Mr. Jackson. Mr. Chairman, thank you very much.
    We are totally evaluating the allocation. There was a 
technical mistake. And clearly from my perspective, it deserves 
us to look again at the process that we used.
    I think you said it well. In many cases, yes, we try to be 
objective, but sometimes it is very subjective.
    We hope to have an answer to you very quickly, as I have 
said, because it is important that St. Louis receive those 
monies.
    Senator Bond. Thank you very much, Mr. Secretary.
    Now I turn to Senator Murray.
    Senator Murray. Thank you, Mr. Chairman.

             RESCIND UNOBLIGATED CASH AND CARRY-OVER FUNDS

    Mr. Secretary, your fiscal year 2006 budget seeks authority 
to rescind $2.5 billion in unobligated cash and carry-over 
funds from fiscal year 2005 and previous years.
    Your language allows you to take this funding from any 
account within HUD. I was not on the subcommittee that funded 
HUD last year and I am troubled by this practice where you kind 
of ``one hand giveth and the other hand taketh away''.
    Can you please tell us today precisely which programs you 
intend to cut in order to achieve your proposed rescission of 
$2.5 billion?
    Mr. Jackson. Ranking Member, I cannot. And what I will do 
is in all honesty go back and look at possibilities.
    Initially we had said the Section 8 program, but it 
permitted us to take it from other places within our budget.
    I can respond to you for the record and get that to you 
specifically.
    Senator Murray. Well, do you think you will be in a 
position to identify where these cuts are coming from before we 
mark up this appropriations bill probably in July?
    Mr. Jackson. We have the next 18 months to identify. And 
usually we will not start that process until June or July.
    Senator Murray. So when we are marking up the 
appropriations bill, we will have no idea where you are going 
to be taking those from?
    Mr. Jackson. I will tell you we will have to in all honesty 
look at the budget. It is a very, very tight budget that we are 
operating under and I do not want to give you specifics today 
and then find out that 6, 7 months from now those are not the 
specific areas where the rescission will come.
    And I am trying to be as straightforward as I can with you. 
I cannot today give you the specific areas.
    Senator Murray. Well, I think that makes it really hard for 
this subcommittee to write a bill when we do not know where you 
are going to be taking money away from.
    A similar rescission totaling $1.5 billion was imposed on 
this current year. And you do plan to accommodate that 
rescission, I understand, by recapturing unused voucher funds 
from Section 8?
    Mr. Jackson. That is correct.
    Senator Murray. Can you guarantee me that a rescission of 
$2.5 billion as recommended in your budget will not result in 
the loss of housing or other essential services to any of our 
low-income individuals or families served by HUD?
    Mr. Jackson. No, I cannot do that.
    Senator Murray. So it could possibly come from those?
    Mr. Jackson. Yes.
    Senator Murray. Well, I understand that many of your grants 
to actually eliminate homelessness remain unobligated because 
the grants are not transmitted to the housing agencies until 
late in the year.
    Can you guarantee that none of your proposed $2.5 billion 
will be derived by limiting available assistance to the 
homeless?
    Mr. Jackson. Homelessness is an extreme priority for us 
just like the Section 8 program. I will do everything within my 
power to make sure that those are not rescinded.
    Senator Murray. Well, Mr. Secretary, there are very few 
programs I know of that have such wide bi-partisan support by 
members of Congress, governors, mayors. We have been flooded by 
people supporting the Community Development Block Grant.
    The administration is planning to merge this program with 
17 others and then cut the available funding by more than a 
third. The rationale that has been presented in the President's 
budget for consolidating and cutting these programs is that the 
existing programs are cumbersome, duplicative, ineffective, and 
unaccountable.
    Do you feel that CDBG is unaccountable under your 
authority?
    Mr. Jackson. Absolutely not. And that is not the basis for 
the consolidation. What we are saying is to try to get all of 
the economic development programs in one place.
    And I think it would be very hypocritical on my part, 
having been chairman of two community development agencies, one 
in St. Louis and one in Washington, DC, and I have seen the 
effects of those programs which are very positive around the 
country, specifically in Washington. It has been extremely 
effective in Seattle and Spokane.
    So I think to say that the program has been ineffective--
there are problems in the program. There is no question, as 
just the chairman just said.
    But you have to note that once those were brought to our 
attention by OMB, the thing that I did specifically was to 
compel people in the profession, the industry, and members of 
OMB staff to go out and make recommendations how we could 
better make the program work.
    And we came back with those specifics and we have submitted 
those to your committee and to the Senate and to the House as 
to how we can better make the program work.

                           CDBG CONSOLIDATION

    Senator Murray. Mr. Secretary, in the President's budget, 
he said that he is consolidating and cutting these existing 
programs because they are cumbersome, duplicative, ineffective, 
and unaccountable. Those are the administration's words.
    So you are telling me they are not unaccountable?
    Mr. Jackson. I am telling you the Community Development 
Program is not unaccountable. I am saying to you that the 
Economic Development Program for consolidation purposes, yes, a 
number of them exist around six or seven different agencies and 
they are encumbered because some, I do not think, should be----
    Senator Murray. Well, what is cumbersome or ineffective? 
Meals on Wheels, elderly and child day care? What programs that 
CDBG supports are cumbersome and unaccountable?
    Mr. Jackson. Well, I do not think they are not specifically 
talking about the Community Development Program. We are talking 
about the Economic Development Program. We are consolidating 
for the purpose of economic development.
    Senator Murray. Well, the administration is planning to 
merge CDBG with 17 others and then cut that funding by a third. 
And in the budget itself, the President said the reason he is 
merging CDBG is because it is unaccountable and duplicative and 
ineffective.
    And so I am just asking you which programs under CDBG? Is 
it Meals on Wheels? Is it child care? What is it that is 
cumbersome, unaccountable and ineffective?
    Mr. Jackson. I am saying to you, Ranking Member, that is 
not my perspective of what the bill says. We are talking about 
economic development programs, not the Community Development 
Program per se. And that to me is a very different perspective.
    You are asking me their ineffectiveness----
    Senator Murray. I am just reading the words of the 
President's budget.
    Mr. Jackson. I understand what you are saying. I am saying 
to you, are you asking me there is ineffectiveness in the 
Community Development Program? Yes. I think you have seen one 
example which the chairman gave. But I'm saying overall, there 
is a great deal of good that comes from the Community 
Development Program.
    Senator Murray. Thanks, Mr. Chairman.

            RESCISSION OF $2.5 BILLION FOR FISCAL YEAR 2006

    Senator Bond. Thank you, Senator Murray.
    Let me go back to this proposed rescission of $2.5 billion. 
My staff has asked HUD and OMB for justification of the 
rescission.
    Where did you come up with it? I hope that this was not a 
Professor Swag estimate of $2.5 billion. Is there some kind of 
analysis that is performed to justify the level of rescission 
in the budget? There has to be a rationale for a $2.5 billion 
cut. What is it or where is it or when are we going to get it?
    Mr. Jackson. As I said to the ranking member, Mr. Chairman, 
we will start the process probably in June or July looking at 
where the rescissions will occur. To tell you specifically 
where they will occur, I am not in that position to do that 
today.
    Senator Bond. Well, Mr. Secretary, we understand the House 
is going to act on all these bills in June. We are going to be 
acting on them in July. And we need to know what we are buying.
    Are we buying a pig in a poke or are we buying a rational 
plan? At this point, I lean towards the pig. I want to see the 
plan. And June or July, unfortunately I tell you, is not an 
adequate time for us to do our work. We have got to have it 
before we start trying to allocate the headaches that this 
budget causes us. So, please, we need this by the end of April.
    Mr. Jackson. I will make every effort to get it to you as 
quickly as possible.
    Senator Bond. Thank you. We need it by the end of April.

                   TRANSFER CDBG PROGRAMS TO COMMERCE

    Moving on to the CDBG, I got this wonderful November 20, 
2004, consensus document, where a joint HUD, OMB, grantee 
outcome measurement working group reached consensus on an 
outcome measurement system to implement the CDBG program. This 
group spent significant time to make CDBG more effective. I do 
not understand after we have gone through all this effort to 
make it work why the administration wants to eliminate CDBG and 
begin again at Commerce.
    But I have got some practical questions. How could a new 
block grant work even if enacted this year? Even if we were to 
pass it--and I am going to do my best to make sure we do not--
how could the Department of Commerce or any department actually 
get a new program on track, create regulations, educate 
grantees, and get the money out the door?
    What is going to happen to existing projects? Where does 
all this go and how does some other agency get a handle on it?
    Mr. Jackson. I think, not passing the buck, Mr. Chairman, I 
think you are going to have to ask the Secretary of Commerce.
    We simply zeroed out $4.5 billion out of our budget for 
2006. How it is going to be implemented, what is going to 
occur, legislation now is being drafted by Commerce to that 
effect.
    And we will have input in that legislation. But that 
question I cannot answer at this point.

                            STAFFING REQUEST

    Senator Bond. Well, I would look at your staffing request, 
staffing and salaries. HUD is requesting an increase of $32.5 
million over the 2005 level, a total of $1.15 billion for 
salaries. At the same time, the administration is proposing 
elimination of CDBG block granting, homeless, Section 8, as 
well as reduced regulatory requirements over PHAs. Your 
staffing requests are going up while the OMB budget requests 
for programs are going down.
    How could you need even half that amount if we were to 
adopt all of the draconian cuts and removals from HUD 
jurisdiction? What are your true S&E needs were we to enact all 
these changes?
    Mr. Jackson. Those are our true S&E needs. And I will tell 
you that we have cut our staff substantially over the last 2 
years. And it is because in many cases, we have had an increase 
in the cost of living, increase in merit salary that in essence 
requires us to cut the staff but at the same time to meet the 
criteria.
    We feel today that it is very difficult for us to carry out 
some of our missions without an increase in staff and we are 
asking, as we have said before, for the increase in staff. And 
that is what we are projecting within the budget because we 
have to.
    Let me say this to you, Mr. Chairman. When I go out into 
the field--and I am probably one of the few secretaries that 
has ever spent any time in the field. I think I have been, of 
our 81 field offices, I think have been to 53 of them. I have 
been to every one of our regions.
    And when I walk in there and realize that there is not 
enough personnel within those specific field offices or 
regional offices to carry out the work, I think it is 
imperative that I ask not only the administration but also the 
Congress to give me leeway to make sure that those positions 
are filled.
    Senator Bond. Thank you, Mr. Secretary. We want to see that 
your programs work. We want to see that the ones that should be 
in HUD stay in HUD. I know you are going to have to travel to 
Alaska and the great Northwest but please stop in the Midwest 
on the way back.
    Mr. Jackson. And I can assure you I am going to stop by 
Senator Murray's State, too, before I get there or on the way 
back, one of the two.
    Senator Bond. Yes. All right. Well, I will turn the 
questioning over to Senator Murray now.
    Senator Murray. We are a stop on the way to Alaska, so it 
does work.

            NEW CDBG FUNDS TO BE SPENT ON HOUSING ACTIVITIES

    Mr. Secretary, you are the chief administrator for the 
Nation's housing needs. So can you tell me what percentage of 
the Bush Administration's new Consolidated Block Grant Program 
will be spent on housing activities?
    Mr. Jackson. No, I cannot. I think again until the 
legislation is developed by Commerce, I cannot.
    I can tell you 2005, $4.5 billion.
    Senator Murray. We have not gotten any authorizing 
legislation yet. You say that is going to be developed by the 
Department of Commerce?
    Mr. Jackson. Yes.
    Senator Murray. And that you would not have any say in that 
at all?
    Mr. Jackson. No. We will have input in it, yes.
    Senator Murray. So you will have input?
    Mr. Jackson. Yes.
    Senator Murray. So I will assume you will advocate for 
housing needs?
    Mr. Jackson. Absolutely.
    Senator Murray. And you know that roughly a quarter of CDBG 
funds today are used for housing. What would you advocate for 
under the new----
    Mr. Jackson. Again, I will tell you that, as I said a few 
minutes ago to you, I am convinced that the Community 
Development Block Grant Program has some ineffectiveness. But 
as a whole, it is a very excellent program that has done a lot 
for cities in this country.
    So I will continue to advocate the flexibility and that as 
much money as can be appropriated be appropriated for housing 
and community development, that is infrastructure, development 
zones.
    Senator Murray. As this authorizing legislation is put 
together and you are advocating to the Department of Commerce, 
what programs will you tell them should not be cut or what 
current uses under CDBG will you tell them have to remain as 
part of authorizing legislation? What do you think is 
important?
    Mr. Jackson. I think all of it is important.
    Senator Murray. So you are not going to tell them that 
anything is not eligible anymore? Everything will still be 
eligible? Is that what you----
    Mr. Jackson. I think that we have sent over to Congress 
some suggestions and that is for a proposal as to how we can 
best redistribute the Community Development Block Grant fund on 
an equity basis. That is for you all to decide.
    We did not make a recommendation because we thought that 
clearly that was not within our purview. And let me tell you 
why we did that. It is because there are some inequities that 
exist within the program.
    Once OMB did the pilot study for us, we said let us look at 
this and make the best recommendation to Congress that we can 
make. As a whole, I think we have done that. We have also made 
recommendations how to best administer the program.
    So when you start looking at the program, it is a very 
difficult process to say what should or should not be cut. In 
my perspective, all of those programs are very important.
    Senator Murray. So everything that is currently eligible 
for use under CDBG you believe will still be eligible for----
    Mr. Jackson. I will truly advocate that they should be.
    Senator Murray. So we are going to take CDBG, combine it 
with 17 other programs, and then cut the funding by a third and 
everything is still eligible?
    Mr. Jackson. My position is--again, I will go back. We 
reduced our budget by $4.5 billion. How that is going to play 
out in Commerce, I do not have the legislation before me. And 
once we have input in the process, I will tell them what I 
think is very important.
    Senator Murray. But you cannot give us any programs? Meals 
on Wheels, do you think that is affected? Child care? Elderly 
care?
    Mr. Jackson. Yes.
    Senator Murray. It is going to be tough, Mr. Chairman. I am 
looking forward to seeing the administration's proposal.
    All right. Well, let me ask one more question in my time 
then.

                          FOSTER CARE HOUSING

    Mr. Secretary, there are some studies out there indicating 
that the primary reason why as many as 30 percent of our 
children who are in foster care today cannot be reunited with 
one or both of their parents is because they do not have 
adequate housing.
    These are the cases where a parent has gotten over their 
substance abuse problems, fulfilled other requirements, and the 
judge is ready and prepared to reunite the kids with their 
parents as long as they find adequate housing.
    Now, the average welfare family has 2.7 children and the 
cost to the taxpayer of keeping those kids in foster care is 
about $48,000 a year. Your agency, however, provides housing 
for families of this kind for a subsidy of about $13,500 a 
year.
    Do you not think it makes more sense both for the families 
and for the taxpayer to make an aggressive effort to find 
housing for this population so kids can get out of foster care 
and be reunited with their parents?
    Mr. Jackson. I surely do. And let me tell you that that is 
why we have increased the homeless budget by $1.4 billion, but 
we have also created the Interagency on Homeless where we have 
four agencies working together to deal with the homeless 
problem from a holistic point of view, but from a whole 
perspective.
    I had a chance about 5 weeks ago to be out in California 
with Governor Schwarzenegger to see a program called Path that 
is doing exactly what the President has set forth.
    It starts with the person who has been on the streets or 
family that has been on the streets more than 90 days. And they 
start with basically looking at them from a physical, mental, 
and medical perspective, then training them for job training 
and putting them through.
    So I totally agree with you that it is much cheaper and 
much more productive to house them the way you have said with 
our program than to keep a child in foster care.
    Senator Murray. Okay. I understand that the Tenant 
Protective Fund has a special designated program just for 
family reunification. In fact, I believe Senator Bond was 
instrumental in getting that program authorized.
    Mr. Jackson. That is correct.

              NEW VOUCHERS FOR THE TENANT PROTECTIVE FUND

    Senator Murray. But I also understand that no new vouchers 
have been issued for that program for the last 4 years and I 
just want to know why your agency has not issued any new 
vouchers to get some of those families reunited.
    Mr. Jackson. We are issuing the vouchers. And let me say 
this to you. Most housing--well, not most--all housing 
authorities realize that the homeless families take priority on 
their waiting list.
    If we can find or if you can denote to me those that are 
not doing that, I will be happy to speak with them. But that is 
a top priority of every housing authority in this country.
    Senator Murray. Well, I understand you are issuing 
renewals, but you are not issuing any new vouchers. And I have 
heard that that is because you want to leave that funding 
available for your rescissions. Is that correct?
    Mr. Jackson. That is not true.
    Senator Murray. Okay. So why have no new vouchers been 
issued?
    Mr. Jackson. We do not have new vouchers to actually issue 
at this point. I mean, we have funded the program and the new 
Section 8 voucher program by $1.1 billion increase.
    What is occurring is this, and we are going to have to deal 
with this, is that pre-1998, housing authorities received a 
budget base amount of money. And I can tell you because I am 
probably the only Secretary ever to appear before you have ran 
a housing authority.
    In Dallas, we got $20 million as an example and we housed 
as many people as we could. Today it is unit-based. Well, we 
just moved away from the unit-based. But it was unit-based.
    And what occurred is this. With the unit-based, we also put 
another appendage to it that 75 percent of those vouchers must 
be used for people 30 percent or less of median.
    What that created was a symptomatic problem. When we did 
that, 90 percent or over 90 percent of those people do not pay 
anything to live. In fact, we pay them to live in subsidized 
housing. We pay their utilities. We pay their expenses.
    So what we have seen is the Section 8 budget rise 
exponentially, but we are not housing any more people. If I go 
back to 1995, when I left the Housing Authority in Dallas, I 
will bet you that today that 60 percent of the people who were 
on that waiting list are still there today.
    Senator Murray. That is right because housing prices have 
increased.
    Mr. Jackson. No, they have not. They have increased in your 
area. They have increased on the east coast. But west, 
southeast, the housing costs for apartments have gone down. 
But, yet, we are paying extremely high prices because the unit-
based system has protected landlords to charge what they wanted 
just to get a person in.
    I think competitively, once we go back to a system where 
people are paying, I think we will have a different situation. 
That is why we have suggested that we raise the limit to 60 
percent of median where we do have people.
    Pre-1998, a person spent about 3.5 years on a voucher.
    Senator Murray. Are you going to protect areas that have 
higher housing costs?
    Mr. Jackson. Today they're spending 8.
    Senator Murray. Are you going to protect areas like the 
Northwest and Northeast that----
    Mr. Jackson. Absolutely. And I think that that flexibility 
in the flexible voucher program gives the housing authority 
with a budget-based process and the flexibility they have to 
decide what they want to pay for a voucher.
    Senator Murray. My time is up.
    Senator Bond. Thank you, Senator Murray.

                                HOPE VI

    I am going to try to wrap up my questions on this round. 
Obviously as you might expect, I have an extensive question on 
the HOPE VI rescission since I spent so long working to get it 
established and know how it works.
    I am going to give you some time and maybe somebody at OMB 
can help you write a rationale of why you are trying to not 
only gut it but also rescind prior year funding.

          IMPACT OF THE BUDGET-BASED SECTION 8 VOUCHER PROGRAM

    Let me move to the Section 8 vouchers. You know, we work 
with you and I think we reformed the Section 8 voucher program 
as a budget-based program by requiring HUD to allocate funds by 
a budget-based formula. Unfortunately, we have not been able to 
get the data for the 2005 bill to make sure we included enough 
funding. We did the best we could, but I would like to ask you 
what is the impact of the approach? Are the number of vouchers 
going to decrease from the high point? What is HUD doing to 
ensure that PHAs are providing better data? Are they lowering 
payment standards and what has been the impact of this new 
budget-based program for Section 8 tenants?
    Mr. Jackson. I welcome that question and let me tell you 
why, Mr. Chairman, because I think we have not held the public 
housing authorities accountable in the unit-based system.
    I do believe that the passage of the budget-based program 
last year, if with the passage of the flexibility this year, 
will give housing authorities the abilities to house more 
people and to have a tremendous turnover.
    I think we have to look at the basis for the Section 8 
program. And I think over the years, we have lost that 
perspective and I am not talking about the Congress. I am 
talking about the housing authorities.
    The Section 8 program was created as a transition between 
public housing and conventional housing. And when I say that, I 
mean whether it is affordable rental property or home 
ownership.
    We have, over the last 15 years, made it a substitute for 
public housing. And since 1998, we have made it basically 
public housing in many ways when we said only 30 percent or 
less must get 75 percent of the vouchers.
    To me, there are still people in this country at 60 percent 
of median who can use a voucher for a period of time. Pre-1998, 
we spent about 3 years with the voucher, 3.5 years. Since 1998, 
it has gone to about 8 years.
    But the key to it is that we are not serving any more 
people. We are serving the lowest of the lowest and we have 
planned projected prices that clearly should not be paid in 
many parts of the country.
    That is not in Senator Murray's area in the West Coast or 
in the East Coast. Maine, Massachusetts, yes, those are very 
high markets. But in the Southeast, the South, and the 
Southwest, the markets are not that high. In the Midwest, the 
markets are not that high. We have ample rental apartments, but 
still we are paying this unit-based cost.
    So my contention is, Senator, if we can pass the flexible 
part of the Voucher Program now that it is already budget 
based, we can begin to house more people and they will not be 
on the program as long.

                         NEGOTIATED RULE-MAKING

    Senator Bond. I raised concern earlier about the public 
housing negotiated rule-making. The negotiated rule was based 
on a study conducted by the Harvard University Graduate School 
of Design. Unfortunately, the OMB-revised rule appears to 
deviate significantly from the negotiated rule. Is not this 
revision, substantial revision a violation of the negotiated 
rule-making process which we are required by statute?
    Mr. Jackson. I had a meeting yesterday with the leadership 
of the three major entities that represent housing authorities. 
That is the Council on Large Housing Authorities, five of the 
Public Housing Authority directors, Ann Clap of the Council on 
Large Housing Authorities. They perceived that it is.
    We think that we were very candid with them in our process 
of negotiation when we said that there is always possibilities 
that there will be changes. During the comment period, you will 
have a chance to make your wishes known.
    We think that probably 85, 90 percent of what we negotiated 
is within the rule today. Were there changes? Yes. Will they 
have a chance to make sure that their voices are heard? 
Absolutely. Are the housing authorities losing? Yes.
    But the majority of the housing authorities are gaining 
under the present negotiated rules, Chairman Bond. And, you 
know, we think 80, 85 percent of them are gaining. Will we ever 
get 100 percent? No.
    But we believe--and we are open, as I told all three of the 
representatives yesterday, to listening to them and to go back 
and see if there is some efforts we can make to correct some of 
the concerns that they have.

                         FHA MORTGAGE INSURANCE

    Senator Bond. One final question is going to be on FHA 
mortgage insurance. And I would invite Mr. Donohue to come back 
up to the table and just give us a quick summary of what is 
happening with the increasing FHA defaults and what is your 
assessment of the Zero Downpayment program based on the audits 
you have conducted on the FHA mortgage insurance program.
    Mr. Donohue. We have done substantial work as far as audits 
with regard to the FHA default and we concur with the spiked 
increase of defaults in the past few years. I believe you 
quoted 6.9 percent for 2004.
    I believe in our review, the zero down payment or no out-
of-pocket money for the recipient has inherent problems that 
can impact on the FHA funds even though I know FHA is 
increasing the premium amounts, but I do think that this could 
have an impact on the function and operation of FHA.
    Senator Bond. Mr. Secretary, home ownership is at an all-
time high, 73.7 homeowners. However, some people are not ready 
for home ownership.
    Mr. Jackson. That is correct.

                          ZERO DOWNPAYMENT ACT

    Senator Bond. Why should we take the risk to the FHA fund 
when it appears that the only way you can reach out is to 
provide people no-cost housing which we have seen unfortunately 
leads to defaults? And it is not only disastrous for the 
community but disastrous for the credit history and the 
reputation of the families who get this so-called benefit.
    Mr. Jackson. Mr. Chairman, FHA claims are down 15 percent 
from last year. And why I think it is necessary, I will tell 
you. Again--and I do not say this for advisement. I am probably 
the most traveled Secretary to the persons that we serve.
    I would just like to use an example of a family that I met 
in Las Vegas, the Gonzaleses, who came to this country, I 
think, some 20 years ago. The wife works in the hotel, but she 
works in the maid service. The husband works in the kitchen of 
another major hotel.
    Together they make about $40,000 each. I believe that the 
most difficult things that they said to me with them is the 
ability to make the down payment and closing costs. They are 
paying about 42, 43 percent of their money for rent.
    If we can get them into a home, I am convinced in my heart 
that they are going to stay in that home. They will probably be 
paying about 30 percent of their income for rent.
    See, I believe this. I will not call the name of my friend 
because if I call him, you and I will both know him. But I have 
a friend who is a major doctor who has defaulted on two homes 
and both of them were zero down payments. He still has another 
million dollar home with a zero down payment.
    I believe that if we can give low-and moderate-income 
persons the same opportunities, we will not have a huge default 
rate. I believe we should give them that opportunity.
    And, you know, I will just close with this, something that 
my mother used to say, and this is why I stress home ownership 
a lot but also affordable housing. To live with a dream might 
be madness, but to live without a dream is insanity.
    There are a lot of people who want home ownership. I think 
if we can help them through what the President has put forth 
with the American Dreams Down Payment Act and Zero Downpayment 
Act a number of people who would not have the opportunity to be 
homeowners will be.
    Senator Bond. I appreciate your explanation. But when you 
look at what happens, I am afraid that is a path for a lot of 
hardship for communities and families.
    Senator Murray.

                           FARM LABOR HOUSING

    Senator Murray. Thank you. I just have a couple more 
questions and I will submit some. I have some more on HOPE VI 
too.
    But I wanted to ask you about a significant need across the 
country and my home State and that is for seasonable and 
permanent farm labor housing.
    I am aware of the assistance of the Department of Labor and 
Agriculture in this area as well, but it really is not enough 
to meet the needs out there.
    Can you talk to us about what HUD's current authority is 
and activities related to farm labor housing and do you think 
your agency is doing everything it can in that area?
    Mr. Jackson. I am just not sure. I have to ask the 
Assistant Secretary Weicher.
    Mr. Weicher. I am sorry, Senator Murray. We do not have 
responsibility for----
    Mr. Jackson. I did not think so.
    Mr. Weicher [continuing]. Lending. We do not have the 
responsibility for the Rural Housing programs and the Old 
Farmer's Home Administration. We can make loans in rural areas 
and we do, but those are separate programs.
    Senator Murray. So you do nothing for farm labor housing?
    Mr. Weicher. I beg your pardon?
    Senator Murray. You know, I notice that you talked a lot 
about homelessness and I know that the President reactivated 
the U.S. Interagency Council on Homelessness so cabinet-level 
leaders can work together on that problem.
    The farm labor community is one of the most poorly-housed 
populations in the Nation and the only government solutions 
really are spread out over three different departments.
    Mr. Secretary, you are the lead national official for the 
Nation's housing needs and farm labor housing is one of those.
    Would you see any merit in convening a cabinet-level 
working group to address farm labor housing and would you be 
willing to work with me on this?
    Mr. Jackson. Absolutely.
    Senator Murray. Well, I would like to----
    Senator Bond. Senator Murray, excuse me. I have been 
summoned back to my office and if you don't mind, I will give 
you the----
    Senator Murray. Great.
    Senator Bond. I thought you might just like a little bit of 
practice in case. So with that----
    Senator Murray. Senator Leahy and I will be more than----
    Senator Bond [continuing]. I thank you, Mr. Secretary, for 
your noble efforts to answer some unanswerable questions. I 
intend to ask others the same questions.
    And, Senator Leahy, you can continue with Senator Murray.
    Senator Murray [presiding]. I just have one additional 
question----
    Mr. Jackson. Thank you, Mr. Chairman.
    Senator Murray [continuing]. And I will turn it over to 
Senator Leahy. But thank you, Mr. Chairman.
    Mr. Secretary, I have one other question. I do want to 
follow up the farm labor housing with you. It is a critical 
housing issue and we have not done enough. We need to do more 
and I want to work with you on that.

                ERROR IN DISTRIBUTION OF SECTION 8 FUNDS

    But let me ask you one other question. I recently heard 
from King County Public Housing Authority. It is one of the 
largest public housing authorities in my State. And they tell 
me that as a result of a computing error that was executed by 
HUD in the distribution of Section 8 funds, they are enduring a 
loss of $800,000 this year.
    And I am told that HUD staff admitted to them that this was 
done in error, but HUD is also telling them they now do not 
have the money to rectify that error, their error.
    As a result, this agency is contemplating sending out a 
letter to all the families on their waiting list explaining 
that as a result of those losses, they are going to be 
terminating that waiting list since no families on the waiting 
list will have any hope of getting a housing voucher at any 
time in the future.
    There are currently 5,000 seniors, disabled people, single 
parents, and refugees who are on that waiting list who are 
about to get that notice because of an error made by HUD.
    Are you familiar with this situation?
    Mr. Jackson. Yes.
    Senator Murray. Well, I would appreciate your response then 
today on what----
    Mr. Jackson. We are resolving that situation and it should 
be resolved immediately with the King County Housing Authority.
    Senator Murray. And will we be getting a phone call today 
regarding that?
    Mr. Jackson. I cannot say today, but Assistant Secretary 
Liu has been in contact with the executive director there.
    Senator Murray. Well, as of last night, they had not heard 
anything. Can we have someone call us today----
    Mr. Jackson. I surely will if they have not.
    Senator Murray [continuing]. And let us know when that 
phone call is going to be made and how that will be rectified?
    Mr. Jackson. I sure will, Senator.
    Senator Murray. Thank you very much.
    Senator Leahy.

                 STATEMENT OF SENATOR PATRICK J. LEAHY

    Senator Leahy. Thank you. Thank you, Senator Murray.
    Secretary Jackson, I would like to welcome you, in your 
first appearance before our newly reconstituted and renamed 
subcommittee. Sometimes it is hard to keep track of all the 
name changes.
    I see some familiar faces here, of course, Senator Bond, 
who just stepped out, and Senator Murray, two people with a 
great deal of experience.
    So I am looking forward to working with all of you as we 
tackle this new bill in the upcoming fiscal year.
    This is my first hearing as a member of the subcommittee, 
although I have been on the full committee for nearly 30 years. 
I wish we could start on a more positive note.
    But if we look at the President's proposed budget, it calls 
for a total of 12 percent in cuts to housing and community 
development programs. Some days I wish our housing and 
community development programs were treated with the same 
expanding budget as they are if they are in Baghdad or 
somewhere in Iraq and not here in the United States.

                      ELIMINATION OF CDBG PROGRAM

    Most egregious I find is the complete elimination of the 
Community Development Block Grant programs. I know that has 
been raised this morning, but I have got a couple of questions 
on it.
    And I am not suggesting it is an either/or thing with Iraq, 
but we do fall over ourselves to increase, for example, law 
enforcement money for Iraq at the same time we eliminate the 
Cops program here in the United States.
    We work to increase housing in Iraq, we cut it here. We 
increase some of the educational funds for Iraq, we cut it here 
in the United States.
    And after a while, people are justified in asking do we 
have to be an either/or as a great nation?
    CDBG is the largest program up for elimination. And the 
President says he calls it a Strengthening America's 
Communities Initiative, some of us however call it the 
Abandoning America's Communities initiative.
    Under the proposal, 18 community and economic development 
programs would be abolished. A new block grant program will be 
established at the Department of Commerce.
    Now, I see no specifics in the goals of this program. We 
have no information on how the money is going to be allocated. 
We have no information on what activities will be eligible. We 
do know however that it is going to be $2 billion less than was 
spent last year in community and economic development.
    And considering the fact that your agency, Secretary 
Jackson, is principally responsible for housing and community 
development, why would you agree to turn this over to the 
Department of Commerce? They have no experience in this field.
    Your department has decades of experience. You have superb 
professionals at HUD, from both Democratic and Republication 
administrations. Commerce has none of that expertise.
    How do you justify this?
    Mr. Jackson. Senator, as I said before the House Committee, 
we made what we perceived as a logical argument as to where the 
Economic Development Program should be housed, that is the 
Strengthening America's Community Initiative Program. The 
decision was made that it would go to Commerce.
    We are in full agreement that the economic and development 
programs from those 17, 18 departments should be consolidated. 
We felt that we could do the job at Housing. But Commerce also 
had an economic and development program.
    And the decision was made and I fully support the 
consolidation. I will tell you that right now of those 
programs.
    Senator Leahy. Does this not eliminate community 
development as part of HUD's core mission?
    Mr. Jackson. We have zeroed out $4.5 billion that was 
allocated for the Community Development Program. We still have 
the HOME program and other programs that were under the 
community development----
    Senator Leahy. If you have got 37 percent less money, how 
are you going to do it?
    Mr. Jackson. Senator, as I said to the Ranking Member 
Murray, we zeroed out $4.5 billion out of our budget. I cannot 
comment on what the budget will look like or what the programs 
will look like at Commerce.
    What I said to her is that we will use our vast experience 
in giving advice to Commerce as to what we think is very 
important with the Community Development Program.
    Senator Leahy. Do not hold your breath waiting for them to 
take that advice because basically they cut the money, they got 
rid of HUD's core mission, and handed it over to somebody who 
has no experience.
    The budgets for HUD when they've come up here over the 
years have been littered with bullet holes. One year, it is 
Section 8. Next it is Public Housing. Next it is CDBG.
    It appears to me that the administration just abandoned 
HUD. Obviously you feel differently. Your testimony says you 
feel differently. But it is awfully hard to see it otherwise.

                     ADDITIONAL COMMITTEE QUESTIONS

    Thank you, Senator Murray. If I have other questions, I 
will submit them for the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

              Questions Submitted by Senator Arlen Specter

                    CDBG AND LOCAL COMMUNITY SUPPORT

    Question. The President's fiscal year 2006 Budget proposes to 
consolidate 18 economic development programs, including HUD's CDBG 
program, into one program within the Department of Commerce. In fiscal 
year 2005, the CDBG program was allocated $4.11 billion. However, the 
President's fiscal year 2006 Budget would provide only $3.7 billion for 
the consolidated initiative, which includes all 18 programs. I have 
heard from many Pennsylvania communities that the CDBG program provides 
critical funding to support many community development activities such 
as housing rehabilitation, public facilities, public services and 
economic development.
    With the elimination of the CDBG program--the largest source of 
Federal assistance to State and local governments for community and 
economic development projects, how do you propose to work with local 
communities to continue to meet HUD's mission to support community 
development and address the housing needs of society's most vulnerable?
    Answer. HUD will continue to administer all its housing and 
homeless assistance programs that provide much needed assistance in 
accordance with HUD's mission. The new program, Strengthening America's 
Communities Initiatives (SACI), at the Department of Commerce will also 
address community and economic development needs in a productive and 
targeted manner.

                                HOPE VI

    Question. HOPE VI enhances communities by decentralizing poverty 
and giving families an opportunity to live in mixed-income 
neighborhoods with better educational and employment opportunities. I 
have visited HOPE VI sites throughout Pennsylvania and have discovered 
the critical impact that reconstruction in these public housing 
developments has on revitalizing neighborhoods. In the past, HUD 
officials have cited problems with the slow pace of HOPE VI 
reconstruction and high costs, in comparison to other HUD programs. 
However, I have often heard from my constituents that delays of HOPE VI 
projects were linked to HUD's approval process. Can you respond to the 
concerns raised by my constituents that delays in HOPE VI projects were 
often the result of HUD policies?
    Answer. Since its inception as a demonstration program, HOPE VI has 
pursued the ambitious and complex goal of revitalizing the Nation's 
most severely distressed public housing developments. In pursuit of 
this objective over the last 12 years, the program has evolved 
significantly in its structure, methodology, and administration, 
offering an unprecedented learning opportunity for HUD and HOPE VI 
grantees.
    As the program evolved, the mixed-finance development approach was 
incorporated into the HOPE VI program. In accordance with 24 CFR 941, 
subpart 6, which controls such development, the Department has been 
reviewing the PHAs' development proposal and legal documents for each 
construction phase in each HOPE VI grant. Due to the size of the HOPE 
VI grants, combined with other leverage funds that the PHAs have 
obtained, each grant may be broken out into 5 or 6 construction phases, 
resulting in a complex, and potentially time-intensive review process. 
Despite the complexity of the mixed-finance approach, the time it takes 
to complete construction has actually decreased significantly over the 
life of the HOPE VI program. Where the average grant completion time 
was 8 years HUD is endeavoring to lower that average to 4\1/2\ years.
    This reduction in time is due to the heightened emphasis HUD 
continues to place on meeting deadlines and completing HOPE VI 
developments. Earlier in the HOPE VI Program, grantees were having 
difficulty constructing the required housing units in accordance with 
their original production schedules. HUD made significant strides to 
improve its oversight of HOPE VI grantees and management of the HOPE VI 
program between 2001 and 2004 in an effort to increase unit production 
and decrease delays in completing HOPE VI developments. These changes 
resulted in a shift from oversight and management approaches that 
included fluid production deadlines and expectations to a more balanced 
approach that makes HOPE VI grantees and HUD staff accountable for the 
progress of HOPE VI projects. Although grantees have clearly grown in 
capacity since the inception of the program, HUD's attention to 
deadlines and timely completion of developments has forced grantees to 
adhere to schedules and complete projects as planned. In turn, HUD 
continues to work internally to minimize the time necessary for review 
and approval by developing model documents, waiver opportunities and 
other streamlining procedures.
    Question. Additionally, as HOPE VI has accomplished one of its 
goals of demolishing 100,000 units--which suggests to me that the 
program has been effective--how does HUD propose to accomplish this 
level of reconstruction in the future if HOPE VI is eliminated?
    Answer. Rather than funding new rounds of HOPE VI grantees in 
fiscal year 2006, the Department believes that it is more responsible 
for the Department to aggressively manage and complete the grants 
currently awarded, many of which are years from completion. This pause 
will also give the Department time to continue to develop better 
methods for assessing distress, develop new financing tools and 
delivery mechanisms that are less costly and more efficient, and 
explore the need for a new public housing revitalization program that 
is designed to address the scope of severe distress present in today's 
public housing inventory.
    The Department recognizes the importance of addressing the current 
capital backlog within the public housing inventory. In most cases, 
this need can be more appropriately met through other modernization and 
development programs operated by the Department e.g., the Capital Fund, 
Capital Fund Financing Program and Mixed-Finance development. The 
Department continues to encourage housing authorities in need of this 
assistance to submit project proposals to these programs. To date, the 
Department has approved over $2.4 billion in transactions using the 
Capital Fund Financing Program, with approximately $94 million in 
additional funds in the pipeline. Of the approved transactions, over 
$254 million will be used for development activities.

                             MOVING-TO-WORK

    Question. Moving-To-Work (MTW) has enabled public housing 
authorities to implement federally-funded housing programs based on 
local needs by providing budget flexibility and regulatory relief. On 
December 15, 2005, I, along with 11 Senators, sent you a letter 
supporting the extension of MTW agreements to 2011 for public housing 
authorities that request an extension of their current demonstration 
term. We have received your response and understand that participants 
whose agreements are expiring in 2005 will be offered a 1-year 
extension. While we thank you for your response and the 1-year 
extension, could you please clarify why some public housing authorities 
initially received MTW extensions through 2011?
    Answer. No housing authorities have received an extension to 
continue their MTW demonstration until 2011. Agreements for three of 
the demonstration participants have expiration dates that far out. 
Oakland and Baltimore only recently executed their agreements and were 
given the now standard 7-year term. Their Agreements expire in 2011 and 
2012 respectively. Due the complexities of Chicago's Transformation 
Plan, their initial Agreement provided for a 10-year demonstration 
term, which expires in 2011.
    Question. You also stated in your letter that HUD is currently 
examining potential legislation to determine if a successor program to 
MTW would be useful. Why is HUD examining this possibility, rather than 
expanding the current MTW program?
    Answer. The examination of the MTW Demonstration and the 
overwhelming support it has received has led to the proposed 
legislation embodied in Title III of the State and Local Housing 
Flexibility Act of 2005. Title III would expand the program to allow 
even more Housing Authorities to participate. It would also establish a 
permanent program that includes features derived from the MTW 
Demonstration: the fungibility of programs, and flexibility to develop 
different approaches to providing housing assistance. At the same time, 
the proposal corrects some of the difficulties in the Demonstration 
that made it difficult to administer and to measure. These include 
requirements for uniform reporting and provision of uniform evaluation 
measures.

                             OPERATING FUND

    Question. The Quality Housing and Work Responsibility Act of 1998 
requires that HUD develop a formula for allocation of Public Housing 
Operating subsidies through a negotiated rule making process that 
includes the active participation and consensus of stakeholders. In 
2000, Congress further directed HUD, in conjunction with the Harvard 
University Graduate School of Design, to conduct a study of the cost of 
operating a well-run public housing authority. It is my understanding 
that following completion of the cost study that HUD worked through a 
negotiated rule making process to develop a consensus with public 
housing authorities, private housing professionals and affordable 
housing advocates on the amount of subsidies, as well as transitional 
costs to implement the rule. I am gravely concerned that public housing 
authorities throughout Pennsylvania have contacted me recently 
asserting that the published rule alters this negotiated agreement 
reached on a consensus basis. Could you please provide me with an in-
depth explanation of why HUD made changes to the negotiated funding 
rule prior to publication?
    Answer. Consistent with requirements under Executive Order 12866 
entitled ``Regulatory Planning and Review'' and other rulemaking 
authorities, the negotiated rule underwent further HUD and Executive 
Branch review prior to publication. As a result, certain of the 
committee's recommendations were revised to better reflect the 
administration's policies and budgetary priorities. Although changes 
were made to certain of the committee's recommendations, the proposed 
rule stays committed to the Harvard Cost Study and Negotiated 
Rulemaking recommendations.
    Question. Additionally, HUD's fiscal year 2006 Budget proposal was 
developed after the conclusion of meetings conducted as part of the 
negotiated rulemaking process. Does your budget request accurately 
reflect the funding necessary to implement the negotiated rule, 
including transitional costs?
    Answer. The 2006 request of $3.4 billion represents approximately 
89 percent of operating subsidy PHAs that are eligible under the 
proposed Operating Fund Rule. The proposed rule retains the Negotiated 
Rulemaking recommendation for a transition policy of up to 5 years to 
allow time for PHAs to align their resources with the new funding. The 
proposed rule provides PHAs with tools to convert to new asset 
management by providing monthly fees beyond the Harvard cost study for 
information technology, asset management, and asset repositioning. The 
proposed rule also provides PHAs with the ability to maximize other 
revenues streams without receiving an offset in subsidy. PHAs currently 
have approximately $2.8 billion in operating reserves that they can use 
for transition costs.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici

                   COMMUNITY DEVELOPMENT BLOCK GRANTS

    Question. The President proposes a reorganization of economic and 
community development programs by consolidating them in the Department 
of Commerce. This consolidation includes taking the CDBG program out of 
HUD and transferring it to the Department of Commerce.
    Eighteen programs from 5 agencies are involved in the proposed 
consolidation. The administration requests $3.7 billion for the new 
``Strengthening America's Communities Grant Program.'' These programs 
are currently funded at $5.3 billion, so the proposed consolidation 
comes with a reduction in funding of $1.6 billion below the current 
level. By far the largest program in the proposal is the CDBG program, 
which currently receives about $4.7 billion. The administration knows 
Congress will not approve the proposed restructuring of economic and 
community development programs. We have seen proposals such as this 
from previous administrations. However, the proposed funding reduction 
will have a significant impact on the ability of the Appropriations 
Committee to support ongoing programs in the fiscal year 2006 spending 
bills. Mr. Secretary, is your department working on actual legislative 
language to reorganize the economic and community development programs 
of the Federal Government?
    Answer. The Department of Commerce has the lead on developing the 
legislative package to implement the Strengthening America's 
Communities Initiative (SACI). HUD has provided consultative support.
    Question. If your department isn't doing so, is another department 
or agency within the administration working on such legislation?
    Answer. The Department of Commerce has the lead on developing the 
legislative package to implement the Strengthening America's 
Communities Initiative (SACI). As stated, HUD has provided consultative 
support.
    Question. Do you anticipate that the administration will actually 
submit such legislation to the Congress?
    Answer. HUD is advised that the Department of Commerce is 
developing legislation that will be submitted to Congress.
    Question. Since Congress has no intention of approving the proposed 
reorganization, what impact do you anticipate your Department to 
experience when Congress has to reduce ongoing programs by $1.6 billion 
to stay within the overall discretionary spending gap proposed by the 
President?
    Answer. It is important to note that overall funding for 35 Federal 
community and economic development programs is only reduced 4 percent, 
roughly in line with other domestic spending. The President, via his 
2006 Budget, has proposed to consolidate 18 programs (from five 
agencies) within the Department of Commerce, including the CDBG 
Program. These programs would be consolidated into one new program--The 
Strengthening America's Communities Initiative. This initiative would 
support communities' efforts to meet the goal of improving their 
economic conditions through, among other things, the creation of jobs.
    Question. Are you concerned about this eventuality?
    Answer. As you know, CDBG funds are distributed according to 
statutory formula. If CDBG funds are significantly reduced, we are 
still required to distribute them according to the law. Nevertheless, 
HUD employees remain committed to the goals of promoting economic 
opportunity through community revitalization, home ownership, servicing 
society's most vulnerable--homeless individuals and families--and 
ending chronic homelessness.
                                 ______
                                 
              Questions Submitted by Senator Patty Murray

                             CDBG TRANSFER

    Question. The administration has stated publicly that so-called 
affluent communities should not receive assistance from its new smaller 
substitute community development program. What will this mean for 
communities that might be comparatively affluent but still have 
significant pockets of poverty in their service area?
    Answer. It is important that Federal funds for housing and 
community development be distributed in a way that maximizes their 
impact. In general, affluent communities possess the resources and tax 
base to provide services to their pockets of poverty, while distressed 
communities often lack adequate tax bases. While the distribution of 
funds cannot be changed without authorizing legislation, HUD will 
continue to examine certain policies and/or regulatory issues that 
would improve the program's effectiveness. For example, HUD's recently 
released CDBG formula study identified four distinct alternatives to 
the current formula, but Congress could opt for a variety of other 
approaches that HUD, or a new program, would implement. A policy review 
of this nature could provide an extensive menu of options for changing 
the allocation of Federal community and economic development funds. 
Further, CDBG grantees continue to express a need for HUD to provide 
technical assistance that would help improve grantee performance.
    Question. Will they be blocked from participating in your smaller 
substitute community development program?
    Answer. According to the Department of Commerce, the final number 
of communities that receive funding will depend on eligibility 
criteria, but the administration believes that funding should be 
targeted to those communities most in need. This will provide a greater 
level of funding to many communities than they currently receive. 
According to the Department of Commerce, for example, by funding only 
communities with poverty rates above 10 percent, approximately 700 
communities and 50 States could receive funding that is higher than 
their fiscal year 2005 CDBG funding levels.
    Question. A great many communities across the Nation build low 
income housing through the Section 108 loan guarantee program. With 
HUD's approval, they obtained a loan guarantee by pledging their future 
year CDBG funds. What would become of this Section 108 loan guarantee 
commitments if the CDBG program were eliminated?
    Answer. The fiscal year 2006 Budget proposes to eliminate the 
Section 108 Loan Guarantee Program. However, we believe that existing 
Section 108 funded activities will continue to be viable because of 
other collateral that was pledged before the loan was approved.
    Question. Will HUD still expect the communities to pay off these 
guarantees after you have gone ahead and eliminated the CDBG program?
    Answer. Communities will continue to have obligations for Section 
108 loan guarantee repayment. In some cases, communities may need 
assistance in meeting their obligations. This is being taken into 
consideration as part of the development of the Strengthening America's 
Communities Initiative (SACI) legislation.

                    CAPITAL NEEDS OF PUBLIC HOUSING

    Question. Mr. Secretary, the most recent study of the capital needs 
of public housing was published in 1998. That study, which was financed 
by HUD, estimated that there was an estimated capital needs backlog of 
$22.5 billion. The study also found that an additional $2 billion in 
needs was likely to accrue each year thereafter.
    Your budget asks us to cut the Capital grant program by a quarter 
of a billion dollars. You also want us to rescind almost $150 million 
in dollars already appropriated for the HOPE VI program and zero out 
the program next year.
    Mr. Secretary, I understand that, in a hearing before the House 
Financial Services Committee last month, you stated that the capital 
backlog has been reduced to $18 billion over the last 4 years.
    How is it that the capital backlog has been reduced by $4.5 billion 
when funding for all your capital programs have barely kept pace with 
the level of accruing deterioration each year?
    Answer. The administration's proposed budget provides sufficient 
funds to cover the accrual needs of Public Housing Authorities (PHAs). 
HUD commissioned a study of the capital needs of PHAs, which was 
released in 1998. That study identified an annual accrual of capital 
needs of approximately $2 billion per year, as well as a backlog of 
capital needs. The administration's proposed budget would provide 
Capital Fund Program (CFP) monies in excess of the annual accrual need, 
allowing PHAs to meet their accrual capital needs, as well as enabling 
them to address some of their backlog capital needs.
    Further, activities such as the demolition and disposition of 
public housing projects have resulted in the demolition of more than 
100,000 units of public housing since the preparation of the capital 
needs report in 1998. The vast majority of these units were distressed 
and therefore were the most expensive to maintain. This reduction in 
the number of public housing units has served to reduce both the 
backlog of physical needs as well as the annual accrual. It should also 
be noted that replacement units added to the inventory since the 
preparation of the report are new and therefore less expensive to 
maintain.
    In addition to annual appropriations PHAs now are able to access 
the private financial markets and unlock the value of their portfolios. 
HUD has been implementing the Capital Fund Financing Program (CFFP), 
which was authorized under the Quality Housing and Work Responsibility 
Act of 1998 (QHWRA). Through the CFFP, PHAs leverage funds from the 
private market via a pledge of their future CFP grants. HUD has 
approved CFFP Proposals in excess of over $2.4 billion, involving over 
102 PHAs in more than 40 transactions. Funds derived from the CFFP have 
enabled PHA's participating in the program to address a significant 
amount of backlog physical needs.
    In the future, HUD looks forward to expanding the CFFP to permit 
PHAs to use the Federal Public Housing Operating Fund in the same 
manner, and expand the use of mortgages to raise additional private 
capital.
    Question. Does HUD have a new study to back up your assertion that 
the capital backlog has been reduced by $4.5 billion? Would you please 
provide that study to the committee?
    Answer. The Department is proposing to conduct a study of backlog 
needs in 2007.

                           FARM LABOR HOUSING

    Question. Mr. Secretary, in our Hearing on April 14, 2005, I 
addressed the significant needs in Washington State for seasonal and 
permanent farm labor housing. As you are aware, the farm labor 
community is one of the most poorly housed populations in the Nation 
and the only government solutions are spread out over three different 
departments. Since you are the national official responsible for the 
Nation's housing needs, I asked that you raise this issue to the 
highest level by convening a cabinet level working group to look at 
creative solutions, including working with the private sector to 
address this problem. Mr. Secretary, I would like to thank you for 
agreeing to this request and working with me on this issue.
    Can you tell me the progress of your efforts with this goal?
    Answer. As you know, I am dedicated to increasing the minority home 
ownership rate in the United States, as well as expanding home 
ownership opportunities for very low-income populations. Under my 
leadership, HUD has expanded the resources and opportunities available 
to farm labor populations, and is now actively implementing policy 
recommendations that enhance the management, coordination, and delivery 
of HUD programs and services that improve the lives of farm labor 
populations throughout the United States. At my direction the 
Department continues to make enormous strides in delivering programs 
and services to these marginalized populations. These efforts are 
occurring through HUD's competitive and formula grant structures, as 
well as ongoing program processes which collectively have allowed HUD 
to invest over $32 million in fiscal year 2004 in farmworker 
communities and colonias areas.
    Some of this assistance includes: (a) $2.3 million in Housing 
Counseling Grants awarded to organizations providing counseling 
services to migrant/permanent farmworker communities and colonias 
located in Washington, Oregon, Florida, New Mexico, California, and 
Arizona; (b) $3.2 million in Continuum of Care/Emergency Shelter 
Homeless Assistance that entails funding to communities with high 
concentrations of migrant and permanent farmworker populations and 
colonias regions, and; (c) $3.2 million in Rural Housing and Economic 
Development (RHED) grant funds.
    I am very committed to insuring that HUD continues proactive 
efforts to improve the deplorable housing and living conditions of farm 
labor populations. These proactive efforts include equipping 
organizations that provide services to farm labor populations with the 
tools necessary to initiate and sustain housing and development 
services. One such technical assistance effort is the Rural Housing and 
Economic Development Gateway. A joint collaborative project between HUD 
and the Housing Assistance Council (HAC), a nonprofit organization that 
has been helping local organizations build affordable homes in rural 
areas since 1971. The Rural Gateway assists rural communities--
including farm labor populations--improve local housing and economic 
conditions by providing information resources, technical assistance, 
training, and investment capital to rural communities.
    I know that decent, safe and sanitary housing is a critical 
foundation for farm labor populations. However, there are other basic 
necessities that play a vital role in addressing the plight of these 
communities. This is why I have given my unyielding support to the 
development of the Federal Interagency Partnership for Colonias and 
Migrant/Farmworkers Communities. The Partnership, initiated by HUD, 
provides a continuous dialogue with other Federal agencies that provide 
services to these distressed communities to join in coordinated joint 
ventures that expand the benefits to farm labor and colonias 
populations. The Federal Interagency Partnership includes 14 
organizations within Federal agencies that have agreed to identify, 
collaborate and streamline service delivery available to these 
distressed communities. In sum, the Partnership allows for the 
maximization of Federal services assisting farm labor and colonias 
populations. In addition to HUD, Partnership members include:
  --Corporation for National Service;
  --Department of Agriculture/Office of Rural Housing Service;
  --Department of Education/Office of Migrant Education;
  --Department of Health and Human Services/Offices of Minority and 
        Special Populations and International/Global Health Affairs;
  --Department of Justice/Office of Civil Rights;
  --Department of Labor/Employment and Training Administration;
  --Department of Treasury/Community Development Financial Institutions 
        Program and the Community Adjustment and Investment Program;
  --Environmental Protection Agency/Office of Pesticide Programs, and 
        Office of Environmental Justice;
  --Federal Deposit Insurance Corporation;
  --General Services Administration/Computers for Learning Program;
  --Internal Revenue Service/Stakeholder Partnership, Education and 
        Communication (SPEC) Group/Wage and Investment Division.
    These entities are working with HUD to implement collaborative 
projects, such as the Legal Working Group and the Government Kiosk 
Project, that introduce and expand housing resources and opportunities 
to farm labor and colonias populations.
    I have also given my support to the Legal Working Group for 
Colonias and Farmworker Populations. The Legal Working Group, a direct 
product of the Federal Interagency Partnership, consists of attorneys 
from 10 Federal departments and agencies who have jurisdiction over 
colonias and farmworker issues. The Legal Working Group works to 
address civil rights violations perpetrated on migrant and permanent 
farmworker populations as well as colonias residents. Residents of 
these communities face unique legal issues ranging from discrimination 
based on national origin to predatory lending and illegal land sales. 
The Legal Working Group was started to assist local community 
organizations--including legal aid groups--across the Nation address 
the unique needs of these marginalized populations. The goal of the 
Legal Working Group is to connect Federal, State, and local government 
agencies with community organizations so they can discuss and solve 
legal problems that impact farmworker populations in a timely manner. 
By working in a collaborative and coherent fashion, government agencies 
and the respective services they provide are more effective and 
responsive in addressing local problems.
    Another effort that I enthusiastically support is the Department's 
Government Kiosk Project, which provides very low-income populations 
with useful and timely information. The Department of Education, 
Department of Labor, Internal Revenue Service, and Environmental 
Protection Agency have recently joined HUD in bringing information the 
public needs, right to them. These Departments are a part of the 
project's efforts to provide information in a user--friendly format, 
and that dispenses important and useful government information to 
citizens--particularly low-income residents and those who do not have 
ready access to the Internet. The Government Kiosks are located in 
visible, high traffic areas such as shopping malls and mass transit 
centers, which assist in delivering useful and critical information--in 
both English and Spanish languages--to underserved populations. 
Visitors can access information on how to buy a home, apply for student 
loans, make their homes safe from pests, save for retirement, and find 
out if they are eligible for a Federal income tax credit.
    The Department is also responsible for conducting the National Fair 
Housing Policy/Training Conference. This conference provides another 
avenue for enhancing services to migrant and permanent farmworker 
communities and colonias residents. I know that many attendees found 
the information on predatory lending practices and persistent obstacles 
limiting equal access to housing very beneficial and insightful.
    Question. Will you work closely with me and my staff and provide 
the support and technical assistance necessary to address barriers and 
find solutions needed to properly address this problem?
    Answer. I am unequivocally committed to providing the necessary 
support and technical assistance required to alleviate existing 
barriers and develop sustainable housing and development solutions that 
introduce and expand affordable housing units to farm labor populations 
throughout the United States.
    My commitment is illustrated in the recent phase one completion of 
a Geographic Information System Statewide Mapping effort that 
identifies communities utilizing HUD's HOME Investment Partnerships 
Program (HOME) and Community Development Block Grant (CDBG) funds. This 
map identifies specific farm labor housing projects that have recently 
been completed, or are currently under development. Utilizing this 
information, HUD will provide tailored services such as housing 
counseling and financial literacy education, to identified farm labor 
populations.
    At my insistence HUD has also been providing needed technical 
assistance and funding to units of local government and non-profits 
providing services to farm labor populations in the Pacific Northwest, 
including the State of Washington. This assistance has led to the 
development of over 500 temporary or permanent housing units and 
related water and wastewater infrastructure systems.
    The Department also provides assistance to areas with high 
concentrations of farm labor populations, such as the Yakima Valley 
area of Washington. One recent effort connects economic development 
projects with local and regional farm labor housing efforts. 
Subsequently, new farmworker housing is being developed while 
simultaneously expanding job creation opportunities for this 
population.
    An additional benefit of this proactive activity is that HUD is now 
working with the Diocese of Yakima Housing Service and the Office of 
Rural Farmworker Housing to develop a needs assessment for the local 
farm labor population. The results of the assessment will provide a 
framework from which CDBG, HOME and other public funding resources will 
be pulled together to design and build affordable housing units, as 
well as introduce job creation opportunities for the farmworker 
population.
    The Yakima Valley Needs Assessment project mirrors a similar 
project that HUD recently completed in Manatee County Florida. The 
Manatee County Florida Farmworker Needs Assessment was initiated to 
address unmet local needs and capitalize on existing assets and 
partnerships with local governments, nonprofit groups, faith-based 
organizations, and local housing providers. Due to the absence of 
farmworker data and statistics, local organizations were challenged to 
obtain funding that would address the deplorable living conditions of 
area farmworkers. In response, HUD funded the design and implementation 
of a survey instrument that collected local farmworker housing 
statistics, work conditions, income, area demographics, financial 
literacy levels, and health conditions.
    The collected data has been analyzed and is having an enormous 
positive impact. Nonprofit and government entities are now able to 
accurately demonstrate the fundamental needs of the local farmworker 
community. A collateral benefit is that the survey has prompted local 
service providers to develop a farmworker profile, an outreach plan, 
and an action strategy from which to address identified needs.
    As these examples and technical assistance projects illustrate, I 
know the value and importance technical assistance brings to 
communities that so desperately need affordable housing and economic 
development opportunities. I will continue to work and provide 
technical assistance and other resources that alleviate the plight of 
farm labor populations. I look forward to working with you and your 
staff.
    Question. What are HUD's current authorities and activities related 
to farm labor housing?
    Answer. The Department administers the Southwest Border Region 
Colonias and Migrant/Farmworker Initiative (SWBR Initiative), to help 
these distressed communities to address their respective needs. The 
SWBR Initiative is not a program and as such, does not have specific 
grant dollars, but works to coordinate HUD services and programs going 
to these communities. The SWBR Initiative also works to identify 
existing resources, and collaborate with Federal, State and local 
partners to improve the plight of colonias and farmworker communities. 
The mission of the SWBR Initiative is to improve the housing and living 
conditions of migrant and permanent farmworker communities located 
throughout the United States, and colonias located along the U.S.-
Mexico border.
    To maximize resources HUD staff routinely conducts joint workshop 
sessions that combine information on, and access to, several resources 
together, such as conducing sessions that consist of housing 
counseling, financial literacy education and other asset building 
resources.
    Over the past few years HUD, working through the SWBR Initiative, 
has invested over $120 million in farmworker communities and colonias 
through the Department's competitive and formula grant structures, as 
well as on-going program processes.
    Under my direction, during the past few years, HUD has initiated a 
number of projects that address the needs of farmworkers and their 
families residing in the Pacific Northwest. HUD sponsored a 
Practitioners Conference entitled ``Harvesting Hope for Our 
Communities--A Tri-State Practitioners' Conference'' that was held in 
Yakima, Washington. The conference brought together nearly 300 
attendees to not only discuss the challenges faced by farmworker 
communities, but also to develop useful and practical strategies, share 
techniques and methods, and formulate new partnerships to spur action 
and activities.
    Recent HUD efforts include conducting the first annual Yakima 
Valley Homeownership Fair at the Sun Dome in Yakima, Washington. The 
fair attracted over 1,750 attendees and over 25 exhibitors. The fair 
was held in Yakima Valley, the agricultural center of Washington State 
and home of a large migrant and permanent farmworker population. 
Informational materials, and on-site workshops, were available in both 
English and Spanish languages.
    With my support, HUD has also been proactive in outreach 
activities. In fact, only recently HUD staff participated in a 
bilingual (English and Spanish) radio broadcast (KDNA) in Granger, 
Washington that highlighted HUD's Federal Housing Authority home 
ownership information. The listening audience consists of over 25,000 
Spanish-speaking daily listeners located in Central Washington and 
South Central Oregon. These areas consist of very large populations of 
migrant and permanent farmworkers.
    This proactive activity also includes the recent distribution of 
HUD excess computers to various educational institutions located 
throughout the Yakima Valley of Washington. The recipient educational 
institutions have large populations of very low-income students that 
have no access to computers. Over 20 educational institutions, 
including rural communities with large farm labor populations, received 
over 125 excess HUD computers and related equipment.
    Another proactive activity that I am happy to report on is the 
placement of a HUD government kiosk in Sunnyside, Washington. As I 
mentioned earlier, HUD's government kiosk provides and dispenses 
important and useful government information--such as how to buy a home, 
save for retirement, and eligibility for a Federal income tax credit--
to citizens, particularly low-income residents and those who do not 
have ready access to the Internet. Information is accessible in both 
English and Spanish languages.
    The placement of a government kiosk in Sunnyside, Washington is 
especially beneficial when one considers that Sunnyside has one of the 
largest concentrations of migrant and permanent farm labor populations 
in Washington State. The importance and utility of the government kiosk 
is demonstrated in the fact that this particular kiosk is the fourth 
active in the Nation, with a monthly average of nearly 900 hits a 
month.
    At my insistence, HUD has also been actively engaged in expanding 
our partnerships with Community and Faith-Based organizations. Only 
recently, HUD staff met with 90 individuals representing faith and 
community-based organizations at a 2-day grant-writing workshop. The 
workshop took place at the Holy Family Activity Center, Diocese of 
Yakima and was conducted by HUD's Faith Based and Community Liaison. 
The session provided attendees with effective grant writing techniques 
and assisted in strengthening the capacity of emerging organizations to 
compete for HUD and other Federal grant opportunities.
    An additional technical assistance workshop that also recently took 
place was entitled, ``Making Connections through Housing and Economic 
Development.'' The workshop facilitated discussion and cultivated 
partnership opportunities between housing and economic development 
organizations, professionals and public agencies that provide a variety 
of services to the Yakima Valley farmworker population.
    HUD has also been actively engaged in expanding the positive 
benefits of existing service providers. One example is HUD's assistance 
to a non-profit--La Clinica Self-Help Housing--based in Pasco, WA. La 
Clinica, has been in operation for the past 11 years, and is 
responsible for the development of 160 homes located in Benton, 
Franklin, Yakima, Grant and Adams County, Washington.
    With HUD's assistance La Clinica has now started to work with 
several additional funding resources, including the U.S. Department of 
Agriculture Rural Development program, and HUD's Community Development 
Block Grant program, HOME Investment Partnerships program, and the 
Housing Counseling program. These efforts recently allowed La Clinica 
to dedicate 10 new homes to local farmworker families in Pasco, 
Washington.
    My directions to staff have served as a catalyst for HUD staff to 
become actively and intimately engaged with local and regional efforts. 
This can be seen in HUD's recent participation in the Washington State 
Farmworker Housing Trust (WSFHT) Advisory Board. The WSFHT is a non-
profit organization founded in 2003 to bring new resources to meet the 
need for decent and affordable farmworker housing in Washington. The 
Trust is a unique collaboration of growers, farmworker advocates, 
housing providers and community leaders.
    To advance the objectives of the WSFHT, HUD recently provided 
technical assistance funds that were utilized to organize and 
facilitate the WSFHT Capacity Conference in Yakima, Washington a few 
months ago. Participants at the conference developed a plan that will 
focus on building capacity to produce and effectively manage farmworker 
housing in the State.
    HUD's recent participation also includes providing assistance to 
the WSFHT Board that centered on how to design, structure and implement 
an effective needs assessment instrument. The WSFHT hopes to design and 
implement a farmworker needs assessment survey that will be used to 
define the magnitude and scope farmworker housing and living conditions 
and related needs in the State of Washington.
    Question. Do you believe your agency is doing all that it can in 
this area?
    Answer. As exemplified by my instructions and guidance to HUD 
staff, and subsequently by the proactive actions of HUD staff I believe 
that the Department is maximizing available resources and efforts to 
address the housing and living conditions of farm labor populations 
throughout the United States. As demonstrated by these actions I am 
firmly committed to ensuring that decent, safe and affordable housing 
is made available to migrant and permanent farm worker populations. My 
unyielding advocacy and support of HUD's Southwest Border Region 
Colonias and Migrant/Farmworker Initiative underscores the importance I 
place on introducing and expanding HUD services and programs to these 
marginalized populations. I am working to institutionalize HUD services 
and programs that benefit these communities so that they are not one-
time successes.
    The benefits of this focused and concerted effort can be seen in 
the investment of over $120 million in the past few years that 
benefited migrant and permanent farmworker populations throughout the 
United States.
    To further the efforts and critical work that the SWBR Initiative 
continues to undertake, I am reassigning personnel to the State of 
Washington whose task will be to continue to introduce and expand HUD 
services to migrant and seasonal farm labor populations located in the 
Pacific Northwest Region.
    Through the Federal Interagency Partnership for Colonias and 
Migrant/Farmworker Communities, I will continue to support the 
identification of existing resources, and collaborate with Federal, 
State and local partners to improve the plight of these communities, as 
well as the collaborative joint-ventures, such as the Legal Working 
Group for Colonias and Farmworker Communities and HUD's government 
kiosk project.
    During my tenure, HUD has made enormous advances to ensure housing 
and development efforts are made available to farm labor populations. I 
will continue to make available every resource so that the plight of 
these populations is alleviated to the fullest extent possible.

                               CONSORTIA

    Question. Your agency has consistently encouraged public housing 
authorities to streamline their operations to reduce the demand for 
administrative funds. Many public housing authorities in Washington 
State participate in a consortium so that they can achieve economies of 
scale in their purchasing of services. However, efforts to form 
consortia like these have been frustrated by HUD's inability to fully 
implement the consortia provisions required by the 1998 Quality Housing 
and Work Responsibility Act (QHWRA). In the 6 years since this law was 
enacted, HUD has not yet made its data and regulatory systems 
compatible with joint filing by consortia. Why has the Department not 
yet fully implemented consortia provisions of QHWRA?
    Answer. PHAs have always had the ability to form consortia for 
purchasing and contracting activities and the Department has encouraged 
that. Formation of consortia under Section 13 of QHWRA allows for PHAs 
to band together under a formal consortium agreement and subject to a 
joint PHA Plan filed with HUD for the administration of their public 
and assisted housing programs. Both types of consortia have been 
addressed in HUD's procurement handbook for Public and Indian Housing 
Authorities. HUD has not made its data and regulatory systems 
compatible with joint filing by consortia of all PHA reporting 
requirements because consortia are not legal entities HUD contracts 
with directly, which forms the foundation for all HUD systems. 
Consortia do not meet the standards of a reporting entity. Financial 
statement reporting and audits are governed by HUD's Uniform Financial 
Reporting Standards (UFRS), which follow Generally Accepted Accounting 
Principles (GAAP) and Government Accounting Standards Board (GASB) 
Statement 14, which defines financial reporting entities. Following 
from this, HUD assesses individual PHA performance pursuant to the 
funding and regulatory contracts between both parties, and includes as 
components of the evaluation process individual PHA financial 
statements, audits, and the physical condition of contractually covered 
public housing units.
    Question. For example, I understand that the Department has not yet 
enabled agencies to jointly file with HUD items like tenant-income 
data, Public Housing Authority Plans, and audits. If you are serious 
about encouraging PHAs to reduce the demand on administrative funds, 
shouldn't these long overdue technology upgrades be a very high 
priority for the agency?
    Answer. PHAs can and do submit joint PHA Plans to HUD. The PHA Plan 
template used for submitting plans includes a consortia designation. 
HUD has also substantially streamlined annual PHA Plan contents for 
PHAs with less than 250 units, which represents a group very likely to 
also form consortia, and reduces administrative burdens. Joint filing 
of tenant data and audits is not possible for consortia because PHAs 
are legal entities that contract directly with HUD for funding under 
various Federal housing programs. PHAs are regulated under Annual 
Contributions Contracts, grant agreements, and other funding 
instruments that require PHA level reporting to HUD. Financial 
statement reporting and audits are governed by HUD's Uniform Financial 
Reporting Standards (UFRS), which follow Generally Accepted Accounting 
Principles (GAAP) and Government Accounting Standards Board (GASB) 
Statement 14. GASB Statement 14 defines financial reporting entities. 
Consortia are not legally created organizations and do not otherwise 
qualify as reporting entities, and thus joint filing of audits for 
consortia is not possible. Where HUD treats multiple PHAs as one entity 
for consolidated reporting purposes, it is because they are legally and 
organizationally consolidated into one PHA entity. They transferred 
their units, funding, contracts, physical assets, and program 
administration to a consolidated PHA, which could include a regional, 
metropolitan, State, or county PHA.

                  MOVING-TO-WORK DEMONSTRATION PROGRAM

    Question. Mr. Secretary, three of the larger PHAs in my State--
Seattle, King County, and Vancouver, participate in your ``Moving to 
Work'' demonstration program. This program helps ensure that low-income 
individuals will not be penalized by losing their tenant support as 
they struggle to transition off of public assistance. I understand that 
HUD has submitted legislation to the authorization committee to expand 
the number of PHAs that can participate in the Moving to Work program. 
If your legislation is not enacted, is there any risk that the PHAs 
currently participating in the program will have their participation 
terminated?
    Answer. No. The proposed Moving-To-Work (MTW) provisions in the 
State and Local Housing Flexibility Act will not terminate current 
program participants. This legislation provides automatic 3-year 
extensions for those MTW agreements that expire in 2005 and 2006. PHAs 
have the opportunity to enter the program automatically with the 
enactment of the legislation. At the end of any expired agreement 
period under the MTW Demonstration, PHAs can opt into the MTW program 
as described in the legislation under the established eligibility 
provisions. All existing MTW agreements would be honored to the end of 
their term. If legislation is not enacted, MTW PHAs would have to seek 
extensions on an individual basis.
    Question. Is there anything in your legislation that imposes new 
requirements on those PHAs that already participate in the program?
    Answer. Yes. Section 302(h)(1) provides that a PHA's performance in 
the MTW Demonstration and in the MTW Program would be assessed under 
applicable assessment systems that evaluate a public housing agency's 
performance with respect to public housing and voucher programs. This 
means that a PHA in the MTW Demonstration would be assessed by the 
Public Housing Assessment System (PHAS) or the Section Eight Management 
Assessment Program (SEMAP) until January 1, 2008. Thereafter, the MTW 
PHA in the demonstration or in the program would be required to meet 
performance standards developed pursuant to Section 302(h)(2). In 
addition to the requirements of section 302(h)(1), Title III may or may 
not affect current MTW agencies depending on existing individual 
agreements. Housing agencies in the demonstration negotiated contracts 
that provided specific conditions and imposed requirements, some of 
which may be different from the requirement of the proposed program. 
Housing agencies that elect to join the MTW Program when their 
contracts expire, or those that elect to opt out of the MTW 
Demonstration early and enter the MTW Program, will then be subject to 
the requirements of the program.

                           SECTION 8 VOUCHERS

    Question. Mr. Secretary, we have heard from many housing groups 
that, during last year's consideration of the Appropriations bill, HUD 
understated the amount of funding that would be needed to maintain the 
same number of Section 8 vouchers that were active in 2004. As a 
result, the program was under-funded by roughly $570 million and 80,000 
vouchers have been lost. We have also been told that your fiscal year 
2006 request will restore half or 40,000 of these vouchers. Are these 
figures accurate in your view?
    Answer. No. HUD did not understate the amount of funding that would 
be needed to maintain the same number of vouchers that were needed 
based on the May through July 2004 reporting period. The fiscal year 
2005 Appropriations Act provided a specific amount for the Housing 
Choice Voucher program to fund the voucher needs for that period and 
for the adjustments allowed for enhanced vouchers and the first time 
renewal of tenant protection vouchers and HOPE VI vouchers. As a 
result, the Department had to prorate downward the 2005 budgetary 
allocations to PHAs by approximately 4 percent. Our fiscal year 2006 
Budget request seeks to restore the entire 4 percent proration 
reduction.
    Question. Will the actual number of vouchers decline by 80,000 this 
year?
    Answer. No. A recent analysis of actual costs and leasing levels 
per data submitted by PHAs to the Voucher Management System through 
April 2005 are very constant over the 12-month period ending April 30, 
2005. The difference in vouchers leased for the period May through July 
2004, compared to February through April 2005, is less than 3,000 
vouchers.
    Question. If not, what are your precise estimates for the number of 
vouchers that were funded in 2004 and 2005?
    Answer. Actual vouchers leased and funded for calendar year 2004 
were 2,024,553.
    Based on the funding provided in the fiscal year 2005 
Appropriations Act, the Department expects to fund approximately 
1,980,000 vouchers in calendar year 2005.
    Question. How many vouchers will be funded if we fully fund your 
request for 2006?
    Answer. It is too early in the calendar year to estimate how many 
additional vouchers can be funded since only 4 months of data is 
available in 2005. Assuming the existing leasing levels and HAP costs 
can be sustained using the 2005 budgetary allocations, and existing 
inflation assumptions hold true, it is reasonable to conclude that an 
additional 40,000 to 50,000 families may be assisted.
    Question. Based upon HUD's ongoing monitoring of rent burdens, can 
you tell me the percentage of families paying more than 30 percent of 
adjusted income for rent as a national average in fiscal year 2003 and 
fiscal year 2004? Can you tell me the current percentage?
    Answer. Current percentages are as follows:
  --Fiscal year 2003--68 percent;
  --Fiscal year 2004--66 percent;
  --Current--69 percent.
    Under existing program requirements, new families and movers may 
elect to pay up to 40 percent of their income towards rent. For 
existing families in the program who chose not to move, there is no 
limitation on the percentage of their income they can pay towards rent.
    Although the percentages provided above indicate that the number of 
families paying more than 30 percent of income ranges between 66 and 69 
percent, more than 60 percent of those families' rent burden is between 
30 and 35 percent of adjusted income. The average rent burden for all 
vouchers is approximately 39 percent and does not represent a 
significant increase in the 35 percent average rent burden measured in 
1990.
    Question. What percentage of families has a rent burden exceeding 
40 percent of adjusted income?
    Answer. The percentage of families in public housing who have a 
rent burden exceeding 40 percent of adjusted income is as follows:
  --Fiscal year 2003--14 percent;
  --Fiscal year 2004--16 percent;
  --Current--18 percent.
    Question. The Department's fiscal year 2005 voucher funding 
implementation notice States that HUD will reduce existing voucher 
payments reserves from the previous standard of 1 month's funding, to 
no more than 1 week's reserve level. Some portion of this reduction was 
to be used to satisfy fiscal year 2005 rescission requirements.
    Does the Department plan to recapture or reduce reserves for any 
agency below the 1-week level during fiscal year 2005?
    Answer. It is not the Department's intention to reduce any PHA's 
reserves below the 1-week level during fiscal year 2005 or fiscal year 
2006.

              REUNIFICATION OF CHILDREN WITH THEIR PARENTS

    Question. I understand that the Tenant protection Fund has a 
special designated program for family reunification. In fact, our 
Chairman, Senator Bond was instrumental in getting this program 
authorized. However, I understand further that no new vouchers have 
been issued for this program since fiscal year 2001 and historically 
HUD has made approximately 39,000 vouchers available for the family 
unification program. I also understand that it is up to each individual 
PHA to decide if these vouchers keep their identity after they expire. 
How many of the original 39,000 family unification vouchers are still 
used for that purpose and if you are under the authorized level, can 
PHAs move traditional vouchers into the family unification program?
    Answer. PHAs that received Family Unification Program (FUP) 
vouchers were obligated to use those vouchers for that targeted 
population for 5 years. HUD awarded 3,920 FUP vouchers in fiscal year 
2000 and 958 FUP vouchers in fiscal year 2001, so 4,878 vouchers are 
still required to be used for family unification purposes. PHAs that 
decide to voluntarily continue the FUP voucher program after the 5-year 
requirement is completed are not required to report those vouchers as 
FUP vouchers in HUD data collection systems. HUD therefore does not 
know the actual number of vouchers originally allocated for FUP that 
continue to be voluntarily used for this purpose.
    Under the housing choice voucher program, PHAs may establish local 
selection preferences for admission to the program that reflect the 
local needs and priorities of the community. PHAs may use vouchers that 
were not originally allocated as FUP vouchers for family unification 
purposes by establishing a local selection preference for qualifying 
families.
    Question. Why hasn't your agency requested or issued new vouchers 
to get more of these families reunited over the last 4 years?
    Answer. PHAs currently have the ability to use their vouchers to 
promote family unification by establishing local preferences for 
admission to the regular voucher program for qualifying families. A 
special set-aside of vouchers is not necessary in order for PHAs to 
serve this particular population. The Housing Choice Voucher Program 
has grown into a complex, overly prescriptive program that is 
increasingly difficult to administer. The present program has separate 
rules for more than a dozen different types of vouchers. A major 
component of program reform and simplification is to allow local PHAs 
to decide how best to use vouchers to address the needs and priorities 
of their community, rather than to continue to dictate these decisions 
from Washington through a myriad of complicated boutique voucher 
programs.
    Question. Is there any truth to the assertion that you have not 
issued new vouchers out of the Tenant Protection Fund because you want 
to leave that funding available for your proposed rescissions?
    Answer. No. There is no truth to the assertion that HUD has not 
funded tenant protection voucher requirements. HUD has and is issuing 
new vouchers out of the Tenant Protection Fund for tenant protection 
assistance to assist families impacted by public housing relocation and 
replacement activities and conversion actions related to HUD's 
multifamily portfolio. As of June 9, 2005, HUD has allocated 16,211 new 
vouchers out of the tenant protection line item appropriated in the 
fiscal year 2005 Consolidated Appropriations Act.
    Question. Do you intend to propose rescissions from the Tenant 
Protection fund for fiscal year 2005, or if we accept your proposal for 
fiscal year 2006?
    Answer. The rescission language enacted under the Housing 
Certificate Fund gives the Department flexibility to take the 
rescission from any account within the Department. The Tenant 
Protection set-aside can certainly be subjected to the rescission if 
there are unobligated balances remaining under this set-aside. However, 
at this time there is no specific proposal to rescind Tenant Protection 
funds.

                              HOMELESSNESS

    Question. Mr. Secretary, does HUD intend to provide a legislative 
proposal for the ``Samaritan Initiative,'' and if so does it limit 
supportive services such as case management and would this have a 
negative impact because providers and communities would not be able to 
fund the housing and supportive services necessary to achieve the goal 
of ending homelessness?
    Answer. As presented in the 2006 Budget request, HUD proposes to 
consolidate its 3 competitive homeless grant programs into a single 
program. This new consolidated program will include the eligible 
activities similar to the Samaritan Initiative, which will focus on the 
chronically homeless, and will combine housing subsidies paired with 
quality case management. A key ingredient to the overall success of 
ending chronic homelessness is to effectively access mainstream 
healthcare, social services and employment resources so that HUD's 
limited homeless assistance funding can be increasingly devoted to 
housing.

                                HOPE VI

    Question. Mr. Secretary, your budget proposes to eliminate all 
funding for the HOPE VI program next year, and you are also asking us 
to rescind every penny of the $143 million that we appropriated for the 
program this year.
    This program is designed to assist public housing agencies in 
demolishing their most dilapidated housing units and replacing them 
with new, safe and affordable units for mixed-income individuals. I 
understand that part of your agency's rationale for decimating the HOPE 
VI program is that you believe that the program has already achieved 
its intended goals.
    Do you believe that we have already eradicated all of the 
dilapidated public housing units in America?
    Answer. The Department has not had the opportunity to eradicate 
every unit of dilapidated public housing in America. However, HUD has 
met its goal to eliminate 100,000 units of the worst public housing 
through HOPE VI Revitalization and Demolition grants, as well as other 
funding and approval mechanisms. Since surpassing the goal to eliminate 
100,000 units of severely distressed public housing by fiscal year 
2003, HUD has continued its commitment of removing this housing from 
the public housing stock. Through fiscal year 2004, HUD had approved 
for demolition a cumulative total of 165,155 units and PHAs had 
completed demolition of 116,545 total units.
    Since the Department has met this demolition goal, the HOPE VI 
program is no longer necessary. However, the Department recognizes that 
there is an estimated $18 billion capital backlog in the public housing 
inventory. While there is clearly serious need for investment in the 
inventory, it is not clear how much of this backlog is represented by 
severely distressed units needing wholesale demolition and replacement 
as articulated by HOPE VI. Current definitions used by the Department 
to define severe distress were developed in response to a sub-set of 
the public housing inventory that by and large no longer exists i.e., 
severely distressed, super-block, high-rise, public housing 
developments with significant social problems in major cities like 
Cabrini Green and Robert Taylor Homes in Chicago. A new method for 
assessing severe distress, one that considers the nuances of today's 
public housing inventory and is more objective, should be developed 
before HUD funds additional wholesale revitalization of public housing 
communities.
    In the interim, the needs of the remaining public housing inventory 
can be more appropriately met through other modernization and 
development programs operated by the Department e.g., the Capital Fund, 
Capital Fund Financing Program and Mixed-Finance development. The 
Department continues to encourage housing authorities in need of this 
assistance to submit project proposals to these programs. To date, the 
Department has approved over $2.4 billion in transactions using the 
Capital Fund Financing Program, with approximately $94 million in 
additional funds in the pipeline. Of the approved transactions, over 
$254 million will be used for development activities.
    Question. I understand that HUD wants to address the remaining 
dilapidated public housing units by finalizing regulations requiring 
all the public housing authorities to demolish their most dilapidated 
housing. That will be a huge undertaking.
    Are you proposing to give the public housing agencies any 
additional resources to accomplish this massive goal of demolishing all 
dilapidated public housing?
    Answer. The Quality Housing and Work Responsibility Act of 1998 
(QHWRA) revised Section 202 for mandatory conversion, and added another 
possibility for removals by crafting a voluntary conversion option as 
well. More than 140,000 severely distressed housing have been 
demolished over the last 10 years. As a result, it is anticipated that 
mandatory conversions will affect the last remaining units that do not 
meet the minimal threshold conditions and the related formula cost 
test. The Department has requested additional vouchers to cover 
Mandatory conversion needs for fiscal year 2006. PHAs will be 
responsible for using their existing resources to pay demolition and 
relocation costs as they do now under Section 18, Demolition and 
Disposition.
    Question. Your budget is proposing that capital grants to the 
public housing authorities be reduced by over a quarter of a billion 
dollars or almost 10 percent next year. Some experts have observed that 
cuts in funding to help housing authorities maintain their units will 
mean that we will just create more dilapidated buildings that will be 
eligible for HOPE VI grants.
    How do you respond to that assertion?
    Answer. The administration's proposed budget provides sufficient 
funds to cover the accrual needs of Public Housing Authorities (PHAs). 
HUD commissioned a study of the capital needs of PHAs, which was 
released in 1998. That study identified an annual accrual of capital 
needs of approximately $2 billion per year, as well as a backlog of 
capital needs. The administration's proposed budget would provide 
Capital Fund Program (CFP) monies in excess of the annual accrual need, 
allowing PHAs to meet their accrual capital needs, as well as enabling 
them to address some of their backlog capital needs.
    Further, activities such as the demolition and disposition of 
public housing projects have resulted in the demolition of more than 
100,000 units of public housing since the preparation of the capital 
needs report in 1998. The vast majority of these units were distressed 
and therefore were the most expensive to maintain. This reduction in 
the number of public housing units has served to reduce both the 
backlog of physical needs as well as the annual accrual. It should also 
be noted that replacement units added to the inventory since the 
preparation of the report are new and therefore less expensive to 
maintain.
    In addition to annual appropriations, PHAs now are able to access 
the private financial markets and unlock the value of their portfolios. 
HUD has been implementing the Capital Fund Financing Program (CFFP), 
which was authorized under the Quality Housing and Work Responsibility 
Act of 1998 (QHWRA). Through the CFFP, PHAs leverage funds from the 
private market via a pledge of their future CFP grants. HUD has 
approved CFFP Proposals in excess of over $2.4 billion, involving over 
102 PHAs in more than 40 transactions. Funds derived from the CFFP have 
enabled PHA's participating in the program to address a significant 
amount of backlog physical needs.
    In the future, HUD looks forward to expanding the CFFP to permit 
PHAs to use the Federal Operating Fund in the same manner, and expand 
the use of mortgages to raise additional private capital.

                        PROPOSED SECTION 811 CUT

    Question. Mr. Secretary, why is Section 811 Housing for Persons 
with Disabilities being singled out for a 50 percent cut in this budget 
including the elimination of all funding for new production and 
rehabilitation of accessible housing units?
    Answer. The cut in the Section 811 Budget was one of several 
difficult decisions that the Department had to make this year. As you 
know, significant cuts and changes were also proposed for other 
programs, such as the Community Development Block Grant program.
    Question. This proposal to eliminate the project-based side of 
Section 811 appears to be completely at odds with the administration's 
stated goal of promoting community-based alternatives to costly and 
ineffective institutional settings for people with severe disabilities.
    Why is HUD seeking to cut Section 811 funding by 50 percent at a 
time when HHS has been working so hard to promote independence and 
community integration for people with disabilities through the 
President's New Freedom Initiative?
    Answer. The Department will continue to support the President's New 
Freedom Initiative by supporting and fully funding the 40,000 units 
that are supported by Section 811 funds.
    Question. How will HUD ensure that low-income people with 
disabilities continue to have access to affordable housing in light of 
the fact that rental subsides alone are not sufficient because rental 
units are not available in most communities?
    Answer. The Department will continue to support the 200,000 units 
that are occupied by persons with disabilities in various HUD programs. 
As you know, this includes 40,000 units that are supported by the 
Section 811 program. These units are located in many communities 
throughout the United States.

                     OPERATING FUND NEGOTIATED RULE

    Question. The cost of implementing the recommendations of the 
Operating Fund rule negotiated between HUD and stakeholders was nearly 
$4 billion in 2003 dollars. In addition, agencies will incur transition 
costs for the conversion to property-based rather than agency-wide 
accounting and management required by the rule. Your budget requests 
just $3.4 billion for the operating fund for fiscal year 2006. Your 
department arrived at a negotiated agreement with stakeholders on this 
rule in June. Did funding needs of the negotiated rule figure into your 
budget request?
    Answer. The issue of ``transition costs'' was discussed during 
negotiated rulemaking but was not agreed to in the final Agreement. 
Hence, the fiscal year 2006 Budget request does not include any funding 
for transition costs. However, that PHAs currently have approximately 
$2.8 billion in operating reserves that they can use for transition 
costs.
    Question. As I understand it, the Operating Fund proposed rule 
recently sent to Congress is materially different than the rule 
negotiated with public housing stakeholders last June.
    Isn't changing the terms of the rule after you have arrived at a 
negotiated position a fundamental breach of this agreement?
    Answer. Consistent with requirements under Executive Order 12866 
entitled ``Regulatory Planning and Review'' and other rulemaking 
authorities, the negotiated rule underwent further HUD and Executive 
Branch reviews prior to publication. These changes were necessary in 
order to incorporate changes reflective of budget and policy 
priorities.
    Question. The Department released data regarding the impact of the 
previously-negotiated rule on individual agencies. When do you plan to 
release agency-level data regarding the impact of you proposed rule? I 
think this would be key to a productive comment period on the proposed 
rule.
    Answer. Impacts of the proposed rule on PHAs were presented to the 
various public housing trade associations and other representatives and 
posted on REAC's Operating Subsidy web-site: http://www.hud.gov/
offices/pih.
                                 ______
                                 
            Questions Submitted by Senator Richard J. Durbin

    Question. The President's budget proposes a 5 percent cut in fiscal 
year 2006 funding despite the acknowledgment that two new jurisdictions 
will become eligible for formula funding, bringing the total number of 
jurisdictions eligible for formula funding to 125. The proposed 2006 
funding levels of $268 million would return HOPWA to a funding level 
between the 2001 ($257.4 million) and 2002 ($277.4 million) when there 
were only 103 and 107 jurisdictions, respectively. This means that the 
current HOPWA program must support more grantees with less money than 
ever before. Why is the Department withdrawing necessary funds while 
increasing eligible jurisdictions?
    Answer. The Department's fiscal year 2006 Budget request of $268 
million for the Housing Opportunities for Persons with AIDS (HOPWA) 
program will provide continued housing support for the most vulnerable 
individuals and their families living with HIV/AIDS. The funding 
request is approximately at the same level as recent program 
expenditure patterns (the most recent 3-year average was $274 million 
for all HOPWA grantees). HUD estimates that HOPWA housing subsidies and 
support in community residences and through direct rental assistance 
will enable over 67,000 households to reduce their risks of 
homelessness and improve their access to healthcare and other support. 
In addition, HOPWA grantees have shown good success in leveraging other 
resources to operate these housing programs by committing State, local, 
and private resources to their community efforts. On a technical note, 
the qualification of new formula recipients has a minimum effect on 
formula distributions. This is because they qualify for the smallest 
allocations, (generally around $350,000) and because the newly 
qualifying cities are in metropolitan areas that are likely to have 
been included in a grant to the State in a prior fiscal year. This 
latter change would have no net fiscal impact but would change the 
entity responsible for managing these grant activities. The correct 
number of HOPWA formula eligible communities in fiscal year 2006 will 
be 122. This number is being updated based on the use of AIDS 
surveillance data recently obtained from the Centers for Disease 
Control and Prevention (CDC). HUD has determined that the number of 
formula recipients in 2006 will only increase by one additional 
recipient (Palm Bay, Florida) as this metropolitan area meets the 
statutory eligibility requirements with a population of more than 
500,000 persons and a cumulative number of cases of AIDS of greater 
than 1,500 cases of AIDS. Further, this area had previously been 
included in formula funding to the State of Florida, and as such, no 
significant net effect will occur, as the amount of funds allocated to 
the State will be proportionately smaller. Also, in fiscal year 2005, 
one newly designated recipient (Lakeland, Florida) made use of the 
authority provided in a new administrative provision to the HOPWA 
appropriations act that with the agreement of their State, allows the 
State to continue to serve as the grantee for managing the HOPWA 
program in their metropolitan area. The required data from CDC involves 
the use of cumulative cases of AIDS in making these determinations, 
which includes a significant number of persons who have died due to 
AIDS. In 1999, HUD recommended an updated formula based on a CDC 
estimate of persons living with AIDS adjusted for area housing costs. 
The need to update the formula was further identified in the recent 
PART review for this program and a more accurate distribution could be 
based on a CDC report for persons living with AIDS and area housing 
costs.
    Question. HUD is in the process of foreclosing on Lawndale 
Restoration, 1,240 project-based Section 8 apartments in Chicago's 
Lawndale Community. In the past, project-based vouchers would have been 
maintained after foreclosure. However, HUD is not offering that 
possibility, and is instead offering tenants Housing Choice Vouchers. 
If all qualifying tenants receive Housing Choice Vouchers, tenants of 
Lawndale Restoration will comprise a group that is 25 percent of the 
tenants who have been relocated from the Chicago Housing Authority 
during the past 5 years under its Plan for Transformation.
    HUD is not offering other more flexible approaches that take into 
consideration whether project-based assistance, Housing Choice Vouchers 
or a combination of the two would be more appropriate rental assistance 
for this property. Why?
    Answer. Over the last several years, the Department has not offered 
a project-based Section 8 contract after foreclosure. The Department 
believes that residents want flexibility, and the option to relocate if 
they so choose. The housing choice voucher gives residents that 
ability. In the case of the Lawndale project, the Department is aware 
of residents that have indicated their desire to relocate and there are 
some residents who want to remain at the project.
    Although the Department will be issuing vouchers to eligible 
residents, no resident will be required to leave the project if they 
desire to stay. If a resident who desires to move from the development 
is unable to find other housing, they will always have their current 
housing available to them. If a resident decides to move permanently 
from the complex, it is because they desire to do so and not because of 
the foreclosure action.
    Question. Some studies have indicated that 15 percent of voucher 
holders in Chicago are unable to sign a lease within 6 months that they 
have to find an apartment. Given the saturation in Chicago, explain how 
an additional thousand families from Lawndale Restoration will impact 
the housing market in Chicago?
    Answer. The Department engaged a contractor to perform a market 
study in Chicago last year. The purpose of the study was to determine 
whether the rental market in Chicago could absorb the number of 
families projected to be relocated from public housing to private 
sector housing (assisted by the Housing Choice Voucher program) as a 
result of redevelopment activity at the Chicago Housing Authority. The 
market study concluded that there is an ample supply of vacant 
affordable private sector housing to absorb the families projected to 
be housed in private sector housing. The market study estimated that 
there would be 40,000 affordable vacant units in the local rental 
market annually. Based on the market study, the Department believes 
that the private market can absorb the families that would be impacted 
by the Lawndale restoration.
    Question. Will these families be able to find decent housing in 
Chicago?
    Answer. The Department engaged a contractor to perform a market 
study in Chicago last year. The purpose of the study was to determine 
whether the rental market in Chicago could absorb the number of 
families projected to be relocated from public housing to private 
sector housing (assisted by the Housing Choice Voucher Program) as a 
result of redevelopment activity at the Chicago Housing Authority. The 
market study concluded that there is an ample supply of vacant 
affordable private sector housing to absorb the families projected to 
be housed in private sector housing. The market study estimated that 
there would be 40,000 affordable vacant units in the local rental 
market annually. Based on the market study, the Department believes 
that the private market can absorb the families that would be impacted 
by the Lawndale restoration.
    Question. Beyond the Housing Choice Vouchers, will HUD assist these 
families in finding housing? If so, how?
    Answer. The Department has already provided relocation assistance 
(including the costs to move, transportation to find alternate housing, 
housing counseling, etc.) to the 180 residents who were required to 
move from three of the buildings currently being demolished. HUD is 
also providing the same relocation assistance to 35 residents of 
another building in the complex that has severe structural problems.
    For the remaining buildings, the Department is not requiring the 
residents to relocate and therefore there will be no other assistance 
provided except for the housing choice voucher. The purchasers of the 
buildings will be required to provide relocation assistance while they 
make the necessary repairs to the buildings if the residents have to be 
relocated during construction. If a resident decides to move 
permanently from the complex, it is because they desire to do so and 
not because of governmental action and no government relocation 
assistance to those residents will be provided.
    Question. On March 10, 2005, I sent a letter to HUD requesting that 
the Department reconsider HUD's decision to deny the Kankakee County 
Housing Authority funding for its entire voucher allotment. Please 
update me on the status of this request.
    Answer. The Senator's request on behalf of the Kankakee County 
Housing Authority (KCHA) concerned HUD's denial of a request from that 
agency that HUD adjust the leasing figures used to calculate KCHA's 
calendar year 2005 voucher program renewal funding. As background, in 
December 2004, HUD provided to each Housing Authority (HA) the leasing 
and cost information, based on each HA's prior submissions, that HUD 
intended to use as the basis for calculating each HA's calendar year 
2005 funding for voucher program renewals. Each HA was given the 
opportunity to request an adjustment of any data that was not accurate 
or that qualified for adjustment under the terms of the fiscal year 
2005 Appropriations Act. KCHA responded to that information and 
requested that HUD adjust its leasing numbers to include a number of 
vouchers that had been provided to KCHA in a tenant protection action 
in August, 2001, but which were not yet under lease during the period 
HUD was required to use to calculate calendar year 2005 funding. KCHA's 
request was denied because the vouchers provided to KCHA in 2001 had 
been in their inventory for a sufficient period of time that they 
should have been under lease by the time period used to calculate the 
calendar year 2005 funding, which was May through July of 2004. The 
fiscal year 2005 Appropriations Act provided that HUD make necessary 
adjustments for costs related to first time renewals of tenant 
protection vouchers. At the time of KCHA's request, the vouchers in 
question had been renewed three times; as a result, KCHA was not 
eligible for an adjustment to their leasing numbers.

                          SUBCOMMITTEE RECESS

    Senator Murray. Well, thank you very much, Senator Leahy. 
And I agree with you and appreciate your words today.
    This subcommittee will stand in recess until Thursday, 
April 21, when we will take the testimony from OMB Director 
Bolten. And I can assure you we will be talking about the HUD 
budget among other things.
    [Whereupon, at 11:05 a.m., Thursday, April 14, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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