[Senate Hearing 112-454]
[From the U.S. Government Publishing Office]
S. Hrg. 112-454
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2012
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED TWELTH CONGRESS
FIRST SESSION
ON
S. 1596
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2012, AND FOR OTHER PURPOSES
__________
Department of Housing and Urban Development
Department of Transportation
National Railroad Passenger Corporation (Amtrak)
Nondepartmental witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.gpo.gov/fdsys/browse/
committee.action?chamber=senate&committee=appropriations
__________
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COMMITTEE ON APPROPRIATIONS
DANIEL K. INOUYE, Hawaii, Chairman
PATRICK J. LEAHY, Vermont THAD COCHRAN, Mississippi
TOM HARKIN, Iowa MITCH McCONNELL, Kentucky
BARBARA A. MIKULSKI, Maryland RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin KAY BAILEY HUTCHISON, Texas
PATTY MURRAY, Washington LAMAR ALEXANDER, Tennessee
DIANNE FEINSTEIN, California SUSAN COLLINS, Maine
RICHARD J. DURBIN, Illinois LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota LINDSEY GRAHAM, South Carolina
MARY L. LANDRIEU, Louisiana MARK KIRK, Illinois
JACK REED, Rhode Island DANIEL COATS, Indiana
FRANK R. LAUTENBERG, New Jersey ROY BLUNT, Missouri
BEN NELSON, Nebraska JERRY MORAN, Kansas
MARK PRYOR, Arkansas JOHN HOEVEN, North Dakota
JON TESTER, Montana RON JOHNSON, Wisconsin
SHERROD BROWN, Ohio
Charles J. Houy, Staff Director
Bruce Evans, Minority Staff Director
------
Subcommittee on Transportation and Housing and Urban Development, and
Related Agencies
PATTY MURRAY, Washington, Chairman
BARBARA A. MIKULSKI, Maryland SUSAN COLLINS, Maine
HERB KOHL, Wisconsin RICHARD C. SHELBY, Alabama
RICHARD J. DURBIN, Illinois KAY BAILEY HUTCHISON, Texas
PATRICK J. LEAHY, Vermont LAMAR ALEXANDER, Tennessee
TOM HARKIN, Iowa MARK KIRK, Illinois
DIANNE FEINSTEIN, California DANIEL COATS, Indiana
TIM JOHNSON, South Dakota JERRY MORAN, Kansas
FRANK R. LAUTENBERG, New Jersey ROY BLUNT, Missouri
MARK PRYOR, Arkansas RON JOHNSON, Wisconsin
DANIEL K. INOUYE, Hawaii (ex THAD COCHRAN, Mississippi (ex
officio) officio)
Professional Staff
Alex Keenan
Meaghan L. McCarthy
Rachel Milberg
Dabney Hegg
Heideh Shahmoradi (Minority)
Brooke Hayes Stringer (Minority)
Carl Barrick (Minority)
Administrative Support
Molly O'Rourke
C O N T E N T S
----------
Thursday, March 3, 2011
Page
Department of Housing and Urban Development: Office of the
Secretary...................................................... 1
Thursday, March 10, 2011
Department of Transportation: Office of the Secretary............ 79
Thursday, April 7, 2011
Department of Housing and Urban Development: Federal Housing
Administration................................................. 125
Thursday, May 12, 2011
Department of Transportation: Federal Aviation Administration.... 157
Tuesday, May 17, 2011
Department of Transportation: Federal Railroad Administration.... 209
National Railroad Passenger Corporation (Amtrak)................. 224
Nondepartmental witnesses........................................ 245
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2012
----------
THURSDAY, MARCH 3, 2011
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:01 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Pryor, Collins, and Blunt.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. SHAUN DONOVAN, SECRETARY
opening statement of senator patty murray
Senator Murray. Good morning. This subcommittee will come
to order.
Good morning, Mr. Secretary, and we are delighted to have
you here. We are holding our first hearing this year on the
Department of Housing and Urban Development's (HUD) budget for
the fiscal year 2012.
Today is also the first hearing with our new ranking
member, Senator Collins. She and I have worked together over
the years on many issues from women's health to veterans and
particularly on the critical issue of port security. So she is
a great partner. I know she works very hard to get results and
demonstrates dedication to both her State and to very good
policy for this country. So it is a delight to have you join
us.
Senator Collins. Thank you.
Senator Murray. I also want to recognize one of our new
members, Senator Blunt, who is with us as well. We have got a
number of new members on this subcommittee, and we look forward
to working with all of them.
And Secretary Donovan, I want to welcome you back to this
subcommittee as well to talk about your Department's budget
request and housing policy and the condition of the housing
market.
The subject of today is HUD's budget for fiscal year 2012.
Yet, even as we sit here, about halfway through the fiscal
year, the Federal Government still lacks a final budget for
fiscal year 2011. We are continuing to debate the budget as
millions of families and communities across our country are
waiting anxiously to hear about the fate of the programs that
they really depend on.
There is a lot of discussion in the country today about the
deficit and the fiscal health of our Nation, and that debate is
very critical. We have got to tackle the deficit and we have
got to make sure our children and our grandchildren are not
forced to bear the burden of overwhelming debt. So we are going
to have to make some very tough decisions. And as we work to
cut that spending, we have got to make sure we do not do
anything that will impact our economic recovery at the same
time, and make sure that as a country we are continuing to make
the investments that are necessary to strengthen our
communities and remain competitive.
And finally, I just want to say that we cannot continue to
focus all of our attention on this one small part of the
budget, the discretionary domestic spending. It is, I think, a
very short-sighted approach and will not get us to where we
need to be in correcting our Nation's fiscal imbalance.
I am concerned about the House budget that was passed. For
example, they eliminated the new HUD-Veterans Affairs
Supportive Housing (VASH) vouchers, something that I am very
passionate about that provides housing and case management to
our homeless veterans, and it has literally taken veterans off
our street that I have talked to. I know that this makes a huge
impact in putting them into permanent housing. It really is a
model program, bringing together two big agencies, HUD and the
Department of Veterans Affairs (VA), to use their resources
effectively together. And I am impressed that research has
proven that permanent supportive housing like this really saves
taxpayers money, because it reduces the prevalence of more
expensive outcomes like emergency rooms or the judicial system.
So we have to make our decisions wisely as we move forward
on the fiscal year 2012 budget, and I look forward to working
with this subcommittee to do that.
The topic of housing is a fitting way to begin our
discussion on the budget for fiscal year 2012 since it is
critical to the financial security of families and our Nation's
economy. We learned these lessons all too well during the
housing boom and bust. The overconfidence of lenders and
investors, and the perpetual appreciation of home prices
coupled with inadequate regulatory oversight really fueled that
boom, and that market's fall has devastated families and
neighborhoods and, of course, our economy. Millions of
Americans have lost their homes and many more who did not
participate directly in the market run-up have seen their
wealth eroded as their home values have declined.
I recently held a roundtable discussion in Seattle and
heard story after story after story from families who had been
devastated by foreclosure. They had done the right thing. They
found themselves in trouble, were trying to work within the
system and the programs that we have put out there to modify
their home loans, and again and again they were getting the
run-around from everyone. That is not right, and the sloppiness
and incapacity of some of our servicers are now today causing
some even greater strain on families as they try to recover.
We also recently learned that military families have been
overcharged fees and even foreclosed upon despite the
protections that we do have in place for them through the
Servicemembers Civil Relief Act. I know that banks are now
trying to step up to the plate and do this right, and I
appreciate them doing that. But a lot has to change and we have
got a lot of work ahead of us. So I want to take some time to
talk with you about the steps that can be taken today to make
sure that our families are getting through this process and
treated fairly.
As we work to solve these problems for our families, we
also need to think about the future of the housing finance
system and make sure we avoid another situation that would
require taxpayer dollars to cover private-sector losses, as has
been the case with the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac). The Dodd-Frank Wall Street Reform and Consumer
Protection Act addressed many of the failures of our system and
the regulatory structure, but that was just the beginning. We
have to address Fannie Mae and Freddie Mac so we no longer
promote a system of private profits and public loss. But we
have to do it carefully so we do not undermine the fragile
housing recovery or make home ownership unaffordable to many
Americans.
I know the administration recently released its report to
the Congress on options for reforming the Nation's housing
finance structure. Each of those options offers tradeoffs that
we are going to have to consider carefully--tradeoffs between
the level of appropriate risk for the taxpayer, and the
Government's presence in the marketplace, and the ability of
Americans to obtain a mortgage. So I expect to hear more from
you on that as well today.
While we continue to address the Nation's housing market,
we have to also remain focused on HUD's core programs. The
President's budget for fiscal year 2012 includes program
funding of $47.8 billion. That level of funding is offset by
the Federal Housing Administration (FHA) and the Government
National Mortgage Association (Ginnie Mae) receipts for a total
request for new funding of $41.7 billion, 2.8 percent less than
the fiscal year 2010 levels.
The President's budget continues to prioritize maintaining
housing for our Nation's most vulnerable with his request for
the Section 8 voucher program, project-based Section 8, public
housing, and the renewal of homeless projects, and that is a
goal most of us share. Yet, this funding represents nearly 75
percent of HUD's total budget, which is why dramatic cuts to
HUD's total budget could devastate other programs that also
provide critical services to vulnerable Americans or result in
the loss of public housing units that cannot be maintained.
Investments in programs like the Community Development Block
Grant (CDBG) program, which attracts new businesses to our
communities and provides critical access and creates jobs; the
new Homelessness Prevention and Rapid Rehousing Program; the
Sustainable Communities Initiative, which helps our communities
make smarter decisions about their investments--all of these
are really important to our future.
So, today, I have a number of questions for you, Mr.
Secretary. I am concerned about the troubled housing
authorities. These public housing authorities (PHAs) represent
only a small portion, as we know, of all the PHAs, but we
cannot ignore them, and we have to demand accountability.
So I will have a number of questions as we move forward,
and I will submit my entire statement for the record. I know
what we face ahead of us is very challenging.
I am going to turn to my counterpart, Senator Collins, for
her opening statement, and to our members who I know have some
opening statements as well, and to your opening statement.
PREPARED STATEMENTS
I have been called to an emergency meeting, if you will,
for working on our final budget proposal that we have got to
get through the Congress so people know where we are moving
ahead. So, a little after 10:25 a.m., I am going to turn this
over, with great confidence, to my ranking member, Senator
Collins, to run this in a bipartisan fashion here this morning
for all of our members to be able to open their questions.
Also, Senator Kirk regrets that he couldn't be present, but
he has submitted a statement for the record.
But right now, I will turn it over to you, Senator Collins,
for your opening statement.
[The statements follow:]
Prepared Statement of Senator Patty Murray
This morning we are holding our first hearing of the year on the
Department of Housing and Urban Development's (HUD) budget for fiscal
year 2012.
Today is also the first hearing with our new ranking member,
Senator Collins. Senator Collins and I have worked together on many
issues, from women's health to veterans and particularly on the
critical issue of port security. She is a great partner, who works to
get results and demonstrates dedication both to her State and to good
policy. As a member of our subcommittee, she is familiar with the
issues in our bill, and I look forward to working with her to meet our
Nation's transportation and housing needs.
We also have several new members of the subcommittee, and I look
forward to getting their input as we develop the budget for fiscal year
2012.
Finally, I want to welcome Secretary Donovan back before our
subcommittee to discuss his Department's budget request, our Nation's
housing policy and the condition of the housing market.
fiscal year 2011 and the house's year-long continuing resolution
The subject of this hearing is HUD's budget for the fiscal year
2012. Yet even as we sit here today--nearly halfway through the fiscal
year--the Federal Government still lacks a final budget for fiscal year
2011. The Congress continues to debate that budget as millions of
families and communities across the country wait anxiously to learn the
fate of the programs they depend upon.
As we all know, there is a great deal of discussion today about the
deficit and the fiscal health of our Nation. And this debate is
critical. We need to tackle the deficit and make sure our children and
grandchildren aren't forced to bear the burden for of overwhelming
debt. We are going to have to make some tough decisions. But as we work
to cut spending, we need to make sure we don't do anything to undermine
our economic recovery.
We also need to make sure that as a country, we are continuing to
make the investments necessary to strengthen our communities and remain
competitive in the future.
And finally, we can't focus all of our attention on one small part
of the budget--domestic discretionary spending. That's a short-sighted
approach that won't get us where we need to be in correcting our
Nation's fiscal imbalance.
Unfortunately, the spending plan recently passed by House
Republicans takes our country in the wrong direction. It threatens our
economic recovery, slashes investments in our communities, and puts
vulnerable Americans at risk.
For example, the House Republican budget eliminates funding for new
HUD-Veterans Affairs Supportive Housing (VASH) vouchers that provide
housing and case management services to homeless veterans--a program
that has literally taken veterans off the street and put them into
permanent housing. This is a model program--it brings HUD and the
Department of Veterans Affairs (VA) together to use their resources
more effectively to achieve results. And research has proven that
permanent supportive housing like this saves taxpayer money by reducing
the prevalence of more expensive outcomes such as emergency rooms or
the judicial system. But funding to continue this effort and meet the
critical goal of ending homelessness among our veterans in 5 years was
left on the cutting room floor in an effort to meet an arbitrary
bottom-line.
That's wrong. And it's just one example from a House Republican
plan that focuses on short-term, slash-and-burn cuts--while neglecting
a long-term plan for responsible deficit reduction that supports our
economic recovery.
So as we look at the fiscal year 2012 budget, I will be taking a
different approach. I will be analyzing how taxpayer dollars can be
invested most effectively to:
--Continue our economic recovery;
--Strengthen our communities;
--Protect our most vulnerable families;
--Get workers back on the job; and
--Manage our Federal resources efficiently.
THE HOUSING MARKET AND GOVERNMENT-SPONSORED ENTERPRISE REFORM
The topic of housing is a fitting way to begin our discussion on
the budget for fiscal year 2012, since it is critical to the financial
security of families and to our Nation's economy.
We learned this lesson all too well during the housing boom and
bust. The overconfidence of lenders and investors in the perpetual
appreciation of home prices, coupled with inadequate regulatory
oversight, fueled the boom--while the market's fall devastated
families, neighborhoods and our economy. Millions of Americans have
lost their homes, and millions more who didn't participate directly in
the market run-up have nonetheless seen their wealth eroded as home
values declined.
I recently held a roundtable discussion in Seattle and heard story
after story from families facing foreclosure. These families were doing
the right thing. They found themselves in trouble but were working
within the system to get a modification and save their homes. But again
and again, they were getting the runaround from their banks.
This is not right. The sloppiness and capacity challenges of
servicers are causing even greater strain on families across the
country. We have also learned that military families have been
overcharged fees and even foreclosed upon despite protections granted
to them by the Servicemembers Civil Relief Act. So, quite frankly, I am
fed up. It seems to me that the problems have been clearly identified,
and yet my constituents continue to face the same challenges. This
needs to change. I want to talk with you about what steps can be taken
to ensure that families going through this process are treated fairly
by servicers.
And as we work to solve these problems for our families, we also
need to think about the future of the housing finance system and make
sure we avoid another situation that would require taxpayer dollars to
cover private-sector losses as has been the case with Fannie Mae and
Freddie Mac. The Dodd-Frank Wall Street Reform and Consumer Protection
Act addressed many of the failures of our system and the regulatory
structure, but that was just the beginning.
We must address Fannie Mae and Freddie Mac so we no longer promote
a system of private profits and public loss. But we must approach this
reform carefully so that we don't undermine the fragile housing
recovery, or make home ownership unaffordable to most Americans.
The administration recently released its report to the Congress on
options for reforming the Nation's housing finance structure. Each of
these options offers tradeoffs that we must consider--tradeoffs between
the level of appropriate risk for the taxpayer and the Government's
presence in the marketplace and the ability of Americans to obtain a
mortgage. I expect that today you can discuss these tradeoffs so that
we all approach this reform with our eyes wide open.
BUDGET REQUEST FOR HUD'S CORE PROGRAMS AND PROMISING INITIATIVES
While we continue to address the Nation's housing market, we must
also remain focused on HUD's core programs.
The President's budget for fiscal year 2012 includes program
funding of $47.8 billion. This level of funding is offset by the
Federal Housing Administration and Ginnie Mae receipts, for a total
request for new funding of $41.7 billion--2.8 percent less than the
fiscal year 2010 levels.
The President's budget continues to prioritize maintaining housing
for our Nation's most vulnerable with his requests for the Section 8
voucher program, project-based Section 8, public housing, and the
renewal of homeless projects, a goal I think most of us share. Yet this
funding represents nearly 75 percent of HUD's total budget, which is
why dramatic cuts to HUD's total budget could devastate other programs
that also provide critical services to vulnerable Americans, or result
in the loss of public housing units that can't be maintained.
Preserving core housing assistance programs may also reduce our
ability to invest in initiatives that can improve outcomes for
communities, strengthen our economy, or save money over the long-term--
investments in programs such as:
--CDBG, which can help attract new businesses to communities, improve
access to critical services and create jobs; or
--The new homelessness prevention and rapid re-housing programs,
which produce better outcomes for homeless families and are
more cost-effective than shelter stays; or
--The Sustainable Communities Initiative, which can help communities
make smarter decisions about how and where to build housing and
transportation and better use HUD funding in the future.
OVERSIGHT OF HUD PROGRAMS
Whether these programs are new or have been around for decades, we
must demand that they achieve results and provide a return on our
investments. That is why oversight is such a critical part of this
subcommittee's work. So, today, I will have questions about the
Department's management of its Section 8 and public housing programs. I
am concerned about recent reports of troubled housing authorities.
While these public housing authorities (PHAs) represent only a
small portion of all PHAs, the issues surrounding them cannot be
ignored.
HUD must demand accountability from all of its grantees. And it is
incumbent upon them to monitor the use of program resources, identify
problems, and implement solutions before the problems become too large.
I will also have questions about the budget request for technology
investments. Improving HUD data is critical to effective oversight.
This year's budget request proposes changes to the funding structure
for IT investments and requests no new funding for the development of
new systems.
I want to ensure that the administration's request will not
compromise HUD's ability to develop these critical new systems and
deliver important results on-time and on-budget.
CLOSING
This subcommittee's work this year will be challenging. We must
consider how to fund the many transportation and housing needs of our
Nation, which are critical to improving our communities and
strengthening our economy. And the decisions about what investments we
can make will be made in an increasingly constrained budget
environment. I look forward to hearing from the Secretary today, and to
working with my subcommittee colleagues to best address the Nation's
housing and transportation needs.
With that I turn it over to my new partner in these efforts,
Senator Collins.
______
Prepared Statement of Senator Mark Kirk
Thank you Chairwoman Murray and Ranking Member Collins. It is a
pleasure to join you on the subcommittee after previously serving on
the House Appropriations Committee for several years.
I also would like to welcome Secretary Donovan, and thank him and
his staff for coming before the subcommittee to talk about the
Department of Housing and Urban Development's (HUD) fiscal year 2012
budget request.
Illinois is one of the most geographically diverse States in the
Nation. We have a heavily urbanized region in the Chicago area, growing
suburban and ex-urban population centers outside of the city, smaller
but significant population centers in every part of the State and large
amounts of rural area. Each of these regions has very different needs,
but all have low-income populations that utilize HUD-backed programs.
According to Housing Action Illinois, nearly 400,000 individuals in
Illinois live in HUD-assisted units. But we live in an extremely
challenging fiscal environment.
I applaud the Secretary for making some tough decisions in the
fiscal year 2012 budget request such as eliminating the $18 million
Brownfields Economic Development Initiative and the $27 million Self-
Help Homeowner Opportunity Program. Cuts also were made to HOME
Investment Partnerships and construction components.
Every week, numerous housing and community advocates come to my
office to discuss the future of HUD funding. HUD programs are targeted
toward our neediest Americans, and every cut hurts. But if we only
targeted unpopular programs for spending reductions, we would do little
to fight our out-of-control spending.
During first 9 weeks of 2011, Federal debt increased at an average
of $35.6 billion per week. At the end of 2010, total public debt
outstanding stood at $13.9 trillion; and the end of February, it had
increased to $14.2 trillion--a $300 billion increase. The Department of
the Treasury has auctioned nearly $1.1 trillion since the beginning of
the year. That is an average of $121.5 billion per week.
We have passed a 2-week funding stopgap measure filled with
relatively uncontroversial cuts and program terminations. But soon we
will need to make even tougher decisions about how to get our fiscal
house in order. The House-passed long-term continuing resolution made
many in the housing assistance system very nervous.
As a matter of principle, I am opposed to zeroing-out effective
programs. Rather, a policy of shared sacrifice will help us right our
economic ship of state. But we have to start a dialogue about what we
as a Nation can afford, and I do not believe we can afford our current
spending habits. I look forward to working with the chair and the
ranking member to support efforts that will make our country stronger
in the long term on the premise that we should spend within our means.
STATEMENT OF SENATOR SUSAN COLLINS
Senator Collins. Thank you, Madam Chairman Murray. I very
much appreciate the confidence that you have expressed. You
have been a strong and dedicated leader of this important
subcommittee. I am just delighted to be your new ranking
member. I expressed to you earlier in the year the hope that I
would get this position because I have so enjoyed our previous
work together, and I look forward to accomplishing great things
and to working with all of our subcommittee members.
I look forward to partnering with you in advancing
investments in transportation infrastructure, as well as
working to meet the housing and economic development needs of
our families and communities.
I am particularly pleased that we share a commitment to
combating homelessness, particularly among our veterans. The
State of Maine has been a leader in new approaches to helping
those who are homeless, and last year we opened a facility in
Saco, Maine to accommodate veterans who find themselves in need
of a home.
When the men and women of our armed forces return home, we
have an obligation to welcome them all the way home. On any
given night, nearly 76,000 veterans find themselves homeless
and more than 136,000 experience homelessness at some point
during the year.
Today, the number of homeless Vietnam veterans is greater
than the number of Americans who died in that war. And veterans
who served in Iraq and Afghanistan already are appearing in the
homeless population. As a Nation, we must ensure that in the
land of the free there is always a home for the brave. And that
is why I strongly support Senator Murray's efforts to
reinvigorate the HUD-VASH program.
Maine has also been evaluating the Housing First model for
aiding those who are homeless. Just this past summer, Secretary
Donovan joined us as we celebrated the opening of Florence
House, a comprehensive center for homeless women in Portland,
Maine. I worked to secure $343,000 in Federal funds to help
with the planning and the development of Florence House, which
offers a safe environment for homeless women who otherwise
would be spending their nights in shelters or, worse yet, on
the streets.
The Housing First model is proving its effectiveness.
According to Preble Street, an organization in Maine that
advocates for the homeless and disadvantaged, of the 25 women
who have moved into the apartments at Florence House when it
first opened, not a single one has returned to the streets or
to shelters.
A study of another complex in Maine further illustrates
that Housing First models make economic sense, as the
chairwoman points out. And I want to share with my colleagues
this study from Maine. Healthcare costs plummeted by 70
percent, the cost of the ambulance use declined by 71 percent,
and emergency room visits decreased by 74 percent. Furthermore,
jail time decreased by 88 percent and police contacts decreased
by 81 percent. So this model appears to deliver astonishing
results.
Another important issue that I want to explore is the
future of the FHA and its role in the mortgage crisis that
contributed to this recession. I am interested in understanding
how HUD plans to reinvigorate the private market and what
protections HUD is implementing to protect taxpayers against
the risk of loss from mortgage defaults. We need to better sort
out the role of FHA versus Ginnie Mae, Freddie Mac, and Fannie
Mae, and I realize the roles are different.
At a time when the budget is under much stress due to an
unsustainable national debt, it is simply unacceptable that
fraud and corruption continue to plague far too many PHAs.
Alarming reports raise serious concerns about the lack of
effective oversight by HUD of PHAs. HUD has an obligation to
ensure that taxpayer dollars are not lost to fraud and
corruption and that families live in decent, safe, and sanitary
housing. I am appalled to learn of numerous investigations
uncovering outright embezzlement by senior management of PHAs
and cases of negligent oversight, including a young child
suffering a near-fatal asthma attack due to dangerous levels of
mold in an apartment in one of these PHAs.
Madam Chairman Murray, these are just some of the issues
that I am particularly interested in and that confront our
subcommittee. It is an honor to serve with you and I look
forward to working with you as we consider HUD's fiscal year
2012 budget request.
PREPARED STATEMENT
And finally, Secretary Donovan, welcome. I look forward to
working with you and learning more about your budget request.
Thank you very much.
[The statement follows:]
Prepared Statement of Senator Susan Collins
Thank you, Chairman Murray. You have been a strong and dedicated
leader of this subcommittee. I am delighted to be your new ranking
member and have enjoyed our previous work together.
I look forward to partnering with you in advancing investments in
transportation infrastructure as well as working to meet the housing
and economic development needs of our families and communities. I am
particularly pleased that we share a commitment to combating
homelessness, particularly for veterans. Maine has been a leader in new
approaches to helping those who are homeless and last year opened a
facility in Saco to accommodate veterans who find themselves in need of
a home.
When the men and women of our armed forces return home, we have an
obligation to welcome them all the way home. On any given night, nearly
154,000 veterans find themselves homeless, and twice as many experience
homelessness at some point during the year.
Today, the number of homeless Vietnam veterans is greater than the
number of Americans who died in that war. And veterans who served in
Iraq and Afghanistan already are appearing in the homeless population.
As a nation, we must ensure that in the land of the free, there is
always a home for the brave. I support Senator Murray's efforts to
invigorate the Department of Housing and Urban Development-Veterans
Affairs Supportive Housing program.
Maine has also been evaluating the Housing First model for aiding
those who are homeless. This past summer, Secretary Donovan joined us
as we celebrated the opening of Florence House, a comprehensive center
for homeless women in Portland, Maine. I worked to secure $343,000 to
help with the planning and development of Florence House, which offers
a safe environment for homeless women and helps eliminate the need for
women to spend nights in the shelter or on the streets.
The Housing First model is proving its effectiveness. According to
Preble Street, an organization in Maine that advocates for the homeless
and disadvantaged, of the 25 women who moved into the apartments at
Florence House when it opened, none have returned to shelters. A study
of another complex in Maine further illustrates that Housing First
models make economic sense. According to this study, healthcare costs
plummeted by 70 percent. The cost of ambulance use declined by 71
percent and emergency room visits decreased 74 percent. Furthermore,
jail time decreased by 88 percent and police contacts decreased by 81
percent.
Another important issue is the future of the Federal Housing
Administration and its role in the mortgage crisis that contributed to
this recession. I am interested in understanding how HUD plans to
reinvigorate the private market and what protections HUD is
implementing to protect taxpayers against the risk of loss from
mortgage defaults.
At a time when the budget is under much stress due to an
unsustainable national debt, it is simply unacceptable that fraud and
corruption continue to plague far too many public housing authorities
(PHAs). Alarming reports raise serious concerns about the lack of HUD's
oversight of PHAs. HUD has an obligation to ensure that taxpayers
dollars are not lost to fraud and that families live in decent, safe,
and sanitary housing. I am appalled to learn of numerous investigations
uncovering embezzlement by senior management of PHAs and cases of
negligent oversight, including a young child suffering a near fatal
asthma attack due to dangerous levels of mold.
Chairman Murray, these are just some of the issues that confront
our subcommittee. It is an honor to serve with you, and I look forward
to working with you as we consider HUD's fiscal year 2012 budget
request.
Secretary Donovan, welcome. I look forward to working with you and
am interested to hear more about HUD's fiscal year 2012 budget request.
Senator Murray. Thank you very much, Senator Collins.
Senator Pryor.
PREPARED STATEMENT
Senator Pryor. Thank you, Madam Chair. I will just submit
mine for the record. Thank you.
[The statement follows:]
Prepared Statement of Senator Mark Pryor
First, I want to thank the Chair, Senator Murray, and Ranking
Member Collins for their leadership and for conducting this important
hearing to examine the President's fiscal year 2012 budget request for
the Department of Housing and Urban Development (HUD).
I think that it is important that we work together with HUD to
provide the necessary tools and funding mechanisms to support HUD's
mission to bolster the economy through a stronger housing market. It is
also critical that we work with HUD to ensure adequate consumer
protection. With that said, we all know that many tough decisions lie
ahead as we strive to put our Nation's fiscal house in order, and I
believe that no stone can remain unturned as we seek to do so.
Effective oversight will be crucial in preventing and detecting cases
of waste and abuse, and I am hopeful that the Secretary will join us in
seeking to increase efficiency within HUD.
As this subcommittee reviews the fiscal year 2012 budget request
for HUD, I look forward to working with the chair and ranking member to
ensure that tax payer dollars are spent responsibly.
Again, I thank Senators Murray and Collins for conducting this
hearing. I look forward to Secretary Donovan's testimony and look
forward to discussing the fiscal year 2012 budget request.
Senator Murray. Thank you very much.
Senator Blunt.
STATEMENT OF SENATOR ROY BLUNT
Senator Blunt. Thank you, Madam Chairman Murray and Ranking
Member Collins. I am glad you are holding this hearing today. I
am pleased to join the subcommittee. My previous efforts with
housing have been several years as the vice chairman and then
the chairman of the Missouri Housing Development Commission,
and I look forward to reengaging in this area.
I also want to welcome Secretary Donovan, and thank you for
appearing before the subcommittee.
Just yesterday, as you know, the Senate passed a 2-week
temporary continuing resolution (CR) to fund the operations of
Government through the next 2 weeks. We are then going to have
to deal with that, apparently, 2 weeks from now.
But talking to you now about the fiscal year 2012 funding
bill is an important time. Taxpayers deserve a leaner, more
efficient Government. Duplicative programs and costly programs
are going to have to be carefully evaluated to see how we can
end any duplication without failing to serve the specific areas
that that duplication was put in place to ensure got served.
The administration continues to recommend funding for a
cross-agency initiative called Sustainable Communities. I look
forward to talking about that and approach that with my belief
that, really, the local community is going to make the best
decisions about how to spend the money we spend.
In addition to that, the rest of America, for two decades,
has had to focus on how do you produce better results and spend
less money, and everybody that has been competitive in the
international environment they work in has had to think about
that all the time. We have to think about that as well. I look
forward to, Mr. Secretary, to your thought process as we try to
figure out how we spend less and have better results and
frankly produce more. Everybody else in America does that. I
believe we can do that too.
Some of what we are going to have to do is decide where we
are spending money that we have to stop spending money, but
some of it is just a renewed focus on how do we take all the
tools available to us and produce a better result than we were
when we were only measuring how much we cared by how much we
spent. It is time we measured how much we cared by the results
we got, and I am confident you believe that as well and look
forward to your testimony today and working with you.
PREPARED STATEMENT
And, Madam Chairman, working with you and Senator Collins
is something I look forward to. So thank you.
[The statement follows:]
Prepared Statement of Senator Roy Blunt
Thank you Madam Chairman Murray and Ranking Member Collins for
holding today's hearing. Also, welcome Secretary Donovan and thank you
for appearing before our subcommittee. As a new member of this
subcommittee, I look forward to working with your agency to build a
stronger, more effective housing plan in our country.
Just yesterday the Senate passed a 2-week, temporary continuing
resolution to fund the operations of Government through the remainder
of fiscal year 2011. With the short-term budget still in flux, it is
essential that our fiscal year 2012 funding bill be discussed and
debated as soon as possible so that States, localities, and community
organizations can plan for the future. Taxpayers want and deserve
leaner, more efficient government. Duplicative programs and costly
bureaucracy can no longer be the status quo.
The administration continues to recommend funding for the cross
agency initiative known as Sustainable Communities. At a time when we
need to get serious about our bloated spending, I have serious concerns
with siloing much needed dollars into a newly created initiative with
goals set by Washington. I know that the city of St. Louis for
instance, can leverage dollars for sustainability in a much better way
than the Federal Government can. We need to target funds at the State
and local level that will build on the community development and
housing assistance that has already begun and spend the money we are
spending with a new focus on results. Better results for less costs has
been a daily experience in America's private sector for two decades. I
look forward to your efforts for better results at less cost.
Senator Murray. All right. Thank you very much.
Mr. Secretary, we are delighted to welcome you to this
subcommittee again and welcome you to give your opening
remarks.
SUMMARY STATEMENT OF HON. SHAUN DONOVAN
Secretary Donovan. Thank you, Chairwoman Murray. It is
great to be back. And Ranking Member Collins, welcome. I very
much look forward to working with you as well. To all the
members of the subcommittee, thank you for the opportunity to
testify today about HUD's fiscal year 2012 budget proposal.
This afternoon I would like to discuss the investments it
calls for to help America win the future by out-educating, out-
innovating, and out-building our competitors. I will also
highlight the steps our proposal takes to improve how we
operate HUD's programs and the tough choices it makes to ensure
we take responsibility for our deficits.
Madam Chairwoman, in developing this proposal, we followed
three principles.
The first is to continue our support for the housing market
while bringing private capital back. Two years ago, with the
housing market collapsing and private capital in retreat, the
administration had no choice but to take action. The critical
support FHA provided has helped more than 2 million families
buy a home since that time and nearly 1.5 million homeowners
refinance into stable, affordable products with monthly savings
exceeding $100.
And while FHA and Ginnie Mae will continue supporting the
housing recovery in the year ahead, we also must help private
capital return to the market. This is a process that HUD began
many months ago, and I want to thank the Congress for passing
legislation in the last session to reform FHA's mortgage
insurance premium. With this authority, FHA announced a premium
increase of 25 basis points last month. Because of these
reforms and others, FHA is projected to generate approximately
$9.8 billion in receipts for the taxpayer in fiscal year 2011.
Indeed, the reforms that are generating these receipts today
have set the stage for more private capital to return in the
years to come, while ensuring that FHA continues to play an
important role in helping the housing market recover, and
remains a vital source for financing for underserved borrowers
and communities.
Just as important, while HUD's fiscal year 2012 request is
$47.8 billion in gross budget authority, because of FHA and
Ginnie Mae receipts, the cost to the taxpayer for this budget
is only $41.7 billion, fully 2.8 percent less than our fiscal
year 2010 budget and more than meeting the President's
commitment to a 5-year domestic discretionary spending freeze.
The second principle we used to develop our budget was to
protect current residents and improve the programs that serve
them. While the median income of American families today is
more than $60,000, for families who live in HUD-assisted
housing, it is $10,200 per year, and more than one-half are
elderly or disabled.
At the same time, having seen from 2007 to 2009 the largest
increase in the history of HUD's worst case housing needs
survey, it is clear that the recession hit these families hard.
That is why 80 percent of our proposed budget keeps these
residents in their homes and provides basic upkeep to public
housing while also continuing to serve our most vulnerable
populations through our homeless programs.
Because the cost of serving the same families grows each
year, protecting existing families in our programs required us
to make tough choices with the remaining 20 percent of the
budget, including the decision to reduce funding for the CDBG,
HOME Investment Partnerships, and new construction for HUD-
supported housing programs for the elderly and the disabled,
all between 5 and 10 percent. These are difficult cuts. I saw
for myself, as a local housing official, the difference these
funds can make, supporting senior housing, boys and girls
clubs, YMCAs, and other providers of critical community
services. But American families are tightening their belts, and
we need to do the same.
At the same time, this budget makes a strong commitment to
doing more of what works and to stop doing what does not. By
including the Section 8 Voucher Reform Act in the budget, we
will simplify and streamline the voucher program and save $1
billion for the taxpayer over the next 5 years while supporting
the ability of PHAs in small towns and rural areas to better
serve the working poor. Indeed, thanks to the Congress' work on
the Homeless Emergency Assistance and Rapid Transition to
Housing (HEARTH) Act, the budget funds a new rural housing
stability program that reflects the unique and growing needs in
those communities.
PUBLIC HOUSING AUTHORITIES
This budget also holds our partners accountable for the
funding they have received from HUD. To fully fund the Public
Housing Operating Fund, we require PHAs with excess reserves to
contribute $1 billion. These resources were set aside so that
our PHAs could continue operating during a rainy day, and I
think we would all agree that that rainy day is here.
TRANSFORMATION INITIATIVE
These efforts point to a broader commitment expressed
through our Transformation Initiative (TI) to improve HUD's
programs. TI funds are replacing data systems in our largest
program--Housing Choice Vouchers--that date from the early
1990s so we can hold PHAs accountable for managing their
budgets, just like families and businesses are doing across the
country. The flexibility you provided with TI allows us, for
the first time, to offer technical assistance across all of our
community planning and development programs and to launch a new
initiative to improve the financial management and
accountability of troubled housing authorities. And by
supporting research, evaluation, and program demonstrations, TI
improves HUD's own accountability by identifying what we do
well and what we need to do better.
HUD-VASH
These needed reforms allow us to propose increased
investments in programs we know work, like the HUD-VASH program
for homeless veterans. This effort is built on a solid body of
evidence that permanent supportive housing both ends
homelessness and saves money for the taxpayer by putting an end
to the revolving door of emergency rooms, shelters, and jails.
I could not put it more eloquently than the two of you did at
the opening of this hearing.
HOMELESSNESS
As such, this budget would increase funding for homeless
programs by more than 29 percent over 2010 to keep the
President's commitment to Opening Doors, the first Federal
strategic plan to end homelessness, which the administration
unveiled last June to end chronic veterans homelessness by 2015
and homelessness among families and children by 2020. All told,
this combination of tough choices and needed reforms allows us
to serve more than 4.5 million families in our core rental
assistance programs, 86,000 more than in 2010.
RURAL HOUSING STABILITY PROGRAM
Our third and final principle for developing this budget is
to continue critical initiatives that have been part of our
budget over the last 2 years but, in this fiscal climate, to
propose no new initiatives. The President has made clear that
winning the future depends on America winning the race to
educate our children, but that is not possible if we are
leaving a whole generation of children behind in our poorest
neighborhoods. That is why I would like to thank this
subcommittee for working with us last year to fund the Choice
Neighborhoods Initiative, and it is why we have again proposed
$250 million for 2012. This funding will allow communities to
use the mixed use and mixed finance tools pioneered by former
HUD Secretaries Jack Kemp and Henry Cisneros with the HOPE VI
program to transform all federally assisted housing in a
neighborhood.
PUBLIC HOUSING PRESERVATION PROGRAM
Similarly, ensuring that America out-builds our competitors
requires us to protect and preserve public housing for the
future. Right now we are losing 10,000 units from our public
housing stock every year. At the same time, there are billions
of dollars of private capital sitting on the sidelines that
could put tens of thousands of construction workers to work
rebuilding this housing. That is why we have proposed a $200
million demonstration in our budget to preserve up to 255,000
public housing units using long-term project-based rental
assistance contracts. As we have seen in the Section 8 program
and the low-income housing tax credit, opening up these
properties to private capital not only brings new funding to
affordable housing, but also a new sense of discipline that
extends from the way these properties are financed to the way
they are managed.
SUSTAINABLE COMMUNITIES INITIATIVE
Last, Madam Chairwoman, American businesses, large and
small, cannot out-innovate their competitors when their workers
spend 52 cents of every $1 they earn on housing and
transportation combined, and moving products on our roads costs
five times as much wasted fuel and time as it did 25 years ago.
That is why we request another $150 million for our Sustainable
Communities Initiative, which implemented as part of our 2010
budget, helps regions and communities develop comprehensive
housing and transportation plans that create jobs and economic
growth. In a community like Austin, Texas, which is linking its
long-term regional transportation plan to 37 mixed-income
communities near transit and job centers, you can see how the
grants it provides are not about one-size-fits-all rules that
tell communities what to do, but saving the taxpayer money by
coordinating investments more effectively and efficiently.
The demand for these kinds of innovations explains the
extraordinary demand for our grant program, and it was not just
coming from our largest metro areas. Indeed, one-half of our
regional grants were awarded to rural regions and small towns.
And so, Madam Chairwoman, HUD's fiscal year 2012 budget
proposal is not just about spending less, it is also about
investing smarter and more effectively. It is about out-
educating, out-building, and out-innovating our competitors. It
is about making hard choices to reduce the deficit, and putting
in place much needed reforms to hold ourselves to a high
standard of performance. But most of all, it is about the
results that we deliver for the people and places who depend on
us most.
PREPARED STATEMENT
For HUD, winning the future starts at home, and with this
budget of targeted investments and tough choices that I
respectfully submit, we aim to prove it.
Thank you.
[The statement follows:]
Prepared Statement of Hon. Shaun Donovan
Chairwoman Murray, Ranking Member Collins and members of the
subcommittee, thank you for the opportunity to testify today regarding
the fiscal year 2012 budget for the Department of Housing and Urban
Development (HUD), Creating Strong, Sustainable, Inclusive Communities
and Quality Affordable Homes.
I appear before you to discuss this budget in an economic
environment that is significantly improved from when the President took
office. An economy that was shrinking is growing again--and instead of
rapid job loss, more than 1 million private-sector jobs were created in
the last year. But we know there's still more work to be done to ensure
that America and its workers can compete and win in the 21st century.
And we have to take responsibility for our deficit, by investing in
what makes America stronger and cutting what doesn't, and in some cases
making reductions in programs that have been successful.
HUD's fiscal year 2012 budget tackles these challenges head on: by
helping responsible families at risk of losing their homes and by
providing quality affordable rental housing; by transforming
neighborhoods of poverty to ensure we are not leaving a whole
generation of our children behind in our poorest communities; by
rebuilding the national resource that is our federally assisted public
housing stock and ensuring that its tenants are part of the mobile,
skilled workforce our new global economy requires, and by leveraging
private-sector investments in communities to create jobs and generate
the economic growth we need to out-innovate, out-educate, and out-build
the rest of the world.
This budget also reflects the need to ensure that we are taking
responsibility for our country's deficits. As a down payment toward
reducing the deficit, the President has proposed a freeze on
nonsecurity discretionary spending for the next 5 years, cutting the
deficit by $400 billion over 10 years and bringing this spending to the
lowest share of the economy since President Eisenhower. Every
Department shares a responsibility to make tough cuts so there's room
for investments to speed economic growth. HUD's fiscal year 2012 budget
more than meets the President's goal--the Department's $47.8 billion in
gross budget authority is offset by $6 billion in projected Federal
Housing Administration (FHA) and Ginnie Mae receipts credited to HUD's
appropriations accounts, leaving net budget authority of $41.7 billion,
or 2.8 percent less than the fiscal year 2010 actual level of $42.9
billion. To maintain this commitment to fiscal discipline, we have
protected existing residents and made the difficult choice to reduce
funding for new units and projects, including cuts to the Community
Development Block Grant (CDBG), HOME Investment Partnerships (HOME),
and new construction components of the Section 202 Supportive Housing
Programs for the Elderly (Section 202) and Section 811 Supportive
Housing Program for Persons with Disabilities (Section 811).
And because winning the future also means reforming Government so
it's leaner, more transparent, and ready for the 21st century, we are
also reforming the administrative infrastructure that oversees those
programs. The budget includes key provisions from the Section 8 Voucher
Reform Act (SEVRA) legislative proposal that will simplify and
rationalize the rent setting provisions of our three largest rental
assistance program. The budget requests for Housing Choice Vouchers
(HCVs), project-based rental assistance, and public housing reflects a
savings of about $150 million in the first full year and would yield
more than $1 billion in savings over the next half decade.
Additionally, the Transformation Initiative (TI)--important funding and
programmatic flexibility the Congress provided in 2010--will enable the
Department to offer cutting-edge technical assistance that improves the
management and accountability of local partners, and conduct the kinds
of research and demonstrations that ensure that we are funding what
works and identifying what doesn't and what we need to do better.
RESPONDING TO THE CRISIS
Much has happened in the 2 years since HUD submitted its fiscal
year 2010 budget. Only weeks before, the Bush administration and the
Congress had taken dramatic steps to prevent the financial meltdown,
the Nation was losing 753,000 jobs a month, our economy had shed jobs
for 22 straight months and house prices had declined for 30 straight
months.
In the face of an economic crisis that experts across the political
spectrum predicted could turn into the next Great Depression, the Obama
administration had no choice but to step in aggressively. The Federal
Reserve and the Department of the Treasury helped keep mortgage
interest rates at record lows. Because low-interest rates only matter
if there are mortgages available at those rates, the administration
also provided critical support for Fannie Mae and Freddie Mac, while
HUD's FHA stepped in to play its critical countercyclical role in
helping to stabilize the housing market. The administration proposed,
and the Congress enacted, a home buyer tax credit to spur demand in the
devastated housing sector. And we took steps to help families keep
their homes--through mortgage modifications and FHA's loss mitigation
efforts.
The results of these extraordinary but necessary actions are clear.
More than 4.1 million borrowers have received restructured mortgages
since April 2009, including more than 1.4 million Home Affordable
Modification Program trial modification starts, more than 650,000 FHA
loss mitigation and early delinquency interventions, and nearly 2
million proprietary modifications under HOPE Now--more than twice the
number of foreclosures completed in that time. The private sector has
now created jobs for 13 straight months.
HUD's careful and effective stewardship of $13.61 billion in
American Recovery and Reinvestment Act (ARRA) funding has been
essential to economic recovery. To date, HUD has obligated 99.6 percent
of its ARRA grant and loan funds and expended more than 63.5 percent of
this funding--more than 5 months ahead of the aggressive timelines the
administration set down and to which the Vice President has held every
Department accountable. These funds have led to the development and
renovation of more than 400,000 homes (Public Housing Capital Fund,
Native American Housing Block Grant, Tax Credit Assistance Program,
CDBG, Lead Hazard Reduction and Healthy Homes grants). Through
homelessness prevention assistance (Homelessness Prevention and Rapid
Re-Housing Program (HPRP)), local partners have prevented or ended
homelessness for more than 850,000 people. Last, through the Lead
Hazard Reduction and the Healthy Homes programs, more than 3,800
children have been protected from lead paint-based hazards and other
home health and safety risks. As a result of these activities, in the
third quarter of calendar year 2010 alone, HUD ARRA recipients reported
more than 31,000 jobs saved or created.
WINNING THE FUTURE
Now, having prevented our economy from falling into a second Great
Depression, the administration is focused on ensuring that America wins
the future that makes strategic investments in our communities but also
takes responsibility for our deficit. For HUD, that meant using three
core principles to develop our budget:
--Continuing to provide critical support for the housing market while
bringing private capital back into the market;
--Protecting current residents--and improving the programs that serve
them; and
--Proposing no new initiatives--while continuing to invest in
initiatives that have been part of our budget the last 2 years
and are critical to winning the future.
As such, the Department's budget for fiscal year 2012 follows the
roadmap the President has laid out for keeping America at the forefront
of the rapidly changing global economy. Specifically, this budget helps
America:
Out-Educate
America cannot out-educate the rest of the world if a lack of
quality, affordable housing prevents Americans from accessing good
schools in safe neighborhoods, or if homelessness threatens the
schooling of a young child. That is why the budget continues to support
the Choice Neighborhoods Initiative (which links HUD's investments in
housing to education funding provided through the Department of
Education's Promise Neighborhoods Initiative), and proposes to target
housing vouchers--coupled with educational and other supportive
services--to homeless and at-risk families with school-age children.
Out-Innovate
A clean-energy economy is vital for America to compete in the new
century. Through ARRA's dramatic investments to green America's housing
stock, HUD will improve the efficiency of 245,000 HUD-assisted
affordable homes, provide comprehensive energy retrofits that will
reduce energy costs by as much as 40 percent in an additional 35,000
public-housing units, and complete green retrofits of 19,000 units of
privately owned, federally assisted multifamily housing. The funding in
this budget will continue to improve energy efficiency and save money
for the taxpayer by allowing us to track and monitor energy use in our
portfolio while we work more closely with the private sector to scale-
up energy retrofits that pay for themselves through loan products like
the FHA PowerSaver and expanded FHA risk-sharing. In addition, we will
continue to partner with the Department of Energy to leverage
weatherization assistance funds for many of these properties.
Out-Build
The President's focus on repairing our existing infrastructure and
building new ways to move people, goods and information will not only
put people to work now, but also spur investments that build a stronger
economy. Building on the successful Partnership for Sustainable
Communities with the Department of Transportation (DOT) and the
Environmental Protection Agency (EPA), HUD's budget includes $150
million to create incentives for communities to develop comprehensive
housing and transportation plans that aim to help regions and
communities approach their infrastructure investments in a smarter and
more strategic way and reduce the combined cost of housing and
transportation for families. Just as we cannot compete in the new
economy if we fail to rebuild our highways and transit systems, nor can
we ignore the importance of affordable housing in communities. For this
reason, the budget proposes a $200 million rental assistance
demonstration to rehabilitate--cost-effectively--some of our most
valuable affordable housing assets: America's federally subsidized
affordable housing stock. We estimate that this proposal will leverage
$7 billion in private debt and equity capital and, in the process,
support significant job creation in communities across the country.
Reform Government So That It's Leaner, Smarter, More Transparent, and
Ready for the 21st Century
President Obama said in his State of the Union Address that
removing overlapping and contradictory rules and regulations is
essential to generating economic growth. That's why we continue to make
it our focus to improve and simplify the way HUD works with other
agencies. The level of interagency cooperation with both our Federal
and non-Federal partners is unprecedented--from the Sustainable
Communities Partnership (discussed above) to initiatives targeting
housing and services to the homeless (with the Department of Health and
Human Services, and the Department of Education) to a multi-agency
economic development initiative led by the Economic Development
Administration in the Department of Commerce (DOC). This Department
with support from HUD is committed to removing barriers to local
innovation at the Federal level. Through our TI, HUD can continue to
deliver the kind of cutting-edge technical assistance and research that
our local stakeholders are seeking to innovate and grow their economies
and is critical to improving the management and accountability of HUD's
local partners. Indeed, this improved partnership with local
stakeholders also means holding them accountable for their use of
Federal resources. As noted, TI is already supporting research and
demonstrations that will allow the Department to closely monitor local
strategies for expending taxpayers' money. And through the newly
instituted HUDStat internal reporting system (discussed further below),
the Department is holding itself accountable for the funds it invests.
MEETING OUR RESPONSIBILITIES
The need for HUD's investments is clear. The devastating effect
that the economic downturn has had on the housing circumstances of poor
Americans was underscored in early February, when HUD released its
Worst Case Housing Needs study results. HUD defines worst case needs
as: renters with very low incomes who do not receive Government housing
assistance and who either pay more than one-half their income for rent,
live in severely inadequate conditions, or both. The report showed an
increase of 20 percent in worst case needs renters between 2007 and
2009. This is the largest increase in worst case housing needs in the
quarter-century history of the survey, and caps an increase of 42
percent since 2001. These numbers show the scale of the challenge
inherited by the Obama administration, with a historic increase in need
during the 2 years before we took office. Indeed, the critical housing
assistance offered by HUD through ARRA is a key part of HUD's response
to this challenge.
In short, this budget will achieve substantial results not only for
vulnerable, low-income Americans but also for hard-hit local and State
economies across the country. Its carefully targeted investments will
enable HUD programs to:
--house almost 2.5 million families in public and assisted housing
(more than 60 percent elderly and/or disabled);
--provide tenant-based vouchers to more than 2.2 million households
(more than 45 percent elderly and/or disabled), an increase of
more than 86,000 from 2010; and
--nearly double the annual rate at which HUD assistance creates new
permanent supportive housing for the homeless
As in fiscal year 2011, HUD's fiscal year 2012 budget is structured
around the five overarching goals the Department adopted in its
Strategic Plan 2010-2015. These goals reflect the Department's--and
my--commitment to ``moving the needle'' on some of the most fundamental
challenges facing America as we try to win the future. Indeed, every
month, I hold HUDStat meetings on one or more of these goals, to assess
progress and troubleshoot problems in order to:
--ensure that HUD is as streamlined and effective as possible in the
way that we administer our own programs and partner with other
Federal agencies; and
--hold our grantees accountable for their expenditure of taxpayers'
hard-earned dollars.
Goal 1.--Strengthen the Nation's Housing Market To Bolster the Economy
and Protect Consumers
We project that FHA will continue to support the housing market,
insuring $218 billion in mortgage borrowing in 2012. These guarantees
will support new home purchases and re-financed mortgages that
significantly reduce borrower payments. Over the last 2 years, FHA has
helped more than 2 million families buy a home--80 percent of whom were
first-time buyers. FHA also has helped nearly 1.5 million existing
homeowners refinance into stable, affordable products, with monthly
savings exceeding $100 in most cases. FHA financing was used by 38
percent of all home buyers, insuring, along with the Department of
Veterans Affairs (VA) and Federal farm programs, 81 percent of all
loans to African Americans and 73 percent to Hispanics in 2009. But FHA
is also a vital resource for homeowners facing foreclosure. FHA's loss
mitigation program minimizes the risk that financially struggling
borrowers go into foreclosure. Since the start of the mortgage crisis,
it has helped more than 500,000 homeowners.
Paving the Way for Private Capital To Return
It is critical, however, that we pave the way toward a robust
private mortgage market. This was a central goal of the
administration's recently released report on Reforming America's
Housing Finance Market, which proposed to wind down Fannie Mae and
Freddie Mac, fix fundamental flaws in the mortgage markets, better
target the Government's support for affordable housing, and provide
choices for longer-term reforms.
Taking steps to bring private capital back is a process that HUD
began many months ago--and I want to thank you for passing legislation
in the last Congress to provide more flexibility to FHA's mortgage
insurance premium structure. With this authority, FHA announced a
premium increase of 25 basis points last month.
Indeed, FHA has already taken significant steps to facilitate the
return of private capital, making the most sweeping combination of
reforms to credit policy, risk management, lender enforcement, and
consumer protection in FHA history. These reforms have strengthened its
financial condition and minimized risk to taxpayers, while allowing FHA
to continue fulfilling our mission of providing responsible access to
home ownership for first-time home buyers and in underserved markets.
FHA implemented a two-step credit score policy for FHA purchase
borrowers. Purchase borrowers with credit scores less than 580 are now
required to contribute a minimum down payment of 10 percent. Only those
with stronger credit scores are eligible for FHA-insured mortgages with
the minimum 3.5-percent down payment.
The goal of these reforms is to balance the need to provide access
to our mortgage markets with the need to protect taxpayers from
financial risk. That's also why in October 2009, we hired the first
chief risk officer in the organization's 75-year history--and last
July, FHA received congressional approval to formally establish this
position and create a permanent risk management office within FHA, for
which the risk officer is now Deputy Assistant Secretary. With this new
office and additional staffing, FHA is expanding its capacity to assess
financial and operational risk, perform more sophisticated data
analysis, and respond to market developments.
Further, FHA has strengthened credit and risk controls--toughening
requirements on FHA's Streamlined Refinance program, making several
improvements to the appraisal process and to condominium policies, and
implementing the two-step credit score policy discussed above. We are
very grateful for the support that the Congress has provided with our
efforts to reduce fraud and risk. Through the $20 million Combating
Mortgage Fraud funds that the Congress granted HUD in fiscal year 2010,
we have already begun to implement several risk management and systems
modernization reforms to incorporate modern risk and fraud tools and
counterparty data consolidation.
Additionally, FHA introduced policy changes and improved lender
oversight and enforcement to increase the quality of FHA-insured loans.
In April 2010, we published a rule eliminating FHA approval for loan
correspondents and increasing net worth requirements for lenders,
thereby strengthening FHA's counterparty risk management capabilities.
As a result of these actions, FHA finds itself in a stronger
position today. In particular:
--The quality of loans made in fiscal years 2009 and 2010--the years
FHA has done the most significant volume--is much improved.
Fiscal year 2010 is the highest-quality FHA book-of-business on
record.
--Credit score distribution continues to be significantly improved.
The average credit score on current insurance endorsements has
risen to nearly 700. And for the second straight quarter,
average credit scores are equal across refinance and purchase
books of business.
--Loan performance, as measured by early period delinquency and
seasonally adjusted serious delinquency rates, continues to
show significant improvement.\1\
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\1\ HUD's Annual Report to Congress Regarding the Financial Status
of the FHA Mutual Mortgage Insurance Fund fiscal year 2010 can be found
at http://www.hud.gov/offices/hsg/rmra/oe/rpts/actr/
2010actr_subltr.pdf.
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The Department is equally focused on assisting consumers throughout
the home ownership process, from increasing their knowledge of the
mortgage products they are considering to protecting them from fraud in
any phase of that process. Accordingly, the budget also includes $168
million for housing and homeowner counseling through HUD and the
Neighborhood Reinvestment Corporation (NeighborWorks). More than 4
million households have benefited from housing counseling since April
2009.
Goal 2.--Meet the Need for Quality, Affordable Rental Homes
With more than one-third of all American families renting their
homes, it remains more important than ever to provide a sufficient
supply of affordable rental homes for low-income families.
Why HUD Investments Are Vital
While the median income of American families today is more than
$60,000, families who live in HUD-assisted housing have a median income
of $10,200 per year--and more than one-half are elderly or disabled.
The extraordinary vulnerability of residents in HUD-assisted programs
is why we have chosen to protect the funding that houses these
families. Indeed, fully 80 percent of our proposed budget keeps current
residents in their homes and provides basic upkeep to public housing
while also continuing to serve our most vulnerable populations through
our homeless programs.
HUD's fiscal year 2012 budget requests $19.2 billion for the HCV
program to help more than 2 million extremely low- to low-income
families with rental assistance live in decent, safe housing in
neighborhoods of their choice. The budget funds all existing mainstream
vouchers and provides new vouchers targeted to homeless veterans,
families, and the chronically homeless. The administration remains
committed to working with the Congress to improve the management and
budgeting for the HCV program, including reducing inefficiencies, and
re-allocating Public Housing Authority voucher reserves based on need
and performance.
Figure 1
The budget also provides $9.4 billion for Project-Based Rental
Assistance to preserve approximately 1.3 million affordable units
through increased funding for contracts with private owners of
multifamily properties. This critical investment will help extremely
low- to low-income households to obtain or retain decent, safe and
sanitary housing. Similarly, in combination with full funding of the
Public Housing Operating Fund,\2\ the $2.4 billion requested for the
Capital Fund will help to preserve the more than 1 million units within
that program's portfolio.
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\2\ One billion dollars of the amount needed to fully fund the
Operating Fund at $4.962 billion represents excess reserves held by
PHAs, which have grown substantially over the past several years. The
Department will ensure that PHAs have sufficient remaining reserves to
stay on sound financial footing.
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TOUGH CHOICES--PUTTING EXCESS PUBLIC HOUSING OPERATING FUND RESERVES TO
WORK
This budget also holds our partners accountable for the funding
they have received from HUD. Indeed, while the growing need
demonstrated by the Worst Case Housing Needs survey clearly justifies
fully funding the Public Housing Operating Fund at $4.96 billion, we
are requiring that PHAs contribute $1 billion from their excess
reserves. Many PHAs have set aside these reserves so that our PHAs
could continue to effectively manage and operate public housing
properties during a rainy day--and it is clear that rainy day is here.
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Out-Building Our Competitors--Rebuilding Our Nation's
Affordable Housing Stock
The preservation of critically needed hard units of rental housing
in this country is among our top priorities, particularly as the number
of renter households with severe affordability issues has increased
significantly in recent years. Our preservation agenda includes
regulatory and administrative changes to make it easier for owners to
preserve HUD-assisted housing as well as creating tools that will put
the Department's stock of affordable housing on sound financial and
regulatory footing for the long-term. To this end, the budget includes
$200 million for a demonstration and rigorous evaluation of the
conversion of up to 255,000 public housing units to some form of long-
term project-based rental assistance contracts that will enable PHAs to
leverage private debt and equity capital to make repairs. Through
similar conversions, the demonstration will preserve 7,600 privately
owned, HUD-assisted units in so-called ``orphan'' programs at risk of
leaving the affordable housing stock. This funding request will allow
us, working with key stakeholders, to develop new preservation tools to
help ensure that we protect our affordable rental housing stock.
The President's budget also includes two revenue proposals to
reform the Low Income Housing Tax Credit (LIHTC) that will complement
the Department's overall preservation agenda:
--Replace the current cap on household income at 60 percent of area
median income (AMI) with the option that properties serve
households whose average income is no greater than 60 percent
of AMI and with no individual household more than 80 percent of
AMI. These changes to the low-income occupancy threshold
requirements will accomplish three things:
--allow greater income-mixing at the project level, creating
opportunities for workforce housing;
--help align LIHTC with HUD's and the U.S. Department of
Agriculture's (USDA) affordable housing programs (which
define low-income at 80 percent of AMI); and
--lead to the creation of more units targeted to the lowest income
households.\3\
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\3\ It is important to note that this income averaging proposal
would increase our ability to preserve HUD-assisted properties. The
69,224 households living in public housing and 23,271 households in
multifamily housing have incomes more than 60 percent of AMI. This
proposal allows these units to be counted in basis, increasing the
equity flowing to these projects for preservation.
---------------------------------------------------------------------------
--Make the 4-percent credit a more viable source of funding for the
preservation of the Federal affordable housing stock by
allowing allocating agencies to give a limited number of
qualifying properties a 30-percent-basis boost in the context
of preserving, recapitalizing, and rehabilitating existing
affordable housing, including housing targeted by our rental
assistance demonstration as well as other programs. This means
that a greater amount of equity could be raised per credit even
at the higher yields required by investors for 4-percent
investments, which in turn will generate more interest in LIHTC
preservation deals within the investor and developer community.
Finally, the budget once again calls for funding of the National
Housing Trust Fund (NHTF) at $1 billion. The recent Worst Case Housing
Needs report underscores the reality that, since well before the recent
recession, extremely low-income renters (those whose household incomes
are less than 30 percent of median) face the most severe housing
shortage and cost burden of any Americans. In addition, the report
shows that for renters less than 30 percent of AMI, the shortage of
affordable and available units increased from 5.2 million to 6.4
million from 2007 to 2009, with just 36 affordable and available units
per 100 extremely low-income renters in 2009, down from 44 units just 2
years prior. Enacted in 2008, the NHTF was designed to provide capital
resources to build and rehabilitate housing to fill this precise--and
growing--gap in the Nation's rental housing market. The administration
wants to work with the Congress to provide this crucial funding.
Goal 3.--Utilize Housing as a Platform for Improving Quality of Life
HUD, as well as State and local policymakers and our private-sector
partners recognize that stable, affordable housing provides an ideal,
cost-effective place to deliver healthcare and other social services
focused on improving life outcomes for individuals and families.
Out-Innovating--Solving Homelessness, Saving the Taxpayer
Money
Nowhere is this clearer than in the successful efforts in
communities around the country to address homelessness. These efforts
have yielded a substantial body of research, which demonstrates that
providing permanent supportive housing to chronically ill, chronically
homeless individuals and families not only ends their homelessness, but
also yields substantial cost saving in public health, criminal justice,
and other systems.
This year, we have made a specific effort to target homeless
veterans. As our young men and women return from Afghanistan and Iraq,
they deserve to be treated with dignity and honor. Yet our Nation's
veterans are 50 percent more likely than the average American to become
homeless. More than 11,000 servicemembers returning from those wars
have already been forced to live on the streets or in homeless
shelters. And more Vietnam-era veterans remain homeless today than
troops who died during the war itself. Nowhere is our obligation to our
citizens, and to those who have defended our Nation, more important,
more visible, or more urgently necessary than in our commitment to end
homelessness.
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IMPACT ANALYSIS--HOW HUD AND VA ARE PARTNERING TO END VETERANS
HOMELESSNESS
The Homelessness Prevention and Rapid Re-housing Program, created
by the Recovery Act, has helped local partners prevent or end
homelessness for more than 850,000 people--including about 18,000
veterans. And its effects have had an equally innovative impact on how
the Federal Government responds to homelessness--particularly veterans'
homelessness.
HUD and VA are collaborating on HUD-VASH, which combines HUD's HCV
rental assistance with VA's case management and clinical services. This
partnership is critical to ending veterans' homelessness. When
President Obama was sworn into office, the program helped less than
1,200 veterans lease properties. One of the reasons veterans couldn't
use HUD-VASH vouchers was that they couldn't provide something as
simple as a security deposit.
HPRP helped many veterans overcome these kinds of obstacles to find
a home. By the end of 2010, HUD-VASH had accelerated its pace of
housing veterans by nearly 20 times--helping more than 21,000 veterans.
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As the outgoing Chair of the U.S. Interagency Council on
Homelessness, I am pleased that this budget provides more than $2.5
billion to make progress toward the ambitious goals of Opening Doors:
the Federal Strategic Plan To Prevent and End Homelessness, which was
released by the administration in June 2010. Opening Doors establishes
a 5-year timeline for ending chronic and veteran homelessness and
commits to ending family and youth homelessness over a decade. This
budget will enable our stakeholders to make substantial progress on
these ambitious timelines. It includes:
--More than $2.3 billion for Homeless Assistance Grants to maintain
existing units and expand prevention, rapid-re-housing, and
permanent supportive housing;
--$145 million in new housing vouchers and related administrative
fees for more than 19,000 homeless veterans and other homeless
individuals and families who receive education, healthcare and
other services through the Departments of Education, Health and
Human Services, and Veterans Affairs.
--$50 million to test new incentives--including service coordinators
and special payments--to encourage housing authorities and
private landlords to serve more homeless persons.
These funding increases will enable HUD to assist approximately
78,000 additional homeless individuals and families.
The budget also provides a total of $953 million for the Section
202 and Section 811 programs. This not only preserves assistance in all
existing units, but also includes $499 million for new construction to
respond to the overwhelming demand among low-income elderly, including
frail elderly, and disabled individuals for affordable housing that
allows them to continue living independently in the community. The
administration remains committed to further updating and reforming
these crucial programs, building on a foundation that was provided by
two bipartisan bills passed in the 111th Congress. Those bills offered
key steps forward--for Section 811, authorizing HUD to provide
operating-assistance-only funding through States which demonstrated an
integrated healthcare and housing approach to serving disabled
households and for Section 202, authorizing key preservation tools
including new Section 8 contracts to maintain long-term affordability
on aging properties. In 2012, the administration will have in place the
framework to ensure that these programs better leverage other housing
and healthcare resources, afford streamlined processing to improve
timeframes, and are targeted to elderly and disabled individuals who
can best benefit from affordable housing.
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TOUGH CHOICES--REDUCED FUNDING FOR SECTION 202 AND SECTION 811 NEW
CONSTRUCTION
While the budget provides nearly $500 million for new construction
in the Section 202 and Section 811 programs, this does represent a 15-
percent cut from HUD's fiscal year 2010 enacted. Given the progress of
program reforms paired with the overwhelming need for affordable
housing among these vulnerable populations, these are difficult cuts.
But with the proposed reforms, HUD will seek ways to maximize use of
new construction funds.
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Goal 4.--Build Inclusive Sustainable Communities Free From
Discrimination
Each year HUD dedicates approximately one-quarter of its funds to
the capital costs of housing and economic development projects
throughout the country, which become even more critical for communities
hardest hit by our country's economic downturn. As with HUD's rental
assistance programs, HUD's capital grants--including the Public Housing
Capital Fund, HOPE VI capital grants, 202 capital advances, 811 capital
advances, CDBG, HOME, Housing Opportunities for Persons With AIDS
(HOPWA), and Emergency Solutions Grants--tend to assist areas of great
need. For example, 61 percent of HUD capital dollars are invested in
cities and counties with an unemployment rate greater than the national
average. Indeed, the average HUD capital dollar is dedicated to a city
or county with an unemployment rate of 10.5 percent, nearly 1 full
percentage point more than the national unemployment rate.
Through these grants, HUD and its partners are able to provide
better opportunities for people living in neighborhoods of concentrated
poverty and segregation, and offer choices that help families live
closer to jobs and schools. These priorities reflect a core belief:
when you choose a home--you also choose transportation to work, schools
for your children, and public safety. You choose a community--and the
amenities available in that community. Programs such as CDBG, the Rural
Innovation Fund, and Choice Neighborhoods are targeted to areas of
need, to provide locally driven solutions to overarching economic
development challenges.
Strategic Investments in America's Economic Future--the
Community Development Block Grant
The budget proposes a 7.5-percent reduction in CDBG funding,
relative to the fiscal year 2010 appropriated level for CDBG formula
program. This reduction acknowledges two realities. The first is the
need to take responsibility for our deficit, even if it means reducing
support for important, effective programs such as CDBG. Second, it
demonstrates the administration's continued commitment to assisting
local governments and States in improving living conditions in low- and
moderate-income neighborhoods across the country.
As the Federal Government's primary community development program,
CDBG serves as the backbone of State and local community and economic
development efforts. In fiscal year 2010, CDBG was estimated to reach
more than 7,250 local governments through various components of the
CDBG programs--the Entitlement Communities Program, the Urban County
Program, the State Program, and the Insular Area Program. In fiscal
year 2010, CDBG investments directly created 19,293 jobs, not including
any indirect effect on additional jobs. More than 109,000 households
received some form of housing rehabilitation assistance. More than 10
million people benefited from CDBG-funded public service activities and
more than 4 million benefited from CDBG-financed public improvements.
State and local governments are facing unprecedented budget
shortfalls and fiscal constraints. These constraints make CDBG funding
more essential than ever for local communities; CDBG funding is
increasingly one of the few resources available at the local level to
support housing rehabilitation, public improvements, and economic
development assistance--despite growing needs, local governments have
often had no choice but to eliminate some of these activities from
their own budgets.
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TOUGH CHOICES--REDUCING FUNDING FOR CDBG, HOME, AND THE UNIVERSITY
COMMUNITY PARTNERSHIP
This budget reduces funding for CDBG by 7.5 percent or $300
million, and HOME by 9.5 percent or $175 million, relative to current
funding levels, while eliminating funding for the University Community
Partnership. While the budget does provide $5.5 billion in CDBG and
HOME funds-substantial, flexible resources that allow State and local
grantees to improve infrastructure, build and rehab affordable housing,
provide rental assistance, and create and retain jobs--these are
difficult cuts, particularly given the financial challenges States and
localities are facing. But American families are tightening their
belts--and we need to do the same.
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Out-Building the Rest of the World--Sustainable Communities
Attracting new businesses to our shores depends on urban, suburban,
and rural areas that feature more housing and transportation choices,
homes that are near jobs, transportation networks that move goods and
people efficiently, all while lowering the cost and health burdens on
families, businesses, and the taxpayer. Unfortunately, today,
congestion on our roads is costing us five times as much wasted fuel
and time as it did 25 years ago, and Americans spend 52 cents of every
$1 they earn on housing and transportation combined.
Communities from Dallas to Salt Lake City have demonstrated that by
better linking housing, transportation and economic development,
parents can spend less time driving and more time with their children;
more families can live in safe, stable communities near good schools
and jobs; more kids can be healthy and fit; and more businesses have
access to the capital and talent they need to grow and prosper. Indeed,
communities that have planned for growth by linking these together have
a built-in competitive edge when it comes to attracting the jobs and
private investment they need to win the future.
Regions across the country understand this, which is why this
budget continues one of the most groundbreaking cross-agency
collaborations in recent history: the Partnership for Sustainable
Communities, which includes HUD, DOT, and EPA.
When the Obama administration announced the availability of
regional and local planning grants for sustainable communities, demand
was extremely high, as we received applications from all 50 States and
two territories--from central cities to rural areas, small towns, and
tribal governments. Over one-half of HUD's Sustainable Communities
Regional Planning Grants were awarded to regions with populations less
than 500,000 and rural places with fewer than 200,000 people. And of
the 62 planning grants awarded jointly by HUD and DOT almost 30 percent
went to rural communities.
At a time when every $1 the Federal Government invests in
jumpstarting the economy is critical, the Partnership helps ensure that
all agencies are coordinating efforts and targeting resources more
strategically. Reflecting this new collaboration, the initial round of
grants was judged by a multidisciplinary review team, drawn from eight
Federal agencies and from partners in philanthropy. We have heard
clearly from local businesses and elected officials that the joint
grants supported by the partnership are helping them achieve their own
local visions: working across their own jurisdictional lines to
coordinate land use, housing, and transportation investments on
regional and community levels; creating more sustainable development
patterns that reduce the crushing financial housing and transportation
cost burden too many working families face today; and putting in place
an infrastructure that will make them competitive in the global, 21st
century economy.
HUD's fiscal year 2012 budget requests another $150 million to
create incentives for more communities to develop comprehensive housing
and transportation plans that result in jobs, economic growth, easier
commutes, and more efficient transport of goods. Up to $5 million will
be used to develop more sophisticated data tools to help owners and
operators identify and implement energy-efficiency measures that can
lower the cost of heating, cooling and lighting in their HUD-assisted
properties.
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IMPACT ANALYSIS--HOW SUSTAINABLE COMMUNITIES FUNDING CREATES JOBS
In the fall of 2010, HUD and DOT awarded nearly $170 million in
planning grants to regions and communities across the country. HUD
awarded a $3.7 million regional grant to a consortium of public and
private partners in Austin, Texas, which is developing a long-range
regional transportation plan connecting a network of 37 mixed-use,
mixed-income communities closely linked to transit and job centers.
Specifically, with this planning grant, the city intends to build a
trucking/air/rail transportation hub near the Austin International
Airport that will employ 2,000 people from the region. In addition,
Austin's use of these funds will help 3,000 small, family-run
businesses expand or open a second location contingent on each of these
businesses hiring one new worker who has been unemployed for 1 year or
more. This will create an additional 3,000 jobs in an area of the
country where small businesses are the major driver of growth. Last,
with the expertise of private, higher education, and public partners,
the consortium is using the grant to redevelop up to 10 strategically
located properties for workforce housing and small businesses, directly
and indirectly creating as many as 2,000 additional jobs.
Austin's Department of Economic Growth and Redevelopment Services
estimates that HUD's grant will help create at least 7,000 permanent
jobs and thousands more in the construction sector, generating an
additional $1.1 billion of economic growth over the next 5 years and
saving the taxpayer $1.25 billion through better connected housing and
businesses, more people employed and fewer people dependent on
Government services.
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Out-Educating the Rest of the World--Choice Neighborhoods
The President has made clear that winning the future depends on
America winning the race to educate our children. But that's not
possible if we are leaving a whole generation of children behind in our
poorest neighborhoods. That is why the budget also brings Federal
partnerships to connect historically isolated people and neighborhoods
to local, regional, and national economies by providing a third year of
funding ($250 million) for another signature element of the
administration's place-based approach--the Choice Neighborhoods
Initiative.
Choice Neighborhoods builds upon the HOPE VI program launched by
previous HUD Secretaries Jack Kemp and Henry Cisneros and congressional
champions like former Senator Kit Bond and current Senator Barbara
Mikulski. HOPE VI restored the most severely distressed public housing
across America and did so while leveraging double the Government
investment in additional private development capital. Choice
Neighborhoods will continue transformative mixed-finance investments in
high-poverty neighborhoods where distressed HUD-assisted public and
privately owned housing is located. It will bring private capital and
mixed-use, mixed-income tools to transform affordable housing in five
to seven neighborhoods with grants that primarily fund the
preservation, rehabilitation, and transformation of HUD-assisted public
and privately owned multifamily housing. Like HOPE VI, it will also
engage the private sector and the ``third sector'' of nonprofits,
philanthropies, and community development corporations who have become
some of our most sophisticated affordable housing developers and
important civic institutions.
Choice Neighborhoods is a central element of the administration's
inter-agency strategy to provide local communities with the tools they
need to revitalize neighborhoods of concentrated poverty into
neighborhoods of opportunity. This strategy requires HUD, the
Departments of Justice, Education, Health and Human Services, and other
agencies to work together, co-investing, and pooling their expertise as
part of a focused Neighborhood Revitalization Initiative where local
actors can seamlessly integrate diverse Federal funding streams to
tackle complex problems. In particular, through partnerships with
Education's Promise Neighborhoods Initiative, Choice Neighborhoods will
help ensure that the President's commitment to out-educating the rest
of the world applies to every child in America, regardless of their
neighborhood or the kind of housing they grow up in.
The Department's administration of the first rounds of funding for
Choice Neighborhoods and the Sustainable Communities Regional and
Community Challenges grants exemplify how our practices generate
effective partnerships with local housing and community development
efforts. In the past, many Federal grant programs followed a rigid,
top-down, one-size-fits-all approach that dictated what local
policymakers could and could not do rather than listening to them and
providing the tools they needed to meet local needs. Having served in
local government myself, I am committed to a collaborative approach
responsive to local needs--and believe the results thus far demonstrate
that we are making good on that commitment.
Ensuring Rural Communities Can Compete in a 21st Century
Global Economy
The administration has placed a significant emphasis on ensuring
that America's rural communities are competitive in the 21st century
economy. Rural communities generally have less access to public
transportation, along with higher poverty rates and inadequate housing.
This administration recognizes that residents of these communities also
face unique challenges when it comes to accessing healthcare, grocery
stores, and adult education opportunities, among others.
HUD currently invests billions of dollars in rural communities
through its core rental assistance programs and block grants. The State
CDBG program uses 30 percent of annual CDBG funding for nonentitlement
areas across the country. Because small towns and rural areas often
lack the basic modern infrastructure that citizens in larger
communities can take for granted, States annually spend more than 55
percent of their CDBG funds on basic public improvements such as water
and sewer lines, paved streets, and fire stations. And because rural
communities need good jobs to sustain themselves, $1 out of every $8 in
State CDBG funds is spent on economic development. In fiscal year 2010,
State CDBG funds created or retained more than 12,000 jobs for lower-
income rural Americans.
In addition to the special category of funding we created for small
towns and rural places in the Sustainability Regional Grant Program,
this budget requests $790 million to fund programs that are
specifically targeted to housing and economic development activities in
rural communities including:
--$25 million for the Rural Innovation Fund to support innovative
approaches dedicated to addressing the problems of concentrated
rural housing distress and community poverty through
comprehensive community development, housing, and economic
development activities. The fund builds on the Rural Housing
and Economic Development program which has built and rehabbed
more than 17,000 homes, created credit unions and business
incubators that have helped more than 2,000 businesses get off
the ground, and supported housing counseling and home ownership
programs--over the last decade creating 13,000 jobs, providing
job training to nearly 38,000 people and leveraging more than
three times the $250 million HUD has invested in this program
in other public and private funds providing an excellent return
for the taxpayer. With the Rural Innovation Fund, we will
support these kinds of efforts on the larger scale these
challenges require.
--$25 million for the Rural Housing Stability Program to assist
homeless persons in rural communities. Since 2010, HUD has
provided targeted Homeless Assistance Grants to persons living
in small communities through a set-aside. As part of the
Homeless Emergency Assistance and Rapid Transition to Housing
(HEARTH) Act, the Rural Housing Stability program was
specifically authorized in order to provide housing, training,
and services for homeless individuals and families, as well as
those families at risk of becoming homeless.
--$782 million to fund programs that will support housing and
development initiatives in American Indian, Alaska Native, and
Native Hawaiian communities. As the single largest sources of
funding for housing Indian tribal lands today, HUD initiatives
in Indian country continue to have some of the Department's
most successful track records. Programs like Indian Housing
Block Grants, Indian Home Loan Guarantees, and Indian CDBGs
support development in remote areas where safe, decent,
affordable housing is desperately needed. HUD also directly
supports housing and economic development initiatives in remote
areas of Hawaii, through the Native Hawaiian Housing Block
Grant Program and Native Hawaiian Loan Guarantee Program.
Winning the Future--a Successor to Empowerment Zones
The budget also includes a multi-agency initiative, Growth Zones,
to assist communities in using their funds more effectively to support
job creation--an improved successor to the Empowerment Zones that
expire this year. Coupling targeted tax benefits and grant funding, the
budget supports the launch of an interagency effort led by DOC's
Economic Development Administration (EDA), and supported by HUD and the
Department of Agriculture. In addition, the budget also supports
another interagency effort with EDA that helps communities to better
employ the Federal investments they already receive (such as CDBG and
HOME), promote high-impact strategies, and build the local capacity
needed to execute those strategies in economically distressed areas.
This effort will enable these communities to create more effective
partnerships with businesses and nonprofits that will attract critical
private investments to promote job creation. With leveraged support
from HUD, other Federal agencies, and the philanthropic community, the
Federal Government offers targeted EDA funds, technical assistance, and
a National Resource Bank--a ``one-stop shop'' of experts that
communities can draw upon for a full range of services, including
fiscal reforms, re-purposing land use, and business cluster and job
market analysis.
Inclusive Communities for All
Finally, a sustainable community is one in which all people--
regardless of race, ethnicity, religion, sex, disability, or familial
status--have equal access to housing and economic opportunities.
Throughout its portfolio of programs, HUD is committed to maintaining
that inclusivity and providing accountability in housing and lending
practices nationwide. Through inclusive development, education,
enforcement of fair housing laws, and participation of historically
underrepresented populations in HUD policies and planning, HUD will
affirmatively further fair housing and the ideals of an open society.
To that end, the Department is requesting $72 million--$11 million more
than the fiscal year 2011 request--to support the division of Fair
Housing and Equal Opportunity's administration of the Fair Housing
Initiative Program (FHIP) and Fair Housing Assistance Program (FHAP).
Goal 5.--Transform the Way HUD Does Business
Winning the future means reforming Government so it's leaner,
transparent, and ready for the 21st century. While HUD programs make a
big difference in the lives of ordinary Americans, this administration
is also committed to making Government more efficient, more effective
and more accountable. Particularly in today's tight fiscal environment,
the need for responsible budgeting has never been greater--and making
smart, responsible choices depends on quality information. That is why
this budget demonstrates a strong commitment to conducting the research
and collecting the data we need to understand what works, what doesn't,
and what we need to do better--so that HUD can better serve the
American people, better protect the American taxpayer and better
partner with communities to meet the challenges of the decades ahead.
The budget provides up to $120 million for the TI fund. In fiscal
years 2010 and 2011, thanks to the TI fund, HUD began to fundamentally
alter how we approached our investments in delivering technical and
capacity-building assistance, conducting research demonstrations, and
maintaining and upgrading our IT systems so that we can hold ourselves
and our local partners accountable for the outcomes needed to achieve
the Department's strategic goals.
More of What Works and Less of What Doesn't--Research and
Demonstrations
A key element of HUD's transformation strategy is to provide a
predictable stream of funding for high-quality research and evaluation
that can inform sound policymaking. Allocating a small increment of
program funds to this account will enable HUD to subject programs
continuously to rigorous evaluation. Absent investment in key
evaluations, demonstrations and analysis, HUD's capacity to support
program refinement, measure progress toward goals and engage in robust
policy development is extremely limited. This new era of evidence-based
policymaking demands that HUD build back its internal research capacity
and work in partnership with the research community to evaluate
existing programs and design new policy approaches to solving America's
housing and community development challenges.
The Research, Evaluation, and Performance Metrics Initiative will
supplement research and technology (R&T) appropriations in order to
provide the Nation's basic infrastructure of housing data. The more
careful and scientific approach enabled by these additional research
investments will highlight for policymakers what works and what needs
reform. Systematic research enables HUD to monitor results and
undertake timely modifications of programs and policies that fail to
produce results. A component of this research and evaluation will
develop the right set of metrics to track program performance between
evaluations to inform management decisionmaking. In fiscal year 2010,
the Department was able to supplement a $48 million R&T appropriation
with $26 million in Transformation Initiative Research, Evaluation, and
Program Metrics funds. This funding permits the Department to determine
how certain program functions ought to cost or ought to operate.
For example, the current allocation method for HCV administrative
fees is not based on rigorous and objective studies, and may over-
compensate some public housing agencies (PHAs) while underfunding
others. The Department has used TI funds to develop a careful
examination of the costs of administering the HCV program at high-
performing and efficient PHAs in a wide variety of communities.
For fiscal year 2012, the Department anticipates approximately $25
million to be allocated for research projects. HUD's proposed
transformational approach to research would also inform the decisions
of a broad network of public and private-sector actors. A key feature
of the new approach is to partner with other Federal agencies, such as
DOT, the Department of Energy, and EPA, on research topics of mutual
interest. HUD will again confer with the Office of Management and
Budget and the appropriate congressional appropriations and authorizing
committees before finalizing the research agenda for funding under TI.
Combined with efforts already in progress, HUD expects that this
research will both improve program effectiveness and generate savings
over time.
An additional strategic thrust of TI was to enable HUD to design
and execute a series of major research demonstrations. These trials of
new program ideas provide a controlled mechanism to improve programs
and help State and local governments develop more effective strategies
for housing and community and economic development. Demonstrations are
necessary to test innovative program approaches to improve the delivery
and reduce the cost of public services. In short, well-run
demonstration programs--such as the Jobs Plus, Moving to Opportunity,
and Effects of Housing Vouchers on Families demonstrations of the early
1990s--enable the Federal Government and our local partners to fund
what works, and defund what does not. However, demonstrations generally
require funding over several years and often allow waiver of program
rules when conducted to pilot ideas for existing program changes.
Flexible funding may be needed to cover design resources, additional
program costs, such as incentives for participating households, and
evaluation of the impacts over several years.
Using funding flexibility granted in fiscal year 2010, HUD launched
important demonstrations to test policy interventions in the Family
Self Sufficiency (FSS) program, rent reforms in our major rental
assistance programs, and the first round of Choice Neighborhoods
grants, among others. For instance, the FSS program encourages public
housing tenants to increase earnings by allowing them to set aside the
rent increases they would otherwise pay to further specific goals, such
as education and home ownership. TI funds will be used to test whether
this is a cost-effective approach to increasing self-sufficiency that
can be taken to scale. HUD anticipates allocating $15 million in fiscal
year 2012 TI funding to program demonstrations, and, as in fiscal years
2010 and 2011, HUD will confer with both the House and Senate
Appropriations Committees before finalizing planned demonstrations
under TI. These demonstrations will, in conjunction with HUDStat, be
critical for informing funding decisions, as well as the re-engineering
and streamlining of business processes and procedures in HUD's
programs.
21st Century Technology To Protect the Taxpayer's
Investment
Funding for information technology (IT) modernization and
development is not requested under the TI fund for fiscal year 2012.
Having assessed the fiscal year 2010 planning and implementation
efforts, HUD has determined that funding these activities under the
Working Capital Fund in fiscal year 2012 will allow the Department to
better align the account structure and decisionmaking process with
budget planning and investment life-cycle management policies. Within
the TI fund, HUD will utilize significant balances from fiscal year
2010, as well as funds available in fiscal year 2011, to continue the
execution of priority IT development, modernization, and enhancement
efforts, including FHA Transformation and the Next Generation Voucher
Management System (NGVMS).
The FHA Transformation project involves the development of a modern
financial services IT environment to better manage and mitigate
counterparty risk across all of FHA's Insurance Programs. The system
will minimize the exposure of our Insurance Funds and support the
restoration of the capital reserve ratio to congressionally mandated
levels by enabling risk detection, fraud prevention, and the capture of
critical data points at the front-end of the loan lifecycle. More
simply put--FHA Transformation will enable HUD to identify trends, and
seamlessly take action, before problems occur. This approach will
protect consumers and the economy by ensuring that safe underwriting
standards are adhered to, as FHA approaches $1 trillion of Insurance-
in-Force. Importantly, FHA Transformation will also allow HUD to start
the careful process of migrating relevant portions of our legacy
applications, most of which were built in a 1970s-era programming
language, to a more cost-effective platform.
NGVMS performs a department-wide reengineering of the current
voucher management business models and processes. NGVMS will replace
20-year-old legacy systems and Excel-based budget spreadsheets with a
solution that establishes uniform processes and a standard set of rules
and regulations that support all of HUD's rental assistance programs.
The system will support enhanced budget planning and forecasting
capabilities, improve grantee reporting and data integrity, and ensure
that programs comply with the requirements of the selected provisions
from the proposed SEVRA.
In addition to improving systems that support HUD's programs, the
agency is also investing in technology to improve HUD's administrative
processes. For example, the HUD Integrated Acquisition Management
System (HIAMS) will automate all phases of the acquisition lifecycle to
create greater accountability and transparency, as well as enable
timely processing of procurement actions. The agency's current process
is manually intensive and highly susceptible to errors. HIAMS will
reduce processing inefficiencies, increase visibility into the
acquisition process, and enable HUD to obtain services faster. The
system utilizes the most widely adopted Federal acquisition management
software, a solution that is currently used by more than 80
organizations across the civilian, intelligence, and defense sectors.
Reforming Government and Improving Accountability With
Cutting-Edge Technical Assistance
The community development field is evolving to a more
comprehensive, sustainable approach to neighborhoods and cities. As
noted, HUD has embraced this change with new initiatives like
Sustainable Housing and Communities, Choice Neighborhoods, and the
Neighborhood Stabilization Program. In order to realize this expanded
vision, the Nation needs local practitioners--both local government and
nonprofit partners--who understand a more comprehensive approach, who
can use current technology to assess needs and to measure success, and
who have modern skills to deliver results and save money for the
taxpayer.
TI recognizes that enhanced and focused information, and more
targeted support for grantees, will result in better program
administration and more integrated planning and action that cross
programs and jurisdictions. Effective responses to urban and housing
challenges increasingly require coordination and awareness of diverse
areas of knowledge:
--housing finance as well as land-use planning;
--economics as well as energy efficient design;
--community development as well as transportation planning; and
--accessible design as well as job creation strategies.
TI is helping HUD to develop a new level of technical assistance
and capacity building to Federal funding recipients. Traditionally, HUD
has delivered compliance-oriented technical assistance, funded through
individual program accounts that ensure grantees are fully aware of the
rules governing HUD's disparate programs. HUD's fiscal years 2010 and
2011 budgets proposed rolling these accounts into one broad technical
assistance effort to be funded from global transfers to the TI fund.
Central funding through TI has allowed the Department to develop
comprehensive technical assistance efforts that focus on skills needed
to improve program outcomes, rather than merely reinforcing program
compliance.
In the fiscal year 2012 budget, HUD once again requests discretion
to target technical assistance funding to those programs that need it
most based on the capacity of current grantees, new program
requirements (e.g., the continued implementation of the HEARTH Act, or
implementation of new programs such as Choice Neighborhoods or
Sustainable Housing and Communities), broader economic and social
imperatives (e.g., a spike in homelessness, or the impact of high
energy and housing costs on housing affordability), or unanticipated
crises (e.g., natural disasters). In order to ensure that these
critical but limited resources are targeted appropriately, HUD will
continue to evaluate the technical assistance needs of its grantee
communities in fiscal year 2011 with TI funds and build on those
findings with funds from fiscal year 2012.
In particular, HUD will pilot a new approach--involving 12 other
agencies including the White House--aimed at improving the capacity of
local governments in chronically distressed cities and developing
partnerships to support job creation and economic development. Many of
the cities that have historically driven America's economic growth are
now amongst its most economically distressed. These cities have
struggled to return to a place of economic productivity and opportunity
after decades of industrial decline--a challenge exacerbated by the
recent economic downturn. This initiative is designed, not to provide
additional funding, but instead to ensure that communities are using
the resources already available to them more effectively and
efficiently so they can compete in the global economy.
As part of this effort, TI will support the creation of a National
Resource Bank (NRB). The bank is so named because it will be a
repository of technical assistance for local governments across the
Nation, but will not provide direct financial resources. NRB will align
and aggregate public and private funds to provide cities tailored
technical support through a ``one-stop shop'' of national experts with
wide-ranging skills that are critical for economic development. These
include fiscal reforms, repurposing land use, and business cluster and
job market analysis, to name a few. NRB will help lay the foundation
for economic recovery and transformation in these cities through truly
place-based support that leverages existing strategic partnerships
between local governments, Federal regional office staff, and the
philanthropic community and helps to foster further linkages for the
long-term benefit of these cities. The local demand for the capacity-
building assistance that NRB will provide is broad and sustained.
Cities have had few options for building organizational capacity since
the 1970s, and recent budget cuts have created even greater strains on
capacity at the same time that local challenges are growing more
complex. NRB will play an essential role in helping to coordinate and
direct Federal technical assistance functions at a time of severe local
government need.
CONCLUSION
Madam Chairwoman, this budget reflects the Obama administration's
recognition of the critical role the housing sector must play for the
Nation to out-build, out-educate and out-innovate our competitors.
Equally important, it expresses the confidence of the President in the
capacity of HUD to meet a high standard of performance.
Given the economic moment we are in, HUD's fiscal year 2012 budget
proposal isn't about spending more in America's communities--it's about
investing smarter and more effectively.
It's about making hard choices to reduce the deficit--and putting
in place much-needed reforms to hold ourselves to a high standard of
performance. But most of all, it's about the results we deliver for the
vulnerable people and places who depend on us most.
I believe winning the future starts at home--and with this budget
of targeted investments and tough choices that I respectfully submit,
we aim to prove it. Thank you.
Senator Murray. Thank you very much, Mr. Secretary, and
thank you for your openness and continual communication with us
on a lot of questions.
I do have some questions I will submit for the record that
I want to make sure I have a chance to talk with you about. I
do have to get over to a very critical meeting.
Secretary Donovan. Very critical.
Senator Murray. And in the spirit of bipartisanship that
this subcommittee has always operated on, I am going to turn
the gavel over to my able ranking member, Senator Collins, for
her questions and I will submit mine for the record. Thank you
very much, Senator Collins.
HOMELESSNESS
Senator Collins [presiding]. Thank you, Madam Chairman.
Secretary Donovan, as I mentioned, one of my primary
concerns is the number of homeless Americans. The Government
Accountability Office (GAO), however, recently issued a report
that indicated that there was considerable duplication among
Federal housing programs aimed at the homeless. For example,
GAO reported that at least seven Federal agencies,
administering more than 20 programs spending nearly $3 billion,
provide some type of shelter or housing assistance. GAO has
raised concerns that this leads to fragmentation, duplication
of service, unnecessary costs, and points out that this
fragmentation can create difficulties for people who are trying
to access those services, as well as administrative burdens for
providers.
What is your response to GAO's concern that we are not
delivering programs to people who are homeless in as efficient
a way as possible?
Secretary Donovan. First of all, I would say not only do I
agree that there is significant work we can do on consolidating
and streamlining programs, but also on better coordinating
those. The President talked very directly about this in his
State of the Union Address.
Homelessness is a very good example where part of what we
need to do is simplify and streamline overlapping programs, but
we also need to step up our coordination and improve the work
between agencies. One of the most important advances we have
made was the HEARTH Act which consolidated and improved HUD's
programs so that we have a much simpler but more effective set
of programs at HUD, and we are in the process of implementing
the HEARTH Act through new rules. And you will see, fully
reflected in our budget for 2012, full funding for that.
We have a number of other ways that we are consolidating
overlapping programs that I would be happy to talk about
outside of homelessness, but I do want to mention for a moment
the coordination piece of this, which I learned very well
working across party lines in my prior work at the local level
to create a plan to end homelessness.
VASH is a very good example. When we came into office,
there were only about 1,200 veterans who were actually
benefiting from VASH despite 20,000 vouchers having been
appropriated by this subcommittee. And so we rolled up our
sleeves. We sat down, figured out what the blockages were
between us and VA, figured out what our roles should be, how we
could coordinate better. And I am proud to say that today we
have almost 20 times as many veterans who are benefiting from
VASH as there were 2 years ago, more than 21,000 today. That is
exactly the kind of coordination that we need, and it is an
example of how the U.S. Interagency Council on Homelessness is
leading the coordination across 19 different Federal agencies
to implement our homeless programs.
Senator Collins. I think that everyone is for effective
coordination, and the partnership with the VA on that program
is absolutely critical to reaching the veterans who need help,
and I have seen the success in my own State.
But GAO is talking about something far more than that. GAO
is raising questions about whether we are delivering services
as effectively as possible or whether, in fact, there is a
system of such duplication that it is not serving those who
need help, nor the providers, nor the taxpayers well.
So I would ask you to take a look at GAO's specific
criticisms and get back to our subcommittee about whether there
is some overlap and fragmentation that is not serving anyone
well.
THE HOMELESS EMERGENCY ASSISTANCE AND RAPID TRANSITION TO HOUSING ACT
On the HEARTH Act, I was the cosponsor of that bill, and it
was so important because it does create a more comprehensive
approach. It updates the McKinney-Vento Homelessness Assistance
Act. HUD, under this bill, is charged with developing a new
formula to distribute the funds in a fair way across the
Nation. What is the status of that effort? And what factors is
HUD weighing in deciding how to distribute those funds?
Secretary Donovan. We are, as I mentioned earlier, working
actively on the implementation. One of the impacts this year of
having a CR continuing for fiscal year 2011 is, unfortunately,
that we cannot go ahead and implement yet, but we do plan to
have the rules out in the next few months for all the various
pieces, and there are a number of different pieces that we are
implementing.
And specifically on the formula, we began discussions with
stakeholders and others last summer around potential changes to
the formula. We expect them to be included as the regulation is
released, and we are particularly looking at how to better
incorporate need into that formula because the original formula
was based primarily on the CDBG formula which is not the best
proxy, if you will, for the way that homelessness affects
different communities. And so it is particularly around need
and the way that it varies across different types of
communities that we are looking at, as we look at the formula.
PUBLIC HOUSING AUTHORITIES
Senator Collins. You mentioned in your statement that we
were losing--I think you said--10,000 units of public housing.
As you know, a lot of these housing issues are relatively new
to me, and as I have been learning about the various programs,
I have wondered why we still have public housing and whether or
not we should be moving to a system where we give vouchers so
that low-income individuals have more choices about where they
live. And it would take more of a private-sector approach as
well. It would still have the kinds of benefits for the
construction industry that you have talked about because the
demand for housing would still be there, but it seems to me you
would avoid some of the problems that we have seen with private
housing units.
And that question, which came to my mind, was heightened
when I read about the truly egregious and outrageous cases of
fraud and corruption in some PHAs. I know some do a wonderful
job, but some of these cases recently, such as in Philadelphia
or where money was wasted on belly dancers, dead residents--it
is really very, very troubling.
Has HUD looked at taking a whole different approach to
helping low-income people perhaps by expanding the Section 8
voucher program and not trying to replace these public housing
units?
Secretary Donovan. A terrific question, Senator.
Let me go to the issue of, currently, some of the things we
need to do, because I could not agree with you more that we
need to look at the system overall, but we also have to make
sure in the short run that we are better enforcing against the
most troubled housing authorities.
I do want to say more than 95 percent of housing
authorities are not troubled. We have a significant system that
we use to track and monitor them, but I think it is fair to say
that we can step up what we are doing. In Philadelphia
specifically, we cut off excessive payments they were making to
outside law firms. We have called on the board to step down
and, in fact, are coordinating very closely with our inspector
general on audits that they are doing there. I was pleased to
see yesterday that one of the board members stepped down, and I
am hopeful that the remaining board will step down so that we
can really move the housing authority forward there.
But one critical thing I would point out in the budget--our
TI, in addition to the dedicated team that we are setting up,
thanks to that funding, to go in and catch troubles before they
develop too significantly by early warning signs through
financial information is critically important.
The other thing that TI is doing is allowing us to create
new systems for the voucher program and the public housing
program which will allow us to dramatically step up our
monitoring and enforcement there and, again, to catch problems
before they happen.
On your point about the system overall, this is exactly why
we have proposed a demonstration in the budget. We, for more
than one-quarter of a century, have been using private capital
to develop any new unit of affordable housing, including
Florence House that we saw together in Maine. We have a low-
income housing tax credit system that has worked quite well,
and it introduces not just discipline from the private sector
that allows not just HUD's eyes but other sets of eyes to make
sure the property is working. It also allows a mix of incomes
that we know is much more beneficial to the families that are
there. And so that is a critical part of what we are trying to
do with this budget. I look forward to having further
conversations about it.
One of the components of that is to try to expand choice in
public housing. Right now, for a family that lives in public
housing that may have a job in another town, that may be a
decision to give up $4,000 or $5,000 a year in housing
assistance because they would have to get back on a waiting
list somewhere else. So part of our proposal would allow more
flexibility for those families to take a voucher with them and
open up a unit in public housing behind them.
So I could not agree more with the direction that you are
going. We do need to think about the system structurally for
changes. And in fact, Congressman Ellison on the House side
introduced a bill called the Rental Housing Revitalization Act
that would open up public and private financing, allow public
housing to be more integrated, and provide more choice last
year, and we look forward to working with you, hopefully, in
the Senate on that as well.
Senator Collins. Thank you.
Senator Pryor.
Senator Pryor. Thank you, Madam Chairman, but I think
Senator Blunt was here before I was. Go ahead, please.
Senator Collins. Senator Blunt. Everybody is so polite
here.
BUDGET NUMBERS
Senator Blunt. I only have a couple of questions, Mr.
Secretary.
One, on your overall budget, how does that number compare
to the fiscal year 2010 number and the fiscal year 2008 number?
Secretary Donovan. I do not have the fiscal year 2008
number in front of me. I will ask my team to look at that, and
I should have it in a moment.
Compared to fiscal year 2010, on a net basis, it is about
$1.2 billion less than 2010 actuals, or a 2.8-percent reduction
on a net basis. It is quite important----
Senator Blunt. What does that mean ``on a net basis''?
Secretary Donovan. Our budget has both spending and also
has substantial receipts from FHA. So, for example, our
proposal to increase the premium for FHA 25 basis points is
expected to increase our receipts next year by about $2
billion. This year our expectation is that FHA will earn on its
new loans that it is making about $10 billion. So that is an
important component of our budget. The more effectively and
efficiently we can manage FHA, the more return there is to the
taxpayer from that side of our budget.
Senator Blunt. So that increase in FHA is part of the net
reduction?
Secretary Donovan. That is correct.
Senator Blunt. And what about fiscal year 2008? Does your
staff have that yet?
Secretary Donovan. On a net basis, fiscal year 2008 was
$37.7 billion, and that compares to the $41.7 billion that we
are requesting this year. So it is an increase from fiscal year
2008.
Senator Blunt. An increase from fiscal year 2008.
Secretary Donovan. Yes.
RURAL HOUSING
Senator Blunt. On all this discussion about duplicative
programs and streamlining, there is some discussion that
Section 538 rural housing might be better served as part of a
bigger program. We have a lot of rural housing in Missouri, in
most of the States, through a not very big program but a much
targeted program. What is your view of the best place to
administer housing programs that have a targeted audience, a
targeted group they are trying to help?
Secretary Donovan. It is an excellent question, and in
fact, we have already begun, as part of the initiative that the
President announced in the State of the Union Address, between
HUD, the Department of Agriculture (USDA), and VA, to look at
where we might be able to streamline and simplify the overlaps
between our lending programs. For example, currently Ginnie Mae
is the securitizer for not just FHA but also VA and USDA, and
that works quite effectively. So I think there are further
things that we could do to share knowledge systems, reduce
duplication between all of our credit programs.
I think ultimately I would expect--we are, obviously, just
beginning that look--that not everything should be consolidated
because USDA, for example, has a presence in many rural areas
that we do not have. But it might be that there are certain
functions, as Ginnie Mae serves today for USDA, that we might
be able to consolidate or streamline across the agencies, and
that is exactly what we are looking at through this task force
that we have put together as a result of the President's new
initiative.
Senator Blunt. Everybody in Washington now seems to be
strongly on the side of minimizing duplication and not having
all kinds of money spent for programs that do the same thing.
But I just would hope that you will make the case that if the
elimination of duplication means that you have to have a
different kind of staff serving an area that you do not have a
presence in now, that is something that very much needs to be
understood. If all we do by eliminating rural housing under
USDA is require you to have significant monitoring
responsibilities that you currently do not have any way to deal
with, be sure that we understand that as part of why this
duplication exists and why it makes more sense. It is helpful
for me to hear you put it that way as well.
Secretary Donovan. Despite the word ``urban'' in the
agency's name, we actually do have a substantial presence in
rural areas as well. And in fact, in our budget, we not only
have a substantial, more than $800 million set of programs that
are directed exclusively to rural areas, things like a Rural
Innovation Fund which helps creative nonprofits and others do
things like self-help housing or other things that are
particularly appropriate for rural areas or in Native American
communities, we also for the first time are proposing, thanks
to the HEARTH Act that Senator Collins was a cosponsor of, will
have a dedicated $25 million program attacking homelessness in
rural areas because homelessness, as we learned, is different
in rural areas. We are also proposing more than $700 million
targeted to Native American communities.
But in addition to that, one thing I would point out--and
this is often missed--the CDBG program is a program that does
not just serve cities or large counties. Thirty percent of the
money goes to States and 75 percent of that State money, about
$800 million, is used in rural areas. And so the CDBG program
is a critical tool, about $800 million directly to serve
housing and other kinds of infrastructure needs in rural areas,
and it has a different distribution channel exactly for what
you are saying. It reaches those areas more effectively.
Senator Blunt. Thank you, Secretary.
Thank you, Madam Chairman.
Senator Collins. Thank you.
Senator Pryor.
DISASTER RECOVERY REPORT
Senator Pryor. Thank you very much.
Mr. Secretary, let me start with an issue that is important
to Senator Blunt and myself, and that is the New Madrid Seismic
Zone, which is the New Madrid fault that begins in the boot
heel of Missouri and goes on down into Arkansas and is
predicted to be--heaven forbid--a very serious threat in terms
of catastrophic damage if it ever happens. In fact, this week
we had three earthquakes in Arkansas. One was a 4.7 on the
Richter scale. It was felt in four States. And then we had two
sort of follow-up earthquakes, 3.8 and 3.6, in that same few-
hour span.
The reason I am asking you about this is because last year
the President announced that you and Secretary Napolitano would
lead a long-term disaster recovery working group which would
report to him on your efforts for long-term disaster recovery
apparatus in our country. The report was promised in April
2010. That did not happen. We inquired, and the deadline was
moved back to August 2010. It still has not been delivered. Do
you have any idea when that is going to be ready to be
delivered to the President and sent to the Congress?
Secretary Donovan. Let me be honest about this, Senator. We
had done extensive work on the report. We were close to
releasing it. And then the oil spill in the gulf happened, and
it made us step back and take a look at the approach that we
had taken because, frankly, this was a different kind of
disaster than we had primarily focused on, and we had some
real-world learning experience that happened over last summer
to look at in that. And so we have gone back, done a range of
revisions, and we are literally in the process now of working
with all the agencies that were involved in trying to make
final revisions to that report.
So I would be hopeful that this spring, certainly, that we
would have it out. I cannot tell you if it is 1 week or 2 weeks
or 2 months, but we are very close through this interagency
process of trying to resolve the final comments on it.
And I would say that as an agency that is very much
involved like CDBG has been in responding to the long-term
implications of disaster, it has been a very important process
for us, and we have begun standing up already increased
capabilities at HUD, thanks to the support of the subcommittee.
Senator Pryor. Also, this year, the 2011 national level
exercise, which is an exercise to make sure we are prepared for
various disasters, will focus on the New Madrid Seismic Zone. I
do not know if your Department is participating in that.
Secretary Donovan. Yes, we are.
DUPLICATION IN FEDERAL PROGRAMS
Senator Pryor. I was going to say if you are not, I
certainly hope you get involved in that.
Let me also follow-up on one of Senator Collin's questions
because her Committee asked for this GAO report, and the GAO
report actually singled out several HUD programs. I know in one
section of the report, it says there are 12 HUD programs among
some 80 economic development programs at four other agencies.
These are, as they say, fragmented programs that overlap, in
terms of economic development activities. In other words, they
do overlap and they are duplicative.
We spend about $6.5 billion on all of those programs.
I do not know if you are familiar with the GAO finding, but
if you are, is this an area in your view that needs to be
addressed?
Secretary Donovan. The GAO report was just issued this
week, so we are still in process of reviewing it. I do not have
a detailed response for you at this point.
What I will say is there is no question--as the President
talked about, in the State of the Union Address, one agency
focused on fresh water salmon, a different one focused on salt
water salmon--that in the economic development world, that
there are overlapping programs. So, for example, we have
proposed in this budget a number of consolidations where we
think that makes sense. One in terms of new construction would
be the Self-help Home Ownership Program (SHOP), which we have
proposed to be incorporated into the HOME program as an
eligible use rather than having a separate stand-alone program.
Those are the kinds of steps that I think we can take.
In addition to that, I do think it is important not only to
focus on the consolidations--we will never get down to one
program at one agency because, as the discussion we had about
rural housing, there are important differences in the programs
that they serve. So in addition to the consolidation and
simplification, the coordination that we have set up with the
Economic Development Administration at Commerce, with the
Department of the Treasury, is very, very important as well.
And in fact, we have some coordinated proposals in the budget
this year to try to simplify and improve the low-income housing
tax credit and other programs that cut across agencies as well.
Senator Pryor. Also, on a similar vein--Madam Chairman, if
you will just give me 1 more minute here.
Senator Collins. Absolutely.
SECTION 108 LOAN GUARANTEE PROGRAM
Senator Pryor. Along a similar vein, the Section 108 Loan
Guarantee Program. The budget this year is a request for $500
million, which is a 100-percent increase, but that same GAO
report contends that HUD does not do a sufficient job in
tracking the long-term performance outcomes measured in this
program because the agency lacks a reporting mechanism to
capture how the program funds are used.
In addition to that, back in 2007, the Office of Management
and Budget (OMB) had a report that questioned Section 108's
effectiveness and impact on neighborhoods.
I do not disagree with the goals of the programs. I am on
board with the goals, but I want to tell you, like Senator
Blunt said a few minutes ago, I do not think I can support more
funding unless we know that those tax dollars are going to be
spent effectively and be spent wisely.
So did you have any comment on that?
Secretary Donovan. First, specifically on Section 108,
Section 108 is effectively an option under the CDBG program
which allows a grantee to use their own CDBG funding to
leverage private capital. So in that sense, it can be a very
powerful, effective tool to get more bang for the buck. It
typically leverages many multiples of the CDBG funding itself
and has been used effectively.
The specific issue that GAO pointed to, which is exactly
right, is that because of the nature of this--that it leverages
private capital--we have not had a tracking system in the same
way that we track regular CDBG funds when they are used for
other purposes. And one of things that the investments that we
have had from this subcommittee to improve our technology is
allowing us to do is to incorporate better tracking of 108 into
what we call the Integrated Disbursement and Information
System, which is the system we use to report and track CDBG
funding. So that recommendation is something that in fact was
already in process and that we completely agree with.
Let me just make one other point. As I hope you will learn
on this subcommittee, I am a numbers guy, and one of the most
important things for me--and this goes directly to Senator
Collins' discussion about homelessness--we have very good data
now to prove that these programs work and they save money. One
of the key things that I have begun to establish at HUD, partly
using the TI funding that the subcommittee provided and the
flexibility it provided to use that more effectively, is a
HUDStat process. Every month, I sit down with every senior
person in the Department, many program directors, and we track
progress on the four key strategic goals that we set out in our
strategic plan and use that as an accountability mechanism
which never existed before at HUD.
That, combined with the research, the demonstrations, other
things that we are doing which are longer-term studies to see
whether the programs work, I think are critically important. It
is one of the places where I really want to make sure we are
working closely with the subcommittee to ensure that you are
comfortable that you can see the monies being used effectively
and what those specific results are, not just that we are
avoiding, waste, fraud, and abuse, which is critical, but also
that we are getting bang for our buck in terms of the outcomes
of these programs.
Senator Pryor. Thank you, Madam Chair.
HOUSING FIRST MODEL
Senator Collins. You are welcome.
Mr. Secretary, as you were talking about the effectiveness
of programs and the savings that they produce and the outcomes
that result, I could not help but think that with the Housing
First model, which I have become convinced works very well and
the data proved that----
Secretary Donovan. Amen.
Senator Collins [continuing]. The problem is it saves money
not for HUD but for the Medicaid program, for the corrections
system, for State and local governments. So somehow we need to
be able to measure the overall impact, even if it means we are
spending more money out of the HUD budget, overall it produces
tremendous savings and better outcomes but that is not going to
be reflected in the HUD budget. So I think this is a challenge
for all of us as we assess the effectiveness of the programs.
I was originally a skeptic of the Housing First model
because I felt that unless you made getting assistance for
substance abuse problems, for example, a condition of getting
into these apartments, it would not work. In fact, just the
opposite has been proven. And I, like you, am convinced by
data, and the data totally convinced me that this is the case.
But when I read you those statistics, I could not help but
think you are not the beneficiary of those savings.
Secretary Donovan. It is absolutely right. In fact, this is
true at the local level, obviously, as well, and we used to
call it in New York the ``wrong pocket problem,'' that you may
take money out of one pocket and save it in the other, but
unless you have budget mechanisms to allow those dollars to be
shifted across accounts, you do not do the smart thing, which
is invest more in places that are going to save you money.
I would say, however, we have had these discussions in
detail, including with the OMB Director. It is very difficult--
and it might even be worth having this conversation with CBO
from the subcommittee's point of view. It is very difficult to
write that recognition into the budget scoring rules, but you
will see there is an important reason why we have almost a 30-
percent increase in our homeless programs, despite significant
cuts that we are taking in other places, is because even if it
cannot officially score it, OMB very clearly recognizes the
kind of benefits that you are talking about. And so it is
clearly something we have taken into account as we were putting
together the budget this year.
FHA'S FUTURE ROLE
Senator Collins. Let me switch subjects now to talk to you
about FHA. There is a basic philosophical issue that I believe
that the Congress and the administration need to confront
regarding the future role of FHA, and that is, should it
support low- and moderate-income borrowers or should it support
all borrowers? And that is an important threshold question
because the answer to that influences what the limit is on the
cost of houses. And I know that is an issue that the
administration is looking at. So tell me what the
administration's vision is for FHA.
Secretary Donovan. I think that vision is actually
consistent with what you have seen happen through this crisis
at FHA. And what I mean by that is, our primary mission, when
the housing market is functioning in ``normal times,'' let us
call them, is to serve low- and moderate-income borrowers and
to serve underserved populations who may not have access
otherwise, but always within a loan limit that restricts who we
can reach. In fact, historically, our market share has been in
the range of 10-15 percent, so you could see quite targeted to
a very small subset of the overall market.
However, we do have another mission as we were established,
which is to make sure that there is liquidity in times of
crisis, and that is, I think, very consistent with why the
Congress raised the loan limits for FHA as we went into the
crisis. Our market share has expanded significantly. It is up
more than 20 percent, still very targeted, I would add, on low-
and moderate-income folks, because 80 percent of those who used
our loans for purchases were first-time home buyers and only a
tiny share of the loans that we are doing are near the top of
the higher loan limits.
But we believe, as I said in my testimony, that we need to
take steps to bring us back to that historically more limited
role. One important step is the premium increase that I
described. We also called in our housing finance reform
proposal for the Congress to allow the higher loan limits to
expire on October 1, which is what they would do unless the
Congress takes other action, and that would begin to bring our
loan limits back down to more historic levels. It would go from
$729,000 in the highest-cost areas--that is not everywhere, but
just the highest-cost areas--down to $625,000 in the highest-
cost areas. We believe that is a good first step, but we also
say in the reform proposal that we need to go farther than
that.
We want to be cautious about the timing because the housing
market is still fragile. We think October, assuming we do not
have any major shocks in the system, makes sense as a first
step, but the further steps, we should time, and how far we go
in lowering the loan limit, we should time based on how the
market is recovering and what speed private capital is coming
back into the market.
I hope that answers the question.
FREDDIE MAC AND FANNIE MAE REFORM
Senator Collins. It does.
I know that you have also been very involved in the
administration's white paper on the options for Freddie Mac and
Fannie Mae. What will be the impact on FHA and Ginnie Mae if
the Congress reforms Freddie and Fannie in a way as to reduce
their role in the mortgage market?
Secretary Donovan. That really depends on the range of
options, and we did lay out three options. And I think this is
a critical point. We did call for, in any option, to continue
FHA. So it is a clear statement that FHA has an important role
to play. A targeted Government guarantee is important to the
functioning of the market and to reaching low- and moderate-
income borrowers, whatever we do with Fannie Mae and Freddie
Mac. And so that was one important principle.
Within the options, though, were we to take option one,
which would be no Government guarantees beyond FHA, VA, and
USDA, it is clear that FHA would be required to play a much
more significant role particularly in times of crisis, that we
would have to step up and our volume would increase much more
dramatically than it has through this crisis that we have just
experienced. And I will tell you--and this is part of, as Madam
Chairwoman Murray said, the pros and cons of the various
options that we need to understand--I think there is real risk.
FHA is already straining to keep up with the volume increase
that we have experienced. To rely on FHA to take up far more
than 50 percent of the market, for example, in the next crisis,
I think has real implications.
I would also say, recognize that FHA's guarantee is a 100-
percent guarantee. We do not have significant private capital
sitting ahead of us. There are private implications for
defaults. We try to align those incentives. But one of the
things that we argue around option 3 is that you could design a
guarantee outside of FHA that has more private capital sitting
ahead of us that would allow you to be more sure the incentives
are better aligned when you are really looking at a large share
of the market, rather than just the targeted share that we
currently have.
So the impact on FHA would really vary depending on the
outcome, and I think that is a very important consideration as
we think about which option to choose.
GINNIE MAE
Senator Collins. It is my understanding that for the first
time in its history, the outstanding guarantees on Ginnie Mae
securities now exceed $1 trillion. What are the prospects that
Ginnie Mae would need a Government bailout similar to the very
unpopular Government bailouts and very expensive Government
bailouts of Fannie Mae and Freddie Mac?
Secretary Donovan. It is a terrific question. Let me just
try to clarify, first of all, exactly what Ginnie Mae is on the
hook for, so to speak.
Senator Collins. Yes.
Secretary Donovan. Any loan that Ginnie Mae so-called
guarantees already has some other form of Government insurance
on the loan, and so in no case is Ginnie Mae guaranteeing
whether a borrower can pay, whether a home might go under water
or there is a foreclosure on the individual home. That risk is
covered by FHA or USDA or VA.
What Ginnie Mae is guaranteeing against is that the
financial counter-parties--in other words, whatever financial
institution is actually required to pay the investors in the
case of default--that that institution runs out of capital and
would not be able to make good. So it guarantees timely payment
to the holder of the security from whatever financial
institution is collecting the payments from whether it is the
borrower or from FHA in the case of a default. And so the risk
is a very narrow risk relative to the risk that FHA takes on.
Having said that, we have seen through this crisis the
failure of a number of those institutions with significant
losses to Ginnie Mae, all very much absorbable within the
reserves that Ginnie Mae has, and Ginnie Mae has continued to
be profitable for the last few years.
What I would say--and this is related to the budget
proposal for 2012--because of the nature of FHA and Ginnie Mae,
our need to respond to the market--there are times where the
lack of flexibility we have in the appropriations process and
the way the budget is set often 1 year or 1\1/2\ year in
advance, it is very difficult to respond to the fluctuations in
the market. And particularly through this crisis, we have been
challenged to have Ginnie Mae step up its monitoring and
oversight. Particularly, we can hire contractors through the
flexibility that Ginnie Mae has. We have not been able to hire
staff except for the good work that this subcommittee has done
to increase our staffing there. But that takes time, obviously,
through the appropriations process.
One of the things we are proposing in the fiscal year 2012
budget is to allow Ginnie Mae to use its revenues more flexibly
not only to pay for contractors but to hire staff as well. It
is something that we think is a good model and we might even
think about applying it to FHA in ways that would allow us to
respond more flexibly to invest more in technology and other
things.
So it is a long answer, but I wanted to make sure that that
was clear as well in the fiscal year 2012 budget.
FHA RESERVES
Senator Collins. I am told, however, that Ginnie Mae's
reserves are less than the 2 percent that traditionally has
been held. Is that not a problem?
Secretary Donovan. Actually FHA's reserves are less than
the 2 percent that the Congress mandates. That is an issue that
we are concerned about and in fact is the primary reason why we
proposed the 25-basis-point increase----
Senator Collins. In the insurance.
Secretary Donovan [continuing]. In our insurance fees.
I will say we have--because of a range of reforms that we
have made--we have hired the first-ever chief risk officer in
the history of FHA. Using funding that the subcommittee has
provided through TI, we are investing in automated fraud tools,
creating new systems for FHA that allow us to track performance
better. All of those have allowed us to perform significantly
better than our independent actuarial reviews have predicted
each year. And so our reserves are now more than $1 billion
above what was expected even just this year from our actuarial
review that was done just a few months ago. So we are
performing better than expected. I do not want to say we are
out of the woods by any means. We continue to watch it closely,
but we have seen the reserves stabilize. We still have more
than $32 billion in our combined reserves, and we feel that
given what the actuarial has said and the premium increase,
that we should be able to get back to the 2-percent level
within the next few years--by 2014 or sooner.
SECTION 8 CONTRACTS
Senator Collins. I want to switch now to another issue that
is a potential fiscal time bomb in HUD's budget. As the older,
long-term Section 8 contracts with private property owners
expire, HUD requires new appropriations to renew those
contracts, which increase the cost of the programs each year.
And I am told that that now accounts for approximately 20
percent of HUD's budget.
Your budget documents indicate that most of these old
contracts have been renewed, but about 17 percent are still
being funded from old appropriations accounts and they are
obviously eventually going to need new funding.
So I have a series of questions for you.
First of all, when will most of these remaining contracts
expire?
Secretary Donovan. I have some details here.
Let me make one point just to begin with. Even if those
contracts, the long-term contracts, are not requiring new
appropriations, they do have outlays associated with them. So
there is a very different picture if you look at the actual
money we are spending out of the Department of the Treasury as
outlays versus the increased appropriations. This is not to say
this is not an issue and that we need to be focused on it. We
do. But it is important to remember that we are already
spending money every year on these contracts, and when we
appropriate new money for them, all we are doing is a new
appropriation, but the outlays remain roughly the same with
inflation each year.
Having said that, in 2012 alone the first-time renewals of
these long-term contracts would account for about $230 million
of new needs in terms of appropriations; from 2013 through
2016, another 600 contracts would expire, and that would be an
additional $450 million in annual renewal needs by 2016. And if
you look at the longer term out to 2021, the total needs by
that time for renewals of those contracts that expire is about
$1.5 billion in total for those contracts.
Senator Collins. So is HUD looking for offsets for those
costs? $1.5 billion is a fair chunk of change.
Secretary Donovan. It is.
Senator Collins. I understand your point that there are
outlays going on year after year, but----
Secretary Donovan. The most important effort on that front,
which began actually a decade ago when I was first at HUD, was
the Mark-to-Market program, which was an extensive effort to
reduce where we were paying above-market rents. And I think it
would be important to get you some detailed information about
the reductions in rents that have been achieved through that
program and the long-term preservation as well.
And there are a number of other things that we can do. I
will give you one example. We have contract administrators that
overlook these properties, and we are in the process, as we
speak, of rebidding those contracts competitively, which we
think will achieve a savings of about $37 million just on the
contracting portion in the fiscal year 2012 budget. That is an
example of the kinds of efficiencies that we can achieve
through better management of the programs to help bring down a
portion of those costs. Obviously, it does not get to the
larger need, but it is an important example of the steps we can
take.
The other thing I would say, though, is--and former Senator
Bond was a strong proponent of preservation of these properties
where it made sense--the alternate cost that you need to look
at oftentimes is new construction of properties because if we
lose these units, they convert to market, we stop funding them.
What that often means is a voucher can be more expensive in
many cases as an alternative for these families. So I think it
is important to look at not just the status quo and to try to
bring down those costs, but also what is the alternative if we
lose those units, they opt out of the programs, and what the
costs of that are as well. And so we have a number of things
that we are trying to do to preserve those properties,
including a proposal with the Department of the Treasury this
year to improve the low-income housing tax credit and the way
that it preserves these Federal properties.
Senator Collins. Mr. Secretary, I am informed that the
chairwoman is unlikely to be able to return. I am going to take
that as a good sign that they are making some progress on the
budget since long meetings usually indicate that there are some
true negotiations going on.
PUBLIC HOUSING AUTHORITIES
Before I let you go, however, I do want to return to an
issue that was raised at the beginning, and that was these
truly alarming and unacceptable accounts of fraud and
corruption and mismanagement of PHAs. I know that in the
Philadelphia case, you clearly are on top of that. You are
directing that the board resign. The director has been
replaced.
But if this kind of fraud and corruption can occur, it
suggests to me that there are some systemic weaknesses in HUD's
oversight of the PHAs. What are you doing to make sure that you
not only do effective corrective action when such fraud occurs,
but that you have internal controls or other oversight
mechanisms that prevent it from occurring in the first place?
Secretary Donovan. A very important question. I really
appreciated the perspective you had on looking at the program
and the structure of how we fund public housing systemically
because I do think in the long term that is a very important
way to move the program to ensure that there is greater
discipline and there is a different way of approaching it. And
it has worked very effectively in all the housing we have
produced the last 25 years.
More specifically to your question, one of the key things
that we are doing is establishing a dedicated team with
improved financial information through the next-generation
voucher management system that we are putting together with TI
funding that the subcommittee gave us last year. That dedicated
team would go in much earlier where we see early financial
warning signs. It is a cross-agency team. So it includes public
housing folks, folks from our enforcement center, and if
necessary, as we have done in Pennsylvania in Philadelphia, to
bring in forensic accountants or other outside help to support
the team to make sure that we catch it early.
The goal there is--today we have about 175 troubled housing
authorities. Again, that is less than 5 percent out of the
thousands around the country. But the goal is to reduce that by
more than two-thirds to about 50 troubled authorities. I think
it will be difficult for us to get to zero, but our goal is to
reduce it by two-thirds through the application of this team
and the new systems that we are putting in place.
Senator Collins. So you are putting into place not only a
team that can go in and look at these troubled authorities, but
some sort of financial reporting that will raise red flags so
that you can be on top of this sooner.
Secretary Donovan. Yes. In fact, we do have a real estate
assessment center which has automated tools to review
financials that has automated flags, if you will, that come
out. The problem, to be frank, is we have a number of systems
that do not talk to each other at this point. It is not just
that the information is not collected as effectively and
clearly as possible. It is also that the follow-up to that
information is not strong enough. And that is why, in addition
to the better systems, we also need this team that would take
that information and act on it much more quickly and earlier
because, as we have seen in Philadelphia, if we get to the
problem earlier, we end up not having these kinds of results.
PUBLIC HOUSING AUTHORITY OVERSIGHT
Senator Collins. I know that HUD is without an inspector
general at this point. There is an acting inspector general. I
would also encourage you to work very closely with the new
inspector general when he or she is appointed. The former
inspector general, obviously, uncovered a lot of problems. In
too many Departments I have observed an adversarial
relationship between the inspector general and the Secretary or
Administrator, and it really should not be. It should be an
opportunity for the IG to identify program weaknesses,
mismanagement, vulnerabilities, and should be welcomed by the
Secretary. And I hope that will be your approach as well.
Secretary Donovan. I could not agree more. I have seen
personally, when those relationships do not work, the negative
impacts that it can have.
I would encourage you to reach out to Ken Donohue, who
recently left as our inspector general. It may sound strange to
say about an inspector general, but we miss him. He was
actually a very good partner with us, told it like it was. When
there were issues, he clearly brought them to our attention.
But I would say, for example, the American Recovery and
Reinvestment Act (ARRA) was an example where we worked very
effectively together. The troubled housing authorities are a
good example. We set up, in consultation with the inspector
general, a system where we preapproved every single $1 that the
troubled housing authorities were going to get to make sure
they were used effectively. We made the decision that we did
not want to harm the residents by not giving them the benefit
of ARRA funds, but we were going to make sure that they were
used effectively. In fact, every one of those troubled housing
authorities was able to obligate the money on time. And as Earl
Devaney has said broadly about ARRA, we have seen less than
one-half percent of all of the funding in ARRA challenged in
any way, and a far smaller fraction of that where charges have
actually been brought.
So I think we have improvements to make, but I would
encourage you to reach out to Ken to get an honest assessment
of what we have done together.
Senator Collins. Thank you.
Secretary Donovan. And we certainly expect to bring that
same kind of relationship to working with the new inspector
general.
Senator Collins. Of course, when you apply even one-half
percent against $800 billion, it is still troubling. But I
agree with you that ARRA, because we had controls in place from
the beginning, was far less vulnerable to waste, fraud, and
abuse than many Federal programs. But I think the key was that
there was such a focus and there was so much more transparency
than is typical of many Federal programs. So I think we can
learn from that.
Mr. Secretary, I want to thank you for your time this
morning and for your very straightforward responses and clear
presentation of the administration's budget. I look forward to
working closely with you.
I appreciate the chairwoman allowing me to take over for
her today. I will tell her staff that I enjoyed it very much
and that I look forward to working with Madam Chairman Murray
in what I know is going to be a great partnership with you as
well.
ADDITIONAL COMMITTEE QUESTIONS
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Patty Murray
PUBLIC HOUSING AUTHORITY RESERVES
Question. The Department of Housing and Urban Development's (HUD)
budget request for fiscal year 2012, proposes to fund the Public
Housing Operating Fund by tapping into ``excess reserves'' held by
public housing authorities (PHAs). The Department believes that it can
fully fund the needs of housing authorities at $3.8 billion by
requiring PHAs to use reserves of around $1 billion to meet their needs
through this offset policy. Yet, HUD regulations have encouraged PHAs
to build up reserves.
Why does HUD encourage PHAs to hold reserves?
Answer. HUD believes that given PHAs' responsibilities as property
owners and managers, agencies should retain some level of operating
reserves. As property managers, PHAs must retain some level of
contingency funding which is necessary to minimize the many risks
associated with short-term expense fluctuations, including, for
example, spikes in energy and utility costs that may not be covered by
appropriations for up to 18 months; expenses associated with staff
turnover, temporary staffing needs, or surge capacity; as well as
emergencies related to the habitability of their properties. HUD's
recommended level of minimum reserve is differentiated by PHA size such
that agencies that have 250 units or more should maintain a minimum
balance of 4 months of operating expenses. HUD recommends that small
agencies with less than 250 units maintain a minimum reserve of 6
months of operating expenses.
These recommended levels are consistent with the current interim
Public Housing Assessment System (PHAS) rule that awards points for a
PHA's level of liquidity and ability to cover current liabilities. The
current PHAS provides maximum points to all PHAs when their reserve
balance is equal to 4 months of operating expenses based on their
current liabilities.
Question. What are the eligible uses of the operating fund
reserves, and specifically can these resources be used for capital
expenditures?
Answer. In 1998, the Quality Housing and Work Responsibility Act
(QWHRA) established the Operating Fund program, in section 9(e) of the
Housing Act of 1937, to provide for the operation and management of
public housing. Eligible uses of operating funds would include those
activities specifically listed in section 9(e) of the Housing Act of
1937. Additionally operating funds may be used for routine and
preventative maintenance, addressing unforeseen emergencies, and to pay
debt service on approved operating fund finance projects.
Development and modernization activities within the public housing
program are often broadly and collectively referred to as capital
activities for which capital funds may be used. Notwithstanding section
9(g)(2) of the Housing Act of 1937, a PHA may not use its Operating
Funds for capital activities, or more specifically development and
modernization, except as permitted by statute (i.e., Operating Fund
Finance Program requiring HUD approval). The Operating Fund Finance
program is attracting greater interest, but has had limited usage to
date involving relatively small amounts of funding. While the
Department is deeply committed to providing PHAs maximum flexibility
under the Housing Act of 1937, and committed to the preservation of
public housing, HUD does not have the authority to expand the uses of
operating funds beyond those set forth in the statute. In conformance
with the statute, the Operating Fund regulations at 24 CFR 990
reiterate that the fund was established for the purposes of the
operation and management of public housing, and not development or
modernization.
Question. If this policy is adopted it will be critical that HUD
can accurately calculating PHA reserves. Policies must be implemented
using accurate, timely data, which has been a challenge for HUD.
If you were to implement this policy, what specific data would you
use to calculate ``excess reserves,'' and would it be timely? For
example, if PHAs have used their reserves during the continuing
resolution (CR) period, would this information be reflected in the data
you would use to make your calculations?
Answer. Public Housing Operating reserves are calculated using the
PHA's financial statement submissions into the Financial Assessment
Subsystem. Data is from the four quarters ending March 31, 2010, June
30, 2010, September 30, 2010, and the Department will have December 31,
2010, financials available within the next 30 days. If the PHA has
failed to submit timely financial data, the previous year's information
may be used. PHAs have 90 days from their fiscal year end to submit
unaudited statements and 9 months to submit audited financial
statements. The Department is currently reviewing alternatives for
allowing PHAs to confirm or validate the amount of operating reserves
HUD has calculated for their agency.
The operating subsidy is paid on a calendar year basis. Should the
Department operate under a CR, PHAs will have full eligibility funding,
as provided by the 2011 Appropriations Act, to cover operating expenses
from October 2011 through the end of December 2011. Should an
appropriations act not be passed by January, the Department generally
provides additional funding to PHAs, as made available to the
Department under the CR. The amount of operating subsidy provided to
PHAs under a CR is based on an estimated eligibility level. In 2011,
PHAs were provided 93 percent of their estimated eligibility during the
period covered by a CR. Given the additional operating funds provided
to PHAs during periods covered by a CR, the amount of reserves used
during this period could be minimal--conditioned upon the terms placed
in the CR by the Congress.
Question. The budget states that under this proposal, PHAs would be
allowed to have somewhere between 4-6 months of reserves.
What is the basis for 4-6 months, and how will you determine what
an adequate level of reserves is?
Answer. The reserve calculation is an assessment of PHA liquidity,
or their ability to cover current liabilities with current assets. The
calculation is comparable to the ``excess cash'' definition used within
HUD's Multifamily program. When determining what the appropriate
reserve level should be for agencies, the Department looked across
other project-based programs within HUD and other Federal agencies as
well as non-Federal property managers. Within the nonprofit market,
recommendations for reserves ranged from a high of 2 years' budget, to
a low of 1 month's payroll. Financing programs, such as HUD's Mark-to-
Market and the Federal Housing Administration (FHA) loan programs used
a very different methodology to establish financial risk and the value
of a long-term debt as the denominator to establish a recommended
reserve level. The Rural Development Multifamily Housing Program
requires participants to maintain reserve balances of 10 percent of the
total development cost, which was also not directly comparable to
pegging reserves to expenses. HUD's recommended level of minimum
reserve is differentiated by PHA size such that agencies that have 250
units or more should maintain a minimum balance of 4 months of
operating expenses. HUD recommends that small agencies with less than
250 units maintain a minimum reserve of 6 months of operating expenses.
After reviewing the many different housing standards HUD derived
its reserve objectives based on the operational requirements of PHAs
and the specific exigencies that occur (see previous response).
IT FUNDING AND MANAGEMENT
Question. HUD is charged with the oversight of thousands of PHAs,
as well as thousands of other grantees including cities, counties, and
FHA-approved lenders. One of the essential elements to effective
oversight is comprehensive and accurate data. HUD has placed a priority
on addressing IT challenges, particularly through the modernization
efforts that are part of the Transformation Initiative (TI).
When the funding for these information technology (IT) investments
was provided in fiscal year 2010, the Congress also required the
Government Accountability Office (GAO) to examine HUD's ability to
implement the processes and develop the capacity necessary to ensure
that these critical investments result in improved capabilities and are
delivered on-time and on-budget. GAO's work is on-going, but it has
found that HUD is making progress in bringing the discipline and
processes necessary to meet its goals. In this year's budget, the
Department is proposing to move modernization efforts from the
Transformation Initiative into the Working Capital Fund (WCF). I am
concerned about this change, especially since GAO raised concerns that
the Chief Information Officer's (CIO) lack of central budget authority
over all departmental IT spending has been an obstacle to the
modernization efforts under way.
What is the rationale for moving the modernization efforts to the
WCF?
Answer. Effective August 1, HUD moved the allotment holder
authority for WCF and TI allocations to the CIO. This change will:
--provide greater control over the use of HUD's limited IT resources;
and
--support the implementation of the same rigor that HUD is applying
to the TI/IT projects to investments that are funded under the
WCF. HUD is creating a single IT Investment Portfolio that
provides a consolidated view of all of our IT investments
regardless of funding source, such as, the WCF, TI funding, or
carryover funds. The consolidated portfolio will provide a
clear separation and view of how much of each funding source is
used for each investment, across multiple fiscal years. This
does not mean that HUD is transferring the TI projects that
support HUD's modernization into the WCF.
The additional TI funding provided in fiscal years 2010 and 2011
was needed to jump start the transformation of FHA, voucher management,
and other critical HUD functions and has helped HUD build an IT
management framework that reduces the risks associated with business
and IT transformation efforts. Our approach was recognized in the GAO
report and has built a new investment transparency partnership with the
Office of Management and Budget (OMB) that brings project issues to the
forefront early before investments fail.
With the advent of the key seven development projects in fiscal
year 2010 it is important to co-relate for fiscal year 2012 the entire
HUD IT program both development and operations and maintenance in order
to:
--capture the changes as we decrease the number of our operating
systems; and
--to calibrate and harmonize the Operations and Maintenance
requirements as phases of the new projects come on line.
The fiscal year 2012 proposal will allow us to continue to
integrate important component efforts, but in future requests the
Department may again recommend using some portion of TI for IT. The
possible use of TI resources in the future will follow the original
premise of the TI fund which is to provide necessary and adequate
investments in key areas, including IT, that are key to reinventing the
Department and ensuring that priority results are delivered. In
addition, developmental funding needs may need to be addressed as
complex cost allocations mature over time: as further enhancements to
existing IT investments are supported by program performance
improvements or as the changing landscape of IT investment presents
desirable new opportunities that the Congress and the Department
support.
Question. What steps are being taken to address the concerns raised
by GAO and ensure HUD's ability to manage and deliver IT investment
won't be undermined by this change?
And what specific steps is HUD taking to ensure that the CIO will
have adequate control over all IT spending?
Answer. As of August 1, 2011, the CIO is the HUD IT allotment
holder. This move provides the CIO with greater control over IT funding
across the Department.
The management controls developed and used for the transformation
initiatives are now required for all IT activities at HUD. We are also
consolidating our IT investment activities to provide full transparency
into where all of HUD's resources are allocated to ensure that we are
supporting the most critical operations of the agency and closing
service delivery performance gaps. This change helps HUD achieve that
goal by ensuring that CIO has insight into all of the planning and
allocation of IT funds across the agency.
This holistic view will better enable HUD to look at all projects,
systems, and services grouped as an investment to see where there are
gaps, duplications, and other inefficiencies in the portfolio.
Additionally, HUD will perform regular reviews of IT investments
through the IT governance structure to make decisions to add, continue,
modify, or terminate investments.
In the new IT governance structure, there are two subcommittees
that report to the CIO, one looks at IT investments and performance
from the overall investment and budget perspective, another
subcommittee looks at each project, systems, and service; and reviews
the work as it is completed in each of seven phases of the projects
life cycle. Funding is incrementally applied to a project if the
project successfully completes the designated control review before
being approved to move to the next phase of the project.
The consolidation of activities into one portfolio does not change
the source of funding approved for each IT activity.
TRANSFORMING RENTAL ASSISTANCE PROGRAM FUNDING
Question. The President's budget for fiscal year 2012 request $200
million for Transforming Rental Assistance (TRA) Initiative. The
President requested funding for this program in fiscal year 2011. At
that time, I raised concerns about the lack of details and the
uncertainty around the long-term costs associated with this proposal.
Please explain the differences between the fiscal year 2011
proposal and the fiscal year 2012 request for TRA.
Answer. The primary goal of the TRA Initiative remains the same--to
preserve affordable housing assistance by facilitating access to
private capital to address the large backlog of capital needs. The main
difference between the two proposals is that the 2012 request calls for
a Rental Assistance Demonstration (RAD), allowing for the conversion of
only public housing and renewal of certain multifamily ``legacy''
programs--the Rent Supplement, Rental Assistance Payment, and Section 8
Moderate Rehabilitation programs--to long-term Section 8 rental
assistance contracts. The demonstration would allow for a limited
number of properties funded under these programs to convert to Section
8 contracts, versus the entire program inventories. The number and cost
of conversions will be constrained by the amount appropriated in fiscal
year 2012. The demonstration would be voluntary, includes an evaluation
component, and does not affect HUD's other multifamily housing
programs.
While some PHAs, private owners, and resident groups expressed
concerns with the breadth of changes that would result from last year's
approach, most were nonetheless supportive of the core components of
the proposal. The productive feedback the Department has received from
a wide variety of stakeholders has shaped this year's demonstration.
This year's proposal seeks to address the fair criticisms we heard, and
test out many of the viable recommendations offered by a wide range of
stakeholders. Through the feedback process the Department embarked on,
we heard general agreement among those in the affordable housing
industry that a long-term, rental assistance contract--with reasonable
rights for current residents and measures in place to assure continued
public control and long-term affordability--offered a more sustainable
option over the long-term than the limited funding currently available
to public housing and the legacy programs. Although this proposal has
faced numerous challenges, we know that the need is too great--and this
opportunity too important--to risk shying away from continuing to seek
a solution for properties most at risk of being lost from the
affordable housing inventory.
Question. What are the long-term costs associated with TRA proposal
included in the fiscal year 2012 budget, as well as those associated
with a full implementation of TRA?
Answer. The fiscal year 2012 budget request includes $200 million
for the incremental cost of converting or renewing an estimated 140,000
to 180,000 units of public housing and certain HUD multifamily legacy
programs to long-term Section 8 rental assistance contracts under the
RAD. The long-term incremental costs of conversion or renewal for the
cohort of properties participating in the demonstration through the
fiscal year 2012 appropriation will be $200 million. As this proposal
is a voluntary demonstration, a long-term cost would be dependent on
the demand for these types of conversions by public housing agencies
(PHAs) and other owners/operators, and their ability to secure other
sources of equity capital, including low-income housing tax credits,
which are not currently accessible to PHAs except in a limited number
of mixed-finance transactions.
Question. What are the specific ideas and policies that HUD will be
looking to assess during this demonstration? And how will HUD ensure
that any lessons learned will be applicable on a broad basis?
Answer. Of particular concern, the Department is attempting to
evaluate: the amount of private financing leveraged, the cost of
preserving the converted properties in the affordable housing stock,
the financial and programmatic impact of providing residential mobility
to those in converted properties with continuing tenant-based rental
assistance, the impact of conversion on residents' continuing receipt
of rental assistance, and eligible families' access to diverse
communities of their choice. The proposed size and structure of the
demonstration will ensure that a sufficient variety of projects and
PHAs will participate so that lessons can be gleaned for the broader
stock of affordable housing.
NATIONAL RESOURCE BANK AND THE TRANSFORMATION INITIATIVE
Question. The budget request for fiscal year 2012 includes a
request for funding for a National Resource Bank (NRB) under the TI.
This proposal is based on interagency approach to improving the
capacity of HUD grantees who also receive funding from other
Departments and agencies to better implement and manage Federal
resources. There is also a focus on improving the long-term planning
and outcomes of investments.
Explain why funding is only included in the HUD budget, and the
role that other agencies will plan in this initiative.
Answer. The NRB is part of a partnership between HUD, the
Department of Transportation, the Environmental Protection Agency, the
Departments of Commerce, Education, Agriculture, the Treasury, Energy,
Health and Human Services, Justice, and Labor, the Small Business
Administration, and the Army Corps of Engineers; and it is managed by
the White House Domestic Policy Council. This initiative, known as
Strong Cities, Strong Communities (SC2), is focusing on the ways the
Federal Government can better assist America's most distressed cities,
towns, and regions to reach their full economic potential and improve
the quality of life for their residents.
To be a better partner to localities that have faced significant
long-term challenges, the Federal Government has to work as one
government, not a fragmented set of Departments. We can do this by
helping cities leverage existing Federal resources, removing roadblocks
that accompany the use of Federal funds, and providing access to
experts in the areas of focus for the community. Some options include
better coordination by staff across Federal agencies, which the
partnership has begun, but a clearly missing piece is improving the
basic operating efficiency and staff capacity in local governments.
This does not clearly fall into an existing program, and the NRB will
fill this gap.
HUD's mandate makes the Department a natural fit for leading this
effort. HUD has unique authority from the 1965 Department of Housing
and Urban Development Act to ``exercise leadership at the direction of
the President in coordinating Federal activities affecting housing and
urban development; provide technical assistance and information,
including a clearinghouse service to aid State, county, town, village,
or other local governments in developing solutions to community and
metropolitan development problems.'' \1\ While this authority has not
always been exercised, on-going structural problems and recent economic
conditions require a response that goes beyond business as usual, and
HUD's existing connections to local governments through its Office of
Community Planning and Development (CPD) programs is a starting point
other agencies do not have.
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\1\ 42 U.S.C. 44 section 3532(b).
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Although HUD will lead the clearinghouse, partners at other
agencies engaged in SC2 will serve as national advisors to the NRB.
Partners at other agencies have been involved in drafting an Advance
Notice and Request for Comment HUD has developed, will be involved in
developing the criteria for and drafting the final Notice of Funding
Availability (NOFA), reviewing NRB applications, and advising the
development of the process for city selection. The NRB is not intended
to replace the topic-specific expertise and technical assistance HUD
and other agencies currently provide, but will connect communities
seeking expertise on specific topics to existing technical assistance
programs, ensuring an interdisciplinary and comprehensive perspective.
We have had discussions with other Departments from this partnership
about aligning some of the existing technical assistance they provide
with the cities that apply for assistance from the NRB. HUD will
provide the gateway clearinghouse to make these and other Federal
programs work better for these communities, something HUD is uniquely
positioned to facilitate and that otherwise will not exist.
While HUD is electing to reorient a portion of its technical
assistance for this need, it cannot, and is not intending to, provide
the full technical assistance resources necessary given the scope of
local demand. Using an outside intermediary to run the daily operations
of the NRB will make the Federal investment go further in three ways.
First, it will use a limited Federal investment to leverage
considerable private and philanthropic resources that would not be
available to a Government program office. Philanthropic organizations
have expressed considerable interest in this type of initiative, and
similar efforts have leveraged their base investment up to six times
through philanthropic funds, private funds and pro bono services.
Second, HUD will be able to retain accountability and oversight of the
program by executing a cooperative agreement with the intermediary, but
will avoid the long-term commitment of additional Federal staff and a
new office. Last, the outside intermediary structure taps the expertise
and networks of outside philanthropy and nonprofits specializing in
these issues to engage and improve Federal programs rather than spend
time working around them.
Question. What are the specific benefits that are expected in the
outcomes of HUD funded programs from this resource?
Answer. The NRB will help local governments harmonize Federal
funding through cooperation with Federal agency partners. Since the NRB
will focus on basic operating efficiency and staff capacity, high-
priority outcomes for local governments involve the achievement of
basic performance metrics, including reducing budget deficits and
improving bond ratings. Interim outputs might include increased
revenues, decreased costs, and efficient human capital changes or
restructuring. Local governments and researchers stress the varying
nature of the issues local governments face, so, other more specific
measures will be established with the help of the technical assistance
providers within each technical assistance plan. These could include
good governance, expanded or new collaborations, timeliness of
processes, or improving the use of Federal funds.
In a HUD-specific context, we see the NRB as an investment that
will result in better program management for communities that are
suffering severe economic distress and having challenges with multiple
program delivery and management systems. The NRB will target these
places which currently lack the staff resources to adequately manage
their Federal funds and comply with statutory and regulatory
requirements.
The effectiveness of the individual interventions will be
evaluated, and a system will be developed for evaluating the NRB as a
whole. The effectiveness of the intermediary's management of the NRB
will be reviewed periodically through regular reporting, procedures for
which will be established within the cooperative agreement.
ONECPD AND THE TRANSFORMATION INITIATIVE
Question. HUD has also developed a new approach to providing
technical assistance to its grantees with the goal of addressing skill
sets that will improve outcomes across a variety of HUD programs,
called OneCPD. This is a departure from HUD's traditional approach to
technical assistance, was more focused on program compliance. What are
the outcomes expected from OneCPD?
Answer. The outcomes will vary, depending on what type of technical
assistance (TA) a community needs. However, the Department is committed
to actively working with the grantee and the TA provider to reach these
goals. By establishing written agreements for each engagement,
performance will be assessed for the specific community receiving TA,
taking into account market conditions and expectations. The
effectiveness of all TA will be judged according to the capacity needs
of the recipient, and not an overly general national standard.
In addition, the Department expects that OneCPD will be more
efficient and effective than prior efforts at delivering technical
assistance by:
--Replacing five separate TA programs managed by four separate
program offices with a single program managed by a single
office;
--Eliminating overlapping TA engagements by establishing a single
approving body;
--Involving fewer HUD staff in the management and oversight of TA;
--Requiring TA to be delivered under a written agreement signed by
all participants (grantee, HUD, TA provider) that specifies the
responsibilities of the parties, and the specific outcomes to
be achieved to guarantee active involvement and ensure
accountability;
--Ensuring that the necessary and appropriate TA is provided
according to a required needs assessment that will precede TA
engagements; and
--Ensuring a ``place-based'' problem-solving approach, by identifying
a single point of contact for each grantee in the local HUD
field office to coordinate across all CPD programs.
Furthermore, the OneCPD competition itself was structured as a
``Request for Qualifications'' which simplified--and shortened--the
review process, and ensured that the size of the awards was
commensurate with the ability of the grantee to carry out the program
effectively.
HUD is accountable for ensuring that the funding we administer is
spent responsibly. Grantees that lack strong management systems, have
programs that are underperforming, or that are addressing monitoring
findings will be prioritized for TA. CPD is aggregating quantitative
and qualitative indicators to assess grantee capacity gaps. The
activities funded under OneCPD include:
--Formal needs assessments, which precede every engagement to ensure
that the appropriate TA will be provided to the right people;
--Direct TA and training to assist grantees in addressing gaps in
capacity to improve program performance and compliance;
--The development of tools and products that assist grantees in
automating their systems, improving financial management, and
attend online courses; and
--Self-directed and group learning, that brings together grantees,
both in in-person and virtual environments, to discuss similar
challenges, and to learn and develop new skill sets at their
own pace or as their workload permits.
Further Background
OneCPD enables CPD to develop a new level of technical assistance
and capacity building to meet the challenges facing Federal funding
recipients. Block grants are designed for local decisionmaking.
However, the assumption has been that grantees have the capacity and
skillsets to make market-based decisions when, in reality, many
grantees do not, due to a lack of investment and budget cuts. The
Federal role is two-fold:
--build capacity of local and State governments to support local
decisionmaking; and
--conduct monitoring and oversight to ensure compliance with
applicable regulations and to ensure appropriate use of Federal
funding. OneCPD balances these two roles where traditionally
HUD has delivered only compliance-oriented technical
assistance, funded through individual program accounts and
separately geared toward the rules governing HUD's disparate
programs. OneCPD rolls these accounts into one broad technical
assistance effort to be funded from global transfers to the
Transformation Initiative Fund. Central funding through TI has
allowed the Department to develop comprehensive technical
assistance efforts that focus on skills needed to improve
program outcomes not just reinforcing program compliance rules.
This innovative thinking has led to the OneCPD technical
assistance and capacity building model.
OneCPD ``flattens'' the bureaucratic structure needed to manage
technical assistance by adopting a ``place-based'' approach that
assesses community needs as a whole, and works across programs to
deliver technical assistance that addresses those needs. It allows
synergies impossible in a siloed approach. For example, in fiscal year
2010's Section 4 Program NOFA, CPD, for the first time, asked
applicants to set aside 10-15 percent of their grant amounts to align
with place-based strategies that result in joint projects and technical
assistance efforts. Through OneCPD, TA can be combined to assist both
HOME and Community Development Block Grant (CDBG) users during the same
visit. This reduces costs for HUD and for local grantees.
OneCPD TA will address the needs of all of CPD's grantees--
including more than 1,200 CDBG recipients, nearly 650 HOME recipients,
more than 200 Housing Opportunities for Persons With AIDS (HOPWA)
recipients, and thousands of homeless grant recipients and
subrecipients. Investments in TA will be allocated based on needs
assessments by HUD, to ensure that we are working with grantees on
underlying issues not symptoms, and that the right people are involved.
OneCPD will help grantees assess their local markets; design housing,
community, and economic development programs best suited to meet local
market demands; leverage private and public resources; and improve
their understanding of and compliance with statutory and regulatory
requirements.
NATIONAL RESOURCE BANK AND THE TRANSFORMATION INITIATIVE
Question. What are the specific similarities and differences
between OneCPD and the NRB?
Answer. OneCPD is a broad initiative that touches nearly all
geographies across the Nation, including all States and territories
that receive CPD funds and their small city and nonprofit
subrecipients. The NRB is a complementary program to respond to the
basic capacity needs in the most distressed communities, with a focus
on coordinating resources across Federal agencies. These communities
have long-standing overarching operational issues that need to be
addressed. The programs will work closely together, responding to the
needs of grantees to develop cross-agency strategies through the NRB or
to improve housing and community development capacity with OneCPD.
Similarities
The programs are similar in that they work with the city and county
government grantees, the direct or indirect recipients of CPD funds.
PIH has complementary programs to work with housing authorities, such
as the Troubled PHAs Initiative.
All of these programs will build the capacity of HUD's grantees to
do more with the funds we provide, and are part of HUD's transformation
from nationally uniform, topic-specific assistance to a place-based
approach specific to local needs and local market conditions.
All of these programs will take the lessons learned in one
community to others.
Differences
OneCPD meets grantees at their current level of capacity by
providing a range of capacity building products based on past
performance and the results of needs assessments. Products include
intensive onsite TA around management consulting, designing programs to
markets, comprehensive planning, and leveraging resources; skills-based
training on finance and asset management; and Web toolkits for sharing
model documents that support development projects and internal
operations. OneCPD will not only build the capacity of lower performing
grantees to create market-based affordable housing, community
development, and economic development strategies, but will also enable
middle performing grantees to increase the impact of their programs and
to capture and share the innovations of high-performing grantees.
OneCPD operates in concert with the current HUD/CPD headquarters
and field infrastructure for monitoring and oversight of grantees.
OneCPD activities are formalized under memoranda of agreement to
establish the roles and expected outcomes of each party, including HUD,
the TA provider, and the political and administrative leadership at the
grantee level. Once a TA engagement has formally ended, the HUD/CPD
infrastructure is in place to follow up with grantees, support
implementation of changes, and hold grantees accountable for agreed
upon outcomes.
The NRB is focused on just the most economically distressed
communities. Places that might be losing population or have experienced
major economic shifts have told us they need more basic assistance
before they are able to address affordable housing and community
development issues.
--The NRB is not topic-specific expertise, but general TA for cities
leveraging HUD as well as other Federal resources.
Examples of assistance to grantees:
OneCPD/Joint Core Skills Curricula:
--Assessing conditions in the affordable segment of the local housing
market;
--Designing and appropriately implementing housing, and community and
economic development programs based on assessments;
--Understanding of and compliance with statutory and regulatory
requirements;
--Development finance; and
--Construction and rehabilitation management.
National Resource Bank:
--Budgeting: revenue and service analysis;
--Performance management;
--System and process improvements across various local departments or
agencies;
--Human capital policies and procedures and staff capacity
assessment;
--Coordinating long-term goals and plans across multiple topics and
agencies; and
--Strategically leveraging investments and multiple Federal funding
streams.
SECTION 811 FUNDING AND REFORM
Question. Secretary Donovan, HR 1 as passed by the House allocates
$90.36 million for the HUD Section 811 program. We understand that this
amount would not allow for production of any new project-based units in
the current fiscal year. While this is an enormous concern, there
appears to be a larger threat to renewal of operating and rent
subsidies for current 811 units--both project-based contracts and
``mainstream'' tenant-based vouchers.
Your budget projects the cost of 811 PRAC renewals for fiscal year
2012 at $85 million. This is a $36-million-increase over the fiscal
year 2011 estimate--a 70-percent increase. What accounts for such a
large 1-year increase in renewal costs?
Answer. The fiscal year 2011 PRAC 811 Renewal/Amendment amount
presented in the fiscal year 2012 budget did not reflect HUD's estimate
of actual 2011 needs, but rather HUD's assumptions at the time the
budget was transmitted. HUD's 811 PRAC Renewal/Amendment estimate for
fiscal year 2011 was, and still remains, at approximately $66 million;
however, the budget assumed that a full-year CR would be enacted, with
no change to the fiscal year 2010 appropriations provided for the 811
account, yielding only $48.9 million.
The increase from HUD's fiscal year 2011 estimate of $66 million to
$85 million in fiscal year 2012 is roughly 28 percent. The majority of
this increase results from an estimated 184 contracts that will be
funded with PRAC Renewal/Amendment program funds for the first time in
fiscal year 2012 (i.e., contracts previously funded by the original
initial PRAC).
Question. Late last year the Congress passed the Frank Melville
Supportive Housing Investment Act--legislation reforming and
modernizing the Section 811 program. The new law (Public Law 111-374)
creates new authority for HUD to direct funds toward a new
``multifamily'' option, as well as a new ``PRAC-only'' competition for
States.
Can you please update the subcommittee on progress in implementing
the new law?
Answer. HUD is implementing Public Law 111-374 through a number of
administrative vehicles. The new ``multifamily'' option will be
implemented through an upcoming NOFA. As part of that effort, HUD is
soliciting feedback from stakeholders on the language that was included
in the 2010 NOFA which incorporated several elements of Public Law 111-
374. In addition, HUD is currently developing regulation to support the
``PRAC-only'' option. A Notice of Proposed Rulemaking is expected to be
issued in the late summer or early fall. HUD has been and will continue
to work closely with stakeholders, State housing agencies, and State
Medicaid, health, and human service agencies to ensure that this new
authority will be implemented in an effective and coordinated manner.
Subject to appropriations, HUD looks forward to providing ``PRAC-only''
funding to States starting in fiscal year 2012.
NATIVE AMERICAN NEEDS ASSESSMENT
Question. I understand you are currently undertaking a study of the
housing needs of Native Americans. What is your outreach and assessment
strategy?
Answer. There are two phases to the outreach and assessment
strategy for the Assessment of Native American, Alaska Native, and
Native Hawaiian Housing Needs.
The first phase was undertaken before the study even began, in late
2010 and early 2011, when HUD's Office of Native American Programs
conducted a series of seven preliminary outreach meetings with program
recipients, tribal leaders, and other stakeholders. In preparation for
the study, these 2-day outreach meetings informed participants about
the scope and results of prior needs studies, and the benefits of a
new, accurate assessment of need. The meetings provided a forum to
examine and discuss the formulation, implementation, and possible
benefits of a comprehensive study on housing needs. HUD requested
stakeholders' advice and assistance in planning and implementing the
study. All comments, suggestions, and questions from participants were
collected and documented for consideration. These meetings introduced
and promoted the benefits of the study to the Indian and Alaska Native
housing communities, and paved the way for willing participation and
successful data collection.
The preliminary outreach meetings were held on:
--December 1-2, 2010, in Denver, Colorado;
--December 14-15, 2010, in Reno, Nevada;
--January 12-13, 2011, in Honolulu, Hawaii;
--January 26-27, 2011, in Oklahoma City, Oklahoma;
--February 23-24, 2011, in Hollywood, Florida;
--March 2-3, 2011, in Seattle, Washington; and
--March 23-24, 2011, in Anchorage, Alaska.
HUD has convened an expert panel consisting of a group of nine
scholars and American Indian/Alaska Native representatives who will
meet four times over the course of the study. The first, day-long
meeting was held in April 2011 in Washington, DC to solicit input
regarding the project's research design. Three subsequent meetings will
allow for guidance and feedback regarding sampling and data collection
instruments, a presentation of interim report findings, and a
presentation of the final research findings and analysis to solicit the
panel's substantive comments and suggestions, which will guide the
researchers in the preparation of the final report.
To further inform tribal leaders about the study, HUD Assistant
Secretary for Policy Development and Research, Raphael Bostic, spoke
about the study at the National Congress of American Indians' mid-year
conference in Milwaukee, Wisconsin, in June 2011. The Assistant
Secretary also gave an update on the study to the National American
Indian Housing Council at its meeting in Phoenix, Arizona, in May 2011.
Another meeting for tribal leaders is scheduled for late July 2011.
Once the 40-site sample of tribes has been selected, the contractor
(the Urban Institute) will begin the second phase of outreach and
assessment. The first steps are as follows:
--Research the tribal history and tribal leadership for each
reservation, tribal area, or native village selected and gain
advice on working with the tribes from knowledgeable advisors
and HUD staff.
--Through email or phone, identify a tribal contact to receive the
project information and accompanying materials.
--Provide informational material to a tribally designated contact for
dissemination. This will include a brochure, a fact sheet about
the project, reports or briefs of projects conducted by the
National Opinion Research Center of the University of Chicago
(NORC), a sub-contractor to the Urban Institute, and
endorsement letters.
--Conduct a follow-up call at a pre-arranged time with the tribal
contact to address any questions and inquire about tribal
research protocols and requirements. Then take next steps as
advised by the contact.
--Conduct a presentation for tribal leaders, either by phone or in
person, which addresses:
--The study and its importance/benefit to the tribe;
--An overview of questions to be asked in the household survey;
--A description of NORC's role in the project as an impartial data
collector;
--NORC's Pledge of Confidentiality and Ethics Standards; and
--Review of survey tasks, including preparing a list of addresses
on tribal lands (if required), hiring and training field
interviewers, conducting interviews and housing
observations, and providing respondent incentives.
--Meet with the tribal contact or other designated person to discuss
next steps.
The study will require the collection of a substantial amount of
information from three main types of sources:
--background interviews and literature reviews;
--data from secondary sources; and
--primary data collection.
The researchers will review relevant research literature published
since 1996 and interview people knowledgeable about conditions and
trends in Indian country and about the evolution of the policy
environment, particularly with respect to housing and housing services.
U.S. Census Bureau data, HUD administrative data files, and national
data files for small areas maintained by the Urban Institute will be
analyzed.
A major in-person household survey in 40 selected tribal areas will
be conducted with a goal of interviewing 1,280 households.
A telephone survey of all tribal housing offices will be conducted.
More in-depth, in-person interviews with local housing officials,
tribal leaders, and community leaders will be conducted in 24 of the 40
tribal areas selected for the household survey.
A telephone survey of lenders that originate home loans in Indian
country will be conducted (sample of 35, weighted toward those who have
been the most active lenders in tribal areas).
Site visits will be made to 5 urban areas with concentrations of
Native American populations and telephone interviews will be conducted
with staff at Urban Indian Community Centers and other informed
individuals in 25 other urban areas.
Telephone interviews will be conducted concerning the assessment of
Native Hawaiian housing needs with directors of homestead associations
(approximately 50), selected Department of Hawaiian Home Lands staff,
and representatives of key stakeholder organizations.
The final report will be made available through HUD's Web site and
copies will be sent directly to all tribal partners, OMB, and Members
of Congress. The Department's protocol is to share copies with the
House and Senate Appropriations Committees, including the Committee and
subcommittee chairs, and the ranking minority members of those
committees. HUD will also send copies to the Senate Committee on Indian
Affairs, and the House Subcommittee on Indian and Alaska Native
Affairs.
This project began in December 2010, and is scheduled to be
completed 2 years and 9 months later, in September 2013. Household
surveys and other primary data collection is scheduled to begin in
October 2011. An interim report will be delivered in December 2011, and
the final report in September 2013.
HEALTHY HOMES PROGRAM
Question. The Healthy Homes Strategic Plan was released in July
2009 and I understand the subsequent action plan is still under
development. While you identified many housing issues that can affect
an individual's health, you did not identify any clear goals, targeted
populations or performance measures to focus limited resources
effectively.
When do you anticipate being able to provide the subcommittee with
this information and the Healthy Homes Action Plan?
Answer. The Healthy Homes Federal Strategic Action Plan has just
finished clearance from OMB and inter-agency review on July 5, 2011. We
are currently reviewing and incorporating the changes and comments. The
final document should be available around or before September 15, 2011.
______
Questions Submitted by Senator Dianne Feinstein
COMMUNITY DEVELOPMENT BLOCK GRANT AND HOME PROGRAMS
Question. As a former mayor, I know firsthand how impactful
Community Development Block Grants and other Federal funding can be for
cities that struggle to provide affordable housing and services to the
most vulnerable citizens. In California, the Governor is proposing to
cut Redevelopment Agencies, which eliminates one of the major sources
of funding in the State for housing and other services. Furthermore,
the administration's budget proposes to reduce funding for the
Community Development Block Grant (CDBG) and HOME programs, which
States rely on in providing these critical services. I am concerned
about the devastating impacts that the loss of these funds could have
on my constituents.
The Department's CDBG program was funded at $4.45 billion in fiscal
year 2010, but the administration has requested $3.804 billion for
fiscal year 2012. This is a 15-percent cut to a program that provides
much-needed funding for local agencies and nonprofit organizations to
provide facilities improvements, human services, and affordable
housing. In addition, the HOME program is proposed to be cut by 9
percent. This Federal funding has great potential to leverage private
dollars, which brings development and revitalization during this
economic downturn.
How will the Department help support States, such as California,
that are facing major cuts to community development and housing?
Answer. The fiscal year 2011 appropriation for the CDBG formula
allocation was reduced to $3.304 billion from the fiscal year 2010
allocation of $3.942 billion. This represented a 16 percent reduction
in the CDBG formula program. The administration continues to advocate
for the originally proposed fiscal year 2012 funding CDBG formula level
of $3.69 billion which would restore some of the funding reduction in
fiscal year 2011. The Department is well aware of the ability of CDBG
to leverage other funding and many CDBG grantees use the flexibility of
the program to ensure the maximum return on their CDBG investments.
Further, HUD understands that many States and local governments are
facing unprecedented fiscal pressures and that the importance of CDBG
to local budgets has grown as local revenues have declined. In order to
assist grantees in making the most of this funding, HUD is implementing
an aggressive technical assistance effort known as OneCPD to aid
grantees to better leverage and target their resources to address their
needs.
AFFORDABLE HOUSING FOR LOW-INCOME SENIORS AND INDIVIDUALS WITH
DISABILITIES
Question. The administration has proposed cuts to Section 202,
which serves low-income seniors. In fiscal year 2010, it was funded at
$825 million. However, the administration has requested $757 million,
an 8-percent cut to the program. The administration has requested $196
million for housing for persons with disabilities, a 35-percent cut
from the fiscal year 2010 level of $300 million.
How will the Department continue to offer affordable rental housing
to low-income seniors and persons with disabilities despite these
budget cuts?
Answer. In fiscal year 2012, the administration has had to make a
series of tough choices in order to freeze overall spending levels.
However, because of the tremendous demand for affordable housing among
vulnerable elderly and persons with disabilities who are otherwise at-
risk of institutionalization or homelessness, funding for the Section
202 and Section 811 programs were largely held constant in the
President's fiscal year 2012 budget request. Funding for the Section
202 program was reduced by only 8 percent relative to fiscal year 2010
levels. Funding for the Section 811 actually increased by 3 percent
(once Section 811 Mainstream Vouchers are accounted for with proposed
transfer to the Tenant-Based Rental Assistance account).
However, to address the significant unmet need for affordable
housing for very low-income elderly and persons with disabilities, HUD
is currently implementing a number of administrative changes to the
Section 202 Supportive Housing for the Elderly program and the Section
811 Supportive Housing for Persons with Disabilities program in order
to make them more targeted and better leveraged. During fiscal year
2011, HUD initiated a series of these changes to NOFAs and guidance.
While HUD still has more work to do, the administration is
confident that making these changes will enhance the programs and
deliver much more value to local communities. Our nonprofit and local
partners are eager to ensure the continued availability of these funds,
given the incredible demand by frail elderly and persons with
disabilities for affordable housing.
Among the changes currently being implemented are a number that
will better facilitate pairing Section 202 and Section 811 with the
low-income housing tax credit program (LIHTC). When Section 202 or
Section 811 funds are used in conjunction with LIHTC, fewer HUD funds
are required up-front on the capital side on a per unit basis,
effectively increasing the number of lower income, frail elderly, or
disabled households that the Federal Government supports as a share of
the total inventory of new federally assisted low-income housing.
______
Questions Submitted by Senator Frank R. Lautenberg
REPLACING THE ACTIVITIES OF THE PUBLIC HOUSING DRUG ELIMINATION PROGRAM
Question. Prior to 2002, public housing authorities (PHAs) were
able to fund safety, security, and drug- and gang-prevention activities
through the Public Housing Drug Elimination Program, which I created.
That program was eliminated by the Bush administration.
In the absence of dedicated funding, how is your agency working
with public housing to make their facilities safe and drug-free?
Answer. Safety and security of the public housing residents is part
of the overall mission of HUD. Both the capital and operating funds
provide certain flexibilities that enable PHAs to address safety and
security concerns. Presently, improvements that promote the safety and
security of public housing developments are an eligible use of capital
funds. Also, the public housing operating funds enable PHAs to use
operating funds to support anticrime and antidrug activities. These may
include providing security or designating ``special use'' units for
police or other anti-drug activities.
Additionally, the Department recognizes certain PHAs face greater
needs toward addressing threats to the safety and security of their
residents. To address this, the Department made $5 million of fiscal
year 2009 and $2 million of fiscal year 2010 funds available from the
Emergency Disaster set-aside under the Capital Fund for the purpose of
improving safety and security at PHA properties. These funds were
awarded through a competitive award process. The Department is looking
at continuing this in fiscal year 2011 and beyond; however, additional
funding under the set-aside depends on the demand for funds from other
types of emergencies and non-Presidentially declared disasters.
EMERGENCY CAPITAL FUNDING FOR PUBLIC HOUSING AUTHORITIES
Question. In fiscal year 2009 and fiscal year 2010, the Congress
allocated $20 million to address the emergency capital needs of public
housing authorities, including ``safety and security measures necessary
to address crime and drug-related activity.'' After a long delay, HUD
finally provided public housing authorities with a formal notification
of this funding last June.
To date, how many public housing authorities have applied for
emergency capital funding to address safety and security needs?
Answer. One hundred and seventy-six PHAs have applied for funding
to meet safety and security needs.
Question. Of the $20 million allocated for emergency capital needs
in fiscal year 2010, HUD reserved just $2 million for safety and
security and needs. However, HUD indicated that this amount may be
increased toward the end of the fiscal year, depending on the number of
applications received for other types of eligible emergencies and
natural disasters.
Has all the emergency capital needs funding for fiscal year 2010
been exhausted? If not, has the Department made additional awards to
address safety and security needs?
Answer. The demand in fiscal year 2010 for emergency capital needs
funding exceeds the $20 million available notwithstanding any funding
made available for safety and security grants and leaves no room for
additional awards to address safety and security needs. Regardless of
any amount being designated to safety and security needs, capital needs
resulting from bona fide emergency conditions are eligible to be funded
from the emergency reserve. Furthermore, capital improvements to
address these situations are eligible activities under section 9(d)(1)
of the United States Housing Act and can be funded through a PHA's
annual Capital Fund Formula grant.
______
Questions Submitted by Senator Mark Pryor
DISASTER RECOVERY ACTIVITIES AT HUD
Question. Last year, the President announced that you and Secretary
Napolitano would lead a Long-Term Disaster Recovery Working Group,
which would report to him on the administration's efforts to improve
the Nation's long-term disaster recovery apparatus. The report was
promised on April 2010, when that deadline passed, the administration
promised to deliver the report in August 2010. The report has yet to be
delivered.
When will this report be delivered to the President and when will
you and Secretary Napolitano be available to speak with the Congress
about it?
Answer. The Long-Term Disaster Recovery Working Group's Report to
the President is still in draft. The report was delayed following the
BP oil spill in anticipation of Secretary Mabus' Report from the Oils
Spill Commission. Upon completion of that report, both the Department
of Homeland Security and Department of Housing and Urban Development
(HUD) reconvened the Working Group.
The administration is in the final stages of agency clearance on
the National Disaster Recovery Framework. Once this document has been
cleared, the administration will move to clear the Long-Term Disaster
Recovery Working Group's Report and deliver it to the President.
The expectation is that the report will be delivered soon and
subsequently discussed with the Congress.
Question. In the fiscal year 2011 budget, HUD discussed expanding
its role in disaster recovery activities given the fact that more than
$20 billion in disaster Community Development Block Grant (CDBG) have
been allocated in the past decade. However, the fiscal year 2012 budget
contains no mention of HUD plans to expand its capacity for involvement
in long-term disaster recoveries. Where is HUD in its planning for
playing a more significant role in disaster recoveries?
Answer. The effectiveness of CDBG's flexibility is demonstrated by
the use of CDBG as the funding conduit to assist in addressing a range
of national priorities. CDBG is one the Federal Government's primary
vehicles for long-term disaster recovery assistance to States and local
governments. For example, the Congress appropriated $19.7 billion in
supplemental disaster assistance to aid the comprehensive recovery of
Alabama, Florida, Louisiana, Mississippi, and Texas following the
devastation of Hurricanes Katrina, Rita, and Wilma in 2005.
Furthermore, during fiscal year 2008, the Congress appropriated $300
million in supplemental CDBG disaster recovery funding to address a
range of Presidentially declared major disasters occurring in the late
spring and early summer of 2008 and an additional $6.5 billion in
supplemental CDBG disaster recovery funding as part of the fiscal year
2009 continuing resolution to promote recovery from Presidentially
declared major disasters that occurred during calendar year 2008, most
notably the widespread flooding in the Midwest and Hurricanes Gustav
and Ike.
Congressional support for CDBG is also evident in the increasing
use of CDBG as a vehicle to provide long-term disaster recovery funding
to areas of the county that have suffered from man-made and natural
disaster. Since September 11, 2001, almost $30 billion in CDBG disaster
recovery funding has been appropriated to assist in recovery from a
range of events, including the September 11 attacks, the 2004
hurricanes, Hurricanes Katrina, Rita, and Wilma in 2005, and Hurricanes
Ike and Gustav as well as Midwest floods in 2008. The Congress clearly
values the flexibility of CDBG over other Federal programs in allowing
States and local government to develop recovery programs responsive to
local needs.
HUD did not request any fiscal year 2011 funding for CDBG disaster
recovery efforts. However, HUD has been part of the efforts to re-
evaluate broader Federal disaster recovery policy that was undertaken
in fiscal year 2009 or fiscal year 2010. HUD has advocated for a
permanent disaster recovery provision in the CDBG authorizing statute
to avoid problems and delays associated with ad hoc appropriations
language.
HUD also proposed a statutory codification of CDBG disaster
assistance requirements and development of implementing regulations to
allow the Secretary to expedite future recovery initiatives.
CDBG is the congressional vehicle of choice to assist States and
local governments in long-term recovery efforts due to its flexibility
and established requirements. HUD is generally able to quickly deliver
the funds to the States, enabling them to design and implement their
recovery programs.
A weakness in this approach is the uncertainty associated with the
availability of funding as well as the amount of funding. The ad hoc
nature of CDBG disaster recovery appropriations does not allow grantees
to aggressively plan recovery efforts in the immediate wake of a
disaster and can take the Congress several months to move on providing
supplemental funds with additional time required for HUD to develop
guidance based on the specific language of the appropriation.
CDBG disaster recovery assistance is funded through supplemental
appropriations.
CONGRESSIONAL VIEWS AND ACTIONS
While the Congress has appropriated substantial sums for CDBG
disaster recovery purposes, the Congress closely monitors HUD actions
with regard to the use of these funds. The Congress generally requires
that HUD provide advance notice with regard to allocations of CDBG
disaster recovery funding as well as any alternative requirements
established for the use of the funds. Further, the Congress has been
aggressive in conducting oversight hearings on the use of CDBG disaster
recovery funds and such efforts can be expected to continue into the
future.
MAJOR PROGRAM EVALUATIONS/AUDITS/ISSUES
The Office of Community Planning and Development has engaged the
Office of Policy Development and Research to undertake a longitudinal
study evaluating the efficacy of homeowner compensation programs in
Louisiana and Mississippi. This study will provide semi-annual reports
on the results of the homeowner compensation programs for the next 3
years.
The HUD Office of Inspector General (OIG) has also undertaken a
broad effort to review the use of CDBG disaster recovery funds in lower
Manhattan and the gulf coast. To date, the OIG has identified a very
limited number of significant problems with both grants initiatives.
GAO REPORT ON DUPLICATIVE GOVERNMENT PROGRAMS
Question. In a report released this month by the Government
Accountability Office (GAO) entitled, ``Opportunities to Reduce
Potential Duplication in Government Programs, Save Tax Dollars, and
Enhance Revenue'', which was requested by the Senate Homeland Security
and Governmental Affairs Committee, the GAO listed 12 HUD programs
among some 80 economic development programs at four other agencies that
are ``fragmented programs . . . [that] overlap with that of at least
one other program in terms of economic development activities they are
authorized to fund.'' The report goes on to say that the funding for
these 80 programs in fiscal year 2010 amounted to $6.5 billion. Was HUD
contacted by GAO during this study and is the Department aware that GAO
has concluded that 12 of its programs are duplicative to programs at
other Departments?
Answer. HUD has been contacted by GAO, and is aware of the report's
conclusions. In its earlier studies GAO notes that Federal programs
across four agencies may have similar purposes but different grantees,
or different purposes for similar grantees. In many cases Federal
programs may seek to benefit similar populations, but be designed to
address different barriers to economic growth, or fill different gaps
between what private markets will serve and the mission of the program
and the agency. GAO concluded that many of the programs studied funded
only one or two activities, and that these narrowly targeted programs
were most likely to overlap.
While HUD's focus on the needs of low- and moderate-income people
is distinct from that of other agencies, the eligible uses of economic
development program funding are generally quite flexible. This allows
for faster and more accurate responsiveness to unique local market
conditions and particular opportunities. Grantees can identify gaps in
the activities funded through the private and public sources available
in a particular situation and within statutory and regulatory limits
can support project needs that are not covered by other sources of
funds available to the grantee or the project. This flexibility is
critical to doing business effectively with the private sector, and to
securing sufficient additional investment to sustain activities with
lower subsidy levels over time. HUD's core economic development
program, the CDBG, is the Federal Government's largest direct economic
development assistance program. To the degree that overall efforts are
further focused, they should be directed toward HUD's overall
programmatic efforts.
Also, GAO uses the Catalogue of Federal Domestic Assistance numbers
to identify programs for inclusion in this effort and this approach
makes CDBG appear as four different programs when it is a singular
program providing funds under virtually identical rules to four groups
of governmental entities. CDBG is a formula driven program ensuring
that grantees have a constant flow of funds over time as opposed to the
competitive nature of the other HUD programs cited and virtually all
other programs included in GAO's review. CDBG grantees make the
decisions regarding the use of CDBG funds and may or may not choose to
use the funds for economic development purposes. The Section 108 Loan
Guarantee Program is part of the CDBG program and provides a unique
100-percent full faith and credit guarantee backed by CDBG grant funds,
a program design not duplicated by any other Federal program.
Question. What sort of interagency cooperation takes place between
HUD and its partner agencies with similar economic development goals to
ensure that programs are not being duplicated and that similar
populations aren't being served by multiple programs at different
agencies?
Answer. HUD, through the Office of Economic Development, has
initiated collaborative discussions with several agencies that support
economic development activities through support for government,
business, financial institutions, and nonprofits. The aim of these
conversations is to provide information to HUD grantees (both that
receive block grants and those that receive competitive awards) to
assist them in making strategic investments of block grant funds for
economic impact, and effective proposals for competitive grants.
Information gained will be disseminated through a variety of outlets
including new online information for grantees and staff, better
availability of information for staff working with grantees on economic
development issues, and others.
In addition, in many cases Federal programs may seek to benefit
similar populations, but be designed to address different barriers to
economic growth, or fill different gaps between what private markets
will serve and the needs of low- and moderate-income people. For
example, HUD economic development programs may be used to help build
facilities, purchase equipment, or create infrastructure necessary for
business location and retention, with the aim of creating or retaining
jobs for low-income people. This is a very different entry point to the
jobs goal than supporting workforce development services for low-income
people, or from services to business owners to support managerial
strength.
Competitive economic development programs, such as the Rural
Innovation Fund, complement the array of block grant funding for urban
and rural areas, under which programs are often sized by block grant
formula to provide a consistent level of funding for a particular
geography or population. Funding for targeted new investments, which
can attract other capital and expand the opportunities for low-income
people, is often not available in systems that are focused on
maintenance of existing service levels. In addition, even the
consistent funding sources can be intermittently available in rural
communities--for example CDBG funds for smaller cities are distributed
competitively by State governments, and generally are not sufficient to
meet all of the needs documented in rural areas at one time.
Competitive programs provide targeted capital to establish new projects
or initiatives.
In addition to criteria related to program outcomes, the criteria
used to select proposals for competitive programs prioritize the
realistic ability to leverage other public and private resources
(including firm commitments of other funds at the time of application
and realistic plan for attracting additional sources), capacity to
complete the project, and sustainability of the endeavor. This reduces
duplication through incentives to target available sources
strategically and make the most efficient use of HUD funds.
Competitions also prioritize applications that that have the ability to
sustain funded activities over time, after the period of HUD funding is
completed. The grants create the potential for real economic growth and
decreased dependence on Federal resources in the long term.
Question. What sort of process have you put in place at HUD to
ensure that programs within your own building are neither duplicative
nor wasteful?
Answer. The programs administered by the Office of Economic
Development are competitive, which allows the Office to underwrite
proposals made by applicants for funding. These proposals include
specific budget information showing all sources and uses of funds
anticipated for the project, and financial projections that allow the
Office to understand the prospective financial viability of the project
over time. Substantial points are given under the competitions for
leverage of other funds, with strongest (and sometimes exclusive)
preference for funding that is firmly committed at the time of
application. This mechanism ensures that competitive applications are
using HUD funds in the most efficient way to fill the gaps in their
unique investment situation.
As stated above, for economic development activities provided under
the CDBG program, grantee communities are responsible under the
regulations for sizing assistance in accordance with regulatory
financial management regulations and underwriting guidelines. They may
not use CDBG to substitute for another source of Federal funding and
are required to consider other sources of funding as part of
underwriting for direct assistance to for-profit businesses. This means
that CDBG by its nature normally serves to address unidentified
economic development needs missed by other resources.
In addition, each Section 108 Loan Guarantee proposal is reviewed
at the HUD field office level and in a headquarters review panel. In
addition to regulatory compliance review, the layering of funding is
examined carefully to ensure it is prudent, not duplicative, and likely
to result in a workable activity if approved. Each Section 108 borrower
must certify that it has made efforts to find financing without the
Federal guarantee and cannot complete such financing consistent with
the timely execution of the program plans without such guarantee.
For the minimal Public and Indian Housing activities that could be
described as economic development, the vast majority of the funds are
restricted legislatively to grantees under the Office of Native
American Programs. Therefore, there probably is little overlap with
other programs.
MORTGAGE PROGRAMS
Question. Why is FHA raising the annual mortgage insurance
premiums, also known as the FHA monthly mortgage insurance?
Answer. In April 2011, FHA further increased the annual premium for
guarantees of single family mortgages of the Mutual Mortgage Insurance
Fund. Under current law FHA is required to achieve a 2-percent capital
ratio for this fund. At the end of fiscal year 2009, the capital ratio
dropped to 0.53 percent due to the general distress in the Nation's
housing market, and sharply lower projections for home prices. Despite
a comprehensive array of program improvements and reforms over the
following year, and significant improvement in the credit quality of
FHA borrowers, the housing market downturn deepened and further steps
are necessary to restore the MMI Fund's mandated capital ratio.
Question. The FHA has said the Short Refinance program could help
500,000 to 1.5 million homeowners. The program is 100 percent
voluntary--lenders or lien holders are not compelled to participate.
One news story reported that since its September launch, only 38
homeowners have refinanced mortgages through the program.
Why is the FHA Short Refinance program not working?
Answer. As of June, 2011, we have more than 20 lenders, including
some of the largest mortgage originators in the industry, who've
completed FHA Short Refinance transactions. These 20-plus lenders have
now done more than 230 of the mortgages and production is ramping up
each week. In addition to those who've completed applications, we have
another 20 lenders who have submitted applications and are on their way
to completing transactions. In total, we've received more than 630
applications for the program.
The FHA Short Refinance program has been in effect for
approximately 9 months. As with any new mortgage program, the lenders
and servicers need ample time to build the necessary infrastructure to
facilitate the program. This infrastructure includes technology,
systems, product training, and borrower outreach. These initiatives
take significant time and money to complete. In addition to the
operational hurdles to the program, there are also various financial
and economic factors that come into play. For example, many of the
underwater borrowers this program seeks to help are also delinquent on
their mortgage. The program requires that any delinquent borrower be
cured through a modification prior to participating in FHA's Short
Refinance. Modifications can be cumbersome and therefore many people
may unfortunately not qualify for the program. For borrowers who are
not delinquent, servicers and investors have taken a cautious approach
given their economic opinion on whether or not it's beneficial to
forgive principal. Given the voluntary nature of the program, the
investors will only forgive principal if they feel it's economically in
their best interest.
Question. What needs to be done to make the program effective?
Answer. As of June 2011, we have more than 20 lenders, including
some of the largest mortgage originators in the industry, who've
completed FHA Short Refinance transactions. These 20-plus lenders have
now done more than 230 of the mortgages and production is ramping up
each week. In addition to those who've completed applications, we have
another 20 lenders who have submitted applications and are on their way
to completing transactions. In total, we've received more than 630
applications for the program. As with any new mortgage program,
significant time is needed for the lenders and servicers to put the
program into operation. FHA is committed to the success of the program
and will review and update guidelines to the program as needed. In the
interim, we feel extending the program will have an impact on
participation and will encourage those lenders who've been sitting on
the fence to jump into the program.
______
Questions Submitted by Senator Kay Bailey Hutchison
DISASTER RECOVERY FUNDING
Question. Thank you for appearing before the subcommittee. I
appreciate in advance your response to these questions.
As you are no doubt aware, in 2008, Hurricane Ike struck land over
Galveston County, Texas on September 13, 2008, leaving billions of
dollars of destructions behind in its wake. In eastern Galveston
County, on the Bolivar Peninsula, more than 97 percent of structures
were damaged and nearly 70 percent were completely destroyed.
The Bolivar Peninsula is a unique land mass. It acts as a 27-mile
long barrier island with a width of a quarter-mile at its narrowest
point and no more than 3.5 miles at its widest. Texas State Highway 87
runs the length of the peninsula roughly parallel to the coastline,
connecting to the west to city of Galveston via a Texas Department of
Transportation ferry while to the east, the peninsula connects to the
Beaumont/Port Arthur area via State Highway 124.
In Hurricane Ike's aftermath, more than $3 billion in Community
Development Block Grants (CDBGs), approved by the Congress for disaster
recovery, was directed toward Texas counties impacted by the storm.
Galveston County is currently working on two significant CDBG projects
for Bolivar Peninsula:
--The first project proposes to construct a sanitary sewer project
composed of between one and five, small-scale, individual sewer
package plants to serve the geographically distinct historic
communities of the Bolivar Peninsula.
--The second project would elevate Highway 87 in its current
footprint. Highway 87 is the only evacuation route on the
peninsula, thereby providing residents more time to evacuate
prior to the highway becoming flooded. During Hurricane Ike,
the highway became impassible due to tidal surge 24 hours prior
to Ike making landfall, thereby stranding hundreds of residents
and necessitating their rescue by Coast Guard helicopters.
Unfortunately, 2.5 years after Hurricane Ike, officials in
Galveston County tell me they are struggling with unique challenges to
use CDBG funds to implement rebuilding projects on Bolivar Peninsula.
One challenge Galveston County faces is that Bolivar Peninsula
contains several areas designated as Coastal Barrier Resources System
(CBRS), managed by the U.S. Fish and Wildlife Service (USFWS). The
proposed packaged plants would serve communities separated by the
peninsula's CBRS, while the elevation of Highway 87 would run the
length of the peninsula. It is my understanding that the USFWS advises
Federal agencies such as the Department of Housing and Urban
Development (HUD) regarding what kind of Federal expenditures are
allowed in the CBRS. However, Galveston County officials tell me that
there has been reluctance by HUD to consult with the USFWS as to how
the Coastal Barrier Resources Act may impact Galveston County's
proposed projects, if at all. Will HUD immediately begin a formal
consultation with the USFWS to determine the viability of Galveston
County's two disaster recovery projects?
Answer. The State of Texas is the recipient of the CDBG disaster
recovery funding and, in conjunction with its local government sub-
recipients such as Galveston County, is responsible for coordinating
with other Federal agencies that have an interest or responsibility for
enforcing various Federal requirements such as the Coastal Barriers
Resources Act. While HUD is willing to participate in any such
discussions in order to facilitate implementation of important projects
such as these sewage treatment plants, the primary responsibility lies
with State and local officials to obtain proper permitting and other
necessary approvals in order for the projects to proceed. It is HUD
understanding that Galveston County has yet to submit the required
project information to allow the State to initiate the environmental
review process for these projects.
Question. According to HUD, the Congress may appropriate additional
funding for the CDBG program in response to disasters to rebuild the
affected areas and provide crucial seed money to start the recovery
project. However, HUD also stipulates that grantees generally must use
at least one-half of Disaster Recovery funds for activities that
principally benefit low- and moderate-income persons. This stipulation
presents another challenge for Galveston County, as Hurricane Ike's
path did not discriminate when it devastated Bolivar Peninsula. The
peninsula has historically been a very diverse community consisting of
both multi-generational, lower-income family dwellings and newer second
homes. According to the Bolivar Chamber of Commerce, prior to Hurricane
Ike's landfall, the median home cost on the peninsula was less than
$100,000. Given the unique geography of Bolivar Peninsula, is it
reasonable to limit Galveston County's ability to help rebuild Bolivar
Peninsula using CDBG criteria that are nearly impossible to meet in
this area? Is HUD willing to grant Galveston County a waiver so that it
can pursue these important projects?
Answer. The State of Texas is the recipient of the CDBG disaster
recovery funding and may request from HUD waivers or alternative
requirements deemed necessary to facilitate the use of the funds. The
appropriation language of Public Law 110-329 further states that HUD
may grant a waiver to the 50 percent low- and moderate-income benefit
standard only if there is a specific finding of ``compelling need'' to
reduce or eliminate the percentage requirement. Galveston County
officials would have to convince State officials to seek a waiver to
reduce the low- and moderate-income benefit threshold. To date, the
State of Texas has not sought such as waiver from HUD. If the State
submits a waiver request on the low and moderate income benefit issue,
HUD would give it due consideration.
Question. The final challenge faced by local jurisdictions in Texas
is that successful CDBG disaster recovery projects must be completed by
December 31, 2015. Though this seems like it is well into the future,
the challenges faced by local jurisdictions, such as those above for
Galveston County, have already significantly delayed the use of CDBG
funds approved in 2008. If HUD does not expeditiously approve major
CDBG projects, many local jurisdictions may not be able to construct
them prior to the program's expiration date. What is HUD doing both in
Washington and on a local level to ensure that specific, large-scale
projects are given timely consideration and ultimate approval, so that
local governments may either implement these projects or consider other
alternatives? Texas's allocation of CDBG funds has been critical to
allow reconstruction efforts to continue and our communities to get
back to normalcy. Galveston County is eager not only to help
reconstruct Bolivar Peninsula, but to improve the peninsula's
infrastructure in order to mitigate the effect of future storms. Thank
you for your consideration of these questions, and I look forward to
your response.
Answer. HUD does not approve individual projects for CDBG disaster
recovery funds allocated to the State of Texas. The State is the
grantee and has responsibility for establishing a process selecting,
implementing, and overseeing these projects and activities. HUD closely
monitors the State's performance in the execution of its
responsibilities and is currently undertaking quarterly monitoring
reviews of the State due to concerns over the State's capacity to
properly administer these funds. The December 2015 date has been
established by the State of Texas, not HUD.
______
Questions Submitted by Senator Mark Kirk
CENSUS DATA AND FORMULA FUNDS
Question. As both an authorizer and appropriator, my office has
received numerous visits by housing assistance organizations since I
came to the Senate late last year. Every group has concerns about
funding levels for fiscal year 2011 and fiscal year 2012, but a growing
concern for me is how the new census numbers will affect the formula
funds we receive through programs like the Community Development Block
Grant (CDBG). In my State, while our total population grew by 3.3
percent, we'll most likely lose a congressional seat because we have
not kept pace with faster growing western and southern States.
Additionally, our major population center, Chicago, saw its population
decrease by nearly 7 percent since 2000, dropping from 2.9 million to
2.7 million. Cook County, our largest county, saw its population
decrease by 3.4 percent. Has the Department of Housing and Urban
Development (HUD) run an analysis on what Illinois and its communities
can expect in formula funds as a result of this new data?
Answer. HUD has not used new census data as of yet per governance.
The new census data will be rolled in the fiscal year 2012 allocation
formula process. The fiscal year 2011 allocations, announced 2 months
ago, continued to use census 2000 data for most variables and 2009
population estimates for the population and growth lag variables.
Although we have more current census data, the statute directs HUD to
use the most recent census data published as of 90 days before the
beginning of the fiscal year.
For fiscal year 2012, HUD will be incorporating American
Communities Survey data from 2005-2009 data for poverty, pre-1940
housing, and overcrowding and census 2010 population data for growth
lag and population. Prior to the fiscal year 2012 allocation, HUD will
write a short memo describing the impact of rolling these new data into
the CDBG formula.
Question. Would it be possible to get that data for the rest of the
subcommittee members as well? I'm sure they would be interested.
Answer. New census data will come into play in fiscal year 2012.
The new census data will be rolled in the fiscal year 2012 allocation
formula process. The fiscal year 2011 allocations, announced 2 months
ago, continued to use census 2000 data for most variables and 2009
population estimates for the population and growth lag variables.
Although we have more current census data, the statute directs HUD to
use the most recent census data published as of 90 days before the
beginning of the fiscal year.
For fiscal year 2012, HUD will be incorporating American
Communities Survey data from 2005-2009 data for poverty, pre-1940
housing, and overcrowding and census 2010 population data for growth
lag and population. Prior to the fiscal year 2012 allocation, HUD will
write a short memo describing the impact of rolling these new data into
the CDBG formula.
MOVING-TO-WORK
Question. In Rockford, Illinois, a city of 157,280, the housing
authority serves thousands of city residents through its 1,918 public
housing units and 1,390 Housing Choice Vouchers. Mayor Larry Morrissey
is very interested in becoming a Moving-to-Work (MTW) demonstration
project community, but as you know participation is capped at 33 public
housing authorities (PHAs). While I am certainly concerned about the
lack of comprehensive data coming from the program, I am glad to see
positive lessons learned, and many communities, including Rockford,
believe that the flexibility provided by MTW will help them serve their
constituents more effectively.
What kind of metrics or data analysis does HUD use to determine if
MTW participants are successful?
Answer. The premise of the MTW demonstration, as set forth in the
MTW statute, is the ability to allow agencies to define and test
locally driven policies for administering housing assistance. Agencies
define activities in their annual MTW plans using available MTW
statutory and regulatory flexibilities to address specific local needs,
yet all MTW activities must relate back to at least one of the MTW
statutory purposes. Agencies are required, as part of a proposed
activity, to discuss anticipated positive and negative impacts of the
activity, and to define metrics (baseline measurements and performance
targets/benchmarks) to gauge the outcomes of the activities after
implementation. Agencies report on outcomes of these activities each
year in the MTW annual report, and discuss the activities with MTW
staff and field office staff at annual MTW site visits.
With the exception of the MTW statutory requirement to serve
substantially the same number of families, MTW does not measure program
initiatives against set criteria, since MTW agencies are encouraged to
design solutions tailored to address local housing issues. If an
individual agency's metrics indicate a particular approach is not
having the desired result, it can adjust the approach accordingly.
Lessons learned can be both positive and negative, as both positive and
negative outcomes help to inform the national policy dialogue. For a
MTW agency, the definition of ``success'' is that agencies experiment
and try different approaches, so that HUD, the Congress, and the
industry can learn from these approaches.
In addition to the information provided in annual MTW plans and
reports, MTW agencies are required to report into and utilize all HUD
systems. MTW agencies must report households served into the Public and
Indian Housing (PIH) Information Center's form 50058-MTW, document
Housing Choice Voucher program expenditures and vouchers under lease in
the Voucher Management System (VMS), and (as of June 30, 2010) submit
annual unaudited and audited financial information into the financial
data schedule. All MTW housing units must meet housing quality
standards as required by the MTW statute, and public housing units are
still subject to the Real Estate Assessment Center's physical
inspections. Finally, MTW agencies are still subject to monitoring
reviews by local field offices and are required to submit annual
audits.
Question. What is the timetable for the fiscal year 2011 third-
party evaluation of the MTW Program as mentioned in last year's report
to the Congress?
Answer. During the past 1 \1/2\ year, HUD has completed a statement
of work and has been attempting to identify a funding source for this
effort. We had initially identified fiscal year 2009 Capital Fund
Technical Assistance funds that could be used for the evaluation and
that were not already committed for other purposes. However, we
received a recent notification that there are two other procurements
now trying to access these funds. If senior PIH management decides that
the Capital Fund Technical Assistance funds should be used for an
alternate purpose, then we would not have a sense of the timing of this
effort, as we would not be able to solicit a contractor without funds
in place. Instead, we would have to wait for a Transformation
Initiative (TI) competition in order to try to obtain TI funds for the
evaluation.
Question. In that same report, HUD floated the idea of doubling the
current number of enrollees to better gauge the success of the program.
As an authorizer and appropriator, can I get a commitment from you to
work together on how we might expand eligibility for communities like
Rockford in an equitable, fair and effective way?
Answer. HUD looks forward to working with congressional
appropriators to share lessons learned and to refine the selection
criteria set forth in future appropriation acts. HUD shares your
commitment to expanding MTWs in a way that is equitable, fair and
effective and looks forward to working with you and other appropriators
to accomplish this.
As stated in the report, both HUD and the Congress will need to
carefully consider eligibility criteria for agencies to be included in
the demonstration. Admitting new PHAs to MTW with the use of strategic
selection criteria and program implementation can help demonstrate the
impacts of MTW on a broader scale, with the ultimate objective of
applying the most successful approaches nationwide. However, program
expansion should only proceed if the newly admitted PHAs structure
their programs for high-quality evaluations that permit lessons learned
to be generalized beyond the single PHA experience. Altering the scope
of the demonstration for new participants by mandating controlled
studies and other more rigorous evaluation methodologies would lend
insight into a variety of areas of interest.
In the fiscal years 2009, 2010, and 2011 appropriations language,
the Congress has required eligible applicants to be high-performing
agencies under HUD's Public Housing Assessment System (PHAS). This
requirement, coupled with additional eligibility and scoring criteria
centered on performance (as set forth by HUD in the PIH notices
soliciting applicants), has assisted HUD in selecting new agencies that
are both creative and competent. Further, in the fiscal year 2010
solicitation notice, HUD utilized the selection of new MTW agencies as
a method to guarantee the testing of policies that are of interest to
HUD, the Congress, and the industry. HUD intends to continue this
requirement in future solicitation notices to ensure policies of
interest are tested in the ``MTW laboratory.''
WASTE/FRAUD/ABUSE OVERSIGHT
Question. I'm sure you are well aware of the ABC News investigation
into the waste, fraud, and abuse at the Philadelphia Public Housing
Authority. The results of mismanagement were frankly shocking, and HUD
was correct to suspend funds to the authority. But what bothers me is
that this appears to be a trend. The Government Accountability Office
(GAO) recently issued a report about duplicative and overlapping
programs in the Federal Government. The GAO report in particular called
out Section 108 Loan Guarantees that allow States and communities to
leverage CDBG allocations to finance redevelopment projects. For fiscal
year 2012, HUD requested loan guarantee authority of $500 million--
nearly doubling the 2010 authority. But according to the GAO, HUD does
not track the performance of this account because there is no reporting
mechanism to determine how funds are used. Can we get a list of all
Section 108 guaranteed projects?
Answer. Please see the attached listing of outstanding Section 108
Loans as of May 31, 2011.
OUTSTANDING SECTION 108 LOANS AS OF MAY 31, 2011
------------------------------------------------------------------------
Name of recipient State Loan amount
------------------------------------------------------------------------
ABILENE................................ TX $450,000
ABILENE................................ TX 2,599,000
AGUADILLA.............................. PR 7,795,000
AKRON.................................. OH 1,555,000
ALACHUA................................ FL 1,600,000
ALAMEDA................................ CA 6,691,000
ALBANY................................. GA 3,575,000
ALBANY................................. GA 250,000
ALBANY COUNTY.......................... NY 260,000
ALBANY COUNTY.......................... NY 40,000
ALBUQUERQUE............................ NM 220,000
ALHAMBRA............................... CA 1,225,000
ALHAMBRA............................... CA 925,000
ALLEGHENY COUNTY....................... PA 6,000,000
ALLENTOWN.............................. PA 3,400,000
AMSTERDAM.............................. NY 263,000
ANAHEIM................................ CA 8,711,000
ANAHEIM................................ CA 14,655,000
ANASCO................................. PR 2,453,000
ANCHORAGE.............................. AK 1,790,000
ANDERSON............................... SC 390,000
ANDERSON............................... SC 700,000
ANNE ARUNDEL COUNTY.................... MD 410,000
ARCADIA................................ NY 159,000
ASHEVILLE.............................. NC 650,000
ATLANTA................................ GA 1,415,000
ATLANTA................................ GA 175,000
ATLANTA................................ GA 455,000
ATLANTA................................ GA 1,980,000
ATLANTIC COUNTY........................ NJ 3,000,000
AUBURN................................. NY 979,000
AUGUSTA................................ GA 2,500,000
AURORA................................. IL 1,430,000
AURORA................................. IL 115,000
AUSTIN................................. TX 4,495,000
AUSTIN................................. TX 1,740,000
AUSTIN................................. TX 3,415,000
AUSTIN................................. TX 5,315,000
BABYLON................................ NY 70,000
BABYLON................................ NY 725,000
BAKERSFIELD............................ CA 2,995,000
BAKERSFIELD............................ CA 602,000
BAKERSFIELD............................ CA 773,000
BAKERSFIELD............................ CA 1,482,000
BAKERSFIELD............................ CA 3,614,000
BAKERSFIELD............................ CA 1,570,000
BALDWIN PARK........................... CA 4,108,000
BALTIMORE.............................. MD 6,275,000
BALTIMORE.............................. MD 17,459,000
BALTIMORE.............................. MD 11,937,000
BALTIMORE.............................. MD 6,480,000
BARBERTON.............................. OH 750,000
BARCELONETA............................ PR 4,150,000
BAY CITY............................... MI 2,000,000
BAYAMON................................ PR 26,350,000
BEAUMONT............................... TX 7,530,000
BEAVER COUNTY.......................... PA 2,068,000
BEAVERTON.............................. OR 587,000
BELLFLOWER............................. CA 5,555,000
BENTON HARBOR.......................... MI 670,000
BERKELEY............................... CA 318,000
BERKELEY............................... CA 604,000
BERKELEY............................... CA 516,000
BERKELEY............................... CA 6,000,000
BERKELEY............................... CA 4,000,000
BERKS COUNTY........................... PA 8,169,000
BERKS COUNTY........................... PA 3,359,000
BESSEMER............................... AL 1,600,000
BETHLEHEM.............................. PA 4,123,000
BINGHAMTON............................. NY 4,025,000
BINGHAMTON............................. NY 410,000
BINGHAMTON............................. NY 363,000
BIRMINGHAM............................. AL 295,000
BIRMINGHAM............................. AL 670,000
BOISE.................................. ID 980,000
BOSTON................................. MA 15,000,000
BOSTON................................. MA 3,535,000
BOSTON................................. MA 11,360,000
BOSTON................................. MA 5,280,000
BOSTON................................. MA 600,000
BOSTON................................. MA 9,455,000
BOSTON................................. MA 1,510,000
BRIDGEPORT............................. CT 2,430,000
BRIDGEPORT............................. CT 1,347,000
BRIDGEPORT............................. CT 943,000
BRIDGEPORT............................. CT 545,000
BRYAN.................................. TX 2,140,000
BUCKS COUNTY........................... PA 2,500,000
BUFFALO................................ NY 1,325,000
BUFFALO................................ NY 180,000
BUFFALO................................ NY 200,000
BUFFALO................................ NY 5,285,000
BUFFALO................................ NY 2,100,000
BUFFALO................................ NY 575,000
BURLINGTON............................. VT 495,000
BURLINGTON............................. VT 800,000
BURLINGTON............................. VT 650,000
CAGUAS................................. PR 270,000
CAGUAS................................. PR 4,600,000
CAMBRIDGE.............................. MA 265,000
CAMDEN................................. NJ 85,000
CAMUY.................................. PR 4,054,000
CANANDAIGUA............................ NY 1,450,000
CANOVANAS.............................. PR 2,925,000
CAROLINA............................... PR 7,150,000
CAROLINA............................... PR 4,000,000
CARSON................................. CA 5,500,000
CASPER................................. WY 619,000
CAYEY.................................. PR 460,000
CAYEY.................................. PR 1,310,000
CAYUGA COUNTY.......................... NY 265,000
CAYUGA COUNTY.......................... NY 108,000
CHARLESTON............................. SC 745,000
CHARLOTTE.............................. NC 9,380,000
CHARLOTTE.............................. NC 385,000
CHARLOTTE.............................. NC 1,810,000
CHARLOTTE.............................. NC 1,552,000
CHATTANOOGA............................ TN 3,966,000
CHESAPEAKE............................. VA 390,000
CHESTER................................ PA 2,300,000
CHESTER COUNTY......................... PA 426,000
CHICAGO................................ IL 15,000,000
CHICAGO................................ IL 8,895,000
CHICAGO................................ IL 5,870,000
CHINO.................................. CA 933,000
CHULA VISTA............................ CA 8,911,000
CIDRA.................................. PR 4,300,000
CIDRA.................................. PR 1,695,000
CINCINNATI............................. OH 3,450,000
CINCINNATI............................. OH 605,000
CINCINNATI............................. OH 135,000
CLEVELAND.............................. OH 570,000
CLEVELAND.............................. OH 30,000,000
CLEVELAND.............................. OH 1,010,000
CLEVELAND.............................. OH 51,833,000
CLEVELAND.............................. OH 1,245,000
CLEVELAND.............................. OH 2,275,000
CLEVELAND HEIGHTS...................... OH 276,000
CLYDE.................................. NY 105,000
COLUMBUS............................... OH 100,000
COLUMBUS............................... GA 4,500,000
COMPTON................................ CA 4,100,000
CONCORD................................ NC 1,974,000
CONROE................................. TX 1,343,000
COUNCIL BLUFFS......................... IA 705,000
COVINGTON.............................. KY 330,000
CRANSTON............................... RI 50,000
CUMBERLAND............................. MD 1,270,000
CUYAHOGA COUNTY........................ OH 4,000,000
CUYAHOGA COUNTY........................ OH 1,000
CUYAHOGA COUNTY........................ OH 2,307,000
DADE COUNTY............................ FL 17,505,000
DADE COUNTY............................ FL 21,683,000
DADE COUNTY............................ FL 1,465,000
DALY CITY.............................. CA 3,552,000
DANBURY................................ CT 1,022,000
DANE COUNTY............................ WI 350,000
DAUPHIN COUNTY......................... PA 2,680,000
DECATUR................................ IL 390,000
DECATUR................................ IL 2,190,000
DEKALB COUNTY.......................... GA 1,000,000
DENVER................................. CO 2,820,000
DENVER................................. CO 3,292,000
DENVER................................. CO 452,000
DENVER................................. CO 2,301,000
DENVER................................. CO 2,912,000
DES MOINES............................. IA 8,500,000
DES MOINES............................. IA 1,425,000
DETROIT................................ MI 7,789,000
DETROIT................................ MI 17,000,000
DETROIT................................ MI 13,247,000
DETROIT................................ MI 18,000,000
DETROIT................................ MI 18,700,000
DETROIT................................ MI 1,200,000
DETROIT................................ MI 180,000
DETROIT................................ MI 2,195,000
DETROIT................................ MI 8,815,000
DETROIT................................ MI 1,800,000
DORADO................................. PR 5,194,000
DOWNEY................................. CA 1,000,000
DULUTH................................. MN 2,966,000
DUTCHESS COUNTY........................ NY 236,000
EAST LANSING........................... MI 1,200,000
EAST LIVERPOOL......................... OH 60,000
EAST PROVIDENCE........................ RI 2,650,000
EASTON................................. PA 1,000,000
EDINBURG............................... TX 1,385,000
EL CAJON............................... CA 1,356,000
EL CAJON............................... CA 508,000
EL MONTE............................... CA 3,435,000
EL MONTE............................... CA 1,790,000
EL MONTE............................... CA 1,200,000
EL MONTE............................... CA 1,684,000
ELIZABETH.............................. NJ 365,000
ELMIRA................................. NY 2,725,000
ENID................................... OK 1,212,000
ESOPUS................................. NY 294,000
EUGENE................................. OR 6,118,000
EVERETT................................ MA 1,000,000
FAIRFAX COUNTY......................... VA 6,516,000
FAIRFAX COUNTY......................... VA 6,535,000
FAIRFAX COUNTY......................... VA 275,000
FAIRFAX COUNTY......................... VA 345,000
FAIRFAX COUNTY......................... VA 580,000
FAIRFAX COUNTY......................... VA 125,000
FAIRFAX COUNTY......................... VA 5,000
FAIRFAX COUNTY......................... VA 252,000
FAIRFAX COUNTY......................... VA 1,265,000
FALL RIVER............................. MA 2,000,000
FAYETTEVILLE........................... NC 675,000
FITCHBURG.............................. MA 3,391,000
FLINT.................................. MI 904,000
FLINT.................................. MI 5,307,000
FLINT.................................. MI 3,840,000
FLINT.................................. MI 1,778,000
FLORENCE............................... SC 870,000
FORT MYERS............................. FL 125,000
FORT PIERCE............................ FL 3,395,000
FORT WAYNE............................. IN 6,250,000
FORT WAYNE............................. IN 535,000
FORT WORTH............................. TX 1,855,000
FORT WORTH............................. TX 5,610,000
FRESNO................................. CA 1,550,000
FRESNO................................. CA 900,000
FRESNO................................. CA 1,117,000
FRESNO COUNTY.......................... CA 1,125,000
FRESNO COUNTY.......................... CA 435,000
FULLERTON.............................. CA 4,500,000
FULTON................................. NY 127,000
FULTON................................. NY 753,000
GADSDEN................................ AL 500,000
GADSDEN................................ AL 1,200,000
GARDEN GROVE........................... CA 6,110,000
GASTONIA............................... NC 973,000
GASTONIA............................... NC 190,000
GASTONIA............................... NC 1,230,000
GENEVA................................. NY 670,000
GENEVA................................. NY 2,745,000
GLENDALE............................... CA 470,000
GLENVILLE.............................. NY 341,000
GRAYS HARBOR COUNTY.................... WA 3,615,000
GREENSBORO............................. NC 4,702,000
GREENSBORO............................. NC 2,736,000
GRESHAM................................ OR 1,373,000
GUAYNABO............................... PR 1,831,000
GUAYNABO............................... PR 1,811,000
GUAYNABO............................... PR 2,330,000
HAMMOND................................ IN 2,799,000
HARFORD COUNTY......................... MD 1,385,000
HARRISBURG............................. PA 3,375,000
HARRISBURG............................. PA 2,450,000
HARTFORD............................... CT 5,895,000
HARTFORD............................... CT 4,836,000
HARTFORD............................... CT 7,000,000
HARTFORD............................... CT 1,105,000
HAWTHORNE.............................. CA 250,000
HAWTHORNE.............................. CA 1,940,000
HAWTHORNE.............................. CA 3,010,000
HAZLETON............................... PA 340,000
HERKIMER............................... NY 365,000
HESPERIA............................... CA 600,000
HIALEAH................................ FL 2,680,000
HIDALGO COUNTY......................... TX 1,980,000
HOLLYWOOD.............................. FL 3,720,000
HOUSTON................................ TX 9,215,000
HUDSON................................. NY 705,000
HUNTINGTON............................. WV 2,735,000
HUNTINGTON............................. WV 1,135,000
HUNTINGTON............................. WV 460,000
HUNTINGTON BEACH....................... CA 1,560,000
HUNTINGTON BEACH....................... CA 3,665,000
HUNTINGTON PARK........................ CA 6,368,000
HUNTINGTON PARK........................ CA 1,150,000
ILION.................................. NY 70,000
INDIANAPOLIS........................... IN 3,000,000
IRVING................................. TX 2,820,000
ISABELA................................ PR 4,312,000
ISLIP.................................. NY 1,050,000
ITHACA................................. NY 520,000
JACKSON................................ TN 3,165,000
JACKSON................................ MS 7,000,000
JACKSON................................ MI 635,000
JACKSONVILLE........................... FL 1,860,000
JACKSONVILLE........................... FL 160,000
JACKSONVILLE........................... FL 685,000
JACKSONVILLE........................... FL 1,420,000
JACKSONVILLE........................... FL 280,000
JACKSONVILLE........................... FL 440,000
JAYUYA................................. PR 2,010,000
JAYUYA................................. PR 560,000
JERSEY CITY............................ NJ 8,000,000
JERSEY CITY............................ NJ 2,400,000
JERSEY CITY............................ NJ 5,700,000
JERSEY CITY............................ NJ 5,929,000
JUANA DIAZ............................. PR 5,300,000
JUNCOS................................. PR 657,000
JUNCOS................................. PR 414,000
KANKAKEE............................... IL 500,000
KANNAPOLIS............................. NC 1,349,000
KANSAS CITY............................ MO 750,000
KANSAS CITY............................ KS 3,314,000
KANSAS CITY............................ MO 4,260,000
KANSAS CITY............................ MO 6,000,000
KEY WEST............................... FL 13,007,000
KING COUNTY............................ WA 4,905,000
KING COUNTY............................ WA 5,102,000
KING COUNTY............................ WA 972,000
KINGSPORT.............................. TN 856,000
KINGSTON............................... NY 1,100,000
KINGSTON............................... NY 1,500,000
LAFAYETTE.............................. IN 2,790,000
LAKEWOOD............................... OH 277,000
LAKEWOOD............................... CO 3,118,000
LANCASTER.............................. CA 1,066,000
LANCASTER.............................. CA 1,167,000
LANCASTER.............................. OH 580,000
LANCASTER.............................. CA 1,690,000
LANCASTER.............................. CA 200,000
LARAMIE................................ WY 400,000
LAREDO................................. TX 765,000
LAS CRUCES............................. NM 2,000,000
LAWRENCE............................... MA 2,900,000
LAWRENCE............................... MA 500,000
LAWTON................................. OK 1,807,000
LEFLORE COUNTY......................... MS 4,500,000
LENOIR................................. NC 512,000
LEWIS COUNTY........................... NY 458,000
LITTLE FALLS........................... NY 256,000
LITTLE ROCK............................ AR 230,000
LITTLE ROCK............................ AR 185,000
LIVERMORE.............................. CA 137,000
LIVERMORE.............................. CA 1,320,000
LOCKPORT............................... NY 260,000
LORAIN................................. OH 1,730,000
LORAIN................................. OH 20,000
LORAIN................................. OH 220,000
LORAIN................................. OH 2,125,000
LOS ANGELES............................ CA 13,542,000
LOS ANGELES............................ CA 7,400,000
LOS ANGELES............................ CA 6,806,000
LOS ANGELES............................ CA 10,000,000
LOS ANGELES............................ CA 6,174,000
LOS ANGELES............................ CA 8,999,000
LOS ANGELES............................ CA 13,965,000
LOS ANGELES............................ CA 22,725,000
LOS ANGELES............................ CA 2,000,000
LOS ANGELES............................ CA 18,200,000
LOS ANGELES............................ CA 2,455,000
LOS ANGELES............................ CA 4,781,000
LOS ANGELES............................ CA 21,566,000
LOS ANGELES............................ CA 10,193,000
LOS ANGELES............................ CA 8,975,000
LOS ANGELES COUNTY..................... CA 8,986,000
LOS ANGELES COUNTY..................... CA 14,077,000
LOS ANGELES COUNTY..................... CA 7,320,000
LOS ANGELES COUNTY..................... CA 14,350,000
LOWELL................................. MA 2,340,000
LOWELL................................. MA 140,000
LUBBOCK................................ TX 250,000
LYNCHBURG.............................. VA 2,300,000
LYNN................................... MA 385,000
LYNN................................... MA 1,220,000
LYNN................................... MA 428,000
LYNN................................... MA 585,000
LYNWOOD................................ CA 5,105,000
LYONS.................................. NY 166,000
LYONS.................................. NY 75,000
MADISON COUNTY......................... IL 2,076,000
MAHONING COUNTY........................ OH 120,000
MALDEN................................. MA 1,000,000
MALDEN................................. MA 3,000,000
MALDEN................................. MA 900,000
MALDEN................................. MA 580,000
MANATI................................. PR 3,750,000
MANCHESTER............................. NH 2,337,000
MANCHESTER............................. NH 3,563,000
MANSFIELD.............................. OH 300,000
MARSHALL............................... TX 266,000
MASSILLON.............................. OH 1,725,000
MAUNABO................................ PR 2,666,000
MEDFORD................................ MA 1,000,000
MEDINA................................. NY 81,000
MEMPHIS................................ TN 8,500,000
MEMPHIS................................ TN 1,740,000
MEMPHIS................................ TN 1,380,000
MEMPHIS................................ TN 6,271,000
MEMPHIS................................ TN 3,650,000
MERCED................................. CA 2,600,000
MERCED................................. CA 580,000
MIAMI.................................. FL 3,806,000
MIAMI.................................. FL 2,300,000
MIAMI BEACH............................ FL 1,050,000
MIDDLETOWN............................. CT 109,000
MIDDLETOWN............................. NY 225,000
MIDDLETOWN............................. NY 100,000
MIDDLETOWN............................. NY 90,000
MIDDLETOWN............................. NY 503,000
MIDDLETOWN............................. NY 260,000
MIDDLETOWN............................. NY 190,000
MIDDLETOWN............................. NY 750,000
MIDDLETOWN............................. NY 25,000
MIDDLETOWN............................. NY 35,000
MIDLAND................................ TX 450,000
MINNEAPOLIS............................ MN 6,055,000
MOBILE................................. AL 980,000
MOBILE................................. AL 2,255,000
MOBILE................................. AL 380,000
MOBILE................................. AL 850,000
MOBILE................................. AL 780,000
MODESTO................................ CA 3,574,000
MOLINE................................. IL 515,000
MONESSEN............................... PA 43,797,000
MONESSEN............................... PA 286,000
MONROE COUNTY.......................... NY 760,000
MONROE COUNTY.......................... NY 60,000
MONTEBELLO............................. CA 5,279,000
MONTEREY PARK.......................... CA 4,768,000
MONTGOMERY COUNTY...................... MD 569,000
MONTGOMERY COUNTY...................... PA 2,454,000
MONTGOMERY COUNTY...................... PA 1,000
MONTGOMERY COUNTY...................... PA 175,000
MONTGOMERY COUNTY...................... PA 2,390,000
MOSS POINT............................. MS 540,000
NASHVILLE.............................. TN 3,315,000
NASSAU COUNTY.......................... NY 7,182,000
NASSAU COUNTY.......................... NY 6,472,000
NASSAU COUNTY.......................... NY 4,745,000
NATIONAL CITY.......................... CA 5,505,000
NEW BEDFORD............................ MA 1,265,000
NEW CASTLE............................. PA 1,400,000
NEW HAVEN.............................. CT 770,000
NEW HAVEN.............................. CT 2,140,000
NEW ORLEANS............................ LA 3,530,000
NEW ORLEANS............................ LA 5,334,000
NEW ORLEANS............................ LA 8,145,000
NEW ORLEANS............................ LA 5,585,000
NEW ORLEANS............................ LA 3,250,000
NEW YORK............................... NY 1,000
NEW YORK............................... NY 8,639,000
NEWARK................................. NY 31,000
NEWARK................................. NY 365,000
NEWARK................................. NY 161,000
NEWBURGH............................... NY 450,000
NEWBURGH............................... NY 855,000
NEWPORT BEACH.......................... CA 1,788,000
NORFOLK................................ VA 12,885,000
NORRISTOWN............................. PA 1,000
NORTH ADAMS............................ MA 2,514,000
NORTH TONAWANDA........................ NY 142,000
OAKLAND................................ CA 2,460,000
OAKLAND................................ CA 9,835,000
OCEAN SHORES........................... WA 915,000
OCEANSIDE.............................. CA 3,295,000
OGDEN.................................. UT 1,700,000
OGDEN.................................. UT 460,000
OKLAHOMA CITY.......................... OK 3,750,000
OKLAHOMA CITY.......................... OK 1,925,000
OMAHA.................................. NE 441,000
OREM................................... UT 1,090,000
OSWEGO................................. NY 235,000
OSWEGO COUNTY.......................... NY 249,000
PALM BEACH COUNTY...................... FL 1,138,000
PALM BEACH COUNTY...................... FL 1,151,000
PALM BEACH COUNTY...................... FL 7,875,000
PALM BEACH COUNTY...................... FL 152,000
PALMDALE............................... CA 4,383,000
PALMYRA................................ NY 260,000
PARKERSBURG............................ WV 2,007,000
PASADENA............................... CA 1,000,000
PASCO COUNTY........................... FL 11,387,000
PENNS GROVE............................ NJ 523,000
PENNSYLVANIA........................... PA 15,000,000
PHARR.................................. TX 270,000
PHILADELPHIA........................... PA 2,600,000
PHILADELPHIA........................... PA 8,400,000
PHILADELPHIA........................... PA 20,000,000
PHILADELPHIA........................... PA 1,089,000
PHILADELPHIA........................... PA 6,825,000
PHILADELPHIA........................... PA 8,670,000
PHILADELPHIA........................... PA 2,000,000
PHILADELPHIA........................... PA 2,585,000
PHILADELPHIA........................... PA 12,745,000
PHILADELPHIA........................... PA 23,500,000
PHILADELPHIA........................... PA 29,870,000
PHILADELPHIA........................... PA 12,345,000
PITTSBURGH............................. PA 2,949,000
PITTSBURGH............................. PA 3,920,000
PITTSBURGH............................. PA 3,000,000
PITTSBURGH............................. PA 2,000,000
PITTSBURGH............................. PA 3,600,000
PITTSBURGH............................. PA 10,000,000
PITTSFIELD............................. MA 992,000
PITTSFIELD............................. MA 571,000
PLATTSBURGH............................ NY 110,000
POMONA................................. CA 750,000
PONCE.................................. PR 18,801,000
PONCE.................................. PR 2,765,000
PORT TOWNSEND.......................... WA 690,000
PORTERVILLE............................ CA 3,092,000
PORTLAND............................... ME 1,418,000
PORTLAND............................... OR 5,161,000
PORTLAND............................... OR 3,465,000
PRINCE GEORGE'S COUNTY................. MD 5,395,000
PROVIDENCE............................. RI 585,000
PROVO.................................. UT 1,050,000
QUINCY................................. MA 4,025,000
RADFORD................................ VA 425,000
RAYMOND................................ WA 790,000
READING................................ PA 2,708,000
READING................................ PA 1,050,000
READING................................ PA 3,000,000
READING................................ PA 4,300,000
READING................................ PA 550,000
READING................................ PA 865,000
REDFORD................................ MI 3,205,000
RENO................................... NV 336,000
RIALTO................................. CA 2,276,000
RICHMOND............................... VA 2,245,000
RICHMOND............................... CA 3,500,000
RICHMOND............................... CA 2,710,000
RIVERSIDE.............................. CA 1,740,000
RIVERSIDE.............................. CA 2,695,000
ROANOKE................................ VA 1,355,000
ROCHESTER.............................. NY 2,200,000
ROCHESTER.............................. NY 3,200,000
ROCHESTER.............................. NY 875,000
ROCHESTER.............................. NY 343,000
ROCHESTER.............................. NY 150,000
ROCK HILL.............................. SC 2,016,000
ROCKFORD............................... IL 750,000
ROCKFORD............................... IL 705,000
ROCKLAND COUNTY........................ NY 416,000
ROCKLAND COUNTY........................ NY 553,000
ROCKLAND COUNTY........................ NY 1,650,000
ROCKLAND COUNTY........................ NY 581,000
ROCKLAND COUNTY........................ NY 672,000
ROCKLAND COUNTY........................ NY 1,279,000
ROCKLAND COUNTY........................ NY 1,088,000
ROCKLAND COUNTY........................ NY 668,000
ROCKY MOUNT............................ NC 2,655,000
SACRAMENTO............................. CA 4,860,000
SACRAMENTO............................. CA 3,370,000
SACRAMENTO COUNTY...................... CA 76,000
SAINT PAUL............................. MN 3,300,000
SALEM.................................. OR 4,926,000
SALEM.................................. MA 140,000
SALISBURY.............................. NC 372,000
SAN ANGELO............................. TX 2,035,000
SAN ANTONIO............................ TX 49,975,000
SAN ANTONIO............................ TX 12,155,000
SAN BERNARDINO......................... CA 7,500,000
SAN BERNARDINO......................... CA 3,860,000
SAN BERNARDINO COUNTY.................. CA 350,000
SAN DIEGO.............................. CA 1,620,000
SAN DIEGO.............................. CA 1,180,000
SAN DIEGO.............................. CA 2,336,000
SAN DIEGO.............................. CA 1,701,000
SAN DIEGO.............................. CA 2,421,000
SAN DIEGO.............................. CA 4,840,000
SAN DIEGO.............................. CA 127,000
SAN DIEGO.............................. CA 573,000
SAN DIEGO.............................. CA 133,000
SAN DIEGO.............................. CA 89,000
SAN DIEGO.............................. CA 337,000
SAN DIEGO.............................. CA 3,010,000
SAN DIEGO.............................. CA 3,505,000
SAN DIEGO.............................. CA 2,040,000
SAN DIEGO.............................. CA 741,000
SAN DIEGO.............................. CA 1,606,000
SAN DIEGO.............................. CA 450,000
SAN DIEGO.............................. CA 2,142,000
SAN FRANCISCO.......................... CA 6,534,000
SAN JOSE............................... CA 12,430,000
SAN JOSE............................... CA 16,625,000
SAN JOSE............................... CA 21,877,000
SAN JOSE............................... CA 2,365,000
SAN JUAN............................... PR 57,535,000
SAN LEANDRO............................ CA 2,500,000
SAN LEANDRO............................ CA 559,000
SAN LORENZO............................ PR 5,647,000
SAN MATEO COUNTY....................... CA 7,145,000
SANDY CITY............................. UT 1,010,000
SANTA CLARITA.......................... CA 166,000
SANTA CLARITA.......................... CA 534,000
SANTA CLARITA.......................... CA 570,000
SANTA FE............................... NM 243,000
SAVANNAH............................... GA 1,120,000
SCRANTON............................... PA 2,375,000
SCRANTON............................... PA 3,000,000
SCRANTON............................... PA 880,000
SCRANTON............................... PA 1,980,000
SCRIBA................................. NY 1,240,000
SEASIDE................................ CA 1,470,000
SEATTLE................................ WA 805,000
SEATTLE................................ WA 13,248,000
SEATTLE................................ WA 9,877,000
SEATTLE................................ WA 910,000
SEBRING................................ FL 4,365,000
SELMA.................................. AL 600,000
SENECA COUNTY.......................... NY 63,000
SHREVEPORT............................. LA 1,714,000
SHREVEPORT............................. LA 520,000
SHREVEPORT............................. LA 1,184,000
SHREVEPORT............................. LA 1,787,000
SOMERVILLE............................. MA 300,000
SOUTH BEND............................. IN 535,000
SOUTH BEND............................. IN 3,300,000
SOUTH BEND............................. IN 200,000
SOUTH GATE............................. CA 2,210,000
SOUTH GATE............................. CA 1,835,000
SOUTH SAN FRANCISCO.................... CA 1,166,000
SPARTANBURG............................ SC 3,470,000
SPRINGFIELD............................ MA 3,384,000
SPRINGFIELD............................ MA 3,492,000
SPRINGFIELD............................ MO 7,463,000
SPRINGFIELD............................ OR 441,000
SPRINGFIELD............................ MA 105,000
SPRINGFIELD............................ MA 1,640,000
ST. LOUIS.............................. MO 34,250,000
ST. LOUIS.............................. MO 12,500,000
STOCKTON............................... CA 11,480,000
STOCKTON............................... CA 6,760,000
STOCKTON............................... CA 1,980,000
SUFFOLK................................ VA 3,073,000
SULLIVAN............................... NY 425,000
SUMTER................................. SC 772,000
SUMTER................................. SC 816,000
SYLVAN BEACH........................... NY 198,000
SYRACUSE............................... NY 635,000
SYRACUSE............................... NY 4,184,000
SYRACUSE............................... NY 888,000
SYRACUSE............................... NY 1,065,000
SYRACUSE............................... NY 138,000
TACOMA................................. WA 3,600,000
TACOMA................................. WA 1,375,000
TACOMA................................. WA 1,149,000
TAMPA.................................. FL 7,720,000
TAUNTON................................ MA 480,000
TAYLOR................................. MI 300,000
TEMPE.................................. AZ 5,883,000
TOA ALTA............................... PR 7,886,000
TOA BAJA............................... PR 12,157,000
TOLEDO................................. OH 125,000
TOLEDO................................. OH 13,630,000
TROY................................... NY 2,666,000
TRUJILLO ALTO.......................... PR 2,740,000
TRUMBULL COUNTY........................ OH 955,000
TULARE................................. CA 291,000
TUSCALOOSA............................. AL 1,500,000
ULSTER COUNTY.......................... NY 647,000
UNION CITY............................. CA 1,710,000
UTICA.................................. NY 947,000
UTICA.................................. NY 2,250,000
VACAVILLE.............................. CA 706,000
VACAVILLE.............................. CA 420,000
VANCOUVER.............................. WA 3,840,000
VEGA BAJA.............................. PR 2,325,000
VEGA BAJA.............................. PR 1,905,000
VEGA BAJA.............................. PR 1,245,000
VINELAND............................... NJ 2,720,000
VISALIA................................ CA 1,721,000
VISALIA................................ CA 1,618,000
VISTA.................................. CA 3,175,000
WARREN................................. OH 1,485,000
WARREN................................. OH 520,000
WATERFORD.............................. NY 6,000
WATSONVILLE............................ CA 1,821,000
WAYNE COUNTY........................... MI 228,000
WAYNE COUNTY........................... MI 168,000
WAYNE COUNTY........................... NY 173,000
WEST JORDAN............................ UT 1,215,000
WEST VALLEY............................ UT 2,266,000
WESTFIELD.............................. MA 840,000
WESTMORELAND COUNTY.................... PA 720,000
WHEELING............................... WV 1,500,000
WICHITA................................ KS 990,000
WILKES-BARRE........................... PA 3,000,000
WINSTON-SALEM.......................... NC 2,591,000
WINSTON-SALEM.......................... NC 1,200,000
WOODLAND............................... CA 400,000
WOONSOCKET............................. RI 2,050,000
WORCESTER.............................. MA 2,287,000
WORCESTER.............................. MA 2,218,000
YAKIMA................................. WA 1,843,000
YAKIMA................................. WA 2,921,000
YAUCO.................................. PR 4,000,000
YONKERS................................ NY 608,000
YONKERS................................ NY 2,316,000
YONKERS................................ NY 2,450,000
YONKERS................................ NY 2,625,000
YONKERS................................ NY 950,000
YONKERS................................ NY 5,608,000
YORK................................... PA 2,530,000
YORK................................... PA 1,100,000
YOUNGSTOWN............................. OH 730,000
YOUNGSTOWN............................. OH 955,000
YOUNGSTOWN............................. OH 530,000
YOUNGSTOWN............................. OH 500,000
------------------------------------------------------------------------
Question. Why is there no oversight for this program?
Answer. There is extensive oversight of the Section 108 program as
it is part of the long standing CDBG program. Section 108 projects are
considered in the annual CDBG risk analysis process and Section 108
projects are reviewed as part of regular CDBG monitoring reviews. CDBG
grantees that use Section 108 funds report annually on the use of those
funds in their Consolidated Annual Performance Report that describes
uses and performance of CDBG and other funding sources. Activities
financed with Section 108 funds are subject to all program, financial,
and cross-cutting requirements applicable to CDBG funds. Further, each
Section 108 Loan is reviewed by the respective field office and
underwritten by headquarters with approvals issued centrally from
headquarters.
Question. According to the GAO, this issue came up in 2007. Why has
no action been taken during the last 5 years?
Answer. The question misstates the GAO's analysis of Section 108.
GAO is not stating that the program lacks oversight, but rather that
HUD should improve data collection and reporting on the program by
integrating it into the Integrated Disbursement and Information System
(IDIS). IDIS is the finance and data system for other HUD-CPD programs.
The fiscal year 2010 TI funding will allow us to integrate the Section
108 program into IDIS. We expect that these system improvements will be
completed in fiscal year 2012.
Question. The GAO report I previously mentioned also targeted
fragmented overlap in economic develop, homeless assistance and water
projects among Federal agencies, including HUD. For example, the
Department of Commerce, HUD, the Small Business Administration, and the
U.S. Department of Agriculture (USDA) combined oversee 52 programs that
assist in ``entrepreneurial efforts.'' GAO says the agencies have made
minimal effort into developing compatible policies and procedures. Once
again, monitoring and oversight came up.
With resources already tight, how can we improve the efficiency of
HUD in situations like this?
Answer. HUD is familiar with the GAO report and is considering ways
to address many of the concerns it highlights. First, we have entered
into a partnership with almost a dozen Federal agencies, described in
HUD's TI justification, to institutionalize monitoring and evaluating
interagency collaborative efforts. This partnership responds to a
section of the report that notes:
``Moreover, GAO is finding that most of the collaborative efforts
performed by program staff on the front line that GAO has been able to
assess to date have occurred only on a case-by-case basis. As a result,
it appears that the agencies do not consistently monitor or evaluate
these collaborative efforts in a way that allows them to identify areas
for improvement.''
In addition, HUD and its partners are also planning a pilot that
places teams comprised of interagency representatives from across the
Federal Government to work in a few locations and coordinate the
various Federal programs these communities use. These teams will serve
as both on-the-ground technical assistance and implementation partners
and as liaisons between the Federal Government and the pilot site. By
working across agencies and reporting back successes and limitations,
this effort will help cities and regions maximize the benefits from the
Federal funds they already receive and provide valuable information to
make programs less duplicative or incompatible. The National Resource
Bank is another resource that will assist in this regard.
Finally, we note that some of the overlap reflects an interest in
leaving more discretion to local governments rather than imposing
restrictions from Washington. However, HUD recognizes that this has at
times been done inelegantly, and understands that incompatible rules in
these programs hinder this ultimate goal. This is something that HUD is
working to resolve. Please see program examples below.
Section 108
The Section 108 program is part of the CDBG program and operates
within the CDBG statutory and regulatory requirements. Monitoring and
oversight of Section 108-funded activities is part and parcel of
regular monitoring efforts under the CDBG program and, in this sense,
there is exceptionally close alignment with the CDBG program. The most
significant factor inhibiting the development of closer policies and
procedures across programs at various agencies is the fact that
differences in the underlying statutory authorities creates a profound
obstacle to reconciling these programs. A classic example is the fact
that an environmental review carried out by one Federal agency can
seldom be accepted by other agencies absent clear statutory authority
to act in this manner. Another example is that many program
authorization statutes have varying planning requirements that prohibit
one plan from being used for multiple purposes. To the extent that the
subcommittee is interested in identifying and these barriers, the
Department is available to engage in that discussion.
Homeless Programs
HUD works closely with other Federal agencies on the issue of
homelessness, and is a key member of the U.S. Interagency Council on
Homelessness (USICH). Through these efforts HUD is working to align its
targeted and mainstream resources with the resources available through
other programs, especially those at the Departments of Health and Human
Services, Veterans Affairs, and Labor. This is evidenced in the goals
and strategies articulated in the USICH ``Opening Doors: Federal
Strategic Plan To Prevent and End Homelessness.''
Question. GAO also found an example where HUD provided a utility in
Texas with a grant for $860,000 to extend water distribution and waste
collection for the community. But 5 years after the funds were issued,
the lines were unused because the utility did not receive enough USDA
money to complete a well. What metrics and data analysis are used when
HUD funds projects that are contingent on another agency's funding?
Answer. The Fort Hancock, Texas, water and sewer lines have been
laid, however the homes were not connected due to insufficient water
pressure and inadequate treatment facilities (improvements being
constructed by USDA-RD). The water well and reverse osmosis system and
related improvements (now funded by both USDA-RD and Texas Water
Development Board) will be complete by July 2011 and connections should
be made beginning in August. If this schedule holds, these grants could
be closed by the end of 2011.
In CDBG generally, HUD does not decide what projects to fund as
funding decisions are left to local or State grantees. CDBG is unique
among Federal programs in that CDBG funds may count as local match
against other Federal programs. As a result of this provision, CDBG
grantees have an incentive to leverage other funding sources. CDBG does
not have any specific rules on the drawdown of CDBG funds in project
with multiple funding sources as timing of the investment will depend
upon the costs that are being covered with CDBG funds (e.g.,
acquisition of property may be prerequisite to construction
activities).
It is not HUD's role to undertake an analysis that leveraged funds
will be available for a State CDBG project. The vetting and approval
process has been a State responsibility since the advent of the State
CDBG program in 1981. HUD does not get involved in State selection
processes beyond determining that methods of distribution (i.e., how
they will allocate CDBG funds) comply with statutory and regulatory
standards.
SUBCOMMITTEE RECESS
Senator Collins. So with that, the hearing record will
remain open for 15 days for the submission of additional
questions for the record or any other statements and testimony,
and this hearing is now recessed.
[Whereupon, at 11:26 a.m., Thursday, March 3, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2012
----------
THURSDAY, MARCH 10, 2011
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:33 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Pryor, Collins, Coats, and Blunt.
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
STATEMENT OF HON. RAY LaHOOD, SECRETARY
ACCOMPANIED BY CHRISTOPHER BERTRAM, ASSISTANT SECRETARY OF
TRANSPORTATION FOR BUDGET AND PROGRAMS, AND CHIEF FINANCIAL
OFFICER
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Good morning. The subcommittee will come to
order.
Welcome, Secretary Ray LaHood. Thank you for coming back to
our subcommittee to talk about the Department of
Transportation's (DOT) budget request and our Nation's
transportation policy. I appreciate your being here today.
The subject of this hearing is the DOT budget for fiscal
year 2012. Yet, even as we sit here today, halfway through the
fiscal year, the Federal Government still lacks a final budget
for fiscal year 2011. The Congress is continuing to debate that
budget as millions of families and communities across the
country wait anxiously to learn the fate of programs they
depend upon. And this debate is critical. We do need to tackle
the deficit and make sure our children and grandchildren aren't
forced to bear the burden of overwhelming debt.
Yesterday, the Senate voted on two bills, one from the
House Republicans, the other a Senate Democratic alternative,
to fund Federal agencies through the end of this fiscal year
2011. The House proposal was a budget that would have
eliminated the high-speed rail and Transportation Investment
Generating Economic Recovery (TIGER) grant programs and made
deep cuts to transit, Amtrak, and aviation spending.
Transportation is central to so much of the way our lives
are organized, and there is overwhelming evidence that greater
investment is needed today in communities across our country,
whether it's replacing our crumbling bridges and tunnels, or
building new roads and transit lines to support economic growth
and competitiveness and ease congestion. The DOT budget has a
real impact on real people.
I was deeply concerned that the House Republican budget
would eliminate funding for the highly competitive TIGER
Discretionary Grant program. It's a program that has become a
showcase for innovation in both rural and urban communities.
The House proposal goes so far as to eliminate TIGER grants
that were already awarded to 75 communities last year--the 75
most promising projects out of a field of more than 1,000
applicants.
One of those 75 projects is a project in my home State that
really typifies what those grants mean to all of our States. In
south Seattle, there is a community that is hanging on by a
thread. The main access road to commerce goes through a bridge
that, like infrastructure in a lot of our States, was crumbling
and had to be closed. Mr. Secretary, you were there and saw
that. I have spoken to the small business owners and residents
of this community who told me that bridge is really their
lifeline.
Last year, the South Park Bridge won a TIGER grant to help
rebuild that bridge. And that bridge today is now creating jobs
and aiding the recovery of an entire community, and will be a
foundation for that community to thrive on for generations to
come. But the funding for that project, and many others like
it, was left on the cutting-room floor by House Republicans in
an effort to meet an arbitrary bottom line. And that is just
one example from an extreme plan that focuses on short-term and
shortsighted cuts while neglecting a long-term plan for
responsible deficit reduction to support our economic recovery.
The Senate Democratic bill protected those investments,
choosing to end programs that have served their purpose or are
no longer needed. We do need to make responsible and practical
budget cuts that will allow us to continue out-innovating, out-
educating, and out-building our competitors.
As we all know, neither bill was able to garner enough
votes to win passage. A compromise is needed, one where both
sides come to the table to work together on a long-term
solution that invests in our country's future. And as we work
to cut spending, we need to make sure that we are not doing
anything to threaten our economic recovery or cause even more
workers to lose their jobs.
So, today, as we look at the fiscal year 2012 budget, I
will be taking the responsible approach and analyzing how
taxpayer dollars can be invested more effectively to continue
our economic recovery, improve our economic competitiveness,
strengthen our communities, ensure safety, foster innovation,
and manage our Federal resources efficiently. The investments
we make in transportation and in our national infrastructure
are such an important part of supporting our economy,
rebuilding our communities, and improving safety.
And the need to invest in our transportation infrastructure
is huge. Many of us have seen the report card for America's
infrastructure that was put together by the American Society of
Civil Engineers. Their overall grade for our Nation's
infrastructure is a D. And their grade for roads is even more
depressing: a D-. Our Nation's rail network earned a paltry C-.
And transit earned nothing more than a D.
The President's budget request tries to address this
problem, asking for a 69-percent increase in funding for DOT.
The request includes an immediate investment of $50 billion to
boost the economy, as well as the 6-year reauthorization
proposal for surface transportation. Clearly, this proposal
offers a grand vision for our transportation programs.
I applaud the administration's effort to promote investment
in our Nation's infrastructure, but I also think we need more
than grand ideas. We need to discuss real strategies that will
make them happen. And unfortunately, this budget proposal
doesn't offer us real solutions for the challenges we face
today. When we talk about paying for transportation, the
biggest challenge we face is the solvency of the Highway Trust
Fund (HTF). Even under current funding levels, without paying
for the additional $50 billion in stimulus funding requested by
the administration, HTF will be bankrupt by the end of fiscal
year 2012 or the beginning of 2013. The administration has
offered to work with the Congress to address this problem, but
when it comes to discussing specific solutions, the President
has opposed an increase to the gas tax, opposed the development
of a new revenue system based on miles traveled, and still not
offered any proposals for making sure HTF has enough revenues
to pay for its budget request.
I'm also concerned about what happens to transportation
programs in fiscal year 2012. A long-term solution for HTF will
not be able to solve our immediate crisis. The Congress has
already transferred more than $34 billion from the General Fund
to HTF. I will be interested to hear from the Secretary if he
thinks another transfer is necessary to get through this year
or if he can offer another way to avert a crisis. At a time
when the House is focusing on slash-and-burn politics, we need
to see some realistic alternatives being discussed. And I'm
disappointed the budget request doesn't offer that.
I'm also troubled by the administration's proposal to
reclassify transportation programs as purely mandatory funding.
This proposal helps the administration meet its goal of
freezing growth in discretionary budget, but it also means the
administration has failed to request about $7 billion for the
rail and public transit programs that have been traditionally
funded with discretionary resources. That is a large hole for
the Congress to fill from the outset.
More importantly, the proposal leaves the Department
without annual oversight and input from the Appropriations
Committee. This subcommittee has played an important role in
supporting our Nation's infrastructure, providing additional
resources for transit, roads, and bridges from HTF as well as
the General Fund of the Department of the Treasury. In fact,
the TIGER program was created by this subcommittee.
This subcommittee has been particularly engaged in
supporting rail transportation, providing additional funding
for the high-speed rail grants, and making sure the Department
has the resources it needs to administer the program.
As concerned as I am about the future of the surface
transportation programs, I believe the threats facing the
President's high-speed rail initiative are potentially even
greater. I believe in high-speed rail. I think it has the
ability to spur innovation and economic growth, tying
communities together in ways that roads and airports don't
today.
Unlike most of Europe, we are still a young and growing
Nation. Our population is projected to reach 420 million by
mid-century, almost 140 million more than in 2000. If you think
your travel on roads and airports is crowded today, just wait.
And building more and wider roads won't be enough. High-speed
rail, like the Federal Aviation Administration's (FAA) Next
Generation Air Transportation System (NextGen), is one of the
solutions we will need if we are to avoid paralyzing gridlock.
I recognize the Department has had to stand up this
ambitious new program in record time, hammering out agreements
with States and freight railroads, with so many questions to be
answered and problems resolved. I believe the Federal Railroad
Administration is to be commended for its efforts. And yet, I'm
concerned these efforts will be for naught, and the funding at
risk, unless the Department produces a detailed and
comprehensive plan that answers basic questions about the
program like, Where does it make the most sense to build high-
speed rail? What will it cost to build? And what will it cost
to operate? I will continue to fight for high-speed rail, but
it is now time for the program to produce a compelling and
rigorous plan to justify that support and future funding.
Separate from high-speed rail, there are many other issue
areas where the Department has been pushing for innovation. The
Department continues to forge ahead on NextGen, a long-term
effort to modernize our air traffic control system. Last year,
it took recommendations from an industry task force, refocusing
some of its programs, like Performance-Based Navigation. This
past year, the Department has also worked hard to overcome
challenges with En Route Automation Modernization.
In the area of highway safety, the Department has led a
very public campaign to address distracted driving. This past
week, Secretary LaHood announced a partnership with Consumer
Reports aimed at getting young people to put down their phones
while they're behind the wheel. That is an effort that will
save lives.
At this hearing, as we continue our work on the budget for
fiscal year 2012, I look forward to hearing more about the
Department's work in these and other areas, and appreciate your
being here again today, Mr. Secretary.
PREPARED STATEMENTS
Also, Senator Kirk regrets that he couldn't be present, but
he has submitted a statement for the record.
[The statements follow:]
Prepared Statement of Senator Patty Murray
I want to welcome Secretary Ray LaHood back before our subcommittee
to discuss his Department's budget request and our Nation's
transportation policy. Thank you for being here today.
fiscal year 2011 and the house's year-long continuing resolution
The subject of this hearing is the Department of Transportation
(DOT) budget for fiscal year 2012.
Yet even as we sit here today--nearly halfway through the fiscal
year--the Federal Government still lacks a final budget for fiscal year
2011.
The Congress continues to debate that budget as millions of
families and communities across the country wait anxiously to learn the
fate of programs they depend upon.
And this debate is critical. We need to tackle the deficit and make
sure our children and grandchildren aren't forced to bear the burden of
overwhelming debt.
Earlier this week, the Senate voted on two bills--one from House
Republicans, and the other a Senate Democratic alternative--to fund
Federal agencies through the end of fiscal year 2011.
The House proposal was a highly politicized, slash-and-burn budget
that would have eliminated the high-speed rail and Transportation
Investment Generating Economic Recovery (TIGER) grants programs, and
made deep cuts to transit, Amtrak, and aviation spending. In short, it
was a bill that would have cost hundreds of thousands of jobs and
eliminated investments the nation will need to compete in the future.
Transportation is central to so much of the way our lives are
organized. And there is overwhelming evidence that greater investment
is needed in communities across the country--whether it be replacing
crumbling bridges and tunnels, or building new roads and transit lines
to support economic growth and competitiveness, and ease congestion.
The DOT budget has a real impact on real people.
For example, the House Republican budget would eliminate funding
for the highly competitive TIGER grant program, a program that has
become a showcase for innovation in both rural and urban communities.
The House proposal goes so far as to eliminate TIGER grants that were
awarded to 75 communities last year--the 75 most promising projects out
of a field of more than 1,000 applicants.
One of the 75 projects is a project in my home State that typifies
what these grants mean to all of our States. In south Seattle there is
a community that is hanging on by a thread. The main access road to
commerce goes through a bridge that--like infrastructure in all of our
States--was crumbling and had to be closed.
I have spoken to the small business owners and residents of this
community who tell me the bridge is their lifeline. Last year, the
South Park Bridge won a TIGER grant to help rebuild the bridge. That
bridge today is creating jobs and aiding the recovery of an entire
community, and will be a foundation for that community to thrive on for
generations to come.
But the funding for this project and many other like it was left on
the cutting-room floor by House Republicans in an effort to meet an
arbitrary bottom-line.
That's wrong. And it's just one example from an extreme plan that
focuses on short-term and shortsighted cuts, while neglecting a long-
term plan for responsible deficit reduction that supports our economic
recovery.
By comparison, the Senate Democratic bill protects these
investments, choosing instead to end programs that have served their
purpose or are no longer needed. Our alternative makes responsible and
practical budget cuts that will allow us to continue out-innovating,
out-educating, and out-building our competitors.
As you know, neither bill was able to garner enough votes to win
passage. A compromise is still needed, one where both sides come to the
table to work together on a long-term solution that invests in our
country's future. And as we work to cut spending, we need to make sure
that we aren't doing anything to threaten our economic recovery or
cause even more workers to lose their jobs.
So as we look at the fiscal year 2012 budget, I will be taking the
responsible approach. I will be analyzing how taxpayer dollars can be
invested most effectively to:
--Continue our economic recovery;
--Improve our economic competitiveness;
--Strengthen our communities;
--Ensure safety;
--Foster innovation; and
--Manage our Federal resources efficiently.
THE DEPARTMENT'S BUDGET PROPOSAL AND SAFETEA-LU
The investments we make in transportation and in our national
infrastructure are such an important part of supporting our economy,
rebuilding our communities, and improving safety.
And the need to invest in our transportation infrastructure is
huge. Many of us have already seen the Report Card for America's
Infrastructure put together by the American Society of Civil Engineers.
Their overall grade for our Nation's infrastructure is a D, and their
grade for roads is even more depressing--a D-. Our Nation's rail
network earned a paltry C-, and transit earned nothing more than a D.
The President's budget request tries to address this problem,
asking for a 69-percent increase in funding for DOT. The request
includes an immediate investment of $50 billion to boost the economy,
as well as a 6-year reauthorization proposal for surface
transportation. Clearly, this proposal offers a grand vision for our
transportation programs.
I applaud the administration's effort to promote investment in our
Nation's infrastructure, but I also think we need more than grand
ideas. We need to discuss real strategies that will make them happen.
And unfortunately, this budget proposal does not offer us real
solutions for the challenges we face today.
When we talk about paying for transportation, the biggest challenge
we face is the solvency of the Highway Trust Fund (HTF). Even under
current funding levels--without paying for the additional $50 billion
in stimulus funding requested by the administration--HTF will be
bankrupt by the end of fiscal year 2012 or the beginning of 2013.
The administration has offered to work with the Congress to address
this problem, but when it comes to discussing specific solutions, the
President has:
--Opposed an increase to the gas tax;
--Opposed the development of a new revenue system based on miles
traveled; and
--Still not offered any proposals for making sure that the trust fund
has enough revenues to pay for its budget request.
I am also concerned about what happens to transportation programs
in fiscal year 2012. A long-term solution for HTF will not be able to
solve our immediate crisis. The Congress has already transferred more
than $34 billion from the General Fund to HTF. I will be interested to
hear from the Secretary if he thinks another transfer is necessary to
get through the year, or if he can offer another way to avert a crisis.
At a time when the House is focusing on slash-and-burn politics, we
need to see some realistic alternatives being discussed. I am
disappointed that the budget request does not offer that.
I'm also troubled by the administration's proposal to reclassify
transportation programs as purely mandatory funding. This proposal
helps the administration meet its goal of freezing growth in the
discretionary budget, but it also means that the administration has
failed to request about $7 billion for the rail and public transit
programs that have traditionally been funded with discretionary
resources. This is a large hole for the Congress to fill from the
outset.
More importantly, the proposal leaves the Department without annual
oversight and input from the Appropriations Committee. This
subcommittee has played an important role in supporting our Nation's
infrastructure, providing additional resources for transit, roads, and
bridges from the trust fund as well as the General Fund of the
Department of the Treasury. In fact, the TIGER program was created by
this subcommittee.
This subcommittee has been particularly engaged in supporting rail
transportation, providing additional funding for the high-speed rail
grants, and ensuring that the Department had the resources it needs to
administer the program.
HIGH-SPEED RAIL
As concerned as I am about the future of the surface transportation
programs, I believe the threats facing the President's high-speed rail
initiative are potentially even greater.
I believe in high-speed rail. I think it has the ability to spur
innovation and economic growth, tying communities together in ways that
roads and airports don't today. Unlike most of Europe, we are still a
young and growing Nation. Our population is projected to reach 420
million by mid-century, almost 140 million more than in 2000. If you
think travel on our roads and at our airports is crowded today, just
wait. And building more and wider roads won't be enough.
High-speed rail, like the FAA's Next Generation Air Transportation
System (NextGen), is one of the solutions we will need if we are to
avoid paralyzing gridlock.
I recognize the Department has had to stand up this ambitious new
program in record time, hammering out agreements with States and
freight railroads, with so many questions to be answered and problems
resolved. I believe the Federal Railroad Administration is to be
commended for its efforts.
And yet, I am concerned these efforts will be for naught, and the
funding at risk, until the Department produces a detailed and
comprehensive plan that answers basic questions about the program,
like:
--Where does it make the most sense to build high-speed rail?
--What will it cost to build?
--And what will it cost to operate?
I will continue to fight for high-speed rail, but it is now time
for the program to produce a compelling and rigorous plan to justify
that support--and future funding.
OTHER ISSUES
Separate from high-speed rail, there are many other issues areas
where the Department has been pushing for innovation.
The Department continues to forge ahead on NextGen, a long-term
effort to modernize our air traffic control system. Last year, it took
recommendations from an industry task force, refocusing some of its
programs like Performance-Based Navigation. This past year, the
Department has also worked hard to overcome challenges with the En
Route Automation Modernization program.
In the area of highway safety, the Department has led a very public
campaign to address distracted driving. This past week, Secretary
LaHood announced a partnership with Consumer Reports aimed at getting
young people to put down their phones while they are behind the wheel,
an effort that will save lives.
At this hearing, and as we continue our work on the budget for
fiscal year 2012, I look forward to hearing more about the Department's
work in these areas.
______
Prepared Statement of Senator Mark Kirk
Thank you Chairwoman Murray and Ranking Member Collins. I also
would like to welcome Secretary LaHood, my former colleague for many
years.
Madam Chairwoman, as you know the focus of the Congress and the
American people is on our unsustainable spending. During the first 9
weeks of 2011, Federal debt increased at an average of $35.6 billion
per week. At the end of 2010, total public debt outstanding stood at
$13.9 trillion; and the end of February, it had increased to $14.2
trillion--a $300 billion increase. The Department of the Treasury has
auctioned nearly $1.1 trillion since the beginning of the year. That is
an average of $121.5 billion per week.
Recently the Senate was presented with two long-term continuing
resolutions funding the Government, and rejected both. It's my hope
that we can come together to examine ways we can rein in spending and
restore confidence in the dollar.
This will not come easily, and will require shared sacrifice at
every level of the Federal Government.
Now I fully recognize the economic impact of investing in
infrastructure and one of the key reasons why I voted against the
stimulus was that it focused too many resources on social spending in
comparison to investments made in infrastructure. But I worry that the
fiscal year 2012 request, while bold, is light on details regarding how
we will fund a 6-year, $556 billion surface transportation
reauthorization. Mr. Secretary, I know you have told the Commerce
Committee that DOT is currently working with the Office of Management
and Budget on that very issue, and I look forward to seeing the result.
I'll have a few other issues to highlight during questions, but
good to see you on this side of the Capitol, Mr. Secretary--I look
forward to working with you in the Senate. Thank you, Madam Chairwoman.
Senator Murray. With that, I will recognize my partner and
ranking member, Senator Collins, for any opening remarks she
would like to make.
STATEMENT OF SENATOR SUSAN COLLINS
Senator Collins. Thank you, Chairman Murray.
First of all, welcome, Secretary LaHood. I appreciate your
leadership at DOT, and as the new ranking member of this
subcommittee, I look forward to working with you, the chairman,
and all of our colleagues to promote fiscally responsible
investments in our Nation's aging transportation
infrastructure.
As Senator Murray has pointed out, the transportation
system is truly the lifeline for our country and our economy.
Improving the efficiency and reliability of our Nation's
transportation system is vital to the movement of people,
freight, and goods. Yet, every single State has a backlog of
vital transportation projects.
The administration is proposing a $129 billion budget for
DOT, a 66-percent increase more than the fiscal year 2010
enacted level. Included in this budget request is a 6-year,
$556 billion surface transportation reauthorization, but
without a revenue mechanism to pay for it. HTF can only support
approximately a $240 billion program over the next 6 years. An
additional $167 billion in new revenues would have to be
established to support a bill of that magnitude, but the
administration has yet to specify the source of these revenues,
as the chairman has pointed out.
I also want to associate myself with the comments of
Senator Murray about the TIGER program. Capital investments in
transportation projects through the TIGER program have been an
important tool in helping to save and create jobs at a time
when so many families are struggling. And the TIGER program has
resulted in needed, lasting assets for communities. I, too, am
disappointed that the House of Representatives passed a budget
bill that included language to rescind funding for this
important program. It is fundamentally unfair for the Federal
Government to award grants to States, only then to take them
away. I'm going to continue working with the chairman, and
others who feel that way, to ensure that the final version of
the continuing resolution, or appropriations bill, does not
include that language.
I worked closely with the Secretary and appreciate his
leadership to ensure that the necessary paperwork was concluded
at both the State and Federal level for the Aroostook County
Rail Preservation Project. But, I remain concerned about the
fate of the funding for the Memorial Bridge replacement
project. That is a major bridge that connects New Hampshire and
Maine. It has been strongly supported by the delegations of
both States. And replacing the Memorial Bridge is an important
infrastructure project that is essential to the flow of goods,
services, and people between Maine and New Hampshire, and for
keeping and attracting new jobs to both States. Its funding is
now in jeopardy because of the House language.
Many smaller-scale transportation projects also help to
build infrastructure and create jobs in our local communities.
For example, in Maine's capital city of Augusta, a new regional
hospital is being constructed, just yards from Interstate 95
(I-95). There is, however, no convenient way to exit the
interstate and arrive at the new hospital. The hospital, the
State, and the local community of Augusta have all pledged
funding for the project. This is a perfect example of a
partnership project where everyone from the private sector, the
capital city of Augusta, and the State are kicking in funds to
make the improved transportation a reality. But they can't do
it alone. They need the Federal Government to complete the
piece of the puzzle. We need to ensure that funding is
available for smaller communities and rural communities where
there is local support and committed funding for meeting these
needs, as there is in this example.
Not only do we need to continue our commitment to making
investments in infrastructure, but also we must continue to
improve highway safety. The chairman mentioned and commended
the Secretary for his initiatives on distracted drivers. I know
the Department has also done a great deal to look at the Toyota
case and other issues involving questions that have arisen
about vehicle safety.
The States of Maine and Vermont recently participated in a
year-long pilot project that I authored that allowed trucks
weighing up to 100,000 pounds to travel on those States'
Federal interstates. Senator Leahy joined me in this effort to
help provide a level playing field for our States, and allow
heavy trucks to use our most modern, safe, and efficient
highways. In 2010, as a result of our pilot project, people
throughout our two States saw their roads less congested, our
downtowns and secondary roads safer, our air cleaner, and our
businesses more competitive, since the surrounding States
already have these exemptions, as do the two provinces in
Canada that border Maine. And that is why I'm committed to
fighting to make this pilot project, which unfortunately
expired in December, permanent.
I would note that all the public safety groups in Maine,
including the Maine Association of Police, the Maine State
Police, the Maine State Troopers Association, the Maine
Department of Public Safety, and the Maine Chiefs of Police
strongly support a permanent extension of the pilot project.
A recent study by the Maine State Police Commercial Vehicle
Enforcement Division found fewer accidents involving trucks
during the time that the pilot project was in effect. Countless
Maine business owners have told me how this change would
improve their competitiveness. For example, under the pilot
project, Lincoln Paper and Tissue, a manufacturer in Lincoln,
Maine, was able to save 1.1 million billable truck miles, a 28-
percent decrease from the prior year. These savings are the
equivalent of the company being 220 miles closer to its primary
market. That benefits not only the small business, but also our
Nation, as we seek to reduce overall fuel consumption and
reduce carbon emissions.
[The information follows:]
The people of my State are very unhappy that the heaviest
trucks are once again being forced onto secondary roads and
into downtowns, when they belong on the interstates.
PREPARED STATEMENT
I look forward to working with you, Madam Chairman, as well
as Secretary LaHood, as we consider this issue and the
Department's overall fiscal year 2012 budget request.
Thank you.
[The statement follows:]
Prepared Statement of Senator Susan Collins
Thank you, Chairman Murray. Welcome, Secretary LaHood. I appreciate
your leadership at the Department of Transportation (DOT) and look
forward to working together to promote fiscally responsible investments
in our Nation's aging transportation infrastructure.
The transportation system is the lifeline for our country and our
economy. Improving the efficiency and reliability of the Nation's
transportation system is vital to the movement of our freight and
goods, yet every State has a backlog of vital transportation needs.
The administration is proposing a $129 billion budget for DOT, a
66-percent increase more than the fiscal year 2010 enacted level.
Included in this budget request is a 6-year, $556 billion surface
transportation reauthorization, but without a revenue mechanism to pay
for it. The Highway Trust Fund can only support a $240 billion program
over the next 6 years. An additional $167 billion in new revenues would
have to be established to support a bill of this magnitude, but the
administration has yet to specify the source of these revenues.
Capital investments in transportation projects through the
Transportation Investment Generating Economic Recovery (TIGER) program
have been an important tool in helping to save and create jobs that so
many families need right now. I am disappointed that the House of
Representatives passed a bill that included language to rescind funding
for this important program. As a result of this language, the State of
Maine was at risk of losing funding for two critical projects that were
awarded last October--the Aroostook Rail Preservation project and the
Memorial Bridge Replacement project. It is fundamentally unfair for the
Federal Government to award grants to States only to have them taken
away.
I worked closely with Secretary LaHood and appreciate his
leadership to ensure the necessary paperwork was concluded at both the
State and Federal level for the Aroostook Rail Preservation project. I
remain concerned about the fate of the funding for the Memorial Bridge
replacement project. Replacing the Memorial Bridge is an important
infrastructure project that is essential to the flow of goods,
services, and people between Maine and New Hampshire and for keeping
and attracting new jobs to our States.
Many smaller-scale transportation projects also help build
infrastructure and create jobs in our local communities. For example,
in Maine's capital city of Augusta, a new regional hospital is being
constructed just yards from Interstate 95 (I-95). There is, however, no
convenient way to exit the interstate and arrive at the new hospital.
The hospital, the State, and the local community have all pledged
funding for this project. We should ensure funding is available for
smaller and rural communities where there is local support and
committed funding for these needs.
Not only do we need to continue our commitment to making
investments in our infrastructure, but also we must continue to improve
highway safety. The States of Maine and Vermont recently participated
in a year-long pilot project that allowed trucks weighing up to 100,000
pounds to travel on their Federal interstates. Senator Leahy joined me
in this effort to help provide a level playing field for our States and
allow heavy trucks to use our most modern, safe, and efficient
highways.
In 2010, as a result of this pilot project, people throughout our
State saw their roads less congested, our downtowns and secondary roads
safer, our air cleaner, and our businesses more competitive. That is
why I am committed to fighting to make this pilot program, which
expired in December, permanent.
Let me give a specific example of these results. On a trip from
Hampden to Houlton, Maine, the benefits are very clear. A truck
traveling on I-95 rather than on State Route 2, which runs nearly
parallel to I-95, avoids more than 270 intersections, nine school
crossings, 30 traffic lights, and 86 crosswalks. In addition, a driver
also saves more than $30 on fuel. Given the rising cost of diesel, it
is even higher than that now. Additionally, 50 minutes is saved by
traveling on I-95 rather than on the secondary road of Route 2.
Public safety groups in Maine, including the Maine Association of
Police, the Maine State Police, the Maine State Troopers Association,
the Maine Department of Public Safety, and the Maine Chiefs of Police
all support a permanent extension of the pilot project. Bangor's Chief
of Police, Ron Gastia, recently noted that, ``I, along with chiefs
across Maine, recognize that trucks of this size do not belong on
Maine's city streets and secondary roads.''
A recent study by the Maine State Police Commercial Vehicle
Enforcement Division reported that in 2009, before the pilot came into
effect, 139 accidents involving six-axle trucks occurred in Maine. In
2010, the year the pilot was in effect, the number of accidents fell to
125. That's 14 fewer accidents as a result of allowing these trucks to
operate on all of Maine's interstates.
Countless Maine small business owners have told me how this change
would improve their competitiveness. For example, under the pilot
project, Lincoln Paper and Tissue, a paper and tissue manufacturer in
Lincoln, Maine, was able to save 1.1 million billable truck miles, a
28-percent decrease from the prior year. These savings are the
equivalent of the company being 220 miles closer to its primary market.
That benefits not only this small business but also our Nation as we
seek to reduce our overall fuel consumption and reduce carbon
emissions.
We need to make the pilot project permanent. The people of my State
are unhappy that the heaviest trucks are once again forced onto
secondary roads and into downtowns when they belong on the interstates.
I am looking forward to working with you Chairman Murray as well as
Secretary LaHood as we consider DOT's fiscal year 2012 budget request.
Senator Murray. Thank you, Senator Collins.
We'll now turn to our members for any opening statements
they have, and then to you, Mr. Secretary.
Senator Pryor.
Senator Pryor. I don't have anything.
Senator Murray. Okay.
Senator Coats.
Senator Coats. No, I'm fine.
Senator Murray. Senator Blunt.
STATEMENT OF SENATOR ROY BLUNT
Senator Blunt. Madam Chairman, I'd just like to say, I'm
pleased to see my good friend Secretary LaHood here, and know
he's got a big job. And after those two opening statements, it
sounds even bigger to me.
So, we look forward to working with you. Transportation is
clearly one of the critical keys to our ability to compete and
create jobs and opportunity. And Mr. Secretary, I'm glad you're
here today, and look forward to working with you through this
budget process that we're beginning today for next year. Too
bad that we're still focused on last year's budget process, but
maybe we'll get into a pattern here that actually makes sense
to the American people and to the people doing the kinds of
jobs you're doing.
Senator Murray. Thank you very much.
Mr. Secretary, we will turn to you for your opening
statement.
SUMMARY STATEMENT OF HON. RAY LAHOOD
Secretary LaHood. Thank you, Chairman Murray, and Ranking
Member Collins, and to the other Senators who are here, for the
opportunity to discuss President Obama's fiscal year 2012
budget request for DOT.
Just a few weeks ago, President Obama delivered a powerful
message in his State of the Union Address. He said that, for
Americans to win the future, our citizens and companies need
the safest, fastest, most reliable ways to move goods and
information. He reminded us that if we build it, they will
come. If we want businesses to open shop and hire our families,
friends, and neighbors, we have to invest in our roadways,
railways, and runways. We have to invest in 21st-century buses,
streetcars, and transit systems, and we have to invest in next-
generation technology for our skies, and in sidewalks and bike
paths that make our streets more livable. All of this is
included in the President's $129 billion fiscal year 2012
budget for DOT, designed as the first installment of a bold 6-
year, $556 billion reauthorization proposal.
To make room for these essential investments, President
Obama's fiscal year 2012 budget proposes the lowest relative
level of domestic spending since President Eisenhower was in
office six decades ago. That was 10 administrations ago, if
you're counting.
The simple fact is that we have to cut and consolidate
things that aren't growing the economy, creating jobs, or
making it easier to do business, in order to pay for the things
that are. So, at DOT, President Obama's budget slashes red
tape. It consolidates more than 50 programs, and it includes
reforms that will accelerate project delivery and empower local
communities.
Of course, our major objective is to make investments in
tomorrow that expand economic opportunity today, to dream big
and to build big. That's why this budget keeps us on track
toward a national high-speed rail system with an $8 billion
investment in 2012 and a $53 billion investment over the next 6
years. It increases resources for highway and bridge
improvements by 48 percent. It increases funding for
affordable, efficient, and sustainable bus, streetcar, and
transit systems by 126 percent. It includes $50 billion up
front to keep our recovery moving in the short term, and a $30
billion National Infrastructure Bank that will finance major
projects of national regional significance over the long run.
At the same time, safety is, and always will be, our top
priority. President Obama's budget renews our commitment to
prevent traffic crashes with resources for our ongoing campaign
against distracted driving, drunk driving, and to promote
seatbelt use. The President's proposal requests new authority
for the Federal Transit Administration to ensure the safety of
rail transit riders across America, and it gives the Federal
Motor Carrier Safety Administration stronger capacity to keep
commercial traffic safe.
Finally, we're dedicated to doing all of this without
passing on another dime of debt to our children or
grandchildren. For the first time, transportation spending will
be subject to pay-go provisions that ensure the dollars we give
out do not exceed the dollars coming in.
So, these are just a few components of the President's
plan. They reflect a much larger point: America's
transportation system is at a crossroads. Our choice isn't
between policies on the left or policies on the right. Our
choice is whether our economic recovery rolls forward or falls
backward. It's up to us whether we lay a new foundation for
economic growth, competitiveness, and opportunity, or whether
we settle for a status quo that leaves America's next
generation of entrepreneurs, our children and grandchildren,
with clogged arteries of commerce.
PREPARED STATEMENT
It's up to us whether we do big things or whether we do
nothing. If we choose wisely, our legacy can be an economy on
the move and a future that America is prepared to win.
I'll be happy to answer questions.
Thank you.
[The statement follows:]
Prepared Statement of Hon. Ray LaHood
Chairman Murray, Ranking Member Collins, and members of the
subcommittee, thank you for the opportunity to appear before you today
to discuss the administration's fiscal year 2012 budget request for the
Department of Transportation (DOT). The President is requesting $129
billion for Transportation in fiscal year 2012. This includes the
first-year of a bold new 6-year $556 billion reauthorization proposal
that will transform the way we manage surface transportation for the
future.
America is at a transportation crossroads. To compete for the jobs
and industries of the future, we must out-innovate and out-build the
rest of the world. That is why President Obama called on the Nation to
repair our existing roadways, bridges, railways, and runways and to
build new transportation systems--including a national high-speed
intercity rail network--which will safely and efficiently move people
and goods. The administration's Surface Transportation Reauthorization
proposal is designed to accomplish precisely this, and is the
centerpiece of the President's fiscal year 2012 budget.
It proposes four broad goals:
--building for the future;
--spurring innovation;
--ensuring safety; and
--reforming Government and exercising responsibility.
The fiscal year 2012 proposal includes a $50 billion ``up-front''
economic boost that is designed to jump-start job creation while laying
the foundation for future prosperity. This initial funding would
finance improvements to the Nation's highway, rail, transit, and
aviation systems.
BUILDING FOR THE FUTURE
America's aging roads, bridges, and transit systems must be
addressed. For too long we have put off the improvements needed to keep
pace with today's transportation needs. By 2050, the United States will
be home to 100 million additional people--the equivalent of another
California, Texas, New York, and Florida. More than 80 percent of them
will live in urban areas. Concerns about the need for livable
communities will increase as communities tackle the need for
transportation choices and access to transportation services. If we
settle for the status quo, our next generation of entrepreneurs will
find America's arteries of commerce impassably clogged and our families
and neighbors will fight paralyzing congestion. So the administration's
proposal addresses this challenge in three ways:
--Creating a National High-Speed Rail Network.--First, the proposal
provides $53 billion over 6 years to continue construction of a
national high-speed rail network. It will place high-speed rail
on equal footing with other surface transportation programs;
include funding for both Amtrak and new ``core express,''
``regional,'' and ``emerging'' corridors; and keep the country
on track toward achieving a goal of providing 80 percent of
Americans with access to an intercity passenger rail network,
featuring high-speed rail within 25 years.
--Rebuilding America's Roads and Bridges.--Second, the
administration's proposal will provide a 48-percent funding
increase--to $336 billion over 6 years for road and bridge
improvements and construction. A key element expands the
current National Highway System to include an additional
220,000 miles of critical arterials. It will also simplify the
highway program structure, accelerate project delivery to
realize the benefits of highway and bridge investments for the
public sooner, and underscore the importance of maintaining
existing highway infrastructure in good condition. These
investments and reforms will modernize our highway system while
creating much-needed jobs.
--Investing in Accessible, Affordable Transit Options.--Third, the
proposal will provide a 128-percent increase in funding--to
$119 billion over 6 years--for affordable, efficient, and
sustainable transit options. It will prioritize projects that
rebuild and rehabilitate existing transit systems, including an
important new transit safety program, and allow transit
authorities (in urbanized areas of 200,000 or more in
population) to temporarily use formula funds to cover operating
costs.
SPURRING INNOVATION
The administration's Surface Transportation Authorization proposal
acknowledges the important role that innovation and modern business
tools play in putting our transportation dollars to work wisely. We can
no longer afford to continue operating our systems the same way we did
50 years ago, with outdated processes and financial tools that were
made for yesterday's economy. Our proposal and the President's fiscal
year 2012 request responds to this challenge in several ways.
It establishes a National Infrastructure Bank (NIB) to finance
projects of national or regional significance. By working with credit
markets and private-sector investors, the NIB will leverage limited
resources to achieve maximum return on Federal transportation dollars.
The NIB will initially receive $30 billion over 6 years, will reside
within DOT, and will be managed by an executive director with a board
of officials drawn from other Federal agencies.
Recognizing that competition often drives innovation, the
administration's proposal and the President's fiscal year 2012 budget
also includes a $32 billion competitive grant program called the
Transportation Leadership Awards. This program's goal is to reward
States and local governments that demonstrate transformational policy
solutions. Examples include the use of innovative multimodal planning
and funding methods, pricing and revenue options, land-use guidelines,
environmental stewardship measures, economic development strategies,
innovation of project delivery, and deployment of technology--just to
name a few possibilities.
These new and innovative tools will help us to better meet the
transportation needs of America's small towns and rural communities.
Increased highway funding will expand access to jobs, education, and
healthcare. Innovative policy solutions will ensure that people can
more easily connect with regional and local transit options--and from
one mode of transportation to another.
At the same time, our proposal will bolster State and metropolitan
planning; award funds to high-performing communities; and empower the
most capable communities and planning organizations to determine which
projects deserve funding.
Innovation must span beyond surface transportation. This is why the
President's budget request also includes $3.4 billion for aviation in
the $50 billion ``up-front'' investment. The budget requests $3.1
billion for airport improvements for runway construction and other
airport projects such as Runway Safety Area improvement projects as
well as noise mitigation projects. Modernizing our air traffic control
systems is critical if we are to meet the needs of the future. The
President's fiscal year 2012 budget addresses this by providing $1.24
billion for the Federal Aviation Administration's (FAA) efforts to
transition to the Next Generation (NextGen) of Air Traffic Control.
This funding will help the FAA move from a ground-based radar
surveillance system to a more accurate satellite-based surveillance
system--the backbone of a broader effort to reduce delays for
passengers and increase fuel efficiency for carriers.
ENSURING SAFETY
Keeping travelers on our transportation systems safe is my top
priority. That is why preventing roadway crashes continues to be a
major focus at DOT. The administration's Surface Transportation
Reauthorization proposal will provide $330 million for the ongoing
campaign against America's distracted driving epidemic. It will also
commit $7 billion to promote seatbelt use, get drunk drivers off the
road, and ensure that traffic fatality numbers continue falling from
current historic lows. In addition, it almost doubles the investment in
highway safety, providing $17.5 billion to Federal Highway
Administration (FHWA) safety programs. The Department is also taking a
fresh approach to interstate bus and truck safety. Compliance, Safety,
Accountability (CSA) is a new initiative that will improve safety and
use resources more efficiently. The administration's Surface
Transportation Reauthorization proposal will dedicate $4.9 billion to
the Federal Motor Carrier Safety Administration (FMCSA), and give DOT
new authority to set tougher safety performance goals for States.
Transit safety is another important priority. Our proposal will,
for the first time, entrust the Federal Transit Administration with the
authority to oversee rail transit safety across America. In light of
recent transit-related accidents, I believe this is critical to
ensuring the oversight and accountability our transit riders deserve.
Our safety focus must also include the transportation of hazardous
materials and our network of pipelines. The administration's Surface
Transportation Reauthorization proposal will fund the safety programs
of the Pipelines and Hazardous Materials Safety Administration (PHMSA)
and will enhance its authorities to close regulatory loopholes and
improve its safety oversight. The President's fiscal year 2012 budget
requests $221 million for PHMSA to help ensure that families,
communities, and the environment are unharmed by the transport of
chemicals and fuels on which our economy relies.
REFORMING GOVERNMENT AND EXERCISING RESPONSIBILITY
As we move forward together to plan for America's transportation
needs, we must also keep in mind the responsibility we all share for
using taxpayer dollars wisely. The administration's Surface
Transportation Reauthorization proposal will cut waste, inefficiency,
and bureaucracy so that projects can move forward quickly, while still
protecting public safety and the environment.
Our proposal consolidates and streamlines our current Highway and
Transit Programs in a major way. The current system of more than 55
separate highway programs will be folded into five new categories.
Similarly, six transit programs are merged into one ``state of good
repair'' program and one ``specialized transportation'' program. As a
result of these changes, we expect to shorten project delivery and
accelerate the deployment of new technologies.
The Administration's Surface Transportation Reauthorization
proposal also includes important reforms that change the way we manage
our transportation spending. Consistent with the recommendations of the
Fiscal Commission, for the first time, the budget proposes to subject
surface transportation spending to ``paygo'' provisions to make certain
that spending does not exceed dedicated revenue. This approach is
designed to ensure that our surface transportation program is paid for
fully without increasing the deficit. The proposal will also expand the
current Highway Trust Fund into a new Transportation Trust Fund with
four accounts--one for highways, one for transit, one for high-speed
passenger rail, and one for the NIB.
OTHER HIGHLIGHTS
The President's fiscal year 2012 request includes some other key
transportation priorities as well. These include the $18.7 billion in
total funds requested for FAA. FAA would receive $9.8 billion to fund
the operation, maintenance, communications, and logistical support of
the air traffic control and air navigation systems. An additional $3.1
billion would support FAA's Facilities and Equipment program to fund
FAA's capital projects. A total of $5.1 billion in fiscal year 2012
would fund the Airport Improvement Program when funding from the $50
billion ``up-front'' investment is included.
The President's request also includes $93 million for the U.S.
Merchant Marine Academy (USMMA). Of these funds, $29 million will be
used to support the next phase of the USMMA's Capital Asset Management
program and for renovations to selected barracks and the mess hall.
These improvements will help ensure that our cadets have the facilities
they need to support their education.
CONCLUSION
Thank you for the opportunity to appear before you to present the
President's fiscal year 2012 budget proposal for DOT and our Surface
Transportation Reauthorization proposal that will help transform
transportation programs over the next 6 years in ways that will benefit
all Americans for years to come. I look forward to working with the
Congress to ensure the success of this request.
I will be happy to respond to your questions.
H.R. 1
Senator Murray. Thank you very much, Mr. Secretary.
I will begin by asking you--well, actually, just let me
say, I'm really troubled by the harsh cuts that the House is
proposing to make in the transportation programs that are so
important. I talked a little bit in my opening statement about
high-speed rail and TIGER. There are deep cuts to transit and
FAA, and I think these are really shortsighted. This is less a
debate about taming the deficit, which we all agree we need to
be doing, but it really is a question of priorities and a
statement about what we are going to look like in the future.
And I wanted to ask you this morning, while you're here, do you
have an estimate for the number of jobs that would be lost as a
result of the cuts the House is proposing now to make in
transportation?
Secretary LaHood. I don't know the estimate of jobs as a
result of H.R. 1, but I will tell you that as a result of what
you all did, in providing DOT $48 billion in the stimulus
program, we were able to create 15,000 projects over 2 years,
and 65,000 jobs were created. So, if that's any indication--$48
billion, 15,000 projects, 65,000 jobs over 2 years, as a result
of the stimulus--a lot of jobs, a lot of projects that would
not have been created if the Congress had not passed on $48
billion, which we now have out the door and have put a lot of
Americans to work.
Senator Murray. And I would just have to add that those are
private contractors that get those jobs.
Secretary LaHood. That's correct.
Senator Murray. They're not government jobs. We give this
money to private contractors----
Secretary LaHood. That's correct. The money goes, in the
case of TIGER and the case of many of these other programs,
directly to the people that provide civilian jobs. A lot of
small businesses benefited; more importantly, a lot of
Americans benefited. Our friends and neighbors around the
country benefited in good-paying jobs, and America's
infrastructure was rebuilt.
Senator Murray. Yes.
Both Senator Collins and I mentioned concerns about the
TIGER grants that would be rescinded by the House budget
proposal. What are you hearing from other communities that were
awarded TIGER grants last year?
Secretary LaHood. I'm hearing from a lot of Members of
Congress, both Republicans and Democrats, who are very
concerned that we made a commitment. I appreciate what both you
and the ranking member have said about TIGER. These are
commitments that have been made. Senators and Congressmen are
asking me: ``Can you obligate the money so it can't be
rescinded?'' The answer is, even if the money is obligated, the
Congress can do whatever it wants. We made a commitment, to
people all over the country, for good projects--for freight
projects, for light rail, for highways, for bridges. These
projects were not earmarked. They weren't sweetheart deals or
boondoggles. These are projects that people out in the country
said needed to be done to put people to work. The TIGER program
is a jobs program. There are going to be a lot of people who
aren't going to go to work as a result if these monies are
rescinded. What I'm saying to every Senator, both Republican
and Democrat, and House Member is, I know you want your money
obligated. I just talked to a Senator on the way over here in
my vehicle, who was talking to me about his TIGER project. He
didn't realize that, even if it's obligated, there's still a
chance that you all could rescind it. That's not fair to the
people who thought they were going to get this money. It's not
fair to the people who thought they were going to have a job on
the other side of these projects.
This TIGER program is a jobs program. So, for all the talk
of all Members of Congress who want to put people to work, this
is the way to do it: Keep our commitments.
Senator Murray. In a competitive program, I would add.
Secretary LaHood. Absolutely. No earmarks. No sweetheart
deals. No boondoggles, they are all done the correct way.
You're not going to see any stories written about DOT giving
money out to somebody in any other way except in a competitive
fashion--that was competed in a way that reflects that these
are good projects. This program will create jobs.
STATUS OF THE HIGHWAY TRUST FUND
Senator Murray. Thank you very much for that.
Let me ask you about HTF. Keeping enough balances in HTF
has been an ongoing problem now for 3 years. And now we expect
HTF to again slip into bankruptcy by the end of fiscal year
2012. You've offered to work with us on a long-term solution,
and that work will be a vital part of developing a
reauthorization plan. I know that. But in the meantime, this
subcommittee needs to develop a budget for your Department for
2012. And a new revenue plan will not fix HTF quickly enough to
get us out of this immediate crisis.
Do you believe that another transfer from the General Fund
of the Department of the Treasury will be necessary to sustain
HTF through 2012?
Secretary LaHood. Our smart budget people, one of whom is
sitting next to me, Chris Bertram, who comes from this part of
the world--Chris worked in the Senate, and he's very smart on
this--our people believe that HTF has sufficient funds to stay
solvent through fiscal year 2012.
Senator Murray. You do.
Secretary LaHood. Yes.
Senator Murray. Okay. If that changes, we'd like to be
told----
Secretary LaHood. Absolutely.
Senator Murray [continuing]. As soon as possible. And we
will----
Secretary LaHood. You'll be the first to know.
Senator Murray [continuing]. Need your recommendation on
how we're going to deal with that.
Secretary LaHood. Absolutely.
Senator Murray. All right.
Senator Collins.
HOURS OF SERVICE RULE
Senator Collins. Thank you, Madam Chairman.
I'm surprised to hear the Secretary's last comment, but
pleased to hear it. We're still going to have a challenge of
the reauthorization, which was put in the budget, goes through,
because we're going to have to work to figure out how to fund
that, as well.
Mr. Secretary, one of the issues that I'm hearing the most
about is the Department's proposed change to the hours-of-
service rules for commercial truck drivers. And I've heard a
lot from truckers in my State who are opposed to the changes,
as well as from trucking businesses. But, yesterday I also met
with a State trooper who is head of the Commercial Vehicle
Division for the State of Maine, and he expressed opposition,
as well, and called the changes ``unenforceable.''
What is the status of those rules? And second, is the
administration working with stakeholders, with the trucking
association, and with law enforcement to try to take into
account some of the comments in opposition?
Secretary LaHood. We have a rule pending, Senator. I know
that what I'm going to say, you already know. This problem has
been kicked down the road for 10 years. So, I made a decision;
we're not going to kick it down the road anymore. We developed
a rule, in cooperation with our friends in the trucking
industry--and we have friends in the trucking industry--and
we've developed a rule. It's out there. People can comment on
it. I know that the truckers are not happy with this.
We believe that what we've developed is a very good safety
metric for making sure that drivers will drive safely, and do
it a certain number of hours. We believe what we've developed
is the safety metric that makes the most sense. We know people
don't agree with us, and that's why, when we do these rules, we
have lots of opportunities for people to comment.
We need to do something. A court has ruled that we need to
do something on this issue. We're not going to just sit back
and kick it down the road like others have done. We're not
going to do that. So, we've put it out there. Senators or House
Members may disagree with us, and the trucking companies, I
know, are going to be talking to you about it. My suggestion
is, look at our rule, see what you think about it, make a
comment about it, put it in the Federal Register, and then
we'll see where it takes us.
Senator Collins. It's good to know that all the comments,
I'm sure, will be fully evaluated.
Secretary LaHood. Absolutely. They will be. In the end,
we'll take that into consideration when we put the final rule
together.
MOTOR CARRIER WEIGHT RESTRICTIONS
Senator Collins. Let me turn to a second safety issue,
which I alluded to--more than alluded to--in my opening
statement. And I do this----
Secretary LaHood. We have multiple----
Senator Collins. I'm glad you've got----
Secretary LaHood [continuing]. Copies of this map.
Senator Collins. My favorite chart. And this is not only to
talk to the Secretary, who's probably tired of hearing from me
on this issue, but also to talk to my colleagues. So, I hope
the staff has passed out a copy to each of my colleagues.
[The information follows:]
This is a specific example of the results of the pilot
project that I referred to in my opening statement. And if you
take a trip from Hampden to Houlton, Maine, the benefits are
very clear, and they're illustrated on this chart.
A truck traveling on I-95 rather than Route 2, which runs
nearly parallel to I-95, avoids more than 270 intersections--
zero on I-95, obviously--270 intersections. It avoids nine
school crossings, 30 traffic lights, and 86 crosswalks. And
that's why our State safety officers, from the troopers to the
police chiefs, are so much in favor of making this pilot
project permanent. And it's why you've seen the accident rate
decline.
In addition--and this is so important at a time when diesel
prices are climbing through the roof--a driver saves more than
$30 on fuel. That's an old figure. I'm sure it's way more than
that now. Additionally, 50 minutes of driving time is saved by
traveling on I-95 rather than on the secondary route.
I want to express my appreciation to the administration for
endorsing making this pilot project permanent. I know it was
included in the budget that was sent up by the administration.
And I just hope that we can continue to work together to make
this a reality. If we can't get a permanent program, then
perhaps we could work on a 5-year extension, which would allow
even more data to be collected.
Secretary LaHood. Absolutely. I know this is a very serious
problem. We've had lots of discussions about this with you and
other people in your State. We will continue and are committed
to work with you on this.
Senator Collins. Thank you, Mr. Secretary.
Thank you.
Senator Murray. Thank you.
Senator Pryor.
Senator Pryor. Thank you, Madam Chair.
TOYOTA INVESTIGATION
Mr. Secretary, it's good to see you again.
Secretary LaHood. Thank you.
Senator Pryor. Thank you again for your willingness to
always be available and responsive on all of our needs and all
of our questions. So, thank you very much for that.
Let me start with the National Highway Traffic Safety
Administration (NHTSA), and let me compliment one of the folks
on your team: David Strickland. I think he's doing a good job
there. He----
Secretary LaHood. Thank you.
Senator Pryor [continuing]. Has his hands full with a lot
of different things, and I know you've loaded him up with lots
of work and lots of initiatives.
Secretary LaHood. You trained him well.
Senator Pryor. I'm glad to see that he's doing well there.
Let me ask, as a follow-up to the Toyota investigation that
has been going on over the last year or more, has that resulted
in any changes in the agency? And the reason I ask that is
because I know that one of the recommendations was that maybe
NHTSA and DOT didn't have enough engineers with real technical
expertise to evaluate some of the new software that's in
vehicles. They're not all mechanical anymore. It's largely done
by software now. Have there been lessons learned? And does your
budget reflect those lessons?
Secretary LaHood. As a result of the hearings last year,
Senator, we believe that, with respect to Toyota, the sticky
pedal and the floormat entrapment were the cause of that
terrible accident in California, and other accidents. It led us
to require that Toyota fix both of those issues. Every Member
of Congress, at the time, thought it was an electronics issue.
Our people didn't think that, but we engaged the National
Aeronautics and Space Administration (NASA) in this, and they
took a year to complete a study. They found the same thing we
found. It's not electronics.
We, in our budget, are proposing additional electrical
engineers. That's one of the things that the Congress pointed
out to us, and I think it was a deficiency. If you look in our
budget, we've requested additional expertise, particularly as
it relates to electrical engineers.
Senator Pryor. Right. Then the second part of my question
is: I noticed, in your budget, you've added about $19.8 million
more than the fiscal year 2010 levels for staffing at NHTSA.
And is that correct?
Secretary LaHood. Yes, it is.
Senator Pryor. Is that engineers and----
Secretary LaHood. Yes, sir. It's electrical engineers and
other engineers, and people with expertise that can really help
us do our job.
Senator Pryor. I don't have the numbers in front of me, but
do you have a number on the----
Secretary LaHood. The budget adds 119 new staff----
Senator Pryor. That's what I was going to ask.
Secretary LaHood [continuing]. In the vehicle safety area.
Senator Pryor. Okay.
Secretary LaHood. It's 119.
Senator Pryor. Okay, all right. I'd like to look at that in
more detail.
Secretary LaHood. Sure.
Senator Pryor. And I'll work with----
Secretary LaHood. Yes. I appreciate your interest in our
safety organization. The one thing that the NASA study proved
is that we do have very good people, that we do pay attention
to safety, and we did get it right when it came to Toyota.
SAFETY GRANTS
Senator Pryor. Right. I know you spent a lot of time with
it, and showed a lot of determination to get it right.
Let me ask about your safety grant programs. I understand
that you're discontinuing the $120-million-per-year section 406
Seatbelt Performance Safety Grant Program. And I guess I'm
wondering why you're----
Secretary LaHood. Yes, let me ask Chris Bertram----
Senator Pryor. Yes.
Secretary LaHood [continuing]. Just to address that, if you
don't mind.
Mr. Bertram. Sir, that was a program created in the last
highway reauthorization, and the point of the program was to
create incentives for States to change their laws. It was
always intended to be a temporary program, and a number of
States have changed their laws. It wasn't intended to be there
permanently, so we've taken that money and incorporated it into
other grant programs.
Senator Pryor. Okay. Other safety type programs?
Mr. Bertram. Yes, right.
CROSS-BORDER TRUCKING
Senator Pryor. Okay. I don't want to shortchange safety. I
know that we need to trim our budgets, and everybody agrees
that we're spending too much, but highway safety and
transportation safety is very critical.
Let me ask another question--and last time we saw each
other, I asked this question about the cross-border trucking
issue. And you made a very emphatic statement that they would
include electronic on-board----
Secretary LaHood. Yes, sir.
Senator Pryor [continuing]. Recorders (EOBRs).
Secretary LaHood. Yes, sir. Those will be included on every
truck. We need to have a metric to make sure we know how many
hours are driven, and that they're complying with the hours
that are in the agreement that we signed with Mexico.
Senator Pryor. Do you know if we're paying for those, or--
--
Secretary LaHood. We're paying for those.
Senator Pryor. Why are we paying for those and not the
Mexican trucking companies?
Secretary LaHood. In the negotiations, it became clear
that, if we were going to require these EOBRs, which--we
absolutely had to require them--I came up here and met with
more than 25 Senators when the program was suspended, and one
of the things that was made very clear to me was that we have
to know that safety metrics are in place, ones that will
measure the kind of safety that we want. We felt that EOBRs
were one of the top things that we had to do. It'll be in our
budget. In the negotiations, we made it clear, trucks coming
from Mexico have to use EOBRs. Mexico acceded to that request.
That's the reason we're paying for them.
Senator Pryor. I would like to reiterate something that you
and I said in our last setting--and this is really more for the
subcommittee's benefit--as we do this pilot project, I'm very
concerned about border corruption down along the United States-
Mexican border. And we've seen this. Senator Collins, on her
Committee, she's seen this through the Customs and Border
Patrol. And I hope that you will build in the safeguards and
protection to, as much as humanly possible, prevent the
corruption of your folks down along the border, because they're
having problems in other areas.
Secretary LaHood. We will certainly do that. I have been to
the border; I've talked to our people down there. The one thing
that I was so stunned by is the lack of good facilities that
they have to work in, the lack of facilities that they have
when they have to inspect trucks in the 120-degree weather that
exists down there in the summertime. We've made a commitment to
them to try and improve the facilities, and we need a
commitment from them that they will do everything by the book,
according to the law. We're going to pay attention to that.
Senator Pryor. Thank you.
Senator Murray. Senator Coats.
FISCAL YEAR 2012 BUDGET REQUEST
Senator Coats. Thank you, Madam Chairman.
Mr. Secretary, welcome. And----
Secretary LaHood. Thank you.
Senator Coats [continuing]. It's good to see a good former
colleague and----
Secretary LaHood. Yes, sir.
Senator Coats [continuing]. Midwestern bred-and-born-and-
raised Secretary here to--and I appreciate your straight talk--
--
Secretary LaHood. Thank you.
Senator Coats [continuing]. Calling it for what it is.
We served together in the House. You know how the Congress
operates. You're well aware of our current fiscal situation.
The reality is that, probably, we're not going to get to the
numbers the administration has proposed. And so, I guess the
question is, does the Department--have you looked at the
possibility of a plan B, in terms of how you would prioritize
the things that are put together in the President's budget?
And I would suggest a couple of points here in that regard.
We all know that we're focusing exclusively on about 15 percent
of the total budget. As result of that, the discretionary
spending is getting an inordinate amount of focus and
attention, and will be subject to a disproportionate share,
when you look at the whole budget, of the cuts that are taking
place.
Now, a number of people, including me and others, have been
increasingly calling for getting the whole pie on the table so
that we look at mandatory spending, which, as you know, is two-
thirds of the budget. I'm not asking you to answer this
particular question. But, if you have the opportunity to
discuss this at Cabinet level or with the President, we can't
accomplish this without the President's leadership. There are
an increasing number of Democrats and Republicans that are
basically saying, publicly, ``Look, we can't solve our deficit
problem if we don't look at the whole picture.'' And
discretionary spending is just simply going to dry up and go
away.
You've listed some high priorities here that we all have--
crumbling roads and bridges. We know this infrastructure,
particularly in the East and the Midwest, is old and needs a
lot of repair. So, I'm hoping, for one, that we're able to look
at the larger portion of our spending and take some of the
pressure off some of the necessary discretionary spending.
So in that regard, as I'm looking at the building for the
future, you list three specific areas: high-speed rail,
America's roads and bridges, and affordable transit operations
and options. Could you characterize how you might prioritize
those three, should you get a mark that's significantly below
what the budget calls for?
Secretary LaHood. You know, Senator, that DOT has a long,
long history of working with States on building roads and
bridges. That's what we know how to do. That's why we have a
state-of-the-art interstate system, thanks to the good people
out in the country who know how to build roads, and to our
partners in the States who have really been good partners with
us in providing the match money and making sure that the
contractors are doing what they're supposed to do. Roads and
bridges are very important.
Transit is very important. Look at Washington, DC. If we
didn't have the great Washington Metropolitan Area Transit
Authority system that we have here, the Metro system, nobody
would ever be able to get anywhere. This place would be like a
parking lot, and most people think it's a parking lot now.
So, transit is very important. And highways and bridges are
very important.
But, I want to say this: If we want to do what our
predecessors did for us, in thinking about the interstate
system, then we need to think about improving our
infrastructure. I have nine grandchildren, and I have four
grown children. Four of my grandchildren actually live in
Indianapolis, Senator. We need to think about the next
generation of transportation, and that's high-speed rail. If we
want to get more cars off the road, if we want to be able to do
what they've done in Europe and Asia by providing people with
good rail transportation, then we need to think about high-
speed rail. High-speed rail is a priority for this
administration. It's the President's signature transportation
program, because it's about the next generation of
transportation, the way that our predecessors thought about the
next generation, and it is why we have an interstate system.
We're going to be able to deal with the deficits and the
debt, and also have a good, strong transportation program of
roads, highways, bridges, transit, and high-speed rail.
Senator Coats. Yes, I'm----
Secretary LaHood. Those are our priorities.
Senator Coats. I would suggest that your statement, ``We're
going to be able to deal with the deficits and the debt'' and
the need for infrastructure and high-speed rail, and all this--
it seems to me there's a priority there. We're not going to be
able to do No. 2 unless we can do No. 1; No. 1 is facing us
right now. And the budget realities are that we just simply
can't do both at the same time. And I think every Department
is----essentially--every agency that has been before us so far,
and probably all those still to come--are going to say this is
the top priority.
I, just yesterday, dealt with Homeland Security. It's
pretty hard--they're all making their case. And we're doing it
at a time when the limitations on our going further into
deficit and further into debt have put us up against the wall.
That's why I suggested looking at the whole pie, including the
mandatory spending, as a way of dealing with No. 1, but also
understanding that, at the end of the day, given the realities
of the election in November, the makeup of the House of
Representatives, the change in public attitude toward what we
must do with our debt, it's going to cause all of us, whatever
Department we're talking about, to have to make some tough
decisions and to prioritize some of those. And that really was
the essence of my question.
Secretary LaHood. Sure.
HIGH-SPEED RAIL
Senator Coats. The other thing I want to just state here, I
guess, for the record--I'm not asking for a response on this--
when the President said, ``If they build it, they will come''--
well, you know, we allocate a portion of this money to--the
problem with building it, and even when it goes to high-speed
rail, the political system kind of rears its ugly head, and
every State and every locality and every Member representing
those States and localities says, ``I've got to get my fair
share.'' High-speed rail makes sense in some very dense
corridor areas. It doesn't make sense in the middle of America.
High-speed rail between Indianapolis and Fort Wayne would be a
waste of money, because you can get in the car and drive there
in 2 hours. The road is not crowded. High-speed rail on Senator
Collins' I-95 between--two towns I'm not aware of, but she's
not aware of a lot of towns in Indiana--Hampden, and what is
the other one?----
Senator Collins. Houlton.
Senator Coats [continuing]. Houlton--doesn't make any
sense. But as you know, politicians like to divide up the pie.
They don't want New Jersey and New York to get all of it,
because they're dense, and Indiana and Illinois not get its
fair share. And some of those may make financial sense, and
some not make financial sense.
The same with bike trails. I drive every day from Virginia
into the Capitol here, and there are bike trails along the way.
If I see one biker on those trails on my 30- to 45-minute trip
in here, or on the way home, I'm lucky. I see a few messengers
on the trails here, but DC closes down one of the lanes, which
clogs up Pennsylvania Avenue. Once in a while, you'll see a
messenger on one of those trails. But, no one would take their
life in their hands, No. 1; and No. 2, some of these things
just don't make sense. And particularly at a time of decreasing
funds available, let's make sure we prioritize the reality of
how people conduct their transportation.
So, that's my little spiel. You don't need to respond to
that. But I appreciate the opportunity to at least try to be as
straightforward with what I think as you have been. And I
appreciate your service----
Secretary LaHood. Thank you.
Senator Coats [continuing]. To the country.
Senator Murray. Thank you.
Senator Blunt.
PREPARED STATEMENT
Senator Blunt. Thank you, Madam Chairman. I do have a
statement for the record. I probably should have said that
earlier. And I'll submit that for the record.
[The statement follows:]
Prepared Statement of Senator Roy Blunt
Thank you Chairman Murray and Ranking Member Collins for holding
this hearing today. This hearing is a great opportunity to not only
examine the Department of Transportation (DOT) investment needs
throughout our system but also to develop a proper transportation
investment structure that fosters economic development and produces the
greatest return on all taxpayer dollars.
Additionally, I would like to thank Secretary LaHood. Your hard
work on the budget is greatly appreciated. I look forward to working
with you now and in the future to address our country's infrastructure
needs.
In Missouri and across the country, there is a growing concern with
the capacity of the transportation system. We are beginning to bust at
the seams, our vehicle miles traveled remain high, congestion rates at
our airport and on our rails are up. Congestion is a real problem and
it is taking an economic toll at a time when we simply cannot afford
more burdens on our system.
Moving forward, we will look to invest in good roads, but we cannot
rely on roads alone. We must begin to look toward rail and river
transport as an efficient way to move goods and ease choke points. We
must start to think in a comprehensive manner that stresses the
flexibility rather than rigidity of several separate ones.
One of my major concerns is the President's investment of $53
billion over the next 6 years in high-speed rail. This call comes at a
time when our current infrastructure is crumbling around us. It is easy
to get caught up in the idea of high-speed rail, but the facts make
high-speed rail difficult to swallow.
High-speed rail cost estimates are skyrocketing, the estimated cost
of the California line jumped nearly 25 percent in 1 year. State and
local governments are worried about the cost burdens of operating
expenses and the inevitable budget overruns. Making such a large
investment at a time when we face a very difficult fiscal situation
especially when the benefits are still in question and DOT still hasn't
produced a national rail plan just doesn't make much sense.
The President's DOT budget also takes a Washington knows best
mentality. With the increase funding for programs like the National
Infrastructure Bank (NIB), the livability program, and grant programs
similar to Transportation Investment Generating Economic Recovery
(TIGER), the message being sent to our States, counties, and cities is
that Washington will set the priorities.
Handing more money and empowering unelected unaccountable
bureaucrats isn't going to solve our transportation problems. In fact,
many are still scratching our heads on the process and criteria the DOT
used in awarding previous TIGER and High-Speed Rail grants.
Perhaps the most concerning part of this budget is the new
Transportation Trust Fund. Another idea that sounds great but the math
just doesn't add up. You are basically taking the current insolvent
unsustainable Highway Trust Fund and adding the cost of the NIB and the
expensive, subsidy-laden rail program . . . two programs that will not
generate any revenue for the trust fund.
--According to the latest figures from the Congressional Budget
Office (CBO), trust fund receipts will amount to $36.8 billion
in fiscal year 2012, or about 7 percent less than was spent in
fiscal year 2010 ($39.4 billion),
--During the next 6 years CBO projects tax receipts of $230 billion
which now the administration's vision will be responsible for
funding rail, transit, highways, and a NIB. Yet the
administration is calling for a $550 billion reauthorization
bill. Needless to say something is missing.
There has been a lot talk about how this DOT budget is a bold
vision. But bold visions are the easy part. Our country's
infrastructure is in need of a bold detailed plan. We have difficult
decisions before us, but understanding both the challenges ahead and
establishing a clear path forward can make those decisions more
informed and more effective.
Again, I thank the chair, ranking member, and the Secretary for
their hard work. I look forward to hearing your perspectives and
working together to move us forward in solving our economic and
infrastructure needs.
HIGH-SPEED RAIL FUNDING
Senator Blunt. Mr. Secretary, on the new Transportation
Trust Fund--I'm going to ask a couple questions about that--I
think one of the things that the Federal Government has done
over the last 60 years that has been the least complained about
and most supported has been HTF, because people really did
believe people using the system were paying for the system. And
the idea of expanding that fund creates some concern to me. I
mean, currently, rail is funded by the general transportation
appropriations. Will adding the rail program to the new trust
fund erode the protection that the drivers on highways and
people that buy gasoline now think they have in that system?
And what's your view of that?
Secretary LaHood. We're just getting started on high-speed
rail. The initial downpayment, more than $10 billion, which
we've put out around the country--$8 billion, was included in
the stimulus bill, and another $2.5 billion was provided by
people around here, on the Appropriations Committee, because
they see the value of high-speed rail. We need to develop a----
Senator Blunt. Where did you say the first $8 billion came
from?
Secretary LaHood. In the stimulus bill. We got $48 billion.
Senator Blunt. Oh, right, right.
Secretary LaHood. Eight billion dollars of that was high-
speed rail, and the other money came through the appropriation
process for high-speed rail. We've put that money out, and
we've had very few people turn that money down. There's a lot--
--
Senator Blunt. What will you do with the money that has
been turned down, like the Florida money and the----
Secretary LaHood. We're going to reallocate it.
Senator Blunt. To other States.
Secretary LaHood. Absolutely. Senator, there is a line
outside of my door, of Governors, Senators, Congressmen, that
have either written me letters or called me. There's no
shortage of interest for the $2.3 billion that we're going to
reallocate from Florida. There's a lot of enthusiasm for high-
speed rail in America. We've allocated somewhere in the
neighborhood of 33 different projects in the country, our $10.5
billion. And I met with six Senators yesterday from the
Northeast that all want the reallocated Florida money.
Senator Blunt. Under your plan, will the money for high-
speed rail come from the newly named HTF?
Secretary LaHood. Yes.
Senator Blunt. It will. Okay.
The CBO estimate, I think, of income, over the next 6
years, for your purposes, is $230 billion. The reauthorization
bill asks for $556 billion.
Secretary LaHood. Right.
Senator Blunt. Tell me how that works, how do you take $230
billion of income and do $556 billion of authorized----
Secretary LaHood. We need to work with the Congress on
that, Senator. If transportation is a priority, if people see
transportation as a jobs bill, if they look at our budget as a
jobs budget, then we're going to have to sit with the Congress
and figure out how to pay for it. We believe that you can do a
lot of things, and there are a lot of creative ways to
accomplish our request. But we want to work with the Congress
on this.
Senator Blunt. On coming up with more funding?
Secretary LaHood. On coming up with $550 billion, if you
all like our budget.
Senator Blunt. That's very straightforward. And we'll look
at it and see if there's a way to bridge that tiny gap between
$230 billion and $556 billion.
And I yield back my time, Madam Chairman.
REAUTHORIZATION PROPOSAL
Senator Murray. Thank you, Senator Blunt. Let me follow up
on that.
I mean, I think we all know we need to invest in our
infrastructure, but we've got to find a way to pay for them. I
understand you do not want to increase gas taxes in order to
pay for your reauthorization proposal, but I think it really is
important to understand the size of the problem, and I
wondered, if you had done an estimate of how much we would have
to increase gas taxes, for example, even though I know you
oppose it, in order to pay for the 6-year reauthorization. Do
we know what that number is?
Secretary LaHood. We are not in favor of raising the gas
tax.
Senator Murray. I understand that. I'm just asking: If that
was how we had to do it, what would it mean? I'm just trying to
understand the problem.
Secretary LaHood. How much an increase would be?
Senator Murray. Yes.
Secretary LaHood. I haven't calculated that, Madam Chair.
Senator Murray. Okay. Another alternative that we've been
hearing about is a tax on vehicle miles traveled (VMT). The
State of Oregon has done a pilot on that. I know that you
oppose that, as well. So tell us, what are the other revenue
options that you do see to fill that small gap?
Secretary LaHood. Madam Chair, we want to work with the
Congress on finding the path forward.
If I can just say this generally--this is about my own
experience. I was elected in 1994. I served on the
Transportation Committee for 6 years. When I came to the
Congress, there was a deficit, and throughout the period that I
served, we overcame the deficit and were still able to do a lot
of creative things. When I was on the Transportation Committee,
we passed two bills with more than 380 votes in the House and
more than 80 votes in the Senate. Transportation has always
been bipartisan.
This goes to my point that I was trying to make earlier. We
all can work on reducing the deficit, which is what the
President wants to do and you all want to do, but we can also
have transportation priorities. We did it during the 14 years
that I served in the Congress on the Transportation and
Appropriation Committee. It can be done. These things are not
impossible to do. And I think----
Senator Murray. I would agree with you, but I think----
Secretary LaHood [continuing]. History has shown that we've
done it. Other Congresses have done it.
Senator Murray. I agree with you. But I think we all need
to be honest, that there has to be a way to pay for the----
Secretary LaHood. I agree with that.
Senator Murray [continuing]. Project. We can't keep saying
that we can cut deficits and these projects will happen. We
have to say how we're going to--we either have the budget we
have and we have fewer projects and less infrastructure, or we
say, ``This is what we believe the Nation needs,'' and how
we're going to pay for it. And I love how everybody says,
``There's another idea.'' I want to see what those other ideas
are. At some point, we've got to come to grips with that. And--
--
Secretary LaHood. We're ready to sit down and work with
you.
Senator Murray. As long as it's not gas tax or vehicle
miles traveled.
Secretary LaHood. That's correct.
Senator Murray. So, I was just asking, what are the other
options, if those are off the table?
Secretary LaHood. We'll be happy to visit with you about
that.
``UP-FRONT'' $50 BILLION
Senator Murray. Okay. Let's talk about your budget request.
It did include some dramatic increases for DOT. And part of
that increase was a $50 billion one-time investment to boost
the Nation's economy. There, as you know, is a lot of
resistance to any idea of further so-called stimulus spending.
Setting aside the additional $50 billion, the President's
budget does include some modest increases for highways and
transits. But, there are real cuts to rail and aviation
programs, in comparison to the levels that were enacted in
2010. For example, airport grants being cut by $1 billion.
If the Congress cannot agree to the $50 billion in stimulus
spending, then how should we view these cuts to rail and
aviation programs?
Secretary LaHood. Madam Chair, we think the $50 billion
upfront is a good investment. We don't really consider it an
additional stimulus. I can give you the project list for the
record. I mean, there's a long list of projects and areas that
we would like to address to help really jumpstart our
opportunity and continue progress that we have made with the
stimulus. We think that this is a good way to continue the
progress that we've made and keep things moving.
[The information follows:]
The fiscal year 2012 President's budget includes an ``up-front''
$50 billion economic boost in transportation to rebuild and modernize
America's roads, rails, transit, and runways for the long term.
Investments in transportation lead to a well-functioning, mobile
economy. Unfortunately, our investment in transportation has been
lagging with what we need to keep our economy moving, and compete with
other countries. Congested roads and airports result in $90 billion in
productivity and losses and wasted fuel. Perhaps the greatest cost of
our crumbling infrastructure is the American lives lost every year on
our highways.
As described in President Obama's Labor Day speech last year, this
$50 billion ``up-front'' economic boost will help to re-build America.
These resources will be targeted toward projects that will quickly
create American jobs here at home, while improving our transportation
infrastructure for the next generation. The President envisions this
up-front investment as the leading edge of the longer-term
reauthorization plan. Typically surface transportation reauthorizations
gradually increase funding over the life of the bill. This frontloaded
plan is designed to give States and localities the confidence they need
to be decisive about their investment plans and concentrate the impact
of increased investment in the early years of the reauthorization.
The ``up-front'' $50 billion economic boost will be for airport,
highway, transit, and rail programs and distributed as shown below:
--$25 Billion for Critical Highway Infrastructure.--This funding will
help fund critical highway and bridge improvements.
--$450 Million for Transportation Infrastructure Finance and
Innovation (TIFIA).--This funding will help meet the growing
demand for highway credit assistance to States.
--$7.5 Billion for Transit State of Good Repair.--This funding will
help pay for capital asset renewal and replacement at local bus
and rail transit systems nationwide with a focus on the oldest
and largest systems with the greatest need.
--$3 Billion for Urban and Rural Formula.--This funding will support
more than 1,300 local transit agencies nationwide with capital
assistance, including routine maintenance, and limited
operating assistance for certain small urban and rural systems.
--$1 Billion for New Starts.--This funding is for investment in new
transit options to reduce congestion, decrease travel times,
improve mobility, reduce energy consumption, and create more
livable communities.
--$3 Billion for Rail Network Development.--This funding will help
develop our high-speed rail network, with the ultimate goal to
connect 80 percent of Americans to an efficient and viable
passenger rail system over 25 years.
--$2.5 Billion for Rail System Preservation and Renewal.--This
funding will allow Amtrak to make critical investments in its
aging rail car fleet and bring all Amtrak stations into
compliance with the Americans with Disabilities Act.
--$3.1 Billion for Grants-in-Aid for Airports.--This funding would be
available for runway construction and other airport
improvements such as Runway Safety Area improvement projects
and noise mitigation projects.
--$250 Million for the Federal Aviation Administration's (FAA)
Facilities and Equipment.--$200 million of this funding will be
available for NextGen for applied research, advance
development, and implementation of engineering solutions for
NextGen technologies, applications and procedures; and $50
million will be available to make near-term improvements in
FAA's infrastructure, including upgrading power systems and air
traffic control centers and towers.
--$2.2 Billion for Cross-Border Transportation.--This funding will
significantly improve the condition of land port of entry
facilities that link directly to the transportation
infrastructure at border crossing locations.
--$2 Billion for a National Infrastructure Investments.--This grant
program, similar to the TIGER program, will provide grants to
State and local governments and transit agencies for capital
investments in the Nation's surface transportation
infrastructure, including roads and highways, public
transportation facilities, freight and passenger rail, and port
infrastructure.
HIGH-SPEED RAIL
Senator Murray. Okay. I said, in my opening statement, I
support the development of high-speed rail, and the benefits
for both the movement of passengers and freight. I think it's
very important. However, I also expect that an initiative that
has received this much funding and support has to demonstrate
results. That is exactly why this subcommittee did include
language last year in our appropriations bill requiring a
national rail plan. The Department was required to submit that
to us by September 15. We still haven't gotten it. And I think
it's hurting some of the program's credibility, and
strengthening the position of those who want to eliminate it.
And I wanted to ask if you can tell me the status of that
national rail plan.
Secretary LaHood. We are finalizing a plan that will
connect 80 percent of the country over the next 25 years, at a
cost of about $500 billion. We will finalize that and make sure
that you all see it.
Senator Murray. Any estimate of time on those yet?
Senator Collins. I think very soon.
Senator Murray. Okay. That's right along there with paying
for the authorization, all right.
Senator Murray. Thank you, Mr. Secretary.
Senator Collins.
BUILD AMERICA BONDS
Senator Collins. Thank you, Madam Chairman.
I want to pick up on Senator Murray's questions about how
we would fund the reauthorization. An idea that has been around
for a few years, that was initially proposed by Senator Jim
Talent and now is going to be introduced by Senator Ron Wyden,
is to develop a new kind of bond that would be used to finance
transportation projects.
Now, as with the gas tax, there are downsides to the bond
proposal, because it increases our indebtedness at a time when
the debt is already too high. I believe, however, that Senator
Wyden is really looking at some sort of revenue bond, where
there would be funding that could help offset the cost. I don't
know whether he's talking about tolls or whether there are
other--he, at one point, talked about everyone's favorite
offset, which is customs user fees.
Have you taken a look at the bond proposal? And, if so,
what do you think of it? I, for one, have not decided----
Secretary LaHood. Are you referring to the Build America
Bond, Senator?
Senator Collins. Yes. The Build----
Secretary LaHood. Yes. We think that's a very good program.
I don't know if it was a pilot or not, but the program has
ended. A total of $116 billion in Build America Bonds were
issued. The President's budget has requested that the Build
America Bonds be made permanent. We think it's a good way to
fund significant projects. It's been a good program.
Senator Collins. Thank you. I should be more precise and
say it's a variation of what the administration put in its
budget.
But, I will get to your staff the language of the proposal
of Senator Wyden. And I, for one, would be very interested in
your analysis of it.
Secretary LaHood. This program is bipartisan. Senator Thune
was a cosponsor of this bill and this program, and he supports
it.
NEXTGEN
Senator Collins. Thank you.
I want to turn to another issue, and that is the problems
that the Government Accountability Office (GAO) has found with
NextGen for managing air traffic. GAO has been critical of the
FAA's management of the program, and has pointed to budget and
schedule delays that are affecting the implementation of
NextGen systems. What is the status of this program? And, more
specifically, what is FAA doing to respond to the criticisms
that GAO has levied?
Secretary LaHood. NextGen is really about safety. It's
about saving jet fuel. It's about guiding planes, safer and
more directly, in and out of airports. It would require putting
the technology in every terminal radar approach control in the
country, and in every airplane in the country, also. We're
making progress. Part of it has been implemented in the Gulf of
Mexico and a couple of other places. We're going to continue
our investments in this. The President is requesting $1.2
billion for NextGen, which is an increase of $369 million.
We're committed to this.
With respect to the GAO report, what I would prefer to do
is maybe answer that for the record, or come up and brief you
all on that. I haven't looked at that lately.
We are committed to next-generation technology. We have to
do this, for air safety, for saving jet fuel, and just because
of the Northeast Corridor congestion and congestion at other
airports. This will solve a lot of problems.
[The information follows:]
The Federal Aviation Administration (FAA) takes the Government
Accountability Office's (GAO) concerns seriously and we continue to
monitor the progress of the Next Generation Air Transportation System
(NextGen). In response to the GAO report FAA has developed a draft set
of NextGen outcome-based metrics through a cross-agency team, initiated
joint FAA industry working group to confer and provide recommendations
on NextGen performance outcomes, and established a NextGen
Implementation Performance and Reporting Office to provide transparency
on NextGen performance improvements via a dashboard. Official metric
recommendations are expected from industry at the September 29, 2011
NextGen Advisory Council meeting. FAA will be briefing your staff
shortly on these activities in response to the GAO report.
Senator Collins. Thank you.
Senator Murray. Senator Blunt.
HIGH-SPEED RAIL
Senator Blunt. Mr. Secretary, on the rail expansion, does
your Department have any ideas on how we might encourage the
private-sector----
Secretary LaHood. Yes, sir.
Senator Blunt [continuing]. Extension of the rails? And
what would some of those be?
Secretary LaHood. There are about 8 or 10 foreign companies
in America, right now, partnering with the States to build the
train sets, to employ Americans, to take shuttered plants
around the country and turn them into train manufacturing
facilities. They're going to invest their money in American
workers and build the train sets.
They have the expertise. The truth is we don't have very
many experts in building train sets and infrastructure for
high-speed rail, but companies from France, Germany, Japan, and
China are in America right now, partnering and looking for
opportunities to open shop, hire American workers, and to begin
to build the train sets.
Senator Blunt. What about infrastructure for traditional
rail?
Secretary LaHood. If you look at the TIGER program, which
was $1.5 billion that was provided in the stimulus, one-half of
that money went to the class I freight rail systems so we could
pay them to fix up their tracks, so then passenger rail could
use those tracks to go higher speeds. We've had great partners
with the class I freight rails.
Amtrak is a huge player in this, also. Amtrak will provide
the service on many of these corridors. We're making
investments with Amtrak in fixing up their tracks. The line
from Chicago to St. Louis is a classic example. The money that
went to Illinois and Missouri is being used to fix up the
tracks to get these trains to higher speeds. That's the service
being provided by Amtrak.
Senator Blunt. Any discussion of tax credits or other
things that would encourage the railroad companies to build
additional track, additional infrastructure?
Secretary LaHood. We haven't really talked in terms of tax
credits, but more in terms of partnering with these companies
that are here and trying to leverage the private dollars that
they want to invest.
Senator Blunt. Okay. Thank you, Madam Chairman.
Senator Murray. Thank you.
I just have two more questions.
Secretary LaHood. Okay.
TITLE XI LOANS
Senator Murray. I wanted to ask you about the title XI loan
guarantees for ship construction. That processing has now taken
about 270 days. And as of last week, all the applications
pending exceed that deadline by anywhere from 100 to 450 days.
While some of these delays may be the fault of the applicants
themselves, some are the Department, as well. The average time
it takes to execute a contract to hire an independent external
review of an application, that the applicant pays for, is 165
days. This shouldn't take more than 60 days. It really is
unacceptable. Can I get you to look at this problem----
Secretary LaHood. Absolutely.
Senator Murray [continuing]. And get back to me about how
we can----
Secretary LaHood. Absolutely. I'll look at it.
Senator Murray. Okay.
Secretary LaHood. And I'll report back.
[The information follows:]
The Maritime Administration (MARAD) is changing the process it
currently uses to award external review contracts. This change should
be fully implemented by the end of this year. The current process
requires MARAD to procure independent financial advisors through a
Federal Highway Administration solicitation. The new process will
internalize the procurement within MARAD and reduce the number of steps
required to award an external review contract eliminating many of the
delays recently experienced.
FUEL PRICES
Senator Murray. I appreciate that.
I also wanted to just ask you about fuel prices. I know you
follow this so you can make forecasts about air travel and HTF
and all those things. I am concerned about the impact--today
we're hearing a lot about it--I wanted to ask you where you see
prices going, both near- and long-term, and what is the
Department's role, here?
Secretary LaHood. We play a role, as a member of the
President's Cabinet. We've already played a significant role
over the last 2 years by working with the Environmental
Protection Agency (EPA) to develop higher corporate average
fuel economy (CAFE) standards, higher gasoline standards. By
2016, the standard will be 35 miles per gallon. Our people are
working very hard with the EPA, beyond 2017, for another
standard. We're working with a lot of different folks on that.
That's where we can play a significant role on CAFE standards.
We're also working, as a part of the administration, with
car companies on the electrification of cars, which I think is
something that's obviously very significant. We're a part of a
team at the White House that, like you and many others, is very
concerned about high gasoline prices and the impact it'll have
on the economy. The impact that it has on average, ordinary
citizens--many of whom are out of work and can ill-afford a
gallon of gasoline, let alone at $4 or $4.50 a gallon.
I can tell you, the administration is focusing like a laser
beam. I was at the White House yesterday with some of my
Cabinet colleagues, talking about this, trying to figure out
what the best way forward is. The administration will be
stepping up on this and providing the leadership.
Senator Murray. Good. I really appreciate that. It is
deeply concerning to all of us--families, businesses. And as we
head into the spring and summer months, it's going to----
Secretary LaHood. Absolutely.
Senator Murray [continuing]. Have an impact on our economy,
as we're just starting to get out of this.
Secretary LaHood. Absolutely. Yes. I know full well that in
Illinois, particularly Chicago, when the temperatures start to
rise, then there has to be a different blend. In the past, that
has only increased the cost of----
Senator Murray. Yes.
Secretary LaHood [continuing]. A gallon of gasoline.
So, all of these things are being weighed very heavily and
discussed around the clock at the White House.
Senator Murray. Okay. I very much appreciate that.
ADDITIONAL COMMITTEE QUESTIONS
With that, I remind all of my colleagues that we will be
leaving the hearing record open for an additional week for any
additional questions.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Patty Murray
COMMERCIAL VEHICLE INFORMATION SYSTEM NETWORK
Question. This past summer the subcommittee was notified of
potential Anti-Deficiency Act violations in the Federal Motor Carrier
Safety Administration's (FMCSA) management of the Commercial Vehicle
Information Systems Network (CVISN) program. This subcommittee asked
the Government Accountability Office (GAO) to conduct an audit, and
they found compliance issues dating as far back as 1998. While these
problems developed long before your tenure, the subcommittee has been
waiting for the Department of Transportation's (DOT) audit findings
since last October. Mr. Secretary, when will you be able to provide
your findings and conclusions to the subcommittee? What corrective
actions has the Department taken and what issues still need to be
addressed?
Answer. The Department has determined that FMCSA violated the Anti-
Deficiency Act when it obligated funds in excess of the statutory
limitations as defined by section 4126 of the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users. The
Department has concurred on the May 5, 2011, GAO audit, which describes
FMCSA's Anti-Deficiency Act violations. The Department is working
closely with FMCSA to complete its report to the Congress and GAO on
these violations. We expect the report to be completed shortly.
FMCSA has undertaken the following corrective actions. First, FMCSA
immediately realigned the responsibility for administrative CVISN grant
functions from the agency's Office of Analysis, Research and
Technology, which oversees agency research and data analysis, to the
State Programs Division, Office of Safety Programs, under the Associate
Administrator for Enforcement and Program Delivery, whose primary
functions involve State and local grants management. As a result, as of
June 2010, administrative responsibility for all of the agency's 11
grants programs resides within the Office of Safety Programs. This
realignment has improved coordination across all agency grant programs
and significantly improved consistency and compliance with the agency's
grant management policies and procedures. The technical programmatic
oversight of the CVISN grant program will remain with the Technology
Division in the Office of Analysis, Research and Technology, where the
technical program expertise still resides.
Second, FMCSA is implementing Grant Solutions, a Governmentwide
grants management system and support service. Grant Solutions
incorporates all grant life cycle processes both for awarding-agencies
and recipients, and provides postaward reporting mechanisms. Grant
Solutions is used widely across the Government, including within the
various DOT modes. The use of Grant Solutions allowed FMCSA to formally
develop grant process workflows, standardize grant agreements and
amendments, and allow for more efficient financial tracking.
Third, FMCSA has revised its grants manual which sets forth policy
on all grant administration activities and provides FMCSA with a
general and uniform set of minimum procedures for soliciting,
reviewing, awarding, managing, and closing out grants. This manual
provides direction to ensure the consistent implementation of
legislation, regulations, Office of Management and Budget regulations
and circulars, Executive orders, and departmental and FMCSA policies
and procedures related to financial assistance. FMCSA is also
continuing to develop individual training plans for each position that
has a role and responsibility in the grant management life cycle.
TRANSPORTATION OF HAZARDOUS MATERIALS
Question. In 2010, the inspector general conducted an investigation
into the Pipeline and Hazardous Materials Safety Agency (PHMSA) Special
Permits and Approvals program. The inspector general found such
troubling management issues that he was compelled to issue not one, but
two special management advisories. The agency is now granting special
permits to an actual company rather than a trade association, as well
as conducting the required safety fitness evaluations. These actions,
in addition to growth in the industry, have caused a quadrupling of
applications from 13,000 in an entire year to 13,000 in just one-
quarter. How have you addressed the inspector general recommendations?
Answer. On February 4, 2011, PHMSA closed all open inspector
general recommendations issued to the Office of Hazardous Materials
Safety Approvals and Permits Division. PHMSA accomplished this by
developing and executing action plans that included deliverables such
as:
--clarifying that special permits and approvals are only granted to
companies who are members of associations;
--improving our data management and stewardship;
--building analytical capability to better assess risks of hazmat in
transportation;
--investing in training;
--acquiring tools needed to enhance productivity;
--reengineering business processes; and
--modernizing our information system.
Implementing these process improvements has allowed PHMSA to
process more than 5,600 explosive approval applications in fiscal year
2010-2011, which has virtually eliminated the backlog and reduced the
total applications in queue from 2,000 in January 2010 to 300 as of
September 2011.
Likewise, PHMSA has processed more than 26,000 fireworks approval
applications in fiscal year 2010 to fiscal year 2011, and reduced the
backlog from 1,117 in April 2010 to 65 in September 2011. PHMSA
continues to strive to reduce the backlog of special permits, which is
due largely to the implementation of a necessary Safety Equivalency
Evaluation Recovery program, which entailed reviewing existing safety
justifications for more than 1,350 active special permits. PHMSA
completed the Safety Equivalency Recovery Plan in September 2011 and
even though the number of special permit applications received almost
doubled from 2009 to 2010 and has remained at a high level, the number
of special permits in queue has been reduced from 2,449 on January 2011
to 769 on September 2011. Other actions include modernizing our
information system to streamline application processing and
incorporating widely used special permits with a proven safety record
into the Hazardous Materials Regulations.
Question. How does your budget proposal support the agency's
ability to effectively manage the safe transportation of hazardous
materials in this country?
Answer. PHMSA administers a comprehensive, nationwide program
designed to protect the public from the risks to life, health,
property, and the environment inherent in the commercial transportation
of hazmat by air, rail, vessel, and highway. Hazardous Materials Safety
achieves its goals through:
--evaluating hazmat transportation safety risks;
--developing and enforcing standards for transporting hazmat;
--providing compliance assistance to hazmat shippers and carriers;
--offering assistance to State and local emergency responders and law
enforcement officials on hazmat transportation issues;
--investigating hazmat incidents and failures;
--conducting research; and
--providing grants to improve emergency response to incidents.
PHMSA's fiscal year 2012 budget addresses specific program
enhancements. PHMSA plans to:
--Improve hazardous material data collection, analysis, and
reporting; technical assessments; and research and development
to strengthen decisionmaking capabilities when setting domestic
and international hazmat transportation safety standards;
--Enforce the hazmat transportation safety standards and improve
enforcement through a training program;
--Provide safety and compliance assistance to the hazmat safety
community; and
--Enhance the special permit and approvals program and permit the
Secretary to collect fees for processing and enforcement of
special permits and approvals.
unsecured loads
Question. Washington has been a leader in passing legislation that
would require secured cargo loads on personal vehicles. What is DOT
doing, if anything, with regards to raising awareness of the hazards of
unsecured loads on our highways? Does the Department record and track
data related to secured loads?
Answer. While the National Highway Traffic Safety Administration
collects limited data on the issue of fatalities attributed to falling/
shifting cargo, we have not developed an awareness program for that
specific issue.
______
Questions Submitted by Senator Dianne Feinstein
OBLIGATION OF FUNDS FOR CALIFORNIA PROJECTS
Question. As of today, there is close to $1 billion in funding for
California projects that has yet to be obligated. This includes three
Transportation Investment Generating Economic Recovery (TIGER) II
projects, three Transit Investments for Greenhouse Gas and Energy
Reduction (TIGGER) II projects, and 26 high-speed and intercity rail
projects. Some of these were awarded as early as January 2010 and have
yet to begin construction.
What is the reason for the delay in obligating the funds for these
projects?
Answer.
TIGGER II
All three of the TIGGER II projects have been obligated and the
funds have been awarded.
Foothill Transit--Fast-Charge Electric Transit Bus Project,
Line 291
The project is for the purchase and deployment of fast charge
electric buses for revenue service. The $10.1 million grant was awarded
in August 2011.
Alameda-Contra Costa Transit District--Sustainable Energy
Supply
The project is for the development and deployment of fuel cell bus
technology for revenue service. The $6 million grant was awarded in
June 2011.
Mendocino Transit Authority--Solar Canopies
The project is for the design and construction of a solar cell
canopy to reduce energy consumption and emissions through the use of
solar energy. The $470,000 grant was awarded in September 2011.
TIGER II
Los Angeles County--Crenshaw/LAX Light Rail Project
The Crenshaw/LAX project is an 8.5-mile light-rail transit line
with a budget of $1.715 billion (year of expenditure), and TIGER II
assistance of $20 million to support the subsidy cost of a $545.9
million TIGER Transportation Infrastructure Finance and Innovation Act
(TIFIA) loan. As such, the environmental effort for such a project is
significant and time consuming. The project sponsor, the Los Angeles
County Metropolitan Transportation Authority (LACMTA) recently
submitted the administrative Final Environmental Impact Statement for
Federal Transit Administration review, with a Record of Decision
expected in the September/October 2011 timeframe.
Preliminary engineering work is underway and the final design
effort will begin later this year. Construction will begin in December
2012, pursuant to the award of design-build contract to be advertised
in January 2012. The memorandum of understanding for the TIGER II
funding is expected to be executed in December 2011.
LACMTA has delayed submission of a TIFIA loan application until the
environmental milestones are complete. The TIFIA Office expects to
receive an application from the project sponsor in October 2011. Once
an application is received, it typically takes 6-9 months to evaluate
the project's financial feasibility and negotiate a credit agreement.
The TIFIA loan will not be obligated until the credit agreement is
ready to execute. At that time, the subsidy cost of the credit facility
(the TIGER II funds) will be finalized and obligated.
San Mateo County--Grand Boulevard Initiative: Removing
Barriers to Sustainable Communities
The San Mateo Planning Project Grant (CA-79-1000) from the TIGER II
program was awarded March 10, 2011, and executed March 14, 2011.
East Bay Regional Park District
The East Bay Regional Park District received $10.2 million under
the TIGER II program from FHWA for the East Bay Green Transportation
Initiative. The TIGER II funds are assisting a series of six separate
project elements. Under phase 1 of the TIGER II Grant Agreement TIGER
funding is being used to complete the environmental review and
engineering for two projects. In phase 2, it is anticipated that
construction will be completed on five of the project elements.
Currently, FHWA has obligated the entire phase 1 base amount of
$1,100,000 for costs associated with environmental review and
preliminary engineering for the Iron Horse Trail and San Francisco Bay
Trail. Work is progressing on both of these project elements. FHWA
anticipates making additional obligations during fall 2011 for the
Alamo Canal Trail ($1.3 million) and possibly the Hercules Intermodal
Station ($1.8 million). FHWA anticipates obligating the balance of
TIGER II funds in 2012 as the remaining project elements complete the
environmental and engineering processes. FHWA is continuing to work
closely with the East Bay Regional Park District and Caltrans to ensure
the project remains on track and all parties give the project a high
level of attention and focus on rapidly advancing the various elements.
San Bernadino Airport Access Project
The city of Highland received $10 million under the TIGER II
program from FHWA for the San Bernardino Airport Access project. The
purpose of the project is to expand roadway capacity to provide safe,
direct, and efficient highway access on State route 210 and Del Rosa
Drive to the new San Bernardino International Airport. None of the
funds have been obligated yet, because the grantee is working on
complying with planning and design requirements, as well as completing
required the National Environmental Policy Act of 1969 (NEPA) analyses.
FHWA anticipates that the grantee will be ready to obligate a portion
of the funds for final design work in fall 2011 and the remainder of
the funds for construction by September 2012. FHWA continues to work
closely with the city and Caltrans to ensure that the project remains
on schedule.
High-Speed and Intercity Rail Projects
As of September 2011, the Federal Railroad Administration (FRA) has
obligated more than $3.2 billion of the $4.2 billion in high-speed
intercity passenger rail (HSIPR) funding allocated to California for
projects throughout the State, including California's High-Speed Rail
project.
Most recently, three projects were obligated:
--$16 million in fiscal year 2010 HSIPR funding to the California
High-Speed Rail Authority (CHSRA) that will support safety and
scheduling improvements on the heavily traveled San Francisco
to San Jose corridor;
--$1.7 million in American Recovery and Reinvestment Act of 2009
(ARRA) funding for Caltrans to construct maintenance of way
spurs extending the hours of intercity passenger rail service
on Southern California Regional Rail Authority's Orange
Subdivision; and
--$1.5 million in fiscal year 2010 funding for Caltrans to prepare
its State Rail Plan.
We have prioritized obligations with the assistance of our grantees
in conjunction with their local agencies and are actively working to
obligate the remaining grant funds to California.
Question. Is there anything that Senators can do to hasten the
obligation of these projects in their States?
Answer. As of September 2011, the FRA has obligated more than $3.27
billion for 18 projects of the $4.2 billion in High-Speed Intercity
Passenger Rail (HSIPR) funding allocated to California, including
California's High-Speed Rail project. FRA will keep the Senator and
California delegation appraised of progress and address issues needing
attention when appropriate.
--Good progress is being made with several recent obligations
totaling $179 million, including:
--$86.4 million in ARRA funding to CHSRA to support the Central
Valley project, extending the current 110-mile segment an
additional 20 miles to Merced and Bakersfield;
--$68 million in ARRA funding to Caltrans for new trains servicing
intercity routes, which is part of a multi-State
procurement between California, Michigan, Iowa, Illinois,
Missouri, and Washington State to pool resources and
maximize the purchase of next-generation American-made
trains; and
--$24.9 million in fiscal year 2009 HSIPR funding to Caltrans to
install positive train control (PTC) between San Onofre and
San Diego.
--Of the 14 remaining projects, most are nearing final obligation.
There are:
--8 preliminary engineering (PE)/NEPA projects for $28.7 million;
--3 planning projects for $2 million;
--1 final design/construction project for $4.6 million; and
--2 large corridor programs for $928.6 million.
The attached chart describes these projects in more detail.
------------------------------------------------------------------------
California high-speed rail projects Project status
------------------------------------------------------------------------
PE/NEPA projects:
Pacific Surfliner: PE/NEPA for FRA is working with Caltrans to
Double Track. revise language in the
Raymer-Bernson: PE/NEPA for Double statements of work. Once these
Track, Grade Crossings, New revisions are agreed to and
Bridges, New Platform. approved, FRA anticipates
Pacific Surfliner: PE/NEPA for immediately obligating
Double Track, Curve Realignments. remaining funding.
Van Nuys Boulevard: PE/NEPA for
Bridge Widening, New Platform,
System Improvements.
Del Mar: PE/NEPA for Second Track,
Bridge, Signal Improvements.
Seacliff: PE/NEPA for Track
Realignment, Siding Extension.
Planning projects:
Los Angeles-San Luis Obispo
Corridor Plan.
Bakersfield-Oakland-Sacramento (San
Joaquin) Corridor Plan.
Los Angeles-San Francisco Corridor
Plan.
PE/NEPA projects:
San Diego: PE/NEPA for Double Track Caltrans and San Diego
Oceanside: PE/NEPA for Bridge Association of Governments are
Replacement with Double Track. resolving issues and making
revisions to their scopes of
work. If these scope issues
delay obligations, FRA will
reach out to Senator Feinstein
and the California
congressional delegation.
Construction project: Capitol Corridor-- Caltrans and Union Pacific are
Yolo West Cross- over. continuing to work toward
reaching an agreement in the
near term. Should these
negotiations not prove
productive, FRA will reach out
to Senator Feinstein and the
California congressional
delegation.
Central Valley projects:
Initial Central Valley Construction As required by law, FRA is
Project-Extension to Merced working collaboratively with
Station and Bakersfield Station. California to develop a
Central Valley HSR: Fresno- business and public investment
Bakersfield or Merced-Fresno. case. CHSRA is providing
revised figures for its
updated business plan to the
California legislature in
October, once FRA has received
and incorporated the revised
numbers, the business and
public investment case can be
finalized and reported to the
Congress for the necessary 30
days before moving to
obligation.
------------------------------------------------------------------------
CALIFORNIA HIGH-SPEED RAIL
Question. I am very grateful for the Department of Transportation's
(DOT) continued support and investment in California's high-speed rail
project. As you know, this is a very ambitious project for our State,
one which has an immense amount of support--but also has several issues
to resolve in order to reach success.
Would you be willing to designate a high-level official in your
personal office to oversee high-speed rail projects?
Answer. The FRA Administrator and Deputy Administrator have been
intimately involved in the establishment and implementation as well as
engaged in the selection, obligation and oversight of FRA's high-speed
rail (HSR) projects. The DOT Deputy Secretary and his leadership staff
are also briefed and involved on a regular basis with the high-speed
rail program. DOT is committed to the awarded projects and will work
with California to ensure success.
POSITIVE TRAIN CONTROL IMPLEMENTATION
Question. In November 2010, DOT announced that seven projects were
awarded funds from the Rail Safety Technology Grant Program. A majority
of the funds went to PTC technology development rather than to transit
agencies to implement these systems.
Why didn't the Department request any funds for fiscal year 2012?
Answer. The President's budget for fiscal year 2012 requested $50
million for railroad safety technology grants within the Network
Development appropriation and specifically under the program, Capacity
Building and Transition Assistance. FRA believes this level of funding
will help identify common issues and solutions that will facilitate the
national deployment of PTC. The funding will also help resolve critical
hardware and software issues associated with PTC development,
implementation, and deployment across multiple railroads, including
commuter rail providers. These common issues include interoperability
in a high-speed rail environment, limited shared communications in a
single high-density infrastructure, security and identity management
standards, and a rapid and reliable track database verification system.
Question. Do you believe rail operators are on track to meet the
deadline of December 31, 2015, without Federal assistance?
Answer. All railroads subject to the statutory mandate have
presented plans to FRA for complying with the December 31, 2015,
deadline. However, these plans provide little or no margin for delays
due to technical issues that might emerge during deployment. For
example, FRA has identified emergent issues associated with
communications and spectrum availability where Federal assistance is
appropriate. FRA has used Railroad Safety Technology Grant Program
funding and is working with the Federal Communications Commission to
aid in resolution of these issues.
Question. If we are going to subsidize the developers of the
technology, shouldn't we also support the transit agencies that are
mandated by the Congress to purchase the technology?
Answer. The statutory mandate creates a challenge for already
financially strapped transit agencies. Recognizing this challenge and
the limited Federal funding available, FRA is devoting its resources to
resolving development, implementation, and deployment issues that
confront multiple railroads, including commuter rail providers. This
focus will provide benefits beyond any single railroad or transit
agency.
GOODS MOVEMENT
Question. More than 40 percent of all containerized goods in the
United States travel through southern California. Due in part to Goods
Movement, the Los Angeles basin has suffered from poor air quality and
massive congestion. Imports and Exports traffic is expected to increase
in places like California, Washington, Texas, Louisiana, New York, and
Florida for the foreseeable future.
Is there a strategy in place to handle increased container traffic
in the coming years?
Answer. In the fiscal year 2012 budget, DOT has proposed robust
investments in transportation infrastructure that would include a major
focus on freight transportation. This proposal includes a National
Infrastructure Bank (NIB) that could focus freight-related
infrastructure investment funding on areas of national significance
(for example, on investments to facilitate increases in container
traffic through U.S. ports). By making strategic investments in ports
and goods movement surface transportation infrastructure, the
Department believes that we can improve the competitiveness of the U.S.
economy while minimizing the congestion and adverse environmental
impacts of any projected increases in container traffic.
The Department currently has a study underway that will quantify
the anticipated changes in international and domestic freight flows
expected to result from the expansion of the Panama Canal (which will
be completed in 2014). The findings of this study will provide guidance
in making future investments in freight transportation.
In the past 2 years, significant portions of the discretionary
TIGER grant program have been directed to investments in freight
facilities, including improvements to ports, highways, and railroads
that handle import and export traffic.
Question. Do you believe a National Goods Movement Policy is
necessary given the current congestion and health issues that affect
many parts of the country?
Answer. The President's budget proposal for DOT included creation
of an Office of Freight Policy within the Office of the Secretary, to
coordinate freight policy across the Department's modal
administrations. We believe that a coordinated, intermodal freight
policy will be essential in the future to guide investments in freight
infrastructure and assure efficient operation of the Nation's
intermodal freight system.
As a step toward the goal of a national freight policy, the
Department is in discussions with the U.S. Army Corps of Engineers to
develop a process for aligning their dredging program and other
waterway projects with DOT activities, with the aim of developing a
coordinated policy for Federal investment in marine transportation.
NATIONAL INFRASTRUCTURE BANK
Question. The mandate of a NIB appears to overlap with the efforts
of other existing programs, such as State infrastructure banks and
TIFIA and Railroad Rehabilitation and Improvement Financing (RRIF) loan
programs. What is the justification for creating a new entity? Why not
expand existing programs or alter the mandates for programs already in
existence? Do you see these programs co-existing?
Answer. The primary objective of the NIB will be to invest in
infrastructure projects that significantly enhance the economic
competitiveness of the United States or a region thereof by increasing
or otherwise improving economic output, productivity, or competitive
commercial advantage. The NIB will leverage Federal dollars and focus
on investments of national and regional significance that often fall
through the cracks in the traditional transportation programs.
Creating the NIB as a new entity within the Department will
encourage multi-modal approaches to the transportation infrastructure
problems currently facing the Nation. A multi-agency Investment Council
will help guide the investment decisions of the NIB and target critical
projects that existing funding sources organized by mode can often fail
to finance. Increasing the economic competitiveness of the Nation is
such a compelling objective for transportation and this proposed bank
with its unique ability to invest in the full range of transportation
infrastructure options--highway, transit, rail, aviation, and port
facilities--can support solutions that no other program at the
Department can offer.
Credit assistance under the TIFIA program would cease within 2
years of the enactment of legislation to create the NIB. All credit
instruments of the TIFIA program would be transferred to the NIB within
3 years. The RRIF program would continue to be administered by FRA.
RRIF loans would not be transferred to the NIB.
______
Questions Submitted by Senator Mark Pryor
MAINTENANCE OF HIGHWAY INFRASTRUCTURE
Question. In Arkansas, we have I-49 and I-69 and other high-
priority corridors that are in need of major upgrades, but the existing
formula funds are inadequate to make the needed investment while
continuing to maintain existing infrastructure.
Is the administration doing enough to invest in future highway and
interstate corridors?
Answer. Yes. In his State of the Union address, President Obama
said that, ``To win the future, we have to out-innovate, out-educate
and out-build the rest of the world, tapping the creativity and
imagination of our people.'' Consistent with this policy, the
President's budget called for a 6-year investment of $336 billion in
highways, 48 percent higher than the previously authorized level. In
addition, the President's budget proposed funding of $30 billion over 6
years for the establishment of a National Infrastructure Bank (NIB) to
finance projects of national or regional significance. For fiscal year
2012, the President's budget also proposed funding of $2 billion for
the continuation of the National Infrastructure Investments program,
commonly referred to as Transportation Investment Generating Economic
Recovery (TIGER) grants. The increased funding levels for the Highways
program, TIGER grants and the creation of the NIB will provide multiple
opportunities for investment in the arterial highways that connect
Americans and support commerce.
Question. How do you propose we build out these future corridors of
interstates and highways?
Answer. As described above, the administration supports increased
investment in critical infrastructure through a 48-percent increase in
highway authorizations over 6 years, the creation of a NIB, and the
continuation of the TIGER grant program. We also believe that better
planning, including freight and corridor planning, will serve to
identify the best ways to address specific transportation needs. The
administration has also proposed consolidating more than 55 programs
into five streamlined program areas with investment decisions driven by
performance rather than narrow categorical niches. We believe that the
administration's proposal provides options for addressing interstate
corridor needs.
Is this administration focused enough on roads and bridges?
Answer. Yes, the administration recognizes the value of our
transportation infrastructure and the need to invest in it. The 48-
percent increase we propose for highway authorizations, the creation of
a NIB, the continuation of the TIGER grant program, and our emphasis on
planning and performance are good indications of our focus on roads and
bridges. We're also focused on delivering highway projects efficiently.
Under its Every Day Counts Initiative, the Federal Highway
Administration is challenging States to make use of the new
technologies that make our roads and bridges stronger and safer and
allow those projects to be delivered faster.
CROSS-BORDER TRUCKING PILOT PROGRAM
Question. I understand that the administration is refocusing
efforts to restart the cross-border trucking pilot program between the
United States and Mexico. I remain concerned about this program, and I
hope you will work closely with this subcommittee and other relevant
Committees if you are indeed moving forward with such a proposal.
Following the recent news of a Federal Motor Carrier Safety
Administration (FMCSA) inspector in Canada taking tens of thousands of
dollars in bribes, I'm especially concerned about the potential for
corruption of FMCSA agents tasked with doing inspections in Mexico.
How can you assure us that such corruption would not take place?
Answer. FMCSA can assure the subcommittee that we will remain
vigilant and ask our employees to remain vigilant to identify potential
corruption and create a culture in which this behavior is not tolerated
in any form or manner. Efforts by FMCSA to fight corruption include our
``See something--say something'' campaign. All employees were advised
in writing of the obligation to report any suspected criminal behavior
to the Department's Office of the Inspector General (OIG) and provided
the OIG hotline number for their use if necessary. FMCSA recently held
meetings with all staff and stressed integrity and individual
accountability. This staff training was in addition to annual ethics
training provided by the agency's Office of the Chief Counsel. In
addition, all investigators are being re-credentialed. This involves
updating background checks for each investigator who has not had one in
5 years. Finally, to address these considerations and further improve
FMCSA's efforts in this area, FMCSA will be meeting with the Customs
and Border Patrol to complete benchmarking and lessons learned in this
area.
Question. What is the status of this pilot program?
Answer. On July 6, 2011, Secretary LaHood joined Mexico's Secretary
of Communications and Transportation in signing documents that specify
the details of a new cross-border, long-haul trucking pilot program.
FMCSA received more than 2,000 comments from its notice describing the
proposed pilot program. The Department of Transportation has completed
the public notice and comment period and the final proposal was posted
in the Federal Register on July 8, 2011.
Question. Why, under this program, is the United States proposing
to pay for the electronic on-board recorders to be used by Mexican
carriers?
Answer. Following the termination of the previous pilot program,
Secretary LaHood met with more than 30 Members of Congress and other
stakeholders to hear their concerns about the safety of that program.
During these visits he consistently heard concerns that the United
States needed to be able to determine how many hours a Mexican driver
had already been working when he or she arrived at the United States
border. He also heard concerns about Mexican drivers taking United
States jobs by illegally engaging in cabatoge (movement of goods from
place to place within the United States).
Electronic monitoring devices will allow FMCSA and State inspectors
visibility into the hours a Mexican driver is working, not only in the
United States, but also while he or she is operating a commercial motor
vehicle in Mexico. The devices will allow FMCSA to monitor the
operations of the Mexican companies to ensure they do not engage in
cabotage. Finally, they will provide critical data about the miles
traveled by the pilot program trucks while they are operating in the
United States. This will allow FMCSA to evaluate the safety of the
program as required under the North American Free Trade Agreement. For
all of these reasons, electronic monitoring devices are vital tools in
ensuring the safety of Mexican trucks in this program and success of
the overall program.
FMCSA is proposing to pay for the electronic monitoring devices
because:
--These devices are not currently required for trucks in the United
States. The Mexican Government would not accept an agreement
that put Mexican carriers at a disadvantage to United States
carriers by requiring a piece of expensive equipment not
required for United States carriers; and
--By owning the devices, FMCSA will own the data produced and be able
to conduct on-going monitoring of the vehicles in the program.
This on-going monitoring would not be possible if the devices
were owned by the Mexican carriers. FMCSA would only be able to
view the data when conducting reviews of the carriers'
compliance.
It should be noted that since the equipment will be owned by the
United States, we will have the devices removed from the trucks at the
end of the pilot program. In addition, if the proposed rule requiring
electronic on-board recorders (EOBRs) for all United States trucks
becomes effective or if a Mexican carrier is required to install EOBRs
under a remedial directive under current FMCSA regulations, the Mexican
carrier will be required to obtain its own EOBRs to comply with those
regulations. At no point will equipment purchased by FMCSA be used to
comply with a regulation requiring EOBRs.
______
Questions Submitted by Senator Mark Kirk
REGIONAL TRANSPORTATION AUTHORITY
Question. As you are aware, the Regional Transportation Authority
(RTA) is the third-largest public transportation system in North
America, and provides the financial and budget oversight of the Chicago
area's three service boards--Metra, Pace, and the Chicago Transit
Authority. Earlier this year, there was a proposal in the State capital
to change how the RTA chair is selected. Under current State law, the
RTA board selects its chair. This ensures that the chair best
represents the communities RTA serves. The proposal that was introduced
would change how the RTA chair is selected, taking that power away from
the board and giving it to the Governor--nothing short of the
politicization of the RTA.
Would you agree with me that the RTA and all transit authorities
are best served by keeping politics out of their management?
If you haven't had a chance to meet him yet, I'd strongly recommend
you chat with the current RTA Chair John Gates.
Answer. The Federal Transit Administration (FTA) works with a large
variety of public transportation systems across the United States, many
of which have leaders that are chosen through a political process.
While FTA is involved in the planning, financing, and oversight of the
public transportation systems receiving Federal funds, it does not get
involved with the governance of those systems. As such, FTA does not
have a position on the State of Illinois' proposed changes to the
selection process for the RTA chair.
METRA NEW STARTS
Question. What is the current status of Metra's UP-Northwest and
UP-West new start projects? My understanding is that FTA may have
expressed concerns about the proposed financial plan associated with
both new start projects. Please provide details on FTA's concerns with
those projects, if any.
Answer. In April 2010, Metra submitted a financial plan to FTA for
its two proposed Union Pacific commuter rail upgrade projects. Because
funding for the New Starts program is very competitive and funding is
limited, FTA informed Metra that it needed to reduce the requested New
Starts shares (the percent of the project covered by New Starts
funding) for the projects to make them more competitive for funding.
FTA also informed Metra of several financial plan deficiencies that
needed to be addressed before FTA could approve the projects into the
New Starts program. These included providing sufficient information to
FTA on revenues and expenses related to ongoing rehabilitation and
replacement of the existing system, projecting growth rates for tax
revenue sources more similar to historical growth rates, and addressing
State funding uncertainties. Metra reported to FTA in summer 2010 and
again in summer 2011 that the two projects are on hold until December
2011 at the earliest.
METRICS
Question. In the President's fiscal year 2012 request, $5 billion
is requested for a NIB that will provide grants and loans to leverage
transportation dollars for individual projects. We are currently
operating in an environment without earmarks, making the need for
transparency in executive investment even more crucial.
What metrics and analysis will the Department of Transportation
(DOT) use to determine project eligibility for NIB financing?
Answer. The NIB will assign to each eligible application a single
numerical factor on the basis of an evaluation of the information and
data collected either from the applicant or otherwise in the course of
due diligence on the application. This factor would be the
application's qualification score and would represent the NIB's primary
estimate of the present value of net benefits most likely to result
from the funding of the project or projects as proposed in the
application. In order to indicate the potential for uncertainty in
estimating the qualification score, the NIB would also estimate a range
for the present value of the application's net benefits. The
calculation of the qualification score and associated range would be
determined through a consistently applied analytic and systematic
framework. The methodology of that framework, including the specific
mechanics of data inputs and calculations, would be published in an
investment prospectus. The qualification score and range would be
shared with the applicant and published on the NIB's Web site.
The methodology used to calculate the qualification score and range
will apply equal weighting to equal monetary values of all categories
of benefits and costs used to calculate the present value of net
benefits; use standardized measures of the expected uncertainty in
total net benefits for the project to define the range, and include
standardized measures of the expected uncertainty in specific benefits
and costs associated with the project; and include a descriptive
statement delineating the significant factors and analysis that went
into determination of the score and the range.
Question. Will regional considerations be given for projects,
meaning will DOT address projects located only in urbanized areas?
Answer. The President's fiscal year 2012 budget states that the
National Infrastructure Bank (NIB) would invest in projects of
``national and regional significance.'' Projects located entirely in a
rural area must exceed $10 million to be eligible for funding, compared
to a figure of $50 million for projects in urbanized areas.
We believe that rural projects would compete well for grant and
loan funding under a NIB, as they did under the Transportation
Investment Generating Economic Recovery (TIGER) Discretionary Grant
program, which required cost-benefit analysis for rural and urban
projects.
Question. With regard to the Transportation Leadership Awards,
which would be the equivalent of the Department of Education's Race to
the Top Initiative, what metrics or analysis will you use to base the
awarding of grants? What are the performance outcome criteria that you
will use?
Answer. The Transportation Leadership Award (TLA) program is a
multimodal, multiyear competitive grant program designed to spur major
reform in the way States and metropolitan regions make transportation
policy and investments, and encourage new and innovative solutions to
transportation challenges. Under the TLA program, funding will be
awarded to applicants that have adopted or implemented best practices
in transportation planning, finance, delivery, and operation. Examples
of best practices include:
--Commitment to a variety of sustainable and innovative non-Federal
sources of transportation funding that provides flexibility to
make investments across all modes;
--Analytical tools in the investment decisionmaking process;
--Practices that increase the efficient use of system capacity and
reduce the need to invest in new highway capacity;
--Technologies and training to improve the condition and performance
of transportation networks;
--Adoption of laws, rules, and regulations, and a commitment of
resources toward practices that reduce transportation-related
fatalities and injuries, improve air quality, reduce greenhouse
gas emissions, enhance community quality of life, and expand
transportation choices;
--Integration of transportation planning and investment decisions
with other land-use and economic development decisions;
--Collection and use of data in longitudinal analyses of investment
performance and return on investment; and
--Performance-based distribution process for the allocation of a
significant portion of non-Federal funds and Federal
transportation formula funds under the control of the
applicant.
The TLA program includes two types of grants. The first, and
largest, type is designed to fund a program of projects that is
intended to address cross-cutting performance needs. The program of
projects must:
--Include the priorities of metropolitan planning organizations
within the applicant's jurisdiction as identified in their
transportation improvement programs;
--Demonstrate superior return on investment and competitive value for
taxpayer money by means of a benefit-cost analysis of
alternatives;
--Be developed through a multimodal, performance-based, and
comprehensive transportation planning process that includes
linkages to housing, economic development, environment, land
use, and other infrastructure investment planning and
investment, and with strong, interactive public input and
awareness; and
--Further transportation policy best practices and reform
initiatives.
The second type, known as a managing performance grant, is designed
to fund initiatives that help communities build up the technical and
organizational capacity to needed develop and undertake the
transformative changes in transportation planning, management,
investment, and project delivery that will enable them to qualify for
TLAs. Typical initiatives that could be funded under this grant
include:
--Data collection, storage, and analysis systems;
--Advanced transportation modeling, simulation, and analysis; and
--Staff training to utilize new, more advanced systems and
departmental reorganization to support implementation of best
practices.
Applications submitted for funding consideration under the TLA
program will be evaluated based on the extent to which it:
--Promotes national transportation priorities, including:
--Reducing transportation fatalities and injuries;
--Strengthening economic competitiveness, including improvement to
goods movement and encouragement of reuse of underutilized
developed land;
--Improving the state of repair of the transportation system;
--Improving asset performance by reducing congestion through demand
management strategies, particularly strategies that curb
demand for single occupancy vehicle travel; and
--Supporting environmental sustainability by reducing air emissions
and water pollution, improving or protecting aquatic
resources, and protecting sensitive lands.
--Provides for a multimodal approach to solving transportation
challenges.
--Demonstrates the progress made through earlier grant awards, for
applicant that are awarded funding in previous rounds of TLA
grant-making.
HIGH-SPEED RAIL
Question. We've seemed to work out a model for private-public
partnerships on the highway side--the Chicago Skyway and the Indiana
Toll Road being good examples. What is DOT and the Federal Railroad
Administration doing to incentivize private capital to get involved on
the rail side?
Answer. While significant Federal investment is necessary in the
early years to demonstrate a national commitment to passenger rail,
build institutional capacity, and initiate multi-year and multi-State
projects, the National High Performance Rail System (NHPRS) will
succeed only if States, regional entities, and the private sector all
have vital roles in planning, developing, financing, and operating
these services. Private partners have been and will continue to be
instrumental in developing the system, from partnerships with freight
railroads, to designing and constructing high-speed rail
infrastructure, to operating the services.
The fiscal year 2012 budget request encourages innovation in
project delivery, such as the use of public-private partnerships, to
assist with project financing, delivery, and risk-management of high-
speed rail projects. The proposal also promotes more direct and
substantial private sector participation in developing and operating
high-speed rail by making private entities eligible for targeted
financial assistance, provided that their project proposals are
consistent with State and regional passenger rail plans. In addition,
it provides dedicated resources to support private-sector capacity
building in the field of rail transportation, as the rail industry
grows to accommodate future expansion.
The fiscal year 2012 proposal expands partnerships with rail
manufacturers and suppliers by investing in new equipment and
overhauling existing equipment. The establishment of a strong Federal
partner with a stable and predictable source of financing will allow
manufacturers and industry to invest in expansion, new facilities, and
new employees. With explicit Buy America provisions included, the
fiscal year 2012 proposal provides U.S. manufacturers and equipment
builders opportunities in high-speed and intercity passenger rail.
SUBCOMMITTEE RECESS
Senator Murray. And for now, this hearing is recessed until
Thursday, March 31, at 9:30 a.m., at which time we'll hear
testimony from Commissioner David Stevens on the fiscal year
2012 budget request for the Federal Housing Administration.
[Whereupon, at 10:45 a.m., Thursday, March 10, the
subcommittee was recessed, to reconvene at 9:30 a.m., Thursday,
March 31.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2012
----------
THURSDAY, APRIL 7, 2011
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:30 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Collins, and Blunt.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Federal Housing Administration
STATEMENT OF HON. SHAUN DONOVAN, SECRETARY, DEPARTMENT
OF HOUSING AND URBAN DEVELOPMENT
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Good morning. The subcommittee will come to
order.
And I want to thank everybody in advance for--we're going
to really confine everything this morning. I have a leadership
meeting this morning, as everyone knows. The elephant in the
room of the Congress today is how we are going to come to
agreement and avoid a shutdown. It's absolutely critical for
families, for our country, for all of us to come to that
agreement. So I will have to leave here shortly before 10:15
a.m. So, I'm going to consolidate my opening statement. I know
the Secretary's agreed to this as well, as well as Senator
Collins. And we will get to the critical questions of the day
and submit many for the record.
So, Mr. Secretary, thank you for your understanding.
Senator Collins, thank you for working with us as well. And
I will make a short opening statement.
This morning we are holding a hearing to get an overview on
the Federal Housing Administration (FHA) and talk about the
future of housing finance. And I again want to welcome
Secretary Donovan back before this subcommittee to talk about
these important issues.
In the aftermath of the housing crisis, FHA has played a
central role in making sure the Nation has a functioning
mortgage market when the private market failed. It has served
the role it was intended to play.
Today's FHA insures around 20 percent of all mortgages
being originated, and almost 40 percent of all new home
purchases. The pivotal role that FHA is currently playing in
the fragile housing market is important to keep in mind as the
threat of Government shutdown looms.
The Federal budget provides FHA with the commitment
authority that allows the agency to insure loans. If a budget
is not passed, FHA will be unable to endorse any new loans, so
anyone who is planning to close on a home using FHA insurance
will be out of luck. At a time when the housing market remains
so fragile, this seems particularly irresponsible.
The debate about the Government's budget is an important
one, but we have to get on with the business of making
decisions necessary to fund the Federal Government in a
responsible manner, and I believe the time has come for a
resolution. The consequences are too great for too many
Americans and the Nation's economy to refuse to come to an
agreement because of political agendas or pressure.
But as we await a resolution to the fiscal year 2011
budget, we have to continue to do our job in exercising
oversight over the programs this subcommittee funds.
For several years, this subcommittee has focused on the
solvency of FHA's Insurance Fund. FHA has never received an
appropriation to support its Insurance Fund, and I'm committed
to making sure that it never does. This subcommittee has worked
to provide FHA with the resources necessary to hire skilled
staff and develop the technology necessary to oversee FHA's
growing portfolio.
And I want to applaud the efforts of the Administration
under the leadership of Secretary Donovan, as well as former
Commissioner Stevens, to bring a renewed focus on managing risk
at FHA.
Despite all of the reforms, the overall health of the
housing market is critical to the continued stability and
improvement of FHA's finances. We find ourselves at a critical
moment: We continue to deal with the ramifications of the
housing crisis, while trying to establish a better housing
finance system for the future. This challenge is similar to
that which FHA has focused on over the last few years. It's
working to improve its financial position so it can deal with
the fallout of past loans. At the same time, the Department is
working to improve its future business and financial position
by implementing reforms and creating a culture focused on sound
risk management.
Through all of this, FHA has worked to balance the need to
mitigate risk with serving its mission of providing access to
affordable and sustainable home ownership to under-served
Americans.
As we look to the future, we have to find the appropriate
balance between strengthening and protecting the housing
finance system from undue risk, while maintaining access for
credit-worthy Americans to achieve sustainable home ownership.
PREPARED STATEMENT
So, I look forward, Secretary Donovan, to your statement
this morning and to questions.
And I want to thank Senator Collins for her work on this,
and turn it over to her for her opening statement.
[The statement follows:]
Prepared Statement of Senator Patty Murray
This morning we are holding a hearing to get an overview on the
Federal Housing Administration (FHA) and discuss the future of housing
finance. I want to welcome Secretary Donovan back before the
subcommittee to discuss these important issues.
FHA--an institution born out of the Great Depression--has assisted
millions of Americans in attaining home ownership.
And in the aftermath of the housing crisis, FHA has played a
central role in ensuring that the Nation had a functioning mortgage
market when the private market failed. It has served the role it was
intended to play.
FHA'S ROLE IN THE MARKET AND CONSEQUENCES OF A SHUTDOWN
Today, FHA insures around 20 percent of all mortgages being
originated and almost 40 percent of all new home purchases.
The pivotal role that FHA is currently playing in the fragile
housing market is important to keep in mind as the threat of a
Government shutdown looms.
The Federal budget provides FHA with the commitment authority that
allows the agency to insure loans. If a budget isn't passed, FHA will
be unable to endorse any new loans. So anyone who was planning to close
on a home using FHA insurance will be out of luck.
At a time when the housing market remains so fragile, this seems
particularly irresponsible.
The debate about the Government's budget is an important one. But
we must get on with the business of making the decisions necessary to
fund the Federal Government in a responsible manner. The time has come
for a resolution.
The consequences are too great for too many Americans--and the
Nation's economy--to refuse to come to an agreement because of
political agendas or pressure.
But as we await a resolution to the fiscal year 2011 budget, we
must continue to do our job in exercising oversight over the programs
we fund.
OVERSIGHT OF FHA
For several years, this subcommittee has focused on the solvency of
FHA's Insurance Fund.
FHA has never received an appropriation to support its Insurance
Fund; and I am committed to ensuring that it never does.
Yet in the wake of the housing crisis, FHA has sustained
substantial losses. As a result, its capital reserve fund has fallen
below the level of 2 percent mandated by the Congress.
While this does not mean that FHA will require taxpayer dollars, it
highlights the need for vigilant oversight of the agency's portfolio,
which has increased dramatically in the last few years.
In recognition of this task, this subcommittee has worked to
provide FHA with the resources necessary to hire skilled staff and
develop the technology necessary to oversee FHA's growing portfolio.
I want to applaud the efforts of the Administration, under the
leadership of Secretary Donovan, as well as Former Commissioner
Stevens, to bring a renewed focus on managing risk at FHA.
The Administration has moved quickly to institute significant and
necessary reforms to the program.
Among other reforms, FHA has:
--Increased premiums to shore up its finances;
--Set minimum FICO scores;
--Increased down payment requirements for riskier borrowers; and
--Stepped up enforcement so that lenders who aren't following the
rules can no longer participate in the program.
In October of 2009, FHA also hired Bob Ryan as the agency's first
Chief Risk Officer. The Administration recently announced that Mr. Ryan
will serve as acting FHA Commissioner, and I am pleased that this role
is being filled by someone who will continue to focus the agency on
managing and mitigating risk.
HOUSING MARKET
Despite all of these reforms, the overall health of the housing
market is critical to the continued stability and improvement of FHA's
finances.
Improving jobs numbers and fewer new delinquencies are positive
signs in the market.
But the reality is that:
--Millions of Americans are still in foreclosure and 30 percent of
all homeowners have not made a payment over the past 2 years;
--Roughly 7 million borrowers are seriously delinquent and at risk of
foreclosure;
--New and existing home sales continue to fall;
--And home prices are declining in most markets--leaving nearly 27
percent of all mortgages in a negative or near-negative equity
position
We have a long way to go before the market fully recovers. And it
is critical that we continue to look for ways to address the needs of
millions of Americans facing the prospect of foreclosure or who are
underwater on their mortgage.
We must work to increase opportunities for:
--meaningful modifications;
--achieving a fair and efficient foreclosure process; or
--reasonable options for borrowers trying exit home ownership.
I hope that there will be a global deal that will provide a way to
work through the current inventory of delinquent or foreclosed homes
that will also provide real relief to borrowers that have been wronged
in the process.
THE HOUSING MARKET AND GOVERNMENT-SPONSORED ENTERPRISE REFORM
The market also needs certainty about the new reforms and the
future of the Nation's housing finance system.
As we think about the future, we should draw on the important
lessons from the recent boom and bust.
This boom was fueled by overconfidence of lenders and investors in
the perpetual appreciation of home prices, coupled with inadequate
regulatory oversight.
As a result, millions of Americans have lost their homes, and
millions more who didn't participate directly in the market run-up have
nonetheless seen their wealth eroded as home values declined.
The Dodd-Frank Wall Street Reform and Consumer Protection Act began
to address many of the failures of our system and its outdated
regulatory structure.
But it is clear that we must also address Fannie Mae and Freddie
Mac so we no longer promote a system of private profit and public loss.
However, reform must be approached thoughtfully, so that we don't
undermine the fragile housing recovery.
And in our effort to guard against another crash, we must be
careful not to overcorrect and put home ownership out of reach for
millions of Americans.
As a first step, FHA released its report to the Congress on options
for reforming the Nation's housing finance structure.
This report presents three options that range from one with the
Government's role limited to FHA, to one where the Government has a
more significant presence in the market, though substantially reduced
from the role it is playing today.
Each of these options presents tradeoffs that we must consider--
tradeoffs between the level of appropriate risk for the taxpayer and
the ability of individuals and families to obtain a mortgage.
RISK RETENTION AND QUALIFIED RESIDENTIAL MORTGAGE
A similar debate is also occurring around the rule on risk
retention recently proposed by FHA. This rule also includes the
definition of a qualified residential mortgage (QRM), which will be
exempt from risk retention requirements.
This rule ensures that lenders have an incentive to properly
underwrite loans by requiring them to retain partial exposure to their
performance.
Under the proposed QRM definition, loans with a downpayment of 20
percent or more would be exempt from this retention requirement.
Ensuring that borrowers have more equity at stake in their home is
an important goal.
At the same time, many hardworking, creditworthy Americans will
have a difficult time coming up with a 20-percent downpayment--
particularly in high-cost areas, like Puget Sound.
So, I want to have a discussion today about the potential impact of
this rule on the availability and affordability of mortgages in the
future. Especially as we contemplate the role that FHA or other
Government-supported institutions will play in the future.
CLOSING
We find ourselves at a critical moment--we continue to deal with
the ramifications of the housing crisis while trying to establish a
better housing finance system for the future.
This challenge is similar to that which FHA has faced over the last
few years. It is working to improve its financial position so it can
deal with the fallout of past loans.
At the same time, the Department is working to improve its future
business and financial position by implementing reforms and creating a
culture focused on sound risk management.
Through all of this, FHA has worked to balance the need to mitigate
risk with serving its mission of providing access to affordable and
sustainable home ownership to underserved Americans.
As we look toward the future, we must find the appropriate balance
between strengthening and protecting the housing finance system from
undue risk, while maintaining access for creditworthy Americans to
achieve sustainable home ownership.
I look forward to hearing from Secretary Donovan on these issues.
And with that I turn it over to my partner in these efforts, Senator
Collins for her opening statement.
STATEMENT OF SENATOR SUSAN COLLINS
Senator Collins. Thank you very much, Madam Chairman. Like
you, I will submit my opening statement for the record and just
make a few very brief comments.
First of all, I wholeheartedly agree with your comments on
the need for the Congress to resolve the budget crisis. It is
the height of irresponsibility if Government is allowed to shut
down, and would represent a colossal failure that would reflect
poorly on everyone involved.
And you're right about the impact on the housing market.
The Secretary and I were talking prior to the hearing about the
critical role that FHA is playing, and the fact that those
pending mortgages would come to a screeching halt, and
potential homeowners would not be able to close on their
properties.
The Department of Housing and Urban Development (HUD) faces
many challenging responsibilities that include balancing the
goal of strengthening responsible home ownership, while
minimizing the financial risk to FHA and the taxpayer, and
promoting long-term stability and motivating the private sector
to reinvest in the housing market.
Today in my questions I'm going to talk about my concern
about HUD's oversight of FHA's Single Family Housing program. I
do appreciate and recognize the progress that's been made in
minimizing risk to this program, including the creation of a
Chief Risk Officer position in 2009. But there, it is clear
from a recent USA Today report that FHA has been slow to flag
problem lenders and stop them, despite the withdrawal of
approval from more than 1,500 approved lenders in the last
fiscal year.
The housing market is still very weak, and FHA is going to
continue to play a critical role.
PREPARED STATEMENT
Another issue that I want to explore today if we have time
is what the impact on FHA will be if we dramatically change the
role of the Federal Home Loan Mortgage Corporation (Freddie
Mac) and the Federal National Mortgage Association (Fannie
Mae). So, those are some of the issues I want to touch on.
Again, I'll put my full statement in the record, with your
consent. Thank you, Madam Chairman.
[The statement follows:]
Prepared Statement of Senator Susan Collins
Chairman Murray, thank you for holding this important hearing to
review the Federal Housing Administration (FHA) and to discuss the
future of the housing finance market. It is a pleasure to see Secretary
Donovan before our subcommittee again, and I join you in welcoming him
to this hearing.
The Department of Housing and Urban Development (HUD) faces many
challenging responsibilities that include balancing the goal of
strengthening responsible home ownership while minimizing the financial
risk to FHA and the taxpayer and promoting long-term stability and
motivating the private sector to reinvest in the housing market.
FHA is largely financed by proceeds from the mortgage insurance
premiums paid by homeowners. As we all know, home purchases provide an
important economic stimulus, with benefits to local communities in the
form of jobs and local development.
Part of our discussion today will include the status of the Federal
National Mortgage Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac), which were originally established
by the Congress to promote liquidity, affordability, and stability in
the housing finance market. The future of FHA heavily relies upon the
debate on how to reform Fannie Mae and Freddie Mac. This will be a
critical discussion that will shape not only FHA, but also the future
of the Nation's housing market.
Recent news articles have highlighted the lack of recovery in most
housing markets. Last week, according to Standard & Poor's (S&P) Case-
Shiller home price index, U.S. home prices in major cities across the
Nation dropped 3.1 percent since January 2010. According to the
chairman of the S&P Index Committee, ``The housing market recession is
not yet over, and none of the statistics are indicating any form of
sustained recovery.''
These data are particularly concerning since FHA currently insures
nearly $1 trillion in mortgages for the single-family home program. The
agency's role has dramatically expanded since the beginning of the
housing crisis. At the peak of the crisis, FHA accounted for less than
4 percent of the single-family housing market; now it holds more than
20 percent.
Another important issue relates to HUD's oversight of the FHA
Single Family Housing program. I recognize and appreciate that HUD has
made progress in minimizing risk to this program, including the
creation of a Chief Risk Officer position in 2009. A number of reforms
have also been implemented to the mortgage insurance premium structure
and eligibility requirements to help ensure the long-term economic
viability of this program. For example, FHA withdrew approval from more
than 1,500 FHA-approved lenders and imposed more than $4 million in
civil penalties on noncompliant lenders in fiscal year 2010.
While progress has been made, more needs to be done. Just last
month, HUD's Office of Inspector General reported underwriting issues
concerning FHA-insured loans. After reviewing 284 loans from 15
lenders, the inspector general found nearly 50 percent of the loans
were not underwritten in accordance to FHA requirements. As a result,
HUD missed critical opportunities to recover losses of more than $11
million.
It is also troubling that FHA cannot meet its statutory requirement
of maintaining a 2-percent capital reserve ratio. According to HUD's
own data, the earliest FHA can reach this requirement is 2014. This is
a major concern since the reserve ratio was intended to cover
unexpected losses.
I am eager to hear the administration's overall plan for
revitalizing the financing of the housing market and for the future of
FHA, Fannie Mae, and Freddie Mac. We must ensure that we limit
taxpayers' exposure to additional financial losses in the housing
market.
Chairman Murray, I look forward to working with you and Secretary
Donovan on ways to enhance and protect homeowners and to stabilize the
housing market by reinvigorating the investments and participation of
the private sector. These are not easy issues to resolve, but they are
critically important to our Nation's long-term economic health.
Senator Murray. Thank you very much. Both of our opening
statements will be printed in the record.
And with that, we'll turn it over to Secretary Donovan for
opening remarks.
SUMMARY STATEMENT OF HON. SHAUN DONOVAN
Secretary Donovan. Thanks, Madam Chair. Thank you, Ranking
Member Collins.
And I want to just echo your concerns about the potential
impact of a shutdown and the critical importance of resolving
this. The President yesterday in remarks talked about the
importance of FHA to the broader housing market, to individual
Americans on the verge of closing a purchase of a home, or
selling a home, and the critical role we play in the housing
market today, and the potential significant risks that it would
pose if we can't resolve this budget issue.
And he talked about the fact that we have come a great
distance. We have agreed to the original cuts that were asked
for, proposed by Speaker Boehner, and that, really, what we are
down to is politics in this debate. And we must resolve this in
order to ensure that we can continue to do the people's
business.
In the interest of time, I will also submit my statement. I
do just want to make a few comments beyond the concern about
the potential shutdown--in particular, to thank you both, and
your colleagues in the Congress for your leadership. Thanks to
the partnership that we have had with this subcommittee and
with the Congress, we have been able to put in place the most
sweeping combination of reforms to credit policy, risk
management, lender enforcement and consumer protection in the
agency's history. And thanks to those, FHA is in a stronger
financial position today.
In the last year, we've taken 10 times more lender
enforcement actions than FHA had taken in the previous 10 years
combined. The agency has implemented a two-step credit score
policy that requires borrowers with credit scores below 580 to
contribute a minimum down payment of 10 percent. And with your
help, FHA has increased premiums to bring back private capital,
begin putting into place the cutting-edge modern financial
services--IT environment--that FHA needs for the 21st century,
and taken steps to increase staffing, which the fiscal year
2012 budget would further.
And I would note that it's our hope that the kind of
flexibility that we've proposed for the Government National
Mortgage Association (Ginnie Mae) in this budget--to use fees
paid by Ginnie Mae's customers to address critical staffing in
emerging issues, without requiring any additional congressional
appropriations--could be a possible template for addressing
critical FHA issues in the years to come.
While we still need the Congress to pass FHA reform
legislation that allows us to be prepared for any future
crisis, the reforms we've already implemented have resulted in
the fiscal year 2010 book of business being the highest quality
on record. The average credit score of FHA borrowers has risen
to 700. Total reserves have increased. And while foreclosure
processing delays are certainly a factor, claim payments are
much lower than projected by the independent actuary. As a
result, in fiscal year 2012 we expect FHA and Ginnie Mae to
generate more than $6 billion in receipts that will offset the
Department's gross budget authority request of $47.8 billion
and help to rebuild FHA's capital reserves--this in addition to
the $9.8 billion in receipts FHA is projected to generate in
fiscal year 2011.
Indeed, Madam Chair, even with the decreased loan volume
we've seen in recent months, we expect FHA to make
substantially more money for the taxpayer this year than our
actuary predicted and an even larger amount more than the
Congressional Budget Office (CBO) predicted when they did their
projections last year. And I'm very pleased to note, thanks to
our work with CBO, that our offsetting budget receipts in
fiscal year 2012, our estimates of those, are dramatically
closer than they have been in years past.
PREPARED STATEMENT
With that, let me stop, and make sure that we can get to
your questions. Again, I thank you for the partnership that
we've had in working together to make sure that FHA has the
resources and the tools that it needs to fulfill its mission.
Thank you.
[The statement follows:]
Prepared Statement of Hon. Shaun Donovan
INTRODUCTION
Chairman Murray, Ranking Member Collins, and members of the
subcommittee, thank you for the opportunity to testify today regarding
the Federal Housing Administration (FHA), in the context of the
Department of Housing and Urban Development's (HUD) proposed fiscal
year 2012 budget, and also with respect to FHA's key role in the Obama
administration's efforts to both address the foreclosure crisis and to
reform America's housing finance market.
I was pleased to have the opportunity to testify before this
subcommittee on March 6, 2011 to discuss in detail the Department's
2012 budget, Creating Strong, Sustainable, Inclusive Communities and
Quality Affordable Homes. As you know, the budget proposal works to
``win the future'', and I look forward to discussing with you in my
testimony how FHA will play a central role in that effort.
I would be remiss if I didn't say a few words about David Stevens,
the recently departed FHA Commissioner. Dave brought to the job a
unique blend of private sector expertise and commitment to providing
underserved communities access to our programs. The strong team that
Dave and I were able to put in place was instrumental to ensuring that,
in the midst of the worst economic crisis in decades, FHA was able to
fill the gap left by the retreat of private capital, while also
significantly strengthening FHA's financial position and toughening
enforcement. I am delighted that Robert Ryan, our Deputy Assistant
Secretary for Risk Management and Regulatory Affairs, will be serving
as Acting Assistant Secretary for Housing and FHA Commissioner. While I
anticipate the naming of a permanent Commissioner in the near future, I
would like to assure the subcommittee that under Bob Ryan's leadership,
there will be continuity in FHA's operations, based on the strong
foundation laid down by Dave Stevens, including the bipartisan approach
he consistently followed.
OVERVIEW OF HUD'S FISCAL YEAR 2012 BUDGET
As I discussed when I last appeared before the subcommittee, we are
in an economic environment that is significantly improved from when the
President took office. An economy that was shrinking is growing again--
and instead of rapid job loss, more than 1.8 million private sector
jobs were created in the last 13 months, including 230,000 private
sector jobs in March. But we know there's still more work to be done to
ensure that America and its workers can compete and win in the 21st
century. And we have to take responsibility for our deficit, by
investing in what makes America stronger and cutting what does not, and
in some cases making reductions in programs that have been successful.
HUD's fiscal year 2012 budget tackles these challenges head on:
--by helping responsible families at risk of losing their homes and
by providing quality affordable rental housing;
--by transforming neighborhoods of poverty to ensure we are not
leaving a whole generation of our children behind in our
poorest communities;
--by rebuilding the national resource that is our federally assisted
public housing stock and ensuring that its tenants are part of
the mobile, skilled workforce our new global economy requires;
and
--by leveraging private sector investments in communities to create
jobs and generate the economic growth we need to out-innovate,
out-educate, and out-build the rest of the world.
As a downpayment toward reducing the deficit, the President has
proposed a freeze on nonsecurity discretionary spending for the next 5
years, cutting the deficit by $400 billion over 10 years and bringing
this spending to the lowest share of the economy since President
Eisenhower. HUD's fiscal year 2012 budget more than meets the
President's goal--the Department's net budget authority of $41.7
billion is 2.8 percent below the fiscal year 2010 actual level of $42.9
billion. To maintain this commitment to fiscal discipline, we have
protected existing residents and made the difficult choice to reduce
funding for new units and projects, including cuts to the Community
Development Block Grant, HOME Investment Partnerships, and new
construction components of the Supportive Housing Programs for the
Elderly (section 202) and Disabled (section 811).
As discussed in more detail below, this budget balances the need
for FHA and the Government National Mortgage Association (Ginnie Mae)
to continue supporting the housing recovery in the year ahead and
ensuring that underserved borrowers have access to home ownership, with
affirmative steps to encourage the return of private capital to the
housing market. I want to thank the members of the subcommittee for
working with your colleagues to enact legislation (H.R. 5981) in the
last Congress to reform FHA's mortgage insurance premium structure.
With this authority, FHA announced a premium increase of 25 basis
points last month. Because of these reforms and others, the current
President's budget reflects estimated FHA offsetting budgetary receipts
of $9.8 billion in fiscal year 2011, which will reduce the Federal
deficit. This is far more than the $5.8 billion originally estimated by
the administration for the current fiscal year. These changes are
largely due to the premium increase and the policy changes we have made
since the President's budget was published last February. While the
ultimate receipts for fiscal year 2011 are subject to fluctuations in
loan volume, FHA is on track to outpace both of these figures in the
current fiscal year. Furthermore, in fiscal year 2012, the President's
budget projects FHA and Ginnie Mae to generate, collectively, more than
$6 billion in receipts that will help to rebuild FHA's capital reserves
and offset the Department's gross budget authority request of $47.8
billion.
I am pleased to note that, as the members of the subcommittee are
no doubt aware, the Congressional Budget Office (CBO) estimate of these
offsetting budgetary receipts in fiscal year 2012 are quite close to
those reflected in the President's budget--the magnitude of difference
between CBO's estimate and the President's budget for fiscal year 2012
is significantly smaller than in previous years at approximately $300
million. I am hopeful this new estimate will make the development of
the fiscal year 2012 HUD appropriations bill--a challenging task in any
year, and particularly so in the current fiscal climate--somewhat more
manageable. I look forward to working with the members of the
subcommittee in that effort.
Last, because winning the future also means reforming Government so
it is leaner, more transparent, and ready for the 21st century, we are
also continuing to reform the administrative infrastructure that
oversees our programs. For example, the Transformation Initiative
(TI)--important funding and programmatic flexibility the Congress
provided beginning in 2010--is enabling HUD to establish the FHA
Transformation project, which will give FHA cutting-edge, modern
financial services information technology (IT) systems.
RESPONDING TO THE EVOLVING HOUSING CRISIS
Before describing in detail FHA's 2012 budget and the future of the
housing market in which FHA will continue to play a central role, I
believe it is important to take a brief look at the response of HUD and
the administration as a whole to the housing crisis, both in its early
stages and today.
In the face of an economic crisis that experts across the political
spectrum predicted could turn into the next Great Depression, the Obama
administration had no choice but to step in with a plan to aggressively
confront the economic crisis as soon as we took office, including
taking steps to stabilize the housing market. The Federal Reserve and
the Department of the Treasury helped keep mortgage interest rates at
record lows with combined mortgage-backed securities purchases of
almost $1.5 trillion. Because low-interest rates only matter if there
are mortgages available at those rates, the administration also
provided critical support for the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac), while FHA and Ginnie Mae stepped in to play critical
countercyclical roles in helping to stem the crisis and enabling a
robust refinancing market to emerge.
As reported in the Obama administration's March Housing Scorecard,
since April 2009, nearly 13 million homeowners have been able to
refinance their mortgages to benefit from lower-interest rates, saving
them an average of $140 per month or $17.6 billion annually. In
addition, the administration proposed, and the Congress enacted, a
homebuyer tax credit to spur demand in the devastated housing sector.
We also took significant steps to help families keep their homes--
through mortgage modifications and FHA's loss mitigation efforts.
The results of these extraordinary actions are clear. Since April
2009, more than 4.4 million borrowers have received restructured
mortgages, including more than 1.5 million Home Affordable Modification
Program (HAMP) trial modification starts, more than 775,000 FHA loss
mitigation and early delinquency interventions, and more than 2.1
million proprietary modifications under HOPE Now--more than twice the
number of foreclosures completed in that time. Today, monthly
foreclosure starts are down more than 30,000 per month from this same
time 1 year ago. I would note that while the sharp decline may be
partially attributed to servicer process reviews in light of
foreclosure processing deficiencies, the number of homeowners entering
delinquency in the first place was down significantly even before these
reviews began. That said, this number may trend upwards as servicers
revise and resubmit foreclosure paperwork in coming months,
Additionally, FHA and HUD recently launched two programs to address
the two most pressing problems facing the housing market, negative
equity and unemployment.
--In September 2010, FHA launched the FHA Short Refinance Option to
assist non-FHA borrowers to refinance their underwater
mortgages into sustainable fixed rate, FHA-insured mortgages.
This option provides an additional opportunity for lenders to
voluntarily offer principal writedowns and restructure loans
for some families who owe more than their home is worth. To
date, more than 400 applications have been submitted by a wide
diversity of lenders and four large servicers have announced
that they are finalizing development of the infrastructure that
is required to participate in this program and voluntarily
offer principal writedowns to select underwater borrowers,
which will benefit homeowners by reducing their monthly
payments and addressing negative equity, while also
significantly reducing the investors' risk of default.
--As part of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act), the Congress provided HUD
authority and funds to assist unemployed and underemployed
homeowners struggling to make their mortgage payments via the
Emergency Homeowner Loan Program (EHLP). Last week, HUD
announced that five States--Connecticut, Delaware, Idaho,
Maryland, and Pennsylvania--have been approved to provide a
combined total of almost $200 million of assistance from these
funds. These States are expected to be ready to accept
applications as soon as next week to help eligible residents in
these States. HUD continues to responsibly develop additional
components of the program to serve the remaining 27 States that
have been awarded EHLP funds, and we will announce additional
details and program specifics for these States in the coming
weeks.
FHA'S FISCAL YEAR 2012 BUDGET
The number of borrowers who depend on FHA for access to mortgage
financing has increased greatly during this economic recovery as access
to private capital has contracted in the recent difficult economic
period. In fiscal year 2012, HUD is requesting $400 billion in loan
guarantee authority for the Mutual Mortgage Insurance Fund, which will
provide an estimated 1.2 million single-family mortgages. In addition,
HUD is requesting $25 billion in loan guarantee authority for the
General and Special Risk Insurance Fund, which will enable FHA to
insure an estimated 190,000 units in multifamily housing properties and
an estimated 98,000 beds in healthcare facilities.
As housing markets continue to be stressed, FHA is taking on
business that is resulting in a portfolio of historically high borrower
credit quality. These new loan guarantees and mortgage insurance
premiums that they generate are providing net income that can be used
both to offset claim expenses on the earlier books and to start
rebuilding FHA's capital position.
FHA Multifamily Mortgage Insurance
With more than one-third of all American families renting their
homes, during this time of economic hardship for so many it is more
important than ever to provide a sufficient supply of affordable rental
homes for low-income families. Multifamily mortgage insurance programs
make critical contributions toward the Department's mission of creating
strong, sustainable, inclusive communities and quality affordable homes
for all by expanding the supply of rental housing in areas where they
are most needed, and by preserving the affordability and quality of
both federally assisted and private unassisted rental housing. The role
of FHA's multifamily mortgage insurance programs is especially
significant in the current economic climate. Driven by low-interest
rates, more constrained lending in the conventional mortgage market,
and improvements in HUD business operations, demand for FHA multifamily
programs has increased dramatically. At this time of unprecedented
stress in the financial markets, FHA multifamily programs provide
necessary liquidity so that apartment construction and rehabilitation
can continue. FHA financing is often paired with low-income housing tax
credits, rental subsidies for low- and moderate-income families, tax-
exempt bond financing, and/or other State and local resources to expand
the offering of affordable units in areas where they are needed most.
Multifamily mortgage insurance programs also contribute significantly
to local revitalization efforts and economies by providing liquidity to
uniquely sustainable projects located in centers of job growth, near
transportation and other community opportunities.
In 2008, FHA supported the development of about 49,000 rental
homes. Now, however, conditions are very different, reflecting the
sharp decline in fully private financing and most notably commercial
mortgage-backed securities. In 2010 alone, FHA supported the
development or refinancing of more than 150,000 rental units with a
total dollar volume of nearly $11 billion--almost four times the level
of 2 years earlier, and now almost 25 percent of the multifamily
market. This activity is projected to increase further to $13.1 billion
in 2011 and to be at a level of $12.8 billion in 2012. HUD estimates
that these construction volumes will support up to 85,000 direct jobs
annually.
I'd like to thank the Congress for passing legislation last
summer--H.R. 5872, the General and Special Risk Insurance Funds
Availability Act of 2010--to increase FHA's commitment authority for
our multifamily and healthcare facilities insurance programs. This was
a key step to help facilitate the continued production and refinancing
of multifamily properties and healthcare facilities. To ensure that
these programs continue to operate responsibly despite the
unprecedented demand, FHA simultaneously implemented the most
significant reforms to its multifamily programs to strengthen
underwriting guidelines and minimize financial risk to taxpayers while
providing this critical support.
FHA-Insured Healthcare Facilities
In fiscal year 2011, FHA is continuing to provide critical support
to enable the construction and refinancing of acute-care hospitals,
skilled nursing, assisted living, and board and care facilities.
Additionally, these projects contribute to stimulating the local
community economy where the project is based as well, expanding
employment, and reducing healthcare capital costs. In fiscal year 2010,
17 hospital facilities received commitments to advance their mission in
communities throughout the country. For fiscal year 2010, the total
construction expenditures for all hospital commitments amounted to $1.4
billion, which HUD estimates will result in 15,465 new direct jobs that
will be created during construction, with $3.9 billion of overall
economic benefit. Following construction, fiscal year 2010 projects
will generate estimated annual new economic activity of $1.4 billion
and 8,464 new jobs.
Demand for section 232 Residential Care Facilities (Skilled
Nursing, Assisted Living, and Board and Care Facilities) has also
increased. FHA considered 347 applications and issued commitments for
318 facilities in fiscal year 2010. As of March 18, 2011, an additional
241 insurance commitments have already been issued in fiscal year 2011
for 232 program applicants serving the senior housing market. Through
LEAN processing methods and high productivity from FHA staff members,
this industry-generated volume is being addressed as responsibly as
possible given staffing and capacity constraints.
Home Equity Conversion Mortgages
In October, FHA launched the Home Equity Conversion Mortgages
(HECM) Saver product. Designed as a second reverse mortgage option for
senior home owners to tap into their equity, the HECM Saver product has
lower upfront loan closing costs and is optimal for homeowners who want
to borrow a smaller amount than that which would be available with a
HECM Standard loan.
HECM Saver has a nominal upfront premium of only 0.01 percent of
the property's value. Under the HECM Standard option, the upfront
premium remains at 2 percent. The mortgage insurance premium for both
HECM Saver and HECM Standard is charged monthly at an annual rate of
1.25 percent of the outstanding loan balance. The 2012 President's
budget request estimates that these two programs will generate $304
million in receipts.
Borrowers using the Saver option have access to home equity in
amounts that are between 10-18 percent less than would be available
with the HECM Standard option. The reduction equity take-out for Saver
substantially lowers risk to the FHA Insurance Fund, and thus permits
the virtual elimination of the upfront premium charge.
HECM Standard remains as an option for senior home owners who need
to tap the highest-possible home equity to cover living expenses and/or
healthcare costs, while continuing to live in their homes without
having to make the mortgage payments required with a traditional
mortgage or home equity loan.
Transformation Initiative
Winning the future means reforming Government so it's leaner,
transparent, and ready for the 21st century. While HUD programs already
make a significant difference in the lives of ordinary Americans, this
administration is also committed to making Government more efficient,
more effective, and more accountable. The fiscal year 2012 budget
provides up to $120 million for the TI Fund to support cutting edge
research and demonstrations and technical assistance to our partners.
In fiscal year 2010, thanks to the TI Fund, HUD began to fundamentally
alter how we approached our investments in delivering technical and
capacity-building assistance, conducting research demonstrations, and
maintaining and upgrading our IT systems so that we can hold ourselves
and our local partners accountable for the outcomes needed to achieve
the Department's strategic goals.
Twenty-First-Century Technology To Protect the Taxpayer's
Investment
In fiscal years 2010 and 2011, IT investments constituted the
largest share of proposed TI project funding, $122.5 million was
allocated for IT in fiscal year 2010 and $119 million was requested in
fiscal year 2011. The Department's careful investment planning has
prepared us to act responsibly to modernize our use of IT to meet
today's mission challenges. Our intent is to fully leverage these
resources to meet our transformation needs. Additional funding was not
requested in fiscal year 2012 on the presumption that sufficient
funding would be available to support these projects for fiscal year
2012, between prior-year TI funding and the Working Capital Fund.
One of the top-priority IT projects is the FHA Transformation
project, which involves the development of a modern financial services
IT environment to better manage and mitigate counterparty risk across
all of FHA's insurance programs. The new tools will minimize the
exposure of our insurance funds and support the restoration of the
capital reserve ratio to congressionally mandated levels by enabling
risk detection, fraud prevention and the capture of critical data
points at the front-end of the loan life cycle. More simply put, FHA
Transformation will enable HUD to identify trends, and seamlessly take
action, before problems occur. This approach will protect consumers and
the economy by ensuring that lenders adhere to safe underwriting
standards. Importantly, FHA Transformation will also allow HUD to start
the careful process of migrating relevant portions of our legacy
applications, most of which were built in a 1970s era programming
language, to a more cost-effective platform.
In addition to prior-year TI fund transfers, in fiscal year 2012
HUD will utilize $315 million in Working Capital funding to support
HUD's transformation efforts, providing resources for the development
of, modification to, and infrastructure for department-wide information
technology systems.
Housing Counseling Assistance
Each year, HUD awards grants to hundreds of local counseling
agencies and State Housing Finance Agencies that offer a variety of
services, which are especially critical in today's economic climate.
HUD-approved counselors help clients learn how to avoid foreclosure,
how to purchase or rent a home, how to improve credit scores, and how
to qualify for a reverse mortgage. In 2009, HUD assisted more than 2.5
million families through its housing counseling program, including 1.58
million potential and current homeowners with issues pertaining to
mortgages and financing of their homes. In 2010, HUD awarded $79
million for housing counseling grants, a 27-percent increase over its
2009 funding.
In fiscal year 2012, HUD is requesting $88 million in Housing
Counseling Assistance. The primary benefits of the program are to
expand home ownership opportunities, improve access to affordable
housing and preserve home ownership. With this level of funding, HUD
anticipates serving as many as 318,187 low- to moderate-income
families, as well as training approximately 4,400 counselors.
Salaries and Expenses--Flexibility To Respond in a Crisis
As the subcommittee knows, HUD's salaries and expenses budget is
divided into multiple sub-accounts, with limited transfer and
reprogramming flexibility. While the Department has once again
submitted this portion of the budget proposal in that structure, recent
FHA and Ginnie Mae staffing needs have illustrated the challenges of
proposing a personnel plan a full year and a half prior to the onset of
the fiscal year. Events, including developments related to the housing
crisis, can intervene and the Department needs the flexibility to
respond. Accordingly, I hope that we can work with the subcommittee to
strike an appropriate balance between the need for transparency and
oversight of HUD's salary and expenses expenditures, and this need to
be able to respond nimbly to changing circumstances.
In the fiscal year 2012 budget, we have proposed to restructure the
Executive Direction account by removing subfunction allocations to
provide the Department with the flexibility needed to respond promptly
to emerging issues or unanticipated needs as they arise throughout the
year. Moreover, we would like to explore with your subcommittee, the
possibility of providing additional administrative flexibilities in
accounts funding salaries and expenses across the Department. Over the
past 2 years, it has become clear to us that the administrative burden
and lack of flexibility afforded by the current structure outweighs the
potential management benefits.
Ginnie Mae Budget Request for Salaries and Expenses as a
Model
Our budget request with respect to Ginnie Mae's staffing needs,
provides an example of the kind of flexibility that can be achieved to
enable greater capacity, service, and protection to taxpayers, without
requiring additional appropriations. In light of Ginnie Mae's vastly
increased market share (from 4 percent to more than 30 percent in the
past few years) and a guaranty portfolio that now tops $1 trillion, the
fiscal year 2012 request proposes to fund its personnel expenses
through commitment and multiclass fees rather than through a separate
appropriation for personnel compensation and benefits. This will allow
Ginnie Mae to increase its staff level to strengthen risk management
and oversight, and to move in-house some functions that are performed
by contractors.
Our budget proposal affords Ginnie Mae more flexibility in funding
its critical personnel and administrative needs. Importantly, the
Congress will retain its role in determining annual Ginnie Mae funding.
However, with receipts accumulating in Ginnie Mae's program account, a
ready source of funding will be available to help the agency fund both
current needs along with contingencies that may arise in the future. In
addition, the budget allows Ginnie Mae to increase the amount for
salaries and expenses if its volume of guaranty commitments rises above
a specified level. The budget proposes to allocate $100 for salaries
and expenses for each $1 million of guaranty commitments exceeding $300
billion. As Ginnie Mae's role in the housing finance market continues
to grow, it is critical that the agency have this additional
flexibility to be able to respond to market needs. This proposal
positions Ginnie Mae to continue to effectively and responsibly bring
global capital into the American housing finance system.
With respect to FHA, we have requested a significant increase in
staffing in the fiscal year 2012 budget--92 additional FTEs compared to
fiscal year 2010 enacted levels.
REVIEW OF FHA'S FINANCIAL CONDITION
Results From FHA Reforms to Date
As you know from the Secretary's Annual Report to Congress on the
Financial Status of the FHA Mutual Mortgage Insurance (MMI) Fund at the
end of fiscal year 2009, the secondary reserves held in FHA's Capital
Reserve account to support single-family loan guarantees had fallen
below the required 2-percent level--to 0.53 percent of the total
insurance in-force. At the same time, total reserves held in the
Capital and the Financing accounts at that time were at an historical
high of more than $31 billion. Total reserves grew again to more than
$33 billion in fiscal year 2010. These funds are available to cover
potential future losses on outstanding loan guarantees. The independent
actuarial study for fiscal year 2010 indicated that these would be
sufficient for even a stressed scenario of loan performance over the
next 5 years. Even prior to the release of the fiscal year 2009
actuarial review that indicated capital reserves had fallen below the
statutory threshold, we took several steps to strengthen the fund.
Today, I am pleased to inform you that tangible, measurable progress
has been achieved and we continue to see improvements in the financial
condition of the fund, while holding lenders more accountable, and
reducing risk to taxpayers.
Making that progress required FHA to put in place the most sweeping
combination of reforms to credit policy, risk management, lender
enforcement, and consumer protection in the agency's history. These
reforms have strengthened its financial condition and minimized risk to
taxpayers, while allowing FHA to continue fulfilling our mission of
providing responsible access to home ownership for first-time
homebuyers and in underserved markets.
Specifically, FHA implemented a two-step credit score policy for
FHA borrowers. Those with credit scores below 580 are now required to
contribute a minimum downpayment of 10 percent, or have equity of 10
percent at the time of refinance. Only those with stronger credit
scores are eligible for FHA-insured mortgages with the minimum 3.5
percent downpayment.
To balance the need to provide access to our mortgage markets with
the need to protect taxpayers from financial risk, we established FHA's
first Office of Risk Management. With this new office and additional
staffing, FHA is expanding its capacity to assess financial and
operational risk, perform more sophisticated data analysis, and respond
to market developments.
Further, FHA has strengthened credit and risk controls--toughening
requirements on FHA's Streamlined Refinance program, making several
improvements to the appraisal process and to condominium policies, and
implementing the two-step credit score policy discussed above. We are
very grateful for the support that the Congress has provided to our
efforts to reduce fraud and risk. Through the $20 million Combating
Mortgage Fraud funds that the Congress granted HUD in fiscal year 2010,
we have begun to implement several risk management and systems
modernization reforms to incorporate modern risk and fraud tools and
counterparty data consolidation. Additionally, FHA introduced policy
changes and improved lender oversight and enforcement to increase the
quality of FHA-insured loans.
As a result of these actions, FHA finds itself in a stronger
position today. In particular:
--The quality of loans endorsed in 2009 and 2010--the years FHA has
done the most significant volume--is much improved. Fiscal year
2010 is the highest quality FHA book-of-business on record, and
fiscal year 2011 may prove to be even better.
--The credit-score distribution for new insurance continues to
improve. The average credit score on current insurance
endorsements has risen to 700. And in the second-half of
calendar year 2010, average credit scores were equally strong
across refinance and purchase books-of-business.
--Loan performance, as measured by early period delinquency and by
seasonally adjusted serious delinquency rates, continues to
show significant improvement from the high rates experienced in
2007 and 2008.\1\
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\1\ HUD's Annual Report to Congress Regarding the Financial Status
of the FHA Mutual Mortgage Insurance Fund fiscal year 2010 can be found
at http://www.hud.gov/offices/hsg/rmra/oe/rpts/actr/
2010actr_subltr.pdf.
---------------------------------------------------------------------------
--FHA's seasonally adjusted 90+ day delinquency rate in December 2010
was 5.8 percent, compared to 7.45 percent in December 2009.
Summary of Fiscal Year 2010 Actuarial Review
Total capital resources (combined Capital Reserve account and
Financing account) in fiscal year 2010 increased by $1.5 billion to
$33.3 billion. At the same time, the overall capital ratio held steady
at 0.5 percent reflecting that more conservative economic forecasts and
model changes offset the benefits of improved borrower credit profiles
and increased premium income. On a stand-alone basis, had capital
resources not been shifted from the forward loan accounts to HECM
accounts to cover HECM budget re-estimates, the capital ratio of
single-family forward loans (96 percent of the portfolio) would have
increased from 0.42 percent in fiscal year 2009 to 0.79 percent in
fiscal year 2010, demonstrating significant improvement in loan quality
and underlying reserves. Without any additional policy actions, and
incorporating conservative economic forecasts, the capital ratio for
the entire MMI Fund is projected by the independent actuaries to exceed
the 2-percent statutory requirement early in 2015. Furthermore, we have
implemented a wide range of additional policy actions that are expected
to strengthen the fund even more quickly than forecasted.
While we are not yet completely out of the woods based on the
evidence we're seeing, FHA is weathering the economic storm. And we're
doing so, Madam Chairwoman, while simultaneously reducing financial
risk to taxpayers and helping to create a firm foundation for the
recovery of the housing finance system.
The Need for FHA Reform Legislation
As discussed, within the existing authorities granted to us by the
Congress, we have already begun the necessary process of making changes
to FHA to ensure that it will be able continue its mission. Moving
forward, we look to the Congress to pass FHA reform legislation that
enhances our lender enforcement capabilities and risk management
efforts that are critical to our ability to monitor lender performance
and ensure compliance, among other things. Indeed, last year the House
of Representatives passed an FHA reform bill, H.R. 5072, containing an
array of changes along these lines, and, while similar legislation was
introduced in the Senate, action on the bill was not completed. I urge
the Congress to make passage of legislation along these lines a top
priority in the 112th Congress. In addition to provisions strengthening
FHA's lender enforcement ability, the 111th Congress bill also included
technical clarifications that will allow third-party loan originators
to close FHA-insured loans in their name. This third-party originator
provision is particularly important to ensuring that several hundred
community banks are able to continue originating FHA loans.
Additionally, HUD is seeking congressional authority to extend FHA's
ability to hold all lenders to the same standard and permit FHA to
recoup losses through required indemnification for loans that were
improperly originated and for which the error may have impacted the
original loan decision, or in which fraud or misrepresentation were
involved. We also hope to work with the Congress to give FHA additional
flexibility to respond to stress in the housing market and to manage
its risk more effectively. This will mean giving FHA flexibility to
adjust fees and programmatic parameters more nimbly than it can today.
FHA should also have the technology and talent needed to run a world-
class financial institution.
THE FUTURE OF HOUSING FINANCE
Toward a New System of Housing Finance
Despite all of the efforts to date, there is much more to do. We
must continue to take steps to facilitate the return of private capital
to the housing finance system in a responsible way. Last summer, the
Congress passed, and the President signed, sweeping financial reform
legislation. Crucially, the Dodd-Frank Act provides vital protections
for consumers and investors that will help end abusive practices in the
mortgage market and improve the stability of the overall housing
finance market.
In keeping with our obligations under the Dodd-Frank Act, the Obama
administration recently delivered a report to the Congress, Reforming
America's Housing Finance Market, which provides a path forward for
reforming our Nation's housing finance system. The report outlines
steps that will be taken to wind down Fannie Mae and Freddie Mac and
help bring private capital back to the market in a first loss position.
Moreover, it describes how to fix fundamental flaws in the mortgage
markets and better target the Government's support for a full range of
housing that is affordable for its occupants, and lays out choices for
longer-term reforms.
Bringing private capital back into the housing finance system does
not mean eliminating all Government involvement in housing finance. We
believe that a Government role, targeted correctly, and with the right
protections for taxpayers, should remain an important component of any
future system. That is why all three of the reform options we lay out
in the white paper include a strong, resilient FHA and solid consumer
and investor protections.
To that end, reforming and strengthening FHA is the first of four
primary areas of reform to achieve a system with transparent and
targeted support for mortgage access and housing affordability. The
other crucial components of reform are a commitment to affordable
rental housing, a flexible and transparent funding source for access
and affordability initiatives, and strong measures to ensure that
capital is available to creditworthy borrowers in all communities,
including rural areas, economically distressed regions, and low-income
communities.
The Importance of a Robust and Responsible Private Mortgage Market
Today, FHA is the largest insurer of mortgages in the world, with a
portfolio that today exceeds $1 trillion, and a history that includes
insuring more than 39 million home mortgages and 52,000 multifamily
project mortgages since 1934.
But a critical component to further recovery of the broader
economy, and to reducing the financial risk to taxpayers, is to
facilitate the return of private capital to the housing finance system
in a responsible way. This was a central goal of the administration's
recently released report on Reforming America's Housing Finance Market,
which proposed to wind down Fannie Mae and Freddie Mac, fix fundamental
flaws in the mortgage markets, make the Government's support for
affordable housing explicit and better targeted, and provide choices
for longer-term reforms. The return of private capital is particularly
important given that today, Fannie Mae, Freddie Mac, FHA, and Ginnie
Mae collectively insure or guarantee more than 9 out of every 10 new
mortgages.
During the height of the housing boom in 2006, FHA-insured
mortgages constituted less than 4 percent of the number of new home
purchases. This was a significant decrease from FHA's historically
traditional share of approximately 10-15 percent, and an indication
that the private sector was aggressively extending credit. All too
painfully, we learned that this extension was often irresponsible. As
poorly underwritten subprime loans and other products that were
securitized into private label securities (PLS) began to default at an
alarming rate, their defaults led to losses throughout the private
market and private capital vanished from the housing sector at an
unprecedented pace--in 2006, more than $1 trillion of such mortgages
were securitized into PLS; in 2010, that figure was less than $60
billion.\2\
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\2\ Source: Inside Mortgage Finance, HMDA, and Mortgage Bankers
Association.
---------------------------------------------------------------------------
FHA's temporarily elevated market share of more than 20 percent of
the overall loan volume (home purchases and refinances) is the result
of our efforts to fulfill our mission to be a countercyclical
facilitator of responsible capital liquidity in the housing sector at
times when the private sector exits the market abruptly. As the
subcommittee knows, FHA does not lend directly to homeowners, but
instead insures lenders against losses that may result in the event of
a borrower default, under the condition that lenders are required to
abide by extensive documentation and underwriting guidelines to
originate sustainable mortgages, as well as providing numerous loss
mitigation opportunities to help borrowers avoid default or
foreclosure.
The most recent data shows that 60 percent of African-American and
Latino homebuyers purchase homes with FHA backing.\3\ FHA thus plays a
vital role in opening up access to home ownership for the underserved
in our country.
---------------------------------------------------------------------------
\3\ HUD analysis of 2009 Home Mortgage Disclosure Act data.
---------------------------------------------------------------------------
A Reformed and Strengthened FHA
Strengthening and reforming FHA in a way that is healthy for its
long-term finances and ensures that FHA is able to continue its mission
of providing access to mortgages for low- and moderate-income families
is a central component of broader systematic reforms. While FHA has
already changed policy to require that borrowers with lower FICO scores
make larger downpayments, FHA will consider other options, such as
lowering the maximum loan-to-value ratio for qualifying mortgages more
broadly. In considering how to apply such options, FHA will continue to
balance the need to manage prudently the risk to FHA and the borrower
with its efforts to ensure access to affordable loans for lower- and
middle-income Americans, including providing access to home ownership
for first-time homebuyers and underserved markets.
FHA will take any steps for reform carefully to ensure that they do
not undermine the broader recovery of the housing market. Similarly, as
we consider changes in such areas as downpayments and loan-to-value
ratios, we will make sure to retain the flexibility to respond to
changing market conditions, so that we are able to manage risk, and
maintain access, as effectively as possible.
Some have expressed concerns that the increases to the monthly
premium set to go into effect next month--on the order of $30 per month
for the typical home-purchase borrower--and any increase in downpayment
requirements have the potential to excessively restrict access to
credit or perpetuate a dual credit market. We believe that the benefit
to the financial health of FHA of the relatively modest premium
increase is appropriately balanced with the need to maintain access, as
the change remains affordable for almost all homebuyers who would
qualify for a new loan. Similarly, we will strongly consider the impact
on access with any proposal to increase downpayment requirements.
Proposed Rule for Qualified Residential Mortgage
Last month, HUD joined with the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the Federal
Housing Finance Agency, the Federal Reserve, and the Securities and
Exchange Commission to announce the consideration and release of their
Notice of Proposed Rulemaking for section 941 of the Dodd-Frank Act,
which sets proposed rules to implement the credit risk retention
requirements for asset-backed securities and sets a 60-day comment
period where all stakeholders are able to comment and provide feedback.
Following this comment period, the rule writers will consider all
comments received before releasing final rules.
The goal of the proposed rule is to provide clarity and rules of
the road to the securitization markets. The proposed rule is one part
of the administration's goal of bringing private capital back into the
housing finance system.
Getting this right is critical. With the financial crisis, we saw
how bundling and packaging mortgages to sell on Wall Street with no
accountability helped lead to the erosion of lending and underwriting
standards that fed the housing boom and deepened the housing bust. The
Dodd-Frank Act requires that securitizers or originators have ``skin in
the game'' by retaining at least 5 percent of the credit risk and the
rule proposed today sets out options to accomplish that mandate.
Importantly, the rule seeks to define qualified residential
mortgages--the loans that would not be subject to the risk retention
requirements. Much debate will center on the size of downpayments.
While there is no question that larger downpayments correlate with
better loan performance, downpayments only tell part of the story.
That's why we have laid out two alternatives, one requiring a 10-
percent downpayment and another requiring 20 percent.
We look forward to comments from stakeholders on the relative
merits of these choices, so that we strike the right balance between
managing risk and maintaining access to safe, responsible home
ownership.
CONCLUSION
Madam Chairwoman, between our budget request and the Obama
administration's proposals to reform the housing finance system, it is
clear that FHA will continue to play a central role in the continued
recovery of the housing market--particularly its ongoing commitment to
provide access and affordability to low- and middle-income Americans.
And as the reforms we have already made demonstrate, FHA has the
capacity to perform this role in a way that minimizes risk to the
taxpayer.
I look forward to working with this subcommittee--and this
Congress--to ensure that FHA has the tools it needs to fulfill that
mission. Madam Chairwoman, thank you again for this opportunity to
testify. I would be glad to respond to any questions.
GOVERNMENT SHUTDOWN
Senator Murray. Thank you very much, Mr. Secretary. And we
will put your entire statement into the record for all of our
members.
We've all been talking about it--obviously, this hearing is
about writing the fiscal year 2012 appropriations bill--but we
are all very concerned about finishing the fiscal year 2011
budget, and the concern about the prospects of a Government
shutdown. There are a lot of consequences, obviously. You
mentioned a few.
But I wanted to ask you specifically today--particularly
for Americans hoping to buy a home with FHA insurance, what are
the consequences if Government shuts down?
Secretary Donovan. Quite simply, if there is a shutdown,
FHA cannot endorse any further loans. Individual lenders would
have the ability to continue to fund loans on their own. They
would have to draw funding from their own balance sheets to do
that, under the hope that they could then come back and insure
those once the shutdown was ended.
But unlike in the prior shutdown, when FHA represented a
very small fraction of the market, given that we are endorsing
close to $30 billion in loans a month, I am very concerned that
a significant number of lenders would not choose to continue to
close on those loans, and particularly, if there were any
extended period that the shutdown continued, that both the
costs of funding those loans and the potential risks of
defaults or other issues with those loans would increase the
pressure on lenders to stop funding loans during that period.
Senator Murray. This is going to affect a lot of people. If
you're hoping to sell your home because you're buying another
one--it could impact you, too, obviously, if you are purchasing
a home. Do we have any idea how many homebuyers would be
affected by this?
Secretary Donovan. The President spoke eloquently yesterday
about the impacts on someone on the verge of buying their first
home--80 percent of our loans went to first-time homebuyers
last year--and also, about the impact on anyone in the process
of selling their home--if you're planning to move, to take a
new job in a different location. Multiply that by the millions
of homeowners that depended on FHA financing last year. We
represented 40 percent of all home purchases in this country
last year. And so, the impact isn't just on individual
families. It's on entire communities, and the international
housing market.
So, we do have real concerns, at a time when our market
continues to be fragile, when our economy has shown real
progress with 1.8 million private sector jobs created over the
last 13 months. This is the worst time that we could introduce
that uncertainty into this fragile housing market.
Senator Murray. For any of us who have been there--known we
have to move out by a certain date, and we're waiting for a
closing to occur--this is a very, very stressful moment for
many families. So, I'm very concerned about that.
We also know that Federal funds support HUD and FHA's
efforts to oversee its growing portfolio. That would, of
course, be put on hold as well, correct?
Secretary Donovan. That's correct.
And I would also add, Madam Chair, that while the focus
today is on FHA, we have millions of families who depend on our
assistance--whether it's through vouchers, or public housing,
or a range of our other programs--more than one-half of the
residents of HUD-assisted housing are elderly or disabled. And
our ability to provide funds for the operations of those
units--the capital to do repairs on those units, and the jobs
that that creates in construction, which is an industry that's
been particularly hard-hit by the downturn--all of those are
put at risk, because we simply can't provide any further funds.
And so, while it may be a number of weeks that housing
authorities could continue to operate, the lack of payments,
particularly if there's an extended shutdown, would be very
problematic for those families as well, and put millions of
families at risk.
Senator Murray. Okay. Thank you very much for outlining it.
I think we need to understand what the consequences of this
are, and that's been very helpful.
I'm going to turn it over to Senator Collins, and then I
have a few additional questions as well.
Senator Collins. Thank you, Madam Chairman.
First, let me associate myself with the Chairman's
comments. I was thinking, having recently moved, that this
affects not only the buyer of the house, the seller, the moving
company--the ripple effects go on and on. And that's why we
simply must resolve this issue.
Mr. Secretary, I mentioned in my opening statement that I
would like you to comment on what the role of FHA would be if
Fannie Mae and Freddie Mac's roles were diminished, or the
entities were privatized. Would that have an impact on the role
played by FHA?
Secretary Donovan. Absolutely. And I think our housing
finance reform proposal that we laid out 2 months ago with the
Department of the Treasury made clear that, in all cases, we
foresee a smaller role for FHA, and a smaller role for Fannie
Mae and Freddie Mac going forward; that, simply, we must take
steps, as we've begun to do, to shrink the footprint of
Government in the housing finance market. And in particular,
the proposed increase in premiums that we have in the budget
for 2012 is an important step, along with our endorsement of
allowing the loan limits to step down on October 1, as they
would currently do without further action by the Congress.
So, having said that, in the context of believing that we
need to work to reduce the footprint of both the Government-
sponsored enterprises (GSEs) and FHA, we lay out a set of
options in the white paper, and in particular, if option 1--
which would have no additional ability for the Federal
Government to provide mortgage insurance outside of FHA--were
the path, then I think we would see a significantly increased
role of FHA relative to other options. And in particular, in
moments of crisis, it would be enormously important that FHA
have the flexibility and the ability to step up even more
significantly than it has done through this crisis. We've
reached, as I said earlier, 40 percent of the purchase market.
But in the kind of crisis that we've experienced, without a
Fannie Mae or Freddie Mac, it would be absolutely critical that
FHA could potentially go even further to ensure that the
housing market is not further damaged by the kind of crisis
that we've seen.
LOAN LIMITS
Senator Collins. At your previous appearance before this
subcommittee, you recommended a reduction in the loan limit
from $729,750 to $625,000. There are several bankers with whom
I've talked who believe that is still far too high if the goal
of Government is to try to make housing more accessible to
lower- and middle-income families. What is your response to
that criticism?
Secretary Donovan. The administration believes that we
ought to work together with the Congress to design lower limits
for FHA beyond the initial step on October 1.
Having said that, it is absolutely critical that we do that
in the context of what the housing finance system would look
like more broadly. In other words, if we have a well-designed,
targeted, explicit guarantee that would be available outside of
FHA, I think it would be wise to look at a reduction of those
loan limits that would go further than if we did not have an
alternative mechanism for guaranteeing loans, either in a
crisis or during more normal times in the market. Because,
frankly, FHA would be called on, as I just said, to do more
without some alternative form of explicit, targeted guarantee.
And so, I think we can't, in the absence of coming to some
agreement with the Congress about the broader solutions for the
housing finance market, be too specific about what an FHA loan
limit would look like, other than to say it should be lower
than the $625,000 that we've talked about.
Senator Collins. Thank you.
Senator Murray. Senator Blunt.
STATEMENT OF SENATOR ROY BLUNT
Senator Blunt. Thank you, Chairman, just a couple of
questions quickly. I know we're on a timeframe here, and I
appreciate that.
So, what impact does it have on the housing market when
you--this may be in your prepared statement, too, Secretary, I
apologize if I've missed this already--if you lower this limit?
How does that impact an already fragile housing market? Are you
concerned about that?
Secretary Donovan. What we have seen, in fact, is that
there is a relatively small share of FHA's overall lending,
significantly less than 10 percent, that is above that $625,000
limit at this point. So, that initial step----
Senator Blunt. Significantly lower than what?
Secretary Donovan. Than the $625,000 limit which would go
into effect--that lower limit that would go into effect on
October 1. So, while it has some impact on FHA, the bigger
impact would be on lending by Fannie Mae and Freddie Mac. And
that would be an important step for us, to see if private
capital were to return to that level of lending, and what kind
of rates it would be at.
As we just discussed, the much more significant impact
would be to begin to look at going back down to significantly
lower limits--$417,000 was the limit before. It was raised by
the Housing and Economic Reform Act (HERA) up to the $625,000,
then to be raised further after that.
Really, what you're looking is more like about 20 to 25
percent of our lending that's between that $417,000 limit and
the $625,000 limit. So, that's really where I think we need to
have a fuller discussion with the Congress about where we ought
to go. And I would particularly mention that this will be
important in higher cost markets; a much larger share of our
lending in California, in certain metropolitan areas, like
Seattle, is at that higher limit. And so, the localized impacts
could go significantly higher than that 20 or 25 percent of our
business that I talked about.
FHA PREMIUM INCREASE
Senator Blunt. And in terms of the premiums--I know you're
talking about FHA, raising the new premium structure--what's
the likelihood that that structure will serve the purpose for
the full budget year and beyond, or that you'll have to have
another adjustment?
Secretary Donovan. First of all, the impact of the 25-
basis-point increase is in the range of $30 a month. And given
that interest rates remain very low, given that our Ginnie Mae
securities, in particular, continue to be very attractive
investments, I am not substantially concerned. We do expect
some decrease in volume. As I've said, we do expect to see
private capital return--mortgage insurers and others--to step
up as we increase the premiums. But I don't think that it will
have a major effect, and certainly not a significant effect, on
the overall national market.
I think it's very hard to say, Senator, today, without
knowing the initial impacts that the combination of a change in
loan limits and the premium structure--we've also seen Fannie
Mae and Freddie Mac increase their pricing structure as well. I
would really want to see what the impacts are, where the
housing market is, through the critical summer period that
we're going to be coming into, before I would say specifically
whether we need to continue to increase premiums or not. At
this point, given the actuarial review and where we are, I'm
confident that this premium increase will help us rebuild the
reserves to through 2012. Beyond that, I really would like to
come back once we see the initial impact and have a fuller
discussion with you.
PREPARED STATEMENT
Senator Blunt. Okay, Madam Chairman, thank you.
[The statement follows:]
Prepared Statement of Senator Roy Blunt
Thank you Chairman Murray and Ranking Member Collins for holding
today's hearing. The topics for this hearing are extremely important
and in the forefront of many people's minds.
Also, welcome back Secretary Donovan and thank you for appearing
before our subcommittee on behalf of the now acting commissioner, Bob
Ryan. As we recover from the recent housing crisis, I look forward to
serious discussions with you about our current housing finance system.
Since the crisis, Federal Housing Administration (FHA) has become
the lender of first resort for both homebuyers and homeowners who want
to refinance. FHA alone now guarantees about one-third of all home
loans, up from about 3 percent before the financial crisis. Like many,
I have grave concerns that with an implicit guarantee from the Federal
Government, this agency could be the next big bailout waiting to
happen.
FHA was to be self-sustaining and was founded to help low- to
moderate-income borrowers achieve home ownership; so it is troubling to
see this dramatic increase in lending authority. People with
substantial borrowing power should not make up such a substantial
portion of the FHA loan portfolio, and I am interested in hearing how
you plan to address this unsustainable growth.
Last year, FHA's capital-reserve ratio fell below the
congressionally mandated level of 2 percent for a second year in a row.
While I recognize that FHA is in a stronger fiscal position this year
than it was in 2009, I would like to hear when these reserves will
return to their mandatory levels and how FHA intends to keep these
reserves from dipping below 2 percent in the future.
I have serious concerns about the current vacancies in both the FHA
Commissioner and the Federal Housing Finance Agency Director positions.
In a still very fragile housing market, all agency oversight positions
must be filled without disruption and I will continue to remind the
President.
Mr. Secretary, I know you realize how serious these issues are and
I look forward to hearing your plans to keep FHA solvent and off of the
backs of the taxpayers as we consider alternatives to the Federal
Government's role in financing the housing market.
MUTUAL MORTGAGE INSURANCE FUND
Senator Murray. Thank you very much.
I think you answered my question that I was going to ask
you about the independent audit on the Mutual Mortgage
Insurance Fund (MMI Fund), and why you felt it was necessary to
raise that premium again.
Can you just give me a quick glimpse on how you determined
the size of that increase, and just let us know what your
thinking is on that?
Secretary Donovan. Yes. We did very careful analysis of the
impacts that we would see, both on the capital reserves, but
also looked at what barrier it might pose to access to home
ownership, and analyzed that across a range of income groups, a
range of markets, and felt that 25 basis points was the right
balance of helping to build our reserves and yet not impacting
particularly under-served communities that we've seen have been
particularly hurt by the downturn. And so, we felt it was the
right balance.
I also would just have to add a thank you to the
subcommittee for working with us. It would not have been
possible to implement that--a premium increase, which goes into
effect on April 18--without the very strong partnership that we
had with this subcommittee as well as your colleagues on the
Banking Committee to get that passed very quickly and give us
that flexibility. So, thank you again.
Senator Murray. Okay. Over the last 2 years, FHA has
implemented a series of reforms which you talked about in your
written testimony. These changes will improve the quality of
new loans being insured, but the MMI Fund problems right now
stem from the loans that FHA endorsed in prior years--
particularly those that it took on in the height of the housing
boom. So, the size of the losses facing FHA will be affected by
the overall recovery of the housing market, which, as we know,
continues to deal with foreclosures and depressed home values.
In fact, the current discussion on the housing market is about
the possibility of a double dip in home prices.
Are you concerned about a possible double dip?
Secretary Donovan. Certainly the data that we've seen over
the last few weeks has raised concerns about where the market
is going. We have seen declines in house prices pretty
consistently over the last few months, as well as, after a
number of months of increasing existing home sales, a decline.
There is some information through pending home sales that we
may see home sales start to trend up. And obviously, as we're
entering the spring and the summer selling seasons, which are
the strongest seasons of the year, we're going to be watching
very, very closely.
What I would say is, really, two things. First of all,
rightly, as you point out, our ability to ensure that we
continue to grow the capital reserve--there are many factors
that we control. We've taken enormous steps forward--again,
working with this subcommittee and the Banking Committee--to
improve our enforcement. We need to continue to do that so that
we weed out bad lenders and can enforce against problems that
we've seen with our existing book.
But beyond that, I think the most critical thing that we
can do is to hold servicers accountable to helping those that
can remain in their homes to do that. And frankly, what we have
found in our investigations of FHA servicers is a consistent
pattern of not helping borrowers soon enough in the process--
and that is a lose-lose situation. It's a loss for that
homeowner, obviously--devastating impacts; it's a loss for that
community, where homeowners who are paying their bills, are
current on their mortgages, see their house prices decline even
further; and it's a loss for the servicers and the investors in
those loans, because they, where they could help that family
recover and continue to see them pay, will end up taking deeper
losses on those loans because they haven't helped those
families stay in their homes.
So, that's why I'm very focused, and working closely with
my colleagues in the Administration, the State Attorneys
General, to hold those servicers accountable and to make sure
that we help families who can stay in their homes, stay in
their homes. Mark Zandi has said that if we can help an
additional 500,000 borrowers to stay in their homes, he thinks
that could make the difference between a double dip and a
stronger recovery in the housing market. So, that is a critical
focus that I have in making sure that we hold not just FHA
servicers accountable, but all servicers accountable.
LENDER OVERSIGHT AND ENFORCEMENT
Senator Murray. I personally appreciate the focus you've
put on oversight and enforcement that you've just talked about.
We know that at the height of the housing boom, really, too
many loans were poorly underwritten and putting people in
unaffordable mortgages, and here we are.
I know, I've watched carefully and seen that you've really
increased the enforcement. I know the Mortgagee Review Board
meets regularly now, and it's removed nearly 15 times as many
lenders in the last 2 years than in the previous 9 years
combined.
Can you talk a little bit about how that enforcement has
actually impacted FHA's financial standing and the performance
of FHA lenders?
Secretary Donovan. I think the most direct impact of that
is that what we've seen is substantially improved quality of
loans that we're making. As we've weeded out bad lenders, we've
seen our early payment defaults decline substantially. And
frankly, all of that comes back to benefiting the taxpayer. We
have out-performed the predictions, as I said earlier, not just
of our own actuaries, but dramatically out-performed the
predictions that CBO had for the performance of our loans. And
that is, I think, the most responsible thing that we can be
doing, particularly given the context--as you said, the
elephant in the room today is this broader budget discussion.
And the President has talked about smart government. I think
FHA is a very good example of how, through better managing
government, we can ensure that we have benefits--not just to
homeowners, but to taxpayers as well.
Senator Murray. I very much appreciate that. Thank you.
Senator Collins.
Secretary Donovan. Thank you.
FHA UNDERWRITING
Senator Collins. Thank you.
Let me follow up on the issue of problem lenders and HUD's
efforts to protect the FHA Insurance Fund from bad loans. I
note that HUD has made enormous strides in this area in recent
years, and I want to give you credit for that. But,
nevertheless, the inspector general continues to have concerns
regarding HUD's oversight of its underwriting program, despite
the significant actions that HUD has taken.
For example, there's a recent inspector general report that
says the Department missed critical chances to recover up to
$11 million in losses to the FHA's Insurance Fund on bad
mortgage loans. And what was more troubling to me is the
inspector general raised the concern that there are still
systemic problems with the underwriting of FHA-insured loans,
and the resulting costs for the Insurance Fund for loans that
just never should have been insured in the first place.
In the sample that the inspector general conducted, it
found that lenders did not properly underwrite 140 of the 284
loans reviewed--that's almost 50 percent--because they were not
properly following FHA requirements. Similarly, there was a
very recent story in USA Today that talked about a New York
mortgage company that had been flagged in October 2007, and it
says that HUD knew back then, or, FHA knew back then that this
company, Cambridge Home Capital, posed a danger to homebuyers
and repeatedly violated the agency's safe lending standards.
Even so, FHA continued to approve mortgages for this company
until June of this year, and that was nearly 3 years after the
agency had flagged this company as being potentially
fraudulent.
What is being done to ensure that when FHA's early warning
system, which is the database that flags problem lenders,
identifies a lender, that there is swift action to prevent that
lender from continuing to make more mortgages that are insured
by FHA?
Secretary Donovan. Senator Collins, first, let me just
start by saying, I am very proud of the work that we've done to
increase enforcement. And in fact, the partnership that we've
had with our inspector general has been, I think, very strong.
The inspector general report, the report that you talked about,
was actually focused on lenders that we brought to their
attention, and had identified as problem lenders through our
systems, and I would just quote from Ken Donohue when he
testified last May, that he had seen FHA do more in the last
year than he had seen in all of the previous 8 years combined
as inspector general. So, I think we've made substantial
progress.
And in particular, I would point to the fact that we have
done more enforcement actions--I think, Madam Chair, you just
cited this--15 times more enforcement actions in the past year
than we'd done in the 9 previous years combined.
Having said that, are we perfect? Do we still have a ways
to go? We are not perfect. We still have a significant distance
that I think we can go, and we should go, to strengthen those
tools. And I would really point to two things: Too often today,
our--what we call--postendorsement technical reviews, which are
really one of our ways of catching these problems, are manual,
or, we don't have the depth of automated systems that we need.
One of the critical things that we worked with this
subcommittee to do last year was to create the Transformation
Initiative (TI).
One of the two largest investments we're making with TI is
to create a much more sophisticated set of systems within FHA
that would allow us to have a structural way, a systemic way,
of identifying potential fraud and poor underwriting much
earlier in the process. So, I want to make sure that we
continue to work together to invest in the state-of-the-art
technology that will allow us to identify that fraud on a
systemic basis earlier.
The second thing I would say is, we still have limitations
in our statutory authority to be able to go after some of the
worst lenders, and in particular, to go after some of the
principals. And it is frustrating to us, for example, that we
can only terminate a branch, or a region of a lender, but not
terminate the entire company from operating in FHA through our
Neighborhood Watch system. That is one of the legislative
changes that was proposed in legislation last year that we got
close to getting done but we didn't get done. I would really
like to make sure that we continue to work with the Banking
Committee to get further authority to allow us to enforce more
strongly.
Senator Collins. Thank you.
Secretary Donovan. Thank you.
Senator Murray. Senator Blunt.
FHA COMMISSIONER VACANCY
Senator Blunt. Yes. I have one more set of questions here
that I hope will be pretty quick.
Mr. Secretary, last month David Stevens, the FHA
Commissioner, who'd only been on the job 6 or 7 months, I
think, I think started last July, announced he was going to
leave and become president of the Mortgage Bankers Association.
You haven't had a permanent Director at the Federal Housing
Finance Agency (FHFA) since 2008. I'd just like your comment.
What are we doing here, and how is this hampering your efforts
as Secretary, not having these positions filled--and when we do
fill one, I think that was confirmable, and the person's
confirmed, and then they come and go so quickly, as----
Secretary Donovan. Yes. Actually, Commissioner Stevens was
at FHA for closer to 2 years. He was a nominee right when we
came into office. It took roughly 3 months for him to get
confirmed. And so, he was there, and that is not atypical for a
commissioner to stay for 2 years. And frankly, he was pretty
clear, having worked in the private sector, that he would
return there at some point. But I think the important thing
there is that we have built a very strong team within FHA. With
Dave's help, we brought in the agency's first ever Chief Risk
Officer, Bob Ryan. The President asked Bob to be Acting
Commissioner during this period. And I'm fully confident, with
his work, the work of Vicki Bott, and Carol Galante's
leadership, that there is a very, very strong continuity, and
that while we will be nominating a successor in the coming
weeks, I'm very confident that the work that we've done
continues.
On the FHFA post, to be frank, I think, we were frustrated.
We had nominated an outstanding candidate in Joe Smith. And
because of delays in the ability to get confirmed, he was asked
to take on increased responsibilities in the State of North
Carolina and made a decision when the last Congress ended in
December that he would withdraw from the process, given the
delays that we've had. And so, I think it's absolutely critical
that we have a strong permanent nominee and leader at FHFA. I
think Ed DeMarco's done a good job as Acting Commissioner. But
the confirmation process there has really stood in the way of
our being able to get a permanent leader at FHFA.
Senator Blunt. Thank you.
Chairman, I'm sure you're probably involved in these
discussions to try to cut down the number of people that have
to go through this process. I'm supportive of that and hope
that we can give more attention to the people that we think
absolutely need attention, and be less of an impediment to
leadership in the Government generally----
Senator Murray. I'll agree with that.
Senator Blunt [continuing]. So, thank you, Chairman.
RISK RETENTION RULE
Senator Murray. Thank you.
I just have a couple more questions. I wanted to ask you,
as we continue to think about how to create a stronger, safer
housing system--managing risk is going to be a central concern.
And we have to be very careful not to overcorrect.
Looking at the administration's proposed rule for risk
retention and the definition of a qualified residential
mortgage, I do have some concerns about the impact of a 20-
percent downpayment requirement. I get the skin in the game. I
understand that. But when I think about the high cost of
housing in my State, the idea of middle-class families trying
to come up with 20 percent of a downpayment on a mortgage is
really daunting. And I really worry that we're putting home
ownership out of the ability of many middle-class Americans
today with that.
FHA demonstrated last year when it announced its new tiered
downpayment system that credit risk is more than just about
loan to value ratio--it's also about creditworthiness. So, the
risk retention rule calls for 20 percent. But I saw that you
also have an alternative for 10 percent. Can you talk a little
bit about why you put that out?
Secretary Donovan. I think you've just made an eloquent
case for why it's important that, as we are discussing this
rule--it's a proposed rule--that we have a vigorous debate
about the proper balance between downpayment requirements, and
access and affordability. Home ownership has been, continues to
be an important gateway to the middle class. And we've made, in
our broader housing finance reform proposal, a strong case that
FHA needs to continue to be a critical source of access to home
ownership by insuring that first-time homebuyers, for whom a
downpayment is typically the biggest barrier to home ownership,
can continue to get access to the wealth building and the
stability that home ownership can provide.
So, there's no question the downpayments affect
performance. But too often, I think, in this debate we focus on
downpayments and don't focus on the other aspects of
underwriting--whether it be credit history, whether it be debt-
to-income (DTI) ratios, the nature of the products that we're
talking about--all of those are critical steps. And what we've
learned from the crisis is, it's really when you start to layer
risk--low downpayments with high DTIs, with poorly chosen
products for that homeowner--all of those, when you layer them
on top of each other, lead to exponential increases in risk.
And so, we thought it was very important, as we put out the
rule, to have an alternative in the preamble that focuses on a
10 percent downpayment, rather than a 20 percent.
Again, we want to make sure, as we finalize this rule, that
we have this full and open debate. I do think it's important
that, in particular, we ensure that we don't pull up the
drawbridge, if you will, to those who can be successful
homeowners in this debate.
Senator Murray. Yes. And as you know, getting the
downpayment, can be a huge barrier, but the question is, for
many homeowners, were you able to make the mortgage payment
every month? So, creditworthiness has to be an important part
of that, and I appreciate your thoughts on that. And we'll
continue to follow it.
The same question can be asked about the GSE reform. Do we
put in place so many barriers and changes that we don't allow
average middle-class families to be able to get into the
market? And you put forward three proposals on that. Are you
thinking about that in the same context?
Secretary Donovan. Absolutely. I think part of the question
is really about what happens in a moment of crisis like we've
been through, and ensuring that we can step up our response in
a responsible way, just as I think FHA's been able to do
through this crisis.
But there's also a fundamental question about, what does
our housing finance market look like in normal times? There's
no question that we went too far.
Senator Murray. Yes.
Secretary Donovan. Seller-funded downpayments, all of the,
frankly, crazy products that we saw. People making loans that
we knew families couldn't afford on the day those loans were
made. We have to get back to safer, saner products, there's no
question. But we have to think about as well, as we've
acknowledged, that relative to the crazy place that we were,
the cost of housing finance is going to go up--we have to
balance that, those increases in costs, the strengthening of
underwriting standards, with really looking carefully at the
data and understanding where we are confident that families can
be successful homeowners. And I think we've had that experience
in FHA, and that we really bring that to this debate as we will
go forward.
Senator Murray. Yes, and I appreciate that. I mean, we all
know that we went too far, the market went too far. But we
can't overcorrect and create a situation that makes it
impossible for people to purchase homes. So, it is a tough
balance, and I appreciate your thoughts on that.
Senator Collins.
FDA'S RISK EXPOSURE
Senator Collins. Mr. Secretary, I'm curious what the impact
has been on FHA's risk exposure as a result of the increase in
the higher mortgage limit that FHA is insuring. Has that
increased the risk exposure for FHA?
Secretary Donovan. Because the loans that we've made at
these larger loan limits are relatively young--they're
relatively new loans--it's too early to definitively say
whether the performance of those loans is better or worse than
other loans, and whether they would increase the risk exposure.
There have been some faulty studies, frankly, that have looked
at this.
Our best estimate at this point, as we look at it--
obviously, with Bob Ryan's work as the first Chief Risk
Officer, this is an issue he's looked carefully at--and the
early data that we have shows that those loans perform roughly
the same as the rest of the portfolio. So, I think it's fair to
say that moving to those larger loans--particularly given that
the highest-cost loans represent a relatively small share, as
the loans that are above $625,000 represent only around 3
percent of our lending--that we really haven't seen a
significant change in our risk profile as a result of the
higher loan limits. But, we should continue to look at that as
these loans age.
Senator Collins. Because they're pretty young loans.
Secretary Donovan. Yes.
Senator Collins. What percentage of FHA's insured loans are
delinquent at this point?
Secretary Donovan. Let me get specifics. What I will say is
both our seriously delinquent share and our 30-plus day
delinquencies have declined quite consistently over the last
roughly 15 months. So, from the beginning of last year we've
seen fairly significant declines. We're in the range of 8
percent today--serious delinquency at 8.2 percent today.
And I would just point out, we'd be happy to get you more
data that looks at this in a range of ways. We analyze this by
how recently the loans were made, as well. And one of the most
encouraging things we see is, when we separate out recent
originations, we see dramatically lower early payment defaults,
and at just about every stage, as they age we've seen
significantly lower defaults on newer loans.
I would also point out that our defaults remain about one-
third of the performance of subprime loans. And so, while we do
have somewhat higher serious default rates than, for example,
prime loans in the GSE books, if you look at them compared to
the subprime default rates, which are well more than 20
percent--serious delinquencies--it's a dramatic difference, and
that you can see the sort of consistent, safe underwriting that
we've done coming through in that.
CAPITAL RESERVE RATIO
Senator Collins. My final question, because I know that we
do need to adjourn, concerns the capital reserve ratio. It's my
understanding that the ratio is currently below the
congressionally mandated level of 2 percent, and I know that
last year HUD established a performance goal to restore the
excess capital reserve ratio of the MMI Fund to the mandated
level of 2 percent by the year 2014.
Could you give us an update on whether you believe that at
the end of this fiscal year you will improve over last fiscal
year? And are you on track to reach the congressionally
mandated level by 2014?
Secretary Donovan. Based on everything that we know today,
we are somewhat ahead of the path that was laid out in the
actuarial review last year, which was to be able to get back to
the 2 percent by 2014.
The reason for that is because we have outperformed
predictions that the actuarial review made in a range of areas,
to the point where, as I said earlier, our projection is that
our receipts would be about almost $10 billion this year. Our
volume's down a little bit in the last few months. It may be
that they come in somewhat lower than that. But that's
substantially higher than what the actuary predicted and, as I
mentioned, CBO. So, the indications are good.
There are two cautions I would give to that. One is that we
have seen a buildup in pending foreclosures, so we're not
realizing claims on those. Because we've seen delays on behalf
of lenders, particularly with the problems that we've found in
servicing and in the foreclosure process, many lenders have
gone back to re-look at those processes. So, I think it's fair
to say we will see a jump in claims as those foreclosures
proceed--at least some of them--in the coming months.
I think the larger issue, though, is what we don't control.
The single largest factor in the performance or where we are in
the actuarial review in the capital ratio is the direction of
home prices. We were relatively conservative in the projections
that we used--they're independent projections, but I think they
were relatively conservative--they predicted a more than 5-
percent decline this year in house prices.
There's nothing that concerns me at this point in terms of
the performance being worse than was projected in the
actuarial. Having said that, if we do see a slowdown in the
broader economy--whether it's the effects of what's happening
overseas or other issues that would slow down the economy--a
jump in interest rates, those kind of broader macroeconomic
effects and the way that they affect house prices, is the
single biggest variable that we, frankly, don't control with
our actions at FHA, that could impact where we are on the
capital reserve ratio.
I don't want to get in the business of predicting or saying
I'm absolutely confident that we'll be in a stronger position
next year. All indications are that way, but there's lots of
time between now and then for the market to evolve.
Senator Collins. Thank you.
Senator Murray. Thank you very much.
And, Mr. Secretary, thank you so much for your statements
this morning.
ADDITIONAL COMMITTEE QUESTIONS
We will leave the record open for any additional questions
to be submitted, and we look forward to your responses.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Patty Murray
OPERATION WATCHDOG RECOMMENDATIONS
Question. Last month, the Department of Housing and Urban
Development (HUD) Office of Inspector General (OIG) issued a report
based on ``Operation Watchdog'', an initiative prompted by the Federal
Housing Administration (FHA) concerns over increasing claim rates. This
OIG focused its attention on Direct Endorsement (DE) lenders, and
discovered instances where HUD failed to identify problems in
underwriting resulting in claims paid on unqualified FHA loans. The OIG
has recommended that FHA implement procedures to review riskier loans
and that HUD seek administrative remedies to recover losses. I
understand that one of the FHA legislative reforms being sought is
indemnification authority against DE lenders, which would address part
of the OIG's concern.
How HUD is working to address the OIG recommendation?
Answer. In recent years, FHA has significantly strengthened its
ability to review and evaluate mortgagees' underwriting and servicing
operations for compliance with HUD requirements. Even before Operation
Watchdog was announced, FHA had been taking stock of its oversight and
enforcement activities and had begun to initiate several changes to its
policies and practices. Recent changes include:
--The expansion of the Credit Watch Termination Initiative to include
DE mortgagees. This endeavor allows FHA to evaluate lender
underwriting performance on a quarterly basis and take action
to quickly terminate poorly performing lenders.
--The development of comprehensive lender performance metrics and
reporting. These reporting capabilities significantly improve
FHA's ability to analyze and evaluate lender performance in
order to timely identify lenders whose performance poses
potential or actual risks to FHA.
--The pursuit of statutory authority to require indemnification by DE
mortgagees. At present, FHA only has authority to request
rather than require indemnification from DE mortgagees.
Therefore, the Department has eagerly sought legislation that
would expand its authority to require indemnification from
these lenders.
--A comprehensive overhaul of FHA's loan-level review procedures.
This effort has yielded improved risk-based targeting and
evaluation methodologies and better aligned the Department's
various loan review processes to more effectively identify
loans that do not comply with FHA's requirements.
--The development of a comprehensive counterparty risk management
information technology (IT) solution. Employing state-of-the-
art technologies and practices, these new IT tools will improve
HUD's risk analysis and recognition capabilities throughout the
FHA lending life cycle.
In sum, FHA is executing substantial changes to its policies and
procedures that are dramatically improving the Department's ability to
identify and mitigate risks to its insurance funds, via the development
of risk-based monitoring and analysis, implementation of strengthened
oversight and enforcement mechanisms, and the acquisition and
utilization of substantially improved technologies. FHA is ensuring
that it possesses the tools necessary to conduct its business in ways
that are consistent with industry best practices and appropriately
protect the Department's insurance funds. These changes were underway
long before the release of the Operation Watchdog audit report.
Operation Watchdog merely validated that the improvements FHA is
pursuing already are both necessary and appropriate.
Question. Why does HUD lack the authority to recoup losses against
these types of lenders and how will the legislation you are seeking
address this?
Answer. FHA-insured single-family mortgages are originated and
underwritten through the DE process, which permits an FHA-approved DE
lender to underwrite mortgages without FHA's prior review and submit
them directly for insurance endorsement. High-performing DE lenders
with acceptable default and claim rates may apply for approval to
participate in the Lender Insurance (LI) Program, which enables them to
endorse FHA mortgage loans without a pre-endorsement review by FHA. As
of April 30, 2011, there were 1,859 active DE lenders. Of this total,
687 were approved for participation in the LI Program.
Current statutory authority at section 256(c) of the National
Housing Act (12 U.S.C. 1715z-21) permits the Secretary to require
indemnification if a mortgage approved by the Secretary pursuant to
delegation of authority through the LI Program was not originated or
underwritten in accordance with requirements established by the
Secretary, and the Secretary pays an insurance claim within a
reasonable period specified by the Secretary. If fraud or
misrepresentation was involved in connection with the origination or
underwriting, the Secretary may require the lender to indemnify the
Secretary for the loss regardless of when an insurance claim is paid.
This existing authority only applies to indemnification by LI lenders
and does not include DE lenders that are not participants in the LI
Program.
Therefore, FHA is seeking to extend the Secretary's authority such
that HUD can require indemnification by all DE lenders, not simply
those approved for participation in the LI Program. The Secretary's
existing indemnification authority only provides recourse for FHA to
avoid or recoup losses through required indemnification for loans that
were improperly originated or underwritten, or in which fraud or
misrepresentation were involved, from LI lenders. As stated above, only
687, or 37 percent, of DE lenders, are approved LI Program
participants. Therefore, FHA would benefit from explicit authority to
require indemnification from DE lenders, and thereby recover losses
from the remaining 63 percent of lenders authorized to make
underwriting and loan approval decisions on FHA's behalf. The current
limitation on FHA's counterparty risk management authority with regard
to DE lenders poses obvious and unnecessary risks to FHA's insurance
funds. Extending the Secretary's authority to require indemnification
by lenders to include all FHA-approved DE lenders will ensure that FHA
will be able to mitigate losses arising from claims on inappropriately
or fraudulently originated or underwritten loans.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION HIRING
Question. The budget for fiscal year 2012 requests authority to
alter the way we fund the Government National Mortgage Association
(Ginnie Mae) salaries and expenses. Instead of receiving direct annual
appropriations, the budget proposes to allow Ginnie Mae to fund its
operations using fees it generates under authority provided in
appropriations bills.
I share the concern about ensuring that Ginnie Mae has the
appropriate staff to monitor its growing portfolio, which is why the
Senate bill for fiscal year 2011 proposed an increase above the
President's budget request--which actually sought to reduce funding for
Ginnie Mae staffing. However, I am not convinced that the proposal in
the budget actually addresses all of the challenges with building
Ginnie Mae's workforce. As I understand it, Ginnie Mae did not use all
of the funding the Congress provided it last year, and it wasn't the
first time Ginnie Mae lapsed funding. This suggests the problem isn't
really a question of resources.
What has been the problem with hiring at Ginnie Mae, and given that
you didn't use all of the resources allocated to Ginnie Mae last year,
how would this language address the challenge?
New Funding Structure
Answer. The President's budget request for fiscal year 2012
includes a proposal to fund Ginnie Mae with $30 million in personnel
compensation and benefits, and other administrative expenses through
collections of multiclass and commitment fees. The proposal is forward
looking and is designed to provide Ginnie Mae with flexibility to
accommodate a multiyear hiring initiative. The administration's
proposal provides Ginnie Mae with certainty as to the level of funding
that will be available in the next year and thus, Ginnie Mae will be
able to staff to that level of funding. With the new funding structure,
Ginnie Mae's hiring would not be hampered by the uncertainty and
interruptions sometimes caused by insufficient appropriations or
continuing resolutions.
During the last few fiscal years, Ginnie Mae has sought an increase
in its salaries and expense appropriation to increase our staff to
better manage the housing crisis. Small increases were approved in
fiscal year 2010 and fiscal year 2011 through reprogramming. However,
in each of those years, a continuing resolution was in place holding
agency expenditures to prior-year levels for part of the year making it
very difficult for Ginnie Mae to take full advantage of the additional
funds. In addition, even if reprogrammed funds are given in one fiscal
year, there is no guaranty that the same reprogramming will be
available the next fiscal year. Thus, in order to avoid beginning the
next fiscal year at payroll higher than the base appropriated amount,
Ginnie Mae has limited its hiring. The proposed funding structure will
provide certainty as to the level of funding available and will allow
Ginnie Mae to execute its multi-year hiring plan.
Lapsed Funds Due to Uncertainty
In recent years, HUD has not had an approved budget at the
beginning of the fiscal year and has had to operate under a continuing
resolution. The lack of certainty as to the funding level for the year
has hampered Ginnie Mae's ability to move aggressively on its planned
hiring schedule in the past few years. Under a continuing resolution
Ginnie Mae receives a fraction of the previous year's approved salaries
and expense budget until a full budget is approved.
SUPPORTING COMMUNITY BANK MORTGAGES
Question. According to estimates, nearly 70 percent of all mortgage
originations flow through the big four lenders--JPMorgan Chase, Bank of
America, Citigroup, and Wells Fargo. In the aftermath of the housing
crisis hundreds of small, community banks have failed. Yet, community
banks serve an important role and are an important part of a healthy
market. In your testimony you refer to reforms that you are proposing
that would assist small, community banks.
Can you elaborate on the current problem, and how the reforms you
are proposing would address it?
Answer. FHA began requiring the submission of audited financial
statements from Supervised Mortgagees (i.e., banks, thrifts, and credit
unions) because without receiving audited financial statements from
these institutions, FHA was not able to adequately assess their
financial stability and possession of sufficient capital. To put
supervised lenders on par with FHA's existing requirements for other
lenders, and to avoid potential losses from undercapitalized
institutions, HUD decided to begin requiring supervised entities to
submit audited financials. The failure of 157 banks in 2010 testifies
to the prudence of this policy change.
For some small FHA-approved supervised lenders that originate low
volumes of FHA loans the expense of obtaining an external audit of
their financial statements is deemed too burdensome to justify their
continued participation in FHA programs. Because many of these small
supervised lenders are located in underserved communities that possess
a limited selection of residential mortgage lending entities, small
supervised lenders' relinquishment of FHA-approval may decrease access
to FHA programs for some communities. Given FHA's present prominent
role in the Nation's mortgage market, a reduction in the availability
of FHA-insured mortgage credit could adversely impact the recovery of
some States and communities. In order to accommodate the needs of such
community banks, HUD issued a waiver in April 2011 of the new audited
financial statement requirements for small supervised lenders. Small
supervised lenders that meet the asset thresholds delineated by their
Federal regulators (the current asset threshold being $500 million)
will be permitted to submit a copy of their unaudited regulatory report
(e.g., consolidated or fourth quarter Call Report or Report of
Condition and Income, Office of Thrift Supervision Report, consolidated
or fourth quarter Thrift Financial Report, Form 10-K, NCUA Supervisory
Committee Audit) that aligns with their fiscal year end. These lenders
will also be required to submit a report on their compliance with HUD
program requirements.
The accommodations afforded to small supervised lenders, including
community banks, represent an appropriate balance between FHA's
management of counterparty risk and the Department's continued
commitment to ensuring the participation of community banks and other
small lenders in its programs.
Question. What other steps can be taken to make sure that small and
community banks can compete for mortgage business?
Answer. In addition to the measures to assist community banks
described above, HUD is also seeking legislative changes that will
expand the opportunities for small banks and other lenders to
participate in FHA programs. Another option by which community banks
and other small supervised institutions may participate in FHA programs
is through a sponsored origination relationship. Sponsored originators
are not subject to FHA lender approval, but are permitted to originate
FHA loans by partnering with an FHA-approved underwriting mortgagee.
Community banks that wish to continue originating FHA loans, but that
do not want to be subject to FHA lender approval requirements and
processes, may act as sponsored originators.
Many community banks have cited their inability under the National
Housing Act to close loans in their own names should they forfeit their
FHA approval as a deterrent to their acting as sponsored third-party
originators. FHA has proposed an amendment to 12 U.S.C. 1709(b), which
has been included in comprehensive FHA Reform legislation, that would
allow sponsored third-party originators to close loans in their names,
addressing what has been a chief concern of small community banks in
considering a switch in status from FHA-approved mortgagee to
nonapproved sponsored third-party originator. The passage of FHA's
proposed amendment (which passed the House last fall) would provide yet
another sensible solution for small community banks, while enabling FHA
to continue prudently managing its risk and mitigating losses to its
insurance funds.
Additionally, the passage of the proposed amendment to the National
Housing Act would significantly expand access to FHA programs for small
business lenders of all types without unnecessarily increasing the risk
to FHA. FHA strongly encourages the Congress to pass the proposed
amendment in order to protect FHA insurance funds and accommodate the
interests of community banks and other small lenders.
SUBCOMMITTEE RECESS
Senator Murray. And thank you again for everything.
Secretary Donovan. Thank you. Get us a budget.
Senator Murray. All right. Thank you.
This hearing is recessed.
[Whereupon, at 10:24 a.m., Thursday, April 7, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2012
----------
THURSDAY, MAY 12, 2011
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:34 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Lautenberg, Pryor, and Collins.
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
STATEMENT OF HON. J. RANDOLPH BABBITT, ADMINISTRATOR
ACCOMPANIED BY HON. CALVIN L. SCOVEL III, INSPECTOR GENERAL
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. This subcommittee will come to order.
This morning we are going to be holding a hearing on the
President's budget request for the Federal Aviation
Administration (FAA). We will be hearing testimony from the
Administrator of the FAA, Mr. Randy Babbitt, and the Inspector
General for the Department of Transportation, Mr. Calvin
Scovel.
I want to thank both of you for being here this morning,
and I look forward to hearing your testimony.
The United States is a leader in air transportation, and I
am very proud of our innovation and our safety record. For 3
out of the past 4 years, there has been less than 1 fatality
for every 100 million passengers on board commercial air
carriers. As the agency in charge of overseeing the safety of
air transportation, the FAA has built a strong record for more
than 50 years.
But while we can be proud of the safety record, we can
never believe that our work is done or let down our guard, not
even for a moment. So I am very troubled by recent news reports
that include stories about air traffic controllers falling
asleep on duty and a dramatic increase in the number of errors
committed by air traffic controllers.
The FAA made a series of announcements as more and more of
these incidents came to light. Soon after the first news
reports, the FAA promised air traffic controllers will no
longer be working alone in the middle of the night, and the FAA
would no longer use certain kinds of schedules that are known
to worsen fatigue. More recently, the FAA announced a series of
initiatives, including a new working group that will make
recommendations to improve the qualifications, placement, and
training of air traffic controllers. These initiatives may be
important work for the FAA, but I am troubled by the fact that
they came as a result of unflattering news reports, especially
when the inspector general has been sounding the alarm on these
issues for years.
Back in 2004, the inspector general recommended the FAA
develop a method for placing newly hired controllers at its
various facilities based on skill and ability. This
recommendation was repeated in 2010. In both cases, the FAA
agreed and said the agency was working on a test that would be
used in the placement of its new hires. Today, however, the FAA
still does not have an objective-reliable test it can use to
place newly hired controllers.
The FAA also knew it needed to evaluate how well graduates
from the training academy in Oklahoma City were prepared to
enter the workforce and begin their on-the-job training. In
2008, the inspector general found the FAA had not yet fulfilled
this promise. In 2010, the inspector general found academy
training was focused on short-term memorization, and facility
managers did not believe new hires were prepared for their on-
the-job training.
In short, the FAA has known about troubles with how it
trains and places newly hired controllers for a long time, and
yet, after a series of news reports, suddenly the FAA announces
a new working group to address this issue and we are supposed
to believe that in a few short months, this working group will
be able to do something the FAA could not accomplish for the
past 7 years.
So, we have been down this road before. In fact, it was
just 3 years ago that this subcommittee held a hearing with the
FAA and heard about how FAA managers allowed Southwest Airlines
to violate Federal safety regulations and punished the safety
inspector who tried to bring these violations to light. The FAA
acknowledged its safety office had an inappropriate
relationship with the very airline it was supposed to oversee.
Again, there was a history of reports and recommendations
from the inspector general. Importantly, the inspector general
found safety inspections were being missed and FAA headquarters
needed to take a more a hands-on approach to make sure
individual inspection offices were getting the job done.
I know the FAA is dedicated to its safety mission, but we
cannot afford to let news stories determine how the FAA does
its work. We need the FAA to make the right decision before an
issue gets in the news.
The Next Generation Air Transportation System (NextGen) is
another area where we need to see more from the FAA. This
subcommittee has long understood the importance of NextGen, and
until this year, we have met all of the administration's budget
requests for its modernization programs. In fact, this
subcommittee has provided targeted increases for NextGen,
giving additional funds to push for more capabilities out of
the Automatic Dependent Surveillance-Broadcast (ADS-B) program
and to see more demonstrations of network-enabled operations.
Still, even when there has been a steady stream of funding,
we have seen delays and management problems with some of the
most important capital programs. For example, the En Route
Automation Modernization (ERAM) program is now years behind the
FAA's original target, and we still do not know for sure if
this program is working well enough to control traffic at
additional sites. Only recently has the FAA started to work
hand in hand with the air traffic controllers who will be
working with the ERAM software.
This year, however, we find ourselves in a completely new
budget environment. For fiscal year 2011, the Committee enacted
the largest 1-year cut to discretionary spending in our
Nation's history, and debates over the fiscal year 2012 budget
continue to focus on spending cuts. In this kind of
environment, we cannot afford further delays and mismanagement.
We need to see a realistic strategy for funding NextGen. To
date, the FAA has filled its budget request with a laundry list
of programs and development activities and a vague promise that
somehow the agency will achieve its goals by 2018, but that
approach is not enough this year. The FAA must be able to show
how each of its programs contribute to NextGen goals, and we
need to hear a clear set of priorities from the FAA so we know
what the impact of various funding levels will be on
modernization.
We are waiting now to get a final spend plan from the FAA
on how it will distribute the funding levels provided for 2011,
but the FAA also needs to think about the impact of various
funding levels in a different way, not a year-by-year basis,
but with a long-term strategy in mind.
PREPARED STATEMENT
With that, I am going to turn it over to my ranking member,
Senator Collins, for her opening statement.
[The statement follows:]
Prepared Statement of Senator Patty Murray
The subcommittee will come to order.
This morning we will be holding a hearing on the President's budget
request for the Federal Aviation Administration (FAA).
We will be hearing testimony from the Administrator of FAA, Mr.
Randy Babbitt, and the Inspector General for the Department of
Transportation, Mr. Calvin Scovel.
I would like to thank both of you for being here this morning, and
I look forward to hearing your testimony.
PROFESSIONALISM OF AIR TRAFFIC CONTROLLERS
The United States is a leader in air transportation, and I am proud
of our innovation and our safety record. For 3 out of the past 4 years,
there has been less than 1 fatality for every 100 million passengers on
board commercial air carriers.
As the agency in charge of overseeing the safety of air
transportation, the FAA has built a strong record for more than 50
years.
But while we can be proud of this safety record, we cannot believe
that our work is done, or let down our guard--not even for a moment.
So, I am troubled by recent news reports that include stories
about:
--air traffic controllers falling asleep on duty; and
--a dramatic increase in the number of errors committed by air
traffic controllers.
The FAA made a series of announcements as more and more of these
incidents came to light. Soon after the first news reports, the FAA
promised that air traffic controllers will no longer be working alone
in the middle of the night, and that the FAA would no longer use
certain kinds of schedules that are known to worsen fatigue.
More recently, the FAA announced a series of initiatives, including
a new working group that will make recommendations to improve the
qualifications, placement, and training of air traffic controllers.
These initiatives may be important work for the FAA, but I am
troubled by the fact that they come as the result of unflattering news
reports.
Especially when the inspector general has been sounding the alarm
on these issues for years.
For example, in 2004, the inspector general recommended that the
FAA develop a method for placing newly hired controllers at its various
facilities based on skill and ability. This recommendation was repeated
in 2010. In both cases, the FAA agreed, and said that the agency was
working on a test that would be used in the placement of its new hires.
Today, however, the FAA still does not have an objective, reliable
test that it can use to place newly hired controllers.
The FAA also knew that it needed to evaluate how well graduates
from its training academy in Oklahoma City were prepared to enter the
workforce and begin their on-the-job training. In 2008, the inspector
general found that the FAA had not yet fulfilled this promise. And then
in 2010, the inspector general found that academy training was focused
on short-term memorization, and that facility managers did not believe
that new hires were prepared for their on-the-job training.
In short, the FAA has known about troubles with how it trains and
places newly hired controllers for a long time.
And yet, after series of news reports, suddenly the FAA announces a
new working group to address this issue. And we're supposed to believe
that in a few short months, this working group will be able to do
something that the FAA couldn't accomplish for the past 7 years.
We've been down this road before.
In fact, it was just 3 years ago that this subcommittee held a
hearing with the FAA and heard about how FAA managers allowed Southwest
Airlines to violate Federal safety regulations and punished the safety
inspector who tried to bring these violations to light. The FAA
acknowledged that its safety office had an inappropriate relationship
with the very airline it was supposed to oversee.
Again, there was a history of reports and recommendations from the
inspector general. Importantly, the inspector general had found that
safety inspections were being missed, and that FAA headquarters needed
to take a more hands-on approach to make sure that individual
inspection offices were getting the job done.
I know the FAA is dedicated to its safety mission. But we cannot
afford to let news stories determine how the FAA does its work. We need
the FAA to make the right decision before an issue gets in the news.
A STRATEGY FOR FUNDING NEXTGEN
The Next Generation Air Transportation System (NextGen) is another
area where we need to see more from the FAA.
This subcommittee has long understood the importance of NextGen,
and until this year, we have met all of the administration's budget
requests for its modernization programs. In fact, this subcommittee has
provided targeted increases for NextGen, giving additional funds to
push for more capabilities out of the Automatic Dependent Surveillance-
Broadcast program and to see more demonstrations of network-enabled
operations.
Still, even when there has been a steady stream of funding, we have
seen delays and management problems with some of the most important
capital programs.
For example, the En Route Automation Modernization (ERAM) program
is now years behind the FAA's original target. And we still don't know
for sure if the program is working well enough to control traffic at
additional sites. Only recently has the FAA started to working hand-in-
hand with the air traffic controllers who will be working with ERAM
software.
This year, however, we find ourselves in a completely new budget
environment. For 2011, the Committee enacted the largest 1-year cut to
discretionary spending in our Nation's history. And debates over the
2012 budget continue to focus on spending cuts.
In this kind of environment, we cannot afford further delays and
mismanagement.
We need to see a realistic strategy for funding NextGen. To date,
the FAA has filled its budget requests with a laundry list of programs
and development activities, and a vague promise that somehow the agency
will achieve its goals by 2018.
But that approach is not enough this year.
The FAA must be able to show how each of its programs contribute to
NextGen goals. And we need to hear a clear set of priorities from the
FAA, so that we know what the impact of various funding levels will be
on modernization.
We are waiting to get final spend plans from the FAA on how it will
distribute the funding levels provided for 2011. But the FAA also needs
to think about the impact of various funding levels in a different
way--not a year-by-year basis, but with a long-term strategy in mind.
With that, I will turn to my ranking member, Senator Collins, for
her opening statement.
STATEMENT OF SENATOR SUSAN COLLINS
Senator Collins. Thank you very much, Madam Chairman, for
holding this hearing on the fiscal year 2012 budget request for
the FAA.
I want to welcome our two witnesses this morning,
Administrator Babbitt and Inspector General Scovel, to our
hearing.
Let me begin my remarks by associating myself with the
comments that the chairman made about safety.
It is extremely worrisome to learn of the incidents over
the past couple of months regarding air traffic controllers who
have behaved unprofessionally. It is unacceptable that Federal
employees who are responsible for the safe arrival and
departure of our flying public were asleep on the job or
inattentive to pilot requests, and of course, in reading these
incidents, one cannot help but think that it is the tip of the
iceberg--that this problem, as the inspector general perhaps
will illuminate today, has been going on for some time, but it
has only recently come to the public's attention.
The Administrator of FAA has one of the toughest challenges
in overseeing the national airspace system, the most complex
airspace in the world. This includes monitoring more than
45,000 flights per day from commercial air, cargo, military,
and nearly 240,000 general aviation aircraft that could enter
the system at any given moment.
While there are not nearly as many flights going in and out
of the State of Maine as I would like to see, it is important
that we ensure that sufficient options are available to rural
communities, particularly those that support our smaller
municipal airports.
In rural States, such as my home State, aviation helps to
keep residents connected to the rest of the country and is a
key element in economic development. A lot of times, when we
are doing business attraction efforts in Maine, the first
question that we get is what the air service is like. FAA
resources help airports, particularly general aviation or
smaller airports with limited resources, to make the necessary
infrastructure upgrades to improve air traffic services,
availability, and safety.
Recognizing safety as the No. 1 priority, ensuring a safe
civil aviation system is also critically important to the
overall economy. According to the FAA, aviation adds $1.3
trillion to our economy and accounts for more than 11 million
jobs.
As the chairman has indicated, as we move forward to the
fiscal year 2012 budget, we will face even tougher choices than
those in the recently passed 2011 budget. It is, therefore,
essential that the FAA identifies and prioritizes programs to
ensure the least amount of consequences to safety and
operations, and I am particularly concerned about any cuts that
would delay the implementation of NextGen. The full
implementation of NextGen by 2025 will total between $20 and
$25 billion from FAA resources alone.
The airline industry also needs to be a team player in the
decisionmaking process, as it too must make an equal amount of
investments in retrofitting their aircraft. With NextGen,
however, and despite the costs, the benefits are enormous.
Airlines will see a reduction in fuel consumption. Travelers
will see fewer delays, and the environment will benefit from
lower carbon emissions.
PREPARED STATEMENT
I look forward to hearing the testimony of our witnesses
today as we consider this very important budget request.
Thank you, Madam Chairman.
[The statement follows:]
Prepared Statement of Senator Susan Collins
Good morning, and thank you Chairman Murray for holding this
hearing on the fiscal year 2012 budget request for the Federal Aviation
Administration (FAA). I welcome Administrator Babbitt and Inspector
General Scovel and thank you both for being here today.
This subcommittee faced many challenges passing the fiscal year
2011 budget in which important programs had to be reduced or
eliminated. I appreciate the leadership of Chairman Murray and am glad
we worked in a bipartisan effort.
The soaring debt of more than $14 trillion and growing poses a
grave threat to our Nation's future prosperity. We simply must rein in
our spending and get our financial house in order.
It is unacceptable that we came at all close to a government
shutdown. It is my hope that the Congress and the administration will
take a much more thoughtful and reasoned approach to the difficult task
of developing a budget for 2012 and demonstrate to the American people
that we are willing to work together to put our country back on a
strong fiscal course.
Administrator Babbitt has one of the toughest challenges overseeing
the national airspace system, the most complex airspace in the world.
This includes monitoring over 45,000 flights per day from commercial,
air cargo, military, and nearly 240,000 general aviation aircraft that
could enter the system at any given moment.
While there are not as many flights going into and out of Maine as
I would like to see, it is important we ensure that sufficient and
adequate options are available to rural communities, particularly those
that support small or municipal airports.
In rural States, such as my home State of Maine, aviation helps
keep residents connected with the rest of the country. FAA resources
help airports, particularly general aviation or small airports with
limited resources, make the necessary infrastructure upgrades to
improve air travel services and safety.
Recognizing safety as the No. 1 priority, ensuring a safe civil
aviation system is also critically important to the overall economy.
According to FAA, aviation adds $1.3 trillion to our economy and
accounts for more than 11 million jobs.
As this subcommittee moves forward to the fiscal year 2012 budget,
we will face even tougher choices than those from the recently passed
fiscal year 2011 budget. It is essential that FAA identify and
prioritize programs to ensure the least amount of impacts to safety and
operations, particularly those that could delay the implementation of
the Next Generation Air Transportation System (NextGen).
FAA estimates full implementation of NextGen by 2025 will total
between $20 and $25 billion from FAA resources alone. The airline
industry also needs to be a team player in the decisionmaking process
as they too must make an equal amount of investments retrofitting their
aircraft while struggling with unstable profits and rising operating
costs. FAA must present the benefits early enough in the process of
implementing NextGen that outweigh the costs of equipage. With NextGen,
airlines will see a reduction in fuel consumption, travelers will see
fewer delays, and the environment will benefit from lower carbon
emissions.
I also want to highlight the serious concerns as the chairman noted
in her statement. It is troubling to hear recent media reports over the
past couple of months regarding air traffic controllers who behaved
unprofessionally. It is unacceptable that Federal employees who are
responsible for the safe arrival and departure of our flying traveling
public to be asleep on the job or inattentive to pilot requests.
I appreciate the department for taking action within the Air
Traffic Organization. Accountability starts at the top with management
and I am hopeful that FAA will be able to quickly address the issues
surrounding air traffic controller and pilot fatigue and training to
avoid further incidents from occurring.
Chairman Murray, thank you and I look forward to hearing the
testimony of Administrator Babbitt and Inspector General Scovel as we
consider the fiscal year 2012 budget request of FAA.
Senator Murray. Thank you very much.
Senator Lautenberg, do you have an opening statement for
us?
STATEMENT OF SENATOR FRANK R. LAUTENBERG
Senator Lautenberg. Thank you very much, Madam Chairman.
I am pleased that we are inspired with some extra funds to
do our job here, and we welcome the President's budget for the
next year.
We are constantly wrestling with whether or not we have
adequate population, based on the outline of what should be the
number of fully trained professionals. And we see in the
airports in the New York area nowhere near the number that
should be there to manage the traffic flow. It is made up for
with trainees, but we would not like trainees going into the
operating room with us and we should not have an excessive
number of trainees doing the job of fully prepared, fully
certified controllers.
Madam Chairman, one of the things that I look at here with
some degree of--more than annoyance, and that is the extra fees
that are put on for baggage. If you want the large pretzels, it
is $1. If you take the small ones, you might have to pay only
50 cents. But these things--you do not get it when you use
other means of travel. I consider it an affront to a welcome to
travel for the average passenger. One of these days I suspect
that you are going to be charged for going to the lavatory, and
maybe they will say, okay, you do not have to pay going in, but
you have to pay getting out, some kind of scheme that will put
you under the gun, as they say.
So we have important things to do. NextGen has been NextGen
for years. We have spent billions of dollars trying to get
there and have not yet got what we consider an up-to-date plan
in place, and we have got to wrestle, as all of you know.
And I thank you both. The system is terrific. It really is
when you consider how many passengers are handled each day and
each year, and with the shortages and with the problems that we
have--despite them, thank goodness, air travel is really safe.
So I encourage us to move the budget along as we have,
Madam Chairman. I am glad that you are doing this and that we
have Senator Collins here also, people who understand what we
have got to do to improve our aviation system. So thank you
very much.
Senator Murray. Thank you very much, Senator Lautenberg.
With that, we will turn it over to the testimony from our
witnesses today and begin with Randy Babbitt.
SUMMARY STATEMENT OF HON. J. RANDOLPH BABBITT
Mr. Babbitt. Good morning, Madam Chairman, Ranking Member
Collins, subcommittee members as well. Thank you very much for
the opportunity to come in and discuss with you the
administration's budget request for the FAA for the fiscal year
of 2012.
As you have mentioned, everyone at the FAA is committed to
continuing to run the safest and most efficient airspace system
in the entire world. I want to take a moment, however, to
address some of the issues in the news recently and update you
on some of our actions.
Yesterday, we proposed a comprehensive overhaul of pilot
and crew training that will require pilots to work together and
demonstrate their skills in real-world scenarios during
training that will expose them to situations they might
actually encounter in the cockpit. This is a major effort to
strengthen performance and represents the most significant
changes in crew training in more than 20 years. With this
proposed training, we want pilots and crews to have more
training in the kinds of rare--but they do happen--type of
emergency events that test their skills and give them the
confidence to appropriately handle the situation.
In addition to this update on crew training, I want you to
be aware of the latest steps that we have taken with regard to
the incidents involving air traffic controllers who have
behaved unprofessionally.
Last month, I traveled all around the country with the
National Air Traffic Controllers Association's (NATCA) Paul
Rinaldi. We went to air traffic facilities across the Nation in
a call-to-action on professionalism. The visits reinforced for
me that we have a workforce that is committed to the safety of
this system 24 hours a day, 7 days a week, 365 days a year, but
the incidents of a few employees falling asleep on position
showed us that we have to make changes, and we have.
We have added a second controller on the midnight shifts in
some facilities where we only had one.
We made significant changes to long-time scheduling
practices that will reduce further the possibility of fatigue,
and we will do more.
We have changed management within the FAA in some critical
positions to ensure that we have the right people in the right
places.
We, unfortunately, found it necessary to terminate three
controllers who were found sleeping on the job.
We continue to review the 12 recommendations developed by a
joint FAA/NATCA task force work group that I believe you
referenced, which was undertaken more than 1 year ago in an
effort to reduce controller fatigue and do so in a
collaborative fashion.
Controllers have a responsibility to report rested and
ready to work for their shifts, and as management, we have the
responsibility to make sure that they have the opportunity for
adequate rest between those shifts. The American public trusts
us to perform our jobs and make safety the highest priority
each day, year in and year out. We are committed to making
whatever difficult changes are necessary to preserve that
trust.
The President's 2012 budget is designed to maintain and
enhance operational safety, as well as to invest in NextGen
infrastructure and technology. We are facing a very pivotal
time in aviation history. We are transforming to NextGen. We
are moving from ground-based radar to a satellite-based style
of navigation. Air travel will, in fact, become more precise
and safer. It will leave a smaller carbon footprint, and
NextGen will create thousands of good jobs. We need to embrace
this opportunity and lead the way.
Our budget contains limited discretionary increases and
really emphasizes cost efficiency. We are taking a good hard
look at our organizational structure and we are making changes
to create a more streamlined, as well as a more efficient,
agency.
The infrastructure of the future is going to be a marriage
of NextGen procedures with our airports, our runways, our
airlines, and the flight crews. This budget supports the
airport grant program, which enhances the safety, efficiency,
and capacity of the aviation system. This is vital, because
delaying infrastructure investments today means the ultimate
long-term cost to our Nation, to our passengers, and to our
environment will far exceed the cost of going forward today.
This budget also pays for safety inspectors who inspect the
latest generation of innovative aircraft that Americans are
building. We do not want to be the chokepoint in the assembly
line of progress. We want to certify aircraft. We want to
certify equipment and new procedures that keep the Nation's
aviation economic engine running and running smoothly. So I
sincerely ask for your support in helping the men and women of
this agency to perform the tasks that they so proudly do day in
and day out.
PREPARED STATEMENT
So, thank you very much for this opportunity, and I would
be happy to answer any questions, should you have some.
[The statement follows:]
Prepared Statement of Hon. J. Randolph Babbitt
Good morning, Chairman Murray, Ranking Member Collins, and members
of the subcommittee. Thank you for the opportunity to discuss the
administration's fiscal year 2012 budget request for the Federal
Aviation Administration (FAA).
FISCAL YEAR 2012 BUDGET
The FAA's mission is to provide the safest, most efficient air
transportation system in the world. We have proudly delivered on this
promise for more than 50 years, providing the world's leading aviation
system and setting an unparalleled standard for safety and efficiency
that is emulated globally. Since 2001, we have managed more than 600
million airport operations, including more than 93 million successful
flights on U.S. commercial aircraft, transporting more than 6.5 billion
passengers safely to their destinations. Commercial aviation fatality
rates are at historic lows and the number of commercial air carrier
accidents has decreased 83 percent since the mid-1990s. In the last 10
years, 16 new runways have opened at large commercial airports. And
we've put in place financial systems that have helped us better account
for and save taxpayers' money. Despite our many successes, there is
still more to be done.
The demand for FAA services has never been more complex or
comprehensive. We are heading into a period of unprecedented challenge
as we pilot the future of aviation into our skies and into space. We
must work to stay ahead of changing technological, economic, social,
environmental, and energy needs of both our Nation and our global
partners. We are confident that the President's fiscal year 2012 budget
request will enable us to take aviation to the next level of safety,
while providing the public, U.S. business, and our international
partners with secure, convenient, and environmentally sustainable air
travel.
Our vehicle for this transformation is the Next Generation Air
Transportation System (NextGen), which will enable increased safety,
capacity and efficiency while providing for a cleaner environment and
bolstering America's continued economic growth. The next 15 years
promise to be a pivotal time in the history of air transportation, as
the face of aviation is transformed around the world. Parts of NextGen
are already on the ground and in cockpits, and are improving air travel
for passengers and aviation professionals today. From flight decks to
control towers, our system is already changing, delivering access
through innovation. As we change, FAA remains deeply committed to
providing the safest, most advanced and efficient aviation system in
the world, and to ensuring air transportation is safe and efficient
wherever U.S. citizens travel.
We must continue to fulfill our mission for the flying public,
delivering a safe and efficient system that continues to set the global
standard. We are working to promote an increased sense of
professionalism and accountability, while fostering a culture of
vigilance and safety. We also aim to support aviation's crucial role in
our Nation's economic recovery, building on today's successes to meet
tomorrow's growing demands. That means delivering on the promise and
benefits of NextGen, offering economic and environmental efficiencies
and technologies that support America's ability to shape international
aviation standards and development around the world.
Operations
The fiscal year 2012 request of $9.8 billion funds the development
of the performance-based navigation routes and procedures necessary to
support NextGen, increased safety staffing, enhanced Information System
Security protection, implementation of environmental and energy
technologies, and appropriate staffing to improve safety and hazardous
materials compliance. The request also supports annualization costs of
new hires, adjustments for inflation, and maintenance and operating
costs of National Airspace System (NAS) systems and equipment.
The fiscal year 2012 request maintains our critical aviation safety
(AVS) inspector staff changes from recent years, while further
increasing overall AVS staffing by 178 positions. The request,
recognizing increasing flight operations and complexity, adds 100 new
safety inspectors to implement new flight procedures, operation
methods, airmen qualifications, and Air Carrier Evaluation Program
functions. These inspectors will also oversee the conformity of new
designs and the production of new aircraft and aircraft parts. We must
be responsive to innovation in our Nation's market place while ensuring
that safety always remains our top priority. We must certify new
aircraft and new equipment as expeditiously as possible so as not to
become a bottleneck in the industry's assembly line. The fiscal year
2012 request enables FAA to perform additional rulemaking,
certification, and outreach activities necessary to move NextGen
forward.
As the National Aeronautics and Space Administration (NASA) retires
the space shuttle, it will begin to utilize commercial space
transportation systems to access the International Space Station (ISS).
The FAA is solidifying our relationships with the Air Force and with
NASA to ensure a seamless transition to a commercial space
transportation model that provides access to ISS as we focus on the
development of commercial human spaceflight systems.
This change increases the workload of FAA's Office of Commercial
Space Transportation. In response, our fiscal year 2012 budget includes
$5 million for the FAA Commercial Spaceflight Technical Center at the
Kennedy Space Center in Florida and includes $1.3 million to begin
development and implementation of safety requirements for commercial
human space flight. We also request $5 million to establish a Low-Cost
Access to Space Incentive program.
We must protect against persistent and organized threats that beset
FAA systems every day, as hackers launch attacks that may compromise
service to our users. We must also improve safety standards and
compliance for hazardous materials transportation, while meeting an
increased requirement for security investigations of new hires and
existing staff. The budget request includes the enhancement of FAA's
Cyber Security Management Center (CSMC) to increase information system
security protection and increased staffing to more effectively support
our intelligence activities and oversight of hazardous materials in air
commerce.
The fiscal year 2012 Operations request includes $45 million in new
cost savings. In the Air Traffic Organization (ATO), we expect the
flight services contract to save FAA $1.9 billion over its 13-year
lifespan and $8 million in fiscal year 2012. The Aviation Safety
Organization expects to achieve $2.4 million in administrative
efficiencies. Finally, our budget request incorporates base transfers
that better align our resources with organizational functions.
Facilities and Equipment
Our fiscal year 2012 budget request of $3.1 billion allows FAA to
meet the challenge of improving the capacity and safety of the current
NAS while keeping our comprehensive modernization and transformation
efforts on track.
To spur job growth and initiate sound multi-year investments, the
President's budget includes a $50 billion boost more than current law
spending for roads, railways and runways. As part of this initiative,
our facilities and equipment (F&E) request includes $250 million in
mandatory General Fund appropriations that will be used to advance
NextGen and make near-term improvements in FAA's air traffic control
infrastructure. Two hundred million dollars will be used to accelerate
applied research, advance development, and implement engineering
solutions for NextGen technologies, applications, and procedures while
$50 million will be used to upgrade existing capital infrastructure
such as power systems and air traffic control centers and towers.
The F&E NextGen portfolio of $1.14 billion in fiscal year 2012 will
continue our ongoing NextGen modernization activities. This includes
nation-wide Automatic Dependent Surveillance-Broadcast (ADS-B)
deployment, the data link communications services program, NextGen
future facilities investment planning, and follow-on En Route
Automation Modernization (ERAM) data side-position development for
future NextGen capabilities.
The remainder of our investment--representing $2 billion--will be
in legacy areas, including our extensive infrastructure, power systems,
information technology, navigational aids, and weather systems. In
fiscal year 2012, FAA plans to award four tower construction contracts.
Funding is also requested to replace and upgrade aging aerospace
medical equipment needed to perform research in pilot certification and
performance, aircrew health, atmospheric and radiation risk data, and
other medical areas to keep FAA in the forefront of aeromedical
research.
Research, Engineering, and Development
The fiscal year 2012 request of $190 million supports FAA's
continued work in both NextGen and other research areas such as fire
research and safety, propulsion and fuel systems, advanced materials
research, aging aircraft, and environment and energy.
The request supports our research to enable the use of ``drop in''
sustainable jet fuels for commercial aviation, reinforcing American
leadership in clean technologies and enhancing energy supply security.
It also supports developing alternatives to leaded aviation gasoline to
lessen general aviation environmental impacts. Other environment and
energy investments ($35.8 million including NextGen) support a range of
research activities, from improved science and modeling capabilities
that characterize and quantify aviation's environmental impacts to
maturing certifiable clean and quiet aircraft technologies via the
Continuous Lower Energy, Emission and Noise (CLEEN) program and other
vehicles.
FAA must meet our Nation's growing need for unmanned aircraft
systems (UAS). Our research, engineering, and development (RE&D)
request continues to support this critical area, providing $3.5 million
to develop minimum performance requirements for ground control stations
and to revise standards and guidance that address UAS crew resource
management and training for both pilots and crewmembers.
Grants in Aid for Airports
Airports remain the critical foundation of our Nation's aviation
system infrastructure. Our fiscal year 2012 request provides the
funding needed to ensure safety, capacity, and efficiency at our
Nation's airports through a combination of continued grant funding and
an increase in passenger facility charges (PFCs). Our fiscal year 2012
request totals $5.5 billion for the Airport Improvement Program (AIP),
which includes $2.4 billion from the Airport and Airway Trust Fund and
$3.1 billion in mandatory General Fund resources. The fiscal year 2012
request will continue our focus on safety-related development projects,
including runway safety area improvements, runway incursion reduction,
AVS management, and improving infrastructure conditions.
The budget proposes to lower funding for ongoing airport grants to
$2.4 billion by eliminating guaranteed funding for large- and medium-
hub airports. The proposal is consistent with the recommendation of the
President's National Commission on Fiscal Responsibility and Reform to
eliminate grants to large- and medium-hub airports. Our budget
continues to support smaller commercial and general aviation airports
that do not have access to additional revenue or other sources of
capital. The reduction in AIP funding for larger airports is premised
on an increase to PFCs of $4.50 to $7 per enplanement, providing these
airports greater flexibility to generate their own revenue.
In addition, FAA requests a one-time appropriation of $3.1 billion
in mandatory General Fund resources for the Grants-in-Aid program.
While regular AIP eligibility will be suspended for large- and medium-
hub airports, eligible airports in all size categories will be able to
compete for the $3.1 billion. Most of this funding will be used for
runway construction and other airport improvement projects aimed at
increasing overall system efficiency in the future.
Our request also includes $101 million for Personnel and Related
Expenses to support Safety Management Systems (SMS) training in the
Office of Airports; improved joint use agreements between the
Department of Defense and airports; data trend analysis; engineering
support; field operations program/portfolio management/inspectors; and
information systems security and privacy.
The budget also provides $29.3 million for Airport Technology
Research to support enhanced safety and pavement research efforts and
conduct noise studies. In addition, the budget provides $15 million for
Airport Cooperative Research.
The American Recovery and Reinvestment Act of 2009 (ARRA) provided
resources to preserve and enhance safety, capacity and access while
maximizing efficiency and operational performance. The FAA obligated
100 percent of the ARRA funds available for airport grants ahead of
schedule. Work has been completed on 98 percent of 372 airport grant
projects at 334 airport locations nationwide. We have improved runways
and taxiways, modernized terminal buildings, and provided aircraft
rescue and firefighting improvements at airports that serve millions of
passengers every year. Our commitment to successfully implementing ARRA
established FAA's place as a recognized leader in the Department of
Transportation's (DOT) efforts to bring Americans back to work.
NextGen Implementation
The fiscal year 2012 budget request reflects FAA's ongoing
commitment to the implementation and deployment of innovative NextGen
solutions. The application of these critical 21st century technologies
represents a pivotal shift that will transform aviation. NextGen is
already yielding immediate results for a safer America while working to
maximize efficiencies to meet future demands. The investment in NextGen
will reduce taxpayer and industry costs while safeguarding our world's
precious environment and resources. We are working in cooperation with
industry toward a shared vision, leveraging powerful technologies and
setting new standards for the future of global aviation.
NextGen is our evolutionary blueprint for modernizing air
transportation with revolutionary technologies. NextGen represents a
wide-ranging transformation of the entire national air transportation
system to meet future demand and support the economic viability of
aviation while improving safety and protecting the environment. The
application of critical 21st century solutions is already transforming
aviation from a ground-based system of air traffic control to a
satellite-based system of air traffic management. We continue to work
in full partnership with industry, other agencies and departments, and
our labor groups to achieve a shared vision, leveraging powerful
technologies and setting new standards for the future of global
aviation.
Our fiscal year 2012 budget request bolsters FAA's NextGen
investment to $1,237 million, distributed among F&E programs ($1,135
million), RE&D ($77 million), and Operations activities ($25 million).
The FAA continues to support the Radio Technical Commission for
Aeronautics (RTCA) NextGen mid-term implementation task force
recommendations. Our fiscal year 2012 budget request further emphasizes
our commitments in the areas of surface, metroplex, runway access,
cruise, as well as some cross-cutting recommendations. As FAA moves
forward on NextGen implementation, we will continue to evaluate and
adjust our strategies, priorities and deployment timelines in full
collaboration with aviation stakeholders.
We have also been working hard at our Nation's airports to reduce
delays and improve the environment with NextGen initiatives that help
curb fuel burn and emissions by improving surface efficiencies. We move
forward with these initiatives knowing we might have to make
adjustments due to new information, program interdependencies,
realignment of priorities, and other changes that can't always be
anticipated as we pursue our mid-term operational vision.
Fiscal year 2012 promises to be every bit as productive as last
year. Design and implementation teams will focus on streamlining
arrival and departure traffic at clustered metroplex airports. Our work
on data communications is setting the stage for the delivery of a
NextGen technology that the 2009 RTCA task force identified as a
priority. And the report of our ADS-B In rulemaking committee, due in
September, will give us an indication of which cockpit-based ADS-B
applications may be most important to the aviation community.
Our fiscal year 2012 budget includes $9 million in the Operations
account for 30 new AVS staff to support the certification and oversight
of NextGen systems and procedures. They will play a pivotal role in the
implementation of several NextGen initiatives including efficient
aircraft designs, revolutionary cockpits, data link communications, new
interactive instrumentation, SMS, and aviation safety information
analysis and sharing (ASIAS). This will enable AVS to review, process,
and certify new NextGen-related technology applications from aircraft
manufacturers and operators, as well as evaluate the safety aspects of
changes in the airspace system proposed by the ATO. We also are
striving to streamline our own internal processes to ensure that the
NextGen capabilities emerging from our test beds and research centers
begin producing operator benefits as quickly and safely as possible.
The new policies, standards, and guidance produced by these additional
staff will facilitate the transition of maturing NextGen research and
development toward implementation.
ADS-B is a proven centerpiece component of NextGen, evolving from a
radar-based system to a sophisticated satellite-derived aircraft
location data system. Future ADS-B applications will provide
surveillance, like radar, but will offer greater precision and
additional services, such as weather and traffic information for
pilots. In 2010, we successfully integrated ADS-B into all four air
traffic control automation platforms at key sites across the country.
Our ADS-B technology deployed in the Gulf of Mexico has opened up
250,000 square miles of new, positively controlled airspace in the
gulf, in an area where radar cannot reach.
We cleared the way to begin integrating ADS-B into FAA air traffic
control facilities nationwide, and to train both our workforce and
users. We have issued our ADS-B Out rule requiring aircraft operating
in most controlled airspace to be equipped to broadcast their position
to the ADS-B network by the start of 2020. This rule allows
manufacturers to start mass-producing certified ADS-B avionics, which
we believe will drive prices down, addressing a key concern of the
operators.
Our budget request includes $285 million for our continued rollout
of ADS-B. This will ensure that our deployment of the ground
infrastructure that will support ADS-B surveillance remains on time and
on budget. We are installing more than 800 ground transceiver stations
nationwide, and 330 ground transceiver stations have been installed to
date. Of these, 260 are operationally providing services in the NAS.
FAA plans to complete the ADS-B network in 2013.
The budget designates $200 million from the President's $50 billion
``up-front boost'' in support of NextGen research, so we can stay on
the forefront of the technology. We have enjoyed success in our early
efforts to leverage surface data sharing in support of collaborative
surface traffic management at select locations. We must continue
developing innovative programs to manage air traffic and provide better
weather data to general aviation and commercial carriers alike.
The FAA has already produced a significant number of performance-
based navigation (PBN) routes and procedures, exceeding our fiscal year
2010 goal. Our fiscal year 2012 request also includes $26 million to
improve performance-based GPS-based precision approach and departure
procedures, better known as area navigation/required navigation
performance (RNAV-RNP), at airports across the country. Performance-
based navigation offers our airline industry better routes, added
capacity, improved on-time performance and lower fuel bills. Our
country benefits from reduced airspace congestion, more efficient air
travel, reduced emissions, and a reduced dependency on oil.
There is a strong business case for NextGen that many companies
have already embraced. They are already seeing fuel savings. Fuel
represents about 40 percent of an airline's total expenses, on average,
and the cost of jet fuel has increased significantly in the last 6
months. Southwest Airlines started using the precision procedures at a
dozen airports this year and estimates it will save $60 million per
year in fuel when it uses NextGen arrival procedures at airports across
the country. Helicopters in the Gulf of Mexico have benefited from ADS-
B technology, saving up to 10 minutes and 96 pounds of fuel each
flight. Airlines flying over the Pacific Ocean are taking advantage of
a combination of improved capabilities to save 200 to 300 gallons per
flight. This represents a significant return on their investment, while
justifying ours.
Alaska Airlines has long been a NextGen pioneer and is the only
U.S. carrier to fully equip its entire fleet for high-performance GPS-
based procedures. This allows aircraft to navigate precisely through
mountainous terrain in low-visibility conditions. The company estimates
it would have canceled 729 flights last year into Juneau alone due to
bad weather if it were not for the GPS-based approaches. Alaska
Airlines saved $7.5 million last year by making these flights, safely
transporting passengers to their respective destinations without
diversions or ground holds.
The FAA will maintain an ongoing focus on top priorities for the
development and implementation of NextGen. The detailed planning that
supports NextGen--including the NAS Enterprise Architecture (EA) and
the NextGen Segment Implementation Plans (NSIP)--enable cost-effective
decisions for NextGen projects. Cross program dependencies are captured
on EA roadmaps, which assist planners in assessing impacts and
developing alternative plans. The NSIP documents linkages among
programs and promotes coordination and risk management to support cost-
effective investments in NextGen.
As we move forward with NextGen, our goal is to reach the next
level of safety and prepare our workforce for the future. We will
continue to work closely with industry to implement new technologies
and procedures that are sustainable. And we want to work with other
countries to establish uniform standards around the globe.
The Airport and Airway Trust Fund
The Airport and Airway Trust Fund provides all of the funding for
FAA's airport improvement, facilities and equipment, and research and
development activities, as well as a share of FAA's operations. As of
the end of last fiscal year, the Trust Fund had a cash balance of
approximately $9.4 billion, of which $770 million remains uncommitted.
The AIR-21 formula for calculating Trust Fund appropriations safeguards
the future solvency of the Trust Fund by ensuring that expenditures
will not exceed projected revenue. If revenue forecasts are accurate,
the uncommitted balance will remain relatively stable for fiscal year
2012.
Reauthorization
We are grateful for the considerable efforts the Congress has made
to prepare an FAA reauthorization bill. As you already know, the
current and 18th extension expires on May 31. The budgetary and
operational uncertainties of repeated extensions make running the FAA
much more difficult, which makes the passage of a multi-year bill
vital. Most notably, delaying a multi-year reauthorization has produced
several hurdles for managing and funding AIP.
While the administration supports the enactment of a multiyear
reauthorization bill, the funding levels in the House-passed bill for
FAA operations and air traffic modernization represent significant
reductions from levels proposed by the administration. While we will
never reduce our commitment to safety, if funding were appropriated at
the levels proposed in the bill, the safe and efficient movement of air
traffic in the air and on the ground would be degraded--today and in
the future. In addition, the administrative funding levels for AIP in
the House bill, if enacted, will seriously undermine the
administration's ability to execute congressionally mandated airport
programs.
The administration looks forward to working with the Congress to
craft final legislation that will provide adequate funding
authorization for infrastructure investment, enhance the efficiency and
safety of the national airspace, accelerate and streamline
implementation of NextGen, and advance research and sustainable
technologies to improve efficiencies and reduce environmental impacts.
SAFETY
Safety is FAA's primary mission and our 2012 budget request
reflects this most important of strategic objectives. We have
identified and mitigated many of the major risks in the system and we
will continue to act on the remaining safety challenges and keep air
travelers safe. Approximately 49 percent of our fiscal year 2012 budget
will be required to maintain and improve the agency's safety programs.
Our day-to-day operations in the four key programs of air traffic, AVS,
airports, and commercial space transportation contribute toward a
reduction in air transportation-related injuries and fatalities.
The FAA continues to address concerns over capacity and safety with
increased vigilance and professionalism. The flying public must have
the highest confidence that the airplanes they board are properly
designed, produced, operated, and maintained. They must know that their
pilots and air traffic controllers are qualified, trained for their
mission, and fit for duty. This year we continue to take AVS to a new
level, making aggressive effort to take advantage of the latest
research on fatigue to create a rule on pilot flight, duty and rest.
Our landmark proposal combats fatigue among commercial pilots by
setting new flight time, duty and rest requirements based on fatigue
science. Additional rulemaking proposals will be put forward this year,
such as redefining requirements for pilot certification and
qualifications, flight crewmember training, leadership and professional
development.
The FAA's implementation of an SMS is a critical component of our
overall approach to safety. SMS is a systematic and continuous
management process based on proactive identification of hazards and
analyses of their risk. SMS gives us the wherewithal to gather
information that takes safety to the next level. Our ASIAS team gathers
crucial safety information from various data sources and uses
sophisticated analysis tools to detect trends, identify precursors, and
assess risks. We are pushing the science of advanced data analysis,
developing cutting edge tools to find emerging threats, as well as
identifying previously undiscovered risks that are buried in terabytes
of safety information.
AVS inspectors, engineers, and other staff increases are key to
leveraging standardized SMS processes to implement an integrated, risk-
based method of oversight while supporting FAA's efforts in rulemaking,
certification, and outreach activities that will move NextGen forward.
The FAA will continue to work on focus areas for reducing aviation
related injuries and fatalities, such as the air tour industry and in
helicopter emergency medical services (HEMS). The HEMS weather tool
will be enhanced in 2012 to provide additional altitude and location
specific data to increase safety. The FAA will collaborate with NASA to
develop measurement technology and forecast capability of the high ice
water content conditions that represent a critical safety hazard.
The FAA places a high priority on initiatives to reduce runway
incursions and excursions. We continue to implement ambitious training
programs for pilots, controllers, and airport operators. We will
implement solutions through technologies and advanced programs such as
runway status lights, airport surface detection equipment, engineered
materials arresting systems, improved runway safety areas, and others.
The Runway Incursion Reduction Program remains a catalyst for
acquisition of promising safety technologies that have reached a level
of maturity appropriate for transition and implementation into the NAS.
The FAA's mandate for AVS includes leading the world safely into an
exciting new era where international spaceports, commercial space
transportation and orbital tourism are already becoming a reality. Last
year, there were four licensed launches, bringing the overall total to
more than 200, without any fatalities, serious injuries or property
damage to the public. Our fiscal year 2012 budget request allows us to
maintain a spotless industry record for safety in the rapidly
developing industry of commercial human space flight. The FAA will
develop safety requirements, policies, processes and procedures to
address and safeguard this bourgeoning industry.
The FAA's 2012 budget supports continued AVS research, focusing on
critical areas such as UAS, fire and structural safety, human factors,
and airworthiness. It further supports enhanced safety and pavement
airport technology research. Weather systems research continues in
naturally occurring atmospheric hazards including turbulence, severe
convective activity, aircraft icing, and restricted visibility.
STATE OF GOOD REPAIR
As good stewards of our aviation system, we apply asset management
principles proactively to maintain and modernize our airport runways.
We recognize the safety benefits of ensuring that pavement, marking and
lighting at airports identified in the National Plan of Integrated
Airport Systems (NPIAS) meet current safety and design standards.
Airport infrastructures, particularly airfield facilities, are
exposed to constant heavy use and harsh environmental conditions.
Runways, taxiways, and aprons are designed to withstand the heavy
equipment that operates on them, but even so these facilities require
frequent maintenance and rehabilitation in order to remain in good
working condition. Runways and taxiways must be kept clear of snow,
ice, and ponding water that can jeopardize aircraft directional control
or braking action. Chemicals and plowing, as well as freeze-thaw
cycles, all take a toll on runways, taxiways, and other paved areas.
The smallest bit of broken asphalt or concrete can represent a major
safety hazard to aircraft.
We have had a target to ensure that 93 percent of runways are in
good condition for the past several years, and we have exceeded that
goal, most recently reaching 97.2 percent. AIP grants and PFC funding
will continue to support this goal by funding airport pavement and
lighting system rehabilitation projects, treatments to minimize
hydroplaning in wet conditions, obstruction removal in runway approach
zones, perimeter fencing to prevent wildlife entry, and aircraft
firefighting equipment. By continuing to surpass this target, we are
not only achieving the goal of a state of good repair, but we are also
contributing to our overall primary goal of safety.
ECONOMIC COMPETITIVENESS
NextGen remains our most critical investment to ensure our economic
competitiveness on the global market. NextGen involves the total
overhaul of our NAS to make air travel more convenient and dependable
while ensuring our stakeholders have the safest and most secure flights
possible. Technological advancement and integration of new systems, new
procedures, aircraft performance capabilities, engines, airframes,
renewable fuel technologies, new supporting infrastructure, and new
ways to do business as the Air Transportation System will keep the
United States globally competitive. We have partnered with industry in
our CLEEN technology program to develop new technologies to reduce
aircraft noise, emissions, and fuel burn, and to advance sustainable
alternative aviation fuels.
The NextGen portfolio of investments focuses on the implementation
and integration of key NextGen transformational technologies. The
capabilities these technologies provide begin a shift of information
flow from the ground to the cockpit. These include:
--Automatic Dependent Surveillance-Broadcast (ADS-B);
--System-Wide Information Management (SWIM);
--Data Communications;
--NextGen Network-Enabled Weather (NNEW);
--Collaborative Air Traffic Management Technologies (CATMT);
--Time-Based Flow Management (TBFM); and
--NAS Voice Switch (NVS).
Our NextGen efforts further include supporting performance-based
navigation (RNP/RNAV) between select metropolitan areas. Deployed over
a 3- to 4-year period, these high-altitude performance-based routes
will provide increased efficiency and flexibility to the aircraft using
them, as well as significant savings in fuel costs and usage.
We have already seen the benefits of implementing ADS-B in the Gulf
of Mexico. For one major helicopter operator in the gulf, only 14
percent of their flight hours in 2009 were flown by instrument flight
rules (IFR). But in 2010, the first full year ADS-B was available, the
percentage went up to nearly 21 percent. And just in the first 2 months
of this year, 36 percent of flight hours were IFR This means that this
very important airspace is more accessible, more of the time thanks to
NextGen innovation.
NextGen will also provide numerous benefits for the general
aviation community by facilitating better access to airports, and
providing more complete weather and traffic information. In addition,
even those aircraft that are not fully equipped will benefit from the
improved traffic flow that NextGen will achieve.
Implementation of NextGen technologies and capabilities, with the
resulting benefits to economic growth in large and small communities
around the Nation, is essential if the United States is to maintain its
global aviation leadership. Timely and effective progress on NextGen
helps the U.S. aviation sector sustain this position.
ENVIRONMENTAL SUSTAINABILITY
Environmental protection and addressing the energy challenge are
vital elements to sustaining the future of United States air
transportation viability and global leadership. We are continuing
efforts to reduce greenhouse gas emissions, improve water use
efficiency, prevent pollution, and improve building energy consumption.
Environmental pressures on the national and international aviation
system will continue to increase as growth in aviation activity
returns. FAA supports DOT's environmental sustainability outcomes to
reduce carbon emissions, improve energy efficiency, and reduce
dependence on oil. We are reducing transportation-related pollution and
impacts on the ecosystems while increasing the use of environmentally
sustainable practices in the transportation sector.
We are committed to managing aviation's growth while reducing the
negative impacts of aviation noise and air emissions. Through increased
efforts on the CLEEN initiative, FAA will develop and mature clean and
quiet technologies and advance alternative fuels. The Commercial
Aviation Alternative Fuel Initiative is moving forward to qualify and
approve new aviation alternative fuels for operational use. And by the
end of this year we should have approval for a renewable biofuel for
commercial aircraft made from plants, algae or other sustainable
sources. These alternative jet fuels are ``drop-in fuels.'' There's no
need to change the engines or equipment. The source would be renewable
and would reduce greenhouse gases.
Sustainable alternative jet fuels offer benefits for both our
environment and our economy. They can help stabilize supply and the
cost volatility in the jet fuel market. In 2010, U.S. airlines spent
$36 billion on jet fuel. This represents $21 billion more than in 2000
even though the airlines consumed 3 billion gallons less.
The budget request supports identifying and exploring advances in
communication, navigation and surveillance technology to advance
aircraft arrival and departure, surface movements, and en route/oceanic
procedures for reduced noise, fuel burn, and engine emissions. It also
supports updating and enhancing the Voluntary Airport Low Emissions
Program so that airports located in nonattainment or maintenance areas
for National Ambient Air Quality Standards will have continued
opportunities to reduce air emissions.
In addition, we are working to mitigate noise impacts for thousands
of people exposed to a day/night sound level (the energy-averaged sound
level metric used by the aviation industry to determine the impact of
noise) equal to or greater than 65 decibels through ongoing noise
compatibility efforts. These efforts include the purchase and
relocation of residences and businesses, the soundproofing of
residences and buildings used for educational or medical purposes, the
purchase and installation of noise barriers or monitors, recommended
land use planning, and public outreach.
ORGANIZATIONAL EXCELLENCE
The fiscal year 2012 budget request provides for a motivated, well-
trained, and dynamic workforce that possesses the vital resources and
reliable data necessary to support the continued success of FAA's
mission for safety and efficiency. It further includes enhanced cost-
control measures to ensure savings that can be effectively managed to
fund mission-critical initiatives.
One of the key challenges we face is building the workforce of the
future to meet the transition to NextGen. Effecting this transition
will involve a systematic approach to getting the right number of
people with the right skills, experience, and competencies in the right
jobs at the right time.
We will continue to ensure adequate numbers of safety staff.
Workforce planning for mission-critical and key occupations will
benefit our managers as they make staffing decisions to achieve program
goals based on a rigorous analysis of their organization's activities,
workforce and expected technological advances. The flying public will
benefit from a better prepared and well trained workforce.
The FAA is delivering programs that build leadership capabilities,
support professional development and promote continuous learning at
executive, manager, and employee levels. The development of our
executive corps is grounded in creating a culture of accountability and
professionalism. Building stronger leadership within the agency helps
us to achieve strategic goals and manage people and resources
effectively while driving continuous improvement.
Part of our organizational excellence goal is to protect agency IT
assets from cyber-attacks, to ensure alignment between IT investment
and agency business needs, and provide certain enterprise-wide shared
services. The FAA's CSMC is a core component of our overall Information
Security Services. CSMC is tasked with protecting our information
infrastructure using advanced cyber defense strategies. The CSMC works
to enhance our architecture to include cybersecurity, to harden
individual systems and networking elements, improve recover rate times,
and enhance boundary protection by completing remediation of
vulnerabilities, improved information sharing, and systemic monitoring
of systems.
The budget request supports activities to remediate moderate
vulnerabilities identified for our information systems that support
human resources, finance, security/safety, and air traffic services. In
the last few years, we have focused on high-risk vulnerabilities. Now
the focus is on remediating the moderate vulnerabilities. The request
will cover contracts that will conduct information system assessments,
certifications, recertifications, and risk mitigation activities. The
funding will allow FAA to handle risks to its information systems
sooner, which will save out-year dollars and prevent higher and more
costly system vulnerabilities and remediations.
The fiscal year 2012 budget request supports continued efforts to
manage our acquisitions responsibly so we deliver programs on time and
on budget. In addition, we are implementing a Real Property Asset
Management Plan to ensure timely disposition of assets are measured by
the number of days to process inactive assets. Since 2000, FAA has
removed more than $341 million in real property assets from our
portfolio.
CONCLUSION
Despite a challenging economic environment, 713 million passengers
flew on U.S. airlines in 2010. We anticipate stronger growth this year,
with a projected increase of 3.5 percent. Economic indicators project
that we are rapidly approaching a historic milestone of carrying 1
billion passengers on U.S. airlines annually within the next decade. To
offer additional perspective, that increase represents an additional
300 million passengers per year, roughly equal to the entire population
of the United States.
In this age of global competition, we have a clear opportunity to
invest now in America's future even as we prepare our world class
aviation system to meet the demands of that future. NextGen
technologies offer our Nation a worthy opportunity for investment in
safety and innovation. Delaying infrastructure investment means the
long-term cost to our system, passengers, and environment will far
exceed the cost of a timely deployment today. NextGen technologies are
an investment in aviation's continued viability, and will produce
economic benefits for decades--far beyond their cost. Our Nation and
airline industry will yield immediate and measurable financial returns
that will bolster America's future economic stability and continued
growth, as we continue to meet the challenge of giving the world new
ways to fly.
Our Nation's continued economic recovery demands a cautious and
well-considered fiscal policy. We have to invest carefully in America's
future where we can be certain of reliable returns.
Aviation is a growth industry worthy of that investment,
representing a key element of our country's economy. The FAA is already
delivering on the promise of tomorrow, and we are grateful that the
Congress continues to recognize our ongoing mission of safety and
modernization as a national priority.
Senator Murray. Thank you very much.
Mr. Scovel.
STATEMENT OF HON. CALVIN L. SCOVEL III
Mr. Scovel. Madam Chairman, Ranking Member Collins, members
of the subcommittee, thank you for inviting me here today to
testify on FAA's proposed fiscal year 2012 budget.
Like other Federal agencies, FAA faces the formidable
challenge of achieving its goals in a constrained fiscal
environment. For FAA, this means ensuring safe operations while
implementing NextGen, a multi-billion-dollar investment for
increasing national airspace capacity.
Our past and ongoing work has shown that a lack of
comprehensive analyses and rigorous oversight have created
significant challenges for FAA in meeting its safety,
modernization, and financial goals. My testimony will outline
our ongoing concerns related to FAA's efforts to improve safety
and accommodate aviation growth.
Maintaining a safe national air transportation system has
been an ongoing challenge for FAA. Between fiscal years 2009
and 2010, operational errors by air traffic controllers
increased 53 percent. FAA primarily attributes this increase to
the introduction of voluntary, nonpunitive safety reporting.
However, other factors may contribute to the increase, such as
the introduction of an automated tool to detect operational
errors in terminal radar approach controls (TRACONs) and the
large influx of new controllers in training. Some critical
facilities have 40 percent of their workforce in training.
FAA faces a similar challenge with its inspector workforce.
The agency is requesting almost an additional $12 million to
support a potential increase of more than 100 inspectors.
However, we have concerns about FAA's methodology for assigning
inspectors to high-risk areas and the training they receive on
how to assess risk. Oversight of aircraft repair stations also
remains a concern, despite FAA's implementation of a risk-based
system in 2007.
Reducing pilot error and fatigue also remains a key safety
challenge, especially given industry opposition to proposed
rules on pilot training and rest requirements. FAA's proposed
requirements for more realistic flight scenarios and special
hazard training could significantly enhance pilot training.
However, FAA still lacks adequate systems for tracking poorly
performing pilots and overseeing pilot training programs. FAA's
proposed rule for new pilot rest requirements is an important,
much needed step but may also lack all the elements needed to
mitigate pilot fatigue.
As FAA works to address these safety concerns, it must also
address key challenges with NextGen's advancement. FAA needs to
make decisions about NextGen's overall design--decisions that
will impact the program's long-term benefits and costs and
overcome problems in NextGen systems.
In particular, FAA needs to resolve technical issues with
ERAM, a $2.1 billion system for processing en route flight
data. System testing revealed more than 200 software-related
problems, pushing estimated completion dates out several years
and potentially increasing costs by as much as $500 million.
Cost escalations of this magnitude will affect FAA's capital
budget and could crowd out other projects.
At the same time, FAA must tackle known vulnerabilities in
key programs for delivering critical NextGen capabilities. FAA
plans to spend more than $2 billion on these programs over the
next 5 years, but has yet to establish consistent requirements,
clear lines of accountability, or an integrated plan that will
address the complex linkages between programs. Without clearly
defined requirements and program priorities, problems with cost
and schedule estimates will continue.
To realize the full benefits of NextGen, FAA must maximize
capacity at our Nation's airports. Over the past decade, more
than 20 runways have been built, reconfigured, or extended.
However, funding, environmental, and legal concerns could
impede this progress. As runway projects move forward, FAA must
maintain vigilant oversight to ensure that they are completed
on time and within budget.
Rigorous oversight of DOT's $1.1 billion American Recovery
and Reinvestment Act of 2009 (ARRA)-funded airport grants is
critical to ensuring funds are available to meet needed
improvements. Last September, FAA consultants determined that
14 of 24 airports did not have adequate support to justify
their ARRA payment requests, a finding consistent with those we
reported in December. Specifically, we identified $6 million in
improper payments made to non-ARRA-funded Airport Improvement
Program (AIP) grantees due in part to weaknesses in FAA's
financial oversight strategies.
Continued schedule delays and program weaknesses in FAA's
safety, NextGen, and airport infrastructure programs will have
a significant impact on its current and future budgets. FAA
needs sound strategies for identifying impediments to meeting
its goals that will allow the agency to prioritize its
oversight and maximize its investments.
PREPARED STATEMENT
Madam Chairman, this concludes my statement. I would be
happy to answer any questions you or members of the
subcommittee may have.
[The statement follows:]
Prepared Statement of Hon. Calvin L. Scovel III
Madam Chairman and members of the subcommittee: Thank you for
inviting me to testify today on the Federal Aviation Administration's
(FAA) fiscal year 2012 budget request. As you know, FAA faces
significant challenges to control costs in a tight budget environment
while ensuring a safe and modern National Airspace System (NAS). This
past year, FAA has taken actions to address many significant safety
issues, most notably with its recent airworthiness directive to inspect
aging Boeing 737s in response to a recent in-flight hull breach.
However, much work remains to meet other key goals, including improving
pilot and air traffic controller training, effectively managing its
multibillion-dollar capital investments for the Next Generation Air
Transportation System (NextGen), and overseeing Federal airport grants.
My testimony today focuses on three major challenges FAA faces:
--addressing ongoing safety concerns;
--managing NextGen advancement while controlling costs; and
--maximizing airport infrastructure funding to accommodate aviation
growth.
In summary, FAA faces the formidable challenge of safely operating
and maintaining an increasingly strained NAS system while developing
the next generation of air traffic control--all within a severe
budgetary environment. FAA will require resources to address safety
issues related to pilot, controller, and inspector workforces and to
make critical, long-delayed decisions about NextGen's overall design--
decisions that will impact the program's long-term costs and benefits.
At the same time, FAA requires better controls to instill
accountability and better manage airport infrastructure contracts and
grants. FAA's fiscal year 2012 budget request reflects the agency's
plans to improve its NextGen efforts, but it also reveals the
difficulties FAA has had in controlling its costs and schedules.
Effectively balancing agency priorities now is essential to deliver a
future system to travelers and airspace users that provides a return on
taxpayers' investment, functions safely and efficiently, and adapts to
growing capacity needs and industry changes for many years to come.
BACKGROUND
FAA's budget funds four accounts:
--Operations;
--Operations funds most of FAA's day-to-day activities, including
the agency's safety oversight and air traffic control
functions.
--Facilities and equipment (F&E);
--F&E funds the agency's NextGen initiatives and other
modernization activities such as improving aging
infrastructure, power systems, navigational aids, and
weather systems.
--The Airport Improvement Program (AIP); and
--AIP funds grants to airports to pay for runway construction and
other related projects.
--Research, engineering, and development (RE&D).
--RE&D funds NextGen and other research areas such as fire research
and safety, aging aircraft, and other activities.
FAA's total fiscal year 2012 budget request of $18.7 billion
represents a 17-percent increase more than this year's appropriated
amount and includes significant funding increases for infrastructure
and modernization projects over its fiscal years 2010 and 2011 budgets
(see table 1).
TABLE 1.--FAA BUDGET FISCAL YEAR 2010 THROUGH FISCAL YEAR 2012
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Increase from
Account 2010 Actual 2011 Enacted 2012 Request 2011 to 2012
(percent)
----------------------------------------------------------------------------------------------------------------
Operations...................................... $9,351 $9,514 $9,823 3
F&E............................................. 2,928 2,731 3,120 14
AIP............................................. 3,121 3,515 5,524 57
RE&D............................................ 191 170 190 12
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Total..................................... 15,591 \1\ 15,929 18,657 17
----------------------------------------------------------------------------------------------------------------
Source: FAA's Office of Budget.
\1\ Figures may not add up due to rounding.
FAA proposes to shift the focus of its AIP account--which
represents the largest requested increase--to smaller commercial and
general aviation airports and eliminate guaranteed AIP funding for
large- and medium-hub airports. The proposal would also increase the
passenger facility charge (PFC) limit from $4.50 to $7 per enplanement
for all eligible airports, giving large- and medium-hub airports
greater flexibility to generate their own revenue.
Almost 37 percent of FAA's F&E account request, which represents
the second largest increase, is allocated for NextGen activities. Most
of the increase in FAA's Operations budget is to fund inflation
adjustments and the National Air Traffic Controllers Association
(NATCA) contract. Nearly 71 percent of the total requested amount for
Operations is used to pay for the salaries and benefits of most FAA
employees, including safety inspectors and air traffic controllers.
FAA is currently financed by two mechanisms:
--excise taxes deposited into the Airport and Airway Trust Fund; and
--a General Fund contribution.
While the General Fund has paid for about one-third of FAA's total
budget the past 2 years, in fiscal year 2012 the General Fund is
expected to contribute $8.2 billion, or 44 percent, toward the total
budget. In addition, past differences between FAA's budget, Trust Fund
revenues, and General Fund contribution were bridged by drawing down
the Trust Fund's uncommitted balance. These draw downs have caused a
90-percent decline in the uncommitted balance, from $7.3 billion at the
end of fiscal year 2001 to $770 million at the end of fiscal year 2010
(see Figure 1).
ADDRESSING ONGOING SAFETY CONCERNS
The United States has the world's safest air transportation system;
however, our current audit work and recent events, such as the near
mid-air collision between an American Airlines flight and two Air Force
planes near New York City, underscore the need for FAA to take
additional actions to improve its safety oversight functions. Key
safety issues that FAA needs to address include a significant increase
in operational errors, controller staffing and training at air traffic
control critical facilities, oversight of air carrier and repair
stations, and pilot training and fatigue.
Causes of Increases in Air Traffic Controllers' Operational Errors Are
Not Fully Known
The number of operational errors by air traffic controllers
increased by 53 percent between fiscal years 2009 and 2010--from 1,234
to 1,887. According to FAA, the rise in errors is primarily due to the
introduction of voluntary, nonpunitive safety reporting programs, such
as its new Air Traffic Safety Action Program (ATSAP). ATSAP encourages
controllers to voluntarily report operational errors in an effort to
better capture the actual number of errors and identify and address
their root causes. However, other factors may also contribute to the
recent increases, including the large influx of new controllers in
training and the implementation of the Traffic Analysis and Review
Program (TARP), an automated system to identify when operational errors
(or other losses of separation between aircraft) occur at terminal
facilities.
The National Transportation Safety Board (NTSB) has raised concerns
about the reliability of FAA's process for assessing and reporting
incidents involving losses of separation and is currently reviewing
reports of Traffic Collision and Avoidance Systems (TCAS)
advisories.\1\ Since NTSB issued its final rule requiring aircraft
operators to report certain TCAS advisories in January 2010, the Board
has received nearly 950 reports of these collision advisories and has
initiated investigations into nine of the more severe incidents.\2\
These mid-air incidents raise further concerns about controller
performance and how FAA classifies, reports, and mitigates losses of
aircraft separation within these new reporting systems. At the request
of members of the Senate Committee on Commerce, Science, and
Transportation, as well as the ranking member of the House
Transportation and Infrastructure Subcommittee on Aviation, we will
begin two audits to assess FAA's implementation and oversight of ATSAP
and evaluate FAA's process for tracking and reporting near mid-air
collisions and mitigating those risks.
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\1\ An onboard TCAS issues advisories for pilots to take evasive
actions when the system detects a potential collision with other
aircraft.
\2\ After review by NTSB, many of these reports were considered
``nuisance alerts'' (i.e., situations in which there was no collision
risk, but TCAS generated a resolution advisory). However, about 260
reports required additional data in order for NTSB to understand and
evaluate the circumstances that caused the apparent conflict and to
determine whether further action was warranted.
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Critical Facilities May Need More Certified Professional Controllers To
Effectively Train New Controllers
FAA is taking action to hire and train nearly 11,000 new
controllers through fiscal year 2020 to replace large numbers of
retiring controllers hired after the 1981 strike. However, FAA must
focus on staffing and controller skill levels at those facilities that
are most critical to NAS operations. As of March 2011, 25 percent of
FAA's controller workforce was in training--compared to 15 percent in
2004--meaning fewer certified controllers in the workforce to control
air traffic and provide on-the-job training for new controllers. In
addition, due to the attrition surge, FAA has had to assign newly hired
controllers to complex air traffic control locations, such as southern
California, Atlanta, Chicago, and New York. Normally, new hires would
start their on-the-job training at less complex facilities and
eventually transfer to a higher-level facility.
While FAA has ongoing actions or plans to improve controller
training and placement, some of the most critical facilities now have a
significant percentage of their workforce in training. For example,
Denver Terminal Radar Approach Control has 43 percent of its workforce
in training, and LaGuardia Air Traffic Control Tower has 39 percent. We
are reviewing FAA's plans to provide its critical facilities with
appropriate controller staffing, training resources, and other support
necessary to ensure continuity of facility operations. We expect to
report on our results later this year.
FAA Has Not Addressed Inspector Training and Staffing Issues That Would
Enhance Its Risk-Based Oversight
Since 2003, FAA has enhanced the Air Transportation Oversight
System (ATOS), its risk-based oversight system for air carriers, by
improving inspector guidance and completing key processes for analyzing
inspection results. However, in December 2010, we identified additional
improvements FAA needed to make to strengthen ATOS, such as requiring
that inspectors' risk assessments include analyses of all available
data sources--such as voluntary self-disclosure data--and changes that
occurred in the airline industry, such as mergers and acquisitions. We
also reported that ATOS implementation at smaller air carriers was
hindered due to inspectors' frustrations with adapting ATOS principles
to their operations, staffing limitations, and insufficient data to
support ATOS's data-driven approach. A contributing factor may be that
inspectors experienced gaps of 3 years or longer between when they
received systems safety training and when they actually used the
system. FAA is currently addressing our recommendations to ensure
inspectors receive timely training and use all available data sources
for more accurate and relevant air carrier risk assessments.
Another concern has been FAA's inadequate oversight of aircraft
repair stations, a weakness we reported on in 2003. While FAA
strengthened its procedures for monitoring inspections of foreign
repair stations that are conducted by aviation authorities on its
behalf and implemented a risk-based system in 2007 to target repair
stations with increased risk, concerns remain. As a result, the
Congress directed us to assess FAA's oversight system for foreign and
domestic repair stations. We began our review in January of this year.
FAA must also ensure it targets limited resources to areas of
greatest risk by placing its approximately 4,300 inspectors where they
are most needed to effectively oversee a dynamic aviation industry. In
a 2006 study directed by the Congress, the National Research Council
concluded that FAA's methodology for allocating inspector resources was
not effective and recommended that FAA develop a new approach. In
response, FAA completed a new staffing model in October 2009. After
completing the model, FAA tested it using actual staffing data to
determine whether it was ready for full deployment. FAA used the model
to assist in developing its fiscal year 2012 budget request for an
additional $11.9 million to support an increase of up to 106
inspectors. However, FAA is still refining the model to make it more
reliable. As directed by the Congress, we are evaluating FAA inspector
staffing and the new staffing model.
FAA and Industry Have Not Fully Addressed Pilot Training and Fatigue
Pilot training and fatigue continue to present challenges to FAA.
The February 2009 fatal crash of Colgan Air flight 3407 underscores the
importance of addressing these long-standing safety concerns. In
January 2009, FAA issued a Notice of Proposed Rulemaking (NPRM) to
revise crew training requirements by requiring more realistic training
scenarios with a complete flight crew, using flight simulator devices,
and working with new special hazard practices for pilots and crew
members. Because of the extensive industry comments on this proposed
rule, FAA plans to submit a Supplemental Notice of Proposed Rulemaking
(SNPRM) to address the concerns. However, as of April 2011, the SNPRM
had not been issued. While the proposed rule could significantly
enhance pilot training programs, FAA still faces challenges tracking
pilots with poor performance and training deficiencies and overseeing
air carrier programs aimed at improving pilot skills.
FAA has also taken steps to address pilot fatigue issues, as
required by the Airline Safety and FAA Extension Act of 2010.\3\ In
September 2010, FAA published an NPRM to institute new flight, duty,
and rest requirements for pilots based on factors such as time of day
flown and sleep consideration rather than type of flight operation.
Issuing the NPRM was an important step toward changing outdated
regulations. However, FAA has already received more than 2,500 comments
from industry, most of which oppose the NPRM. Given industry's
historical opposition to revamping rest rules, it will be a substantial
challenge for FAA to finalize the rule by the congressionally mandated
deadline of August 2011. Further, the NPRM would not require carriers
to track pilots with lengthy commutes, a factor that can contribute to
pilot fatigue. FAA officials stated that enforcing this requirement
would be difficult and not necessarily result in responsible commuting.
FAA instead issued draft advisory guidance on pilots' and carriers'
responsibility to ensure proper rest before flying. However, without
FAA and industry efforts to collect and analyze data on pilot
commuting, the current proposed actions to mitigate fatigue in aviation
may not fully address this critical safety issue.
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\3\ Airline Safety and Federal Aviation Administration Extension
Act of 2010 Public Law 111-216, section 212 (August 2010).
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MANAGING NEXTGEN'S ADVANCEMENT WHILE CONTROLLING COSTS
FAA is developing NextGen, a satellite-based air traffic control
system intended to replace the current ground-based system, to better
manage air traffic and meet future air travel demands. However, FAA
faces several management challenges in implementing key NextGen
programs in an efficient and cost-effective manner. These include
mitigating ongoing cost increases and schedule delays with FAA's ERAM
program that will impact several NextGen programs and capabilities,
better managing contracts and its acquisition workforce to protect the
taxpayers' interest, and keeping its operating costs from crowding out
capital investments in NextGen.
Uncertain Design Decisions Put NextGen's Cost and Schedule Targets at
Risk
FAA is making progress on near and mid-term NextGen efforts in
response to recommendations from a government-industry task force but
must address long-term cost, schedule, and performance issues.\4\ In
response to one of the task force's most critical recommendations, FAA
launched its ``metroplex initiative''--a 7-year effort aimed at
improving airspace efficiency to reduce delays at 21 congested airports
in major metropolitan areas. While FAA has completed studies at two
prototype sites and plans to study five more sites this year, many
unresolved issues could delay the effort and ultimately increase costs.
For example, FAA has not established detailed milestones to complete
initiatives at high-activity locations or a mechanism for integrating
its metroplex initiative with other related task force recommendations,
such as better managing airport surface operations. Further, FAA needs
to resolve concerns that airline and air traffic facility officials
have expressed about FAA's execution thus far, such as the slow pace of
the effort and a lack of clearly defined benefits to airspace users.
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\4\ NextGen Mid-Term Implementation Task Force Report, September 9,
2009.
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Realizing these benefits, however, depends on the timely deployment
of new flight procedures. As we noted in our December 2010 report,\5\
FAA's flight procedures are mostly overlays of existing routes, which
do not provide shorter flight paths to alleviate congestion. Because
FAA has mainly focused on developing a targeted number of procedures
each year--not on measuring user benefits--airlines have not widely
used the new procedures. At the same time, FAA faces several
organizational, policy, logistical, and training challenges that could
impede NextGen implementation in the midterm, including working across
diverse agency lines of business.
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\5\ OIG report number AV-2011-025, ``FAA Needs To Implement More
Efficient Performance-Based Navigation Procedures and Clarify the Role
of Third Parties'', December 10, 2010.
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FAA's most recent NextGen Implementation Plan provides a framework
for what NextGen will resemble in the 2015 to 2018 timeframe and
broadly outlines the linkages between FAA and stakeholder investments.
While the plan is responsive to the task force, it does not outline
NextGen capabilities, timing, and costs, which FAA committed to in
previous plans and budget requests to the Congress. For example, the
plan does not discuss how delays in critical design decisions will
affect NextGen performance. Delayed decisions include:
--division of responsibility delegated to pilots in the cockpit and
to controllers and FAA ground systems for tracking aircraft;
--level of automation needed to support division of responsibility,
ranging from today's largely manual flight management to a
primarily automated system with little controller involvement;
and
--the number and locations of air traffic facilities needed to
support NextGen.
Unresolved Technical Problems With ERAM Have Resulted in Delays and
Cost Increases
Numerous technical problems with ERAM--the primary tool that will
process en route flight data--have pushed schedules well beyond
original completion dates and increased cost estimates by hundreds of
millions of dollars. FAA planned to complete deployment of ERAM to 20
en route facilities by the end of 2010 at a cost of $2.1 billion.
However, ERAM testing at initial operating sites revealed more than 200
software-related problems, such as radar processing failures, errors
that tag flight data to the wrong aircraft, and hand-off problems
between controllers. As a result of these problems at the initial
sites, FAA postponed its plans to continue deployment of ERAM at
additional sites--originally scheduled for December 2009.
FAA is requesting $120 million for ERAM in its fiscal year 2012
budget request and now plans to complete ERAM in 2014--a schedule slip
of 4 years. However, FAA and its contractor plan to add new
capabilities while attempting to resolve problems identified in earlier
software versions, which could cause further schedule delays. New
software releases have already exhibited problems, including a
significant software failure that caused one site to revert back to
using the legacy operating system for several weeks.
While FAA estimates that delays with ERAM will translate into an
additional $330 million to complete deployment, our work and a recent
MITRE analysis suggest the total cost growth could be as much as $500
million.\6\ Cost escalations of this magnitude will affect FAA's F&E
budget and crowd other projects. Further, FAA will incur additional
costs to sustain aging equipment longer than planned and retrain
controllers on both the legacy and ERAM systems. The MITRE analysis
cautions that implementing ERAM at more complex sites, like Chicago and
New York, may require additional time and resources. Continued problems
with ERAM will also affect both the cost and pace of FAA's other key
NextGen efforts--some of which have already been allocated more than
$500 million to integrate and align with ERAM. ERAM delays will also
affect FAA's ability to develop trajectory-based operations \7\ and
transition to a common automation platform for terminal and en route
operations.
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\6\ MITRE Corporation and Massachusetts Institute of Technology/
Lincoln Laboratory Report, Independent Assessment of the ERAM Program,
October 15, 2010.
\7\ Trajectory-based operations focus on more precisely managing
aircraft from departure to arrival with the benefits of reduced fuel
consumption, lower operating costs, and reduced emissions.
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FAA Lacks an Integrated Master Schedule To Mitigate Risks in NextGen's
Transformational Programs
FAA has not approved total program cost, schedule, or performance
baselines for any of NextGen's transformational programs \8\ and faces
significant risks and challenges to successfully implementing them.
FAA's fiscal year 2012 budget request includes $590 million for the six
programs, and the agency plans to spend more than $2 billion on them
between 2012 and 2016. Three transformational programs that are
critical to achieving streamlined and more efficient data sharing for
airspace users face uncertainty with respect to what they will
ultimately cost, when they will be completed, and what they will
deliver.
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\8\ FAA's transformational programs, defined as programs directly
related to the delivery of NextGen capabilities, will fundamentally
change NAS by enhancing communications, improving the tracking of
aircraft, and revamping overall air traffic management.
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Automatic Dependent Surveillance-Broadcast (ADS-B)
ADS-B ($285 million requested for fiscal year 2012) is a satellite-
based surveillance technology that combines the use of aircraft
avionics and ground-based systems. FAA is planning to implement ADS-B
in four segments but has only approved $1.7 billion for the initial two
segments to deploy the system's ground infrastructure. FAA has deployed
275 of the planned 800 radio ground stations and also published a final
rule mandating that airspace users equip ADS-B avionics by 2020. As we
noted in our October report,\9\ realizing the full range of ADS-B
benefits will depend on:
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\9\ OIG report number AV-2011-002, ``FAA Faces Significant Risks in
Implementing Automatic Dependent Surveillance-Broadcast Program and
Realizing Benefits'', October 12, 2010.
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--finalizing requirements for capabilities to display traffic
information in the cockpit;
--modifying the systems controllers rely on to manage traffic;
--addressing broadcast frequency congestion concerns;
--implementing procedures for separating aircraft; and
--assessing security vulnerabilities.
These risks, if not successfully mitigated, could lead to cost,
schedule, and performance shortfalls.
System-Wide Information Management (SWIM)
SWIM ($66 million requested for fiscal year 2012) is expected to
form the basis for a secure network that manages and shares information
more efficiently among all air traffic systems that will comprise
NextGen. Key benefits expected from SWIM are streamlined data
communications and real-time information that will improve air traffic
management, enhance airspace capacity, reduce flight delays, and
decrease costs for FAA and aviation users. FAA is planning to implement
SWIM in three segments but has only approved funding for the first
segment at an estimated cost of $284 million. FAA has already increased
costs for the first segment by more than $100 million and delayed its
completion by at least 2 years. Further, FAA has not established clear
lines of accountability for overseeing how SWIM is developed and
managed. Without a consistent vision of SWIM's requirements and clearly
defined program priorities, the true cost and timeline to deploy SWIM
and the realization of expected benefits are unknown. We have
transmitted recommendations to FAA for improving SWIM and expect to
issue our final report this spring.
Data Communications (DataComm)
DataComm ($150 million requested for fiscal year 2012) will provide
two-way data communication between controllers and pilots that is
analogous to wireless email. FAA plans to implement DataComm in at
least two segments, and a final investment decision is not expected
until fiscal year 2012. Total program costs are uncertain but estimated
to be almost $3 billion. Developing and implementing DataComm is a
complex, high-risk effort, and industry officials have expressed
skepticism about FAA's ability to deliver on such a program because the
agency abandoned a data link effort in the past due to cost concerns.
The successful implementation of DataComm faces the challenges of
integrating with FAA automation systems and overcoming users'
reluctance to equip.
FAA's approach of baselining smaller segments of larger programs
may reduce some risks in the short-term, but as requirements continue
to evolve, programs are left with no clear end-state and decisionmakers
lack sufficient information to assess progress. Moreover, delays with
one program can significantly slow another, since the programs have
complex interdependencies and integration issues with FAA's existing
automation and communications systems. While FAA recognizes the need
for an integrated master schedule to manage the implementation of these
NextGen capabilities, it has yet to develop one. Without a master
schedule, FAA will continue to be challenged to fully address
operational, technical, and programmatic risks and prioritize and make
informed trade-offs among the programs.
Contract Oversight and Administration Problems Contribute to Cost
Overruns With FAA Acquisitions
Our work on large FAA acquisition programs and high-risk
procurements has repeatedly identified weaknesses in the agency's
contract administration. For example, FAA awarded an $859 million
contract for training air traffic controllers \10\ without correctly
assessing how many controllers needed training or addressing the risk
that the contractor's proposed instructor hours were too low. These
weaknesses contributed to a $46 million cost overrun for the first 2
years of the contract.
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\10\ OIG report number AV-2010-126, ``FAA's Air Traffic Controller
Optimum Training Solution Contract: Sound Contract Management Practices
are Needed to Achieve Program Outcomes'', September 30, 2010.
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Our ongoing work has similarly found weaknesses in FAA's cost and
price analysis processes for noncompetitive contracts. In fiscal year
2009, FAA obligated more than $541 million for more than 16,500
noncompetitive contract actions. These contracts have a high risk of
overpayment because the contractor is assured to receive the award.
However, for 8 of the 25 contracts we reviewed, FAA did not perform
effective cost and price analyses and was unable to demonstrate that
prices paid were reasonable. We expect to issue our final report later
this month.
Another ongoing audit has identified concerns with FAA's Systems
Engineering 2020 (SE-2020) contracts to augment FAA staff and support
NextGen implementation. The contracts have a cumulative maximum value
greater than $7 billion--the largest award in FAA history. To date, our
assessment of FAA's contract award processes, oversight mechanisms, and
performance-based methods found that they may not be adequate to
achieve intended outcomes. We plan to issue our report later this year.
At the same time, FAA faces challenges in maintaining an
acquisition workforce with the skills needed to oversee its NextGen
contracts. Currently, 20 percent of FAA's experienced acquisition
workforce is eligible to retire, with a cumulative retirement
eligibility of 40 percent by fiscal year 2015. FAA's Acquisition
Workforce Plan outlines the acquisition competencies needed,
establishes hiring strategies, and describes new certification and
training programs.\11\ However, the plan excludes Federal and
contractor acquisition employees working on FAA's support services
contracts and technical officer representatives responsible for
overseeing contracts vital to NextGen, such as ERAM. Further, FAA fell
short of its planned hiring targets and hired less than 40 percent of
the engineers needed to support acquisition programs. FAA's primary
staffing needs are for engineers, which are critical to implementing
NextGen programs. However, FAA could not accurately determine whether
it hired enough engineers or program managers for NextGen because FAA's
hiring data were either inaccurate or missing. FAA's tracking systems
are also ineffective in monitoring the training and certification of
its acquisition workforce. We expect to issue our final report on FAA's
acquisition workforce this summer.
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\11\ FAA issued its workforce plan in 2009 and updated the plan in
2010, projecting its acquisition workforce needs through fiscal year
2014.
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Increasing Operating Costs Risk Crowding Out NextGen Capital
Investments
FAA estimates that the 2009 collective bargaining agreement with
NATCA will cost the agency $669 million more than it would have cost to
extend the work rules established in 2006 for 3 more years. In the
past, our audit work found that uncontained increases in operating
costs have crowded capital investments.
Several factors in the agreement may further increase FAA's costs:
--Most estimated costs are for increased salaries and benefits for
controllers, but these will depend on the rate at which veteran
controllers retire and are replaced by new controllers with
lower salaries and benefits.
--Negotiated memorandums of understanding (MOU) may incur additional
costs. FAA has had problems with managing its MOUs in the past.
For example, in 2003 we identified negotiated MOUs that
resulted in millions of dollars in cost overruns.\12\ As a
result of our review, FAA established controls that it believes
will prevent additional costs with MOUs in the agreement.
However, some local air traffic managers and regional managers
are not strictly complying with these controls. FAA must
consider these issues as well as its budgetary constraints when
negotiating its next collective bargaining agreement.
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\12\ OIG report number AV-2003-059, ``FAA's Management of and
Control Over Memorandums of Understanding'', September 12, 2003. OIG
reports are available on our Web site: www.oig.dot.gov.
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MAXIMIZING AIRPORT INFRASTRUCTURE FUNDING TO ACCOMMODATE AVIATION
GROWTH
FAA projects that passenger traffic will grow by 3.7 percent
annually each of the next 5 years, and that by 2021 there will be 1
billion passengers. Ensuring enough capacity at the Nation's airports
is essential to meeting this demand, reducing delays, and realizing the
full benefits of NextGen. This includes keeping key runways that are
planned or under construction on schedule and improving oversight of
airport grant programs to ensure funds are appropriately spent.
Funding, Legal, and Other Concerns Could Undermine Efforts To Keep
Runway Projects on Track
FAA has made progress in overseeing opening and improving runways
at our Nation's airports; however, with capacity-enhancing airspace
changes being developed, FAA must ensure that current runway projects
remain on schedule. Since the start of fiscal year 2000, 17 new runways
have been built,\13\ 4 runways were reconfigured, 2 runways were
extended, and 3 taxiways have opened.
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\13\ These projects included new runways at Boston, Chicago O'Hare,
Atlanta, and Washington Dulles airports.
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FAA is pursuing several airspace redesign projects nationwide--
including major efforts to revamp airspace in the Atlanta, New York-New
Jersey-Philadelphia, and Chicago areas--that require a sufficient
amount of runways to accommodate additional traffic. Several runway
projects either under construction or planned at key airports will
accommodate future air traffic growth and coincide with airspace
redesign efforts (see table 2). However, FAA and local airport
authorities face challenges that could impede the progress of these
projects, including funding issues, extensive environmental reviews,
coordination among numerous stakeholders, and legal issues. As these
projects move forward, FAA should continue its efforts to ensure that
these projects are completed on time and within budget.
TABLE 2.--STATUS OF MAJOR NEW RUNWAY PROJECTS
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Total cost
Airport Phase Estimated completion date estimate
----------------------------------------------------------------------------------------------------------------
Atlanta (Runway 9L/27R)................ Site prep................. 2012..................... $46
Chicago O'Hare (Runway 1 0C/28C)....... Construction.............. December 2013............ $1,265
Chicago O'Hare (Runway 9R/27L) \1\..... On hold \2\............... October 2015............. $357
Chicago O'Hare (Runway 9C/27C)......... On hold \2\............... October 2015............. $1,470
Chicago O'Hare (Runway 10R/28L)........ Site prep................. January 2015............. $578
Fort Lauderdale (Runway 9R/27L) \1\.... Design.................... June 2014................ $720
Philadelphia (Runway 9R/27L, 8/26,\1\ Record of decision, To be determined......... $5,200
9R/27L) \1\. December 2010.
----------------------------------------------------------------------------------------------------------------
Source: OIG analysis of FAA's quarterly report ``Runway Projects at Core Airports Under Construction'' for
October--December 2010 (published February 1, 2011).
\1\ Extension of existing runway.
\2\ Due to lack of funding, completion dates for these projects could be extended up to 5 years.
FAA's AIP Program Is Vulnerable to Improper Payments
Our continuing work on FAA's $1.1 billion ARRA-funded airport
grants indicates that FAA has primarily focused its oversight on the
construction status of projects, not on ensuring grantees comply with
FAA and Office of Management and Budget financial oversight
requirements. While FAA commissioned a review of ARRA payments, its
consultants determined in September 2010 that 14 of 24 airports did not
have adequate support to justify their ARRA payment requests. This is
consistent with findings we reported in December 2010 on FAA's
oversight of non-ARRA-funded AIP grants.\14\
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\14\ OIG report number FI-2011-023, ``Improper Payments Identified
in FAA's Airport Improvement Program'', December 1, 2010.
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In our December report, we identified $13 million in improper
payments made to AIP grantees; $7 million of that amount was due to
documentation problems, and $6 million could have been recovered by
FAA. The $6 million of recoverable funds included grantees receiving
payments for ineligible services or paying ineligible recipients and
FAA making incorrect and duplicate payments. For example, during fiscal
years 2007 and 2008, the county of Sacramento billed FAA and was
reimbursed a total of $675,000--the full amount of construction
invoices received--but FAA reimbursed the county before the county had
actually paid its construction contractor. Subsequently, FAA agreed
that these AIP payments were improper.
Both our prior and ongoing AIP and ARRA work have identified
several potential weaknesses in FAA's financial oversight that make its
grant funds vulnerable to improper payments. First, FAA relies on
grantees to self-certify that they adhere to their grant agreements and
to maintain documentation validating payment requests. Second, FAA does
not review grantee payment requests beyond summary documentation, which
does not include actual contractor invoices. Third, grantees approve
change orders for contract work without required cost or price
analyses--and without FAA approval. Finally, FAA employees often cited
staff and resource limitations as impediments to more rigorous
oversight.
CONCLUSION
FAA's fiscal year 2012 budget proposal comes at a time when FAA
must prepare for the increasingly complex demands of the air system of
the future--while continuing to improve safety for the public today.
Whether the particular issue at hand is operational errors by air
traffic controllers, technical problems affecting NextGen's
advancement, or grant oversight of airport infrastructure projects, FAA
needs sound strategies for identifying trends that may be impeding its
safety, modernization, and financial goals. Effective data, analyses,
and oversight will prove critical for FAA to ensure taxpayer dollars
are used wisely to maintain a safe, modern, and efficient American
airspace.
Madam Chairman, this concludes my statement. I would be happy to
address any questions that you or other members of the subcommittee may
have.
CONTROLLER FATIGUE--OPERATIONAL ERRORS
Senator Murray. Thank you very much. I appreciate both of
your testimonies today.
Let me start with the issue about the air traffic
controllers falling asleep on duty. I know the FAA has
announced several new reforms and initiatives.
Mr. Babbitt, you quickly began to work with NATCA to visit
some of the FAA facilities and talk about the importance of
professionalism, and in the most recent announcement, the FAA
started to look more carefully at its own management team. The
agency said it would revisit how managers are selected and how
their performance is evaluated. And I know that the FAA is
going to send out some review teams to look into the management
practices of some of the facilities.
But the agency, as I said earlier, already had questions
about how well its facility managers follow FAA policies. In
fact, in 2007, the FAA learned that managers at certain
facilities had been covering up a number of errors committed by
their air traffic controllers.
So I wanted to ask you today why the FAA did not take a
closer look at the management of its facilities before we saw
these stories in the press.
Mr. Babbitt. Madam Chairman, of course, I did not arrive at
the FAA until 2009, in the summer.
Senator Murray. Correct. I should state that, but yes.
Mr. Babbitt. A number of the things that you have mentioned
to us are absolutely points of focus for us. And we have
undertaken some very serious attempts to reform. These do not
happen quickly. There are 49,000 employees. We have facilities
all over the country. But we have been working for more than 1
year. For example, the fatigue study was undertaken by a joint
agreement with NATCA.
The management changes that we have taken--first, we have
made some changes in the upper management structure, followed
by a broader review, as we work our way down, and making
certain that all of our facilities do, in fact, stay consistent
with the policies that we want and the procedures that we
expect them to follow. We made it very clear there is no
tolerance in the FAA for this type of ``looking the other
way.''
We have a very dedicated workforce, and unfortunately, what
came to light are the sins of a few, not the good deeds of
many. And so we are working very, very hard to maintain the
morale--as a matter of fact, to increase it, and at the same
time, making certain that everyone follows the same guidelines
and principles. That is a difficult transition for us to make.
We have streamlined our internal workings. As of 6 months
ago, internally, we had more than 30 different governing
committees that were structured inside the FAA. Next month, we
will have five. We are far more efficient. We have realigned a
number of our businesses and streamlined the way we do things
to give ourselves better program oversight. I would invite--it
is probably unheard of for the administrator to invite the
inspector general to come over, but I would be delighted to
have them look at some of the changes that we have done in
program management and program oversight that we have done in
the last 6 to 12 months. So, I think we are going to be a much
more efficient agency going forward, and we have taken to heart
some of the very constructive criticisms that people have
brought to us.
Senator Murray. When you announced your review teams, you
only identified a couple of facilities that would be visited by
those review teams. One of them is Cleveland, where the air
traffic controller was found watching a movie, I believe, on
duty. Can you tell us why review teams are not going out more
aggressively to a larger number of facilities?
Mr. Babbitt. We have a finite number of people that can
conduct the review teams, and so we took a few right off the
top of the bat. We took a look at the facilities that we
thought would most benefit from the immediate review. But the
plan is to review everyone, all facilities, over time.
Senator Murray. Over what kind of time period?
Mr. Babbitt. I would actually be giving you a wag here, but
I would hope within the next 6 months.
CONTROLLER TRAINING--PLACEMENT
Senator Murray. In following a lot of these news reports,
the FAA announced it was pulling together this working group
that will make recommendations about how new air traffic
controllers are trained and placed into FAA facilities.
But as I said in my opening statement, the inspector
general has actually been talking about this for many years.
Mr. Scovel, both in 2004 and again in 2010, your office
recommended the FAA develop an objective, reliable method for
placing new air traffic controllers at FAA facilities based on
skills, and the FAA actually agreed they needed that. But to
date we still don't have or see a way that FAA is placing these
air traffic controllers based on an objective test.
Can you tell us why an objective, reliable way of placing
air traffic controllers is so important?
Mr. Scovel. Thank you, Madam Chairman.
Yes, it is important. In the course of conducting our 2010
audit of FAA's practices for assigning new air traffic
controllers, we found that new air traffic controllers were
promised duty assignments before they had even started
training. It appears to us to have been a part of the
recruitment and hiring process. There was little attention, if
any, paid at that time to an objective, reasonable method based
on the new air traffic controllers' capabilities and
performance at the Air Traffic Control Academy in Oklahoma City
to determine where these people might best be placed. And in
fact, we have found that new air traffic controllers in
increasing numbers are being assigned to the most complex
facilities: the New York TRACON, for instance; the Cleveland
facility that you mentioned; areas that govern complex
airspace, have high traffic volumes, and require intense on-
the-job training by the certified professional controllers
assigned to those stations.
We can only urge in the strongest terms that FAA quickly
adopt a reasonable method, whether it is by test, by interview,
or whether it is by performance at the training academy in
determining where new air traffic controllers should be
assigned.
Senator Murray. After their training, I assume, not pre-,
when they are----
Mr. Scovel. Exactly. We assume that this will be an item of
intense interest to applicants for air traffic controller
spots, but it must be made clear to them that while certain
duty options and stations might be available, final assignment
will remain with the discretion of the agency.
Senator Murray. So, Mr. Babbitt, where are we on putting in
place a reliable test?
Mr. Babbitt. One of the key changes that has been made
might not appear to have anything to do with controller
placement, but it has everything to do with it, and that had to
do with the collective bargaining agreement. We have a new
agreement with our controllers. It was reached shortly after I
took the Administrator position.
During the last agreement, there was absolutely no
incentive to bid controllers into higher paying positions. So
if we had a vacancy in the most complex facility in our system,
there was absolutely no incentive for a controller to bid over
there. And so we were forced to assign people out of the
academy. There was no other way to fill the vacancies. That is
not a good practice. I will tell you now, it is not a good
practice, and we have eliminated it.
So now we have the ability to incentivize seasoned
controllers who can take that opportunity. And in fact, when
they go to a more complex facility, they are going to work
harder. It is a more difficult task, and they are going to be
compensated accordingly. That gives us the opportunity to put
new hire controllers into facilities that are more suited to
their skill set.
Senator Murray. Is there an objective test developed to
give to air traffic controllers on assignment yet?
Mr. Babbitt. We test all the air traffic controllers, and
while I realize everyone would like to appreciate that we would
have a range, we like to think that all of the controllers are
qualified. When they are qualified, they are qualified to do
anything. We would never want to be in the position of saying,
well, we sent the good ones here, but the not-so-good ones went
here.
Senator Murray. I have additional questions about that, but
I have gone over my time. So I am going to turn it over to
Senator Collins.
Senator Collins. Thank you, Senator Murray.
I actually am going to pick up exactly on the point that
Senator Murray was raising with you because I have read the
March 30 report of the inspector general, which points out that
the FAA will need to hire and train nearly 11,000 new air
traffic controllers through fiscal year 2019, because there are
going to be a large number of retiring controllers.
And the inspector general's report finds that the FAA's
reported training failure rate was not accurate and is critical
of the metrics. In the report, it explains that when there are
student controllers who are unable to pass the training
process, they are either transferred within their assigned
facility to a new area of operation, or transferred to a less
complex facility, or terminated. It bothers me if individuals
who could not pass the training are being placed in any
position. So is that still happening?
Mr. Babbitt. I believe that the training that you are
talking about--we have a variety of controllers. We have tower
controllers. We have en route center controllers, and we also
have controllers in the very complex areas. If someone has, for
example, been a very effective tower controller working for a
number of years fully trained and wished to upgrade to another
level and simply did not master that training, we would let
them go back to their previous area where they had exhibited a
success rate.
Senator Collins. That makes sense, but that is not what
this report seems to be saying is going on. Are you familiar
with this March 30 report from the inspector general?
Mr. Babbitt. Yes, ma'am.
Senator Collins. And do you agree with the findings?
Mr. Babbitt. I believe that we have incorporated--and I
believe that the inspector general has concurred with the
suggestions that we made going forward. One of the points of
that report I think we partially concurred with, and I think
one area of the report was simply a data measurement point in
terms of failure rate. I believe the inspector general's team
was looking at a certain period, and we were looking at a
longer period of time. I think if you go to the end, the
failure rates come back into alignment. In other words, we
would say we had someone who was still in school at the end of
a year and we failed them at 18 months. We were counting that
person as having passed at the 1-year point, and I think the
inspector general said, well, they ultimately failed. You
should reflect it that way. And we understand the difference in
the accounting of that.
OPERATIONAL ERRORS
Senator Collins. Let me ask you both a basic question. It
seems that in the last year, there has been an alarming
increase in close calls in the air and on the ground,
collisions that were narrowly averted. In addition, we have
seen these reports about the air traffic controllers falling
asleep or being inattentive.
What are your views on the increase in operational errors,
and also in these incidents with the air traffic controllers?
Are we seeing a true increase, or has this problem been going
on all the time and there has just not been public awareness of
it? There is just better coverage of it now?
I am going to start with the inspector general and then
hear the Administrator.
Mr. Scovel. Thank you, Senator Collins.
As I mentioned in my opening statement, operational errors
by controllers increased between 2009 and 2010 by 53 percent,
from 1,234 operational errors to 1,887 operational errors. At
this point, we do not have a good handle on what the true cause
may be, and I suspect that we will not find a single true
cause. We have examined National Transportation Safety Board
(NTSB) investigations as well, where operational errors have
been discussed, and found that they too have not found any kind
of silver bullet. But there have been a number of reasons,
perhaps, advanced to explain it.
One that the agency points to frequently--in recent weeks,
in the last month or so, since all of this has arisen in the
news, is what Mr. Babbitt likes to call the enhanced safety
culture and safety awareness in the agency. That is due, in
large part, the agency believes, to the Air Traffic Safety
Action Program (ATSAP), the voluntary, nonpunitive disclosure
program that was recently put in place for air traffic
controllers. The theory is that controllers, now, without
fearing punishment, will be more willing to report operational
errors. And that may be a cause.
Another cause might be the automated tool that was recently
put in place at TRACON facilities, which up until recent times
did not have any kind of automated tool to capture operational
errors committed by controllers in those facilities. This is
the TARP program, the Traffic Analysis and Review Program. That
certainly has flushed out more operational errors, I would
speculate.
A final cause might be--and some point to the fact that we
have all been talking about this just this morning--the
increase in newly hired controllers at air traffic control
facilities, and the question of if they might not be committing
more operational errors.
At this point, we do not know and neither does FAA, neither
does NTSB.
I commend Mr. Babbitt for naming an independent team--that
panel that he has charged with investigating the seeming rise
in operational errors that is due to report in the early fall.
This week, too, my office has announced audits to get to
the root cause of all these operational errors. We are going to
be looking at ATSAP, the voluntary disclosure program that I
mentioned. We are also going to be looking at the agency's loss
index, their loss of standard separation index, which attempts
to capture all the different types of proximity events. We want
to look at all of that and see if we can identify the range of
causes. And I suspect that, like NTSB, we will not find a
single one or even a couple, but it could be attributed to a
number of them.
Senator Collins. Thank you.
Mr. Babbitt, what are your initial impressions on the cause
of the increase in operational errors?
Mr. Babbitt. I believe that the inspector general
highlighted a number that we concur with. Certainly it is a
concern whenever the rate goes up, but we have made such
important strides in so many areas. Runway incursions, for
example, have been reducing at a rate of 50 percent per year
for the last 3 years. We had a grand total of six serious
runway incursions last year, and that is out of 50 million
operations. Had we maintained the same rate we had in 2005,
there would have been more than 100. So dramatic reductions
have been made, and that is attributed to a lot of things: the
professional controller workforce, the attentiveness, new
electronic gear, Airport Surface Detection Equipment, Model X
(ASDE-X) radar on the ground. All of these are leading to that.
By the same token, we may be somewhat being penalized by
the fact that we do have better electronic ways of reporting.
As the inspector general mentioned, this electronic reporting,
this TARP program, allows us to flag things electronically that
if no one had seen, we would not have noticed. And so we are
taking the position that it is not necessarily the amount of
operational errors that is increasing, but that we are
capturing them. And that is a good thing. We want to capture
what is happening. The next question is, then what is causing
them? What do we need to change? Are we asking controllers to
put airplanes too close together? Are we not being clear with
our navigational instructions? We want to get to the bottom so
that we can train to reduce these.
But I use the example: I had an office over in Arlington
for years, and at the intersection, there were two or three
traffic light violations being given a week. They put in a
camera and there were suddenly 40 being given a week. There
were not more people running the light. There were more people
getting caught running the light. In a sense, that is what we
have done with this electronic capture, is our ability to find
them. But again, that is a good thing. It is not a bad thing.
Senator Collins. And it still begs the question of the
cause, as you indicated.
Thank you, Madam Chairman. As you know, I need to leave to
go to the White House, and I would ask unanimous consent to put
questions in the record. Thank you.
Senator Murray. Absolutely. And I appreciate that. Your
questions will be submitted for the record, and we will get a
response. Thank you very much.
Senator Lautenberg.
FUNDING CONSTRAINTS AND CONTROLLER ATTRITION
Senator Lautenberg. Thanks again for your being here and
for the excellent support that you have brought to the system--
being constantly on guard to rid ourselves of those occasional
slips. Mr. Babbitt, you know that no matter how many flights it
is compared to, the fact is that we will look simply at the
number of incursions or other close calls. Those are the ones.
It could be millions of airplanes flying or in the air, but we
want to make sure that we catch all of the problems.
In terms of what we see happening, the House Republicans
have threatened to cut back FAA funds to fiscal year 2008
levels. Yet, a large number of trainees are entering the air
traffic controller system, particularly--with a large wave, not
unexpected, of controller retirements expected soon. Now, would
that impair the system's ability to maintain the safety levels
or that can be improved in the future?
Mr. Babbitt. Let me answer. I read that as sort of a two-
part question. We have a training program that will accommodate
what we anticipate for retirements. In the hiring program, we
did have, from about 2005 through about 2009, an exceedingly
high number of retirements, far above what was anticipated,
which put a huge demand on our training. That has abated. We
now are down to what we believe is a steady state rate of
replacing our controller workforce as they age, and I am very
comfortable that the profile that we have now--we are also
seeing the ratios of fully trained certified professional
controllers to train these----
Senator Lautenberg. Can we do better with less?
Mr. Babbitt. No, sir, I would fear that we could not. We
have four fundamental areas that we have to address, and if you
said we are going to do with less, then we would have to
certainly take priorities into consideration and something
would have to give.
Senator Lautenberg. So this would not help protect the
public more than they are protected now.
Mr. Babbitt. The priorities--we would certainly share with
the subcommittee here what our new priorities would be and----
Senator Lautenberg. You are the boss, Mr. Babbitt. You have
got the orchestra in front of you and you are the conductor.
Will the sounds be the same? Will the system be the same if we
have less to work with? Is it fair to assume that the answer
would be no?
Mr. Babbitt. You are correct. The answer would be no.
Senator Lautenberg. Thank you.
PASSENGER BAGGAGE FEES
The airlines are tacking on fees that account for an
additional 20 percent of the ticket costs, and we have seen
what happened when one airline imposes a new fee. Others
quickly follow suit. These fees are on everything, as I said
earlier, from checking your bags to pretzels. I would like to
have the airlines required to publish what fees they are going
to charge above the basic airline ticket so that a prospective
passenger can make a comparison. Maybe I can get a bite to eat
and not have to pay for it. And everybody who flies is not a
millionaire.
So, Madam Chairman, I would like to propose that we try to
put a system like that into play. And I do not know whether
this is an appropriate moment or hearing to move this along,
but I would like that to be in the works.
JFK AIR FRANCE INCIDENT
Last month, a large Air France plane struck a much smaller
Delta plane at JFK. Luckily nobody was seriously injured, but
it gave everyone pause to think about how something like that
can happen. What went wrong that permitted that incident to
take place?
Mr. Babbitt. Yes, sir. That was an instance where an
aircraft was on a taxiway that was being controlled by air
traffic ground control at Kennedy Airport. The aircraft in
front of it, a smaller airplane, was exited onto a private
ramp.
Now, I should mention this is under investigation by the
NTSB, and we are party to that investigation. There has not
been a conclusion reached, but I would say that the airplane
went to a traffic area that is managed by their local ramp no
longer in our control. Clearance needs to be provided----
Senator Lautenberg. We would like to hear the conclusion
there----
Mr. Babbitt. Yes, sir.
Senator Lautenberg [continuing]. Because it seems almost
impossible that that is the situation.
Mr. Babbitt. We will certainly get back to you when the
NTSB concludes.
[The information follows:]
The National Transportation Safety Board (NTSB) has not yet
completed its investigation into the April 11, 2011, incident at John
F. Kennedy International Airport (New York, New York) where the wing of
an Airbus A380 (Air France Flight 7 bound for Paris, France) clipped
the tail of a Bombardier CRJ 700 regional jet (Comair Flight 293 in-
bound from Boston) that was waiting to park at an arrival gate.
The agency will provide the subcommittee with a copy of the NTSB's
finding once the investigation report is made available.
Senator Lautenberg. Madam Chairman, if my colleague,
Senator Pryor, would indulge, just one last thing here.
Is there anything on the drawing board that either of you,
or you particularly, Mr. Babbitt, are aware of that might
suggest that further noise reductions could take place? Because
that affects our airspace usage and design enormously.
Mr. Babbitt. Yes, sir. I know a lot of times we are sort of
charged with, so, where is NextGen and how is it progressing.
We are actually very well along, and we are operating at a
number of airports around the country utilizing very complex
and robust procedures that utilize NextGen technologies. In
Seattle, for example, we use these continuous descent arrivals
that save 60 to 80 gallons of fuel and produce much less noise
in the communities by using required navigational performance
(RNP), and satellite-based navigation. Aircraft arriving into
Seattle use curved approaches and avoid flying over populous
areas and therefore produce much less noise with a much smaller
carbon footprint. We are doing those procedures in Atlanta, Los
Angeles, Seattle, and Philadelphia. We have a lot of
opportunities where this is actually being deployed today. So,
yes, sir, there is a huge benefit available.
Senator Lautenberg. Yes. Bring it up to New Jersey, please,
Mr. Babbitt.
Thank you.
Senator Murray. Senator Pryor.
AIRPORT IMPROVEMENT PROGRAM
Senator Pryor. Thank you, Madam Chair. And I want to thank
our witnesses for being here today. We appreciate your service.
Mr. Babbitt, let me start with you. I would like to ask
about AIP, and I would like to focus on one particular case
that I hope you will look at and see if we can get some help
with.
There is a city in Arkansas about 30 miles outside of
Little Rock called Conway, Arkansas. It is a great community.
They have great people there, and it is growing. It is a
robust, very energetic community.
For the last 17 years, they have been trying to move their
airport, and they have taxed themselves in order to do so. They
have done everything they need to do. They have a location.
They have a plan. They have all this. They want to do it over a
3-year period. FAA says they need to do it over a 5-year
period. I am not sure why the FAA wants to go slower.
But there is a compelling reason why I think we need to
move the airport as quickly as possible, and that is the
current airport is very old. On one end of the runway is
Interstate 40. On the other end is a neighborhood. And I know
they have had at least two, maybe more incidents, where planes
are landing or taking off and actually crash into homes and
kill people. So it really needs to be moved to a safer
location.
Again, this community is totally behind this. They have
taxed themselves. They have a great plan. I wish you would look
at that. I know that they are in line to get some grant money
this year too, and I know because of the budget issues we have
been going through recently, you guys have not done that
allocation yet. But I hope you will look at that as well.
Conway, Arkansas. We will get you more information on that.
Why would the FAA want to go slower than a community? Do
you know the answer to that?
Mr. Babbitt. I can give you one of several potential
answers. Oftentimes we are limited. We might suggest that we
could do that in 3 years and--I will just make up a number--
that it might cost $20 million. However, between authorizations
and appropriations, they might say, well, you can have $15
million and you can get the next $5 million later on. And so we
are compelled to say to the airport we simply cannot get the
money that fast for you, and of course, you are in competition
with a lot of other airports. And it is based on a very
thoughtful formula of what that airport expansion and change
will do to improve the overall effectiveness of the national
airspace system. But usually those are limited simply by the
amount of funds that we have to flow at the rate of change, and
it is always slower than both of us would like to be, and
limited by the amount of money available.
Senator Pryor. I just hope you will look at the Conway
issue.
Mr. Babbitt. Yes, sir. I have jotted that down.
[The information follows:]
The Federal Aviation Administration (FAA) supports the city's
efforts to relocate Conway Municipal Airport (KCWS).
The agency has invested more than $5.4 million in seven separate
Airport Improvement Program (AIP) grants to support the airport
relocation efforts. These grants were used for planning, land
acquisition, and the first stage of construction.
The Office of the Secretary of Transportation announced on June 20,
2011, an AIP grant award in the amount of $2.3 million for the second
stage of construction at KCWS. The FAA Southwest Regional Office will
continue to work closely with the city on the administration of this
grant.
Additionally, the FAA Southwest Regional Office carefully assessed
opportunities to speed up the project and accelerate the construction
schedule, taking into consideration other critical needs across the
Arkansas system. After examining various options, a strategy was
developed to complete the project over a 4-year period, enabling KCWS
to be funded 1 year earlier than previously reported to city officials.
Senator Pryor. Thank you very much.
And the other thing is I know that we are all--and I know
Senator Murray has been a leader in this as well--trying to
look for ways to be more efficient and to trim our spending. We
are trying to do it in a way that does not harm the public and
that would be considered a smart way to trim our spending.
Last year I added a provision in the FAA bill as it came
through the legislative process. It would require a study on a
proposed Air Traffic Control Modernization Board to look at
whether there should be consolidation of air traffic control
towers. We had problems a few years ago with some strong
indicators that they were going to consolidate a tower--in
fact, it was the Little Rock tower--and take it offline and
just use the Memphis tower. But we could never get real
clarification on that from FAA.
So my question for you is: Are there any plans to
consolidate any air towers that we need to know about?
Mr. Babbitt. Yes, sir. We have looked at a number of
consolidations. I think for clarity, we would be talking about
consolidating the radar functions and the TRACON functions. For
example, in the State of California, we have two very large
northern and southern California TRACONs where the people in
those facilities control the air traffic at literally dozens of
airports.
Senator Pryor. Right.
Mr. Babbitt. NextGen technology will allow us to really
capitalize on those kinds of efficiencies. Let me give you an
example. If we had 10 facilities in an area, every one of those
facilities would have a radar room, and in that radar room, we
would have all the necessary hardware, software, backup
generators and backup IT capability. All of that would be
duplicated times 10. We, on the other hand, could consolidate
that, and with the digital technology we have today, the
controllers do not need to sit underneath the air traffic they
are controlling. They can do it very efficiently. You have a
lot easier staffing. You have a lot of efficiencies that come
from that. So we are weighing those things with our colleagues
in the House and the Senate, as well as the people we work
with, the air traffic controllers. We want to look at this
thoughtfully. Does this make sense? Is this good use of our
technology? And are we truly more efficient, or is there any
harm done? So we have working groups that are looking at this,
and in the interest of being efficient with our tax dollars, it
is something we have to look at.
Senator Pryor. I am all for efficiency, but you also need
some redundancy in the system in case one location goes down.
In our region, we have had a situation I know a couple of times
in the last 3 or 4 years where the Memphis airport, for one
reason or other, storms or whatever, has lost power. And they
have had to go down, and the Little Rock TRACON takes up the
slack on the Memphis area. So do you not want some redundancy
in the system?
Mr. Babbitt. Absolutely, yes, sir.
And one of the things when we talk about--it is very
germane to your question there. When we transition completely
to ERAM, the ERAM system and aircraft equipped with ADS-B, we
have the same fidelity as terminal approach radar so that if a
TRACON, for example, were to have some catastrophic power
failure, the center controllers would have the same update
rates that TRACON enjoys today. That is not the case today with
the host system and, essentially, the analog type radar we use.
Senator Pryor. Thank you.
Madam Chair, I have other questions I will just submit for
the record. Thank you very much.
Senator Murray. Thank you very much.
EN ROUTE AUTOMATION MODERNIZATION
I did want to ask about the ERAM program. It is a
fundamental part of the FAA's NextGen effort, and under ERAM,
the FAA is completely replacing a key part of the agency's air
traffic control system. Unfortunately, that means that when
there are problems with ERAM, there are problems in other parts
of NextGen.
Now, this subcommittee has provided a steady stream of
funding for ERAM, but the program fell years behind on its
schedule, and those delays are now affecting other important
programs, like the data communications program, that need the
new features that ERAM is supposed to be offering.
According to the inspector general, the ERAM program is
facing additional cost increases between $330 and $500 million,
and because of those delays and cost overruns, the FAA is going
to be establishing a new budget and schedule for ERAM this
summer.
If more funds are needed for ERAM, will you be identifying
which programs will be cut in order to make room for the cost
increases on those?
Mr. Babbitt. I am going to start with the positive approach
that I am very optimistic that we will not need sufficient new
funds. ERAM was a program that was started more than 9 years
ago. It was a quite ambitious program, and I think, candidly,
it was more ambitious than people gave it credit for and more
complex than people appreciated that it might be. We have run
into some serious complications in integrating this type of
technology into the national airspace system.
With that said, it was clear to me within 1 year of my
arrival that this program was not on track. We literally
stopped the program and brought it to a halt and said, let us
analyze it top to bottom. We invited MITRE to come in. We
invited outside--certainly the inspector general has looked at
it and the results. We have revamped it. We have revamped some
of the cost allocations.
And yes, those numbers were re-baselined, but they were
done with a lot of transparency, a lot of openness. And the
cascade of implementation, or waterfall, if you would, that we
set forth is a very achievable process and program.
Second, we changed completely our program management
oversight. We have completely revamped how we do that. I think
it is more state of the art. I think it is something that we
probably should have done some time ago. But the bottom line is
here today. We also are carefully monitoring each of the
stages.
I think one of the most important things that we have done
is we have now incorporated our air traffic controllers. They
were not really involved in the implementation schedules. They
have been a great benefit. These are people who have wonderful
practical experience in how this program should work. They have
been very helpful in working with us, and we have identified a
lot of the open items. I just read a report in the last 2 or 3
days; there was something like 150 open items as of 6 months
ago with one of the operating systems. Today we are down to
about seven or eight. Granted, that is seven or eight too many,
but it is a dramatic improvement over where we were. We now
have ERAM operating in two different areas, Seattle and Salt
Lake. Once we have our initial service decision in place, we
will move on with implementation in other areas, and I believe
we are on track.
Senator Murray. Mr. Scovel, you have disagreed with the FAA
on this cost estimate. They have said that the cost increase
will not exceed $330 million. You said it could be as high as
$500 million. Why do you see the cost increase being so high?
Mr. Scovel. Madam Chairman, the cost increase is a
difficult figure to pin down. The agency has specified, as you
pointed out, $330 million, and extended the initial timeline
for ERAM by about 4 years. The work of our office and that of
MITRE as well has suggested that $330 million might only be the
start.
Mr. Babbitt has spoken to the extreme technical
difficulties and unpredictable nature of putting ERAM in place
first at the initial operating sites, much less at other places
around the country. We can anticipate that those difficulties,
in fact, will continue. The Salt Lake City and Seattle sites
were selected as test beds precisely because they are less
complex than some of the other locations where ERAM will need
to be installed, like New York, Chicago, and Cleveland. When
ERAM is put in place in those areas, we can anticipate new
problems cropping up, especially more software problems. More
time and more effort will be needed in order to bring those to
closure, and that, of course, translates into more expense. We
and MITRE have predicted perhaps an upper range of $500 million
in order to accomplish all of those fixes.
Mr. Babbitt is absolutely correct. ERAM is critical to
NextGen. There is a logjam right now in NextGen, and ERAM is
the key log. The agency is working night and day to work on
fixes. They appreciate the seriousness of the situation.
At times, however, in our opinion, the agency has been
over-eager, a bit too quick to declare temporary victory in the
face of some of the limited accomplishments that it has
achieved. For instance, the in-service decision actually was
announced at the end of March but then quickly suspended in the
face of protests from the NATCA representatives that Mr.
Babbitt has mentioned, and also from an independent operating
assessment team that the agency had commissioned to review ERAM
fixes to date.
That is the kind of over-eagerness that can sometimes lead
to skepticism on the part of decisionmakers like you, and by
users in the industry, and by oversight authorities like my
office. We would strongly encourage the agency to adopt a very
sober and rational approach in deciding what needs to be
accomplished with ERAM, and then putting it in place and
testing it thoroughly before taking the next step.
Senator Murray. And so, Mr. Babbitt, you answered my
question on what you would cut in order to make room for the
cost increase, with the positive attitude that you will not
have to do that. But having been around here for a while
watching this, I would come back to you and say that we do need
to know from you what programs you will cut in order to deal
with that cost increase because that will be what this
subcommittee will have to deal with here in the coming months.
So I would ask you to go back and look at that, and for the
record, if you could give that answer back to me, I would
appreciate it.
Mr. Babbitt. Absolutely. I mean, we clearly would have to
reevaluate our priorities, but the savings that come from
implementation of NextGen are so powerful and so far outweigh
the incremental costs. For example, for every month we delay
the implementation--we do appreciate staying on schedule,
because every month that we delay the implementation of a fully
robust ERAM system, we continue to support an old legacy system
that costs us $10 million a month.
Senator Murray. I do not disagree with the long-term
projections at all. I totally am where you are. I am dealing
with the immediacy of a budget that does not appear to be
growing. So we need to make some tough decisions here, and we
will need your input as we do that.
Mr. Babbitt. We will do that.
[The information follows:]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year Fiscal year
Budget Fiscal year Fiscal year Fiscal year 2012 2012 revised
line Program name Summary of impact 2011 enacted @ 2012 request @ 2012 mandatory discretionary ERAM funding $2.87 billion--
item $2.73 billion $3.12 billion @ $250 million @ $2.87 adjustment $28.5 million
billion
--------------------------------------------------------------------------------------------------------------------------------------------------------
2B07 ATCT/TRACON Improve Will delay the execution $45,508.80 $61,900.00 $5,000.00 $56,900.00 $(6,900.00) $50,000.00
of backlogged and new
projects.
2D03 WAAS Funding for the 94,810.00 125,500.00 .............. 125,500.00 (12,200.00) 113,300.00
deployment of a 5th GEO
Satellite was reduced.
2B17 ASR-8 SLEP/ ASR-8 Relocation-- 2,594.80 2,700.00 .............. 2,700.00 (2,700.00) ..............
Relocation Bismark, North Dakota.
This was to complete a
congressionally
directed item in the
fiscal year 2008
budget. The airport
secured an earmark to
relocate the ASR-8 to
make room for an
industrial park.
4A08 CAASD Will reduce the planned 73,755.20 80,800.00 .............. 80,800.00 (6,700.00) 74,100.00
level of 263 MITRE
technical staff years
that will support
communications
modernization,
performance-based NAS,
enroute evolution,
terminal operations and
evolution, airspace
design and analysis,
NAS System operations,
aviation safety, and
security--13-percent
reduction.
2A01 ERAM Accelerated funding for 181,935.40 120,000.00 .............. 120,000.00 28,500.00 148,500.00
ERAM into fiscal year
2012 from fiscal year
2014 in order to meet
the programs fiscal
year 2014 schedule
goal. Revised fiscal
year 2012 funding does
not increase the
overall program
baseline cost which
remains at $330 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The total reduction of ERAM funding adjustment is $0.
SYSTEM-WIDE INFORMATION MANAGEMENT
Senator Murray. I wanted to ask about the System-Wide
Information Management (SWIM) program. It is an essential part
of FAA's NextGen effort as well. And under SWIM, the FAA will
be able to have a network of different computer systems and
programs. It is about sharing data and working more
efficiently, a good long-term goal, and we support that.
But, Mr. Scovel, in your written testimony, you talk about
the fact that the SWIM program has already seen a cost increase
of about $100 million. Now, I understand the FAA has been
setting a very cautious baseline for SWIM, committing to only 2
years of funding at a time, and the FAA has stayed within the
budget set by those baselines. But the overall cost of this
program is increasing, and I wanted to ask you today to explain
what these 2-year baselines mean for a program and how a
program can stay within its short-term baselines and still
experience long-term cost growth.
Mr. Scovel. Madam Chairman, SWIM is a key transformational
program for NextGen. It is a program, however, that is now in
trouble. It started off at $179 million for the first segment
estimated cost. Now it is $104 million or so above that and
extended by about another 2 years on this first segment. We do
not have the cost estimates, in fact, for the next couple of
segments--not that my office has seen, at any rate.
If I could drop a footnote at this point, I would say that
had FAA published a detailed NextGen implementation plan or an
integrated master schedule that would be of benefit to
decisionmakers like you, we might know. We might have some
visibility over the longer term of how SWIM would fit in, along
with other programs, in terms of cost, benefits, timing, and
sequence. The agency has not yet given us that.
In the meantime, we see a program like SWIM that appears to
be in trouble. When we commissioned our audit, the initial
report, which we have submitted to the agency for their
comments back--we think that we have identified a root cause of
the problem, and that is the diffused and decentralized nature
of the development and management structure of the program.
Rather than a strong central program office, SWIM, in fact, has
devolved or delegated key implementation decisions to the seven
subordinate programs or peer programs that will draw on SWIM's
capabilities--programs like ERAM. And we just discussed that
and how the requirements and fixes for ERAM are very much in
flux.
We have suggested to the agency, and we have recently
learned that they have, in fact, put in place a way to clarify
accountability and authority over SWIM. It will be the deputy
administrator who will adjudicate disputes between the SWIM
program office and other program offices as to what SWIM should
include, and what requirements should be, and fixes to be put
in place.
LIFE-CYCLE PROGRAM COST MANAGEMENT
Senator Murray. Mr. Babbitt, can you tell me how the agency
manages the cost of a program over its entire lifetime, and
does not just look at the short-term baselines?
Mr. Babbitt. It is a complicated answer that I have to give
you. We do, in fact, have a NextGen implementation plan, but
that is simply the mechanics and the actual layout and rollout
of the various functions. To attach a budget to that is more
complex.
Oftentimes we would ask for--and I think it explains, or I
hope to explain the question to you with a suitable answer. We
might say, for example: We would like to be funded. We would
like to put this program in place that would cost $50 million
and take us 2 years. What we may get back instead is, well, you
can only have $30 million. So now it makes it a 3-year program
which will be, in fact, more expensive. And so then we will re-
baseline and we will reprogram the funding for that. So those
things change for us subject to how we are allocated funds. It
does make it difficult.
Of course, we are on our 18th extension. It does make it
very difficult to give you a budget forecast with all these
very short-term extensions. It makes it a little more
complicated for us. And sometimes it would appear that, well,
you did not do a very good job of your forecast when, in fact,
it was necessary to change the timeline.
Senator Murray. It is my understanding that SWIM has gotten
all of its funding that they requested.
Mr. Babbitt. As the inspector general has noted, it is a
complex program, and we have run into some technical
difficulties.
Two things that I think are very important: We have changed
the reporting structure and the accountability to very much
more centralize this to overcome the very things that were
pointed out. We had a very diverse and not very transparent
process, and we were not leveraging the technology that we had,
or the skills inside the agency. I think we have made great
steps toward that.
Our program management oversight has been changed. A number
of the changes that I mentioned to you that have been
undertaken are now being implemented. I truly hope that we will
produce a far better and more realistic result to your
subcommittee and others.
NEXTGEN FUNDING PRIORITIES
Senator Murray. As we face these continuing budget cuts, we
have to know that. This subcommittee is watching it very
closely. So we will stay in touch with you on that.
You mentioned the managing of NextGen, and I know FAA has
come under a lot of criticism for its management. Good
questions have been asked about whether the FAA can manage a
wide variety of programs as a single portfolio and whether the
FAA has set appropriate goals and metrics to measure the
success of NextGen. But I think recent pressure to make drastic
cuts to the budget raises new kinds of issues about NextGen.
When there is only a limited amount of funding available,
we need to know what FAA's priorities are and what benefits we
are going to get for the money that we spend. I know that right
now you are working on a new spend plan for 2011. But I am just
not convinced that the FAA has a strategy for identifying its
highest priorities for the long term, and not just on a year-
by-year basis. So I wanted to ask you if you could tell me
which NextGen capabilities have the highest priority for
funding if there is not enough money to pay for all of it.
Mr. Babbitt. That is a very complicated question. Let me
see if I can tackle it for you. Some of this is going to be
dependent--remember, there are two components, or actually
three components internal to the FAA. But there is the fourth
component of equipage on aircraft outside the FAA.
Now, we have taken great lengths to determine the
prioritization of what we would want to do, and we took it to
an outside group, RTCA. We showed them our draft program for
the NextGen implementation, and we asked them to review it.
Now, these were 300 people from around the industry. These were
manufacturers, pilot groups, mechanics, air traffic
controllers, all the people directly affected by NextGen. And
we asked them to look over what we had done.
And they have given us a new set of priorities, which are
now the steps we are following. We revised our NextGen
implementation plan to align ourselves with what the industry
said would be most effective. In other words, the industry
said--for example, we were going to build something for data
communication. They said that does not do us any good until we
get something else. You should do the something else first. So
we have realigned our priorities to that extent.
So if showing you the new NextGen implementation plan and
then putting dollars with it--that would probably do about as
good a job of laying out for you the priorities that we have
accepted, driven by the industry, driven by the consumers, and
that would be the steps we would follow.
Now, having said that, I am very concerned that you cannot
just take one brick out of a building and say, well, this is
the brick we will save. That may be a very foundational brick
and we would want to be very cautious in thinking about--even
though it might not be the highest priority, it might be very
necessary to support the rest of the program. So we would have
to go back and look.
And this has been complicated by an uncertainty of funding.
Given a finite amount of money, we can tell you what we are
going to do. Given sort of an unknown quantity, it is
different.
One of the things that does concern me--I just recently
read an independent study that shows the benefits of NextGen if
it were to be fully implemented by 2025 and if we spent every--
even on the high-side dollars, it would cost, in round numbers,
$22 billion to fully implement. But the benefit to the global
economy of the world is $897 billion. This has an enormous
return on its investment. So we would want to be very careful
about saying we can save a billion here if it delays the
program implementation. But this independent report says, if
you delay the implementation 5 years, it reduces the $148
billion.
So we would want to be very thoughtful and we certainly
would want to have your understanding and concurrence before we
said, well, we are going to cut back here. We are going to save
$4 billion over the next 2 years, but it is going to cost us
$80 billion in the long run. So I think we need to be----
Senator Murray. Those are issues we are dealing with in
every program here, and we are trying to be sober about what we
can realistically do. So we will work with you.
Mr. Scovel, do you have any ideas on how the FAA can
prioritize this as we face these continuing challenges here
with budget cuts?
Mr. Scovel. We would commend the agency for their efforts
in the short-term implementation for NextGen to have worked
with the RTCA so-called Task Force 5. And by the short term, we
are talking about from the present up to the 2015-2017
timeframe. FAA, we think, has very wisely chosen to focus its
short-term efforts on the Metroplex initiative, and working
with users in the industry to determine those benefits that can
be most quickly and most tangibly achieved at those key
locations throughout the country. And FAA has been working on
airspace and procedural changes in order to accomplish that.
Looking out over the longer term, we would cite a couple of
programs. And I am certain the Administrator would likely
agree. ERAM, as we have talked about, needs to be fixed, and as
quickly as possible. ADS-B is absolutely critical. One that has
not been mentioned yet today, apart from our written
statements, is terminal modernization. In order for the
benefits of NextGen to be achieved, and specifically for the
ADS-B benefits to be put in place, not only ERAM at the en
route centers, but also the modernization platforms at the
TRACONs need to be in place. The users have been clamoring for
some certainty and identification as to when, and how, and
where those initiatives will take place, and we would certainly
second that.
AIR FRANCE FLIGHT 447--LOSS OF SEPARATION
Senator Murray. I appreciate both of your testimony on all
those complex budget issues.
Mr. Babbitt, while I have you, I just want to ask you one
question. It was almost 2 years ago when Air France flight 447
disappeared into the Atlantic Ocean, and the New York Times
published a lengthy story on that this week which was very
interesting. I know that was not under FAA's watch, but I
wanted to ask you, while you are here, what procedures are
followed when U.S. aircraft controllers lose contact with the
aircraft.
Mr. Babbitt. I guess that changes depending on other
circumstances. But if an aircraft were to lose contact, we
would certainly institute a set of procedures to try and regain
radio communications. If that is not possible after about 10
minutes, we go into----
Senator Murray. That soon.
Mr. Babbitt. Yes. We start notifying other agencies. We
escalate it. Now, that is just radio communication.
If we lose radio and radar communication--in other words,
we lose sight of the target--we immediately assume that some
catastrophic loss has occurred. If we cannot even get a primary
target, meaning there is no radar return whatsoever, we would
assume that the airplane is down and we would go to another
level. We would notify the NTSB. We would notify other
agencies. We would begin search and rescue.
Senator Murray. How soon? Because I think it was a day
before they began search and rescue. How soon would we be
looking at search and rescue?
Mr. Babbitt. We would have notified people within 30
minutes. So, we would have been reacting very, very quickly. Of
course, this was an airplane that was not a U.S.-registered
aircraft and it was not in U.S. control.
Senator Murray. Yes. My question was more, what do we have
in place that is dissimilar to that. It seemed like it just
took them--from reading the article--I do not know if you read
it, but it just seemed like it took them forever to do
anything.
Mr. Babbitt. Right. Yes. No, we would have responded more
quickly. That one was complicated in consideration of the
circumstances. That airplane could not have been further from
anything than it was. It was in a very remote area across the
ocean, which really complicated the authorities' ability to
move there. But I do not know the exact timeline of when they
implemented. But things would be well underway in this country
in 30 minutes.
Senator Murray. That is good to know.
ADDITIONAL COMMITTEE QUESTIONS
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Question Submitted by Senator Patty Murray
performance and retention bonuses
Question. Please explain what changes the Federal Aviation
Administration (FAA) has made to its procedures in the past year to
ensure it is using its retention bonus authority appropriately. Please
compare how FAA's retention bonus policy differs from that of other
department modes.
Answer. To ensure appropriate and responsible use its Retention
Incentive Program, in October 2010, FAA raised the approval level for
all retention incentives to the FAA Administrator. In addition, FAA is
in the process of strengthening its policy that will:
--require increased analysis and written justification based on
specific factors;
--require a period of employment with FAA of at least 1 year prior to
being authorized any retention incentive; and
--add an annual review to determine continued business need for the
retention incentive.
Other than the approval level, these added requirements mirror the
Department of Transportation's incentive policy. Pursuant to 49 U.S.C.
40122, the FAA Administrator holds the final approval authority for pay
decisions.
______
Questions Submitted by Senator Richard J. Durbin
FAA AIRPORT PRIVATIZATION PILOT PROGRAM
Question. Since the Federal Aviation Administration (FAA) Airport
Privatization Pilot Program began in 1997, how many airports have
applied to participate in the program?
Answer. Since the program's inception in 1997, 10 airports have
submitted applications for participation in the Pilot Program:
--Stewart International Airport, Newburgh, New York;
--San Diego Brown Field, San Diego, California;
--Rafael Hernandez Airport, Aguidilla, Puerto Rico;
--Niagara Falls International Airport, Niagara Falls, New York;
--New Orleans Lakefront Airport, New Orleans, Louisiana;
--Chicago Midway International Airport, Chicago, Illinois;
--Louis Armstrong International Airport, New Orleans, Louisiana;
--Luis Munoz Marin International Airport, San Juan, Puerto Rico;
--Gwinnett County-Briscoe Field, Lawrenceville, Georgia; and
--Hendry County Airglades Airport, Clewiston, Florida.
Question. How many airports have applied to be sold or privatized
under the pilot program? How many airports have successfully been
privatized under the program?
Answer. Ten airports have submitted applications for participation
in the pilot program. Title 49 U.S.C. 47134 requires that commercial
service airports can only be leased while general aviation (GA)
airports can be leased or sold. Nine airports have applied for leases;
Hendry County Airglades Airport, a GA airport, is the only GA airport
considering a sale.
To date, Stewart International Airport (SWF) in Newburgh, New York,
is the only airport to receive final agency approval. National Express
Group, a private company from the United Kingdom, operated SWF from
March 2000 until October 2007, when the Port Authority of New York and
New Jersey purchased the National Express Group's Airport Lease. SWF is
no longer privatized.
Question. How many applications are currently pending in the
privatization program? What airports are currently participating in the
program?
Answer. Of the five slots available in the pilot program, FAA has
four slots reserved:
--Chicago Midway International Airport, Chicago, Illinois;
--Luis Munoz Marin International Airport, San Juan, Puerto Rico;
--Gwinnett County Briscoe Field, Lawrenceville, Georgia; and
--Hendry County Airglades Airport, Clewiston, Florida.
Question. The privatization pilot program allows FAA to exempt the
public airport sponsor from the obligation to repay Federal grants and
return property acquired with Federal assistance upon the lease or sale
of the airport. Is this authority discretionary or is FAA required to
exempt airport sponsors from repaying Federal grants?
Answer. Title 49 U.S.C. 47134(b)(2) gives the Secretary
discretionary authority to grant an exemption to an airport sponsor
necessary to waive an obligation to repay Federal grants.
Question. The privatization pilot program allows FAA to exempt the
public airport sponsor from the obligation to repay Federal grants and
return property acquired with Federal assistance upon the lease or sale
of the airport. Has the FAA ever used this discretionary authority?
Answer. In the case of SWF, FAA granted an exemption to the New
York State Department of Transportation from its obligations to repay
Airport Improvement Program grants. Title 49 U.S.C. 47134(b)(1)
requires that the exemption permitting revenue to be used for
nonairport purposes must be approved by at least 65 percent of the air
carriers serving the airport; and by air carriers whose aircraft
landing at the airport had a total landed weight of at least 65 percent
of the total landed weight of all aircraft landing at the airport. The
air carriers declined to approve New York State's request to use
airport revenue for nonairport purposes.
Consequently lease proceeds remained airport revenue. The State of
New York could only receive reimbursement for capital contributions
incurred within the past 6 years as permitted by existing statute. An
exemption was issued waiving the obligation to return Federal surplus
property.
Question. The privatization pilot program allows FAA to exempt the
public airport sponsor from the obligation to repay Federal grants and
return property acquired with Federal assistance upon the lease or sale
of the airport. If so, when and how much funding were airport sponsors
exempted from repaying?
Answer. In 2000, New York State Department of Transportation was
exempted by FAA from repaying $59,118,796 in AIP funds and repaying an
Economic Development Administration grant for the construction of an
air cargo terminal. The Federal obligations were transferred to the
private operator. Since the air carriers declined to approve New York
State's request to use the lease proceeds for nonairport purposes, the
lease proceeds remained airport revenue, and therefore the exemption
was not used.
Question. The privatization pilot program allows FAA to exempt the
public airport sponsor from the obligation to repay Federal grants and
return property acquired with Federal assistance upon the lease or sale
of the airport. If FAA did not require repayment at any airport
involved in the privatization program, how much total Federal funding
would each airport sponsor in the privatization program be exempted
from repaying?
Answer. If FAA did not require repayment by any of the four active
applicants in the privatization pilot program, the exemptions issued
would equal approximately $215,931,838 in total Federal funding. The
amounts due the Federal Government would include:
--Chicago Midway, $145,340,713;
--Luis Munoz Marin, $42,736,309;
--Gwinnett County Briscoe Field, $24,408,257; and
--Hendry County Airglades Airport, $3,446,559.
These amounts include the remaining useful life of grant-funded
pavement, buildings, and equipment. Grant amounts are amortized over
the 20-year useful life of the physical asset. The FAA would not
require repayment for federally acquired land as long as the airport
remained an airport. These amounts do not include improvements older
than 20 years or intangible investments like studies and planning that
are not depreciable assets.
Question. The privatization pilot program allows FAA to exempt the
public airport sponsor from the obligation to repay Federal grants and
return property acquired with Federal assistance upon the lease or sale
of the airport. Have any of the public airport sponsors interested in
privatization received Federal funding for land acquisition to build
their airport? How would these types of grants be considered in the
requirement to repay Federal grants?
Answer. Yes, some of the public airport sponsors interested in
privatization have received Federal funding for land acquisition to
build their airport. Since the useful life of land does not end or
depreciate, the obligations associated with the Federal purchase of
land do not expire. Federal surplus property deeds conveying land for
airport purposes also do not expire. FAA would not require repayment
associated with land acquisition because sponsors would want those
obligations released. FAA would not normally seek reimbursement for the
land, in order to ensure that these airports remain federally
obligated.
Question. Midway Airport in Chicago is currently the only large-hub
airport in the privatization program. How much total Federal funding
has gone to build and maintain Midway Airport?
Answer. The FAA has obligated $376,480,477 in AIP grant funds for
Midway Airport in the last 20 years.
Question. Midway Airport in Chicago is currently the only large-hub
airport in the privatization program. How much Federal funding would
the city of Chicago need to repay if it were successfully privatized
under the program and FAA did not use their authority to exempt
repayment of previously received Federal grants?
Answer. The FAA could require repayment associated with the
remaining useful life of the Federal investment without repayment for
the cost of land. The city of Chicago and its private operator would
have to repay $145,340,713. This would include the depreciated value of
pavement, buildings, and equipment. This sum would not include
improvements older than 20 years or intangible investments like studies
and planning.
Question. Midway Airport in Chicago is currently the only large-hub
airport in the privatization program. What other large-hub airports
have expressed interest in the privatization program?
Answer. It is unclear what other large-hub airports are interested.
The FAA has not received applications from other large-hub airports
because Midway currently holds the only slot for large hubs.
Question. Under the current privatization pilot program, what
disclosure requirements does the private entity wishing to buy or lease
the airport have?
Answer. The disclosure requirements are identified in the FAA's
Airport Privatization Pilot Program: Application Procedures, 62 Federal
Register 48693, September 16, 1997. Such disclosures include the
following:
--qualifications of private airport operator, including the identity,
experience and responsibility of key personnel;
--financial resources, including copies of 10K annual reports filed
with the Securities and Exchange Commission, if not filed,
balance sheet and income statement prepared in accordance with
generally accepted accounting principles, with all footnotes
applicable to the financial statements;
--description of the private operator's capability of complying with
the public sponsor's existing grant assurances;
--affiliations with air carriers or other persons engaged in
aeronautical business activity at an airport (other than
airport management); and
--description of all charges of unfair or deceptive practices or
unfair methods of competition brought against the private
operator, private operator's key personnel and in the case of a
private operator that is a joint venture, partnership or other
consortium, the separate members of the entity in the past 10
years.
The description should include the disposition or current status of
each such proceeding. If application is approved, the private operator
is subject to financial reporting requirements provided for in 49
U.S.C. 47107(a)(15) and (19) and as implemented in Grant Assurance Nos.
13 and No. 26. Additionally, if the application is approved, the
private operator would be subject to periodic audits of the financial
records and operations of an airport receiving an exemption under the
pilot program and the applicant indicates their express assent to this
provision. Private operators may file a request for confidentiality of
documents or information submitted to protect the disclosure of
confidential business information.
Question. Do private airport sponsors need to disclose any conflict
of interests they may have with parties involved in a sale or lease
agreement?
Answer. According to the application procedures, private operators
must disclose affiliations with air carriers or other persons engaged
in aeronautical activity at an airport (other than airport management).
Private operators must also disclose all charges of unfair or deceptive
practices or unfair methods of competition brought against the private
operator and or key personnel within the past 10 years. The private
applicant would also be subject to applicable State law conflict of
interest requirements when submitting a response to a request for
proposal and/or bid.
Question. Do private airport sponsors need to disclose an estimated
amount of tax benefits over the life of a long-term lease or sale of a
privatized airport?
Answer. Neither the statute nor the application procedures require
the private operator to disclose estimated tax benefits over the life
of a long-term lease or sale of a privatized airport.
Question. Do private airport sponsors need to disclose savings they
may receive from changes in workforce, wages, benefits, or rules? Are
the private entities required to disclose any tax or financing benefits
they receive from entering into a long-term lease of an asset like an
airport?
Answer. Neither the statute nor the application procedures require
the private operator to disclose savings or estimated tax benefits over
the life of a long-term lease or sale of a privatized airport. The
statute does require that any collective bargaining agreement that
covers airport employees and is in effect on the date of the sale or
lease of the airport not be abrogated by the sale or lease.
Additionally, if the application is approved, the private operator
would be required to comply with all applicable Internal Revenue
Service (IRS) rules and regulations.
Question. Under the current privatization pilot program, what
disclosure requirements does the airport sponsor have before they sell
or lease their airport?
Answer. The disclosure requirements are identified in the FAA's
Airport Privatization Pilot Program: Application Procedures, 62 Federal
Register 48693, September 16, 1997. Public Sponsors interested in
applying must file a preliminary application to reserve a slot,
followed by a final application for the exemption. The application
procedures require the sponsor to submit a statement of the public
sponsor's authority to sell or lease the airport, with a citation to
legal authorities. The sponsor is required to file a distribution ready
copy of the request for proposals (RFP) for the management and
operation of the airport which should contain references to the nine
statutory objectives listed in 49 U.S.C. 47134. In the RFP, the sponsor
will need to disclose whether it is proposing to sell or lease a GA
airport, or to lease any other type of airport. The applications are
filed on www.regulations.gov and available for public review and
comment. The FAA conducts a public hearing in the local community and
holds a 60-day public comment period before making a decision. Public
Sponsors must disclose the amount of airport revenue that will be used
for non airport purposes and the amount of airport revenue that will be
paid to the private operator. The FAA encourages airport sponsor to
augment FAA's efforts with their local means of communicating with the
general public. The FAA requires a description of any local public
outreach efforts by the applicant.
Question. Does the public airport sponsor need to conduct an
assessment of whether a sale or lease with a private entity would
represent a better public and financial benefit than keeping the
airport under public ownership and control?
Answer. No, not formally through the privatization application
process. The FAA views the type of management structure an airport
owner chooses to manage its airport as a local decision. However, as a
matter of prudence, FAA would expect an airport sponsor to perform
appropriate due diligence in considering whether to privatize its
public use airport. Most airport owners have conducted some form of
assessment and made a decision to seek private investment and operation
prior to submitting an application for the privatization pilot program.
As stated in the application procedures, it was the intent of
Congress in enacting the airport privatization pilot program to
determine if new investment and capital from the private sector can be
attracted through innovative financial arrangements. The FAA and the
public have a reasonable expectation that a private operator will
provide new capital and create new investment opportunities at the
airport.
Furthermore, the airport sponsor is required to describe how the
private operator, the public sponsor, or both will address operation,
maintenance, and development of the airport after the proposed
transfer, and the continued operation of the airport in the event of
bankruptcy or other financial or legal impairment of the private
operator. One approach would be through reversion of the airport back
to the public sponsor.
Question. Does the public airport sponsor need to disclose how much
revenue they will lose from selling or leasing an airport?
Answer. The application procedures require the public airport
sponsor to disclose the lease or sale proceeds from the transaction
that will be used for nonairport purposes. As with all Federal
obligated airports, FAA can require airport owners and operators to
submit financial information. The FAA did caution the sponsor and the
private applicant for Niagara Falls International Airport about its
concern about the level of investment in a proposed privatization
process. This application was ultimately closed out in January 2002 for
failure to proceed.
Question. Does the public sponsor need to disclose their plan for
spending any up-front payments received in a sale or lease of an
airport?
Answer. Yes, typically this occurs when the sponsor responds to the
preliminary application question related to a summary narrative of the
objectives of the privatization initiative--what the public sponsor
wants to accomplish by the solicitation. The application procedures
require the sponsor to disclose the amounts and timing of payments, and
the amounts of payments to sponsor to be used, respectively, for
airport purposes (including recoupment of public sponsor investments
not previously recovered) and other purposes.
______
Questions Submitted by Senator Mark Pryor
Question. How do small communities benefit from the Essential Air
Service (EAS) program?
Answer. The Department of Transportation's (DOT) EAS program was
established in the 1978 Airline Deregulation Act (ADA) as a safety net
for smaller and more isolated communities to have access to the
national air transportation system. Under the program, small
communities are assured a basic level of air service, linking them to
the national air transportation system--generally with two departures
per day, 6 days per week.
As of July 1, 2011, EAS-subsidized service was provided at 153
communities across the country--44 in Alaska and 109 in the rest of the
country and Puerto Rico. Funding is now provided via an annual $50
million payment from the Federal Aviation Administration (FAA), which
derives the funds from air traffic control fees for international
overflights, and an additional amount through annual appropriations.
Program budget amounts have increased from $22.6 million in fiscal year
1992 to $200 million in fiscal year 2010.
The EAS program has largely retained its basic eligibility criteria
since the ADA was enacted; it specified that those communities then
receiving scheduled airline service were ensured of receiving at least
a basic level of service thereafter, with subsidy if necessary. The
guarantee was originally scheduled to expire after 10 years, but it has
been extended indefinitely. The most notable change in eligibility
dates from 1990, when Federal statute excluded from subsidy eligibility
those communities in the 48 contiguous States that were located fewer
than 70 highway miles from the nearest large- or medium-hub airport, or
that require a rate of subsidy per passenger in excess of $200, unless
the point is more than 210 miles from the nearest large- or medium-hub
airport. Public Law 106-69, title III, section 332. DOT is precluded by
statute from making any determinations that would exclude communities
from subsidy eligibility on any other basis. 49 U.S.C. 41731(b).
Question.What effect will the EAS provisions that have been added
to the Senate version of the FAA bill with regard to the 100-mile rule
have on small communities? How many airports will be affected by the
100-mile rule?
Answer. Senator Coburn's 100-mile amendment was subsequently
modified, such that what was adopted by the Senate would define an
eligible place for EAS as a place in the United States (but excluding
Alaska) that ``is located not less than 90 miles from the nearest
medium or large hub.'' See S. 223, section 420, as passed the Senate on
February 17, 2011. A 90-mile limitation, by DOT calculation, would
affect 10 communities and produce an annual savings potential of
approximately $12.5 million. (Increasing the limitation to 100 miles
would affect three additional communities, at a potential additional
savings of $4.2 million.)
FEDERAL CONTRACT TOWERS
Question. Contract tower cost share programs are important to my
State as well as several others. An amendment I introduced to FAA bill
would set a local cost share cap on the cost-share airports
participating in the contract tower program and provide relief for
airports recovering from the recession. What steps are you taking to
assist cost share contract tower communities currently struggling due
to the economic downturn?
Answer. The FAA is keenly aware of the challenges faced by airports
that are recovering from the economic downturn and has taken steps to
lessen the financial impact of the cost share program on local
communities. Historically, FAA updated its benefit cost (B/C) ratios on
a biennial cycle; however, given the drastic decline in general
aviation (GA) traffic in the past few years, FAA had delayed its B/C
update until recently to avoid unnecessarily penalizing communities.
However, the agency now believes the lower growth rate in GA traffic is
going to persist for the foreseeable future and is in the process of
revising its B/C ratios. We are taking steps to make sure the
methodology and data involved in updating our B/C results as well as
how that information is communicated and potentially appealed by
communities is open and transparent.
While the hourly wages of the air traffic controllers are
determined by the Department of Labor, FAA continuously evaluates and
verifies the staffing for each facility. This is done to ensure the
facilities are adequately staffed to provide safe, efficient operations
and not overstaffed, to keep the price of each facility as low as
possible. This successful program provides highly trained, experienced
controllers at a reduced cost to the taxpayers.
Capping the local cost share for airports will have budget impacts
on the FAA and opportunity costs for other programs as it will lead to
a need to increase the funds made available to the current and future
Cost Share program. It will also limit FAA's ability to allow new
towers and communities into the program. There may also be lower-cost
alternatives over time with the capacity of Next Generation Air
Transportation System (NextGen) to deploy ``virtual towers'' with
automatic dependent surveillance-broadcast capability.
AIR TRAFFIC CONTROL MODERNIZATION
Question. The budget request includes an estimated $1.2 billion to
support the ongoing NextGen program that will modernize the Air Traffic
Control system. This is about a $350 million increase more than the
fiscal year 2010 enacted level. What is the rationale for the increase?
Answer. The fiscal year 2012 President's budget request for NextGen
totals $1.237 billion, an increase of $369 million, or 43 percent more
than the fiscal year 2010 enacted level of $868 million. While this is
a significant funding increase, it:
--includes a one-time $200 million mandatory spending request in
support of the President's $50 billion infrastructure
initiative;
--is consistent with the FAA's Capital Investment Plan and NextGen
Implementation Plan; and
--underscores the declaration by this administration that NextGen is
a top national transportation and infrastructure priority.
The NextGen Implementation Plan lays out FAA's plan for delivering
significant benefits by the 2018 timeframe. Specifically, our most
recent estimates show that by 2018, NextGen air traffic management
improvements will reduce total delays (in flight and on the ground) by
about 35 percent compared with what would happen if we did nothing.
This delay reduction will provide $23 billion in cumulative benefits
from 2010 through 2018 to the traveling public, aircraft operators, and
the FAA. We will save about 1.4 billion gallons of aviation fuel during
this period, and cut carbon dioxide emissions by 14 million tons.
Aviation is critical to our Nation's economy. As recently as 2009,
civil aviation contributed to $1.3 trillion annually to the national
economy, and constituted 5.2 percent of the gross domestic product. It
generated more than 10 million jobs, with earnings of $397 billion.
Question. One of my goals is to ensure that all taxpayer dollars
are spent wisely and effectively, particularly given the fiscal
situation we are in right now. Can you give me some specific examples
of how taxpayers will benefit from this spending (i.e., what is the
return on investment for taxpayers)?
Answer. The advantages of NextGen will benefit almost all
taxpayers, whether they are frequent flyers or never fly at all. Those
who do fly will enjoy fewer delays, the highest level of safety, and
more predictable trips. Those living in neighborhoods near airports
will experience less aircraft noise and fewer emissions. Communities
will make better use of their airports and strengthen their local
economy, as well as our national economy.
Specifically, our most recent estimates show that by 2018, NextGen
air traffic management improvements will reduce total delays (in flight
and on the ground) by about 35 percent compared with what would happen
if we did nothing. This delay reduction will provide $23 billion in
cumulative benefits from 2010 through 2018 to the traveling public,
aircraft operators, and the FAA. We will save about 1.4 billion gallons
of aviation fuel during this period, and cut carbon dioxide emissions
by 14 million tons.
NextGen mid-term improvements made during this time will continue
to accrue benefits beyond 2018. Total cumulative benefits through 2030
are estimated to be worth $123 billion, including a total savings of
6.7 billion gallons of fuel and 64 million tons of carbon dioxide. This
represents a net present value to the taxpayers of $33 billion.\1\
---------------------------------------------------------------------------
\1\ Net present value equals discounted benefits, minus discounted
costs.
---------------------------------------------------------------------------
______
Question Submitted by Senator Daniel Coats
AIRPORT SLOT ALLOCATIONS AT REAGAN NATIONAL AIRPORT
Question. I am concerned about the fairness of the criteria used
for counting slots at Washington, DC's Ronald Reagan Washington
National Airport (DCA). It appears the current regulation has led the
agency to double-count the number of ``holds'' an airline possesses for
purposes of qualifying as a ``limited incumbent'' (See 14 CFR 93.213).
For example, Republic Airways Holdings, an Indiana-based company,
maintains control over fewer than 20 slots at DCA. But the company
cannot qualify as a limited incumbent due to its minority interests in
and financial transactions with other airlines. Under the current
method of counting, these investment interests result in Republic
holding more than 100 slots at DCA. But airlines other than Republic
retain complete control over the use of those slots--and the slots
count against the controlling airlines as well as against Republic.
Thus, numerous slots are being double-counted for purposes of
qualifying as a limited incumbent. Why has the agency adopted a policy
that results in such dramatic double-counting of slots? Is there a way
to end double-counting and promote accuracy and fairness when counting
slots for purposes of qualifying as a limited incumbent at DCA?
Answer. Pursuant to 14 CFR 93.213, a ``limited incumbent'' at high-
density airports is defined as a carrier that ``holds or operates''
fewer than 20 slots, including slot exemptions. The limit was increased
from 12 to 20 in the AIR-21 legislation, Public Law 106-181, an action
we interpret as indicating congressional recognition and support for
the ``hold or operate'' approach.
In this case, Republic Airways Holdings, Inc. clearly holds 113
slots at DCA, Republic Airlines (a subsidiary of Republic Airways
Holdings), holds 16 slots and Frontier Airlines, another subsidiary of
Republic Airways Holdings, holds 6 slots. We understand Republic
Airways Holdings' claims that under their agreement US Airways
effectively has control over use of the slots, but there appears to be
no dispute either that Republic Airways Holdings is in fact the holder
of the 113 slots or that it derives financial benefit as a result of
such holdings.
Notwithstanding this point, in the latest ``slot counting'' issue
at DCA--in which Delta Air Lines is proposing to swap certain slots at
DCA for slots held by US Airways at LaGuardia Airport--the Department
has demonstrated some flexibility in its approach by proposing to allow
Frontier Airlines to be eligible to compete for certain slots to be
divested, despite the fact that it is wholly owned by Republic Airways
Holdings. While the issue remains open for comment, the Department of
Transportation tentatively found that Frontier Airlines maintained a
discretely different low-cost carrier business plan than its parent and
that Frontier Airline's presence as an eligible bidder would help to
stimulate and maintain competition at these airports.
SUBCOMMITTEE RECESS
Senator Murray. I appreciate both of your testimonies today
and look forward to working with you.
With that, this hearing is recessed.
[Whereupon, at 10:52 a.m., Thursday, May 12, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2012
----------
TUESDAY, MAY 17, 2011
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:18 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Lautenberg, and Collins.
DEPARTMENT OF TRANSPORTATION
Federal Railroad Administration
STATEMENT OF HON. JOSEPH C. SZABO, ADMINISTRATOR
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. This subcommittee will come to order.
This morning we are holding a hearing on the President's
budget request for the Federal Railroad Administration (FRA)
and the budget request for the National Passenger Railroad
Corporation (Amtrak).
I want to welcome the Administrator of the Federal Railroad
Administration, Mr. Joseph Szabo, and Amtrak's President and
CEO, Mr. Joe Boardman. Thank you both for being here this
morning, and we look forward to your testimony.
We are now at a pivotal moment for our Nation's
transportation policy. Over the last several years, we have
made important investments in our rail infrastructure. But the
recent focus in the Congress on budget cuts has created a race
to the bottom that will make it difficult to continue those
investments.
Rail offers an environmentally sound and efficient
alternative to move people and goods. It creates jobs, reduces
the price of goods being shipped, and helps commuters across
the country get to work.
Our population is projected to reach 420 million by mid-
century, almost 140 million more than in 2000. If you think
travel on our roads and at our airports are crowded today, just
wait. Building more and wider roads will not be enough. We have
to look to other alternatives such as passenger rail for the
future.
But we need to be smart about building intercity passenger
rail in a way that works with our systems of road and aviation.
We need to make targeted investments where it makes economic
sense to improve mobility options in and between America's
congested cities.
I know communities around the country value their rail
service. I know families in my home State of Washington deeply
value our Amtrak service, the Cascade Line, which just set
record ridership for the second year in a row. Which is why I
am so disappointed that the new Republican majority in the
House of Representatives has targeted rail transportation for
their budget cuts.
A year ago, we sat together in this room at our last
hearing on rail and discussed the financial constraints of the
fiscal year 2011 annual appropriations. A year later, we have
instituted the largest 1-year reduction in discretionary
spending in our Nation's history. These budget cuts have had a
severe impact on our rail transportation programs. Capital
grants to Amtrak were cut by $78 million and new funding for
intercity and high-speed rail was eliminated for fiscal year
2011.
But many Republicans in the House say these cuts are not
enough, and they are clamoring for more. The House version of
the 2011 bill would have cut Amtrak by $151 million, resulting
in furloughs for up to 1,600 employees. It also would have
taken back more than $2.5 billion of high-speed and intercity
rail grants.
I agree that leaders here in Washington, DC need to tighten
our belts and work together to get our Nation's debt under
control. But we cannot be reckless about this. We cannot put
together a Federal budget that will put our fragile economy and
millions of jobs at risk. And we must continue making
investments we know will make our country more competitive in
the long term.
As we develop the budget for fiscal year 2012, the bar has
never been higher for concrete results to justify Federal
investment. The administration used its budget request to show
its vision of rail placed on par with other modes of
transportation. But in today's environment, a big vision just
will not cut it. We need to see realistic alternatives to the
kind of slash and burn politics that have taken over our budget
debates. I am disappointed that the budget request does not
offer that.
You have significant competition for very limited resources
in the Department of Transportation (DOT). Transit systems are
suffering across the country, shutting down services, and
unable to make operating costs under constrained State budgets.
The Next Generation Air Transportation System (NextGen) air
traffic control system is costly and fundamentally necessary
for the future of air transportation as well.
That is why I need more from you, Mr. Szabo. I recognize
the hard work that you and the staff at FRA have done to
protect the agency's role as a rail safety organization and to
build its capacity to oversee multi-billion dollar investment
choices. It was no small task, and I commend you for your
efforts.
But I need you to improve transparency in FRA's work. We
need detailed and compelling answers to basic questions about
the awards that FRA is making to States, like what markets make
the most sense to target rail investment and why. What will it
cost to build? What are the benefits to investment? And what
will it cost to operate?
A March 2011 Government Accountability Office (GAO) report
on the program found the criteria and evaluation of the grants
to be sound. GAO's only recommendation was that FRA provide
more detailed information of its record of decisions. And I
could not agree more. As this program matures, transparency
about the analysis and consideration of projects can only aid
in resolving the criticisms about the integrity of the program.
We also need to dispel some of the myths that seem to plague
the intercity and high-speed rail program.
There should be no question about interest from States. In
the most recent $2.4 billion grant competition, FRA received
more than 90 applications from 24 States, the District of
Columbia, and Amtrak for projects along the Northeast corridor,
with preliminary requests totaling nearly $10 billion. This
includes the State of Wisconsin's application for $230 million.
That was a State that previously returned an American Recovery
and Reinvestment Act (ARRA) award.
I support investment in intercity and high-speed rail, but
it is now time to address the program's critics head on, and it
is time for the program to produce and communicate tangible
results that the Congress and American taxpayers clearly
understand.
I am sure Mr. Boardman can sympathize with the difficult
position you are in, Mr. Szabo. I remember a point not too long
ago when there were discussions about the end of Amtrak. This
subcommittee saw a series of budget requests coming out of the
previous administration that would have bankrupted the
railroad. I worked hard for adequate funding for Amtrak and to
see reforms of its financial management. The Passenger Rail
Investment and Improvement Act of 2008 (PRIIA) helped put
Amtrak on the right track for success, and a new management
team has done so much to improve the way Amtrak does its work.
Amtrak has a new level of cooperation between its board and
management teams. They have worked diligently to complete a new
strategic plan, developed a system to prioritize capital
projects, built a plan for fleet modernization, improved the
transparency of the annual budget, and developed a
comprehensive business plan.
As the leadership at FRA and Amtrak face significant
challenges in the years ahead, I cannot emphasize enough the
importance that you administer your programs and manage their
funding effectively and responsibly.
PREPARED STATEMENT
Finally, I look forward today to discussing with you the
security challenges that you face and what steps you are taking
to safeguard our Nation's rail passengers. As you well know,
there is no higher priority, and with details of terrorist
plots against rail targets emerging from the raid on bin
Laden's compound, I want to make sure you have the resources
you need to protect our railways and the passengers.
Thank you very much, and I now yield to Senator Collins for
her opening statement.
[The statement follows:]
Prepared Statement of Senator Patty Murray
This morning we will be holding a hearing on the President's budget
request for the Federal Railroad Administration (FRA) and the budget
request of the National Passenger Railroad Corporation (Amtrak).
I would like to welcome the Administrator of FRA, Mr. Joseph Szabo,
and Amtrak's president and CEO, Mr. Joe Boardman.
Thank you for being here this morning, and I look forward to
hearing your testimony.
We are now at a pivotal moment for our Nation's transportation
policy. Over the past few years, we have made important investments in
our rail infrastructure. But the recent focus in the Congress on budget
cuts has created a race to the bottom that will make it difficult to
continue those investments.
Rail offers an environmentally sound and efficient alternative to
move people and goods. It creates jobs, reduces the price of goods
being shipped, and helps commuters across the county get to work.
Our population is projected to reach 420 million by mid-century,
almost 140 million more than in 2000. If you think travel on our roads
and at our airports is crowded today, just wait. Building more and
wider roads won't be enough. We have to look to other alternatives such
as passenger rail for the future.
But we need to be smart about building intercity passenger rail in
a way that works with our system of roads and aviation. We need to make
targeted investments where it makes economic sense to improve mobility
options in and between America's congested cities.
I know communities around the country value their rail service. I
know families in my home state of Washington deeply value our Amtrak
service--the Cascade Line which just set record ridership for the
second year in a row. Which is why I am so disappointed that the new
Republican majority in the House of Representatives has targeted rail
transportation for their budget cuts.
A year ago, we sat together in this room at our last hearing on
rail and discussed the financial constraints of the fiscal year 2011
annual appropriations.
One year later, we have instituted the largest 1-year reduction in
discretionary spending in our Nation's history.
These budget cuts have had a severe impact on our rail
transportation programs. Capital grants to Amtrak were cut by $78
million, and new funding for intercity and high speed rail was
eliminated for fiscal year 2011.
But many Republicans in the House say these cuts are not enough,
and they are clamoring for more. The House version of the 2011 bill
would have cut Amtrak by $151 million resulting in furloughs for up to
1,600 employees. It also would have taken back over $2.5 billion of
high speed and intercity rail grants.
I agree that leaders in Washington, DC need to tighten our belts
and work together to get our Nation's debt under control. But we cannot
be reckless about this. We cannot put together a Federal budget that
will put our fragile economy, and millions of jobs at risk.
And we must continue making investments we know will make our
country more competitive long-term.
As we develop the budget for fiscal year 2012, the bar has never
been higher for concrete results to justify Federal investment.
The administration used its budget request to show its vision of
rail placed on par with other modes of transportation. But in today's
environment, a big vision just won't cut it.
We need to see realistic alternatives to the kind of slash and burn
politics that have taken over our budget debates. I am disappointed
that the budget request does not offer that.
You have significant competition for very limited resources in the
Department of Transportation. Transit systems are suffering across the
country shutting down services and unable to make operating costs under
constrained state budgets. The Next Generation Air Transportation
System air traffic control system is costly and fundamentally necessary
for the future of air transportation as well.
That is why I need more from you Mr. Szabo.
I recognize the hard work you and the staff at FRA have done to
protect the agency's role as a rail safety organization, and to build
its capacity to oversee multi-billion dollar investment choices. This
was no small task and I commend you for your efforts. But I need you to
improve transparency in FRA's work.
We need detailed and compelling answers to basic questions about
the awards that FRA is making to States like: What markets make the
most sense to target rail investment and why? What will it cost to
build? What are the benefits to investment? And what will it cost to
operate?
A March 2011 Government Accountability Office (GAO) report on the
program found the criteria and evaluation of the grants to be sound.
GAO's only recommendation was that FRA provide more detailed
information of its record of decisions.
I could not agree more. As this program matures, transparency about
the analysis and consideration of projects can only aid in resolving
the criticisms about the integrity of the program. We also need to
dispel some of the myths that seem to plague the intercity and high
speed rail program.
There should be no question about interest from States. In the most
recent $2.4 billion grant competition, FRA received more than 90
applications from 24 States, the District of Columbia, and Amtrak for
projects along the Northeast corridor with preliminary requests
totaling nearly $10 billion. This includes the State of Wisconsin's
application for $230 million, a State that previously returned a
Recovery Act award.
I support investment in intercity and high speed rail, but it is
now time to address the programs critics head on. And it is time for
the program to produce and communicate tangible results that the
Congress and the American taxpayer clearly understand.
I am sure Mr. Boardman can sympathize with the difficult position
you are in Mr. Szabo. I remember a point not too long ago when there
were discussions about the end of Amtrak. This subcommittee saw a
series of budget requests coming out of the previous administration
that would have bankrupted the railroad.
I worked hard for adequate funding for Amtrak, and to see reforms
of its financial management. The Passenger Rail Investment and
Improvement Act of 2008 helped put Amtrak on the right track for
success, and a new management team has done so much to improve the way
Amtrak does its work.
Amtrak has a new level of cooperation between its board and
management teams. They have worked diligently to: complete a new
strategic plan, develop a system to prioritize capital projects, built
a plan for fleet modernization, improve the transparency of the annual
budget, and develop a comprehensive business plan.
As the leadership at FRA and Amtrak face significant challenges in
the year ahead, I cannot emphasize the importance that you administer
your programs and manage their funding effectively and responsibly.
I also look forward to discussing with you today the security
challenges that you face and what steps you are taking to safeguard our
Nation's rail passengers. As you well know, there is no higher
priority, and with details of terrorist plots against rail targets
emerging from the raid on bin Laden's compound I want to make sure you
have the resources you need to protect our railways. Thank you.
OPENING STATEMENT OF SENATOR SUSAN COLLINS
Senator Collins. Thank you. Good morning.
First, let me join the chairman in welcoming Mr. Szabo and
Mr. Boardman to this important hearing.
I want to begin by thanking the Administrator for working
with me, State, and county officials to preserve critical rail
freight service in northern Maine. The 233 miles of rail line
serving this area of my State had been proposed for
abandonment, and that would have endangered some 1,700 jobs.
Now, thanks to a cooperative effort, we can begin the important
work of upgrading the tracks to preserve and actually improve
this important freight rail service. So thank you, Mr. Szabo,
for coming to Maine and for all that you did to make that
possible.
Over the past few years, FRA has begun to transform itself
from essentially a safety oversight agency to one with the
added responsibility of allocating and overseeing billions of
dollars in high-speed rail and intercity passenger rail
projects. I agree with the chairman that we need to have a
better understanding of how money is being allocated under this
program.
Many, however, have questioned the basic economic
efficiency of building a high-speed rail network in our
country. Several States have already rejected funding for which
their States had been awarded. With looming budget shortfalls
in many States, the cost of building and maintaining high-speed
rail lines is proving to be daunting. FRA has an ambitious
national rail plan in place. However, the agency has yet to
provide cost estimates on what it would take to build and
maintain a new network of this magnitude.
In March, Secretary LaHood approved the latest designated
high-speed rail corridor, the Northeast corridor. This
designation now allows Amtrak to apply directly for high-speed
rail funding. Amtrak has projected that the planning and
construction of the high-speed rail lines for the Northeast
corridor could cost upward of $117 billion over the next 30
years. I can only imagine the cost to complete a national
system when the other 10 corridors are included.
The administration's budget also calls for a significant
change in the manner in which Amtrak is funded. Under this
proposal, the direct appropriation to Amtrak would be
eliminated, and it appears to force Amtrak to compete for
funding through FRA. I am interested, as a longtime Amtrak
supporter, in better understanding how that would work.
With more than 28 million passengers in the last year,
Amtrak ridership has increased, I believe, by 5.5 percent, with
more than 137,000 passengers from March 2010 to March 2011. I
suspect that escalating gasoline prices will push ridership
levels even higher.
Amtrak's Downeaster service between Portland, Maine and
Boston has become very successful, and last August we
celebrated the arrival of the first shipment of rail for the
Downeaster expansion project which will expand the line from
Portland to Freeport to Brunswick. And I appreciate the
Administrator's participation in that celebration. This
infrastructure project is particularly welcome in the Brunswick
area, given the recent closure of the Brunswick Naval Air
Station.
Federal investment plays an important role for Amtrak, but
in this time of budget constraints, it must be done in a
fiscally responsible manner. I do commend Amtrak for cutting
its debt level substantially from $4 billion in 2002 to $1.8
billion today. But there still is a net operating loss, which
for fiscal year 2012 is some $616 million, which is nearly $200
million more than the fiscal year 2010 operating loss. This
stems largely from the unprofitable long-distance routes that
continue to prove unsuccessful from a dollars and cents
standpoint.
Finally, let me just add to what Chairman Murray said. Only
a few days after our operation in Pakistan removed Osama bin
Laden as a threat to our country, the Department of Homeland
Security (DHS) and the Federal Bureau of Investigation (FBI)
released an alert about rail security. This was a result of the
intelligence that was gathered from bin Laden's compound. I was
pleased to see the quick turnaround that intelligence gathered
from halfway around the world was analyzed so quickly and an
alert issued.
Although this intelligence was not connected to any
particular city or rail line and was dated from early last
year, it demonstrates that mass transit remains a tempting
target for terrorists. And of course we all know that, based on
terrorist attacks on trains and subways in Madrid, in London,
in Mumbai, and in Moscow. We are all thankful that there has
not yet been a similar attack here in our country, but we
cannot become complacent as al Qaeda or even homegrown
terrorists could launch attacks, particularly given the warning
that we have received from the intelligence from bin Laden's
compound.
With an eye toward ensuring that taxpayer dollars are used
as efficiently as possible, we must be certain that adequate
security measures and technology deployment are implemented
throughout the passenger rail sector, and although that is
primarily the responsibility of the Transportation Security
Administration (TSA), I look forward to getting the thoughts of
our witnesses on this issue today.
PREPARED STATEMENT
Thank you, Madam Chairman.
[The statement follows:]
Prepared Statement of Senator Susan Collins
Good morning, and thank you Chairman Murray for holding this
important hearing. I welcome the Federal Railroad Administrator (FRA)
and the National Passenger Railroad Corporation's (Amtrak) CEO to this
hearing.
Let me begin by thanking Administrator Szabo for his working with
me, State, and county officials to preserve critical rail freight
service in northern Maine. I worked closely with the Department of
Transportation to secure $10.5 million in Federal funds on a crucial
rail line project in my home State. The 233 miles of rail line serving
northern Maine had been proposed for abandonment, which would have
endangered nearly 1,700 jobs. Now we can begin the important work of
upgrading the tracks to preserve and improve this rail service.
Over the past few years, FRA has begun to transform itself from
essentially a safety oversight organization to one with the added
responsibility of allocating and overseeing billions of dollars in
high-speed rail and intercity passenger rail projects.
Many question the economic efficiency of building a high-speed rail
network in the United States. Several States have already rejected
funding for which their States have been awarded. With looming budget
shortfalls in many States, the cost of building and maintaining high-
speed rail lines is daunting.
FRA has an ambitious national rail plan in place; however, the
agency has yet to provide cost estimates on what it will take to build
and maintain a new network of this magnitude.
In March of this year, Secretary LaHood approved the latest
designated high-speed rail corridor, the Northeast corridor. This
designation now allows Amtrak to apply directly for high-speed rail
funding. Amtrak has projected that the planning and construction of the
high-speed rail lines for the Northeast corridor to cost upward of $117
billion over the next 30 years. I can only imagine the cost to complete
a national system when the other 10 corridors are included. I am
hopeful the FRA will be able to provide a cost estimate to the
subcommittee soon.
The administration's budget also calls for a significant change in
how Amtrak is funded. Under the proposal, the direct appropriation to
Amtrak would be eliminated, forcing Amtrak to compete for funding
through FRA. I am interested in hearing the details regarding the
potential outcomes of such a change.
Amtrak has been operating intercity passenger train service since
1971. With more than 28 million passengers in fiscal year 2010,
ridership has increased over the previous years, with a 5.5-percent
increase, more than 137,000 passengers, from March 2010 to March 2011.
I suspect the escalating gasoline prices will push ridership levels
even higher.
Amtrak's Downeaster service between Portland, Maine, and Boston has
become a success. Last August, we celebrated the arrival of the first
shipment of rail for the Downeaster Expansion Project, which will
expand the line from Portland to Brunswick. I appreciate Administrator
Szabo's participation in that event. This infrastructure project is
especially welcome in the Brunswick area, which is coping with the
closure of the Brunswick Naval Air Station.
Federal investment plays an important role for Amtrak, but must be
done in a fiscally responsible manner. Amtrak has cut its debt level
from $4 billion in 2002 to $1.8 billion today. While progress has been
made in reducing the debt level, more needs to be done. Amtrak's net
operating loss for fiscal year 2012 is $616 million, which is nearly
$200 million more than fiscal year 2010's net operating loss. This
stems from the unprofitable long distance routes that continue to prove
unsuccessful from a business standpoint.
Only a few days after our U.S. Navy SEALs removed Osama bin Laden
as a threat to America, the Department of Homeland Security and the
Federal Bureau of Investigation released an alert about rail security.
I was pleased with the quick turnaround that intelligence gathered from
halfway around the world was analyzed and an alert was issued.
Though this intelligence was not connected to any particular city
or rail line and was dated from early last year, it demonstrated that
mass transit remains a tempting target for terrorists.
We all remember watching in horror as the television relayed the
devastating aftermath of the terrorist attacks on trains in Madrid in
2004, London in 2005, Mumbai in 2006, and Moscow in 2010.
We are thankful that there have not yet been similar attacks here
in America, but we cannot become complacent as al Qaeda or even
homegrown terrorists could launch attacks, particularly given the
intelligence from bin Laden's compound.
With an eye towards ensuring taxpayer dollars are used as
efficiently as possible, we must make certain that adequate security
measures and technology deployment are implemented throughout the
passenger rail sector.
I am looking forward to working with you Chairman Murray as well as
Administrator Szabo and Mr. Boardman as we consider the fiscal year
2012 budget requests.
Senator Murray. Thank you very much.
Senator Lautenberg.
STATEMENT OF SENATOR FRANK R. LAUTENBERG
Senator Lautenberg. Thank you, Madam Chairman. It is good
to be sitting with colleagues who understand the urgent need to
get on with investing in rail systems, and Amtrak particularly,
and improving the opportunity to get cars off the road and
improve air quality and save money on fuel.
Trains have helped move America's economy forward since the
19th century when the transcontinental railroad was built--an
engineering marvel that captured imaginations across the world.
Almost 150 years later, railroads are still an engine of
economic success, but the United States is no longer leading
the way.
I recently returned from China, which spends heavily on
high-speed rail, investing about 9 percent of its GDP on
infrastructure, more than three times the amount we invest here
in the United States. China's investments are paying off. When
I was there, I road on a train that moved faster than 200 miles
an hour--also, I might add, without, Mr. Boardman, the rattle,
shake, and move, hard to write as it is now on Amtrak. And I
use it twice a week. So I do not want people to think my
handwriting is a product of age, but rather a rough ride.
By comparison, our fastest trains travel 150 miles an hour
and that is under optimal conditions over very short distances.
And to remain competitive globally, America must strengthen
its high-speed rail network and give more people access to
faster trains. It is going to help spark job creation as
businesses flock to communities served by new train stations.
And we see that. We have seen it abundantly in New Jersey,
where we added a couple of new rail sections, and within a very
short period, businesses will move to places convenient to
train travel. It is better for their employees and their
customers and their staff alike. So we found also that it
boosted property values in the areas that were served by good
rail service.
Now, in our State, I am working with Amtrak to help build
the Gateway Tunnel with an innovative project that will expand
high-speed rail in the Northeast corridor. Each week, this
corridor takes 30,000 cars off our highways and 243 flights out
of the skies. I cannot help but repeat something that everybody
can understand, and that is Penn Station in New York handles
more passengers in a day than all three major airports that
service our area. It is quite a fantastic thing. And more would
come if there was room and high speed and comfort.
I commend Amtrak on its success in the Northeast corridor.
It demonstrates that when Americans have access to trains, they
will gladly take them. I came down last night and the train was
pretty much filled, and I have seen that more often than not.
President Obama recognizes this, and the administration has
made a $1 billion investment in improving high-speed rail in
our region.
Now, the President's bold vision to build a world-class
high-speed rail network will carry America into the future.
Faster trains give Americans a better alternative to spending
their time stuck in traffic on our congested highways,
absorbing the air pollution that accompanies it, and waiting in
endless lines at the airport.
Now, unfortunately, some say we cannot afford an investment
in high-speed rail right now, and they are determined to slam
the brakes on our progress. But I say we cannot afford the cuts
proposed in the House budget without imperiling a return to a
more robust economy. It is part of the plan and we must do it.
This short-sighted view ignores great transportation
achievements of the past, like the George Washington Bridge
built during the Great Depression. It created jobs, but also
created a travel opportunity between New York and New Jersey
and principal highways going north and south.
So, Madam Chairman, I look forward to hearing from today's
witnesses about how we can reclaim our role as the world's
leader in rail and get our economy back on track. Thank you.
Senator Murray. Thank you very much.
We will now turn to our witnesses for their opening
statement. Mr. Szabo, we will begin with you.
SUMMARY STATEMENT OF HON. JOSEPH C. SZABO
Mr. Szabo. Thank you, Chairwoman Murray, Ranking Member
Collins, Senator Lautenberg, and members of the subcommittee. I
am honored to appear before you today on behalf of President
Obama and Secretary LaHood to discuss the President's proposed
fiscal year 2012 budget for the Federal Railroad
Administration.
By 2050, the U.S. Census Bureau projects a population
increase of an additional 100 million people. To put that in
context, that is like adding the population of another New
York, California, Florida, and Texas combined.
To plan for the future, this budget proposal details how
strategic investments will build an innovative, national rail
network to move people and goods safely with speed and
flexibility.
Railroad safety remains a top priority, and I am pleased to
report that the industry's safety record for 2010 achieved all-
time lows in the number of accidents per million train miles
traveled. And this is a direct result of FRA's multifaceted
approach to bringing about change, taking one of the most
dangerous industries and making it now one of the safest.
To continue this progress, the fiscal year 2012 budget
proposes $223 million for Safety and Operations. With more
freight and passengers moving as the economy improves, this
funding enables FRA to remain squarely focused on new and
comprehensive safety strategies while building a national rail
network.
And while we remain squarely focused on safety, the
momentum and groundwork for the high-speed intercity passenger
rail program continues. Over the past year, FRA has obligated
more than $5.8 billion from ARRA and annual appropriations,
bringing dollars to States and real projects across the country
and putting Americans to work.
With the help of FRA, States have entered into
groundbreaking agreements with freight rail partners on four
major corridors that assure that Federal investments will
produce quantifiable performance outcomes for passenger rail
while preserving and improving a world class freight rail
system.
The demand is stronger than ever by States competing to get
into the rail business. Just last week, we announced $2 billion
in high-speed rail awards for 15 States and Amtrak. The
competition was tough. Twenty-four States submitted more than
90 applications requesting nearly $10 billion. And for our
fiscal year 2010 funding request, FRA received 132 applications
from 32 States. And since the award selections in October, we
have been busy obligating these projects. Response to the
program has been overwhelming.
And it is no wonder that States are clamoring to be a part
of the rail movement. Gas prices are on the rise, and future
population growth figures are skyrocketing. We know that our
existing air and roadway systems are among the best in the
world, but congestion and traffic threaten to stymie the
American economy and our productivity. We have to provide
Americans with new and enhanced mobility options.
The President's budget strategically invests $8.2 billion
in fiscal year 2012 for the continued development of high-speed
intercity passenger rail, as part of the bold, $53 billion, 6-
year transportation proposal. And $8.2 billion will lay the
foundation for the passenger railways of the future,
consolidating passenger rail into two accounts through the
Transportation Trust Fund: Network Development and System
Preservation. The budget proposal places passenger rail on
equal footing with other surface transportation programs.
Funding for Amtrak and new passenger rail corridors keep us on
track, providing 80 percent of Americans access to a high-speed
rail network within the next 25 years.
Our goal is to create a balanced transportation system,
with highways, transit, and aviation enhanced with high-speed
intercity passenger rail. Developing a passenger rail network
requires a long-term commitment at both the Federal and State
levels to keep the American people moving and communities
connected.
The strategic investments in rail that were made in 2009
and 2010 are paying off. We are enhancing the global economic
competitiveness of America, boosting domestic manufacturing,
reducing reliance on imported oil, and creating a new base of
highly skilled, well-paying jobs. And we are establishing a
pipeline of rail projects for future corridor development.
PREPARED STATEMENT
For decades, investments in transportation have connected
cities and States from coast to coast and served as a
foundation for economic growth and our prosperity. By providing
a long-term commitment for high-speed intercity passenger rail
today, we are taking a bold and definitive approach to
addressing the Nation's near- and long-term passenger and
freight mobility demands, and ensuring that future generations
will have access to the high quality, safe, and efficient rail
transportation for decades to come.
I look forward to your questions.
[The statement follows:]
Prepared Statement of Hon. Joseph C. Szabo
Chairman Murray, Ranking Member Collins, and members of the
subcommittee, I am honored to appear before you today on behalf of
President Obama and Secretary LaHood to discuss the administration's
fiscal year 2012 budget proposal for the Federal Railroad
Administration (FRA).
The President is requesting a bold new 6-year, $53 billion rail
plan that will bring high-speed rail in line with our other surface
modes in order to meet the Nation's transportation needs today and into
the future. In fiscal year 2012, $8.2 billion sets the framework for
building networks and infrastructure to realize the President's vision
of providing 80 percent of Americans with access to an intercity
passenger rail network featuring high-speed service within 25 years
while continuing to make the necessary investments in FRA's highest
priority--assuring the safety of all aspects of our rail industry--
freight, commuter, traditional intercity passenger service as well as
high-speed rail.
While safety is our highest priority, the President's budget
proposal will provide critical new travel options for Americans. But it
must also be the right level of investment for the market needs which
will serve to underwrite the future of true American high-speed rail.
INVESTING IN TOMORROW
The President, in his State of the Union Address said:
``The future is ours to win. But to get there, we can't just stand
still . . . Sustaining the American Dream has never been about standing
pat. It has required each generation to sacrifice, and struggle, and
meet the demands of a new age. Now it is our turn.''
The administration didn't come up with our high-speed rail
initiative overnight. National, State, and local high-speed rail
interest and planning has permeated throughout U.S. transportation
history. Capitalizing on the timing and decades of work, this
administration leveraged the American Recovery and Reinvestment Act of
2009 (ARRA) funding as a way to provide a beginning--a ``down-payment''
on a new and needed transportation alternative while also putting
people to work.
MOBILITY CHOICES
Our existing air and roadway systems are among the best in the
world, but congestion and highway traffic are threatening to stymie the
American economy and our productivity. High-speed rail will help
complement today's systems and keep goods and people moving. Americans
experience an average delay of 36 hours every year while idling in
highway traffic and this number rises to 51 hours in the largest
metropolitan areas.\1\ Aviation congestion, meanwhile, has also risen
in recent years, with an estimated annual economic impact of $10
billion according to the Air Transport Association.\2\
---------------------------------------------------------------------------
\1\ Texas Transportation Institute, ``2009 Annual Urban Mobility
Report''.
\2\ Air Transport Association, ``Annual and Per-Minute Cost of
Delays to U.S. Airlines''.
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The Nation expects a nearly 25-percent increase in the population
(to 390 million) \3\ by 2035. The U.S. Census Bureau projects growth
will be concentrated in a small number of growing and merging areas of
urbanization known as mega-regions. All of this new growth, and the
ensuing economic output, will need development of new and enhanced
mobility options. A more comprehensive and balanced transportation
system of highways, transit, and aviation assets would be strengthened
by high-speed intercity passenger rail, which can be effective in
meeting the intercity travel demands in such regions.
---------------------------------------------------------------------------
\3\ Table 1.--Projections of the Population and Components of
Change for the United States: 2010 to 2050, Population Division, U.S.
Census Bureau, Release Date: August 14, 2008.
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Investments in rail will ease demand for Federal and State highway
and aviation funding and create balanced public funding options. By
providing an alternative to regional flights that clog runways and
airspace, high-speed rail investment will permit the aviation industry
to focus on the market segment of higher yielding long-haul flights.
INVESTMENT PROFILE
Developing a comprehensive intercity passenger rail network will
require a long-term commitment by Federal, State, and local as well as
private partners. ARRA's down-payment on high-speed intercity passenger
rail, followed by fiscal year 2010 appropriations, emphasized strategic
investments that will yield tangible benefits to rail infrastructure.
We're starting to see a ``pipeline'' of projects for future corridor
development and the beginnings of a domestic market for world-class
rail engineering, equipment, and technology development. Since the
jump-start of ARRA funding, FRA has ramped up its high-speed rail team,
hammered out service agreements with freight railroads and forged
partnerships with State and local stakeholders. To date, we have
entered into 49 cooperative agreements obligating nearly $5.8 billion.
To further enhance this progress, the fiscal year 2012 budget
proposes $53 billion over 6 years to continue construction of a high-
speed rail network. It places passenger rail on equal footing with
other surface transportation programs and includes funding for long-
deferred capital investments in Amtrak's aging equipment and
infrastructure, state of good repair, and systems performance
reliability. It envisions the construction of new ``core express'',
``regional'', and ``emerging'' corridors which will be backed by
careful cost-benefit analysis. The proposal offers high-speed rail
where it makes sense, cost-justified, and at the right level of
investment for the market needs. It will underwrite the future of true
American high-speed rail.
To effectively accomplish this going forward, the right
organizational and administrative construct is required. The fiscal
year 2012 President's budget consolidates passenger rail programs into
two accounts to ensure comprehensive and effective management of high-
speed rail. Through the proposed rail account of the new Transportation
Trust Fund, Network Development and System Preservation focus on two
main business lines: building high-speed rail and operating/maintaining
existing and new assets and infrastructure. Included in the request is
$5.5 billion from the President's ``up-front'' $50 billion call for
transportation investment, which will begin corridor development and
address existing long-standing backlog such as Amtrak's aging assets
and rail stations inaccessible to those with disabilities.
Just recently, we received more than 90 applications from 24
States, the District of Columbia, and Amtrak totaling nearly $10
billion for competition for $2 billion available for high-speed rail
projects. The demand to participate transcended political lines because
communities will grow, manufacturing activity will expand, and mobility
will improve. Not unlike the bold step under President Eisenhower, the
development of our interstate highway system needed significant
spending even during the recessionary period of the late 1950s. Our
leaders recognized this spending was simply needed and worth it, not
only for the many transportation benefits but also for the creation of
industries, communities and jobs of the future.
CREATING JOBS TODAY
While the President's vision describes a goal for tomorrow, it's
also about creating jobs today. We're seeing real results from existing
high-speed and intercity passenger rail projects. For example, through
ARRA investments, State and freight rail working together, the Union
Pacific Railroad's modern Track Renewal Train is pulling up antiquated
wooden crossties and replacing them with modern concrete crossties, all
in one step. This will permit increased passenger train operations to
110 miles-per-hour; and lay the groundwork for frequent service with
competitive trip times in the Chicago to St. Louis corridor. The Union
Pacific estimates that it will have 700 employees working on the
project this year. In addition, during fiscal year 2011, we will see
construction activity from Amtrak's Northeast corridor to the Pacific
Northwest, which will create hundreds of rail-related jobs.
Similar to the Interstate System plan in the 1950s, we haven't
finalized all the lines on the map or precisely calculated the costs,
but we know a major undertaking like this will have a ripple effect on
job creation across the Nation. The impact extends beyond the regional
transportation and economic development benefits. The rail being laid
today is coming from places like Pueblo, Colorado; Columbia City,
Indiana; and Steelton, Pennsylvania. The crossties are coming from
places like Tucson, Arizona; Durham, Connecticut; and Sciotoville,
Ohio. Specialized track work such as turnouts and crossovers are coming
from places like Birmingham, Alabama; Newport, Arizona; Newton, Kansas;
Knoxville, Tennessee; Sherman, Texas; and Vancouver, Washington.
Ballast is coming from places like Sprague, Washington; Westbrook,
Maine; Gad's Hill, and Iron Mountain, Missouri. Most of these places
are not likely to see high-speed passenger rail service in the near
future. However, they are seeing the positive employment impacts of
high-speed rail development today.
ECONOMIC BENEFITS
While mobility is essential to our current and future economic well
being, high-speed rail offers the potential for further long-term
economic benefits. Throughout our history, transportation has served as
a catalyst in developing the new industries and businesses that make
our economy the envy of the world. The 19th century railroad
investments were a catalyst for the creation of a steel industry. The
development of improved highways served as a catalyst for the
development of the automotive industry. The development of airports and
aids to navigation has served as a catalyst for advancements in the
civilian aircraft industry.
High-speed intercity passenger rail offers an opportunity for
equipment, component, and supporting manufacturers to build a robust
and sustainable passenger rail system. Once ``Made in America'' meant
the standard for the world in passenger rail transportation. The
President, Secretary LaHood, and I are committed to re-invigorating
that standard through implementation of a strong ``Buy America'' policy
that will ensure that whenever possible, American companies will
provide the materials and equipment we need to keep our rail lines up
and running.
Companies from across the Nation--from New York to California--are
starting up, expanding or leveraging work already begun to compete in
terms of quality, price, and U.S. content. U.S. companies are
applauding that our program makes domestic production a competitive
advantage. The manufacturer of Amtrak's new single-level long-distance
coaches committed to exceeding minimum U.S. content requirements and
moved functions in-house that were previously performed offshore. The
Canadian manufacturer of Amtrak's Acela rail cars in the 1990s opened a
factory in New York State that can do work once done beyond our
borders. But the key to building a sustainable domestic industry, an
industry where companies strategically plan, develop new products, and
create stable, long-term employment with good salaries and benefits, is
a sufficiently large and reliable domestic market demand. Our proposal
provides the stability needed to grow the industry and will provide
U.S. companies manufacturing opportunities.
Rail investments also influence our communities and invite new
development and economic activity. Washington's Union Station was once
in a depressed part of town and the station was in ruins. With
determination and vision, our predecessors restored the rail station as
an intermodal hub linking high-speed rail service on the Northeast
corridor to Washington's regional and local transportation. Union
Station attracts over 32 million visitors per year and its intermodal
connections attracted new companies like Sirius XM, Kaiser Permanente,
and CNN who were eager for good workers. Creating an opportunity for
corporate development and investment goes beyond the rail platform and
station to include surrounding localities.
High-speed rail not only benefits larger cities but also small,
rural communities. The Northern New England Rail Passenger Authority
(NNEPRA) has been tracking the influence of intercity passenger rail
service on the communities served by Amtrak's Downeaster. The service
began 10 years ago and NNEPRA estimates that more than $350 million in
public/private development projects have been completed or are underway
in Maine, creating jobs, revitalizing downtowns, and generating new
revenues for the surrounding areas. Within weeks of DOT's announcement
that it was allocating funds for the expansion of the service, private
developers began to invest near rail stations in Freeport and
Brunswick. Many cities and towns contact us every week looking to
compete and bring high-speed rail and those benefits to their area.
ENERGY AND ENVIRONMENT BENEFITS
High-speed intercity passenger rail uses less energy, often from
cleaner sources than other transportation alternatives. The U.S.
transportation sector consumes 13.8 million barrels of oil every day
and consumption per capita is nearly twice that of the European
Union.\4\ Imported oil accounts for two-thirds of U.S. demand and has
substantial implications for our economy and national security--each
day, the United States spends $1 billion from foreign countries.\5\
More efficient than airplanes and vehicles, high-speed rail offers the
opportunity to power intercity transportation with domestically
generated electricity. Instead of travelers spending more money for
higher cost imported fuel, we can keep the money here and help
strengthen our economy.
---------------------------------------------------------------------------
\4\ CIA World Factbook.
\5\ ``Remarks by the President to the Nation on the BP Oil Spill.''
15 June 2010.
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Fuel savings will result in a healthier environment by reducing
emissions. The United States emitted 14 percent more greenhouse gases
in 2008 than it did in 1990 with nearly one-third of emissions from the
transportation sector. There's a concern growing about climate change
and other air pollutants. Our vehicles, aircraft, and rail will need to
reduce emissions in the years ahead. Rail can help our economy and our
environment, with its greater efficiency and the opportunity it affords
to use domestically produced, renewable, or low-emissions electricity.
AMTRAK
For the last several years, Amtrak's Northeast corridor service has
been a real world demonstration of the potential for high-speed rail in
the United States. Amtrak increased ridership on its high-speed
service--Acela--from 2.5 million trips in 2005 to 3.2 million in 2010.
The Northeast corridor carried more than 10.3 million passenger trips
in 2010. The Northeast regional economy wouldn't be the engine it is
today without passenger rail. Just last month, Amtrak posted its 18th
consecutive month of year-over-year increased ridership and it is on
target for another record year. In the first half of the fiscal year,
Amtrak's ridership is up 5.9 percent, while its yields are up 5.5
percent--more than twice the rate of inflation.
Amtrak and its new management have made many positive changes to
maintain an effective and reliable train system. However, years of
underinvestment and cyclical Federal support have challenged Amtrak's
ability to provide service levels the public expects. This is evident
in antiquated bridges (some old as 100 years) and main power systems
(going on 80 years of service) on the Northeast corridor. Rail stations
need improvement and accessibility to comply with ADA requirements, and
Amtrak's aging fleet is due for major replacement.
The fiscal year 2012 budget proposes stable and sufficient
resources to operate and maintain a safe and reliable rail system for
the American public. First, we recognize that Amtrak provides important
national connectivity and backbone systems such as ticket reservations
upon which intercity passenger rail depends. The proposal provides
dedicated funds to Amtrak for the near-term to continue foundational
systems as well as develop integrated and improved high-speed and
intercity passenger rail service.
Further, Amtrak's vital special services such as custodians of the
intercity passenger rail equipment fleet and other publicly controlled
assets and infrastructure require directed funds in the short-term.
However, as ownership of rail equipment for Regional Express and
Emerging High-Speed Rail Corridors mature and develop, that approach
will be revisited and other service providers will compete for funds.
In the area of new corridor development, Amtrak would be the lone
recipient or partner with States. The key for Amtrak is that the
competition be based upon a ``level playing field'' and that the
corporation continues its progress in improving efficiency and
responsiveness which will be essential in a competitive environment.
The fiscal year 2012 proposal builds on the paradigm of Federal
rail investment created by PRIIA. Historically Federal investment in
intercity passenger rail was a bilateral arrangement--FRA grants to
Amtrak. Going forward, many different arrangements would be available
to develop and operate intercity passenger rail. There will also be an
important role for private capital investment as well. The transition
has begun with the funding provided in ARRA and in fiscal year 2010. I
am confident that Amtrak will continue to play an important and growing
role in America's emerging high-speed intercity passenger rail program.
SAFETY
FRA's backbone mission is safety. Together with the rail industry,
FRA has made significant progress in changing what was once one of the
most dangerous sectors to one of the safest. An independent study
conducted as part of the fiscal year 2009 Annual Enforcement Report
states that ``the safety program as a whole, including the effects of
civil penalties, is highly effective.'' However, when rail accidents do
occur, they carry a high probability of risk to lives and communities.
The budget proposes safety funding and programs that build upon
existing approaches to prevent accidents and reduce potential injuries.
The most significant element of our new strategies is the risk
reduction program (RRP). We are supplementing our existing regulatory
and inspection system with a new focus on the precursors of accidents
and incidents. FRA's RRP is an FRA-led industry wide initiative which
builds strong safety cultures by addressing systemic contributive
factors using ``upstream'' predictive data. This system is most
effective with a range of programs such as confidential close call
reporting system, peer-to-peer coaching, management development systems
and collision hazard analysis currently in place on some commuter
railroads.
FRA's Office of Safety and Office of Research and Development have
been collaborating on the development of new metrics, such as the Track
Quality Index, that address trends in safety-sensitive infrastructure
and equipment and identifies those precursors needing monitoring. Those
offices are also developing technologies such as the autonomous track
geometry system, the joint bar inspection system, and guided wave rail
flaw detection that will permit FRA and the rail industry to more
closely monitor infrastructure and equipment to prevent accidents
before they occur.
MOVING FORWARD
The new strategies that FRA is pursuing require not just more
resources but different skills and abilities to build upon our
traditional safety program. Our staffing request focuses on additional
safety and safety-related research and development personnel.
Specifically, it includes an increase of 83 full-time equivalents
including 24 for the high-speed rail program. The proposal also gives
FRA the authority to use program funds for FRA's costs related project
implementation and oversight. Ultimately, FRA's assistance programs
will closely mirror familiar Federal Highway and Federal Transit
Administration programs. These resources are essential for FRA to
continue successful implementation of our new mission.
Despite the challenges FRA has faced, I am proud of the job FRA has
done. The Government Accountability Office's (GAO) recent report:
Intercity Passenger Rail: Recording Clearer Reasons for Award Decisions
Would Improve Otherwise Good Grantmaking Practices praised FRA's merit-
based practices in identifying projects and awarding grants and
particularly called FRA a top agency for communicating critical
information on the competitive high-speed intercity passenger rail
program. Conversely, GAO's suggestions for improvement will be
incorporated into the grant making process. Coming from an independent
source such as GAO, I still see this as validation of the efforts of a
small agency that just 5 years ago had only $30 million in
discretionary grants.
WHERE WE'RE HEADED--WINNING THE FUTURE
The President's fiscal year 2012 budget and bold vision to invest
in high-speed rail is important not only for folks hoping for another
option, but for our children and their children who will need one. One
of the projects funded by ARRA is the replacement of a nearly 100-year-
old bridge over the Pattagansett River near East Lyme, Connecticut. It
has been a vital link for Amtrak and travelers through seven wars, 19
Presidents, and numerous cycles of our economy. That bridge was an
investment by our great grandparents' generation and helped America
develop the greatest economy and transportation system in the world.
The challenge today is for us to recognize--as our forefathers
did--that even in uncertain times, we must invest in our infrastructure
to ensure we meet the transportation needs of the future. A long-term
commitment to developing high-speed intercity passenger rail will pay
significant dividends for our children and grand-children. We must be
willing to make this investment to win the future.
Senator Murray. Thank you very much.
Mr. Boardman.
NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK)
STATEMENT OF HON. JOSEPH H. BOARDMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
ACCOMPANIED BY JOHN O'CONNOR, VICE PRESIDENT AND CHIEF OF POLICE,
AMTRAK POLICE DEPARTMENT
Mr. Boardman. Thank you. Good morning, Senator Murray,
Senator Collins, and Senator Lautenberg.
Before I get into the 2012 funding need, I would like to
take just a second to discuss some of the revelations that have
come in the wake of Osama bin Laden's demise.
We have worked closely with both domestic security
organizations and foreign rail organizations. The European
network of Railway Police Forces (RAILPOL), for example, has
been created, and I have our Vice President and Chief of Police
John O'Connor with us today, who has taken an active role in
making sure that we are keeping an eye on what is happening not
only in this country, but in Europe, in terms of the way that
this is being investigated.
We are most concerned with the possibility of an external
attack on a train at a vulnerable point, whether that be a
bridge or a tunnel, and we are seeking as best we can, in
cooperation with DHS and TSA, additional support to find
warning and detection systems that would help us in the event
of such an attack.
The Administrator talked a little bit about his program,
and there is a large part of his program that involves
development. And if you look at some of the technology that is
available today, adopting that, extending it, and using it for
the future, we think, has real possibilities for us.
I think it is important to really think about what we are
really threatened with, rather than some of the other ideas
that have been expressed. And what we are really looking at
today is ridership that has increased month-over-month for the
last 18 months in Amtrak. We see people flocking back to using
rail. And as Senator Lautenberg talked about, there is standing
room only in many, many of our trains today. Our ridership has
grown 36 percent since 2000, and last week the DOT awarded us a
$450 million grant to improve speeds on our Northeast corridor,
a line through New Jersey. And the Senator already asked me
this morning when that was going to be done, and I do not have
that schedule yet, Senator. That improvement will be one of the
steps in recognizing for the future our vision for a greatly
improved Northeast corridor service that was talked about this
morning.
For fiscal year 2012, Amtrak has asked for a total of $2.22
billion, divided into $616 million to support our operations,
$1.285 billion for capital programs, and $271 million for debt
service, as we are working hard on debt, as you have already
recognized. With the exception of about $50 million in funding
we requested for the Northeast corridor Gateway Project in New
York, and the additional debt service money to buy out leases,
these are levels that are authorized by the Passenger Rail
Investment and Improvement Act of 2008.
We have detailed many of our major programs in the written
portion of our testimony, and we have just updated the fleet
plan. We placed orders for new electric locomotives and single-
level long-distance cars. We need to add capacity to the Acela
services; we expect to be able to add 40 cars to the existing
20 Acela passenger service vehicles. This investment will
generate for us about $100 million of additional revenue once
we deploy it. We plan to begin that procurement with these cars
in fiscal year 2012.
Amtrak has focused heavily on controlling its costs. We
have cut our debt level from $4 billion to $1.8 billion, as has
already been mentioned. We are the most cost-efficient
passenger railroad in America, covering 85 percent of our total
operating costs from revenue, of which 76 percent is generated
through ticket sales.
We are improving how we are doing our work with point-of-
sale solutions on our trains, with e-ticketing, with Wi-Fi on
the Acela trains, which in and of itself increased an
incremental 1.5 percent improvement in our ridership,
translating into 47,000 riders and $6.5 million of incremental
revenues in 2011.
PREPARED STATEMENT
I understand, as Amtrak understands, there will be
difficult fiscal choices for you to make. As you know,
continued capital funding will allow us to reduce or eliminate
problems that translate into increased operating expenses. Over
the long term, an effective capital investment program can
translate into permanent reductions in expenses. I also look
forward to questions.
[The statement follows:]
Prepared Statement of Hon. Joseph H. Boardman
Good morning, Chairman Murray, Ranking Member Collins, and members
of the subcommittee. On behalf of the Amtrak Board of Directors and the
men and women of Amtrak, I'm pleased to have the opportunity to come
before the subcommittee today to discuss our fiscal year 2012 funding
request. To start with, I have some very good news to report: Amtrak
has just finished 18 straight months of year-over-year ridership
growth. This was our best April ever, and we're on track to set another
annual ridership record. This is part of a long-term trend we've seen
since 2000 of growth in demand for our services, and many of our
individual services are likewise setting records and seeing similar
trends of growth--the Downeaster service in Maine, for example, just
finished its best April ever in terms of ridership and revenue.
Systemwide, our ridership has grown more than 36 percent since
2000, and I expect that trend to continue--and if gas prices continue
to rise, to accelerate; our only restriction will be the available
capacity. Last year, we carried more than 28.7 million people. Of
those, about 10.4 million rode Northeast corridor (NEC) trains, and
13.8 million rode other short-distance corridor, many of them in
California, whose three corridor services carried about 5.2 million
riders. Our 15 long-distance trains, which carried more than 4.5
million riders, are the only Amtrak service in 23 States and at 223 of
the 516 stations we serve. They provide an important service to
passengers with disabilities who travel on long-distance trains at a
proportionally higher rate than the other services; 42 percent of the
passengers with disabilities who took an Amtrak train in 2010 traveled
on one of those 15 trains.
Amtrak plays an important role as a provider of rural
transportation services, which has become increasingly important as bus
and air services to rural areas contract. The Bureau of Transportation
Statistics estimates that almost 16 percent of Americans enjoy access
to only 1 of 3 intercity transportation modes (train, bus, or
airplane), and bus routes today serve 12 percent fewer rural residents
than they did in 2005. About 152 of Amtrak's stations serve rural
communities, many of which have no intercity bus service.
To sustain this system, Amtrak has asked for a total of $2.22
billion in fiscal year 2012, divided into $616 million to support our
operations, $1.285 billion for capital programs, and $271 million for
debt service. With the exception of the $50 million in funding we've
requested for our NEC Gateway project in New York, and some additional
debt service money to buy out leases, these levels are those authorized
by the Passenger Rail Investment and Improvement Act of 2008. The
administration has proposed a considerably higher number, totaling more
than $53 billion over a 6-year period. As Secretary LaHood recently
testified, this money would both preserve the existing system and
continue construction on a national high-speed rail network. Their plan
will level the playing field, funding high-speed rail in a manner
similar to the way other modes such as aviation and highways have been
funded for decades. The administration's proposal will simultaneously
help to fund Amtrak's state-of-good-repair needs, and it will go a long
way toward advancing the goal of making passenger rail more accessible
to more Americans.
These are major needs, and Amtrak strongly supports this effort to
invest in transportation modes that provide Americans alternatives to
congested highways and airports. We detailed some of the major programs
in our grant request, which we submitted in February. Foremost among
the needs we have identified are rolling stock replacement and capacity
development. We have just published an update to our fleet plan, which
identifies some of our major equipment needs, and we have placed orders
for new electric locomotives and single level, long-distance cars to
replace the aging Heritage Fleet that we inherited from predecessor
railroads.
As an interim measure, we have used American Recovery and
Reinvestment Act of 2009 funding wisely to return stored cars and
diesel locomotives to service. A total of about 60 Amfleet cars (enough
for 11 NEC trains) and 15 locomotives, as well as 21 Superliner cars,
were put back to work after rebuilding at our shops in Bear, Delaware
and Beech Grove, Indiana. This equipment has eased the strain on a
fleet that's aging and hard-run and has helped us to expand capacity on
our heavily patronized Northeast Regional trains. We would like to
expand capacity on our Acela Express trains, but to do so will require
the addition of 40 cars to the fleet. We plan to begin the procurement
of these cars in fiscal year 2012.
Amtrak is also working to realize our vision for high-speed rail in
the Northeast. We recently unveiled our vision for ``next-generation''
high-speed rail in the NEC, and we announced our plans for the ``NEC
Gateway'' into New York in January. Our grant request included a
specific request for $50 million in funding to begin this project, and
we are also actively pursuing High-Speed Intercity Passenger Rail
Program (HSIPR) grant funding from the Federal Railroad Administration
for components of the project. We are working closely with States to
pursue projects that will improve existing services. The States of
Washington and Oregon have received about $590 million in HSIPR grant
funding to improve the Cascades route, lay the groundwork for faster
service, and make immediate improvements in service reliability, route
capacity, on-time performance, and trip times. Maine has received a $35
million grant to restore 30 miles of track and extend the Downeaster
service to Brunswick and Freeport. In addition to these ongoing
projects, Amtrak has partnered with Maine, Oregon, and Washington,
among others, to seek additional grant funding under the HSIPR program.
Last month, we supported applications for $62 million to add double
track on portions of the Downeaster route. We also supported a series
of applications for more than $105 million in funding to replace aging
bridges, eliminate bottlenecks, and add equipment to the Cascades
service.
Amtrak is focusing heavily on cost-effectiveness, and projects like
these will sustain the system, reduce operating costs, and generate
additional revenues. We've made significant progress in paying down our
debt, cutting our debt level in half, from $4 billion in 2002 to $1.8
billion today. Amtrak reduced its debt by $850 million in fiscal year
2010 alone, and we have addressed recent audit findings to improve our
financial controls and accountability. We're in the process of
launching a new financial accounting system, and I expect that this
will help us greatly in our ongoing efforts to improve accountability
and management procedures.
Amtrak is already the most cost-efficient passenger railroad in
America, generating 76 percent of its operating need out of the farebox
and covering more than 85 percent of its total operating costs from
revenues. We are working constantly to find solutions that will
generate more revenue from each person-hour worked. For example, we are
developing electronic ``point-of-sale'' solutions for our on-board
environment that will replace the time-consuming and costly process of
manually tracking stock in every cafe and dining car on every trip with
a system that will automatically track sales and allow our workforce to
focus instead on selling food. Similarly, we are in the process of
implementing an e-ticketing system that will deliver a real-time
manifest and ultimately replace the traditional conductor's ticket
punch with a handheld ``smart phone'' device to lift tickets
electronically. The first phase of this system went into operation on
the Auto-Train, where we use gate check-in, in February, and it is
already providing us with improved customer service and manifest
information. We expect to extend testing with the conductor handheld to
the Downeaster service this month, followed by the Capitol Corridor in
California. The program, which should be complete by the end of fiscal
year 2012, will greatly improve our manifest system, make ticketing
easier, and allow better customer service and reduced costs.
Wi-Fi on our Acela trains, which we introduced in fiscal year 2010,
is another such success. Conservatively we estimate Wi-Fi has delivered
an incremental 1.5 percent improvement in Acela ridership, which
translates into 47,000 riders and $6.5 million in incremental revenues
in fiscal year 2011. In fiscal year 2012, we expect incremental
ridership and revenue from Acela Wi-Fi to grow to 63,000 and $8.6
million, respectively. Given this proven success, and working with our
State partners, Amtrak is now in the process of extending Wi-Fi to our
eastern and western corridor services this year. In fiscal year 2012,
these new offerings are expected to generate an additional $13.7
million in ticket revenue while simultaneously adding more than 250,000
additional riders (the exact number is 280,400).
Solutions like these are dependent on capital funding, but have
proven themselves capable of raising revenues and improving our cost
recovery rate. Similarly, the process of replacing outdated
infrastructure can reduce maintenance and operating expenses, and for
that reason, we're seeking every penny we can get so that we can
continue to develop a more cost-efficient and effective operation.
I understand that there will be some difficult choices this year
and in the coming years with regard to Federal spending and the budget
deficit. Amtrak recognizes the funding challenges and will continue to
provide financial transparency for all of our programs so that the
Congress and our stakeholders have the information they need regarding
the way in which we are expending federally appropriated funds. As you
can appreciate, continued capital funding will allow us to reduce or
eliminate problems that translate in turn into higher levels of
operating expense. Over the long term, an effective investment in
capital can translate into a permanent reduction in expenses, and I
hope the subcommittee members will consider this carefully as they
discuss our proposed funding levels in coming months.
Thank you and I welcome the opportunity to answer your questions.
Senator Murray. Thank you very much.
RAIL SECURITY AND TERRORIST THREATS
As has been mentioned a number of times now, we have
discovered credible and specific documentation about al Qaeda's
interest in launching an attack against our national rail
network from information that was gathered at Osama bin Laden's
compound. That information strongly suggests the administration
become more diligent in recognizing rail transportation as a
potential target, and we have got to take some active steps to
secure our passengers and hazardous materials in particular.
Mr. Boardman, can you please comment on the steps you are
taking to protect your passengers, your partnership with DHS,
and what financial support they provide to assist the
corporation with its homeland security mission?
Mr. Boardman. Yes, ma'am. We have a very strong partnership
with DHS and TSA. My vice president for security and chief of
police has almost a daily conversation with TSA staff in terms
of what we can work together to do.
Security grants since 2005 total almost $200 million, and
we have used those for infrastructure protection--for bridges,
for example--and also to expand our K-9 program. Our K-9
program has grown from about 23 animals and handlers to 47
today, and we believe that we are probably the best in the
United States with both vapor wake dogs and with determining or
detecting improvised explosive device (IED) explosives. Even in
one of our recent competitions, our dogs and team handlers came
in first, third, and fourth across the country in terms of our
ability. We have the ability to train--and we do--every single
day to stay at a high level of readiness with those animals and
with their handlers.
OFFICE OF INSPECTOR GENERAL
We have increased our patrols. We have had a public
outreach program and worked diligently with DHS and the
Secretary on ``See Something, Say Something.'' We have a
Regional Alliance Including Local, State, and Federal Efforts
(RAILSAFE) program, which really is a multistate and multi-
agency effort to immediately mobilize and provide assistance
from all of the community resources that are available for
security and enforcement. We have been able to demonstrate our
ability to set that up in a very short period of time, as a
matter of fact.
We were able to help Alabama with our own mobile command
post, and our employees in Hackleburg, Alabama, by providing
them with assistance during the recent tornado, and we have an
entire team of Amtrak police and security folks that provided
that assistance.
We work with the TSA on regular screenings on an irregular
basis, and we are proposing today and looking at an inspector
right-of-way patrol, some of the visible intermodal prevention
and response (VIPR) operations, maybe even some air support on
things that we are trying to provide across the country.
The no-ride list issue is a very difficult one for
everybody to deal with, especially in railroads. Railroad
security is very different than aviation security in the sense
of the access there is, even on the Northeast corridor. So
often we talk about Amtrak ridership nationally being 28
million, but every day we handle in the neighborhood of 600,000
to 700,000 commuters on the Northeast corridor, using most of
the facilities that we operate, handle, manage, and control. So
we are well into the millions of ridership that depend on
Amtrak's ability to do that job.
Senator Murray. What about additional security checks?
Mr. Boardman. Pardon me?
Senator Murray. What about additional security checks?
Mr. Boardman. Additional security checks?
Senator Murray. Yes.
Mr. Boardman. We have worked with especially the New York
City police agencies to make those additional checks at Penn
Station, and also up and down the corridor--we have many of our
VIPR teams providing that.
COLLABORATION WITH OTHER SECURITY FORCES
Senator Murray. Mr. Szabo, do you want to comment on FRA's
collaboration with Homeland Security?
Mr. Szabo. Well, I think that President Boardman did a
great job articulating it from an Amtrak perspective.
From an FRA perspective, we talk at least weekly with TSA,
who has primary jurisdiction here--more often if necessary. We
meet with them at least quarterly, more often if necessary, to
ensure that we have the proper level of coordination. We are
deeply involved in the inspection and implementation of
programs to protect hazardous material shipments and work very
closely with TSA on that.
I think one of the most important things we can do for the
future is to ensure that we have appropriate funding for
research and development (R&D). There is quite a bit that we
can do through enhanced technology to make sure that there is
no interference with the railroad right-of-way, to make sure
that both passenger trains, as well as freight trains, are
properly protected. We have got some R&D underway that I think
would be helpful on this as far as rail detection in real time.
But ensuring that programs like that, technologies like that
move forward would be very important.
We do require and regularly inspect both the rail carriers'
and the shippers' plans for their personnel security, what
guarantees they have to prevent unauthorized access to the
property and their en route security plans.
Senator Murray. Well, I appreciate the comments from both
of you. I want to reiterate that rail security going forward is
going to be very important. As both of you know, and we all
know, long before potential plots were uncovered in Osama bin
Laden's compound, security officials have been warning the
United States that our railways were potential terrorist
targets. They did that, in part, because we had seen attacks
abroad, but also because there were failed attacks on our
surface transportation systems here at home.
The Congress passed the 9/11 Commission Implementation Act
which required TSA to address a variety of surface
transportation security issues, including passenger rail and
mass transit. But unfortunately, there are many unfilled
requirements of the act that are of concern. TSA developed
several risk assessments to address rail and other public
transportation at high risk of attack, but they have not done a
comprehensive risk assessment of all modes of transportation.
And I am concerned that TSA's security strategy for freight
rail focuses almost exclusively on rail shipments of toxic
inhalation hazards, despite other assessments that have
identified potential security targets, such as tunnels and
bridges.
So despite nearly doubling TSA's surface transportation
security budget, these issues do remain unaddressed and
unanswered. In fact, a Wall Street Journal article recently
pointed out the fact that for every $50 TSA spends on aviation
security, the agency budgets $1 to protect surface
transportation.
Now, I realize that these issues are not solely under the
jurisdiction of our witnesses today, but I do feel that they
are very critical issues moving forward, and I want to work
with my friend and colleague, Sue Collins--she and I wrote the
Port Security Act--and move forward on that. And I think that
is very important, that we really focus on this as we move
forward, and I look forward to working with anyone who will
work with us again to do that.
Thank you very much. And I will turn it over to Senator
Collins.
Senator Collins. Thank you.
AMTRAK RESPONSE TO AL QAEDA TERROR THREAT
Mr. Boardman, let me just follow up on the chairman's
questions. You mentioned--and you are exactly right--that it is
far more challenging to deal with train security than air
security. Air security--you can vet every passenger. The plane
is presumably out of danger during the transit if there has
been appropriate screening of passengers and baggage and other
freight. But trains can be vulnerable every step of the
journey.
So my question to you, without asking you to disclose
classified information, is: When you received the joint
intelligence bulletin about the data that was confiscated in
bin Laden's compound, what specific additional steps did you
take to improve rail security for Amtrak? You talked about
inspections and K-9 use, but those have been around for some
time. What additional measures did you put in place in response
to this intelligence?
Mr. Boardman. I think the answer to that is that we needed
to think about how this may happen and where it might happen,
for example. And you have already pointed out that it could
happen anywhere. It could happen anywhere across the country.
So one of the things I looked at, being the former FRA
Administrator, was to look at what does FRA and what does the
industry have on its plate, and looking at development of the
detection devices that we might be able to employ, using work
already done by the FRA and industry. FRA, as was pointed out
earlier, has been primarily a safety organization, and works on
rail flaw detection to see where there might be a potential for
a derailment based on some flaw in the rails that exist.
But the technology began to come forward with ultrasonic
testing and laser-based projection of that technology to see
ahead of a train, to see how far ahead we could investigate
whether a rail had the ability to sustain the train, and maybe
even if you are looking ahead and looking at the gauge of the
track, whether there was any widening of the gauge or narrowing
of the gauge in some fashion. So the first real step was to
think about what it was that we could do for the future to
detect it through technology. And there is some potential.
Right now, the way they are looking at it, though, is at
speeds of 40 miles an hour. That is okay for freight, but it is
not okay for passenger, especially for our very high-speed
rail. There needs to be an improvement in that. There is not
funding there to do that, and whether the capability is there
or not, investigation funding needs to happen to see us improve
that technology.
The second thing was that we needed more right-of-way
patrols that we could look at and find whether there was any
difficulty at vulnerable locations. There have been studies in
the past done to identify vulnerable infrastructure, at least
in many places early on. After 9/11, we began to look and
catalog what those vulnerable locations are so that there would
be an increase in the number of patrols. Some of that has
occurred. More of it needs to happen. We are working with TSA
and DHS to find a better way to do that as well.
PARTNERING WITH STATE AND LOCAL LAW ENFORCEMENT
Senator Collins. One of the lessons that we have learned in
the Homeland Security Committee is the importance of the
partnership among all levels of government, and it occurs to me
that given the challenge you face, in addition to looking to
technology, maybe we should look at some sort of program like
Operation Stonegarden, which DHS has, where the Border Patrol
works with State, county, and local law enforcement to do
patrols along the border. Because Federal officials, Federal
law enforcement, Homeland Security, Amtrak officials, cannot be
everywhere. It is simply impossible. But if in fact you tap
into State, local and county law enforcement, it really is a
force multiplier, and the Operation Stonegarden program has
worked very well in that regard.
So I would be interested in your taking a look at whether
we should create some sort of similar program for training
security where you can work in partnership with State, local,
and county officials to do some of those patrols along your
railways. I think that would be a way to expand coverage in an
economical way. The partnership is absolutely essential if we
are going to increase the security of our country, no matter
the mode of transportation.
Mr. Boardman. May I respond?
Senator Collins. Yes, please.
Mr. Boardman. I absolutely agree with you and I think a few
years ago, Amtrak had lost its way in terms of what it was
going to do for security. We now have a direction of a very
strong relationship in community policing that begins or helps
with the kind of thing that you are talking about, and we do
that with RAILSAFE.
The one caveat--and I am sure you already recognize this--
is we have to be careful with having untrained people in any
kind of right-of-way along the railroad because of the danger
that is involved. Even our own folks have lost their lives
because of how quick a train is upon somebody.
So, yes, I agree with what you are saying. Yes, I think we
can do better and do something different, and I will talk to
our staff about doing that. But it needs to be people that are
knowledgeable about the environment they are in.
Senator Collins. Thank you.
Senator Murray. Senator Lautenberg.
Senator Lautenberg. Thank you each for the work that you do
and the leadership that you provide in your respective
departments. We see really good progress being made.
FUNDING FOR RAIL SECURITY
However, it is not enough. This is not a discredit to you.
It is the fact that we are not devoting enough energy, enough
funding, and enough attention to what the circumstances are
with rail. Last year, we saw 700 million airline passenger
trips on airlines, 10 billion on transit and rail trips, and
yet we spend 98 percent of our money on aviation security and 2
percent on rail security. And we know the risks are real. I
mean, if we look at the experience of Madrid, London, Moscow,
and Mumbai, we know that these are soft points for terrorists,
and that is confirmed, obviously, by the information obtained
as a result of the Osama bin Laden information that has come
out.
So we have got a job to do, and it is frustrating, and I am
sure you feel it as we do here. Why is this subject
overwhelming and not a place that we have to battle to get
basic funding for these projects? The George Washington Bridge
was built during the Depression. Jobs, and improvement in the
future--and that is what we are looking about.
Now, when we talk about the population growth that might
come in 30 or 40 years, when I get there, I want to feel that
we can travel with ease. So I would like that word of
cooperation from you. Say: Frank, 40 years from now, when that
population growth includes you, you will be able to move
around.
HIGH-SPEED RAIL INVESTMENTS IN THE NORTHEAST CORRIDOR
But apart from that attempt at humor, I commend the
administration for recognizing the importance of the Northeast
corridor by awarding Amtrak nearly $500 million in high-speed
rail funds to upgrade the corridor in New Jersey. And I ask
specifically, Mr. Szabo, how will these funds, like the Gateway
Tunnel, help advance the President's national high-speed rail
plan?
Mr. Szabo. It is about making those improvements that
really do three things: reduce trip times, improve reliability,
and provide for additional capacity. The improvements that were
announced last week, particularly those investments in the
power supply in the catenary, do all three. They have been a
source of reliability problems historically. So we will help
fix that problem. The new catenary is going to allow for top-
end speeds up to 160 miles per hour. And so with that, it is
reducing trip times. And the ability to expand utilization of
the Northeast corridor has historically been hindered because
of the power supply. So it provides that additional power that
will allow for future enhancements.
I think it has to be viewed as, these are only first steps,
but they are very, very important steps that do those three
things: improve reliability, reduce trip times, and provide for
additional capacity.
Senator Lautenberg. Mr. Boardman, Amtrak included $50
million for the Gateway Tunnel project in its budget request
for next year. What will be the impairment of these ideas to
the ability to develop a more reliable, higher-speed system?
What will be the impairment if we do not build that Gateway
Tunnel?
Mr. Boardman. I think we are out of capacity in the
Northeast corridor. We cannot add, especially in Penn Station.
So we have tunnels. We have signals and approaches. We have
power. We have nowhere to put the New Jersey Transit trains,
for example, that come into Penn Station. Whereas the Long
Island Railroad trains come in and go to the west side yard and
get out of the way, we do not have an ability to find a place
to put the New Jersey Transit trains. So capacity is really
beginning to constrain the ability to add service, and then the
fluidity of high-speed service. If we are really going to have
high-speed service that works so we have 3 hours between Boston
and Washington, DC, we need not to have New York be any more of
a bottleneck than it already is.
Senator Lautenberg. So that is a key item in the
development of the high-speed system.
Mr. Boardman. Absolutely critical.
Senator Lautenberg. Without question, a tunnel is
essential.
Mr. Boardman. Yes.
Senator Lautenberg. You know, we have had a few attempts at
other designs and so forth, but this one, in this early stage,
looks like it really fills the bill, will permit more Amtrak
trains to get through on an hourly basis and improve the
transit business, the transit opportunities as well.
Mr. Boardman. We all work together.
Senator Lautenberg. Thank you, Madam Chairman. I assume
that we will have an opportunity to submit questions for the
record.
Senator Murray. Yes, you will have an opportunity to submit
questions. Any member will. Thank you very much.
HIGH-SPEED RAIL GRANT SELECTION CRITERIA
I know that FRA has done extensive work to develop a
commercial feasibility study for high-speed rail development, a
strategic plan, and a progress report on the national rail
plan. And as GAO reported recently, you have done a good job of
developing clear application criteria and a merit-based review
process for high-speed rail grants.
At this point, the Congress is looking for more detailed
information about the designated corridors, regional services,
and emerging routes you have identified. For example, we want
to know, where does it make sense to focus investment in the
short and long term? What it will cost in terms of initial
capital and operations and maintenance? And what are the
tangible benefits that we achieve with these investments.
Mr. Szabo, when will you have answers for this subcommittee
on questions like that?
Mr. Szabo. First off, let me say this. We were very pleased
with the GAO report backing up to that. It was the first time
in more than a decade that the term ``good'' has been used in a
title of a GAO report. It happens once for every 12,000 reports
that they issue. So we appreciate the fact that the vast
majority of that report was complimentary in our selection
process.
You made a statement in your opening address which is
imperative, and that is that we show that these corridors make
economic sense. We absolutely have to provide the business case
that shows we are not simply building high-speed rail just to
build high-speed rail, but in fact that we are selecting
corridors that make sense from both an economic standpoint,
public benefit standpoint, as well as a transportation
standpoint.
We are in the process now of putting together both what I
would call a broader business case that will analyze and
quantify the broad benefits of high-speed rail for the Nation,
and then as a second component of that, building the business
case on the individual high-speed rail projects for the
corridors. We intend to have information out to you in the next
couple of months.
Senator Murray. In the next couple months. The budget is
not going to get any better, and we need to be able to show
exactly what we are doing and why. So if we can get that sooner
rather than later and have a clear idea of how you evaluate the
public benefit for us and what those investments need to be, we
will need this as we put this budget together.
STATE SUPPORT FOR HIGH-SPEED RAIL INVESTMENTS
The high-speed and intercity rail grants that have been
awarded so far have largely supported capital projects.
Obviously, there are costs associated with operating new rail
services. One of the reasons that Florida and Ohio pulled out
of the program was due to concerns by the newly elected
Governors about the life-cycle costs for operations and
maintenance and services.
Can you tell us how FRA is ensuring that States will be
capable of sustaining services from those investments?
Mr. Szabo. Yes. First off, I think it is important to note,
while there is a lot of chatter about the fact that three
States chose to pull out, one of them chose to get back in and
apply again, No. 1. And more important than that, 32 States and
the District of Columbia and Amtrak continue to move forward
with projects. So the vast majority of States in this Nation
are choosing to move forward.
To your question, first off, there is an old saying that
the more you capitalize, the less you have to subsidize
relative to operations. By having modern infrastructure, modern
equipment, and a good on-time performance and frequency of
service, you can actually drive down the operating subsidy to
the point where in many cases, if you choose the right markets,
you can eliminate it entirely. I think the Northeast corridor
is a great example there, that there is the appropriate level
of service, frequency, and reliability that allows them to
actually generate a net operating profit.
If you take a look at the President's fiscal year 2012
proposal, our budget proposal, we do propose in there
transitional assistance for the States with the understanding
that as some of these corridors go through their initial
startup period, it does take a period of time to grow the
ridership. And so we are, in fact, proposing in the 2012 budget
this transitionary help for the States, to be phased out over a
period of time at the point that either they become self-
sustainable or at least the State knowingly went in to a
position that they would have to cover operating support
because of other public benefits that they are receiving.
But that is a part of the application that we review from
the States, their business plan, and they understand their
commitment to have to cover the cost of operations should there
be a deficit.
OVERTIME PAYMENTS TO AMTRAK EMPLOYEES
Senator Murray. Mr. Boardman, I wanted to ask you about
some recent criticism about Amtrak for excessive overtime
payments to some of its employees. As we try to put together a
bill in this very tough environment, we need to know that every
expense is justified. So I wanted to ask you today if you can
explain why the corporation faces those expenses, or whether or
not it is more cost-effective than increasing the workforce and
what steps you are taking to manage those costs.
Mr. Boardman. Thank you. Yes, ma'am.
The particular area of overtime costs is really on
maintenance-of-way and the capital work that we are sustaining.
It is not a new problem for Amtrak. It has been a series of
problems over the years on being able to control that cost. It
is very difficult to control initially because it requires 24
to 30 months of training for the people that are involved to do
the work that is expected to be done.
It is difficult to do that planning--and I think it is part
of what the Administrator was talking about on their proposal
of having a different way of giving Amtrak money for the
future--on a 12-month timetable that we operate on for our
capital program. For example, when we got the additional ARRA
funds, one of the things that increased the overtime cost was
the demand to get so much of that work done as quickly as it
needed to get done.
But in terms of whether you hire more staff or not and take
that couple of years to train them, the overtime is actually at
a lower cost burden. In other words, there is about a 54
percent or so benefit package that goes along with full-time
employees and then the overtime. That comes down to about 18
percent. And even though the numbers of overtime dollars look
high--and they are--there actually would have been an overall
higher cost if we would have been able to get people on board,
train them, and get them working at that point in time. And
then when the ARRA funding went away, we would have had to lay
them off and we would not have gotten it done in the same
period of time.
All that being said, we were not doing as good a job
managing the overtime as we could have with the work rules that
were available, even though those work rules in some cases are
not very flexible for us and so the percentage of the amount of
overtime paid as opposed to the percentage of straight-time
paid was escalating beyond where it should be.
That has backed down now already with a focus on that. The
Chief Financial Officer and the Chief Engineer have made great
strides in making that happen. I know that has happened because
the number of grievances has gone up among the workforce
because of their concerns about having some of that overtime
down.
Senator Murray. Thank you very much. I appreciate it.
Senator Collins.
Senator Collins. Thank you.
AMTRAK OPERATING LOSSES
Mr. Boardman, let me ask you a fundamental question. In
your testimony, you noted that Amtrak has enjoyed 18 straight
months of year-over-year ridership increases. Yet, as I noted
in my opening statement, your projected deficit, your operating
loss, for this year is actually projected to be worse than last
year.
So reconcile this for me. I do not understand how you can
be serving more passengers than ever before--and it is not just
a quick blip. It is every month for the last 18 months. So that
presumably means you are getting more revenue and fuller trains
by everyone's experience. So how come you are losing more
money?
Mr. Boardman. It is a difficult thing to understand, but I
think I can explain it pretty well. It is the long-distance
trains, and it is almost entirely the long-distance trains.
There are several reasons. Wages have gone up. The fuel costs
have gone up. The expenses for us to operate those services
have increased. While there has been an increase in both
revenue and ridership on the long-distance trains, it is
nowhere near what the increase in revenue and ridership has
been on the Northeast corridor.
What makes it look even worse is we were able to, in the
past, use some of the money that we received over and above the
Northeast corridor revenues to offset and reduce the demand or
need for long-distance train subsidy. Now it is more difficult
because we are actually executing a fleet plan and we are using
the potential of the revenue that is coming from the Northeast
corridor to go to pay for the debt costs on the 70 electric
locomotives that we purchased, which means that there is a
greater need again on the long-distance trains.
If the business model for long-distance trains does not
work--and the pro-rail folks always shudder and worry and get
very concerned when I talk like this. And that is part of what
is necessary for this transparency, to understand that you are
not going to cut costs far enough on the long-distance trains
to make the long-distance trains profitable. We can cut costs.
Food and beverage costs are continuing to be something we are
focusing on to bring down.
There is a fairly significant cost today, about $60
million, that we pay the freight railroads for on-time
performance. That needs to be adjusted. The program does not
work in every fashion and form the way we would like it to do.
So it becomes more a question of policy in the United
States about whether we are going to have a border-to-border,
coast-to-coast surface transportation connectivity in the
United States. Forty-two percent of the disabled people that
ride Amtrak ride the long-distance trains. The rural isolated
are particularly dependent on the long-distance trains. And it
is not just the long-distance trains. About $180 million worth
of subsidy is needed for the State-supported trains because we
have not gotten back from the States yet the amount that was
expected in the PRIIA legislation. So, on the corridors that
they operate, some of them are part of the long-distance
network and some of them operate independently. But it is that
area where there is a low density that it is difficult to
recover those kinds of costs.
Senator Collins. Would you consider recommending the
termination of some of those long-distance routes that are
unprofitable year after year?
Mr. Boardman. They are all unprofitable. They are all
unprofitable.
Senator Collins. Some are more unprofitable than others.
Mr. Boardman. And as soon as we eliminate those, there will
then be some that are more unprofitable than the remaining
ones. It is kind of like the old story about if you live in a
red house and people are coming to take away the people in the
red house, the people in the yellow house do not care until
they come for the people in the yellow house.
The fact is that my recommendation is we either run them or
do not run them. But if you do not run them, the first-year
cost--and this is a business decision--is a little more than $1
billion because of the protections that are there for labor,
but also putting away the equipment and protecting it and so on
and so forth.
We bring a huge benefit economically to the rural portions
of the United States by having a place that people can actually
get on a surface transportation mode of service.
The FAA itself, the whole FAA is 50,000 people in the DOT
out of 60,000. Fifty thousand people are paid for for the FAA
for aviation, and about 33 percent of their salaries are
covered back from the aviation industry. But because of the way
that we are financed or subsidized compared to other modes, it
does not stick out like that where we have that kind of cost.
Senator Collins. I assume, therefore, that you are not a
fan of former Pennsylvania Governor Ed Rendell's proposal to
spin off the Northeast corridor into a separate public/private
corporation because that would reduce the subsidy that you have
available for those other lines. Is that an accurate----
Mr. Boardman. I am not. British Rail, when they spun off,
they went from about, let us say, $1 billion a year to about $7
billion a year in public subsidy by the time they were done.
And I believe that you need a connected intercity passenger
rail service in the United States.
Senator Collins. Thank you. I was not endorsing it. I was
just soliciting the views of the witness.
Madam Chairman, I am participating in the Holocaust
Remembrance Ceremony in the Capitol which begins very shortly,
so I am going to excuse myself. Thank you for holding this
hearing.
Senator Murray. You can submit all of your further
questions for the record.
Senator Collins. Thank you.
Senator Murray. I just have a few more.
FUNDING FOR AMTRAK'S CAPITAL INVESTMENTS
Mr. Boardman, I really appreciate that Amtrak's new
leadership has focused on strategic long-term capital planning.
The fleet strategy is evidence of that. It describes how Amtrak
will replace its railcars and locomotives, and I understand
that Amtrak applied for a $563 million loan from DOT to pay for
those 70 electric locomotives back in October 2009. However,
FRA and Amtrak have yet to finalize the loan agreement.
So, Mr. Szabo, can you explain why this process is taking
so long, and when do we expect to have this agreement
finalized?
Mr. Szabo. We are prohibited about talking about pending
applications, but I will say this. We are incredibly close to
having that closed.
Senator Murray. Incredibly close, okay.
Amtrak is requesting $79 million to fund its fleet plan in
fiscal year 2012, and of this, $16 million is for the first
four installments to purchase new Acela cars along the
Northeast corridor. I understand this investment would result
in sufficient revenue to repay the cost of procurement by 2018.
Mr. Boardman, why have you asked for a direct appropriation
rather than a DOT loan for those Acela cars?
Mr. Boardman. I do not remember. Hold on a minute.
It is a backup plan. If we do not receive the loan, then we
need to get the money, but we need to move forward.
Senator Murray. Okay. So you are hoping that that is what
happens at this point?
Mr. Boardman. The application for the loan is not in yet,
but we intend to.
THE FEDERAL ROLE IN THE NATION'S RAIL SYSTEM
Senator Murray. Mr. Szabo, at our hearing last year, you
indicated one reason for the delay in the development of a
national rail plan was that the Congress shaped this program as
a State-driven process, and the FRA's 2012 budget request
argues that there should be a stronger Federal role in the
development of rail infrastructure than the current statutory
framework allows.
Can you define for us what an enhanced Federal authority
means and how it would change FRA's relationship with the
States?
Mr. Szabo. Think interstate system. Frankly, this is based
on the feedback that we received from the States and from our
partners over the past year--the past 18 months in implementing
this brand new program. It will always continue to be a strong
Federal-State partnership. It is going to have to continue to
be a strong partnership.
But we believe, particularly when you start talking about
the core express service--the top tier where you are talking
150 to 220 miles per hour, because this is going to be multiple
States, more regionally based in most every case--there needs
to be a stronger hand in the development of those segments of
the high-speed rail network.
In addition, our experience in the past 18 months has shown
us that States continue to need a much higher level of support
from us than I think we first anticipated. A great example
would be dealing with the freight rail industries who are the
hosts, in many cases, for the emerging rail lines. They are
national in scope, and so the States have been coming to us
looking for a much stronger hand from FRA.
You know, we have got basically 70-80 years of experience
with the U.S. DOT and State DOTs in building highways. We have
now got about 24 months of experience in building high-speed
rail corridors, and clearly there is a need for a stronger
Federal hand.
POSITIVE TRAIN CONTROL
Senator Murray. I wanted to ask you about positive train
control. The Rail Safety Improvement Act mandated it, and as we
know, the GAO has been saying that delay risks completing the
remaining steps necessary. Can you tell us where we are? Are we
going to meet the 2015 deadline on positive train control?
Mr. Szabo. It is a statutory deadline, and FRA is
absolutely committed to ensuring that that deadline is met. And
we do believe that it is achievable. The implementation plans
are in from all of the carriers. Particularly for the class 1s,
they are very, very strong. There is no question it is an
aggressive timeline and that everything must fall into place--
--
Senator Murray. You are not proposing any changes to----
Mr. Szabo. We are not. We are not. Now, there is a more
significant challenge for the commuters than there is for the
class 1s. But, no, we believe the deadline can and should be
met.
AMTRAK COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT
Senator Murray. Mr. Boardman, I wanted to ask you about
American with Disabilities Act (ADA) compliance. Can you
explain to us what challenges you have been encountering and
how those will affect Amtrak's ability to meet the ADA
compliance targets?
Mr. Boardman. I think the challenge, Senator, was first to
understand what needed to be done, who owned the station,
whether we could get agreement from either the local community
or the freight railroad or both to get whatever it was that was
necessary for that particular station done. All that was a
bigger challenge than we ever really expected across the
country, with the number of stations that we were dealing with,
well into the hundreds--400-some-odd stations.
But we are now making real progress, we believe, in terms
of making that happen. And yes, because of that progress, we
are going to meet, at least in the spirit of what needs to be
done, our responsibilities for ADA.
Senator Murray. Okay, thank you very much.
ADDITIONAL COMMITTEE QUESTIONS
I do have additional questions I will submit for the
record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Hon. Joseph C. Szabo
Questions Submitted by Senator Richard J. Durbin
ROLLING STOCK
Question. How can this funding help bring railcar and manufacturing
jobs to Illinois? What actions is the Federal Railroad Administration
(FRA) taking to help bring manufacturing jobs to the United States to
build new passenger rail rolling stock?
Answer. The Department of Transportation (DOT) is committed to
expanding economic activity and the jobs across the country including
Illinois. This is a core part of our High-Speed Intercity Passenger
Rail Program. In fact, the track work that was undertaken this summer
between Chicago and St. Louis created a significant number of jobs in
Illinois. While construction jobs are the most visible, new jobs are
also created at manufacturers through supply orders; for example, track
components for the project were made at the Nor-Trak plant in Decatur,
Illinois. To date the Congress has committed more than $10 billion to
developing high-speed rail. That Federal investment means many new
orders and jobs at suppliers across the country, even in areas that
will not see new service immediately. On the Illinois project alone,
supplies have been produced in Arizona, Colorado, Nebraska, Nevada,
Texas, Arkansas, and Missouri.
With respect to passenger cars and locomotives, DOT and FRA are
actively supporting the Administration's goal to rebuild domestic
passenger equipment manufacturing under three initiatives:
--Development of standard designs for the equipment so that it can be
used in emerging high-speed corridors nationwide. This will
reduce unit costs, improve maintenance and provide a
significant degree of flexibility to the States and Amtrak;
--Creation of a large enough order of a single-equipment design that
it will attract the interest of manufacturers and create the
critical mass necessary to stand-up the necessary domestic
manufacturing facilities; and
--Establishment of a strong Buy America program that will assure the
equipment and its components are manufactured in the United
States, not just assembled here. We will be working with the
Department of Commerce's Manufacturing Extension Program to
identify U.S. companies that can make components and
subcomponents for the trains of the future. Not only does this
provide jobs in the short-term, it helps provide U.S.-based
manufacturers with the incentive to build upon prior equipment
designs that can then result in equipment that meet both
domestic and international market needs.
Year to date tangible achievements include:
--The Section 305 Committee, which is comprised of Amtrak, the
States, and FRA, has already developed standard designs for
passenger equipment.
--FRA grants to California and Illinois are expected to result in the
largest order of new intercity passenger rail equipment in a
generation.
--The solicitation of proposals and contract awards for this
equipment will incorporate FRA's aggressive new Buy America
standards.
AIR QUALITY--UNION STATION AND DIESEL EMISSIONS
Question. What are your thoughts about creating a way for Amtrak
some other entity to make a pool of trainsets and then allowing States
to lease the equipment rather than have to purchase and maintain the
equipment themselves?
Answer. FRA is very interested in this concept and is exploring it
within the context of the Next Generation Corridor Train Equipment Pool
Committee established by Section 305 of the Passenger Rail Investment
and Improvement Act of 2008 (PRIIA). FRA also awarded over $200 million
in High-Speed Intercity Passenger Rail Program grants to Illinois to
purchase rail cars and locomotives for a Midwest equipment pool. FRA
requires a final equipment ownership, management, and maintenance plan
to be developed by August 2012 that will address issues related to a
multi-State equipment pool, in addition to many other issues. This plan
will be developed by California, Illinois, Michigan, Missouri, and
Washington, in collaboration with the PRIIA Section 305 Committee, and
submitted to the FRA for prior review and approval.
Question. Administrator Szabo, what can FRA do to help improve the
diesel emissions of passenger trains?
Answer. The Environmental Protection Agency regulates the emissions
from diesel locomotives, with progressively more stringent standards
applying to locomotives newly manufactured or remanufactured after 2004
(tier 2), 2011 (tier 3), and 2014 (tier 4). FRA oversees and manages
rail financial assistance programs available to States and passenger
rail operators for investing in new technologies and systems such as
modern and more environmentally sound locomotives.
In addition, FRA's Research and Development Program is actively
funding research to develop technologies to reduce diesel fuel
emissions. Among those initiatives are:
--Development of battery-powered locomotives;
--Addressing improvements in clean energy storage such as advanced
battery and super capacitor designs; and
--Use of biodiesel that reduces certain types of emission.
Finally, FRA's Office of Safety is involved with Metra's working
groups that are working to identify and address means of reducing the
worker and public exposures to diesel exhaust in the Chicago union
station environment.
______
Questions Submitted to Hon. Joseph H. Boardman
Question Submitted by Senator Patty Murray
Question. As you know, the fiscal year 2010 conference agreement
provided $3 million for Amtrak to deploy and study the use of human
emulation technology on the Amtrak Web site. The subcommittee and the
Congress agreed this technology had the potential to reduce Amtrak's
operating costs, improve customer service over the telephone and
online, and to provide consumers with better feedback through voice,
text and page navigation support, as has been the case with deployment
of such technology on private sector, transportation booking Web sites,
among others. Furthermore, Amtrak was directed to provide a
comprehensive report to the House and Senate Committees on
Appropriations an evaluation of the impact of the utilization of such
technology in achieving cost savings, and improving customer service
and overall utilization. The deadline for this report is December 16,
2011. The subcommittee is aware that Amtrak has initiated a request for
information (RFI), thus, beginning this process, however, I am
concerned that Amtrak is in danger of missing the deadline set for this
report. Therefore, I want to take this opportunity to reiterate the
subcommittee's interest in this subject and request that Amtrak provide
me with a specific timeline for consideration of such technology
improvements to the Amtrak Web site.
Answer. Human emulation technology (HET) allows users to query an
automated system to answer questions and/or provide issue resolution.
It engages users through natural language dialog and has intelligence
to understand a question and determine the correct answer with a high
degree of accuracy. The system can deliver this cost savings by
answering questions through automated systems and reducing call volume.
Amtrak's exposure to this technology dates back to November 2007.
Though still an emerging technology, HET suppliers suggested it could
deliver a more satisfactory experience for the online customer than the
current Web site search engine. However, internal research conducted at
that time surfaced limitations including prohibitive costs, unknown
benefits and an immature, untested technology. As a result, Amtrak
initially deferred exploration of HET.
In August 2010, Amtrak found that the technology had matured and
undertook a 5-month pilot program with an external vendor. As this
trial found mixed results, Amtrak subsequently issued an RFI to gain
more industry insights, including into functionality it was not able to
explore during the pilot. The resulting 3-month review allowed Amtrak
to evaluate four potential solutions. The two highest-scoring vendors
presented in-depth presentations of their technology. It was concluded
from the RFI that this technology continued to improve and had the
potential to be a worthwhile investment for Amtrak both in terms of
customer service and cost savings. The team subsequently began
developing a request for proposals (RFP).
Presently, the RFP has been finalized and is scheduled to be issued
in late August. Assuming bids can meet RFP goals within a reasonable
cost, Amtrak anticipates awarding the contract in October or November
and is targeting completing full implementation in late summer 2012.
The following timeline outlines in more detail the history and
actions Amtrak has taken in regard to HET.
TIMELINE
November 2007
Amtrak was introduced to HET technology, and though it appeared
promising, the cost of the solution was priced as a function of usage,
exposing Amtrak to unknown costs. As the technology was new, the value
to our customers and contribution to the bottom line were unclear.
June 2010
Amtrak issued a request to implement a proof-of-concept trial
recognizing that this technology was still emerging and questions
remained about its efficacy with customers. One vendor offered a unique
product and was willing to test the solution with us. Conditionally, if
the trial proved promising and Amtrak wished to pursue this further,
the solution would be put out for competitive bidding.
June 29, 2010
Amtrak representatives met with Senator Murray's staff to discuss
HET. The group agreed that Amtrak would:
--Explore the technology further to more accurately assess the value,
including through results from the pilot program; and
--Assuming the pilot proved that the technology was worthwhile,
solicit an expanded program through a competitive bid process
(per Amtrak's internal procurement policy).
The amount of money required to support this program was not yet
known, but was expected to be within $3 million.
August 2010 to January 2011
In August 2010, Amtrak began a pilot program to test the value of
HET. The pilot program ended with generally favorable results, though
results were limited to qualitative findings and it was not possible to
quantitatively demonstrate changes in customer handling costs. Based on
these findings, Amtrak began the procurement process through
development of an RFI. An RFI was then issued at the beginning of
January 2011. The goal of the RFI was to learn more and to improve the
team's confidence in the application's potential benefits.
February to March 2011
RFI responses were received in February. The RFI evaluation
committee reviewed and scored the four submissions, and then asked for
demonstrations from the top two vendors. Both vendors showed strong
expertise in a key factor for evaluation: enterprise-wide (multi-
channel) support.
April 2011
Vendor presentations concluded and the team determined that this
technology had the potential to be a worthwhile investment for Amtrak
both in terms of customer service and cost savings. Beyond customer
handling savings, the team came to understand that there could also be
efficiencies in reducing content management costs. As the HET interface
would allow companies to manage/modify their enterprise-wide content
from a single source, for example, it mitigates the expense of placing
all relevant content in one place.
May 2011
An interdepartmental Amtrak team agreed to move forward and issue
an RFP; Amtrak's Finance Department agreed funding would be available
through fiscal year 2012 (until the project's completion).
July 2011-Forward
The RFP was finalized. Procurement is expected to issue the RFP in
August and to award the contract in October/November. Work is expected
to be completed by late summer 2012.
______
Questions Submitted by Senator Richard J. Durbin
ROLLING STOCK
Question. President Boardman, States across the country are
expanding passenger rail service. For example, in Illinois we are
adding new routes from Chicago to the Quad Cities and Rockford.
However, the trains running in the Midwest now are very old and seem to
breakdown more frequently.
Does Amtrak currently have enough equipment to serve these new
routes? Are there other areas across the country where there is an
equipment shortage?
Answer. Amtrak's existing fleet of aged equipment is experiencing
very high levels of utilization across the country, and we currently
have very little spare equipment that can be used on new routes.
Recently announced Federal grants will support the procurement of
new equipment to be used throughout the Midwest States and California.
This equipment will replace some of the older, less reliable equipment
Amtrak operates, as well as provide capacity for planned new and
expanded services. The State of Washington has also received Federal
funds to procure equipment necessary for additional service once
infrastructure improvements are completed.
Amtrak continues to experience unprecedented ridership growth that
is expected to continue into the future. Without new equipment,
capacity issues will likely be experienced on many routes throughout
the country. Additionally, managing growth with the aging profile of
our current fleet will be more difficult that it would otherwise be
with modern equipment. In order to meet the increasing demands for new
services and to increase the efficiency and reliability of existing
services, obsolete and costly to maintain equipment must be
systematically replaced, as outlined in Amtrak's Fleet Strategy Plan.
To execute this plan, additional investment in equipment beyond the
scope of the recent Federal grants will be necessary.
AIR QUALITY--UNION STATION AND DIESEL EMISSIONS
Question. Last fall, the Chicago Tribune conducted an investigative
report showing Metra commuters and workers may be exposed to
excessively high levels of diesel soot. The Tribune found dangerous
levels of particulates in both the train cabins and in Union Station in
Chicago. The Tribune's studies show the increased levels of air
pollution are the result of Metra and Amtrak's aging locomotives.
Mr. Boardman, what can Amtrak do to help clean up the air quality
in and around Union Station?
Answer. Results from Amtrak industrial hygiene surveys indicate
that the operating areas of Chicago Union Station are below
Occupational Safety and Health Administration standards for air
contaminant exposure, including particulate concentrations. However,
further reducing exposure is important to Amtrak passengers and
employees, and there are a number of measures that could improve the
current situation.
For one, upgrading Amtrak's diesel locomotive fleet could certainly
improve air quality in and around Union Station. Amtrak's current
diesel locomotive fleet meets Environmental Protection Agency tier 0
emissions standards. Tier 4 emissions standards, which will have to be
met by 2015, are expected to reduce particulate matter emissions by 95
percent.
The Next Generation Corridor Equipment Pool Committee developed a
specification for a new high-speed diesel locomotive that will be
compliant with tier 4 requirements. Additionally, Amtrak's Fleet
Strategy Plan contemplates a large number of diesel locomotives being
delivered in 2015. Combining Amtrak's diesel locomotive requirements
with those of the States would make for a substantially larger and more
cost-effective procurement of lower-emission, tier 4-compliant
locomotives.
In addition to procuring new locomotives, plugging locomotives
waiting at the station into 480-volt ground power sources would reduce
idling and associated diesel emissions.
Further, for the holders of air rights above Chicago Union Station,
there is semiannual testing of their station-area fan equipment. The
results of these tests are used as a tool to monitor compliance with
the building owner's responsibility for maintaining their exhaust
equipment. This testing is performed in the spring and fall. A system
to check that the ventilation systems are operating continuously would
be helpful as a monitoring tool.
Amtrak is also undertaking a study for concept-level design of an
improved ventilation system at the station. We expect this study to
begin shortly and be completed during fiscal year 2012 or fiscal year
2013, subject to available funding.
______
CONCLUSION OF HEARINGS
Senator Murray. I appreciate both of your testimonies
today, and I just want to reiterate that safety is a concern to
everyone, as we all know, and I look forward to working with
you as a number of proposals come forward on the safety and
security of our national railway systems. Thank you very much.
[Whereupon, at 11:30 a.m., Tuesday, May 17, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2012
----------
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
NONDEPARTMENTAL WITNESSES
[The following testimonies were received by the
Subcommittee on Transportation and Housing and Urban
Development, and Related Agencies for inclusion in the record.
The submitted materials relate to the fiscal year 2012 budget
request for programs within the subcommittee's jurisdiction.]
Prepared Statement of the American Public Transportation Association
INTRODUCTION
Mr. Chairman and members of the subcommittee, on behalf of the
American Public Transportation Association (APTA), I thank you for this
opportunity to submit written testimony on the fiscal year 2012
Transportation and Housing and Urban Development, and Related Agencies
appropriations bill as it relates to Federal investment in public
transportation and high-speed and intercity passenger rail (HSIPR).
APTA's highest priority is the enactment of a well-funded, 6-year,
multimodal surface transportation authorization bill, as it is one of
the most important actions the Congress can take to improve mobility
for our citizens and put our Nation's economic engine into high gear.
We recognize the challenge that the absence of an authorization bill
places on the Appropriations Committee, yet we must stress the
tremendous needs that persist for public transportation agencies
throughout the country. A strong commitment to investment in our
transportation infrastructure remains essential to the Nation's
economic prosperity and fiscal health. Failure to invest will force
private sector businesses in the transit industry and other industries
to lay off employees and to invest overseas. For the Nation's tens of
millions of transit riders, it will mean less service, fewer travel
options, higher costs, and longer commutes.
OVERVIEW OF FISCAL YEAR 2012 FUNDING REQUESTS
The fiscal year 2012 Obama administration budget requests $22.4
billion for public transportation programs, and $8.3 billion for HSIPR.
This includes a one-time, upfront investment of $11.5 billion for the
Federal Transit Administration (FTA) programs and the first installment
of the administration's $53 billion 6-year proposal for high-speed and
intercity rail investment.
APTA strongly supports the President's proposed public
transportation budget request. APTA's authorization recommendations,
which had assumed enactment of authorizing legislation 2 years ago,
proposed a Federal transit investment of $17.9 billion in fiscal year
2012. APTA urges the Congress to resist efforts to make further cuts to
general fund components of the Federal transit program, such as Capital
Investment Grants and research, as these are important elements of
Federal surface transportation investment. We are most disappointed
with the severity of cuts in the Full-Year Continuing Appropriations
Act for fiscal year 2011, as the need for these investments is only
growing, and the costs associated with these investments will be
greater in future years.
Our funding request continues to be instructed by APTA's
recommendations for surface transportation authorization and the
estimated Federal funding growth required to meet at least 50 percent
of the $59.2 billion in annual capital needs by the end of the
authorization period. These levels are intended to support a projected
doubling of transit ridership over the next 20 years. The American
Association of State Highway and Transportation Officials agrees with
APTA's estimate, stating in its ``Bottom Line Report for
Transportation--2009'' that ``if transit ridership grows yearly by 3.5
percent, investment would have to increase to $59 billion annually.''
It is important that steady and growing investment continue despite
economic or fiscal situations, as demand and long-term planning
requirements for transportation investment continue as well.
APTA strongly opposes the elimination of prior-year HSIPR funding.
These funds are needed to ensure that the 32 States and the District of
Columbia which are forging ahead with planning and implementing HSIPR
improvements can continue their efforts to modernize and expand our
Nation's passenger rail services.
Finally, we encourage the Congress to fund the Rail Safety
Technology Grants program (section 105) of the Rail Safety Improvement
Act (RSIA) at a level significantly higher than the $50 million annual
authorization, to assist with the implementation of congressionally
mandated positive train control (PTC) systems. The federally imposed
deadline for implementation of PTC systems is rapidly approaching, and
neither the Congress nor the administration is proposing to put the
necessary funding behind this safety priority.
THE NEED FOR FEDERAL TRANSIT INVESTMENT
In previous testimony to this subcommittee, I have presented the
case for increasing Federal investment in public transportation. APTA
has recommended $123 billion of transit investment over 6 years, and
President Obama has proposed $119 billion in the same period. In either
scenario, new Federal investment would produce much-needed progress
toward bringing our Nation's public transportation infrastructure up to
a state of good repair, improving safety, and building the capacity for
millions of new riders who will want quality transit service in the
coming years. The Department of Transportation (DOT) estimates that a
one-time investment of more than $78 billion is needed to bring transit
infrastructure up to a state of good repair, and this does not include
annual costs to maintain and preserve the existing system. Research on
transit needs shows that capital investment from all sources--Federal,
State, and local--should be doubled if we are to prepare for future
ridership demands.
I want to stress that the demand for public transportation and the
need for Federal leadership will not diminish in the months and years
ahead. As gasoline prices continue to increase, Americans are turning
to public transportation in record numbers, just as they did in 2008
when gas reached an average price of $4.11 per gallon. APTA recently
completed an analysis that reveals if regular gas prices reach $4 a
gallon across the Nation, as many experts have forecast, an additional
670 million passenger trips could be expected, resulting in more than
10.8 billion trips per year, roughly a 6-percent increase. If pump
prices jump to $5 a gallon, the report predicts an additional 1.5
billion passenger trips can be expected, resulting in more than 11.6
billion trips per year. And if prices were to soar to $6 a gallon,
expectations go as high as an additional 2.7 billion passenger trips,
resulting in more than 12.9 billion trips per year. The volatility of
the price at the pump is another wake up call for our Nation to address
the increasing demand for public transportation services.
FEDERAL TRANSIT ADMINISTRATION PROGRAMS
Capital Investment Grants (New Starts).--The New Starts program is
the primary source of Federal investment in the construction or
expansion of bus rapid transit projects, heavy and light rail transit
systems, and commuter rail systems. Unlike most other FTA programs, the
New Starts program is funded from the General Fund, not the Mass
Transit Account of the Federal Highway Trust Fund. Funding for New
Starts was previously included in funding guarantees for highway and
transit programs, and the success of these major, multi-year capital
projects requires predictable support by the Congress and FTA. The
Congress established Full Funding Grant Agreements to ensure this
predictability. A continued commitment to Federal investment will also
influence the willingness of private financial markets to fund public
transportation projects and it will guarantee that the bond ratings
will remain high and interest rates will remain low. Going forward,
whether the New Starts program is funded out of the general fund or
from a trust fund, APTA believes that the program should grow at the
same rate as the rest of the transit program. New Starts is essential
to enhancing our Nation's mobility, accessibility, and economic
prosperity while promoting energy conservation and environmental
quality.
Formula and Bus and Bus Facilities.--Like other elements of the
program, we urge the Congress to grow funding for existing formula
programs, including urban and rural formula, small transit intensive
cities, fixed guideway modernization, and others at a rate consistent
with overall FTA funding. These formula programs address core needs of
our public transportation systems, and deserve the continued support of
the Congress. In our authorization recommendations, APTA recommends
modifying the current Bus and Bus Facilities program to create two
separate categories of funding, with 50 percent distributed under bus
formula factors, and the remaining 50 percent available under a
discretionary program distributed either through congressional
direction or a competitive grants process administered by FTA. This is
particularly relevant to the consideration of appropriations
legislation as we recognize that the Congress will attempt to address
the issue of earmarks and discretionary spending accounts. It is
important to recognize that certain transit needs like facilities
projects, are often larger than an agency's typical formula allotment,
and as such, will require discretionary decisionmaking on either the
part of the Congress, or the administration, in order to effectively
fund such projects.
FEDERAL RAILROAD ADMINISTRATION PROGRAMS
Positive Train Control.--A high priority for APTA within the
programs of the Federal Railroad Administration (FRA) is the adequate
funding of the Railroad Safety Technology Grants Program, section 105
of RSIA of 2008. APTA is very discouraged that the Congress has
rescinded fiscal year 2010 appropriations for this program in addition
to the possibility of leaving it unfunded in fiscal year 2011. RSIA
requires commuter rail operators implement PTC systems by December 31,
2015, and APTA is urging the Congress to increase the authorized levels
for implementation of PTC systems required under RSIA. The cost of
implementing PTC on public commuter railroads alone is estimated to
exceed $2 billion, not including costs associated with acquiring the
necessary radio spectrum or the subsequent software and operating
expenses. Our Nation's commuter rail systems are committed to complying
with the PTC mandate and implementing critical safety upgrades.
However, both the costs associated with implementing PTC, as well as
the challenges associated with a technology that is still under
development, are quite substantial. Full funding will help ensure that
these important safety improvements can be implemented within the
required timeframe.
High-Speed and Intercity Passenger Rail Investment.--Ridership in
the overall passenger rail market in the United States has been
steadily growing, with commuter rail being one of the most frequently
used methods of public transportation for those traveling from outlying
suburban areas to commercial centers of metropolitan areas, often to
and from places of employment, education, commerce and medical care.
The most recently published APTA public transportation ridership
report, which provides data on transit passenger ridership for U.S.
transit agencies, shows a continued strong demand for public
transportation despite the economic downturn, with nearly 10.2 billion
trips taken on public transportation nationally in 2010. The demand for
commuter rail service has also remained strong, with 13 of 26 commuter
rail systems in operation for all of 2010 reporting ridership increase.
Similarly, despite the Nation's slow economy, Amtrak experienced record
ridership in the last fiscal year, reporting a ridership increase of
4.6 percent for an overall ridership of more than 28.7 million
passengers. As the current political unrest in many oil producing
nations continues, more and more commuters are turning to public
transportation to escape rising gas prices, and many transit operators
are reporting double digit ridership increases this year.
In addition to commuter rail, it is critical that intercity
passenger rail become a more useful transportation option for travelers
looking for alternatives to high gas prices and congested road and air
travel in many corridors. While much attention has been lavished on
three Governors who rejected Federal rail funding for their States, 32
other States plus the District of Columbia are forging ahead in
planning and implementing rail improvements. Funding from the three
States which opted to cancel their HSIPR programs is being redirected
by DOT to other HSIPR projects across the country.
CONCLUSION
I thank the subcommittee for allowing me to share APTA's views on
fiscal year 2012 public transportation and high-speed and intercity
rail appropriations issues. We look forward to working with the
subcommittee to make the necessary investments to grow the public
transportation program. We urge the subcommittee to invest in making
commuter, intercity, and high-speed rail safer by fully appropriating
the funds authorized in the RSIA. Finally, we support the efforts of
the Congress thus far to invest in a high-speed rail system and
encourage your subcommittee to continue support for this effort. This
is a critical time for our Nation to continue to invest in transit
infrastructure that promotes economic growth, energy independence, and
a better way of life for all Americans.
ABOUT APTA
APTA is a nonprofit international association of nearly 1,500
public and private-member organizations, including transit systems and
commuter, intercity and high-speed rail operators; planning, design,
construction, and finance firms; product and service providers;
academic institutions; transit associations and State departments of
transportation. APTA members serve the public interest by providing
safe, efficient, and economical public transportation services and
products. More than 90 percent of the people using public
transportation in the United States and Canada are served by APTA-
member systems.
______
Prepared Statement of the Manufactured Housing Association for
Regulatory Reform
The Manufactured Housing Association for Regulatory Reform (MHARR)
is a national trade association representing the views and interests of
producers of manufactured housing. Manufactured housing has
historically been the Nation's leading source of affordable,
nonsubsidized home ownership. But, the manufactured housing industry is
in danger of disappearing, with devastating consequences for affordable
housing, employment, and job creation. Over the past decade,
manufactured home production has declined by more than 86 percent (from
373,143 units in 1998 to 50,046 in 2010), nearly 75 percent of the
industry's production facilities have closed (from 430 to fewer than
110), together with more than 7,500 retail centers, resulting in the
loss of more than 200,000 jobs.
The decline of the manufactured housing industry began long before
the decline of the broader housing market, and has been much more
severe. This disparity is principally a result of two factors. The
first is a costly and unjustified expansion of Department of Housing
and Urban Development (HUD) regulation, in the face of rapidly
diminishing production. Second, this regulatory expansion, imposed by
circumventing or undermining key program reforms mandated by the
Congress in the Manufactured Housing Improvement Act of 2000, has
ensured the continuing status of manufactured homes as ``trailers,''
fueling discrimination against manufactured homes and manufactured home
purchasers.
The HUD program has been able to engage in this unwarranted
regulatory expansion because of an artificially inflated budget which
has not had adequate oversight either within HUD or by the Congress in
recent years. The HUD manufactured housing program was originally
conceived as a self-funding program. In fiscal year 2009, HUD, for the
first time, sought and received a direct appropriation of $5.4 million
in general revenue funds, supposedly as a one-time request, to
implement the new Federal installation and alternate dispute resolution
(ADR) programs mandated by the 2000 law. In fiscal year 2010, however,
HUD requested an additional $9 million direct appropriation. This
infusion of millions of dollars in tax funds, though, has not been used
to implement the new programs of the 2000 law. Instead, these funds
have been used to impose a needless ``make-work'' regulatory expansion
and, with it, an increase in the size of HUD program staff and the
duties and functions of its entrenched inspection ``monitoring''
contractor, all at a time of dramatically reduced production levels,
while revenue allocated to the States for consumer protection has been
significantly reduced.
Now, in its fiscal year 2012 budget request, despite continued
weakness in the manufactured housing market, HUD is seeking $14 million
in total program budget authority. This involves yet another $7 million
direct appropriation of general revenue funds and an announced label
fee increase from $39 to $60 per home section. HUD claims that it needs
$3.8 million for an ``installation inspect and enforcement'' contract
and $1.4 million for a ``dispute resolution enforcement'' contract.
These are the same contracts, however, for which HUD requested tax
revenues in 2009 and 2010, but did not award, while it used the
additional funds provided by the Congress to needlessly expand
regulation and program staff, and increase funding for its inspection
``monitoring'' contractor. In fact, though, there is no legitimate
basis for a budget of this size or further infusions of taxpayer
dollars when industry production continues to decline and the Federal
Government faces a large deficit. Accordingly, the Congress should
carefully scrutinize HUD's fiscal year 2012 budget request, as detailed
below, based on section 620 of the 2000 law, pertaining to program
funding and expenditures.
IMPROPER EXPANSION OF PRODUCTION REGULATION
Section 620(a)(1)(A) of the 2000 law provides for the use of the
authorized fee paid by manufacturers to conduct ``inspections and
monitoring.'' Section 620(c), however, as amended by the 2000 law,
prohibits HUD from using ``any fee collected under this section'' for
``any purpose or activity not specifically authorized by this title.''
Section 604(b) of the law specifically requires HUD to bring
proposed regulations or amendments to the Manufactured Housing
Consensus Committee (MHCC) for consensus review and input, followed by
notice and comment rulemaking. Section 604(b)(6) of the 2000 law
further requires HUD to bring any change to ``policies practices, or
procedures relating to . . . inspections, monitoring, or other
enforcement activities'' to the MHCC for consensus review and input,
followed by notice and comment rulemaking. The section further provides
that ``any change adopted in violation'' of its requirements ``is
void.''
Starting in 2008, HUD has systematically imposed on manufacturers a
costly de facto expansion of in-plant regulation without complying with
the requirements of either section 604(b) generally or section
604(b)(6) specifically. Indeed, HUD, through a February 5, 2010,
``interpretive rule,'' issued with no opportunity for public comment,
has effectively read section 604(b)(6) out of the law completely.
Absent compliance with section 604(b) and section 604(b)(6), the
imposition of this program of de facto expanded regulation and
enforcement is not an activity ``specifically authorized'' by
applicable law. As a result, its costs--including additional amounts
paid to contractors for inspections, oversight, or enforcement--should
not be funded.
INADEQUATE STATE FUNDING
State administrative agencies (SAAs) are the first line of
protection for home buyers living in a growing number of both new and
existing manufactured homes. The law envisions a Federal-State
partnership for the enforcement of the Federal standards. To ensure
State participation in this partnership, section 620(a)(1)(B) of the
law requires HUD to ``provid[e] funding to the States. . . .'' The
proposed HUD fiscal year 2012 budget, however, as with the last three
HUD budgets, keeps funding for the States flat (at approximately one-
half the fiscal year 2005 funding level--$3.7 million in 2012, as
contrasted with $6.6 million in 2005), while artificially and
unnecessarily increasing contractor funding (and program staff), even
though the responsibilities of SAAs are more extensive than the
monitoring contractor. Thus, at the same time that HUD has artificially
inflated the functions performed by its monitoring contractor, HUD is
failing to properly fund State participation in the Federal program.
NONCAREER PROGRAM ADMINISTRATOR
HUD has refused to appoint a noncareer administrator for the
Federal program, maintaining that such an appointment is discretionary
under section 620(a)(1). This interpretation of the 2000 law, however,
is incorrect. The law, as amended in 2000, grants the Secretary of HUD
permissive authority under section 620(a)(1) to establish a
``reasonable fee'' to fund specific program functions if the Secretary
wishes. If such a fee is established, however, as it has been (i.e.,
the HUD label fee), the use of that fund, to offset expenses in
connection with statutory HUD ``responsibilities'' listed in
subsections (620)(a)(1)(A)-(G), is nondiscretionary. Despite this
nondiscretionary ``responsibility,'' the HUD manufactured housing
program has not had a noncareer administrator since 2004.
UNWARRANTED EXPANSION OF PROGRAM STAFF
Section 620(a)(1)(D) provides for the use of the authorized fee
paid by manufacturers to provide ``the funding for salaries and
expenses of employees of the Department to administer the manufactured
housing program.'' This provision was designed to encourage HUD to use
its own employees to carry out most program functions, rather than
relying on revenue-driven contractors. Due to HUD's make-work expansion
of in-plant regulation, however, HUD has not only increased program
staff to 14 employees, its highest level ever, but has also
systematically increased the functions of--and payments to--its
monitoring contractor, even though manufactured housing production has
declined by a factor of more than 86 percent.
MANUFACTURED HOUSING CONSENSUS COMMITTEE
Section 620(a)(1)(E) provides for the use of the authorized fee
paid by manufacturers to administer the Manufactured Housing Consensus
Committee (MHCC) established by the 2000 law. But the independence,
role, and authority of the MHCC are being emasculated by HUD
regulators.
Among other things, HUD career regulators:
--have refused to trigger the MHCC consensus process for regulations
as required by section 604(b) of the 2000 law;
--have read the ``catch-all'' provision (section 604(b)(6)) requiring
MHCC consideration of all new policies and practices affecting
enforcement out of the 2000 law through an ``interpretive
rule'' issued without public comment;
--have improperly taken control of the MHCC's agenda, focus, and
procedures;
--have undermined the balance of the MHCC required by law through
politicized appointments, by unilaterally selecting the current
chairman, by gerrymandering the composition of MHCC
subcommittees, and by excluding collective industry
representation while appointing four board members and
executives of the same consumer group and two former HUD
employees/contractors to the committee; and
--have attempted to improperly suppress stakeholder and public
participation in MHCC deliberations.
HUD maintains that these restrictions are required by the Federal
Advisory Committee Act (FACA), but that statute does not mandate such
restrictions, as is demonstrated by a review of the bylaws of other
FACA committees. Moreover, FACA, by its express terms, is superseded by
contrary provisions in the authorizing legislation for specific
advisory committees. In this case, section 604 of the 2000 law
specifically describes the role, authority, functions and operation of
the MHCC. To the extent that those provisions conflict with FACA, they
are controlling.
FAILURE TO ENSURE PARITY OF MANUFACTURED HOUSING
Section 620(a)(1)(F) provides for the use of the fee paid by
manufacturers to facilitate ``the acceptance of the quality,
durability, safety and affordability of manufactured housing within the
Department.'' This provision reflects the over-riding purpose of the
2000 law--to complete the transition of manufactured housing from the
``trailers'' of the cold war era to legitimate ``housing.'' HUD
regulators, however, have not made any effort--known to MHARR--to
advance manufactured housing as an equal participant in all HUD housing
programs and, by failing to fully and properly implement the 2000 law,
continue to treat manufactured homes as ``trailers,'' thus fueling and
intensifying discrimination that is crippling the industry.
FAILURE TO PROPERLY IMPLEMENT 2000 LAW PROGRAMS
Section 620(a)(1)(G) provides for the use of the fee paid by
manufacturers for ``the administration and enforcement'' of the Federal
installation standards and the Federal dispute resolution system in
``default'' States that do not adopt their own programs under State
law. Under section 605(c)(2)(B) and section 623(c)(12) of the 2000 law,
both of these programs were to have been operational by December 2005.
Yet, according to the latest information available from HUD, neither
has been fully implemented and, to date, no significant implementation
contracts have been awarded, even though HUD has included funding for
contractors for both programs in its budget requests since at least
2008.
ANNOUNCED LABEL FEE INCREASE--SECTIONS 620(D)-(E)
Section 620(d) of the 2000 law provides that ``the amount of any
fee collected under this section may only be modified as specifically
approved in advance in an annual appropriations Act''. Section
620(e)(2) further provides that ``amounts from any fee collected under
this section shall be available for expenditure only to the extent
approved in advance in an annual appropriations Act''.
HUD's proposed fiscal year 2012 program budget includes a label fee
increase of more than 50 percent--from $39 per section to $60 per
section--in addition to an appropriation of general revenue funds in
the amount of $7 million. HUD provides no specific justification for a
label fee increase of this magnitude, or a $7 million direct
appropriation, other than its unsupported assertion that its
responsibilities remain unchanged notwithstanding a 48-percent decline
in industry production--and corresponding drop in label fee revenues--
just since 2007. The facts, however, do not support this claim. HUD's
assertion that its responsibilities remain ``unchanged'' despite a
sharp decline in industry production is unsupportable. In 2007, the
industry produced 95,752 HUD Code homes. In 2010, the industry produced
50,046 HUD Code homes. Accordingly, the program's raw oversight burden
today is nearly one-half what it was in 2007. This decline should have
meant lower program expenditures between 2007 and proposed fiscal year
2012. Instead, the fiscal year 2007 appropriation of $6.510 million
grew to $16 million in 2009 and 2010, and now a requested $14 million
for fiscal year 2012.
CONCLUSION
For all the above reasons, the Congress should:
--require HUD to appoint a noncareer program administrator;
--require HUD to choose between either a direct appropriation or a
label fee increase, but not both; and
--direct HUD to divert funding from expanded staff and contractor
functions to provide adequate funding for State participation
in the manufactured housing program.
______
Prepared Statement of the National AIDS Housing Coalition
The National AIDS Housing Coalition (NAHC) requests $362 million
for the Housing Opportunities for Persons With AIDS (HOPWA) program for
fiscal year 2012. NAHC is a national nonprofit membership housing
organization founded in 1994 that works to end the HIV/AIDS epidemic by
ensuring that persons living with HIV/AIDS have quality, affordable,
and appropriate housing. NAHC's members are people living with HIV/AIDS
(PLWHA), service providers, developers, researchers, public health and
housing departments, and advocates.
Research findings presented through NAHC's Research Summit Series
overwhelmingly confirm that housing is a strategic point of
intervention to address HIV/AIDS, homelessness, and the concomitant
effects of race and gender, poverty, mental illness, chronic drug use,
incarceration, and exposure to trauma and violence. HIV housing
interventions are a cost-effective means to prevent new HIV infections,
improve HIV health outcomes, reduce mortality, and reduce reliance on
other public systems such as expensive emergency and inpatient medical
services.
The HOPWA program is relied upon by HIV/AIDS service organizations
nationwide to assure that stable, affordable housing and the critical
supportive services that help people remain housed is available to
those coping with the debilitating and impoverishing effects of HIV/
AIDS. HOPWA's hallmark is its flexibility to provide a continuum of
housing and housing-related case management and supportive services for
low-income individuals living with HIV/AIDS and their families. HOPWA
dollars are used for short- and longer-term rents, facility-based
assistance as well as limited rent, mortgage, or utility payments that
play a critical role in homelessness prevention. HOPWA can also be used
for new development and rehabilitation. In the face of shrinking
resources, HOPWA's importance to community strategic planning efforts
cannot be underestimated--facilitating better coordination of local and
private resources and filling gaps in local systems of care to meet
housing need among people with HIV/AIDS and their families.
AIDS HOUSING IS CENTRAL FOR HIV/AIDS HEALTH
A now substantial body of research shows that housing status has a
direct, independent, and powerful impact on HIV incidence and the
health of PLWHA, regardless of demographics, drug use, health and
mental health status, or receipt of other services. Housing affects an
individual's ability to avoid exposure to HIV; an HIV-positive
individual's ability to avoid exposing others to HIV; and the ability
to receive and benefit from HIV healthcare. Whatever else makes one
vulnerable to HIV infection--homelessness magnifies the risk. Whatever
other factors lead to disparities in care--for women; for youth; for
sexual minorities; for people of color; for those who experience mental
illness, addiction, violence, abuse, or incarceration--housing
instability amplifies their vulnerability for poor health outcomes and
early death. Research has consistently shown that people without stable
housing are significantly more likely to become HIV-infected, they will
have limited access to care once they are infected, and they will live
less healthy and shorter lives--compared to people just like them who
are fortunate enough to have a home.
Recent findings from the U.S. Centers for Disease Control and
Prevention (CDC) show how that poverty and homelessness contribute to
worsening HIV health disparities. CDC surveillance data reveal that at
least 2.1 percent of heterosexuals living in high-poverty urban areas
in the United States are HIV-positive--an HIV prevalence rate that is
more than 20 times greater than the rate among all heterosexuals in the
United States (0.1 percent), and that exceeds the 1-percent infection
rate that defines a generalized HIV epidemic. Poverty--not race--is the
most important demographic factor associated with HIV infection among
inner-city heterosexuals. Men and women in low-income neighborhoods who
live below the poverty line are twice as likely to have HIV infection
as those living above it, and other social factors--including
unemployment, low-education level, and housing status--are also
independently associated with infection. Within the low-income
communities examined, the rate of new HIV infections almost twice as
high (1.8 times) for inner-city heterosexuals who had experienced
homelessness in the past year, compared to low-income persons with
housing.
AIDS HOUSING WORKS TO IMPROVE HEALTH AND REDUCE PUBLIC COSTS
Research also shows that receipt of housing assistance is
independently associated over time with reduced HIV risk behaviors,
better health outcomes, and sharp reductions in costly emergency and
inpatient services. Recent findings from housing-based interventions
provide new evidence that housing supports create stability and
connection to care for people living with HIV--improving healthcare
outcomes, changing the individual behaviors that put people at risk of
acquiring HIV infection, and reducing overall public costs.
PLWHA who are unstably housed lack ongoing HIV care and rely more
on expensive crisis services including shelters, jails, and avoidable
emergency and hospital care. Housing assistance for people with HIV who
are homeless improves their health outcomes and dramatically reduces
emergency and inpatient health services, criminal justice involvement,
and other crisis costs. A recent study funded by the CDC and HUD found
that more stable housing for people with HIV reduced emergency medical
visits by 35 percent and hospitalizations by 57 percent. Each new HIV
infection prevented through more stable housing saves countless life
years and more than $300,000 in lifetime medical costs. Indeed, housing
assistance for homeless and unstably housed people living with HIV
leads to savings in avoidable health services that can more than offset
the costs of the housing intervention.
This consistent evidence base supports housing assistance as a
cost-effective healthcare intervention for homeless and unstably housed
persons with HIV. Action to meet HIV housing needs costs far less than
inaction, making HOPWA and other low-income housing programs that serve
people living with HIV a wise use of limited public resources.
HOUSING NEED AMONG PEOPLE WITH HIV/AIDS
More than 56,000 people became infected with HIV in the past year
in the United States. Experts estimate that more than one-half of PLWHA
will need some form of housing assistance during the course of their
illness, while national research has shown that housing is the greatest
unmet service need for people living with HIV disease. Data indicates
that approximately 72 percent of PLWHA have incomes less than $30,000;
the number in need is likely to increase proportionally with the
weakened economy and sustained high unemployment levels.
In 2011, HOPWA will continue providing housing support for more
than 60,000 households in 133 formula-eligible jurisdictions, providing
assistance in all 50 States, the District of Columbia, Puerto Rico, and
the Virgin Islands. Under the current formula configuration, two to
five new jurisdictions may become available, from cities diverse as
Greenville, South Carolina to Syracuse, New York. In addition, 91
competitive grants are currently operating. The program is tied to
positive client outcomes in the 60,699 households served in the current
fiscal year, making it possible for assisted individuals to better
attend to their health needs, function in their families and society.
AIDS housing is a cost-effective way to end homelessness and achieve
positive individual and community health outcomes. HUD reports that 94
percent of all HOPWA rental assistance households in a recent program
year were able to achieve maximum stability, reducing risks of
homelessness, and participating in healthcare.
NAHC recommends a funding level of $362 million, which would permit
assistance to an additional 4,800 people with HIV/AIDS in need of
housing.
EXAMPLES OF AIDS HOUSING NEED ACROSS THE COUNTRY
AIDS housing need has exploded in virtually every region of the
country. Though waiting lists are no longer maintained in many
jurisdictions, affordable housing need continues to grow. Below is a
snapshot of the number of HOPWA-eligible households with unmet housing
needs in cities and states across the country:
------------------------------------------------------------------------
No. of
HOPWA-
eligible
City and/or State households
with unmet
housing
needs
------------------------------------------------------------------------
Alabama..................................................... 3,621
California:
Los Angeles............................................. > 8,000
San Francisco........................................... 13,000
San Jose................................................ 279
District of Columbia........................................ >700
Tampa, Florida.............................................. 285
Honolulu, Hawaii............................................ 130
Chicago, Illinois........................................... 10,257
Iowa........................................................ 115
Maine....................................................... 110
Lowell, Massachusetts....................................... 624
Minnesota................................................... 309
New York:
New York City........................................... 11,000
Syracuse................................................ 103
Columbus, Ohio.............................................. 115
Oregon...................................................... 202
Philadelphia, Pennsylvania.................................. 6,000
Texas:
Dallas.................................................. 617
El Paso................................................. 56
Seattle, Washington......................................... 425
------------------------------------------------------------------------
OTHER LOW-INCOME HOUSING PROGRAMS REMAIN CRUCIAL
Of course, HOPWA will never fully meet the housing need for all
those living with HIV/AIDS and their families. AIDS housing providers
urge full and adequate funding for the range of low-income housing
programs relied upon in the continuum of housing and services for
people with HIV/AIDS, including Homeless Assistance Grants, Tenant-
Based Rental Assistance, Public Housing, and Section 811 Housing for
People with Disabilities, among others.
In conclusion, NAHC urges the subcommittee to fund the HOPWA
program at the highest level possible for fiscal year 2011 to
accommodate new formula jurisdictions expected to become eligible and
to assist existing programs in moving closer to meeting the actual
housing needs in their jurisdictions.
NAHC respectfully asks the subcommittee to approve funding of $362
million for the HOPWA program for fiscal year 2012.
______
Prepared Statement of the National Association of Railroad Passengers
Thank you for the opportunity to submit this statement. Thank you
also for the positive role that you and your subcommittee have played
over the years in providing funding for intercity passenger trains.
Energy-efficient passenger trains are more important than ever as
Amtrak ridership continues to rise, along with gasoline prices.
Ridership growth is colliding with the realities of a fleet that is too
small.
Thus, our key requests for intercity passenger trains for fiscal
year 2012 are:
--Full funding of the Obama administration's requested $8 billion for
intercity passenger trains, including approximately $4 billion
each for network development (capital upgrades to tracks and
stations and procurement of new or rebuilt equipment) and for
system preservation and renewal. We support this as the
baseline for the multi-year commitment as outlined in the
administration's budget.
--The bare minimum should be $4.7 billion, comprised of Amtrak's
request of $2.2 billion plus the 2010 level at which High Speed
and Intercity Passenger Rail (HSIPR) program was funded, $2.5
billion.
We strongly support the Department of Transportation's (DOT)
approach in HSIPR grants to the States. We applaud the agreements
reached to date with BNSF (Washington State), Norfolk Southern (North
Carolina) and Union Pacific (Illinois). We look forward to the early
conclusion of agreements with CSX, especially for Virginia and New
York.
Failure to meet, at minimum, the funding targets Amtrak identified
in its fiscal year 2012 grant and legislative request puts the country
close to a no-growth scenario, which would be extremely unfortunate
given the likelihood that high gasoline prices are here to stay.
``Smart growth'' housing, intercity passenger trains, and rail transit
have two things in common:
--Both help enable Americans to sustain the highest possible quality
of life in a competitive world economy, and to mitigate what
The Weekly Standard's Christopher Caldwell called ``America's
almost unbelievable demand for oil.'' Caldwell noted that this
demand ``has led [the United States] to diverge from the rest
of the west on energy policy,'' a polite way of saying that we
are headed for trouble if we don't make it possible for more
people to burn less oil. (Quotes: Financial Times column, April
2.)
--Demand for both exceeds supply, indicating that the public is ahead
of the policymakers and moving faster than the market place can
react.
We continue to urge consideration of the use of tax credits and/or
asset depreciation benefits to encourage private leasing companies to
buy equipment and lease it to States and perhaps Amtrak. This could
help reduce the high upfront costs that taxpayer-supported agencies
face when procuring new equipment.
As gasoline prices continue their steady upward climb, airfares are
at historic highs, and intercity bus service has been dramatically
scaled back over the past 4 years, America's growing population is
seeking better, more affordable mobility. Amtrak's historically high
ridership--even though the railroad's fares are as high as the market
can bear, especially on the Northeast corridor--is evidence of this.
The need to maintain mobility for our citizens, bolster our
Nation's economic competitiveness and energy efficiency, provide good
jobs for Americans, and reduce our transportation system's negative
environmental impact all demand that we ramp up investment in modern
passenger trains.
The following table, showing 2008 data, comes from the annual
Transportation Energy Data Book (Edition 29, released in 2010),
published by Oak Ridge National Laboratory under contract to the
Department of Energy, at http://cta.ornl.gov/data/chapter2.shtml:
------------------------------------------------------------------------
BTUs \1\ per
Mode passenger-mile
\2\
------------------------------------------------------------------------
Amtrak.................................................. 2,398
Commuter trains......................................... 2,656
Certificated air carriers (domestic).................... 2,995
Cars.................................................... 3,437
Light trucks (2-axle, 4-tire)........................... 3,641
------------------------------------------------------------------------
\1\ BTU = British thermal unit.
\2\ Passenger-mile = one passenger traveling 1 mile.
The table indicates that Amtrak is 20 percent and 30 percent more
energy efficient per passenger-mile, respectively, than airlines and
autos. That is true even though Amtrak's fleet averages 37 years old
while the airplane and automobile fleet is constantly turning over with
energy efficiency generally improving. Thus, the Amtrak 2008 figures
understate rail's true potential.
We are disappointed that negotiations between Amtrak and Union
Pacific Railroad apparently remain stalled regarding Amtrak's
initiative to provide daily service over the entire line between New
Orleans and Los Angeles.
We fully support Amtrak's Gateway Tunnel project, which will create
a long-overdue expansion in track capacity between New York City and
New Jersey, and for the entire Northeast corridor.
We are concerned about the impact of Passenger Rail Investment and
Improvement Act's section 209 which directs States to provide full-
operating support for intercity trains whose routes total 750 miles or
less. It is important that this not become an obstacle to service
continuation. We continue to urge consideration, at least in emergency
situations, of allowing Federal support for such routes' continued
operation on a 50-50 matching basis, without making Amtrak swallow the
difference.
Thank you for considering our views.
______
Prepared Statement of the University Corporation for Atmospheric
Research
On behalf of the University Corporation for Atmospheric Research
(UCAR), a consortium of 76 research universities that manages the
National Center for Atmospheric Research, I submit this written
testimony regarding the fiscal year 2012 appropriation for the record
of the Senate Committee on Appropriations, Subcommittee on
Transportation, Housing and Urban Development, and Related Agencies. I
urge the subcommittee to fully fund the fiscal year 2012 $110 million
request for the Federal Highway Administration's (FHWA) Intelligent
Transportation Systems (ITS) program including the ITS Wireless
Innovation Initiative. Further, I ask that the subcommittee support
$2.87 billion for the Federal Aviation Administration's (FAA)
Facilities and Equipment (F&E) account and $190 million for its
Research, Engineering and Development (RE&D) account.
The Department of Transportation (DOT) relies on its partnerships
with State DOTs, local transportation agencies, the first responder
community, freight community, and the academic community, to meet its
mission of ensuring a fast, safe, efficient, accessible, and convenient
transportation system that meets our vital national interests and
enhances the quality of life of the American people. The academic and
research community contributes directly to this mission with applied
research and development (R&D) of cutting-edge technologies to move
people and shipments safely and expeditiously. Research on the physics
of microbursts, for example, has resulted in the development of wind
shear detection technologies that, since full implementation, have
reduced aircraft crashes caused by downbursts to zero. Applied research
is now being conducted on road snow and ice control, aircraft icing,
and turbulence, and other weather hazards, resulting in products that
are saving industry and States tens of millions of dollars per year and
making the traveling public far safer on the roads and in the skies. I
urge you to support the requested levels for the following programs:
FEDERAL HIGHWAY ADMINISTRATION'S RESEARCH, TECHNOLOGY, AND EDUCATION
PROGRAM
Understanding and addressing adverse weather conditions helps to
mitigate the impacts of congestion and accidents, and is a high
priority for the FHWA. The Research, Technology, and Education Program
provides for a comprehensive, nationally coordinated program that will
advance DOT organizational goals and accelerate innovation delivery and
technology implementation. The request includes $257 million for the
following Research and Innovative Technology Administration programs on
which I would like to comment.
Intelligent Transportation Systems
Every year, thousands of people are injured or killed in accidents
on our Nation's highways because of bad weather and poor road
conditions. The consequences go beyond those human costs to include
lost productivity to commercial motor vehicle operators and the expense
to local governments responsible for clearing accidents and repairing
damaged roadways, to say nothing of the inconvenience to motorists.
Because of R&D investments, innovative new wireless technologies
will soon allow cars to share with vehicles behind them important
safety data such as adverse weather and road conditions. Knowing about
icy or foggy road conditions 2 miles ahead, for example, will save
lives and keep traffic moving smoothly. DOT's IntelliDrive (recently
renamed ``Connected Research Vehicle'') program is the centerpiece of
the DOT ITS 2010-2014 Strategic Research Plan. Intellidrive partners
government, industry, academia, and others to specify, develop, and
produce the necessary technology to gather and broadcast a car's
``heartbeat'' continuously, including weather conditions. Road weather-
connected vehicle applications are the next generation of applications
and services that assess, forecast, and address the impacts of weather
on roads, vehicles, and travelers. Such applications will build upon
decision support tools currently undergoing development, testing, and
deployment such as the Clarus Regional Demonstrations, the Maintenance
Decision Support System and Vehicle Data Translator.
To meet its core research and technology transfer mission, I urge
you to support the requested fiscal year 2012 amount of $110 million
for the FHWA's ITS, including IntelliDrive and its V-V and V-I
Communications for Safety program ($43.3 million) and Dynamic Mobility
Applications ($14 million). However, I am concerned about the proposed
consolidation of Road Weather Research with these larger programs. The
risk is that this successful, small program could be seriously
compromised. Road Weather Research has been highly leveraged by States
and localities to save lives and millions of dollars. I urge you to
ensure that at least $5 million for a distinct road weather research
program is included as an important safety and mobility R&D topic in
the previously mentioned programs. This funding is consistent with the
Safe, Accountable, Flexible, Efficient Transportation Act: A Legacy for
Users (SAFETEA-LU).
Intelligent Transportation Systems Wireless Initiative
DOT's ITS program is launching a new research initiative to improve
transportation safety, relieve traffic congestion, and enhance
productivity. The budget request includes funding for the ITS Wireless
Initiative, which will be managed by RITA and funded out of the
Miscellaneous Appropriations account. This new program will develop
``living laboratories'' where innovative wireless communications
methods and applications can be developed for eventual deployment. To
accomplish its goals, the DOT will leverage the knowledge, expertise,
and experience of the research community. I urge you to support the
fiscal year 2012 request of $100 million for FHWA's ITS Wireless
Initiative.
FAA'S RESEARCH, ENGINEERING, AND DEVELOPMENT
The FAA's fiscal year 2012 budget request supports continued
aviation safety and capacity R&D, focusing on critical areas such as
turbulence, in-flight icing, storm prediction, oceanic weather, and
restricted visibility. For more than two decades, the FAA has funded
R&D efforts to improve forecasting of weather affecting aviation.
The fiscal year 2012 request continues important work in current
research areas, including aviation weather. This budget supports
enhanced Next Generation Air Transportation System (NextGen) R&D
efforts in the areas of improved weather information for integration
into decisionmaking, weather information for pilots, and environmental
research for aircraft technologies and alternative fuels to improve
aviation's environmental and energy performance. The following programs
can be found within the RE&D section of the fiscal year 2012 FAA budget
request:
Weather Program
The goal of the Weather Program is to increase safety and capacity,
and to support NextGen. A number of aviation weather research projects
are underway, in collaboration with industry representatives, focusing
on in-flight icing, turbulence, winter weather, and deicing protocols,
thunderstorms, ceiling, and visibility. One example of a system that
translates a large amount of weather data into significant safety and
delay improvements is the Consolidated Storm Prediction for Aviation
(CoSPA). Thunderstorms and winter storms have long been recognized as
significant safety hazards, as well as major causes of system delays.
Using CoSPA, accurate forecasts of storms can be translated into
probable impacts to the system. This allows for improved decisionmaking
resulting in improved safety and reduced delays.
I am very concerned that the budget request of $16.4 million will
not support the R&D needs of the Weather Program within RE&D. The
request for this program is reduced more than 2 percent from the fiscal
year 2010 level and is operating at one-half the level of funding
appropriated 10 years ago. To address the pressing challenges and to
meet the research needs of NextGen, the Weather Program must receive,
at a minimum, $18 million for fiscal year 2012.
Weather Technology in the Cockpit
The 2009 crash of an Air France jet over the Atlantic Ocean,
killing all 216 passengers and 12 crew members, is very likely an
example of the limits of pilots' ability to cope with severe weather.
Pilots currently have little weather information as they fly over
remote stretches of the ocean where some of the worst turbulence
encounters occur. Providing pilots with at least an approximate picture
of developing storms could help guide them safely around areas of
potentially severe turbulence.
The Weather Technology in the Cockpit Program leverages research
activities with other agencies, academia, and the private sector by
enabling the adoption of cockpit technologies that provide pilots with
hazardous weather information and improve situational awareness.
I am very concerned that the fiscal year 2012 request for this
small, but life-saving program within RE&D was reduced by almost 4
percent from fiscal year 2010 levels. I urge you to fund the Weather
Technology in the Cockpit program at $10 million, at a minimum.
FAA'S FACILITIES AND EQUIPMENT
Delays in the National Airspace System (NAS) are primarily
attributable to weather. According to the FAA, during the last 5 years
more than 70 percent of delays of 15 minutes or more, on average, were
caused by weather. Weather also impacts safety. Between 1994 and 2003,
weather was determined to be a contributing factor in more than 20
percent of all accidents. Currently, most operational decision tools do
not utilize weather information effectively or at all. Therefore,
exploring, identifying, and employing better methods for data
collection and communication will help facilitate the flow of
operation-specific weather data and information to end users. Within
F&E, I would like to call your attention to the following two very
important programs:
NextGen Network Enabled Weather.--NextGen Network Enabled Weather
(NNEW) is a transformational, multiagency project dedicated to using
and developing technologies and standards for NextGen that will support
effective dissemination of weather data. NNEW will develop the FAA's
portion of the 4-D Weather Data Cube which will provide standardized
information from multiple contributors and locations to a variety of
end-users including air traffic managers and pilots.
The fiscal year 2012 request for NNEW is $27.35 million, a $7
million increase more than fiscal year 2010. To develop the NextGen
weather dissemination system smoothly and efficiently, I urge you to
support this request.
NextGen Reduce Weather Impact.--The goal of the NextGen Reduce
Weather Impact program is to provide increased capacity in NAS while
reducing congestion and meeting projected demand in an environmentally
sound manner. The current weather observing network is inadequate to
the needs of NextGen and improvements will be central to the work in
the Reduce Weather Impact Program. Working with appropriate scientific,
modeling, and user communities, current sensor information and
dissemination shortfalls will be identified and evaluated.
Investigating technologies for optimizing and improving automated
aircraft weather reporting will also be conducted, to meet NextGen
requirements.
The Reduce Weather Impact portfolio will leverage the NNEW
transformational program that will interface with the National Oceanic
and Atmospheric Administration's 4-D Weather Data Cube, for universal
common access to weather information.
I urge you to increase the NextGen Reduce Weather Impact program
funding to $43.2 million for fiscal year 2012, an increase of $7.6
million from fiscal year 2010.
On behalf of UCAR, I want to thank the subcommittee for its
leadership in supporting research, development and technology transfer
programs within the FHWA and FAA, and for your commitment to ensuring
safer, more efficient air and road travel.
______
Prepared Statement of the YWCA USA
Thank you Chairman Murray, Ranking Member Collins, and members of
the subcommittee for the opportunity to submit testimony. My name is
Gloria Lau, and I am the chief executive officer of the YWCA USA. As
the Congress works on priorities for the fiscal year 2012 Federal
budget, I would like to highlight one vital program in particular under
the jurisdiction of this subcommittee: the Community Development Block
Grant (CDBG) which is administered by the Department of Housing and
Urban Development (HUD).
The YWCA USA is a national, not-for-profit (501(c)(3)) membership
organization committed to eliminating racism, empowering women, and
promoting peace, justice, freedom, and dignity for all. We represent
more than 2 million women and girls with nearly 300 local associations
nationwide. We serve thousands of women, girls, and their families
annually through a variety of programs including violence prevention
and recovery programs, housing programs, job training, and employment
programs, childcare and early education programs, and more. Our clients
include women and girls who come from all walks of life, including
those escaping violence, low-income women and children, women veterans,
elderly women, disabled women, and homeless women and their families.
The YWCA is a major provider of social services to women, children,
and families throughout the United States. Today, the YWCA is the
largest provider of battered women's shelters in the Nation and one of
the largest providers of childcare. As a major provider of social
services, the YWCA is extremely supportive of the CDBG. Every day, in
communities across this country, we witness the important role CDBG
plays in helping communities meet the needs of their low-income women,
children, and families. Today, CDBG is one of three main funding
streams for YWCA programs and services nationwide. YWCAs use CDBG
funding for a variety of programs, including programs that assist
victims of domestic violence and sexual assault, children and youth,
and homeless women and children. CDBG also provides flexible funding
for YWCAs nationwide to make capital improvements to their buildings
such as installing wheelchair ramps or security cameras.
Because of our strong support for the CDBG, the YWCA asks the
subcommittee to concur at a minimum to fund the CDBG program in HUD at
$4 billion. This call for support comes directly from local communities
across the country, as local YWCA associations surveyed in December
2010 identified this vital block grant as one of their most critical
funding sources for the services they provide.
As members of the subcommittee know, the CDBG, created in 1974, is
a block grant program that provides funding to local communities across
the United States. The CDBG provides annual grants on a formula basis
to more than 1,200 units of local government and States, which then use
the funds to pay for community development initiatives, affordable
housing programs, and anti-poverty initiatives. CDBG helps communities
provide social services to low-income women, children, and families who
reside in their communities, but cannot afford the cost of services.
While CDBG is often perceived as a funding stream mainly for local
governments, the impact of this program on nonprofit organizations,
such as the YWCA, is substantial. Local governments that receive CDBG
collaborate with community service providers, such as YWCAs, to provide
social services. The local governments then pass through the CDBG funds
to the service providers to help cover the cost of the services
provided.
As a service provider working with women, children, and families
with unique needs, the YWCA values the fact that CDBG is not a cookie-
cutter/one-size-fits-all program; it is a block grant funding stream
that provides local governments and States flexibility in developing
programs and services most appropriate to meet the needs of its low-
income residents. Thanks to the flexibility afforded under the block
grant, YWCAs are able to use CDBG funding for a variety of programs and
services that help countless women, children, and families annually.
For example, YWCAs use CDBG funding to provide:
--short-term shelter and supportive services for homeless families;
--night and day shelter and services for chronically homeless women;
--economic assistance programs that help low-income working women pay
for work uniforms, tools, transportation, background checks,
and certification and licensing fees;
--housing programs such as emergency, transitional, and permanent
housing for women and families;
--programs and services for vulnerable women and children including
programs that help formerly incarcerated women returning to the
community;
--after-school groups and youth recreation programs in at-risk
neighborhoods for girls and boys; and
--programs for adult and child survivors of domestic violence and
sexual assault.
In addition, though often not recognized as an important source of
funding for addressing violence against women and children, CDBG plays
a critical role in the ability of YWCAs to meet the needs of women and
children who are crime victims. For example, YWCAs nationwide are
allocated CDBG funds by their local governments to provide anti-
violence services such as emergency shelters and services for victims
of domestic violence; sexual assault crisis services including 24-hour
hotlines, support group and crisis counseling; hospital, police
department and court accompaniments; and prevention education.
Given the flexible nature of CDBG, it is not surprising that YWCAs
cite CDBG as one of the most vital sources of Federal funds available
to serve people in their communities. Stories abound of how YWCAs have
been able to serve women and families in cities and towns across the
United States because of CDBG funding. The following are just a few
stories:\1\
---------------------------------------------------------------------------
\1\ Ibid.
---------------------------------------------------------------------------
The YWCA of Lancaster uses CDBG funding to run its Sexual Assault
Prevention and Counseling Center, which serves 700 to 1,000 direct
service clients annually. Specifically, the YWCA uses CDBG funding to
hire counselors to work directly with the victims of sexual assault. A
loss in CDBG funding for the YWCA of Lancaster would mean sexual
assault victims would not be able to receive services and would be
placed on a waiting list. Maureen Powers, the executive director of the
YWCA of Lancaster, comments, ``One-third of our direct service clients
are children, and we really should not have a waiting list for child
clients. It takes a lot for them to disclose sexual abuse to begin
with.'' Though these are tight fiscal times for our Nation, I think
many of us would agree that funding to help child victims of sexual
assault is taxpayer money well spent.
Another story,\2\ this time from the YWCA of Binghamton/Broome
County in Binghamton, New York, further demonstrates how CDBG helps the
most vulnerable in our communities. The YWCA of Binghamton/Broome
County uses CDBG funding to run its emergency shelter for women, which
serves more than 300 women and children a year. Many of the women and
children served by the shelter are victims of domestic violence. CDBG
funds, which come to the program through the city of Binghamton annual
Emergency Shelter Grant, are the shelter's primary funding source. A
loss in CDBG funding would mean the women and children served by the
shelter would not be able to receive housing and the shelter, the only
facility of its kind in the community, would possibly have to close.
---------------------------------------------------------------------------
\2\ As reported in ``A Better Budget for All: Saving Our Economy
and Helping Those in Need'' published by Coalition on Human Needs for
the ``For the SAVE for All Campaign: Strengthening America's Values and
Economy for All'', on February 25, 2011, and downloaded from http://
www.chn.org/pdf/2011/BetterBudget4AllReport.pdf.
---------------------------------------------------------------------------
In today's anti-spending climate, people often believe Federal
funding provides total operating funding for social service programs.
That is not the case for local YWCAs that use Federal, State, and local
funding as well as individual, foundation, and corporate donations.
Even if CDBG does not provide total program funding for YWCA programs,
CDBG provides funding for critical components of those programs. For
YWCAs across this country, every dollar counts.
In addition to helping fund vital components of social services
programs, CDBG helps nonprofit service providers leverage other sources
of funding--whether from other government sources or private community
support--to further assist women and children in need. For example, in
2010, the YWCA Seattle/King/Snohomish in Washington used more than $1.4
million in CDBG funding to leverage approximately $19 million in other
funding to support some of its most critical programs such as those for
homeless individuals and families and those with very low incomes.
Though CDBG accounted for just a small percentage of this YWCA's
government grants and operating income, the YWCA would have had to
decrease services without CDBG funds.
In Lewiston, Maine, the YWCA has used support from community block
grant funds to make an aging facility more safe, more energy efficient
and more usable for the 10,000 people from a tri-county area who look
to the YWCA for support and services. With just a modest amount of
funding support, this Maine YWCA is working in close cooperation with
its community to be more green, more accessible to disabled clients and
more responsive to the women and their families who come to the YWCA
for lifesaving support.
As you can see, this call for your support of CDBG comes directly
from communities across the country. CDBG is an invaluable tool that
assists local governments in addressing domestic violence, sexual
assault, homelessness, and poverty. Severely cutting CDBG funding would
cause budget gaps for local governments, lead to the discontinuation of
many vital community services, and place in harm's way some of our
Nation's most vulnerable women and children.
Though my testimony today is on behalf of the YWCA, the importance
of CDBG is also recognized by the leaders of our Nation's cities and
our U.S. Senators. These leaders recognize that cutting CDBG would be
harmful because it promotes private sector growth.
For example, every $1 from the CDBG program brings in $1.62 in non-
CDBG funds.\3\ As noted by the National League of Cities, for nearly
four decades, CDBG has served as a catalyst for financing housing,
infrastructure, and economic development in America's cities and towns.
The program has also been credited with retaining and creating
employment opportunities. According to a letter written in March 2011
to the chairman and ranking member of the Appropriations Committee,
signed by about one-third of the Senate, ``Based on data that grantees
have reported to the U.S. Department of Housing and Urban Development
over the past 6 years, the CDBG program has . . . created or retained
259,346 jobs for low- and moderate-income persons through a variety of
economic development activities.'' The letter also notes that CDBG has:
---------------------------------------------------------------------------
\3\ National League of Cities CDBG Issue Brief, downloaded April
12, 2011, from http://www.nlc.org/ASSETS/
4D74A625F6714A6688F93FC892AA0FAC/CDBG-Issue-Brief.pdf.
---------------------------------------------------------------------------
--Assisted 865,874 low- and moderate-income households through
single-family and multifamily residential rehabilitation, home
ownership assistance, energy efficient improvements and lead-
based paint abatement;
--Benefited 22,998,047 low- and moderate-income households through
such public improvements as the development of senior centers,
childcare centers, and centers for the disabled; and
--Benefited 73,863,286 low- and moderate-income households through
public services such as employment and training, youth
services, meals and other assistance to the elderly, and
services for abused and neglected children.
The contribution of the CDBG program to thousands of communities
across the country and hundreds of thousands of people in the United
States cannot be denied.
In closing, the YWCA recognizes these are unique times in our
Nation's history and we agree that our Nation must address its deficit
and debt. At the same time, the YWCA believes strongly that investments
in local communities and programs are wise uses of Federal funds that
provide substantial returns to our Nation. On behalf of YWCAs
nationwide, we look to you for continued commitment to the women,
children, and families we serve through the CDBG and respectfully ask
the subcommittee to support the President's fiscal year 2012 budget
request for $4 billion dollars in funding for CDBG.
Thank you once again for the opportunity to provide testimony to
your subcommittee. Your attention and assistance are greatly
appreciated.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
American Public Transportation Association, Prepared Statement of
the............................................................ 245
Babbitt, Hon. J. Randolph, Administrator, Federal Aviation
Administration, Department of Transportation................... 157
Prepared Statement of........................................ 165
Summary Statement of......................................... 163
Bertram, Christopher, Assistant Secretary of Transportation for
Budget and Programs, and Chief Financial Officer, Department of
Transportation................................................. 79
Blunt, Senator Roy, U.S. Senator From Missouri:
Prepared Statements of........................11, 90, 104, 144, 145
Statement of................................................. 10
Boardman, Hon. Joseph H., President and Chief Executive Officer,
National Railroad Passenger Corporation (Amtrak):
Prepared Statement of........................................ 225
Questions Submitted to....................................... 240
Statement of................................................. 224
Coats, Senator Daniel, U.S. Senator From Indiana, Question
Submitted by................................................... 208
Collins, Senator Susan, U.S. Senator From Maine:
Opening Statement of......................................... 213
Prepared Statements of.........................9, 88, 130, 162, 215
Statements of.......................................7, 85, 129, 161
Donovan, Hon. Shaun, Secretary, Office of the Secretary,
Department of Housing and Urban Development....................1, 125
Prepared Statements of......................................15, 132
Summary Statements of.......................................11, 131
Durbin, Senator Richard J., U.S. Senator From Illinois, Questions
Submitted by............................................202, 239, 242
Feinstein, Senator Dianne, U.S. Senator From California,
Questions Submitted by........................................55, 114
Hutchison, Senator Kay Bailey, U.S. Senator From Texas, Questions
Submitted by................................................... 61
Kirk, Senator Mark, U.S. Senator From Illinois:
Prepared Statements of....................................... 6, 85
Questions Submitted by......................................63, 121
LaHood, Hon. Ray, Secretary, Office of the Secretary, Department
of Transportation.............................................. 79
Prepared Statement of........................................ 91
Statement of................................................. 79
Summary Statement of......................................... 90
Lautenberg, Senator Frank R., U.S. Senator From New Jersey:
Questions Submitted by....................................... 56
Statements of..............................................163, 216
Manufactured Housing Association for Regulatory Reform, Prepared
Statement of the............................................... 248
Murray, Senator Patty, U.S. Senator From Washington:
Opening Statements of..........................1, 79, 125, 157, 209
Prepared Statements of.........................4, 83, 127, 159, 212
Questions Submitted by.......................45, 113, 153, 202, 240
National AIDS Housing Coalition, Prepared Statement of the....... 251
National Association of Railroad Passengers, Prepared Statement
of the......................................................... 253
O'Connor, John, Vice President and Chief of Police, Amtrak Police
Department, National Railroad Passenger Corporation (Amtrak)... 224
Pryor, Senator Mark, U.S. Senator From Arkansas:
Prepared Statement of........................................ 9
Questions Submitted by.................................57, 119, 206
Scovel, Hon. Calvin L., III, Inspector General, Department of
Transporta-
tion........................................................... 157
Prepared Statement of........................................ 175
Statement of................................................. 174
Szabo, Hon. Joseph C., Administrator, Federal Railroad
Administration, Department of Transportation................... 209
Prepared Statement of........................................ 219
Questions Submitted to....................................... 239
Summary Statement of......................................... 217
University Corporation for Atmospheric Research, Prepared
Statement of
the............................................................ 255
YWCA USA, Prepared Statement of the.............................. 257
SUBJECT INDEX
----------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Federal Housing Administration
Page
Additional Committee Questions................................... 153
Capital Reserve Ratio............................................ 152
FDA's Risk Exposure.............................................. 151
FHA:
Commissioner Vacancy......................................... 149
Premium Increase............................................. 144
Underwriting................................................. 147
FHA's:
Fiscal Year 2012 Budget...................................... 134
Role in the Market and Consequences of a Shutdown............ 127
Government:
National Mortgage Association (Ginnie Mae) Hiring............ 155
Shutdown..................................................... 141
Housing Market................................................... 127
Lender Oversight and Enforcement................................. 147
Loan Limits...................................................... 143
Mutual Mortgage Insurance (MMI) Fund............................. 145
Operation Watchdog Recommendations............................... 153
Oversight of FHA................................................. 127
Overview of HUD's Fiscal Year 2012 Budget........................ 132
Responding to the Evolving Housing Crisis........................ 133
Review of FHA's Financial Condition.............................. 137
Risk Retention:
And Qualified Residential Mortgage (QRM)..................... 128
Rule......................................................... 150
Supporting Community Bank Mortgages.............................. 155
The:
Future of Housing Finance.................................... 139
Housing Market and Government-Sponsored Enterprise (GSE)
Reform..................................................... 128
Office of the Secretary
Additional Committee Questions................................... 45
Affordable Housing for Low-Income Seniors and Individuals With
Disabili-
ties........................................................... 56
Budget:
Numbers...................................................... 33
Request for HUD's Core Programs and Promising Initiatives.... 5
Census Data and Formula Funds.................................... 63
Community Development Block Grant (CDBG) and HOME Programs....... 55
Congressional Views and Actions.................................. 58
Disaster Recovery:
Activities at HUD............................................ 57
Funding...................................................... 61
Report....................................................... 35
Duplication in Federal Programs.................................. 36
Emergency Capital Funding for Public Housing Authorities......... 57
Federal Housing Administration (FHA) Reserves.................... 41
FHA's Future Role................................................ 39
Fiscal Year 2011 and the House's Year-Long Continuing Resolution. 4
Freddie Mac and Fannie Mae Reform................................ 40
Ginnie Mae....................................................... 40
Government Accountability Office (GAO) Report on Duplicative
Government Programs............................................ 58
Healthy Homes Program............................................ 55
Homelessness.....................................................13, 30
Housing First Model.............................................. 38
HUD-Veterans Affairs Supportive Housing (VASH)................... 13
Information Technology (IT) Funding and Management............... 47
Major Program Evaluations/Audits/Issues.......................... 58
Meeting Our Responsibilities..................................... 17
Mortgage Programs................................................ 60
Moving-to-Work (MTW)............................................. 63
National Resource Bank (NRB) and the Transformation Initiative...49, 52
Native American Needs Assessment................................. 53
OneCPD and the Transformation Initiative......................... 50
Oversight of HUD Programs........................................ 6
Public Housing:
Authorities (PHAs).......................................13, 32, 43
Authority:
Oversight................................................ 44
Reserves................................................. 45
Preservation Program 14
Replacing the Activities of the Public Housing Drug Elimination
Program........................................................ 56
Responding to the Crisis......................................... 15
Rural Housing.................................................... 34
Stability Program............................................ 13
Section:
8 Contracts.................................................. 42
108 Loan Guarantee Program................................... 37
811 Funding and Reform....................................... 53
Sustainable Communities Initiative............................... 14
The:
Homeless Emergency Assistance and Rapid Transition to Housing
(HEARTH) Act............................................... 31
Housing Market and Government-Sponsored Enterprise Reform.... 5
Transformation Initiative (TI)................................... 13
Transforming Rental Assistance Program Funding................... 48
Waste/Fraud/Abuse Oversight...................................... 64
Winning the Future............................................... 16
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
A Strategy for Funding NextGen................................... 160
Additional Committee Questions................................... 202
Addressing Ongoing Safety Concerns............................... 177
Air:
France Flight 447--Loss of Separation........................ 201
Traffic Control Modernization................................ 207
Airport:
Improvement Program (AIP).................................... 191
Slot Allocations at Reagan National Airport.................. 208
Controller:
Fatigue--Operational Errors.................................. 184
Training--Placement.......................................... 185
Economic Competitiveness......................................... 171
En Route Automation Modernization (ERAM)......................... 193
Environmental Sustainability..................................... 172
FAA Airport Privatization Pilot Program.......................... 202
Federal Contract Towers.......................................... 206
Fiscal Year 2012 Budget.......................................... 165
Funding Constraints and Controller Attrition..................... 189
JFK Air France Incident.......................................... 190
Life-Cycle Program Cost Management............................... 198
Managing NextGen's Advancement While Controlling Costs........... 179
Maximizing Airport Infrastructure Funding To Accommodate Aviation
Growth......................................................... 182
NextGen Funding Priorities....................................... 199
Operational Errors............................................... 187
Organizational Excellence........................................ 173
Passenger Baggage Fees........................................... 190
Performance and Retention Bonuses................................ 202
Professionalism of Air Traffic Controllers....................... 159
Safety........................................................... 170
State of Good Repair............................................. 171
System-Wide Information Management (SWIM)........................ 198
Federal Railroad Administration
Amtrak........................................................... 222
Creating Jobs Today.............................................. 220
Economic Benefits................................................ 221
Energy and Environment Benefits.................................. 222
Investing in Tomorrow............................................ 219
Investment Profile............................................... 220
Mobility Choices................................................. 219
Moving Forward................................................... 223
Safety........................................................... 223
Where We're Headed--Winning the Future........................... 223
Office of the Secretary
79
Additional Committee Questions................................... 112
Build America Bonds.............................................. 109
Building for the Future.......................................... 92
California High-Speed Rail....................................... 117
Commercial Vehicle Information System Network (CVISN)............ 113
Cross-Border Trucking............................................ 100
Pilot Program................................................ 120
Ensuring Safety.................................................. 93
Fiscal Year:
2011 and the House's Year-Long Continuing Resolution......... 83
2012 Budget Request.......................................... 101
Fuel Prices...................................................... 112
Goods Movement................................................... 118
H.R. 1........................................................... 94
High-Speed Rail..................................84, 103, 108, 110, 123
Funding...................................................... 105
Hours of Service Rule............................................ 96
Maintenance of Highway Infrastructure............................ 119
Metra New Starts................................................. 121
Metrics.......................................................... 121
Motor Carrier Weight Restrictions................................ 97
National Infrastructure Bank (NIB)............................... 118
Next Generation Air Transportation System (NextGen).............. 109
Obligation of Funds for California Projects...................... 114
Other:
Highlights................................................... 94
Issues....................................................... 85
Positive Train Control (PTC) Implementation...................... 117
Reauthorization Proposal......................................... 106
Reforming Government and Exercising Responsibility............... 93
Regional Transportation Authority (RTA).......................... 121
Safety Grants.................................................... 100
Spurring Innovation.............................................. 92
Status of the Highway Trust Fund................................. 95
The Department's Budget Proposal and SAFETEA-LU.................. 84
Title XI Loans................................................... 111
Toyota Investigation............................................. 99
Transportation of Hazardous Materials............................ 113
Unsecured Loads.................................................. 114
``Up-Front'' $50 Billion......................................... 107
NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK)
Additional Committee Questions................................... 239
Air Quality--Union Station and Diesel Emissions................240, 242
Amtrak:
Compliance With the Americans With Disabilities Act.......... 238
Operating Losses............................................. 235
Response to al Qaeda Terror Threat........................... 229
Collaboration With Other Security Forces......................... 228
Funding for:
Amtrak's Capital Investments................................. 237
Rail Security................................................ 231
High-Speed Rail:
Grant Selection Criteria..................................... 233
Investments in the Northeast Corridor........................ 232
Office of Inspector General (OIG)................................ 228
Overtime Payments to Amtrak Employees............................ 234
Partnering With State and Local Law Enforcement.................. 230
Positive Train Control........................................... 238
Rail Security and Terrorist Threats.............................. 227
Rolling Stock..................................................239, 242
State Support for High-Speed Rail Investments.................... 233
The Federal Role in the Nation's Rail System..................... 237
Timeline......................................................... 241
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