[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
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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\
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    \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.
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                    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.
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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\
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    \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.
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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, 
2,000,00040=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

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                                                                   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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