    [Senate Hearing 110-820]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 110-820

    TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
                      APPROPRIATIONS FOR FISCAL YEAR 2009

    =======================================================================

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 3261

    AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
    HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR
               ENDING SEPTEMBER 30, 2009, AND FOR OTHER PURPOSES

                                   __________

                                     Amtrak
                  Department of Housing and Urban Development
                          Department of Transportation
                           Nondepartmental witnesses

                                   __________

             Printed for the use of the Committee on Appropriations

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html

                       U.S. GOVERNMENT PRINTING OFFICE
    41-272 PDF                  WASHINGTON : 2009
    ----------------------------------------------------------------------
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                                   __________
                          COMMITTEE ON APPROPRIATIONS

                    ROBERT C. BYRD, West Virginia, Chairman
    DANIEL K. INOUYE, Hawaii             THAD COCHRAN, Mississippi
    PATRICK J. LEAHY, Vermont            TED STEVENS, Alaska
    TOM HARKIN, Iowa                     ARLEN SPECTER, Pennsylvania
    BARBARA A. MIKULSKI, Maryland        PETE V. DOMENICI, New Mexico
    HERB KOHL, Wisconsin                 CHRISTOPHER S. BOND, Missouri
    PATTY MURRAY, Washington             MITCH McCONNELL, Kentucky
    BYRON L. DORGAN, North Dakota        RICHARD C. SHELBY, Alabama
    DIANNE FEINSTEIN, California         JUDD GREGG, New Hampshire
    RICHARD J. DURBIN, Illinois          ROBERT F. BENNETT, Utah
    TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
    MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
    JACK REED, Rhode Island              SAM BROWNBACK, Kansas
    FRANK R. LAUTENBERG, New Jersey      WAYNE ALLARD, Colorado
    BEN NELSON, Nebraska                 LAMAR ALEXANDER, Tennessee

                        Charles Kieffer, Staff Director
                      Bruce Evans, Minority Staff Director
                                     ------

     Subcommittee on Transportation and Housing and Urban Development, and
                                Related Agencies

                       PATTY MURRAY, Washington, Chairman
    ROBERT C. BYRD, West Virginia        CHRISTOPHER S. BOND, Missouri
    BARBARA A. MIKULSKI, Maryland        RICHARD C. SHELBY, Alabama
    HERB KOHL, Wisconsin                 ARLEN SPECTER, Pennsylvania
    RICHARD J. DURBIN, Illinois          ROBERT F. BENNETT, Utah
    BYRON L. DORGAN, North Dakota        KAY BAILEY HUTCHISON, Texas
    PATRICK J. LEAHY, Vermont            SAM BROWNBACK, Kansas
    TOM HARKIN, Iowa                     TED STEVENS, Alaska
    DIANNE FEINSTEIN, California         PETE V. DOMENICI, New Mexico
    TIM JOHNSON, South Dakota            LAMAR ALEXANDER, Tennessee
    FRANK R. LAUTENBERG, New Jersey      WAYNE ALLARD, Colorado
                                         THAD COCHRAN, Mississippi (ex
                                             officio)

                               Professional Staff

                                  Peter Rogoff
                                William Simpson
                              Meaghan L. McCarthy
                                 Rachel Milberg
                             Jon Kamarck (Minority)
                          Matthew McCardle (Minority)
                            Ellen Beares (Minority)

                             Administrative Support

                                  Teri Curtin

                                C O N T E N T S

                                  ----------
                                                                       Page

                            Thursday, March 6, 2008

    Department of Transportation.....................................     1

                            Thursday, March 13, 2008

    Department of Housing and Urban Development: Office of the
      Secretary......................................................    53

                            Thursday, April 3, 2008

    Department of Transportation:
        Federal Transit Administration...............................   117
        Federal Highway Administration...............................   117
        Federal Railroad Administration..............................   155
    Amtrak...........................................................   157
    Department of Transportation.....................................   167
    Nondepartmental witnesses........................................   197

     TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT AND RELATED AGENCIES
                      APPROPRIATIONS FOR FISCAL YEAR 2009

                                  ----------

                            THURSDAY, MARCH 6, 2008

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10 a.m., in room SD-192, Dirksen
    Senate Office Building, Hon. Patty Murray (chairman) presiding.
        Present: Senators Murray, Lautenberg, Bond, Specter, and
    Stevens.

                          DEPARTMENT OF TRANSPORTATION

    STATEMENT OF HON. MARY E. PETERS, SECRETARY

                   OPENING STATEMENT OF SENATOR PATTY MURRAY

        Senator Murray. This subcommittee will come to order. Good
    morning. Today, the subcommittee holds its first hearing of the
    year and we're very pleased to welcome Transportation Secretary
    Mary Peters back before the body, and I also want to welcome
    Phyllis Scheinberg, who's the Department's Assistant Secretary
    for Budget and Programs and Chief Financial Officer.
        You know, much earlier in my career, I was the first woman
    ever appointed to the Transportation Committee in my State
    senate and at the time some of my senate colleagues there in
    Olympia made it very clear to me that they didn't think it was
    a role for women doing transportation policy. So, I'm only
    sorry that they can't be here this morning to see this. It
    takes, as my friend Senator Mikulski says, a lot of women and a
    few good men to get anything done. So, Mr. Bond, I welcome you
    here as well.
        Last year, the White House and the Democratic Congress went
    to battle over budget priorities. The majority in Congress
    believed we could not ignore our needs here at home, including
    transportation and housing, two areas where we have very grave
    needs. In the end, we were able to provide over $1 billion more
    for the Department of Transportation than the President
    requested. That was $2.3 billion more than the 2007 level.
        I certainly hope we can do better this year, but we're
    starting off at a huge disadvantage. Last year, President Bush
    wanted to increase the level of spending for the Transportation
    Department. We just disagreed on how much transportation
    spending should grow.
        This year, however, President Bush wants to take us
    backward and cut transportation funding by more than $2.1
    billion. In fact, the President wants us to take back the $1
    billion we added to his budget request last year and cut an
    additional $1.1 billion below that level.
        The administration's deepest cuts would be to investments
    in highways and airports along with his usual request to slash
    Amtrak and throw the railroad into bankruptcy. These cuts would
    be devastating and his proposal is unacceptable.
        In the last 15 months before the President unveiled his
    2009 budget, the U.S. economy lost 284,000 construction jobs.
    Just this week, the Commerce Department reported that
    construction spending in January, which includes spending on
    highways and other municipal projects, took its biggest single
    month's drop in 14 years, but the President's response to the
    dismal economy and rising unemployment has been to send us a
    transportation budget that makes a bad situation worse.
        By cutting highway and airport investments by a combined
    $2.6 billion, his budget would eliminate an additional 120,000
    jobs. Each one of these jobs represents the difference between
    a family with some economic stability and a family staying up
    at night worrying about where they're going to find next
    month's rent and it would put off for yet another year the
    repairs and improvements our roads and airports already need
    very badly.
        The President claims that his proposals would return the
    budget to surplus by the year 2012, but when you dig into the
    details, you find that the President has to rely on a series of
    unrealistic and irresponsible gimmicks to get there. One of
    those proposals should frighten every member of this
    subcommittee. He wants to cut federally-funded transportation
    services by 25 percent by 2012. His budget would have the
    Federal Government just give up its responsibility for funding
    our highways, airports and maintaining critical safety
    programs. I guess he expects a quarter of the Department of
    Transportation to simply disappear in the next 4 years.
        Thankfully, five floors above us right now, the Senate
    Budget Committee is marking up a budget with realistic and
    responsible priorities for our Nation. I am a long-time member
    of that committee and I can assure you the budget we will
    report this evening puts Transportation on a very different
    path than the one proposed by President Bush.
        Under our budget, Transportation would grow by almost $4
    billion above the levels requested by the President for next
    year and Transportation funding will continue to grow above the
    level of inflation into the future.
        The President's budget would effectively slash
    transportation funding by about $45 million over the next 5
    years. The administration has defended its proposals to cut
    highway funding by $1.8 billion next year because the Highway
    Trust Fund is rapidly running out of money.
        I've been warning Congress and the administration for years
    about the problem we face with the Trust Fund. We discussed
    that problem at last year's hearing. This year, I've worked
    with the Finance Committee to ensure that at least for 2009, we
    won't have to cut highway funding next year. That bill is
    awaiting action on the Senate Floor.
        The Bush administration has offered an alternative: cut
    highway funding by $1.18 billion and steal from the Transit
    Account of the Trust Fund to bail out the Highway Account, and
    while the DOT maintains this loan from the Transit Account
    would be paid back once the Highway Account has sufficient
    resources, there's absolutely nothing in the administration
    budget projections to indicate whether repaying that loan would
    actually be possible.
        By stealing from Transit to pay for highways, all we do is
    speed up the time it will take for the Transit Account to be as
    bankrupt as the Highway Account and that is just not a
    solution.
        So, as we face looming shortfalls in highway funds, the
    only other idea being proposed by the administration is a sea
    of new tolls to be paid by the driving public. Secretary Peters
    recently advocated this new system of road pricing in a speech
    to the National Governors Association and her testimony
    addresses this today.
        Road pricing basically requires drivers to pay steep new
    tolls and these new tolls are not just for traveling over
    brand-new highways and bridges, they'd be levied on the network
    of roads that have already been built with taxpayer funds. So,
    the administration is advocating now that working families who
    are already paying almost $4 a gallon for gas and who are
    barely making ends meet should pay brand-new tolls on highways
    they already paid for.
        Now I believe new tolls have a place, especially for
    expensive projects, new projects, like a brand-new bridge, but
    the administration's plan is simply unrealistic for most
    Americans. Our families struggle enough to keep their cars on
    the roads so they can travel between their jobs, their kids'
    schools, their childcare centers and their homes.
        I also believe the Federal Government should be cautious
    about the idea of leasing major transportation assets,
    including toll roads, to private investment banks. This idea is
    popular among mayors and governors. Here's how it works. Banks
    pay a huge amount of cash upfront, allowing cities and States
    to spend it immediately, but when the money's gone, their
    successors in office watch the toll revenues roll directly to
    the investment bank for as long as 99 years. If the money's
    used on transportation, this could be a good idea, but I think
    we have to be very careful if we're talking about leveraging
    transportation assets to get quick cash to pay down debt or to
    spend on other things.
        So, as we discuss this today, I look forward to hearing the
    Secretary's views on whether governors and mayors, when they
    lease out transportation assets, should be required to invest
    their windfalls on transportation needs, and I also want to
    hear whether she believes this toll revenue is really a
    substitute for the Federal Aid Highway Program that has served
    to unify our communities and our country for the last half
    century.
        Senator Bond?

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Thank you very much, Senator Murray. I thank
    you for being such a good working partner, look forward to
    working with you on this year's THUD bill and we welcome
    Secretary Peters for appearing before us today to testify on
    the Department's budget submission for 2009.
        Not that I need to add anything to encourage your gambit
    about woman power but 35 years ago when I started appointing
    the first women as heads of departments in the State of
    Missouri Government, one of them very humbly told me, you know,
    with the trouble that women face today, to take on a job she
    has to be twice as good, twice as effective and twice as
    efficient as a man. Fortunately, that's not at all hard, but
    that is not my quote. That's from a department head woman who
    is a great friend of mine.
        Madam Secretary, this will potentially be the last time
    that you appear before us. We have appreciated your service in
    the Department as Administrator of the Federal Highway
    Administration and now as Secretary overseeing all of DOT, and
    I look forward to your comments on the overall dismal budget
    picture for all of the modes of transportation within the
    Department.
        As the chair has noted, the 2009 budget proposes $68.2
    billion in gross budgetary resources which is a decrease of
    $2.13 billion from the level enacted in our recent omnibus
    appropriations package. That level of reduction in spending for
    transportation is a non-starter.
        Madam Secretary, during this final year of SAFETEA, I would
    have hoped that the administration would have remained
    committed to meeting the guaranteed funding levels for highways
    and transit as authorized. I understand from your testimony you
    believe you've lived up to the terms of SAFETEA by providing
    $286.4 billion over the life of the bill, thereby fulfilling
    your commitment to the spending agreement made with Congress
    when the president signed SAFETEA.
        I have to disagree respectfully with that assessment and I
    believe that the chair and I will continue to try to honor our
    commitment to highways and transit.
        Last year on the Senate Floor, I did not support the
    additional $1 billion for bridges that was included in the
    final omnibus appropriations bill. As you know, a majority of
    my colleagues felt that in light of the Minnesota bridge
    collapse, additional funding for bridges was necessary not only
    for Minnesota but for all 50 States. For this reason, an
    additional $1 billion was provided in obligation limitations
    for bridges in the final omnibus which I call ominous because
    they always turn out bad things for those of us who work on the
    individual appropriations bill.
        That negotiation was separate and apart from the deal that
    was agreed to by the administration when SAFETEA funding levels
    were agreed to and the guarantees under SAFETEA should be met.
        SAFETEA guaranteed the States $41.2 billion for highways.
    However, this budget only provides $39.4 billion. This
    reduction comes in part from a projected negative revenue
    aligned budget authority of $1 billion, plus another $800
    million in reductions.
        Similarly, this budget proposes to fund the Federal Transit
    Programs at a level which is $200 million below the SAFETEA
    authorized levels for new starts. These funds allowed an
    increased investment in key highway and transportation projects
    which will compliment and assist the continued growth of the
    U.S. economy.
        I stated before and I'll go on record again that these
    large rescissions of contract authority on the States cannot
    continue. For the last several appropriations cycles, we have
    increasingly used the practice of rescinding unobligated
    highway contract authority to make the overall size of
    transportation funding in our bill appear smaller.
        The Department's budget submission regrettably joins us
    once again in using this budget gimmick to mask overall
    spending. Last year, regrettably, we included a rescission of
    over $4 billion in contract authority which was much higher
    than I was able to comfortably accept. Your budget submission
    now includes a rescission of almost $3.9 billion in contract
    authority and also does not reflect the $8.5 billion rescission
    in contract authority which will take place on September 30,
    2009, the final day of SAFETEA, making the total rescission
    proposed for 2009 $12.39 billion.
        There are real world consequences to these rescissions that
    are beginning to materialize from our actions. According to the
    individuals who run State departments of transportation,
    rescinding contract authority can limit our State departments
    of transportation ability to fund the priorities and operate
    their programs as efficiently as possible.
        Our States need the flexibility to identify the Federal Aid
    Program categories to which these rescissions should apply,
    assuming we should continue to rescind these large amounts of
    contract authority. Last year, in exchange for agreeing to this
    high rescission in the THUD bill, I was able to convince my
    colleagues that rescission decisions should be made and remain
    in the hands of the States who know best where they should be
    made.
        However, the Energy Bill passed and mandated in statute
    that proportional rescissions out of all the core funding
    categories are required, thereby severely limiting the ability
    of our States to set our spending priorities.
        For example, if these high rescissions continue to be made
    and Missouri is forced to apply the categorical rescission,
    Missouri will be forced to cancel projects on their State
    implementation plan. Missouri has some categories with zero
    unobligated balances and would be forced to cancel projects
    currently on the STIP in interstate maintenance, national
    highway system, and Surface Transportation Program categories.
        I've been told by our colleagues from Nevada that they have
    no remaining balances and our rescission decisions are starting
    to impact actual capital programming. The same is becoming true
    in Tennessee and Alaska and maybe many other States.
    Proportional rescissions of contract authority will hamper
    Missouri's program as well as many other States.
        Madam Chair, this is an area where I think we need to work
    together to correct. I hope we can find a way to reduce the
    level of rescissions and, if necessary, at least give them the
    flexibility so that they don't incur the cost, the expense and
    the waste of canceling contracts already underway.
        I also hope we can work with the Senate Finance Committee
    to fix the current shortfall in the Highway Trust Fund to get
    us through 2009 and beyond. It appears to me that no one can
    really get a handle on the Highway Trust Fund shortfall that we
    will face this year.
        Last August, Madam Secretary, our staffs were briefed on
    the midyear projection of revenue into the Highway Trust Fund
    and we were told that a $4.3 billion gap would occur at the
    beginning of 2009. Lower than anticipated tax receipts, which
    fund the Highway Trust Fund, were due in part to a sharp
    downturn in vehicle miles traveled, VMT, and truck sales being
    down 20 percent.
        It would appear then that high gas prices were having a
    major impact on the traveling public and their willingness to
    drive long distances. I expect these issues to continue to
    limit the availability of funds for the Highway Trust Fund.
        The budget you have before us today re-estimates that
    shortfall in the Highway Trust Fund to $3.3 billion, based upon
    slower than expected outlays on earmarks and projected negative
    RABA. To make up for this shortfall, your budget calls for
    another budget gimmick, allowing the HTF to borrow up to $3.3
    billion from the Mass Transit Account to cover the shortfall in
    the Highway Account. This is what I would call at best a
    bandage for a bleeding wound, but it's taking a bandage off of
    another area that will be bleeding just as badly.
        What we really need is a solution from the Senate Finance
    Committee to get us through 2009 and into 2010 until a
    comprehensive reauthorization proposal can be passed and signed
    into law.
        Madam Secretary, in this year's budget, you've proposed
    once again a Congestion Reduction Initiative redirecting a $175
    million in debt earmarks from ISTEA. Given the fact that $848
    million was awarded or is conditionally awarded for five
    communities using 2007 funds and only one of the five has met
    all of the terms of its urban partnership agreement, one might
    ask why do you feel you need more money?
        I understand that Minnesota, at $133 million, is close, but
    New York with $345 million and San Francisco with almost $159
    million are not going to know from the State legislatures until
    March 31, of this year and Seattle is not to be decided until
    September 2009. No one at this point really knows if any of the
    three undecided urban partners will meet their deadlines or if
    their proposals will have any real effectiveness in reducing
    congestion.
        Once again, on another subject, we have a non-starter for
    Amtrak. Last year, we gave Amtrak $1.3 + billion, $850 million
    for capital and debt service, $475 million in operations. The
    budget we have before us proposes to reduce this level by 40
    percent.
        Beyond the issue of what's the right number for Amtrak lays
    the recent Presidential Emergency labor board settlement which
    is not included whatsoever in the budget that we have before
    us.
        As for aviation and, of course, the bad news keeps getting
    worse, the administration again attempts to slash funding from
    the Airport Improvement Program by $765 million. This is the
    third year in a row that the administration has attempted to
    reduce substantially this critical account beyond acceptable
    levels.
        I look forward to working with the chair and fellow members
    of this committee to restore these cuts and to ensure that the
    Nation's airport infrastructure receives the appropriate
    Federal investment.
        Nevertheless, Madam Secretary, you know the importance of
    airport infrastructure in regards to solving our aviation
    congestion problems. We applaud you for acknowledging that many
    of our Nation's major congestion choke points need to develop
    and improve secondary airports to handle traffic.
        I talked last night with several pilots who said that they
    were very much concerned because we've got a lot more resources
    up in the air than we have places to land them and it's not
    just air traffic control, its actual facilities.
        Madam Secretary, you deserve credit for seeking to change
    the landing fee structure to incentivize moving operations to
    off-peak hours and secondary airports in congested areas and to
    change the way airport projects are financed both at major hubs
    and at secondaries. We need to ensure proper investment in
    these secondaries if we're truly serious about battling
    congestion and properly funding the AIP Program goes a long way
    towards that goal.
        In closing, I would only say that healthy investment in
    highway, transit and aviation programs, including safety,
    improves America's quality of life and is the lifeblood of our
    Nation's economic growth.
        Thank you, Madam Chair.
        Senator Murray. Senator Lautenberg.

                    STATEMENT OF SENATOR FRANK R. LAUTENBERG

        Senator Lautenberg. Thank you, Madam Chair, and Secretary
    Peters, we wish you well in your next endeavors and I know how
    hard you worked to put things together. Unfortunately, they did
    not come together, whether it was the President's choice or
    whether we didn't bite hard enough to make him aware of the
    fact that the Nation's suffering terribly as a result of
    insufficient investment.
        If we want to strengthen and grow our economy, the one
    thing we must do is invest in our transportation infrastructure
    now. The President isn't willing to make these critical
    investments. That's kind of obvious. He wants to cut funding
    for bridges, highways, repairs by almost $2 billion. He also
    wants to fund transit programs at $200 million below the level
    that Congress authorized.
        Now these cuts hurt States like mine, like New Jersey and
    its working families that need transit options the most, and
    airline passengers will fare no better under this budget. The
    delays will continue. As a matter of fact, the projections are
    that they'll get substantially worse in the years ahead.
        President Bush wants to raise airline taxes, cut funding
    for our Nation's airports and runways by $765 million. Our air
    traffic control system is already dangerously understaffed and
    the FAA has done far too little to prevent runway incidents.
        President Bush once again is trying to bankrupt Amtrak and
    it's really shocking when we see that whether it's out of
    desperation or choice that Amtrak ridership is substantially
    higher than it's been. In the year 2006, we had 24,300,000
    passengers. In the year 2007, we had 25,800,000 passengers, and
    the revenues also have showed substantial increases, whether or
    not the choice was made out of, as I said earlier, desperation
    or convenience, but the revenues were up almost $200 million in
    those 2 years.
        So, when we look at reductions in funding for Amtrak, it
    really makes one wonder why. At a time of record high gas
    prices, record airport delays, we should not be taking away
    this popular energy efficient and convenient travel option
    which people are using in record numbers, as I just described.
        Our economy depends on our transportation infrastructure.
    It demands a greater investment and commitment from the Federal
    Government and I look forward to working with my colleagues on
    this subcommittee to provide the leadership that we need for us
    to provide the critical factors to enable our Nation to
    function more efficiently, creating less toxic emissions, and
    to be able to search for new technologies and innovations,
    remembering that population growth in America in 1970, we had
    200 million people, 37 years later, we have 300 million, and
    the transportation system was certainly not built for that kind
    of growth and we have to make adjustments and make them rapidly
    because it doesn't look like we're leveling off in population
    growth.
        Thank you, Madam Secretary.
        Senator Murray. Thank you. Secretary Specter.
        Senator Specter. Madam Chairman, Senator Stevens has asked
    for 30 seconds.
        Senator Murray. Senator Stevens.

                        STATEMENT OF SENATOR TED STEVENS

        Senator Stevens. Madam Chairman, I greet the Secretary, but
    I ask unanimous consent to make my statement appear in the
    record and the questions submitted for me. I have to go on the
    Floor.
        Senator Murray. Without objection.
        Senator Stevens. Thank you very much.
        [The statement follows:]

                   Prepared Statement of Senator Ted Stevens

        Madam Secretary, I understand the challenges that the Department
    faces to provide funding for our Nation's aging transportation systems,
    with growing congestion and the continued need to continue to
    prioritize safety.
        It is important that, as we work with the Department of
    Transportation to address these challenges, we must continue our
    commitment to increase aviation safety and rural community access.
        The FAA has made great strides in aviation modernization and
    safety. As we move forward, it is important that we understand the
    challenges faced in Alaska. We're a State that's one-fifth of the
    United States in size, as you know. We have very few roads. Our taxis,
    our buses, and our ambulances are almost all aircraft. Seventy percent
    of our communities are not connected to the outside world or to each
    other by roads. They are accessible only by air and in some instances
    by water.
        Because of our reliance on air travel, the hazardous weather
    conditions, and diverse terrain, (AK has 17 of the 20 highest peaks in
    the United States), Alaska has served a critical role in the
    development and implementation of aviation safety technology, which
    will be implemented nationwide as the ADS-B system. (Known as capstone
    in AK).
        In last weeks Commerce Committee hearing, we discussed some of the
    shortfalls of this years proposed budget, specifically cuts to the
    essential air service program which provides a lifeline for isolated
    communities in my State and across the Nation.
        Despite the many shortfalls of this years proposed budget, I look
    forward to working together to address the needs of our Nations'
    transportation systems, as well as the needs of Alaska.
        I appreciate the funding provided in the proposed budget for Alaska
    Flight Service Modernization ($14.6 million). As the FAA considers the
    final investment analysis of how to modernize the Alaska Flight Service
    Stations, I want the Department to understand that the flight stations
    in Alaska provide services beyond the functions provided by stations in
    the rest of the Nation, as many facilities do not have towers. I hope
    that the Department recognizes that reality, and continues to make
    safety as primary concern as we move forward.

                       STATEMENT OF SENATOR ARLEN SPECTER

        Senator Specter. Thank you, Madam Chairwoman. I will be
    brief. I left the Judiciary Committee where I'm ranking and I'm
    needed there for a quorum.
        I wanted to raise some issues which are very, very serious
    to Pennsylvania. Secretary Peters, I know you're aware of them,
    but I've not had any responses from the Department. So, I
    repeat them here.
        There had been a commitment that the flight routing over
    Delaware County in Pennsylvania would not be done between 9
    a.m. and 11 a.m., and 2 p.m. to 7 p.m., unless there is a
    significant backlog, and that commitment was made by a
    representative from your Department named Steve Kelley and the
    planes are being routed over Delaware County when there is no
    backlog at all, which has created an enormous and justifiable
    local furor and other approaches are not being used, such as a
    river approach, and we would like to know the details.
        I've been trying very hard to get Mr. Sturgell to come for
    a hearing so we could deal with these issues and I would
    appreciate your assistance on that.
        On another matter, the scheduling of flights at the
    Philadelphia International Airport is intolerable. You don't
    have to look at the schedules to know it. I can give you lots
    of personal experience on the subject, and I had written to you
    back on November 8, of last year and December 18, of last year
    and I would very much appreciate responses to those letters,
    and I've asked to have a meeting convened among the carriers,
    similar to the one which you held in New York. That meeting
    impacted on Pennsylvania and the Philadelphia International
    Airport because there are analogous routes. So these are
    matters of enormous importance to my State and to me
    personally.
        There has been an application pending in your Department
    regarding MAGLEV, a high-speed line which we're trying to move
    ahead in Pennsylvania, and it has been pending for more than a
    year and I personally called the key official and got
    assurances that something would be done and a long time has
    passed since then.
        So again I would appreciate it if you would give that your
    personal attention.
        In conclusion, let me associate myself with the remarks of
    Senator Lautenberg about Amtrak. It's enormously vital in this
    country and Congress has had to intervene consistently and I
    think that a more realistic approach needs to be taken by the
    administration on the subject.
        Thank you, Madam Chairwomen.

                  PREPARED STATEMENT OF SENATOR ROBERT C. BYRD

        Senator Murray. Thank you. The subcommittee has received a
    statement from Senator Byrd which we will insert into the
    record.
        [The statement follows:]
                  Prepared Statement of Senator Robert C. Byrd
        Madame Chairman, In May 1829, President Andrew Jackson vetoed the
    Maysville Road bill. The measure would have funded a section of the
    national highway running through Maysville, Kentucky, across the Ohio
    River, into Cincinnati. Failing to comprehend or acknowledge the
    benefits to the national economy, the Jackson administration derided
    the funding for the Maysville Road as local, pork-barrel spending. But
    U.S. Senator Daniel Webster, who understood that local projects often
    have national implications, especially investments in transportation
    infrastructure, opposed the President's veto. He remarked, ``There is
    no road leaving everywhere, except the road to ruin. And that's an
    administration road.''
        I often think about that quote--the administration's ``road to
    ruin.'' President Bush's budget included lots of bombast against State
    and local infrastructure projects, derisively dismissing them as
    special interest earmarks. Once again, a presidential administration is
    failing to recognize that inadequate infrastructure in one State
    affects the economies of other States. It affects the Nation as a
    whole. Therefore, it is the Federal Government's unquestionable role to
    do something about it.
        Let's consider the statistics. According to the American Society of
    Civil Engineers, our Nation has 590,000 bridges, and one out of every
    four is structurally deficient or functionally obsolete. One of those
    bridges was the I-35 bridge that collapsed in Minnesota last year.
    Because of congested roads, Americans sit in traffic for 3.5 billion
    hours annually, at a cost of $63 billion to the economy. Our airways
    are not much better. Airports are struggling to accommodate an
    increasing number of airplanes and jumbo jets, and passengers are
    forced to wait interminably on runways. Rail capacity is limited.
    Intercity passenger rail service is routinely attacked by this
    administration, leaving it in a precarious state of near-bankruptcy.
    Commuter rail and transit infrastructure is aging, and budgets are
    shrinking, as fares increase and services are reduced.
        Our Nation's deteriorating infrastructure expands well beyond the
    Transportation Department. There are 3,500 deficient and unsafe dams
    posing a direct risk to human life if they should fail. Of the 257
    locks on the more than 12,000 miles of inland waterways operated by the
    U.S. Army Corps of Engineers, nearly half of them are functionally
    obsolete. For every barge that is affected, it is the equivalent of
    disrupting 58 semi-trucks carrying cargo across the country.
        Aging water facilities fail to comply with safe drinking water
    regulations. Outdated wastewater management systems discharge billions
    of gallons of untreated sewage into surface waters each year. Existing
    transmission facilities within the national power grid are overwhelmed
    by bottlenecks, which elevates the risk of regional blackouts. Our
    public parks, beaches, and recreational harbors need attention because
    they are falling into disrepair. These facilities are anchors for
    tourism and economic development in many States.
        Congested roads and long commutes, crowded airlines and delayed
    flights, vulnerable bridges, energy blackouts, failing dams, dirty
    water and waste mismanagement--these are the festering signs of a
    Nation's infrastructure which is slowly starving. And it's happening on
    this administration's watch. It's happening because the Bush
    administration refuses to fund our country's basic infrastructure--the
    bones on which the muscles of a sound economy depend.
        This is Mr. Bush's ``road to ruin.''
        An editorial in The Washington Post in 2005 described the situation
    this way: ``[We] have let the Nation's plumbing rust, its wiring fray,
    its floor joists warp and its walkways crumble . . . Sooner or later,
    though, we're going to have to pony up . . . If you continue to ignore
    that drip, drip, drip in the upstairs bedroom, pretty soon you're going
    to be pricing a new roof.''
        This editorial appeared only weeks before Hurricane Katrina. The
    investments we delayed and postponed in New Orleans cost lives. The
    investments we delay in transportation infrastructure cost lives, and
    undermine our economic prosperity. When it comes time to pay, it costs
    tens of billions of dollars in repairs and new building, much more than
    would have been necessary had we not ignored the problem. These are
    painful lessons that this administration is stubbornly refusing to
    acknowledge. Our constituents expect us to have the vision to look down
    the road and put policies in place that ensure productivity and
    prosperity. But instead, some have chosen the rocky road to ruination.
    One thing is certain. If we allow the drip, drip, drip to continue, we
    will one day suffer the crushing costs that come when the roof falls
    in.

        Senator Murray. Secretary Peters, we will now turn to you
    for your testimony.

                        STATEMENT OF HON. MARY E. PETERS

        Secretary Peters. Madam Chairman, thank you very much. I
    know that Senator Specter has to leave. My apologies that we
    have not been responsive; we will ensure that we respond right
    away, sir. I am aware that there is a hearing scheduled in
    Philadelphia for April 7, on the Philadelphia air routings.
        Chairman Murray, members of the committee, thank you for
    the opportunity to appear before you today to discuss the
    administration's fiscal year 2009 budget request for the U.S.
    Department of Transportation.
        President Bush is requesting $68.2 billion for America's
    transportation network in the next fiscal year, including
    funding for the Department's mandatory programs.
        We are working with the President to hold the line on
    spending, while giving travelers and taxpayers the best
    possible value for their transportation dollars by transforming
    the way our transportation system works and is funded.
        Our focus is on real transportation solutions that make
    travel safer, improve the performance of our transportation
    systems so that they operate more efficiently and serve us
    better, and apply technologies and contemporary approaches to
    today's transportation challenges.
        For the first time since the creation of the interstate
    highway system, we have an incredible opportunity to come
    together and completely reassess our approach to financing and
    managing the surface transportation systems. Because gas and
    diesel taxes are levied regardless of when, where or how
    someone drives, a misperception has been created that the
    highways are free.
        As with any scarce resource that is perceived to be free,
    demand will chronically exceed supply. In the case of highways,
    the peak demand is serious and it's growing worse in every
    medium or large city in the United States today.
        While highway spending at all levels of government has
    increased by 100 percent in real dollar terms since 1980, the
    hours of delay during peak travel periods experienced by
    drivers has increased by over 200 percent during the same
    period of time. Nationwide, congestion imposes delay and wasted
    fuel costs on the economy of at least $78 billion a year.
        The true costs of congestion, however, are much higher.
    Consider the significant costs of unreliability to drivers and
    businesses, the environmental impacts of idle-related auto
    emissions, increased gasoline prices and the immobility of
    labor markets that result from congestion. All of these costs
    substantially affect interstate commerce and our ability as a
    Nation to compete in a global economy.
        The President's budget includes $14.6 billion for the
    Federal Aviation Administration (FAA). The budget request
    assumes passage of the President's reauthorization proposal for
    FAA programs and revenue streams associated with that reform
    package.
        With the more efficient revenue structure, we will be able
    to build on our exemplary safety record in aviation while
    expanding the number of aircraft that the Nation's airspace can
    safely handle at any given time.
        The key to achieving higher levels of safety and efficiency
    is to move to 21st century technologies to guide air traffic.
    The fiscal year 2009 budget request would more than double the
    investment in these NextGen technologies, providing $688
    billion for key research and technologies, including the
    transformation from radar-based to satellite-based navigation
    systems.
        Without these reforms to help finance increased air traffic
    control capacity and modernization, we can all expect,
    unfortunately, to spend more time waiting in airports or
    strapped in an airplane seat sitting at the end of a runway.
        Nearly 31 percent of the funds requested for fiscal year
    2009 support safety programs and activities. The budget allows
    us to build on our successes in delivering safer transportation
    systems by focusing on problem areas, such as runway
    incursions, as well as motorcycle crashes and pedestrian
    injuries on the road.
        It is important that we continue a data-driven safety focus
    that allows us to target our resources more effectively to save
    lives. Last week, the Department announced a new national
    strategy that will bring new focus, including resources and new
    technology, to reducing deaths on the Nation's rural roadways.
    Our Rural Safety Initiative will help States and communities
    develop ways to eliminate the risks drivers face on America's
    rural roads and highlight the available solutions and
    resources.
        The President's fiscal year 2009 budget builds on the
    exciting things that we're doing at the Department of
    Transportation, things that will help move America forward on a
    new course, a course that delivers high levels of safety, takes
    advantage of modern technology and financing mechanisms, and
    mitigates congestion with efficient and reliable transportation
    systems.
        Madam Chairman, as I mentioned, I believe that we are at an
    important crossroads in terms of our Nation's transportation
    system. I have put some ideas out there, but I am anxious to
    work with you and to hear your ideas, and those of this
    committee, as we move forward to meet these challenges.

                               PREPARED STATEMENT

        Thank you for the opportunity to appear before you today. I
    look forward to working with Congress and with the
    transportation community so that together we can ensure that
    America continues to have the best transportation system in the
    world.
        Thank you.
        [The statement follows:]

                   Prepared Statement of Hon. Mary E. Peters

        Chairman Murray and members of the subcommittee, thank you for the
    opportunity to appear before you today to discuss the administration's
    fiscal year 2009 budget request for the U.S. Department of
    Transportation.
        President Bush is requesting $68.2 billion for America's
    transportation network in the next fiscal year, including funding for
    the Department's mandatory programs. We are working with the President
    to hold the line on spending, while giving travelers and taxpayers the
    best possible value for their transportation dollars by transforming
    the way our transportation system works and is funded. At the
    Department of Transportation, our focus is on finding real
    transportation solutions that make travel safer, improve the
    performance of our transportation systems so that they operate more
    efficiently and serve us better, and apply advanced technologies and
    contemporary approaches to today's transportation challenges.
        Consistent with these priorities, nearly 31 percent of the funds
    requested for fiscal year 2009 support safety programs and activities.
    The budget allows us to build on our successes in delivering safer
    transportation systems by focusing on problem areas like runway
    incursions, as well as motorcycle crashes and pedestrian injuries on
    the road. It is important that we continue a data-driven safety focus
    that allows us to target resources more effectively.
        Just as the budget supports continued strong progress on the safety
    front, it also builds on our comprehensive efforts to identify new
    partners, new financing, and new approaches to reduce congestion. One
    example is the New York region where the Bush administration has moved
    aggressively to alleviate congestion in the air and on the ground. The
    administration recently announced short-term measures to bring
    passengers relief from chronic flight delays and we have been
    supporting Mayor Bloomberg's efforts to reduce the crippling congestion
    on the streets of Manhattan. If last year's record traffic jams and
    flight delays taught us anything, it is that traditional financial
    approaches are not capable of producing the results we need to keep
    America's economy growing and America's families connected.
        Fiscal year 2009 is the final year of the current surface
    transportation authorization--the Safe, Accountable, Flexible,
    Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU).
    The President's budget fulfills the President's commitment to provide
    the 6-year, $286.4 billion investment authorized by SAFETEA-LU. For
    2009, the budget provides $51.7 billion in 2009 for highways, highway
    safety, and public transportation.
        To honor that commitment, even with an anticipated shortfall in the
    Highway Account balance of the Highway Trust Fund, the President is
    requesting temporary authority to allow ``repayable advances'' between
    the Highway Account and the Mass Transit Account in the Highway Trust
    Fund. This flexibility will get us through the current authorization
    without any impact on transit funding in 2009; however, unreliable
    Trust Fund revenues are another sign that we need to more aggressively
    begin moving away from our reliance on fuel taxes by partnering with
    State and local governments willing to develop more effective means to
    finance our surface transportation infrastructure.
        It is increasingly clear that America's transportation systems are
    at a crossroads. Even as we continue to make substantial investments in
    our Nation's transportation systems, we realize that a business-as-
    usual approach to funding transportation programs is no longer
    effective. We need serious reform of our approaches to both financing
    and managing our transportation networks.
        For the first time since the creation of the Interstate Highway
    System, we have an amazing opportunity to come together and completely
    re-assess our approach to financing and managing surface transportation
    systems. For too long, we have tolerated exploding highway congestion,
    unsustainable revenue mechanisms and spending decisions based on
    political influence as opposed to merit.
        Now, thanks to technological breakthroughs, changing public opinion
    and highly successful real-world demonstrations around the world, it is
    clear that a new path is imminently achievable if we have the political
    will to forge it. That path must start with an honest assessment of how
    we pay for transportation. In fact, our continued transportation
    financing challenges are in many ways a symptom of these underlying
    policy failures, not the cause.
        Because gas and diesel taxes are levied regardless of when, where
    or how someone drives, a misperception has been created that highways
    are ``free.'' As with any scarce resource that is perceived to be free,
    demand will chronically exceed supply. In the case of highways, this
    peak demand problem is serious and growing worse in every medium or
    large city in the United States. While highway spending at all levels
    of government has increased 100 percent in real dollar terms since
    1980, the hours of delay during peak travel periods has increased
    almost 200 percent over the same time period.
        Traffic congestion affects people in nearly every aspect of their
    daily lives--where they live, where they work, where they shop, and how
    much they pay for goods and services. According to 2005 figures, in
    certain metropolitan areas the average rush hour driver loses as many
    as 60 hours per year to travel delay--the equivalent of one and a half
    full work weeks, amounting annually to a ``congestion tax'' of
    approximately $1,200 per rush hour traveler in wasted time and fuel.
        Nationwide, congestion imposes delay and wasted fuel costs on the
    economy of at least $78 billion per year. The true costs of congestion
    are much higher, however, after taking into account the significant
    cost of unreliability to drivers and businesses, the environmental
    impacts of idle-related auto emissions, increased gasoline prices and
    the immobility of labor markets that result from congestion, all of
    which substantially affect interstate commerce.
        Traffic congestion also has an increasingly negative impact upon
    the quality of life of many American families. In a 2005 survey, for
    example, 52 percent of Northern Virginia commuters reported that their
    travel times to work had increased in the past year, leading 70 percent
    of working parents to report having insufficient time to spend with
    their children and 63 percent of respondents to report having
    insufficient time to spend with their spouses.
        Nationally, in a 2005 survey conducted by the National League of
    Cities, 35 percent of U.S. citizens reported traffic congestion as the
    most deteriorated living condition in their cities over the past 5
    years; 85 percent responded that traffic congestion was as bad as, or
    worse than, it was in the previous year. Similarly, in a 2001 survey
    conducted by the U.S. Conference of Mayors, 79 percent of Americans
    from 10 metropolitan areas reported that congestion had worsened in the
    prior 5 years; 50 percent believe it has become ``much worse.''
        Around the country, a growing number of public opinion polls
    reflect the unpopularity of gas and diesel taxes, particularly when
    compared to open road electronic tolling. Most recently, in a King
    County, Washington survey conducted in December 2007, respondents
    preferred financing the reconstruction of a major bridge with
    electronic tolling instead of gas taxes by a margin of 77 to 17
    percent. In addition, the concept of variable tolling using new
    technologies in which prices vary regularly based on demand levels
    received support from 76 percent of respondents and opposition from
    only 22 percent.
        A survey of public opinion surveys conducted in November 2007 for
    the Transportation Research Board by the research firm NuStats found
    that ``in many parts of the United States, a wide gap exists between
    elected officials' perceptions of what the public thinks about tolling
    and road pricing and what public opinion actually is.'' Summarizing
    their findings, the report said, ``in the aggregate there is clear
    majority support for tolling and road pricing. Among all surveys, 56
    percent showed support for tolling or road pricing concepts. Opposition
    was encountered in 31 percent of the surveys. Mixed results (i.e., no
    majority support or opposition) occurred in 13 percent of them.''
        In the 2007 edition of their Annual Survey of U.S. Attitudes on Tax
    and Wealth, the Tax Foundation wrote, ``the one surprise this year was
    at the State and local level, where gas taxes were viewed as the least
    fair tax. That's the first time any State-local tax has edged famously-
    disliked local property taxes out for the honor of most unfair tax.''
        Virtually every economist who has studied transportation says that
    direct pricing of road use, similar to how people pay for other
    utilities, holds far more promise in addressing congestion and
    generating sustainable revenues for re-investment than do traditional
    gas taxes. And thanks to new technologies that have eliminated the need
    for toll booths, the concept of road pricing is spreading rapidly
    around the world. The brilliance of road pricing is that it achieves
    three major policy objectives simultaneously.
        First, it will immediately reduce congestion and deliver
    substantial economic benefits. Drivers have proven in a growing array
    of road pricing examples in the United States and around the world that
    prices can work to significantly increase highway speed and
    reliability, encourage efficient spreading of traffic across all
    periods of the day, encourage shifts to public transportation and
    encourage the combining of trips. In fact, the National Household
    Travel Survey shows on an average workday, 56 percent of trips during
    the morning peak travel period and 69 percent of trips during the
    evening peak travel period are non-work related, and 23 percent of peak
    travelers are retired.
        Second, it will generate revenues for re-investment precisely in
    the locations that need investment the most. Recent estimates in a
    forthcoming paper, ``Toward a Comprehensive Assessment of Road Pricing
    Accounting for Land Use'' by economists Clifford Winston and Ashley
    Langer at the Brookings Institute conclude that utilizing congestion
    pricing in ONLY the largest 98 metropolitan areas would generate
    approximately $120 billion a year in revenues while simultaneously
    solving the recurring congestion problem in those areas. Implementation
    of a broader road pricing strategy tied to wear and tear and
    reconstruction costs would obviously produce even higher revenue. In
    2006, as a Nation, we spent approximately $150 billion on all of our
    highways. State and local officials would even gain additional
    flexibility to reduce the wide array of taxes currently going into
    transportation that have nothing to do with use of the system.
        Third, direct pricing will reduce carbon emissions and the
    emissions of traditional pollutants. According to Environmental
    Defense, a nonprofit environmental organization, congestion pricing in
    the city of London reduced emissions of particulate matter and nitrogen
    oxides by 12 percent and fossil fuel consumption and CO2
    emissions by 20 percent; a comprehensive electronic road pricing system
    in Singapore has prevented the emission of an estimated 175,000 lbs of
    CO2; and Stockholm's congestion pricing system has led to a
    10-14 percent drop in CO2 emissions.
        Technology must play an important role in relieving traffic on our
    Nation's highways. Through programs like our Urban Partnerships and
    Corridors of the Future initiatives, we have been aggressively pursuing
    effective new strategies to reverse the growing traffic congestion
    crisis. The interest around the country has proven quite strong--over
    30 major U.S. cities responded to our call for innovative plans to
    actually reduce congestion, not simply to slow its growth.
        The fiscal year 2009 budget would encourage new approaches in
    fighting gridlock by proposing to use $175 million in inactive earmarks
    and 75 percent of certain discretionary highway and transit program
    funds to fight congestion, giving priority to projects that combine a
    mix of pricing, transit, and technology solutions. While State and
    local leaders across the country are aggressively moving forward,
    congressional support and leadership is critical. These projects will
    help us find a new way forward as we approach reauthorization of our
    surface transportation programs.
        Through the Urban Partnership initiative, communities submitted
    innovative transportation plans that would not just slow the growth of
    congestion, but would reduce it. The Department promised to allocate
    the Federal contribution in a lump sum, not in bits and pieces over
    several years. This initiative is part of a national dialogue about how
    transportation should be funded in the future. Congestion pricing is
    being talked about in major newspapers and cutting-edge traffic-
    fighting packages are combining technology and tolling, using the
    revenues to expand highway and transit capacity.
        In August 2007, the Department awarded $850 million in Federal
    grants to five cities--Miami, Minneapolis, San Francisco, Seattle, and
    New York--to support their bold and innovative strategies to reduce
    gridlock and raise new funds for transportation. The Department's
    discretionary grant awards under the Congestion Initiative in fiscal
    year 2007 were awarded in accordance with the statutory criteria of the
    applicable Federal-aid programs and Federal appropriations law.
        Local leaders in Minneapolis, for example, are tackling congestion
    there by converting HOV lanes to HOT lanes, congestion pricing new
    capacity on the shoulders of I-35 West, and deploying high-end bus
    rapid transit service and intelligent transportation technologies.
        San Francisco, meanwhile, plans to charge variable tolls on its
    most congested roadway into the city, implement a comprehensive smart
    parking system and institute traffic signal coordination at 500 key
    intersections throughout the city.
        And, New York City Mayor Bloomberg--together with key members of
    the New York State legislature, environmental leaders, and city
    business leaders--is advancing the most comprehensive congestion
    solution yet seen in the United States: ``cordon pricing'' of Manhattan
    south of 86th Street, supported by new bus rapid transit service to the
    city center.
        Accessible and cost-effective transit projects also help fight
    congestion, and the President's budget includes over $10 billion for
    transit programs. The President's budget includes $6.2 billion to help
    meet the capital replacement, rehabilitation, and refurbishment needs
    of existing transit systems. Also included is $1.4 billion for major
    New Starts projects, which will provide full funding for 15 commuter
    rail projects that are currently under construction, as well as
    proposing new funding for 2 additional projects. Another $200 million
    will be used to fund 13 projects under the Small Starts program.
        The President's budget includes $14.6 billion for the Federal
    Aviation Administration (FAA). In addition to critical new technology,
    the budget includes sufficient resources to hire and train an
    additional 306 air traffic controllers--people who are key to keeping
    the system safe.
        The budget request assumes Congressional passage of the President's
    reauthorization proposal for FAA programs and revenue streams. With a
    more efficient revenue structure, we will be able to build on our
    exemplary aviation safety record while expanding the number of aircraft
    that the Nation's airspace can safely handle at any given time. Also,
    our proposal would modernize how we pay for airport infrastructure
    projects and allow us to overhaul the Nation's air traffic control
    system.
        Key to achieving higher levels of safety and efficiency is the move
    to 21st century technologies to guide air traffic. For the flying
    public, this investment is critical if we are to deploy the state-of-
    the-art technology that can safely handle dramatic increases in the
    number and type of aircraft using our skies, without being overwhelmed
    by congestion. The fiscal year 2009 budget request would more than
    double investment in these Next Generation Air Transportation System
    (NextGen) technologies, providing $688 million for key research and
    technologies including the transformation from radar-based to
    satellite-based navigation systems.
        The fiscal year 2009 budget once again provides the framework of
    the Next Generation Air Transportation System Financing Reform Act, a
    new proposal that will make flying more convenient for millions of
    travelers. As air traffic is expected to nearly triple by 2025, our
    aviation system requires a more reliable and responsive source of
    revenue to fund the modern technology required to manage this expanded
    capacity. The investment in NextGen will allow the FAA to not only
    handle more aircraft, but also to maintain high levels of safety,
    reduce flight delays, and reduce noise near airports.
        From a finance perspective, our proposal replaces the decades-old
    system of collecting ticket taxes with a stable, cost-based funding
    program. Based on a combination of user-fees, taxes and general funds,
    it creates a stronger correlation between what users pay to what it
    costs the FAA to provide them with air traffic control and other
    services. The incentives our plan puts in place will make the system
    more efficient and more responsive to the needs of the aviation
    community.
        Without reforms to help finance increased air traffic control
    capacity and modernization, we can all expect to spend more time
    waiting in airports or strapped in an airplane seat, sitting at the end
    of a runway. There has already been a vigorous debate about the
    structure of the system, and we ask Congress to support our substantial
    aviation reform.
        We also urge action on making needed reforms to the Nation's
    Intercity Passenger Rail system. The President's fiscal year 2009
    budget provides a total funding level of $900 million for intercity
    passenger rail. Included in this total is $100 million for a matching
    grant program that will enable State and local governments to direct
    capital investment towards their top rail priorities.
        Our ``safety first'' priority includes ensuring the safe and
    dependable transport of hazardous materials throughout the
    transportation network. The President's budget request would increase
    funding for pipeline safety programs to over $93 million by funding
    eight new inspectors to increase oversight of poor performing pipeline
    operators and increasing State pipeline safety grants by $11.3 million.
        Last week, the Department announced a new national strategy that
    will bring new focus, including resources and new technology, to
    reducing deaths on the Nation's rural roads. The Department's Rural
    Safety Initiative will help States and communities develop ways to
    eliminate the risks drivers face on America's rural roads and highlight
    available solutions and resources. The new endeavor addresses five key
    goals: safer drivers, better roads, smarter roads, better-trained
    emergency responders, and improved outreach and partnerships.
        We are also requesting $174 million to support a fleet of 60
    vessels in the Maritime Security Program to assure the viability of a
    U.S.-flag merchant marine capable of maintaining a role in
    international commercial shipping and of meeting the sea lift needs of
    the Department of Defense.
        Finally, the President's budget includes $17.6 million to support
    the first year of a $165 million, 10-year asset renewal program for the
    Saint Lawrence Seaway Development Corporation. After 50 years of
    continuous U.S. Seaway operations, this federally-owned and operated
    infrastructure is approaching the end of its original ``design'' life.
    Coordinated large scale capital reinvestment is now required to assure
    continuous, safe and efficient flow of maritime commerce.
        The President's fiscal year 2009 budget builds on the exciting
    things we are doing at the Department of Transportation to help America
    move forward on a new course--a course that delivers high levels of
    safety, takes advantage of modern technology and financing mechanisms,
    and mitigates congestion with efficient and reliable transportation
    systems.
        Thank you for the opportunity to appear before you today. I look
    forward to working with the Congress and the transportation community
    to ensure that America continues to have the best transportation system
    in the world.

                     FUNDING FOR INFRASTRUCTURE INVESTMENTS

        Senator Murray. Thank you very much, Secretary Peters. As I
    mentioned in my opening statement, few areas of our economy
    have deteriorated as badly as employment in the construction
    sector. By far and away, the two biggest cuts in the
    transportation budget are your proposals to slash highway
    funding by almost $2 billion and airport funding by more than
    $750 million.
        Together, those cuts represent a potential loss of about a
    120,000 well-paying jobs.
        Given the state of the economy, why does the President
    right now feel that it's the right time to cut back on
    infrastructure investments and really worsen the job losses in
    our construction sector?
        Secretary Peters. Madam Chairman, we understand that
    there's some disagreement with this body in terms of what the
    President has proposed in those areas.
        As I have mentioned, the President asked us to use great
    care in spending our taxpayers' dollars and to tighten our
    budget wherever we could.
        In terms of highway, highway safety, and public
    transportation programs, we are meeting the commitment of the
    Safe, Accountable, Flexible, Efficient Transportation Equity
    Act: A Legacy for Users (SAFETEA-LU) legislation in terms of
    the full $286.4 billion authorized. We are reducing the request
    for the Federal Highway Administration based on the $1 billion
    of Revenue Aligned Budget Authority (RABA) that would take
    place this year, $800 million in highways, and $200 million in
    transit for a total of $2 billion.
        Madam Chairman, we understand that these reductions are
    going to cause some concern with State leaders, but we believe
    that we can help them bring new resources to bear that will
    help them meet their needs, and as you mentioned, create the
    jobs that are associated with them.
        In terms of the Airport Improvement Program, our proposal
    funds all important safety projects. We also included in the
    administration's FAA reauthorization proposal other new
    mechanisms that would allow airports to bring more money to
    bear to meet infrastructure at our airports.
        I think Senator Bond made a very good point. The challenge
    that we have in aviation is not just in the sky, but it's also
    on the ground. Improving the efficiency of the capacity that we
    have today, and expanding that capacity in the future, is going
    to be crucial if we're able to meet the growing demand for
    aviation.

                       AIRPORT INFRASTRUCTURE INVESTMENT

        Senator Murray. Well, I've heard you justify highway cuts
    in the past by talking about the precarious situation of the
    Highway Trust Fund, but in terms of the huge cuts to the
    Airport Program, there is still a lot of money in the Aviation
    Trust Fund to maintain the current level of spending.
        Your proposed cut in airport investment might cause the
    loss of more than 30,000 construction jobs.
        Can you tell this committee why you're proposing to cut
    airport infrastructure when we know that airport congestion is
    worsening and there are adequate funds in the Trust Fund today
    to cover that?
        Secretary Peters. Certainly, Madam Chairman. The balance,
    as you indicated, in the Aviation account is about $1.5
    billion. Unfortunately, it's only approximately 2 months worth
    of operations, down substantially from what it has been in the
    past.
        But back to your question about why we are not proposing
    more for the Airport Improvement Program. Madam Chairman, we
    included $2.75 billion, which would cover all essential safety
    projects and those projects that are on deck and ready to go
    right now.
        Last year when we sent the administration's aviation
    reauthorization proposal to Congress, we proposed new
    mechanisms that would allow airports to use new ways to bring
    money to bear for these important capital improvement projects.
        Senator Murray. And you're waiting for Congress on that?
        Secretary Peters. We have been, Madam Chairman. We
    understand that there may be some difficulty in reaching that
    goal.

                                HIGHWAY TOLLING

        Senator Murray. Well, let me go back to the highways. You
    know the condition of the Highway Trust Fund and the Revenue
    Study Commission that you chaired issued a report and put a lot
    of options on the table as far as fuel taxes, user fees,
    public-private partnerships, freight fees, streamlined funding
    categories, a number of things.
        You dissented from that report and instead you are here in
    front of this committee today advocating a $1.8 billion funding
    cut which is by using a raid on the Mass Transit Trust Fund of
    expanded tolling.
        Can you talk to us about how you see tolling to be a near-
    term solution to the crisis that we're facing?
        Secretary Peters. Madam Chairman, I would be pleased to do
    that. I think the goal that we together have is to move the
    solutions to transportation challenges that our Nation faces
    into 21st century solutions.
        We, as a Nation, have depended on fossil-based fuel taxes
    for most of our surface transportation funding on a Federal
    level since the mid-1950s when the interstate highway system
    was first authorized. That mechanism served us well to deal
    with the challenges that we had at the time in terms of
    connecting major cities in the United States. But because it
    bears no direct relationship to the use of the system, and
    because those revenues, as you said, are dropping off
    substantially at this point in time, it no longer is adequate,
    responsive, or sustainable. In fact, it's not a popular taxing
    mechanism with the public as well.
        The Energy Independence and Security Act, and other
    important reforms that this Congress passed and the President
    signed, will move us into more fuel efficient vehicles, which
    is very good and very important. It will help our environment.
    We'll also move away from burning fossil-based fuels and use
    more alternative and renewable fuels.
        All of those things point to the way that we need to do
    something different in the future, Madam Chairman, and that is
    why I dissented from the committee majority recommendation to
    increase by some 40 cents a gallon fuel taxes----
        Senator Murray. In favor of tolls, but tell us how, if you
    think the cities and States are ready to collect an additional
    $1.8 billion by this coming October to fill the hole in this.
        Secretary Peters. Madam Chairman, I will do that. There is
    conservatively right now about $400 billion available in
    private sector investment funds that could be brought to bear
    not only to meet that $1.8 billion, but to meet substantially
    more than that if we create the proper environment. Many States
    have done so already, where these funds can be used.
        In fact, Madam Chairman, I think you mentioned earlier a
    new SR520 bridge in your home State.
        Senator Murray. For a new bridge?
        Secretary Peters. For a new bridge. Yes, ma'am. A new
    bridge for SR520 has enjoyed popular support in Seattle and in
    Washington State, and I think Governor Gregoire has properly
    targeted use of private sector funds for an important and, you
    said, new project like that.
        Senator Murray. But your proposal is on existing highways.
    You're asking taxpayers to pay tolling on roads that are
    already paid for, and I know in your testimony, you talked
    about New York and London as innovative approaches to financing
    our highway system.
        Most of America doesn't look like London or New York and I
    know this committee has become well aware of public concern
    about tolling. Last year, the Texas delegation on a broad
    bipartisan basis insisted on a provision in our bill to
    prohibit Governor Perry from implementing a toll plan.
        So, based on that Texas experience, do you really think
    America is ready for widespread tolling?
        Secretary Peters. Madam Chairman, if I may correct, I am
    not advocating tolling on existing highways. Some of the local
    and State governments did for five urban partnership proposals,
    but it is not something that we're driving.
        I wouldn't necessarily take it off the table, but I would
    say it has to be up to State and local elected officials to
    make a decision about where and how they would provide tolling
    and bring these new revenue sources to bear.
        Again, I believe, Madam Chairman, that we have an
    opportunity to bring substantial new revenues into the system.
    That is my goal. My goal is to make more money available to us
    on a Federal level, and on a State and local level without
    imposing new taxes on our citizens, which several of you have
    mentioned with the high fuel prices today places a very great
    burden on those of limited income.
        Senator Murray. Well, tolling is a burden on those with
    limited income, too, and you mentioned King County in my State.
    I just want you to know that a survey was conducted by the
    Washington State DOT and it found that 57 percent of those in
    King County oppose tolls on our major freeways. So that's not
    an easy route to this decision either.
        Senator Bond?

                             SAFETEA-LU RESCISSIONS

        Senator Bond. Thank you very much, Madam Chair, and let me
    go back to the questions on rescissions, if you don't mind,
    Secretary.
        SAFETEA-LU requires an $8.5 billion rescission. How much
    contract authority would be available for future rescissions if
    we were to include the $3.89 billion that is in your budget,
    along with the $8.5 billion rescission for SAFETEA-LU? I've
    heard it's only about $4.5 billion, is that correct?
        Secretary Peters. Senator Bond, I'm going to refer to our
    Assistant Secretary for Budget and Programs, so I hopefully can
    give you the correct and right answer on that.
        Ms. Scheinberg. Senator, I don't have the exact number that
    would be left, but as you know, SAFETEA-LU itself authorized
    the rescission of the $8.5 billion.
        Senator Bond. I know.
        Ms. Scheinberg. So that was----
        Senator Bond. How much is left if you take another $3.89
    billion out?
        Ms. Scheinberg. I don't have that number.
        Senator Bond. I'm going to guess its $4.5 billion. So, let
    me know if I'm wrong.
        Ms. Scheinberg. Okay.
        [The information follows:]

        The Federal-aid highway program currently has $16.8 billion in
    excess contract authority. Under the Safe, Accountable, Flexible,
    Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU),
    $8.6 billion in contract authority will be rescinded in fiscal year
    2009. If Congress were to also enact the $3.2 billion in rescissions
    proposed in the fiscal year 2009 President's budget request,
    approximately $5 billion in excess contract authority would remain at
    the end of the current authorization.

                          AVAILABLE CONTRACT AUTHORITY

        Senator Bond. But in any event, the point is we're scraping
    the bottom of the barrel.
        And my second question, Madam Secretary, would be what
    would be the practical effect on State DOTs of having to
    utilize their annual Federal highway funds without excess
    contract authority?
        Secretary Peters. Senator Bond, the effect would be that
    they would not be able to let certain contracts if they hit up
    against the limit of their contract authority. It's a little
    like requiring a minimum balance be kept in an account. Even
    though funds are there, they would not be able to spend it
    absent sufficient contract authority.
        Senator Bond. So, this would be another major roadblock, to
    mix a metaphor, in construction, is that correct?
        Secretary Peters. Senator, it certainly could be limiting
    and I think it's indicative of what we're facing right now. The
    system has supported our surface transportation needs for over
    50 years, but will not be able to do so in the future.

                               URBAN PARTNERSHIPS

        Senator Bond. Well, that's my major worry. Madam Secretary,
    you come from State government. I was in State government. One
    of the things that I really didn't appreciate in State
    government, when the Federal Government told us that we could
    get some money or they'd take some money away, when we made
    decisions that normally are appropriate for the people in the
    State through their elected officials to make in the State
    government.
        Now it looks to me that this urban partners effort which
    gobbled up $844 million in 2007 is designed to provide, pick
    one of them, you can call it an incentive or you can call it a
    bribe to State legislatures to pass bills authorizing tolling
    and it may or may not work, but now you come back and you
    proposed 75 percent of the funds for discretionary programs be
    made available for critical congestion relief projects.
        Well, just as you did today, I suffer from congestion
    problems as well, but when you look across the country, we kill
    people in areas outside of--when traffic is going very slowly,
    you don't kill so many people.
        Now I'm one who got hit by a car in the congestion, so I
    know that's bad, but I survived it, but in many of our States,
    the real need is to keep people safe on the highways and I
    really question the judgments going into this urban partnership
    and, No. 2, I'd like to know if the States involved, King
    County, Washington, New York, California, Minnesota, don't go
    along with the incentive or bribe, what's going to happen to
    all that money?
        Why is it necessary to have $175 million more for
    congestion pricing when there's still potentially huge 2007
    dollars that have not been awarded and we are facing drastic
    shortfalls elsewhere?
        Secretary Peters. Senator Bond, I'm to start with my
    apologies for being a little bit late this morning. I would
    have happily paid a toll to get on an express lane and be here
    on time this morning, but I didn't have that option.
        That said,----
        Senator Bond. Maybe when enough people see congestion, they
    can make up their own minds in their areas whether they want to
    use tolls while we use some of the other money, some of the
    money to keep people off of crowded highways and rural efforts.
        Anyhow, excuse me. Pardon the interruption.

                             RURAL AREA ROAD SAFETY

        Secretary Peters. Senator, let me first speak to the rural
    areas. You are correct. We're very concerned about rural area
    road safety. That is precisely why we designed a program to
    bring resources available from all across the Department to
    complement and supplement those revenues already available in
    safety programs.
        It is a huge concern of mine and one that I've been
    devoting personal resources to and have asked, in fact, our
    Deputy Secretary to stay on top of as well.
        Let me go back to the cities that you asked about, the
    urban partner cities.
        Senator Bond. Thank you.

                               URBAN PARTNERSHIPS

        Secretary Peters. As you mentioned, several of them have to
    get enabling legislation in order to go forward and spend the
    money that we allocated from the 2007 budget for them. They
    have until March 31, 2008 to do that, the one exception being
    Seattle which has until September 2009.
        If they fail and are not able to get the legislation they
    need to move forward with those projects, then we will take
    back the funds and redistribute them to other cities.
        Why other cities, sir? We received 26 applications from
    cities who had put together very comprehensive plans to reduce
    congestion in their cities. If we are not able to go forward
    with New York or San Francisco or some of the other cities,
    then we will move to other cities who have good plans.
        Cities like Los Angeles who wish they had been in the
    opportunity the first time, cities like Houston, St. Louis,
    Atlanta, Denver, and many other cities at the ready to give us
    a very strong proposal to spend this money in their areas. That
    is why we have requested an additional allocation of money in
    the President's 2009 budget because there is a tremendous pent-
    up demand in our urban areas.
        Senator Bond, if we were able to fix some of these problems
    in urban areas, then we would improve air quality
    substantially, as well as congestion. We're going to use
    technology and learn tools that will help us to reduce
    congestion in other areas.
        Where we are able to bring private sector revenues to bear,
    as would be the case in supplementing what we have allocated to
    these cities in many areas, then that frees up money that we
    can spend on other important priorities, like our rural roads.

                       STATUS OF THE DULLES RAIL PROJECT

        Senator Bond. Jumping over to mass transit, what's the
    status of the Dulles project? I understand you're reviewing it.
    When's there a final determination? If the money doesn't go
    forward, I understand there will be considerable funds lapsing.
    How would you handle them should that project not go forward?
        Secretary Peters. Senator Bond, we're in continuous
    discussions with the project sponsors about the Dulles Rail
    Project. It's been emphasized to me by many people how
    important that project is to this region.
        Our responsibility, of course, based on statutes that
    govern the program, is to ensure that we are allocating the
    money in a manner that gives the public, whose money it is, the
    best opportunity for investment. So, we're working very hard
    with the project sponsors to try to work out details on that
    project.
        Senator Bond. I understand from the head of that division
    that there are significant problems with that in your initial
    analysis.
        Secretary Peters. Senator Bond, that is correct. In January
    we put in writing for the project sponsors some of our
    significant concerns about the project. They have been back in
    touch with us and we are working to obtain additional
    information from them, but we have not yet reached a final
    decision.
        Senator Bond. Thank you very much, Madam Secretary. Senator
    Lautenberg?

                                     AMTRAK

        Senator Lautenberg. Thank you. Madam Secretary, you were
    careful to suggest that the President wants us to be
    responsible to the taxpayer dollars and as a consequence guards
    them very carefully.
        But is that without concern for the convenience of our--the
    reliability, the innovations that we desperately need on our
    transportation systems?
        I don't understand why, for instance, that when we look at
    Amtrak, Amtrak said it needs more than twice the $800 million
    that President Bush asked for in order to operate safely and
    reliably next year, and when I look at the President's budget
    requests over the years, there's no contact with reality.
        In 2002, the President requested $521 million. The
    appropriation came out to $826 million. The scene was repeated
    the next year, $520 million from the Bush office and the Amtrak
    request was $1.2 billion. It wound up over a billion. There's
    this constant reduction in offers to help Amtrak get to where
    it has to be to accommodate the rush and the interest for
    passenger loads.
        So, by law, you're granted a seat on the Amtrak Board along
    with six more of the President's appointees. Does the President
    know what the railroad's actual funding needs are when he makes
    these; you'll forgive me, ridiculous requests?
        Secretary Peters. Senator Lautenberg, as you mentioned, I
    have a seat on the Amtrak Board and I am represented on a
    regular basis by Administrator Boardman, the head of our
    Federal Railroad Administration (FRA). He works with the Board
    in terms of establishing their budget.
        We believe that Amtrak can operate more efficiently. You
    mentioned earlier the significant increase in ridership that
    Amtrak is experiencing. In fact, they generate about $2 billion
    in revenue annually. I have to say it is confusing to me how
    ridership can go up substantially but requests for subsidies
    also go up substantially. It would seem that there ought to be
    some economies with substantially increased ridership, that
    Amtrak would be able to operate more efficiently.
        That said, the President's budget proposes $900 million in
    funding, including $100 million that could be State matching
    grants. The reason for that, Senator, is that we see
    substantially increased ridership and efficiency in
    circumstances where States support routes. In fact, ridership
    was up 88 percent in those circumstances as opposed to 17
    percent overall.
        And finally, we believe that Amtrak management must
    continue the reforms and make strong business decisions----
        Senator Lautenberg. That recommendation is so hollow;
    you'll forgive me, Madam Secretary. You say that because the
    ridership has gone up on this antiquated system, it can't stand
    it. There are constant calls for better maintenance. There are
    constant calls for better trackage. There are constant calls
    for better equipment.
        So, why the needs are less is for me unfathomable. The fact
    of the matter is that the system is overworked just like our
    highways are overworked and our skyways are overworked. There's
    too much demand, and you cannot take profits out of these
    things and expect it to be realistic.
        It surprises me that the logic that you produced suggests
    that you're doing less and expecting more from the railroad.
    The railroad has never been funded properly, never, and as a
    consequence, they're ricketing along with equipment that long
    since should be off the tracks. I use Amtrak a lot and I see
    it. You can't ride on the best line that Amtrak has, the Acela
    line, and you can't write with a steady hand there because the
    ride is so bumpy and the thrusts right and left are so sharp. I
    saw one of the cabin attendants fall down the other day and
    that's the way the system is.
        Do you think it ought to be better than it is? Are you
    satisfied with what we've got out there?
        Secretary Peters. Senator, we think it would be better for
    the Government to invest in capital for Amtrak, and to reduce
    substantially over time the operating subsidies being paid to
    the railroad.
        Senator Lautenberg. Do you know of any system, any
    commuting system where they're able to cover their costs from
    ticket revenues?
        Secretary Peters. Senator, as you know, most do not.
    However, most----
        Senator Lautenberg. Most don't. I can't think of any that
    do.
        Secretary Peters. But most do not substantially continue to
    increase subsidies over time.

                            AIRLINE CONSUMER RIGHTS

        Senator Lautenberg. If they don't increase the subsidies,
    then the quality of the operation deteriorates rapidly.
        Last year I worked with leaders on this subcommittee to
    include a $2.5 million program for enforcement of airline
    consumer rights. Why did the President cut this funding level
    by $1.4 million in the 2009 budget? Shouldn't we be increasing
    funding during a time of more frequent delays and a rising
    number of consumer complaints, and don't you look at the--the
    Department look at what the prospects are that by 2014, delays
    are going to be 60 percent higher than they are now?
        Where do we deal with the customer complaints, learn from
    them and make the appropriate adjustments?
        Secretary Peters. Senator, you're right. Consumer
    complaints are a problem and we need to do something to fix the
    root cause so that people don't have unhappy experiences.
        That said, the 2008 appropriation includes $2.5 million for
    the Office of the General Counsel's Aviation Consumer
    Protection Enforcement Program. We are spending the money that
    was provided by Congress in December when the Consolidation
    Appropriations Act passed.
        We're increasing staffing levels so that we can pursue
    investigations and enforcement actions. We are also using the
    funding to enhance the Aviation Enforcement and Consumer
    Protection Program, including updating the Consumer Complaint
    Application System, and updating the Aviation Consumer
    Protection Web site so that flyers have access to information.
        Senator Lautenberg. But it all boils down to one thing. I
    don't mean to be rude. That is, we're not able to maintain the
    kind of service reliability that we need, and I point out here
    to you that since fiscal year 2004 till fiscal year 2007, that
    the subsidy per passenger mile on Amtrak has gone down over 20
    percent.
        So, it doesn't wash and we can go ahead with this
    unspecified response to these things by talking about what we
    ought to be doing and how we ought to make this adjustment and
    it doesn't wash.
        Madam Secretary, what we're doing today is not only a
    serious impairment to our functioning as a society but what
    it's doing is setting a trap for much worse things in the
    future and it's too bad.
        Thank you very much.

                                AVIATION DELAYS

        Senator Bond. Thank you very much, Senator Lautenberg.
    Madam Secretary, as those of us who try to fly know, delays in
    our aviation system were some of the worst on record last year
    with flights arriving on time only 73 percent of the time.
        Aside from the caps on operations for the New York-New
    Jersey area, what else is your Department doing to ensure what
    some of the folks who fly the airplanes see as being not just a
    repeat of last year but even a bigger problem?
        Secretary Peters. Well, Senator, we're working very hard to
    hopefully not let that happen. First of all, the caps that have
    been imposed already at JFK International Airport will be very
    quickly announced for Newark. LaGuardia, of course, is already
    operating under some limitations and we're looking at what we
    may need to do to refine that.
        Also, as Senator Specter indicated, Philadelphia is in the
    airspace. We want to make sure that we don't push in one place
    and have that pop out and overburden another airport.
        That said, a substantial redesign of the airspace in the
    New York region will give us operating efficiencies. We also
    put forth a change in what we call the airport rates and
    charges policy to allow airports more flexibility by varying
    charges by time of day. This hopefully, would help spread out
    the peak demand for those flights. As was just mentioned with
    Senator Lautenberg, substantially beefing up the Consumer
    Complaint Office would enable us to know what those complaints
    are and to respond to them.
        In fact just last week I met with a task force that deals
    with tarmac delays so that we can work with the airlines and
    the airports to find better ways not to have planes sitting out
    on the tarmac for lengthy periods of time in the event of
    weather system delays.
        We're working with the Department of Defense to establish
    ``holiday express'' lanes. These are flight lines that the
    military normally uses along the Atlantic seaboard, but would
    be made available to commercial flights on a more frequent
    basis should the weather systems require that.
        We believe that if we can relieve congestion in the New
    York City region, where about 40 percent of the delays
    nationally emanate, then we can make a big difference. But I
    promise you, Senator, that the airlines, the airports, our air
    traffic controllers, and I, all of us are doing everything we
    can not to have a repeat of the Summer of 2007.

                 AIRLINE SERVICE TO SMALL AND RURAL COMMUNITIES

        Senator Bond. As I believe I mentioned to you last year, I
    was one who experienced one of those tarmac delays. Not only
    was the 2\1/2\ hours I sat on Reagan runway unproductive, we
    landed from St. Louis and the airline said that the FAA won't
    let us move, the FAA said it's the airline's problem. So, I sat
    there for 2\1/2\ hours as the NFC playoff game was finished on
    television and that was brought back to mind as I was watching
    some recent football playoff games and I do hope that there are
    some common sense solutions. I would be happy to share ideas
    but something has to go be done.
        Now you mention pushing in one place and causing a problem
    in another place. I know that there's aviation congestion
    initiatives to charge higher rates during peak hours has some
    appeal, but let me ask you about how this could impact service
    to small and rural communities.
        Some of the carriers are telling us that feeder flights--if
    they're moved to off-peak hours--will not be profitable for a
    lot of carriers and small communities can lose service. You've
    got a one hand and the other hand. How are you going to balance
    that?
        Secretary Peters. Senator, that is an excellent question.
    We negotiated with the airlines when putting the caps in place.
    We did not want to cut out feeder flights that feed into other
    line-haul flights, and in the case of a number of airlines,
    international flights, which provide greater profitability than
    many domestic flights. That is why we negotiated with
    individual airlines in setting caps and in monitoring the
    situation so that we don't disadvantage certain areas from
    having flights meet at the feeder airport, if you will, at the
    right time.
        Senator Bond. Well, as one who sometimes uses those feeder
    flights, if you're maybe going a half hour earlier, if that
    would allow you to get the small planes in so you can meet with
    the larger plane and delaying the outbound feeder flight from
    the incoming plane, but that's going to require a lot of
    negotiations and I'll look forward to seeing that.
        Secretary Peters. And Senator, let me apologize to you and
    to all other passengers who had such miserable experiences. My
    youngest daughter spent the better part of a day in one of
    those delays with a then 8-month-old baby. So, it is
    unacceptable and I do----
        Senator Bond. I think that 8-month-old baby may have been
    on the plane on which I was delayed.
        Secretary Peters. Was she beautiful and quiet?
        Senator Bond. You talk about instant consumer feedback,
    that young passenger expressed him or herself very, very
    vocally and very firmly.
        Secretary Peters. You would have recognized her, sir. She
    is the most beautiful grandchild in the world with the
    exception of yours.

                     FEDERAL ROLE IN TRANSPORTATION FUNDING

        Senator Bond. Fortunately or unfortunately, I don't have
    one yet.
        Madam Chair, for the record, I think I better go vote, but
    I would ask the Secretary as chair of the National Commission
    Report to describe either in your testimony here or for the
    record what you believe the Federal role in transportation
    funding should be, and I thank you very much for your service
    and for your kind work in attempting to answer very difficult
    questions, and I wish you well and I'm happy to return it to
    the chair.
        [The information follows:]

        Our country is at a transportation policy crossroads. For the first
    time since the creation of the Interstate Highway System, we have an
    amazing opportunity to come together and completely re-assess our
    approach to financing and managing surface transportation systems. For
    too long, we have tolerated exploding highway congestion, unsustainable
    revenue mechanisms and spending decisions based on political influence
    as opposed to merit.
        Now, thanks to technological breakthroughs, changing public opinion
    and highly successful real-world demonstrations around the world, it is
    clear that a new path is imminently achievable if we have the political
    will to forge it. That path must start with an honest assessment of how
    we pay for transportation, not simply how much (our current focus). In
    fact, our continued transportation financing challenges are in many
    ways a symptom of these underlying policy failures, not the cause.
        Until we decide what our national transportation priorities are,
    and what roles are appropriate for Federal, State and local government
    as well as the private sector, we will be unable to adequately address
    our Nation's infrastructure needs. Trying to be all things to all
    people has proven to be an unsuccessful strategy.
        The Department believes that the Federal role in transportation
    should be completely re-focused on truly national imperatives. In our
    view those include:
      --Improving and maintaining the condition and performance of the
            Interstate Highway System. Roughly one quarter of all highway
            miles traveled in the United States takes place on the
            Interstate System;
      --Reducing congestion in major metropolitan areas and increasing
            incentive funds to State and local officials that pursue more
            effective congestion relief strategies. A more effective
            integration of public transportation and highway investment
            strategies is central to this challenge;
      --Investing in and fostering a data-driven approach to reducing
            highway fatalities;
      --Using Federal dollars to leverage non-Federal resources;
      --Focusing on cutting edge, breakthrough research areas like
            technologies to improve vehicle-to-infrastructure
            communications; and
      --Establishing quality and performance standards.
        To better prioritize funding, earmarks should be eliminated. In a
    September 2007 report by the DOT Inspector General, a review was done
    of 8,056 earmarked projects within the Department's programs that
    received more than $8.54 billion for fiscal year 2006. Ninety-nine
    percent of the earmarks studied ``either were not subject to the
    agencies' review and selection process or bypassed the States' normal
    planning and programming processes.''
        Beyond earmark proliferation, there are a wide array of special
    interest programs that have been created to provide funding for
    projects that may or may not be a State and local priority. While it is
    true that not all earmarks or special interest investments are
    wasteful, it is also true that virtually no comparative economic
    analysis is conducted to support these spending decisions. No business
    could survive for any meaningful period of time using a similar
    investment strategy. Recent studies have shown that the economic return
    on highway capital investments has declined into the low single digits.
        Virtually every economist who has studied transportation says that
    direct pricing of road use, similar to how people pay for other
    utilities, holds far more promise in addressing congestion and
    generating sustainable revenues for re-investment than do traditional
    gas taxes. And thanks to new technologies that have eliminated the need
    for toll booths, the concept of road pricing is spreading rapidly
    around the world. The brilliance of road pricing is that it achieves
    three major policy objectives simultaneously.
        First, it will immediately reduce congestion and deliver
    substantial economic benefits. Drivers have proven in a growing array
    of road pricing examples in the United States and around the world that
    prices can work to significantly increase highway speed and
    reliability, encourage efficient spreading of traffic across all
    periods of the day, encourage shifts to public transportation, and
    encourage the combining of trips. In fact, the National Household
    Travel Survey shows on an average workday, 56 percent of trips during
    the morning peak travel period and 69 percent of trips during the
    evening peak travel period are non-work related, and 23 percent of peak
    travelers are retired.
        Second, it will generate revenues for re-investment precisely in
    the locations that need investment the most. Recent estimates in a
    forthcoming paper, ``Toward a Comprehensive Assessment of Road Pricing
    Accounting for Land Use'' by economists Clifford Winston and Ashley
    Langer at the Brookings Institution conclude that utilizing congestion
    pricing in ONLY the largest 98 metropolitan areas would generate
    approximately $120 billion a year in revenues while simultaneously
    solving the recurring congestion problem in those areas. Implementation
    of a broader road pricing strategy tied to wear and tear and
    reconstruction costs would obviously produce even higher revenue. In
    2006, as a Nation, we spent approximately $150 billion on all of our
    highways. State and local officials would even gain additional
    flexibility to reduce the wide array of taxes currently going into
    transportation that have nothing to do with use of the system.
        Third, direct pricing will reduce carbon emissions and the
    emissions of traditional pollutants. According to Environmental
    Defense, a nonprofit environmental organization, congestion pricing in
    the city of London reduced emissions of particulate matter and nitrogen
    oxides by 12 percent and fossil fuel consumption and carbon dioxide
    (CO2) emissions by 20 percent; a comprehensive electronic
    road pricing system in Singapore has prevented the emission of an
    estimated 175,000 pounds of CO2; and Stockholm's congestion
    pricing system has led to a 10-14 percent drop in CO2
    emissions.

                          AIRLINE CONSUMER COMPLAINTS

        Senator Murray. All right. Thank you very much, Senator
    Bond. Madam Secretary, it seems that every couple years or so
    when passenger conditions get really bad, the airlines provide
    improvements for awhile and then things get worse again and the
    DOT Inspector General has said that your Department should take
    a more active role in overseeing some of the customer service
    and he made several recommendations, some of which date back to
    2001, asking that your Department conduct incident
    investigations of long onboard delays, oversee the airlines
    policies for dealing with these onboard delays and improving
    the airlines performance reporting.
        Can you tell us what progress you have made on any of those
    recommendations?
        Secretary Peters. Senator, I would be happy to. I want to
    go back to what you said about this being a recurring theme. In
    the summer of 2001, there were some pretty miserable
    circumstances. Tragically when 9/11 happened, that wasn't the
    case again.
        It is my goal and the goal of the Department not to have
    recurring delays. The Inspector General's report has been very
    important to us and we are following each recommendation very
    carefully. For example, I just mentioned the Tarmac Delay Task
    Force that we convened last week. It includes representatives
    of the airlines, airports, and passenger groups. Kate Hanna,
    for example, who by virtue of having had a miserable
    experience, started a passenger group to look at aviation
    delays.
        As I mentioned earlier, we are beefing up the Airline
    Enforcement Office to make sure that we are more responsive to
    consumers when they have complaints. We are categorizing delays
    and in the case of chronically delayed flights, we're going
    back to the airlines and putting them on notice that they will
    face substantial penalties if they continue to misrepresent to
    the public that a plane will take off at a certain time when in
    fact more than 70 percent of the time it does not take off on
    time.
        Each of the recommendations that the Inspector General made
    are very important to me. We're following up on those and I am
    taking this very seriously.
        Senator Murray. Okay. Well, one of the things the IG
    complained about was that your office was issuing enforcement
    orders to airlines and then just letting the airlines certify
    in writing that they'd complied, no onsite follow-up occurred.
        Do you really trust the airlines to police themselves when
    complying with your enforcement orders?
        Secretary Peters. Senator Murray, we're going to be able to
    do random checks to ensure that they have complied.
        Senator Murray. Are you doing random checks now?
        Secretary Peters. I don't--Madam Chairman, I will get back
    to you if they've started yet. I believe they have, but let me
    confirm that for you.
        Senator Murray. Okay. I'd appreciate an answer back on
    that.
        [The information follows:]

        The adoption of or compliance with voluntary airline customer
    service commitments is not required by statute or Department of
    Transportation regulation. Neither are carriers required to track their
    compliance with their commitments. In fact, only a limited number of
    air carriers have adopted such commitments and the commitments that
    have been adopted are couched in terms that would, in general, make
    them unenforceable. The Department is currently conducting a rulemaking
    to enhance airline passenger protections, 72 Federal Register 65233
    (November 20, 2007), which, in part, proposes to require carriers to
    conduct self audits of compliance with their customer service
    commitments.

               PRIVATIZATION OF PUBLIC TRANSPORTATION FACILITIES

        Senator Murray. Let me change the topic a little bit.
    You've been an advocate for the privatization of public
    transportation facilities and in my opening remarks, I talked
    about an increasing number of mayors and governors who've
    enjoyed huge cash windfalls by privatizing transportation
    projects, Indiana Toll Road, Chicago Skyway.
        However, in many cases, these cash windfalls have not been
    used to pay for transportation improvements. Now the city of
    Chicago wants to privatize Midway Airport which is one of the
    30 busiest airports in the country, over 300,000 flights a
    year.
        Do you believe that a mayor or a Governor that privatizes a
    transportation facility, be it an airport, a highway, should
    use their cash windfalls strictly for transportation?
        Secretary Peters. Senator Murray, ideally I think it should
    be spent on transportation. I will caveat whether or not I
    should substitute my judgment for that of Mayor Daley or
    someone else, if they believe that a higher public good can be
    served by spending the money elsewhere. I believe that it would
    break trust with people if that money were spent elsewhere,
    absent a thorough and open dialogue with the public and with
    elected officials before decisions are made.
        Senator Murray. Well, in terms of that, Midway Airport has
    received $370 million in direct airport grants from the FAA for
    infrastructure improvements and several million dollars more in
    direct investments to modernize its navigation air traffic
    control systems.
        Right now, there are a variety of financial institutions
    that are preparing bids to pay the city of Chicago a huge cash
    windfall in exchange for the right to lease that airport for a
    period as long as 99 years.
        Given that the Nation's airline passengers have provided
    hundreds of millions of dollars in grants to that airport, do
    you think the city should be required to spend their cash
    windfalls specifically on transportation needs?
        Secretary Peters. Senator, we're looking at that as the
    process moves forward on Midway Airport and on privatization. I
    hear what you're saying and will take another look at the
    decisions that we may be making in that light.
        Senator Murray. Well, since that city is moving to
    privatize the Midway Airport, the law does require the airport
    to pay back a portion of Federal grants that they've received
    over the years. However, we know that you as Secretary do have
    the authority to waive that requirement if the city requests
    it.
        Do you expect to grant Chicago an exemption from repaying
    its Federal grants?
        Secretary Peters. Senator, it would be premature for me to
    respond right now, absent knowing more about it, but I will
    look at the arrangements and the negotiations that are ongoing
    and get back to you specifically with an answer on that point.
        Senator Murray. Have you talked about that situation at
    all?
        Secretary Peters. We've talked about it, Madam Chairman. We
    have talked about it, but I don't--not to the level of detail
    that I would be comfortable giving you a definitive response to
    that question today.
        Senator Murray. Okay. Well, I would like to hear back from
    you on that question.
        [The information follows:]

        Under title 49 United States Code section 47134, ``Pilot program on
    private ownership of airports,'' a public-use airport that has received
    Federal assistance may apply to the Secretary of Transportation, and
    through delegation the FAA Administrator, for certain exemptions to
    allow for the sale or lease of an airport. In the case of Midway, for
    example, the city of Chicago may only apply for exemptions to lease the
    airport because the statute only permits the sale of general aviation
    airports. The FAA's decision to grant exemptions is permissive under 49
    U.S.C. 47134(b). The statute provides that the Secretary ``may'' grant
    an exemption. An exemption is neither automatic nor required by the
    statute.
        Two exemptions may be granted under the statute to a sponsor of a
    public-use airport. First, the statute permits the FAA to exempt a
    sponsor from the requirement to use proceeds from the sale or lease of
    the airport for airport purposes only. However, FAA may grant this
    exemption only if the amount is approved by at least 65 percent of the
    air carriers serving the airport, and by the air carriers that account
    for at least 65 percent of the total landed weight of all aircraft
    landing at the airport in the preceding year. Second, the FAA is
    permitted to exempt the sponsor of a public use airport from any
    obligation to repay to the Federal Government any grants, or to return
    to the Federal Government any property.
        The FAA accepted Midway's preliminary application to the FAA for
    participation in the Airport Privatization Pilot Program, established
    pursuant to 49 U.S.C. 47134. The city of Chicago states, on page 18 of
    its preliminary application for privatization of Midway, ``As part of
    its application to the FAA for approval of the proposed transaction the
    city will request that the FAA grant exemptions from otherwise
    applicable regulatory requirements, including the prohibition on use of
    airport revenues for non-airport purposes by the city and the private
    operator; and the requirement to repay Federal grant funds.'' However,
    this is only a preliminary application. If the city of Chicago applies
    for these exemptions in its final application, the FAA will apply, at a
    minimum, the statutory and policy requirements necessary for the FAA to
    evaluate an application, including any exemptions requested by the
    sponsor. The FAA may consider an application for an exemption only if
    the FAA finds the sale or lease agreement includes provisions to ensure
    the following:
      --The airport will continue to be available for public use on
            reasonable terms and conditions without unjust discrimination;
      --The operation of the airport will not be interrupted in the event
            lessee becomes insolvent or files bankruptcy;
      --The lessee will maintain, improve, and modernize the facilities of
            the airport through capital investments;
      --Every fee of the airport imposed on an air carrier the day before
            the date of the lease of the airport will not increase faster
            than the rate of inflation unless a higher amount is approved
            by at least 65 percent of the air carriers serving the airport,
            and by air carriers who had a total landed weight during the
            preceding year of at least 65 percent of the total landed
            weight at the airport;
      --The percentage increase in fees imposed on general aviation
            aircraft at the airport will not exceed the percentage increase
            in fees imposed on air carriers at the airport;
      --Safety and security at the airport will be maintained at the
            highest possible levels;
      --The adverse effects of noise from operations at the airport will be
            mitigated to the same extent as at a public airport;
      --Any adverse effects on the environment from airport operations will
            be mitigated to the same extent as at a public airport;
      --Any collective bargaining agreement that covers employees of the
            airport and is in effect on the date of the sale or lease of
            the airport will not be abrogated by the sale of the lease; and
      --he approval will not result in unfair and deceptive practices or
            unfair methods of competition.
        The FAA will need a final application from the city of Chicago
    before FAA can apply these provisions.

                            AIR TRAFFIC CONTROLLERS

        At the end of 2004, the Department of Transportation
    published its first Workforce Plan for Air Traffic Controllers.
    That plan showed that the number of air traffic controllers the
    Department expected to lose and how many it planned to hire
    over the following 10 years. That plan has now, I believe, been
    updated twice and the record shows the FAA has gotten it wrong
    each and every year. They have consistently underestimated the
    number of controllers who leave the Department every year, and
    I continue to hear reports that the air traffic control
    facilities are understaffed, new air traffic controllers are
    not adequately trained, experienced air traffic controllers are
    too busy doing their own job to train new hires and experienced
    controllers will retire before your Department will be able to
    bring on fully trained replacements.
        Can you tell this committee if you are confident that the
    FAA management really has a handle on how to manage this
    workforce?
        Secretary Peters. Madam Chairman, we may have
    underestimated in some cases, but the differences are not as
    large as I think some folks have been led to believe. I'll give
    you the specific numbers.
        But before I do that, let me say how important the air
    traffic controllers are to the fact that we are enjoying the
    safest period ever in aviation safety. I think a great deal of
    the credit goes to air traffic controllers who do a magnificent
    job managing the planes with an antiquated system.
        We're facing a substantial increase in the number of
    retirements because, after the Professional Air Traffic
    Controllers Organization strike back in the 1980s, significant
    numbers of new air traffic controllers were hired to replace
    the controllers who were fired. Many of the new controllers who
    were hired back then are reaching retirement age. So, we're
    going to have a need for new controllers.
        Last year we planned to hire 1,386 controllers. We actually
    hired 1,815. We planned for 700 controllers to retire. The
    actual number of retirements was 828. There is other
    ``leakage'' of air traffic controllers, such as resignations,
    removals and, tragically, deaths. We had assumed 243. There
    were actually 264.
        Transfers and promotions, this is an area where a number of
    the air traffic controllers are promoted into management. We
    had estimated 185 and the actual number that moved up was 407.
    There are also academy failures; we had estimated 69, and the
    actual number was 60.
        Based on the first quarter of this year, Madam Chairman, we
    are within the range of accuracy for the number of retirements
    we had forecast. We continue to monitor and modify the
    Workforce Planning document so that it can be as accurate as
    possible.
        I can tell you that we are meeting the controller hiring
    goals. We are also meeting the goals of getting those
    controllers through their training. The simulators that we have
    allow us to get the training done a little quicker without
    taking an experienced controller off terminal----
        Senator Murray. Yes.
        Secretary Peters [continuing]. And to assist them.
        Senator Murray. I'm well aware of that earmark that
    provided those simulators and I have heard you in the past say
    we don't--we shouldn't be doing earmarks and I just have to
    comment as you say that, that is one of those earmarks that's
    making a huge difference out there.
        Secretary Peters. Yes. The simulators are doing a great
    job.
        Madam Chairman, we never put an air traffic controller that
    isn't fully certified for a task on terminal to do that task.
    As air traffic controllers complete their training program, and
    prior to full certification on the tasks that they're certified
    to handle, we are mindful of not taking our more experienced
    controllers off terminal to assist others.
        Senator Murray. Well, I guess the larger question is do you
    feel confident that the FAA is managing its workforce well? I
    know now that bonuses are being paid to retain experienced
    controllers, there was no request for or money budgeted or
    planned for those bonuses. You're just paying them to keep
    experience levels there.
        So, I'm just asking you a confidence question. Do you think
    the FAA is managing its workforce? Are you confident in that?
        Secretary Peters. Madam Chairman, I am more confident today
    than I was 15 months ago. I have worked with Acting
    Administrator Sturgell very carefully on this issue.
        As you know, our Inspector General and others in the
    Department of Transportation, including our Assistant Secretary
    for Budget and Programs, have looked at the management of the
    FAA workforce. I am more comfortable today than I was when I
    first came to this position that we are managing the workforce
    correctly, but it is something we're going to have to stay on
    top of because, as I said, we're hitting a big retirement wave.
        Senator Murray. Well, you should know that we are very
    concerned. We're hearing a lot across the country, as I told
    you, about understaffing and not adequately trained and
    experienced air traffic controllers who are having a very hard
    time trying to train because of inadequate staffing. So, I
    would hope that you'd stay on it and get back to this committee
    throughout the next several months as we follow this.
        Secretary Peters. Madam Chairman, I will do that.

                             MOTORCYCLE FATALITIES

        Senator Murray. Okay. Let me turn to a topic that I know is
    near and dear to your heart and that is an issue about
    motorcycles.
        At last year's hearing, I complained about the fact that
    your agency was delaying by 3 years your very own deadline for
    reaching your highway safety goal of one fatality per 100
    million vehicle miles traveled.
        Now when you dig into the data as to why you are not
    reaching that goal, you discover that there's a big problem in
    the rising number of motorcycle fatalities. They have increased
    every year now for 9 years in a row and I know you're a
    motorcyclist yourself. You know the issue.
        Your own Department maintains that helmets are estimated to
    be 37 percent effective in preventing fatal injuries to
    motorists. However, over the last 5 years, helmet use has
    actually declined by 20 percent and now today there only 20
    States, the District of Columbia, and Puerto Rico, that
    actually require helmet use by all motorcycle operators.
        Do you support the mandatory enactment of motorcycle helmet
    laws?
        Secretary Peters. Madam Chairman, I support giving the
    information to States so that they can act on helmet laws. I
    have also made myself available to a number of States and, in
    fact, have called governors when I see substantial increases in
    the number of motorcycle deaths in a State, especially a State
    that has repealed its helmet law.
        I think it's very important. We could have saved easily 700
    lives last year if all motorcyclists wore helmets. So, I am
    very interested in pursuing this. In fact, we have recently
    sent out a letter asking that we have the ability to use some
    of our safety money for education on the importance of helmet
    use. We got some pushback, frankly, on that, but we think it's
    that important that we've stepped out to do that.
        Also, following our discussion last year, I filmed a public
    service announcement on motorcycle safety, including a hard
    push on helmet use, and reiterated the fact that had I not had
    a helmet on when I had a crash, I think that I would be a brain
    injury patient today.
        Senator Murray. I was aware of that.
        Secretary Peters. I keep that helmet in my office to remind
    me of how important that is.
        Senator Murray. Well, I understand that there are
    restrictions on DOT's lobbying efforts on behalf of specific
    laws, such as motorcycle helmet laws. However, as part of the
    last reauthorization law, DOT was given an exception that
    allows you to lobby on behalf of the enactment of primary
    seatbelt laws.
        Would you support a similar exception that would allow DOT
    to lobby on behalf of motorcycle helmet laws?
        Secretary Peters. Madam Chairman, yes, I would.
        Senator Murray. Very good.
        Secretary Peters. Maybe I should be careful with the use of
    the word ``lobby.'' There's been some concern about that term,
    but yes, I would support our ability to----
        Senator Murray. An exemption similar to the seatbelt law.
    Would you use that authority, if you had it, to go out and talk
    to States?
        Secretary Peters. Madam Chairman, yes, I would.

                           ALCOHOL-RELATED FATALITIES

        Senator Murray. Okay. Great. Let me ask you about another
    safety issue. Your staff has explained that another factor in
    missing your highway fatality reduction goal has been your
    failure to make progress in reducing the number of fatalities
    resulting from drunk driving.
        In 2006, the most recent year for which we have data, there
    are over 17,500 alcohol-related fatalities and 50 percent of
    those had a blood alcohol level that was at least twice the
    legal limit. I think we've got to start taking bolder steps to
    prevent drunk drivers from getting behind the wheel and this
    summer, the NHTSA Administrator urged increased use of ignition
    interlocks for our repeat drunk driving offenders.
        Given that we have not made any measurable progress in
    reducing the alcohol-related fatalities, haven't we moved past
    the point of merely urging, just asking for these ignition
    interlocks? Shouldn't we be looking at some requirements?
        Secretary Peters. Madam Chairman, as I mentioned earlier,
    generally speaking, we would prefer to use education and let
    State officials make these decisions.
        Governor Richardson in New Mexico, for example, was one of
    the first States to help pass a law for mandatory ignition
    interlocking devices for those convicted of drunk driving. The
    requirement has been very effective in that State and has since
    been replicated in a number of other States.
        So if one State shares with another what's been effective,
    then we believe that more States will adopt laws like this.
    Arizona, my home State, recently adopted very strict penalties
    for repeat offenders, especially for repeat DUI offenders.
        We're also aiming more of the money that you have made
    available to us for what we call ``high visibility
    enforcement'' DUI checkpoints, especially around holidays.
    Every holiday, I go out and meet with officers who are doing
    these kinds of checkpoints to reassure them that they're doing
    the right thing.
        Another problem we're having, Madam Chairman, is substance
    abuse. We haven't always provided the tools that law
    enforcement officials could use to distinguish someone who
    doesn't register a blood alcohol level in excess of the legal
    limit, but is obviously impaired. So, we're supporting law
    enforcement in terms of more tools to identify impaired
    drivers, and that's been very successful. More often, that
    requires a blood test instead of a breathalyzer test. But
    again, we are working with States to educate and make resources
    available to them to use to detect impaired drivers.
        Continued advertising campaigns such as, ``You Drink and
    Drive, You Lose'' help to push more information out there.
    Governor Napolitano in Arizona has been very effective in
    saying that if you drink and you drive, then you will go to
    jail. Make no mistake about it. They have worked with the
    judicial branch on adjudication. Too often, someone who is
    caught driving drunk pays a lawyer, gets a plea bargain, and
    the offense never appears on their driving record. Governor
    Napolitano has done a very good job of working with the
    judicial community to make sure that when drivers are caught
    drunk, then they're not allowed to plea bargain.
        Senator Murray. Okay. All right, well, thank you. I
    appreciate your aggressive efforts on that.
        Secretary Peters. Thank you.

                      CROSS-BORDER TRUCKING PILOT PROGRAM

        Senator Murray. Let me turn to one of your favorite topics.
    There has been a lot of discussion over the Department's
    interpretation of the language that was included last year in
    the Consolidated Appropriations Act on the Cross-Border
    Trucking Pilot Program.
        I understand the Commerce Committee is going to have a
    special hearing on the question and it may be that the courts
    will have to make the final decision, but I want to focus on a
    different question about this demonstration program. It's a
    question that I first asked you when you appeared before this
    subcommittee last March and I didn't get a very clear answer.
        And I wanted to know if your Cross-Border Program continues
    precisely what happens at the end of the 1-year pilot period in
    September?
        Secretary Peters. Chairman Murray, we will evaluate the
    pilot at the end of the year, and report back to you on the
    results. It would not be my intent to continue the program past
    that time, absent learning something different. We would
    certainly come back and talk with you about that.
        Senator Murray. So, we will expect that program to cease in
    September?
        Secretary Peters. Madam Chairman, that is my understanding
    because there is a prohibition in the 2008 appropriation
    against establishing a program. Our interpretation, as you're
    aware, is different than others. We are continuing to implement
    a program that has already been established.
        If we were to move forward at the end of our pilot program,
    I believe we would be in violation of the 2008 appropriation.
        Senator Murray. So, will the Cross-Border Trucking stop
    then in September?
        Secretary Peters. Madam Chairman, that would be my intent,
    absent something changing in the law prior to that time.
        Senator Murray. Okay, all right. Well, I will then assume
    you will come back to us with your exact intent at that time
    and if you want to continue any Cross-Border Trucking after
    that point, you will have to get our authority to do so?
        Secretary Peters. Madam Chairman, that is my understanding,
    based on the language in the 2008 appropriation. I will ask our
    Counsel's Office to follow up with you and be more precise. I
    am not an attorney, but that is my understanding, yes.
        [The information follows:]

        In clarification, as announced in February 2007, the Cross Border
    Demonstration Project was intended to last a period of 12 months.
    However, section 6901 of the U.S. Troop Readiness, Veterans' Care,
    Katrina Recovery, and Iraq Accountability Appropriations Act of 2007 (
    the Supplemental Appropriations Act) required the Department to
    undertake the Demonstration Project in accordance with the pilot
    program statute found at 49 U.S.C.  31315(c). The latter provision
    authorizes the Department to extend the Project to a maximum period of
    3 years. As the Department noted in its brief in the 9th Circuit case
    challenging the Project, the Department has the discretion to extend
    the project up to 3 years pursuant to that provision.
        Section 135 of the Consolidated Appropriations Act, 2008, division
    K, provides that ``[f]unds appropriated or limited'' in that act for
    transportation into the United States by Mexico-domiciled motor
    carriers would be subject to the terms and conditions of section 6901
    of the 2007 Supplemental Appropriations Act. The 2008 Appropriations
    Act also prohibited the expenditure of funds ``to establish'' a cross
    border motor carrier demonstration program. The Department read that
    language as prohibiting the funding of any new programs, but not as
    prohibiting the funding of the ongoing Project, which was established
    in September 2007. The continued implementation or extension of an
    existing program, by definition, does not constitute the establishment
    of a new program and, therefore, would not be barred by the 2008
    Appropriations Act. At this time, although this extension authority is
    available, the Department has made no decision whether to extend the
    time frame for the Demonstration Project.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Murray. Okay. Well, I will submit some other
    questions on that and we will look forward to what your
    response is at that time.
        I do have some other committee members and myself included
    that do have some questions that will be submitted for the
    record and your prompt reply would be very much appreciated.
        [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 Patty Murray

                            AIRLINE CUSTOMER SERVICE

        Question. Domestic airline delays last year were the second-worst
    ever recorded. In fiscal year 2008, this committee provided an
    additional $2.5 million for your General Counsel's office to increase
    its enforcement activities and better protect airline consumers.
        What specific activities are you funding with these additional
    funds?
        Answer. Our Aviation Enforcement Office is increasing its staffing
    levels in fiscal year 2008 to pursue investigations and enforcement
    action with respect to many areas of public concern, such as
    unrealistic scheduling, failing to provide timely refunds, and failing
    to provide flight delay information. A portion of the requested funds
    has been and will be used to pay the salaries and expenses of the new
    hires.
        The office is also using the additional funding for start-up costs
    to enhance the aviation enforcement and consumer protection program,
    including: (1) upgrading the consumer complaint application system and
    computerized tracking and monitoring system; (2) upgrading the DOT
    aviation consumer protection Web site to make it more consumer friendly
    and useful; (3) contractor support for drafting a regulatory evaluation
    to accompany a consumer protection rulemaking and a task force on
    tarmac delays; and (4) hosting ``listening'' forums to hear the
    problems that air travelers are encountering, and a disability forum
    concerning a new disability regulation. We have also put aside travel
    funds for on-site investigations and compliance reviews and trips
    related to carrier compliance education and consumer information and
    assistance. Further, the additional funds will be used by the Aviation
    Enforcement Office to print consumer brochures (e.g., Fly Rights) and
    widely distribute them to help consumers understand their rights and
    responsibilities as an air traveler. It would also enable the office to
    translate into Spanish new consumer protection-related materials
    developed by the office.
        Question. Do you believe your agency's enforcement actions have any
    meaningful impact on the airlines' behavior when it comes to customer
    service?
        Answer. Enforcement is one of the best ways to effect change. For
    example, the U.S. Department of Transportation's Aviation Enforcement
    Office has had significant success in reducing the number of
    chronically delayed flights as a result of its on-going investigations
    of chronically delayed flights operated by the airlines that are
    required to report on-time performance data to the Department. The
    office considers any flight that is late by 15 minutes or more at least
    70 percent of the time it operates during a calendar quarter to be
    chronically late. There were 183 chronically delayed flights in the
    first quarter of 2007. This was reduced to 79 chronically delayed
    flights in the first quarter of 2008. Moreover, during the first two
    consecutive quarters we reviewed (the first and second quarters of
    calendar year 2007), there were 27 chronically delayed flights in both
    quarters. This was reduced to 3 chronically delayed flights in both the
    fourth quarter of calendar year 2007 and the first quarter of calendar
    year 2008. No flights remained chronically delayed during three
    consecutive quarters.
        The Aviation Enforcement Office has been encouraged by the results
    of its investigation. In addition, based on carrier correspondence and
    meetings with the majority of the reporting carriers, the Aviation
    Enforcement Office has observed that carriers are now monitoring
    chronically delayed flights more closely. Moreover, the office is aware
    that the carriers are now taking concrete steps to correct chronically
    delayed flights, such as adding more flight time, moving departure
    times, changing aircraft routings, and providing spare aircraft and
    crews.

                              NEW STARTS PIPELINE

        Question. Madam Secretary, your budget proposal would fund the
    Federal Transit Administration at a level that is $200 million less
    than what is authorized by SAFETEA-LU. Your budget would fully fund the
    Small Starts program, but it would take the full $200 million cut out
    of the New Starts program. According to your staff, this is because a
    larger pipeline of projects is developing for the Small Starts program,
    while there is less demand for the New Starts program.
        From where I sit, there seems to be a great demand for the New
    Starts program. I hear all the time from metropolitan areas trying to
    compete for a New Starts full funding grant agreement, or ``FFGA.''
        Please tell me why the pipeline of projects competing for a New
    Starts FFGA is shrinking at the same time that there seems to be a
    great demand for Small Starts funding?
        Answer. Several factors likely contribute to the smaller New Starts
    pipeline, which the Federal Transit Administration (FTA) defines as the
    list of projects in the preliminary engineering and final design phases
    of project development.
        First, the reduction of the number of projects in the pipeline
    reflects FTA's improved management of the New Starts program. FTA is
    more actively managing the New Starts pipeline, approving into
    preliminary engineering only projects that FTA believes have a very
    strong likelihood of receiving a Full Funding Grant Agreement (FFGA).
    Many projects do not meet the criteria, so they never make it into the
    pipeline or drop out along the way.
        Second, project development delays sometimes reduce the New Starts
    pipeline. Such delays can be attributed to the lack of local funding
    commitments, unforeseen environmental impacts and concerns, and local
    decisions to make significant changes in the scope of the project under
    development to meet revised priorities, goals, and objectives. When
    these situations occur, project sponsors withdraw from the pipeline
    until such time as they can resolve local issues.
        Last, the simplified and streamlined Small Starts process created
    by the Safe, Accountable, Flexible, Efficient Transportation Equity
    Act: A Legacy for Users (SAFETEA-LU) is causing metropolitan areas to
    reconsider major capital investments in favor of less costly, smaller
    scaled projects.
        In summary, local decisionmakers determine whether they want to
    pursue funding under the rigorous New Starts program. The need for
    considerable technical resources and strong political and financial
    support can affect those decisions.

                      PROMOTION OF THE NEW STARTS PROGRAM

        Question. At a time when oil prices reach over $100 per barrel, and
    the President is learning that prices at the gas tank may pass $4 per
    gallon this spring, I do not believe that this administration is doing
    enough to invest in transit alternatives. Americans need another option
    than sitting in traffic congestion and burning gasoline.
        Madam Secretary, what are you doing to promote the New Starts
    program and ensure that metropolitan areas are able to compete for
    these valuable grants?
        Answer. During the past year, FTA has offered numerous training
    courses, attended conferences, and issued guidance pertaining to the
    New Starts program. The following table lists training courses
    sponsored by FTA and conferences at which FTA made presentations on the
    New Starts program.

                   RECENTLY SPONSORED FTA NEW STARTS TRAINING
    ------------------------------------------------------------------------
       Training or Conference           Location           Month and Year
    ------------------------------------------------------------------------
    Alternatives Analysis.......  Washington, DC......  April 2007.
    APTA Bus and Paratransit      Nashville...........  May 2008.
     Conference.
    Association of Public         Toronto, Canada.....  June 2007.
     Transportation Association
     (APTA) Legislative
     Conference.
    Transportation Research       Denver..............  August 2007.
     Board: Transportation and
     Land Use.
    Travel Forecasting..........  St. Louis...........  September 2007.
    Alternatives Analysis.......  San Francisco.......  November 2007.
    Alternatives Analysis.......  San Diego...........  February 2008.
    APTA Legislative Conference.  Washington, DC......  March 2008.
    Small Starts Workshop.......  Pittsburgh..........  April 2008.
    New Starts Roundtable.......  Pittsburgh..........  April 2008.
    Alternatives Analysis.......  New York............  April-May 2008.
    Small Starts Workshop.......  Phoenix.............  May 2008.
    New Starts Roundtable.......  Phoenix.............  May 2008.
    World Bank..................  Washington, DC......  June 2008.
    TRB-Innovations in Travel     Portland, OR........  June 2008.
     Forecasting.
    ------------------------------------------------------------------------

        FTA plans to sponsor an alternatives analysis course in Seattle in
    July 2008, and an alternatives analysis course in Washington, DC during
    the fall.
        FTA has also issued several guidance documents, which can be found
    on FTA's public Web site at http://www.fta.dot.gov, including: (1) New
    Starts, Small Starts, and Very Small Starts Fact Sheets--Spring 2007;
    (2) Reporting Instructions and Templates--May 2007; (3) Guidance on New
    Starts Policies and Procedures--June 2007; (4) Preliminary Engineering
    Checklist--August 2007; and (5) Proposed Guidance on New Starts
    Policies and Procedures--April 2008.
        In addition to promoting New Starts, FTA has been actively involved
    with the following other programs: (1) Public Transportation
    Participation Pilot Program; (2) Transit-Oriented Development & Joint
    Development; (3) Transportation Planning Capacity Building Program; (4)
    Public-Private Partnership Pilot Program (also known as Penta-P); and
    (5) Urban Partnership Agreement Program.

                       OVERSIGHT OF THE NATION'S BRIDGES

        Question. Recent news reports have highlighted some problems with
    your Department's National Bridge Inventory. While these stories may
    not have told the whole story, it seems that the best case scenario is
    that this database needs to be greatly improved in order to be a useful
    tool for overseeing bridge conditions. The worst case scenario is that
    States are neglecting to inspect thousands of bridges within a 2-year
    time frame as required by Federal regulations.
        Madam Secretary, other than collecting data from each State, please
    describe to me exactly what your Department does to ensure the safety
    of the Nation's bridges.
        Answer. The National Bridge Inventory (NBI) database contains more
    than 90 individual data items on nearly 600,000 highway bridges.
    Information in the NBI is used for apportioning Highway Bridge Program
    funds to the States, preparing the biennial Conditions and Performance
    Report to Congress and the annual report on bridge materials required
    under SAFETEA-LU, monitoring bridge conditions and compliance with the
    National Bridge Inspection Standards (NBIS), research, and other
    reporting.
        The collection and maintenance of bridge inspection data by the
    Federal Highway Administration (FHWA) does not, by itself, ensure
    bridge safety. However, this information is of critical importance to
    States, localities, and Federal bridge owners as they carry out their
    inspection responsibilities under the NBIS. Based on these inspections,
    safety is enhanced through timely maintenance, repair, and
    rehabilitation conducted as a result of these inspections, along with
    proper load posting and enforcement of load restrictions.
        FHWA monitors compliance with the NBIS regulation through various
    oversight activities. FHWA Division Offices oversee each State's bridge
    inspection program. The primary means of monitoring the State program
    is through a comprehensive annual review. The review includes assessing
    overall compliance with the NBIS as well as the quality of bridge
    inspection.
        A typical review involves a field check of a sampling of bridges to
    compare inspection reports for quality and accuracy; interviews with
    bridge inspection staff to review procedures; and a review of various
    inventory data reports to assess compliance with such things as
    frequencies, load posting, and data accuracy. Annual reviews are
    supplemented with periodic in-depth reviews of specific program areas
    such as bridge load capacity rating and posting practices.
        The FHWA Resource Center assists in oversight by providing expert
    technical assistance to Division Offices and partners; assisting in
    development and deployment of policies, advanced technologies, and
    techniques; and deploying market-ready technologies. Also, the FHWA
    Resource Center assists in coordinating and conducting bridge
    inspection reviews and program exchanges, as well as delivering and
    updating training.
        FHWA Headquarters' oversight responsibilities include issuing
    bridge inspection policies and guidance; maintaining the NBI;
    monitoring and updating an array of bridge inspection training courses;
    collecting, reviewing, and summarizing the Division Office annual
    program review reports; and monitoring overall NBIS compliance.
        FHWA also works with the States at Technical Committee Meetings of
    the American Association of State Highway and Transportation Officials
    Highway Subcommittee on Bridges and Structures to assure that the
    States and local agencies apply the state-of-the-knowledge in bridge
    design, construction, maintenance, and inspection practices to assure
    bridge safety and durability.
        Question. Are there additional tools that you need to be more
    effective in overseeing bridge safety?
        Answer. Bridge safety is ensured by the States, localities, and
    Federal bridge owners as they carry out their responsibilities under
    the NBIS. Various tools are used during bridge inspections as
    appropriate based on the type of inspection being performed. These
    tools include basic items such as hammers, binoculars, tape measures,
    and laptop computers, as well as more sophisticated non-destructive
    evaluation tools such as ultrasonic testing, eddy current, and infrared
    thermography equipment.
        With respect to FHWA oversight of the national bridge inspection
    program, the need for the types of tools described above is limited as
    FHWA does not conduct the physical inspections. FHWA relies on
    computers to assist in analyzing, summarizing, and maintaining data as
    part of its compliance monitoring activities. There have been advances
    in computing and software technology that have the potential to improve
    the effectiveness of FHWA oversight as well as general program
    administration, and those advances are currently being explored.
        Question. According to the news reports and staff at your
    Department, field offices of the Federal Highway Administration are not
    required to make a thorough review a State's bridge database to ensure
    that its inspections are up-to-date. I am disconcerted to hear that
    your staff may be doing ``spot checks'' of this important data.
        Madam Secretary, are ``spot-checks'' an adequate method for
    overseeing a State's bridge inventory?
        Answer. The NBI contains more than 90 individual items of data for
    nearly 600,000 highway bridges. More than half of the bridges are owned
    by localities. With such a large and complex database, spot checks and
    sampling of data are considered effective means of strategically
    utilizing limited resources to monitor a very large program; however,
    they do not guarantee 100 percent compliance with NBIS regulation
    provisions nor complete data accuracy.
        It is important that the NBI data be accurate and up-to-date. There
    are provisions in the NBIS regulation to ensure that States and Federal
    bridge owning agencies are keeping their data up-to-date (refer to 23
    CFR 650.315). There are also provisions within the regulation
    pertaining to the need for quality control and quality assurance
    procedures, in part, to maintain a high degree of accuracy and
    consistency in bridge inspection data (refer to 23 CFR 650.313(g)).
        The ``spot checks'' of data do not represent the entirety of FHWA's
    oversight. FHWA oversight of the National Bridge Inspection Program
    includes the following major components:
      --An annual review of each State's bridge inspection program with a
            sampling of bridge site visits;
      --Resolution of any issues resulting from the annual reviews;
      --Preparation of an annual NBIS summary report for submittal to
            Headquarters; and
      --Ensuring that the State submits their annual NBI data to
            Headquarters.
        Procedures and guidelines for conducting the annual reviews are
    documented in the FHWA Bridge Program Manual. The reviews typically
    involve interviews with inspection personnel, bridge site visits, and
    data review and analysis using standardized and ad-hoc reports from the
    NBI along with data from specific inspection records. As an additional
    check on quality, individual NBI data submittals from the States and
    Federal agencies are checked for errors and inconsistencies prior to
    loading into the NBI.
        Inspection frequency is one of the NBIS provisions that are
    evaluated during each annual review, per FHWA policy. This evaluation
    most often requires the analysis of data; however, it may involve only
    a sample population of an individual State's total bridge stock. Since
    the NBI contains a snapshot of data at a given point in time, an
    analysis of inspection frequency often requires use of more up-to-date
    data from the individual State's inventory.
        Question. States can negotiate with your Department on a set of
    criteria for putting some bridges on a 4-year schedule for inspection,
    instead of the usual 2-year schedule required by highway regulations.
    The criteria for putting bridges on a slower schedule vary from one
    State to another, and your Department has set no overall standard for
    setting these schedules. Yet, on its own Web site, the Federal Highway
    Administration promises ``to work with our partners to ensure quality
    and uniformity in signs, signals, and design standards on the Nation's
    major highways.''
        Madam Secretary, can you explain to me why the Highway
    Administration should not also promote uniformity in bridge
    inspections?
        Answer. FHWA promotes uniformity in the national bridge inspection
    program. By definition, the National Bridge Inspection Standards
    developed by the FHWA establish national uniformity in inspection
    procedures, inspector qualifications, inspection frequency, inventory
    data, and organizational responsibilities.
        With respect to extended inspection intervals, the National Bridge
    Inspection Program statute, 23 U.S.C. 151, requires the establishment
    of minimum standards, including the maximum time period between
    inspections.
        Effective October 12, 1993, FHWA adopted as final the interim final
    rule that introduced a provision for adjusting the frequency of routine
    inspection for certain types or groups of bridges to better conform
    with their inspection needs. The provision allowed States to develop an
    alternative inspection program which specifies bridges that may be
    inspected at intervals longer than 2 years, not to exceed 4 years;
    however, FHWA approval was required to go beyond the normal 2-year
    interval. This provision was retained in the 2005 NBIS regulation
    update, but the intervals were revised to be stated in terms of months
    instead of years.
        The baseline requirements for FHWA approval of a 48-month
    inspection frequency policy are described in the Technical Advisory T
    5140.21, dated September 16, 1988. The Technical Advisory defines
    uniform basic criteria for identifying classes of bridges that, in
    general, would not be considered for routine inspection at intervals
    longer than 24 months. The basic criteria that apply to all State
    requests include:
      --Bridges with any condition rating of five or less.
      --Bridges that have inventory ratings less than the State's legal
            load.
      --Structures with spans greater than 100 feet in length.
      --Structures without load path redundancy.
      --Structures that are very susceptible to vehicular damage, e.g.,
            structures with vertical over- or under-clearances less than 14
            feet, narrow thru or pony trusses.
      --Uncommon or unusual designs or designs where there is little
            performance history, such as segmental, cable stayed, etc.
        The Technical Advisory further states that the criteria developed
    for establishing the interval between inspections, if greater than 24
    months, shall include the following:
      --Structure type and description.
      --Structure age.
      --Structure load rating.
      --Structure condition and appraisal ratings.
      --Volume of traffic carried.
      --Average daily truck traffic.
      --Major maintenance or structural repairs performed within the last 2
            years.
      --An assessment of the frequency and degree of overload that is
            anticipated on the structure.
        The basic criteria are not negotiable; however, individual States
    may add to this list or establish more stringent criteria.
        Once the criteria for extended intervals have been approved by the
    FHWA, monitoring is required to ensure continued compliance with the
    criteria. FHWA has recognized the need to improve monitoring in this
    area and will focus on reviewing this during future annual compliance
    reviews.

                       ADA COMPLIANCE OF COMMERCIAL BUSES

        Question. Madam Secretary, access to transportation is critical to
    ensuring our Nation's disabled citizens can lead full and independent
    lives. Since the passage of the Americans with Disabilities Act (ADA),
    great strides have been made in making transportation more accessible
    to the disabled, yet work remains. As you know, DOT has its own ADA
    regulations, yet one agency--the Federal Motor Carrier Safety
    Administration (FMCSA)--contends that it lacks the authority to enforce
    the Department's own ADA regulations.
        This issue has already been litigated in court and the D.C. Circuit
    Court disagreed with FMCSA's claim that it lacked the authority to deny
    or revoke operating authority to commercial buses that are unwilling or
    unable to comply with DOT's own ADA regulations and remanded the case
    back to FMCSA. Yet, notwithstanding these reports of disabled travelers
    being denied access to transportation and the court's ruling, FMCSA's
    position has not changed. In response to the court, the agency
    reasserted its position that it lacks the authority to enforce
    compliance with DOT's ADA regulations.
        Can you explain to me why FMCSA--the sole Federal agency
    responsible for granting or denying operating authority to commercial
    buses--does not have the authority to enforce the Department's own ADA
    regulations?
        Answer. The U.S. Department of Transportation (DOT) is mindful of
    its responsibilities for ensuring access to transportation services for
    all travelers, including those with disabilities, and its multi-year
    Strategic Plan emphasizes the importance of enhanced access to
    transportation services by travelers with disabilities. The Federal
    Motor Carrier Safety Administration (FMCSA) also works to ensure access
    to transportation services by individuals with disabilities within the
    limits of its legal authority.
        In the D.C. Circuit decision that addressed FMCSA's authority to
    consider alleged violations of the Americans with Disabilities Act of
    1990 (ADA) in determining whether a passenger carrier is fit to receive
    operating authority, Peter Pan Bus Lines, Inc. and Bonanza Acquisition,
    LLC v. Federal Motor Carrier Safety Administration, 471 F.3d 1350
    (2006), it was the position of FMCSA that it did not have such
    authority. The court remanded the case to the agency because it
    disagreed with the FMCSA's determination that the relevant statutory
    language clearly did not permit the agency to deny operating authority
    for a carrier's failure to comply with ADA requirements. The court did
    not support FMCSA's interpretation that the statutory language was
    clear and unambiguous. It determined that the text of the statute was
    ambiguous, instructed FMCSA to re-examine the statute, and emphasized
    that remanding the case to the agency did not mean that FMCSA's
    interpretation of the statutory language was necessarily incorrect. The
    court further stated that after the agency revisits the issue, its
    decision will be entitled to deference by the court, as long as the
    agency's reading of the statute is reasonable.
        In a decision issued October 26, 2007, after thoroughly re-
    examining the governing statute, FMCSA reaffirmed its earlier finding
    that it lacks statutory authority to enforce the ADA through the
    agency's licensing procedures. Peter Pan Bus Lines, Inc. and Bonanza
    Acquisition, LLC have sought review of this decision in the D.C.
    Circuit Court of Appeals and the parties will be filing their
    respective briefs with the court later this year.
        Question. While I disagree with your assessment that FMCSA lacks
    the authority to enforce the Department's own regulations, have you
    requested the specific authority that you think you need to begin
    enforcing these regulations?
        Answer. While this case is under consideration by the D.C. Circuit
    Court of Appeals, FMCSA has not sought specific authority to enforce
    ADA requirements when reviewing passenger carriers' requests for
    operating authority. However, FMCSA is closely monitoring the status of
    the pending legislation entitled the ``Over-the-Road Bus Transportation
    Accessibility Act of 2007,'' H.R. 3985. H.R. 3985 was passed by the
    U.S. House of Representatives on December 12, 2007, and was reported by
    the Committee on Commerce, Science, and Transportation, U.S. Senate, on
    April 24, 2008.

                       FUNDING FOR PIPELINE SAFETY OFFICE

        Question. I want to take a moment to discuss your budget request
    for the Office of Pipeline Safety. This office is seeing an increase of
    nearly $14 million, or 17 percent. I want to applaud you for
    recognizing the needs in that area. Just this past year alone, we saw
    pipeline-related fatalities in Mississippi, Louisiana and Minnesota.
        Last year, the Congress added 15 new inspection positions and your
    budget request for 2009 proposes to add 8 additional positions.
        Given the importance that we both see in this area, can we expect
    to see these positions filled promptly?
        Answer. The Pipeline and Hazardous Materials Safety Administration
    (PHMSA) has launched an aggressive recruitment strategy to promptly
    fill vacant inspection and enforcement positions. PHMSA's strategy is a
    three pronged approach: (1) entry level--outreach to colleges and
    universities training future inspectors; (2) mid-level--offer current
    industry inspectors recruitment bonuses; and, (3) senior level--recruit
    retiring senior inspectors that are industry experts.
        PHMSA offers a variety of Federal incentives such as remote
    deployment from home and recruitment incentives. Recent legislative
    proposals with regard to pay setting in Alaska (as well as other non-
    foreign areas) will, if passed, also assist in the longer term
    attractiveness of employment in that location and should aid in
    recruitment in that State. Since the Consolidated Appropriations Act of
    2008 was enacted, PHMSA has recruited 13 inspection and enforcement
    personnel.
        Question. Do you expect to have problems recruiting the right
    candidates for these positions? We would like to ask you to keep us
    regularly updated as to the progress you are making at bringing these
    people on board.
        Answer. The expertise required to maintain and expand any safety
    program is specialized, constituting inherent challenges to recruiting
    the ``right'' candidates. However, PHMSA's recruitment strategy is
    predicated on those challenges and the agency expects to address and
    overcome them. For example, qualified candidates are interviewed by an
    expert panel. In an effort to ensure that PHMSA is meeting its
    recruitment goals, the agency is monitoring the process and will
    provide the committee with monthly updates; the most recent is provided
    below.

             PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION

                   PIPELINE SAFETY--FISCAL YEAR 2008 INSPECTION/ENFORCEMENT POSITIONS AS OF 5/31/2008
    ----------------------------------------------------------------------------------------------------------------
                                         Number of
                                        Inspection/     Actual On-       Accepted                       Percent of
                Location                Enforcement        Board          Offers         Vacancies       Positions
                                         Positions                                                        Filled
    ----------------------------------------------------------------------------------------------------------------
    Headquarters....................              12               9  ..............               3              75
    Eastern Region..................              13              11  ..............               2              85
    Southern Region.................              14              11               1               2              79
    Central Region..................              20              16               1               3              80
    Southwest Region................              25              22               1               2              88
    Western Region..................              25              22               1               2              88
                                     -------------------------------------------------------------------------------
          TOTAL.....................             109              91               4              14              82
    ----------------------------------------------------------------------------------------------------------------

                      FEDERAL INVESTMENT IN TRANSPORTATION

        Question. Secretary Peters, you have argued that tolling and
    privatization can translate into a greatly reduced role for the Federal
    Government in financing transportation infrastructure. In fact, the
    President's out-year projections for the Department of Transportation
    call for a major reduction in the Federal investment transportation.
        How would tolling and the private sector support a national
    transportation system that includes building infrastructure in
    disadvantaged areas? For example, would the private sector and tolling
    have built the Appalachian Development Highway System?
        Answer. Public private partnerships are a valuable supplement to,
    not a replacement for, the national highway system and networks of
    local streets and roads. In some parts of the country tolling could
    certainly be considered one of the options by States that can not
    afford desired improvements with the existing mix of Federal and State
    highway taxes to replace bridges or expand capacity of existing
    highways running through disadvantaged areas.
        Question. If certain States choose to toll, does that mean that the
    Federal Government should be spending less in those areas? Or put
    another way, will the citizens in those States be financing their own
    transportation while other places receive a greater share of Federal
    resources?
        Answer. Under current law, the amount of Federal funding that is
    distributed to States is not affected by whether or not a State has
    toll roads.
        Question. The details of your proposal are not part of your budget
    request; when will we see the specifics? Are you working on a
    legislative proposal?
        Answer. The authorization for current Federal surface
    transportation programs does not expire until the end of fiscal year
    2009. Reauthorization will be a major factor in the fiscal year 2010
    budget deliberations.
        Question. Most Federal oversight over the highway system consists
    of requiring State and local governments to meet Federal standards
    before receiving their highway grants.
        How would your Department continue to oversee the safety and
    performance of the transportation system when it no longer plays as
    critical a role in highway financing?
        Answer. Even if support from the private sector significantly
    enhances our transportation capacity, the Federal Government will
    continue to play a critical role in both highway financing and safety.
    The U.S. Department of Transportation has a proven ability to oversee
    the safety and performance of both transportation systems that it helps
    finance, such as highways and transit, as well as those that are
    predominantly controlled by the private sector, such as trucks,
    pipelines and railroads.
             nationwide differential global position system (ndgps)
        Question. The fiscal year 2009 budget requests funding at $4.6
    million for the NDGPS, which is consistent with the requests in prior
    years. However, the cost of this program is likely to increase in
    fiscal year 2009 by as much as $800,000.
        Is the budget request sufficient funding to maintain all current
    services and keep NDGPS equipment in good repair?
        Answer. The U.S. Department of Transportation (DOT) is committed to
    maintaining current inland (terrestrial) NDGPS services to the many and
    varied users of these services, as identified by the Research and
    Innovative Technology Administration (RITA) in its recently completed
    NDGPS Assessment. President Bush's fiscal year 2009 budget includes
    $4.6 million to continue inland NDGPS operations.
        In March 2008 DOT approved, and the interagency National Space-
    Based Positioning, Navigation and Timing (PNT) Executive Committee
    (EXCOM) endorsed, a decision to continue inland NDGPS services as a
    national utility in support of America's surface transportation,
    precision agriculture, natural resources and environmental management,
    and surveying communities. (See: http://www.dot.gov/affairs/
    dot5508.htm).
        Question. If NDGPS costs were to increase in 2009, where would the
    additional funds come from? Alternatively, in what way and to what
    extent might service be reduced?
        Answer. As part of its decision to continue inland NDGPS
    operations, DOT is seeking a cost-share mechanism with other Federal
    agencies that use NDGPS. DOT is still developing this mechanism through
    the interagency NDGPS team, and is examining if there are any changes
    that may be made to the near-term costs of operating and maintaining
    the NDGPS system.
        Question. The NDGPS has deferred maintenance requirements and also
    needs an upgrade to catch up with the Coast Guard's DGPS technology. It
    is reported that these could be completed in 2009 for $3.5 million, but
    will grow more expensive in the future.
        Does RITA expect to complete this refresh? If so, when, and what is
    the cost expected to be at that time?
        Answer. The 2009 budget includes $4.6 million for annual operating
    costs of the NDGPS system. The U.S. Coast Guard is expected to complete
    the Maritime DGPS refresh by second quarter fiscal year 2009. As is
    prepares the fiscal year 2010 budget and develops a cost share
    methodology, DOT and its partners are evaluating the costs of deferred
    maintenance, and of upgrading the inland component of NDGPS to be
    equivalent with the Coast Guard maritime component.
                                     ______

                Questions Submitted by Senator Patrick J. Leahy

                           INFRASTRUCTURE MAINTENANCE

        Question. On your congestion initiative, which I do not believe has
    been authorized by Congress. There are vast areas of the country with
    transportation funding needs that have more to do with aging
    infrastructure than overcrowded roads. In Vermont, for instance, 453 of
    our 2,675 State- and town-owned bridges (nearly 20 percent) are
    structurally deficient.
        In fiscal year 2007, DOT was granted full authority to make
    spending decisions with all of its discretionary funding. Instead of
    using this opportunity to show fairness and evenhandedness nationwide,
    modal agencies across the DOT decided to give away all of their money
    to a few big cities. You should have seen the letters I received from
    my constituents back home. They ranged the gamut from disappointment to
    frustration to infuriation. And I agreed with every one of them.
        While the Minnesota bridge tragedy last year refocused Congress in
    the fiscal year 2008 appropriations process on the need to repair
    deficient bridges and roads, it is disappointing to look at the DOT's
    budget request for the coming year and again see a proposal that
    emphasizes congestion mitigation and kicks essential infrastructure
    maintenance further down the road.
        How will you ensure that rural areas around the country will be
    treated fairly and equitably under this budget proposal?
        Answer. The foremost transportation goal of Federal, State and
    local governments no longer is establishing connectivity, but rather
    ensuring that people and commerce are able to move efficiently. The
    Department is deeply concerned about the massive problem of traffic
    congestion, which presents significant challenges to this goal and
    affects millions of people across the Nation every day. Hence, we have
    proactively established the congestion initiative under the
    Department's existing authorities. It also bears mentioning that the
    Government Accountability Office has testified favorably before
    Congress regarding the Congestion Initiative, highlighting our efforts
    as ``encouraging'' and stating that ``successfully addressing the
    Nation's mobility needs [will require] strategic and intermodal
    approaches and solutions.'' \1\
    ---------------------------------------------------------------------------
        \1\ Statement of Patricia A. Dalton, Managing Director, Physical
    Infrastructure Issues, GAO. Testimony before the Subcommittee on
    Transportation, Housing and Urban Development & Related Agencies;
    Committee on Appropriations; House of Representatives; March 7, 2007.
    ---------------------------------------------------------------------------
        When implementing programs, I have been consistent throughout my
    tenure as Secretary in attempting to focus the Department's limited
    discretionary resources on projects that yield the greatest possible
    benefits. With this in mind, fiscal year 2007 discretionary funding
    decisions focused not on a big city ``give-away,'' but rather on the
    results of a competitive and comprehensive application and review
    process. This was Congress's intended role for the Department when
    Congress established various ``discretionary'' grant-making programs in
    SAFETEA-LU and in prior authorizations.
        With respect to the question of highway spending in rural areas of
    the Nation, I can assure you that the Department is concerned with the
    condition, safety, and performance of rural roads. The latest
    information published in the 2006 Conditions and Performance report
    notes that the percentage of travel in rural areas on roads of good
    pavement quality has steadily increased from 46 percent in 1995 to 58.3
    percent in 2004. Further, over this same time the condition of bridges
    in rural areas has also improved from year-to-year, with the percent in
    deficient condition at their lowest levels in the most recent year for
    which we have data. Safety levels on rural highways have also shown
    considerable improvement over the last decade.
        The steady improvements we have witnessed on the condition of rural
    highway and an safety performance nationwide is commensurate with the
    level of spending on these roads. Highway capital outlays in 2004 on
    arterial and collector roads in rural areas amounted to $22.9 billion,
    as contrasted with $36.2 billion for the same class of roads in urban
    areas. When looked at on a per vehicle-mile of travel (VMT) basis,
    outlays were 2.4 cents per VMT for rural roads and 2.2 cents per VMT
    for urban roads.
        In summary, highways in rural areas of the Nation are being
    improved at a steady pace, and their condition and performance reflect
    the fact that highway funds are being directed to these road systems at
    an appropriate level.

                           INFRASTRUCTURE MAINTENANCE

        Question. You recently chaired a national commission on
    transportation financing that concluded we are not spending nearly
    enough to build and maintain our transportation infrastructure. While a
    majority on that panel agreed that we must keep open the option of
    increasing the Federal gas tax in order to upgrade our existing
    transportation system, you dissented and said the Federal Government
    should instead pursue ``a different kind of investment,'' like tolling,
    congestion pricing, and public-private partnerships. I am not sure if
    you have been to Vermont before, but I am afraid that the traffic
    volume on our roads will not even pay for the tollbooth operators, much
    less the huge backlog in deferred maintenance projects piling up at the
    Vermont Agency of Transportation. On top of that, I do not foresee many
    private equity firms being interested in getting a piece of the action
    on I-89, I-91, or I-93 in Vermont--except maybe during leaf peeping
    season.
        Has your Department developed any specific financing proposals that
    would be ready to implement as part of this year's appropriations bill
    or next year's reauthorization bill to address the over $225 billion in
    new investment that the national commission said we need annually to
    upgrade our transportation system?
        Answer. The Department disputes the validity of the Commission's
    assertion of $225 billion in annual needs. First, this figure
    represents simply an estimate of projects whose benefits slightly
    outweigh their costs--a criterion that does not take into account the
    fact that resources are limited, and on which we do not base investment
    decisions in any other sector of the economy. Raising the fuel tax
    reduces disposable incomes available for private sector expenditures--
    many of which may have benefits in excess of their costs. Second,
    several of the investment assumptions used in the Commission analyses
    include unjustifiable investments, and are not based on a strict
    benefit-cost analysis. Finally, the Commission Report gives inadequate
    consideration to the potential for controlling demand for investment
    and increasing the efficiency of the current system, including through
    the use of congestion pricing to increase the performance of existing
    roads.
        Regarding congestion pricing, this is one tool available to States
    and localities for improving the performance of transportation systems.
    We do not suggest it is a blanket solution for addressing all highway
    funding needs. Where there is considerable congestion, pricing can be
    an effective strategy for managing traffic and producing revenues that
    can support local transportation systems. Where there is not
    congestion, local governments will likely continue to rely on
    conventional financing mechanisms, at least for the near term. As
    technologies develop Federal, State, and local governments will have
    growing opportunities to use innovative means to raise transportation
    funds, regardless of the level congestion.
        The Department is currently developing financing proposals to
    address the Nation's surface transportation infrastructure needs, which
    we hope to present to Congress later this year as part of a broader
    surface transportation reauthorization proposal.

                             ESSENTIAL AIR SERVICE

        Question. I am disappointed that the administration once again has
    proposed such a significant cut in the Essential Air Service program
    and a new general provision that would lead to considerable reductions
    in service to rural communities across the country. Specifically, the
    President's budget requests only $50 million for the EAS program--far
    less than half of the $125 million that Congress appropriated last
    year. The $50 million funding level is clearly insufficient to meet the
    needs of EAS communities around the country, as over 60 would be
    dropped from the program immediately under the administration's
    proposal.
        While this is not the first time that this administration has tried
    to kill the EAS program, as its chief administrator, how do you expect
    small communities around the country, like Rutland, Vermont, to
    maintain their Essential Air Service with only $50 million in direct
    funding?
        Answer. The Essential Air Service program was designed when airline
    rates, routes, and services were regulated as means of providing
    temporary support to some communities during the transition of the
    airline industry to a deregulated structure. Although the program was
    eventually made permanent, it has remained fundamentally unchanged
    since its inception. That is one reason the administration has proposed
    reforms over the last several years. We believe that the program needs
    to be targeted to serve the needs of the most truly isolated
    communities across the country, and the administration's plan offers
    specific proposals to accomplish that objective.
        It is clear that the EAS program must be reformed or the costs will
    continue to escalate. As more and more regional carriers upsize their
    fleets to larger turboprops or even regional jets, it will leave more
    and more communities reliant upon subsidized EAS. In addition, as the
    spread of low-fare carriers continues, more local communities will be
    unable to support their local airport's service as travelers will drive
    to nearby, low-fare jet service. EAS service of two or three round
    trips a day cannot compete with low-fare jet service, and more and more
    communities are falling into this situation. The administration's
    budget request is wholly consistent with the notion that the most
    isolated communities should continue to receive subsidized EAS in order
    to keep them connected to the national air transportation system.
                                     ______

                Questions Submitted by Senator Dianne Feinstein

                                  SMALL STARTS

        Question. The fiscal year 2009 budget proposal included funding for
    five projects in California through the ``small starts'' program. These
    projects will allow a number of California communities to expand their
    public transit offerings. I have worked to secure past funding for this
    project, and I appreciate the administration's support.
        Can you describe for us the rigorous review that ``small starts''
    proposals undergo? Am I correct that these projects are some of the
    most cost effective transportation projects in the Country?
        Answer. The Small Starts evaluation and rating process is a
    simplified version of the process used for New Starts projects. Small
    Starts projects must meet the criteria specified in law, which include:
    project justification (cost-effectiveness, transit supportive land use,
    and other factors such as economic development) and local financial
    commitment. The rigorousness of the Federal Transit Administration's
    (FTA) review depends on the estimated capital and operating costs of
    the Small Starts project. Those projects which qualify as Very Small
    Starts (under $50 million total capital cost, less than $3 million per-
    mile capital cost, and more than 3,000 riders in the corridor today)
    essentially qualify automatically as meeting the project justification
    criteria specified in law. Therefore, FTA performs little review other
    than to ensure the project qualifies.
        For projects that do not qualify as Very Small Starts, FTA reviews
    and evaluates their estimates of ridership, cost-effectiveness, and
    transit supportive land use. Those projects with estimated operating
    costs totaling less than 5 percent of system-wide operating costs
    automatically qualify as meeting the local financial commitment
    criteria, so FTA again performs little review. If the project's
    operating costs are greater than 5 percent of system wide-expenses,
    then FTA reviews and evaluates a detailed financial plan submitted by
    the project sponsor.
        There are seven projects in California approved for project
    development and these are included in the Annual Report on Funding
    Recommendations (the ``New Starts Report''). Four are Very Small Starts
    (limited review and evaluation by FTA) and three are Small Starts
    (subject to more rigorous FTA review/evaluation). The Very Small Starts
    are automatically ``warranted'' as being cost-effective based on the
    aforementioned qualifying criteria. The three Small Starts projects are
    cost-effective (San Francisco received a High rating for cost-
    effectiveness, San Bernardino received a Medium-High rating for cost-
    effectiveness, and Riverside received a Medium rating for cost-
    effectiveness.) Of these seven projects approved for project
    development, five were recommended for funding in the fiscal year 2009
    President's Budget. The other two projects, San Bernardino E Street
    Corridor and Van Ness Avenue BRT, were not ready for a funding
    recommendation.

                CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS

        Question. The fiscal year 2009 Department of Transportation budget
    proposal requests $855 million for the National Highway Traffic Safety
    Administration (NHTSA), an increase of only $17 million for the agency
    that administers Corporate Average Fuel Economy (CAFE) Standards.
    Considering that NHTSA has to write a whole new set of CAFE standards
    to comply with the Ten-in-Ten Fuel Economy Act, I am concerned that
    this increase is insufficient. What assurance can you provide the
    Senate that this budget request will allow NHTSA to put out new CAFE
    regulations on time?
        Answer. On April 22, 2008, NHTSA issued a notice of rulemaking
    proposing standards for Model Years 2011 through 2015 passenger cars
    and light trucks. The CAFE program was appropriated $1.88 million in
    fiscal year 2008 as part of the $12.8 million provided by Congress for
    NHTSA's rulemaking activities. NHTSA estimates that it will require an
    additional $3.8 million in fiscal year 2008 to support expanded CAFE
    activities, and submitted a reprogramming request to the committee on
    June 2, 2008. The fiscal year 2009 budget request is $3.88 million.
        Question. The law requires NHTSA to issue draft CAFE regulations at
    least 30 months before they go into effect. Therefore, NHTSA must issue
    draft CAFE regulations for Model Year 2011 this year. Is NHTSA on track
    to issue draft CAFE regulations on time? In what month do you expect
    NHTSA to issue draft regulations?
        Answer. On April 22, 2008, NHTSA announced a notice of proposed
    rulemaking for CAFE standards applying to model years 2011-2015. After
    a 60-day comment period that ends July 1, 2008, NHTSA will begin work
    to finalize CAFE standards for those years. NHTSA expects to publish
    the final rule before the end of this year. This rule must be published
    by April 1, 2009, to be effective for the 2011 model year.
        Question. The Ten-in-Ten Fuel Economy Act requires a fleet-wide
    average of at least 35 miles per gallon by 2020. Between now and 2020,
    NHTSA must increase fuel economy ``ratably'' and issue the regulations
    in 5 year increments. Will the draft rule, for the first 5 years,
    accomplish at least a 5 mile per gallon increase, so that NHTSA
    maintains steady progress towards 35 mpg in 2020?
        Answer. Overall proposed CAFE standards for the entire light duty
    fleet would increase by approximately 25 percent over 2011-2015, as
    shown the table below. This is a 4.5 percent average annual rate of
    growth and exceeds the 3.3 percent annual average increase required in
    the Energy Independence and Security Act of 2007 (EISA). The overall
    proposed fuel economy requirement in 2015 is 31.6 miles per gallon
    (mpg). This is 6.3 mpg higher than the combined standard in 2010. If
    these standards were finalized, the agency would only need to increase
    CAFE standards by 2.1 percent per year from 2016-2020 to achieve a
    combined standard of exactly 35.0 mpg in 2020 (as required by EISA).

                                  PROPOSED PASSENGER CAR AND LIGHT TRUCK CAFE STANDARDS
    ----------------------------------------------------------------------------------------------------------------
                                                                                                         Combined
                                  Year                                 Car Standard   Truck Standard     Standard
    ----------------------------------------------------------------------------------------------------------------
    2011............................................................            31.2            25.0            27.8
    2012............................................................            32.8            26.4            29.2
    2013............................................................            34.0            27.8            30.5
    2014............................................................            34.8            28.2            31.0
    2015............................................................            35.7            28.6            31.6
    ----------------------------------------------------------------------------------------------------------------

        Question. Last year the 9th Circuit Court of Appeals struck down
    NHTSA's new fuel economy standard for light trucks and SUVs, in part
    because NHTSA refused to quantify the benefits of reducing greenhouse
    gas emissions as part of its cost effectiveness analysis. Has NHTSA now
    developed a valuation method to quantify the benefits of reducing
    emissions of gases that cause global warming?
        Answer. In its April 22nd notice of proposed rulemaking, NHTSA
    proposed placing a value on reductions in carbon dioxide emissions.
    NHTSA reviewed the literature and proposed a value based on information
    from Working Group II's contribution to the Fourth Assessment Report of
    the United Nations Intergovernmental Panel on Climate Change (IPCC).
    The IPCC report tentatively concluded that the most likely value for
    the global benefits was $14 per metric ton of carbon dioxide. However,
    the value for benefits to the United States could be as low as $0 per
    metric ton of carbon dioxide. The IPCC conclusion was derived from a
    peer-reviewed study that examined 103 estimates of the social cost of
    carbon from 28 published studies. While NHTSA used the midpoint of the
    $0-$14 range ($7 per ton) as a value for the analysis in our notice, it
    also conducted sensitivity analyses around the upper and lower
    boundaries. NHTSA realizes that substantial variability exists in
    estimates of the domestic and global values of carbon dioxide
    reductions. The agency consulted with the Environmental Protection
    Agency and the Department of Energy on this issue and will continue to
    do so for the final rule. The agency also requested and anticipates
    receiving comments during its rulemaking process on how to estimate
    properly the value of reducing carbon dioxide emissions.
        Question. The fine for failing to meet CAFE standards equals $55
    per mile per gallon, per vehicle below the standard, which is below the
    cost effective price of improving fuel economy. As a result, some
    European firms choose to pay CAFE fines year after year instead of
    improving fuel economy. Historically the big three U.S. automakers have
    complied with the standards because paying fines would have led to
    stockholder lawsuits. But now one of these firms is privately held,
    creating the possibility of increasing fuel economy violations. Should
    Congress consider increasing CAFE fines so that it is in the economic
    interest of automakers to comply with the standards?
        Answer. NHTSA is committed to achieving the fuel savings sought in
    EISA, and will continue to work with Congress to achieve the goals of
    EISA. Historically, most manufacturers have met fuel economy standards.
    Should we see a reversal of this trend, NHTSA will examine all options,
    including a provision to double the fine and/or additional legislative
    authority.
        Question. According to an investigation conducted by the House
    Oversight Committee, Secretary Peters and numerous other staffers
    contacted the Environmental Protection Agency and Members of Congress
    to ``solicit comments against the California waiver,'' as a Department
    of Transportation official put it. Did Secretary Peters call Governors
    and urge them to oppose the California waiver? According to internal
    DOT e-mails, Secretary Peters spoke with Steve Johnson about the
    California waiver on June 6, 2007. Did Secretary Peters encourage him
    to deny the waiver?
        Answer. To repeat a clarification that we have made in response to
    previous Congressional inquires on this subject, the Department of
    Transportation (DOT) did not under take any improper ``lobbying'', as
    that term is used in the anti-lobbying restrictions found in 18 U.S.C.
    1913, or provisions routinely contained in annual appropriations acts
    restricting the use of appropriated funds for ``publicity or propaganda
    purposes'' to support or defeat pending legislation. As we have
    previously acknowledged, however, DOT undertook an effort to contact
    Governors and Members of Congress to inform them of California's waiver
    petition and of its possible implications.
        As I have previously indicated, I spoke with EPA Administrator
    Stephen Johnson concerning the California waiver petition. I recall a
    conversation in which he indicated that the docket would benefit from a
    wider array of commenters, including State Governors or other elected
    officials who represent stakeholders. We discussed the possibility that
    such potential commenters might need an extension to the comment period
    on order to submit comments. We also discussed DOT's longstanding
    position in favor of a uniform national fuel economy regulatory scheme.

                          CALIFORNIA MARITIME INDUSTRY

        Question. On February 11, I wrote to Maritime Administration
    Administrator Sean T. Connaughton:
        ``. . . to express my concern that the actions of the U.S.
    Department of Transportation Maritime Administration (MARAD) are
    causing harm to the maritime industry in the State of California. This
    industry, which I have worked to expand for more than three decades,
    employs thousands of Californians on board ships, in ports, and in our
    shipyards. I request that you explain why MARAD has pursued an effort
    that may significantly decrease cruise ship visits, cruise ship turn-
    around operations, and cruise ship maintenance in California.''
        In order to better understand how MARAD's recent efforts conformed
    to its mission, I asked a series of questions, but I have received no
    response. Please answer the following questions, first asked in my
    letter nearly one month ago:
        If CBP finalizes its draft ``Hawaiian Coastwise Cruises'' rule,
    does MARAD estimate that any U.S. flagged cruise ships will begin
    servicing Californian ports of call? If so, how many annual ports of
    call will result?
        Answer. Based on information available to the Maritime
    Administration, operators of large U.S.-flag cruise ships do not appear
    to currently have plans to offer services from ports in California to
    Hawaii, regardless of the final outcome of the Customs and Border
    Protection (CBP) rule. Whether U.S.-flag cruise ships service
    California ports of call is a market decision, so it is not possible to
    provide at this time a specific number of annual ports of call that
    will result.
        Question. If CBP finalizes its draft ``Hawaiian Coastwise Cruises''
    rule, does MARAD estimate that total cruise ship visits to California
    ports will decrease? If so, how many annual ports of call will be lost
    as a result?
        Answer. Under the CBP proposal, foreign-flag ships could alter
    itineraries and still call in Hawaii in order to provide a cruise
    experience similar to what is currently offered, resulting in little or
    no decrease in calls to California ports. However, it is far more
    likely that poor economic conditions and highly elastic demand for
    leisure travel will reduce the total number of cruise ships visits to
    California ports in the short term. The Maritime Administration has not
    received specific information from cruise ship operators on the
    projected effects of the CBP draft rule. Therefore, the Maritime
    Administration has not developed estimates of the potential reduction
    in the number of port calls in California.
        Question. Have you or any other MARAD officials visited cruise ship
    operating companies to discuss their round-trip cruise itineraries that
    depart from California ports and visit ports of call in Hawaii?
        Answer. The Maritime Administration regularly meets with ship
    operating companies. Some companies have identified some aspects of
    their plans to reduce round-trip cruise voyages from California to
    Hawaii based on operating economics and poor demand. These business
    decisions, however, were based on the industry market assessment made
    prior to the November 2007 announcement of the CBP to reinterpret
    Passenger Vessel Services Act (PVSA) rules.
        Question. If so, have you or any other MARAD officials encouraged
    cruise ship operating firms to reduce their total number of annual
    round-trip cruises that depart from California ports and visit ports of
    call in Hawaii?
        Answer. The Maritime Administration has not encouraged any operator
    to reduce any legal vessel operations in any trade. On the contrary, in
    pursuit of its mission to improve and strengthen the U.S. marine
    transportation system, the Maritime Administration supports the cruise
    industry, operating in compliance with the PVSA.
        Question. Do you believe that advocating for decreased cruise ship
    activity in California's ports is consistent with the mission of MARAD
    if no increase in U.S. flagged service in Californian ports is expected
    to result?
        Answer. The Maritime Administration has not advocated for decreased
    cruise ship activity in California's ports. Rather, the Maritime
    Administration strongly supports cruise industry operations that are in
    compliance with the PVSA.
        Question. Approximately 40 percent of all container traffic enters
    the United States through the ports of Los Angeles and Long Beach.
    Moving the goods out of the ports has severe economic consequences and
    human health impacts. What does this budget proposal do to address
    these impacts?
        Answer. One of the primary objectives of the Maritime
    Administration is to ensure the continued success of our Nation's
    Marine Transportation System. This includes not only the ports and
    near-port intermodal connectors, but also ensuring water access and the
    interstate road, rail and Marine Highway corridors that move the
    freight into and out of the ports.
        Nowhere is this more important than the ports of Los Angeles and
    Long Beach. Included in this budget are the resources necessary to
    staff our Southern California Gateway Office, located in the port of
    Long Beach. This Gateway Office, as in the other nine Gateway Offices
    in our Nation's major ports, works to identify bottlenecks and ways to
    improve freight movement, as well as work on environmental and
    community challenges in the ports and their intermodal connectors.
        This office also supports the broader Department of Transportation
    National Strategy to Reduce Congestion and one of its key elements, the
    initiative to reduce Southern California freight congestion. The
    Maritime Administration led the development of a Southern California
    National Freight Gateway Cooperation Agreement, signed in October 2007,
    among Federal, State and local entities to achieve an agreed agenda to
    seek improvements in freight throughput capacity in Southern
    California, balanced with environmental and community concerns. The
    team is actively assessing issues and potential solutions that are
    compatible with California's Goods Movement Action Plan. The Maritime
    Administrator and Deputy Administrator have met frequently with port,
    environmental, and community stakeholders to identify solutions that
    improve the environment, health and community while sustaining
    international trade.
        For example, the Maritime Administration is actively working with
    the Port of Los Angeles and Pacific Rim ports to transfer emissions
    reduction and energy efficiency technology. The Maritime Administration
    continues to participate in the International Maritime Organization and
    the International Standards Organization to develop international
    regulations standards that address marine emissions from vessels and
    ports. At the same time, the Maritime Administration continues to
    collaborate with academia to develop unique and groundbreaking tools
    that assess optimal crossmodal freight routing in an effort to reduce
    energy consumption and emissions.

                        NATIONAL GOODS MOVEMENT STRATEGY

        Question. California has identified $48 billion in transportation
    infrastructure needs directly related to goods movements. In November
    2006, Californians passed Proposition 1B, agreeing to tax themselves to
    pay for a $20 billion transportation bond, $2 billion of which are
    about to go towards goods movement projects. What is the status of the
    Department of Transportation's efforts to develop a national goods
    movement strategy and what revenue sources do you intend to seek to
    finance a national system?
        Answer. The Department of Transportation commends the State of
    California for its vision and planning to improve freight flows, both
    through individual efforts at the local level as well as through the
    comprehensive Goods Movement Action Plan released in 2005 and the
    follow-on Multi-County Goods Movement Action Plan. The continued
    efficient flow of freight through Southern California to and from
    factories and consumers across the Nation is a vital component of the
    national economy. The port complex of Los Angeles/Long Beach is the
    busiest container seaport in the Nation and the fifth busiest in the
    world. The rapid increase in freight volumes through the complex has
    strained existing infrastructure and has raised the urgency of
    environmental concerns surrounding this activity that is so essential
    to our Nation's economic growth.
        The Department of Transportation is addressing the need to improve
    freight movement nationwide through our comprehensive National Strategy
    to Reduce Congestion. Transportation system congestion is one of the
    single largest threats to our Nation's economic prosperity and way of
    life. Whether it takes the form of cars and trucks stalled in traffic,
    cargo stuck at overwhelmed seaports, or airplanes circling over crowded
    airports, congestion costs America almost an estimated $200 billion a
    year.
        In 2006, the Department of Transportation announced a major
    initiative to reduce transportation system congestion. This plan
    provides a blueprint for Federal, State, and local officials to
    consider as we work together to reverse the alarming trends of
    congestion, which is critical to improving freight flows through our
    transportation system. Several components of the initiative are
    directly addressing goods movement. They include congestion relief
    programs, public-private partnerships, national road and rail
    corridors, and technological and operational improvements to the
    transportation system and its business processes.
        A recent example of the actions taking place to improve freight
    flows is the plan announced by Secretary Peters on April 25, 2008, to
    cut traffic jams, provide better bus service, and clean the air in Los
    Angeles. The area is eligible for more than $213 million in Federal
    Congestion Reduction grants. The funds would also finance the creation
    of new High-Occupancy Toll (HOT) lanes, which single-occupancy vehicles
    can use by paying a variable toll. Through the concept of ``congestion
    pricing,'' these tolls would vary with travel demand and real-time
    traffic conditions throughout the day so that transportation
    authorities can better manage the number of cars in the lanes to keep
    them free of congestion, even during rush hour. As congestion is
    reduced, freight velocity will improve.
        The Department is implementing other congestion pricing
    demonstrations in areas of extreme congestion in order to reduce
    gridlock and clear the air. These demonstrations can be replicated in
    other cities and regions to improve the efficiency of the
    transportation system across the Nation. The initial demonstrations are
    being funded with grants from the Department of Transportation,
    including $495.1 million through the Urban Partnership Program and
    $366.7 million through the Congestion Reduction Demonstration Program.
    In addition, the Department is advocating that metropolitan planning
    organizations designate freight projects as funding priorities in their
    transportation planning.
        The Department also recognizes the potential for private sector
    participation in national, regional and local transportation projects.
    A major element of the National Strategy to Reduce Congestion is the
    potential for public-private partnerships (PPPs) to jointly finance
    transportation projects. PPPs provide benefits by allocating the
    responsibilities to the party--either public or private--that is best
    positioned to control the activity that will produce the desired
    result. With PPPs, this is accomplished by specifying the roles, risks
    and rewards contractually, so as to provide incentives for maximum
    performance and the flexibility necessary to achieve the desired
    results.

                                 CONTAINER FEES

        Question. There seems to be a growing consensus that container fees
    are likely to be the most significant source of funds to pay for the
    billions of dollars necessary to move goods through Southern
    California, if not the Nation. For example, there are now bills both in
    Congress (Rep. Rohrabacher) and the California legislature (State Sen.
    Lowenthal) proposing container fees. The ports of Los Angeles and Long
    Beach have already approved, but not yet implemented, their own
    container fee plans. Has the Department of Transportation explored the
    feasibility of a national container fee system at water, land and air
    ports of entry as a means to finance goods movement infrastructure
    specifically? What is the department's position on container fees?
        Answer. The Department of Transportation has not explored the
    feasibility or desirability of a national container fee system to
    finance goods movement infrastructure. There are several approaches and
    alternatives to the implementation of container fees that the
    Department is evaluating. Direct assessments on shipments is an
    approach that has been presented to Congress and to the California
    legislature. Other approaches, such as the successful PierPass program
    at the ports of Los Angeles and Long Beach, uses a congestion pricing
    model that provides an incentive for cargo owners to move shipments at
    night and on weekends. Cargo owners moving containers at the two ports
    during peak daytime hours are required to pay a Traffic Mitigation Fee,
    which helps fund the cost of operating five new shifts per week at
    marine terminals. Another approach is the use of public-private
    partnerships as a means to finance infrastructure growth and congestion
    mitigation.
        The Department has consistently heard from shippers, carriers and
    the transportation industry that the acceptability of the concept of a
    fee depends upon how the fee is structured and collected, the amount of
    the fee, and how the funds are used. Of particular concern is that an
    assessment be clearly tied to specific transportation improvement
    projects that will improve freight flows, and that it be clear from the
    outset whether the fee is permanent or would sunset after the specific
    projects are completed. Another key issue is whether non-containerized
    cargoes using port facilities and rail and road connectors would also
    be included in the assessment.

                               SUPPORT FOR S. 406

        Question. Public Transportation Systems serving urbanized areas
    exceeding 200,000 in population may not use funds received through
    section 5307 of the United States Code to pay for operating expenses.
    However, some very small systems--with fewer than 100 buses--exist in
    urbanized areas. I have cosponsored a bill (S. 406) that would allow a
    system with fewer than 100 buses to use these funds for operating
    expenses, as other small bus systems are allowed to do.
        Does the Secretary of Transportation support S. 406? If not, please
    explain why.
        Answer. Currently, the Federal Transit Administration's (FTA)
    urbanized area formula program is focused on capital assistance; during
    the remaining time under the current authorization--SAFTEEA-LU--the
    agency is not prepared to support operating assistance in areas over
    200,000 in population. FTA believes a proposal based on fleet numbers
    is not appropriate for at least three reasons:
      --The urbanized area formula program is based on urbanized area
            populations. The manner in which public transit is organized in
            an urbanized area is a local decision, which FTA is prohibited
            from regulating.
      --FTA also believes good public policy should not include any feature
            in the urbanized area formula program that could be viewed as
            discriminating between transit agencies in a single urbanized
            area.
      --A proposal based on fleet numbers would discourage agencies from
            expanding bus service for fear of losing operating assistance.
                                     ______

                   Questions Submitted by Senator Ted Stevens

                     ALASKA FLIGHT SERVICE STATION NETWORK

        Question. The FAA is currently reviewing how to modernize the
    Alaska Flight Service Station network. As part of the FAA fiscal year
    2009 budget request, the FAA intends to conduct a final investment
    analysis of how to modernize the Alaska flight service stations. Could
    you provide the committee with an analysis of the alternatives the FAA
    is considering? Does the FAA intend to consolidate any current
    facilities? Will any new technologies be approved for new sites?
        Answer. The Federal Aviation Administration (FAA) has laid out a
    plan to modernize Alaska flight services in an evolutionary manner. FAA
    plans to modernize the current technology while maintaining existing
    operational flight services. The Alaska Flight Service Modernization
    (AFSM) plan is divided into two segments. Segment 1 is defined as the
    one-for-one replacement of the current automation system by February
    2010 when the current automation system's (Operational and
    Supportability Implementation System) period of performance on the
    contract will expire. Segment 2 is composed of two parts--the
    deployment of a new technology voice switch and the modernization of
    facilities (infrastructure).
        FAA is looking for ways to expedite the deployment of the voice
    switch (part of segment 2) by the end of 2011. After the automation and
    voice switch technologies are delivered with remote user access
    capability, FAA will have implemented the new flight services concept
    of operations.
        The strategy for the modernization of the facilities will be
    determined by what is required to support the new concept of operations
    in Alaska flight services. After approximately a 2-year period of
    demonstration and analysis, FAA will determine whether projected user
    benefits are being achieved and adjust our plan as necessary.
    Generally, FAA does not support the consolidation of Alaska flight
    services facilities, but does support expansion of flight services
    delivery. FAA has not completed the investment analysis work for
    facility modernization but expects to do so by 2014.
        FAA has an ongoing program to sustain Alaska flight service
    facilities that will continue to operate while the system is
    modernized. FAA will not consider implementing any strategies to
    consolidate facilities in Alaska until the technology has proven itself
    efficient, and full coordination has been completed with users and
    primary stakeholders, including congressional oversight authorities.

                                SMALL SHIPYARDS

        Question. The shipbuilding industry is vital to our Nation's
    commerce and security. In 2006 the Congress enacted legislation
    establishing a program within the Maritime Administration that provided
    financial assistance to small shipyards throughout the Nation. This
    program is especially beneficial to shipping communities in my State of
    Alaska. Small shipyards received $10 million in assistance last year,
    but the administration's 2009 Budget proposes no funding for this
    program. What do you plan to do to ensure the viability of our nation's
    shipping industry and small shipyards specifically?
        Answer. The Maritime Administration's (MARAD) fiscal year 2009
    budget proposal was developed well in advance of the enactment of the
    fiscal year 2008 appropriation for the small shipyard grants program,
    the first time this program has been funded. On April 22, 2008, MARAD
    awarded $9.8 million in grants to 19 shipyards throughout the United
    States. These funds will be expended for projects over the next 2
    years, which will enhance the viability of small shipyards.

                    PIPELINE AND HAZARDOUS MATERIALS SAFETY

        Question. Why is the President's budget request for Pipeline Safety
    $10 million below what this committee authorized in the Pipeline
    Inspection, Protection, Enforcement and Safety Act of 2006?
        Answer. The Pipeline and Hazardous Materials Safety Administration
    (PHMSA) is making good progress toward achieving the goals of the
    Pipeline Inspection, Protection, Enforcement and Safety (PIPES) Act of
    2006. In its first budget submission since the PIPES Act, the
    Department is requesting a significant increase in funding of PHMSA's
    Pipeline Safety Program in order to continue implementation of the
    PIPES Act. The $93.3 million request, a $13.5 million increase over the
    fiscal year 2008 enacted level, supports the top three PIPES Act
    priorities: (1) increasing financial support for State pipeline safety
    programs; (2) preventing excavation-related damage to pipelines; and,
    (3) increasing Federal inspection and enforcement personnel. The
    administration has kept its commitment to help States with increased
    financial support, up to an average of 60 percent of program costs and
    closer to our shared goal of funding 80 percent of costs. We are
    supporting stronger damage prevention programs by providing incentives
    to States to develop more effective programs and to expand the use of
    civil enforcement authority against anyone who violates ``one-call''
    laws. We are increasing PHMSA's pipeline safety inspection and
    enforcement personnel to 123 full-time positions. The national pipeline
    safety program has been successful in driving down risk by targeting
    safety areas of greatest concern. This budget will allow PHMSA to
    continue to sharpen its focus while maintaining the gains it has made
    over 20 years.

        Senator Murray. We thank you for taking your time today and
    your testimony as well as all your staff I know who have worked
    very hard for this as well.
        Secretary Peters. And again my apologies for being late
    this morning.
        Senator Murray. All right. Well, it was a transportation
    issue, I understand?
        Secretary Peters. Yes, it was.
        Senator Murray. That's under your jurisdiction.
        Secretary Peters. Indeed.

                              SUBCOMMITTEE RECESS

        Senator Murray. With that, this subcommittee is recessed,
    subject to the call of the Chair till next Thursday.
        [Whereupon, at 11:29 a.m., Thursday, March 6, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
                      APPROPRIATIONS FOR FISCAL YEAR 2009

                                  ----------

                            THURSDAY, MARCH 13, 2008

                                           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. Patty Murray (chairman) presiding.
        Present: Senators Murray, Lautenberg, Bond, Specter, and
    Allard.

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                            Office of the Secretary

    STATEMENT OF HON. ALPHONSO JACKSON, SECRETARY
    ACCOMPANIED BY:
            BRIAN MONTGOMERY, COMMISSIONER, FEDERAL HOUSING ADMINISTRATION
            PAULA BLUNT, GENERAL DEPUTY ASSISTANT SECRETARY, OFFICE OF
                PUBLIC AND INDIAN HOUSING
            NELSON R. BREGON, GENERAL DEPUTY ASSISTANT SECRETARY, OFFICE OF
                COMMUNITY PLANNING AND DEVELOPMENT
            MILAN M. OZDINEC, DEPUTY ASSISTANT SECRETARY FOR PUBLIC HOUSING
                INVESTMENTS

                   OPENING STATEMENT OF SENATOR PATTY MURRAY

        Senator Murray. This subcommittee will get to order, and I
    want to thank the Secretary for coming a half-hour early and I
    apologize. We had votes early this morning, so we had to move
    up the time. I know Senator Bond will be here as well, so I'll
    go ahead and start my opening statement and we'll start moving
    in that order so we can get to some questions in a few minutes.
        Today we are going to hear testimony from the Secretary of
    Housing and Urban Development, Alphonso Jackson. The principal
    mission of Secretary Jackson's agency is to address the housing
    needs of our most vulnerable citizens. My colleagues on this
    subcommittee and I take our responsibilities towards these
    citizens, as well as all taxpayers, very seriously. We believe
    it is our duty to protect and expand the opportunities for the
    neediest in our society, provide hope for people struggling to
    keep a roof over their heads, and redevelop blighted
    neighborhoods in partnership with our mayors and our Governors.
        But in recent months the mortgage crisis has really tested
    HUD's ability to keep people in their homes and carry out its
    mission, and its performance has been totally inadequate. The
    mortgage crisis threatens the housing and credit markets
    throughout the economy. Millions of families are at risk for
    foreclosure. The administration has the responsibility to do
    everything in its power to prevent this crisis from spinning
    further out of control. Yet its solutions, such as the FHA
    Secure program and the HOPE Now Alliance, will help just a few
    hundred thousand borrowers at most.
        Today, as I usually do, I reviewed in advance the formal
    testimony that Secretary Jackson submitted for this hearing. I
    have to say that I agree with some observations and I disagree
    with most of the rest. I agree wholeheartedly with the
    Secretary when he says that his 2009 budget request, quote,
    ``is measured in more than dollars; it is measured in the lives
    we touch.'' But as I read the President's budget request for
    HUD, I'm very concerned because it doesn't touch nearly enough
    lives, and even while the number of people in need is growing
    quickly every day.
        This budget proposes to cut Housing for the Elderly by more
    than a third and it proposes to cut Housing for Persons with
    Disabilities by almost the same amount. The President's budget
    proposes to completely eliminate funding for the HOPE VI
    program, which tears down the most decrepit public housing
    facilities and replaces them with modern, safe mixed income
    housing.
        It proposes to cut the Public Housing Capital Fund by
    almost a fifth, which would reduce our efforts to keep public
    housing sanitary and safe for tenants. It proposes to slash
    Housing Counseling for distressed homeowners by 60 percent,
    even though there is an unprecedented demand for help. And its
    budget proposes to cut Community Development Block Grants by 18
    percent, more than $650 million, at a time when the economic
    downturn is forcing our cities and towns to slash their own
    local budgets and slow down their own community investments.
        The cuts to just these six programs total $1.6 billion. So
    yes, I agree with Secretary Jackson that we should measure this
    budget, as he says, by the lives we touch. But in the midst of
    a national housing crisis the effect of this budget will be to
    hurt those most in need, rather than to provide a helping hand
    to a more stable and secure future.
        Secretary Jackson will tell us in his opening statement
    that his budget proposal reflects America's compassion and
    commitment. Well, I think the American people feel compassion
    and they are committed to helping needy senior citizens,
    disabled, and people at risk of losing their homes. But that's
    exactly what this budget does not do. This budget reflects a
    lack of compassion and commitment demonstrated by the Bush
    Administration and its misguided budget priorities.
        Perhaps to me the most egregious statement in the
    Secretary's testimony is his observation that ``The President
    has been a strong proponent of funding for housing
    counseling,'' and that's a quote. The reality is the President
    has fought our efforts to increase this funding every step of
    the way. Almost every observer of the mortgage foreclosure
    crisis in both the public and the private sectors has
    emphasized the urgent need to expand housing counseling
    resources. At a time when the threat of foreclosure looms over
    the heads of literally millions of families, it is essential
    that we get the word out that they do have options. Too many
    families are ignoring their lender's calls. Too many families
    fear that nothing can be done, and too many families are left
    at home, hoping and praying that things will just work
    themselves out.
        This committee recognized that problem last year, even
    while the Bush administration complained about our efforts and
    issued veto threats. The fact is this committee on a bipartisan
    basis had to fight the administration even to provide an
    additional $180 million to expand housing counseling through
    the NeighborWorks America. When the committee added this money,
    we got letters from OMB that threatened to veto our
    appropriations bill, and those veto threats specifically cited
    the counseling money as an example of excessive and unnecessary
    spending.
        OMB Director Nussle told us that our expanded effort could,
    and I quote, ``produce adverse consequences, including
    interfering with existing efforts by private and public
    entities to address mortgage foreclosures.''
        And the White House opposition has continued since then.
    Just a few weeks ago, our majority leader introduced an
    amendment to the stimulus bill that would boost our housing
    counseling resources by another $200 million.
        Now, the reality is we are still not meeting the needs that
    are out there today. Even our historic funding increase last
    year will only reach 450,000 families when we know as many as 2
    million families need this help. But what was the White House's
    response to Senator Reid's proposal? Another veto threat,
    saying it's excessive funding.
        As I said earlier, the administration's 2009 budget request
    actually cuts total resources for Housing Counseling by more
    than 60 percent in the coming year. So I don't see how anyone
    can say the President has supported that effort. And this, as I
    said, is not just a partisan fight. In the last 7 years, this
    subcommittee has consistently had to rewrite the HUD budget to
    ensure that critical programs serving our citizens and
    communities are not slashed or dismantled. That's been true
    under the leadership of Senator Bond and of myself. And it is
    an example of the administration's lack of dedication to
    helping low-income and working families and its failure to
    invest in our communities.
        Now, an equally important responsibility of this
    subcommittee is to keep an eye on how our tax dollars are being
    spent, so I want to turn to that. Earlier I said I agreed with
    Secretary Jackson that his budget should be measured in the
    lives it touches. Unfortunately, allegations have surfaced
    recently that HUD funds have in fact touched the lives of some
    of Secretary Jackson's personal friends. We have read the
    allegations of cronyism by Secretary Jackson. We have read
    allegations that he inappropriately interfered in hiring and
    contracting, and we have read allegations that he tried to
    dictate the spending decisions of public housing authorities to
    benefit his acquaintances.
        I know Secretary Jackson has grown tired of reading those
    allegations questioning his character. I've grown tired of
    reading them, too. I believe they've taken a real toll on the
    morale of HUD employees and the credibility of HUD's
    leadership.
        Many of these allegations are currently being investigated
    by the HUD Inspector General and the Department of Justice. I
    want to point out that Secretary Jackson has been charged with
    absolutely nothing. Our system of governance and justice
    presumes innocence and Secretary Jackson is owed that
    presumption.
        That said, as part of this hearing I do intend to ask
    Secretary Jackson some direct questions regarding his conduct
    as Secretary, how he has administered funds provided by the
    subcommittee, and how he has interacted with other HUD staff
    whose salaries are paid for by this subcommittee. I expect the
    Secretary to provide direct answers. Our oversight
    responsibilities require no less and I appreciate the
    Secretary's cooperation.
        With that, I will turn to Senator Allard for his opening
    comments.

                       STATEMENT OF SENATOR WAYNE ALLARD

        Senator Allard. Madam Chairman, I want to thank you and
    Ranking Member Bond for providing a hearing to hear the fiscal
    year 2009 budget of the Department of Housing and Urban
    Development. I would also like to welcome Secretary Jackson to
    the subcommittee. Secretary Jackson, we appreciate you making
    time in your busy schedule to be here, especially since this is
    your second morning in a row testifying before the Senate.
        HUD has a long history of problems. For years it was the
    only Cabinet-level agency on GAO's high risk list. However, I
    want to take this opportunity to publicly commend Secretary
    Jackson and now Secretary Martinez, who was there before him,
    for his progress on this point. Last year the remaining HUD
    programs were removed from GAO's high risk list. This is a
    tremendous accomplishment and represents a great deal of work,
    and I would encourage Secretary Jackson, all the dedicated
    staff at HUD to remain focused on maintaining the positive
    direction.
        Certainly one of the biggest challenges HUD faces is the
    tight fiscal scenario. This is a constraint shared by nearly
    all agencies. No one denies that the budget for HUD or any
    other agency, for that matter, is insufficient to meet every
    single perceived need in this country. Increasingly, the
    definition of a need seems to be a bottomless well. I believe,
    though, that this budget strikes a reasonable balance at
    meeting the most pressing needs while still being responsible.
        I support the administration's decision to pursue fiscal
    responsibility for these times. It would be irresponsible to
    continue to overspend and leave a mounting debt for future
    generations.
        It is easy to look at the proposed HUD budget and complain
    that it lacks money. Certainly needs are great and in a perfect
    world we would have the money to meet all needs. However, the
    administration has had to make some very difficult choices, and
    the choices at HUD were, I'm sure, no exception in their
    difficulty. The budget is evidence of these difficult choices
    and I commend the administration for facing reality and not
    simply taking the easy way out.
        I want to reiterate a position that I have put forward at
    previous meetings, but I believe bears repeating: HUD's success
    as an agency is not defined by a budget number. More money does
    not necessarily mean more people are served or that people are
    served any better. This would seem to be especially true when
    reviewing the effectiveness of HUD's programs as determined by
    the PART analysis. Forty-five percent of HUD's funds are spent
    on programs we either know are failing to produce results or we
    have no way to tell whether they are producing any results.
        Why do we talk at such length about the dollars going to
    HUD, but fail to look at what is coming out the other side? I
    for one intend to keep looking at both sides of the equation.
        I appreciate the opportunity to do this, to do so at this
    hearing. Mr. Secretary, your testimony will be helpful to this
    subcommittee and it will be helpful as we begin the
    appropriation process.
        Thank you, and thank you, Madam Chairman.
        Senator Murray. Senator Lautenberg?

                    STATEMENT OF SENATOR FRANK R. LAUTENBERG

        Senator Lautenberg. Thank you, Madam Chairman, for holding
    this hearing. We welcome Secretary Jackson here. We have to ask
    questions about why it is, when one of the most difficult
    things for young people growing up and ultimately winding up
    often in difficult situations out on our streets, while we
    spend over $3 billion each and every week on the war in Iraq
    and supplementals to support that in addition to that, and we
    turn our backs on the housing needs for people who lack the
    income to get themselves into normal routine housing.
        So these are tough times for families struggling to keep
    their homes now. Thousands of families may lose their homes
    because they were sold risky subprime mortgages. And instead of
    realizing the American dream, more than 35,000 households in
    New Jersey may have their homes taken away.
        That's why I co-sponsored the Foreclosure Prevention Act to
    help homeowners refinance their loans and to be able to afford
    their payments and keep in their homes. Our bill would also
    provide an additional $4 billion in community development block
    grants, known as CDBG, for local governments to purchase
    foreclosed properties and to renovate them to improve
    neighborhoods. CDBG invested more than $98 million into New
    Jersey's neighborhoods last year, creating vibrant and safe
    communities, new homes and shops, new jobs, and more
    opportunities, and a better atmosphere totally.
        But while we were trying to do our part in the Congress,
    the American people are not getting enough help from the other
    side of Pennsylvania Avenue, where the housing for President
    Bush is more than adequate. Despite the acknowledged success,
    President Bush wants to cut funding for CDBG by nearly $1
    billion, and he also wants to cut funding for public housing.
    New Jersey has more than 38,000 public housing units and the
    average income of those residents is $12,000 a year, $250 a
    week. How can you afford decent housing with that? You've got
    to have help from our Government. Without these public housing
    units, these men, women, and children would literally be out on
    the streets.
        We're spending billions and billions, almost into the
    trillions, on housing and restructuring Baghdad and other
    cities in Iraq, and yet we're willing to turn loose young
    people on the streets who are so demoralized by the places
    they're forced to live in. And yet the President's budget
    request is nearly $900 million short of what our housing
    authorities need to patch leaky roofs, fix heating systems, and
    to make other repairs to their residents' homes.
        Finally, Madam Chairman, the President's budget falls short
    when it comes to the section 8 program, a program that's worked
    very well over the years. Section 8 is the Federal Government's
    most important program for low-income families trying to find
    decent and safe homes in the private market by making up the
    difference between what the resident can afford to pay and the
    actual rent.
        Once again, the President's budget is more than $1 billion
    less than what America's families need to succeed in their
    goals for life. In New Jersey alone, these cuts would cost
    3,000 people their housing assistance and possibly their homes.
    Every child, every individual, and every family deserves a safe
    and affordable place to call home, and if the President wants
    to see America's homeowners and public housing residents
    through these tough economic times, his budget doesn't reflect
    that interest.
        I look forward to working with this committee to make sure
    our public housing residents, the section 8 program, and our
    housing authorities get the resources they need to succeed. Mr.
    Secretary, I hope that you'll communicate your concerns for
    public housing, for affordable housing, to the White House and
    to the President and let them know that this is something that
    must be done to help keep stability and reasonable fairness in
    our society.
        So we welcome you here, Mr. Secretary. But there are a lot
    of questions that are going to have to be answered.
        Thank you.
        Senator Murray. Thank you, Senator.
        Senator Specter, do you have an opening statement?

                       STATEMENT OF SENATOR ARLEN SPECTER

        Senator Specter. Yes. Thank you, Madam Chairman.
        I join the subcommittee in welcoming Secretary Jackson here
    today. He has a job of enormous importance, housing and urban
    development, which has a very, very heavy impact on my city.
    Public housing is a matter of the utmost importance as it seeks
    to provide decent accommodations for people, a very important
    factor, providing a home, providing a basis for family, for
    school.
        We have a very high crime rate in Pennsylvania, especially
    in Philadelphia, and adequate and affordable housing is very
    important. Beyond the overall concern I have for the housing
    issues, there has been a matter that's very contentious between
    the Department of Housing and Urban Development and the
    Philadelphia Housing Authority, something that the Secretary
    and I have discussed personally. There is an issue which could
    cost Philadelphia $50 million at the end of this month unless
    it is resolved.
        Senator Casey and I undertook to try to mediate the
    dispute, spent a little more than an hour on November 1, in my
    office, a very rancorous, cantankerous, bitter meeting, which
    perplexed me. And I asked the parties to go get it worked out,
    but if they didn't I would try again.
        On December 11, I sat down with them again for an hour, and
    there have been some very sharp accusations in that matter,
    which I hope we do not have to go into. What I want to do is I
    want to see the matter resolved. There is litigation now. It's
    costing the United States Government a lot of money to hire a
    lot of expensive lawyers, and taking up the time of the United
    States District Court for the Eastern District of Pennsylvania.
    And we're all on the same team.
        I was very much concerned to read in the Washington Post
    yesterday some e-mails which pertain to this matter between two
    of the Assistant Secretaries of HUD. This is what they said,
    ``Would you like me to make his life less happy?''--I think
    referring to Carl Greene, the head of the Philadelphia Housing
    Authority. ``If so, how?'', Orlando J. Cabrera, then Assistant
    Secretary at the U.S. Department of Housing and Urban
    Development, wrote about Philadelphia Housing Director Carl
    Greene. Kim Kendrick, an Assistant Secretary who oversaw
    accessible housing responded, ``Take away all his Federal
    dollars.'' She typed symbols for a smiley face at the end of
    her January 2, 2007 note. Cabrera then wrote back a few minutes
    later, ``Let me look into that possibility.''
        The Philadelphia Housing Authority Director Greene says
    that this is in retaliation for his refusal to comply with a
    request, or really a demand, made by the Secretary, and there
    are alleged calls from the mayor.
        I hope we don't have to get into the details of it, and I
    hope we're able to get it worked out. But I have some important
    questions. I noticed in your statement, Mr. Secretary, that you
    will only take written questions. Well, that's not
    satisfactory. This is a subcommittee of the United States
    Senate, charged with putting up billions of dollars for your
    Department, and there are some very important questions that
    have to be answered. And I say that in a context that I don't
    like. You and I have worked very closely together, and when I
    wrote to you yesterday I scratched off ``Mr. Secretary'' and
    put ``Al'' and signed it ``Arlen'' because you and I have an Al
    and Arlen relationship.
        But when $50 million is at stake and the kind of
    allegations that are involved here, I hope we don't have to get
    to the bottom of it. What I hope is we can settle it.
        Thank you, Madam Chairman.
        Senator Murray. Senator Bond, I apologize for starting
    ahead of time with the votes going on. Do you want to make your
    opening statement?

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. I might as well, and begin by apologizing to
    you, my colleagues, the Secretary, and those here. This morning
    a wreck on North Capitol of a school bus put me about 45
    minutes behind. So this is the day when I could least afford to
    be 45 minutes behind, but I appreciate your going ahead, and
    again my sincere apologies.
        I thank you, Madam Chairman, for having this hearing. I
    believe Senator Murray has already noted this is likely the
    last time we will have the pleasure of receiving testimony from
    Al Jackson, the Secretary of HUD. I would say also, the
    Secretary's a good friend. We worked together in previous
    transmogrifications and I hope that he will be able to provide
    closure for a number of HUD programs, most especially public
    housing reform, lead-based paint, as well as providing
    demonstrated leadership on the subprime mortgage crisis.
        These are no small challenges that have to be resolved.
    Nevertheless, I hope that this hearing will assist us in
    crafting an appropriations bill that will assist in meeting at
    a minimum the housing and community development needs of the
    Nation.
        HUD continues to face a slew of funding and programmatic
    issues which are not likely to be resolved for a number of
    years into the future. This statement is not intended to
    detract from any accomplishments of the Secretary, but it is an
    honest assessment of HUD as it continues to have problems, many
    of which are long-term and, to be quite frank, require a lot
    more funding than the administration is willing to commit.
        Unfortunately, many of HUD's programs are part of a safety
    net to assist many low- and very low-income families with
    greatest needs, including seniors and persons with
    disabilities. In many cases these are persons who are unable to
    help themselves, through no fault of their own. These are the
    people we all want to help.
        Unfortunately, HUD's problems are not just a question of
    inadequate funding. I believe strongly that HUD does not have
    adequate staffing or expertise to ensure that its programs can
    work effectively. This coupled with the risk of many impending
    retirements from the senior ranks also means that HUD will have
    difficulty conducting the necessary oversight to prevent fraud,
    abuse, and negligence in its programs.
        On top of these problems, HUD has admitted that its IT
    systems are antiquated, underfunded, flat-out do not work as
    expected. That's a real hat trick, and that is a serious
    problem, which not only compounds HUD's program failures, but
    it further enhances the risk of fraud, abuse, and loss of
    program income.
        Nevertheless, I congratulate Senator Murray for her
    aggressive efforts to ensure that the final fiscal year 2008
    appropriations bill included language that provides a separate
    appropriation for each of HUD's primary offices. Frankly, I
    think that was an excellent move. With HUD's assistance and
    this information, our subcommittee should be able to make
    constructive funding decisions on staffing requirements once we
    understand which offices are overfunded and which are
    underfunded. The bottom line is that we need to help ensure
    that HUD staff is allocated to the office with the most needs,
    where they can provide the best expertise.
        I also expect HUD to make personnel recommendations for HUD
    offices consistent with staffing needs within the next 2 months
    to the House and Senate Committee on Appropriations.
        For another year, I must express extreme disappointment
    with the proposed administration HUD budget for fiscal year
    2009. For example, the administration has increased overall
    funding by some $600 million in fiscal year 2009, with an
    advanced appropriation of $400 million, for 2010 project-based
    assistance. Unfortunately, HUD has been short-changing its
    long-term rental contracts to preserve and pay existing section
    8 project-based needs and now we find ourselves in a $2.4
    billion hole. That's unacceptable. HUD's approach is to fund
    2009 needs through bits and pieces despite a legal obligation
    to fund fully all housing for the entire term of the contract,
    many of which begin in 2009, but stretch into 2010.
        Not only is this approach of dubious legality, but it
    creates a financial burden of $2.4 billion from 2009 into 2010
    without any clear way to pay for the obligation without short-
    funding other important programs or possible shortfalls in
    long-term contracts.
        Public housing has its concerns, but I'm pleased that the
    Public Housing Operating Fund received an increase. I assume
    these funds will operate to assist PHAs in meeting their asset-
    based management requirements. More funds are needed, but this
    is a start. Nevertheless, cutting the Public Housing Capital
    Fund by some $400 million is counterproductive, especially
    since public housing will only result in higher costs later by
    failing to address deteriorating needs, which will only get
    worse.
        The administration wrong-headedly continues to request the
    elimination of HOPE VI. While I would support certain reforms
    to expedite demolition and streamline construction with HOPE
    VI, I do support HOPE VI, which has transformed communities
    throughout the Nation, building mixed housing that has
    leveraged new investments, economic development, stable
    communities, from which hospitals, schools, and jobs have
    grown, often resulting in an increase in the tax base and a
    reduction in crime.
        I know, Mr. Secretary, you're quite familiar with Murphy
    Park and the King Louis Developments in St. Louis, which took
    some of the most uninhabitable, dangerous high rises and
    converted them into mixed use viable communities with decent
    housing on a mixed income basis.
        I think we should look at HUD through a gestalt process
    whereby we take public housing as a whole, with a goal to fix
    all PHA problems as a totality, and we're going to have to do
    that regardless of costs.
        Even more drastic, section 811 housing for persons with
    disabilities would be gutted, from $237 million in fiscal year
    2008 to a meager $65 million under the 2009 budget request.
    These are people who rely on this program and in many cases
    this housing represents the primary focus around which services
    and related programs are provided.
        Equally serious, the administration seeks significant
    reductions to the section 202 elderly housing program. In the
    section 202 program, the administration proposes a cut of $195
    million from a 2008 funding level of $730 million. People are
    getting older. Our population's getting older. The demand and
    the need for this housing are growing, not contracting.
        For the sake of time, I will highlight only several other
    important issues and leave other issues for later resolution.
    But in particular, HUD's FHA Single Family Mortgage Insurance
    program has always been a concern of mine, especially since
    homeownership appears to be a bigger priority to the
    administration than affordability and foreclosure. To some
    extent, I will tell you quite frankly I think the emphasis on
    homeownership helped to drive the foreclosure crisis we're now
    in. We were warned about it. Zero down payments, all these
    wonderful ideas to give people who couldn't afford housing the
    opportunity to get into the housing didn't do them any good
    when we put them in housing they couldn't afford, no matter how
    many gimmicks up front, whether it was seller financed Nehemiah
    or no down payments provisions.
        I think we all need to recognize that homeownership is a
    great goal, but it's not achievable for everyone. Rental
    housing has its place and in many cases it's more affordable
    and realistic for people and families in this country. I've
    lived in rental housing and there is nothing wrong with that if
    you are not in the position to buy a house and ruin your credit
    when you can't make the payments.
        In addition, I emphasize an agreement I have with FHA.
    Namely, FHA is not intended to bail out either homeowners or
    lenders regardless of negligence, predatory lending, or
    whatever. In other words, FHA is not permitted to refinance
    mortgages at mortgage costs that are above the current value of
    the property. FHA could obviously refinance mortgages at the
    actual appraised value and I would urge FHA to do so.
        My real concern here is the appraisal system is flawed and
    to some extent to blame for the housing crisis we're now
    facing. It's certainly a worthwhile discussion that may result
    in the need for legislation or State action. I'd be very
    interested to see how FHA plans to deal with appraisals.
        In particular, FHA needs to report quarterly to the House
    and Senate Committees on Appropriations on appraisal reforms. I
    do expect people guilty of fraud to be barred from the
    appraisal program, perhaps even including fines and jail
    sentences.
        If we do not see action and FHA losses actually increase,
    it might be time for a new FHA corporation or a new housing
    GSE. If that sounds harsh, just talk with families who've lost
    their homes.
        One of the major problems facing HUD and FHA is seller down
    payments. In general, this is where seller-funded nonprofits
    provide down payment assistance to families in order to qualify
    for FHA mortgage insurance. Unfortunately, this practice, while
    it's done well for the sellers, allowing them to sell the
    property, but if it results in inflated real estate prices and
    the risk of default then the FHA winds up holding the bag.
        In fact, the costs to the FHA have been dramatic. From 2000
    to 2004, these loans as a percentage of FHA's business grew
    from 6 to 30 percent, with approximately a 35 percent default
    rate. In fact, without some change in the law or HUD practice,
    seller down payments will cost as much as $1.4 billion in
    appropriations to pay for losses in 2009. Unfortunately, courts
    have not been receptive to HUD's attempt to ban the practice,
    justifying the most recent decision on procedural grounds.
        Finally, there is a local issue where three relevant
    Federal agencies are required to meet the basic requirements of
    legislation that identifies and makes unutilized and
    underutilized public lands available on preference to homeless
    providers. HUD conducts the initial analysis; Health and Human
    Services provides the application with a preference to any
    homeless provider. The biggest problem in Missouri is a certain
    homeless provider who repeatedly appears to have gotten
    priority for HUD excess properties. The provider has no
    relation to any other homeless provider in Missouri, never
    participated in the Federal homeless funding or local continuum
    of care. There has never been any comprehensive attempt to
    administer these facilities in a professional manner.
        Among the troubling issues, there have been reports of
    rapes committed by employees, theft, as well as a recent knife
    and chain saw attack by a psychiatric patient. Equally
    troubling, the Springfield facility is near a school, which
    clearly poses some risk to the students.
        Unfortunately, the Government appears unable to implement
    its responsibilities as to excess properties for the homeless.
    I know any major change would cause concern. My suggestion and
    compromise is not to eliminate the program, but to tie the
    program, this program, to homeless participants and the Federal
    continuum of care to ensure the excess property will be used
    effectively and appropriately.
        I initially supported the law because of the past bias
    against housing the homeless in almost any community.
    Nevertheless, not all Federal properties are appropriate. We
    almost ended up with a homeless shelter in St. Louis that was
    an obsolete Social Security building in the downtown district,
    which was going through revitalization, and if they made that
    the largest homeless shelter in the Nation it would have doomed
    the revitalization efforts of downtown St. Louis. That's only
    one example of property decisions made under a poorly
    administered law.
        Madam Chairman, I apologize for the length of my statement,
    but, as you may have noted, I have a lot of concerns dealing
    with HUD. I thank you and my colleagues and the Secretary for
    the indulgence.
        Senator Murray. Thank you very much, Senator.
        Secretary Jackson, if you will give your opening statement.

                       STATEMENT OF HON. ALPHONSO JACKSON

        Secretary Jackson. Thank you very much, Chairwoman Murray.
    And I want to thank Ranking Member Bond and the members of the
    committee for the opportunity to appear before you today.
        Madam Chairman, I am here to present the fiscal year 2009
    HUD budget. But before I do that, I want to thank you, Madam
    Chairman and the entire subcommittee, for priority given to FHA
    Modernization. We need the legislation right away. As you and
    your colleagues finish work on this important legislation, I
    should mention the administration's remaining priorities with
    respect to what's in the final bill.
        First, the legislation must allow HUD to address the recent
    explosion in loans where the seller provided buyers with down
    payment assistance and then add the price into the home. These
    loans have a foreclosure rate three times the norm. They are
    costing hard-working Americans their homes, and these types of
    loans have pushed FHA to the brink of insolvency.
        Second, Congress should allow FHA to proceed later this
    year with some flexibility in setting premiums. I assure you we
    have no intentions of increasing premiums on our bread and
    butter customers, but a few modest changes will strengthen
    FHA's ability to offer safe alternates to home owners who want
    to refinance out of high-cost subprime loans and will actually
    allow us to reduce the premium for our potential home owners
    with low income.
        Such legislation would fit well into the general direction
    of the President's budget. We need actions that are positive,
    solutions to complex problems that confront home owners in the
    housing market, like FHA modernization and the Government-
    sponsored enterprises.
        The proposed budget is fiscally sound, representing a
    historical investment of $38.5 billion for programs at HUD.
    This is an increase of more than $3 billion, or 9 percent over
    last year's budget. The budget is almost $1 billion more than
    our current budget authority. This funding will be timely and
    on target for people served by this Department. We need this
    budget to maintain the current home ownership and to stimulate
    new purchases. It will help us expand our current effort.
        Let me put the budget in context. Last year President Bush
    and I introduced FHA Secure to help more Americans facing
    foreclosure refinance into safer, more secure FHA loans. We did
    this using the current regulatory authority. As we have been
    able to make the FHA available to more qualified families,
    there has been a noticeable increase in the number of closings.
    We believe that FHA Secure will help about 300,000 families
    refinance into affordable FHA-insured mortgages. FHA Secure has
    proved to be extremely valuable.
        Madam Chairman, you should also know that only in 5 months,
    from September 2007 through January 2008, FHA has pumped more
    than $37.5 billion of much-needed mortgage activities into the
    housing market. More than $14.7 billion of that investment came
    from FHA Secure.
        FHA modernization would greatly assist our effort. As you
    know, the economic stimulus package provided a temporary 10-
    month window. We announced the new loan limits last week when I
    was in California. This will help hundreds of thousands of
    people nationwide, perhaps as many as 250,000. But this is no
    substitute for the FHA modernization, which would raise
    appropriate loan limits permanently and also provide other
    important changes that would benefit American home owners.
        At a time of high foreclosure, FHA is helpful in other
    ways, such as a strong loan loss mitigation program which has
    saved hundreds of thousands of homes from going into
    foreclosure.
        In addition to FHA-related actions, we are also taking
    steps to ensure it is easy for home owners to understand the
    fine print when they do sign on the dotted line. That's why we
    are committed to RESPA reform. We're in the process of
    publishing a new Real Estate Settlement Procedure Act rule and
    hope it will bring much-needed transparency to the home buying
    process.
        Now, the budget will work in concert with other actions
    that we must take. For instance, the proposed budget
    appropriately increases funding for housing counseling. America
    needs the present request for $65 million in the budget for
    housing counseling. Those funds, in addition to the $180
    million provided to NeighborWorks, will serve our constituents
    very well.
        Many Americans are facing foreclosure. We know that we can
    stop these foreclosures and housing counseling works very well.
    This funding will help partially address the crisis and prevent
    such a situation in the future. It will get the job done. We
    want to make sure that housing counseling services get the
    funds they need, now and in the future, and can manage the
    funds they get.
        We also need to continue Government efforts to partner with
    the private sector to help build back the housing market. The
    Hope Now allowance is a good example. Hope Now is a private
    sector voluntary industry effort to address foreclosure through
    freezing mortgage interest rates and working directly with
    financially troubled home owners.
        I also commend a recent effort by six Hope Now Alliance
    members to provide a temporary pause for home owners in the
    foreclosure process. These actions provide direct assistance to
    those in need right now. These are the sort of responses that
    provide quick help for home owners.
        As in the past, Madam Chairman, the largest part of our
    budget is for affordable rental housing. Combined, this budget
    seeks more than $29 billion for the rental assistance program,
    which is expected to help more than 4.8 million households. We
    are mindful of the continuing need for more affordable rental
    housing. Especially low- and middle-income workers still find
    themselves priced out of the real estate market. We need to
    maintain the units currently available and expand their
    numbers. This budget will help us do that.
        Finally, the homeless must not be forgotten. We are making
    strides to cut the number of chronic homeless within our
    continuum of care approach. For the first time ever, we saw a
    decrease in the number of chronic homeless last year, a drop of
    12 percent. We must continue that process. Our budget once
    again seeks an increase for homeless programs to continue this
    good work.

                               PREPARED STATEMENT

        Madam Chairman, I know that you are mindful of the need to
    help our Nation's homeless veterans. Americans are deeply,
    profoundly grateful for the service and sacrifice of our
    Nation's veterans. In this proposed budget there is a request
    for $75 million for our Veterans Affairs supportive housing
    program. Prior to 2008, this program has not been funded since
    1993. Working with the Veterans Administration, we will create
    an additional 9,800 vouchers for fiscal year 2009. This will
    bring the total of approximately 20,000 homeless veterans to be
    able to be served through social service and housing.
        Overall, I believe that this is a good budget and I look
    forward to working with you to carry out this. Thank you very
    much.
        [The statement follows:]

                  Prepared Statement of Hon. Alphonso Jackson

                                  INTRODUCTION

        Thank you, Chairwoman Murray, Ranking Member Bond, and the members
    of the subcommittee for this opportunity to appear today.
        Madam Chairwoman, the budget for the Department of Housing and
    Urban Development (HUD) represents an investment in the American people
    by the American people. This investment is measured in more than
    dollars. It is measured in the lives we touch, whether in creating and
    protecting sustainable homeownership, preserving affordable rental
    housing, helping the homeless, or revitalizing our cities.
        The budget reflects America's compassion and commitment. The
    President's budget will ensure housing assistance for those in need,
    preserve and promote homeownership by addressing subprime mortgages,
    strengthen communities by sustaining homeownership gains, make further
    progress towards ending chronic homelessness, and continue the trend of
    improving HUD's management and performance.
        Almost every American is touched by our programs, directly or
    indirectly. And there are few things more personal or cherished as the
    house or apartment where we live, watch our children grow up, and where
    we grow old. Our budget is about promoting new homeownership and making
    the American dream possible. The budget is about protecting families
    already in homes. It is about expanding affordable rental housing. It
    extends funding and services to those in need, including the disabled,
    veterans, the homeless, people with HIV/AIDS, and elderly and disabled
    people affected by hurricanes Katrina and Rita. Further, it continues
    to support and encourage community growth and revitalization.
        I believe we have a good budget. It is fiscally sound, supports our
    mission, and fits in well with the overall vision for the President's
    entire fiscal year request. My Department would receive an historic
    investment, $38.5 billion. This is an increase of more than $3 billion,
    or 9 percent, over last year's proposal. The budget is almost $1
    billion more than our current budget authority.
        Let me break this down in more detail.

                          ENSURING HOUSING ASSISTANCE

        I am pleased that the budget strongly ensures housing assistance
    for those in need. As in the past, the largest part of our budget is
    for affordable rental housing. Combined, this budget seeks more than
    $29 billion for our rental assistance programs which we expect will
    help more than 4.8 million households. We are mindful of the continued
    need for more affordable rental housing, especially as some low-and-
    middle-income workers find themselves priced out of the real estate
    market in many cities. We need to maintain the units currently
    available and this budget will help us do that.
        The budget increases primary housing programs by providing $7
    billion to renew all project-based rental contracts and $400 million
    for an advance appropriation to bridge renewal funding into 2010. This
    will help provide housing assistance for nearly 1.3 million low-income
    tenants.
        We also increase housing choice vouchers, reaching over 2 million
    low-income families, while removing the cap on the number of housing
    units that Public Housing Authorities may assist.
        The budget also supports public housing operations with a request
    for $4.3 billion, the highest proposed funding level in history. This
    will cover the necessary operating expenses for 1.2 million public
    housing units.
        The proposed budget also seeks $300 million for persons living with
    HIV/AIDS. This funding would provide housing and care for 70,500
    people.
        The proposed budget also contains $3 billion in Community
    Development Block Grant (CDBG) funding for States and local
    governments. We have once again asked Congress to revise the outdated
    funding formula for this program. With appropriate revisions, we can
    distribute resources more efficiently and fairly, making this funding
    more effective and helpful.
        Madam Chairwoman, let me also add some comments about the recovery
    effort from Hurricanes Katrina, Rita, and Wilma. The disaster was
    unprecedented. Recovery will take many years. We have been deeply
    involved in these recovery efforts.
        You should know that HUD has funds available of nearly $20 billion
    throughout the gulf coast region to assist in recovery. States have
    spent approximately $8.5 billion to date. So far, more than 110,000
    homeowners in Louisiana and Mississippi have received financial
    assistance from HUD. We know that there is more to do--much more. We
    have learned much and worked through some enormous difficulties. But
    progress is noticeable.
        The American people should be proud of their investment and their
    compassion. If anyone wants to see America's heart, they should go to
    the gulf coast, where so many people have given generously of their
    time, their love, their patience, and their courage.
        The gulf coast is coming back, and one important reason is a
    fundamentally sound approach to recovery.
        When Hurricanes Katrina, Rita, and Wilma devastated the gulf coast,
    many of our most vulnerable citizens lost the only homes they had
    known. We recognized last year that some of those families affected by
    the storm needed additional time to recover, which is why the
    administration transferred the responsibility for housing these
    families from Federal Emergency Management Agency (FEMA) to HUD under
    the Disaster Housing Assistance Program (DHAP) and extended Government
    housing assistance another 18 months to 30,000 families.
        The President is also requesting $39 million to ensure that the
    elderly and disabled families displaced by the 2005 gulf coast
    hurricanes remain protected at the conclusion of DHAP. These Disaster
    Displacement Assistance vouchers will provide permanent affordable
    housing to eligible elderly and disabled families, while the remaining
    storm victims who are not on fixed incomes continue on the path to
    self-sufficiency.
        The Department will administer these vouchers as part of the
    section 8 Housing Choice Voucher Program. We will make rental
    assistance payments on behalf of these families, whether they have
    relocated or returned home.

                     PRESERVING AND PROMOTING HOMEOWNERSHIP

        Promoting homeownership remains one of the central goals of this
    administration. We have to get the housing market back on track. We
    know that homeownership is good for families, the community, the
    Nation, and the world. Homeownership equals empowerment, wealth
    creation, independence, and fulfillment of the American Dream. It gives
    the family a stake in the community. Homeownership is a source of
    pride. It is particularly important for America's minority communities,
    which historically have lower rates of homeownership.
        Clearly, the housing crisis is a powerful challenge. After the
    unprecedented, historic gains in homeownership between the start of the
    decade and 2005, there has been a downward trend in homeownership. The
    troubling rates of foreclosure and other housing indices reveal more
    than a statistical drop or figurative decline. They tell us of families
    losing their homes, of people losing their investments, and of dreams
    stolen away.
        The causes are many. But the subprime situation is often the
    reason. But not all subprime loans are bad. Subprime loans broadened
    the availability of credit and led to housing investment for those who
    previously had less than perfect credit. And the majority of subprime
    loans are still being paid on time. About 20 percent of subprime loans
    are problematic. This means that many families cannot afford their
    subprime loans. Some families are on the edge of a financial abyss. The
    rapid rate of foreclosure threatens to continue unless appropriate
    actions are taken.
        This budget will help HUD in its efforts to address the housing
    crisis. It will give us the tools we need to continue our work. We must
    reverse the downward trend in housing indices and homeownership. We
    must help homeowners retain their homes. We must also look to the
    future because we must increase the number of families who own their
    own homes. And we must retain the sizable increase in minority
    homeownership. As you may recall, in 2002, the President challenged the
    Nation to create 5.5 million new minority homeowners by the end of this
    decade. And we have made substantial progress: 3 million more minority
    families have become homeowners since 2002. We must build on that
    progress.
        Of course, the President's stimulus package will help. I'm grateful
    Congress has given this package its support. By temporarily increasing
    FHA loan limits, we can back more safe, sound mortgages in high-cost
    States and help homeowners trapped in exotic subprime loans to hold on
    to their houses.
        We also need the President's request for $65 million in this budget
    for housing counseling. Why? Well, we have learned that housing
    counseling makes a powerful difference in homeownership and foreclosure
    avoidance. You see, many of the failed loans were a surprise because
    the homeowner didn't read the fine print and didn't understand the
    contract. Housing counselors could have helped the homeowner gain a
    better perspective about affordability and balanced expectations.
    Families must buy homes they can afford. They must understand the
    contracts--have an especially clear idea of the features of financing
    and the ramifications of resets, and the terms and the timelines.
    Prospective homeowners must have a prudent mortgage, not a ``suicide
    loan.'' We must remove the mystery, confusion, and vagueness from the
    process. There must be full disclosure, understandable information, and
    a transparent process.
        That's why we need housing counselors to be fully engaged in the
    process. Housing counselors are an important line of defense against
    foreclosure. They can enlighten homeowners and help prospective owners
    determine the affordability and appropriateness of a mortgage. They can
    explain the contract and answer questions.
        The President has been a strong proponent of funding for housing
    counseling, and has worked with you to more than double the funding for
    housing counselors since the start of this administration. Now, given
    the magnitude of the crisis we face, it is important to expand funding
    for housing counseling. The President's request in this area is
    paramount to prevent future foreclosures.
        These funds, in addition to the President's request of $180 million
    for the Neighborhood Reinvestment Corporation, provide great services
    to those in need. And we now know that spending in this area is a sound
    investment, saving the Nation from expenses related to foreclosures,
    lost revenues, slowdowns in business spending and new housing
    construction, and declining home values.
        The administration is also taking steps to ensure it isn't as hard
    for homeowners to read the fine print when they do sign on the dotted
    line. That's why we are committed to reform of the Real Estate
    Settlement Procedures Act (RESPA). We hope to publish a new RESPA rule
    in the coming days. Our goal is to bring much needed transparency to
    the home-buying process.
          strengthening communities by sustaining homeownership gains
        The President has also requested a substantial increase of $263
    million for our HOME program. This would bring the funding level up to
    nearly $2 billion for the Nation's largest block grant program
    specifically designed to produce affordable housing. This request
    includes $50 million for the American Dream Downpayment Initiative,
    which provides flexible housing assistance, and increases affordable
    housing and minority homeownership. Since the inception of the HOME
    program 16 years ago, almost 812,000 units of affordable housing have
    been created.
        We also need to support other efforts to maintain current
    homeownership and stimulate new purchases. In August 2007, the
    President and I introduced an effort, FHASecure, to help more Americans
    facing foreclosure refinance into a safer, more secure Federal Housing
    Administration (FHA) loan. We did this using current regulatory and I
    am pleased to report that the program is helping many families avoid
    foreclosure. There has been a noticeable increase in the number of
    closings with FHA. Two months ago, there were 2,500 closings a month
    with FHA. Now, there are 4,500 closings a week! By year's end, we
    expect FHA will be able to help more than 300,000 families refinance
    into affordable FHA-insured mortgages.
        Madam Chairwoman, you should also know that FHA has mailed letters
    to hundreds of thousands of at-risk homeowners to urge them to
    refinance with safer, more affordable FHA-backed mortgages. These
    letters are being sent to homeowners who already have or soon will
    confront the first reset of their adjustable rate mortgage, and are
    currently living in locations subject to FHA loan limits. We will be
    sending these letters out to about 850,000 at-risk homeowners.
        But we could do so much more with legislation to modernize the FHA.
    Congress needs to quickly complete work on a bill that will immediately
    give us authority to expand FHA's ability to serve the very type of
    borrowers who were lured into high-cost, high-risk loans. We need to
    make the minimum down payment more flexible, create a fairer insurance
    premium structure, and permanently increase FHA's loan limits. This
    will allow more families to use FHA, perhaps hundreds of thousands of
    families. We need FHA modernization as soon as possible. Every day of
    delay places qualifying homeowners at unnecessary risk. Our estimates
    indicate that FHA modernization could help as many as 250,000 more
    families by the end of 2008.
        We asked for this bill 2 years ago to help us avoid the mortgage
    crisis. But now we need it to help address the crisis.
        I am also pleased that the mortgage industry has stepped forward to
    help. Treasury Secretary Paulson and I have worked closely with the
    mortgage industry to address the housing crisis in another way: enlist
    proactive industry cooperation. The industry worked with the
    administration to develop a program called the HOPE NOW Alliance to
    help homeowners at risk of foreclosure. The Alliance has implemented a
    plan that could help up to 1.2 million homeowners avoid foreclosure
    over the next 2 years by providing systematic relief that includes
    modifying or refinancing existing loans, moving borrowers into
    FHASecure loans, and implementing a 5-year freeze on interest rate
    resets for subprime loans. The industry has already assisted 370,000
    homeowners. HOPE NOW has contacted more than half a million borrowers
    in the second half of 2007.
        There are other actions that will help. So, you'll see the budget
    has a sharp increase for our Self-Help Homeownership Opportunity
    Program (SHOP) that works with organizations like Habitat for Humanity
    and others to build housing through sweat equity.
        Fair housing practices are an important aspect of homeownership.
    This year marks the 40th anniversary of passage of the Fair Housing
    Act. Our budget provides $51 million to protect the right of all
    Americans to be free from housing discrimination based on race,
    religion, gender, sexual orientation, family status, or disability.
    This is an increase of $1 million over the current appropriated level.
        I also hope you will notice our new Fair Lending Division. This
    office will examine questionable mortgage practices and investment
    complaints from homebuyers. It is an important addition--a new way to
    directly address unfair practices.
        This new division has already made an impact. Recently, HUD awarded
    grants totaling approximately $1 million for the development of
    strategies to address lending discrimination. These grants were awarded
    to State agencies in Ohio, Massachusetts, Colorado, and Pennsylvania,
    States with some of the highest rates of foreclosure in the Nation. The
    agencies in these four States are developing ``best practices'' for
    intake procedures, investigation techniques, and education and outreach
    activities for their mortgage lending enforcement programs. These
    ``best practices'' will be made available to all State and local
    agencies in the Fair Housing Assistance Program (FHAP).

                          ENDING CHRONIC HOMELESSNESS

        And the homeless must not be forgotten. We are making strides in
    reducing chronic homelessness with our ``continuum of care'' approach.
    We are working to provide assistance across the entire spectrum of
    homelessness. This continuum of care is vital because homelessness is a
    complex, difficult, multi-dimensional problem, both for those who are
    homeless and for those who are working to meet the needs of the
    homeless.
        Our national effort to end homelessness has been steadfast, with
    strong commitment and investment. Since 2001, HUD has awarded
    approximately $10 billion in funding to support the housing and service
    needs of the homeless.
        We are working especially hard to stop the revolving door for the
    chronically homeless. Early on in this administration, President Bush
    set a goal to end chronic homelessness in America. If we are to be
    successful, we must help break a cycle of circumstances and behaviors
    that consistently place the chronically homeless on the streets.
        And there is evidence that we are making progress. The investment
    by HUD and local communities is working. In November, HUD announced
    that, across the country, local communities saw a nearly 12 percent
    drop in the number of individuals who literally call the streets their
    home, nearly 20,000 fewer persons living on our streets. This was good
    news. It shows that the hard work of thousands of people is paying off,
    that our efforts can make a powerful, positive difference.
        Of course, we still have a long way to go before ending chronic
    homelessness. There are still people living on the streets, many of
    them are mentally ill, addicted to alcohol and/or drugs, or physically
    disabled. These are the most vulnerable among us, the hardest-to-house
    and the hardest-to-serve. The chronically homeless are people who are
    homeless for more than a year or who continue to cycle back into
    homelessness. They are people who need serious, sustained assistance to
    overcome their homelessness.
        Madam Chairwoman, I know you are mindful of the need to help our
    Nation's homeless veterans. Americans are deeply, profoundly grateful
    for the service and sacrifice of our Nation's veterans. In the proposed
    budget, there is a request for $75 million for our Veterans Affairs
    Supportive Housing Program (VASH). Prior to fiscal year 2008, this
    program had not been funded since 1993. Working with the Veterans
    Administration, we will create an additional 9,800 vouchers for fiscal
    year 2009, bringing the total to approximately 20,000 homeless veterans
    being served through housing and social services and double the number
    of available housing vouchers.

              CONTINUING HUD'S IMPROVED MANAGEMENT AND PERFORMANCE

        Finally, I would like to discuss the management of the Department.
    For the first time since 1994, the Government Accountability Office
    (GAO) removed HUD's single-family housing mortgage insurance and rental
    housing assistance programs from the list of High-Risk Federal
    programs. I am very proud of that fact.
        I am also very pleased that HUD achieved a clean opinion in its
    2007 financial statements, continuing a multi-year trend.
        We need to build upon this progress. So, Madam Chairwoman, I also
    want to mention that the $313 million included in the request for our
    Working Capital Fund will enable the Department to make critical
    upgrades to our aging information technology (IT) systems. If we want
    to improve the delivery and control of the Department's significant
    program resources for the benefit of the people and communities we
    serve, then it is imperative that we have sufficient funding for IT
    systems modernization efforts. The $65 million reduction of our 2008
    request for IT funding was devastating. That reduction has stopped
    practically all HUD systems modernization efforts.
        Madam Chairwoman, this subcommittee should know that without
    sufficient funding, we will be unable to modernize FHA's 25 year old
    mainframe systems to effectively support FHA program reforms. We will
    be unable to improve the automation of the section 8 Project-Based
    Assistance contract renewal and payment processes. We will be unable to
    effectively implement asset management improvements over the public
    housing stock. We will continue to manage our $16 billion a year
    Housing Choice Voucher Program through a cumbersome spreadsheet process
    rather than an automated database that can provide timely information
    for HUD and Congressional oversight. HUD has demonstrated the ability
    to successfully use its limited IT funding. I urge you to support the
    budget request for IT funding.

                                   CONCLUSION

        Overall, this is a good budget for the Department . . . balanced,
    reasonable, appropriate, and workable. It allows us to operate within a
    framework of cooperation and partnership with other Federal agencies,
    State and local governments, and non-profit initiatives. The American
    people count on HUD . . . count on us for direct assistance, grants,
    professional administration, and high-quality public service. With this
    budget we meet those expectations. With this budget we can get the job
    done.
        I also want to thank the employees at HUD for their extraordinary
    service during a very trying and difficult period. Madam Chairwoman and
    members of the subcommittee, I am sure that you would be extremely
    impressed by the day-to-day work product of our employees. I am very
    proud of my colleagues at HUD.
        Madam Chairwoman, as we proceed through the budget process, I look
    forward to working with you. I thank you and the subcommittee for your
    consideration of this budget request.

                          SELLER DOWN PAYMENT PROGRAM

        Senator Murray. Thank you very much, Mr. Secretary.
        We will have 5-minute rounds, and I'm told that we may
    start voting as early as 10:30, so I will try and make mine
    short so we can get to everybody.
        Mr. Secretary, HUD's budget assumes that there will be
    major reforms to the FHA Single Family Housing program and I'm
    told that if these reforms are not enacted this year the MMI
    Fund could potentially face a $1.4 billion shortfall. We're
    also told this is largely the result of the defaults of the
    seller down payment program. What are your views on the seller
    down payment program and its impact on the solvency of the FHA
    fund?
        Secretary Jackson. Chairlady, we really believe that the
    seller down payment program, if we are still forced to carry
    it, will create severe problems for us, on the brink of
    insolvency for this year. We have heavy reserves, but this year
    it's creating a problem. As I said when I was reading the
    statement, it's three times higher than our default rate. We're
    about two and one-half and they're three times higher. It is
    presenting serious problems.
        Senator Murray. What is the default rate for the program?
        Secretary Jackson. What is that?
        Mr. Montgomery. The foreclosure rate is 2.3 percent and the
    default is about 6.3 percent.
        Secretary Jackson. Foreclosures--well, come and tell the
    chairlady.
        Mr. Montgomery. Brian Montgomery, FHA Commissioner.
        Our overall foreclosure rate the last quarter of 2007 is
    2.3 percent. The default rate is about 6.3 percent.
        Senator Murray. What is it costing the taxpayer to run this
    program compared to the standard FHA mortgage program?
        Mr. Montgomery. The Secretary is exactly right. These loans
    that have seller-funded down payment assistance are two and
    one-half, three times more likely to default. As you know, part
    of what we've been trying to do is to sound the alarm on just
    how volatile these loans are. We proposed a rule, too, that
    would eliminate that type of assistance, but were stopped, sued
    and stopped in two court decisions last week.
        Senator Murray. Let me ask you, Mr. Secretary. Last week
    the U.S. District Court for the District of Columbia vacated
    the HUD final rule that prohibited the Seller Down Payment
    Assistance Program you're referring to from acquiring an FHA
    guarantee. How does that court decision affect HUD's ability to
    ensure the solvency of the FHA Fund?
        Secretary Jackson. Chairlady, I'm not sure that I can
    answer that because the judge in his opinion said exclusively I
    was not to deal with the process. He excluded me out of the
    process. Brian can answer it for you, but I cannot.
        Senator Murray. Well, let me get an answer in writing from
    you, because I do want to ask one more question on my time and
    turn it to Senator Bond.
        [The information follows:]

                           Seller Downpayment Program

        The Department is re-publishing the Notice of proposed rulemaking
    in order to allow for additional comment on information that further
    explains and supports HUD's proposal to prohibit seller-funded down
    payment assistance. In its proposal, HUD is advising the public that
    the current practice that allows for seller-funded down payment
    assistance is having a serious negative impact upon the overall
    financial health of the FHA Fund. The Senate's FHA modernization bill
    also prohibits this type of assistance.

                                      HECM

        Senator Murray. HUD's Housing Equity Conversion Mortgage,
    the HECM program, provides elderly home owners the option of
    taking out a reverse mortgage on their home in order to meet
    their financial needs today, providing them with the
    flexibility to use that equity in their homes for what they
    need, health care, home repairs. As we're watching our elderly
    population struggle with this economic downturn, this program
    has become increasingly important to them. In fact, it is the
    fastest growing loan program within FHA.
        We are seeing some pretty distressing news reports,
    including one by AARP, of unscrupulous sales agents who are
    selling older home owners annuities, long-term care insurance,
    investments, home repairs, that are very high in cost and low
    in value to the consumers, and sometimes these schemes are done
    with the collaboration of lenders participating in the HECM
    program.
        What steps is your Department taking, Mr. Secretary, to
    crack down on these abusive practices directed at HECM
    borrowers by sales agents and lenders?
        Secretary Jackson. You're absolutely correct, chairlady,
    and we are doing everything with the Office of Housing to seek
    out these persons. We're very, very concerned about this
    process because we do a large number of HECM loans. And I am
    very, very committed to senior citizens that they don't lose
    their homes. So we are making every----
        Senator Murray. Are you taking any action against any of
    the lenders?
        Secretary Jackson. I can get that information for you. I
    know that our Assistant Secretary has taken some action. I'm
    just not sure how much action we took.
        Senator Murray. Okay. I'd like that back in writing, then.
        Secretary Jackson. I will make sure I get that for you.
        [The information follows:]

                   Housing Equity Conversion Mortgage (HECM)

        Over the past 2 years, FHA has taken major steps to mitigate risk
    in its Home Equity Conversion Mortgage program. During fiscal year
    2007, FHA reviewed 90 mortgages and a total of 4,572 HECM loan files,
    uncovering findings in half of the loans examined. FHA issued findings
    letters to these mortgagees notifying them of the deficiencies.

                          PUBLIC HOUSING CAPITAL FUNDS

        Senator Murray. Senator Bond?
        Senator Bond. Thank you very much, Madam Chairman.
        I'm very much concerned about the Capital Funds for public
    housing. Apparently a 2000 ABT study estimated the annual
    accrual needs of capital. When you inflate them to 2009, it
    looks like they are being budgeted at about 79 percent of the
    need, which I understand to be about $20 billion. There are
    multi-billion dollar backlogs existing.
        Do we have an adequate estimate or a reasonable estimate of
    what those needs are, and how do you plan to maintain this
    large inventory of housing into the future if we're not meeting
    the ongoing needs?
        Secretary Jackson. Senator Bond, I really believe that we
    do, and I will give you the overview and I will have Paula come
    and give you the depth.
        As you know, when we created the Commission on Severely
    Distressed Public Housing back in the late 1980s, early 1990s,
    we said that there were about 88,000 severely distressed public
    housing units in this country. As of to date, we have
    demolished 150,000. We've built back some 60 or 70,000.
        Senator Bond. Thanks in large part to HOPE VI in some
    areas.
        Secretary Jackson. No question. And you know you will not
    get an argument with me about HOPE VI.
        Senator Bond. Just because I set it up, I appreciate your
    willingness to agree.
        Secretary Jackson. You won't get an argument.
        But I will let Paula give you the details.
        Senator Murray. Please. We're concerned about it.
        Ms. Blunt. Just to add to that, I would like to say that
    we're still using the figures from the 1998 study that you were
    talking about, and we are in the process of procuring services
    to do a new capital needs study and that will be under contract
    by next month. So we will have a real more current estimate of
    what those modernization needs are.
        Senator Bond. Based on that previous estimate, what is the
    general range of the needs and how much of that is funded in
    this budget?
        Ms. Blunt. I'm not sure. I guess we would have to get back
    to you on that. I'm not sure of the exact dollar amount in
    terms of those needs right now.
        Senator Bond. That's what I'm very worried about. Frankly,
    until OMB understands these needs are a critical investment,
    we're going to see the stock decline and we're going to face
    even greater costs in the future.
        Secretary Jackson. What we've done, Senator, is given the
    housing authorities permission to use their bond authority in
    many cases, to use their reserves to make sure that they do the
    capital replacement.

                         PUBLIC HOUSING OPERATING FUND

        Senator Bond. That's a band aid. That's a band aid but it
    isn't curing the underlying infection.
        Let me turn to the Operating Fund. There is $4.3 billion in
    the request. How much of these funds will be dedicated to
    ensure proper training of asset-based management and how ready
    are the PHAs to take it on? Is this something they have the
    ability to do?
        Secretary Jackson. I think so. As you know, Senator, even
    before we moved to asset-based management, when I was in St.
    Louis and Washington, DC and Dallas, I basically practiced
    asset management. Those assets that were not viable we got rid
    of and only managed those that were viable. That's all we're
    asking again for the housing authorities around the country to
    do.
        I think they have the ability to do that, and we will
    assess that process.
        Ms. Blunt. If I could just add to that, as you mentioned
    the technical assistance and training, we have $5.9 million
    that we're suggesting for that. Just as early as yesterday, we
    sent out invitations to the industry to come meet with us in
    order to talk about what they feel the best use of that money
    is in terms of what kind of technical assistance that the
    housing authorities need in this transition to asset
    management. We're in the first stages of that, as you know.

                                    HOPE VI

        Senator Bond. I will have a bunch of questions on section 8
    and FHA, but I'm not going to pass up HOPE VI without asking
    you how we can keep it alive, how we can facilitate
    development. Have you considered new bonding authority,
    continued redevelopment through an alternative program? How do
    we get rid of the distressed housing?
        Secretary Jackson. Senator, let me say this. Of the 270-so
    grants that we have made on the HOPE VI, 75 have been completed
    to date since 1990. We have outstanding right now about $1.4
    billion. I would love to somehow recapture the money and send
    it to cities that have performed well.
        Senator Bond. Well, I would agree----
        Secretary Jackson. I just think that----
        Senator Bond [continuing]. But if they're not doing the
    job----
        Secretary Jackson. We have some cities with HOPE VI moneys
    that are 10 years old that have not been spent. If we could
    just capture those between 5 and 10, we could probably get $600
    million out of this process or more. So I think that the money
    is there and we should utilize it for those cities that are
    performing well.
        Senator Bond. I believe we've tried to get that done, but
    your staff has been resisting because it's a difficult choice.
    But we need to continue to talk about that.
        Secretary Jackson. I'll be happy to.
        Senator Bond. If you'll support it, maybe you can pass that
    word down to some of the folks who work for you.
        Secretary Jackson. I will do that.
        Senator Bond. Thank you very much, Mr. Secretary, Madam
    Chairman.
        Senator Murray. Senator Specter?

               PHILADELPHIA, PA/UNIVERSAL COMMUNITY HOMES DISPUTE

        Senator Specter. Thank you, Madam Chairman.
        Mr. Secretary, did you call Mayor Street about the dispute
    that Philadelphia Housing Authority was having with Universal
    Community Homebuilders?
        Secretary Jackson. Senator, I did speak to the Mayor, but
    not about any dispute.
        Senator Specter. What did you speak to the Mayor about?
        Secretary Jackson. Just the completion of the HOPE VI
    project, that's all.
        Senator Specter. But you're saying that you did not talk to
    him about the dispute PHA was having with Universal Community
    Homes?
        Secretary Jackson. Senator, I've said to you that I spoke
    to him about the completion of the project, that's all.
        Senator Specter. Nothing about Universal's unhappiness with
    having this piece of property not turned over to them?
        Secretary Jackson. Senator, I've just told you the truth.
        Senator Specter. So you're saying that didn't enter into
    your conversation at all with Mayor Street?
        Secretary Jackson. Senator, I have told you the truth and I
    think that the person who spoke to him mostly was our staff
    member, Dominic Bloom, who spoke to him.
        Senator Specter. Do you know what your staff member told
    Mayor Street?
        Secretary Jackson. Just we were concerned about the
    completion of the project.
        Senator Specter. Anything about Universal Community Homes
    being unhappy that the land wasn't turned over?
        Secretary Jackson. Senator, I have told you the truth, and
    I think you and I have a relationship. I have not lied to you
    and I'm not lying to you now.
        Senator Specter. Did anyone from Universal contact you
    concerning PHA's refusal to turn over that ground?
        Secretary Jackson. If they did, I mean, I can't remember, I
    really can't. I don't think--I can't remember. I don't want to
    say no, I just can't remember.
        Senator Specter. A possibility that they did?
        Secretary Jackson. I can't remember.
        Senator Specter. Mr. Secretary, you have these e-mails,
    three e-mails on January 12, 2007. The e-mails are ``Would you
    like''--this is Mr. Cabrera: ``Would you like me to make his
    life less happy,'' referring to Carl Greene. What reason would
    Mr. Cabrera have for wanting to make Carl Greene's life less
    happy?
        Secretary Jackson. I think you would have to ask Mr.
    Cabrera.
        Senator Specter. Well, I will.
        When you saw these e-mails, albeit only 2 days ago, didn't
    they arouse some concern or suspicion on your part that
    something was amiss if they're out to make Carl Greene's life
    unhappy?
        Secretary Jackson. I think if you look at what I said, what
    I submitted to you last evening, Senator, it said I think it
    was made out of frustration, and I made that very clear to you.
    I think that you and I have had lots of discussion on this
    matter and we had not come to a resolution, and I was working
    directly with you to try to get a resolution. And I think that
    many of our staff people, as I said, were operating on a very
    frustrated level.
        Senator Specter. Well, what were the frustrations if not
    retaliation?
        Secretary Jackson. I can't answer that, sir. I just think
    that, as I said to you before, we had been trying to work the
    accessibility out, as in my memorandum to you; work it out,
    that's all we are trying to do, to make sure that the civil
    rights of the disabled are covered. That's all we're talking
    about.
        Senator Specter. Well, Mr. Secretary, you have these e-
    mails, ``Would you like me to make his life less happy? If so,
    how?'' on January 12. You have a response, ``Take away all of
    his Federal dollars,'' on January 12. A response to that, ``Let
    me look into that possibility,'' on January 12. Then on January
    12 your Department tells PHA that they might be in danger of
    losing a lot of money.
        Isn't that an extraordinary coincidence----
        Secretary Jackson. Senator----
        Senator Specter [continuing]. If not causally connected?
        Secretary Jackson. Senator, as I stated to you earlier, I
    will make every endeavor to answer the questions, but I don't
    know the intricacies. That's why when I--it was not there to
    insult you. That's why I said that if there were questions,
    please, if you can tell me what they are I will go back and
    have the staff answer those questions for you. I really don't
    know all of the intricacies.
        As I said to you in the memo, I saw this as of Tuesday. Am
    I concerned? Yes. But I don't know all the intricacies.
        Senator Specter. You say you are concerned, yes, and what?
        Secretary Jackson. I don't know all the intricacies of what
    occurred. That's why I'm saying that's why I'd like to get back
    to you, to find out what occurred, why it occurred, and have
    the staff answer your questions.
        Senator Specter. Well, Mr. Secretary, I will pursue that
    with you. But on this state of the record, the question is what
    were these Assistant Secretaries doing? And when you have this
    exchange of e-mail about making his life unhappy and taking
    away the funding and ``I'll look into that,'' and then the same
    day they take action which now is amounting to a potential loss
    of $50 million, that's just too much of a coincidence. It all
    happens on the same day.
        These aren't collateral frustrations or something else.
    This is simultaneous. That kind of timing is very, very
    forceful evidence that they're taking action to take away the
    money, making his life unhappy, and they're doing it for this
    reason.
        Secretary Jackson. Senator, again, as I stated to you
    earlier, I will be happy to get back to you. As I stated in the
    memorandum to you, I saw this for the first time on Tuesday,
    and I am making every effort to get to the bottom of it.
        When you sent me the letter--and I really appreciate it
    because you did say ``Al''--that's why I responded so quickly,
    because I thought that, to try to get to the bottom of it. I
    don't know all the answers at this point.
        Senator Specter. Well, Mr. Secretary--just another minute,
    Madam Chairman--I will take you up on your offer. Then you're
    willing to sit down with me and Mr. Cabrera and Ms. Kendrick
    and get to the bottom----
        Secretary Jackson. Mr. Cabrera's no longer with us.
        Senator Specter. Well, I know he's no longer with you. I
    will invite him. Will you encourage him to come?
        Secretary Jackson. I have no problems at all.
        Senator Specter. Thank you very much.
        One addendum, what I would really like to do at the meeting
    is to spend our time to see if we can't solve the controversy.
    I would a lot rather deal with the substance of this issue and
    get $50 million for housing for the poor in Philadelphia than
    air a lot of laundry.
        Secretary Jackson. Senator, we have been trying to resolve
    that. I think the staff has been working very hard to resolve
    that. But I would tell you this. I'll do whatever you ask
    because I have a great deal of respect, but I don't think we
    can sit down and resolve the problem when a lawsuit was brought
    against us. It would be very difficult.
        Senator Specter. No, no, you're not right about it. The
    case can be settled. The parties can come together. The judge
    would be delighted.
        Thank you very much, Mr. Secretary. Thank you, Madam
    Chairman.
        Senator Murray. Thank you very much, Senator.
        Senator Lautenberg.

                           PUBLIC HOUSING MAINTENANCE

        Senator Lautenberg. Thank you very much, Madam Chairman.
        Mr. Secretary, we're all upset, frustrated, if I may use
    your own terminology, with what's happened in the funding needs
    for the maintenance of public housing. What we see is
    technology gone awry.
        And despite the housing authorities' alarm about public
    housing in crisis, especially with rising utility and
    operational costs, despite that, President Bush's budget falls
    $850 million short of what is needed just for the maintenance
    needs of public housing. How can these authorities provide
    decent affordable housing that thousands of people depend on
    when they don't have the money to make the basic repairs? What
    should they do?
        Secretary Jackson. I think, Senator Lautenberg, that's a
    very fair question. I believe that since we have demolished
    almost 150,000 units in this country since 1990, we believe
    that we still have enough capital funds, with the bonding
    authority, with the reserve, and, as Mrs. Blunt said a few
    minutes ago, with we're doing the second portion of the study
    for the capital needs. If this study comes out that there's
    more capital needs, I will be the first to defend that process
    and come before you.
        Right now, I think we have enough capital needs, and if I'm
    wrong I'll be the first to admit I'm wrong.
        Senator Lautenberg. Why is that taking review now?
    Shouldn't it have taken place before the budget was presented?
    Were you consulted before you got your budget for the year?
        Secretary Jackson. We do this on a, I think it's about
    every 8 or 10 years we do the study. What is it?
        Every 10 years, and this is the time for us to do it and so
    we're doing it again.
        Senator Lautenberg. Now, what happens every 10 years?
        Secretary Jackson. We do a study, Senator, to decide what
    the capital needs are for all of the housing authorities, the
    2,300 housing authorities around the country.
        Senator Lautenberg. For a 10-year cycle?
        Secretary Jackson. Yes, for a 10-year cycle.
        Senator Lautenberg. Anybody hear about inflation or growth
    in population or any of those things?
        Secretary Jackson. Yes, sir.
        Senator Lautenberg. I'm not sure what a 10-year cycle does,
    a 10-year review does.
        And this has been reviewed by my colleagues. Last April in
    front of this committee you said to me that you hadn't touched
    one contract, and that was after the IG, Inspector General,
    looked into allegations that you injected political favoritism
    into Government contract awards. Now an investigation is taking
    place for asking a housing authority official in New Orleans to
    provide a contract to a friend. And there are new questions
    about your involvement in a controversy involving a friend and
    the transfer of property in Philadelphia. I think Senator
    Specter covered that.
        How do you feel about those comments now?
        Secretary Jackson. Senator, I will say that I think it is
    best, with all the misinformation that has been put out right
    now, to simply let the investigators do their job quickly and
    expeditiously as possible. Therefore, I am going to let the
    investigators complete their work before I make any public
    comment.
        I am confident that when the dust settles and the
    investigators finish their work, the allegations will be put to
    rest. But I would like to just continue to try to do the work
    that I've done to provide decent and affordable housing. That's
    really where I am.
        Senator Lautenberg. Your statement, Mr. Secretary, doesn't
    match with the budget that's being sent here now to us. We
    can't get the job done. We can't provide decent, affordable
    housing. You say that you support it, but how can we do that
    without the funds necessary?
        Secretary Jackson. I really think, Senator, that the funds
    are sufficient to carry out this responsibility. I guess I'm in
    a very unique situation, having been the only HUD Secretary to
    run a housing authority. I ran three housing authorities. And I
    truly believe that the funds are sufficient, and that I have
    worked with the people in the industry to make sure that the
    funds are.
        You know, the question is can you always use more? The
    average person will say yes, there's no question about it. But
    I think that clearly sir, they have enough tools to work with
    to carry out and produce safe, decent, sanitary housing for low
    and moderate-income people.
        Senator Lautenberg. You suggest--and I'll take just a
    moment more, Madam Chairman, if I may. You suggest that there's
    a lot of misinformation out there. You--I quoted you here. Are
    you saying that these were--this was not your statement that
    you haven't touched a contract, and this was after the
    Inspector General looked into allegations? Is that the
    misinformation you're----
        Secretary Jackson. No, sir, that's not. When I said that to
    you, I specifically said that--I think it's a quote--``I have
    not touched a contract,'' which means that I cannot originate a
    contract, I cannot cancel a contract. Those are handled by the
    contract review board and others in the agency. I will be
    happy, if you want to, to show you the process that is used.
        Senator Lautenberg. Well, I would hope, Mr. Secretary, you
    knew what was coming at this hearing. You knew the questions
    that were going to be asked. And to be able to defend what took
    place at the same time insufficient funds to carry out a
    serious responsibility to provide safe and affordable housing
    is very disappointing.
        Thank you, Madam Chairman.
        Secretary Jackson. Thank you.
        Senator Murray. Senator Allard.

                                SELLER FINANCING

        Senator Allard. Thank you, Madam Chairman.
        I want to follow up a little bit on what Madam Chairman had
    asked you about, seller finance. I think it's important that we
    draw a distinction between seller financed down payment and
    what would be referred to as legitimate gift down payment
    assistance, which creates real equity, the latter creating real
    equity in the home. Can you say a few words on the beneficial
    forms of down payment assistance? And then I'd like to have you
    comment a little bit about the American Dream Down Payment Act
    that we both worked on.
        Secretary Jackson. Surely. I'd like Brian to do that for
    you if it's okay with you, Senator.
        Senator Allard. Yes.
        Mr. Montgomery. Yes, sir. Brian Montgomery, the FHA
    Commissioner.
        Sir, are you talking about the volatility of the seller-
    funded, or----
        Senator Allard. Well, there are two down payment assistance
    categories. There's the seller finance, where you have your
    problems, and then there's what we call sort of gift down
    payment assistance----
        Mr. Montgomery. Yes, sir.
        Senator Allard [continuing]. Which is the kind of
    assistance that's promoted by the American Dream Down Payment
    Act. I think that it's important that the committee understand
    the difference between those two types of down payment
    assistance.
        Mr. Montgomery. Yes, sir. Thank you. There are several
    groups of borrowers that use FHA. There are those families that
    tend to save the money themselves, sock it away; when they have
    enough money for a down payment they apply for an FHA loan.
    There are others who use the seller-funded down payment
    assistance, which I think we've addressed that issue. And then
    there are those that use assistance from units of local
    government, State and local housing finance agencies.
        It's no surprise that the lowest claim rates are those that
    save their own money and then purchase a home. Those that use
    assistance from local housing finance agencies and others; the
    claim rate is about one and one-half times larger than it is
    for those who use their own funds. But it jumps up to two and
    one-half, almost three times more likely to go to claim, when
    families use the seller-funded down payment assistance.
        Senator Allard. Okay. On the American Dream Down Payment
    Act, what are you proposing for that program in your budget?
        Mr. Montgomery. That is under a different office in HUD,
    sir, but I believe its $25 million.

                                      ADDI

        Mr. Bregon. Good morning, sir. My name is Nelson Bregon.
    I'm the General Deputy Assistant Secretary in the Office of
    Community Planning and Development. We administer the American
    Dream Down Payment Initiative under the HOME program.
        For that program, originally the administration had
    requested $200 million. It has been funded at $50 million. Now,
    for 2008 we received $10 million in funding for that program.
    That money is distributed by formula. It goes to participating
    jurisdictions. There are about 600 of them, and those
    participating jurisdictions use the moneys as down payment
    assistance for low income residents.
        Senator Allard. I see.
        Mr. Bregon. Of that portfolio, I think about 12 percent are
    FHA-guaranteed. Then Mr. Montgomery has the numbers as to the
    default rate on the ADDI program is similar to the regular
    portfolio of the FHA.
        Senator Allard. I see, okay. Thank you.
        Secretary Jackson. Thank you.

                                     RESPA

        Senator Allard. I want to move to RESPA if I might.
        Secretary Jackson. Yes, sir.
        Senator Allard. I understand that the proposal that you're
    working on now is close to 270 pages--I guess this is a rumor
    on the street--and that the good faith estimate, which was
    previously proposed would be one page long, is now somewhere
    around four pages, another rumor on the street.
        Further, a new form of comparing GFE and HUD is apparently
    being introduced and real estate closings will now have to have
    a script read explaining aloud loan terms and fees.
        It doesn't sound like simplification to me. I know that's
    what one of your goals was. And I wondered if you might explain
    those rumors.
        Secretary Jackson. Well, let me say this, Senator. It is
    simplification, but I will let Commissioner Brian go into depth
    with it.
        Senator Allard. Okay.
        Mr. Montgomery. Thank you, sir. The 278-page preamble will
    be published tomorrow in the Federal Register. However, today
    it is available for public viewing at the offices of the
    Federal Register, so I can discuss it in some instance.
        While the preamble is long, we are updating a 34-year-old
    statute, the Real Estate Settlement Procedures Act. We think
    that it's implicit from what we've seen the last several years,
    that there's better disclosure to the borrower, there's greater
    certainty of costs, so we avoid the sticker shock between the
    good faith estimate today and what ends up on the HUD-1
    statement. You can talk to some of the consumer groups, as I'm
    sure you have, and they will share multiple instances of
    families who witnessed and experienced that sticker shock
    first-hand.
        So our guiding principle is that we wanted to develop a
    good faith estimate, a standardized form that takes some of the
    best of what other organizations have proposed, from what we've
    seen in best practices, and make it a document that not only
    fully articulates to the borrower what they're getting into,
    but also provides them a document that they can now do what
    very few borrowers do, and that is shop for the best deal that
    they can get.
        Senator Allard. Was the process simplified?
        Mr. Montgomery. Yes, sir, absolutely. And I want to say----
        Senator Allard. Less paperwork, so when you're closing,
    instead of it being this, it's more like this?
        Mr. Montgomery. We are doing our best to do that, sir. It
    may shorten by a quarter of an inch. I can't promise you much
    more than that. But I will say this: We've conducted extensive
    consumer testing and the consumers have been telling us that
    they like the standardized form. They like the fact--none of
    us--very few of us have degrees in finance, and when you see
    terms in a closing document, we've all experienced that process
    in our life and I don't think any of us when we leave that
    closing table feel 100 percent good about what we've just done.
    Now, the euphoria of owning your home may overtake that. But
    you put your best faith into the system.
        We are trying to get to the heart, where consumers leave
    that settlement table where they've had it explained to them
    and they say, you know, I feel good about what I've just done.
    The closing script that would be read along with the HUD-1
    statement is the single most item that consumers told us they
    like the most, because now it's being explained to them in
    plain, simple English what they were doing.
        Senator Allard. Thank you, Madam Chairman.

                                 HUD OVERSIGHT

        Senator Murray. Thank you, Senator.
        Mr. Secretary, obviously there are a number of issues in
    front of this committee regarding the budget that are extremely
    important. However, as I said in my opening statement, this
    subcommittee has a tremendously important oversight role for
    every dollar appropriated by it. And as you have heard, your
    agency is operating under a cloud right now. I know, as I said
    in my statement, you're tired of the allegations, we're tired
    of them. I think it's important that we clean up some of that
    and want you to answer a series of questions that I have as
    openly and as honestly as you can. Our committee has the
    responsibility for taxpayer dollars and I would like you to
    answer in the spirit of that.
        Mr. Secretary, you did testify before us last year that you
    have never involved yourself in any contracts with HUD. You
    said: ``I have not touched one contract, not one.'' I would
    like you to address the allegations regarding your involvement
    in the hiring of William Harrison to serve as a construction
    manager at the Housing Authority of New Orleans. Since 2002
    your agency does run that authority in receivership.
        Mr. Harrison reportedly is a personal friend of yours and
    received between $400,000 and $500,000 through a no-bid
    contract for 18 months of work. That's a good bit more money
    than you make as the Nation's top housing official. Mr.
    Harrison has told the press that he believes he was hired for
    this position because of your involvement.
        It's alleged that you personally involved yourself in
    seeing to it that Mr. Harrison was paid on a timely basis.
    Finally, it has been alleged that members of your senior staff
    slapped the wrist of certain officials at the Housing Authority
    of New Orleans that questioned the hiring of Mr. Harrison.
        Mr. Secretary, did you personally recommend Mr. Harrison to
    be employed by the Housing Authority of New Orleans, as he
    asserts?
        Secretary Jackson. Chairwoman, I think it is best, with all
    the misinformation being put out there right now, to simply let
    the investigators do their job quickly and expeditiously as
    possible. Therefore----
        Senator Murray. You have an opportunity to----
        Secretary Jackson. Therefore----
        Senator Murray. You have an opportunity to set the record
    straight here and I'm asking you a direct question.
        Secretary Jackson. Therefore, I'm going to let the
    investigators complete their work before I make any public
    comment.
        Senator Murray. Well, it is alleged that you personally
    called one of your employees, Mr. Donald Babers, to complain
    that Mr. Harrison was not getting paid in a timely way by the
    Housing Authority of New Orleans. He is your appointee on the
    HANO board of directors. Have you personally complained to Mr.
    Babers, to any HUD contractor, or to any other individual
    currently or formerly employed by HUD regarding whether Mr.
    Harrison was getting paid or the pace at which he was getting
    paid?
        Secretary Jackson. Again, chairlady, I think it is best,
    with all the misinformation that is being put out there right
    now, to simply let the investigators do their job quickly and
    expeditiously as possible.
        Senator Murray. Mr. Secretary, you have an opportunity
    before this committee that has oversight of your agency and the
    tax dollars that we appropriate, to clean this up, and I would
    ask you to answer honestly if you could for us this morning.
        Secretary Jackson. Therefore, I'm going to let the
    investigators complete their work before I make any public
    comment.
        Senator Murray. Well, did you ever discuss with Mr. Thorson
    any HUD contractor or any other individual currently or
    formerly employed by HUD the matter pertaining to Mr.
    Harrison's contract and whether or not it should be signed?
        Secretary Jackson. I think it is best to let the
    investigators complete their work, and I will say again that I
    think it is important that they complete that work and I will
    let them do that before I make any public comment.
        Senator Murray. So it is clear you'll not answer any
    questions about New Orleans. Let me ask you about the Housing
    Authority of the Virgin Islands. It's had a very troubled
    history and it's also operated by your agency in receivership.
    It's alleged that you personally advocated the hiring of a
    friend of yours, Mr. Michael Hollis, by a company called Smith
    Real Estate Services, which was a HUD contractor on the Virgin
    Islands. Mr. Hollis reportedly had no experience in public
    housing, but a short time following his employment as the HUD
    contractor Mr. Hollis was hired directly by HUD to be executive
    director of the Virgin Islands Housing Authority, at a
    compensation level that is reported to have exceeded a million
    dollars.
        Mr. Secretary, did you ever have a conversation with any
    HUD contractor or any individual currently or formerly employed
    at HUD regarding the merits of hiring Mr. Hollis for either the
    position at Smith Real Estate Services or the position with the
    Virgin Islands Housing Authority?
        Secretary Jackson. Again, chairlady, I think it's best,
    with all the misinformation that's being put out there right
    now, to simply let the investigators do their job as quickly
    and expeditiously as possible. Therefore, I'm going to let the
    investigators complete their work before I make any public
    comment.
        Senator Murray. Did you have any conversations with your
    Assistant Secretary, Orlando Cabrera, or anyone else currently
    or formerly employed, or any HUD contractor, regarding the
    compensation level that Mr. Hollis would receive?
        Secretary Jackson. I think it is best, with all the
    misinformation being put out there right now, to simply let the
    investigators do their job----
        Senator Murray. You won't comment on any conversations
    regarding Mr. Hollis's contract?
        Secretary Jackson [continuing]. Investigators do their job
    as quickly and expeditiously as possible. Therefore I'm not
    going to comment, any public comment, until they finish their
    work.
        Senator Murray. Well, Mr. Secretary, as you can imagine,
    it's very difficult for this subcommittee. We have
    responsibility to take care of our responsibility of oversight.
    You control an agency that spends millions of taxpayer dollars.
    Your agency's operating under a cloud at this point. I think
    that it is imperative that you clear up these questions as
    quickly as possible so that we can continue to serve our
    taxpayers, and I hope that by submitting these to the record
    that you will reconsider and answer the questions to the
    committee.
        Secretary Jackson. Thank you very much, chairlady.
        Senator Murray. Thank you, Mr. Secretary.
        Senator Bond?
        Senator Bond. Madam Chairman, I would only say that with an
    ongoing investigation, we sought to get information from the IG
    about it. They told us this was an ongoing investigation and
    they would not comment with it. When there is an ongoing
    investigation, I would have to say that if potentially serious
    charges may come out of it, was I representing someone in
    Secretary Jackson's position I would have to tell him, instruct
    him not to answer questions, to allow the investigation to be
    finished.
        Having said that, we will be, obviously, following very
    closely the results of that investigation and what comes out.
    When that investigation closes, then, if appropriate, I think
    once that is resolved then we should have answers to all of
    these questions. But given the circumstances, I, as an attorney
    who's represented some people who were in trouble, I'd have to
    tell you that I would have a strong edict not to get out ahead
    of it.
        Now----
        Senator Murray. Senator, I totally understand your
    statement. However, the IG has not told this committee that we
    can't conduct our oversight.

                                   SECTION 8

        Senator Bond. Oh, no question about it, we can conduct our
    oversight. But all I said was the IG, when we asked about it,
    the IG said it's an ongoing investigation. The IG's office
    would not tell us about this investigation. We have oversight
    responsibilities and I have a whole bunch of serious questions
    that go, not to these particular allegations.
        For example, I am concerned about section 8. With $14.3
    billion budgeted, what percent of the authorized vouchers will
    this amount pay for? And how many section 8 funds are
    available, but are unused because of the caps in place? If you
    could prepare us a map showing where there has been more money
    made available above the caps, that we can work with you to
    figure out how to help you allocate those funds to make sure in
    a shortfall of section 8 funds that they go where they are most
    needed?
        What's the situation with the caps, where some PHAs have
    more money available than the caps?
        Secretary Jackson. I will let Milan Ozdinec, who controls
    the program, Senator, discuss that with you.
        Mr. Ozdinec. Good afternoon, Senator. How are you? It's an
    honor to be here.
        As you may know, there is about $2.2 billion today sitting
    in accounts called net restricted assets. These are funds that
    were previously appropriated by this body as well as the House
    to provide housing authorities with HAP payments as well as
    administrative fees. Of that $2.2 billion, approximately $800
    million of that are funds that are above the caps, that is
    funds that housing authorities may not use because they're at
    their authorized amounts of units.
        We, as you may know, have advocated for the past 3 years to
    having the caps removed and to allow housing authorities that,
    for example, had done all the right things, reduced payment
    standards, improved their utility allowances, provided minimum
    rents, to reduce their costs so that they could serve more
    families.
        As you may also know, in last year's budget, in 2008, the
    Congress instructed the Department to offset the appropriation
    by $723 million of that unusable cap money. So housing
    authorities that had been at their caps and have money in their
    net restricted assets we will in fact offset in 2008.

                                   FHA SECURE

        Senator Bond. Well, it would be nice to be able to let the
    PHAs have all the section 8 money they need. But given the
    budget we've been presented, there is such a squeeze that we
    may not have that luxury. It would be great to have the well-
    performing PHAs rewarded, but the shortfalls we have are
    serious.
        Let me turn very quickly, Mr. Secretary, to the FHA, and
    you may want to call up the FHA Commissioner. Number one, I
    assume you'll be refinancing mortgages at their current value
    only. What steps are you going to take to assure the appraisals
    are accurate? Do you have the staff and expertise for FHA to
    ensure that this program runs efficiency?
        This is a big concern.
        Mr. Montgomery. Absolutely, Senator, and we share in that
    concern. With the FHA Secure product, again these are
    conventional FHA refinances we're talking about here. Probably
    95, 97 percent of those are subprime, subprime ARMs. We are
    very aware of the declining housing markets in this country.
    Therefore we require a new appraisal prior to the transaction
    occurring to ensure that we have the best snapshot in time of
    what that home is worth.
        Moreover, in markets that are weak, that are called
    declining markets, severely declining markets, we require two
    appraisals, two appraisals, to make sure again that some of
    what you see is happening in the subprime market does not occur
    in FHA.
        Senator Bond. Thank you, Madam Chairman.

                   ADMINISTRATIVE AND JUDICIAL RECEIVERSHIPS

        Senator Murray. Mr. Secretary, the President's budget
    includes $10 million to fund administrative and judicial
    receiverships. HUD currently has six public housing agencies
    under administrative receivership, in other words under your
    control, complete control. The Department often uses these
    funds to contract with outside vendors that, according to your
    budget justification, have the specialized knowledge and
    expertise needed to address specific deficiencies in housing
    authority performance.
        Can you give me examples of the types of contractors you're
    looking for to assist a public housing authority under
    receivership?
        Secretary Jackson. Ms. Blunt will answer that for you.
        Ms. Blunt. I'm sorry, the last time I did not identify
    myself. I'm Paula Blunt, the General Deputy Assistant Secretary
    for Public and Indian Housing.
        When we go into, when we take over a housing authority that
    goes into receivership, we usually do an assessment to see
    where the needs are. Many times they vary from housing
    authority to housing authority. The financial-related matters
    is a big one, so usually many times we may have a contractor
    come in that can provide financial assistance. Section 8 is
    one. Many times if the housing authority is having severe
    problems with their section 8 program, we may bring someone in
    there to help with that.
        But when we bring the contractors in, not only do they help
    to fix the problem, but they train the staff also so that they
    can eventually have those skills, be able to do that, so we can
    return the housing authority to local control.
        Senator Murray. Okay. Mr. Secretary, when you hire those
    contractors do you set specific performance measures or
    milestones, and how do you establish the value for the services
    that they provide?
        Secretary Jackson. That is done out of Public and Indian
    Housing.
        Ms. Blunt. Yes, we do establish standards----
        Senator Murray. But it is under your control, correct, Mr.
    Secretary?
        Secretary Jackson. All of HUD is under my control.
        Senator Murray. Right. So can you tell us how those
    specific milestones are met?
        Secretary Jackson. I think that Ms. Blunt can tell you,
    because they're the persons who carry out the program.
        Ms. Blunt. Yes. They are--when the contract is set, there
    are specific standards, milestones that must be met. They are
    part of the contract, and they will vary according to what the
    needs of that housing authority and the expertise that we need.
        Senator Murray. What safeguards do you have in place so
    that those contractors actually have the experience?
        Ms. Blunt. We do a review. We go through our Office of
    Procurement and Contracts, which has review of the experience.
    There are panels that review the applications that come in and
    the panels actually make those decisions and they are forwarded
    for signature, approval.
        Senator Murray. So they are required to have experience
    within the work frame of----
        Ms. Blunt. Yes.
        Senator Murray [continuing]. What you're contracting them
    for?
        Ms. Blunt. Definitely.
        Senator Murray. Did you do that for the Virgin Islands?
        Ms. Blunt. We do that for all of our contracts.
        Senator Murray. Did you do it for the Virgin Islands?
        Ms. Blunt. I specifically didn't, but yes, they are done
    for all contracts. There's an established process in the
    Department through our Office of Procurement and Contracts
    where there are certain things that have to be met. If you
    could look, think of it in terms of a job application. When
    someone applies for a job, there are certain things, criteria--
    --
        Senator Murray. Did your Department do that for the Virgin
    Islands?
        Ms. Blunt. Yes, we did.
        Senator Murray. Mr. Secretary, you have PHAs that have been
    under HUD's control for years and years, a few of them for over
    a decade. If a PHA has been under HUD's control for several
    years, what would be the rationale for an emergency-based non-
    competitive sole source contract?
        Secretary Jackson. I think you'll have to ask, have to ask
    the entity that gave the contract.
        Ms. Blunt. Many times we may run--from time to time we run
    into a situation like that, and it could be the emergency
    situation. Without calling names, we have a situation that
    recently came about where there was no staff left at a housing
    authority to perform the functions and it was necessary to get
    someone in there right away to take care of the needs of those
    residents and that housing authority. So in that case you don't
    have the time to go out for the long, lengthy contract process
    in terms of bringing in competitive bids or whatever. We take
    them off one of the lists that we have and give them, award the
    contract to someone that has the expertise.
        Senator Murray. And was that the case in the Virgin Islands
    as well?
        Ms. Blunt. I'm sorry?
        Senator Murray. Was that the case in the Virgin Islands as
    well?
        Ms. Blunt. I'm not definitely sure. I would have to check
    on that. I think it was a sole source contract, so that
    probably is. If it was that kind of contract, that is what
    would have happened.

                           MIAMI-DADE HOUSING AGENCY

        Senator Murray. The Miami-Dade Housing Agency, Mr.
    Secretary, has recently come under your control and we're
    seeing news reports related to the mismanagement and wide scale
    potential fraud of HUD funds. Can you tell us HUD's actions to
    date with Miami, including what HUD staff you've placed on the
    ground and who you've contracted with to assist in this effort?
        Secretary Jackson. I can't tell you that. I'm sure Ms.
    Blunt can.
        Ms. Blunt. Yes. We've been working with the local
    government there in Miami-Dade and others to take care of the
    situation. That happened to be one of the ones I was referring
    to where the staff had been pulled from the housing authority
    and we had to do an emergency contract to get someone in there
    that could take care of those needs. We're still in the process
    of doing the things that need to be done to bring everything
    together, but we do have a contract there, a contractor there.
    We have HUD staff there. We have a HUD person there working
    diligently on a day to day basis to do what needs to be done to
    work with that housing authority.
        Senator Murray. Senator Bond.

                              HOMELESS FACILITIES

        Senator Bond. Thank you, Madam Chairman.
        I have just three questions that I want to wind up my
    formal questions, the rest for the record. I mentioned, Mr.
    Secretary, the problem we were having with the underutilized
    and unutilized public lands and buildings for the homeless. I'd
    be interested to know what criteria you have for making these,
    this housing available to the homeless or rejecting it. Do you
    have standards about putting homeless shelters next to schools,
    and how many people on your staff are responsible for
    implementing this program?
        Mr. Bregon. Good afternoon, sir.
        Senator Bond. Good afternoon. It has not quite turned into
    afternoon. We've been at this, but it's getting there.
        Mr. Bregon. It seems like a long time.
        Sir, the Department of Housing and Urban Development under
    the McKinney-Vento Act, is responsible for looking at, under
    the BRAC program, any military bases, any military properties
    that are surplus properties, or any other Federal land that
    becomes available.
        What we do first is we publish a list in the Federal
    Register, a notice that indicates to the public which sites are
    available.
        Senator Bond. Do you make any judgment about whether those
    sites would be suitable before you publish the list?
        Mr. Bregon. We do not. We just publish the list and then we
    request proposals. Usually the local communities create a local
    redevelopment authority and those agencies are the ones that
    submit proposals to us saying, that land, we would like to use
    it for a park, we would like to use it for a public facility.
        In that process, the homeless providers also have an
    opportunity to look at that facility. What we do is we look at
    the need of the homeless in that particular area and make a
    determination whether in fact there is a homeless need.
        Senator Bond. Well, one of the things in the instances I
    cited, this was something that the local authorities were very
    dead set against, and they pointed out the lack of continuum of
    care.
        How many people are implementing that program?
        Mr. Bregon. That is serviced out of our Special Needs
    Office. We have one individual that looks at the plans and they
    look at the data that we have available to determine what are
    the housing needs for that jurisdiction.
        Senator Bond. Do they look at whether that is an
    appropriate selection, site for homeless?
        Mr. Bregon. What they do is they work with the local
    redevelopment authority and say, there is a housing need and
    perhaps you can negotiate with that group.
        Secretary Jackson. Let me say this, Nelson. I see what the
    Senator is getting to.
        Senator, let me go back and see how we can----
        Senator Bond. I think on this one there's a little
    disconnect between what I'm hearing and what we saw.
        Secretary Jackson. I understand. I remember the incident
    that was in the papers.

                                     HECMS

        Senator Bond. There are several incidents now. The
    incidents are multiplying.
        Let me jump to HECMs. I understand Australia is a year
    ahead of us. They've addressed a number of predatory lending
    issues. What are the key issues facing HECMs? HECM fees are
    high. It seems to be perhaps unduly lucrative. Has HUD taken
    any steps to reduce the cost of HECMs?
        Mr. Montgomery. Brian Montgomery again, sir.
        We've been working diligently with AARP, with the National
    Reverse Mortgage Lenders Association, I daresay refereeing in
    some cases those discussions about how we can bring down the
    origination costs for reverse mortgages. While this product has
    been around 20 years and it has seen its growth rise
    dramatically of late, it is still a niche product by and large.
    That may change in 5, 10, 15 years. So they are certainly more
    time-consuming than a forward mortgage product.
        I think there are some legislative remedies. We just want
    to be mindful, though, that lenders--if you do low origination
    costs, we don't want to make sure they try to make it up
    somewhere else. So those discussions continue, and I think we
    are in agreement that we need to bring those origination fees
    down.
        Senator Bond. Do you need legislation? Do you have
    legislative recommendations, or do you have recommendations
    against legislation that's being considered? Should we act?
    What should we not do?
        Mr. Montgomery. I just think we need to be mindful of the
    teeter-totter effect, that if we lower the origination cost
    lender, as they do, and that's the way business is, that
    they'll drive up costs somewhere else.
        But I do agree going forward as this product continues to
    grow in popularity, this issue needs to be addressed, as it is
    now. But I would like to share later on some requests and some
    suggestions with this committee and how we could do that.
        Senator Bond. I would hope you will. My cohort is--the
    folks who are still alive at my reunions are all becoming more
    and more interested in HECMs, and I wanted to make sure my
    classmates are well served.
        Thank you very much.
        Mr. Montgomery. Thank you, sir.
        Senator Bond. Mr. Secretary.
        Secretary Jackson. Thank you.

                                 HUD OVERSIGHT

        Senator Murray. We all share that concern, Senator Bond.
    Thank you.
        Mr. Secretary, I do want to go back because again I do
    believe this committee has oversight. I do have a question I
    want to ask you regarding Philadelphia. You did answer Senator
    Specter's question. It has been alleged that you personally
    intervened on several levels to try to get a certain parcel of
    land that's been controlled by the Philadelphia Housing
    Authority to be sold to Mr. Kenny Gamble, an acquaintance of
    yours. It's alleged you not only instructed your regional staff
    to look into the matter, but you personally called Mayor Street
    of Philadelphia to encourage him to force the Philadelphia
    Housing Authority to sell that parcel to Mr. Gamble.
        I want to ask you a separate question: What conversations
    have you had with any HUD contractors or any individuals
    currently or formerly employed at HUD regarding Mr. Gamble's
    issues with the Philadelphia Housing Authority and whether or
    not this parcel of land should be sold to Mr. Gamble?
        Secretary Jackson. You know, chairlady, I think it's best,
    with all this misinformation that's being put out right now, to
    simply let the investigators do their job as quickly and
    expeditiously as possible.
        Senator Murray. I think I've heard that response, Mr.
    Secretary.
        Secretary Jackson. Therefore--therefore, I am----
        Senator Murray. But I have to tell you, it is very
    frustrating to me that you sat here and answered Secretary
    Specter's question regarding the phone call forthrightly and
    honestly. I have given you the opportunity to do that now on a
    number of questions as well. Yet you refuse to answer me on
    those questions. It's very frustrating when you did answer
    Senator Specter.
        Secretary Jackson. I think it is--I think it is very
    frustrating to me. There's an ongoing investigation.
        Senator Murray. Yet you answered Senator Specter's
    question.
        Secretary Jackson. And I think that we should simply let
    them do their job, and once that's done----
        Senator Murray. But this committee does have a
    responsibility of oversight. We are responsible for doing that.
    It's frustrating to hear no responses.
        Secretary Jackson. And I respect you, chairlady, but I
    don't think I can answer.
        Senator Murray. Thank you, Mr. Secretary.

                        ADDITIONAL SUBMITTED STATEMENTS

        The following statements from the National Association of
    Housing and Redevelopment Officials and Hector Pinero before
    the Committee on Banking, Housing, and Urban Affairs have been
    submitted for inclusion in the record.
        [The statements follow:]

         Prepared Statement of the National Association of Housing and
                            Redevelopment Officials

        Thank you for holding an oversight hearing on HUD's fiscal year
    2009 budget. The 23,000 members of the National Association of Housing
    and Redevelopment Officials (NAHRO) look forward to working with you
    and the committee to ensure that our Nation's housing and community
    development needs are adequately addressed as part of the fiscal year
    2009 budget and appropriations process.
        Following a detailed review of the administration's 2009 budget
    presentation, we believe the request not only calls into question the
    underlying justification for critical program funding cuts in fiscal
    year 2009, but also raises a more fundamental question regarding the
    administration's plans to address well-documented and long-deferred
    housing and community development needs. A full listing of NAHRO's
    funding recommendations to help address current needs is attached to
    this letter. We have also attached several charts demonstrating the
    impact of the president's budget on HUD programs. We hope you find this
    information to be helpful.
        Housing has taken center stage of late as many families face
    foreclosure resulting from questionable, sub-prime lending practices.
    As the ``first responders'' to local housing needs, local housing
    agencies have already been called upon to assist families caught up in
    this crisis. Community development agencies are already searching for
    ways to help devastated neighborhoods to recover. Our members stand
    ready to continue to assist families and communities in need. Going
    forward, we welcome the opportunity to work with the committee to
    design and later implement pragmatic responses to this crisis.
        However, as the committee is also well aware, the Nation's housing
    and community development needs are much larger than the mortgage
    crisis we now face. Consider the fact that nearly 14 million American
    families face severe housing needs, paying over 50 percent of their
    incomes toward housing costs or living in substandard housing. In
    communities nationwide, families face daunting waits for scarce rental
    housing assistance. In fact, on any given night, nearly 750,000 people,
    many of them children, are homeless.
        In short, NAHRO believes that the administration's 2009 budget
    request, if adopted, would continue a pattern of large scale
    disinvestment in our Nation's irreplaceable inventory of affordable
    housing and would undermine efforts to sustain vibrant communities by
    cutting or eliminating programs to revitalize our Nation's community
    infrastructure.
        In recent years, we have made the committee aware of our questions
    and concerns regarding significant funding reductions contemplated in
    affordable housing and community development programs. These questions
    are raised once again by the President's fiscal year 2009 proposal.
    Going forward, we believe the larger question before the Congress is:
    what resources are necessary to sustain current levels of assistance to
    families and communities, and how as a Nation do we begin to make
    progress toward addressing unmet needs? For example, how will we
    preserve 1.1 million units of public housing, renew all vouchers,
    maintain vital community and economic development services, and address
    the millions waiting for some form of assistance to secure decent
    housing? These are the questions your committee, along with your
    colleagues on the Budget and Appropriations Committees in both houses,
    must, in our opinion, resolve to address.
        Among the more striking examples found in this budget which we
    believe to be emblematic of the challenges and concerns noted above is
    the administration's request for basic public housing operations. The
    Department's own budget justification states that $5.3 billion is
    necessary to subsidize the 1.1 million families living in public
    housing, yet its budget request inexplicably asks for just $4.3
    billion. We believe that the rationale for this and other
    contradictions in the budget request is best explained by the
    administration and we hope that more will be learned during your
    hearing. It is safe to say, however, that the fiscal year 2009 budget
    request, which would fund local agencies' public housing operations at
    just 81 percent of need, would constrain local agencies' ability to
    administer public housing in a responsible way and, as a result,
    underserve those most in need. In sum, we believe this budget denies
    residents the quality of life in public housing that they deserve.
        There are several additional recommendations in this budget request
    that merit reversal. For example:
      --Disinvestment in Public Housing Infrastructure.--The budget
            proposes $2.024 billion for the Capital Fund, a $415 million
            (17 percent) decrease compared with the amount provided by
            Congress for fiscal year 2008 ($2.438 billion). This
            recommendation has been put forward for the second year in a
            row despite the fact that the HUD's own estimates of long term
            deferred maintenance are between $18 and $20 billion.
      --No Disaster Planning for Public Housing.--Within the Capital Fund
            account, the budget does not request funding for public housing
            disaster relief. The budget narrative states that ``FEMA
            disaster assistance is available for any needs that are not
            covered by the required property insurance.'' Despite HUD's
            assertion, however, disaster assistance from FEMA for PHAs has
            not been forthcoming in recent years. Differing HUD and FEMA
            interpretations of the agencies' Memorandum of Understanding
            (MOU) have meant that neither agency has stepped in to provide
            the funding necessary in a major disaster, save HUD's limited
            allocation of emergency capital funds.
      --HOPE VI Eliminated.--The President's budget proposes, once again,
            to zero out funding for the HOPE VI program. Instead, the
            administration intends to spend out the ``remaining balance''
            in the program, which amounts to more than ``$1.4 billion as of
            the end of 2006.'' Except for unawarded grants from fiscal
            years 2007 and 2008, however, this $1.4 billion is already
            committed to previously awarded grants. It is not available for
            new projects and awards as the administration seems to imply.
      --Deep Reductions in CDBG Formula Grants.--The President's fiscal
            year 2009 proposal would fund Community Development Block Grant
            formula grants at $2.934 billion, a $659 million (18 percent)
            cut. This proposed cut is actually $865 million (24 percent) if
            one considers the administration's unrealistic proposal to
            offset fiscal year 2009 funding by rescinding $206 million in
            prior-year, special-purpose grants. Amounts available to local
            communities would be further reduced if Congress adopted the
            administration's proposal to set-aside $200 million of the
            remaining CDBG funding to support competitive ``challenge
            grants'' for communities pursuing targeted neighborhood
            revitalization.
      --Elimination of Economic Development Programs.--The budget proposes
            to eliminate the section 108 Community Development Loan
            Guarantee program, the Brownfields Economic Development
            Initiative (BEDI), and the Rural Housing and Economic
            Development (RHED) program, arguing that ``these programs are
            duplicative'' and that ``their activities are eligible to be
            funded by CDBG and other Federal programs.'' Because they are
            valuable components of the Federal community and economic
            development toolkit and should remain available to States and
            localities, NAHRO has consistently called upon Congress to
            fully fund HUD's economic development programs. The section 108
            program, for example, allows an entitlement community to borrow
            up to five times the amount of its most recent CDBG formula
            allocation in order to finance large-scale physical improvement
            projects. HUD's own Office of Community Planning and
            Development, during a recent briefing for public interest
            groups, suggested that the section 108 program could be
            valuable to communities as a ``source of funding to address
            problems created by the sub prime crisis'' noted above. All
            three programs received funding under the Fiscal Year 2008
            Omnibus Appropriations Act.
      --Insufficient Housing Voucher Assistance.--HUD's budget assumes
            $14.161 billion in fiscal year 2009 appropriated funds for
            rental housing assistance voucher renewals, to be augmented by
            $600 million in agencies' net restricted assets, for a total of
            $14.8 billion. NAHRO's preliminary estimate is that $15.4
            billion will be needed to support the voucher program in fiscal
            year 2009. When compared with PHAs' voucher expenditures in
            calendar year 2008, HUD's budget request would leave the
            program significantly under funded at levels insufficient to
            cover inflation, let alone the renewal of approximately 14,000
            incremental vouchers appropriated in fiscal year 2008.
      --Underfunding Effective Administration of the Voucher Program.--
            HUD's budget request includes $1.4 billion for Housing Choice
            Voucher administrative fees, including $1.34 billion for
            ongoing fees of existing vouchers and up to $40 million for
            PHAs that need additional funding to administer new vouchers in
            fiscal year 2009. The nominal increases in these accounts,
            however, will be insufficient to fully pay for needs for both
            ongoing and new vouchers, leading to likely downward prorations
            of administrative fees. Without sufficient funding for
            administration, local agencies will not be able to maximize the
            efficiency of available rental assistance dollars, will not be
            able to maintain program integrity, and will not be able to
            provide families with the services and support necessary to
            find appropriate housing.
      --Short-funding Project-Based Section 8 Contracts.--HUD's budget
            would provide $7 billion for the section 8 project-based multi-
            family housing program for fiscal year 2009, representing a
            $682 million increase (10.8 percent). In addition to the $7
            billion, the budget proposes a $400 million advance
            appropriation, which would become available on Oct. 1, 2009, to
            bridge renewal funding into fiscal year 2010. Recent HUD
            estimates of the amount needed to fully fund renewals for the
            full 12 months of the contract term rather increments through
            September 30, 2009, have cited the need as $8.1 billion. NAHRO
            is concerned that the short-funding of contracts as proposed by
            the Department may increase owner uncertainty and hasten the
            loss of affordable housing.
        Taken together, the budget request provides no assurance that well-
    documented housing and community development concerns will be resolved
    in fiscal year 2009. This, in our opinion, places our invaluable
    affordable housing infrastructure at risk and thwarts our ability to
    undertake necessary revitalization of our neighborhoods and
    communities. Some will contend that larger, unrelated budget pressures
    necessarily limit funding for these accounts. However, those familiar
    with the Nation's housing and community development assets fear that we
    will pay an even greater price for years of disinvestment in this
    infrastructure if we fail to recognize the economic downside of our
    inaction and continue to underfund these accounts.
        Our public housing stock represents a 70-year commitment to provide
    decent, safe, and affordable housing in this country. Local housing
    agencies, with few exceptions, preserve this inventory in a responsible
    and cost-effective manner. However, this is an older inventory that,
    like any other form of real estate, will deteriorate if its needs are
    unmet. The longer these needs are unaddressed, the more the cost of
    repairing the infrastructure grows. If let go too long, the price tag
    to sustain this inventory will become too great a burden on the Federal
    budget. At that point, absent a plan to provide new affordable housing,
    families will, quite possibly, be displaced.
        Thank you for this opportunity to outline our concerns and advance
    our recommendations on the fiscal year 2009 HUD budget. Under your
    leadership, the committee has worked hard in recent years to improve
    upon a series of bad HUD budgets. We look forward to working with you
    once again this year to ensure that America's affordable housing and
    community development needs are addressed in fiscal year 2009.

                                     NAHRO FISCAL YEAR 2009 FUNDING RECOMMENDATIONS
                                                [in millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                         NAHRO
                              Program                             2008 Enacted    2009 Proposed   Recommendation \1\
    ----------------------------------------------------------------------------------------------------------------
    Public Housing Operating Fund.............................           4,200            4,300            \2\ 5,300
        Elderly & Disabled Service Coordinators...............             [15]             [16]                  50
    Public Housing Capital Fund...............................           2,439            2,024                3,500
        Resident Opportunity & Supportive Services............             [40]             [38]                  55
    HOPE VI...................................................             100   ...............                 800
    Safety & Security.........................................  ...............  ...............                 310
    Tenant-Based Rental Assistance (Sec 8 Vouchers), Total....      \3\ 16,391       \3\ 15,881   ..................
        Housing Asst. Payments................................     \3\ [14,695]     \3\ [14,161]          \4\ 15,400
        Admin Fees............................................          [1,351]          [1,400]               1,540
        FSS Coordinators......................................             [49]             [48]                  72
        Tenant Protection Vouchers and Administration.........           [$200]           [$150]             ( \5\ )
    Project-Based Section 8...................................           6,382            7,000              ( \5\ )
    Community Development Fund................................           3,866        \6\ 3,000   ..................
        Community Development Block Grant formula grants......          [3,593]      \6\ [2,934]               4,500
    Brownfields...............................................              10   ...............                  25
    Rural Housing/Econ. Dev...................................              17   ...............                  25
    Sec. 108 Loan Guarantees..................................               5   ...............                   7
    HOME......................................................           1,704            1,967   ..................
    HOME Formula Grants.......................................           1,628            1,901                2,000
        ADDI set-aside in HOME................................             [10]             [50]  ..................
    HOPWA.....................................................             300              300                  300
    Homeless Assistance Grants................................           1,586            1,636          ( \7\ \8\ )
    Affordable Housing Production                               ...............  ...............          \9\ 1 ,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ NAHRO requests are for stand-alone programs only. Blank indicates no position.
    \2\ Reflects the administration's own estimate of need.
    \3\ TBRA figures displayed on a program-year basis, consistent with appropriations bill language. HUD documents
      display figures on a fiscal year basis, which blend program years.
    \4\ Renewal of existing and incremental vouchers based on 2007 calendar year voucher leasing and cost data
      through September 30, 2007, inflated by blended BLS Consumer Price Index, Urban (CPI-U), Rent of Primary
      Residence component. Assumes a 96 percent utilization rate.
    \5\ Fully Fund.
    \6\ The President's budget nominally requests $3.000 billion for the CD Fund for fiscal year 2009. However, it
      offsets this amount by presuming the cancellation of $206 million in fiscal year 2008 Economic Development
      Initiatives and other earmarks within the fund. The combination of the request and rescission results in a net
      fiscal year 2008 appropriations request of just $2.794 billion for the CD Fund.
    \7\ NAHRO's proposed funding level for Homeless Assistance Grants is for existing McKinney-Vento programs and
      does not include the administration's proposed $50 million set-aside for the Samaritan Initiative.
    \8\ At least $1,636.
    \9\ Affordable Housing Production should be derived from sources other than appropriations if possible.

                                     ______

     Prepared Statement of Hector Pinero Before the Committee on Banking,
    Housing, and Urban Development on Behalf of the National Leased Housing
    Association, National Multi Housing Council, and the National Apartment
                                  Association

        Chairman Dodd, Senator Shelby and distinguished members of this
    committee, my name is Hector Pinero and I am senior vice president of
    Related Management Company. My firm manages 26,000 apartments of
    affordable and market-rate housing in 135 locations in 13 States from
    New York to California. I am responsible for the affordable housing
    portfolio in the New York metropolitan area. Today I am representing
    the National Leased Housing Association (NLHA) the National Multi
    Housing Council (NMHC) and the National Apartment Association (NAA).
        NLHA represents the interests of 600 member organizations involved
    in federally assisted rental housing including developers, owners,
    lenders, housing agencies and nonprofits. NLHA's members provide
    affordable rental housing for over 3 million families.
        NMHC represents the interests of the larger and most prominent
    firms in the multifamily rental housing industry. NMHC's members are
    the principal officers of these organizations and are engaged in all
    aspects of the development and operation of rental housing, including
    the ownership, construction, finance and management of such properties.
        NAA is the largest national federation of State and local apartment
    associations, with nearly 200 affiliates representing more than 51,000
    professionals who own and manage more than 6 million apartments.
        We commend you, Chairman Dodd, for your leadership, and we thank
    the members of the committee for your valuable work addressing the
    important issue of housing and the Federal budget.

                        FISCAL YEAR 2009 PROPOSED BUDGET

        On February 4, the President unveiled his fiscal year 2009 budget.
    The President's plan would fund the U.S. Department of Housing and
    Urban Development (HUD) at $38.7 billion, which according to the Center
    on Budget and Policy Priorities, is $330 million above current levels,
    but insufficient in light of the housing affordability issues plaguing
    this country. The HUD budget continues to strain efforts to provide
    decent and safe affordable housing. Over the years, HUD spending has
    declined significantly, illustrated by the fact that HUD's budget in
    1974 was nearly $70 billion (in today's dollars) as compared to the
    $38.7 billion being proposed for fiscal year 2009. Clearly, such cuts
    are indicative of the reduced commitment of the Federal Government to
    affordable rental housing in favor of failed homeownership policies.
        We would like to focus our testimony on two programs that are the
    cornerstone of federally assisted housing, the section 8 tenant-based
    rental assistance program, also known as the Housing Choice Voucher
    program and the section 8 project-based programs.

                            PROJECT-BASED SECTION 8

        The project-based section 8 programs, enacted more than 30 years
    ago, have provided effective and enduring shelter for millions of low-
    income families. In addition to making possible the construction or
    rehabilitation of housing units dedicated to low-income occupancy for
    extended periods, the program reduces the rent burden for low-income
    residents living in those properties.
        My company, Related Management, has its headquarters in New York
    City and owns and manages about 26,000 units of multifamily housing in
    13 States from New York to California. Our section 8 project-based
    inventory totals 11,287 units in 64 projects.
        In our opinion, the section 8 subsidy mechanism is the most
    effective housing subsidy ever devised by Congress. It is an elastic
    subsidy that can reach the very poorest families and keep their rent
    burden proportionately the same as the rent burden of families with
    more income.
        However, for section 8 to be an effective program, HUD must comply
    with its contractual promise to housing providers to make timely
    monthly assistance payments. These assistance payments cover the
    difference between tenant rent contributions, generally set at 30
    percent of a tenant's adjusted income, and the HUD-approved rents for
    the property. The tenant rent contribution generally pays for only a
    small portion of the costs of running a property, including debt
    service payments. Without assistance payments from HUD a building
    cannot continue to operate and serve its residents.
        While HUD has been late sporadically in making payments over the
    past several years due to its antiquated computer systems, it was not
    until last summer that a major disruption in payments occurred. From
    June through September, late payments were widespread over most of the
    country. The negative impact of HUD being delayed in meeting its
    contractual obligations has both short- and long-term consequences,
    which we will discuss along with our recommendations to the committee
    for addressing the problem.
        In the case of our company, for example, we billed HUD in June 2007
    for $9.8 million in assistance payments for the month of July. Almost
    one-third of our bill, or $3.1 million, was not paid by July 31, and
    about 20 percent or $2 million remained unpaid until November. One of
    our properties, in San Diego, received no funds for the period of July
    through November, for a total of $875,000. No doubt many other owners
    have been hit harder than us, but any late payment at any time is
    indefensible.
        Owners do what they can to cope during these periods of nonpayment,
    such as drawing funds from a replacement reserve and other reserves if
    they exist, borrowing funds, delaying payments to vendors, and making
    personal contributions. However, not all properties have the ability to
    make ends meet when HUD fails to make timely payments, resulting in
    notices of default, inability to pay operating expenses, deferred
    maintenance, etc.
        Late Housing Assistance Payments (HAP) not only affect the
    operations of a project but also make more difficult the preservation
    of these aging projects through sales, often to nonprofit or other
    preservation purchasers that commit to long affordability periods, and
    through rehabilitation, usually with proceeds from the low-income
    housing tax credit.
        Purchasers, lenders, and tax credit investors have been put on
    alert that the Government may not perform under its contracts, and they
    will act accordingly to protect their interests, assuming they continue
    to participate at all. We have attached to our testimony a list of 19
    adverse consequences of delayed or insufficient HAP funding. We think
    it will be helpful to explain the circumstances that resulted in the
    late HAP debacle.
        In the mid-to-late 1970s and early 1980s, when the section 8
    project-based programs were first developed, the monies for the HAP
    contract (be it 20, 30 or 40 years) were funded up front. For example,
    the costs of a 20-year contract were appropriated during the first year
    of the contract. Further, the subsidy amounts were based on the total
    rental costs at the time and did not consider the tenant contribution,
    which left wiggle room for rent increases during the contract term.
    When the first of the 20-year contracts started to expire around 1994,
    it was the first time in 20 years that Congress needed to make an
    appropriation to subsidize the properties. Congress agreed to fund the
    renewals, but only at rents not to exceed comparable market rents
    (hence the Multifamily Assisted Housing Restructuring Act (MAHRA),
    which provided the Mark-to-Market program and ultimately the Mark-Up-
    to-Market program).
        As the number of HAP contracts renewing under MAHRA continued to
    increase and more appropriations were needed, instead of HUD requesting
    additional funds in its budget request, the Department chose to ask for
    less funding than was actually required to renew the contracts. This
    approach masked the true costs of contract renewals, but it was
    successful for a number of years because HUD was able to recapture
    previously appropriated funds remaining in HAP contracts that were
    about to expire. When most of the 20-year contracts expired around 2001
    and 2002, the availability of recaptured funds diminished. HUD's need
    for increased funding for section 8 renewals should have been reflected
    in its budget proposals around that time, but again HUD chose to mask
    the true costs.
        To enable the renewal of contracts without sufficient
    appropriations, HUD chose to renew the HAP contracts with less than 1
    year of funding. For example, if a contract expired in December 2005,
    HUD would provide 9 months of funding until September 30 (the end of
    the fiscal year) instead of providing the full 12 months of funding up
    front. Essentially, it was bifurcating the 12 months of funding over 2
    fiscal years. In this example the remaining funding for the contract
    would have been provided after October 1 (the new fiscal year) at which
    time 3 months of funding would be added to the contract for a total of
    12 months. Until last year, this practice was invisible to the owners.
    However, in the fall of 2006, HUD's Chief Financial Officer (CFO)
    determined that such partial funding of contracts could not continue as
    the CFO believed this approach to be a violation of the Antideficiency
    Act (ADA), a law that is intended to ensure that appropriated funds are
    not mishandled. This new interpretation of the law by the CFO (which,
    incidentally, was not put into writing until requested by Members of
    Congress more than a year later) resulted in HUD reverting to funding
    renewals for the full 12 months in advance and not in increments.
        Because the HUD fiscal year 2007 budget request was based on its
    previous practice of partially funding contracts, there were
    insufficient funds appropriated by Congress, thus creating a large
    shortfall. The result of the shortfall was a delay in funding to
    thousands of section 8 properties. When HUD realized in May 2007 that
    it would not have sufficient funding to renew all of the contracts
    expiring in fiscal year 2007, HUD's Office of Housing eventually
    reached a compromise with its CFO office to revert to partial or
    incremental funding of renewal contracts as long as the renewal HAP
    contract was amended to reflect the fact that partial (and not 12-
    month) funding was being provided at the time the renewal contract is
    executed. In other words, if HUD disclosed to the owner that only
    partial funding was being provided, the CFO deemed that HUD was not in
    violation of the ADA.
        HUD's policy of incrementally funding (or funding for less than 12
    months) continues in the current fiscal year (fiscal year 2008) because
    of insufficient appropriations. Further, the President's fiscal year
    2009 request does not include sufficient monies to put section 8
    contract renewals back on a 12-month funding track. Insufficient
    funding coupled with HUD's inefficient payment process and questionable
    disbursement systems is likely to create financial disruptions to
    section 8 properties for the foreseeable future.
        The perception a partially-funded contract creates is devastating.
    It is of a government struggling to keep its financial house in order.
    Until recently, several years of predictability and stability in the
    section 8 renewal process have led purchasers, lenders and investors in
    section 8 properties to rely on long-term section 8 renewal contracts,
    even though they are subject to annual appropriations, as sufficient
    backing for their investment. They assumed the appropriations risk in
    these contracts because they thought the risk was minuscule. They are
    not so sure anymore.
        There are other more technical, but serious, concerns with short
    funding commitments. These contracts purport to bind an owner to
    providing section 8 housing for 1 year. If HUD funding stops after 4
    months, is the owner bound to continue to comply with section 8 rent
    and other rules without receiving assistance payments? If the owner can
    get out of the contract will it be bound by the 1-year tenant notice
    statute, which will prevent the owner from raising rents for 1 year
    after an opt-out notice to the tenants? Will the tenants be eligible
    for enhanced vouchers if the contract is abrogated? Will HUD wait until
    the 1-year notice period has elapsed before awarding enhanced vouchers
    to the tenants, as has been its recent policy? Will there be sufficient
    funding for all enhanced vouchers?
        All of these concerns will influence an owner's decision to remain
    in the program or to opt out, as well as decisions about whether to
    purchase and rehabilitate section 8 projects. At a minimum, owners will
    more likely give routine notices to tenants that they intend not to
    renew a section 8 contract, in order to reduce their exposure period
    during which they do not receive assistance payments but cannot raise
    rents. These opt-out notices will cause anxiety among tenants who will
    be placed in a continual state of uncertainty as to whether they will
    lose their homes or not.
        Unless the industry has confidence that the Government is committed
    to adequate and timely funding, the section 8 inventory is likely to
    shrink in size. Nor will it get the new investment needed to preserve
    these properties as affordable housing and to keep them affordable far
    into the future.
        What can this committee do to help rectify the damage done to the
    section 8 inventory? First, it can exercise close oversight over the
    process HUD uses to make section 8 assistance payments, as well as how
    budgetary needs are calculated. The Secretary should be directed to use
    a portion of the appropriated working capital funds for this purpose.
    Second, legislation should be enacted to: impose a penalty on HUD when
    its payments are more than 30 days late; remove any requirements that
    owners receive HUD permission to use reserves to pay their mortgages
    and employees when HAP payments are late; and require HUD to notify
    owners when late payments are anticipated. Third, the committee should
    urge that sufficient appropriations be provided for fiscal year 2009 to
    avert the use of a succession of short-term funding obligations by HUD.

                            HOUSING CHOICE VOUCHERS

        We would also like to express our strong support for the section 8
    Voucher Program. Housing Choice Vouchers enable nearly 2 million
    households of low- and very-low-income families and the elderly to
    achieve decent, safe and affordable housing. The program has been
    successful because it provides choice to families, allowing them to
    rent decent and safe apartments in the communities that are near their
    schools, churches and workplaces. It also has the benefit of reducing
    the concentration of poverty. Vouchers also enable the private sector
    to partner with housing agencies to improve the housing stock in
    communities as well as protect tenants during market rate conversions.
    Vouchers are an essential tool for the provision of housing assistance
    and are supported by the owner community. Related Management is a
    strong supporter of this program and currently leases to 1,600 voucher
    holders.
        We are concerned about the future of the program because HUD's
    budget proposes to reduce funding for the voucher program by nearly
    $500 million, offsetting the reduction by relying on unused reserves, a
    move that the Center on Budget and Policy Priorities (CBPP) believes
    will result in the loss of at least 100,000 vouchers. Further, the
    proposed budget recommends using a funding formula that would base
    fiscal year 2009 funding on the costs per voucher (plus inflation) from
    fiscal year 2007 instead of the previous 12 months. This is
    unacceptable to our members because such an approach will result in
    additional shortfalls, jeopardizing housing assistance currently in use
    by tens of thousands of low-income families. It is imperative that the
    2009 funding cycle be based on leasing and cost data for the most
    recent Federal fiscal year as provided for fiscal year 2008 by the
    Omnibus Appropriations Act (H.R. 2764) that President Bush signed into
    law on December 26, 2007. This is a fair formula that maximizes the
    amount of dollars provided by the appropriations process and ensures
    program stability.

                      THE BROADER NATIONAL HOUSING CRISIS

        The current situation in the for-sale housing market is an
    unfortunate turn of events that is made even more unfortunate by the
    fact that it was completely foreseeable and preventable. For decades
    the Government has pursued a ``homeownership at any cost'' housing
    policy. Many Government officials, like other participants in the
    housing sector, mistakenly assumed that house prices would always go
    up. So they enticed people into houses they could not afford, and they
    forgot the rarely spoken truth that there is such a thing as too much
    homeownership.
        Now we are seeing the consequences of that misguided policy. For
    years, we and others have been predicting this meltdown. We have been
    warning policymakers that pushing homeownership so aggressively could
    be disastrous not only for the hard-working Americans lured into
    unsustainable homeownership, but also for our local communities and our
    national economy.
        That is exactly what is happening now. People are losing their
    homes, local communities are struggling with blight and crime, and our
    national economic growth is at risk. We understand that policymakers
    are worried that this situation might spill over into the broader
    economy, and we support efforts to help our country avoid a housing-
    induced recession.
        The mortgage market meltdown represents a failure of Government
    oversight and regulation. Despite repeated warnings, nothing was done
    to prevent it. On the contrary, the Federal Government gave a ``green
    light'' to this bubble by trying to push homeownership without limits
    and even trying to create a federally insured no-downpayment mortgage.
        Unfortunately, while there was much the Government could have done
    to prevent this crisis, there isn't much it can reasonably do now to
    alleviate it. What it can do, however, is recognize its own mistakes
    and ensure that this doesn't happen again. And that means, among other
    things, recognizing that homeownership isn't the right housing choice
    for all households at all points in their lives. Housing our diverse
    Nation well means having a vibrant rental market along with a
    functioning ownership market. It's time we adopt a balanced housing
    policy that doesn't measure success solely by how much homeownership
    there is.

                                   CONCLUSION

       I thank you for the opportunity to testify on behalf of the
    National Leased Housing Association, the National Multi Housing Council
    and the National Apartment Association, and wish to offer our
    assistance to the committee as you continue your important work.

      SOME IMPLICATIONS OF INADEQUATE FUNDING OF PROJECT-BASED SECTION 8
                                   CONTRACTS

    NLHA
        If Congress fails to appropriate sufficient funds for fiscal year
    2008 to make all contractual section 8 payments, in original and
    renewal contracts, this failure will be regarded by participants in the
    section 8 program, other housing programs, other Federal programs, and
    the capital markets as a default by the United States in its perceived
    moral obligation. The section 8 contract has already been devalued even
    without a default by sustained talk of inadequate funds, widespread
    late payments in 2007, and the inability of HUD to provide 1-year
    extension contracts because of insufficient funds. A quick and decisive
    fix may salvage some of the damage.
        The following are several specific adverse consequences:
      --Lenders will be less willing to make long-term loans for
            refinancings or purchases of section 8 projects, transactions
            that help in the rehabilitation and preservation of the
            projects.
      --Investors and syndicators will be less willing to purchase low-
            income housing tax credits, which are key to the sale and
            rehabilitation of those projects.
      --To the extent the above players continue to participate, it will be
            on more onerous terms and with a more rigorous selection
            process to assist only projects that would be viable if section
            8 payments terminated.
      --Owners who economically can opt out of the section 8 program will
            plan to do so and will do so at the first opportunity.
      --Owners can also stop providing section 8 housing even prior to
            contract expiration if HUD fails to provide assistance
            payments.
      --Tenants will become anxious about the potential loss of their
            subsidy and homes. The elderly are particularly susceptible to
            those concerns. Some will move out and live with their
            families, thus losing their eligibility for tenant protection
            vouchers when an owner opts out.
      --Owners will select the highest-income tenants they legally can
            select in order to mitigate the impact of missed or reduced
            assistance payments.
      --The cost of enhanced vouchers and other tenant protection vouchers
            will soar, or, alternatively, all tenants will not be protected
            if there is an opt-out.
      --There may be an increase in defaults on FHA-insured mortgages
            covering section 8 projects.
      --Affordability use restrictions for projects that have been
            restructured in the mark-to-market program, which run 30 years,
            would be converted to permit higher-income tenants to be
            served.
      --Fifty-year affordability use restrictions for LIHPRH projects and
            existing use restrictions for ELIPHA projects would be
            terminated and the projects rented to market tenants if HUD
            cannot provide all the contractual section 8 payments.
      --For those projects remaining in the program, there will be an
            increase in deferred maintenance, depletion of replacement
            reserves, and little likelihood of obtaining tax credits for
            rehabilitation.
      --Prices realized by HUD in selling foreclosed properties with
            section 8 subsidies would decline.
      --If Congress authorizes the conversion of rent supplement and RAP
            contracts to section 8, there will be few takers.
      --Participation and continued participation in other housing programs
            involving multi-year subsidies, such as project-based vouchers,
            tenant-based vouchers, and participation in the 202/811
            programs would decline, or the quality of participants would
            decline.
      --The lack of sufficient section 8 funds will also thwart the
            refinancing of older section 202 projects for the elderly and
            disabled that have section 8 subsidies. Many of these projects
            are 20 to 30 years old and can be preserved for another long
            period with recapitalization and rehabilitation, but lenders
            and investors would be wary of participating.
      --The ability of public housing agencies (PHA) to borrow funds for
            capital improvements, secured by future appropriations to the
            capital fund, would be made more difficult and costly.
      --Participation in non-housing Federal programs, dependant on ongoing
            Federal subsidies, would be compromised if participants felt
            the United States defaulted in the major section 8 program.
      --There are broader implications in the capital markets. A default by
            the United States in any area could send further shock waves to
            the already shocked markets. Would this be the end of the
            perceived Federal backing of Fannie Mae and Freddie Mac
            obligations, and if so, would that increase borrowing costs for
            home purchases and refinancing? Would the hint of default by
            the United States raise borrowing costs for Treasury?

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Murray. At this time, if the members have any
    additional questions, please submit them for inclusion in 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 Richard J. Durbin

                          HOUSING DISCRIMINATION STUDY

        Question. Historically, how has HUD funded the Housing
    Discrimination Study? Why is HUD requesting funding for the HDS through
    the Fair Housing Initiatives Program account?
        Answer. Congress has appropriated the funding under the Fair
    Housing Initiatives Program (FHIP) to support its housing
    discrimination studies. Beginning in fiscal year 1999, Congress gave
    HUD the authority to use the FHIP budget to support these studies. To
    date, HUD has issued three decennial housing discrimination studies.
    The first in 1977 was funded through non-FHEO program funds.
        However, the Housing Discrimination Study (HDS) 2000 study, as
    appropriated by Congress, was funded through FHIP. Specifically, $7.5
    million, $6.0 million, and $7.5 million were appropriated in HUD's
    fiscal years 1999, 2000 and 2001, budgets respectively. Consistent with
    the 2000 study, in fiscal year 2009 HUD continues to use this funding
    methodology in requesting funds for the 2010 HDS study.
        HDS is a tool that HUD uses to make or change fair housing policy
    by providing evidence of housing discrimination in America through a
    comprehensive research approach that includes using standard testing
    methods. HDS data helps HUD understand the nature of housing
    discrimination and the extent of the problem, as well as to identify
    the groups that are more impacted by acts of housing discrimination.
    This data helps HUD in determining the most effective strategies in
    meeting its fair housing mission. HUD has used the results of the
    housing discrimination studies to design new education and outreach
    initiatives and in making decisions for fair housing with most
    activities funded with FHIP resources.

                                  FHIP GRANTS

        Question. Last year, how many private fair housing groups applied
    for FHIP grants, how many received grant funding, and how many were
    denied? Of those that were denied, what were the reasons for denial?
        Answer. In fiscal year 2007, HUD made $18.1 million available under
    the Fair Housing Initiatives Program (FHIP) Notice of Funding
    Availability (NOFA). This funding was divided between two initiatives:
    the Education and Outreach Initiative (EOI) and the Private Enforcement
    Initiative (PEI). This broke down as $4.1 million for EOI and $14
    million for PEI.
        EOI provides funding for education and outreach programs to inform
    the public about their rights and responsibilities under the Fair
    Housing Act. HUD awarded the $4.1 million under EOI to 32 groups out of
    127 groups who applied for grants under EOI. Of the 95 groups who did
    not receive awards, 4 were ineligible for various reasons, and 36 had
    scores below the threshold minimum established by the Office of
    Management and Budget (OMB). The remaining 55 groups had qualifying
    scores but did not receive funding either because their score was not
    competitive enough for funding or because a higher scoring group in the
    same geographic area received funding.
        In order to achieve the broadest geographic scope with the
    Department's education and outreach funding, the Department took into
    consideration not only the applicant's scores, but also where the
    applicant was located. This funding strategy allowed HUD to make EOI
    awards in 32 different States.
        In addition, the Department awarded $1 million for a national
    education and outreach campaign on lending discrimination, which will
    reach approximately 100 million people throughout the country. The Ad
    Council reported that one-quarter of the public viewed one of the
    Department's previous public service announcements.
        PEI supports the investigation and resolution of housing
    discrimination allegations handled by private fair housing
    organizations. These organizations conduct testing where discrimination
    is suspected and assist the public in resolving complaints through
    informal means. When necessary these groups file complaints with HUD
    and in Federal court on behalf of victims of discrimination.
        In fiscal year 2005, at the urging of several fair housing
    organizations, including the National Fair Housing Alliance, HUD added
    the Performance-based Component to PEI. Performance-based funding
    provides 3-year grants to top-performing enforcement organizations.
    These organizations must have exceptional experience and excellent
    performance reviews. The multiple-year funding encourages them to take
    on larger cases of housing discrimination and allows for better
    strategic planning by the organizations.
        Funds to performance-based groups now account for 73 percent of PEI
    funding. In fiscal year 2007, of the $14 million awarded under PEI, the
    Department first had to reserve $6.5 million for 25 top-performing
    groups who received a performance-based grant in fiscal years 2005 and
    2006. That left $7.4 million to be awarded in new grants under PEI. The
    Department received 101 applications for this PEI funding. Of these 101
    applicants, 30 were ineligible, and 18 had scores below minimum
    threshold level established by OMB. Of the remaining 53 applicants
    qualified for the PEI funding available in 2007, 14 groups received
    their first year allocation of performance-based funding, and an
    additional 16 organizations received general PEI grants.
        The 2007 PEI grants support fair housing enforcement in 25 States.
    This includes four States where there is no substantially equivalent
    State or local fair housing law---Nevada, Alabama, Mississippi, and
    Wisconsin.
        In addition to enforcement efforts, all PEI recipients are required
    to use 10 percent of their funding for education and outreach efforts.
    This leverages an additional $1.4 million in education and outreach
    dollars on top of the $4.1 million the Department has already awarded
    under EOI. Education and outreach by PEI groups is particularly
    effective, because information about fair housing rights is provided by
    the local group that someone can turn to if those rights are violated.

                                  FHIP FUNDING

        Question. Why has HUD requested less funding for FHIP in fiscal
    year 2009 compared to the fiscal year 1994 funding level, even as
    housing discrimination persists in this country? Please explain the
    reasons for this diminished request and how HUD can expect to fulfill
    the promise of the Fair Housing Act in light of the fact that the
    number of complaints filed with HUD and its fair housing partners is
    less than 1 percent of total fair housing violations; a HUD study shows
    that knowledge of fair housing laws has not improved and is critical to
    pursuing alleged violations; HUD is unable to fund private fair housing
    centers who score highly on the agency's own performance scale; and the
    predatory lending practices highlighted by the recent mortgage crisis
    disproportionately victimize racial minorities, a class protected under
    the Fair Housing Act.
        Answer. For fiscal year 2009, HUD requested $26 million for Fair
    Housing Initiatives Program (FHIP). In fiscal year 2009, $19.2 million
    of this funding will be made available to fair housing organizations
    through competition, with $6 million going to a study the Nation
    conducts every decade to measure the level of housing discrimination.
    All these funds go either directly to enforcement of the Fair Housing
    Act, education of the public regarding their rights and
    responsibilities under the Act, or research that will help best target
    these funds in the future. Moreover, the 2010 Housing Discrimination
    Study (HDS) will enlist and compensate private fair housing
    organizations in conducting the proposed research. In the study
    conducted in 2000, private fair housing groups received approximately
    68 percent of the funding set aside for the study. The Department
    expects the same with the 2010 study. Therefore, the study would
    provide an estimated $4.08 million to fair housing groups, in addition
    to the $19.2 million directly allocated to the groups.
        HUD does not believe its fiscal year 2009 FHIP budget of $26
    million is an inappreciable amount. The requested amount is
    appropriately balanced to workload needs and continuing and evolving
    fair housing efforts. We also do not think one can make an appropriate
    comparison between this year's FHIP budget and one from 1994. First,
    the funding amounts are roughly the same, and second, the overall
    amount to fair housing organizations will likely exceed the 1994 level,
    given the additional amount provided through research testing for HDS
    2010.
        Though housing discrimination continues to persist, the
    Department's studies show that HUD, State, and local agencies, and the
    private fair housing advocacy community, have also done a lot to
    address the problem. HUD's HDS from 2000 shows that the overall level
    of discrimination that African-Americans and Hispanics face has
    declined from 1989 as a result of these efforts. Nevertheless, the
    Department each year requests a budget that allows HUD, State and local
    agencies, and private fair housing groups to tackle the evolving
    problem and the new forms such discrimination takes. The fiscal year
    2009 budget, we believe, will meet this challenge.
        In addition to the support HUD's annual budget provides for the
    short-term needs of fair housing groups, this budget also sustains the
    long-term needs of existing groups through its Performance-Based
    Component. Private fair housing groups, including the National Fair
    Housing Alliance, advocated for this component, and HUD began funding
    it in fiscal year 2005. In fiscal year 2007, this funding now accounted
    for 73 percent of FHIP's $1.4 million enforcement budget, providing the
    top-performing groups with 3 years of funding. This allows for broader
    testing and more systemic investigations by these groups.
        FHIP's enforcement budget promotes the activities of the private
    groups, assists them in bringing in more allegations, and expands fair
    housing outreach by requiring that enforcement grantees spend 10
    percent of their grant on education activities. In fiscal year 2007,
    this means that the groups will expend approximately $1.4 million
    marketing their services and educating the housing industry. These
    leveraged funds add to the $4.1 million in the budget allocated
    strictly for education and outreach grants.
        State and local agencies in the Department's Fair Housing
    Assistance Program (FHAP) are also an integral part in the Nation's
    fulfillment of its fair housing objectives. These agencies handle
    approximately 75 percent of the complaints filed in the United States.
    For fiscal year 2009, HUD has requested $25 million to support fair
    housing investigations and education by its State and local partners.
    This funding is tied largely to the complaints these groups receive
    each year. As complaints to these agencies have increased, the
    Department has had to increase the amount budgeted for these
    organizations in order to keep pace.
        In fiscal year 2008, HUD and State and local FHAP agencies received
    more than 10,000 complaints under the Fair Housing Act or a
    substantially equivalent State or local law. In almost one-third of the
    complaints, whether at HUD, or at one of the 108 State and local
    agencies, the agency obtains a positive result for the complainant,
    either through a finding of discrimination or resolution between the
    parties. In 2007, conciliation agreements and settlements provided more
    than $4.76 million in monetary relief to victims of discrimination.
    This is addition to other relief that agencies obtain for the
    complainant, such as providing the victim with the desired unit or
    accommodation, a reduction in the amount of rent or in the interest
    rate on loans, and retrofits that make a property accessible to persons
    with disabilities.
        In addition to individual complaints, HUD has stepped up its use of
    Secretary-initiated enforcement in its efforts to proactively address
    and eliminate housing discrimination. This means if only a small share
    of the public is filing complaints, the Department is not waiting to
    receive a formal housing discrimination complaints but is vigorously
    pursuing cases where there is reason to believe that a person or entity
    has committed a discriminatory act. In fiscal year 2007, HUD filed 16
    Secretary-initiated investigations or complaints. These addressed a
    variety of issues including widespread race discrimination in the New
    York rental market; housing providers who excluded families with
    children; discrimination against African-American and Hispanic mortgage
    applicants; and religious discrimination among real estate agents. The
    Department has filed 4 Secretary-initiated complaints or investigations
    in fiscal year 2008.
        To further the Department's mission of ensuring fair housing, HUD
    has taken a number of strategic initiatives to enhance fair housing
    enforcement including creating a lending division to conduct fair
    lending investigations. The division initiates investigations when
    lending patterns or other information suggests discrimination by a
    lender, but no individual has come forward to file a complaint. In
    addition, the Department has reassigned to the division HUD's fair
    lending oversight of Fannie Mae and Freddie Mac to ensure their
    underwriting policies and practices comply with fair lending laws. The
    Department is pursuing six nationwide Secretary-initiated
    investigations into independent mortgage companies for discrimination
    based on race or national origin in the making of loans, the pricing of
    loans, and for policies that have a discriminatory effect.

                               FAIR HOUSING LAWS

        Question. How does HUD plan to increase public awareness of
    existing fair housing laws?
        Answer. As explained in more detail below, HUD uses an array of
    strategies, including print (e.g. posters, pamphlets and brochures) and
    electronic media (e.g., internet, television, radio), advertisements in
    movie theaters, on buses, taxis, public buildings, and meetings,
    conferences, seminars, etc., to increase public awareness of the Fair
    Housing Act. In fiscal year 2007, HUD, with its Fair Housing
    Initiatives Program (FHIP) and Fair Housing Assistance Program (FHAP)
    partners, conducted fair housing education and outreach programs and
    activities that reached approximately 50 million people, which is about
    16 percent of the population of the United States. Going forward, HUD
    will continue to use these and other methods to promote its fair
    housing mission.
      --National Slogan.--HUD started to consistently use the slogan,
            ``Fair Housing It's Not an Option, It's the Law,'' in fiscal
            year 2006. We determined that mixed messages and multiple
            slogans confused the general public. Therefore, HUD has
            utilized the same slogan in fiscal years 2007 and 2008 and will
            continue to use it in fiscal year 2009.
      --Fair Housing Initiatives Program (FHIP)--Education and Outreach
            Initiative (EOI).--The FHIP was created under the Housing and
            Community Development Act of 1987. One of the goals of the FHIP
            is to educate the public and the housing industry on their
            rights and responsibilities under the Fair Housing Act. Each
            year since 1987, HUD has awarded funds to fair housing
            organizations under EOI to meet this goal. In fiscal year 2007,
            approximately $2.6 million was awarded to 32 fair housing
            organizations to conduct fair housing education and outreach
            programs and activities. In the fiscal year 2008 HUD budget,
            Congress appropriated $24 million for the Fair Housing
            Initiatives Program. For the EOI Awards, $2.8 million has been
            set aside for EOI awards. In addition, Private Enforcement
            Initiative-General Component ($19 million) has a requirement
            that 10 percent of the funds, about $1.9 million, be used for
            education and outreach activities. HUD has requested additional
            funds for FHIP in fiscal year 2009.
      --National Media Campaign.--In April 2002, HUD released a study of
            fair housing laws, ``How Much Do We Know?'' The report gauged
            what the public knew about fair housing laws. The Study found
            general awareness, with one-half of the public able to
            correctly identify six or more of the eight scenarios that
            described illegal conduct. However, while many persons were
            conscious of fair housing protections, 83 percent did nothing
            about it when confronted with an act of housing discrimination.
            Following this awareness study, HUD, in fiscal year 2003,
            developed a national media campaign to educate the public on
            fair housing. Since 2003, HUD has awarded funds for a national
            media campaign. We believe that a national media campaign is an
            effective mean of promoting the fair housing because it
            provides a consistent message and it provides information to
            the entire country. Our national campaigns have been
            particularly effective. For example:
        --In fiscal year 2006, HUD launched a national campaign to inform
                individuals who were displaced by Hurricanes Katrina and
                Rita of their fair housing rights and how to file housing
                discrimination complaints. The message of the public
                service announcement (PSA) was, ``the storm isn't over.''
                This PSA encouraged hurricane evacuees and other members of
                the public to call HUD's housing discrimination hotline if
                they suspected they had been denied housing for
                discriminatory reasons.
        --In fiscal year 2007, HUD awarded a grant to Pacific News Service,
                a not-for-profit organization with specialization in radio,
                television, and print media for minority and ethnic
                populations, to provide an education and outreach program
                on fair lending, to education the public of the fair
                lending requirements of the Fair Housing Act. Pacific News
                Service partnered with the National Community Reinvestment
                Coalition (NCRC), a Fair Housing Initiatives Program
                recipient and a nationally recognized non-profit
                organization with expertise in fair lending issues. A PSA
                with actor Dennis Haysbert as the fair lending
                spokesperson, has been distributed to all HUD Fair Housing
                Assistance Program and Fair Housing Initiatives Program
                partners and to approximately 1,800 national cable and
                commercial television networks for airing. The PSA is
                available in both English and Spanish and it is closed
                caption. Additionally, fair lending posters have been
                produced in English, Spanish, Russian, Arabic, Chinese,
                Vietnamese, and Korean. The posters have been distributed
                to our Fair Housing Initiatives Program and Fair Housing
                Assistance Program partners. They will also be available
                through HUD/Fair Lending Web site.
        --In association with the fair lending media campaign, NCRC will
                conduct 12 fair lending forums in the following cities:
                Atlanta, Georgia; Boston, Massachusetts; Charlotte, North
                Carolina; Chicago, Illinois; Columbus, Ohio; Denver,
                Colorado; El Paso, Texas; Fresno, California; Philadelphia,
                Pennsylvania; Washington, DC; Cleveland, Ohio; and Detroit,
                Michigan. These 12 cities were selected because they were
                identified as cities with high foreclosure rates. The first
                forum begins in Atlanta, GA, on May 17, and the last 1
                forum is scheduled for Detroit, MI, on September 20. We
                estimate that the lending forums will reach approximately
                6,000 households and will result in an increase of public
                knowledge on the fair lending requirements of the Fair
                Housing Act, how to avoid predatory loans, and what options
                are available to homeowners facing foreclosures. In
                addition to the NCRC staff, the forums will feature HUD
                staff, and HUD approved HUD housing counseling agencies.
        --In fiscal year 2008, HUD designated $1 million of the Fair
                Housing Initiatives Program appropriation for a national
                media campaign. The funds will be awarded through the FHIP
                NOFA again to address discriminatory and predatory lending.
                Consistent with is strategies since 2003, HUD, in its
                fiscal year 2009 proposed budget, requested $1 million for
                a national media campaign.
      --Media Activities.--In fiscal year 2007, as detailed in HUD's fiscal
            year 2007 Fair Housing Annual Report to Congress, HUD undertook
            the following media activities to increase the public's
            knowledge of fair housing laws:
        --From April 6, through 12, 2007 and October 26, through November
                2, 2007, HUD sponsored two fair housing advertisements that
                appeared in over 100 movie theaters, on more than 1,000
                screens throughout the country. HUD spent approximately
                $17,000 in its movie theater advertisements that reached
                approximately 1.5 million movie goers. This is at a cost of
                about $0.011 per person. This marketing technique is a cost
                effective method of informing the public about the Fair
                Housing Act and HUD's toll free numbers. During June 2008,
                HUD will place the lending PSA, described above, in movie
                theaters across the Nation. Because HUD believes the use of
                the movie theaters is a cost effective method to reach
                large number of people, it will continue to utilize this
                source of marketing during fiscal year 2009.
        --Samples of news articles and interviews follow:
                      As a result of HUD's outreach efforts, the April 15,
                    2007, issue of Parade magazine contained an article on
                    fair housing. The article advised readers that housing
                    discrimination is illegal and provided several examples
                    of unlawful discrimination, such as charging higher
                    rent to tenants based on race or religion or refusing
                    to accept families with children. The article also
                    provided HUD's housing discrimination hotline, 1-800-
                    669-9777. Parade has a circulation of more than 35.5
                    million.
                      On September 28, 2007, Gannett News Service ran a
                    featured article on fair housing. USA Today had
                    multiple stories, including a prominent main story that
                    included quotes from Assistant Secretary Kim Kendrick.
                    The story was largely about HUD's education and
                    outreach efforts led to increased fair housing
                    complaints. The estimated circulation for Gannett
                    Newspapers is 7.2 million readers. For complete details
                    on the Gannett News Service on ``Closed Doors: Housing
                    Discrimination Complaints on the rise across the
                    country,'' please go to: http://gns.gannettonline.com/
                    apps/pbcs.dll/section?Category=HOUSING
                      On July 16, 2007, Assistant Secretary Kim Kendrick
                    was featured on ``The Federal News Drive'' with Mike
                    Causey and Jane Norris on Federal News Radio. Ms.
                    Kendrick discussed the fair lending provisions of the
                    Fair Housing Act.
                      On February 17, 2007, the CNN program Open House
                    aired a segment on housing discrimination. The segment
                    featured an interview with Nannatte Bishop, an African-
                    American woman who filed a complaint with HUD alleging
                    that Fifth Third Bank denied her application for
                    mortgage loan because of her race. Approximately
                    665,000 viewers watched this episode.
                      On a monthly basis, starting with the June 2006
                    through June 2007, Essence Magazine featured an article
                    on 12 steps of the home buying process. Assistant
                    Secretary Kim Kendrick served as one of 12 members of
                    an advisory board throughout the 12 steps. The name of
                    the Office of Fair Housing and Equal Opportunity
                    appeared in all 12 issues of Essence. Assistant
                    Secretary Kendrick was featured in three steps. For
                    instance, Step 3: Learn About the Mortgage Industry,
                    included information on the home buying process and
                    five ways individuals can protect themselves from
                    unfair lending practices and predatory lenders. On a
                    monthly basis, Assistant Secretary Kendrick provided
                    guidance to each of the three families. Essence has a
                    monthly circulation of approximately 1,066,000.
        --One way to raise public awareness of fair housing laws is for HUD
                to publicize cases that result in significant housing or
                monetary relief on its Web site and through press releases.
                By publicly announcing all of its charges and major
                conciliations, we hope to re-enforce the public's trust of
                HUD's fair housing enforcement mission. FHEO's Web site
                statistics show that it receives from 4,000 to 20,000 hits
                per day.
        --Letters to the editors from Assistant Secretary Kendrick appeared
                in the Sunday Los Angeles Times (approximately 1.2 million
                readers) and Times Picayune (approximately 262,000
                readers).
        --Fair Housing Op-Ed. During April 2007, an op-ed piece written by
                HUD appeared in four African-American newspapers. The op-ed
                appeared in the Pittsburgh Courier, Dallas Examiner,
                Louisville Defender, and East of the River newspaper, which
                together reach more than 60,000 readers.
        --Assistant Secretary Kim Kendrick appeared in an article in the
                Federal Times which has an estimated circulation of 38,000.
                In the article, Assistant Secretary Kendrick discussed her
                role as the Administration's top enforcer of the Federal
                fair housing laws.
      --Fair Housing Month--2007, 2008, and 2009.--During the April 2007
            Fair Housing Month, HUD and its FHIP and FHAP partners
            sponsored and participated in over 250 events. Many of these
            events will be duplicated in fiscal year 2008 and fiscal year
            2009. Some of the more innovative events include:
        --Charleston Human Rights Commission and the Huntington Human
                Relations Commission--both FHAP funded agencies--erected
                several Fair Housing Month billboards in their cities.
                Also, the Charleston, WV, Human Rights Commission placed
                advertisements on the tops of taxi cabs to raise awareness
                of fair housing. It is estimated that approximately 51,000
                people may have seen these taxi advertisements.
        --For the second year in a row, Philadelphia skyline was lit by
                HUD's Fair Housing Month slogan as it scrolled around the
                top of the 28-story building of the Philadelphia Energy
                Company (PECO). PECO displayed the slogan on the evenings
                of April 13, 14, 15, and 16. In bright letters that are 38
                feet high, Fair Housing: It's Not an Option; It's the Law
                is scrolled around all four sides of the downtown
                skyscraper.
        --During the Fair Housing Month 2007, the LA Times and San Diego
                Union Tribune each ran fair housing ads four different
                times in their newspapers. Displaying HUD's Fair Housing
                message, ``Fair Housing: It's Not an Option; It's the Law''
                for free.
        Additional information about HUD's 2007 Fair Housing Month events
    may be found on the following website: http://www.hud.gov/offices/fheo/
    FHMonth/2007FHM-Events.pdf
      --Disaster Response.--HUD strongly believes that it has a
            responsibility to ensure that persons affected by disaster are
            not victimized when searching for a new place to call home. As
            a measure of prevention and pro-action, FHEO collaborated with
            a group of Fair Housing Assistance Program (FHAP) and Fair
            Housing Initiative Program (FHIP) agencies and other fair
            housing professionals to develop a fair housing toolkit for
            emergency preparedness. Toward this end, FHEO engaged Emergency
            Management and Special Needs Consultants to facilitate
            roundtable discussions to define the role of fair housing in
            disaster preparedness planning identify the challenges that
            fair housing professionals face in responding to disaster
            situations, develop disaster-related education and outreach
            initiatives, develop communication strategies, and coordinate
            enforcement efforts. The final result was a ``Fair Housing
            Disaster Toolkit for Emergency Preparedness'' for fair housing
            professionals. The toolkit was issued in July 2007 and was
            distributed to over 800 participants of HUD's 2006 National
            Fair Housing Policy Conference. A copy of the toolkit continues
            to be available through the following website: http://
            www.hud.gov/offices/fheo/library/FHEO-DisasterToolkit.pdf
      --Fair Housing Exhibit Booth.--The purpose of the Fair Housing
            Exhibit Booth is to provide fair housing information to the
            general public, housing, real estate, lending, insurance, and
            civil rights professionals at their national conferences and
            meetings. In fiscal year 2007, HUD operated the Fair Housing
            Exhibit Booth at 12 events throughout the country, including
            national conferences held by the National Association for the
            Advancement of Colored People, the National Association of Home
            Builders, the National Council of La Raza, the National Bar
            Association, National Black Family Reunion, and the
            Congressional Black Caucus. It is estimated that approximately
            500,000 people were reached through HUD's Fair Housing Exhibit
            Booth.
      --Participation in Conferences and Events.--Another way that HUD
            increases the public's awareness of the Fair Housing Act is by
            participating in conferences and other events held by HUD
            offices, housing industry groups, and fair housing groups
            throughout the Nation. For example, during fiscal year 2007,
            staff has participated in the following conferences:
        --Education Conference and Lone Star Expo sponsored by the Texas
                Apartment Association in Houston, TX;
        --National Community Reinvestment Coalition Conference, Washington,
                DC;
        --Housing and Development Law Institute's Conference, Washington,
                DC; and
        --National Coalition for Asian and Pacific Americans Community
                Development Conference, Honolulu, HI.
        Just recently, from April 8, through 11, 2008, HUD held its 2008
    National Fair Housing Policy Conference in Atlanta, GA, to commemorate
    the 40th anniversary of the Fair Housing Act. Approximately 1,000
    people attended the Conference. The next national fair housing policy
    conference will be held in June 2010.
      --Accessibility First.--In January 2003, HUD launched Fair Housing
            Accessibility FIRST, a FHIP-funded program that provides
            training and technical assistance on the Fair Housing Act's
            accessibility requirements to architects, builders, developers,
            and other others involved in the design and construction of
            multifamily housing. Approximately 7,500 people have attended
            the training since 2003. In fiscal year 2007, when asked the
            number of multifamily housing units on which the attendees were
            working, the attendees reported a total of 329,543 multifamily
            units in which they were assisting with the development,
            design, or construction. As a result of the training, we expect
            these units will be built in compliance with the accessibility
            standards of the Fair Housing Act.
      --40th Anniversary of the Fair Housing Act.--The Assistant Secretary
            and FHEO senior staff were interviewed CNN Radio, with over
            2,000 worldwide affiliates; CNN Espanol Radio (with over 9
            domestic and 20 internationals bureaus); NPR--All Things
            Considered (with 11 million listeners), and Fox News Atlanta.
            During the separate interviews, Assistant Secretary Kendrick
            and staff discussed the 40th anniversary of the Fair Housing
            Act and the Reverend Dr. Martin Luther King, Jr.'s dream of an
            ``open society.''
      --Fair Housing Education in America.--On April 16, 2008, HUD launched
            a new initiative, ``Fair Housing Education in America Day.''
            This national education project is designed for 4th through 6th
            grade students for them to hear from fair housing experts who
            present lessons on fair housing requirements. It gives
            teachers, parents, and their children a basic understanding of
            the Fair Housing Act. The goal of this initiative is to start
            the conversation about fair housing opportunities at a young
            age. It's critically important to teach future generations of
            renters and home buyers about their rights under fair housing
            laws. Over 50 schools nation wide registered to participate in
            this inaugural event. Additional information on Fair Housing
            Education in America Day may be obtained through the following
            website: http://www.hud.gov/offices/fheo/fheducationday.cfm. As
            this Initiative was successful, HUD plans to continue this
            Initiative on the 3rd Wednesday of April for fiscal years 2009
            and 2010.

                             HOUSING DISCRIMINATION

        Question. What concrete steps will HUD be taking to increase the
    percentage of persons who file complaints in response to the belief
    that they have been victims of housing discrimination?
        Answer. HUD's fair housing mission is to eradicate housing
    discrimination. HUD plays several roles in this mission: (1) to
    increase public awareness of the Fair Housing Act; (2) to educate
    housing providers on their rights and responsibilities under the Fair
    Housing Act to reduce the number of occurrences of housing
    discrimination; and (3) to enforce the provisions of the Fair Housing
    Act.
        HUD believes that persons cannot report housing discrimination
    unless they understand their fair housing rights and the recourse
    available to victims of discrimination. In order to increase the
    percentage of persons that report housing discrimination, HUD has
    engaged in media campaigns and other activities to raise public
    awareness of fair housing. These activities are described in the answer
    responding to Senator Durbin's question, ``How does HUD plan to
    increase public awareness of existing fair housing laws?''
        Moreover, HUD has conducted many of these activities in languages
    other than English in order to reach persons with limited English
    proficiency. For example, in fiscal year 2004, HUD, in conjunction with
    the Advertising Council, launched a fair housing education campaign
    through a series of public service announcements. This campaign
    consisted of two television advertisements, two radio advertisements
    and two print advertisements, in English and Spanish.
        Additionally, in fiscal year 2005, HUD produced five new fair
    housing radio advertisements. Two of these advertisements were in
    Spanish and two of these were in Cantonese, Hmong, Korean, and
    Vietnamese. Starting in fiscal year 2005, HUD also produced fair
    housing print advertisements in Arabic, Bengali, Cantonese, Hmong,
    Khmer, Korean, Punjabi, Thai, Urdu, and Vietnamese.
        Furthermore, HUD's 2005 Study--``Do We Know More Now?''--concludes
    that unless a person who has been discriminated against can see
    benefits in filing a complaint, he/she is unlikely to do so. Therefore,
    HUD makes a conscious effort to publicize the outcomes of its fair
    housing enforcement efforts to help encourage persons to report housing
    discrimination. HUD believes that publicizing the results of its
    enforcement efforts helps build public trust in its enforcement
    efforts, and, in turn, increases the likelihood that persons will
    report housing discrimination.
        In February 2007, the CNN program Open House aired a segment on
    housing discrimination. The segment featured an interview with
    Assistant Secretary Kim Kendrick and Nannatte Bishop, an African-
    American woman who filed a complaint with HUD alleging that Fifth Third
    Bank denied her application for mortgage loan because of her race. HUD
    negotiated a $125,000 settlement in this case. An estimated 665,000
    people may have viewed this broadcast.
        HUD is also building the public trust in its enforcement efforts by
    training the approximately 500 full-time investigators employed by the
    more than 100 State and local government agencies that are certified
    through its Fair Housing Assistance Program (FHAP). In fiscal year
    2004, HUD opened the National Fair Housing Training Academy (the
    Academy) to provide training and certification to ensure that FHAP and
    now HUD investigators have the necessary skills to conduct thorough and
    timely investigations.
        The Academy offers a 5-week program, which covers fair housing
    laws, investigative skills, negotiation skills, litigating fair housing
    cases, and many other topics. After completing the 5-week program, the
    investigators must pass a comprehensive examination in order to receive
    a certificate of completion from the Academy. At of the end of fiscal
    year 2007, a total of 174 investigators have completed the 5-week basic
    training course.
        However, HUD is not simply waiting for persons to file complaints.
    HUD has increased the use of its Secretary-initiated enforcement
    authority to eliminate discriminatory housing practices. Under the Fair
    Housing Amendments Act of 1988, the Secretary of HUD, in the public
    interest, has the authority to conduct an investigation and file a
    complaint when there is reason to believe that an alleged
    discriminatory housing practice has occurred or is about to occur, even
    when no aggrieved person has filed a complaint. HUD also uses its
    Secretary-initiated enforcement authority when it receives an
    individual complaint, but believes there may be additional victims of
    the discriminatory act or wants to obtain broader relief in the public
    interest.
        Secretary-initiated enforcement authority allows HUD to take
    proactive measures to eliminate housing discrimination and ensure equal
    housing opportunity. In fiscal year 2007, HUD filed 12 Secretary-
    initiated complaints and launched four additional Secretary-initiated
    investigations. These investigations include a complaint against a
    management company alleging that it refused to rent to African-
    Americans, a complaint against brokerage organizations alleging that
    they limited their membership on the basis of religion, and a complaint
    against housing providers alleging that they prohibited families with
    children.
        At the same time that HUD is increasing public awareness of the
    Fair Housing Act, HUD is taking steps to work with its housing industry
    members to reduce housing discrimination. For example:
      --In fiscal year 2000, HUD signed a memorandum of understanding (MOU)
            with the Department of Justice and the Department of the
            Treasury setting forth procedures each signatory agency would
            follow in reporting Fair Housing Act violations. The MOU also
            outlined options for fair housing education for those involved
            in the financing, construction, and operation of low-income
            housing tax credit properties. For example, to help ensure that
            residential rental housing built with low-income housing tax
            credit was accessible to persons with disabilities. Since the
            implementation of this MOU, HUD staff members have participated
            at numerous meetings of State housing finance agencies to
            educate them on the accessibility requirements of the Fair
            Housing Act. This MOU is still in effect.
      --In fiscal year 2003, HUD signed an MOU with representatives from
            the National Association of Realtors, the National Association
            of Real Estate Brokers, the National Association of Hispanic
            Real Estate Professionals, and the National Association of
            Asian American Real Estate Professionals to work together to
            increase minority homeownership and address housing
            discrimination. As part of the MOU, the real estate
            associations provide fair housing information to their members
            and partner with HUD and private fair housing organizations to
            distribute fair housing information to minority communities.
            This MOU is still in effect.
      --In January 2003, HUD launched Fair Housing Accessibility FIRST
            (Fair Housing Instruction, Resources, Support, Technical
            Guidance), a FHIP-funded program that provides training and
            technical guidance on the Fair Housing Act's accessibility
            requirements to architects, builders, developers, and others
            involved in the design and construction of multifamily housing.
            FIRST consists of a comprehensive training curriculum that is
            accredited by the American Institute of Architects and various
            local professional groups.
      --In fiscal year 2007, FIRST training sessions were held in
            Birmingham, AL; Tucson, AZ; San Jose, CA; Washington, DC;
            Atlanta, GA; Boise, ID; Chicago, IL; Frankfort, KY; Lake
            Charles, LA; New Orleans, LA; Portland, ME; Biloxi, MS;
            Jackson, MS; Bismarck, ND; Buffalo, NY; Cleveland, OH; Eugene,
            OR; Philadelphia, PA; Corpus Christi, TX; Houston, TX; and San
            Antonio, TX. In total, FIRST conducted 22 training sessions and
            trained 1,351 persons.
      --HUD continues to fund the FIRST program at $800,000 in fiscal year
            2008 and has requested $800,000 in its fiscal year 2009 budget
            to continue this program.
      --In fiscal year 2007, HUD and the Texas Apartment Association (TAA)
            signed a Memorandum of Understanding (MOU) pledging to work
            together to conduct fair housing training and outreach to
            rental housing providers and renters in the State of Texas. As
            part of the MOU, HUD's FIRST program has conducted two training
            sessions on the accessibility requirements of the Fair Housing
            Act to TAA members. This MOU is still in effect.
      --In fiscal year 2008, HUD plans to negotiate an MOU with the
            National League of Cities to collaborate to increase inclusive
            and diverse communities and strengthening financial education
            at the local levels. One of the goals of the MOU is to increase
            understanding of the Fair Housing Act and how fair housing is
            good business for local communities when dealing with unfair
            lending and predatory lending practices. It is anticipated that
            the MOU will be signed by the end of August 2008.
        Complaint filing in fiscal year 2006 exceeded 10,000 for the first
    time since HUD began to gather statistics. It is likely that the
    increase was a direct result of these and other education and outreach
    programs and activities. HUD expects that the number of complaints will
    continue to grow as it carries forth education and outreach activities,
    but at the same time acts of housing discrimination may decrease as a
    result of HUD's partnerships with housing industry groups and
    associations.
                                     hopwa
        Question. Why is HUD requesting the same level of funding for
    fiscal year 2009 as in fiscal year 2008 for the HOPWA program, even as
    demand for housing services among persons living with HIV/AIDS
    increases?
        The $14 million increase from fiscal year 2007 to fiscal year 2008
    will help HOPWA city and State grantees expand the number of clients
    assisted by an estimated 3,500 households, from 67,000 to 70,500. The
    administration's fiscal year 2009 request proposes to protect this
    increase in light of financial constraints which represents a high
    priority over other pressing needs. HOPWA is a highly effective and
    targeted program, and resources create and maintain stable housing for
    very low-income persons and dramatically improve their access to the
    available health-care and HIV treatments.

                                 HOPWA FUNDING

        Question. How many jurisdictions will be funded with fiscal year
    2008 dollars, both nationwide and specifically in IL? How many
    jurisdictions is HUD projecting to fund with fiscal year 2009 dollars,
    both nationwide and specifically in IL? How will the change in the
    number of jurisdictions affect the individual levels of funding for
    jurisdictions?
        Answer. The HOPWA program targets housing resources to States and
    cities to address pressing needs for a vulnerable population, low-
    income persons with HIV/AIDS and their families. Ninety percent of
    HOPWA funding is distributed by formula to qualifying States and
    metropolitan areas, and the remaining grant funds are distributed
    through the competitive grant process.
        Formula Grants.--The HOPWA formula grant allocations, which entail
    90 percent of the program, are based on AIDS data provided annually by
    the Centers for Disease Control and Prevention (CDC). For fiscal year
    2008, the formula portion of the HOPWA program serves 127
    jurisdictions: 40 States, 1 county, and 86 cities. Furthermore, four
    new areas qualified for the fiscal year 2008 allocation: Bakersfield
    (CA), Palm Bay (FL), Tulsa (OK), and the State of Nebraska.
        Fiscal year 2008 grantees in Illinois are the State of Illinois and
    the Chicago-Naperville-Joliet Metropolitan Statistical Area (MSA)
    Division. The city of St. Louis, MO also provides HOPWA assistance in
    Illinois parts of it's MSA.
        Although the Department has not yet received CDC data for 2008, the
    Department estimates that several new jurisdictions will become
    eligible for HOPWA formula funding for fiscal year 2009. The
    eligibility of jurisdictions is dependent up the application of CDC
    data and the definitions of metropolitan statistical areas. We cannot
    predict at this time how many, if any, of the new jurisdictions will be
    in Illinois.
        The addition of new formula areas does not have much of an affect
    on funding levels overall as most of the new areas were already
    included as part of the prior year allocations to their State. Of the 4
    new areas in fiscal year 2008, the State of Nebraska was the only area
    not previously part of the formula programs, and received $306,000, a
    net impact of one-tenth of 1 percent on the overall formula.
        Competitive Grants.--The HOPWA program's competitive grants have a
    3-year duration and can be renewed if successful in providing permanent
    supportive housing. Two grantees in Illinois received awards during the
    fiscal year 2005 competition grant cycle and have indicated their
    interest in renewing their grants during fiscal year 2008. The
    Department is currently reviewing these and would expect to make
    selection in the next few months in accordance with grant renewal
    procedures. Additionally, there are five permanent housing grants in
    Illinois that would be eligible for renewal in fiscal year 2009, as
    these grants are now operating under 3-year awards made in the fiscal
    year 2006 grant selection.

                                 MOVING TO WORK

        Question. Members of the Illinois congressional delegation sent you
    a letter on December 11, 2007, requesting a minimum 5-year extension to
    the Chicago Housing Authority's 10-year Moving to Work agreement with
    HUD. Please explain why HUD has not responded to the December 11, 2007
    letter, as of March 25, 2008.
        Answer. The Department responded to the letter on February 19,
    2008. Please see letter below.

      U.S. Department of Housing and Urban Development,
       Office of Congressional and Intergovernmental Relations,
                                     Washington, DC, February 19, 2008.
    The Honorable Richard J. Durbin,
    United States Senate,
    Washington, DC 20510-1304.
        Dear Senator Durbin: On behalf of Secretary Alphonse Jackson, thank
    you for your letter of December 11, 2007, requesting an extension of
    the Chicago Housing Authority's (CHA) Moving to Work Demonstration
    (MTW) agreement, which will expire in 2010. Since the demonstration was
    authorized in 1996, the Department of Housing and Urban Development has
    worked closely with the participants in the MTW demonstration to
    provide the flexibility to design and test various approaches for
    providing and administering housing assistance to achieve the three
    objectives outlined in the authorizing statute.
        Over the last year and a half, the Department has collaborated with
    the MTW agencies, including CHA, to develop a standard Amended and
    Restated MTW Agreement (Restated Agreement) for all MTW agencies. This
    Restated Agreement will ensure both that the flexibility that MTW gives
    is retained and that the demonstration provides the measurable outcomes
    as required for those MTW agencies extended by the 2006 Appropriations
    Act. Should Congress choose to expand the number of agencies eligible
    to participate in MTW, the Restated Agreement would better enable the
    Department to manage the larger number of agencies taking advantage of
    MTW flexibilities.
        The final version of the Restated MTW Agreement was mailed to CHA
    and the other MTW agencies on January 4, 2008, and agencies have 120
    days to execute the agreement. Under the Restated MTW Agreement, the
    MTW demonstration will continue until 2018, which will allow the
    Department to fully evaluate the impact of initiatives developed under
    the demonstration.
        Thank you for your interest in the Department's programs. If I can
    be of further assistance, please let me know.
                                              Mark A. Studdert,
                                    General Deputy Assistant Secretary.

                            MOVING TO WORK AGREEMENT

        Question. According to CHA, HUD has informally agreed to extend the
    agreement in meetings. Can you confirm this understanding and provide a
    timeline for formally extending the agreement?
        Answer. The final version of the standard Moving-to-Work (MTW)
    Agreement was mailed to the Chicago Housing Authority (CHA) and the
    other MTW agencies on January 4, 2008, and agencies have 120 days to
    execute the agreement. Under the standard MTW Agreement, the MTW
    demonstration will continue until 2018, which will allow the Department
    to fully evaluate the impact of initiatives developed under the
    demonstration. CHA has advised us that it is considering the Agreement
    and will act on it shortly.

                                  HOMELESSNESS

        Question. How does HUD expect to meet the administration's 2001
    goal of ending chronic homelessness in 10 years given its funding
    request for fiscal year 2009, which is inadequate to cover the cost of
    permanent housing renewals let alone fund the addition of new projects?
        Answer. HUD originally set forth a goal of ending chronic
    homelessness by 2012. As we and the U.S. Interagency Council on
    Homelessness worked with communities across the Nation, city after city
    became engaged in taking on this challenge to end chronic homelessness.
    Not all communities implemented their plan in the same year. To secure
    political will and resources required more time for some communities
    than it did for others. Every year additional communities commit to the
    10 year goal. Significantly, there is Federal, State and local
    commitment to achieve this bold goal. Communities are tracking the
    number of chronically homeless so that they can measure their progress.
    Communities are also securing Federal, State and local government and
    private resources to develop housing for this population. As a result
    of these efforts, nationally we saw an 11.5 percent reduction in
    chronic homelessness between 2005 and 2006. The 2007 figure is
    scheduled to be released in June and we expect to see further
    reductions.
        HUD has employed creative incentives to encourage grantees across
    the country to use the limited HUD funds available for new units to
    specifically target the chronically homeless and thereby help meet the
    administration's goal. The Department has designated a portion of the
    competitive funds to be awarded to Continuums of Care (CoC) that set as
    their first priority, a permanent supportive housing project for the
    chronically homeless. In addition, HUD has created a reallocation
    process within the competition that allows CoCs to negotiate the
    elimination or reduction of grants that either no longer serve the need
    of the homeless in that community or have found alternative subsidy.
    They are thereby enabled to use the newly available funds to create
    additional new permanent support housing programs. These incentives
    have an incremental but cumulative impact on these production goals.
        Finally it is important to note that while we continue to make
    progress in ending chronic homelessness, we also continue to provide
    funding for renewal projects. HUD estimates that the 2009 homeless
    assistance request is sufficient to fully fund all permanent housing
    renewals and to provide a limited amount of funds to develop new
    projects to help end chronic homelessness.

                          PERMANENT SUPPORTIVE HOUSING

        Question. Please provide a status update on how close the agency is
    to the benchmark of 150,000 units of permanent supportive housing.
        Answer. Former HUD Secretary Mel Martinez set a goal that as a
    Nation we create 150,000 permanent supportive housing units for
    chronically homeless individuals. The definition of a chronically
    homeless individual is a single, unaccompanied person with a disabling
    condition who has either been continuously homeless for more than a
    year or who has experienced at least four episodes of homelessness in 3
    years.
        While it is a challenging goal, HUD has instituted several
    incentives to meet it, such as providing extra funding for Continuums
    of Care that set as their first priority for funding a permanent
    supportive housing project for the chronically homeless. This incentive
    has led to a tremendous increase in the number of units for this target
    population.
        At the end of 2006, Continuums of Care reported that about 40,000
    new permanent supportive units were in place for the chronically
    homeless. In 2007, HUD funded approximately 4,000 additional permanent
    supportive housing units for this same population. These units do not
    include thousands of transitional housing units for the homeless
    created with HUD funds since 2002. These units also do not include
    funds awarded under the Emergency Shelter Grants program.
        Moreover, in 2008, Congress appropriated the HUD VASH (HUD VA
    Supportive Housing) program, which will create 10,000 more units for
    homeless veterans, many of whom are chronically homeless. Finally, the
    President has requested $75 million in the fiscal year 2009 budget
    which would provide for approximately 10,000 additional HUD VASH
    vouchers for homeless veterans.
        Question. How does HUD plan to reverse the trend of fewer new
    units? What plans are there to ensure HUD meets the 10-year goal of
    establishing 150,000 units of permanent supportive housing?
        Answer. The percentage of funds needed to operate renewal projects
    increases each year. The renewal burden for fiscal year 2006 was 84
    percent of funds awarded, and in fiscal year 2007 the renewal burden
    was 86 percent of funds awarded. However, the administration has
    requested and Congress has appropriated increased funding since 2001
    for HUD's homeless programs, which has allowed HUD to continue to
    increase the number of new units created each year. With continuing
    appropriations increases, HUD will be able to continue to create even
    more new units of permanent supportive housing as well as transitional
    housing to help homeless families and individuals move to greater self-
    sufficiency.
        In order to meet the ambitious goal of establishing 150,000 new
    units of permanent supportive housing for chronically homeless persons
    that are to be developed by HUD and our State and local partners, HUD
    focuses on this population in the (CoC) application by awarding
    ``bonus'' funds to communities that propose new permanent housing for
    chronically homeless persons. In addition, HUD awards more points to
    communities that demonstrate an emphasis on creating new housing units.
        However, HUD is not working alone to meet this goal. In the annual
    (CoC) application, HUD provides incentives for State and local
    governments and the private sector to provide resources to develop
    permanent housing for the chronically homeless and for other homeless
    populations. Moreover, the Interagency Council on Homelessness has been
    working to help communities create local 10-year plans to end chronic
    homelessness. While many of the units created under these plans are
    funded by HUD, States as well as local communities are working to find
    additional funding sources to create new units of permanent supportive
    housing.

                                RAPID RE-HOUSING

        Question. Does HUD plan to continue the rapid re-housing
    demonstration funded by Congress in fiscal year 2008? If not, please
    explain.
        Answer. The Rapid Re-housing initiative was funded in 2008 as a
    one-time only demonstration program. The administration has not
    requested additional funds for this demonstration in fiscal year 2009.
    Included in the appropriation is funding to conduct a rigorous
    evaluation to determine the effectiveness of different local programs
    participating in the demonstration. The grant awards will be made later
    this calendar year. Once awarded, selected demonstration sites will
    begin collecting data on the homeless families. Our review of the
    eventual study results should provide very useful insights as to which
    interventions are actually effective. These findings will help inform
    future programming and use of limited resources.

                             REDUCING HOMELESSNESS

        Question. What is HUD's strategy for reducing the number of
    homeless families?
        Answer. HUD's performance objective related to homelessness
    underscores our commitment to serving homeless families. It is to ``End
    chronic homelessness and move homeless families and individuals to
    permanent housing'' (emphasis added). We require each community to
    annually enumerate and report to HUD on the size of their homeless
    family population. To address this local established need and to
    achieve HUD's performance objective, HUD provides each year significant
    funding to communities to assist their homeless families. Approximately
    half of all persons assisted by HUD homeless programs are persons in
    homeless families.
        With the recent expansion of the HUD VA Supportive Housing (HUD-
    VASH) Program to sites across the Nation and the demographics of Desert
    Storm era veterans, it is anticipated that many homeless military
    families will be housed through this specialized HUD section 8 program.
        The new $25 million Rapid Re-housing for homeless families
    demonstration initiative will also provide valuable insights into how
    communities and we as a Nation can most effectively help homeless
    families.
        HUD's commitment to improve its programming for homeless families
    is reflected in the Department's efforts to better understand both the
    particular needs of homeless families today and how to best serve them.
    Several studies are underway or planned to help inform HUD and the
    Nation on this important subject. For instance, a study to be conducted
    by HUD's Office of Policy Development and Research entitled ``The
    Impact of Various Housing and Service Interventions on Homeless
    Families'' is in the early stages of being conducted. Once completed,
    the results will help inform future homeless family housing and service
    policies.

                          HOMELESS ASSISTANCE FUNDING

        Question. What percentage of homeless assistance funding is
    currently going directly to families?
        Answer. Data on homelessness provided by each community to HUD
    indicate that approximately 40 percent of all homeless persons are
    members of homeless families. Significantly, just over 40 percent of
    all of HUD's competitive homeless funds benefit homeless families. As
    such, HUD resources are well aligned with meeting the needs of homeless
    families.

                           FAMILY UNIFICATION PROGRAM

        Question. How and when will the Family Unification Program vouchers
    be issued?
        Answer. We expect the Family Unification Program vouchers to be
    issued between September and October 2008. HUD staff is currently
    working on the Notice of Funding Availability, which will explain the
    application procedures.

                       HUD-VA SUPPORTIVE HOUSING VOUCHERS

        Question. How and when will the HUD-Veterans Affairs Supportive
    Housing vouchers be issued?
        Answer. We expect to provide funding to housing authorities by the
    first week of May 2008. The actual issuance of the vouchers will depend
    on the referral of homeless veterans to housing authorities by the U.S.
    Department of Veterans Affairs. Eligibility for the program is
    determined by the Department of Veterans Affairs and not the housing
    authorities.
                                     ______

                  Questions Submitted by Senator Arlen Specter

                                 MOVING TO WORK

        Question. Secretary Jackson, I understand that the Department has
    already informed the Philadelphia Housing Authority that it will not
    extend its successful Moving to Work Demonstration program beyond March
    31, 2008, under similar terms and conditions. Is it true that the
    Department has granted similar extensions 30 times since 2000 and never
    denied a request for an MTW extension until now?
        Answer. On February 8, 2002, the Philadelphia Housing Authority
    executed a Moving-to-Work (MTW) Agreement with the Department that
    expired by its own terms on March 31, 2008. Starting in the first
    quarter of 2006, HUD began the process of standardizing the MTW
    agreements it had with the housing authorities participating in the MTW
    program. In November 2005, Congress passed legislation that mandated
    extensions of current MTW agreements that would otherwise expire by
    September 30, 2006, and also called for data collection ``so that the
    effect of Moving-to-Work policy changes on residents can be measured.''
    (section 320(b) of the Transportation, Treasury, Housing and Urban
    Development, the Judiciary, the District of Columbia and Independent
    Agencies Appropriations Act of 2006) (Pub. L. No. 109-115, 119 Stat.
    2396 (Nov. 30, 2005)) (``section 320(b)).
        The Department's development of standardized agreements was
    consistent with this Congressional mandate: one of the Department's
    principal objectives in developing the standardized agreement was to
    improve and reinforce requirements for tracking, reporting, and
    evaluating the effectiveness of the MTW program in achieving the goals
    of the MTW legislation. In addition, through the standardized MTW
    agreement, the Department sought to clarify the submission and approval
    processes, and to develop standard operating procedures for the
    Department's interaction with all MTW agencies under the program.
        The Department has extended MTW Agencies under their current terms
    in 15 instances over the past 3 years, all involving PHAs in a
    different position than Philadelphia Housing Authority. The Department
    extended 13 MTW Agreements during the first 9 months of 2006 under the
    mandate of section 320(b). Because the Philadelphia Housing Authority's
    MTW Agreement did not expire during the period covered by section
    320(b), the Philadelphia Housing Authority does not fall within the
    category of PHAs that were to receive this statutorily mandated
    extension.
        In addition to the 13 PHAs covered by the 2006 extension provision,
    the Department has extended MTW agreements for two other housing
    agencies since September 30, 2006. Each of the PHAs in those instances
    is in a different position than Philadelphia Housing Authority, as each
    of those extensions was granted before the Department finalized and
    adopted the new, standardized MTW agreement. In December 2006, the
    Department extended the MTW for Pittsburgh, Pennsylvania for 3 years to
    December 31, 2009. The Department also extended the MTW agreement for
    Minneapolis, Minnesota for a 7-month period to allow for completion of
    the standardized agreement. The Minneapolis Housing Authority has now
    signed the new, standardized agreement. The Department has offered to
    execute the standardized agreement with PHA, as with any other
    participating housing authority, but Philadelphia Housing Authority has
    refused that offer.

                            MOVING TO WORK EXTENSION

        Question. Without the MTW extension, Philadelphia Housing Authority
    understands that as of April 1, 2008, it will no longer be eligible to
    receive as much as $50 million in Federal assistance, including
    approximately $25 million in section 8/housing choice voucher funds. Is
    that your understanding? Can you assure me that the Philadelphia
    Housing Authority will continue to receive the same allocation of
    Federal funds if its MTW designation is not extended?
        Answer. The Department does not agree that the Philadelphia Housing
    Authority would lose $50 million in funding because of this transition.
    The Department has made a comparison of the Philadelphia Housing
    Authority`s funding under both the MTW agreement and current
    regulations and can find no basis for such a claim. Indeed, even the
    legal declarations made by the Philadelphia Housing Authority as part
    of its lawsuit against the Department only reference the $13,050,000
    associated with the diversion of over 2,000 units worth of Housing
    Choice Voucher funding (MTW Activity Vouchers) for other purposes in
    support of the Philadelphia Housing Authority's public housing program.
    Even as the Philadelphia Housing Authority makes the transition to
    become a traditional non-MTW housing authority, it does not
    automatically lose this funding. Rather, the $13 million would be
    applied towards the Philadelphia Housing Authority's traditional
    Housing Choice Voucher Program, allowing it to provide 2,000 units of
    much-needed housing assistance to the low-income residents of
    Philadelphia.

                             HOUSING DISCRIMINATION

        Question. What concrete steps will HUD be taking to increase the
    percentage of persons who file complaints in response to the belief
    that they have been victims of housing discrimination?
        Answer. HUD's fair housing mission is to eradicate housing
    discrimination. HUD plays several roles in this mission: (1) to
    increase public awareness of the Fair Housing Act; (2) to educate
    housing providers on their rights and responsibilities under the Fair
    Housing Act to reduce the number of occurrences of housing
    discrimination; and (3) to enforce the provisions of the Fair Housing
    Act.
        HUD believes that persons cannot report housing discrimination
    unless they understand their fair housing rights and the recourse
    available to victims of discrimination. In order to increase the
    percentage of persons that report housing discrimination, HUD has
    engaged in media campaigns and other activities to raise public
    awareness of fair housing. These activities are described in the answer
    responding to Senator Durbin's question, ``How does HUD plan to
    increase public awareness of existing fair housing laws?''
        Moreover, HUD has conducted many of these activities in languages
    other than English in order to reach persons with limited English
    proficiency. For example, in fiscal year 2004, HUD, in conjunction with
    the Advertising Council, launched a fair housing education campaign
    through a series of public service announcements. This campaign
    consisted of two television advertisements, two radio advertisements
    and two print advertisements, in English and Spanish.
        Additionally, in fiscal year 2005, HUD produced five new fair
    housing radio advertisements. Two of these advertisements were in
    Spanish and two of these were in Cantonese, Hmong, Korean, and
    Vietnamese. Starting in fiscal year 2005, HUD also produced fair
    housing print advertisements in Arabic, Bengali, Cantonese, Hmong,
    Khmer, Korean, Punjabi, Thai, Urdu, and Vietnamese.
        Furthermore, HUD's 2005 Study--``Do We Know More Now?'' concludes
    that unless a person who has been discriminated against can see
    benefits in filing a complaint, he/she is unlikely to do so. Therefore,
    HUD makes a conscious effort to publicize the outcomes of its fair
    housing enforcement efforts to help encourage persons to report housing
    discrimination. HUD believes that publicizing the results of its
    enforcement efforts helps build public trust in its enforcement
    efforts, and, in turn, increases the likelihood that persons will
    report housing discrimination.
        In February 2007, the CNN program Open House aired a segment on
    housing discrimination. The segment featured an interview with
    Assistant Secretary Kim Kendrick and Nannatte Bishop, an African-
    American woman who filed a complaint with HUD alleging that Fifth Third
    Bank denied her application for mortgage loan because of her race. HUD
    negotiated a $125,000 settlement in this case. An estimated 665,000
    people may have viewed this broadcast.
        HUD is also building the public trust in its enforcement efforts by
    training the approximately 500 full-time investigators employed by the
    more than 100 State and local government agencies that are certified
    through its Fair Housing Assistance Program (FHAP). In fiscal year
    2004, HUD opened the National Fair Housing Training Academy (the
    Academy) to provide training and certification to ensure that FHAP and
    now HUD investigators have the necessary skills to conduct thorough and
    timely investigations.
        The Academy offers a 5-week program, which covers fair housing
    laws, investigative skills, negotiation skills, litigating fair housing
    cases, and many other topics. After completing the 5-week program, the
    investigators must pass a comprehensive examination in order to receive
    a certificate of completion from the Academy. At of the end of fiscal
    year 2007, a total of 174 investigators have completed the 5-week basic
    training course.
        However, HUD is not simply waiting for persons to file complaints.
    HUD has increased the use of its Secretary-initiated enforcement
    authority to eliminate discriminatory housing practices. Under the Fair
    Housing Amendments Act of 1988, the Secretary of HUD, in the public
    interest, has the authority to conduct an investigation and file a
    complaint when there is reason to believe that an alleged
    discriminatory housing practice has occurred or is about to occur, even
    when no aggrieved person has filed a complaint. HUD also uses its
    Secretary-initiated enforcement authority when it receives an
    individual complaint, but believes there may be additional victims of
    the discriminatory act or wants to obtain broader relief in the public
    interest.
        Secretary-initiated enforcement authority allows HUD to take
    proactive measures to eliminate housing discrimination and ensure equal
    housing opportunity. In fiscal year 2007, HUD filed 12 Secretary-
    initiated complaints and launched four additional Secretary-initiated
    investigations. These investigations include a complaint against a
    management company alleging that it refused to rent to African-
    Americans, a complaint against brokerage organizations alleging that
    they limited their membership on the basis of religion, and a complaint
    against housing providers alleging that they prohibited families with
    children.
        At the same time that HUD is increasing public awareness of the
    Fair Housing Act, HUD is taking steps to work with its housing industry
    members to reduce housing discrimination. For example:
      --In fiscal year 2000, HUD signed a Memorandum of Understanding (MOU)
            with the Department of Justice and the Department of the
            Treasury setting forth procedures each signatory agency would
            follow in reporting Fair Housing Act violations. The MOU also
            outlined options for fair housing education for those involved
            in the financing, construction, and operation of low-income
            housing tax credit properties. For example, to help ensure that
            residential rental housing built with low-income housing tax
            credit was accessible to persons with disabilities. Since the
            implementation of this MOU, HUD staff members have participated
            at numerous meetings of State housing finance agencies to
            educate them on the accessibility requirements of the Fair
            Housing Act. This MOU is still in effect.
      --In fiscal year 2003, HUD signed an MOU with representatives from
            the National Association of Realtors, the National Association
            of Real Estate Brokers, the National Association of Hispanic
            Real Estate Professionals, and the National Association of
            Asian American Real Estate Professionals to work together to
            increase minority homeownership and address housing
            discrimination. As part of the MOU, the real estate
            associations provide fair housing information to their members
            and partner with HUD and private fair housing organizations to
            distribute fair housing information to minority communities.
            This MOU is still in effect.
      --In January 2003, HUD launched Fair Housing Accessibility FIRST
            (Fair Housing Instruction, Resources, Support, Technical
            Guidance), a FHIP-funded program that provides training and
            technical guidance on the Fair Housing Act's accessibility
            requirements to architects, builders, developers, and others
            involved in the design and construction of multifamily housing.
            FIRST consists of a comprehensive training curriculum that is
            accredited by the American Institute of Architects and various
            local professional groups.
      --In fiscal year 2007, FIRST training sessions were held in
            Birmingham, AL; Tucson, AZ; San Jose, CA; Washington, DC;
            Atlanta, GA; Boise, ID; Chicago, IL; Frankfort, KY; Lake
            Charles, LA; New Orleans, LA; Portland, ME; Biloxi, MS;
            Jackson, MS; Bismarck, ND; Buffalo, NY; Cleveland, OH; Eugene,
            OR; Philadelphia, PA; Corpus Christi, TX; Houston, TX; and San
            Antonio, TX. In total, FIRST conducted 22 training sessions and
            trained 1,351 persons.
      --HUD continues to fund the FIRST program at $800,000 in fiscal year
            2008 and has requested $800,000 in its fiscal year 2009 budget
            to continue this program.
      --In fiscal year 2007, HUD and the Texas Apartment Association (TAA)
            signed a Memorandum of Understanding (MOU) pledging to work
            together to conduct fair housing training and outreach to
            rental housing providers and renters in the State of Texas. As
            part of the MOU, HUD's FIRST program has conducted two training
            sessions on the accessibility requirements of the Fair Housing
            Act to TAA members. This MOU is still in effect.
      --In fiscal year 2008, HUD plans to negotiate an MOU with the
            National League of Cities to collaborate to increase inclusive
            and diverse communities and strengthening financial education
            at the local levels. One of the goals of the MOU is to increase
            understanding of the Fair Housing Act and how fair housing is
            good business for local communities when dealing with unfair
            lending and predatory lending practices. It is anticipated that
            the MOU will be signed by the end of August 2008.
        Complaint filing in fiscal year 2006 exceeded 10,000 for the first
    time since HUD began to gather statistics. It is likely that the
    increase was a direct result of these and other education and outreach
    programs and activities. HUD expects that the number of complaints will
    continue to grow as it carries forth education and outreach activities,
    but at the same time acts of housing discrimination may decrease as a
    result of HUD's partnerships with housing industry groups and
    associations.

                              SUBCOMMITTEE RECESS

        Senator Murray. We will recess subject to the call of the
    Chair.
        [Whereupon, at 11:17 a.m., Thursday, March 13, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
                      APPROPRIATIONS FOR FISCAL YEAR 2009

                                  ----------

                            THURSDAY, APRIL 3, 2008

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:35 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Patty Murray (chairman) presiding.
        Present: Senators Murray, Lautenberg, Bond, Alexander, and
    Allard.

      STATUS OF SURFACE TRANSPORTATION TRUST FUNDS AND IMPACT ON FEDERAL
                                    SPENDING

                          DEPARTMENT OF TRANSPORTATION

                         Federal Transit Administration

    STATEMENT OF HON. JAMES S. SIMPSON, ADMINISTRATOR

                         Federal Highway Administration

    STATEMENT OF JAMES D. RAY, ACTING ADMINISTRATOR

                   OPENING STATEMENT OF SENATOR PATTY MURRAY

        Senator Murray. This subcommittee will come to order.
    Today, we are addressing two different topics, the financial
    health of the Highway Trust Fund and the financial health of
    Amtrak, but in many ways, these two issues present this
    subcommittee with the same question: Is the Federal Government
    prepared to take the steps necessary to invest in our
    infrastructure and in our people, and is it prepared to keep
    people employed, to keep people and goods moving, and to keep
    our economy moving?
        The Highway Trust Fund has served us well since it was
    first authorized in 1956, but today, the Trust Fund's Highway
    and Mass Transit Accounts are rapidly nearing bankruptcy and in
    Congress, this raises some critical questions in the short-term
    and in the long-term about the future of transportation
    funding.
        The Bush administration has suggested some solutions, but
    after examining its proposals, I find them unrealistic and
    irresponsible, and I fear they would harm our highway system
    and the citizens that depend on them.
        For the short-term, the administration wants us to cut
    highway funding by some $1.8 billion next year. It also wants
    to allow the Highway Account of the Trust Fund to borrow
    roughly $3.2 billion from the Transit Account.
        The administration likes to call this unprecedented
    transfer a loan even though it hasn't proposed a budget that
    will guarantee the loan would ever be paid back. As I see it,
    this loan will only bankrupt the Transit Account faster and
    that is unacceptable.
        For the long-term, the administration is proposing the
    Federal Government slash investment for transportation
    infrastructure in a number of areas. President Bush has claimed
    that his budget proposals can reverse the deep deficits he's
    built in the last 8 years and bring us to surplus by 2012, but
    as always, the devil is in the details.
        One of the ways he wants to do this is by cutting
    transportation funding by 25 percent by 2012 and the largest
    cut would come from the Highway and Transit Programs. He wants
    to slash those by almost a fifth between 2009 and 2012.
        To make up for the cuts, the administration has been
    promoting alternative financing, such as privatization schemes
    that involve charging new tolls to drive on existing roads. The
    administration is advocating new tolls for the purpose of
    relieving congestion, but they want to price working families
    off the road.
        I think tolling can be a successful way to build new
    highway capacity. It makes sense when the public supports that
    additional charge for the additional highway capacity that it
    would provide. But, most working families can't be expected to
    make up for Federal funding cuts by paying new tolls on
    highways they have already paid for with tax dollars.
    Especially while they are already struggling to keep up with
    record high gas prices.
        So, it's clear that there are no quick fix solutions that
    will allow the kind of investments our highway and transit
    systems increasingly need, but I think we can avoid President
    Bush's drastic and damaging suggestions. I have been working on
    a short-term solution with the Finance Committee to get enough
    revenues into the Trust Fund to avoid painful cuts next year.
        Chairman Baucus and Ranking Member Grassley have reported a
    bill out of their committee that solves the problem for 2009
    and we need to pass that bill and pass it soon.
        For the long-term, however, Congress must begin the next
    surface transportation reauthorization process with all
    financing options on the table. Separate from these decisions
    about transportation funding, this subcommittee must make
    another short-term decision, whether to invest in highway and
    transit construction to help stimulate our struggling economy.
        I believe that with the economy on the verge of a recession
    and with a growing number of construction workers facing
    unemployment, now is the time to increase, not cut,
    infrastructure spending, but I also believe the money must come
    from the General Fund, not the Trust Fund.
        I can say without hesitation that the next supplemental
    appropriations bill will include funding for highways. The only
    question is which highways.
        The President's supplemental request for the wars in Iraq
    and Afghanistan includes almost $777 million for improved
    bridges and roads in Iraq and Afghanistan. Meanwhile, there are
    21 States, including my State and Senator Bond's, waiting for
    Federal funding that are owed for the repair of highways and
    bridges damaged or destroyed in declared disaster areas, and
    the administration hasn't requested one dime in the
    supplemental for the Emergency Relief Highway Program to make
    those States whole.
        We also have billions of dollars in ready-to-go highway and
    transit projects in every State of the Nation. Money in the
    supplemental to finance those projects could help save
    construction jobs and help our economy.
        A couple months ago, we had the single largest reduction in
    construction employment recorded in the last 14 years. So, I
    hope that as our subcommittee convenes in the coming months to
    mark up the supplemental appropriations bill, we will recognize
    the critical infrastructure needs here at home, not just those
    in Iraq and Afghanistan.
        Now I want to spend a few moments talking about the second
    subject of this hearing before we hear from Senator Bond.
        Our second panel of witnesses this morning will discuss the
    current status of Amtrak, our national passenger railroad. As I
    mentioned earlier, the American public is facing record high
    gas prices, the highest level in 18 years. The average gallon
    of gasoline nationwide last week was $3.29. In my home State of
    Washington, it was $3.46 and States like California are facing
    gas prices of over $3.61 per gallon.
        Partly as a result of those high gas prices, more people
    than ever before have been using Amtrak across the country and
    you would think with gas prices like these, even the Bush
    administration might reconsider the merits of an energy-
    efficient mode of travel like Amtrak. Unfortunately, it has
    not.
        For the second year in a row, the administration has
    proposed cutting direct subsidies to Amtrak by almost 40
    percent. For Amtrak's critical operating and debt service
    subsidies, which keep the railroad out of bankruptcy, the
    administration is proposing a cut of 64 percent.
        Once again, the administration is proposing to decimate
    inter-city rail transportation and once again, this
    subcommittee will need to take a much more realistic look at
    what Amtrak's genuine needs are and develop a budget for fiscal
    year 2009 that maintains and hopefully improves rail service.
        I'm pleased that we are now about to resolve a period of
    very sour labor-management relations at Amtrak. I look forward
    to a new era in which management and labor at Amtrak will work
    side by side. We need a railroad that can focus on the
    country's transportation needs without the constant distraction
    of wage and workplace disputes.
        President Bush's Emergency Board addressed all of the key
    disagreements that kept Amtrak labor and management from
    getting an agreement on their own. One particularly difficult
    issue that President Bush's Emergency Board settled was the
    issue of back pay. The PEB settled this by recommending two
    separate payments to Amtrak workers for well-deserved moderate
    wage increases that they did not receive over the last 8 years.
        The first payment will be made shortly and the second one
    will be made in 2009, but we have to decide whether we must
    appropriate more resources to pay for it. Amtrak's management,
    which is represented here today by their Board Chairman, is not
    formally asking for this funding.
        The DOT Inspector General's Office has regularly reviewed
    Amtrak's books. They will testify that Amtrak can expect to
    have adequate resources to make the second payment next year
    without any support from the subcommittee.
        At the same time, the subcommittee must be mindful that we
    are unsure what will happen in the economy or Amtrak's revenue
    in the next year. Over the next several months, this
    subcommittee will have to monitor Amtrak's finances carefully
    to see whether we will have to act to keep Amtrak running or
    whether we will have to ensure that Amtrak's workers get the
    back wages they have gone without for too long.
        With that, I will turn it over to our subcommittee's
    ranking member, Senator Bond, for his statement.

                OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

        Senator Bond. Thank you very much, Madam Chair, and I
    welcome our witnesses today. We have nine witnesses on two
    panels, so it's going to be a long hearing, and in order to
    save time, I will try to keep my opening comments brief, at
    least by senatorial standards, which would not apply in any
    other way, but first to answer the question a whole bunch of
    people asked.
        I'm a born-again safety advocate. I'm here today with a new
    shoulder joint and my arm sewed back on as a result of a driver
    turning right on red without looking last year. So count me as
    a highway safety advocate from the word go.
        Moving on to the direct subject of the hearing, I was one
    of the key authors of the SAFETEA bill. It took us 3 long years
    and two different bills to finally get an agreement with the
    House and the White House on a bill that didn't raise taxes and
    didn't quite spend the $300 billion in total.
        At the time, we used Treasury and CBO projections on what
    the Highway Trust Fund could sustain over the life of the bill,
    realizing that we did have some balances available and that
    forecasts were projections of what we believed would be coming
    in to the HTF to be spent.
        As I stated at our hearing with the Secretary of
    Transportation on the overall budget, I had hoped that the
    administration would have recommended--would have remained
    committed to meeting the guaranteed funding levels for highways
    and transits as authorized in SAFETEA. I understand from the
    testimony today that you believe the administration lived up to
    the terms by providing $286.4 billion over the life of the
    bill, thereby fulfilling the commitment of the spending
    agreement made with Congress when the President signed SAFETEA.
        I disagree with your assessment and believe that Senator
    Murray and I will continue to work to honor our commitment to
    highways and transit.
        I also hope that we can work with the Senate Finance
    Committee and the House Ways and Means Committee, to fix the
    current shortfall in the HTF to get us through fiscal year 2009
    and beyond.
        It appears to me that no one can really get a handle on the
    Highway Trust Fund shortfall that we face this year and next.
    Last year, last August, our staffs were briefed on the midyear
    projections of revenue in the HTF and were told that a $4.3
    billion gap would occur at the beginning of 2009.
        As you know, this came about from lower anticipated gas tax
    receipts into the Highway Trust Funds due to sharp downturn in
    vehicle miles traveled and truck sales being down 20 percent.
    It appeared then that high gas prices were having a major
    impact on the traveling public and their willingness to drive
    long distances.
        It is true that the marketplace works and when prices go
    up, people tend to use less, and in some respects, that's good
    in terms of those who are concerned about global warming and
    economy, but it is bad when you look at it from the Highway
    Trust Fund side.
        The budget you have before us today re-estimates that
    shortfall to be $3.3 billion, based upon slower-than-expected
    outlays on earmarks and projected negative RABA. To make up for
    this shortfall in the budget, the administration calls for
    other budget gimmicks, allowing the HTF to borrow up to $3.3
    billion from the Mass Transit Account to cover the shortfall in
    the Highway Account. That's what I'd call putting a small
    bandaid on a bleeding wound.
        What we really need is a solution to the problem to get us
    through 2009 and beyond and get a comprehensive reauthorization
    proposal that can be passed and signed into law, which, by
    judging past experience, would be a very long time, given the
    fact that there will be a new administration, insufficient
    balance in revenue raisers in the Highway Trust Fund, and a new
    Congress to contend with.
        I understand the old rocker Jethro Tull once said,
    ``Nothing is easy.'' He probably didn't know much about
    highways or at least highway funding, but he accurately and
    succinctly characterized the problem.
        SAFETEA guaranteed the States $41.2 billion for highways.
    This budget provides $39.4 billion. This reduction comes in
    part from a projected negative revenue aligned budget authority
    of RAB, as we call it, of just over $1 billion, plus another
    $800 million in other reductions.
        Similarly, this budget proposes to fund the Federal Transit
    Programs at a level which is $200 million below the SAFETEA-
    authorized levels for new starts. These funds allow an
    increased investment in key highway and transportation projects
    to complement and assist the continuing growth of the U.S.
    economy and I would hope we could live up to our commitments.
        On Amtrak, once again the administration has forwarded a
    budget proposal which is a non-starter. In 2008, Amtrak
    received $1.325 billion, $850 million of that for capital debt
    service and $475 million in operating subsidies. The budget
    submission we have before us provides only $525 million for
    capital and debt service and $275 million for efficiency
    incentive grants that would take the place of direct operating
    subsidies, placing more control in the hands of Secretary
    Peters and Administrator Boardman rather than Amtrak.
        I'm troubled that, while the administration seems to push
    for lower subsidies to Amtrak, they are also losing sight of
    reform initiatives that need to be part and parcel of a
    lowering operating subsidy.
        The Secretary of Transportation already has sole authority
    to approve or disapprove Amtrak's request for funds to cover
    capital needs and operating losses and to date, I am unaware of
    how the Department has used its existing authority.
        Are there any instances where DOT has denied funding to
    Amtrak because Amtrak's grant request would not be the
    efficient use of Federal funds? I understand that Mr. Boardman
    voted no on the Amtrak grant legislative request for 2009 and
    we'll want to know if that was solely because of the higher
    numbers contained or the fact that there was no operating
    reforms.
        As the chairman has said, we are glad that the presidential
    board did provide the appropriate wage increases and the back
    pay, but as far as I can tell, none of the operating reforms
    were addressed. They whiffed on perhaps what is one of the
    significant long-term solutions for Amtrak's continued
    viability.
        Now, some have indicated an interest in potentially
    reprogramming some of the efficiency grants of $66 million in
    2006 and 2007 to fund a portion of the $114 million in 2009 for
    the unbudgeted retroactive wage costs in the PEB labor
    settlement. The IG for the Department will state that he
    believes that these could be funded out of the $269 million in
    end-of-the-year 2008 cash balances.
        During the question period, I will ask you to describe how
    you believe we should deal with the issue and what's the
    sufficient level of cash balances for Amtrak.
        FRA's priority appears to be the Intercity Passenger Rail
    Grant Program, which in 2009 they requested $100 million for,
    up from $30 million in 2008. I find it interesting that FRA
    doesn't include the labor settlement agreement in the budget
    and Amtrak does not include in its grant a legislative request,
    the Intercity Passenger Rail Grant Program, each totaling
    around $100 million.
        We commend Amtrak for improved on-time performance,
    revenue, ridership and cash operating losses. These are good
    pieces of news. However, some of this can be attributed to
    labor costs held down by the absence of a labor settlement over
    the past 7 years that will now have to be addressed.
        We had attempted to have a witness here today from the
    Presidential Emergency Board (PEB) to describe what exactly
    Amtrak received in work rule changes and the like through the
    PEB settlement, but they declined to come and speak today
    before this panel and as I look at what they did, I can see why
    they wouldn't want to come and talk about it.
        Regardless of Amtrak's success of late, Amtrak has made no
    significant progress in restructuring operations to become less
    reliant on Federal funds. This year in operations, they're
    requesting a $50 million increase over last year. The IG will
    testify that level funding at $475 million is sufficient to
    meet the operating needs. The Graham legislative request for
    2009 contains no operational reforms in 2009. The pace of
    Amtrak's reform savings has slowed from $61 million in 2006,
    almost $53 million the next year, and only $40 million in 2008.
        There is little chance Amtrak will achieve anywhere near
    the $500 million in annual reform savings it promised when it
    adopted its 2005 plan. Is there a new plan or do the witnesses
    feel there's no need for a plan to be in place as long as the
    money keeps coming?
        I look forward to the answers to these questions from the
    panels.
        Senator Murray. Thank you very much. Senator Allard.

                       STATEMENT OF SENATOR WAYNE ALLARD

        Senator Allard. Thank you, Madam Chairman. Thank you for
    holding this hearing.
        I have two important hearings this morning and fortunately
    I do want to make my opening statement and will have to go to
    the other hearing since I am the ranking Republican on
    Securities. It involves our housing and securities issues.
        First of all, you know, these are some very important
    matters for our surface transportation system, and I appreciate
    the opportunity to be able to review the testimony after this
    hearing.
        Before I begin my remarks related to the hearing, I want to
    take this opportunity to publicly commend Federal Transit
    Administrator Jim Simpson. Administrator Simpson has been a
    tireless advocate for public transportation and I especially
    appreciate his efforts in Colorado.
        RTD in Denver is currently in the midst of an aggressive
    multiyear multicorridor package known as Fast Trax. The
    successor in Fast Trax is closely linked to a close cooperative
    relationship with FTA and we are lucky to have him as its head.
        Both Administrator Simpson and Deputy Administrator Sherry
    Little have gone out of their way to be helpful and supportive,
    devoting significant time to RTD and the Denver corridors. I
    especially appreciate their support for our public-private
    partnerships and the value that they can bring, particularly
    during these times of rapidly escalating materials costs. They
    both bring a flexible, innovative, solution-oriented mindset
    that has served the transit community well.
        Jim, I offer my heartfelt thanks to you and Sherry for all
    that you've done. Your public service is appreciated in public
    transportation in Denver and across the country is better for
    it. Thank you.
        Because I've been very involved with Amtrak on the
    authorizing side, I also wanted to make a few comments on that
    topic.
        While passenger rail has a significant role in an
    efficient, modern transportation infrastructure, I'm concerned
    about how Amtrak has performed in providing that service. As my
    colleagues may know, I'm a strong proponent of results and
    outcomes. Amtrak and other Government-funded entities should
    not be judged based upon how much they receive in Federal
    funding but the results that they can demonstrate with those
    taxpayer dollars.
        In the case of Amtrak, I'm afraid those results are not
    very impressive. In the administration's Part Assessment, their
    tool for evaluating the effectiveness of programs, Amtrak was
    rated as ineffective. In fact, it was the only program in the
    entire Department of Transportation to receive an ineffective
    rating.
        I want to be clear on what this rating means. From the
    administration's description of ineffective, programs receiving
    this rating are not using your tax dollars effectively. That
    seems pretty clear to me.
        I'm concerned, however, that we're not talking about real
    changes to reform Amtrak. I'm unconvinced that Amtrak has
    completely turned the corner and is solidly on the path to
    financial soundness.
        I look forward to the opportunity to hear from the
    witnesses about this budget request and how it fits into
    Amtrak's future. Their testimony will be helpful as we move
    forward with the appropriations process.
        Finally, I want to say a brief word on the Trust Fund. I
    have been fortunate enough to serve on the authorizing
    committee during drafting of the last two surface
    transportation bills. While we struggled to complete action on
    both T21 and SAFETEA and in fact produced both behind schedule,
    in a sense, they were easy.
        With significant funding increases, Congress was able to
    avoid some of the more difficult choices about how we structure
    and fund our surface transportation programs. With the Trust
    Fund that is running on empty, those decisions can no longer be
    avoided.
        I regret that I won't be here to participate in the debate
    for the next bill, but I look forward to today's discussion.
        Thank you, Madam Chairman.
        Senator Murray. Senator Alexander?

                      STATEMENT OF SENATOR LAMAR ALEXANDER

        Senator Alexander. Thank you, Madam Chairman. I thank the
    witnesses for coming. I only have one thing I'd like to say and
    then I'll look forward to your comments.
        Perhaps the greatest compliment I've been paid since I was
    elected a few years ago was by one critic who said the problem
    with Lamar is he hasn't gotten over being Governor, and I
    consider that a big compliment, and one of the things I
    insisted on as Governor was that if we raised money through the
    gas tax to build roads, that we only spent it for
    transportation projects and we did that year in and year out
    and as Governor, I resisted every attempt to take that money
    and use it for something else.
        I want to be the same kind of United States Senator on that
    score that I was as Governor. In Tennessee alone, more than
    $237 million has been taken from transportation funds since
    December 2005, and spent on other purposes, maybe worthy
    purposes, but it's having a severe impact on our State
    transportation system.
        I've heard the chairman talk about the twin goals here of
    dealing with traffic jams and highway safety. About one-half of
    Tennessee's highway budget is funded by the Federal Government.
    Well, when we take $237 million out of Tennessee's highway
    budget, that means less money to relieve traffic jams and less
    money for highway safety, so things don't happen to other
    Americans like what happened to Senator Bond not so long ago.
        So, we're upset about that in Tennessee and so what I want
    to say today is that I intend to offer an amendment in the
    appropriations process in the appropriate way that will exempt
    transportation accounts from these raids by the rest of the
    Federal Government to pay its other bills.
        The American people and Tennesseans have a right to know
    that if they pay gas taxes, that that money is used for
    transportation purposes.
        Thank you.
        Senator Murray. Thank you very much. We will now hear from
    our witnesses and we'll begin with Mr. Simpson who's speaking
    on behalf of the Department of Transportation today as the
    Administrator at the Federal Transit Administration.

                       STATEMENT OF HON. JAMES S. SIMPSON

        Mr. Simpson. On behalf of Jim Ray, the Acting Administrator
    of the Federal Highway Administration, good morning and thank
    you, Chairman Murray, and members of the subcommittee for the
    opportunity to be here today to testify, to discuss the
    President's budget for the Department of Transportation's
    Surface Transportation Programs for fiscal year 2009.
        I am pleased to report to you that the President's budget
    for all of the Department's programs is $68 billion. Of this,
    76 percent or $51.7 billion is for our highways, highway
    safety, and transit programs. Fiscal year 2009 is the final
    year of the current surface transportation authorization known
    as SAFETEA-LU. Our request fulfills the President's commitment
    to provide the total 6-year, $286.4 billion investment that was
    agreed to when SAFETEA-LU was enacted in 2005. It does so
    without raising taxes or subsidizing transportation spending
    with other tax dollars.
        The President's request for the Federal Highway
    Administration reflects the final installment of the total
    agreement for SAFETEA-LU. It totals $40 billion in new
    budgetary resources and reflects the downward adjustment of $1
    billion in accordance with the statutorily-directed revenue-
    aligned budget authority calculation.
        The requested funding will be used to improve highway
    safety and improve the Nation's highway system. The request
    also encourages new approaches to fighting gridlock by
    proposing to use $175 million of inactive earmarks and 75
    percent of certain discretionary program funds to fight
    congestion.
        The President's request for the Federal Transit
    Administration's fiscal year 2009 budget provides a record
    level of funding, $10 billion, for the Federal public transit
    programs. Funding will be used to increase transit system
    capacity and improve safety. It will also leverage private
    investment into public transit through joint development
    activities.
        FTA's request fully funds what is needed in 2009 for the
    New Starts and Small Starts Programs. The request for major
    capital investment grants of $1.6 billion includes funding for
    15 existing and two pending full funding grant agreements. When
    completed, these projects will encourage transit-oriented
    development and promote new economic activity throughout the
    Nation.
        Receipts in the Highway Trust Fund have not kept pace with
    SAFETEA-LU funding levels. This has resulted in the continual
    decline of the cash balances of the Highway Trust Fund. During
    fiscal year 2009, we are projecting a possible $3.2 billion
    shortfall in the Highway Account. However, the Mass Transit
    Account is expected to remain solvent through fiscal year 2009
    with an estimated ending balance of $4.4 billion. This will
    leave a combined total of $1.2 billion in the Highway Trust
    Fund at the end of fiscal year 2009.
        To ensure that the administration can continue to meet its
    commitments to SAFETEA-LU, we are proposing new flexibility to
    manage funds in the Highway Trust Fund by allowing repayable
    advances between the Highway Account and the Mass Transit
    Account. We will be able to support authorized funding levels
    for surface transportation programs with the existing tax
    structure.
        Our proposal would not impact the transit program in fiscal
    year 2009. The President's budget builds on the exciting things
    we are doing at the Department of Transportation to help us
    move forward on a new course, a course that provides high
    levels of safety and mitigates congestion.
        As we look to the next surface transportation
    authorization, we have an opportunity to come together and
    completely reassess our approach to financing and managing
    these programs. The Department looks forward to working with
    the Congress to address the challenges we face in
    transportation and to meet our Nation's transportation
    financing needs.

                               PREPARED STATEMENT

        Thank you for the opportunity to appear today. Jim Ray and
    I would be happy to answer your questions, I on the transit
    portion and Jim Ray on the highway side.
        Thank you.
        [The statement follows:]

                  Prepared Statement of Hon. James S. Simpson

        Good Morning. Thank you, Madam Chairman and members of the
    subcommittee, for the opportunity to appear before you today to discuss
    the President's fiscal year 2009 budget plan for the Department of
    Transportation's surface transportation programs. I am pleased to
    report to you that the President's fiscal year 2009 budget for the
    Department of Transportation is $68 billion. Of this, 76 percent, or
    $51.7 billion, is for our highway, highway safety, and public
    transportation programs.
        As you know, fiscal year 2009 is the final year of the current
    surface transportation authorization--the Safe, Accountable, Flexible,
    Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU).
    Our fiscal year 2009 request fulfills the President's commitment to
    provide the 6-year, $286.4 billion investment in highway, highway
    safety and public transportation programs that was agreed to when
    SAFETEA-LU was enacted in 2005, and does so without raising taxes or
    subsidizing transportation spending with other tax dollars. We are
    working with the President to hold the line on spending, while giving
    travelers and taxpayers the best possible value for their
    transportation dollars by transforming the way our transportation
    system works and is funded.
        The President's budget builds on the exciting things we are doing
    at the Department of Transportation to help us move forward on a new
    course--a course that delivers high levels of safety, takes advantage
    of modern technology and financing mechanisms, and mitigates congestion
    with efficient and reliable transportation systems. However, it is
    increasingly clear that America's transportation systems are at a
    crossroads. Even as we continue to make substantial investments in our
    Nation's transportation systems, we realize that a business-as-usual
    approach to funding transportation programs will not work much longer.
    Long-term, we need a serious reform of our approaches to both financing
    and managing our transportation network. We need to not only maintain
    our infrastructure, but also win the battle against congestion.

                         FEDERAL HIGHWAY ADMINISTRATION

        The President's request for the Federal Highway Administration
    (FHWA) in fiscal year 2009, $40.1 billion in new budgetary resources,
    reflects the final installment to the $286.4 billion total agreement
    for SAFETEA-LU. This level includes a Federal-aid highway obligation
    limitation of $39.4 billion and $739 million in exempt contract
    authority. The obligation limitation reflects a downward adjustment of
    $1 billion from the base level in SAFETEA-LU, in accordance with the
    statutorily directed revenue aligned budget authority (RABA)
    calculation. The request supports the Department's goals and policy
    initiatives, and FHWA's priorities including improving highway safety,
    minimizing project delays, reducing traffic congestion, and promoting
    environmental stewardship and streamlining.
        Since the enactment of SAFETEA-LU in 2005, FHWA has implemented new
    programs to improve highway safety, promoted innovative solutions to
    reduce traffic congestion, worked with other Federal agencies and
    States to streamline the project approval process, enhanced program
    oversight and stewardship, and responded to unforeseen events such as
    Hurricane Katrina and the collapse of the I-35W Bridge in Minneapolis,
    Minnesota. Funding requested in fiscal year 2009 will enable FHWA to
    continue to improve the Nation's highway system while looking ahead to
    the next highway program authorization.
        The budget request for FHWA will help address challenges that still
    confront us, such as congestion mitigation. The fiscal year 2009 FHWA
    budget would encourage new approaches to fighting gridlock by proposing
    to use $175 million in inactive earmarks and 75 percent of certain
    discretionary highway program funds to fight congestion, giving
    priority to projects that combine a mix of pricing, transit, and
    technology solutions. Congestion pricing of our highways will generate
    funding that can be used locally for transit projects. While State and
    local leaders across the country are aggressively moving forward,
    Congressional support and leadership is critical. These projects will
    help us find a new way forward as we approach reauthorization of our
    surface transportation programs.
        The FHWA budget includes $4.5 billion for the bridge program, as
    authorized in SAFETEA-LU. In fiscal year 2009, FHWA will focus its
    bridge program on decreasing the percent of deck area of our Nation's
    highway bridges on public roads that are rated as either structurally
    deficient or functionally obsolete.
        The FHWA safety program will continue to concentrate efforts to
    reduce the number of fatalities on our highways, focusing on four types
    of crashes: roadway departures, crashes at intersections, collisions
    involving pedestrians, and speeding-related crashes. The FHWA budget
    includes more than $1 billion dedicated to safety purposes such as the
    Highway Safety Improvement Program (HSIP), and funds utilized by States
    to support safety infrastructure and operational improvements as part
    of other Federal-aid highway programs such as the National Highway
    System (NHS) and the Surface Transportation Program.
        In fiscal year 2009, FHWA will continue to assist States with the
    implementation of Strategic Highway Safety Plans and safety planning so
    that safety funds will be used where they yield the greatest safety
    improvement. The HSIP provides States with flexibility to use safety
    funds for projects on all public roads and publicly owned pedestrian
    and bicycle paths, and to focus efforts on implementation of a State
    Strategic Highway Safety Plan.
        Rural two-lane, two-way road fatality rates are significantly
    higher than the fatality rates on the Interstate. To address these
    higher rural road fatalities, and in support of our Rural Safety
    Initiative, highway safety program funds will provide a foundation for
    safety improvements in areas where the greatest need exists. The High
    Risk Rural Road portion of the HSIP sets aside $90 million in fiscal
    year 2009 to address safety considerations and develop countermeasures
    to reduce these higher rural road fatalities.

                         FEDERAL TRANSIT ADMINISTRATION

        The President's request for the Federal Transit Administration's
    (FTA) fiscal year 2009 budget provides a record level of funding, $10.1
    billion, for the Federal public transportation programs. This is an
    increase of $643.8 million, or almost 7 percent above the Consolidated
    Appropriations Act, 2008. At this level of funding, FTA will achieve
    quantifiable and executable improvements that support the Secretary's
    priorities--safety, system performance and reliability, and 21st
    century solutions for 21st century transportation problems.
        FTA's budget focuses on priorities such as increasing transit
    system capacity and improving safety and performance with existing
    infrastructure; leveraging private investment in public transportation
    through public-private partnerships and joint development activities;
    finding transit solutions to reduce traffic congestion; implementing
    the President's ``Twenty In Ten'' plan by increasing the fuel economy
    of transit buses; improving customer service through targeted program
    delivery process improvements; and increasing productivity through an
    agency-wide continuous improvement program that identifies new
    opportunities for streamlining, efficiency, and performance
    measurement.
        Within the $10.1 billion, $8.4 billion is requested in fiscal year
    2009 for transit services to provide stable, predictable formula funds
    to urbanized areas and increase funding for underserved rural
    communities. A total of $59.6 million is requested in fiscal year 2009
    to support activities that improve public transportation through
    research and technical assistance.
        FTA's budget fully funds the annual cost of multi-year construction
    projects under the New Starts and Small Starts programs, and is based
    on actual project requirements. The fiscal year 2009 request for major
    capital investment grants of $1.62 billion includes funding for 15
    existing and 2 pending Full Funding Grant Agreements (FFGAs). The
    request is about $52 million over the fiscal year 2008 enacted level.
    When completed, these projects will encourage transit-oriented
    development and related initiatives by improving mobility, reducing
    congestion and pollution, and promoting new economic activity
    throughout the Nation.
        The fiscal year 2009 FTA budget will also provide financial support
    and technology to further our Urban Partnerships. Transit is critical
    to the success of the Urban Partners' efforts to reduce congestion.
    Increasing the quality and capacity of peak-period transit service is
    necessary in order to offer a more attractive alternative to automobile
    travel and to accommodate peak-period commuters who elect to switch to
    transit in response to congestion pricing.

                        STATUS OF THE HIGHWAY TRUST FUND

        The Highway Trust Fund is the principal source of funding for our
    Nation's highway, highway safety and public transportation programs.
    The President's 2009 budget projections reflect a continuing downward
    trend in the Highway Trust Fund cash balances. A fact sheet is attached
    to this statement that displays the current status of the Highway Trust
    Fund. The trust fund has two accounts--a Highway account that funds
    FHWA, the National Highway Traffic Safety Administration (NHTSA), and
    the Federal Motor Carrier Safety Administration (FMCSA) programs--and a
    separate Mass Transit Account that funds FTA programs. By the end of
    the SAFETEA-LU authorization period in 2009, the administration is
    projecting a $3.2 billion shortfall in the Highway Account. The Mass
    Transit Account is expected to remain solvent through fiscal year 2009,
    with an estimated balance of $4.4 billion, leaving a net total of $1.2
    billion in the combined Highway Trust Fund at the end of fiscal year
    2009.

                           HIGHWAY TRUST FUND CASH BALANCES--FISCAL YEAR 2004-FISCAL YEAR 2013
                       [In billions of dollars as shown in the fiscal year 2009 Presidents budget]
    ----------------------------------------------------------------------------------------------------------------
                                                                  Actual                    Estimated      Repayable
                                                   ------------------------------------      Balances       Advances
                                                                                       -------------------  Proposal
                                                      2004     2005     2006     2007     2008     2009       2009
    ----------------------------------------------------------------------------------------------------------------
    Highway Account (HA):
        Cash Balance (Beginning of Year)..........     13.0     10.8     10.6      9.0      8.1      3.0        3.0
        Receipts..................................     29.8     32.9     33.7     34.3     34.2     34.8       34.8
        Outlays \1\...............................     32.0     33.1     35.3     35.2     39.3     41.0       41.0
        Repayable advance from MTA................  .......  .......  .......  .......  .......  ........       3.2
                                                   -----------------------------------------------------------------
          Cash Balance (End of Year)..............     10.8     10.6      9.0      8.1      3.0     (3.2)  .........
                                                   =================================================================
    Mass Transit Account (MTA):
        Cash Balance (Beginning of Year)..........      4.8      3.8      2.0      6.2      7.3      6.4        6.4
        Receipts..................................      4.9      5.0      4.9      5.1      5.0      5.1        5.1
        Flex Funding Transfer \2\.................  .......  .......      1.4      0.2      0.3      0.2        0.2
        Outlays...................................      6.0      6.8      2.0      4.2      6.3      7.3        7.3
        Repayable advance to HA...................  .......  .......  .......  .......  .......  ........      (3.2)
                                                   -----------------------------------------------------------------
          Cash Balance (End of Year)..............      3.8      2.0      6.2      7.3      6.4      4.4        1.2
                                                   =================================================================
          Highway Trust Fund End of Year Cash          14.6     12.5     15.2     15.4      9.4      1.2       1.2
           Balance (Total)........................
    ----------------------------------------------------------------------------------------------------------------
    \1\ Includes Flex Funding Transfer to MTA.
    \2\ Flex Funding in fiscal year 2004 and fiscal year 2005 was fully outlaid to the General Fund.

    Note: Totals may reflect rounding error.

        Despite the anticipated shortfall in the Highway Account, the
    administration retains its strong commitment to SAFETEA-LU programs. To
    ensure that the administration can continue to meet its commitments,
    the budget proposes a new flexibility to manage funds in the Highway
    Trust Fund so the existing tax structure can continue to support
    authorized funding for surface transportation programs. By requesting
    temporary authority to allow ``repayable advances'' between the Highway
    Account and the Mass Transit Account, the fiscal year 2009 President's
    Budget will enable us to complete the current authorization without any
    impact on transit programs in 2009. In addition to ensuring delivery of
    both FHWA and FTA programs, this mechanism will ensure that the vital
    safety programs funded through the Highway Trust Fund for NHTSA and
    FMCSA will also be able to continue without disruption.
        However, as we look to the future, the projected shortfall in the
    Highway Account is evidence of the need to re-examine how surface
    infrastructure is funded in this country.

                      FUTURE SURFACE TRANSPORTATION NEEDS

        For the first time since the creation of the Interstate Highway
    System, we have an opportunity to come together and completely reassess
    our approach to financing and managing surface transportation systems.
    For too long, we have tolerated exploding highway congestion,
    unsustainable revenue mechanisms and spending decisions based on
    political influence as opposed to merit.
        Now, thanks to technological breakthroughs, changing public opinion
    and highly successful real-world demonstrations, it is clear that a new
    path is imminently achievable if we have the political will to forge
    it. That path must start with an honest assessment of how we pay for
    transportation, not simply how much (our current focus). In fact, our
    continued transportation financing challenges are in many ways a
    symptom of these underlying policy failures, not the cause.
        In a report released in July 2007 entitled ``Surface
    Transportation: Strategies Are Available for Making Existing Road
    Infrastructure Perform Better,'' the Government Accountability Office
    (GAO) cited existing revenue mechanisms as the culprit, stating:
        The existing revenue-raising structure provides no incentive for
    users to take these costs (delays, unreliability and pollution) into
    account when making their driving decisions. From an economic
    perspective, a mechanism is needed that gives users price incentives to
    consider these costs in deciding when, where, and how to drive. Because
    the existing structure does not reflect the economic, social, and
    environmental costs of driving at peak periods, drivers who may have
    flexibility to share rides, use mass transit, use more indirect but
    less congested routes, or defer their trips to uncongested times have
    no financial incentives to do so. Without such incentives, the
    transportation system will be headed for more frequent occurrences of
    congestion that last longer, resulting in more time spent traveling,
    greater fuel consumption, and higher emissions in the long run.
        We must decide what our national transportation priorities are, and
    what roles are appropriate for Federal, State and local government as
    well as the private sector, before we can adequately address our
    Nation's infrastructure needs.
        One of the biggest challenges we face is congestion. Technology
    must play an important role in relieving traffic on our Nation's
    highways. Nationwide, congestion imposes delay and wasted fuel costs on
    the economy of at least $78 billion per year. The true costs of
    congestion are much higher, however, after taking into account the
    significant cost of transportation system unreliability to drivers and
    businesses, the environmental impacts of idle-related auto emissions,
    increased gasoline prices and the immobility of labor markets that
    result from congestion, all of which substantially affect interstate
    commerce. Through programs like our Urban Partnerships and Corridors of
    the Future initiatives, we have been aggressively pursuing effective
    new strategies to reverse the growing traffic congestion crisis.
        However, our funding is limited and trying to be all things to all
    people has proven to be an unsuccessful strategy. Options such as
    direct pricing of road use, similar to how people pay for other
    utilities, holds far more promise in addressing congestion and
    generating sustainable revenues for re-investment than do traditional
    gas taxes. Drivers have proven in a growing array of road pricing
    examples in the United States and around the world that prices can work
    to significantly increase highway speed and reliability, encourage
    efficient spreading of traffic across all periods of the day, encourage
    shifts to public transportation and encourage the combining of trips.
    Direct pricing will also reduce carbon emissions and the emissions of
    traditional pollutants. According to Environmental Defense, a nonprofit
    environmental organization, congestion pricing in the city of London
    reduced emissions of particulate matter and nitrogen oxides by 12
    percent and fossil fuel consumption and carbon dioxide (CO2)
    emissions by 20 percent; a comprehensive electronic road pricing system
    in Singapore has prevented the emission of an estimated 175,000 lb. of
    CO2; and Stockholm's congestion pricing system has led to a
    10-14 percent drop in CO2 emissions.
        The Department believes that the highest priorities for Federal
    resources should be:
      --Improving and maintaining the condition and performance of the
            Interstate Highway System. Roughly one quarter of all highway
            miles traveled in the United States takes place on the
            Interstate System;
      --Reducing congestion in major metropolitan areas and increasing
            incentive funds to State and local officials that pursue more
            effective congestion relief strategies. A more effective
            integration of public transportation and highway investment
            strategies is central to this challenge;
      --Investing in and fostering a data-driven approach to reducing
            highway fatalities;
      --Using Federal dollars to leverage non-Federal resources;
      --Focusing on cutting edge, breakthrough research areas like
            technologies to improve vehicle to infrastructure
            communications; and
      --Establishing quality and performance standards.
        A streamlined Federal role would allow the Federal Government to
    ensure accountability for specific investments that are in the national
    interest and give States greater flexibility to prioritize other
    investments in their transportation infrastructure.
        We look forward to partnering with the Congress to address the
    challenges we face in transportation and to meet our Nation's
    transportation financing needs. Thank you for the opportunity to appear
    before you today. I would be happy to answer questions.

        Senator Murray. Very good. Thank you very much. We will
    move to Mr. John McCaskie, Chief Engineer of Swank Associated
    Companies, who will speak on behalf of the Transportation
    Construction Coalition.

                           NONDEPARTMENTAL WITNESSES

    STATEMENT OF JOHN McCASKIE, CHIEF ENGINEER, SWANK
                ASSOCIATED COMPANIES, ON BEHALF OF THE
                TRANSPORTATION CONSTRUCTION COALITION
        Mr. McCaskie. Madam Chairman, Senator Bond, and members of
    the subcommittee, thank you for convening this hearing to
    discuss the financial outlook for the Highway Trust Fund.
        My name is John McCaskie, and I am chief engineer of Swank
    Associated Companies, a highway and bridge construction firm
    located in western Pennsylvania.
        I appear today on behalf of the Transportation Construction
    Coalition, a coalition of 28 national associations and labor
    unions.
        The Federal Highway Program is facing a potentially
    devastating situation that, if not remedied soon, will impact
    not only State transportation programs but the construction
    industry and the economy in general.
        SAFETEA-LU set guaranteed funding for the Federal Highway
    Program at the highest annual levels that could be supported by
    projected Highway Trust Fund revenues and existing balances at
    the time. Since then, it's become evident that the revenue
    projections Congress relied on at that time were overly
    optimistic. As a result, projected highway account revenues are
    $3.7 billion below the amount necessary to support the SAFETEA-
    LU fiscal year 2009 highway investment level of $41.2 billion.
        Based on the historic spend-out rate, the Highway Account
    could support no more than $29.5 billion of new obligations for
    fiscal year 2009. This is $13.7 billion less than the amount
    appropriated in fiscal year 2008. Every State would be hit with
    a 32 percent cut in Federal highway funds.
        Our Nation already faces a transportation crisis. We are
    not currently investing enough to address that crisis and
    cannot afford to get further behind by cutting transportation
    investment.
        Some warning signs include 27 percent of the Nation's
    nearly 600,000 bridges have structural problems, pavement
    conditions on one-third of America's major roads are not up to
    minimum standards, many of the 15,000 interchanges on the
    interstate system are unsafe or create bottlenecks, and the
    number of vehicles using our highways has nearly doubled in the
    past 25 years while we have added less than a 7 percent
    increase in lane miles.
        The transportation construction industry is concerned we
    may be facing the perfect storm set of conditions that could
    lead to substantial downturn in construction of transportation
    facilities. While public investment in transportation
    infrastructure has remained relatively stable over the past
    year, these numbers don't tell the full story.
        Dramatic construction material cost inflation has reduced
    the purchasing power of public works dollars. As a result,
    fewer contracts are going to bid, which leads to less work for
    contractors, fewer jobs for employees, and denial of
    transportation improvements to the public.
        An industry survey of States indicates that many DOTs have
    cut back substantially in the number of highway projects going
    to bid. The cutback in contracts being bid is already being
    felt. Heavy and civil engineering construction employment
    peaked in January 2007. Over the past 14 months, there has been
    more than a 2.4 percent decrease in heavy and civil
    construction employment over that period of time, which equates
    to 24,400 construction employees out of work.
        An industry survey of the transportation construction
    businesses indicates that further layoffs are a looming
    possibility.
        Not addressing the Highway Trust Fund revenue shortfall and
    the potential resulting cut of as much as 32 percent in highway
    funding would result in further cutbacks in transportation
    projects and lead to further job losses. While the situation
    may seem bleak, there is hope. The Senate Finance Committee, as
    you mentioned, Chairman Backus and Ranking Republican Grassley
    have developed legislation that allows SAFETEA-LU highway
    investment commitment to be met.
        The Backus-Grassley plan would generate new Highway Account
    revenues by crediting the account for currently unrealized
    highway user fee receipts. Furthermore, the legislation is
    fully offset.
        Madam Chairman, failure to address this situation will
    impede your ability to fully fund the Highway Program in fiscal
    year 2009. The Transportation Construction Coalition urges this
    subcommittee's support for the Backus-Grassley proposal and the
    Transportation Construction Coalition is working diligently to
    build broadbased congressional support for this measure.

                               PREPARED STATEMENT

        Thank you again for the opportunity to appear before you
    today and I would be happy to answer any questions that you
    might have.
        [The statement follows:]

                      Prepared Statement of John McCaskie

                          HIGHWAY TRUST FUND SOLVENCY

        Madam Chairman, Senator Bond and members of the subcommittee, thank
    you for inviting the Transportation Construction Coalition to testify
    on the financial outlook for the Highway Account of the Highway Trust
    Fund. What I would like to focus on this morning is how failure to
    address the projected shortfall of Highway Account revenues could
    affect Federal highway investment and highway construction in the
    United States this year and next.
        When Congress enacted the Safe, Accountable, Flexible, Efficient
    Transportation Equity Act: A Legacy for Users--or SAFETEA-LU--in August
    2005, guaranteed funding for the Federal highway program was set at the
    highest annual levels for fiscal years 2005 through 2009 that could be
    supported by projected Highway Account resources. Not only did the bill
    spend all of the projected revenues into the Highway Account through
    2009, it also spent down the accumulated cash balance in the Highway
    Account, envisioning virtually no cash reserve when SAFETEA-LU expires
    on September 30, 2009.
        Since then, it has become evident that the revenue projections
    Congress relied on at that time were overly optimistic. Actual Highway
    Account revenues in fiscal year 2007 were about $300 million less than
    originally expected and the Treasury now projects about $2.7 billion
    less Highway Account revenues in fiscal year 2008 and 2009, for a total
    shortfall of about $3.0 billion. This, combined with higher outlays due
    to positive RABA adjustments in fiscal year 2007 and 2008 and the extra
    $1 billion bridge investment in fiscal year 2008, means that outlays
    from the Highway Account are now projected to exceed revenues by $3.7
    billion in fiscal year 2009 if the Federal highway program is fully
    funded as enacted in SAFETEA-LU, as shown in Figure 1.

        The Bush administration has proposed two measures for addressing
    this shortfall. First, it proposes to limit Federal highway investment
    in fiscal year 2009 to $39.4 billion rather than the $41.2 billion
    guaranteed in SAFETEA-LU. Second, it proposes to let the Highway
    Account borrow the necessary cash from the Mass Transit Account, which
    will continue to show a positive balance through the end of fiscal year
    2009.
        The administration's proposal is a band-aid. Unfortunately the
    patient needs surgery. Their plan fails to address the core issue of
    insufficient Highway Account revenues. The Transportation Construction
    Coalition opposes it because it perpetuates a zero-sum mentality by
    transferring resources from one mode of transportation to another.
    Madame Chairman, the reality is that greater resources are needed for
    both the highway and public transportation programs.
        We are happy to see that both Houses of Congress have passed budget
    resolutions that assume the full $41.2 billion highway investment
    guaranteed for fiscal year 2009. But Congress still has to address the
    pending Highway Account insolvency to assure this recommendation can be
    realized in this year's appropriations process. Other than borrowing
    from the Mass Transit Account, there are only three options.
        One is to cut highway funding in fiscal year 2009 to an amount that
    could be supported by existing revenue projections.
        Based on the historic spendout of Federal highway funds, the
    Highway Account could support no more than $29.5 billion of new
    obligations for the Federal highway and highway safety programs in
    fiscal year 2009, as shown in Figure 2. This is $13.7 billion less than
    the amount appropriated in fiscal year 2008. Every State would be hit
    with a 32 percent cut in Federal highway funds. Washington State, for
    example, would see its Federal highway funds cut from $573 million in
    fiscal year 2008 to about $390 million in fiscal year 2009. Dozens of
    planned highway improvements in the State would have to be postponed or
    cancelled. Missouri would be hit with a $240 million drop in Federal
    highway funds, from $762.5 million in fiscal year 2008 to about $518
    million in fiscal year 2009. Other States would experience similar
    cuts.

        A second option would be to fully fund the Federal highway program
    at $41.2 billion in fiscal year 2009 but not add revenues to the
    Highway Account.
        In this case, State departments of transportation (DOTs) could move
    forward on Federal-aid highway projects, but the Federal Highway
    Administration would not be able to pay the bills on time. Currently,
    when a state DOT pays a contractor for work completed on a Federal-aid
    project, the State invoices the Federal Highway Administration for the
    Federal share and receives an electronic transfer of funds usually
    within 24 hours. But when the Highway Account cash balance is
    exhausted, FHWA can pay bills only as new revenues come in, which means
    most bills will be days to weeks late.
        With the economic downturn eroding State government revenues, many
    States will have no option but to stop work on highway projects,
    putting thousands of construction workers out of jobs. The reaction on
    Wall Street and in international markets when investors in Treasury
    bonds see a Federal agency failing to pay its bills on time can only be
    imagined.
        Furthermore, an unfunded highway program is a very dangerous and
    disturbing precedent to set on the eve of a new multi-year
    reauthorization of the Federal surface transportation program.
        Congress has a third option for dealing with the projected Highway
    Account deficit and that is to inject additional revenues. Senate
    Finance Committee Chairman Max Baucus and Ranking Republican Charles
    Grassley made a commitment to you last year to find the necessary
    revenue to keep the Highway Trust Fund whole for the life of the
    current authorization. They honored that commitment when the Finance
    Committee developed a three-part plan--the American Infrastructure
    Investment and Improvement Act, S. 2345--that would:
      --Compensate the Trust Fund for emergency highway spending since
            1998;
      --Suspend exemptions from the Federal motor fuels taxes for 6 months;
            and
      --Reduce motor fuel tax evasion.
        The proposal would generate an estimated $5.1 billion for the
    Highway Account between now and the end of fiscal year 2009, which
    would be sufficient to support a $41.2 billion Federal highway
    investment in fiscal year 2009 as called for in SAFETEA-LU and possibly
    provide a small cash cushion for the SAFETEA-LU reauthorization
    process. We strongly support this proposal, even though it is
    temporary, and urge all Members of Congress to support enactment of the
    Senate Finance Committee proposal.
        The transportation construction industry is concerned we may be
    facing a ``perfect storm'' set of conditions that could lead to a
    substantial downturn in the construction of highways, bridges, transit
    and other transportation facilities. Dramatic construction material
    cost inflation has reduced the purchasing power of public works
    dollars. As a result, fewer contracts are going out to bid which leads
    to less work for contractors and fewer jobs for their employees. Not
    addressing the Highway Trust Fund revenue shortage would result in a
    further cutback in transportation projects. This would heighten the
    ``perfect storm'' scenario and have a drastic effect on not only the
    transportation construction industry but the U.S. economy as well. The
    construction industry employs more than 7 million people (about 5
    percent of total employment) and represents more than $1 trillion
    annually in economic activity including the purchase of $500 billion in
    materials and supplies and $36 billion in new equipment. Construction
    represents over 8 percent of annual U.S. gross domestic product.
        While economic data show that public investment in transportation
    infrastructure has remained relatively stable over the past year, these
    numbers do not tell the full story. An industry survey of States
    indicates that many have cut back on the number of highway projects
    going out to bid in the last year because of the significant increase
    in highway construction material costs. Economic research shows that
    the Producer Price Index (PPI) for highway and street construction rose
    49 percent from December 2003 to February 2008. This compares to a 15
    percent increase in the Consumer Price Index (CPI) over the same period
    of time. The PPI reflects the dramatic increase in the cost of basic
    building materials, including: steel, cement, asphalt, aggregate and
    other materials. Diesel fuel price increases also impact this cost as
    construction activity is energy intensive.
        State and local budgets are also feeling pressure. At the beginning
    of 2008, 13 States were facing severe budget deficits this year,
    including multi-billion dollar deficits in: California, New York and
    New Jersey. Six more States will be facing significant deficits. Local
    governments, dealing with the ramifications of the housing crisis are
    cutting budgets all across the country.
        The impact from the cutback in contracts being bid by State DOTs is
    already being felt. Heavy and civil engineering construction employment
    peaked in January 2007 and has steadily decreased over the past 14
    months. There was more than a 2.4 percent decrease in construction
    employment over that time period, which equates to 24,400 construction
    employees now out of work. An industry survey of transportation
    construction businesses indicates that future lay offs are a very real
    possibility if States continue to cut back on the number of contracts
    going out to bid. This worrisome trend should not be allowed to
    continue. The potential cut of as much as 32 percent in highway program
    funding in fiscal year 2009 would lead to further job loss only making
    this situation worse.
        The fact that the pending highway trust fund insolvency won't occur
    until fiscal year 2009 belies the fact that Congress cannot waste time
    resolving the problem. This has to be addressed quickly or it will have
    a serious negative impact on highway construction this year,
    compounding the economic downturn and partially thwarting the recent
    efforts of Congress to stimulate the economy.
        As States face uncertainty about receiving their Federal
    apportionment, they tend to take a conservative approach and cut back
    on the number of contracts going out to bid. Since highway and bridge
    projects take time to plan and construct, a reliable and predictable
    flow of financing is essential to keep construction plans on schedule.
    Whenever there is a disruption in Federal financing as often occurs
    during reauthorization or uncertainty about Federal highway funding as
    happened in fiscal year 2003, when this committee led the effort to
    overcome a potential $8.6 billion cut in Federal highway investment--
    and is facing us again in fiscal year 2009--State DOTs often hold back
    on starting new projects. They simply cannot afford to commit money
    they may not receive. And this becomes an even bigger problem when the
    economy is in a recession and State governments have their own fiscal
    problems. Uncertainty and disruptions in Federal funding for highway
    and bridge construction is detrimental to the construction industry and
    the economy because decisions about investing in equipment and hiring
    and training employees are deferred. The public also suffers because
    the long term capital investments funded by these dollars are deferred
    and therefore transportation improvements that improve safety, ease
    commutes, and promote economic development are delayed.
        The last time we faced a situation of uncertainty about Federal
    highway investment combined with pending reauthorization and an
    economic recession was in 2002 and 2003. The combination forced many
    States to cut back on highway construction. As Figure 3 shows, the
    value of construction work put in place on the Nation's highways and
    bridges actually fell in 2002 and remained flat until 2005. The same
    forces are at work today, and there is the distinct possibility of a
    similar downturn in the 2008 construction season.
        With the economy facing a possible recession and Congress
    committing $160 billion in tax rebates and incentives to stimulate the
    economy, it makes no sense to worsen the economic situation by putting
    thousands of highway construction workers out of jobs this summer.

        Madam Chairman, we appreciate the efforts of this subcommittee to
    draw attention to this critical issue during last year's appropriations
    process. We recognize that failure to address this situation as soon as
    possible will impede your ability to fully fund the highway program as
    you move forward with the fiscal year 2009 transportation
    appropriations bill. In this regard, we hope all members of this
    subcommittee will support the proposal developed by Senators Baucus and
    Grassley to ensure the highway investment commitment made in SAFETEA-LU
    for fiscal year 2009 becomes a reality. Rest assured that the
    Transportation Construction Coalition is working diligently to urge all
    Members of Congress to resolve this issue.
        Thank you very much for the invitation to testify and I am happy to
    respond to questions.

        Senator Murray. Thank you very much. Mr. Millar, if you
    would speak to us? The President of the American Public
    Transportation Association.
    STATEMENT OF WILLIAM W. MILLAR, PRESIDENT, AMERICAN
                PUBLIC TRANSPORTATION ASSOCIATION
        Mr. Millar. Thank you, Madam Chair, and thank all the
    members of the committee for the invitation to be with you.
        Before I address the Highway Trust Fund, let me just second
    something you said in your opening statement, Madam Chair.
        We believe that an economic fiscal package needs to include
    public transit and highway construction. Our own members have
    said they have some $3.6 billion worth of ready-to-go projects
    that could mean thousands of jobs for Americans. We would
    strongly support that. So, thank you very much.
        As you all know, the Highway Trust Fund was created in
    1956. It was created primarily to provide a reliable and
    adequate source of funds to build the Nation's interstate
    highway system.
        In 1982, the Congress amended that Trust Fund and President
    Reagan signed into law a bill that would allow a portion of the
    funds to provide funding for public transportation projects as
    well.
        The Highway Trust Fund has worked well. It has provided a
    reliable and predictable funding mechanism both for highways
    and for public transportation. It has been phenomenally
    successful and therefore we must find ways to save it.
        Now over the years, the Congress had periodically approved
    modest increases in the user fees to fund increases in the
    Trust Fund. Unfortunately, the Congress has not made such an
    approval since 1993. As a result, and I completely agree with
    Mr. McCaskie's statements there, the pure inflation as well as
    the growing needs of our country has meant there simply is not
    enough money for public transit or highway construction.
        As things stand now, the Fund is scheduled to run--the
    Highway Account is scheduled to run out of money next year,
    fiscal year 2009, followed by the Transit Account shortly
    thereafter. Therefore, there isn't a lot of time here. The
    Congress must fix these problems.
        If there's any doubt about it, only look at the collapse of
    the I-35 bridge in Minnesota and then all the subsequent work
    that was done to identify deficient transportation facilities
    throughout the country. We're behind in what we should be
    investing in and as the National Surface Transportation Policy
    and Revenue Study Commission pointed out, the importance of
    having a good transportation system because it is fundamental
    to the growth of our economy, to the ability of our Nation to
    meet its people's needs, to provide jobs and to provide for the
    kind of life that all Americans want to have.
        We certainly agree with that Commission's recommendation
    that the Highway User Fee must be immediately raised to restore
    purchasing power and to allow growth in highway and transit
    investment.
        For fiscal year 2009, we ask you to act quickly. We should
    not accept the administration's proposal. We should reject the
    administration's proposal. It makes no sense, as they say, to
    rob Peter to pay Paul. Both highway investment is important,
    public transit investment is important, and we need to make
    sure there's adequate funding for both.
        We do think that a temporary fix needs to be put in place
    for 2009. We strongly support the work of the Finance Committee
    and its leadership to try to identify a temporary fix. All of
    us know it's only temporary and that by the next year, when
    SAFETEA-LU is scheduled to be reauthorized, a long-term and
    permanent fix will be necessary here.
        I think it's important to point out that many associations
    have come to agreement on this, besides my own APTA that deals
    primarily in transit. Certainly the American Association of
    State Highway and Transportation Officials, AASHTO, which deals
    with all modes of transportation, the U.S. Chamber of Commerce,
    Americans for Transportation Mobility, the American Road and
    Transportation Builders Association, ARTBA, the Associated
    General Contractors, AGC, to name just a few, have come
    together in common interests and belief in this, and we
    strongly urge you to work with the Finance Committee to find a
    temporary fix, reject the administration's proposal. It would
    not be appropriate. Then, finally, we need to work together on
    a long-term fix.

                               PREPARED STATEMENT

        So, in my remaining few seconds here, let me also say that
    we certainly hope the subcommittee will work to restore the
    proposed Bush administration cut in the Transit Program. We
    need to make sure that the levels that the Congress set in
    SAFETEA-LU are met and again we would ask you to reject the
    administration's proposal.
        Thank you, Madam Chair. I'd be happy to answer any
    questions you might have.
        [The statement follows:]

                    Prepared Statement of William W. Millar

                                  INTRODUCTION

        Chairman Murray, Ranking Member Bond and members of the
    subcommittee, I thank you for the opportunity to testify today on
    behalf of the American Public Transportation Association (APTA), to
    provide the perspective of the public transportation industry on the
    status of the highway trust fund. My name is Bill Millar, and I am the
    President of APTA.

                                   ABOUT APTA

        APTA is a nonprofit international association of more than 1,500
    public and private member organizations, including transit systems and
    commuter rail operators; planning, design, construction, and finance
    firms; product and service providers; academic institutions; transit
    associations and State departments of transportation. APTA members
    serve the public interest by providing safe, efficient, and economical
    transit services and products. More than 90 percent of the people using
    public transportation in the United States and Canada are served by
    APTA member systems.

                      THE STATUS OF THE HIGHWAY TRUST FUND

        Madam Chairman, the Highway Trust Fund was created by Congress in
    1956 to provide a dedicated revenue source for the Federal Government
    to build the interstate highway system. In 1982 Congress enacted
    legislation that was singed into law by President Reagan that created
    the mass transit account of the highway trust fund, which provides a
    dedicated source of revenue for public transportation. Funded primarily
    by the motor fuels user fee, the trust fund has provided a steady
    stream of revenue to fund critical capital surface transportation
    projects in America for more than five decades.
        The Federal gas tax is currently set at 18.4 cents per gallon, and
    of that, 2.86 cents is dedicated to the mass transit account. The mass
    transit account of the highway trust fund has served as a dependable
    funding source for the Federal transit program for over 25 years.
    Revenues generated from the highway user fee have allowed for a steady
    growth in Federal capital investment in public transportation.
    Currently, approximately 80 percent of the Federal dollars invested in
    public transportation come directly from the trust fund. This reliable
    funding mechanism has provided predictable and guaranteed investment in
    transit, allowing for not only large scale capital transit projects
    throughout the country, but also important smaller scale transit
    investments.
        Unfortunately, the future of the highway trust fund is in jeopardy.
    Receipts from the highway user fee are not generating sufficient
    revenue to sustain the current level of Federal investment in the
    surface transportation program. While Congress has periodically
    approved modest increases for Federal investment in surface
    transportation, it has not approved an increase in the user fee since
    1993. Recent Congressional Budget Office projections show that by the
    end of fiscal year 2009, without intervening action by Congress, the
    highway account of the trust fund will no longer be solvent. Those same
    projections show that the mass transit account will be insolvent by
    fiscal year 2012. Without sufficient revenues in the trust fund,
    Congress will not be able to continue to sustain current levels of
    Federal investment in surface transportation, and insolvency will make
    future growth in the Federal program impossible. This is bad news at a
    time where increased investment in our Nation's transportation
    infrastructure is critical. One only needs to look at the collapse of
    the 1-35 bridge in Minnesota to realize the importance of maintaining
    and growing Federal investment in the surface transportation program.
        In its recent report on the status of the surface transportation
    program in America, the National Surface Transportation Policy and
    Revenue Study Commission noted that a good transportation
    infrastructure is essential to the Nation's economic health, and we
    need to invest more to both preserve the current aging system and to
    expand and improve our transportation infrastructure to meet the
    demands of our growing population. The report recommends that an
    immediate increase in the highway user fee is necessary to restore the
    purchasing power of the trust fund, and it should be indexed to account
    for future inflation. APTA agrees with those conclusions, and calls on
    Congress to make the necessary increase as it considers the next
    surface transportation authorization legislation next year.
        Since there has been no increase in the motor fuel tax since 1993,
    inflation has steadily eroded the purchasing power of the highway trust
    fund. In addition, recent studies by the U.S. Department of
    Transportation on price trends for construction show that increases in
    construction costs have outpaced inflation, further weakening the
    ability of the trust fund to meet investment needs. The original
    purchasing power of the gas tax must be restored to allow for growth in
    the Federal investment in our Nation's surface transportation
    infrastructure.

                              SHORT TERM SOLUTIONS

        While Congress will have the opportunity to address the long term
    stability of the trust fund in the next authorization bill, more
    immediate action is needed to prevent the insolvency of the highway
    account in fiscal year 2009. A short term solution is to ensure that
    revenues are available for Congress to appropriate the guaranteed and
    authorized levels in SAFETEA-LU for the highway program. APTA supports
    full funding of the highway program in fiscal year 2009, but we
    strongly oppose the administration's short sighted proposal to raid the
    mass transit account to cover the short fall.
        The President's budget, released in early February, proposes to
    allow transfers of balances in the mass transit account into the
    highway account to cover projected short falls that occur before the
    end of fiscal year 2009. The administration estimates that this will
    result in a transfer of up to $3.2 billion out of the mass transit
    account. As I wrote to this subcommittee a month ago, we urge Congress
    to reject the administration's proposal. Concern over the projected
    insolvency of the highway account does not justify the proposed
    transfer. Not only is this a temporary fix for the highway account, but
    it jeopardizes public transportation investment by hastening the
    insolvency of the mass transit account. Absent new revenues for
    transit, this would preclude funding the transit program at even
    current levels by fiscal year 2010. The tens of millions of Americans
    who depend on public transportation should not be penalized, especially
    when there are other alternatives to meeting highway funding needs in
    fiscal year 2009. While it is important to fix the Federal highway
    account, robbing Peter to pay Paul is not the way to go. The
    President's short-sighted transportation policy ``fix'' is
    irresponsible and flies in the face of common sense. With more than 10
    billion trips taken on public transportation annually, public
    transportation's growth rate outpaced the growth rate of the population
    and the growth rate of vehicle miles traveled on our Nation's roads
    over the past 12 years. This irresponsible proposal has also been
    opposed by American Association of State Highway Transportation
    Officials (AASHTO), the U.S. Chamber of Commerce's Americans for
    Transportation Mobility (ATM), the American Road and Transportation
    Builders Association (ARTBA), and the Association of General
    Contractors (AGC), to name only a few.
        The Senate Finance Committee has proposed legislation that would
    prevent the insolvency of the highway account in fiscal year 2009,
    without borrowing funds from the mass transit account. APTA supports
    this proposal and we urge Congress to adopt it as soon as possible.

       FISCAL YEAR 2009 TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT
                              APPROPRIATIONS BILL

        I also want to take this opportunity to comment briefly on the
    President's funding request for public transportation in fiscal year
    2009. APTA is disappointed that the Bush administration's budget
    request would fund Federal transit programs in fiscal year 2009 at
    $202.1 million less than the levels authorized and guaranteed in
    SAFETEA-LU. As your subcommittee works to adopt the fiscal year 2009
    Transportation and Housing and Urban Development Appropriations bill,
    we urge you to reject this proposed cut and to provide full funding for
    the pubic transportation program at $10.3 billion, as authorized in
    SAFETEA-LU. The $10.1 billion the president proposes for public
    transportation does not come close to addressing current transit
    capital needs, let alone the costs of a growing public transit system
    that meets growing demands for more public transportation. Ironically,
    failure to adequately fund the Federal transit program will push more
    public transportation riders onto already congested roads making
    matters worse for road users.
        Adequately funding public transportation is an important action
    that benefits all Americans and meets many of our Nation's national
    priorities. Public transportation helps Americans save money and is a
    key strategy in helping conserve energy, minimize climate change and
    reduce highway congestion. A household that uses public transportation
    saves more than $6,200 every year, compared to a household with no
    access to public transportation. This amount is more than the average
    household pays for food each year. Using public transportation is also
    one of the quickest ways that people can help our country become energy
    independent since using public transit saves 4.26 billion gallons of
    gasoline every year (the equivalent of 324 million cars filling up or
    almost 900,000 gallons per day). Using public transportation is also
    more effective at reducing greenhouse gases than environmentally
    friendly household activities which everyone should do, such as home
    weatherizing, changing to efficient light bulbs, and using efficient
    appliances.
    The Bus and Bus Facilities Program and Urban Congestion Initiative
        I would also like to express my gratitude to this subcommittee for
    including a provision in the Fiscal Year 2008 Omnibus Appropriations
    bill that limits the Federal Transit Administration (FTA) from spending
    more than 10 percent of Bus and Bus Facilities Program funds on
    congestion pricing initiatives. We urge the subcommittee to continue to
    protect these funds by adopting a similar provision in the fiscal year
    2009 THUD bill. As you know, in fiscal year 2007, Congress did not
    allocate Bus and Bus Facilities Program funds, and instead gave the
    funds to the FTA to distribute to transit agencies to address capital
    needs. We were disappointed that the U.S. Department of Transportation
    (U.S. DOT) decided to allocate virtually all of these funds to its
    Urban Partnership Congestion Initiative (UPCI). While members of APTA
    recognize the potential benefits of projects funded under the UPCI, we
    do not believe that these projects should be funded at the expense of
    much needed capital investment for buses and bus facilities across the
    Nation. Numerous transit systems, both large and small, depend on this
    Federal capital assistance to replace aging buses, expand bus fleets to
    meet growing service demands, and address needs for vehicle maintenance
    and fueling facilities.
    New Starts Rule
        We also appreciate the subcommittee's inclusion of language in the
    Fiscal Year 2008 Omnibus Appropriations bill that from prohibits the
    FTA from finalizing its Notice of Proposed Rulemaking (NPRM) for the
    New Starts and Small Starts program. Simply put, the NPRM is
    unacceptable to the transit industry, and does not sufficiently follow
    guidance provided by SAFETEA-LU. For example, the proposed rule does
    not sufficiently consider the benefits of economic development and land
    use criteria in its project approval rating process, and does not
    effectively simplify the Small Starts approval process. The provision
    adopted by Congress to prevent FTA from finalizing this NPRM expires at
    the end of the fiscal year on September 30, and we urge the
    subcommittee to extend the prohibition prior to its expiration.

                                   CONCLUSION

        I thank the subcommittee for allowing me to share my views on the
    status of the highway trust fund and fiscal year 2009 transit
    appropriations issues. We look forward to working with the subcommittee
    to take necessary steps to ensure the future solvency of the trust
    fund, so that we can meet the investment needs of our surface
    transportation system. We urge Congress to reject the administration's
    short-sighted proposal to raid the mass transit account of the highway
    trust fund to cover the projected short-fall in the highway account in
    fiscal year 2009, and instead urge this subcommittee to support the
    common sense proposal to solve this problem that is being advanced by
    the Senate Finance Committee. Finally, we urge the subcommittee to
    fully fund the transit program in fiscal year 2009 at the level
    authorized and guaranteed in SAFETEA-LU, and to renew provisions that
    ensure that transit funds are spent in accordance with the authorizing
    statutes.

                         FEDERAL HIGHWAY BUDGET REQUEST

        Senator Murray. Thank you very much. Administrator Ray, I'm
    going to start with you. Your budget proposal would make
    dramatic cuts to the Highway Program. Your request is $1.8
    billion less than the level we appropriated for this current
    year.
        Using the most recent information on the impact of highway
    funding on the economy, this cut to the Highway Program
    represents a potential loss of over 54,000 well-paying jobs and
    almost $2 billion of employment income. You know, few areas in
    our economy have deteriorated as badly as employment in the
    construction sector.
        So, given the state of the economy, is this the right time
    to cut back on infrastructure investments and worsen the job
    losses in our construction sector?
        Mr. Ray. Madam Chairman, thank you for the question. First
    and foremost, let me say that we're, of course, very concerned
    about the economy at the Department of Transportation. We
    recognize that transportation in America is really the life
    blood of the American economy, but let me say that the numbers,
    the $1.8 billion reduction that you're talking about is an
    effort to bring spending in line with the agreement made
    between the administration and the Congress in the original
    SAFETEA-LU agreement. Of that amount, $1 billion is the
    negative RABA adjustment and the rest of it a step to bring
    spending in line with SAFETEA-LU figures.
        The true point of your question is, is this the appropriate
    time to be cutting spending like that, considering the jobs?
    Let me suggest that all of our estimates with regard to
    spending a billion dollars of Federal funding plus the 20
    percent State match supports 34,700 jobs. These are jobs that
    are sustained by current funding levels. They are not jobs that
    are created by funding levels and I think that's an important
    distinction to make.
        The other thing that is important to note about
    transportation spending is that approximately only one-third of
    the jobs created for every $1.25 billion, again that's the
    Federal and the State investment into the transportation
    marketplace, are actually construction-related jobs. The others
    are more downstream.
        Senator Murray. Well, I want Mr. McCaskie to comment on
    that, but first, you claim your budget's just following
    SAFETEA-LU, but in reality, your budget proposals over the last
    couple years have sometimes honored the SAFETEA-LU law and
    sometimes ignored it.
        This year, more than half of the cuts you propose to take
    out of the Highway Program is due to the revenue aligned budget
    authority adjustment that's called for in SAFETEA-LU. That
    provision adjusts highway funding up or down based on
    projections of revenue to the Highway Trust Fund.

                        REVENUE ALIGNED BUDGET AUTHORITY

        Last year, you asked this subcommittee to eliminate Revenue
    Aligned Budget Authority (RABA) adjustment because it would
    trigger increased highway spending. This year, you want us to
    fully honor the RABA adjustment because it would cut highway
    funding.
        So, explain the discrepancy.
        Mr. Ray. Madam Chairman, I appreciate the comment, and it
    seems to be a particular note of interest. Of course, I'm sure
    you know that my predecessor, Administrator Capya, was in this
    position at the time. We'd be happy to respond on the record
    for that.
        Senator Murray. Do you have different philosophies?
        Mr. Ray. It would be premature for me to say. I don't know
    the specifics of what occurred last year. So again, I'd be
    happy to respond on the record, but I don't have that
    information in front of me at this time.
        Senator Murray. Were you at the agency last year?
        Mr. Ray. I was.
        Senator Murray. Were you in any discussions about this?
        Mr. Ray. I was not. I was in the role of Chief Counsel last
    year, but again I would be happy to work with your staff,
    respond on the record and get you a full answer on that in the
    days and weeks to come.
        [The information follows:]

        In preparing its fiscal year 2008 budget, the administration
    considered the projected shortfall in the Highway Account of the
    Highway Trust Fund and determined that it would be prudent to begin to
    address it in fiscal year 2008, and to not increase the discretionary
    Federal-aid highway obligation limitation for RABA in fiscal year 2008.
    The requested level would have been more effective in avoiding a cash
    shortfall during the SAFETEA-LU authorization period than waiting until
    fiscal year 2009 to control spending. Outlays from the Federal-aid
    highway program take place over a number of years, with the highest
    outlays in the second year (the year after an obligation is made).
        Again mindful of the projected Highway Trust Fund shortfall, the
    President's fiscal year 2009 budget proposes a $1.8 billion reduction
    to the fiscal year 2009 Federal-aid highway obligation limitation that
    incorporates the negative $1 billion RABA calculation authorized in
    SAFETEA-LU.

        Senator Murray. Okay, interesting. All right, Mr. McCaskie,
    do you want to comment on the economy and jobs impact of
    transportation funding?
        Mr. McCaskie. I really don't view the Highway Trust Fund as
    strictly a jobs situation. Yes, it employs a lot of people, but
    my focus is on the condition of the highways because what we
    are working on out there today is strictly catch-up maintenance
    and we don't have enough people to do it or enough money to
    keep even, but to cut highway funding, irrespective of
    employment, is ludicrous.
        I heard about Minneapolis. I think we all should feel that
    we were extremely fortunate that Minneapolis was not much worse
    and you say, well, we lost lives and so forth. I would repeat,
    we were very fortunate.
        In Pennsylvania, we have a bridge problem that some
    advertise as the worst of any of the States. I think we have
    competition. The problems that have developed lately, i.e., the
    closing of I-95 for a couple of days to put some shoring under
    it, the closing of the Birmingham Bridge in Pittsburgh, these
    are just indications of the deterioration.
        We bought an interstate system, a wonderful purchase, but
    it's bordering on 50 years old and just like the 20-year roof
    on your house, it needs repairs.
        Thank you.

                        TRANSIT REQUEST BELOW SAFETEA-LU

        Senator Murray. Thank you. Let me go back to SAFETEA-LU one
    more time. Administrator Simpson, you request an increase in
    funding for the Transit Administration over last year's level,
    but you still don't request the $200 million in funds that were
    authorized by SAFETEA-LU.
        Why does the Transit budget ignore the SAFETEA-LU law?
        Mr. Simpson. Well, I wouldn't say that we're ignoring it.
    The shortfall, as you might call it, of $202 million, $188
    million of which is from the New Starts Program, and the need
    wasn't there. We looked at all the projects that we had in the
    pipeline and the flow charts of demand for each project over
    each fiscal year. Then we prepared the budget to meet the need
    100 percent. There's not one project that we're not funding.
        Had we other projects that were ready to go, we would have
    asked for more money. So, we took a needs-based approach and
    did not request the remaining portion of the authority, I would
    hope that you would call that good government because while my
    colleague to the left wants the full amount of SAFETEA-LU, I'm
    sure he's also happy that we're trying to be good caretakers--
    --
        Senator Murray. Well, I'd like to ask Mr. Millar where the
    needs are there. You just heard----
        Mr. Simpson. Well, I'd like to finish my answer.
        Senator Murray. Quickly, if you would.
        Mr. Simpson. Yes, because the other part of it was
    discretionary administrative funding. We held the line on
    administrative expenses and we also reduced our discretionary
    research a bit because we took a hard look at the research and,
    like Senator Allard said, we looked for outcomes-based
    solutions. We weren't satisfied with a lot of the outcomes that
    we had in research, so we thought we'd hold back a little bit
    on research and administrative expenses and try to do more with
    less. But we fully fund the Formula Programs and we're fully
    funding every New Starts/Small Starts project in the pipeline.
        Senator Murray. Well, Mr. Millar, Mr. Simpson just
    testified that many of those New Start Programs were not ready
    to go. What is your information on that?
        Mr. Millar. My information is that there are projects
    across the country that could use additional funding, that
    there are bus fleets that need to be replaced, that over the
    years what this administration has done is squeezed the
    pipeline. They have caused projects to be removed from that
    pipeline, so there are many fewer projects in the pipeline
    today.
        Just because a project goes outside the Federal pipeline
    doesn't mean the need isn't there. In fact, we're seeing
    unprecedented in modern times the number of projects that are
    moving forward outside the Federal process. It used to take 5
    years to get through that process. It now takes 10 years. There
    are many reasons for that. Not all of them can be laid at the
    feet of the Federal Transit Administration, but it is a broken,
    flawed process, and as a result, it needs to be fixed, and it's
    our hope to work with the Congress to make sure that we can
    move good projects along that will improve transit for
    Americans.
        At this time, with high gas prices, with the increasing
    concern about global warming and climate change, Americans need
    choice. That's what transit gives them.
        Senator Murray. Okay. And my time is up. I will turn it
    over to Senator Bond.
        Senator Bond. Thank you very much, Madam Chair. Mr. Ray, I
    don't want to influence the outcome of your review of RABA but
    a little historical fact you may not be aware of.
        RABA is in the law because of the Chafee-Bond proposal in
    T21, now known as the Bond-Chafee proposals. So just keep that
    in mind when you're looking at RABA, if you would.
        Mr. McCaskie, I would say that Missouri may rival you in
    bridge needs. We are now down to a maintenance-only status in
    Missouri. So, we are up against the wall.

                       DULLES CORRIDOR METRORAIL PROJECT

        But I want to address a very difficult question to Mr.
    Simpson. You are faced with tremendous popular pull and appeal
    in the Beltway for the Dulles Rail Project. On the other hand,
    you have a responsibility to the taxpayers in Washington,
    Missouri, and the rest of the Nation to spend the money wisely,
    and I would like to know how the process, the review is
    proceeding, when it will be completed. It continues month after
    month, and it's my understanding that if these funds lapse,
    they're 2-year funds, there will be--could be significant
    funds, and I would be interested in knowing how you would
    handle the reprogramming should the decision be made not to go
    forward.
        Mr. Simpson. The Dulles Project has been getting a lot of
    attention, as you know, in the local area, more than we'd care
    to read about, but in a nutshell, we are the last firewall, the
    Federal Transit Administration, for the taxpayer's dollar.
        This is a mega project. The first phase is $3 billion. The
    second phase is $3 billion. That's $6 billion and that's before
    you turn the key and start to operate the system. So, we want
    to make sure before we make that kind of a commitment over a
    10- or 20-year period that the taxpayer is getting the best
    bang for the dollar.
        We have numerous concerns, probably too many to enumerate
    right now, but it's been part of the public record that we've
    been working with the folks in Virginia, the Governor's office
    and the congressional delegation. I was pressed by the
    Commonwealth of Virginia and by the Metropolitan Washington
    Airports Authority (MWAA) to give them an answer by January 31,
    because of contracts that they had ready to proceed.
        When we looked at that project, I guess it was January 23,
    there was no way that I in good conscience could move that
    project forward, given the complexities of the project, given
    the unanswered questions, and also given the state of good
    repair of the WMATA system.
        It's like building a 25 percent addition on to your home.
    The other witness talked about the house analogy. Let's say
    you've got the roof collapsing and, you've got shorts in the
    electrical system and you've got water in the basement and you
    come to the bank, that is the FTA, and you're looking for a
    loan to put this 25 percent addition on to your house. You've
    got to stop and wonder, hey, wait a minute, what's going on
    here?
        So, we're in the process of working with the Commonwealth,
    with WMATA, with MWAA and all the other stakeholders to try and
    get the wheels back on the track to Dulles.
        Senator Bond. If the funds were to lapse, how would they be
    reprogrammed?
        Mr. Simpson. Are you talking about the funds that have
    already been committed to the project? It's about a $180
    million left.
        Senator Bond. Well, actually, there would be--there could
    be. There was a tremendous impact. Would there be unspent funds
    from the 180 or has that already been blown?
        Mr. Simpson. No.
        Senator Bond. Spent?
        Mr. Simpson. The total Federal share is about $900 million
    and approximately $200 million have been committed. About $153
    million is still unobligated. I guess you'd have to ask the
    congressional delegation what they would like to do with that.
    I don't know, but I'll tell you the rest of that pot, that $750
    and some odd million would be up for grabs for another project.

                          URBAN PARTNERSHIP AGREEMENTS

        Senator Bond. Okay. Now let me ask you something on which I
    have a rather strong opinion. You may have read about it some
    place.
        I'd like to ask you about the use of the 2007 bus facility
    money, some $844 million, for five communities or urban
    partners to ``incentivize'' the city councils and the State
    legislatures to impose tolls and also we in Congress are owed a
    3-day notice after the terms have been met before grants are
    announced and I heard the Secretary may be preparing to
    announce a major grant to one city before the tolls have been
    implemented, and I'd like to know how that works.
        Mr. Simpson. The Federal Transit Administration will follow
    SAFETEA-LU to the letter of the law. We will give the three-day
    notification before we at FTA make any sort of announcement.
    I'm sure the Department will as well.
        Senator Bond. And does that not require that the tolls be
    implemented before they grant the money?
        Mr. Simpson. That was a departmentwide initiative. Since
    I'm on the transit side, I'm going to tell you what I've heard.
    The cities have to have the legislative authority. They need
    not have the toll booth up and running, but they have to have
    the legislative authority. Right now, I believe Miami and San
    Francisco are the only two cities right now that have the
    legislative authority to move forward.
        Senator Bond. Well, that's because we heard rumors there
    was going to be an announcement of another city before they had
    the legislative authority, and I'm glad you agree with us.
        Mr. Simpson. What city would that be?
        Senator Bond. New York.
        Mr. Simpson. New York?
        Senator Bond. Yes.
        Mr. Simpson. I believe the deadline is April 7, on New York
    to get their State legislation to vote. It's in the hands of
    the State. The city council passed the resolution, I think it
    was on Monday, and the State needs to vote before April 7.
        Senator Bond. And if they don't vote, no announcement, if
    they don't approve it.
        Mr. Simpson. That's correct.
        Senator Bond. Okay. I want to ask just quickly to Mr. Ray.
    I have mentioned in the previous hearing, I'd asked Secretary
    Peters about the rescission. SAFETEA requires an $8.5 billion
    rescission on September 30, 2009.

                           EXCESS CONTRACT AUTHORITY

        How much contract authority would be available for future
    rescissions if we were to include the $3.89 billion that is in
    your budget, along with the $8.5 billion rescission called for
    in SAFETEA?
        Mr. Ray. Senator Bond, that's a good question. I'm not
    surprised that you asked it and actually did a little bit of
    homework in advance of this hearing to look into it.
        It is a fluid number, of course, it moves. So, it's based
    completely on our estimates, but we believe there would be
    approximately $5 billion in contract authority still available
    in excess of the obligation amount that we would have available
    to us at the end of that time period.
        Senator Bond. There would be $5 billion on top of that?
        Mr. Ray. Approximately $5 billion on top of that.
        Senator Bond. We'd be interested to see the numbers. Thank
    you, Madam Chair.
        [The information follows:]

        The Federal-aid highway program currently has $16.8 billion in
    excess contract authority. Under the Safe, Accountable, Flexible,
    Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU),
    $8.7 billion in contract authority will be rescinded in fiscal year
    2009. If Congress were to also enact the $3.2 billion in rescissions
    proposed in the fiscal year 2009 President's budget request,
    approximately $5 billion in excess contract authority would remain at
    the end of the current authorization.

                         REIMBURSEMENTS WHEN SHORTFALL

        Senator Murray. Thank you, Senator Bond. Administrator Ray,
    let me go back to you.
        As much as we all want to prevent the Highway Trust Fund
    from going bankrupt, I think it's still important that we all
    understand what might happen if that Trust Fund's balance is
    depleted.
        Because the Highway Program operates on a reimbursable
    basis, by the time States apply for funding from the Highway
    Trust Fund, they've already spent their own funds completing
    projects that they know are going to be eligible for Federal
    assistance.
        If the Trust Fund were to go bankrupt, States may find that
    the money isn't there when they ask for reimbursement from the
    Federal Government. How would you decide which States get
    reimbursed first?
        Mr. Ray. Well, that's an interesting question, Madam Chair,
    and I appreciate it. It's something that we're looking at right
    now and, as you already mentioned, we don't have the authority
    to slow down or stop obligations. We will continue business as
    normal. But bankrupt may not be the most appropriate word--
    perhaps shortfalls is more accurate.
        As you know, we get receipts from the Treasury into the
    Highway Trust Fund twice a month, with the exception of
    October, in which one deposit is made. Right now States can get
    their reimbursements almost instantaneously.
        Senator Murray. Correct.
        Mr. Ray. What will happen is that we will experience fits
    and starts, and so there could be a tremendous slowdown. We
    have not actually decided what framework we would use.
        Senator Murray. Are you looking at establishing criteria?
    Will it be a first come/first serve basis?
        Mr. Ray. We are looking into that issue now. We've not
    decided. First come/first serve is certainly one potential
    approach and we'd be happy to work with you in terms of how
    we're going to do that, but we have not decided that framework
    yet.
        Senator Murray. What do you mean when you say fits and
    starts in terms of reimbursement? Couple days? Few weeks?
    Months? What?
        Mr. Ray. We're estimating a $3.2 billion shortfall and that
    is if Congress gives us the flexibility to borrow from the Mass
    Transit Account. That's not going to occur in any 1 day. It
    will build up over time.
        So, in the early days, certainly there will be a gap,
    possibly until the next receipts come in 2 weeks later or
    potentially sooner than that. As that balance builds up, the
    length of time will extend.
        Senator Murray. Are you beginning to talk to States about
    that possibility? Are you giving them any advice on managing
    their funds?
        Mr. Ray. Those conversations are just beginning, are
    underway. In fact, I had one just last week with the Nevada DOT
    and so those conversations are beginning.
        Senator Murray. Mr. McCaskie, in your formal testimony, you
    say that ``economic pressures have already forced States to
    slow down their bids for contracts so that the impact is really
    being felt across the industry,'' and you testified that
    ``States become even more conservative when they feel uncertain
    about their highway grants.''
        Have you started to see evidence of that at your own
    company?
        Mr. McCaskie. I cannot say that in Pennsylvania, which is
    where Swank primarily operates, that we have seen a cutback in
    highway spending at this point. However, going down the road,
    there's a stonewall.
        We face the same problem on State funding. We're right at
    the edge. The Department of Transportation in Pennsylvania is
    doing everything they possibly can with the money available to
    maintain the roads. There is no expansion whatsoever with the
    exception of the Pennsylvania Turnpike which is a separate
    authority.
        There's concern that--for instance, there is a lot of work
    being done and the Department is asking contractors now can you
    handle this and I've heard contractors say yes, we can handle
    it. Well, you better build up; we're going to have more work.
    They say no, we are not building up because we have had
    promises in the past too many times.
        The stability of funding is paramount. If a firm or an
    individual is going to invest in equipment and develop people,
    employ people, he has to have a long-range steady program that
    he can depend upon and a lot of firms in the highway
    construction industry are strictly in the highway construction
    industry. They aren't into what's known as vertical
    construction. They're heavy and highway contractors.

                       TRANSIT ACCOUNT REPAYABLE ADVANCE

        Senator Murray. Thank you for that. Mr. Simpson, let me ask
    you. The administration is asking this subcommittee to include
    language in our appropriations bill that would allow the
    Highway Account of the Trust Fund to borrow from the Transit
    Account.
        Even with the President's proposed cut in highway spending,
    OMB is still estimating that the Transit Account would have to
    borrow $3.2 billion from the Highway Account just to get
    through the year.
        Based on the President's anticipated levels of highway and
    transit spending in our future years, is there any reason to
    believe that this Transit Account would ever be repaid?
        Mr. Simpson. I think the first answer is that we look at
    the Highway Trust Fund as one entity, not as the Highway and
    Mass Transit Account, and we know that the Transit Account
    would probably go bankrupt as well around 2011 or 2012. One of
    the concerns I had as the Federal Transit Administrator is that
    if we left that shortfall in the Highway side, that about $1
    billion a year in CMAQ and STP flexed from Highway into the
    Transit Account. So, the concern that I had personally as the
    FTA Administrator, is that's 10 percent of the Transit Program.
    We've got about $10 billion in our own budget, plus another $1
    billion is flexed from Highway. So that was an immediate
    concern.
        Second, we look at this as more of a mobility problem, one
    problem that the entire Surface Transportation Program has, not
    Highways versus Transit. When we talked about this as far as
    our Department is concerned and the administration is
    concerned, this was the best fix for now. For the long term, we
    are looking to the reauthorization.
        Senator Murray. Okay. I'm certain we'll have more
    discussions about this. So, let me ask you one more question
    and then I'll turn it over to Senator Bond for his questions.

                                CHARTER BUS RULE

        Your agency, Mr. Simpson, has a new rule that is supposed
    to come into effect at the end of April that restricts special
    bus services that can be run by publicly-subsidized transit
    agencies.
        In Seattle, our city and our transit agency have made a
    commitment to minimizing congestion during our Seattle Mariner
    games and our University of Washington football games by
    running free buses from all parts of the city to the ballparks.
    That service, by the way, has made a huge difference in our
    city, it keeps the city out of gridlock. However, there's
    concern, I am told, that this new rule could cause part of that
    service to be canceled.
        Can you explain to me why you are working on a rule that
    would really worsen the congestion problem in Seattle and
    probably other cities?
        Mr. Simpson. Madam Chair, are you talking about the new
    charter rule that went into effect?
        Senator Murray. Correct, yes.
        Mr. Simpson. It's one of the few rules that both the public
    and the privates are happy about, actually. That's been in
    print. I don't know the specifics on the Seattle situation, but
    I'd be more than willing to work with staff when we finish
    here.
        Senator Murray. Okay.
        Mr. Simpson. People are still digesting the rule. It was
    just published. As a matter of fact, Bill Millar and I spoke
    earlier. There's a lot of confusion about the rule because it
    is complex.
        Senator Murray. Mr. Millar, have you heard similar
    concerns?
        Mr. Millar. Yes, there are concerns around the country that
    what used to be classified as public transportation service is
    now classified as charter service and so we have asked the
    Federal Transit Administration to work carefully with us to
    make sure our members understand how to comply with the new
    rule and understand the best way to handle these situations.
        Mr. Simpson. Since I worked on the rule myself, I know it
    is very complex. But, there are opportunities now that the
    public agencies never had before in order to provide charter
    service, particularly for government officials on official
    business.
        Senator Murray. Well, this program, in our city, makes a
    huge, huge difference, and so I would like my staff to work
    with you on this issue.
        Mr. Simpson. We will work with your staff today on it. If
    they will call us any time after 12 o'clock today, we'll get
    with them.
        Senator Murray. So will everybody else now.
        Mr. Simpson. That's all right.
        Senator Murray. Okay. Thank you very much. Senator Bond.
        Senator Bond. Thank you very much, Madam Chair. I think
    you've asked the most important questions. There are many
    questions remaining, but I believe we have significant
    questions for our friends to speak about Amtrak. So, I will
    pass on further questions and thank the witnesses for their
    participation.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Murray. Thank you very much to all of our
    witnesses. We will leave the record open for additional
    questions for members who couldn't be here today. Thank you
    very much, with that, if our next panel could come up and be
    seated.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

                  Questions Submitted to Hon. James S. Simpson
                  Questions Submitted by Senator Patty Murray

                 APPROPRIATE BALANCE FOR THE HIGHWAY TRUST FUND

        Question. As we talk about what needs to be done to fix the Highway
    Trust Fund, we need a better understanding of what level of balances
    would provide an adequate safety net for the Highway Trust Fund.
        Administrator Simpson, as I have mentioned in the hearing, the
    transit account of the Highway Trust Fund is also in a precarious
    situation. Even without the borrowing authority requested by the
    administration, the transit account is expected to go bankrupt over the
    next few years.
        What are your thoughts on the appropriate balance of the transit
    account?
        Answer. The appropriate balance in the Mass Transit Account depends
    on many different factors, including forecasts of future revenue and
    anticipated Federal funding for transit. One of the goals in the Safe,
    Accountable, Flexible, Efficient, Transportation Equity Act: A Legacy
    for Users (SAFETEA-LU) was to spend down the balances in the Highway
    Trust Fund and Mass Transit Account. SAFETEA-LU also restructured
    Federal Transit Administration programs to eliminate split funded
    (trust fund and general fund) accounts, so that outlays from the MTA
    are not premature.
        Going forward and in general, projected spending levels should not
    exceed projected receipts. A prudent balance in the MTA would fund
    annual Federal Transit Administration programs over the course of the
    next authorization, based on projected receipt levels, with a
    sufficient cushion to keep the account solvent if receipts are below
    projected amounts.

                        FEDERAL TRANSPORTATION OVERSIGHT

        Question. This administration claims that the Federal Government
    should play a reduced role in infrastructure investment. Given that
    most Federal oversight is accomplished by requiring States to meet
    certain standards in order to receive their highway grants, I would
    like to know what reducing the Federal role means for continuing any
    kind of meaningful oversight.
        Recent GAO reports have indicated that there is already a lot of
    room for the Federal Government to improve its oversight over our
    highway system. Your agency currently has only a limited ability to
    ensure that projects are completed efficiently, Federal dollars are
    invested in projects with the greatest benefit, and complex projects
    are built safely.
        According to one GAO report, State departments of transportation
    are increasingly using contractors to carry out what had been primarily
    government jobs, such as engineering, inspection, and quality
    assurance. As a result, staffs at the State level are finding it
    difficult to oversee a growing number of projects, and they are losing
    their in-house expertise.
        Administrator Simpson, you provide a very high level of scrutiny
    for transit projects that are applying for New Starts funding. Again,
    this oversight is possible because project sponsors are very interested
    in receiving a New Starts grant agreement from the FTA.
        Do you believe that this oversight works in terms of improving the
    quality of transit projects being built across the country?
        Answer. In the early 1980s, several FTA-funded transit projects
    suffered major setbacks due to problems with quality, cost overruns,
    and delays in schedules. To safeguard the Federal investment and ensure
    public safety, Congress directed FTA (then the Urban Mass
    Transportation Administration) to establish the Project Management
    Oversight (PMO) Program. The Program is financed by setting aside 1.0
    percent of the funds available under 49 U.S.C., section 5309, Capital
    Investment Programs, 0.75 percent of funds available from sections
    5307, Urbanized Area Formula, and 0.05 percent from section 5311, Non-
    urbanized Area Formula Program. Today, PMO contractors monitor projects
    worth over $80 billion in a very effective and systematic manner and in
    accordance with pre-established guidelines. PMO contractors serve as an
    extension of FTA's technical staff in assessing grantees' project
    management and technical capacity and capability to successfully
    implement major capital projects. They also monitor the projects to
    determine if they are progressing on time, within budget, and in
    accordance with the grantees' approved plans and specifications. The
    PMO program has repeatedly proven to be a very powerful, effective, and
    efficient tool in monitoring major capital transit projects. We have
    also witnessed some project sponsors incorporating some of the project
    management oversight tools and principles into their project
    development plans on non-FTA funded projects and believe FTA's project
    management oversight is definitely helping improve the quality of
    transit projects being built across the country.

                       BORROWING FROM THE TRANSIT ACCOUNT

        Question. Mr. Simpson, the administration is asking this
    subcommittee to include language in our Appropriations bill that would
    allow the highway account of the trust fund to borrow from the transit
    account in 2009. Even with the President's proposed cut in highway
    spending, OMB still estimates that the transit account would have to
    borrow $3.2 billion from the transit account just to get through the
    year.
        Administrator Simpson, based on the President's anticipated levels
    of highway and transit spending in future years, is there any reason to
    believe that the transit account will ever be repaid? If so, where will
    the money come from and when will it happen?
        Answer. As I stated our goal is to ensure the solvency of the
    Highway Trust Fund through the current authorization period. The topic
    and solution to the future solvency of the Highway Trust Fund,
    including and the Mass Transit Account, will be addressed in the next
    surface transportation reauthorization. The MTA remains solvent until
    2010 with the proposed ``advanced payment'' provision in the
    President's fiscal year 2009 budget. I believe that once the Highway
    Trust Fund solvency issues are solved there is no reason to believe
    that the MTA will not have sufficient resources to meet all future
    commitments.
        Question. My understanding is that this proposed transfer will just
    speed up the date at which the transit account will go bankrupt from
    2011 to 2010.
        Mr. Simpson, why does the administration believe that the way to
    solve the problem of a bankrupt highway account is to expedite the
    bankruptcy of the transit account?
        Answer. The administration estimate is that if the MTA transfers
    funds to the Highway Account during fiscal year 2009, both accounts
    will remain solvent until fiscal year 2010. This provision will fund
    surface transportation programs at levels requested in the President's
    fiscal year 2009 budget and delay the impending shortfall in the
    Highway Account of the Highway Trust Fund until fiscal year 2010, past
    the point when Congress is scheduled to enact the next surface
    authorization. This mechanism has a precedent in the ``repayable
    advances'' used during the early years of the Highway Trust Fund. The
    mechanism was used in 1960, 1961, and 1966 and each time the advance
    was repaid.

                           TOLLING AND PRIVATIZATION

        Question. The Secretary has clearly stated in previous testimony,
    as well as in her dissent from the Surface Transportation Policy
    Commission Report, that she supports a greater role for tolling and
    private investment in our highway infrastructure, and a reduced role
    for Federal funding. Your testimony today also praises tolling, but
    does not mention its close ties to privatization.
        A GAO report released last month found that many existing road
    privatization schemes are expected to short-change the public in the
    long term and to restrict our ability to respond to changing
    transportation needs.
        The GAO study also found that public opposition to private toll
    schemes has prevented several such projects from getting off the
    ground. Opposition to proposals like the Trans-Texas Corridor shows us
    that, even if we encourage privatization at the Federal level, many
    State and local communities are unwilling to accept it. Just last year,
    at the strong urging of all sides of the Texas delegation, we enacted a
    provision that banned the tolling of certain highways in Texas.
        You claim in your testimony that tolls collected on highways can be
    used for local transit projects. This may be true for publicly-owned
    toll roads, but a private toll road's purpose is to generate revenue
    for investors, not for local governments, and certainly not for transit
    agencies.
        Administrator Simpson, how does private tolling of highways provide
    for the Nation's rapidly growing transit needs?
        Answer. Private tolling of highways involves the long term lease of
    existing, publicly-financed toll facilities to a private sector
    concessionaire for a prescribed concession period during which they
    have the right to collect tolls on the facility. In exchange, the
    private partner must operate and maintain the facility and in some
    cases make improvements to it. The private partner must also pay an
    upfront concession fee.
        It is this upfront concession fee that enables States to address
    longstanding transportation needs. It has been shown that the
    facilities where tolls are used to manage traffic create free-flow
    conditions that benefit transit vehicles by ensuring predictable travel
    times.
        The State of Indiana entered into a toll concession and lease
    agreement with the ITR Concession Company for $3.8 billion. The receipt
    of these funds enabled the State of Indiana to pay for longstanding
    transportation improvements throughout the State. Similarly, the State
    of Pennsylvania has accepted a bid of $12.8 billion to lease the
    Pennsylvania Turnpike, providing the State with resources to repair
    deteriorating transportation infrastructure and invest in new
    construction.
        Given the growing need for transit, it is the State's choice to use
    concession fees from long term leases of highway facilities to invest
    in transit as part of an overall strategy to improve their
    transportation system.
                                     ______

                      Questions Submitted to James D. Ray
                  Questions Submitted by Senator Patty Murray

                 APPROPRIATE BALANCE FOR THE HIGHWAY TRUST FUND

        Question. As we talk about what needs to be done to fix the Highway
    Trust Fund, we need a better understanding of what level of balances
    would provide an adequate safety net for the Highway Trust Fund.
        Administrator Ray, what do you believe is the appropriate balance
    to maintain in the highway account of the Highway Trust Fund?
        Answer. The purpose of maintaining a positive cash balance in the
    Highway Account is to provide a cushion in the event that Highway
    Account tax receipts, obligations, and/or outlays are not as projected
    at the time an authorization act is enacted. In addition to providing a
    cushion from the normal economic ups and downs that impact Highway
    Account receipts, maintaining a sufficient cash balance also provides
    time for remedial Congressional action should a dramatic event occur,
    such as an interruption of shipments of foreign oil, or a dramatic
    downturn in revenue.
        Factors to be considered in determining the minimum prudent balance
    for the Highway Account are the size of the programs funded by the
    Highway Account, historic errors in projecting receipts and outlays,
    the time that would be needed for legislative action to correct any
    imbalance between receipts and outlays, and the degree of risk of short
    term insolvency that the Federal Government is willing to bear.
        In recent years, receipt and outlay estimates have been within plus
    or minus 2 percent, but secondary sources indicate that the receipt
    projections were off by about 14 percent as the result of the 1973 oil
    embargo. Risk assessment principles would suggest that the minimum
    balance be based on likely estimation error rather than the maximum or
    minimum error. Of course, the effect of a potential 2 percent error on
    the need for a minimum cash balance depends on the size of the program.
        Question. Administrator Ray, do you have a detailed reauthorization
    proposal that will allow the Congress to see how you would address
    these concerns?
        Answer. The Department recently released a comprehensive and
    fundamental reform proposal a copy of which can be found at http://
    www.fightgridlocknow.gov/.
        Question. Will the reauthorization proposal include legislative
    language so that the Congress can see exactly how the administration
    proposes to change current law?
        Answer. The Department is working on legislative language, but has
    not yet decided when or in what manner it would be released. The
    Department may choose to submit some of the concepts as individual
    components rather than as a complete proposed bill.

                        FEDERAL TRANSPORTATION OVERSIGHT

        Question. This administration claims that the Federal Government
    should play a reduced role in infrastructure investment. Given that
    most Federal oversight is accomplished by requiring States to meet
    certain standards in order to receive their highway grants, I would
    like to know what reducing the Federal role means for continuing any
    kind of meaningful oversight.
        Recent GAO reports have indicated that there is already a lot of
    room for the Federal Government to improve its oversight over our
    highway system. Your agency currently has only a limited ability to
    ensure that projects are completed efficiently, Federal dollars are
    invested in projects with the greatest benefit, and complex projects
    are built safely.
        Question. Administrator Ray, do you agree that Federal oversight
    over the Nation's highway system should be strengthened?
        Answer. At its heart, the Federal-aid highway program is a
    federally assisted State program. I believe that at the Federal level,
    we have a responsibility to those who use our highways and pay for them
    through their Federal highway fuel taxes to ensure that the funds are
    effectively and efficiently invested to support the transportation
    projects that promote national interests (e.g., interstate commerce,
    defense and security and economic well being) and meet regional needs.
    More rigorous, data-driven and mode-neutral transportation
    decisionmaking by State and local officials is needed, including the
    use of asset management techniques, benefit-cost analyses, and a focus
    on improving the safety and performance of our transportation systems.
        Question. Do you see a conflict between reducing the Federal role
    in transportation investment and maintaining Federal oversight?
        Answer. No. I do not equate achieving a better focused Federal role
    in transportation investment with a reduced Federal role. The Federal
    role in surface transportation policy should be better focused than it
    is today to provide for surface transportation needs that are critical
    to the Nation as a whole. The Federal role includes providing
    leadership for, and stewardship of, the system with a focus on
    enhancing system performance. This includes ensuring that the
    Interstate System and other facilities of national significance, which
    are critical to the Nation's interstate commerce, are maintained
    properly, rebuilt as needed, and expanded when justified; maintaining
    the productivity of our metropolitan areas, which are the economic
    engines of the Nation's prosperity and which experience the
    overwhelming share of congestion; and providing for safety on all our
    Nation's roads. As described above, I believe that decisionmaking for
    investment of Federal funds in these national priorities warrants
    additional attention.
        Question. According to one GAO report, State departments of
    transportation are increasingly using contractors to carry out what had
    been primarily government jobs, such as engineering, inspection, and
    quality assurance. As a result, staffs at the State level are finding
    it difficult to oversee a growing number of projects, and they are
    losing their in-house expertise.
         Do you believe that it would be easier for States to oversee
    highway development that has been transferred to the private sector?
        Answer. In general, because State DOTs are unlikely to serve as the
    construction contracting entity when States enter into a highway
    development agreement with a private sector partner, demands on State
    employee resources are likely to be considerably lessened but clearly
    not eliminated. The degree of State employee involvement in project
    development is unique to the development agreement, the size and type
    of project negotiated between the State DOT, and the private developer.
    While there may be many routine oversight functions and tasks a private
    sector partner may perform and certify to the State, State DOTs are
    still ultimately responsible for the quality control and assurance
    associated with how a project is designed, constructed, maintained and
    operated. In some cases, the size and type of a project may still
    require a State DOT to provide a substantial amount of staff and
    resources to ensure it is suitably equipped to provide the appropriate
    level of stewardship and oversight needed for each partnership with the
    private sector. The commitment of the staff and resources that may be
    necessary to ensure the public interests are represented in these
    partnerships is typically not covered or funded through an agreement
    with a private sector partner.

                           TOLLING AND PRIVATIZATION

        Question. The Secretary has clearly stated in previous testimony,
    as well as in her dissent from the Surface Transportation Policy
    Commission Report, that she supports a greater role for tolling and
    private investment in our highway infrastructure, and a reduced role
    for Federal funding. Your testimony today also praises tolling, but
    does not mention its close ties to privatization.
        A GAO report released last month found that many existing road
    privatization schemes are expected to short-change the public in the
    long term and to restrict our ability to respond to changing
    transportation needs.
        Administrator Ray, do you agree that encouraging the privatization
    of our highway infrastructure on a grand scale is a responsible
    decision?
        Answer. Increased involvement and investment in the development,
    maintenance and operation of our highway system is a necessity if we
    are to resolve the current imbalance among the needs of our system,
    funding availability and the need to deliver projects in a more timely
    manner whether that investment is derived from public sector resources
    or the private sector. In this era of fiscally constrained budgets,
    private investment in State transportation assets permits States to
    target public sector funds on projects that are not able to be
    supported by user fees.
        The great majority of goods and services produced in our economy
    are provided by the private sector, including telecommunications,
    electricity, and freight rail transportation. Given that we trust the
    private sector in these and other essential areas, there is no reason
    that the private sector cannot play a major role in serving all surface
    transportation infrastructure needs. An increased private sector role
    does not connote privatization. In virtually all highway public private
    partnerships, the public sector owns the roads and is able to establish
    performance standards governing their use.
        I would also note that the GAO report (page 19) cited above also
    found: ``Highway public-private partnerships have resulted in
    advantages from the perspective of State and local governments, such as
    the construction of new facilities without the use of public funding
    and extracting value--in the form of up-front payments--from existing
    facilities for reinvestment in transportation and other public
    programs. In addition, highway public-private partnerships can
    potentially provide other benefits to the public sector, including the
    transfer of project risks to the private sector, increased operational
    efficiencies through private sector operation and life-cycle
    management, and benefits of pricing and improved investment
    decisionmaking that result from increased use of tolling.''
        The GAO study also found that public opposition to private toll
    schemes has prevented several such projects from getting off the
    ground. Opposition to proposals like the Trans-Texas Corridor shows us
    that, even if we encourage privatization at the Federal level, many
    State and local communities are unwilling to accept it. Just last year,
    at the strong urging of all sides of the Texas delegation, we enacted a
    provision that banned the tolling of certain highways in Texas.
        Question. Administrator Ray, given the public's hostility to road
    privatization, how can we rely on private capital to replace Federal
    funding in providing critical highway infrastructure?
        Answer. One reason some oppose public-private partnerships is that
    they believe ownership of facilities will be turned over to the private
    sector and the public sector will lose all control over the facility.
    This, however, is not how public-private partnerships are being pursued
    in this country or in other countries around the world. Other reasons
    that public-private partnerships are opposed include fears that the
    private sector will be free to set whatever toll rates they choose, and
    concern about the private sector not maintaining the condition and
    performance of facilities they operate. These concerns result primarily
    from a lack of information about how public-private partnerships
    operate or misinformation spread by opponents of public-private
    partnerships. In some States, opposition to public-private partnerships
    stems from a more general opposition to tolls, not from the fact that
    facilities would be operated by the private sector.
        We are not proposing that public-private partnerships replace all
    Federal funding, and in States where they are implemented, public-
    private partnerships replace not only a portion of Federal funding, but
    State fuel tax revenues as well. Polls have shown that when given a
    choice, more highway users would prefer to fund new highway
    improvements from tolls than from general increases in the gas tax.
    When presented with the facts concerning public-private partnerships
    and when presented with the options available to fund needed highway
    improvement programs, we believe users in more and more States will
    support the use of private capital to fund new highway improvement
    programs rather than increases in their fuel taxes.
        Again, I would cite the aforementioned GAO study (page 72):
    ``Highway public-private partnerships show promise as a viable
    alternative, where appropriate, to help meet growing and costly
    transportation demands. The public sector can acquire new
    infrastructure or extract value from existing infrastructure while
    potentially sharing with the private sector the risks associated with
    designing, constructing, operating, and maintaining public
    infrastructure.''

                 FUTURE OUTLOOK AND BUDGETARY NEEDS FOR AMTRAK

                          DEPARTMENT OF TRANSPORTATION

                        Federal Railroad Administration

    STATEMENT OF HON. JOSEPH H. BOARDMAN, ADMINISTRATOR
        Senator Murray. Okay. As our panelists take their seat, no
    one in the audience needs panic. There are five witnesses but
    two of them are going to combine their 5-minute time, Donna
    McLean and Mr. Kummant. So, I appreciate that.
        We will hear first from Joseph Boardman, who's the
    Administrator at the Federal Railroad Administration. Then
    Donna McLean, Chairman of the Board of Amtrak, and Mr. Kummant,
    President and CEO of Amtrak, will share 5 minutes. Then we will
    here from Mr. David Tornquist, Assistant Inspector General, and
    then Joel Parker, the International Vice President and Special
    Assistant to the President on Transportation and Communications
    International Union.
        So, we'll begin with Mr. Boardman.
        Mr. Boardman. Chairman Murray and Ranking Member Bond, I
    appreciate the opportunity to appear before you today on behalf
    of Secretary of Transportation Mary Peters and the Bush
    administration to discuss the president's budget proposal for
    fiscal year 2009 as it relates to the FRA and Amtrak.
        Safety remains FRA's mission, essential activity and
    strategic performance objective. You'll find in my written
    testimony and our fiscal year 2009 budget request that provides
    a greater detail about the FRA essential safety initiatives.
    However, given today's hearing, I'll limit my comments to the
    largest portion of our request, our intercity passenger rail
    funding.
        In 2009, FRA requests $800 million in direct assistance for
    Amtrak and a $100 million to expand the new Intercity Passenger
    Rail Grant Program, which Congress appropriated $30 million for
    in 2008.
        The 2009 Amtrak request is intended to encourage the
    corporation to continue to implement meaningful reforms and
    control spending. I would note that while Amtrak has made
    progress in certain reform initiatives, significant progress
    remains to be achieved. In particular, the corporation's 2009
    grant request does not articulate how it will achieve
    operational savings necessary to meet its growing labor and
    fuel costs in 2009 and beyond.
        As you know, we have requested $100 million to expand the
    Intercity Passenger Rail Grant Program, which awards
    competitive matching grant, capital grants to States for
    intercity passenger rail services. This program truly
    represents the single most important initiative to spur
    corridor development and create market pressure, to drive
    reform and service improvements at Amtrak.
        After just one week of accepting applications, we received
    three applications and expressions of strong interest from 13
    other States. The request includes $525 million in direct
    Federal subsidies for Amtrak capital costs and this amount
    allows Amtrak and its State partners to continue to address the
    most pressing investment needs in the Northeast corridor
    infrastructure as well as essential equipment investments.
        I commend Amtrak on its efforts to seek a more
    collaborative investment process by engaging in a multi-State
    Northeast corridor user planning group.
        I would note, however, that the corporation has further
    work to do in developing long-term capital investment
    strategies for other assets, particularly fleet and stations.

                               PREPARED STATEMENT

        The administration's request also includes $275 million for
    operating expenses that are to be made available to Amtrak as
    they demonstrate and achieve efficiencies. Under this account,
    the 2009 request proposes establishing a new competitive pilot
    program that would allow the Secretary to test the viability of
    using non-Amtrak operators on selected routes to provide
    passenger rail services.
        I appreciate your attention and yield back my time.
        [The statement follows:]

                 Prepared Statement of Hon. Joseph H. Boardman

        Chairman Murray, Ranking Member Bond, I appreciate the opportunity
    to appear before you today on behalf of Secretary of Transportation
    Mary Peters and the Bush administration to discuss the President's
    budget proposal for fiscal year 2009 as it relates to the Federal
    Railroad Administration (FRA) and Amtrak.
        This budget request continues to support the administration's
    commitment to ensuring that the Nation's rail transportation system is
    safe, secure, and efficient. The requested $1.1 billion will sustain
    and advance FRA's mission to improve railroad safety, while providing
    valuable resources to ensure the continuation of intercity passenger
    rail operations.
        As you are aware, safety remains FRA's single most mission
    essential activity and strategic performance objective. The fiscal year
    2009 request includes $185 million in funds to directly support the
    agency's core safety assurance, oversight and enforcement activities,
    to achieve our goals of preventing and reducing railroad accidents and
    incidents and contributing to the avoidance of serious hazardous
    materials incidents in rail transportation. Included within FRA's
    safety budget is $1.2 million to expand the implementation of the Close
    Call Confidential Reporting Pilot (C3RP) program. This initiative
    allows FRA to more effectively leverage its resources by expanding its
    partnership with industry to promote risk reduction programs on the
    Nation's railroads.
        With regard to FRA's Railroad Research and Development activities,
    the fiscal year 2009 request includes $34 million to support our
    Railroad Safety efforts. Of note are new initiatives that fund research
    in the area of ``level boarding'' to support further access and
    compliance with the Americans with Disabilities Act; the development of
    new Joint Bar Inspection technology; and procurement of a high-speed
    ultrasonic rail flaw detection system.
        By far, the largest portion of FRA's fiscal year 2009 request
    provides $900 million in financial assistance for intercity passenger
    rail services. This total includes $800 million in direct subsidies to
    Amtrak and $100 million to expand the current $30 million Intercity
    Passenger Rail Grant Program that was appropriated for the first time
    in fiscal year 2008. In total, this funding level will support
    continued intercity passenger rail service, while Amtrak's management
    team continues to make progress in reshaping the company. This funding
    level encourages Amtrak to continue to undertake meaningful reforms and
    control spending.
        The administration remains steadfast in its desire to improve the
    manner by which intercity passenger rail services are provided. This,
    of necessity, also includes improvements to how Amtrak provides such
    services and laying the groundwork for the States to have a stronger
    role in determining the important characteristics of services that they
    support financially and for the participation of other entities in the
    provision of intercity passenger rail service under contract to States
    and/or Amtrak.
        The fiscal year 2009 budget request marks part of a multi-year
    effort to reduce, and eventually eliminate, federally funded operating
    subsidies for Amtrak. Overall, this level of subsidy is appropriate as
    it provides Amtrak continuing incentive to more effectively manage
    costs, rationalize its services, and pursue innovations. It also
    expands State support for intercity passenger rail, thus putting more
    of the decisions on what should be operated with public subsidies in
    the hands of those who know best what intercity passenger needs exist
    and how best to meet those needs.

                             AMTRAK CAPITAL GRANTS

        The request includes $525 million in direct Federal subsidies for
    Amtrak capital costs. This amount allows Amtrak and its State partners
    to continue to address the most pressing investment needs on the
    Northeast Corridor infrastructure as well as essential equipment
    investments.

                     INTERCITY PASSENGER RAIL GRANT PROGRAM

        In addition, the budget includes the aforementioned $100 million to
    expand the new Intercity Passenger Rail Grant Program, which awards
    competitive grants to States to finance the cost of State driven
    capital improvement priorities associated with intercity passenger rail
    services. This program encourages State involvement in planning and
    decisionmaking for intercity passenger rail service, allowing them to
    identify where mobility needs justify public investment. Additionally,
    State involvement in planning and decisionmaking helps prioritize
    infrastructure improvements, such as stations, and lets States assure
    connectivity to other forms of transportation supporting intermodalism
    within the State. State involvement in funding intercity passenger rail
    service also provides an added discipline on Amtrak to continually seek
    ways to provide the highest quality of service. A ``Notification of
    Funds Availability'' for this program was published in the Federal
    Register earlier, and we anticipate awarding the first grant under this
    program later this fiscal year.

                            AMTRAK EFFICIENCY GRANTS

        The administration's request also includes $275 million for
    operating expenses that are to be made available to Amtrak as they
    demonstrate and achieve efficiencies. Under this account, the fiscal
    year 2009 request proposes establishing a new competitive pilot program
    that would allow the Secretary to test the viability of using non-
    Amtrak operators on selected routes to provide passenger rail services.

                  RAIL LINE RELOCATION AND IMPROVEMENT PROGRAM

        Finally, I'd like to offer a brief update on the Rail Line
    Relocation and Improvement Program. As you know, just over $20 million
    was appropriated for this new program in fiscal year 2008. FRA is
    taking aggressive steps to implement the program, and has developed
    regulations governing its implementation. These regulations are
    currently being cleared within the administration. We expect to issue
    them this spring, with the first grant awards under the program
    beginning in fiscal year 2009.
        I appreciate your attention and would be happy to answer questions
    that you might have.

        Senator Murray. Thank you very much. We will move to Donna
    McLean and Mr. Kummant.

                                     AMTRAK

    STATEMENT OF DONNA McLEAN, CHAIRMAN, BOARD OF DIRECTORS
        Ms. McLean. Thank you. Good morning, Chairman Murray and
    Senator Bond. Thanks for the opportunity to testify before the
    committee this morning.
        I am the Chairman of the Board of Amtrak, a position I
    assumed in November 2007.
        I'd like to thank the Senate for the recent confirmation of
    our new Board members, Nancy Naples of New York and Tom Carper
    of Illinois.
        As Chairman, I envision the Board as functioning as a
    governing body, one that provides a combination of oversight
    and guidance. The Board should be in the business of setting
    goals and monitoring and assessing performance, but the day to
    day management of the company is the responsibility of Alex
    Kummant and the Executive Committee.
        Alex has assembled an excellent team, and I'm very pleased
    with the progress of Amtrak under Alex's guidance.
        The Board and the Executive Committee are currently
    refining our corporate strategy. We are developing a strategy
    that's multiyear and provides detail and specific guidance for
    the next 5 years.
        One of our key questions, though, is how do we measure
    success at Amtrak? As Alex will report, our ridership and
    ticket revenue are up. They're increasing in almost all of our
    markets and that's success, right? Well, Amtrak's corporate
    debt is decreasing. That's good as well, but our operating
    subsidy needs are increasing, but at the same time, our subsidy
    per passenger mile is declining.
        Our fiscal year 2007 on-time performance was around 82
    percent in the Northeast corridor and our capital needs are
    growing. We collect a lot of great data, but our real challenge
    is going to be analytical. We've often looked at ridership and
    revenue and stopped.
        The Amtrak team understands that we have to rely on some
    additional measures, such as revenue per available seat mile,
    load factor, on-time performance, and customer satisfaction
    indicators which are a leading indicator in revenue. These
    measures are going to be key components to both our day to day
    operations and for planning in the long term.

                               PREPARED STATEMENT

        As we set out to define success at Amtrak, we'll strive to
    be increasingly transparent in all of our areas of business,
    and I feel very strongly that it's our responsibility to
    provide information to Congress and our other stakeholders and
    that information should be clear and easy to understand.
        Thank you.
        [The statement follows:]

                       Prepared Statement of Donna McLean

        Good morning Chairman Murray, Senator Bond, and members of the
    committee. Thank you for the opportunity to testify before your
    committee this morning. My name is Donna McLean, and I am the Chairman
    of the Board of Amtrak, a position I assumed in November 2007. I was
    confirmed as a member of the Board of Directors in late July of 2006.
    Prior to that, I worked as Chief Financial Officer of the Department of
    Transportation and as the Assistant Administrator for Financial
    Services at the Federal Aviation Administration. Presently, I work as a
    consultant and an adjunct professor, and I am based here in Washington,
    DC.
        The Amtrak Board of Directors is a seven-person body, and includes
    the Secretary of Transportation; currently, five of those seats are
    filled and two are vacant. I would like to thank the Senate for the
    recent confirmation of our new board members, Nancy Naples O'Neill of
    New York and Thomas C. Carper of Illinois. As Chairman, I envision the
    Board functioning as a governing body, one that provides a combination
    of oversight and guidance to ensure that the company is working toward
    the attainment of its strategic objectives. The Board should be in the
    business of setting goals and monitoring and assessing performance. The
    day-to-day management of the company and the setting of specific
    policies within the overarching framework of our strategic goals are
    going to be the responsibility of Alex and our Executive Committee.
        We are currently refining our corporate strategy. We have had a
    provisional strategy since last summer, and it is included in the
    business plan we have just published, since it guided the development
    of our fiscal year 2008 budget. Currently, we are developing a strategy
    that is multi-year but provides detailed and specific guidance for the
    next 5 years. Our strategic priorities must reflect the dual nature of
    Amtrak, which combines the goals of a private company with the
    obligations of a public service provider.

                          MEASURING SUCCESS AT AMTRAK

        To succeed, this company must be a safe, convenient and affordable
    transportation choice for travelers. We recognize that we can't be
    everywhere, and we know that there are markets where we will not have a
    competitive advantage. But where we do provide service, it must be
    professionally operated and as responsive as possible to the needs of
    the traveling public.
        So how do we measure success? As Amtrak's management team and I
    have been working on our multi-year strategic plan, this is the central
    question that the Board and I have to answer. As Alex will report, our
    ridership and ticket revenue numbers are increasing in almost all of
    our markets. That is success, right? Amtrak's corporate debt is
    decreasing, which is also good. Our operating subsidy needs are
    increasing. But at the same time, our subsidy per passenger mile is
    declining. Our fiscal year 2007 on time performance was around 82.3
    percent in the Northeast Corridor and our share of the air/rail market
    has also improved, but our capital needs are growing. Our average on-
    time performance on our long distance train routes in fiscal year 2007
    varied from a low of 10.2 percent to a high of 86.2 percent.
        The good news is we do a pretty good job of tracking and collecting
    the basic data we need to inform our analysis. The real challenge is
    going to be analytical--we are going to need to produce answers that
    matter to us and are useful to other stakeholders. In other words, we
    are going to have to do some thinking about what we want to know, why
    we want to know it, and what it's telling us about consumer demand,
    about the health of our business, and about our internal efficiency. We
    will have to rely on some additional measurements such as:
      --Operating ratio
      --Revenue per available seat-mile
      --Cost per available seat-mile
      --Load factor
      --On-time performance
      --Customer satisfaction indices
      --Partner (state and commuter authority) satisfaction
      --Employee satisfaction
      --Safety ratio
      --Ridership growth
        These measures will be key components of both our day-to-day
    operations and for planning for the long term.
        In my written statement I am submitting several charts and graphs
    that will give you a better understanding of some of the metrics that
    we rely on to monitor our performance. It is important for you to know
    that I am asking the questions of the Board, the management, and the
    employees of Amtrak--how do we measure ourselves? How can we best
    position ourselves for the future, and how can we meet the growing
    demand for our services, given our challenges? As we set out to define
    success at Amtrak, we will strive to be increasingly transparent in all
    areas of our business. I feel very strongly that it is our highest
    responsibility to provide information to Congress and our other
    stakeholders, and that information should be clear, easy to understand,
    and transparent.

                             INTERMODAL CONNECTIONS

        As we strive to provide a service that is increasingly transparent
    and successful, as transportation providers, we have a couple of
    important competitive advantages that we can offer travelers that
    increase their range of choices. We are trying to think of travel not
    just in terms of a rail trip, but in terms of the passenger's journey.
    People don't wake up at 5 in the morning to ride an Amtrak train; they
    wake up early to get to a meeting in Philadelphia which they just
    happen to do via Amtrak. We must take into consideration the
    passengers' need to get to and from the train station, a need that
    intermodal planners will need to satisfy if we are to provide those
    essential and convenient connections.
        In fiscal year 2007, Amtrak carried 56 percent of what we call the
    ``New York to D.C. air-rail'' market--the people who either flew or
    took the train. That number has been trending generally upward since
    2000, when we had 37 percent of the market share. The Acela service has
    been a big contributor to our market share growth. We believe our
    market advantage is three fold; our service is frequent and reliable;
    our service is between city centers; and our stations include
    intermodal connections to the subway, bus, or taxi. That intermodal
    connection is key to getting our passengers to their final destination.
        This is an important advantage--and one that is not limited to the
    Northeast Corridor. The Bureau of Transportation Statistics recently
    studied the connectivity of intercity rail and airport facilities, and
    concluded that while only 34.5 percent of airports in the 48 contiguous
    States included connectivity with another mode of mass transportation,
    about 54.3 percent of intercity rail stations did. I think that's an
    important statistic. The ability to offer travelers a range of choices
    is vital to Amtrak's appeal, and we consider the development of those
    connections to be a high priority. This connectivity is currently most
    marked on the east and west coasts. This is a pattern not just
    associated with the Northeast Corridor, but in California, Washington,
    and Oregon, over 85 percent of the stations have some kind of
    connectivity, usually bus service. That's a real benefit to travelers,
    and we want to work on developing that elsewhere.
        And as road congestion grows, I think the ability to travel without
    having to drive a car is going to be increasingly popular, and we need
    to be poised to provide consumers with that alternative. We are
    particularly interested in the possibility of offering connections to
    airports, and we currently have direct connections with five airports:
    Newark, Baltimore-Washington International, Burbank, Oakland, and
    Mitchell Field in Milwaukee. While these are all traffic feeders for
    Amtrak, they offer the promise of an essential component of an
    intermodal national transportation policy--the prospect of a system
    that allows the various modes to provide the transportation services
    that maximize the consumer's utility.
        In conclusion, I hope that you are satisfied with the knowledge
    that Amtrak is moving forward with a strategic vision that should make
    sense to most people who understand Amtrak's mission. Our strategy will
    provide a realistic assessment of what we can do as a transportation
    provider, of the opportunities we see, and of the types of events and
    trends that could be obstacles to success. We are committed to
    measuring our performance, continuous improvement, and defining the
    true meaning of success. And each step of the way, we will do our level
    best to provide the transparency that is essential to the policymakers,
    taxpayers, and passengers that provide the resources for Amtrak's
    nationwide service.
        This concludes my opening statement. I will be happy to answer any
    questions you might have.

    STATEMENT OF ALEX KUMMANT, PRESIDENT AND CHIEF
                EXECUTIVE OFFICER
        Mr. Kummant. Madam Chairwoman, ranking member, thanks for
    the opportunity today.
        I would just ask that my full statement be submitted for
    the record and I'll quickly summarize much of what's in there.
        We ended fiscal year 2007 with a set of strong numbers and
    we are now, as we sit in April, halfway through our fiscal year
    and feel good about the progress, certainly on a revenue and
    ridership basis. On ridership, we're up another 11 percent year
    over year and almost 14 percent in revenues.
        One of the key issues we have going forward and you will
    hear in strategy discussion later in the year is we're working
    on a plan for equipment procurement in the coming years. That
    will be especially critical given the aging of the entire
    fleet. It will also be an opportunity to really recast and to
    generate everything we can out of the Northeast corridor, both
    in terms of efficiencies and the fact that new equipment will
    be much cheaper to maintain. I believe you have probably a good
    sense of what it takes to maintain our aging fleet.
        On the core operating numbers, again those numbers have
    been submitted and discussed. Let me make one comment on the
    debt service, a number we're requesting. We've requested $345
    million. Our core debt service needs are $285 million. We
    believe there are some opportunities there to retire debt early
    and in fact generate significant savings over the next couple
    of years if we do that. So that's the nature of that request.
        We are really in an inflationary environment that we have
    not seen probably for a decade and a half, and I think that is
    one of the core issues that are reflected in the numbers next
    year. All the commodities are up dramatically. So, if you look
    at just core materials, cost of tie, rail, copper, anything
    material we put in the system, we're seeing dramatic
    inflationary effects, and there's some obviously effect, as
    we'll discuss, cost of the PEB.
        Let me get to that point and talk directly about that.
    Obviously there will be some discussion about the second
    installment of back pay and there will be some discussion, as
    there was a year ago, about our ability to pay or not pay that.
        I would just suggest, first of all, that we're still 6
    months away from the end of the year, in a pretty complicated
    environment and strong inflationary pressures. So, I think
    before we get too definitive on what the year-end cash balance
    will look like, we need to be careful there.
        I'd also suggest we had this discussion a year ago where it
    was suggested that we had a lot of cash on hand and after the
    CR was signed in December and we got our first installment of
    cash in February, we were a little over 3 weeks from running
    out of cash. So, I would suggest we continue having that
    discussion through the year but take some care on a longer-term
    cash plan rather than thinking about it as a point in time.

                               PREPARED STATEMENT

        That being said, I think we're enjoying a relative period
    of stability. I'm happy with the management team and we're
    working hard to make the operation better every day.
        Thanks.
        [The statement follows:]

                       Prepared Statement of Alex Kummant

        Good morning, Madame Chairwoman, and thank you for the opportunity
    to testify before your committee this morning on Amtrak's financial
    needs for fiscal year 2009. As you may know, fiscal year 2007 finished
    as a strong year for Amtrak, and fiscal year 2008 has gotten off to a
    good start as well. We set an annual ridership record of 25.8 million
    passengers, the largest in the company's history. We had record summer
    months and a record Thanksgiving, which are important indicators of the
    traveling public's preferences and confidence. Our ridership and
    revenue for fiscal year 2008 have also been strong; we carried 11.7
    percent more riders between the beginning of the fiscal year and the
    end of February than we carried in fiscal year 2007, and those riders
    brought us 14.8 percent more revenue. Finally, we have concluded
    agreements with most of our unions after years of negotiations. Of the
    unions before our recent PEB, the members of 9 groups ratified their
    tentative agreements on March 10, one additional group has ratified an
    agreement, and we expect the remainder to be complete soon. These
    agreements follow the recommendations of the Presidential Emergency
    Board in providing wage increases and retroactive pay to our employees,
    and our employees will also be making contributions to health care.
        With this performance as background, I think it's safe to say that
    passenger rail service has a bright future. To help shape the next few
    years, Amtrak is focusing its efforts on a set of key strategic
    priorities. We are working on increasing revenue, reducing costs, and
    improving both trip times and systemwide on-time performance. We are
    also in the process of developing a comprehensive plan for equipment
    procurement in the coming years; the acquisition of additional
    equipment is a small component of the fiscal year 2009 capital request,
    but we expect it to grow as our electric engines and Amfleet cars
    approach the end of their useful lives. We are also working with a
    number of States to develop and augment short-distance corridor
    operations. We are, however, quickly bumping up against the limits of
    our existing equipment capacity at a time when States are seeking new
    service. To address this problem, we are going to need to begin a new
    equipment procurement cycle.
        To realize these strategic priorities, Amtrak will continue to
    require a certain core level of operating assistance and capital
    investment from the Federal Government. In fiscal year 2009, Amtrak
    will need a total of $1.671 billion in Federal assistance. Of this
    total, $506 million will be required to meet operating costs, $801.4
    million will be invested in capital projects, $19 million will be
    required for the funding of Amtrak's Office of the Inspector General,
    and $345 million will be spent on debt service. All of these numbers
    represent increases over our fiscal year 2008 spending levels, and I
    will give you some background on them. We have provided additional
    detail in our fiscal year 2009 legislative and grant request, which I
    would ask to have made a part of the record.
        We foresee significant cost inflation in several important areas in
    fiscal year 2009. The most significant costs will be increases in
    wages, benefits, and fuel. Wage increases will be a byproduct of the
    labor agreement, and will add about $27 million to the fiscal year 2009
    budget, but the largest single category of cost increases is going to
    be benefits. This is principally a reflection of the growing cost of
    health care. We expect our total benefits costs to rise by $50 million
    in fiscal year 2009, and the expenses associated with medical treatment
    and drugs are at the core of it. We expect that the cost sharing
    provisions in our labor agreements will to some degree restrain medical
    cost growth, but that growth is still going to be substantial.
        I think it's also important to mention at this point that we have a
    single additional expense that will come due in fiscal year 2009. As
    you may know, from 2002 until early this year, this company and many of
    its unions were unable to agree on the terms of contracts for our
    employees. In November 2007, the administration appointed a
    Presidential Emergency Board (or PEB) under the terms of the Railway
    Labor Act to hear the dispute and recommend a settlement, which it did
    in early January. The management of Amtrak has accepted this
    recommendation, as have nine of our labor groups; we expect that groups
    whose ratifications and negotiations are ongoing will likewise accept
    the contract pattern the PEB recommended. The recommended agreement
    pattern included a pair of lump sum retroactive payments to Amtrak's
    employees to effectively extend the raises it offered back to the
    beginning of the negotiating period, and Amtrak accepted the
    recommendation. Amtrak believes at this time that it has the financial
    wherewithal to meet our fiscal year 2008 wage and retroactive pay
    obligations, as well as its wage obligations in fiscal year 2009 and
    fiscal year 2010. However the 60 percent (or $114 million) of the one
    time ``back pay'' payment the PEB recommended be made in fiscal year
    2009 is noted separately in the fiscal year 2009 grant request summary
    table on page 3 of the leg and grant request, and is not contained in
    Amtrak's fiscal year 2009 operating costs. The PEB was aware that
    Amtrak did not have the means to pay the additional $114 million and
    recommended that the decision to fund this amount lies with Congress.
        To fund our fiscal year 2009 capital programs, Amtrak is asking for
    a total of $801.4 million. Of this total, we intend to use $506.9
    million to pay for ongoing ``state of good repair'' (or SOGR) programs
    dedicated to the rehabilitation of our plant and equipment. In addition
    to meeting day to day SOGR requirements, we are undertaking an
    ambitious capital program in fiscal year 2008. The replacement of the
    lift span on the Thames River Bridge in New London, Connecticut will be
    the centerpiece, and we are planning a large scale repair ``blitz'' on
    our New England Division in June to undertake repair and replacement
    work on the electric catenary, several interlocking plants, and a host
    of smaller projects. We intend to continue our capital investment
    program effort in fiscal year 2009, when our program to replace the
    lift span on the Niantic River Bridge will hit its stride. Big projects
    like lift bridge replacement are expensive but enduring--we expect the
    completed span to last for a lifetime. Though we have an aging fleet,
    we will also be spending significant capital on bringing it into SOGR.
        We are also working to comply with the Americans with Disabilities
    Act, and our 2009 budget includes $68.5 million for that effort. ADA
    compliance is going to be a significant challenge, and Amtrak is
    seeking an extension of the current compliance deadline of July 26,
    2010, because, even if we had the regulatory guidance and resources to
    comply, it would still be impossible to achieve compliance by that
    date. Amtrak is fully focused on making its service accessible, and we
    are pursuing compliance under the terms of the ADA, but we will need
    additional time to accomplish that. New rules proposed nearly 2 years
    ago by the DOT would materially change the standards for compliance
    under the Act with respect to station platform level requirements,
    would add millions of dollars to the compliance cost, and would deprive
    that aspect of compliance of any clarity and certainty. Even under the
    current law, Amtrak will need more time and more resources to achieve
    full ADA compliance.
        On the whole, I think our projections for the upcoming year are
    responsible, realistic, and attainable. There are a lot of points that
    must be considered, and the rising costs of fuel, which now hovers at
    $4.00 a gallon and health care and the condition of the economy will
    all have a bearing on our plans. We're going to need new equipment,
    both to modernize our fleet and have equipment available for expansion.
    But from where I sit, the leading indicators continue to trend in the
    right direction. I believe there is a latent demand for intercity
    passenger rail service in the United States. In the coming year we will
    work to inform this discussion and to meet the expectations and needs
    of our customers. Let me conclude by saying we are going to have some
    big opportunities ahead, and we will need a strong, skilled and well-
    trained workforce with high morale if we're going to make the most of
    them. To that end, these new labor agreements will help. I appreciate
    all of the hard work our employees put in every day, sometimes in
    difficult or trying situations, and I am glad that we have been able to
    conclude a workable settlement and trust that our employees will
    embrace it. I also want to thank our Board of Directors, and
    particularly Donna, for their ongoing support and their wise counsel.
        This concludes my opening statement. I will be happy to answer any
    questions you might have.

        Senator Murray. Mr. Tornquist?

                          DEPARTMENT OF TRANSPORTATION

    STATEMENT OF DAVID TORNQUIST, ASSISTANT INSPECTOR
                GENERAL, OFFICE OF THE INSPECTOR GENERAL
        Mr. Tornquist. Chairman Murray, Ranking Member Bond, I
    appreciate the opportunity today to present the views of the
    Office of the Inspector General on Amtrak's fiscal year 2009
    financial needs.
        Let me start by saying that Amtrak has benefited from the
    strong leadership provided by Chairman McLean and CEO Kummant
    and Alex's executive team. The results of that leadership have
    been borne out in Amtrak's recent operating and financial
    statistics, many of which I've cited in my written statement.
        Regarding fiscal year 2009 needs, we believe that Amtrak
    requires only a modest funding increase. Specifically, we
    recommend $475 million for operations, $675 million for
    capital, and $266 million for debt service.
        In addition, we believe the fiscal year 2009 share of the
    retroactive wages that would result from the pending labor
    agreement can be accommodated within Amtrak's projected end of
    fiscal year 2008 cash balances without additional
    appropriations.
        Our recommended grant level would allow Amtrak to run a
    nationwide system and when combined with Amtrak's likely
    increase in fiscal year 2009 revenues would allow for an
    approximately 3.5 percent increase in operating expenses.
        Of particular concern to us is that Amtrak's request does
    not include any operating reform savings in fiscal year 2009.
    We feel Amtrak can do more to minimize its costs and dependence
    on Federal operating subsidies.
        The $675 million we recommend for capital would allow
    Amtrak to fund its legal, safety and security requirements, and
    continue to make progress to a state of good repair. The $266
    million we recommend for debt service is the minimum that we
    believe is needed to meet Amtrak's fiscal year 2009 debt
    obligations.
        Looking to the future, I'd like to draw the subcommittee's
    attention to a report we issued last week which concluded that
    ``Amtrak would receive a significant financial benefit by
    improving its on-time performance.'' Specifically, we found
    that ``improving on-time performance to 85 percent on all
    routes outside the Northeast corridor in fiscal year 2006 would
    have generated a net gain of a $136 million for Amtrak.''
        However, there's little agreement between Amtrak and the
    host railroads, on whose track Amtrak operates, regarding the
    causes of this poor on-time performance and therefore little
    consensus on how to improve it.
        We expect to report shortly on work we have ongoing at the
    request of this subcommittee regarding the root causes of these
    delays. Our preliminary findings indicate that Amtrak trains
    are delayed by a combination of insufficient track capacity,
    host railroad operating practices, and external factors beyond
    the host railroad's control.
        Determining who is responsible for delays is made difficult
    by the disagreement that exists among the stakeholders
    regarding the exact nature of Amtrak's statutory right to
    preference.
        We believe the issue of improving Amtrak's on-time
    performance can best be addressed through collaboration between
    Amtrak, the host railroads and the executive branch which
    balances the enforcement of Amtrak's rights with incentives to
    the freights for cooperation, and we think that the State
    capital matching grant program can play an important role in
    this effort.

                               PREPARED STATEMENT

        As we testified previously, we believe that Amtrak's long-
    term outlook would be improved through a reauthorization. We
    look forward to seeing the results of the ongoing strategic
    planning process that the Board has underway and believe it can
    be an important tool in guiding Amtrak's decisionmaking.
        That concludes my statement. I'd be happy to answer any
    questions.
        [The statement follows:]

                     Prepared Statement of David Tornquist

        Chairman Murray, Ranking Member Bond, and members of the
    subcommittee: I appreciate the opportunity to present the views of the
    Office of the Inspector General on Amtrak's fiscal year 2009 financial
    needs and the future of intercity passenger rail. My statement today
    will draw upon the work we have ongoing for your subcommittee on
    Amtrak's financial performance and labor agreement costs, its efforts
    to achieve operating reform savings, and the causes of its on-time
    performance (OTP) problems, as well as other work we have ongoing on
    Amtrak's capital plan.
        Despite Recent Progress, Amtrak Still Faces Challenges.--Once
    again, Amtrak's 2007 ridership and ticket revenue records set new
    records. Amtrak also improved its OTP on about two-thirds of its
    routes, implemented an expanded capital program, and continued to pay
    down its debt. In addition, the labor agreement now in the ratification
    process holds the promise of allowing both Amtrak management and
    employees to focus on the business of running a passenger railroad.
        At the same time, Amtrak is seeking to increase its Federal subsidy
    by 35 percent in a very difficult budget environment while continuing
    to incur unsustainably large and potentially growing operating losses.
    We believe Amtrak can do more to minimize its costs and dependence on
    Federal subsidies and that its spending initiatives need to make a
    demonstrable contribution to its bottom line.
        Amtrak Requires a Modest fiscal year 2009 Funding Increase.--We
    believe that Amtrak's fiscal year 2009 legislative and grant request
    understates Amtrak's likely fiscal year 2009 revenues, overstates its
    costs, and ignores its significant cash balance. As a result, we
    believe that Amtrak needs $475 million in fiscal year 2009 for
    operations, $675 million for capital, and $266 million for debt
    service. Furthermore, the fiscal year 2009 share of retroactive wages
    included in the pending labor agreement \1\ can be accommodated within
    Amtrak's projected cash balances without additional appropriations.
    ---------------------------------------------------------------------------
        \1\ This agreement would grant full retroactive pay raises back to
    2002 to all agreement employees onboard on December 1, 2007. The
    payment would be split, with 40 percent being paid in fiscal year 2008
    and 60 percent in fiscal year 2009.
    ---------------------------------------------------------------------------
        Our recommended operating grant level would allow Amtrak to operate
    a nationwide system. When combined with Amtrak's likely increase in
    fiscal year 2009 revenues, our recommendation would cover an
    approximately 3.5 percent increase in Amtrak's operating expenses.
    Regarding these revenues, we believe that Amtrak's forecast is
    understated because it was arbitrarily reduced below the levels
    projected by its econometric models. The expense forecast is likely
    overstated because it includes the cost of significant hiring in fiscal
    year 2008 and 2009 and other cost increases which Amtrak need not
    incur, and no additional operational reform savings.

                                            TABLE 1.--FEDERAL APPROPRIATIONS
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                        Fiscal Year          Fiscal Year 2008                Fiscal Year 2009
                                           2007      ---------------------------------------------------------------
                                       Appropriated    Appropriated   Forecasted Use      Request        Recommend
    ----------------------------------------------------------------------------------------------------------------
    Operating.......................             485             475             454             525             475
    Capital.........................             495             565             564             801             675
    Debt service....................             277             285             285             345             266
    Retroactive wages for labor       ..............  ..............  ..............             114  ..............
     settlement.....................
                                     -------------------------------------------------------------------------------
        Total Table.................           1,257           1,325           1,303           1,785           1,416
    ----------------------------------------------------------------------------------------------------------------
    Source: Amtrak data and OIG analysis.

        The $675 million for capital would allow Amtrak to fund legal,
    safety, and security requirements and continue to make progress towards
    a ``state of good repair''. The $266 million for debt service is the
    minimum needed to fund Amtrak's fiscal year 2009 debt obligations.
    Amtrak's proposal to pay off debt early is linked to a plan to borrow
    funds in the future for rolling stock replacement. However, significant
    issues still need to be resolved regarding States' willingness to pay
    the full costs of State services not covered by ticket revenues which
    may impact the overall demand for new rolling stock.
        Finally, Amtrak could fund the unbudgeted $114 million in fiscal
    year 2009 retroactive wage costs and $11.3 million in other planned
    pay-related costs within its anticipated $269 million end of fiscal
    year 2008 cash balance. The resulting $119 million cash balance would
    be less than Amtrak's preferred $150 million level, but consistent with
    the $103.9 million cash balance that would have resulted in fiscal year
    2007 from Amtrak's spending decisions.
        Achieving Reliable On-Time Performance Could Substantially Improve
    Amtrak's Finances.--We recently reported that improving OTP to 85
    percent on all routes outside the Northeast Corridor in fiscal year
    2006 would have generated a net gain of $136.6 million for Amtrak.
    However, there is little agreement between Amtrak and the host
    railroads on whose track Amtrak operates regarding the cause of this
    poor OTP, and, therefore, no consensus on how to improve it.
        In work we have ongoing at the request of this subcommittee, we
    have found that Amtrak trains are delayed by insufficient track
    capacity; host railroad operating practices, including dispatching; and
    external factors beyond the host railroads' control, such as weather
    and derailments. Amtrak's data on delays does not allow us to quantify
    the relative share each cause contributes to delay. Disagreement also
    exists regarding the precise nature of Amtrak's right to ``preference
    over freight transportation in using a rail line, junction, or
    crossing''.\2\ We believe the issue of improving Amtrak's OTP can best
    be addressed through collaboration between Amtrak, the host railroads,
    and the executive branch which balances the enforcement of rights with
    incentives for cooperation. The State capital matching grant program
    can play an important role in this effort.
    ---------------------------------------------------------------------------
        \2\ Section 24308c of title 49 of the United States Code.
    ---------------------------------------------------------------------------
        Reauthorization Remains Key to Amtrak's Long-Term Outlook.--As we
    have testified previously, we believe that Amtrak's long-term outlook
    would be improved through a reauthorization that focused on three
    goals: (1) continuous improvements in the cost-effectiveness of
    services provided; (2) devolution of the power to determine those
    services to the States; and (3) adequate and stable sources of Federal
    and State funding.
        Absent a reauthorization, it will continue to fall to the
    Appropriations Committee to maintain fiscal discipline at Amtrak while
    providing the tools to improve their performance. At the same time, as
    we reported last year in our audit of the Amtrak Board's activities,
    the Board plays a key role in setting a strategic direction for Amtrak
    within the statutory parameters set by Congress. The Board and Amtrak
    management currently are developing a new strategic plan, which, if
    accompanied by implementation plans, will be very helpful in guiding
    Amtrak's decisionmaking.
        I will now discuss these issues in greater detail.

             DESPITE RECENT PROGRESS, AMTRAK STILL FACES CHALLENGES

    Operating Losses
        Amtrak ended fiscal year 2007 with a net operating loss of $1.0
    billion and a cash operating loss, excluding interest and depreciation,
    of $486.3 million.\3\ Amtrak currently projects a cash operating loss
    of $454.3 million in fiscal year 2008,\4\ $21 million below its
    original budgeted loss, and $525 million in fiscal year 2009. The
    increase in fiscal year 2009 is due largely to fuel, benefits, and
    labor settlement costs, and the impact of a projected economic slowdown
    on revenues.
    ---------------------------------------------------------------------------
        \3\ Amtrak's fiscal year 2007 cash operating loss includes $190
    million in accrued expenses from the pending labor settlement.
        \4\ Amtrak originally budgeted for a $475 million cash operating
    loss in fiscal year 2008. However, based on actual revenues and
    expenditures through January, this loss has been revised downward by
    $21 million to $454.3 million.

        Based on the information available today, we believe Amtrak could
    manage with $475 million for its fiscal year 2009 operating subsidy
    instead of the $525 million requested. We differ with Amtrak's
    estimates of likely fiscal year 2009 revenues, expenses, and operating
    reforms. Our recommended operating grant level would provide Amtrak
    with an increase of almost $100 million and cover an approximately 3.5
    percent increase in operating expenses as a result of likely revenue
    increases. We strongly urge the subcommittee to reexamine Amtrak's
    funding requirements after Amtrak completes its more detailed, bottom
    up budget projection in July.
        We are concerned about the seemingly arbitrary manner in which
    Amtrak management revised its fiscal year 2009 revenue estimates
    developed using their econometric models to reflect a potential
    recession. While we understand the desire to be conservative in light
    of economic uncertainty, we believe that the tight budget environment
    calls for a more scientific and supportable approach to revenue
    forecasting.
        In this regard, we note that both the Federal Reserve's Federal
    Open Market Committee and the Blue Chip consensus forecast call for
    economic growth in fiscal year 2009 at a level commensurate with that
    in fiscal year 2007, not a decline as Amtrak projects. Growth in the
    gross domestic product, a measure of overall economic activity, began
    to slow in 2007, and projected to slowdown further in 2008 before
    picking up in 2009. Despite the current slowdown, Amtrak's fiscal year
    2008 passenger related revenues are projected to be $170 million above
    fiscal year 2007 and $71 million above the level Amtrak originally
    projected in its fiscal year 2008 budget.

        In addition, we believe that Amtrak should take a more restrained
    approach regarding expenditures given the large uncontrollable cost
    increases Amtrak anticipates for wages, benefits, and fuel costs.
    Amtrak's budget estimates anticipates hiring about 200 employees which
    might be aggressive considering the tight budget environment. Finally,
    since Amtrak forecasts its fiscal year 2008 cash operating loss will be
    about $21 million below the amount it used as a starting point to build
    its fiscal year 2009 request, its fiscal year 2009 expenses are likely
    to be less than reflected in Amtrak's budget request.
        Finally, Amtrak anticipates achieving no savings from operating
    reforms in fiscal year 2009. Amtrak saved $61.3 million from operating
    reforms in fiscal year 2006, $52.8 million in fiscal year 2007, and
    anticipates saving $40.3 million in fiscal year 2008. The current
    estimate of fiscal year 2008 savings is just half of the amount Amtrak
    originally anticipated it would save. The Amtrak Board of Directors, in
    the fiscal year 2008 Action Plan, established as one of its seven
    corporate goals, to ``contain cost growth through productivity and
    efficiency improvements''. We strongly support this goal and believe it
    should be reflected in the fiscal year 2009 budget.
        As shown in Table 2, Amtrak anticipates achieving $17.0 million in
    fiscal year 2008 savings through revenue enhancements and $23.3 million
    through expense reductions. The revenue enhancements include
    improvements to both Acela and long-distance services and additional
    food and beverage sales. The expense reductions include reducing energy
    costs, increasing use of credit cards on-board trains, and implementing
    several productivity improvements in Amtrak's Environment,
    Transportation, Mechanical, and Engineering departments. Through
    January, Amtrak has achieved $6.3 million of these projected savings.

                              TABLE 2.--AMTRAK'S FISCAL YEAR 2008 COST SAVINGS FROM REFORM
                                                [In millions of dollars]
    ----------------------------------------------------------------------------------------------------------------
                                                                                                              YTD
                                                                        Annual    Budget YTD  Actual YTD   Variance
    ----------------------------------------------------------------------------------------------------------------
    Revenue Enhancements............................................       17.0         4.5         4.4        (0.1)
        Food and Beverage...........................................        0.9         0.9         0.5        (0.4)
        Overhead Functions..........................................        2.4         0.4         0.4   ..........
        Customer Service............................................        1.3         0.4         0.9         0.5
        Marketing and Sales.........................................        1.8         1.2         0.2        (1.0)
        NEC Operations..............................................        7.6         1.4         2.3         0.9
    Long Distance Services                                                  3.2         0.2         0.2   ..........
                                                                     ===============================================
    Expense Reductions..............................................       23.3         5.3         1.9        (3.4)
        Mechanical..................................................       (7.2)       (2.1)       (1.7)        0.4
        Overhead Functions..........................................       11.0         0.7        (0.1)       (0.8)
        Customer Service............................................       17.7         6.2         4.9        (1.3)
        Ongoing Efficiencies........................................        1.8         0.5        (1.2)       (1.7)
                                                                     ===============================================
          Total.....................................................       40.3         9.8         6.3        (3.5)
    ----------------------------------------------------------------------------------------------------------------
    Columns may not sum due to rounding.

    Source: Amtrak.

    Labor Settlement Costs
        Amtrak anticipates the fiscal year 2008 and fiscal year 2009 cost
    of the labor agreement currently in the ratification process will be
    $412.2 million for both the operating and capital accounts. As shown in
    Table 3, Amtrak's estimate of $148.9 million in fiscal year 2008 costs
    includes $52.4 million for the prospective fiscal year 2008 pay raise,
    $94.4 million for the fiscal year 2008 share of the retroactive fiscal
    year 2002-2008 pay raise, and $2.1 million for management pay raises to
    supervisors to maintain an appropriate pay differential relative to
    their employees. The $263.3 million in fiscal year 2009 costs include
    $117.4 million for the prospective fiscal year 2009 pay raise, $141.6
    million for the fiscal year 2009 share of the retroactive pay raise,
    and $4.3 million for management pay raises.
        We believe that Amtrak does not require a separate $114 million
    appropriation in fiscal year 2009 to cover the partial costs of the
    retroactive wages resulting from the pending settlement ratification.
    Based on actual revenues and expenditures through January, Amtrak
    forecast that its cash balance at the end of fiscal year 2008 would be
    $268.7 million. According to Amtrak, paying off the unbudgeted labor
    settlement costs would reduce this cash balance to $118.7 million.
    While this cash balance is below the $150 million level Amtrak stated
    they prefer to have on hand, it is 14 percent more than the $103.9
    million cash balance that would have resulted in fiscal year 2007 from
    Amtrak's spending decisions. Amtrak is currently refining these
    estimates as it determines the amounts due on an employee-by-employee
    basis.

                   TABLE 3.--ESTIMATED LABOR SETTLEMENT COSTS
                            [In millions of dollars]
    ------------------------------------------------------------------------
                                          Due in       Due in
                                       Fiscal Year  Fiscal Year     Total
                                           2008         2009
    ------------------------------------------------------------------------
    Retroactive Wage Payment (2002-           94.4        141.6        236.0
     2008)...........................
    Management Pay Raise.............          2.1          4.3          6.4
    Prospective Pay Raises...........         52.4        117.4        169.8
                                      --------------------------------------
        Total........................        148.9        263.3        412.2
    ------------------------------------------------------------------------
    Source: Amtrak.

    Capital
        Amtrak's infrastructure continues to suffer from the effects of
    years of underinvestment, and its estimated backlog of infrastructure
    projects needed to attain a ``state of good repair'' \5\ is $4.8
    billion. The $675 million recommended for capital would allow Amtrak to
    fund legal, safety, and security requirements and continue to make
    progress to achieving a ``state of good repair.''
    ---------------------------------------------------------------------------
        \5\ Amtrak uses a component life cycle replacement approach to
    defining ``state of good repair''. Amtrak defines being in a ``state of
    good repair'' when each of its infrastructure assets is maintained and
    replaced within the design life of that component.
    ---------------------------------------------------------------------------
        Amtrak initiated a new capital planning process in fiscal year 2008
    that prioritizes capital projects across different departments. We
    believe this planning process is an important step forward. As it
    matures, we would like to see greater reliance on return on investment
    analyses for projects, when appropriate. This analysis would facilitate
    the comparison and prioritization of projects and would demonstrate how
    projects contribute to meet Amtrak's business goals, i.e., increasing
    ridership and revenues, reducing costs, improving OTP, and reducing
    trip times.
    Debt Service
        The $266 million for debt service is the minimum needed to fund
    Amtrak's fiscal year 2009 obligations. This amount reflects Amtrak's
    minimum debt payment schedule adjusted for Amtrak's pre-payment of the
    $21 million on its Railroad Rehabilitation and Improvement Financing
    (RRIF) loan. Amtrak's proposal to pay off debt early is based on the
    economic benefits of paying off higher interest debt and a desire to
    reduce its overall debt burden to facilitate new borrowing in the
    future for rolling stock replacement.
        We have previously testified that from an economic standpoint, the
    taxpayer would benefit by the Federal Government paying off Amtrak's
    $3.3 billion in long term debt and capital lease obligations.
    Currently, this debt is being paid off with Federal appropriations.
    Because portions of Amtrak's debt were financed at higher interest
    rates than what the Federal Government can borrow, it would be less
    costly for the Federal Government to payoff the entire debt at once.
    However, in this tight budget environment, we believe Amtrak has higher
    funding priorities at this time than repaying debt, such as
    infrastructure investment.
        In addition, significant issues still need to be resolved which
    will affect Amtrak's rolling stock needs. In particular, Amtrak needs
    to develop a more equitable method of charging States for State
    corridor services and determine whether the States will pay the fully
    allocated operating costs and, over time, a growing contribution to
    capital costs for new and existing service. In addition, the higher
    labor rates resulting from the pending labor agreement will increase
    State costs and may affect their willingness to pay for current
    services, let alone expand into new services. The impact these issues
    will have on States' demand for new service and the need for additional
    rolling stock needs to be incorporated into a comprehensive fleet plan.
    Revenue and Ridership
        Passenger revenues increased to a peak level of $1.52 billion in
    fiscal year 2007, primarily as a result of revenues from Acela service
    that were $56.7 million above budget projections. Amtrak attributed
    increases in Acela revenues and ridership to reduced trip times,
    improved OTP, deteriorating airline service, increased highway
    congestion, and higher gasoline costs. Systemwide ridership increased
    to 25.8 million in fiscal year 2007. For the first 4 months of fiscal
    year 2008, passenger revenues were $71.1 million higher than the same
    period in fiscal year 2007, supported by strong demand for corridor
    trains, particularly for Acela and Regional services. Ridership grew
    11.2 percent during this period.

      ACHIEVING RELIABLE ON-TIME PERFORMANCE COULD SUBSTANTIALLY IMPROVE
                               AMTRAK'S FINANCES

        Amtrak's OTP had been declining steadily since fiscal year 2002,
    from 77 percent to 68 percent in fiscal year 2006. However, the OTP
    increased in fiscal year 2007 to 69 percent and to 72.7 percent through
    January 2008. In fiscal year 2006, average OTP across Amtrak's long-
    distance routes was only 30 percent. For Amtrak's corridor routes,
    average OTP was much higher, but still only 67 percent (excluding the
    NEC). In fiscal year 2007, the OTP of a number of long-distance routes
    increased substantially, but only enough to raise the average for long-
    distance routes to 42 percent. Through January 2008, long-distance OTP
    increased to 59.7 percent.
        We recently reported that improving OTP to 85 percent on all routes
    outside the Northeast Corridor (NEC) in fiscal year 2006 would have
    generated a net gain of $136.6 million for Amtrak. This total net gain
    includes increased Amtrak revenues of $111.4 million and reduced fuel
    and labor costs of $39.3 million. Revenue would increase as customers
    become more confident in Amtrak's ability to arrive on time. Labor
    expenses would be reduced in part by fewer overtime hours required to
    staff late trains. Fuel costs would also fall with a reduction in
    delays as less time would be spent idling or accelerating and
    decelerating. The improved OTP would also require an increase in net
    performance payments paid to the host railroads. We estimated these
    would total $14.1 million. Achieving an OTP of 75 percent outside of
    the NEC in fiscal year 2006 would have generated a net gain of $122.1
    million and an OTP of 100 percent would have generated a net savings of
    $136.4 million. This latter estimate reflects higher performance
    payments that exceed the revenue increase and cost reductions.

        However, there is little agreement between Amtrak and the host
    railroads on whose track Amtrak operates regarding the cause of this
    poor OTP, and, therefore, no consensus on how to improve it. In work we
    have ongoing at the request of this subcommittee, we have found that
    Amtrak trains are delayed by insufficient track capacity; host railroad
    operating practices, including dispatching; and external factors beyond
    the host railroads' control, such as weather and derailments. The
    available data does not allow us to quantify the relative share each
    cause contributes to delay.
        The capacity of the freight rail network is insufficient to handle
    the mix of fast (passenger and inter-modal freight) and slow (bulk
    commodity freight) trains operating according to different business
    models, i.e., scheduled versus unscheduled or loosely scheduled
    service. In this network, passenger trains frequently catch up with
    slower moving freight trains, or other passenger and commuter trains.
    In addition, most Amtrak trains outside the NEC operate over single
    tracks with bi-directional traffic, which requires trains to be held on
    sidings until they can pass each other. Capacity is also reduced by
    temporary speed restrictions, or slow orders.
        Host railroad operating and dispatching practices also can delay
    Amtrak trains. Dispatch operations are focused on maintaining network
    fluidity, sometimes at the expense of Amtrak's OTP. It is difficult to
    determine how individual dispatching decisions impact delays simply by
    observing day-to-day dispatching operations. Nevertheless, we found
    certain practices intentionally delay Amtrak trains. In addition, a
    lack of management attention by a host railroad to Amtrak's performance
    can increase delays. Amtrak and the host railroads largely attribute
    recent OTP improvements on the Auto Train and other Florida services,
    the California Zephyr, Crescent, Capitol Limited and Lake Shore Limited
    trains to more focused and cooperative management efforts. Each of
    these root causes contributes to Amtrak's delays, often in combination
    with each other. As delays accumulate, it can be difficult to separate
    the relative impact from each other.
        Disagreement also exists regarding the precise nature of Amtrak's
    right to ``preference over freight transportation in using a rail line,
    junction, or crossing''.\6\ Amtrak views the legislation as granting an
    absolute right to run unimpeded on the freight network and, as such,
    considers all freight train interference a violation of its right of
    preference. In Amtrak's view, host railroads need to proactively manage
    operations on their rail lines to avoid interference-related delays.
    The host railroads we met with did not offer us a legal definition of
    preference, but generally viewed their responsibility to grant
    preference relative to their ability to manage congestion levels and
    maintain ``fluidity'' in the overall system.
    ---------------------------------------------------------------------------
        \6\ Section 24308c of title 49 of the United States Code.
    ---------------------------------------------------------------------------
        We believe the issue of improving Amtrak's OTP can best be
    addressed through collaborative interactions between Amtrak, the host
    railroads, and the executive branch which balances the enforcement of
    rights with incentives for cooperation. The State capital matching
    grant program can play an important role in this effort in terms of
    providing an incentive to freight railroads for cooperation. In
    addition, the quarterly reporting requirements regarding host railroad
    OTP Congress established last year will also focus the Department and
    host railroad management's attention on this issue.

           REAUTHORIZATION REMAINS KEY TO AMTRAK'S LONG-TERM OUTLOOK

        As we have testified previously, we believe that Amtrak's long-term
    outlook would be improved through a reauthorization that focused on
    three goals: (1) continuous improvements in the cost-effectiveness of
    services provided; (2) devolution of the power to determine those
    services to the States; and (3) adequate and stable sources of Federal
    and State funding.
        Absent a reauthorization, it will continue to fall to the
    Appropriations Committee to maintain fiscal discipline at Amtrak while
    providing the tools to improve their performance. At the same time, as
    we reported last year in our audit of the Amtrak Board's activities,
    the Amtrak Board of Directors plays a key role in setting a strategic
    direction for Amtrak within the statutory parameters set by Congress.
    The previous Board set a strategic direction for Amtrak with its April
    2005 Amtrak Strategic Reform Initiatives and fiscal year 2006
    Legislative Grant Request. However, this plan's broad long-term
    objectives were not fully translated into a detailed plan with
    outcomes, milestones, and performance measures. As a result, the Board
    and Amtrak management lacked a comprehensive standard against which to
    evaluate how Amtrak's day-to-day activities are addressing the Board's
    strategic vision for Amtrak.
        The current Board and Amtrak management are developing a new
    strategic plan, which if accompanied by implementation plans, will be
    very helpful in guiding Amtrak's decisionmaking.
        Madam Chairman, this concludes my statement. I would be happy to
    answer any questions at this time.

        Senator Murray. Thank you very much. Mr. Parker.

                            NONDEPARTMENTAL WITNESS

    STATEMENT OF JOEL PARKER, INTERNATIONAL VICE PRESIDENT
                AND SPECIAL ASSISTANT TO THE PRESIDENT,
                TRANSPORTATION COMMUNICATIONS INTERNATIONAL
                UNION
        Mr. Parker. Good morning. Thank you very much. I'm an
    International Vice President and Special Assistant to the
    President of Transportation Communications Union, TCU, which is
    affiliated with the International Association of Machinists.
        I've been renegotiater for TCU on Amtrak since 1984. TCU
    represents the most unionized workers on Amtrak, approximately
    7,500. In the just-completed bargaining round, I served as
    spokesman for a coalition of shop craft unions. I was also lead
    witness for all 8 unions that were before PEB 242 representing
    about 11,000 Amtrak workers.
        I've submitted written remarks that cover the relevant
    issues in greater detail, particularly Amtrak's overall funding
    needs and labor's belief that only a permanent funding source
    for Amtrak will make it possible for Amtrak to fulfill its
    promise as a truly national rail passenger service.
        Today, I will focus only on the recent labor settlements. I
    want to begin by thanking this committee for including forceful
    report language in last year's appropriation bill calling on
    Amtrak to negotiate fair and equitable collective bargaining
    agreements.
        We have now succeeded in that task. Contracts have been
    ratified covering the 10-year period from 2000 through the end
    of 2009 by all eight unions that were before PEB 242 and four
    other unions who were not.
        For the first time in a very long time, I am pleased to say
    that labor peace is a real possibility on Amtrak. For that to
    happen, Amtrak must live up to the one item left hanging in all
    the contracts, payment of the second retroactive pay
    installment that the unions agreed to defer to 2009.
        To understand why the unions agreed to defer this payment,
    I want to review the negotiations briefly and especially the
    PEB recommendations that served as a basis for the contracts
    that were reached.
        Negotiations opened on January 1, 2000. From almost the
    first day, Amtrak stated no contract was possible without far-
    reaching unprecedented concessions. Amtrak never wavered from
    that position. While making take-it-or-leave-it demands that it
    knew the unions would never voluntarily accept, Amtrak also
    pronounced another departure from traditional bargaining. It
    would never agree to a dime of back pay.
        Under this strategy, the longer negotiations dragged on,
    the more money Amtrak saved. Amtrak had no incentive to
    compromise to reach a negotiated deal, and let me just say that
    the reason we now are before you for this extra money is
    largely a result of the negotiations going on so long.
        As you know under the Railway Labor Act, there's no time
    limit for negotiations. The parties can't resort to self-help
    until released by the NMB. Repeated requests over the years by
    several of the unions for release for mediation were opposed by
    Amtrak. Finally, in October 2007, the NMB proffered binding
    arbitration to the eight unions who were then in mediation.
    Following the rejection of that proffer, President Bush created
    PEB 242.
        President Bush appointed the following individuals to serve
    on the PEB. As Chairman Peter Tredick, as members, Ira Jaffe,
    Joshua Javits, Annette Sandberg and Helen Witt. Chairman
    Tredick was a long-time management side attorney, specializing
    in labor disputes. Joshua Javits and Helen Witt were former
    Chairmen of the NMB, appointed by President Reagan. Annette
    Sandberg had recently served as Administrator of the FMCSA to
    which she had been appointed by President Bush.
        No one could possibly accuse this Board of harboring a pro-
    labor bias, yet their report overwhelmingly adopted labor's
    proposals for settlement. Many outside observers professed
    surprise at this result. I was not surprised. The unions
    proposed to follow the contracts that had traditionally served
    as a pattern for settlement on Amtrak, the National Freight
    Agreements. Those agreements were hardly extravagant. The wage
    increases, 2.6 percent a year net of employee health
    contributions, were far less than national outside industry
    averages and than those, for example, of Federal employees
    during the past 8-year period.
        A strong case could have been made that Amtrak employees
    had more in common with much higher-paid commuter workers who,
    like them, work on passenger carriers that require public
    subsidy, but we elected to present the conservative proposal
    based on historic pattern considerations.
        Amtrak, on the other hand, proposed radical departures from
    pattern in the areas of back pay and work rules. The Board
    rejected Amtrak's non-traditional approach.
        On back pay, the Board recommended that the wage increases
    be effective on the same dates they were effective in the
    pattern agreements, the National Freight Contracts.
        I'm going to run out of time. I would beg your indulgence
    to go a little beyond. Thank you very much.
        To address Amtrak's argument that Congress had not
    appropriated enough funds to allow them to pay retroactive
    wages, the Board recommended two divergencies from their
    National Freight Agreements.
        First, it recommended that the back pay component be paid
    in two installments, 40 percent at the time of signing the
    remaining 60 percent 1 year later. Secondly, the Board limited
    back pay to employees in service on December 1, 2007, which was
    the day the Board was established. By doing that, the Board
    eliminated all employees who had retired or died before
    December 1, 2007, from receiving any compensation for the 7
    years of work they had performed.
        Upon issuance of the report, negotiations between Amtrak
    and each of the eight unions immediately began. Contracts were
    reached on January 18, 2008. The contracts followed almost to
    the letter the PEB's recommendation.
        However, there was one significant departure. Amtrak
    insisted it would not agree to the second back pay payment
    until sufficient funds were appropriated by Congress. In order
    to avoid a strike, the unions agreed to a contingency
    provision. If Amtrak determined it lacked the money to pay the
    second back pay installment, it would notify the unions in 2009
    and after a 60-day negotiation and cooling-off period, the
    unions would be free to strike.
        In summary then, what has been the most difficult and
    contested negotiations in Amtrak history are finally on the
    verge of being resolved with a fair outcome. Only one
    outstanding issue remains, the payment of the second back pay
    installment. Amtrak estimates it requires an additional
    specific appropriation of $114 million to be able to pay that
    installment.
        As you consider this request for appropriation, I believe a
    few facts should be front and center. First, the agreements
    reached with Amtrak are modest, 2.6 a year net in wages is by
    no means an extravagant settlement. Most importantly, the
    contract is a product of recommendations by a well-respected
    group of neutral experts that concluded there could be no
    rationale for Amtrak workers to be paid less than their
    counterparts in the rail industry simply because the company
    they work for receives public subsidies.
        Senator Murray. Mr. Parker, if you could summarize for us.
    We will submit all of your testimony for the record.
        Mr. Parker. I will. Let me end on a positive note. I felt
    compelled to bring the issue of retirees to you but that is in
    my written statement and it's in the oral statement that I
    didn't get to.
        We believe there are valid reasons for optimism going
    forward. Amtrak President Alexander Kummant has said he wants
    to establish a new partnership with Amtrak workers. He was not
    there when this bargaining strategy was devised nor were most
    of the current Board of Directors.

                               PREPARED STATEMENT

        We wholeheartedly seek a cooperative relationship with Mr.
    Kummant and his management team. We want to strive together to
    work for the best possible service to the riding public. We can
    accomplish much for the public good. It's time to embark on
    that journey and to put the strains of the past behind us. That
    will require the payment of that $114 million back pay
    installment.
        [The statement follows:]

                       Prepared Statement of Joel Parker

        Thank you for your invitation to testify this morning about
    Amtrak's budgetary outlook, and specifically about the recent labor
    settlements on Amtrak and their impact on Amtrak's financial needs.
        I am testifying on behalf of the Transportation Communications
    Union, TCU, an affiliate of the International Association of
    Machinists. TCU is the union which represents the most workers on
    Amtrak, approximately 7,500 clerks, carmen, on-board service workers,
    mechanical supervisors, maintenance of way supervisors, and product
    line supervisors.
        I have served as lead negotiator for TCU on several contracts with
    Amtrak since 1984. In the just-completed bargaining round I served as
    spokesman for a coalition of Shopcraft unions, which included the
    International Brotherhood of Electrical Workers, the International
    Association of Machinists, the Transport Workers Union and TCU. I was
    also the lead witness for all eight unions that were before
    Presidential Emergency Board 242.
        I want to begin by thanking this subcommittee for its historic
    support for Amtrak funding. The members we represent have had to endure
    the uncertainty of working for a company whose survival was never
    assured beyond the upcoming year. Every year we faced a serious attempt
    to underfund Amtrak, or in the case of the current administration, to
    zero fund it. This funding uncertainty not only fostered job insecurity
    and concomitant low morale, but also was a direct contributor to the
    unprecedented nadir in collective bargaining that marked the last 8
    years on Amtrak.
        The administration has attempted every year to dismantle Amtrak by
    starving it of the Federal resources it needs or pursuing risky
    privatization initiatives. Through those efforts the White House
    demonstrated its complete lack of understanding of the importance of
    Amtrak to our national economy and our competitiveness. It also
    demonstrated the administration's disregard for the growing
    transportation needs of cities and States that are on the front-lines
    of addressing major congestion and environmental challenges. And by
    pursuing a reckless funding plan for Amtrak every year, the Bush
    administration exacerbated Amtrak's already enormous backlog of much
    needed equipment, infrastructure and safety and security upgrades.
        Fortunately, each year this subcommittee has stepped to the plate
    and funded Amtrak at levels adequate to keep a national system running.
    You have done this even though Congress as a whole has failed to pass
    an authorization bill since 2002. For that steady support I again want
    to thank you on behalf of all of the men and women we represent.
        I am especially appreciative of you, Madame Chair, for calling an
    early hearing last year to highlight the plight of Amtrak employees who
    had worked for up to 8 years without new contracts and a general wage
    increase. And I want to thank you and your committee colleagues for
    including forceful Report Language in last year's appropriations bill
    that called on Amtrak to negotiate fair and equitable collective
    bargaining agreements.
        Amtrak's accomplishments have been remarkable given its year to
    year funding scramble for survival. Ridership records continue to be
    set, and service levels continue to improve. This is largely due to the
    dedication and professionalism of Amtrak workers, who have refused to
    let adverse working conditions and terribly bitter labor negotiations
    deter them from their work of making sure train sets, even terribly
    antiquated ones, run safely and efficiently, and that service to the
    passenger be of the highest caliber possible.
        But year to year funding can never be the real answer to this
    Nation's need for a technologically advanced coast to coast rail
    passenger system. The greatest obstacle to Amtrak's long term success
    is the absence of a permanent funding source. At this time of soaring
    gas prices, energy dependence, and the need for environmentally
    friendly modes of transportation, there is a growing public consensus
    that Amtrak can play a major positive role in all three areas. Amtrak
    President Alexander Kummant has laid out an exciting vision of growth
    in those markets where Amtrak service is now woefully inadequate but
    where the demand for decent speed rail passenger service clearly
    exists. To realize that vision will take consistent investment and
    planning, which is contingent on long term funding certainties.
        That is why TCU and the rest of rail labor wholeheartedly endorses
    a multi-year funding plan that provides no less than $2 billion a year
    with adequate allocations for both capital and operating needs. We will
    work with Senators and House Members to achieve long-term financial
    stability permitting Amtrak and its workers to produce the first-class
    national rail passenger system Americans deserve.
        It is our sincere hope that the Senate and House will not only fund
    the current needs of Amtrak including the costs associated with newly
    signed collective bargaining agreements, but will adopt a multi-year
    blueprint for a truly national Amtrak system. Hopefully, a
    congressional blueprint for Amtrak will:
      --provide multi-year Federal funding of at least $2 billion a year;
      --restructure and pay-down Amtrak's debt, which is a product of 30
            years of under-funding and neglect;
      --reform the make up of Amtrak's Board to include a rail labor member
            and to ensure it is comprised of strong advocates of the
            company and its mission; and
      --fund critically important security and safety upgrades.
        But while we work to see a long term authorization passed, we must
    necessarily also focus on making sure Amtrak receives an adequate
    appropriation to not only fund next year's operations, but also to live
    up to the settlement terms of the just-negotiated contracts that ended
    an unprecedented 8 years of negotiations without a strike. On the first
    count, TCU and rail labor support the $1.8 billion for fiscal year 2009
    that the House and Senate Budget Committees provided. On the second, we
    strongly urge the Senate to appropriate an additional $114 million that
    is needed to fulfill the economic terms of the recent contracts.
        It is to that issue that I will devote the balance of my testimony.
        To understand the need for the additional $114 million, it is first
    necessary to understand why negotiations dragged on for 8 long years,
    why a Presidential Emergency Board appointed by President Bush
    overwhelmingly decided on recommendations that were largely consistent
    with labor's proposals, and why the unions agreed to allow Amtrak to
    pursue additional funding to meet its contractual obligations rather
    than striking when the law permitted.
        Negotiations for contracts opened on January 1, 2000. From almost
    the first day, Amtrak stated that no contract was possible without far-
    reaching, unprecedented concessions. In the 8 years that followed,
    Amtrak never wavered from that position. While making take-it-or-leave-
    it demands that it knew the unions would never voluntarily accept,
    Amtrak also pronounced another departure from traditional bargaining:
    it would never agree to a dime of back pay. Under this strategy, the
    longer negotiations dragged on, the more money Amtrak saved. Amtrak had
    no incentive to compromise to reach a negotiated deal. As months turned
    into years, the ever-growing amount of back pay due itself became an
    obstacle to settlement.
        Under the Railway Labor Act, there is no time limit to
    negotiations. The parties cannot resort to self-help until released by
    the National Mediation Board (NMB). Repeated requests over the years by
    several of the unions for release from mediation were opposed by
    Amtrak, and ignored by the NMB.
        Finally, on October 18, 2007, almost 8 full years since bargaining
    began and in some cases 7 years after the NMB had assigned mediators to
    the disputes, the NMB proffered binding arbitration to the eight unions
    who were then in mediation. (Four unions had elected not to be in
    mediation and they were therefore not subject to the proffer of
    arbitration.) The involved unions were: the Brotherhood of Maintenance
    of Way Employes--Teamsters; the International Brotherhood of Electrical
    Workers; the International Association of Machinists & Aerospace
    Workers; the Brotherhood of Railroad Signalmen; the Joint Council of
    Carmen, comprised of the Transport Workers Union of America and TCU;
    the American Train Dispatchers Association; the National Conference of
    Firemen & Oilers/Service Employees International Union; and two ARASA
    (Supervisors) crafts of TCU.
        After the involved unions all rejected the proffer of arbitration,
    President Bush, on November 28, 2007, created Presidential Emergency
    Board (PEB) 242. Under the Act, the Board had 30 days to investigate
    the dispute and issue non-binding recommendations, after which there
    would be a 30 day cooling off period at the end of which the parties
    would be free to exercise self-help.
        President Bush appointed the following individuals to serve on the
    PEB: as Chairman, Peter Tredick; as Members, Ira Jaffe, Joshua Javits,
    Annette Sandberg, and Helen Witt. Four of the five had previously
    served on other PEB's appointed by President Bush. Chairman Tredick had
    served as Chairman of PEBs 240 and 241, which made recommendations in
    2007 to settle disputes on Metro North Commuter Railroad and several of
    its unions. Joshua Javits and Helen Witt were former Chairmen of the
    National Mediation Board, appointed by President Reagan. Annette
    Sandberg had been an official in the Department of Transportation under
    President Bush.
        The Board held 3 days of hearings in December 2007, at which the
    parties fully presented their positions. All eight unions presented a
    common position to the Board.
        The Board issued its Report to the President on December 30, 2007.
        The Report for the most part recommended the proposals for
    settlement that had been advanced by the unions. It advocated adoption
    of the wage terms of the last two national freight railroad settlements
    to cover the period January 1, 2000 through December 31, 2009. Wages
    would be increased by approximately 28 percent over the 10 year period,
    or about 2.6 percent a year. As in the freight agreements, employee
    health insurance contributions would be retroactively increased from
    zero to $166 a month this year, and $200 a month by the end of the
    agreement. Employees would also have to pay significantly higher copays
    for doctor visits and prescription drugs, and deductibles were also
    increased. Wages would be paid retroactively to the dates the increases
    in the freight contracts were effective, to be offset by retroactive
    health insurance contributions and COLAs already paid. There would be
    no changes in work rules.
        To address Amtrak's argument that Congress had not appropriated
    enough funds to allow them to pay retroactive wages, the Board
    recommended two divergences from the national freight agreements.
    First, it recommended that the back pay component of the settlements be
    paid in two installments: 40 percent at the time of signing, and the
    remaining 60 percent 1 year later. Second, the Board limited back pay
    to employees in service with Amtrak on December 1, 2007, the day the
    Board was established. By doing so, the Board eliminated all employees
    who had retired or died between January 1, 2000 and December 1, 2007
    from receiving any compensation for the work they had performed. The
    Board stated it did this in response to Amtrak's inability to pay
    argument as a way to ``reduce somewhat the cost of the retroactivity
    pay . . .'' (P. 40 of Report of PEB 242).
        Upon issuance of the Board report, negotiations between Amtrak and
    each of the eight unions immediately commenced, and contracts were
    reached with each union on January 18, 2008. The contracts followed
    almost to the letter the recommendations of the PEB. However, there was
    one significant departure. Amtrak insisted that it could not agree to
    the second back pay payment until sufficient funds were appropriated by
    Congress. In order to avoid a strike, which would have been legally
    permissible on January 30, 2008, the unions agreed to a contingency
    provision. Under that provision, the 60 percent second retroactive
    payment would be due 1 year from the first retroactive payment, which
    will occur within 60 days after contract ratification. If Amtrak
    determined that it lacked the money to pay that installment, it would
    notify the unions and, after a 60 day negotiation and cooling off
    period, the unions would be free to strike.
        All of the contracts involving the eight unions before the PEB have
    now been ratified by their memberships. The four unions who also had
    not reached agreements since 2000 but were not before the PEB have also
    reached agreements that mirror the Board's recommendations. Those
    contracts have either been ratified or are in the process of being
    ratified. Three crafts (clerks, on-board service workers, and product
    line supervisors) reached agreements in 2003 for the period January 1,
    2000 through December 31, 2004, but are without agreements for the
    period 2005 through 2009. They are now in negotiations with Amtrak, and
    I am confident agreements will be reached in the immediate future.
        In summary, then, what has been the most difficult and contested
    negotiations in Amtrak's history are finally on the verge of being
    resolved with a fair outcome. Only one outstanding issue remains, and
    that is payment of the second back pay installment. Amtrak estimates
    that it requires an additional specific appropriation of $114 million
    to be able to pay that second back pay installment.
        I am here today on behalf of all of rail labor to urge this
    subcommittee, and Congress as a whole, to bring this bargaining round
    to a fair conclusion by appropriating the $114 million to allow Amtrak
    to fulfill its back pay obligation to its employees.
        As Congress considers this request for appropriation, I believe
    certain facts should be front and center. First, the agreements reached
    with Amtrak are modest in their terms, 2.6 percent a year in wages is
    by no means an extravagant settlement. The $114 million needed for back
    pay covers an 8 year period, which amounts to less than $15 million a
    year.
        Most importantly, the contract is the product of recommendations by
    a well-respected group of neutral experts, none of whom could be
    accused of harboring a pro-labor bias or background. They were guided
    by the evidence before them, and concluded there could be no rationale
    for Amtrak workers to be paid less than their counterparts in the rail
    industry simply because the company they worked for received public
    subsidies. The Board adopted the traditional pattern for Amtrak
    workers--the national freight agreements.\1\ In doing so, the Board
    noted that had it looked at contracts of rail workers that worked for
    other subsidized carriers, namely commuter rail workers, its
    recommendations on wages would have been significantly higher.\2\
    ---------------------------------------------------------------------------
        \1\ ``There is no dispute that . . . the Freight Agreements have
    served over the years as the historical pattern referenced for
    establishment of wages, benefits, and working conditions, at Amtrak.''
    (P. 14 of Report of PEB 242.)
        \2\ The Board found that if the freight pattern was not used as the
    basis of settlement, ``One would then be compelled to more closely
    examine similarities between Amtrak's operations and those of Commuter
    Rail and Urban Transit in which wages and benefits are significantly
    higher.'' (P. 23 of Report of PEB 242.)
    ---------------------------------------------------------------------------
        As to the prolonged nature of negotiations, the Board found the
    blame lay squarely at Amtrak's door. ``. . . the evidence paints a
    fairly clear picture that places much greater responsibility on Amtrak
    for the failure to ink a deal over the prolonged period since December
    31, 1999, than on the Organizations.'' (P. 37 of Report of PEB 242.)
        In fashioning its recommendations, the Board noted the ``tremendous
    gains in productivity in recent years by the employees represented by
    the Organizations.'' (P. 30 of Report of PEB 242.)
        On the back pay issue, the Board unequivocally wrote, ``We are
    persuaded that, in this case, nothing short of full retroactivity is
    fair and equitable and appropriate to begin to restore to employees the
    lost wages that resulted from their inability to obtain a successor
    agreement over the unprecedented 8 year period that these employees
    have continued to work without a new agreement. Even an award of full
    retroactivity will result in Amtrak having had the benefit of an
    interest-free `loan' of the pay that would have been granted on an
    ongoing basis if the Freight or other applicable pattern had been
    timely incorporated as part of an Agreement.'' (P. 38 of Report of PEB
    242.)
        Because Amtrak could not credibly point to collective bargaining
    settlements in the rail industry, freight or commuter, to justify its
    no back pay position, it relied principally on an argument that it
    simply could not afford to pay retroactive wages without jeopardizing
    its operations.
        Amtrak failed to mention that not once over the course of the 8
    years had it asked Congress to appropriate money to fund an eventual
    settlement, including back pay. In the absence of such a request, I
    submit it was disingenuous for Amtrak to suggest that Congress' failure
    to appropriate such money in advance as evidence of congressional
    intent that Amtrak workers should work for lower wages than comparable
    workers in the rail industry.
        In fact, the PEB cited this very committee as evidence that
    Amtrak's arguments on this score were remiss. On page 11 of their
    Report, the Board wrote that ``the Senate Committee on Appropriations
    recently noted that most of Amtrak's employees have gone more than 7
    years (now eight) without a general wage increase, and that
    consequently many craftsmen have fallen further and further behind
    craftsmen conducting identical work for freight and commuter railroads.
    This report went on to State that `Amtrak's failure to reach a labor
    settlement is not a result of inadequate Federal funding.' ''
        The PEB also referenced your counterpart committee in the House who
    in 2007 reported that ``Amtrak's wages, in many cases, are well below
    market . . .''
        Labor did not rely on those reports to make our economic case to
    the PEB. The facts of the wage comparisons spoke for themselves. But
    the reports did demonstrate that underpayment of Amtrak workers was not
    necessarily congressional intent, as Amtrak tried to suggest.
        But in fashioning what they considered a fair settlement based on
    traditional comparators such as pattern settlements in the industry,
    wages paid for comparable work, and economic trends such as inflation,
    the Board did in effect punt one part, albeit a small part, of the
    settlement to Congress: the second back pay installment.
        In doing so, the Board wrote that its ``role is to find a fair and
    reasonable basis for agreement. We must consider traditional factors
    relevant to the collective bargaining process but cannot tailor those
    recommendations to a prediction of Congressional action. We are
    cognizant of the political and financial constraints facing Amtrak, and
    have recommended adoption of contractual terms that are reflective, in
    part, of those realities. But we agree with PEB 234 (the last Amtrak
    PEB) that Congress should be informed of the `true cost' of Amtrak's
    service. It is then for Congress to determine whether to provide the
    funding necessary for passenger train service.'' (P. 11 of Report of
    PEB 242.)
        Labor believes that it was never Congressional intent to base
    Amtrak's survival on having Amtrak workers endure substandard wages and
    working conditions. Just as Amtrak suppliers, vendors and contractors
    expect to be fully compensated, Amtrak workers deserve to be treated
    fairly, and to not have to discount their labor as the price of keeping
    a national rail passenger service funded.
        Now the decision is squarely in Congress' hands. Appropriating the
    $114 million will bring this round of bargaining to a long overdue
    conclusion. Failure to appropriate will foment another year of labor
    unrest, at the end of which once again Amtrak workers will have to
    contemplate a strike as the only legal means to obtain the settlement
    that the Board recommended and to which Amtrak agreed.
        Amtrak admits that the lion's share of the settlements is payable
    based on current and anticipated funding action--that is, Amtrak is not
    requesting additional funds to pay the wage increases over the 10 year
    life of the agreement, nor the 40 percent of the back pay due payable
    in 2008. The only piece that Amtrak says it requires additional funding
    for is the 60 percent back pay component payable in 2009, which Amtrak
    calculates as $114 million.
        All of labor on Amtrak strongly urges this subcommittee, and
    Congress as a whole, to appropriate that additional $114 million.
        There is one other issue I would like to address before concluding.
    I mentioned before that in an attempt to reduce the amount of back pay
    due, the PEB recommended that employees who retired and the estates of
    employees who died between January 1, 2000 and December 1, 2007 would
    not be eligible for any back pay. All of the unions vigorously
    disagreed with this recommendation, but Amtrak would not agree to
    ignore it without funding to pay for it. Amtrak estimates the cost of
    funding the back pay for retired and deceased employees as between $13
    and $14 million. We do not have the data necessary to verify those
    figures, so for purposes of this discussion I will rely on them as
    accurate.
        We believe that it is extremely unfair that these employees who
    contributed so much to Amtrak's success be arbitrarily excluded from
    any consideration for the time they worked during the 7 year period.
    Amtrak didn't even propose this as a resolution. The Board came up with
    it out of thin air, arbitrarily picking the date of its appointment as
    the cut-off date for back pay. Its only stated reason was to reduce
    costs. Many of the affected workers had been there from Amtrak's
    creation. Excluding them is both inequitable and bad public policy. As
    a result of this action, their railroad retirement annuities were
    permanently reduced. We don't believe that Congress ever intended that
    retirees be treated in such a manner. For an additional $13 to $14
    million, this unfair situation could be rectified. We urge Congress to
    give it serious consideration.
        In conclusion, it is time to move beyond the bitter labor relations
    of the past 8 years. That will be impossible until the issue of funding
    the second back pay installment is resolved, since a lack of resolution
    will throw the parties back into impasse and a possible strike. We
    believe that it was never congressional intent to embark on such a
    course, and past Amtrak management used it as a smokescreen to justify
    their confrontational agenda.
        But we believe that there are valid reasons for optimism going
    forward. Amtrak President Alex Kummant has said he wants to establish a
    new partnership with Amtrak workers and their unions. He was not there
    when Amtrak's bargaining strategy was devised. Nor were most of the
    current Board of Directors. Amtrak unions wholeheartedly seek a
    cooperative relationship with Mr. Kummant and his management team. We
    want to work together to strive for the best possible service to the
    riding public and the expansion of service to new areas and along
    existing routes so that Amtrak fulfills its promise as a major
    transportation alternative. Working together, we can accomplish so much
    for the public good.
        It is time to embark on that positive journey, and to put the
    strains of the past behind us. That must begin with fulfillment of the
    contractual terms just agreed to, which includes the second back pay
    installment. I urge Congress to appropriate the necessary $114 million
    to finally bring this round to a fair and equitable conclusion. Thank
    you.

        Senator Murray. Thank you very much, and all of the
    testimony will be included as part of the record.
        Mr. Parker. Thank you.
        Senator Murray. The President's budget cuts direct
    subsidies to Amtrak by about 40 percent, and when you look at
    the direct subsidies for Amtrak's operating losses and required
    debt service payments, the cut proposed by the administration
    for fiscal year 2009 is 64 percent.
        Mr. Tornquist, let me start with you. Your office has been
    reviewing Amtrak's books every quarter for some time now. Do
    you believe there is any way possible for Amtrak to avoid
    bankruptcy if they absorb a 64 percent cut at this time?
        Mr. Tornquist. No, we don't see a way forward with that
    level of reduction that would avoid bankruptcy.
        Senator Murray. Mr. Kummant?
        Mr. Kummant. Excuse me. It would take just a complete
    radical reconfiguration of what's there. It would not resemble
    what's here today.
        Senator Murray. Ms. McLean?
        Ms. McLean. I agree with what Mr. Kummant said, that it
    would be very difficult.
        Senator Murray. Mr. Boardman?
        Mr. Boardman. I wondered if I would be last.
        Senator Murray. You are.
        Mr. Boardman. I think $900 million is the number that has
    probably been dealt with here since 2004. The years 2004, 2005,
    and 2006 were zero years, it was $360 million at that time. It
    was $900 million in 2007 and $900 million in 2008, and when you
    look at that number, what you find is that on all the requests
    of all administrations back as far as I could look is the
    highest number that's been requested, and you ask yourself how
    do you deal with a trap that you continue to seem to be in here
    between what is asked for, what is appropriated, what is spent,
    and I think it partly has to do with the fact that there is no
    request of the administration from Amtrak in the budget
    process.
        They aren't part of the budget process, we never receive
    anything from them, and so you wind up with a number that goes
    in and if you look over the years, those numbers sometimes have
    been more realistic than other times, but what Amtrak has
    instead is a legislative and grant request which I see as a
    board member right before it comes here as a request for----
        Senator Murray. Well, you are on the Amtrak Board?
        Mr. Boardman. Yes.
        Senator Murray. You know what their expenses are,----
        Mr. Boardman. Yes.
        Senator Murray [continuing]. Their operating expenses are?
        Mr. Boardman. Yes.
        Senator Murray. You sent the request to us?
        Mr. Boardman. Yes, we sent the request to you. We do our
    budget in the July beforehand. We provide and lock down the
    budget by the end of the year and by that point in time, we
    have not yet had an estimate from Amtrak. Doesn't mean I don't
    have reality of understanding what the number is.
        Senator Murray. Well, in that reality, hearing what you
    just heard, do you think the budget request, 64 percent cut, is
    going to----
        Mr. Boardman. I don't know what the percentage is, Senator.
    I trust your----
        Senator Murray. Okay.
        Mr. Boardman [continuing]. Your numbers.
        Senator Murray. Sixty-four is----
        Mr. Boardman. The $900 million that we propose----
        Senator Murray. The question is do you realistically
    believe that the budget request you sent in your position and
    in your capacity as a Board Member will allow Amtrak to
    continue without going bankrupt?
        Mr. Boardman. Not in the system that they currently
    operate.
        Senator Murray. And what miracle will occur in the next 6
    months to have that change?
        Mr. Boardman. Well, there's no miracle. I'm not talking
    about any miracle, but there are hard business decisions that
    could be made that would reduce the need for that Federal
    assistance substantially.
        If you look at the fare box going back to 1995, they
    covered approximately----
        Senator Murray. As a Board Member, have you proposed those
    changes?
        Mr. Boardman. Yes.
        Senator Murray. And the Board has said?
        Mr. Boardman. The Board itself has had those discussions.
    Management has had those discussions. We have not had action on
    those changes.
        Senator Murray. Well, can you describe for us what those
    detailed changes are?
        Mr. Boardman. One of the changes could be that New York
    could start paying for the services that are provided and it
    was a fairly fun discussion that we had at the time since I'm
    the former New York Commissioner and they said to me and
    management said to me and the Board, well, you could have paid
    us then.
        Senator Murray. Okay. So, first of all, New York sends us a
    big check. Then what?
        Mr. Boardman. Well, I think that's part of it. I think it's
    a lot of different things that would need to happen and change
    for the future, and I think the administration has said from
    the beginning, if it sees those changes, it sees those reforms
    then we can talk about what additional incentives could be
    provided to Amtrak for the future.
        Senator Murray. Mr. Kummant, do you want to comment on
    that?
        Mr. Kummant. The reality is that Mr. Boardman and I are not
    really that far off. In fact, this feels a little bit like a
    board meeting with Mr. Tornquist who sits in on all of ours and
    Donna McLean as well.
        But if you look, it's really a question of timing. I think
    there are a lot of things we agree on. In fact, one of the
    first things I did when I arrived was to reconfigure our
    organization to be able to go and gauge the State DOTs more
    effectively. It was one of the strategic reform initiatives to
    recoup more overhead and equipment money from the States and
    that, as you all know, is easier said than done given the state
    of the State budgets as well.
        But we are in very active discussions and strategic
    planning with States everywhere to say how can we reconfigure,
    make this far more transparent.
        To your question, will that happen in the next 6 months,
    no.
        Another example we're very much together on is working very
    hard on our mechanical operations. That's a $500 million
    operation. It needs to be modernized. We're doing that. We
    also--we have choices to also even attract outside business in
    order to leverage those assets more effectively. Again that
    will all take time.
        Senator Murray. Well, let me jump to one other question
    before I turn it over to Senator Bond.
        Ms. McLean, I want to ask you. The budget submission by
    your board of directors is really confusing. It acknowledges
    the requirement to pay an additional $114 million for the
    second installment on back pay, but it doesn't actually request
    the funding of this committee.
        Mr. Tornquist has testified that if Amtrak receives the
    current year's level of operating support again in 2009, then
    the railroad can be expected to have sufficient cash on hand to
    make the $114 million payment without an explicit appropriation
    from our committee.
        What is the formal position of the Amtrak Board on this?
        Ms. McLean. If I can step back for one second on our
    request for our operating, we've got a $50 million increase and
    what it represents is we have agreed that we can absorb the
    $127 million in 2009 for additional wage increases as a result
    of the PEB.
        We are saying we're going to absorb the anticipated
    increase in fuel costs, deal costs, et cetera, et cetera, but
    what hit us unexpected was a $50 million increase in our health
    benefits, our estimated costs for health benefits. We could not
    absorb that, so that's most of our request for an increase in
    operations in 2009.
        Then on top of that, you've got the PEB back pay. We went
    into the PEB negotiations offering as much as we could afford,
    which stopped short of the 100 percent back pay. After
    accepting the PEB, the PEB's recommendation is based on
    historic patterns. They looked to what happened in the past.
    That was their recommendation. We accepted it, but we also
    looked to the past and in previous negotiations where there had
    been additional requests and the PEB stated this in their
    recommendation, it's the decision of Congress on meeting those
    requirements.
        So, our request does not include the $114 million. It is
    the decision of Congress on whether or not that's going to be
    funded. We have worked with your staff on other ideas, some
    alternative funding. The efficiency grants is something that
    was brought up. That's not something we can do, but it's
    something that can be changed in law and offset that $114
    million.
        We have come to the table paying and offering that within
    our budget request, we are able to afford 81 percent of this
    PEB, but the $114 million is dependent on Congress and the
    ratification clearly states that if Congress gives us the
    money, then we will be paying that 100 percent back pay.
        Senator Bond. Thank you very much, Madam Chair. As the
    Inspector General pointed out, there's a great big black hole
    in the presentation of Amtrak that I didn't hear either the
    Chair or the Chief Executive Officer address.
        Mr. Tornquist noted the commitment to savings. I believe in
    2005, the goal was set for $500 million savings. Well, the next
    year they got 61.3 in operating reforms, 52.8 in 2007, 40.3 in
    2008 planned, and then it's disappeared. The funding requests
    go up, the operational reforms disappear.
        What happened to them? Where are the operating reforms?
        Mr. Kummant. Well, I'll start. First, I'm not entirely sure
    what the genesis of that figure is. All of our internal numbers
    are based on an additional $40 million in savings, so that
    continues. The food reforms continue. We continue to
    reconfigure the mechanical operations. We continue having fuel
    savings work.
        As I alluded to, the State partnership work is very
    difficult and is a very heavy lift. We have a whole group of
    people working on that. So, the operating reforms certainly are
    continuing, sir.
        Senator Bond. There were no work rules changes. Are you
    considering those?
        Mr. Kummant. We're considering every day to make the
    operation more efficient, but as you well know, we are
    constrained in what we can do on work rules, given the PEB.
        Senator Bond. And there were no--the Emergency Board
    completely--did they completely ignore the work rule changes?
        Mr. Kummant. Well, in terms of any forward deal, we are
    going to continue to pursue the rights that we do have, but
    there are no reforms contractually agreed to.
        Senator Bond. Mr. Tornquist, you said there are no savings
    from operating reforms in 2009. Do you have a different view of
    the budget from Mr. Kummant?
        Mr. Tornquist. I think it's a question of definitions. The
    $40 million that I think Alex is referring to is the fiscal
    year 2008 reforms and to their credit, Amtrak in the previous 3
    years has had significant reforms. Our definition of reforms is
    a change in business practices that is recurring into the
    future, so that we are lowering their ongoing core operating
    costs.
        So, there have been significant reforms. There are no new
    reforms in that area in the 2009 request as it was presented to
    us.
        Senator Bond. Do you have suggested reforms that you would
    offer to them?
        Mr. Tornquist. I think they have reforms that are on the
    table in terms of their long distance service. I think they
    have reforms that they have proposed in the past regarding
    State payments, and I would encourage them to look in those
    areas.
        Senator Bond. Mr. Boardman, do you know of any instances
    where the DOT has denied funding to Amtrak because Amtrak's
    grant request would not be the most efficient use of Federal
    funds?
        Mr. Boardman. No. When we looked at the efficiency
    requirements itself, we made sure that the kinds of things that
    Amtrak was talking about would provide efficiencies.
        Senator Bond. You voted against Amtrak's grant legislative
    request for 2009 and the basis for that vote?
        Mr. Boardman. So that the chairwoman wouldn't ask me why we
    submitted $900 million and voted for $1.6 billion --what is it?
    I'm just kidding.
        Senator Bond. Just wanted to get that on the record. It was
    rather obvious.
        Mr. Boardman. Yes, sir.
        Senator Bond. Are you concerned there are no operating
    reforms proposed? What do you see for operating reforms in----
        Mr. Boardman. Well, I think that operating the train
    reforms, there are some things that are going on that I see as
    a Board Member. I think there's been a strong effort to reduce
    the amount of debt, and I think that has been important in this
    process and that Amtrak, as you know, was in trouble with that
    debt, and when you look back again at this whole history of the
    appropriation levels, it was when they got in debt back in 2000
    and 2001, when the really big debt came along, it was because
    appropriation levels partly were much, much lower, $520 million
    on 1 year and $726 million on the next, which was substantially
    lower than they had been, and you look at the consistency of
    the revenues, you look all the way along the process, they also
    began to drop between 2002 and 2004 on their revenues for
    ancillary business about 8 percentage points.
        I guess what I'm trying to look at here is I've been trying
    to look at the whole consistency of how you fund Amtrak and I
    think that they are making changes, whether it's in the
    mechanical side of things or whether it's in the back shop
    where they're really changing today, E-ticketing, for example,
    and some of the things, business practices, that have come
    about and they've gotten a focus on.
        As we measure those, I think you're going to see
    improvements, but how you adjust in the middle of the changes
    that Alex talked about with fuel costs and other costs that are
    going up has been particularly difficult.
        Senator Bond. Let me just have one last question for you,
    Mr. Boardman and for Mr. Kummant and Ms. McLean.
        In 2006 and 2007 a total of about $66 million was
    appropriated for efficiency grants. I understand that Amtrak
    has only sent in $15 million in receipts, leaving about $47.5
    million remaining.
        What's going on with the efficiency grants? Would Amtrak
    like to use these funds in part for labor settlement? I'd also
    like to know Mr. Boardman's position on use of those funds for
    that purpose. So, let me ask Amtrak first on the efficiency
    grants.
        Ms. McLean. We are not opposed to using it, but like I
    stated before, it's not something that we can do. It has to be
    legislatively changed. We would have used those funds for a
    variety of activities and which Alex can probably go through.
    That's obviously a lost opportunity but, you know, we have
    immediate needs as well.
        Mr. Kummant. A key point to be made, though, on how the
    efficiency grant functioned and why those funds don't disappear
    quickly is we have to spend the money first and then we're
    reimbursed. So, we don't have enormous other reserves to draw
    on. It's not like we have a lot of excess cash to go work
    projects and then come to the FRA for reimbursement, but there
    are projects identified, such as really modernizing our
    dispatch system and consolidating other backroom functions, but
    it's a slow process, given the mechanism that we have to fund
    it ourselves first, and we're all here today because we're not
    a cash-rich organization.
        Senator Bond. Mr. Boardman.
        Mr. Boardman. We've obligated the funds. They would have to
    be deobligated. We would look at the expenses that Amtrak has
    already incurred on them, but I think Alex said it the right
    way and that is, that these are things that still need to be
    done.
        Senator Bond. Thank you, ladies and gentlemen. Thank you.
        Senator Murray. Thank you. I just have a few more
    questions. I wanted to go back to the PEB recommendations right
    now because Amtrak is signing those contracts right now, and as
    I understand it, if Amtrak does not make the $114 million
    payment for back pay next year, then Amtrak's unions are free
    to strike 60 days after the decision is made.
        Under those new contracts, who decides if Amtrak has the
    resources to make the payment or not?
        Mr. Kummant. It's the sole discretion of the Board.
        Senator Murray. So that's strictly your decision?
        Mr. Kummant. I'm a non-voting member of the Board. I
    actually should perhaps look at Donna and Joe, but it's the
    sole discretion of the Board to look at our cash balance and
    make the decision whether or not we can manage that.
        Senator Murray. Is that correct, Ms. McLean?
        Ms. McLean. Yes, that's how I understand it.
        Senator Murray. Mr. Parker, would you like to comment on
    that?
        Mr. Parker. That is correct. In the negotiations, we
    decided we didn't want to get hung up on whether this amount of
    money was appropriated or not. Obviously revenue is either
    sufficient or not. They can do it without. So, the issue to us
    was payment, period.
        Senator Murray. Let me move on to another happy topic, on-
    time performance. When we had the hearing last year, we spent a
    lot of time talking about the very poor on-time performance of
    Amtrak trains outside of the Northeast corridor, and when you
    look at Amtrak's most recent data, things have improved
    slightly but certain trains, including those that are
    subsidized by the States, still have a pathetically poor record
    of getting to their destinations on time.
        Amtrak services in Indiana are on time less than a quarter
    of the time. I'm afraid the record is worse when it comes to
    State-supported services in Senator Bond's State, for example.
    Certain services, like Vermont are not doing well. In fact, it
    is much worse than last year. In Amtrak's long distance
    network, more than 40 percent of the trains do not arrive
    within a half hour of scheduled arrival time and a lot of them
    arrive later than that.
        Mr. Boardman, actually you testified last year that
    improving on-time performance was one of your top priorities.
    Can you tell us what you've done in the past year to work on
    that?
        Mr. Boardman. I think what we've mostly done is work with
    Amtrak. We think Amtrak's done a good job, for example, with
    CSX and the Auto Train and some of the other improvements that
    are out there.
        I think that David Tornquist, in the study that they did,
    did point out some of the real difficulties here, the capacity
    issues. I think that by proposing last year and starting to
    fund the grants programs with the State, the idea was that we
    could get some passing sidings and we could make some
    improvements in the longer term.
        We have included in our annual review of every one of the
    railroads now a document that begins to measure for us what the
    on-time performance is on that particular segment that would be
    on that railroad, regardless of what the railroad itself has as
    capacity problems and we've set up--in a couple of weeks from
    now, the Secretary will meet with the chief executive officers
    of all the freight railroads and the Amtrak Board and one of
    the subjects or topics will be on-time performance. So, we're
    trying to make sure we're raising that to a level of
    importance.
        Senator Murray. You probably know that I included a
    provision in the 2008 appropriations bill requiring some
    quarterly reports from you on on-time performance. The first
    one was due in January 1. The second one was due in April 1. We
    have not seen either one of those.
        Can you tell me what you're doing to meet those statutory
    requirements?
        Mr. Boardman. You will get it right away because I thought
    that we had some time yet.
        Senator Murray. Okay. One was due January 1, another is
    due. When can we expect that?
        Mr. Boardman. Right away. I will get staff. If you need a
    date on it, it will be done by the end of this month.
        Senator Murray. Right away, like in on-time performance
    right away or right away like in right away?
        Mr. Boardman. Yes, ma'am. I deserved that.
        Senator Murray. Thank you. One more question and then I'll
    turn it over to Senator Lautenberg.
        Mr. Tornquist, your agency has been doing an audit of this
    on-time performance and its causes. The law that established
    Amtrak granted passenger trains priority over other traffic
    when operating on track owned by freight railroads. That
    priority was part of the deal in exchange for the Federal
    Government taking passenger trains off the books of the freight
    railroads that used to run them.
        Have you found that there's any consistency among the major
    freight railroads on what they consider to be their obligations
    under this provision of the law?
        Mr. Tornquist. That actually has been one of the
    difficulties in determining the exact cause of the delays that
    Amtrak trains experience. There's both a lack of agreement
    between Amtrak and the freights in regarding the freights'
    obligations under the preference requirements. The freights as
    a whole place a different emphasis on on-time performance of
    Amtrak trains within their own operations.
        So, Amtrak has a very black and white definition of
    preference which is that their trains should run unimpeded
    along the host railroad tracks. The freights did not give us a
    legal definition of their preference obligations. By their
    practices, they are in fact defining Amtrak's preference rights
    since they control the dispatching. They view their dispatching
    responsibilities, as they describe it to us, more in terms of
    giving Amtrak priority while maintaining the flow of traffic
    across their networks.
        Senator Murray. Okay. I have a number of other questions
    that I will submit for the record.
        Senator Lautenberg, who's been a major player in this area,
    I know as well, has some concerns, has a comment. I will give
    you your time to ask questions.
        Senator Lautenberg. Thank you very much, Madam Chairman,
    for holding this hearing.
        With gas prices as they are, greater delays at the
    airports, the train is becoming ever more popular, and I can
    attest to it directly. Coming down on Amtrak last night from
    Newark, the place was busy and so it's been, I'm told by the
    people who work in Newark Penn Station that, they're continuing
    to see ever-larger crowds, and people seem to be content to
    take a little bit longer, or in reality maybe some time less.
        Effectively once you look at the delays getting into the
    airport, the distance from city-centers and so forth, the train
    is the way to go. I've even seen an improvement in the quality
    of the food. So, I wanted to tell you things are picking up at
    Amtrak and over 26 million people having taken the train in the
    last year and again literally clamoring for more space and for
    more opportunity for improving schedules and service.
        So, I thank you, Madam Chairman, and I wanted to just get a
    couple of questions in place here, and I ask for Mr. Tornquist.
    The recent audit that you completed at my request estimates
    that in fiscal 2006, late trains cost Amtrak $137 million or
    about 30 percent of its Federal operating subsidy.
        How can Amtrak recover some of these costs, especially when
    most of these delays are caused by private freight rail
    companies?
        Mr. Tornquist. That's a very good question. The $137
    million was tied to an on-time performance off the NEC of 85
    percent which is an ambitious target. We would view it would
    require a combination of effort, both clarifying Amtrak's
    preference and the enforcement of those rights. S. 294 includes
    provisions in those areas.
        But we also think it has to be a collaborative effort
    between Amtrak, the freights and the administration, that
    simply standing over the freights' shoulders as they dispatch
    trains is not a very good or efficient way of ensuring that the
    desired result will be achieved.
        We look to the State capital grant program that Mr.
    Boardman has referred to as a way of bringing some capital into
    the problem. In addition, a portion of the $137 million that
    could be derived by improving Amtrak's on-time performance
    could possibly be used to further incentivize the host
    railroads to improve their dispatching of Amtrak trains.
        Senator Lautenberg. Have the incentive opportunities moved
    the freights along at all, Mr. Boardman, do you think?
        Mr. Boardman. We have--in the $30 million, we do have 3
    applications and 13 States that have serious interest in it and
    yes, we think that it does help with the freights because in
    some cases, the freights are talking about providing that local
    share, so they can make improvements in the railroad.
        Senator Lautenberg. Is there--how else might we enforce the
    development of the relationship between the two? I mean, in
    law, it says that the freights are to give consideration, the
    preference to the rail service.
        Can you think of what else we might do to make this a
    reality?
        Mr. Boardman. Well, I think--I was instructed or, I mean,
    it was instructed to me to read David's report and his
    testimony and the different definitions that there are out
    there for what a railroad or what their dispatchers, what their
    operators really think the obligation is, along with listening
    to management at some of the board meetings at Amtrak, which I
    think has taken a pretty aggressive approach in dealing with
    the freight railroads, especially the ones that really aren't
    coming up to the plate on these kinds of things.
        I answered the question earlier and got myself in hot water
    because I should have written it as a quarterly report, but we
    have had regular meetings now with the freight railroads where
    we're identifying for them and beginning to measure their on-
    time performance in our safety review. The Secretary will be
    meeting with the CEOs and the Amtrak Board this month, on the
    16th of this month, together as a group for the first time and
    one of the key elements of the discussion will be on-time
    performance.
        So, we're going to try to get to the bottom of what the
    definition is, what the expectation is, and we think that's the
    way to go, both in terms of talking to them, having Amtrak be
    more aggressive about it and continuing to measure that
    performance.
        Senator Lautenberg. Mr. Kummant, do you want to tell us
    what Amtrak is doing for their share of the problem?
        Mr. Kummant. We have some good examples. I think we've done
    very well with CSX on the Auto Train, for example, and when
    they have serious maintenance issues, we need to be flexible in
    schedules.
        I do think that going forward to have the opportunity to
    offer them capital for siding extensions or sidings to work
    with them. Some of the best examples are with strong State
    DOTs. If you look at BNSF's relationship on the west coast,
    there's a lot of capital that flows into their systems. That's
    related to passenger rail. That helps clear bottlenecks. So,
    there are capital solutions.
        Other than that, I do think visibility is important. I
    mean, it's clear that the political environment is
    significantly different, but just to scope the magnitude, only
    four times really since the founding of the company has the OTP
    been over 75 percent and that was as far back as 1985 and if we
    recall, in this period of time, freight volume on the railroad
    has doubled while mainline track capacity has probably dropped
    by 30 or 40 percent.
        So, it's a tough problem and in the end, yes, I do think
    working on dispatching is maybe 5 or 10 points, but in the end,
    it's about capital and it's about the way the States, the
    freights and Amtrak come together as a coalition to solve each
    individual problem. They're all different. That's what makes it
    hard. Every single challenge is different on every different
    corridor.
        Mr. Boardman. Can I add to that? One of the other things
    that's been a particular difficulty for us is to figure out how
    to manage the slow order difficulties that are out there, that
    a freight is just fine with the slow order because of their
    demand for their particular service, but it's not an acceptable
    deal for the passenger railroad because it really does hang
    them up and slow them down.
        So, we're trying to figure out how do we get the freights
    to pay attention to that issue and move slow orders and take
    care of things quicker.
        Senator Lautenberg. Well, we have a bill that's passed
    through the Senate, as you know, that will provide more capital
    and perhaps can help us deal with this particular problem. It's
    an important thing. We want freight to continue to be able to
    have the capacity that they need, but we also have to make sure
    that we encourage people to use the rail system and one way to
    do it is to make it more reliable and the appetite is there. We
    should try to fill it.
        I want to ask Ms. McLean. Amtrak has now been given a $114
    million for the resolution of the retroactive employee pay.
    Does Amtrak have the $114 million or will it have now or next
    year?
        Ms. McLean. The $114 million is the back pay dollar amount
    for fiscal year 2009. That is not something that we can absorb
    and one thing that was brought up earlier in the hearing was
    whether or not our cash balance would at the end of the year,
    which we tend to have $200 million to a $180 million at the end
    of the fiscal year, could that--could we just pick that up and
    pay for the $114 million?
        Well, that's what the IG David Tornquist is saying we could
    do. Our experience at Amtrak is that we need a cash balance
    around a $180 million because as our funds come in slowly at
    the beginning of the fiscal year, you know, we need a cash
    balance to be able to run our business, be able to pay your
    basic requirements, and if we run down into about a $100
    million, which we did in fact last year with the continuing
    resolution situation, we get in a position where we are going
    to have to start, you know, calling our company bankrupt, quite
    honestly, because we cannot operate on a cash flow of nothing.
        We have--we basically lose $40 million a month and that's
    just, you know, the facts. So, we can't take our cash balance
    and just pay for the $114 million out of that.
        Senator Lautenberg. Mr. Tornquist, should they have--Amtrak
    have that money available?
        Mr. Tornquist. The point that we were making in our
    testimony is that when looking at how to pay all of Amtrak's
    bills, we think it's important to look at all the resources
    that are available to Amtrak, and the cash balance that Amtrak
    expects to have on hand at the end of fiscal year 2008 is a
    resource that they have available.
        We understand the concerns about cash flow that Amtrak has
    expressed. I think Chairman Murray and Mr. Kummant both have
    talked about how we're dealing with forecasts and we need to
    keep an eye on how the economy is doing and how the
    expenditures are doing. But based on the information we have
    right now, there is almost $270 million that will be on hand at
    the end of the year. Amtrak has expressed a need to have $150
    million on hand at the time. I recognize the cash flow issues
    are tied to when they'll get their appropriation in the next
    fiscal year, but there are ways to address that problem in the
    CR. However, it is a resource that we think just needs to be
    considered in calculating their ultimate appropriation needs.
        Senator Lautenberg. Madam Chairman, you've been patient.
    May I ask one more question? One or two short ones?
        Mr. Kummant, as we look at stimulus packages, opportunities
    I'll call them, are there any capital projects in which Amtrak
    could begin in let's say a 90-day period, if you had additional
    funds?
        Mr. Kummant. I think we could, we certainly could find work
    on the Northeast corridor. The problem and the reason I need to
    be hesitant and there's probably some people behind me grinding
    their teeth, depending on how I answer it, is, I mean, material
    is tight. With commodity markets, I mean that's difficult.
        I can think of all kinds of expenditures, if you broaden
    the 90 days to, you know, 6 or 9 months. The 90-day provision
    is a tough one, but, I mean, I'm sure we could find a few
    things, but material availability is difficult outside of our
    core planned efforts that we have today.
        I might just--I have to turn around and look and see if
    there's a nod. I mean, we certainly have a backlog of projects,
    but again we have to review what we can do on material.
        Senator Lautenberg. Thanks very much, Madam Chairman. I
    appreciate the courtesy.
        Senator Murray. Thank you very much, and before I recess, I
    just want to ask Mr. Kummant. In terms of on-time performance,
    I noticed that one of the biggest problems is in my own
    backyard with the Empire Builder going from 80 percent
    performance to less than 45.
        Do you know what is going on in that case?
        Mr. Kummant. Yes. That was--we had a lot of weather, a lot
    of slides. I think that was very much a seasonal issue over the
    winter. Generally, Empire Builder does well and BNSF does well
    with the Empire Builder. That's--obviously we're concerned
    about that, but that should be improving.
        Senator Murray. So that was mostly due to the snow that we
    had?
        Mr. Kummant. Yes. We had a very difficult winter in your
    backyard.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Murray. At this time I would like to remind the
    members that we will leave the record open for additional
    questions they have for the second panel.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

                      Questions Submitted to Alex Kummant
                  Questions Submitted by Senator Patty Murray

                            STATE SUPPORTED SERVICES

        Question. Mr. Kummant, in your testimony and budget submission, you
    stated that additional States are interested in expanding Amtrak's
    services with State subsidies.
        At the same time, we have heard that new costs associated with the
    labor agreement will have to be covered by States that support Amtrak
    services, and that some of these States may not be in a position to
    cover those costs.
        What should we expect to see in the coming years as far as the
    expansion or contraction of State supported Amtrak trains?
        Answer. Amtrak is currently working with more than two dozen States
    on proposals for new or increased State-supported intercity rail
    services. However, due to a lack of available passenger rail equipment
    and Federal matching capital funds for intercity rail investments, near
    term expansion will be limited. As evidence for the need of such a
    program, 22 States have applied to the Federal Railroad Administration
    for a portion of the $30 million in Federal matching grant funds that
    Congress appropriated this year. The Amtrak reauthorization legislation
    approved by both houses of Congress would at least in part address this
    need by creating a multi-year Federal matching capital grant program
    for intercity passenger rail development, modeled on the Federal
    programs that provide funding to States for other transportation modes.
    We believe that enactment of a Federal capital matching grant program
    would allow States and Amtrak to bring many of the proposals mentioned
    above to fruition, and would encourage additional initiatives to expand
    Amtrak service.
        Question. Do you foresee any States dropping rail service because
    of their inability to pay their portion of the cost?
        Answer. While many States are seeking to start or expand existing
    intercity passenger rail services, increased operating expenses
    associated with higher labor rates resulting from the recent settlement
    and increased fuel costs (which for many routes have been largely
    offset by higher demand) have negatively impacted some routes. Coupled
    with lower than expected tax revenue several States may be forced to
    consider reducing or eliminating service over existing State-supported
    routes. Amtrak is working closely with each of these States to seek new
    efficiencies and/or increase passenger revenue through fare adjustments
    or service improvements. We remain confident that these actions and
    continued strong demand will avoid service cuts. However, a reduction
    or elimination of service remains a possibility in at least four and
    perhaps more States.
        Question. What communities do you think are poised to expand to
    rail service even at these increased costs?
        Answer. Despite higher operating, costs strong demand driven by the
    safety, affordability, comfort and convenience of rail travel has
    driven many communities to seek new or expanded service. Major routes
    where equipment has been identified and service expansion is currently
    underway or in advanced planning phase include the Downeaster Service
    (expansion to Brunswick, Maine), Cascades Service (additional service
    between Bellingham, Washington and Vancouver, British Columbia) and the
    Piedmont service (additional service between Raleigh, North Carolina
    and Charlotte, North Carolina). In addition, routes where planning
    efforts are underway and near term expansion (2 to 3 years) is possible
    include the Northeast Regional Service (between Washington, DC and
    Lynchburg, Virginia and between Washington, DC and Richmond, Virginia);
    addition of an eighth daily roundtrip of the Hiawatha service operating
    between Chicago and Milwaukee; new service between Chicago and the Quad
    Cities; and new service on the Chicago-Rockford-Dubuque route. However,
    Amtrak's inventory of available equipment is nearly depleted and
    therefore not all of these routes will be implemented in the near term.
    Amtrak is working with our State partners to standardize equipment
    templates in an effort to reduce the cost and lead time necessary to
    secure new equipment in the event that Federal capital matching funds
    are made available.

                             HEALTH INSURANCE COSTS

        Question. Mr. Kummant, in your grant request for next year, you
    state that you expect a very large increase in expenditures for health
    insurance. However, health insurance is one area where the expenditures
    for the current year to date are below your projections.
        What is the realistic outlook for your health insurance costs next
    year?
        Answer. The grant request for next year projected a large increase
    in employee benefit costs that included taxes and pension costs as well
    as insurance. Health insurance costs are not expected to grow
    significantly over the current year's forecast as a result of favorable
    lower claims experience. Taxes will increase due to higher wages paid
    and higher tax ceilings. Pension costs are expected to rise as our
    workforce ages. The combined increase is about $20 million less than
    what was projected in the grant request.

                                      DEBT

        Question. When it comes to Amtrak's appropriations request for debt
    service payments, there is a dramatic difference between the level
    sought by the Amtrak Board and the level recommended by the Inspector
    General. Ms. McLean, the Board is recommending that we increase your
    appropriations for debt service payments by $60 million next year in
    order to allow you to buy down some of your outstanding debt. Mr.
    Tornquist, the IG is actually recommending that we cut debt service
    payments by $19 million next year.
        Could each of you explain the rationale behind your recommendation?
        Answer. The current budget proposal before the Amtrak Board of
    Directors is $264 million in order to satisfy all required debt service
    payments. This is lower than fiscal year 2008 due to the repayment of
    the RRIF loan. The additional $60 million requested was proposed in
    order to buy down approximately $120 million of debt at a discount.

                            DEFECTIVE CONCRETE TIES

        Question. Mr. Kummant, Amtrak owns much of the Northeast Corridor.
    I was disturbed to learn that Amtrak has repeated a past problem of
    purchasing defective concrete ties for the Northeast Corridor. Your
    grant request for 2009 points out that the vendor is covering only the
    cost of the new ties, but that Amtrak has to bear the cost of
    installing those new ties.
        Why isn't the vendor covering the entire cost of replacing its
    defective ties? How much is this problem likely to cost the corporation
    this year and in the years going forward?
        Answer. Amtrak's purchase of the defective ties is subject to a
    contract which generally governs Amtrak's rights and remedies. Amtrak
    is currently reviewing available options to recover as much as possible
    for the defective concrete ties. At the present time the vendor, ROCLA,
    is supplying the necessary new ties to Amtrak at cost, but Amtrak has
    not waived any of its rights with respect to the defective ties.
        We have spent $37.4 million in fiscal year 2008 and have budgeted
    $38.0 million in fiscal year 2009 for concrete tie mitigation. Our
    present estimates anticipate a cost of $150 to $200 million over the
    next 5 to 6 years to complete the replacement of the defective concrete
    ties.

                             CONCLUSION OF HEARINGS

        Senator Murray. Thank you very much. With that, we will
    conclude this hearing and this subcommittee is in recess until
    Thursday, April 10, when we will take the testimony in the
    housing crisis with the Federal Housing Commissioner and
    outside witnesses.
        [Whereupon, at 11:40 a.m., Thursday, April 3, the hearing
    was concluded, and the subcommittee was recessed, to reconvene
    subject to the call of the Chair.]

    TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
                      APPROPRIATIONS FOR FISCAL YEAR 2009

                                  ----------

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

                           NONDEPARTMENTAL WITNESSES

        [Clerk's note.--The following testimonies were received by
    the Subcommittee on Transportation and Housing and Urban
    Development, and Related Agencies for inclusion in the record.
    The submitted materials relate to the fiscal year 2009 budget
    request.
        The subcommittee requested that public witnesses provide
    written testimony because, given the Senate schedule and the
    number of subcommittee hearings with Department witnesses,
    there was not enough time to schedule hearings for
    nondepartmental witnesses.]
              Prepared Statement of the City of San Marcos, Texas
                          san marcos municipal airport
        Madam Chairman and members of the subcommittee: On behalf of the
    city of San Marcos, Texas, I am pleased to submit this statement in
    support of our request for project funding for fiscal year 2009.
        The city of San Marcos requests Federal funding for the San Marcos
    Municipal Airport to accomplish improvements that are in the public
    interest. The improvements are described in the three specific project
    components listed below:

    ------------------------------------------------------------------------
                                                                  Amount
    ------------------------------------------------------------------------
    Northside Infrastructure Development....................      $2,021,250
    New Terminal Building...................................       4,725,000
    Fixed Base Operator (FBO) Facility......................       1,575,000
                                                             ---------------
          Total Request.....................................       8,321,250
    ------------------------------------------------------------------------

        The San Marcos Municipal Airport is a public general aviation
    classified as a reliever airport within the National Plan of Integrated
    Airport Systems. The airport is owned and operated by the city of San
    Marcos, Texas. It is located just east of Interstate Highway 35 on
    Texas Highway 21 approximately 30 miles south of Austin and 45 miles
    north of San Antonio in one of the fastest growing corridors in Texas.
        The airport is part of a closed military base; the remainder of the
    former Air Force Base is occupied by the United States Department of
    Labor's Gary Job Corps Center. When the base was closed and divided in
    1966, the Job Corps retained the portion of the property with the
    buildings and other amenities, while the city of San Marcos was given
    the aeronautical facilities consisting of runways, taxiways, and the
    parking apron.
        This arrangement has resulted in a ``bare bones'' airfield that
    lacks the support structure to sustain an economically viable modern
    airport. We have adequate aeronautical facilities and real estate, but
    few other vital facilities. In addition, current legislation provides
    for airport capital improvement funding assistance through the Federal
    Aviation Administration for aviation infrastructure, but not for the
    type of improvements that this airport needs.
        The city of San Marcos requests assistance to transform the airport
    into a modern, self-sustaining enterprise benefiting not only the local
    community, but the region as well. After analysis and master planning,
    we have determined that the three project components herein described
    will produce the ``biggest bang for the buck.'' These components
    represent our highest priorities and most immediate needs, and they
    will be a highly visible indicator that the San Marcos Municipal
    Airport is on the move. We are firmly convinced that these improvements
    will initiate further development and attract private investment that
    will far surpass the amount that we are seeking in Federal support.
        The following program descriptions outline our three-part request:
    North Side Infrastructure Development--$2,021,250
        The layout of the former Gary Air Force Base is such that all the
    buildings and developed area of the base are to the south of the
    airfield. When the base was divided between the Gary Job Corps Center
    and the San Marcos Municipal airport, the airport was given only a thin
    sliver of land on the south side to provide access and support the
    airfield. There is not enough room for all the support facilities such
    as hangars, maintenance shops, and terminal buildings that an active
    airport requires.
        However, on the north side of the airfield is real estate that has
    never been developed. One prime piece of this area consists of
    approximately 40 acres of very desirable airport land that fronts Texas
    Highway 21 and borders an existing taxiway that will become the main
    taxiway for the entire north side development. Except for the absence
    of infrastructure, it is the prime location on the airport. The area
    requires access roads, including a main airport entrance, drainage
    improvements, aircraft ramps and aprons, existing taxiway pavement
    reconstruction, and utilities. It also needs a seed project to
    stimulate private investors to move into the area.
        Our plan proposes to construct the infrastructure and then to build
    approximately 50 nested T-hangars in two or three city-owned buildings.
    Our planning estimate for the cost to implement this project is
    $2,021,250. San Marcos Airport received $1,575,000 in appropriations
    funding for fiscal year 2008, leaving $2,021,250 needed to complete the
    infrastructure project. We are also convinced that once this north side
    development ball starts to roll, the future of the new San Marcos
    Municipal Airport will shift from the current limited and constrained
    south side to the several hundred acres of prime undeveloped land
    available on the north side.
    New Terminal Building--$4,725,000
        The commercial, economic, and public service hub of a modern
    airport is the public terminal building. The terminal building provides
    public amenities such as a waiting room or lounge, airport
    administration offices and public meeting rooms, restrooms, flight
    planning facilities and communications links to obtain flight planning
    information, commercial lease space for on-site businesses such as
    restaurants, retail shops, rental car facilities, and other aviation-
    related commercial activities.
        An airport's facilities will be the first thing a business traveler
    will see, and it is those facilities which represent the city of San
    Marcos. These facilities are sorely lacking in our present airport
    configuration, and the existing terminal building is undersized to meet
    existing demand, much less provide room for growth. The planned
    terminal building planning concept is for a modern, state-of-the-art
    building of approximately 10,000 square feet first floor and total cost
    estimated at $4,725,000. This terminal building will be the seed
    project to stimulate private investors and other commercial and
    corporate business to move into the area. Lease payments and other
    airport fees would offset this investment; and the investment is
    calculated to be a profitable enterprise for the airport in the long
    term.
    Fixed Base Operator (FBO) Facility--$1,575,000
        For general aviation operations, airport activity centers on the
    Fixed Base Operator (FBO). This facility is where the transient and
    airport-based pilots and aircraft operators buy fuel and obtain direct
    support for their flights. It is also a place where transient and
    airport-based pilots can arrange to have their aircraft serviced,
    repaired, and hangared overnight or longer when required.
        It is again opportune that the San Marcos Municipal Airport has an
    established FBO that is capable of accomplishing these vital services
    if a facility were available for them to lease. We propose that a
    modern, state-of-the-art FBO facility be constructed to meet the
    airport's present and future commercial requirements. The approximately
    30,000 square foot structure would be primarily hangar space with an
    attached business, repair shop, and office area. Cost is estimated at
    $1,575,000. Lease payments and other airport fees would offset this
    investment; and the investment is calculated to be a profitable
    enterprise for the airport in the long term.
        The 1,356 acre San Marcos Municipal Airport is a potential economic
    dynamo for this region of Central Texas. The three airport improvement
    components that we are proposing will result in an increase in activity
    and private investment. This is a good investment of public revenue
    that will result in more high-paying aviation jobs, an increased tax
    base, and more direct revenues in the form of airport fees and rents.
    Our airport will also better serve the aviation needs of the region and
    spur further growth, development, and prosperity for our citizens.
    These projects are grounded in sound public policy principles. They
    will result in excellent value for the American taxpayer and for the
    traveling public that will utilize the facilities.
    Cost-Sharing
        The city of San Marcos will contribute real estate on the north
    side of the airport for the three components of the airport project.
    The value of the local municipal government in-kind share is estimated
    at $832,125. Additionally, our development code will require new
    developers to share the costs for infrastructure extensions (water
    lines, waste water lines, roadways, etc.) We estimate this cost share
    value to be approximately $1,500,000.
        The city of San Marcos sincerely appreciates your consideration of
    these requests for funding in the fiscal year 2009 cycle and
    respectfully requests your support.

                       LOOP 82 RAILROAD OVERPASS PROJECT

        On behalf of the city of San Marcos, Texas, I am pleased to submit
    this statement in support of our request for project funding for fiscal
    year 2009.
        The city of San Marcos requests an appropriation of $10 million
    from the Transportation, HUD & Related Agencies Subcommittee to
    complete the funding for a vitally needed $25 million railroad overpass
    on Aquarena Springs Drive (Loop 82), a major State highway in San
    Marcos, Texas.
    Background
        San Marcos has 50,371 residents, plus an estimated 13,000 commuting
    students who are part of our 28,500 student campus at Texas State
    University, all within the city limits. The city is located in the
    heart of the Interstate 35 corridor halfway between Austin and San
    Antonio, Texas.
        Aquarena Springs Drive (Loop 82) is a major entryway into San
    Marcos and the primary access point for Texas State University from
    Interstate 35. In addition to traffic generated by commuters and
    residents, Aquarena Springs Drive carries heavy traffic from numerous
    university housing and large apartment complexes located along this
    busy thoroughfare. Aquarena Springs Drive averages an estimated 32,000
    vehicles per day.
        San Marcos has an elevated railroad crossing on only one State
    highway and 20 at-grade railroad crossings throughout the city. Union
    Pacific Railroad tracks completely bisect San Marcos, with most
    crossings located within 1 mile of downtown, including the Aquarena
    Springs Drive crossing. An average of 47 trains travel through San
    Marcos every 24 hours. The existing at-grade crossing on Aquarena
    Springs Drive results in increased risk for automobile/railroad
    conflicts and significant trip delay.
        In February 2005, a freight train transporting hazardous materials
    derailed in the center of San Marcos near a heavily populated
    neighborhood about 1.6 miles from Aquarena Springs Drive. While no one
    was injured and no hazardous materials were spilled, the incident
    raised the level of concern about the lack of safe passage at railroad
    crossings along major thoroughfares in San Marcos.
    Cost Sharing
        The Loop 82 Aquarena Springs Drive overpass project has been
    approved by the Texas Department of Transportation (TXDOT) and Union
    Pacific Railroad, and preliminary design has begun. Approximately $15
    million in railroad safety funds have been allocated to this $25
    million project. As of October 2007, design was scheduled to be
    completed by April 2011, with construction to begin in August 2011.
        The city of San Marcos has received voter approval to allocate
    $932,800 in tax-supported general obligation bonds as our local share
    to pay for the realignment of local roadways associated with the
    railroad overpass. As noted, the Texas Department of Transportation has
    set aside $15 million in railroad safety funds for the bridge. However,
    the recent financial shortfalls at TXDOT have caused the State agency
    to halt all work on this important project.
    Community Safety Issue
        The $10 million shortfall has effectively stopped a project that
    addresses a critical issue of health, safety and welfare in our
    community. Loop 82 was identified by the Texas Department of
    Transportation as the only other State highway on which a railroad
    overpass can be constructed in San Marcos. In December 2006, the city
    of San Marcos and TXDOT opened the first railroad overpass on Wonder
    World Drive (FM 3407) on the south end of San Marcos, a project that
    took us more than 25 years to achieve.
        Design, right-of-way acquisition and construction of a 4-lane
    railroad overpass on Aquarena Springs Drive (Loop 82) with associated
    frontage roads will improve railroad safety, traffic safety, mobility
    and air quality in San Marcos. We believe that it is a matter of safety
    and community health and welfare to build this overpass and create an
    unobstructed access to Texas State University and downtown San Marcos.
        The city of San Marcos sincerely appreciates your consideration of
    this request for funding in the fiscal year 2009 cycle and respectfully
    requests your support.
                                     ______

          Prepared Statement of the Institute of Makers of Explosives

                              INTEREST OF THE IME

        The IME is the safety and security association of the commercial
    explosives industry. Commercial explosives are transported and used in
    every State. Additionally, our products are distributed worldwide,
    while some explosives, like TNT, must be imported because they are not
    manufactured in the United States. The ability to transport and
    distribute these products safely and securely is critical to this
    industry.

                                   BACKGROUND

        The production and distribution of hazardous materials is a
    trillion-dollar industry that employs millions of Americans. While
    these materials contribute to America's quality of life, unless handled
    properly, personal injury or death, property damage, and environmental
    consequences can result. The threat of intentional misuse of these
    materials also factors into public concern. To protect against these
    outcomes, the Secretary of Transportation (Secretary) is charged under
    the Hazardous Materials Transportation Act (HMTA) to ``provide adequate
    protection against the risks to life and property inherent in the
    transportation of hazardous materials in commerce by improving''
    regulation and enforcement.\1\ The Secretary has delegated the HMTA
    authorities to various modal administrations, with primary regulatory
    authority resting in the Pipeline & Hazardous Materials Safety
    Administration's (PHMSA) Office of Hazardous Materials Safety (OHMS).
    How OHMS has handled and proposes to handle these responsibilities is
    the focus of this statement.
    ---------------------------------------------------------------------------
        \1\ 49 U.S.C. chapter 51.
    ---------------------------------------------------------------------------
                        FISCAL YEAR 2009 BUDGET REQUEST

    Staff and Program Resources
        We understand that this is an unusually tight budget year. While
    OHMS is level funded, it is technically adsorbing a $1.3 million cut
    from the adjusted fiscal year 2008 base. It is able to sustain those
    cuts because it has automated some activities, streamlined some
    regulatory processes, leveraged other agency resources, and made
    efforts to fully staff up to allowable FTE. At the same time, however,
    PHMSA leadership has charted an aggressive program of work for OHMS
    that is risk-based, compliance-oriented, and stakeholder-focused. We
    believe OHMS is operating at capacity. Any additional cuts would
    compromise the agency's role to ensure the reliability of commercial
    hazardous materials transportation.
        We are concerned that ``over one-third of [OHMS] employees will be
    eligible to retire within 5 years.'' \2\ Essential programmatic
    knowledge may be lost with turnover of this magnitude. We urge Congress
    to ensure that adequate transition plans are in place.
    ---------------------------------------------------------------------------
        \2\ Fiscal Year 2009 PHMSA Budget Submission, page 50.
    ---------------------------------------------------------------------------
    Regulatory Backlog
        This year OHMS has designated four rulemakings as ``significant,''
    the same number as last year. However, two from the old list were
    completed and two new ones have been opened.\3\ In addition to these
    four priority rulemakings, OHMS is assisting the Federal Railroad
    Administration with a priority rulemaking and working on 17 additional
    dockets. These rulemakings do not take into account rulemaking
    petitions, which OHMS has accepted but has not yet assigned to a
    specific rulemaking action. OHMS has pending 24 such rulemaking
    petitions.\4\ In addition, OHMS is in the 10th of a 10-year cycle to
    review the impact of its regulations on small entities pursuant to the
    Regulatory Flexibility Act (RFA).\5\
    ---------------------------------------------------------------------------
        \3\ DOT Rulemaking List, Fall 2007. http://www.reginfo.gov/public/
    do/eAgendaMain.
        \4\ http://dms.dot.gov/reports/PHMSA_report.cfin, February 13,
    2008.
        \5\ Public Law 96-354, section 610 as amended.
    ---------------------------------------------------------------------------
        Since the enactment of the 2005 HMTA amendments, OHMS' special
    permit workload has decreased because permits may now be issued for
    periods up to 4 years, rather than the previous 2 year limitation.
    Still, OHMS processes nearly 200 special permit requests annually--a
    commendable effort. However, this does not reveal how timely the
    special permit workload is handled. OHMS is under a statutory mandate
    to process special permits within 180 days. Yet last year, ``lack of
    staff resources given other priorities or volume of applications'' was
    the reason given 81 percent of the time that special permit
    applications were delayed. A helpful workload indicator may be the
    actual number of special permit requests received, the actual number
    processed, and of that number, the actual number processed within the
    statutory 180-day deadline set by Congress.
        One aspect of the hazmat regulatory workload that continues to
    present concern is the processing of petitions for preemption. This
    activity is managed by the PHMSA Office of Chief Counsel. Six petitions
    for preemption determinations are currently pending. There has been no
    change in the status of these petitions during the last year. Neither
    these, nor any prior petition for preemption, have been processed
    within the congressionally mandated 180-day turnaround.\6\ PHMSA's
    ability to swiftly deal with petitions for preemption is essential to
    the purpose Congress hoped to achieve in granting administrative
    preemption to DOT, namely that the preemption determination process
    would be an alternative to litigation.\7\
    ---------------------------------------------------------------------------
        \6\ 49 U.S.C. 5125(d).
        \7\ In authorizing the preemption determination process, Congress
    found that ``the current inconsistency ruling process has failed to
    provide a satisfactory resolution of preemption issues, thus
    encouraging delay, litigation, and confusion.'' H. Rept. 101-444, part
    1, page 21.
    ---------------------------------------------------------------------------
    Hazmat Registration and Fees
        We have appreciated the oversight the House and Senate
    Appropriations Committees have provided to ensure that fee collections
    have not been spent on activities above authorized amounts. The 2005
    amendments to the HMTA nearly doubled the fees to be collected in
    support of the Emergency Preparedness Grant Program (EPGP), ``train-
    the-trainer'' grants for first responders, publication of the Emergency
    Response Guide, and, for the first time, grants to train hazmat
    employees. At the same time, the statute requires OHMS to adjust the
    amount of the fees charged to account for unexpended balances that
    accrue to the fund. In the past, OHMS failure to adjust fees due to
    over-collection resulted in litigation.\8\ OHMS finds itself again with
    a substantial $18 million over-collection. As a result, OHMS is not
    proposing to increase hazmat registration fees for the 2008-2009
    registration year to cover the increases authorized by the 2005
    amendments.\9\ But, we expect a rulemaking to increase fees in fiscal
    year 2009.
    ---------------------------------------------------------------------------
        \8\ Hazardous Materials Advisory Council, Inc. et al. v. Mineta,
    No. 02-01331, (D.D.C., filed July 1, 2002).
        \9\ The 2005 amendments were enacted too late to appropriate
    increases to the fiscal year 2006 EPGP. Fiscal year 2007 was funded on
    a continuing resolution. Fiscal year 2008.
    ---------------------------------------------------------------------------
        Our concern about over-collection of hazmat fees stems from the
    statutory provision that allows OHMS to transfer fees ``without further
    appropriation'' from the Hazardous Materials Emergency Preparedness
    Fund (HMEPF).\10\ It is important, therefore, that the subcommittee
    continue to scrutinize the amount of hazmat fees that can be
    transferred from the HMEPF and to cap transfers at levels the
    subcommittee believes will be appropriately spent.
    ---------------------------------------------------------------------------
        \10\ 49 U.S.C. 5116(i).
    ---------------------------------------------------------------------------
        OHMS is authorized to assess a separate fee to process registration
    submissions. Currently, that fee is $25 per registration. The fiscal
    year 2009 budget request cuts the amount needed to cover the costs of
    registration processing from $1.2 million to $765,000. OHMS has been
    able to reduce costs through system automation, bringing the
    registration program in-house, and by eliminating costly 24/7 emergency
    registration processing. We fully support the registration program
    whose purpose is to provide OHMS information on the community it
    regulates, and have no objection to paying fees for this function.
        Thirty percent of the $13.5 million fee increase provided by the
    2005 amendments is earmarked to train trainers of private sector hazmat
    employees or hazmat employees themselves.\11\ This program is of
    questionable benefit because the training provided is limited to that
    offered by non-profit hazmat employee organizations that are unlikely
    to be relied upon to provide the specific and specialized training each
    ``hazmat employer'' is required by law to provide to address its own
    unique hazmat environment. Any potential hazmat employee who availed
    themselves of such training from a third-party non-profit training
    organization would still have to be trained in his employer's hazmat
    operations. The program amounts to double taxation for hazmat employee
    training. The real issue with private sector training is assessing the
    quality of the training that is available. Given the millions of
    dollars in fees industry is already paying to fund other aspects of the
    EPGP, this program cannot be justified. If fee revenue will be
    allocated for hazmat employee training, OHMS is proposing some creative
    options to make the program more palatable. First, OHMS is committed to
    competitively award the hazmat employee training grants, a good
    Government decision that should be supported.\12\ Second, OHMS is
    proposing to limit the hazmat employee grant program to $2 million.
    With this allotment, OHMS could still train 50,000 employees.\13\
    Third, the agency is proposing to redirect $1.5 million of the
    remaining fees to fund its authority to establish grants and
    cooperative agreements.\14\ This initiative proposes to create a data
    repository of training materials developed using EPGP funds. Fourth,
    OHMS is proposing to develop training competency standards and
    instructor guidelines and to offer instructor certification as a way to
    improve the quality of training available to the hazardous materials
    community.\15\
    ---------------------------------------------------------------------------
        \11\ 49 U.S.C. 5107(e) & 5128(c).
        \12\ Fiscal Year 2009 PHMSA Budget Submission, page 129.
        \13\ OHMS estimates that training will cost $40.00/employee. OHMS
    estimates that only 25,000 will be trained. However,
    2,000,00040=50,000. See fiscal year 2009 PHMSA Budget Submission, page
    52.
        \14\ 49 U.S.C. 5121(g). Fiscal year 2009 PHMSA Budget Submission,
    page 131. These grant funds are in addition and not to be confused with
    the $1.25 million OHMS receives from the Federal highway trust fund to
    support research projects identified by the National Academy of
    Sciences. See. Public Law 109-59, sec. 7131, and fiscal year 2009 PHMSA
    Budget Submission, page 43.
        \15\ Fiscal Year 2009 PHMSA Budget Submission, page 42.
    ---------------------------------------------------------------------------
    Emergency Planning and Training Grants
        The purpose of the Emergency Preparedness Grants Program (EPGP) is
    to cover the ``unfunded'' Federal mandate that States develop emergency
    response plans and to contribute toward the training of emergency
    responders. Industry has contributed, through hazmat registration fees,
    nearly $199 million during the life of the grants program. More
    accountability is needed in the EPGP and more evidence of coordination
    among other similar Federal initiatives to ensure that all resources
    are used as efficiently and effectively as possible. Congress directed
    OHMS to submit annual reports to Congress on the allocation and uses of
    the grants, the identity of the ultimate recipients, a detailed
    accounting of all grant expenditures, as well as an evaluation of the
    efficacy of the programs carried out.\16\ No reports or information
    have been forthcoming. The subcommittee is best suited to insist on
    this level of oversight.
    ---------------------------------------------------------------------------
        \16\ 49 U.S.C. 5116(k).
    ---------------------------------------------------------------------------
        As an indication of congressional concern that the LEPC set-aside
    may not be the best use of the new $9 million fee increase in the EPGP,
    the 2005 HMTA amendments provide OHMS discretion to limit or deny new
    funding. Yet, OHMS has not exercised this discretionary authority, nor
    does it describe any sort of analysis that would justify ignoring this
    funding opportunity. OHMS should be asked to prioritize the needs and
    value of the planning and training portions of the EPGP to the safety
    and security of hazardous materials transportation. The subcommittee
    should use this information to redirect the new $9 million allocation
    up to the maximum extent allowed.
        While the law provides that OHMS can expend industry's hazmat
    registration fees for the EPGP ``without further appropriation,'' we
    would encourage the subcommittee to exercise its oversight to address
    programmatic issues and concerns before handing over a blank check. The
    subcommittee has established congressional precedent in this area,
    setting caps on the amount of the fees that may be expended for the
    EPGP.
    Program Priorities
        OHMS lays out an aggressive array of priorities for the fiscal year
    2009 funding request. In particular, we are particularly pleased to see
    plans to charter a Hazardous Materials Technical Advisory Committee
    (HMTAC). The HMTAC would be modeled after successful advisory
    committees currently serving the Federal Motor Carrier Administration
    and the Federal Railroad Administration, with representation from the
    regulated community, State and local government and the public
    sector.\17\ Likewise, we support several training initiatives OHMS
    outlines to address the needs of the agency for a skilled workforce, to
    improve the competency of Federal and State hazmat investigators, and
    to promote professionalism throughout the regulated community.\18\ We
    are particularly enthused by OHMS' proposal to develop curriculum for
    the regulated community and to establish an exclusive authority to
    certify hazmat professionals.
    ---------------------------------------------------------------------------
        \17\ Fiscal Year 2009 PHMSA Budget Submission, page 47.
        \18\ Fiscal Year 2009 PHMSA Budget Submission, page 50.
    ---------------------------------------------------------------------------
        OHMS also proposes to establish a Integrity Management Program.\19\
    This type of initiative is a hallmark of the pipeline regulatory
    program. However, we are approaching this initiative for the hazmat
    community with a degree of caution. The hazmat community is so diverse
    that relatively few entities have systemwide control of a hazmat
    shipment. Typically, a hazmat shipment will involve multiple offerors
    and carriers as a package transits from the manufacturer to the end
    user. OHMS has suggested that some form of regulatory relief will be
    the reward of those that employ a IMP approach. However, the one factor
    that underpins the undisputed success of the Federal regulatory program
    is the very uniformity of its requirements. It remains to be seen how
    IMP relief will translate into a regulatory environment dependent on
    uniformity to function safely and efficiently.
    ---------------------------------------------------------------------------
        \19\ Fiscal Year 2009 PHMSA Budget Submission, page 49.
    ---------------------------------------------------------------------------
                                   CONCLUSION

        The transport of hazardous materials is a multi-billion dollar
    industry that employs millions of Americans. This commerce has been
    accomplished with a remarkable degree of safety, in large part, because
    of the uniform regulatory framework authorized and demanded by the
    HMTA. Within the Federal Government, OHMS is the competent authority
    for matters concerning the transportation of these materials. Finally,
    we note that OHMS intends to kick-off a number of innovative
    initiatives with a flat-lined budget and in the face of unprecedented
    staff turnover, largely due to retirements. We, therefore, strongly
    recommend full funding for OHMS.
                                     ______

         Prepared Statement of the Capital Metropolitan Transportation
                            Authority, Austin, Texas

        Mr. Chairman and members of the subcommittee: On behalf of the
    Capital Metropolitan Transportation Authority in Austin, Texas, I am
    pleased to submit this statement for the record in support of our
    fiscal year 2009 funding requests from the Federal Transit
    Administration and the Federal Highway Administration for Capital
    Metro--the transportation provider for Central Texas. I hope you will
    agree that the appropriating of funds for these Central Texas projects
    warrants serious consideration as Austin and the surrounding Texas
    communities plan for our region's growing transportation needs.
        First, let me thank you for your past financial support for
    transportation projects in Central Texas. Your support has proven
    valuable to Capital Metro and to our Central Texas community as we face
    new challenges.
        As you know, Interstate 35 runs from Canada to Mexico, and along
    the way it also runs through the city of Austin and Capital Metro's 600
    square mile service area. While traffic in this important corridor has
    always been a challenge, the North American Free Trade Agreement has
    resulted in increased traffic and congestion for our region. In fact, a
    2002 study by the Texas Transportation Institute determined Austin,
    Texas to be the 16th most-congested city nationwide.
        Also, Central Texas' air quality has reached near non-attainment
    levels. Together, our community has developed a Clean AirForce, of
    which Capital Metro is a partner, to implement cooperative strategies
    and programs for improving our air quality. Capital Metro has also
    unilaterally implemented several initiatives such as converting its
    fleet to clean-burning Ultra Low Sulfur Diesel (ULSD), becoming the
    first transportation authority in Texas to introduce environmentally-
    friendly hybrid-electric buses, and creating a GREENRide program to
    carpool Central Texas workers in low emission hybrid gas/electric
    automobiles.
        To address these transportation and air quality challenges as well
    as our region's growing population, in 2004 Capital Metro conducted an
    extensive community outreach program to develop the All Systems Go
    Long-Range Transit Plan. This 25-year transportation plan for Central
    Texas was created by Capital Metro, transportation planners, and local
    citizens. More than 8,000 citizens participated in the design of the
    program that will bring commuter rail and rapid bus technologies to
    Central Texas. The plan will also double Capital Metro's bus services
    over the next 25 years.
        By a vote of over 62 percent, this long-range transportation plan
    was adopted by the Central Texas community in a public referendum on
    November 2, 2004. The plan received bipartisan support, along with
    endorsements from the business community, environmental organizations,
    neighborhood associations, and our community leaders.
        An important component of the All Systems Go Long Range Transit
    Plan is the creation of an urban commuter rail line along a 32-mile
    long freight rail line currently owned and operated by Capital Metro.
    The proposed starter route would provide urban commuter rail service
    extending from downtown Austin (near the Convention Center) through
    East and Northwest Austin and on to Leander. This project was entirely
    financed with local funds and will open in late 2008.
        To implement the community's All Systems Go Transit Plan, Capital
    Metro is seeking $10 million for fiscal year 2009 for three projects of
    importance to our Central Texas community. Each of the three projects
    is contained in the community-designed All Systems Go Long Range
    Transit Plan, and each will be funded by Capital Metro with a
    significant overmatch of local funds.
      enhancement and improvement of buses and bus facilities--$5 million
        Capital Metro has embarked on a long term plan to improve and
    expand bus service. In addition to improving bus routes, the agency is
    investing in critical park and ride facilities, transit centers and
    enhanced bus stop locations and amenities. As Capital Metro's service
    area and the population we serve continue to grow, we will continue to
    enhance our system and facilities while addressing traffic congestion
    and air quality concerns. In the next 3 years, Capital Metro has
    planned to invest nearly $300 million in capital projects to better
    serve our growing population. Capital Metro seeks $5 million from the
    appropriations process for these improvements and expansions of our bus
    service and facilities.

                        HIKE AND BIKE TRAIL--$3 MILLION

        During Capital Metro's 2004 All Systems Go open houses, workshops
    and briefings, the Central Texas community encouraged Capital Metro to
    begin planning for bike and pedestrian trails along rail lines. Capital
    Metro has coordinated local efforts to plan for pedestrian and bicycle
    trails along several rail corridors in Capital Metro's service area.
        Capital Metro is seeking $3 million for its planned pedestrian and
    bicycle trail located in the right of way of its 32-mile Urban Commuter
    Rail line from Austin to Leander.

                    PARATRANSIT SERVICE VEHICLES--$2 MILLION

        Pursuant to, and in accordance with, the Americans with
    Disabilities Act, Capital Metro provides door-to-door van and sedan
    paratransit service throughout Central Texas for persons with
    disabilities and senior citizens. This $11.7 million fiscal year 2008
    program provides more than 500,000 rides each year. Capital Metro will
    be replacing many of the vans and sedans that serve this program, as
    they are retired during fiscal year 2009. This crucial funding will
    assist Capital Metro in ensuring the accessibility of transportation
    services for all Central Texans.
        I look forward to working with the Committee in order to
    demonstrate the necessity of these projects. Your consideration and
    attention are greatly appreciated.
                                     ______

          Prepared Statement of the National Association of REALTORS

      THE FEDERAL HOUSING ADMINISTRATION`S ROLE IN ADDRESSING THE HOUSING
                                     CRISIS

        The mortgage crisis continues to grow--homeowners continue to face
    foreclosure, and housing markets are in turmoil. For all these reasons,
    I and the 1.3 million members of the National Association of REALTORS
    thank you for holding this hearing on ``The Federal Housing
    Administration`s Role in Addressing the Housing Crisis.''
        In 1934 the Federal Housing Administration was established to
    provide consumers an alternative during a similar lending crisis. FHA
    served as the foundation for our housing market, which has served our
    citizens and our economy well for more than 70 years.
        However, as private mortgage markets evolved, FHA remained
    stagnant. Because FHA was unable to serve its core constituency, other
    mortgage providers stepped in to fill the gap. Without another
    alternative, many homebuyers were lured into these more exotic mortgage
    options, which fueled our current crisis. Even after all of this
    evidence, the need for a viable FHA remains unmet. Despite the best
    efforts of you and others, FHA reform has yet to be achieved.
        We urge you and your colleagues in the Senate to continue to work
    towards FHA reform. Permanent, realistic increases in the FHA loan
    limits; lowered FHA downpayment requirements; and new opportunities for
    condominium purchases are needed to create safe and affordable mortgage
    options for homebuyers and those wishing to refinance. These changes
    will also provide much needed stability to our local housing markets
    and economies.
        We also believe that the FHASecure program has been, and can
    continue to be a valuable tool for homeowners in crisis. This program,
    introduced in September 2007, gives credit-worthy homeowners who were
    making timely mortgage payments but are now in default, a second chance
    with a FHA insured loan product. We believe enhancements to this
    program can help an even greater number of borrowers without negatively
    impacting the sovereignty of the FHA insurance fund.
        As you know, through FHASecure, lenders and homeowners may
    refinance mortgages that, due to the increased mortgage payment
    following the interest rate reset have become delinquent. However, in
    many cases, subprime borrowers are becoming delinquent for reasons
    other than an interest rate reset meaning a rate reduction alone will
    not help borrowers avoid default or foreclosure.
        Specifically, we believe that where prudent, FHA should modify
    underwriting criteria in return for a lower loan-to-value ratio thereby
    assuring the lenders share risk. Changes include:
      --Permit late payments on fixed-rate and on conventional adjustable-
            rate mortgages without regard to interest rate reset or higher
            DTI ratios.
      --Create a sliding scale whereby the number of late payments allowed
            for qualification is dependent on the LTV ratio. For example,
            LTV = 90 percent, with several late payments = 80 percent LTV.
      --Permit second mortgage with CLTV treatment like FHASecure.
        A borrower would only be permitted to utilize one of the program
    changes mentioned above for their mortgage. Loans that qualify for
    FHASecure under these changes could be placed into a special risk
    insurance fund to further protect FHA.
        We submitted these recommendations to HUD on February 15, for their
    consideration. Based upon testimony given by the FHA Commissioner on
    April 9, 2008 before the House Financial Services Committee, we are
    hopeful that these changes will be implemented. The enhancements
    proposed will allow a greater number of borrowers to avoid foreclosure
    and reduce their burden of debt. Risk to FHA will continue to be
    mitigated by traditional FHA underwriting standards beyond the
    recommended enhancements to the FHASecure Program.
        The National Association of REALTORS thanks you for your efforts
    to help stem the housing crisis. Congress must act expeditiously to
    help our Nation's homeowners, communities, and local economies recover.
    We applaud you efforts and stand ready to work with you on solutions.
                                     ______

       Prepared Statement of the University Corporation for Atmospheric
                                Research (UCAR)

        On behalf of the University Corporation for Atmospheric Research
    (UCAR) and the university community involved in weather and climate
    research and related education, training and support activities, I
    submit this written testimony for the record of the Senate Committee on
    Appropriations, Subcommittee on Transportation and Housing and Urban
    Development, and Related Agencies.
        UCAR is a consortium of 71 universities that manages and operates
    the National Center for Atmospheric Research (NCAR) and additional
    research, education, training, and research applications programs in
    the atmospheric and related sciences. The UCAR mission is to serve and
    provide leadership to the atmospheric sciences and related communities
    through research, computing and observational facilities, and education
    programs that contribute to betterment of life on Earth. In addition to
    its member universities, UCAR has formal relationships with over 100
    additional undergraduate and graduate schools including several
    historically black and minority-serving institutions, and 40
    international universities and laboratories. UCAR is supported by the
    National Science Foundation (NSF) and other Federal agencies including
    the Federal Highway Administration (FHWA), and the Federal Aviation
    Administration (FAA). I would like to comment on the fiscal year 2009
    budgets for these agencies.

                       THE FEDERAL HIGHWAY ADMINISTRATION

        The fiscal year 2009 budget request for the FHWA should support the
    administration's and the country's commitment to a safe, efficient, and
    modern surface transportation system. Weather research and intelligent
    transportation system (ITS) technology significantly contributes to
    this commitment. According to the National Academy of Sciences, adverse
    weather conditions obviously reduce roadway safety, capacity and
    efficiency, and are often the catalyst for triggering congestion. In
    the United States each year, approximately 7,000 highway deaths and
    450,000 injuries are associated with poor weather-related driving
    conditions. This means that weather plays a role in approximately 28
    percent of all crashes and accounts for 19 percent of all highway
    fatalities.
    Road Weather Research and Development Program--Request: $3.3 Million
        Bad weather contributes to 15 percent of the Nation's congestion
    problems; the economic toll of weather-related deaths, injuries and
    delays is estimated at $42 billion per year. The Road Weather Research
    and Development Program (section 5308 in the SAFETEA-LU authorization
    bill) funds the collaborative work of surface transportation weather
    researchers and stakeholders. This work is potentially life saving for
    the users of the national surface transportation system. Much has been
    accomplished already in understanding and developing decision support
    systems to address the impact of poor weather on the surface
    transportation system including congestion. For example, State
    Departments of Transportation (DOTs) have already benefitted from the
    development and implementation of real world decision support
    solutions, including the Winter Maintenance Decision Support System
    which has been successfully demonstrated by 23 State DOTs, and the
    Clarus System, a research and development initiative to demonstrate and
    evaluate the value of integrating and processing data from State DOT
    weather observation systems across the Nation. However, additional
    resources are required to develop technologies that will support
    improvements in traffic and emergency management to develop, test, and
    implement solutions nationally that will reduce congestion and save
    lives.
        A fully funded Road Weather Research and Development Program could
    support such activities as developing technologies that would integrate
    weather and road condition information in traffic management centers,
    improved understanding of driver behavior in poor weather, developing
    in-vehicle information systems and wireless technologies that provide
    warnings to drivers when poor weather and road conditions exist,
    improving the understanding of the impact of weather on pavement
    condition, and developing new active control strategies (e.g., signal
    timing and ramp metering) optimized for poor weather and road
    conditions.
        SAFETEA-LU (section 5308) contains language that established the
    Road Weather Research and Development Program within the FHWA ITS
    Research and Development Program, with annual authorized funding at
    $5.0 million (significantly less than the National Research Council's
    recommendation of $25.0 million). This road weather research program is
    well supported by numerous organizations including the American
    Association of State Highway and Transportation Officials (AASHTO), the
    Intelligent Transportation Society of America (ITSA), the
    Transportation Research Board (TRB), the National Research Council
    (NRC), State Departments of Transportation (DOTs), numerous commercial
    weather service companies, and the American Meteorological Society
    (AMS). Improved safety, capacity, efficiency and mobility, of the
    national roadway system will benefit the general public, commercial
    trucking industry, State DOT traffic, incident and emergency managers,
    operators and maintenance personnel. Environmental benefits will be
    realized due to improved efficiency in the use of anti-icing and
    deicing chemicals for winter maintenance, reduced congestion, and
    improved mobility. I urge the subcommittee to fund the Road Weather
    Research and Development Program at the authorized level of $5.0
    million, at a minimum, in fiscal year 2009.

                     FEDERAL AVIATION ADMINISTRATION (FAA)

        Fliers nationwide are stuck in an air traffic jam. Famous for
    delays, Chicago, New York, and most recently, Newark airports, have all
    reached travel capacity, forcing them to reduce the number of flights
    in and out. To make matters worse, it is estimated that by 2025 U.S.
    air transportation will increase two to three times. Today's existing
    air traffic control system will not be able to manage this staggering
    growth rate. Fortunately, the Federal Government has proactively
    responded by undertaking an unprecedented initiative: the Next
    Generation Air Transportation System (NextGen). While a joint effort
    involving a number of agencies, the FAA has taken the lead by
    developing a budget that truly supports developing and implementing
    NextGen. The FAA accounts mentioned in this testimony all support the
    much-needed transformation of the National Airspace System.

              RESEARCH AND ENGINEERING DEVELOPMENT ACCOUNT (RE&D)

        The following programs can be found within the RE&D section of the
    fiscal year 2009 FAA budget request.
    Weather Program--Request: $16.9 Million
        According to the FAA, 70 percent of flight delays are caused by
    weather. A key area for NextGen is using advanced forecasting
    techniques and shared information among all system users--dispatchers,
    pilots and controllers. FAA's Weather Program is a research program
    focused on improved forecasts of atmospheric hazards such as
    turbulence, icing, thunderstorms and restricted visibility. Improved
    forecasts enhance flight safety, reduce air traffic controller and
    pilot workload, and enable better flight planning and productivity. The
    request of $16.9 million, however, is essentially flat; in real terms,
    it is down. To truly reduce delays associated with weather, it is
    essential this program be provided at least $20 million. Enhanced
    research and improved technologies will result in longer forecast lead
    times, increased accuracy and ultimately, more efficiency and safer
    skies. Two years ago, the request for the Weather Program was $19.5
    million, but has declined since. I urge the subcommittee to support the
    goals of NextGen and provide the Weather Program $20.0 million, at a
    minimum, in fiscal year 2009.
    Weather Technology in the Cockpit--Request: $8 Million
        Weather, according to the FAA, is more than twice as likely to
    cause general aviation fatalities as any other factor and is also the
    largest cause of general aviation fatalities in the United States,
    equating to 200 deaths annually. Weather uplinks in the cockpit, when
    combined with a thorough preview of the weather during pre-flight
    planning and other cockpit weather avionics, will help ensure that
    general aviation pilots increase awareness and reduce accidents.
    Weather Technology in the Cockpit, a new and innovative program, will
    provide a common weather picture to pilots, controllers, and users, and
    will expedite flight planning and decisionmaking. ``Cockpit weather''
    applied research will focus on hardware and software standards,
    integrate weather information, and prototype forecasting products for
    the flight deck. I urge you to support the fiscal year 2009 request of
    $8 million, which will revolutionize the way pilots and controllers
    receive and use weather information in real-time.
    Joint Planning and Development Office (JPDO)--Request: $20 Million
        The multi-agency Joint Planning and Development Office (JPDO) has
    accomplished much since its inception 5 years ago. The JPDO has a
    challenging mandate: to coordinate and manage six agencies focused on
    bringing NextGen online by 2025. It has completed its integrated work
    plan on how NextGen will improve safety, security, mobility,
    efficiency, and capacity to transform the Nation's air transportation
    system. Recently, the Secretary of Transportation tasked the JPDO to
    develop an action plan that would accelerate implementation of NextGen.
    The plan will address constraints and opportunities in both the near-
    and mid-term. After the action plan is approved, the intent is for the
    partner departments and agencies to start immediate implementation. In
    order to move forward with this directive, I urge the subcommittee to
    fund the Joint Planning and Development Office at the fiscal year 2009
    request of $20 million.
    Wake Turbulence--Request: $10.1 Million
        Aircraft in flight create wake turbulence, dangerous swirling air
    masses that trail from aircraft wingtips. Better detection and
    forecasting of wake turbulence is a key element in the FAA's safety
    program. Research results and technologies derived from the Wake
    Turbulence program will allow airports and airlines to operate more
    efficiently, increasing capacity and safety, by providing a better
    understanding of this phenomenon. I urge the subcommittee to support
    the fiscal year 2009 request of $10.1 million for the wake turbulence
    program.
    Atmospheric Hazards/Digital System Safety--Request: $4.8 Million
        The Atmospheric Hazards/Digital System Safety Research Program
    focuses on reducing the number of accidents or potential accidents
    associated with aircraft icing. The program promises to develop and
    test technologies that detect icing, predict anti-icing fluid failure,
    and ensure safe operations both during and after flight in icing
    conditions. To prevent the number and severity of icing-associated
    accidents, I urge you to support the fiscal year 2009 request of $4.8
    million for this life-saving program.
     within faa's air traffic organization--capital programs, i would ask
      that you pay particular attention to the following critical programs
    NextGen Network Enabled Weather (NNEW) and Reduced Weather Impact
            Request: NNEW: $20 Million Reduced Weather Impact: $14.4
            million
        The current weather dissemination system is inefficient to operate
    and maintain. Information gathered by one system is not easily shared
    with other systems. This leads to redundant and inconsistent
    information, and in many cases information not being universally
    available or used leading ultimately to suboptimal decisions. The
    complementary goals of NNEW and RWI are to integrate tens of thousands
    of global weather observations and sensor reports from ground-,
    airborne-, and space-based sources into a single national (eventually
    global) weather information system, constantly updated as needed. This
    integration will be enabled by system-wide availability of
    observational and forecast weather information to all NextGen users,
    service providers, military planners, security personnel, and the
    flying public. The key word is ``information.'' No longer will it be
    necessary to manually gather and integrate diverse weather data to
    realize a coherent picture of the weather situation--that will be
    accomplished with automation assistance prior to dissemination to
    interested parties. This will enable ``common situational awareness''
    of the weather, and rapid dissemination of any changes.
        The request of $20 million for NNEW is significantly more than the
    fiscal year 2008 enacted level of $7 million, which illustrates the
    FAA's commitment to NextGen. Because NextGen Network Enabled Weather
    and the Reduced Weather Impact Program are directly aligned with the
    goals of a flexible, safe, efficient air traffic system, I urge you to
    support the fiscal year 2009 request of $20 million for NNEW and $14.4
    million for Reduced Weather Impact.
    Wind Profiling and Weather Research-Juneau--Request: $1.1 Million
        In the late 1990s, after two 737s encountered severe turbulence
    during departure from the Juneau Airport, the FAA mandated a system be
    developed to provide high-wind alerts to pilots at the airport. The
    Wind Profiling and Weather Research-Juneau program supports the design
    and development of the Juneau Airport Wind System (JAWS), an
    operational system designed to detect and warn of wind and airport
    turbulence hazards. This will result in reduced severe delays and
    flight cancellations. The fiscal year 2009 request of $1.1 million,
    however, is a dramatic cut, which is extremely disruptive to the
    research program. In order to complete the work of developing this
    turbulence alerting system, I urge the subcommittee to support the
    fiscal year 2008 enacted level of $4.0 million for Wind Profiling and
    Weather Research-Juneau.
        On behalf of UCAR, as well as all U.S. citizens who use the surface
    and air transportation systems, I want to thank the subcommittee for
    the important work you do that supports the country's scientific
    research, training, and technology transfer. We understand and
    appreciate that the Nation is undergoing significant budget pressures
    at this time, but a strong Nation in the future depends on the
    investments we make in research and development today. We appreciate
    your attention to the recommendations of our community concerning the
    fiscal year 2009 FHWA and FAA budgets and your concern for safety
    within the Nation's transportation systems.
                                     ______

         Prepared Statement of the Coalition of Northeastern Governors

        The Coalition of Northeastern Governors (CONEG) is pleased to share
    with the Subcommittee on Transportation, Housing and Urban Development,
    and Related Agencies this testimony on fiscal year 2009 appropriations
    for transportation and community development programs. The CONEG
    Governors appreciate the subcommittee's longstanding support of funding
    for the Nation's highway, transit, and rail systems and critical
    community development programs. We understand the particularly
    difficult fiscal challenges and complex, interlocking issues that the
    subcommittee faces in crafting this appropriations measure. We urge the
    subcommittee to continue the strong Federal partnership so vital for a
    national, integrated, multi-modal transportation system. This network
    underpins the competitiveness of the Nation's economy, broadens
    employment opportunities, and contributes to the efficient, safe,
    environmentally sound, and energy smart movement of people and goods.

                                 TRANSPORTATION

    Surface Transportation
        The Governors recognize the impending shortfall in the Highway
    Trust Fund and the still-uncertain outcome of proposed short-term
    solutions. However, we urge the subcommittee to fund the combined
    highway, public transit, and safety programs at the fiscal year 2009
    levels authorized in the Safe, Accountable, Flexible, Efficient
    Transportation Equity Act: A Legacy for Users (SAFETEA-LU). This level
    of Federal investment is necessary to sustain the progress made under
    SAFETEA-LU to improve the condition and safety of the Nation's
    highways, bridges, and transit systems.
        Continued and substantial Federal investment in these
    infrastructure improvements--in urban, suburban, exurban, and rural
    areas--is necessary to safely and efficiently move people and products
    and support the substantial growth in freight movement projected in the
    coming decades. A significant increase in public investment is needed
    to keep America competitive in a global economy. According to the
    majority report of the National Surface Transportation Policy and
    Revenue Study Commission, at least $225 billion annually is needed from
    all sources--public (Federal, State and local) and private--for the
    next 50 years to upgrade the existing infrastructure system to a state
    of good repair and to create the advanced system that can sustain and
    ensure strong economic growth nationwide.
        Specifically, the CONEG Governors urge the subcommittee to:
      --support a Federal aid highway obligation limit at the authorized
            level of $41.2 billion; and
      --fund public transit at the authorized funding level of $10.3
            billion, including full funding for Formula and Bus Grants, the
            Capital Investment Grants, and the Small Starts Programs.
        The Governors also urge the subcommittee to fund the Transit
    Security Grant program at the full $750 million as authorized in Public
    Law 110-53 (Implementing Recommendations of the 9/11 Commission Act of
    2007). This critically needed funding makes the Federal Government a
    partner with State and local governments and public transportation
    authorities in enhancing the security of the Nation's public
    transportation systems and their tens of millions of riders.
        While recognizing the difficult decisions facing the Congress, the
    Governors are also concerned about several techniques--actual or
    proposed--to manage the Highway Trust Fund and appropriations outlays.
    For example, the recent practice of mandating how to rescind
    unobligated highway funding is now cutting into the States' ability to
    make planned investments and deliver much needed transportation
    improvements.
        The Governors also oppose the administration's proposal to cover
    the projected shortfall in the Highway Account of the Highway Trust
    Fund by transferring $3.2 billion from the Mass Transit Account to the
    Highway Account. This proposal would jeopardize the future of public
    transportation funding while sidestepping the underlying problem facing
    the Highway Account. A more appropriate short-term solution is timely
    action on the proposals to secure additional revenues to the Highway
    Account contained in title II of the American Infrastructure Investment
    and Improvement Act of 2007 (S. 2345) currently pending in the Senate.
    Rail
        Rising fuel prices and congested highways and airways make
    intercity passenger rail an ever more vital component of a national,
    balanced transportation system. Increasing market demand for intercity
    passenger rail travel is creating unique opportunities for growth in
    Amtrak's revenue. Amtrak's ability to respond to these opportunities
    requires substantial and on-going maintenance and ``state of good
    repair'' capital investments essential for the reliable, on-time
    service that attracts and retains ridership.
        The Governors request that the subcommittee provide $1.78 billion
    in fiscal year 2009 Federal funding for Amtrak, with specific funding
    levels provided for operations, capital, and debt service. We recognize
    that Amtrak faces a one-time need for additional funding in fiscal year
    2009 to meet its legal obligations for ``back pay'' as part of the
    Presidential Emergency Board recommendations, which are close to final
    ratification.
        A funding level of $801.4 million in fiscal year 2009 for capital
    improvements is critically needed for the ``state of good repair''
    improvements to aging infrastructure and equipment. These capital
    investments are vital to Amtrak's ability to deliver efficient,
    reliable, quality service nation-wide. We particularly encourage the
    subcommittee to ensure that Amtrak can continue bridge repair projects
    underway on the Northeast Corridor, as well as the system-wide security
    upgrades and the life-safety work in the New York, Baltimore, and
    Washington, DC tunnels as authorized under Public Law 110-53 (sections
    1514 and 1515).
        The Governors recognize that the subcommittee has initiated
    internal Amtrak reforms while intercity passenger rail authorization
    legislation is pending. We welcome the subcommittee's consistent
    commitment to continued transparency and accountability in Amtrak's
    financial and data systems, and to meaningful collaboration in its
    dealings with State partners. This guidance, including the requirement
    that Amtrak consult with its State partners and report to the Congress
    on the results of those discussions, has set the stage for productive
    coordination and information-sharing, particularly on the future of the
    Northeast Corridor Network.
        The CONEG Governors appreciate the subcommittee's leadership in
    creating and providing initial funding for the State Intercity
    Passenger Rail Grant Program. This program provides an important
    foundation for a vibrant Federal-State partnership that will bring
    expanded, enhanced intercity passenger rail service to corridors across
    the Nation. We urge the subcommittee to provide the requested $100
    million for this program, and to ensure that 10 percent is directed to
    corridor development planning and that an additional 5 percent to
    essential education and outreach initiatives.
        A number of other national rail programs are important components
    of the evolving Federal-State-private sector partnerships to enhance
    passenger and freight rail across the country. We encourage the
    subcommittee to provide funding for the Rail Relocation Program, the
    Swift High Speed Rail Development Program, the Next Generation High
    Speed Rail program, and the Nationwide Differential Global Position
    System effort--all of which benefit passenger rail and freight rail
    systems. In addition, initial funding for the Advanced Technology
    Locomotive Grant Pilot Program, created in section 1111 of the Energy
    Independence and Security Act of 2007, would be an important first step
    to assist the railroads and State and local governments in a transition
    to energy-efficient and environmentally friendly locomotives for
    freight and passenger railroad systems.
        The CONEG Governors also support a modest increase in funding for
    the Surface Transportation Board (STB) above the overall $26.3 million
    provided in fiscal year 2008. This funding level will allow the STB to
    provide critical oversight as the Nation's rail system assumes
    increasing importance for the timely, efficient, and environmentally
    sound movement of people and goods across the Nation.

                             COMMUNITY DEVELOPMENT

        The CONEG Governors urge the subcommittee to provide at least $4.1
    billion for the Community Development Block Grant (CDBG) program. The
    CDBG program enables States to provide funding for infrastructure
    improvement, housing programs, and projects that attract businesses to
    urban, suburban, exurban, and rural areas, creating new jobs and
    spurring economic development, growth and recovery in the Nation's low
    income and rural communities.
        The CONEG Governors thank the entire subcommittee for the
    opportunity to share these priorities and appreciate your consideration
    of these requests.
                                     ______

        Prepared Statement of the National Congress of American Indians

        On behalf of the National Congress of American Indians, we are
    pleased to present testimony on the administration's fiscal year 2009
    budget request for transportation and housing programs. We look forward
    to working with this subcommittee to ensure that the critical programs
    and initiatives funded are at levels which will ensure their long term
    effectiveness.

                                   BACKGROUND

    Housing
        A successful start in life depends on safe, quality and affordable
    housing, which helps to prevent and alleviate other physical and social
    problems from occurring, including lack of educational achievement and
    poor health. These types of problems make it difficult to obtain and
    maintain employment, creating further economic hardship for Indian
    families. The Native American Housing and Self-Determination Act
    (NAHASDA) allowed tribes to be more resourceful in creating homes for
    their members. NAHASDA modernize how Native American housing funds are
    provided by recognizing tribes' authority to make their own business
    decisions. Tribes have been able to increase capacity housing and
    improve infrastructure conditions in Indian Country. However, housing
    need continue to rise as do the maintenance needs of Housing and Urban
    Development (HUD) homes.
        Because of NAHASDA, tribes are better able to address the needs of
    their communities. In 1995, 20 percent of tribal residents lacked
    complete plumbing. This number was reduced to 11.7 percent by 2000,
    although it is still far higher than the 1.2 percent for the general
    population. In 2000, 14.7 percent of tribal homes were overcrowded, a
    drop from 32.5 percent in 1990. Despite improvements, severe conditions
    still remain in some tribal homes, with as many as 25-30 people living
    in houses with as few as three bedrooms. Native Americans are also
    becoming homeowners at an increasing rate, 39 percent more from 1997 to
    2001. Fannie Mae's investment in mortgages increased exponentially,
    from $30 million in 1997 to more than $640 million in the most recent 5
    year period.
        Although tribes have the desire and potential to make headway in
    alleviating the dire housing and infrastructure needs of their
    communities, tribes' housing needs remain disproportionately high and
    disproportionately underfunded. Due to funding levels and population
    growth tribal housing entities are only able to maintain the status
    quo.
    Transportation
        The nearly 56,000 mile system of Indian Reservation Roads (IRR) is
    the most underdeveloped road network in the Nation \1\--yet it is the
    primary transportation system for all residents of and visitors to
    American Indian and Alaska Native communities. Over two-thirds of the
    roads on the system are unimproved dirt or gravel roads, and less than
    12 percent of IRR roads are rated as good.\2\ The condition of IRR
    bridges is equally troubling. Over 25 percent of bridges on the system
    are structurally deficient.\3\
    ---------------------------------------------------------------------------
        \1\ Bureau of Indian Affairs, Transportation Serving Native
    American Lands: TEA-21 Reauthorization Resource Paper (2003).
        \2\ Id.
        \3\ Id.
    ---------------------------------------------------------------------------
        Building a transportation system that allows for safe travel and
    promotes economic expansion will help us strengthen our tribal
    communities while at the same time making valuable contributions to
    much of rural America. Surface transportation in Indian Country
    involves thousands of miles of roads, bridges, and highways. It
    connects and serves both tribal and non-tribal communities.
        Tribal communities share much the same obstacles as rural
    communities in addressing how to improve transportation needs. NCAI has
    diligently worked with tribal governments to find solutions for
    improving the transportation infrastructure of Indian Country. Tribes
    are pro-active in this effort through the legislative process, by
    building partnerships with other entities, and by generating revenue to
    assist in financing their transportation projects.
        Even though great strides have been made, there is still a
    tremendous need to address the terrible conditions of surface
    transportation on tribal land. These conditions significantly impact
    the daily lives of tribal members and the entire governments of tribal
    nations. Tribal communities as well as rural America require a proper
    infrastructure if they are both to become thriving hubs of economic
    growth and opportunity.
        Economic development cannot occur without a solid foundational
    infrastructure that must involve adequate surface transportation.
    Improving transportation systems sets the stage for economic
    development. Connecting people within tribal communities and to the
    areas and communities that surround Indian Country is vital for
    business, industry, and labor. Sustaining both the tribal communities
    and surrounding communities through viable surface transportation
    systems improves the lives of all involved.
        Another important reason for improving transportation systems is to
    enhance public safety. Insufficient transportation systems increase the
    risk factor for law enforcement and emergency personnel in responding
    to emergency situations. The fatality rate on roads on the Indian
    Reservation Road (IRR) System has the highest national average.
    Inadequate roads are a major contributor to vehicle crashes. These
    emergencies cost tribes millions of dollars each year in lost
    productivity, property damage, higher insurance premiums, medical and
    rehabilitative treatment. And that still does not factor in the human
    suffering of victims and their families. The poor condition of many
    tribal roads and bridges jeopardizes the health, safety, security and
    economic well-being of our tribal members. This environment creates
    dangerous and deadly situations for all who drive within Indian
    Country.

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

        The President proposed increased funding for the Indian
    homeownership program; however he proposed decreases in other Indian
    programs in the HUD. The section 184: Indian Housing Loan Guarantee
    Program, $420 million for fiscal year 2009, is an increase of over $53
    million over the enacted fiscal year 2008 amount. This increase is to
    promote homeownership and to address the lack of mortgage capital on
    tribal lands. The President's request for fiscal year 2009 proposes the
    amount of $627 million for the Native American Housing Block Grant, an
    amount similar to his request for fiscal year 2008. In addition, the
    President's budget for fiscal year 2009 requests $57 million for the
    Indian Community Development Block Grant, a decrease of $5 million from
    the enacted fiscal year 2008 amount.
        Native American Housing Block Grant.--The President's request for
    fiscal year 2009 proposes the amount of $627 million for the Indian
    Housing Block Grant.
      --NCAI recommends $750 million, which would maintain funding at the
            fiscal year 2002 level adjusted for inflation.
        Indian Community Development Block Grant.--These funds are
    dedicated to improve not only housing but the overall economy and
    community development of tribal communities. Community development
    includes a variety of commercial, industrial and agricultural projects.
      --This budget area has faced numerous and devastating reductions over
            the last few years and its funding needs to be increased to a
            more realistic level of $77 million.
        Section 184 Program.--Created in 1992, the section 184 program
    provides 100 percent reimbursement to private lenders in case of
    default. Tribes have been successful in participating in this program
    with little to no defaults. Under section 184, tribes or tribal members
    can purchase an existing home or obtain single-close construction loans
    for a stick-built or a manufactured home on a permanent foundation,
    rehabilitation loans or a purchase and rehabilitation loan. This
    underutilized program continues to grow as TDHEs expand their housing
    programs beyond low-income programs, tailoring them to meet the needs
    of their people.
      --NCAI recommends $420 million for section 184.

                          DEPARTMENT OF TRANSPORTATION

        Federal-aid Highway Program.--The President proposed essentially
    flat funding for Indian programs in the Department of Transportation.
    The President has proposed for the Federal-aid Highway Program $39.6
    million, a slight increase from the $39,585,000 for enacted fiscal year
    2008. Indian tribes receive funding under the Federal Lands Highway
    Program (FLHP), which improves the access to and within Federal lands
    such as Indian reservations.
      --NCAI recommends the authorized amount of $450 million for Indian
            Reservation Road Programs.
        Pipeline and Hazardous Materials Safety Administration-Emergency
    Preparedness Grant.--The Pipeline and Hazardous Materials Safety
    Administration provides funding to Indian tribes, States, and local
    governments under their program. This program primarily focuses on
    reducing serious hazardous materials and pipeline transportation. This
    agency provides training and planning grants to Indian tribes to
    improve hazardous materials emergency preparedness. The funding request
    for fiscal year 2009 is leveled for this program in the amount of $28
    million.
      --NCAI recommends the $28 million for the Emergency Preparedness
            Grant.
        Highway Traffic Safety Grant.--The National Highway Traffic Safety
    Administration (NHTSA) which gives grant funding to Indian tribes,
    States, and territories under their Highway Traffic Safety Grant,
    includes; the supports for highway safety initiatives; to improve
    traffic records and other data systems for safety traffic information;
    and alcohol-impaired driving countermeasures incentives for addressing
    alcohol driving incidents. For fiscal year 2009, the funding level for
    this program is elevated from the enacted fiscal year 2008 in the
    amount of $599 million. According to USC, tribes receive 1\1/2\ percent
    of the total allocation amount. Statutorily, Indian tribes are eligible
    to receive 2 percent of the total appropriation authorized amount from
    the NHTSA funding amount.
      --NCAI recommends that authorized amount of $4.3 million for Indian
            tribes from NHTSA.
                                     ______

     Prepared Statement of the Council of Large Public Housing Authorities

        Chairwoman Murray, Ranking Member Bond and members of the
    subcommittee, on behalf of the Council of Large Public Housing
    Authorities (CLPHA), thank you for the opportunity to submit testimony
    for the record on the administration's proposed fiscal year 2009 public
    housing budget. CLPHA members represent virtually every major
    metropolitan area in the country and on any given day, they serve more
    than 1 million households. Together, they manage approximately 40
    percent of the Nation's multi-billion dollar public housing stock, and
    administer over 30 percent of the section 8 voucher program.
        Last year, a first-ever national study measuring the economic
    impact of public housing concluded that public housing is an essential
    part of the housing market and makes significant contributions to local
    economies. The Econsult study showed that direct spending by public
    housing authorities on capital improvements, maintenance and operations
    generates additional dollar-for-dollar indirect economic activity in
    local communities.
        Given the uncertain economic conditions of today's housing market--
    with record-setting foreclosure rates among homeowners, a crisis in the
    credit and home mortgage lending industries, and an insufficient supply
    of rental housing nationwide--the housing crisis we are facing will
    place even greater pressure on the type of decent, safe, and affordable
    housing provided by public housing communities. Regrettably, this
    administration's proposed fiscal year 2009 budget is a continuation of
    a now 8 year effort to cripple, dismantle, devalue, and under fund
    public housing as we know it.

                                 OPERATING FUND

        The administration's proposal of $4.3 billion for the Operating
    Fund is a paltry increase of $100 million over last year's
    appropriation. HUD's own budget justifications indicate that $5.3
    billion is needed to fully fund the Operating Fund in fiscal year 2009.
    Furthermore, the Operating Fund has not been fully funded since 2002
    and estimates show that during those years, public housing lost nearly
    $3 billion in operating subsidies alone. At 81 percent funding, in
    essence, this budget proposal fails to fund 19 percent of--or
    approximately 227,000--public housing units. Housing authorities will
    cope with this low proration by reducing services to residents. Also,
    with insufficient resources to properly maintain existing units, the
    problem becomes cyclical, with more units becoming severely distressed.
        Coupled with the under-funding is HUD's problematic implementation
    of asset management and the restrictions HUD placed on management fees
    that prevent housing authorities from charging reasonable fees for
    administration. These continued shortfalls in annual public housing
    funding will make the transition to asset management needlessly
    difficult, if not impossible to achieve, and will result in negative
    consequences for resident services.
      --CLPHA requests the Senate Appropriations fully fund the Operating
            Fund at the industry recommended level of $5.3 billion in
            fiscal year 2009.

                                  CAPITAL FUND

        The administration's proposal for $2.024 billion is approximately
    $415 million less than the amount appropriated in fiscal year 2008.
    This funding request is considerably lower than annual accrual needs
    and therefore, funding at this level would severely under-fund accrual
    needs by more than $700 million in fiscal year 2009. Furthermore, it
    completely ignores the backlog of modernization needs, which could be
    in the tens of billions.
        The negative impacts of under-funding the Capital Fund will have
    harmful trickle down effects on private sector investments. Housing
    authorities are currently able to raise private capital by pledging
    their future Capital Funds toward the repayment of bonds and loan. To
    date, housing authorities have borrowed $3 billion through the Capital
    Fund Financing Program (CFFP) and have used the money creatively to
    make large-scale comprehensive improvements to their developments.
    Thus, under-funding the Capital Fund will create uncertainty for
    private investors. Similarly, private lenders will avoid future
    investments in public housing neighborhoods. As a result, housing
    authorities who borrow against their future years' Capital Fund
    allocations will be unable to address future years' annual capital
    needs. This will result in the delay of necessary services and
    upgrades, inevitably leading to future higher costs for essential
    repairs. Thus, if the Capital Fund is fully funded in fiscal year 2009,
    housing authorities will be able to meet accrual needs, begin to
    address the modernization backlog, and continue to encourage private
    sector investment in public housing neighborhoods.
      --CLPHA requests the Senate Appropriations fully fund the Capital
            Fund at the industry requested level of $3.5 billion in fiscal
            year 2009.

                                    HOPE VI

        In fiscal year 2009, for the third consecutive year, the
    administration is proposing to end HOPE VI. HOPE VI is an essential
    tool for public housing authorities and has leveraged more than $12
    billion in additional private and public investment since the program
    began in 1993. HOPE VI has transformed communities of despair and
    unrelenting concentrations of poverty into mixed-income communities
    that will serve as long-term assets in their neighborhoods. In 1993,
    when the program was first authorized, the stated goal was to demolish
    severely distressed public housing, estimated at that time to be
    100,000 units. Today, 15 years later, we are still faced with a
    substantial number of severely distressed public housing units and
    estimates show there may be an additional 82,000 units. The work of
    HOPE VI is not yet over as there is still much work to be done.
      --CLPHA requests the Senate Appropriations reauthorize, expand and
            provide adequate funding of $800 million for the HOPE VI
            program.

                  TENANT-BASED HOUSING CHOICE VOUCHER PROGRAM

        In fiscal year 2009, the administration is proposing $14.3 billion
    and an offset of $600 million for renewals under the Tenant-Based
    Housing Choice Voucher Program. However, the industry estimates that
    $15.4 billion is needed for tenant-based renewals. Therefore, HUD's
    request would fail to support between 55,000-100,000 vouchers currently
    in use. HUD proposes that public housing authorities be funded ``based
    on the amount public housing agencies were eligible to receive in
    calendar year 2008 and by applying the 2009 annual adjustment factor.''
    This budget based approach does not account for significant changes in
    local housing markets, nor does it reward housing authorities for
    improved utilization costs. Funding for the housing choice voucher
    program should continue to be funded by using actual leasing and cost
    data, as it has for the past two funding cycles. Even though HUD and
    OMB recognize the voucher program as one of the most effective
    Government programs, this proposed budget does not provide the full
    funding required for continued success.
      --CLPHA requests the Senate Appropriations fully fund the renewal of
            the Tenant-Based Housing Choice Voucher program at the industry
            requested level of $15.4 billion.

                           TENANT PROTECTION VOUCHERS

        This year, the Tenant Protection account is cut from $200 million
    in fiscal year 2008 to $150 million in fiscal year 2009. HUD claims
    additional costs for tenant protection vouchers may be obtained by
    using un-obligated balances from funds in the Housing Certificate Fund
    or from Annual Contributions for Assisted Housing. HUD also proposes
    removing the requirement that a tenant protection voucher be provided
    for all units that were occupied in the previous 24 months that cease
    to be available for occupancy. Here again, HUD will attempt to limit
    affordable housing opportunities for low-income families.
      --CLPHA requests the Senate Appropriations fully fund Tenant
            Protection Vouchers in fiscal year 2009.

                              ADMINISTRATIVE FEES

        HUD proposes $1.4 billion for administrative fees in fiscal year
    2009, a $49 million increase over fiscal year 2008. This amount is
    insufficient. The fiscal year 2008 administrative fees were prorated at
    86 percent so if they were fully funded, the fees would require over
    $1.5 billion in fiscal year 2009.
      --CLPHA requests the Senate Appropriations fully fund Administrative
            Fees at the industry recommended level of $1.54 billion.

                              SAFETY AND SECURITY

        Since 2002, the administration's budget provides no specific
    funding for safety and security in public housing through the Public
    Housing Drug Elimination Program (PHDEP). It fails to see the
    widespread, positive impact the program has gained and its strong
    support from PHAs, residents, local law enforcement and other concerned
    parties. Since PHDEP's termination, housing authorities have had to use
    their already scarce operating subsidies to combat crime and drugs, and
    ensure safety in their units.
      --CLPHA requests the Senate Appropriations fully fund Safety and
            Security at the industry recommended level of $310 million.

                         RESIDENT OPPORTUNITY SERVICES

        For fiscal year 2009, the administration recommends $38 million for
    supportive services, service coordinators, and congregate services.
    This is a $2 million reduction from fiscal year 2008 and is budgeted in
    the Public Housing Capital Fund, which has the effect of further
    reducing the total funding for capital needs. CLPHA strongly supports
    and urges separate funding for the ROSS program in order to address the
    critical, on-going need for supportive services among our most
    vulnerable residents, including the elderly and persons with
    disabilities.
      --CLPHA requests the Senate Appropriations fully fund Resident
            Opportunity Supportive Services as a separate program at the
            industry recommended level of $55 million.

                                OTHER SET-ASIDES

        This year, HUD proposes $48 million for Family Self-Sufficiency
    coordinators, $1 million less than the fiscal year 2008 appropriation.
    HUD also proposes $39 million to prevent displacement of the elderly
    and disabled families who receive assistance by the Disaster Assistance
    Program, and $75 million for incremental vouchers administered in
    conjunction with the Department of Veterans Affairs.
      --CLPHA requests the Senate Appropriations fully fund Service
            Coordinators for the Elderly and Disabled at the industry
            recommended level of $50 million.
        CLPHA members remain committed to providing quality housing and
    management services in public housing. However, without adequate
    funding, public housing authorities cannot ensure that housing is
    properly maintained or needed services are available. Given increasing
    housing costs and struggling housing markets across the country,
    protecting and preserving public housing has proven ever more critical
    to low-income families. We appreciate the opportunity to submit our
    comments and public housing funding requests to the subcommittee. We
    look forward to continuing to work with the subcommittee in our joint
    efforts to advocate for, and deliver, safe and affordable public
    housing to our Nation's most disadvantaged and vulnerable persons.
                                     ______

    Prepared Statement of the American Association of Service Coordinators
                                     (AASC)

        The American Association of Service Coordinators (AASC) appreciates
    the opportunity to share our views on the fiscal year 2009
    appropriations for the Department of Housing and Urban Development
    (HUD). While we have funding concerns with a number of programs
    contained in the THUD fiscal year 2009 appropriations bill, we will
    focus our comments on resources needed for the staffing of service
    coordinators in federally assisted and public housing.
        Service coordinators have helped thousands of low-income elderly,
    persons with disabilities, and others with special needs to link with
    community-based health and supportive services. While most local
    communities may have available the various services needed, they are
    highly fragmented, not well known, and/or have complexities that have
    hindered easy access. By providing timely assistance, service
    coordinators have enabled many frail and vulnerable older persons to
    achieve their preference to remain in their home for as long as
    possible. Without the benefit of service coordinators, many vulnerable
    persons have been forced to move prematurely into more costly settings,
    such as nursing homes.
        Service coordinators in federally assisted housing are funded
    through a number of sources, including national competitive grants
    funded through the section 202 Elderly Housing Program. However, since
    the service coordinator grant program was established there have been
    insufficient funds available to enable service coordinators to be
    staffed in most eligible federally assisted housing. Findings of a
    recent HUD survey revealed that there are about 1,500 service
    coordinators funded through the competitive grant program which
    represents less than one-third of the more than 12,000 eligible housing
    facilities. Current eligible facilities for these grants are those
    funded with: section 202 without PRACs; HUD insured section 221d3, some
    section 236s, and project based section 8 rent subsidies. In addition,
    nearly 2,000 service coordinators are funded through project
    operations, and over 200 service coordinators are funded through
    project residual receipts and excess revenues. Unfortunately, many
    facilities do not have sufficient funds to absorb service coordinators
    into their operating budget; and it is very difficult to secure the
    necessary rent increase to enable staffing as a routine part of the
    operating budget.
        In addition to federally assisted housing, there are 1.3 million
    households living in public housing and almost half of all residents
    are elderly or persons with disabilities, including more than 50,000
    seniors age 83 and older. Service coordinators are needed not only to
    assist frail elderly to remain in their home, but also to provide
    assistance to many low-income families in public housing or using
    Housing Choice Vouchers to become more self-sufficient and economically
    independent through employment and homeownership. Service coordinators
    have been funded to assist public housing residents through short-term
    competitive grants with the Resident Opportunities and Self-Sufficiency
    program (ROSS), the Housing Choice Vouchers Family Self-Sufficiency
    (HCV-FSS) program; or through public housing Operating Funds.
    Unfortunately, over the past few years there have been significant cuts
    and shortfalls in Federal funds needed for the sound operation of
    public housing, including the routine staffing of service coordinators.
        Despite the critical need and cost-effectiveness of service
    coordinators in assisting frail and low-income elderly and others with
    special needs to access supportive services or the need to assist
    families to become more self-sufficient, funding for service
    coordinators remains very limited. While the administration's fiscal
    year 2009 budget provides a slight increase for service coordinators in
    section 202 and other federally assisted senior housing, yet funding
    for service coordinators in public housing remains essentially flat.
    AASC would urge the subcommittee's support for the following:
      --$100 million in fiscal year 2009 for service coordinators in
            federally assisted housing, particularly to ensure adequate
            funds for expiring contracts of existing service coordinators;
      --Full funding for section 8, Project Rental Assistance Contracts
            (PRAC), other rent subsidies and project operating funds to
            permit the staffing of a service coordinator as a routine part
            of the project's operating budget;
      --A separate add-on of $75 million in Public Housing Operating Funds
            for service coordinators;
      --$55 million for the Resident Opportunities for Self-Sufficiency
            (ROSS) program; and
      --$85 million for the Housing Choice Voucher Family Self-Sufficiency
            Program.

                    FEDERALLY ASSISTED HOUSING--$100 MILLION

        The administration's fiscal year 2009 budget requests $80 million
    for service coordinators, an increase over the $71 million budget
    requested in fiscal year 2008 and the $60 million appropriated as part
    of the consolidated fiscal year 2008 appropriations bill enacted
    December 26, 2007 (Public Law 110-161). Unfortunately, the $60 million
    appropriated for fiscal year 2008 is insufficient even to extend
    contracts of existing service coordinators; and will provide no funds
    for any additional service coordinators. In fact, it is anticipated
    that there will be no funds for service coordinators in the fiscal year
    2008 Notice for Funds Available (NOFA) when it is issued (anticipated
    by the end of April). This will be the first time since the service
    coordinator grant program was established that no funds will be
    available for additional service coordinators. In fiscal year 2007, HUD
    awarded nearly $3.5 million for 21 grants in 11 States (2,064 units);
    $12 million was provided in fiscal year 2006; and $30 million in fiscal
    year 2002.
        The shortfall of fiscal year 2008 appropriations for the staffing
    of service coordinators in federally assisted senior housing has
    contributed to several months delays in HUD allocation of fiscal year
    2008 funds to extend existing contracts for service coordinators. In
    order to extend all contracts, it is anticipated that HUD will make
    proportional cuts to all existing contracts. This action may seem
    equitable in sharing the shortfall; however, it may also have an
    unintended consequence of reducing needed assistance to many low-
    income, frail and vulnerable elderly and others with special needs and
    jeopardize their well-being as a result of anticipated reduced hours
    and capacity of existing service coordinator programs. While HUD may
    allow service coordinators to be funded through project reserves or to
    be incorporated into project operations; most federally assisted and
    public housing facilities do not have sufficient resources in their
    operating budgets to staff service coordinators. Given the shortages
    for section 8, HAPs, PRACs and other operating funds and critical
    competing needs, it is unlikely that projects will be able to secure
    necessary rent increases to allow the staffing of service coordinators.
        AASC would recommend several actions: first, there is a need for
    $20 million in fiscal year 2008 supplemental funds in order to extend
    contracts at full funding for existing service coordinators to ensure
    there are no cuts in hours, elimination of service coordinator
    positions, or cuts in quality assurance and other aspects of the
    service coordinator program; second, to provide $100 million in fiscal
    year 2009 for service coordinators in federally assisted housing to
    ensure full funding with the renewal of existing contracts, as well as
    to expand service coordinators in federally assisted housing for
    elderly or persons with disabilities that currently do not have them
    (two-thirds of eligible facilities do not have service coordinators);
    and to expand eligibility for service coordinators to section 515 rural
    housing and for Low-Income Housing Tax Credits (LIHTC) projects that
    involve non-profit organizations.
        There is also a need for a dual strategy for funding service
    coordinators that includes maintaining the service coordinator grant
    program, and also increasing the routine staffing of service
    coordinators within the facility's operating budget. While statutory
    authority exists to allow HUD to fund coordinators, many senior housing
    facilities have not been able to secure the necessary rent adjustments
    to accommodate them. AASC would recommend that sufficient section 8,
    PRAC, or other operating funds be increased to allow routine staffing
    of service coordinators, as well as to direct HUD and their field
    offices to provide necessary budget adjustments and regulatory relief
    to remove any barriers restricting the staffing of service coordinators
    through the project's operating budget. There is also a need to expand
    the funding for housing-based service coordinator to assist frail
    elderly in the facilities' surrounding community. While there is
    existing statutory authority to enable service coordinators to assist
    residents in the surrounding community, there are insufficient funds to
    enable service coordinators to reach out to assist these surrounding
    residents.

          PUBLIC HOUSING: COMPLEXITY AND INADEQUATE FUNDS FOR SERVICE
                                  COORDINATORS

        Elderly and other residents with special needs living in public
    housing and those using Housing Choice Vouchers (HCV) have been denied
    full access to the valuable and cost-effective assistance provided by
    service coordinators. Over one-third of residents in public housing are
    elderly residing in various settings such as senior housing, family
    housing, and mixed-population housing with younger persons with
    physical and mental disabilities. Unfortunately, funding for service
    coordinators in public housing is very limited, complex, and has
    experienced a steady reduction in funds over the past few years, both
    with specific grant programs for service coordinators, as well as with
    the public housing operating budget.
        A number of local housing authorities have funded service
    coordinators through competitive short-term grant programs, such as
    those under the Resident Opportunities and Self-Sufficiency (ROSS) or
    Family Self-Sufficiency (FSS) programs. Unfortunately, over the past
    few years, there have been funding cuts and a lack of program
    consistency contributing to disincentives for PHAs to participate in
    these grant programs. For example, the Elderly and Persons with
    Disabilities Service Coordinator program (EDSC) funded at over $15
    million as part of the ROSS program was shifted to the Public Housing
    Operating Fund, but with no additional funds. Therefore, coordinators
    that once were funded through the EDSC program now need to compete with
    other funding priorities and are subjected to the same proportional
    cuts with Public Housing Operating Funds. Because of funding cuts in
    their operating budgets and other competing needs, a number of public
    housing authorities have been forced to lay-off or reduce their service
    coordinator program. Service Coordinators have also been essential in
    facilities that have a mix of older residents and non-elderly persons
    with disabilities. Therefore, it is necessary to ensure that there are
    adequate funds available in the fiscal year 2009 Public Housing
    Operating funds to accommodate service coordinators. AASC recommends
    that $85 million be provided as a separate add-on to Public Housing
    Operating Funds to ensure that PHAs can include service coordinators as
    a routine part of their operating budget.

        RESIDENT OPPORTUNITIES AND SELF SUFFICIENCY (ROSS)--$55 MILLION

        The Resident Opportunities and Self Sufficiency (ROSS) program
    provides grants to public housing agencies, tribal housing entities,
    resident associations, and nonprofit organizations for the delivery and
    coordination of supportive services and other activities designed to
    help public and Indian housing residents attain economic and housing
    self-sufficiency. There are several separate programs within the ROSS
    program that were appropriated at $40 million in fiscal year 2008,
    including: (1) Family and Homeownership ($33.4 million funded in fiscal
    year 2007), (2) Elderly and Persons with Disabilities ($16.6 million
    funded in fiscal year 2007; and (3) Public Housing Family Self-
    Sufficiency ($12 million in fiscal year 2007 NOFA). Despite the
    demonstrated need and effective results, the administration's fiscal
    year 2009 budget seeks $37.6 million for these three ROSS programs, and
    no additional funds for Neighborhood Networks (funded earlier at $15
    million), a slight reduction from the $40 million appropriated in
    fiscal year 2008. AASC recommends that ROSS be funded at $55 million,
    as it had been prior to fiscal year 2005.
     housing choice voucher/family self-sufficiency (hcv/fss)--$85 million
        The HCV/FSS program allows participants in the section 8 Housing
    Choice Voucher program to increase their earned income, reduce or
    eliminate their need for welfare assistance, and promote their economic
    independence. Funds are used to provide for FSS program coordinators to
    link participants with supportive services they need to achieve self-
    sufficiency and to develop 5-year self-sufficiency plans. The HCV/FSS
    program currently assists over 63,000 families and 8,300 families in
    public housing. In fiscal year 2004, HUD made a number of changes in
    the program that led to a number of technical errors and elimination of
    nearly one-third of the existing grants. The administration's fiscal
    year 2009 budget requests $48 million for HCV/FSS, slightly less than
    the $49 million appropriated in fiscal year 2008 and essentially the
    same since fiscal year 2005. AASC recommends $85 million for HCV/FSS
    funding in order to restore funds to PHAs that were cut in fiscal year
    2004 and to expand the number of FSS participants. In addition, we
    support administrative changes for up-front funding of HCV/FSS escrow
    accounts, and to streamline the staffing of service coordinators.

                                   CONCLUSION

        While we understand the difficult funding choices that the
    subcommittee needs to make with limited resources, we would urge your
    support for the funding of service coordinators as a cost-effective
    means to assist the low-income elderly and other residents with special
    needs and as a means to save public funds by promoting economic self-
    sufficiency for low-income families and options for frail elderly to
    delay or avoid premature admission into costly nursing homes.
                                     ______

                       Prepared Statement of Easter Seals

        Chairman Murray, Ranking Member Bond and members of the
    subcommittee, Easter Seals appreciates this opportunity to share the
    successes of Easter Seals Project ACTION and the National Center on
    Senior Transportation.

                            PROJECT ACTION OVERVIEW

        Project ACTION was initiated during the appropriations process in
    1988 by funding provided to the Federal Transit Administration to
    undertake this effort with Easter Seals. We are indeed grateful for
    that initiative and the ongoing strong support of this subcommittee in
    subsequent years.
        Following its initial round of appropriations, Congress authorized
    assistance to Project ACTION in 1990 with the passage of ISTEA and
    reauthorized the project in 1997 as part of TEA-21 and in 2005 as part
    of SAFETEA-LU. The strong interest and support of all members of
    Congress has been greatly appreciated by Easter Seals as it has pursued
    Project ACTION's goals and objectives.
        Since the project's inception, Easter Seals has administered the
    project through a cooperative agreement with the Federal Transit
    Administration. Through steadfast appropriations support, Easter Seals
    Project ACTION has become the Nation's leading resource on accessible
    public transportation for people with disabilities. The current project
    authorization level is $3 million, and Easter Seals is pleased to
    request the appropriation of that sum for fiscal year 2009.
        The strength of Easter Seals Project ACTION is its continued
    effectiveness in meeting the congressional mandate to work with both
    the transit and disability communities to create solutions that improve
    access to transportation for people with disabilities of all ages and
    to assist transit providers in complying with transportation provisions
    in the Americans with Disabilities Act (ADA).

               NATIONAL CENTER ON SENIOR TRANSPORTATION OVERVIEW

        The National Center on Senior Transportation (NCST) was created in
    SAFETEA-LU to increase the capacity and use of person-centered
    transportation options that support community living for seniors in the
    communities they choose throughout the United States. The center is
    designed to meet the unique mobility needs of older adults and provide
    technical assistance and support to older adults and transit providers.
    The NCST is administered by Easter Seals in partnership with the
    National Association of Area Agencies on Aging (N4A) and involves
    several other partners including the National Association of State
    Units on Aging, The Community Transportation Association of America,
    The American Society on Aging, and The Beverly Foundation. The
    Cooperative agreement forming the NCST was developed in August 2006 and
    the Center was officially launched in January 2007.
        The goals of the NCST are:
      --Greater cooperation between the aging community and transportation
            industry to increase the availability of more comprehensive,
            accessible, safe and coordinated transportation services;
      --Increased integration of provisions for transportation in community
            living arrangements and long-term care for older adults;
      --Enhanced capacity of public and private transportation providers to
            meet the mobility needs of seniors through available,
            accessible, safe and affordable transportation;
      --Enhanced capacity of human service providers to help seniors and/or
            caregivers individually plan, create and use appropriate
            transportation alternatives;
      --Increased knowledge about and independent use of community
            transportation alternatives by seniors through outreach,
            education and advocacy;
      --Increased opportunities for older adults to obtain education and
            support services to enable the individuals to participate in
            local and State public and private transportation planning
            processes.
        The tools and resources being developed to achieve these goals
    include:
      --Technical assistance extended through cross-agency and public/
            private collaboration to improve and increase mobility
            management for older adults through new or existing local and
            State coalitions;
      --Technical assistance and other supportive services extended to
            communities, seniors, transportation and professional agencies
            and organizations, government, and individuals so they can
            effectively address barriers and/or respond to opportunities
            related to senior transportation;
      --Creation and dissemination of products and training programs (e.g.,
            brochures, workbooks, best-practice guides and self-
            assessments) to help transportation providers, human service
            agencies and older adults and their caregivers understand their
            roles and/or opportunities for increasing senior mobility
            options;
      --Use of an 800-telephone line, website, visual exhibit, newsletters
            and other communication tools;
      --Implementation of communication strategies to increase the profile
            of senior transportation on topics such as emerging best
            practices, advances in public policy, success stories and more;
      --Facilitation and testing of new ideas to increase and improve
            community mobility for seniors through the administration and
            management of demonstration projects.
        In SAFETEA-LU, the NCST is authorized at $2 million for the first
    year of the project and $1 million for years after that. Easter Seals
    respectfully requests an appropriation of $3 million for the NCST in
    fiscal 2009. The additional $2 million included above the authorized
    level in this request would allow the center to fund local community's
    efforts to demonstrate creative, unduplicated and effective solutions
    to increasing mobility for older adults. This funding will allow us to
    support local communities' efforts to put the tools and resources
    developed by the NCST into practice.

      HIGHLIGHTED ACTIVITIES OF PROJECT ACTION AND THE NATIONAL CENTER ON
                   SENIOR TRANSPORTATION DURING THE LAST YEAR

        Both Project ACTION and the NCST are working at the State, local
    and national level to achieve the goal of greater mobility for all
    Americans. The past year has been an exciting one and the role of
    Project ACTION and the NCST as productive, highly trustworthy,
    innovative resources to the Federal Transit Administration has
    continued to grow.
        In late 2007, the NCST released an RFP to local communities to
    undertake demonstration projects that will work creatively to meet the
    transportation needs of older adults living in the community. More than
    300 public, private and faith-based aging/human services and
    transportation organizations from 46 states plus the District of
    Columbia applied. Eight community organizations have been selected to
    receive grants from the National Center on Senior Transportation. The
    grants range from $35,000 to $90,000. The sites will also receive 24
    months of tailored technical assistance. A panel of external reviewers
    selected these organizations: Human Services Council, Vancouver, WA;
    Jewish Family and Children's Services of Minneapolis, Minnetonka, MN;
    Knoxville-Knox County Community Action Committee, Knoxville, TN;
    Leslie, Knott, Letcher Perry Community Action Council, Inc., Jeff, KY;
    Meadowlink Commuter Services, Rutherford, NJ; Mid County Senior
    Services, Newtown Square, PA; Southwest Michigan Planning Commission,
    Benton Harbor, MI; ACCESS Transportation System, Pittsburg, PA.
        A highly promising new tool that both Project ACTION and the NCST
    are accessing to achieve their missions is distance learning. Distance
    learning has proven to be a highly effective method to reach an
    exponentially greater number of stakeholders to educate and inform them
    about activities that will increase the mobility of older adults and
    people with disabilities. For instance, over 800 people have
    participated in technical training offered by Project ACTION and the
    NCST with approximately 120 people signing up for each event on
    average. This has allowed approximately 5 times as many people to be
    trained by project staff. The experience has been so positive that the
    FTA has requested that the project triple their distance learning
    activities over the next 3 years contingent on funding. An additional
    training success was the presentation of the Project ACTION ``People on
    the Move'' program in New Orleans, LA to help assure that
    transportation options for people with disabilities were part of the
    rebuilding efforts in that city. Project ACTION was also proud to
    introduce a new course this year to increase the skills, knowledge and
    abilities of travel training professionals. Within 3 months following
    each of these three trainings being offered this year, participants
    will submit a report detailing how they used the curriculum materials
    to train people with disabilities to use public transportation, improve
    policies and practices, educate colleagues and increase their own
    knowledge.
        Both projects have also instituted an on-line technical assistance
    tracking process that will help identify geographic and issue area
    trends in our technical assistance efforts so that broader training and
    technical assistance tools can be targeted at specific needs.
        There are currently three ongoing studies that will result in new
    tools being added to the resource clearinghouse for both projects. The
    first is in the area of accessible taxi service and is critical to
    meeting the needs of both older adults and people with disabilities,
    particularly in rural areas. The other two are in the areas of bus stop
    accessibility and accessible pathways. In addition Project ACTION just
    released a report on wheelchair mobility that addresses the growing
    need to address larger wheelchairs in vehicles.

                              FISCAL 2009 REQUEST

        In order to continue the outstanding work of Easter Seals Project
    ACTION and the NCST, Easter Seals respectfully requests that $3 million
    be allocated for Project ACTION and $3 million be allocated for the
    National Center on Senior Transportation in fiscal 2009 to the
    Department of Transportation for project activities.
        Mr. Chairman, thank you for the opportunity to present this
    testimony to the subcommittee. Your efforts have improved the
    accessibility of transportation for persons with disabilities and older
    adults and the ability of the transportation community to provide good
    service to all Americans. Easter Seals looks forward to continuing to
    work with you toward the pursuit of these objectives.
                                     ______

     Prepared Statement of the National Association of Railroad Passengers

        The National Association of Railroad Passengers strongly supports
    $1.785 billion as a minimum appropriation for Amtrak for fiscal year
    2009 in the absence of a responsible request by the Bush
    administration. There are two caveats below regarding rolling stock and
    infrastructure (sections II and IV) which justify additional funding.
        Looking forward, we strongly urge the next Congress and
    administration to take seriously the $9 billion a year recommendation
    of intercity passenger train investments contained in the report of the
    National Surface Transportation Policy and Revenue Study Commission.

                            STRONG RIDERSHIP GROWTH

        Americans are turning to trains. Demand for all types of services
    is growing rapidly--long distance, corridor, commuter rail and local
    transit. At Amtrak, ridership for the first 6 months of fiscal year
    2008 (October-March) was up 12 percent compared with the same period of
    fiscal year 2007. And ridership for all of fiscal year 2007, which
    Amtrak said marked ``the fifth straight year of gains,'' was 6.3
    percent higher than in fiscal year 2006.
        Sold-out trains on Amtrak means we don't have enough capacity to
    meet current demand, and certainly not the larger demand that is likely
    in the future as more people seek alternatives to high and rising
    gasoline prices and airline fares. As explained below, from a public
    policy standpoint, the increased popularity of energy-efficient trains
    is good.

                         HOW TO KEEP RIDERSHIP GROWING

        Amtrak has about 100 cars that need repairs before they can be
    returned to service. The fiscal year 2008 budget apparently would
    accomplish very little in this regard. Similarly, it appears that
    little could be accomplished within what Amtrak has requested for
    fiscal year 2009, since they are showing a significant drop in capital
    spending on both ``passenger cars'' and ``locomotives.'' Passenger cars
    would drop $40.1 million or 22.5 percent, from $178.0 million this year
    to $137.9 million next year.
        This issue also is complicated by the fact that, as a result of
    leaseback deals in the pre-Gunn years, Amtrak does not own many of
    ``its'' cars and the law, as we understand it, prohibits Amtrak's use
    of capital dollars to repair such cars.
        With passenger demand already exceeding what Amtrak can supply
    today, we urge the subcommittee to sort through the above and take the
    necessary steps to maximize the number of cars Amtrak can operate,
    including--if needed for this purpose--adding additional funding.
        New Equipment.--We appreciate that Amtrak is working on developing
    a program to secure new equipment in cooperation with the States, and
    is working with them to standardize equipment design as much as
    possible. However, we are concerned at the lack of action with regard
    to equipment for the national network (long-distance) trains, where
    demand also is strong and growing, and cars also are aging. It is
    essential that the Federal funds become available to move both of these
    programs forward; with States partnering on ``State corridors''
    equipment.

                              STATE GRANT PROGRAM

        The Association appreciates the fact that, for the first time,
    Federal funds are available to match State investments for intercity
    passenger trains, and not just as a by-product of commuter rail or
    intermodal terminal programs. The $30 million approved for fiscal 2008
    is significant as a start; we urge the subcommittee to expand this
    program as rapidly as possible--and not at the expense of Amtrak
    funding--ideally at $100 million in fiscal year 2009, and including a 5
    percent set-aside for education and outreach.

                              SERVICE RELIABILITY

        While some on-time performance issues result from problems with
    railroad operating practices, substantial delays also are caused by
    genuine track capacity issues. One of the biggest problems involves the
    Norfolk Southern mainline between Porter, Indiana, 26 miles east of the
    Illinois State line, and Chicago. This segment handles Amtrak's five
    daily Michigan round-trips as well as Amtrak's four Chicago-Cleveland
    trains (Lake Shore Limited serving New York State, New York City and
    Boston; Capitol Limited serving Pittsburgh and Washington).
        Paralleling this mainline is the abandoned former New York Central
    right-of-way (and associated drawbridges, still in place). Putting this
    back into service would improve both passenger and freight operations.
    This is one major example of the sorts of projects that could blossom
    under an adequately funded Federal program to jointly fund railroad
    projects with States.

                  IT IS SOUND PUBLIC POLICY TO SUPPORT TRAINS

        Fuel efficiency offers the most immediate and biggest potential for
    reducing CO2 emissions from transportation over the next 3
    decades, partly because we are so far from developing radically
    advanced, low-carbon technologies to replace oil-based transportation
    energy. The emissions reduction policy measure that will have the most
    immediate impact is the one that will make greater use of the most
    fuel/carbon efficient forms of transportation.
        It is in that context that we present the most recent data from the
    annual Transportation Energy Data Book (Edition 26, released in 2007),
    published by Oak Ridge National Laboratory, under contract to the U.S.
    Department of Energy. The following table shows 2005 data; the five
    modes shown are listed from most to least energy efficient:

    ------------------------------------------------------------------------
                                                              BTUs per psgr-
                              Mode                               mile \1\
    ------------------------------------------------------------------------
    Amtrak..................................................           2,709
    Commuter trains.........................................           2,743
    Certificated air carriers...............................           3,254
    Cars....................................................           3,445
    Light trucks (2-axle, 4-tire)...........................           7,652
    ------------------------------------------------------------------------
    \1\ BTU = British Thermal Unit; passenger-mile = one passenger traveling
      one mile.

        The aviation figure shown above is straight energy consumption; no
    multiplier is added although there is evidence that ``radiative
    forcing'' increases the negative environmental impacts of high altitude
    emissions.

                              HUDSON RIVER TUNNELS

        One other geographically specific project demands comment: the
    current plan of New Jersey Transit to build two tunnels under the
    Hudson River which would not connect with existing New York Penn
    Station and which would lead to a dead-end, deep cavern station so far
    under 34th Street as to render questionable the ability to extend
    tracks to Grand Central. Moreover, we understand that the tunnels are
    designed in a way that prohibits additional intercity capacity in the
    future.
        We cannot support or justify a $7.6 billion expenditure on new
    tunnels that, in 2017, will find existing Penn Station and all
    intercity service under the Hudson just as dependent as today on two
    century-old tunnels. Moreover, these new tunnels will block future
    investments to expand intercity capacity, violating a basic rule: do no
    harm. As we have testified to New Jersey Transit and written to the
    Governors of New York and New Jersey, it is inconceivable that the
    continent's strongest market opportunity for rail to ameliorate
    aviation congestion could remain one incident away from rail paralysis.
    Even without an incident that closes those tunnels for any length of
    time, basic track maintenance needs are increasingly in conflict with
    growing demand for both commuter and intercity weekend services.

                                    BACK PAY

        Our $1.785 billion request includes both the $1.671 billion that
    Amtrak formally requested and the additional $114 million to fulfill
    the new contracts.
        The alternative approach of relying on an end-of-year cash balance
    to cover the $114 million would be unwise because the remaining cash on
    hand would be inadequate for responsible management of a $3+ billion
    corporation like Amtrak. While it is unfortunate that Amtrak did not
    forthrightly request the $114 million, we agree that the board arguably
    would be failing in its fiduciary responsibility to recommend
    ``swallowing'' the $114 million. As Alex Kummant testified before your
    subcommittee on April 3, ``it's early to project end-of-year cash. Last
    year, we came within 3 weeks of running out of cash by the time we got
    our first grant in February.''

                                   WORK RULES

        We have supported reasonable efforts to improve productivity,
    believing that such efforts will facilitate service expansion that
    provides services travelers need while increasing the number of good
    jobs on and related to passenger trains. It is widely known that the
    PEB ``does not recommend any of Amtrak's requested changes.'' However,
    rail labor submissions to the PEB noted that Amtrak can increase
    productivity within the scope of existing contracts. Also, the new
    contracts become amendable in just over 19 months which leaves room for
    hope that all parties, informed by the recent process, can approach the
    issue more effectively.
                                     ______

            Prepared Statement of the Railway Supply Institute, Inc.

        Dear Mr. Chairman, the Railway Supply Institute (RSI) appreciates
    the opportunity to provide this subcommittee with our views on
    important transportation funding policy.
        Established in 1908, RSI is the international association of
    suppliers to the Nation's freight, passenger rail systems, and rail
    transit authorities. The domestic railway supply industry is a $20
    billion a year business with some 500 companies employing 150,000
    people. Approximately 25 percent of sales involve Amtrak, commuter
    railroads and transit authorities. A strong national freight and
    passenger rail system will not only continue to sustain good paying
    domestic jobs but will lead to future job creation as well.
        RSI supports both our Nation's freight and passenger rail
    operations. Today we will focus on passenger rail service.
    Unfortunately, in our view, our transportation policy places entirely
    too much emphasis on those modes of transportation that have the
    inverse effect on the issues mentioned above.
        We need a strong, national railroad passenger system that
    contributes to reducing dependence on foreign oil; reducing carbon
    emissions into the atmosphere; reducing congestion on our highways;
    improving transportation safety; reducing airport congestion; and that
    will enhance our ability to move vast numbers of people in emergency
    evacuation situations (i.e. 9/11, Katrina, etc).
        As representatives of those who supply our Nation's railroad
    industry, we submit that a more balanced national transportation policy
    that places more emphasis on rail will significantly contribute to
    meeting our Nation's stated policy objectives that are designed to make
    this Nation stronger.
        That is why we urge this subcommittee to reject the
    administration's proposed cuts in rail passenger service and support
    Amtrak's fiscal year 2009 appropriation request of $1.671 billion.
    However, if policy makers are truly serious about achieving the above
    stated objectives, then we need to do much more than just allowing
    Amtrak to survive on a year to year basis. And, certainly get away from
    the annual starvation budget for rail passenger service.
        Last August, the Wall Street Journal wrote that just the increase
    in ridership alone on the Acela's on Amtrak's Northeast Corridor was
    ``enough new passengers to fill 2,000 Boeing 757 jets''. Just imagine
    running more corridor operations that would do more of that and the
    impact that could have on fuel consumption and carbon emissions. Amtrak
    needs more equipment and investment in railroad infrastructure so it
    can expand capacity allowing it to move more people by rail. By doing
    that, it will help reduce short distance flights and auto trips.
        At a time when we are considering capping air traffic in some of
    our busiest airports, wouldn't it make more sense to have a Federal
    policy that encourages the development of rail corridors that will
    reduce the need for short distance air travel and free up valuable air
    slots at airports? Such a policy would not only reduce airport
    congestion but would aide in reducing fuel consumption.
        In addition:
      --Air transportation produces significant levels of CO2.
            Air emissions effects are greater at high altitudes.
      --Airliner fuel use triples during the takeoff climb, and sometimes
            in descent, making short distance trips inefficient and adding
            unnecessarily to airport congestion.
      --Rail travel could efficiently replace short distance air travel and
            longer distance highway trips, while reducing greenhouse gas
            emissions if we had a policy that encouraged more rail
            passenger corridor development.
        Former airline executives, (Gordon Bethune-Continental/Robert
    Crandall-American) have publicly stated that the United States should
    do what governments in Europe and Asia have long done--building high
    speed rail lines for short distance travelers and freeing up runway
    space for long distance flights. States all over this country are
    interested in adopting policies that reward and encourage energy
    efficient, low-emissions transportation modes like passenger rail and
    corridor development. The Federal Government needs to be a partner with
    those States.
        Mr. Chairman, we are here to urge you and the members of this
    subcommittee to focus your attention on the benefits of rail passenger
    service and, perhaps, even follow some of the recommendations of the
    National Surface Transportation Commission which clearly states that
    ``intercity passenger rail is . . . more energy efficient than many
    other modes of passenger transportation.'' That same report goes on to
    say that the average intercity passenger rail train produces 60 percent
    lower carbon dioxide emission per passenger mile than the average auto,
    and half the carbon dioxide emission per passenger mile of an airplane.
        These facts suggest that Federal transportation policy should do
    more to develop those modes of transportation that we already know are
    efficient. Perhaps our policy should measure the value of rail
    passenger service in a way that will reflect its overall value and
    enhance other policy objectives rather than only measuring the pure
    cost of the service as we do today.
        Instead of measuring the ``loss-per-passenger-mile'' on Amtrak
    trains maybe this subcommittee should entertain other measures like
    ``carbon emission reduction per-passenger-mile'' or ``reduction in
    VMT'' (vehicle miles traveled).
        Why not require a Fuel Efficient/Carbon Emission Impact Statement
    similar to the Environmental Impact Statement that will give
    transportation policy makers a different measurement tool that will
    actually help to gage the progress (or lack of it) in reducing fuel
    consumption and carbon emissions.
        Above all, we would urge the subcommittee and Congress to provide
    full funding for Amtrak and to resist micro-managing their activities.
    If Congress wants Amtrak to operate more like a business, it should
    treat it like a business and have an arms-length relationship allowing
    the Board of Directors to be responsible for setting management
    objectives.
        Clearly there are things Amtrak can do to be more efficient but
    dictating operational reforms for specific on-board services or a
    marketing strategy should be left to the Board of Directors and its
    management oversight and not spelled out in statutory language. Allow
    the Amtrak Board to be responsible and accountable for the actions of
    the corporation. The whole purpose for having a Board of Directors is
    to provide management with a general direction and hold management to
    the policies it sets.
        Once Congress begins to dictate policies to management, it becomes
    part of the problem. We believe that the appropriate role of Congress
    should be to make policy, provide funding, and engage in oversight. The
    Appropriations Committees have a responsibility to work in the best
    interests of the Nation, making funding decisions that can set the
    foundation for a strong economy and a brighter future for all
    Americans. Support for rail passenger service is part of the solution
    for many of our Nation's concerns over congestion and pollution.
        We applaud the subcommittee for its wisdom in providing the initial
    funding for the Intercity Passenger Rail Grant Program last year. In
    addition, Federal Railroad Administrator Joseph Boardman deserves
    credit for proposing this concept and for recommending an additional
    $100 million to expand the current program to assist the States in
    being more aggressive in improving intercity rail passenger service.
    This is one of those areas where Amtrak, the States, Congress and the
    administration can all agree needs to move forward and we hope this
    subcommittee will do its best to fully fund this proposal.
        Your continued support for rail passenger service is good public
    policy and good for the Nation.
        Thank you for the opportunity to present our views.
                                     ______

                     Prepared Statement of Foothill Transit

        Mr. Chairman and members of the subcommittee, my name is Doran
    Barnes and I serve as the Executive Director of Foothill Transit in
    West Covina, California. Thank you very much for the opportunity to
    submit testimony to this subcommittee.
        Mr. Chairman, I recognize the difficult tasks before this
    subcommittee and commend your leadership in determining the allocation
    of available transportation resources during this congressional budget
    period. We are very appreciative of the strong support provided to
    Foothill Transit by this subcommittee over the past 13 years. The
    support of this subcommittee has enabled Foothill Transit to construct
    two operating and maintenance facilities and to initiate replacement of
    our aging bus fleet with new compressed natural gas coaches, as well as
    to embark upon providing commuter parking to encourage transit
    ridership. These initiatives have greatly enhanced our service to our
    riders, and continue to do so.

                         WHY THIS BUS CAPITAL REQUEST?

        Thanks to the unwavering support of our Congressional delegation,
    Foothill Transit has been extremely successful in achieving its capital
    goals. Our fiscal year 2009 funding request is for $5 million in
    Discretionary Bus Capital funding to assist Foothill Transit in our
    aggressive efforts to continue the conversion of our entire 314-bus
    fleet to cleaner burning compressed natural gas (CNG) buses. To date,
    Foothill Transit's fleet consists of 232 CNG buses and 82 diesel buses.
    The funds requested here would be utilized for the purchase of both 40-
    foot buses, and additional 60-foot articulated buses to add to the new
    ``Silver Streak'' service just introduced in March 2007. This
    successful new service includes 58-passenger buses which board faster,
    save riders substantial commuting time, have state-of-the-art safety
    features, and offer onboard WiFi (Internet) service.
        The conversion of transit fleets to alternative fuel sources
    multiplies the benefits that transit service already contributes to our
    national energy conservation goals. The Federal Government has
    recognized the importance of such energy-saving initiatives by
    providing Federal matching funds and incentives to assist local
    agencies, such as Foothill Transit, with the procurement of alternative
    fuel buses.
        The agency's Pomona Operations Yard is now running a 100 percent
    CNG fleet with 170 buses. Diesel fueling infrastructure has been
    dismantled at this yard as the use of diesel fuel buses has been phased
    out at this facility.
        Foothill Transit's Arcadia/Irwindale Operations Yard runs the
    remaining 144 buses, with the goal of converting to a cleaner burning
    CNG facility as soon as possible. This funding request will enable the
    retirement of a portion of the older diesel-fueled vehicles and advance
    the ``green'' goals of the agency, furthering its role in improving
    regional air quality through the cleaner fuel technologies and
    congestion reduction in Los Angeles County.
        Since its introduction in March 2007, the Silver Streak service
    mentioned above has become a great success. The service saves riders
    approximately 40 minutes of commute time from one end of the county to
    the other. Ridership has increased rapidly since its inception and has
    improved overall system access on connecting lines. This funding, if
    approved, will enable the purchase of an additional 10 60-foot CNG
    ``articulated'' buses, as well as additional 40-foot CNG buses.

                             ABOUT FOOTHILL TRANSIT

        Foothill Transit was created in 1987 as an experiment to determine
    the effectiveness of competitively bidding for transit service
    operations. A public/private partnership, Foothill Transit is governed
    by an elected board comprised of mayors and council members
    representing the 21 cities and 3 appointees from the County of Los
    Angeles who are members of a Joint Exercise of Powers Authority. The
    agency provides public transit service over a 327-square-mile service
    area. Foothill Transit is one of the best investments of taxpayer
    dollars in these times of limited funds.
        Foothill Transit has established a reputation of providing
    outstanding customer service. In five separate customer surveys,
    Foothill Transit drivers have consistently received ratings above
    average or greater by more than 805 of our customers. Customers also
    rate Foothill Transit buses very highly on their cleanliness, comfort
    and graffiti-free appearance.
        Foothill Transit was initially established as a 3-year experiment
    to operate 14 bus lines at least 25 percent more effectively than the
    former Southern California Rapid Transit District (now Metro), with
    those savings to be passed on to the community through increased
    service and/or lower fares. A 3-year evaluation completed by Ernst &
    Young in 1995 showed that Foothill Transit's public/private structure
    resulted in cost savings of 43 percent per revenue hour over the
    previous provider.
        Recognized by Congress in 1996 as a ``national model,'' the
    combination of public accountability and private sector efficiencies
    has allowed Foothill Transit to hold costs constant since its inception
    in 1987, while increasing ridership by 77 percent and more than
    doubling the amount of service on the street.
        Foothill Transit has no employees. All management and operation of
    Foothill Transit service is provided through competitive procurement
    practices. The Foothill Executive Board has retained my employer,
    Veolia Transportation, to provide the day-to-day management and
    administration of the agency. The management contractor oversees the
    maintenance and operation contractors to ensure adherence to Foothill
    Transit's strict quality standards. We currently have two operating
    contracts, with First Transit at our Pomona facility, and MV
    Transportation at our Arcadia/Irwindale facility.
        Mr. Chairman, thank you for the opportunity to provide testimony
    and for your consideration of this request. Please feel free to contact
    me with any questions you may have or if I can be of any assistance.
                                     ______

        Prepared Statement of the Illinois Department of Transportation

        Madam Chairwoman and members of the subcommittee, we appreciate the
    opportunity to submit testimony concerning the fiscal year 2009 U.S.
    Department of Transportation (U.S. DOT) appropriations on behalf of the
    Illinois Department of Transportation (IDOT) to the Senate
    Appropriations Subcommittee on Transportation and Housing and Urban
    Development, and Related Agencies. We thank Chairwoman Patty Murray and
    the members of the subcommittee for their past support of a strong
    Federal transportation program and for taking into consideration
    Illinois' unique needs.
        IDOT is responsible for the planning, construction, maintenance and
    coordination of highways, public transit, aviation, intercity passenger
    rail and freight rail systems in the State of Illinois. IDOT also
    administers traffic safety programs. Our recommendations for overall
    funding priorities and our requests for transportation funding for
    projects of special interest to Illinois are discussed below.

                                    HIGHWAY

    Highway Obligation Limitation
        IDOT urges the subcommittee to set the obligation limitation for
    highway and highway safety programs at no less than the guaranteed
    SAFETEA-LU level of $41.2 billion for fiscal year 2009--the same
    funding level approved in fiscal year 2008. As you are aware, these
    guarantees/funding levels were also approved in both the House and
    Senate fiscal year 2009 budget resolutions. Moreover, IDOT continues to
    support the SAFETEA-LU guarantees and funding firewalls as do other
    transportation advocates such as the American Association of State
    Highway and Transportation Officials (AASHTO) and the American Road and
    Transportation Builders Association (ARTBA).
        IDOT is aware of the implications of supporting increased
    transportation funding when the long-term viability of the trust fund
    is in question. However, IDOT is responsible for securing the Federal
    funding that is needed to address the immediate highway and bridge
    deficiencies in Illinois and to preserve Illinois' transportation
    system for succeeding generations. To paraphrase the recent findings of
    the National Surface Transportation Policy and Revenue Study
    Commission, the consequences of inaction, at any level, will lead to
    further deterioration of the Nation's transportation system assets.
    Rescission of Unobligated Highway Apportionments
        IDOT urges the subcommittee to suspend its practice of rescinding
    unobligated highway apportionments. Since fiscal year 2002, Congress
    has enacted language requiring Illinois to rescind a total of $466
    million in unobligated apportionments. Rescissions undermine the
    SAFETEA-LU principles of guaranteed funding and budgetary firewalls by
    withdrawing promised Federal funding to offset increased non-
    transportation funding in other areas of the budget. The accumulated
    impact of numerous rescissions since fiscal year 2002 has exacted
    burdensome programmatic consequences. With large-scale rescissions,
    such as the one implemented in fiscal year 2008 for $3.15 billion,
    States have less flexibility to shift funding toward unique State needs
    and to meet individual highway program priorities. Moreover, State
    transportation departments are being pressured by various
    transportation interests to make rescissions based on that group's
    particular preference.
        Lastly, the members of the Senate Appropriations Committee should
    be reminded that the $8.6 billion rescission enacted in SAFETEA-LU,
    which becomes effective on the last day of the bill, represents a 22
    percent reduction of the estimated $38.3 billion to be apportioned to
    the States in fiscal year 2009. Illinois' share of the fiscal year 2009
    rescission is estimated in the range of $285 million to $300 million.
    Funding Requests for Meritorious Projects
        If the subcommittee finds the flexibility to fund meritorious
    projects in existing discretionary SAFETEA-LU categories or outside the
    authorized categories, IDOT requests funding for the following projects
    (noted throughout the testimony) for highway, Intelligent
    Transportation Systems (ITS), transit and rail funding:
      --Rehabilitation of Congress Parkway Bridge.--IDOT requests $20
            million for rehabilitation and construction of the bridge,
            which crosses the South Branch of the Chicago River, and is
            currently classified as structurally deficient.
      --New Mississippi River Bridge.--IDOT requests $9.6 million for the
            land acquisition required for the construction of a new eight-
            lane Mississippi River Bridge in the St. Louis, Missouri and
            East St. Louis, Illinois area.
      --Remote Control Bridge Monitoring for Des Plaines River.--IDOT
            requests $6 million to provide automated remote monitoring and
            control for a group of six movable bridges crossing the Des
            Plaines River in the Joliet region.
        Other IDOT Highway Priorities Include.--$20.5 million for expansion
    of US 51 between Decatur and Centralia; $62.5 million for expansion of
    US 67 between Macomb and Alton; $10 million for I-39/I-90 Interchange
    Reconstruction in Rockford; and $12.6 million for development of an
    east-west IL Route 120 Corridor.
        Other IDOT ITS Priorities Include.--$6 million for a traffic
    surveillance system for I-80; $2 million for dynamic message signs at
    the I-39/I-80 Interchange; $1.5 million for I-270 fiber network and
    other ITS devices; $6 million for a traffic surveillance system for I-
    55; and $9 million for Vehicle Infrastructure Integration along Route
    66.

                                    TRANSIT

    Transit Obligation Limitation
        IDOT urges the subcommittee to set the obligation limitation for
    transit programs at the guaranteed SAFETEA-LU level in fiscal year 2009
    at $10.4 billion.
      --Bus and Bus Facilities.--IDOT and the Illinois Public
            Transportation Association jointly request a Federal earmark of
            $30 million ($6.1 million for downstate bus and $23.9 million
            for downstate facilities) in fiscal year 2009 section 5309 bus
            capital funds for downstate Illinois.
        The request will provide $6.1 million for downstate Illinois
    transit systems to purchase up to 43 buses and paratransit vehicles to
    replace overage vehicles and to comply with Federal mandates under the
    Americans with Disabilities Act. All of the vehicles scheduled for
    replacement are at or well beyond their design life. The request will
    also provide $23.9 million to Illinois to undertake engineering, land
    acquisition or construction for eight maintenance facilities and two
    transfer facilities that will enhance efficient operation of transit
    services.
        Illinois transit systems need discretionary bus capital funds.
    Regular formula funding is inadequate to meet all bus capital needs.
    IDOT believes that Illinois' needs justify a much larger amount of
    discretionary bus funds than the State has received in recent years.
    Under SAFETEA-LU, Illinois is expected to receive approximately 6.5
    percent of the needs-based formula funds but Illinois has only received
    between 1 percent and 3 percent of appropriated bus capital funds in
    the past.
    New Systems and Extensions--Chicago Transit Authority (CTA)
        IDOT supports the CTA's request for an earmark totaling $30.5
    million in New Starts funding to assist in upgrading the Ravenswood
    Brown Line. The match for these funds has been provided by IDOT.
        The funding requested for upgrading the Ravenswood Brown Line would
    continue construction to extend station platforms to handle longer
    trains that are needed to serve the increasing demand along this line.
    Lengthening all platforms to handle longer, 8-car trains, straightening
    tight S-curves that slow operations and selected yard improvements will
    increase capacity by 25 to 30 percent. The CTA is seeking $30.5 million
    in New Starts funds for fiscal year 2009. A Full Funding Grant
    Agreement for $245.5 million was executed in January 2004 for the
    project.

    New Systems and Extensions--MetroLink
        IDOT supports the Bi-State Development Agency's request for a
    Federal earmark of $50 million in fiscal year 2009 New Starts funding
    for extending the MetroLink light rail system in St. Clair County from
    Scott Air Force Base to MidAmerica Airport. The MetroLink system serves
    the St. Louis region in both Illinois and Missouri. MetroLink service
    has been a tremendous success and ridership has far exceeded
    projections.
    Formula Grants
        IDOT urges the subcommittee to set appropriations for transit
    formula grant programs at levels that will allow full use of the
    anticipated Mass Transit Account revenues. IDOT also supports utilizing
    general funds to supplement transit needs.
        In Illinois, Urbanized Area formula funds (section 5307) are
    distributed to the Regional Transportation Authority and its three
    service boards which provide approximately 600 million passenger trips
    per year. Downstate urbanized formula funds are distributed to 14
    urbanized areas which provide approximately 30 million passenger trips
    per year.
        The Rural and Small Urban formula funds (section 5311) play a vital
    role in meeting mobility needs in Illinois' small cities and rural
    areas. IDOT urges the subcommittee to fully fund section 5311 at the
    SAFETEA-LU authorized level. With section 5311 funding increases
    already authorized in SAFETEA-LU, Illinois is in the process of
    expanding service into 24 counties not currently served.
        Any decrease in Federal funding below the SAFETEA-LU authorized
    levels could jeopardize the much needed service expansion. In Illinois,
    such systems operate in 60 counties and 11 small cities, carrying
    approximately 2.9 million passengers annually.

                                      RAIL
    Amtrak Appropriation
        IDOT supports Amtrak's grant request of $1.671 billion in funding
    from general funds for fiscal year 2009 to cover capital, operating and
    debt service costs. In addition, IDOT supports Amtrak's supplemental
    request for $114 million to cover 60 percent of the labor settlement
    amount (40 percent was funded within fiscal year 2008) determined by
    the Presidential Emergency Board.
        Amtrak needs the full amount of their request to maintain existing
    nationwide operations. IDOT urges Congress to provide funds to continue
    current service until it develops a new national rail passenger policy
    and a clear plan for any changes to existing services as part of the
    congressional reauthorization of Amtrak. Chicago is a hub for Amtrak
    intercity service, and Amtrak operates 58 trains throughout Illinois as
    part of the Nation's passenger rail system, serving approximately 3.6
    million passengers annually. Of the total, Illinois subsidizes 28
    State-sponsored trains which provide service in four corridors from
    Chicago to Milwaukee, Quincy, St. Louis and Carbondale. Amtrak service
    in key travel corridors is an important component of Illinois'
    multimodal transportation network and continued Federal capital and
    operating support is needed.
      --CREATE Railroad Grand Crossing Connection.--IDOT requests $10
            million in fiscal year 2009 for design and construction of a
            railroad connection between the CN and Norfolk Southern
            Railroads at 75th Street in Chicago--also know as the Grand
            Crossing.
      --Passenger Rail-Freight Congestion Relief.--IDOT requests $1 million
            in fiscal year 2009 for engineering and capital improvements to
            relieve passenger and freight train congestion/delays on the
            three State-supported downstate corridors.

                                    AVIATION

    Airport Improvement Program Obligation Limitation
        IDOT supports a fiscal year 2009 Airport Improvement Program (AIP)
    obligation limitation of $3.9 billion, thereby continuing the 4-year
    VISION-100 pattern of increasing the obligation limitation each year by
    $100 million. This level of funding is supported by the American
    Association of Airport Executives and the National Association of State
    Aviation Officials.
        Adequate AIP funding remains especially important for Small, Non-
    Hub, Non-primary, General Aviation and Reliever airports. While most
    Large/Medium Hub airports have been able to raise substantial amounts
    of funding with Passenger Facility Charges, the smaller airports are
    very dependent on the Federal AIP program. Airports must continue to
    make infrastructure improvements to safely and efficiently serve
    existing air traffic and the rapidly growing passenger demand.
        Despite challenges that include high fuel prices and concerns about
    the economy, U.S. commercial aviation is on track to carry one billion
    passengers by 2016, as predicted by the Federal Aviation Administration
    in a recently released forecast for the period 2008-2025. In addition,
    the most recent National Plan of Integrated Airport Systems (NPIAS)
    report identified $41.2 billion in airport development needs over a 5-
    year period (2007-2011), an annual average of $8.2 billion. Lower AIP
    obligation levels translate into less Federal funds for airport
    projects, thereby exacerbating the existing capital project funding
    shortfall.
        Essential Air Service Program (EAS).--IDOT supports an EAS program
    funded at a level that will enable the continuation of service at all
    current Illinois EAS points. Several Illinois airports, Decatur,
    Marion/Herrin and Quincy, currently receive annual EAS subsidies.
        Small Community Air Service Program.--IDOT supports funding for the
    Small Community Air Service Development Program in fiscal year 2009, at
    a level of no less than at the full authorized fiscal year 2008 level
    of $35 million. Illinois airports have received funding from this
    program in the past.
    Other IDOT Non-Modal Priorities
        Resource Center for Disadvantaged Business/Minorities/Women.--IDOT
    requests $450,000 for an IDOT resource center for disadvantaged,
    minority and women owned businesses aimed at increasing participation
    on all IDOT projects as well as CREATE.
        Height Modernization.--IDOT requests $3.5 million to establish a
    Height Modernization (HM) program in Illinois. This will be requested
    through the Appropriations Subcommittee on Science, State, Justice,
    Commerce and Related Agencies.
        Finally, should Congress develop a second stimulus package IDOT
    would support the inclusion of an infrastructure component. IDOT has
    identified approximately 295 highway, transit, rail and aviation
    projects at a value of $2.5 billion that would be ready-to-go in a
    short timeframe to not only stimulate the economy by creating good
    paying jobs, but provide long-term improvements to our transportation
    infrastructure.
        This concludes my testimony. I understand the difficulty you face
    trying to provide needed increases in transportation funding. However,
    an adequate and well-maintained transportation system is critical to
    the Nation's economic prosperity and future growth. Your ongoing
    recognition of that fact and your support for the Nation's
    transportation needs are much appreciated. Again, thank you for the
    opportunity to discuss Illinois' Federal transportation funding
    concerns.

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page

    Alexander, Senator Lamar, U.S. Senator From Tennessee, Statement
      of.............................................................   124
    Allard, Senator Wayne, U.S. Senator From Colorado, Statements of56, 123
    American Association of Service Coordinators (AASC), Prepared
      Statement of the...............................................   215

    Blunt, Paula, General Deputy Assistant Secretary, Office of
      Public and Indian Housing, Department of Housing and Urban
      Development....................................................    53
    Boardman, Hon. Joseph H., Administrator, Federal Railroad
      Administration, Department of Transportation...................   155
        Prepared Statement of........................................   156
    Bond, Senator Christopher S., U.S. Senator From Missouri, Opening
      Statements of..............................................3, 59, 120
    Bregon, Nelson R., General Deputy Assistant Secretary, Office of
      Community Planning and Development, Department of Housing and
      Urban Development..............................................    53
    Byrd, Senator Robert C., U.S. Senator From West Virginia,
      Prepared Statement of..........................................    10

    Capital Metropolitan Transportation Authority, Austin, Texas,
      Prepared Statement of the......................................   203
    City of San Marcos, Texas, Prepared Statement of the.............   197
    Coalition of Northeastern Governors, Prepared Statement of the...   208
    Council of Large Public Housing Authorities, Prepared Statement
      of the.........................................................   212

    Durbin, Senator Richard J., U.S. Senator From Illinois, Questions
      Submitted by...................................................    99

    Easter Seals, Prepared Statement of..............................   218

    Feinstein, Senator Dianne, U.S. Senator From California,
      Questions Submitted by.........................................    45
    Foothill Transit, Prepared Statement of..........................   224

    Illinois Department of Transportation, Prepared Statement of the.   225
    Institute of Makers of Explosives, Prepared Statement of the.....   200

    Jackson, Hon. Alphonso, Secretary, Office of the Secretary,
      Department of Housing and Urban Development....................    53
        Prepared Statement of........................................    65
        Statement of.................................................    63

    Kummant, Alex, President and Chief Executive Officer, Amtrak.....   164
        Prepared Statement of........................................   165
        Questions Submitted to.......................................   195

    Lautenberg, Senator Frank R., U.S. Senator From New Jersey,
      Statements of.................................................. 7, 57
    Leahy, Senator Patrick J., U.S. Senator From Vermont, Questions
      Submitted by...................................................    43

    McCaskie, John, Chief Engineer, Swank Associated Companies, on
      Behalf of the Transportation Construction Coalition............   130
        Prepared Statement of........................................   132
    McLean, Donna, Chairman, Board of Directors, Amtrak..............   157
        Prepared Statement of........................................   158
    Millar, William W., President, American Public Transportation
      Association....................................................   136
        Prepared Statement of........................................   137
    Montgomery, Brian, Commissioner, Federal Housing Administration,
      Department of Housing and Urban Development....................    53
    Murray, Senator Patty, U.S. Senator From Washington:
        Opening Statements of....................................1, 53, 117
        Questions Submitted by............................36, 149, 151, 195

    National Association of Housing and Redevelopment Officials,
      Prepared Statement of the......................................    89
    National Association of Railroad Passengers, Prepared Statement
      of the.........................................................   220
    National Association of REALTORS, Prepared Statement of the.....   204
    National Congress of American Indians, Prepared Statement of the.   210

    Ozdinec, Milan M., Deputy Assistant Secretary for Public Housing
      Investments, Department of Housing and Urban Development.......    53

    Parker, Joel, International Vice President and Special Assistant
      to the President, Transportation Communications International
      Union..........................................................   176
        Prepared Statement of........................................   179
    Peters, Hon. Mary E., Secretary, Department of Transportation....     1
        Prepared Statement of........................................    12
        Statement of.................................................    11
    Pinero, Hector, Before the Committee on Banking, Housing, and
      Urban Development on Behalf of the National Leased Housing
      Association, National Multi Housing Council, and the National
      Apartment Association, Prepared Statement of...................    94

    Railway Supply Institute, Inc., Prepared Statement of the........   222
    Ray, James D., Acting Administrator, Federal Highway
      Administration, Department of Transportation...................   117
        Questions Submitted to.......................................   151

    Simpson, Hon. James S., Administrator, Federal Transit
      Administration, Department of Transportation...................   117
        Prepared Statement of........................................   126
        Questions Submitted to.......................................   149
        Statement of.................................................   125
    Specter, Senator Arlen, U.S. Senator From Pennsylvania:
        Questions Submitted by.......................................   112
        Statements of................................................ 9, 58
    Stevens, Senator Ted, U.S. Senator From Alaska:
        Prepared Statement of........................................     8
        Questions Submitted by.......................................    51
        Statement of.................................................     8

    Tornquist, David, Assistant Inspector General, Office of the
      Inspector General, Department of Transportation................   167
        Prepared Statement of........................................   168

    University Corporation for Atmospheric Research (UCAR), Prepared
      Statement of the...............................................   205

                                 SUBJECT INDEX

                                  ----------

                                     AMTRAK

                                                                       Page

    Additional Committee Questions...................................   194
    Debt.............................................................   196
    Defective Concrete Ties..........................................   196
    Health Insurance Costs...........................................   195
    Intermodal Connections...........................................   163
    Measuring Success at Amtrak......................................   159
    State Supported Services.........................................   195

                  DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                            Office of the Secretary

    ADDI.............................................................    79
    Additional Committee Questions...................................    99
    Administrative and Judicial Receiverships........................    84
    Continuing HUD's Improved Management and Performance.............    69
    Ending Chronic Homelessness......................................    69
    Ensuring Housing Assistance......................................    66
    FHA Secure.......................................................    84
    FHIP:
        Funding......................................................   101
        Grants.......................................................   100
    Fair Housing Laws................................................   102
    Family Unification Program.......................................   112
    Fiscal Year 2009 Proposed Budget.................................    95
    HOPWA............................................................   108
        Funding......................................................   108
    HUD:
        Oversight....................................................80, 88
        VA Supportive Housing Vouchers...............................   112
    Homeless:
        Assistance Funding...........................................   111
        Facilities...................................................    86
    Homelessness.....................................................   109
    Hope VI..........................................................    73
    Housing:
        Choice Vouchers..............................................    97
        Discrimination.............................................106, 113
            Study....................................................    99
        Equity Conversion Mortgage (HECM)........................71, 72, 87
    Miami-Dade Housing Agency........................................    86
    Moving to Work.................................................109, 112
        Agreement....................................................   109
        Extension....................................................   112
    Permanent Supportive Housing.....................................   110
    Philadelphia, PA/Universal Community Homes Dispute...............    74
    Preserving and Promoting Homeownership...........................    67
    Project-based Section 8..........................................    95
    Public Housing:
        Capital Funds................................................    72
        Maintenance..................................................    76
        Operating Fund...............................................    73
    RESPA............................................................    79
    Rapid Re-housing.................................................   111
    Reducing Homelessness............................................   111
    Section 8........................................................    83
    Seller:
        Down Payment Program.........................................70, 71
        Financing....................................................    78
    Some Implications of Inadequate Funding of Project-based Section
      8 Contracts....................................................    98
    Strengthening Communities by Sustaining Homeownership Gains......    68
    The Broader National Housing Crisis..............................    98

                          DEPARTMENT OF TRANSPORTATION

    Achieving Reliable On-time Performance Could Substantially
      Improve Amtrak's Finances......................................   174
    ADA Compliance of Commercial Buses...............................    40
    Amtrak...........................................................    22
    Additional Committee Questions...................................    36
    Air Traffic Controllers..........................................    31
    Airline:
        Consumer:
            Complaints...............................................    28
            Rights...................................................    24
        Customer Service.............................................    36
        Service to Small and Rural Communities.......................    25
    Airport Infrastructure Investment................................    17
    Alaska Flight Service Station Network............................    51
    Alcohol-related Fatalities.......................................    33
    Available Contract Authority.....................................    20
    Aviation Delays..................................................    24
    California Maritime Industry.....................................    48
    Container Fees...................................................    50
    Corporate Average Fuel Economy (CAFE) Standards..................    46
    Cross-border Trucking Pilot Program..............................    34
    Despite Recent Progress, Amtrak Still Faces Challenges...........   170
    Essential Air Service............................................    45
    Federal:
        Investment in Transportation.................................    42
        Role in Transportation Funding...............................    26
    Funding for:
        Infrastructure Investments...................................    16
        Pipeline Safety Office.......................................    41
    Highway Tolling..................................................    18
    Infrastructure Maintenance.......................................43, 44
    Motorcycle Fatalities............................................    32
    National Goods Movement Strategy.................................    49
    Nationwide Differential Global Position System (NDGPS)...........    43
    New Starts Pipeline..............................................    37
    Oversight of the Nation's Bridges................................    38
    Pipeline and Hazardous Materials Safety..........................    52
        Administration...............................................    42
    Privatization of Public Transportation Facilities................    29
    Promotion of the New Starts Program..............................    37
    Reauthorization Remains Key to Amtrak's Long-term Outlook........   176
    Rural Area Road Safety...........................................    21
    SAFETEA-LU Rescissions...........................................    19
    Small:
        Shipyards....................................................    51
        Starts.......................................................    45
    Status of the Dulles Rail Project................................    22
    Support for S. 406...............................................    50
    Urban Partnerships...............................................20, 21

                         Federal Highway Administration

    Additional Committee Questions...................................   149
    Appropriate Balance for the Highway Trust Fund...................   151
    Excess Contract Authority........................................   145
    Federal:
        Highway Budget Request.......................................   140
        Transportation Oversight.....................................   152
    Reimbursements When Shortfall....................................   145
    Revenue Aligned Budget Authority.................................   141
    Tolling and Privatization........................................   152

                        Federal Railroad Administration

    Amtrak:
        Capital Grants...............................................   157
        Efficiency Grants............................................   157
    Intercity Passenger Rail Grant Program...........................   157
    Rail Line Relocation and Improvement Program.....................   157

                         Federal Transit Administration

    Additional Committee Questions...................................   149
    Appropriate Balance for the Highway Trust Fund...................   149
    Borrowing From the Transit Account...............................   150
    Charter Bus Rule.................................................   148
    Dulles Corridor Metrorail Project................................   143
    Federal:
        Highway Administration.......................................   126
        Transit Administration.......................................   127
        Transportation Oversight.....................................   149
    Future Surface Transportation Needs..............................   129
    Status of the Highway Trust Fund.................................   128
    Tolling and Privatization........................................   150
    Transit:
        Account Repayable Advance....................................   147
        Request Below SAFETEA-LU.....................................   142
    Urban Partnership Agreements.....................................   144

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