[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2012

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                              FIRST SESSION
                                ________

   SUBCOMMITTEE ON THE DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND 
         URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS
                       TOM LATHAM, Iowa, Chairman
 FRANK R. WOLF, Virginia            JOHN W. OLVER, Massachusetts
 JOHN R. CARTER, Texas              ED PASTOR, Arizona
 STEVEN C. LaTOURETTE, Ohio         MARCY KAPTUR, Ohio
 MARIO DIAZ-BALART, Florida         DAVID E. PRICE, North Carolina
 CHARLES W. DENT, Pennsylvania      
 STEVE WOMACK, Arkansas             
                                    
 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
               Dena Baron, Matt McCardle, Mike Friedberg,
                     Sara Peters, and Brian Barnard,
                           Subcommittee Staff

                                ________

                                 PART 4
                                                                   Page
 Department of Housing and Urban Development......................    1
  Department of Housing and Urban Development--Transformation 
Initiative........................................................  133
 HUD--Housing Counseling with Neighborhood Reinvestment...........  181
 Department of Transportation.....................................  291
 Federal Highway Administration...................................  369
 Federal Aviation Administration..................................  425
 AMTRAK...........................................................  529
 Office of Public and Indian Housing (HUD) Fiscal Year 2012 Budget 
Overview..........................................................  561
 Questions for the Record.........................................  601

                                ________

         Printed for the use of the Committee on Appropriations




 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2012

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                              FIRST SESSION

                                ________

   SUBCOMMITTEE ON THE DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND 
         URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS
                       TOM LATHAM, Iowa, Chairman
 FRANK R. WOLF, Virginia            JOHN W. OLVER, Massachusetts
 JOHN R. CARTER, Texas              ED PASTOR, Arizona
 STEVEN C. LaTOURETTE, Ohio         MARCY KAPTUR, Ohio
 MARIO DIAZ-BALART, Florida         DAVID E. PRICE, North Carolina
 CHARLES W. DENT, Pennsylvania      
 STEVE WOMACK, Arkansas             

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
               Dena Baron, Matt McCardle, Mike Friedberg,
                     Sara Peters, and Brian Barnard,
                           Subcommittee Staff

                                ________

                                 PART 4
                                                                   Page
 Department of Housing and Urban Development......................    1
  Department of Housing and Urban Development--Transformation 
Initiative........................................................  133
 HUD--Housing Counseling with Neighborhood Reinvestment...........  181
 Department of Transportation.....................................  291
 Federal Highway Administration...................................  369
 Federal Aviation Administration..................................  425
 AMTRAK...........................................................  529
 Office of Public and Indian Housing (HUD) Fiscal Year 2012 Budget 
Overview..........................................................  561
 Questions for the Record.........................................  601

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

 71-388                     WASHINGTON : 2012








                                  COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\         NORMAN D. DICKS, Washington
 JERRY LEWIS, California \1\           MARCY KAPTUR, Ohio
 FRANK R. WOLF, Virginia               PETER J. VISCLOSKY, Indiana
 JACK KINGSTON, Georgia                NITA M. LOWEY, New York
 RODNEY P. FRELINGHUYSEN, New Jersey   JOSE E. SERRANO, New York
 TOM LATHAM, Iowa                      ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama           JAMES P. MORAN, Virginia
 JO ANN EMERSON, Missouri              JOHN W. OLVER, Massachusetts
 KAY GRANGER, Texas                    ED PASTOR, Arizona
 MICHAEL K. SIMPSON, Idaho             DAVID E. PRICE, North Carolina
 JOHN ABNEY CULBERSON, Texas           MAURICE D. HINCHEY, New York
 ANDER CRENSHAW, Florida               LUCILLE ROYBAL-ALLARD, California
 DENNY REHBERG, Montana                SAM FARR, California
 JOHN R. CARTER, Texas                 JESSE L. JACKSON, Jr., Illinois
 RODNEY ALEXANDER, Louisiana           CHAKA FATTAH, Pennsylvania
 KEN CALVERT, California               STEVEN R. ROTHMAN, New Jersey
 JO BONNER, Alabama                    SANFORD D. BISHOP, Jr., Georgia
 STEVEN C. LaTOURETTE, Ohio            BARBARA LEE, California
 TOM COLE, Oklahoma                    ADAM B. SCHIFF, California
 JEFF FLAKE, Arizona                   MICHAEL M. HONDA, California
 MARIO DIAZ-BALART, Florida            BETTY McCOLLUM, Minnesota
 CHARLES W. DENT, Pennsylvania         
 STEVE AUSTRIA, Ohio                   
 CYNTHIA M. LUMMIS, Wyoming            
 TOM GRAVES, Georgia                   
 KEVIN YODER, Kansas                   
 STEVE WOMACK, Arkansas                
 ALAN NUNNELEE, Mississippi            
   
 ----------
 \1\Chairman Emeritus    

               William B. Inglee, Clerk and Staff Director

                                  (ii)

 
 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2012

                              ----------                              

                                          Thursday, March 10, 2011.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                WITNESS

HON. SHAUN DONOVAN, SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND 
    URBAN DEVELOPMENT
    Mr. Latham. Let's call the hearing to order. First of all, 
we welcome the Secretary here. This is the first hearing we 
have had in the THUD Subcommittee, and we are short a couple of 
new Members here, but Mr. Womack and Mr. Dent and Mr. Diaz-
Balart are new Members to the Committee. We want to welcome 
them if they were here. I think there are about 20 other 
hearings going on.
    I just want to extend my thanks to the Ranking Member, when 
he was Chairman and his courtesy and kindness, and we expect to 
operate under the same manner in this Congress. So I look 
forward to working with the gentleman from Massachusetts.
    And, again, welcome. Mr. Secretary, I want to thank you for 
your testimony and thank you for your continued service at HUD. 
And certainly on a personal level, thank you for your 
communications and being able to address a lot of the problems 
that we face and to do it in a very open way. We may not always 
agree on issues, but your competence and hard work are very, 
very much appreciated.
    While your request would appear to the casual observer to 
be $1.2 billion or about 2.8 percent lower than our Fiscal Year 
2010 enacted level, I take some exception to that since you get 
that number through a projected increase in FHA and Ginnie Mae 
receipts. And as we noted last year, the Congressional Budget 
Office took a different view of how to score the FHA receipts 
in your budget request.
    Even with that scorekeeping issue, I think it should be 
noted that in the fiscal year 2008 discretionary budget 
authority allocation for the entire THUD bill, Transportation 
and HUD, was $48.8 billion. Your request for Fiscal Year 2012 
is $41.8 billion just for HUD. And it really doesn't leave a 
whole lot of room, I guess, for Transportation for other parts 
of our bill.
    We both agree that in this fiscal environment, protecting 
existing residents and those served by HUD's programs need to 
be our top priority. Doing so will require some hard choices 
and prioritization of the HUD programs and particularly, among 
the many grant programs under your jurisdiction. I am looking 
forward to working together to identify programs and areas 
where reasonable savings can be achieved, while keeping 
residents currently served by HUD in their housing.
    I also remain concerned over FHA's continuing market share 
in the single family mortgage insurance market. Last year, you 
were hopeful that fiscal year 2011 would see private capital 
return to that segment of the market. We are halfway through 
the fiscal year, and so far that hasn't happened. I look 
forward to hearing how the administration will relieve 
themselves of the government from being the lender and insurer 
of first and last resort for those seeking to purchase a single 
family home.
    I look forward to an open and productive discussion with 
you as we continue through the process. And I thank you again 
for your hard work at the Department. I think we all have a lot 
of questions and a lot of ground to cover today, so with that I 
will yield to the gentleman from Massachusetts, Mr. Olver.
    Mr. Olver. Goodness. I used to give much longer opening 
statements than that.
    Mr. Latham. That was your warm up.
    Mr. Olver. I must say, Mr. Chairman, we are going to have 
quite a cozy quiet little hearing today with the Secretary of 
State across the hall seeming to have sucked up all of the 
media.
    But let me start by congratulating you, Mr. Chairman, on 
your elevation to the chairmanship of this subcommittee. We had 
the opportunity to work together for the last 2 years, and I am 
committed to showing you the same respect and cooperation that 
you afforded me while I was chairman. I will start by doing my 
best to keep from testing your willingness to gavel me quiet.
    Mr. Secretary, it is a pleasure to have you before us 
today.
    Mr. Latham. 5-minute rule.
    Mr. Olver. This is the third budget request you have 
presented to the subcommittee, making you an old hand at this 
dance. Your appearance comes at an important time. While the 
recession technically ended over a year and a half ago, 
hundreds of thousands of families continue to struggle with the 
burden of underwater mortgages and a weak job market.
    As the Secretary of the Department of Housing and Urban 
Development, you are able to help families facing foreclosure 
and to make capital investments in housing infrastructure that 
creates jobs.
    I am particularly pleased to see that your fiscal 2012, 
budget request strongly addresses the increased demand for 
housing assistance that stems from continuing high unemployment 
rates and the millions of foreclosures in the last 3 years. 
Specifically, the budget provides increases for the project and 
tenant-based Section 8 program, and fully funds these housing 
assistance programs.
    The budget request also makes a strong commitment to 
helping families that have lost their homes to come in off the 
street by increasing homeless assistance grants. As you know, 
there has historically been strong bipartisan support for this 
program among members of this subcommittee, and I hope that 
will be the case again this year.
    I am also pleased that your budget embraces the VASH, 
homeless veteran program, obviously, by providing $75 million 
for additional 10,000 vouchers. This funding is needed as 
veterans are over 50 percent more likely than the average 
American to become homeless, and already over 11,000 veterans 
of Iraq and Afghanistan have found themselves on the street.
    This request represents the first time that HUD has 
included the VASH program in their request since this 
subcommittee originally provided funding to reactivate the 
program in fiscal 2008. You also provide good budget requests 
for elderly and disabled housing programs, these two programs 
address the needs of two of our most vulnerable populations, 
and I look forward to hearing more about how you intend to use 
the reforms provided by two authorization bills at the end of 
the 111th Congress to more effectivity administer those 
programs.
    Mr. Secretary, capital investments are provided throughout 
HUD's budget, including the public housing capital fund, Native 
American block grants, CDBG, all of these create jobs that are 
vital to sustaining our economic recovery, and I hope you can 
enlighten us on the categories and numbers of such jobs.
    In addition, I am pleased to see that the fiscal year 2012 
budget continues HUD's commitment to the Sustainable 
Communities Initiative. Through this initiative, HUD has led in 
promoting interagency cooperation and in breaking down the 
stove pipes that stifle innovative planning. Like you, I 
strongly believe that Federal dollars are most effectively 
utilized when local communities have the resources and the 
flexibility to determine what the right investments mix of 
housing, transportation and economic and environmental 
infrastructure is in order to foster job growth.
    Lastly, while overall I believe you have put forth a strong 
request that meets our need to support vulnerable families and 
help grow our economy, I am concerned that this budget is 
predicated upon the assumption that FHA's loan program will 
result in almost $5.5 billion in receipts. As you well 
remember, each year the CBO has disagreed with the Department's 
assumptions regarding FHA receipts, resulting in significant 
consequences for the level of resources this subcommittee was 
able to provide. I fear we may be in a similar situation again 
this year, and that an unfavorable CBO score could put many of 
the important investments you have proposed at risk.
    In my view, this budget request allows HUD to contribute to 
our economic recovery. And I greatly appreciate your leadership 
over the past 2 years, and am committed to working with you 
towards our shared goal of providing adequate affordability 
housing.
    I find it quite ironic that today and tomorrow the new 
majority is considering bills to end two of the homeowner 
assistance programs that have been able to squeeze even minimal 
concessions out of the banks, apparently, solely, because the 
programs were started by President Obama.
    With that I yield back.
    Mr. Latham. I thank the gentleman. Do you have anything you 
want to say? Okay.
    Go ahead. I would love to hear your comments, your 
statement.
    Secretary Donovan. Thank you, Chairman Latham.
    Mr. Latham. We are going to try to operate under--your 
entire statement will be in the record, but try to operate 
under the 5-minute rule if we can. Except for Mr. Olver.
    Mr. Olver. I stayed within it, didn't I?
    Secretary Donovan. Okay. I do have a statement that I think 
is somewhat longer than 5 minutes unfortunately, so I 
appreciate your----
    Mr. Olver. I yield you my time.
    Secretary Donovan. But thank you Chairman Latham and 
Ranking Member Olver for this opportunity to testify about 
HUD's fiscal year 2012 budget proposal. This morning I would 
like to discuss the investments it calls for to help America 
win the future by out-educating, out-innovating and out-
building our competitors. I will also highlight the steps our 
proposal takes to improve how we operate HUD's programs, and 
the tough choices it makes to ensure we take responsibility for 
our deficits.
    Mr. Chairman, in developing this proposal we followed three 
principles. The first is to continue our support for the 
housing market, while bringing private capital back. Two years 
ago, with the housing market collapsing and private capital in 
retreat, the administration had no choice but to take action. 
The critical support FHA provided has helped over 2 million 
families buy a home since that time, and nearly 1.5 million 
home owners refinancing to stable affordable products, with 
monthly savings exceeding $100 in most cases.
    While the Federal Housing Administration and Ginnie Mae 
will continue supporting the housing recovery in the year 
ahead, we must also help private capital return to the market. 
This is a process that HUD began many months ago, and I want to 
thank Congress for passing legislation last year to reform 
FHA's mortgage insurance premium structure. With this 
authority, FHA announced a premium increase of 25 basis points 
last month.
    Because of these reforms and others, FHA is projected to 
generate approximately $9.8 billion in receipts for the 
taxpayer in fiscal year 2011. Indeed, the reforms that are 
generating these receipts today have set the stage for more 
private capital to return in the years to come, while ensuring 
that FHA remains a vital source of financing for underserved 
borrowers and communities.
    Just as importantly, Mr. Chairman, while HUD's 2012 request 
is $47.8 billion in gross budget authority, because of FHA and 
Ginnie Mae receipts, the cost to the taxpayer for this budget 
is only $41.7 billion, fully 2.8 percent below our fiscal year 
2010 budget, and more than meeting the President's commitment 
to a 5-year domestic discretionary spending freeze.
    Finally, in light of the vital role that FHA has been 
playing to address the foreclosure crisis, I also will mention 
for the House's consideration today and tomorrow of H.R. 830 
and 836, bills which would rescind the FHA refinance option for 
underwater borrowers and the Emergency Homeowners Loan Program 
for unemployed homeowners. These programs have the potential to 
help many homeowners having trouble making their mortgage 
payments through no fault of their own, and I would oppose 
passage of these bills, and urge the Members of this body to 
vote against these bills.
    The second principle we used to develop our budget was to 
protect current residents and improve the programs that serve 
them. While the median income of American families today is 
over $60,000, for families who live in HUD-assisted housing, it 
is $10,200 per year, and more than half are elderly or 
disabled.
    At the same time, having seen from 2007 to 2009, the 
largest increase in the history of HUD's worse case housing 
needs survey, it is clear that the recession hits these 
families hard. That is why 80 percent of our proposed budget 
keeps these residents in their homes and provides basic upkeep 
to public housing, while also continuing to serve our most 
vulnerable populations through our homeless programs.
    Because the cost of serving the same families grows each 
year, protecting existing families in our programs required us 
to make tough choices with the remaining 20 percent of the 
budget, including the decision to reduce funding for the 
community development block grant, home investments 
partnerships, and new construction for HUD supported housing 
programs for the elderly and disabled, all cuts between five 
and 10 percent.
    These are difficult cuts. I saw for myself as a local 
housing official the difference these funds can make supporting 
senior housing, boys and girls club, YMCAs and other providers 
of critical community services. But American families are 
tightening their belts, and we need to do the same.
    At the same time, this budget makes a strong committee to 
doing more of what works and to stop doing what doesn't. By 
including the Section 8 Voucher Reform Act in the budget we 
will simplify and streamline the voucher program and save $1 
billion for the taxpayer over the next 5 years, while 
supporting the ability of public housing authorities in small 
towns and rural areas to better serve the working poor.
    Indeed, thanks to Congress's work on the Hearth Act, the 
budget funds a new rural housing stability program that 
reflects the unique and growing needs in these communities.
    This budget also holds our partners accountable for the 
funding they have received from HUD. To fully fund the Public 
Housing Operating Fund, we require public housing authorities 
with excess reserves to contribute $1 billion. These resources 
were set aside so that our PHAs could continue operating during 
a rainy day, and I think we would all agree that rainy day is 
here.
    These efforts point to a broader commitment expressed 
through our Transportation Initiative to improving HUD's 
programs. TI funds are replacing data systems in our largest 
program, housing choice vouchers, that date from the 1990s, so 
we can hold PHAs accountable for managing to their budgets, 
just like families and businesses are doing across the country.
    The flexibility TI provides has also allowed us, for the 
first time, to offer technical assistance across all our 
community planning and development programs and launch a new 
initiative to improve the financial management and 
accountability of troubled housing authorities. And by 
supporting research and evaluation and program demonstrations, 
TI improves HUD's only accountability by identifying what we do 
well and what we need to do better. These needed reforms allows 
us to propose increased investments in programs we know works, 
like the HUD-VASH program for homeless veterans.
    This effort is built on a solid body of evidence that 
permanent and supportive housing both ends homelessness and 
saves money for the taxpayer by putting an end to the resolving 
door of emergency rooms, shelters and jails. As such, this 
budget would increase funding for homeless programs by more 
than 29 percent over 2010 to keep the President's commitment to 
opening doors. The first Federal strategic plan to end 
homelessness which the administration unveiled last June to end 
chronic and veteran homelessness by 2015 and homelessness among 
families and children by 2020.
    All told, this combination of tough choices and needed 
reforms allows us to serve over 4.5 million families in our 
core rental assistance programs, and 86,000 more than we did in 
2010.
    Our third and final principle for developing this budget is 
to continue critical initiatives that have been part of our 
budget for the last 2 years, but in this fiscal climate to 
propose no new initiatives. The President has made clear that 
winning the future depends on America winning the race to 
educate our children. But that is not possible if we are 
leaving a whole generation of children behind in our poorest 
neighborhoods. That is why we worked with the House Financial 
Services Committee last year to pass Choice Neighborhoods 
legislation that was implemented in our budget, and have again 
proposed $250 million for 2012.
    This funding will allow communities to use the mixed use 
and mixed finance tools pioneered by Secretaries Jack Kemp and 
Henry Cisneros with the HOPE VI program to transform all the 
Federally assisted housing in a neighborhood.
    Similarly, insuring that America out-builds our competitors 
requires us to protect and preserve public housing for the 
future. Right now we are losing 10,000 units from our public 
housing stock every year. At the same time, there are billions 
of dollars of private capital sitting on the sidelines that 
could put tens of thousands of construction workers to work 
rebuilding this housing.
    That is why, Mr. Chairman, we have proposed a $200 million 
demonstration in our budget to preserve up to 255,000 public 
housing units using long-term project based rental assistance 
contracts.
    Lastly, Mr. Chairman, American business, large and small, 
cannot out-innovate their competitors when their workers spend 
52 cents of every dollar they earn on housing and 
transportation combined, and moving products on our roads costs 
five times as much wasted fuel and time as it did 25 years ago. 
That is why we request another $150 million for our Sustainable 
Communities Initiative which, implemented as part our fiscal 
year 2010 budget, helps regions and communities develop 
comprehensive housing and transportation plans that create jobs 
and economic growth.
    The demand for these kinds of innovations explains the 
extraordinary demand for our grant program. And it wasn't just 
coming from our largest metro areas. Indeed, over half our 
regional grants were awarded to rural regions and small towns.
    And so, Mr. Chairman, HUD's fiscal year 2012 budget 
proposal isn't just about spending less. It is about investing 
smarter and more effectively. It is about out-educating, out-
building and out-innovating our competitors. It is about making 
hard choices to reduce the deficit and putting in place much 
needed reforms to hold ourselves to a high standard of 
performance. But most of all, it is about the results we 
deliver for these people and places who depend on us most.
    For HUD, winning the future starts at home. And with this 
budget, I respectfully submit, of targeted investments and 
tough choices, we aim to prove it. Thank you.
    Mr. Latham. I thank you, Mr. Secretary.
    [The information follows:]





                         section 8 funding gap


    Mr. Latham. And we will try to adhere to the 5-minute rule 
on the questions and responses.
    While we won't know what our allocation is until later in 
the process here, it is pretty safe to assume that we will be 
somewhere in the Fiscal Year 2008 level with our allocation. 
And as you know, there are several areas of significant growth 
in your budget since 2008. In Fiscal Year 2008, the tenant-
based Section 8 was funded at roughly $16.5 billion. Your 2012 
request is for $19.2 billion. And we have seen similar 
increases in the Project-Based Section 8.
    And you mentioned a little bit in your opening statement, 
but specifically, what changes can we make to address this 
funding gap that we have, and find some savings?
    Secretary Donovan. First of all, Mr. Chairman, much of that 
growth, particularly in the tenant-based account, has to do 
with renewals of new vouchers coming into the account for the 
first time. So, for example, the VASH vouchers that we 
discussed earlier, as well as what we call tenant protection 
vouchers. So when we lose units from our project-based account, 
the project-based Section 8 housing, or from public housing, 
those tenants move over to the voucher account because they get 
a voucher to protect them from being displaced from their 
housing and losing their homes. And so part of it is new 
vouchers being renewed. Part of it is the migration of funding 
from other programs like public housing or project based 
Section 8 to the tenant-based account. So it is important to 
look at this on a net basis.
    Having said that, clearly, given they are such a large part 
of our budget and that costs go up every year, they have been 
an increasing share of our budget and that is why we had to 
reduce funding in the remaining 20 percent of our budget.
    I think there are a number of steps that we can take to 
ensure that we minimize any increases in those accounts. One of 
those is to look very carefully at the inflation adjustments 
that we provide. And you will see that in our budget proposal 
this year we have gone back and looked very carefully at the 
needed increases, and have reduced those substantially to about 
1 percent inflation rather than historic increases of 3, 4 or 
even higher percent.
    The other critical thing that I think we could do this year 
is the Section 8 Voucher Reform Act. As I mentioned earlier, 
what we see, frankly, is that we have overly burdensome 
requirements for housing authorities. We require, for example, 
even seniors on fixed incomes who we know their incomes aren't 
going to be fluctuating substantially year over year, we still 
have requirements to recertify those just as frequently as 
other participants. That is just one small example of the kinds 
of streamlining we could do to simplify, we could simplify our 
rules on incomes and a range of things.
    Not only will that help the program operate more 
efficiently, it would save about $150 million this year or, I 
am sorry, in 2012, if it were included in the budget. But that 
would just be the beginning of those savings. It would be $1 
billion over 5 years, and I think that would be a great effort 
with this committee and the authorizing committees to try to 
advance the Section 8 Voucher Reform Act this year.


                              pha reserves


    Mr. Latham. Okay. Well, one area that we may examine in the 
Fiscal Year 2012 process is the Public Housing Authorities and 
the excess Section 8 reserves. And if you could, your budget 
really doesn't address the issue at all. But how much is there 
in excess reserves at the public housing authorities, and is 
there some way we could adjust those to have proper balances, 
but still not excess?
    Secretary Donovan. In the tenant-based accounts, our 
estimate of the balances at this point is about $1.3 billion. 
And we do ask for, in the 2012 budget, flexibility to utilize 
excess reserves within that 1.3. Obviously, a significant 
amount of that is what is needed to operate a program 
effectively. You need some number of months of reserves to be 
able to operate a program effectively. But we do ask for 
flexibility to be able to recapture excess reserves and put 
them to use to house families. That is something that the 
committee has done in prior years, and it is something that we 
would support some flexibility there to be able to utilize 
excess reserves.
    We have applied the same theory, if you will, to the 
operating fund for public housing for the first time this year. 
We are proposing that and that is something obviously we look 
forward to discussing with the committee. We do believe as we 
have seen significant growth in the operating fund reserves at 
housing authorities, that there is an opportunity to recapture 
some of that to put to work. Obviously, given that is a new 
proposal we would need to do that carefully and make sure that 
the data is correct, that there aren't regions that housing 
authorities are holding that money to be able to utilize it for 
purposes that aren't clear in their financial statements that 
we are looking at. But we do think, based on the growth over 
the last couple of years, that there is an opportunity to 
recapture, and we proposed 1 billion in the budget there.


                              capital fund


    Mr. Latham. My time has expired. The gentleman from 
Massachusetts.
    Mr. Olver. Thank you, Mr. Chairman. Mr. Secretary, there 
was a recent Wall Street Journal article that indicated if the 
funding levels of the Public Housing Capital Fund in H.R. 1 
were enacted into law, most public housing agencies would 
experience bond rating downgrades. Such downgrades would result 
in higher interest rates, which would make it harder to finance 
capital improvements, it seems to me. Given the substantial 
maintenance backlog, which has been estimated at somewhere in 
the 20 to $30 billion covering a couple million units under the 
PHAs, there is a substantial need for improvements in the 
public housing stock.
    Could you comment on the potential impacts of a bond rating 
change, as suggested in that article, on the ability of PHAs to 
protect their and obviously our capital investments in those 
units?
    Secretary Donovan. Congressman, it is a very important 
question because, as the system that we use to finance 
affordable housing has moved increasingly over the last few 
decades toward a public/private partnership, which I think is a 
very important advance and has significantly improved 
affordable housing, the impacts that budget changes, not just 
in the Public Housing Capital Fund, but across all of our 
programs can have on the willingness of private sector 
investors to invest is a very important point.
    Specifically, within the Public Housing Capital Fund, not 
only is there the direct effect that if we were to cut $1 
billion from the capital fund, that is a loss of about 20,000 
jobs in that year, but it does have these ripple effects into 
the private market that you are talking about. There is about 
$3.5 billion today of bonds outstanding that are backed by the 
Capital Fund. And there would be significant potential 
increases as the report you referenced showed from one of the 
rating agents just recently, it is likely we would see a 
substantial increase in interest rates on those bonds.
    I think the more worrisome trend even that that is that it 
would make it extremely difficult to put in place new bond 
financing. And any new bond financing would be at substantially 
higher interest rates, so we would get much less bang for the 
buck, if you will, far fewer jobs, far fewer investments. And 
ultimately, what happens, as you know, if you leave renovation 
longer and longer, it gets substantially more expensive. And so 
it is better to catch these things early. That is the benefit 
of the Public Housing Capital Fund Financing program is you can 
accelerate, without increasing spending, you can accelerate the 
renovations and lower the cost of those renovations over time 
by getting them done earlier.
    Just lastly, I would say, there are similar impacts that we 
would see in a range of other programs. Project-based Section 
8, for example, is fully funded, or capital work is all 
financed by private capital, tax credits, other forms of 
financing that depend on private sector investment. And 
anything that would shake the confidence of investors to invest 
in the public housing capital fund would also begin to shake 
the confidence of investors to invest in project-based Section 
8 and our programs. So clear stable consistent funding in those 
programs is critical for maintaining the confidence of the 
private sector to invest.
    Mr. Olver. At the same time, you have cut, as you say, 5 to 
10 percent from the 202 and the 811 programs. So that is 
getting toward the direction that would lead to what you are 
suggesting.
    Secretary Donovan. I think the difference there is that we 
have prioritized existing programs and existing funding over 
new units. The cuts to Sections 202 and 811 are very difficult. 
In different fiscal times, we wouldn't propose those cuts. But 
those wouldn't shake the confidence of any investors in those 
programs because it would lower the number of new units that 
could be built, but it doesn't impair in any way the confidence 
that there would be renewals for those smaller number of units 
that were built.
    And so, in that way, this is really about is there an 
ongoing commitment to existing units that are financed with a 
partnership with the private sector.
    Mr. Olver. Thank you. I yield back.
    Mr. Latham. Okay. I believe Mr. LaTourette was here first.
    Mr. LaTourette. Thank you, Mr. Chairman. Welcome, Mr. 
Secretary. I have to say I have been getting a unique view up 
here. You have the most efficient operation I have ever seen in 
a hearing. This attractive young lady hands a piece of paper to 
this guy and he hands it to you. You are very well prepared for 
this hearing.
    Secretary Donovan. It is emblematic of the efficiency 
improvements.
    Mr. LaTourette. You are doing a great job. The affordable 
housing folks that come to visit me give you very high marks 
and indicate that prior secretaries may have been caretakers, 
but you have been pretty aggressive in a number of these 
programs.
    Secretary Donovan. Thank you.


                          section 202 housing


    Mr. LaTourette. And I would like to talk to you about a 
couple of them that they bring to my attention. One is the 
aging section 202 housing in need of rehabilitation. And just 
an example from the greater Cleveland area, it is over in 
Congressman Kucinich's district over in a town called Lakewood, 
but there are 417 units that were built in the 1960s and 1970s. 
The rent is at or below $410 a month, utilities included, 
pretty reasonable. But when the initial affordable housing or 
project-based rental assistance didn't exist, these things were 
constructed. And so now we run into--and I am going to talk to 
you about market-to-market in a minute. But what we run into is 
that many of these structures are one boiler or one air 
conditioner or one elevator from being obsolete. And when you 
talk about maintaining housing stock, particularly for the 
elderly, these are probably pretty cost effective. And the data 
that I reviewed for this particular complex to purchase 
rehabilitate is about $75,000, which is clearly less than a lot 
of new construction would require.
    The Congress has enacted legislation that has two parts to 
it. One is that will allow for the first time prepayment and 
refinancing of the HUD debt, which was previously prohibited. 
The second piece is to provide for project-based contracts on 
these properties.
    However, I am advised that to date, no funding has been put 
in place for the second and critical piece, and without that 
piece they can't move forward with these needed renovations. 
And the feeling is these buildings from the 1960s and 1970s are 
never going to be brought up to speed to compete with new 
construction. So just to invite your comment on where you think 
that is.
    Secretary Donovan. Congressman, it is a terrific point, and 
I would say, you have targeted one of the most critical areas, 
which is Section 202. But we have this same challenge across a 
range of our programs, where the irony is, if we lose those, 
they are cost effective relative to the alternative in 
particular. Whether that would be new construction, or 
oftentimes a voucher as an alternative. Even if a senior can 
find a place to live with that voucher, it typically doesn't 
provide them the same services they would have on-site, and 
through moving costs and typically the higher cost that you 
have through that voucher, the net cost is substantially worse 
if we don't preserve.
    The expiring contracts or the inability to renew certain 
times of contracts, not just on 202, but also, for example, on 
rents up and wrap is a serious problem. I appreciate you 
recognizing the work that we have done to allow the refinancing 
to happen for 202s, but we would like to work with the 
committee this year to ensure that where we have older 
projects, we have about 45,000 units of rents up, wrap and mod 
rehab contracts, for example, the alphabet soup of programs 
that we have.
    We are proposing that not only do we consolidate those 
programs into project-based Section 8 to simplify and 
streamline the number of programs that we have at HUD, but also 
to provide renewal funding for those that today have no ability 
to refinance. And that is something we were encouraged to see 
that there was a kind of stopgap 1-year measure included in the 
Senate proposal for 2011, and that is something we would love 
to discuss with the committee as we finalize the 2011 budget, 
as well as to look at longer-term solutions through 2012.
    And we are very open, we have proposed something in the 
budget, but we are open to whatever suggestion the committee 
might have about other ways to preserve those as well.
    Mr. LaTourette. I would be more than interested in 
exploring that further with somebody from your staff. And I 
would be happy to help. I see my yellow light is on. If we come 
back in another round I would like to talk to you about market-
to-market. I yield back.
    Mr. Latham. I thank the gentleman. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. Mr. Secretary, welcome 
to the subcommittee.
    Secretary Donovan. Thank you.


                      hri effect on hud's programs


    Mr. Price. The focus of today's hearing, of course, is on 
your 2012 budget request. But as you well know, we don't have a 
budget for 2011 yet. We have yet to adopt a final budget. 
Instead, we have resorted to a series of stopgap continuing 
resolutions, and are on the verge of debating one next week, 
one to avert a government shutdown. All of this could have been 
avoided had the omnibus bill, put together with bipartisan 
collaboration, been passed in December, or a year-long CR. But 
here we are instead with a series of stopgap measures.
    And the longer term spending plan that was passed on a 
party line vote last month, to put it very mildly, would have a 
major impact on HUD operations. And so I think we need to be 
very clear about what the impact of that might be.
    It would severely undermine government investments in 
affordable housing and community development at precisely the 
time that the economy is only just beginning to recover and 
individual American families are struggling to provide a home 
for their families.
    Compared to the fiscal year 2010 law, H.R. 1, this 
Republican spending plan, cuts community development block 
grants by 66 percent. It cuts HOME investment partnerships by 
10 percent. It zeros out the Nation's program for comprehensive 
urban renewal. It eliminates veterans supportive housing 
vouchers. It cuts housing for the disabled, by 72 percent. It 
cuts construction for the housing for the elderly and the 
housing for the disabled by more than 70 percent.
    Now, in a couple of respects this flies in the face of the 
Bowles/Simpson Fiscal Commission, which did excellent work. But 
there are a couple of things that Commission said that this 
directly contradicts. First of all, they said everything has to 
be on the table. You cannot ever address our country's fiscal 
issues simply by focusing on 12 percent the budget, 
discretionary domestic spending.
    Secondly, they said precisely, do not do this kind of thing 
to the economy in the short-run because it could well stall the 
recovery. And we have had plenty of validation of that last 
week. Conservative economists from all sorts of reputable 
houses, reputable institutions, saying this will cost hundreds 
of thousands of jobs. It will stall growth by 1, maybe even 2 
percentage points.
    It is fiscal folly. I think we know that. What I would like 
to ask you to elaborate for us is, not just the macro economic 
impact, but the micro impact, the impact of these specific cuts 
on specific efforts that your department has underway. How 
would these cuts affect local economic development? How would 
they affect the availability of affordable housing for the 
veterans of this country, for the elderly, for the disabled?
    Secretary Donovan. Congressman, first of all, let me say 
that the President has made very clear and is encouraged that 
the leaders on both sides, House and Senate, Democrat and 
Republican, have made clear their commitment to keeping the 
government operating and to that funding. And also the 
President has made clear that we do need to reduce spending. 
And, in fact, our 2012 budget proposal would bring domestic 
discretionary spending to the lowest level since President 
Eisenhower as a share of the economy. And so we are absolutely 
committed to fiscal discipline and to ensuring that we can 
reach agreement across the parties.
    Having said that, the President has also said, and I would 
reiterate, that we cannot cut out critical investments that 
will help our economy grow, help put people back to work and 
help us win the future, or we can't budget, balance the budget 
on the backs of our most vulnerable citizens. So I am 
encouraged by the focus of the committee on our most vulnerable 
residents, focusing on ensuring that we can renew existing 
programs, even in H.R. 1.
    But I am concerned, as you have rightly said, that the cuts 
that that requires to other programs would have significant 
impacts. Specifically, our estimate is that the reductions 
would cost 120,000 jobs this year, from the cuts just this 
year. And in particular, half of those would come from the 
reduction in the CDBG program. About 64,000 jobs from the 
reductions to the CDBG.
    Mr. Price. You are talking about the HUD cuts alone?


                          reductions in h.r. 1


    Secretary Donovan. I am talking about proposed reductions 
in H.R. 1, so the more than 60 percent reduction in CDBG. In 
terms of the impact on families, the ability of veterans who 
are living on the street to be able to find decent housing, for 
example, under VASH, that is a program that we have shown not 
only helps save the lives of those veterans, but also reduces 
costs for taxpayers. The typical chronically homeless person 
living on the street costs taxpayers about $40,000 a year. And 
so if we can get them out of that cycle, we not only help them 
with a better quality of life, we also help them be able to 
save money for the taxpayer as well. So those are the kinds of 
impacts that we would see.
    Mr. Price. Thank you.
    Mr. Latham. I thank the gentleman. Judge Carter.

                                RESERVES

    Mr. Carter. Thank you, Mr. Chairman. This is an interesting 
conversation. And I, first and foremost, want to get back to 
what the chairman started with because I have been listening 
intently to hear an answer and basically, I think the answer 
that we are getting is no, we are not going to do that.
    So I would like for you to explain again, have you looked 
at, have you studied, and have you worked to try to see where 
you would go if your funds were at 2008 levels and how you 
would operate. And I think that is what the chairman asked, and 
he also asked about the reserves that you are holding. And you 
gave an answer of I believe an estimated $2.3 billion that were 
in reserves. That certainly doesn't get the shortfall of about 
$16 billion I think that we were talking about. Have you 
addressed this? Have you looked at it? Or is your answer that 
you can't do it.
    Secretary Donovan. I think the answer, Congressman, would 
be we have, clearly, in putting forward the 2012 budget, we 
have made some difficult choices and reduced spending relative 
to 2010 by almost 3 percent, 2.8 percent, over $1 billion. We 
believe that going farther than that would have the kinds of 
impacts that I have talked about, and that is not the choice 
that we have made in putting forward the budget. Again, we 
believe it is a responsible budget, that it reduces spending to 
the lowest level in 5 years overall in the Federal Government, 
but that, particularly at a time of rising worst case housing 
needs, that it is critical to protect those residents.
    I do think there are ways that we can work together with 
the committee to find savings. We proposed a number of those. I 
think the reserves is a good point, and that is a significant 
contribution, the $1 billion in additional reserves that we 
have proposed to use this year, in addition to using net 
restricted assets in the tenant-based account are both areas 
where we want to work with the committee on a bipartisan basis 
to find those kind of savings.
    But we are concerned that going back to 2008 levels to 
those kind of reductions has real harm on families and 
communities that would be counterproductive for them and also 
for the economy.
    Mr. Carter. You seem to be at least a partially trained 
economist. A number came out last week about the fact that last 
month, the shortest month of the year, our deficit spending 
equaled the entire deficit spending that took place in 2006. So 
last month, we accumulated a deficit that equaled the year of--
maybe it was 2007. But it was the last year of the Bush 
administration. Does that seem like that is a sustainable 
operation, in view of the fact that we are looking at the 
possibility of inflation starting up at 1 percent of 
acceleration and the cost of our money, just 1 percent we have 
already looked at what those projections would be and they are 
pretty sizeable? So basically it is up to the other agencies of 
the government, the other parts of our economy to make these 
cuts because you just can't help us. Is that the answer?
    Secretary Donovan. Congressman, I couldn't agree more. I 
think the President said clearly the level of deficits today 
are not sustainable, and that we need to bring those down in a 
substantial way. A 2.8 percent reduction in HUD's 
appropriations relative to 2010, so to 2 years ago, is a 
substantial contribution to that. It more than meets 
President's commitment to a freeze on domestic discretionary 
spending.
    But we also----
    Mr. Carter. Basically we are operating on 2010 funds right 
now. We are operating under the CR.
    Secretary Donovan. That is correct.
    Mr. Carter. And the Democratic Party last year didn't 
choose to give us a budget for 2011, that is why we are in this 
predicament right now. They just didn't give us a budget for 
the first time since '76 or something like that.
    Secretary Donovan. But we are proposing almost a 3 percent 
reduction, over 1 billion from what we are operating on right 
now, which is 2010 level. So it is not just a freeze, it is a 
significant reduction from 2010.
    But again, I think we also have to look at other parts of 
the budget, as the President has said, that go beyond just 
domestic discretionary spending. And we need to ensure that we 
are not doing damage to the economy this year while we are 
recovering from the crisis because obviously, a strong economy 
is one of the primary drivers of reducing the deficit as well.
    Mr. Carter. I agree.
    Mr. Latham. I thank the gentleman. And let me just say, it 
is frustrating to hear some of the comments. Let me just ask 
you a question. For the first time since the Budget Act was 
passed in 1974, 35 years ago, there was no budget last year. 
If, in fact, the people who were in control at that time had 
done their job, passed all the appropriation bills and signed 
them into law, would we be in this mess today?
    Secretary Donovan. Mr. Chairman----
    Mr. Latham. Wouldn't we be talking about 2012 rather than 
still trying to get through 2011 appropriations?
    Secretary Donovan. Clearly, if we had a budget in place we 
would be focusing on 2012.
    Mr. Latham. So you are saying that because of the lack of 
any budget last year that was done, or any assumption of 
responsibility for actually doing our work in Congress, that 
this is the reason we are in this mess today. And it is a 
little frustrating to hear comments, as there was an election 
that took place, and I know the President said elections have 
consequences. I think the message was to cut spending. I don't 
know if anybody else got that message, but I certainly did in 
my district. And the reason that there was a change was because 
things were out of control. And I think we have to accept that, 
that that is part of the reality.
    The Veterans Affairs Supportive Housing program has really 
received a lot of attention lately. And particularly there are 
11,000 vouchers from the past fiscal years that remain unused; 
is that correct?
    Secretary Donovan. That sounds like----
    Mr. Latham. Assume it is.
    Secretary Donovan. I have the figures here.

                                VOUCHERS

    Mr. Latham. From the latest data that we have from you, 
only 17 percent of the vouchers provided in Fiscal Year 2010 
have been leased. And also, do you still stand by the 
administration's request for Fiscal Year 2011 which requested 
no new vouchers, which is the same policy and consistent with 
H.R. 1?
    Secretary Donovan. Congressman, when we came into office 
there had been 20,000 VASH vouchers appropriated. And just over 
1,000 of them were actually in use. And so we had almost 18, 
more than 18,000 that were unused, almost 19,000. And so we put 
together an effort with Secretary Shinseki to focus on those 
and to make sure that we were significantly increasing leasing. 
And, in fact, did not request, as you rightly said for 2011, 
those vouchers, because we felt utilization at the time we put 
the budget together was too low. I am happy to say that, 
because of that focused effort, I think we can all agree, no 
matter our party, where we are from, we want to make sure that 
veterans are housed. We have now increased the leasing by more 
than 20 times.
    We are now over 20,000 veterans that are using VASH 
vouchers today. Our very latest numbers are that almost 20 
percent of the 2010 vouchers are leased, and we are increasing 
that by about 3,000 vouchers a quarter. And so we do believe 
that if we, at this point, because of the acceleration that we 
have had, that we could use new vouchers in 2011 and get those 
leased.
    Mr. Latham. But you didn't request them.
    Secretary Donovan. We didn't request them because at the 
time, our utilization was well behind where it is today. I will 
say clearly, there are still improvements that we can make. We 
would be happy to talk to the committee about the details of 
those kind of improvements, but----
    Mr. Latham. How many vouchers are available today?
    Secretary Donovan. There are 30,000 that have been 
appropriated. But just to be clear, the process to actually 
have a voucher leased requires picking a housing authority 
through assessing the needs, getting the vouchers to that 
housing authority, them finding a veteran that is at risk of 
homelessness or homeless, getting them a voucher, and then the 
process of actually leasing up.
    So to have the final step in the process of a leased 
voucher can take typically a year or more after the funding is 
appropriated. So it is not surprising that vouchers 
appropriated a year ago would still be about 20 percent leased. 
That is the kind of timing it takes to find the voucher, find 
them an apartment. There are definitely things we can do to 
speed that up in certainly communities, but it is dramatically 
faster than it was before, and we now believe, because of the 
improvement that we could effectively use new vouchers in 2011.
    Mr. Latham. But you haven't asked for a budget amendment. 
You haven't come forward in making any kind of request, have 
you?
    Secretary Donovan. I think we have made it clear in prior 
testimony----
    Mr. Latham. Have you made a request?
    Secretary Donovan. I would be happy to make a formal 
request if that would be appropriate.
    Mr. Latham. Thank you. Mr. Olver.

                          DOT'S TIGER PROGRAM

    Mr. Olver. Thank you, Mr. Chairman. I just want to return 
to one thought. It seems that several times we have in the 
questioning, you have heard that the 2008 budget numbers look 
very good. Well, they don't look very good in the two largest 
rental assistance programs, the rental assistance program for 
tenant based section 8 would be reduced by about 15 percent 
below the 08 level if we went to the 08 level.
    And were it to happen in the case of project-based, it 
would be 30 percent below the number that you have requested to 
reach the number that was the enactment in 2008.
    So in those two major programs, people would be put out of 
housing. There is no question that that would happen, at least 
by my calculation, which I have been sitting here scribbling as 
we have been talking.
    So I wanted to ask you about--you were given $150 million 
in the 2010 budget for the sustainable communities initiative. 
And you have asked again for $150 million in the 2012 budget. 
All of that is caught up in the tangle of whatever is the 
situation for 2011.
    The 2010 monies have been used, with about $100 million of 
that going out to planning projects, some of them quite 
substantial planning projects, but about over 40 such projects 
in 27 different States. And then, in addition to that, there 
was a $40 million amount that was awarded as community 
challenge grants in connection with the DOT's Tiger program. 
Now, that $40 million was awarded in partnership with the DOT's 
tiger program, and that is what I want to examine.
    As far as I am aware, this is the first time that two 
departments have cooperated in making the award of those 
monies, in the grading of the requests and the applications for 
those monies. So I would like you to tell me a little bit about 
the, about how that process worked and what were the structural 
challenges of making that cooperation work.
    Secretary Donovan. Well, Congressman, one of the clear 
things that the President has set out in the State of the Union 
and has asked us to do is to look at ways that we are 
duplicating or overlapping work that can be simplified and 
streamlined. And one of the major problems that I think the 
Federal Government has had in working with local communities is 
that the departments tend not to talk to each other and that 
creates real inefficiencies.
    We tend to put housing investments here, transportation 
investments there, exacerbating long commutes, reducing the 
economic competitiveness of regions. And so this process was 
directly targeted at trying to improve the way that we work 
together. We literally had teams from the Department of 
Transportation, HUD and EPA sitting in a room evaluating those 
together. It had never happened before. The Tiger planning 
money that you talked about was included.
    I think one of the other important points about that 
process, we included more than a dozen foundations in the 
evaluation process, and they actually made a $150 million 
commitment as well to invest alongside ours. So it leveraged 
our dollars substantially and got more bang for the buck in 
terms of the planning based on that collaboration. And it 
insured that when the investments that the plans envisioned are 
made, that we would have alignment between us and the 
Department of Transportation to improve the speed with which we 
can make those investments.
    Just to give you one example, in Austin, Texas there is an 
expectation that as the plan is implemented, it is 37 different 
areas that will create 7,000 permanent jobs, and far more 
construction jobs; that there is going to be not only over $1 
billion of economic growth that comes out of that, but $1.25 
billion of savings to taxpayers because of the coordination of 
those investments. So that working together is quite powerful 
in terms of producing more efficient investments in those 
communities.
    Mr. Olver. There has been some argument that in whole 
effort at the sustainability initiative has really served only 
urban areas. And I am wondering if you can give me some thought 
about how does this also serve some rural areas and how many of 
those planning programs may have gone in such areas. I have 
been watching the new census data come out. I often watch that 
sort of thing. People who are coming from States which are 
about to lose or gain congressional seats, which four of the 
five of us here at the table, well, at least five of six of us, 
five of seven of us here at the table are in such States that 
are losing or gaining, Judge Carter is in a major gaining kind 
of a situation.
    And I have watched the data for some of the midwestern 
States, looking particularly at places like Illinois and Iowa, 
the chairman's State, and South Dakota and Kansas and Nebraska, 
and I find that between the censuses of 2000 and 2010, the 
number of counties that are losing population in places like 
Iowa, South Dakota, Nebraska and Kansas, all of those, those 
are now more--they have more than doubled the number of 
counties that are losing population.
    Mr. Olver. So I think that we need to do something about 
sustainability in rural communities because to speak to 
population tends to mean that there is loss of investment and 
such.

                         DISCRETIONARY SPENDING

    Mr. Latham. I thank the gentleman. Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman. And I would just 
ask the distinguished ranking member is there a census channel 
I could watch to stay up on this. I want to talk to you about 
Mark-to-Market because it is another innovation that you 
brought forward that you deserve credit for, and then I want to 
talk about one difficulty at the back end of it that some folks 
in our area are finding. But before I do I am a pretty calm 
guy, but some of the comments made here this morning really 
bother me. I mean the President sent up a budget. He didn't 
include one recommendation from this Bipartisanship Commission 
that has been praised so widely. And if it was such a great set 
of recommendations, maybe he could have seen fitted to put a 
couple of recommendations into it.
    Nobody is proposing to balance the budget on the basis of 
nondefense discretionary spending. The decision was made in 
H.R. 1 to deal with those issues, and the entitlements, which 
the President has completely punted on, will be addressed at a 
later moment in time. But sitting here and listening to people 
who control all three levels, of government, the Executive 
branch and both Houses of government, in veto-proof ways and in 
filibuster proof ways lecture about a product that we produced 
6 weeks into the new majority is pretty, pretty disheartening.
    Quite frankly there was a failure to govern, even with 250 
some members in the House and at one point 60 Senators in the 
United States Senate in control of the White House, now no 
budget, no appropriations bills, money spewing out of 
Washington that made drunken sailors blush, and it left us with 
a situation where we had to deal with it.
    Now I am going to tell you, I don't like H.R. 1. I had a 
proposal that indicated that we should take Lee Iacocca's 
approach and cut everybody across the board some amount and you 
figure it out. And I think that that is reasonable, that is 
what families have to do. My dissatisfaction with H.R. 1, you 
mentioned CDBG, we do great work with CDBG in Ohio, and I would 
have preferred that it receive a 10 percent cut rather than a 
66 percent cut. But the answer to do nothing, the answer to 
freeze was a pretty dramatic policy. When I got here 17 years 
ago, that was a pretty dramatic budget approach to freeze 
spending. It is not so dramatic in 2011. And we have to do 
better than freeze.
    And so we put forward this $100 billion proposal or $61 
billion proposal, and it is met with deafening silence. Our 
friends on the other side of the Capitol can't seem to get over 
$10 billion over this amazingly bloated Federal budget, and it 
causes them to stutter when you get beyond that. We ask our 
friends on the other side of the aisle to come up with a 
proposal and their answer is, while we all recognize we have to 
cut spending, just don't cut this spending, don't cut that 
spending, don't cut this spending, and as a result, we are 
never going to cut any spending if left to their own devices.
    The President, to his credit, appointed the Vice President 
to be the lead negotiator on this, but the Vice President isn't 
even in the country. So it is very difficult to sit down and 
negotiate with somebody that is not even in the country to talk 
about a number. So I would hope that we could talk about the 
good work that you are doing and save some of this other 
nonsense for another day.

                             MARK-TO-MARKET

    Now, Mark-to-Market, you have done a beautiful job on Mark-
to-Market, in my opinion. And the deficiency comes in post 
Mark-to-Market strategies, is where I want to sort of plumb 
your knowledge on this. In the post Mark-to-Market 
transactions, the policy, as I understand it, is that HUD will 
permit the Mark-to-Market financing to remain in place if there 
is a paydown agreement to continue on in a post Mark-to-Market 
function.
    Initially, that seemed to be working well. The feedback 
that I am getting today is that the paydown calculation being 
applied to the transactions is now becoming nonuniform, 
nonconsistent and it is creating some difficulties with people 
that want to engage in planning. So my request to you is that 
the agency create one unified policy for paydown requirements 
for post Mark-to-Market transactions and sort of solicit your 
thoughts on it.
    Secretary Donovan. Something we would be very happy to look 
at. Obviously as the economic circumstances have changed 
substantially since many of these agreements were entered into, 
I think the idea of going back and looking at whether we need 
to adjust those policies at this point, particularly given the 
challenges that we have seen, many, many residents that we have 
seen are project-based Section 8; their incomes have declined, 
in fact, and so the cost of those properties have changed 
significantly.
    So I would be happy to sit down with you and talk through 
whether there is some adjustments we might make there. 
Obviously we want to ensure that we are recovering for the 
taxpayer as often as we can. I am sure you agree with that. And 
so we need to balance that with any changing needs of the 
property, but would be happy to follow up with you specifically 
on that.
    Mr. LaTourette. I would appreciate that very much. And I 
think the number one word that I hear from all sectors of 
business and in the community is uncertainty. What I am being 
told is that this failure to have sort of a not a big one-size-
fits-all person, but to have some unified policy for the 
paydown requirement prevents people from planning. And I am 
sure that you want them to plan and you want these things to go 
forward.
    Secretary Donovan. Absolutely.
    Mr. LaTourette. I would love to talk to you, and I thank 
the chair.
    Mr. Latham. I thank the gentleman. The ranking member of 
the full committee, Mr. Dicks.

                                HUD-VASH

    Mr. Dicks. Thank you, Mr. Chairman. And I understand that 
you brought up the question about the HUD-VASH Program. I just 
want--Mr. Secretary, I want to welcome you, and I want to just 
talk about this a little bit. As I understand it, as of 
December 2010, 29,950 vouchers have been awarded the Public 
Housing Authority.
    So out of that number 28,497 vouchers have been issued and 
21,078 leases have been signed. I think this is a very good 
program. I talked to General Shinseki just a couple days ago, 
and I asked him what did he think. And he says, this is 
working, this is one of the best programs we have, and the 
veterans that get these vouchers and get their lives together 
do better in terms of recovery, getting off drugs, alcohol, 
improving their situation.
    But according to General Shinseki, and maybe you can 
enlighten us on this, we need another 30,000 of these. Now, 
there wasn't any--there was no money in the fiscal year 2011 
budget from the administration because you had vouchers that 
you hadn't utilized yet. But you have a request in 2012 for, as 
I understand it, $75 million. Is part of that yours and part of 
that VA, or is there another pot of money that comes from VA?
    Secretary Donovan. The $75 million is specifically for HUD. 
There is a special allocation within the VA budget that covers 
the service costs.
    Mr. Dicks. Now, do you think this program is working?
    Secretary Donovan. Absolutely. And we have partners around 
the country, independent observers, who said clearly it not 
only helps those veterans get back off the street on their 
feet, but saves money as well because of reduced costs in 
shelters, jails, emergency rooms and a range of other settings.

                           HOMELESS VETERANS

    Mr. Dicks. And some of these veterans even today are 
veterans of Iraq and Afghanistan, isn't that correct? That we 
have a homeless--a lot of--in my district we had a lot of 
Vietnam veterans who were homeless. I did a hearing many years 
ago out in Tacoma, Washington. There were 30 percent or 33 
percent of the homeless were veterans. We have a large veteran 
population there. I understand today that number may be 
something like 18 percent of the homeless are veterans. So in 
your opinion, we should keep this program going, is that 
correct?
    Secretary Donovan. That is exactly why we have made a 
request in 2012. We talked earlier about why we didn't make the 
request in 2011. We have made substantial improvements. We 
still have a ways to go, let's be clear. And in 2010, one of 
the things we did was to reach 62 new housing authorities 
around the country that had never had VASH before. And when you 
are establishing this program for the first time, there are 
challenges. And so we would be happy to follow up with the 
committee to talk about ways that we are improving the 
utilization in those areas and reaching more communities and 
more veterans as a result.
    So I am not going to say that we are going to stop 
improving the program. We still have things we can change to 
speed up lease up. But there is no question, given that we are 
leasing up more than 3,000 a month now that we could use 
another 10,000 in 2012 effectively.
    Mr. Dicks. And Secretary Shinseki has told me that your 
goal is around 60,000, to take this from 30,000 to 60,000.
    Secretary Donovan. That was the long-term goal that was set 
out in the President's plan to end veterans' homelessness.
    Mr. Dicks. Could you go further than that? I mean, if this 
program is working--you know, and we still have a number of 
veterans out there. I understood last year there was 137,000, 
some number like that, of our veterans who at least one night a 
year were homeless.
    Secretary Donovan. That is exactly right. And at a point in 
time about 75,000. So I think if we got up to 50,000 or 60,000 
VASH vouchers, I think we would want to look at where we are, 
how close we are to achieving our goals before I say to you 
that we would today need more. That is why we think 10,000 a 
year, given the lease up rate that we are doing which is now 
over 12,000 a year, is the right strategy, and let us come back 
as we proceed as we measure the number of veterans each year to 
see whether we need additional ones beyond the 50,000 or 60,000 
we originally laid out.
    Mr. Dicks. Thank you, Mr. Chairman, for letting me ask this 
question. And I just hope we can work together. You and I had a 
colloquy on the floor about this. There was some 
misunderstanding on everybody's part because there wasn't any 
money in 2011. But I would hope that this program, we can find 
a way to keep it going, because I think it is really being very 
effective in helping these veterans, and that is what we need 
to do. Thank you, Mr. Chairman.
    Mr. Latham. I think you will find total bipartisan 
cooperation.
    Mr. Dicks. Thank you.
    Mr. Latham. The gentleman from Rogers, Arkansas, the former 
mayor, Mr. Womack.

                        OVERSIGHT AND MANAGEMENT

    Mr. Womack. Thank you, Mr. Chairman. And thank you, Mr. 
Secretary, for your testimony this morning. I have only got one 
or two questions. I might get down in the weeds here for a 
minute as a mayor, because I have got a war story from HUD that 
still bothers me. In fact, I will do that at the outset. And I 
realize that it is an isolated, hopefully it is an isolated 
incident. But I think it goes direct to the issues of oversight 
and management and what we are doing to ensure that we are 
guarding the good stewards of our tax dollars.
    You know, we had a Recovery Act program of just $100,000 
plus dollars, it was a street project. And I was told right 
after my election, before I left office as a mayor, that I had 
a meeting one morning with HUD officials to talk about why we 
hadn't spent our money. And when I arrived at the meeting, 
there were three HUD representatives sitting in my conference 
room. And my block grant coordinator was in there and informed 
me that we had indeed spent the money. You could go out there 
at the site and look at it, the project is near completion. And 
there was some glitch, and I don't know whatthe glitch was. 
There was some computer problem. But it didn't keep the agency 
from having three people on per diem sitting in my conference 
room taking 15 minutes of time to understand that the problem 
was really on their end, not on our end.
    And I only use that example as to how important it is that 
we look at each one of these agencies and--have a critical 
analysis as to how they are being managed and how they are 
prioritizing travel, these sorts of things, because I know over 
time, spread over thousands of communities, that these numbers 
do add up to some real dollars. And I am not asking for a 
response on that. I am just giving you a story that I am 
witness to, that perhaps there are others out there as well.

                          TECHNICAL ASSISTANCE

    My question, though, is more about technical assistance, 
because I know we spend large sums of money teaching us, 
teaching mayors and coordinators, how to spend your money. Is 
that an area that we could maybe find some savings so we could 
get to the root causes that the gentleman from Ohio talked 
about just a few minutes ago, that have put us in the financial 
pickle that we happen to be in? Is technical assistance really 
all that necessary?
    Secretary Donovan. Well, first of all, let me say, as a 
former local housing official, I know that there are plenty of 
ways that HUD can improve the way we interact with local 
communities. And I think I would be happy to spend time as a 
former mayor talking in more depth given your experience about 
ways that we are trying to do that. I am very proud of the way 
we have utilized the Recovery Act funds. Not only have we 
allocated 75 percent of our money in eight days, I think a lot 
of people were shocked that we could do it that quickly, we are 
more than 3 months ahead of the time lines the Vice President 
set out, we have met every single deadline for obligation of 
funds, and I will say that given the level of reporting and 
transparency, that we required there were some headaches for 
our customers out in the field who had to report more than they 
had, and we certainly had some glitches and that may be what it 
was related to. But we have had 99 percent of our grantees 
report on time and achieved very high levels of success with 
the Recovery Act.
    On the technical assistance point, I think if we can 
effectively use a small amount of money that ensures that a 
large amount of money is spent more quickly and gets more bang 
for the buck then I think technical assistance is a good use of 
funding. What we saw when we came in, however, is that the way 
technical assistance was organized at HUD, it was siloed. Each 
program had its own allocation of technical assistance. And 
oftentimes it was overlapping. It did the same thing in 
different programs. We were doing it twice.

                       TRANSFORMATION INITIATIVE

    And so what we did working with this committee was to 
create an account called the Transformation Initiative that 
allowed us instead of having eight or ten different buckets of 
technical assistance, to put it all into a single more flexible 
bucket and to use it much more effectively. And I would be 
happy to spend more time with you on that. We have gotten 
tremendously good feedback from cities and other communities 
around the country about the work that we have done, for 
example, on neighborhood stabilization, to not just sort of 
check the box, but to actually help communities spend their 
money faster and more effectively, and to take from communities 
information about how we could improve and simplify and 
streamline the program.
    So I think you are right that when used poorly technical 
assistance is a place that we could look to streamline and cut 
back on, but I do think it is a critical part of our budget. 
And the work that we have done with the committee over the last 
couple of years has improved significantly our usage of that 
money.
    Mr. Womack. Are you pretty confident that the----
    Mr. Latham. The gentleman's time has expired.
    Mr. Womack. Mr. Chairman, I yield back.
    Mr. Latham. Thank you, Mr. Womack. The gentlewoman from 
Ohio, Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman. Welcome, Mr. 
Secretary.
    Secretary Donovan. Thank you.

                         MORTGAGE FORECLOSURES

    Ms. Kaptur. I bet our chairman would like to have $55 
billion to help with development around this country. I know 
just where it is. The Big 6 On Wall Street; Citigroup, Wells 
Fargo, Goldman Sachs, Morgan Stanley, Chase. That is how much 
they made in 2010, $55 billion. They paid at an 11 percent tax 
rate compared to the businesses in my district that have to pay 
at a 35 percent tax rate. Bank of America alone this year is 
going to get a $666 million refund. It is very interesting to 
think about what is going on here. And they are being rewarded.
    There has not been one prosecution, not one, by either the 
last administration or this one. And again, districts like 
mine, 37.5 percent of the mortgages are under water. And the 
homes that are vacant, including many HUD homes that are a 
disgrace, have been vandalized, copper pipes have been stolen. 
Every day the value of the real estate gets lower. Nationwide 
real estate values have declined 27 percent, in my district 
37.5. People are at one another's throats in the State capitals 
in Wisconsin and Ohio. They are saying where is the revenue? 
Well, when property taxes can't yield as much as they used to, 
it doesn't take a mental giant to figure out what happened to 
the money.
    The devaluation of foreclosures in places like Ohio have 
created a massive housing problem around this country. And what 
is disappointing to me is that there isn't more of an outcry 
from Members of this institution, as well as the 
administration, to really get serious about housing. So we are 
just tinkering at the edges, we will make a difference here in 
a few people's lives. It is really sad. I keep asking myself 
where is the greatness of our Nation, where is it, what 
happened to it, is it hiding, where is it, in the housing 
sector? So we will argue about nickles and dimes up here, and 
meanwhile the whole system is collapsing, the housing system.
    And even if it were to recover tomorrow the damage that has 
being done every day by vandalism and by nonuse, particularly 
in areas that get cold, where properties deteriorate, it is 
going to take a decade and a half to dig out of, if we ever 
fully dig out of it.
    So my question really, Mr. Secretary--I mean, the way I 
look at it, both this administration and the last one, they 
just capitulated to Wall Street. You like them too much, you 
are not really willing to take them on. And it is a sad day for 
America. Kevin Phillips calls it the financialization of our 
economy, and I think it is embedded deeply right in the housing 
sector.
    So what are we going to do here? Well, you can do a little 
bit. I think in communities like mine, and I am not the only 
place, I think in Ohio it had the deepest discounts in our 
Nation's housing stock for foreclosed homes last year, in the 
third quarter of last year. You need to somehow, at HUD, talk 
with your colleagues in other departments and form strike 
forces in these areas that are so hard hit. We need to turn 
these HUD houses around yesterday and to get them back on the 
market, get them rehabbed.
    Norm talks about veterans that need housing. The head of 
our public housing authority told me the other day, I said, are 
you going to open up your public housing? What are you going to 
do with all these homeless people? Do you know what she said? 
Oh, Marcy, we haven't opened up our list in years. She said, 
there would be thousands of people, we would be inundated with 
homeless people. I said, right, well, isn't that our job, 
aren't we supposed to be picking up the broken pieces of 
humanity here that Wall Street has delivered at our feet.
    I really think you need some kind of rootedness on the 
ground beyond your regional offices that can come to hard hit 
communities, whether they are California, Ohio, wherever they 
might be, and help us put the pieces together at the bottom, 
because it is not being put together. And involve our realtors, 
involve if we have land trusts, and some of us do, involve the 
heads of those, involve our mayors, take a look at the flow of 
Federal funds into these areas.
    I sit on Defense, frankly I am willing to use some of our 
guard bases to have people who do demolition to get rid of some 
of these vacant units, get them off the market, get the dirt 
put in the basements and at least get them off the eyesores 
that they are all over our community. So my question really, 
one, is structurally what can you do to put together a serious 
group of people targeted at some of these areas that are so 
hard hit to prevent further decline?
    Secretary Donovan. Congresswoman, I will come back in one 
moment to the specifics of the question about our stock and 
about a team of people. Generally, let me say, though, that----
    Mr. Latham. Let me just say to the gentleman, your time is 
expired. We are trying to stay within the 5-minute rule. If you 
could answer extremely briefly and then for the record, I would 
appreciate it very much.
    Secretary Donovan. Our efforts, while I think we could all 
agree, haven't allowed the housing market to fully recover at 
this point, there is no question about that, and that our 
targets were to help more people than we have, we still have 
reached over four million families with our efforts to keep 
them in their homes. And that has had a significant impact on 
stabilizing the market and helping those millions of families.
    We are also working collectively across 11 agencies and 
with the 50 State attorneys general to hold the servicers 
accountable for the clear mistakes that were made around robo-
signing and a range of other problems. Specifically on the 
stock, we have made a number of changes to the way that we 
manage our stock. In particular, our contracts used to have us 
paying up front to those who managed our homes, not pay for 
success, but paying up front, which was a big problem in terms 
of their motivation frankly to get those houses sold. We have 
changed that. In December, we completed the transition to those 
new contracts. We have already seen about a 7-percent reduction 
in the time to market and occupy our homes nationally, about 9 
percent in Ohio. And so I think we are seeing improvements 
there. I would be happy to talk to you more about it. On the 
idea of staff on the ground----
    Mr. Latham. If you would respond later, if you would like. 
Out of courtesy for other Members, I would hope we don't make 
statements for 5 minutes or 4 minutes and 50 seconds and then 
ask a question with 10 seconds left.
    Ms. Kaptur. I didn't know they had to answer the question 
in the 5 minutes, Mr. Chairman, I am sorry.
    Mr. Latham. What is that?
    Ms. Kaptur. I didn't know they had to answer the question 
in the 5 minutes.
    Mr. Latham. Right. We are trying to stay in the 5-minute 
rule if we can.
    Secretary Donovan. We would be happy to sit down to talk 
about a team that we could put in place, as you have talked 
about.
    Ms. Kaptur. Thank you.
    Mr. Latham. I thank the gentleman. The gentleman from 
Houston, Mr. Carter.
    Mr. Carter. No, not Houston.
    Mr. Latham. I am sorry.
    Mr. Carter. That is all right. Texas is close enough.
    Mr. Latham. Texas. One of those States down there.

                   SUSTAINABLE COMMUNITIES INITIATIVE

    Mr. Carter. One of those little States down there. Thanks 
for the comment about Austin, Texas. That happens to be my 
neighbor to the south. I live in Round Rock, Texas, for the 
chairman's benefit, and the fastest growing county in the State 
of Texas in the last 10 years. And so you are going to do a 
project that is part of the Sustainable Communities Initiative 
that is down in Austin, I don't know what the value of that 
project is going to be, but President Obama, by Executive 
Order, mandated that we require now that agencies use project 
labor agreements (PLA) on projects that are over $25 million or 
above. This basically requires a union shop to be used. I am 
trying to shorten my question. We are in a right-to-work State 
in Texas, and we can probably number the union-based 
construction firms on one hand in our State. Eighty-seven 
percent of all the U.S. construction workforce is nonunion, and 
I would argue that it is probably more than that in Texas. Is 
HUD promoting these anti-competitive costs of union favoring 
PLAs on HUD projects? And I will ask specifically, is that 
going to be required on the Austin project?

                              DAVIS-BACON

    Secretary Donovan. HUD operates under Davis-Bacon under 
very clear rules, long-standing rules, about which of our 
projects require union labor and which don't. The sustainable 
communities grants are not subject to those Davis-Bacon 
requirements, but a direct construction funding of just about 
every kind under HUD appropriations are subject to Davis-Bacon 
requirements.
    Mr. Carter. Where PLAs are different from Davis-Bacon, 
people argue all the time, and I would agree with you, that 
Davis-Bacon requires union wages. It doesn't require 
contributions to union pension funds, it doesn't require those 
other things that the PLAs, as I understand it, do require. 
Even if it is managed by a union shop and there are non-union 
workers on the job, they have to contribute, as a union worker 
does, and hiring will take place at the union hall and all of 
those things. And when we are talking about economy, you talked 
to us about economy of scale, economy of planning where you are 
going to save money, then how do you go to a very successful, 
probably the most successful in the Nation in the State of 
Texas, and a very proud right-to-work State, and impose these 
labor union standards on construction jobs, and how is that in 
any way cost efficient or saving the United States Government 
any money?
    Secretary Donovan. I think the change that was made under 
the executive order is that PLAs were prohibited, and that was 
reversed under the executive order. So we have used PLAs in a 
number of cases, particularly with housing authorities. And we 
have seen in those cases reductions in time it takes to build 
projects and significant savings in many of those projects 
under the PLA.
    Mr. Carter. Are these projects in Texas you are talking 
about or projects in other places?
    Secretary Donovan. I am not aware of one in Texas at this 
point. I can check with my team and get back to you to ensure 
that that is correct, but not in my memory.
    Mr. Carter. Well, as a lawyer who developed Section 8 
housing projects back in the 1970s, I can assure you that we 
could have built those projects much cheaper without the 
imposition of Davis-Bacon. But PLAs which require contributions 
to unions I find quite offensive to our right-to-work States. I 
don't think the Federal Government should be imposing that upon 
States that have chosen to make their economy run differently 
than the east coast or the west coast. And I think we have 
proven in this recession how effective it is when you do it the 
right way. So I am very concerned about that. And I thank you 
for telling us about it.
    Mr. Latham. The gentleman will yield back. Very good. Mr. 
Price.
    Mr. Price. Thank you, Mr. Chairman. Mr. Secretary, I want 
to ask you about your proposal regarding HOPE VI and Choice 
Neighborhoods, in other words, about this Nation's most 
comprehensive program, as I understand it, for addressing the 
renewal of urban neighborhoods. I want to make a brief 
observation though on the running discussion we have had here 
this morning about our current budget situation. I actually 
think it is very important for all of us to bend over backward 
to figure out where we agree, and especially to figure out what 
the facts are. So just a couple of quick comments on the 
process. I am regretful, and I am critical that the 
appropriations bills in this body last year did not get further 
along in the process. I was critical at the time.
    However, the fact also is that we had, through the 
subcommittee process, generally with bipartisan collaboration, 
12 good bills. They were assembled into an omnibus bill that 
could have been passed in December. And there was nothing 
inevitable whatsoever about the Republican decision to threaten 
a filibuster of that bill in the Senate, or for that matter, a 
year-long CR.
    So it is not as though this was written in the stars. We 
could have avoided this kind of over-the-cliff situation we 
face right now. And so I think it is important for all sides to 
acknowledge their part in that. Secondly, surely we can also 
agree that the best cure for a deficit is a thriving economy. 
That is the lesson of the 1990s.
    We balanced our budget in the 1990s. We balanced it, and we 
paid off $400 billion of the national debt. We did that, yes, 
through tight budget rules; we did it through spending 
restraint; we did it through an equitable Tax Code; but above 
all, we did it with a thriving economy. It ought to be a point 
of common concern, in whatever we do on our current budget 
situation, that we do nothing that would slow or stifle the 
recovery.

                      HOPE VI/CHOICE NEIGHBORHOODS

    Now, about Choice Neighborhoods, as you know, this 
subcommittee under previous leadership had many discussions, 
many concerns, regarding HOPE VI and Choice Neighborhoods, and 
it has always seemed problematic to me to terminate HOPE VI and 
replace it with Choice Neighborhoods or to propose that unless 
and until Congress acts on the authorization front.
    Of course, now we are faced with the proposal from our 
friends in the majority to eliminate both programs, to fund 
neither HOPE VI nor Choice Neighborhoods. So I want to ask you 
what is the rationale for your Choice Neighborhoods proposal in 
this budget, what is unique, what is distinctive about this 
program, why should we fund it in your view, or is it somehow 
fungible or replaceable by other efforts?
    Secretary Donovan. Thank you for the question, because I 
think it is important. There has been some misunderstanding 
about the difference. HOPE VI, as you well know, has been a 
very successful effort, a total--it has replaced about 100,000 
of the very worst public housing developments around the 
country with mixed use. Mixed income developments that have 
been very successful. It has attracted about twice as much 
money in private capital, so a total of $6.1 billion in public 
funding, attracted over $12 billion in private capital and has 
substantially improved the outcomes for residents of that 
housing as well.
    Choice Neighborhoods was always intended to build on that 
record of success. And in fact, projects that are eligible 
under HOPE VI could very much be funded and would be funded 
under Choice Neighborhoods. But the problem is that if you have 
a privately owned affordable housing development that is in 
terrible condition, and we have seen examples here in 
Washington, D.C., side-by-side publicly owned housing sitting 
next to privately owned affordable housing, equally terrible 
condition, HOPE VI could not help that privately owned 
affordable housing, it could only help the public housing.
    And so what we were doing with Choice Neighborhoods was 
building on the legacy of HOPE VI and expanding its 
applicability. In fact, we think it had been successful enough 
that we ought to apply that same model to other types of 
housing. And the intention was always that the significant 
majority, our expectation was 75 percent or more of the Choice 
Neighborhoods' funding would be used for public housing.
    So there is absolutely no flagging of our commitment to 
continue the legacy of HOPE VI and to continue to renovate and 
revitalize troubled public housing. Choice Neighborhoods builds 
on that record, and it does it as well by bringing other types 
of funding to the table. HOPE VI only awarded housing funding, 
it didn't bring other kinds of funding from the Department of 
Justice, Department of Education to improve schools. Choice 
Neighborhoods has another advantage that it brings these other 
funding sources together with the funding for the housing 
revitalization as well.
    Mr. Price. Thank you.

                              FHA RECEIPTS

    Mr. Latham. I thank the gentleman. It is my turn here. Last 
year, Mr. Olver, the former Chairman, asked you how confident 
you were that CBO was going to go along with your estimate of 
$5.8 billion of FHA receipts. And if I remember, you gave a 
very persuasive response that day saying that it is going to 
happen. CBO didn't really agree apparently and is going to 
receive about $4 billion less than what you had in the budget.
    So I guess I will ask Mr. Olver's question again, how 
confident are you that CBO will go along with your estimate of 
$5 billion in FHA receipts. I hope this isn't another budget 
gimmick to supposedly meet the President's discretionary 
freeze, because it obviously didn't materialize last year and 
do the same thing this year.
    Secretary Donovan. First of all, just in terms of what has 
actually happened, we use estimates from our independent 
actuary to drive the President's budget. And not only have 
those estimates in the actuarial review been borne out, we have 
actually produced more revenues than was predicted by our 
independent actuary. And in fact, if you look at this year, 
their prediction was $6 billion. Our latest estimate is that it 
will be more like $10 billion this year. Now, part of that, 
about $2 billion of that additional is from the premium 
increase, but the remainder of it is not from the premium 
increase.
    So I think in terms of the accuracy of our projections, if 
anything, they have underestimated actual results rather than 
the other way around. Now, CBO's, one of CBO's concerns when 
they estimated those receipts last year was in the way that we 
were modeling. And we did go back and revise the way we have 
modeled the FHA receipts to improve them to account for some of 
the concerns that CBO has had. We have sat down with CBO and 
discussed this with them. They have not given us a clear 
indication of what their likely receipts would be. I would say 
anything the committee could do to encourage them to sit down 
with us and have these discussions before their estimates come 
out rather than after would be helpful.
    And in particular, given that we have already raised 
premiums and it is clear that our receipts will be higher this 
year, encouraging them as well to revise their receipts this 
year, not just for 2012, I think would be helpful to the 
committee as well as to us to recognize those improvements that 
we have made.
    So I can't sit here and tell you I know what they are going 
to say. I will say that relative to what they projected last 
year, it is absolutely clear that a higher premium will produce 
increased receipts. So the difference that we have been focused 
on is two billion additional dollars. It is hard for me to see 
any way it could be projected that a premium increase won't 
produce substantially increased receipts, and in fact, we 
expect it already to be $2 billion this year just for part of a 
year.

                          EMPLOYEE INCENTIVES

    Mr. Latham. You are as good as you were last year. We will 
see what CBO, our good friends down at CBO, everybody loves 
them. Anyway, I just had one question. I know there is talk 
about freezing the Federal workers' salaries. And I honestly 
believe a lot of Federal employees get a very bad rap and that 
some incentives at the workplace are good. It is somewhat 
amazing and shocking to me that almost every one of your 
employees at HUD received a bonus last year. It is like 97 
percent of your people all got bonuses. And it looks like it 
didn't necessarily translate into good working morale--
apparently the Partnership for Public Service rated HUD last in 
its rankings of best places to work in the Federal Government.
    So even though it has got all these incentives, it didn't 
really help as far as job satisfaction. Just tell me what is--
or how can you have 97 percent of your employees get 
incentives, and doesn't that kind of fly in the face of what 
you are talking about with a freeze.
    Secretary Donovan. Yes. And in fact, the information that 
you are looking at, the number was 95 percent. But that was 
2009. We actually haven't awarded 2010 bonuses yet. And we are 
actually waiting to see the outcome of the budget discussions 
for 2011 before we award bonuses for 2010. But I think it was 
very clear when we came in and we looked at the rating systems 
that were in place for 2009 when we took office that they were 
not targeted enough in performance, that performance criteria 
weren't connected enough to the goals of the Department. And so 
we have made substantial changes on that.
    Already with our SES the numbers are dramatically different 
this year. I think we have shared those with your staff. And 
while I will say, and I appreciate your acknowledging this, I 
am very proud of the work that our employees have done around 
the Recovery Act and other things, but we clearly did not have 
a performance management system that accounted for truly 
outstanding performance and connecting that to the goals. And 
part of this frankly is the training that we provide as well. 
It came through in the survey that you are talking about that 
our employees don't feel that they are trained good enough to 
perform their jobs effectively. So both stronger performance 
criteria, as well as providing the support they need to do 
their jobs better I think are the two pieces that we are 
putting in place.
    Mr. Latham. I am just curious what the 3 or 5 percent did 
to not get a bonus.
    Secretary Donovan. As I said, I think you will see those 
numbers are substantially different.
    Mr. Latham. We don't need to go there today.
    Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman. I am sure you are 
trying to reach to other people, so I just want to clarify a 
couple of things. Unfortunately, Mr. Carter has left and Mr. 
Price has left, but I still want to clarify something they 
said. And then, I don't want to give my friend from Ohio too 
much time. I will make a comment on something that he has said 
as well.

                        PROJECT LABOR AGREEMENTS

    First of all, on the project labor, this is more for the 
audience since it may not be entirely clear how the project 
labor arrangement works here, that President Bush had issued an 
executive order prohibiting the use of project labor 
agreements, which meant that it could not be used whether you 
were a right-to-work State or a union State. What President 
Obama did was to rescind that executive order and replace that 
executive order with an order which encouraged people to use 
it, not demand it, not require it, encourage right-of-work 
States.
    There is nothing to make them do that. If they wish to 
follow the encouragement by the President they can. There is no 
requirement at all. And for those which were union States, they 
then could work with the project labor agreement. So in fact, 
we have returned to a situation where there is choice for 
whether the State wants to use them or not use them, number 
one. Number two, I want to simply ask you if, and you can 
answer it yes or no, I think, and we may have follow up, is Mr. 
Price's comments about HOPE VI and Choice Neighborhoods.

                      HOPE VI/CHOICE NEIGHBORHOODS

    Have you actually in the language that you are submitting 
as your authorization language, since it has to be new, you get 
the chance to make any changes you want for this 112th 
Congress, you have to start again, and it has not gotten very 
far in the authorization process, do you make it clear that 
something like, as I think you used the word, something close 
between two-thirds and three-quarters would probably follow the 
pattern of HOPE VI, and the remainder would follow a new 
additional pattern, which you say brings in money from several 
other agencies. We are talking about our budget.
    And whatever justice puts into it or any other agency puts 
into it. We are not paying money that would normally be in from 
justice or those other departments. That would have to come 
from them.
    Secretary Donovan. Separately.
    Mr. Olver. Separately. Have you made it clear that you are 
honoring, in the language you are submitting for authorization, 
that my members on my side very much want a HOPE VI kind of a 
thing that is very clear, and Choice Neighborhoods can be a 
part of the whole program, which is, I think, what you say. 
Just give me a yes or no on that one and we can clarify it 
later, because I want to get back to my friend from Ohio so he 
can answer.
    Secretary Donovan. The legislation that passed the 
committee, the authorizing committee in the House last year, 
did have a clear set-aside for public housing.
    Mr. Olver. And how much of that--what was that clear set-
aside in that language?
    Secretary Donovan. I believe it was 75 percent. It might 
have been two-thirds. I want to check on that.
    Mr. Olver. So then it would roughly follow then. So it did 
have that set aside?
    Secretary Donovan. Yes.
    Mr. Olver. Okay. That is fine, that is fine. Now, just a 
clarification for the gentleman from Ohio.
    Mr. LaTourette. I am all ears.
    Mr. Olver. This sort of reiterates something that Mr. Price 
I think also said. We actually, in this subcommittee, passed in 
a fairly bipartisan way, not as much as you might have liked, 
but, you know, reasonable, and lay a bill through the House of 
Representatives, it was part of that bill that went to the 
Senate as an omnibus bill, it was created out of the process of 
we having in the subcommittees created a dozen different bills, 
all of which were ready to go.
    Ours was the only one that actually passed through the 
House. And the Senate never acted on ours by itself, nor on an 
omnibus. So that is how we got to here. I don't wish to take 
particular blame for what happened last year on that issue. I 
just want to clarify.
    Mr. Latham. It is all your fault.
    Mr. Olver. Thank you. I yield back.
    Mr. Latham. Thank you.
    Mr. Olver. And I am only on yellow, look at that. And time 
left for the other three to have something.
    Mr. Latham. This is amazing. Mr. Dent.
    Mr. Dent. Thank you. Secretary Donovan, good morning.
    Secretary Donovan. Good morning.

                                  CDBG

    Mr. Dent. With respect to the CDBG, I know you have 
proposed a cut, and certainly H.R. 1 provided a significant cut 
to CDBG. But one thing I have noticed over the years is that it 
seems that a fair amount of the CDBG money is going to 
communities that perhaps, in my view, aren't as needy as 
others. I often think of communities like Allentown or Toledo 
or Akron, that may need substantial help through CDBG, and 
there are other communities that are comparatively very 
affluent growing communities, often in the south and the west.
    And is there a way to revise how those funds, those 
precious CDBG dollars, are allocated in a way that might be 
considered more equitable and to account for those communities 
that have greater needs, and what authorities would you need 
from us to make that happen?
    Secretary Donovan. A very important question. And I think 
there are a range of ways that we could work with the committee 
to improve the targeting and the effectiveness of CDBG. Because 
it is the most flexible program we have it is harder to measure 
the outcomes and the metrics for performance. But I think there 
is more we could do on targeting it and ensuring we are getting 
bang for our buck, so to speak. That is one set of reforms that 
I think we would want to work with the committee on. In terms 
of the formula itself, there is no question that the formula is 
an older formula at this point. And in fact, we have had 
discussions in prior years about potential reforms. And in 
particular, things like population loss and other factors in 
the formula are things I think might be worth looking at again. 
But one thing I would point out, it is a bit deceptive to say a 
whole community may be at a higher level of income when what 
you really need to look at is are there a significant number of 
low-income people within that community. So you take many 
cities where there may be an average income that is quite high 
and still have a large number of low- and moderate-income 
people with neighborhoods that are very challenged.
    And so it would be worth, I think, not just looking at the 
overall level of poverty in those places, but in fact, the 
share of low-income people and making sure that we are not 
cutting out communities that even if their average levels of 
income are high enough, that have significant needs in poor 
communities that need to be met by the purposes of CDBG.
    Mr. Dent. Well, I do want to work with this committee to 
try to help make this formula more equitable, because I have 
noticed it. There is going to be declining CDBG dollars. We 
have to extend those as best we can in communities where they 
are needed most. And I recognize that many municipalities and 
communities, that they all have pockets of poverty or need, but 
some are much greater than others, I mean in terms of vast 
swaths of many communities, particularly in the northeast and 
midwest are pretty hard hit. And I just would like to further 
work with you and your folks on that issue.
    Mr. Olver. Would the gentleman yield for 30 seconds?
    Mr. Dent. Sure.
    Mr. Olver. Thank you very much. How quickly will we take on 
the new data, because they are coming out week by week for 
censuses on what are those changes in coming up with a better 
formula. Any idea?
    Secretary Donovan. So for 2011 we would continue to use the 
2000 census data. For 2012 our plan is to incorporate the 
latest American community survey data from 2005 to 2009, with a 
number of elements from the 2010 census as well. So we would 
be, for 2012, incorporating a range of new census data as well 
as the American community survey.
    Mr. Olver. So 2012 data phase in, not quickly, but phase 
in?
    Secretary Donovan. That is right.
    Mr. Dent. I guess my time is up, right?
    Mr. Latham. You have 50 seconds.
    Mr. Dent. Go ahead, finish the answer to your original 
question.
    Secretary Donovan. The answer is, yes, I would be happy to 
sit down with you.
    Mr. Dent. I yield back.
    Mr. Latham. I thank the gentleman. The gentleman from Ohio, 
Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman. And I just want 
the former chairman and distinguished ranking member to know 
that I absolve you of all responsibility for what happened here 
last year. You did a masterful job of guiding this subcommittee 
to conclusion. My difficulty, however, is that your leadership 
in both Houses completely abdicated their responsibility to 
govern this country when it came to the Nation's fiscal health. 
It has been mentioned for the first time since 1974 we didn't 
have a budget, and so while you were able to craft a bill in 
subcommittee it was based upon a number that the former 
distinguished chairman of the committee just made up.
    I mean, we didn't have a 302(b) allocation as a result of 
the budget consideration, so Mr. Obey got together and just 
gave each subcommittee a number. And then that is not a way to 
run the government. And you certainly weren't responsible for 
that but others were. And quite frankly, I have nothing but 
respect for the former chairman, but if I had a nickel for 
every time he went to the floor during the 12 years that the 
Republicans were in control of the House of Representatives and 
chastised us for not completing our work, I would live in a 
much better house today than I do, and so I would just make 
that observation. But enough about you know the past.

                        PROJECT LABOR AGREEMENTS

    I do have to talk just for a minute about Judge Carter. He 
is mistaken sadly about project labor agreements. Ninety 
percent of the project labor agreements that are conducted in 
this country are done by private enterprises, not government, 
there is no union requirement. And probably the best project 
labor agreement example that is close to us is National 
stadium. It was completed under budget, under time and employed 
a great number of people from the Washington, D.C. area to get 
it done. There is no requirement that it be a union shop. The 
requirement is that you reach an agreement. And by having a 
project labor agreement in place, the history demonstrates that 
the contractor, the big contractor, is able to plan for all 
contingencies and you don't have to run out and hire an 
electrician here and an electrician there.
    And it is not a union shop. It can be a non-union shop, it 
can be whatever is required. And this whole notion that somehow 
those are bad I think is misunderstood here, as is the 
application of Davis-Bacon which has been in the law since 1956 
and supports a local labor market. I want to talk to you about 
the hardest-hit fund. Again, thanks to some very aggressive 
lobbying by Ms. Kaptur, who is not here anymore. And 
Congressman Kucinich, and I think the President was nervous 
that Mr. Kucinich was going to run against him for President 
again so he designated Ohio as one of the hardest-hit States. 
But there has been a little hiccup in the guidance and whether 
or not nonprofit housing counseling agencies are able to 
participate. And the initial guidance from Treasury and HUD 
announced that HUD-approved counseling agencies had to be 
licensed under State law in order to participate.
    Three days later that instruction was rescinded. And so my 
question to you is the confusion that concerned me, and it has 
also concerned some of the not-for-profit counseling agencies, 
and just ask for your observation and thoughts what you are 
doing to fix it and work with Treasury, because even though 
Treasury was the one that sort of set the standards, my 
understanding is that the rule making needs to be done by HUD. 
And I knew that lady would have a piece of paper. She is the 
best. I hope she got a bonus. I am telling you that because she 
is really good.
    Secretary Donovan. We were waiting to see how the hearing 
went today. We will be polling all of you afterwards to get 
your opinion on it. I will be honest, Congressman, I had not 
been aware that that change had been made in the Treasury 
rules. We have been working with them, but Treasury is 
overseeing the hardest-hit program. And I will have to get back 
to you on the specifics of that.
    Mr. LaTourette. That would be good. Thank you.
    Mr. Latham. Thank you, sir. Mr. Womack.
    Mr. Womack. Nothing further, Mr. Chairman.
    Mr. Latham. Mr. Dent.
    Mr. Dent. Nothing.
    Mr. Latham. Mr. Olver. That is way too tempting.
    Mr. Olver. Well, my only very brief comment is that Mr. 
Obey's coming up with allocations for the subcommittees is not 
very different from what the present budgetary chairman has 
done this year, because that is essentially a deeming of the 
same numbers again. So we will see how the rest of the process 
goes. Thank you.
    Mr. Latham. Well, at least at that time there was a 
baseline to deem a number from, this year there is not even a 
budget baseline to have it deemed from. So anyway, we will talk 
personally. Anyway, unless you have anything further I 
appreciate very much your testimony and continued ongoing 
communications. We got a lot of work to do. Doing it smart, 
that is what it is all about.
    Secretary Donovan. I appreciate your leadership, Mr. 
Chairman.
    Mr. Latham. Okay. Thank you very much, and the hearing is 
adjourned.




                                           Tuesday, March 15, 2011.

 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT--TRANSFORMATION INITIATIVE

                               WITNESSES

ESTELLE RICHMAN, CHIEF OPERATING OFFICER, U.S. DEPARTMENT OF HOUSING 
    AND URBAN DEVELOPMENT
JERRY WILLIAMS, CHIEF INFORMATION OFFICER, U.S. DEPARTMENT OF HOUSING 
    AND URBAN DEVELOPMENT
RAPHAEL BOSTIC, ASSISTANT SECRETARY FOR POLICY DEVELOPMENT AND 
    RESEARCH, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
    Mr. Latham. Good morning. Today's hearing looks at the 
President's Fiscal Year 2012 budget request for HUD's 
Transformation Initiative. We welcome our three witnesses from 
the Department: Mr. Jerry Williams, who is HUD's Chief 
Information Officer; Estelle Richman, HUD's Chief Operating 
Officer; and Dr. Raphael Bostic, HUD's Assistant Secretary for 
Policy Development and Research. Welcome all of you. I look 
forward to your testimony this morning.
    The Transformation Initiative is a relatively new creation 
at HUD. This account did not exist prior to Fiscal Year 2010, 
when Secretary Donovan requested funds and flexibility to 
change the way HUD does business. We still are not sure of what 
that all entails or where one would even start to fix HUD. I 
think many of us were thinking or hoping the Secretary was 
going to improve HUD's performance in the areas of accounting 
for funds and programs and operate more efficiently in its 
basic functions. I think we can all agree that HUD has never, 
ever been the poster child for a great Federal Government.
    There are a few initiatives where we have been very 
supportive. Despite the grand ideas and new proposals in the 
research area, I am convinced that the one true change at HUD 
that will reform the way HUD does business and allows for 
greater transparency and more informed decision-making is our 
IT investments today in FHA and in voucher management. I am 
hopeful that these investments will outlast our involvement 
with HUD. With FHA now about 30 percent of the housing market, 
we need to ensure that we have the systems and infrastructure 
to support and protect the government's investments. For the 
voucher system, the Department desperately needs to get a grip 
on the operations and ebb and flow of the programs.
    Vouchers keep millions of Americans in a home each night. 
However, this program is expensive, and its baseline costs are 
rising faster than any other program at HUD and its costs 
threaten to devour any discretionary funds at HUD.
    I see there are a few new ideas in the budget; namely, the 
technical assistance teams and the National Resource Bank. I 
will let you speak to those in your testimony. But I will tell 
you I am concerned that your congressional budget materials 
contain really inadequate justifications or explanations for 
these requested funds.
    Today we are going to go on the 5-minute rule as far as 
questions. So if we could get both the questions and answers in 
5 minutes, I would appreciate it.
    Mr. Latham. I will now turn it over to my colleague Mr. 
Olver for his statement, and then we will hear from our 
witnesses. Thank you. Mr. Olver?
    Mr. Olver. Thank you, Mr. Chairman. Thank you all for being 
here with us today. I think most everybody in the room, at 
least hopefully the two of us here, would agree that HUD has 
been a neglected Department for many years and that ultimately 
this neglect has hindered the Department's ability to 
efficiently meet the demand for affordable housing.
    Today's hearing topic, HUD's Transformation Initiative, is 
a product of the current administration's commitment, and in 
particular Secretary Donovan's commitment to revitalizing the 
Department, addressing its structural inefficiencies, and 
modernizing its information technology systems. The presence of 
Estelle Richman, HUD's Chief Operating Officer, is a testament 
to that commitment.
    Since the Secretary first requested the initiative in the 
Fiscal Year 2010 budget, we have worked with you to identify 
the Department's most pressing needs, and our respective staffs 
have spent countless additional hours defining an appropriate 
approach. While we understand that effectively implementing a 
transformation of the Department's fundamental systems requires 
significant upfront strategic planning, I do look forward to 
hearing what progress you have made towards accomplishing the 
goals identified in the fiscal 2010 plan.
    Lastly, I want to reiterate that I am committed to working 
with the Department to maintain the appropriate balance between 
providing the flexibility needed to nimbly accomplish the 
Department's transformation and the structure necessary to 
allow appropriate congressional oversight.
    Mr. Chairman, I yield back.
    Mr. Latham. Thank you.
    [The information follows:]



    
    Mr. Latham. Your testimony, Ms. Richman.
    Ms. Richman. Thank you. Chairman Latham, Ranking Member 
Olver, and members of the subcommittee, thank you for the 
opportunity to talk to you today about HUD's Transformation 
Initiative. Before we get into the nuts and bolts, I want to 
stress to you that the Secretary is not using the word 
``transformation'' in a throwaway manner. HUD is in the midst 
of a multiyear effort to fundamentally transform the way HUD 
does business. It is one of HUD's five strategic goals and is 
critical to achieving the other four policy goals.
    The portfolio of projects that make up the Transformation 
Initiative includes, but is not limited to, those projects 
funded by the Transformation Initiative Fund that is the 
subject of today's hearing. That said, the TI Fund remains the 
primary source of funding for changing the way HUD does 
business by increasing the efficiency and the effectiveness of 
our programs. To date, we have invested significant time and 
energy to get TI right. We are trying to do something new, and 
new things, especially systemic changes, take time. This is 
particularly true at HUD, given the organizational history, 
atrophy, capacity to deliver IT solutions and conduct research, 
structural inefficiencies and waste of TA dollars, as well as 
constrained thinking about TA delivery, broken procurement and 
NOFA processes, and the lack of a centralized structure for 
monitoring and accountability.
    Fiscal year 2010 was a necessary transition year for TI. We 
have built a new and solid foundation that we believe will 
secure timely and quality results with fiscal year 2010, 2011, 
and 2012 TI funding. We engaged in a Department-wide 
competition to develop and select 70 innovative and strategic 
investments. We have driven the development of outcome-focused 
project plans that will allow us to effectively evaluate the 
impact of HUD dollars. We are creating new contract vehicles 
and NOFAs that are flexible and easily leveraged to accommodate 
future years' funding. We have established a framework to 
systematically track and monitor projects, as well as hold 
responsible parties accountable when goals are not achieved. We 
are undertaking major process improvement initiatives for our 
procurement and NOFA processes.
    Having established this foundation, we are starting to see 
progress. Nine months after your approval of our fiscal year 
2010 TI plan, we have obligated or expended $51 million, or 20 
percent of the fiscal year 2010 TI funds, with another $71 
million, or 30 percent, to be obligated in the next few months.
    In mid-February, we submitted to you and the GAO a 
comprehensive plan for TI-IT spending, the first of its kind at 
HUD. And awards for OneCPD, one of our cross-cutting and 
flexible TA vehicles, are set to be made by the end of this 
month.
    HUD believes that these and future TI Fund investments will 
go a long way to increase program efficiency and effectiveness 
and reduce fraud, waste, and abuse. We could have gone the 
business-as-usual route to simply get the money out of the 
door, but instead we have taken the time to ensure clear 
accountability and impact.
    The projects in the TI Fund are truly transformational, 
facilitating unprecedented cross-program integration, 
coordination, and creativity. We hit some bumps along the way, 
as you always do when creating fundamental change, but we have 
now laid a solid foundation to execute projects efficiently and 
effectively in fiscal year 2011, 2012, and beyond.
    Thank you, and I look forward to answering any questions 
you may have.
    Mr. Latham. Thank you.
    [The information follows:]



    
    Mr. Latham. Mr. Williams.
    Mr. Williams. Thank you for allowing me to speak to you 
today about HUD's information technology priorities. Let me 
begin by stating HUD did not request TI funding authority in 
2012 for information technology. However, IT funds were 
requested in the Working Capital Fund for 2012. And while we 
believe that we will continue to need funds to support the 
modernization of our business processes in subsequent years, we 
believe that we would have sufficient funding from the fiscal 
year 2010 TI transfers and the requested 2011 transfers to meet 
our commitments in 2012.
    HUD estimates that $122.5 million in fiscal year 2010 TI 
funds and $119 million in fiscal year 2011 TI funds will be 
needed to support the multiyear Transformation Initiative IT 
projects. Our intent is to fully leverage these resources to 
meet our transformation needs. Additional funding was not 
requested in fiscal year 2012 on the presumption that fiscal 
year 2011 funds would continue to be available for 3 fiscal 
years and would be adequate to support all of HUD's planned TI-
IT projects.
    I will begin by discussing what we have been able to do 
with the Transformation Initiative funding that was made 
available in fiscal year 2010. As you are aware, HUD had some 
significant management problems that related to poor 
performance from our IT projects. Language that requires HUD to 
mature these management processes was included in the fiscal 
year 2010 appropriations, along with the authority to utilize 
funding to support transformation initiatives. We recognized 
the magnitude of the changes needed, and to date have limited 
our spending to correct the management weaknesses, and to plan 
to prepare for meaningful modernization of the IT systems that 
will support HUD's business functions.
    With the advice of the Government Accountability Office, we 
have now developed and implemented new policies, procedures, 
and standards that govern the way that HUD manages its IT 
investments. The new management framework makes use of vigilant 
planning and transparency of progress to create accountability 
and to ensure there are tangible results. We have begun to 
rebuild our capacity to carry out IT modernization and have 
adopted management controls to guide the modernization effort. 
Our spending to date has therefore been limited, given our 
prudent approach to taking the time needed to properly plan the 
significant change effort.
    This approach is consistent with previous GAO 
recommendations and requirements specified in the Consolidated 
Appropriations Act. HUD submitted its plan for spending the 
remaining $88 million of the funds available from the fiscal 
year 2010 budget to the House and Senate committees on February 
15. The plan centers on leveraging technology across HUD 
mission areas, rather than investing in these capabilities as 
separate projects within each mission area, a previous practice 
that has led to rising complexity and cost of HUD's 
infrastructure.
    HUD is now poised to responsibly invest in and guide seven 
of its highest priority projects to successful results. They 
are FHA Transformation, Next Generation Voucher Management, 
eGrants Management in support of the Hearth Act, Place-based 
Performance Management, HR End-to-End Solution, HUD's 
Integrated Acquisition System, and Integrated Financial 
Management Improvement Project.
    We structured these projects to deliver business 
functionality in 6-month increments and to begin sharing a 
common technical infrastructure over the next year. This took a 
considerable amount of time, but is a necessary step in 
ensuring success.
    The first set of business functionality will be delivered 
over the next 45 days. These improvements are the first step in 
preparing for and implementing real change at HUD. Greater 
functionality and depth, including new shared infrastructure 
tools, is planned and being tracked for delivery in September 
2011 and in March of 2012. Additional improvements will be 
planned and implemented in fiscal years 2012 and 2013 as we 
continue to follow this model.
    Thank you. I am pleased to address any questions you may 
have.
    Mr. Latham. Thank you.
    [The information follows:]



    
    Mr. Latham. Dr. Bostic.
    Mr. Bostic. Chairman Latham, Ranking Member Olver, and 
members of the subcommittee, thank you for the opportunity to 
talk to you today about the Transformation Initiative and the 
Department's fiscal year 2012 budget request.
    I am here today to speak more directly on two of the three 
pillars of the Transformation Initiative: Technical Assistance 
and Research and Demonstrations. Technical Assistance 
strengthens the nuts and bolts of program operations, training, 
staff development and capacity building for HUD's program 
partners. TA is a force multiplier that makes program dollars 
go further through effective implementation, something even 
more critical in the current climate with governments at all 
levels facing serious budget pressures. Transformation 
Initiative TA represents a new approach to doing business built 
on the principles of accountability and increased efficiency 
through streamlined processes.
    Regarding accountability, a 2002 report on HUD TA had one 
overriding conclusion: HUD needs to enhance accountability by 
introducing performance measurement into its technical 
assistance contracts to ensure that they are working. And we 
are doing just that. Indeed, performance measures are being 
built into all TA contracts issued through TI, such as the 
OneCPD and Troubled PHA initiatives.
    Besides adding accountability, a major improvement only 
possible under TI is the streamlining and aligning of technical 
assistance across the Department and with other Agency partners 
that work in local communities.
    Previously, HUD TA was provided haphazardly through either 
individual program accounts and annual appropriations or 
through separate statutorily authorized provisions in selected 
programs. Moving these funds into the combined TI account 
allows the Department, with congressional input, to align 
limited TA funds with key priorities.
    Through the TI, HUD is able to address documented areas for 
improvement, many of which have been identified by the HUD IG 
and the GAO. For example, we are using Technical Assistance to 
support independent assessment teams that will deal directly 
with the problems of troubled housing authorities cited by the 
IG and others.
    The budget request also includes an important TA effort 
that seeks to address the specific needs of economically 
distressed places, the National Resource Bank which you 
referred to earlier. This resource will create a nationwide 
capacity to provide cities tailored technical expertise and 
support through a one-stop shop.
    As Technical Assistance multiplies the effects and 
efficiency of our programs, Research and Demonstrations tell us 
which policies and tools provide the most impact for the lowest 
cost. Through previous research, my office has been effective 
in uncovering savings to taxpayers.
    A recent report by a committee of the National Academy of 
Sciences chaired by John Weicher, who is both my predecessor at 
PD&R and FHA Commissioner under two President Bushes, 
highlights a PD&R-executed quality control study undertaken in 
the early 1990s. This study led to changes in the process to 
set rents for tenants in HUD's assisted housing programs that 
now save an estimated $1.4 billion each year, or almost 3 
percent of HUD's budget. This is but one of many such PD&R 
successes in this regard.
    Rigorous evaluations and demonstrations also lead the 
programs that deliver results. As a lifetime researcher, I will 
certainly admit that it is often not easy or cheap to conduct 
the rigorous studies that can tell us the answers we need. For 
example, demonstrations generally require funding over several 
years. But the benefits to the taxpayer from making our 
investments count extend beyond the direct efficiencies and 
outright cost savings they produce. Indeed, they help inform 
and shape the ensuing generations of policy.
    Since the 1990s, HUD has conducted several key 
demonstrations providing critical information on real program 
impacts. For example, the Effects of Housing Vouchers on 
Families Demonstration produced results that have been crucial 
for aligning our programs to meet our goal to eliminate 
homelessness within the decade. This is precisely why the 
Transformation Initiative is important: to align our research 
investments with strategic directions and answer larger 
questions that may take several years of investment.
    Through TI, we have begun to put in place a structure for 
more consistently satisfying these objectives. We currently 
have projects underway that will study issues such as family 
self-sufficiency, housing counseling, and a rental program 
administration, with the goal of highlighting ways in which 
policy can be more effective at improving the quality of life 
for all Americans. For 2012, we expect to continue to pursue 
projects that address fundamental questions such as these.
    Thank you, Chairman Latham, Ranking Member Olver, members 
of the subcommittee, for your time this morning, and I look 
forward to having a conversation and addressing any of your 
questions.
    [The information follows:]



    Mr. Latham. I thank all three of you for your testimony. 
The whole funding construct of the Transformation Initiative is 
somewhat, shall we say, unusual. There are really no other 
examples in the Federal government and other agencies where we 
allow the Secretary to basically skim off appropriated funds to 
fund activities that are already eligible under other accounts.
    Ms. Richman, in your testimony you state that, quote, ``The 
Transformation Initiative Fund remains the primary source of 
funding for changing the way HUD does business.'' Could you 
just elaborate on what conditions and challenges that really 
inspired HUD to create this account, and maybe some examples of 
how the Transformation Initiative is addressing these issues?
    Ms. Richman. Thank you. Great question.
    Mr. Latham. Thank you. It is written right here.
    Ms. Richman. One of the things I think that the Secretary 
found in coming into HUD is that it really was a very siloed, 
not administratively well-managed entity. And by using the 
Transformation Initiative and transformation funding, we have 
become about busting bureaucracy, breaking down those silos 
under which HUD has historically operated.
    But we have tried to be both thoughtful and deliberate in 
building the framework for how we both manage the TI Fund, 
understanding both the creativity and the flexibility and the 
originality of having this opportunity, but wanted to really 
look at how those silos affected our day-to-day business, how 
important it was to work together in a coordinated way.
    This has led to several ways of looking at our business. 
One of the first, and I think you have both mentioned it, is 
the status of all of our IT operations. As we began to look at 
them, we realized that we needed to fundamentally change how we 
did project management, that we had to look at project 
management as a new area for HUD, put some training in, began 
to look at the details of it. We also have moved to weekly IT 
stat meetings, which means we are tracking and meeting with 
each of the offices that looks at those six areas in IT every 
single week to track their progress, to make sure we know 
whether they are on track or not; that we put in activities to 
correct them if they are, and hold them accountable for that.
    We have done the same thing both in procurement and 
finance, to make sure we know where tracking is, 
accountability, transparency. We have begun to apply the same 
activity to our NOFA process. As I am sure you and your staff 
know, our NOFA process has been considered fairly broken. And 
we are speeding it up. We have put some very tight timelines 
around it. We have eliminated those things that began to take 
it long.
    In addition to our cross-silo coordination, we have 
implemented comprehensive planning projects that create a focus 
on impact and outcomes rather than just compliance. It is not 
okay any longer just to say we are complying with the rules. It 
has to be done in a way that produces an accountability in a 
timely way. Folks just cannot take their time to make sure they 
are touching the bases. It has to be accounted for in a way 
that tells us it is moving.
    Therefore, we have developed fairly robust performance 
metrics that actually measure the impact of each assessment in 
just about everything we do. This will help us on the 
transformation. It was important to us to take the time to get 
this one right. HUD has been considered broken for quite a 
while. And we wanted to make sure that the things we were 
fixing now were not just fixed temporarily, but are fixed on an 
ongoing basis that will far outlast this administration.
    Mr. Latham. I think the big question is there already are 
accounts at HUD for all the activities and projects that you 
want to do. Why wouldn't we just appropriate into those funds 
like Information Technology and the Working Capital Fund and 
the Research Demonstration Projects? We currently have those 
accounts. What stops you from innovating without having this 
Transformation Initiative?
    Ms. Richman. Let me refer that one over to our IT expert.
    Mr. Williams. I think part of the challenge that we faced, 
particularly as it relates to information technology, is that 
the dollars were siloed. So even withstanding the Working 
Capital Fund, the dollars are siloed. So one example of what we 
have seen happen there is voucher management, where we found 
that three organizations were investing in voucher management 
capability. And we found that there was an opportunity that in 
fact 90 percent of the functionality or thereabouts was common 
amongst them all.
    So rather than build three voucher management systems, we 
thought it was better to build one voucher management system 
and deal with the differences, right? TI has allowed us to do 
that.
    We have also gone back and we have created greater rigor 
around the way, as Estelle mentioned a moment ago, around the 
way that we manage these projects. She mentioned that we meet 
every week on each of these with a fairly diverse team. We are 
meeting with the procurement folks and folks from the business 
units, setting them down in a room every single week and 
talking about the desired set of functionality and how we meet 
that.
    Another major change is that rather than trying to do what 
I have referred to as the big bang theory, we have broken these 
efforts down into 6-month increments. We are looking for 
functionality today, not tomorrow. We are not banking on 
everything tomorrow. So what we are saying is you ought to have 
functionality available today that can be used today to begin 
to achieve some efficiencies and economies in the way that we 
do business.
    I hope that addresses your question.
    Mr. Latham. Thank you very much. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman. Let me make certain 
that I understand. I think from this discussion and the 
testimony, the requests for the fiscal 2012 budget, which is 
what we are talking about, is $120 million, which is 
considerably less than the requests in previous years. But my 
understanding is that is needed to continue the IT portion. I 
am getting into the TI-IT, TI-TA and TI-RD sort of sideways, I 
guess. And I do not know how much of that is being moved to the 
Working Capital Fund I think maybe because that is viewed as 
something that has to be a sequential thing over a period of 
time, as Ms. Richman and you have said, that is intended to be 
done over 2011, 2012, and maybe even 2013. Whereas, the other 
parts here, TA and R&D, are very much focused on individual 
things that can be achieved within a fiscal year or something 
like that. So that the $120 million is to be used for TA and 
R&D is that correct?
    Ms. Richman. That is correct.
    Mr. Olver. That is correct. Okay. Then let me follow up on 
the chairman's question--I like to follow the leadership of the 
chairman here.
    On your project management skills, the GAO has identified 
that project management skills are underdeveloped at HUD. And 
so I am curious. What are you doing to develop the project 
management capacity, to develop the human resources within HUD, 
to bring in resources from outside HUD, and to provide 
incentives for employees to get these skills? Whoever it is 
that wishes to answer that for the project management skills.
    Mr. Williams. Okay. I will take a shot at that one as well. 
Rather than to look at project management simply from an IT 
perspective, we have chosen to look at it HUD-wide. Because we 
realize that a deficiency exists HUD-wide. Oftentimes, the 
leaders of individual initiatives, IT projects, are from the 
functional or the business units themselves. So what we have 
chosen to do is make sure that they understood fundamentally 
what project management is about, right, and that they are 
certified in project management, and that they have a track 
record for succeeding and delivering projects.
    So we are working on a Center of Excellence for Project 
Management across the entirety of HUD that will focus on things 
like having a project plan, having a risk register, being able 
to measure risk when there is risk associated with projects. 
And there almost always is risk associated with projects. We 
are actually creating a database that tracks and monitors 
individuals who have been successful at managing projects so 
that we can reuse them across the enterprise whenever the 
opportunity presents itself. So fundamentally we are putting 
all that stuff together as we speak.
    We began this effort late last year, and we have already 
seen some evidence of the value proposition provided through 
this effort. One example is FHA has gone out over the last few 
months and hired, I believe, six project managers that are 
certified. And so it gives us some degree of confidence that 
those individuals will in fact be able to deliver on those IT 
projects that we are assigning them to.
    Ms. Richman. In addition, we are also doing our own 
training of additional project managers within all of our 
program offices. And while this group is focused on IT, we 
needed to make sure we had program managers across HUD, I think 
as Jerry mentioned, so we can both track, follow, and be on top 
of all of our projects. This was a weakness. We heard the 
weakness, GAO was able to expound on it, and we have taken that 
as a mandate to be able to change how HUD does business, not 
just a piece of HUD.
    Mr. Olver. Okay. Well, I noticed we are on yellow, so I 
will adhere with the 5-minute rule. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Olver. Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman. Welcome. And Mr. 
Chairman, I apologize for being a couple minutes late. I just 
wanted to check in to make sure is there anything Mr. Olver 
said in his opening statement I need to correct?
    Mr. Latham. He did very well.
    Mr. LaTourette. All right, good. Welcome. This 
Transformation Initiative, in my mind always seeking to do 
better is a good thing. And I suppose the goals should be two; 
that is, increasing customer service and also being wise with 
the dollars that are appropriated to the Agency. So you get 
high marks for that.
    I do have some questions. As I understand, that $258 
million was the level for fiscal year 2010. Ms. Richman, in 
your testimony on page 2, you indicate that you were 
establishing the framework to track and monitor projects, which 
you have said again, as well as hold responsible parties 
accountable when milestones and overall project goals are not 
achieved.
    I am wondering if understanding that fiscal year 2010 was 
the first year, have you identified responsible parties who 
have not met their milestones and that they are not where they 
should be on their project goals?
    Ms. Richman. Yes. And particularly as we have related on 
some of the early TI-IT goals and on much of our NOFA process, 
one of the reasons that we went to a weekly stat-type meeting 
is that people were not meeting those goals when we gave them. 
We were meeting monthly. We cut back to every week to make sure 
we could spot where some of those problems were and give them 
the necessary assistance. We have done some of the same things 
with very tight timelines and accountability to change some of 
the habits people have had around the NOFA process. So part of 
this is beginning to diagnose the problem, be able to work with 
people closely enough to correct it so things do not sit, and 
to be able to move them to a different track of accountability.
    Mr. LaTourette. But I guess the question is, understanding 
that those are the changes you have made, so are they now all 
meeting their goals and milestones?
    Ms. Richman. Yes. On the TI-IT projects, all seven projects 
are on track. And on the NOFA process, there are folks that are 
not on track, but they are hearing from us almost on a daily 
basis now.
    Mr. LaTourette. Okay. Mr. Williams, you mentioned that 
there were three departments or entities within HUD that were 
investing in voucher management, and you felt it was better to 
just have one. So did that lead to a consolidation of the IT 
for voucher management? And as a result, did it lead to 
reductions in force or transferring of people?
    Mr. Williams. It did consolidate those efforts into one. I 
think the benefits in terms of people and dollars have not yet 
been realized. We will not realize those until we create the 
capability. But certainly we are along that path.
    Mr. LaTourette. But is it your expectation when you create 
that capability that if you had 30 people across the three 
departments, and now you have consolidated that, you do not 
need 30 people anymore; maybe you need 15?
    Mr. Williams. It is still early in the game, too early for 
me to give specific numbers. My expectation is that we will be 
able to reduce our costs and increase our efficiency across the 
board.
    Mr. LaTourette. Ms. Richman, you mentioned that fiscal year 
2010 funds were used to automate processes, particularly in the 
voucher programs. Has this resulted in a reduction in staff as 
a result of these automated efforts?
    Ms. Richman. The voucher project is still underway. Our 
anticipation, yes, it will reduce.
    Mr. LaTourette. Okay. And are we talking about those 
annoying machines that answer the telephone where you have to 
push 8,000 buttons before you get to a live person? Is that 
what you are doing?
    Ms. Richman. I am not sure. I will refer this one to my IT 
person. I am not sure that was there, but we will look at it.
    Mr. Williams. Yeah, I am really not sure either. I am not 
prepared to talk about that specifically. I can talk more 
directly about the voucher management program and the kinds of 
things that we are seeing there, the promise that we believe 
exists as it relates to those three program areas. But I am not 
familiar with the phones.
    Mr. LaTourette. I am not saying there is a problem. I just 
read in somebody's testimony that you are automating processes. 
And to me, automating processes when it comes to some of this 
stuff is, you call and you have to push 1 if you want English, 
2 if you want Spanish, and then you move past that and you have 
to describe your problem, and the thing can't hear you, and 
then you push it again. So I would hope that that is not what 
you are talking about.
    Mr. Williams. No, that is not what we are talking about. In 
fact, what I can share with you is that rather than letting IT 
lead the way completely on business functionality, we are 
actually working with those business units within HUD. They 
understand their programs more uniquely than I do, and we are 
simply applying IT to those in a comprehensive way.
    Mr. LaTourette. Thank you. I thank the chair.
    Mr. Latham. Thank you, Mr. LaTourette. Mr. Diaz-Balart.
    Mr. Diaz-Balart. No questions at this time, Mr. Chairman.
    Mr. Latham. Very good. Thank you.
    Just looking at the budget justifications, I see HUD 
carried over $225 million in Fiscal Year 2011 and plans on 
carrying over another $125 million in 2012. Why all the 
carryover?
    Ms. Richman. The carryover within the TI Fund?
    Mr. Latham. Yes. Right.
    Ms. Richman. As a total? Part of that carryover is the part 
of the delay of the obligating some of those dollars. I can 
tell you that many of those dollars will be obligated within 
the next 90 days. And the rest of it will probably, for fiscal 
year 2010, will be obligated well before the end of the fiscal 
year. So that will reduce that amount of carryover.
    With, then, fiscal year 2011, our hope is that as soon as 
there is a budget, we are ready to put out our NOFAs and to be 
able to make those awards probably within a 90- to 180-day 
format, which sounds long, but is fairly short for HUD. My 
focus now is to try to get our obligations on our NOFAs and be 
able to get grants out within 120 days. But that is reducing 
from a fairly long period of time. Again, part of our focus on 
why the transformation is so critical for us is that there are 
so many--the statutes and regulations often prevent us from 
moving dollars around. And what those TI dollars allow us to do 
is to move dollars in a way and to centralize dollars in a way 
that we can spend them more effectively.
    Because of the complexity of that activity, we first needed 
to make sure we had our stakeholders, we had our staff all 
understanding what we were doing and why. So it really did take 
us a little longer to make sure we had everything in the right 
place at the right time. Now that we believe that is true, we 
can move very, very quickly on getting those dollars obligated 
and reducing that carryover.
    Mr. Latham. With the carryover, does that reduce the amount 
you need in Fiscal Year 2011 and 2012 to maintain the current 
activities? Are these fully funded up front here, your 
multiyear activities?
    Mr. Bostic. There is variation in that across the different 
projects. But I did want to step back and to address the 
question more directly in the sense that you noted at the very 
outset that this was a new enterprise, a new exercise to try to 
fix an organization that was fundamentally broken in terms of 
its procurement processes, in terms of its NOFA processes, in 
terms of how we do solicitations and work through decision-
making in the building. That has taken some time. That has been 
a significant impact on how we do our business. And those 
changes have meant that that first year of the process has just 
gone a bit slower than we had anticipated. We knew it was going 
to take some time. We did not have an appreciation for exactly 
how entrenched some of these problems were.
    It is our view and our expectation that now that we have 
gone a long way toward establishing the new processes, 
establishing the new protocols, and actually improving our 
programs significantly, that the extent to which we will have 
carryover moving forward year over year will decline 
considerably. And Chief Operating Officer Richman noted that 
when we are ready to roll, we get the okay signed for our 
fiscal year 2011 plan, we expect to have those things out on 
the street very quickly and get that stuff obligated in a much 
more rapid fashion.
    Mr. Williams. And if you do not mind, I can say the very 
same. In IT, rather than continue to perpetuate the broken 
processes that we had in the past, and those things are well 
cited by both the GAO and the IG, we decided to fix the broken 
processes before we went out. Add to that the fact that there 
was a 25 percent cap on what we could spend the first year. We 
believe that we have approached this in the most prudent and 
intelligent way possible in terms of spending the dollars. We 
did not want to waste the money.
    Mr. Latham. Okay. I am on yellow here, so I will yield to 
the gentleman from Massachusetts.
    Mr. Olver. You seem to be generating a 4-minute rule here 
or something close to that.
    Mr. Latham. It is either 4 or 8.
    Mr. Olver. I think I can answer and defend--I want to 
defend in part the Department in this instance, both for the 
initiative in the first place, recognizing there were serious 
problems that have been identified and we knew about over a 
longer period of time, really going back a couple of decades I 
think in a substantial way. But in this instance, the 2010 
budget passed in December, mid-December of 2009. You do not get 
much done in the last 2 weeks of December, so you start in 
January.
    The Department presented a plan, which was required under 
the legislation, a plan for how this Transformation Initiative 
money would be used. And that plan came in late in February or 
early in March, to my recollection. But it ended up with staffs 
then working back and forth on that. I hope that the minority 
staff was involved in that. I cannot tell exactly how much. I 
cannot attest for how much that specifically was done. But the 
plan was not approved until early in May, sometime in May. 
Early in May. Let me give us the best position on that. But 
that leaves you with less than 5 months of the fiscal year in 
order to be able to get up and running on this and get those 
items out. So I am not the least bit surprised that there is 
carryover. If there were not carryover, you would be wasting 
our money, it seems to me.
    Now, the carryover is being carried over for IT into the 
2011, 2012, and 2013, and moved to a more regular place within 
the budget, which is what you, Mr. Chairman, have been 
suggesting there are places where this can be done. And they 
are doing that for the IT, which is an ongoing thing. You are 
always trying to improve your IT sort of situation.
    So let me leave that one and just ask quickly a different 
one. There is a $50 million amount that is for what is called a 
National Resource Bank. I think of natural resources. But that, 
I take it, is a set-aside within the 120 that is being asked 
for for this year.
    Can you tell me, can you explain the National Resource 
Bank? I think of banks being places that either lend money, do 
not lend money, drive us into recessions. Exactly what banks do 
I am not quite sure these days. But this is a different kind of 
a bank.
    Mr. Bostic. It is. As someone who studies finance, I do not 
always like to think of banks as leading into recessions, but I 
do understand the history. When we talk about the National 
Resource Bank, we view this as an important TA initiative, an 
initiative in technical assistance with a particular focus.
    And just to provide some context, we have in our country a 
great productive history. And as economics and as the economy 
has shifted, certain parts of our country have been left 
behind. And they have not adapted as well to those changes, and 
have really entered into a period of chronic distress.
    And so our goal in this technical assistance with this 
National Resource Bank is to really target assistance, target 
capacity-building to those communities who have struggled in 
terms of their economics. These would be places like 
northeastern Ohio, like the central valley of California, 
places that have good, hardworking people but need economic 
changes. And what we have heard when we go out and we talk to 
mayors, we talk to community organizations, is that one of the 
biggest barriers to those transformations, to making the 
transition to growth, has been local capacity.
    So what we are trying to do with the National Resource Bank 
is set up a pool of resources, a team of experts that have a 
wide-ranging scope of expertise that these communities can 
reach out to, can organize and become connected to in order to 
help break down the barriers internally that have led to these 
capacity difficulties, and really with the objective of helping 
these communities spend their existing resources better.
    When we go around, when we have looked to a number of 
cities like Detroit, like New Orleans and other places, they 
have lots of resources that have been given to them, but they 
either have not been used or have not been used well. And that 
we think is one opportunity to really improve the efficiency 
and the effectiveness of their programs.
    Mr. Olver. I think, if I may just for 30 seconds, I think 
that is really important. I have looked at the first set of 
data coming out of Ohio, which just came out in the last couple 
of days. And from Toledo, which is the gentlewoman from Toledo, 
Ms. Kaptur's territory, to Lucas County there, and then 
Cuyahoga County and Stark County, and Warren County, there is a 
series of counties, Youngstown, and Canton, and Akron, and 
Cleveland, and Toledo, all their counties are losing 
population, significantly losing population. It is taking 
investment out. And there is clearly need.
    Thank you, Mr. Chairman, for that moment.
    Mr. Latham. You made my whole day. Mr. LaTourette.
    Mr. LaTourette. Thank you. And let me just say before I 
ask, I only have two more questions, but it is refreshing that 
the former chairman, now the ranking member, has acknowledged 
that the reason that they have the cash carryover is because 
they were so late in delivering the budget for fiscal year 
2010. I thank you for that.
    Let me talk to you about how long is this going to last; 
how many years are you going to transform yourselves?
    Ms. Richman. In all honesty, transformation is something 
that departments should continually look at. We should always 
be looking for ways to prevent waste, fraud, and abuse, ways to 
become more effective, ways to become more efficient. So in 
that sense, I think a Transformation Initiative should go on.
    Clearly, the flexibility in our funding and our ability to 
bring dollars from the offices and integrate them and continue 
to do silo-busting is critical to the changing of HUD. And I 
think one of the things that we have acknowledged and that you 
have pointed out to us is the need for not only HUD to change, 
but to find our way to make sure that change survives any given 
administration; that that change is ingrained in our culture; 
and that HUD is no longer not only considered not the poster 
child, but hopefully can become the poster child for both 
better management and better accountability.
    With that said, the dollars that we have requested in the 
Transformation Initiative now allow us 3 years to be able to 
expend those dollars and to improve the inner functionings of 
HUD. I think we probably need to expend the dollars we have, 
and then determine where we are in that process and what else 
needs to be done to continue the renewal of HUD and to continue 
to make sure that we never drift back.
    Mr. LaTourette. Right. My only observation on that is if 
you take the 2010 level together with the request for 2012, you 
are at about $378 million. And so the goal would be as you root 
out waste, fraud, and abuse and inefficiencies, that you are 
correcting more than $378 million; or we would be better off 
just having somebody steal the $300 million and we would be 
ahead 75. So I assume you are optimistic that that is the kind 
of result that you are going to get to over the course of time. 
Right?
    Ms. Richman. Absolutely. And I would like to also make sure 
that we do not forget that as we are doing this transformation, 
we should be able to save thousands of man-hours. And man-hours 
obviously convert to dollars with all of our partners. The 
grantees, local officials, and all of the things that HUD 
funds, if we are able to have better streamlined systems, if we 
are more efficient, then we make it possible for them to need 
less of our resources to be able to do their job, which makes 
us all more efficient. So certainly we hope the outcome of this 
is an ability to reengineer and to relook at both how we spend 
dollars and how do we generate additional dollars.
    Mr. Williams. I would mention as well that the very thing 
that you are talking about is an example of what you are seeing 
for TI-IT, where we are actually moving to the Working Capital 
Fund to do this. But we are also looking to expand these new 
management practices beyond the Transformation Initiatives to 
everything within our portfolio. So the way that we manage IT, 
generally speaking, across all of HUD will change. And that is 
why you are not seeing something in the 2012 budget.
    Mr. LaTourette. Got it. Housing counseling grants are 
something that Mr. Olver has correctly indicated that we have 
some tough economic times in Ohio, northeastern Ohio, 
northwestern Ohio. The notice of funding for fiscal year 2010 
was not posted until November of 2010, which of course is 
already into fiscal year 2011. I am wondering if this 
Transformation Initiative that you are working through has 
examined these delays, and do you plan to use funds for these 
types of problems in the future?
    Ms. Richman. You are speaking directly to some of the 
challenges we have had in getting our NOFAs out on time, and 
not only getting the NOFA out but following with getting the 
dollars obligated. Yes. My hope is that we will have our NOFA 
process up to date and working effectively within this fiscal 
year so that you will not see the long delays.
    It has taken us on an average of probably about 18 months 
to go from the appropriation to be able to have obligated 
dollars. My goal is to have that down to somewhere between 120, 
around 120 days, 180 days. We have people on the calendar now. 
We are tracking them back. We are being transparent in making 
sure all the involved folks--so this would include the 
counseling NOFA and anything else that is coming through.
    Mr. LaTourette. If I could beg the chair's indulgence just 
for one more question. I guess this is one of the things that 
baffles. Why does it take 18 months from the time that you have 
an appropriation to when you can put a notice out that funds 
are going to be available? That is a long time.
    Mr. Bostic. We all agree.
    Mr. LaTourette. So where is it?
    Mr. Bostic. What I would say is the Transformation 
Initiative actually is an opportunity for us to change that. As 
one example, in the TA account, our section 4 NOFA, we changed 
that process. A year ago it took 134 days from appropriations 
to award. This round we got it down to 33 days. We actually 
believe that this Transformation Initiative is changing the way 
we do business in fundamental ways so that we do not ever have 
to have this conversation about how broken things are. We want 
them to be fixed. And it is our goal to take these experiences, 
to take this streamlining, and really get us to a place where 
both our staff and our partners out in the field who are 
delivering services spend as little time as possible just doing 
the paperwork, and can spend their time actually delivering 
services and changing what is happening on the ground.
    Mr. LaTourette. Well, I thank you. And maybe you need a 
NOFA czar. Maybe that would take care of it.
    Ms. Richman. I think that is me.
    Mr. LaTourette. That is you. All right. Excellent. Thank 
you very much.
    Mr. Latham. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Mr. Chairman. Very briefly. In 
just listening to this conversation, one of the things that I 
guess people are always frustrated about is when you hear about 
the private sector when there is an investment, for example, in 
technology, it usually culminates in a reduction of personnel. 
And the criticism is that when governments--Federal, State, 
local--they invest in technology, it doesn't do that. It is the 
cost of the technology plus no reduction necessarily in 
personnel.
    You mentioned, though, how you are hoping you can reduce 
man hours when you go through this process.
    The question is this: Is the goal then to reduce those man 
hours and then have a subsequent reduction in the men and the 
women that those man hours are not going to be doing, number 
one? And number two is, do you have specific goals of specific 
savings of time? We just talked about 18 months between the 
appropriation and the time the money is released. Do you have 
specific goals that are already established that you want to 
reduce that time to, what is it, a month? 2 months? A specific 
time and individuals that you are hoping you will be able to 
reduce by, or is this just kind of going through this and 
eventually going to come up with those numbers? Do you have 
specific goals?
    Ms. Richman. Let me clarify. One piece is that the saving 
of thousands of man hours, to a large degree, is among our 
partners. In that particular statement, I was referring to the 
stakeholders, to the local officials, and to people who have to 
respond to us that when we can have a more efficient IT system, 
we have a more efficient system, they, then, can come into our 
system in a streamlined way. So it saves a lot of man hours on 
their end.
    But let me go back to your exact question. Yes, we are--I 
am trying to look at this in a holistic way, so not only look 
at the NOFA process and what it is taking in time to get it 
done, but at the same time, looking at the number of staff it 
is taking, where we can make shortcuts, how we can become 
accountable and set out those timelines and how many staff are 
needed.
    That is part of the broader process in looking at how to 
transform how HUD does business.
    I wish I could give you right now all of the things to put 
in a package, but certainly are willing to get back to you 
where we are on that at any given point in time, and how do we 
plan to go to the future.
    Mr. Diaz-Balart. Great. Again, like anything else, you need 
elicit goals, specific goals, and then you have to figure out 
if you met those goals, and if you do meet those goals, what 
does that mean? So that would be interesting to see what those 
specific goals are.
    Thank you, Mr. Chairman.
    Mr. Latham. Did you have a comment?
    Why don't I go ahead. The National Resource Bank. Of the 
$50 million to create the National Resource Bank, how much is 
for the HUD operations, and how much is for the contractor that 
is going to operate the bank?
    Mr. Bostic. That is not entirely settled. I mean, we want 
to have a conversation but almost none of that would be for HUD 
staff. This would be resources that would be allocated and to 
be devoted very heavily towards the delivery of the services, 
the staffing-up of the organization that would then be the 
liaison between communities and their experts, and to actually 
help fund the experts so that as they go out, they are able to 
deliver services.
    One of the things that is really important is that the 
technical assistance not bankrupt the folks that they are 
assisting. So we need to make sure that there are resources 
that are available to help support these experts that when they 
go out, they are able to do it in a way that doesn't burden 
these communities that we have identified already as having 
capacity constraints.
    Mr. Latham. So who are the contractors?
    Mr. Bostic. So I will answer this two ways:
    The first thing we are planning to do is--we are not 
planning to administer this inside HUD. We want to contract 
with someone who has a track record of having clear connections 
and liaisons with communities, with a lot of different 
communities. There are a series of non-profits that have done 
that. We would contract with them to deliver the services.
    They, then, would enter into arrangements with a series of 
experts and communities all across this country as they seek to 
do economic development, as they seek to build affordable 
housing and do other types of activities. They know that there 
are people out there who have done this, either in prior stints 
in the government, in local non-profits, local consulting 
agencies. They would then be--agree to enter into this roster 
from which communities of distress would draw.
    So there are really two levels of contractors. There is 
sort of the operational logistics that would be necessary to 
execute this, and then you would have this team of local 
experts who understand local context who then can talk to 
communities, who can go into communities and really help them 
work through their challenges.
    Mr. Latham. Okay. Interesting.
    It just seems like you are losing control as you go out 
here. And can't they talk to you now?
    Mr. Bostic. They can.
    Mr. Latham. Why do we have to spend $50 million to have 
people go talk to HUD?
    Mr. Bostic. I would say it differently.
    So the question is not can they talk to us, it is do we 
have specialized expertise that is targeted on the problems and 
the challenges of these lower-capacity communities that are 
freely available to spend a significant amount of time engaging 
with these communities.
    As you know, internal to HUD, we don't have a lot of staff 
who can do this as basically a full-time exercise. They are 
pulled and they have to provide services for a full range of 
programs to their entire region. We believe that it is very 
important that we provide some really deep dive assistance to 
these lower capacity communities that have these chronic 
challenges, and this is really a way to do it.
    What we have done is we have done some calculations to 
identify the list of these places, and there are about 250 that 
we believe reach a very high level of chronic distress when you 
look at terms of population loss, when you look in terms of 
vacancy rates, when you look in terms of unemployment, the 
level of foreclosures. This is a major pool, a major set of----
    Mr. Latham. Is this only HUD, or is it multi-agency 
initiative from the White House that would have like Labor, 
Commerce, Justice, Transportation resources together with it?
    Mr. Bostic. This is interagency. The National Resource Bank 
is a piece of this broader engagement. As we know----
    Mr. Latham. There is no request in the DOT budget for 
anything having to do with this. So are you paying for all of 
this but it is coming from everywhere else?
    Mr. Bostic. We are paying for the technical assistance 
piece through this, but there will be--there is commitment on 
the part of these other agencies to have their staff be engaged 
and provide assistance as necessary and as requested.
    So on one level, we are paying for it through our technical 
assistance, but on another level, this is a broader 
governmental engagement. And it needs to be to the extent that 
for many of these cities, the solutions are not necessarily 
going to be HUD solutions. They could need to be transportation 
solutions or job-training issues, or other sorts of 
infrastructure investment.
    And so what we have tried to do is get commitments on the 
part of the other partners across the administration that they, 
as they get approached in these areas, will offer assistance as 
they can.
    Mr. Latham. Okay. Again, there is no request anywhere at 
DOT for any funds for the initiative like this?
    Mr. Olver.
    Mr. Olver. I think I understand that there is a problem 
here. I am sort of curious whether over a period of time in one 
of the primary affordable housing topics, which was the old 
HOPE VI program.
    Mr. Bostic, you have mentioned Detroit. Detroit had several 
HOPE VI projects. I don't think any of them ever got completed. 
It took a very long time, and it may be that whatever there 
were--and there were ones that went back years and years and 
weren't moving the last time I looked at it, so which is 
several years ago now, carefully.
    So there is a very great need in places like Detroit and 
Toledo and Youngstown or something along these lines.
    I hope you are not forgetting about another group of 
places. I follow other census figures in places like South 
Dakota and Iowa and Nebraska and Kansas; those are a group of 
States where more than two-thirds of all the counties are now 
losing population in all four of those, and almost two-thirds 
of the counties in Illinois are losing population. So that, 
again, is a place where there is need for technical assistance 
which could come from what you call the resource bank.
    I have trouble thinking of the resource bank not as moneys 
available for something rather than a technical assistance 
operation. And the resource bank must be trying to leverage 
technical assistance moneys.
    But enough for that. Let me go on to another point.
    On the research issue. In the 2010 budget, there was a 
mandate that HUD was to conduct a study on Native American 
housing needs and Moving to Work demonstration study. And while 
it wasn't mandated, HUD was also doing a housing choice, 
starting a housing choice voucher administration kind of a 
program.
    Mr. Bostic, can you give us a bit of an update on the 
status of those items?
    Mr. Bostic. Sure. The MTW report, I believe, has been 
submitted to Congress, but I will check on that. There is 
some----
    Mr. Olver. Moving to Work that is?
    Mr. Bostic. Yes, I think that has been submitted, but I 
will verify that.
    In terms of the Native American Needs, that is under 
contract, the housing needs contract, it is under contract. We 
have started to have a series of listening sessions with the 
tribes. There have been seven. The last one I think is next 
week in Anchorage, Alaska, and we are in the process of 
developing the survey instrument and enlisting the tribes' 
support because as you know, we get much more effective 
response when the tribes are active participants, when people 
from the tribes actually deliver the surveys. And so we want to 
make sure that we do that most effectively.
    The listening sessions have also been quite interesting. I 
attended one at the Seminole Nation in Hollywood, Florida, just 
to note that the tribes are very interested in this. They 
understand there are significant housing challenges and really 
do want to be partners with us as we develop the surveys. So I 
am optimistic that we will have a very effective session.
    Mr. Olver. So you are still developing the survey in 
essence and that has not yet been put on the field?
    Mr. Bostic. Correct.
    Mr. Olver. So there will be a report, what, will it be a 
year?
    Mr. Bostic. I am hoping 12 months.
    Mr. Olver. Done in 12 months.
    Mr. Bostic. I am hoping.
    Mr. Olver. That is part of the carryover.
    Mr. Bostic. Yes. Well, no. No, it is not part of the 
carryover. Since it has been awarded--well, I guess technically 
it is part of the carryover, but that money has been awarded. 
So it showed up as a carryover for 2010, but it will not be a 
carryover moving forward.
    So then we have the third which is the administrative cost 
project. That project is also under contract. We are starting 
to go through the process of enlisting feedback from varied 
interests. So we have established an expert panel of some of 
the interest groups like the large public housing agencies, 
home housing authorities, and the like to get information.
    And there has been a fair amount of, we will call it 
``robust'' conversation, about how we should draw our sample 
and do other things that has caused us to be a more lengthy 
conversation than we wish.
    But in order for this project to be effective, we have got 
to have buy-in of the housing authorities. And so we are going 
to do that. It will get done, and I am hopeful that we will 
have results for this in a couple of years.
    Mr. Latham. Thank you, Mr. Olver. Mr. Dent.
    Mr. Dent. Thanks, Mr. Chairman. Good to see you again. Just 
a few things.
    I am glad to see that HUD is trying to streamline. We must 
find ways to do more with less.
    How engaged are State and local users in providing guidance 
to HUD in terms of what they need such as flexibility, 
technical assistance, et cetera.
    Mr. Bostic. They are very involved. You know, we have, in 
crafting all of our technical assistance and our research and 
demonstrations for that matter, gone and heavily engaged local 
communities to find out what they need, to find out where they 
find difficulties in terms of working with us in getting the 
services and getting things and programs put in place. And 
also, the areas where they feel like they need more assistance 
in terms of their technical assistance.
    I would also say that your observation about the importance 
of State and local input has driven and guided a fair amount of 
our design of our technical assistance programs in particular. 
So if you think about our transformation in the community 
planning and development what we have done in our One CPD 
program is take basically technical assistance that might be 
associated with 13 different programs, and try to consolidate 
them into a single program, which we are calling One CPD.
    The idea, then, is that communities, local and State folks 
have one point of contact. They call one person who will offer 
the technical assistance menu, and then we will figure out--we 
will work with our local partners to figure out which of the 
programs they actually need assistance with and it gets us to a 
much more flexible type of approach that can really address the 
local context associated with the challenges the communities 
face.
    Mr. Dent. Thank you. I have no further questions. Sorry, I 
didn't get here sooner. I had two other competing hearings this 
morning.
    Mr. Latham. Thank you. Ms. Kaptur.
    Ms. Kaptur. Thank you very much, and I will stay within the 
5 minutes. I am prepared today.
    First of all, thank you for your life service. I am very 
impressed with your resumes and where you have lived and worked 
in America.
    And in order to stay within 5 minutes, I have three 
specific asks. And to me, even though HUD is kind of many times 
hidden as a cabinet level agency, this should be one of the 
most exciting times to be at HUD in American history because 
America really needs you. So thank you for your service.
    My questions are, and kind of following on with what Mr. 
Olver said, in the communities that are truly struggling to 
turn this corner--and today on NPR there was a big story about 
Youngstown, Ohio, and their difficulties with adjustment and so 
forth. I don't represent Youngstown. I am north and west of 
that. Could you, at HUD--some of you are information officers, 
some of you are in charge of the entire operations--to do some 
teleconferences, your travel budgets are short. But to find the 
10 Members of Congress--I know I am one of them--that represent 
the 10 lowest income communities in America and to share 
experience through that teleconference where we have certain 
people around the table, people from our city government, 
people from our local housing authority, people who are working 
in the neighborhoods, and maybe share best practice examples 
from elsewhere.
    Because one of the things I see that we need is we need 
vision. And people are so beleaguered they don't have time to 
apply for Federal programs. Some of the places that need it the 
most don't have time to ask. If they try--I had one group that 
tried for Promised Neighborhoods over at--I guess that is at 
the Department of Education. They didn't get it. And I said, 
Well, why didn't you get it. We don't have time to ask. It 
would be very nice if HUD--I was thinking of using your new 
towns and model cities authorities if those still exist and we 
could access them, where you could convene maybe some of the 
other Federal agencies and we have kind of a collaboration.
    So communities like Toledo, Detroit, Youngstown, Cleveland 
would be on the list--there would be others from around the 
country--but they are truly trying to transform themselves. And 
we could work out an agenda with you. But HUD can be the 
convener, and it could be kind of exciting for people because 
they could break out of their boxes and see that oh, this is 
what that program is. And it would kind of be like a Webinar, 
kind of a seminar for people working at the local level.
    So number one, do you have that convening authority.
    Number two, I notice one of you, Mr. Williams, worked at 
CIO for U.S. Department of Agriculture. Another Webinar I would 
like is urban agriculture. What is going on in the community I 
represent is so exciting. The problem is USDA simply doesn't 
understand urban America. I feel sorry for them. They are very 
uncomfortable there. But their resource--but having been chief 
information officer over there, you know what they do. And I 
think my request would be for Cleveland, Toledo, Detroit, 
Milwaukee, and Chicago, that a Webinar would happen between 
those five places, and we would get USDA, we would get you, we 
would get the Department of Labor, and we would talk about some 
of the programs where we are transforming the heart of 
community using agriculture.
    And the third issue is--so that is a request for two 
Webinars. And it doesn't cost a lot of money. We can put people 
around a table.
    And number three, for Ms. Richman, you have an incredible 
background dealing with the mentally ill or you have an 
interest in it. So do I. And my question is in Ohio, what we do 
for the autistic in my region is best in the world, okay. What 
we have been able to do because of inspired people who helped 
us. We don't have any such model for the mentally ill. I am 
wondering if you are as impressed with the Fountain House 
Clubhouse model as I am, what I see happening in New York City.
    You know, we only have one clubhouse in Ohio. It is in 
Cleveland. It is Magnolia House. And it is not as robust as New 
York is.
    My question is could you do a Webinar bringing together 
some of the best people in the country to help people that I 
represent Vision, what could they do for housing and supportive 
services for the mentally ill. What are the models? Our State 
people don't work well with the local people. They don't know 
what the Federal resources are. So that is the third question.
    So three Webinars really. One on collaboration on what is 
happening transformative-wise in cities as we try to readjust 
to population shrinkage; number two, urban agriculture; and 
three, Clubhouse funnel.
    Mr. Olver. You have 10 seconds for that.
    Ms. Richman. I have been very involved in the mental health 
field for most of my life, both in Cleveland and in 
Pennsylvania. I know the Fountain House model very well. We 
were able to replicate it many times in Philadelphia and in the 
Commonwealth. I know the people in HHS that are responsible 
for--very well and will work with director Pam Hyde to see what 
we could do to integrate housing and mental illness and 
behavioral health.
    Mr. Latham. Ms. Kaptur is doing better.
    Ms. Kaptur. I have got big issues I am dealing with.
    Mr. Bostic. Sure. Just on the Webinar thing. We love 
Webinars. For NSP, we did a series of them. Two of them, in 
particular, helped cities in northeastern Ohio work through 
that program. In One CPD--the training program that I talked, 
the TA program that I talked about--associated with community 
planning development, Webinars are a basic piece to that.
    And I know that the Secretary agreed to work with you and 
assist your staff about how we can talk to communities last 
week in a hearing. On behalf of the three of us here, I will 
make the same offer. I would love to come to Toledo and talk to 
your folks and figure out exactly how we might be able to help 
and make things more effective.
    Ms. Kaptur. Mr. Chairman, could I ask them when they do 
that, if you could grade us on how well we do in accessing 
Federal resources for a community of our size. I am sure you 
have those measures. We need to understand that.
    Mr. Latham. Thank you. Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman.
    I have to say I didn't come here this morning to talk a lot 
about this research bank, but the more I am hearing about it, 
the less I am liking it because to me it is sounding a little--
touchy-feely isn't right.
    But let me ask you this: You are going to issue a national 
contract for $50 million. Is that where you are headed? You are 
going to have one contractor at $50 million and that contractor 
is going to subcontract to experts, is that your vision for the 
$50 million?
    Mr. Bostic. To some extent, yes.
    Mr. LaTourette. To me, this sounds ACORN-esque. And I would 
prefer that the Department think about--and, you know, as you 
look at the problems that face the Toledos and the Youngstowns 
and the Clevelands and the Detroits, I don't know that we need 
a bunch of experts hired by a Federal contractor coming in and 
providing technical assistance. I think we need people on the 
ground with money to transform the communities.
    And I would prefer and gladly vote if you said you are 
going to take that 50 million bucks and give it to Ms. Kaptur 
in Toledo so she can make a real impact on the housing stock in 
her community than having sort of this spread out thin network 
of experts that are going to come to Cleveland for a week and a 
half and spend some time and then go someplace else. And it 
begins with whomever your national contractor is skimming off a 
good portion of that $50 million.
    So I think I would ask that you go back and reconsider it 
and maybe talk to Ms. Jackson over at the Environmental 
Protection Agency. Because the President deserves really high 
marks for putting for the first time in history real money on 
Great Lakes restoration. But what happens is it was supposed to 
be $475 million, then it is $300 million, now it is $250 
million.
    But what happens is the original plan was to fund, like, 
250 projects. And what you wind up having is a lot of check 
presentations and no ribbon cuttings. And because the money 
that you put in that is not enough to take care of it.
    I would be very interested in what you come up with when 
you are ready with your NOFA, whatever it is you are going to 
do to talk about how you are going to roll out this bank.
    I really, Mr. Chairman, would hope we could have another 
hearing and just ask a few questions about it. Because it may 
be the best thing since sliced bread, but just in the 
description of it, and maybe it is my poor hearing, I am really 
not crazy about the model that you are developing. To spend 
almost half of the money that you are asking for for your 
transformation initiative.
    And lastly, Ms. Richman, when you were talking about your 
goal on some of this is making it easier to deal with you and 
the partners and that is where the man hour reduction is going 
to be. Probably the biggest complaint that we get is agencies 
at the local level have to make a decision whether they want to 
deal with the Federal Government because it takes them a lot of 
time. And so it would be easier to measure what the 
efficiencies were at your shop and did it lead to fewer people, 
did it lead to quicker turnaround time for the 18 months and so 
forth and so on.
    I would hope that you build in to your metrics that the 
local public housing authorities say--are able to come back to 
us and say well, you know when we used to access this program, 
it would take Jane or Jimmy 5 hours to get through the forms, 
but now it only takes them 30 minutes. It is going to be tough 
for us to evaluate from here how effective you are being in 
achieving the goal that you set out, which I think is laudable, 
without actually having a metric that we can talk to the 
locals.
    I am sorry to beat up your bank, but I am just not liking 
it for the moment.
    Mr. Bostic. I appreciate your feedback. I would say I don't 
disagree with your view that it is important to get resources 
on the street in communities. I do, however, think that it is 
important that we do speak to the capacity challenges that many 
of these places have so that when they do use the money that is 
available to them already, they use it as effectively and 
efficiently.
    Mr. LaTourette. I don't disagree with you. But the last 
thing we need is a bunch of people in suits and hard hats to 
come in to Cleveland and say well, you should do this and you 
should do that and $50 million is out the door.
    I think if you gave Mayor Jackson, you know, $2 million, he 
could fix the efficiency problem and you could give him a set 
of metrics that he would have to follow in order to keep 
getting money so forth and so on. I just worry about the 
structure.
    Fifty million for the whole country isn't a lot of money. I 
see again the national contractor taking some of that money. 
And then I see these people with sharp pencils coming into town 
and saying, you know, a lot of reports and no ribbing cutting. 
And that is what I am worried about and maybe you are way ahead 
of me.
    Mr. Bostic. I have the same concern. I would say from the 
outset of this hearing we have talked about the importance of 
accountability and oversight and all of the systems that we are 
putting in place, all of these programs have clear performance 
metrics about on-the-ground outcomes, and if those aren't 
happening, then we have problems.
    The other thing I would emphasize is that an important 
piece to this resource bank concept is the leveraging of 
private and other capital. So other models that have been out 
there have taken the public sector investment in it and 
leveraged it three to one, four to one. And so getting that 
kind of investment in these local places on the ground and 
having an organizing structure that can, perhaps, increase the 
degree to which there is that leveraging in these communities 
is, I think, particularly valuable and important.
    The last thing I do want to say is that the resource bank 
isn't all we are thinking about in this context. We are working 
with others to try to find ways to embed people.
    So we have gotten a gift from the Rockefeller Foundation to 
start a fellowship program to place people into these 
communities for extended periods of time so this is not a ``2-
week in a suit'' situation. This is roll up your sleeves and 
get down into the systems and try to change processes in a 
fundamental way, very similar to what we are doing with the 
transformation initiative. But this is an important part of 
this broader approach.
    But if we were to have a hearing on it, we would be happy 
to talk to you more and maybe we can do that off line as well.
    Mr. LaTourette. I would love to do it. Thank you.
    Ms. Richman. I just wanted to very quickly say success to 
me means that our partners, those stakeholders, also spend less 
man hours and we do need a way to have a metric on that. But 
certainly a good outcome wouldn't be just tightening the 
process for us, it would mean also making sure that we are 
saving them both time and money.
    Mr. Latham. All right. Thank you.
    Just a yes or no. Is the Federal implementation training 
teams, is that part of the National Resource Bank?
    Mr. Bostic. No.
    Mr. Latham. It is not. Okay.
    And your budget proposal is a creation of that 
implementation teams where the people from 12 different 
agencies will move to a chronically distressed locality or 
region to teach the locals how to effectively use their Federal 
funds to benefit the area.
    I think I would be a little nervous. Number one, I want to 
know how you pick out the six pilot programs. But, I mean, you 
are going to have people from HUD, DOT, EPA, Commerce, 
Education, USDA, Treasury, DOE, Health and Human Services, 
Department of Justice, Department of Labor, and SBA. I don't 
think there is going to be room in the room if you have teams 
from every one of those Departments going into a community. 
Tell me about it.
    Mr. Bostic. So you won't. There will be some subset of 
these.
    Mr. Latham. That would be somewhat overwhelming.
    Mr. Bostic. That would be a lot of folks to be taking vans 
in every day for sure.
    There will be some subsets of these teams. And one of the 
things that we are doing right now is we are working with the 
other agencies to see where communities do better and do worse 
and then we would target from this subset staff from the 
agencies where the communities seem to be using their resources 
less effectively.
    So if a city like Indianapolis----
    Mr. Latham. How do you pick the six pilot?
    Mr. Bostic. It is a process whereby we first score all 
cities. And so we score all of our cities based on unemployment 
rate, population loss, vacancy rates--I said unemployment 
rates. There are a couple other factors. Through that we have 
an index whereby cities get ranked according to--we call it a 
distress index. And then we look at those cities that are most 
distressed and start to--and basically you have a big tie at 
the top.
    And then from that, what we have tried to do is think about 
cities in terms of some geographic variation, in terms of 
different sizes so that we can understand what kind of 
challenges communities are facing and how we might overcome 
them more effectively.
    And then in addition, because as several of you have noted, 
we don't have enough resources to do the deep dive everywhere. 
We are creating--we are trying to create a community of these 
cities so that as we learn our lessons, that information 
becomes more broadly known, sort of the type of idea that 
Representative Kaptur was talking about.
    Mr. Latham. Do you know how many full-time equivalents you 
are talking about to do all of this and do you know the other 
11 departments, agencies, are they planning the same kind of 
effort?
    Mr. Bostic. I am not sure I understand.
    I don't have a hard number on FTEs handy right now. My 
recollection is that it would be about three or four people per 
team across the various pilot cities. So that would be 24 to 30 
people across these agencies. So probably like three people per 
agency for this first round of assessment.
    Mr. Latham. There goes your motel vacancies. You will be 
well taken care of in Toledo.
    Ms. Kaptur. We are glad for any business.
    Mr. Latham. Just in general, when you talk about the bank 
and the high intensity Federal teams moving over, doesn't it 
tell you something about maybe how complex some of the programs 
are? That they are just impossible to navigate? Why do we need 
all of this? I mean, if these were programs to begin with that 
people could understand and could use, would we need all of 
this?
    Mr. Bostic. Perhaps. So there are places----
    Mr. Latham. We would still need it.
    Mr. Bostic. Perhaps. So even in the best schools, we have 
students who need tutoring. So I wouldn't that say if we had a 
perfect delivery that communities--there would be no 
communities that might still need assistance.
    Mr. Latham. Who are some communities that do it right?
    Mr. Bostic. There are a lot of communities that do it right 
that have been innovative. New York City uses resources 
interestingly, Los Angeles, areas in Florida. So across the 
country there are lots of----
    Mr. Latham. How do you judge that?
    Mr. Bostic. Well, you can judge it in terms of----
    Mr. Latham. How much money goes out?
    Mr. Bostic. No. No, no. So this is the new HUD, right, and 
so we are judging based on what happens on the ground. These 
are material outcomes. So Secretary Donovan has been clear 
consistently since he has been in office that it is not how 
fast the money goes out, but what the money does once it goes 
out. And thinking about effectiveness, that is the metric.
    So in a homelessness situation, it is how many people get a 
roof over their head and don't return to homelessness. In terms 
of foreclosure, it is how many foreclosure properties get taken 
off the markets. We don't have these negative spillovers. In 
terms of community development, it is to what extent do we 
create new instruments and new community amenities and 
facilities that improve outcomes and maybe keep youth off the 
streets and all of those sorts of things. Those are the sorts 
of measures we are trying to get to.
    Mr. Latham. Okay. Thank you. I am done if you want to take 
another question.
    Mr. Olver. I have very little left to say.
    I must say I have some sympathy for the comments that were 
made by Mr. LaTourette here who, when you first mentioned that 
this was going to be a contract-out, I probably nearly dropped 
my teeth. But a contract-out for one agency to do this, it 
seems to me in most of these places whether they are urban or 
rural, the big ones and the big problems are, in large part, to 
go in identify what the goals are at the local or regional 
community level countywide or groups of counties where you have 
a really distressed, perhaps rural area as well. And energize, 
you know, draw out locally what those goals may be. And they 
may be quite different. I am rather concerned about the 
contract to do that that you have described, that you have 
identified.
    There are lots of ideas. They need to be organized, and 
maybe then, the tools to identify that they can achieve some of 
those so that there are successes at the local level. And maybe 
it is going to take a series of Webinars in each of these 
places in order to make this sort of thing happen.
    That is just a comment.
    Mr. Latham. Is that it?
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    One of the most interesting parts about serving in Congress 
is to really understand other Members and how different their 
districts are than our own. And I am lucky to serve on many 
Subcommittees in my career and I have been amazed, for 
instance, for the agricultural regions that I represent, how 
many farm service agency offices are in those counties, how 
many personnel are there to help people.
    My region of Ohio does not have a lot of agricultural 
subsidy. Other parts of Ohio do. But how much money comes into 
areas from the Federal Government directly?
    HUD, for our cities, the story is very different. The 
personnel aren't there. These regular subsidies other than CDBG 
really don't come in.
    And I respect every single member of this committee and 
what they try to do for their regions. But I have found a real 
divide between rural America and urban America that is 
operationally dysfunctional for the Nation. And so the greater 
effort that we can make to understand one another's districts I 
think so much the better.
    If you represent an area where the majority of your people 
live in communities over 250,000 versus under, you represent a 
different slice of America. And for many of our urban areas, 
which are changing, obviously, I have to respect HUD and what 
you are trying to do in getting information available in a very 
complex situation where there is not just one industry that 
predominates in a community but many, multilayered where there 
are city and county governments struggling with urban poverty 
which is different than rural poverty. Where there are Federal 
programs. The Federal Government has always been the place to 
deal with poverty and with low-income people and there are 
different shoots. But the Federal Government tends to come down 
in a nonintegrated way. They come down in silos. They don't 
deal in community building. They deal in, Labor does this, and 
HUD does that. It is how the Federal Government thinks. And 
maybe it will always be that way.
    But I want to commend you for trying to blend these 
different resources and encourage you on. HUD doesn't really 
have a presence anywhere in my community. We have to go all the 
way over to Cleveland to find HUD. We have nice people over 
there.
    But the kind of information that I am asking for, I think 
you are moving toward that, and I am kind of excited about--I 
think the chairman is asking very good questions. But you know, 
imagine, Tom, in Iowa with no Farm Service Agency. Imagine in 
Iowa with no rural crop subsidies going to individuals.
    What happens in cities is the CDBG money, the little bit of 
it that there is, goes to mayors. Now, does that really get 
down to people who are trying to rebuild the north side of 
Toledo or the west side of Detroit? Oh, my. It is so infinitely 
more complex. People don't know one another as well. Look at 
what is happening in Detroit. Half the schools are closing. 
Just imagine what that means to that community.
    So for the helpers that are on the ground, frankly, I just 
got back from Israel and I was so impressed with this college, 
Oranim College on the east side of Israel, where they do this 
community builders program that was launched off of the Mandel 
School of Advanced Social Work in Cleveland, where they have 
integrated all of this effort and they are creating leaders at 
the local level--not just mayors, but people who can undertake 
development in their own neighborhoods which is just so--it was 
beautiful to see.
    People who shot one another before are now working 
together, identifying the assets in their community, 
integrating these resources. And it was interesting because I 
said to them, What about your government? You know, are they 
helping you? And they just laughed. They said it is just like 
your central government. They really don't know we are here and 
they don't care.
    And people at the local level are trying to work together.
    So you are trying to do community building. I get it. I am 
a city planner by training. I know how complex is the world, 
the universe is that you are working in. I would just propose 
to you that think about the Webinars that I have suggested and 
the members can gather, even if they are not awarded one of the 
top six, they can gather the people in their community that 
really need to be involved.
    But I will just say for the benefit of the other people on 
the committee, do you know that my community doesn't have one 
single HUD certificate for veterans' housing? They are getting 
their first six through our local housing authority now. We 
have hundreds and hundreds and hundreds of veterans who need 
shelter. And yet we didn't even get the first 60 certificates 
from the public housing authority because they are so 
beleaguered. There is so much going on there.
    So we need the help. You know, we are not like other places 
in the country because of what we have been under. And I won't 
go into all of the bidding problems at local city hall and you 
have got people that used to be in garbage collection that are 
over in something else now because of the layoffs. But I just 
want to say that I am more favorably inclined by what you are 
trying to do than perhaps some of my colleagues. But I may be 
the only person here that represents a city of over 250,000.
    Thank you.
    Mr. Latham. I thank the gentlelady.
    Mr. LaTourette.
    Mr. LaTourette. I don't have any more questions.
    I just want to say to Mr. Bostic, I am going to steal 
unashamedly your comment that even the best schools have kids 
that need to be tutored. That is an excellent line, and I am 
going to use it in all of my speeches from here on out.
    Mr. Latham. With that, and if Members have other questions 
they can submit, we appreciate very much your testimony today. 
You have got a big job and we appreciate your efforts.
    Thank you very much.
                                           Tuesday, March 29, 2011.

         HUD--HOUSING COUNSELING WITH NEIGHBORHOOD REINVESTMENT

                               WITNESSES

VICKI BOTT, DEPUTY ASSISTANT SECRETARY, SINGLE FAMILY HOUSING, U.S. 
    DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
EILEEN FITZGERALD, ACTING CEO OF NEIGHBORHOOD REINVESTMENT CORPORATION
    Mr. Latham. Good afternoon, and welcome to the hearing. 
Today, we look at the President's fiscal year 2012 budget 
request for HUD's Housing Counseling Assistance Program and the 
Neighborhood Reinvestment Corporation, which is commonly known 
as NeighborWorks.
    We welcome the two witnesses today, Eileen Fitzgerald, 
acting CEO of Neighborhood Reinvestment Corporation and Ms. 
Vicki Bott, Deputy Assistant Secretary for Single Family 
Housing. Welcome, and we look forward to your testimony today.
    Housing counseling can mean a lot of different things to a 
lot of different people. It could be directed to home buyers, 
homeowners, renters, seniors, and other populations with 
various goals. It is an important hearing because it has been 
some time since we have looked at the Federal role in housing 
counseling.
    Since 2008, we have appropriated over $1.4 billion to your 
organizations, and I hope our hearing today will shed some 
light on whether the money is all well spent. I do have some 
concerns about HUD's Housing Counseling Assistance Program, and 
these concerns are held on both sides of the aisle. The biggest 
concern is HUD's inability to distribute these funds in a 
timely manner. As my good friend and colleague Mr. Olver stated 
in last year's committee report, quote, the stagnation of 
funding for a year or more makes it very difficult to defend as 
a necessary expenditure despite the obvious demand for the 
program, end quote. That is really pretty strong language, and 
I couldn't agree with it more. So in these tough budget times 
where every dollar should be explained and justified, we need 
to examine HUD, if it is up to the task of efficiently 
distributing this funding.
    Another concern is the duplication of efforts done by your 
organizations. In this year's budget, NeighborWorks and HUD 
requested $80 million and $33 million, respectively, for 
foreclosure mitigation counseling. Given the President's stated 
goal of eliminating duplicative programs, we need to find out 
if we require two organizations spending a major chunk of money 
in essence trying to do the same thing.
    On the point of duplication, I find it equally 
disconcerting that the Dodd-Frank Act created a new Office of 
Housing Counseling. It seems to me that we are simply moving 
the deck chairs and it is not going to help. But I am 
interested in finding out how the reorganization is progressing 
and how it is going to improve efficiencies. And I look forward 
to an open and productive discussion as we continue to work 
through the process.
    And again, thank you for your hard work. I will turn to my 
colleague, Mr. Olver, for his opening statement, and then we 
will hear from our witnesses.
    Mr. Olver. Thank you, Mr. Chairman. And thank you both for 
being here with us today and giving us your thoughts on these 
issues.
    As you both are intimately aware, owning and keeping a 
house is a perilously complicated affair nowadays. Furthermore, 
you both recognize that counseling services are important at 
all junctures of the process, particularly for families looking 
to purchase a first home and for families that can no longer 
afford their homes and are facing foreclosure.
    Today's hearing will focus on the services provided through 
HUD's housing counseling programs and NeighborWorks' National 
Foreclosure Mitigation Counseling Program to help home buyers 
and homeowners navigate the system. Specifically, I want to 
better understand how HUD leverages its approved counseling 
agencies to reach over 3 million households, and in addition I 
will want to explore the reliability of reports that homeowners 
who receive counseling through the Foreclosure Mitigation 
Counseling Program under NeighborWorks are 1.7 times more 
likely to cure a threatened foreclosure. That is a curious 
number to me.
    Lastly, I am interested to discuss how HUD and 
NeighborWorks' respective programs complement each other and I 
would be interested to know what areas they may overlap. That 
said, as this committee looks to reduce the overlap and program 
duplication, it is important to balance this with an 
understanding of the need. In the last 3 years, almost 9 
million households have entered the foreclosure process with 
over 3 million homes having been sold under foreclosures. 
Furthermore, the monthly rate of homes entering foreclosure 
continues to remain near crisis highs. As such, in addition to 
routing out inefficiencies, it is equally important that the 
committee explore whether these two programs have sufficient 
resources to meet existing needs.
    Mr. Chairman. I yield back.
    Mr. Latham. Thank you, Mr. Olver. And, Ms. Bott, your 
written testimony is in the record. If you would go ahead, 
somewhere close to 5 minutes would be fine. Thank you.
    Ms. Bott. Thank you, Chairman Latham, Ranking Member Olver, 
and members of this subcommittee, for this opportunity to 
testify for you today on HUD's Housing Counseling Program. 
Today I would like to provide you with an overview of the HUD 
Housing Counseling Program, discuss its critical role in 
keeping families in their homes during the recent economic 
crisis and how we have helped homeowners avoid loan scam and 
fair lending abuses.
    Since taking the office, the Obama administration has acted 
to help stabilize the housing market and provide critical 
support for struggling homeowners. Working with Congress, we 
helped avert a deeper economic collapse and more severe housing 
crisis. Our efforts preserved access to our mortgage markets at 
a moment they were threatening to seize up.
    More than 4.2 million distressed homeowners or borrowers 
have received modifications since April 2009, more than twice 
the number of foreclosures completed during that time. Critical 
to these efforts has been HUD's Housing Counseling Program, 
which supports the work of a large number of nonprofit 
organizations and skilled professionals that provide valuable 
housing related assistance to millions of households 
nationwide. The critical services provided through this program 
have provided needed services to help stem the Nation's 
foreclosure crisis and facilitate the recovery of the housing 
market.
    There are over 2,700 housing counseling agents 
participating in the HUD Housing Counseling Program. Housing 
counseling agencies are approved to participate in the program 
by applying directly to HUD. Approval criteria are designed to 
ensure the quality of agencies who are providing services 
throughout the program. Key approval criteria include having 
experience administering housing counseling programs for at 
least 1 year prior to application and knowledge of HUD programs 
to local housing market and counseling best practices.
    HUD conducts performance reviews to ensure that counseling 
agencies are in compliance with program regulations and 
requirements. The majority of these performance reviews 
actually take place on site, but we are also incorporating 
additional models of reviews, such as remote monitoring files 
at HUD offices.
    Housing counseling agencies participating in the program 
are required to employ trained counselors. HUD invests 
approximately $5.5 million annually to ensure that quality 
training is affordable and accessible to counselors. These 
funds help approximately 4,400 housing counselors receive 
training annually. Our investment in housing counseling 
training helps leverage other training assistance for agencies 
in the program, so the impact of our investment is actually 
much larger.
    HUD's Housing Counseling Program is the only dedicated 
source of funding for the full spectrum of housing counseling, 
including housing counseling, education, outreach topics, 
including prepurchase counseling, resolving or preventing 
mortgage delinquency or default, non-delinquency post-purchase 
counseling, rental counseling, reverse mortgage counseling for 
seniors, which is mandatory, and homeless assistance. To help 
at-risk households, counselors apply loss mitigation skills and 
other strategies to help homeowners modify their loans, 
refinance or otherwise escape high interest rates, hidden 
costs, prepayment penalties and other predatory practices.
    Current program activity reflects the rapidly growing 
percentage of housing counseling appropriation that is being 
used for foreclosure prevention counseling. During the fiscal 
year 2010, 46 percent of all counseling sessions were dedicated 
to providing mortgage delinquency and default resolution 
counseling compared to fiscal year 2007 when 15.7 percent of 
all counseling activity focused on that.
    Currently, over 2,200 housing counseling agencies are 
approved to provide foreclosure prevention counseling. Housing 
counseling agencies provided foreclosure prevention counseling 
to over 1.4 million households in 2007. Early outcome data 
demonstrates that foreclosure prevention counseling greatly 
improves the likelihood that the household will achieve a 
constructive alternative to foreclosure.
    Housing counseling agents are a key factor in making 
Federal, State and local foreclosure prevention programs 
successful because counselors help qualify and prepare 
household and borrowers for programs available to them.
    The NFMC, National Foreclosure Mitigation Counseling 
Program Fund, administered by NeighborWorks, has also allowed 
HUD to be able to continue to invest in the other forms of 
housing counseling services that are still critical during this 
housing crisis, including the prepurchase counseling, reverse 
mortgage, rental and homeless counseling which may help 
thousands transition to other forms of affordable housing when 
home ownership is no longer an option.
    Many foreclosures have involved rental properties. So 
rental counseling helps renters find new rental units when 
their homes become unavailable due to foreclosure.
    In 2010, HUD devoted 500,000 to specifically train 
counseling regarding fair lending and mortgage fraud. The 
Housing Counseling Program and the Office of Housing Counseling 
which HUD is establishing, as required by Dodd-Frank, have 
helped, and with your assistance, will continue to serve 
individuals across the country to learn about their housing 
options and meet their needs.
    Thank you for the time, and I look forward to answering 
your questions.
    [The statement of Ms. Bott follows:]



    Mr. Latham. Thank you. Ms. Fitzgerald.
    Ms. Fitzgerald. Good afternoon, Chairman Latham, Ranking 
Member Olver, and members of the subcommittee. I would ask that 
my full written testimony be submitted for the record. Thank 
you.
    My name is Eileen Fitzgerald, and I am the acting CEO for 
the Neighborhood Reinvestment Corporation doing business as 
NeighborWorks America. Thank you for inviting me to talk about 
our fiscal year 2012 budget request, which includes $135.3 
million in core funding and $80 million for the National 
Foreclosure Mitigation Counseling Program, also known as NMFC. 
I would like to address some of our core activities and our 
role as administrator of the NFMC program.
    NeighborWorks America was established by Congress in 1978. 
We support a network of 236 local non-profit organizations, 
which expand affordable housing opportunities and strengthen 
their communities. Each involves a partnership of local 
government, business leaders and community residents. Together, 
they serve 4,500 urban, suburban and rural communities in all 
50 States, the District of Columbia, and Puerto Rico. In the 
last 5 years, NeighborWorks America and its network has 
generated more than $20 billion in investment in local 
communities, assisted almost 1.2 million families with their 
housing needs, and created and preserved more than 20,000 jobs 
a year. The network also owns and manages more than 80,000 
units of affordable high quality rental housing.
    NeighborWorks is also the Nation's largest and most highly 
regarded nonprofit trainer of affordable housing and community 
development practitioners, making sure that nonprofit and 
municipal staff across the Nation have the necessary skills to 
deliver an array of Federal and State programs and to deliver 
high quality affordable housing. Almost 60 percent of the 
training participants are from organizations outside of our 
network.
    NeighborWorks America was already a national leader in the 
fight against foreclosures when Congress asked us to administer 
the NFMC program in fiscal year 2008. To date, more than 1.1 
million homeowners have been counseled through NFMC.
    The legislation required us to launch the program and award 
funds within 60 days of enactment. We met that aggressive 
timeline. We get money out to communities quickly while still 
ensuring an appropriate level of compliance and monitoring, 
always making sure we are meeting our fiduciary duty to 
Congress and to the taxpayer.
    The benefits of foreclosure counseling extend beyond 
individual homeowners since foreclosed homes affect entire 
communities and the Nation's economy. With up to 2 million 
foreclosures projected in 2012, the $80 million fiscal year 
2012 request for NFMC is really critical. We know, however, 
that the best defense against foreclosure is education and 
counseling before a borrower starts considering home ownership 
and the most reliable counseling is provided by objective 
nonprofit agencies, including local NeighborWorks organizations 
and other HUD-approved non-profit counseling agencies that put 
the consumers and the communities' interests first.
    One additional indicator of NeighborWorks America's value 
is the fact that in fiscal year 2010, supported by a core 
appropriation of $168 million, NeighborWorks organizations 
generated nearly $4 billion in direct investment, effectively 
leveraging our appropriation by a factor of 23 to 1. At a time 
of scarce Federal budget dollars an investment in NeighborWorks 
is an efficient and effective use of taxpayer dollars.
    At our fiscal year 2012 request, NeighborWorks America 
projects assisting 227,000 families across the Nation. 
NeighborWorks grant dollars have a catalytic impact, attracting 
private sector funding to create and preserve affordable rental 
and home ownership units, generating additional economic 
impact, and creating jobs in local communities.
    On behalf of the hundreds of thousands of families served 
by the NeighborWorks network and the NFMC counseling community 
across the country, I thank the committee for its support and 
for your consideration of the Corporation's fiscal year 2012 
budget request.
    [The statement of Ms. Fitzgerald follows:]



    Mr. Latham. Thank you both for your testimony. I really 
have a couple of just basic questions. And you touch on it in 
your testimony.
    But since Public Law 111-117 was signed into law on 
December 16, 2009, can you tell me how many homeowners HUD has 
provided direct assistance to with the $88 million provided? 
And I will ask the same question to Ms. Fitzgerald.
    Ms. Fitzgerald. For the NFMC Program, we have counted 
aggregate numbers. So since the inception in 2008, it has been 
1.1 million. I can say that in the fiscal year 2010 funding, 
which we call Round 4, 81 percent of the grant funds have been 
essentially expended of the counseling grant funds and 53 
percent of the grantees are out of money. So they are actually 
waiting. If we are able to have a fiscal year 2011 program, 
they are waiting for that money. And I can get you the specific 
units for that number.
    Mr. Latham. If you would, please.
    Ms. Bott. We have had three million homeowners receive 
counseling. And as I mentioned in the testimony, a large 
portion of that is for foreclosure mitigation in today's 
environment versus what it was in 2007.
    Mr. Latham. Is that direct assistance?
    Ms. Bott. HUD does not provide direct assistance. All of 
our assistance would be provided through grant funds, through 
grantees or subgrantees. So HUD doesn't do any direct 
counseling. So that would be counting who we funded.
    Mr. Latham. Again, very broad, but as far as the goals in 
housing counseling, is the goal fewer foreclosures? You have 
got less people buying houses. It seems like it would be 
somewhat difficult to gather data on all the efforts. Each of 
you, how do you measure success?
    Ms. Bott. I think it is cyclical in different markets 
related to the type of counseling or the majority of 
counseling. Obviously today a large percentage, close to 50 
percent, is foreclosure preventions. And the fact that the 
consumer has, or homeowner has a non-foreclosure outcome, and 
we provided some of the statistics within the testimony, 
whether that be modification, refinance in some cases, it is a 
grateful exit short sale or deed in lieu versus foreclosure, we 
consider that a success related to the foreclosure mitigation. 
There are other types of counseling, reverse counseling, 
prepurchase counseling, rental assistance counseling, and some 
of that is more difficult to measure. But the education that we 
provide those homeowners to make good decisions, or renters, we 
think is essential in today's market.
    Ms. Fitzgerald. I think the basic value of counseling is to 
help a consumer really understand what can be a very 
complicated financial transactional mortgage product, right? So 
if that is in a pre-purchase, we think that the goal is to get 
that consumer before they start shopping or looking for a home 
to understand the requirements of home ownership and to 
understand the mortgage process.
    In a foreclosure situation, again there is many different 
options available. So we are helping them to navigate that. As 
you well know, the servicers are overwhelmed and really can't 
spend that time explaining that.
    For the foreclosure side, we have a study done by the Urban 
Institute that Ranking Member Olver noted that does demand 
success in the foreclosure intervention counseling. Families 
who came to a foreclosure counselor were 70 percent more likely 
to cure their foreclosure. They reduced their loan payments by 
$267 a month compared to a similar comparison group of clients, 
and their odds of remaining current on their loan payments was 
increased by 45 percent. That was all from data taken from 
servicer reported data. So it wasn't data reported by the 
counselors or by the individual homeowners. It was servicer 
reported data that the Urban Institute was able to get access 
to.
    Mr. Latham. I am almost out of time. Why don't you go 
ahead, Mr. Olver, if you would. Are you ready?
    Mr. Olver. I am always ready, Mr. Chairman. Thank you.
    My impression is that the NeighborWorks program is solely 
for foreclosure counseling. Is that foreclosure mitigation 
counseling?
    Ms. Fitzgerald. That is absolutely correct.
    Mr. Olver. Now, in the testimony that--Ms. Bott, you have 
given the written testimony. It lists the Housing Counseling 
Program supports the delivery of a wide variety of housing 
counseling services to potential home buyers, homeowners, low- 
to moderate-income renters, and the homeless and goes on to 
then say counselors provide information that improve their 
housing conditions and choices, avoid foreclosure, access 
government assistance programs and understand the 
responsibilities of tenancy and home ownership. So yours is a 
much broader--it isn't solely related by any means to 
foreclosure situations, though I think I heard you say, and 
correct me if I am incorrect, if I am wrong, that you said--I 
think you used the word ``vast'' majority of your monies was 
going into foreclosure counseling. Did I hear you correctly?
    Ms. Bott. So in today's environment, we have seen an 
increase; in 2007 about 15.7 percent of our counseling 
activities were foreclosure mitigation. Today, it is 47 
percent.
    Mr. Olver. That is not a vast majority. It is still under 
50 percent.
    Ms. Bott. Correct.
    Mr. Olver. And normally it would have been a much lower 
number?
    Ms. Bott. Correct.
    Mr. Olver. So in this atmosphere, you have moved somewhat 
toward this foreclosure issue? Let me ask you. You are saying 
that you have provided services to three million families in 
the past year. Is that what it is meant to be the case in the 
past year out of the funding that was provided in the 20----
    Ms. Bott. Fiscal year 2010.
    Mr. Olver. In the 2010 budget you provided counseling to 
that number of million or is that also a cumulative number over 
time?
    Ms. Bott. No. It is during the fiscal year 2010. It was 
2009 funding appropriations.
    Mr. Olver. Funding out of the 2009 funding?
    Ms. Bott. Correct. During the fiscal year 2010 the activity 
happened.
    Mr. Olver. That you provided. Well, then the incidence then 
of service, the unit value of service for the number of dollars 
must be much lower than the value of service--I cannot quickly 
calculate in my head because I don't have the figures right in 
my head or I would have. It must be a considerably lower number 
than the service that is provided under NeighborWorks, which is 
for 1.16 million households out of their slightly larger amount 
that is available to you.
    Ms. Bott. I think the key difference is HUD administers but 
our primary function is to deliver grant funds to housing 
counselors where NeighborWorks delivers funds to counselors as 
well as provides counseling service.
    Ms. Fitzgerald. I think that HUD is probably counting all 
of the activities that its counseling agencies are doing 
whether HUD is funding them or not. I think that--whether HUD 
is providing the direct funding for that. So in NFMC, what we 
are telling you--the numbers that we provide to you are clients 
who are paid with NFMC funding. Many of our counseling--many of 
the HUD-approved intermediaries and other counseling agencies 
might get funding from other sources, not just HUD but maybe 
there is some State funding or some other foundation support 
that is giving them money for foreclosure counseling. For NFMC 
we don't count those clients. We are just counting the clients 
that we are directly paying for. I think you are probably 
counting all of the activity of the HUD-approved counseling 
agencies.
    So, yes, there is a differentiation. We have 2,700 approved 
HUD counselors. We do not provide grant funding to all 2,700. 
So we do create some regulations and standards that counselors 
may exist for credibility, ensuring that they are complying 
with HUD standards. We may not specifically be funding them.
    Mr. Olver. Because you provide services to a much broader 
group of people, which has grown in this crisis from 15 percent 
to 47 percent or thereabouts, it is exceptionally difficult to 
compare exactly what the agencies are doing. The NeighborWorks 
is purely foreclosure counseling and I don't see any numbers in 
your testimonies that indicate what proportion of the families 
actually avoided foreclosure through the counseling that either 
of you provided. We are really trying to compare apples and 
oranges here without having a discrimination sufficient enough 
to tell how they should be compared. I think this is much of 
the difficulty that we are coming under.
    I will continue later.
    Mr. Latham. You actually were asking my next question.
    Mr. Olver. I am sorry.
    Mr. Latham. No. Great minds think alike.
    Mr. Womack.
    Mr. Womack. I have only got a couple of questions before I 
have to excuse myself, Mr. Chairman. Thank you for the 
opportunity, and I appreciate the testimony of the people here 
today.
    We are in this era right now where we are trying to figure 
out how to finance government, how to do more with less, work 
smarter and not harder and much more efficiently. And I am new 
to this congressional process, even though I have gotten a 
background as a mayor of a city. But how can I be sure that we 
are not seeing duplication here? The chairman had talked a 
little about duplication in his opening comments and how can 
new Members of Congress like myself be able to discern between 
programs and understand where there is duplication and where 
there is not?
    Ms. Fitzgerald. In general, we feel that the programs are 
complementary. HUD's breadth in being able to fund prepurchase 
education rental counseling, which often helps the families who 
might have been in foreclosure but are looking for a place to 
live, the reverse mortgage for elderly homeowners and the 
homeless assistance obviously are very complementary, the 
foreclosure intervention. Even in situations where grantees are 
using HUD dollars to specifically fund foreclosure 
intervention, it is very clear in our program requirements that 
that can't be used for the same--they can't use the same dollar 
for the same activity, and that is very clear and that is 
something we look for when we go on site. So I think that those 
two things are very complementary.
    We talk with them often about challenges and issues we are 
seeing, how can we improve the capacity of the counselors. So I 
think we are both there trying to make sure that this crisis 
that is really hitting families and communities so hard, we are 
trying to mitigate what we can with that. So I think we are 
doing a very good job of trying to both bring something to the 
table and not duplicate.
    Ms. Bott. Yes, I would agree with Eileen. We are 
complementary services. We have had a longstanding 
relationship, HUD and NeighborWorks. I do want to kind of 
differentiate some of the key activities that HUD maintains 
that NeighborWorks leverages. We regulate HUD-approved 
counseling agencies across the country, including 
NeighborWorks. We establish and administer criteria for the 
approval of counseling agencies and counselors. So we set the 
standards. We make regulatory housing standards within the 
marketplace and we provide on-going oversight and monitoring.
    The thing we know today as it relates to funding housing 
counselors, is the demand outpaces the supply as it relates to 
trained counselors. So HUD definitely leverages the experience 
of NeighborWorks in using training and getting out to create 
more qualified housing counselors in the marketplace to ensure 
that the supply is sufficient to meet the needs of the 
marketplace.
    Ms. Fitzgerald. And just one clarification. HUD doesn't 
regulate NeighborWorks on the NFMC Program or all of our 
activities. NeighborWorks, as are many non-profits, is a HUD-
approved intermediary. So we in that 1.2 to $1.7 million that 
we get as a HUD-approved intermediary that we pass through 
directly through NeighborWorks organizations, that is the role 
HUD has, but not in overseeing the rest of NeighborWorks.
    Mr. Womack. Not long ago as it relates to foreclosures, I 
saw a publicized piece, I think it was on 60 Minutes, regarding 
voluntary foreclosures. And in the foreclosure mitigation 
business, when we are counseling people on foreclosures, is any 
of our money going to advise or counsel people on the subject 
of when they are making their payments but their home is under 
water, seriously under water, in the area of voluntary 
foreclosures?
    Ms. Fitzgerald. Kind of in a short sale or choosing to 
give----
    Mr. Womack. Yes, ma'am.
    Ms. Fitzgerald. Yes. Absolutely. When a counselor meets 
with a homeowner, they really try to work with them about what 
their options are in total. And one of the values that a 
counselor brings is working with that family on their budget 
and is there any way that they can be able to make that 
mortgage payment or even if they could get a loan modification 
if that was realistic. Some of the hard work a counselor does 
is sometimes making a family realize they can make some budget 
change, but the other is there really is no modification here 
that is going to help you and the best solution for you and 
your long-term credit is to try to get a short sale. And that 
is the hard work a good counselor does every day.
    Mr. Womack. But assuming a person is capable of meeting the 
demands of that mortgage, assuming that premise, are we 
counseling people to let it go?
    Ms. Bott. Yes. So certainly we are not coaching or asking 
counselors or advising them to tell borrowers just to 
strategically default, which I think is what you were----
    Mr. Womack. Yes, ma'am.
    Ms. Fitzgerald. I just would add that part of the NFMC 
requirement is a budget analysis from the start. So the 
counselor goes through the budget. It is clear if the family 
can pay it they are going to say you need to pay it, you have a 
mortgage obligation.
    Mr. Womack. Thank you, Mr. Chairman. I yield back.
    Mr. Latham. We can come back if you can make it. You can 
submit for the record, too.
    I guess I am still somewhat confused, I think in the same 
line as Mr. Olver, that the 88 million, if you add 3 million 
people, that is about $29 per family helped, and I guess you 
are saying you are leveraging with a lot of other outside 
investment. Part of that--you say that NeighborWorks funding is 
supplementing housing counseling at HUD so you can invest in 
other forms of housing counseling service. However, you also 
stated the foreclosure prevention counseling made up about half 
of last year's funding. That was at 47 percent. If 
NeighborWorks is supplementing HUD's activities, why are you 
still focusing most of your resources on an activity that they 
are already doing and it would almost seem a little bit more 
logical to actually have one agency do it as far as the 
counseling like NeighborWorks rather than to have them give you 
money to do the same thing that they are already doing when you 
have got these other people that, whether renters or the 
reverse mortgages and counseling, things that you should be 
doing.
    Ms. Bott. Just to clarify, HUD approves housing counselors 
and the $3 million covers all HUD-approved counselors. So there 
are 2,700 HUD-approved counselors, yet we do not fund all 
2,700. If you want to think about a HUD-approved counselor as 
kind of a certification, whether or not I am receiving HUD's 
funds is a different story. So the $3 million would cover all 
HUD-approved counselors activity, not just those that HUD paid 
specifically for the counseling services.
    Mr. Latham. But when I asked the question earlier, you said 
3 million is what you pay for.
    Ms. Bott. So I will clarify. Three million homeowners were 
helped through HUD-approved counselors. That is not what we 
paid for specifically through our grant funding. The $88 
million----
    Mr. Latham. How many do you pay for?
    Ms. Bott. Can I answer your second question while we get 
that number?
    Mr. Latham. Okay.
    Ms. Bott. From a demand standpoint, the 47 percent isn't 
necessarily defined by HUD what percentage is going to go for 
foreclosure counseling. Clearly it is a demand in the market 
for what consumers are coming to the housing counselor and 
needing. If we did not have HUD and the NFMC working through 
foreclosure intervention today, I believe there would be a 
significant shortage of housing counselors able to help the 
consumers today. So while we do meet the needs of the economic 
cycle and expand with increased foreclosure counseling, we do 
continue to support all of the other services that are needed 
in the marketplace today, albeit not as high. There are not as 
many purchasers in the market who are looking for pre-purchase 
counseling as there was in 2007.
    Mr. Latham. Is there something you want to add here?
    Ms. Bott. In FY 2009, $65 million was appropriated for the 
Housing Counseling Program. The housing counseling activity 
occurred in FY 2010. The program served 108,959 households with 
58 million awarded in grants for direct counseling services. 
Five million dollars was awarded for training grants and $2 
million for administrative contracts. The cost per client would 
be approximately $532.
    Mr. Latham. Okay. In your request, there is $5.5 million to 
train 4,400 counselors, which is about 1,250 per counselor 
trained. Ms. Fitzgerald, your budget requests $3 million to 
grant 7,500 training certificates, which is about $400 per 
certificate. Why does HUD cost so much more than NeighborWorks 
does or are they not the same thing?
    Ms. Fitzgerald. Well, training certificates sometimes--a 
counselor could come to a week of training and go to one very 
long course or they could go to two courses. So we also give 
certificates for e-learning, right? So there is a different 
range----
    Mr. Latham. For what?
    Ms. Fitzgerald. E-learning. So we have a few courses that 
counselors can take over the Internet basically. It is a course 
that we have invested a lot of time in. They take a little test 
at the end. But if they can't make it to physically get to a 
course. So there is a range. So one certificate cost might be 
$900 and another one might be 1,400. Our average is probably 
right around 1,200. So we can look at those numbers and see, 
but I think they are actually very close.
    Mr. Latham. Your request says 3 million for 7,500 
certificates.
    Ms. Fitzgerald. Certificates. But if we were going to 
figure out by people--because one person might get several 
certificates. I think HUD's comment was how many people. So if 
I am one individual counselor and I go to a training where I 
get two certificates, a 3-day training and a 2-day training, 
two certificates but HUD counts that as one person.
    Mr. Latham. What is the difference in certificates?
    Ms. Fitzgerald. Sometimes we have a course that is a 5-day 
course and sometimes we have a course that is a 3-day course?
    Mr. Latham. What is the content difference?
    Ms. Fitzgerald. The content, there is a whole range. There 
is a course on mortgage lending, right, that we found that 
foreclosure counselors--that I think is a 3-day course or 2-day 
course. There is advanced foreclosure counseling where they 
actually go through case studies every single day. That is a 5-
day course. We can certainly provide that information, but it 
is a range and we just count certificates. But we can also get 
back to you on numbers of people.
    Mr. Latham. My time has expired. Mr. Olver.
    Mr. Olver. Thank you. We are going back and forth here 
rather too quickly for me to think clearly about what is going 
on here. It seems to me that both of you work through 
intermediaries. Now, there must be some of these intermediaries 
that are overlapping intermediaries. Would that be correct? 
Some of the agencies, some of the 2,700 would also be some that 
NeighborWorks use, is that correct?
    Ms. Fitzgerald. Yes. By statute----
    Mr. Olver. What would you guess would be the overlap, is it 
10 percent where it is agencies using some set of services, 
which doesn't necessarily mean that they were doing overlapping 
foreclosure services?
    Ms. Fitzgerald. Right. By statute, part of the eligible 
applicants are HUD-approved intermediaries and that was in the 
law. So there are 18, 19 HUD-approved intermediaries right now 
that receive NFMC funding. They then work with several 
agencies. We also give money directly to State housing finance 
agencies, again by statute. HUD does not typically go to State 
housing finance agencies. But those State housing finance 
agencies have a network of typically HUD-approved counseling 
agencies.
    The NFMC money goes across the Nation to about 1,700 
subgrantees and most of those are, if not all, are HUD-approved 
counseling agencies. So, yes, there is a huge overlap in who is 
doing the service, but I can tell you NeighborWorks 
organizations do both pre-purchase education and foreclosure 
intervention. In many communities where housing prices were 
very high and families who said you know what, I cannot pay 
that, I am not going to take an ARM, they went and they waited, 
they have saved up some money and now they are saying I need 
some assistance in figuring out how to buy a home. So they have 
a lot of demand in those kind of communities at the same time 
they have foreclosure demand. They have two different 
counselors usually working that demand.
    Mr. Olver. We are so short here. We are going to go round 
and round and round. I find these numbers exceptionally 
difficult to sort out. I have no particular problem with the 
issue that Mr. Womack raised earlier here because I have the 
feeling that most of the people that are under water got there 
because of totally irresponsible operations on the part of our 
largest investment banks in causing this housing crisis in the 
first place. And so if they feel that they have been drawn into 
a situation, I am understanding--let me try to get back to some 
base numbers here. I think we have about 50 million mortgages 
in this society these days. There are a lot of people that they 
have paid off mortgages. But that is what I have been hearing 
lately. Is that a number that comports somewhere closely to 
what you understand are the number of mortgages that are 
extant?
    Ms. Fitzgerald. I am honestly not sure.
    Mr. Olver. You are not sure. Let me follow that one with a 
comment that I saw a report in the newspaper, or one of the 
newspapers just recently, that there were about 10 million that 
were now under water. That is 20 percent of all of the 
mortgages. I think it was out of the same article that I also 
got actually 47.9, I think it was, million as the number of 
mortgages. That strikes me as still a huge number of mortgages 
under water. The housing market is not coming back. Some of 
those are still going--the number of filings are a totally 
different set of numbers that you see. What is under water 
doesn't necessarily mean it is going to be filed for 
foreclosure and not all of the filings for foreclosure end up 
being foreclosed.
    Now, I use the figure that there have been something over 3 
million actual foreclosures. I had earlier thought that it was 
much higher than that. We have gone through 2007, 2008, 2009, 
2010 with heavy foreclosures and underwater rates and filings 
rates and, Ms. Fitzgerald, you had mentioned that we are 
expecting--I don't know how we expect--expecting 2 million more 
in 2011, more foreclosures, which suggests to me that my number 
of 3 million is, in fact, a good deal more than that that have 
actually foreclosed up to now.
    How does one get a straight set of numbers out of these 
things that one can really understand the impact and the 
totality of this disaster that has occurred in the housing 
market? And why you are doing what you are doing?
    Ms. Fitzgerald. The 2 million is from a Moody's Analytics 
estimate. I agree. Every estimate that I have seen--and that is 
for 2012. For 2012, it goes between 1.8 and 3 million. Now, 
whether that is actually going to happen, we look for those 
numbers the same. We do know that there are families out there 
every day because we have unprecedented demand for the 
counseling piece. So we can certainly get back to you on all of 
the numbers we have collected.
    Mr. Olver. I think it would be wonderful if we could figure 
out how many of the people that you actually gave foreclosure 
counseling to, either or both of you, if you could go back and 
identify this family avoided foreclosure and quite often that 
ends up going back into filings at a later time and again the 
data are so conflated that it is nearly impossible, it is a 
mess to try to figure this out.
    Ms. Fitzgerald. The Urban Institute report took a 
substantial sample and we can go back and tell you from that 
sample what percent of them actually have avoided foreclosure 
and Urban Institute would argue that we could apply that to the 
universe. Trying to track every single borrower is incredibly 
difficult. As you know, part of the challenge is that we see a 
borrower, the servicers sometimes take 9 months, sometimes 12 
months to get to an outcome. So that is challenging to track. 
But this is the best data I think that is out there and we can 
definitely get back to you on the actual number if we apply 
that percentage.
    Mr. Latham. Thank you, Mr. Olver. Mr. Dent.
    Mr. Dent. Thanks, Mr. Chairman. I only have one quick 
question. NeighborWorks, are you doing deconversions--do you 
support--what I am saying is do you support with your money, do 
you send monies to the States, it trickles down to the local 
level that will be used for deconverting, say, apartment units 
in densely populated or urban areas to single owner occupied 
housing because much of where I live we have a lot of single 
homes that were converted to apartment units. Are you doing 
much of that work?
    Ms. Fitzgerald. We actually have a NeighborWorks 
organization, Neighborhood Housing Services of Lehigh Valley 
that works in your----
    Mr. Dent. I know you do.
    Ms. Fitzgerald. You know, the value of NeighborWorks is 
really trying to support locally driven solutions. So if there 
is local demand to take those properties and turn them back 
into single family owner occupied, yes, that is kind of the 
roots from where we come, is doing that single family owner 
occupied. But we don't dictate any one strategy from 
Washington. We really try to work with our organizations and 
let them say locally they are working with their local 
governments, the private sector to say what is needed.
    In the older communities across the country, ensuring that 
those properties can be used for owner occupied single family 
is something that we work on every day, whether that is helping 
rehab the property, helping get credit to that homeowner or 
doing home ownership counseling to help them get into the home.
    Mr. Dent. The only reason I ask you is because in a lot of 
these older urban communities where you have these properties 
that have been converted, they have obviously become rental 
situations, more garbage on the streets, more children, more 
parked cars in neighborhoods that were never designed for that 
level of density. And that is why I was just trying to 
understand if you were taking an active leadership role in that 
type of initiative.
    Ms. Fitzgerald. The stability that home ownership brings--I 
mean, home ownership is getting some bad press these days. But 
the bottom line is home ownership does really bring stability 
to a community and people are invested in caring about that and 
making sure their trash is picked up and taken care of. 
NeighborWorks for all of our history has been about doing home 
ownership right, making sure families can afford the payments 
they are getting into and a house that makes sense for them and 
making sure that that house brings value to the community. So 
that is what we are doing every day, is making sure those 
communities are stabilized. We worry a lot with the real estate 
owned property out from foreclosure that investors are buying 
that up and they don't care about that neighborhood.
    So again one of our courses actually for housing counselors 
is how for them to help homeowners who are buying our real 
properties, real estate owned properties. It is a more 
challenging thing. So that is another example of where the 
counselor brings value.
    Mr. Dent. I yield back. Thank you.
    Mr. Latham. Thank you, Mr. Dent. I am still, I guess, hung 
up on the counselor thing a little bit. Ms. Bott, do you offer 
the same kind of credits that Ms. Fitzgerald does? Or 
certificates, I guess training certificates?
    Ms. Bott. Are we differenty types of training. I think one 
of the key ones--and they could be different--is certifying 
reverse mortgage counselors to ensure that they meet our 
requirements to educate the seniors and ensure that there is 
independence from the loan officer. So there are some 
certificates that we would provide. It may not be all of the 
exact ones that NeighborWorks provides through their training.
    Mr. Latham. But you have certificates similar to what she 
has, same curricula?
    Ms. Fitzgerald. HUD provides through their counseling 
funds, contracts with NeighborWorks and other trainers to do 
training. So some of the people that we train and we give 
certificates to were funded through HUD's training money.
    Mr. Latham. Tell me why you are not both doing the same 
thing.
    Ms. Bott. Because HUD is not actually doing the training. 
HUD is just funding a variety of partners.
    Mr. Latham. She is asking for $5.5 million to train 4,400 
counselors, but you don't train.
    Ms. Bott. The key difference between the activities that 
HUD does versus NeighborWorks is I would call them more feet on 
the ground. So we may disburse training funds to entities who 
perform training and define the standards that that training 
must conform to, even though we may not, specifically HUD, 
provide the training ourselves because we don't have the staff 
or the capacity to do that.
    Mr. Latham. Should there be a revision or an amendment to 
the budget request? Because it specifically is for training 
4,400 counselors at HUD.
    Ms. Bott. Not at HUD. HUD does not actually do counseling 
themselves and we don't--our HUD employees----
    Mr. Latham. This is for training counselors.
    Ms. Bott. Correct.
    Mr. Latham. But you don't do that.
    Ms. Bott. We specifically, HUD employees do not do 
training. We develop the standards for the people who are going 
to perform the training and then we would provide funds for 
them to do training within the standards that we have 
developed.
    Mr. Latham. So then you give the money to NeighborWorks?
    Ms. Bott. They are potentially someone who would receive 
money and they have in the past.
    Mr. Latham. How much money do you receive?
    Ms. Fitzgerald. We apply through the RFP as do others. It 
would vary from $2 to $3 million typically a year. And through 
that we enter a competitive process basically that HUD 
establishes. So there is no guarantee that we would have that 
next year.
    Mr. Latham. Who else gets the money? Two to three million 
goes to NeighborWorks, where does the rest of it go? Who gets 
it?
    Ms. Bott. National Council of La Raza got some, we fund 
other organizations that provide training. So last year, 
slightly over $3 million of the training through the 
competitive process went to the NeighborWorks organization and 
then others who bid on training actually perform it. Once 
again, like I said, we develop the standards that the training 
must conform to even though we actually compete the money out 
to the marketplace.
    Mr. Latham. Can you give me a list of the other groups that 
supposedly do the training?
    Ms. Bott. Absolutely.
    HUD awarded three housing counseling training grants with 
FY 2010 appropriations. The National Council of La Raza was 
awarded $1.325 million, the Neighborhood Reinvestment 
Corporation (NeighborWorks) was awarded $3.05 million and the 
National Community reinvestment Corporation was awarded 
$749,999.
    Mr. Latham. I didn't know La Raza did training. I don't 
know if you--John.
    Mr. Olver. At this point I am not sure I know what I know.
    Mr. Latham. But you do it well. I don't know if you are 
ready, John. Go ahead.
    Mr. Olver. Thank you. I am not sure whether you finished 
commenting, Ms. Fitzgerald. There was a recent preliminary 
report by the Urban Institute that tried to quantify the 
positive impact that the program participants have seen. And 
that is one of these things that we insisted in the creation of 
the program in the first place back in 2008, the 2008 budget, 
that there be studies done to know what the results were. Could 
you comment further on that study? And I will go quickly with 
this one, I think.
    Ms. Fitzgerald. Sure. We were required by statute to have 
an independent evaluation. We went through a competitive 
bidding process and chose the Urban Institute. What they did 
was create a comparison group of clients that matched the NFMC 
client profile. They used 25 different variables, they actually 
started with a higher number and then through several testings 
found that they could use 25 variables from income, to 
household size, to head of households, race, a variety of 
things. So that we got as close as we could in a comparison 
group. That comparison group had not gone through counseling 
and obviously the NFMC clients had. So then they--I am sorry. 
Go ahead.
    Mr. Olver. So it is meant to be an objective study of what 
the results are, a scientifically objective study on the part 
of the Urban Institute?
    Ms. Fitzgerald. Yes.
    Mr. Olver. Were there results that came out of that or have 
you only seen preliminary results at this point?
    Ms. Fitzgerald. We have had two--we have a first set of 
preliminary results. These are still--there is one more report 
they are due us.
    Mr. Olver. Are there things they are expecting in their 
findings?
    Ms. Fitzgerald. I think they are not that surprising to us 
because we have seen counseling work on the ground a lot. I 
think to some others it was a little surprise.
    Mr. Olver. It is complicated. It is difficult stuff.
    Ms. Fitzgerald. For example, the fact that they found 
consistently the last time and this time that folks who went 
through counseling reduced their loan payments by $267 more 
each month. We think that is because those counselors really 
work with the families of the budget of what they can afford 
and they push back at the servicer when the servicer is saying 
this family can pay 45 percent of their income or X dollars and 
the counselor is saying they are not going to be able to pay 
the child care payment to keep them in their job, right? So 
that makes the client more successful and therefore they are 
showing a much less redefault rate on the loan modifications, 
which as you know has been somewhat of a challenge.
    Mr. Olver. There is a fairly sizeable default rate on even 
those modifications as I am understanding.
    Ms. Fitzgerald. Right, but under this they are much less 
likely to have a redefault.
    Mr. Olver. Let me ask a couple of things of Ms. Bott. I do 
know that the general program that you have been operating for 
counseling across the board, which covers financial literacy, 
rental assistance, homeowner counseling and so on, home buyer 
counseling and a variety of other things, that has been there 
for how many years? How long has that been in HUD's portfolio? 
Do you know?
    Ms. Fitzgerald. A long time.
    Ms. Bott. I was going to say since I----
    Mr. Olver. Long before you arrived there. How long have you 
been there?
    Ms. Bott. 1968.
    Mr. Olver. What? It has been longer than--when did we 
create HUD? Wasn't it in 1975 or something?
    Ms. Bott. During the Great Depression. Well, at least the 
FHA loan was created. So I assume.
    Mr. Olver. All right. Let me not dwell on my faulty 
understanding of when these were created. Because of this 
crisis, you went from 15 percent roughly. I am going to take 
that as a baseline over a period of time when we didn't have a 
lot of foreclosures going on and that the other regular 
programs were then 85 percent of what you were doing in those 
years. I really don't know how much money, how much increase 
there has been in the program monies during this crisis. But 
you are now up to almost half of it going into the foreclosure 
sort of thing and would you anticipate that if we ever get out 
of this continuing foreclosure and housing softness, and so 
forth, that you would go back to where you were doing the 
other?
    Ms. Bott. Once again, remember, demand does drive it, 
right? The consumer comes to the housing counseling agent. We 
have not received significant--we have asked for more, did not 
receive significantly more funding even though those numbers 
have changed. So in other words, in 2007 to----
    Mr. Olver. So you kept the same amount of money. You have 
just shifted the money from other things that seemed to be more 
critical at the present time.
    Ms. Bott. Right.
    Mr. Olver. Is that right?
    Ms. Bott. The demand shifted it, correct. So there is 
stress on the----
    Mr. Olver. That is a full enough answer. Let me go back to 
Ms. Fitzgerald and ask you. You have had a budget which was--
you are asking for $138 million of which only $65 million is--
$135 and $80 million--for 2012 you are asking 135, of which 80 
is for foreclosure.
    Ms. Fitzgerald. No, 135 plus our $80 million for 
foreclosure. So a total of 215----
    Mr. Olver. 215. In the 2010 budget, it was 168 and 65 or 
something. What does the 135 go to if only 80----
    Ms. Fitzgerald. Right.
    Mr. Olver. What does the 135 go to?
    Ms. Fitzgerald. It is the work that NeighborWorks does and 
our network does on a daily basis. So that helps us assist 
270,000 families and do the $4 billion in direct investment in 
fiscal year 2010. So the several organizations like----
    Mr. Olver. So you took on this additional foreclosure 
mitigation at our request?
    Ms. Fitzgerald. That is right, sir.
    Mr. Olver. With money that we provided in that period of 
time?
    Ms. Fitzgerald. Yes.
    Mr. Olver. The rest of it is something that you have been 
do for how long?
    Ms. Fitzgerald. Over 30 years.
    Mr. Olver. Over 30 years. Maybe that helps. Thank you.
    Mr. Latham. She started when she was 6.
    Ms. Fitzgerald. Thank you.
    Mr. Latham. I think we all agree that taking more than a 
year to get appropriated funds out the door is simply 
unacceptable. And I believe that to solve the problem, we have 
got to really understand what is going on or what is going 
wrong. Ms. Bott, can you explain why it currently takes so 
long, how long should it take and what are you doing to fix it?
    Ms. Bott. It is one of our priorities to reduce the time 
frame across the agency to get notice of funding out the door. 
Just to help clarify, though, the process should not create a 
gap in funding because 2009 is actually spent in 2010, 2010 is 
spent in 2011. If indeed we sped up the process to be 30 days, 
we would have 2 years of funding actually happening within the 
same year. So consistently over time a previous year's 
appropriation has actually been spent in the next year.
    Do you want me to clarify that?
    Mr. Latham. Yes, please.
    Ms. Bott. So when the monies in 2009 were appropriated, 
those monies were spent--typically go out the door on October 
1st. So they are spent in the fiscal year 2010. So historically 
there hasn't been a gap because the appropriation goes out the 
door for 2009 the first day of the fiscal year 2010, spent in 
2010, and then the process kind of starts over. It is not to 
say we aren't focused on increasing the speed of the NOFA. It 
is within our employees performance standards to find ways to 
reduce the time frame.
    Mr. Latham. Can you----
    Ms. Bott. Do you want me to walk through the process?
    Mr. Latham. Well, it sounds like it is some kind of budget 
anomaly or something. In 2009, yes, we do the 2010 fiscal year 
funds.
    Ms. Bott. We award it and they are actually spent during 
the 2010 fiscal year. So right now--or in 2010--all the figures 
I gave you were based on 2009 appropriations were spent. Right 
now we are spending 2010 appropriations during the 2011 year. 
But I will give you a quick breakdown of what happens. We do 
draft the notice so it can go out to the market because it is a 
competitive process. Once drafted, it goes through HUD, OMB, 
and other clearances to actually get out to the market. Once we 
get it to the market and publish it, we give grantees, 
intermediaries, subgrantees about 45 days to apply for the 
grant. So they would submit all of their paperwork to apply for 
the money. Then those grants--our applications come in. We have 
about 2 months probably internally to score those and determine 
what the allocations, who gets funds, who doesn't get funds and 
what portion of the funds that they get. We make that scoring 
decision and then we award the funds.
    There is a lengthy process that we are working to shorten 
that does go through to ensure that the funds are used 
responsibly, the scoring is accurate, and the funds are 
delivered to the agencies who meet the requirements of the 
NOFA.
    Mr. Latham. Ms. Fitzgerald, how do you do it differently? 
You seem to be able to--you don't have all the hurdles.
    Ms. Fitzgerald. Yes, we have a different set of 
requirements. When Congress provided the NFMC funding to us, 
they made it clear that they wanted it to get out in 60 days. 
So we designed a program that we could get it out efficiently. 
So we have an on-line grant application system. We had created 
a structure of the program so each kind of unit of counseling 
is equal to a certain dollar value so that way we are reviewing 
the capacity of the organizations, but we don't necessarily 
have to review their business model and are they charging too 
much or too little. We were very clear for this activity you 
get this much money. So I think that helped it. And we were 
just committed to meeting the deadline and we have a lot of 
groups that are out of money and we know it is really important 
to get out there.
    Mr. Latham. I think the real problem is OMB comes into play 
someplace.
    Ms. Bott. Did I mention that?
    Mr. Latham. Just kind of a follow-up on that. Your staff 
has informed the committee that HUD has about 154 people 
working on distributing $88 million and that money goes into 
intermediaries and, on the other hand, NeighborWorks has 25 
people last year to distribute about $65 million. Why do you 
need 154 people, if they can not do that much different with 25 
people?
    Ms. Bott. I will go back to what I talked about earlier 
regarding some of the differences between HUD and 
NeighborWorks. One, we do create the statutes and regulations 
as it relates to some of the overall regulatory standards--
excuse me, not the statutes, but the regulations pertaining to 
these housing counseling agencies. We also provide oversight 
for the 2,700 approved HUD counselors and that includes on-site 
reviews and other types of monitoring to ensure that they are 
complying with the regulations and HUD's requirements. We also 
do outreach ourselves with our HUD staff, whether it be at 
large events by some of the housing counseling agencies to 
support FHA borrowers and other borrowers and understanding how 
to apply or get approved for a loan modification, or other 
types of loss mitigation. We also do some outreach with the 
local communities with that staff.
    Mr. Latham. I am out of time. John, go ahead.
    Mr. Olver. I think I have just about run out. I am much 
frustrated by the numbers. The data here are just beyond my 
capacity to sort out. I think. And I want to just make a 
comment. If there is anybody out here who can create for me 
some sort of a chart year by year--because we have been going 
through this now for 2007, 2008, 2009, 2010 and 2011, at least 
5 years in a row now that we have had significant foreclosures. 
This crisis began in the 2007 fiscal year and if you are not 
very careful, you lose track. And I am losing track and I have 
been losing track here of that question of how many actual 
mortgages there were which is the base from which you are 
working, how many are under water? We read reports also in the 
newspapers that homes have lost as much as 75 percent of their 
value, of their paper value, in the course of this 5-year 
crisis. Now, for most families in this country, the home is 
their largest investment. And if it has lost 75 percent, then 
it is--and that--recognizing that that is high growth areas 
that grew too fast, too far and took a terrible dive, both in 
places that were growing very fast and in places that are 
recession sensitive like Ohio and Michigan, they are 
particularly recession sensitive, and they took very heavy 
dives so that there is the filings--the question of how many 
filings there are, which are sort of rolling filings that can 
reappear year after year after--they may appear in several 
years of this data. This would take a major study that I don't 
think anybody here in the Congress would like to fund to sort 
the numbers out as to the history, the real history of this 
debacle that has befallen so many homeowners in this country. I 
really don't understand that.
    Ms. Fitzgerald, you mentioned I think the last time after I 
mentioned that you said something in the 2 million range of 
foreclosures anticipated or projected. I thought that was for 
2011. You suggested it might be for 2012, I think, the 
projections for 2012 are----
    Ms. Fitzgerald. They are probably similar.
    Mr. Olver [continuing]. Between 1.8 and 3. That indicates 
it is still going on and raging and still going on. Does 
anybody know how to get the data as to how many actual 
foreclosures occurred in 2007, 2008, 2009, 2010 and 2011? 
Somebody must have this stuff.
    Ms. Bott. We believe we have it.
    Mr. Olver. You believe you have it.
    Ms. Bott. 2008, 2009, 2010, 7 million foreclosures.
    Mr. Olver. 7 million actual foreclosures.
    Ms. Bott. That is 2008, 2009 and 2010.
    Mr. Olver. Where did my staff get 3 million?
    Ms. Bott. But we do have some----
    Mr. Olver. I didn't ask--3 years together. What I said in 
the beginning because I have been fighting with my staff, I 
thought it was 8 to 10 million total up to now.
    Ms. Bott. You can say that you were closer to right.
    Mr. Olver. You would say that I am closer to right?
    Ms. Bott. Right. We have some proprietary data that we can 
share. Because you are right, the foreclosure filings may be 
three times on a single home. So that may not be a good 
indicator of how many individual homes are going to 
foreclosure.
    Mr. Olver. It must be some----
    Ms. Bott. Yes, we believe we can provide some data----
    Mr. Olver [continuing]. Accounting of how many foreclosure 
filings are issued each year and then you have to sort out how 
many of those are duplicates of what were filed twice in one 
year----
    Ms. Bott. We have some data we would be happy to share with 
you that we think will pull that out.
    Mr. Olver. The question of how many actual foreclosures 
occurred should be a fairly clear set of numbers. All right. I 
would like to see that. And the business of how many there are 
under water is an accumulation at this point of how many remain 
under water now at 10 million, which is that number that I have 
been seeing recently. I think this is just such an enormity. 
Anything we can do to help these people seems to me worth doing 
because it has been so vital. I have supported, as you know, I 
would like to understand the numerics and how we can then judge 
the values of what each of you does.
    Ms. Bott. So we will put together some information to 
provide to you.
    Mr. Olver. For the record for this committee, make it 
official data, not just that I have, if you would.
    Ms. Bott. Absolutely.
    Mr. Olver. Thank you.
    [The information follows:]



    
    Mr. Latham. Thank you, Mr. Olver, as you battle it out with 
your staff. I think they have a number that maybe--anyway, one 
thing that got my curiosity in your last answer was that you 
don't look at business models of the people that you are giving 
the money to. Is there an audit or anything that goes on with 
this?
    Ms. Fitzgerald. Yes, we do a lot of compliance. In looking 
at the applications, now that they have participated in four 
rounds, we actually look at their past performance. We do 
substantial oversight. We have a contract out with MHM, which 
is a major accounting firm in Kansas City. And they have gone 
on site twice. We also do a lot of off-site compliance. We 
actually also review every single entity that is supplying to 
us audits. We don't just check a box that the audit came in. We 
look and see what are their issues, if they have an outstanding 
A-133 or A-110 or 1B circular issues. We see if they can solve 
those or else we look at--that can impact their award or how we 
give them money. So we do ongoing oversight of the 
organizations.
    Mr. Latham. This will be my final question here. Last year 
the Dodd-Frank bill created a separate Office of Housing 
Counseling. So why do we need either one of you after that?
    Ms. Bott. The proposal will be coming to Congress shortly 
and it really is leveraging the vast majority of staff that 
exists within single family housing that are performing, in 
some cases, 90 percent housing counseling functions and 10 
percent others. We will move staff over and there is a limited 
amount of new staff that we will ask for. But it is very 
limited. We are reallocating staff to have the pure focus on 
housing counseling and the new activities required under Dodd-
Frank.
    Ms. Fitzgerald. NeighborWorks' core mission is to foster 
locally driven solutions with these organizations that are 
local partnerships on the ground. We developed a lot of 
capacity in counseling because our organizations counsel and in 
foreclosure counseling in particular because in 2005 we created 
the Center for Foreclosure Solutions seeing what was coming 
down the pike. Our counseling specific activity we have done at 
the request of Congress. So we will continue to do that as long 
as you ask us to do that. But the core value of NeighborWorks 
is our local organizations leveraging at 23 to 1, putting money 
to work every day in communities, and then our training work, 
that makes sure that all of the money that is being put 
throughout is used effectively and efficiently.
    Mr. Latham. My concern--and it is something that is learned 
around here--is that you are adding another program, you are 
going to have more people doing basically the same function 
without it seems redundant once again, if that makes sense. 
Just adding another separate office and you are going to 
continue to do what you do, you are going to continue to do 
what you do and now we are going to have another office that 
does the same thing.
    Ms. Bott. Actually I won't continue to do what I do as the 
Office of Housing Counseling moves from underneath Single 
Family under a different reporting structure. I may provide 
some of my resources to do outreach in conjunction with the 
Office of Housing Counseling, but as I said, the vast majority, 
less than what I can count on both hands, will be recommended 
to increase that staff that is being reallocated from under 
Single Family and we will not replace those with new resources. 
The office is being really built with existing staff, just a 
new reporting structure and 100 percent focus on all housing 
counseling activities and any of the new required activities 
through Dodd-Frank.
    Mr. Olver. Would you yield?
    Mr. Latham. I would be happy to yield to you, Mr. Olver.
    Mr. Olver. I want to ask you, does Dodd-Frank actually 
place that function under HUD? Where does it exist, in the 
Treasury?
    Ms. Bott. No, it is within HUD.
    Mr. Olver. It is in HUD?
    Ms. Bott. It is outside--I am a division within the Office 
of Housing, which is Single Family Housing. It will be another 
division if you want to say comparable to the Single Family. It 
will just be, like I said, solely focussed and I will lose the 
staff that were performing those functions who will move over 
to the Office of Housing Counseling.
    Mr. Olver. That ought to be resolvable within HUD 
obviously. HUD is very good about knocking down silos and so 
forth. One ought to be able to get work between different 
divisions of HUD to cooperate and collaborate and so forth, 
shouldn't it?
    Ms. Bott. Absolutely.
    Mr. Latham. I am still looking for that silo that was 
knocked down. I am not familiar with that effort. But anyway, 
unless you have something else, Mr. Olver----
    Mr. Olver. I have nothing else. I am struggling hard to 
figure out this very confusing set of numbers.
    Mr. Latham. With that, thank you both very, very much for 
your testimony today, and the hearing is adjourned.




                                           Tuesday, March 29, 2011.

                      DEPARTMENT OF TRANSPORTATION

                               WITNESSES

HON. RAY LAHOOD, SECRETARY, DEPARTMENT OF TRANSPORTATION
CHRIS BERTRAM, ASSISTANT SECRETARY FOR BUDGET AND PROGRAMS, DEPARTMENT 
    OF TRANSPORTATION
    Mr. Latham. Good morning, everyone. We have invited 
Secretary LaHood to testify before the subcommittee on the 
DOT's fiscal year 2012 budget request.
    We are delighted to have you here and look forward to your 
testimony, Ray.
    It is going to be a tough budget hearing because, let us be 
honest, the administration didn't propose a budget for 2012. 
They really proposed a lot of pie in the sky, a pipe-dream 
concept paper for what you would love to see in a 
reauthorization bill. There are no budgetary details, not one 
word of the legislative proposal, and worst of all, there is no 
way to pay for their concepts.
    I know you said to other panels in committees where you 
appeared as a witness that everything is on the table and you 
are ready to sit down and discuss. We have a table. We are all 
here. We can sit down and discuss it right now if you want to. 
I think we need to get some answers as to what the real 
substantial proposals are, how we are going to pay for them, 
and how the taxpayer is going to be affected.
    In your budget and written testimony, you state that this 
budget is investing in creating. Mr. LaTourette isn't here yet, 
and I don't want to steal a great line from his questioning, 
but we tried to reshape and improve the first stimulus bill by 
doing pretty much exactly what the President is now calling 
for: more investment in infrastructure to lead to more and 
better jobs, improving the industry, and fixing the roads and 
bridges of America.
    However, when the deal was cut, no one seemed interested at 
that time in really investing in our transportation 
infrastructure. The first stimulus bill was a one-time shot in 
the arm by the administration, and I think they botched it by 
not focusing on what was needed or what could be done.
    Now they are back with a second stimulus bill after we have 
already spent billions on some questionable programs and 
activities. Now they have found religion, but have no way to 
pay for it.
    I am hopeful we will have a productive discussion here 
today and I hope, Mr. Secretary, you will be able to shed some 
light on this budget proposal.
    I want to remind the colleagues here that this is the first 
of many DOT hearings we have scheduled for the subcommittee. We 
will hear from the DOT highway Administrator, Mr. Menendez, 
tomorrow; the Federal Aviation Administration; the Federal 
Transit Administration; and high-speed and other rail programs 
and budgets. Further, Amtrak will have a solo hearing next 
Thursday, the 7th. So we have plenty of opportunities to ask 
more specific questions down the road with the agency 
administrators.
    With that, I want to recognize the subcommittee's ranking 
member, Mr. Olver, for his opening comments.
    Mr. Olver. Well, thank you, Mr. Chairman.
    And Mr. Secretary, it is a pleasure to have you here.
    Welcome, it is a pleasure to have you here to speak with us 
today.
    I see some greater good in the DOT's budget request than I 
think the chairman has outlined. I view the Department's 2012 
budget request as a reflection of the ambitious vision needed 
to ensure America's competitiveness in the global economy 
through job-creating investments in our Nation's 
infrastructure, transportation infrastructure.
    Overall, your budget request presents the outlines of a 
robust 6-year comprehensive transportation program, and it 
recognizes the immediate investment opportunities by following 
through on the President's commitment to a $50 billion upfront 
infrastructure proposal, which was first laid out back in 
September of last year. This represents a $128 billion 
investment in 2012 and $556 billion over a 6-year period as 
that robust long-term authorization.
    As we discuss the specifics, I look forward to better 
understanding how your request balances the need to expand the 
network while ensuring that our existing infrastructure is 
maintained. As you well know, DOT's most recent conditions and 
performance report indicates that there is an annual investment 
gap of $27 billion to maintain our current system of highways 
and bridges in a state of good repair and an annual gap of 
around $96 billion to expand the system to meet the needs of 
the population, that continues to grow at nearly 10 percent per 
decade. And we can expect while that growth rate will probably 
go down a little, it will continue near that.
    The state of transit isn't much better, where the estimated 
state of good repair backlog is nearly $80 billion.
    Broadly speaking, every dollar of maintenance deferred this 
year will catch up to the next generation in the form of aging 
and less safe highway and transit systems and an economy choked 
by congestion.
    I also agree with the administration's goal of building a 
21st century passenger rail network, the $8.3 billion request 
for rail programs reflects an understanding that all users of 
all modes benefit from an interconnected network that increases 
transportation options. And specifically, highway users will 
benefit from decreased congestion; transit users will receive 
access to improved inter-city connections; and airlines can 
focus on more efficient, profitable long-distance routes.
    In addition, I am pleased to see that fiscal year 2012 
budget request continues DOT's commitment to the Sustainable 
Communities Partnership. DOT and HUD have been leaders in 
promoting interagency cooperation and breaking down the 
stovepipes that stifle innovative planning. Like you, I 
strongly believe that Federal dollars are more efficiently 
utilized when local planning organizations have the resources 
and flexibility to determine what the right investments mix of 
housing, transportation, and community infrastructure are in 
order to foster job growth.
    Finally, the Department must remain vigilant when it comes 
to the agency's core safety mission. From day one, you have 
embraced this responsibility for all modes and specifically 
have made raising awareness of the dangers of distracted 
driving a personal crusade. And I commend you for continuing 
that commitment for a safer transportation system.
    I believe the budget request you have submitted is robust 
and presents a strong vision for how we tackle our evolving 
transportation challenges. However, I am concerned that in the 
absence of a surface transportation authorization, the new 
rules enacted by the House majority will block implementation 
of the innovative solutions that the Department has proposed 
for meeting our current and emerging infrastructure needs.
    Mr. Chairman, I yield back.
    Mr. Latham. I thank the gentleman.
    Again, welcome, Mr. Secretary. Your written testimony will 
be printed in the record. If we could, 5 minutes for your 
opening statement.

                           Opening Statement

    Secretary LaHood. Thank you, Mr. Chairman, and Ranking 
Member Olver and other members of the committee.
    I am joined today by Chris Bertram, our Chief Financial 
Officer.
    I want to thank you for the opportunity to discuss 
President Obama's fiscal year 2012 budget request for DOT. Just 
a few weeks ago, President Obama delivered a powerful message 
in the State of the Union. He said that for America to win the 
future, our citizens and companies need the safest, fastest, 
most reliable ways to move goods and information. He reminded 
us that if we build it, they will come. If we want businesses 
to open shop and hire our family, friends and neighbors, we 
have to invest in our roadways, railways and runways. We have 
to invest in 21st century buses, street cars and transit 
systems. We have to invest in the next-generation technology 
for our skies and in sidewalks and bike paths that make our 
streets more livable.
    All of this is included in the President's $129 billion 
fiscal year 2012 budget for the U.S. Department of 
Transportation, designed as the first installment of a bold 6-
year $556 billion authorization proposal. To make room for 
these essential investments, President Obama's 2012 budget 
proposes the lowest relative level of domestic spending since 
President Eisenhower was in office six decades ago. That was 10 
administrations ago.
    The simple fact is that we have to cut and consolidate 
things that aren't growing the economy, creating jobs or making 
it easier to do business in order to pay for the things that 
are. So, at DOT, President Obama's budget slashes red tape. It 
consolidates more than 50 programs, and it includes reforms 
that will accelerate project delivery and empower local 
communities. Our major objective is to make investments in 
tomorrow that expand economic opportunity today, to dream big 
and build big. That is why this budget keeps us on track toward 
a national high-speed rail system with an $8 billion investment 
in 2012 and a $53 billion investment during the next 6 years.
    It increases resources for highway and bridge improvements 
by 48 percent and increases funding for affordable, efficient, 
sustainable buses, streetcars and transit systems by 126 
percent. It includes a $50 billion upfront boost to keep our 
recovery moving in the short term and a $30 billion national 
infrastructure bank that will finance major projects of 
national and regional significance over the long run.
    At the same time, safety is and always will be our top 
priority. President Obama's budget renews our commitment to 
prevent traffic crashes with resources for our ongoing campaign 
against distracted driving, drunk driving and to promote seat 
belt use. The President's proposal requests new authority for 
the Federal Transit Administration to ensure the safety of rail 
transit riders across America, and it gives the Federal Motor 
Carrier Safety Administration stronger capacity to keep 
commercial traffic safe.
    Finally, we are dedicated to doing all of this without 
passing on another dime of debt to our children or 
grandchildren. For the first time, transportation spending will 
be subject to PAYGO provisions that ensure the dollars that we 
give out do not exceed the dollars coming in.
    So these are a few of the components of the President's 
plan, and they reflect a much larger point: America's 
transportation system is at a crossroads. Our choice isn't 
between policies on the left and policies on the right. Our 
choice is whether our economic recovery rolls forward or goes 
backwards. It is up to us whether we lay a new foundation for 
economic growth, competitiveness and opportunities or whether 
we settle for a status quo that leaves America's next 
generation of entrepreneurs, our children and grandchildren, 
with clogged arteries of commerce. It is up to us whether we do 
big things or do nothing. If we choose wisely, our legacy can 
be an economy on the move and a future that America is prepared 
to win.
    I look forward to your questions. Thank you.
    [The information follows:]



    
                        FISCAL YEAR 2012 REQUEST

    Mr. Latham. Thank you very much, Mr. Secretary.
    Your testimony and the entire budget request extensively 
talk about the new legislation to reshape the Department. But 
we haven't seen any legislative proposals coming from the 
administration regarding your Department. When is that going to 
come forward?
    Secretary LaHood. We hope that we can have legislation to 
the Congress as soon as possible.--We have all been very busy 
as a team working with the leadership of the administration, 
who are working with the leadership of Congress, to get us past 
the 2011 budget, so that we can really begin to focus on the 
2012 budget. I think once those issues are resolved, you will 
see legislation up here very quickly.
    Mr. Latham. Well, you realize without a proposal or any 
kind of guidelines, it is going to be very difficult for us to 
write a 2012 appropriation bill?
    Secretary LaHood. Understood. Everybody is focused right 
now on working with the leadership and Congress to get us 
beyond 2011. That is where all our time and energy is being 
spent.
    Mr. Latham. I know last year you talked about how you 
wanted to delay the reauthorization until March, and that we 
would have a bill by March. But we still haven't seen any 
proposals.
    Secretary LaHood. When I said that last year, I had no idea 
that the Congress would be passing two continuing resolutions 
working toward trying to get the 2011 budget fixed. We have to 
work with Congress, and I think all of you want us to work with 
you to get us beyond 2011, getting a budget for 2011, and then 
we will be prepared to discuss 2012.
    Mr. Latham. I think everybody knew that last year there was 
no budget even proposed, let alone the appropriation bills.
    Secretary LaHood. There is no question the President has 
proposed as big and bold a transportation budget as any 
President has ever proposed.
    Mr. Latham. What assumptions as far as revenue are you 
making in the budget? Where is the money coming from?
    Secretary LaHood. The Highway Trust Fund will always be a 
source of revenue. We know that, but we know it is inadequate 
to do all the things we want to do and all the things that you 
all want to do because people are driving less and people are 
driving more fuel-efficient cars.
    We believe that some states will adopt tolling to pay for 
some of the things that they want to do. I have met with a 
number of Governors over the last several months who will be 
using tolling, along with highway trust funds, along with money 
from public-private partnerships. We have proposed an 
infrastructure bank in the President's budget as a way to pay 
for big significant projects. These are things that we need to 
continue to talk about with you all to figure out how we get to 
where we want to be.
    The President has put a significant budget out there, and 
we think it really reflects the idea that the transportation 
bill could be a jobs bill. If our goal is to put Americans to 
work, no better way to do it than with the transportation bill. 
We are willing to sit with any of you at any time and figure 
out how we pay for these things.
    There is no question that what we do, what this committee 
does in terms of transportation puts Americans to work. We 
proved that over the last 2 years. The $48 billion that you all 
gave us in the stimulus worked. It created 15,000 projects and 
put 65,000 Americans to work. There is no dispute about that. 
You haven't read one bad story about any earmarks, any 
sweetheart deals, any boondoggles. We spent the money the way 
you told us to spend it, and we put a lot of our friends and 
neighbors to work around America. We know how to put people to 
work with our partners in the States and with other people out 
in the country, who take our money and use it to put Americans 
to work. That is what we want to do with the budget we are 
proposing.
    Mr. Latham. If we had to rely just on the gas taxes, what 
kind of increase would we need to fund----
    Secretary LaHood. We really haven't looked at that.
    As you know, Mr. Chairman, I have said many times, the 
President has said that he is not in favor of raising the gas 
tax when unemployment is just below 9 percent. This is not the 
time to be talking about raising the gas tax. So we really 
haven't run those numbers.
    Mr. Latham. Where do we get the revenue?
    Secretary LaHood. Well, that is something that we have to 
work with all of you on.
    Mr. Latham. Have you got people in the Department working 
on the revenue side right now?
    Secretary LaHood. Well, what we would prefer to do is sit 
down with all of you and figure out the answer. It is not that 
complicated once we figure out what direction we want to go. We 
can run the numbers pretty quickly.
    Mr. Latham. My time has expired.
    Mr. Olver.

                        SURFACE REAUTHORIZATION

    Mr. Olver. Thank you, Mr. Chairman.
    Goodness. All of us, I think, Mr. Secretary--you were in 
the House at the time of the passage of SAFETEA-LU. All of us 
were in here at that time and virtually unanimously we felt 
that the SAFETEA-LU was too small. Now, in the meantime--and it 
turned out to be too small. We had to put in moneys from the 
general fund to keep the program that was authorized going.
    Now, if all we are going to have as revenue is the gasoline 
tax, then we are headed for an even smaller program for the 
next 6 years or whatever years, 2 years if we end up doing just 
extensions or short-term sorts of things while we are waiting.
    Now, my understanding here is that the whole transportation 
industry, who had taken all of the automobiles, the 
manufacturing that goes with this, all of the movement of 
passengers and freight and all of the goods that have to move 
around this country within our transportation system, that that 
represents basically about 20 percent of our total American 
economy. And I just want to go back and say, every dollar of 
maintenance deferred this year will catch up to the next 
generation in the form of aging and less safe highways and 
transit systems and an economy choked by congestion. So we 
really need to resolve this in a better way.
    The December 2009 infrastructure proposal included 150,000 
miles of roads. That one always puzzled me a little bit. Let me 
just state that I don't know what we are going to do with those 
roads. You certainly can't build new. You can hardly repair 
them for less than a million dollars a mile, at least if they 
are interstate. That would be a huge number of billions of 
dollars. I don't know what the basis--maybe you can tell me 
what the basis is of what you thought was going to be done for 
that. But that is what has been included in original layout of 
the $50 billion allowance for additional infrastructure.
    And I do want to point out that we on the House side passed 
in December of 2009 a bill for additional infrastructure that 
was close to this number in its totality. It was never looked 
at by the Senate. It was at a time when the economy was not 
growing as fast as we hoped it would grow. And that just wasn't 
dealt with at all. So the deficit of infrastructure money 
available in an economy such as we have going for us, has 
already started to defer significantly the amount of 
investments that need to be dealt with.
    Now, let me ask you a specific question. How did the sale 
of assets, such as the Indiana Turnpike, which was a public 
asset built with public money and then sold, and I don't know 
how it has worked--is that one of the private-public 
partnerships that you speak of? Or is that some other category, 
some other cubbyhole in which----
    Secretary LaHood. We believe that what Governor Daniels did 
was a good investment of Indiana tax dollars, that has worked 
out very well. It is an example of, the Governor determining 
that the lease of that asset made the best sense in terms of 
managing that particular interstate, and it has been a good 
project.
    Mr. Olver. In that deal, does the Federal investment, which 
in that turnpike was close to 90 percent I would think, is that 
being paid back in some kind of return to the Federal 
Government?
    Secretary LaHood. Mr. Olver, I don't know the specific 
answer to that question, but I will find out for you.
    [The information follows:]

    The construction of the Indiana Toll Road (ITR) in the early 1950s 
predated the Interstate Highway program. Like other toll highways and 
turnpikes from that era, the ITR was ultimately incorporated into the 
Interstate network for connectivity purposes. However, only toll 
revenues, rather than Federal or State funds, financed its initial 
construction. Although there was subsequently a small amount of Federal 
participation ($1.9 million) in the construction of three interchanges 
connecting the ITR to other Interstate highways, Congress enacted 
legislation in 1979 to permit Indiana to refund the Federal portion of 
the project. Therefore, in a strict sense, there was no remaining 
Federal investment in the ITR in 2006 when the state leased the highway 
to a private concessionaire for 75 years to operate and manage. The ITR 
remains a public asset of the State of Indiana.
    The asset monetization of the ITR represents only one type of 
public-private partnership (P3), which the United States Department of 
Transportation (DOT) defines as a contractual agreement between a 
public agency and a private entity allowing for greater private sector 
participation in transportation infrastructure.
    Via Congressionally authorized tools such as private activity bonds 
(PABs) and the TIFIA credit program, DOT facilitates many types of P3 
projects that expand our infrastructure investment. These include long-
term agreements in which the risks of design, construction, financing, 
operations, and maintenance are assumed by a private concessionaire, to 
less extensive transactions that retain some of these risk in the 
public sector. A P3 may be appropriate for developing a new 
(``greenfield'') facility, whether a toll road or a rail transit 
extensions, for rebuilding and maintaining an existing (``brownfield'') 
facility, or for any situation within those points.
    As our State and local partners explore new partnerships with the 
private sector, it is paramount that the public interest is protected. 
Financial risks and rewards on both the public and private sides must 
be appropriately balanced, to ensure that the traveling public gets 
real value in return, and that people with limited travel options are 
not taken advantage of. The financial returns realized by the private 
sector must be appropriately related to the risks they bear and any 
operational efficiencies that they are able to achieve.

    Mr. Olver. I think I need to understand what that deal 
really--how that is structured. Because we talk about public-
private partnerships, and there must be a whole variety of 
forms in which that can--I don't know. We just talk about it.
    Secretary LaHood. We will get you some information on that.
    Mr. Olver. I think it would be helpful to the committee as 
a whole.
    Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Olver.
    Mr. Carter.

                       LIGHT RAIL/TRANSIT OPTIONS

    Mr. Carter. Thank you, Mr. Chairman.
    And welcome, Mr. Secretary.
    I am looking over the statement that you made here. And 
according to this, as you look toward the future, the 
administration is proposing to address the challenge of the 
future in three ways: creating a national high-speed rail 
network; rebuilding America's roads and bridges; and investing 
in accessible, affordable transit options. I am not sure what 
the third one means. I think I know what the first two mean. 
What does the third one mean?
    Secretary LaHood. The best example I can use for your 
State, Judge Carter, is the light rail system in Houston. That 
is an example of a transit system where the community came 
together; we are trying to deliver for people that either 
couldn't afford cars or wanted another form of transportation 
other than an automobile. That light rail system runs all the 
way into the medical district in Houston, and it has a lot of 
community support. That is an example of transit, what we call 
light rail.
    Mr. Carter. I believe I would have picked Dallas, not 
Houston. But that is all right. The train in Houston runs from 
the medical center to the ball game.
    Secretary LaHood. In terms of Dallas, Judge, what we have 
done there is what the people asked us to do. We have invested 
in a very comprehensive streetcar system, which is an example 
of transit. That is what they wanted. If they wanted light 
rail, we would have done light rail, but they wanted 
streetcars. So that is where we made our investment.

                            HIGH SPEED RAIL

    Mr. Carter. I was at the medical center during this last 
work period in Texas, and I visited with them about the train. 
And they said that the light rail created huge traffic 
problems. In addition, it runs over someone nearly every day 
and literally hits a car a day, every day since they have built 
it, because I guess we are backward, and not used to having 
trains run out in the middle of our streets. And it goes from 
the medical center to the ballpark. I don't think there are any 
doctors or anybody else that is trying to get from the medical 
center to the ballpark. So I don't think it has been a very 
good use of our money. But that is Houston's business, and it 
is a big debate in Houston.
    I have a question about high-speed rail. And you know I do. 
I have talked to you about it before. The high-speed rail that 
runs from here to New York, I know at some point in time it 
gets up to 80 or 90 miles an hour on one little stretch of the 
tracks, but it doesn't really run that speed very often. It 
runs a whole lot slower. It costs about--about $300--something 
like that. It costs a whole lot of money to ride the train. And 
it doesn't go at any speed that I would call high speed.
    Right now, it is $232 one way, $337 first class, for a one 
way ticket to go into New York City. And a high-speed rail, one 
of my staffers just got back from Taiwan where their high-speed 
rail runs 200-plus miles an hour, and it was $50-something 
dollars for a coach ticket. And they say that that is not 
subsidized by the government. That is an actual cost. Now, what 
is wrong with our system versus their system? If they are going 
200 miles an hour and charging $50 bucks, and we are charging 
$232 bucks, and we are running 70 miles an hour?
    Secretary LaHood. The Northeast Corridor was built sometime 
ago, Judge. The system that your staffer rode on was built in 
the 21 century to 21st century standards. I have ridden on all 
these trains. In Europe and Asia, they are all ahead of us. 
What we have over them is a state-of-the-art interstate system 
and a state-of-the-art freight system. They don't have either 
one of those in these countries. You know why? Because we made 
our investments in the interstate system. Good investments. 
That is why we have a state-of-the-art interstate system in 
America, a dream that Eisenhower had that took 50 years for us 
to build. We have a state-of-the-art freight system. No other 
country has the freight system that we have, thanks to the 
vision of Abraham Lincoln, believe it or not, way back then.
    My point is this: Japan, China and the European countries 
have made huge investments in high-speed rail. That is why they 
go 250 miles an hour, because they have made the huge 
investments. They made the upfront investments. The Northeast 
Corridor was built shoehorned between all the communities that 
you go through on your way to New York, but when you shoehorn a 
passenger rail service through every community on the Northeast 
Corridor, it is going to be very difficult to get the high 
speeds. We have designated Amtrak as eligible to receive high-
speed money so that if there are opportunities to get the 
higher speeds and fix up the tracks, we can do that.
    Mr. Carter. I understand that. But in my last question when 
we talked about this last year, the proposed high-speed rail 
system that is in the President's budget is a 100-mile-an-hour 
train.
    Secretary LaHood. In California, it will go 200 miles an 
hour, because they are going to build new infrastructure. On 
the Northeast Corridor, because it is an older system, it is 
going to be difficult to get there. In Illinois, the train from 
Chicago to St. Louis, will probably get up to 170 miles an hour 
between stops.
    Mr. Carter. That is different from our discussion last 
year.
    Secretary LaHood. No. I know it is. Things have changed 
since last year. They have.
    Mr. Carter. Good. You are speeding it up.
    Secretary LaHood. Yes, sir.
    Mr. Latham. Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman.
    Mr. Secretary, a pleasure to see you.
    Secretary LaHood. Good morning. Thank you.
    Mr. LaTourette. Unfortunately--Judge, I think the problem 
in Houston is you have the train going the wrong way. When 
people watch the Astros, they have to take the train to the 
hospital.
    Mr. Carter. There is something to that.

                    FUNDING SURFACE REAUTHORIZATION

    Mr. LaTourette. The train goes both ways.
    Mr. Secretary, I guess I am disappointed would be the word. 
Not in you, but this administration has joined the last 
administration in basically abdicating leadership in 
transportation. You can send up a budget of $556 billion over 6 
years. You can have a 127 percent increase in transit, which I 
think is a good thing. Unlike the Judge, I think the $53 
billion in high-speed rail is a good thing. And apparently, you 
want to do some leadership awards of $32 billion.
    But the transit piece, the high-speed rail piece and this 
leadership award program are not contributors to the Highway 
Trust Fund. And Mr. Olver is right. I was on the authorizing 
committee for 14 years, and I think you were there for a cup of 
coffee. You stayed for 2 years.
    Secretary LaHood. Six.
    Mr. LaTourette. Six. Well, it seemed like 2.
    Secretary LaHood. I stayed for coffee, dinner and dessert.
    Mr. LaTourette. I assume you know from the run up to 
SAFETEA-LU, that SAFETEA-LU was delivered 2 years late because 
President Bush had done an OMB and his folks told him that the 
Highway Trust Fund was only going to generate $256 billion over 
the 6-year period, even though his Department of Transportation 
said that the thing needed to be closer to $400 billion. So we 
went back and forth, and we jawboned with the Senate and we 
jawboned with the White House and we finally came in at about 
$300 billion. But Mr. Olver is right, woefully inadequate for 
the needs that exist in this country.
    And then when you all came into office, I think at your 
first hearing, you said you were going to go on an 18-month 
listening tour and sort of listen to how we are going to solve 
this problem. I think the 18 months are over, and you listened. 
But this budget at 556 billion with no idea of how to pay for 
it and sort of the appealing to the Tea Party with PAYGO, I 
mean, you are missing the whole point of PAYGO because you have 
got nothing to pay with it.
    So I will just tell you that I know the President's 
position; I knew President Bush's position. But if you think 
that you are going to get $556 billion and this is going to be 
more than just a proposal that goes in the trash can, it is not 
going to be tolling. You would have to toll every road in 
America to raise the revenue that you are talking about. 
Public-private partnerships are lovely when they come to some 
specific projects, when they want to build an interchange that 
is going to benefit a new factory or something like that.
    But without sort of grabbing the bull by the horns and 
saying you know what, here is the problem and we either 
confront the situation that we need more revenue or we punt. 
And if we punt, then just say punt. But don't send up a $556 
billion bill and pretend that somehow the money is going to 
appear. The trust fund is limping along on about $32 billion a 
year. So you can't even get to $200 billion over the 6-year 
life of the bill, and you want to increase the takeouts. 
Transit doesn't pay into the Highway Trust Fund. And to 
increase it $126 billion--somebody has got to pay for this.
    And there is no appetite clearly in the new majority to 
transfer money out of the general fund. That means it has to be 
raised by the users of the system, and there is no proposal 
forthcoming by your administration and, quite frankly, by the 
House or the Senate. Spread it all around and fix this. It has 
got to be fixed. You said you would sit down with anybody 
anywhere. There is an empty chair next to you.
    I think, Latham, go down there and sit next to the 
Secretary.
    And Olver, you sit on the other side of the Secretary and 
figure this thing out.
    Because if we don't come to grips with where this money is 
going to come from--you started with Abraham Lincoln. I would 
go to Teddy Roosevelt and the Panama Canal. We would all be 
speaking Japanese if it hadn't been for Teddy Roosevelt 
deciding we were going to make that investment and then Dwight 
Eisenhower and even Ronald Reagan.
    So grab the bull by the horns. You are a bold guy. You were 
always bold when you were here. We have got to find the money. 
And to recreate the line, and quite frankly, the chairman of 
the authorizing committee, when he was applying for the job, I 
sat on the steering committee, I said, how are you going to 
fund this 6-year bill? He said public-private partnership. I 
said, maybe you didn't hear me, how are you going to fund this 
bill? Public-private partnerships isn't going to get it done. 
You know it. I know it. He knows it. So until somebody has the 
political will to do what is right, we are finished.
    So you are not going to have $53 billion. You are not going 
to have the increase. You are not going to have livable and 
sustainable communities, and you are not going to have roads in 
a state of good repair. That is what I have got.
    Mr. Latham. Was there a question there?
    Mr. LaTourette. I am working up to the question in the next 
round.
    Mr. Latham. Very good. Very good.
    Mr. Womack.
    Mr. Womack. Good morning. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for your testimony this 
morning.
    Secretary LaHood. Good morning.

                        REAUTHORIZATION PROPOSAL

    Mr. Womack. Earlier in your comments, you indicated that 
there was not a proposal out there, and we have to all talk 
together about how we are going to fix the revenue generation 
piece of this thing. I didn't hear a proposal. I didn't hear 
from you a recommendation. If you were in our shoes, what 
proposals would be----
    Secretary LaHood. I would start with the Highway Trust 
Fund, and then I would talk about examples where tolling has 
been effective when used with the Highway Trust Fund, when used 
with other moneys from the State, when used with local money. 
There are a lot of projects that have been funded with a 
combination of money. So there are opportunities. We have 
talked about four or five different funding sources that can be 
used, and again, we are willing to sit with anybody that wants 
to sit and figure out how we get to the goal of $550 billion.
    Mr. Womack. I am glad to hear you say that.
    The I-49 corridor, as you likely know, runs from Kansas 
City to New Orleans and comes right through one of America's 
premier districts, my district, the Third District of Arkansas. 
We have already established an unprecedented decision in 
Arkansas to go to tolling as a mechanism to create the ability 
to develop infrastructure, particularly along this corridor. I 
would like to know the status of that I-49 corridor in the 2012 
budget. If Northwest Arkansas, through potential tolling, is 
willing to go that route--and obviously we are; we have 
established regional mobility authorities that have the ability 
now to go out and create potential revenue generation and 
leverage with Federal dollars--is that something that we are 
going to see more and more of in our country, where the ability 
to leverage local dollars is going to give us a better seat at 
the table for some of this Federal funding?
    Secretary LaHood. Congressman, I am very familiar with that 
project. I have talked to Senator Pryor, Senator Boozman, and I 
have talked to others about this project. Precisely what you 
say is accurate, that we could leverage tolling. There are 
probably some opportunities for public-private partnerships, 
certainly highway trust funds, and State funds. This is a 
priority for us because it is a priority for all of you. This 
is an important project. It becomes a real economic engine for 
that part of Arkansas, and we are going to work with you and 
your delegation to make this a reality.

                      AIRPORT IMPROVEMENT PROGRAM

    Mr. Womack. I want to ask a question about the Airport 
Improvement Program and its impact on small airports, as many 
of us have those. AIP, as you know, is the funding that goes to 
these airports. It is an invaluable tool. It allows us to pay 
for multimillion dollar projects to modernize some very 
terribly aging infrastructure. What percentage of AIP goes into 
small airports in the 2012 budget?
    Secretary LaHood. That I don't know. I will have to get 
back to you for the record on that.
    [The information follows:]

    To assist those airports that need the most help, the 
Administration proposes to focus Federal grants to support smaller 
commercial and general aviation airports that do not have access to 
additional revenue or other outside sources of capital. Based on the 
President's budget proposal, small airports will receive 100 percent of 
AIP funding in FY 2012. By comparison, in FY 2010 small airports 
received about 72 percent of AIP grants.
    The President's budget suspends regular AIP funding for Large and 
Medium hub airports in FY 2012, meaning all AIP funding will be granted 
to small airports. However, eligible airports in all size categories 
will be able to compete for an additional $3.1 billion in one-time 
funding from the President's infrastructure proposal. This funding will 
first be used to fund Letters of Intent issued before FY 2012; planned 
Runway Safety Area improvement projects through FY 2015; and noise 
mitigation projects caused by activity at Large and Medium-hub 
airports.

    Mr. Womack. Will it change from previous years? And how 
drastically?
    Secretary LaHood. We have talked about some reforms of AIP, 
and I am going to have Chris Bertram answer that.
    Mr. Bertram. There is an actual proposed increase. Part of 
the $50 billion upfront includes extra funding for AIP. We 
would have to do the math for you, sir, to figure out how much 
of that would go to smaller airports. A large part of it would 
be discretionary, so it would be hard to tell up front how much 
would go. In general, the core program for AIP would continue 
to have the same amount of money for smaller airports.
    Mr. Womack. Very good. Thank you.
    I will yield back.

                           HIGHWAY TRUST FUND

    Mr. Latham. Thank you very much, Mr. Womack.
    Mr. Secretary, I think we all are frustrated, obviously. 
You have taken the fuel taxes off the table.
    Secretary LaHood. Increase. An increase. I haven't taken 
them off the table. We are going to use them.
    Mr. Latham. I know. But the problem is we have got to back 
fill $35 billion out of the general fund just to make our 
current commitment.
    Secretary LaHood. Correct.
    Mr. Latham. And you said there were, what, two or three, 
four other possible scenarios. What are they?
    Secretary LaHood. Tolling. In some States where they have 
used tolling, they have raised a lot of money. Public-private 
partnerships in some States where they have combined highway--
--
    Mr. Latham. Are you saying the Federal Government gets the 
revenue from the toll?
    Secretary LaHood. Of course not. It goes to the project.
    Mr. Latham. Then how does that affect the trust fund?
    Secretary LaHood. It helps to build the capacity that 
people in the States want to do. They take the Highway Trust 
Fund, which comes from the tax that is collected, and they 
leverage against other sources of money, including tolling.
    Mr. Latham. So how do we get to the $556 billion?
    Secretary LaHood. You need to pull up a chair here, and I 
am sure you and I can figure it out.
    Mr. Latham. What are the other suggestions? In your 
request, you have got $20 million for revenue offers. What are 
they doing?
    Secretary LaHood. I am going to have Chris talk about that. 
It is interesting that we get criticized for only $48 billion 
in the stimulus, which worked.
    Mr. Latham. But there is only, what, 28 of that actually 
went to highways.
    Secretary LaHood. Yes, 28 went to highways. A billion went 
to redo runways all across America; $8 billion went to high-
speed rail; $1.5 billion went to TIGER, which funded a lot of 
innovative and creative projects around America. The lion's 
share of it went to highways. So the idea that we are going to 
be criticized for only $48 billion, when we didn't write the 
bill, and then we come in with $550 billion and now that is too 
much. You can't have it both ways. Either we did it right one 
way or we didn't do it right the other way.
    We are criticized for $48 billion, which wasn't enough, and 
$550 billion is too much, and yet we haven't provided any 
leadership? I don't think that is quite accurate. We have 
provided leadership in presenting a bold picture for what 
America needs for transportation. We all know what that is, and 
that is what we have put out there. People criticize us for 
only coming up with $48 billion, which we spent correctly by 
the way, and put 65,000 people to work, notwithstanding all of 
the information that was not factual during the last campaign.
    Mr. Latham. You have to understand, too, in the stimulus 
bill, we had a motion to recommit to more than double the 
infrastructure, and it was voted down. And now you are coming 
back and asking for, in essence, exactly what we said----
    Secretary LaHood. Great. We are on the same page on that 
then.
    Mr. Latham. It is also frustrating that we actually 
proposed that and it was voted down and now you say that we are 
not bold enough or----
    Secretary LaHood. I didn't say you weren't bold enough.
    Mr. Latham. All I am asking is, how do you pay for it?
    Secretary LaHood. We are going to have to figure that out.

                            UPFRONT FUNDING

    Mr. Latham. I understand that. In the $50 billion--I don't 
know how you came up with that number as far as the second 
stimulus funding; the $25 billion in that for highways, and you 
have got transit, you have got cross-border, $2.2 billion. How 
did you figure out the $50 billion, and how did you figure out 
how you break that down?
    Secretary LaHood. We came up with the $50 billion based on 
the fact that we needed to continue the momentum that was 
created by the $48 billion. The $48 billion created a lot of 
jobs and created 15,000 projects, and we felt that $50 billion 
would be similar to that in the sense that we would continue 
the momentum that had been created by that part of the 
stimulus.
    Mr. Latham. But it is interesting, in the stimulus--these 
are the new priorities, apparently. But in the stimulus, you 
didn't fund a lot of these activities.
    Secretary LaHood. Congress established the priorities for 
the $48 billion. We didn't write that bill.
    Mr. Latham. You had no input on it?
    Secretary LaHood. Not much.
    Mr. Latham. Okay. Well, join us then. We didn't either.
    So, anyway, Mr. Olver.

                        FUNDING HIGHWAY PROJECTS

    Mr. Olver. Thank you, Mr. Chairman.
    I am so pleased that we now have--for the last 4 years, I 
had to take the whole series of conversations with people 
interested in Interstate 49 as the chairman of this committee. 
And because we didn't have enough money, in the authorizing 
bill in any case, as I think at least Mr. LaTourette and I 
agree on that, we never really were able to put that in as 
quickly as we would like to do it. I am so pleased we have now 
a champion of the I-49 corridor right on the committee, a 
member who is from that area and knows what it is that is going 
on and what those needs are and has some understanding of what 
that need is as part of the overall need for transportation.
    I must say, Mr. Secretary, when you suggested that you and 
the chairman could sit right across the table from each other 
and figure out how to fund your $556 billion program, I thought 
I almost heard a shudder and a couple of heartbeats missed on 
the part of the chairman. I think that that is not something 
that he particularly wants to do.
    It is a responsibility, of course, as the authorizing 
committees to do that somewhere along the way. And then you 
have to find the votes.
    Let me--I never allowed you the time to answer the original 
question that I had asked. But it is not an important one in 
any case.
    I want to say, maybe it is that we have got to forget about 
the concept that only the gasoline tax can pay for 
transportation. If it is 20 percent of our economy--and I don't 
think--I think some would argue it is even more in its sum 
total impact on the economy, then it is a responsibility that 
goes far beyond just the gasoline tax. And maybe we should be 
putting general fund moneys into it as part of the mix, along 
with these other things that you are suggesting.
    So I am not afraid of doing that, and I don't object to 
putting general fund moneys into it. But let me suggest, in 
2007 and 2008, the last time we had a huge gasoline price 
spike, if we had created a mechanism whereby when the gasoline 
price went down by a significant amount, maybe by 20 cents, for 
instance, from its peak, once you knew where the peak was, that 
the gas tax automatically increase 1 cent, just 1 cent out of a 
20 cent reduction, as it went downward from $4 a gallon back 
down to about $2 a gallon, we would have put a very large 
amount of money into the gasoline tax, per se; it has not been 
increased since 1993 or thereabouts, and that would have been 
done 15 years later with all the inflation that had gone on. I 
just pose that as something hypothetical. Obviously you can't 
do something ex post facto there. But that would have provided 
some of the needs that we have.
    In our State, we untolled programs, interstate programs 
that could have remained tolled and probably should never have 
been untolled. I can say that because I was not in the 
legislature when that was done within our State.
    In New York, they had a congestion pricing program, and it 
was struck down by either the legislature or the city council, 
I don't know. But London has a very extensive congestion 
pricing and time-of-day sort of thing, a mechanism to try to 
keep the cars out of the center of the city. And London is by 
far the most prosperous part of Great Britain. Other parts of 
Great Britain are in terrible shape, but London is doing 
exceptionally well. It is an international financial center and 
so on.
    So the idea of congestion pricing and getting people out of 
cars and not going into the center city seems to be a very 
popular thing elsewhere. Why can't we do these similar sorts of 
things here? And I would like to see a set of several different 
types of public-private partnerships that are working somewhere 
around.
    Secretary LaHood. There have been lots of programs on 
congestion pricing, and we will get you some information on the 
success of those rather than me trying to talk about it off the 
top of my head.
    [The information follows:]



    
    Mr. Latham. Thank you.
    Mr. Dent.

                            PIPELINE SAFETY

    Mr. Dent. Good to be with you, Mr. Secretary.
    Secretary LaHood. Good morning.
    Mr. Dent. A couple of quick things first. I know you will 
be coming up to my area in the near future.
    Secretary LaHood. Monday.
    Mr. Dent. Monday?
    Secretary LaHood. Yes, sir.
    Mr. Dent. To discuss pipeline safety and other issues.
    Secretary LaHood. Correct.
    Mr. Dent. As you know, we have had these two major pipeline 
explosions in Pennsylvania in recent weeks; the first in 
Philadelphia, the second up in my area in Allentown. A few 
weeks ago, Congressmen Bill Shuster and Jim Gerlach, a few 
other Members, participated in a roundtable discussion on this 
very important issue. One of the issues that was highlighted by 
actually, Jim Gerlach was the possibility of creating a 
stronger partnership between Federal and State providers in the 
inspection process. Has any thought been given to leveraging 
our resources in that kind of way?
    Secretary LaHood. Absolutely. After the pipeline explosion 
in Pennsylvania, I convened a meeting with the board of the 
American Gas Association that represents all of the companies 
around the country. I told them that I was going to pull 
together a meeting of their industry. The problem, is that the 
way we do this is very disjointed. DOT has responsibility for 
pipeline safety, but the FERC has the responsibility for 
licensing the companies. We need to have better coordination 
between the FERC and what we are doing in terms of our 
inspections of pipelines and also with the industry.
    I am going to convene a meeting of all of these groups so 
that we can have better coordination and put together a task 
force to really address licensing, pipeline safety and 
opportunities for the public to know where these pipelines are. 
Many of these pipelines were built 100 years ago when many 
communities did not exist or certainly the industrial part of 
the communities. We need better coordination, and I am going to 
provide that coordination by getting all of these people in a 
room so that we can start talking to one another.

                             COMMUTER RAIL

    Mr. Dent. Excellent. I look forward to having that 
conservation next week up in Allentown. That would be great. 
Thank you.
    On the issue of new starts, I saw that you requested a 
billion dollars as part of the $50 billion up-front money for 
new starts. There have been advocates in my community and 
elsewhere who are advocating for passenger rail. And I think 
the rule of thumb right now is that for a new starts project, 
that 80 percent of the money would be provided by the Federal 
Government, 20 percent by the local share. In effect or in 
actuality, typically I understand it is about 50 percent 
Federal, 50 percent non-Federal match. With even greater 
constraints on our Federal resources, Mr. Secretary, what kind 
of local financial commitment do you think we will be needing 
going forward?
    Secretary LaHood. On high-speed rail?
    Mr. Dent. Not just high speed, any kind of passenger or 
commuter rail project.
    Secretary LaHood. Commuter rail is different than high 
speed rail. If you look at our budget, we put an 80/20 formula 
in for highway speed rail.
    Mr. Dent. How about for non-high speed, but for 
traditional----
    Secretary LaHood. Traditional is 50/50.
    Mr. Dent. And you anticipate that that would continue to be 
the formula?
    Secretary LaHood. Probably.
    Mr. Dent. Okay.
    Secretary LaHood. I don't really see that changing, Mr. 
Dent.

                           BUS RAPID TRANSIT

    Mr. Dent. Well, the other final issue, bus rapid transit. I 
have often found that bus rapid transit might be a viable cost-
effective alternative to rail in many communities. What are you 
doing to promote and support communities in making the best 
infrastructure investments for that particular region or that 
type of mode? Bus rapid transit, I think it gets lost in a lot 
of these conversations. A lot of people like to talk about rail 
when it seems like bus rapid transit is a very viable 
alternative.
    Secretary LaHood. It really is. What we have tried to do, 
going back to my conversation with Judge Carter, is we don't 
try to impose these things on communities. Some communities 
want to get in the streetcar business. Other communities don't; 
they want to get into light rail. Other communities want to get 
into what you are talking about, the bus rapid transit. So we 
have expert people that can help communities work through these 
opportunities and funding to help communities realize their 
opportunities, depending on what the community wants to do. We 
have no bias against a community if they want to get into 
streetcars or light rail or bus rapid transit. It is up to the 
community to decide, and then we want to be partners with them.
    Mr. Dent. Thank you. I will yield back.
    Thank you, Mr. Secretary.
    Mr. Latham. Thank you, Mr. Dent.
    Mr. Carter.

                         CROSS BORDER TRUCKING

    Mr. Carter. Thank you, Mr. Chairman.
    Mr. Secretary, for the past 2 years, Congress has 
prohibited funding for the U.S. to develop a cross-border 
trucking program with Mexico, which is a clear violation of 
NAFTA. The Northern American Free-Trade Agreement trucking 
provisions were established as a key component of the agreement 
for imposing cross-border traffic with the United States and 
Mexico under our obligation to NAFTA. In 2009, the United 
States unilaterally stopped the pilot program that we 
established, and shortly thereafter, Mexico established 
compensatory tariffs on a variety of U.S. exports. These 
tariffs rate from 10 to 45 percent. Mexico is permitted to 
impose these tariffs, thus the United States is not complying 
with its obligation under the trade agreement. I am wondering 
where we stand. The truth is, who is raising the flag to not go 
forward on working out this trucking agreement? It has been an 
emotional issue in Texas for years. But we seem to have gotten 
over the emotional issue now and--I have one question. Do the 
labor unions now support resolving this cross-border trucking 
issue? Have they backed off from opposing administrations to 
ever resolve the issue? Does the Mexican government get the 
right to reestablish these tariffs if this pilot program is not 
implemented?
    Secretary LaHood. Judge, when I came into this job a little 
more than 2 years ago, the Congress put language in an 
appropriations bill to suspend the program. This pilot program 
is law. It is not something that Ray LaHood said it has to be 
or any President or anybody else. It is the law. It is a part 
of the NAFTA agreement. We have an obligation under the law to 
carry out the program, but somebody put language in a bill, in 
an appropriation bill, and suspended the program. What the 
Mexicans did was well within their right under NAFTA. They 
added 100 tariffs, and it really hurt a lot of people all up 
and down California, the State of Washington, and California, 
and Texas. The tariffs have hurt growers that grow Christmas 
trees and apples and all kinds of products.
    Over the last 2 years, we have negotiated an agreement to 
restart the program. I met with 25 or 30 Members of Congress on 
this, and every one of them suggested some safety measures that 
we ought to include. We put these safety measures in the new 
program: onboard recorders that will record the hours of 
service, making sure that a trucker doesn't go beyond the area 
he is supposed to under the Cabotage laws, making sure that the 
driver has been drug tested, making sure the driver has the 
right license, and making sure that the trucking company has 
trucks that are safe.
    We have reached an agreement with Mexico: On the day that 
we certify the first truck, 50 percent of the tariffs across 
the board will be taken off. On the day that we actually start 
the program, the other 50 percent will come off. We believe by 
midsummer, this program will be restarted. It is an agreement 
that we reached with Mexico after a lot of deliberations. We 
believe by midsummer, the program will be restarted and that 
the tariffs will be off 100 percent.

                      SALARY AND EXPENSE INCREASES

    Mr. Carter. That is good. I have one more question if I 
have time. Mr. Secretary, you propose in your budget nearly 119 
million just for salaries and expenses of the Office of the 
Secretary, a 20 percent increase over fiscal year 2009. With us 
struggling to control spending, how do we justify this increase 
in this purely, administrative expense.
    Secretary LaHood. I am going to ask Chris to answer that. I 
think that is not accurate. I think we actually have a 
decrease, right?
    Mr. Bertram. We will have to get back to you. I think 
overall in terms of salaries, salaries are pretty much frozen. 
I think there are some other expenses within the Office of the 
Secretary, but there is not a major increase in personnel,
    Mr. Carter. According to my numbers, you proposed 119 
million in 2009, was 98.4.
    Mr. Bertram. Let me get back to you with the particular 
breakdown of exactly what all the changes are.
    [The information follows:]

    Of the 20 percent increase, 3 percent is for inflation increases; 5 
percent is due to pay changes (e.g., 2009 and 2010 pay raises); 6 
percent is for rent increases; 9 percent is for working capital fund 
increases; 37 percent is for a government-wide acquisition workforce 
development initiative; and 40 percent is for new program initiatives 
and FTEs (e.g., cyber security enhancements, transportation 
reconstruction assistance for Iraq and Afghanistan, environmental 
sustainability initiatives, and funding associated with an approved 
reprogramming request for the executive protection detail).

    Mr. Carter. Okay, okay. Thank you, Mr. Chairman.
    Mr. Latham. Mr. LaTourette.

                                COAL ASH

    Mr. LaTourette. Thank you, Mr. Chairman. Mr. Secretary, two 
things, one is a regulation that is going on with the EPA, and 
other one is something that your Department is promulgating and 
I just want to ask you about both of them. Coal ash and the 
EPA, when the Administrator Jackson was in front of us she 
indicated that they do not expect them to come up with a 
regulation this year because they receive 450,000 comments. I 
know that you have been written to by AASHTO and some of the 
other highway construction industries. I was just wondering if 
you have weighed in.
    Secretary LaHood. On coal ash?
    Mr. LaTourette. On coal ash.
    Secretary LaHood. I will be honest with you, Mr. 
LaTourette, I don't know a thing about that.
    Mr. LaTourette. I will be happy to send you something. The 
coal ash is a byproduct of coal-fired generated electricity 
plants, among other things. It is about 40 to 50 tons a year, 
and at least according to the AASHTO folks, it is a very 
important ingredient in road construction. The EPA has set out 
three proposals to make it a hazardous substance, which 
obviously would require special land filling which creates 
stone problems, but would make it non available for road 
construction purposes which seems counterintuitive. I think if 
the experts in your Department would be kind enough to take a 
look at that issue and express an opinion, maybe----
    Secretary LaHood. Absolutely. I know Victor Mendez is 
coming before your committee. So I will make sure that he has 
an answer for you when he comes.
    Mr. LaTourette. I appreciate that.
    Secretary LaHood. I think he is coming in a few days.

                           LITHIUM BATTERIES

    Mr. LaTourette. And lithium batteries, you all have 
promulgated rules on lithium batteries as a result of some work 
that Mr. Oberstar did at the request of the pilots union and 
just wondering where you are with lithium battery regulation.
    Secretary LaHood. There is a rule pending, and we are 
waiting to receive comments. We are working on two different 
rules, but one is pending. We believe that this is an issue 
that we really need to look at, particularly when lithium 
batteries are stored in the cargo wells of airplanes, like UPS 
and FedEx. We think this is an area where we need to really 
take a careful look.
    Mr. LaTourette. I agree with you. I think my concern is 
that just like you described the Mexican truck situation to 
regulate American U.S. producers and carriers and have the 
foreign following the IMOs would certainly be unfair.
    Last thing, I just give you this for your--maybe you have 
already seen it, it is a letter to you from the Director of the 
Department of Transportation, the State of North Carolina, and 
it is my understanding that as of today Norfolk Southern 
railroad has, in fact, signed the definitive services outcomes 
agreement with the State of North Carolina. But this letter is 
greatly disturbing to me and would like your observation. And 
what is disturbing to me is the last paragraph. And then 
basically, it is this guy down in North Carolina complaining 
that Norfolk Southern won't sign this DSOA, and the reason, 
quite frankly, is why these DSOAs are of concern to the freight 
industry, as you well know, is that if Amtrak or your new high 
speed rail gets into an on-time performance issue and there is 
a mandate, then the freight railroad who owns the track, the 
right-of-way, and basically has schedule concerns, is going to 
have to park its freight trains while we figure out--that is 
the problem with mixed passenger and freight.
    So that was their reluctance. In the last paragraph of the 
letter--are you aware of this letter before I----
    Secretary LaHood. No, I am not, but if I can just say this, 
there has been an agreement signed. I talked to Rick Mormon, 
the CEO of Norfolk Southern last evening. I think whatever 
differences we have have been resolved. He signed the agreement 
and we are moving on to some other areas where we need to work 
together with them. If you want me to look at this, I will.
    Mr. LaTourette. Well, I just want you to look at the last 
paragraph, because that is what concerns me, this fellow down 
in--Eugene O'Conte is writing to you saying that, here is the 
problem. But he is also aware that U.S. DOT has awarded $100 
million TIGER grant for the Norfolk Southern railroads Crescent 
Corridor program, and he is suggesting that, based upon their 
refusal which has now been corrected by your good work----
    Secretary LaHood. Correct.
    Mr. LaTourette [continuing]. Refusal to sign the agreement 
that you should revoke their----
    Secretary LaHood. You know what, we are not going to get 
into that. That is not what we do at DOT. We do not hold grants 
for somebody to sign an agreement, we don't do that. I have 
never suggested that, and if anybody on my staff did, I would 
make sure that they understood that is not what we do under my 
leadership. The grant was awarded based on its merits, and it 
will be carried out based on its merits, not whether somebody 
signs an agreement or not.
    Mr. LaTourette. You know that is exactly the answer I 
expected from you. And I appreciate it, because it would be 
shocking if the Department had a position that somehow you sort 
of used that as a club to get something that they didn't quite 
want.
    Secretary LaHood. Not at all.
    Mr. LaTourette. Well, I thank you.
    Secretary LaHood. The agreement should be reached on its 
merits, and based on negotiations. If you were to talk to Rick 
he would tell you that it was difficult deliberation, but it is 
done.
    Mr. LaTourette. I have talked to Rick, and I did not know 
about your phone call, I was aware of some other phone calls 
and he was not happy until last night. So if you made him 
happy, then good for you and I yield back.
    Mr. Latham. Mr. Womack.

                           HIGHWAY TRUST FUND

    Mr. Womack. Just a couple of follow-up questions. One I am 
just trying to find the logic on, and I think I know the answer 
to it. You have spoken about substantial investment that we 
would have to make in order to build a fast and effective high 
speed rail network, particularly in heavily-populated areas. 
And this kind of goes back to my original line of questioning, 
particularly as it pertains to I-49.
    We are already invested in some projects that are 
critically important, that are unfinished. It has never really 
been a practice of this Nation to get involved in a major high 
priority network project and not see it through to fruition in 
somewhat of a timely manner. And that is my concern, investing 
so much money in rail networks at a time when we have limited 
resources, number 1. And number 2, I am concerned with 
dwindling trust fund money, but to have investments made in 
some quality road projects that are absolutely critical to the 
economic well-being of the areas that they serve. I would just 
like to know your thoughts on rail versus projects that are 
currently underway that are struggling to find the investment 
to complete.
    Secretary LaHood. This budget speaks to the values and 
priorities of this administration. The President's budget 
places a high priority on highways and roads and bridges. We 
put more money into that than we put into high speed rail or 
anything else. We have a state-of-the-art interstate system, we 
want to make sure it is in state of good repair, and we want to 
finish those parts of the country that haven't been finished.
    I will say what I said before, we are committed to your 
project, because it is important to all of you. It is important 
to your delegation, it is important to the State. We want to be 
partners with you, we will be partners with you, we believe we 
will have the resources to do that, but the President also has 
a big vision about the next generation of transportation. We 
are 95 percent complete on the interstate highway system.
    We have got to maintain and finish it, but the next 
generation of transportation in America is high speed rail. 
That is the President's vision. We can do both. We have put a 
lot more resources into highways and bridges than we have in 
anything else, because we want to finish projects, and we want 
to make sure they are in a state of good repair.

                CONTRIBUTIONS TO THE HIGHWAY TRUST FUND

    Mr. Womack. And then lastly, more of a statement. I am 
concerned, as I said about the trust fund, and the fact we are 
getting fewer miles driven and we are getting better gas 
mileage. And indeed, with the notion that we are going to 
electrify so many vehicles. I am looking for the way forward on 
how we continue to address serious issues with maintenance and 
reconstruction of deteriorating conditions of some of our 
roads, when we are indeed putting as many if not more cars on 
them that are getting fewer miles and contributing less to the 
trust fund, I continue to look for leadership as to how we are 
going to continue to afford to do the projects that we have 
already articulated.
    Secretary LaHood. Thank you.
    Mr. Womack. Mr. Chairman, I yield back.
    Mr. Latham. Thank you very much. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Mr. Chairman. Mr. Secretary.
    Secretary LaHood. Good morning.

                        AIR TRAFFIC CONTROLLERS

    Mr. Diaz-Balart. First, let me thank you and congratulate 
you for your quick action after the incident at Reagan Airport.
    Secretary LaHood. Thank you.
    Mr. Diaz-Balart. And luckily a tragedy was avoided. But you 
clearly acted quickly as soon as those facts came out.
    I want to talk a little bit about air safety, if that is 
all right. I am sure you are aware that there have been a 
number of media reports talking about increases and near misses 
and near mid air collision misses. The Washington Post reported 
that errors recorded by air traffic controllers have increased 
by 51 percent nationwide in 2010. There are examples, including 
the Airbus, the United Airbus that was within 15 seconds of 
colliding with a gulf stream jet. And again, even our 
colleague, Mr. Sensenbrenner, supposedly was a witness to one 
of those near misses.
    So according to news reports, FAA has said that the 
operational errors are due to the new self-reporting system. 
However, there are then other news reports, and I think The 
Post was one of them that said that those are not even included 
in those numbers.
    So I am not quite sure if we have a definitive answer. 
Question 1 is can you set the record straight? What are the 
causes in the increases of those operation errors? Is it self-
reporting issues has somewhat been reported but then others 
have said that is not the case? Is it insufficient training or 
inadequate training or is it something else?
    If could you provide us with some specifics, not right now, 
a breakdown of what operation errors are actually included in 
the FAA results. So again, if you could clarify as to what is 
happening and why those increases, and do we know what the real 
reason is.
    Secretary LaHood. 2 years ago when we came into this 
Administration, we believed that we had to hire the most 
experienced, qualified person to head the FAA, and we did that. 
Randy Babbitt who is the administrator is a trained pilot. He 
flew for Eastern Airlines for 25 years. He knows the business 
very well. He was the president of the Air Line Pilots 
Association during his time as a professional pilot.
    We did change the system for reporting, we put different 
safety metrics in for gliding planes in and out of airports and 
different reporting procedures. We believe the reporting of 
these incidents is way up because more reporting is going on 
for different kinds of things that were not being reported in 
the past. As a result, we think these incidents are being 
reported more often for things that had not been reported in 
the past. I know that the Administrator is going to appear 
before this committee. I will make sure that he has more 
specifics when he comes.
    [The information follows:]



    
    Mr. Diaz-Balart. Thank you. Exactly what is included in 
those new numbers? Because there are conflicting reports and we 
just need to make sure we get the right answer. Going back, 
again, to the same issue of air traffic training. There is an 
I.G. report September 30th, 2010. According to that report, a 
new air traffic control training program has been seriously 
mismanaged and has had significant cost overruns. Again, it 
seems that air traffic controller training, may be, may be a 
part of some of the current issues that we are dealing with.
    According to the report, ``FAA did not fully consider 
program requirements in designating and designing the system.'' 
It talks about how it would be difficult for FAA to achieve the 
original training program goals and training innovations and it 
keeps going. And then there were also issues, according to the 
I.G. Report of some serious, serious cost overruns. According 
to the report, and my understanding is that cost and fees have 
exceeded the baseline estimate by 35 percent during the first 
year of the contract and increased 20 percent during the second 
year.
    You know, those are huge issues. And when you tie that to 
some of the recent reports, I am concerned whether training is 
part of that problem.
    According to the I.G. Report, there were indications during 
the bidding process that there would be cost issues. Again, so 
there are a lot of issues that were there, supposedly before 
the contractors let that were evident according to the I.G. 
Report. And as far as I know, the training program office has 
not responded to the financial control review team's 
recommendation or to the I.G's report.
    Again, second issue if you could also see if we could get 
some answers on that, as to the cost overruns, if there have 
been--if the I.G's report and all those other concerns have 
been addressed. Again, if you could maybe also get us some cost 
estimates as to where we are heading.
    Secretary LaHood. Yes, sir. We will get it for you.
    [The information follows:]

    The Department of Transportation Office of the Inspector General 
(OIG) issued Report Number AV-2010-126 on September 30, 2010 with nine 
recommendations. Two recommendations were considered closed at report 
publication. The FAA provided the OIG acceptable actions for the 
remaining seven. The FAA is executing the plan to close out those 
issues. The FAA also answered in full additional recommendations from 
our internal Office of Financial Controls in October 2010.
    Air traffic controller training continues to occur within the 
volume and speed guidelines of the Controller Workforce Plan. This 
addresses the needs of both the agency and the flying public. The 
agency continues to meet mandated time-to-train and controller staffing 
quotas. Current-year expenditures are within targeted cost and 
schedule. A number of learning transformation efforts will further 
reduce expenditures and improve the efficiency of the contract.
    The intent of the contract has always been to supplement training 
provided at the Academy and field facilities. Our independent cost 
estimates for training requirements continue to exceed the original 
contract award and available funding because:
     The FAA developed the scope of training requirements 
during the procurement phase. The scope did not include requirements 
for Certified Professional Controllers--In Training (CPC-IT) and ERAM 
training which have been added and therefore increased the cost.
     Higher contract labor costs for instructors also 
contributed to greater costs.
    The FAA has conducted numerous initiatives to rein in costs and 
ensure more effective vendor performance. These include:
     Emphasizing cost containment by tying two award fee 
performance measures to keeping costs at or under budget.
     Securing third-party cost audit assistance that provides 
dedicated cost analyses for the program. This augments the voucher 
review in place at the beginning of the contract. The team ensures 
direct and indirect costs paid under the contract are allowable and 
appropriate.

    Mr. Diaz-Balart. Good. Thank you. We will obviously talk to 
the Administrator and I look forward to it, I just figure I 
would----
    Secretary LaHood. Absolutely.
    Mr. Diaz-Balart. The one thing that we can always count on 
you is that you get back to us and you respond.
    Secretary LaHood. Yes, sir.
    Mr. Diaz-Balart. Thank you, Mr. Chairman.

              BLOCK AIRCRAFT REGISTRATION REQUEST PROGRAM

    Mr. Latham. Thank you. Mr. Secretary, I am very concerned 
about, and I am hearing from a lot of private aviation folks 
about the changes to the Block Aircraft Registration Request 
program where you want to track general aviation aircraft real-
time on the Internet and have it become public knowledge. I 
guess I am curious, what is the problem we are trying to solve 
here.
    Secretary LaHood. Okay, go ahead, I am sorry.
    Mr. Latham. And if people want to keep their privacy, we 
are not tracking people in automobiles or any other modes of 
transportation, I just don't understand.
    Secretary LaHood. The program was established by Congress 
to provide security and safety for people who have private 
planes. So when I read an article, which I would be happy to 
submit for the record, where you have drug dealers having their 
numbers exempted from public record, and you have athletic 
directors at colleges having their numbers exempted so somebody 
can not find out that they are going to recruit a basketball 
player to me that did not meet the criteria.
    When I read about the people who had their numbers exempted 
from the public record, I thought this is not what the program 
is about. This is a special privilege that we give to people 
for safety and security reasons, that is--
    Mr. Latham. They don't pay for it?
    Secretary LaHood. Pardon me?
    Mr. Latham. They don't pay for the registration and pay for 
the infrastructure?
    Secretary LaHood. The program was established by Congress 
to allow certain people, for safety reasons to have their 
number taken off their planes so it couldn't be made public.
    When I find out that there are people that are taking 
advantage of it for no other reason than they do not want 
somebody to find out where they are flying, I say that does not 
work. So I put in the Federal Register the program and the 
changes we want to make. Everybody can comment on it. If they 
don't like what I am doing, they can comment on it. If you all 
don't like what I am doing, change the program. But look, 
people are trying to take advantage of something for no other 
reason than they want a little privacy, not for safety and 
security. If it is safety and security, I have no problem with 
it, none. We are going to get to what the intent of what 
Congress wants.
    Mr. Latham. I think that is safety and security.
    Secretary LaHood. Then I am going to put this in the 
record. I am not going to take your time to read this, but 
there are examples here of people that are not doing it for 
safety and security, that is my point.
    [The information follows:]



    
    Mr. Latham. Are you saying you can't track them?
    Secretary LaHood. I am saying they don't qualify for the 
program under safety and security, I am saying if people in the 
program can show me that because their CEO or somebody on that 
plane is under some kind of threat, I have no problem with 
that, none. But if it is some athletic director who is flying 
to recruit a kid and he does not want some other school to know 
it, that does not fit, neither do drug dealers or people 
smuggling gold--I am not for that. I don't think any of you 
would be either, that is the reason why I am trying to change 
the program, to get it back to what you all wanted.

                          INFRASTRUCTURE BANK

    Mr. Latham. You have asked for the whole other subject. 
Third year, consider funding some sort of national 
infrastructure bank.
    Secretary LaHood. Right.
    Mr. Latham. Are we going to finally see does OMB have any 
proposed legislation, is there anything forthcoming?
    Secretary LaHood. When our bill comes up, Mr. Chairman, we 
will have in detail what we think the bank should be doing in 
terms of funding. Really, it is a pot of money to leverage 
other money. It is not going to pay for full projects but it 
may leverage a RRIF loan, or leverage a TIFIA loan, or leverage 
some other money that somebody out in the States might be 
putting up. It is there to do big significant projects.
    Mr. Latham. Is the proposal only going to be transportation 
functions or is there going to be the Hutchinson-Kerry bill as 
a lot of other----
    Secretary LaHood No, I know there are people who want to do 
locks and dams----
    Mr. Latham. Right.
    Secretary LaHood. [continuing]. And Corps of Engineers 
projects. Our infrastructure bank is really for transportation.
    Mr. Latham. Is it both grants and loans that you are going 
to propose?
    Secretary LaHood. It would really be grants that would 
leverage other loan programs that we have or other money that 
might be out in the States.
    Mr. Latham. If you could get a grant, why would you get a 
loan?
    Secretary LaHood. Because you can't pay for the entire 
project with the grant and you have to find other sources of 
money.
    Mr. Latham. Are we talking about a revolving fund here, 
loan fund?
    Secretary LaHood. Well----
    Mr. Latham. If we are giving out grants, I mean this is 
just another----
    Secretary LaHood. Part of it would be a loan, and part of 
it would be grants, but it would be a way to leverage other 
money.
    Mr. Latham. Why is it different than any other grant 
program?
    Secretary LaHood. Because it doesn't exist to do big 
projects. We don't have anything like that.
    Mr. Latham. Haven't you had TIGER Grants and all those 
things?
    Secretary LaHood. Yes, we have had TIGER Grants and they 
have worked very well. If you all are for TIGER Grants, we will 
be with you on that. I have heard a lot of criticism about 
TIGER grants, but we are with you, we like TIGER grants.
    Mr. Latham. There are some concerns obviously with those 
grants.
    Why does in your request----
    Secretary LaHood. Can I have Chris talk in detail for a 
minute about the Infrastructure Bank because he has really 
worked with OMB, and maybe he can provide a little more clarity 
than I provided.
    Mr. Latham. If we could. I am over time here.
    Secretary LaHood. Well, you are the chairman, so.
    Mr. Latham. I don't want them to hate me.
    Mr. Olver. We will give you time.
    Secretary LaHood. I doubt if they will hate you.
    Mr. Bertram. The Infrastructure Bank would make loans 
similar to how TIFIA, and RRIF make loan guarantees and it 
could also combine that with grants to actually round out 
projects. Potentially it could have all three different funding 
mechanisms within it.
    Mr. Latham. I guess I am still--I understand what a bank 
is, and when I go to my bank, they don't grant me half the 
money and then loan me the other half of the money. It is 
either a loan or--I don't know how it is sustainable.
    Mr. Bertram. Under our proposal to consolidate all the 
existing FHWA programs, there are no other discretionary 
programs left such as interstate or bridge discretionary 
programs. This would be the one place where States and locals 
could come and actually get grants with those types of 
projects; rather than have to go to highways and go to a bank, 
they would have one place they could go.
    Mr. Latham. Okay. Mr. Olver.

                          UP-FRONT INVESTMENT

    Mr. Olver. Thank you, Mr. Chairman. My staff has been 
sitting back here wondering if I was ever going to get around 
to asking any of the questions that they thought they wanted to 
have answers to, so I am going to try to get to do that. If you 
would be kind enough to answer succinctly, at least as 
succinctly as I am asking the question, it would be appreciated 
and I might get two or three of them in. Why do you think it is 
necessary to make a substantial up-front investment in 
infrastructure this year?
    Secretary LaHood. Because we haven't done it for many, many 
years. It has been inadequate. All you have to do is travel 
around the country and you see roads that are deteriorating, 
there are many, many bridges that need to be repaired and fixed 
up. We need to begin to make investments, that is one part of 
it. The other part of it is, if we all want to get the economy 
going again, there is one way to do it, provide jobs. The 
transportation bill is a jobs bill. Nobody could dispute that. 
If there is one thing around here that creates jobs, it is 
transportation dollars. So this is a twofer.
    We may have deteriorating roads, deteriorating bridges, but 
we have lots of unmet transportation needs in America and we 
want to put our friends and neighbors to work. No better way to 
do it than to pass a transportation bill.
    Mr. Olver. I will add one more to that. In my State, the 
bids for infrastructure programs are coming in at least 20 
percent below expectations. This is the time to be doing these 
kinds of infrastructure things with quality level, with a much 
lower cost, so add that to it, I would say.
    The authorizing committees, your 50 billion plan we are 
talking about, the authorizing committees would have to take 
action to provide the contract authority for these investments. 
Have you had conversations with them about that?
    Secretary LaHood. We have had conversations with the 
authorizing committee about the President's transportation 
budget, yes.
    Mr. Olver. Specifically about this aspect?
    Secretary LaHood. The answer is yes, we have.
    Mr. Olver. Okay, all right. Well, you might want to 
summarize that for the record.
    [The information follows:]

    The President's FY 2012 Budget includes an ``Up-Front'' $50 billion 
economic boost in transportation to rebuild and modernize America's 
roads, rails, transit, and runways for the long term. These funds will 
build upon the success of the ARRA transportation funds. As noted by 
the President, transportation investment lags behind what we need to 
keep our economy moving, and compete with other countries. The 
Department has held overall budget briefings with the authorizing 
committees. In addition, discussions about the details of the budget 
are ongoing.

    Secretary LaHood. Okay.

                              RAIL NETWORK

    Mr. Olver. Within that same program, there is a new rail 
account structure. I think if I understand it, you have within 
that 50 billion, you have 3 billion for rail network 
development, and 2\1/2\ billion for rail system preservation. 
Is the main thing here the rail network development is other 
than the ICE--northeast corridor? Is that the main difference 
there, distinction?
    Secretary LaHood. Do you know the answer to that, Chris?
    Mr. Bertram. The idea would be that you would actually try 
to develop and build a rail network that would consist of high 
speed rail as well as more regional rail. That would be the 
part of the rail development part of the program.
    Mr. Olver. But it would be passenger rail?
    Mr. Bertram. Yes.
    Mr. Olver. But the other one, the preservation, is that 
meant for all Amtrak-owned property?
    Mr. Bertram. It could be all Amtrak-owned or if Amtrak 
operates on other right-of-ways, that would be eligible as well 
as any sort of State passenger rail programs that would need to 
be rehabilitated or upgraded.
    Mr. Olver. Well, I am not sure why there is a distinction 
here between the two accounts then, which maybe you can clarify 
in writing for the record.
    [The information follows:]



    
    Mr. Bertram. Okay.

                            HIGH SPEED RAIL

    Mr. Olver. On the high speed rail issue, I understand that 
last week that United Continental, which is now the world's 
second largest airline, I think, with its merger is planning to 
cut domestic flights by 2 or 3 percent and increase 
international flights by 3 or 4 percent. The long hauls are 
much more profitable and much more energy efficient, which is 
probably why they are more profitable than short distance 
flights. Does that give you any change in thought or anything 
to think about on the issue of where one uses high speed rail?
    Secretary LaHood. We thought more in terms of high speed 
rail in corridors where people have been ready to go and have 
had plans, and have done some of the environmental work, we 
really haven't done it with respect to airports and airlines.
    Mr. Olver. What the airports think they need to do is one 
thing, but clearly, high speed rail works best when you have 
got sizable cities at reasonable distance, couple of hundred to 
500 miles apart and there is some gain. If you do that in a 
corridor from Atlanta to Boston you cover a lot of short-run 
air line kinds of stuff, that otherwise is not very profitable. 
I yield back.
    Mr. Latham. Thank you, Mr. Olver. Let's go to Mr. Dent.

                            HIGHWAY PROJECTS

    Mr. Dent. Thank you. Mr. Chairman, you were just talking 
about highway funding and its impact on jobs and the economy. 
One of the challenges with the stimulus that I noticed in my 
district is that the road bridge money largely went to bridge 
painting projects, and to, I would also say just resurfacing 
roads, staying between the lines. Largely because of the 
procedural problems inherent in road construction, bridge 
construction, which leads to the big issue. I was seeing a lot 
of sidewalks, what I call curb cuts to nowhere, they were just 
curb cuts in areas where they are never going to build 
sidewalks and it looked like a misallocation of resources. A 
lot of it was used with stimulus resources.
    They had to stay between the lines. If we do a highway 
bill, we are going to need some very serious process reform. 
One reason why people are not getting to work as quickly, I 
have noticed, is that when you go through the NEPA process and 
you go through the EIS, the preliminary engineering, the final 
design, right-of-way acquisition. And by the time you get to 
the actual construction, it is many, many years. We call it the 
12-year plan where I live, and you don't call it the 12-year 
plan for nothing.
    What would you recommend in terms of reforming this 
process, just like when the bridge collapsed up in Minnesota 
and everybody was able to effectively able to reconstruct that 
bridge within 437 days. What would you recommend to us to help 
you get these transportation dollars out there so we can build 
new capacity much more quickly than it is currently?
    Secretary LaHood. One of the things that we have done in 
this budget is collapse 50 programs into five programs. We 
believe that we need to streamline. We agree with you on this, 
Mr. Dent, and we believe we can do it. We believe that over 2 
years, we put $48 billion out the door and employed 65,000 
people in 15,000 projects, and did it by the way Congress told 
us to do it. The idea was to do shovel-ready projects. Most of 
the shovel-ready projects ended up being resurfacing runways, 
resurfacing roads, and resurfacing bridges. That is what States 
had on their shelves when this money became available, but it 
did put a lot of people to work, and it did resurface.
    We agree with you, though. That is the reason we have 
collapsed these programs down so it doesn't take 10 to 12 years 
to get a project approved, maybe it takes 3 to 4 years. We 
believe by collapsing these and getting everybody at the 
Department working together, you speed up the process and you 
cut down on the bureaucracy.
    Mr. Dent. Well, thanks. That is encouraging, because that 
has been my greatest frustration watching these projects over 
the years.
    Secretary LaHood. Ours too.
    Mr. Dent. Even simple projects. I get into archeological 
digs in areas where there really is not a lot of significance.
    Secretary LaHood. Right.

                              RAIL FUNDING

    Mr. Dent. Finally, back to the issue of rail funding, we 
were just talking a little bit earlier about the local match, 
non federal match at 50 percent for most non high speed rail 
type projects. What has been your experience with communities 
around the country? I have noticed in my State, it seems a lot 
of folks talk about rail, and I hear in some of the local 
communities, but no one ever has matching dollars and kind of 
don't want to hear that part of the conversation. Is this 
typically what you are hearing throughout the country? Do they 
come to you for rail projects or do they have the local 
funding?
    Secretary LaHood. They do. People think very creatively. 
They think about what they can do at the fare box and what they 
can do with the cities that are involved, some States 
contribute to these projects. People get very, very creative 
when it comes to these projects. We have no shortage of people 
that are interested in transit projects, whether they be 
streetcar, light rail, buses, or other forms of transit. 
Creative people find local resources to do it, and we 
contribute a lot to these. These are almost always big 
projects, they are not insignificant and people find the 
resources.
    Mr. Dent. We did some rail studies where I live, and we 
found that to do passenger rail for my community to New York, 
it was estimated that we would be able to recover about $0.22 
on the dollar. Which is not very appetizing for most of us. 
When a community comes to you for rail funding, what do you 
expect them to recover in terms of what the riders will pay or 
contribute?
    Secretary LaHood. I will get you the formulas, but we look 
at these things very carefully. If you can't hold up a project 
on ridership, then we are very honest and frank with people on 
these things. Not every community can.
    [The information follows:]

    As a point of reference, Amtrak recovers approximately 85 percent 
expenses with fare box and other revenues. The FRA's FY 2012 budget 
proposes passenger rail service featuring high-speed rail delivered as 
a three-tiered service: Core Express, Regional and Emerging. Federal 
grants, up to 80-85 percent federal share, assist states and other 
qualified applicants with capital costs, which represent the highest 
hurdle in rail corridor development. This is also consistent with the 
intent of the Passenger Rail Improvement Act of 2008. Operating 
subsidies, also included in the FY 2012 proposal, reflect the need for 
start-up assistance and are short-term or transitional only.

    Mr. Dent. I would like to see the formula.
    Secretary LaHood. We will get it for you.
    Mr. Dent. Thank you.
    Secretary LaHood. Sure.
    Mr. Latham. Judge Carter.

                             CAFE STANDARDS

    Mr. Carter. Thank you, Mr. Chairman. Mr. Secretary, let's 
talk about CAFE standards, because I have a question I don't 
really understand. Title 19, U.S. Codes, section 32, 
902(b)(3)(b) states ``The Secretary shall issue regulations 
under this title describing average fuel economy standards for 
at least 1, but not more than 5 model years.''
    The notice of intent, published in October 10, 2010, with 
the EPA, DOT requested comments for setting fuel economy 
standards for model years 2017 to 2025, recognizing that it is 
technically permissible for techs not to issue fuel economy 
rulemaking for model years 2017 to 2021. The next day proposed 
fuel economy standards for 2021 to 2025. Is there some 
compelling reason why the Department of Transportation is 
seeking to evade this spirit of the law?
    Secretary LaHood. Let me tell you what has happened. One of 
the first executive orders that the President signed right 
after he was sworn in was to set CAFE standards for 2012 and 
2016. 2012, the standard is 26 miles per gallon; 2016, it is 35 
miles per gallon. That was signed, that was agreed to by every 
car manufacturer. When the President announced that there was 
an agreement on those, every car manufacturer stood with the 
President and announced that.
    Now we have to think beyond 2017. NHTSA, our safety 
organization, is working with the EPA on beyond 2017 and we are 
trying to figure out what the right standard should be.
    Now we have to work closely with California, because if 
California were to decide to accept to do its own standard, 
that would throw the car manufacturers into a real dilemma. You 
have got to have one standard for all 50 States. We have been 
working closely with the EPA on this, and we think we have got 
it right for 2012 and 2016.
    I think we will get it right beyond 2017. We are working on 
it right now. We are putting our heads together and trying to 
get the right figures and the right statistics. We want to get 
it right for the car manufacturers. They are just starting to 
come back. They are just starting to make money, and they are 
starting to sell cars. The last thing that we want to do is 
inhibit their ability to continue to do well.
    I think we get it from that point of view, but it is the 
EPA and our folks at DOT that are working on this.
    Mr. Carter. We are sort of dealing with three standards, 
right? We are dealing with your standards, EPA's standards and 
California's standards?
    Secretary LaHood. No, sir, there's going to be one 
standard. With the EPA, the two of us are going to establish 
that. We consult with California, because we don't want them to 
have a waiver or their own standard.
    Mr. Carter. Well, I agree with that. My question is are the 
California regulators driving the train or are we driving the 
train?
    Secretary LaHood. The drivers of the train are DOT and EPA; 
there are two drivers of the train.
    Mr. Carter. It takes a long time to figure out how 
convoluted the Federal Government operates, but when your draft 
legislation says ``shall,'' that generally means that is how 
you are supposed to do it. But under the rules around here, I 
guess executive order can overcome Federal law on that issue of 
``shall,'' and basically skip the section.
    Secretary LaHood. There are two agencies driving this 
regulation, Judge, DOT and EPA. We are consulting with 
California because they are a big player in this. They are not 
driving the train.
    Mr. Carter. But you told me that the President, by 
executive order, just declared a standard.
    Secretary LaHood. No. The executive order said the EPA and 
DOT will come up with a standard. That is what we did over a 
year period, we came up with a standard for 2012 and 2016. The 
President didn't say what the standard should be. What he said 
is establish the standard between the two agencies, and get it 
done. We got it done, but we also got the car manufacturers to 
agree to it.
    Mr. Carter. Why did you jump all the way to 25 on the next 
day.
    Secretary LaHood. We had to go beyond 2017, and when we 
talk about it, we talk beyond 2017.

                         VEHICLE MILES TRAVELED

    Mr. Carter. That explains it.
    One other question, do I have time for one other question?
    In Texas, they are running ads, at least in Texas, because 
I happened to hear from them at town hall meetings last week 
about mileage tax.
    Secretary LaHood. Vehicle miles traveled?
    Mr. Carter. Yeah. It has been picked up by every network 
and has been run both nationally and locally, and I am getting 
questions on it and I am wondering where that is coming from.
    Secretary LaHood. The administration is opposed to that.
    Mr. Carter. Do you know where it is coming from?
    Secretary LaHood. Yeah, I know where it is coming from. 
When I started this job, I said everything's on the table and 
somebody said vehicle miles traveled. I said everything is on 
the table and it got picked up that we were supporting vehicle 
miles traveled. Immediately the White House came out with a 
statement saying that we were not in favor of that.
    Mr. Carter. This is a current event, this is within the 
last couple of weeks there have been ads.
    Secretary LaHood. Judge, there is something called the 
viral Internet, and I have learned the hard way that once you 
say something, it doesn't make any difference if you said it 10 
years ago, it could still be very popular today because some 
blogger out there picks it up. He wasn't paying attention 2 
years ago, and he just decided he heard Ray LaHood say that, so 
he decides to put it out, that is where it comes from, though.
    Mr. Carter. Thank you.
    Mr. Latham. Mr. Womack.
    Mr. Womack. I yield back, Mr. Chairman.
    Mr. Latham. Good bless you. Mr. Diaz-Balart.
    Mr. Diaz-Balart. I won't be as brusque, but I will be 
quick.

                        SURFACE REAUTHORIZATION

    Mr. Secretary, you were talking about the importance of 
passing a highway bill, transportation bill. However, as one 
who came from the T&I Committee, where then-Chairman Oberstar 
was ready to go forward, where now Chairman Mica had language 
in there dealing with trying to streamline the construction 
process, frankly, as was stated rather clearly and rather 
publicly, the reason that bill didn't go forward was because 
the White House objected to passing a bill.
    So I agree with you, it is important to pass a bill, but 
the facts remain that Oberstar was chairman for 4 years and 
what stopped him from passing a bill and from bringing a bill 
forward was not the House, but it was the President, it was the 
administration. Has that changed? Does the President now 
support moving forward on a bill?
    Secretary LaHood. Yes.
    Mr. Diaz-Balart. Well, let me ask you this: But if it is so 
important, which I agree with you, why was he against it? Why 
was he the main obstacle in stopping what you just said is 
frankly one of the most important things which is to create 
jobs and everything else which is to pass the transportation 
bill. He was the one obstacle as you know, and that is why Mr. 
Oberstar was not able to move the bill forward. What happened? 
Why was he so against it?
    Secretary LaHood. Because we had the $48 billion in 
stimulus which we were implementing, which for over 2 years 
15,000 projects were funded and 65,000 people employed.
    Mr. Diaz-Balart. So the stimulus took precedent over the 
transportation bill?
    Secretary LaHood. You are asking me what our priorities 
were. The priorities were for the DOT to implement what 
Congress passed, which was the stimulus bill.
    Mr. Diaz-Balart. Again, as always, we get straight answers 
from you, Mr. Secretary. I will tell you, reclaiming my time, 
that obviously, when 7 percent of the stimulus bill went to 
transportation projects a lot of it has not been spent as Mr. 
Dent said because the red tape. Some of those were not even 
spent on issues that could have been the higher priority 
issues, because the administration decided not to push forward 
for the highway bill, which the Secretary and we all agree, 
frankly, was a high priority. So again, I think that was a 
grave mistake, but that is water under the bridge, so to speak. 
Thank you, Mr. Secretary, for always being so candid.
    Secretary LaHood. Thank you.

                           HIGHWAY TRUST FUND

    Mr. Latham. I think to Mr. Carter's question, that was a 
proposal, the vehicle traveled miles that you had mentioned a 
couple years ago.
    Secretary LaHood. Yes.
    Mr. Latham. A couple years ago.
    Secretary LaHood. Yes, I said that 2 years ago.
    Mr. Latham. But that is off the table, the fuel tax is off 
the table.
    Secretary LaHood. Raising the fuel tax is off the table.
    Mr. Latham. I am still curious why you need $20 million for 
a revenue, full-time equivalence if you are not generating any 
revenue.
    Secretary LaHood. At some point----
    Mr. Latham. What are they going do?
    Secretary LaHood. I am going to let Chris explain the 20, 
but I think at some point we will figure out a path forward 
with you all.
    Mr. Latham. What is on--if you eliminated fuel tax and the 
vehicle miles traveled, what is left on the table?
    Secretary LaHood. Working with all of you. You want him to 
explain the 20?
    Mr. Latham. God bless you, Ray. You are good.
    Mr. Bertram. The point of the Office would be to study some 
of the things that have been discussed here about the fact that 
the amount of revenue collected from the traditional gas tax, 
from electric vehicles, alternatives fuels is actually 
declining and what the alternatives are to take a look at 
replacing that.
    Mr. Latham. Revenues from electric vehicles; is that what 
you said?
    Mr. Bertram. Right. Electric vehicles do not pay anything 
under the trust fund, and hybrid vehicles actually pay less. So 
this office would take a look at the effect that has on the 
trust fund and what alternatives are for paying.
    Mr. Latham. Okay. But wouldn't that be pretty obvious, 
there is less money going into the trust fund?
    Mr. Bertram. Right.

                                 AMTRAK

    Mr. Latham. I am just curious what the $20 million is 
actually going to do, I guess? But anyway.
    Talked about the high speed rail situation, and Mr. Olver 
made a good point that a lot of the rail, if it is between 
places where there are people in the northeast corridor, or 
actually pays for operation and it doesn't pay for any capital 
investment as you are well aware. But it is frustrating to me, 
I know you came out and you had $230 million for ``high speed 
rail'' which is going to average 53 miles an hour from Chicago 
to Iowa City. I have always been curious why Amtrak, that goes 
through Iowa purposely bypasses any population centers.
    I mean, it goes through southern Iowa. And if you are Des 
Moines, which is our largest city you have got to drive 53 
miles, I think, to get on Amtrak. And I guess my thought is why 
wouldn't it be--maybe it makes too much sense, but to take the 
train from Chicago where it leaves now and rather than run it 
across southern Iowa, run it from Chicago, to Davenport, to 
Iowa City, to Des Moines where there are actually people.
    Secretary LaHood. Yes, I think that is the plan eventually.
    Mr. Latham. No, this is not changing Amtrak's route.
    Secretary LaHood. I think if you look at----
    Mr. Latham. This is a whole separate initiative.
    Secretary LaHood. Yes, it is a separate initiative.
    Mr. Latham. It is not Amtrak.
    Secretary LaHood. No, it is not Amtrak, but it is the 
initiative we would have with the State of Iowa. I haven't 
talked to Governor Branstad specifically about the continuation 
from Iowa City to Des Moines, but I have talked to the mayor of 
Des Moines about it a lot.
    Mr. Latham. I know. But wouldn't it just make common sense 
to actually maybe combine the two ideas and have one train that 
would be kind of----
    Secretary LaHood. Absolutely.
    Mr. Latham [continuing]. High speed and not run the other 
train across----
    Secretary LaHood. I think that makes a lot of sense. We 
wouldn't be opposed.
    Mr. Latham. Why wouldn't anyone listen?
    Secretary LaHood. I am listening to it. I think it is a 
good idea. We have very limited resources, and we want to get 
this program going. If that makes the most sense in Iowa, I see 
no reason why we wouldn't do it.
    Mr. Latham. I haven't heard anyone talk about it. Okay. I 
just want to conclude this, if we can, maybe this round. We 
will extend the extra time if you need it, Mr. Olver. Not that 
you have ever needed it in the past.
    Okay, we are going to have to have a bill here in June, 
hopefully get it off the floor. I don't see any progress 
actually being made on a reauthorization.
    What is our plan B here? I mean, none of this in the 2012 
appropriation bill, I don't see any of this getting done that 
you are talking about legislatively, because there is not even 
proposals out there from anybody. So what are we to do? What is 
our back-up here? What is our plan B?
    Secretary LaHood. Well, plan A is to get through the 2011, 
that is what we are spending our time doing. I know that your 
leadership is doing the same. So that is number 1. We haven't 
been sitting around twiddling our thumbs. We have been working 
as a part of the team with the administration, to help the 
administration work with your leadership to get beyond 2011. 
Once that happens, and once you all pass something, then I 
believe you will see some very significant leadership from the 
administration on the path forward for 2012.
    I know that the authorizing committee has been on a 
listening tour. I know they are committed to a bill, and we are 
committed to working with you on this. We spend a lot of time 
trying to get 2011 finished up, and will continue to do that 
until 2011 gets finished. As soon as 2011 is finished, we will 
be up here working with you on 2012.
    Mr. Latham. You can see our----
    Secretary LaHood. Absolutely.
    Mr. Latham. Forget about 2011, but 2012, and all the moving 
parts you are talking about with the reauthorization, that has 
a huge impact as far as what we are trying to accomplish.
    Secretary LaHood. Exactly.
    Mr. Latham. And there is not even a proposal anywhere yet. 
So we are going have to proceed one way or another here, and 
that will be very difficult to incorporate your budget 
proposals without certainty for us, so I appreciate it.
    Secretary LaHood. Understood.
    Mr. Latham. Thank you. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman. I want to just comment 
here, there is going to be a series of comments again that the 
answer to many of the chairman's questions are when we can get 
to talk with you, and broadly that to talk with us on this side 
of the table is with both the House and the Senate as to how 
you are going pay for these things. I don't get much impression 
on this side of the table--you have to have a partner to do 
that discussion, and a partner that is willing to come to a 
resolution of the issue that everybody can agree to as workable 
and that doesn't seem yet to be showing up, I would say.
    Now on the Iowa situation, I shouldn't delve into that one, 
but I get the impression that the chairman does not ever expect 
to represent many of these communities along that route that 
the Amtrak route now goes through, or much of the way across 
the State, or he wouldn't be talking about moving the Amtrak 
line in particular. But Mr. Secretary, I will be happy to talk 
with him about a very similar situation that we are working on 
in Massachusetts with your help, with your help. So we will 
talk about that.
    Mr. Latham. I will look forward to that.

                              RECOVERY ACT

    Mr. Olver. Now, let me--you have worked very hard to get 
the recovery monies out of the high speed rail, innercity 
passenger rail recovering monies out. How close are you to 
doing that for the ARRA monies at this point? Can you give us a 
quick update? And then the secondary part of the question is 
how quickly----
    Secretary LaHood. You know what, Mr. Olver, we will have--
--
    Mr. Olver. Be able to get on to doing the 2010 monies?
    Secretary LaHood. We will for the record. We don't have 
those figures here. They change every day.
    [The following information is provided to Congress on a 
weekly basis:]




    Mr. Olver. Okay, okay.
    Secretary LaHood. We will get them for you.
    Mr. Olver. We will have them for the record.
    Secretary LaHood. Exactly.
    Mr. Olver. And have it as an update for the record about 
every--not less than once a month, I suppose.
    Secretary LaHood. Okay, we will do it.
    Mr. Olver. That is all I want to bother with.
    Mr. Latham. Mr. Diaz-Balart apparently--I guess that will 
be it for today, Mr. Chairman.
    Secretary LaHood. Thank you, Mr. Chairman. Thank you. I 
always appreciate it.
    Mr. Latham. You are a very good friend and I appreciate 
your hard work. Thank you.
    Secretary LaHood. Thank you, thanks a lot.



    
                                         Wednesday, March 30, 2011.

                     FEDERAL HIGHWAY ADMINISTRATION

                                WITNESS

VICTOR M. MENDEZ, ADMINISTRATOR
    Mr. Latham. I apologize for being a little bit delayed 
here. We just had some votes on the floor.
    But I want to welcome the administrator and thank you for 
coming to the subcommittee and for your testimony. You have had 
a busy year administering the American Recovery and 
Reinvestment Act, and I appreciate your efforts to speed 
project delivery time.
    Yesterday, we had Secretary LaHood before the subcommittee 
to discuss the proposed fiscal year 2012 DOT budget, and we had 
some dialogue about what I call the pie-in-the-sky changes that 
DOT has proposed. Secretary LaHood had some things to say about 
that but actually offered up very little detail about the 
budget. But we won't belabor that, I guess, today.
    We are all aware of the state of the Highway Trust Fund. 
The Congressional Budget Office is predicting insolvency by the 
end of fiscal year 2012. In this fiscal climate, I don't think 
Congress is in the mood to transfer billions of dollars out of 
the general fund as we have in the past. We really need to hear 
some ideas from you today about how we are going to fix the 
problem.
    Mr. Administrator, safety on our Nation's roads has been a 
long priority for your department, and I am pleased that you 
and the Secretary continue to focus on this issue of national 
importance. Keeping our roads and bridges in a state of good 
repair is an essential part of your job.
    And I am also happy to see you propose consolidating some 
of the numerous programs within the Federal-Aid Highway 
Program, but, as we all know, the devil is in the details. It 
is going to be a challenge to seriously consider the DOT's 
budget without knowing how you are going to operate these 
programs.
    For instance, I remain concerned that the Livability 
Initiative may be draining scarce resources from needed safety 
and maintenance programs. I hope that you will work with the 
committee to find cost savings in some of your programs to 
reinvest so safety remains the top priority.
    I also notice that your budget request focuses a bit more 
on performance-based programs and flexibility than in the years 
past. I would like to hear a bit more about how you will be 
measuring State performance and, as it would logically follow, 
how you anticipate penalizing States that are not meeting your 
standards.
    Again, thank you for your continued work. I believe we all 
will have many questions for you, so I will yield to our 
ranking member, Mr. Olver.
    Mr. Olver. Thank you. Thank you, Mr. Chairman.
    Mr. Administrator, it is a pleasure to have you here to 
speak with us today.
    The Federal Highway Administration's $70-plus billion 
fiscal year 2012 budget request reflects an understanding that 
an ambitious investment in our transportation infrastructure is 
needed to maintain our economic competitiveness in the global 
marketplace.
    Yesterday, during his testimony, Secretary LaHood stated 
that the Eisenhower Interstate Highway System is a model for 
the world and that we must maintain this system as we expand 
our transportation options. I fully agree with his statement 
that the highway system is a backbone of our economy. 
Unfortunately, it is well-documented there is an annual 
investment gap of $27 billion to maintain our current system of 
highways and bridges in a state of good repair--that goes 
considerably beyond just the interstate system, of course--and 
an annual gap of $96 billion to expand the system to meet the 
needs of a population that grows by nearly 10 percent every 
decade.
    In addition, there was a good discussion at yesterday's 
hearing, with most members of this subcommittee agreeing--I may 
be taking license there--that the funding levels provided in 
SAFETEA-LU were wholly inadequate in 2005 and certainly would 
not meet current needs.
    Most observers understand that every dollar of maintenance 
deferred this year will catch up to the next generation in the 
form of deteriorating highways and bridges and transit systems 
and less-safe highways and bridges and transit systems, as well 
as an economy choked by congestion.
    Furthermore, the question of how we fund a robust highway 
program came up again and again, but few specific solutions 
were offered. The simple truth is that, while we can debate the 
pros and cons of various revenue methods and models, we need to 
at least agree that a revenue increase is needed to maintain a 
viable transportation system. This will require tough political 
votes, with cooperation across the aisles and between 
legislative bodies. But I am committed to working with my 
colleagues to see such a robust infrastructure program enacted.
    Mr. Chairman, I yield back.
    Mr. Latham. All right. I thank the gentleman.
    Mr. Administrator, welcome once again. Your written 
testimony will be part of the record, but if you want to 
summarize, we would appreciate that. Thank you.
    Mr. Mendez. Good afternoon, Mr. Chairman and Ranking Member 
Olver. Thank you for giving me this opportunity to appear 
before you today to discuss the Federal Highway 
Administration's fiscal year 2012 budget request.
    The President's request for FHWA in fiscal year 2012 
represents a new paradigm in funding our Nation's highways. It 
includes $42.8 billion for a restructured Federal-Aid Highway 
Program and $27.7 billion in up-front funding to invest in 
critical highway infrastructure and to continue creating jobs 
that will help repair our aging roads and bridges.
    This request represents the first year of the 
administration's reauthorization proposal, which would provide 
$336 billion for highway programs from fiscal year 2012 through 
2017. Most significantly, this proposal reflects a 48 percent 
increase in funding for road and bridge improvements and 
construction.
    If we look at some of the details in the proposal, we see 
its true promise. Almost 60 percent is dedicated toward 
improving the condition and performance of an enhanced National 
Highway System, one that would carry 55 percent of all traffic 
and 97 percent of all truck-borne freight. Through 2017, the 
proposal would enable States to reduce the backlog of bridge 
repairs, rehabilitations, and replacements to almost one-half 
of its 2006 levels. And, by 2017, almost 70 percent of the 
miles traveled on the National Highway System would take place 
on pavement with good ride quality.
    The proposal would simplify the highway program structure, 
consolidating more than 55 programs down to 5 core programs. 
And it will establish a performance-based highway program in 
the critical areas of safety and state of good repair.
    A revamped performance-based Highway Safety Improvement 
Program is the first of the five core programs. The President's 
budget proposal will almost double the Federal investment in 
infrastructure safety programs to reduce fatalities and serious 
injuries on all the public roads.
    The new National Highway Program will target investments to 
maintain a state of good repair on roads critical to the 
national interest, while also providing States flexibility to 
make transportation investment decisions on the larger system 
of Federal-aid eligible highways.
    FHWA's third core program, Livable Communities, will help 
communities increase transportation choices and access to 
transportation services, improve quality of life in both rural 
and urban areas, and improve air quality as well.
    The new Federal Allocation Program consolidates several 
existing programs with inherently Federal responsibilities into 
one program with components focused on improving access to 
Federal lands, improving access to and within tribal lands, 
Emergency Relief, and Workforce Development.
    FHWA's fifth core program is a nationally-coordinated 
Research, Technology, and Education program that will 
accelerate innovation delivery and technology implementation.
    In addition to the five core programs, the 2012 budget 
includes the establishment of a Surface Transportation Revenue 
Alternatives Office to evaluate a range of revenue-generation 
options for the future.
    Our request also includes a Transportation Leadership 
Awards program to provide competitive grants to strengthen 
collaboration among different levels of government; allocate 
funding to projects based on performance and outcomes; and 
encourage the development of a multimodal transportation system 
focused on connecting people to opportunities and goods to 
market.
    As President Obama has indicated, maintaining and improving 
our infrastructure is at the heart of our effort to ``win the 
future.'' His budget reinforces that vision with a bold roadmap 
to invest in the 21st century. The investments proposed for 
FHWA in 2012 will support thousands of jobs, make roads safer 
and our communities more livable, and lay a foundation for 
future economic growth.
    I look forward to working with all of you and other Members 
of Congress in the weeks and months ahead to ensure that the 
proposal moves forward with success.
    Mr. Chairman, thank you very much for inviting me, and I 
will be happy to answer any questions.
    [The information follows:]



    
    Mr. Latham. Thank you for your statement.
    As I mentioned earlier, the state of the Highway Trust Fund 
is perilous, to say the least. It appears the Appropriations 
Committee will finish our work before the authorizers have a 
chance to finish theirs.
    Given this, and keeping in mind the balance of the trust 
fund, what do you believe is a prudent level of funding for 
FHWA in 2012 to ensure a stable Highway program at least 
through calendar year 2012?
    Mr. Mendez. As I mentioned in my opening remarks, our 
recommendation for 2012 for FHWA, including all the core 
programs that I mentioned, totals up to about $70 billion. 
Within that, we do include an upfront investment of about $27.7 
billion for the first year of the framework for a 6-year bill.
    Mr. Latham. So where do you get the money?
    Mr. Mendez. Our intent is to work closely, collaboratively 
with Congress to look to the future and see how we might be 
able to develop strategies to fund our request.
    Mr. Latham. Do you have any suggestions?
    Mr. Mendez. At this point in time, I do not. Our strategy 
would be to work closely with all of you, and try and find 
those strategies that will move us forward.
    Mr. Latham. I don't know if you heard the Secretary's 
testimony yesterday. Basically, he took any kind of gasoline 
tax increase off the table. As far as vehicle miles traveled, 
he took that off the table yesterday as well. What else is 
left?
    Mr. Mendez. There have been, as you are aware, over the 
years, a lot of discussions about how to fund transportation 
for the future. One of the strategies that we bring to the 
table is the creation of this Surface Transportation Revenue 
Alternatives Office to help us look at those issues.
    These are issues that we need to work collectively and 
collaboratively with stakeholders, and Congress of course, to 
help us get there, so we can invest in the future for America.
    Mr. Latham. You are requesting--$20 million for a Surface 
Transportation Revenue Alternatives Office that will focus on 
vehicle miles traveled, but the Secretary took that off the 
table yesterday. So what is the purpose of the $20 million if 
you have already said that you are not going to do what you are 
saying this office is for?
    Mr. Mendez. I didn't listen in to the session, because the 
hearing room is not wired for that. But let me just say that 
what we want to do with that office is to, again, reach out to 
the stakeholders. We would create a policy group to run that 
office, to bring stakeholders to the table, and identify 
strategies that are out there, so we could collectively move 
forward in the future on those strategies that hopefully we can 
all agree to.
    Mr. Latham. I don't know, shouldn't someone have considered 
revenue before proposing the $556 billion reauthorization? How 
did you come up with the number if there are no dollars behind 
it?
    Mr. Mendez. What we have proposed--and, again, just to make 
sure we are on the same page, we requested $70 billion for 
fiscal year 2012. That framework lays out what we believe a 
reauthorization package would look like for the next 6 years.
    Mr. Latham. Where is the detail?
    Mr. Mendez. We are working on reauthorization detail that 
hopefully we will be releasing sometime in the future.
    Mr. Latham. Do you have a date?
    Mr. Mendez. No, I do not, sir.
    Mr. Latham. Any idea, any guess?
    Mr. Mendez. I hesitate to guess. We are working on all the 
details, and you will hear from us.
    Mr. Latham. So how do we proceed here writing an 
appropriations bill when we know we don't have the money and, 
the reauthorization is not going to be done by the time we have 
to write? We are expecting in June, I would hope, to be on the 
floor with this bill.
    What is a realistic, prudent level of funding for 2012, 
understanding that we are not going to have a reauthorization?
    Mr. Mendez. Our recommendation today stands at $70 
billion----
    Mr. Latham. It is very frustrating to not get any answers 
yesterday or today. I don't know if it is even necessary to 
continue here if we are not going to get any answers.
    I will yield to the ranking member.
    Mr. Olver. Let me try one thing here. Thank you, Mr. 
Chairman.
    Mr. Mendez, you have said that the regular program is $27.5 
billion and then the additional program up front is--I think 
you used the term ``another $27.5 billion.'' And I am not 
exactly certain where we get from there to the $70 billion; I 
will have to look back over the sheets of paper that I have to 
see where that difference lies. I suppose--well, I guess it may 
be in transit and other things, because it is the whole surface 
transportation for $70 billion in the first year, I guess, 
something along those lines.
    But what will the known amount of money that we have 
already transferred from the general fund to be used for 
highway purposes and the number of dollars that are projected 
to come in from the gasoline tax, what does that support? Would 
that support for the year 2012 the $27.5 billion and the second 
upfront amount totally, or does that still leave a gap?
    Mr. Mendez. Let me take you through where we are today. 
Late last month, the Highway Trust Fund balance was about $19 
billion. And, as you alluded to, there have been infusions from 
the General Fund over the past 2 years of close to $35 billion.
    Given those revenues, the existing revenues from the gas 
tax, and given outlays at this point in time, and making 
projections, we estimate that the Highway Trust Fund can 
support the current program through the end of fiscal year 2012 
and probably into the first quarter of 2013.
    That is where we stand today, given all of the projections.
    Mr. Olver. Well, if there is $35 billion left--but I don't 
think there is $35 billion left. There is an expectation in the 
present fiscal year of bringing in--is it $31 billion or $32 
billion from the gasoline tax?
    Mr. Mendez. I don't have an exact number.
    Mr. Olver. Do we have enough left over from what had been 
provided out of the general fund to fund both of those?
    I am just wondering whether there is enough money that has 
already been transferred from the general fund to cover this 
kind of upfront portion, which you have given as $27 billion or 
thereabouts, and also the regular.
    We are trying to do 1 extra year of the program because, 
apparently, of a sense that the administration has that there 
is a great need for that additional money for that 1-year 
basis. That is what the upfront concept would be.
    Is there enough money, in your view, to cover both of those 
without going to additional revenues? That is what the 
discussion here has been about.
    Mr. Mendez. No. At this point in time, there is not.
    Mr. Olver. There is not. Okay.
    Mr. Mendez. There is enough to get us through the current 
program through the end of fiscal year 2012, early fiscal year 
2013.
    Mr. Olver. All right. Well, let me go to a different thing 
then.
    We have had a lot of criticism--I am not sure whether it 
was my friend from Ohio who raised the matter in the first 
place or someone else, but--that it takes far too long to 
complete projects. You hear tales of, from beginning to end, it 
taking 10 years in the transit area and 13 years in the highway 
area from the beginning of planning until you can actually use 
the new facility that you have been working on so hard over 
time.
    I am surprised, though--I was really surprised at that. I 
thought it was probably the other way around. I thought it 
would be harder to get transit projects going.
    But, anyway, major transit projects, as well as highway 
projects, have been criticized for that. Why does project 
delivery take so long? And what can be done to streamline that 
process?
    Mr. Mendez. Mr. Olver, you hit on a point that is very near 
and dear to my heart. Project delivery, at least in the highway 
arena and I am assuming in the transit arena, is just simply 
taking too long. I believe we owe the taxpayers a much better 
approach. And I think those of us that work in transportation 
can actually do much better.
    We have been looking at this issue for the past 18 months 
to 24 months here at FHWA. We have implemented an innovation 
initiative that we call ``Every Day Counts.'' I provided two 
basic goals and challenges to our transportation industry, both 
the private sector and the public sector.
    Goal one is to reduce project delivery time by 50 percent. 
I didn't settle for 10 percent or 12 percent. I said, we need 
to cut our delivery time by half. Thirteen years is simply too 
long, and it is not fair to the taxpayer to take that long.
    Our second goal is to identify innovation and technology--
some technology already exists--and be able to implement that 
faster. For whatever reason, in our industry, implementation of 
new ideas and new technologies simply takes too long. And a lot 
of these ideas actually can help us save lives and deliver our 
projects faster.
    So, within my innovation initiative of Every Day Counts, we 
are looking at reducing project delivery time to between 6 to 7 
years. We are looking at the entire process, from planning all 
the way through construction. I know a lot of people tend to 
focus on the environmental process; we are looking at that, as 
well. But I believe there is a lot of opportunity for us to 
really deliver projects faster, and we have to look at the 
entire process.
    Mr. Olver. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Olver.
    Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman.
    Mr. Administrator, welcome.
    When the Secretary was here the other day, he said you 
could answer my fly-ash question. Did he talk to you about that 
at all?
    Mr. Mendez. Yes, he did.
    Mr. LaTourette. Okay. So you are aware that the EPA now has 
three different proposals out on treating carbon coal ash as a 
hazardous substance. AASHTO and other highway installers have 
weighed in, and I asked the Secretary whether or not the DOT 
had taken the time to talk to its sister agency, the EPA, and 
express an opinion.
    I guess I am asking whether that has happened.
    Mr. Mendez. Yes, sir. We have heard from the external 
stakeholders, and we understand their concerns. This is still 
under the rulemaking process----
    Mr. LaTourette. Right.
    Mr. Mendez. I believe sometime this year they plan to come 
out with a final rule.
    Mr. LaTourette. Well, I think they actually said they are 
not going to do it this year because they received 450,000 
comments. And I am just wondering, on behalf of the 
transportation system of the country, has your department 
expressed an opinion to the EPA relative to the wisdom of their 
proposed regulation?
    Mr. Mendez. We have not expressed an opinion per se. We 
have expressed to them what we are hearing from the 
stakeholders. And I think probably the best thing, if you would 
like for us to do so may be to facilitate a meeting with our 
sister agency. We could do that.
    Mr. LaTourette. Well, I have talked to the EPA. I am not 
worried about the EPA.
    What I am not getting--and it is a little bit like the 
answer--and I don't blame you for this, because I don't believe 
you are the ultimate decisionmaker. But this is an example of--
I mean, the people that build highways have indicated that the 
regulation of fly ash as a hazardous waste would be more than 
detrimental to the construction of highways and bridges in this 
country. And I would expect the Department of Transportation to 
have an opinion.
    And you say that you passed on the comments. Well, they 
have 450,000 of them. I don't think they are going to be 
confused that this is of interest to people in the community.
    Leadership, in my mind--and, again, this isn't directed at 
you; it is directed at the entire administration--leadership, 
in my mind, is having an opinion. I mean, if you think the EPA 
is on the right course, you say, ``Way to go. How can we help 
you?'' If you don't think it is a good idea, based upon what 
you have heard from your shareholders, I expect you to say it 
is not a good idea.
    And that brings me to the trust fund and, I think, the 
frustration you heard in the chairman's voice. This is beyond 
comprehension, where this administration has chosen to not 
exhibit leadership in this area.
    This $556 billion or this $559 billion, whatever it is, it 
is like everybody wants to go to heaven but nobody wants to 
die. And so you have promised increased highway funding, 127 
percent increase in transit funding, you got this $34 billion 
grant program for performance-based highways, you have $53 
billion for high-speed rail. If I take your number of $70 
billion a year over the life of a 6-year bill, that is $420 
billion. The trust fund is limping along at a rate that will 
give you 180. And, you know, I wasn't a math major, that is why 
I ran for office, because I don't get the numbers, but I get 
this number. You are over half short, with no suggestion.
    The Secretary's suggestion yesterday was tolling. Well, 
that is ridiculous. Now, just by way of example, my in-laws 
live across the George Washington Bridge. Twelve bucks a day to 
go from New Jersey into New York City. Apparently there is no 
toll the other way because nobody wants to go to New Jersey. 
They all just want to go to New York City.
    But if you raise the gas tax 10 cents a gallon and they use 
a tank of gas a week, that is a $1.50, as opposed to 60 bucks 
to cross the bridge. You can't toll every piece of concrete and 
asphalt in this country and substitute it for public policy.
    But this administration, following on the failures of the 
last administration, has punted this issue. And I will tell you 
exactly how. President Bush sent up $256 billion for SAFETEA-
LU--wholly inadequate. We finally wasted 2 years, got to $300 
billion. Everybody knew, at that moment in time, we had a 
revenue problem. That was 6 years ago.
    Your administration comes in. The Secretary's first 
hearing, I remember it was in the big room because we were all 
excited our buddy got appointed as the Secretary of 
Transportation, and so we had him in the big room. And he said, 
``You know what? We are going to go on an 18-month listening 
tour.'' And I said, well, that is just nuts. What are you going 
to listen to? You are going to listen to the same thing people 
have been saying for the last 6 years? We need money.
    Now, somebody someplace, in the Congress, at the White 
House, in the Senate, is going to have to make a tough 
decision. And you are either going to have to say, you know 
what, this idea that Dwight Eisenhower had, it ain't going to 
work anymore, and so we are going to be resigned to having 
about $200 billion to spend at the Federal level every 6 years; 
and, States, good luck to you.
    But this proposal, in my mind, is the President Obama 
reelection plan. You are going to try and skate through fiscal 
year 2012 without making a tough decision on how to solve the 
long-term problems of the infrastructure funding of this 
country. And I think that that is an abdication of 
responsibility.
    And there is no way that you guys--and I assume you and the 
Secretary didn't write your opening remarks together, but they 
sound exactly alike. You are going work with us, sit down at a 
table. You have had 2\1/2\ years or 2 years and 3 months.
    And this is not new. It is not like, all of a sudden, you 
know, there was an earthquake or some catastrophic event. We 
have known for years that the trust fund is not sustainable and 
we have to do something about it. But there is no leadership. 
And I think it is disgusting, I think it is awful.
    And, again, it is not directed at you, but it is the bunch 
you work with. Unless you guys come up with a proposal that we 
can talk about, I think this is sinful. And you should go 
apologize to every group that you are promising this money to, 
because you don't got any money.
    I yield back.
    Mr. Latham. Do I understand your feeling on this, Steve?
    Mr. LaTourette. I tried to be clear.
    Mr. Latham. Thank you.
    Mr. Olver. You are not going to leave us.
    Mr. LaTourette. I have to go to Rules to testify on the FAA 
bill.
    Mr. Latham. Mr. Administrator, you mentioned earlier about 
being fair to the taxpayer, and I think everyone agrees the gas 
tax is a user fee. When motorists pay this tax, they assume 
that you are going to be building roads, bridges, something 
with the dollars that they are putting into the trust fund.
    You have this Livability Initiative. By funding programs 
like that, how can you actually look the person buying gas--
which is very expensive today--in the eye and say that you are 
a good steward of their money? I just don't understand how that 
translates.
    When people buy a gallon of gas, they expect those tax 
dollars to go to build infrastructure, rather than somebody's 
great idea out there. How can you justify that to the taxpayer?
    Mr. Mendez. The primary philosophy about the Livability 
Program is that we want to provide transportation choices to 
the public and connect communities. And you do that with 
transportation. That leaves out the----
    Mr. Latham. I am sorry, but the Highway Trust Fund is on 
life support. We are broke. How can you justify taking more 
money out of the trust fund for some other initiative? If you 
have another new initiative, find a way to pay for it. To take 
it out of the trust fund is just really being unfair and is not 
keeping what is a contract with the taxpayer.
    Mr. Mendez. What we have done as I mentioned, is 
consolidate about 55 programs down to 5. And a lot of the 
current activities that we actually undertake under the Highway 
Trust Fund have been wrapped up into the livability component. 
So, the eligibilities from some of these other existing 
programs are part of the livability----
    Mr. Latham. So how much do you save there that can be 
applied to livability?
    Mr. Mendez. I would have to compare. We have a crosswalk, 
and I don't have that with me, and I certainly can provide that 
to you.
    Mr. Latham. This is extraordinarily frustrating. You know 
what the situation is, as far as us writing a bill this year. 
We are not going to have the money. Do you have a backup plan B 
to actually have an honest proposal that we can actually act on 
this year?
    Mr. Mendez. I think what we need to look at is, if nothing 
moves forward, we have the existing process in place. As I 
mentioned, our Highway Trust Fund remains solvent through the 
end of fiscal year 2012 and probably into the first quarter of 
2013.
    Mr. Latham. So that is the backup plan?
    Mr. Mendez. If there is nothing else available, I have to 
continue moving the program forward given what I have today.
    Mr. Latham. Now like Mr. LaTourette said, there is a 
responsibility for an administration to propose and Congress to 
dispose. And, like he said, I do not see any leadership, 
yesterday or today, as far as submitting an honest proposal 
before Congress. I just don't know why we should even continue 
the hearing; I really don't. If we can't get any suggestions, 
any kind of an honest proposal, why should we even be here?
    Mr. Mendez. We have a proposal in place.
    Mr. Latham. What? Where is it?
    Mr. Mendez. Our current fiscal year 2012 budget request, as 
I mentioned, outlines what we see for the future over the next 
6 years.
    Mr. Latham. Where is the money?
    Mr. Mendez. We would like to work with you to try and 
identify that and reach agreement on it.
    Mr. Latham. All right. I am not going to do it anymore. I 
am going to adjourn the hearing. This is just ridiculous.




                                          Wednesday, April 6, 2011.

                    FEDERAL AVIATION ADMINISTRATION

                                WITNESS

J. RANDOLPH BABBITT, ADMINISTRATOR, FEDERAL AVIATION ADMINISTRATION
    Mr. Latham. Good morning. We want to welcome the 
administrator of the Federal Aviation Administration (FAA), 
Randy Babbitt, to the Subcommittee to testify on the 
administration's Fiscal Year 2012 budget proposal.
    Your agency faces a familiar problem that we have 
throughout our Subcommittee. You have increasing operating 
costs and expensive capital and research initiatives that 
require more and more funding. This Subcommittee will be 
writing a bill that will be freezing funding levels at Fiscal 
Year 2008 or lower. While many of these programs and funding 
proposals are good ideas in the abstract, we are forced to 
prioritize. The last several FAA budget proposals and your 
labor agreement with the National Air Traffic Controllers Union 
(NATCA) ignored any future-year cost impacts, and you can no 
longer take that approach.
    This new fiscal reality, combined with the complexities of 
operating a national airspace system 24 hours a day, 7 days a 
week, would be challenging enough. However, many of your major 
acquisitions struggle to stay within the original schedule or 
cost estimates.
    In particular, the En Route Automation Modernization 
program, or ERAM, has been nothing short of disappointing. We 
now have spent 3 years at Salt Lake City and Seattle trying to 
get this program ready for national deployment. The original 
schedule called for 12 months of testing at these locations. 
The usual protocol is to have an independent team evaluate the 
program before it is expanded nationally. The independent team 
concluded on March 18th, and I quote, ``The independent 
operational assessment team determined that ERAM is not 
operationally ready for national deployment,'' end quote. The 
team found 17 different safety risks. And, in spite of this, 
the FAA signed an in-service decision that paves the way for 
national deployment. I am deeply concerned and believe this is 
the wrong approach.
    The ERAM program that we have already spent $2 billion on--
and I have little confidence this won't cost taxpayers an 
additional $500 million over the baseline at the very least. If 
the FAA cannot prove that it has the capability to do major 
acquisitions like ERAM and NextGen on time and on budget and 
clearly demonstrate the benefits, significant portions will not 
be funded. We simply can't afford it.
    The challenges ahead are very significant, as you are well 
aware. And we have a lot of ground to cover here today.
    So, with that, Mr. Olver can't be here, so we are very 
pleased to have Mr. Pastor here. And the gentleman is 
recognized.
    Mr. Pastor. Thank you, Mr. Chairman.
    Good morning, Mr. Babbitt. Thank you for being with us 
today.
    The FAA is requesting $18.7 billion in budgetary resources, 
of which $3.4 billion is part of the administration's up-front 
investment in transportation infrastructure. Overall, this is a 
relatively flat budget request.
    While airline passenger levels remain below the 2008 
levels, traffic is expected to return. In that regard, we must 
continue to invest to improve our aging aviation infrastructure 
in order to accommodate future passenger growth. The FAA's 
NextGen program will also play a key role in modernizing the 
air traffic control system.
    At the same time, FAA must remain committed to its core 
mission of safety. The incident last week with the cracked 
fuselage demonstrates the important role that FAA plays for the 
traveling public.
    Finally, the FAA's most important asset is its workforce. 
Every controller, inspector, airport ground administrator, 
manager, and rank-and-file employee is critical to the success 
of the agency.
    I look forward to your testimony.
    And I yield back, Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    And I would like to have you have your opening statement. 
Obviously, your written statement testimony will be included 
for the record, but if you could--somewhere around 5 minutes 
would be wonderful.

                           Opening Statement

    Mr. Babbitt. Yes, sir.
    Mr. Latham. Thank you for being here.
    Mr. Babbitt. I appreciate the opportunity, Mr. Chairman and 
Ranking Member Pastor, members of the committee. I do 
appreciate this opportunity to discuss the administration's--
    Mr. Latham. Apparently the microphone is not working.
    Mr. Babbitt. Are we doing better now? All right. Thank you.
    Well, good morning again, Mr. Chairman, Ranking Member 
Pastor, Members of the Subcommittee. I appreciate very much 
this opportunity to discuss the administration's budget request 
for the Federal Aviation Administration in fiscal year 2012.
    First off, everyone at the FAA is committed to continuing 
to run the safest and most efficient airspace system in the 
world. I would like to address up front some recent safety 
events that have been in the news so you will know exactly what 
action we are taking.
    Last Friday, Southwest Airlines suffered a breach of the 
hull on one of their aircraft. The investigation into that is 
ongoing, and we are working with the NTSB.
    I would note that the professional crew, the pilots and the 
flight attendants, did an absolutely outstanding job of landing 
the aircraft and caring for their passengers. Our air traffic 
controllers were also very critical in facilitating the safe 
and rapid descent of that airplane.
    Yesterday, we issued an airworthiness directive to require 
enhanced inspections of these early generation 737 aircraft 
after they reach certain flight-cycle limits. This is to ensure 
the continued safe operation of the fleet.
    The FAA has worked diligently over the last 20 years to 
develop a program dedicated to ensuring the safety of aging 
aircraft. As a result of thorough research, we have put in 
place stringent requirements to prevent fatigue damage that 
encompasses both aircraft design and maintenance. As a part of 
this effort, just 6 months ago, we issued a widespread fatigue 
damage rule to proactively address the additional required 
maintenance actions and to ensure the safety of our older 
aircraft.
    Make no mistake, Friday's event was very serious, but I 
want to make absolutely certain that what we learn from this 
accident gets incorporated into our requirements for reviewing 
aging aircraft. Therefore, I am asking my team to review our 
aging aircraft program to ensure we are asking the right 
questions and taking full advantage of all available data. I 
want the traveling public to be assured that the system they 
fly in and that the airplanes they fly in meet the highest 
levels of safety.
    I also want to take a moment to address the issue of the 
air traffic controller who failed to perform his duty at Reagan 
National Airport last month. As I said at the time, I was 
personally outraged at that lapse, and the controller has been 
suspended from operational duties.
    Furthermore, we have taken several steps to ensure that a 
similar incident will not happen again. We placed a second 
controller on the midnight shift at Reagan National Airport. 
That airport has unique security issues that surround it. We 
have taken similar steps to provide coverage at other airports. 
During overnight shifts we have directed, therefore, that 
controllers contact their counterparts at selected facilities 
prior to transferring aircraft and to confirm that there is a 
controller ready to handle the incoming flight.
    I have also ordered a nationwide review of the air traffic 
control system to confirm that the appropriate backup 
procedures and equipment are both in place and in use. Today, 
we staff our towers based on the level of traffic that is 
handled as well as other operational concerns, such as national 
security and defense. A preliminary analysis of selected 
airports shows us that we may need to shift schedules, add 
equipment, or redeploy personnel at some towers to achieve the 
appropriate coverage. We will work with NATCA as well as 
Congress to reach final decisions on how we handle going 
forward.
    I am determined that we will not repeat this unacceptable 
incident.
    Aviation itself is an economic engine for this country. We 
move passengers, we move freight, and we ensure that our 
economy remains competitive and prosperous. As a former airline 
pilot and businessman, I want taxpayers to know that the money 
in this budget will be well-spent. So I want to share with you, 
if I could, the business case for this budget request.
    We are facing a very pivotal time in aviation history. We 
are transforming to NextGen. We are moving from ground-based 
radar to satellite-based navigation. Air travel will be more 
precise, it will be safer, it will be more efficient, and more 
environmentally friendly. We need to embrace this opportunity 
and lead the way.
    The President's FY 2012 budget is designed to maintain and 
enhance the operational safety and to invest in our 
infrastructure and technology. In doing this, we will improve 
efficiency, we will reduce our environmental impact, and we 
will create thousands of jobs.
    Our budget contains very limited discretionary increases 
and emphasizes cost-efficiency. We are taking a good look at 
our own organizational structure. We are making changes to 
create a more streamlined and efficient agency. As NextGen 
changes the way the whole world manages air traffic, we are 
transforming the way we do business at the FAA to embrace it.
    NextGen makes safety sense. It makes business sense. It 
gets passengers where they want to go more quickly. It cuts 
fuel-burn. Most importantly, it pays for itself with a very 
positive rate of return. Delaying infrastructure investments 
means the long-term cost to our Nation, to our passengers, and 
to our environment will far exceed the cost of going forward 
with technology of today. Some airlines are already 
capitalizing on this. They have done the math and they have 
seen the business case for equipping with NextGen. They are 
capturing real dollar savings today.
    The infrastructure of the future is going to be a marriage 
of NextGen procedures with our airports, our runways, our 
airlines, and our flight crews. The budget supports the airport 
grant program as well, which enhances safety and efficiency 
while maintaining capacity, and addressing the expanding needs 
of our aviation system.
    This budget also pays for safety inspectors to inspect the 
latest generation of innovative aircraft that Americans are 
building today. We don't want to be the chokepoint in the 
assembly line. We want to certify the aircraft and the 
equipment and the procedures to keep the aviation economic 
engine running. So I would sincerely ask your support in 
helping the men and women of this agency that perform the tasks 
they so proudly handle day-in and day-out.
    So I thank you, and appreciate this opportunity. I would be 
happy to answer any questions that you might have.
    [The information follows:]



                SOUTHWEST AIRLINES HULL BREACH INCIDENT

    Mr. Latham. I thank the gentleman for his testimony.
    Mr. Babbitt, in 2008, Southwest was fined $10 million by 
the FAA for skipping mandatory inspections that related to skin 
cracking in their aging 737-300 fleet. And those are 
inspections that FAA personnel knowingly allowed them to miss; 
knowingly allowed them to miss.
    A year later, in July of 2009, a large hole appeared mid-
flight in high altitude and prompted an emergency landing in 
West Virginia. And, again, last week, a similar hole appeared 
mid-flight, causing the emergency that you mentioned in 
Arizona.
    Why has it taken a second incident, the same type of 
incident that happened at West Virginia, why has it taken a 
second incident for you to finally have inspections and 
rigorous oversight?
    Mr. Babbitt. Going back to 2008 I think I should let the 
committee know, I was part of an internal review team that was 
put forward by Secretary Peters to review the Southwest 
incident and the compliance issues. I am very familiar with 
what the history was there.
    Following that, however, the FAA, conducted a long and very 
rigorous review that brought together the folks in the 
maintenance world, the manufacturers, pilots, mechanics, the 
FAA experts, and NTSB recommendations. We put forward a rule 
back in November that addressed the aging aircraft.
    Now, it is unfortunate that we have seen a second event. I 
think it is important for the traveling public to note that the 
airplanes are certified by FAA so they will not suffer a hull 
breach. But, in the event they do suffer a hull breach, FAA 
ensures the airplane is designed to maintain its structural 
integrity even with a hull breach. Both of these aircraft did 
that.
    We don't know what happened in this most recent incident. 
It is under investigation. We are working with the NTSB. We 
certainly want to get to the bottom of it. I have asked my 
team, as I noted in my oral testimony, to take a good look at 
this 6-month-old rule that examines all aging aircraft to make 
sure that we are asking the right questions, to make sure we 
are getting the right data, and make certain that we have the 
right maintenance inspection procedures in place.
    Mr. Latham. Was this aircraft inspected?
    Mr. Babbitt. Yes, it was. This aircraft was inspected back 
in March. Again, we don't know what happened. We suspect 
fatigue, but there is often a big gap between suspicion and 
fact.
    Mr. Latham. Is this a Southwest issue or a Boeing issue? 
Or, is it your issue?
    Mr. Babbitt. No, sir. The fact that it is under 
investigation, I really wouldn't want to speculate too much. 
But, clearly, there is some correlation between high cycles and 
metal fatigue. That is why we have the rule, in the first 
place, that begins to look more aggressively at these aircraft 
as the cycles increase, with a cycle being a takeoff and 
landing. The airplane is pressurized and depressurized. The 
aircraft is also subjected to pretty extreme changes in 
temperatures as it climbs to altitude. So the metal is heating 
and cooling, while being pressurized and depressurized.
    Mr. Latham. Do you know whether it is an issue? Is it 
maintenance? Is it design? Lack of oversight?
    Mr. Babbitt. No, sir. What I believe, pending the outcome 
of the investigation, is that we are clearly looking at the 
fatigue areas of metal. We have very advanced techniques. I 
think the question that would arise is, when these aircraft are 
manufactured, the manufacturers subject them to very intensive 
simulated cycles so that an aircraft within perhaps a 6-month 
period, whether they can subject it to having simulated 30,000-
35,000 cycles.
    But that is on the test stand. Are we getting a different 
performance out in the field? We don't know. We are going to 
work with the NTSB. We are going to work with the 
manufacturers. We need to know the answer. If the answer to 
that means that we move back this AD that says that anybody 
with an airplane that has more than 30,000 cycles on it has to 
inspect their airplanes within 20 days and an airplane that has 
more than 35,000 cycles has to be inspected within 5 days.
    So we are going to take a good look. Perhaps, working with 
the manufacturer, the numbers should move back some. We will 
get to the bottom of it.
    Mr. Latham. Do you have the expertise, yourself? Or do you 
rely on the manufacturers and the airlines and outside----
    Mr. Babbitt. When you say myself, me personally?
    Mr. Latham. Well, the agency, the FAA.
    Mr. Babbitt. Yes, the FAA has a variety of experts.
    Mr. Latham. I would expect you do also.
    Mr. Babbitt. No, sir, I have a shortcoming in that area. We 
have a group of highly qualified and very technical engineers 
that have expertise.
    Mr. Latham. How much do you rely on the industry?
    Mr. Babbitt. Well, in some cases, you do rely on the 
industry and take their designs. Often, the industry innovates 
and creates things, as we are not inventors at the FAA, where 
we are forced to go with them and go through testing.
    We design the testing to make sure that the product will 
live up to the rigorous standards it is going to encounter in 
airline operations or general aviation operations.
    Mr. Latham. My time has expired.
    Mr. Pastor.

             FUNDING IMPACTS FROM FAA REAUTHORIZATION BILL

    Mr. Pastor. Thank you, Mr. Chairman.
    Last week, the House passed the authorization bill that 
extends the FAA's authorization through fiscal year 2014. As 
compared to what happened in that bill and your request in your 
budget, you request $9.8 billion for operations, and the bill 
that passed authorizes $9.2 billion in fiscal year 2012. For 
your capital program, your budget requests $2.87 billion; the 
bill carries $2.6 billion. For airport grants, your budget 
requests $5.5 billion, including the up-front request; and the 
bill includes $3 billion.
    If these funding levels were to be enacted, what impact 
would they have on the FAA's operation, your effort to 
implement NextGen, and the overall capital needs of our 
Nation's airports?
    Mr. Babbitt. There would clearly be some very, very serious 
constraints imposed upon the FAA. We take our number one focus, 
which has been and will be safety, very seriously. We will 
maintain all of the critical safety components of the FAA. We 
will continue to have our air traffic control operate safely. 
We will continue to inspect and do the things in that area.
    However, you did mention a few of the other things. We 
simply will have to slow down NextGen deployment. What I have 
tried to do is make a fairly clear business case. For example, 
for 2 or 3 years of $1 billion less, $3 billion less overall in 
funding, we can demonstrate--and this is supported by the RTCA 
and the rest of the industry--that we would save something in 
excess of 1.5 billion gallons of fuel by the year 2018 and 
something in excess of a billion gallons a year each year 
thereafter. I don't expect jet fuel to remain at $3 a gallon in 
2018. But if it was, that is $3 billion a year in fuel this 
industry is going to burn if we can't deploy NextGen.
    We simply cannot continue with the radar system we have 
today. This is Eisenhower-era technology. We have the 
technology at hand; it simply needs to be deployed. It does, in 
fact, take money to deploy it, but the return on your 
investment is calculable and realistic.
    Mr. Pastor. So, in determining your priorities in case your 
budget is reduced, and I heard 2008. That is what the chairman 
said, that that would be the level of funding. Obviously, that 
would be a reduction. Your priority would be safety. So it 
would be in staffing or inspections? Or what would be your 
priorities?
    Mr. Babbitt. We would clearly have to reduce the overall 
staffing of the FAA. I have spoken about other things that 
would become a concern to me that are that we have, about 800 
or more annualized requests in flight standards for new 
airlines, new operations that people propose that have to be 
certified. We simply can't continue to certify those types of 
operations with less personnel. In any given year we have 
approximately 2,200 to 2,400 certification requests that is 
about 200 objects whether they be airplanes, parts for 
airplanes, new components for airplanes, new graphic materials 
for airplanes, or things that make airplanes safer and more 
efficient.
    But even more important, these things, when certified, go 
to factories that employ people. So, for example, on the east 
coast of the United States, we now have three manufacturers 
that are proposing to build new facilities, with Boeing being 
one of them. They want to build a factory to assemble 787s on 
the east coast of the United States. They propose that this 
factory will employ 4,000 people. HondaJet wishes to build a 
factory down in Florida. Embraer wishes to assemble aircraft on 
the east coast. All of these are aircraft assembly plants, that 
will bring jobs into this area. But those factories have to be 
certified, and I have to have personnel to conduct those 
certification inspections.
    So I just want us to be very careful. We are trying to be 
very judicious with the funds that we have and have adopted a 
number of things. This budget encompasses almost $85 million in 
cost reductions for areas that we have found. And we are doing 
things, going forward, to streamline the FAA.
    As I said in my testimony, I don't want these restraints to 
result in our being the chokepoint of the assembly line or the 
reason someone can't open a factory on time and it is delayed 
for 3 months because I don't have enough people to inspect it. 
I just don't think that is a wise use of our money.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Pastor.
    Mr. Womack was first here.

                          AIP PROGRAM CHANGES

    Mr. Womack. Thank you, Mr. Chairman.
    And thank you, Mr. Administrator, for your testimony.
    I am trying to better understand the budget request, and 
parts of it don't seem to add up, to me, at least on the 
airport side of the equation.
    When the Secretary was here last week, we talked a little 
bit about AIP, but I would kind of like for to you walk me 
through this process a little bit. The budget assumes a one-
time $3 billion-plus infrastructure investment as part of the 
President's call for an additional $50 billion in spending that 
we all know is likely not feasible, given the environment we 
are in and the deficit.
    Then you proposed to kick out the large and medium hub 
airports from the AIP program, which I am personally directly 
opposed to, and I think some of my colleagues feel the same 
way.
    And then, you support an increase in the passenger facility 
charge, which is not the jurisdiction of this committee and is 
not in the bill the authorizers presented on the House floor, 
which, finally, leaves us with your budget request of $2.4 
billion for Fiscal Year 2012.
    Assuming we do not increase the passenger facility charge, 
what is the funding level you believe the AIP program should be 
funded at in Fiscal Year 2012?
    Mr. Babbitt. Those two things are somewhat coupled. The 
idea is that you would take the large airports and make them 
independent, with their ability to raise their own money, which 
would free up money and be less of a burden on the taxpayers in 
terms of our smaller airports. So we sort of bifurcate those 
two issues. They go hand in hand. To say that you would reduce 
the funding and not increase the PFC would have a serious 
impact on all the airports.
    The rationale for the larger airports is that these are 
clearly in large metropolitan areas. They have a tax base and 
the ability to raise funds on their own. And, therefore, the 
feeling is--and They often express their willingness to be 
unbundled from the package.
    The authorization to go to 7 is simply an authorization. 
They don't have to do it. Not everyone goes to the full 450 
anyway. They base their capital projects, and the people that 
use those airports pay the facility charges for that use.
    So that is sort of the rationale of why we propose to split 
those two things apart.
    Mr. Womack. Assuming Congress decides to continue to 
provide access to the AIP program to airports of all sizes, can 
you supply for the record how those funds would be distributed 
throughout the various sub-accounts within the program?
    Mr. Babbitt. Well, the way we operate today, I wouldn't see 
any real change. We operate today where the funding is based on 
the need and the contribution to the national airspace and 
airport system. So an airport that clearly makes a large 
contribution in moving our traffic safely and efficiently is 
going to be eligible.
    We look at safety features such as runway safety areas. 
Part of the added stimulus boost, the infrastructure initiative 
that is called for, is to have those moneys complete pledges 
that we made for safety improvements, runway safety through 
2015. We identified a number of areas at a number of airports 
that simply didn't meet our standards and have helped these 
airports, by this type of funding, to improve those runway 
safety areas, runways, and the areas around the approach zones.
    So we would go back to our formula, which has been a pretty 
tried and proven formula over the years, where we allocate the 
funding based on the contribution to the system. Smaller 
airports often serve as feed or reliever airports to a major 
airport. This helps unburden the traffic. Those projects are 
highly considered and often awarded.
    Mr. Womack. Thank you.
    I yield back, Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    The gentleman from Ohio, Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman.
    Nice to see you, Mr. Administrator.
    Mr. Babbitt. Yes, sir.

                LABOR PROVISIONS IN FAA REAUTHORIZATION

    Mr. LaTourette. Last week, we had the authorization bill on 
the floor, and the administration issued an SAP, indicating 
that the President's advisors would recommend a veto of the 
bill if it didn't fix the National Mediation Board or if the 
National Mediation Board language wasn't removed. And despite 
my efforts and my friend here from Florida's best efforts, it 
didn't happen.
    Is there anything that you have seen that would change your 
advice to the President relative to whether or not he signs or 
vetoes the bill that cleared the House last week?
    Mr. Babbitt. The fact that it is in the aviation bill, I 
would just have to announce a little bit un-germane to the job 
that we do, the labor relations aspect and what the FAA does 
are somewhat unrelated.
    Mr. LaTourette. Right. So you don't have a dog in the 
fight?
    Mr. Babbitt. That is correct. Nicely said.
    Mr. LaTourette. Well, you know, I think my frustration, as 
an old transporter, is that you haven't had--not you, but the 
FAA hasn't had a clean reauthorization bill since 2003, and you 
have been operating on extensions, 17 of them I think. That has 
to make it difficult to implement NextGen and all of the other 
things that are required.
    And, you know, every time we do this, it is something else. 
First, it was UPS and FedEx were fighting. And then the Bush 
administration was fighting with the air traffic controllers. 
Then it was the PFCs that have been mentioned here a little 
earlier. And then the last thing was--which was tried again 
this time--was a group of Senators trying to favor one airline 
over all other airlines relative to adjusting the zone at 
Washington National. And slots at Reagan was what brought down 
the bill in the last Congress, despite Mr. Costello's best 
efforts and Mr. Mica's best efforts. And now we got this NMB 
thing.
    So I think it is unfortunate that issues that really don't 
have a lot to do with implementing what we all say we have to 
do keep getting in the way. But that is not your fault; that is 
our fault.

                          RNAV/RNP PROCEDURES

    However, having said that, you know, all the modeling I 
have seen on NextGen convinces me that the fuel savings that 
you are talking about are a reality. And I guess I am 
wondering, even in this current environment, why there aren't 
things that the FAA can currently do to achieve some of the 
fuel savings that we are talking about.
    And, specifically, where you would get the greatest 
immediate benefits, in terms of carbon dioxide emissions and 
fuel-burn and everything else, and I think the last thing I saw 
is it shortens the average flight by 3 minutes, if you make the 
adjustment to RNP, required navigation performance. But I don't 
see the FAA moving in that direction. As a matter of fact, some 
people say that the FAA policy is ``RNAV everywhere and RNP 
where required.'' And that is unfortunate, if that is your 
policy.
    And I guess I am asking you to tell me why you can't, with 
the money that you have available, move forward with this piece 
that would achieve the greatest efficiencies, the greatest 
savings, and increase safety, I would think.
    Mr. Babbitt. You are correct on all fronts.
    First, let me state for the record that that is not our 
policy. We are moving forward as quickly as we can to develop, 
with our colleagues, so we reached out to the RTCA.
    We took 300 members of the aviation community and laid out 
our NextGen implementation plan and said, ``So how does this 
look to you, the members of the industry?'' And they said, ``It 
looks pretty good, but it could use a lot of changes.'' They 
gave us those changes. We have implemented those changes into 
our NextGen implementation policy, which is a major change in 
direction.
    For example, doing overlays. To simply take an approach 
that exists today and replace it with an RNAV or an RNP 
approach, that doesn't give us a benefit. So, let's let those 
types of facilities age out on their own, and let's design 
facilities and approach procedures that capitalize on what we 
can do.
    We have a number of partnerships now that we are using with 
folks around the country. JetBlue is a great example. We have a 
partnership where we are going to equip some of their aircraft. 
They are going to use new, efficient routes down through 
Florida and the Caribbean. And, in return, they provide us with 
data so that we see just what these savings are.
    The program we entered into with Petroleum Helicopters 
International was a great partnership with the oil companies in 
the gulf. Two hundred and fifty thousand square miles of the 
Gulf of Mexico today have positive surveillance equivalent to 
radar. People are flying direct. Every day, there are 300 to 
400 flights. Every day, 10,000 people go on and off of those 
oil rigs. And they are saving 100 pounds of fuel per flight. So 
yes, sir, we are enjoying and look to expand in those 
opportunities.
    Mr. LaTourette. Could I just finish this thought?
    Mr. Latham. Yes, sir.
    Mr. LaTourette. Thank you so much, Mr. Chairman, for your 
indulgence.
    While I certainly appreciate what you just said, my 
observation is that there continues to be the publication of 
these overlays, the RNAV overlays. And so I guess the direct 
question is, how much benefit is this metroplex activity and 
RNP, the move to RNP, how much of it are we actually going to 
see, the examples that you just talked about, in 2012?
    Mr. Babbitt. We should see some very positive results. We 
have a team working right now in the Houston metroplex and they 
have done some great things down there. In the Dallas area, the 
same thing. We are also looking at the New York airspace, which 
has been complicated with litigation. We are seeing optimized 
and tailored arrivals into cities like Atlanta and Los Angeles.
    We have a terrific partnership with Alaska Airlines 
carrying out optimized profile descents. And I would note for 
the record, Alaska is the only airline that has every one of 
their aircraft equipped with all full NextGen. They can 
completely utilize all of the RNPs, which allow us even curved 
noise avoidance procedures. Not only are they efficient, they 
are environmentally very strong. They report to us that they 
are saving in excess of 200 pounds per arrival into the Green 
Skies Initiative in Seattle. So I look to expand and accelerate 
those areas.
    Mr. LaTourette. I appreciate that.
    And I thank the chair.
    Mr. Latham. Thank you.
    Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you.
    Mr. Administrator, good to see you, sir.
    Mr. Babbitt. Yes, sir.
    Mr. Diaz-Balart. Let me first thank you for you have always 
been exceedingly accessible and easy to work with. And I cannot 
thank you enough for just, frankly, that attitude that you have 
always expressed.
    Mr. Babbitt. Well, thank you. And I thank you for 
representing my old hometown. That is where I grew up.

                           OPERATIONAL ERRORS

    Mr. Diaz-Balart. That is right, that is right. So I might 
be a little biased then, okay? But it is all right, it is all 
right.
    Let me talk to you a little bit about air safety. I brought 
these issues up with Secretary LaHood. And I don't know if I am 
going to have enough time to get through all of them, so let me 
just kind of throw some of them out there.
    We have all seen a lot of reports of near misses and of 
potential accidents. We had last July the United airbus 
incident, supposedly, the report is that they were 15 seconds 
away from a collision. Last weekend, central Florida, in your 
old, you know, running-around grounds, there was an incident 
where you were very emphatically calling it ``totally 
inappropriate.'' There is the incident, you know, supposedly, 
even our colleague, Mr. Sensenbrenner, personally witnessed a 
potential catastrophe.
    Now, according to the FAA, the FAA has said that--the press 
has mentioned--and I don't know if these numbers are right. The 
Washington Post reported a 51 percent increase nationwide on 
recorded incidents or near misses, et cetera, et cetera.
    I want to see if you can set the record straight, because 
the FAA has said that it is due because of this new self-
reporting system. However, there are a number of conflicting 
media reports that state that some of those things that are 
included are not part of that.
    Mr. Babbitt. Correct.
    Mr. Diaz-Balart. So if you could set the record straight--
and I don't know if you can do it now--but as to what is 
included, what is not included. And maybe if you could provide 
us, you know, either today or whenever it is possible--it 
doesn't have to be today--with what exactly is included in 
those reports.
    If you want to address that first, then I will get to my 
next----
    Mr. Babbitt. Sure. And let me say for you that we would be 
more than happy to come over and spend as much time----
    Mr. Diaz-Balart. I think we should.
    Mr. Babbitt [continuing]. As you would like so that you 
have a complete understanding.
    Essentially, we are undergoing a tremendous culture change. 
We are adopting a safety management culture within the FAA. And 
this means that people should be able to talk about any 
mistakes, whether they make, see, or encounter, without fear of 
retribution. We certainly want people to be held accountable, 
but we also want people to report everything they see.
    Today, we also have adopted some electronic methodologies 
so that we now capture things electronically that we might not 
have even seen before. So we are capturing a lot more of this 
type of an incident.
    Now, this all brings us data. I am not happy to see any 
rise in these incidents. The incidents you talk about are 
operational errors. We have boundaries that we have set. We 
don't want people inside these boundaries. Now, this is the 
case where you come to the stop sign and your wheels were up on 
the white line and the policeman says, ``You didn't come to a 
stop soon enough.'' Now, you didn't run through it, but you 
made an operational error. We want to stop; we don't even want 
your wheels on the white line. Therefore we report these; we 
track them. We have overhauled our entire training curriculum. 
We have a new safety structure; we have completely rebuilt it.
    All of these things will take some time. I am happy with 
the progress we are making. But we are seeing, in fact, a 
higher incidence of reportings. But the good news is, we know 
now why they are happening, we know what to train to and what 
to fix.
    Mr. Diaz-Balart. And I would like to--Mr. Chairman, if I 
may proceed. Thank you.
    I would like to maybe sit down with you and spend some 
time----
    Mr. Babbitt. I would be happy to do that.
    Mr. Diaz-Balart. Just make sure that I----
    Mr. Babbitt. Yes, sir.

                   CONTROLLER TRAINING COST OVERRUNS

    Mr. Diaz-Balart. And, again, I always appreciate your 
willingness to do that. You always have been willing to do 
that.
    There was an IG audit that talked about the air traffic 
control training program and cost overruns, significant cost 
overruns. But based on that IG report's conclusions, it seems 
that air traffic control training may be part of the problem. 
And based on that report, obviously, it is important if there 
is an issue with air traffic control--the air traffic control 
training program.
    Now, let me just quote you one part of it. It says, ``The 
FAA did not fully consider program requirements,'' and then 
talking about designation of the training program. And it adds 
that, ``It will be difficult for FAA to achieve its original 
ATCOTS program goals or any training innovations without 
significantly modifying the existing contract.''
    So are you aware of some of those issues dealing with--and, 
again, that is also for probably a more lengthy conversation. 
But I am obviously very concerned about making sure that, for 
safety's sake, that training has not become--there was a huge 
difference in how we do training, I guess, in 2008.
    Mr. Babbitt. Yes, sir.
    Mr. Diaz-Balart. And ever since that change, there have 
been, you know, cost overruns and there have been huge issues. 
And I just want to make sure that that is not one of the 
factors that may be creating the problem.
    And that is why I would like to maybe spend some time with 
you----
    Mr. Babbitt. Sure.
    Mr. Diaz-Balart [continuing]. And be able to get a little 
bit more in depth on these issues.
    Mr. Babbitt. Sure.
    In this job, when you come in, you have to live with the 
hangover somebody else has left you. So we are trying to work 
our way through a lot of these and we have made some big 
corrections.
    I am happy to tell you that in that IG report we agreed 
with and have corrected two, and they agree. We have seven 
other areas that we are waiting to understand. They were 
correct; but they were not incorrect in what they pointed out. 
That is why we revised the training program. That is why we 
have made these modifications. We want to have these things 
corrected.
    One of the problems that we had, the controller agreement, 
led to a very high number of retirements. Exceedingly high; 
double forecast. Some of the training cost overruns were, 
therefore, attributed to the fact that we had to train twice as 
many people as we forecasted we would have to train. That has 
abated. We now have just the opposite problem. We now are 
getting to a period of stability. It is a terrific opportunity 
for us to make certain that we have the right training profiles 
and program in place. We would be happy to come over and share 
with you what we are doing.
    Mr. Diaz-Balart. Thank you.
    Thank you very much Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    Mr. Dent.

                         AIRCRAFT CERTIFICATION

    Mr. Dent. Thank you, Mr. Chairman, Mr. Administrator.
    A few things. The incident last week with Southwest 
Airlines has drawn greater public attention to safety issues 
and standards and inspections. And I know that you have issued 
an order requiring the inspections of planes with a similar 
construction to the Southwest Airlines jet that experienced 
this metal fatigue.
    And I understand you touched on this a bit earlier, but I 
am interested in discussing aircraft certification. Obviously, 
aircraft certification is critically important for safety. It 
is also important from an economic perspective. Timely 
certification of new technologies and products certainly will 
lead to a safer, more efficient, modern aviation system.
    Given the fiscal constraints we are now facing, I would 
like to hear how the FAA will work to improve the certification 
process so that new technologies and products can be brought to 
the domestic market in a more timely but equally safe manner.
    Mr. Babbitt. Well, as I mentioned earlier having these 
aircraft properly certified is first and foremost. We don't 
want any aircraft, anything in the airspace system that isn't 
completely tested and deemed completely safe. So our 
certification process is very robust.
    However, I am not aware of anyplace where certification of 
aircraft, for example, where we are necessarily the slow point 
in the process. I would use the 787 for example. We are working 
closely with Boeing. We mutually have discovered some areas 
that aren't working right. They are working to fix those areas. 
It is not our ability to certify the airplane or not. It is 
their ability to get to the standards that they, themselves, 
want and, therefore, we would require.
    Now, there are a number of things. I mentioned earlier 
there is probably 2,200 to 2,400. We probably certify around 
200 things, whether they be wing-tip modifications; new 
generators; lighter, more efficient materials; aircraft, the 
difference between some of the older aircraft and the newer 
aircraft; or the type of laminates that they use on the wing. 
We work with people to certify these and get them into service. 
Some of those do, in fact, take time because we need to design 
the testing with the people that are building them.

                 TSA'S LARGE AIRCRAFT SECURITY PROGRAM

    Mr. Dent. And on another issue, and this really relates 
more to the TSA than the FAA, but the Large Aircraft Security 
Program, there is a stakeholder discussion that has been 
ongoing, how to deal with general aviation, specific to the 
security needs of those types of aircraft.
    Have you been participating in any of those stakeholder 
discussions? And have you been monitoring that? What are your 
thoughts and perspectives?
    Mr. Babbitt. Well, you are correct; that it is not, you 
know, necessarily under our purview. But we have a very good 
working relationship and I have developed a good working 
relationship with John Pistole, the administrator of the TSA. 
We have worked closely on a number of things, whether it be 
airmen access, security access, Federal marshals onboard. One 
of the issues we are working to get our controllers more 
familiar with airline operations is to put them back in the 
cockpits for an occasional observation ride to help out.
    So we have a good working relationship with them. We 
certainly are working with them on some other issues. And, yes, 
we do participate, but I am not personally involved with any of 
those.
    Mr. Dent. Okay. Thank you.
    I will yield back. Thank you.
    Mr. Latham. I thank the gentleman.

                EN ROUTE AUTOMATION MODERNIZATION (ERAM)

    I had mentioned in the opening statement about concerns 
about the ERAM program. And I guess my first question would be, 
why are you going forward with this when an independent study 
said that there are 17 serious safety issues that are not 
resolved? And, as we mentioned earlier, you have been at this 
now, what, 2, 3 years, and cost overruns and all that.
    But how can you certify going forward with national 
deployment?
    Mr. Babbitt. I have been going at it 18 months. So that is 
my tenure here. Let me bring you up to speed. You might have 
had an interim report. Where we are, starting back with the 
fundamental, is that this was a massive undertaking. This 
program has been underway and is one of the largest software 
deployments in Federal history. It is a massive program.
    Candidly, I think we underestimated the complexity of what 
was going to be changed. We underestimated how we would bring 
it into the system, how we would fuse the data. When we got to 
about 2010, we basically said, we are off-track. We literally 
shut the program down and said, ``Stop. Let's re-evaluate this. 
Let's re-evaluate the waterfall, the funding, and everything 
else.''
    Now, I think the FAA should be reasonably proud of the fact 
that most of the projects that we do, and this is confirmed by 
both IG reports and GAO reports, are within 2 percent of their 
budget guidelines and about 8 percent of their timelines. This 
project is not one of those. It is over that.
    But what we did was reset all the registers, had outside 
people come in and look at it. MITRE Corporation modeled our 
entire new proposal and is very comfortable with it. We began 
to redeploy based on that. I am happy to say that what we have 
up and running in Salt Lake and what we have up and running in 
Seattle now has performed pretty well. There were a number of 
items, but the concern when you do those independent audits is, 
do you have any highly critical? There were only two rated 
highly critical. Of those, one has been corrected and is in 
testing right now. They have done a recent software drop. With 
that in mind and with conversations with our controllers, the 
decision was to proceed with the in-service.
    Now, we have a deployment that is scheduled to go down in 
the Houston area but we are not going to deploy that until we 
are certain that those two have, in fact, been fixed.
    Mr. Latham. Which one has been, supposedly?
    Mr. Babbitt. I will have to get back to you. I know that we 
had a data transfer where the data tags were not following. I 
am not certain which one was the more critical. The other was, 
when they went from one sector to the other sector, sometimes 
the data tags had to be manually adjusted. Neither of those can 
be operational; we can't operate a system until those are 
fixed.
    Mr. Latham. But you have certified. You made a decision to 
go forward.
    Mr. Babbitt. With the concurrence of that audit group and 
with the concurrence of our controllers.
    Mr. Latham. I mean, the final report and one of the high 
risks: ``Incorrect pairing information could lead controllers 
to misidentify and issue instructions to the wrong aircraft, 
which could result in the loss of separation with other 
aircraft and terrain.''
    Has that been resolved?
    Mr. Babbitt. I will have to get back to you as to which 
one. But what we are doing, just so you understand, that is if 
we weren't aware of the problem. We are manually doing these. 
We are not going to let the system operate so that this could 
happen.
    Mr. Latham. And, also, the team observed handoff problems 
between ERAM and other facilities. ``System and controller-
initiated handoffs were sent to incorrect sectors and 
facilities. In at least 50 instances, controllers were unable 
to initiate automated handoffs. Conflicting handoff status was 
displayed at initiating and receiving sectors. System-initiated 
handoffs resulted in excessive fail messages.''
    So you are handing off to another sector and they don't 
know where the plane is, and there is separation, and these 
things are moving at 600-and-some miles an hour, and we don't 
know where they are or who has them?
    Mr. Babbitt. No, the automated side of it now, which is 
what we are testing, is why we can't deploy until they are 
resolved. You continue to do the manual backups, which slows 
the system down. Each one of these we work with our software 
vendors. One of the things I have to applaud is the fact that 
we are using our controllers today to help us, which has been 
an enormous step. I candidly think that the early 
implementation suffered because we did not have the involvement 
of the air traffic controllers. Today they are an integral part 
of the team working with us.
    They have workarounds for this, but workarounds are not the 
way the system needs to run. The things you have identified are 
happening. We have workarounds. But that is like putting a 
yellow sticky on something and saying, ``Don't turn this switch 
on.'' That is not the way it has to run when it is completed. 
We want to make sure that these workarounds become resolved and 
are, in fact, automated, and automated 100 percent of the time 
so that the system is failsafe.
    Mr. Latham. If I could just finish my thought--it was 
certainly not the right thing to do to exclude the controllers 
from participating--I mean, that is just nuts. They should have 
been involved from the very beginning.
    And if you could answer very quickly, what is your current 
estimate of how far the program will exceed original schedule? 
Mostly, the funding baseline. How much more overrun are we 
going to have? Is the $500 million right?
    Mr. Babbitt. We have in this budget $330 million. We think 
that we are on the waterfall. We have two up and running. We 
plan to put five more----
    Mr. Latham. ``On the waterfall''? I am not sure----
    Mr. Babbitt. I am sorry. The scheduled. When we bring these 
on, we bring----
    Mr. Latham. We pour a lot of money around here.
    Mr. Babbitt. Very poor choice of words. We have the dam up.
    Mr. Latham. Okay.
    Mr. Babbitt. We have deployment scheduled for 5 more this 
year, 6 the year after, and 7 the following year, which will be 
full deployment of all 20. We do not, nor do any of the folks 
working on this with us, see any reason to believe that this is 
not a realistic timeline and a realistic budget projection.
    Mr. Latham. Thank you.
    Mr. Pastor.

                    IMPACTS OF A GOVERNMENT SHUTDOWN

    Mr. Pastor. Thank you, Mr. Chairman.
    Given the current state of play, I would be remiss if I did 
not ask you what the FAA would do in the event of a government 
shutdown. What happens to the FAA if the government shuts down? 
What functions continue, and what functions will cease?
    Mr. Babbitt. I know the administration has expressed this 
concern, and we certainly hope that there can be a resolution 
to this to avoid it. We are refining the plans that we have. We 
certainly have identified those highly critical safety areas 
that we would have to maintain. Certainly, air traffic control 
and our critical safety areas will be addressed.
    We have some history here as this happened in 1995. We are 
using 1995 as a template. And, of course, we are coordinating 
with the Department of Transportation to refine our plans.
    Mr. Pastor. Well, I mean, that is a general response. If 
you could be more specific. I would ask you, take that 1995 
template, what did you learn? And how are you going to 
implement it? You weren't there, but you were probably flying 
at the time.
    Mr. Babbitt. Let's see, was I? No.
    Mr. Pastor. But air traffic controllers, are they all going 
to be on call? Are they going to be on regular duty? What are 
we doing with air traffic controllers?
    Mr. Babbitt. Air traffic control will be unchanged. There 
will not be any impact on the air traffic control system. As we 
refine these plans, areas that clearly would come to mind are 
administrative functions. Certification-type inspections will 
go on, but things that are being certified for use in the 
future will not. We are working to refine those areas.
    Mr. Pastor. So air traffic controllers report to duty if 
your time is----
    Mr. Babbitt. They will be on schedule. There will be no 
degradation to the service provided in the national airspace 
system. The towers will be manned. The centers will be manned. 
The TRACONS will be manned.
    Mr. Pastor. The safety personnel--obviously, ongoing safety 
requirements will continue over the weekend or as long as we 
make sure these planes are fit to fly, et cetera?
    Mr. Babbitt. Yes.
    Mr. Pastor. Who else would be considered essential that you 
would have?
    Mr. Babbitt. We need the people that work on our technical 
operations so that all the facilities work. We maintain about 
12,000 facilities around the country. The radars have to work, 
the approach equipment has to work, the radios have to work. 
Those people would be at work. We are not going to degrade the 
safety of the system.
    Mr. Pastor. So the safety will continue so that the 
American public----
    Mr. Babbitt. The American public should be very comfortable 
that the national airspace system will operate as safely as it 
does today.

                   CONTROLLER TRAINING/WASHOUT RATES

    Mr. Pastor. I think it was one of the other Members who had 
talked about the IG report of the washouts you had at the air 
traffic controller school. Was it one out of five, is that 
correct?
    Mr. Babbitt. Yes, sir.
    Mr. Pastor. And I think in this budget, how many air 
traffic controllers are you asking for or requesting? The 
staffing level, what do you have?
    Mr. Babbitt. We staff to the traffic levels, and we are 
forecasting that the air traffic is not going to be back to 
pre-9/11 levels until after 2020. There are a number of reasons 
why there has been a reduction after 9/11. The fuel crisis and 
the economy have impeded traffic. All of these things led to a 
drop-off in air travel. You have also seen airlines 
consolidating so that, instead of running three 35-passenger 
airplanes, they run one 100-passenger. That is a serious 
reduction in the traffic.
    So we man to the traffic. We also have not requested as 
many new controllers because attrition is down. As our training 
it gets to equilibrium, we simply don't need any new 
controllers. We have enough to run the system, and we have 
reflected that.
    Mr. Pastor. I will go back to my question. You have 300 
less air traffic controllers based on all those factors?
    Mr. Babbitt. Yes, sir. That is right.
    Mr. Pastor. And on the trainings, what are we doing to 
improve that so that we can improve, I guess, better people so 
that they will be--or what seems to be the determination for 
why people are washing out?
    Mr. Babbitt. Well, we have had quite a range of retention 
and washout rates. And, by the way, there was some disagreement 
that we had in the IG's report. For example, if we hired a 
controller and we had 9 percent of them washed out in the first 
year, we said that we had a 9 percent attrition rate. The 
following year, another 9 percent washed out of that same 
class, we would have another 9 percent. They said, no, actually 
you had 18 percent. A little of this is the semantics and the 
math.
    So we will accept the attrition rate. But that is not 
exceedingly high. This is a very complicated environment. One 
of the things that we were forced to do prior to my arrival 
here but was going on, involved the controller agreement that 
was in place limiting our ability to attract experienced 
controllers into more advanced facilities. So, we were often 
forced to put new trainees into our most complex facilities. We 
suffered a much higher washout rate.
    So to take someone from school, because the only way you 
can fill the vacancy was to do it with a new controller, was 
unfair to the new controllers. You would not start as a brand-
new pilot, you would not put them in the left seat of a 747. 
You would train them as a first officer and build their 
experience. Today, we are doing that better. We are assigning 
people to less complex facilities. Let them learn and let them 
advance, as we had done in previous years. So I think it is 
going to result in a more effective program, lower washouts and 
better use of our training dollars.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    Mr. Womack.

                         CONTRACT TOWER PROGRAM

    Mr. Womack. I am going to ask one more question. And I 
realize you have a lot of things on your plate, and this 
particular question may not be one of your highest priorities. 
But it is important to me, and, in the interest of full 
disclosure, having been a mayor of a city that is affected by 
this program, I have to ask you about it. But I want to talk 
about the Contract Tower Program.
    Mr. Babbitt. Yes.
    Mr. Womack. And I was glad to hear your comments about the 
economic-development impact that airports, large and small, 
have on communities. And, certainly, they do in the area where 
I was the Mayor, because at the Rogers airport we had a pretty 
large fleet of jet aircraft operated by a pretty sizable five-
and-dime operation in Northwest Arkansas.
    There are about 230 or so smaller airports in the Contract 
Tower Program, and the vast majority of these airports are 
almost fully funded, heavily subsidized by Federal dollars. 
There are 16 airports, however, that are in a cost-share 
program, and I think it has been somewhat punitive to these 
airports--particularly the one that I am speaking of, because 
over 80 percent of its traffic is high-performance jet aircraft 
bringing a number of passengers in to transact business with 
some pretty impressive companies scattered in our region.
    Why do we continue to hardship the municipalities that have 
to pick up the remaining share of these programs? And it is a 
small amount of money that could fix the problem. And I realize 
we are in a constrained financial environment and every dollar 
counts. But, truly, why are we still having to deal with these 
new cost-benefit analyses? And, in this particular case, 
because over 80 percent is corporate traffic, safety is a must, 
dealing with some of America's most known companies.
    Why are we still having to deal with this?
    Mr. Babbitt. Well, leaving the philosophical question for a 
second to discuss the mechanics of the program, we start with 
the smallest airports that have no radio control tower, no 
radar, nothing. Complexity builds and builds. You get to the 
point where perhaps you should have some type of coverage so 
navigation facilities get added.
    As the complexity works its way up, we get to a level where 
we say, well, should there be a tower here or not? No, it is 
actually below the level where we would command to put a 
contract tower. But a city might say, ``But we really want one, 
and we will pay the difference.'' You may well have inherited 
one of those situations where someone said, ``We want this 
tower. The Federal Government will only pay this much, but you 
know what? We want the tower, and we think it will attract 
business.'' Airports do attract business; I appreciate that. So 
they will make a conscious decision to say, ``Okay, well, we 
will pay the difference if we can get the tower because that 
will generate the traffic.'' Hopefully, the traffic will build 
enough so that you won't have to pay the subsidy any longer.
    I would actually like to have a little better understanding 
of some of these airports. I am giving you a very superficial 
answer, but I could look into it and would be happy to get back 
with you.
    Mr. Womack. Well, having been the chief executive of that 
city at the time this process was conceived--it all happened on 
my watch----
    Mr. Babbitt. Oh, okay.
    Mr. Womack [continuing]. The cost-benefit analysis was 
feasible for the city to absorb its share of the cost.
    However, into the program, having spent a million dollars 
on the tower and having gone to this process and invested all 
this money in these personnel, the cost-benefit analysis all of 
a sudden flipped on us when new bean counters came to town and 
decided that our share of the cost was going to be 
exponentially higher. At some point in time, these cities have 
to decide whether it is actually worth it to maintain the tower 
and continue to provide that type of controlled airspace.
    But I would like for someone on your staff to----
    Mr. Babbitt. Sure.
    Mr. Womack. And I realize it is 16 airports. One of my 
concerns is that there was no way in the cost-benefit analysis 
to award any kind of prioritized value, if you will, to the 
fact that there are many high-performing corporate jet aircraft 
that are flying in and out of that place. And that is a big 
difference in flying a few skyhawks in and out, doing touch-
and-go.
    Mr. Babbitt. Yes, sir.
    Mr. Womack. That is my concern, and I would like for you to 
look into it----
    Mr. Babbitt. We sure will.
    Mr. Womack [continuing]. And have your staff talk to my 
office about it.
    I yield back, Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    We will go to the distinguished Ranking Member of the full 
Committee, Mr. Dicks.

                     SOUTHWEST AIRLINES HULL BREACH

    Mr. Dicks. Thank you very much.
    I am sure you have covered this territory, but I was hoping 
to ask you about the situation on the Boeing 737s and Southwest 
Airlines and, kind of, what the FAA is doing about this and 
where we stand on this.
    Mr. Babbitt. All right, sir.
    Well, first off, we announced yesterday an airworthiness 
directive, which has all the operators and the approximately 
175 airplanes worldwide. About only 80 of them are in this 
country and the majority of those are operated by Southwest 
Airlines. We have put an airworthiness directive out that says 
any aircraft that has more than 30,000 cycles (a cycle is a 
takeoff and landing), needs to be inspected within 20 days. If 
the aircraft has more than 35,000 cycles, we want that 
inspection done within 5 days.
    We put out a widespread fatigue damage rule 6 months ago. 
It is now finishing its data-collections period. This looks at 
these aircraft in general, not just this specific model. This 
AD, or airworthiness directive, is specific to the Boeing 737-
300, 400, and 500 series. The other Boeings are not subjected 
to this AD.
    But I have asked the team to go back and look at this 
overarching rule that we put out 6 months ago. The 
manufacturers were involved in the construction of this rule. 
Pilots, mechanics, lots of people in the industry, people who 
frame these airplanes and so forth, all experts, came up with 
this rule.
    But we are going to go back. I have asked the team to look 
at this. Are we collecting the right data? Are we asking the 
right questions? Are we testing the right things? Because we do 
have an aging fleet of aircraft and we want to make certain and 
we want to make sure that the traveling public is comfortable 
that these aircraft are safe.
    Mr. Dicks. One issue that came up--and I think Boeing said 
something yesterday about this--was metal fatigue. What about 
that? Is that one of the major problems here? They were saying 
that where the rivets--that there were cracks, and they were 
caused, as you have suggested, by the number of landings and 
takeoffs.
    But this is an older airplane, too. Isn't this about 12 to 
15 years?
    Mr. Babbitt. It is a 15-year-old airplane. We have 
airplanes that fly safely, but the number of cycles are 
important. As I explained a little bit earlier, not only is it 
the pressurization and depressurization, but the aircraft, the 
metal, is subjected to some pretty extreme heat changes. So at 
40,000 feet, for example, the temperature is about 40 degrees 
below zero centigrade. That is very cold. Now that airplane 
heats back up and lands in Dallas or someplace, and it is 90 
degrees. So it is extreme temperature changes.
    Most of the metal fatigue is not visible to your eye. We 
use some very sophisticated techniques, eddy current or 
electromagnetic type of testing, where we measure the flow of 
electricity across an area of metal, and you know what it 
should flow at. If it does not flow at that rate, then you 
suspect that there may be a crack that you can not even see.
    So, we do not know what happened to this airplane. That is 
an important point, too. We have suspicions, but we do not know 
whether it was the metal itself, the riveting, the technique? 
We do not know.
    Mr. Dicks. Now, Southwest has had some--I am a big 
supporter of Southwest Airlines, especially on baggage fees, 
Mr. Chairman.
    Mr. Pastor. Also mileage. Throw mileage in there, too.
    Mr. Dicks. Okay, mileage, too, yeah.
    Mr. Pastor. And peanuts.
    Mr. Dicks. But they have had some problems in the past, 
isn't this correct, on doing proper inspections. And they 
received a very significant fine a few years ago. Is that still 
part of the problem? Are they not doing what they should be 
doing in terms of inspecting these airplanes?
    Mr. Babbitt. No.
    Mr. Dicks. Do we have the resources--this is what I am 
trying to get to--do we have the resources to make sure that 
the airlines are abiding by these directives that you quite 
properly put out?
    Mr. Babbitt. We have no suspicion that they have done 
anything wrong in that area. Their compliance was one of the 
first things we looked at. Again, they have been scrutinized 
quite heavily. And you are correct, they did receive a 
substantial fine.
    I mentioned earlier that I was part of a review team that 
looked at their AD compliance. They have completely revamped 
their maintenance operations, and we are very comfortable. They 
did have one other aircraft have a hull breach, I think it was 
almost a year ago in a completely different area of the 
airplane and for completely different apparent reasons.
    So, again, we do not know what happened in this. We know 
what we think happened. But we are working with the NTSB. The 
investigation is ongoing. They will give extensive testing to 
all the metal and test it for fatigue and other things.
    Mr. Dicks. So this doesn't affect all the other--737 is 
kind of the workhorse of the air transportation business. And, 
you know, they are building these planes at, you know, 30-some 
a month in Renton, Washington. So those aren't affected; it is 
just these older aircraft that you are focused----
    Mr. Babbitt. Yes, sir. As I said, there are only 175 of 
these in the world. Boeing has, I believe at last count, over 
3,000 of these aircraft that have been built. Only 175 are of 
this model, and they are the only ones affected.
    Mr. Dicks. Thank you, Mr. Chairman. I appreciate it.
    Mr. Latham. Thank you.
    Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman.
    And, Mr. Administrator, I want to congratulate you. You 
have lasted 20 more minutes than the administrator from the 
FHWA did. I appreciate that very much.
    Mr. Latham. And he is giving some answers.
    Mr. LaTourette. Yeah, I know.
    So you are doing a great job.
    Mr. Babbitt. Could I ask what happened to him?
    Mr. LaTourette. Well, you know, it was his little notion of 
sending up a $556 billion highway program without any idea of 
how we are going to pay for it. Kind of got him in trouble. But 
you are doing a wonderful job.
    Mr. Babbitt. Thank you, sir.
    Mr. LaTourette. You know, this 737 thing bothers me because 
I--even though I am a big fan of Continental Airlines, you 
know, these regional jets are like flying on a hypodermic 
needle. So I have been going up to Baltimore and getting on 
Southwest and taking the 737s, which I think is a wonderful 
airplane.
    And I can remember maybe 15 years ago after the crash in 
Pittsburgh, there was a rudder problem, I remember, that 
grounded them for a while. And I know you will get to the 
bottom of this, and I hope you do, because I think it is a 
wonderful airplane.

                GROUND-BASED AUGMENTATION SYSTEM (GBAS)

    I want to talk to you about something we talked about last 
year. It is another acronym, GBAS, Ground-Based Augmentation 
System. And I specifically talked to you about Air Station Guam 
and the inability to certify GBAS in bad weather conditions in 
Guam, even though--and I heard that you said Alaska Airlines is 
the only airlines that have everybody equipped with the NextGen 
system. But other airlines are in different stages of that.
    Mr. Babbitt. Right.
    Mr. LaTourette. And it is my understanding that Continental 
United do have a fleet of aircraft available to take advantage 
of that in Guam, if the system was working.
    So a year has passed. Where are we?
    Mr. Babbitt. Well, GBAS, which, just to sort of break 
through the acronym barrier, Ground-Based Augmentation System. 
Fundamentally, when we have a satellite signal that comes down, 
they are not deadly accurate. It is okay for your car if you 
are driving and you wound up one driveway away from the house 
you were headed for; that is close enough in your car. It is 
not close enough in an airplane. We want to know precisely 
where the center line is; we want to know precisely the 
altitude.
    So, what we do, we correct the signal. We take a device on 
the ground which knows exactly where it is, it takes the 
satellite signal, and it says to the satellite, ``You are off 
by 20 feet,'' and it sends a correction to the airplane. That 
is a Ground-Based Augmentation System.
    Now, what we have in Guam specifically, we have currently 
an operable ILS landing system that everyone uses. If we were 
to put a ground-based system there, we would simply replicate 
that capacity and capability so we could shoot the same 
approach. It is expensive. We only have three of these right 
now in testing and we would have to have one moved or buy one.
    In an effort to try to meet folks halfway, I actually met 
with Continental Airlines. They said, ``Well, we would use it a 
lot.'' And we got into, ``Well, when would you use it? Because 
you have ILS's now. You can shoot an ILS.'' They said, ``Well, 
sometimes storms blow the ILS down, and it is out for a few 
days. That is when we would use it.'' We said, ``Well, we will 
make you a deal. If it is worth that much to you, it is about a 
$3 million system, would you pay a million dollars of it and 
enjoy the benefit?'' And they said, essentially, ``Well, it is 
not worth that much to us.'' So we didn't go any further with 
those discussions with them.
    Again, we have a limited number that are being used. I 
think we have one in Newark for testing and that has been very 
effective. Again, in the area where we don't want to just 
recreate overlays to what we do, but we want to use them to 
provide new services and so forth, it really did not meet that 
criteria. Not that we would not revisit it again, but that was 
the essence of where we were.
    Mr. LaTourette. I appreciate that answer.
    And just on Mr. Pastor's comment, I echo your observation. 
I don't think a government shutdown is good for anybody. And 
that is why I know Mr. Pastor and Mr. Dicks will do everything 
in their power to convince their leadership to be more 
reasonable as we go through these discussions.
    Mr. Pastor. We are working on it.
    Mr. LaTourette. I know you are. Listen----
    Mr. Pastor. You need to persuade the Speaker not to raise 
the amount every time we agree to one, though. That is the 
problem.
    Mr. LaTourette. Well, the difficulty, quite frankly, 
reclaiming my time, is that, as time goes by----
    Mr. Dicks [continuing]. Moving the goal post.
    Mr. LaTourette. Well, anyway. I know if you guys were in 
charge, we would have this thing solved.

                            COMMERCIAL SPACE

    Just real quickly, commercial space.
    Mr. Babbitt. Yes, sir.
    Mr. LaTourette. My concern, you know, there are a lot of 
discussions about NASA or FAA housing commercial space. And I 
guess that ship has sailed.
    I think it is how quickly we are going to develop 
commercial space. Because I happen to think the administration 
made a mistake when they canceled the Constellation program and 
surrendered near-space manned space flight as a government 
function to the Russians and Chinese. And we are seeing today 
that the Russians have indicated, I think, to take one of our 
astronauts to the space station, $58 million. And they can only 
bring a backpack with 110 pounds on it, as opposed to all the 
wonderful things that the shuttle was able to accomplish.
    So, how quickly is commercial space going to be a reality 
in this country? And when are we going to have the craft 
necessary to replace what the Constellation and the shuttle was 
doing?
    Mr. Babbitt. Well, that, of course, is asking me to look a 
little bit out into the future. We do have commercial rockets 
today, and they have been very successful. They have handled a 
lot of the payload. Some of the Low-Earth-Orbit-type payloads 
go up, in terms of delivering satellites into geostationary 
orbit.
    I think we are looking at 2016, when using commercial 
forecasts. We have licensed our first exit and re-entry 
recently, which was exciting, and it went precisely as planned. 
Our concern is, during this launch, that we don't jeopardize 
anybody in the cargo area itself and obviously passengers if 
they are onboard.
    This is a new area for us, but 2016 looks to be the time 
frame where we are going to be able to perhaps take cargo to 
the Space Station.
    Mr. LaTourette. I thank you, Chairman.

                           CONTROLLER FATIGUE

    Mr. Latham. I thank the gentleman.
    You know, I think our air traffic controllers do a 
fantastic job. And it has to be just a really tough job. And we 
had the unfortunate incident here in Washington. Have there 
been other incidents of the same thing happening?
    Mr. Babbitt. Yes, sir. We actually, I am disappointed to 
say, in our investigation we did find another incident, 
different than this one.
    Mr. Latham. Just one?
    Mr. Babbitt. Yes, sir, just one. And it was, unfortunately, 
willful. And we are in the process of disciplinary proceedings 
which will terminate this employee.
    Mr. Latham. Okay. So you are handling that differently than 
this instance?
    Mr. Babbitt. This was willful. This was willful. The 
current one is under investigation. But this was a willful 
violation.
    Mr. Latham. Okay. We don't need to do it here, but if we 
could get information on that, I would appreciate it.
    Mr. Babbitt. Yes, sir.

                    NEXTGEN/RNAV-RNP IMPLEMENTATION

    Mr. Latham. Going to NextGen, I think everyone, obviously, 
is very supportive of the concept. And I think it will save a 
lot of fuel and a lot of time, efficiency in the system, as 
well as safety. But we are also looking at kind of a tradeoff. 
When you look at some of the airports, like JFK and LaGuardia 
and Newark, you could have the system in place, but you still 
don't have the runways to land airplanes on. So what is the 
priority?
    Mr. Babbitt. Well, I think these go somewhat hand-in-hand. 
You have two problems. If you fix one, you only have half a 
problem left. We are trying to fix half of the problem.
    Mr. Latham. Okay. So which comes first?
    Mr. Babbitt. Well, I think we have fixed the airspace. 
There is a finite amount of ground in which to expand. We just 
finished a major expansion at Kennedy. We now have the longest, 
other than where the space shuttle lands, runway in North 
America at Kennedy Airport. This helps that airport serve all 
their long-haul international traffic.
    But one of the things we gain when we fix the airspace is 
our ability with RNP-type approaches. We are doing this today. 
It is in place and operating in the Chicago metroplex, where we 
have taken O'Hare and Midway and decoupled them. In the past, 
we would have treated that airspace as one area of airspace. 
For example, if Midway Airport, was operating at 60 percent of 
its runway capacity but O'Hare was having ground delays and 
holding, then if someone new wanted to come to Midway they had 
to suffer whatever the delays were at O'Hare. Well, today they 
don't. We can go into and avoid being in the O'Hare airspace, 
therefore, Midway is unaffected. So at least we have solved 
some of that problem.
    We hope to do that. There are times when, in the New York 
metroplex, we have closed Teterboro. We literally close the 
airport to accommodate the volume of traffic that is going into 
Kennedy, LaGuardia, and Newark. We do not have to do that if we 
can separate those airports. Right now, we are working with the 
controllers, and we have tests under way where we can de-link 
LaGuardia from Kennedy's operations.
    Those two airports, if we had a map, are remarkably close 
together for two big, high-volume airports. They suffer the 
problem that, when the wind is from one direction, the arrivals 
going into one airport overlap the departures from the other 
airport. That makes traffic movement very difficult in high-
wind conditions. If we can decouple those, then we get a huge 
advantage. Then we can attack the runway problem.
    Mr. Latham. Going to that point, as far as the procedures 
in and out of the busiest airports, and you are well aware, the 
rest of the world is surpassing us here. And you have systems, 
you know, in Australia, Canada, throughout Europe, China, they 
are using a lot of third-party procedure development. Is that 
an option for us? Or why aren't we keeping up with the rest of 
the world?
    Mr. Babbitt. If I could have the air traffic flow problems 
of Sydney and put them in place at Kennedy, it would look like 
a Swiss watch running. To compare those traffic levels, it 
doesn't do justice.
    Mr. Latham. In Europe?
    Mr. Babbitt. Even Heathrow, I think, is the sixth-busiest 
airport. Houston is busier. We have unique problems with the 
high volume that we put into our metroplex areas. In terms of 
deploying more rapidly, it is certainly something we can look 
at. I certainly would not rule it out of the equation.
    Mr. Latham. Okay. My time has expired.
    Mr. Pastor.

     CONTINUOUS LOWER ENERGY, EMISSIONS, AND NOISE (CLEEN) PROGRAMS

    Mr. Pastor. Thank you, Mr. Chairman.
    In the past, the subcommittee has given you funding for 
CLEEN, which deals with alternative fuels, lowering the 
emissions, and also abate some of the noise with, hopefully, a 
combination of better fuels, et cetera. And I know that we have 
an agreement with five companies in the private sector to 
develop the technologies that will result in lower noise and 
lower emissions in the fuel burn.
    Where are we today on that particular program, CLEEN, in 
terms of alternative fuels and noise abatement, et cetera?
    Mr. Babbitt. Sure, CLEEN is a wonderful program. I think it 
is a very good example of the partnership between government 
and the private industry. CLEEN has participants which include 
engine manufacturers, airframe manufacturers, people in the 
fuel industry, all working together. CLEEN is Continuous Low-
Energy, Emissions, and Noise. We are talking about the noise 
that the aircraft make and the amount of carbon emissions that 
they make. Yes, we do have some funding there, and this is one 
of the areas I think would be negatively affected.
    Our goal is to have sustainable fuels, and sustainable in 
terms of the environment. Secondly, we want these fuels to be 
drop-in. When I say drop-in, we are talking about a fuel that 
is not certified just for operation in one particular jet 
engine or one model of airplane. We are talking about fuels 
that can go to any current tank farm, be delivered through any 
hose, any truck, be put it in any airplane. If you burn JP-4 
today, kerosene jet fuel; this fuel could go in the exact same 
delivery system without effect.
    I think we are making very good progress in that regard.
    Mr. Pastor. But where are we? I mean, do we have such a 
fuel now that we are using? Or do we have a number of fuels 
that we are testing? I mean, where are we?
    Mr. Babbitt. Yeah, we have a number of fuels that we are 
developing. Quite often, in the past, you En-Route operations 
where someone would fuel one tank and run one engine. But 
today, we have confidence and have run aircraft in the test 
modes, not with passengers, but in the test modes with these 
types of fuels.
    Mr. Pastor. I was going to ask a question. I know you are 
in the test mode. When do you foresee that that will be into 
the commercialization and being used on the aircraft that we 
are currently operating?
    Mr. Babbitt. Well, a little of this becomes the economics 
of it. In other words, could we develop that fuel tomorrow, or 
have it in place? We might. I think we are actually a couple of 
years away from that fuel.
    Mr. Pastor. Okay.
    Mr. Babbitt. But the other side of it is, if kerosene costs 
$3 a gallon and this fuel costs $5 a gallon, I don't think 
people are going to line up to buy it without some other 
incentive. We have to look at the economics of these 
alternative fuels.
    The goal, of course, would be to have a fuel that is equal 
to or even less expensive than what is currently being used--
since it is a sustainable fuel.
    Mr. Pastor. Well, at one time, I think last year, we were 
talking about jet fuel that was being produced by algae.
    Mr. Babbitt. Right.
    Mr. Pastor. Is that still part of the testing?
    Mr. Babbitt. Yes, sir. Yes, it is.
    Mr. Pastor. Where are we at? I guess we were testing that 
fuel.
    Mr. Babbitt. Yes, we are. I think this is one of the areas 
where I have folks that have a lot more expertise and details. 
I would be more than happy to educate both myself as well as 
sharing that information with you. We would be more than happy 
to come over and give you a better, more robust view.
    Mr. Pastor. Yeah, because, as I understand, this program 
wants to not only get to the sustainable fuel but also abate 
the noise, which is something very important around our 
airports----
    Mr. Babbitt. Right.
    Mr. Pastor [continuing]. And, at the same time, also lessen 
the carbon imprint in the emissions. So there are other 
incentives that are built into this program that, possibly, as 
we look at the price of the alternative fuel, price may not be 
the only factor, or should not be the only factor, because 
there are other advantages, hopefully, that will come with this 
program.
    Mr. Babbitt. That is right. I completely agree.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Latham. I assume the gentleman believes that soybean 
oil from Iowa would be a very good part of the whole equation 
on the clean fuels?
    Mr. Pastor. If we can get away from corn, the answer would 
be yes. Because I will tell you the problem I have----
    Mr. Latham. You are killing me. The gentleman is not 
recognized.
    Mr. Pastor. Mr. Chairman, I want to tell you what my 
problem is. I have almost every Mexican restaurant in Phoenix, 
Arizona, on me on the price of corn. So they have a personal 
interest in this.
    Mr. Latham. I appreciate that.
    The gentleman from Texas, Mr. Carter.

                           NEXTGEN USER INPUT

    Mr. Carter. Thank you, Mr. Chairman. I apologize for being 
late, but, unfortunately, all of my chairmen have such great 
minds that they all work at the same time, and so they schedule 
hearings at the same time.
    On the NextGen program, this is not a very complex 
question, but a question that I think needs to be asked. We 
have experienced in some of the programs that have been 
developed by this administration that they have been reluctant 
to talk to people for opinions or to go into the field and ask 
for ideas.
    On the NextGen program that the FAA is working on, have the 
pilots, the air traffic controllers, and others been asked for 
field input as to the reality of the program? And has that 
input been a part of the development of NextGen?
    Mr. Babbitt. Yes, sir, absolutely. Shortly after I became 
the administrator, we worked with the RTCA, which is a 
nonprofit industry group, and 300 different people. These were 
avionics manufacturers, pilots, airlines, everyone in the 
business was involved. We gave them the NextGen implementation 
plan and asked them to, essentially, validate it. They came 
back and said, ``There are a lot of things we would change.'' 
We have worked on those changes. They were thoughtful and 
refocused our thinking, candidly.
    We continue to work with them and meet with them. Today, we 
have a NextGen advisory council, which is made up of people in 
the industry all outside of the FAA. They are ongoing oversight 
available to us.
    So, yes, we openly seek and have developed partnerships 
with airlines. We have a partnership with Southwest. We have a 
partnership with JetBlue. We have a partnership with a number 
of our carriers out there. In the past, we have used UPS to 
help us with experiments we did into Louisville, KY. We have 
been able to get user feedback and actual data. It is one thing 
to forecast it; it is another thing to put it into practical 
use. I think we are doing an exceptionally good job of seeking 
and listening to the users that are eventually going to help us 
develop the system.

                      CONTROLLER FATIGUE INCIDENT

    Mr. Carter. Excellent. That is good. I am glad to hear 
that.
    I want to ask very quickly about the incident that occurred 
at Reagan National Airport. My dad used to tell the story of 
the little boy who pushed over the outhouse. And when his dad 
asked him if he pushed over the outhouse, he said, ``I did, 
Dad. I cannot tell a lie. I pushed over the outhouse.'' Then 
his daddy took out a belt and whipped him. And he said, ``But, 
Daddy, when George Washington confessed to cutting down the 
cherry tree, he got commended.'' He said, ``Yeah, but his dad 
wasn't in the cherry tree when he got pushed down.''
    Well, the very same thing on the incident at Reagan 
National Airport. All of us, at least the ones sitting in this 
room, could be in the cherry tree.
    Mr. Babbitt. Yes, sir.
    Mr. Carter. And so I want to ask the question about the air 
traffic control situation where the gentleman fell asleep. I 
understand the shout lines, which are supposed to be able to 
wake people up, didn't work. And I don't know if you want to 
comment on that and why they didn't work.
    And, secondly, what are we doing to make sure that--even 
though only six flights are coming in each night, if you are on 
those six flights, it would be pretty important to you to know 
that there was somebody watching the situation.
    Mr. Babbitt. Yes, sir. Well, I expressed my own personal 
outrage that this happened. And it shouldn't have happened, and 
I am going to make certain it never happens again. We have an 
ongoing investigation as to what happened. We have put in a 
number of things. I described a little bit earlier in here the 
things that we have done in the short term. We are looking at 
longer-term solutions of how we man these towers, what 
equipment we might need.
    One thing that I am compelled to put forward here: At no 
point were these aircraft ever out of radar contact. At no 
point did they not have backup communications available to 
them. We were talking to them all the time. Sometimes we have 
to shut down a tower due to lightning striking a tower, high 
wind warnings, or other absolute things out of our control. 
There are plans and procedures in place to supplement this.
    Now, this should not have happened, and you have my pledge 
that it will not happen again. But I would not want anybody to 
think that these aircraft were just wandering around aimlessly. 
No, that was not the case at all. They were always in 
communication. Anytime an aircraft changes frequency, if you do 
not get a communication established, you go back to the last 
frequency. This is a standard routine. The pilots did that and 
the controllers worked with the three aircraft in question by 
using backup procedures.
    Now, we are asking everyone to review what our backup 
procedures are. Is the equipment there? Are the procedures--and 
not only, are they there; make certain, let's revisit and make 
sure that we follow those procedures.
    Mr. Carter. And I figured that there was a backup system 
that was communicating to them in the air. A question I would 
have is, one of the procedures I understand you have in place 
is to tell pilots that the runway is clear for them to be 
landing, and it is hard for someone in a tower in New York to 
be talking to this person down at Reagan and to tell them that 
the runway is cleared. That is my understanding, that they 
actually had baggage handlers go out and check and then report 
that the runway was clear. And that all seems a little bit 
amateur to me.
    And so I hope we have systems that will fix this, because, 
unfortunately, I am in that cherry tree twice a week.
    Mr. Babbitt. Yeah. I can assure you, we are taking every 
step to change not only the procedures but to make certain this 
never happens again.
    Mr. Carter. Okay. Thank you. That is really what I wanted 
to discuss.
    Thank you, Mr. Chairman.
    Mr. Latham. Just to follow up, if there is not enough 
activity to keep one air traffic controller awake, now you have 
two sitting there. So we are paying for two people to sit 
throughout the night with very little work. Is this going to be 
a permanent situation?
    Mr. Babbitt. Well, we are certainly going to look at what 
the alternatives are. We have some things that we have looked 
at. For example, at some of the airports, we have a radar 
controller in a TRACON room in the same building and we have 
someone upstairs. We may, in fact, move them upstairs at night 
so two people are each working together. We will have a number 
of things we will look at.
    Mr. Latham. Okay. I would appreciate it.
    The gentleman from Washington.

                     IMPACTS OF GOVERNMENT SHUTDOWN

    Mr. Dicks. I will be very brief here. And, obviously, we 
are all working up here to try to make sure that the government 
does not shut down. But if, in fact, it should happen, what are 
the implications for the FAA?
    Mr. Babbitt. Well, to the travelling----
    Mr. Dicks. I would assume you are emergency and you would 
stay in place.
    Mr. Babbitt. Yes, sir. We have plans, and we are refining 
those plans, you know, with the Department of Transportation 
and the Office of Management and Budget.
    Fundamentally, we want to make certain that we cover all 
the safety aspects, that the safety of the system never 
changes. The integrity of the system will be maintained. We 
will have all the necessary air traffic controllers, we will 
have all of the necessary inspectors to ensure safety of the 
system. Now, that doesn't mean that we will not look at areas 
that are nonessential, whether they be administrative or if I 
were a pilot who was planning on taking a check ride in one of 
these types of events, we may not have that inspector 
available.
    But we will look and make certain we have all the safety-
critical functions covered. As I mentioned earlier, this 
happened back in 1995. We have looked at that as a template. I 
think people were comfortable with the general template we used 
back then. We are taking a good look at that as we refine our 
procedures.
    Mr. Dicks. Thank you, Mr. Chairman. I appreciate it.
    Mr. Latham. I thank the gentleman.
    I think we are going to conclude the hearing. And there 
will be more questions probably submitted for the record.
    Just on a personal level, I want to say thank you, because 
your communications have been tremendous. I respect very much 
the job that you do.
    We are going to have difficult budget situations going 
forward. And if we can do things jointly in an intelligent way, 
I think that is the way it would be best for everyone to 
proceed. So I just want to make sure you know my door is open. 
And I appreciate very much the communications we have had, and 
we will hope to continue that.
    Mr. Babbitt. I thank you, sir. I appreciate the 
consideration that this committee has always shown us. And we 
want to be as open as we possibly can. We respect the fiscal 
constraints that are in front of us, and we are trying to do as 
best we can with that.
    Mr. Latham. Very good.
    Mr. Babbitt. Thank you.



    
                                         Thursday, April 7, 2011.  

                                 AMTRAK

                                WITNESS

JOSEPH BOARDMAN, PRESIDENT AND CEO, AMTRAK
    Mr. Latham. The hearing will come to order this morning, 
and first of all, good morning.
    Mr. Boardman. Good morning, sir.
    Mr. Latham. Today's hearing looks at the Fiscal Year 2012 
Budget Request for the National Railroad Passenger Corporation, 
or Amtrak, and we welcome Joe Boardman, who is Amtrak's CEO, 
and I look forward to your testimony. Thank you for being here 
this morning.
    Mr. Boardman. Yes, sir.
    Mr. Latham. Amtrak is the Nation's only provider of 
intercity passenger rail service. It is structured as a private 
company, but virtually all of its shares are held by the United 
States Department of Transportation.
    As we all know, Amtrak runs a deficit each year, with an 
estimated loss of $616 million in Fiscal Year 2012, which is 
$198 million more than Fiscal Year 2010's net operating loss. 
Given the fiscal constraints that we are faced with, this might 
finally be the year to tackle how to reduce the operating 
losses at Amtrak.
    The GAO, and Amtrak Inspector General, of course, indicated 
Amtrak needs to initiate major reforms and improve service and 
operations. I think that we all know that Amtrak must address 
its long distance routes and labor contracts if we want to 
reduce Amtrak's net operating losses.
    I think the can has been kicked down the road--and I hope 
today will be the start of figuring out what steps are needed 
and that need to be taken to reduce the size of those losses. 
First, Amtrak's largest revenue shortfalls are in its long 
distance routes.
    In Fiscal Year 2010, long distance routes lost close to 
$600 million. It was the worst performing route and has a 22 
percent recovery rate. It is time to reevaluate our national 
strategy for long distance routes and determine whether these 
routes are in the taxpayer's best interests.
    Second, I was astonished to learn the extent of Amtrak's 
labor costs. Having over eighteen-hundred employees each make 
over $30 thousand a year in overtime, and that is not base 
salary, but that is overtime, simply is not a sustainable 
business model.
    I understand that you are currently negotiating a 
collective bargaining agreement, and I hope that you show 
strong leadership and come up with an agreement that is both 
fair to the Amtrak employees and to the taxpayer.
    I look forward to your opening statement, and an open and 
productive discussion with you today as we continue through the 
process, and again, thank you for your hard work and excellent 
job in a very tough situation. I would now like to recognize 
the Ranking Member, Mr. Olver.
    Mr. Olver. Thank you. Thank you, Mr. Chairman, and good 
morning, Mr. Boardman. It is a pleasure to speak with you 
today. First, let me commend the work that you and your 
organization have done to improve the financial health of 
Amtrak.
    Ridership records continue to be broken, with now almost 29 
million passenger trips in 2010. The corporation has 
approximately halved its debt burden over the last eight years.
    Despite the railroad's record of progress, critics of the 
railroad continue to argue for defunding Amtrak and making it 
the only non-subsidized mode of transportation in the United 
States.
    This stance would kill Amtrak and damage the American 
economy. It is my strong belief that the administration's $4.4 
billion request for Amtrak reflects an understanding that all 
users of all modes benefit from an interconnected network that 
increases transportation options.
    Specifically, highway users will benefit from decreased 
congestion, and transit users will receive access to improved 
intercity connections, and airlines can focus on more efficient 
and profitable long distance routes, just as it contrasts with 
what the Chairman has said that you have deeply unprofitable 
long distance routes, their long distance routes are their most 
profitable, and probably are the only ones that really do run a 
profit.
    Mr. Boardman, in spite of the critics and the threats, 
Amtrak is entering an exciting period of opportunity. The 
Secretary's designation of the Northeast Corridor as a high 
speed rail corridor allows Amtrak to compete for high speed and 
intercity passenger rail funding, and address capital 
improvements that will greatly reduce travel times.
    Furthermore, while the Northeast Corridor is already our 
premier passenger rail corridor, I am interested to hear more 
about the long terms visions for the corridor that you released 
last September, and how the administration's robust Fiscal Year 
2012 rail request makes that vision achievable. Thank you and I 
yield back.
    Mr. Latham. I thank the gentleman, and Mr. Boardman, your 
statement will be entered in the record, but if you want to 
summarize it hopefully within five minutes.
    Mr. Boardman. Yes, sir, thank you, Chairman, and just so 
you feel like you are at home, I am a graduate of Cornell 
University, College of Agriculture, and so if you were in the 
wrong room, sometimes I think I am as well.
    Both Mr. Olver, Chairman, and Members, I appreciate the 
opportunity to come here, and I will be fairly short in my 
comments. As of this morning, we finished 17 straight months of 
year-over-year ridership growth at Amtrak.
    Our ridership has grown more than 36 percent since the year 
2000. The only restriction that we are really running into is 
available capacity. Last year, we carried more than 28.7 
million riders, and that does not really tell the whole story, 
because it is not just the ridership on Amtrak.
    Amtrak provides the opportunity for the commuter riders 
across this United States to handle about a million people a 
day, and so we are talking about 300 million commuter riders 
because of Amtrak's control of the Northeast Corridor, and some 
of the services that it provides.
    Our 15 long distance trains, which carry about four-and-a-
half million in riders, are the only Amtrak service in 23 
States, and at 223 of the 516 stations that we serve. Forty-
three percent of passengers with disabilities who took an 
Amtrak train in 2010 traveled on one of those 15 trains, Amtrak 
plays an important role as a provider of rural transportation 
services--and that is becoming clearer and clearer to me as an 
Agriculture graduate and somebody who came from a rural area of 
New York, which people often do not understand has a rural 
area--which has become increasingly important as bus and air 
services are contracted.
    Our bus routes today serve about 12 percent fewer rural 
residents than they did in 2005, and about 152 of Amtrak's 
stations serve the rural communities, many of which have no 
intercity bus service whatsoever.
    To sustain our system, our budget request is $2.2 million--
excuse me, billion. I think you would say yes to the million--
in 2012, divided into $616 million to support operations, and 
the only operations that are supported at Amtrak are the rural 
services, and not the Northeast Corridor. That is the operating 
side of the structure.
    And 1.285 billion for capital programs, and $271 million 
for debt service, with the exception of the $50 million that we 
are looking for to advance the Northeast Corridor Gateway 
Project.
    And our debt levels, and you have already recognized it, 
Congressman Olver, have been reduced in the last five years 
from about $4 billion to less than $2 billion. We just 
published an update to our fleet plan, which identifies some of 
our major equipment needs, and we have placed orders for 70 new 
electric locomotives, and 130 single-level long distance cars 
to replace our Heritage Fleet.
    Building long distance cars is a new operation entirely 
within the United States out of Elmira, New York, and right 
from the ground up, these cars will be built in the United 
States. We used the Recovery Act money that came to us in 2009, 
$1.3 billion, to return our stored cars and diesel locomotives 
to service--81 Amfleet cars, 25 locomotives, and 21 
Superliners.
    We also plan on growing Acela service capacity by adding 40 
cars to the existing 20 Acela trains, that we expect to begin 
on in 2012. We will talk a little bit later here about the 
vision for our real very high speed service, and I am sure some 
questions on that will come later.
    We have made a lot of improvements, and in fact when you 
really look at Amtrak, depending on how you look at the 
numbers, for operating service, we cover 85 percent of our 
costs.
    So for every dollar that you spend for operating, or for 
every dollar that we spend, you contribute 15 cents to provide 
that service, and it is the most efficient railroad in the 
United States.
    There is no other railroad that you can find that operates 
that inexpensively and efficiently. I appreciate again the 
opportunity of being here, and I will stay within my time.
    Mr. Latham. I thank the gentleman. I was surprised to see 
that one of your employees made $21 thousand in regular pay, 
and $149 thousand in overtime last year.
    Mr. Boardman. So was I.
    Mr. Latham. I thought it was an anomaly, but there are 
eighteen-hundred Amtrak employees who made over $30 thousand in 
overtime last year. I do not blame the employee, but I do 
believe in these budget times that we probably need stronger 
management here somehow.
    I mean, the idea of someone's salary being $21 thousand, 
and $149 thousand in overtime, how does this happen? It is 
outrageous. How does it happen?
    Mr. Boardman. I think it happens for a couple of reasons. 
One is that the overtime that we are talking about has been a 
long term issue at Amtrak. This is not a new situation, and it 
is hardly supervision, but more importantly it is about how the 
work gets done.
    When you look at that list of employees, you are going to 
find that almost all of them are maintenance, engineering 
maintenance, on the railroad, and most of them, or all of them, 
I believe, are pretty much in the Northeast Corridor.
    And part of it--most of the dollars are paid back to the 
States to a large extent because of the work that has to get 
done on a railroad on the nights and the weekends, and nights 
and weekends are when the real overtime gets paid.
    So, for example, in New York just recently, we had a couple 
of bridges that New York wanted to get done, and we told them 
that we really could not do that right now because of all of 
the work that we were doing, especially in 2009 and 2010.
    And because of the work that we were doing, we did not have 
the workforce to protect the railroad to help the States get 
the job done to get those bridges done across our railroad.
    So it was in some cases more than a regular overtime 
situation that occurred, and that happens on the railroad on a 
frequent basis. It is a very difficult thing to manage, but it 
needs to be managed better, and we understand that.
    Mr. Latham. Are any of these going to be addressed in the 
budget collective bargaining agreement?
    Mr. Boardman. That particular collective bargaining 
agreement is not done. We have 13 different bargaining 
agreements, with 23 different unions at Amtrak that we have to 
work with. This one is not done where the large part of it is, 
and so some of it can be addressed.
    Mr. Latham. As management, who assigns the shifts? Does 
management, or do the employees themselves bid for the shifts?
    Mr. Boardman. It is a combination. It is the employees 
bidding for shifts, and then when there is the extra work, they 
have to be assigned on a prescription basis, and it usually on 
an extra board.
    Mr. Latham. But on a regular basis management does not 
assign shifts to employees?
    Mr. Boardman. Management prepares the shift assignment, and 
the employee works it, but also works a second shift in often 
cases because of the amount of work that is available, but it 
is not a consistent level of work.
    And it is not an easy situation of going out and getting 
some laborers who are able to understand railroad rules and 
work safely. So it is not easy to take our workforce up and 
down, which happens in a lot of other industries, so you can 
reduce the overtime.
    Mr. Latham. Explain how it works. Say there is a shift on 
Monday, and someone assigns that one, and let's say there is a 
shift at midnight, and coming on Sunday, and midnight to eight 
o'clock in the morning. Are those bid by seniority?
    Mr. Boardman. I believe so.
    Mr. Latham. Okay. And if a person who is working would 
normally show up for the 8 to 4, but they bid the midnight to 8 
in the morning, they get paid overtime?
    Mr. Boardman. That is a shift differential.
    Mr. Latham. Okay. And do they work then the next eight hour 
shift?
    Mr. Boardman. If we need them, and they are available, yes.
    Mr. Latham. So my understanding is that they do not, but 
there is a requirement that you cannot work two shifts like 
that together, and so what happens is that while they are 
getting paid overtime from midnight to eight o'clock in the 
morning, the next shift that they are assigned to, someone else 
has to come in and work that, and they get paid overtime.
    Mr. Boardman. We have got some sharpshooters that come in, 
and sharpshooters being the people that figure out what the 
loopholes are in the rules, and wind up getting paid more 
money.
    But you can call people in to work just on an overtime 
basis, and not just because they have had one shift to work, 
and that they can come in afterwards.
    Mr. Latham. Is this part of the negotiations going on with 
the labor agreement to understand that there are some loopholes 
out there? I mean, that much overtime----
    Mr. Boardman. I understand, and part of the problem, Mr. 
Chairman, is that we cannot take down our railroad except on 
nights and weekends, to get some of this work done. We just 
cannot do it.
    So they will work all week, and they will work on weekends 
as well, and we have some people who are willing to work on a 
continual basis. And the sharpshooters are a problem, and that 
is the outrageous part of it, I guess.
    Mr. Latham. My time has expired. Mr. Olver.
    Mr. Olver. Mr. Boardman, I was startled by your piece where 
you said that 43 percent of the passengers--and I am reading 
directly here--with disabilities who took an Amtrak train in 
2010 traveled on one of those 15 trains in the long distance 
routes.
    How does it come out to be 15 trains?
    Mr. Boardman. It is the 15 long distance trains across the 
country.
    Mr. Olver. What is that, there is four routes are there 
not, four long distance routes?
    Mr. Boardman. No, there are 15 routes that we operate.
    Mr. Olver. And each one of those 15--well, what do you call 
a long distance route? I think of long distance routes as being 
ones that go across the great west, from Chicago to the West 
Coast, or from somewhere south to the West Coast. What are the 
other ones that you call long distance?
    Mr. Boardman. New York to Miami, New York to Tampa, 
Washington to Chicago, New York to Chicago. Anything that is 
over 750 miles is considered long distance.
    Mr. Olver. All right. On that score, if there are 15 trains 
which are those, how many total trains do you claim that run?
    Mr. Boardman. 310 trains a day operate.
    Mr. Olver. 310 a day, but those 15 trains are actually 
the--those most come to. Well, 310 trains a day?
    Mr. Boardman. 310 trains, yes, actually operate. I believe 
that is the right number per day. What you have got, or what I 
am mixing is two things. A long distance train has one or two 
going one way, or one or two coming the other way on some of 
the very long distances.
    Mr. Olver. On the same day?
    Mr. Boardman. Yes.
    Mr. Olver. On the same day.
    Mr. Boardman. So you would have one headed west, and one 
headed east.
    Mr. Olver. Well, I am going to get myself terribly confused 
as to whether or not we are talking about trains or the number 
of trips, and so forth. But in any case the number that those 
15 trains out of your 310, if those are being counted on a 
similar basis, apples to apples so to speak, that that group of 
15 would be carrying 43 percent of all of the disability 
personnel.
    Now, the reason that it puzzles me is that I think we have 
concluded that from testimony last year, I think there were 
only 48 out of your stations that were ADA compliant, and now I 
understand at this point that we are up to a hundred that are 
complaint.
    But this is all out of about 500 stations is it? What is 
the total?
    Mr. Boardman. It is a little over 500 stations.
    Mr. Olver. So, a little over 500 stations, and so that we 
have a very small portion of the stations that are actually 
complaint. Why is that group of 15 trains carrying such a large 
proportion of the disability population when my guess is that a 
huge number of the stations along those routes of those trains 
are non-ADA complaint?
    Mr. Boardman. Well, even if a station is not ADA complaint, 
we still can carry a disabled passenger from that station.
    Mr. Olver. Why then are so many disabled passengers using 
that service?
    Mr. Boardman. I do not know that I have the real answer to 
that, sir, but there is a----
    Mr. Olver. But they do have plane service, and disabled 
people do fly on planes, and disabled people do ride on buses?
    Mr. Boardman. Yes.
    Mr. Olver. What is the reason? This is startling me 
essentially, the proportion of disability that is involved in 
this.
    Mr. Boardman. I do not think that I have the detailed 
answer, but I can ask the staff to put this together as to why 
this is occurring. But, I mean, my only answer is that people 
do find it more convenient to ride a train than they do to ride 
a plane.
    Mr. Olver. Well, okay. I am already on yellow, and so I 
will pick it up in the next round.
    Mr. Latham. Thank you, Mr. Olver, and now Mr. Carter.
    Mr. Carter. Thank you, Mr. Chairman, and welcome. I am glad 
to be here. I took the Amtrak from Austin, Texas, to 
Washington, D.C., and it was an interesting experience.
    Mr. Boardman. Interesting does not necessarily mean good.
    Mr. Carter. Well, to me it was, but I grew up with a 
grandfather who was an engineer on a passenger train. I had 
surgery and they would not let me fly, and so I did not have a 
choice. I had to come to work.
    Mr. Boardman. I understand. You are one of those disabled 
that we carried.
    Mr. Carter. Disabled people, yes, and I think I have an 
answer for Mr. Olver, and the disabled situation, and that is 
that I met a lot of people on the train who told me that they 
were retired, and they rode the train almost continuously.
    That Amtrak had a special rate for retired people, and they 
were all over the country. These retirees stay on the train, 
and so that may be part of it.
    Mr. Olver. Well, that is a good answer. I am hoping to find 
out what portion of the population is using Amtrak that would 
not have any other place to go. Sorry to take your time.
    Mr. Carter. Well I am going to ask some questions about why 
Amtrak costs so much money. Up here on the East Coast, which is 
the mecca of Amtrak, I was checking last night on today's 
fares.
    A one-way ticket from Washington, D.C. on the Northeast 
Regional runs from $76 to $109 for coach, and $114 to $144 in 
first-class. A one-way ticket today on the Acela train from 
Washington, D.C. to New York City was as much as $232 for 
coach, and $337 for first-class.
    By comparison, the Bolt Bus, which is a commercial service, 
non-subsidized by the government, with leather seats and 
wireless internet, costs between a dollar and $23; and on Jet 
Blue, a one-way flight from Washington, D.C. to New York City, 
was $170.
    Now, with the heavy subsidy that the Federal Government 
puts into Amtrak, why are train fares more expensive than plane 
fares? And of course with bus fares, it is easy to figure that 
out.
    Mr. Boardman. The Federal Government does not subsidize 
Amtrak on the Northeast Corridor for our costs. We cover all of 
our costs for operating on the Northeast Corridor above the 
rail.
    And when you compare the modes, and I think that it is an 
important question, and I think the balance often times in the 
context of the balance gets lost. The United States Department 
of Transportation has 60,000 employees. Fifty thousand of those 
employees work for the Federal Aviation Administration.
    And all the airlines together pay about 57 or 58 percent of 
the costs of the FAA. The FAA provides the Air Traffic Control 
System. Nobody provides that for the railroads except the 
railroads themselves, Amtrak or the freight railroads.
    For Bolt Bus, and I was in the bus business, and I 
understand a little bit about it, they pay tolls on the way to 
New York, but they do not pay for the infrastructure and the 
repair of that infrastructure along the way.
    And the Federal Highway Administration and the highway 
industry gets about $51 billion a year now to maintain the 
interstates that are out there today, and while there is a 
certain level of assistance that a Boat Bus provides, it is 
nowhere near what Amtrak has to provide and railroads have to 
provide for their capital.
    And that is where the assistance for the Federal Government 
comes in for the Northeast Corridor and what you are talking 
about. It is the investment necessary to keep the Corridor 
safe, and the infrastructure safe.
    In regard to the fares, we charge the maximum that we can 
in order to reduce the amount of tax that has to be provided to 
Amtrak.
    Mr. Carter. Well, I understand that, but that brings us 
back to the debate that we were having with Secretary Ray 
LaHood, about the world of high speed trains, and I take the 
position that high speed trains run 200 miles an hour or 
better, and I understand this is not the definition of an 
American high speed train.
    Mr. Boardman. And that is not the definition of a world 
high speed train either, sir, but I understand the point.
    Mr. Carter. Well, one of my staff members just returned 
from a honeymoon to Europe, and he rode the high speed trains, 
and real high speed trains, and he said that what we call high 
speed trains are not high speed. The ones that were high speed 
trains went 200 miles an hour.
    Mr. Boardman. I understand.
    Mr. Carter. But if the fares on regular trains are hard to 
justify to the market at some level, the upper level, then 
putting in a real high speed train in the United States is 
going to require a whole new infrastructure.
    I am told that at least a million dollars a mile to put in 
a high speed train, and that by people who build them, at least 
a minimum of a million dollars a mile, and it is going to take 
extensive maintenance.
    How will this ever become cost effective so that the 
average American citizen can get on a high speed train, and 
utilize the speed capacity, and compete with an airplane?
    Mr. Boardman. I think you can only have it cost effective 
if you have enough ridership, and in the Northeast Corridor, 
you have got 40 million people within 40 miles of the corridor, 
and this is probably the most likely success in the United 
States.
    Mr. Carter. That is true, except that if they stop, it is 
not high speed. So you are going to have to go from Washington, 
D.C. and not stop.
    Mr. Boardman. I understand, and that can be done, but 
people in Philadelphia will not like it.
    Mr. Carter. Amen. I understand. I am just pointing out that 
the cost is going to be really, really high.
    Mr. Boardman. Yes, sir.
    Mr. Latham. The gentleman's time has expired. The gentleman 
from Ohio, Mr. LaTourette.
    Mr. LaTourette. Good morning, Joe. How are you?
    Mr. Boardman. Good morning, sir. How are you?
    Mr. LaTourette. Just to put things in perspective for some 
of my friends about Amtrak. If you look at the way the Nation 
subsidizes all modes of transportation, and just starting with 
about 1971, the last 37 years, the Federal Government has 
poured over a trillion dollars into the highways, and about 
$421 billion into the Federal Aviation Agency, and 
comparatively, it is $36 billion for Amtrak, about a billion 
dollars a year for the last 37 years.
    And I do not think that is too much, and in relative fares, 
and I have to tell you that we would criticize them if they did 
not charge enough and were asking for a higher subsidy.
    The proof is sort of in the pudding. The ridership has 
increased 36 percent since the year 2000. I think that they 
have been given a mandate. They were given a tough job when the 
great railroads in this country did not want to be in the 
passenger business anymore, and they dumped a bunch of old 
equipment.
    And there was the start of this new company, and have there 
been mistakes? Sure. Have there been things that you probably 
should not have done? Sure. But I have great faith in what Joe 
Boardman did in his past job and what you are doing in your 
current job. So I think you are doing a hell of a job.
    Let me ask you just a couple of things. One is about the 
FRA's proposal to reestablish an infrastructure back, and 
create this new sort of funding, and where they are going to 
have a new national rail system, and there is going to be a 
newly dedicated rail account named the Transportation Trust 
Fund.
    And at the moment the proposal is that Amtrak would be the 
only recipient of those funds. My concern is that that is the 
way that the National Highway Trust Fund started, and now after 
talking with Chairman Latham there has been 106 diversions from 
the Highway Trust Fund.
    So it makes me nervous that we would embark on another 
event and doing things that way--whatever the Federal 
contribution to Amtrak is, rather than continuing in the way 
that we have been operating to create this new fund that you 
are the only recipient today, but tomorrow there may be 20 
people who are recipients of this fund.
    Mr. Boardman. I think, Congressman, that everybody in this 
industry, in Amtrak and passenger rail, supports the increased 
support that is proposed by--and strongly supports that by the 
administration.
    There is always trepidation, and I think that you--and I 
want to go back to something that the Chairman talked about, is 
the number of our labor unions which are particularly 
interested in what happens here for the future because of the 
employment question.
    And so they are looking at this very carefully, and I have 
asked my staff, who came back and gave me a thumbs up, a 
positive, that this was a very positive thing that the 
administration was proposing, because we had an obligation to 
really think about that.
    But I think that you do bring up the question, and Congress 
can do anything that they want to, to change something for the 
future. But I do know that we have to rebalance for the benefit 
of the United States, and for the people of the United States, 
the modes of transportation that we are using for the future, 
and for our energy security as well.
    Mr. LaTourette. Of course we do, and I do not remember 
which freight rail line had the commercial that with one gallon 
diesel fuel that you could take a ton of stuff I think from 
Washington to New York City or Buffalo.
    But it is in stark contrast to the fuel that you burn in an 
airplane, and in contrast to the fuel that you are burning in a 
truck, and forget about the congestion and everything else.
    So I just throw that out as sort of a caution flag. It 
makes me nervous when we set up these new organizations, and 
then--well, we had that when Mr. Olver was the chairman, and 
sustainability initiates of probably a million dollars a year, 
and I am all for the goals of that program, but they wanted to 
take it out of the Highway Trust Fund.
    And that is just an example, and that they will come up 
with a Peace Train, and who is going to argue against the Peace 
Train, and all of a sudden the Peace Train cuts into and is now 
eligible to take money out this fund that is being established. 
So I just worry, and that is all I want to say about that.
    Mr. Latham. I thank the gentleman, and in order of arrival 
here, Mr. Womack.
    Mr. Womack. Mr. Boardman, thank you for your testimony, and 
I am one of the people on this committee who have not ridden 
Amtrak. I have never ridden Amtrak. I have seen it a lot. It is 
not too convenient for me because of where I live and who I 
represent.
    The Texas Eagle runs through Arkansas. It does not come up 
through my particular district, but it serves many other 
important parts of our State, including our capital city, 
Little Rock.
    In 2010, you spent $53 million on the line, and lost 29, 
and so 24 million is what you made, and the Federal Government 
basically subsidized the rest, a cost recovery ratio of less 
than 50 percent.
    The line hits Little Rock, but you can go to Arkadelphia, 
and you can go to Walnut Ridge, and some other towns. But those 
cities are not in our most populous cities, and those trips 
would probably have to be made sometime in the wee hours of the 
morning.
    Is Amtrak really feasible? And I realize that we are kind 
of a pass through State for the line, but is it really feasible 
in States like Arkansas that have a rural character, and how 
much of an investment would it require before it could be more 
useful to, shall we say, more of the population in our rural 
State?
    Mr. Boardman. I think it is an excellent question, and I 
appreciate it, and I understand as a freshman, and where you 
live in Arkansas, you would probably be much more interested in 
Interstate 49 than you would be the rail service. On that Texas 
Eagle service----
    Mr. Womack. I will count that as an endorsement on your 
part.
    Mr. Boardman. Dan Flowers made the endorsement while I was 
back as a Commissioner of Transportation, but there are 287 
thousand riders on the Texas Eagle. I do not know exactly what 
is out of Arkansas at this point in time.
    But last year, we had a great effort on the part of Hope, 
Arkansas, to get an additional stop at that location, pretty 
close to Texarkana, of course, and on into Texas. The revenue 
was 24 million, but our total cost was 53. Part of the 
difficulty on all the long distance trains, and this goes for 
all of them, is that the business model did not really work 
because of the amount of time that it takes, and the 
availability of capacity on the train for us to really get the 
kind of--and we are not cheap.
    Just as Judge Carter was talking about, we are not a cheap 
operation. We charge as much as we can, and still try to 
provide a service that is cost effective. It is very difficult 
to do, but there are people in Arkansas who believe it is 
effective in the areas that it operates in today.
    It also provides just an ability for bus service if it was 
coming out of Northwest Arkansas to connect to Little Rock, or 
to connect to one of the other stations, and to have that 
connectivity across the country.
    And that is probably the most important part of what the 
national intercity interconnected service is about, is that 
connectivity across the United States.
    Mr. Womack. But back to the last part of my question. Do 
you see a point in time when in some of these rural areas that 
there is an investment, it could be recaptured, and make that 
service more useful without some other kind of connecting 
mechanism like a bus service, say, from Northwest Arkansas?
    Mr. Boardman. The operative question is useful, and not to 
be argumentative at all, but I think it is useful now, but if 
the real question is are you going to be able to make money on 
the route, then I am going to say no.
    I am going to say that for the most part most of the long 
distance trains, the best one we have is Auto Train, which 
covers about 74 percent of its costs. And whether you are in a 
bus system today, or any passenger service, unless there is 
some kind of subsidy, and it does not always have to be cash as 
we can look at the FAA with 50 thousand employees out of the 
USDOT, and doing all the air traffic control.
    It is debateable I guess sometimes whether the TSA checkers 
are the folks there, but that is all paid for by the 
government. So there are different levels of subsidy to secure 
transportation across the country that we provide as a subsidy, 
that is a policy question in the United States, and so I do not 
see it as being able to operate profitably.
    Mr. Womack. Mr. Chairman, let the record reflect that he 
did say I-49 before I did. I yield back.
    Mr. Latham. I thank the gentleman. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you very much, Mr. Chairman. How are 
you, sir?
    Mr. Boardman. Yes, sir.
    Mr. Diaz-Balart. I do not want to misquote you, but you 
talked about how Amtrak was very efficient. Is that what you 
said?
    Mr. Boardman. Yes, sir, cost efficient.
    Mr. Diaz-Balart. Cost efficient. Speak to me a little bit 
about freight rail. We know, and you mentioned that, and our 
colleague, Mr. LaTourette, mentioned how much we subsidize 
other forms of transportation.
    But how about freight rail? Freight rail, I think, they pay 
for the infrastructure, and they pay for their lines, and they 
frankly--and it is my understanding, and I may be wrong, but 
that is why I am asking the question, but do we subsidize them 
as well or not?
    Mr. Boardman. We do, but not very much.
    Mr. Diaz-Balart. Not very much.
    Mr. Boardman. And let me explain what that means, is that 
when we do a highway grade crossing job, it is usually paid for 
by the highway side of the house, and not the railroad.
    Mr. Diaz-Balart. Sure.
    Mr. Boardman. And there have been several times that 
several investments have been made in the last couple of years 
that have helped the freight railroad.
    Mr. Diaz-Balart. And we also regulate them and cause them 
additional costs as well, which----
    Mr. Boardman. And I have to live by those regulations as 
well.
    Mr. Diaz-Balart. And I was going to say that it also 
affects you, but my question is this, and I know that it is 
comparing not even apples and oranges. It may be apples and 
trees.
    But if they are not heavily subsidized, and yet they are 
able to provide an actual profit, and so the question then I 
think needs to be asked is that you are subsidized, and yet you 
do not provide a profit, and we still have to subsidize you 
because you have operating losses.
    And so why the difference? In other words, it seems that 
the private sector does it, and they make a profit, and they 
compete with each other, and they invest in their 
infrastructure, and you do through subsidies, and not just 
through your revenues.
    So why is it that Amtrak cannot do that? I understand that 
it is passenger and not freight, but why is it that Amtrak 
cannot do the same thing that the private sector does with 
freight, and with passenger?
    Mr. Boardman. Well, that is a good question. I think that 
the freight railroads have not always been profitable. The 
Staggers Act really helped them become more profitable when 
they were able to spin off a lot of their unprofitable routes, 
and it helped them substantially in 1971 when they turned over 
all their passenger services to Amtrak.
    So they have been able to get rid of those things that had 
to be subsidized by somebody, and in the past, they were 
subsidized by other revenue that the freight operated from. 
Freight railroads today, I think, are key providers of the 
movement of our economy.
    And 40 percent of the--well, it used to be 40 percent, and 
it may be a little bit different, but 40 percent of the freight 
that they carry is coal. Coal today handles or is responsible 
for about 50 percent of the electric energy in the country, 
with about 20 percent natural gas, and 20 percent nuclear, and 
the rest hydro and so forth.
    But that is a key element of what the freight railroads 
provide as a base level of service.
    Mr. Diaz-Balart. So they have kind of a solid market that 
they have, which is coal?
    Mr. Boardman. They do.
    Mr. Diaz-Balart. Now, are there--there must be parts of the 
system that make money, and other parts that lose money, 
correct?
    Mr. Boardman. You mean in terms of passenger service?
    Mr. Diaz-Balart. Yes, and I apologize, and I am getting 
back now strictly to Amtrak. Do you look at--and I understand 
and I think I know the answer to this, but do you look at 
getting rid of those, and closing those down that do not make a 
profit?
    And if so, then why do not you get rid of those that do not 
make a profit?
    Mr. Boardman. I think that there was a large part of time 
spent in the late 1990s, and all the way up to perhaps 2002 and 
beyond, and maybe to 2005, trying to make that change, and 
trying to figure out how many long distance trains could we 
cut, and could we save money.
    We even looked quite frankly, Congressman, at ourselves, 
because we know that our country is in trouble, and we looked 
at it and said if we were going to reduce service, where would 
we do that, and would we save money by going to three days a 
week on the service.
    We have two of our 15 long distance trains that are three 
days a week, and they are the two worst performers. So when you 
look at them, they are on the bottom of the rung. And what we 
found is that we would lose more money if we did that, because 
people could not depend on it. It was not every day, and the 
service would not----
    Mr. Diaz-Balart. But if you closed them down?
    Mr. Boardman. If you closed them down altogether, next 
year's costs would be the first year to close down the 15 
routes, would be $1.1 billion, and that is because of the 
requirements that we had right from the beginning of this 
railroad to pay out labor pay, and also we would have to spread 
other costs as part of the shutdown.
    So it would be over a billion dollars next year, and then 
that would play out over a five year period. We would have 
probably in excess of 4 to 5 billion dollars to shut them down, 
and you would no longer have any service for the rural States 
of the United States.
    Mr. Diaz-Balart. And, Mr. Chairman, I do not know if I have 
any time, but just so I understand, that you would have an 
initial closedown, or shutdown costs. Eventually, however, you 
would not have to subsidize, and you would not have to, I 
guess, maintain, and you would not have to have all the costs 
that that involved.
    So that eventually you would start saving money, and it 
would not be a substantial amount of money? In other words, 
look, I am posing this question. In the private sector, when 
something is losing big money, and I realize that I am out of 
time, but in the private sector, when you are losing big money, 
you shut those down, and you focus on what makes you money.
    And I am not quite sure if we are looking at that, and if 
that is possible, and if that is feasible, and if not, I would 
like to know later on why not, and we will continue the 
conversation. Thank you, Mr. Chairman. You have been very 
generous.
    Mr. Latham. I thank the gentleman. Mr. Dent.
    Mr. Dent. Thanks, Mr. Chairman. I appreciate this 
opportunity. Just a couple of things about the high-speed rail. 
I know that Florida is not going to utilize the money. I keep 
hearing that Amtrak wants to take some of the elective, have 
some of that Florida money, and use it for the Northeast 
Corridor to expand high-speed specifically between Philadelphia 
and New York. I think you are talking about $450 million, I 
guess for track and signal upgrades. Is that a fair assessment?
    Mr. Boardman. Actually, I brought the application with me. 
For the Northeast Corridor Gateway Project, we were looking 
for--let us see, 188, 50, 570, and 449, so well over that, over 
a billion. We do not know that we would get all that, and that 
we are ready to----
    Mr. Dent. I was talking between Philadelphia and New York. 
I heard 450 million.
    Mr. Boardman. I do not know exactly where that came from. I 
would have to look----
    Mr. Dent. It was in the Philadelphia Inquirer. That is 
right. That is my source. So okay. There you go.
    Mr. Boardman. It is 449.9.
    Mr. Dent. Okay. Well, pretty accurate then. I guess the 
question that I have is right now, I ride Amtrak, both the 
Regional and Acela in the Northeast Corridor. The maximum speed 
on the Acela, is that 135 miles an hour right now?
    Mr. Boardman. South end.
    Mr. Dent. Pardon me?
    Mr. Boardman. On the south end, yes; 150 on the north end.
    Mr. Dent. And if you were to go to high-speed rail between 
Philadelphia and New York how fast do you think you could get 
that rail?
    Mr. Boardman. Well, the project that is being talked about 
here is power signal, track, and catenary improvements, which 
are required to get us to above 135. Probably one of our most 
serious problems for the electric train is the power available 
to really run them, and then the catenary has to be improved to 
go to 160 so that--the current generation of Acela is capable 
of 150, but----
    Mr. Dent. It rarely goes at that speed, right?
    Mr. Boardman. Just on the north end, for about 20 or 30 
miles, is all that is available for the track and the physical 
characteristics of operating it. We can operate a higher speed 
train, but we would have to make infrastructure improvements, 
major infrastructure improvements.
    Mr. Dent. And if you were to have--what would be the 
maximum speed you think you could get on a train running on the 
Northeast corridor?
    Mr. Boardman. With our vision for the future, 220 miles an 
hour.
    Mr. Dent. So 220, okay. A question, too, about the rail 
service in the Northeast, and this is sort of a parochial 
concern. We have done studies where I live about expanding rail 
service between New York City and the Lehigh Valley region, not 
through Amtrak, but through New Jersey Transport, extend their 
lines, and we have done studies, and we found that if we were 
to extend the lines, riders would cover 22 cents on the dollar.
    Now, I understand that many of these types of systems, you 
know, operate at a deficit. As a rule of thumb in the 
Northeast, what would you expect the cost recovery from riders 
to be if you were going to rail service?
    Mr. Boardman. Well, I think if you are talking about 
commuter rail service like I think what you----
    Mr. Dent. Interregional, yes.
    Mr. Boardman. You are talking about a commuter service. I 
think they are covering--Metro North is probably the most 
efficient in covering costs, and they are in the 50 to 60 
percent category. But that is because you had a rail culture 
that was built into this. So much of rail and bus and transit 
is dependent upon external circumstances. When you are seeing 
four dollar gasoline, you are going to have a much higher 
recovery of people riding transit, which is what you are 
talking about here, then you would if you did not have four 
dollars. If you have ten dollar gasoline, you are going to do a 
lot better than that. And that is part of the difficulty of 
making that happen.
    Mr. Dent. How would you react to 22 cents on the dollar in 
terms of recovery?
    Mr. Boardman. Well, for what period of time? I do not know 
the study. I would have to look at----
    Mr. Dent. Well, I will get back to you on that. I cannot 
tell you the time period, but it was----
    Mr. Boardman. I would be happy to look for it.
    Mr. Dent. Yes. We are trying to make decisions between bus 
and rail. Okay. I have no further questions. I yield back. 
Thank you.
    Mr. Latham. I thank the gentleman. Just a couple of things 
that kind of caught my attention. Mr. Diaz-Balart talked about 
it, and you discontinued several of these routes, and you said 
it would cost $5 or 6 billion. Am I correct, did I hear you 
right, that you would have to pay the employees for five or six 
years?
    Mr. Boardman. Yes.
    Mr. Latham. Even though they were not working?
    Mr. Boardman. Yes.
    Mr. Latham. So that would be a huge part of that.
    Mr. Boardman. That was created in 1971 as a part of the 
original effort. There was an expectation that Amtrak might not 
continue. And so in order to get qualified employees, the 
Congress at the time passed a law called the C2, which was a 
result of a dockworker decision in New York City that paid 
employees, depending on how long they served, for up to five 
years of their wages before you could end.
    Now, Congress pulled that particular clause out in 1997, 
when they made some changes, and they required Amtrak to 
negotiate, and it changed a little bit, but not a lot in terms 
of what employees would be paid if you ended the service.
    Mr. Latham. Now, looking through your budget, I was 
actually pleased to see that your estimate, $192 million 
increase in operating revenue for Fiscal Year 2010, and you 
testified about having 17 straight months of year-over-year 
ridership growth, which all makes it surprising to see that you 
are estimating an even larger net operating loss. If you have 
increased revenues and increased riders, should it not increase 
profits and reduce losses?
    Mr. Boardman. Let me explain that. Sorry. I did not mean to 
interrupt you. I think it is----
    Mr. Latham. It is an unusual business model.
    Mr. Boardman. It is a great question because what we really 
are applying for is the maximum authorized level, is what we 
are asking for. If you look at--and what have we done with the 
money I think is evident in the finances itself. For example, 
we have reduced the debt of this company down from $4 billion 
down to less than $2 billion. We are not using that money 
frivolously somewhere else.
    What you are really seeing is last year I think we were in 
the neighborhood of $434 million that it cost to operate the 
long-distance trains, and that was down over the year before. 
And those dollars were used to reduce our cost for the future, 
and that is part of what we are doing, is we are making sure 
that we make the investments that reduce those costs.
    So what we are really asking for here is the maximum 
authorized level to make improvements for Amtrak. That is where 
the $616 million really comes from, Mr. Chairman.
    Mr. Latham. So you are saying that--I guess I still do not 
understand. What your budget says, you have a larger operating 
loss.
    Mr. Boardman. We have a----
    Mr. Latham. An operating loss.
    Mr. Boardman. We have a request for the maximum 
authorization of money, and our operating loss is--the 
operating part of the budget is 616. That does not wind up as 
our operating loss in the end. It is whatever we have actually 
lost on those long distance trains. And then you still have 
those dollars, which we use to make sure that we continue to 
reduce those costs.
    Mr. Latham. But you also have another request for your 
capital account, right?
    Mr. Boardman. Yes, that is correct.
    Mr. Latham. Okay. And it was interesting. I noted in the 
discussion about the bus that, yes, they paid tolls. They do 
not pay for infrastructure, at least burning fuel, where they 
are paying taxes into the trust fund. And you have an operating 
loss primarily caused by the longer routes. But that does not 
apply any of the profits in the Northeast Corridor, do not go 
towards infrastructure and capital accounts, do they?
    Mr. Boardman. They do. As a matter of fact, with our 
purchase of the 70 electric locomotives, we are using revenues 
as the base for our debt structure. So we are using the surplus 
that we have available and expect it----
    Mr. Latham. Okay. But when you talk about new bridges or 
overpasses or that type of tunnels, maintenance, you are not 
talking about using operating funds.
    Mr. Boardman. No.
    Mr. Latham. Those are capital.
    Mr. Boardman. Those are all capital.
    Mr. Latham. Right. I mean, I think it is clear or should 
be. People should be aware that there is a capital account and 
an operating account.
    Mr. Boardman. Yes.
    Mr. Latham. The operating is justifying or paying for a lot 
of other routes that are not as profitable as the Northeast.
    Mr. Boardman. But we are--if I can just respond. We are 
operating right now on a continuing resolution at the Fiscal 
Year 2010 levels. I mean, we----
    Mr. Latham. We are aware of that.
    Mr. Boardman. But we also did not start using the dollars 
that we expected for Fiscal Year 2011 because we thought that 
was irresponsible. We have been maintaining a spend level that 
would keep us within the Fiscal Year 2010 level.
    Mr. Latham. I thank the gentleman. Mr. Olver.
    Mr. Olver. Well, thank you, Mr. Chairman. The more I hear 
questions asked and the answers and so forth, the less I think 
I know about how Amtrak runs or can run or should run. In fact, 
now you have added the last thing. It leads me to that we are 
talking about a shutdown here in the next few days. What 
happens in your case in a shutdown procedure? I am interested 
in whether you can give us a sense of what your plan is? You 
must have a plan, and does that go into an immediate effect--
sort of like a light switch being turned off? Or does that go 
in over several days? Or did what you just suggested, is that 
most of the Fiscal Year 2010 money, much of the 2011 money 
provided for in the previous CRs has not yet been used, and 
therefore you have got money that would be able to keep you 
going for some period of time?
    Please explain to me what happens----
    Mr. Boardman. We do not keep a zero balance on a regular 
basis because you are going to have potential problems that you 
are dealing with, and we always provide and have provided what 
our financial condition is at any one time. We are keeping a 
close eye on what is happening with the potential shutdown. We 
see ourselves being able to operate for an additional month.
    Mr. Olver. For an additional month?
    Mr. Boardman. For an additional month prior to us----
    Mr. Olver. And that is so because some reserves have been 
held and carried forward, either from other years or you have 
not used everything that you were allowed?
    Mr. Boardman. Well, it is not reserves from--it could be 
that we have not spent all the money that is in the accounts 
that we have available. And that is really where we are, is 
what our cash is available. And we also, remember, we receive 
revenue every day. We receive revenue every day. And as I said 
earlier, we get 85 percent of our operating money from the 
operations itself. So about 75 percent of it out of the fare 
box, and the rest of it out of leases that we would lease at 
30th Street Station or Penn Station and other places.
    Mr. Olver. And so those monies, does that mean that you 
could sit with a computer and decide which trains to cut out 
and keep going for two months or three months?
    Mr. Boardman. No. I do not think it is quite that simple. 
But there would be a lot of major changes if that happened.
    Mr. Olver. You would not be the one using the computer.
    Mr. Boardman. I would not.
    Mr. Olver. Yes. Well, okay. So you think you could keep 
running for a month.
    Mr. Boardman. Yes.
    Mr. Olver. And maybe somewhat longer on the basis of 
revenues coming in.
    Mr. Boardman. So when I ask my finance guy the same 
question, well, we can run for a month, and maybe a little 
longer, his answer always is, a month. He is pretty definite.
    Mr. Olver. Yes. And at which point does it just all come to 
a stop, at once?
    Mr. Boardman. A month.
    Mr. Olver. Or is there then some--does the Northeast 
Corridor go because it is an operating wash nearly?
    Mr. Boardman. I do not have a month two plan yet.
    Mr. Olver. Ah. Well, it is complicated, in any case.
    Mr. Boardman. But I understand what you are asking.
    Mr. Olver. All right. I will take----
    Mr. Boardman. If you actually shut down, we will start 
planning month two.
    Mr. Olver [continuing]. That it is complicated. Look, I do 
not know how long this hearing is going to go on. We have been 
told there might be some votes here going on sometime soon, and 
I do not know what the process is on that.
    Mr. Boardman. I am happy to end any time, sir.
    [Laughter]
    Mr. Olver. I wanted to learn something about the fleet 
plan. You have, as I understand it, across the fleet--and this 
is a variety of different sorts of equipment, but average age 
of 26 years. I do not know how you do an average age because 
the kind of equipment that you use is so very different. It is 
from single cars and bilevel cars and electric locomotives and 
diesel locomotives, and everything else along the way.
    What portion of this--where are we on that plan? Are you on 
a plan where you have achieved out of a 20-year the first two 
years or something? How much of this has been done, and how 
much of it is really maintenance and rehabilitation of 
equipment, and how much of it has to be really new equipment? 
How long can we--how do you keep track of that? This is a 
horrendous job.
    Mr. Boardman. Well, I think one of the things--and I said 
it recently at one of the NARP meetings--is, is it not great 
that--because there was some criticism of our fleet plan. I 
said, is it not great we have got a fleet plan you can 
criticize because up until February 2010, there was no fleet 
plan. And are we moving it forward? We just updated it, and we 
are in fact moving it----
    Mr. Olver. Did you learn a lesson from that in the way the 
government operates? Never offer anything that----
    Mr. Boardman. Right.
    Mr. Olver [continuing]. Is clearly going to be criticized?
    Mr. Boardman. No. I think you have to offer it, and you 
have to get criticized, because you have to get the job done. 
And so we are doing that. We have a five-year business plan. We 
have a fleet plan. We have offered up a lot of plans, and we 
are willing to talk about those plans. We are moving forward on 
the replacement of, for right now, only the 70 electric 
locomotives and the 130 long-distance single level cars.
    Mr. Olver. They are the oldest.
    Mr. Boardman. They are the----
    Mr. Olver. Not the electric locomotives?
    Mr. Boardman. The conventional electrics are very old.
    Mr. Olver. Very old.
    Mr. Boardman. They tie----
    Mr. Olver. How long have they been in use?
    Mr. Boardman. Very high mileage. Some of them back from the 
eighties that--but it was more for those electric locomotives. 
It was really more the mileage, which we really ran into 
problems with and the technology for the future.
    Mr. Olver. Now, ultimately, there comes a point when----
    Mr. Boardman. Absolutely.
    Mr. Olver [continuing]. Rehabilitating and maintaining--but 
if you do not maintain, then you are going to--so you must be 
putting a lot of maintenance money in year by year by year.
    Mr. Boardman. It is $250 million a year to overhaul and 
maintain the fleet. That is what it costs us. That is to keep 
us going.
    Mr. Olver. Is there a manufacturing base in this country 
for the replacements? Which is a piece of this equipment that 
is most likely to be replaced as opposed to making do through 
repairs?
    Mr. Boardman. The decision was that the electric 
locomotives had to be replaced. The decision was that our 60-
year old baggage cars and diners needed to be replaced. We have 
and are still debating to some extent some of our superliners, 
whether they need to be replaced or whether they continue to be 
overhauled. And we have had----
    Mr. Olver. And do we have the manufacturing base to deal 
with that? Is this something, if we are trying to produce in 
some places----
    Mr. Boardman. CAF USA has been awarded the contract for the 
130 single-level cars in Elmira, and that is the beginning of a 
new manufacturing base for single levels.
    Mr. Latham. Okay. The gentleman's time started late anyway. 
Thank you, Mr. Olver. Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman. As you know, I was 
the chairman of the Railroad Subcommittee, and so just indulge 
me for a couple of minutes, just to dispel some of the 
observations that were made. The notion that the freight 
railroads--and I love the freight railroads, and they really 
need to be strengthened in this country. But the notion that 
they are not the recipients of any subsidization is not true.
    If you look at the two that operate in my part of the 
world, CSX and Norfolk Southern, both receive title grants in 
the amount of hundreds of millions of dollars. In the case of 
Norfolk Southern to the mouth of the line that goes directly to 
Norfolk at the seaport--and there are a lot of tunnels that 
were built way back in the twenties and the thirties that do 
not have the capacity to take the double stack containers, 
which make those trains not as quick as they could be without 
that investment.
    And the CSX line goes directly to the port of Baltimore. 
And again, that is hundreds of millions of dollars just in the 
last year. In addition, you correctly point out section 130 of 
the highway bill that has dealt with grade crossing, more for 
the benefit of the motoring public than they have for the 
railroad. Something that I could never get you to use, the RIFF 
program, this is a $35 billion cheap money loan guarantee 
program for infrastructure improvements for the railroad system 
in this country. And the Create program in Chicago is a couple 
of billions of dollars. They are moving freight through the 
city of Chicago.
    So again, I would go back to the fact that whether you like 
it or not, Amtrak has been on the receiving end of $36 billion 
since 1971. I would still say that that pales in comparison to 
all other modes of transportation, including the freight 
system.
    Now, getting to the--just to take care of Asia and Europe 
as well. I have had the chance to ride every train that moves 
fast in the world because of my previous posting. And when we 
would meet with the transportation officials, I would always 
ask them, you know, is this thing paying for itself. No. And in 
France, if a ticket is 100 bucks, how much of my trip am I 
actually paying for? Thirty percent. The French government 
subsidizes 70 percent of the passenger rail system because they 
have made a societal choice that for trips of 400 miles or 
less, that is how they want their people to move.
    Now, you can say it is greenhouse gas. You can say it is 
fuel. You can say it is efficiency. You can say whatever you 
want. But that is a choice that the country has made. And for 
your long distance routes that lose money, to my good friend 
Mario's questions, I mean, the choice is pretty stark. I mean, 
first of all, you correctly point out you would lose $5 billion 
over the first five years because of the structure of the 
agreements.
    But once you get past that, sure, you could save money on 
all those 15 long distance routes if they ceased to exist after 
five years. But you would not have anybody riding on a train. 
So if that is where the country wants to go, at a price of a 
billion dollars a year, well, okay. Then people with the most 
votes should be able to oppose that.
    That will never get my support because, I tell you, I think 
that passenger rail needs to exist in this country. It is never 
going to pay for itself. That is a fiction. It does not pay for 
itself anyplace in the world. And, you know, if we are going to 
nickel and dime, we waste a lot more money than a billion 
dollars a year on a lot of stuff around here that is not as 
effective.
    So anyway, so that is my soapbox. Let me ask you about--we 
had a conversation about H.R. 1. And you are aware, I know you 
know, you are not getting $2.22 billion, not out of this 
Congress, this year or next year. So the questions are two. The 
Administration's decision on the Northeast Corridor Gateway 
that now lets Amtrak participate and put in applications for 
that $1.3 billion. If you were able to access those funds--and 
those are primarily for capital improvements. Those are not for 
operations. And if this Congress were to give you flexibility, 
so whatever the number is--the number is one, two, but you had 
the flexibility to move between capital and operating, what do 
you think? How much money do you need?
    Mr. Boardman. It is an important question, Steve, and I 
appreciate it, and I appreciate where you are coming from here. 
We asked for, for example, the 50 million for the Gateway 
Project in both the budget and now also in application. So one 
of the things I asked us to start really looking at here--
because I understand where our country is. We looked at what 
could we do from a capital standpoint. What do we really need? 
We need for safety, 350 million bucks in the Northeast 
Corridor. We need 250 million bucks for mechanical overhauls.
    If we are going to continue with ADA, we need 175 million 
bucks if we are going to make a continued commitment, as we 
have. We need 63 million to continue the 130 cars, for the 
acquisition of the 130 cars. We think we need to continue our 
reservation system at 17 million. We have a labor management 
system that we are putting together to get better data. We need 
about 12 million for that. This is all capital.
    Our 30th Street garage has to get fixed. We have got cement 
falling off of it. We need 17 million bucks to make that 
happen. We need 12 million for Chicago Union Station. Can I 
finish the list here? That puts us at a bare bones just about 
at $900 million.
    Mr. LaTourette. On the capital side.
    Mr. Boardman. On the capital side. On the operating side, 
where we really need to be is $544 million. If that is what 
happens, we will not be able to progress a lot of the other 
improvements that have been detailed in the budget to make 
future improvements.
    Mr. LaTourette. Okay. Thank you.
    Mr. Latham. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman. I apologize for not 
being here earlier for your testimony, Mr. Boardman. I come 
from a part of America that loves railroads. In fact, we want 
to invite you the last Saturday of April to our Train Day in 
Toledo. And the way we look at the world, is we look sort of 
toward Mr. LaTourette, out there way in the East heading for 
New York City and Washington, and we look West to Chicago. We 
also look up to Ontario, up in Canada. And my questions will 
relate to our abilities to modernize our passenger as well as 
our freight rail system, which congests in our part of the 
country. And the ability to offer good passenger service is 
constricted by the confluence of the freight and passenger on 
the same system.
    So one of my questions really has to do in this Pittsburgh, 
Cleveland, Sandusky, Toledo, Chicago corridor, what, to your 
knowledge, are plans? Do you talk with the freight lines? Is 
there a way of separating those as we move toward a more modern 
transportation for America? And my focus really is on the 
Midwest. You mentioned New York in your testimony. You 
mentioned California. But, you know, our part of the country, 
as far as I can tell, is not specifically mentioned. So I have 
to be a bit of an advocate here.
    As much as we support you for the country and the necessity 
for having modern transportation in passenger and freight, this 
issue of being efficient in passenger is constricted by what is 
happening with the freight using the lines at the same time. It 
makes for bad hours, you know, passenger--you know, you are 
supposed to catch the Amtrak train at 3:30 in the morning or 
something. And that is not much fun. And so it makes for--it is 
not as user friendly as it could be for the part of America I 
live in. That is question one, dealing with in terms of 
Midwestern plans, headed to Chicago, headed east out of that 
Ohio corridor, how can we conceive of a corridor plan that 
would separate those? Are those plans on the drawing table?
    Secondly, what are your thoughts toward Canada? I have 
traveled Canada VIA many times. And we are not that far from 
it, and we look at the world differently than if you live in 
New York City or San Francisco. And Ontario is our friend. How 
do you work with VIA? How do you work with that whole Great 
Lakes corridor up there in terms of passenger rail?
    And then thirdly, what about the improvements that you have 
to make, the cars and so forth? What percentage of that work is 
done in America versus being imported? As we look toward a more 
modern rail system in this country, how capable are we to make 
it in America? So those are my three questions.
    Mr. Boardman. Thank you, Congresswoman. I understand. I 
have never considered Steve living in the East, but we do not 
claim him as part of New York.
    Mr. Olver. Talking about eastern Ohio.
    Ms. Kaptur. Right, yes. Well, you know, it depends where 
you live. We are out there in--we are in duck country in the 
west side of Ohio.
    Mr. Boardman. I understand.
    Ms. Kaptur. So we--that is where the Toledo Mudhens got its 
name by the way, the little black ducks that crawl around. I do 
not know if Steve has those over in his region of Ohio. But we 
view them as east.
    Mr. LaTourette. We ate all of ours. [Laughter]
    Mr. Boardman. We have been doing a lot of different studies 
that have been required under the PRIIA law, and those did not 
include Toledo. But when you look at where Toledo is and where 
the Ohio piece is, there were some--the 3C corridor, of course, 
that was considered. And those were state initiatives, which is 
what PRIIA really looked for, was state initiatives, to make 
those things happen.
    But there is a connection to Toledo up to the Michigan 
service, of course, that operates to Detroit. And some of those 
kinds of things--and we have had some discussions--I do not 
think anything has moved forward yet--on looking at how that 
might happen, at least in a serious way of what the cost would 
be and those kinds of questions, rather more in the spatial way 
of what does it take to get some changes in the kind of a 
structure that we are really looking for along that whole lower 
Great Lakes area.
    Ms. Kaptur. I guess that is my question. As a city planner 
by training myself, I am interested in the corridors, the 
connectivity. And you are saying that it is sort of on hold 
right now.
    Mr. Boardman. Well, I will tell you what, better than that. 
We will give you a written response to that because there may 
be something that our planners are doing. I did not prepare 
myself in that area, and I apologize.
    Ms. Kaptur. Okay. That is fine. And have them include the 
Canadian question also with VIA.
    Mr. Boardman. Okay. We will do that.
    Ms. Kaptur. Because we have got some--on the freight side, 
we have got Canadian Northern coming down into our area, for 
example, and the future is going to be our relationship to 
Canada. They just simply are on the other side of the lake. So 
we have to think about that. I am just curious on the passenger 
side how that connects.
    Mr. Boardman. I will respond to both----
    Ms. Kaptur. It does not connect in your end of the state, 
does it, to VIA? Pardon?
    Mr. LaTourette [continuing]. Rail facility--and hopefully 
going to develop that. It has not happened yet because----
    Mr. Olver. If I might say so, you need to be careful. You 
might find that there is a train that goes from Detroit to 
London and Hamilton and Buffalo, and completely bypasses the 
whole south side of Lake Erie.
    Mr. Boardman. Thanks for that help, Mr. Olver. [Laughter.]
    Ms. Kaptur. That is what I am concerned about.
    Mr. Olver. They will both be there.
    Mr. Latham. We seem to have gone from ducks to Canada. I am 
not sure why I lost control here, but anyway. [Laughter.]
    Mr. Olver had mentioned earlier about the ADA compliance in 
your budget request, and you listed this in some of your 
capital needs, $175 million for those projects at stations for 
compliance. Do you own those stations?
    Mr. Boardman. In most cases, we do not. It is a complex 
ownership structure but we have to meet the requirements even 
so.
    Mr. Latham. Why do you have to pay for it, and the owners 
do not?
    Mr. Boardman. Because of the--I do not have the--I will get 
a legal answer for you that our legal office will put out. But 
we were required under the ADA law to make sure that all 
stations were compliant with ADA.
    Mr. Latham. They also have to comply with ADA.
    Mr. Boardman. Well, they do. To some extent, I guess they 
do. I will get you an answer. But let me get you a written 
answer. I do not know the----
    Mr. Latham. Do you know what it would cost to bring the 
stations that you own into compliance?
    Mr. Boardman. I think most of the stations that--I do not 
know. Let me ask that question. We will look for it and get it 
back to you.
    Mr. Latham. You stated that you are requesting $50 million 
in funding to begin the Northeast Corridor Next-Gen vision for 
development of high-speed rail. I guess I have a couple of 
questions about that. Is not the estimate for the Next-Gen rail 
about $117 billion?
    Mr. Boardman. Yes. But this is really the Northeast 
Corridor Gateway Project.
    Mr. Latham. So you want $50 million to start a $117 billion 
project.
    Mr. Boardman. No. It has to be independent utility. And 
what we are really running out of in Penn Station in New York, 
Congressman, is capacity. There is insufficient capacity to 
increase the demand that is occurring on the corridor. We are 
going to be locked up and unable to really move trains through 
Penn Station or increase the number of trains in Penn Station.
    The Northeast Corridor Gateway Project is really about the 
Portal Bridge, the tunnels, and the capacity in the Penn 
Station, Penn Station South.
    Mr. Latham. How much is that? How much is the Gateway?
    Mr. Boardman. We do not know yet the total number. We would 
have to get the financial--that is part of the reason for the 
$50 million to move it forward. There have been some estimates 
of the total cost used from some of the ARC projects. I do not 
have it in my head.
    Mr. Latham. What is the $50 million going to be used for?
    Mr. Boardman. For moving forward on our engineering and any 
environmental requirements.
    Mr. Latham. You know, we get into a lot of different 
projects around here. But are we getting ahead of ourselves?
    Mr. Boardman. No.
    Mr. Latham. If you do not know what the cost is going to 
be?
    Mr. Boardman. You never know on a construction cost until 
you get----
    Mr. Latham. Up to a point.
    Mr. Boardman. We have, you know, we have the overall 
largest. We do not have what it is----
    Mr. Latham. What are they?
    Mr. Boardman [continuing]. Really going to cost us. I do 
not remember right this minute. If I have it on here somewhere, 
I would pull it up. But I do not know where it is.
    Mr. Latham. I am just, you know--I think someone has to be 
responsible to taxpayers. To have $50 million for an open-
ended, we do not know what it is going to cost, but we are 
going to go forward. This is the first payment on this huge 
project, and we do not know what it is going to--we do not have 
any idea what it is going to cost.
    Mr. Boardman. We know what pieces of it. The Portal Bridge 
is in the billion dollar range of category. You are going to be 
in the--probably a total cost of 12 billion in the end.
    Mr. Latham. It is 8 to 10.
    Mr. Boardman. It is 8 to 10, so it will be 12.
    Mr. Latham. The whole Gateway.
    Mr. Boardman. For the Northeast--for that Gateway Project, 
is $8 to 10 billion. I can get you the--I mean, Chairman, we 
have those numbers. It is my failures in memory, and I do not 
have a staff guy that can hand me that, although I need to get 
that.
    Mr. Latham. Okay. In your budget, you are saying the 
project will cost 13.5 billion through 2018, with 50 million of 
that in 2012 for engineering work. So you just said 8 to 10.
    Mr. Boardman. I said 12. So my memory was better than their 
estimate.
    Mr. Latham. Maybe a billion someplace? I mean, we are 
talking real money here.
    Mr. Boardman. I would have to look at the list. But we are 
not trying to hide anything.
    Mr. Latham. My time has expired. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman. This is sort of going 
to be a round of quickies maybe, if I can articulate the 
questions in a quickie way for him. When you get back to these 
labor issues that you had been talking about, this five- or 
six-year problem that was created in legislation in 1971, all 
the employees who were there at that time certainly have now 
retired, long since retired. But this is a continuous--this was 
not a grandfathering kind of a thing for--that is really quite 
remarkable.
    Well, maybe it is not remarkable, the way these agreements 
get created. I should never be surprised at what shows up in 
agreements that are created long in the past.
    Mr. Boardman. The same thing exists in the transit 
industry, for the bus system, for example, only they call it a 
13C there. If you begin to shut down a bus system, you have the 
same requirements to pay employees for--depending on how long 
they have served, for the time, their salaries.
    Mr. Olver. Let me ask you then, do you--as I said, it is 
going to be scattergun. Do you own the stations on the trackage 
where you own the tracks?
    Mr. Boardman. Yes.
    Mr. Olver. You do? So that would mean that you do own from 
New Haven to Springfield. You do own from Philadelphia to 
Harrisburg.
    Mr. Boardman. Some of them are owned by the transit system.
    Mr. Olver. By the transit systems----
    Mr. Boardman. Yes.
    Mr. Olver [continuing]. That operate out of each station.
    Mr. Boardman. The same place, yes.
    Mr. Olver. Do you run--do you manage SEPTA? Do you run 
those trains? Or does SEPTA have its own operator?
    Mr. Boardman. We dispatch everything.
    Mr. Olver. You dispatch?
    Mr. Boardman. Everything on the corridor, for the most 
part.
    Mr. Olver. But you are not providing--oh, are you providing 
the whole service for their commuter rail out of 30th Street 
Station?
    Mr. Boardman. No. They run the trains themselves, but they 
cannot come on the tracks unless we dispatch them.
    Mr. Olver. Okay. You do the dispatching. I am always 
curious at having the dispatching done by someone different 
from the ones who are operating the tracks, and so forth. We 
have got situations, every imaginable situation where----
    Mr. Boardman. We operate the tracks and dispatch the--I 
mean, the tracks are Amtrak's tracks. It is just not their 
train, and it is not their employee.
    Mr. Olver. Okay. So but you then run the program to 
Harrisburg.
    Mr. Boardman. Yes. That is an Amtrak employee, an Amtrak 
train.
    Mr. Olver. On Amtrak trackage. But does their commuter rail 
system go to places like Westchester or Lancaster or Redding?
    Mr. Boardman. I do not know the limits of where they 
operate to, but they do use part of our track.
    Mr. Olver. Part of your track. But they are the operators.
    Mr. Boardman. They are the operators.
    Mr. Olver. Because you are the operator on Redding.
    Mr. Boardman. We are the dispatcher, the maintainer, the 
owner of the track.
    Mr. Olver. In the Detroit situation, which is another 
conundrum, you own a mess of track in Michigan----
    Mr. Boardman. Battle Creek.
    Mr. Olver [continuing]. Sort of disconnected from any--your 
own track in Michigan.
    Mr. Boardman. We own----
    Mr. Olver. How are you proceeding? What progress is being 
made on--you have an ARRA grant for something there in 
Michigan. Has that been obligated?
    Mr. Boardman. Actually, I think it is Michigan that has the 
ARRA grant themselves. It was really the state had, and we are 
working----
    Mr. Olver. Okay. But it is for work on your own trackage.
    Mr. Boardman. No. It is really the part that Norfolk 
Southern owns. And our own trackage, we are improving positive 
train control and improving the speed of those trains to try to 
get to 110 miles an hour.
    Mr. Olver. And that is the route that would connect to 
Toledo and on through the South Shore of Lake Erie.
    Mr. Boardman. Well, it could connect to Toledo if you come 
down. It is quite a ways north of Toledo.
    Mr. Olver. Well, it goes into Detroit. But is not the way 
to--oh, no, it would not be. The route from New York to Chicago 
does not go through Detroit?
    Mr. Boardman. No, it does not.
    Mr. Olver. It does not get to Detroit.
    Mr. Boardman. No.
    Mr. Olver. Does that pass through Toledo?
    Mr. Boardman. Yes.
    Mr. Olver. That one goes through Toledo and then to Fort 
Wayne and South Bend and places.
    Mr. Boardman. Yes.
    Mr. Olver. Okay. I am on yellow. You know, up our way, we 
actually have salamander crossings under the highways and under 
the railroad tracks.
    Mr. Latham. Thank you for sharing that. [Laughter.]
    Mr. Womack.
    Mr. Womack. I do not have any further questions. I do 
appreciate the gentleman's testimony this morning. I just want 
to make a comment. And I am a freshman. I recognize that, and I 
am new to this business. But my comment is, I just think it is 
a shame that when economic conditions and economic 
circumstances might dictate that business decisions be made 
regarding an enterprise like this, and that we have in place 
agreements that guarantee certain benefits are paid for a 
series of years, that on a day like today, when we are debating 
shutting down our government, that no such agreement exists to 
pay the people who are defending the freedoms that we enjoy.
    I find that to be incredible. And I yield back my time.
    Mr. Latham. I thank the gentleman. Mr. LaTourette. If 
everyone is not aware, we have votes on the floor, and we will 
try to conclude this hearing before those votes are over. Mr. 
LaTourette.
    Mr. LaTourette. Thank you. I will be brief. I want to hear 
more about what Ms. Kaptur wants to say about Toledo. I will be 
brief, two quick items. Just as I continue my series of 
advertisements for Amtrak, I would just like the record to 
reflect that if you go to the transportation energy data book, 
that Amtrak moves its passengers with 20 percent less energy 
than airlines and 30 percent less energy than cars. So all the 
greenhouse gas people, they can perk up, that this is a good 
use of a billion dollars a year to get this done.
    I just want to bring to your attention, we had Secretary 
Ray LaHood in front of us. And, you know, one of the problems 
with all of these high-speed, high-speed being 110 miles an 
hour at the moment, arrangements with the states is that you do 
not own a lot of track in the places that you want to expand. 
And the situation was brought to my attention dealing with 
Norfolk Southern in the state of North Carolina. And I guess 
you have some discussions going on down there.
    And basically, the observation was that, as I indicated, 
Norfolk Southern has a TIGER grant and some other grants to do 
some work to make that line get to the sea. And there is a 
proposal, some $400 million floating around North Carolina, I 
guess, to do this high-speed rail service. And I think the 
freight railroads have a legitimate concern when it comes to 
signing some of these agreements, MOUs, that require the usage 
of their track, and this is not going to be your track; it is 
their track, and that they are being sort of strong-armed into 
signing things dealing with Amtrak on-time performance. And I 
would just ask--I know as a former administrator of the FRA, 
you are more than sensitive about it. And the Secretary said 
that would never happen on his watch, and no employee of his 
would ever do such a thing.
    But, you know, the difference between Europe and the United 
States is they do not have any freight rail in Europe. 
Passenger rail just goes wherever it pleases, whenever it 
pleases. But if you are asking to have an MOU agreement to use 
Norfolk, CSX, UP, BNSF, it does not make any difference, they 
still have their job to do. And I would just hope that you 
would be not complicit through the Administration's headlong 
rush to make high-speed rail their signature transportation 
issue in a way that damages the continued growth and viability 
of freight rails, and work together rather than not.
    Mr. Boardman. Understood. And we are doing that. I think 
Norfolk Southern are hard bargainers. Once they agree to 
something, they keep their word.
    Mr. LaTourette. They do. And I thank you.
    Mr. Latham. I thank the gentleman. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman. I just wanted to 
continue on my same line of questioning and place on the record 
that I represent the fifth largest rail center in the country. 
So we are within 75 percent of the nation's population, and the 
role of rail in moving all kinds of cargo on the freight side 
as well as passengers and other items that come on those trains 
into regions like ours is a vital part of our economy.
    All of our freight rails are hiring right now, with the 
economy picking up a bit. And we have massive investment, 
billions of dollars in investment in our region in rail. So we 
look a little different maybe than some of the other members 
maybe on the committee. I really would reiterate my interest in 
meeting with your land and service planners in looking forward 
to take a look at our part of the country and the real 
impediments to increasing passenger rail because of the 
conflict of freight, and what we do with those easements.
    We have to think forward. Also, sir, if you could include 
in that how you look at the Canadian passenger freight 
confluence with us up way at the border where we live. I would 
be very grateful so we could take a look at both passenger and 
freight in that Great Lakes corridor, what is really going on 
there, what do you own, what do you not own. If we want to get 
passengers from point A--in my circumstance, Sandusky, Toledo, 
to Chicago, or points north, whether it be Detroit or Ontario, 
how those systems interconnect. I am very interested in that.
    My other question relates to making the locomotives, the 
cars, parts--we hear a lot about foreign companies really being 
the places that are making the passenger cars. And I am 
interested in what is made in America anymore in the area of 
rail, or are we always depending on foreign imports to satisfy 
that demand. And I might just, you know, let you answer that, 
but to say you're increasing ridership is really impressive, 36 
percent since 2000. That means your people are working really 
hard, and we have got an old system stressed out. And we want 
to thank everybody that works for Amtrak and tries to give 
people a really good experience in moving around this country.
    So on the question of making it in America, how American 
are we in terms of the repairs you are making, the items that 
you will be procuring, or are we depending on foreign 
suppliers?
    Mr. Boardman. Well, we are always going to be depending on, 
Congresswoman, foreign suppliers for some things because of the 
way that the economy really works today. Kawasaki bends metal 
in Nebraska, meaning that they begin their build of their cars 
there, primarily the transit industry cars that they build, and 
they are building them. Bombardier builds them in Canada, and 
we now have a U.S. manufacturer of coach in Elmira, New York, 
by the name of USA CAF, which is a Spanish company that came 
here to begin building the 130 cars that we have available.
    The logistics of the rail industry is very difficult in the 
United States for passenger side because of the low level of 
passenger that we really have. There are other industry--there 
is a rail manufacturer in Harrisburg. There is one in 
California. There are several freight car manufacturers. There 
is a locomotive, diesel locomotive, plant, of course, G.E. in 
Erie, Pennsylvania, not too far from you, and then there is 
also EMD in Illinois, which is part of Caterpillar now. And we 
have our electric locomotives being built by Siemens out on the 
Sacramento area of the West Coast.
    Ms. Kaptur. Thank you. Thank you very much. And are there 
Buy-American provisions that apply to you as Amtrak?
    Mr. Boardman. We actually have somewhat different 
provisions, but we still look at trying to follow what the 
policy is of Congress and the President.
    Ms. Kaptur. Thank you very much.
    Mr. Latham. I thank the gentlewoman. And I think we are 
going to close the hearing. We have just a few minutes left to 
make our votes on the floor. I want to thank you for your 
testimony today. We have got a lot of challenges before us, 
obviously. This current situation and then long term is going 
to be very challenging. I will say this. Amtrak will always 
have a warm spot in my heart. When I was dating my wife, she 
lived in Northeast Colorado, in Brush. And I used to get on 
Amtrak on Friday night at Osceola, Iowa, and ride and get off 
in Fort Morgan about 7 o'clock in the morning to visit my wife, 
my girlfriend at the time; but anyway, fortunately my wife 
today.
    But anyway, there will always be a warm spot there. But I 
appreciate your testimony and want to work closely with you in 
the future.
    Mr. Boardman. Thank you.
    Mr. Latham. So thank you, sir.



    
                                           Wednesday, May 25, 2011.

   OFFICE OF PUBLIC AND INDIAN HOUSING (HUD) FISCAL YEAR 2012 BUDGET 
                                OVERVIEW

                                WITNESS

SANDRA B. HENRIQUEZ, ASSISTANT SECRETARY FOR THE OFFICE OF PUBLIC AND 
    INDIAN HOUSING, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 
    (HUD)
    Mr. Latham. Good morning and welcome to our witness.
    Today's hearing looks at the President's fiscal year 2012 
budget request for Public and Indian Housing at HUD. We welcome 
Sandy Henriquez, HUD's Assistant Secretary for PIH, and we look 
forward to your testimony.
    Ms. Henriquez. Thank you, Chairman.
    Mr. Latham. Your office is responsible for some of the most 
important and most challenging functions in the Department. 
Public and Indian housing makes up approximately 56 percent of 
the HUD budget, and your request would grow PIH nearly $3 
billion from the fiscal year 2008 enacted level.
    Given the fiscal constraints we are faced with, it is not 
clear how the Administration will meet the goal of increasing 
families and individuals served by these accounts without 
further reforms to the programs as they exist today. For far 
too long, administrations from both sides of the aisle have 
neglected to tackle the management and financial problems both 
at HUD and at many public housing agencies throughout the 
country.
    Oversight of the PHAs has been far too lax, and sound 
justification for many of the costs associated with the 
execution and management of these programs has been 
nonexistent. Given the fiscal environment and the billions of 
dollars spent on these programs, this must change. The 
Administration has had 2 years to engage on these issues, and I 
am interested to see what progress has been made.
    The budget for PIH contains several billion dollars worth 
of guesses, assumptions, and wishful thinking. There is never 
an appropriate time to budget billions of dollars based on 
hunches and guesswork. HUD can no longer use excuses as to why 
things cannot be run more efficiently and effectively and can 
no longer rely on guessing and estimating to arrive at their 
needs for renewal figures, administrative fee needs, and other 
important areas of increasing costs. We need data, and we need 
it to be sound.
    The bottom line in all the PIH programs is simple. When 
HUD, a PHA, or a guarantee mismanages or wastes funding, it is 
not just the taxpayers that lose. It is the resident or the 
family that relies on HUD to provide them with a place to live. 
The stakes are high for these programs, and we owe it to the 
beneficiaries of this funding and the taxpayer to get the 
programs right.
    Now, I would like to recognize the ranking member, Mr. 
Olver.
    Mr. Olver. Thank you, Mr. Chairman; and, Sandy, thank you 
for being here. It is a pleasure to have you with us today. 
Your appearance comes at an important time.
    While the recession technically ended over a year and a 
half ago, hundreds of thousands of families continue to 
struggle with the burden of underwater mortgages and a weak job 
market. As the Assistant Secretary for the Office of Public and 
Indian Housing, you are in an important position to help 
families facing foreclosure and to make capital investments in 
housing infrastructure that creates jobs.
    I am particularly pleased to see that your fiscal year 2012 
budget request strongly addresses increased demand for housing 
assistance that stems from continuing high unemployment rates 
and the millions of foreclosures in the last 3 years. 
Specifically, the budget provides notable increases for the 
tenant-based Section 8 program and fully funds this housing 
assistance program.
    Furthermore, the capital investments provided throughout 
the HUD budget, including the Public Housing Capital Fund and 
the Native American Block Grants, create jobs that are vital to 
sustaining our economic recovery, and I hope you can enlighten 
us as to the categories of such jobs.
    The budget request also provides $250 million for the 
revitalization of distressed neighborhoods through the Choice 
Neighborhoods proposal. This Subcommittee has long been a 
proponent of the proposal's predecessor, HOPE VI, and I am 
looking forward to discussing with you the recent announcement 
that six cities have been selected for the initial fiscal year 
2010 Choice Neighborhoods demonstration awards.
    Finally, I look forward to discussing your proposal to 
recapture $1 billion in operating funds from public housing 
authorities, in particular how HUD's recent clarification of 
eligible operating activities will impact the ability to 
perform this recapture and how this will impact strategies PHAs 
have employed to leverage these funds.
    In closing, it is my view that this budget request allows 
HUD to contribute to our economic recovery. I greatly 
appreciate your leadership over the past 2 years and am 
committed to working with you toward our shared goal of 
providing adequate, affordable housing.
    However, I am greatly concerned that the appalling 302(b) 
allocation that was agreed to yesterday by the full committee's 
majority will counter your efforts. In fact, your office 
exemplifies the choice presented by the allocation, whether to 
throw low-income tenants out on the streets or to defer capital 
expenditures and allow Federal housing investments to 
deteriorate. In my opinion, neither is good for our country.
    Mr. Chairman, I yield back.
    Mr. Latham. I thank the gentleman.
    You didn't vote for the allocation yesterday?
    Mr. Olver. No, I did not.
    Mr. Latham. Okay. Your full statement will be in the 
record, but if you'd like to summarize, we would appreciate it. 
Thank you.
    Ms. Henriquez. Thank you very much, Mr. Chairman.
    Chairman Latham, Ranking Member Olver, and members of the 
Committee, I want to thank you for the opportunity to testify 
before you today regarding the fiscal year 2012 budget of the 
Office of Public and Indian Housing.
    I have submitted longer testimony, as you said, for the 
record, but, today, I want to focus on how our budget protects 
current residents of HUD, houses vulnerable communities, holds 
public housing authorities accountable for the use of taxpayer 
dollars entrusted to them to benefit those residents, and 
proposes long-term reforms that meet the need for the quality, 
affordable rental homes we need today to win the future.
    Our challenge is clear. Having seen from 2007 to 2009 the 
largest increase in the history of HUD's worst-case housing 
needs survey, it is clear that the recession hit poor families 
hard. And while the median income of American families today is 
over $50,000 per year, for families who live in HUD-assisted 
housing, it is $10,200 per year; and more than half of those 
families have a member who is elderly or disabled. Mr. 
Chairman, these families need to be protected, and with this 
budget they will be protected.
    This budget houses 1.1 million families in public housing 
and provides tenant-based vouchers to another 2.2 million 
households.
    Additionally, the budget funds programs that will support 
housing and community economic development initiatives in 
American Indian, Alaskan Native, and Native Hawaiian 
communities. We are also requiring housing authorities to 
contribute to meeting these challenges from their excess 
reserves. In particular, the budget reduces the 2012 funding 
allocations to public housing authorities with excess reserves 
accumulated from prior year appropriations from the Operating 
Fund.
    We believe that housing authorities should have a prudent 
level of operating reserves, which is why our proposal would 
draw down excess reserves in a targeted way, not across the 
board. These reserves were set aside so that housing 
authorities could continue operating on a rainy day; and, as 
Secretary Donovan has said before in his testimony before this 
very Committee, that rainy day is now. Indeed, Mr. Chairman, 
this budget holds HUD and our partners accountable for the 
funding we steward on behalf of vulnerable residents and 
communities.
    By including key provisions from the Section 8 Voucher 
Reform Act proposal, this budget now simplifies and streamlines 
our three largest rental assistance programs. It also saves the 
taxpayer over $150 million in the first full year of 
implementation and over $1 billion over the next 5.
    In addition to streamlining programs and saving taxpayer 
funds, our budget enhances oversight and accountability among 
our local housing authority partners in some important ways. 
And while the vast majority of our public housing authorities 
operate very responsibly and are good public stewards--indeed, 
95 percent of our Nation's public housing authorities meet or 
exceed property and program management standards--it is clear 
that we have more work to do. That is why I am announcing today 
specific new steps that HUD has begun to undertake that will 
add to the transparency of our public housing authorities.
    In late April, we published a notice that HUD will require 
every public housing authority in the country to report to HUD 
the compensation packages of their top five paid personnel.
    In addition, while HUD does not have the authority to set 
compensation packages for public housing authorities, we will 
require all housing authority boards to undertake and certify 
that they have done comparability analyses before setting their 
executive director's compensation.
    This is but one part of an on-going effort at HUD to ensure 
our staff, both at Headquarters and in the Field, are not just 
checking a box but engaging in real oversight and technical 
assistance, collecting the best data, using state-of-the-art 
technology, acting quickly if trouble arises, and working 
across sectors and silos to assess problems, engage local 
leaders, and to ensure compliance. After all, HUD has a zero 
tolerance for waste, fraud, and abuse; and anything less is a 
disservice to the families who live in the homes we provide and 
to the taxpayers who make it possible.
    Indeed, HUD is focussed on protecting taxpayer dollars and 
ensuring that public housing tenants receive quality housing 
and the services they deserve. Still, Mr. Chairman, the time 
has come to have a larger conversation about how we preserve 
America's affordable housing stock in the 21st century. And 
that is why with our proposed budget we have begun to lay out a 
comprehensive strategy to place our public and assisted housing 
stock on a sound, sensible financial and regulatory footing for 
the long term and to better serve the families that live there.
    As part of this approach, we are working with the 
Departments of Treasury and Agriculture to enhance the low-
income housing tax credits which was responsible for about half 
of all multifamily production in the 1990s. In our budget, we 
have made a basis boost proposal to increase tax credits 
available to preserve Federally assisted housing, including 
public housing.
    We are also launching a demonstration to preserve thousands 
of homes supported by our public housing and the so-called 
orphan programs in our assisted stock, with rents up and 
moderate rehab. We want to work with you to shape that 
demonstration.
    Our goal is not only to bring new capital to public housing 
but also to bring private sector discipline that extends from 
the way these homes are financed to how these properties are 
managed. And so, Mr. Chairman, this budget isn't just about 
spending less. It is also about investing smarter and more 
effectively. It is about making hard choices to reduce the 
deficit and putting in place much-needed reforms to hold 
ourselves accountable to a high standard of performance. But, 
most of all, it is about the results we deliver for the 
vulnerable people in places that depend on us the most. That is 
the goal of this budget proposal.
    And, with that, I look forward to answering your questions. 
Thank you.
    [The information follows:]



    
                     PHA COMPENSATION FOR PERSONNEL

    Mr. Latham. Thank you very much for your statement. I am 
pleased that you mentioned as far as compensation for the--and 
collecting data for the PHA compensation as long overdue, but I 
still have several concerns.
    Do you believe that the $300,000 a year in compensation, as 
is the case in Philadelphia, is excessive; and should any 
director make more than you do or more than the Secretary does?
    Ms. Henriquez. It is a good question, and there has been a 
lot of debate about that, a lot of discussion about that.
    What I believe is that housing authorities, we have asked 
them to be entrepreneurial. I think that the vast majority of 
housing authorities have salary compensation packages that are 
comparable to the amount of work and the lines of business that 
they do and that most boards of HUD----
    Mr. Latham. What is comparable?
    Ms. Henriquez. We are asking for comparability studies so 
that a housing authority board, before setting a compensation 
package for its executive director, can look at the size of the 
organization, the amount of money that comes in and gets 
handled, and what does that mean in the local economy and the 
local job market in which that housing authority exists.
    I will say that it is important for us to always remember 
that this is a public sector opportunity. It needs leadership. 
People need to be well-compensated and not overcompensated, and 
we are looking to the boards of commissioners and appointing 
authorities at the State and local level to make sure that they 
have performed all of their due diligence to set those rates 
within that marketplace that makes sense for their local 
communities.
    Mr. Latham. Are you setting guidelines as to these studies 
of comparable--I mean, you could find anything you want to as 
far as a study without any kind of direction.
    Ms. Henriquez. We think that by posting and making 
available comparability studies, also by posting on a HUD Web 
site the five top compensated individuals at a housing 
authority, brings both accountability and transparency so 
boards can see what housing authorities are paying their 
executives for similarly sized organizations. We believe that 
that will force more discipline and will help boards understand 
how to right-size their compensation packages.
    Mr. Latham. You know, there is probably the debate as to 
whether it is about compensation or whether it is about public 
service as far as the executive directors. Who are they 
accountable to? Do you have--to their local board or is it 
accountable to you at all?
    Ms. Henriquez. Housing authorities are creatures of State 
and local government, and so the appointing authorities for 
boards really are at the local and State level. Executive 
directors, therefore, are employees of those appointed boards. 
Because there are Federal dollars going into these housing 
authorities, it is important for our oversight to happen, but 
executive directors are not employees of HUD but of their local 
institution.
    Mr. Latham. But it is our money.
    Ms. Henriquez. But it is Federal money, which is why the 
oversight is important.
    Mr. Latham. So you can't set any caps on it as far as 
salaries at HUD, I guess, unless they are in receivership; is 
that correct?
    Ms. Henriquez. When they are in--there is two types of 
receivership. And so if they are in receivership, if it is 
Federal, those are set by then the Federal judge or local judge 
who has that. When they are in administrative receivership, it 
is our responsibility to make sure that there is comparability 
and that we do set those and try to figure out what is the best 
salary for that size housing authority and its span of control 
in its jurisdiction.
    Mr. Latham. I am still, I guess, confused. Are there any 
guidelines as to what is comparable in the Department?
    Ms. Henriquez. HUD does not have specific guidelines 
because we do rely on the due diligence of like local and State 
appointing authorities to do that through their boards.
    Mr. Latham. But we have seen some cases of very, very high 
compensation at the local level, and you are relying on them.
    Ms. Henriquez. I would suggest that the comparability or 
the salaries that are set, in most instances, are because 
people have performed well, that there are merit evaluations. 
People have been in places for quite a while, shepherding and 
leading an organization quite well, and I would say that with 
the vast majority of executive directors the compensation 
really does bear out with their length of service and their 
performance evaluation.
    Mr. Latham. Are there any consequences if it is deemed 
excessive?
    Ms. Henriquez. By consequences?
    Mr. Latham. From HUD? From anybody?
    Ms. Henriquez. What HUD does, when we find that there are 
problems at a housing authority tied to finances or to 
governance, we do move in, we do make an assessment, we do call 
into question whether or not compensation is what we would call 
an outlier, it is higher than the same sort of peer group by 
similarly sized agencies. We will work with housing authorities 
to try and right-size their costs, but----
    Mr. Latham. But you have no leverage or no consequences?
    Ms. Henriquez. The executive directors are not our 
employees.
    Mr. Latham. All right. Thank you very much.
    Mr. Olver.

                PUBLIC HOUSING ASSESSMENTS SYSTEM (PHAS)

    Mr. Olver. Thank you, Mr. Chairman.
    You have gone right to the question of compensation in 
situations. I have not seen any study that shows what those 
compensations may be, but I was going to explore a slightly 
different program, slightly different aspect here.
    You do have a system that has been in place maybe--I don't 
know how long, but perhaps you can tell me. How long has the 
system of public housing assessments, the PHAS system, public 
housing, PHAS, how long has that been in existence?
    Ms. Henriquez. It has had several iterations, but it began 
in the early 1990s.
    Mr. Olver. In the early '90s. Has it been recently changed? 
In your tenure, for instance, has it been significantly 
changed?
    Ms. Henriquez. We are always working to update it so that 
the program and the assessments really speaks to place-based 
property management.
    Mr. Olver. To what?
    Ms. Henriquez. Place-based. We see housing authorities as 
real estate operations, and we are scoring them and assessing 
them based on how they perform in various ways, and that is how 
they get scored in this PHAS system.
    Mr. Olver. Okay. My understanding is that there is a series 
of criteria that include the condition of the properties, the 
financial integrity of the agency, the satisfaction of the 
residents, the soundness of the management.
    And this issue of compensation, if you see outlandish kinds 
of compensation situations, there comes a question of the 
soundness of the management maybe. I don't know.
    So that gets right to the core of what the board governance 
is. And is that merely taken into account peripherally? Because 
each one of those decisions, board decisions in any of these 
areas that might affect the issues that I understand to be part 
of that assessment process, each one of those decisions really 
has an involvement of board governance. Is there a way of 
really looking at board governance in a separate way? Has that 
been thought of? Have you considered doing that?
    Ms. Henriquez. We have considered doing it, but we have not 
considered doing it within the assessment itself. We look at 
board governance as an overarching principle. So what we have 
done to ensure better governance is we have instituted a series 
of board trainings so that boards, although they are local- and 
State-appointed officials, we have a system where we train them 
in governance and financial oversight so they can perform their 
due diligence the way they are supposed to. If that all then 
turns and we find there is a problem at a housing authority, we 
want to make sure that that board has been retrained and 
looking at those issues and taking full responsibility and 
living up to their fiduciary responsibility of running that 
operation and providing policy direction and oversight.
    Mr. Olver. How do you think boards would respond to a more 
hands-on effort on your part to get in there, and what 
incentives do they have to change the way they are functioning 
if you can see things that are important that are affecting 
their performance?
    Ms. Henriquez. What we found typically is that if a board 
is not performing its role satisfactorily, if it is not looking 
at the financials, if it is not looking at issues of governance 
and how those housing authorities under their control operate, 
that shows other problems. When that happens and housing 
authorities are deemed troubled based on our assessment system, 
the incentive or the disincentive means that there are funds 
for which--and competitive funds for which they will not score 
well and not receive.
    The disincentive is that we will be much more hands-on. We 
will insert ourselves in their processes, making sure that 
policies and priorities are in place. We will put them on an 
improvement program with timetables for performance and move 
them and judge them and hold them accountable to those 
timetables for that performance.
    Failing that, we will then say, enough already. We will 
move in and we will take more concrete steps.
    Again, these are creatures of local governments. We expect 
that those housing authorities or their appointing authorities 
will do the right thing. We expect if boards are not performing 
that their appointing authorities will take action--that is, 
mayors and town managers and governors and so on--and make the 
changes that are required to make sure that that organization 
gets back on a stable financial footing and operates to serve 
the people who need the services provided.
    Mr. Olver. I probably will follow up with this one again.
    Mr. Latham. Okay. Thank you.
    Mr. Womack.

                    PHAS COMPENSATION FOR PERSONNEL

    Mr. Womack. Thank you, Mr. Chairman; and thank you, Madam 
Secretary, for being here today.
    I am a little ahead of myself, Mr. Chairman. I have a 
question about another subject, but I want to go back to the 
discussion of compensation. In your personal opinion, do you 
think 300K is a little bit excessive? I mean, I heard your 
discussion about how it is an entrepreneurial-style board, but, 
really, do you think it is a little excessive?
    Ms. Henriquez. If I might take liberty to answer that in 
two ways. The first of which is that $300,000 compensation for 
that particular organization, the total operating dollars for 
that organization approximates $1 billion a year all in. If you 
take that and translate that to a non-profit or a for-profit 
marketplace comparable job, I expect that you could see some 
similarities. That needs to be balanced, however, with the fact 
that this is a public sector job; and so, again, that is why we 
are looking at the comparability studies.
    The second response I would give you in terms of personal 
is I ran a housing authority for 13 years. It is one of the top 
10 largest, I guess, in the Nation.
    Mr. Womack. Boston.
    Ms. Henriquez. Boston. And my salary was higher than had 
ever been paid before to executive directors at that housing 
authority over time. Did I think it was enough? No. But I 
thought it was in keeping with what we were doing and, again, 
comparable to what was going on in my locality.
    So I think that if we really want good housing 
professionals to lead the largest housing organizations in this 
Nation, we have to pay adequate salaries based on someone's 
competencies, their level of experience, and so on. That has to 
be balanced with this is a public sector position. We need to 
be mindful of that at all times, and I think we have got to 
figure out how to balance those things.
    Mr. Womack. I am going to step out on a limb here and 
assume that your present salary today in this public sector job 
that you have is probably significantly less than your earnings 
in Boston?
    Ms. Henriquez. No, sir. This is an increase for me over 
what I was earning in Boston.
    Mr. Womack. Wow. Does it trouble you that Philadelphia is a 
$300,000 year job making significantly more than the Assistant 
Secretary?
    Ms. Henriquez. I have to honestly say to you that thought 
has crossed my mind. However, in all honesty, when this offer 
was made, I came to it with my eyes wide open and made a 
decision that this is what I wanted to do, and this was the 
salary, and with this is the salary I would hopefully do my 
best work at this amount.
    Mr. Womack. Well, I can tell you that it more than crosses 
my mind that I think we have somewhat of an imbalance here. And 
with all due respect to the entrepreneurial nature in which the 
boards try to conduct their business, it is a public sector 
job, and we are struggling right now to find savings to put our 
country back on a better fiscal path.
    Was it true that they did buy some pretty expensive 
designer bags for members of the board?
    Ms. Henriquez. Mr. Womack, it is true that those were 
purchased. It is not true that Federal funds were used.
    Mr. Womack. Okay.
    Ms. Henriquez. May I, if I might, say to you the following. 
The vast majority of public housing directors in this Nation 
are compensated adequately, not overly compensated for the work 
they do every single day. These jobs are 24-hour, 7-day a week 
jobs. They are filled by a cadre of professionals who are 
committed to the programs and the people they serve. These are 
folks who are out on the front lines every single day doing 
this work, and they are always on their own trying to maintain 
the highest possible standards of performance for themselves 
and for their staffs and play a significant role in their 
communities for affordable housing.
    Mr. Womack. Well, representing an area where we have no 
major public housing authorities, I can assure you that the 
people in my district are more representative of the people you 
just spoke of.
    And, with that, I yield back.
    Mr. Latham. Thank you, Mr. Womack.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman. Thank you, Madam 
Secretary, Mr. Chairman. Thank you for your great work.
    Ms. Henriquez. Thank you.
    Ms. Kaptur. Thank you for your dedication in your life to 
the field of housing for the most vulnerable in our country. I 
know a little bit about what that takes. Thank you.
    Ms. Henriquez. Thank you.

                            HUD/VASH PROGRAM

    Ms. Kaptur. First, endorsement of your HUD-VASH program for 
our returning vets. You couldn't do enough there. We have the 
highest rates of suicide in the military now, and we know that 
when folks come home one of the reasons is family life often is 
just imploded by multiple deployments. And when you come home 
and you lose your house, too, it is absolutely devastating.
    Our food banks are filled with so many veterans. I am very 
upset about what is happening across this country.
    So to the extent you can give us guidance on how we can 
help strengthen your efforts in HUD-VASH, please, this is one 
Member who would try to help you.

                        HOUSING FOR MENTALLY ILL

    Number two, I don't know what percentage of those you have 
discussed in your testimony are mentally ill, but I know from 
the district that I represent HUD often becomes the place where 
those who are rejected by everyone else fall on your doorstep. 
I am looking for ideas to help with housing for the mentally 
ill and improve the programs that we have today, people 
abandoned by their families, people who wander our communities, 
people who live under bridges. You know the situation. Boston 
is not immune to this. And so I am very interested in the 
future and how we better house the mentally ill. I look at all 
the programs we have had between HUD and HHS over the years, 
our supported housing programs. I would appreciate any backup 
you could give me on that particular subject.

                           FUTURE PRIORITIES

    In your testimony, I love your priorities. In investing in 
our future you talk about out-educating, out-innovating, and 
out-building. One of the experiences I have had in my own 
lifetime, and I will share it because, as you create 
initiatives in a very difficult time when housing is in such 
critical condition across our country, I think the ability of 
HUD to link to the Department of Labor is just very, very 
important in areas where we have large concentrations of 
housing, of subsidized housing. What I have discovered in my 
own life is that we need that housing many times because we do 
simply have populations that can't be housed anywhere else, 
but, also, those communities have been absolutely denuded of 
any building skills.
    And in my own career I have helped to create homemaker 
programs for women, home builder programs involving men, trying 
to plant building skills in people in historically in trades 
that were very discriminatory, and so we have huge parts of 
communities that have no skills because they simply weren't 
afforded the opportunity to have those skills.
    So as HUD repairs its buildings, as communities try to 
rebuild after this terrible great recession, if there is 
anything we can do through your programs to help engage those 
who are capable of learning skills, building skills, perhaps 
linking to Habitat for Humanity, perhaps linking to other 
programs that exist at the VA--HUD is one of the largest 
holders--and I said this to the Secretary yesterday, Secretary 
Donovan--of abandoned units across this country. Why not create 
a program with Secretary Solis where you are identifying vacant 
units in a community that could ultimately be in your 
inventory, let's say, initially at least, or in a turnkey-type 
effort where we use unemployed veterans who are returning home, 
leading groups of individuals who might want to learn the 
building skills, linking to our apprenticeship programs, so 
that we plant building skills for the future in places that 
simply haven't had them?
    So your out-build--I am very interested in this--and your 
out-educate priorities, anything I can do to help there, I see 
a real, real possibility. And I know Secretary Solis is 
concerned about the pools of unemployed in our communities, 
including those that I represent. Your testimony doesn't 
address that directly, but I think you have the capability to 
do that and may be doing it in different places in the country. 
Even if we could platform some experiments in that way, I think 
it could be very helpful to the future.
    Finally, I really like the out-educate, out-innovate. I 
have always viewed--and this is sort of an unusual point of 
view--but public housing authorities as campuses, campuses for 
learning. And we have found it very difficult--although we have 
made some progress--in bringing in financial literacy, as well 
as GED programs and skills training programs. Anything that can 
be done through your authorities, ma'am, to help to educate and 
to advance skills, you have an incredible opportunity there.
    Mr. Chairman, I know I am out of time and----
    Mr. Latham. Right.
    Ms. Kaptur. You are on a subject I care very much about. 
So, anyway, if you can get back to me, I would appreciate it; 
and thank you, Mr. Chairman.
    Mr. Latham. Thank you, Ms. Kaptur.
    Judge Carter.

                         PHA BOARD COMPENSATION

    Mr. Carter. Thank you, Mr. Chairman.
    Madam Secretary, welcome.
    As some background, I interned as a lawyer for developers 
operating in some cases lower built 22 section 8 housing 
projects in Texas, and the largest housing authority I ever 
dealt with was San Antonio. Most of the housing authorities I 
dealt with were small. I got the impression that most of the 
housing authorities boards didn't get paid much.
    In listening to this compensation issue--and I don't think 
anyone can discuss the compensation issue as secondary to a 
controlling authority. Most housing authorities for cities are 
appointed by the city council, and I think once they are 
appointed they kind of forget about them unless they do 
something to make the newspapers.
    With what happened in California with the famous case of 
the city council getting paid three-quarters of a million 
dollars and the city manager making millions of dollars, people 
are thinking about that right now. And I think that is why this 
subject has to be of interest to us as we look at the situation 
that we have been discussing here today.
    And I don't know the answer, so I am going to ask a couple 
of questions. I don't believe that the council, in most 
instances, does a lot of oversight. Like I said, as long as 
they don't make the news, they don't look at them.
    Does the board set its own compensation? I mean, once they 
are appointed can they actually--like the city council vote on 
their own compensation. Do they have that authority or do they 
have to go to the city council to get a raise for the board?
    Ms. Henriquez. In all instances that I am aware of, there 
is no compensation for board members who oversee the housing 
authority.
    Mr. Carter. Okay. That is what I thought. So you couldn't 
get in a situation like they got in California where you pay 
the city manager more, he makes sure that the council gets paid 
more, and then the council gets paid more until you get this 
escalating disaster that happened in California.
    Ms. Henriquez. That is correct. The housing authority board 
is a creature of State or local government. And the appointing 
authorities are then town managers, mayors, governors, et 
cetera. They are not compensated, but we do expect in all cases 
that those appointing authorities will appoint individuals who 
are interested and committed to the issues around affordable 
housing in their community.
    We also expect that those appointing authorities will 
continue having due diligence and some oversight of the people 
that they appoint.
    And so when housing authorities find themselves in trouble, 
we look to the fiduciary issues, we look to the governance 
issues. Because somewhere there has been a disconnect. And 
which is why we in our moving forward and we are now focusing 
more and more on board governance and board training on an 
ongoing basis. We want to make sure that we have conversations 
with appointing officials if something is derailed with a 
board's performance so that no one is off the hook. They can't 
appoint for a 3- or 4- or 5-year term and look away while other 
things go awry, and they are still responsible for what happens 
in their community.
    Mr. Carter. I really believe that in managing any number of 
units, HUD is probably more involved than the city council 
would be. If you became aware that there was a compensation 
issue like we are describing, gift giving, which causes raises 
to happen and things like that, would you report that to the 
cities? Would you accept that as part of your duty of oversight 
from a national government to report that to the cities and say 
we want to take a look at your board?
    Ms. Henriquez. Absolutely. There are a number of issues 
that we would employ to get at issues like that. First, I would 
hope that you understand that these are outliers, that this is 
not the way that normally it happens at housing authorities 
across this Nation. So when we are aware of this problem, I 
have to tell you, it is appalling when they happen because it 
really then blows back and taints everybody else who is doing 
good work at housing authorities, really being good public 
stewards, and then you have got a problem that seems to get 
elevated to the national stage, and that is unfair to, you 
know, 99 percent of the housing authorities.
    Mr. Carter. I would agree with that.
    Ms. Henriquez. That having been said, when there is a 
problem that affects all of us, what happens is when we become 
aware we do a couple of things. We send in our own staff to 
look at the issue, and when we believe that there are problems 
that present that are beyond our scope in terms of 
investigation we turn to the IG and ask the IG to go in. They 
have the subpoena powers and the investigatory powers to go 
look at those situations to really use all of their tools and 
resources to bring a better understanding and to do what needs 
to happen both to provide an understanding of what the problem 
is and its root causes. And if the problems need to go on 
because there is criminal activity or whatever needs to happen 
in the judicial arena, the IG is prepared to take it there.
    We then come in behind as well at the same time. We have 
our auditors come in. We look at what the financing has been. 
Sometimes it calls into question, again, both the fiduciary 
responsibility and the due diligence of those local officials 
and those appointing authorities and those board members to try 
and act as quickly as possible to clean it up, get it on a 
stable footing. Because, first and foremost, we don't want 
residents harmed who are living in those properties. We don't 
want them affected by what would be a bad deed by someone who 
just made a stupid decision.
    Mr. Latham. The gentleman's time has expired. Thank you, 
Mr. Carter.
    Mr. Price.

                                HOPE VI

    Mr. Price. Thank you, Mr. Chairman.
    Secretary Henriquez, let me join in welcoming you to the 
subcommittee, congratulating you on your approaching second 
anniversary of your swearing in.
    Ms. Henriquez. Thank you very much.
    Mr. Price. We thank you for your service, and we know that 
your good work in Boston is a prelude to the work you are doing 
now. I am very interested to note that one hallmark of your 
Boston service was your success in redeveloping old public 
housing developments into thriving mixed-income communities via 
the HOPE VI program, which is, as you well know, a unique piece 
of the HUD portfolio, and it has a comprehensive scope that is 
very desperate and needed in a number of our cities.
    My district has made good use of HOPE VI, and I am 
particularly mindful of the record of the Raleigh Housing 
Authority, which I am sure you are well acquainted with. The 
Raleigh Housing Authority has had two award-winning HOPE VI 
projects completed on budget, on time, a model of the way these 
things should work, They are ready for the third of three 
absolutely critical projects.
    The question I am going to ask you does have something to 
do with, in this case, an exemplary housing authority trying to 
get itself in as strong a position as possible to undertake 
this kind of work. I want to question your plan that you do 
articulate in your testimony but I think don't explain, at 
least to my satisfaction, the plan to recapture $1 billion in 
public housing operating reserves to pay for the 2012 Operating 
Fund. I assume you are going to submit a full proposal to the 
Subcommittee for how that is going to work, how that $1 billion 
will be recaptured--
    Ms. Henriquez. Yes, we have provided some detail already. 
We will do more.

                             OPERATING FUND

    Mr. Price. Let me just articulate as briefly as I can some 
concerns here and then ask you to respond.
    It strikes me that one measure, but only one measure, of 
where this money might be recaptured is the presence of 
exorbitant reserves or what appear to the Department to be 
excessive reserves. Clearly, that is something you are going to 
want to look at, but I would think not all reserves are equal 
in this respect and certainly not all housing authorities are 
equal in terms of their performance, their stewardship, their 
responsibility. I wonder to what extent you are going to 
consider, for example, whether a public housing authority 
receives maximum points on its annual report card.
    Is there some danger here of disincentivizing good 
behavior, disincentivizing fiscal prudence, disincentivizing 
the prudent accumulation of reserves for needs that can be 
anticipated and should be anticipated? We need to have these 
housing authorities managing their funds carefully, and we 
don't want to punish those that have done that, have 
accomplished a prudent accumulation of reserves.
    Is there any danger that recapturing $1 billion would put 
any public housing authorities into troubled status? How would 
it affect their ability or how could it affect their ability to 
get private loans?
    Your staff has described this to us as a one-time deal, but 
might that one-time deal undermine confidence as to what kind 
of precedent it is setting and what kind of capacity these 
public housing authorities might have in the future to pay 
their bills, to make good on their obligations?
    I understand that excessive funds may be present in the 
case of some housing authorities. I realize they are. I realize 
that those can be a sign of bad management as well as good 
management, bad stewardship as well as good stewardship. But I 
am very uneasy, representing in the case of Raleigh an 
exemplary housing authority, that this might be applied in a 
way that punishes good behavior and really makes life more 
difficult in the future.
    Ms. Henriquez. Thank you for your question, Mr. Price.
    The issues you raise are issues that we discuss and have 
discussed and continue to discuss with HUD and with industry 
partners as well.
    First of all, I believe that every organization, every 
housing authority needs to have a minimum of operating reserve 
in its account. And these are not necessarily recaptured, but 
it is an allocation adjustment. But we have looked at the 
industry, we have looked at our colleagues in the multifamily 
side, we have looked at some information from State housing 
finance agencies about other multifamily properties as well. 
And we have established a 4- or a 6-month floor of reserves for 
each housing authority based on their size and their operation 
and their monthly spending patterns as taken from their own 
audited financial statements that they have filed with us.
    We then said, no one, no one should go below that floor. 
You need reserves to stabilize your organization if you have an 
emergency. If you have some unforeseen circumstances that you 
need to attend to, then you need to have that bit of cushion. 
It is good, sound operating business principles. So that is our 
beginning and underlying premise.
    From there, we looked at 2009 financial statements. We will 
continue to update those numbers as more and more financial 
statements come in so we are using the most current information 
that we have on file for a housing authority.
    And so, yes, I have heard the arguments about are we 
penalizing people for prudence. And the issue is that, no, we 
are not. We are saying that there is--and, in fact, overly 
reserved housing authorities lose points on their financial 
assessment system because they are overreserved. And, more to 
the point, we want those funds used in the properties for the 
purposes for which they are intended. We want people to update 
and upgrade and continue to improve their properties, and 
sitting on them in a bank account is not helpful and doesn't 
advance the program.
    Mr. Price. Mr. Chairman, I know my time has expired. Let me 
just register one sentence, if I might.
    I really think it is important that this measure not simply 
be a quantitative measure of the size of the reserves but that 
the overall performance of the authority be taken into account 
and the accumulation of reserves be placed in that operational 
context.

                     PHA-COMPENSATION FOR PERSONNEL

    Mr. Latham. It is a long sentence.
    Just very briefly go back to the compensation thing, and 
you said like in Philadelphia it is a $1 billion organization. 
How much do you oversee?
    Ms. Henriquez. Well, HUD itself, you mean, to my portfolio?
    Mr. Latham. Your portfolio.
    Ms. Henriquez. About $26 billion or thereabouts.
    Mr. Latham. You don't make $300,000 a year. Okay.
    Ms. Henriquez. No, Mr. Chairman. I don't.

                           FEDERALIZED UNITS

    Mr. Latham. Okay. Moving along.
    In your budget request, it identifies the federalization of 
nearly 15,000 units of State-owned public housing under the 
stimulus, or the ARRA, as a major cost driver in public 
housing. Why were they federalized?
    Ms. Henriquez. Under the stimulus act, language included 
that housing authorities could bring in units into the Federal 
portfolio if it didn't exceed its Faircloth limit, which was 
established a number of years ago, and could use this mechanism 
to infuse and improve the quality of housing of State-assisted 
units and then bring them into the Federal portfolio.
    Mr. Latham. When you drafted the language in the stimulus, 
was this your intention?
    Ms. Henriquez. I don't know the answer to that question, 
sir. I was not around.
    Mr. Latham. Because you wrote the language.
    Is there one particular State that stands out as far as out 
of the 15,000?
    Ms. Henriquez. That federalized? We brought in units from 
Massachusetts, Connecticut, Wisconsin. The units that came in 
from New York were already under an ACC, and so they were 
already in----
    Mr. Latham. How many of the 15 is that in New York?
    Ms. Henriquez. About 11,700 something.
    Mr. Latham. Okay. How much is this going to cost the 
taxpayers from the Federal?
    Ms. Henriquez. I think our estimate is something around 
80--let me take just a moment. We are expecting that it is 
about $80 million on an annual basis in operating funds.
    Mr. Latham. Okay. So even though this was in the stimulus, 
which was meant to be one-time spending, this is going to be an 
$80 million ongoing annual need for an appropriation; is that 
correct?
    Ms. Henriquez. That is correct. But, also, I would call 
your attention to the fact that these were units that serve the 
same population that serve vulnerable people. Those units were 
falling into disrepair, and those units would have been lost to 
affordability virtually forever. And given the need, both in 
the worst-case housing needs survey in 2009----
    Mr. Latham. But isn't that the State's responsibility if 
they own those facilities?
    Ms. Henriquez. In the case of a number of those units that 
came into the Federal portfolio, States were not providing any 
subsidy at all to those units. In the case of New York in 
particular had not funded those. Those were already outside and 
in the Federal portfolio, just not being funded, and that is 
the bulk of the units, of the 16,000.
    Mr. Latham. But you agree that we will have to 
appropriate--because of the stimulus, which was meant to be 
one-time spending to stimulate the economy, we are going to 
have an ongoing at least $80 million a year expenditure due to 
language----
    Ms. Henriquez. That is correct.

                     SECTION 8 ADMINISTRATIVE FEES

    Mr. Latham. All right. On Section 8 administrative fees, 
the lack of detail in quantitative analysis and how HUD arrives 
at the request for tenant-based administrative fees is really 
pretty much unacceptable. How can you not know how much it 
costs to administer a Section 8 voucher? And, apparently, it is 
going to take several million dollars and 4 years to study the 
issue; is that correct?
    Ms. Henriquez. We have a study that is beginning now, and 
we expect preliminary data in 2013 and final data and 
conclusion in 2014.
    Mr. Latham. How can you not know how much it costs today? 
We have never looked at what it costs to administer this?
    Ms. Henriquez. I think we look at costs for administration. 
We know what our per unit costs are. What you are asking I 
think is the question about what is the staff cost to 
actually--from taking someone from a waiting list, recertifying 
their income, inspecting their unit, and moving it through the 
system to a lease up and then on an annual basis.
    Mr. Latham. If you don't know, then how can you justify the 
$200 million increase?
    Ms. Henriquez. What we do know is that----
    Mr. Latham. Just curious.
    Ms. Henriquez. What we do know is that housing authorities 
use this money to administer this program to move people more 
quickly from their waiting lists into stable housing that is 
affordable for them.
    Mr. Latham. It is a wonderful goal, but there is no basis 
for your request.
    Ms. Henriquez. I think the basis you will see is what 
happens when those funds are not available, and you will see 
the kind of actions that housing authorities will do which will 
impact negatively people who need the services.
    Mr. Latham. Okay, I am out of time.
    Mr. Olver.

                               GOVERNANCE

    Mr. Olver. I am still back thinking about our governance 
discussions, and it seems to me that as I look at the broad 
nature of the areas that go into the public housing assessment 
system, things like physical condition of properties, operating 
integrity of the agency, fiscal integrity, satisfaction of the 
residents, and solvency of management are the sorts of things I 
would expect would be graded on a one-to-five basis, something 
like one, two, three, four, five. It is a pretty general sort 
of a thing.
    There are some very specific things that I would think 
would indicate some really sharp signals of what is likely to 
be going on in housing authorities. If you have a compensation 
program that has somebody who is really an outlier, there are 
probably others in there that are outliers, too, of their own 
levels and that is obviously much more clearly quantifiable.
    The other thing that seems to me that is completely 
quantifiable would be how fast those authorities are getting 
out the moneys. We give two and a half billion dollars--
although the '11 number was quite a bit lower than that. It was 
just over $2 billion--to the public housing authorities in the 
Capital Fund. How quickly that goes out. Because that money is 
intended to improve the lives of people there, upgrade their 
facilities, and create jobs, in essence. The effectiveness with 
which that gets out is also a very much more quantifiable 
thing. You can time that and what is the rate at which people 
are getting those moneys out and into operation.
    So it seems to me to there are sharp signals of what might 
be problems in the governance, whereas the other, broader 
assessment issues are a little bit more vague.
    You can comment on that if you want to at some point, but I 
just wanted to make that comment myself before actually my 
question.

                     TENANT-BASED RENTAL ASSISTANCE

    The Chairman has gone into talking about the tenant-based 
rental assistance programs, and I commended you for the 
President's budget on the tenant-based program, for fully 
funding it. At the same time, I note that if you look at the 
budgets for the last several years, going back to fiscal '08 at 
least, what seems to be happening here is that the amount of 
the tenant-based rental assistance as a percentage of your 
section of the PIH, the Public and Indian Housing, and also of 
HUD's budget is going up pretty dramatically. It is taking a 
big jump up, particularly in the final '11 enactment but also 
in the President's budget request.
    And so what I am concerned about here is that, in this time 
of constrained fiscal environment, if this is going to continue 
to happen, then what we are doing is crowding out a bunch of 
other important HUD functions. And I want to ask quickly, what 
are you doing to contain those costs? I think the chairman was 
playing on this one, too. What incentives can HUD create to 
encourage voucher holders to pick the most cost-effective 
housing options? And what are you doing at HUD to align the 
policies, with not allowing the growth of these to crowd out 
other good programs?
    Ms. Henriquez. Thank you for your question.
    There are a number of things that are going on. The program 
does grow. We have made definitive decisions in the 2012 budget 
to protect the existing residents and the relationships we have 
with people who are already being served by our programs, both 
in public housing and the multifamily program and in the 
voucher program as well.
    Those are our most important rental assistance programs and 
we serve over 3 million households in those programs, in fact, 
almost four and a half million in all of those programs, and 
our decision was that those people, who are some of our most 
vulnerable, need to be protected and not suffer a possibility 
of being out on the street and not having the services and the 
affordable housing they need.
    In terms of cost containment, however, you are right, that 
this program continues to grow on the voucher program side. And 
that is because as special purpose vouchers, the VASH vouchers 
and so on, are appropriated every single year, they need to be 
renewed. They are leased up, and the money is available for 
them to lease up and operate their first year.
    When it comes time for those to be renewed, then we flip 
into our tenant-based renewal account and need to be taken care 
of and underwritten so that those voucher holders, again, do 
not fall out and not have to give up the affordable houses that 
they have been living in for the years.
    In terms of what we are doing, we are really trying to 
align issues to make some simplification administratively for 
housing authorities. So we are saying you don't have to 
necessarily--and SEVRA contains some of this. You are going to 
do recertifications instead of every single year where there is 
a fixed income you will do it every 3 years.
    In the meantime, we are looking at ways in which 
affordability and how we--you are right--ask housing 
authorities to figure out ways, working with either housing 
counseling or other services to make sure that people are 
getting appropriate units, appropriately sized for their family 
but not at exorbitant rental costs. And I will say in red hot 
markets, that is a challenge for us to do.
    Mr. Latham. Okay. I thank the gentleman.
    Mr. Olver. Mr. Chairman, could I have one sentence shorter 
than Mr. Price's?
    Mr. Latham. That would not be difficult.
    Mr. Olver. I have identified by the Secretary's answer that 
I, by my advocacy, have probably contributed to the problem 
that I identified for the future.
    Mr. Latham. Thank you for that admission.
    And Mr. Womack.
    Mr. Womack. The Chair will be pleased to know that I have 
one more question.
    Mr. Latham. Okay.

                           OPERATING RESERVES

    Mr. Womack. Just one and it's a brief one. And, Mr. Olver, 
if I need to yield 30 seconds or so to the gentleman, I will be 
pleased to do that.
    In my district, housing authorities obviously are concerned 
about this operating reserve offset recapture. What can I say 
to my housing authorities to assure them that the smaller 
organizations are not unnecessarily affected by recapture and 
give them some assurance going forward?
    Ms. Henriquez. I think there are several things that you 
could say that we have been saying.
    One is that every housing authority will not go lower than 
its 4- or 6-month reserve based on its size; and to the extent 
that there are housing authorities that do not have a 4- or 6-
month floor, they will not be touched at all. They will not 
contribute in this way.
    We are looking at a targeted approach. We are having 
conversations with the industry. We are having conversations 
with housing authorities. And to the extent that housing 
authorities are worried, they should pick up the phone. They 
should call us and explain to us what is going on, what is in 
their reserves, and we will walk them through a process. We 
have laid out methodologies, but we will also actually walk 
them through a process that says this is what they could 
expect. We are not looking to harm.
    The other thing I will say is we believe that a targeted 
approach is more equitable. Because an across-the-board 
haircut, if you will, proration would force housing authorities 
that don't have the minimum to dip into already declining 
reserves, and we think that that puts them at greater jeopardy 
because they will not have a cushion or a floor, and they will 
continue to have less and less reserves available to them 
should they have an emergency.
    Mr. Womack. Finally, I would agree. I just think that there 
are some agencies that are probably managed better than others, 
and I certainly don't want to see anything happen to those 
people who may be penalized unnecessarily, because they have 
been very, very good stewards.
    Ms. Henriquez. Nor do we. We don't see this as a penalty. 
We just do see this as people have a number of reserves, a 
number of reserve months, and they need to spend it for the 
purposes for which they were intended.
    Mr. Womack. Thank you. I yield back.
    Mr. Latham. I thank the gentleman.
    Judge Carter.

                           FEDERALIZED UNITS

    Mr. Carter. Thank you, Mr. Chairman.
    Very quickly, I want to understand how you are going to 
make these people who feel like they have been good stewards of 
tax payer funds feel like they are lifting the load for the 
people who have not been good stewards, and I think that is 
going to be a real challenge on your part. One of the things 
government doesn't do well is reward good behavior. It does 
pretty well at punishing bad behavior but isn't so good at 
regarding good behavior.
    Another question I have, real quickly. Those units you 
picked up, as the Chairman was talking about, under the 
stimulus. You made the comment that some of them were in 
disrepair. Is the number that the Chairman gave out, does that 
include rehabbing those disrepaired units that you bought from 
the States or is rehab additional spending we are going to have 
to do?
    Ms. Henriquez. No, the number includes rehabbing those 
units. The stimulus money that went into those units was a 
requirement that they had to expend and bring those units up to 
code and standards so that they were habitable and so the 
people could live well in those units, and so that was a 
requirement to use stimulus dollars to do that. And then the 
chairman's issue was, once that work had been done, what does 
that entitle them to in terms of an ongoing contribution from 
the public housing budget?
    Mr. Carter. I just want to get that clear in my mind, I 
know rehabbing is a pretty expensive process because I have 
done some of it.
    Ms. Henriquez. And a lot of housing authorities didn't just 
use stimulus money and ARRA funds to do that. They leveraged 
other funding. They leveraged low-income tax credits, both 9 
and 4 percent. They did a variety of things to really make sure 
that the investment overall was such that when those units came 
into the Federal portfolio they were not lacking.

                                HUD-VASH

    Mr. Carter. Very quickly, I would like to get to the HUD-
VASH program. There has been indications to some of us that the 
leasing up of the HUD-VASH vouchers has been a little slow in 
some areas and that the vouchers wouldn't be leased up as 
quickly as possible. This is a program I happen to agree with. 
What is your position on funding for HUD-VASH vouchers?
    Ms. Henriquez. So the slow lease-up initially, the new 
program came into the landscape, and it really required that 
both housing authorities and Veteran Affairs medical centers 
worked together. And it was that we were poised and waiting for 
medical centers to staff up, to do case management, to do the 
referrals, and to get critical numbers of veterans referred to 
housing authorities so housing authorities could do the lease-
up.
    Once we cleared that hurdle and worked on those 
partnerships--and it has been really an incredible partnership 
between VA and HUD--once that happened and people started 
cycling through the process, you see that the lease-up rates 
picked up enormously. We have served over 20,000 veterans thus 
far, and the number is higher for some people who have moved up 
and moved out and no longer need the affordability that the 
voucher provides.
    We also saw that housing authorities wanted to project base 
those vouchers, to work with developers and other builders and 
nonprofits to actually provide transitional facilities, if you 
will, so they could focus services and case management services 
at a location, again, to serve veterans more effectively and 
more efficiently.
    You will see that HUD and VA have developed a tool so that 
we can troubleshoot. We have something on our site where if 
some housing authority or VA is having some issues and their 
leasing is lagging, talking about what their issues are, what 
are the hurdles and challenges that they have to meet and 
overcome, and where are some best practices with replicability. 
So we have peer-to-peer talking to each other, VAs and housing 
authorities, again, to continue driving the lease-up rates in 
this program.
    We need to get people housed as quickly as possible for the 
longer term, and so the success rate has dramatically increased 
every single month. It continues to do that.
    A little bit of a hiccup, I guess I would say, given the 
timing of the 2011 appropriation, so housing authorities were 
being a little bit more cautious, making sure that they were 
able to push these numbers out. And now, with that in place, 
they are continuing to move forward, again at a very increasing 
clip.
    Mr. Carter. Well, the other question was, do you foresee a 
need for expanding this voucher program?
    Ms. Henriquez. Absolutely. Until we eradicate homelessness 
for veterans--it's a phenomenon I don't quite understand in 
this country--until we eradicate homelessness for veterans and 
for families and children, these resources are desperately 
needed.
    Mr. Carter. Thank you.

                             INDIAN HOUSING

    Mr. Latham. I thank the gentleman.
    On the subject of Indian housing, and according to 
information provided by the Department, the Indian housing 
block grant has nearly $1 billion of undisbursed funds, money 
that this Committee has appropriated and the Department 
allocates to tribes through the HUD's formula. We have heard 
from tribes and the Department about tremendous housing needs 
in Indian country. So, I mean, just why haven't the funds been 
used? What is going on?
    Ms. Henriquez. In general, most tribes get their money, use 
it appropriately, and use it in a timely way, and there are 
some large balances sitting out there, but the vast majority of 
those tribes expend their funds very quickly. Our staff have 
been working with tribes to help them build capacity when we 
see that they have slow expenditure rates; and we are doing 
capacity building, training about planning and execution as 
well, and trying to provide that technical assistance.
    When problems are discovered, slow spending rates during 
monitoring reviews, for example, we are providing sort of 
almost day-to-day technical assistance to help people 
understand what they are supposed to do.
    There is no statutory requirement, however, for 
expenditures. We are pushing always to get tribes to obligate 
as quickly as possible, but when you are building 
infrastructure, which is what a lot of these funds go for and 
for housing, you need the infrastructure first. And so 
sometimes that contributes to what seems to be--which may 
appear to be the lag in spending. Once infrastructure is in 
place--roads, electricity, water, and sewer--then you will see 
that those expenditures actually do accelerate. Money gets out 
the door.
    We will continue to push this issue. We will continue to 
work with tribes to make sure that they are reporting all of 
their dollars being obligated and expended so we get a fuller 
picture and more timely picture of those applications.
    Mr. Latham. Apparently, the Navajo authority has about a 
half a billion dollars sitting there. That is about five times 
more than what they get annually. Can you explain that?
    Ms. Henriquez. Having had a meeting with Navajo in 2010, 
and I ran through the numbers with them personally and spent a 
significant portion of time talking with them about the issues, 
not just with staff but with council members, tribal council 
members who were there, and for Navajo, 270-some thousand 
square miles of land, trying to figure out with them both the 
issue of capacity and size and planning and the planning of how 
they are going to do communities, how they are going to spend 
that money, getting it out the door. That number of unexpended 
balances has come down. It will continue to come down, but we 
need to do more.
    Mr. Latham. The half a billion dollars is not correct?
    Ms. Henriquez. Well, as of May 24, their undisbursed funds 
was $393 million, still a considerable amount of money. I am 
not trying to hedge that at all. And our southwest ONAP office 
continues to work with them, both with staff and tribal members 
to make sure that money gets expended, making sure there are 
plans for that and how do----
    Mr. Latham. What is their plan?
    Ms. Henriquez. There are housing developments planned, 
expansions of some. In fact, the conversation I had with them 
last year was building another 100 units to an already existing 
174 at a location, but it was building remaining infrastructure 
before they could site the houses. It is a capacity issue, and 
we need to provide the technical assistance, and we will 
continue to do that with them.
    Mr. Latham. Is someone's phone on back here? Okay.
    Why don't I go to Mr. Olver, and then I will have one more 
question after that.
    Mr. Olver. Well, now you have really opened Pandora's box, 
but I am not going to take the bait on this one, except to say 
that there is desperate need on Indian reservations. And the 
question of building capacity, I don't know how you do that 
exactly. I have no true idea how to do that. Maybe you do have 
some idea how to do that, but the housing is just awful in many 
places and there is great need.

                      CHOICE NEIGHBORHOODS/HOPE VI

    So I wanted to talk about Choice Neighborhoods and HOPE VI. 
You had in the 2010 budget $200 million, and that was divvied, 
allowing for--since HOPE VI has been in place for many years, 
although it is not actually one in the usual authorization 
scheme of 5- or 6-year authorizations, it has sort of been 
running as an authorization as year by year by the fact that we 
have appropriated it.
    Choice Neighborhoods is also unauthorized. It has not ever 
been authorized. We included it as a demonstration project in 
the 2010 budget and allowed a maximum of $65 million to be used 
for our Choice Neighborhoods. Then in the 2011 budget we have 
allowed the demonstration project to continue in the 2011 
budget.
    A NOFA went out on the 2010 amount for the HOPE VI, and 
since the Administration's interest was very strong in Choice 
Neighborhoods, you certainly didn't use any of the $65 million 
available there to pay for the NOFA. The NOFA comes back with 
announcements just made, and I am grateful that you have done a 
couple of communities that are under a hundred thousand. They 
are Patterson, New Jersey, and Taunton, Massachusetts, 
deserving communities. And it is always good to me, because I 
represent smaller communities, to see smaller cities get some 
of the benefit out of a program like HOPE VI.
    The NOFA comes back and the awards have been made and that 
comes to $152 million. Now, how do you get the $152 million out 
of the 2010 moneys, or don't you?
    Ms. Henriquez. We get the $152 million out of the 2010 and 
the 2011 money.
    Mr. Olver. The NOFA did not--well, okay. All right. I 
accept that.
    Now, how much then do you still have to do the 
demonstration or continued demonstration of Choice 
Neighborhoods?
    Ms. Henriquez. We have the $65 million implementation 
grants in the 2010, and we have a similar amount for 2011.
    Mr. Olver. All right. Now where is the other $18 million? 
Has that allowed for the difference between the $170 million, 
using your calculus, which the $100 million for 2011 is going 
to be divided at 35 for HOPE VI and that supposedly could give 
you part of the money that allowed you to go above 135 from the 
2010 moneys. So what is the $18 million? Is that----
    Ms. Henriquez. Sir, there is some money for planning 
grants, which we gave out, so that housing authorities and 
assisted rental properties that weren't ready for an 
implementation grant but wanted to plan for the future so they 
have gotten planning grants out----
    Mr. Olver. How much was used for planning grants? How much 
is allowed for administration in this whole program? Do you 
have a sense?
    Ms. Henriquez. Let me get the numbers for you. Just a 
moment.

                      CHOICE NEIGHBORHOODS FUNDING

    Mr. Olver. I don't mean to put you on the spot. I think I 
should ask for sort of an explanation at a different time.
    But what I do sense from the way you have answered, Sandy, 
that the 65 has been protected for Choice Neighborhood grants. 
Some of the planning grants were planning grants for moneys 
that have been expended for the planning of the Choice 
Neighborhood group, in essence, and all the administration is 
coming out of the side which is HOPE VI. This committee has 
supported the HOPE VI program over quite a long period of 
years. Whether it is going to continue I can't tell you. But I 
realize you have asked each of the last 2 years for only Choice 
Neighborhoods. We refused to give that, meaning only Choice 
Neighborhoods, in the 2010 bill and also in the 2011 bill. And 
here, of course, again you are asking only for Choice 
Neighborhoods now.
    Do you stick by that, that all you want is Choice 
Neighborhoods? And why is that? What is the difference? The 
size of the grants are roughly the same. What is the real 
difference between the two that makes that the only thing that 
should go forward?
    Ms. Henriquez. It is a good question.
    We are asking for Choice Neighborhoods funding because in 
the Choice Neighborhoods program housing authorities, as well 
as other rental assistance properties, can be the lead and the 
applicant. And so housing authorities continue to have access 
to that money.
    What we found in the past through the success of HOPE VI is 
that a lot of properties got redeveloped, but the surrounding 
community remained the same. So Choice Neighborhoods really 
seeks to improve upon the theme, re-doing within the public 
housing footprint and then also neighboring, distressed sister 
properties that may need significant renovation and income 
leveraging and mixed finance leveraging as well and to build 
out into the greater communities so that there is greater 
success, greater change. And that incorporates our ability then 
to use money with our other Federal partners--Departments of 
Labor, Health, and Human Services, Department of Education--
aligning the Promise Neighborhoods grant moneys as well with 
these communities.
    So using Federal dollars and Federal resources to make a 
greater change to promote greater communities of opportunity as 
we revitalize distressed neighborhoods.
    Mr. Olver. Well, I guess if you are just about to be done, 
I recognize what you have said there, but then we still have 
pockets in communities of really serious blight, and we are not 
going up in the number of dollars. And the ending product of 
your Choice Neighborhoods is probably going to be total numbers 
of dollars that are not significantly greater than the amount--
the number of dollars not greatly increased from the number of 
dollars in the HOPE VI programs to do all these other things. 
And we are still in this situation where we have serious, quite 
contained pockets in communities that have used the HOPE VI 
programs in the past. That is all.
    Mr. Latham. Thank you for that very brief----
    Mr. Olver. Thank you very much for your testimony today.

                          INDIAN HOUSING FUNDS

    Mr. Latham. I just actually have a couple.
    Going back to the Indian excess funds that are there, the 
surplus funds appear. Do they actually have control of that 
money that is in a savings account or CD someplace that they 
are earning interest from or do we know? Do we have any idea 
where the money is actually sitting?
    Ms. Henriquez. The money sits in what is called the LOCCS 
which is the system of drawdowns. So it sits within the HUD 
Chief Financial Officer's purview, if you will, or at the 
Treasury. And it means that it is not out there in someone 
else's bank account, but, again, we still need to make sure 
that they pull down that money appropriately in a more timely 
way.
    Mr. Latham. Does it generate any revenue while it is 
sitting there?
    Ms. Henriquez. If it does, it does that for the Federal 
Government. It is in the Federal Government's control.

                           SECTION 8 RESERVES

    Mr. Latham. Okay. Your budget proposes an offset of $1 
billion, and we talked about, from the Public Housing Operating 
Fund; and Secretary Donovan informed us earlier that there was 
over $1 billion in excess in Section 8 reserves. Why propose 
the offset from public housing but not from Section 8 and how 
much is currently available in excess reserves in the voucher 
program?
    Ms. Henriquez. You might recall that in a number of years 
past there were two offsets in the net restricted assets or in 
the Section 8 account because that number was seen as growing 
and Congress deemed it appropriate in two tranches to resize 
and reallocate that funding.
    What is left in those balances, a little over a billion 
dollars, is what is the reserve, if you will, for 2.2 million 
vouchers. So it is a $1 billion, maybe a little bit more, $1.2 
billion reserve for a almost $20 billion program all in. So the 
amount of the reserve is really quite little. It is 3 to 4 
weeks worth of a reserve in a program that has significant 
size. That is a minimum I think that is an appropriate amount.
    I think that housing authorities would contend it is still 
too slim, given potentially in some communities the cost per 
unit and if they are really striving to maximize the number of 
people that they serve in their communities might be a little 
too lean. But that is where that number is, and we think that 
is an appropriate number.

                          PERFORMANCE CRITERIA

    Mr. Latham. Okay. When the Secretary was here, just talking 
about management of the PIH, he said HUD's performance criteria 
weren't connected enough to the goals of the Department as far 
as any basis of--when we talked about 97 percent of the people 
at HUD got bonuses last year. I asked him, what do you have to 
do not to get a bonus?
    Ms. Henriquez. I remember that question.
    Mr. Latham. Anyway. However, he stated that HUD had made 
substantial changes. I am just interested to hear from you what 
changes have you made as far as administrative ideas and 
management.
    Ms. Henriquez. There are a number of things. Thank you for 
the question.
    Mr. Latham. You are welcome.
    Ms. Henriquez. There are a number of things that have 
happened.
    Number one, we have worked very hard to put our strategic 
plan together. We have put our goals together. That has really 
cascaded down to all of the employees and all of the field 
offices. And performance standards are in, and we are not 
counting widgets and how many checklists did you perform, did 
you really accomplish. It is really what piece of work did you 
perform to further the strategic goal? Are we having net 
occupancy gains in our voucher program and our public housing 
program? Very tangible, translatable goals, number one.
    Number two, holding people accountable to perform against 
those measures and really thinking as a management team and a 
supervisory team of what it means to be outstanding, what it 
means to be excellent, and what it means to be fully 
successful, and to really think about on balance what is 
outstanding. Because we expect that everybody will be fully 
successful, we expect people to do their jobs and to do their 
jobs well. But we do know that there will be people who will go 
above and beyond because that is how they work, and those 
people need to be recognized, and we want to incent them to do 
so and to do that. We can't make everybody outstanding. It is 
just an impossible task.
    We are holding people accountable in a level of different 
ways, whether they are bringing in their budgets in on time, 
whether they are turning information around, what they are 
doing and performing on customer service. We are having 
constant discussions with employees about their performance, 
where it is good and where it is not. That step-up in 
communications I believe has really led more employees to 
understand the expectation and to perform to those expectations 
more and more and better and better.
    So I think you will see over time we have said we need to 
continue to reward excellence and outstanding performance, but 
it is not an easy one to get these days. It is like a 
university grading on the curve and you have to change the 
culture, set expectations, and then hold people accountable to 
those expectations as they have changed. We are doing all of 
that work, including training and retraining staff so that they 
have better skill sets, can perform better in the marketplace, 
whether it is at HUD or they decide to take those skills 
elsewhere in the Federal Government or outside of the Federal 
Government.
    Mr. Latham. Okay. Mr. Olver, did you have anything else?
    Okay. All right. Thank you very much for your testimony. 
You have a very big job, and comparatively you don't get paid 
enough.
    Ms. Henriquez. We will talk.
    Mr. Latham. But I really do appreciate it. Thank you and 
you really you do a tremendous job. Thank you so much.
    Hearing is adjourned.



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