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


                                                                      ?
 
 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2013

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                             SECOND 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, Mike Friedberg, Sara Peters,
                     Doug Disrud, and Brian Barnard,
                           Subcommittee Staff

                                ________

                                 PART 4
                                                                   Page
 Department of Transportation FY 2013 Budget......................    1
 Department of Housing and Urban Development......................   45
 Department of Transportation--Major Modes FY 2013 Budget Request.  207
 HUD and DOT Management Issues....................................  273
 Outside Witness Testimony........................................  409

                                ________

         Printed for the use of the Committee on Appropriations
                                 Part 4

TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES 
                                FOR 2013
                                                                      ?

 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2013

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                             SECOND 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, Mike Friedberg, Sara Peters,
                     Doug Disrud, and Brian Barnard,
                           Subcommittee Staff

                                ________

                                 PART 4
                                                                   Page
 Department of Transportation FY 2013 Budget......................    1
 Department of Housing and Urban Development......................   45
 Department of Transportation--Major Modes FY 2013 Budget Request.  207
 HUD and DOT Management Issues....................................  273
 Outside Witness Testimony........................................  409

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 74-711                     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 JerseyJOSE 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)


DEPARTMENT OF TRANSPORTATION, HUD, AND RELATED AGENCIES APPROPRIATIONS 
                                FOR 2013

                              ----------                              

                                           Thursday, March 8, 2012.

              DEPARTMENT OF TRANSPORTATION--FY 2013 BUDGET

                               WITNESSES

HON. RAY LAHOOD, SECRETARY, DEPARTMENT OF TRANSPORTATION
CHRIS BERTRAM, ASSISTANT SECRETARY, BUDGET AND PROGRAMS, DEPARTMENT OF 
    TRANSPORTATION

                  Chairman Latham's Opening Statement

    Mr. Latham. The subcommittee will come to order. We want to 
welcome the Secretary of Transportation, and our good friend, 
Mr. Ray LaHood, here this morning, and we want to say how 
pleased we all are that your son is back safely.
    Secretary LaHood. Thank you.
    Mr. Latham. We all hope they have a wonderful honeymoon, 
finally. Much delayed.
    Secretary LaHood. Yes. Thank you.
    Mr. Latham. That is great, great news.
    The Secretary will be testifying on behalf of DOT's fiscal 
year 2013 Budget Request and we look forward to his testimony. 
This year, we will have a short hearing schedule and hopefully 
an early markup schedule, right, Mr. Chairman?
    Mr. Rogers. Absolutely.
    Mr. Latham. We are not able to schedule separate DOT modes 
for individual hearings. However, we are providing Members the 
opportunity to question the Secretary today. We will also hear 
from a panel of DOT administrators, for highways, transit, 
rail, and aviation on Thursday, March 22. This year, the 
department is requesting authority to spend almost $74 billion 
in fiscal year 2013. Last year, if you remember, we went round 
and round on when we would see DOT's legislative proposal and 
pay-for to fund the fiscal year 2012 program. Great debate went 
into what was going to hopefully be a successful re-
authorization bill before the trust fund went broke. Like the 
saying goes, just when you thought it could not get any worse, 
sure enough, it does get worse. We seem to be at a crossroads, 
literally, with the future of investment in transportation, 
infrastructure, and financial solvency hanging in the balance.
    So far, we are not seeing any proposals in terms of length, 
costs, financing, or policy that will pass both the House and 
the Senate. And I do not think the administration's proposal of 
using the OCO funds, making transportation funds mandatory, or 
the requirement that livability be used as a criterion for 
awarding funds, will garner the required votes either. We need 
to find middle ground for everyone. There are a lot of people 
out there who want to see a robust, long-term transportation 
bill, as we all do, but we need to find a way to pay for it.
    Right now, the mandatory programs are the largest 
contributors to our budget programs. Without a long-term, 
realistic, or even sensible funding stream, I do not know how 
we can really advocate for moving transportation over to the 
mandatory side of the ledger. A lot of that spending is where 
the problem is to begin with and to add more over there would 
not be wise. A lot of Members looking to reduce spending put 
eliminating the OCO funds at the top of their list of things 
that we can do to reduce the budget.
    I am looking forward to a lively debate on all things 
related to the budget, both current and proposed. Again, 
welcome, Mr. Secretary. It is nice to have you back.
    Before we go to your opening statement, I will recognize 
the gentleman from Massachusetts. This will be his last hearing 
with the secretary, but Mr. Olver is recognized.

                Ranking Member Olver's Opening Statement

    Mr. Olver. Thank you very much, Mr. Chairman. I, too, join 
with the Chairman in your joy of having your son back.
    Secretary LaHood. Thank you.
    Mr. Olver. One of the things that is possible for a ranking 
member, you do not have to get quite as deeply into the details 
as the chairman of this committee, so, I kind of take, I think, 
a more generalized view.
    Mr. Secretary, it is a pleasure to have you here, really, 
today. The department's budget request reflects the ambitious 
vision needed to ensure America's competitiveness in the global 
economy through job-creating investments in our Nation's 
transportation infrastructure. Overall, your budget request 
provides structural guidelines for a robust, 6-year, $476 
billion Surface Transportation Program, and that is what we 
need. It reflects a growing consensus among partisan 
professionals that increased public investment in our 
transportation system as needed to maintain an efficient 
foundation for our economy.
    As you are well aware, DOT's most recent conditions and 
performance report quantified the investment gap to maintain 
our current system of roads and bridges and good repair at $27 
billion and an annual gap of $96 billion to expand the system 
to meet the needs of a population which continues to grow and 
will continue to grow at 9 or 10 percent per decade.
    For transit, repair backlog is nearly $78 billion. 
Unfortunately, the House Reauthorization Proposal does not meet 
the challenge. The threat of inaction, the uncertainty of 
short-term extensions, or worse a lapse, disrupting state 
planning activities and putting the upcoming construction 
season in jeopardy, not only allows our infrastructure deficit 
to increase, but it comes at a time when the unemployment rate 
within the construction sector stands at 18 percent.
    I am pleased that the administration continues its 
leadership in advocating for a 21st century passenger rail 
network. The $2.5 billion in requests for rail programs and 
your commitment to the TIGER Grant Program reflects an 
understanding that all users of all modes benefit from an 
interconnected network that increases transportation options, 
and that an all-of-the-above strategy is needed to meet the 
transportation needs of population expected to grow by another 
100 million people by 2050.
    In addition, I am pleased to see that the 2013 budget 
remains committed to the development of a next-gen air traffic 
control system. It is clearly a complex management undertaking, 
but I believe it is vital to efficiently utilizing our 
airspace, reducing congestion, improving safety, and minimizing 
aviation's environmental footprint.
    Finally, the department must remain vigilant when it comes 
to the agency's core safety mission. From day one, you embraced 
this responsibility for all modes and specifically have made 
raising awareness of the dangers of distracted driving a 
personal crusade, and I appreciate that. That has become more 
and more important. Your pipeline safety reform initiative 
would add newer inspectors to provide oversight of interstate 
and intrastate pipeline facilities. I believe the budget 
request you submitted is robust and presents a strong vision 
for how we tackle our evolving transportation challenges.
    So, Mr. Chairman, I yield back.

                   Chairman Rogers' Opening Statement

    Mr. Latham. Thank you, gentlemen.
    We have the honor to have the chairman of the full 
committee here, Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Secretary, Ray, welcome back to your own turf here.
    Secretary LaHood. Good morning. Thank you.
    Mr. Rogers. We are glad to see you here and we are 
delighted about your son's return safely from Egypt.
    Secretary LaHood. Thank you.
    Mr. Rogers. When I came to the Congress before you, in 
1981, discretionary spending was about two-thirds of the whole 
budget. One-third was entitlements. Today, it is just the 
reverse. Two-thirds of the money the government spends is for 
entitlements, mandatory spending. We have no choice, the 
Congress, in appropriating those funds. They are automatic. You 
qualify for food stamps, you get them. If you qualify for 
Social Security, you get it. It does not take an act of 
Congress, it does not take an appropriation. So, we have no 
real effective oversight of that spending and it is eating us 
alive.
    Last calendar year, when Republicans took over the 
Congress, there had not been any appropriations bills passed 
for that fiscal year and we were four months or so into that 
year already. So, we had to pass a FY 2011 spending bill, which 
took the form of a large omnibus, H.R. 1. We finally passed it. 
And then we had to do FY 2012 because it was coming up that 
October 1 and we finally passed that one in a large omnibus 
bill, a huge undertaking. So, we passed two appropriations 
bills in one year. I do not think that has ever been done. But 
most importantly, we cut discretionary spending in both of 
those years, in succession, which has not been done since World 
War II. We actually cut spending two years in a row in this 
hard atmosphere.
    Discretionary spending is not the problem now, it is the 
mandatory, it is the entitlements, it is two-thirds of all the 
money we spend. We borrow 42 cents of every dollar we spend, 
most of it from China. We cannot go on like this. We have to 
wrestle this thing to the ground and mandatory entitlement 
spending is something we cannot increase. It is growing 
iteratively, it seems, already.
    So, why am I preaching to you on this? Because we simply 
cannot afford to add any more money to the mandatory side of 
the budget. That is where we have to fight to lower that 
spending, and as we try to pass some of a bill here to fund 
highway construction and the like, we have got to figure out a 
way to keep that out of mandatory.
    Now, none of us singly have the answer, including Mr. 
Secretary, I do not think, to the problem of the diminishing 
trust fund. We have got to figure that out, but no one has the 
answer yet.
    You have got a bushel load of problems that you have taken 
on. We congratulate you on your work, welcome you to the 
committee, and look forward to hearing from you.
    Secretary LaHood. Thank you.
    Mr. Latham. Thank you, Mr. Chairman, and another sad day 
and the last time Mr. Dicks will have a chance to visit with 
the secretary of transportation here on their budget. So, we 
welcome the gentleman from Washington.

                Ranking Member Dicks' Opening Statement

    Mr. Dicks. Thank you, Mr. Chairman. I am glad to see the 
subcommittee beginning consideration of the Fiscal Year 2013 
Transportation HUD Appropriation Bill. This subcommittee funds 
absolutely critical projects that equate to real, on the ground 
jobs which play a crucial role in putting Americans back to 
work.
    Secretary LaHood, it is always good to see you and I thank 
you for being here today to talk about the administration's 
request and to make the case for further infrastructure 
funding. You have been a great friend of this committee and of 
mine over the years. A superbly effective advocate on 
transportation issues and one of our finest transportation 
secretaries. And I also appreciated the fact that you came all 
the way out to Bremerton, Washington, and rode the ferry across 
from Seattle and helped me christen our new tunnel in 
Bremerton. My hometown, by the way.
    The President's Budget Request for Fiscal Year 2013 
acknowledges the infrastructure deficit facing this country. We 
have seen study after study, blue ribbon panel after blue 
ribbon panel chaired by both Republicans and Democrats, all 
calling for substantially higher levels of investment in our 
Nation's roads, bridges, airports, and public transportation 
systems. The American Society of Civil Engineers gives us roads 
and highway infrastructure a grade of D- and this is the 
greatest country in the world, D-, while economists, organized 
labor, and even the U.S. Chamber of Commerce all concur that 
infrastructure investments are immediately necessary. 
Transportation is vital to our economy, moving products to 
market, getting workers to their jobs, and allowing people to 
move about within their communities.
    The fiscal year 2013 budget request puts forth a blueprint 
for investing in our infrastructure, including the 
appropriation requests in 2013 in addition to the $476 billion 
reauthorization proposal that is outlined in this budget. We 
are now just a little more than three weeks until the highway 
funding is once again set to expire. I sincerely hope that the 
majority in the House can put together a sensible 
reauthorization proposal that our side will find acceptable and 
that will provide all of our cities and states with the ability 
to make long-range planning decisions. These short-term 
extensions cannot keep going on. It is just not effective 
governance.
    I know there have been partisan disagreements about the 
stimulus package that was approved two years ago, but in my 
view and the view of most learned economists, the stimulus did 
not go far enough in providing for infrastructure funding. We 
sort of put more of the money in the infrastructure. These 
projects actually put people back to work, provide business for 
private contractors, and get money flowing back into the 
economy and we still need growth.
    Now with respect to the 2013 budget proposal, I believe 
this is a request that responds to some of our most critical 
challenges facing our national infrastructure. I am pleased 
with the administration's continued commitment to passenger 
rail and other mass transit and I am encouraged by the 
inclusion of new funding for the TIGER Discretionary Grant 
Program, which is truly accomplished what its full title 
intended, transportation investment, generating economic 
recovery. This has been an extremely popular and effective 
program, Mr. Secretary, not just among states and localities, 
but also among Democrats and Republicans here in the Congress, 
as well as tens of thousands of other constituents whose jobs 
have been supported by this program.
    Again, I want to thank you for being here and also we are 
really very happy your son was released and you have been the 
model of bipartisanship. And, Mr. Rogers, I have tried in your 
absence to restore a little regular order up here and we are 
looking forward to working together this year on a bipartisan 
basis. Thank you.
    Mr. Latham. Thank you, Mr. Dicks. After the secretary gives 
his opening statement, we are going to be going back and forth 
here on the five-minute rule. We have votes expected at about 
11:15, 11:30, ground there. So, we hope to conclude the hearing 
at that time. I would hope people would not extend, Mr. Olver, 
past that. [Laughter.]

                  Secretary LaHood's Opening Statement

    Secretary LaHood. Mr. Chairman, you have my statement, and 
in the interest of time, if you want to just put it in the 
record, I will happy to just begin with questions so that 
everybody gets a fair shot here.
    [The statement of Mr. LaHood follows:]

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    Mr. Latham. Okay. Well, if you had any comments in opening 
that you would like to make, go ahead.
    Secretary LaHood. I think a lot of this is going to come 
out in the questions, but let me just, on a personal note, say 
thank you to all of you for your expressions for my family. We 
appreciate that very much. And I am happy to answer questions.
    Mr. Latham. Okay, thank you. That is probably the briefest 
opening statement I have ever heard. [Laughter.]
    Mr. Rogers. It is the smartest move I have seen in a long 
time. [Laughter.]

                           HIGHWAY TRUST FUND

    Mr. Latham. While we are in the middle of this 
reauthorization bill, given certain scenarios out there, what 
happens to the Highway Trust Fund if there is no extension 
beyond March 31?
    Secretary LaHood. We have sufficient funds to carry us 
through the Summer of 2013?
    Mr. Bertram. Thirteen.
    Secretary LaHood. Yes. Chris Bertram, my CFO, is with me, 
and Chris tells me that we have funding, I am going to let him 
say it correctly, but through next year. Chris, do you want 
to----
    Mr. Bertram. There is enough funding in the trust fund 
through next year, but I think your question is if there is no 
extension of----
    Mr. Latham. Right.
    Mr. Bertram [continuing]. The expenditure authority at the 
end of March. First, what really happens is the people that 
work at the Federal Highway Administration that actually 
administer the Federal Aid Program cannot come to work because 
we cannot pay them. That means that we need to stop reimbursing 
the states for the projects they have underway. It is about 
130,000 active Federal aid projects that would not be able to 
be reimbursed by the Federal government. The states would 
either have to stop those projects or they would have to find 
other funds to keep those projects going. It would also affect 
the Federal Motor Carrier Safety Administration and some of the 
grants that the Federal Transit Administration administers.
    Mr. Latham. So, you are saying there is enough money in the 
pipeline assuming there was an extension?
    Mr. Bertram. Right. We think the trust fund this fall in 
the highway account would reach about a $4 billion balance. 
That is the time when we start monitoring the trust fund very 
carefully. Our current projections are that we would not have 
to slow down reimbursements to the states until next summer 
some time.

                     DISCRETIONARY/MANDATORY GRANTS

    Mr. Latham. You have got proposals for discretionary 
grants, and we do not have a copy of the exact legislative 
proposal, but how many programs and how many dollars in highway 
and transit modes are competitive grants where the awards are 
left to the discretion of the secretary?
    Secretary LaHood. Do you know the answer to that, Chris?
    I do not, but we will have to get that for the record, Mr. 
Chairman. I do not think we have that, do we?
    Mr. Bertram. No, we do not. We do not have it.
    [The information follows:]

    The FY 2013 President's Budget request for the Federal Highway 
Administration includes $1.9 billion for three competitive 
discretionary programs: $500 million for the Transportation 
Infrastructure Finance and Innovation Act (TIFIA) loan program, $700 
million for the Transportation Leadership Awards and a total of $700 
million for the non-formula portion of the Livable Communities Program.
    The FY 2013 President's Budget request for the Federal Transit 
Administration includes $2.4 billion for five discretionary grant 
programs: $2.2 billion for the Capital Investment Grants program, $27 
million for Transit in the Parks, $15 million for Tribal Transit, $30 
million for Livability Demonstration Grants and $50 million for 
Greenhouse Gas and Energy Reduction Demonstrations.

    Mr. Latham. Now, given your proposal making the highway and 
transit funds mandatory, does that not kind of fly in the face 
against the discretionary grants? Why do we not have a proposal 
to make everything mandatory or formula-driven?
    Secretary LaHood. Go ahead Chris.
    Mr. Bertram. Well, I think there is a balance between----
    Mr. Latham. Oh, come on, Ray. [Laughter]
    Secretary LaHood. I am not going to say something here 
that--I would rather let Chris answer.
    Mr. Latham. Okay.
    Mr. Bertram. I think there is a balance between regular 
formula-driven programs that go to the states and to transit 
authorities to provide a base amount of funding and the 
discretionary grants that can be given for larger, major 
infrastructure projects above the regular formula. In our 
reauthorization proposal, we will continue to have a program 
for discretionary bridge, discretionary interstate, and in 
transit, we would have the New Starts Program.

                        SURFACE REAUTHORIZATION

    Mr. Latham. Last year, we had a debate about where we get 
the money and what we----
    Secretary LaHood. Yes.
    Mr. Latham [continuing]. Do for the reauthorization. 
Language last year contingent upon enactment of a multiyear 
surface transportation authorization legislation was based on 
what the appropriation was.
    Have you put forth a reauthorization bill proposal?
    Secretary LaHood. Well, what we have put forth is the 
President's budget, which is a $500 billion budget, which is 
paid for. Unlike the last two years that I was here when many 
of you criticized the administration or at least asked a lot of 
hard questions about how do you pay for what you want to do, we 
pay for it this year. Half of it comes out of the Highway Trust 
Fund and the other half comes out of the Iraq/Afghanistan War 
Fund, which, by the way, has been scored by CBO. So, the idea 
that we have not paid for it is not accurate. If you want to 
know what our priorities are, if you want to know what the 
President's priorities are when it comes to transportation, 
they are laid out in his budget and they are paid for.
    Mr. Latham. But you have not put forth a proposal?
    Secretary LaHood. We put forth the President's budget. 
Look, we have provided a lot of technical assistance, to the 
T&I Committee, when it comes to their bill and we have provided 
a lot of technical assistance to all of your staff when they 
have asked for it when it comes to putting your bill together. 
Everybody knows what our priorities are, and if you do not, 
look at the President's budget.
    Mr. Latham. Okay. I am out of time.
    Mr. Olver.

                           HIGHWAY TRUST FUND

    Mr. Olver. Well, I can see this is going to end up being a 
discussion on semantics. The President's budget has in it, as I 
understand it at least, a broad outline for what a very robust 
program should be with the how to pay for it, as you have 
indicated. The proposals that we have on either side, the first 
proposal coming from the actual writing of the legislation has 
always been left to the legislature, to the Congress. In my 20 
years, we have not had legislation for any of the 
reauthorization programs that have originated in the Executive, 
but here because of the tangle, we have this deadline on the 
end of March with which if that goes by and we do not have a 
reauthorization, then there is what I talked about as a 
possible lapse and the confusion and the really obstruction 
essentially of planning for a future program and you do not 
know how and when you are going to get it back going, even 
though we may have money, if I understand from what--and you do 
not have a tag, so, I forget names.
    Mr. Bertram. Yes, Bertram.
    Mr. Olver. Mr. Bertram, you have said that the trust fund 
monies that you expected to go in will take us through the 
fiscal year 2013.
    Mr. Bertram. Correct.
    Mr. Olver. And did you mean also into fiscal year 2014 at 
all or only through this fiscal year?
    Mr. Bertram. Well, we are in fiscal year 2012, so, we think 
that the trust fund on our projections under baseline spending 
will have enough money until this fall to where it reaches the 
point where it has about a $4 billion balance, which is when we 
start watching the balance more carefully. We do not think we 
will actually hit a critical point where we have to slow down 
spending from the trust fund until the summer of next year, 
which is 2013, which is the fiscal----
    Mr. Olver. Which is in the 2013 fiscal year.
    Mr. Bertram. Fiscal year, right.

                      METROPOLITAN TRANSPORTATION

    Mr. Olver. Okay. Well, thank you for that clarification.
    In any case, the proposal ended up removing transit from 
the trust fund issue and covering only the highway business, 
but urbanization is going on in this country. This last census 
puts quite a number of millions of people. We are now up to 4 
out of 7 people are in our metropolitan areas, which have more 
than 1 million people in them. That number of metropolitan 
areas of that size goes up each census, but in this instance, 
we are now at 57 percent of the total population of the country 
is in those 50 metropolitan areas with over 1 million 
population. And so, to put them adrift in this process when 
those are the places where the exceptional need seems to me for 
doing infrastructure sort of as you go, helping them out to get 
planning and to get into these constructions before they grow 
even worse and the problem becomes geometrically worse, that is 
important.
    So, your program paid for, even though it is with the OCA, 
we have to find a different way to pay for it if we are not 
going to pay for it as the administration has proposed. It is 
the underlined yellow here and I am perhaps already wandering 
in my comments. [Laughter]
    But is clear that the administration is laying forward what 
the need is for the economy and for an effective economy which 
we must grow, as well. The best way to get out of our budgetary 
problems and our deficit problems is to grow the economy and 
this kind of investment is necessary for that.
    I will yield back.
    Mr. Latham. You have no questions?
    Mr. Olver. I have no questions.
    Mr. Latham. No questions.
    Mr. Olver. No questions.
    Mr. Latham. Thank you very much, Mr. Olver.
    Mr. Rogers.

                         TRANSPORTATION PAY-FOR

    Mr. Rogers. Thank you, Mr. Chairman. Mr. Secretary, last 
year and again this year, you are proposing to move all surface 
transportation outlays to the mandatory side of the budget, 
$60.3 billion. You know, you tried that last year and we said 
no way, and you are trying it again this year and I have got a 
feeling we are going to say no way.
    And, you know, I think your justification was it was in the 
Simpson-Bowles Commission recommendation. Well, there were 
other provisions of the Simpson-Bowles plan, which you have 
conveniently ignored. For example, they proposed increasing the 
gas tax by 15 cents or tying current year's spending to 
previous year receipts. Both of those you said we are not going 
to do that. But you conveniently picked this, I am going to 
call it a gimmick, to move the funding to mandatory and outside 
the purview of this Committee; outside the oversight of this 
appropriating committee.
    We have the responsibility to guard every penny that is 
spent. Except when it goes to mandatory and entitlements, it 
escapes our oversight and I do not like to see that happen, you 
might guess. So you know, you are proposing to take OCO money, 
assuming there is money in OCO, the wind down of the wars, 
there are 50,000 other agencies with their eye on that fund of 
money, if there should turn out to be that kind of money. So I 
do not really believe that you have given us a realistic option 
here and you are going to leave it to us to try to figure out 
what to do to fill that $60.3 billion hole that is in your 
budget because you have not responsibly given us a route to 
travel. So how do you advise us to fill that hole?
    Secretary LaHood. Well, take your lead from the President's 
budget. Look, for two----
    Mr. Rogers. That is what I just got through talking about.
    Secretary LaHood. For two years, Mr. Chairman, people have 
sat up there and criticized us for no-pay-for. We are not going 
to raise the gas tax. The President has been against raising 
the gas tax since the day he was sworn in. So that has not 
changed.
    So we take the Highway Trust Fund, the money that is in 
there, and we take the remainder from the Iraq-Afghanistan 
Fund. Now, there may be 50 people lined up, but our budget was 
put together with our colleagues at OMB. So we assume that when 
they sign off on this, this is one of the priorities the 
President wants the money used for. So we have a pay-for.
    Mr. Rogers. What is that old saying, the President 
proposes, and what is it?
    Mr. Carter. Congress disposes.
    Mr. Rogers. Congress disposes. Well, I am here to tell you 
we have already disposed of that provision. And so we have got 
to have something more constructive and we would rather do it 
with your absolute cooperation.
    Secretary LaHood. Well, look, we are more than willing to 
cooperate. We are willing to sit down with anybody that wants 
to. We need a transportation bill, Mr. Chairman, and we need 
the money to pay for it.

                        SURFACE REAUTHORIZATION

    Mr. Rogers. I agree we need a transportation bill or we are 
wrestling with that even as we speak. The Senate Bill, two 
years, we are trying to draw up a House Bill of five-year 
extension.
    Secretary LaHood. Mm-hmm.
    Mr. Rogers. Which would you prefer?
    Secretary LaHood. What I would prefer is that you use the 
model that the Senate used, which begins with bipartisanship, 
where the chairman and the ranking member--you have Chairman 
Boxer and Ranking Member Senator Inhofe, who sat together 
around a table with their members and put together a bipartisan 
bill which was voted 18 to nothing out of their committee. And 
now it is going to be debated in the Senate. Use that 
bipartisanship as a model. If you begin there I think you will 
get a bill. And theirs is paid for, by the way.
    Mr. Rogers. It is two years. It does not solve the long-
term insolvency problem that is haunting all of us. We are 
trying to find a bill that would be a five-year extension that 
tries to solve the long-term insolvency problem that is 
hampering states, localities, private enterprise from making 
some kind of long-term planning on how to spend the money. 
Would you not prefer a five-year extension?
    Secretary LaHood. Well, first of all, I would prefer that 
Congress passed a transportation bill that reflects the values 
of the American people; reflects the values of what Congress 
has always done. Now, I served on the T&I Committee and I also 
served on this Committee. And when we served together we did 
things in a bipartisan way. There was no more bipartisanship 
than came out of the Appropriation Committee and the T&I 
Committee, and I sat next to Mr. Latham on that committee when 
we put together two bills that passed the House with 400 votes 
and the Senate with 80 votes. That is the way you do it. That 
is the way it has always been done.
    Mr. Rogers. Would you prefer if we have a two year 
extension?
    Secretary LaHood. I would prefer Congress pass a bipartisan 
bill that reflects the values of the American people.
    Mr. Rogers. All right.
    Mr. Latham. Thank you, Mr. Chairman. Mr. Dicks? Gone. Mr. 
Pastor.

                         ARIZONA TRANSPORTATION

    Mr. Pastor. Thank you, Mr. Chairman. Good morning, Mr. 
Secretary.
    Secretary LaHood. Morning.
    Mr. Pastor. First of all, let me thank you for your years 
of public service as secretary, as well as in the Congress.
    Secretary LaHood. Thank you.
    Mr. Pastor. And I am also very happy to hear about your 
son.
    Secretary LaHood. Thank you.
    Mr. Pastor. I will take my time to thank you for all of the 
efforts in developing the light rail system in Maricopa County, 
as well as the efforts the Administration has done in Pima 
County in Tucson, and so it is very important to us.
    I can tell you that the first 20 miles are completed and 
the ridership has doubled. And with the gas prices as they are, 
we probably will see increased ridership, and so we are taking 
advantage of the transportation system that we have in Maricopa 
County.
    With your support we are going to continue to expand the 
light rail system. The next three miles is in Eastern Maricopa 
County, which happens to be in Congressman Flake's district, so 
we are also going into the eastern part of Maricopa County. And 
with the investigative money that the department has invested, 
we are now looking for expansion to Western Maricopa County as 
well as Southern Maricopa County. So we are very appreciative 
and very happy that the system is going to continue to expand 
and provide public transportation for many people in the 
county.
    An initiative that this subcommittee started in terms of 
having HUD and Department of Transportation provide grants in 
terms of how do you develop the light rail system for 
affordable housing, economic development, commercial 
development. With the recent grant that we received, we are now 
planning to take the light rail system and meet the objectives 
of the initiative with affordable housing and economic 
development and commercial development. So we are on track.
    We also want to thank you because you have supported ADOT, 
the Arizona Department of Transportation, in how we can--well, 
we are investigating the feasibility of building a commuter 
train between Phoenix and Tucson, which would connect in 
Arizona the two largest urban areas and connect 85 to 90 
percent of the population in Arizona.
    And so I thank you for all of those efforts, and on behalf 
of my constituents and the people of Arizona, we thank you for 
that. As you know, about a year ago the entire, we sometimes 
surprisingly get them all together, but the entire Arizona 
Delegation, including our two senators, contacted you in 
designating a north-south corridor, as we propose the 
Interstate 11. That would basically serve as a corridor from 
the border in Mexico north.
    And we have worked jointly with the delegation of Nevada, 
as well as the entire Arizona delegation. I just have the 
question as what is the progress of this designation within 
your department?
    Secretary LaHood. You know what, Mr. Pastor? I will get 
back to you. I do not know where that stands, but I will get 
you an answer. And I want to thank you and your colleagues who 
have shown great leadership in your state for these projects 
that you mentioned. We cannot do what we do unless we have good 
leadership, and you all have really stood up and said this is 
the kind of transportation that we need in our state. And it 
has made a difference and it will continue to make a 
difference, and we look forward to working with you on these 
important projects, and I will get back to you on the 
designation.
    [The information follows:]

    The Arizona and Nevada State Departments of Transportation must 
submit a designation request to the U.S. Department of Transportation 
through the Federal Highway Administration (FHWA) Division Office in 
order to begin the review process for Interstate 11. Designation 
requests should include a route description, justification, and have 
the recommendation of the State involved. In a letter dated July 14, 
2011, the Department informed the Nevada and Arizona delegations that 
to date FHWA has not received a request to designate Interstate 11.

    Mr. Pastor. Thank you very much. I will yield back, Mr. 
Chairman.
    Mr. Latham. Thank you, gentlemen. The gentleman from Texas, 
Mr. Carter, the judge.

                                 PORTS

    Mr. Carter. Thank you, Mr. Chairman. Once again, Mr. 
Secretary, welcome.
    Secretary LaHood. Thank you.
    Mr. Carter. And I am really happy for the good fortune of 
your family.
    Secretary LaHood. Thank you.
    Mr. Carter. Many of us were praying for you.
    Secretary LaHood. I know that, thank you.
    Mr. Carter. I want to start off with a question I got from 
one of my city managers yesterday, and I had lunch with him. He 
is from Temple and he had just come from this transportation 
seminar that, I think, you all are probably part of.
    Secretary LaHood. Yes.
    Mr. Carter. It has been going on here in Washington. And he 
was talking about our harbor situation. We do not have any 
harbors in my district.
    Secretary LaHood. Yes.
    Mr. Carter. But we have a harbor in Texas. It is, I think, 
the second largest harbor in tonnage in the country. We also 
have something peculiar to the Gulf Coast states called 
hurricanes. And when they blow inland, they blow silt up into 
harbors.
    And the discussion yesterday that was held at the 
transportation seminar was the fact that the Panama Canal is--
we have just expanded the Panama Canal. We are major transit. A 
lot of the China trade is headed for the Gulf Coast. We have 
one-lane channels at almost every major Gulf Coast port that we 
have. And the estimate of time to dredge the channels at that 
seminar yesterday was 14 years because of the additional 
regulations that have been imposed since the last time we 
dredged those channels.
    Now 14 years, there is going to be a lot of stuff parked 
out in the Gulf of Mexico waiting to land over 14 years. And I 
was shocked by that number. But all of the other regulations, 
not necessarily directed by your department, but--I would 
expect, at least, the secretary of--and the Department of 
Transportation is in the business of making transportation work 
and should be advocates for transportation projects and helping 
to fast track dealing with regulations as best you can when we 
get to these transportation projects.
    But it is unacceptable to say that the Houston ship channel 
has to be a one-lane ship channel for the next 14 years with 
the China trade sitting out in the Galveston Bay. Do you have 
any input about these kind of thoughts?
    Secretary LaHood. Yes. Look, Judge, this is a very 
important issue. When I came to this job I held a port summit 
in San Diego, got all of the port directors in the country 
gathered together. Since that time each year we have had a port 
summit where we talk about issues like this.
    This Administration has given more money to ports, to more 
ports, than any administration ever. We have done it through 
our TIGER Program. Now, that money has not been used to dredge; 
it has been used to increase capacity. We have really tried to 
help these ports out.
    Ports are an economic engine, they provide jobs. We also 
developed at DOT a program called the Marine Highway Program, 
which I will send your office a copy of, where we actually use 
the waterways to relieve congestion and deliver goods around 
America, in and out of America. That report is out, and we rely 
on ports.
    [The information follows:]

    A copy of the Marine Highway Report was provided to Mr. Carter on 
March 9, 2012.

    At the meeting that the governors had with the President 
two weeks ago, Governor Haley from South Carolina asked the 
President about this. How can we take some of the Harbor 
Maintenance Trust Fund and use that to help ports become 
deeper, dredge them, and cut through the red tape? And what the 
President said was he would put together, under his Chief of 
Staff, a working group within the Administration, because he 
agreed and we agree it takes too long to do the permitting.
    And it involves too many Federal Agencies. So we get it, we 
know it takes too long. It does not take too long because of 
DOT. We do not have any--you know, we are not standing in the 
way. We are trying to help ports. But there are agencies within 
our government that do take too long. And I think the President 
recognizes it and we hope to get on this immediately.
    Mr. Carter. Yeah, well, as you raised that issue that I was 
not even going to go into, not only the ports silted up, but 
there are coastal canals silted up, too.
    Secretary LaHood. Correct.
    Mr. Carter. And that ships all of the stuff to your part of 
the country where you came from.
    Secretary LaHood. Right.
    Mr. Carter. It all moves up the Intracoastal----
    Secretary LaHood. Right.
    Mr. Carter [continuing]. To service Chicago all of the way 
over to Pennsylvania. And if those shipping lanes close, it is 
a bad deal.
    Secretary LaHood. Right.
    Mr. Carter. And I wanted to raise this issue first because 
it was raised to me yesterday.
    Secretary LaHood. Yes.
    Mr. Carter. Especially from a person that is not even 
connected to port.
    Secretary LaHood. Right, right.
    Mr. Carter. So I think it is a--I think the President, if 
that is what he is going to do, I have some other Federal 
regulations I would love for him to come down to my district 
and help me cut through them, but----
    Secretary LaHood. Well, in his absence I would be happy to 
do that.
    Mr. Carter [continuing]. We made the disclaimer statement 
not all projects are shovel ready when we think they are shovel 
ready. I would argue it has to do with other agencies and their 
new regulations that they are imposing and it is getting to be 
a real problem.
    Secretary LaHood. Well, look at, Judge, whenever you invite 
me, I will come to your district. I do not speak for the 
President's schedule but I would love to come to your district 
and meet with you.
    Mr. Carter. We will get you down there.
    Secretary LaHood. Yes.

                        QUESTIONS FOR THE RECORD

    Mr. Carter. One more thing.
    Secretary LaHood. Yes, sir.
    Mr. Carter. You said you would send me something. Last year 
it took an awful long time to get something. It took us like 
five months.
    Mr. Rogers. The gentleman's time has expired.
    Mr. Carter. Could you shorten the time if we need to get 
stuff from you?
    Secretary LaHood. Sure. What do you need?
    Mr. Carter. Well, last year, in March, I had some questions 
I do not know now.
    Secretary LaHood. Oh.
    Mr. Carter. Have those reports you just talked----
    Secretary LaHood. It took too long and you forgot what it 
was.
    Mr. Carter [continuing]. No, but last year I forgot what it 
was. It was way past the time we needed it.
    Secretary LaHood. You figure out what it is and I will get 
it to you quickly. [Laughter.]
    Mr. Carter. Okay. Get it there fast, that helps.
    Mr. Latham. Thank you for being so short there. Mr. 
LaTourette.

                        SURFACE REAUTHORIZATION

    Mr. LaTourette. Thank you, Mr. Chairman. Mr. Secretary, 
nice to see you again.
    Secretary LaHood. Thank you.
    Mr. LaTourette. Just a couple of clean-up matters, and I am 
sorry Mr. Dicks is not here anymore because, you know, a lot of 
us did have difficulties with the stimulus bill. And given his 
comments, the Republican version that often gets overlooked was 
half as much money and most of it went into infrastructure, and 
I do not remember Mr. Dicks supporting it. But it is good that 
he bemoans the fact that the original stimulus bill only put 
about $68 billion in the infrastructure.
    Secondly, I am kind of amazed by the observations that we 
are coming up against this March deadline and people are sort 
of saying, well, I cannot believe that this is happening. You 
know, and I assume most all members of the Committee knows, 
that the last highway authorization expired in September of 
2009.
    Secretary LaHood. Three and a half years ago.
    Mr. LaTourette. And at that time the President was the 
President, the current majority leader in the Senate was the 
current--was the majority leader, and Ms. Pelosi was the 
Speaker of the House, and every extension until the beginning 
of this year was under that storage ship.
    And I have to tell you, Representative Cravaack gets really 
mad at me when I say this, but you had in place an individual 
as chairman of the T&I Committee that knows more about 
transportation than any of us will ever know in Jim Oberstar in 
Minnesota. He had a bill. He had a six-year bill. But he was 
constrained by Mrs. Pelosi and I think the Administration for 
moving forward. He paid for it. It was $450 billion. It would 
have addressed the needs of this country moving forward and it 
was squashed not by the current bunch in charge now. It was 
squashed by our friends on the other side of the aisle.
    Now we get to the current, and I have read your comments 
about the Mica bill, and I cannot because of my party 
affiliation go as far as you did, but I will tell you it is not 
a satisfactory bill. And I believe that a majority party has 
the ability to write a partisan bill. We certainly saw that 
with Mrs. Pelosi. And if you can get 218 votes you can do that.
    The difficulty with this--and you are right, I participated 
in T-21 and SAFE T-LU, and those bills flew out of here. I 
would love to see a bipartisan bill and I think given the fact 
that the whip count yesterday was another disaster on the five-
year proposal, I think you will see a bipartisan bill when we 
come back from our recess.
    And we have to get 218 votes because the fact of the matter 
is the Senate has parked their bill at the desk, and even 
though nobody wants a two-year bill, I think that is 
disgusting, and it is everybody's failure to deal with the 
issue that we have seen coming since I got here. Nobody wants 
to deal with the issue. It is disgusting, but you know at the 
moment it is the only bipartisan thing in town and we have to 
get something over there or else all hell is going to break 
loose. I guess that is enough of that.
    I do want to express disappointment in a couple of areas 
that, you know, there is this business about the President 
proposes and the Congress disposes. I will tell you, I believe 
every President since Dwight Eisenhower has submitted the full 
bill text of their legislative Highway Trust Fund 
Reauthorization, either as an executive communication from the 
President to the Speaker, or a letter from the secretary to the 
committee chairman. I do not believe that this administration 
has done that. So that is one disappointment.
    Two, this OCO thing is not real, and it continues to create 
the same type of fiction that the Mica bill does. The Mica bill 
is dependent upon sticking it to the pension contributions of 
Federal employees, current and those in the future. That is not 
solving the trust fund problem.
    And your reliance on OCO is not solving the trust fund 
problem. It may score right, but I read your blogs, I also read 
Mr. Elmendorf's blogs, and you know that the OCO funding is 
discretionary. And the way CBO scores that is that they look at 
what was spent this year and they make it the same number for 
next year, adjusted for inflation. There is no OCO fund. There 
is no money lying around that is going to be appropriate. If 
the wars are over we need the money for other purposes.
    There is no stream. So your proposal is not paid for, the 
Mica proposal is not paid for. The Senate proposal is paid for, 
with some fancy maneuverings. I still think they have some 
problems.
    But the fact of the matter is, listen, we either have got 
to go to vehicle miles traveled, somebody has got to have the 
courage to adopt Simpson-Bowles and actually raise the gas tax 
15 cents a gallon, or all we are going to do is continue to 
have 10-year projected fixes for problems and extensions that 
go a couple of months, 10 months in the case of the payroll 
tax. That is why we are broke.
    And so I, you know, I like you, I like the President, but 
this is not a serious pay-for and we have to get past this and 
fix the Nation's infrastructure problem, and nobody is doing 
it.
    Secretary LaHood. Well, Mr. LaTourette, first of all, let 
me thank you for your leadership. You have been a good friend 
for Transportation; always have been and always will be. I 
appreciate what you are doing.
    Mr. Latham. The gentleman's time has expired. The gentleman 
from Pennsylvania, Mr. Dent.

                                BRIDGES

    Mr. Dent. Thanks, Mr. Chairman. Secretary LaHood.
    Secretary LaHood. Good morning.
    Mr. Latham. Is your mic on?
    Mr. Dent. Oh, yeah, it is not. Glad to hear your son is 
doing okay.
    Secretary LaHood. Thank you.
    Mr. Dent. It is wonderful news. Just a couple of things 
about bridge replacements. The last time I checked the bridge 
inventory data suggests about 11.5 percent of our Nation's 
bridges are rated structurally deficient. Nearly half of the 
states are above that national average.
    Pennsylvania, we have the unfortunate distinction of 
ranking first in the country for deficient bridges with nearly 
6,000, or more than 25 percent, of our bridges in the 
Commonwealth are in bad shape. And my district is probably the 
worst in the Commonwealth of Pennsylvania. So we have a lot of 
deteriorated bridges. You know what happened with I-35 up in 
Minnesota, the bridge was replaced in 437 days. That was simply 
terrific.
    I am working with the T&I Committee on language that would 
make the approval process for these bridges faster and much 
simpler. The reality is that the Emergency Relief Program 
cannot fund all of these projects. But I certainly believe that 
treating these bridges similar to how we treat these emergency 
projects, you know, cutting the red tape, expediting the 
process, would go a long way to building our bridge 
infrastructure.
    And to the extent that we replace bridges ``as is'', I 
would like to really avoid using all of these various NEPA 
steps and let us get to work. Time is money and since we cannot 
find a way to pay for, you know, to replenish the trust fund 
adequately, if we save time, we save money. I want to get your 
thoughts about this kind of----
    Secretary LaHood. We favor that. We just worked very hard 
with our friends in Ohio and Indiana to open up the Sherman 
Minton Bridge. We are working with our friends, the Governor of 
Kentucky and the Governor of Indiana, on some important bridge 
projects that we are going to speed up because we have to.
    These river crossings are very, very important. You all 
just passed a river crossing bill between the state of 
Wisconsin and Minnesota, and it had the support of both 
delegations, with the exception of one person. So if we can 
speed things up, we will.
    Some people know that our Highway Administrator Victor 
Mendez started a program called Everyday Counts. That program 
is about moving things quickly. We are not opposed to moving 
things quickly and we know there are a lot of bad bridges 
around the country. Nobody wants them fixed up more than we do.
    We have had some great partners with our governors and will 
continue to move things as quickly as we can. We are certainly 
not opposed to that so anything you can include in the 
transportation bill we will be happy.

               HAZARDOUS MATERIALS SAFETY PERMIT PROGRAM

    Mr. Dent. That is good to hear. I appreciate that. And 
also, a secondary issue that has come up recently, a few weeks 
ago I met with an explosive company in my district. And they 
brought an issue to my attention pertaining to the Hazardous 
Materials Safety Permit Program. And I do not know how familiar 
you are with that issue.
    But since 2005, the Federal Motor Carrier Safety 
Administration--I do not know, I guess FMCSA; I do not know if 
that is the right acronym--has implemented a safety permit 
program for motor carriers of certain hazardous materials 
intended to ensure a higher fitness standard than required to 
trucking companies generally.
    It is my understanding that under the program, the 
carrier's fitness is based solely on limited out-of-service 
violation history, and the current rules do not provide an 
appeals process for carriers whose permits were denied as 
opposed to revoked or suspended. I am just concerned that a 
number of these folks are simply just going to go out of 
business.
    They are just going to go out of business with some rather 
arbitrary rulings that really are not affecting safety, and I 
was hoping that we could have some conversations with your 
office about this issue.
    Secretary LaHood. Well, what I will do is I will have Anne 
Ferro, our administrator, come up and meet with you, Mr. Dent, 
and talk to you about your concerns and explain the program.
    [The information follows:]

    Administrator Ferro met with Representative Dent to discuss 
the Agency's hazardous materials safety program on April 16, 
2012.

    Mr. Dent. Yeah, because there is some real issues there 
that I think we do need to deal with.
    Secretary LaHood. Sure.
    Mr. Dent. With that, I see my yellow light is on, too, and 
I am going to----
    Secretary LaHood. Okay.
    Mr. Dent [continuing]. Thank you.
    Mr. Latham. Thank you gentlemen. Mr. Diaz-Balart.

                                  CUBA

    Mr. Diaz-Balart. Thank you, Mr. Chairman. Actually what I 
was going to talk about was already touched on by Chairman 
Rogers and Mr. LaTourette. I do, however, want to take this 
opportunity, and you have heard again, but I think it is 
important that you hear it.
    First place, how relieved, frankly, all of us are, because 
of the relationship that we have with you----
    Secretary LaHood. Thank you.
    Mr. Diaz-Balart [continuing]. And I think the entire 
country is, about----
    Secretary LaHood. Yes, thank you.
    Mr. Diaz-Balart [continuing]. About your son and the entire 
group of, frankly, really courageous Americans who are willing 
to, you know, work for democracy around the world.
    Secretary LaHood. Yeah, thank you.
    Mr. Diaz-Balart. I just also want to remind everybody here 
now as a kind of point of personal privilege that, you know, 
this administration seems to be the administration of American 
hostages. And as we speak, there is an American still being 
held hostage in Cuba. Since December of 2009, he has lost 100 
pounds, his health is frail, his daughter and wife are 
suffering from--are fighting cancer, and, unfortunately, this 
administration continues to give unilateral concessions to that 
terrorist regime.
    So I bring that up because as we remember and are grateful 
for the fact that a group of Americans have been released, 
still there is one American that is really, really suffering 
and this administration seems to be either be powerless or 
just, frankly, unwilling or unable to do anything about it. And 
let us just not forget other Americans who are suffering as 
hostages at this time. And we are exceedingly pleased about 
your son.
    Secretary LaHood. Thank you.
    Mr. Diaz-Balart. And again, by the way, and also not only 
pleased that he is here, but I would also, if you could, just--
our gratitude for his efforts for democracy.
    Secretary LaHood. Thank you.
    Mr. Diaz-Balart. Thank you, sir.
    Mr. Latham. Thank you, gentlemen. Recognize the gentleman 
from Northwest Arkansas, Mr. Womack.

                               AIP GRANTS

    Mr. Womack. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary for being here, and I associate myself with all of 
the remarks that have come from my colleagues in a gratefulness 
for the outcome there with your son.
    I want to pivot for a moment to AIP funding because last 
year I asked about this particular subject and about the 
percentage that goes to the smaller airports. This year, I was 
initially pleased to see in the budget that more AIP grant 
money is going to smaller airports while allowing the medium 
and larger hub airports to make up their funding shortfall 
through increased passenger facility charges. I suppose that 
would work with one exception, and that is the PFCs are capped.
    So why did you propose PFCs as a solution to the funding 
gap when current law does not allow for that kind of an 
increase? Is that a Mr. Bertram question?
    Secretary LaHood. Yes, if you do not mind?
    Mr. Bertram. Our request would only cut the overall funding 
for the large and medium airports if, in fact, there is a 
legislative change that changes the PFC from $4.50 to $7.
    Mr. Womack. All right. Do you support the current funding 
level for AIP as $3.35 billion? I know right now, as I 
understand it, the request is for a billion less than current 
funding and the secretary has said many, many times in this 
hearing that this is the plan. This is the plan that you 
support. So I am coming back and asking if you would support 
the current level of funding for AIP at $3.35 billion or 
thereabouts?
    Mr. Bertram. If there was not a change in the PFC, we would 
support the current levels of funding for AIP. Our level of 
$2.4 billion is predicated on an increase in the PFCs that 
would allow the large and medium airports to raise the funds 
locally.
    Mr. Womack. One other question about that same subject 
matter. So we reduce the level of funding in the request, and 
AIP takes a pretty significant hit. While at the same time as I 
understand the budget, not so much of a hit if a hit at all to 
something like a high speed rail.
    So what is the motivation between reducing there--I guess 
it goes back to the secretary's position that it is the budget 
that they have asked for, and it reflects the priorities of the 
administration. Is that indeed the priority?
    Mr. Bertram. Right. I think the general theory behind that 
is that large and medium airports are not that dependant on AIP 
grants. They have fairly large capital programs. AIP grants do 
not make a big impact on that. They would prefer to have the 
ability to actually raise the funds they need locally. So that 
is what the----

                            CONTRACT TOWERS

    Mr. Womack. Very good. I do not know how much time I have 
left. I have two minutes? Okay. Let me go to contract towers 
for just a minute. I think I can do this pretty quickly.
    The administration's budget cuts funding for FAA contract 
towers by 15 percent. It is one of the FAA's most successful 
and cost effective air traffic safety programs. I have several 
towers in my district, and one in the town where I was mayor, 
that has a tremendous amount of corporate traffic in and out of 
that airport. Can you explain why the administration is 
recommending such a big reduction to a program so vital to air 
safety in some of these areas?
    Mr. Bertram. I think our budget for contract towers goes 
down by about $2 million, and we can double-check to see where 
you got the $14 million. We support the contract tower program. 
It is a cost-effective way of providing air traffic services at 
smaller airports.
    The new reauthorization bill requires us to go through and 
do a new cost-benefit analysis to determine if they stay in the 
program and to what degree there needs to be a local 
contribution. But, in general, we support the contract tower 
program.
    [The information follows:]

    The total FY 2013 request in the FAA Operations budget for the 
Federal Contract Tower program is $138 million. This consists of:
     $130 million in the Contract Tower Base Program
     $8 million in the Contract Tower Cost Share Program
    This is a decrease of $2 million from the FY 2012 enacted level of 
$140 million. The decrease reflects:
     The budget's proposed adjustment to the Cost Share program 
(increasing the local cost share cap from 20 to 50 percent), and
     FAA's use of newly available, site-specific cost information to 
update benefit-cost ratios used to determine local share.
    The table below shows total funding levels for the program.

----------------------------------------------------------------------------------------------------------------
                                                                                      FY 2012         FY 2013
                                                                  FY 2011 Actual      Enacted         Request
----------------------------------------------------------------------------------------------------------------
Contract Tower--Base Program....................................           122.6           130.0           130.0
Contract Tower--Cost Share Program..............................            10.0            10.0             8.0
                                                                 -----------------------------------------------
    Contract Tower--Total.......................................           132.6           140.0           138.0
----------------------------------------------------------------------------------------------------------------

    There are currently 246 towers in the FAA's Federal Contract Tower 
program. Sixteen of these are in the cost share program, where the 
local sponsor pays a portion of the operating cost of the tower based 
on the benefit/cost ratio (i.e., if the benefit/cost ratio is 0.85, the 
local share is 15 percent). The remaining 230 towers are in the base 
program and have all operating costs paid for by the FAA.

    Mr. Womack. Have you done any analysis? Had any dialogue 
with these contract tower programs to see the reality that if 
indeed funding is cut to certain levels, that some of these 
municipalities as an example may just simply close the tower 
for want of funding? And I do not think that is a direction 
that the----
    Secretary LaHood. Well, look, before we would do that, 
obviously we would sit down with the communities and talk to 
them about the contract and talk to them about the amount of 
money and make sure that they can continue to provide a service 
there at some kind of a funding level that makes sense from our 
point of view and from their point of view. We are not going to 
arbitrarily go into communities and eliminate this service 
without sitting down and talking to these folks.
    Mr. Womack. I encourage that dialogue. Thank you, Mr. 
Secretary.
    Secretary LaHood. Thank you.
    Mr. Womack. I yield back.
    Mr. Latham. Gentlemen, I would recognize the gentlewoman 
from Ohio, Ms. Kaptur.

                         SAINT LAWRENCE SEAWAY

    Ms. Kaptur. Thank you very much. Welcome, Mr. Secretary. 
Sorry I could not be here a few moments ago. I was at a 
competing hearing. I wanted to thank you for your great work 
and I just have a few issues I would like to ask about.
    First of all, I noticed the Saint Lawrence Seaway 
Development Corporation is not mentioned in your testimony. 
Have I not found it or is it not a priority for the 
administration?
    Secretary LaHood. It is doing so well, Ms. Kaptur, that we 
did not have a thing to say about it. We just leave it lie 
because everything is fine. If we raise it as an issue then 
somebody around here might get an idea about doing something. 
Everything is fine at the Saint Lawrence Seaway.

                                TRANSIT

    Ms. Kaptur. I wanted to ask you, on transit I was very 
pleased to see some reference to that in your testimony. And 
just to express the view of the part of the country we come 
from, transit is absolutely critical. We cannot get people to 
work from areas where there is high unemployment, and we 
certainly need some sort of a close attention by the department 
to places of high unemployment and the condition of their 
transit systems and to get people to jobs that are in the 
region.
    I might encourage you, you know, just ask your staff to 
take a look in the 10 poorest places in America and look at 
what kind of bus systems or transit systems that are there to 
move people regionally. You might be interested in what you 
find.
    Secretary LaHood. Yes. Look, transit is a very high 
priority, and particularly as gas prices go up, there are some 
people in this country can little afford to put a gallon of 
gasoline in their car, but they can ride a bus or light rail or 
other forms of transit. Transit is a high priority. The reason 
I spoke out so strongly against the bill that came out of the 
House T&I Committee is what it did to transit. Transit is one 
of the most important transportation options that we have in 
America today. It simply is.

                          CLEVELAND INNER-BELT

    Ms. Kaptur. Thank you. Did Mr. LaTourette in his question 
period get into the inner-belt in Cleveland or not?
    Secretary LaHood. No, he was actually lecturing me on the 
fact that we have not paid for the bill the right way.
    Mr. LaTourette. I was pretending I was older for the 
moment.
    Ms. Kaptur. Oh, all right. All right. I just wanted to--you 
know, you have got a little problem there in Ohio with a 
massive transportation project over in Cleveland from which 
they do not have enough money. And the administration will be 
in receipt of information and an request for TIGER attention to 
that project. But it is plugging up traffic in that major city 
and is a real priority, obviously for the region and that 
community again stretched in terms of jobs and income at the 
present time and needing to get that infrastructure in place so 
they can build their economy forward.

                         DISCRETIONARY SPENDING

    Finally, Mr. Secretary, I wanted to ask a question 
regarding the budget, and I think someone took my piece of 
paper here. Here we go. Thanks, David. The Budget Control Act 
last year set discretionary spending for 2013 at $1.047 
trillion, $4 billion above 2012, this year. It appears there is 
some news out of the House Budget Committee.
    There are some members that would like to reduce 
discretionary spending down to $930 billion or $950 billion. 
Funding at those levels would mean that your Department of 
Transportation would have to absorb cuts as high at 22 percent. 
Can you please talk about what that would mean to overall state 
of our infrastructure, our ability to compete in the global 
market place, put our people back to work if we had to sustain 
cuts of that level?
    Secretary LaHood. Well, for the record, I can get you some 
specifics, but the Chairman has been talking earlier about 
mandatory versus discretionary, and I certainly understand his 
point very well. And so we will see what the Budget Committee 
does and respond accordingly. But I will be happy to provide 
for the record what impact it would have.
    [The information follows:]

    A reduction of 22 percent in discretionary spending totals would 
adversely impact infrastructure development and transportation 
operations funded by the Department. In particular, a cut of this 
magnitude would significantly affect modernization and operations of 
the Federal Aviation Administration (FAA), the New Starts program at 
the Federal Transit Administration (FTA), and Amtrak's operating and 
capital investments. For instance, the FAA might need to curtail late 
night air traffic control services at low-level-use towers, which would 
disproportionately affect rural communities. They might also need to 
close towers and consolidate air traffic control services. In addition, 
progress on the Next Generation air traffic control system would come 
to a halt. The FTA would postpone new Full Funding Grant Agreements 
(FFGAs) to finance and support locally planned, implemented, and 
operated transit capital investments. In addition, the FTA might have 
to reduce payments to existing FFGAs. This change in funding could 
stall local transit projects, delay the delivery of greatly needed 
transit services, and eliminate construction jobs. Under this funding 
scenario, Amtrak might have to halt large-scale capital projects and 
reduce operating service for subsidized lines, which would affect rural 
areas served by long distance trains. Overall, a reduction in 
discretionary spending of 22 percent would have a significant impact on 
transportation operations and capital investments; however, the 
Department would continue to prioritize safety activities to ensure any 
cut does not compromise our commitment to safety.

    Ms. Kaptur. Thank you. Thank you very much, Mr. Secretary. 
Thank you, Mr. Chairman.
    Mr. Latham. Thank the gentlewoman. The gentleman from 
Virginia, Mr. Wolf.

                           WMATA SILVER LINE

    Mr. Wolf. Thank you, Mr. Chairman. I appreciate it. And Mr. 
Secretary, I want to welcome you. I wanted to thank you, but 
before I did I want to tell you, I was in Egypt last year in 
June, and I met with your son. And the job they were doing out 
there was an incredibly, incredibly important job, and I know 
you are very proud of him. But they were really making a 
difference, and I hope that effort will be able to continue. 
But I want to let you know----
    Secretary LaHood. Thank you.
    Mr. Wolf [continuing]. In a very tough environment he was 
doing a tremendous job.
    Secretary LaHood. Thank you.
    Mr. Wolf. Secondly, I want to thank you for your help on 
reaching out and bringing this whole issue with regard to rail 
to Dulles. You basically have saved the project, and I 
personally want to thank you very, very much. I also want to 
ask you to thank your IG. Mr. Latham and I, on March 7th, sent 
a letter to Calvin Scovel asking that they do an in-depth 
investigation of this rail to Dulles to make sure there is 
transparency.
    Personally, I think the MWOL Board is dysfunctional. I 
think it has kind of gone astray. And that is why this 
committee, and I appreciate, Mr. Latham, writing two new people 
on from the state of Virginia. We are having--when the terms 
end, they end. But if you would, thank your IG for the work 
that they are doing. They are going to be coming out with an 
in-depth analysis investigation both of contracts, government's 
transparency. Most of the board meetings are in secret; they 
ought to be public. So if you would thank him, I would 
appreciate it.
    Secretary LaHood. Of course.

                       INSPECTOR GENERAL FOR MWAA

    Mr. Wolf. The last question I would want to ask you is, 
this Congress, I think, under the leadership of Congressman 
Davis and others, put together an IG for the Metro system. And 
I am thinking of--I want to ask your opinion of passing and 
asking this committee, if we would, to have an IG, inspector 
general, for the Airport Authority so that once your people 
give their report, which will print sometime in May, June, July 
of this year, then there would be a clean slate and we would 
then have an IG on the Airport Authority who could make sure 
that this thing was run appropriately.
    So the Congress I think, maybe when you were here did an IG 
for Metro. What are your thoughts on having an IG?
    Secretary LaHood. You know, I have never really thought 
about that, Mr. Wolf. But I would be happy to visit with you 
about it and figure out if it really makes sense. As you know, 
the Federal government does own the airports but I have never 
thought about it. Can I just say to you, Mr. Wolf, you know one 
of the reasons we got involved in the Dulles line was because 
of you and your support for this.
    For the rest of the Committee, this is the connection for 
people in Washington to Dulles International Airport. And it is 
not just people that are flying in and out. It is for a lot of 
people who work there and a lot of people who work along the 
corridor. This is really the completion. This line could become 
a model for the country in terms of how it is funded, the 
number of people it will deliver. And so I want to thank you, 
Mr. Wolf, and members of your delegation for really hanging in 
there and making sure that we get it right. It is a very 
important project. It completes the Metro system in this area.
    Mr. Wolf. It does. Well, I thank you for your comments and 
I hope that there could be a LaHood station somewhere along the 
way.
    Secretary LaHood. I think the Wolf station is probably more 
appropriate.
    Mr. Wolf. I do not want anything named after me ever. I 
just--just on my tombstone. Anyway, thank you very, very much. 
Mr. Chairman, I yield back.
    Mr. Latham. Thank you. I thank the gentleman. The gentleman 
from North Carolina, Mr. Price.

                               NEW STARTS

    Mr. Price. All right. Well, thank you, Mr. Chairman. 
Welcome, Mr. Secretary. Glad to have you before the 
subcommittee again. I find a lot to like in your budget 
submission. I want to thank you for the emphasis on safety and 
various aspects, on aviation modernization, on high-speed rail 
development. There is a lot here that I hope we can respond to 
in a positive way.
    Also, I want to quickly say thank you on behalf of our 
Department of Transportation in North Carolina for the approval 
of our I-95 proposal for the third and final slot in the 
Federal Highway Administration Interstate System Reconstruction 
and Rehabilitation Pilot Project. That is a very positive 
development for our state.
    In my limited time here this morning, I want to turn to 
transit and to the process for awarding New Starts funding and 
supporting funding to communities undertaking transit 
development. As you know, we have a very strong interest in 
this in the Triangle area of North Carolina. We had some 
disappointments in earlier years, but we are now on board I 
believe.
    Our area transit providers, advocates, the local 
governments do now have a collaborative transit expansion plan 
with the combination of bus and rail service. And on the 
fundraising piece, the local fundraising piece, Durham recently 
approved a half-cent sales tax dedicated to this expanded 
service. And we are hopeful that the other affected 
communities, Orange County, Wake County, hopefully, will follow 
suit.
    We have now submitted a formal Notice of Intent to FTA for 
their okay to let us go forward with the scoping process. And 
we had FTA Administrator Rogoff in the Triangle recently to 
check out the whole situation. So we are hopeful.
    I wonder if you could tell us from the Secretary's 
perspective what kind of efforts you have had underway and 
anticipate developing to streamline this process? I know we 
have all talked about that, streamlining the process of 
applying for transit and light rail funds, and to diversify the 
criteria that you are looking at. You know, there are many 
approved projects that really are not new starts but are simply 
extensions to older lines. That is a good thing, I am sure, for 
those communities because they have made this work and they 
want to make it work in an expanded area.
    But we do need for emerging communities growing areas, like 
the one I represent, to be able to get started on building new 
infrastructure. There are economic development considerations. 
There are maybe some particular qualities of these communities 
that would require some flexibility in terms of applying the 
usual models. So I wonder what kind of ideas you would have 
about how we can help growing areas like ours with truly new 
starts, what this process.
    Secretary LaHood. Sure. It is a very important program that 
we have implemented. Our transit administrator, Mr. Rogoff, has 
put out an NPRM which is on our website and it really gives us 
an opportunity to show people, we are trying to really shorten 
the time that it takes. Almost from the very first day on the 
job here, I have had Members of Congress on both sides of the 
rotunda ask me why it takes 12 or 13 or 14 years to get a New 
Starts Project approved.
    It is too long. We have short-circuited it. We still are 
going to have good criteria, but we need to move things along 
and we need to short-circuit and eliminate the duplicative 
things that take place, procedures that take place, and we 
intend to do that. If you look on our website, and I will be 
happy to provide it for the record, the way that Mr. Rogoff 
really--I think has figured out a way to make sure that we are 
doing it by the book, but that it does not take 12 years.
    [The information follows:]

    In June 2010, FTA began a new rulemaking process by publishing an 
Advanced Notice of Proposed Rulemaking (ANPRM) to update the New and 
Small Starts evaluation and rating process to better capture the wide 
range of benefits transit can provide, including specific questions on 
how to measure and evaluate cost effectiveness, economic development, 
and environmental benefits. FTA reviewed the comments received on the 
ANPRM and developed a Notice of Proposed Rulemaking (NPRM), which was 
published in late January 2012.
    The NPRM seeks to balance the goals of measuring a wider range of 
transit project benefits and establishing measures that streamline the 
project development process. FTA aims to change the current system in 
which the measures used to determine the project justification or local 
financial commitment are so complex that they create an unnecessary 
burden for project sponsors or the agency. FTA wants a system and set 
of measures that are not difficult to understand, and which can instead 
foster effective public involvement. The simplified measures and 
streamlined process could save both the federal government and 
taxpayers millions of dollars annually by allowing approved projects to 
begin construction sooner, thereby creating savings in finance charges 
and other construction costs.
    The key features of these changes include:
     Use of a broad set of more objective measures, including 
environmental benefits and a project's impact on local economic 
development. FTA proposes to give these measures equal weight in 
project justification evaluations.
     Establish measures that support streamlining of the New Starts 
and Small Starts project development process, including:
         Use of project ridership instead of user travel time 
        savings as a streamlined measure of mobility;
         Streamlined analytical methods to develop the 
        information needed by FTA for project evaluation and rating;
         Simplified and more clear-cut comparisons for 
        incremental measures; and
         Revised local financial commitment criteria to address 
        more clearly the strong interaction between capital and 
        operating funding plans.
    Through these changes, FTA proposes a more holistic evaluation of a 
project's potential benefits to a community while maintaining rigorous 
scrutiny of proposed major capital projects. It will allow FTA to 
reduce red tape and approve projects that are more reflective of a 
local vision rather than only those that fit a rigid, outdated set of 
criteria.

    Mr. Price. Well, and then the question--I appreciate that 
and I think it is extremely important and very promising. There 
is also this question which I alluded to about what exactly by 
the book means. And I have said all along, I would gladly trade 
a reduced Federal percentage, you know, a reduced Federal 
participation, for greater flexibility in looking at these 
proposals and working with these communities.
    Secretary LaHood. Sure. Well, we are trying to find the 
flexibility and not really cutting short people's money to do 
it. We can have it both ways, really. We can eliminate some of 
these duplicative procedures and still get to the goal of 
proving these funds, but doing it in a shorter period of time.
    Mr. Price. All right. Well, that is good news. And we look 
forward to working with you. Thank you, Mr. Chairman.

                         TRANSPORTATION PAY-FOR

    Mr. Latham. Thank you, gentlemen. We will go to the second 
round. Again, we expect votes probably in a half-hour, so if we 
could expedite the process, that would be wonderful.
    It is interesting with the offsets that you are using the 
OCO funds. If we remember, Mr. Obey, our former chairman of the 
full committee, and every time we would have a budget he would 
either want to raise taxes or borrow to pay for the war 
funding.
    He said that money is not there. You either have to borrow 
it or raise taxes. Even Mr. Obey agreed that there was no money 
there to use for an offset for this program. So I just throw 
that out there. I do not know if you have any comment.
    Secretary LaHood. Did you ever think you would be quoting 
Mr. Obey, Mr. Latham? I never dreamed you would.
    Mr. Latham. Well, you know.
    Secretary LaHood. But anyway, look, I know you all would 
like to have it both ways. I know that for two years, I have 
come here and you have criticized me and you have said where is 
the pay-for? And I have had no answer. This year I have an 
answer. It is paid for and it is scored by CBO and you still do 
not like it. Look at this as a no-win deal for me. I get it. 
Okay?

                       PIPELINE SAFETY INSPECTORS

    Mr. Latham. God bless you, Ray. Okay. Let us change the 
subject then, shall we? Okay. You are keenly aware that it is 
not easy to enact new laws around here, but we did get the FAA 
and Pipeline Safety bills completed and signed by the President 
just a few months ago.
    Your budget request proposes some program levels that are 
well above the authorized levels. Would you agree with me that 
the authorized levels are now the law and should govern the 
funding decisions or are you sticking with your proposal?
    Secretary LaHood. The one thing I do not want to compromise 
on is when you pass the Pipeline Safety Bill, you increase the 
number of inspectors. That is very, very important. I visited 
San Bruno and I also visited Pennsylvania, both places that had 
explosions. When you go to those communities, what you find is 
that people are startled by the fact there is an explosion in 
their front yard. We need more inspectors. You all put that in 
the bill, and it is a good provision.
    Mr. Latham. Right. But that was for 10 more inspectors. In 
your budget, you are talking about 100 more, which is well 
beyond the authorized levels. So you are staying with your 
budget proposal apparently, even though this was just signed 
into law by the President. Now you are already going way beyond 
what the President signed.
    Secretary LaHood. Yes, I know. Look, part of my job is to 
recommend to all of you what we need. We need more inspectors 
in pipeline safety. That has been a problem. No administration 
has paid the kind of attention we have paid to pipeline safety. 
And not one of you on this panel wants to have an explosion in 
your community and then have somebody say well, these have not 
been inspected for 100 years or whatever. That is what we are 
trying to do. This is about safety.
    Mr. Latham. There are 12 unfilled positions--there are 13 
unfilled positions right now for inspectors. Were you not aware 
of this when the bill was signed into law?
    Secretary LaHood. Unaware of the fact there were 12 
unfilled positions or 13 or whatever?
    Mr. Latham. Well, 13, and now you say you need all these 
additional ones. I mean, the ink is not even dry on this and 
you are already----
    Secretary LaHood. Well, look, I am not going to compromise 
on safety. If you want to, that is fine. We need more 
inspectors. And what we need to do is find people--this is a 
complicated inspection job. This is not like going out and 
looking at a fire hydrant or looking at your water heater to 
see if everything is okay. These pipelines are in the ground. 
They are over 100 years old. Many of them need to be replaced. 
You need to have the right people. So we are going to find the 
right people. We need to get the right number. We need to make 
sure that communities that have pipelines running through 
people's front yards are inspected so that we do not have these 
explosions. That is what this is about.
    Mr. Latham. I could not agree with you more, but it is 
frustrating that we just signed a bill into law that limits 
what we can spend, and you are going way beyond that here. This 
is the President's proposal and it is a bill the President just 
signed.
    Mr. Olver.

                         TRANSPORTATION PAY-FOR

    Mr. Olver. I have tried very hard not to get into a debate 
with the Secretary about anything today, but I have enjoyed 
very greatly the conversation today. I am very sorry. It has 
been rumored that you may go out the door with Norm Dicks and 
myself at the end of this year, and that would be a tragedy for 
the country because you have done such a wonderful job, I 
think, as secretary of transportation. I just want to start out 
by saying that.
    Secretary LaHood. Thank you.
    Mr. Olver. Oh, my goodness. At least you come back, and we 
had gotten back into the OCO business again. The OCO at least 
has the feature that the one war, the war of choice in Iraq, we 
have wound down and are really getting to low levels. The other 
one, which was the one that stuck around for a long time was 
basically forgotten for a long time. That is going on far too 
long. But if we get down on that one, we will have some monies 
that are clearly available, and your administration has decided 
that that is where they are going to put it. Our chairman here, 
I do not want to get into a debate with him either 
particularly, but here I am starting.
    The pay-for is in the bill that was proposed and now is put 
aside. The papers for that were even more imaginary by far than 
the pay-for that you have put forward because we are winding 
down; those wars are ending.

                                 PORTS

    Now, I want to move on to just a short comment about the 
conversation with Mr. Carter. You made the assertion that this 
administration has put more money into port-related facilities 
than any. I do not know how far you wanted to go back, whether 
you meant going all the way back to 1790 or what. But in any 
case, I just want to give a little bit of statistics here. You 
have done about 15 or 16 projects out of the TIGER grants that 
come to at least $250 million that cover the landside part of 
the proper movement of freight that is necessary for an economy 
to function. The other side of it, the water side, comes out of 
a different subcommittee. It comes out of Corps of Engineers in 
the Energy & Water Committee, which we both happen to serve on 
also. And if I remember, if I understand it correctly, you have 
an MOU with the Corps of Engineers so that there will be 
cooperation, collaboration, and so forth on other of these 
flexible grants that come through TIGER grants. I am just 
supporting very strongly the TIGER Grant Program at the same 
time. But would you talk about that MOU?
    Secretary LaHood. Well, look, one of the common complaints 
that we hear from our friends in the ports is that they need to 
be dredged in order to be effective. I visited the Savannah 
port in Savannah, Georgia. It needs to be dredged. I have 
obviously visited a lot of ports. I have been to a lot of ports 
around the country. Every one of them needs to be deeper in 
order to accommodate what is going to be happening at the 
Panama Canal with the expansion of the canal.
    What some governors are suggesting to the administration is 
the use of the Harbor Maintenance Tax, at least part of it, 
because dredging is so expensive and there really is no money 
to do that. I think that is one thing that this working group 
that the President put together under the Chief of Staff 
certainly will be looking at. Dredging these ports now is very 
important in order to accommodate the big ships that are going 
to be coming through with the expansion of the Panama Canal.
    Mr. Olver. I think we really must articulate the land, the 
rail, and truck transportation systems with the water and port 
systems. I think that is very important.
    Secretary LaHood. Right.

                                NEXTGEN

    Mr. Olver. Now, let me just quickly--your budget includes 
over $1 billion for the Federal Transportation's NextGen 
program. And that, of course, is the program to change our 
pretty ancient air traffic control system, a low technology 
system, from a ground-based system to a satellite-based system. 
And that is a multiyear--we already spent a fair amount of 
money on that. Can you give us some sense of what with the 
money spent has really been accomplished at this point? What 
are the best examples of the advances that we have made that 
really highlight what is achievable with the NextGen system?
    Secretary LaHood. We have opened up some opportunities 
around the Gulf, around the Houston area, and the availability 
of helicopters to fly around that area. There are a couple of 
communities where we have begun to implement the models for 
NextGen, and I will be happy for the record to get that to you. 
We have made some progress, but now that you all have passed 
the FAA bill and it has been signed, we have the resources and 
we have the capability to really launch this and continue to 
make a lot progress over the next four years.
    [The information follows:]

    In a continuous rollout of improvements and upgrades, the FAA is 
building the capability to guide and track air traffic more precisely 
and efficiently to save fuel and reduce noise and pollution.
    NextGen integrates new and existing technologies, creates policies 
and procedures to reduce delays, save fuel and lower aircraft exhaust 
emissions to deliver a more reliable travel experience.
     Examples of the considerable progress NextGen has already 
achieved include:
     Automatic Dependent Surveillance-Broadcast (ADS-B): The FAA 
has rolled out over 339 radios providing ADS-B service, with a target 
of 500 by the end of FY 2012 and all 800 in place next year, providing 
satellite-based surveillance coverage of the East, West, and Gulf 
coasts and most of the area near the U.S. border with Canada.
     Performance Based Navigation Routes: The FAA substantially 
increased the number of Performance Based Navigation (PBN) routes and 
procedures available. PBN provides direct routes, which save time, 
fuel, and reduce aircraft exhaust emissions.
     System-Wide Information Management (SWIM): The program is 
providing weather information to our users in formats that can be 
easily used in their systems in an effort to improve our joint planning 
for bad weather. In addition, we are providing surface traffic 
information from all major airports where our Airport Surface Detection 
Equipment Model-X (ASDE-X) system is deployed. This is a surveillance 
system using radar and satellite technology that allows air traffic 
controllers to track surface movement of aircraft and vehicles to help 
reduce critical runway incursions.
     NextGen Tools for Controllers: FAA is rolling out tools for 
air traffic controllers. New systems help air traffic controllers 
better track the spacing between aircraft lined up for final approach 
during periods of reduced visibility, as well as predict periods of 
potential congestion. These new systems help us optimize aircraft 
routing and better manage ground delays.

    Mr. Latham. I am glad after the light went red you finally 
got to a question.
    I understand the gentleman from Kentucky does not have any 
questions?
    Mr. Rogers. No, no further questions.
    Mr. Latham. Okay. In order of appearance here, Mr. Carter.

                              TIGER GRANTS

    Mr. Carter. Thank you, Mr. Chairman. And I want to thank 
Mr. Olver for the clarification. I was a little confused. I was 
looking at the--I actually have a list of the TIGER grants that 
you mentioned. All three were rail projects: one in the Gulf 
Coast and two others on the West Coast and East Coast. But I am 
glad we all are on the same team.
    Secretary LaHood. Sure.
    Mr. Carter. We have to fix those ports.
    Secretary LaHood. Sure.
    Mr. Carter. And the question I asked last time were CFRs, 
after we got through asking our questions, we asked them in 
March, we got the answer in August.
    Secretary LaHood. Sorry about that.
    Mr. Carter. A couple of things I want to ask you about. 
Fuel economy mandates.
    Secretary LaHood. Yes.

                          FUEL ECONOMY MANDATE

    Mr. Carter. According to a recent study and an analysis of 
the government's fuel economy and mandate, this will average 
$3,000 a vehicle for every vehicle built anywhere in the world 
that is going to be sold in this country. This is going to 
prevent, according to this study, 6.8 million drivers from 
being able to qualify to buy an automobile. Therefore, they are 
not going to be on the roads. Therefore, they are not going to 
be paying the fuel tax. Therefore, we are losing revenue. Do 
you have any opinion about the rationale of preventing 6.8 
million Americans by regulation--meanwhile the President just 
announced he is going to up the government tax credit on the 
vote from $7,500 to $10,000, and on this Fisker Karma and Tesla 
Roadster, which means I might as well be speaking a foreign 
language. I do not know what that is, but it is going to raise 
it. We have a $7,500 tax credit on two cars that cost $95,000. 
Now, how does all that make sense as we are battling how we are 
going to pay for our transportation, and we are pushing people 
off paying the tax?
    Secretary LaHood. Well, let me stipulate, first of all, 
that no administration, no President, has done more for the 
American automobile manufacturer than this President.
    Mr. Carter. Granted.
    Secretary LaHood. Thank you. We will not have to have that 
debate then. Your figures are correct that there will be an 
increase in automobiles by 2025 with the increase to 54.5 miles 
per gallon, but it will be made up by the savings in the cost 
of gasoline for people that will be driving those automobiles. 
So the one figure is correct, but you need to make sure you 
understand that there will be a cost savings on the other end 
by the amount of fuel that people will not be using in these 
more fuel-efficient automobiles. That is part of the 
calculation.
    Mr. Carter. I understand it, but it is really kind of 
Catch-22 when we are getting our money from burning gasoline to 
pay for the highways, and we are building fuel-efficient cars 
pushing people out of the market, and then we are wondering why 
we do not have the funds for the highways. It is sort of a 
Catch-22, if you ever read that book.
    Another question I have to ask you for the sake of my God-
fearing farmers in Texas. The Department of Transportation 
recently set forth some comments about causing or wanting to 
require our Agriculture workers on the farm to have commercial 
drivers' licenses. I know you backed off of that, but it is 
still being pondered very heavily in the Agriculture community 
about what the rationale was for having tractor drivers on the 
farm have to have a commercial driver's license.
    Secretary LaHood. Look it, Judge, when I was here, for 14 
years my district was largely an agricultural district. When I 
heard about that, I put a stop to it. Nobody at DOT is talking 
about that anymore.
    Mr. Carter. That is what I want to go home and report. 
Thank you, Mr. Secretary.
    Secretary LaHood. Thank you.
    Mr. Latham. I thank the gentleman. The gentleman from North 
Carolina, Mr. Price.

                   HIGH SPEED RAIL AND TIGER FUNDING

    Mr. Price. Thank you, Mr. Chairman. Mr. Secretary, let me 
return to the topic of high-speed rail. Your budget requests $1 
billion to supplement the funding that was provided for high-
speed rail in the Recovery Act and the fiscal 2010 
appropriations bill. Unfortunately, as you know, the 2011 and 
2012 bills did not include specific funding for high-speed 
rail. However, the TIGER grant program does permit some funding 
for that purpose.
    So let me just ask you a group of interrelated questions. 
First, can you give us an update generally as to the projects 
that are underway with the previously appropriated dollars? Do 
you in particular expect the California project to move 
forward? Your recent TIGER NOFA indicated that as much as $100 
million of the fiscal 2012 TIGER funding will be available for 
high-speed rail projects. Now, those preapplications are in I 
expect. I would like to know what level of interest you found 
in high-speed rail projects. And then finally, what more 
generally can you tell us about the ongoing interest of states 
and localities and further investments in high-speed rail?
    Secretary LaHood. Well, first of all, let me say this. 
There is a pent-up demand in America for high-speed intercity 
rail. We have put out $10 billion, over $3 billion in 
California, over $2 billion in Illinois. We have put some money 
out in some of your states because of the leadership in your 
states. The people are way ahead of some members of Congress on 
this. The people want high-speed intercity rail.
    We did put out the idea that we might use up to $100 
million of our TIGER money for high-speed intercity rail, and 
the requests came in at $1 billion. So the country wants high-
speed rail. That is not because Ray LaHood says it. That is 
because of what they just requested. Those requests just came 
in for the TIGER money.
    We have great partners in governors all over the country, 
and the people want this because they are tired of being in 
congestion. They want a good form of transportation, and that 
is what high-speed intercity rail does. It is the next 
generation of transportation for the next generation. It is not 
for us. It is for our kids and grandkids. This is the 
President's vision, but it is also the country's vision.
    And again, the people are way ahead of a lot of elected 
officials and politicians when it comes to high-speed rail.
    Mr. Price. Well, I can certainly attest to that from a 
North Carolina standpoint. I wonder if you could give us 
anecdotally and then maybe provide more systematically for the 
record an answer to my first query about the state of these 
projects across the country, projects that are underway with 
the previous----
    Secretary LaHood. Just generally, there are no projects 
that are stalled. We have reached agreements with just about 
every freight railroad that we needed to, the states have, to 
be able to use freight rail. In California, they will begin 
construction soon. In Illinois, there are all kinds of rail 
work going on with the money we have given. We just gave Amtrak 
almost $1 billion to buy new cars, to fix up catenary. We are 
doing some great work in some of your states, but I will give 
you the specifics.
    [The information follows:]

    The table below shows the status of the High-Speed and 
Intercity Passenger Rail (HSIPR) grants as of March 19, 2012. 
FRA distributed over $10 billion from three sources (FY 2009 
Recovery Act, FY 2009 Intercity Passenger Rail Grants, and FY 
2010 HSIPR) to states and other entities for passenger rail 
projects in six regional corridors. Of the total, 95 percent 
has been obligated. The table shows the total funding profile 
for each corridor along with a summary of activities and 
funding amounts in progress.
[GRAPHIC] [TIFF OMITTED] T4711A.006

[GRAPHIC] [TIFF OMITTED] T4711A.007

    Secretary LaHood. The $10 billion is starting to be spent. 
This not only creates jobs, it creates the next generation of 
transportation for America. It is what this generation will do 
for the next generation when it comes to transportation.
    Mr. Price. And as you say, the pent-up demand is there. 
When you say $1 billion in applications through TIGER----
    Secretary LaHood. Correct, for $100 million.
    Mr. Price. That is $1 billion for high-speed.
    Secretary LaHood. Just for high-speed intercity rail.
    Mr. Price. All right, that is my question. That is just for 
the high-speed rail component of those applications.
    Secretary LaHood. That is correct.
    Mr. Price. All right, very convincing.
    Secretary LaHood. And when Florida decided to turn their 
money back, $2.5 billion, we had $10 billion worth of requests.
    Mr. Price. All right, thank you. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, gentlemen. Mr. LaTourette.

                         TRANSPORTATION PAY-FOR

    Mr. LaTourette. Thank you, Mr. Chairman. Mr. Secretary, I 
want to be real clear in case you did not get my observation 
about your pay-for before. I will tell you that it is fake, it 
is phony, and it is disappointing. And even if it was not fake 
and phony, it still relies upon a general fund transfer to pay 
for something that has always been funded with user fees. It is 
the exact same problem we have with the Mica bill: It increases 
pension contributions on Federal employees to create $40 
billion to plug a hole. Even if the money that you are 
suggesting is real, it is a general fund transfer to plug a 
hole rather than fixing the problem.
    And when Judge Carter talks about the fuel efficiency 
standards--my good friend, Jeff Davis, who writes this 
transportation weekly and who knows a lot more about this than 
I do--the gas tax when President Clinton initiated the increase 
in the gas tax in 1993, the purchasing power was when every 
mile you drove on the highway, that gas tax translated into 
about seven-tenths. You were paying about seven-tenths of a 
penny to drive. Now because of alternative energy things--
electric cars, all these cars--that moving away from purchasing 
gas tax, the ethanol subsidy, it is down to about half of a 
cent. With the new fuel efficiency standards that the 
administration has proposed, it will be down to .25 cents. 
There is no way that the math works unless you pivot to vehicle 
miles traveled or unless you raise the gas tax or unless you 
come up with some other solution. Your pay-for, even if real, 
which it is not, does not solve the Nation's long-term problem.
    And I said some things about the Mica bill, and I want to 
be clear. I understand where that came from. Where it came from 
was Secretary Peters' argument that you have all these 
diversions from the trust fund and people are not contributing 
to it, so you need to take it out. I could not disagree more 
with that.
    I happen to be a transportation enhancement proponent. I 
happen to think transit is good. And the short-sightedness of 
the current bill on transit was that people said, well, transit 
does not participate in the trust fund. They do not pay any 
money in, so let us just take them out. And after five years 
they can jump off a cliff and good luck to them, and I hope you 
can still have buses and trains in this country.
    But that failed to recognize that if my transit authority 
gets $5 million as a result of that 2.86 cents, it is not just 
$5 million. They are able to take that guarantee of 2.86 cents 
to Wall Street or to the bank and leverage it 10, 15 times. 
That is what funds transit in this country. We have to fix the 
problem.
    And with all due respect to you because I am so fond of 
you, your pay-for does not fix the problem. And if the 
President is reelected or if there is another President who 
happens to be elected in November, somebody really has to have 
the courage to either fix this or--and I never thought I would 
be a fan of this. We have some voices in our conference that 
want to just devolve all this back to the states. If we are not 
going to be serious, and if we are not going to have a trust 
fund that is funded with user fees in a way that is sufficient 
to take care of our needs so we do not have the D bridges and 
the F highways, we should just send it all back to the states 
and let them do what they have to do. But for us to sort of 
limp along and perform in this shameless way with 10-year pay-
fors, general fund transfers, rather than facing up to the 
issue, I really think it is sad, Ray.
    And I have to tell you, the blame does not lie with your 
administration solely. It lies with the Republicans and the 
Democrats and the House and the Senate and previous Presidents. 
But for you to come here today and say that, okay, we beat you 
up for two years and now you have this great pay-for, it does 
not pass the straight-face test and I am sorry we are having 
this discussion.
    Mr. Latham. Gentleman, yield back?
    Mr. LaTourette. I am about done with that I think.
    Mr. Latham. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Nothing at this time.
    Mr. Latham. Mr. Womack.

                         TRANSPORTATION PAY-FOR

    Mr. Womack. I am not going to go into a monologue about how 
I feel because I associate myself with some of the remarks that 
were up here, maybe not all of them. I, too, believe that OCO 
is a gimmick. It is borrowed money, and I have problems with 
using that as a pay-for.
    But I just wanted to ask you, Mr. Secretary, that given 
what Mr. LaTourette has said and others--the distinguished 
judge here from Texas--with these fuel-efficient standards and 
electrification and who knows what is next, how do we fund 
transportation infrastructure in the future?
    Secretary LaHood. Well, we have made a proposal. Obviously, 
some of you do not think it is real, but it is real. It has 
been scored by CBO. Some people like when CBO scores things and 
some people disagree with it. Look, you cannot have it both 
ways here. I know people here like to have it both ways because 
I have been in those chairs. I loved having it both ways. For 
two years you said where is the pay-for. Guess what? We 
provided one. If you do not like it, figure something else out. 
You will all work your will. You always do.
    But we have put together as good a budget as has been seen 
around here for a long time, $500 billion. And what it does, it 
addresses the values, the transportation values of the American 
people--airports, rail, roads, bridges--and it puts a lot of 
Americans to work. It is a good budget and it is paid for. If 
you do not like the pay-for, have at it.

                        ARKANSAS TRANSPORTATION

    Mr. Womack. Let me just finish by thanking you. I think it 
was last July, you came down to Northwest Arkansas and spent 
some time on the I-49 project in the Greater Northwest Arkansas 
Area, and I want to thank you for taking time out of a schedule 
to come down there and see. And I hope that by that visit you 
were able to see that--and I have to brag on our state because 
our state is investing a lot of its own resources into 
leveraging the Federal dollars that we get to address some of 
the major transportation concerns.
    Later this year our state will vote on a tax increase to 
support infrastructure in our state. Without offering an 
opinion as to whether that is a good idea or a bad idea, the 
fact is the state has recognized that our ability to develop 
infrastructure in the future and economic development programs 
relies on our having skin in the game. And so I commend our 
state for at least having that desire.
    Secretary LaHood. I agree with that. You have great 
leadership. I just saw your governor at the meeting that they 
had here. He and I spoke about that project and a few other 
things. Your two senators have talked to me often about 
transportation. You have a lot of good leadership in your 
state, including yourself, sir, and we look forward to working 
with you.
    Mr. Womack. Thank you very much for your time today. I 
yield back.

                           CLOSING STATEMENTS

    Mr. Latham. The gentleman from Massachusetts. We are not 
going to have another whole round here. We will try to conclude 
the hearing, but if the gentleman would like 30 seconds.
    Mr. Olver. I will need much less than that. I just wanted 
to thank you.
    Mr. Latham. Thank you. Are there any other questions right 
now? If not, thank you very much, Mr. Secretary, and look 
forward to working with you.
    Secretary LaHood. Thank you. Yes, sir. Thanks a lot, 
appreciate it.
    Mr. Latham. Meeting is adjourned.

    [GRAPHIC] [TIFF OMITTED] T4711A.008
    
                         Wednesday, March 21, 2012.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                WITNESS

HON. SHAUN DONOVAN, SECRETARY, DEPARTMENT OF HOUSING AND URBAN 
    DEVELOPMENT
    Mr. Latham. The subcommittee will come to order. Today we 
welcome the Secretary of the Department of Housing and Urban 
Development, Shaun Donovan, to the THUD subcommittee to testify 
on behalf of HUD's fiscal year 2013 budget request. We look 
forward to your testimony, Mr. Secretary. Due to a shortened 
hearing schedule, today is the only opportunity to question the 
secretary. We will hear from HUD's inspector general and the 
GAO later this month regarding HUD management issues.
    The department is requesting authority to spend almost $45 
billion in fiscal year 2013. On its face the budget looks like 
a current services budget, but as with most things, the devil 
is in the details. For example, you state that we should use 
FHA receipts in determining your net spending level. Everyone 
knows this would artificially increase spending and create huge 
cliffs when these receipts go down. I am concerned that we are 
at a tipping point with the amount of renewals overtaking the 
rest of the department's budget. For every 1 dollar you 
increase for public housing, you have to cut $5 from other HUD 
programs. I am interested in seeing how you plan to implement 
the reduction in funding for the Project-Based Rental 
Assistance Program. Your confidence in implementing this change 
will influence our decisions going forward so I expect to hear 
a little more about this in your testimony and upcoming 
questions.
    Another concern I have is the administration's actions 
related to the Federal Housing Administration and FHA loans. It 
seems like you are raising premiums in order to backfill 
reserves and increase budget authority without increasing the 
private market share. CBO's March reestimate of the President's 
budget estimated that the administration's recent 75 basis 
point increase will cost FHA borrowers more than a billion 
dollars in mortgage premiums. However, CBO and OMB assume that 
the administration's recent policies do not do anything to 
drive more people into the private market.
    So the only reason I could think of for the increase is to 
replenish your reserve fund and to use these receipts to pay 
for increased government spending. I think we would all agree 
that this is not the best way to budget.
    Mr. Secretary, as I stated last year, I thank you for your 
service at HUD and thank you for your commitment to address the 
ongoing problems we face. However, it is disappointing to learn 
that there were six reported anti-deficiency violations last 
fall where your department spent more money than it had. This 
is not just bad management but is a violation of the law. So I 
hope this has been fixed and duly investigated.
    To end on a good note, I want to congratulate you and your 
staff for submitting much improved congressional 
justifications. It has taken a while, starting with Mr. Olver's 
direction, but the justifications submitted are substantially 
better and I look forward to your continued improvement in this 
area.
    Again, welcome, Mr. Secretary. It is great to have you 
back. Before I recognize you, I will ask the ranking member, 
Mr. Olver, for his statement.
    Mr. Olver. Thank you, Mr. Chairman. Mr. Secretary, it is a 
pleasure to have you back before us today, the last time that 
you will be before me at least.
    While the recession technically ended almost three years 
ago, hundreds of thousands of families continue to struggle 
with the burden of underwater mortgages in the face of 
institutional intransigence. As the Secretary of the Department 
of Housing and Urban Development, you have embraced the 
challenges and have personally accepted the responsibility of 
helping families facing foreclosure, providing housing security 
to families experiencing economic insecurity and in making 
capital investments in housing infrastructure to create jobs. 
This is an incredibly difficult undertaking and I greatly 
admire your dogged persistence over these years.
    I am particularly pleased to see that your fiscal year 2013 
budget request continues to embrace the VASH homeless veterans 
program by providing $75 million for an 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 streets. More 
generally, the budget also requests $2.2 billion for the 
Homeless Assistance Grants Program in order to address the 
broader homeless population. The administration has made 
reducing homelessness a priority and this robust request 
reinforces that commitment.
    In addition, I am pleased to see that the fiscal year 2013 
continues HUD's commitment to the Sustainable Communities 
Initiative. Through this initiative HUD has been a leader in 
promoting interagency cooperation and breaking down the 
stovepipes that stifle innovative planning. Like you, I 
strongly believe that federal dollars are most efficiently 
utilized when local communities have the resources and 
flexibility to determine what the right investment mix of 
housing, transportation and infrastructure is for their 
community in order to foster job growth. I also look forward to 
hearing more about your proposal to combine the public housing 
capital and operating funds and how it will strengthen PHAs by 
modernizing asset management practices and improving their 
ability to maintain, operate and expand housing services 
efficiently.
    While there are many aspects of your budget request that I 
appreciate, I must express concern about your proposal to fund 
two-thirds of the project-based Section 8 contracts for less 
than a full year. We experienced this with the previous 
administration and I am interested in better understanding what 
lessons you learned from the previous administration's mistakes 
and how you plan to ensure that tenants are held harmless by 
the proposal.
    Lastly, in past years I have expressed concerns about the 
wide discrepancy between HUD's and CBO's FHA receipts 
projections and the constraints it puts on this subcommittee. I 
am pleased to see that this year's CBO estimates were $1.7 
billion higher than HUD's and it should strengthen our ability 
to provide robust resources for HUD's programs.
    Mr. Secretary, in conclusion while I wish the current 
fiscal environment would allow you to request higher capital 
funding levels, I do believe the request allows HUD to 
contribute to our economic recovery. I greatly appreciate your 
leadership over the past three years and I am committed to 
working with you toward our shared goal of strengthening HUD's 
ability to provide affordable housing.
    Mr. Chairman, I yield back.
    Mr. Latham. Thank you, Mr. Olver. I want to recognize also 
that this is the last hearing you will have with the Secretary, 
and thank you.
    Mr. Olver. I should not have mentioned that, should I?
    Mr. Latham. You could change your mind. A great partner 
there. After the Secretary's testimony we will have rounds of 5 
minutes on the clock. With that, we would invite you to make 
your opening statement. Your full written statement is included 
in the record. So, you are recognized for 5 minutes.

                  Secretary Donovan's Opening Remarks

    Secretary Donovan. Thank you, Chairman Latham and Ranking 
Member Olver, for this opportunity to testify today. I do want 
to thank you, Chairman, for the cooperative way our teams have 
worked together and appreciate you recognizing the improvements 
that we have had in submitting our budget this past year. I do 
want to thank the ranking member for his service and appreciate 
the way that we have worked together so well. You will be 
missed very much in this body, so thank you.

                        HOUSING AND COMMUNITIES

    Today I would like to discuss how HUD's fiscal year 2013 
budget proposal is essential to creating housing and 
communities built to last and will support 700,000 jobs. Mr. 
Chairman, in developing this proposed budget, we followed four 
principles. The first is to continue our support for the 
housing market while bringing private capital back. The 
critical support FHA provided the last 3 years has helped 
nearly 2.8 million families buy a home and more than 1.7 
million homeowners refinance into stable, affordable products 
with average monthly savings of more than $125. At the same 
time, we have taken the most significant steps in FHA history 
to reduce the risk to taxpayers and reform FHA's mortgage 
insurance premium structure. With premium increases of 10 basis 
points recently enacted by Congress coupled with additional 
premium increases on jumbo loans reflected in the budget, FHA 
projects to add an additional $8.1 billion in receipts to the 
capital reserve account in 2013. And 2 weeks ago we announced a 
series of premium changes that will increase receipts to FHA 
above those already in the budget by 1.48 billion in fiscal 
years 2012 and 2013. We have also taken steps to increase 
accountability for FHA lenders and continue to seek expanded 
authority via legislation that will further enable us to 
protect the fund, as will the recent settlement with some of 
America's largest banks through which FHA will receive 
approximately $900 million to compensate for losses associated 
with loans originated or serviced in violation of FHA 
requirements.
    With FHA's market share declining since 2009, these reforms 
will further help private capital return while ensuring that 
FHA remains a vital source of financing for underserved 
borrowers and communities.
    Overall, HUD's budget request is $44.8 billion in gross 
budget authority. This program funding level was offset by $9.4 
billion in projected FHA and Ginnie Mae receipts at the time 
the budget was submitted leaving net budget authority of $35.4 
billion or 7.3 percent below the fiscal year 2012 enacted level 
of $38.2 billion. However, because of premium increases I just 
mentioned, the administration now projects that the cost to the 
taxpayer of this budget is offset by an additional $894 
million, more than meeting our deficit reduction targets while 
still allowing us to improve oversight of our core programs. As 
you know, the Congressional Budget Office has just provided the 
committee with its own scoring of receipts which is a total of 
1.77 billion higher than the President's submission.

                    IMPROVING HUD'S HOUSING PROGRAMS

    The second principle we used to develop our budget was to 
protect current residents and improve programs that serve them. 
The 5.4 million families who live in HUD assisted housing earn 
$10,200 per year on average and more than half are elderly or 
disabled. That is why 83 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.
    As you know, inflation and stagnant incomes put real 
pressure on the cost of these programs each year. This year we 
redoubled our efforts to minimize and even reverse these 
increases not just for this year but in the years to come. For 
instance, we are working to enact Section 8 reform legislation 
that would save $1 billion over the next 5 years while also 
supporting the ability of PHAs in small towns and rural areas 
to better serve the working poor. The budget also achieves 
savings in the Project-Based Rental Assistance Program by 
improving oversight of market rent studies, capping certain 
annual subsidy increases and offsetting excess reserves.
    I would note that should Congress fail to come to an 
agreement within the framework of the Budget Control Act the 
sequestration that would result, by design bad policy, could 
well mean that some of the families now receiving HUD rental 
assistance would be put out on the street and undo virtually 
all of the progress we have made toward ending homelessness. 
Further, struggling homeowners across the country would not get 
the housing counseling needed to help them stay in their homes 
and communities of all sizes would lose funds they count on to 
build infrastructure and create jobs.
    Already, protecting current families required us to make 
choices we would not have made in a different environment. 
Requesting $8.7 billion for the PBRA program allows us to serve 
the same number of families, but it required us to provide less 
than 12 months of funding for the majority of our contracts. In 
addition, even though the budget maintains hardship exemptions, 
the budget raises minimum rents throughout our core rental 
assistance programs to a uniform $75 per month. These difficult 
decisions are the kinds of sacrifices this budget environment 
has already forced us to make and I would urge Congress to pass 
the kind of balance deficit reduction the President has 
proposed to avoid putting an even greater share of this burden 
on our poorest families.
    Indeed, the need to stretch federal dollars further even 
further reminds us why our third principle, continuing 
investments that leverage private dollars and create jobs, is 
so important. Through our Choice Neighborhoods Program we are 
helping communities engage a broad range of public and private 
partners to transform our poorest neighborhoods and ensure our 
children are prepared for the 21st century economy. As the 
President said, if we are going to compete with China and 
India, we cannot leave anyone on the sidelines. Likewise, our 
Sustainable Communities Grants challenge communities to 
creatively use existing resources that help them in-source and 
bring jobs back to our shores. Memphis is using HUD's Community 
Challenge Grant to more effectively invest federal and state 
resources in neighborhoods surrounding its international 
airport. FedEx has already created over 300,000 new jobs, and 
companies like Electrolux and Nucor Steel are poised to create 
another 1,500. And by ensuring grantees can collaborate not 
only across sectors and jurisdictions, but state lines to align 
their housing, transportation and economic development 
strategies, this growth benefits not only Tennessee but its 
neighbors in Arkansas and Mississippi.
    Interstate planning is particularly critical to smaller 
places. Nebraska and Iowa, Idaho and Wyoming and the Pine Ridge 
Indian Reservation are but a few examples of rural and tribal 
economies using regional planning grants which I would note 
flow not through their states but directly to them. And at a 
time when the fiscal environment has required us to make tough 
choices about CDBG, dollar for dollar the most effective job 
creators in our budget, these grants are essential because they 
leverage the limited resources of core programs even smarter 
and more efficiently.

                      REDUCING REGULATORY BARRIERS

    Indeed, reducing regulatory burdens and increasing 
efficiency is the fourth principle we used to formulate this 
budget. For example, the budget provides flexibilities to PHAs 
to better manage in this fiscal environment, and to hold our 
partners accountable for the funding they receive it also 
continues our Transformation Initiative. With your help, we are 
both continuing the next generation management system that will 
improve monitoring and oversight of our largest rental 
assistance programs and launching a crosscutting technical 
assistance initiative targeted to PHAs so that they have the 
capacity to manage their budgets. TI research will also allow 
us to propose increased investments in programs we know work 
like permanent supportive housing and rapid rehousing, end 
homelessness and save money. That is why even in this difficult 
fiscal environment we propose additional funding for homeless 
assistance grants and the HUD VASH program for homeless 
veterans ensuring we can end chronic and veteran homelessness 
by 2015. All told, despite tough choices, this proposed budget 
allows us to serve 27,000 more vulnerable families. It 
recognizes that the recovery of our housing market is essential 
to our broader economic recovery and it expresses our belief 
that every American should get a fair shot, do their fair share 
and play by the same rules.

                         SETTLEMENT WITH BANKS

    Mr. Latham. Thank you, Mr. Secretary. The settlement 
between some of the Nation's largest banks and the 
administration, close to a billion dollars, you said 900 
million, will go to the Federal government to repay public 
funds lost as a result of servicer misconduct. Did FHA pay 
claims on mortgages insured by the agency due to servicer 
misconduct? If so, how much? What were the costs?
    Secretary Donovan. What we did to arrive at that settlement 
amount is both on the servicing side. And the origination side 
starting in the summer of 2010, we began an intensive 
investigation of our five largest servicers and in each case, 
both on the origination and servicing side where we settled, we 
looked at thousands and thousands of files to arrive at a 
statistically significant number that gave us confidence we 
understood in the broader portfolios what share of loans were 
either originated or serviced in violation of HUD requirements. 
In the end, because we have the authority thanks to Congress in 
many of those cases to assess treble damages, we arrived at a 
figure for servicer of what the maximum potential exposure 
would be considering those treble damages.
    Like in any other settlement, we then entered into a 
negotiation. It was not clear for sure whether we would win all 
those cases or whether we would be awarded the full amount, but 
essentially those treble damages we calculated created a kind 
of ceiling if you will on the potential exposure and the single 
damages, one time the losses that came to the fund as a result 
of those loans, created kind of the floor and there was a 
negotiation to arrive at the final numbers that we arrived at 
in the settlement both on the origination and on the servicing 
side.
    So that was the process to get to those dollars. This is 
far and away by 10 times the largest settlement we have ever 
gotten in recovery for the FHA Fund so that it represents a 
very aggressive effort to hold these lenders accountable.
    Mr. Latham. With treble, what would be the ceiling?
    Secretary Donovan. It would be in the range of about twice 
what we were able to recover. Where we ended up was between a 
single damages estimate and a treble. But, again, there is risk 
anytime you go to litigation that you are not going to recover 
that full treble damages amount so that we were in no case 
assured that we would be able to recover the full treble 
damages.
    Mr. Latham. When do you expect to receive the funds?
    Secretary Donovan. The settlement specifies that funds have 
to be paid to the FHA within 7 days of the suit being approved 
by the Federal District court here in the D.C. circuit. We 
expect that approval to happen in April. We do not have an 
exact date on that, but I would certainly expect that by May 1 
we should have those receipts to the Fund.
    Mr. Latham. If you do not get the funds, then you would 
have to draw down on the line of credit from Treasury to avoid 
a negative balance. Is that right?
    Secretary Donovan. That really depends on what happens the 
rest of the fiscal year. With the increased premiums that were 
in our budget as well as the ones we have announced since then, 
it really depends particularly on the volume of lending that we 
have this year whether we would need to. But again, I think the 
chances of us not getting this funding at this point are 
extremely low given the agreements that we have reached and the 
role of the Federal District court to be able to enforce the 
settlement.

                        SUSTAINABLE COMMUNITIES

    Mr. Latham. Once again you are proposing funding for 
sustainable communities, even though Congress did not fund it 
last year. While I support allowing--and even encouraging--
communities to work together to think about development in a 
holistic way, I cannot support the administration picking 10 
percent of interested communities to receive the funding.
    As you know, there is no legal framework for the program. 
There is no definition of sustainability or livability. It 
appears to be simply in the eye of the beholder. So this, I 
think, should be a local decision and not a decision made by 
the administration without any authorization. Our colleagues on 
the Financial Services Committee, led by Ranking Member Mr. 
Frank, have recommended that we not fund sustainable 
communities and that we transfer those funds to community 
development block grants. Your budget funds sustainable 
communities in the same account that has the block grants; so 
every dollar for sustainable communities comes out of those 
block grants. Why is funding for the pilot program more 
important than increasing funding for communities to give them 
the flexibility to use those dollars?
    Secretary Donovan. I think it is a very important question 
in terms of the way this funding kind of works together and 
also how they are different. Let me try to focus in particular 
on what we were able to accomplish with the sustainable 
communities grants that we cannot with CDBG. Again, I think it 
is very important to recognize as you said that it is critical 
that this be about a local vision and I think the demand for 
the program, the fact that we have had 10 times more 
applications than we have been able to fund, is a good measure 
of the fact this really is about local interest in implementing 
their vision.
    Specifically, the things that CDBG cannot do that this 
effort is able to accomplish, one, is to work across geographic 
lines. More and more, economies are regional and yet CDBG goes 
to individual localities or to states not funding the way that 
economies are now working in our metropolitan and rural areas 
on a regional line. Kansas City is a very good example where 
the Mid-America Regional Council has funding that covers a 
metro area that is in two different states, for example.
    A second is that private sector actors are not just 
indirect beneficiaries but can directly come in and be part of 
these applications. As you know, in the Des Moines Regional 
Partnerships case, a chamber of commerce that covers a regional 
area in Iowa, they have been a direct applicant in funding and 
have been implementing their plan which they began well before 
this program was put into place but needed funding to make that 
happen.
    A third example is that in many cases market rate housing 
is an important part of these strategies. North Dakota has seen 
a boom in oil production in the northwest corner. They have 
individuals making over $100,000 a year that are sleeping in 
their trucks or in man camps because they cannot build fast 
enough. Clearly that kind of housing would not qualify for CDBG 
because of the income limits and they have been able to put 
into place a strategy to grow private sector market rate 
housing through zoning and planning and other things that they 
would not be able to keep up with or fund but for this grant.
    Mr. Latham. You do not think that they would be able to 
fund that with the explosion of money in that area without your 
help? I am sorry, but they have more money than they know what 
to do with out there.
    Secretary Donovan. Clearly, and I have visited myself that 
region, what I heard time and again from them is they have not 
been able to keep up with the necessary planning and zoning to 
have a regional plan that cuts across jurisdictions to keep up 
with this. Could that do it in the long run? They might be able 
to achieve it, but it might take 5 to 10 years longer without 
this support.
    Mr. Latham. I am out of time but it is amazing that the 
federal government has to come in and subsidize them to do 
planning. I am not sure that that would be expedited, having 
federal restrictions involved in the funding there.
    Mr. Olver. I have gone over time, so I will be flexible 
with you, sir.
    Mr. Olver. Let me start with a set of comments to try to 
elicit some metrics on the program. How many actual 
sustainability grants were given out? We know that we funded it 
in 2010 and again in 2011, but not in 2012, so we have had 2 
years of funding. How many grants went out in 2010?
    Secretary Donovan. I believe there were 45 regional grants.
    Mr. Olver. Regional grants?
    Secretary Donovan. Yes. And 100 percent of those have been 
allocated both in 2010 and 2011. One hundred percent of it has 
been obligated at this point to those grants.
    Mr. Olver. Where are the 2011 monies? Have those all been 
awarded and at what stage are they?
    Secretary Donovan. One hundred percent have been awarded so 
that 100 percent of the funding has been obligated at this 
point.
    Mr. Olver. One hundred percent obligated?
    Secretary Donovan. Yes.
    Mr. Olver. But it is far too early to know what may have 
been achieved by it.
    Secretary Donovan. The 2010 grants are about halfway 
through their 3-year life and so what we have started to see is 
a number of communities that have completed and are 
implementing the planning already. Columbia, Tennessee, was the 
first to do that, we have a number of others, that even though 
they are only halfway through the period have now completed 
plans and are beginning to implement already. We would be happy 
to provide more details on the specifics.
    Mr. Olver. Is there any other place in the HUD budget that 
regional planning, broadly regional kinds of considerations, 
are taken up?
    Secretary Donovan. There is no other way for us to fund 
directly those regionals that cross county lines or even 
particularly across state lines which is particularly important 
in many communities.
    Mr. Olver. But you sort of mentioned when you talked about 
Memphis and the effects that that regional planning program has 
on Arkansas and Mississippi.
    I would also note that from a map that I sometimes keep a 
vision of, that the Charlotte, North Carolina, area has a broad 
regional--quite a number of counties involved, and they are in 
South Carolina and North Carolina, and provide--my guess is, if 
my colleague from North Carolina were here, he would be very 
supportive of that sort of thing.
    So what I am getting at is, the Chairman has pointed out 
that it is not authorized, but then neither, by the way, is 
CDBG authorized at this stage. It was authorized once, but it 
has not been authorized in quite a number of years.
    So this is an effort, as I see it, at doing something in a 
broad regional way. What have you learned out of this in these 
first 2 years? When some of them are well in implementation, 
you have probably been following what they are doing. What are 
the features of projects which are particularly important in 
these kinds of sustainability initiative grants that would not 
get otherwise dealt with? What are the features that are 
important to it? And where do you see some of the biggest 
opportunities?
    As we know, you have only been able to give 10 percent of 
the applications that came in, so there is a demand. It is a 
lot like the TIGER Grant demand for flexible material that is 
coming from the communities. It is emanating from the 
communities rather than in a top down way.
    Secretary Donovan. So I would say two things that have been 
particularly helpful that we have learned. One is that having 
the chambers of commerce, the private sector engaged in this 
regional planning from the beginning makes it much more likely 
that they are effective. And there are more than a half a dozen 
examples where we have cut across state lines partnering with 
chambers of commerce: Idaho and Colorado, you mentioned 
Mississippi and Arkansas, North and South Carolina, Iowa and 
Nebraska, New York and Connecticut; I mentioned Missouri and 
Kansas. All of those are examples where we have the chamber of 
commerce regionally leading this, and they are particularly 
interested in how we ensure that infrastructure investment is 
coordinated across state lines.
    One of the biggest barriers to the growth of regional 
economies is this fragmentation, where we have different tax 
systems, different planning systems, different land use 
systems.
    The other thing that I would point out is that these grants 
have put these communities in a much better position to be able 
to benefit from a broad range of federal investments, because 
we have aligned at the Federal level that our Kansas City is a 
good example, where they have been able to access investments 
to implement their plans from six different Federal agencies, 
including HUD.
    So these plans have put them in a much better position to 
be able to attract private capital and other federal capital 
toward their plans.
    Mr. Latham. Gentlemen, it is time. Thank you. Mr. Carter.
    Mr. Carter. Thank you, Mr. Chairman. Thank you, Secretary 
Donovan.
    Secretary Donovan. Thank you.

                                HUD/VASH

    Mr. Carter. I am, I would say blessed, in my district to 
have the largest military facility on Earth, Texas, which makes 
veterans a priority in my world. We have got to be concerned 
about the men and women who serve bravely in the armed forces. 
They are coming back. And you mentioned sequester, and if 
sequester goes through, in addition to the agreed cuts in the 
military which will put soldiers out on the street, we are 
going to see possibly another 100,000 soldiers come out of our 
army as a result of the sequester, heaven forbid, I hope.
    But we have to be concerned about this. And I am very 
supportive of the HUD VASH program. My veterans are very 
supportive of this program and enthusiastic about it. I support 
the President's request for 75 million and 10,000 new vouchers.
    I guess the first question we need to ask, and I would like 
your expertise on it, does HUD have estimates regarding the 
number of additional vouchers? Will this number work? Do we 
need more? Are there other forms of assistance we need to 
accomplish the goal of ending veteran homelessness? We do not 
want another generation, as our Vietnam veterans were, of 
homeless veterans.
    Secretary Donovan. First of all, I would say that this has 
been an area where I must recognize the very strong work that 
the committee has done on a bipartisan basis to support this. 
It is largely because of VASH, although we have other 
investments around veterans homelessness, as well, that we were 
able to accomplish a 12 percent reduction in veterans 
homelessness around the country in just one year, and, in fact, 
an 18 percent reduction in the number of veterans sleeping on 
the street. So it is working, and thanks to the push of this 
committee, we have been able to improve the implementation.
    We do think that 10,000 is the right number per year to add 
to this. We think it would be hard to absorb a significantly 
higher number than that in a year. But we do think that we will 
need an additional likely 2 to 3 years more allocations after 
this in order to truly solve veterans homelessness.
    And so we do think if we can get 10,000 this year, that is 
the right thing for this annual budget. But we should recognize 
that it will not be the last allocation that we will need to 
solve veterans homelessness.
    Mr. Carter. Well, I am fully supportive of that. I guess 
the other question that I am going to be talking to the city 
about this, too, probably today, how is HUD and VA working? Are 
they working well together? Are there stumbling blocks that you 
bump into as you work between the agencies to get this done? 
And what can we do to improve the program?
    Secretary Donovan. So I would just recognize Secretary 
Shinseki and his team have been great partners. We actually 
have regular HUD Stat meetings that combine our staffs. We set 
a joint goal for reducing veterans homelessness. We were not 
even using the same systems to count veterans before. And I 
think, as the committee knows, when we came into office, the 
VASH program had only served about 1,200 veterans in total. We 
are now over 35,000 and counting.
    We are not only accelerating our progress, we serve 28 
percent--or about 30 percent more veterans in 2011 than we did 
in 2010. It allowed us to exceed our goal that we set jointly 
for VASH with VA by 78 percent over the last 2 years. And we 
decreased the amount of time it takes to get a veteran into a 
VASH voucher by 40 percent. So we have made real progress in 
partnering with them.
    I think the single most important thing that we can 
continue to do is to make sure that we have--we continue to 
build the data systems, and this committee has been very 
supportive of the investments that we are making in our 
information technology infrastructure to be able to count and 
target those vouchers to the right places.
    And I think you will see increasingly, in the next year or 
more, that we will be targeting these vouchers to places where 
we have the largest concentration of veterans. Many of them 
tend to come back to bases and stay in those communities, and 
so we need to be more strategic about figuring out exactly 
where these vouchers should go.
    Mr. Carter. Very good. Thank you, Mr. Chairman.
    Secretary Donovan. Thank you.
    Mr. Latham. Thank you, Judge. In the order of appearance 
here, Mr. Dent.

                              CDBG FORMULA

    Mr. Dent. Thanks, Mr. Chairman, Mr. Secretary, good to be 
with you today. As you are aware, some communities in my 
district took a pretty significant cut in their formula 
allocations under CDBG due to the funding, due, in part, to the 
funding reductions in the fiscal year 2012 bill, but largely as 
a result of the new Census data. They ended up taking a pretty 
disproportionate share of the cuts, cities like Allentown.
    I am concerned that the formula in the application, the new 
Census data, short-shifts the high-need communities while 
providing additional resources to communities that may not be 
as in desperate need. I know there has been a great deal of 
attention to this when the formula allocations came out a 
little while back. With these limited resources, I think we are 
going to have to work to ensure every dollar is being spent and 
leveraged as effectively as possible. Has the department looked 
at the impact and considered these recommendations?
    I am concerned, too, when you look at those three factors 
in determining the allocations, you have got poverty, you have 
got this population growth lag, and then the age of the housing 
stock, and what are you recommending to deal with this? Because 
a city like Allentown grew very substantially, and a lot of 
that growth was a lower income population, and they seem to be 
penalized under the formula for that. I am just curious as to 
the reaction.
    Secretary Donovan. And you are exactly right, particularly 
in the case of Allentown. It is a Formula B. There are two 
different formulas that are used. It is Formula B for 
Allentown, which really was driven by a lower number of older 
housing units relative to----
    Mr. Dent. Pre-1940.
    Secretary Donovan. Pre-1940 relative to other communities. 
And, frankly, that they did not--Allentown did not experience 
as much shrinkage or loss of population compared to other 
communities over those 10 years. We do not have any flexibility 
in terms of how we implement it. It is statutory that we needed 
to use this new data. And Allentown is not alone in terms of 
the impacts.
    In terms of what we would propose, we have proposed in past 
years changes to the formula for CDBG that would update it. We 
are still operating on the original formula from decades ago. 
In 1975, the program was created. And, frankly, we do think it 
is worth working with Congress toward reform of the formula.
    So the difficult thing, to be frank, is that in an era of 
shrinking dollars for the program, it makes it that much harder 
to do formula reform because, for the losers on that formula 
reform, the cuts are even more dramatic, as you have seen with 
the recent formula.
    And so we had proposed originally a sort of hold harmless 
factor that we would provide when we proposed an increase in 
CDBG funding. Unfortunately, with the challenges in the budget 
this year, we simply were not able to propose a kind of hold 
harmless methodology that would allow us to do that reform. So 
we think that is something worth Congress working together on. 
We think it is going to be very difficult, frankly, in this 
budget environment this year to see that reform happen with the 
harm that it would provide to many communities.
    Mr. Dent. Well, CDBG, I will assume that it is going to 
become even more diluted if we do not adjust this allocation 
formula. Another question regarding CDBG, I corresponded with 
the department in the fall last year about an issue that came 
up in my district with a misuse of CDBG funds. What was 
happening, that a city in my district was improperly 
transferring CDBG funds into the city's general fund in order 
to support operating expenditures and costs.
    I appreciated prompt response with respect to this 
particular situation.
    I want to continue a dialogue with you on what is being 
done on a broader level to make sure that funding is being used 
very efficiently and effectively. Language in our bill last 
year directed you to work to identify and address waste, fraud, 
and abuse in programs like CDBG and HOME. As I wrote you in 
October, I support the CDBG and believe one of the strengths of 
the program is that it gives localities flexibility to target 
resources.
    However, it is not intended to be used as a slush fund, to 
backfill other budget shortfalls. I am just interested in your 
comments on efforts to address these issues more broadly. Are 
you seeing this around the country, communities in these tough 
times moving their CDBG funds, you know, backfilling elsewhere 
which is clearly prohibited?
    Secretary Donovan. What I would say is, we have two 
different issues here that we are seeing, and the budget 
pressures, the cuts in CDBG, there is no question that it has 
reduced the number of staff that localities have that are doing 
budgeting, doing maundering and oversight, and that does raise 
concerns for us in terms of the challenges in operating and 
implementing the program well.
    On the one hand, what we have done with the help of this 
committee, you have given us more flexibility to invest in the 
right kind of technical assistance. It used to be that our--we 
were basically sort of check-the-box technical assistance. Now 
what we do is go in and do a much more real assessment of what 
the shortfalls in a community's oversight of the program is and 
target training and help to them to build their capacity, 
particularly with the limited budget resources that they have.
    On the other hand, we have had to increase accountability. 
And so what we have done and what we are going to be doing this 
year with the support of the Committee is significantly 
improving our data systems to find and avoid the kind of 
challenges that you are talking about, where money may be 
diverted. We need to have better systems that ensure that we 
have that data that shows us where communities may be misusing 
those funds.
    Mr. Dent. Thank you.
    Mr. Latham. Gentlemen, your time has expired. The gentleman 
from Ohio, Mr. LaTourette.
    Mr. LaTourette. Thank you, Mr. Chairman, Mr. Secretary, 
nice to see you.
    Secretary Donovan. Good to see you.

           NEIGHBORHOOD STABILIZATION PROGRAM (NSP) 2 GRANTS

    Mr. LaTourette. In a rare spurt of bipartisanship on 
Monday, we introduced a piece of legislation with a lot of 
Republicans and Democrats from Ohio and Michigan in particular, 
and we hope to broaden the base, that deals with the situation 
of abandoned property. As you know, currently only 10 percent 
of the neighborhood stabilization funds may be used by a 
community to demolish properties.
    The bill would permit those cities and land banks to use 
100 percent where it is appropriate, and in addition, 
supplement those funds with the authority for Treasury to issue 
$4 billion in qualified bonds, where the bond holders would 
receive tax credits rather than other compensation.
    We toured an area in Cleveland, Marcia Fudge's district, 
called Slavic Village, and, you know, everybody has heard the 
expression, ``Everything but the kitchen sink.'' We actually 
went into a house with no wiring, no copper, down to the studs, 
and they had taken the kitchen sink.
    And so while I think everybody has as a goal, you know, if 
you can go in and rehab and refurbish a house, that is great, 
but I think everybody knows that there are some houses that are 
not coming back no matter what the good intentions are. The 
City of Cleveland has already taken down 6,000 houses. They 
have 15,000 more to go. And so this program is going to be 
modeled after something in Flint, Michigan. Dan Kildee had a 
land bank up there who is now, I understand, running to fill 
the seat of his retiring father, Dale Kildee, our colleague, 
took about $3 million and used it to demolish homes. And as a 
result, they saw the tax duplicate in the City of Flint, 
Michigan, go up 200 million. And, clearly, I think sometimes 
before you can rebuild, you have got to rip it out.
    So my questions are multi-planed. One, are you familiar 
with what they did in Flint? And if you are not, I would be 
happy to send it to you. And two, just the outline that I have 
described of the legislation, which I think is going to receive 
a lot of bipartisan support here in the House and also in the 
Senate, does any of that cause you any angst as sort of the 
shepherd of the neighborhood stabilization?
    Secretary Donovan. So, first of all, very familiar with 
what Dan Kildee has done. And, in fact, we have worked with him 
very closely. The largest NSP2 Grant that we made was to the 
State of Michigan and included the leadership of Dan's 
organization in bringing together a range of different 
municipalities that were hard hit.
    And I want to thank you for introducing the legislation. We 
are very supportive of what you are trying to achieve with that 
legislation. We think it does work very well along the 
principals of what we have done with neighborhood 
stabilization. In fact, there has been an investment of almost 
half a billion dollars in Ohio alone through neighborhood 
stabilization. We have been very willing to grant waivers to go 
above 10 percent in terms of demolition, and I think there are 
almost 14,000 homes that have been demolished across. You 
mentioned Cleveland in particular, but many others in many 
cities.
    And we know that there is much more demand--Detroit, 
Cleveland, many other places in Ohio, as well--and that is why 
the President, as part of the Jobs Act, proposed Project 
Rebuild, which would provide the kind of flexibility that we 
did in neighborhood stabilization to do demolitions.
    We obviously think that, in some cases, keeping those 
homes, renovating them makes sense if it is a neighborhood that 
is viable. It is very good for job creation. We think Project 
Rebuild will create about 200,000 jobs. But we would very much 
look forward to working with you and Congresswoman Fudge to 
advance legislation that would continue to build on what we 
have been able to achieve together with NSP and could achieve 
with Project Rebuild and the Restore Our Neighborhoods Act.
    Mr. LaTourette. I really appreciate that. And as we move 
this product to the floor, I very much look forward to the 
administration--in support of this so we can get everybody to 
vote for it. And I would just say, aside from the jobs and 
rebounding out their value, these things are dangerous. Last 
year, Cleveland police officers have been injured going in, for 
people who have sort of decided to homestead there. A month and 
a half ago, a young woman and her one-year-old daughter were 
dragged into an abandoned home and killed.
    So I think it is the right thing to do. I am glad to have 
your support. We will stay in touch as we move it forward.
    Secretary Donovan. I would just add, Congressman, just 
yesterday we had a HUD Stat meeting on this exact topic to look 
at the impact neighborhood stabilization is having. 
Interestingly, what we are seeing, because demolition tends to 
be faster, some of the most impressive results we have seen 
from the analysis we are doing, the vacancy rates are down, 
home prices are up in these neighborhoods where we focused on 
demolition. So we would be happy to provide that information to 
you.
    Mr. LaTourette. Thanks so much.

                      UNDEROCCUPIED HOUSING UNITS

    Mr. Latham. Thank you, Mr. LaTourette. I am still somewhat 
stunned by using the North Dakota example for sustainable 
communities. I mean, Mr. Dent, I think, clearly stated the need 
for the community development block grants. And to give--I 
mean, God bless them, maybe they need your help up there, but, 
you have got roughnecks making 100 grand a year, you have got 
dirt farmers that have been poor all their lives who are now 
multi-, multi-, multi-millionaires up there. So you are taking 
money away from communities that really need it and subsidizing 
a community that has got more money than it knows what to do 
with. I do not understand that, but we will move on. Okay.
    Earlier this month, the New York Times reported on a very 
troubling issue with the New York City Housing Authority, where 
about a third of all housing units are under-occupied, with 
fewer occupants than appropriate for the unit. At the same 
time, the article said 15,000 units are over-crowded and 
160,000 families are on a waiting list for housing.
    If you can just tell us how widespread the problem of the 
mismatch between the available housing and families served is, 
and what we can do to fix the problem, some remedies. You are 
very familiar, obviously, with that market.
    Secretary Donovan. Yes, and I think one of the things that 
the article pointed out is, this is not unique to the New York 
City Housing Authority. You do have, particularly where a 
senior or an older couple whose children have moved away, they 
are overhoused, and it is a significant number.
    To be frank about this, this is not a simple issue. As you 
can imagine, somebody who has been in their home for some 
period of time, to force them to move is often difficult. You 
may have a resistance or lawsuits or other things that----
    Mr. Latham. Talk to my mother.
    Secretary Donovan. Right. So it is something that we have 
focused on and tried to make sure that housing authorities are 
implementing rules, but we have left some flexibility to 
housing authorities about how they push that or incentivize it 
and how strong the rules are in terms of whether you would 
displace a family from their community or a senior from their 
community to be able to move. So it is something that we have 
not taken a sort of one size fits all approach on, frankly.
    If it is something that the committee would want to focus 
on or that you personally would want to focus on, we would be 
happy to come back to you with more analysis of the specifics 
and some options that we might consider, either legislatively 
or through notice of regulations.
    Mr. Latham. Is there anything in the budget specifically to 
address the problem?
    Secretary Donovan. I think the improvements in data systems 
and other things, that we have could help with that, but we do 
not have a specific proposal in the budget to deal with that 
issue.

                            FHA REFINANCING

    Mr. Latham. Yes, work with it certainly. On a different 
subject, you mentioned one of the steps to bring private 
capital back is your recent administrative actions, which 
include increasing the premium of FHA by 75 basis points. 
However, in your and the CBO assumptions on the receipts 
associated with this policy, do not assume that this will 
reduce the value of the FHA guarantees. How then, is it not 
simply a budget gimmick to make FHA borrowers pay an extra fee 
to fund other discretionary programs?
    And your assumptions, they are kind of saying two different 
things. Number one, it will not affect the volume, but then 
again, you are saying that it will affect the volume.
    Secretary Donovan. Yes. I think it is an important 
question. And as you said at the outset----
    Mr. Latham. Very good.
    Secretary Donovan [continuing]. The devil is in the 
details, right. We actually did estimate a reduction in volume 
in our budget for next year. I think what you are seeing----
    Mr. Latham. I do not think CBO did.
    Secretary Donovan. What CBO did, we made it--we announced, 
since our budget was introduced a reduction in our refinancing 
fee. And so I think what is driving their numbers is that a 
number of refinances will increase. Just to be clear, those 
refinances are existing FHA borrowers. So it is not adding to 
the total number or share of borrowers that have FHA loans, it 
is simply taking borrowers that are in FHA and refinancing them 
in FHA. So the fact that you would see a volume increase does 
not necessarily mean it is adding to our market share, so to 
speak, particularly of the new loans that we make.
    Mr. Latham. If they are existing loans, it would not be an 
increase.
    Secretary Donovan. It would be an increase in originations, 
because instead of them just keeping their old loan, they are 
getting a new FHA loan, but it is not a new borrower to FHA. 
And I told you the devil was in the detail. What we are seeing, 
though, is a continuing shrinkage in our origination for 
purchase, and that is really what shrinks our market share.
    And as you know, Congress passed an increase of 10 basis-
points in our annual fee to pay for the short-term extension of 
the payroll tax cut. That is about $9 a month on average in 
increased fees. Our up-front increase we think is about $5 a 
month on average. So the two of those together we do think will 
shrink the share of the market that we have in purchase loans 
while our refinancing of existing FHA loans does increase, and 
that is what explains the difference.
    And we think, frankly, it is the purchase loans where it is 
most important that we focus on shrinking that share. For 
refinances, what we are really doing is helping the economy 
more broadly by lowering on average about $3,000 a year the 
payments that those homeowners would make.
    Mr. Latham. I am certainly glad you have clarified that. 
Mr. Olver.
    Mr. Olver. I want to engage just a minute about the North 
Dakota situation. I have watched the Census statistics for 
North Dakota now carefully for the last two Census, and in the 
2000 Census, of the 96 counties in North Dakota, there were 
only 6 in the whole state that grew in population. Virtually 
the whole western part of the state was losing population. 
Every county was losing population in the western part of the 
state.
    Interestingly, I was surprised, I thought there would be 
roughly the same pattern. With the 2010 Census, there were 
several counties there in western North Dakota that actually 
were growing in population, and that is the oil boom. But most 
of them were still losing. There were now a dozen communities 
that were actually gaining population, even though the state's 
population was gaining way below the national average, 
nonetheless even though there were a few more counties that 
were gaining in population.
    And there are some of those counties that are basically 
major Indian Reservations, or a number of Indian Reservations, 
in North Dakota and South Dakota, though I do not have the map 
in front of me so I cannot be sure exactly where they are. It 
is almost half of the state that was part of what was getting 
money. So there are places there which clearly have some rather 
unique sorts of needs. At the same time, the growth and the 
boom, the oil boom, is very narrowly located and growth there 
might be a reasonable time to actually do some regional 
planning about what you are going to do with that growth, 
because it is probably going to be there. That oil growth is 
going to be there for quite a number of years.
    So, I am not so sure that that is an illegitimate one. It 
was a pretty small grant, even though it covered a lot of 
territory. A pretty small grant, it was only a million and a 
half dollars or so in that planning grant.
    I would have commented on Cleveland. Well, I will. Do you 
ask for something in the--it is the Sustainable Communities' 
planning grants to recognize that one of the areas that they 
might think about is how to deal with foreclosed housing? I 
mean, often I read columns written by economists who say the 
housing market is not going to really recover until we have 
absorbed all of the foreclosed housing, a fair amount of which 
in the most severe places have actually been trashed, as Mr. 
LaTourette was commenting about. But there are lots and lots of 
those, and if those do not get absorbed, are you particularly 
asking for large urban areas that were hit to consider what 
they might use in implementation, what they would be planning 
for? Or is that something that plans take some time to come up 
with and you really need something that is happening right now 
that you can use your money for? And can CDBG money be flexibly 
used to do exactly that sort of thing to buy up those 
properties?
    Secretary Donovan. So, specifically in Cleveland, the work 
that we have done through Sustainable Communities has included 
these challenges. So it is focused on how those neighborhoods 
that have been particularly hard-hit are tied in through 
infrastructure and transportation. But, again, this goes back 
to the point about this is really about a local vision for what 
this funding would be used for. We have many areas that may be 
growing, like, again, the North Dakota example, growing where 
that would not be an issue, right? And so it really is going to 
be driven by--the only other thing I would just say on it, to 
go back to the North Dakota example, the fact that the real 
issue here is, are there resources to do this kind of planning? 
And is that planning something that the country ought to want 
to see?
    And the fact is, the problem is that the growth cannot keep 
up with the needs of oil production there, and, frankly, 
somebody living in a camper or in a man-camp does not 
contribute to the funds that a community needs to plan with 
cuts to CDBG and other cuts from shrinkage around the state. We 
thought that this was actually a very good use of funds that 
were not available otherwise, and would help not just the local 
economy but the national economy by allowing faster growth in 
oil production in that part of the world.
    Mr. Olver. Could I use one minute of my next time so that I 
can go on?
    Mr. Latham. The gentleman is recognized for an additional 
one minute.
    Mr. Olver. I wanted to make a comment to my colleague, Mr. 
Dent, but he has now left. When I start speaking, people leave.
    Mr. Latham. So you have burned your minute?
    Mr. Olver. No, no. That is all right. I yield back.
    Mr. Latham. Judge Carter.

                           REGULATORY BURDENS

    Mr. Carter. Thank you, Mr. Chairman. Secretary Donovan, 
last night I was reading through your fiscal year 2013 budget 
overview and noticed your budget principles include reducing 
regulatory burdens and increasing efficiency. Well, I was 
pleased and a little bit shocked because when I go home every 
week, and I go home to Texas every week, my constituents are 
constantly telling me that the regulatory burden that is being 
imposed by this administration is killing job growth in our 
world. And I know the President in his speech to the Congress 
talked about repealing regulations and rolling back job-killing 
regulations, but folks back home are not seeing it.
    It is a good election-time speech to make, but we see 106 
major regulations that have been imposed on industry, which has 
killed jobs and costing us about $46 billion annually, which is 
around 5 times what the previous administration did in a 3-year 
period. So, let us talk about what HUD is doing to rein in 
unnecessary regulations. Give me some specifics as to what you 
are doing to kill job-killing regulations.
    Secretary Donovan. Let me try to be very specific about 
things that are included in this budget that would allow us to 
do that.
    One, we are working very closely with your colleagues on 
the authorizing side to pass Section 8 reform legislation that 
would lower the cost of operating these programs. Just to give 
you one very specific example, over 50 percent of those who 
have vouchers or live in public housing are seniors or people 
with disabilities whose incomes rarely change. They are on 
fixed incomes. And yet, we have not had the flexibility in the 
programs to do income recertification less frequently for those 
kind of families than we would for others.
    Another example is, those apartments that they live in 
typically have less wear and tear, and yet we have no 
flexibility on how often we might inspect those or we may have 
an inspection for one program and then have to go back and do a 
second inspection for a second program. Providing flexibility 
to housing authorities in the way they implement these programs 
will reduce the costs and, in fact, you see that savings 
reflected in the budget. We are also simplifying the way we 
calculate income and medical deductions and a whole range of 
other things that are part of it.
    A second thing I would point out that we are proposing in 
the budget itself, not through authorizing legislation, is to 
combine the operating and the capital funds. Right now, we 
create a lot of paperwork for housing authorities to track 
those two different funds separately when every other kind of 
housing operates with a single stream of revenue and does not 
have to divide up the operating and the capital. So, that is a 
simplification, a streamlining that would provide real benefits 
and allow us with the same dollars to serve more people.
    And those are the kinds of things that have allowed us--we 
actually have in our budget our proposal. We would fund the 
same number of people in the voucher program with no increase 
in cost this year, and the Chairman referred to this in his 
opening statement. The concern about the long-term costs of 
renewal of these programs, we have actually been able to keep 
it level in the voucher program because of many of those 
streamlining changes that we proposed in the budget this year.
    Mr. Carter. Are you doing--you mentioned Section 8 and 
having a little bit of knowledge about that. Is it basically 
Section 8 existing that you are issuing the vouchers for or is 
there actually new construction projects in Section 8? I know 
there is probably rehab projects going on in Section 8. What 
about the construction side of the HUD regulations that in some 
instances are very, very onerous? Having been in that business 
myself, especially when local codes are being met and HUD is 
imposing additional and sometimes complex codes on top of local 
codes, is anything being done in that area to reduce the 
regulatory burden?
    Secretary Donovan. We are making some of the same changes 
on the project-based Section 8 side. Just to be clear, we do 
not do new project-based Section 8 contracts, so it is all 
existing. The only new housing that is being developed with 
Section 8 is in our project-based voucher program. That is 
where a housing authority has the flexibility to choose to 
project-base some units for a particular development. And so 
the streamlining we are proposing on the voucher side would 
help to simplify for that new construction the regulation.
    Mr. Carter. Okay. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, gentlemen. Mr. Diaz-Balart.

                              CDBG FORMULA

    Mr. Diaz-Balart. Thank you very much, Mr. Chairman. Mr. 
Secretary, how are you, sir?
    Secretary Donovan. Doing well, thank you. Good to see you.
    Mr. Diaz-Balart. Good to see you, and thanks again for your 
service. Let me follow up on Mr. Dent. And I apologize, Mr. 
Chairman. As you know, there are multiple hearings going on at 
the same time.
    Mr. Latham. I have to be at one myself.
    Mr. Diaz-Balart. Yes, it is that time of the year. CDBG 
funds, and though I was not here, my staff basically gave me a 
quick update as to what the conversation was. And obviously my 
specific concern here is the new formula.
    In the case of, for example, the city of Hialeah, which I 
represent, which is a poor city. As you know, South Florida, 
Southeast Florida, was in the epicenter of the housing crisis. 
Unemployment is exceedingly high. We can go on and on and on, 
and yet I believe they received a 50 percent reduction. Was it 
50? Forty-seven percent reduction on that formula, and there is 
just no way. In other words, there is no reasonable way with 
the economic situation in that city, with the demographics of 
that city--by the way, it is a minority majority city. I do not 
see how mathematically that can work. It makes no sense. It 
does not pass the straight-face test.
    So what I would like is to see if you can look at that 
specifically because when you look at, the national situation 
out there--Southeast Florida, again, South Florida--got hit 
exceedingly hard and yet they are getting hit in a level that 
makes no sense whatsoever.
    Hialeah City--Miami, which I do not have the privilege of 
representing, but they also have huge hits, but, again, 
Hialeah, the highest in the country, I believe. And there is no 
way that the city of Hialeah--I do not think that there is a 
way that you can justify the city of Hialeah being the hardest 
hit in the country when you look at the demographics, when you 
look at the economy, et cetera, and the population.
    So, that is something that I would like to somehow revisit 
with you, with your staff, and if you could let me know how to 
do that so that we can look at it and figure out what happened 
there because that makes no sense.
    Secretary Donovan. Congressman, we would be very happy to 
do that, and the short answer is that change was required 
statutorily----
    Mr. Diaz-Balart. I know.
    Secretary Donovan [continuing]. By the data that we 
implement. I agree with you that the formula is outdated. In 
fact, with your colleague Mr. Dent we had a very similar 
discussion about Allentown for different reasons----
    Mr. Diaz-Balart. Sure.
    Secretary Donovan [continuing]. But a cut that was deeper 
than the average cut across the country. And there is no 
question that the formula has outdated elements to it that have 
not kept pace with what is happening on the ground, with the 
challenges that South Florida is facing.
    I would say we have been very happy to be able to work with 
you and we appreciate your support around the regional planning 
work that we have been doing that has added to the funds that 
are available to that community, and done it on a regional 
basis through the Sustainable Communities Program. And I just 
wanted to say thank you.
    Mr. Diaz-Balart. Well, and, Secretary----
    Secretary Donovan. Thank you for your support on that.
    Mr. Diaz-Balart. Thank you for being extremely accessible. 
For example, the issue of Chinese drywall, which as you know 
you were out there yourself and you saw what a tragedy that is 
for the individuals that have to suffer.
    Secretary Donovan. Yeah.
    Mr. Diaz-Balart. It is hard to explain it to people----
    Secretary Donovan. Until you see it.
    Mr. Diaz-Balart [continuing]. Just how--until you see it. 
But anyway, thank you for being accessible. That is why I 
wanted to bring this up and, hopefully, we can maybe sit down 
with, you know----
    Secretary Donovan. I would be happy to do that. Whatever we 
can do.
    Mr. Diaz-Balart [continuing]. Your folks and figure out how 
we can get a handle on that. Thank you.
    Secretary Donovan. Thank you.
    Mr. Diaz-Balart. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, gentlemen. The gentleman from 
Arkansas.
    Mr. Womack. Yes, thank you. And I apologize for being late. 
There are a number of hearings going on and we are all consumed 
by those.
    I want to go back to Section 8 reforms for just a minute. 
Is there a time when we are going to have the U and the D out 
of HUD dropped? Because housing consumes virtually everything. 
I mean, we are $19 billion now? Over $19 billion in housing 
programs? Do you foresee that this becomes just basically a 
housing organization?
    Secretary Donovan. Actually, frankly, we are trying to move 
in the other direction to make sure that we are doing more to 
support not just urban development, but rural development as 
well. Our discussion earlier about the work we are doing on 
regional planning and other things, and the coordination that 
we have had, one of the big problems that we have had is that 
we have only thought about housing separately and we have not 
thought about it in a combined way with transportation or other 
infrastructure investments, to the point where the average 
American family now spends 52 cents of every dollar they earn 
just on housing and transportation. We have not coordinated 
where folks live, where they work. And what it has meant is for 
many communities the cost of moving goods, it has become much 
less competitive for many regional economies to be able to 
compete with China and other countries, because we have not 
focused on trying to coordinate and do a better job at the 
Federal level of integrating the way that we make these 
investments.
    So, the more we can do on streamlining our programs, 
simplifying them, saving costs, I think the more that we can 
make sure we can continue to meet both missions of the 
department.

                           PHA STAFF SALARIES

    Mr. Womack. Last year, in a hearing there was a great deal 
of discussion that transpired about the pay of public housing 
administrators. I guess the new current law, if I am reading 
correctly, says that no use of this year's funds may go to 
increasing the salary above what the Assistant Secretary makes. 
But my understanding is that some housing authorities are 
interpreting that line about no use of this year's funds to 
mean that money reserved from previous years and not the money 
of the municipality if you are going to pay somebody more in 
salary.
    Are you aware of that practice?
    Secretary Donovan. I honestly was not, had not heard that 
there was this issue about prior year funds. We can check to 
make sure. I do not think that is accurate, if that is the way 
it is being perceived. And it is something that we can 
certainly work----
    Mr. Womack. And I hope it is not.
    Secretary Donovan [continuing]. With housing authorities 
on.
    One thing I would say, Congressman, and this committee was 
very focused on this last year, it is one thing to set those 
limits. The other thing is that I think we feel very strongly 
there needs to be some real transparency about this issue. And 
so, within the next few weeks, we will be making public for the 
first time ever the salaries and other compensation of the top 
five officers in every housing authority around the country. We 
believe this is something the public has a right to know, and 
so it is something that--and it is something the committee 
urged us to do last year. We will be making those public in the 
next few weeks, and we would be happy to sit down with your 
staff and let you know----
    Mr. Womack. Very good.
    Secretary Donovan [continuing]. What that data shows and 
the timing of making it available.

                               RECAPTURE

    Mr. Womack. I applaud you for that transparency. While I 
appreciate that the public housing recapture is off the table 
for this fiscal year, I would like to ask one more question 
about the actual effect of last year's recapture. I have 
received reports from one of my housing authorities that not 
only are they receiving modified estimates from HUD on the 
amount of money to be recaptured from their housing authority, 
but the appeals process is sporadic, in their words, at best, 
with HUD officials missing documents in certain cases and 
communicating that they are still working on responses to those 
authorities or requesting to speak with someone about their 
denial.
    Small housing authorities have been thrown into economic 
uncertainty by the flaws of the process and cannot plan future 
projects until HUD has it all sorted out. Are you aware of the 
problems, and what is being done to manage this administrative 
burden?
    Secretary Donovan. So, I would first of all just say we 
would be happy--any specific examples where you have concerns 
we will follow up with you and make sure we know which housing 
authorities have concerns and what the issues are. Overall, 
what I would say is this clearly was a new process. We had 
never before recaptured these reserves. We did propose this to 
the committee, even though it was controversial. Many housing 
authorities did not want to give up those reserves, but we felt 
simply in a time of shrinking resources that we needed to take 
some steps to make sure that money was being used quickly and 
effectively and drawing down the reserves rather than cutting 
other funds, we thought, was the right approach in tough budget 
times.
    We did set up an appeal process, so that housing 
authorities could come in. I have gotten regular reports from 
my team on that, and what I would tell you is the vast majority 
of housing authorities we have been able to work through those 
appeals. There may be specific cases that you are aware of 
where there have been issues or document problems. We will be 
happy to follow up on those.
    Mr. Womack. Yes, and maybe just an isolated case, but we 
would like to develop that conversation. Thank you, Secretary, 
for your remarks. I yield back.
    Secretary Donovan. Thank you.

                                  SHOP

    Mr. Latham. I thank the gentleman. Mr. Secretary, the 
fiscal year 2013 budget proposes to eliminate the SHOP program, 
which helps organizations like Habitat for Humanity continue to 
do the good work they do, helping low-income families afford 
new homes through a combination of sweat equity, private 
donations, and public funding. Projects funded by SHOP leverage 
about 5 non-Federal dollars for every 1 Federal dollar. Why are 
you proposing to eliminate it?
    Secretary Donovan. Honestly, Mr. Chairman, this is one of 
those difficult decisions that we had to make. We felt given 
that this is an eligible use of funds to do self-help housing 
in the broader home program, that we would leave the 
flexibility of local jurisdictions to make the decision. Many 
of them do work very closely with Habitat and these other 
organizations and do these kinds of projects themselves, and in 
a different fiscal time we might have maintained the program. 
We just felt that being able to combine them, have a single 
program rather than multiple programs that would fund this kind 
of work, was the choice that we made in a difficult budget 
year.
    Mr. Latham. Well, it is my understanding that most of the 
SHOP sub-grantees are in rural areas, and they have to compete 
for statewide home funds, which are obviously in high demand 
and which are oftentimes set aside for large tax credit deals. 
And with the recent cuts to the HOME program, I do not know how 
likely it is that anybody who currently is in SHOP is going to 
be able to compete in the HOME program.
    Secretary Donovan. Well, look. You will not get an argument 
from me that the cuts----
    Mr. Latham. Oh, come on.
    Secretary Donovan [continuing]. To the HOME program have 
been tough, and that we would have supported and would support 
higher levels there. On the other hand, given the choice of 
having these two programs with these lower funding levels, we 
felt particularly with the allocations that do go to states 
that are targeted at rural areas that there was a good chance--
and we certainly see this is a priority for many communities to 
work with organizations like Habitat that do these self-help 
efforts.
    So again, in a different world fiscally we might have made 
a different choice, but this is what we proposed in the budget.

                            CDBG FLEXIBILITY

    Mr. Latham. The GAO's 2011 follow-up report on duplications 
in programs found that HUD has made minimal progress in 
assessing the extent to which its economic development programs 
overlap with those at SBA, USDA, and the Commerce Department. 
Of these four, HUD is the only one that has not taken steps to 
define common economic development outcomes with the other 
agencies. In particular, GAO found the Department does not know 
what portion of its economic development programs are 
duplicated by other agency programs.
    What are you doing to better understand the extent and 
types of duplication? And I would really be curious to know 
what you are doing as far as interagency cooperation so that 
the programs complement each other rather than duplicate each 
other.
    Secretary Donovan. With all due respect, Chairman, what I 
would say here is this was a case of a disagreement with GAO on 
this specific point. There are plenty of things in the report 
that we thought that we agreed with. We have been working, for 
example, on homelessness to better coordinate and simplify the 
structure of the programs around our Energy Programs. We have 
been working very closely with DOE. We simply think in this 
case, GAO by saying that basically CDBG was a similar program 
to these other programs that they focused on at other agencies, 
we did not agree with that. It is a block grant, as you know. 
It is enormously flexible. It allows infrastructure 
development. It allows services like Boys and Girls Clubs, a 
very broad range of things that do not fit into what GAO 
characterized as character development. And so, we frankly, in 
our report back to them, disagreed with their point about CDBG 
looking at combining that with other programs because we think 
it is a fundamentally different type of program.
    Having said that, we do think we can do better and agree 
with GAO that we can do more to show outcomes and to measure 
the effectiveness of CDBG, and so we have a range of system 
improvements that we are proposing and will implement during 
2012 to improve the way that we track and monitor the outcomes 
that CDBG has. We do not want to change its flexibility, so we 
want to leave local discretion on how it is used. On the other 
hand, we do think we can do a better job of holding grantees 
accountable to what those dollars are actually producing 
through changes that we are making in our systems.
    Mr. Latham. Okay. Thank you. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman. I want to return to 
what the chairman has just been talking about. On the Project-
Based Rental Assistance Program, your 2013 proposal is a $640 
million reduction from the enacted 2012 level, and under this 
proposal, we would expect nearly two-thirds of all of these 
projects would be funded for only the continuation, only within 
the fiscal year and not renewals. This is the gimmick that we 
have seen before and it took $2 billion in the ARRA funding 
only 3 years ago to make the program whole, and I think we were 
sort of relearning bad behaviors.
    If this were enacted into law, how would HUD propose 
ensuring the solvency that these contracts for 2014 and beyond, 
but try for 2014 at least?
    Secretary Donovan. Yes. Congressman, I want to be very 
clear from the beginning that this was one of the most 
difficult decisions we made in this budget. We would not have 
made this decision were it not that the other choice would have 
been to reduce the number of families that we could serve 
somewhere else in our programs. And so, we are not saying it is 
something we would propose at other times and that it does not 
have its risks, it does, but we simply made that choice because 
we thought it was a less bad choice than some of the others we 
would have had to make.
    Mr. Olver. There is an inflation rate year by year that 
drives these prices up. What would then for 2014 be the cost of 
renewing those, even if it were just for the additional one 
year? Are you proposing that you are thinking would go back to 
the one year or keep the fiscal year program or are you going 
to have to do more in one year?
    Secretary Donovan. It is no question I think this is an 
important one. This is a one-time savings. It cannot be----
    Mr. Olver. What is the cost in the next year----
    Secretary Donovan. So, we would need----
    Mr. Olver [continuing]. Of doing this?
    Secretary Donovan [continuing]. Just under $1.2 billion 
additional next year to get to the full 12 months of funding. 
To reverse the short funding, we would need roughly double that 
in 2014.
    To your question earlier, I am confident that we have made 
improvements in the way we allocate this funding and work with 
owners that this short funding would not result in units that 
went unfunded or similar kinds of problems that we saw in the 
past. I think the risks here are not on the operational side. 
The issue is there is private capital that comes to these units 
and there is a risk that there might be somewhat less 
confidence on the part of those private lenders in supporting 
these developments should this proposal go through and that 
might have the effect of raising interest rates or other 
things. That I think is the risk that I would focus on rather 
than the operational risk, which I do feel confident we have 
been able to solve the problems that we saw in the past.
    Mr. Olver. Just let me summarize that. There is a shift 
into the next year with interest of the costs of doing what is 
there. Now, you have also suggested that there is some 
possibility that because there is uncertainty with the 
financing of some of the projects, how serious do you think 
that threat is?
    Secretary Donovan. I think given the history that Congress 
has always funded these units, they have always made funding 
available in subsequent years, we already have multiyear 
contracts that are funded year by year. So, we have lived with 
this uncertainty to some degree. I think it would increase 
that----
    Mr. Olver. Now, that is how we got into the $2 billion one 
lump sum in the ARRA funding down the way because I have been 
on this subcommittee for 8 years, 2 years in the ranking 
position, 4 in chairing, and then back to 2 in ranking under 
the distinguished present chairman, and I saw exactly what was 
happening over that period of time. It is a really, really very 
troubling situation. Thanks.
    Mr. Latham. Thank you, Mr. Olver. Mario, you do not have 
any questions?
    Mr. Diaz-Balart. No, sir.

                            FHA PROJECTIONS

    Mr. Latham. The Department and the FHA have occasionally 
been criticized for presenting more positive projections than 
what actually exists. For example, your projections are 
routinely more positive than what is reported in the Annual 
Actuarial Report. As recently as December, you stated that this 
review ``made clear that under base-case economics, the fund 
will remain positive and its prospects for the future are 
good.'' However, 2 months later in your budget, you projected 
that you would need $688 million drawn from the Treasury. In 
December, you testified the FHA Fund would recover to statutory 
minimum of 2 percent capital level by 2014. However, just two 
months later, you are projecting it will take until fiscal year 
2015, even though you have taken a number of measures to help 
the FHA Fund recover. Should we fire the guy that does 
projections? Actually, what factors contribute to the worsening 
conditions? Explain what is going on.
    Secretary Donovan. Yes.
    Mr. Latham. Why the projections are so far off all the 
time.
    Secretary Donovan. So, the single biggest determinate of 
the health of the fund is house prices and where they are 
headed. We have over the last few years the projections that we 
have used, which are independent projections by Moody's 
Analytics, they are not done in-house, they are not 
administration projections, they are independent projections, 
have proved to be more optimistic than what has actually 
happened. That is the single factor that has driven the changes 
that you are talking about.
    The other criteria and issues that lead to those 
projections, in fact, generally have performed better than have 
been projected within the actuarial study, and I think one good 
example of that is CBO's estimates this year that receipts will 
be almost $1.8 billion better next year than the administration 
projected. In other words, they think our models and our 
projections are too conservative for what would be.
    I think the important one I would point out about the 
estimate that was in the budget that you pointed to, at the 
time the budget was published we already knew that those 
numbers were outdated. We did not have the settlement dollars 
that we talked about factored in because the settlement was not 
completed. We also had not announced at that point additional 
premium increases because we were waiting for the settlement to 
get completed in order to decide what the final numbers would 
be that we would impose. So, we always knew that those numbers 
were not accurate and that, in fact, we never expected to have 
to draw on the Treasury. It was simply an artifact of the 
budgeting process and the timing that those numbers were 
included. And we continue to believe and, in fact, the budget 
shows that we expect more than $8 billion in net receipts next 
year and we expect the fund to recover to the 2 percent 
consistent with that original projection that you talked about.
    Mr. Latham. So, we can take that to the bank, right?
    Secretary Donovan. I wish I had a crystal ball. If I did, I 
would not be in this job probably; I would be somewhere else 
making a lot more money. [Laughter].
    But, certainly, what I will say is, again, the single most 
important thing this year that determines where the health of 
the fund will be is where house prices perform. Our base case 
was a roughly 1 percent drop this year and that, I think, 
continues to be what is expected overall net for the year, but 
we need an additional roughly 4 percent drop before the premium 
increases to push the fund negative and now it would be a 
significantly larger drop and that would have to happen this 
year to drive the fund negative.
    Mr. Latham. Why do I not go to Mr. Olver?

                     SECTION 8 ADMINISTRATIVE FEES

    Mr. Olver. Thank you, Mr. Chairman.
    Mr. Secretary, in the enacted 2012 bill, administrative 
fees for tentative base Section 8 were funded slightly lower 
than fiscal year 2008. During that time, since 2008, we have 
seen a 14 percent increase in renewal costs for the program.
    From what you have seen and heard from public housing 
agencies, has this lower funding level for the administrative 
fees impacted the PHA's ability to lease Section 8 vouchers?
    Secretary Donovan. Congressman, there is no question that 
the levels of the administrative fees in the last few years, 
and particularly in 2012, are a real threat to the program. 
And, in fact, something I never thought I would see, we had two 
housing authorities that turned back HUD-VASH vouchers, Akron 
and Milwaukee, and just since January, we have had 18 housing 
authorities that have made the decision to give up their 
broader Section 8 Voucher Program, so just since January, 18 
agencies because they simply do not think that they can run the 
programs given the level of administrative fees.
    As you know, the proration in 2012 was about 74 percent of 
what the estimate is of the full need to run those programs. 
Even in a very, very difficult budget year, we made the 
decision to add over $200 million to the administrative fees. 
We would not have done that had we not thought there was a real 
risk of serving fewer families of housing authorities giving up 
their programs with the low level of admin fees. Even with the 
increases that we are proposing, we would still only be at 81 
percent proration of admin fees. So, this is something that we 
are very concerned about, enough so that in a very, very 
difficult year, we proposed more than $200 million increase and 
we think that is the minimum necessary to be able to make sure 
that housing authorities have adequate funds to be able to even 
tread water, much less improve their programs.

                              VASH PROGRAM

    Mr. Olver. I, of course, am particularly concerned about 
examples of the turn back of VASH vouchers, but you are 
suggesting that there are other more recent, since the 1st of 
the year are not just VASH, that there are other resource 
requiring programs that are also suffering. Which are those 
other programs coming from? Which of those other resource 
needful programs that are now, you think, threatened?
    Secretary Donovan. Well, these 18 housing authorities since 
January did not just turn back VASH vouchers. They decided to 
give up their entire----
    Mr. Olver. Prior program.
    Secretary Donovan [continuing]. Voucher programs.
    Mr. Olver. Entire program.
    Secretary Donovan. And, again, these admin fees I am 
speaking about are just for the voucher program. So, they have 
given up their entire programs since January, 18 of them.
    Mr. Olver. Is there a difference between 202s and 811s?
    Secretary Donovan. 202s and 811s are funded through 
separate contracts through multifamily and do not have a 
separate administrative fee associated with.
    Mr. Olver. Are you doing a study of the fees? Is there an 
administrative study being done? What is the status of that?
    Secretary Donovan. Well, we do have a very extensive study 
that is underway. It will not be fully completed in time for 
the budget process in 2013. We do have initial results though 
that will be coming over the next months that we would be happy 
to share with the committee that might help to inform decisions 
about the admin fee funding for next year.
    Mr. Olver. You mentioned Milwaukee and another place. Was 
it Asheville?
    Secretary Donovan. Akron.
    Mr. Olver. Akron.
    Secretary Donovan. Akron, Ohio.
    Mr. Olver. Milwaukee. I have not heard a list of the 18----
    Secretary Donovan. The 18.
    Mr. Olver [continuing]. Since the 1st of the year that have 
gone beyond just VASHs and decided to go all the way here.
    Secretary Donovan. Well, we would be happy to provide that 
to you and the committee.
    Mr. Olver. All right. And the study, you say, will not be 
done for how long again?
    Secretary Donovan. Let me get the exact date. If you give 
me a minute, we will give you the exact date on the 
expectation.
    Mr. Olver. Well, at some point, you can tell me. I am ready 
to yield back.
    Mr. Latham. That is amazing. The gentleman from North 
Carolina, Mr. Price. Welcome.

                           HUD FUNDING LEVELS

    Mr. Price. Thank you, Mr. Chairman. I apologize for my late 
arrival. It is due, as you might guess, to another hearing, 
another subcommittee. So, I will consolidate my questions.
    I understand we want to make this the last round and I 
think I can do that. But it is a challenge because there is so 
much in this budget that is really going to stretch and strain 
the agencies and the programs that we have counted on. One size 
does not fit all in housing, and whether we are looking at the 
HOME program or public housing or Section 8, there are a range 
of approaches here and all of them are under a good deal of 
financial duress, some more than others though. So, I want to 
ask you about three programs that have been very important in 
my district and just ask you what is going on and what kind of 
assurance you can offer.
    I am sure I am not the first to mention the Community 
Development Block Grants, but you have essentially flat-lined 
both CDBG and HOME. The HOME Program has been particularly 
useful to promote home ownership. In a district like mine, you 
can imagine this is a program we have taken full advantage of. 
You are flat-lining both of these successful programs or 
programs that I think most people would regard as great 
successes.
    I know you are dealing with the Budget Control Act and it 
looks like the budget we are getting now is going to reduce 
that allocation even further, which is not good news by any 
means and for housing in particular. So, you do have these 
constraints, and is that what is going on here or is there some 
sort of trend here where the department is going to continue to 
deemphasize CDBG and HOME in particular? Is there something you 
need to tell us about your assessment of those programs in 
particular?
    And then finally, I come to you once again as a champion of 
HOPE VI or as a witness to what HOPE VI has achieved in my 
district. We have had model HOPE VI Programs, on time, on 
budget, taking these devastated neighborhoods like no other 
housing community development program can do and has developed 
large areas in a very significant way that has simply turned 
around significant portions of the cities of Raleigh and 
Durham. I know Choice Neighborhoods is supposed to be the new 
HOPE VI, just take up the banner there, but that has been 
funded at a very low level: 5 implementation grants, I 
understand, last year; 30 planning grants. I wonder what you 
can say about where those awards have gone, to what extent it 
is indeed supplanting HOPE VI or to what extent the kind of 
emphasis we used to have in HOPE VI, the kind of awards you 
were able to make are simply now not being granted.
    Secretary Donovan. Congressman, I would say on all three 
programs that you mentioned--CDBG, HOME, and Choice 
Neighborhoods or HOPE VI--we certainly see Choice Neighborhoods 
as a successor that builds on the great success that HOPE VI 
had. In all of those cases, in a different budget environment, 
we would clearly think there is reason to fund them at a higher 
level. And, in fact, these are three of the programs that 
dollar for dollar are the best job-creators available. And the 
only reason that they are not funded at a higher level is that 
in a world where 83 percent of our budget goes to renew just 
existing units, and we have pressures of lower incomes for 
those families and inflation, it makes it very difficult to 
maintain the other investments that invest in new projects, and 
that really is the challenge, but we would clearly support 
higher levels.
    What I would say on Choice Neighborhoods in particular is 
that with just the five implementation grants that we have 
provided so far--and I would make the point one of the concerns 
I think you had and others had was would this deemphasize the 
renewal of public housing by moving to Choice Neighborhoods? 
And, in fact, what we have seen is that public housing has 
continued to be the very centerpiece of what Choice 
Neighborhoods is doing with over 75 percent of the winners, 
including housing authorities and public housing as the focus 
of what they are doing. So, I think we have kept our promise on 
that.
    And one thing I would point out, just those 5 
implementation grants, we wish there were more, but just those 
5 have leveraged from our awards 13 times the funding that we 
awarded in private capital to create jobs, to do construction 
to rebuild those neighborhoods. So, when I say dollar for 
dollar, these are some of the most powerful job creators, they 
leverage private sector funds in a way that is really 
remarkable, 13 times our investment in terms of the scale of 
private capital that is coming into just these 5 projects that 
we have awarded.
    Mr. Price. Well, both of those points are impressive about 
the leverage and also the public housing.
    Mr. Chairman, I would ask at this point in the record if 
the Secretary could furnish the list of those awards for the 
current year and any assessment he wishes to make about the 
marginal difference, the difference at the margins, that the 
substitution of Choice Neighborhoods for HOPE VI. I know there 
are some reasons for that.
    Secretary Donovan. Yes.
    Mr. Price. I would like to have your assessment of what 
kind of difference that, in fact, has made on the ground. Thank 
you.

                      TRIBAL TECHNICAL ASSISTANCE

    Mr. Latham. Mr. Secretary, I am glad to see the department 
is working with Native American Tribes to reduce large backlog 
of block grant funds. We continue to hear from tribes that 
specialized technical assistance is greatly appreciated, much 
needed. What are you doing, any innovation to improve the 
assistance for the tribes as far as the technical assistance to 
advance their projects?
    Secretary Donovan. Yes. One thing I would just say is to 
say thank you for the flexibility the committee has given us to 
improve our technical assistance through the Transformation 
Initiative, and I really do think that is making a real 
difference.
    I think one of the most important things we can do not just 
for Native American Tribes, but also, more broadly, is to 
continue to focus our efforts around rural communities.
    What we have seen and one of the many things I have heard 
from many of the tribes initially when we came in was that we 
needed to speed up and improve our funding processes. We have 
been able to cut by 82 percent the time it takes to get our 
NOFAs out. So, an 82 percent reduction in time I think has made 
a real difference in getting the money to where it is needed 
more quickly across the board. Housing counseling was an area 
you were very focused on last year, where we made real 
improvement. Choice Neighborhoods, we already have our awards, 
our NOFA out. But specifically targeting in other programs to 
smaller communities, rural communities has made a real 
difference for tribes.
    I would give you an example of our Rural Innovation Fund, 
where tribes did very well because of the technical assistance 
that we provided. Another area, sustainable communities, the 
committee made sure that we had a set aside for smaller places. 
We actually went beyond that and had a set aside for even 
smaller places that has made sure that over 50 percent of the 
winners in that program are rural communities and in particular 
Native American communities have done very well. One example, 
the first ever zoning code that has ever been implemented on 
tribal lands for this tribe was able to be funded through a 
Sustainable Communities Grant. So, making them eligible for the 
broader range of programs has been one of the best results I 
think of this technical assistance.
    Mr. Latham. I know there is some concern with folding the 
tribal technical assistance in with the Transformation 
Initiative, concern about that, and I do not know if we need to 
talk about it, or you need to respond.
    The Navajo Tribe says they plan to accelerate their spend-
out, nearly 110 million over each of the next 3 years. But then 
they received 90 million, so they are actually only going to--
they have got a $450 million backlog, but they are only 
reducing that by about 60 million. I do not know if you can 
work more closely with them to help them as far as----
    Secretary Donovan. That has been a particular issue as you 
know, that we have worked with them on. I know we have talked 
to the committee about what I would say is the concern about 
the set-aside for technical assistance. As we have moved with 
the cooperation of the committee towards this Transformation 
Initiative model, we have flexibly made available up to half a 
percent in our budget that could be transferred to The 
Transformation Initiative.
    That is something where we have come back to the committee 
for approval each year of how we are using it. And so I would 
say if it is a focus for the committee to make sure there is 
technical assistance funding available as it is for us, for 
Native American activities, that that is absolutely something 
that we would prioritize there and we would want to work with 
you on making sure there is funding for.

                               IT FUNDING

    Mr. Latham. I may run a little over here, if that is all 
right. And then this will be my last round if we could do that, 
okay? Thank you, Mr. Olver.
    Well, you have kind of gone to what my next question was 
going to be. Over the past couple of years you have sought 
authority to skim about a half or 1 percent off various 
appropriated accounts and use them for the Transformation 
Initiative with the goal of transforming HUD.
    This is your fourth budget and while we can understand some 
need for flexibility early in the process, I would think that 
by now you should kind of know where your funds are going to be 
needed to actually ask for appropriated funds. In quoting from 
your budget it says, ``Given the time between the formulation 
of HUD's budget and its passage, new information needs to be 
identified as current projects progress and policy issues 
develop with input from across the department, Congress, and 
outside experts and stakeholders.''
    You are telling me that the Department that oftentimes 
takes 365 days to get out the NOFA, you cannot plan ahead that 
far to ask for appropriated funds rather than just moving--it 
is like $200 million you are asking to move around.
    Secretary Donovan. So, first of all, I would say I am glad 
to report it no longer takes us 365 days to get those NOFAs 
out. We did reduce that time by 82 percent, so a big 
accomplishment. And part of that, frankly, was through the 
Transformation Initiative, the investment that we have made in 
technology. To be frank, what I would just say here is, in the 
private sector, in the public sector, I think there is no 
question that we do not know everything that is going to be 
needed. The exact amount that is ultimately going to be 
required in technical assistance, up to a year and a half in 
advance.
    Mr. Latham. Why are you unique to everybody else in 
government?
    Secretary Donovan. Frankly, this is an area where OMB and 
the administration believe it could be a model, and this kind 
of flexibility would be useful in other places as well. What we 
are trying to make sure of is in a program like the voucher 
program or others that--where we propose this, that having a 
set amount that would be transferred is--I think all of us 
would say is a less smart way to go than to have the 
flexibility to say if it is not needed this year, if a budget 
comes in below--or project comes in below budget, if the 
technical assistance because the market shifts in FHA we are 
doing less volume than we expected, to keep that money in the 
core programs might be a better approach rather than having it 
sit and not go used to help the families that I think we all 
want to help.
    And so that flexibility really goes to benefit our programs 
by saying it is up to a certain amount that could go to these 
uses, but if it turns out that it is not needed or that full 
amount is not required because of changes that we could not 
have anticipated a year in advance, the money stays within the 
programs to be used to help more families or to make the 
programs more effective.
    That is really the flexibility we are talking about. And I 
do not think we will ever get to a point where our planning is 
going to be perfect enough where a year in advance we are going 
to know, you know, down to the dollar. These are relatively 
small amounts in our budget overall. Exactly what the timing is 
going to be on these----
    Mr. Latham. You can always come back the committee and ask 
to reprogram. But, I mean, it is unique to your department. I 
think we all get nervous when we see people have the ability 
without any kind of oversight to basically move money around.
    You are talking--I mean, 200 million bucks--of funds 
sitting there that you can play with. You know, and I do not 
know why it is not possible, like in the IT funding to, you 
know, to have that go into the working capital fund to----
    Secretary Donovan. Let me give you an example. And I would 
say, Mr. Chairman, I----
    Mr. Latham. We were here.
    Secretary Donovan. I hope you believe we have--you have 
seen that we have worked very closely with you. We come back, 
we need your approval to use the money in that account, but let 
me just give you an example. Last week we had a meeting on our 
major effort with--this committee has been very supportive of, 
to restructure our financial systems at HUD.
    And as can often happen with a very large system 
investment, there were some issues that came up that made us 
step back and re-think--should we re-think the timing of the 
way this rolls out, and to phase certain pieces differently 
than we might have expected. That might have a real impact on 
what the spending would be this year in real time for this.
    Not something we ever could have anticipated, and I think 
the flexibility that--particularly on these types of projects, 
technical assistance, research and demonstrations, and 
particularly IT, is a benefit to both of us as long as we 
remain in very good communication, which I hope you would agree 
we have on this.
    Again, I would use a private sector example. This is the--
in my mind, more of the way a private sector organization would 
be able to operate to be flexible in real time on being able to 
do this. I would not say we are perfect yet on that or that we 
have reached where I would want to get as an organization, but 
I think the Transformation Initiative has made a real 
difference in helping us get there.
    Mr. Latham. Thank you very much. I apologize, Mr. Olver, 
for running over, but if you have a question----

                           HOUSING COUNSELING

    Mr. Olver. We have had discussions around HUD's Housing 
Counseling Program several times over the last several years. 
In any case, the 2012 bill set an ambitious deadline for 
awarding those grants within the 120-day period. And last week 
I was pleased to see that HUD actually had met that deadline 
and awarded within the 120-day period, another fast movement 
here.
    Just a few years ago, that kind of a 120-day turnaround 
would have been a long stretch, so I commend you for that. I 
know you set up a formal proposal to the committee which 
requires committee consideration on both sides of the Congress 
and approval for reorganization of the Housing Counseling, and 
it is under consideration.
    But I would like to know, in the meantime, what changes 
have you made in the Housing Counseling Program?
    Secretary Donovan. Congressman, let me just say, I do have 
the information on the admin fee study that you asked about. It 
will be completed in 2013, but in July we should have the first 
findings available. And so we look forward to being able to 
present that to the committee over the summer as we see those 
results come back.
    Mr. Olver. That would be good.
    Secretary Donovan. Specifically on housing counseling, 
there are a number of changes that we made that allowed us to 
get this money out dramatically faster than we had in the past. 
First of all, and I will say, we heard very clearly from the 
committee that this was one of the reasons that it was not 
funded in 2011 and that it was important that we move more 
swiftly. We actually drafted and put together the NOFA in 
advance of the committee appropriating the money so that we 
were ready to go right away.
    Mr. Olver. You actually assumed that the committee----
    Secretary Donovan. No, we did not.
    Mr. Olver [continuing]. That we would finally de-fund that 
money?
    Secretary Donovan. We just wanted to make sure that----
    Mr. Olver. Okay.
    Secretary Donovan [continuing]. If you chose to fund it, 
that we were ready to go. We thought that work was worth the 
risk that you might make a different decision.
    Second, we have reorganized our whole clearance process of 
how we have the different parts of the agency work together to 
streamline the approval processes, and we have also radically 
transformed the way we do funds control to simplify it and 
speed up getting those grants approved and out there.
    And then finally, I do think these changes in the office 
structure are very important. When we looked at it, I think the 
committee had a very reasonable concern that the way that we 
had organized our Housing Counseling Function was not ideal. 
And that lead to the reorganization that we have presented to 
the committee, and we look forward to working with you on it.
    Mr. Olver. Does that process that you have described also 
include the stakeholders, the people out there in the field who 
have to actually produce the counseling?
    Secretary Donovan. I will tell you, we had a series of 
meetings with our stakeholders. When we went and told them not 
to get too much in the weeds here, that we were eliminating our 
old logic model in the way that the NOFAs were done, we got a 
standing ovation. So this very much was a collaborative process 
with our Housing Counseling Organizations.
    Mr. Olver. Thank you very much., Mr. Chairman.
    Mr. Latham. Thank you, Mr. Olver. Mr. Price.

                   REDUCTIONS IN HUD'S BUDGET REQUEST

    Mr. Price. Thank you, Mr. Chairman. Mr. Secretary, as we 
close out here, let me return to the broader question I was 
raising earlier having to do with your overall allocation. As 
you know, The Budget Control Act last year set discretionary 
spending for fiscal 2013 at $1.047 trillion. That agreement is 
now being breached with the House Budget Resolution which is 
coming in at 1.028 trillion.
    And, of course, even lower numbers have been bandied about 
and debated.
    So I want to ask you, you have testified already that the 
very austere allocation you have been working with in putting 
this budget together have led you to do such things as flat-
line CDBG and HOME and you have acknowledged readily that that 
is not what you really want to do or think represents the best 
of the best policy approach.
    Choice Neighborhoods is another program that is being 
squeezed. That is a very minimal program compared to what many 
of us think it should be and what it has been at some points in 
the past. Now you are talking maybe here about tentative and 
project based Section 8 as well or public housing capital and 
operating expenses, just the whole array of departmental needs.
    Can you tell us, is there slack in this budget that we are 
missing somewhere? I mean, what is the implication for cuts 
even of the sort we are seeing in the House Budget Resolution? 
What our subcommittee's likely share of that is going to be? 
What implications do you see and to the extent you want to 
comment more generally on the challenge of preserving our 
housing stock or for that matter, keeping economic recovery 
going? What would you say?
    Secretary Donovan. So just to be very specific about the 
budget proposal, assuming that it would lead to a 22 percent 
reduction in the allocation to HUD, our estimate is that it 
would lead to over a million families losing their housing. 
Specifically, 585,000 families in the Voucher Program; 425,000 
families in the Project Based Section 8 Program; between 110- 
and 180,000 people in our homeless programs who would end up 
back on the streets, and those are just the core housing 
programs.
    You talked earlier about CDBG and HOME. CDBG alone that 
estimate--that level of cut we estimate would lead to the loss 
of almost 17,000 jobs just for the one year of the budget that 
we are talking about, and tens of thousands of new units of 
housing that would not be built as a result of the HOME 
reduction. So those are a few estimates to be specific about 
what that proposed cut would lead to.
    Mr. Price. And that is at the 22 percent level, which as I 
understand it is at the high end of the cuts being contemplated 
or discussed.
    Secretary Donovan. That is correct.
    Mr. Price. But even if something like what the House Budget 
Resolution puts forward is enacted and we get our share of 
that, I mean, it really is an important question, what our 
share of that is and what this subcommittee is going to be 
dealing with. Because presumably the numbers you cite would be 
or some fraction of those numbers would be the result of almost 
any reduction from an already austere allocation level.
    Secretary Donovan. That is right. Given the choices that we 
made around the Project-Based Section 8 Program, minimum rents, 
other very, very difficult decisions, additional cuts would 
result in families not being able to keep their housing.
    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Mr. Latham. I thank the gentlemen. Do you have any more 
further questions? If not, I think we will conclude the 
hearing.
    I will have some questions certainly to ask you for the 
record. One, I know there is real concern with some property 
and casualty insurance companies with some new regulations 
coming down, their ability to continue to offer those 
coverages. We will get more details and the question to you on 
that.
    But I just publically want to thank you for the 
communication and the cooperation. You are a great partner to 
work with, and I admire you very much in a very tough job 
there.
    Secretary Donovan. Thank you, Mr. Chairman. And I feel very 
much the same way. Both you and I would compliment your team. 
You have worked very, very collaboratively with us and I 
appreciate it. And want to say thank you to Mr. Olver for his 
service once again.
    Mr. Latham. The last time. Anyway, with that we will 
conclude the hearing.
    Secretary Donovan. Thank you.
    Mr. Latham. Thank you.

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                                          Thursday, March 22, 2012.

    DEPARTMENT OF TRANSPORTATION--MAJOR MODES FY 2013 BUDGET REQUEST

                               WITNESSES

MICHAEL HUERTA, ACTING ADMINISTRATOR, FEDERAL AVIATION ADMINISTRATION
VICTOR MENDEZ, ADMINISTRATOR, FEDERAL HIGHWAY ADMINISTRATION
JOSEPH C. SZABO, ADMINISTRATOR, FEDERAL RAILROAD ADMINISTRATION
PETER ROGOFF, ADMINISTRATOR, FEDERAL TRANSIT ADMINISTRATION

                   Chairman Latham Opening Statement

    Mr. Latham. The Subcommittee will come to order. Today we 
welcome administrators from the largest modes at the Department 
of Transportation. In no particular order, we have with us 
Administrator Victor Mendez from the Federal Highway 
Administration, Administrator Peter Rogoff from the Federal 
Transit Administration, Acting Administrator Michael Huerta 
from the Federal Aviation Administration, and Administrator 
Joseph Szabo from the Federal Railroad Administration. We 
welcome each of you here today, and we thank you for coming, 
and we look forward to your testimony regarding the fiscal year 
2013 budget request.
    We do have a tight schedule this year. We are not able to 
have individual hearings, which is probably a relief to each of 
you, from the DOT modes, nor are we able to include all of the 
modes today. However, we are providing an opportunity for 
members to question the four largest modes, and we look forward 
to a productive discussion.
    We are going to also have a series of votes, so when we 
leave for that, we will end the hearing. Because there is going 
to be an extended series of votes, the hearing is going to be 
somewhat limited, so we want to move along as quickly as 
possible. Mr. Olver, do you have any comments?

                 Ranking Member Olver Opening Statement

    Mr. Olver. Well, thank you all for being here. The Chairman 
has gone carefully through the first and last names, so I do 
not need to do that. As you know----
    Mr. Latham. I have got it parenthetically written down.
    Mr. Olver. [continuing]. As you know, Secretary LaHood was 
with us earlier this month, and testified on the overall budget 
for 2013. I believe this proposal reflects the vision needed to 
ensure America's competitiveness of the global economy through 
job creating and investments in our nation's transportation 
infrastructure. And I look forward to discussing in more detail 
your respective portions of the budget. So thank you for being 
with us.
    Mr. Latham. Thank you, Mr. Olver. And when the Secretary 
was here a couple of weeks ago, we decided to forgo opening 
remarks in the interest of time and it worked really well. We 
are going to ask you today to shorten your remarks to two to 
three minutes each, and after that, we will get right into 
questions. And, as always, your full statement will be part of 
the record. Administrator Mendez, you are recognized for two to 
three minutes.
    Mr. Mendez. Thank you and good morning.
    Mr. Latham. Good morning.

                 Administrator Mendez Opening Statement

    Mr. Mendez. Chairman Latham, ranking member Olver, and 
members of the Subcommittee, thank you for this opportunity to 
discuss the Federal Highway Administration's fiscal year 2013 
budget request. The President's request for FHWA includes $42.6 
billion for a restructured federal highway program that will 
put Americans to work repairing bridges and repaving roads now, 
while making worthwhile long term investments in America's 
infrastructure.
    FHWA programs not only help build and maintain our 
infrastructure, but also provide people across the country with 
transportation options to get to their jobs and other 
destinations.
    Investment in highway infrastructure is critical to the 
success of our nation's economy. But the true impact of our 
investment is realized by delivering the best value for the 
taxpayer dollars. We must pursue better, faster, and smarter 
ways of doing business.
    To that end, three years ago, I launched an innovation 
initiative that we call Every Day Counts to shorten project 
delivery time and speed the deployment and widespread use of 
new and proven technologies into the marketplace.
    In combination with FHWA's innovation initiative, the 
President's fiscal year 2013 budget request will support 
thousands of jobs, improve safety, spur innovation that will 
shorten project delivery and accelerate the deployment of new 
technologies, make our communities more livable, and lay a 
foundation for future economic growth. Mr. Chairman, with that, 
I conclude my remarks and will be happy to answer your 
questions.
    [The statement of Mr. Mendez follows:]

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                 Administrator Rogoff Opening Statement

    Mr. Latham. Thank you very much. Why do not we go to 
Administrator Rogoff?
    Mr. Rogoff. Thank you, Mr. Chairman, Mr. Olver, members of 
the Subcommittee. I am going to highlight just a couple of the 
Obama Administration's priorities for public transit this 
morning. Our funding request for safety is our first and 
highest priority. Our 2013 budget renews our request for $45 
million to go along with new authority that the Obama 
Administration has been seeking since 2009, to enable the FTA 
to develop and enforce common sense safety oversight standards 
for rail transit.
    The transportation authorization bill that passed the 
Senate by a wide bipartisan margin included many of the safety 
provisions requested by the administration. Even the deeply 
flawed and troubled bill that was reported by the House T&I 
Committee significantly expands FTA's responsibility for 
safety.
    In the past two budget cycles, this Subcommittee has 
deferred our request for new safety resources on the grounds 
that our authority had not yet been expanded. That expansion is 
about to come in some form, and it is long past time that we 
were able to move forward on these important safety 
improvements. Quite frankly, the status quo on rail transit 
safety oversight is really indefensible. I really implore you 
to take a hard look at our safety request this year, because, 
like I said, our authority is about to be expanded and we do 
need resources to address this issue.
    Transit ridership is, again, climbing to record levels, and 
the growth is occurring across all communities in America, both 
urban and rural.
    According to FTA data, transit ridership rose in January by 
a healthy 5.1 percent over the same period a year ago. We have 
some transit agencies, frankly, that are reporting growth of 10 
to 20 percent this year, and that comes without any expansion 
in bus route service or rail service; it is just ridership 
spiking to that degree.
    While transit ridership was increasing well before the 
recent rise in gas prices, those higher prices now threaten to 
undermine the ability of transit agencies to provide the 
increased level of service that the public is demanding. 
Transit agencies have to pay the higher fuel costs just like 
everybody else. It is worth pointing out that the majority of 
transit trips in America are still taken by bus. That makes our 
budget request for temporary and targeted operating assistance 
all the more critical.
    Finally, FTA also needs appropriate staffing levels in 
order to oversee federal funds and ensure they are spent 
properly. The fact is, the FTA has far fewer people overseeing 
more taxpayer money to more grantees than almost any other 
government agency. So I encourage you to look at those 
comparisons. We seek your support for a modest staffing 
increase even at a time when we know that staffing increases 
are hard to come by. Thank you, Mr. Chairman, that is all I 
have.

                 Administrator Szabo Opening Statement

    Mr. Latham. Thank you, Mr. Rogoff. Let us go to Mr. Szabo 
here with the Federal Railroad Administration.
    Mr. Szabo. Thank you, Mr. Chairman, to you, ranking member 
Olver, members of the Subcommittee. It is an honor to appear 
before you today on behalf of President Obama and Secretary 
LaHood to discuss the President's proposed fiscal year 2013 
budget for FRA.
    With 100 million more Americans by the year 2050, we must 
take aggressive action to increase our transportation networks 
capacity. High speed and modernized inner city passenger rail 
will boost capacity and alleviate the huge pressure on modes 
already weighed down by congestion.
    Since the year 2009, FRA has obligated 98 percent of the 
Recovery Act funding that started funding for the high speed 
and inner city passenger rail program. Our 32 state partners 
building out rail projects will provide service to 65 percent 
of our population in five regions. This year, there are $1.65 
billion of high speed and inner city passenger rail program 
projects that are under construction. Throughout the country, 
we are seeing examples of how connecting a town to passenger 
rail is triggering surges in new business and development. With 
the new 110 mile per hour service recently achieved in the 
Midwest, higher speed rail has officially expanded outside of 
the northeast corridor.
    The President's budget request includes $2.5 billion for 
rail projects, and the budget also requests $196 million for 
our top priority, which is safety. As the rail network grows, 
the President's funding request for safety will help us remain 
innovative in reducing accidents. We want to keep making 
progress addressing the human element in building stronger 
safety cultures.
    FRA is committed to true 21st century rail and to working 
with our state partners to better move people and goods. The 
systems will not appear overnight, but they will put people 
back to work today rebuilding America and ensuring that we make 
good on a basic promise, that the country we leave for our 
grandchildren is even stronger than the country our 
grandparents left for us.

                 Administrator Huerta Opening Statement

    Mr. Latham. Thank you, Mr. Szabo. Mr. Huerta.
    Mr. Huerta. Thank you very much. Good morning, Chairman 
Latham, ranking member Olver, and members of the Subcommittee. 
Thank you for the opportunity to discuss the administration's 
fiscal year 2013 budget request for the FAA. Our $15.2 billion 
budget is fiscally responsible and represents an important 
investment. It supports our mission to deliver the safest and 
most efficient aviation system for the traveling public.
    This budget allows us to maintain appropriate staffing for 
air traffic control, to keep pace with safety inspections, and 
to continue critical investments in both airport infrastructure 
and in NextGen technologies.
    We are always striving to make our system safer. The FAA 
has made important advancements in improving safety such as the 
new flight duty and rest requirements for pilots that we 
announced last December. And we are working toward a final rule 
that required air carriers to implement safety management 
systems.
    We aim to improve cost efficiency, and we are tightening 
our belt internally at the FAA, as well. We had to make hard 
choices in this year's budget about how to maximize benefits, 
and, for example, we are focusing our airport grants on smaller 
airports.
    We thank Congress for our four year reauthorization which 
will continue vital safety programs, create jobs, and support 
NextGen. The FAA forecasts that air traffic will nearly double 
in the next 20 years, and to handle this growth, we need to 
transform our aviation system through NextGen. We are moving 
from the ground base navigation and surveillance system of the 
last century to the satellite based system of the 21st century. 
The FY 2013 budget request includes $1 billion toward those 
efforts, and at the same time, the budget maintains our 
existing infrastructure which must perform flawlessly every day 
while we pursue this transformation.
    NextGen will deliver more on time and fuel efficient 
flights and continue to ensure that we operate the safest air 
transportation system in the world. It is a better way of doing 
business for the FAA, for the airlines, for airports, and for 
the traveling public.
    These improvements are vital to expanding on the 10 million 
jobs that civil aviation creates and the $1.3 trillion the 
sector contributes to the U.S. economy. I thank you for your 
support of America's aviation system and for keeping this vital 
economic engine running at full throttle. Thank you.

                           HIGHWAY TRUST FUND

    Mr. Latham. Very good. Thank you all for your brief opening 
statements. We will do five minute rounds if we can so 
everybody can get questions in with our limited time. If we 
could try to stay to that five minutes, Mr. Olver, we will do 
that, I know.
    Administrator Mendez, the Highway Trust Fund as we know it 
is unsustainable. Your estimate for the trust fund is to run 
out of money in the summer of 2013 if we continue to spend at 
the current levels without any new sources of revenue. The FY 
2013 budget would put an eight year band aid on the problem by 
using the supposed OCO savings to fund increased spending and 
making all surface transportation spending mandatory, even 
though there is no long term revenue source to pay for it. 
Essentially, the budget would abandon the user supported trust 
fund model that has been in place since 1956. First of all, I 
guess, are you comfortable with abandoning that model that has 
worked in the past?
    Mr. Mendez. Mr. Chairman, the President's proposal 
certainly addresses the benefits of our investments in 
transportation, so that is what we are focused on. Moving 
forward with recommendations in terms of how to actually pay 
for all of that, we are comfortable with that approach.
    Mr. Latham. That is a yes. At our hearing with Secretary 
LaHood, members of the Subcommittee made it clear that we do 
not view the OCO as legitimate revenue because it would have to 
be borrowed money, if, in fact, that money were to be spent in 
the future, which no one is anticipating.
    We are not willing to increase our country's already 
enormous mandatory spending. I think it is telling that neither 
the House nor the Senate authorization bills propose any kind 
of mandatory shift in transportation spending. Is it not time 
to abandon this, I mean the idea of going to mandatory?
    Mr. Mendez. Well, as I said, our proposal, as it stands 
today, is pretty clear on that point. We believe that is the 
way to go. I know there is some disagreement on the OCO 
component. But if you look at the CBO recommendations, I 
believe CBO actually scores OCO. So we are comfortable with 
that approach.
    Mr. Latham. Okay. Have you submitted anything to do that?
    Mr. Mendez. No, we have not.
    Mr. Latham. If Congress is unable to pass new authorization 
by the time we mark up this bill, I guess we have to assume it 
is an extension of SAFETEA-LU. And without new authorization, 
it says the trust fund can only sustain about nine billion in 
FY 2013 highway spending if we maintain the $4 billion balance, 
which you recommend, otherwise you have delays for the states. 
And if we take the trust fund down even further to a zero 
balance in 2013, we can spend about 22 to 24 billion, although 
the states would have delays in their reimbursement. Would you 
want to tell us about the difficulties if, in fact, we get into 
that scenario?
    Mr. Mendez. Well, if we get into that scenario, I think if 
you run through the numbers, that would equate to maybe a 30 to 
35 percent reduction in highway investment--it would be 
devastating. I think you hit it on the nose. When we reimburse 
states, there would be a delay in that regard. The states 
themselves would have a hard time trying to plan the major 
projects that make a difference. I am sure some states would be 
able to continue with some of the smaller, minor projects, 
pavement preservation and such, but I think as you look at our 
needs throughout the entire nation, the major projects that are 
critical from a national perspective probably would not move 
forward.
    Mr. Latham. Okay. We are doing a lot better than last year.
    Mr. Mendez. Yes, we are. Yes, sir. Thank you.

                         EMERGENCY RELIEF FUNDS

    Mr. Latham. At least you are kind of answering questions. I 
actually applaud you for getting the emergency relief dollars 
out. Places like Iowa, they got hammered last year, that was 
extraordinarily important. And each year the authorizing 
committee is provided about 100 million in emergency funds. The 
rest, which totaled 1.7 billion last year, is provided by the 
Subcommittee. And we have got to make sure that the largest 
disaster expenses submitted by the States are sound.
    The GAO report said you could do a better job documenting 
and verifying emergency damage estimates. Are you doing 
anything to follow their recommendations?
    Mr. Mendez. Yes, sir, we are. And I do want to backtrack a 
little bit. I want to say that I did go to Iowa to do the 
ribbon cutting on I-685. They were able to turn that one around 
really--well, I will leave that up to the state. But, the 
important thing was, we were able to turn that around rather 
quickly, in three months. Obviously, the weather helped, so 
that was really good for your state.
    We are continuing to look at those recommendations from 
GAO. We are looking at modifying our manuals and looking on a 
nation-wide basis through our structure to ensure that we 
improve upon the reporting structure. We do monitor the ER 
expenditures very closely. And, we are always open for any room 
for improvement. I am supportive of that.
    Mr. Latham. Okay. Thank you. Mr. Olver.

                  TRANSPORTATION STATE OF GOOD REPAIR

    Mr. Olver. Thank you, Mr. Chairman. I just want to start 
out slowly here. I am going to ask a question that I would like 
an answer from each one of you. The last budget, the 2009 
budget was the last budget under the SAFETEA-LU Authorization 
Act.
    We have had now at least three budgets since then, the '10, 
'11, and '12 budgets, and we are trying to write now the 2013. 
There have been eight extensions of the SAFETEA-LU budget in 
that period of time, short term extensions that have gotten us 
through that group of years. Now, in 2009, the American Society 
of Civil Engineers gave grades for America's infrastructure 
that fell from C minus to D minus. And I am not going to list 
each one of your grades, you probably know what they were. Each 
of your agencies has done their own evaluation of the state of 
good repair and needs of your modes, events, and initiatives to 
address the infrastructure deficiencies.
    I would like each of you, and it has got to be fairly short 
and concise, more concise than my question, to assess the 
progress that you have been able to make over these last three 
years. Has your agency been able to achieve a better grade than 
the ASCE gave you three years ago in the area of state of good 
repair? Okay. And we will go from Mr. Rogoff down the line.
    Mr. Rogoff. Well, the short answer to your question, sir, 
is, no, and let me explain why. We have a considerable backlog 
of unmet needs in transit, some $78 billion by our own estimate 
in unmet capital needs. Now, the Recovery Act did a very good 
job in helping us buy down some of that backlog.
    But the reality is, the backlog increased faster than we 
could buy it down with the Recovery Act. So we have basically 
been treading water, and absent a reauthorized program that 
allows us to set a new course that includes our new state of 
good repair program, we are going to continue to tread water. 
As far as our grade on that, it sort of reminds me of my son's 
performance in algebra right now, sort of barely passing and 
lots of room for improvement. And I think that is where we are 
in transit across the country.
    Mr. Olver. Mr. Mendez.
    Mr. Mendez. Yes, sir. Thank you. I would agree with my 
colleague. ARRA, in fact, in the highway arena did help quite a 
bit. We made a lot of improvements. But again, the demand out 
there, as you are all aware, is overwhelming. I can tell you 
that over the last decade or so, our deficient bridges did drop 
from 31 percent to 29 percent. So we do have a good handle on 
bridges and safety on roadway conditions.
    And that is in spite of the increase in traffic volumes and 
all of that. So I know you understand there are a lot of issues 
out there.
    But I would say one other thing, that if you look at what 
is happening on a national basis, and probably all of you face 
it in each and every one of your states, when it comes to the 
major projects, the ones that make a real impact not only from 
a state perspective, but from a national perspective, we are 
lagging in that.
    We do not have the resources. And each and every one of you 
is probably struggling with at least one project in your state 
that cannot move forward that would make a major impact.
    Mr. Olver. Okay. Would you say your grade--you have earned 
a grade higher or is it deteriorating?
    Mr. Mendez. Well, unlike my colleague, I do not have kids, 
so I do not go by grades. I am looking at my statistics.
    Mr. Olver. All right. We do not need to spend the time 
then. Mr. Szabo.
    Mr. Szabo. I do not think there is any question with 
congestion costing our nation nearly $130 billion a year, that 
it is effecting our economic competitiveness. From a rail 
standpoint, I believe we have made good progress in the past 
three years in expanding and advancing our infrastructure for 
both freight and passenger rail.
    The TIGER program has done a great job--targeting 
investments to expand the use of freight rail. And in the 
passenger rail program, we are seeing some great substance 
actually take place this year.
    As I mentioned in my testimony, you will see 110 mile an 
hour operations on both the Chicago/Detroit segment and 
Chicago/St. Louis segment this year. And within the next two 
and a half years, roughly 80 percent of Chicago/Detroit and 
roughly 75 percent of Chicago/St. Louis will be at those 
sustained speeds of 110 miles per hour including----
    Mr. Olver. And some of that may not be state of good 
repair. But I would generally agree with you, you were a 
smaller agency three years ago and we have put a lot of effort 
into it, so some of that has to have gotten to state of good 
repair. Mr. Huerta.
    Mr. Huerta. I also have a son taking algebra, so I do 
follow grades. We were given a grade of D in 2009. As you know, 
the FAA has to operate and sustain the existing infrastructure 
while making the transformation to NextGen, and we have made 
very good progress on that in the last three years.
    Some of the achievements to date include modernizing the 
automation of the base infrastructure that we have for air 
traffic control. Our en route automation modernization is 
replacing a 40 year old host system that we use to separate air 
traffic into high altitudes.
    We have a companion program that looks at terminal 
automation modernization, and that process modernizes the RADAR 
processing in display systems that air traffic controllers use 
at or near the nation's major airports.
    At the same time, we are also accelerating benefits 
associated with this technology.
    Mr. Olver. How much has your grade improved in all of this?
    Mr. Huerta. I have not checked my grade lately, but I think 
it has gone up.
    Mr. Latham. Judge Carter.

                            CONTRACT TOWERS

    Mr. Carter. Thank you, Mr. Chairman. Mr. Huerta, the 
President's '13 budget proposes a $2 million cut in the FAA 
contract tower program. This is one of the most successful, 
cost effective air traffic safety programs around.
    While this may not sound like a lot of cut for the size of 
this federal budget, it represents a potentially $8,000 cut per 
contract tower distributed equally among the 248 airports. If 
only general aviation airport control towers are hit, it would 
be a $16,000 cut per airport.
    In Texas, we have invested a great deal of time and money 
constructing contract towers with the understanding that the 
FAA would provide funding for the operation.
    Georgetown Airport, which is in my district, in fact, quite 
close to my home, is a general aviation airport. And all across 
Texas--we are involved in this program. Can you explain why the 
administration is recommending reductions when this is a very 
cost effective safety program for the general aviation at 
least?
    Mr. Huerta. Certainly. The contract tower program and the 
cost share elements, one of the things that the President has 
suggested is we re-examine and analyze the cost benefit 
calculation that determines the relative amount of local share 
that goes with it. The President's proposal is to update the 
cost-benefit calculation and increase the local share 
requirement. At the same time, however, we do recognize that 
reauthorization has asked for an 18-month moratorium on updates 
to be made before those changes would actually be implemented. 
So that will make it difficult to achieve the $2 million cost 
saving that we project based on the President's request for 
2013.
    Nonetheless, I think the question is still out there, that 
it does make sense for us to update the cost share formulas 
associated with the contract tower program. We have not done 
that for four years and it is something we need to do. We want 
to work with all of the stakeholders to come up with an 
equitable resolution there.
    Mr. Carter. Many view this as sort of a move against 
general aviation. General aviation creates 1.3 million jobs and 
contributes $150 billion to our economy. It is important to us. 
In Texas alone, we have 391 public use airports, 50,932 pilots, 
31,690 general aviation aircraft. It is an important part 
getting across a big state.
    In fact, anybody in politics in Texas that is running 
state-wide and does not have access to a private airplane is 
not going to get elected. It is just generally that important. 
And I am asking the question directly. There are many in 
general aviation that think that the issue with contract towers 
is just one step in the discouraging general aviation. What is 
the Department of Transportation and the FAA doing to encourage 
general aviation, and is there a move to discourage general 
aviation?
    Mr. Huerta. There is not a move to discourage general 
aviation. It represents a very significant element, as you 
point out, of contribution to the economy. In terms of 
operations in the system overall, I think it reflects the 
majority of aviation operations that exist in the national 
airspace system.
    What the President's proposal attempts to do is recognize 
that over time, the general fund contribution to the operation 
of the FAA has gradually crept up. What we are looking to do is 
find ways to assign more of those costs to the users of the 
system. We recognize this is an important contribution and we 
are trying to do it as equitably as we possibly can.

                            HIGH SPEED RAIL

    Mr. Carter. Well, we see a trend of having a concept of 
transportation in this administration, and in order to push 
that concept, we are trying to come up with things, and we are 
seeing the President out on the stump today talking about 
issues to push people over into rail and so forth.
    I am from Texas, 110 miles an hour, we drive 110 miles an 
hour. I am all for a 225 mile an hour train, but I am not for a 
110 mile an hour train, especially when it is only for like 40 
miles of a 200 mile stretch. So it may fit D.C., it may fit 
Chicago, it may fit New York, it may fit the East Coast. I 
would argue it does not fit the Midwest, I would argue--at 
least the central part of the country, it certainly does not 
fit Texas. And I do not want us to start discouraging one 
transportation means which is being effectively used in our 
state because other states want to encourage pushing resources 
over into rail.
    I am not anti rail. My granddaddy was an engineer on the 
railroad. But for effectiveness in my state, general aviation 
is very important to us. And so I wanted to raise that issue, 
because I certainly would not want to see us discouraging 
general aviation. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Carter. Mr. Pastor.

                                 H.R. 7

    Mr. Pastor. Thank you, Mr. Chairman, and good morning 
gentlemen. Recently the T&I Committee passed H.R. 7 and it 
proposes to eliminate the bus state of good repair funding for 
multimodal operators. Those are agencies that deal with both 
bus service and the transit service. And as you know, the 
Valley of the Sun, Valley Metro, does both. So Mr. Rogoff, by 
elimination of this program what does it do nationally and what 
does it do to us particularly in the Valley of the Sun?
    Mr. Rogoff. Well, Mr. Pastor, there were four items 
pertaining to transit that were in the President's statement of 
Administration policy on H.R. 7 in which we issued our veto 
threat and this was one of them.
    Frankly, by FTA's own numbers, two-thirds of the bus trips 
taken in America are provided by transit agencies that provide 
both bus and rail. And to take the bus funds in the bill and 
direct them solely to those agencies that provide only one-
third of the bus trips, we just see as deeply wrongheaded. It 
is sort of like sending the subsidies to where the passengers 
are not.
    We feel strongly that obviously if we are going to have a 
bus program of any size, all bus operators should participate 
in it and especially those bus operators that are performing 
the majority of trips, like Valley Metro in Phoenix.

                           202 SOUTHWEST LOOP

    Mr. Pastor. Thank you. Mr. Mendez, as you know, we are 
dealing with the Southwest loop of the 202. And it seems like 
there is concurrence on the north and south alignment, both by 
the city of Phoenix, Arizona Department of Transportation, and 
MAG, which is the regional planning council. And their north-
south alignment is 61st Avenue; they have agreed that that is 
the best place.
    But the Federal Highway Administration has been hesitant to 
give its blessing or to jump aboard on it. And the question I 
have is what are the concerns that the agency has and how soon 
do you think those concerns will be met so that we can go 
forward with the procedure to finally construct the 202 in 
Southwest Valley?
    Mr. Mendez. Well, Congressman, the big issue there is, to 
work on some of the 4F properties to ensure that we can find a 
way to mitigate against that. Now one thing that we have been 
working on very closely with Arizona DOT, with the regional 
planning council, MAG, and the city of Phoenix, is to approach 
the State Historic Preservation Office and look for a way to 
reevaluate the historic properties.
    And, in fact, late yesterday afternoon I spoke with ADOT 
Director John Halikowski about the issue and we are working 
together to approach the SHPO and see what kind of results we 
can get. It really comes down to a matter of the historic 
property being in the alignment. And so we want to find a way 
to move it forward and mitigate at the same time.
    Mr. Pastor. It is my understanding that the properties have 
not been declared historic, that they have the potential to 
becoming historic, but no one seems to have an interest in 
making them historic.
    If that is a situation that no one has come forth in the 
last 10 years to make them historic, why is that problem 
persistent and why don't we agreed that the probability of them 
becoming historic is minimal and let us go forward and begin 
the citing on that 61st Avenue?
    Mr. Mendez. Right. It's my understanding that there are 
certain criteria within the law that identify what could be 
historic property. This property we are talking about meets, I 
believe, most of those criteria, if not all of the criteria----
    Mr. Pastor. But in the last 10 years no one has stepped 
forward to say we want to protect it or claim it is historic.
    Mr. Mendez. Right. But again, moving our way through the 
requirements of the 4f section of the law, we have worked 
collaboratively with everyone at the table on that. It is not 
yet designated. It is a possibility that it could be 
designated. So now what we are trying to do is reevaluate what 
we have done to date and try and back off the limits so we 
can--if we need to mitigate we will mitigate--and move forward.
    Mr. Pastor. I guess my question is, there is always a 
possibility, but you also have to decide what is the 
probability. And it seems that everyone concerned says that the 
probability is very, very minimal. There is always a 
possibility, but the probability is minimal. So why don't we 
proceed forward, so that we can continue the project and move 
it forward? So does probability deal at all in your 
determination?
    Mr. Mendez. Well, we will continue to work on the issue and 
try and get through the 61st alignment.
    Mr. Pastor. I thank you for it.
    Mr. Mendez. Thank you.
    Mr. Latham. Thank you, gentlemen. Mr. Diaz-Balart.

                         TRANSIT FORMULA GRANTS

    Mr. Diaz-Balart. Thank you very much, Mr. Chairman. I have 
a number of questions. First actually before questions, really 
a comment to Administrator Rogoff. You obviously are very 
familiar with the issue of Dade County when the FTA suspended 
the county's transit formula grants, for a pretty good reason I 
may add.
    So I know you have spoken several times. I mean, I have 
spoken to you and your staff. But I really just want to thank 
you for dealing with this issue. I know that you were meeting 
with the mayor, with our new mayor, or you are going to?
    Mr. Rogoff. I actually spoke on the phone with Mayor 
Jimenez just yesterday just to update him on our most recent 
audits. We have got a lot of work we both need to collectively 
do, but we are making sure that the public is still served 
through the process.
    Mr. Diaz-Balart. Well, I just want to thank you for that 
and I encourage you to continue to, as you have, to work with 
our new county leadership and also just to let you know that I 
support the efforts of making sure that the taxpayer and the 
transit rider is well served. And again, sir, I look forward--
you know, use me as an ally.
    Mr. Rogoff. Absolutely.
    Mr. Diaz-Balart. Consider me an ally on this issue, if you 
would.
    Mr. Rogoff. And we believe the mayor is committed to it as 
well. There is just----
    Mr. Diaz-Balart. Yes.
    Mr. Rogoff [continuing]. A good bit of work that needs to 
be done.

                           NEXTGEN EQUIPTAGE

    Mr. Diaz-Balart. Absolutely. I think that is probably an 
understatement.
    A few other issues, Mr. Chairman, that I have. The recently 
enacted FAA reauthorization bill authorizes the secretary to 
establish a Federal loan guarantee program to incentivize 
NextGen equipage. That is an issue that has been central in all 
of the FAA's and DOT's NextGen testimonies for now more than a 
year.
    So when should the aviation community, specifically the 
general aviation community, expect implementing guidance and 
how do you envision that new program working?
    Mr. Huerta. Thank you very much.
    Mr. Diaz-Balart. Mr. Huerta. Thank you, sir.
    Mr. Huerta. Thank you very much. Yes, the FAA bill does 
incorporate language that calls on us to develop a credit 
guarantee program to facilitate equipage. This, combined with 
efforts that the agency is focusing on with respect to 
operational incentives are very important I think because there 
are two parts to the delivery of NextGen: the infrastructure 
that the FAA delivers and then what the industry needs to do to 
be able to take advantage of the capabilities. This has been a 
central issue.
    We were quite pleased to see that language. We are working 
within our finance, operations, and NextGen organizations in 
the FAA to frame out how best to respond. Then we want to sit 
down with industry. This is what the legislation envisions as 
the partnership approach: working with private-sector funders 
and then ensuring there is a link between delivery of 
capabilities and the users of the system equipping.
    We would envision that it looks at the whole spectrum of 
users of the system: air carriers, business aviation, and 
general aviation. Those are details we have to finalize, but we 
look forward to working with the industry.
    Mr. Diaz-Balart. Any idea of when you--are thinking of the 
timelines for this?
    Mr. Huerta. I do not have a timeline yet. We are still 
framing out what the steps are, but we can report back to you 
with a timeline.
    [The information follows:]

                         Loan Guarantee Program

    The FAA is pleased with the authority in the recently enacted FAA 
Reauthorization Bill that allows the agency to establish an avionics 
incentive program to help commercial and general aviation (GA) aircraft 
equip with NextGen avionics.
    We are currently talking to our stakeholders to seek their input on 
the loan guarantee program. We hope to design a program that meets 
their needs. One goal for an equipage program would be to encourage 
deployment of NextGen-capable aircraft in the National Airspace System 
sooner than would have occurred otherwise.

                         UNLEADED AVIATION FUEL

    Mr. Diaz-Balart. Great. That would be great.
    And actually, Administrator, a word if I may. Also last 
year, the appropriations bill included $2 million for the 
research on initiatives to transition to unleaded aviation 
fuel. And I think the administration also, recommended $2 
million this year I believe. There is obviously great interest 
in that.
    And I understand that you are working with stakeholders on 
this issue, number one. Also the Aviation Rulemaking Committee 
recently made recommendations to the FAA. When do you think the 
FAA will announce these recommendations and what is the process 
for implementation?
    Mr. Huerta. With respect to fuel?
    Mr. Diaz-Balart. Yes. Yeah, the transition to----
    Mr. Huerta. On transition to unleaded av gas, I'll need to 
get back to you with a specific response, but this is a 
significant issue. As you know, av gas is, for general 
aviation, the last leaded fuel out there, and there is a lot of 
concern in the general aviation community about its continued 
availability.
    Mr. Diaz-Balart. Thank you, sir.
    Mr. Huerta. But I will get back to you with that.
    [The information follows:]

                   Unleaded Aviation Gasoline (AVGAS)

    The FAA is taking a leadership role in the General Aviation (GA) 
industry's efforts to transition to an unleaded aviation gasoline. 
Recent initiatives such as the Unleaded Avgas Transition Aviation 
Rulemaking Committee (UAT ARC), in combination with the continuing 
research and development support provided by the FAA William J. Hughes 
Technical Center have made significant contributions to address the 
technical challenges of introducing an unleaded aviation gasoline. Our 
target is to work with industry to have a replacement fuel for leaded 
aviation gasoline available by 2018 that is useable by most GA 
aircraft. Once an unleaded fuel is available, each aircraft and engine 
combination will need to be evaluated and approved to use the new fuel. 
The timeline for the GA community's transition to an unleaded fuel is 
uncertain and is largely dependent on market forces, the continuing 
availability and cost of leaded fuel versus an unleaded alternative, 
and the future regulatory environment that may restrict lead emissions 
from aircraft sources. The FAA is committed to working with industry to 
assure a viable path towards an unleaded fuel for the GA fleet.

    Mr. Diaz-Balart. There are obviously economic issues and 
market challenges and transition fleets and everything else. So 
if you could just get back to us on that it would be great.
    Mr. Huerta. Absolutely.
    Mr. Diaz-Balart. Mr. Chairman, if I may, just a couple of 
more questions, if that is all right with you?
    Mr. Latham. In 25 seconds.

                       FRA CRASH AVOIDANCE SYSTEM

    Mr. Diaz-Balart. In 25 seconds. All right.
    The issue of--and this is for Mr. Szabo--the crash 
avoidance system, which obviously has been controversial at 
best and we know the issues. So to make it quick, with all of 
the issues out there, does the FRA believe they have enough 
resources and personnel dedicated to the implementation of the 
PTC? And what is a timetable for issuing the final rules 
because obviously there is a lot of uncertainty out there?
    Mr. Szabo. Well, the final rule, of course, is out there 
published already. Based on the President's Executive Order we 
are doing a revisit on that for some tweaks. A final rule 
removing the dual test, which the industry was so concerned 
about, will, in fact, be published by June of this year. It 
should save the industry somewhere between half a billion to a 
billion dollars.
    And then the remaining miscellaneous issues that the 
industry have been concerned about will have the Notice of 
Proposed Rulemaking published by August. And of course, there 
is a report that is due to Congress by the end of this year. We 
will have that to you several months early. It is in 
administrative clearance right now.
    Mr. Diaz-Balart. Thank you, sir. Thank you, Chairman.
    Mr. Latham. Thank you. Mr. Price.

                       CAPITAL INVESTMENT GRANTS

    Mr. Price. Thank you, Mr. Chairman. We appreciate all of 
you gentlemen being here today and the good work you do in your 
agencies. In the limited time I have I want to focus on 
Administrator Rogoff, if I might, and on the question of the 
criteria governing capital investment grants, the rules that 
are underway and the rules that might be contemplated in the 
future.
    We did appreciate, Administrator, your visit to the 
Triangle area of North Carolina a few weeks ago; glad to be 
able to show you firsthand the groundwork we are laying for a 
strong regional bus and transit system and also, hopefully, we 
were able to demonstrate the critical importance of regional 
rail to assuring our quality of life as we grow.
    As you well know, our regional transit agency was hamstrung 
by DOT's midstream change in cost effectiveness standards in 
the last administration, and more generally by a New Starts 
system that seem to accommodate expansion projects and to meet 
the needs of our largest metropolitan areas at the expense of 
areas like ours.
    So I applaud the secretary's efforts to reform the 
evaluation criteria and the streamline of the process. Under 
the last administration's rule, cost effectiveness counted for 
about 80 percent of the project's worth. Now, of course, that 
is still a criteria, but the administration has begun to 
evaluate projects in a more comprehensive manner, including 
land use, increased mobility, economic development, and so 
forth.
    Just this January, you published a rule that would 
significantly revise the criteria to incorporate social equity 
and environmental considerations, and would aim to speed up the 
process, speed up FTA review by altering the process required 
for projects to obtain a full funding grant agreement.
    So I wonder if you could comment on the status of this 
rule. I know your comments are just now coming in, but what 
kind of practical difference do you anticipate this will make? 
When do you expect it to be finalized?
    And then just one further matter. I wonder if you could 
comment on efforts to update the New Starts program to reach 
smaller urban communities, communities that do need Federal 
support. I have always thought it made sense to allow more 
flexibility in the amount of Federal support, the Federal 
share. And you have said the FTA would not take a one-size-
fits-all approach.
    The Federal share is down; is 50 percent now down from 60 
percent. In some cases a share of more like 25 or 30 percent 
would be significant enough to get a project off of the ground. 
So I wonder what your thoughts would be on that matter.
    Mr. Rogoff. Well, let me address them one at a time. First, 
let me say I, too, really enjoyed the visit and I really 
commend the folks in the Triangle for approaching this on a 
regional basis. It makes sure that we are not going to 
balkanize systems and we are not going to have competing and 
duplicative service. No one has the money for that these days 
and there is a lot of need down there. As you know, Triangle 
Transit has had some stutter steps in terms of moving off of 
the ground and deploying a valuable system.
    We have seen great success in Durham, where voters have 
already voted to tax themselves to help match Federal dollars. 
We are looking forward to seeing what Wade County and Orange 
County are likely to do in the future. But there seems to be a 
lot of enthusiasm and we want to partner with them.
    On the rulemaking, the comment period for the Notice of 
Proposed Rulemaking is still open, but it will close shortly. 
And the Secretary and I are determined to get a final rule out 
by this summer. The proposed rule has been very widely well-
received and as such, we do not expect to have a very difficult 
time dealing with the comments we have received. It really, as 
you said, takes a broader view in terms of what are the 
benefits these projects provide and get us away from that very 
narrow criteria that was imposed by our predecessors in 2005, 
which, frankly, it was super statutory. They imposed criteria 
even though they had no basis in the law. We are really, in 
many respects, just going back to the law as it exists.
    In terms of streamlining, yes, our rulemaking will also 
enable us to streamline the process. The real benefits of 
streamlining our process will come with reauthorization. I will 
say with all of the disagreements that we are having with 
elements of the House bill especially, and all of the 
differences between the House and the Senate and the Executive 
Branch over reauthorization, the approach on how we need to 
streamline the New Starts projects is an area where we have 
remarkable unanimity.
    We think the language in the Senate bill is actually very 
workable and the House bill language on this particular topic 
is workable, too. Obviously there are other elements of the 
House bill that we are troubled by. So in terms of share, in 
terms of raising the available Federal share for smaller 
projects, that is just challenging for managing the pipeline of 
money.
    I would love to have the same 80/20 split as we have in 
highways. However, I do not have the resources to pay for that. 
So that is really a----
    Mr. Price. Excuse me, Mr. Chairman. Let me just clarify. 
What I am talking about is lowering the share as a way of 
letting the money go further and----
    Mr. Rogoff. Lowering the Federal share?
    Mr. Price. Yes.
    Mr. Rogoff. Well, I think as you said, we have effectively 
done that because we are now, you know, not only at 50 percent, 
but some projects are at 40, 30, and 20 percent based on what 
they can put up and what we can put up.
    Mr. Latham. Thank you, gentlemen. Mr. Womack.

                         HIGHWAY INFRASTRUCTURE

    Mr. Womack. Thank you, Mr. Chairman. And before I ask a 
couple of questions I would like to just associate myself with 
the remarks of my friend Judge Carter down here on contract 
towers. That is, associate myself with his remarks, all but 
that driving 110 miles an hour thing. We have too many hills; a 
little dangerous.
    This is for Administrator Mendez. We all know that road 
construction infrastructure projects are a source of great 
jobs. As a former mayor, I look at it not necessarily in the 
short term on jobs, but the long term on jobs and the return on 
investment we get from a lot of this infrastructure. And with 
that said, you know, I spoke last year about the I-49 project 
and I will use it as an example because it is in my district, 
and we do appreciate your support on the I-49 corridor.
    But the large question is how do we keep these projects 
that we have already committed to funded through completion. 
When it is certain that they are going to provide us a long-
term return on investment through massive economic development 
that has already been proven, in my district, for example? How 
do we do that and ensure that the heartland has this capacity 
to continue to build?
    Mr. Mendez. Yes, sir. I think you hit really on the crux of 
the matter here. We all know, I believe, that when you invest 
in our infrastructure it is good for the Nation. It is good for 
economic growth, particularly in today's economic conditions, 
and trying to get people back to work. It certainly does that. 
We know that for a fact.
    I think what we need to focus on, as you mentioned, is the 
long term. We have these major projects that are really 
important, not only to the state, but to the Nation. The 
processes we have in place when there is Federal 
participation--we do have a process where on the major projects 
we do require a financial plan to be submitted before we 
actually participate in those big projects. We then continue to 
monitor those projects on a monthly basis.
    We have an office in each and every state, but we also have 
an office here at headquarters that monitors the progress on 
major projects. And that's our focus, to ensure that these 
projects continue.
    If there are hiccups we try and address them in concert 
with the state DOT. So it is really, once they are up and 
running, it is a matter of, how do we better manage that 
process? And we can only do that in concert with the state 
DOTs.
    Mr. Womack. The greater Northwest Arkansas area, I think 
can prove to be a model for how a region is putting its skin in 
the game. In fact, there is a proposal coming up in November to 
levy a sales tax in the state for infrastructure improvements. 
Is it possible or is it even possible or practical for the 
grant process to help reward areas that are willing to tax 
themselves, levy themselves, so as to have a lot of skin in the 
game and further leverage these very precious Federal 
resources?
    Mr. Mendez. Right. And you hit on another key point about 
regions coming together as was discussed here just a while ago. 
I have been there. I have been at the front line at a state DOT 
and when you bring all of the parties together, you can really 
create great plans and actually move them along.
    I think what we have done with some of our grant programs, 
we look at, for example, the TIGER grant program. If you come 
in with an application that shows that you are leveraging any 
funding you might get or receive from Federal aid, I think that 
gives you a better positioning in the award situation. So we do 
look at that in some of the grant programs.
    Mr. Womack. Then I am going to pivot to the process, 
particularly the environmental impact statement process, and I 
will give you an example. In my district, Northwest Arkansas 
Regional Airport received money for an airport access road back 
in the late 1990s and they have waited 12 years to finish this 
entire environmental review process with no end in sight, no 
certainty to be seen.
    So I would ask, with this example of mine, how can we 
further refine the environmental review process to allow these 
projects to move forward? Or should we just accept that they 
are doomed to some kind of a 10- or 15-year process?
    Mr. Mendez. No, sir, I cannot accept that. I think there is 
a lot of room for improvement within FHWA. I believe you missed 
my opening remarks.
    Mr. Womack. I did, sir.
    Mr. Mendez. We do have an innovation initiative underway 
within FHWA to look at some of these processes and improve 
them. I believe there is a lot of flexibility within the 
current laws that we have not explored. On the environmental 
process, a project like this under that innovation initiative, 
we have SWAT teams. We call it Enhanced Technical Assistance, 
where we would send in a SWAT team to do whatever it takes to 
resolve those issues.
    Mr. Womack. Thank the gentleman. I yield back.

                            HIGH SPEED RAIL

    Mr. Latham. Thank the gentleman. Mr. Szabo, the high-speed 
rail project from Los Angeles to San Francisco is currently 
about $100 billion in costs and it is also $87 billion short of 
funds, and that is even after California committed $10 billion 
to the project and the Federal Government committed $3 billion 
to it. I think it is notable that there are no private 
investors who have decided to commit any funds to it.
    I know you are full steam ahead on high-speed rail, so let 
us focus on the one line that is actually being planned today, 
from Fresno to Bakersfield. The line is estimated cost about $6 
billion, but the 6 billion does not include the cost of 
electrification or any rolling stock on it. Do you know how 
much those will cost?
    Mr. Szabo. Well, actually what you are quoting from is the 
earlier version of the business plan, which is in the process 
of being revised right now, and so there will be new numbers 
with----
    Mr. Latham. Is there a new plan?
    Mr. Szabo. Yes. Oh, yes. In fact----
    Mr. Latham. Is it published?
    Mr. Szabo. It is due to be released next week by the 
California High-Speed Rail Authority. Through some value 
engineering, they believe that the initial construction costs 
will be less and so many of these concerns that have been 
raised will be addressed.
    Mr. Latham. So where do we get the funds for the hundred 
billion?
    Mr. Szabo. It is going to take a public-private 
partnership. And there is, in fact--there continues to be 
strong private interest. So the key is to make sure that 
between the money that the Federal Government commits, that the 
state commits, and with the operating plan that they have put 
forward, that there is sufficient meat there to entice the 
private sector to come forward with their investment.
    But their interest continues to be strong. We continue to 
hear from the private sector and so does California High-Speed 
Rail.
    Mr. Latham. Do they have any authority to use the Federal 
funds for any activities other than the high-speed rail 
activities in the grant agreement?
    Mr. Szabo. No, the funds that we have granted, you know, or 
have awarded through our grant process are specific for that 
purpose of which they applied for. So there is not flexibility 
either under the law or the grant process to shift them to a 
different purpose or to another use.
    Mr. Latham. Did you have any idea of what the $3 billion 
would do as far as existing lines, as far as repair and 
improvements?
    Mr. Szabo. You mean elsewhere in the system? Well, again, 
it would depend on those proposals. I mean, if you are talking 
about the Northeast corridor, of course, we have put $3 billion 
in there over the last couple of years and there continues to 
be needs. The important thing is for the good planning to be 
done in order to help define the projects and put into place 
the engineering and NEPA work to make sure we can go forward.
    That effort is being done now, led by the Northeast 
Corridor Commission. And, in fact, the FRA is leading the 
environmental planning. We initiated that effort a couple of 
months ahead of schedule to start taking a look at the next 
generation for the improvements on the Northeast corridor.

                       AIRPORT REVENUE DIVERSION

    Mr. Latham. Okay. Mr. Huerta, are you aware of any patterns 
of airport revenue diversions at any locations across the 
country? Which ones are you looking at, and what are you doing?
    Mr. Huerta. Airport revenue diversion is something that we 
take pretty seriously, and we have a regular and ongoing audit 
process where we work with our airport's district offices to 
try to identify this. We do have a couple of specific requests 
that have come in and have been brought to our attention. Most 
recently, there is a request that has come in through the 
Office of the Inspector General hotline relating to Los Angeles 
World Airports, and potential diversion relating to cost 
associated with the policing at the airport.
    We have been working with the Office of the Inspector 
General and with the local authorities there and they are 
responding to questions. We have requested the OIG give us some 
additional time to continue to work this, and we owe them a 
report at the end of May.
    Mr. Latham. Did you have any idea of how much has been 
diverted in Los Angeles?
    Mr. Huerta. I can get back to you with details on that.
    Mr. Latham. And what are the issues with full-time rather 
than part-time?
    Mr. Huerta. Correct. It relates to, are they actually 
carrying out airport-related functions? That is exactly the 
subject of our investigation right now, to try to determine 
what exactly is going on there.
    [The information follows:]

                       Airport Revenue Diversion

    The investigation into Los Angeles World Airports (LAWA) is 
ongoing.
     In August 2011, the US DOT Office of the Inspector General 
(OIG) became aware of allegations that LAWA may have misappropriated 
airport revenues by diverting them from airport security purposes to 
security services unrelated to the airport.
     The OIG informed FAA of the allegations in October 2011. 
FAA subsequently contacted LAWA. LAWA was advised of the allegations 
and asked to respond accordingly. Information continues to be exchanged 
between LAWA and the FAA. As of February 2012, LAWA disagreed with the 
allegations.
     Due to the complexity of the cost allocations and 
accounting involved, there has been no final determination as to 
whether funds were actually diverted and misappropriated.
     FAA expects to complete its investigation by May 31, 2012. 
FAA plans to share its findings with the Committee at that time.

    Mr. Latham. Okay. I do not have enough time to ask another 
question. So Mr. Olver, I will yield to you.
    Mr. Olver. I will be happy to use your time.
    Mr. Latham. The gentleman's time is expired.

                        SURFACE REAUTHORIZATION

    Mr. Olver. Mr. Huerta, you have just managed to get 
recently a long-term authorization, so you have got your 
marching orders for some period of time. We are now within 10 
days of requiring a new surface authorization or a string of 
extensions.
    And my own experience suggests that if we do a short-term 
extension--and it was very depressing to hear my chairman say, 
we are headed toward a 3-month extension, because I think that 
what happens is that we will get to 10 days from the end of 
June and have not a surface transportation program ready to go 
even then. And there will be the same argument of whether the 
extension or something else.
    If Congress does not take action, the endpoint of inaction 
is that all of the surface transportation agencies, those that 
are involved in the movement of people and freight, will end up 
facing some sort of shutdown scenarios of planning and 
constructions and so on. That is unthinkable in a sense.
    But I would like to have a sense from the three of you, who 
are in the surface transportation, what impacts a series of 
short-term extensions would have upon the programs that you 
deal with. And in particular, we are right into the beginning 
of the construction season this year, when things are being 
sent out to bid and construction would be starting and so 
forth. What are the impacts that are particularly going to 
affect us for this year?
    So if you can put your thinking cap and not more than a 
minute or so on each of you to summarize what you think the 
problems are with short-term extensions.
    Mr. Rogoff. There are several problems with short-term 
extensions, the biggest one being the uncertainty it sows on 
the part of our grantees and their inability to go to contract 
on projects of any significant size. The upshot of that is it 
depresses potential employment that we are going to generate 
from those contracts. And importantly, it also, if you will, 
dumbs down the type of work that they can and should be doing. 
So rather than doing major important capital improvements to 
deal with their state of good repair, they are going to be 
doing a lot smaller purchases, not knowing whether they can 
execute a contract of any size.
    That means that buses are not going to be bought, bridges 
are not going to be replaced, and it is why, frankly, we feel 
strongly that the House rather than take up another short-term 
extension, which, as you say, goes right into the construction 
season and really knocks right through it, that the House 
should take up and pass the Senate bill. Because it is paid 
for, it is bipartisan, it is balanced, and will provide the 
certainty our users need.
    Mr. Mendez. Well, Mr. Olver, I think in the highway arena 
it is very similar to transit. If you look at the implications 
from a long-term planning perspective, if you are a state DOT, 
for example, it really puts a big damper on your ability to 
plan long term.
    I think for those states that are up in the northern parts 
of the country, construction season is pretty much around the 
corner here, and that is going to have a major impact. So, 
there are some pretty serious implications going short term to 
short term.
    Mr. Szabo. Yeah, there is no question that the uncertainty 
brings significant problems. In our case, it would affect 
public safety. It would, you know, affect our ability to 
implement things like positive train control in a timely 
manner, to assist the commuter rail expansion that is going on 
and the work that we have to do with those folks, efforts like 
conductor certification.
    And then, of course, it also would put the $10 billion of 
grants that have already been awarded at some element of risk 
because, you know, we have to provide strong oversight to our 
grantees and make sure that public funds are being spent 
appropriately. And it is critical that we have the resources 
that we need for that oversight.
    Mr. Olver. Okay, so we are talking about what happens with 
the ninth extension pending here. We have already had eight. 
And if we end up doing some of the ones with aviation we are as 
short as a couple of weeks. You know, it became really silly. I 
will have another chance probably. Thank you.
    Mr. Latham. We will see. Mr. Diaz-Balart, you did not have 
a question. Mr. Womack.

                            HIGH SPEED RAIL

    Mr. Womack. Thank you. I have just got one more question. 
And not to kick the high-speed rail issue much further, but it 
is hard to convince people in my area about the merits of high-
speed rail. I understand that my area is not like some of the 
other areas, such as the Northeast corridor, even in Florida 
where they have turned back money on high-speed rail. So it is 
hard for me to go through my district and tell people the 
advantages of it.
    And as it concerns Amtrak, if you want to catch that as it 
goes through Arkansas, you have got to get up between 1 and 3 
a.m. It is just a matter of population density. I get all of 
that.
    Mr. Szabo. Right.
    Mr. Womack. So is this rail concept feasible in the middle 
of our country where there is low population density? And if 
not, how can we, at a time of crushing debt and deficits that 
our country continues to rack up, divert money away from known 
contributing pieces of our vital economic development 
initiatives, like road and bridge construction, to projects 
like high speed rail? Help me address that issue with my 
constituency.
    Mr. Szabo. Sure. I think it comes back to a point I made 
earlier about congestion already costing our Nation $130 
billion a year and that cost continuing to go up. You compound 
that with the fact that our Nation is going to see about a 33 
percent growth in population over the next 35 years.
    And then it is important to note that our program is 
targeted to give states this option as a tool to meet their 
mobility needs. Our existing investments have been primarily 
focused in 5 mega regions that hold 65 percent of the Nation's 
population. The population and congestion in these areas are 
significant: the Midwest, Pacific Northwest, California, the 
Northeast corridor, and the Southeast. It is not a matter of 
saying, Arkansas, you have to move forward with passenger rail.
    But it gives your state DOT another tool, another option, 
that if it meets the needs of your state, provides mobility to 
your citizens. Of course, people today are looking for choices, 
transportation choices, so they are not trapped into paying 
escalating fuel costs. It is just a matter of bringing some 
balance to the transportation system, providing people choices, 
and giving options to the DOTs.
    Mr. Womack. Well, I will end with this. It is not a 
question, it is just a statement. The fact is that congestion 
is a quality of life issue, and the more congestion you have, 
the more frustrating it is for people.
    And given the fact that if we put a little more money into 
some of the projects, such as those I articulated earlier in my 
series of questions, that it is possible that the future 
population growth of this country may indeed not be in some of 
the more metropolitan areas because it does become a quality of 
life issue.
    And indeed, maybe a good portion of this population growth 
will happen in areas of our country that are primed and ready 
for that type of population growth, but for the need to improve 
their ability to move traffic under more traditional means.
    So I will just kind of leave that as a thought because I 
have seen that in my district, and I think you will see more of 
it. And with that, I yield back.
    Mr. Latham. I thank the gentleman.
    Mr. Pastor.
    Mr. Pastor. Mr. Chairman, thank you very much, and I still 
have faith in bipartisan reauthorization. I have not given up 
on my colleague, Steve LaTourette. So, I hope that----
    Mr. Latham. We are all eternal optimists. That would be 
wonderful.

                  GROUND-BASED AUGMENTATION TECHNOLOGY

    Mr. Pastor. It would be a great thing.
    Mr. Huerta, congratulations on your appointment, but let me 
talk a bit about the ground-based augmentation system 
technology. As I understand it, you are evaluating it to see 
how it enhances and improves the air traffic control 
capabilities. Now, where are we on the evaluation? And then the 
question is, if it is going well, are you going to expand it to 
what airports?
    Mr. Huerta. We are still evaluating what its performance 
is, and I think the principal question and concern that we had 
is the potential interference issues we ran into during some of 
our early testing relating to GPS jammers at adjacent 
facilities. We have successfully been able to shield it with 
that, and I think that it does provide a very good augmentation 
using ground-based systems of aircraft position, which greatly 
enhances safety and performance.
    As the evaluation continues, we do have a further rollout 
plan that we will be developing and, at that time, I would be 
happy to share it with you.
    Mr. Pastor. Do you have a timeline more or less?
    Mr. Huerta. I do not.
    Mr. Pastor. You do not. Okay. I know that a lot of the 
lamps you are replacing in the PAPI system, you are bringing in 
the LEED lamps, and, obviously, that is saving a lot in terms 
of energy use.
    Mr. Huerta. Correct.
    Mr. Pastor. Where are we on that in the replacement 
throughout the system?
    Mr. Huerta. I will need to get a current report on where we 
are. I had a briefing on it in a recent visit to our 
aeronautical center, but I do not have a good feel for exactly 
where it is nationwide.
    Mr. Pastor. Well, if you could let me know----
    Mr. Huerta. I will.
    [The information follows:]

                Ground Based Augmentation System (GBAS)

    There are two areas of FAA GBAS technical evaluation, Category I 
(CAT I) and Category III (CAT III).
    GBAS CAT I was given a System Design Approval (SDA) in September 
2009 by the FAA as a non-Federal system. Excessive Radio Frequency 
Interference (RFI) on the Global Positioning System (GPS) was 
identified at the first installation location, Newark, New Jersey. The 
preliminary finding is that it is possible to mitigate GPS interference 
at GBAS ground installations. The work is in the final stages and the 
FAA expects to issue a revised GBAS SDA by mid-July 2012, which would 
allow FAA to approve GBAS for operational use by August 2012. GBAS is 
currently not scheduled for CAT I deployment by the FAA. However, 
several domestic airports have pursued non-federal GBAS installations 
based on airline requests.
    On GBAS CAT III, the primary focus of FAA efforts is validating the 
International Civil Aviation Organization (ICAO) Standards And 
Recommended Practices (SARPS). The FAA GBAS program is leveraging the 
CAT I system, and identifying how that system either meets or can be 
modified to meet CAT III requirements. Several contracts are in place 
for this work, which the FAA and it is expected to be completed in June 
2014. A non-federal approval of that system is currently expected to 
take two years, making GBAS CAT III available in July 2016. While 
engineering and standards work on GBAS CAT III continues, no investment 
decisions have been made on deployment and implementation.

    Mr. Pastor [continuing]. Where we are at and where we are 
going, I would greatly appreciate it. I think it saves energy 
at many of these airports.
    Mr. Huerta. Oh, yes, it has great cost-saving potential. 
How we roll that out and how it is managed is something that is 
very significant benefit to us.
    [The information follows:]

           Precision Approach Path Indicator (PAPI) Lighting

    The program to replace the Visual Approach Slope Indicator (VASI) 
with the Precision Approach Path Indicator (PAPI) lights in the 
National Airspace System (NAS) is progressing. There are 793 federally-
owned commissioned VASIs remaining in the NAS. In fiscal year 2012, six 
replacement projects have been completed to date. Twenty-seven 
replacement projects were completed in fiscal year 2011. On average, 
the FAA completes 25 of these projects per year. All six runway ends 
(08, 26, 07L, 25R, 07R, and 25L) at Phoenix Sky Harbor International 
Airport have a commissioned PAPI. All VASIs there have been replaced.
    A contract was awarded in August 2010 to New Bedford Panoramex of 
Claremont, CA for development on the Light Emitting Diode (LED)-based 
PAPI. A Critical Design Review was conducted successfully in August 
2011, and we are planning on conducting the Design Qualification 
Testing starting in May 2012. The current schedule calls for an In-
Service Decision (ISD) in July 2013, with production equipment 
available for installation in August 2013. The ISD authorizes 
deployment of the equipment into the NAS. After demonstration of 
initial operational capability at the key test site.
    The waterfall schedule for LED PAPI sites will be developed in 
August 2013 after the ISD is reached.

    Mr. Pastor. I thought I heard in your statement, Airport 
Improvement Grant, that in the airport improvement grants you 
were concentrating on the smaller airports.
    Mr. Huerta. That is correct.
    Mr. Pastor. And the question is, what happens to those of 
us with bigger airports? Because we also have needs, as you 
well know, because we have most of the traffic.
    Mr. Huerta. Sure. The President's proposal has two parts. 
It is a reduction in the base AIP program and focuses on the 
smaller airports. But central to it, is increasing the PFC cap 
authority for the larger airports so that they would be able to 
generate local revenues through passenger facility charges that 
would support their capital program. You need both pieces of 
that to make it work.
    I think if you talk to virtually all of the large airports 
in the country, they would love to have that flexibility. They 
feel it gives them a more predictable and local source of 
revenue that enables them to support their capital 
improvements. The important point is you need both components. 
In order to reduce the AIP allocation and concentrate it 
towards smaller airports, you have to have the increase in the 
PFC to go with it.
    Mr. Pastor. Well, I will check with Sky Harbor to see where 
they are on this and I will get back to you.
    Mr. Huerta. Certainly.

                             COMMUTER TRAIN

    Mr. Pastor. Mr. Szabo, in the past, you have been working 
with ADOT and some of our efforts to connect commuter train 
Pima County and Maricopa County, which is Phoenix-Tucson metro 
areas. And I know that we have had a number of studies and you 
have been working with ADOT, the Arizona Department of 
Transportation. Where are we and how is that going?
    Mr. Szabo. I would have to get back to you on that, but we 
can set up some time to talk about it. I know staff was just 
out in the Southwest here last week working with the leaders 
out there on their planning efforts and we can set up a 
briefing for you.

                         ARIZONA INTERSTATE II

    Mr. Pastor. Mr. Mendez, how about I-11? How are we doing 
there?
    Mr. Mendez. Well, as you are aware, that has been an 
ongoing issue and----
    Mr. Pastor. That is why I asked the question. [Laughter.]
    Mr. Mendez. The Secretary has been very clear. We are 
prepared to work with all the states to make that happen in 
Nevada and Arizona. Other than having discussions about it, 
there is no formal proposal on the table. So, as soon as the 
states approach us with some formality, we are ready to work 
with you and make that happen.
    Mr. Pastor. Thank you. I yield back, Mr. Chairman.

                            HIGH SPEED RAIL

    Mr. Latham. I thank the gentleman.
    Kind of following up with Mr. Womack, Mr. Szabo, what is 
the definition of high-speed rail for the purpose of the 
Committee here? What is high-speed?
    Mr. Szabo. Under our program, it is a three-tiered program, 
three components. There is core express service, which is 
speeds of 150 to 220 miles per hour or higher; and then there 
is regional service, which operates from 90 to 125 miles per 
hour; and then you have your traditional service, what we call 
emerging service for emerging markets, which is 79 miles per 
hour. Under Federal statute, Congress defined it as those 
speeds over 110 miles per hour, but our program is three-
tiered, essentially based on what they do in both Europe and 
Asia. It is based on the international experience.
    Mr. Latham. So why last year, the week before the 
elections, did the Secretary come out and make a $230 million 
grant for a ``high-speed rail,'' yet the average speed was 53 
miles an hour?
    Mr. Szabo. Which particular project was it?
    Mr. Latham. Chicago to Iowa City.
    Mr. Szabo. Chicago to Iowa City. I mean----
    Mr. Latham. Fifty-three miles an hour.
    Mr. Szabo. Yes, the award was based under the High-Speed 
and Intercity Passenger Rail Program that we have. So that, at 
this point, the initial operating speed----
    Mr. Latham. So, does that fit the definition?
    Mr. Szabo. That particular one would be regional. So, it is 
in the second tier of our program, and I think the speed that 
you are coming up with is talking about initial construction, 
not where it would be at full build-out.
    Mr. Latham. That is what you said.
    Mr. Szabo. Yes. So, that is not a full build-out. It is not 
a full build-out, Mr. Chairman.
    Mr. Latham. I do not know. Those are your numbers. Okay. I 
do not want to leave anyone out here.

                             TRANSIT SAFETY

    Mr. Rogoff, the budget proposes an increase in transit 
personnel by a whopping 117 full-time equivalents, 47 new for 
the base program, 45 for an unauthorized Office of Safety, 25 
more for an unauthorized Rail Transit Safety Initiative, and 
that is a 22 percent increase. I do not know any other agency 
that is getting a 22 percent increase in FTEs. The budget 
states that the 47 new ones in the core program are currently 
being paid by stimulus funds, primarily to do environmental 
work.
    Are those must-have employees, or I am sure you would like 
to have more employees, and how many actual positions are you 
funding with the 47 FTEs?
    Mr. Rogoff. Well, let me just say, you may recall, I 
touched on this briefly in my opening statement. We understand 
that this is not the best environment in which to come forward 
for more people. Frankly, it was not an easy sell given that 
environment to get it in the President's budget, but there is a 
reason that it is there, twofold.
    One, on safety, this is a huge unmet need. As I said in my 
opening remarks, we have a very weak and ineffective oversight 
regime on safety, specifically in transit, that I do not think 
anyone of any political stripe wants to defend. We have some 
common sense measures that would not create a huge, new 
bureaucracy to try to address that. And that is where those 
positions come from.
    As it relates to our core program, here again, it was not 
easy to get additional people in the President's budget, but 
the reason we were successful in making the case is when you 
look at the size of our program and how it has expanded and the 
size of our staffing and how it has not expanded. I do not want 
to get into comparisons with my other colleagues at the table, 
but we have hundreds of grantees that we have to deal with, 
some of whom are not very sophisticated and need a lot of hand-
holding in order to put good money to work on transit dollars. 
We want to make sure that those dollars are spent according to 
all law and regulation. And when it comes to this, I have 
challenges where I do not have enough staff to send a staff 
person to every one of the triennial audits that we do with our 
agencies, and that is a real problem. I would love to have a 
chance, give me 10 minutes in your office, I will walk through 
with you what the most critical needs are. But both on safety 
and on our core mission, we really are short-staffed and the 
President's budget recognizes that.
    Your question on positions, I am happy to provide that 
separately for the record.
    [The information follows:]

    FTA estimates the 47 FTE equates to approximately 69 positions. The 
out-year costs will be determined by a range of factors including 
government-wide pay raises, promotions, and within grade increases that 
are not known at this time.

    Mr. Latham. Okay. Mr. Olver, I will give you chance here.
    Mr. Olver. Thank you. Thank you, Mr. Chairman. Let me just 
to follow that little piece for a moment.
    You had mentioned in your opening statement that on this 
safety issue for transit, that the two positions on the Senate 
and then the House authorization proposals were both better 
than nothing.
    Mr. Rogoff. Indeed.
    Mr. Olver. But in one minute can you sort of give me what 
are the essential differences and what is the minimum of 
resources that you would need for that safety program, which 
was 70 new full-time employees, $45 million, or something like 
that in order to achieve either of them or each one of them?
    Mr. Rogoff. The core differences between the House and the 
Senate bill, sir, is the Senate bill importantly reverses a 
provision that has been in law since 1964 that prohibits my 
agency from issuing any safety regulations of any kind. And the 
House bill does not do that, but the House bill does call on us 
to certify the state agencies that do this. These state 
agencies are very underpowered and do not have the expertise or 
training they need to do this function. So, there is a core 
difference between the House and the Senate. We think the 
Senate bill is much more comprehensive, but, yes, the House 
bill does significantly expand our area in safety.
    We right now are starting with a very small safety staffing 
component. We have situations right now where you have got 
three railroad tracks side by side, two of them are inspected 
by the FRA with a voluminous rulebook and have Federal 
inspectors looking at the facilities and the third track, 
whether it is in Denver or in Washington, D.C., as was 
happening with WMATA, is inspected largely by nobody. And a 
one-person state office is supposed to be looking at this 
question.
    Mr. Olver. But if you were to go in the direction that you 
have described of a ``voluminous rulebook----''
    Mr. Rogoff. We do not want to go there.
    Mr. Olver [continuing]. It would be a serious problem.
    Mr. Rogoff. We would be playing right at--we do not want 
to. I mean, we have always said that we do not even want this 
initiative to be more than 1 percent of our budget and it does 
not need to be. We have some common sense safety proposals that 
are not a new bureaucracy. We do not want to create Mr. Szabo's 
rulebook for rail transit agencies. We really want to install a 
high-level safety management system approach. But we need to 
move on with it, and we need people to help us do that, and we 
need the authority in the law to help us do that, and the 
administration has formally asked for this in legislation back 
since 2009.
    When you look at the comparison on how many passengers are 
in the regulated safe area, and then the many, many-fold more 
passengers that are in the unregulated area, it really does not 
make sense and it is not a status quo that people want to 
defend.
    Mr. Olver. Okay. Well, I think that is a very cogent 
description of what the situation is because you need some 
safety and some authority. If you have the authority, then you 
have to have some resources in order to exercise the authority.
    Mr. Rogoff. If I can get all the new resources, I would 
like to work with the Committee on how we can redirect some 
existing resources to really get on this.
    Mr. Olver. Okay. We have already been called on votes, is 
that correct?
    Mr. Latham. Yes, we had a call.

                        SURFACE REAUTHORIZATION

    Mr. Olver. All right. Well, let me just finish. I want to 
make a bit of a statement that relates back to this idea of 
short extensions and so on.
    The efficient movement of people and goods around this 
country by all of your modes and whatever else we do in 
transportation ends up really being something like 20 percent 
directly and indirectly, with the supply systems for all of 
those organizations, the manufacturing, the products that are 
involved, represents at least 20 percent of our total economy. 
I can really think of nothing that would be more effective at 
slowing down the economic growth, at slowing down the recovery 
from this enormous recession that we have lived through, more 
effective at keeping the unemployment rate up at a totally 
unacceptable level, than a series of simple, short extensions 
of the authorization legislation. It keeps the whole industry 
from managing to move on and plan and get their work done.
    That is all I want to leave you with today. That is my 
belief in what is at stake here at the moment. Thank you very 
much for being here.
    Mr. Latham. Thank you very much, Mr. Olver. I could not 
agree more that we need to get the reauthorization done.
    Mr. Olver. Well, thank you. We agree. We agree. [Laughter.]

                          FAA REAUTHORIZATION

    Mr. Latham. We always agree with each other, on everything.
    I just have one quick question here. In the reauthorization 
for FAA, the programs are significantly lower than the levels 
in your budget request and the President just signed and agreed 
with what the levels were, but then the request comes out to be 
considerably higher. How do you justify that? Are you going to 
be able to go by what the President just agreed to or I do not 
understand?
    Mr. Huerta. Well, I think that there are two dimensions to 
that. What the President's request reflects is what we think we 
need to maintain the system, to operate the system, as well as 
to----
    Mr. Latham. He did not know that when he signed it?
    Mr. Huerta [continuing]. The transition to--let me finish.
    Mr. Latham. I am sorry.
    Mr. Huerta. To manage the transition to NextGen. However, 
the timing of these two things, they crossed in the night, as 
you know, when the reauthorization was signed and the 
preparation of the budget request. What we need to do now is 
work together and come up with what is the appropriate resource 
we need to dedicate to FAA programs and the investments we need 
to make in the years ahead.
    Mr. Latham. Yes, he agreed at the authorized levels, right?
    Mr. Huerta. As I said, the President's request reflects 
what we think we need to maintain the system----
    Mr. Latham. It is different than----
    Mr. Huerta [continuing]. And to invest in the system going 
forward.
    Mr. Latham. Right.
    Mr. Huerta. We all want to work together and come up with 
the right number.
    Mr. Latham. That is good, I like that. [Laughter.]
    I think with that, unless you have anything else, Mr. 
Olver, we thank the panel very, very much. We look forward to 
working with you very closely to continue your modes in the 
best possible way to fund them properly and within the budget 
constraints that we have.
    So, with that, we will adjourn the hearing.

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                                          Thursday, March 29, 2012.

                     HUD AND DOT MANAGEMENT ISSUES

                               WITNESSES

HON. CALVIN L. SCOVEL III, INSPECTOR GENERAL, U.S. DEPARTMENT OF 
    TRANSPORTATION
HON. DAVID A. MONTOYA, INSPECTOR GENERAL, OFFICE OF INSPECTOR GENERAL, 
    U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
PHILLIP R. HERR, MANAGING DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, 
    UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE
MATHEW J. SCIRE, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY INVESTMENT, 
    UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE
VALERIE C. MELVIN, DIRECTOR, INFORMATION MANAGEMENT AND TECHNOLOGY 
    RESOURCES ISSUES, UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE
    Mr. Latham. Let's call the hearing to order.
    As you are probably well aware, we are going to have some 
votes that will interrupt us today, so, we may want you to 
shorten your opening statements.
    Today, we welcome HUD's Inspector General, David Montoya; 
DOT's Inspector General, Calvin Scovel; Matthew Scire, GAO's 
Director for Financial Markets and Community Investment; 
Valerie Melvin, GAO's Director for Information Management and 
Technology Resources; and Phillip Herr, GAO's Director for 
Physical Infrastructure.
    This subcommittee looks to your offices to help us conduct 
critical oversight to ensure our tax dollars are well spent and 
actually go to meet our Nation's housing and transportation 
needs. This oversight is even more important at a time when we 
must shrink the Federal budget and deal with our mounting debt. 
Waste, fraud, and abuse should never be tolerated, but this is 
especially true in today's budget climate.
    We look forward to your testimony, and we will look closely 
at your work as we make the tough decisions that will be 
required as we put together this year's Transportation-HUD 
funding bill. This is our last subcommittee hearing for fiscal 
year 2013, so we will soon be writing our bill with the hope 
that the authorizers finish their work and make it to 
conference with the Senate by September.
    I would ask each of you to limit yourselves to 2 or 3 
minutes, whatever you can do.
    And, with that, I would like to recognize the distinguished 
ranking member, Mr. Olver, for our last hearing--and his last 
hearing.
    Mr. Olver. I am looking forward to it.
    Mr. Latham. Oh, come on.
    Mr. Olver. Our last hearing.
    Well, thank you, Mr. Chairman.
    It is a pleasure to speak with all of you today. Your 
organizations play a key role in supporting this subcommittee's 
oversight of the Department of Transportation and the 
Department of Housing and Urban Development, and we greatly 
respect the work that you do. This is especially true this 
year, as our accelerated schedule has limited the number of 
oversight hearings that will be held, making your work 
particularly informative. For this reason, I thank you for 
instilling within your respective organizations a culture that 
facilitates open communication and cooperation between our 
staffs.
    I would also like to commend the Chairman for holding this 
hearing and continuing the practice of holding the hearing with 
GAO and the respective IGs during each Congress. We started 
this practice in 2007 when I was Chairman of the subcommittee, 
and I believe it has been very valuable. I hope it continues 
after I leave.
    Thank you, Mr. Chairman. I yield back.
    Mr. Latham. Thank you, Mr. Olver.
    We will begin with HUD's Inspector General, Mr. Montoya. 
Your full written statement will be included in the record, but 
you are recognized.
    Mr. Montoya. Good morning, sir. Thank you.
    Chairman Latham, Ranking Member Olver, and members of the 
subcommittee, I am David Montoya, the Inspector General for the 
Department of Housing and Urban Development. Thank you for the 
opportunity today to discuss HUD's management challenges. It is 
my first opportunity to testify before this subcommittee, and I 
thank you.
    Since becoming the Inspector General 4 months ago, I have 
personally met with Secretary Donovan and his Assistant 
Secretaries on a regular basis. These meetings have been honest 
and open dialogues about the many management challenges that 
they face, and I find the Secretary to be genuine in his 
interest in addressing many of the issues that you will see in 
my written testimony in detail.
    Certainly one of the top management challenges for the 
Department is maintaining the health of the FHA's Mutual 
Mortgage Insurance Fund, and my office continues to be 
concerned the FHA fund has not been able to obtain the capital 
reserve ratio of 2 percent for the past 3 years. While we 
commend the Department for taking action to address the Fund's 
finances, we remain concerned that these actions may not be 
enough to make up for the losses.
    The other major area for the Department is within the HOME 
program, the largest Federal block grant to State and local 
governments for affordable housing. Our previous external audit 
work focused on high-risk grantees. We have commonly found a 
lack of adequate controls. While HUD focuses its monitoring 
activities at the grantee level through its field offices, 
grantees, in turn, are responsible for monitoring their 
subgrantees, and we have found on many occasions that little or 
no monitoring is occurring.
    My office is firmly committed to working with the 
Department and the Congress to make sure that HUD's important 
programs operate effectively for the benefit of all American 
taxpayers now and into the future.
    Again, I thank you for the opportunity to speak to you this 
morning, and I am willing to answer any questions you may have.
    [The information follows:]

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    Mr. Latham. Very good. Thank you for your brevity.
    We will now hear from Mr. Scovel, the DOT's Inspector 
General.
    Mr. Scovel. Thank you, Chairman Latham, Ranking Member 
Olver, members of the subcommittee. Thank you for inviting me 
here today to discuss DOT's top management challenges.
    The Department's 2013 budget requests over $74 billion for 
a wide range of programs and initiatives. While the 
Department's efforts clearly demonstrate its commitment to 
ensure a safe and reliable transportation system, we identified 
opportunities for DOT to achieve greater efficiencies and 
improve program outcomes. The nine challenges we reported last 
September point to the need for effective planning and 
guidance, a capable workforce, reliable data, an increased 
oversight, and accountability.
    Mr. Chairman, my written statement addresses those four 
topics in somewhat more detail. I would be happy at this time 
to yield and to be ready to respond to your questions.
    [The information follows:]

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    Mr. Latham. Thank you very much.
    We have a vote on the floor now. So, Mr. Scire, you have 
drawn the short straw to cover three GAO testimonies in one 
statement and limit it to about 2 minutes. So, you have got a 
big job.
    Mr. Scire. I will try to be brief.
    Mr. Chairman, Ranking Member Olver, members of the 
subcommittee, on behalf of my colleagues, Phil Herr, who 
represents GAO's team covering transportation issues, and 
Valerie Melvin, who represents GAO's IT team, thank you for the 
opportunity to be here today.
    Let me begin with a summary of my colleague's statement 
concerning transportation, starting with funding issues.
    Highway Trust Fund revenues are eroding as inflation has 
decreased the purchasing power of the gasoline tax, and fewer 
revenues are expected with more-fuel-efficient vehicles. 
Maintaining current spending levels plus inflation will be a 
challenge and require $125 billion more revenues than are 
projected.
    There are also several key policy issues concerning surface 
transportation that need to be addressed, including the Federal 
role in relation to other levels of government and linking 
transportation funding to performance.
    DOT also faces challenges to improving safety, and my 
colleague's statement highlights examples from recent reports.
    And, finally, we highlight several NextGen management 
challenges, including delays experienced by 15 programs.
    Turning now to HUD, in particular FHA, last fall, HUD 
reported that the capital ratio used to measure the fund's 
financial soundness had declined to 0.24 percent, well below 
the 2 percent minimum, and this is the third year that has 
happened. We think there is much more that FHA can do to more 
reliably estimate the fund's financial condition, and I can 
talk about that.
    From a budgetary perspective, this worsening loan 
performance for FHA has caused increases in estimated costs, 
including $9 billion for this year alone.
    And, as with FHA, Ginnie Mae faces a number of challenges 
in managing its rapid growth, including limited staff and risk 
management.
    In the technology arena, HUD has been working to modernize 
its IT systems. It has been working with this committee. We 
have reported that in 2009 the Department lacked sound 
management controls, and we also made recommendations that they 
make improvements in these areas. They have made some progress 
ensuring that expenditure plans meet conditions required by 
statute, and the most recent expenditure plans provide better 
information that is needed for continued oversight.
    We look forward to helping the committee in its oversight 
efforts, and that concludes my remarks. We would be glad to 
take any questions you have.
    [The information follows:]

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    Mr. Latham. When we move to questions for GAO, Mr. Scire 
will discuss HUD management and issues in FHA, Ms. Melvin will 
address HUD information technology, and Mr. Herr will cover the 
DOT. As we go into questions, I encourage the GAO witnesses to 
comment on questions asked to the IGs and also the IGs to add 
comments if you have relevant information.
    Mr. Montoya, your report last May on the Philadelphia 
Housing Authority's use of stimulus was startling in its 
findings of total mismanagement and lack of accountability. You 
looked at a random sampling of 10 scattered housing capital 
improvement projects and found that each and every project 
lacked documentation on how the funds were spent. Further site 
inspections of these properties found dozens of violations of 
basic codes for electrical, plumbing, and more.
    Most disturbing, however, was that the PHA spent over $5 
million in taxpayer funds to obstruct the audit itself and 
misused funds in other ways, such as to pay for lavish 
entertainment.
    I would just ask you, if that Philadelphia PHA is now in 
HUD's receivership, and hopefully being turned around, can you 
tell us what the study revealed about HUD's oversight of the 
PHAs in general and how things could get so bad at one of our 
Nation's largest PHAs without anybody at HUD noticing?
    Mr. Montoya. Yes, sir, absolutely.
    You are correct, Philadelphia is probably on the very bad 
scale of housing authorities we have seen. Unfortunately, 
because of capacity, there is not a lot of oversight coming 
from HUD. Keep in mind that, for many of these public housing 
authorities, the oversight is really left to them. In 
Philadelphia's case, they are under the Moving to Work program, 
which even requires less oversight. The Moving to Work program 
is a program designed to allow the housing authority more 
flexibility on how they spend their funding.
    We have argued with the Department since probably 2004 that 
we did not feel that we had certainly the confidence, if you 
will, in the Philadelphia Housing Authority to go under the 
Moving to Work Program. Because of the lack of more stringent 
oversight, we have encouraged HUD to take them off of that 
program and provide more of the stringent oversight they 
otherwise would have.
    Our concern with a number of issues there falls into the 
use of Federal monies, if you will, housing monies to pay 
outside legal firms. In the particular case you mentioned, it 
was actually $1.1 million that they spent on an outside legal 
firm, in fact, to fight our oversight. They fought our subpoena 
requirements because they would not provide us the information 
we originally requested and which we have the right to have as 
the IG. They have even gone so far as to put attorneys with our 
auditors and follow them while they are doing their audits. 
This is money that is spent on what we believe to be frivolous, 
unnecessary items when it could very well be used for housing 
issues.
    Mr. Latham. Okay, thank you. And you have given 
recommendations to HUD as to how to address this?
    Mr. Montoya. Yes, sir, we have, one of them being taking 
the Philadelphia Housing Authority off of the Moving to Work 
program.
    Mr. Latham. I think, Mr. Herr, your key issues and 
management challenges submission notes in the high-speed rail 
segment that project sponsors find it difficult to secure 
upfront investment for construction costs and indicated that 
project sponsors will need Federal funding to develop these 
projects. Why do you think it is so hard for these sponsors to 
find it difficult to secure private upfront capital funding?
    Mr. Herr. Some of the work that we have done in the past 
suggests that the costs to get into high-speed rail are quite 
high, and the private sector finds it difficult to make some of 
these upfront investments.
     There are also the long timelines associated with some of 
these investments in terms of the long build time, getting the 
environmental review process done, and then also to get them 
under way. So there is the potential uncertainty associated 
with some of those investments and the large costs.
    Mr. Latham. Is there anything that we could do, other than 
appropriate an awful lot of money, to bring outside investment 
on?
    Mr. Herr. I think that is probably more on a case-by-case 
basis in the sense of looking at the demand and the potential 
use of particular segments of rail.
    Mr. Latham. Mr. Scovel, the FAA has a responsibility to 
ensure that all revenue collected by airports are used for the 
airport itself, recognizing that any diversion of those funds 
for nonairport use is a violation of the law. We have been made 
aware of diversion of airport funds at LAX and New York City. 
In the case of LAX, those diversions have been occurring for a 
number of years. Can you tell me if you have looked at the 
diversion in those sites and what are your findings?
    Mr. Scovel. Thank you, Mr. Chairman.
    We have done work in the revenue diversion field regarding 
airport revenues for a long, long time. Specifically, regarding 
LAX, dating back to the 1990s, we did several revenue-diversion 
reviews and found in one, for instance, that, of $12 million 
billed for police services, $9.8 million was improperly billed.
    We have done more recently revenue-diversion studies with 
regard to Denver last year, and found over $40 million 
improperly diverted.
    Venice, Florida----
    Mr. Latham. $40 million in Denver?
    Mr. Scovel. Yes, sir.
    And with regard to Venice, Florida, on a much, much more 
minor scale but still some questionable diversions of airport 
revenue from that local airport.
    We are in receipt of communications from Members of 
Congress, Members Gallegly, Miller, and Lungren from 
California, regarding the LAX situation. We have received those 
last fall.
    We referred a couple of these issues initially to FAA for 
their initial review. FAA has been, frankly, slow in getting 
back to us. They have requested an extension until June 5th to 
address the LAX situation.
    We think, as we have learned more about it, that we will 
need to do more work in the revenue-diversion area, and we are 
prepared to embark on that quickly with regard to LAX.
    With regard to New York City, which you mentioned as well, 
sir, our office has not done work with regard to New York; but 
we are of diversions perhaps exceeding $500 million, 
approaching $600 million in excess of the statutory cap that 
New YorkCity and some other airports were granted when the FAA 
grant program was first initiated in the 1980s. We will be prepared, as 
we tackle LAX, to look at other airports as well to try to get our arms 
around the magnitude of that problem.
    Mr. Latham. Thank you very much. We will be of any 
assistance that you need to push this forward. We will be more 
than happy to help.
    Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman.
    Mr. Latham. Finally.
    Mr. Olver. You have quickly gone through three totally 
different questions with three different people here. So I have 
a feeling--I thought you were going to at least cover 
everybody, and then we would close the hearing.
    Mr. Latham. We can do that.
    Mr. Olver. We can do that. My mind is not quite as flexible 
as yours, I think, on these sorts of things.
    Mr. Montoya, I want to simply ask you, on this Philadelphia 
situation, in your discussions with HUD, do you have the 
feeling--how much staff would they need to really do the 
oversight that you now believe was necessary in the case of 
Philadelphia? In other words, they deal with 3,000 housing 
authorities, some of them quite small, some of them quite big, 
and apparently it is possible for this to happen because they 
are not focused upon the oversight. What kind of staff would 
they have to have to do what you feel was necessary here, 
integrated over the whole of the system?
    Mr. Montoya. Thank you for the question, Mr. Olver.
    There are, in fact, over 4,000 housing authorities, and I 
do not know that HUD would ever have the amount of capacity to 
properly do oversight on every single one of them is the short 
answer. So I do not think there is any number I could possibly 
give you.
    Mr. Olver. Do you think that they have the staff that can 
be moved from other places without taking seriously from their 
other activities?
    Mr. Montoya. I do not believe that would be the case.
    But what I would say to you, sir, is that having a housing 
authority under this Moving to Work program, which allows for 
even less oversight, would be a start in the right direction, 
i.e., getting them off that program, providing more of the 
stringent oversight that HUD would normally be giving to a 
program like that.
    Our concern since 2004 has been why are you not asking the 
right questions? Why are you putting Philadelphia Housing 
Authority, given the years of information we had provided with 
our concerns, why would you still put them under a program that 
offers less oversight?
    Mr. Olver. So you think that they ought to have not put 
them under it in the first place probably?
    Mr. Montoya. That would be the first thing I would say.
    Mr. Olver. Okay. They should have done more oversight 
before putting them into this new program?
    Mr. Montoya. That would be correct, sir.
    Mr. Olver. Let me ask something else.
    Since 1991, HUD OIG has indicated--this is tough for you 
maybe because you have only been there 4 months--that the OIG 
has indicated that HUD needs a more sophisticated financial 
management system. Funds to modernize this system have been 
provided as part of the Transformation Initiative since fiscal 
year 2010, and I am concerned about the slow progress on that 
project. Could you elaborate on the current limitations of 
HUD's existing financial management infrastructure?
    Mr. Montoya. Yes, sir. They currently have five financial 
management systems, none of which are integrated with each 
other. Their plan all along has been to build a system that all 
five would be in, if you will, where they can actually do 
better budget analysis, better staffing analysis, these sorts 
of things. Because of a number of hurdles, to include whether 
they could include FHA and Ginnie Mae in the IT transformation 
process, there has been some delay.
    My understanding is that sometime this year two of those 
financial management systems will be integrated with each 
other, if you will. We are still concerned that that is 
actually going to happen. You still would have three other 
outlying systems that are not integrated.
    Mr. Olver. Okay. So you have five management systems that 
do not communicate. You are saying that you have been having 
conversations with the Secretary and his staff, and they are 
working on getting two of them to--is that good enough 
progress?
    Mr. Montoya. No, sir.
    Mr. Olver. What are they saying about how they intend to--
--
    Mr. Latham. If I could interrupt, we are down to zero on 
the time, and I would like to have you continue this line of 
questioning when we come back.
    Mr. Olver. Okay.
    Mr. Latham. Keep that answer in your mind.
    Mr. Montoya. Yes, sir.
    Mr. Latham. We will be in recess here.
    Mr. Olver. This is just one vote, as I understand it.
    Mr. Latham. There is a possible second one, but I do not 
think so.
    Excuse us. Thank you.
    [Recess.]
    Mr. Latham. Go ahead, Mr. Olver. Complete your questioning.
    Mr. Olver. Mr. Montoya, you were in the midst of an answer 
to the question of my elaboration on the existing financial 
management infrastructure as you understand it from your 
discussions with them.
    Mr. Montoya. Right, sir.
    Well, what I would like to stress is that there has been 
steady improvement over the years. We will give HUD that. There 
has been a steady improvement. From our audit standpoint, we 
had ranked them as a material weakness for their IT 
infrastructure, and that has been upgraded, to significantly 
deficient. So it is still deficient, but they are moving in the 
right direction.
    With regards to the five core financial management systems, 
the first phase of this new financial management improvement 
project that they have going on would replace two of these 
systems. What we are not clear about is how that is going to 
function and integrate with the other systems that are not yet 
at that point. So, our concern continues to be that it is not 
moving as quickly as we thought it would, given the number of 
years that the program has been in effect.
    Mr. Olver. Well, we have funded money for some time. If it 
takes 3 years each time to get one more system, do they need to 
be all five of them integrated?
    Mr. Montoya. That might be a question that GAO might be 
able to better answer for you. But, from our perspective, yes, 
it would help us and we believe help them to have all their 
core financial management systems on the same platform.
    Mr. Olver. Well, then let me ask Ms. Melvin--Mr. Melvin, 
good for you. I just noticed it. Okay.
    From what you have observed during your engagement with 
HUD's transformation initiative, what can you tell us about the 
status and future of that project?
    Ms. Melvin. What we understand about that particular 
initiative at this point is that it has been halted and is 
under reassessment. There are some concerns going forward, kind 
of building on what Mr. Montoya was saying, in terms of not 
really knowing at this point what will happen next with it.
    It appears that, based on a CIO review, they did find some 
concerns relative to this particular initiative lacking a 
number of key elements relative to an integrated master 
schedule, and certified project management professional. So 
there are a number of deficiencies in the IT management of that 
particular initiative. And as we understand right now, they 
have some go-forward alternatives that have been presented to 
the Secretary, and the Secretary has not yet made a decision on 
how they will move forward with this particular initiative. So 
it is on hold at the moment.
    Mr. Olver. Waiting for the Secretary's decision?
    Ms. Melvin. Yes.
    Mr. Olver. Do the proposals, in your opinion, address the 
concerns that Mr. Montoya is expressing?
    Ms. Melvin. Unfortunately, we have not seen them. We have 
not done an in-depth review of this particular initiative yet. 
Our work has been at a much higher level, looking at the 
expenditure plans for the transformation initiative.
    But from what I do understand, several of the alternatives 
that have been given to the Secretary for going forward are in 
terms of maintaining the status quo, meaning continuing with 
the project as it is, or making some revisions and course 
corrections. Presumably, those course corrections would deal 
with some of the weaknesses that were identified through that 
assessment, but I do not have specific details that I could 
provide on exactly what those proposals look like.
    Mr. Olver. Do you folks work hand in glove, the GAO and the 
IGs? Is it expected that there will be strong cooperation and 
collaboration on these issues?
    Mr. Montoya. Yes, sir, I believe GAO, again, is looking at 
it at more of a 60,000-foot level. We are talking more 
specifically about how these core financial systems are 
actually going to help on the day-to-day function, not so much 
the oversight of the expenditures of the larger picture.
    Mr. Olver. Okay, Mr. Chairman, I have beaten that one for a 
while.
    Mr. Latham. Thank you, Mr. Olver.
    Mr. Womack.
    Mr. Womack. Mr. Scovel, I have asked this question over the 
last couple of years but recently asked Secretary LaHood about 
the proposed cut to the contract tower program, which would 
harm not only my district but I think compromise aviation 
safety in general, I understand that you have looked into not 
only the effectiveness of the program from a safety standpoint 
but also the savings created by the program. Can you share with 
me your most recent work on this program and what your findings 
may have been?
    Mr. Scovel. Thank you, Mr. Womack, and we are aware of your 
keen interest in this subject.
    Sir, I am sure you will recall that at this committee's 
request we have ongoing work into FAA's contract tower program. 
We are not yet in a position to indicate in detail what our 
findings and recommendations might be. We anticipate reporting 
to the Secretary and to this committee sometime this summer on 
that.
    However, if I may refer back to our previous work, which 
dates in the period from 1998 to 2003, we conducted a couple of 
audits of FAA's contract tower program, and at that time we 
noted, of course, 248 contract towers in 46 different States. 
We found generally that those contract towers could be operated 
at a lower cost than a typical comparable FAA-operated tower. 
We found an equivalent level of safety, and we also found that 
the users and the local communities, of course, generally 
accepted and appreciated the services, that the services were 
comparable to those of the typical FAA-operated tower.
    We have progressed far enough, I think, in our work at this 
point on behalf of the committee that I can say generally that 
we do not see our previous findings changing dramatically. We 
will be refining our data and providing all of that to the 
committee, but I think generally we will come down to where we 
were before. The picture has not changed a whole lot because 
the number of contract towers has not grown much. They have 
continued to be operated, we think, fairly well, just as they 
were 10 to 15 years ago.
    We understand that part of FAA's budget request calls for a 
change in the funding ratio to increase the cost share, in 
fact, that the local communities would be required to pony up. 
That has not been part of our ongoing study. Rather, we have 
addressed the safety and use and cost aspects for the contract 
tower program.
    Mr. Womack. You mentioned audits. What is the methodology? 
As I recall back when the city where I was mayor first got into 
the contract tower program, somebody from FAA shows up, or 
maybe it was a contractor, and they sit in an area where they 
can observe the runway, and they count operations. Is that 
still the methodology? Is that how they base this funding 
formula?
    Mr. Scovel. How FAA does it? I do not know, sir. I would 
need to get back to you. And I do not know that my staff has 
sat down with that----
    Mr. Womack. But when you refer to audits, what specifically 
are you looking at in the audits?
    Mr. Scovel. Right. We are looking at the performance of the 
contract tower program. We are looking at anecdotal evidence 
that we will take from the users as well as from the 
contractors. We are also comparing costs between FAA-operated 
towers of comparable size and complexity with those under the 
contract tower program. We are trying to establish a series of 
measures between the two sides of the program, one FAA 
operated, the other contract tower, so that we are evaluating 
or attempting to reach conclusions based on apples-to-apples 
comparison.
    Mr. Womack. One of my concerns--and I am only recounting 
from memory. There was not a weighted factor in this program 
toward airports that had a lot more jet engine operations, the 
number and type of jet aircraft that are coming in and out. My 
city was unique because I happen to have a pretty sizable five 
and dime company there that has its fleet of aircraft based 
there and a lot of vendor traffic coming in and out of that 
airport. And I always thought it was a pretty good deal because 
it was very close to where they are trying to work, and it did 
not compete with the passenger issues over at Northwest 
Arkansas Regional.
    So do they ever look at the type of aircraft using the 
airport? Does that go into the formula?
    Mr. Scovel. I would need to check with my staff, sir, to 
see whether we have looked into FAA's decision-making process 
to see whether that is, indeed, a factor that they would 
consider.
    Mr. Womack. Very good. I will come back.
    Mr. Scovel. I would be happy to come back to you, sir, with 
a question for the record.
    Mr. Womack. Thank you very much, but it is still on my 
mind, as you know.
    Mr. Scovel. We understand.
    Mr. Womack. Thank you, sir.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T4711A.264
    
    Mr. Latham. Thank you, Mr. Womack.
    Mr. Scovel, the Federal Transit Authority's fiscal year 
2013 budget once again requests $45 million for new, 
unauthorized rail safety oversight activities. We denied the 
request last year, and the reports by both the DOT IG and GAO 
regarding FTA's ability to simply compile reliable incident 
data do not give me a high degree of confidence that the FTA 
even knows how to go about setting up this organization. And 
based on the IG's January, 2012, report and GAO's January, 
2011, report, FTA is still trying to figure out the accident 
universe and how exactly they would create a safety office.
    In your opinion, does the FTA have the ability to mandate 
the quality and type of data the States enter into the rail 
accident database? And, if so, what is hindering them from 
doing it now?
    Mr. Scovel. Thank you, Mr. Chairman.
    We did report in January, 2012, on what FTA could do now 
using its present authority to position itself should Congress 
give it extended authority in the rail transit safety area. We 
homed in on a couple of things, and they had to do with data.
    We looked at the national transit database to see what 
elements FTA should be including in that, and recommended FTA 
identity data gaps. They agreed and are working with an 
advisory group on a near-miss/close-call data element, similar 
to what FAA uses as it evaluates air traffic incidents.
    We also recommended, because in addition to the quality of 
the data in the database, in order to have any hope of making 
improvements in any safety program, you need to have a baseline 
as to what incidents are. And one data element that we 
considered essential in establishing a baseline was the number 
of fatalities attributable to rail transit accidents. GAO has 
reported, I believe, 13 fatalities over the period roughly mid-
2000s to current. Certainly that is an important element. But 
we would recommend as well that FTA in its performance plans 
and reports include that.
    FTA declined. While they accepted our recommendation on 
identifying data gaps in the transit database, they declined 
this recommendation. Because they do not have enhanced 
authority, they declined our recommendation to start separately 
reporting rail transit fatalities.
    Mr. Latham. Mr. Herr.
    Mr. Herr. I would just like to add, Mr. Chairman, that in 
doing this work we do think that FTA needs to do a much better 
job of improving the quality of the data. When we looked at 
this in 2011, as the Inspector General mentioned, we could not 
even examine trends because there were so many inaccuracies. So 
certainly a good starting point is looking at the data, getting 
that cleaned up.
    We understand there is some work under way to improve some 
of the data screens. We have not gone back to look at that, but 
that is certainly an important base for any sort of safety 
initiative.
    Mr. Latham. In the IG's report, a number of parallels were 
drawn between the safety oversight done by FAA and FMCSA and 
the FHWA and what could or might be done at FTA. I would note 
all those agencies have responsibility because they have 
interstate transportation in these modes, and it would be next 
to impossible or it would be very expensive to require 50-plus 
identical oversight agencies for commercial aviation or motor 
carriers. Very few transit rail agencies cross State lines.
    I think we are all in favor, certainly, of safer systems, 
but in light of the lack of interstate commerce as applied to 
transit and the other issues identified in your report, what 
specific reason can you give for requiring a Federal oversight 
office?
    Mr. Scovel. Well, from our discussions with the 
administrator and others on the Secretary's staff, they believe 
that, given albeit a limited number of transit systems that do 
cross State lines, that there is a clear Federal role.
    They also see at the local and State level serious 
deficiencies in the quality of oversight provided by--for 
instance, just to use the crash here in Washington as the most 
recent example--the very limited oversight that the safety 
office for that system was able to provide. There is a gap, and 
in order to bring consistency and to raise the quality of 
safety, sir, they would indicate a Federal role.
    Mr. Latham. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman.
    We will keep you on the hot seat for a bit, Mr. Scovel.
    Your budget requests adding 27 FTEs to your permanent 
staffing mode. My understanding is that you had a much larger 
number to deal with the Recovery Act and that funds from the 
Recovery Act, which were not necessarily yearly as 
appropriated, were carried over to allow you to do that so that 
now you are asking for 27. Are these 27 for ongoing Recovery 
Act work or do they relate to just being able to continue the 
rigorous oversight that OIG conducts of the general agencies 
under transportation?
    Mr. Scovel. Yes, sir, thank you for the question, and we 
appreciate your and the entire committee's keen interest and 
strong support of our office over the years.
    We do, first, wish to acknowledge the very difficult fiscal 
environment in which all of us are forced to operate these days 
and the difficult decisions that this committee must make.
    Sir, as I sit before you today, I must say that I am in 
fear, and I would be remiss in my duties as Inspector General 
if I did not tell you that I fear for the ability of my office 
in the future to conduct its statutory mission to keep you 
fully and currently informed.
    We have had the benefit over the last couple of years of an 
additional appropriation, specifically under the Recovery Act, 
so that we could hire staff as needed to accomplish the extra 
oversight that the Recovery Act responsibilities entail, and we 
did that. We are in the process now of seeing that staff walk 
out the door, and our recovery funds have diminished greatly, 
and they will either expire or be totally expended within the 
next year or so.
    Given that situation and where we look at where our 
baseline appropriations are, we see our FTE level, our strength 
level at the lowest it has ever been historically, since 1978, 
since the Inspector General Act was enacted, and we also see 
the Department's funding and safety responsibilities and fiscal 
programs expanding.
    Mr. Olver. Well, how long do you expect to do oversight on 
the Recovery Act project?
    Mr. Scovel. Some of our Recovery Act oversight will 
continue as long as those programs continue.
    Mr. Olver. Until all the money is expended or far beyond 
when the money is expended or what?
    Mr. Scovel. Until 2015 or 2016, for instance, on some of 
the high-speed rail projects. Some of the Secretary's TIGER 
program grants will continue as well.
    Mr. Olver. Well, I am hearing, then, that you need this in 
order to do the Recovery Act because those monies are running 
out.
    Mr. Scovel. Yes, sir, but----
    Mr. Olver. But also you need it for your regular programs; 
is that right?
    Mr. Scovel. Yes, sir. And, in fact, I would weight my 
answer, if I could, more strongly on the latter, and that is on 
our ability to conduct oversight Department wide.
    Mr. Olver. Okay. Well, let me go on, then. Your top 
management report notes, among other things, that there is 
great need for transit FTA to exercise more oversight on rail 
transit, that the NHTSA, the National Highway Traffic Safety 
Administration, needs to improve its processes for identifying 
vehicle defects, that the Pipeline and Hazardous Materials 
Safety Administration must strengthen integrity management 
programs and ensure that States carry out their pipeline safety 
responsibilities.
    Each one of those agencies has asked for additional money. 
The chairman pointed out that FTA had asked for $45 million, 70 
FTEs. GAO, you have said that they have to have better quality 
of data. They are asking for 70 new FTEs there and $45 million.
    Well, the processes of getting--gathering data and so forth 
go far beyond. The actual costs of the employees may only be 7 
to 10 million bucks out of the 45. It is a much larger request.
    The pipeline and hazardous waste has asked for an increase 
of 75 FTEs, and NHTSA has asked for 45 FTEs. You, GAO, and I 
think they have problems that they ought to be addressing.
    Do you then support--either or both of you--support the 
needs for those additional FTEs in those other places?
    Mr. Scovel. Sir, we have identified the need. In some of 
those instances, we have not been able yet to pin down what 
analysis has gone into the request for a specific FTE number 
from some of those agencies.
    Mr. Olver. Do you have a comment on that, sir?
    Mr. Herr. We have not looked at these individually, but we 
did a recent report dealing with FMCSA and we highlighted where 
several more FTEs could allow them to do quite a bit more 
oversight of the trucking sector, as one small example.
    Mr. Olver. Thank you.
    Mr. Latham. We will come back. Thank you, Mr. Olver.
    Mr. Dent.
    Mr. Dent. Thanks, Mr. Chairman.
    Mr. Montoya, I would like to follow up on Chairman Latham's 
question about Philadelphia and the spending there. I guess I 
heard numbers about $5 million in attorneys' fees to 
essentially obstruct HUD investigations and that particular 
problem. Could you elaborate a little bit on what has actually 
been going on in Philadelphia? Is this really relevant to their 
public housing entities?
    Because, as you know, we have had problems over the years. 
We have had problems with the housing authority that were, 
let's just say, well documented. If you could just expand on 
your answer.
    Mr. Montoya. Yes, sir.
    Well, to clarify, over a period in 2010 our acting IG at 
the time had sent a memo to the Assistant Secretary for Public 
and Indian Housing and the general counsel, and at that time he 
identified over a 40-month period where Philadelphia Public 
Housing Authority had actually expended something on the order 
of $30 million in legal expenses.
    Subsequent to that we went into----
    Mr. Dent. Over what period of time?
    Mr. Montoya. Well, this would have been November, let's 
say, of 2010, so the 40-month period before that. So we are 
talking maybe 2007 or 2008 to about 2010. They had expended 
about $30 million in legal fees. We are not sure what all of 
that was for.
    So we went in and did an audit. Out of about a $5 million 
number we had picked to audit, $4\1/2\ million of that was 
unsupported. They could not support really what the 
expenditures were.
    But as part of that audit and as part of subpoenas we had 
issued, they expended $1.1 million to basically fight us on our 
own subpoena. We had requested information from the housing 
authority. They refused to give it to us. We then issued a 
subpoena, and it was the $1.1 million that they used to not 
only fight the subpoena but to argue on our authority to do the 
audit and oversight.
    Mr. Dent. So they used Federal money to fight the subpoena?
    Mr. Montoya. Yes, sir.
    Now, in fairness to the Department, as the receiver of the 
housing authority, they have indicated to us that Philadelphia 
will be making re-payment of that money. That is supposed to be 
decided sometime in July this year. So we expect that that 
money would come back to the Department using non-Federal funds 
to pay for it.
    Our concern is that with the $4 million that was not 
substantiated, what exposure then does that leave for the other 
$30 million. We have expressed concerns that some of this money 
for outside legal expenses, is really what it amounts to, is 
being used to have attorneys shadow my auditors as they are 
doing their work. Clearly unnecessary we believe, and in some 
cases it is two attorneys per auditor. These are funds that we 
have elaborated on that could be very well used for housing 
issues for the low income there in Philadelphia, but they are 
being used for outside legal firms.
    Mr. Dent. So I guess you are making all sorts of attempts 
to recover that money, clearly, and I guess that is what we 
need to be doing. But it is just a sad state of affairs when 
the Federal monies are being used like this to fight.
    You are right. This is money that should be going to help 
lower-income individuals seek housing.
    Does anybody else have any comments on this?
    Mr. Herr. Actually, I would just like to second what Mr. 
Montoya said.
    I led GAO's work on the State of Pennsylvania on the 
Recovery Act, and we did work on the Philadelphia Public 
Housing Authority, and we had this same experience. Our 
auditors were shadowed by attorneys, they were present at all 
meetings, and it added to the cost, and I think ultimately took 
away from what the Recovery Act funding could be used for, an 
issue we communicated to our housing folks. It was part of what 
I think was a broader pattern that was in place at that time.
    Mr. Dent. Is work actually being done--I mean, are you 
satisfied that the money that they are receiving is being spent 
appropriately by various contractors to do work? That was an 
issue years ago, a big issue years ago.
    Mr. Montoya. Well, we are still looking. We still obviously 
have concerns over where a lot of this money is going. We are 
still continuing to look and do audits in Philadelphia.
    What I would like to say is the Department has forced the 
housing authority to use their own in-house counsel now and not 
expend money for outside counsel. So that is a step in the 
right direction.
    Unfortunately, at the time the board, which should have 
really been providing the oversight for the executive director, 
was really, from what I have been told, dysfunctional. They 
were disbanded. The Department became the board for a short 
time, and I know they are working on new rules to strengthen 
HUD's enforcement authority, for example, the ability to make 
PHAs pay for mismanagement of funds.
    Mr. Dent. I can go back into the early 1990s, and I 
remember looking at the housing authorities all across the 
Commonwealth, and we saw atrocious situations in the city of 
Philadelphia.
    Where I live up in Allentown, we actually had housing 
authorities that actually were clean, livable units. In 
Philadelphia, we just had the most deplorable situations. We 
had civil service employees up in Allentown and other 
communities, and we had a better-run system. Philadelphia that 
was not the case.
    I will not get into all the inside city politics as to why 
I think it was horrible, but I just hope the situation has 
improved. I thought it had gotten a bit better. That is why I 
am a little discouraged, not by you but just by what I am 
hearing down there. Thank you.
    Mr. Montoya. Thank you, sir.
    Mr. Latham. I thank the gentleman.
    Mr. Womack.
    Mr. Womack. Just one other question, and it is kind of 
related to what the subject matter has been, and that is an 
oversight question.
    On Section 8--and my situation pales in comparison to the 
millions of dollars that are going--Federal dollars going to 
fight Federal Government. But a recent example in my State, we 
had some Section 8 homes taken back by HUD where 14, I think, 
of the 15 homes inspected failed suitable living standards, 
which would be a good catch except for the fact that this was 
over a cumulative period of time of several years.
    And so my general question--and I do not know if this is 
for Mr. Montoya or Ms. Melvin or whomever--but what can we do 
to improve the oversight or the policies and protocols that 
would be able to ensure that these living standards are being 
met and not be exacerbated over a period of time where some 
drastic action has to take place?
    Mr. Montoya. From the standpoint of HUD, sir, the authority 
does extend down to the housing authority to be doing the 
inspections. The Department right now is currently working on a 
standardized inspection protocol so that there is some 
standardization across the country on how these things are 
inspected and what they would be looking for. We are doing some 
work now with Maine housing and a couple of others. There was 
some news articles about a lot of the same issues that you are 
discussing, living conditions, lack of running water and some 
of these sorts of things.
    Mr. Womack. Not to interrupt, but you talked about 
standardization. Running water--and I do not know if the cases 
I am talking about here are running water, but that really 
should not be a standardization issue, should it?
    Mr. Montoya. Well, to the extent that your inspector is 
going to go in there and only going to look at what is on his 
sheet to look for and maybe not use some common sense in just 
making sure the overall unit is functioning the way it should 
be, I believe that is what they would be looking for, sort of a 
checklist, if you will, that requires you to check all these 
different things to say you checked it at least.
    In some of the audits we have seen, you have an inspector 
that might go in there for 10 minutes, look around. As long as 
he does not see a wall falling down, he writes it as a clean 
bill of health and walks out, really does not do any checking 
per se.
    Mr. Womack. That is kind of lazy.
    Mr. Montoya. I could not agree with you more, sir.
    Mr. Womack. Are there punitive actions that occur when 
things like this happen? I mean, is there an accountability 
trail?
    Mr. Montoya. I do not know, sir. I would have to get back 
to you.
    I think part of what the Department has faced with regards 
to its IT system is their systems are not robust enough to 
allow, for example, an inspector to go in, go back to the 
office, upload a report, maybe even pictures, and so there is 
none of that going on. So from a standpoint of clear oversight, 
unless you are going to take the hard copy file of what the 
inspector filed, you may not have the opportunity to really see 
what he or she has seen and be able to sort of do the checks 
and balances.
    What I can tell you is that at least the Department is 
working towards, again, a standardized sort of view. We are 
continuing to work on that and providing recommendations on 
what we think they can do to sort of firm up the concerns, but 
it all does fall back on the inspector doing the quality work 
that you would expect him to do if you are paying him to do 
that. So some of that is human--sort of the human condition on 
what you will or will not do for a paycheck, if you will.
    Mr. Womack. You mentioned common sense in there a minute 
ago.
    Mr. Montoya. Quite lacking most often, sir.
    Mr. Womack. I would agree with that. Thank you.
    Mr. Montoya. Thank you, sir.
    Mr. Latham. Thank you, Mr. Womack.
    I want to go back to the question of money being diverted 
at the airports, and you mentioned Denver and how much was 
being diverted there or had been diverted?
    Mr. Scovel. A little over $40 million, Mr. Chairman, over 
the course of a number of years dating back to the closure of 
Stapleton and the building of the new Denver International 
Airport.
    Mr. Latham. How were they doing it?
    Mr. Scovel. A lot of it had to do with real estate 
transactions, sir, and how Stapleton real estate was valued and 
disposed of and what happened with that money and how Denver 
International did or did not come into those funds so that it 
could apply them to airport operations.
    Mr. Latham. Is there a means of recovery or anything of 
those funds?
    Mr. Scovel. Generally not.
    Mr. Latham. Is it not illegal?
    Mr. Scovel. It is illegal, sir, and the FAA on occasion 
does make requests or demands of airport authorities. Success 
varies. Put it that way.
    Mr. Latham. Why?
    Mr. Scovel. The inability to restore and recover those 
funds and to apply them, not to return them to FAA but at least 
to generate those funds and apply them to future airport 
operations. Many airport authorities find that difficult.
    Mr. Latham. Okay, we again want to support you in your 
efforts to find out what diversions are taking place and how 
much and what we need to do.
    Your office has also done some very helpful work on the 
FAA's En Route Automated Modernization, ERAM, program, and you 
found slippages of 4 years and cost overruns of about $330 
million. This is a $2 billion system that FAA says is a 
critical building block for the NextGen air traffic control 
program. What has caused the delays, the cost overruns, and 
have they taken steps to ensure ERAM gets on budget? And, also, 
are they going to be able to meet their goal of complete it by 
2014?
    Mr. Scovel. Mr. Chairman, the ERAM story is a long and 
tortured one.
    Mr. Latham. I did not want to hear that.
    Mr. Scovel. Yes, sir. We are prepared to meet at length 
with your staff; and, in fact, we have a meeting coming up in a 
couple of weeks on that.
    But many of the problems date back to the design and 
structure of the original contract, and FAA's inability to 
manage starting from day one. I have termed it a contract that 
was hobbled coming out of the gate, because it focused solely 
on development and not actual deployment.
    In addition the testing process that FAA used to receive 
the initial offering from the contractor of the ERAM product to 
test it at the tech center in New Jersey and then to place it 
in the two test bed sites in Seattle and Salt Lake City--that 
testing process was flawed. The contractor turned over a 
limited version of the product to the tech center that did not 
yet account for all linkages to a wide range of systems needed 
to manage aircraft.
    As it turned out, the tech center, even with an incomplete 
product, was unable to test comprehensively the ERAM system 
because it needed to be tested in a robust operating 
environment that can only be done in the field. But because the 
contract was written at the time and FAA's procedures at the 
time called for Government acceptance after test center 
testing, the Government accepted it coming out of the tech 
center, put it into Salt Lake and Seattle and quickly ran into 
significant problems.
    It is a very complicated system, sir. It is software 
intensive, and if we have learned anything from DoD's 
experience over the years, anything having to do with software 
is bound to run into problems, and ERAM has done that. As they 
have tried to fix software problems--it is much like a pinball 
or a domino effect--other software problems are created, 
indeed, by the fixes. So it is a long and involved process to 
try to bring it up to 100 percent.
    Mr. Latham. Have they learned any lessons? I mean, we are 
talking about 2016, another $5 billion as far as NextGen. Have 
they learned from this or are the new contracts going to be 
something that will work?
    Mr. Scovel. We hope so, sir. My office has gone to great 
pains to point out the lessons learned based on ERAM.
    Your question in the last section, sir, was can we be 
confident in 2014? Can we be confident with only a $330 million 
overrun? I write those numbers in pencil, quite frankly, sir. 
Because not only the results of our office, but FAA's 
independent study that it commissioned with Mitre points out 
the next case scenario would be 2016 and upwards of a $500 
million overrun. So it remains to be seen.
    Right now, ERAM is on pause. It has been fielded to six 
more additional sites in addition to the first two. FAA does 
not intend to proceed with any more fielding for the rest of 
this fiscal year so that they can try to identify the current 
state, which is a wise move on their part. Because two of the 
newer sites, Chicago and Los Angeles, are exceedingly complex, 
complicated air space, controllers will need to be trained. We 
will see how the agency handles all of that over the rest of 
this year, sir.
    Mr. Latham. Do you have any comment, Mr. Herr?
    Mr. Herr. Yes, I would like to just add two things.
    One thing, a lesson learned that came out of some of the 
early work was that they were not involving controllers in the 
testing, and that I think was really an Achilles heel.
    Mr. Latham. They were prohibited.
    Mr. Herr. That is, I think, a common-sense point that Mr. 
Womack made earlier. But it is our understanding that has been 
corrected, and they are being brought in to do some of that, 
which makes a lot of sense.
    The other thing in some recent work that we have done on 
NextGen has suggested they need to address is the ping-pong 
effect of some complexities with the software is integrated 
scheduling so they understand if a slippage in system A has 
implications for other systems. That will help you as an 
oversight committee do a better job of seeing where they are 
going and what the likelihood of success is.
    Those are two things that we have in recent reports.
    Mr. Latham. Okay, thank you very much.
    Mr. Olver.
    Mr. Olver. I would like to try to engage Mr. Scire in this 
endeavor, along with you, Mr. Montoya.
    As part of the Nation's response to the housing crisis, 
there have been a number of new programs at HUD that focus on 
reducing the number of foreclosures, restructuring existing 
mortgages, and stabilizing communities in distress. At the same 
time, HUD is expected to carry out its core mission areas and 
maintain the integrity of these core programs. What effect have 
these new programs, particularly in the single-family area, had 
on the oversight of core programs?
    And I would like you each to give us your perspectives.
    Mr. Scire. Right. So I think you are talking about the 
emergency homeowner loan program and the HAMP programs as it 
relates to FHA. We have not looked specifically at what sort of 
resources the Department is devoting to the development of 
these, and I would add to that the Hope for Homeowners program 
and the FHA short refi program.
    We are currently doing some work taking a look at 
foreclosure mitigation programs across the Federal Government, 
including FHA, VA, USDA, as well as the Treasury programs, and 
so we think there is some things that could be done to improve 
how those programs operate, and we are working on that right 
now. So I think that there are things that they could do to 
more effectively and efficiently operate these programs.
    There is some benefit potentially for effective foreclosure 
mitigation, because it could reduce, for example, potential 
claims, ultimately. So although there may be some resources 
devoted to this, there could be some payback to it as well.
    But we have not looked specifically at what resources were 
devoted to development and management of these particular 
programs.
    Mr. Olver. Mr. Montoya.
    Mr. Montoya. I would echo the GAO's position, sir.
    We have taken a look at really how that relates to the 
staffing and what they are doing specifically to oversee it. We 
certainly see the benefit to that.
    Our major concern is to ensure that we do not have any more 
claims coming to FHA as are necessary, and we are continuing to 
work with them on risk-management types of issues and to be 
more aggressive and to look into these claims before they are 
paid out to ensure that there is not a way to come back and 
indemnify them with the lenders.
    Mr. Olver. But I think you both clearly know that they have 
a number of these programs which are designed to stabilize the 
housing market. Do you think that they have the core human 
resources, human capital to do these kinds of oversights when 
they do a bunch of new programs like that? What is the damage 
to the core programs in the process?
    Mr. Montoya. I do not know what that number would be, sir. 
I could tell you that, they are obviously going to be spreading 
themselves pretty thin, but I could not give you an exact sense 
on how we would see that, because we have not looked at that. 
It is certainly something that draws an interest in me about 
whether we should do that or not.
    Mr. Scire. The concern I would raise is whether or not FHA 
has assessed its resource needs--and we believe FHA has not 
done a sufficient job of looking at what its workforce needs 
are. So it would be difficult for us to say whether what they 
have is sufficient or not. The FHA itself has not gone through 
and done a rigorous assessment of what resources it needs, what 
skill gaps it has, and then taken actions to fill them. We make 
recommendations in this regard in our November report.
    I would also point out that FHA is facing a potential for a 
lot of retirements, and so we made recommendations there for 
FHA to do more in terms of succession planning.
    Mr. Olver. Are there programmatic reforms that they have 
applied in these new programs that ought to apply to others 
that would give them--to the older programs that would give 
them capacity?
    Mr. Scire. I do not think that the newer programs are 
instructive for how they are running the older programs. FHA 
has done a lot in response to the----
    Mr. Olver. This was a crisis. This was not part of the 
regular programs.
    Mr. Scire. Right. Even before the advent of Hope for 
Homeowners and all these others, FHA took a lot of steps to try 
to be more effective in use of its existing resources and to 
use more risk-based approaches in terms of lender oversight, 
appraisal reviews, and things like that. But, still, what we 
have not seen is for them to rigorously take a look at what 
their needs are.
    Mr. Olver. Do either of you have comment on how HUD and FHA 
are managing the record number of HUD-owned foreclosure 
properties?
    Mr. Scire. We actually are just beginning an engagement to 
look just at that, looking at not only at FHA but also the 
GSEs, all of which have tremendous portfolios of REO.
    Mr. Montoya. Sir, what I can tell you is that I have 
actually met with the other inspectors general from not only 
the FHFA but Agriculture and VA to talk about that very issue, 
to sort of combine our resources just to see what is going on 
with all the real estate owned properties. We would like to see 
from our standpoint whether there is any potential for fraud, 
abuse, mismanagement in that, the sale of the properties, 
maintenance until they are sold, those sorts of things.
    So we are trying to do a collaborative effort for all of 
our programs, and we are trying to geospatially identify where 
these are and where might be the biggest pockets and start with 
those biggest pockets.
    Mr. Olver. How much new staff will each of you need to do 
these kinds of things?
    Mr. Montoya. Like many, sir, I am just going to be 
reassigning people.
    Mr. Scire. Using our existing resources.
    Mr. Latham. Thank you, Mr. Olver.
    Mr. Dent.
    Mr. Dent. Thanks, Mr. Chairman.
    I just want to focus on the HOME program for a moment.
    I have heard a fair amount of comments about this program 
back home, generally favorable comments, about the HOME 
program. They see it as something that is an important program 
but certainly needs better accountability. I know The 
Washington Post did that story that was very critical.
    I know HUD focuses a lot of its monitoring activities at 
the grantee level through the various field offices. The 
grantees then are responsible for monitoring their subgrantees, 
and I know that the audits have found that in too many cases 
there has been little or no monitoring and particularly at the 
subgrantee level.
    I should ask this of Mr. Montoya. What are we doing here to 
ensure better accountability in the HOME program, particularly 
in light of The Washington Post series?
    Mr. Montoya. With regards to the Department, we are doing a 
sort of roll-up, if you will, of the body of work we had done 
over the last 5 years. What I want to ensure is that we do not 
have any systemic sort of problems that we might have missed to 
identify that to the Department.
    What I can tell you is that, historically, they have agreed 
with maybe, 99 percent, of our recommendations in change in 
oversight, so that is actually a very good thing that we are 
working with them on. I know they are developing new 
regulations to enhance their enforcement capabilities. That was 
asked for by Senators Murray and Collins, and I can certainly 
provide you copies of what we would come up with as well, sir.
    So I think they are moving in the right direction, but, at 
the end of the day, as was the discussion with Mr. Olver, it 
comes down to the oversight and just what capacity anybody has. 
And to the extent that the local government, which has 
responsibility for the structure of the program, it all boils 
down to just being able to get in there and ask the questions 
they need to ask.
    Mr. Dent. I will yield back.
    Mr. Latham. Thank you, Mr. Dent.
    Kind of on the same subject, but, Mr. Montoya, the 
Integrated Disbursement Information System, the IDIS, in HUD is 
supposed to track how CDBG and HOME grant dollars are used by 
States and localities. However, both the IG and the GAO have 
repeatedly found serious data integrity flaws at IDIS. They 
cannot fully account for the full life cycle of a grant, nor 
can it show the fiscal year in which the funds were provided.
    Congress allows grant funds to remain available for a 
certain period of time, and when that time expires leftover 
funds should be returned to the Treasury. Because HUD is not 
tracking funds properly, you recently found hundreds of 
millions of dollars in unexpected balances that HUD failed to 
recapture and redistribute in a timely manner. Some of these 
funds were appropriated as far back as 1992, and some were 
associated with contracts that were already expired. How can 
HUD return expired funds to the Treasury if it does not even 
keep track of where the funds are appropriated?
    Mr. Montoya. Well, sir, that goes back down to the very 
archaic information technology and core financial system that 
they operate under.
    Mr. Latham. Come on.
    Mr. Montoya. Well, it does go to part of that, sir. Without 
systems that can actually help you track money, it is very 
difficult to be able to figure out where the money is going and 
how you are spending it.
    Our concern with regards to the IDIS system is that they do 
use this First in, First Out, FIFO, system where monies that 
would come in, irrespective of fiscal year identification, are 
the first ones that are expended. And so you are right. There 
is no identification by fiscal year.
    We look at it from the standpoint of it not being in 
compliance with Federal financial management system 
requirements. They are looking at it more from a programmatic, 
how do you operate the program.
    Because they did not agree with our recommendation, our 
findings, we have sent it over to GAO, who is now doing a 
review. There actually may be more wide scope impact to other 
government agencies, so they want to look at the entire thing 
before they opine on which is it and what, if anything, HUD 
should do to change it.
    So it is at this point with GAO, and I know they are 
looking at it closely to make that determination. I just do not 
have any updates for you.
    Mr. Latham. Do you have any comments?
    Mr. Scire. No, that is with another group within GAO, but I 
would be glad to get back to you with an answer on the status.
    [The information follows:]

    After GAO received the request for a legal decision from the HUD 
Inspector General, we requested that HUD-OIG complete follow-up audit 
work to demonstrate concrete examples of the problems that HUG-OIG 
alleged were occurring. HUD-OIG completed that work in late November 
2011. On January 11, 2012, GAO sent the Chief Financial Officer of HUD 
a development letter to obtain HUD's legal views on the issues and 
establish a factual record on the issues raised by the Inspector 
General. On February 17, 2012, HUD provided its response. GAO is 
currently analyzing that response, as well as conducting follow-up 
meetings with both the OIG and CFO staff. After that analysis is 
completed, GAO will issue a legal decision on the matter.

    Mr. Latham. Okay. I think one of the most troubling things 
is that all the data is self-reported by the grantees and 
subgrantees and there is no verification at HUD. So, basically, 
the grantees choose the data they will share with HUD, and they 
can adjust or change that data at any time without permission 
from HUD or without HUD even checking the data. And it is not 
surprising that you found that many data flaws, including 
unsupported contracts, inflated contract amounts, and 
underreporting of program income by grantees.
    To make matters worse, HUD relies heavily on this data. 
They have no control whether it is good or bad, using it to 
justify its budget to report how the CDBG and HOME programs are 
working and to monitor the grantees.
    When HUD uses the grantees for their basis of information, 
can you have any confidence in what the IDIS data and what--
maybe either one of you or both of you could mention what we 
need to do to improve it.
    Mr. Montoya. Well, certainly as part of a lot of our 
recommendations over the course of the last 5 years, that has 
certainly been on the top of the hit parade, if you will, on 
our recommendations. I know that they are making changes. The 
new regulations that they are proposing will address many of 
those issues.
    You know, I must state I have actually met with that 
Assistant Secretary. Again, they have accepted quite a few, 99 
percent, of our recommendations, so it is not that they are not 
trying and do not want to make these changes. Some of them are 
a function of old systems and just nobody really looking and 
coming in to ask, but those are being changed. We will continue 
to monitor it. We will continue to work with them. We are 
certainly looking forward to GAO's response.
    Mr. Latham. But is the data--can you rely on anything?
    Mr. Montoya. Well, I guess it would go down to the 
integrity and the ethics of the person putting in the data. But 
you know the old saying, sir, garbage in, garbage out. Unless 
we can really satisfy ourselves to the validity of the data, 
its ability to be changed at anytime, obviously we would always 
question that.
    Mr. Latham. Right, so they can adjust it themselves 
whenever they want?
    Mr. Montoya. Yes, sir.
    Mr. Latham. Yes, Ms. Melvin.
    Ms. Melvin. Thank you very much.
    I would just add that as one of the seven transformation 
initiative projects that HUD is currently undertaking, their 
HEARTH IDIS system, there is a release that is related to 
improving the grants management effort, and that is currently 
under way in terms of their overall efforts on IT management.
    Mr. Latham. Okay, thank you.
    Mr. Olver.
    Mr. Olver. Thank you.
    We are now about to start a quick process I think since 
votes are now being called again, so I am going to--I could go 
on on other places, but I want to just ask you perhaps an odd 
question for us.
    Both you in your oversight responsibilities and your 
organizations and this committee in our oversight 
responsibilities, we often spend a majority of our time 
focusing on the underperforming programs and agencies. I 
wonder, are there agencies or programs that consistently 
perform at a high level and demonstrate management strategies 
that could be transferred to other places? Do you ever think 
about that? Or is it so much not in your DNA that you could 
judge that?
    I would like either of the IGs and you at the GAO to make 
short answers to that.
    Mr. Scovel. Mr. Olver, I hope no one asks for me to 
surrender my IG credentials as a result of my answer, but I 
must acknowledge, as I constantly do with my staff, that we 
want to give credit where credit is due. And while I would be 
reluctant to give blanket approval to an entire agency within 
DOT, I can certainly say, program by program, FAA, FRA, and 
FTA, are doing many things quite well--starting with Recovery 
Act implementation from the Secretary on down, the focus on 
fraud prevention, Federal highways and establishing national 
review teams to go out and look at State implementation using 
recovery funds.
    FTA had $423 million in recovery money invested in a major 
transit center in New York City and put in extensive controls 
to ensure that that was handled right. FMCSA is now focused on 
bus safety like they never have before. Administrator Ferro is 
like a dog with a bone on this one, and that is exactly what it 
takes. They have data challenges, database challenges as well, 
as we have talked about extensively this morning, but they are 
trying to get their arms around it.
    Mr. Olver. Well, you cannot take all of my time. Let 
somebody else have a bit at that answer here, okay?
    Mr. Scovel. Very well.
    Mr. Montoya. I will promise to give you a short answer, Mr. 
Olver.
    Yes, and certainly within our audits we do pay credit where 
credit is due, and we have acknowledged that there are some 
best practices in some of the programs.
    The biggest thing I would probably tell you in my short 
tenure there is, having met with the Assistant Secretaries and 
the Secretary, they really are in my opinion at this point 
pretty open to these dialogues and discussions. We have had 
some very poignant discussions on many of these issues.
    I think the example of the HOME program, where they take 
many of our recommendations and they are trying to better it, 
shows me something good. It does not mean that it is all 
perfect. But certainly we are willing to give credit where 
credit is due, sir.
    Mr. Herr. On the DOT side, a couple programs and efforts 
come to mind. The TIGER grant program that was started under 
the Recovery Act, one thing that we have noticed with 
transportation, a lot of the programs, as you know, are formula 
based, but this is an effort to identify programs that cut 
across jurisdictional lines. We looked at it a few years ago 
and gave it fairly good marks. There were issues about 
transparency in some of the decision making, but that is a big 
move away from the formula programs.
    On the NHTSA side, we have seen establishment of 
performance measures, working to improve some of the data, 
sharing some best practices among the States.
    On the FAA side, the airline fee disclosures that have gone 
into effect, and the tarmac delay rules have certainly 
benefited consumers.
    Mr. Olver. Well, I am glad you could came up with something 
relatively specific.
    You folks for HUD?
    Ms. Melvin. My perspective is from the information 
technology side of things, and we have issued reports that have 
identified a number of areas of concern--which Mr. Montoya has 
already alluded to relative to their IT management controls--
which really pervade all of the information technology systems 
that the department is either undertaking through the 
transformation initiative or otherwise.
    As a part of our work we have been reviewing expenditure 
plans that the appropriations legislation required HUD to 
develop to account for and explain its spending of money on the 
particular initiatives that it is undertaking under the 
transformation initiative; and what we have found is that, 
through recommendations that we have made, they have made a lot 
of progress relative to providing information in those plans 
that have made them a valuable tool for oversight.
    So it is one of the main things that is emphasized in our 
statement in terms of seeing them take initiative to really 
articulate in those plans how they are spending the money, and 
how those particular initiatives are supporting or will support 
their mission overall. So that is an example where we have seen 
them actually taking some steps in a positive direction, 
recognizing that there is more to be done.
    Mr. Olver. Do you have a simple answer of one or two 
agencies that you deal with or subagencies that you think are 
high performance?
    Mr. Scire. I will make it simple. I think that what we saw 
in the Recovery Act implementation by HUD is that they moved 
out very quickly in the public housing area and the TCAP area. 
And TCAP is noteworthy in a way because it is a whole new 
program. So they really put this together fairly quickly, and I 
think we have reported they have done a fairly good job in 
getting the money out the door.
    FHA has served a real countercyclical role in the mortgage 
market, and that has been, I think, an important role for it to 
play. The ultimate cost of that is not yet known, but it is 
difficult to say where the mortgage market would be if it were 
not for FHA being there.
    Mr. Olver. Thank you.
    Mr. Latham. If you have some more questions, we will make 
this your last chance unless you are----
    Mr. Olver. It is okay.
    Mr. Latham. You are done? Okay.
    Just very quickly, Mr. Scovel or Mr. Herr, I wanted to just 
ask you, does DOT do a good enough job in responding to your 
findings and recommendations?
    Mr. Herr. One challenge that we have had with our reports 
is we often do not get a written response to our products. So 
we will get an oral comment, and one of the things that makes 
it difficult from my perspective is that we do not necessarily 
get a departmental position on our recommendations. There is a 
required 60-day letter that follows that goes to the oversight 
committees. This is an area that we have been talking with the 
Department about.
    But I do think in terms of helping committees do oversight 
and getting an articulated position on an area such as rail 
safety data, some of the FAA issues, I think it would be 
helpful to be able to pick up a report and get a clear picture 
of what the agency's response is and a commitment to making 
some changes or correcting things going forward.
    Mr. Latham. Thank you.
    We will be submitting questions for the record here to each 
and every one of you, but this is kind of a weird question 
probably, but is there anybody here or would anybody like--is 
there something that you would just like to scream to the 
world? I mean, is there anything you really--that we have not 
asked, that you would like to really bring up? Is there 
something that really bugs you or something that really needs 
to be aired?
    Mr. Scire. Yes, I think that we have made some 
recommendations to FHA for how it can better measure the 
economic value of the MMI fund, and we think that is a very 
important thing for FHA to move forward on. We have had year 
after year after year of cost estimates of that have had to be 
reestimated, and this year it was a $9 billion reestimate in 
costs alone. So we think there is a lot more that FHA could do 
to present what the economic value of the MMI fund is so that 
the Congress would have more reliable information on the costs 
that it faces.
    Mr. Latham. Okay, thank you.
    Mr. Herr. One of the areas I would be remiss if I did not 
mention, GAO has transportation financing on our high-risk 
list. We have a list of agencies and programs that we very much 
want to bring to the attention of Congress, and certainly you 
are going into a vote now today on dealing with reauthorization 
issues and pushing that forward. We have made tremendous 
investments in our Nation's infrastructure. Going forward, it 
is obvious we need to find ways to maintain and sustain that. 
If there is something worth shouting about in transportation, I 
think that is it.
    Mr. Latham. Yes?
    Ms. Melvin. If I may speak to HUD's information technology 
again, I mentioned in my previous response that we had looked 
at their expenditure plans at a high level. In those plans, we 
were looking primarily to see the value added in terms of 
information that HUD provided for oversight purposes.
    What I would add from a significant standpoint is that 
moving forward we do feel that there is a greater--a larger 
need to look more in depth at what HUD is doing. While we see 
them making progress relative to their information management, 
information technology management, we do recognize that there 
are a number of areas that they still have not implemented our 
recommendations on relative to having policies to make sure 
that they can execute against their enterprise architecture or 
to evaluate the success of their information technology 
projects.
    So for fiscal year 2012 one of the things that we will be 
doing is taking a more in-depth assessment of how HUD is 
actually performing relative to evaluating some of its projects 
from a project management and other IT management perspective.
    Mr. Latham. Very good. Thank you.
    Yes, Mr. Scovel.
    Mr. Scovel. Yes, sir, from Transportation, if I may, it has 
been stated many times by the Congress and acknowledged by 
every Secretary that transportation safety is the Department's 
number one priority. We have three items that we commend to 
their and your attention.
    First, with regard to operational errors and how those are 
counted, so that we can get an accurate count, establish the 
baseline and then investigate it and analyze it, and identify a 
key area for FAA.
    The overall area of pipeline safety has attracted a lot of 
attention. The agency has put in place a lot of rulemakings 
over the last 10 years. Now it is looking for authority and 
even staffing to enable it to move forward further in that 
area.
    Bus safety as well. I mentioned Administrator Ferro's 
efforts. She is, frankly, stymied by this question of 
reincarnated carriers. You close down one because of safety 
enforcement action. They pop up with a new corporate identity 
but operating with the same driver, same route, and same 
equipment. They need to do a far better job with their 
database. Rather than expanding what they intend to look at, 
they need to refine so they can home in on those reincarnated 
carriers.
    Mr. Olver. Mr. Chairman, would you yield for a moment on 
that point?
    Mr. Latham. I would be honored to yield.
    Mr. Olver. Do you believe that the FTA really needs 
authority to--more authority than they already have to deal 
with safety issues, to deal with the safety issues? It is a 
question we dealt with earlier.
    Mr. Scovel. FTA you mentioned specifically?
    Mr. Olver. FTA, yes.
    Mr. Scovel. Yes, I did not include that on my list of top 
three.
    Mr. Olver. Oh, I thought you did say on this one.
    Mr. Scovel. FMCSA, sir, motor carriers. FMCSA certainly 
needs to develop its database more fully so that it can address 
the question of reincarnated carriers for passenger carriers 
specifically.
    Mr. Latham. Very good.
    Mr. Montoya, do you have a burr under your saddle anywhere?
    Mr. Montoya. You know, sir, with only 4 short months in 
office and the reception I have received and the open dialogues 
I have had, I do not think I am there yet. It does not mean I 
will not get there, but I think at this point I do not, sir, 
thank you.
    Mr. Latham. I am glad everything is perfect at HUD, right?
    Mr. Montoya. It is not perfect, sir. I maybe just have not 
found it.
    Mr. Latham. Okay. Thank you, Mr. Olver. Again, this is your 
last hearing and recognize----
    Mr. Olver. All rise.
    Mr. Latham. No, please, do not. You have been a great, 
great partner, and I appreciate your great work.
    To the panel, thank you on behalf of the taxpayers out 
there, people whose lives depend upon the services and safety 
and all of those issues, but you are the frontline as far as we 
are concerned as to giving us the information we need to try to 
do the right thing and to hold people accountable in the 
bureaucracies that need oversight. What you do is 
extraordinarily important, and I thank each and every one of 
you for what you do.
    So, anyway, with that, we will adjourn the hearing this 
morning. Thank you.

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