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



 
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2008

                              ----------                              


                         THURSDAY, MAY 3, 2007

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Patty Murray (chairman) presiding.
    Present: Senators Murray, Lautenberg, Bond, and Allard.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                        Office of the Secretary

STATEMENT OF HON. ALPHONSO JACKSON, SECRETARY
ACCOMPANIED BY:
        ORLANDO J. CABRERA, ASSISTANT SECRETARY, OFFICE OF PUBLIC AND 
            INDIAN HOUSING
        KENNETH M. DONOHUE, INSPECTOR GENERAL

               OPENING STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Good morning. This subcommittee will come 
to order. I'm going to be joined by Senator Bond in just a 
minute, but we have a vote in about 40 minutes, so we're going 
to go ahead and get started with this hearing.
    Housing is one of the most important, but least talked 
about, challenges across our country today. People don't want 
to talk about how close they are to losing their homes or not 
being able to afford their rent. I think there's something in 
our society that makes people feel like they've somehow failed 
if they can't afford housing.
    But with housing prices on the rise, it is a challenge 
facing more and more American families. In fact, housing has 
become the silent epidemic facing far too many communities 
across our country.
    The reach of this epidemic was reinforced, for me, last 
month, when I convened a roundtable on affordable housing in 
the Puget Sound region of my State. I brought together 
realtors, bankers, along with representatives from public 
housing agencies and transit agencies. Together, we discussed 
the extraordinary financial pressures being placed on working 
families in the Puget Sound, and how we might address them.
    As families are forced to move away from their jobs in 
order to obtain affordable housing, citizens in a great many 
cities across the Nation are spending an inordinate number of 
hours commuting from their neighborhood to their workplace and 
back. These are hours that they can't spend with their children 
and their families. These are hours when parents could be 
supervising homework or watching a little league game. Instead, 
they're spent crawling through punishing traffic jams.
    Swedish Hospital is one of the premier medical centers in 
downtown Seattle in my home State of Washington. The 
recruitment director at Swedish Hospital recently told the 
Seattle newspaper that more than one-half of the employees 
don't actually live in Seattle proper, and it's typical for 
their employees to commute for at least a full hour to a home 
or a rental property they can afford.
    It's not just young families seeking to own a home that 
can't find affordable housing. HUD section 8 voucher recipients 
struggle to find affordable rental units, and landlords that 
will take vouchers. That means endless hours, often on public 
transportation, just to get to and from work. As a result, 
Seattle continues to rank as one of the most congested cities 
in the country, and we have a great many cities facing the 
identical mix of challenges across the country.
    The congestion problem has gotten so troubling that our 
Transportation Secretary, Mary Peters, has made funding for a 
number of new congestion mitigation initiatives the cornerstone 
of her 2008 budget. However, as I review Secretary Jackson's 
2008 budget for the Department of Housing and Urban Development 
(HUD), I do not see the same sense of urgency or importance 
being devoted to the problem of affordable housing. Instead, 
what I see is a budget that abdicates responsibility and 
shortchanges programs that serve some of our most--neediest 
citizens.
    Despite the strong support by Republican and Democratic 
mayors and Governors across the country, President Bush's 
housing budget again proposes to slash the Community 
Development Block Grant Program. This year, it's a cut of 20 
percent, a reduction of almost three-quarters of $1 billion. 
The President's budget fails to provide even an inflation 
adjustment for the section 8 tenant-based housing assistance 
program. That means that as rents rise, public housing agencies 
will have to trim the ranks of their section 8 recipients, 
potentially throwing some of them into homelessness.
    HUD's program for housing the elderly is cut by 22 percent. 
That is a reduction of $160 million, despite the fact that the 
number of needy seniors continues to rise.
    And HUD's program to house citizens with disabilities is 
slashed by 47 percent, almost in half, a cut of almost $110 
million.
    Funds to ensure that public housing is maintained and 
brought up to safety codes, slashed by 17 percent, $415 
million.
    Even programs designed to remove lead paint from low-income 
housing units with children, cut by 23 percent.
    And the HOPE VI program that has allowed us to tear down 
some of the most dilapidated public housing and replace it with 
modern mixed-income units is proposed for complete elimination.
    In fact, the President wants this subcommittee to go a step 
further when it comes to HOPE VI by reopening the 
appropriations bill that he already signed for 2007, so we can 
eliminate the funding we provided for HOPE VI for this current 
fiscal year.
    The President's budget for HUD is irresponsible and 
unacceptable on its face, but it is all the more startling 
considering his investment in housing infrastructure in Iraq. 
Over the past 4 years, the President has asked American 
taxpayers to spend almost $36 billion on building housing and 
utilities and other necessary infrastructure in Iraq.
    Unfortunately, the Special Inspector General for Iraq 
Reconstruction has reported to us that a frightening percentage 
of that $36 billion has been wasted or stolen. Despite these 
reports, the President has sought, and received, an additional 
$2 billion to rebuild Iraq in the supplemental appropriations 
bill he vetoed 2 days ago.
    The President sees no problem in investing up to $38 
billion to rebuild the nation of Iraq, but when it comes to 
rebuilding America's struggling communities through the 
Community Development Block Grant Program, the President is 
calling for a cut of three-quarters of $1 billion. In fact, the 
President is unwilling to provide even 10 percent of what we've 
invested in Iraq's reconstruction to rebuild and provide some 
hope to the rundown neighborhoods right here at home.
    The President's budget and supplemental request are a clear 
statement of his priorities. Unfortunately, far too frequently 
these priorities are out of step with the American people. As 
chair of this subcommittee, I will work to put our budgets and 
priorities back on track.
    Earlier this year, we held a hearing with Secretary 
Jackson's Federal Housing Commissioner, Brian Montgomery. 
During that hearing, it became clear that at a time when we are 
facing an historic level of foreclosure and a potential crisis 
in the availability of loan capital for low- and middle-income 
homebuyers, the Federal Housing Administration (FHA) has become 
an increasingly irrelevant player in the market.
    In my home State of Washington, while the FHA covered 80 
percent of the home loan activity of the Washington State 
Housing Finance Commission some 10 years ago, it covers only 20 
percent today. Nationwide, it represents only 3 percent of 
total mortgage volume.
    I believe it's essential that we revive the FHA and make it 
a relevant player in the market again, especially now, when we 
have a great many families facing foreclosure because of the 
upheaval in the subprime market. I look forward to discussing 
with Secretary Jackson this morning how the FHA might develop 
solutions to keep these families in their homes.
    I also want to talk about how the FHA can get back to the 
business of providing access to first-time homebuyers who want 
to live near where they work, who want to spend time with their 
families, rather than in ever-worsening traffic jams.
    And, finally, I'd like to examine with the Secretary what 
HUD is doing to address the housing crisis that faces the 
communities that were devastated by Hurricanes Katrina and 
Rita. For weeks, Americans across the country were glued to 
their televisions, simply overwhelmed by the pictures of 
tremendous devastation and unfathomable suffering of so many of 
our fellow Americans. The images were too much to bear, 
watching families without food and water, people trapped on 
their roofs and searching for their loved ones. And although 
the TV cameras have left the gulf coast, for far too many the 
suffering continues still.
    Damage estimates indicate that over 300,000 homes were 
damaged or destroyed by those hurricanes, at a cost of over $67 
billion. Mr. Secretary, this is arguably the biggest housing 
crisis of the modern era. This subcommittee invested an 
unprecedented level of resources to rebuild the housing stock 
and assist in that region in their recovery. I want to hear 
from you how the resources and legal authorities that we 
granted HUD are being used now to improve the lives and 
communities of our gulf coast residents.
    With that, I will turn it over to Senator Bond for his 
opening statement.

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Madam Chair, for calling 
this important hearing on the budget for fiscal year 2008 of 
the Department of Housing and Urban Development.
    And I welcome my old friend, Secretary Jackson, back to 
this----
    Secretary Jackson. Thank you.
    Senator Bond. [continuing]. Subcommittee. You're playing a 
very difficult hand, and this budget that the Office of 
Management and Budget (OMB) has given us is not adequate in 
many areas. I share the concerns raised by the chair of this 
subcommittee. But since this is the Senate, and even though 
it's already been said, I'm going to say, essentially, many of 
the same things as she has said.
    The subcommittee's already held an in-depth hearing on the 
state of HUD's FHA mortgage insurance programs, where serious 
concerns were raised about the FHA's challenges in meeting the 
needs of new homeowners, and the implication of certain reforms 
to address the FHA mortgage insurance problems.
    Today's hearing should provide us insights into the 
remainder of HUD's programs, including the reforms in funding 
needed to ensure that our Nation's affordable housing and 
community development needs are being adequately met.
    Secretary Jackson has been a good friend and a strong and 
committed advocate of housing. He served this administration 
first as Deputy Secretary and now as HUD Secretary. Prior to 
that, Secretary Jackson served as president and chief executive 
officer (CEO) of the housing authority of the city of Dallas, 
Texas, and as executive director of the St. Louis Housing 
Authority, where I came to know and respect his good work. And 
I think his past experience has contributed significantly to 
his work in the very challenging structure, both legally and 
bureaucratic, of HUD.
    Before I discuss this budget and other matters, I would 
like to express my strong appreciation for Mr. Robert Kenison, 
who recently retired from HUD after 40 years of dedicated 
public service as the dean of HUD lawyers. Mr. Kenison 
contributed positively to almost every housing and community 
development legal issue. He's known for a bright, inquisitive, 
and creative mind. To say that he will be sorely missed is a 
major understatement, due, not only to his legal insights, but 
his contributions to the always growing body of housing and 
community development law, but also for the many friends he 
leaves behind at HUD, and I personally wish Bob and his family 
all the best in his retirement.
    Secretary Jackson. Thank you.
    Senator Bond. Now, in terms of this budget, we begin the 
appropriations process being hamstrung by OMB's apparent 
mission to underfund most HUD programs. This is not new, 
unfortunately. We have seen this in administration after 
administration, and this budget request is simply a rerun of a 
bad budget movie that I'm tired of watching. Frankly, it has 
become predictable and frustrating because of its potential 
negative impact on our most needy Americans in communities 
across the Nation.
    Unfortunately, nondefense discretionary shortfalls are more 
problematic than in just Transportation/HUD appropriations. 
This is a challenge I think Congress is recognizing, as evident 
in the budget resolutions recently passed by the House and 
Senate. Nevertheless, I know that Chair Murray shares these 
concerns, as she's already outlined. I look forward to working 
with her, the chairman--and the chairman and the ranking member 
of the House Appropriations Subcommittee to fund, adequately, 
the needs of HUD.
    Let me highlight a few areas of concern. My first area of 
concern is the HOPE VI program, which the administration, 
again, proposes to zero out. The administration didn't propose 
it. The past administration didn't propose it. And nobody in 
the administration seems to support it. But I strongly support 
HOPE VI, which Senator Mikulski, a previous partner on the VA/
HUD Appropriations Subcommittee, and I helped initiate. As the 
HOPE VI program demonstrates, it has helped to rebuild and 
transform blighted communities by leveraging other funding and 
program commitments. This has resulted in stable and safe 
communities and new homes, increased tax bases for these 
communities and new job opportunities.
    A second area of concern is the proposed elimination of the 
Bond-Mikulski Lead Hazard Reduction Demonstration Program. It 
is absolutely unforgivable that we have a significant health 
threat to a whole generation of young people because of lead 
based paint hazards that can be resolved fully, in particular, 
this program has made substantial inroads against the hazards 
of lead-based paint, which has placed many children in 
situations constituting unacceptable health risks, including 
diminished IQs, brain damage, and sometimes health impacts that 
are even worse.
    My most significant concern, however, is the Section 8 
Project-based Rental Assistance Program. Frankly, I am 
extremely troubled. Based on a reasonable assumption, my staff 
has calculated that the budget request underfunds section 8 
project renewals by almost $1.2 billion. We're not talking 
about a simple rounding error here. We're talking about a major 
funding gap which could impact some 176,000 affordable housing 
units. I'm not here to point fingers, but I emphasize the 
shortfall is unacceptable, and I expect resolution.
    I recall an incident several years ago, when the HUD 
Secretary at that time contacted the then-chair of the VA/HUD 
Appropriations Subcommittee on the eve of the bill's markup to 
inform us that HUD had underestimated section 8 funding by over 
$1 billion. Let's just say that that HUD Secretary did not get 
a very pleasant reception. I hope history is not repeating 
itself, and that the administration plans to address this 
matter in the very near future.
    I'm equally troubled by the administration's proposal for 
tenant-based section 8 programs. Under this proposal, the 
administration proposed to lift the cap on the number of 
section 8 vouchers that can be utilized by public housing 
authorities.
    The budget request for fiscal year 2008 for the tenant-
based section 8 program appears to rely on the fact that a 
number of public housing authorities (PHA) are sitting on some 
$1.3 billion in section 8 reserves. Under HUD's proposal, PHAs 
with reserves would be permitted to use these funds for 
vouchers in excess of their authorized level. Unfortunately, 
PHAs without reserves would not appear to receive funding for 
additional vouchers, regardless of need or the effectiveness of 
their section 8 program. This seems both inequitable and 
counter-intuitive; PHAs which have done a good job should not 
be penalized but should be rewarded, assuming there is adequate 
funding. This is a complex and sensitive issue, and any 
decision on the use of the excess reserves will have a 
significant impact on PHAs throughout the Nation.
    I'll not get into questions I have about this proposal 
right now. But I emphasize the fact that PHAs must be treated 
fairly, and that any new vouchers, or use of vouchers, must be 
implemented with criteria that is objective, balanced, and 
equitable in the allocation of any new vouchers.
    Other areas of concern of mine include the section 202 
Elderly Housing Program, and the section 811 Housing for the 
Disabled Program, which are both severely underfunded. This is 
not the time to cut the development of housing for seniors and 
those with disabilities. Their needs are significant, and 
cutting programs for these vulnerable citizens is simply harsh.
    Finally, I emphasize my strong objection to the proposed 
cuts to the Community Development Block Grant Program, or CDBG, 
and the elimination of the Rural Housing and Economic 
Development Program. Despite criticism of the effectiveness of 
CDBG, it remains a critical resource for leveraging other 
public and private dollars for local affordable housing and 
economic development process.
    In addition to my concerns about HUD funding, I highlight 
HUD's efforts in the rebuilding of the gulf coast region that 
were devastated by Hurricanes Katrina, Rita, and Wilma. Despite 
the negative press and criticism from some on Capitol Hill, it 
appears that real progress is being made, and much of the 
success is the result of funding made available under the 
emergency CDBG Program, the Public Housing Program, and section 
8. It's important that we understand how these funds are being 
used, any mistakes that have been made, and the success 
stories. This is important, because any misuse or fraud in the 
use of Federal funding undermines the credibility of any future 
request for Federal funds.
    While I acknowledge that full recovery will take several 
years and significant challenges remain, I still have optimism 
that we are beginning to make some real progress in these 
areas.
    I'll not belabor my concerns about FHA today, which I laid 
out in detail at a FHA hearing in March. I support reforming 
FHA if the reforms are tied to benchmarks that measure the 
success of the reforms while preventing fraud and abuse. 
However, I consider proposals like zero downpayment to be a 
nonstarter, because these types of products are marked by 
historically high rates of default, substantial losses to FHA, 
damage to creditworthiness of families in default, and a 
negative impact on the community where there are large numbers 
of defaults, leading to severe community problems, not just for 
the families affected. FHA reform must balance the risk and 
benefits of homeownership so that the interests of the 
borrower, the American taxpayer, and the communities affected 
are adequately protected.
    Before I close, however, I want to make sure there's no 
confusion by the media, by saying that I do not blame you, Mr. 
Secretary, for the funding gaps in the budget request. I am 
assuming that you fought hard on behalf of many of these 
programs, and I will expect you to work with Senator Murray and 
I throughout the appropriations process to assure that HUD 
programs are adequately funded and implemented.
    Further, you've not gotten the credit you deserve in some 
areas of housing. I believe your most notable achievement in 
housing has been in the area of homelessness. I'm proud of the 
efforts to end chronic homelessness and the results we are 
beginning to see across the Nation, including in my own home 
State of Missouri, in St. Louis, where homelessness has 
decreased by 34 percent over the past 2 years. These results 
demonstrate that homelessness can be solved if properly 
addressed.
    Last, I credit you, Mr. Secretary, and your senior 
management team, led by your Deputy Secretary, CFO, and CIO, 
for the management reforms and improvements over the past 
several months. For years, I and others on Capitol Hill have 
railed mercilessly on the longstanding and seemingly 
intractable management problems at the Department. But I give 
credit where credit is due, and I believe you and your team 
have made some significant progress and deserve credit for that 
progress.
    Despite this progress, I still believe the Department has 
many challenges to overcome. Unfortunately, many of HUD's 
challenges are tied to inadequate budget funding. This is a 
failure that is largely the responsibility of the 
administration and its fiscal year 2008 budget. And without 
adequate funding of HUD programs, there cannot be true success.
    Thank you very much, Senator Murray.
    Senator Murray. Senator Lautenberg, do you have a 
statement?

                STATEMENT OF SENATOR FRANK R. LAUTENBERG

    Senator Lautenberg. Thank you very much, Madam Chairman.
    This subject is such an important one, Mr. Secretary. And 
you have an enormous responsibility. But we're concerned about 
the availability of affordable housing. When you see the 
definition of what constitutes affordable housing in our State, 
and with a 30-percent maximum cost for housing, the income of a 
family's got to be $44,000. Well, $44,000 is in the middle-
class category. And it's very hard to be spending $3,600 a year 
on rent. And, you know, I don't understand where the numbers 
have come from that deal with inflation, cost of living, et 
cetera, these very modest gains in the index for inflation. 
They don't seem to stand up in the real world. If you look at 
gasoline, if you look at other things, things that are included 
in the calculations belie the fact that inflation has been so 
modest, except, frankly, in wages for working people across the 
country.
    And, above all, we have to be certain, Mr. Secretary, that 
when we award contracts for Government work, that they're done 
without any bias at all, that they're done--contracts given to 
the most efficient, best price that we can find in the market, 
and without any hint of any other suggestions involved that 
say, ``Well, we'll give it to these guys because they smile 
right,'' or, ``give it to these people for other reasons.''
    One of the things, in particular, that came up in your 
remarks in April of last year, when you posed the question, 
``Why should I reward someone who doesn't like the President, 
so they can use funds to try to campaign against the President? 
Logic says they don't get the contract. That's what I 
believe.'' Your statement. Do you still believe that contract 
awards should be--contain a political calculation when awarding 
that contract?
    Secretary Jackson. Are you asking me to answer that now?
    Senator Murray. Senator Lautenberg, we're going to let the 
Secretary make his opening statement----
    Senator Lautenberg. Oh, I'm sorry.
    Senator Murray [continuing]. And then we'll move to----
    Senator Lautenberg. Forgive me. Okay.
    Senator Murray. We'll let you ask your questions----
    Senator Lautenberg. Forget I asked the question----
    Senator Murray. Yes, well, we'll----
    Senator Lautenberg [continuing]. Mr. Secretary.
    Senator Murray [continuing]. We'll come back to our----
    Senator Lautenberg. I'm sorry.
    Senator Bond. He got the first question in.
    Senator Lautenberg. I didn't mean to do that.
    Senator Murray. All right. No problem.
    We're going to go ahead and let the Secretary give his 
opening statement. And, again, we have a vote very shortly, so 
we would like you to----
    Secretary Jackson. All right.
    Senator Murray [continuing]. Keep it to 5 minutes. We do 
have your written statement, so we'll make sure that all 
members of the subcommittee have that. So, if you can keep it 
to 5 minutes, I'd appreciate it.
    Secretary Jackson. First of all, thank you very much, 
chairlady, Ranking Member Bond, and other members of the 
subcommittee.

                           PREPARED STATEMENT

    What I would like to do so that we can get right to the 
point is to submit my oral statement also and give you all the 
opportunity, since you will have a vote, to ask questions of 
me.
    Senator Murray. Thank you, we will put that in the record.
    [The statement follows:]

              Prepared Statement of Hon. Alphonso Jackson

    Chairwoman Murray, Ranking Member Bond, distinguished members of 
the committee: The President's proposed fiscal year 2008 budget will 
address our Nation's housing, economic, and community development 
needs. HUD's $35.2 billion fiscal year 2008 budget request--an increase 
of $1.6 billion more than last year's request--ensures that our 
Department can build on our success in helping low-income and minority 
families achieve the dream of homeownership, ensure equal opportunity 
in housing, and lend a compassionate hand to Americans in need, while 
using taxpayer money more wisely and reforming programs in need of 
improvements. The President's fiscal year 2008 budget request will 
allow the Department to build upon those successes by advancing the 
core mission given to HUD by Congress.
    In formulating HUD's fiscal year 2008 budget, HUD examined its 
funding priorities to ensure that the resources were used for those 
most in need. The fiscal year 2008 HUD budget also requests needed 
reforms in multiple program areas, notably FHA, CDBG, and Public 
Housing.

   PROMOTING ECONOMIC AND COMMUNITY DEVELOPMENT THROUGH HOMEOWNERSHIP

    The President's vision of an ownership society has been a central 
theme of his administration, and correctly focuses on the reality that 
ownership--and homeownership in particular--is the key to financial 
independence, wealth building, and stronger, healthier communities.
    Under President Bush's leadership, this administration has achieved 
new records in the rate of homeownership. Today, more than 75 million 
families, or nearly 70 percent of all Americans, are homeowners--the 
largest number of Americans to ever own their own homes. Despite having 
achieved record-level homeownership rates, minorities in America remain 
less likely than non-Hispanic whites to own their homes. To close this 
gap, President Bush challenged the Nation to create 5.5 million new 
minority homeowners by the end of the decade, and to date 3.5 million 
minority families have joined those ranks. President Bush and I are 
pleased that we are making progress ahead of schedule. But we will not 
rest until the goal has been fully met, and we are asking Congress to 
help us do more to close the minority gap.
    The President's proposed budget will help HUD to further that 
mission by transforming the Federal Housing Administration (FHA) so 
that it can expand homeownership opportunities for low- and moderate-
income families; spur Fannie Mae and Freddie Mac to lead the market to 
create more affordable homeownership opportunities; help more of the 
lowest-income Americans make downpayment and closing costs through the 
HOME Investment Partnerships program (HOME) and American Dream 
Downpayment Initiative (ADDI) and increase the level of housing 
counseling that has been so useful in helping families prepare for 
homeownership, avoid predatory lending practices, and avoid default on 
their homes. Let me explain each of these areas further.

                           FHA MODERNIZATION

    Since its inception in 1934, FHA has helped more than 34 million 
Americans become homeowners. In recent years, however, FHA's outdated 
statutory authority has made it difficult to keep pace with the 
changing financial needs of those families who traditionally 
participated in the programs. Through the Expanding American 
Homeownership Act of 2006, HUD sought to provide workable solutions for 
borrowers, including homebuyers who do not qualify for prime financing. 
This will give borrowers more affordable and safer ways to achieve the 
American Dream and reward them for having good household financial 
management. The key components of the legislative proposal, which has 
been reintroduced in this Congress, will: provide greater flexibility 
to the current statutory 3 percent minimum downpayment, reducing a 
significant barrier to homeownership; create a new, risk-based 
insurance premium structure for FHA that would match the premium amount 
with the credit profile of the borrower; and increase and simplify 
FHA's loan limits.
    Modernizing FHA will give it the tools it needs to again meet its 
legislative mandate: offering hard-working, credit-worthy borrowers, 
including those who cannot qualify for prime financing, the opportunity 
to obtain financing on reasonable terms at a cost they can afford.

    USING HOME TO HELP MORE LOW-INCOME FAMILIES OWN THEIR OWN HOMES

    The HOME Investment Partnerships program is the largest Federal 
block grant program specifically focused on creating affordable 
housing. Since 1992, more than 600 communities have completed building 
almost 762,000 affordable housing units, including more than 319,000 
for new homebuyers. In addition, more than 160,000 tenants have 
received direct rental assistance. The administration proposes to 
increase the HOME program to $1.97 billion in 2008, $50 million over 
the fiscal year 2007 request and $210 million above 2007 enacted.
    For many low-income Americans, the single greatest obstacle to 
homeownership is the cash requirement for downpayment and closing 
costs. Within the HOME allocation, American Dream Downpayment 
Initiative or ADDI funds have assisted 21,000 families to purchase 
their first home--of which approximately 50 percent were minorities. 
The fiscal year 2008 budget requests $50 million to continue funding 
the ADDI--double the fiscal year 2007 enacted--to help provide grants 
to low-income families to help purchase their first homes. Further, the 
administration plans to submit re-authorization for ADDI in the coming 
months to continue this effort.

              SELF-HELP HOMEOWNERSHIP OPPORTUNITY PROGRAM

    SHOP grants are another important program to boost homeownership 
among low-to-moderate income Americans. These grants are provided to 
national and regional non-profit organizations, like Habitat for 
Humanity, that are experienced in providing self-help housing. The 
fiscal year 2008 budget seeks $40 million for the SHOP Program. An 
additional $30 million under this account is also proposed for the 
National Community Development Initiative (NCDI). This funding will be 
used by intermediaries--Enterprise Community Partners, Inc., and Local 
Initiatives Support Corporation (LISC)--to develop the capacity and 
ability of nonprofit community development corporations to undertake 
community development and affordable housing projects.

              COUNSELING OUR WAY TO GREATER HOMEOWNERSHIP

    Housing counseling is an extremely important tool to help Americans 
purchase and keep their homes. The fiscal year 2008 budget proposes $50 
million for housing counseling, $5 million over the fiscal year 2007 
request, in order to prepare families for homeownership, help them 
avoid predatory lending practices, and help current homeowners avoid 
default. In partnership with faith-based and community organizations, 
HUD will assist approximately 600,000 families to become homeowners or 
avoid foreclosure in fiscal year 2008. More than ever, potential 
homebuyers need assistance to make smart homeownership choices. Housing 
counseling is the most cost-effective way to educate individuals and 
arm them with the knowledge to make informed financial choices and 
avoid high risk, high cost loans, and possible default and foreclosure.

                         COMBATING HOMELESSNESS

    While helping homeowners and renters to a better way of life, HUD 
remains committed to the goal of ending chronic homelessness, and has 
aggressively pursued policies to move more homeless families and 
individuals into permanent housing. While persons experiencing periods 
of long-term homelessness frequently get temporary help, they often 
return to a life on the streets. New data from the Annual Homeless 
Assessment Report indicates that 20 percent of the homeless experience 
chronic homelessness. Persons with disabilities who are homeless for 
extended periods of time, often referred to as the chronically 
homeless, consume a disproportionate share of available resources 
(psychiatric facilities, jails, detox centers, hospitals, emergency 
shelters, etc.) without having their basic needs appropriately 
addressed. Housing this population will free up Federal, State, and 
local emergency resources for families and individuals who need 
shorter-term assistance.
    In July 2002, the President reactivated the Interagency Council on 
Homelessness (ICH) for the first time in 6 years, bringing together 20 
Federal entities involved in combating homelessness. Since its 
inception, the ICH has helped State and local leaders across America 
draft plans to move chronically homeless individuals into permanent 
supportive housing, and to prevent individuals from becoming 
chronically homeless. As HUD Secretary, I currently chair the ICH.
    In 2003, the Federal Collaborative Initiative to End Chronic 
Homelessness, through HUD, Health and Human Services, and Veterans 
Affairs, funded 11 grantees across the country.
    The fiscal year 2008 Budget provides a record level of resources to 
address the housing needs of homeless persons living on the streets of 
this Nation. The fiscal year 2008 Budget provides $1.586 billion for 
Homeless Assistance Grants. In addition to requesting a record level of 
funding, the administration also proposes to consolidate the various 
competitive homeless programs into a single Continuum of Care grant 
program that would greatly simplify the local administration of HUD's 
homeless resources which benefit over 3,800 cities and counties.

                INCREASING ACCESS TO AFFORDABLE HOUSING

    While homeownership is one of President Bush's top priorities, the 
President and I realize that it is not a viable option for everyone. 
The largest component of HUD's budget promotes decent, safe, and 
affordable housing for families and individuals who may not want to 
become homeowners or who may not yet be ready to purchase a home.

                 ASSISTING THE MOST FAMILIES--SECTION 8

    HUD's Housing Choice Voucher Program provides approximately 2 
million low-income families with subsidies that help them obtain 
decent, safe, sanitary, and affordable homes. In the fiscal year 2008 
budget request, the President is asking for $16 billion, nearly $100 
million over the fiscal year 2007 request. The administration is also 
proposing several changes to the Housing Choice Voucher Program that 
would allow the 2,400 Public Housing Authorities (PHAs) that administer 
the program to assist even more families. The administration is 
proposing that Congress eliminate current appropriations language that 
imposes a cap on the number of families each PHA is allowed to assist. 
Many PHAs that have reached their caps have additional funds that they 
are unable to use to assist additional households. In addition, 
administrative fees would again be tied to the number of households 
assisted, encouraging PHAs to assist more families. By better utilizing 
all appropriated funds, the Housing Choice Voucher Program would assist 
thousands of additional families.

                 MAKING IMPROVEMENTS TO PUBLIC HOUSING

    For fiscal year 2008, the Department will continue its efforts to 
transition Public Housing Agencies to asset management, which will 
result in improvements in public housing management and financial 
accountability.

                         PUBLIC HOUSING FUNDING

    The fiscal year 2008 budget for the Public Housing Operating Fund 
provides $4 billion, which is the highest funding level ever in the 
history of the program, up from $3.6 billion in the fiscal year 2007 
request. This funding will assist PHAs in the second year of transition 
to the new operating formula and will help pay for utility/energy and 
other cost increases. Additionally, HUD will continue its successful 
implementation of the Public Housing Capital Fund Financing Program. 
This program allows PHAs to borrow from banks or issue bonds using 
future Capital Fund grants as collateral or debt service, subject to 
annual appropriations. In this way, PHAs can leverage their Capital 
Funds to make improvements. The President's fiscal year 2008 budget 
request maintains the overall Capital Fund Account funding at the $2 
billion level.

              MANAGEMENT ACCOUNTABILITY OF PUBLIC HOUSING
 
   The Department continues to place great emphasis on the physical 
condition of public housing properties, and the financial status and 
management capabilities of PHAs. The Department will continue providing 
technical assistance to PHAs and rating the effectiveness of PHAs 
through the Public Housing Assessment System (PHAS). PHAs with 
consistently failing scores may be subject to an administrative or 
judicial receivership. The Department will continue to utilize other 
tools such as Cooperative Endeavor Agreements with local officials, 
Memoranda of Agreements, and increased oversight, in order to correct 
long-standing deficiencies with PHAs.

                   INDIAN HOUSING LOAN GUARANTEE FUND

    HUD is also working to improve housing for Native Americans. The 
U.S. Government holds much of the land in Indian country in trust. Land 
held in trust for a tribe cannot be mortgaged, and land held in trust 
for an individual must receive Federal approval before a lien is placed 
on the property. As a result, Native Americans historically have had 
limited access to private mortgage capital. The section 184 program 
addresses this lack of mortgage capital in Indian country by 
authorizing HUD to guarantee loans made by private lenders to Native 
Americans. The President's budget proposes $367 million in section 184 
loan guarantees under the Indian Housing Loan Guarantee Program for 
homeownership in tribal areas, which represents a more than $251 
million increase over the enacted fiscal year 2006 budget and $116 
million over the fiscal year 2007 request.

                 ELDERLY AND PERSONS WITH DISABILITIES

    The fiscal year 2008 budget will provide $575 million in funding 
for the Supportive Housing for the Elderly (section 202) Program--a net 
increase of $30 million over the fiscal year 2007 request. This funding 
level covers all operating costs for existing section 202 housing and 
supports construction of about 3,000 new units. In the section 202 
program, funding for housing for the elderly is awarded competitively 
to non-profit organizations that develop these facilities. The 
facilities are also provided with rental assistance subsidies, enabling 
them to accept very low-income residents. Many residents live in the 
facilities for years, and over time, they often become frail and less 
able to live without some additional services. Therefore, the budget 
allocates up to $25 million of the grants to fund the conversion of all 
or part of existing properties to assisted-living facilities, enabling 
these elderly residents to remain in their units. In addition, up to 
$71 million--an increase of $11 million over the fiscal year 2007 
request--of the grant funds will be targeted to funding the service 
coordinators who help elderly residents obtain supportive services from 
the community.
    The fiscal year 2008 budget proposes $125 million for Supportive 
Housing for Persons with Disabilities (section 811), a $6 million 
increase over the 2007 budget request. The section 811 program will 
also continue to set aside funds to enable persons with disabilities to 
enjoy independent lifestyles. In fiscal year 2008, up to $75 million of 
the grant funds will be used to renew Mainstream section 8-type 
vouchers so that individuals can continue to use their vouchers to 
obtain rental housing.
    The Department is proposing financing demonstration projects in 
both section 202 and section 811: $25 million is requested for section 
202 and $15 million is requested for section 811. A key priority is to 
increase the production of units serving these special needs 
populations by removing the barriers that discourage tax credit 
applicants from utilizing sections 202 and 811. In developing the 
program, the Department will consider mixed-finance arrangements 
including low-income housing tax credits and other creative financing 
options for development of additional housing units and/or rental 
operating assistance.

          HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS (HOPWA)

    The HOPWA program provides formula grants to states and localities 
for housing assistance for low-income persons living with HIV/AIDS. The 
program helps maintain stable housing arrangements that improve access 
to health care and other needed support. The program also provides 
competitive grants to government agencies and nonprofit organizations 
that serve as Special Projects of National Significance due to their 
model or innovative qualities. HOPWA also provides grants to 
governmental agencies in areas that do not qualify for formula funds.
    In fiscal year 2008, HOPWA will fund an estimated 26 competitive 
grants to renew expiring permanent housing projects and use the 
remaining funds to select new model projects. HUD will also provide 
HOPWA formula funding to an estimated 122 jurisdictions. Grant 
recipients will collaborate with over 700 non-profit and local agencies 
to subsidize housing for an estimated 67,000 households. In fiscal year 
2008, HUD will proposes to provide $300 million in new grant funds for 
housing assistance and related supportive services for low-income 
persons with HIV/AIDS and their families.
    The administration is proposing legislation to update the HOPWA 
allocation formula. The revised formula will more accurately reflect 
the current housing needs of persons living with AIDS in this country.

        REFORMING THE COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM

    It has been more than 30 years since President Gerald Ford and 
Congress created the Community Development Block Grant (CDBG) Program 
to address the community needs. Since 1974, CDBG has been an important 
tool for cities, counties and States, allocating more than $116 billion 
to help them to target their own community development priorities. The 
fiscal year 2008 budget proposes funding CDBG's formula program at 
$2.775 billion.
    CDBG's underlying formulas have remained essentially the same since 
1978 while the Nation's demographics have changed significantly. It has 
becoming increasingly clear that an outdated formula that once measured 
the needs of urban America no longer reflects the modern needs of 
today's cities, larger urban counties and States. Some high-need areas 
receive smaller grants than they should, some low-need areas receive 
larger grants than they should; and some communities with similar needs 
receive different per capita grant amounts.
    The Department will continue to pursue ``formula fairness'' by 
appealing to Congress to authorize a new formula that will more 
effectively target CDBG funding to areas of greatest need in 21st 
Century America. A second key part of the President's proposal is the 
$200 million Competitive Challenge Grant. The Challenge Fund will award 
``bonus grants'' to distressed communities that target and leverage 
funds to the most distressed areas within the community. In addition, 
HUD will work to boost performance measurements within CDBG to ensure 
these critically needed dollars produce the results the program was 
designed to achieve.

                 HEALTHY HOMES AND LEAD HAZARD CONTROL

    HUD's Lead Hazard Control program is the central element of the 
President's effort to eradicate childhood lead-based paint poisoning. 
In fiscal year 2008, proposed funding for the Lead Hazard Control 
Program will be $116 million, continuing the substantial progress to 
date in eliminating lead hazards to all children. Grant funds are 
targeted to low-income, privately owned homes that are most likely to 
have children exposed to lead-based paint hazards.
    The program conducts public education, compliance assistance, and 
regulatory enforcement to prevent childhood lead poisoning. New 
estimates from the Centers for Disease Control and Prevention (CDC) 
show that the program has helped to reduce the number of children at 
risk by 65 percent, but more than 250,000 children still have dangerous 
levels of lead in their bodies.

          CONTINUING THE FIGHT AGAINST HOUSING DISCRIMINATION

    The Bush Administration is committed to the vigorous enforcement of 
fair housing laws in order to ensure that equal access to housing is 
available to every American. Fair housing enforcement and education 
activities are pivotal in achieving the administration's goal to 
increase minority homeownership by 5.5 million by 2010.
    The intent of HUD's fair housing programs is to bring about equal 
opportunities in housing by protecting the right of families and 
individuals to live where they choose, free from discrimination. HUD 
accomplishes this goal by aggressively enforcing the Nation's fair 
housing laws and by educating the public and the housing industry about 
their fair housing rights and responsibilities. HUD also furthers fair 
housing by funding housing activities through two programs: the Fair 
Housing Assistance Program (FHAP) and the Fair Housing Initiatives 
Program (FHIP).
    The fiscal year 2008 budget will provide $25 million through FHAP 
for State and local jurisdictions that administer laws substantially 
equivalent to the Federal Fair Housing Act. The Department supports 
FHAP agencies by providing funds for capacity building, complaint 
processing, administration, training, and the enhancement of data and 
information systems.
    The fiscal year 2008 budget will also provide $20 million to help 
private, non-profit FHIP agencies across the Nation combat 
discrimination through an array of targeted education and outreach and 
enforcement activities.
    Additionally, the requested amount would support the Department's 
ongoing efforts to address fair housing concerns in areas affected by 
Hurricanes Katrina and Rita. The efforts would include support for fair 
housing enforcement efforts in the gulf coast, bilingual public service 
announcements, printed advertisements, and training events. Protecting 
the fair housing rights of persons with disabilities is a Departmental 
priority. As such, the Department would continue to provide technical 
assistance to builders, architects, and housing providers on 
disability-accessibility requirements through its Accessibility FIRST 
program to ensure that newly constructed housing units are accessible 
to persons with disabilities.

                   INCREASING OPERATIONAL EFFICIENCY

    Over the past several years, HUD has taken many notable steps to 
improve its management and performance, and the President's new budget 
request strengthens these efforts.
    In fiscal year 2006, HUD received a clean financial audit for the 
seventh consecutive fiscal year, and for the first time ever had no 
auditor-reported material internal control weakness issues.
    In January 2007, the Government Accountability Office (GAO) removed 
HUD from its watch list of high-risk government programs. It marked the 
first time since 1994 that no HUD programs were on the list, 
demonstrating HUD's effective implementation of the President's 
Management Agenda to improve our fiscal house and program results.
    Improved information technology systems are enabling HUD and its 
program partners to more efficiently and effectively deliver HUD's 
program resources, and more can be accomplished with the funding 
increases proposed for the Working Capital Fund that supports the 
Department's information technology infrastructure and systems 
applications.
    In Conclusion, Madam Chairwoman, the President's proposed fiscal 
year 2008 budget makes good progress toward successfully realigning 
Federal Government priorities according to our Nation's current needs. 
The HUD portion of that budget will help promote economic and community 
development through increased opportunities for homeownership and 
affordable rental housing, free from discrimination; it will also lay 
the groundwork for reform by focusing community development funding 
more carefully toward those most in need; and it will enable HUD to 
continue along the path to greater Departmental efficiency and 
effectiveness.
    This is a good budget, Madam Chairwoman, and I respectfully urge 
the Congress to adopt it. I am now available to answer any questions 
that you, or other members of the committee, may have.

    Senator Murray. So, you're ready for a question?
    Secretary Jackson. We're ready.
    Senator Murray. Okay. Well, very good, we'll do that, then. 
I will ask a couple of questions. I'll turn it over to Senator 
Bond. He's going to ask his questions and then go to the floor 
and vote and come back. So--all right.
    Mr. Secretary, let me just ask you, really quickly, before 
I turn to Senator Bond, for the cost to renew the 2 million 
section 8 vouchers that are currently in use, your 2008 budget 
request asks for an increase of only $9 million above the level 
that we provided for the current year. That is an increase of 
less than six one-hundredths of 1 percent. And, at the same 
time, as we all know, rents across this country are growing by 
4.6 percent.
    Where I live, in Puget Sound, it's even more than that, 
it's 7 percent. What--how is your requested funding increase of 
just six one-hundredths of 1 percent supposed to be sufficient 
to ensure that our public housing authorities across the 
country are able to even keep all the current tenants that they 
do have?
    Secretary Jackson. Chairlady, I would say this, that if we 
would carry out the reforms and deal with section 8 on a budget 
base rather than a unit base, we have ample monies. And I 
thought that I had an agreement 2 years ago, when I went and 
got a little over $1 billion for the industry in section 8 that 
we would go toward budget-base allotment. They have not carried 
out their part of the agreement. So, if you're saying, If we're 
still using unit-base, will that cover the process? Probably 
not. But we would like to see the reforms enacted, and I 
thought I had an agreement to enact those reforms.
    Senator Murray. Your agreement with who?
    Secretary Jackson. With the industry, whether it be CLPHA, 
PHADA, NAHRO.
    Senator Murray. Well, so knowing that that's not happening, 
isn't it your responsibility to ensure that the section 8 
housing authorities are able to keep their current tenants?
    Secretary Jackson. Well, we believe that by lifting the 
cap, they will be able to keep that commitment. That will be 
some $600 million more to meet the process. So, yes, I think 
the budget is--for the section 8 tenant base is fair. We've 
lifted the cap so they can utilize their monies to help house 
probably about 170,000 more people.
    Senator Murray. Yes, I know that you believe that some of 
them have reserves, but even your own data says that about one-
third of all the public housing authorities have no reserves, 
or a reserve that's lower than inflation costs for a full year. 
So, how are all of they--how are all of them going to be able 
to provide additional--or to even keep their own section 8?
    Secretary Jackson. From our perspective, we believe that 
each housing authority will be able to address their section 8 
needs. And we think the budget clearly amplifies that.
    Senator Murray. So, you don't think there's any out there 
without reserves that would be put in jeopardy?
    Secretary Jackson. Well, there are some without reserves, 
but I don't think that many of those that are without reserves 
will be hit the hardest. It's those large housing authorities 
in many of the major cities that, really, the $600 million will 
address the issues of the shortfall.
    Senator Murray. Well, if they don't have the reserves, then 
they're going to have to put people out on the street.
    Secretary Jackson. No, that's not necessarily true.
    Senator Murray. How do you see that----
    Secretary Jackson. I just--I don't see the same thing you 
see. I think we do have enough within our budget to address the 
needs of those tenant-based vouchers, clearly.
    Senator Murray. Where I live, we saw, on average, rent 
increase by 6.4 percent in Seattle, at an average unit cost of 
$900 a month. And, like I said, the Bureau of Labor Statistics 
(BLS) is reporting that for the 1-year period that ended in 
March, rents across the country are being increased by 4.6 
percent. So, knowing that that rent increase is out there, how 
can you make that----
    Secretary Jackson. I still believe that the budget that we 
submitted for the tenant-based section 8 program is absolutely 
well enough to make sure that those persons who today have 
vouchers will keep those vouchers.
    Senator Murray. I find that hard to believe, with what we 
have, and it's certainly not what we're hearing from on the 
ground.
    But, with that, I will turn it over to Senator Bond to ask 
his questions, and head over to the floor.
    Senator Bond. Thank you very much, Mr. Secretary.
    Continuing on the section 8 tenant-based ones, I understand 
we do have a budget-based approach for section 8 vouchers, 
subject to the authorized level. But, as the chair mentioned, 
there are some PHAs who have no reserves, and may have greater 
needs. You talked about the amount of excess reserves in 
certain PHAs. How will you ensure that those reserve funds and 
any other funds are adequately and equitably allocated to PHAs 
which may have done a very good job----
    Secretary Jackson. Right.
    Senator Bond [continuing]. In spending, but do not have 
sufficient funds in the budget proposal to meet section 8 
housing needs.
    Secretary Jackson. Ranking member, as I said to the 
chairlady, I think there are a number of things that can be 
done, and I do think that the budget is still ample for this 
process. Housing authorities have the ability to modify the 
payment standards. They can aggressively negotiate with 
landlords on rent. And they can charge a minimum rent.
    Now, in many cases, I think you know, as I know, since we 
have that 75 percent of those vouchers must be for persons 30 
percent less than median, we're ending up, in many cases, not 
serving more people, serving the same people over and over. 
Pre-1998, the average stay of a voucher was about 3\1/2\ years.
    Today, it's about 8, because of the standards that we've 
set up. So, my position is, clearly--or, you know, 2 years ago, 
when I went and got the extra--a little over $1 billion, that 
we would go to basically a leave unit base and go to a project-
based budget. If we go to that immediately, yes, I think we 
have more than ample money. And even now, with the three 
standards that I just gave you, I still think it's ample money 
to carry out the program.
    Senator Bond. Turning now to the project-based section 8, 
my staff analysis suggests that the current budget is about 
$1.2 billion short. Have you and the Department done a thorough 
examination of the needs for project-based section 8? And have 
you done that? Can you give me a figure on what the shortfall 
is?
    Secretary Jackson. What we are doing now is going contract 
by contract. We expect to have that finished by the end of the 
summer to make sure that we have the ample resources. We will 
be able to submit that to you in--probably by September, the 
raw data; and probably sometime in November, we will have it 
all calculated. But we truly believe that the project-based 
contracts will be fine. But we have to make an evaluation. And 
we've never had an evaluation of these contracts. Each year, we 
have been piecemealing, and now I think it's important to have 
an evaluation of them.
    Senator Bond. Mr. Secretary, I couldn't agree with you 
more. Now, I'm not one who believes in artificial timelines in 
certain other areas, but we have a legislative timetable, and 
we hope to be passing this bill in the latter part of July. So, 
if you could move up that analysis----
    Secretary Jackson. Okay
    Senator Bond [continuing]. And give us some idea----
    Secretary Jackson. I will----
    Senator Bond [continuing]. Before we get this bill done, 
and I also would like your assurance that if you see a 
shortfall, you will go back to OMB and suggest that they are 
not to throw people out of project-based section 8, that a 
budget amendment is needed. And I hope that you will consider 
that, and help us, because right now it looks like a 
significant shortfall to us that is unacceptable.
    Secretary Jackson. Okay. I will do my very best, I can 
assure both of you--all three of you all, to make sure that we 
can get you an answer as--before July.
    Senator Bond. Thank you, Mr. Secretary.
    Madam Chair, we are hoping that we are going to have a vote 
here very shortly, so I will go over and get aligned and ready 
to vote as soon as it occurs, and look forward to a significant 
number of questions when I get back.
    Senator Murray. Very good. All right.
    Senator Lautenberg.
    Senator Lautenberg. Thank you. Once again, I apologize for 
my jumpstart.
    But, Mr. Secretary, you heard where my inquiry was going. 
And I'll repeat it, just to make sure that I'm not missing 
anything or that I'm not misquoting you. And you say, ``Why 
should I reward someone who doesn't like the President, so they 
can use funds to try to campaign against the President? Logic 
says they don't get the contract. That's what I believe.''
    Now, the question, Mr. Secretary--and I commend you for the 
work that you do, but I think that what took place there needs 
explanation. So, do you still view that position, that contract 
awards should be based on political favoritism?
    Secretary Jackson. First of all, let me say this to you, 
Senator. The inspector general did a thorough investigation and 
found that I had not tampered, nor touched any contract. In 
fact, because of what the Government Accountability Office 
(GAO) said, and the inspector general said, I set up a Contract 
Review Board. I do not interfere with any contract that is 
given in HUD, period. That's a fact. And the inspector general 
looked at every contract that had been given out at HUD, and I 
didn't touch it.
    Now, if you're asking me about my personal opinion, the 
President is my friend, and I care a great deal about him. But 
it doesn't mean that I'm going to interfere with contracts 
because I think that people might not like him. What I said, 
when this guy approached me in the hallway, is that, ``He must 
be out of his mind if he's going to attack me and attack the 
President, and think I'm going to help him.'' I'm not going out 
of my way to help him, but I didn't go out of my way to hurt 
him, either.
    Senator Lautenberg. Well--so, was the quote accurate?
    Secretary Jackson. Which quote?
    Senator Lautenberg. The one I gave you, ``Why should I 
reward someone who doesn't like the President,'' et cetera, 
``so they can use funds to campaign against him? Logic says 
they don't''----
    Secretary Jackson. Well, first of all----
    Senator Lautenberg [continuing]. ``That's what I believe.'' 
Did you say that?
    Secretary Jackson. First of all--yes--first of all, I don't 
touch contracts.
    Senator Lautenberg. But you said it, Mr.----
    Secretary Jackson. Yes, I said it, but I don't touch 
contracts. I set up a Contract Review Board.
    Senator Lautenberg. But you're stating a view that I think 
poisoned the--poisons the atmosphere. You----
    Secretary Jackson. I disagree with you. I don't think I----
    Senator Lautenberg. You disagree----
    Secretary Jackson [continuing]. Poison the atmosphere.
    Senator Lautenberg [continuing]. With me?
    Secretary Jackson. Yes.
    Senator Lautenberg. So, you think, then, that it's 
appropriate----
    Secretary Jackson. No, I don't think it's appropriate. I 
said----
    Senator Lautenberg [continuing]. If I said----
    Secretary Jackson [continuing]. I said what I said.
    Senator Lautenberg. Why did you say it, if you don't----
    Secretary Jackson. Because----
    Senator Lautenberg [continuing]. Think it's appropriate?
    Secretary Jackson [continuing]. I was speaking----
    Senator Lautenberg. Why are you defending it now? That, I 
don't understand, altogether. I mean, you're saying, ``Well, 
yeah''----
    Secretary Jackson. I have not touched----
    Senator Lautenberg [continuing]. ``It's true, but I''----
    Secretary Jackson. Senator, I have not touched one 
contract. Not one. Now, if you can prove that I have interfered 
with a contract, then you should do that.
    Senator Lautenberg. Mr. Secretary, we're spinning words 
here.
    Secretary Jackson. No, I'm not spinning words, Senator. I 
have not touched a contract.
    Senator Lautenberg. But if you said it, then we shouldn't 
believe what you said is what you're----
    Secretary Jackson. It----
    Senator Lautenberg [continuing]. What you're saying.
    Secretary Jackson. Absolutely, then, if that's----
    Senator Lautenberg. We should not----
    Secretary Jackson [continuing]. That's right.
    Senator Lautenberg [continuing]. Believe what you said.
    Secretary Jackson. Because I have not touched a contract.
    Senator Lautenberg. Too bad.
    In New Jersey, the HOPE VI program successfully generated 
over $1 billion to revitalize distressed public housing, yet 
the President's 2008 proposes to totally eliminate the program. 
Wouldn't funding programs like this pay big dividends on our 
communities, helping poor and middle-class families to----
    Secretary Jackson. I will----
    Senator Lautenberg [continuing]. Obtain----
    Secretary Jackson. Sorry. I would agree with you. I sat on 
the National Commission for Severely Distressed Housing, which 
the HOPE VI came out of--I agree that HOPE VI, when it's 
performed well, it's a great program. I've never said that it 
wasn't. Of the 237 awards, Senator, that we have made, only 65 
have been completed. If we look from 1994 to 2000, we still 
have over $500 million outstanding, where nothing has been done 
on those HOPE VI funds. And of all the money that's 
outstanding, about a million--$1.8 billion is still 
outstanding.
    So, I don't believe that we should continue to fund a 
program, when you have less than 30 percent of the projects 
completed since the beginning of the program. Sixty-five of 237 
projects, that's all we've completed since HOPE VI started in 
1992. And this is 2007.
    Senator Lautenberg. Why is that? Why haven't we done better 
in completion?
    Secretary Jackson. I really think that one of the things we 
have done lately with the HOPE VI program is required that the 
housing authorities come in with a developer who can leverage 
the money. And in the process of leveraging the money, we're 
able to develop much better. The initial HOPE VI were not that 
way. Many of the housing authorities took those HOPE VI 
themselves, and they used the administrative authority that 
they had, and used it up with architectural engineering 
drawings and pulled down the money.
    So, they still have money to develop, but they don't have 
the necessary plans to move forward. So, we have suggested that 
we look at those housing authorities, Senator, who have not 
performed, and try to recapture some of that money to send it 
to housing authorities that are performing. It's not that I 
believe the program is bad. That's not the issue. The issue is, 
we have so much money outstanding.
    Senator Lautenberg. Yes. I assume that the red light 
indicates that my time is used, Madam Chairman.
    I would close, and ask that the questions that I'll submit 
after the hearing be promptly responded to.
    But I would say that if you believe in the program, and you 
don't--and you're looking for contractors who can leverage the 
money, there's a mix in language there that I, frankly, don't 
get, because housing doesn't take overnight to build.
    But, thank you, Mr. Secretary. Thank you----
    Secretary Jackson. Thank you, Senator.
    Senator Murray. Thank you, Senator Lautenberg. And your 
questions will be submitted to the Secretary for responses for 
the record. So, thank you.
    Mr. Secretary, this is the third year in a row that your 
budget is proposing to slash funding for the CDBG program while 
arguing that the program needs to be reformed. You are, again, 
arguing that this program needs to be better targeted to 
eliminate funding from thousands of communities you consider to 
be too affluent. Over the last 3 years, has any subcommittee 
ever scheduled a markup to consider that proposal?
    Secretary Jackson. Not--I don't think so, Senator--I mean--
--
    Senator Murray. Has any----
    Secretary Jackson [continuing]. Chairlady.
    Senator Murray. Yes. Has any member of the House or the 
Senate ever introduced your legislative proposal?
    Secretary Jackson. No, they have not.
    Senator Murray. Well, there are sections of King County, 
Washington that are affluent, and that is partly why working 
families have such a hard time finding affordable housing 
there. Let me tell you where King County spent the vast 
majority of their CDBG funds last year. They developed 637 new 
affordable units, they rehabilitated another 150 affordable 
units, they provided 442 households with homeless prevention 
service, they created 487 permanent supportive housing units, 
they constructed 33 new affordable homes, and they repaired 
another 500 homes occupied by low- and moderate-income 
residents--that were repaired. Those funds weren't spent for 
amenities on the wealthy. And under your budget proposal, King 
County would see its CDBG funds slashed by 20 percent.
    So, can you tell me how your budget proposal reforms would 
alleviate the shortage of affordable housing in places like 
King County?
    Secretary Jackson. I think it's going to be very difficult 
in places, in my estimate, west of Utah, east of Virginia. 
These are very, very high-price areas. And it's going to be 
very difficult, even when we target the money to certain 
cities, counties, or areas, to address affordable housing in 
many places. So, I can't tell you that we're going to be able 
to address affordable housing all over this country because I 
don't think that is the case. We will do everything in our 
power within the budget construct and within the way we put our 
formula in place, to address those cities that are most in 
need. And if we can address those cities that are most in need, 
I think we can make a substantial impact.
    Senator Murray. Well, when you announced your reform, you 
published the formula that you'd use for distributing those 
funds, on your web site. I'm told that when you use your own 
formula at the reduced funding level, it really doesn't help 
the poorest communities across the Nation, because the funding 
is slashed so severely. So, I wanted to ask you, does your 
proposal provide any additional help to the poorest 
communities?
    Secretary Jackson. Yes. I think that what we have 
calculated is, at the--the lowest-income cities, counties, will 
be addressed. Second----
    Senator Murray. How is that?
    Secretary Jackson. Because we think we have enough money 
within our budget to address them, if the formula is approved.
    Senator Murray. Well, I don't see how that's going to 
happen, when you're cutting funding for everybody. And, you 
know, the other thing, I heard you last year when you were 
here, you talked about the affluent companies that shouldn't 
receive any funding, and you're trying to devise this formula 
that somehow does that. And one of the cities you talked about 
last year was in my home State of Bellevue, Washington, that 
you defined as affluent. Yet, even in these so-called affluent 
communities, funding under the current formula is targeted by 
law--by law--on assisting low- and moderate-income individuals.
    So, I went back and looked at you--at how Bellevue used 
their funding, and they used it to rehabilitate owner-occupied 
units, to upgrade a center for the disabled and the 
handicapped, they built a facility for the homeless, and they 
built a facility for abused and neglected children. Wouldn't 
you agree that those uses of funding are within the goals of 
CDBG?
    Secretary Jackson. Yes, I would.
    Senator Murray. Well--so, when you define Bellevue as 
affluent, which many would disagree with you, because of the 
price of living there, you take away funding to do that. So, I 
don't understand how your funding formula helps communities----
    Secretary Jackson. Well, I----
    Senator Murray [continuing]. Deal with these issues.
    Secretary Jackson. I'm sorry. Well, I think that Bellevue 
is an affluent community. And I think that in many of those--in 
many of those--the problems that you have just----
    Senator Murray. Have you--I'm sorry----
    Secretary Jackson [continuing]. You've just talked about--
--
    Senator Murray [continuing]. When was the last time you 
were in Bellevue?
    Secretary Jackson. Probably a couple of years ago.
    Senator Murray. Where did you go?
    Secretary Jackson. I can't remember where I went. I was 
in--I was in the city.
    Senator Murray. I mean, this--somehow, just to describe 
Bellevue as affluent is to not know the community that has 
changed dramatically in the past 5 years. And, again, what your 
formula does is, says to Bellevue, ``You're going to have to 
raise your own taxes to pay for the cost of providing the 
services that are dramatically needed.'' And I would urge you 
to go back and take a look at the demographics of that city 
again, and you might----
    Secretary Jackson. I'll be happy to do that for you.
    Senator Murray [continuing]. Be surprised. But your funding 
formula impacts a community that is really a diverse community 
that is trying desperately to deal with some really difficult 
challenges that they're facing today.
    I believe Senator Bond's going to be back in just a minute, 
but let me go to another topic----
    Secretary Jackson. Surely.
    Senator Murray [continuing]. Before he returns.
    This subcommittee held a hearing earlier this year, that 
you may have been aware of, with your FHA Commissioner, Brian 
Montgomery. We talked at length of what role, if any, the FHA 
can play in helping families that are facing foreclosure 
because of the crisis in the subprime lending market. Have you 
already seen FHA activity increase as a result of the shakeup 
in the subprime lending market?
    Secretary Jackson. We really have not, at this point. What 
I have said to you and to Senator Bond is that I believe that 
if we can get the FHA modernization legislation passed, that we 
can make a great impact. We cannot help everyone that's in the 
foreclosure area--there's no question we can't--because some of 
the people are--income is really out of reach. But there are a 
number of people that we can help. And I know a lot of times 
we've had studies that say, ``Well, HUD has got a 12, 13 
percent foreclosure rate.'' We don't go by 30 days, we usually 
go by 90 days, and we do everything in our power for those 
persons to make sure they keep their homes. And I will continue 
to do that.
    And one of the criteria that I talked with Senator Bond 
about was that--the zero downpayment. I agreed with him that a 
cash installment by everybody should be made, because they have 
an investment, to make sure that they've invested in their own 
home. So, I don't disagree with him. But we will do everything 
in our power, if the modernization legislation is passed, to 
try to prevent foreclosure and to try to address low- and 
moderate-income people who are right now in the process of 
being foreclosed on.
    Senator Murray. Do you believe that many of the borrowers 
that were enticed into that subprime loan are now facing--and 
are now facing high interest rates and penalties would be 
eligible to refinance with FHA?
    Secretary Jackson. Some of them--some of them would. Some 
of the exotic loans that were made to--to even some members of 
our staff at the housing authority, their income would probably 
be out of reach. But for low- and moderate-income people, yes, 
I think we would--we would make every effort to work with them.
    Senator Murray. Okay. And I believe Senator Bond will have 
more questions on that as well.
    So, before he returns--and I'm going to have to leave in 
just a minute to vote--I did want to ask you about the gulf 
region, as I mentioned----
    Secretary Jackson. Sure.
    Senator Murray [continuing]. In my opening statement.
    Payments to homeowners have been very, very slow to arrive. 
It's been very painful. And there's little to no evidence that 
public housing units are being rebuilt. Of the $16.7 billion 
which this subcommittee provided to help rebuild the gulf, only 
12 percent, or about $2 billion, has been sent. Can you tell us 
why, 2 years after this disaster, that this activity's been so 
slow?
    Secretary Jackson. When we allocated the money to the gulf 
coast--specifically, Mississippi and Louisiana--they submitted 
a plan to us of how the money was going to be spent. Each plan 
was basically a compensation plan that they would allocate 
monies to a certain level to persons, based on the damage of 
their homes. About 1 month ago, we had a hearing with Chairman 
Frank and Chairlady Waters. An issue was brought up, Are they 
spending the monies the way that they should be spending the 
monies? And I asked our staff, at the request of Chairman--
Chairlady Waters, I asked our staff to go back to make sure 
that Louisiana was complying with the compensation program. We 
realized----
    Senator Murray. Mr. Secretary, I'm going to miss the vote 
if I don't go.
    Secretary Jackson. Okay.
    Senator Murray. So, I'm--I want to get back to this 
question----
    Secretary Jackson. I'll----
    Senator Murray [continuing]. And--I'm going----
    Secretary Jackson. I'll wait for you.
    Senator Murray [continuing]. To go vote, and return. We 
will recess, shortly. And when Senator Bond returns, he is 
going to call the meeting back to order, and return with his 
questions.
    Secretary Jackson. Thank you.
    Senator Murray. I will be right back.
    Senator Bond. [presiding] Gentlemen, ladies, recess is 
over.
    My apologies. The Secretary is sufficiently familiar with 
how this place works, or doesn't work, to know what's 
happening. But, again, we appreciate your indulgence.
    And I want to go back, Mr. Secretary, to the discussion of 
section 8 vouchers, which----
    Secretary Jackson. Right.
    Senator Bond [continuing]. Appears to go back to the 
administration's Section 8 Block Grant Program, whereby PHAs 
would adjust rents down to meet their budget. Now, this appears 
to be a reversal of some 20-plus years of housing policy, where 
the Federal Government has sought to reduce the concentration 
of low-income families in the worst neighborhoods. However, 
with the lower rents, HUD and the PHAs will be pushing a policy 
whose necessary result would be to move the poorest into the 
worst neighborhoods, neighborhoods without jobs, good schools, 
and amenities. And this almost is a return to redlining. So, 
when we talk about budget-based vouchers for PHAs, I think we 
lose sight of the fact that the objective should be, as you 
indicated, to get people in homes where they move from publicly 
assisted housing into market-based housing, because of having 
access to jobs. And I thought you might want to comment on that 
and in light of my further questions about what we see to be 
the $1.2 billion shortfall.
    Secretary Jackson. Senator, I agree with you, in the sense 
that we do not want to redline or re-segregate. And I do 
believe that if the housing authorities in this country--and I 
did it with three housing authorities--if they negotiate with 
landlords, if they charge a minimum rent, if they even put a 
timetable on the time that a person can keep a voucher, I do 
believe that we can move people into very, very good areas. And 
in Dallas, that's what we did.
    In St. Louis, that's what we did. It's whether you really 
want to take the time to negotiate and to make sure that there 
is fair treatment of the residents. And I did it, and I think 
it should be done. And I do think that if we can go to project 
base, it gives the housing authorities incentives to negotiate, 
and to get the best deal that they can. But as long as we're 
unit base, they have no incentives, period. Persons can stay on 
the voucher as long as they want.
    I'm just one that believes that there should be a timetable 
for these vouchers. I don't think people should be on these 
vouchers, Senator, in perpetuity.
    Section 8, from its inception, was to transition from 
public housing to market-rate housing. That was the intent of 
it. But it has become a secondary system for public housing 
today. And I think that the 1998 legislation was a mistake, 
when we said that 75 percent of those vouchers should be for 30 
percent of less than medium. I think we should all go up to 60 
percent of medium and help people transition. That's my belief.
    But I do not want people--any person to be re-segregated. 
And I think we did a very excellent job in Dallas making sure 
that we disbursed those vouchers into middle- and upper-middle 
class areas.
    Senator Bond. But, still, wouldn't that require additional 
resources, if you're going up to a larger population?
    Secretary Jackson. I think that, Senator, when--I entered 
into an agreement with the industry 2 years ago, that I went 
and made a major case to OMB to increase the section 8 tenant-
based budget by $1.1 billion, I think, that in the final 
analysis we would go to project base. Have we done that? Yes, 
clearly. And I still think, if we go to it today, that we can 
cover the cost of the vouchers. But--and that's why we removed 
the cap, so that they would have additional money to carry it 
out.
    Senator Bond. Well, if you have further legislative 
proposals, obviously you should take that to the Banking 
Committee first, but share a copy with us, because we may get 
it--we may help them on that issue, if there is a good 
rationale for it.
    Secretary Jackson. I do think--let me say this--I do think 
there is a good rationale for it, Senator. Pre-1998, we were on 
the budget base budget. We got a budget. That's what I did. I 
got a budget. And I stretched that budget as far as I could to 
make sure that as many people were served as could be served.
    Now, in--after 1998, we went to unit base, and, in that 
process, we have--we have not served more people. That's what 
most of us don't understand. The price has increased 
significantly for the program, but we're not serving a greater 
group of people, because the housing authorities basically have 
no incentives to make sure they stretch the dollar as far as it 
can go. And as long as they don't have those incentives, 
they're not going to do what they should be doing.
    Now, some housing authorities are doing better than others.
    Senator Bond. Well, I was going to say, couldn't they do 
that now, with----
    Secretary Jackson. Yes.
    Senator Bond. They could do that now, and they're not doing 
it.
    Secretary Jackson. They're not doing it. It's unit base. 
And they're--they get the administrative fee, whether they 
house or don't house. I think we should give them some 
incentive to work hard. I had no problem housing people when I 
was at the Dallas Housing Authority or when I was at St. Louis 
or when I was in Washington. And they were all based on budget 
base. That's what it was before 1998.
    Senator Bond. Well, that's something we need to discuss 
with you further.
    Let me talk about--for a minute about----
    Secretary Jackson. I appreciate that.
    Senator Bond [continuing]. The FHA modernization. It 
appears that FHA's business is already doing better than last 
year, with tens of thousands of homeowners with conventional 
loans coming in to FHA through refinancing, which is up 94 
percent this year. Do you think that some of this growth is 
attributed to the problems with subprime borrowers?
    Secretary Jackson. I really do think that it is. And we are 
up. But I also think that's what's important is that if we can 
get this modernization legislation done, we can make 
significant strides and changes low- and moderate-income 
persons. And you and I both agree to--some months ago, when we 
were in Kansas City, one of your major concerns--I agree with 
you that there must be a cash investment. We cannot go zero 
downpayment.
    So, I believe that if we can get this legislation done, we 
can. And I can tell you, the refinancing in FHA has been at 94 
percent since last year. And we're doing everything in our 
power, as I just was going to address to the chairlady, to help 
those low- and moderate-income people who are facing 
foreclosure. We can't help certain groups, because their income 
is too high. But for those that we can help, we will do 
everything in our power to make sure that they keep their 
homes. Because, in my mind, this was not a case where you had 
bad borrowers.
    People were trying to get into a home. But what I saw was, 
you had--people got into really bad products, and there were 
people who were pushing these products, and the people did not 
really read the fine print. And we just had a case that we 
resolved for them--Congressman Scott, in Georgia--where these 
people really didn't understand what they were getting into. 
But we got it resolved. And so, I think that--I don't want 
anyone to leave here saying that, ``Well, these people who 
borrowed was bad.'' It's not that. They wanted a home, like 
everybody else in this room, but they got into a bad product. 
And if we can help some of them get out of that bad product, 
we'll do it.
    Senator Bond. With respect to the modernization, the 
Congressional Budget Office (CBO), the GAO, and the HUD 
Inspector General have all expressed concerns about the 
proposal. And the CBO expects that developing and maintaining 
the appropriate systems for managing a risk-based pricing 
system would take FHA several years to implement. In other 
words, there would be, potentially, a chaotic situation. How do 
you respond to these concerns?
    Secretary Jackson. First of all, I guess, Senator, I don't 
want to get into a debate with GAO or the inspector general. I 
believe in this product. I believe that, yes, we're going to 
have a transition period.
    I believe that clearly we can make this transition period--
we can do it very quickly--much quicker than 7 years. I think 
we're going to have to look at the risk-based factor in this 
process, and we will look at that risk-based factor. But I 
don't want us to connect subprime lending with FHA. There are 
so many more steps in FHA that will stop the subprime area. And 
we will do everything in our power to do that.
    So, I believe that the GAO, the inspector general, have 
their opinions. And I'm not here to debate their opinions. I'm 
here to tell you that I believe that this product can work. I'm 
convinced that if we get to modernization, we can save a lot of 
foreclosures and we can help a lot of low- and moderate-income 
people.
    Will we put the checks and balance in place? Yes. In fact, 
I met with the--I guess it was last week or week before last--
with our inspector general, and I said that I wanted him to 
meet with our FHA Commissioner, and I said, ``Put all your 
concerns on the table so we can address your concerns, because 
if you have concerns, I want to address them. I don't want to 
leave them out there, where he'll come before--and said, `I 
gave them suggestions, but nothing was done.' '' So, if GAO has 
it, we're taking those concerns into study, too.
    Senator Bond. Well, we'd like to be either part of those 
discussions or kept advised of those discussions, because when 
these are credible--creditable entities, and if they've got 
concerns, we want to see how those concerns are addressed. So, 
we're--we'll be very interested to see how that works.
    Secretary Jackson. And I will.
    Senator Bond. Now let's turn to another area of interest 
and excitement for the--for HUD. And that's the Housing 
Authority of New Orleans (HANO) after Hurricane Katrina. How 
many units are habitable now, and how many tenants have 
returned to the HANO?
    Secretary Jackson. We have, habitable units, almost 2,000. 
We've had about 1,600 families to return. We are still trying 
to get families to return. We have done surveys. We've been to 
Houston, to Atlanta, to other places. In fact, what has 
occurred is--Senator Bond, is, I've gotten a number of letters 
from public housing directors telling us to stop scaring the 
people. Many of the people don't want to return. People don't 
like for me to say that, but that's a fact. And so, I have to 
take in consideration, when I get these letters from these 
directors, they're saying, ``You're really scaring many of 
these people, because they're satisfied, they're living better, 
they have a better job,'' and I have to take that in 
consideration, too. So, those persons who are saying, ``Oh, he 
does not want people to return to New Orleans,'' that's not 
true.
    We're doing everything in our power. But, at the same time, 
I think I must in consideration--because I once ran a housing 
authority, the concerns of those people who are running housing 
authorities, who have provided decent, safe, and sanitary 
housing for people--if the persons want to stay, let them stay.
    Senator Bond. Well, I think--I think you make a good point, 
if somebody doesn't want to go back. But, then again, I think 
we all recognize that the more tenants a PHA director has, the 
more administrative fees they receive. So, I----
    Secretary Jackson. Sure.
    Senator Bond [continuing]. Think that needs to be weighed 
in with the--in the considerations.
    Secretary Jackson. I agree.
    Senator Bond. I know there's been a lawsuit delaying the 
development of HANO. And I'd like to know what efforts you're 
making to resolve it, when are you expected to have that 
lawsuit resolved. And will resolving that lawsuit clear the way 
for any additional residents who wish to return?
    Secretary Jackson. Yes. Let me say this. The lawsuit is an 
impediment. We have gotten significant low-income tax credits 
from the State of Louisiana. We've got funds allocated, of $500 
million, to totally redo most of the public housing in New 
Orleans. It's baffling to me for people to say, ``It's okay for 
low-income people to live in the squalor that they were living 
in.'' I find that very abhorring.
    Senator Bond. I agree.
    Secretary Jackson. If we can change the quality of life, 
and make it better, we should do it. We didn't have the 
resources, before, to do it. We have the resources now. But 
that lawsuit is standing in the way. I was very pleased with 
the ruling of the judge, but we're still going to have to have 
a hearing when--on this process. We have people like the 
Enterprise Foundation, Catholic Charity, ready to go to work to 
redevelop housing in this country--I mean, in New Orleans. But 
we have a lawsuit pending, with----
    Senator Bond. What does that lawsuit--how are you trying to 
resolve that lawsuit? That was my question.
    Secretary Jackson. Well, we're trying to work it out. I've 
been working with Chairlady Waters to try to get them to come 
to some agreement. One of the agreements that we came to is to 
have 2,000 units--2,500 units by September. Well, we have 
2,000, but we still have not got any actions from the 
plaintiffs. I mean, they're continuing to talk about, ``People 
should go back into the present situation that exists.''
    Senator Bond. Well, I would--I would think that those--I 
don't know if any of those housing units were in the very 
lowest areas, the low-lying areas, which are most flood-prone, 
and I certainly think it serves anybody's interest to put them 
more at risk.
    Secretary Jackson. I agree.
    Senator Bond. And I will--I'm now going to defer to my 
colleague from Colorado, but, afterwards, I'd like to call on 
the inspector general to provide any insights he has. So, if he 
would be ready to step up.
    But, Senator Allard, we'll now turn to you.

                           PREPARED STATEMENT

    Senator Allard. Well, thank you very much.
    And, first of all, I have a full statement I'd like to make 
a part of the record.
    Senator Bond. We would be delighted to make it part of the 
record.
    [The statement follows:]

               Prepared Statement of Senator Wayne Allard

    I would like to thank Chairman Murray and Ranking Member Bond for 
holding this hearing to review the fiscal year 2008 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.
    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 for his progress 
on this point; earlier this 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. I would encourage Secretary 
Jackson and all the dedicated staff at HUD to remain focused on 
maintaining this 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 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 
in 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. This budget is evidence of 
those 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 
hearings: 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 under 
the PART analysis. In 40 percent of the programs we either know that 
they 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 on the 
other side? I, for one, intend to keep looking at BOTH sides of the 
equation.
    I appreciate the opportunity to do so at this hearing. Mr. 
Secretary, your testimony will helpful as this subcommittee begins to 
write the appropriations bill for fiscal year 2008. Thank you.

    Senator Allard. And I also just would like to congratulate 
Secretary Jackson. When his confirmation came before me on the 
Banking Committee and whatnot, GAO had HUD on the risk list, 
and now you're off of that.
    Secretary Jackson. Yes.
    Senator Allard. And I'm very pleased to see that happening, 
because that brings accountability, as you know, to the 
process. I know how difficult it is to get the Government 
Performance and Results Act, you know, implemented, and then 
each year you get more comfortable with it and----
    Secretary Jackson. Right.
    Senator Allard [continuing]. Things keep moving along. And 
so, I want to compliment you for that effort.
    I think HUD's success as an agency isn't going to be 
defined by the budget number. More money doesn't necessarily 
mean more people are served, and the people are served any 
better. I think, with what you've put in, then I think we can 
feel much more comfortable about what's happening there at HUD.
    The first question I'd have, Secretary Jackson is--it's an 
issue that you and I have explored at past--previous hearings. 
According to a recent article, Deputy Secretary Bernardi had 
indicated that you plan to issue a RESPA rule proposal by 
September 30, and possibly as early as this summer. Will you 
please comment on your intentions? And what is your timeframe 
for action on RESPA?
    Secretary Jackson. The Deputy Secretary is correct. 
Hopefully, by September. But it's going to be clearly 
transparent. We learned our lesson last time around about not 
being transparent with this rule. We will continue--we will not 
put the rule into effect until we have discussed it with--for 
the final time with the industry groups, with the subcommittee 
here, with the subcommittee in the House. We realize that, in 
the final analysis, that we really need a consensus. You know, 
I like to use the analogy, Senator Allard, like last time, 
it's--I was a sprinter, an all-American, and I ran on the 400-
by-100 relay. And if you don't have anybody to hand----
    Senator Bond. Good training for your current position, I 
would say.
    Secretary Jackson [continuing]. If you don't have anybody 
to hand the baton off to, you're not going to be four other 
people running by yourself. That's the situation we were in. 
And I think you made it clear. I think Senator--Congressman 
Manzullo made it clear. And so, we don't want to do anything 
haphazardly this time. We want the rule to be acceptable to a 
consensus of the people. So, we will not be moving the rule. 
And I have not moved it very quickly. There are some people who 
say we should get it out quickly. No, we're still discussing 
it, and we hope to have a consensus.
    Senator Allard. So, what we're going to be seeing in 
September is a proposed rule, it's not going to be a final rule 
by----
    Secretary Jackson. That's correct.
    Senator Allard [continuing]. And so, we're just getting the 
process started.
    Secretary Jackson. That's correct.
    Senator Allard. Okay. And are you going to--what role do 
you see Congress playing in this process? Any at all? Or are 
you just going to expect Members of Congress to drop in on 
public comment?
    Secretary Jackson. No, I think that when you see the 
proposed rule, I would think that you would give us suggestions 
as to how you think the final rule should be made.
    Senator Allard. Well, you know, I think that's nice, but I 
also do think we need to work with the affected parties, you 
know----
    Secretary Jackson. Right.
    Senator Allard [continuing]. And so, like I say, I 
appreciate the way you've been doing business, and--but I felt 
like I needed to ask that question, because it does tend to be 
controversial.
    Secretary Jackson. Surely.
    Senator Allard. Now, your 2008 budget assumes enactment of 
a number of legislative proposals. How would funding and staff 
needs change should those proposals, particularly the FHA 
reform package, not be enacted?
    Secretary Jackson. Well, we believe that if we can enact 
the FHA modernization legislation, we would probably need 
additional staff, but that's because, I think, that we have 
lost a significant number of persons who want to deal with FHA. 
If--you know, if I were a low- or moderate-income person with 
all of the paperwork that they have to go through, I wouldn't 
deal with FHA.
    I think the key to it is to modernize it, but, at the same 
time, not lower our standards, and make sure that, in the final 
analysis, that we can document everything that we're doing, and 
that we, even in the risk-based premium part, make sure that 
we're doing everything we should be doing.
    Senator Bond asked a question a few minutes ago and I 
agreed with him, it's going to take a transition, it's not 
going to be done overnight. I don't think that it will take 
several years. I really don't think that. I think we've got 
competent staff. So, I think that if we can get this 
legislation passed by this summer, we can help a lot of low- 
and moderate-income people, and we can help a number of people 
who are facing foreclosure today.
    Senator Allard. Mr. Chairman, may I--or you're--I guess 
you're the acting chairman--I'll keep going, if that's okay.
    Senator Bond. That's fine.
    Senator Allard. Okay.
    Also, Secretary Jackson, you've been dealing with some 
issues, as far as waste and--wasteful spending. And I want to 
commend you, again, for correcting some of the practices that 
we have there. Can you describe your efforts to end improper 
payments, and update us on your progress?
    Secretary Jackson. Yes. We have done extremely well with 
the improper payments. I would let Assistant Secretary Cabrera 
answer that question, because he's dealt with it firsthand.
    Senator Allard. Mr. Cabrera?
    Mr. Cabrera. For the record, Senator Allard, Orlando 
Cabrera, Assistant Secretary for Public and Indian Housing at 
the Department of Housing and Urban Development.
    We've had enormous success, due to the Secretary's efforts 
and our staff's effort. And what we have done is essentially 
work with other agencies in order to acquire data. That has 
minimized, to a great extent, improper payments. They are down 
to, as I recall, about $1.2 billion, from $3.1 billion, through 
the end of the--through the end of the last fiscal. And I don't 
have the most current data, but my expectation would be that it 
would be even less than that now. And that's in a 2-year 
period, I believe.
    Senator Allard. Thank you for your response.
    Mr. Cabrera. You're welcome.
    Senator Allard. Now, one of the--go ahead.
    Secretary Jackson. Senator, what I was going to say is that 
when I became Secretary, one of the things that I committed to 
the President and to the people is that we would correct a 
number of the problems, the improper payments, and we would get 
off of the high-risk list. And I'm glad that we've done both of 
those. And--but I could not have done it--it was a great team 
effort, not only from the Deputy Secretary and all the 
Assistant Secretaries, but, also, OMB helped us tremendously. 
So, I am very proud that we did that.
    One of the major issues was FHA. I would not be here asking 
for FHA modernization if we were still on the high-risk list. 
It would be very difficult to ask, until we got ourselves in 
order. And the single-family and others have been very positive 
to date.
    Senator Allard. Good.
    Now, you--a lot of businesses and whatnot are experiencing 
an aging workforce. In your agency, I think yours might be as 
acute as any, as I understand it.
    Secretary Jackson. I'm sorry, I didn't hear you.
    Senator Allard. Businesses all over the country are facing 
some problems with an aging workforce.
    Secretary Jackson. Yes.
    Senator Allard. The agencies in the Government are no 
exception. Your agency, HUD, has the highest risk on an aging 
workforce, in that many of them are coming up for retirement in 
2006 and 2008. That is something you can plan for and look 
into. Could you give us some--what you're doing about 
addressing that potential problem, where you're going to have 
your forces coming up for a mass retirement, so to speak, in a 
couple of years?
    Secretary Jackson. In all honesty, it's very scary. It's 
very scary, because unlike when I was running American Electric 
Power--we had a succession program, where, if we knew that an 
engineer was leaving, we could bring one on for the next 90 
days so this--and, you know, you could train--there is 
basically no succession policy in Government. I mean, until the 
person leaves, we can't hire, because we have 9,000 full-time 
equivalents (FTEs), and we can't bring somebody in to a slot 
based on the person leaving in 60 days or 90 days. So, it's 
very difficult. And about 67 percent, I think--Dave can help 
me; he's sitting behind you. I think about 67 percent of our 
population that's at HUD can leave right now. It's very 
devastating. And I can tell you, on a number of occasions I've 
asked at least 30 people to stay, because we didn't know--in 
fact, Ranking Member Bond, I asked Attorney Kenison to stay, 
but he said he had 40 years, and he was ready to go. But that's 
a huge void that we have right now, because he was really a 
senior attorney and knew a lot.
    So, I will tell you, my best answer is I'm afraid that if 
we have a mass exodus, we're going to have a serious problem.
    Senator Allard. Madam Chairman, I've finished--well, I have 
some more questions, but----
    Senator Murray [presiding]. Thank you very much.
    And, Mr. Secretary, thank you for your patience as we've 
bopped in and out, here.
    When I had to leave, I was asking you about the money to 
the gulf region, and wanted to ask you, in particular, about 
the $2 billion, the vast majority of which has been spent on--
focused on homeowner assistance, not on rental housing. This 
subcommittee included statutory mandate in June, 1 year ago 
that required at least $1 billion of the $5.5 billion we 
provided at that time to be used for repair, rehabilitation, 
and reconstruction of affordable rental housing stock in the 
impacted areas. How many projects, can you tell us, have been 
rebuilt or repaired as a result of that funding? And how many 
tenants have now been able to reoccupy those facilities?
    Secretary Jackson. Yes, I will. Let me say this, that in 
Mississippi they've moved expeditiously to do exactly what you 
said. In Louisiana, I must tell you, we have been disappointed. 
In fact, I can't pinpoint exactly what has occurred to rehab 
units for rental, at this point, in Louisiana, because most of 
the monies that have been spent, it's been spent basically on 
paying a vendor, which was--who headed the program, ICF.
    We have been very slow in awarding the compensation grants 
to the people who lost their home. We met with the Governor--I 
shouldn't say the Governor--the Governor's staff, about 1 month 
ago, and told her that it was totally unacceptable at the rate 
that they were spending to--spending the money, and the rate 
that they were giving people compensation or rehabbing housing.
    Now, I think if you look at the legislation, chairlady, the 
first $6.5 billion to Louisiana, we have very little control 
over. The second part, we have a lot of control over. And so, 
with that, we can either say, ``You're not doing an acceptable 
job''--but the leverage is not there.
    So, I will tell you that I'm not pleased with the progress 
that's been made. I'm just not----
    Senator Murray. So, you can't give me the number that have 
been repaired or rebuilt?
    Secretary Jackson. I will look and find out, but I don't 
think it's very many. So, I don't want to give you a faulty 
number today, but I will get it to you immediately after this.
    Senator Murray. Okay. I would appreciate that.
    [The information follows:]
     Public Law 109-234--Requirement for Affordable Rental Housing
    Public Law 109-234 appropriated a total of $5.173 billion in 
supplemental CDBG disaster recovery grant funds to the five gulf States 
affected by Hurricanes Katrina and Rita.
The fifth proviso stated:
    ``Provided further, That not less than $1 billion from funds made 
available on a pro-rata basis according to the allocation made to each 
State under this heading shall be used for repair, rehabilitation, and 
reconstruction (including demolition, site clearance and remediation) 
of the affordable rental housing stock (including public and other HUD-
assisted housing) in the impacted areas:''
    On October 30, 2006, HUD published in the Federal Register the 
five-State allocations, waivers and requirements. In particular, HUD 
published the following provision to implement the statutory 
requirement for the $1 billion to be spent for affordable rental 
housing stock:
    ``Also as required by the law, not less than $1 billion of the $5.2 
billion appropriation less $27 million in administrative set-asides 
(which computes to 19.3311 percent of any State's allocation) shall be 
used for repair, rehabilitation, and reconstruction (including 
demolition, site clearance and remediation) of the affordable rental 
housing stock (including public and other HUD assisted housing) in the 
impacted areas. Therefore, HUD is requiring that not less than 19.3311 
percent of each State's grant be used for these activities.''

------------------------------------------------------------------------
                                                    Minimum amount for
                     State                          affordable rental
                                                         housing
------------------------------------------------------------------------
Alabama........................................               $4,103,146
Florida........................................               19,344,001
Louisiana......................................              811,907,984
Mississippi....................................               81,777,703
Texas..........................................               82,867,166
                                                ------------------------
    Total......................................            1,000,000,000
------------------------------------------------------------------------

    The five States have submitted Action Plans for the required 
housing that HUD has accepted.
    The amounts budgeted for affordable rental housing is as follows:

------------------------------------------------------------------------
                                                              Amount
------------------------------------------------------------------------
Alabama: Unspecified projects for affordable rental           $4,103,146
 housing................................................
Florida: Multifamily Housing Repair and Mitigation......      20,013,304
                                                         ===============
Louisiana:
    Piggyback/LIHTC Affordable Multifamily Rental            593,970,000
     Development, 18,000 units proposed.................
    Small Rental Development--10,000 units proposed.....     492,700,000
                                                         ---------------
      Subtotal..........................................   1,086,670,000
                                                         ===============
Mississippi; Small Rental (1-4 units) Assistance Program     262,000,000
                                                         ===============
Texas:
    Assistance to Multifamily properties (16+ units) in       82,866,984
     areas damaged by Hurricane Rita....................
    Rehabilitation of Multifamily Apartments in Houston/      20,000,000
     Harris County where large numbers of evacuees live.
                                                         ---------------
        Subtotal........................................     102,866,984
                                                         ===============
        Grand Total.....................................   1,475,653,434
------------------------------------------------------------------------

    The above programs are in various stages of program design and 
implementation. The States are at the forefront of implementing their 
program designs which took time to develop and institute. We anticipate 
future progress reports will capture the activity and commitment of 
each State. Louisiana has been accepting applications from prospective 
apartment owners as well as projects for the Affordable Multifamily 
Rental Development program. Mississippi has rolled out its program and 
applications are available on-line.
    The CDBG disaster grant funds currently budgeted for affordable 
housing exceeds the statutory minimum by over 47 percent. Not counted 
in these amounts are funds the States have budgeted from the CDBG 
disaster supplemental appropriated under Public Law 109-148. Funds 
budgeted by the States from this appropriations exceeds an additional 
$500 million. In all, total resources committed to affordable housing, 
public housing and supportive and housing for the homeless is 
approximately $2 billion. At the moment there is limited progress as 
the States are in the initial stages of operationalizing their programs 
or undergoing the application phase.

    Senator Murray. And the administration asked us, and we 
approved, a provision that allows the PHAs in the most heavily 
impacted areas in Mississippi and Louisiana flexibility to 
combine their funding streams from all the Federal resources to 
assist tenants in a lot of ways in reconstructing damaged or 
destroyed housing. You kind of alluded to this, but the Housing 
Authority of New Orleans, which is under your exclusive 
control, is now sitting on over $95 million in Federal funds, 
and doesn't have a lot of activity to show for it. Can you tell 
us why--this is under your control--can you tell us why those 
Federal dollars are not being spent?
    Secretary Jackson. You mean in Louisiana?
    Senator Murray. It's the Housing Authority of New Orleans.
    Secretary Jackson. The dollars are being spent. We are 
moving expeditiously. As the ranking member asked, we have 
completely rehabbed 2,000 units. We have committed to rehab 
2,500 units. We--to date, we've housed 1,600 people. And I will 
give you the same answer that I gave the Senator, we're trying 
to entice people to come back and occupy those units, but we 
have not been very successful, because many of the people are 
pleased with where they are. But the units are online, and we 
committed to the court and to Chairlady Waters on the House 
side, that we would have 2,500 units for occupancy by 
September, and we will keep that commitment.
    Senator Murray. We're seeing $95 million sitting on the 
books. Is that inaccurate?
    Secretary Jackson. I will find out. I don't think there's 
$95 million sitting on the books that's not being spent. If it 
is, I will get back to you.
    [The information follows:]

    On December 7, 2006 HANO, in accordance with Federal Register 
Notice No. 145 Vol. 71, submitted a fungibility plan to the Department 
of Housing and Urban Development (HUD). Under this plan, HANO was 
allowed to combine its Operating Fund, section 8, and Capital Fund/RHF 
funds under one plan to provide for the development and revitalization 
of its public housing stock. The following summarizes HANO's financial 
position at September 21, 2007 in relation to its 2006 fungibility 
plan:
    Summary of HANO 2006 fungibility dollars, amounts expended and/or 
committed, and remaining 901 funds:

------------------------------------------------------------------------
                                                             Amount
------------------------------------------------------------------------
2006 Fungible Dollars (Operating Fund, Capital Fund,       $121,586,296
 and section 8)......................................
                                                      ==================
    Expended on rehab of reoccupancy units at                (1,468,875)
     Iberville.......................................
    Expended on security for vacant sites............        (2,666,354)
    Expended on Lafitte Pre Development Costs........        (3,226,893)
                                                      ------------------
      Total 2006 Fungible Dollars Expended...........        (7,362,122)
                                                      ==================
Obligated for the demolition and infrastructure of          (33,527,103)
 properties slated for redevelopment.................
Obligated for pre construction loans on mixed finance       (18,688,000)
 projects............................................
                                                      ------------------
      Total 2006 Fungible Dollars Obligated..........       (52,215,103)
                                                      ==================
      Total 2006 Fungible Dollars Expended and              (59,577,225)
       Obligated.....................................
          2006 Fungible Dollars net of expended and          62,009,071
           obligated balances........................
                                                      ------------------
          Interest earned on 901 funds held in                1,087,654
           depository accounts.......................
                                                      ==================
            Net Currently Available..................        63,096,725
------------------------------------------------------------------------

    Although HANO has not expended a majority of the 2006 funds 
available, nearly 50 percent has been obligated. This delay between 
obligation and expenditure is typical of redevelopment projects. In the 
case of HANO, delays in redevelopment have been caused by external 
factors such as environmental reviews, including protracted historic 
negotiations with the State Historic Preservation Office (SHPO) and the 
Advisory Council on Historic Preservation (ACHP) requiring the 
finalization of Memoranda of Understanding (MOA) with multiple 
consulting partners. Additional delays resulted from litigation and 
time required to select developer partners. Recently, several approvals 
have been obtained. HUD has approved the demolition and disposition of 
four major public housing sites and predevelopment agreements have been 
signed with the developers of the four sites. HANO intends to obligate 
the remaining funds for redevelopment of public housing within 6 
months.

    Secretary Jackson. I--in fact, one of the issues that we 
are facing is that we have been told by the accountant that's 
in the housing authority, that we have a shortage of funds. And 
I've asked Scott Keller, who's the Deputy Chief of Staff, to 
make sure that we have ample funds to carry out the 
responsibilities.
    So, if we have $95 million, I will surely get back to you, 
because I really don't--I really don't know, at this point.
    Senator Murray. Okay. I have one other area that I wanted 
to just quickly ask you about, and that is the issue of the men 
and women coming home from serving us in the armed services. We 
are hearing a lot about the homelessness issue that is facing 
these veterans when they return, their ability to get in, and 
stay in, housing. And I wanted to ask you what HUD is doing 
specifically to meet some of the challenges of our returning 
veterans.
    Secretary Jackson. We have been working with Secretary 
Nicholson, because he has the same concern. And we're doing 
everything in our power with our vouchers with public housing 
to house many of these people. I'm totally in agreement with 
you, they should not come back and not be housed. And I will do 
everything--I won't say ``I'll do''--I'll continue to do 
everything in my power to make sure that they're housed.
    Senator Murray. Well, I'm familiar with the HUD-VASH 
program----
    Secretary Jackson. Right.
    Senator Murray [continuing]. May have been what you're 
referring to--that combines HUD section 8 with some supportive 
services. We know that, since 1992, only 1,780 of those 
vouchers have been issued. Is this a program that HUD still 
supports?
    Secretary Jackson. Yes, we do. And what we--we're doing--
whenever vouchers are available--and I promised Secretary 
Nicholson this--we will allocate it to the program up to the 
number that we should require. Back in 1996 or 1997, they 
stopped allocating the vouchers and began to allocate them 
outwardly. We should have never allocated those vouchers that 
were set out for veterans. And we're trying to recapture them. 
We have--I think we--to date, we've gotten about 200 back. It's 
very difficult to get the vouchers back once they're out there.
    Senator Murray. Have you had a personal discussion with 
Secretary Nicholson about this program?
    Secretary Jackson. Yes, I have.
    Senator Murray. Okay. Well, I would like to find some 
answers back, and I'd hope that you can really focus on this. 
It is a growing concern out there, and, I think, one that we 
all need to----
    Secretary Jackson. And I agree with you, wholeheartedly.
    Senator Murray. Okay, thank you very much.
    Senator Bond.
    Senator Bond. Thank you very much, Madam Chair.
    And I said I'd like to call up Mr. Donohue. While he's 
taking his seat, I want to call to your attention, Mr. 
Secretary, a problem that was highlighted in the May 2 Post-
Dispatch. And I know you're familiar with that paper, having 
lived and worked in St. Louis.
    There is a tragic situation at Centenary Housing, a company 
of Portland, Maine, that acquired property and--it's a public/
private venture that, according to this paper, and from our 
information, allowed the housing to lapse into a state of 
disrepair and chaos. The elderly and disabled residents are 
being forced out of their homes, and it is another serious 
situation. And I'd ask that you make a personal commitment to 
have somebody look into it to ensure that these residents are 
not harmed and their needs are addressed. Apparently, there has 
been a tremendous number of police calls over the last 2 
months, some 1,151 calls for police support. So, something is 
going drastically wrong there. So, I would like----
    Secretary Jackson. Well, I'll say this. I think, as of last 
evening, we had found vouchers and housed about 60 of the 97 
people. I will be making a trip out to St. Louis early next 
week to make sure that many of the elderly and the disabled 
issues related to housing is addressed, because I'm very, very 
concerned when they're elderly and disabled.
    Senator Bond. Well, thank you. We are, too. And I 
appreciate your personal attention.
    Now, turning to Mr. Donohue, I would like to get your views 
and assessment on the HUD funding, addressing the devastation 
caused by Katrina. And I would like your assessment of what the 
key concerns are and how well Mississippi and Louisiana are 
implementing the use of emergency CDBG funds. Are they being 
allocated quickly and effectively? Has--have you seen any 
evidence of fraud and abuse in these programs?
    Mr. Donohue. Yes--Kenneth M. Donohue, D-o-n-o-h-u-e, 
Inspector General, Housing and Urban Development. Thank you, 
Senator.
    We--as far as the disbursement of funds, I have some notes 
here--Louisiana, 129,260 applications; grants paid out is 
$12,681.
    Senator Bond. So, that's 10 percent?
    Mr. Donohue. That's about right, sir.
    Mississippi is 18,753; grants paid is $12,413.
    Senator Bond. So, that's about 67 percent.
    Mr. Donohue. Yes, sir.
    Senator Bond. My math is a little--my horseback math is a 
little shaky, but, I think, just for the sake of comparison, 
it's--it would be helpful to know.
    Mr. Donohue. I think--as far as our patterns are concerned 
with regard to Louisiana, I think what we're seeing is that the 
applications are slow in the process. And the fact is, I think 
what we're finding is a lot of homeowners are trying to make a 
determination as to whether they want to return or rebuild. And 
I think part of that reason is the fact--is whether the 
infrastructure--education programs and hospitals and so on--are 
enough there to support the efforts that they want to return 
to. But it has been quite slow, and we continue to watch it 
closely.
    Senator Bond. Are you seeing--are the funds--the funds that 
are being allocated, are they being effectively allocated? Have 
you come across any fraud and abuse in either of these two 
States?
    Mr. Donohue. We certainly do, sir. We--as I told you that 
we've tried to take a very proactive approach to our efforts. 
We have several ongoing audits. I've expanded my offices to 
include several locations in Mississippi--Hattiesburg and 
Jackson, Mississippi, increased my staff in New Orleans. We 
have, at this point, about--in the criminal side, about 123 
cases, fraudulent applications.
    Senator Bond. Where are those cases, mostly?
    Mr. Donohue. They were both in Mississippi and Louisiana. 
We had a recent announcement, on April 16, where we indicted 
ten people in Mississippi, primarily with grand fraud. What 
we're seeing, Senator, is, we're seeing a movement from grand 
fraud now to move contract or public corruption cases. And we 
think that will continue on as more contracts are awarded.
    Senator Bond. That's an unfortunate--that's an unfortunate 
result of it, and we appreciate very much you staying on top of 
it. Any other problems on how HUD's dealing with the 
rebuilding, or any major problems facing HUD in rebuilding the 
low-income housing stock?
    Mr. Donohue. Well, just a few things are--I think that one 
of the things we've found is that the Privacy Act issues with 
regard to transferring--doing data matching between Government 
agencies--we'd like to see--and I believe--I would suggest that 
when we have disaster of this type, there are issues that have 
to be addressed in the privacy issues so Government agencies 
can share information with each other more easily.
    The other thing I've seen is--with the Department, is 
communications. And I think--what I mean, between the program 
areas themselves, and also communications with the local 
offices and headquarters. I'm pleased to have learned that the 
Deputy Secretary has--and the Secretary--have announced naming 
a person in charge of the department that'll oversee the entire 
efforts in the gulf States area, and I applaud that effort.
    Senator Bond. Thank you very much, Mr. Donohue.
    Thank you, Madam Chair.
    Senator Murray. Do you have any other questions?
    Senator Bond. Well, I'll--I have just two more, but I'll 
let you and Senator Allard go forward.
    Senator Murray. Senator Allard.
    Senator Allard. Thank you, Madam Chairman.
    Mr. Secretary, as you may well be aware of, I pay close 
attention to the President's PART program. This is made 
possible through legislation we passed over a decade ago, where 
the Congress asked for the agencies to establish a Government 
Procedures and Results Act--I guess it's Performance and 
Results Act.
    Secretary Jackson. Right.
    Senator Allard. And I watch that fairly closely. And I 
notice that you have some agencies there--four, I believe--that 
are rated as ineffective. They have eight or so that are rated 
as ``no results demonstrated.'' And rating on that is: no 
results demonstrated, ineffective, moderately effective, or 
effective.
    And what is it that you're doing to address these agencies 
that refuse to try and do anything, or, for some reason or 
other, are unable to, and then those that are also rated 
ineffective? In my way of thinking, the most egregious one are 
those that absolutely aren't trying. And then, those that are 
ineffective would be next to the bottom. So, I just wondered 
what you're doing, when you look at the results of that, to 
correct those problems.
    Secretary Jackson. Two things. First of all, as I said, we 
are making every effort to do what we did with FHA in the 
public integrity issue with undercounting. I believe that, 
clearly, getting off the high-risk list was extremely important 
to us. One of the things that we have stressed--and, I mean, 
when--I said ``we,'' because I don't like the term ``I''--we 
have stressed--that means the Deputy Secretary and the 
Assistant Secretaries--is performance. And I must tell you, 
working with Clay Johnson, over at OMB, who is a performance 
expert, we have begun to move quickly, programs that were 
ineffective to effective programs.
    Second, when we hired our Chief Information Officer, we had 
so many computer systems, Senator Allard, that did not talk to 
each other, it was unbelievable. She has done--we've gone from 
an F to an A, because we have integrated those systems and cut 
out a lot of those systems. So, we're making tremendous 
strides, because I think that if we don't make those strides, 
then clearly we will find ourselves back on the GAO list again, 
and I don't want to be back on that list.
    Senator Allard. Well, good for you. What are your--getting 
to your budget--I think, 6 years ago, you were carrying--the 
HUD was carrying somewhere--about $12 billion unallocated and 
unspent balances. Are you carrying any unallocated--I assume 
you're carrying some unspent balances and some unallocated--do 
you have any idea what that figure is?
    Secretary Jackson. I will get it for you. I don't, today.
    Senator Allard. Okay.
    Secretary Jackson. If we have it, I will get it.
    Senator Allard. I would like to--I'd like to have that 
information----
    Secretary Jackson. Sure.
    Senator Allard [continuing]. If you would, please.
    [The information follows:]

                  Unobligated and Unexpended Balances

    At the end of fiscal year 2001, The Department carried over $10.99 
billion in unobligated balances into fiscal year 2002. At the same 
time, the unexpended balances for the Department were $103.26 billion. 
At the end of fiscal year 2006, the most recently completed fiscal 
year, the Department carried over $13.69 billion into fiscal year 2007, 
while the unexpended balances were $85.35 billion. Although the amount 
of unobligated balances increased by $2.7 billion, this is largely 
attributable to the emergency supplemental funds appropriated in 
response to Hurricanes Katrina, Wilma, and Rita. During this same 
timeframe, the Department was continuing the successful efforts to 
expend funds more efficiently and expeditiously as demonstrated by the 
$17.9 billion reduction in unexpended balances.

    Senator Allard. And then, finally, as far as I'm concerned, 
on the multifamily mortgage insurance premium, I see that--in 
the budget there, that you're asking for an increase in that. 
The past years, that's been highly controversial. What--are 
there other ways? I mean, why are--why do you include that in 
your budget when it's--in your appropriation--when it's so 
controversial?
    Secretary Jackson. Well, let me have--I can give you an 
answer, a generic answer, but let me have Brian Montgomery--
Brian is not here? Oh.
    Senator Allard. Well, he can give me a written response.
    Secretary Jackson. I will give you a written response, very 
quickly.
    Senator Allard. Okay.
    Thank you, Madam Chairman.
    Senator Murray. Thank you.
    [The information follows:]
            Multifamily Mortgage Insurance Premium Increase
    The proposal to raise the annual insurance premiums on multifamily 
housing projects was prompted by the outcome of an evaluation of the 
program using OMB's Program Assessment Rating Tool (PART). That 
evaluation raised questions concerning program targeting and its 
overall efficiency. While we intend to review the program to determine 
whether or not changes need to be made, let me assure you that no 
actions--including raising the premiums--will be taken until they are 
fully discussed with all interested stakeholders, especially Congress.
    The annual premium increases impact only the following multifamily 
products. Projects that use Low-Income Housing Tax Credits are exempt 
from this increase:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Description                              Fiscal year 2007          Fiscal year 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
221d4.................................  FHA New Construction/Substantial Rehab Apartments...........  45 basis points.........  61 basis points.
223a7.................................  Refinancing of Apartments...................................  45 basis points.........  61 basis points.
223f..................................  Refinancing/Purchasing of Apartments........................  45 basis points.........  61 basis points.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Senator Murray. Mr. Secretary, I do have some questions 
that I'm going to submit for the record that I hope that you 
will respond with, and I will leave the record open for any 
other members who have questions, as well.
    Senator Bond, did you have anything else you wanted to ask 
now?
    Senator Bond. Thank you, Madam Chair.
    Yes, I'll have a few, just to make sure that we keep the 
Secretary busy. But I do want to ask a question about housing 
for the disabled. The 811 budget request assumes a new $15 
million demonstration program, and I'm curious what the logic 
is behind requesting funds for the demonstration, while 
drastically cutting the overall program. I'm especially 
troubled that HUD recommends that $75 million, of the $125 
million requested, be targeted solely to tenant-based vouchers. 
This continues a trend against, apparently, new housing for 
persons with disabilities. And what's the definition for going 
tenant-based without providing some incentive for construction 
or rehab for--of facilities for persons with disabilities?
    Secretary Jackson. Senator, we believe that, as we do with 
HOME dollars, that we should begin to leverage the dollars, 
find developers to develop housing for disabled, for the 
elderly, and do all--and do as much as we can to create more 
housing. We have strictly been building housing with 202 and 
811, but we have not been building it in a quick or judicious 
fashion. We really haven't. And I think that if we can find an 
interim area where we can do it--and that's for the 
demonstration program--then I clearly believe that I will come 
back and ask for more monies. But we've got to build the 
house--housing quickly.
    Now, I know the question becomes, ``Well, if you will ask 
if it's done, what happens to the--to many of the people who 
are disabled?'' That's why we've increased the vouchers, 
because we find that much quicker to be used. They can get an 
apartment much quicker, or get a home much quicker than we can 
build it. So, we're trying to accommodate as many disabled and 
elderly as we can, and that's the reason why we went to the 
demonstration program.
    Senator Bond. Well, it would seem to me that, rather than 
cutting the overall 811 program, that perhaps project-based, 
along with the demonstration program, would begin to provide 
the facilities that we need that are in--truly wanting in many 
areas. So, I question--have you worked with the disabled 
community? And do you expect any legislative proposals to be 
submitted to Congress?
    Secretary Jackson. Yes, I just met with ADAPT--today is 
Thursday--on Monday, when there were about 500 disabled persons 
in town. I went to see them. And clearly their concern is the 
concern that you've raised, not only for veterans, but for 
disabled--not only for disabled veterans, but disabled people, 
period, and especially those persons in nursing homes. And I 
agreed with them that we would work with them to try to create 
legislation that could be presented to you all. And I have my 
staff working with their executive board or committee, whatever 
they're called, to see exactly what it is that they want, and 
to have us introduce legislation.
    Senator Bond. We'll look forward to that proposal.
    Finally, saving some of the best for submission for the 
record, on the question of homeless, as I said in my opening 
statement, I think you've made great progress, and I support 
your--the administration's focus on the chronic homelessness 
and the goal to provide 150,000 units. How close are we to 
meeting this goal? And, after that goal is met, what are your--
what are the next steps to addressing other types of 
homelessness, especially family homelessness? Do you have a 
long-term strategy?
    Secretary Jackson. Yes. You know, I visited a number of 
homeless organizations, and I think the model that I've seen 
that works best is the model out in Los Angeles called PATH. 
And I don't know exactly what the acronym--what they do--and 
that's one of the reasons we increased the budget by $1.6 
billion--they first take the person off the street, then they 
clean up the person, then they have the person go through both 
physical and psychological evaluation, then they begin to train 
the persons in job classifications, and then they monitor the 
person for the next 18 months after they leave. To me, that is 
the way we should be addressing the homeless, not putting a 
person in a shelter because it's cold that one night. And 
that's traditionally what we have been doing. So, what we're 
trying to do is replicate PATH around this country, because if 
they can do it, other cities can do it.
    I think you have made great strides in St. Louis, too, 
addressing the homeless.
    Senator Bond. I'm proud of what's going on there.
    Secretary Jackson. Very much so. But there are other 
cities--and I like to use the city that I'm from--like Dallas, 
that has not made great strides. They still think that the most 
important thing is to house a person for a night. And I don't 
think that's the approach that the President wants to take, or 
I want to take. Once a person is on the streets for 90 days or 
more, they're going to need tremendous help not to go back to 
the street. And I would prefer see them--seeing them not go 
back to the street. I look out, every day, at my window at HUD, 
and there are people sleeping under the freeway. And that is 
unacceptable. And they've been there for 3 or 4 weeks. So, 
clearly, we should be addressing their needs to get them off 
the streets.
    Senator Bond. Well, thank you very much. Mr. Secretary, the 
only thing I'd disagree with, I still think you ought to claim 
St. Louis as your roots, but----
    Secretary Jackson. Well, St. Louis is--let me say this to 
you, Senator. I was born in Dallas, Texas, but I lived most of 
my----
    Senator Bond. You didn't have a choice about that.
    Secretary Jackson. That's right. But I lived most of my 
adult life in St. Louis, and St. Louis is like my home.
    Senator Murray. Okay.
    Senator Bond. Keep the faith in the Cardinals.
    Thank you very much.
    Secretary Jackson. And they are my team, too----
    Senator Murray. But we're not----
    Secretary Jackson [continuing]. The St. Louis Cardinals.
    Senator Murray [continuing]. Going to go there.
    Well, thank you very much, Senator Bond.
    And, Mr. Secretary, I want you to get back to us on a 
number of questions that were raised here today. I especially 
want to find out about the $95 million that the Housing 
Authority of New Orleans--your Assistant Secretary is the one 
who gave us the number----
    Secretary Jackson. Okay.
    Senator Murray [continuing]. That it is sitting there, it 
is available for reconstruction now. So, we want to find out--
--
    Mr. Cabrera. Who is it? I can talk--I can speak----
    Secretary Jackson. He can speak to it, if you want him----
    Senator Murray. I would like a question back in----
    Secretary Jackson. Okay.
    Senator Murray [continuing]. Response.
    Secretary Jackson. I didn't know he had given you the 
number.
    Senator Murray. Actually, we'll get a response back from 
you in writing, if--and not in testimony today, because we do 
need to move on. But I appreciate your being here today. But I 
want to----
    Mr. Cabrera. Can we give a quick----
    Senator Murray. If you can give a 30-second response, we 
have a vote we have to get back----
    Mr. Cabrera. Absolutely, Madam Chair. Orlando Cabrera, for 
the record, once again.
    The $95 million is a reserve number that allows for the 
fungibility that Congress provided in section 901 of the 
supplemental. And so, the reason that it's not--the reason it's 
there is because currently HANO, HUD, and others are being 
sued, and that's impeding development. The purpose of that 
money is to redevelop. And so--but there is--that's composed of 
section 8, operating fund----
    Senator Murray. Right.
    Mr. Cabrera [continuing]. And it includes capital fund, 
even though that determination is a little bit unclear. It's 
actually $81 million plus $14 million----
    Senator Murray. Right.
    Mr. Cabrera [continuing]. But there's an interpretive issue 
as to whether that $14 million is inclusive. And so, that's 
what--that's what the $95 million is.
    Secretary Jackson. And we will still get you a written 
response.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Murray. I--and I very much appreciate that, thank 
you.
    Secretary Jackson. Okay.
    [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 Herb Kohl

                       CUTS IN THE OPERATING FUND

    Question. The Milwaukee Public Housing authority recently told me 
that they are being restricted from using a portion of their capital 
fund to off set some of their operating costs. Specifically, they use 
capital fund money to pay for their Public Safety program, which 
provides security and intervention services for seniors, disabled 
individuals, families and veterans in public housing. They are very 
concerned because current law allows them to use up to 20 percent of 
their capital fund to cover certain operational costs, however, HUD 
issued guidance that would eliminate this flexibility. This rule would 
force the Milwaukee PHA to lay off 35 employees who administer evening 
and weekend security. It is unclear why HUD would eliminate PHAs 
flexible use of the Capital fund given the constraints on the operating 
fund. Why would HUD issue this guidance and will you withdraw the 
provision?
    Answer. The Department has not implemented any restriction on the 
ability of a PHA to use 20 percent of its Capital Fund Program to 
support the ``operations'' of a project. In the case of the Milwaukee 
Housing Authority, security expenses are an ``operating'' cost of each 
project. Hence, the PHA can continue to use the Capital Fund (up to the 
20 percent permitted by statute) to fund its security program.

                          SEC. 202/811 FUNDING

    Question. The section 202 program provides capital to non-profits 
to develop and maintain housing for low-income seniors and section 811 
helps develop housing for disabled individuals. Both programs couple 
housing with supportive services to allow these individuals to live 
independently and participate in the surrounding community. The 
administration has proposed deep cuts to both programs. In 2005, in 
Wisconsin, there were only three new housing developments, totaling 41 
units, to serve these populations. If the administration's proposed 
cuts were accepted, it would result in approximately only 150 new units 
across the country. For every section 202 housing unit, there are 
around 10 seniors on the waiting list and the number of disabled adults 
living with their aging parents is close to 700,000. With these two 
populations growing and housing resources becoming more scarce, how can 
you justify cutting these very valuable programs?
    Answer. The Department's first priority is to provide for the 
increased costs associated with serving the roughly 3.4 million 
families currently receiving section 8 rental assistance. This required 
that the Department make some very difficult funding decisions. 
However, despite the fact that section 8 renewal funding absorbed a 
major part of the Department's budget, we are able to direct 
significant funding in the budget to the section 202 program to provide 
for: (1) funding to convert projects to assisted living; $390.5 million 
for the construction of new units; (2) funds to renew and amend 
existing contracts (Our estimate is that the requested budget funding 
will produce several thousand units nationwide); (3) congregate 
services; and (4) service coordinators.
    In addition, we proposed sufficient funding for the section 811 
program providing for: (1) funds to renew and amend existing contracts; 
(2) $14.5 million for the construction of additional new units; and (3) 
continued financial support for projects under payment and in the 
construction pipeline.
                                 ______
                                 
           Questions Submitted by Senator Frank R. Lautenberg

                       FUNDING FOR PUBLIC HOUSING

    Question. Many housing authorities in New Jersey have told me that 
public housing is in crisis. Yet, President Bush's proposed budget for 
fiscal year 2008 falls $700 million short of what is needed to fully 
fund the HUD operating fund. How are public housing authorities 
supposed to provide the affordable housing thousands of people need 
without full funding?
    Answer. At the end of fiscal year 2006, nationwide, PHAs had 
approximately $2.7 billion in reserves that can be used to support the 
operation and maintenance of low-income housing. Additionally, PHAs are 
allowed to retain all of the income they receive from investments and 
other non-dwelling rental income, such as income from rooftop antennas, 
laundry receipts, etc. In 2006, this other income accounted for $349 
million. Further, for the purposes of subsidy calculation, rental 
income is frozen at 2005 levels, which means that any increase in 
rental income does not decrease the amount of subsidy that the PHA will 
receive in 2007 and 2008.
    Through a variety of initiatives, the Department has encouraged 
PHAs to look at their inventory and make informed management decisions 
about the housing stock. Steps that PHAs have taken include demolishing 
the worst, and often most expensive, housing stock, entering into 
energy performance contracts to reduce the cost of utilities, and 
switching to tenant-paid utilities.

                          AT-RISK REPUBLICANS

    Question. Last month, the Bush Administration admitted conducting 
political briefings with your agency on Republican candidates that were 
at risk of not being re-elected. Was such a briefing given to your 
agency? If so, did your agency award any contracts or take any specific 
action to assist vulnerable Republicans gain re-election?
    Answer. White House personnel conducted briefings for various HUD 
employees to provide overviews of the national electoral landscape. At 
those briefings, there were no discussions of HUD assisting any 
individual candidates, and HUD did not award any contracts or take any 
specific action to assist vulnerable Republicans gain re-election as a 
result of any of those briefings.
                                 ______
                                 
              Questions Submitted by Senator Arlen Specter

                            ASSET MANAGEMENT

    Question. The fiscal year 2008 budget requests funding at $4.0 
billion for the Public Housing Operating Fund. According to your 
agency, this level of funding would represent only 85 percent of actual 
operating subsidy needed for fiscal year 2008 as housing authorities 
convert to asset-based management.
    Given the anticipated shortfall, how will housing authorities be 
able to meet their operating needs, without cutting vital services and 
security, and covert to asset management?
    Answer. At the end of fiscal year 2006, nationwide, PHAs had 
approximately $2.7 billion in reserves that can be used to support the 
operation and maintenance of low-income housing. Additionally, PHAs are 
allowed to retain all of the income they receive from investments and 
other non-dwelling rental income, such as income from rooftop antennas, 
laundry receipts, etc. In 2006, this other income accounted for $349 
million. Further, for the purposes of subsidy calculation, rental 
income is frozen at 2005 levels, which means that any increase in 
rental income does not decrease the amount of subsidy that the PHA will 
receive in 2007 and 2008.
    Through a variety of initiatives, the Department has encouraged 
PHAs to look at their inventory and make informed management decisions 
about the housing stock. Steps that PHAs have taken include demolishing 
the worst, and often most expensive, housing stock, entering into 
energy performance contracts to reduce the cost of utilities, and 
switching to tenant-paid utilities.

                                HOPE VI

    Question. HOPE VI enhances communities by decentralizing poverty 
and giving families an opportunity to live in mixed-income 
neighborhoods with better educational and employment opportunities. I 
have visited HOPE VI sites throughout Pennsylvania and have discovered 
the critical impact that reconstruction in these public housing 
developments has on revitalizing neighborhoods.
    As HOPE VI has accomplished one of its goals of demolishing 100,000 
severely distressed units--which suggests to me that the program has 
been effective--how does HUD propose to accomplish the necessary level 
of reconstruction in the future if HOPE VI is eliminated?
    Answer. The Department recognizes the importance of addressing the 
current capital backlog within the public housing inventory. In most 
cases, this need can be more appropriately met through other 
modernization and development programs operated by the Department, 
e.g., the Capital Fund, the Capital Fund Financing Program, non-HOPE VI 
mixed-finance development including leveraging private capital 
investment, required and voluntary conversion, section 30, and use of 
tax credits. The Department will encourage housing authorities in need 
of this assistance to submit proposals under these programs.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici

                      CUTS IN SECTION 811 FUNDING

    Question. Secretary Jackson, I was disappointed to see that for the 
third year in a row, the Department of Housing and Urban Development is 
seeking a huge cut in funding for the section 811 Supportive Housing 
for Persons with Disabilities programs. This year you requested only 
$125 million for a program that is currently funded at $237 million. In 
each of the last 2 years, Congress--including this subcommittee with 
bipartisan support--has restored these funds. Why does HUD continue to 
seek cuts to this program?
    Answer. The fiscal year 2008 budget request of $125 million is $6.2 
million greater than the $118.8 million requested in fiscal year 2007. 
Despite the fact that we are required to provide funding for renewals 
and amendments, we were able to provide additional funding for new 
production in the fiscal year 2008 request. This includes $14.5 million 
for new capital grants and associated Project Rental Assistance 
Contracts (PRAC). The Department has proposed $15 million for a 
Leverage Financing Demonstration. The Department is committed to fully 
funding all the projects in the construction pipeline.
    Question. All of the cuts you have proposed in the section 811 
programs would come from the capital advance-project-based side of the 
program that helps produce new units. These units help individuals with 
more severe disabilities that have higher support needs and face an 
enormous struggle in trying to find housing. These units also help 
provide a direct link to supportive services such as medical care, 
transportation, and employment. Why is HUD requesting a cut of $112 
million (70 percent) for these programs which fall under your own 
budget title of ``Serving Those Most In Need?''
    Answer. The Department remains committed to serving this vulnerable 
population. There are approximately 250 projects in the development 
pipeline that the Department will continue to work with sponsors to 
develop. The Department will provide additional funding for new capital 
grants and PRAC in fiscal year 2008. HUD also proposed the new Leverage 
Financing Demonstration to investigate more efficient means of bringing 
additional resources to support the program and its participants.
    Question. The administration's request for fiscal year 2008 for 
section 811 includes a proposed $15 million demonstration program that 
would allow funding from the Low-Income Housing Tax Credit (LIHTC) 
program. When do you anticipate having this demonstration proposal 
ready for Congress?
    Answer. Neither the House nor the Senate included the Demonstration 
in their fiscal year 2008 appropriations bills. We estimate that we 
would have a proposal for Congressional consideration 90 days after 
approval.
    Question. How many permanent supportive housing units do you 
anticipate this demonstration proposal to produce in fiscal year 2008?
    Answer. It is unlikely that funding will be available in time to 
produce any units in 2008.
    Question. Do you anticipate this demonstration proposal requiring 
any waivers or exceptions to current statutory or regulatory standards 
in the current 811 program?
    Answer. We are in the process of developing the detailed features 
of this demonstration and have not yet identified any specific 
statutory or regulatory impediments.
    Question. If any such waivers or exceptions are needed, would this 
require a change to the current 811 statute?
    Answer. This will be determined after the completion and evaluation 
of the Demonstration program.
    Question. In March, HUD issued the fiscal year 2007 Super Notice of 
Funding Availability (SuperNOFA) for a range of programs. For section 
811, the SuperNOFA makes available only $88.3 million for the new 
capital advance-PRAC grant competition. This is substantially below 
what was assumed in the fiscal year 2007 ``continuing resolution'' that 
was enacted by Congress back in February (H.J. Res 20). H.J. Res 20 
assumed a freeze at the fiscal year 2006 level of $145.87 million. In 
order for this reduction to be explained by increased demand for 811 
tenant-based renewals, the percentage of renewals would have to have 
increased by 120 percent. What happened to this funding for section 
811?
    Answer. The total new appropriation in fiscal year 2007 was $236.6 
million and the total amount allotted in fiscal year 2007 amounted to 
$158,697,000 exclusive of $77.5 million for Mainstream Vouchers and 
$396,000 for the Working Capital Fund. The table below reflects the 
fiscal year 2007 allotment by funding category including the new 
capital advance funding of $113.6 million and PRAC renewals of $16.9 
million.

------------------------------------------------------------------------
                                                            Allotment
------------------------------------------------------------------------
Capital Advance Inspection Fees.......................     $1,000,000.00
PRAC Renewals.........................................     16,943,000.00
Initial PRAC Awards...................................     11,436,600.00
Capital Advance Amendments............................     11,590,759.00
PRAC Amendments.......................................      3,542,623.00
Initial Capital Advance Awards........................    113,575,425.00
Technical Assistance..................................        608,593.00
                                                       -----------------
      Total...........................................    158,697,000.00
------------------------------------------------------------------------

    Question. Between fiscal year 1997 and fiscal year 2002, Congress 
annually appropriated funding for tenant-based rental assistance for 
non-elderly people with disabilities adversely impacted by the 
designation of public and assisted housing as ``elderly only.'' There 
are approximately 62,000 of these non-elderly disabled vouchers--also 
known as Frelinghuysen vouchers--in use. Unfortunately, HUD was slow to 
develop a tracking system to ensure that these vouchers continue to be 
targeted to the population for which Congress intended. In February 
2005, the Office of Public and Indian Housing (PIH) issued Notice 2005-
5 relating to issuance and preservation of these vouchers. This PIH 
Guidance also covers ``mainstream'' tenant-based rental assistance for 
non-elderly people with disabilities funded under the section 811 
program.
    However, due to the lack of guidance until 2005, there is 
considerable uncertainty as to how many of these vouchers remain 
targeted to non-elderly people with disabilities as Congress originally 
intended.
    Can you please provide the subcommittee with estimates of how both 
the Frelinghuysen vouchers and 811 ``mainstream'' tenant-based 
assistance has been targeted--and is remaining targeted to--the 
intended population?
    Answer. PIH Notice 2005-5 issued implementation guidance to enable 
PHAs and HUD field staff on initiatives to assist non-elderly people 
with disabilities in their search for housing under the Housing Choice 
Voucher Program. In addition, this notice clarifies issues related to 
issuance and preservation of certain types of special purpose vouchers, 
i.e. Frelinghuysen and 811 Mainstream Vouchers. By requiring PHAs to 
electronically report using the Form HUD-50058, HUD monitors these 
vouchers to ensure they are targeted to the intended population. The 
Department continues to work with these agencies to ensure that all 
special purpose vouchers are used for their intended purpose. In fiscal 
year 2007, the Department had 50,533 Housing Choice vouchers, and 
14,836 section 811 vouchers reserved for individuals with disabilities.
    Question. Can you please update the subcommittee on steps that PIH 
has taken to ensure housing agencies that have these non-elderly 
disabled vouchers are meeting their obligations under PIH Notice 2005-
5?
    Answer. To ensure that non-elderly vouchers are meeting their 
obligations under PIE Notice 2005-5, HUD is tracking monthly the usage 
of these non-elderly vouchers through its Voucher Management System 
(VMS). The Department is also working with the PHAs to ensure that all 
special purpose vouchers are used for their intended purpose. Failure 
to serve disabled families as required will result in forfeiture of the 
vouchers.
                                 ______
                                 
               Question Submitted by Senator Wayne Allard

                             HUMAN CAPITAL

    Question. The Government cannot function without human capital, yet 
human capital has been a challenge for most agencies. This is 
particularly true at HUD, which has on average the oldest workforce. In 
fact, HUD is at risk of losing half its employees to retirement between 
fiscal years 2006 and 2008. What are you doing to address this 
challenge?
    Answer. HUD has taken significant steps to better utilize existing 
staff capacity, and to obtain, develop, and maintain the capacity 
necessary to adequately support HUD's future mission-critical program 
delivery. The Department's 5-year Human Capital Management Strategy 
seeks to ensure that: (1) HUD's organizational structure is optimized; 
(2) succession strategies are in place to provide a continuously 
updated talent pool; (3) performance appraisal plans for all managers 
and staff ensure accountability for results and a link to the goals and 
objectives of HUD's mission; (4) diversity hiring strategies are in 
place to address under-representation; (5) skills gaps are assessed and 
corrected; and (6) human capital management accountability systems are 
in place to support effective management of HUD's human capital. 
Further, in fiscal year 2006, HUD developed and officials approved the 
Human Capital Vision Plan, and developed a Leadership Succession Plan 
and set targets for leadership bench strength through 2009. This 
document is currently being updated. Collectively, these actions are 
better enabling HUD to recruit, develop, manage, and retain a high-
performing workforce that is capable of effectively supporting HUD's 
program delivery and mission.'' Following this, each program office 
within the Department was asked to develop a succession plan for their 
organization that identifies succession targets and strategies to 
ensure that HUD's talent pool is secure.
    Additionally, HUD is making great use of intern recruitment 
opportunities to support succession planning. In fiscal year 2004, the 
Department launched and enhanced the HUD Intern Program with several 
hires of Federal Career Interns (FCIs) and Presidential Management 
Fellows (PMFs). In fiscal year 2006, this program was renamed the ``HUD 
Fellows Program'' and a new Masters of Business Administration Fellows 
(MBAFs) was added in fiscal year 2007. In fiscal year 2007, there were 
a total of 58 PMFs and FCIs on board. By the end of fiscal year 2007, 
HUD recruited and hired 50 additional PMFs, MBAs, and FCIs; and for 
fiscal year 2008, an additional 100 Interns will be hired. The 
Department also developed a Recruitment and Retention Plan of Action 
for PMFs, MBAFs, and FCIs in accordance with succession planning 
recommendations made by the Workforce Planning Task Force that were 
approved by the Deputy Secretary on October 12, 2006. The Assistant 
Secretary for administration was authorized to establish a formal 2-
year program for all Fellows, with consultation and input from the 
major program offices.
    In addition to the recruitment efforts, HUD is also using retention 
strategies to support succession planning. In fiscal year 2005, HUD 
developed and launched the Student Loan Repayment Program (SLRP) to 
strengthen and support recruitment and retention efforts. Since 
launching of this program, the Department has reimbursed the following 
amounts to employees participating in the SLR program: fiscal year 2007 
($604,343); fiscal year 2006 ($410,868); fiscal year 2005 ($399,993); 
and fiscal year 2004 ($275,701). The number of HUD employees who have 
received reimbursements under this program is as follows: fiscal year 
2007 (179); fiscal year 2006 (253); fiscal year 2005 (178); and fiscal 
year 2004 (69). We expect to have more than $600,000 available for this 
program for fiscal year 2008. In addition to increasing the amount 
available for the program each year, the SLRP program has been 
automated. Employees can now submit their applications electronically 
to their supervisor and continue the approval process on-line through 
HR staff, the Office of the Chief Financial Officer, and ultimately the 
Employee Service Center for processing. This program is an attractive 
retention tool for new intern hires and top employees throughout the 
Department. In appropriate situations, HUD has also utilized retention 
and relocation incentives to help retain top employees.

                          SUBCOMMITTEE RECESS

    Senator Murray. This subcommittee now stands in recess 
until Thursday, May 10, when we will take testimony from the 
FAA Administrator and the DOT Inspector General.
    [Whereupon, at 11:40 a.m., Thursday, May 3, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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