[Senate Hearing 112-854]
[From the U.S. Government Publishing Office]
S. Hrg. 112-854
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2013
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED TWELTH CONGRESS
SECOND SESSION
ON
H.R. 5972/S. 2322
AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF TRANSPORTATION AND
HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2013, AND FOR OTHER PURPOSES
__________
Department of Housing and Urban Development
Department of Transportation
Nondepartmental Witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.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 1, 2012
Page
Department of Housing and Urban Development: Office of the
Secretary...................................................... 1
Thursday, March 8, 2012
Department of Housing and Urban Development: Federal Housing
Administration................................................. 53
Thursday, March 15, 2012
Department of Transportation: Office of the Secretary............ 85
Nondepartmental Witnesses........................................ 127
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2013
----------
THURSDAY, MARCH 1, 2012
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 and Collins.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
STATEMENT OF HON. SHAUN DONOVAN, SECRETARY
opening statement of senator patty murray
Senator Murray. Mr. Secretary, welcome back to our
subcommittee, as we are here today to talk about fiscal year
2013 budget requests for the Department of Housing and Urban
Development (HUD).
As we begin our work on next year's budget, there are
encouraging signs that our economy is moving now in the right
direction. Although we aren't moving quickly enough for
families that continue to struggle, and we certainly have a
long way to go, the private sector has now been adding jobs for
almost 2 years, businesses are growing, and confidence is up.
We seem to have stepped back, finally, from the precipice,
which, of course, is very good news for the housing market,
which depends on a strong and stable economy to recover and
thrive.
But despite the positive signs, we still face significant
challenges. Over 22 percent of homeowners are underwater.
The recent settlement that was announced among the five
largest banks, the States, and the Federal Government is an
important step. It holds banks accountable and provides relief
to homeowners. But the settlement also paves the way for banks
to proceed with foreclosures that have been stalled in the
pipeline.
While it is important to reduce the excess inventory of
distressed housing, increased sales of these properties at
reduced prices may further depress home values.
Climbing back from the housing crash will not be easy, and
I am interested in hearing your views on how we can increase
the stability of the market.
The depressed housing market has also taken its toll on the
Federal Housing Administration (FHA). This is made clear in the
President's budget. The budget indicates that, for the first
time, FHA may require Federal funding to cover its losses. I
have long been concerned about the solvency of FHA's Mutual
Mortgage Insurance (MMI) Fund, and I applaud the efforts of the
Administration to strengthen FHA's risk controls.
But many of the financial problems facing FHA are related
to older books of business insured at the height of the housing
boom. So while these changes to strengthen the program are
important and long overdue, it will also be important to
recover or prevent expected losses from older loans.
I am pleased that the recent mortgage settlement includes
money for FHA. And other settlements, most notably Bank of
America, will also provide money to cover losses related to
improper mortgage originations.
These settlements should help avoid the need for taxpayer
funding, and I hope you will continue to look for opportunities
to recoup losses from fraudulent or poorly underwritten loans.
Additional changes to FHA premiums contained in the budget,
as well as those announced on Monday, represent your continued
efforts to improve the solvency of the MMI Fund and protect the
taxpayer from having to cover its losses.
Beyond FHA, today we will also examine other aspects of the
Administration's request, which is $44.8 billion in gross
resources to support HUD's programs. While this represents an
increase of over 3 percent, it is largely a current services
budget as a result of the numerous offsets included in the
fiscal year 2012 bill.
As the Secretary's testimony notes, 83 percent of HUD's
budget is dedicated to providing housing to the Nation's most
vulnerable, and these programs require annual adjustments. As
we continue to live under the caps of the Budget Control Act,
this presents us with very difficult choices.
Last year, Senator Collins and I worked very hard to
protect HUD's core rental assistance programs. But doing so
meant difficult cuts to programs like the Community Development
Block Grant (CDBG), HOME, and Housing for the Elderly. The cuts
to CDBG that began in fiscal year 2011 are being widely felt
today. Cities and towns are cutting services to vulnerable
citizens, laying off workers, or delaying critical investments
in their communities.
This year's budget faces many of the same challenges we
struggled with last year. How do you craft a budget that
protects low-income residents who rely on HUD assistance to
keep a roof over their heads, makes the economic development in
affordable investments that strengthen our communities, and
gives HUD the tools it needs to effectively manage its
programs?
While the Administration's fiscal year 2013 budget tries to
address these goals by balancing priorities, I am concerned
about some of the proposals. The proposed budget for Project-
Based Rental Assistance will manage within the requested level
by intentionally not funding contracts for a full 12 months. I
have seen this policy before. And while this may be manageable
in the short run, I'm concerned we won't have the resources
when the bill eventually becomes due.
In the Tenant-Based Rental Assistance account, I'm also
concerned that the funding level requested to renew vouchers is
effectively flat, despite anticipated inflation and the need to
renew vouchers for the first time. The budget also relies on
savings from a number of policy changes which are not without
controversy.
So as we make the difficult choices in this budget, I want
to be sure we are making decisions with an understanding of
their consequences and an eye toward the future.
Despite my concerns, there are some bright spots in this
budget. The request, again, seeks $75 million for new HUD-
Veterans Affairs Supportive Housing (HUD-VASH) vouchers, which
have really helped to reduce homelessness among our veterans by
12 percent between 2010 and 2011.
The Administration has worked hard to develop a plan to
finally end homelessness, and I'm very glad the request for
homeless programs reflects a continued commitment to that plan.
At a time when resources are scarce, oversight of HUD's
programs becomes even more important. I look forward to
continuing to work with the Department and my colleagues to
find additional ways to improve HUD's programs.
I also want to acknowledge today HUD's new inspector
general, Mr. Montoya, who is with us today. I welcome his
vision for HUD's Office of Inspector General, and look forward
to working with him to protect taxpayer dollars and improve the
efficiency of HUD's programs.
The fiscal year 2013 budget, once again, requires difficult
choices to be made. As I work with my colleagues, Senator
Collins and those on this subcommittee, to put together this
bill, I will be mindful of the millions of Americans who rely
on HUD's programs for a place to sleep each night.
prepared statement
Mr. Secretary, I look forward to our discussion today and
working with you as we develop this 2013 budget. And I
appreciate everyone accommodating us in moving this hearing up.
[The statement follows:]
Prepared Statement of Senator Patty Murray
Mr. Secretary, I want to welcome you back to the subcommittee today
as we discuss the fiscal year 2013 budget request for the Department of
Housing and Urban Development (HUD).
As we begin our work on next year's budget, there are encouraging
signs that our economy is moving in the right direction. Although we
aren't moving quickly enough for families that continue to struggle--
and we certainly have a long way to go.
The private sector has been adding jobs for almost 2 years.
Businesses are growing, confidence is up, and we seem to have stepped
back from the precipice. Which, of course, is very good news for the
housing market--which depends on a strong and stable economy to recover
and thrive.
housing market challenges
But despite the positive signs, we still face significant
challenges. Over 22 percent of homeowners are underwater. The recent
settlement announced among the five largest banks, the States, and the
Federal Government is an important step. It holds banks accountable and
provides relief to homeowners.
But the settlement also paves the way for banks to proceed with
foreclosures that have been stalled in the pipeline. While it is
important to reduce the excess inventory of distressed housing,
increased sales of these properties at reduced prices may further
depress home values. Climbing back from the housing crash will not be
easy, and I am interested in hearing your views on how we increase the
stability of the market.
fha solvency
The depressed housing market has also taken its toll on the Federal
Housing Administration (FHA); this is made clear in the President's
budget. The budget indicates that for the first time, FHA may require
Federal funding to cover its losses.
I have long been concerned about the solvency of FHA's Mutual
Mortgage Insurance Fund. I applaud the efforts of this administration
to strengthen FHA's risk controls.
But many of the financial problems facing FHA are related to older
books of business insured at the height of the housing boom.
So while these changes to strengthen the program are important--and
long overdue--it will also be important to recover or prevent expected
losses from older loans.
I am pleased that the recent mortgage settlement includes money for
FHA. And other settlements, most notably with Bank of America will also
provide money to cover losses related to improper mortgage
originations.
These settlements should help avoid the need for taxpayer funding.
And I hope you will continue to look for opportunities to recoup losses
from fraudulent or poorly underwritten loans.
Additional changes to FHA premiums contained in the budget, as well
as those announced on Monday, represent your continued efforts to
improve the solvency of the MMI Fund and protect the taxpayer from
having to cover its losses.
hud's fiscal year 2013 budget
Beyond FHA, today we will also examine other aspects of the
administration's request, which is $44.8 billion in gross resources to
support HUD's programs.
While this represents an increase of over 3 percent, it is largely
a current services budget as a result of the numerous offsets included
in the fiscal year 2012 bill. As the Secretary's testimony notes, 83
percent of HUD's budget is dedicated to providing housing to the
Nation's most vulnerable.
These programs require annual adjustments. As we continue to live
under the caps of the Budget Control Act, this presents us with very
difficult choices. Last year, Senator Collins and I worked very hard to
protect HUD's core rental assistance programs. But doing so meant
difficult cuts to programs like Community Development Block Grant
(CDBG), HOME, and Housing for the Elderly.
The cuts to CDBG that began in fiscal year 2011 are being widely
felt today. Cities and towns are cutting services to vulnerable
citizens, laying off workers, or delaying critical investments in their
communities.
This year's budget faces many of the same challenges that we
struggled with last year. How do you craft a budget that:
--Protects low-income residents who rely on HUD assistance to keep a
roof over their heads;
--Makes the economic development and affordable housing investments
that strengthen our communities; and
--Gives HUD the tools it needs to effectively manage its programs?
budget proposal concerns
While the administration's fiscal year 2013 budget tries to address
these goals by balancing priorities, I am concerned about some of its
proposals.
The proposed budget for Project-Based Rental Assistance will manage
within the requested level by intentionally not funding contracts for a
full 12 months. I have seen this policy before. And while this may be
manageable in the short-run, I am concerned that we won't have the
resources when the bill eventually comes due.
In the Tenant-Based Rental Assistance account, I am also concerned
that the funding level requested to renew vouchers is effectively
flat--despite anticipated inflation and the need to renew vouchers for
the first time.
The budget also relies on savings from a number of policy changes,
which are not without controversy. So as we make the difficult choices
in the budget, I want to be sure that we are making decisions with an
understanding of their consequences and an eye toward the future.
budget highlights
Despite my concerns, there are some bright spots in the budget. The
request again seeks $75 million for new HUD-VASH vouchers, which have
helped to reduce homelessness among veterans by 12 percent between 2010
and 2011.
The administration has worked hard to develop a plan to finally end
homelessness. And I am very glad that the request for homeless programs
reflects a continued commitment to that plan.
hud oversight
At a time when resources are scarce, oversight of HUD's programs
becomes even more important. I look forward to continuing to work with
the Department and my colleagues to find additional ways to improve
HUD's programs.
I would like to acknowledge HUD's new inspector general, Mr.
Montoya, who is with us today. I welcome his vision for HUD's Office of
Inspector General and I look forward to working with him to protect
taxpayer dollars and improve the efficacy of HUD's programs.
closing
The fiscal year 2013 budget once again requires difficult choices
to be made.
As I work together with Senator Collins and my colleagues on the
subcommittee to put together this bill, I will be mindful of the
millions of Americans who rely on HUD's programs for a place to sleep
each night.
Mr. Secretary, I look forward to our discussion today and working
with you as we develop the fiscal year 2013 budget.
With that I will turn it over to my partner in these efforts,
Senator Collins.
Senator Murray. And Senator Collins, thank you for
accommodating us as well.
As all of you know, we have a vote in about an hour and 20
minutes, and I know Senator Collins and I both need to be on
the floor then.
So with that, let me turn it over to my colleague, Senator
Collins. Thank you for being here today.
STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you very much, Chairman Murray.
First, let me say how much I enjoyed working with you last
year as we crafted this important appropriations bill. We did
so in a truly bipartisan fashion. We share a lot of the same
priorities.
And it was also a great pleasure to work with Secretary
Donovan, and I appreciate his being here today as we discuss
how to meet the housing and economic development needs of
families and communities across our Nation.
As we begin to construct the fiscal year 2013 budget, we
are mindful that we are once again operating under very
difficult fiscal constraints. That is even more challenging
when one considers that more than 80 cents out of every $1 of
the budget request is required just to continue serving those
who currently rely on HUD for just housing support.
Addressing the ongoing challenge of homelessness remains a
top priority of mine. Chairman Murray and I continue to share
this commitment, particularly for our Nation's veterans. And we
worked very hard last year to preserve funding for the HUD-VASH
program.
One out of every six men and women in homeless shelters are
veterans, and unfortunately, veterans are 50 percent more
likely to fall into homelessness compared to other Americans.
So I am pleased that the budget request continues funding for
the HUD-VASH program at $75 million. This level of funding
should help us serve an additional 10,000 veterans who would
otherwise likely be homeless.
Veterans' homelessness fell by nearly 12 percent in the
year 2010, demonstrating that these programs work. I've also
always supported funding for the homeless assistance grants
programs to prevent and end homelessness. The budget proposes
$2.2 billion for this program. That's an increase of
approximately $330 million over the previous fiscal year.
It is, however, important that we focus on what works. And
one of the models that I've seen work in the State of Maine is
the Housing First model for aiding those who are homeless.
We need better data to ensure the effectiveness of all
housing programs. This particular model is proving its
effectiveness in my home State of Maine through the Florence
House, a comprehensive center for homeless women in Portland.
In addition to programs that effectively serve the
homeless, HUD, of course, provides support for affordable
rental housing. The budget proposes more than $19 billion for
the Tenant-Based Rental Assistance program, of which $1.6
billion is available for administrative costs. That's an
increase in direct response to the fact that some public
housing agencies (PHAs) are having a difficult time
administering their voucher programs and have actually turned
back vouchers as a result, and that is very troubling.
We don't want to overpay them for their administrative
expenses, but they need to have sufficient expenses to
efficiently and effectively run the program.
Another important issue that I'd like to address is HUD's
oversight of the Maine State Housing Authority Section 8
Voucher Program. A series of recent newspaper stories revealed
troubling cases of code violations and other poor conditions in
Oxford County, Maine. In fact, the local fire chief was so
upset that he wrote a letter to my office, asking for my help.
HUD has an obligation to oversee the use of Federal funds
of public housing agencies nationwide and to ensure that these
funds are not supporting substandard properties.
I just want to share, briefly, with my colleagues and the
people from HUD here, and the inspector general, one of the
particular units, one of the apartments that was cited in this
newspaper series. HUD was actually paying $600 a month in
Federal subsidies for an apartment that had septic backups in
the kitchen sink, a damaged fire escape, and bat and rodent
infestation. Totally unacceptable.
It's bad enough that taxpayers were charged for substandard
units, but it's appalling that residents were forced to live in
such horrible conditions. The welfare and safety of tenants
must be safeguarded, and federally subsidized properties must
represent fair value to both the tenant and the taxpayer alike.
I have requested the inspector general to audit HUD's
oversight of the unit inspections and the Maine State Housing
Authority's administration of the program. It is clearly
critical that federally subsidized properties comply with all
health, safety, and quality standards.
And I want to commend the Secretary for taking my concerns
very seriously and for asking the Maine State Housing Authority
for a corrective action plan.
And I'm also very pleased that the inspector general has
stepped in and is investigating this problem.
I, too, want to echo Senator Murray's concerns about the
Federal Housing Administration, which plays such a critical
role in affordable home ownership. The decline in the housing
market over the past several years has had a tremendous impact
on families and communities throughout the Nation as well as
our economy as a whole.
While I understand that HUD has taken a number of steps to
increase capital reserves, it remains troubling that the
capital reserve ratio remains below the congressionally
mandated level of 2 percent. I'm optimistic that we'll hear
some good news as a result of the settlements, but that still
is of concern.
I also want to discuss in the question period with the
Secretary what can be done to ensure the greater use of wood
pellet heating systems in Maine that have not qualified for
assistance under the FHA program. And those are increasingly
popular. They are an alternative to fossil fuels. Maine is very
heavily dependent on home heating oil, the price of which has
spiked.
Finally, the level funding for the Community Development
Block Grant program, proposed at about $3 billion, is
disappointing. This popular program supports the economic
growth strategies of communities nationwide, and enables key
investments in their long-term economic growth. It is programs
like CDBG that help to build a foundation for future
prosperity.
These are just some of the issues before our subcommittee.
PREPARED STATEMENT
And again, Madam Chairman, I look forward to working very
closely with you again this year.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
Thank you, Chairman Murray. I am delighted to join you once again
as we start the fiscal year 2013 appropriations process and consider
the Department of Housing and Urban Development's (HUD's) budget
request.
Mr. Secretary, it is nice to see you again. I look forward to
working with you to meet the housing and economic development needs of
families and communities throughout the Nation.
As we begin to construct the fiscal year 2013 budget, we will
continue to face difficult decisions given the fiscal constraints we
remain under. This is even more challenging when more than 80 cents out
of every $1 of the fiscal year 2013 request is required just to
continue serving those who currently rely on HUD for housing support.
Addressing the ongoing challenge of homelessness remains a top
priority of mine. Chairman Murray and I continue to share this
commitment, particularly for our Nation's veterans. One out of every
six men and women in homeless shelters are veterans, and unfortunately,
veterans are 50 percent more likely to fall into homelessness compared
to other Americans.
I am pleased the budget continues funding for HUD's Veterans
Affairs Supportive Housing (HUD-VASH) Program at $75 million. This
level of funding will serve an additional 10,000 veterans, who would
otherwise be homeless were it not for HUD-VASH. Veterans' homelessness
fell by nearly 12 percent in 2010, demonstrating that programs like
HUD-VASH work.
I have always supported funding for the Homeless Assistance Grants
program to prevent and end homelessness. The budget proposes $2.2
billion for this program, $330 million more than fiscal year 2012.
We need to focus, however, on what works such as the Housing First
model for aiding those who are homeless. We need better data to ensure
the effectiveness of all housing programs. This model is proving its
effectiveness in my home State of Maine through Florence House, a
comprehensive center for homeless women in Portland.
In addition to programs that effectively serve the homeless, HUD
also provides support for affordable rental housing. The budget
proposes more than $19 billion for the Tenant-Based Rental Assistance
program, of which $1.6 billion is available for administrative costs.
This represents a $225 million increase in administrative funding from
fiscal year 2012. It is my understanding that some public housing
agencies are having a difficult time administering their voucher
programs, including HUD-VASH, this fiscal year.
Another important issue I would like to address is HUD's oversight
of the Maine State Housing Authority's Section 8 voucher program. A
series of recent newspaper articles revealed troubling cases of code
violations and other poor conditions in Oxford County, Maine. HUD has
an obligation to oversee the use of Federal funds at public housing
agencies nationwide and to ensure these funds do not support
substandard properties.
One of the units cited, for which HUD was paying $600 in Federal
subsidies, had septic backups in the kitchen sink, a damaged fire
escape, and bat and rodent infestation. It is bad enough that taxpayers
were charged for substandard units, but it ,is appalling that residents
were forced to live in such horrible conditions. The welfare and safety
of tenants must be safeguarded, and federally subsidized properties
must represent fair value to the tenant and the taxpayer alike.
I requested that the Inspector General audit HUD's oversight of
unit inspections and the MSHA's administration of its program. It is
critical that federally subsidized properties comply with all health,
safety, and quality standards.
In addition to supporting affordable rental housing, HUD plays a
critical role in affordable home ownership through the Federal Housing
Administration. The decline in the housing market over the past several
years has had a tremendous impact on families and communities
throughout the Nation, from the huge number of foreclosures to the
substantial decline in home values.
While I understand HUD has taken a number of steps to increase
capital reserves, it is troubling that the capital reserve ratio remain
s below the congressionally mandated level of 2 percent. In questions I
also want to discuss how HUD regulations can encourage the great use of
wood pellet heat in FHA-assisted homes.
Finally, the level funding for the Community Development Block
Grant (CDBG) program, proposed at $2.95 billion, is disappointing. This
popular program supports the economic growth strategies of communities
nationwide and enables key investments in their long-term economic
growth. It is programs like CDBG that help to build a foundation for
future prosperity.
These are just some of the issues we are confronted with on our
subcommittee this year. Chairman Murray, I look forward to working with
you as we consider HUD's fiscal year 2013 budget request.
Senator Murray. Thank you very much, Senator Collins.
With that, we'll turn it over to you, Secretary Donovan,
for your opening statement.
SUMMARY STATEMENT OF HON. SHAUN DONOVAN
Secretary Donovan. Thank you, Madam Chair, ranking member,
for the opportunity to be here today. Today, I would like to
discuss how HUD's fiscal year 2013 budget proposal is essential
to creating housing and communities built to last and will
directly support 700,000 jobs.
Madam Chair, in developing this proposed budget we followed
four principles. The first is to continue our support for the
housing market, while bringing private capital back. The
critical support FHA provided over the last 3 years has helped
2.8 million families buy a home and more than 1.7 million
homeowners refinance into stable, affordable products with
average monthly savings of more than $125.
At the same time, we have taken the most significant steps
in FHA history to reduce risks to the taxpayer and reform FHA's
mortgage insurance premium structure. With the premium
increases of 10 basis points recently enacted by Congress,
coupled with additional premium increases on jumbo loans
reflected in the budget, FHA projects to add an additional $8.1
billion in receipts to the capital reserve account in 2013.
And just this week, we announced a series of additional
premium changes that will increase receipts to FHA above those
already in the budget by over $1 billion in fiscal years 2012
and 2013.
We have also taken significant steps to increase
accountability for FHA lenders, and continue to seek expanded
authority via legislation that will further enable us to
protect the fund, as will the recent settlement with America's
five largest servicers, through which FHA will receive
approximately $900 million to compensate for losses associated
with loans originated or serviced in violation of FHA
requirements.
With FHA's current market share declining since 2009, these
reforms will further help private capital return, while
ensuring that FHA remains a vital source of financing for
underserved borrowers and communities.
Just as importantly, while HUD's fiscal year 2013 request
is $44.8 billion in gross budget authority, because of FHA and
Ginnie Mae receipts, the cost to the taxpayer for this budget
is only $35.35 billion, fully 7.3 percent below the fiscal year
2012 enacted level, more than meeting our deficit reduction
targets while still allowing us to improve oversight of our
core programs.
The second principle we used to develop our budget was to
protect current residents and improve the programs that serve
them. The 5.4 million families who live in HUD-assisted housing
earn $10,200 per year, as a median, and more than half are
elderly or disabled. That's why 83 percent of our budget, as
you both recognized, keeps these residents in their homes and
provides basic upkeep to public housing, while also continuing
to serve our most vulnerable populations through our homeless
programs.
As you know, inflation and stagnant incomes put real
pressure on the cost of these programs each year. This year, we
redoubled our efforts to minimize and even reverse these
increases, not just for this year, but in the years to come.
For instance, we are working with your colleagues to enact
Section 8 reform legislation that would save $1 billion over
the next 5 years, while also supporting the ability of public
housing authorities in small towns and rural areas to better
serve the working poor.
The budget also achieves savings in the Project-Based
Rental Assistance program by improving oversight of market rent
studies, capping certain annual subsidy increases, and
offsetting excess reserves.
Even still, protecting current families required us to make
choices we would not have made in a different fiscal
environment. Requesting $8.7 billion for the Project-Based
Rental Assistance program allows us to serve the same number of
families, but it required us to provide less than 12 months of
funding for the majority of contracts.
In addition, even though the budget maintains hardship
exemptions, the budget raises minimum rents throughout our core
rental assistance programs to a uniform $75 per month.
These very difficult decisions are the kinds of steps we
were required to take in this difficult budget environment.
That's why our third principle, continuing investments that
leverage private dollars and create jobs, is so important.
Through our Choice Neighborhoods program, we are helping
communities engage a broad range of public and private partners
to transform our poorest neighborhoods and ensure our children
are prepared for the 21st century economy.
As the President said, if we are going to compete with
China and India, we can't leave anyone on the sidelines.
Likewise, our Sustainable Communities grants challenge
communities to creatively use existing resources that help them
insource and bring jobs back to our shores.
In Memphis, which is using HUD's Community Challenge grant
to more effectively use Federal and State resources in
neighborhoods surrounding its international airport, FedEx has
already created over 3,000 jobs, and companies like Electrolux
and Nucor Steel are poised to create another 1,500.
At a time when the fiscal environment has required us to
make tough choices about CDBG and HOME--dollar-for-dollar, the
most effective job creators in our budget--these grants are
essential because they leverage the limited resources of core
programs even more smartly and efficiently.
Indeed, reducing regulatory burdens and increasing
efficiency is the fourth and final principle we used to
formulate this budget. For example, the budget provides
flexibilities to public housing agencies to better manage in
this fiscal environment. And to hold our partners accountable
for the funding they receive, it also continues our
Transformation Initiative (TI).
With your help, we are both continuing the next generation
management system that will improve monitoring and oversight of
our largest rental assistance programs, and launching a
crosscutting technical assistance initiative targeted to PHAs
so they have the capacity to manage their budgets.
TI research also allows us to propose increased investments
in programs we know work, like permanent support of housing and
rapid re-housing that end homelessness and save money. That's
why, even in this difficult environment, as both of you have
championed, we proposed additional funding for homeless
assistance grants and the HUD-VASH program for homeless
veterans, ensuring we can end chronic and veteran homelessness
by 2015.
All told, despite tough choices, this proposed budget
allows us to serve 27,000 more vulnerable families. It
recognizes that the recovery of our housing market is essential
to our broader economic recovery, and it expresses our belief
that every American should get a fair shot, do their fair
share, and play by the same rules.
PREPARED STATEMENT
Thank you for having me here today.
[The statement follows:]
Prepared Statement of Hon. Shaun Donovan
Chairman Murray, Ranking Member Collins, and members of the
subcommittee, thank you for the opportunity to testify today regarding
the fiscal year 2013 budget for the Department of Housing and Urban
Development (HUD), Housing and Communities Built to Last.
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 3.2 million new private sector jobs have been
created in the last 22 months, and national unemployment has fallen to
a near 3-year low. But we know there's still more work to be done to
ensure that America can create an economy built to last--with good jobs
that pay well and security for the middle class.
HUD's fiscal year 2013 budget tackles these challenges head on: By
helping responsible families at risk of losing their homes; by
providing quality affordable rental housing to some of our Nation's
most vulnerable families; 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 our country
needs. Indeed, this budget will support hundreds of thousands of jobs
both directly and indirectly, serving as a powerful engine for job
creation in the places that need them most.
Our budget provides $44.8 billion for HUD programs, an increase of
$1.4 billion, or 3.2 percent, above fiscal year 2012. This program
funding level (i.e., gross budget authority) is offset by $9.4 billion
in projected Federal Housing Administration (FHA) and Ginnie Mae
receipts, leaving net budget authority of $35.4 billion, or 7.3 percent
below the fiscal year 2012 enacted level of $38.2 billion. The budget
reflects the reality that we cannot create an economy built to last
without taking responsibility for our deficit. The caps set by the
Budget Control Act of 2011 promise over $907 billion in total
discretionary cuts over the next 10 years, and every department shares
a responsibility to make tough cuts so there's room for investments to
speed economic growth. To maintain our commitment to fiscal discipline,
this budget invests in improving the infrastructure and technological
systems critical to reforming the Government to be leaner, more
transparent, and ready for the 21st century. Moreover, by providing a
menu of key reforms--including to some of our largest rental assistance
programs--this budget simplifies and aligns policies to be more
efficient and effective, while saving the taxpayer hundreds of millions
of dollars. To be clear, not all of the reforms we're proposing are
easy. Indeed, this budget makes tough choices in order to contribute to
deficit reduction in a substantial way.
responding to the crisis
Much has happened in the 3 years since HUD submitted its fiscal
year 2010 budget. Only weeks before the Bush administration and
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, house prices had declined for 30 straight
months, and consumer confidence had fallen to a 40-year low.
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 take aggressive steps. The Federal
Reserve and 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 support for
Fannie Mae and Freddie Mac, while HUD's Federal Housing Administration
stepped in to play its critical countercyclical role in helping to
stabilize the housing market. The administration proposed, and Congress
enacted, a homebuyer 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.
Since April 2009, more than 5.6 million borrowers have received
mortgage modifications with affordable monthly payments, nearly 14
million families have been able to refinance their homes, and
foreclosures are down by nearly 50 percent.
creating an economy built to last
Now, having prevented our economy from falling into a second Great
Depression, the administration is focused on ensuring that we create an
economy built to last, which makes strategic investments in our
communities but also takes responsibility for our deficit. For HUD,
that meant using four 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;
--Continuing progress on signature initiatives to provide communities
with the tools they need to speed economic growth; and
--Reducing regulatory burdens and increasing efficiency--including
streamlining, simplifying, and reforming current programs.
As such, the Department's budget for fiscal year 2013 follows the
roadmap the President has laid out for jumpstarting our economy through
educating, innovating, and building--by targeting our investments to
the families and geographies that need them the most, and putting
American back to work. Specifically, this budget helps:
--Give Hard-Working, Responsible Americans a Fair Shot.--Not only is
there more work to do to ensure that the economic security of
middle class Americans does not continue to erode, we have a
responsibility to directly address the challenges facing the
most vulnerable Americans. This budget does so by serving over
5.4 million families--the majority of whom are extremely low
income--in our rental assistance programs; and by supporting
the Choice Neighborhoods initiative ($150 million), which
provides communities with the innovative tools they need to
revitalize neighborhoods of concentrated poverty--efforts that
helped communities leverage over $1.6 billion of private
funding last year alone.
--Ensure Every American Plays by the Same Rules.--Put simply, we
cannot settle for a country where a shrinking number of people
do really well, while more Americans barely get by. There are
still millions of Americans who have worked hard, acted
responsibly, and made their mortgage payments on time--who,
because their homes are worth less than they owe on their
mortgage, can't take advantage of today's historically low
interest rates and are facing real economic insecurity. In
addition to steps taken by the administration to combat
predatory lending practices (discussed in depth below), this
budget provides critical funding for the Housing Counseling
program ($55 million), which will directly help over 185,000 of
low- to moderate-income families in improving access to quality
affordable housing, expanding homeownership opportunities, and
preserving homeownership through foreclosure mitigation; as
well as providing training to over 4,800 counselors nationwide.
This budget also recognizes that we can no longer tolerate a
federally supported rental housing system that is ``separate and
unequal''--one which expects public housing authorities (PHAs) to house
over 3 million families, subjecting them to overly burdensome
regulation while denying them access to private capital available to
virtually every other form of rental housing. To bring our rental
housing system into the 21st century and begin addressing the $26
billion in public housing capital needs, this budget includes proposals
that would increase PHA flexibility to fund critical supportive
services for assisted families while also moving them toward mainstream
real estate financing and management practices through the
consolidation of outmoded funding streams. At the same time, by
implementing the second year of our Rental Assistance Demonstration,
the budget will use existing resources to ensure that up to 60,000
units funded through our public housing and the so-called ``orphan
programs'' can leverage debt to access private capital and preserve
affordable housing.
Create New Jobs in America To Discourage Outsourcing.--In addition
to the hundreds of thousands of jobs that this budget creates both
directly and indirectly, it makes an essential contribution to the
administration's broader effort to discourage outsourcing and encourage
insourcing. Specifically, 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, and
transportation networks that move goods and people efficiently--which
is why this budget restores funding for Sustainable Housing and
Communities ($100 million), which embodies the President's commitment
to being a new kind of Federal partner to regions, States, and
localities as they tackle planning and economic development challenges
for the 21st century.
Of course, smart planning requires sustained follow-through. That
is why HUD is committed to ensuring that its core community and housing
development work contributes to more and better transportation choices;
promotes equitable, affordable housing; and aligns Federal policies and
funding to remove barriers to local collaboration. Accordingly, we will
continue to make critical investments programs such as the Community
Development Block Grant (CDBG) ($2.95 billion in formula grants) and
Native American Housing Block Grant ($650 million). In particular, CDBG
is an important catalyst for economic growth--helping leaders around
the country bring retail businesses to their communities, forge
innovative partnerships and rebuild their economies.
Reform Government So That It's Leaner, Smarter, More Transparent,
and Ready for the 21st Century.--It is clear that an economy built to
last requires a Federal Government that is efficient, streamlined, and
transparent. As such, the budget proposes reforms to HUD rental
assistance programs that would save over $500 million in fiscal year
2013 without reducing the number of families served--by streamlining
programs and reforming policies. Moreover, this budget once again calls
for the flexible use of resources (estimated $120 million) \1\ through
the Transformation Initiative, which the Department needs to invest in
technical assistance to build local capacity to safeguard and
effectively invest taxpayer dollars; conduct innovative research,
evaluations of program initiatives and demonstration programs so we can
fund what works and stop funding what doesn't; and upgrade the IT
infrastructure that tracks and monitors our programs.
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\1\ The total TI transfer authority in fiscal year 2013 is
approximately $215 million; however, HUD anticipates transferring
approximately $120 million.
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moving the needle, making substantial progress
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 serve millions of families in thousands of
communities nationwide; to help create an economy built on American
manufacturing, American energy, skills for American workers, and a
renewal of American values.
Consistent with the previous 2 years, HUD's fiscal year 2013 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 create an economy built to
last. Indeed, every month, I hold HUDStat meetings on one or more of
these goals, to assess progress and troubleshoot problems in order to:
(1) 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 (2) hold our grantees accountable for their expenditure
of taxpayers' hard-earned dollars.
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holding ourselves accountable: moving the needle on veterans
homelessness
In a year when we have troops returning from two wars, we cannot
afford to waste any time in the fight to end veterans homelessness.
That is why the partnership between HUD and the Department of Veterans
Affairs (VA) is more important than ever. Over the last 2 years alone,
HUD and the VA have collaborated through the HUD-VASH program to end
homelessness for more than 40,000 veterans, far surpassing HUD's High
Priority Performance Goal of 31,000. Overall, HUD and the VA have
jointly committed to eliminating veterans homelessness by 2015, a goal
which can only be achieved through effective collaboration, along with
a joint focus on data-driven accountability as demonstrated in
processes like HUDStat. VA Deputy Secretary Scott Gould and key VA
program staff have become regular participants in HUDStat meetings,
where together we analyze performance data to understand trends,
identify best practices, and prioritize the actions needed to
accelerate progress. Through this collaboration, which extends to staff
throughout the country, I am proud of the work we have done to keep us
on track to end veteran's homelessness by 2015. However, as President
Obama has said, until we reach a day when not a single veteran sleeps
in our Nation's streets, our work remains unfinished.
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hud goal 1: strengthen the nation's housing market to bolster the
economy and protect consumers
This administration entered office confronting the worst economic
crisis since the Great Depression--as mortgages were sold to people who
couldn't afford or understand them, while banks packaged them into
complex securities that they made huge bets on--and bonuses with--other
people's money. And while the largest factors contributing to this
crisis were market driven, the American people have turned to Congress
and the administration for leadership and action in righting our
Nation's housing market. HUD remains firmly committed to working
together with communities and individuals to cope with these
unprecedented challenges.
Responding to the Market Disruption
The Federal Housing Administration (FHA) and Government National
Mortgage Association (GNMA) continue to have a significant impact on
the Nation's economic recovery. The activities of the Federal
Government are critical to both supporting the housing market in the
short term and providing access to homeownership opportunities over the
long term, while minimizing the risk to taxpayers. Over the past 2
years, HUD has worked with the Department of the Treasury and other
administration partners to construct a housing finance system that
relies on an actuarially sound pricing structure, effective lending
oversight, and adequate organizational capacity to ensure consistent
access to, and liquidity and stability in, the capital markets.
In fiscal year 2013, HUD is requesting $400 billion in loan
guarantee authority for the Mutual Mortgage Insurance Fund, which will
provide an estimated 0.8 million single-family mortgages (a projected
$149 billion in loan volume) and $25 billion in loan guarantee
authority for the General and Special Risk Insurance Fund, which will
provide an estimated 156,000 units in multifamily housing properties
and an estimated 80,600 beds in healthcare facilities. The need for
this investment is clear as FHA has played a critical role in
stabilizing the Nation's mortgage market. At a time when liquidity and
access were needed most in the housing market to facilitate the
recovery of the broader economy, FHA stepped in to ensure that mortgage
capital continued to flow. However, FHA's expanded role is and should
be temporary. FHA's loan volume has declined 34 percent from its peak
in 2009, and its market share is decreasing for the first time since
2006, thereby laying the ground work for private capital to return to
the market. FHA is particularly important to borrowers that the
conventional market does not adequately serve , including qualified
borrowers who would otherwise be shut out of the mortgage market. Fully
60 percent of all African American and Hispanic homebuyers using
mortgages rely upon FHA financing and over 30 percent of all FHA-
insured homebuyers are minorities. Over half of all African Americans
who purchased a home last year and 45 percent of Hispanics did so with
FHA financing.
Redoubling Efforts To Keep Homeowners in Their Homes
While there is work still to be done, HUD is proud of the progress
this administration has made in tackling ongoing foreclosure
challenges. Between April 2009 and December 2011, more than 5.6 million
mortgage modifications were started--including more than 1.7 million
HAMP trial modification starts and nearly 1.2 million FHA loss
mitigation and early delinquency interventions. In addition, to date,
more than 930,000 HAMP trial modifications have resulted in permanent
modifications--saving these households an estimated $10.5 billion in
monthly mortgage payments.
As part of the administration's commitment to help responsible
homeowners stay in their homes, we have actively sought to use our
current programs and authorities to make homeownership sustainable for
millions of American families. Examples of our efforts include:
--Streamline Refinance.--An option that allows borrowers with FHA-
insured loans who are current on their mortgage to refinance
into a new FHA-insured loan at today's low interest rates
without requiring additional underwriting, permitting these
borrowers to reduce their mortgage payments. This program
benefits current FHA borrowers--particularly those whose loan
value may exceed the current value of their home--and by
lowering a borrower's payment, also reduces risk to FHA. And,
because we see potential for more widespread use of this
product, FHA will make changes to the way in which streamline
refinance loans are displayed in the Neighborhood Watch Early
Warning System (Neighborhood Watch) to reduce lender concern
about the potential impact associated with taking
responsibility for loans they have not underwritten, making
them more willing to offer these loans to borrowers who are
current on mortgages already insured by FHA.
--National First Look Program.--A partnership between HUD, the
National Community Stabilization Trust and large financial
institutions that offers Neighborhood Stabilization Program
grantees an exclusive 12- to 14-day window to evaluate and bid
on foreclosed properties.
--Short Refinance Option.--In 2010, FHA made available an option that
offers underwater non-FHA borrowers, who are current on their
existing mortgage and whose lenders agree to write off at least
10 percent of the unpaid principal balance of the first
mortgage, the opportunity to refinance into a new FHA-insured
mortgage.
Finally, as another critical component to the recovery of the
housing market, the President has also put forward a Homeowner Bill of
Rights--a single, straightforward set of commonsense rules that
families can count on when they're shopping for a mortgage, including
the right to a new, simple, clear form for new buyers that gives people
confidence when they're making the most important financial decision of
their lives. And those rights shouldn't end when homeowners get the
keys to their new home. When Americans lose their job or have a medical
emergency, they should know that when they call their lender, that call
will be answered and that their home won't be sold in foreclosure at
the same time they are filling out paperwork to get help.
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funding what works: housing counseling assistance
In fiscal year 2013, HUD is requesting $55 million in Housing
Counseling Assistance to improve access to quality affordable housing,
expand homeownership opportunities, and preserve homeownership, all of
which are especially critical in today's economic climate. With this
funding, HUD expects to serve nearly 185,000 low- to moderate-income
families, as well as provide training to 4,800 counselors nationwide.
HUD-approved counselors help clients learn about purchasing or
refinancing a home; rental housing options; reverse mortgages for
seniors; foreclosure prevention; loss mitigation; preventing evictions
and homelessness; and moving from homelessness to a more stable housing
situation. In 2011, HUD-Approved Housing Counseling agencies, with
grant funds from HUD and other funding sources, assisted over 1.9
million families, including more than 1 million potential and current
homeowners with mortgage-related issues.
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Strengthening FHA and Paving the Way for Private Capital To Return
The books of business in the few years before 2009 have largely
driven the high number of claims to the Mutual Mortgage Insurance Fund
(MMI Fund). This was driven by overall economic and unemployment trends
as well as by the combined effects of poor underwriting, unscrupulous,
and non-compliant practices on the part of lenders, and a seller-funded
downpayment assistance program that allowed many borrowers to obtain
mortgages without a meaningful down payment. As a result, the books of
business FHA insured prior to the start of this administration have
severely impacted the health of FHA's MMI Fund. But thanks to our
efforts, I can say confidently that FHA is moving in another direction,
and that the long-term outlook for FHA and the MMI Fund are now much
better than they were in 2009.
The change in trajectory in the performance of FHA-insured loans is
no accident. Immediately upon taking office, this administration acted
quickly and aggressively to protect FHA's MMI Fund and to ensure its
long-term viability. We have taken more steps since January 2009 to
eliminate unnecessary credit risk and assure strong premium revenue
flows in the future than any administration in FHA history. Indeed, the
gains FHA has experiences since 2009 are the result of a three-part
strategy: Systematic tightening of risk controls, increased premiums to
stabilize near-term finances and expanded usage of loss mitigation
workout assistance to avoid unnecessary claims.
And, we continue to take steps to further strengthen the Fund. In
the 2013 budget we announced a 10 bps annual premium increase on all
FHA insured loans to comply with the requirement passed by Congress
late last year, as well as an additional 25 bps annual premium increase
on ``jumbo'' loans making the total increase for these larger loans 35
bps. And just this week, we announced a series of premium changes that
will further increase receipts to FHA by over $1 billion in fiscal
years 2012 and 2013, beyond the receipts already included in the
President's budget submission. In addition, we have also taken
significant additional steps to increase accountability for FHA
lenders. Via a final rule published a few weeks ago, we clarified the
bases upon which FHA will require indemnification from lenders
participating in our Lender Insurance program, making clear the rules
of the road for lenders and giving FHA a solid basis upon which to
require indemnification by lenders for violations of FHA guidelines.
And we continue to seek expanded authority via legislation that will
further enable us to protect the MMI Fund from unnecessary and
inappropriate losses associated with lenders who violate our
requirements.
The next in a series of steps we have pursued to hold lenders
accountable for their actions are the recently announced settlements
with some of America's largest lenders. Through these settlements, FHA
will receive over $900 million compensation for losses associated with
loans originated outside of FHA requirements, or for which FHA's
servicing requirements were violated.
Despite the unprecedented efforts of this administration to alter
the trajectory of FHA, considerable risks remain. The FHA MMI Fund has
two components: The Financing Account, which holds enough money to
accommodate all expected losses on FHA's insured MMI portfolio as of
the end of the current fiscal year; and the Capital Reserve Account,
which is required to hold an additional amount equal to 2 percent of
the insurance in force. Since 2009, the Fund's capital reserve ratio
has been below that 2-percent level.
The President's budget always includes estimates regarding the
status of the Capital Reserve at the end of the current fiscal year.
This prediction is based on estimates and projections of future
economic conditions, including house prices and other economic factors
which may or may not come to pass. In addition, the 2013 budget
estimate for the FHA Capital Reserve account does not include added
revenue from the additional premium increases announced this week or
the proceeds from FHA-approved lenders under the terms of the mortgage
settlements. With these additional revenues accounted for, the Capital
Reserve is estimated to have sufficient balances to cover all future
projected losses without triggering a mandatory appropriation under the
Federal Credit Reform Act. Moreover, the budget estimates that FHA will
add an additional $8 billion to the MMI Capital Reserve Account in
2013, and return to the congressionally mandated capital reserve ratio
of 2 percent by 2015.
The 2013 budget also includes premium increases for FHA's General
Insurance and Special Risk Insurance programs that serve market rate
multifamily properties and healthcare facilities. These changes are
intended to ensure that FHA products are priced appropriately to
compensate for FHA's risk and encourage the return of private capital
to our mortgage markets. The proposed increases include: 20 basis
points for all new construction or substantial rehabilitation loans
including but not limited to section 220, 221(d), section 231, section
242, and section 232; 15 basis points for permanent loans in section
223(f); and 5 basis points for section 223(a)(7). Premiums for
affordable housing projects (such as those with HUD rental subsidies
and low-income housing tax credits, as well as those insured under FHA
risk-sharing programs) will not be increased.
With the proposed premium increases, FHA Multifamily and Healthcare
loans will be priced more appropriately to crowd back in private
capital, while at the same time continuing to ensure sufficient levels
of available capital in these sectors. The increase in premiums also
reflect new realities--the Multifamily book of business is five times
greater than it was just 3 years ago, and the risk profile has changed
dramatically. FHA's portfolio is now more than 50 percent market rate,
which adds a new component of risk, and a need to take steps to ensure
the future viability of the portfolio. With interest rates at a record
low the existing portfolio loans could remain in FHA's portfolio longer
than the average timeframes and will need to be managed prudently. FHA
will publish the proposed increased in the Federal Register in the next
30-60 days and welcomes feedback during the comment period.
hud goal 2: meet the need for quality, affordable rental homes
In an era when more than one-third of all American families rent
their homes and nearly 7 million unassisted families with very low
incomes spend more than 50 percent of their income on rent, it remains
more important than ever to provide a sufficient supply of affordable
rental homes for low-income families--particularly since, in many
communities, affordable rental housing does not exist without public
support. HUD's fiscal year 2013 budget maintains HUD's core commitments
to providing rental assistance to some our country's most vulnerable
households as well as distributing housing, infrastructure, and
economic development funding to States and communities to address their
unique needs. Overall, 83 percent of HUD's total fiscal year 2013
budget authority requested will provide rental assistance to over 5.4
million residents of HUD-subsidized housing, including public housing
and HUD grants to homeless assistance programs.
And, I am proud to say that, despite an era of challenging budgets,
we have increased the number of families served through our rental
assistance programs every year.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Detailed data shows how vulnerable these families are to the
economic downturn. In HUD's core rental assistance programs, including
Tenant-Based Rental Assistance (TBRA), Public Housing, and Project-
Based Rental Assistance (PBRA): 72 percent of families are extremely
low income (below 30 percent of area median income) and an additional
20 percent are very low income (below 50 percent of area median
income). The devastating effect of the tough economic environment on
the housing circumstances of poor Americans was underscored last year,
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 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 over a 2-year period in the quarter-century history of
the survey, and caps an increase of 42 percent since 2001. The need for
HUD investments in this area is clear.
Preserving Affordable Housing Opportunities in HUD's Largest Programs
This budget provides $19.07 billion for HUD's Section 8 TBRA
program, which is the Nation's largest and preeminent rental assistance
program for low-income families. For over 35 years it has served as a
cost-effective means for delivering safe and affordable housing in the
private market. This 2013 funding level is expected to assist
approximately 2.2 million families by renewing existing vouchers and
issuing new incremental vouchers to homeless veterans.
The budget also provides a total of $6.6 billion to operate public
housing and modernize its aging physical assets through the Public
Housing Operating ($4.5 billion) and Capital ($2.07 billion) funds, a
critical investment that will help 1.1 million extremely low- to low-
income households obtain or retain housing. Similarly, through a $8.7
billion request in funding for the PBRA program, the Department will
provide rental assistance funding to privately owned multifamily rental
housing projects to serve over 1.2 million families nationwide.
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tough choices: project-based rental assistance
In fiscal year 2013, HUD's Project-Based Rental Assistance request
of $8.7 billion represents a $640 million decrease from the fiscal year
2012 enacted level. This reduction, generated by providing less than 12
months of funding upfront on some PBRA contracts that straddle fiscal
years, will not reduce or delay payments to landlords or impact the
number of families served by the program. Nonetheless, it is a
difficult choice, and not one that the administration would choose to
implement in a less austere fiscal environment.
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Reducing Administrative Burdens and Increasing Efficiency
This budget recognizes the need to simplify, align, and reform
programs to reduce administration burdens and increase efficiency
across programs by:
--Streamlining the Public Housing Operating and Capital Funds.--To
both simplify the program and reduce the administrative burden
on State and local public housing authorities, the budget
proposes to combine the separate Operating and Capital funds
into a single Public Housing subsidy stream. As a first step
toward consolidation, the budget provides all PHAs with full
flexibility to use their operating and capital funds for any
eligible capital or operating expense.
--Providing Flexibility for PHAs To Improve Supportive Services for
Assisted Households.--The budget proposes streamlining and
flexibility measures to help PHAs improve supportive services
for assisted families. The Family Self-Sufficiency (FSS)
program will be consolidated and aligned to enable PHAs to more
uniformly serve both TBRA and Public Housing residents. This
program, which the budget also expands to residents of PBRA
housing, aims to connect residents to resources and services to
find and retain jobs that lead to economic independence and
self-sufficiency. In addition, the budget authorizes PHAs to
use a portion of their Public Housing and Housing Voucher
funding to augment case management and supportive services
provided through FSS or provide other supportive services to
increase opportunities for residents.
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tough choices: cost-savings in rental assistance programs
The budget includes a menu of reforms to HUD rental assistance
programs that save over $500 million in 2013 without reducing the
number of families served.
--In the Project-Based Rental Assistance program, savings are
achieved by improving oversight of market rent studies used to
set subsidy payment levels, capping annual subsidy increases
for certain properties, and using excess reserves to offset HUD
payments to landlords.
--The budget also aligns policy across rental assistance programs and
reduces costs by increasing the minimum rent to $75 per month
for all HUD-assisted households, which is comparable to the
minimum rent enacted in 1998, adjusted for inflation.
Recognizing the potential burden that this higher minimum rent
may impose, the budget maintains the current exemption for
families facing financial hardship.
--Finally, this budget request reduces costs by simplifying
administration of the medical expense deduction, better
targeting rental assistance to the working poor in rural areas,
and setting Public Housing flat rents closer to market levels.
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Rebuilding Our Nation's Affordable Housing Stock
Over the last 75 years, the Federal Government has invested
billions of dollars in the development and maintenance of public and
multifamily housing, which serve as crucial resources for some of our
country's most vulnerable families. Despite this sizable Federal
investment and the great demand for deeply affordable rental housing,
we continue to see a decline in the number of available affordable
housing units. Over the last decade, the public housing stock has
shrunk at a rate of 10,000 units per year, largely due to a growing
backlog of unmet capital needs, estimated at $26 billion. To address
these challenges, HUD's 2012 Appropriations Act authorized the Rental
Assistance Demonstration (RAD) to test new preservation tools for its
assisted housing stock allowing for Public Housing and Moderate
Rehabilitation (Mod Rehab) properties to convert to long-term Section 8
rental assistance contracts (capped at 60,000 units of converted
assistance); and Rent Supplement (Rent Supp), Rental Assistance Payment
(RAP), and Mod Rehab properties, upon contract expiration or
termination, to convert tenant protection vouchers to project-based
vouchers. Unlike their current forms of assistance, these contracts
offer a rental subsidy platform that allows PHAs and owners to leverage
current Federal appropriations with other private and public capital to
finance much needed rehabilitation and preserve the assets as
affordable housing.
RAD is a limited demonstration, which will be evaluated to assess
the success of these approaches in preserving affordable housing. Since
HUD will use funding appropriated for existing programs for
implementation and anticipates strong interest in RAD, the 2013 budget
includes a request to exempt Mod Rehab from the 60,000 unit cap on
projects that could convert assistance, at no cost, to long-term
Section 8 rental assistance contracts. If enacted, the 60,000 unit cap
would apply to public housing conversions alone, while the number of
Mod Rehab conversions would not be constrained.
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funding what works: taking jobs-plus to scale
The budget provides that up to $50 million of Public Housing
capital funds may be targeted to Jobs-Plus competitive grants to fund
scaled-up implementation of the Jobs-Plus model--a successful,
evidence-based strategy to increase the employment opportunities and
earnings of public housing residents through a three-tiered program of
employment services, rent-based work incentives, and community support
for work. This investment will increase employment opportunities for
over 30,000 Public Housing residents, by helping them secure and retain
employment, keep more of the income they earn, and receive the full
benefit of work incentives such as the Earned Income Tax Credit (EITC).
A randomized experiment evaluation of the Jobs-Plus model in three
demographically diverse sites found that, on average, participants had
an additional $1,300 in earnings every year from 2000 to 2006--and
these earning increases were durable beyond the period of the
intervention. Jobs-Plus competitive grants will scale up this proven
model by targeting resources to high-capacity PHAs and housing
developments with enough work-eligible residents to achieve economies
of scale. The grants will prioritize broad and diverse local
partnerships that cut across sectors, agencies, and funding streams.
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Increasing the Production of Affordable Housing Capital Projects
In addition to developing tools to address the growing capital
needs of America's Public Housing stock, HUD is committed to expanding
the supply of affordable rental homes in safe, mixed-income communities
that provide access to jobs, good schools, transportation, and, most
importantly, economic self-sufficiency. Accordingly, in fiscal year
2013 HUD is working together with its partners to identify ways to make
the Low Income Housing Tax Credit (LIHTC) program a more flexible and
nimble tool for the creation and preservation of affordable housing. As
the primary tool of the Federal Government for developing and
rehabilitating affordable rental housing, the LIHTC program is
administered by State agencies with the assistance of guidance from the
Treasury Department and the Internal Revenue Service, and attract
capital to low-income rental housing by satisfying some of the Federal
income tax obligations of investors in certain low-income rental
properties.
Since its addition to the tax laws in 1986, the LIHTC program has
been used to create 1.8 million in affordable rental-housing units
across the country. Annually, the program supports 95,000 jobs and
generated $2.7 billion in State, local, and Federal revenues. In fiscal
year 2013, as part of a broader effort to align Federal rental
programs, HUD, the Departments of Treasury and Agriculture, the
Domestic Policy Council (DPC), the Office of Management and Budget
(OMB), and the National Economic Council (NEC) will continue partnering
to allow greater flexibility to State and local agencies that
administer LIHTC programs, as well as to developers and investors, to
continue to enable the creation of affordable housing in markets where
it is needed the most. Specifically, the revenue provisions of the 2013
budget enhance two revenue proposals that were included in the 2012
budget and introduce two new proposals:
--An Income Averaging proposal would encourage a greater range of
incomes in LIHTC-supported affordable housing by allowing
developers to choose an income-limitation requirement that
would be satisfied if households in the low-income units have
an average income no greater than 60 percent of AMI, with no
household above 80 percent AMI. An additional provision would
allow certain existing tenants to remain in residence without
impairing the developer's entitlement to LIHTCs.
--In the context of preserving, recapitalizing, and rehabilitating
existing federally assisted affordable housing, a Basis Boost
proposal would provide a second mechanism for earning ``4
percent'' LIHTCs and would give an extra, up-to-30-percent
increase in qualified basis for certain projects that receive
``4 percent'' LIHTCs, either because they are at least half
financed with tax exempt-bonds or because they employed the new
mechanism.
--A proposal concerning LIHTCs earned by Real Estate Investment
Trusts (REITs) is designed to diversify the pool of investors
for LIHTCs and to increase the overall demand for LIHTCs. The
proposal would allow a REIT that earns LIHTCs to provide a tax
benefit to its investors by paying them tax-exempt dividends in
an amount almost triple the amount of the REIT's LIHTCs.
--A Victims of Domestic Violence proposal would bar LIHTC buildings
from discriminating against victims of actual or threatened
domestic violence and would clarify that occupancy restrictions
or preferences for such victims are an allowable exception to
the general-public-use requirement.
Finally, the recent Worst Case Housing Needs report underscores
what has been the case since well before the recent recession, namely,
that extremely low-income renters face the most severe housing shortage
and cost burden of any Americans. In addition to the Worst Case Housing
Needs report, the most recent data available from the American Housing
Survey shows that, for renters below 50 percent of area mean income,
the shortage of affordable and available units increased from 5.2 to 6
million from 2007 to 2009, with just 39 affordable and available units
for every 100 renters in 2009, compared to 44 [units] 2 years prior.
The 2013 budget once again provides $1 billion in mandatory
appropriations for the Housing Trust Fund (HTF) to address this
critical shortage of housing where it is most desperately needed.
Enacted in 2008, the HTF 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 time has come for Congress
to provide this crucial funding.
hud goal 3: utilize housing as a platform for improving quality of life
Stable housing provides an ideal platform for delivering a wide
variety of health and social services to improve economic, health, and
broad-based societal outcomes. For some, housing alone is sufficient to
ensure healthy outcomes, while others require housing with supportive
services to assist with activities of daily living or long-term self-
sufficiency, as well as proximity to crucial services. HUD's fiscal
year 2013 budget acknowledges this reality by making critical
investments in housing and supportive services, and partnering with
other Federal agencies to maximize resources and best practices.
Moreover, these investments will save money in the long term, by
avoiding overuse of expensive emergency and institutional
interventions.
Preventing and Ending Homelessness, Serving Our Nation's Most
Vulnerable
Nowhere is the relationship between housing and supportive services
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's budget once again invests in this critical
effort, by providing $2.23 billion in Homeless Assistance Grants,
including competitive programs that annually serve over 800,000
homeless families and individuals. This includes funding for the
Emergency Solutions Grants program, which will continue the work of the
Homelessness Prevention and Rapid Re-Housing Program--funded by the
Recovery Act--that in the last 3 years alone has helped prevent or end
homelessness for over 1.2 million people nationwide.
Moreover, HUD continues to focus on the unique needs of veterans
through both its targeted homeless programs and its mainstream housing
programs using successful methods and interventions. Currently, an
estimated one out of every six men and women in our Nation's homeless
shelters are veterans, and veterans are 50 percent more likely to fall
into homelessness compared to other Americans. HUD is committed to
providing affordable housing units to this unique homeless population,
and has partnered with the Departments of Health and Human Services
(HHS) and Veterans Affairs (VA) to develop targeted approaches to serve
the homeless veteran populations. Accordingly, this budget includes $75
million for the HUD-VASH program, which combines tenant-based voucher
assistance with case management and clinical services tailored to
veterans and their families. This funding will provide 10,000 new
vouchers to help veterans move from our streets into permanent
supportive housing, in addition to the nearly 38,000 already allocated
HUD-VASH vouchers provided in previous appropriations, which have been
critical to a 12-percent reduction in veterans homelessness, and the
10,000 vouchers that will be awarded through the fiscal year 2012
appropriation.
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increasing efficiencies: modernizing the housing opportunities for
persons with aids (hopwa) program
The budget proposes to update the HOPWA program to better reflect
the current understanding of HIV/AIDS and ensure that funds are
directed in a more equitable and effective manner. This modernization
includes a new formula that will distribute HOPWA funds based on the
current population of HIV-positive individuals, fair market rents, and
poverty rates in order to target funds to areas with the most need. It
also makes the program more flexible, giving local communities more
options to provide timely, and cost-effective interventions. The
budget's $330 million investment in HOPWA, in combination with the
proposed modernization, will assist local communities in keeping
individuals with HIV/AIDS housed, making it easier for them to stay in
therapy, and therefore improving health outcomes for this vulnerable
population.
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Investing in Leveraging and Serving Our Most Vulnerable
This budget provides a total of $625 million for the Housing for
the Elderly and Housing for Persons with Disabilities programs, which
includes $154 million to support 5,300 additional supportive housing
units. Doing more with less, the budget proposes reforms to the Housing
for the Elderly program to target resources to help those most in need,
reduce the up-front cost of new awards, and better connect residents
with the supportive services they need to age in place and live
independently.
Historically, HUD has provided both capital advances and operating
subsidies to nonprofit sponsors to construct and manage multifamily
housing for low-income people with disabilities. In an effort to
maximize the creation of new affordable units in a time of funding
restraints, in fiscal year 2012, HUD began providing operating
assistance to State housing agencies that formed partnerships with
State healthcare agencies for service provision to low-income persons
with disabilities. These funds are used to set aside supportive units
for this target population in affordable housing complexes whose
capital costs are funded through Low Income Housing Tax Credits, HOME
funds, or other sources. Investing Section 811 funds under this
authority allows HUD to rely on the expertise of the State housing
agencies to administer the award and on the State healthcare agency to
identify the most critical population to be served and guarantee the
delivery of appropriate services. In fiscal year 2013, HUD is
requesting similar authority for the Section 202 program. Drawing on
lessons learned from implementation in the Section 811 program, HUD
will take advantage of efficiencies inherent in these same agencies'
oversight responsibilities for tax credits, HOME funds or similar
housing funding. Assuming requested statutory language is enacted, up
to 3,450 units could be made available with support from this project
rental assistance.
hud goal 4: build inclusive sustainable communities free from
discrimination
No longer can the American economy tolerate the marginalization
from the labor force of significant numbers of people because of
individualized or systemic discrimination, or because they live in
isolated neighborhoods of concentrated poverty. An American economy
built to last requires an increased supply of affordable rental homes
in safe, mixed-income communities that provide access to jobs, good
schools, transportation, high-quality services, and most importantly,
economic self-sufficiency. As such, HUD's fiscal year 2013 budget puts
communities in a position to plan for the future and draw fully upon
their resources, most importantly, their people.
Each year HUD dedicates approximately 15-20 percent of its funds to
the capital costs of housing and economic development projects
throughout the country. Through this investment, 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. Programs
such as the Community Development Block Grant (CDBG), and Choice
Neighborhoods are targeted to areas of need, to provide locally driven
solutions to overarching economic development challenges. As with HUD's
rental assistance programs, HUD's capital grants--including the Public
Housing Capital Fund, Choice Neighborhoods, CDBG, and HOME--tend to
assist areas of great need, including communities with high
unemployment.
Preserving HUD's Major Block Grant Programs for Community Development
and Housing
The budget demonstrates the administration's continued commitment
in a constrained fiscal climate to support municipalities and States as
they navigate through a challenging fiscal climate. By maintaining the
fiscal year 2012 CDBG formula funding level of $2.95 billion, CDBG will
allow over 1,100 State and local governments to improve 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 2011 alone, local
governments used CDBG funding to directly create and retain 21,482
jobs, not including any indirect effect on additional jobs. Moreover,
in fiscal year 2011 CDBG assisted 96,615 households to maintain or gain
access to safe, decent, and affordable housing; provide public service
activities to 10.1 million people; and benefit approximately 4.1
million persons through public improvement investments. 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 eliminate some of these activities from their
own budgets.
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tough choices: home investment partnerships
The HOME Investment Partnerships program is the principal tool for
the production of affordable housing for low- and extremely low-income
families by State and local governments. It is also the critical gap
financing for LIHTC projects--it has created over 1 million units and
an additional 250,000 households have been assisted with temporary
rental assistance since the program's inception. The program leverages
$4 in other public and private funds for every HOME dollar invested,
totaling more than $88 billion over the life of the program.
The fiscal year 2013 HOME request reflects the difficult choices
HUD was faced with, in order to make real progress in reducing the
national deficit and contribute to creating an economy built to last.
American families are tightening their belts--and we need to do the
same. In addition, the fiscal year 2013 budget includes two proposed
HOME authorizing requests: To Permit recaptured Community Housing
Development Organizations set-aside funds to be reallocated by formula
as HOME funds; and to facilitate the removal of dangerous tenants from
HOME properties. We look forward to working together on these
proposals.
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Transforming Neighborhoods of Poverty
The President has made it clear that we cannot create an economy
built to last if: A fifth of America's children live in poverty, at a
cost of $500 billion per year--fully 4 percent of GDP--due to reduced
skills development and economic productivity, increased later life
crime, and poor health; a growing population lives with the problems of
concentrated neighborhood poverty--high unemployment rates, rampant
crime, health disparities, inadequate early care and education,
struggling schools, and disinvestment--all of which isolate them from
the global economy.
That's why HUD's fiscal year 2013 budget provides $150 million for
the Choice Neighborhoods Initiative to continue transformative
investments in high-poverty neighborhoods where distressed HUD-assisted
public and privately owned housing is located. This will reach four to
six neighborhoods with implementation grants that primarily fund the
preservation, rehabilitation and transformation of HUD-assisted public
and privately owned multifamily housing, and will also engage local
governments, nonprofits, and for-profit developers in partnerships to
improve the economic conditions in their surrounding communities.
Moreover, the leveraging power that these grants have is real--to date,
the five Choice Neighborhoods implementation grantees have leveraged a
combined $1.6 billion in private funds--over 13 times their total grant
award amount.
The Choice Neighborhoods initiative is a central element of the
administration's inter-agency, place-based strategy to support local
communities in developing the tools they need to revitalize
neighborhoods of concentrated poverty into neighborhoods of
opportunity. The Department's administration of the first rounds of
funding for Choice Neighborhoods 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.
Supporting Sustainable Communities and Innovative Infrastructure
Planning
Creating an economy built to last requires creating jobs here in
America to discourage outsourcing and encourage insourcing. But
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.
With these realities in mind, the fiscal year 2013 budget supports
the multi-agency Partnership for Sustainable Communities, an
administration initiative that integrates resources and expertise from
HUD, the Department of Transportation, and the Environmental Protection
Agency. In particular, the budget restores $100 million for the
Sustainable Communities Initiative, which creates incentives for
communities to develop comprehensive housing and transportation plans
to achieve sustainable development, reduce energy consumption and
greenhouse gas emissions, and increase affordable housing near public
transit. This includes $46 million to fund about 20 additional regional
planning grants to help enable communities to align public and private
investments in housing, transportation, and infrastructure to
strategically integrate goals for mobility, regional housing choices
and economic development. In addition, $46 million will be invested in
neighborhoods and communities to update building codes, zoning, and
local planning efforts as complementary strategies to the regional
grants.
We know how important these planning tools are to regional
economies--particularly those which rely on integrated supply chains
that cross national borders and are essential to meeting the
President's charge to double U.S. exports over the next 5 years. These
investments will also leverage and increase the ripple effects of other
administration proposals to overhaul America's deteriorating
infrastructure, including the Infrastructure Bank, as well as Project
Rebuild and other elements of the American Jobs Act, as we leverage
increased residential and commercial construction around transit and
other infrastructure investments.
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funding what works: the leveraging power of sustainable communities
funding
In fiscal year 2010, Austin, Texas, was provided a $3.7 million
Regional Planning grant through the Sustainable Communities program.
With this funding, the city is helping link its long-term regional
transportation plan to 37 mixed-income communities near transit and job
centers. This grant will help 3,000 small, family-run businesses expand
or open a second location, provided that each of these businesses hires
at least one new worker who has been unemployed for a year or more.
This work is expected to create more than 7,000 permanent jobs and save
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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Ensuring Inclusivity in Housing Nationwide
An inclusive 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, expanded training and language assistance, HUD will
affirmatively further fair housing and the ideals of an open society.
The Fair Housing Initiatives Program (FHIP) is critical to building
and sustaining inclusive communities. FHIP is the only grant program
within the Federal Government whose primary purpose supports private
efforts to educate the public about fair housing rights and conducts
private enforcement of the Fair Housing Act. In fiscal year 2013, HUD
is requesting approximately $41 million in FHIP funds, representing the
Department's commitment to fair housing, including $28 million to
support the efforts of private fair housing organizations that conduct
private enforcement of the Fair Housing Act. The Private Enforcement
Initiative (PEI) grantees investigate and test housing providers
alleged to have engaged in discrimination. The requested amount will
continue funding to support fair housing enforcement by all statutorily
eligible private fair housing organizations. In addition, it will fund
fair housing education at the local, regional, and national levels.
The Fair Housing Assistance Program (FHAP) is a critical component
of HUD's effort to ensure the public's right to housing free from
discrimination. FHAP multiplies HUD's enforcement capabilities,
allowing the Department to protect fair housing rights in an efficient
and effective manner. In fact, FHAP agencies investigate the majority
of housing discrimination complaints filed in the United States. FHAP
provides funding for 98 Government agencies, including 37 States, 60
localities, and the District of Columbia, to enforce laws that prohibit
housing discrimination that have been reviewed and deemed substantially
equivalent to Federal law. In fiscal year 2013, HUD is requesting
approximately $25 million in FHAP funds.
Ensuring That an Economy Built To Last Includes Opportunities for Rural
Americans
The administration has placed a significant emphasis on ensuring
that America's rural communities are competitive in the global
economy--particularly given the reality that rural communities
generally have less access to public transportation, along with higher
poverty rates and inadequate housing. Each year, HUD invests billions
of dollars in rural communities through its core rental assistance
programs and block grants. The Community Development Block Grant (CDBG)
program allocates funds to States, which provides approximately $692
million to rural areas, supporting over 25,000 jobs both directly and
indirectly, providing needed infrastructure, economic development, and
affordable housing. Because small towns and rural areas often lack the
basic modern infrastructure that citizens in larger communities can
take for granted, States annually spend over 55 percent of their CDBG
funds on basic public improvements such as water and sewer lines, paved
streets, and fire stations. HUD also funds over $300 million in rural
areas for affordable housing and homeownership programs through its
HOME Investment Partnerships program, directly and indirectly
supporting over 5,360 jobs.
In addition, HUD and the Department of Agriculture meet regularly
through an interagency rental housing policy group to better align and
coordinate the affordable rental housing programs each operates.
Altogether, over 800,000 families in rural communities are directly
assisted through the Housing Choice Voucher, Public Housing, and
Multifamily programs, with another 450,000 assisted through USDA. For
homeowners, HUD's Federal Housing Administration (FHA) helps first-time
homebuyers and other qualified families all over the country purchase
their own home. More than 1.5 million of the homes currently insured by
the FHA are in rural areas, and approximately $545 million in current
FHA loans are to rural healthcare facilities designated as ``critical
access hospitals.'' In addition to these critical investments, targeted
rural investments in HUD's 2013 budget include:
--$5 million in Rural Housing Stability Assistance Program (RHSP), as
authorized in the Homeless Emergency Assistance and Rapid
Transition to Housing Act (HEARTH Act), designed to assist
individuals and families who are homeless, in imminent danger
of losing housing, or in the worst housing situations in rural
communities. In addition to this focused RHSP initiative, rural
communities will continue to have access to HUD's targeted
homeless assistance, through the Continuum of Care competition
grant, the Emergency Solutions Grant (ESG) program, and the
Homelessness Prevention and Rapid Re-Housing Program (HPRP).
Rural areas have increasingly gained access to HUD's
competitive homeless assistance grants, primarily through the
creation of Balance of State and Statewide Continuums of Care,
with funds allocated directly to the State. In 2010, the
Continuum of Care competition included a selection priority for
new projects proposing to serve 100 percent rural areas.
Organizations in 69 rural communities submitted applications
for 108 new projects, requesting $19 million. HUD will apply
the rural selection priority to new projects in the 2011
Continuum of Care competition as well.
--$731 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, programs like
Indian Housing Block Grants, Indian Home Loan Guarantees, and
Indian Community Development Block Grants support development
in remote areas where safe, decent, affordable housing is
desperately needed by providing funds to over 550 tribes across
the country. 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.
hud goal 5: transform the way hud does business
An economy built requires a Government that's leaner, smarter, more
transparent, and ready for the 21st century. The current economic and
housing crisis; the structural affordability challenges facing low-
income homeowners and renters; and the new, multidimensional challenges
facing our urban, suburban, and rural communities all require an agency
in which the fundamentals matter and the basics function. As such, HUD
remains committed to transforming the way it does business. This
transformation is more crucial now than perhaps ever before--HUD
remains at the forefront of the Federal response to the national
mortgage crisis, the economic recovery, and the structural gap between
household incomes and national housing prices--roles that require an
agency that is nimble and market-savvy, with the capacity and expertise
necessary to galvanize HUD's vast network of partners. HUD's 2013
budget reflects these critical roles, by investing in transformation,
research, and development that will be implemented persistently over
time. The Transformation Initiative
Thanks to congressional support for the Transformation Initiative
(TI), past fiscal year appropriations are today funding a wide range of
groundbreaking projects, including:
--Innovative, ``silo-breaking'' OneCPD technical assistance in
communities across the country that replaces a fragmented
broken system with one that addresses the holistic and cross-
cutting needs of our grantees, recognizing that these extend
beyond the rules and regulations of any single funding stream;
--Major evaluations and demonstration programs to examine the
outcomes of key administration initiatives like the Rental
Assistance Demonstration and Choice Neighborhoods, the cost to
local public housing authorities of administering the Housing
Choice Voucher program, different approaches to rent reform in
our largest programs, the housing needs of Native American and
Hawaiian communities, and the impact of housing and services
interventions on homeless families;
--Replacement of 30-year-old technology and information management
practices to reduce risks, and implement higher performing, and
cost-effective business solutions to more effectively
administer the Department's rental housing assistance programs.
The 2013 budget request once again includes transfer authority (up
to 0.5 percent at the Secretary's discretion, totaling up to $215
million) to support ongoing improvements of program effectiveness and
efficiency and to help the Department respond and adapt more
effectively to its rapidly changing operating environment.\2\ TI is a
multiyear effort that can only be achieved through the relentless focus
of agency leadership, full transparency and accountability for real
results, and sustained and flexible budget resources. Since TI was
first enacted in 2010, it has bolstered the long-neglected areas of IT
modernization, research and evaluation, and program demonstrations
crucial for increasing the efficiency and effectiveness of the
Department's programs, and remains the primary source of funding for
this transformation. Further, TI has provided a mechanism for
innovative, crosscutting technical assistance that goes beyond program
compliance to improve grantee capacity, performance, and outcomes.
Finally, recent crises with natural disasters, the housing market, and
deep fiscal distress among State and local partners have highlighted
the need for HUD to be more nimble, creative, and collaborative.
Setting aside a portion of HUD's program accounts through TI to better
understand and enhance program results reflects recognition that
planning for continuous improvement and innovation, investing in tools
and capacity, and assessing results are equally integral for the
operation of programs with accountability to the public interest.
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\2\ HUD estimates that it will transfer approximately $120 million
into TI in fiscal year 2013.
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Research and Evaluations
As an integral component of strengthening HUD's capabilities for
evaluating and improving program effectiveness and efficiency, TI
provides a predictable stream of funding for high-quality research and
evaluation of HUD's programs on an on-going, rotating basis to inform
sound policymaking. HUD anticipates allocating 10-20 percent of TI
transfers to Research and Evaluations in 2013. Expected projects
include: A process evaluation of the evidence-based Jobs-Plus pilot,
seeking to understand the effects of larger scale implementation;
energy efficiency and utility costs analysis for PHAs and residents of
public housing; biennial research NOFAs for Sustainable Communities
Research Grants to inform local governments in preparing and planning
for disasters; and a long-overdue follow-up to a 1995 HOME
Affordability Study to assess affordability over time based on
differing levels of subsidy.
Program Demonstrations
Program Demonstrations test new options for HUD programs that can
make them more efficient and effective and establish sound evidence of
whether and how these options could better achieve HUD's mission. Since
the 1990s, HUD has done relatively few research demonstrations, largely
due to budget constraints. Those few demonstrations, however, have been
HUD's most important and informative research on real program impacts.
In 2013, HUD expects Project Demonstrations to include research on the
Rental Assistance Demonstration (RAD), which allows a trial conversion
of public housing and certain multifamily properties to long-term
project-based contracts.
Technical Assistance
Technical assistance (TA) can be seen as a ``force multiplier''--
making program dollars go further and helping communities do more with
limited Federal and local resources. TA under the Transformation
Initiative (TI-TA) allows HUD to combine assistance for different
programs as appropriate, and provide customized help on the issues any
particular grantee confronts.
In 2013, HUD will utilize TI-TA for activities such as: Assessments
and targeted interventions for PHAs; helping local government
comprehensively assess market trends and implement housing and
community and economic development programs through OneCPD; and
targeting underlying, long-term problems like deficits and poor bond
ratings through the National Resource Network. Flexible, cross-program
technical assistance could also help grantees and clients adapt to new
HUD policies, programs, and management approaches, and develop core
skills and critical competencies required to effectively deliver HUD's
programs.
Information Technology
The budget proposes to again use TI funds for Information
Technology in 2013, to reduce risks, implement higher performing
standards, and cost-effective business solutions.
IT transformation efforts to date have helped HUD evolve its
understanding of opportunities to leverage the foundational toolsets
being implemented under the FHA Transformation, the Next Generation
Management project or NGMS (formerly known as NGVMS), and related
infrastructure modernization projects. These opportunities include ways
to further reduce the Government's risk in the marketplace, improve
services to meet the needs of our citizens and employees and reduce
annual operations costs. For example, recent efforts to define
opportunities to reduce cost by consolidating back office business and
administrative services are expected to lead to the need for capital
investment to transition more of HUD's services from legacy platforms
to shared enterprise services. HUD plans to use TI transfer authority
in 2013 to make capital investments in IT to drive these service
delivery improvements and further cost reduction efforts.
conclusion
Madam Chairman, this budget reflects the administration's
recognition of the critical role the housing sector must play to ensure
every American gets a fair shot, everyone does their fair share, and
everyone plays by the same rules. 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 2013 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 that this budget will contribute substantially to
economic recovery, to creating pathways to opportunity, and to an
America built to last. Thank you.
Senator Murray. Thank you very much, Mr. Secretary. Let me
begin by asking you about the status of the FHA's Mutual
Mortgage Insurance Fund. Given the seriousness of this housing
crisis, it's not surprising that FHA has sustained significant
losses, and the capital reserve account has served its purpose
by covering those unexpected losses.
But I was concerned when the President's budget stated that
$688 million would be needed to cover FHA losses in fiscal year
2012. Both the recent settlements and announced premium
increases are expected to improve the MMI Fund financial
position, but I wanted you to update us this morning on the
financial condition of the MMI Fund, of the FHA's MMI Fund.
MUTUAL MORTGAGE INSURANCE FUND
Secretary Donovan. As you correctly stated, the information
that was in the budget was outdated on the day it was
published. And in fact, we were waiting to make final decisions
about premium increases until we knew the outcome of the
settlement. I wish that had been resolved before the budget was
finalized, but it wasn't. And that's the reason for what was
shown in the budget.
Having said that, with the $900 million that I described
that is the result of our work to recover for bad loans in the
FHA program that are in the settlements, and in addition, the
premium increases that we have announced this week, we do
expect that the fund will remain positive this year.
In addition, because of those steps that we have taken, the
fund will be in a stronger position when the next actuarial
study is done in the fall. That's the most comprehensive look,
looking forward. And we do expect that these changes that we
have made will put us in a significantly better position come
fall.
But again, we have to be vigilant. And we will take
additional steps, if necessary. The single-most important
determinant of the health of the fund is where house prices go
this year and beyond. And so we will continue to be vigilant
and watch carefully to make sure, if we have additional steps
that we need to take, that we can work with the subcommittee to
take those.
Senator Murray. So what are the risks and opportunities
that we need to look at? The housing prices this year. What
other things?
Secretary Donovan. Specifically for the re-estimate this
year, the only things that will affect that number are the
premium increases, and so implementing those very quickly is
critical, and the levels of loan volume that we have this year.
Our estimates are that it would take loan volumes that are more
than 20 percent below our expectations to threaten the fund
through the re-estimate this year.
More importantly, for next year, as we go to do the new
actuarial study, the single-most important factor is house
prices. Our estimates last year showed that it would take
greater than a 4-percent reduction in house prices this year.
Our base case predicted a 1-percent increase. It would take
more than a 4-percent reduction in house prices this year to
push the fund negative.
That was before the premium increases that we have
implemented. So in fact, our estimate now is that it would take
a much larger decline in house prices, much larger than that 4
percent, to put the fund in a negative position for the re-
estimate next year.
Senator Murray. Okay, and you decided to increase the
upfront and the annual premium. Can you tell me how that will
affect worthy borrowers who are trying to access credit?
Secretary Donovan. As you know, Congress made the decision
to include a 10-basis-point increase in our single-family
programs as part of the bill that extended the payroll tax
deduction. In addition, we included a 75-basis-point increase
in the upfront premium. The 10 basis points equates, for the
average loan, to about $9 a month for a borrower, and the
upfront premium increase is about $5 a month for the typical
borrower.
The only places where those increases are significantly
larger is for jumbo loans, those over $625,000, where we
thought it was prudent to include a larger increase. And so for
those borrowers, because the average size of the loan is much
larger and because the increase is more, the increases would be
significantly larger.
SETTLEMENTS WITH LENDERS
Senator Murray. Okay, thank you. The joint Federal-State
servicing settlement and the settlement with Bank of America
represent not only a significant monetary award, but they also
really send a message to FHA program participants that there
are serious consequences to not following the rules.
Just last week, settlements with two additional lenders
were announced. And since most of the losses to the MMI Fund
stem from loans insured prior to the reforms you implemented in
2009, it's really important to pursue opportunities to prevent
or recover losses from those books of business.
Are there additional measures that FHA can take to improve
the outlook for riskier loans that it already has on its books?
FEDERAL HOUSING ADMINISTRATION INDEMNIFICATION
Secretary Donovan. There are.
First of all, let me just compliment David Montoya, our
inspector general, and his team for their remarkable work to
lead to both the servicing settlement and these additional
settlements. They partnered very, very closely with us and the
Department of Justice to allow us to make those recoveries, not
just in the servicing settlement, but from Bank of America,
Citibank, and Flagstar. So those are very important steps, and
I just want to compliment him and his team.
The additional steps that we could take--there are a number
of them that require legislative change. I'm happy to say we're
working closely with your colleagues on the authorizing side as
well as Members of the House on the authorizing committee.
There is a bill in the House that includes a number of the
steps that would allow us to step up our enforcement. And those
build on the recent regulation on indemnification that we put
out, which will allow us to further hold lenders accountable
for those prior loans that didn't meet FHA standards.
Senator Murray. Okay. We all think the FHA's current
outsized role in the market is unsustainable. There's no one
who doesn't think differently. But it still remains difficult
for qualified Americans to get a mortgage today. And the
market's recovery, as we all know, is still very fragile.
If FHA steps too quickly, it could have some serious
consequences, not only for our overall economy, as we all know,
but for the solvency of the MMI Fund. And I wanted to ask you
how you balance the continued need for FHA to help provide
access to credit with making room for private capital to return
to the market.
Secretary Donovan. Senator, you've asked the $64 trillion
question. This is what keeps me up at night, and this is
exactly the key question that we have to balance.
And frankly, it is not just helping the broader market
recover, but if we were to take steps to increase our premiums
too quickly, to take steps that would hurt the market recovery,
we actually hurt the FHA fund and taxpayers, because our old
investments, that trillion-dollar portfolio, will perform much
worse.
And so in the steps that we have taken--and you asked
exactly the right question, ``What's the effect for the average
homeowner?''--we felt that $14 a month, on average, was
acceptable, particularly given that we have record low interest
rates today.
We honestly feel that the biggest barrier holding back
lending--and I agree with you, too many qualified borrowers
aren't able to get lending today----
Senator Murray. Yes.
Secretary Donovan. It isn't the pricing that's the biggest
barrier. It would be if we went too quickly on raising our
premiums. The biggest challenge is the uncertainty that's out
there in terms of how we will enforce our rules. So we have to
make clearer what the rules will be.
That's why our indemnification rule clarifying it is
important. It is why we think the Federal Housing Finance
Agency needs to put out a clear policy on buybacks that will
allow Fannie and Freddie lenders to know what to expect. And it
is why the servicing settlement was important as well. It
created a single, clear, strong set of servicing standards and
clarified foreclosure processes around the country so that that
market can move forward with greater certainty.
And again, it is always hard to get that balance perfectly.
I wouldn't say we are ever done. I sleep on this every night.
But it is a critically important balance, and I just thank you
and the ranking member for your understanding of that balance.
Senator Murray. Okay, very good. I appreciate that. Thank
you.
PROJECT-BASED RENTAL ASSISTANCE SHORT FUNDING
Senator Collins.
Senator Collins. Thank you, Madam Chairman.
I want to go back to an issue that Senator Murray touched
on in her opening statement.
I am concerned by the Administration's proposal to fund
thousands of Project-Based Rental Assistance contracts for less
than 12 months. The reason I'm concerned is that short-funding
these contracts may create a perverse incentive for landlords
not to invest in maintenance, to cut expenses, to the detriment
of some of our most vulnerable households, because of the risk
of whether or not the full appropriations for the remainder of
the year is ever going to come through.
I'm also troubled that some owners may decide to leave the
program altogether rather than take that risk. I know this had
to be a difficult decision, and it clearly was budget-driven.
But how is HUD going to mitigate these risks to the program and
to the residents?
Secretary Donovan. Senator, first of all, let me say thank
you for recognizing this issue. This was one of the most
difficult decisions we made in our budget. Personally, for me,
having run the multifamily programs my first time at HUD, it
was particularly difficult, because I know the impacts.
What I would say is, there are two real risks here. One is
an operational risk that we will not be able to mechanically
get the contracts funded with the short-funding. That happened
in the past when these contracts were short-funded. And I can
assure you that I and my team have worked very hard to make
sure that the operational processes are improved. And in fact,
over the last 4 years, we haven't had those same kind of issues
that might spring up with the short-funding.
We also, operationally, have taken a lot of steps to make
sure we have processes in place to monitor the physical
condition of the units. So I appreciate your concern about
whether this will lead to decreased maintenance. We have new
risk ranking and reporting that we do on these units. We have
quality control around our Real Estate Assessment Center (REAC)
process that we have stepped up. Those are all things that are
critical to make sure that the kind of effects that you talk
about don't happen.
The other risk is an uncertainty around funding, and you
mentioned that as well. And that's one where, frankly, because
there is private capital that supports these units, it is
critical that we not create too much uncertainty around these
programs. And I do think that is one of the risks here.
I think what is very important is that we work together to
make very clear, as Congress has always done, that the funding
is available for these units. We signed 20-year contracts
knowing that they're dependent on appropriations each year. And
the market has been confident that that funding will be there.
And we want to make clear despite this short-funding that we
will do everything on our side, and I know that you will as
well to continue this funding and make sure that it is
available in subsequent years.
SUBSTANDARD UNITS IN MAINE
Senator Collins. Let me now turn to the issue that I
mentioned in my opening statement about the poor living
conditions in some of the HUD-subsidized units in Maine. I'm
troubled by this not only because taxpayers shouldn't be paying
for poorly maintained units, but because the health and the
safety of the people living there is clearly at risk. So
something went dramatically wrong with the oversight and
inspection process.
I was also troubled when we learned of the outright fraud
in some of the public housing agencies last year. I believe the
one in Philadelphia, in particular, was found to have fraud.
So what investments is HUD making in this budget to ensure
that you have quality controls, internal controls, effective
audits, a very close relationship with the IG to ensure that we
are not wasting taxpayer dollars on substandard units that are
unsafe for the tenants, or on outright fraud where people are
stealing money that belongs to the taxpayers and is not
benefiting those who need it most?
Secretary Donovan. First, Senator, let me just thank you
for your directness and your focus on these problems--both you
and Senator Murray.
Where there are issues, where we have made mistakes, and
this was clearly--there were mistakes made on these units.
You've been direct and held us accountable to correct those.
And I hope you'll agree that when we discovered these
problems, we worked very closely with you, with David Montoya,
and I want to really recognize him and his team. We are taking
steps specifically in Maine that I think will lead to better
management going forward.
The contracts with the inspectors, the companies that were
doing the inspections, have been rescinded. Those are being
brought back in-house to improve the inspections there. And we
have a very specific plan that we are monitoring for correction
of other quality control and things within the main housing
authority to make sure those are better.
But I think there are lessons, and you rightly point to
this. What lessons can we learn more broadly for the work that
we are doing across the country? And there are really three
things there.
One is, we have to make better use of our existing
resources, staff, and our partnerships with the IG to improve
oversight. We have, in our budget, proposed shifting public
housing staff into field offices to increase direct oversight.
We have also made sure that we are utilizing our
enforcement center, which previously didn't work as closely
with public housing authorities. Just in 2011, and so far in
2012, we have used the enforcement center to review 140 public
housing agencies across the country. And so that is a better
use of existing resources.
The second, we have to do better in coordinating our
inspection systems. To date, we have one inspection system
using REAC for our project-based units in public housing. We
have a separate system for voucher units. What we have started
now is a pilot to use our REAC inspections for quality control
and oversight, where they will go behind local inspectors and
make sure that the results that they're getting are, in fact,
accurate.
And that's something that we plan to expand and
potentially, in the future, to merge those two systems, so we
have a single set of strong standards for inspections across
all our programs.
The third thing is, with your help, the investments we are
making in information technology. Our Next Generation
Management System for our voucher program will allow us to do
things--just to give you one example, right now, we don't have
the ability to look at the photographs that are taken on those
inspections. There's nothing that replaces actually seeing,
with your own eyes, what happens. And this system will allow us
to download and view anywhere in the country the digital
photographs that are taken on the inspections that local
inspectors are doing.
And that's just one example, but there's a whole series of
things in that Next Generation Management System. That's been
one of the two biggest priorities you've had, and you've held
us accountable to invest in those through our information
technology. We couldn't agree more that that's a critical step
we have to take in investing.
Senator Collins. Thank you. I do want to salute you and the
inspector general for your responsiveness to the problems in
Maine and across the country. It is amazing that you don't
download the photographs. I could lend you my BlackBerry.
If even I can do that, it's clearly a feasible step that
should be taken.
Just one very quick point: Another thing I think the
Department really needs to look at is, if you have bad actors
out there, you do have available to you suspension and
debarment tools, where you can prohibit an individual or even
an agency from being involved in your programs for a period of
time. I would encourage you to make more use of those tools in
egregious cases. Thank you.
Secretary Donovan. Thank you.
Senator Murray. Thank you. What's the timeline on being
able to download those pictures? Do you have a----
Secretary Donovan. So we have--and we'll follow up with
detailed information on all the different steps. Those first
pieces of the Next Generation Management System are going into
place this year. I think it is within a few months that we'll
have the photographic capability that I talked about.
SECTION 8 VOUCHER FUNDING
Senator Murray. Sometimes when people know they are going
to be accountable in bigger ways, it makes a huge difference,
so I appreciate that.
And I echo Senator Collins' concerns about short-funding on
the project-based contracts, so we'll be following that very
closely from our end.
You mentioned in your opening remarks that the programs
that directly support the mission of providing housing to low-
income Americans, most of them who are elderly or disabled, is
about 83 percent of HUD's budget. When we have continued
difficult, challenging, constrained resources I know that those
programs place a lot of pressure on HUD's budget.
The largest of those is the Tenant-Based Rental Assistance
program, which, of course, funds the Section 8 vouchers that
are used by residents to find housing in the private market.
In this year's budget, the level of funding that is
requested to renew those existing vouchers is essentially flat.
While the budget does assume savings associated with
programmatic changes, it doesn't appear to be sufficient to
cover the costs of inflation and renewing incremental vouchers
for the first time. I wanted to ask you how you expect PHAs to
maintain their existing voucher portfolios without those
adjustments.
Secretary Donovan. So two things I would say about this,
Madam Chair. First of all, and I think you all have been very
focused on this for a number of years, is how do we balance
making sure we protect every family with sort of bending the
cost curve, if you will, of the renewals on these programs. And
we, through the budget this year, are proposing a whole series
of steps that would allow us to serve the same number of people
and keep the costs relatively flat. Some of those are choices I
think that we could all agree are ones that are common sense
and easy. Some of those are tougher decisions, and we'll
obviously need to discuss with the subcommittee and get your
views and input on whether some of those make sense.
Specifically in the tenant-based program, there are over
$200 million of savings that we are proposing to achieve. The
single-biggest is to change our income targeting in rural
communities to make sure that more of the working poor can be
eligible for vouchers. It is part of the old Section 8 Voucher
Reform Act that we are hopeful will pass in the House in the
coming weeks and that we would be able to implement. I think
there's broad support for those.
But we also have made proposed changes in the medical
expense deductions as well as the minimum rents that would
allow us to serve the same number of people.
So to be very clear, we are maintaining our commitment to
serving all families there. But it did require taking a number
of steps to try to lower costs next year to keep those flat and
to allow us to have lower renewal costs in the out-years.
The other thing I would just say, briefly, is that an
important piece here, as you both recognize, is what it takes
to manage these programs. And we have been very concerned that
we had two housing authorities, Milwaukee and Akron, that
actually turned back HUD-VASH vouchers. I have never seen that
before. Can you imagine the idea of housing authorities saying
we can't serve any more homeless veterans?
And just in January alone, we had 13 different housing
authorities that made the decision to turn back their broader
voucher programs.
ADMINISTRATIVE FEES
Senator Murray. Because of the costs associated with doing
them?
Secretary Donovan. Because they were concerned about the
inability to fund those.
Last year's budget made the very difficult decision to fund
the administrative fees at just over 70 percent in terms of the
overall need. We are proposing a significant increase there to
get above 80 percent. But we still think, even with the
difficult choices that we are making, that there's still some
risk that housing authorities wouldn't have enough.
So particularly that line item of admin fees is a critical
piece that I think we'll need to discuss and work on this year
in the budget.
Senator Murray. Okay. Let me ask you about that because
your request does prioritize funding for Section 8
administrative fees, which have been cut significantly in
recent years. Administrative fees aren't exactly an exciting
part of the budget, but they do fund the basic operations.
I know you struggled with a lot of difficult choices as you
put this together, but can you explain why you prioritized
funding for administrative fees over other needs?
Secretary Donovan. Clearly, the concerns we had that I just
mentioned about the number of housing authorities that have
made the decision not to serve additional veterans, the number
of housing authorities--that just in January alone have
determined that they did not want to continue with their
voucher programs--were critical in terms of that decision.
And let me give you the precise numbers of what has been
happening to administrative fees and what we are proposing.
First of all, in 2012, it was a 74-percent proration that
we estimated for the budget. For 2013, what we are proposing is
an 81-percent proration. Just to give you an example of where
those fees were previously, it was a 90-percent proration in
2010. So even our 81 percent represents a reduction if you go
back a few years.
And that leads to some of the concerns I mentioned, that
even at 81 percent, we were balancing difficult decisions. I do
have some concerns that it won't be enough for some housing
authorities.
But I would also point out that it represents a significant
increase in absolute dollars from where we were last year. And
I'm just looking here for the exact number of what that is to
make sure. Let me get that to you in a moment.
But there's an exact number in terms of the increase that
we are proposing this year in the budget.
Senator Murray. Okay. I have a couple more questions, but
let me turn it over to Senator Collins.
WOOD PELLET BOILER SYSTEMS
Senator Collins. Thank you, Madam Chairman.
I am just going to ask one more question, because I have
been called to the Senate floor, and submit the rest for the
record.
But this one, too, is one that I referred to in my opening
statement and is extremely important to the State of Maine.
Maine is the most heavily dependent of any State in the Nation
on home heating oil. And when you see the spikes in oil prices
that we've seen this year, and the cutbacks in the Low Income
Heating Assistance Program, it is causing tremendous hardship
for so many of our families in Maine.
It is also very difficult because Maine has the oldest
housing stock in the Nation, and thus, there are a lot of homes
that are poorly insulated that would benefit from
weatherization projects. That's something we ought to invest
more in as well.
The large swings in oil have caused many of our residents
to look to alternatives. The wood pellet boiler industry is
growing rapidly in Maine. It has the potential to help out
these families, to allow them to convert from oil, but also to
create thousands of new jobs in our State.
Wood pellet manufacturing, boiler technology, and pellet
delivery systems have progressed dramatically since the days
when you had to scoop pellets from small bags into a small
stove every couple of hours. Now the industry has developed
boilers that don't even require any human intervention during
the day. There are automatic feeds of pellets.
HUD has been slow to consider wood pellet boiler systems as
an acceptable conventional primary heating source. The reason
this is important is that for the purposes of qualifying for
FHA programs, you have to have a conventional primary heating
source.
I wondered if you could tell me if HUD is looking to
include these new wood pellet boilers as a conventional heating
source, which would help more families in Maine have the
confidence that they could convert to wood without losing their
eligibility for FHA and other Federal housing programs.
Secretary Donovan. Senator, first of all, let me thank you
for raising this issue and putting it on our radar screen, so
to speak, at HUD. Just as we talked about with your BlackBerry
a moment ago, I think we could all recognize there are moments
where the Federal Government and government, in general, can be
a little bit behind the cutting edge in terms of new
technologies.
And I'm happy to report not just that we are looking at
this, but just yesterday we updated our frequently asked
questions on our Web site to tell all of our lenders that wood
pellet stoves are an acceptable heating system for homes under
our insurance programs. As long as they meet the qualifications
that any heating system has to meet, it's an acceptable
technology. We are in the process of updating our handbooks to
reflect exactly that.
So not only are we considering it, but we have actually
considered it and made the decision that you were absolutely
right and that we should include these in our program. So thank
you for bringing it to our attention.
Senator Collins. That's absolutely great news. Again, I
thank you so much for your willingness to look at that.
The technology has changed so dramatically, and that's
going to be great news to a lot of homeowners in Maine. Thank
you very much.
Secretary Donovan. Thank you. I'll be coming to borrow your
BlackBerry later.
Senator Collins. Any time.
Senator Murray. Thank you very much, Senator Collins.
Mr. Secretary, your budget assumes savings associated with
programmatic changes to the HUD rental assistance accounts,
including tenant-based and project-based Section 8. You talked
about this a minute ago, but many of those cost-saving
measurements require legislative changes, which would involve
rulemakings.
What will happen to your savings estimates if all of the
proposed reforms are not enacted, or they are enacted late in
this fiscal year and you still need to go through the
rulemaking process?
Secretary Donovan. First of all, Senator, just to get back
on the specific number I was looking for before, the increase
that we are proposing on admin fees is $225 million this year.
So it is a substantial increase, and one we thought, even in a
tough environment, was absolutely critical. And as I said, we
think it is the minimum necessary to try to get more confidence
that housing authorities will actually be able to administer
the programs.
Specifically, on your question about legislative authority,
I'm happy to say that, with your urging, we are working very
closely with your colleagues in the House on the authorizing
committee and in the Senate here, and I am optimistic about
getting that legislation passed.
The large majority of those changes would not require
extensive rulemaking. There are very few that would require
rulemaking. They're really around the old Rent Sup and
Relocation and Acquisition Policies programs, but the large
majority of them we could implement through notice. So if we do
get the legislation passed, we could implement them quickly,
and be prepared for 2013 to be able to implement them and get
the savings that we're projecting.
Obviously, if the legislation doesn't pass, that would stop
us from being able to achieve some, but not all, of the
savings. We do have a share that we could achieve without
legislation. And I'd be happy to follow up with a specific
analysis that shows you precisely which we could do on a
regulatory basis. Of the $920 million that we are proposing
over the major programs, a significant share of it we could do
without any legislative change.
Senator Murray. Okay. If we can see that, that would be
extremely helpful.
Secretary Donovan. Yes.
MINIMUM RENT INCREASE
Senator Murray. But even if HUD was able to achieve these
changes at the beginning of this fiscal year, we have heard
concerns that some of these proposals may harm owners and
tenants alike. Specifically, some are worried about your
proposal for owners to spend down their property reserves that
would jeopardize maintenance and rehabilitation projects.
And I am also really concerned that raising minimum rents
and increasing medical deduction for tenants could put a real
burden on some of these tenants in these still tough economic
times. Can you please talk a little bit about the impact you
might see there?
Secretary Donovan. I'd be happy to. And again, let me
recognize at the outset, these are not decisions we would make
in anything but very difficult fiscal times, making very
difficult choices. And along with the Project-Based Rental
Assistance decision--the short-funding we talked about
earlier--this minimum rent increase was, I think, the single
most difficult decision in the budget.
And I think what's critical is that we need to clarify and
make sure there's a very strong exception policy for anyone
where hardship of that increased rent would result. We are
expecting to do that. We are already working on clarifying and
strengthening that policy. But there's no question that the
impact of this will have some real consequences for families
that are struggling.
We have analyzed fully in which programs what percentage of
families would be affected by this, the average rent increases
that would come out of this. The impact of the minimum rent is
about $150 million itself, across all the programs. And we'd be
happy to share with you the specific impact that it has for the
various tenant-based, project-based, 202/811, all the various
programs, impacts those would have.
RAPID RE-HOUSING PROGRAM
Senator Murray. Okay, I would really appreciate that.
Finally, let me just talk about homelessness funding. I
want to acknowledge your leadership in really developing a
homelessness plan and fostering coordination across
departments. It's so important, and I think we are making
progress there.
I did want to ask you about the Homelessness Prevention and
Rapid Re-Housing Program (HPRP), which was funded in the
Recovery Act and designed to really help homeless families. But
funding for that program ends this year. The Emergency
Solutions Grant program allows communities to continue these
efforts, but on a much smaller scale.
Can you talk a little bit about what the outcomes have been
for HPRP?
Secretary Donovan. Absolutely. I am so glad you asked about
it.
And let me just say, first of all, while you asked about
the HPRP program, without your leadership, we would never have
made the progress that we made on reducing veterans
homelessness. In just 1 year, to have 12 percent fewer homeless
veterans----
Senator Murray. Amazing.
Secretary Donovan [continuing]. Eighteen percent fewer
sleeping on the streets; that is a huge accomplishment. And
your personal leadership around HUD-VASH has made a huge
difference.
Senator Murray. I think the cross-agency coordination on
that has been really----
Secretary Donovan. A huge difference.
So we are concerned about the ending of HPRP, and we're
concerned because it has been so effective. We thought,
originally, it would reach about 500,000 people. It's already
reached more than 1.2 million and still counting.
And one of the best things about it, 75 percent of the
folks it has reached are homeless families, who have often been
the hardest to reach.
And why have we been able to reach more families? Because
what we have realized through doing this, what the data has
shown us, is that for far less money than we expected, we've
been able to stabilize or rapidly re-house families. It might
be 1 month's rent, it might be a security deposit, it might be
just a couple months of utility bills, but that's allowed us to
serve far more people.
And really, I think the most exciting thing about it is,
it's started to reorient many local responses to homelessness,
where for the first time they see that rapid re-housing in
particular is a very beneficial step. It can be particularly
effective with a small amount of money.
EMERGENCY SOLUTIONS GRANT
Our hope is that by continuing to invest in it through the
Emergency Solutions Grant (ESG), and I think one of the reasons
that we proposed a $330 million increase this year for our
homeless assistance grant account is that we have to continue
to invest in ESG. We have to grow the investment there. But it
is never going to be as much as we had in HPRP.
The hope is--and we are starting to see this in some areas,
and Washington has been a leader in this, of shifting
resources, taking them out of, for example, shelters. Shifting
them from Medicaid funding that's going to emergency rooms and
putting them into rapid re-housing is lowering costs overall.
So what we are hoping we see is, with our continued
increased investment in ESG, along with local investments that
complement it, that we will continue to see a focused
investment. We are nervous about that. We are pushing on it. I
know you've been supporting it.
But it is something that I saw locally in New York, our
prevention efforts, our rapid re-housing efforts. It was
something we were willing to shift our funding into, and that's
something we want to encourage at the local level.
Senator Murray. Okay. And I'll be following that very
closely. So anything you can show us on that, that helps paint
that picture, I'd really, really appreciate it.
But again, I appreciate the tremendous work of you and your
entire staff on an issue that has been at the forefront of our
Nation. Although sometimes nobody really pays attention to the
programs, they really are essential in getting us back on
track. And you've done a great job, and I truly appreciate it.
Secretary Donovan. Thank you. Thank you for your leadership
and partnership.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. Thank you so much for your accommodation
today. And we are going to leave the hearing record open for
anyone who would like to ask 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
information technology modernization-fha modernization project
Question. Reliable Data is critical to effective oversight. Time
and again the lack of good data has hindered HUD and the committee's
work. You recognize the challenges with HUD's systems and the
limitations they place on effective program management. To your credit,
you have requested significant funding to update HUD's IT systems. The
two biggest IT projects underway are FHA Modernization and the Next
Generation Voucher Management System, which have been priorities for
this committee.
While new technology has the potential to transform departmental
operations, modernization is a big undertaking for HUD. In response,
HUD is also changing the way it manages its IT systems. This involves a
change in culture, which is never easy. What is the current status of
your IT modernization efforts and these specific projects? Given the
significant changes needed in process, skills, and personnel, how will
you ensure that these projects stay on track and on budget?
Answer. The goal of the FHA Modernization project is to provide
business process improvements and technological tools that will address
longstanding constraints that have been impediments to effective risk
management in our underwriting policies and practices; more robust
fraud monitoring and detection; counterparty management, and portfolio
analysis. The scope of the project includes incorporating a
decommission plan for each legacy system targeted for replacement.
Benefits of the FHA Modernization capital investment are being realized
today.
The cornerstone of the FHA Modernization effort is the acquisition
of what is branded as ``the Federal Financial Services Platform.'' This
investment is a configuration of commercial-off-the-shelf products
which aligns FHA with products and services used by our industry
partners. Moreover, the investment aligns and establishes the baseline
for HUD's new and future enterprise architecture. This platform can
ultimately be extended and provides the capability and capacity to
replace the Unisys and IBM mainframe systems at some logical point in
the future. Eighty percent of the initial planned environments are
built out on the Oracle Exalogic platform; 100 percent by August 31,
2012. A requisition for additional Oracle Exalogic hardware/software is
in the procurement pipeline. This additional capacity positions us to
accept requirements from other offices in the Department (e.g., Public
and Indian Housing (PIH), Next Generation Management System (NGMS)
projects); accordingly, this achieves true enterprise capability and
demonstrates scalability.
Another element of FHA Modernization is the Lender Electronic
Assessment Portal (LEAP) application which consists of four modules
(i.e., Approval, Recertification, Monitoring and Enforcement) that are
in various stages of development and production. Today LEAP automates
what largely has been a manual and paper intensive process. The LEAP
application wholly aimed at improved counterparty (i.e., lender)
management, addresses vestiges of risk and fraud at the front end (or
origination) of the loan rather than relying on antiquated process
during the post-endorsement process. The Approval module went live in
April 2012 and is successfully processing a steady volume of requests.
The Recertification generation I module is slated for operational
capability in the second quarter of fiscal year 2013 with design and
development of the other modules in ensuing months; LEAP is projected
to achieve full operational capability in the first quarter of fiscal
year 2014. Consistent with addressing significant constraints on risk
and fraud detection, the Loan Review System (LRS), Portfolio Evaluation
Tool (PET), and Automated Underwriting System capabilities are slated
to achieve operational capability in early fiscal year 2014. This
complementary set of tools and capabilities effectively provide
decision support (and analytics) at every step in the process of the
loan lifecycle, from origination through post-endorsement technical
review.
Over the past 2 years, FHA has improved its project management
capacity. The FHA Modernization project is staffed with a cadre of
experienced and certified IT project managers, who are working
exclusively on FHA initiatives. HUD continues to invest in project
management training and makes this training available annually as part
of its HUD Virtual University Curriculum. Over the past 2 years, FHA
has actively incorporated HUD's Project Planning and Management (PPM)
framework to increase the occurrences of successful project
implementation. Information on the number (and types) of certified
project managers is readily available. The PPM approach provides a
process-centric methodological framework that is central to eliminating
waste, reducing variation and ensuring projects maintain time, scope,
cost, and quality congruence. The FHA Modernization effort has
tremendous reach to effect sustained productive outcomes and eliminate
constraints in the areas previously mentioned (e.g., counterparty
management, portfolio analysis, etc.), the current culture and business
practices will be modified to take full advantage of improved workflow
processes, customer relationship management and improved data outputs.
As new systems are brought online, staff will be trained. Training
modules and on-demand refresher courses will be developed for ongoing
capacity building. Hiring managers will seek to hire technology savvy
candidates to maximize the capacity of FHA staff at headquarters and in
the field.
NGMS is being engineered to serve as HUD's enterprise solutions for
the Rental Housing Assistance (RHA) line of business (LOB). Currently,
HUD provides rental housing assistance to more than 4.4 million
households through at least 13 different programs, each with different
rules administered by the Offices of Public and Indian Housing,
Housing, Multifamily Housing and Community Planning and Development.
Currently, RHA operations relies on manual manipulation of data
using Microsoft Excel and Microsoft Access, which are time-consuming,
costly, inefficient, and prone to human errors. Despite these
limitations, HUD continues to rely on these tools to execute critical
functions that support HUD's mission. With the investment in NGMS, as
an enterprise solution for the RHA LOB, HUD strives to improve
operating and administrative efficiencies in providing needed services
to its constituents.
During the past years, with the help of contractors, HUD conducted
searches for an automated enterprise solution to satisfy requirements
of RHA LOB. This was very challenging because of inherent business and
organizational complexities.
The NGMS program previously focused efforts on the development of
the Next Generation Voucher Management System (NGVMS). Since then, the
program has been re-focused to include needed functionality to support
HUD's RHA LOB. NGMS now focuses on:
--The activities necessary to develop, test, and implement Oracle
Enterprise solutions as the standard technology and platform
for NGMS; and
--Planning a new path forward for NGMS.
HUD has taken several positive steps to ensure the success of the
NGMS program, including:
--Establishing a cross-organization Executive Steering Committee that
provides program oversight and ensuring appropriate
representation from the IT and business communities;
--Establishing a technology training program for HUD personnel;
--Working with the Chief Procurement Officer to enforce contract
administration;
--Hiring a new overall program manager who reports directly to the
General Deputy Assistant Secretary;
--Establishing a Program Management Office (PMO);
--Supporting the PMO's efforts to improve program performance;
--Implementing active oversight of the program;
--Establishing a NGMS system change control process; and
--Establishing an Executive Steering Committee (ESC).
Going forward the overall program manager (PM) will be held
accountable for the following:
--Earned value management;
--Performance reporting;
--Status reports;
--Risk tracking and mitigation;
--Issue tracking;
--Stakeholder reporting;
--Working with HUD's Chief Information Officer and IT vendors to make
sure business and functional requirements are properly
developed, tested, and implemented; and
--Working with HUD's Chief Information Officer and oversee
Independent Verification and Validation (IV&V) of developed
NGMS modules.
The NGMS program has clearly learned important lessons from the
previous challenging efforts. With the formal establishment of the PMO,
the NGMS program, with direct oversight from the Deputy Secretary,
structured development and execution efforts will allow the program to
produce expected results and to avoid repeating past missteps.
Leveraging the Chief Technology Officer's knowledge and past
experiences and the Federal Housing Administration's experiences, HUD
chose Oracle Corporation technologies as the technology platform of
choice for NGMS.
In conjunction with the Chief Procurement Officer and the Chief
Information Officer, the NGMS PMO is in the process of executing the
following tasks:
--Issuing task order for Requirement Definition for RHA LOB--August
2012;
--Defining business priority for the RHA LOB--August 2012;
--Developing NGMS program project plan--August 2012;
--Exploring the use of other agency's Governmentwide Acquisition
Contract for architect, design, engineering and
implementation--Ongoing;
--Issuing task order for PMO support--August 2012;
--Issuing task order for Independent Verification and Validation--
September 2012;
--Developing training strategies for HUD technical employees--August
2012; and
--Updating business plan and Alternative of Analysis--August 2012.
Once completely implemented, NGMS will have included modules that
will satisfy business requirements from offices across HUD. While all
required NGMS modules are being finalized, the following modules are
being considered as NGMS priorities and will be included in Phase I
development:
--Budget forecasting and formulation;
--Cash management;
--Customer relationship management;
--Portfolio management; and
--New robust RHA data architecture.
information technology modernization
Question. When do you think that we will begin to see the results
of these efforts?
Answer. Benefits of the FHA Modernization capital investment are
being realized today. Acquisition of the Federal Financial Services
Platform (using Oracle Exalogic hardware, featuring the integrated
Fusion Middleware software stack) is the cornerstone IT investment.
This platform ultimately has enterprise extensibility and provides the
capability and capacity to replace the less agile Unisys and IBM
mainframe systems at some logical point in the future. Eighty percent
of the initial planned environments have been on the Oracle Exalogic
platform; 100 percent will be built by August 31, 2012. A requisition
for additional Oracle Exalogic hardware/software is in the procurement
pipeline. This additional capacity positions us to accept requirements
from other Offices in the Department (e.g., Public and Indian Housing
(PIH), Next Generation Management System (NGMS) projects), and Policy
Development and Research. Accordingly, this achieves true enterprise
capability and demonstrates scalability. The Lender Electronic
Assessment Portal (LEAP) application consists of four modules (i.e.,
Approval, Recertification, Monitoring, and Enforcement) that are in
various stages of development and production. Today, LEAP automates
what largely has been a manual and paper- intensive process. The LEAP
application wholly aimed at improved counterparty (i.e., lender)
management, addresses vestiges of risk and fraud at the front end (or
origination) of the loan rather than relying on the current antiquated
reviews at the post-endorsement process. The Approval module went live
in April 2012 and is successfully processing a continuous volume of
lender requests. The Recertification Generation I module is slated for
operational capability in the second quarter of fiscal year 2013, with
design and development of the other modules in ensuing months, LEAP is
projected to achieve full operational capability in the first quarter
of fiscal year 2014. In April 2012, FHA staff was given real-time
online access to access to borrower and collateral risk analytical
tools that have improved the capacity of FHA to capture data that is
currently not collected in existing systems. These data profiles help
to identify emerging fraudulent trends and practices. Consistent with
addressing significant constraints risk and fraud detection, the Loan
Review System (LRS), Portfolio Evaluation Tool (PET), and Automated
Underwriting System capabilities are slated to achieve operational
capability in the first quarter of fiscal year 2014. This complimentary
set of tools and capabilities effectively provide decision support (and
analytics) and every step in the process from loan origination through
post-endorsement technical review.
meeting the housing needs of women veterans
Question. In recent years, homelessness among women veterans has
increased significantly, posing challenges for the VA. For example,
many of the programs that traditionally serve homeless veterans aren't
open to families, posing a barrier to homeless women veterans who have
children. HUD-VASH has been one tool that has been successful in
housing veterans with families, but we need to do more to make sure the
needs of women veterans are met.
GAO recently released a report that I requested on meeting the
housing needs of women veterans. It recommends that both HUD and VA
improve data collection. What steps is HUD taking to obtain better data
on homeless women veterans and how are you coordinating these efforts
with the VA?
Answer. Beginning in 2013, HUD will begin to identify women
veterans as an individual element in its annual sheltered Point-in-Time
(PIT) count and biennial unsheltered PIT count of persons experiencing
homelessness. These PIT counts are administered by HUD's homeless
providers and reported to HUD through our annual Continuum of Care
grant competition.
HUD's coordination efforts with the VA include frequent meetings
with senior leadership and staff of both agencies under our ``Solving
Homelessness as One'' initiative and conducting ``Housing First Boot
Camps'' with HUD-VASH communities to increase the coordination and
performance of participating Public Housing Agencies and VA Medical
Centers. The Department is also planning another HUD-VASH Webinar in
September 2012, part of HUD's ``Ready, Set, Go'' training and education
series. This joint Webinar will focus on increasing the participation
of local Continuum of Care systems in the planning and implementation
of the HUD-VASH program.
Female veterans and veterans with families are a particular focus
of the Veterans Homeless Prevention Demonstration Program. HUD is
currently administering this $10 million demonstration program at five
sites, in collaboration with the Department of Veterans Affairs and the
Department of Labor. This program is designed to explore ways HUD can
offer early intervention homelessness prevention for veterans. Through
this program, HUD is gathering data on veterans, including female
veterans, who are assisted. There will also be an evaluation of the
demonstration which will examine the effectiveness of efforts to assist
female veterans in preventing homelessness.
______
Questions Submitted by Senator Herb Kohl
changes in medical deduction for section 8
Question. One of the proposed section 8 savings measures included
in the 2013 budget is a provision which will increase the threshold for
the unreimbursed medical deduction from 3 percent of a senior's income
to 10 percent of a senior's income. As chairman of the Aging Committee,
I am concerned that this policy will have a disproportionate impact on
seniors with low incomes and high unreimbursed medical expenses,
causing untenable rent increases. Not only do these seniors face paying
for medical expenses that are currently reimbursed, but they will also
be faced with a substantial monthly rent increase. I am concerned that
vulnerable seniors will be forced to choose between paying their rent
and buying food, or taking their medications or obtaining needed
medical procedures if the co-payment is too high. What do you estimate
the savings to be from this new requirement?
Answer. The figure of $165 million is the amount of the medical
deduction savings.
Question. Will HUD provide a hardship exemption for poor seniors
where this change in the medical deduction creates a rent increase that
is too onerous?
Answer. The President's budget does not contemplate a hardship
exemption. Such an exemption would result in substantial administrative
burden for PHAs and owners, and the reduction of administrative burden
was an important goal of the proposal. The current deduction does not
assist the lowest income seniors, who are eligible for Medicaid and
therefore receive no additional subsidy under this provision. The
proposal would align HUD assistance policy with the Internal Revenue
Code, which allows for deductions for healthcare costs above 10 percent
of income but not below that level.
rental assistance
Question. While I appreciate HUD's intent to stretch section 202
dollars further and the request funding for new development under the
section 202 program, I have a number of concerns and questions about
the proposals as described in the budget.
While I support the idea of mixed-income developments, I am
concerned that the administration's proposal for rental assistance may
be a mix that is infeasible. Rents will simply have to be too high in
the non-202 units to cover the cost of debt service. Has HUD done any
analysis of the amount of operating costs and/or debt service the
requested PRAC amounts will support?
Answer. Section 202 currently only provides on-going subsidy
sufficient to cover a project's operating costs absent debt service.
However, the Low Income Housing Tax Credit program produces
approximately 100,000 affordable units each year. Of these, HUD
estimates approximately 40 percent are set aside for elderly only
affordable housing. The large majority of these elderly affordable tax
credit projects are financed with permanent debt from the properties'
net operating income (tax credit restricted rents less operating
expenses). Non-section 202 tax credit rents are almost always in excess
of operating expenses and therefore sufficient to leverage debt
financing. HUD is currently assessing allowing section 202 rents to
include debt service as an eligible expense (as it currently does under
the section 8 program), such contracts would be capped at fair market
rents which in almost all jurisdictions are greater than tax credit-
restricted rents.
Question. Do you have any intention of requesting a change in
authority so that the Project Rental Assistance or operating assistance
that you are requesting (without capital advances) can cover debt
service?
Answer. Under existing statutory authority, HUD determines eligible
costs allowed under section 202 Project Rental Assistance contracts.
However, debt service is not currently an allowable expense under
existing administrative rule making, as codified under 24 CFR part 891.
HUD is assessing the possibility of providing some limited regulatory
relief along those lines.
section 202 prac units
Question. A necessary part of successful models of ``aging in
place'' is the role of service coordinator. I am concerned that
projects with a limited number of 202 PRAC units are unable to pay for
the cost of the required service coordinator. To date, few tax credit
or privately financed senior housing developments have been able to
afford a service coordinator. The service coordinator should available
to help the entire senior resident population, not only for the PRAC-
assisted units. Can you comment on how you intend service coordinators
to be supported?
Answer. Tax credit or privately financed senior housing typically
serves a more affluent, younger, and healthier elderly population than
the section 202 program. These households typically have less service
needs and/or have additional resources to directly access services on
their own. However, having a service coordinator in place to serve this
population is important, particular as those households age in place.
For the last 10 years, the section 202 program has accommodated mixed-
finance projects that include some units financed with tax credits and
other sources and some units that were financed with section 202 PRAC
assistance. Going forward, similar to what HUD has historically allowed
under the mixed-finance program, the section 202 units could cover the
costs of a part-time service coordinator. Compensation for a full-time
service coordinator could be provided either by including a service
coordinator line-item as an operating expense on the non-202 units or
by relying on funding from local area Agencies on Aging or other local/
philanthropic sources.
______
Questions Submitted by Senator Patrick J. Leahy
impact of cuts to the community development block grant program and
home investment partnerships program on rural areas
Question. Mr. Secretary, on that topic, two of the most effective
programs Vermont and rural States around the country have come to rely
upon have been the Community Development Block Grant (CDBG) Program and
the HOME Investment Partnerships Program. The CDBG Program is one of
the most effective Federal programs to revitalize communities with
proven results. CDBG helps to fund homeownership assistance, housing
rehabilitation, economic development projects and improvements to
public services while creating jobs, efforts I know the Department
supports. However, the communities that rely on this funding to serve
their most vulnerable residents, principally low- and moderate-income
persons, have been negatively impacted by recent cuts to the program
totaling 28 percent in the last 2 years alone. The CDBG formula
allocation has been cut by over $1 billion since 2000 and the level
funding request would keep this allocation at its lowest funding level
since 1992. These cuts have left State CDBG programs oversubscribed.
During Vermont's most recent grant round, nearly three out of four
projects submitted were denied funding. This directly translated to
Vermont creating one quarter the number of requested affordable housing
units; this translated to the inability of Vermont to create three out
of four proposed new jobs; and it left millions of dollars in State,
local, and private dollars usually leveraged by the CDBG program on the
table.
The HOME program serves as the largest Federal block grant program
to State and local governments designed exclusively to produce
affordable housing for low-income families. Since Congress created the
program it has been the cornerstone in the United States' affordable
housing finance system. HOME provides a flexible resource to meet the
communities' highest priority affordable housing needs. At a time when
States continue to face significant affordable housing shortages, the
program has helped produce more than 1 million affordable homes
nationally and helps approximately 143,000 families secure affordable
housing each year. Funding for the HOME program has also successfully
leveraged more than $88 billion of public and private funds for
affordable housing.
Despite recent criticisms of the program, the vast majority of HOME
projects are completed successfully, on time and with surprising
success given the impact of the current housing and economic crisis.
The HOME program has continued to provide much needed funds to local
communities for tenant-based rental assistance, rehabilitation of
affordable rental and ownership housing, and construction of affordable
housing. Additionally, the HOME program provides down-payment
assistance to help creditworthy families become homeowners, and housing
vouchers to low-income families and those on the brink of homelessness.
HOME funds often assist seniors, persons with disabilities, and the
homeless in ways which directly respond to local priorities and needs.
As the need for affordable housing continues to grow, for many States
and local governments HOME is the only reliable funding for affordable
and special needs housing development available. Despite the growing
need for HOME funds this program faced a 38-percent cut in last year's
funding bill.
Mr. Secretary, in your testimony you pointed to the Department's
support of the Community Development Block Grant Program and HOME
Investments Partnership Program as the primary assistance the
administration provides to rural communities. When I look at the
overall budget request, one that sustains significant cuts, I see a
shift of priorities that heavily favors urban communities over rural
ones. I am concerned about what this level of funding would mean for
these programs, and particularly concerned about what they mean to
rural America. Do you feel the funding request for CDBG and HOME
adequately addresses the housing needs of rural communities given the
current oversubscription of the programs?
Answer. HUD recognizes that the economic downturn has dramatically
impacted rural communities across the country, and the Department
remains committed to continuing its investment in rural America. The
administration was required to make very difficult decisions during the
fiscal year 2013 budget development process, and HUD supports the
requested level of funding for CDBG and HOME given the current fiscal
situation. The requested levels should not disproportionately impact
rural communities. Both the CDBG and HOME programs are formula
programs. Consequently, the proportion in distribution of funding
between urban and rural areas will remain the same.
The CDBG request will provide more than $880 million for the State
CDBG program in fiscal year 2013. While HUD acknowledges the requested
funding level is the same as the request for fiscal year 2012 and
results in a $116 million decrease for States below the fiscal year
2011 appropriated level, it is important to remember that grantees have
a great deal of discretion regarding the development of programs that
best meet the needs of their communities. Grantees may have to rethink
how they prioritize CDBG funding to have the greatest positive impact,
and HUD will continue providing the resources and technical assistance
necessary to assist grantees in achieving the highest level of
performance and positive outcomes from CDBG allocations.
The HOME request will provide more than $400 million for State HOME
participating jurisdictions in fiscal year 2013. While HUD acknowledges
the requested funding level is the same as the fiscal year 2012
appropriation and results in level funding for States and is also 38
percent below the fiscal year 2011 appropriated level, it is important
to remember that, like CDBG, State-participating jurisdictions have a
great deal of discretion regarding the location of HOME projects that
best meet the needs of their rural communities. Just as in CDBG,
participating jurisdictions may have to rethink how they prioritize
HOME project funding and HUD will continue to provide the resources and
technical assistance necessary to assist them.
impact of cuts on rural areas
Question. What steps is the Department taking to ensure budget cuts
do not disproportionately impact rural communities?
Answer. The administration was required to make difficult decisions
during the fiscal year 2013 budget process. Despite the subsequent
reductions in funding requests for some of HUD's programs, these
reductions should not disproportionately impact rural communities. Both
the Community Development Block Grant and the HOME Investment
Partnerships programs are formula programs. Consequently, the
proportion in distribution of funding between urban and rural areas
will remain the same, though the actual dollars allocated will be
reduced as a result of smaller appropriations.
The Department recognizes the importance of the CDBG program for
rural areas and works with grantees to help them carry out successful
programs while adhering to the requirements of the Housing and
Community Development Act of 1974, as amended. From CDBG program
inception to 1981, HUD administered a small cities CDBG program,
awarding 20 percent of formula funds on a competitive basis. In 1981,
Congress formally established the State CDBG program. This statutory
change required 70 percent of CDBG funds allocated by formula go to
entitlement jurisdictions, and the other 30 percent go to non-entitled
communities (small cities, small towns, and rural areas). This
provision, referred to as the 70/30 split, remains in place to date.
By statute, 40 percent of the annual appropriation for HOME is
allocated directly to States. In 24 CFR 92.201, the HOME program
regulation requires that ``Each State participating jurisdiction is
responsible for distributing HOME funds throughout the State according
to the State's assessment of the geographical distribution of the
housing needs within the State, as identified in the State's approved
consolidated plan. The State must distribute HOME funds to rural areas
in amounts that take into account the non-metropolitan share of the
State's total population and objective measures of rural housing need,
such as poverty and substandard housing, as set forth in the State's
approved consolidated plan. To the extent the need is within the
boundaries of a participating unit of general local government, the
State and the unit of general local government shall coordinate
activities to address that need.''
Both of these block grant programs leave the distribution of the
grant funds for small cities and rural areas to the individual States.
Statutorily, each State has a broad discretion on how to prioritize the
use of these funds. HUD continues to offer support to States, small
cities, and rural areas that will help them discover areas with the
highest level of need.
proposed rule for home
Question. Mr. Secretary, I commended the Department's efforts to
improve the monitoring of the HOME program following last year's
criticism highlighting some unfortunate delays and mismanagement in an
otherwise successful and cost-effective program. I am, however,
concerned about the Department's proposed regulation to address these
criticisms. The proposed HOME Program rules appear to have a
disproportionate impact on rural HOME programs despite the fact that
rural communities have dependably ranked as some of the most efficient
and effective recipients of HOME program funding. I know my home State
of Vermont has been awarded two HOME Program Doorknocker Awards and has
consistently been ranked first among State-participating jurisdictions
over the past 6 years based on their administration of the HOME
program. And yet, the proposed regulation would make it difficult, and
in some cases impossible, for rural communities to continue to use HOME
funding.
Of particular concern is the change in how Community Housing
Development Organizations (CHDOs) are required to demonstrate capacity.
The proposed rule would require CHDOs to have paid staff with
development experience and will not allow them to rely on consultants
to demonstrate capacity. This requirement will undoubtedly negatively
impact small rural CHDOs who rely on small staffs and often
partnerships with groups in the community with housing development
experience.
Additionally, the proposed changes to the set aside requirement
changes the definition of ``sponsor'' in a way that would require the
CHDO to be the sole general partner in a limited housing partnership.
In Vermont this would be a significant problem as our CHDOs often are
partners with Housing Vermont, a Statewide nonprofit syndication and
development company.
While I understand the intent of the proposed rule, I worry that
the rule contains changes could have unintended consequences which
could prove to be costly, duplicative or time-consuming especially for
participating jurisdictions and States in rural areas with limited
staff and resources.
In preparing the proposed regulation how did the Department take
into consideration the often unique circumstances facing rural
communities using HOME funds and what steps were taken to ensure that
this regulation would not negatively impact small rural communities?
Answer. In preparation for the publication of the Proposed HOME
Rule, the Office of Affordable Housing conducted ``Listening Sessions''
with both Statewide and local stakeholders. At the stakeholder meeting
held with State agencies on January 14, 2010, HUD asked ``Do rural
Participating Jurisdictions (PJs) have any particular comments or
concerns about the administration of the HOME program?'' Several States
provided input on the challenges experienced by CHDOs and expressed
concern about the lack of capable CHDOs in rural areas. Many States
expressed the opinion that most CHDOs could not be expected to
undertake complex housing development due to their lack of capacity.
Several suggestions addressed ways to provide CHDOs with more funding
for operating costs (e.g., salaries for experienced staff), including
monitoring fees, and different structures for developer fees. To
mitigate some of those concerns, the Department has also made clear in
the proposed rule that project-related soft costs can be paid for with
HOME funds (e.g., underwriting, market analysis).
In summary, with respect to the performance of CHDOs, and in
particular, the performance of CHDOs in rural areas, the Department
received input prior to rulemaking and public comments on the proposed
rule regarding proposed changes to definitions and requirements related
to CHDOs. HUD acknowledges the concerns raised by commenters,
particularly regarding the effects of some of the provisions on rural
areas. HUD has carefully considered these comments in drafting the
final rule. The Department will provide technical assistance to PJs and
CHDOs to help them meet the new requirements.
Question. Will you commit to working with me and my staff to ensure
that when a final rule is published by HUD later this year that
accommodations for small, rural States and CHDOs are made?
Answer. The Department has given careful consideration to the
comments it received on the proposed rule, including comments regarding
the effect of proposed changes on rural areas. The Department is
confident that many CHDOs in rural areas will be able to increase their
capacity in order to be in compliance with the Final Rule. The
Department will offer several different types of technical assistance
and examples of best practices that will assist States with rural areas
and CHDOs in rural areas to modify their programs and build capacity in
order to meet the new requirements of the HOME Final Rule. The new
OneCPD Resource Exchange, https://www.onecpd.info/, will also provide a
forum for CHDOs and States to engage in peer-to-peer assistance.
______
Question Submitted by Senator Susan M. Collins
duplicative economic programs
Question. The Government Accountability Office notes in its 2011
follow up report on duplicative economic development programs that HUD,
Commerce, SBA, and USDA have made minimal progress collecting data and
assessing the effectiveness of their overlapping economic development
programs. Further, HUD is the only agency of the four identified to not
yet have taken steps to define common outcomes with other Federal
agencies. I know that building collaborative relationships is an
important goal of yours. What limits your ability to reach common goals
and results with other agencies?
Answer. HUD strongly agrees with the concept of collaboration, and
it continues to work with other agencies to ensure that its grants are
effective and useful to the communities they are meant to serve.
HUD's core community and economic development program, the
Community Development Block Grant program (CDBG), is distinct from
programs administered by other agencies in both its objectives and
design. It has a statutory requirement that grantees expend in excess
of 70 percent of grant funds on activities that benefit low- and
moderate-income persons. In addition, the CDBG authorizing language is
clear that funding priorities and other decisions are to be made at the
State and local levels; the program provides grantees with a high
degree of flexibility to respond to local economic conditions with
priorities tailored to meet those needs. As a result, many of the
program's intended outcomes are unique from those of other Federal
economic development programs. This has made it difficult to coordinate
goals and results with other agencies. However, CDBG has been a major
factor in allowing these other programs to be effective: Grantees
regularly leverage CDBG funds with these other Federal grant programs
and private resources to achieve common goals.
Despite these differences, HUD, through the Office of Economic
Development, has initiated collaborative discussions with several
agencies administering economic development programs. These
conversations are intended to provide information to HUD grantees to
assist them in making strategic investments of block grant and
competitive resources. HUD plans to disseminate information gained
through these collaborative efforts using the OneCPD Resource Exchange
Web site, the Department's new online portal designed to share news,
events, resources, and information on all HUD Community Planning and
Development programs.
While, due to differences in program objectives and design, HUD may
not be able to fully align CDBG with other Federal economic development
programs, it does strongly believe that collaboration with other
programs can help make sure that it is effective in building strong
communities across America.
______
Questions Submitted by Senator Roy Blunt
fha's solvency
Question. As one of the only games in town, the Federal Housing
Administration (FHA) continues to have a ballooning portfolio, well
above the intended size. As the Administration's white paper proposes
various reform options for the Government-sponsored enterprises (GSEs)
Fannie Mae and Freddie Mac, how can the Department of Housing and Urban
Development (HUD) ensure that FHA won't become the lender of last
resort for home loans should the private market move slowly to fill the
space where the GSE once operated?
Answer. FHA plays a counter-cyclical role in the housing market,
experiencing higher volume during times of market constriction and
lower volumes when there is sufficient access to mortgage capital in
the conventional market. Regardless of the market environment, FHA
loans are typically 30-year, fixed-rate products and lenders
originating these loans must follow FHA guidance in originating and
servicing these loans. Since 2009, FHA has made significant changes to
credit policy to ensure that future books of business continue to yield
positive economic value to the fund. In addition, FHA has adopted a
number of measures that hold lenders accountable for their actions,
including, among others, rules that require lenders to indemnify FHA on
loans found to be materially deficient. FHA is still seeking
legislative authority to pursue indemnification and other heightened
enforcement authority with respect to all FHA approved lenders. FHA has
also enhanced its underwriting guidance and modified its automated
mortgage scoring system to require more underwriter oversight of
riskier loan applications. Finally, FHA's loss mitigation strategies,
already considered among the strongest in the mortgage industry, have
been further improved to protect both homeowners as well as FHA. Taken
together, these actions are designed to ensure that creditworthy
borrowers have a safe and affordable means of obtaining homeownership
while at the same time encouraging only responsible lending on the part
of FHA's approved mortgage lenders. As the economy continues to recover
and FHA's counter-cyclical role becomes less critical, FHA and HUD will
work with the broader administration and Congress on efforts to ensure
that FHA's role in the market does recede and a stable, sustainable
housing market evolves.
Question. The administration's budget once again requests increases
in MMI premiums to help strengthen the fund. While I'm encouraged by
the increase in liquidity to protect against risk to the solvency of
the fund, I question whether the already bloated portfolio will grow in
2013 rather than shrink as your budget assumes. What steps are being
taken to encourage private lenders to originate quality, non-FHA
insured loans? How can HUD encourage the private market to provide home
loans for minorities who disproportionately rely on FHA's Government
guarantee?
Answer. In February 2012, HUD announced an increase in both FHA
annual and upfront mortgage insurance premiums, effective in April
2012. The decision to adjust FHA premiums for the fourth time since
2009 was made by balancing several factors--FHA's mission of providing
access to credit for low wealth, creditworthy borrowers, the health of
the Mutual Mortgage Insurance Fund and FHA's long-term role in the
Nation's housing finance system. As a result of these premium
adjustments, FHA has been able to continue to serve its countercyclical
role in the mortgage market--providing access to credit to creditworthy
borrowers during this time of market constriction--but has seen overall
volume decline. According to Amherst Securities' June 14, 2012, Amherst
Mortgage Insight Report, the composition of FHA loans in Ginnie Mae
securities has actual declined. This is in large part because these
pricing changes have made conventional loans more competitive; high
FICO borrowers who may have chosen to take out an FHA-insured loan
rather than a loan with private mortgage insurance are now finding the
costs of private versus federally backed mortgage insurance more
comparable. However, adjusting premiums is only one lever. Currently,
FHA is the only federally backed institution able to originate high-
priced loans (loans above $625,500). As a result, borrowers seeking
these ``jumbo'' loans only have one outlet--FHA. In its housing finance
reform white paper, the Administration urged Congress to allow the
higher loan limits to expire. Unfortunately, in November 2011, Congress
elected to extend these limits for FHA while allowing the GSE loan
limits to go back to pre-crisis levels. This does create a disincentive
to originate non-FHA loans in some markets and so we would once again
urge Congress to allow FHA loan limits to step back to the HERA levels.
government-sponsored enterprises
Question. The future of Fannie Mae and Freddie Mac remain uncertain
at this point but I am interested in hearing your views. What are your
views about the future of Fannie and Freddie? If Fannie and/or Freddie
continue to exist in some form, what are your views on reconciling the
conflicting goals of private profits and public good? How important are
the mortgage GSEs to carry out Federal housing policy?
Answer. The administration is currently working diligently on a
number of interagency projects set forth in the white paper that was
published in February 2011, including a detailed exploration of the
three options for the future of housing finance. Of those three
options, the third one does provide considerations around maintaining
some Government presence through a model that would serve as a back-
stop in the form of reinsurance behind significant layers of private
capital at a guarantor level. Below is greater detail on the strengths
and weaknesses of this third option. However, to be clear, the
administration is still working with a number of stakeholders,
including Members of Congress, to fully explore all three.
At the same time, the administration is equally engaged on topics
that directly involve the GSEs, such as the development of national
servicing standards, a transition plan for the wind down of Fannie Mae
and Freddie Mac from their current status and reducing the footprint of
the Federal Housing Administration (FHA). It is important to remember
that the FHA and GSEs continue to provide an important source of credit
availability as Government and industry work collectively to reduce the
barriers of uncertainty that block a robust return of private capital.
Thus, while the administration supports decreasing the role of FHA,
Fannie Mae, and Freddie Mac and re-invigorating the private market, we
also believe that any approach must be measured and comprehensive to
address the tensions your questions above elicit.
homelessness
Question. In your testimony, you say that HUD and the VA have
partnered for the past 2 years to make strides in ending veteran
homelessness by 2015. While I appreciate the ambitious goal and the
collaboration between these two agencies, how will your fiscal year
2013 budget address the significant increase in homelessness for
veterans in Missouri?
Answer. HUD is aware that the number of homeless veterans in
Missouri has increased from 529 veterans in 2009 to 853 veterans in
2011 and is working hard to end veteran homelessness. Despite the
significant current economic challenges, in the fiscal year 2011
Continuum of Care competition, Missouri was awarded $27,371,596, an
increase upon the $27,357,782 awarded in 2010. In 2012, HUD allotted
100 HUD-VASH vouchers to the State of Missouri, doubling the number of
HUD-VASH vouchers allotted to Missouri and bringing the total number of
vouchers to 495 Statewide. HUD will continue to request funding in
order to address the significant increase in veteran homelessness in
Missouri and elsewhere.
HUD is currently administering the $10 million Veterans Homeless
Prevention Demonstration Program at five sites in collaboration with
the Departments of Veterans Affairs and Labor. This is a 3-year
demonstration designed to explore ways HUD can offer early intervention
homelessness prevention for veterans--primarily veterans returning from
the wars in Iraq and Afghanistan. While none of the sites for the
demonstration is in Missouri, the lessons learned will be important in
addressing the unique needs of these veterans and will support efforts
to identify, reach, and assist them to regain and maintain housing
stability. An evaluation of the program will also provide HUD with
additional information to inform programs addressing means of
preventing homelessness among veterans in the future. HUD expects to be
able to provide preliminary results which will guide us in policy
formation.
Question. How does your budget ensure that those who have received
assistance for adequate housing won't become homeless again?
Answer. Performance metrics codified in the Homeless Emergency
Assistance and Rapid Transition to Housing Act (HEARTH Act) of 2009
require communities to be able to track length of homelessness,
recidivism rates, and the number of persons experiencing homelessness
for the first time. Under the HEARTH Act, additional funding is
provided to communities to conduct planning and evaluation, including
this performance measurement. HUD's fiscal year 2013 budget includes a
request for the funds needed to continue the transition to the
McKinney-Vento Homeless Assistance Act, as amended by the HEARTH Act.
As communities receive the funds necessary to conduct these critical
evaluations they will be able to better ensure that persons who enter
the homeless system will be served with the most appropriate
interventions to stabilize their housing and foster independent living.
Question. Do you believe that there is enough emphasis placed on
prevention and homebuyer education to prevent another crisis?
Answer. In response to the recent economic crisis, the American
Recovery and Reinvestment Act (ARRA) was enacted, which included the
funding of the Homelessness Prevention and Rapid Re-housing Program
(HPRP). Over 75 percent of the assistance provided with the $1.5
billion allocation was used for homelessness prevention. HUD has used
the lessons learned from HPRP in its drafting of the interim
regulations for the Emergency Solutions Grant (ESG) program, a
McKinney-Vento Homeless Assistance Act program amended by the HEARTH
Act of 2009. As of fiscal year 2013, HUD will no longer have HPRP funds
available to continue that program--to offset this loss, HUD is
emphasizing the funding for the ESG program.
rural housing and development
Question. Investing in rural communities is very important to me
and my constituents. I realize there are common goals within HUD and
USDA in this area and am interested in your views on how the two
overlap in this space. The most recent GAO report acknowledges this
overlap; however, it remains unclear whether the two agencies will
continue to maintain similar but separate housing goals. How can HUD
further protect rural America's needs as funding reaches the States and
large urban areas?
Answer. In fiscal year 2013, HUD will continue to fund programs
that will directly support housing and economic development in rural
communities. Small towns and rural communities across America are
facing an acute need for more affordable housing, while also searching
for sustainable economic development strategies that link rural housing
to job centers. Recognizing the unique challenges in these
decentralized areas, HUD continues to tailor its programs to provide
rural communities with the resources they need to craft innovative
solutions. While specific appropriations for programs in rural
communities ended in 2011, HUD has continued to partner with rural
communities with programs like Community Development Block Grants, HOME
Investment Partnerships, and the Housing Choice Voucher Program (HCVP).
It also directly supports homeownership in rural areas through FHA
insurance for homeowners. HUD's field offices in rural communities
continue to provide technical assistance resources and to link to other
HUD programs and other Federal agencies. Moreover, HUD is committed to
the development of the poorest areas in America, specifically Indian
Country. Through programs like the Indian Housing Block Grant, HUD
partners with rural American Indian and Alaska Native tribal
governments to support efforts to create locally driven solutions to
economic development challenges. Below, HUD outlines some of the
current programs rural communities are using to address their housing
and community development needs.
collaborations with other agencies
HUD meets regularly with other agencies involved in housing through
an interagency rental housing policy group to better align and
coordinate the affordable rental housing programs each operates. The
Rental Policy Working Group, created by the Domestic Policy Council and
consisting of the Departments of Housing and Urban Development,
Agriculture, and Treasury, has released proposals that will more
efficiently align rental programs across Government agencies, including
inspections, financial reporting, appraisals, energy efficiency
standards, and fair housing compliance enforcement, among others. This
working group has increased collaboration between the rural housing
policies of HUD and USDA.
One specific way HUD is working with other agencies is an effort to
improve access to capital from private sources in isolated rural areas.
The first step in this effort is the Border Community Capital
Initiative (``Border Initiative'') is the first step in a collaborative
effort among HUD, the Department of the Treasury's Community
Development Financial Institutions Fund (CDFI Fund) and the Department
of Agriculture--Rural Development (USDA-RD). The Initiative's goal is
to increase access to capital for affordable housing, business lending
and community facilities in the chronically underserved and
undercapitalized United States/Mexico border region. Specifically, it
will provide direct investment and technical assistance to community
development lending and investing institutions that focus on affordable
housing, small business and community facilities to benefit the
residents of colonias. The United States Code defines a colonia as a
community that (1) is in the State of Arizona, California, New Mexico,
or Texas; (2) is within 150 miles of the United States-Mexico border,
except for any metropolitan area exceeding 1 million people; (3) on the
basis of objective criteria, lacks adequate sewage systems and lacks
decent, safe, and sanitary housing;
HUD, USDA-RD and the CDFI Fund have all identified lack of capacity
among organizations serving the colonias and similar persistent poverty
communities as a limiting factor in the effectiveness of Federal
programs. Organizations specializing in affordable housing, small
business support, and community facilities cannot sustain themselves
and grow. The Border Initiative focuses on using each agency's
resources to effectively improve these organizations, empowering them
to improve colonias communities. Depending upon the programmatic
lessons of the Border Initiative and availability of resources, the
agencies hopes to adapt this collaborative approach to improving
capital access in other rural regions.
on-going rural assistance
Beyond targeted efforts to alleviate housing and development issues
in rural America, HUD serves families in small towns and rural
communities through almost every major program it funds. While many
think of HUD programs as mainly for urban communities, HUD supports
communities across the country.
--In 2012, the State Community Development Block Grant (CDBG) program
provided approximately $882 million to rural areas, supporting
over 25,000 jobs both directly and indirectly, providing needed
infrastructure, economic development, and affordable housing.
The State of Missouri received over $20 million of CDBG funding
for rural areas.
--HUD also provided almost $400 million in rural areas in 2012 for
affordable housing and homeownership programs through its HOME
Investment Partnership program, directly and indirectly
supporting over 5,360 jobs. The State of Missouri received over
$9 million of HOME funding for areas outside of large
metropolitan areas.
--Altogether, over 800,000 families in rural communities are directly
assisted through the Housing Choice Voucher Program, Public
Housing, and Multifamily programs.
--For homeowners, HUD's Federal Housing Administration (FHA) helps
first-time homebuyers and other qualified families all over the
country purchase their own home. More than 1.5 million of the
homes currently insured by the FHA are in rural areas, and
approximately $545 million in current FHA loans are to rural
healthcare facilities designated as ``critical access
hospitals.'' HUD recognizes the unique challenges in these
rural areas, and continues to develop innovative, community-
based programming to meet those needs.
homeless assistance grants
According to HUD's most recent Annual Homeless Assessment Report,
the number of people using homeless shelter in suburban and rural areas
has increased 57 percent since 2007. Suburban and rural homelessness
makes up 36.2 percent of the total homeless population in America. The
reason for this increase is unclear. However, with the Federal
Government's commitment to the Federal Strategic Plan to End
Homelessness, it is crucial that the Department confront this growing
problem.
On May 20, 2009, President Obama signed the Homeless Emergency
Assistance and Rapid Transition to Housing (HEARTH) Act, which includes
the establishment of the Rural Housing Stability Assistance Program
(RHSP) within HUD's Homeless Assistance Grants program. RHSP is
designed to assist individuals and families who are homeless, in
imminent danger of losing housing, or in the worst housing situations
in rural communities. In 2013, HUD is requesting $5 million for the
Rural Housing Stability Assistance program. These grant funds will be
awarded outside of the existing Continuum of Care competition and will
introduce activities that have not historically been available through
HUD's homeless assistance programs. For example, if someone's house is
uninhabitable, RHSP funds can be used to make repairs, preventing that
individual from becoming homeless.
In addition to this focused RHSP initiative, rural communities will
continue to have access to HUD's targeted homeless assistance, through
the Continuum of Care competition grant and the Emergency Shelter Grant
(ESG) program. Rural areas have increasingly gained access to HUD's
competitive homeless assistance grants, primarily through the creation
of Balance of State and Statewide Continuums of Care, with funds
allocated directly to the State to assist areas not currently in
Continuums of Care. In 2012, the State of Missouri received over $2.5
million to fight homelessness in non-urban areas. In 2011, the
Continuum of Care competition included a selection priority for new
projects proposing to serve 100 percent rural areas and an additional
41 projects in rural areas received funding, resulting in nearly $16
million for new projects in rural areas.
american indian, alaska native, and native hawaiian programs
As the single largest sources of funding for housing on Indian
tribal lands, HUD initiatives in Indian country continue to provide
crucial resources to America's poorest communities. Programs like
Indian Housing Block Grants, Indian Home Loan Guarantees, and Indian
Community Development Block Grants support development in remote areas
where safe, 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. HUD recognizes the right of
Indian self-determination and tribal self governance by allowing the
recipients the flexibility to design and implement appropriate, place-
based housing programs according to local needs and customs. All
together, in fiscal year 2013, HUD is requesting $731 million to fund
programs that will support housing and development in American Indian,
Alaska Native, and Native Hawaiian communities, which will directly and
indirectly support over 14,000 jobs.
sustainable housing and communities
Recognizing the strong demand among communities for help in
connecting economic development with future infrastructure and housing
investments, HUD established the Office of Sustainable Housing and
Communities (OSHC) in 2010. Its mission is to both directly assist
those communities looking for assistance in planning for sustainable
growth and to infuse sustainability into HUD policies and programs. HUD
has found that the demand for planning assistance is strong in rural
areas as they attempt to plan for a sustainable future. Through
partnerships with other Federal agencies to align resources and reduce
barriers, HUD has developed the Sustainable Communities Initiative
(SCI) to provide incentives to encourage communities of all shapes and
sizes to use sustainable planning and development strategies. SCI
funding includes special funding categories for smaller communities. In
2011, over 40 percent of the OSHC Community Challenge Grants went to
communities with populations below 50,000. In fiscal year 2013, HUD is
requesting $100 million in SCI funding within the Community Development
Fund, of which a portion will once again be designated for small- and
mid-sized communities.
SUBCOMMITTEE RECESS
Senator Murray. This hearing is recessed until Thursday,
March 8, at 10 a.m., at which time we will hear testimony from
the acting FHA Commissioner, Carol Galante, on the Federal
Housing Administration.
[Whereupon, at 10:33 a.m., Thursday, March 1, the
subcommittee was recessed, to reconvene at 10 a.m., Thursday,
March 8.]
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
APPROPRIATIONS FOR FISCAL YEAR 2013
----------
THURSDAY, MARCH 8, 2012
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:06 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray and Collins.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Federal Housing Administration
STATEMENT OF HON. CAROL GALANTE, ACTING FEDERAL HOUSING
ADMINISTRATION COMMISSIONER AND ASSISTANT
SECRETARY FOR HOUSING, DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Good morning, and welcome to Acting Federal
Housing Administration (FHA) Commissioner Carol Galante. We
appreciate your coming today and your testimony. You have
assumed this role at a very pivotal time for both the market
and FHA. And we really want to thank you for your service and
coming today.
Back in early 2007, this subcommittee held a hearing on FHA
that raised questions about its role and relevance as its
market share had fallen to around 3 percent. At that time, home
prices were on a seemingly unstoppable climb, and based on the
belief that home prices would continue to rise, credit was
flowing freely.
Millions of Americans became homeowners, many through
exotic mortgage products that required very little
documentation, and included attractive offers like interest-
only payments and no down payments. FHA's traditional 30-year
fixed mortgage, which required documentation and underwriting,
simply could not compete.
But the promises made to homeowners and investors alike
were too good to be true. When the risks associated with these
mortgages began to materialize, it was far too late. And when
defaults and foreclosures skyrocketed, the impact was felt not
only by defaulting homeowners, but by entire communities that
watched their home values plummet, investors who bet on these
products and lost, and older Americans who saw their pensions
disappear.
FHA quickly stepped in after the crash to ensure a
functioning mortgage market, the primary function for which it
was designed during the Great Depression. There is no question
that stepping into the faltering housing market exposed FHA to
greater risk, but it took on this risk in order to support the
broader housing market, and without its support, the cost of
the market and to taxpayers today would likely be far higher.
So, today we are not asking about FHA's role and relevance.
FHA now supports nearly 30 percent of the purchase market, and
almost 16 percent of all loans, including refinances. And its
value has been made clear over the past few years. Instead we
are now asking how we protect the taxpayer from the risks
associated with its increased role in the market, and how and
when do we scale back FHA's presence in the market?
FHA's fiscal soundness depends in large part on broader
market and economic conditions. As Secretary Donovan testified
last week, the biggest factor in the health of FHA's Mutual
Mortgage Insurance (MMI) Fund is the direction of home prices.
While we are seeing signs that the housing market has hit
bottom and is starting its climb back up, risks remain. With
over 22 percent of mortgages in the United States underwater,
elevated levels of foreclosures, and an extensive shadow
inventory of properties, the path of home prices remains
uncertain.
I look forward to having this discussion about the
potential risks that remain in the market, and what steps can
and should be taken to strengthen the market and FHA.
This week, the President announced changes to the FHA's
Streamline Refinance Program that will make it easier for
existing FHA borrowers to benefit from low interest rates. And
in February, the administration released a plan to further aid
the market by creating opportunities for homeowners to
refinance into more affordable mortgages. It has also pushed
for a greater use of principal write-downs.
These proposals offer opportunities to make mortgages more
affordable for homeowners, while at the same time putting money
back into their pockets, and in some cases, giving them a
chance to build equity once again.
These proposals are not written without their own risks and
costs. Allowing conventional borrowers to refinance into FHA
loans adds risks to FHA, even if not directly to the MMI Fund.
Under the administration's proposal, this cost would be covered
by a financial crisis responsibility fee paid by banks. In
addition to the financial risks, policies such as principal
write-downs also raise concerns about moral hazard. In
evaluating these proposals, we must have an understanding of
what is currently holding the market back from a stronger
recovery, and if the long-term benefits of public intervention
outweigh the shorter term costs.
The administration is looking at ways also to address the
growth in the number of Government-owned properties. FHA along
with Fannie Mae (the Federal National Mortgage Association) and
Freddie Mac (the Federal Home Loan Mortgage Corporation) own
about one-quarter of 1 million foreclosed properties. These
properties are costly for the Government to manage and
contribute to the decline of home prices.
As we look for ways to address the shadow inventory,
millions of Americans are unable to find affordable housing.
According to a study released by the Department of Housing and
Urban Development (HUD) last year, over 7 million Americans pay
more than 50 percent of their income on housing, which
represents a 20-percent increase in worst case housing needs
between 2007 and 2009.
So, I am glad to see FHA, along with the Federal Housing
Finance Agency (FHFA), the conservator of Fannie Mae and
Freddie Mac, is looking at converting real estate-owned (REO)
properties into rental housing. I am interested in hearing from
Acting Commissioner Galante on the interest this proposal has
garnered, as well as the challenges and benefits that are
associated with it.
While much of FHA's fiscal soundness depends on the overall
market, there are measures that FHA can take to improve its
financial standing. The administration recently announced
premium increases to provide additional funding to the MMI
Fund. In addition, the budget also includes proposals to
increase premiums for its Multifamily and Healthcare Programs.
Similar to its single-family business, FHA's presence in these
areas has grown in recent years, and these premiums should help
strengthen the General and Special Risk Insurance Fund.
Amid the discussions about solvency of the funds and FHA's
future in the market, this subcommittee cannot lose sight of
FHA's day-to-day operations, so I will be asking critical
questions, including: Does FHA have the appropriate staff to
manage its portfolio? Does it have the tools it needs to assess
and manage risk? And does it have the means and authority to
protect taxpayers from fraudulent lenders and excessive losses?
In recent years, this subcommittee has worked to provide
FHA with the resources to increase its hiring, support a new
risk office, and invest in much needed technology upgrades. In
a constrained budget environment, Federal employees and
administrative expenses are often the first items to be cut,
but in the long term, costs resulting from weak oversight are
bound to outweigh any savings that would result from cutting
FHA's workforce.
And as we climb back from this housing crash, we must also
remember the lessons learned from the rise and the fall of the
housing market. We must have soundly underwritten mortgages and
a process that is fair and transparent from the moment a
potential homeowner applies for a mortgage, all the way through
loss mitigation or foreclosure.
This crisis has also taught us the importance of having a
balanced national housing policy, one that includes both rental
and homeownership opportunities. At the same time, we must be
careful not to over correct, as is happening today, and close
the door to homeownership for hardworking, responsible
Americans.
PREPARED STATEMENT
I believe we should continue to strive for a market in
which Americans who work hard, provide for their families, and
pay their bills have an opportunity to own a home. And I think
FHA will continue to be a part of that vision.
So, I look forward to hearing from Mrs. Galante.
[The statement follows:]
Prepared Statement of Senator Patty Murray
Good morning, I want to welcome Acting Federal Housing
Administration (FHA) Commissioner Carol Galante to the subcommittee
today to talk about FHA. Ms. Galante, you have assumed this role at a
pivotal time both for the market and FHA and I want to thank you for
your service.
fha's role in supporting the market
Back in early 2007, this subcommittee held a hearing on FHA that
raised questions about its role and relevance, as its market share had
fallen to around 3 percent. At that time, home prices were on a
seemingly unstoppable climb. And based on the belief that home prices
would continue to rise, credit flowed freely.
Millions of Americans became homeowners--many through exotic
mortgage products that required little documentation, and included
attractive offers like interest-only payments and no down payment.
FHA's traditional 30-year fixed mortgage, which required documentation
and underwriting, simply could not compete.
But the promises made--to homeowners and investors alike--were too
good to be true. When the risks associated with these mortgages began
to materialize, it was far too late. And when defaults and foreclosures
skyrocketed, the impact was felt not only by defaulting homeowners, but
also by entire communities that watched their home values plummet,
investors who bet on these products and lost, and older Americans who
saw their pensions disappear.
FHA quickly stepped in after the crash to ensure a functioning
mortgage market, the primary function for which it was designed during
the Great Depression.
There is no question that stepping into the faltering housing
market exposed FHA to greater risk. But it took on this risk in order
to support the broader housing market, and without its support, the
cost to the market and to taxpayers today would likely be far higher.
So, today, we are not asking about FHA's role and relevance. FHA
now supports nearly 30 percent of the purchase market and almost 16
percent of all loans, including refinances. And its value has been made
clear over the past few years. Instead, we are now asking: How we
protect the taxpayer from the risks associated with its increased role
in the market, and how and when do we scale back FHA's presence in the
market?
fiscal soundness of fha's mutual mortgage insurance fund
FHA's fiscal soundness depends in large part on broader market and
economic conditions. As Secretary Donovan testified to last week, the
biggest factor in the health of FHA's Mutual Mortgage Insurance (MMI)
Fund is the direction of home prices.
While we are seeing signs that the housing market has hit bottom
and is starting its climb back up, risks remain. With over 22 percent
of mortgages in the United States underwater, elevated levels of
foreclosures, and an extensive shadow inventory of properties, the path
of home prices remains uncertain.
I look forward to having a discussion about the potential risks
that remain in the market, and what steps can and should be taken to
strengthen the market and FHA.
new proposals to aid the market
This week, the President announced changes to the FHA Streamline
Refinance Program that will make it easier for existing FHA borrowers
to benefit from low interest rates.
And in February, the administration released a plan to further aid
the market by creating opportunities for homeowners to refinance into
more affordable mortgages. It has also pushed for greater use of
principal write-downs.
These proposals offer opportunities to make mortgages more
affordable for homeowners while, at the same time, putting money back
into their pockets and in some cases giving them a chance to build
equity once again.
These proposals aren't without their own risks and costs. Allowing
conventional borrowers to refinance into FHA loans adds risk to FHA--
even if not directly to the MMI Fund. Under the administration's
proposal, this cost would be covered by a Financial Crisis
Responsibility fee paid by banks.
In addition to the financial risks, policies such as principal
write-downs also raise concerns about moral hazard. In evaluating these
proposals, we must have an understanding of what is currently holding
the market back from a stronger recovery, and if the long-term benefits
of public intervention outweigh the short-term costs.
The administration is also looking at ways to address the growth in
the number of Government-owned properties. FHA, along with Fannie Mae
and Freddie Mac, own about a quarter of a million foreclosed
properties. These properties are costly for the Government to manage
and contribute to the decline of home prices.
As we look for ways to address the shadow inventory, millions of
Americans are unable to find affordable housing. According to a study
released by HUD last year, over 7 million Americans pay more than 50
percent of their income on housing, which represents a 20-percent
increase in worst case housing needs between 2007 and 2009.
So, I am glad to see that FHA, along with the Federal Housing
Finance Agency, the conservator of Fannie Mae and Freddie Mac, is
looking at converting real estate-owned (REO) properties into rental
housing.
I am interested in hearing from Acting Commissioner Galante on the
interest this proposal has garnered, as well as the challenges and
benefits associated with it.
support for fha operations
While much of FHA's fiscal soundness depends on the overall market,
there are measures that FHA can take to improve its financial standing.
The administration recently announced premium increases to provide
additional funding to the Mutual Mortgage Insurance Fund.
In addition, the budget also includes proposals to increase
premiums for its multifamily and healthcare programs.
Similar to its single-family business, FHA's presence in these
areas has grown in recent years, and these premiums should help
strengthen the General and Special Risk Insurance Fund.
Amid the discussions about solvency of the funds and FHA's future
in the market, this committee cannot lose sight of FHA's day-to-day
operations. So, I will be asking critical questions, including: Does
FHA have the appropriate staff to manage its portfolio? Does it have
the tools it needs to assess and manage risk? And does it have the
means and authority to protect taxpayers from fraudulent lenders and
excessive losses?
In recent years, this committee has worked to provide FHA with the
resources to increase its hiring; support a new Risk Office; and invest
in much-needed technology upgrades.
In a constrained budget environment, Federal employees and
administrative expenses are often the first items to be cut, but in the
long term, costs resulting from weak oversight are bound to outweigh
any savings that would result from cutting FHA's workforce.
closing
And as we climb back from the housing crash, we must also remember
the lessons learned from the rise and fall of the housing market.
We must have soundly underwritten mortgages and a process that is
fair and transparent from the moment a potential homeowner applies for
a mortgage all the way through loss mitigation or foreclosure.
This crisis has also taught us the importance of having a balanced
national housing policy--one that includes both rental and
homeownership opportunities.
At the same time, we must be careful not to overcorrect--as is
happening today--and close the door to homeownership for hardworking,
responsible Americans.
I believe that we should continue to strive for a market in which
Americans who work hard, provide for their families, and pay their
bills, have an opportunity to own a home.
And I think that FHA will continue to be part of that vision.
I look forward hearing from Ms. Galante and with that I turn it
over to Senator Collins.
Senator Murray. And with that, I turn it over to Senator
Collins for her opening statement.
STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you very much, Madam Chairwoman. And
thank you for holding this hearing on FHA and the future of the
housing finance market. I join you in welcoming Acting
Commissioner Carol Galante before our subcommittee this
morning.
I want to begin my remarks by commending the
administration's new protections for our Active Duty military
servicemembers and veterans based on the recent settlement with
the Nation's largest banks. It is appalling to think that
lenders were taking advantage of the very people protecting our
Nation. While not every lender was culpable, obviously, the
fact that any of them were doing this is totally unacceptable.
While the administration has made several announcements
regarding existing housing programs, the administration has yet
to present a comprehensive plan to stabilize the housing market
and to reinvigorate private sector participation.
HUD faces many challenges in balancing the goal of
strengthening responsible homeownership while minimizing the
financial risk to the FHA and, thus, the taxpayers. Ultimately,
FHA should play a more limited role in the mortgage market and
help encourage the private sector to reassert its primacy.
Since its inception, FHA has provided mortgage insurance
for more than 39 million single-family home mortgages, and
53,000 multifamily mortgages. This program finances nearly 30
percent of home purchase loans and about 10 percent of
refinance loans nationwide.
FHA continues to partner with current and prospective
homeowners during these difficult economic times. In addition
to helping FHA program participants refinance to take advantage
of lower interest rates, FHA also assists non-FHA homeowners in
refinancing untenable mortgages. When financially sound, FHA is
an essential component of the recovery of the housing market.
The weakening of our housing sector over the past several
years has had a tremendously negative impact on far too many
families and communities throughout the Nation. The housing
market recession is not yet over, and a sustained recovery is
still uncertain. The Federal Reserve recently reported that on
average, national housing prices had fallen 33 percent from
their peak in 2006. Underscoring the Federal Reserve's view
that housing prices remain under pressure, Standard & Poor's
Case-Shiller Index for U.S. home prices is down 4 percent from
last year. This is particularly troubling since FHA currently
insures over $1 trillion in mortgages.
The agency's role has dramatically expanded since the
beginning of the housing crisis. Prior to the crisis, FHA
accounted for less than 4 percent of the single-family housing
market. HUD now estimates that FHA accounts for nearly 16
percent of the overall market share.
It is also troubling that for the third consecutive year,
FHA has not met its statutory requirement of maintaining a 2-
percent capital reserve ratio. Further, the budget indicates
that FHA could have required as much as $688 million from the
Treasury in order to remain solvent. Fortunately, it has, in
essence, been bailed out by the recent foreclosure settlement
agreement.
PREPARED STATEMENT
These are not easy issues to resolve, but they are
critically important to our Nation's long-term economic health,
and to the housing needs of many American families. I remain
concerned that we must reform our present housing finance
programs, but in doing so, we must remain ever mindful to limit
the taxpayer's exposure to additional financial losses.
Thank you, Madam Chairman.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
Chairman Murray, thank you for holding this important hearing on
the Federal Housing Administration (FHA) and the future of the housing
finance market. I join you in welcoming Acting Commissioner Carol
Galante before our subcommittee this morning.
I want to start by commending the Administration's new protections
for our active military servicemembers and veterans based on the recent
settlement with the Nation's largest banks. It is appalling to think
that lenders were taking advantage of the very people protecting our
Nation.
While the Administration has made several announcements regarding
existing housing programs, they have yet to present a comprehensive
plan to stabilize the housing market and reinvigorate private sector
participation.
The Department of Housing and Urban Development (HUD) faces many
challenges in balancing the goal of strengthening responsible
homeownership while minimizing the financial risk to FHA and the
taxpayer. Ultimately, FHA should play a more limited role in the
mortgage market and help encourage the private sector to reassert its
primacy.
Since its inception, FHA has provided mortgage insurance for more
than 39 million single-family home mortgages and 53,000 multifamily
mortgages. The program finances nearly 30 percent of home purchase
loans and about 10 percent of refinance loans nationwide.
FHA continues to partner with current and prospective homeowners
during these difficult economic times. In addition to helping FHA
program participants refinance at lower interest rates, FHA also
assists non-FHA homeowners in refinancing untenable mortgages. A
financially sound FHA is an essential component in the recovery of the
housing market.
The weakening of our housing sector over the past several years has
had a tremendous impact on families and communities throughout the
Nation. The housing market recession is not yet over, and a sustained
recovery is still uncertain. The Federal Reserve recently reported that
on average national housing prices have fallen 33 percent from their
2006 peak. Underscoring the Federal Reserve's view that housing prices
remain under pressure, Standard & Poor's Case-Shiller index for U.S.
home prices is down 4 percent from last year.
This is particularly concerning since FHA currently insures over $1
trillion in mortgages. The agency's role has dramatically expanded
since the beginning of the housing crisis. Prior to the crisis, FHA
accounted for less than 4 percent of the single family housing market;
HUD now estimates that FHA accounts for nearly 16 percent of the
overall market share.
It is troubling that for the third consecutive year, FHA has not
met its statutory requirement of maintaining a 2-percent capital
reserve ratio. Further, the budget indicates FHA could have required as
much as $688 million from Treasury in order to remain solvent, had it
not been bailed out by the recent foreclosure settlement agreement.
These are not easy issues to resolve, but they are critically
important to our Nation's long-term economic health. I remain concerned
that we must reform our present housing finance programs. In doing so,
we must remain mindful to limit taxpayers' exposure to additional
financial losses.
I look forward to working with you on these important issues.
Thank you.
Senator Murray. Thank you very much. With that, we will
turn to you for your opening statement, and appreciate your
being here again today. Thank you.
SUMMARY STATEMENT OF HON. CAROL GALANTE
Ms. Galante. Thank you, Chairman Murray and Ranking Member
Collins, for the opportunity to testify on the fiscal year 2013
budget request for the Federal Housing Administration.
Encompassing HUD's Single Family, Multifamily, and Healthcare
Financing Programs, as well as HUD's Housing Counseling
Program, our office is critical to ensuring more Americans have
the opportunity to realize or maintain the economic security of
the middle class.
And the work this administration has done is going a long
way to create an economy built to last. Three years ago, with
the housing market collapsing and private capital in retreat,
we took decisive action to address the crisis and lay the
groundwork for recovery.
FEDERAL HOUSING ADMINISTRATION REFORM
Since the start of this administration, FHA has helped
nearly 2.8 million families buy a home, and over 1.7 million
homeowners refinance into stable, affordable loans. And with
your help, we have taken the most significant steps in FHA's
history to reduce risk to the taxpayer and reform FHA
practices. We have ensured that FHA has the flexibility
necessary to price its products appropriately for current risks
and market conditions, and we have transformed FHA's risk
management system to better align with the needs and realities
of the 21st century mortgage market. These reforms have
contributed to the most profitable books of business in FHA's
78-year history.
Still, FHA continues to be strained by loans originated
before this administration took office. That is why we continue
to take action to strengthen FHA's MMI Fund. Our budget
reflects the implementation of the 10-basis-point increase to
FHA's single-family annual mortgage insurance premiums, as well
as an additional 25-basis-point increase to annual premiums for
jumbo loans. With these changes, FHA is projected to add $8.1
billion in receipts to the Capital Reserve account in 2013.
In addition, in the past week, FHA has announced two
premium changes: An increase in our up-front mortgage insurance
premium by 75 basis points, and an adjustment in premiums for
Streamline Refinance loans. FHA's Streamline Refinance allows
current FHA borrowers who are current on their mortgages to
refinance their homes, which at today's low interest rates, can
result in $3,000 in annual savings for the typical borrower and
bolster their ongoing ability to pay, thereby lowering their
risk to FHA.
Those changes to our premiums not included in the budget
are expected to produce an additional $1 billion in budget
receipts this fiscal year and next, above what is already
projected in the President's budget.
We also continue to take significant steps to strengthen
accountability for FHA lenders, including the recent servicing
and origination settlements with some of the Nation's largest
mortgage lenders, which will provide FHA with over $900 million
to compensate for losses resulting from their serious
violations of FHA requirements by these lenders. And we are
seeking expanded authority via legislation that will further
enable us to protect the MMI Fund.
While FHA will continue to play an important role in
supporting the housing recovery in the year ahead, we are
committed to reducing the Government's footprint over time.
With FHA's loan volume already down 34 percent from its peak in
2009, and our market share declining to its current level of
15.6 percent, we have set the stage for private capital to
return, while ensuring that FHA remains a vital source of
financing for underserved borrowers and communities.
While additional risks clearly remain for FHA as the
economy continues to recover, the significant reforms and
strong enforcement efforts undertaken by this administration
are yielding sound and profitable businesses, positioning FHA
well for the future.
Despite FHA's important work throughout the crisis, there
remain sectors of the housing finance market where additional
liquidity is still needed. One of those areas is in small
building finance for rental homes. Nearly one-third of the
Nation's renters live in small properties of 5 to 49 units, but
these properties are at risk of disinvestment because they can
be expensive to finance. That is why, as part of the
President's budget, HUD is seeking authority to facilitate
lending to small multifamily properties through minor changes
to our Risk Share Program, and we look forward to working with
Congress on this initiative.
HOUSING COUNSELING
Critical to ensuring success of much of FHA's work is
housing counseling, and we are making significant improvements
to HUD's program. Not only did we get our NOFA (Notice of
Funding Availability) on the street within days of the fiscal
year 2012 budget passage, but we plan to announce grant awards
next week.
And we are also well on our way to setting up a new Office
of Housing Counseling. In recognition of the hard work of
housing counselors last week, the White House and HUD honored
them in a Champion of Change Award. I was honored to
participate in this event and meet with people who are tackling
this Nation's issues head on.
Finally, as we look to make all of our programs more
efficient and effective, the FHA Transformation Initiative will
enable us to replace outdated systems with modern technology.
These efforts will allow FHA to better assess risk, monitor
market trends, and ensure that FHA programs are available for a
long time to come.
PREPARED STATEMENT
And so, Madam Chair, this budget reflects this
administration's belief that the recovery of our housing market
is essential to the restoration of our economy by targeting
resources where they are most needed, while ensuring the
protection of taxpayer interests. HUD's Office of Housing is
doing its part to create housing and communities built to last.
Thank you.
[The statement follows:]
Prepared Statement of Hon. Carol Galante
Chairman Murray, Ranking Member Collins, and members of the
subcommittee, thank you for the opportunity to testify today regarding
the fiscal year 2013 budget request for the Federal Housing
Administration (FHA).
When this administration took office, the economy was on the brink.
Only weeks before this administration took office, the Nation was
losing 753,000 jobs a month, our economy had shed jobs for 22 straight
months, house prices had declined for 30 straight months, and consumer
confidence had fallen to a 40-year low and dramatic steps were taken to
prevent a complete financial meltdown. Today, an economy that was
shrinking is growing again--and instead of rapid job loss, more than
3.7 million new private sector jobs have been created in the last 23
months, and national unemployment has fallen to a near 3-year low.
And, because the Obama administration moved to keep interest rates
low and restore confidence in the housing market more than 13 million
homeowners have refinanced their mortgages since April 2009--putting
nearly $22 billion a year in real savings into the hands of American
families and into our economy. As financing options tightened for
millions of Americans due to uncertainties in the credit markets, the
Federal Housing Administration played a critical role in returning
stability to the housing market by providing access to credit to the
millions of families seeking to purchase a home during the worst
housing market in generations. This countercyclical role is part of
FHA's core mission, and it remains vital as we take further steps to
strengthen the housing market.
Today, because we provided a range of solutions to responsible
families fighting to hold on to their homes, more than 5.6 million
families have been able to reduce their payments and modify their loans
to more sustainable terms and foreclosure notices are down nearly 50
percent since early 2009. The resources we provided for communities
struggling with concentrated foreclosures have enabled them to fund
better uses for almost 100,000 vacant and abandoned properties through
our Neighborhood Stabilization Program. Most important of all, because
of our commitment to economic growth and recovery, our economy has
added private sector jobs for 23 straight months, totaling 3.7 million
jobs.
But we know there's still more work to do to ensure that America
can create an economy built to last. The fiscal year 2013 budget for
the Department of Housing and Urban Development (HUD) tackles these
challenges head on. And, as part of HUD's efforts, FHA is continuing
its efforts to help responsible families at risk of losing their homes
and providing quality affordable rental housing to some of our Nation's
most vulnerable families. The President's fiscal year 2013 budget also
reflects the reality that we cannot create an economy built to last
without taking responsibility for our deficit. The caps set by the
Budget Control Act of 2011 promise over $907 billion in total
discretionary cuts over the next 10 years, and every department shares
a responsibility to make tough cuts so there's room for investments to
speed economic growth. Indeed, the overall HUD budget makes tough
choices in order to contribute to deficit reduction in a substantial
way.
The HUD budget provides $44.8 billion for HUD programs, an increase
of $1.4 billion, or 3.2 percent, above fiscal year 2012. This program
funding level (i.e., gross budget authority) is offset by $9.4 billion
in projected FHA and Ginnie Mae receipts, leaving net budget authority
of $35.4 billion, or 7.3 percent below the fiscal year 2012 enacted
level of $38.2 billion. Today, I would like to discuss FHA's
contributions to the HUD budget and the overall housing market with you
in more detail.
responding to the market disruption
This administration entered office confronting the worst economic
crisis since the Great Depression--as mortgages were sold to people who
couldn't afford or understand them, while banks packaged them into
complex securities that they made huge bets on, leaving American
homeowners with the tab. And, while the largest factors contributing to
this crisis were market driven, the American people have turned to
Congress and the administration for leadership and action in righting
our Nation's housing market.
HUD remains firmly committed to working together with communities
and individuals to cope with these unprecedented challenges. The
Federal Housing Administration and Government National Mortgage
Association (GNMA) continue to have a significant impact on the
Nation's economic recovery. The activities of the Federal Government
are critical to both supporting the housing market in the short term
and providing access to homeownership opportunities over the long term,
while minimizing the risk to taxpayers. FHA has stepped up to face
these unprecedented challenges, playing an important countercyclical
role in the housing market today.
Three years ago, as credit markets froze, FHA remained one of the
few vehicles available for homeowners to obtain financing through
purchase and refinance loans. As a result, FHA's market share grew.
This increase in volume reinforced the need for FHA to strengthen
credit policy and risk management practices and make lenders
accountable. FHA has also taken steps to adjust its premium structure
and improve recoveries on its Real Estate Owned (REO) portfolio. These
efforts combined are intended to ensure that the Mutual Mortgage
Insurance Fund (MMIF) has sufficient resources to account for its
growth, while also supporting the housing market. And as a result of
these efforts, the books of business originated since this
administration took office reflect higher credit quality than FHA
historical averages. Yet, we know that there is much work to be done.
While the number of homeowners at risk of losing their home is down
significantly, there are still too many families that face hardships
and are underwater, and unaffordable monthly payments put them at an
increased risk of default, dragging down markets, reducing labor
mobility and consumer spending alike. That is why FHA is also taking
steps to ease the process whereby FHA borrowers can refinance into new
FHA insured loans and take advantage of today's low interest rates, and
will work with Congress and other stakeholders to allow non-GSE
homeowners who are underwater to refinance into a separate FHA
refinance program.
And in areas where the housing crisis has hit the hardest,
foreclosures, large volumes of vacant properties, and resultant blight
and abandonment, continue to drag down property values and destabilize
communities. That is why FHA is working with its Federal partners at
Treasury and the Federal Housing Finance Agency to develop programs to
convert REO properties to rental properties. By reducing vacancy rates
and lowering the overhang of foreclosed properties, this initiative has
the potential to stabilize both house prices and neighborhoods,
contributing to a more rapid recovery for communities struggling to
emerge from the recent recession.
Overall, the efforts of FHA have been integral in providing
liquidity in a time of market constriction, keeping people in their
homes and addressing the shadow inventory.
overview of the fha fiscal year 2013 budget
FHA has insured over 40 million mortgages through its Single
Family, Multifamily and Healthcare programs since its inception in
1934. In exchange for adherence to strict underwriting, application and
servicing requirements established by HUD and the payment of mortgage
insurance premiums, FHA-approved lenders are able to file a claim with
the FHA if a borrower defaults on their mortgage loan.
FHA, directly and through its partners in the housing counseling
industry, has played a key role in mitigating the effect of economic
downturns in the real estate market. Due to FHA's traditional
countercyclical role, the volume of FHA insured loan products increased
substantially beginning in 2009 and, while FHA loan volumes have
decreased since that peak, the pressures on FHA and its borrowers have
also increased due to the economic downturn.
In fiscal year 2013, HUD is requesting $400 billion in loan
guarantee authority for the Mutual Mortgage Insurance Fund (MMIF),
which will provide an estimated 0.8 million single-family mortgages,
and $25 billion in loan guarantee authority for the General and Special
Risk Insurance Fund (GI-SRI), which will provide an estimated 156,000
units in multifamily housing properties and an estimated 80,600 beds in
healthcare facilities.
The need for this investment is clear as FHA has played a critical
role in stabilizing the Nation's mortgage market. At a time when
liquidity and access were needed most in the housing market to
facilitate the recovery of the broader economy, FHA stepped in to
ensure that mortgage capital continued to flow. However, FHA's expanded
role is and should be temporary and, to that end, FHA is taking steps
in all of its business lines to encourage the return of private capital
into the mortgage market while balancing the need to remain a
supportive mechanism for all types of housing moving forward.
FHA Multifamily and Healthcare Mortgage Insurance Programs
FHA Multifamily and Healthcare Mortgage Insurance Programs operate
under FHA's GI-SRI Fund. These programs encourage critical mortgage
financing opportunities that strengthen communities by addressing
specialized financing needs including insurance for loans to develop,
rehabilitate, and refinance multifamily rental housing, nursing home
facilities and hospitals.
FHA has steadily provided liquidity in the market during times of
economic constriction. Combined with historically low interest rates,
FHA has seen exponential growth in this area. Commitments for FHA
insured multifamily housing and healthcare facilities rose from $4.3
billion in fiscal year 2008 to $17.5 billion in 2011. FHA's multifamily
and healthcare programs have helped private lenders fill the gap left
with the shrinkage of the conventional finance resources. And while
this market seems to be rebounding, we continue to expect high levels
of mortgage insurance activity for the remainder of fiscal year 2012
and through fiscal year 2013, albeit below the peak in 2011. As of
September 2011, the FHA's portfolio of multifamily and healthcare loan
guarantees had an unpaid principal balance of $76.4 billion on 12,666
loans and counting.
Given this unprecedented increase in the number and dollar volume
of loans insured under GI-SRI, the fiscal year 2013 budget also
includes premium increases for FHA's General Insurance and Special Risk
Insurance programs that serve market rate multifamily properties and
healthcare facilities. These changes, the first premium increase in 10
years for these programs, are intended to ensure that FHA products are
priced appropriately to compensate for FHA's risk and encourage the
return of private capital to our mortgage markets. The proposed
increases range from 5 basis points for 223(a)(7) refinancing to 20
basis points for 221(d)(4) new construction or rehabilitation activity.
Premiums for affordable housing projects (such as those with HUD rental
subsidies and low-income housing tax credits, as well as those insured
under FHA risk-sharing programs) will not be increased.
With the proposed premium increases, FHA Multifamily and Healthcare
loans will be priced more appropriately to encourage the return of
private capital while, at the same time, continuing to ensure
sufficient levels of available capital in these sectors. The increase
in premiums also reflect new realities--the Multifamily annual book of
business is five times greater than it was just 3 years ago, and the
risk profile has changed dramatically. FHA's multifamily apartment
portfolio is now more than 50 percent market rate by unit count and 70
percent by unpaid principal balance (UPB), which adds a new component
of risk, and a need to take steps to ensure the future viability of the
portfolio. With interest rates at a record low the existing portfolio
loans could remain in FHA's portfolio longer than the average
timeframes and will need to be managed prudently. FHA will publish the
proposed increased in the Federal Register in the next 30-60 days and
welcomes feedback during the comment period.
During this period of increased activity, FHA has also taken steps
to reduce the processing time of loan applications. The Office of
Multifamily Housing has centralized processing of Section 223(a)(7)
loans to the Office of Affordable Housing Preservation which allows
Multifamily Field Office staff to work on the increasingly complex
transactions in their pipeline. Additionally, Multifamily Housing and
Healthcare have initiated a queue and early warning screening system in
order to more efficiently manage workload and provide greater
transparency to lenders and borrowers regarding the status of their
loan applications. Finally, FHA is conducting monthly performance
dialogues with field staff to discuss progress toward meeting
processing goals and identify proactive solutions to address
performance deficiencies in order to ensure that every effort is taken
to reduce processing times and get funds into communities.
This process is already producing results. Survey results
demonstrate that staff morale has improved significantly in the offices
participating in the pilot roll out of this new process. HUD staff feel
encouraged to come up with new and better ways of doing things and
these offices are processing applications for multifamily insurance
more efficiently and effectively. Offices that had a large backlog of
applications have begun to methodically clear out older applications.
For instance, our Denver office went from having 30 applications that
were older than 90 days in their pipeline to having only 24 overdue
applications. In Chicago, 100 percent of the 223(a)(7) loans were
processed in less than 30 days and 50 percent of its 223(f)
transactions in less than 45 days in January.
In addition, as part of the efforts of FHA's Multifamily and
Healthcare programs to strengthen communities by addressing specialized
financing needs, HUD is seeking authorization to extend support for
Critical Access Hospitals and Small Multifamily Buildings (5-50 units).
We are appreciative of the Congress' longstanding support for
Critical Access Hospitals by amending section 242 to permit these
important facilities to be eligible for FHA insurance. The most recent
amendment to the statute expired on July 31, 2011, and without action
to once again to extend the authority under section 242 to allow these
hospitals to be eligible, no additional Critical Access Hospitals will
be endorsed for FHA insurance. We are grateful to the bipartisan group
of Senators that has co-sponsored S. 1431, which would provide this
important extension for 5 additional years and we hope that the House
(where H.R. 2573 would also extend the critical access authority) and
Senate will pass this language this year.
Additionally, as part of the fiscal year 2013 budget, HUD is
seeking authority to facilitate lending to small multifamily properties
which are an important provider of affordable, but unsubsidized,
housing for low- and moderate-income families. According to the 2010
American Community Survey, nearly one-third of renters live in 5- to
50-unit buildings. These buildings also tend to have lower median rents
than do larger properties: $400 per month for 5-49 unit properties as
compared to $549 per month for properties with 50 of more units.
Because they are expensive to finance, particularly in this
environment, these properties are at risk of divestment. We look
forward to working with Congress to ensure the availability of these
unsubsidized, affordable housing units.
The efforts of FHA's Multifamily and Healthcare programs are
essential in achieving the Department's mission of strong, sustainable,
inclusive communities and quality, affordable housing and services for
all Americans.
FHA Single Family Mortgage Insurance Program
The MMIF is the largest fund covering activities of FHA, and is
used to pay the claims associated with FHA insured single family
mortgage loans. Since 1934, mortgage insurance provided by FHA has made
financing available to neighborhoods and geographic areas facing
economic uncertainty and to individuals and families not adequately
served by the conventional mortgage market. Over 30 percent of all FHA-
insured homebuyers are minorities, with 60 percent of all African
American and Hispanic homebuyers relying on FHA insured mortgage
financing to purchase their homes. In the last year, over half of all
African Americans and 45 percent of Hispanics who purchased a home did
so with FHA-insured mortgage products. In addition, 75 percent of
first-time homebuyers use FHA insured financing.
The fiscal year 2013 budget request will enable FHA to continue its
mission of providing access to mortgages for low- and moderate-income
families and to play an important countercyclical role in the
stabilization and recovery of the Nation's housing market. By
facilitating the availability of credit through a variety of FHA-
approved lenders, including community banks and credit unions, FHA has
helped over 2 million families buy a home since President Obama took
office.
Due to reduced liquidity in the conventional mortgage market, FHA
saw a surge in activity, reaching a peak in 2009. However, FHA's loan
volume has declined 34 percent from its peak in 2009, and its market
share is decreasing for the first time since 2006, thereby laying the
ground work for private capital to return to the single family market.
Today, FHA's total market share is 15.6 percent, down from 17 percent
in 2010 and over 21 percent in 2009.
Strengthening FHA Mutual Mortgage Insurance Fund and Paving
the Way for Private Capital To Return
While FHA's portfolio has grown in recent years, the fund has also
experienced significant losses. The books of business in the few years
before 2009 have largely driven the high number of claims to the MMIF.
This was driven by overall economic and unemployment trends as well as
by the combined effects of, unscrupulous and non-compliant practices on
the part of lenders, and a seller-funded downpayment assistance program
that allowed many borrowers to obtain mortgages without a meaningful
down payment. As a result, the books of business FHA insured prior to
the start of this administration have severely impacted the health of
FHA's MMIF. But thanks to our efforts since taking office, I can say
that the long-term outlook for FHA and the MMIF are now much better
than they were in 2009.
The change in trajectory in the performance of FHA-insured loans is
no accident. Immediately upon taking office, this administration acted
quickly and aggressively to protect FHA's MMI Fund and to ensure its
long-term viability. We have taken more steps since January 2009 to
eliminate unnecessary credit risk and assure strong premium revenue
flows in the future than any administration in FHA history. Indeed, the
gains FHA has experiences since 2009 are the result of systematic
tightening of risk controls, increased premiums to stabilize near-term
finances, and expanded usage of loss mitigation workout assistance to
help homeowners avoid foreclosure, stricter lender enforcement, and
improved recovery strategies for FHA's REO portfolio.
And, we continue to take steps to further strengthen the fund. In
the 2013 budget we announced a 10-bps annual premium increase on all
FHA insured loans to comply with the requirement passed by Congress
late last year, as well as an additional 25 bps annual premium increase
on ``jumbo'' loans making the total increase for these larger loans 35
bps. And just last week, we announced a 75-bps increase in FHA's
upfront mortgage insurance premium that will further increase receipts
to FHA by over $1 billion in fiscal years 2012 and 2013, beyond the
receipts already included in the President's budget submission, while
having minimal impact on consumers.
In addition, we have also taken significant additional steps to
increase accountability for FHA lenders. Via a final rule which took
effect on February 24, 2012, we clarified the basis upon which FHA will
require indemnification from lenders participating in our Lender
Insurance program, making clear the rules of the road for lenders and
giving FHA a solid foundation for requiring indemnification by lenders
for violations of FHA guidelines. And we continue to seek expanded
authority via legislation that will further enable us to protect the
MMI Fund from unnecessary and inappropriate losses associated with
lenders who violate our requirements. Specifically, FHA is pursuing
authority to hold our Direct Endorsement (DE) lenders to the same
standards as our Lender Insurance (LI) lenders by instituting required
lender indemnification for DE lenders who do not following FHA
requirements. Current FHA only has this authority for LI lenders.
Additionally, FHA is seeking authority to take enforcement actions
against all lenders on a broader, geographic basis rather than just at
the branch level. This authority would allow FHA to address systematic
risk to the MMIF.
Recently, we announced another step to hold lenders accountable for
their actions via the settlements with some of America's largest
lenders. Through these settlements, FHA will receive over $900 million
compensation for losses associated with loans originated outside of FHA
requirements, or for which FHA's servicing requirements were violated.
Despite the unprecedented efforts of this administration to alter
the trajectory of FHA, considerable risks remain. The FHA MMI Fund has
two components: The Financing Account, which holds enough money to
accommodate all expected losses on FHA's insured MMI portfolio as of
the end of the current fiscal year; and the Capital Reserve Account,
which is required to hold an additional amount equal to 2 percent of
the insurance in force. Since 2009, the fund's capital reserve ratio
has been below that 2-percent level.
The President's budget always includes estimates regarding the
status of the Capital Reserve at the end of the current fiscal year.
This estimate is based on estimates and projections of future economic
conditions, including house prices and other economic factors which may
or may not come to pass. The 2013 budget estimate for the FHA Capital
Reserve account does not include the almost $1 billion of added revenue
over the remainder of fiscal year 2012 and fiscal year 2013 from the
additional premium increases announced this week or the proceeds from
FHA-approved lenders under the terms of the mortgage settlements. With
these additional revenues accounted for, the Capital Reserve is
estimated to have sufficient balances to cover all future projected
losses, as long as economic conditions do not significantly worsen.
Moreover, the budget estimates that FHA will add an additional $8
billion to the MMI Capital Reserve account in 2013, and return to the
congressionally mandated capital reserve ratio of 2 percent by 2015.
Office of Housing Counseling
HUD's Housing Counseling Assistance program was developed over 40
years ago at a time of severe divestment in housing, unaffordable
interest rates, high unemployment, and irresponsible lending practices.
Over time, this program has evolved in depth and complexity, as have
the issues that it has had to address. Today, housing counseling is
more critical than ever as homeowners seek assistance to navigate the
many hurdles associated with obtaining a modification. We know that but
for the work of counselors, many homeowners wouldn't have received
assistance at all and would likely have lost their home to foreclosure.
And it is critical for the many first-time homebuyers looking to secure
financing in a market where credit and underwriting standards have
dramatically tightened. Housing counseling also assists renters to
budget, save, repair their credit, avoid scams, and access unbiased
information about housing and financial choices. Last year, HUD housing
counseling grants resulted in direct assistance to approximately
186,000 households and leveraged additional non-Federal funding so that
HUD-approved housing counseling agencies could educate and counsel
nearly 2 million American households last year.
It is tragic that public and private support for housing counseling
has been shrinking at a time of great need. We hear anecdotally that
housing counseling agencies are laying off skilled, trained housing
counselors as traditional sources of funding such as charitable
contributions from financial institutions has diminished. Yet recent
studies confirm the value of HUD-approved housing counseling. Research
evidence documents the role of housing counseling in reducing mortgage
delinquency and foreclosure, on helping first-time buyers access and
sustain homeownership, and on the special role of counseling related to
HECM reverse mortgages. Most studies have found that pre-purchase
counseling leads to positive results, reducing delinquency anywhere
from 19 to 50 percent, although one study reported no impact.
HUD-approved housing counseling is also effective in the context of
mortgage delinquency and default. A nationwide Urban Institute study by
Mayer, et al., (2010) of the foreclosure mitigation counseling program
(which uses the HUD housing counseling program infrastructure as a
base) found that borrowers in foreclosure were 70 percent more likely
to get up-to-date on payments if they received the counseling. The same
Urban Institute study showed that homeowners who received a mortgage
modification to resolve a serious delinquency were 45 percent more
likely to sustain that modification if it was obtained with the help of
counseling.
Today, HUD approves, monitors, and supports more than 2,600
counseling organizations. Through the new Office of Housing Counseling,
HUD will support a network of agencies and counselors, trained and
certified to provide tools to current and prospective homeowners and
renters so that they can make responsible choices to address their
housing needs in light of their financial situation. Further, the
Office of Housing Counseling will work to make this network accessible
throughout the country to those who need objective and reliable
information in order to make sound housing and budget decisions,
especially those with low to moderate incomes or otherwise underserved,
or those at risk of housing loss or homelessness.
For fiscal year 2013, HUD requests $55 million for the Housing
Counseling Assistance Program which is expected to inform over 186,000
households about their housing choices in the areas of purchase or
refinancing of their home; rental housing options; reverse mortgages
for seniors as part of required Home Equity Conversion Mortgage (HECM)
counseling; foreclosure prevention; loss mitigation; preventing
evictions and homelessness; and moving from homelessness to a more
stable housing situation. These funds will also be used to launch the
Office of Housing Counseling which was created as part of the Dodd-
Frank Wall Street Reform Act.
The majority of the funds requested in the budget, nearly $45.5
million, are expected to be distributed competitively to support direct
provision of a holistic range of services that are appropriate for
local market conditions and individual needs. An additional $6 million
will be used to strengthen the quality of housing counseling through
training grants which will ensure that individual counselors and
organizations develop the knowledge and capacity to meet the new
certification requirements which HUD must implement under Dodd-Frank.
The remaining $3.5 million will be used for administrative contracts
and support geared towards streamlining internal HUD processes and
enhancing oversight.
Last fiscal year, Congress appropriated $45 million for this
program. I am proud to tell you that we expect that the awards for the
portion of those funds used for grants will be announced next week,
ahead of the aggressive schedule set by the Fiscal year 2012
Appropriations Act. This will ensure that these funds get into the
hands of the counseling agencies that need them as quickly as possible.
fha as part of the administration's efforts to bolster the housing
market
The increase in FHA's market share is directly tied to its
countercyclical role in the recent economic crisis. In addition, FHA is
playing a critical role in the administration's work in tackling
ongoing foreclosure challenges. Between April 2009 and December 2011,
more than 5.6 million mortgage modifications were started--including
more than 950,000 permanent HAMP modification saving households an
estimated $11 billion in monthly mortgage payments and nearly 1.2
million FHA loss mitigation actions and early delinquency
interventions.
Between April 2009 and December 2011, more than 5.6 million
mortgage modifications were started--including more than 950,000
permanent HAMP modification and nearly 1.2 million FHA loss mitigation
actions and early delinquency interventions--saving households an
estimated $11 billion in monthly mortgage payments.
As part of the administration's commitment to help responsible
homeowners stay in their homes, we have actively sought to use our
current programs and authorities to make homeownership sustainable for
millions of American families. Examples of our efforts include:
--FHA Streamline Refinance.--An option that allows borrowers with
FHA-insured loans who are current on their mortgage to
refinance into a new FHA-insured loan at today's low interest
rates without requiring additional underwriting, permitting
these borrowers to reduce their mortgage payments. This program
benefits current FHA borrowers--particularly those whose loan
value may exceed the current value of their home--and by
lowering a borrower's payment, also reduces risk to FHA. To
help more FHA borrowers take advantage of this program, this
week FHA announced an adjusted premium structure for these
loans, reducing premiums for all Streamline Refinance
transactions that are refinancing FHA loans endorsed on or
before May 31, 2009, to further incentivize refinance activity.
These changes--reducing the upfront mortgage insurance premium
for these loans to 1 bp and the annual to 55 bps--will ensure
that borrowers benefit from a net reduction in their overall
mortgage payment while still ensuring FHA has the resources to
pay any necessary claims. This change to the premium structure
of Streamline Refinances is also consistent with the annual
premium that these borrowers were subject to when their loans
were originated.
And, because we see potential for more widespread use of this
product, FHA will make changes to the way in which streamline
refinance loans are displayed in the Neighborhood Watch Early
Warning System (Neighborhood Watch) to reduce lender concern
about the potential impact associated with taking
responsibility for loans they have not underwritten, making
them more willing to offer these loans to borrowers who are
current on mortgages already insured by FHA.
--Short Refinance Option.--In 2010, FHA made available an option that
offers underwater non-FHA borrowers, who are current on their
existing mortgage and whose lenders agree to write off at least
10 percent of the unpaid principal balance of the first
mortgage, the opportunity to refinance into a new FHA-insured
mortgage.
To protect FHA's MMI Fund, a line of credit in the amount of $8
billion has been set up to cover losses the fund might incur as
a result of the FHA Short Refinances having a higher than
normal default rate. The funds, from the TARP program, are
available in the event any of the short-refis go into default.
To date, there have been no claims filed for the short-refis
and the program has not used any of the TARP funds.
--Homeowner Bill of Rights.--As another critical component to the
recovery of the housing market, the President has also put
forward a Homeowner Bill of Rights--a single, straightforward
set of commonsense rules that families can count on when
they're shopping for a mortgage, including the right to a new,
simple, clear form for new buyers that gives people confidence
when they're making the most important financial decision of
their lives. And those rights shouldn't end when homeowners get
the keys to their new home. When Americans lose their job or
have a medical emergency, they should know that when they call
their lender, that call will be answered and that their home
won't be sold in foreclosure at the same time they are filling
out paperwork to get help.
FHA servicing standards will be updated to incorporate the
principles in the Homeowner Bill of Rights.
--REO to Rental.--A glut of vacant foreclosed properties continues to
drag down property values and meanwhile, rental rates are
rising as those who lose their homes to foreclosure seek rental
housing, creating an unprecedented imbalance of supply and
demand between the purchase and rental markets. This problem
requires a creative, innovative mode of addressing the
inventory of unoccupied homes in our communities. When there
are vacant and foreclosed homes in neighborhoods, it undermines
home prices and stalls the housing recovery. The administration
began tackling this issue through the Neighborhood
Stabilization Program (NSP) and our efforts have expanded our
efforts through the REO to Rental initiative.
As part of the administration's effort to help lay the foundation
for a stronger housing recovery, the Department of Treasury and
HUD have been working with the FHFA on a strategy to transition
REO properties into rental housing. Repurposing foreclosed and
vacant homes will reduce the inventory of unsold homes, help
stabilize housing prices, support neighborhoods, and provide
sustainable rental housing for American families.
With about a quarter of a million foreclosed properties owned by
HUD and the GSEs, this August, HUD joined with the Federal
Housing Finance Agency (FHFA) and Treasury to issue a Request
for Information (RFI) to generate new ideas for absorbing
excess inventory and stabilizing prices. In all, about 4,000
submissions were received and, over the past several months,
the interagency task force has been reviewing the submissions
and formulating strategies based on the best practices gathered
from the RFI. Throughout this process, the task force has
continuously met with industry members, community groups, and
other key stakeholders to make sure they are heard in the
strategy development process. Ultimately, we expect a range of
strategies to emerge; however the most commonly discussed
centers around selling REO properties to buyers who will
convert and market them as rental units.
Last week, Fannie Mae announced the first pilot program as part
of the RFI, releasing details on its plan to sell homes that
are part of its tenant in place portfolio. This is the first of
a several collaborative efforts to clear the Nation's shadow
inventory, an effort that FHA is an active part of. We plan to
learn and leverage all we can from this initial pilot as we
work towards conducting a series of additional pilots
throughout the rest of the year.
--Broad Based Refinance.--Last, the President has called on Congress
to open up opportunities to refinancing for responsible
borrowers who are current on their mortgage but whose loans
aren't backed by FHA or the GSEs. Under the proposal, borrowers
with standard non-GSE, non-FHA loans will have access to
refinancing through a new program run through FHA.
The program will be simple and straightforward. Any borrower with
a loan that is not currently guaranteed by the GSEs or insured
by FHA can qualify if they meet the following criteria--each of
which is designed to help reduce risk to the taxpayer:
--They are current on their mortgage: Borrowers will need to have
been current on their loan for the past 6 months and have
missed no more than one payment in the 6 months prior.
--They meet a minimum credit score. Borrowers must have a current
FICO score of 580 to be eligible. Approximately 9 in 10
borrowers have a credit score adequate to meet that
requirement.
--They have a loan that is no larger than the current FHA loan
limits in their area: Currently, FHA limits vary
geographically with the median area home price--set at
$271,050 in the lowest cost areas and as high as $729,750
in the highest cost areas.
--The loan they are refinancing is for a single family, owner-
occupied principal residence. This will ensure that the
program is focused on responsible homeowners trying to stay
in their homes.
--They are currently employed. To determine a borrower's
eligibility, a lender need only confirm that the borrower
is employed.
Borrowers will apply through a streamlined process designed to
make it simpler and less expensive for both the borrower and
the lender. The President's plan includes additional steps to
reduce program costs, including:
--Establishing loan-to-value limits for these loans. The
administration will work with Congress to establish risk-
mitigation measures which could include requiring lenders
interested in refinancing deeply underwater loans (e.g.,
greater than 140 loan-to-value) to write down the balance
of these loans before they qualify. This would reduce the
risk associated with the program and relieve the strain of
negative equity on the borrower.
Cost-Savings to the Borrowers Who Participate in This New
Program.--Given today's record low interest rates, we estimate that on
average, borrowers who participate in this program would reduce their
monthly payments by between $400 and $500 a month.
Option To Rebuild Equity in Their Homes Through This Program.--All
underwater borrowers who decide to participate in this refinancing
program through the FHA outlined above will have a choice: They can
take the benefit of the reduced interest rate in the form of lower
monthly payments, or they can apply that savings to rebuilding equity
in their homes. The latter course, when combined with a shorter loan
term of 20 years, will give the majority of underwater borrowers the
chance to get back above water within 5 years, or less.
To encourage borrowers to make the decision to rebuild equity in
their homes, we are proposing that the legislation provide for
incentives to borrowers who chose this option. Possible incentives
include paying for closing costs or a lower MIP. To be eligible, a
participant in this option must agree to refinance into a loan with a
term of no more than 20 years and with monthly payments roughly equal
to those they make under their current loan.
A Separate FHA Fund.--The broad-based refinance program will have a
separate fund that is funded through premiums established and direct
funding provided under this program with its net cost offset by the
financial crisis fee. The program's premium structure will be designed
in a way to ensure that homeowners have the incentive for lower monthly
payments through the program. By maintaining a separate fund and
funding source for this program the broad-based refinance will not be
contingent on appropriations action and will have no impact on FHA's
MMI Fund.
Expanded refinance options for homeowners with non-GSE and non-FHA
loans, along with changes to the FHA Streamline Refinance, create a
critical patchwork of refinance programs for responsible borrowers who
are current on their mortgage loans. Through the efforts of HUD and its
administration partners, working together with Congress, we can ensure
that every family can have the opportunity to take advantage of today's
historically low interest rates. This will save homeowners thousands of
dollars a year, and as a result provide much needed payment relief and
further strengthen the economy.
conclusion
Madam Chairman, this budget reflects this administration's belief
that the recovery of our housing market is essential to the restoration
of our economy and that FHA is critical to restore health and
confidence to the housing market in particular. By targeting resources
where they are most needed, making tough choices in order to do more
with less, and ensuring the protection of taxpayer interests, FHA's
Single Family, Multifamily, Healthcare and Housing Counseling Programs,
are ensuring more Americans have the opportunity to realize or maintain
the economic security of the middle class. And the work this
administration has done has established a strong foundation upon which
we will construct an economy built to last.
Thank you.
FEDERAL HOUSING ADMINISTRATION--STREAMLINE REFINANCE PROGRAM
Senator Murray. Thank you very much for your testimony.
Let me start by asking you about earlier this week when the
President announced changes to the FHA Streamline Refinance
Program. FHA borrowers can already do streamline refinances,
but the changes would reduce the costs.
Specifically, any borrower who is current on their mortgage
and has a mortgage that was originated before June 2009 would
pay an up-front premium, I understand, of .01 percent, and an
annual premium of .55 percent? Normally borrowers would have to
pay the current up-front premium of 1.75 percent and an annual
premium of 1.25 percent.
This change has the potential to help borrowers enjoy the
benefits of lower interest rates, but we are all focused on
solvency of the MMI Fund. So, I am concerned about the impact
of that change on that fund.
So, first of all, I wanted to ask you, who will benefit
from this change, and how many you would expect to benefit? And
second, what effect do you think that will have on the MMI
Fund?
Ms. Galante. Thank you for the question.
So, there are a large cohort of borrowers who will benefit
from this. Something in the magnitude of 2.5 million borrowers
are eligible under those criteria that you mentioned. And these
are people who are already paying 55 basis points on an annual
basis for their mortgage insurance premium, so they will
continue to pay the same amount and receive the full benefit,
essentially, of a reduction in interest rate from wherever they
are today, which obviously varies, but somewhere between 6.5
percent down to today's rates of around 4-plus percent.
So, there is significant benefit to them in monthly
savings. Again, these are borrowers that already need to be
current on the mortgages, so they are good, paying borrowers at
this point in time. However, we all know that everyone is under
stress in this economy, and if we can help those borrowers put
some additional money in their pocket, we believe that over the
long term, that strengthens their ability to continue to pay
their mortgage payment, and does not cost FHA anything to get
that essentially additional layer of security that they will
continue to pay.
So, the only cost to this, really, would be the assumption
that there were some people who would have refinanced at the
higher mortgage insurance premiums, and we will not receive--
there is an opportunity cost for not refinancing those people
at the higher mortgage insurance premium. But in the mix, it is
a very low amount to pay for that extra so-called insurance
that doing the Streamline Refinance Program will benefit.
And with our other changes, the 75 basis points up front
for all other borrowers combined, we will net between fiscal
years 2012 and 2013 an additional $1 billion in premium
increases.
Senator Murray. So, you do not see an impact on the MMI
Fund, or you think it will benefit the MMI Fund.
Ms. Galante. I think, long term, it will benefit the MMI
Fund. And with the up-front premiums that we are charging for
the balance of borrowers, again, we believe we are going to
net, in addition to what is already in the President's budget,
$1 billion in budget receipts.
Senator Murray. Okay. When you announced the policy change,
you also said some lenders are resistant to doing streamline
refinances because they are concerned about how those loans
might impact their performance assessments that are done
through the Neighborhood Watch System. This system compares the
performance of a lender's loans with other similar lenders.
And so, to ease those lenders' concerns, the new policy is
to exclude those loans from the compare ratio. I certainly want
to see more borrowers take advantage of low interest rates, but
I also want to make sure we are monitoring FHA lenders. So, how
can you ensure us that lenders will still be held accountable
for poor performance?
Ms. Galante. Right. So, a very good question. And they will
continue to be held accountable. Whoever originated that loan
is still accountable for the origination. If there was fraud or
there was a problem in that original origination of that loan,
that lender can still be held accountable under our
indemnification processes.
So, we do not think that that change will have a material
effect on our ability to monitor lenders for their origination
errors.
FEDERAL HOUSING ADMINISTRATION--MUTUAL MORTGAGE INSURANCE FUND
Senator Murray. Okay. The most recent quarterly report to
Congress on the MMI Fund shows an increase in early period
delinquencies for Streamline Refinance mortgages. That raises
some concerns about the current proposal. However, the report
does note that changes to the program have been made requiring
lenders to certify income and employment at the time of
refinance.
Can you explain the changes that you made to the program
requirements and what impact you expect that to have on the
performance of Streamline Refinance loans going forward?
Ms. Galante. So, when the Streamline Refinance was first
being used in the beginning of this crisis, there were not some
of the controls that you just mentioned on the program. Putting
those controls in, we believe, will significantly help the re-
default ratio of those loans.
It is true that people who are being refinanced because
they are under some kind of stress, even though they are
current on their mortgage, may have a slightly higher default
ratio than other people. But on the other hand, we are going to
be better off if they do not ultimately default because we have
lowered their interest rate. If we can help them stay out of
default by lowering their interest rate and putting more money
in their pocket, ultimately, we are going to benefit from that.
Senator Murray. Okay. When the Secretary was here last
week, we spent a bit of time talking about the health of the
MMI Fund and the current expectation that an appropriation will
not be needed to cover the re-estimate.
In the past few weeks, there have been a lot of numbers
released on the MMI Fund related to all the various settlements
and premium increases. And I understand that the settlements
have not been filed in court, so these numbers still are not
final. But if you could, can you give us just a walk through on
what has happened and where we see these, including the premium
increases in various settlements, and the impact on the MMI
Fund?
Ms. Galante. Right. So, the budget projection in the
President's budget was that if there were no additional policy
changes and MIP (mortgage insurance premium) increases, and no
additional funds through enforcement actions, and the economics
that the projections were based on stayed the same and the
volume stayed the same, that we could need to draw $688 million
from Treasury.
Given the policy changes in the premiums, which will
generate, as I said, over fiscal year 2012 and into fiscal year
2013, more than $1 billion of receipts, and the approximately
$900 million that comes from the settlement negotiations, those
two things obviously take away the need for the $688 million
and leave us in the plus category to some degree.
Now, all of this is based on assuming that there is not any
major change in our volume from the projections that were in
the President's budget, or from some other worsening of
economic conditions.
So, there is still some risk, and we do not pretend that
there is not. But it is much less likely given the policy
changes that we have put into place.
Senator Murray. Okay. Thank you very much.
Senator Collins.
Senator Collins. Thank you, Madam Chairwoman. I want to
follow up on the very issue that you were just discussing with
Senator Murray. It does appear that the FHA, contrary to the
projections in the President's budget, will narrowly avoid
requiring funds from the Treasury in this fiscal year. But
there are circumstances under which these steps that have been
taken, such as the increase in mortgage insurance premiums and
the funds from the settlement, might not be sufficient to keep
the FHA from requiring an infusion of cash from the Treasury.
You mentioned broader economic issues. But if you could be
more specific on what could cause the Treasury, to be needed
after all, despite the insurance premium increase and the
settlement funds.
Ms. Galante. So, I think the major issue is if house prices
decline and they decline significantly from the projections
both under the President's budget and from our actuarial, which
had different projections. So, there is a range here.
But the fact is, everyone is at risk of where house prices
are going relative to the whole economy. We are starting to see
some stabilization there. We are starting to see some good
signs. But we have seen the beginning of some good signs
before, and so we do not want to take that for granted, that it
is just absolutely going to turn the corner here.
So, we are continuing to do everything that we can,
including increasing premiums, including additional enforcement
actions. The settlements that you have seen are not necessarily
the end of FHA's enforcement actions to keep lenders
accountable.
We are also making changes in our REO processes, as has
been widely publicized. Again, if we can recover more dollars
as we dispose of our REO, if we can stabilize the housing
market through those kinds of actions, all of that will
ultimately help the MMI Fund.
So, we are going to continue to monitor this very closely.
We are going to continue to take additional actions that we
need to take to keep the fund healthy.
MORTGAGE INSURANCE FEES
Senator Collins. But it seems that the administration is
going in contrary directions when it comes to fees and mortgage
premiums. On the one hand, you are increasing the premiums, but
as part of the FHA's Streamline Refinance Program, you are
actually substantially reducing fees and premiums.
Now, I recognize that that is great news for hundreds of
thousands of families, potentially lowering their monthly
payments. But that obviously has a negative impact, I would
think, on the FHA's capital reserves.
Now, you said in response to a question from Senator Murray
that ultimately you think that it is going to benefit the fund.
I am trying to understand how cutting the fees will benefit the
fund. Is it that you expect to make it up in volume? It seems
inconsistent with your overall approach of increasing premiums.
Ms. Galante. So again, this does get a little bit
confusing. But these are borrowers who are already in our
portfolio, who are paying 55 basis points on an annual basis
today.
And what we have done under the Streamline Refinance that
was announced this week is we have said, if they want to
refinance at today's current interest rates, essentially they
get to keep the same premium that they have as opposed to
having to pay the new current premiums that we have increased,
not just this past week, but that we have increased over the
past 3 years.
And so, if they had to pay those higher premiums, the $175
up front and 1.25 points over time, that would so significantly
cut into their net benefit on a monthly basis that many of them
simply would not choose to refinance. So, they would just stick
where they are, and they would in some ways be a higher risk to
us because they are paying a higher interest rate today, and
they are not being able to take advantage of the lower interest
rate.
So, that is why we really believe that this is different
than charging new borrowers for higher mortgage insurance
premiums.
Senator Collins. I understand that, but are you not
actually cutting their fees compared to the fees that they are
currently paying? I understand they are not going to have to
pay the higher fee, but it was my understanding that you were
going to cut the annual fee in one-half and cut the up-front
insurance premium costs from 1 percent of the loan balance to
.01 percent.
Ms. Galante. So, here is where it gets a little difficult.
For the current borrowers, they are already paying that 55
basis points. What we are saying is we are not going to jack
you up to the higher mortgage insurance premiums. And we had
been doing that to other borrowers. That is how we have been
running this program until June 1 when we have this go into
effect.
So, it is not cutting the existing borrowers' fees. It is
that they will not have to pay the higher fee, if that makes
sense.
CAPITAL RESERVES
Senator Collins. Let me move to the statutorily mandated
level of 2 percent for the capital reserves. This really
troubles me because this is not a guideline. It is not a best
practice. It is not a suggestion. It is not a recommendation.
It is the law. And for the third year in a row, FHA has not met
that level.
Now, I understand why, and the total collapse of the
housing market--and I know that you are putting in new premium
increases and proposing new rules related to lender oversight.
I guess my question is, are you confident that that is going to
be adequate?
I do not think you should be relying on a one-time windfall
from the lender's settlement to get you back to the statutorily
required level.
Ms. Galante. So, we certainly are not relying exclusively
on the settlement funds to get us back to the level. I mean,
$900 million is not going to get us back to a 2-percent capital
reserve. That is why we have been over the past 3 years
increasing mortgage insurance premiums significantly.
So, we have between the start of this administration and
the premium increases announced last week, we have doubled the
mortgage insurance premium on FHA loans. And we are financing
borrowers at very low interest rates. Those loans are going to
stay with us and continue to be paying a mortgage insurance
premium for many years to come.
And we are not going to get there up to the 2-percent
capital reserve in 2013. It is going to take a couple of years
of the loans that we have and that we have put this additional
premium increase on. It is going to take a couple of years to
late 2014, early 2015, before we project we will back to the 2
percent. And it is not a result of just the settlement. It is a
result of these ongoing increases in premiums to help us get
there, as well as other activities, other policy changes that
we are making.
RISK ASSESSMENTS TOOLS
Senator Collins. Thank you, Madam Chair.
Senator Murray. Clearly the re-estimates are going to be
impacted by the conditions in the market that is outside, has
control, if prices of homes decline or whatever. I think
everybody understands that. But we also know that HUD has to
work to improve its ability to monitor its risk and its
estimates. And the Government Accountability Office (GAO) has
recommended improving your risk assessment tools to better
incorporate the risk of future economic volatility.
In years past, the Congressional Budget Office (CBO) has
raised concerns about your estimates, and I understand that you
currently have a contract that will allow you to use stochastic
modeling in the next actuarial review.
Can you explain how that modeling is different than what
you are doing today, and how that will change your estimates?
Ms. Galante. Sure. I will take a stab at it. We, first of
all, appreciate the help that Congress has given us in funding
a number of important initiatives that help us get the modeling
as up to date as possible.
And stochastic modeling allows us to really have more
dynamic scenarios built in, more variables built in, to monitor
many different increases and changes in market conditions. And
so, it will enable us to have many more points of range of--
under different economic conditions, what happens?
So, it is going to provide us significantly more
information than we have under the current modeling. But I
would also say the modeling has been improved over the past
couple of years. It has not been a static situation.
Senator Murray. Does that address the concerns that GAO
outlined for you?
Ms. Galante. I believe so, yes.
Senator Murray. In your testimony, you said HUD has
clarified the rules around lender indemnification for insurance
lenders. What aspect of the rules did you feel were important
to clarify, and what effect will those changes have on
enforcement going forward?
Ms. Galante. So, the most important thing was to define
material and serious violation so that lenders--this cuts two
ways--lenders will know that we are not going after minor
little box checking errors, but it is clear what they will be
held accountable for. So, that helps them understand the
standard that we are going to be looking at. So, that was the
most important thing.
Senator Murray. Okay. You expressed an interest in getting
two additional authorities to strengthen FHA's enforcement
abilities, including lender indemnification requirements to
direct endorsement lenders, and expanding your authority to
remove lenders from the program on a national basis. Can you
explain why those different rules currently apply to those
different classes of lenders, and what impact those proposals
will have on your enforcement?
Ms. Galante. So, right now the indemnification rules apply
to our lender insurance program, which covers, I think, 70
percent of our volume, but only 30 percent of our lenders. So,
we kind of have a reverse situation here where the largest
lenders doing the most amount, we can get indemnities from. But
for the smaller lenders who are direct endorsers, we do not
have that authority. So, that would be a smaller volume, but it
is still important to be able, in our view, to have the same
authority for both types of lenders. So, that is one statutory
requirement that we would like.
The other is, right now, it is incredibly cumbersome to go
after lenders when we see a systematic problem with a lender
that operates in multiple jurisdictions, because we need to
look at their offices on a geography by geography basis and
what problems they have in that office. So, this makes it very
hard when we are in the 21st century where lenders are
operating all across different geographies, and our statutory
requirements have not really kept up with the need to have that
kind of systematic overview.
Senator Murray. Okay, good. And the HUD Office of Inspector
General has recommended that you seek legislative and program
changes to prevent lenders and their corporate officers from
reentering the program as an officer with the same or a new
lender. Is that a recommendation you agree with?
Ms. Galante. We do conceptually agree with that. We have
got to figure out exactly what the legal statutory language
would be to walk a path of ensuring that we are keeping the bad
guys out from just coming in the back door with another lender,
but not trapping everybody who has worked for an institution,
for example, that had issues, but perhaps were not directly
involved in the----
Senator Murray. So, the concept you agree with.
Ms. Galante. The concept we absolutely agree with.
Senator Murray. The language, we have to be careful with.
Ms. Galante. Correct. That is correct.
REAL ESTATE-OWNED PROPERTIES
Senator Murray. Okay. As a result of foreclosures and home
price declines, the rental housing market is really tightening.
So, on the one hand we have an excess supply of distressed
housing, and on the other we have increased demand for rental
housing and a shortage of affordable housing.
Last August, FHA, Treasury, and the Federal Housing Finance
Agency put out a request for information to determine interest
in a proposal to sell distressed properties more
systematically.
FHFA recently announced a pilot sale of real properties,
which would include the sale of 2,500 properties in bulk. Your
testimony mentioned that following that pilot, FHA would do its
own. What, specifically, is HUD considering in terms of a
pilot, and do you have a timeframe on that?
Ms. Galante. So, yes, thank you. There are a couple of
things we are doing on that. The first is the Fannie pilot; the
initial pilot is for properties where they had already tenants
in place, and so it is a little bit separate from the rest of
the REO-to-rental strategy that we are, as FHA, also working
with FHFA and Government-sponsored enterprises (GSEs) on. And
we, together, are looking at other pilot communities where all
three of us--it might make sense to have a pilot where there is
stock from each of those institutions, because one of the
things we are trying to get to is ensuring that there is a
reasonable number of units in a geography so that someone could
actually own and manage these homes as rental housing in a
cost-effective manner.
Frankly, all of us have been working down our REO at the
moment, and so there are limited geographies where it makes
sense to do this all together. So, we are identifying those
places, and I would hope in the next month or two that we would
be able to announce where we would want to continue to work
together.
FHA is doing some other things on its own. We are
interested in ramping up our Notes Sale Program. And without
getting into the details, that is essentially a pre-REO sale of
the note with the existing borrower in place. And then whoever
buys that note has the opportunity to and requirement to work
that borrower, maybe rent them back, maybe put them in a lease-
to-own. There are a variety of mitigation measures that they
can do before the property reaches REO, because by that point,
we are already losing a significant amount of money. So, there
are a number of other things that we are working on around that
pilot.
Senator Murray. Okay, great. Appreciate it.
Senator Collins.
Senator Collins. Thank you, Madam Chairwoman.
The administration has proposed paying for its broad-based
refinancing plan by charging a fee on large financial
institutions, a so-called bank tax.
This fee has previously been proposed and rejected by
Congress. When Secretary Donovan was before us, and also in an
interview that he gave with reporters, he said that while he
personally believes the fee is the right approach, HUD is open
to exploring alternatives.
What alternatives is HUD looking at?
Ms. Galante. So, Senator, I would say I do not have a
particular alternative to put on the table. The President's
proposal does include the financial responsibility fee. If
there are other ideas--I think what we are saying is that we
are open to consider other alternatives for this. But it is
important, back to the health of the FHA fund--we really think
it makes sense to do this broad-based refinance program, but we
also think it is important to have segmented from the MMI Fund,
and whatever risk is in that fund to be funded from a separate
pot of money.
Senator Collins. I would suggest to the administration that
since this proposal did not go anywhere in the past, that it
would be really helpful if you came forward with other
approaches that might be better received. I told the Secretary
that too. I know it is a little bit out of your lane, but I did
want to bring it up today.
Madam Chair, I am going to submit the rest of my questions
for the record because I do have to go to the floor to present
an amendment.
Senator Collins. But thank you for holding this important
hearing. And Ms. Galante, thank you for being here today.
Ms. Galante. Thank you.
Senator Murray. Thank you very much, Senator Collins. And I
just have a couple of questions left, and I appreciate your
answering. Many of our questions we will have to submit in
writing today.
UNDERWATER MORTGAGE RELIEF
Senator Murray. We are beginning to see signs of life in
this housing market, but there are still some looming concerns,
especially about the number of underwater mortgages and the
shadow inventory that is eventually going to hit the market.
The settlement with those five largest servicers includes $17
billion in direct consumer relief that will be provided to
borrowers through help, like principal write-downs and short
sales. It also includes $3 billion to support mortgage
refinancing for underwater borrowers.
I wanted to ask you how you expect the servicers to
allocate the direct consumer relief among various relief
options, and what do you expect the impact of that $3 billion
to be?
Ms. Galante. So, again, I think some of this is going to be
worked out over time. Each servicer has an allocation of the $3
billion of refinancing and the $17 billion in principal
reduction and other consumer relief. And they have allocations
based on a State-by-State basis.
So, we do expect that--the combination of all of those menu
of services across the country will help somewhere in the
magnitude of 1.7 million owners through a variety of those
activities. And it is going to depend on what their individual
portfolio looks like, what State they are in, and a number of
other factors.
Senator Murray. So, we could see a different picture and
different----
Ms. Galante. Different picture in different States and by
different institution depending on, again, what kind of
borrowers they have in their portfolio.
MORTGAGE SCAMS
Senator Murray. Okay. And finally, I wanted to ask you
about mortgage scams. An important part of the recent
settlement is that it provides relief to homeowners. But
throughout this housing crisis, we have seen a lot of scam
artists who are preying on vulnerable homeowners. And those
perpetrating those scams have been incredibly skilled at
adjusting their tactics as new opportunities arise. Are you
concerned that scam artists could try and take advantage of
homeowners who may be eligible for relief through this
settlement?
Ms. Galante. We are concerned, not just about the
settlement, about that, but more broadly. When I was out at the
event with the housing counselors that I mentioned in my
testimony, that was one of the big things I heard, that the
housing counseling community is trying to stay ahead of the
scam artists. And, they get people who come into them after
they had been taken advantage of. And it is a serious problem.
I would say that we have a campaign that we are working
with a number of other agencies and nonprofits that is a
consumer education campaign. And in fact, this week is National
Consumer Protection Week, and we are launching a campaign down
in Atlanta today actually. The press release probably is coming
out today. It is called Know It, Avoid It, Report It, and there
is----
Senator Murray. Know, Avoid It, Report It?
Ms. Galante. Know It, Avoid It, Report It. So this is
reaching out to borrowers to make sure that they understand
that there are scam artists, and if they see it, if they are
being asked for money to do certain activities, there is a
number they can call. There is a Web site they can go to to
report the scams that they are seeing.
Senator Murray. Okay. I urge you to be really aggressive on
that because these scam artists are really aggressive and stay
ahead of us. So, I appreciate that, and we will be following
that closely as well.
Ms. Galante. Right.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. I believe that is all the questions that we
have for you at this time. Again, we will leave the record open
for additional questions and your comments back.
[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
evaluating risk
Question. Given the volume of loans that FHA insures, it is
critical that it has the capacity to monitor and assess risk. Two
important aspects of this are: Staff with the appropriate expertise,
and modern IT systems. In the fiscal year 2012 bill, the committee set
aside $8.2 million for the Office of Risk and Regulatory Affairs to
support increased risk controls. What is the current status of this
relatively new office?
Answer. Led by a Deputy Assistant Secretary with extensive
experience in assessing credit risk, the Office of Risk Management and
Regulatory Affairs (ORMRA) recently received its delegation of
authority to carry out, in concert with program offices, all risk
management, analysis, and evaluation functions, including decisions and
corrective measures related to risk assessment, risk management
strategy, and risk governance policies. With several credit risk
officers already on staff, the office is in the process of hiring
additional staff with credit risk and operational risk expertise to
ensure that there is sufficient coverage and expertise to review and
report risk across all FHA platforms.
The Office of Risk Management and Regulatory Affairs is authorized
to conduct risk management and risk assessment activities including,
but not limited to the following:
--Recommend actions to support FHA's ability to reduce risk exposure
to its insurance funds while meeting its housing mission and
operating in compliance with statutory capital requirements;
--Promote transparency and comprehensive communication of FHA's risk
profile by establishing reporting metrics for key constituents,
both internal and external, in order to communicate, both
qualitatively and quantitatively, FHA's risk levels, trends,
priorities, risk mitigation activities, and impacts;
--Identify the policies and processes that are key drivers of risk
via a structured risk identification framework: I.e., recommend
risk mitigation strategies for FHA and specific program areas
and provide independent oversight and assessment of risk
remediation activities; provide input and guidance to program
areas on key risk analytics, policies and practices, including,
but not limited to, algorithms and underwriting used to
identify, measure, and manage risk-related to endorsement and
management of Single Family, Multifamily, and Healthcare
programs, and collaborate with program areas regarding
counterparty risk (lenders and servicers), portfolio asset
management strategies, and enforcement practices to protect
FHA's insurance funds;
--Design and maintain a comprehensive Risk Governance infrastructure,
including implementing policies, processes, and committees to
reduce risk exposure to the insurance funds; i.e., advise and
provide oversight for the implementation of policies,
processes, and committees that comprise the governance
structure;
--Ensure the timely and proper conduct of statutorily mandated and
other necessary risk analyses, including the annual actuarial
study of the Mutual Mortgage Insurance Fund and front-end risk
assessments (FERA) for new and high-impact programs and
activities, in accordance with Federal standards, and in
concert with other Office of Housing offices; and
--Ensure that risks are measured, monitored, and managed according to
an integrated framework across FHA and Office of Housing
program areas.
In order to carry out its functions, the ORMRA has instituted
monthly credit risk committees with each FHA program office to evaluate
loan performance data and make informed policy decisions which account
for risk. In addition, the Office is utilizing the work of FHA
Transformation to create and obtain monthly reports based on various
model scenarios that will allow FHA to evaluate the health of the FHA
fund on a more regular basis throughout the year.
ORMRA's Office of Evaluation assesses the financial impact of new
or revised HUD/FHA programs and policies; new or proposed legislation;
and/or new or proposed directives, studies or rules of the Office of
Management and Budget (OMB), the Government Accountability Office
(GAO), the Department of the Treasury (Treasury), or other agencies.
The Office of Evaluation is responsible for actuarial analyses and
cash-flow projections of the FHA insurance funds and evaluates
relationships between current market conditions and FHA program goals
and objectives. The Office of Evaluation estimates the financial impact
of policy changes or external factors on FHA programs. In addition,
that Office conducts a quarterly analyses of economic developments and
ongoing portfolio analyses of FHA's insurance funds.
The operational risk team within ORMRA has begun adopting GAO's
recommendations from its November 2011 Report on Improvements Needed in
Risk Assessment and Human Capital Management. This includes employing
stochastic modeling for the 2012 actuarial report. Recently, the Office
briefed GAO on its accomplishments to date in connection with such
report.
Question. GAO has noted the importance of integrated and updated
risk assessments to the solvency of the Mutual Mortgage Insurance (MMI)
Fund. Will the Risk Office assist in more integrated risk assessments?
Answer. Yes, the Office of Risk Management and Regulatory Affairs
(ORMRA) will assist in more integrated risk assessments. ORMRA is
leveraging the current process utilized by the Office of Single Family
Housing in its quarterly Internal Quality Control Reports to populate a
baseline operational risk assessment. This baseline operational risk
assessment will be used in conducting the annual risk assessment. ORMRA
and Single Family will partner in conducting the annual risk assessment
so that it is a more integrated and coordinated effort. In addition,
ORMRA and the program offices plan to hold quarterly operational risk
committee meetings to review the Internal Quality Control Reports, the
risk assessments, and monitor the remediation plans.
Question. Modern IT systems are necessary for FHA to assess risk
effectively. Unfortunately, many of HUD's IT systems are decades old.
This committee has provided HUD with millions of dollars, primarily
through the Transformation Initiative, to modernize FHA systems. What
is the status of that project? And when can we expect to see the
benefits of these updated systems?
Answer. The project is maximizing the funds appropriated by
Congress to the greatest extent. We have completed several studies
documenting a roadmap to follow for implementing business services on
the Federal Financial Services Platform. We have identified the
required Risk and Fraud tool, along with a Portfolio Evaluation tool.
Procurement and deployment of the tools are underway. We need funding
in fiscal year 2013 and beyond to continue to implement the vision of
FHA Transformation which is a priority of the committee.
Benefits of the FHA Modernization capital investment are being
realized today. Acquisition of the Federal Financial Services Platform
(using Oracle Exalogic hardware, featuring the integrated Fusion
Middleware software stack) is the cornerstone IT investment. This
platform ultimately has enterprise extendibility and provides the
capability and capacity to replace the Unisys and IBM mainframe systems
at some logical point in the future. Eighty percent of the initial
planned environments are built out on the Oracle Exalogic platform; 100
percent by August 31, 2012. A requisition for additional Oracle
Exalogic hardware/software is in the procurement pipeline. This
additional capacity positions us to accept requirements from other
offices in the Department (e.g., Public and Indian Housing (PIHs), Next
Generation Management System (NGMS) projects); accordingly, this
achieves true enterprise capability and demonstrates scalability. The
Lender Electronic Assessment Portal (LEAP) application consists of four
modules (i.e., Approval, Recertification, Monitoring and Enforcement)
that are in various stages of development and production. Today LEAP
automates what largely has been a manual and paper intensive process.
The LEAP application wholly aimed at improved counterparty (i.e.,
lender) management, addresses vestiges of risk and fraud at the front
end (or origination) of the loan rather than relying on the antiquated
process during the post-endorsement process. The Approval module went
live in April 2012 and is successfully processing a steady state volume
of request. The Recertification Generation I module is slated for
operational capability in the second quarter of fiscal year 2013 with
design and development of the other modules in the ensuing months; LEAP
is projected to achieve full operational capability in the first
quarter of fiscal year 2014. Consistent with addressing significant
constraints on risk and fraud detection, the Loan Review System (LRS),
Portfolio Evaluation Tool (PET) and Automated Underwriting System
capabilities are slated to achieve operational capability in early
fiscal year 2014. This complementary set of tools and capabilities
effectively provide decision support (and analytics) at every step in
the process of the loan lifecycle, from origination through post-
endorsement technical review.
Question. Given FHA's significant presence in the market, the
systems FHA uses to conduct its business are constantly in use.
Therefore when new systems come online, transitioning from the existing
systems to new ones will require careful planning. What are your plans
for making sure that the transitions to new systems are as smooth as
possible?
Answer. FHA will continue to fully embrace HUD's Project Planning
and Management (PPM) framework. New system deployments will be
coordinated with all stakeholders to minimize disruptions and training
costs. FHA will assess the operational readiness of each system, prior
to its ``go live'' phase. Consistent with the PPM methodology, FHA will
so document and detail the plans and procedures to decommission legacy
systems as they are no longer needed. Launch of the business services
will follow the industry best practices of beta testing, soft launch
and full scale launch. Appropriate communications will be shared with
users of the business services, to include citizens.
______
Questions Submitted by Senator Roy Blunt
fha's solvency
Question. As one of the only games in town, the Federal Housing
Administration (FHA) continues to have a ballooning portfolio, well
above the intended size. The administration's white paper proposes
various reform options for the Government-sponsored enterprises (GSEs)
Fannie Mae and Freddie Mac. How can the Department of Housing and Urban
Development (HUD) ensure that FHA won't become the lender of last
resort for home loans should the private market move slowly, if at all,
to fill the space it once filled?
Answer. The administration is currently working diligently on a
number of interagency projects set forth in the white paper that was
published in February 2011, including a detailed exploration of the
three options for the future of housing finance. Of those three
options, the third one does provide considerations around maintaining
some Government presence through a model that would serve as a back-
stop in the form of reinsurance behind significant layers of private
capital at a guarantor level. Below is greater detail on the strengths
and weaknesses of this third option. However, to be clear, the
administration is still working with a number of stakeholders,
including Members of Congress, to fully explore all three.
At the same time, the administration is equally engaged on topics
that directly involve the GSEs, such as the development of national
servicing standards, a transition plan for the wind down of Fannie Mae
and Freddie Mac from their current status and reducing the footprint of
the FHA. It is important to remember that the FHA and GSEs continue to
provide an important source of credit availability as Government and
industry work collectively to reduce the barriers of uncertainty that
block a robust return of private capital. Thus, while the
administration supports decreasing the role of FHA, Fannie Mae, and
Freddie Mac and re-invigorating the private market, we also believe
that any approach must be measured and comprehensive to address the
tensions your questions above elicit.
Question. The administration's budget once again requests increases
in MMI premiums to help strengthen the fund. While I'm encouraged by
the increase in liquidity to protect against risk to the solvency of
the fund, I question whether the already bloated portfolio will grow in
2013 rather than shrink as your budget assumes. What steps are being
taken to encourage private lenders to originate quality, non-FHA
insured loans? How can HUD encourage the private market to provide home
loans for minorities who disproportionately rely on FHA's Government
guarantee?
Answer. In February 2012, HUD announced an increase in FHA annual
and upfront mortgage insurance premiums, effective in April 2012. The
decision to adjust FHA premiums for the fourth time since 2009 was made
by balancing several factors--FHA's mission of providing access to
credit for low-wealth, creditworthy borrowers, the health of the Mutual
Mortgage Insurance Fund and FHA's long-term role in the Nation's
housing finance system. As a result of these premium adjustments, FHA
has been able to continue to serve its counter-cyclical role in the
mortgage market--providing access to credit to creditworthy borrowers
during this time of market constriction--but has seen overall volume
decline. According to Amherst Securities' June 14, 2012, Amherst
Mortgage Insight Report, the composition of FHA loans in Ginnie Mae
securities has actually declined. This is in large part because these
pricing changes have made conventional loans more competitive; high
FICO borrowers who may have chosen to take out an FHA insured loan
rather than a loan with private mortgage insurance are now finding the
costs of private versus federally backed mortgage insurance more
comparable. However, adjusting premiums is only one lever. Currently,
FHA is the only federally backed institution able to originate high-
priced loans (loans above $625,500). As a result, borrowers seeking
these ``jumbo'' loans only have one outlet--FHA. In its housing finance
reform white paper, the administration urged Congress to allow the
higher loan limits to expire. Unfortunately, in November 2011, Congress
elected to extend these limits for FHA while allowing the GSE loan
limits to go back to pre-crisis levels. This does create a disincentive
to originate non-FHA loans in some markets and so we would once again
urge Congress to allow FHA loan limits to step back to the HERA levels.
commercial lending
Question. In my home State of Missouri, we have a large man-made
lake with a substantial volume of lakefront properties, as well as
continued commercial development. That said, HUD continues to promote
mixed-use properties as needed housing stock diversity for communities.
FHA's condo rules prohibit the purchase of a condominium in a property
with more than 25 percent commercial space. What is the purpose of this
restriction, and doesn't it run contrary to the new ``town center''
model that HUD is promoting?
Answer. While FHA's requirement regarding permissible commercial
space is less restrictive than the industry standard of 20 percent, and
FHA has provided for an exception to 35 percent for those projects
meeting additional eligibility criteria, we have been working on
changes to our requirements that will better accord with the growing
trend of mixed-use development while simultaneously managing risk to
FHA. Prior to recent changes in the housing market, mixed-use
properties were not submitted for FHA condominium project approval. Now
that they are subject to FHA project approval, FHA must develop
standards for approval of these projects. Until standards are fully
developed, these projects are reviewed on a case-by-case basis, taking
into consideration that they tend to be riskier and often times the
primary use is more non-residential than residential. Therefore, there
is a need to review these projects carefully to ensure that approved
projects contribute to FHA's mission of providing affordable,
sustainable housing opportunities while balancing the risk to the
Mutual Mortgage Insurance Fund. We expect to issue updated guidance
regarding mixed-use development very soon.
appraisals
Question. In my office, we often hear concerns from prospective
buyers, builders, lenders, and other industry representatives about
serious problems with the FHA appraisal process. Are you receiving
complaints at your agency? Are you concerned with the current appraisal
environment?
Answer. Consumers and realtors may often have value issues with
appraisals that complicate transactions they are involved with, but it
is important to recognize that both parties have a vested interest in
the properties they seek to purchase and/or sell. Appraisers, by law,
are required to comply with the Uniform Standards of Professional
Appraisal Practice (USPAP), which, among other standards, requires
appraisers to perform assignments with impartiality, objectivity, and
independence. The appraiser's role as a disinterested third party is to
provide an unbiased opinion of value. This may, at times, be at odds
with the negotiated contract purchase price, which while reflective of
market activity may not reflect market values in a given area.
Appraisal issues tend to center around a perceived inability of the
consumer or realtor to be able to communicate directly with the
appraiser because of the Dodd Frank Wall Street Reform and Consumer
Protection Act of 2010, which prohibits undue pressure on the
appraiser, and a separation of production and compliance in the
lender's operation. This has caused some confusion in the markets
regarding what is allowed in terms of communication to the appraiser
among all parties to the transaction including the appraiser. FHA has
released guidance to appraisers and lenders through the release of
Mortgagee Letter 2009-28 (entitled Appraiser Independence) to clarify
what is acceptable.
Question. Also, what appeal process, if any, exists when homes that
were appraised far below or above another appraisal? What appeal
process exists for builders or lenders when an appraiser values a home
well below the price offered and under contract?
Answer. The mechanism for an appraisal appeal is known as a
reconsideration of value. A reconsideration of value is a request to
the FHA Roster appraiser to reconsider the analysis and conclusions of
his or her appraisal based on information that was not presented on the
appraisal report, but was relevant to the appraisal and available to
the appraiser in the normal course of business as of the effective date
of the appraisal.
Only the lender's underwriter can request a reconsideration of
value from the FHA Roster appraiser. Information regarding comparable
sales, listings, or under- contract-of-sale properties that the
appraiser did not cite in the appraisal report but was available to the
appraiser in the normal course of business as of the effective date of
the appraisal are appropriate data to be provided to the appraiser. The
appraiser is required to consider the data provided by the lender. The
reconsideration may or may not result in an amended report. The
underwriter should include all relevant data with the request for the
reconsideration. Information available at the time of the appraisal but
not provided in the original report should be in the appraiser's file.
treble damages
Question. The GSEs and other major mortgage investors require
lenders to repurchase loans that do not meet their underwriting or
servicing guidelines. FHA has additional authority, under the False
Claims Act and the National Housing Act to assess treble damages on
lenders for origination and servicing violations. Clearly, lenders who
commit fraud should be penalized and barred from participating in the
FHA program. But for more routine mistakes, repurchases and
indemnification exist as a remedy.
For large institutions, treble damages on enough loans would be a
significant business cost, but for smaller lenders the impact is even
greater if they have to pay three times the claim amount. Small,
independent mortgage bankers are struggling with compliance business
costs that they incur now because of increased industry regulation.
My concern is instances where lenders acted in good faith and there
was no fraudulent activity. For some of the smaller lenders, the cost
of simply defending themselves could be devastating. Can you tell us
under what circumstances FHA would see itself using this more stringent
authority rather than having lenders simply repurchase or indemnify
loans?
Answer. FHA is an insurer; it does not own loans originated by FHA-
approved lenders. Therefore, repurchase is not a means for resolving
violations of FHA origination, underwriting, or servicing violations.
In instances of material non-compliance, HUD often attempts to settle
with the lender by obtaining an agreement from the lender to indemnify
FHA against losses. Indemnification may also be compelled under HUD's
Lender Insurance Program in response to violations of HUD's origination
and/or underwriting requirements. Since 2010, FHA has pursued statutory
authority to extend this indemnification authority to FHA-approved
Direct Endorsement Lenders.
With respect to treble damages, section 536 of the National Housing
Act (12 U.S.C. sections 1735f-14) authorizes HUD to impose a penalty in
the amount of three times the amount of any insurance benefits claimed
by the mortgagee for any mortgage where the servicer has failed to
engage in loss mitigation in compliance with HUD's requirements.
Imposing treble damages under this authority requires a demonstration
that the lender has acted knowingly (demonstrated through evidence of
actual or constructive knowledge) and that the misconduct is material.
HUD regards treble damages as appropriate only for egregious violations
of its requirements, and has not yet imposed treble damages for
servicing violations.
The Department of Justice (DOJ) has authority under the False
Claims Act to pursue treble damages for, inter alia, knowingly
presenting or causing to be presented false claims to the Government or
making false records to get a false claim paid. The False Claims Act is
only employed where there is evidence of fraud.
While the size of the lender bears no relationship to the extent of
its misconduct or, as a result, the amount of damages and penalties
sought, both HUD and DOJ consider the lender's ability to pay in the
context of settlement discussions.
Question. Has FHA considered how the indemnification polices and
the penalty of treble damages impacts smaller lenders versus larger
lenders?
Answer. When HUD's Mortgagee Review Board (MRB) is determining the
appropriate penalty to impose upon FHA-approved lenders who have
violated FHA's requirements, and when HUD's enforcement lawyers are
negotiating settlements with lenders who have violated FHA's
requirements, HUD consistently takes into consideration the lenders'
abilities to pay the proposed penalties.
Question. How do you see FHA striking the right balance between
fighting fraud while ensuring that honest lenders are not discouraged
from participating in FHA programs? Does FHA have the authority to
cease business with known bad actors?
Answer. HUD, along with DOJ, have powerful enforcement tools to
wield against those attempting to defraud the Federal Government, but
employs these only in cases where there is evidence of fraud or knowing
and material violations of HUD's requirements. Moreover, HUD's
enforcement procedures provide lenders with considerable due process.
Lenders receive written notices of HUD's findings and the underlying
basis for those findings. Lenders then have the opportunity to respond
and, if appropriate, to resolve the issues through, inter alia,
provision of mitigating information or an agreement to indemnify HUD
against harms before any enforcement action is taken. It is only in
those instances when the matter cannot be resolved without enforcement
actions that the case is referred to HUD's Mortgagee Review Board
(MRB). HUD's MRB, after a thorough review of the violations and any
preliminary responses from the lenders, issues a formal notice of its
intent to pursue sanctions, if any, and provides additional
opportunities for lenders to dispute and/or settle HUD's allegations.
If the MRB determines that penalties are appropriate, HUD's enforcement
lawyers initiate administrative proceedings, which enable lenders to
dispute HUD's determinations before administrative law judges.
The substantial due process outlined above assures entities that
abide by HUD rules that they will have sufficient opportunity to show
that any actions that may cause concern do not rise to the level of
fraud or knowing and material violations while still deterring bad
actors with the threat of sanctions. If HUD obtains sufficient evidence
of misconduct by a ``bad actor,'' and that evidence warrants suspension
or withdrawal of the lender's approval to participate in FHA's
programs, HUD's MRB has the authority to suspend or withdraw the
lender's FHA approval. Any such action by the MRB is subject to
adjudication before administrative law judges and review by the Federal
courts.
SUBCOMMITTEE RECESS
Senator Murray. But I appreciate your testimony, and your
time, and your staff today. And with that, this hearing is
recessed. Thank you.
Ms. Galante. Thank you very much.
[Whereupon, at 10:56 a.m., Thursday, March 8, 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 2013
----------
THURSDAY, MARCH 15, 2012
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patty Murray (chairman) presiding.
Present: Senators Murray, Lautenberg, Pryor, Collins, and
Inouye.
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
STATEMENT OF HON. RAY LAHOOD, SECRETARY
OPENING STATEMENT OF SENATOR PATTY MURRAY
Senator Murray. Good morning. This subcommittee will come
to order.
Today, we will hear testimony from Transportation Secretary
Ray LaHood on the President's budget request for fiscal year
2013.
Mr. Secretary, welcome back to our subcommittee. It is
always good to have you here. And just personally,
congratulations on your son's safe return. We are all glad he
is home; I am sure you are as well.
As we begin our work on next year's budget, there are
encouraging signs that our economy is moving in the right
direction. Although we are obviously not moving quickly enough
for families that continue to struggle, and we certainly have a
long way to go, the private sector has been adding jobs for
almost 2 years, businesses are growing, confidence is up, and
we seem to have stepped back from the precipice. That is
encouraging, but to keep growing these improvements over time,
we need a transportation system that supports job creation,
fosters economic growth, is sustainable, and most importantly,
is safe to use.
Unfortunately, today we have a transportation system that
is riddled with bottlenecks, slowing down the movement of
freight, and leading to higher costs for our businesses. We
have a system that makes airline passengers suffer through
flight delays and keeps commuters stuck in traffic jams instead
of allowing them to get to work or get home for their families.
Independent assessments show us that the infrastructure of
our country is falling behind and holding us back. All of these
reports reach the same conclusion: That the need to invest in
our transportation infrastructure is huge and needs to be done.
Many of us have 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-minus.'' Our Nation's rail network earned a paltry ``C-
minus,'' and transit only rates a ``D.''
Last year, the World Economic Forum ranked U.S.
infrastructure 23rd in the world; 10 years ago, we were 6th.
And without aggressive investment, I am very concerned about
where we will be 10 years from now.
The U.S. Chamber of Commerce found that, given expected
growth in population and trade, we need to invest an additional
$50 billion a year in our highway and public transportation
system just to maintain current performance, and we need to
double that number each year to improve performance.
Taken together, these assessments are alarming, and sadly
the condition of our Nation's infrastructure comes at
significant costs. On average, Americans now spend an extra
$400 per year on car maintenance as the result of driving on
poor roads, money every family, I know, could put to better
use. We spend an extra 4 billion hours a year sitting in our
cars due to traffic congestion, burning through an almost extra
3 billion gallons of fuel in the process.
We have the world's worst air traffic congestion with
delays that average twice as long as those in Europe. And
freight delays have gotten so bad that bottlenecks cost the
economy an estimated $200 billion a year. And let us be clear,
holding back on investing in transportation infrastructure does
not actually save us money. It simply turns a budget deficit
into an infrastructure deficit. In fact, kicking the can down
the road will end up costing our Nation even more over the long
term, and forces the next generation to pay to clean up our
mess.
So we can invest now and lay down a strong foundation for
long-term growth, or we can let the system continue to crumble
and pay even more later. I think the choice is clear.
To address this problem, the President's budget request for
next year proposes to reauthorize the service transportation
programs at a funding level of $476 billion over the next 6
years. This is a substantial increase over current funds.
The reauthorization proposal is very similar to the one the
President included in his budget request last year, and like
last year, I applaud the administration's effort to promote
investment in our Nation's infrastructure. I am glad we are
seeing progress on a reauthorization bill, but I am still very
concerned about how we are going to move forward on financing
transportation programs this coming year. We have significant
challenges ahead of us.
The Appropriations Committee is now working under tight
caps on discretionary spending set by the Budget Control Act,
and unfortunately, the budget request does not offer a
realistic picture of how to fund transportation under those
caps. The President's budget, again, seeks to reclassify as
mandatory spending at least $4 billion in programs that have
long been funded by this subcommittee. That request leaves a
big hole this subcommittee will have to fill. In addition,
there is a long way to go before a reauthorization bill is
signed into law, and it is not yet clear what kind of package
will be considered in the House.
This leaves us with a lot of questions for how we are going
to sustain the Highway Trust Fund and fund transportation
programs next year. Recent projections from both CBO (the
Congressional Budget Office) and the administration show the
Highway Trust Fund may not stay solvent throughout fiscal year
2013. And even though the Senate reauthorization bill would
address this problem, no legislation is effective until it is
enacted into law. In addition, until the reauthorization bill
is completed, or until we see a full-year extension of the
transportation program, we do not know what levels of contract
authority there will be for next year.
For the past 3 years, I have been put in the position of
writing appropriation acts without knowing the full-year levels
of contract authority. I am prepared to do that again, but this
is not how a program should be funded. We all know that State
departments of transportation need a stable source of funding
in order to build transportation infrastructure. They need
predictability. They deserve better than a few months of
funding at a time, and more than that, our commuters who are
stuck in traffic and businesses trying to get their goods to
market deserve a better transportation system.
Despite these concerns, I do want to take a minute to
acknowledge some areas where the Department of Transportation
(DOT) has made progress.
Not long ago, the En Route Automation Modernization (ERAM)
program at the Federal Aviation Administration (FAA) fell years
behind schedule, putting the agency's Next Generation Air
Transportation System (NextGen) program at risk. For too long
the agency was unwilling to work with its own air traffic
controllers on getting ERAM back on track. The Department has
come a long way. The program is under new management,
stakeholders have a seat at the table, and it is achieving new
milestones. In addition, the recent reorganization at the FAA
has placed a stronger emphasis on the management of its
technology programs. That was the right move to make.
In the area of highway safety, the Department has led a
very public campaign to address distracted driving. This past
week, Mr. Secretary, you announced a partnership with Consumer
Reports aimed at getting young people to put down their phones
while they are behind the wheel, which is an effort to save
lives.
The Department has also raised the profile of rail
transportation. It is a reliable, safe, and environmentally
sound means of passenger and freight transportation. Building
more roads and wider roads is not enough. We need to continue
to make targeted rail investments to improve mobility in and
between America's congested cities.
Mr. Secretary, these are some of the areas where your
leadership has truly made a difference, and we thank you.
PREPARED STATEMENT
During this hearing, I look forward to discussing these
issues and addressing some questions we have, but before
turning this over to Senator Collins, I want to thank you for
your efforts. As Secretary of Transportation, Mr. Secretary,
you really have proven strong leadership for this agency, and
you have always worked on a bipartisan basis, which is
something we do not see often enough today. And I truly want to
thank you for that.
With that, let me turn it over to my colleague, Senator
Collins.
[The statement follows:]
Prepared Statement of Senator Patty Murray
The subcommittee will come to order. Today we will hear testimony
from Transportation Secretary Ray LaHood on the President's budget
request for fiscal year 2013.
Mr. Secretary, welcome back to the subcommittee. Thank you for
being here.
And congratulations on your son's safe return. The past 2 months
must have been a difficult time to say the least. I can only imagine
what a relief it must be for you and your family.
As we begin our work on next year's budget, there are encouraging
signs that our economy is moving in the right direction.
Although we aren't moving quickly enough for families that continue
to struggle--and we certainly have a long way to go. The private sector
has been adding jobs for almost 2 years. Businesses are growing,
confidence is up, and we seem to have stepped back from the precipice.
This is encouraging. But to keep growing these improvements over
time, we need a transportation system that supports job creation,
fosters economic growth, is sustainable, and most importantly, is safe
to use.
Unfortunately, today we have a transportation system that is
riddled with bottlenecks, slowing down the movement of freight and
leading to higher costs for businesses.
We have a system that makes airline passengers suffer through
flight delays, and keeps commuters stuck in traffic jams--instead of
allowing them to get to work or get home to their families.
Independent assessments show us that the infrastructure of our
country is falling behind and holding us back.
All of these reports reach the same conclusion--that the need to
invest in our transportation infrastructure is huge.
Many of us have 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-'' (minus). Our
Nation's rail network earned a paltry ``C-'' (minus), and transit only
rates a ``D.''
Last year, the World Economic Forum ranked U.S. infrastructure 23rd
in the world. Ten years ago we were sixth. And without aggressive
investment, I am very concerned about where we will be 10 years from
now.
The U.S. Chamber of Commerce found that, given expected growth in
population and trade, we need to invest an additional $50 billion a
year in our highway and public transportation system just to maintain
current performance. And we would need to double that number each year
to improve performance.
Taken together, these assessments are alarming. And sadly, the
condition of our Nation's infrastructure comes at a significant cost.
On average, Americans now spend an extra $400 per year on car
maintenance as a result of driving on poor roads--money every family
could be putting to better use. We spend an extra 4 billion hours a
year sitting in our cars due to traffic congestion, burning through
almost an extra 3 billion gallons of fuel in the process. We have the
world's worst air traffic congestion, with delays that average twice as
long as those in Europe. And freight delays have gotten so bad that
bottlenecks cost the economy an estimated $200 billion a year.
And let's be clear--holding back on investing in transportation
infrastructure doesn't actually save us money. It simply turns a budget
deficit into an infrastructure deficit.
In fact, kicking the can down the road will end up costing our
Nation even more over the long term and forces the next generation to
pay to clean up our mess. So we can invest now and lay down a strong
foundation for long-term growth, or we can let this system continue to
crumble and pay even more later. I think the choice is clear.
the department of transportation's budget proposal and safetea-lu
To address this problem, the President's budget request for next
year proposes to reauthorize the surface transportation programs at a
funding level of $476 billion over the next 6 years. This is a
substantial increase over current funding levels.
The reauthorization proposal is very similar to the one the
President included in his budget request last year. And like last year,
I applaud the administration's effort to promote investment in our
Nation's infrastructure.
I am glad that we are seeing progress on a reauthorization bill,
but I am still very concerned about how we are going to move forward on
financing transportation programs this coming year. We have significant
challenges ahead of us.
The Appropriations Committee is now working under tight caps on
discretionary spending set by the Budget Control Act. And
unfortunately, the budget request does not offer a realistic picture of
how to fund transportation under those caps.
The President's budget again seeks to reclassify as mandatory
spending at least $4 billion in programs that have long been funded by
this subcommittee. This request leaves a big hole that this
subcommittee will have to fill.
In addition, there is a long way to go before a reauthorization
bill is signed into law. It is not yet clear what kind of package will
be considered on the House floor.
This leaves us with a lot of questions for how we are going to
sustain the Highway Trust Fund and fund transportation programs next
year.
Recent projections from both the Congressional Budget Office (CBO)
and the administration show that the Highway Trust Fund may not stay
solvent throughout fiscal year 2013. And even though the Senate
reauthorization bill would address this problem, no legislation is
effective until it is enacted into law.
In addition, until the reauthorization bill is completed--or until
we see a full-year extension of the transportation programs--we do not
know what levels of contract authority there will be for next year.
For the past 3 years, I've been put in the position of writing
appropriations acts without knowing the full-year levels of contract
authority.
I am prepared to do that work again, but this is not how our
programs should be funded.
We all know that State departments of transportation need a stable
source of funding in order to build transportation infrastructure. They
need predictability. They deserve better than a few months of funding
at a time. And more than that, commuters stuck in traffic and
businesses trying to get their goods to market deserve a better
transportation system.
accomplishments
Despite these concerns, I would like to take a minute to
acknowledge some areas where the Department of Transportation has made
progress.
Not long ago, the En Route Automation Modernization (ERAM) program
at the Federal Aviation Administration (FAA) fell years behind
schedule, putting the agency's Next Generation Air Transportation
System (NextGen) program at risk.
For too long, the agency was unwilling to work with its own air
traffic controllers on getting ERAM back on track. But the Department
has come a long way. The program is under new management, stakeholders
have a seat at the table, and it is achieving new milestones.
In addition, the recent re-organization at the FAA has placed a
stronger emphasis on the management of its technology programs. This
was the right move to make.
In the area of highway safety, the Department has led a very public
campaign to address distracted driving. This past week, you 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.
The Department has also raised the profile of rail transportation.
It is a reliable, safe, and environmentally sound means of passenger
and freight transportation.
Building more roads and wider roads is not enough. We need to
continue to make targeted rail investments to improve mobility in and
between American's congested cities.
Mr. Secretary, these are some of the areas where your leadership
has been making a difference.
closing
During this hearing, I look forward to discussing these issues and
addressing some other questions that I have.
But before turning this over to Senator Collins, I want to thank
you for your efforts as Secretary of Transportation.
You provided strong leadership for the Department, and you have
always worked on a bipartisan basis. Which is something we don't see
often enough today.
I will now turn it over to my partner on the subcommittee, Senator
Collins.
STATEMENT OF SENATOR SUSAN M. COLLINS
Senator Collins. Thank you, Chairman Murray. Your final
comments echo my opening comments to the Secretary.
I too want to welcome Secretary LaHood and thank him for
his very strong leadership. We used exactly the same terms at
the Department and for working so closely with both sides of
the aisle as we worked together to promote fiscally responsible
investments in our Nation's transportation infrastructure. Like
the chairman, I too am so relieved that your son, Sam, his
wife, and other Americans are safely out of Egypt. I just
cannot imagine what a difficult time that must have been for
you, and we are so happy that he is safely home.
Transportation investments create jobs and establish the
foundation for future economic growth, but it is equally
important to our economic future that we rein in Federal
spending and keep our national debt under control. The
administration is proposing a $74.5 billion budget for the DOT.
That is approximately a 2-percent increase over fiscal year
2012.
This request helps insure that transportation investments
keep pace with the latest advancements in technology and that
Federal programs continue to promote innovation, and help meet
the needs of our municipalities and States.
One of the most innovative DOT programs is the National
Infrastructure Investments program, a nationally competitive
program known as Transportation Investment Generating Economic
Recovery (TIGER), and a program that Senator Murray and I have
both strongly supported on a bipartisan basis. I am very
pleased to see that the President's budget proposes $500
million for this vital program. By design, TIGER has the
flexibility to fund a wide range of transportation projects as
long as they demonstrate national or regional significance to
economic growth. Most TIGER projects are multimodal,
multijurisdictional, or otherwise challenging to fund through
existing programs. So this funding supports critical projects
nationwide that otherwise would not be built and yet are
absolutely essential to the communities that they are
supporting.
An interesting component of TIGER is the eligibility to
receive credit assistance through the Transportation
Infrastructure Finance and Innovation Act (TIFIA) loan program.
I am pleased to see that the administration is proposing to
dramatically increase funding for the TIFIA program from $122
million to $500 million, and here is why. On average a TIFIA
loan allows every dollar provided in Federal funding to
leverage approximately $30 in additional transportation
infrastructure investment. That is a great ratio, a great
return, and it is the kind of innovation in infrastructure
finance that we need to produce a greater return to taxpayers,
particularly at this time of budget constraint.
In addition to innovative programs, this budget makes
investments in several important technology improvements. The
Federal Aviation Administration (FAA) is in the middle of
undertaking the Next Generation Air Transportation System
(NextGen), the largest transformation of the air traffic
control system ever, and the budget provides more than $1
billion to advance this technology.
Through the use of satellite surveillance, new methods of
routing pilots, planes, and landing procedures, NextGen will
change how Americans fly. It will ensure that the traveling
public is flying in an even safer and more efficient airspace.
But obviously, any program of this type is not without its
challenges.
For investments in our roads and bridges, the budget
includes $42.6 billion for the Federal Highway Administration;
$2.7 billion more than last year. I appreciate the inclusion of
reform proposals designed to simplify the program structure and
improve upon project delivery to bring the benefits of these
investments to the public sooner. These investments and reforms
will help modernize our highway system, and as Senator Murray
has pointed out, that is long overdue and much needed.
I also look forward to working closely with the
administration to urge States to pass stronger distracted
driving laws to avoid tragic accidents, and to ensure that
traffic fatality numbers continue dropping from current
historic lows.
I share the administration's belief that investment in
transportation is critical to our economy. We must balance this
commitment, however, with other pressing needs. I was, and am,
disappointed to see that the budget continues to request a
substantial investment for high-speed rail at a time when too
many of our roadways and bridges are crumbling, and require
billions of dollars in investments.
The continuation of a multibillion dollar commitment to
high-speed rail is particularly troubling in light of our
ongoing battle to control deficits, and the endless spiraling
costs of high-speed rail projects. The map is very clear that
the challenges that we are facing, Highway Trust Fund revenues
and balances over the next 6 years, support approximately $260
billion in spending, and the budget request implies a 6-year
surface transportation reauthorization that spends $476 billion
out of a trust fund that is projected to be insolvent some time
in the next fiscal year.
[The referenced map was not available at press time.]
Congress and the administration must work together. I know
the Secretary said that numerous times, to come up with a
better, more solvent plan for investing in our transportation
system.
PREPARED STATEMENT
I look forward to working with the Secretary and his able
staff, and with you, Chairman Murray, and the rest of the
subcommittee members as we consider this budget request.
Thank you.
[The statement follows:]
Prepared Statement of Senator Susan M. Collins
Thank you, Chairman Murray. Welcome, Secretary LaHood. I appreciate
your strong leadership at the Department of Transportation (DOT) and
look forward to continuing to work together to promote fiscally
responsible investments in our Nation's transportation infrastructure.
And I am so relieved that your son, Sam, and other Americans are now
safely out of Egypt.
Transportation investments create jobs and establish the foundation
for future growth. But it is equally important to our economic future
that we rein in Federal spending and keep our national debt under
control.
The administration is proposing a $74.5 billion budget for DOT, a
2-percent increase over fiscal year 2012. This request helps ensure
that transportation investments keep pace with the latest advancements
in technology and that Federal programs continue to promote innovation.
One of the most innovative DOT programs is the National
Infrastructure Investments program, a nationally competitive program
that we all know as Transportation Investment Generating Economic
Recovery (TIGER). I am pleased to see the $500 million request for this
vital program. By design, TIGER has the flexibility to fund a wide
range of transportation projects so long as they demonstrate national
or regional significance to economic growth. Most TIGER projects are
multimodal, multijurisdictional, or otherwise challenging to fund
through existing programs so this funding supports critical projects
nationwide that would not otherwise be built.
An interesting component of TIGER is the eligibility to receive
credit assistance through the Transportation Infrastructure Finance and
Innovation Act (TIFIA) loan program. I am pleased to see that the
administration is proposing to dramatically increase funding for TIFIA
from $122 million to $500 million. On average, a TIFIA loan allows
every $1 provided in Federal appropriations to leverage approximately
$30 in additional transportation infrastructure investment. That's the
kind of innovation in infrastructure finance that we need to produce a
greater return for taxpayers.
In addition to innovative programs, this budget makes investments
in several important technology improvements. The Federal Aviation
Administration (FAA) is in the middle of undertaking the Next
Generation Air Transportation System (NextGen), the largest
transformation of air traffic control ever, and the budget provides
over $1 billion to advance the NextGen air traffic control technology.
Through the use of satellite surveillance, new methods of routing
pilots, planes, and landing procedures, NextGen will change how
Americans fly. It will ensure the traveling public is flying in an even
safer and more efficient airspace.
For investments in our roadways and bridges, the budget includes
$42.6 billion for the Federal Highway Administration, $2.7 billion more
than fiscal year 2012. I appreciate the inclusion of reform proposals
designed to simplify the program structure, and improve upon project
delivery to bring the benefits of highway and bridge investments to the
public sooner. These investments and reforms will help modernize our
highway system. I also look forward to working with the administration
to urge States to pass distracted drivers' law to avoid tragic
accidents and to ensure that traffic fatality numbers continue dropping
from current historic lows.
I share the administration's belief that investment in
transportation is critical to our economy. We must balance this
commitment, however, with other pressing needs. I was disappointed to
see the budget continue to request a substantial investment for high-
speed rail, at a time when too many of our roadways and bridges are
crumbling and require billions of dollars in investment.
The continuation of a multibillion dollar high-speed rail proposal
is particularly troubling in light of our ongoing battle to control
deficits. This budget request implies a 6-year surface transportation
reauthorization that spends $476 billion out of a trust fund that is
projected to be insolvent sometime in the next fiscal year. While I
share the administration's commitment to investing in our future
transportation needs, responsible budgeting is just as important as
responsible investing. The math here is clear: Highway Trust Fund
revenues and balances over the next 6 years support approximately $260
billion in spending. Congress and the administration must work together
to come up with a better plan for investing in our transportation
system while reducing an unsustainable deficit.
I look forward to working with you, Chairman Murray, as we consider
the Department's fiscal year 2013 budget request.
Senator Murray. Thank you very much, Senator Collins.
Senator Pryor, do you have an opening remark?
PREPARED STATEMENT
Senator Pryor. Thank you, Madam Chairman.
I do, but I will just submit it for the record. Thank you.
[The statement follows:]
Prepared Statement of Senator Mark Pryor
Thank you, Chairman Murray and Ranking Member Collins for holding
this hearing. I look forward to visiting with Secretary LaHood and
learning more about the administration's budget proposal for fiscal
year 2013.
Given the fiscal predicament facing our country, it's obvious that
Congress will have to make some difficult decisions and identify areas
to save taxpayer dollars and reduce spending at the Department of
Transportation (DOT) and every other agency. No agency should consider
itself exempt from needing to find savings. However, we must not back
down from making the needed investments in areas that will foster
short-term and long-term economic growth as well as areas that protect
consumers. If we fail to make such investments, the United States will
struggle to compete in the global market in the coming years.
As a strong proponent in developing transportation infrastructure,
I'm hopeful Congress and the administration can agree on a bold
commitment to meeting the transportation demands of the coming years by
addressing our aging infrastructure while also carrying a vision for
the future. I also hope we can come together and find reasonable and
creative ways to finance these investments. We cannot afford to
continue to pile up deficits while pretending revenues are matching our
needs and investments.
Another high priority for me is continuing to improve upon highway,
automobile, and motor carrier safety. I hope to work closely with the
administration and my colleagues in this area. We've made great strides
in recent years, and we must continue to improve.
As this subcommittee reviews the fiscal year 2013 budget request
for the DOT, I look forward to working with the chair and ranking
member to ensure that taxpayer dollars are spent responsibly.
Again, I thank Senators Murray and Collins for conducting this
hearing. I look forward to Secretary LaHood's testimony and look
forward to discussing the fiscal year 2013 budget request.
Senator Murray. Okay. Thank you very much.
We will then turn it over to Secretary LaHood for your
testimony this morning.
Again, thanks for joining us.
SUMMARY STATEMENT OF HON. RAY LAHOOD
Mr. LaHood. Thank you, Madam Chair, and Ranking Member
Collins, and Senator Pryor.
Really good to be with all of you today. This is really a
hallelujah day for transportation for what you all did
yesterday.
I think passing a bipartisan bill reflects the very best
values of the Senate. Transportation has always been
bipartisan, and you all proved it again yesterday. I hope the
House will take your lead. I hope you have shined a bright
light on the House that the values that people really
understand in America about transportation were carried out
yesterday.
And big, big congratulations to Senator Boxer and Senator
Inhofe. They worked very hard together, they really did, but
without the votes of all of you, it would not have happened. I
just cannot say enough about the way the Senate worked in a
very bipartisan way and in a way that has always been about the
way that transportation has been passed. The bill was a
significant step forward, and as I said, we hope the House will
move swiftly in a similar bipartisan fashion.
As you know, transportation has been in the news a lot, and
that is a good thing. There is good news on the horizon and
reason for optimism. For one thing, after 23 short-term
extensions, Congress finally passed, and President Obama
signed, the FAA bill. President Obama has detailed his vision
for a long-term transportation infrastructure bill, part of his
Blueprint for an America Built to Last. All of this would be
fully paid for.
President Obama is proposing to cap the funding for
overseas contingency operations over the next 10 years, thereby
saving hundreds of billions of dollars. We would use half of
these savings to pay down the debt, and the other half on a 6-
year transportation bill, which lets us do some nation-building
right here at home.
The facts are that our budget proposal has three broad
goals: Creating jobs by investing in infrastructure, spurring
innovation across our transportation system, and maintaining a
laser focus on safety, which is our number one job. Let me take
these goals one at a time.
REBUILDING OUR INFRASTRUCTURE
An America Built to Last needs a strong transportation
infrastructure. The President's budget will improve America's
highways, railways, and transit networks, and will continue to
ensure that these systems are safe.
The President's fiscal year 2013 budget request, includes
$42.6 billion to fund roads and bridges, $305 billion is
proposed over 6 years for this program. This is a 34-percent
increase over the previous authorization for roads and bridges.
Investing in our transit systems is another critical need.
The President's budget includes $10.8 billion in fiscal year
2013; a total of $108 billion is proposed over 6 years for
transit, a 105-percent increase. It will prioritize projects
that rebuild and rehabilitate existing transit systems, and
include an important new $45 million transit safety program.
That program was actually included in the bill that passed
yesterday, and we are grateful that transit safety is now being
addressed.
The President's budget provides $2.5 billion in 2013 as a
part of $45 billion 6-year investment to continue support of
intercity passenger rail, including the construction of a
national highway rail network.
I consider it unfortunate that the fiscal year 2012
appropriation bill did not include funding for high-speed rail.
You know that I am very passionate about that. You know that I
made a plea to all of you for that funding. This is a very high
priority. It is a very big vision that the President has for
the next generation of transportation for the next generation
in America.
For the more than $10 billion in grant funding that
Congress has provided, we received applications from 39 States,
the District of Columbia, and Amtrak. These applications, which
were well in excess of available funding, were for funding and
corridors in every region of the country. Our current high-
speed rail funds are being used in five key corridors around
the Nation. These corridors will create new choices for
travelers, reduce national dependence on oil, foster livability
in urban and rural communities, and promote economic expansion
across the Nation.
INNOVATION
As we rebuild, we can no longer afford to continue
operating our transportation system the same way we did 50
years ago with outdated processes and financial tools that were
made for yesterday's economy. The President's 2013 budget will
invest in research and technologies that our children and
grandchildren will use to bolster America's economic
competitiveness.
The Federal Aviation Administration is in the midst of the
largest transformation of the air traffic control system ever
undertaken. The 2013 President's budget request includes $15.2
billion to support FAA programs. More than $1 billion of these
funds will be used to advance the modernization of our air
traffic control through NextGen, the next generation of air
traffic control technology.
Our proposal will also elevate the vital role research
plays in transportation decisionmaking by moving the Research
and Innovation Technology Administration (RITA) into the
Secretary's office, into a position as an Assistant Secretary
for Research and Technology. This change will provide a
prominent, centralized focus on research and technology, which
will improve collaboration and coordination among the
Department's operating administrations through research
programs.
SAFETY
Keeping our transportation system safe will always be our
top priority. Consistent with this commitment, President Obama
has proposed a record level of investment in safety. The
President's proposal will provide $981 million in fiscal year
2013, and $7.5 billion over the next 6 years to the National
Highway Traffic Safety Administration (NHTSA) to promote
seatbelt use, get drunk drivers off the road, and reduce
distracted driving. This will help ensure that traffic fatality
numbers continue dropping from current historic lows.
We will also double the investment in highway safety
infrastructure funding by providing $2.5 billion in fiscal year
2013 and $17 billion over 6 years to Federal Highway
Administration safety construction programs. The budget will
also dedicate $580 million in fiscal year 2013 and $4.8 billion
over 6 years to the Federal Motor Carrier Safety Administration
(FMCSA). These dollars will ensure that commercial trucks and
bus companies maintain high operational standards, and that our
dedicated safety professionals can get high-risk trucks and bus
companies, and their drivers, off our roadways.
Our safety focus must also include the transportation of
hazardous materials in our network of pipelines. The
President's budget requests $276 million for Pipeline and
Hazardous Material Safety Administration. These resources will
ensure that families, communities, and the environment are
unharmed by the transportation of the very chemicals and fuels
on which our economy relies.
PREPARED STATEMENT
And so with that, again, thank you for all your leadership
from this subcommittee of the Committee on Appropriations,
particularly when it comes to transportation. We have had a
great partnership and we look forward to continuing that.
[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 2013 budget request for the
U.S. Department of Transportation. The President is requesting $74
billion for Transportation in fiscal year 2013.
The President has called on us to rebuild America--to put people
back to work repairing our roads, bridges, transit systems, and
airports. To achieve this, he has laid out a blueprint for ``an America
that's built to last''--a plan that will equip American workers to
seize the opportunities of tomorrow and make certain that businesses
and families have the safest, fastest, and most efficient ways to
connect with these opportunities.
President Obama has proposed a 6-year transportation jobs plan that
puts people back to work rebuilding our airports, roadways, railways,
and transit systems. The fiscal year 2013 President's budget reflects
the first year of this bold 6-year $476 billion reauthorization
proposal that will transform the way we manage surface transportation
for the future.
This proposal will be fully paid for. We will pay for the
investments proposed under the Surface Transportation Reauthorization
Proposal with the savings achieved from ramping down overseas military
operations to do some Nation-building right here at home.
investing in america's future by rebuilding our infrastructure and
creating jobs
Investment in transportation is critical to the success of our
Nation's economy. The fiscal year 2013 President's budget for the
Department of Transportation will enable us to build America's
infrastructure for the future--while putting people back to work today.
The President's $476 billion 6-year surface transportation
reauthorization proposal will improve the Nation's highways, transit,
and rail infrastructure and will ensure that these systems are safe.
The President's fiscal year 2013 budget requests $2.5 billion, the
first year of $47 billion over 6 years, to continue construction of a
national high-speed rail network. The Federal Railroad Administration
is working with States across the country to plan and develop high-
speed and intercity passenger rail corridors. These projects include
upgrades to existing services, as well as entirely new rail lines
exclusively devoted to 125 to 220 miles per hour trains. These
corridors will promote economic expansion, create new choices for
travelers, reduce national dependence on oil, and foster livable urban
and rural communities.
We are already putting America on track toward providing rail
access to new communities and improving the reliability, speed, and
frequency of existing lines. To date, Congress has provided more than
$10 billion in grant funding for high-speed rail through the American
Recovery and Reinvestment Act (ARRA) and annual Appropriations for
fiscal year 2009 and 2010. Interest in this program is strong: 39
States, the District of Columbia, and Amtrak have submitted
applications--well in excess of the available funding--for projects and
corridors in every region of the country.
As shown in the attached map, our current high-speed rail funds are
being used in five key corridors. We are focusing on projects offering
the greatest public benefits, as well as those projects ready for
implementation. The funding that has been provided to date will be used
to improve upon existing services, spur new passenger rail
capabilities, and initiate long-term planning activities. Ninety-five
percent of the funding is committed to corridors that will operate at
90 miles per hour or faster--and nearly 50 percent will operate at
speeds greater than 125 miles per hour. These projects will ultimately
lay thousands of miles of track and ties, build new stations and make
existing facilities more functional, comfortable, and accessible for
all passengers, install advanced signaling and communications systems,
and procure hundreds of modern and more efficient and comfortable
locomotives and passenger cars.
[The referenced map follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The President's fiscal year 2013 budget requests $42.6 billion, the
first year of $305 billion over 6 years, in funding for road and bridge
improvements and construction--a 34-percent increase over the previous
authorization. It will also simplify the highway program structure,
accelerate project delivery, and realize the benefits of highway and
bridge investments to the public sooner. These investments and reforms
will modernize our highway system while creating much-needed jobs. The
proposal consolidates more than 55 programs into five new programs that
invest in roads most critical to the national interest: The National
Highway Program; Highway Safety; Livable Communities; Federal
Allocation; and Research, Technology, and Education. It also
establishes a performance-based highway program in the critical areas
of safety and state of good repair, and provides resources and
authorities to spur innovations that will shorten project delivery and
accelerate the deployment of new technologies.
The President's fiscal year 2013 budget requests $10.8 billion, the
first year of $108 billion over 6 years--a 105-percent increase--in
funding for transit. It will prioritize projects that rebuild and
rehabilitate existing transit systems, include an important new transit
safety program, and allow larger transit authorities (in urbanized
areas of 200,000 or more in population) to temporarily use formula
funds to cover operating costs in limited circumstances.
The administration's Surface Transportation Authorization proposal
also 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.
Recognizing that competition often drives innovation, the fiscal
year 2013 budget requests $700 million, the first year of nearly $20
billion over 6 years, for a ``race-to-the-top''-style incentive
program, called the Transportation Leadership Awards, to encourage
fundamental reforms in the planning, building, and management of the
transportation system. This program would reward States and regions
that implement proven strategies that further the Department's
strategic goals, strengthen collaboration among different levels of
government, focus on performance and outcomes, and encourage the
development of a multimodal transportation system that connects people
to opportunities and goods to markets. Examples of best practices that
applicants might implement to compete in this program include passage
of a primary seatbelt law, use of lifecycle cost analysis, aggressive
deployment of operating practices that reduce need for more costly
congestion solutions and implementation of a performance-based funding
distribution system.
We will also be leveraging our Federal investment farther than we
ever have before through the use of Federal infrastructure loans, which
enable State and local governments to significantly leverage Federal
dollars when financing transportation infrastructure. The fiscal year
2013 budget requests $500 million, the first year of $3 billion over 6
years, for the Transportation Infrastructure Finance and Innovation Act
(TIFIA) program. The TIFIA program leverages each $1 of Federal funds
into $10 of credit assistance, which supports $30 in transportation
infrastructure investment. Therefore, our $3 billion TIFIA investment
is expected to produce up to $90 billion in transportation
infrastructure projects.
In addition, the President's budget makes the investments that we
need to strengthen 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.
modernizing our nation's transportation system through research and
technology
The fiscal year 2013 President's budget request will support the
success of our economy by ensuring that our transportation investments
keep pace with the latest innovations and advancements in technologies.
For example, the Federal Aviation Administration (FAA) is in the
middle of undertaking the largest transformation of air traffic control
ever. The fiscal year 2013 President's budget requests $15.2 billion to
support the FAA current programs in the areas of air traffic controller
and safety staffing, research and development, and capital investment--
and over $1 billion of these funds will be used to advance the
modernization of our air traffic system through ``NextGen''--the next
generation of air traffic control technology. Using satellite
surveillance, new methods of routing pilots, planes, and landing
procedures, NextGen will change how Americans fly.
In addition, we will be focusing our efforts on unmanned aircraft
systems (UAS), which will play an increasing role in both Federal and
civil missions, including homeland security, national defense, law
enforcement, weather monitoring and surveying. Currently, technical and
procedural barriers still exist in the interoperation of UAS with
manned aircraft in the National Airspace System (NAS). In fiscal year
2013, the Joint Planning and Development Office (JPDO) will lead
efforts with the NextGen partners to formulate and develop a national
plan that will achieve the integration of UAS into the NAS, and
accelerate strategic decisionmaking on UAS implementation issues.
The fiscal year 2013 budget also proposes to elevate the vital role
research plays in transportation decisionmaking by moving the Research
and Innovative Technology Administration (RITA) into a new Office of
the Assistant Secretary for Research and Technology. This proposal will
strengthen research functions across the Department by providing a
prominent centralized focus on research and technology, which will
improve collaboration and coordination between the Department's
Operating Administrations.
We will also promote research into Intelligent Transportation
Systems, including Vehicle-to-Vehicle technologies. Vehicle-to-Vehicle
(V2V) connectivity provides constant communication between vehicles to
warn drivers of the potential risk of a collision. In fiscal year 2013,
the Intelligent Transportation Systems (ITS) program will dedicate a
total of $22.4 million to the V2V program, and the corollary programs
including human factors research, the implementation of a safety pilot,
vehicle connectivity policy research and standards development to
further explore and advance technologies that will ultimately reduce
the number of collisions and save lives.
pressing forward on 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 the Department. In fiscal year 2010, highway fatalities
were the lowest since 1949--and yet over 30,000 lives are still lost
each year on our Nation's highways.
Our budget proposes a record level of investment in safety. The
fiscal year 2013 budget requests $981 million, the first year of $7.5
billion over 6 years, for the National Highway Traffic Safety
Administration to promote seatbelt use, get drunk drivers off the road,
and ensure that traffic fatality numbers continue dropping from current
historic lows. Within this amount, $50 million in fiscal year 2013 and
$330 million over 6 years is provided for the Department's ongoing
campaign against America's distracted driving epidemic. In addition, we
will almost double the investment in highway safety infrastructure
funding over 6 years. The fiscal year 2013 budget requests $2.5
billion, the first year of $17 billion over 6 years, for Federal
Highway Administration (FHWA) safety construction programs. The fiscal
year 2013 budget also requests $580 million, the first year of $4.8
billion over 6 years for the Federal Motor Carrier Safety
Administration (FMCSA) to ensure that commercial truck and bus
companies maintain high operational standards, while removing high-risk
truck and bus companies and their drivers from operating.
Transit safety is another important priority. Rail transit provides
over 4 billion passenger-trips each year, and safely moves millions of
people each day. However, as shown by recent accidents and safety-
related incidents, we need to strengthen the existing Federal transit
oversight authorities in order to maintain the safe performance of our
transit systems. The fiscal year 2013 President's budget proposes $45
million to enable the Federal Transit Administration to oversee rail
transit safety across America. Funds will be used to develop, promote,
and conduct safety oversight activities for rail transit systems
nationwide.
Finally, our safety focus must also include the transportation of
hazardous materials and our network of pipelines. The President's
fiscal year 2013 budget requests $276 million for the Pipeline and
Hazardous Materials Safety Administration to help ensure that families,
communities, and the environment are unharmed by the transport of
chemicals and fuels on which our economy relies. We are proposing a new
Pipeline Safety Reform initiative that will expand the oversight of our
Nation's pipeline system. Under this initiative, we will hire 120 new
inspectors and provide an additional $20.8 million in grant funding to
work collaboratively with the States on the oversight of interstate and
intrastate pipeline facilities.
conclusion
Thank you for the opportunity to appear before you to present the
President's fiscal year 2013 budget proposal for the Department of
Transportation and our Surface Transportation Reauthorization proposal.
Our infrastructure belongs to all of us. It is more than the way we get
from one place to another; it is the way we lead our lives and pursue
our dreams. The President's plan charts a bold new course for
transportation infrastructure investment in the United States over the
years to come. I look forward to working with the Congress to put
people back to work making a transportation system that is the envy of
the world--and an America that is built to last.
I will be happy to respond to your questions.
Senator Murray. Mr. Secretary, thank you very much for all
your work on this, again.
Senator Lautenberg. I'd like to make a statement, if I
might.
Senator Murray. Turn your mike on.
STATEMENT OF SENATOR FRANK R. LAUTENBERG
Senator Lautenberg. My wife never tells me I need a mike.
I'd like to congratulate Secretary LaHood for a job well
done. A lot of hard work, but it is a little bit of a salutary
moment. One, is to congratulate him for the return of his son
from----
Mr. LaHood. Thank you.
Senator Lautenberg [continuing]. Incarceration in Egypt.
Two, to say to our colleague from Maine that we wish her
well in the impending marriage and soon engagement.
Senator Murray. I decided not to embarrass her and bring
that up.
Senator Lautenberg. I ask that my full statement be put in
the record.
Senator Murray. Without objection. Absolutely.
[The referenced statement was not submitted.]
VOW TO HIRE HEROES ACT
Senator Murray. Again, Secretary, thank you.
I wanted to ask you about one of my highest priorities,
which is to help veterans transition from their life in the
military into civilian employment.
Last year, we passed the VOW To Hire Heroes Act, which
includes a number of provisions to help our servicemembers as
they transition, plan for employment after they leave the
military, to help translate their military skills into the
private sector, and to gain civilian work experience.
I understand that the Federal Motor Carrier Safety
Administration, the Department of Defense (DOD), and the
teamsters have worked together on a commercial driver's license
(CDL) veterans-to-work initiative to help our military drivers
transition to the commercial motor carrier industry.
And as part of the effort, FMCSA issued a regulation last
May that gave State DMVs (departments of motor vehicles) the
ability to streamline their licensing process for veterans so
that they can meet certain comparable standards of experience.
Today, we only have 15 States that have taken advantage of
this new authority. Three are in the process, and 8 States have
declined, the remainder are still talking about it.
Can you share with us any knowledge that you have about why
States are not taking advantage of that new authority?
Mr. LaHood. Senator, first of all, let me thank you for
your leadership on Veterans Affairs, and the interest that you
have taken in veterans.
We are working to increase opportunities for veterans. In
May 2011, our Federal Motor Carrier group promulgated a new
regulation that does allow States to waive the skills test
portion of the CDL licensing process for military personnel who
can prove 2 years of safe driving experience. The regulation
makes it easier for current military CMV (commercial motor
vehicle) drivers to become licensed through a civilian DMV. We
are working with the American Association of Motor Vehicle
Administration and the U.S. Army to implement the regulation.
But your statistics are correct. We need to continue to
work with States on this to promote this program, to make sure
that States understand that this opportunity exists. At this
time, 15 States now offer the waivers of the skills test for
military personnel who do provide proof of safe driving
experience. Three States are moving to make this happen, 8
States have declined, and 25 other States have not indicated
their plans.
I want to commit to you that we will continue. We have
great partners at the States on these safety programs, and our
motor carrier organization provides money to States for other
safety. And we want to, we are going to step up on this, we
really are.
Senator Murray. Okay. I really appreciate that, and if you
can find out for us, is it a barrier in those States? Is there
something we do not see? Or is it just a matter of them not
knowing the program is available?
Mr. LaHood. Yes, I think it is probably a matter of whether
we have not been as aggressive as we can be, and really going
to legislative leaders, and Governors, and asking them to
really make this available. I think we can do better.
[The information follows:]
The Federal Motor Carrier Safety Administration (FMCSA) administers
the commercial driver's license (CDL) program nationwide by assuring
that State Driver Licensing Agencies (SDLA) are in compliance with
Federal statutes and Agency regulations. Each State has authority to
issue CDLs following guidelines (Regulations) promulgated by FMCSA.
These guidelines represent the minimum States must do. States may
implement additional requirements on drivers seeking a CDL.
In May 2011, FMCSA promulgated a new rule (49 CFR 383.77) that
allows SDLAs to waive the CDL skills test for military personnel with 2
years of safe driving experience. The latest survey shows that 17
States now offer to waive the skills test; 5 States are in the process
of instituting this option; and 8 States have opted not to take
advantage of the option at this time. The remaining 21 States have not
responded to queries of their status. The States that do not offer the
waiver explain that for a variety of reasons, this is not a priority.
These reasons include that instituting the waiver may require State
legislative revisions or instituting new administrative and technical
processes. In some cases, States provide budgetary and personnel
limitations as reasons for not implementing the provision.
When comparing the civilian equivalent of a CDL to the military
heavy-duty truck license, the best comparison is the Army's 88M
training, which both the Army and Marine Corps use to gain this
qualification. FMCSA, in cooperation with the American Association of
Motor Vehicle Administrators (AAMVA) and the U.S. Army Reserve
Command's MPO, has developed a standardized process to make the
transition from 88M qualification to a CDL less burdensome. A waiver
form has been created that allows a State to validate the soldier,
sailor, airman, or marine's safe driving record in the appropriate
vehicle, supported by the signature of the soldier's commanding
officer.
FMCSA is currently exploring additional opportunities to help
servicemembers and veterans that operate or have operated a CMV in the
military to get a CDL. These options include waiving the domicile rule
requirement for military personnel (which would require an act of
Congress) as well as designating the military as a third-party tester
for the standardized CDL skills test.
Senator Murray. Yes, okay. Good. I know the Army has been a
really great partner in that effort.
Mr. LaHood. Right.
Senator Murray. Is there any way we can expand that
collaborative partnership that you have developed with the Army
to help our other services?
Mr. LaHood. Maybe what I should do is try and meet with the
Secretaries of the other armed services, and I will do that,
and the appointed secretaries and make them aware of this
program. That is a good idea.
Senator Murray. Okay, great. I would really appreciate
that, and certainly let me know if there is anything I can do
to help----
Mr. LaHood. Thank you.
Senator Murray [continuing]. Help move that along. I would
also encourage you to work with the Department of Labor and let
them know what you are doing, as they have been involved with a
lot.
Mr. LaHood. Good idea.
SAFETY FITNESS DETERMINATION
Senator Murray. Great. I appreciate that.
Since 2000, the National Transportation Safety Board (NTSB)
has recommended that the FMCSA change its method of evaluating
the safety and performance of carriers. And as a result, FMCSA
began to implement its Comprehensive Safety and Accountability
program, known as CSA, back in 2004.
The Safety Fitness Determination rulemaking is the
cornerstone of that program, and the rule was initially
scheduled to be finalized in 2009. It has been delayed
repeatedly. Until the rule is finalized, FMCSA is still using
the review system that NTSB believes is inadequate.
So I wanted to ask you when you expect to publish the
Notice of Proposed Rulemaking (NPRM), and if you still intend
to assess driver fitness, and what the plan and timetable is
for that.
Mr. LaHood. This is, obviously, a part of our safety
agenda. It is very important and our staff is working with our
colleagues at Office of Management and Budget (OMB) to make
sure that we get it right.
But for the record, I will get back to you and give you
some clearer date on when we will be issuing the----
Senator Murray. Okay. So is the challenge at OMB at this
point?
Mr. LaHood. The challenge is just working through this, and
making sure we get it right, and working with our colleagues at
the White House.
[The information follows:]
The Federal Motor Carrier Safety Administration (FMCSA) is
preparing to publish a notice of proposed rulemaking (NPRM) later this
year that will revise how the Agency determines the safety rating of
motor carriers. This NPRM will incorporate a motor carrier's on-road
safety performance and compliance data into the Agency's safety fitness
determination (SFD) while continuing to use the findings from
investigations that currently determine a carrier's safety rating. This
will allow the Agency to incorporate for the first time data from more
than 3.5 million annual roadside inspections into a motor carrier's
safety rating and will ensure sustained safe performance by the motor
carrier industry.
This rulemaking will only cover the safety ratings of carriers
because FMCSA does not currently have explicit authority to include
drivers. The Agency contends it has explicit authority to establish
safety fitness provisions applicable to CMV ``owners and operators''
but it is not clear that these provisions expressly apply to drivers.
FMCSA provided technical drafting assistance to Congress in May
2011 that would clarify its authority to determine the safety fitness
of commercial motor vehicle (CMV) drivers. The Senate included this
provision in its surface transportation reauthorization bill that
passed the Senate on April 24, 2012. Enacting the Senate provision
would strengthen FMCSA's ability to identify high-risk commercial
drivers and remove them from service.
Conceptually, a driver SFD would entail the Agency establishing an
SFD standard through which it would rate a driver unfit based on a
series of factors rather than waiting for the driver to be convicted of
a disqualifying offense. This would allow the Agency the opportunity to
look at a driver's overall safety and compliance history (violation
rates, crashes, etc.) and determine that the driver's safety
performance is poor enough to warrant a proposed SFD of ``unfit.''
This clarification would help the Agency address recommendations
and concerns from the Government Accountability Office, the National
Transportation Safety Board, and stakeholders.
Senator Murray. Okay. Senator Collins.
DISTRACTED DRIVING
Senator Collins. Thank you, Chairman.
Mr. Secretary, as I mentioned in my opening statement, you
have demonstrated very strong leadership on the growing safety
problem that is caused by distracted driving. In fact, I read
one newspaper story that said you have been known to drive
around Washington honking at drivers who are using their
portable devices when they should be paying attention to the
road ahead and behind them.
But the fact is, this is a very serious problem. Just last
week in my home State of Maine, text messaging was the key
factor in a crash that killed the driver and seriously injured
her passenger. In 2009, hundreds of thousands of people were
injured in crashes reported to involve some kind of
distraction, and the proliferation of electronic devices is
clearly contributing to this growing problem.
Could you explain to the subcommittee what the Department
is doing through its budget to encourage greater public
awareness of the dangers of distracted driving, and also, to
urge States to pass distracted drivers laws?
Mr. LaHood. Thank you.
This is obviously something that is at the top of our
safety agenda. When we started this campaign 3\1/2\ years ago,
only 8 States had passed laws. Now 35 States plus the District
of Columbia and Guam have passed laws. We need every State to
pass a law.
In the past, in the Senate, there have been bills
introduced about distracted driving, and I would encourage any
of you. We would be happy to provide any of you technical
assistance if you all wanted to introduce a bill on distracted
driving. We get asked all the time, ``Will there be a Federal
law?'' And I do not know that there have been any bills
introduced this year in this session of Congress about
distracted driving. So if we can be helpful on that, we
certainly would be.
We are making progress. The money that is being proposed in
the budget would be used for grants to States, similar to what
we did with ``Click It Or Ticket'' so that law enforcement
people can give tickets to people who are not wearing their
seatbelts. As a result of two decades of Click It Or Ticket--
good enforcement, good laws--86 percent of the people, the
first thing they do when they get in their car is buckle up,
but it has taken two decades, good laws, good enforcement, and
some of these grants.
We would also similarly use some of the money to give to
communities like we did for Hartford and Syracuse. We gave them
each $200,000. They matched it with $100,000. They put police
on street corners; that is how they used the money. They wrote
tickets for people that were on cell phones; and distracted
driving went down. So that is one of the ways we would
obviously raise awareness, use it for enforcement. When States
want to pass laws, we have model legislation that we provide to
them.
Senator Collins. Thank you for that update.
I think that kind of technical assistance and helping to
share best practices that the Department has found is very
helpful. And that is very impressive that the number of States
with such laws has grown from 8 to 35.
Mr. LaHood. Yes.
HIGHWAY TRUST FUND INSOLVENCY
Senator Collins. And I think that is directly due to the
fact that you have personally made it a priority, and put a
real spotlight on it.
Let me turn now to the Highway Trust Fund. This is a very
difficult issue. As you know, it has been operating at an
unsustainable deficit since 2008, and has required
approximately $35 billion in transfers, and those are deficit
finance transfers in order to keep the Fund solvent. CBO
estimates that the Fund will, once again, be insolvent or
bankrupt sometime in the next fiscal year.
The President's budget request really does nothing to fix
that shortfall. In fact, you could argue that the spending
increases will make matters worse, and yet we have such needs
out there.
The administration's solution appears to be to transfer
billions of dollars from the General Fund to the Highway Trust
Fund every year. And it is my understanding that the budget
estimates some $17 billion in transfers will be required to
keep the Trust Fund solvent through the end of fiscal year
2013.
Are you concerned that using the General Fund in this
matter undermines the whole concept of the Highway Trust Fund?
Mr. LaHood. We know the Highway Trust Fund has been
diminished because people are driving less and driving more
fuel efficient cars. So the money is just not there for all the
things we need to do in America.
The President this year in his budget proposed using the
Highway Trust Funds, plus the funds that have been used for
Iraq and Afghanistan, half of those funds as a means to pay for
his budget. And I do want to send up a flare, and I want to
send up a little alarm.
You all have done your work here. You passed a
transportation bill. If the House does not pass a
transportation bill, and passes another short-term extension,
to be honest, in a State like yours, Senator Collins, where you
have a very short construction window because of the weather in
Maine, it will be very difficult for your State DOT to really
do anything big in your State.
We need a transportation bill. We need the bipartisan bill
that was passed in the Senate. If that happens, then we do have
a big blueprint. In the absence of that, a short-term extension
does no good for your State in terms of your ability to really
fix up roads and bridges, and it is of great concern to us.
I know that really was not your question, but since you
raised the issue of funding and the Highway Trust Fund, and the
fact that you all have passed a bipartisan bill, it is another
way for us to emphasize this to the House of Representatives,
this idea of passing just a short-term bill is not going to be
good for States like Maine.
Senator Collins. I certainly concur with that. And the fact
is, short-term extensions drive up the cost because contractors
cannot plan. They cannot hire----
Mr. LaHood. That is right.
Senator Collins. Their employees and thus, they are forced
to bid a higher amount.
Mr. LaHood. That is right.
Senator Collins. Because of the uncertainty. So that part,
we agree on.
Senator Murray. Senator Pryor.
MARIAH'S LAW
Senator Pryor. Thank you.
Mr. Secretary, let me thank you for being here, and begin
with a thank you for helping the Conway Airport in Arkansas.
Mr. LaHood. Yes, sir.
Senator Pryor. You helped move it out of a very congested
area abutting a freeway and a neighborhood, where there have
been some fatalities. Thank you for your help, and my
understanding is that Conway is happy because they have moved
from a 5-year plan down to a 3-year plan with your assistance,
so thank you for that.
Also, thank you for mentioning bipartisanship. I think the
way we all feel around here is that if Senator Boxer and
Senator Inhofe can agree on important things, then we all ought
to be able to agree on important things because they are at
different ends of the spectrum, but they really provided a
great example for us.
And one point of clarification is that in the bill that we
passed yesterday, there is a provision on distracted driving
called Mariah's Law, which sets up incentive programs for
States to try to pass----
Mr. LaHood. Great. Thank you.
Senator Pryor. More laws against distracted driving, so
that may have missed your attention, but I hope you will look
at that.
Mr. LaHood. Yes, thank you.
SEQUESTRATION
Senator Pryor. And help us implement that.
Let me start with a question that I know you do not want to
answer, you do not want to get into, and that is sequestration.
If that does happen and there is sequestration, have you looked
at what it will do to the Department of Transportation's
programs?
Mr. LaHood. Let me ask our CFO (chief financial officer)
just to comment on that.
Senator Pryor. OK.
Mr. LaHood. Chris Bertram.
Senator Pryor. Sure.
Mr. Bertram. We have not done a very detailed analysis of
that yet. I think part of the question will have to be to what
extent trust funded programs from the Highway and Aviation
Trust Funds are affected as opposed to the General Fund, but we
do not have a detailed analysis of that yet.
Senator Pryor. Thank you for that. As you do that analysis,
I think it would be helpful if you would get back with the
subcommittee here and let us know what the ramifications----
Mr. LaHood. We will do that.
PRIORITY CORRIDORS
Senator Pryor. Of sequestration might be.
Also, I have a question about future interstate corridors.
I know that we are in a very difficult budget environment and
difficult fiscal times for the Federal Government. However, I
think it is critical that we continue to invest in our
infrastructure that not only creates jobs now, but it is huge
investment in the future.
I know that when you look at a map of the various
interstate highway systems in the country, there are several
highways that have not been built, several interstates have not
been built. In these difficult budget times, I know that we do
not really take care of that in the recently passed surface
transportation bill, but as we look out to the future, do you
have a recommendation for how we should fund these future
significant corridors or these high-priority corridors to try
to make sure that we actually do get them built, given the
constraints that we have?
Mr. LaHood. I think the States need to get into a position
of getting everything planned, get the environmental work done
so that if there are resources available, they are in a
position to come to the Department of Transportation.
This idea that we cannot continue to make progress without
earmarks is not accurate. We got $48 billion in the economic
recovery plan. It came directly to DOT, and because of the
great partnerships we had with States and transit districts and
airports, we spent that in 2 years on 15,000 projects and put
65,000 people to work, and there were no earmarks.
So if States are ready with projects, and they have their
environmental work done, and the money becomes available, we
are ready to go and they are ready to go.
I think if nothing else, that is what one thing that the
economic recovery, our stimulus money, proved--that we can do
this without earmarks because of the great partnerships we have
with the States.
VETERANS TO WORK
Senator Pryor. Okay. Thank you for that.
Let me also follow up on something that Senator Murray said
a few moments ago when she was talking about veterans.
Mr. LaHood. Yes.
Senator Pryor. And obviously, that is important to you and
you all have discussed the Veterans to Work Initiative.
We do something in our State that is not directly related
to veterans, but could be, and it could be a national model,
and that is the trucking industry has partnered with some
community colleges to do some training. If someone finishes
their training, and gets their CDL and gets a job, then part or
maybe all of their tuition is forgiven to help them jumpstart
their career.
We could very easily tailor that towards veterans, and it
sounds very similar to what you are doing.
Mr. LaHood. Yes.
Senator Pryor. If you are not aware of what they are doing
in Arkansas, I would encourage your people to look at it.
Mr. LaHood. Yes.
Senator Pryor. And see if it could apply, because really,
that is a good example of a State and industry partnership.
Mr. LaHood. Yes.
Senator Pryor. And you could fit the Federal Government,
the VA (Department of Veterans Affairs), and everybody else in.
Mr. LaHood. Sure.
TIGER GRANTS
Senator Pryor. It could really help a lot of our veterans.
I am really out of time here, so let me just ask if you
have a timeframe on when you will release or announce this
round of TIGER grants?
Mr. LaHood. Late May.
Senator Pryor. Late May.
Mr. LaHood. Yes.
Senator Pryor. So they are due about now.
Mr. LaHood. They are due next Monday.
Senator Pryor. Okay. So late May we will know.
Mr. LaHood. Yes.
Senator Pryor. Okay. Thank you, very much.
Mr. LaHood. Thank you for all of your leadership, Senator.
It has been great to work with you, not only for the country,
but for your State, and we look forward to doing that.
Senator Pryor. Thank you.
Senator Murray. Thank you very much.
Senator Lautenberg.
AMTRAK GATEWAY TUNNEL
Senator Lautenberg. Thanks, Madam Chairman. And thanks
again, Mr. Secretary.
Amtrak has proposed building the Gateway Tunnel under the
Hudson River to increase high-speed rail and commuter rail
capacity. The current tunnel is at capacity during rush hour
and ridership is expected to double in the next two decades.
It is not unlike the development of the highway system
being done in the early 1950s when the country had a population
of 170 million. Now we have a population of 310 million and we
are suffering from not having done the things that we should
have done many years ago.
You have looked at this proposal many times. What impact
might the Gateway Tunnel project have on mobility and the
economy in the Northeast corridor?
Mr. LaHood. We are working with both New Jersey and New
York. We know this tunnel is absolutely critical and we will
continue our work.
Look, if this is the priority for the region, then it
becomes a priority for us.
Senator Lautenberg. Mr. Secretary, do you see this tunnel
in a larger context because what happens there in terms of rail
service affects much of the country, much of the Atlantic
coast. And it also would get some over 20,000 cars a day off
the highway. And so it is of national interest, whether it is
convenience and reliability or whether it is better air and
less dependence on foreign oil.
We have a situation in New Jersey where we have a 100-year-
old bridge called the Portal Bridge. It is one of the few
things in New Jersey that is older than I am. The bridge has
persistent problems that delay trains and cause devastating
ripple effects in the entire Northeast corridor (NEC).
What is the Administration's plan for helping to upgrade
this important, critical bridge?
Mr. LaHood. The Department has funded about $1.7 billion in
NEC through the high-speed rail funds. The Portal Bridge
replacement, $38 million for the final design and the Moynihan
Station Phase 1, $83 million. Both projects are 100 percent
obligated.
TRANSIT FUNDING
Senator Lautenberg. Public transportation use is
approaching record levels. Yet, our friends in the House
recently tried to eliminate dedicated funding for transit
programs.
What impacts would commuters face if they prevail and had
their way, and transit funding was not protected?
Mr. LaHood. Senator, one of the reasons that I said that
that particular House bill was the worst House bill that I had
seen in 35 years of public service is because it gutted
transit. When gasoline prices go up, transit ridership goes up.
We know gasoline prices are going up. Transit is the lifeblood
of transportation for many people in America to get to work, to
get to a doctor's appointment, to go to the grocery store.
And certainly in your area, which is a transportation-
centric center of the world, transit is absolutely critical. We
need a good, strong transit program to continue state of good
repair, but also to innovate and create new opportunities.
NATIONAL RAIL PLAN
Senator Lautenberg. I agree with that. The number of jobs
that could be created almost instantly is enormous, and the
subsequent job opportunities for commutation and travel through
the area represent an almost magic look at what could be.
My 2008 Amtrak law required DOT to complete a comprehensive
national rail plan. The Surface Transportation Bill that the
Senate approved this week was a good bill, bipartisan,
excellent bill, really. Each side gave a little bit, and each
side took a little bit. It really is a great move forward.
So the bill that the Senate approved this week further
details the need for the plan. When might we see a final
national rail plan from DOT?
Mr. LaHood. We are working on it and we will, for the
record, get you a date certain when we will be complete.
[The information follows:]
The Federal Railroad Administration (FRA) published a Preliminary
National Rail Plan (NRP) in October 2009 following the direction of
Congress, and a subsequent update of the NRP was made in the September
2010 Progress Report. These documents--combined with the policies and
funding levels described in the Administration's fiscal year 2013
budget proposal and 6-year investment strategy--articulate the future
of intercity passenger rail for America.
In October 2011, FRA submitted to Congress a Public Investment and
Business Case for four major corridor programs that were funded through
fiscal year 2010 appropriations (Los Angeles-San Francisco, Chicago-
Detroit, Chicago-St. Louis, and Chicago-Iowa City). Consistent with
requirements established in the fiscal year 2010 appropriations, these
documents summarized the need for these investments, quantitatively and
qualitatively assessed benefits and costs, and reviewed implementation
and operating plans.
Since fiscal year 2009, State and Federal rail planning has
progressed significantly as well as their experience with new rail
development. The need to revise and update the NRP will be incorporated
as the program matures. FRA continues to undertake a number of
interrelated planning and analysis efforts--all of which include
substantial engagement with our State partners and other stakeholders--
that will result in further iterations of the NRP and related
documents.
Senator Lautenberg. I would appreciate that. Thanks very
much.
Mr. LaHood. Senator, I look forward to being with you on
Monday. You and Senator Menendez, I think, were going to be
together in Hoboken talking about the transportation bill and
about transit.
Senator Lautenberg. Yes, I look forward to that.
The Secretary was in New Jersey yesterday, Madam Chairman
and colleagues, at a funeral for a Congressman Donald Payne.
And the place was overflowing with, yes, sadness, but also the
fact that he was almost an icon in terms of being the first
minority member of the House from New Jersey. And the Secretary
was there and made a very good speech, and it was very helpful,
and we thank you.
You are always welcome in New Jersey, and if you cannot get
a ticket on the train, I know some people. Thank you.
FERRY SYSTEMS
Senator Murray. Thank you, Senator Lautenberg.
Mr. Secretary, when you came out and visited my home State
of Washington, you saw and rode on our ferry system, and saw
how essential it was to our transportation system. And you know
that the Federal partnership that supports our ferry system is
very important.
In the Senate transportation bill that we hope the House
takes up, I worked to create a formula to really prioritize and
target Federal funding to our Nation's largest ferry systems,
and it requires enhanced coordination among the numerous DOT
agencies and programs that support ferries. These changes, we
believe, will help reduce administrative costs and improve the
efficiency and effectiveness of our Federal investments.
I am going to continue working for a Federal program that
will support our Nation's ferry systems, but you already have
the authority to make improvements at DOT on coordination and
data collection. And I wanted to ask you if you will work with
me to make sure DOT is focused on that.
Mr. LaHood. The way the trains are important for the
Northeast corridor, ferries are important for the Northwest,
and we recognize that. And certainly the opportunity that you
provided to me to see firsthand the importance of it--you have
my commitment that we will make sure that the Northwest, and
particularly the State of Washington, has the ability to
deliver people around on ferries.
PASSENGER FACILITY CHARGES
Senator Murray. I appreciate that very much.
Another topic. Your budget request would cut airport grants
drastically and focus the program only on general aviation and
small commercial airports. To replace the grants that would
have gone to the large and medium airports, you are asking
Congress to increase the cap on passenger facility charges
(PFCs).
This request, as you know, is the same one that you
submitted last year. However, last year, Congress was still
developing its bill to reauthorize the FAA. This year, we have
enacted FAA reauthorization laws and it does not include an
increase to the cap on PFCs.
So I wanted to ask you how you now propose paying for
airport infrastructure when we do not have an increase to PFCs?
Mr. LaHood. I am going to let Chris just talk about this
for a minute, because he has worked with OMB on this.
Mr. Bertram. Senator, our proposal would only take effect
if there were a change in the PFC cap. So in the absence of a
change in the PFC cap, we would propose to have the same
funding level as we had last year, the baseline level for AIP
(Airport Improvement Program).
Senator Murray. Okay. We have got to make sure airports can
make capital investments, and airport grants and PFCs both play
a really important role in that.
So as part of the next reauthorization bill, would you
support allowing large and medium airports to voluntarily opt
out of the airport grant program in order to increase their
PFCs?
Mr. LaHood. We believe airports are a real economic engine
for communities. They provide a lot of jobs, and obviously, we
have to have modern airports. Airports need the ability to
improve infrastructure and to build new facilities and to make
sure they have the capability to continue, that planes can fly
in and out safely. I certainly would be willing to work with
all of you on that and also with airports.
NEXT GENERATION AIR TRANSPORTATION SYSTEM
Senator Murray. Okay. On another topic.
Your budget request includes over $1 billion for NextGen,
the effort to modernize our air traffic control system. For
NextGen to work, each aircraft has to be equipped with
compatible technology, as you well know. The FAA has mandated
that aircraft be equipped with some of this technology by the
end of the decade, but there is no guarantee that airlines will
be able to meet that requirement.
The FAA reauthorization law allows DOT to set up a program
to provide loan guarantees to support the equipage of aircraft
with this NextGen technology.
Can you talk a little bit about what steps you have taken
to explore setting up that program?
Mr. LaHood. We have had many, many meetings with our
colleagues at the White House, particularly those on the
economic team, about this. And we have involved the airlines in
this also.
We recognize that the airlines are starting to come back.
They are starting to be more financially viable. Many are
actually starting to make money, and we want to make sure that
putting a requirement for this kind of technology in every
airplane does not inhibit their ability to continue to make
progress financially.
We are trying to figure out a way that we can be helpful
with the funding, so that the airlines keep up with the
progress we are making in putting the technology in the TRACONS
(terminal radar approach control facilities). We have had a lot
of meetings about this, and I think everybody recognizes that
some way, shape or form we have to be helpful here to the
airlines, at least in the early stages as this technology is
being put in airplanes.
Senator Murray. Do you have all the legal authority you
need as a Department to implement something to----
Mr. LaHood. Yes, I believe we do.
Senator Murray. Okay. I appreciate that.
Senator Collins.
REINCARNATED MOTOR CARRIERS
Senator Collins. Thank you, Madam Chairman.
Mr. Secretary, there are unscrupulous motor carriers that
reregistered themselves under new identities in an effort to
evade accountability for past poor safety practices.
So, one of the goals discussed in your budget is preventing
these chameleon carriers from reentering the commercial motor
carrier industry. However, only about 2 percent of new carriers
each year are examined by FMCSA prior to entering the industry.
What are your plans to try to prevent these reincarnated
bad actors from invading FMCSA enforcement action by reentering
the industry as supposedly new carriers?
Mr. LaHood. I want to say that our administrator, Anne
Ferro, has worked very hard on this. This is a very, very
serious problem.
If safety is our number one priority, which it is, then it
has to be safety in all modes including trucking and busing. We
have motor coach carriers doing the same thing; put them out of
business, and they slap another name up on the bus.
And so, what Anne has done is set up a taskforce where she
gets all of the key people in the room, and they begin to track
these companies, and make sure that they are not just putting
another name up on the company so that they can continue to
operate. And we are working very hard on this; it is a top
priority.
We have a taskforce that works 24/7 to make sure that these
companies do not operate.
Senator Collins. That is great to hear, and this is
something where I believe the industries, whether the motor
coach side or the commercial truckers, are very eager to work
with you.
Mr. LaHood. They are.
Senator Collins. They do not want to see----
Mr. LaHood. They do not.
Senator Collins. Those bad actors on the road.
Mr. LaHood. You are absolutely right.
CONTRACT TOWERS
Senator Collins. Next, I would like to turn to another
provision of the budget, which proposes an increase in the
local share for the Contract Tower Cost-Sharing Program.
Under the budget proposal, the local share, which is
currently capped at 20 percent, would increase to 50 percent.
Now, that does help the Federal budget. It results in savings
of about $2 million. But I worry that smaller community
airports will simply not have the funds to contribute more than
the current 20 percent, and could potentially be forced to shut
down operations.
As these changes were evaluated, were the impacts on
smaller airports considered and included in your
decisionmaking?
Mr. LaHood. Let me say that the fiscal year 2013 budget
that the President proposed was released shortly before the FAA
authorization. We need to get the two in sync here; we know how
important these contract towers are, and we know that people
have limited resources.
We will make sure that what we do comports with the idea
that, number one, the contract towers are important. And number
two, that we do not impede on their ability to really be able
to continue these.
Senator Collins. Thank you.
Thank you, Madam Chairman.
Senator Murray. Thank you very much, and we have been
joined by the distinguished chairman of our subcommittee. We
are delighted to have him here.
Senator Inouye.
HONOLULU RAIL PROJECT
Senator Inouye. Thank you very much.
Mr. Secretary, I thank you for your request of $250 million
for the city and county of Honolulu rail project, and I
understand that this was the single largest request in the New
Starts portfolio, and I thank you for your support of this
important project for my State.
The city and county of Honolulu is currently involved, as
you may be aware, in a Federal court case regarding the rail
project. According to media reports in Hawaii, as part of the
discovery process, emails from 2006 and 2009, written by
Federal Transit Administration staffers, express concerns about
the rail project.
So Mr. Secretary, I wonder whether you could share with us
the Department of Transportation's stance on this project at
this moment.
Mr. LaHood. Senator, the press reports, the emails that you
make reference to were prior to my taking this position. And
since I have taken this position, I have had the privilege of
being with you in your State. We have talked about this
project. You were kind enough to convene a meeting about this
and other projects in Hawaii. And I want you to know that we
are committed to this project.
This is an important project. This will deliver people all
over the island. It is an important project, and at this point,
we are going to continue to work through whatever issues need
to be worked through. We are committed to this. We are
committed to the money. We are committed to the project, and
until we hear differently from others who are intimately
involved in this, I see no reason why we will not go forward.
Senator Inouye. Mr. Secretary, thank you very much. On
behalf of all the people of Honolulu, thank you.
Mr. LaHood. Thank you, sir.
Senator Inouye. Thank you, Madam Chairman.
CHAMELEON CARRIERS
Senator Murray. Thank you, very much, Senator Inouye.
I just wanted to quickly follow up on Senator Collins's
discussion of the chameleon carriers. I know that you are
looking at passenger and business, but freight is an important
part of that. I know the GAO (Government Accountability Office)
report identified that as a concern as well.
Are you going to include freight in that?
Mr. LaHood. We have really focused on motor coach and
trucks, but we can take a look at freight, sure.
Senator Murray. Okay. The GAO identified that as a concern
as well.
Mr. LaHood. Okay.
COLUMBIA RIVER CROSSING BRIDGE
Senator Murray. So I appreciate Senator Collins bringing
that up.
I did want to ask you about a local project that you know a
lot about as well--the Columbia River Crossing Bridge. I really
appreciate your focus on that. It is so important to us in the
Pacific Northwest. We have been working on it for years. It is
a very complex project, but it is making progress and, in fact,
in December, all the environmental planning work was completed.
And last month our State Senate approved tolling authority that
they need to help pay for it. So I am really pleased to see
that your budget includes funding for it as well.
But I was concerned to see some recent press reports that
there may be disagreements between your Department and other
Federal agencies about the bridge's planned height, an issue
everyone thought, frankly, was resolved years ago. And I wanted
to ask you what kind of impact would changing the design of the
Bridge at this point, as the Coast Guard is suggesting, have on
this project?
Mr. LaHood. First of all, we are totally committed to the
Columbia River Crossing. This is going to be a model for
multimodal transportation. When you look at all the different
modes of transportation that will be involved with that bridge,
it truly is multimodal, and it is bi-State, it is bipartisan,
it is about everything, any way you can describe it. It is a
great project.
What I would like to suggest, Senator, is either you, or
you and I convene a meeting, maybe in your office as soon as
you want to do that to make sure everybody is on the same page,
and that the deadlines are met.
Senator Murray. Okay.
Mr. LaHood. We have had a little hiccup here, but that is
not going to stand in the way of this project moving forward.
We are not going to let it stand in the way of that, but to
make sure that everybody knows what the facts are.
Senator Murray. Right.
Mr. LaHood. What the deadlines are--if you want to convene
a meeting, or if you want me to, or you and I both, we will get
the Coast Guard, DOT, and everybody else that is involved in
this, the two States, and make sure everybody is on the same
page so there are no delays.
Senator Murray. Okay. Very good. I would really like to do
that, and perhaps the FAA as well, because if you make the
bridge----
Mr. LaHood. Fine. Yes. Perfect.
BIOFUELS
Senator Murray [continuing]. Higher than the airport--it is
a complex project. Okay. Very good. We will follow up with
that.
Let me ask you about rising gas prices, an issue that
everybody is concerned about. We are seeing increases in
transit ridership, as she talked about a few moments ago. Gas
prices are hurting everyone. And as you and I have talked about
before, we need to look at all the alternatives to fossil fuels
when it comes to cars, and buses, and ferries, and ships, and
planes.
One of those alternatives is biodiesel, which is a cleaner
burning, homegrown product that has huge potential. And I am
working with the Department of Defense, major airlines, and a
lot of people to expand the availability and market for
biodiesel and other biofuels, working with agriculture and the
biofuels industry. So I think there is a real capacity here.
And I wanted to ask you today, what do you think it will
take to expand the use of biodiesel and other biofuels across
the modes of transportation, so we can help expand and really
get a market for these types of alternatives?
Mr. LaHood. As you know, this administration from the
President to just about every Cabinet Secretary involved has
worked very hard on fuel efficiency. You know where we have
gotten.
By 2025, cars will get 54.5 miles per gallon. Every car
manufacturer has signed off on this. They stood with the
President when he made the announcement. This is an
extraordinary opportunity for our country to set the very
highest standards possible, and we have worked very closely
with the Environmental Protection Agency to develop these
standards.
On biodiesel and on the use of diesel, I think if Congress
sends a loud message, you are not going to hear any heartburn
or criticism from the administration. We need good partners on
this and if you all send a message, I think it can be very
helpful.
Senator Murray. Okay. Very good. Thank you very much, Mr.
Secretary.
Mr. LaHood. Thank you.
Senator Murray. Senator Collins.
Senator Collins. Thank you, Madam Chairman. I am going to
submit the vast majority of the rest of my questions for the
record.
HIGH-SPEED RAIL
Senator Collins. I do just want to raise one more issue on
high-speed rail, even though I hate to end on a note where we
have different views when we agree on so much.
But one of the concerns that I have is whether States are
going to be able to sustain the investment, and California is a
perfect example of that.
The administration has put $3 billion into the California
High-Speed Rail Project. Recently the GAO has confirmed that
the cost of building the line is likely to increase from $33
billion to $98 billion. Now that is GAO's opinion, maybe there
are other estimates, but that obviously is of great concern.
One of my concerns is if the Department makes this kind of
investment of billions of dollars, and then the States prove to
be unable to do their share, and the cost estimates go through
the roof, then we have not accomplished the goal the
administration wants. I would rather see that money spent on
traditional mass transit, and roads, and bridges.
So my question is, what is the Department doing to ensure
when you give money to a State for a project like this, that
the State is going to be able to handle it financially?
Mr. LaHood. First of all, I think we are at the point in
this country when the interstate system was started. It took 50
years to build it and it was not all built in 1 day. I
guarantee you, when the interstate system was conceived, not
everybody knew where all the lines were going to be, and
certainly I do not think people knew where all the money was
going to come from.
But I know this: All the money is not going to come from
the Federal Government. You all have made that pretty clear in
the money that you have not given us in our last request. But
for the States that have received money, $3 billion, the
largest share, has gone to California, over $2 billion to
Illinois, and a lot on the Northeast corridor. And the States
are our partners.
I just spent a week in California. I spent a lot of time
with the legislature there. In some States what they have done
is they have passed referendums and they have passed bonding
issues. So that will be part of what the State will put up.
There are several foreign companies in California right
now, meeting with Governor Brown on their ability to invest in
high-speed rail. I think there will be three sources of funding
for most States, particularly in California where we really
will have high-speed rail. You will have trains going 200 miles
an hour.
I think the funding sources will be: The Federal
Government--we have made a good investment, as you mentioned,
$3 billion; the State will be putting money in through the
selling of bonds; and I think there will be a lot of foreign
investment. I really do. These foreign investments are there,
foreign investors are there. They are meeting with the
governor. They are talking about partnerships.
The same is true in Illinois. The Illinois governor is
working with some foreign investors to make investments in the
corridor in Illinois. And of course, our partners along the
Northeast corridor have been Amtrak. Amtrak is doing very well.
Ridership is up. They are making money. They have good
leadership. Things have really improved. We just invested about
$1 billion in Amtrak for new cabinetry, for new cars, and to
fix up some of the tracks.
So I do not see all the money coming from the Federal
Government. There is not enough money. I do see other sources,
but as an example, the people are way ahead, with all due
respect, the people are way ahead of Washington on this. And
what I mean by that is if you look at our TIGER guidance, we
put in there up to $100 million for high-speed rail. As of
today, we have $1 billion worth of requests for that $100
million.
People in America want different forms of transportation.
The next generation of transportation for America, for the next
generation, is high-speed rail. It is what Americans want.
Every State now has their interstate build out and where
communities have good transit, they want their highways in a
state of good repair. But they want passenger rail. They do,
and that is not just Ray LaHood saying it, or President Obama
saying it. It is what the people want, and that is reflected in
the request that we have received for $1 billion for up to $100
million.
When Florida gave back their money, $2.3 billion, we got
$10 billion worth of requests. This is not for Ray LaHood. It
is not for you two, with all due respect. It is for our kids
and grandkids.
What are we going to do for the next generation? What is
the next generation of transportation? It is not the
interstate. That is pretty much built out. It is not transit.
We are doing well with transit. It is high-speed rail. That is
what we need to leave to the next generation.
FREIGHT RAIL
Senator Collins. Thank you, Mr. Secretary, I know you feel
very passionately about this issue.
Let me just end my comments today by thanking you and the
Department for your commitment, which helped us save freight
rail----
Mr. LaHood. Exactly.
Senator Collins [continuing]. In northern Maine. This was
233 miles of freight rail track that was going to be completely
abandoned, cutting off the top half of my State. Through a
partnership that involved a State bond, private sector
investment, and the Federal funding, we were able to save that
track.
And I want to report to you that it is going extremely
well, that shipments are up, the track is being repaired so the
service is so much better. And that was really a lifeblood that
saved literally an estimated 1,700 jobs in a part of the State
that really needed those jobs. So thank you.
Mr. LaHood. Look, Senator, it is thanks to you. I mean, we
would not have known about that if you had not pointed it out
to us at one of these hearings that we had. Both of you
senators have been great leaders on transportation.
You are never going to hear a complaint from me or a
criticism for either one of you for the work that you do, the
partnership that we have had, in being in your States, and
making sure that the transportation needs of your State are
met, whatever they are. And we will continue to do that. It is
very important.
You all have been great, great friends and great partners,
and we could not do the work we do without great leadership
from both of you.
Senator Collins. Thank you.
Senator Murray. Thank you, Mr. Secretary. We really
appreciate all your work in this, your passion, your energy,
and we will continue to work with you throughout this year to
put the best bill we can together. So thank you very much.
Mr. LaHood. Thank you.
ADDITIONAL COMMITTEE QUESTIONS
Senator Murray. With that, I will remind my colleagues that
the hearing record will be open for 1 additional week for
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 Richard J. Durbin
air quality--union station and diesel emissions
Question. After the Chicago Tribune reported Metra passengers and
workers were exposed to excessively high levels of diesel soot, Metra
took quick action to improve air quality in their cars by installing
cabin air filters, switching to cleaner burning diesel fuel, and
employing automatic idle shut-offs on many of their engines. Amtrak
worked to identify additional solutions for the area around the train
station itself. These actions had an immediate effect, reducing
pollution emissions by as much as 75 percent.
Are other transit agencies taking similar steps to assess and, if
needed, improve the air quality at their stations and in their train
cars?
Answer. While transit agencies across the country work with local
governments to meet air quality goals of the Clean Air Act administered
by the Environmental Protection Agency (EPA), these goals are not
specifically tied to individual transit stations or within transit
vehicles. EPA regulates emissions from diesel-hauled rail transit
vehicles and locomotives. The Federal Railroad Administration (FRA)
regulates most aspects of intercity, regional, commuter, and light
(interurban) rail transit systems operating on the General Railroad
System. This would include diesel-hauled commuter and interurban
systems. Additionally, while the EPA maintains exhaust emission
standards for heavy-duty highway compression-ignition engines and urban
buses, these standards are focused on tailpipe emissions and not
focused on specific environments such as the inside of a transit
vehicle or station.
Federal agencies must ensure that their actions such as grants or
approvals in nonattainment or maintenance areas conform to State air
quality plans for achieving and maintaining air quality standards. Air
quality factors are considered through the Department of Transportation
(DOT) and metropolitan planning organization must comply with EPA's
General Conformity or Transportation Conformity regulations, as
applicable.
EPA's Office of Transportation and Air Quality's (OTAQ) mission is
to reconcile the transportation sector with the environment by
advancing clean fuels and technology, and working to promote more
livable communities. OTAQ is responsible for carrying out laws to
control air pollution from motor vehicles, including their engines, and
fuels. Mobile sources include: Cars and light trucks, large trucks and
buses, farm and construction equipment, lawn and garden equipment,
marine engines, aircraft, and locomotives. OTAQ's activities include:
Characterizing emissions from mobile sources and related fuels;
developing programs for their control, including assessment of the
status of control technology and in-use vehicle emissions; carrying out
a regulatory compliance program, in coordination with the EPA Office of
Enforcement and Compliance Assurance, to ensure adherence of mobile
sources to standards; fostering the development of State Motor Vehicle
Emissions Inspection and Maintenance Programs; and implementing
programs for the integration of clean-fueled vehicles into the market.
Question. Have any studies been conducted to assess which transit
agencies and stations are most in need of taking corrective steps to
improve air quality for their passengers and transit workers?
Answer. To our knowledge no specific study or synthesis report has
been compiled specifically documenting transit agency stations in need
of taking corrective steps to improve air quality specifically for
transit passengers or transit employees. Within current operational
environments, it is not unusual to detect a slight odor of diesel
exhaust inside the one or two passenger cars directly behind the
locomotive, inside diesel-hauled interurban trains, and on station
platforms where such platforms are protected from breezes and other
natural air circulation. This usually passes naturally once the vehicle
is at speed or a few moments after the vehicle has departed the
station. Operations in tunnels, covered stations and other below-grade
configurations may exacerbate this issue.
While the Federal Transit Administration (FTA) does sponsor
research centered on reducing transit emissions through advanced and
innovative technologies, there is no specific research targeting the
passenger environment in vehicles and on station platforms. Further,
there are currently no transit industry standards or FTA Requirements
that address air quality specifically for passengers.
Question. How can DOT help improve the air quality in diesel
powered trains and around train stations?
Answer. On a continuing basis, DOT, through its various modal
administrations and programs, works with State and local communities to
address air quality. FTA specifically has targeted its Transit
Investments for Greenhouse Gas and Energy Reduction (TIGGER) program
and its Clean Fuels program grant funds to transit agencies in both
attainment and non-attainment areas to help them adopt new technologies
that reduce vehicle idle time, overall energy usage, and harmful
emissions. For example, using fiscal year 2010 TIGGER funding, FTA
provided Metra, through the Illinois Department of Transportation,
Federal funds to modify locomotives by implementing innovative
automatic shut-down/start-up systems to reduce unnecessary idle time.
faa airport privatization program--midway and other airports
Question. The recent Federal Aviation Administration (FAA)
reauthorization doubled the number of airports that can apply for the
FAA Airport Privatization Pilot Program from 5 to 10. The privatization
of such large publicly held assets naturally raises questions regarding
responsible stewardship, particularly during times of economic
uncertainty.
Midway Airport
Midway Airport in Chicago is currently the only large-hub airport
in this privatization program. How much total Federal funding has gone
to build and maintain Midway Airport?
Answer. Since 1982, Chicago's Midway Airport has received a total
of $378,350,793 in Federal Airport Improvement Program (AIP) funds
under the Airport and Airway Improvement Act of 1982.
Question. 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. Since 1982, Chicago's Midway Airport has received a total
of $378,350,793 in Federal Airport Improvement Program funds under the
Airport and Airway Improvement Act of 1982. If a private operator is
selected for the airport, it may apply for an exemption under the FAA's
Airport Privatization Pilot Program. At that time, FAA will evaluate
the application for exemption.
Question. What other large hub airports have expressed interest in
the privatization program?
Answer. To date, no other large hub airport has approached FAA with
a formal request to participate in the program. From time to time, we
do receive informal inquiries from airports.
Other Airports
Question. Puerto Rico is currently soliciting bids to sell or lease
Luis Munoz Marin International Airport. How much total Federal funding
has gone to build and maintain this airport?
Answer. Since 1982, Puerto Rico's San Juan Luis Munoz Marin
International Airport has received a total of $180,353,147 in Federal
Airport Improvement Program funds under the Airport and Airway
Improvement Act of 1982.
Question. How much Federal funding would Puerto Rico 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. Since 1982, Puerto Rico's San Juan Airport has received a
total of $180,353,147 in Federal Airport Improvement Program funds
under the Airport and Airway Improvement Act of 1982. If a private
operator is selected for the airport, it may apply for an exemption
under the FAA's Airport Privatization Pilot Program. At that time, FAA
will evaluate the application for exemption.
If an airport is required to repay Federal funding, what would DOT
do with those funds?
Answer. The existing privatization statute does not have any
specific direction on how repayments are to be handled. In the 16 years
that the airport privatization program has been in effect, no
repayments have been required. Repayments would be handled on a case-
by-case basis.
Question. Does DOT believe there are sufficient public interest
protections in the current Airport Privatization Pilot Program law and
regulations?
Answer. The statute and regulation creating the FAA Airport
Privatization Pilot Program (Program) specify how FAA evaluates the
competencies of a proposed private operator. The FAA will not grant a
part 139 airport operating certificate to a private operator that is
unable to demonstrate the ability to meet or exceed existing airport
operating requirements and standards. The FAA must also be satisfied,
under the Program, with the private operator's plans to maintain,
modernize and improve the airport, including its 5-year capital
improvement plan. The Program also requires the FAA to find that the
public sponsor undertook a process consistent with aeronautical users'
interests, including consultation, limitations on fees, rights to
object to the sponsor's planned use of proceeds, and impact on general
aviation users, and that the private operator's plans with respect to
aeronautical users are also consistent with their interests under the
Program. Further, pursuant to the Program, the FAA must find that the
privatization transaction will not abrogate any collective bargaining
agreement that covers airport employees and that is in effect on the
date of the transaction. In addition, the FAA must find that operations
of the privatized airport will not be interrupted in the event of
bankruptcy. Finally, all airports that have accepted Federal grants,
regardless of public or private ownership, must meet the same grant
assurance and safety requirements.
general highway privatization
Question. A 2008 Government Accountability Office (GAO) report was
critical of highway privatization deals. The report recommended several
actions for Congress and the administration. Specifically, GAO
recommended Congress require the Secretary of Transportation to develop
and submit objective criteria for identifying national public interests
in highway public-private partnerships.
Does DOT currently have the legal authority to develop public
interest criteria for highway public-private partnerships?
What additional legal authority does DOT need to develop public
interest criteria to ensure national public interests are protected in
future highway public-private partnerships?
What action is DOT taking now to ensure that national interests are
considered in proposed highway public-private partnerships like the
Ohio Turnpike?
Answer. DOT does not have any statutory authority to require States
to use any particular public interest criteria when determining whether
and how to pursue a public-private partnership (P3) for highway
infrastructure development. However, section 1534 of Public Law 112-141
Moving Ahead for Progress in the 21st Century Act (MAP-21) directs the
Department to develop and post information on best practices in P3s,
including ``policies and techniques to ensure that the interests of the
traveling public and State and local governments are protected'' in any
P3 agreement. That section also allows DOT to provide technical
assistance to a State, public transportation agency, or other public
official ``in analyzing whether the use of a public-private partnership
would provide value compared with traditional public delivery methods''
if requested to do so. DOT is currently working to implement this
provision and could provide such technical assistance for the Ohio
Turnpike if requested to do so.
______
Questions Submitted by Senator Patrick J. Leahy
emergency relief fund
Question. Secretary LaHood, I want to thank you and your whole
Department for all of the help and support you have provided to the
State of Vermont in the wake of Hurricane Irene's devastation last
August. I am amazed at how quickly the engineers and construction crews
have rebuilt roads, bridges, and rail lines that were completely washed
away just a few months ago. I'm especially grateful that we were able
to get the Federal Highway Administration (FHWA) the additional
Emergency Relief (ER) funding that the States need and the flexibility
to grant waivers lifting the State cap and emergency-operations
deadline. I really appreciate you granting of these waivers, which have
been crucial to Vermont's rebuilding efforts.
What is the current status of the Emergency Relief Fund? Do you
anticipate needing more than the statutory $100 million in ER funding
in fiscal year 2013 to deal with the backlog? How do you plan to cover
potential shortfalls as Vermont and other States continue to request
funding as they rebuild from past disasters?
Answer. FHWA is authorized $100 million annually in Emergency
Relief funds. In addition, the Consolidated and Further Continuing
Appropriations Act, 2012 (Public Law 112-55) provided a one-time
general fund appropriation of $1.662 billion. As of July 31, 2012, FHWA
had a balance of $197,573,131.79 in ER funds from both the annual funds
and the one-time funds. A large portion of this balance is the result
of FHWA's more aggressive review of unobligated ER balances that States
have been holding for work that is complete. Since January of this
year, FHWA has recovered over $200,000,000 in unneeded ER funds for
completed events that resided in State Department of Transportation
(DOT) accounts. These funds can now be used to cover expenditures for
other events.
In addition, FHWA has $19,000,000 in Public Law 107-117 and Public
Law 107-206 funds which were appropriated for damages associated with
9/11. These funds are still needed to complete roadway infrastructure
work when the reconstruction of the World Trade Center site is
completed.
FHWA also has a balance of $40,776,019.62 of Fiscal Year 1990
Supplemental Appropriations (Public Law 101-130), which were
appropriated for the Loma Prieta Earthquake and are no longer needed.
Since the funds were specifically appropriated for the Loma Prieta
Earthquake, they cannot be used for other events.
In October 2012, FHWA anticipates asking field offices for their
2013 obligation needs beyond the funding they have in hand.
The available funding is sufficient to cover immediate needs.
However, a major disaster in the late summer or fall of this year could
impact our ability to respond to that event along with previous events.
FHWA will continue to review unobligated balances and redistribute
ER funding as necessary to maximize available ER resources.
restoring amtrak service to montreal
Question. Secretary LaHood, Vermont used to have cross-border
Amtrak service along the old Montrealer line between Washington, DC,
and Montreal, Quebec. Passenger rail access to Montreal went away in
1995, though, when St. Albans, Vermont, became the terminus for
Amtrak's new Vermonter train.
The State of Vermont is very interested in reestablishing Amtrak
service to Montreal--and our Governor, Peter Shumlin, has made it one
of his administration's top priorities.
One of the major obstacles to cross-border travel today is
passenger security screening, and I am pleased that easing the burdens
of cross-border train travel is a goal of the recently announced Beyond
the Border Initiative with Canada.
With other trains already operating across the Northern Border in
New York State and Washington State, I know it can be done. We just
need help and support from Amtrak and U.S. Customs and Border
Protection to make it happen.
Will you work with me, the State of Vermont, the Department of
Homeland Security, Amtrak, and the Canadians to explore reestablishing
passenger train service to Montreal and finding reasonable solutions to
the passenger screening issue?
Answer. DOT stands ready to support the improvement of existing
rail corridors and the development of new rail corridors where markets
exist. The development of such services is driven by the State and
regional plans for intercity passenger rail. Vermont's initial planning
efforts to extend intercity passenger rail service through the State
and on to Montreal has focused on the cross-border and customs
requirements of the proposed service. Those issues are the subject of
the United States-Canada Transportation Border Working Group (TBWG),
which includes United States and Canadian transportation agencies as
well as Federal Railroad Administration (FRA), the Department of
Homeland Security, U.S. Customs and Border Protection, State and
provincial governments, and other relevant agencies. The TBWG's
passenger rail subcommittee, as well as other interested parties such
as Amtrak, met on April 17-18, 2012, to address cross-border
transportation issues including security and customs procedures that
would affect service to Montreal. FRA will continue fully engaging with
the TBWG, Congress, and other stakeholders to address these important
issues.
When Vermont's planning process advances to the next stage, we're
prepared to provide technical assistance where necessary for their full
Service Development Plan (SDP). The SDP process includes the analysis
of a multitude of technical, financial, and policy considerations
unique to the corridor and a completed SPD will be a critical next step
to securing Federal funding, should additional funds become available,
or identifying State and other funding resources to build the service.
______
Questions Submitted by Senator Dianne Feinstein
pipeline safety
Question. When will the Department of Transportation (DOT) begin
verifying pressure testing records and requiring pressure testing of
grandfathered pipelines that were never tested, as required by the
recently enacted Pipeline Safety legislation?
Answer. On April 13, 2012, the Pipeline and Hazardous Materials
Safety Administration (PHMSA) published a notice (72 FR 22387) to
inform the public of the agency's intention to modify its information
collection requirements. This information collection modification,
which will be reflected in gas transmission annual reports, will allow
PHMSA to collect operator pressure test information. Further, the
operator pressure test information will be used to support proposed
rulemaking (ANPRM--August 25, 2011) (76 FR 5308) relating to removal of
the grandfather clause.
Question. About 50 percent of pipeline miles, including a majority
of the oldest and highest risk lines, cannot be inspected using ``smart
pigs'' due to the design of the pipelines themselves. What is your
Department doing to develop a better smart pig, capable of inspecting
more pipeline miles?
Answer. Many pipelines cannot be ``smart-pigged'' using current in-
line inspection technology. Assessing the integrity of these pipelines
requires new, innovative solutions and technologies. PHMSA is actively
promoting increased development of smart pig technology through
Research and Development (R&D) projects that are typically co-sponsored
with industry; PHMSA is neither structured nor funded to independently
develop smart pig equipment.
On July 18 and 19, 2012, PHMSA hosted a public R&D forum to
identify technology gaps in addressing the key technical challenges
facing pipeline integrity assurance. The forum was to allow public,
Government, and industry pipeline stakeholders to develop a consensus
on the technical gaps and challenges for future government-led
research. R&D forums like this one, allow the Government to learn what
research projects are already underway by other stakeholders. At these
forums participants discuss which projects deserve Government funding
by analyzing and prioritizing the research project plans. This helps
ensure PHMSA does not direct funding towards a project that is already
being paid for or that is not beneficial to its mission. The national
research agenda coming out of these types of events is aligned with the
needs of the pipeline safety mission, makes use of the best available
knowledge and expertise, and considers stakeholder perspectives.
Question. The President's fiscal year 2013 budget request proposes
a significant increase in pipeline inspectors. Please describe how
these inspectors will likely increase safety.
Answer. In fiscal year 2013 PHMSA requested additional inspection
and enforcement staff to successfully implement the Pipeline Safety
Reform initiative. Additional personnel will be used to help determine
the safety and fitness for service of pipelines. PHMSA will continue to
raise the bar on the safety of the Nation's pipeline infrastructure,
making sure that companies comply with the critical safety rules that
protect people and the environment from potential dangers.
In 2011, Secretary LaHood issued a national Call to Action for all
stakeholders to address the need for repair, rehabilitation, and
replacement of high-risk pipeline facilities transporting hazardous
liquids and flammable gases through American communities and
environmentally sensitive areas. PHMSA is working with State regulatory
communities, rate-setters, and the pipeline industry to establish
remediation programs for these high-risk pipelines. Additional
inspection and enforcement staff members are needed to assure these
facilities practice good risk analysis and aggressively apply integrity
management principles until these pipelines are repaired or replaced.
Further, the Nation is experiencing a boom in development of
unconventional energy resources, i.e., gas shales and oil plays
throughout the country. Along with swift commercial development of
these resources, pipelines are being constructed at an increasingly
rapid pace to transport the oil and gas from the source to processing
facilities. More inspectors are needed to assure these pipeline
facilities are safely constructed and in accordance with applicable
standards and regulatory requirements.
federal aviation administration
Question. According to the Congressional Research Service, 36
percent of Airport Improvement Program dollars go to airports without
commercial service. However, more than 99 percent of travelers fly
commercial. Do you think this is the right balance of funding
priorities in this time of shrinking budgets?
Would you support a higher percentage of Airport Improvement
discretionary funding going to improving the safety and facilities of
airports that most Americans use?
Answer. The goal of the Airport Improvement Program (AIP) is to
maintain and improve the Nation's airport system. AIP funds are awarded
(based on national priorities) to different-sized airports so they can
address critical airport safety, capacity, and security projects.
General Aviation airports provide the national airport system with
specialized services like emergency medical services, aerial
firefighting, and law enforcement and border control. However, they do
not have access to airport development funding such as passenger
facilities charges and the bonds market that are otherwise available to
airports with commercial service.
The FAA-issued study, General Aviation Airports: A National Asset
(May 2012), provides additional information on the Nation's general
aviation airports. A copy of the study can be accessed at http://
www.faa.gov/airports/planning_capacity/ga_study/.
los angeles subway system
Question. The people of Los Angeles want rapid construction of
their subway system, and no one that has experienced LA traffic can
blame them. What can and should the Federal Transit Administration and
Los Angeles do to get the two subway projects seeking full funding
grant agreements in fiscal year 2013 prepared to execute that
agreement?
Answer. FTA has been very supportive of the two projects, including
recommending the Regional Connector project for $31 million and the
Westside Subway Extension project for $50 million in the President's
fiscal year 2013 budget to help advance the projects through
preliminary engineering and final design. Additionally, in response to
their transmittal of a Letter of Interest, the Department invited the
Los Angeles County Metropolitan Transportation Authority (LACMTA) to
submit an application for a Transportation Infrastructure Finance and
Innovation Act (TIFIA) loan for the Westside Subway Extension project.
Before the two projects will be ready for Full Funding Grant
Agreements (FFGAs), they must complete engineering and design, obtain
firm funding commitments for all non-New Starts funding sources, and
obtain a satisfactory rating from FTA under the statutory evaluation
criteria. Currently the financial plan submitted by LACMTA assumes an
extension of the Measure R half-cent sales tax that will be placed on
the upcoming November election ballot and approved by voters. This vote
would need to occur and be successful, or the financial plan would need
to be revised to demonstrate other available and committed resources,
before FTA could move forward with the FFGAs.
Question. Last year DOT invited the Westside Subway to the Sea to
file its final TIFIA loan application, which should lead to loan term
negotiations. What is the status of this loan?
Answer. The Westside Subway to the Sea project is a major transit
investment that is expected to improve mobility and connectivity in the
city of Los Angeles. Recognizing these and other important benefits,
DOT invited the project sponsor to apply for TIFIA financing in
response to the fiscal year 2011 TIFIA Notice of Funding Availability
(NOFA). As with other major projects, there are a number of milestones
that the project sponsor, the Los Angeles County Metropolitan
Transportation Authority (LACMTA), needs to reach in order to move
toward closure on a TIFIA financing. The environmental review of the
project was finalized with the record of decision date of August 9,
2012. In addition, the project is advancing through the Federal Transit
Administration (FTA) New Starts program with the eventual aim of
financing the project in part through a full funding grant agreement.
It is our understanding that with the progress that has been made in
these areas, LACMTA plans to submit a TIFIA loan application for the
project in the fall. When DOT receives the loan application the TIFIA
office will commence its review of the application including a
comprehensive credit evaluation of the project.
Question. ``America Fast Forward'' is a proposal to build transit
more rapidly using subsidized bonding and low interest lending. The
Transportation-HUD Subcommittee has increased the size of the TIFIA and
Transportation Investment Generating Economic Recovery (TIGER) TIFIA
lending programs in recent years to grant your Department more than
three times the lending authority it had just a few years ago. Do you
agree that expanding the TIFIA program has been an important step in
implementing America Fast Forward?
Answer. In recent years national demand for TIFIA credit assistance
has been overwhelming. The increased funding for TIFIA provided in
Moving Ahead for Progress in the 21st Century Act (MAP-21) will enable
the Department to provide credit assistance to significantly more
projects.
high-speed rail
Question. Will you direct someone within your office to serve as
the full-time point person, trouble shooter, and leader of the
Department's high-speed rail effort full-time?
Answer. FRA has organized its grant project development and
delivery office into geographic teams with a leader of each of its nine
regions spanning the United States. This regional lead manages
oversight efforts for projects and acts as single, centralized point of
contact for State officials and other stakeholders. In turn, each
regional lead coordinates an FRA team composed of project managers,
engineers, environmental specialists, grant managers, attorneys, and
other experts. Together these regional teams used a risk-based approach
to track project progress, provide grantee technical assistance, and
conduct grant monitoring and oversight efforts.
For the California HSR project in particular, FRA has recently
hired a Senior Executive Service-level Project Manager, who has been
designated as DOT's senior point-person on high-speed rail issues to
oversee the California High-Speed Rail project on a full-time basis.
fuel economy labels
Question. The fiscal year 2012 Transportation-HUD Senate Report
directed the Department of Transportation to develop fuel economy
labels for medium-duty vans and pickup trucks like the Ford F-250
within 3 model years. Small businesses--often in the construction
business--buy many of these types of vehicle. But the business owner
has no way to calculate the fuel costs of various models until this
sticker is added to these vehicles. What is the National Highway
Traffic Safety Administration doing to comply with this subcommittee's
direction that these labels be required within 3 years?
Answer. NHTSA is currently focused on completing the final
rulemaking for the Corporate Average Fuel Economy (CAFE) standards for
model year 2017-2025 vehicles. On July 29, 2011, President Obama
announced plans for these rules and charged NHTSA and the Environmental
Protection Agency with developing these rules. The two agencies issued
a proposal last November, have held numerous public hearings around the
country, and are working to complete the rulemaking. NHTSA is devoting
all focus and energy to finalize this presidential priority rulemaking
as expeditiously as possible. After the conclusion of this important
rulemaking effort, the agency will determine the timing and resources
needed to address the committee's concerns about fuel economy labels
for medium trucks and pick-ups.
truck safety
Question. A few years ago I wrote to your Department supporting
mandatory use of electronic onboard recorders to enforce hours of
service limits on truck drivers. Some of my constituents have been
killed by tired truck drivers who were falsifying paper records. I
learned there is almost no enforcement to prevent this kind of hours of
service violation, and it is believed to be widespread.
At the time, the Department of Transportation said that the
electronic onboard recorders were too expensive. I understand that the
Department has proposed a draft regulation to require these recorders
in some cases, but costs remains an issue.
My staff informs me that there is now an iPhone application that
can perform all of the key functions of an electronic onboard recorder
at no substantial cost.
What is DOT doing to consider this technology in its rulemaking?
Answer. FMCSA is committed to the development of electronic logging
device technical specifications focused on hours of service compliance,
and fulfilling all of the requirements included in MAP-21. The Agency
does not believe the technical specifications it is currently
considering would preclude the use of low-cost innovative approaches to
electronic logging, such as smart phones, provided such devices have a
means of meeting the MAP-21 requirement concerning electronic
communications between the device and the commercial motor vehicle to
ensure accurate date, time, and location information the beginning and
end of driving time periods, i.e., integral synchronization of the
device with the commercial motor vehicle.
FMCSA acknowledges that an electronic logging device mandate would
impose nearly $2 billion in costs on the commercial motor vehicle (CMV)
industry. This estimate is based on the Agency's Regulatory Impact
Analysis (RIA) for the 2011 notice of proposed rulemaking (NPRM) in
which the Agency estimated initial total costs of $1.984 billion per
year.
While the estimated costs are economically significant, the
electronic logging device rulemaking would be considered cost-
beneficial. The Agency estimated total benefits of $2.699 billion
resulting in an annual net benefit of $715 million. A significant
portion of these benefits would come from $1.965 billion in annual
paperwork reduction--a savings of $688 per driver each year--due to
drivers no longer completing and submitting logbooks. Therefore, FMCSA
continues to believe that a mandate for electronic logging devices,
potentially including smart phones with an hours-of-service
application, would be cost-beneficial.
The Agency is currently preparing a supplemental NPRM that will re-
examine the estimated costs and benefits (both paperwork savings and
safety) associated with an electronic logging device mandate for
carriers using handwritten records of duty status (RODS), and all of
the MAP-21 requirements concerning this rulemaking.
______
Question Submitted by Senator Frank R. Lautenberg
Question. The Obama administration has yet to release a
comprehensive National Rail Plan as required by my 2008 Amtrak law.
This Amtrak law required the Department of Transportation (DOT) to
develop a National Rail Plan in order to ensure that the administration
was focused on the long-term needs of the intercity passenger rail
system, and to make sure that Amtrak and States can successfully meet
the public's increasing demand for passenger rail. The Plan should also
ensure a cohesive, efficient, and optimized rail system for the
movement of goods and people.
Yesterday, the Senate passed the surface transportation
reauthorization, which further detailed the need for this Plan and
clarified steps that the Department of Transportation should take to
complete it. Additionally, the DOT Inspector General's office recently
released a report and noted that DOT does not have an expected
completion date for the entire plan.
When will we see a final National Rail Plan from DOT?
Answer. The Federal Railroad Administration (FRA) published a
Preliminary National Rail Plan (NRP) in October 2009 following the
direction of Congress, and a subsequent update of the NRP was made in
the September 2010 Progress Report. These documents--combined with the
policies and funding levels described in the administration's fiscal
year 2013 budget proposal and 6-year investment strategy--articulate
the future of intercity passenger rail for America.
In October 2011, FRA submitted to Congress a Public Investment and
Business Case for four major corridor programs that were funded through
fiscal year 2010 appropriations (Los Angeles-San Francisco, Chicago-
Detroit, Chicago-St Louis, and Chicago-Iowa City). Consistent with
requirements established in the fiscal year 2010 appropriations, these
documents summarized the need for these investments, quantitatively and
qualitatively assessed benefits and costs, and reviewed implementation
and operating plans.
Since fiscal year 2009, State and Federal rail planning has
progressed significantly as well as their experience with new rail
development. The need to revise and update the NRP will be incorporated
as the program matures. FRA continues to undertake a number of
interrelated planning and analysis efforts--all of which include
substantial engagement with our State partners and other stakeholders--
that will result in further iterations of the NRP and related
documents.
______
Questions Submitted by Senator Susan M. Collins
Question. The continued delay in issuing the final Notice of
Proposed Rule Making (NPRM) for part 145 repair stations has created a
growing problem for industry and a continued frustration for security
regulatory agencies. Recognizing that much of the remaining work is
dependent on the Transportation Security Administration (TSA), can you
provide a sense of when the final NPRM will be issued? What will be the
process for new certifications once the final NPRM is issued?
Answer. The public comment period for TSA's Proposed Aircraft
Repair Station Security Rule closed February 19, 2010. The rules are
intended to improve the security of maintenance and repair work
conducted on aircraft and aircraft components at domestic and foreign
repair stations certificated by the Federal Aviation Administration
(FAA) (14 CFR part 145), thereby reducing the likelihood of a terrorist
attack on civil aviation via a certified repair station. The NPRM
proposed that repair stations (both foreign and domestic) would be
required to adopt and carry out a standard security program developed
by TSA and comply with TSA-issued security directives.
According to the Federal Register (July 7, 2011), the proposed
rules were then in the final rulemaking stage. No additional
information is available at this time as to when a final rule will be
published.
Absent a final rule, current law prohibits FAA from certificating
new foreign repair stations.
Upon the publication of the final rule, FAA intends to prioritize
applications using the agency's Certification Services Oversight
Process (CSOP).
Question. The Government Accountability Office (GAO) issued a
report in 2009 with 47 recommendations addressing internal control
weaknesses at the U.S. Merchant Marine Academy (USMMA). What progress
has the U.S. Maritime Administration (MARAD) made in addressing GAO's
recommendations to improve the Academy's internal controls?
Answer. GAO completed a follow-up audit of the USMMA, and issued
report GAO-12-369, in July 2012. The report confirms closure of 32
recommendations, and acknowledged agency actions and progress
addressing all of the recommendations. The report identified no new
issues in the areas of concern identified in the 2009 audit report. GAO
reports ``the Academy and MARAD had made substantial progress in
addressing weaknesses related to specific control activities by
successfully implementing 32 of the 46 control deficiency-related
recommendations identified in our 2009 report. For example, the
corrective actions taken to improve controls were sufficient for us to
conclude that all recommendations related to training vessel use,
personal service acquisitions, accountability for Academy reserves, and
NAFI camps and clinics using Academy facilities were successfully
implemented.'' Additionally, the July 2012 GAO report identified one
new recommendation for the USMMA concerning capital improvement
management.
The report indicated a need for additional documentation or action
for 14 remaining recommendations, and identified one recommendation as
overarching, for examination after all other recommendations have been
addressed and closed. In those areas where GAO subsequently determined
that additional detail would need to be taken to fully address
recommended actions, MARAD is working to complete the actions by
December 31, 2012.
Question. While the FAA pursues new regulations overseeing the
public and for-private use of unmanned aircraft, can you assure the
modeling community that FAA will not promulgate new regulations for
recreational use of model aircraft unless consistent with the language
and intent of the Special Rule?
Answer. FAA can assure that any regulatory actions involving
modelers will be consistent with the FAA Reauthorization and
Modernization Act of 2012 regarding model aircraft.
Question. FMCSA's Compliance Safety Accountability (CSA) program
counts crashes against motor carriers and truck drivers, including
crashes they did not cause. For example, a wrong-way crash where a car
is going the wrong direction on an interstate and runs into a truck
could be counted against the truck by CSA. To better target those
carriers and drivers accountable for crashes, I understand DOT is
planning to screen accident reports for crashes that were unavoidable.
I think that is extremely important; otherwise CSA, is unfairly
labeling companies and their drivers guilty unless proven innocent.
What is DOT's timetable for improving the CSA crash data and fully
implementing a Crash Accountability program? Will you commit to making
this change a priority?
Answer. The Federal Motor Carrier Safety Administration (FMCSA)
agrees that better understanding a carrier's role in a crash is
important. After discussions with stakeholders and taking an initial
look at the use of police accident reports (PARs), FMCSA concluded that
more work was necessary to develop a program that is fair, uniform and
administratively feasible.
On July 23, 2012, FMCSA began conducting a study to research the
safety benefits of adjusting crash weights in the Agency's Safety
Measurement System (SMS) based on the carrier's role in the crash
(i.e., preventability). FMCSA is considering modifying the Crash
Indicator to weight crashes not only based on severity and timeliness
but also on the role of the motor carrier in the crash. FMCSA designed
the SMS to be continually improved as better data, information, and
analysis become available. This research study is expected to conclude
in the summer of 2013. Upon completion of the research study, FMCSA
will publicize the results and announce next steps. FMCSA's Crash
Weighting Research Plan can be found at
http://csa.fmcsa.dot.gov/Documents/CrashWeightingResearchPlan_7-
2012.pdf.
SMS is the Agency's system for identifying high-risk carriers, and
it scores any carrier that meets our data sufficiency requirements.
Currently, SMS uses all crashes within the Crash Indicator regardless
of the role of the motor carrier in those crashes. This safety
measurement area has proven to be one of the better predictors of
future crash risk, irrespective of the cause of the crash. Recent
analysis has demonstrated that SMS is an effective tool in identifying
those carriers most likely to have crashes. FMCSA's data system
identifies 525,000 active motor carriers; 200,000 of those carriers
have sufficient data to be assessed in at least one of our SMS Behavior
Analysis and Safety Improvement Categories (BASIC). These 200,000
carriers have been involved in 92 percent of crashes reported to FMCSA.
Question. I understand DOT's analysis of the recently published
Hours of Service rule demonstrates the estimated safety benefits of the
changes to the rule do not outweigh the costs. In this difficult
economy, it is important the Federal Government adequately consider the
costs of regulatory changes. I am concerned the elements of the final
rule may violate this important cost-benefit principle. I understand
the American Trucking Association recently filed a petition with the
U.S. Circuit Court of Appeals for the District of Columbia asking the
court to review the new rule. How does the administration plan to
address stakeholder concerns like those raised in the ATA's court
petition?
Answer. In 2010 alone, large truck crashes resulted in 3,675
fatalities. In these large truck crashes, fatigue is a leading factor.
In 2009, large truck crashes cost nearly $20 billion in societal costs,
including medical, insurance, infrastructure damage, lost wages, and
productivity. These far-reaching impacts on the economy and taxpayers
point to the need for policies that reduce the causes of truck
accidents, including driver fatigue, in order to prevent needless
tragedies on our highways.
FMCSA's 2011 final rule concerning hours of service contains
estimated costs of $470 million per year, which are less than half the
costs in FMCSA's preliminary plan published in the notice of proposed
rulemaking, which were estimated to be $1 billion. This new safety rule
will result in many public safety benefits, as well as benefits due to
improved driver health. The final rule provides $280 million in annual
economic benefits from reducing crashes and $350 million in economic
benefits from improved driver health, totaling $630 million in
benefits. Based on FMCSA's regulatory impact analysis, the economic
benefits significantly exceed the $470 million annual costs of the
rule.
Question. FAA has recently undertaken successful service-based
programs including the surveillance broadcast services (SBS) for
nationwide ADS-B deployment. In these times when budget constraints are
the norm not the exception, what is FAA's view of expanding its use of
fee for service contracts like SBS in areas including communication,
navigation, surveillance, and automation?
Answer. Automatic Dependent Surveillance-Broadcast (ADS-B) services
are procured by the FAA in the same way that power and
telecommunications services are secured. The FAA owns the surveillance
and flight data transmitted and received between aircraft and the ATC
ground stations, but does not own the actual hardware and other
components necessary to provide the services.
The FAA will consider performance-based service contracts as a
potential method of procuring communication, navigation, surveillance,
automation, and other services. The FAA's Acquisition Management System
encourages the use of this method of contracting. As with all
procurements, however, the acquisition strategy will be evaluated to
determine the most cost-effective approach and the approach most likely
to result in the best value for the agency and taxpayer. Should another
major procurement be done utilizing the service-based approach, the
agency will utilize lessons learned from the ADS-B and other
performance based service acquisitions.
CONCLUSION OF HEARINGS
Senator Murray. And with that, this subcommittee is
recessed until further notice.
[Whereupon, at 10:14 a.m., Thursday, March 15, 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 2013
----------
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 2013 budget
request for programs within the subcommittee's jurisdiction.]
Prepared Statement of the American Indian Higher Education Consortium
This statement focuses on the Department of Housing and Urban
Development (HUD).
On behalf of the Nation's 37 Tribal Colleges and Universities
(TCUs), which compose the American Indian Higher Education Consortium
(AIHEC), thank you for the opportunity to express our views and
recommendations regarding the Department of Housing and Urban
Development Tribal Colleges and Universities' Program (TCUP) for fiscal
year 2013.
summary of requests
Department of Housing and Urban Development (HUD).--Beginning in
fiscal year 2001, a TCU initiative had been administered by the HUD--
Office of University Partnerships as part of the University Community
Fund. This competitive grants program enabled TCUs to build, expand,
renovate, and equip their facilities that are available to, and used
by, their respective reservation communities. We strongly urge the
subcommittee to reject the recommendation included in the President's
fiscal year 2013 budget request and to support the goals of Executive
Order 13592 to strengthen TCUs by funding the competitive HUD-TCU
Program, at the fiscal year 2010 level of $5.435 million. Additionally,
we request that language be included to permit that a small portion of
the funds appropriated may be used to provide technical assistance to
institutions eligible to participate in this competitive grants
program.
tcu shoestring budgets: ``doing so much with so little''
Tribal Colleges and Universities are accredited by independent,
regional accreditation agencies and like all United States institutions
of higher education, must periodically undergo stringent performance
reviews to retain their accreditation status. TCUs fulfill additional
roles within their respective reservation communities functioning as
community centers, libraries, tribal archives, career and business
centers, economic development centers, public meeting places, and child
and elder care centers. Each TCU is committed to improving the lives of
its students through higher education and to moving American Indians
toward self-sufficiency.
TCUs have advanced American Indian higher education significantly
since we first began four decades ago, but many challenges remain.
Tribal Colleges and Universities are perennially underfunded. In fact,
TCUs are the most poorly funded institutions of higher education in the
country.
The tribal governments that have chartered TCUs are not among the
handful of wealthy gaming tribes located near major urban areas.
Rather, they are some of the poorest governments in the Nation. Tribal
Colleges are home to some of the poorest counties in America.
The Federal Government, despite its trust responsibility and treaty
obligations, has never fully funded the principal institutional
operating budgets, authorized under the Tribally Controlled Colleges
and Universities Assistance Act of 1978. The Tribal College Act
authorizes basic institutional operations funding on a per Indian
student basis; yet the funds are not appropriated in the same manner.
In fiscal year 2011, Congress proposed level funding for TCU
institutional operating grants and appropriated the communal pot of
funds at the same level as fiscal year 2010. However, due to a spike in
enrollments at the TCUs of over 1,660 Indian students in a single year,
the TCUs are receiving funds at $549 less per Indian student toward
their institutional operating budgets. Fully funding TCUs' operating
budgets would require $8,000 per Indian student. TCUs are currently
operating at $5,235 per Indian student. By contrast, Howard University
located in the District of Columbia, the only other Minority-Serving
Institution to receive institutional operations funding from the
Federal Government, is funded at approximately $19,000 per student. We
are by no means suggesting that Howard University does not need this
funding, only that the TCUs' operating budgets are clearly grossly
underfunded.
While TCUs do seek funding from their respective State legislatures
for the non-Indian State-resident students (sometimes referred to as
``non-beneficiary'' students) that account for 20 percent of their
enrollments, successes have been at best inconsistent. TCUs are
accredited by the same regional agencies that accredit mainstream
institutions, yet they have to continually advocate for basic operating
support for their non-Indian State students within their respective
State legislatures. If these non-beneficiary students attended any
other public institution in the State, the State would provide that
institution with ongoing funding toward its operations.
TCUs effectively blend traditional teachings with conventional
postsecondary curricula. They have developed innovative ways to address
the needs of tribal populations and are overcoming long-standing
barriers to success in higher education for American Indians. Since the
first TCU was established on the Navajo Nation in 1968, these vital
institutions have come to represent the most significant development in
the history of American Indian higher education, providing access to,
and promoting achievement among, students who might otherwise never
have known postsecondary education success.
Tribal Colleges and Universities provide access to higher education
for American Indians and others living in some of the Nation's most
rural and economically depressed areas. According to U.S. Census
data\1\, the annual per capita income of the U.S. population is
$26,059. By contrast, the annual per capita income of American Indians
is $15,671 or about 40 percent less. In addition to serving their
student populations, TCUs offer a variety of much needed community
outreach programs.
---------------------------------------------------------------------------
\1\ Source: U.S. Census Bureau, 2010 American Community Survey.
---------------------------------------------------------------------------
Inadequate funding has left many TCUs with no choice but to
continue to operate under severely distressed conditions. The need for
HUD-Tribal Colleges and Universities Program (TCUP) funding remains
urgent for construction, renovation, improvement, and maintenance of
key TCU facilities, such as basic and advanced science laboratories,
computer labs, and increasingly important student housing, day care
centers, and community services facilities. Although the situation has
greatly improved at many TCUs in the past several years, some TCUs
still operate--at least partially--in donated and temporary buildings.
Few have dormitories, even fewer have student health centers and only
one TCU has a science research laboratory. At Sitting Bull College in
Fort Yates, North Dakota, competitively awarded HUD grant funds have
been leveraged to expand the college's usable space from 12,000 square
feet (sf) to 100,000 sf over 10 years. Additionally, HUD grant dollars
have been used to address three leaking roofs that creating a mold
problem in the area referred to at the college as the ``Hall of
Buckets.'' Currently, funds are being used to complete a renovation on
its learning center, correcting major deficiencies, including recurring
sewer and water issues, handicap accessibility problems, lack of
effective safety/security measures (surveillance and alarm systems),
and outdated washroom facilities.
As a result of more than 200 years of Federal Indian policy--
including policies of termination, assimilation and relocation--many
reservation residents live in conditions of poverty comparable to that
found in third world nations. Through the efforts of TCUs, American
Indian communities are availing themselves of resources needed to
foster responsible, productive, and self-reliant citizens.
justifications
Department of Housing and Urban Development.--Executive Order 13592
addressing American Indian education and strengthening of Tribal
Colleges and Universities holds Federal agencies accountable to develop
plans for integrating TCUs into their programs. TCUs work with tribes
and communities to address all aspects of reservation life, including
the continuum of education, housing, economic development, health
promotion, law enforcement training and crime prevention. Likewise,
Federal agencies need to work with TCUs. To achieve results, Congress
needs to hold the administration accountable for strengthening the TCUs
including their physical plants and that they are routinely included as
full partners in all existing and potential Federal higher education
programs. The HUD-TCU competitive grants program, administered by the
Office of University Partnerships, is an excellent place to start. This
competitive grants program has enabled TCUs to expand their roles and
efficacy in addressing development and revitalization needs within
their respective communities. No academic or student support projects
have been funded through this program; rather, funding was available
only for community based outreach and service programs and community
facilities at TCUs. Through this program, some TCUs have been able to
build or enhance child care centers, including Head Start facilities
and social services offices; help revitalize tribal housing; establish
and expand small business development; and enhance vitally needed
community library services. Unfortunately, not all of the TCUs were
able to benefit from this small but very important program. The program
staff at the Department has no budget to provide technical assistance
with regard to this program. If a small portion of the appropriated
funds were to be available for program staff to conduct workshops and
site visits, more of the TCUs and their respective communities could
benefit from this vital opportunity. We strongly urge the subcommittee
to support the HUD-TCU competitive grants program at $5,435,000, and to
include language that will allow a small portion of these funds to be
used to provide technical assistance to TCUs, to help ensure that much
needed community services and programs are expanded and continued in
the communities served by the Nation's Tribal Colleges and
Universities.
president's fiscal year 2013 budget
The President's fiscal year 2013 budget request provides no funding
for the University Community Fund, which housed the TCU program and
other Minority-Serving Institutions (MSI) programs. We respectfully
request that the subcommittee reject the administration's
recommendation and continue to recognize the abundant need for
facilities construction and improvement funds for TCUs and appropriate
funding for the Tribal Colleges and Universities Program, and the other
MSI-HUD programs, namely: Historically Black Colleges and Universities;
Hispanic Serving Institutions Assisting Communities; and Alaska Native
and Native Hawaiian Serving Institutions Assisting Communities, to be
allocated competitively within their individual programs.
conclusion
We respectfully request that beginning in fiscal year 2013,
Congress illustrate its support for the goals of the new Executive
order aimed at strengthening TCUs by restoring the HUD-TCU competitive
grants program and provide for technical assistance to help these vital
institutions improve and expand their facilities to better serve their
students and communities. Thank you for your continued support of the
Nation's TCUs and for your consideration of our fiscal year 2013 HUD
appropriations requests.
______
Prepared Statement of the American Public Transportation Association
Madam Chairwoman 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 2013
Transportation and Housing and Urban Development Appropriations bill as
it relates to Federal investment in public transportation and high-
speed and intercity passenger rail.
APTA's highest priority continues to be the enactment of a well-
funded, multi-modal surface transportation authorization bill. 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, and remind Congress that investment in
transportation infrastructure puts Americans to work. Failure to invest
will force private sector businesses in the transit industry and other
industries to lay off employees and to invest overseas, while increased
Federal investment addresses the need for much-needed capital
investments and the growth of the industry. For the Nation's tens of
millions of transit riders, any cuts will mean less service, fewer
travel options, higher costs and longer commutes. Americans took 10.4
billion trips on public transportation in 2011, a 2.31 percent increase
from 2010 and the second highest annual ridership total since 1957.
Only ridership in 2008, when gas rose to more than $4 a gallon,
surpassed last year's ridership, and today gas prices are continuing to
rise.
about apta
APTA is a nonprofit international association of 1,500 public and
private member organizations, including transit systems and high-speed,
intercity and commuter rail operators; planning, design, construction,
and finance firms; product and service providers; academic
institutions; transit associations and State departments of
transportation.
overview of fiscal year 2013 funding requests
First, let me applaud the Senate for its work on passing the Moving
Ahead for Progress in the 21st Century Act (MAP-21), with strong
bipartisan support. It has been more than 2 years since the expiration
of SAFETEA-LU, and we are excited to see progress being made toward a
new authorization law. However, in the absence of a finalized piece of
legislation, APTA continues to look towards existing law,
appropriations, and current budget proposals for appropriations request
guidance.
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. In the
Obama administration's fiscal year 2013 budget proposal, along with
their proposed 6-year surface transportation authorization proposal,
the President requests $10.8 billion for public transportation programs
in fiscal year 2013 and would additionally include $50 billion for a
one-time state of good repair investment program, spread across highway
and transit programs. The President's proposal also requests $2.5
billion for high-speed and intercity passenger rail. APTA applauds the
President's proposed public transportation budget request.
While we recognize the growing pressures that are impacting general
fund budget authority allocations, APTA urges 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. In particular, many in the transit industry were
particularly concerned about cuts in fiscal year 2012 to the Transit
Cooperative Research Program (TCRP), an important program that produces
basic research that is used by transit agencies nationwide to improve
efficiency, safety and technical capacity.
Finally, we encourage 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 authorized
annually through fiscal year 2013, to assist with the implementation of
congressionally mandated positive train control systems. The Federal
deadline for implementation of positive train control systems is
rapidly approaching, and to date, Congress has not provided the
necessary funding to support implementation of this important safety
program.
the need for federal transit investment
In previous testimony to this subcommittee, APTA presented the case
for increasing Federal investment in public transportation. The U.S.
Department of Transportation estimates that a one-time investment of
$78 billion is needed to bring currently operating transit
infrastructure up to a state of good repair, and this does not include
annual costs to maintain, expand or operate 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.
APTA's overall funding recommendation continues to be informed by
our recommendations for surface transportation authorization and the
estimated Federal funding growth required to meet at least 50 percent
of the $60 billion in annual transit capital needs. These levels are
intended to support a projected doubling of transit ridership over the
next 20 years. It is important 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. Public transportation is a vital component of the Nation's
total transportation infrastructure picture, and with ridership
projected to grow, dependable public transportation systems will be
vital to the transportation needs of millions of Americans. While
Congress continues to consider how to proceed on a well-funded, multi-
modal surface transportation bill, it remains critically important that
annual appropriations bills support both current and growing needs.
federal transit administration programs
Capital Investment Grants (New Starts).--APTA was pleased to see
the Senate continues to support the New Starts program in MAP-21. The
New Starts program is the primary source of Federal investment in the
construction or expansion of heavy rail, light rail, commuter rail, and
bus rapid transit projects. The success of these major, multi-year
capital projects requires predictable support by Congress and the FTA.
Congress established Full Funding Grant Agreements (FFGAs) to provide
this predictability. A continued commitment to Federal investment will
also influence the willingness of private financial markets to finance
public transportation projects and it will help ensure that the bond
ratings will remain high and interest rates will remain low.
We urge the Congress to recognize the importance of long-term,
predictable funding for all highway and transit programs, including New
Starts. APTA believes that the New Starts program should grow at the
same rate as the rest of the transit program, as it 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.--APTA seeks to continue funding
for existing formula programs, including urban and rural formula, small
transit intensive cities (STIC), fixed guideway modernization, and
others at a rate consistent with overall FTA funding growth. These
formula programs address core needs of our public transportation
systems, and deserve the continued support of Congress. APTA has
recommended that Congress equitably balance the various needs of the
Nation's diverse bus systems, including those operated by multimodal
agencies. APTA has called for 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.
MAP-21, the Senate authorization bill, creates a new structure for
State of Good Repair grants with a new formula program (high intensity
motorbus state of good repair) that focuses on systems that have a
large number of bus rapid transit, express bus or other high intensity
bus routes that may no longer qualify for fixed guideway formula funds.
The Senate-passed version of MAP-21 also provides a new $75 million
general fund bus discretionary program authorization. The new program
provides another source of assistance for bus capital needs beyond the
new formula funds the bill makes available, with priority consideration
provided to bus-only transit agencies.
Transit Research/Transit Cooperative Research Program (TCRP).--APTA
strongly urges the subcommittee to take a renewed look at the TCRP
program and restore funding to previous levels. Funding for the program
was cut by 35 percent in fiscal year 2012 and these cuts are having a
significant impact in the production of high-quality, peer-reviewed
research that assists transit agencies, their employees and even their
governing boards to become more efficient and effective at delivering
safe, reliable and dependable transit services. The TCRP is an applied
research program that provides solutions to practical problems faced by
transit operators. Over the TCRP's 20 years of existence, it has
produced over 500 publications/products on a wide variety of issues of
importance to the transit community. Research has produced a variety of
transit vehicle and infrastructure standards and specifications, as
well as a variety of handbooks addressing many relevant subject areas
of interest to the transit community.
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 Positive Train Control (PTC) through the Railroad Safety
Technology Grants Program, section 105 of the Rail Safety Improvement
Act (RSIA) of 2008. APTA is very discouraged that no funding was
provided for PTC in fiscal year 2012. The RSIA requires that all
passenger railroads implement positive train control PTC systems by
December 31, 2015. The cost of implementing PTC on public commuter
railroads alone is estimated to exceed well over $2 billion, not
including costs associated with acquiring the necessary radio spectrum.
APTA is urging Congress to significantly increase the authorized levels
for implementation of mandated PTC systems.
Our Nation's commuter railroads 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. Recognizing the difficulties related to implementing PTC,
the House and Senate have both included extensions of the
implementation deadline in their respective surface transportation
authorization bills. If enacted, the proposed extensions will assist
publicly funded commuter railroads in meeting the mandate. However,
substantial Federal funding is also necessary. Many commuter railroads
are being forced to delay critical system safety state of good repair
projects in order to install PTC by 2015. Additional funding provided
by Congress for the Railroad Safety Technology grants is fundamental to
the industry's ability to implement PTC.
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 demand for commuter rail service has also remained strong, with
ridership on this mode increasing nationally by 2.5 percent in 2011,
and six commuter rail systems seeing double digit increases in 2011. 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.
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. Thirty-two States plus the District of
Columbia are forging ahead in planning and implementing passenger rail
improvements. It is more important than ever for the United States to
invest in its infrastructure as the efficient movement of people and
goods is essential for sustained economic growth and recovery.
conclusion
We thank the subcommittee for allowing us to share APTA's views on
fiscal year 2013 public transportation and high-speed and intercity
rail appropriations issues. APTA looks forward to working with the
committee 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 and
ask Congress to continue investing in a high-speed rail system. 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.
______
Prepared Statement of the Coalition of Northeastern Governors
The Coalition of Northeastern Governors (CONEG) is pleased to share
with the Subcommittee on Transportation, Housing and Urban Development,
and Related Agencies its views on fiscal year 2013 appropriations for
surface transportation, rail, and community development programs. The
CONEG Governors deeply appreciate the subcommittee's longstanding
support of funding for the Nation's highway, transit, transportation
safety, and rail programs. Federal support is vital to maintain the
Nation's transportation system, enhance its capacity to meet diverse
and enormous needs, and contribute to a balanced, integrated national
transportation system that supports the Nation's current and future
economic growth. As the Nation's population grows and the economy
recovers, these needs confront all of us--Federal, State and local
governments and the private sector.
We recognize that the subcommittee, in crafting the fiscal year
2013 appropriations measure, faces a very difficult set of choices in
this environment of severe fiscal constraints. The current economic
situation exacerbates the shortfall in the Highway Trust Fund (HTF),
even as it has contributed to one of the highest demands for public
transportation in more than 50 years. The national debate on the scope
and scale of the surface transportation authorization and funding has
advanced significantly, but has not yet resulted in a new authorization
framework, including the potential for new approaches to fund,
restructure and finance highway and transit programs. In spite of these
challenges, we urge the subcommittee to continue a strong Federal/State
partnership so vital for a national, integrated, multi-modal
transportation system. This system underpins the competitiveness of the
Nation's economy; broadens employment opportunities; and contributes to
the efficient, safe, environmentally sound, and energy-efficient
movement of people and goods.
surface transportation
As the surface transportation authorization moves to completion,
the CONEG Governors urge the subcommittee to fund the highway
obligation ceiling at the $42 billion level, adequately fund safety and
innovative financing programs, and maintain at least the fiscal year
2012 levels for public transit programs. This level of Federal
investment is the minimum needed to slow the decline in infrastructure
conditions and maintain the safety of the Nation's highways, bridges,
and transit systems.
Continued and substantial Federal investment in these
infrastructure improvements--in urban, suburban, exurban, and rural
areas--is necessary to safely and efficiently move people and products
and to support the substantial growth in freight movement projected in
the coming decades. The Federal Government has invested significant
resources in the Nation's transportation systems, and it has a
continuing responsibility to maintain and enhance the capacity of the
Nation's transportation infrastructure to keep America competitive in a
global economy.
Specifically, the CONEG Governors urge the subcommittee to:
--Fund the highway obligation ceiling at the $42 billion level;
--Maintain public transit funding at no less than the fiscal year
2012 appropriated levels, with full funding for the current
transit formula and capital investment and preserving the
historic funding balance between these programs;
--Ensure that Federal transit funds are released to States and
designated recipients in a timely manner; and
--Expand the use of innovative financing and public-private
partnerships to supplement direct Federal funding, including
Federal loan guarantees and credit assistance, such as the
Transportation Infrastructure Finance and Innovation Act
program (TIFIA).
rail
The Governors deeply appreciate the subcommittee's past support for
intercity passenger rail, and we urge that it again provides funding in
fiscal year 2013 that will allow efficient intercity passenger rail
corridors to be developed as part of a national, multi-modal
transportation system. In the Northeast, continued, adequate Federal
investment is critical to bring the current system to a state of good
repair; help expand its capacity to meet the growing ridership; provide
improved service to communities; attract State, local and private
sector investments in the Nation's intercity passenger rail system; and
develop a coordinated, comprehensive vision and plans for future
services. These investments are essential for the accessible, reliable,
frequent and on-time service that attracts and retains ridership and
grows revenues.
The Northeast has one of the oldest and most extensive multi-modal
transportation systems in the world. This system faces major congestion
and capacity constraints which, if not addressed, have the potential to
curtail future commerce and mobility in a region that is densely
populated and serves as an economic engine for the Nation. To begin to
address these capacity constraints, the northeast States have invested
significantly in the passenger rail corridors of the region--the
Northeast Corridor (NEC), the Empire Corridor, the Northern New England
Corridor, and the Keystone Corridor. They have leveraged Federal funds
appropriated for intercity passenger rail projects eligible under the
framework created by the Passenger Rail Investment and Improvement Act
(PRIIA). The intense efforts of the States, Amtrak and freight
railroads in recent years are now showing results in the Nation's
busiest rail corridor. However, continued significant investments in
this corridor network are needed to meet the growing intercity
passenger travel market. The joint planning and funding efforts over
the past 3 years are part of an on-going coordinated effort to reduce
travel times, increase speed, improve service reliability and on-time
performance, eliminate choke points, improve stations, replace aging
bridges and electrical systems, install track and ties, replace
catenary wires, and purchase new locomotives. Among the current
projects that are employing thousands of workers using American-made
supplies are the following:
--High speed rail improvements between New York City and Trenton, New
Jersey are boosting capacity, reliability, and speed on a 22-
mile segment of track capable of supporting train speeds up to
160 miles-per-hour.
--The Harold Interlocking improvement will alleviate delays for
trains coming in and out of Manhattan by providing new routes
that allow Amtrak trains to bypass the busiest passenger rail
junction in the Nation.
--Installation of high-speed third track near Wilmington, Delaware
will allow for increased speeds.
--Track improvements in Kingston, Rhode Island will add an additional
1.5 miles of third track and improve capacity.
--Access improvements for passengers using Union Station in
Washington, DC will improve passenger travel.
Amtrak.--The Amtrak fiscal year 2013 budget request contains
specific funding levels provided for operations, capital and debt
service. These funding levels will enable Amtrak to continue a balanced
program of adequate, sustained capital investment in infrastructure and
fleet modernization programs that are vital for an efficient intercity
passenger rail system that can meet the rising demand for reliable,
safe, quality services.
The Amtrak capital request encompasses urgently needed investments
in infrastructure, more cost-efficient equipment replacement, and
safety and security improvements in the NEC and corridors across the
Nation. Timely action on a systematic plan to replace aging equipment
used throughout the system can help modernize the current Amtrak fleet,
offer the prospect of more efficient procurement by Amtrak and by
States, and help stimulate the growth of the domestic rail
manufacturing sector.
We also strongly urge the subcommittee to provide Amtrak the
requested $60 million for the Gateway and other integrated
infrastructure and equipment projects that will allow improved
intercity service on the NEC--the backbone of a passenger rail network
that connects the entire Northeast and extends rail service to
communities in the South, West, and Canada. These projects are initial
steps required to address the backlog of deferred investments, and to
make investments in near-term improvements in track, bridges, tunnels
and equipment that will increase the capacity of the NEC to offer more
reliable and frequent intercity service that can deliver more riders to
their destination in less travel time. Improvements on the NEC can also
help address the congested highway corridors and crowded northeast
airports that are a major source of airport travel delays nationwide.
Intercity Passenger Rail Corridors.--To advance the initial
investments made by the Federal Government and the States, the
Governors urge the subcommittee in fiscal year 2013 to fund the
competitive Intercity Passenger Rail Corridor Capital Assistance
Program, and to provide provisions that fund the planning activities
for the development of passenger rail corridors, including multi-state
corridors. The multi-state planning funds are the source of the monies
that support the initial work being led by the Federal Railroad
Administration (FRA) to develop an updated service development plan and
environmental analysis that reflect the current and projected demand
for passenger rail service on the NEC. A funding level of $22 million
is needed in fiscal year 2013 for these analyses which are required for
any future major improvements for high speed intercity passenger rail
service on the NEC.
Since these corridors serve diverse travel markets, we urge that
these grant funds be available to States to advance plans for reliable,
travel-time competitive service, regardless of maximum speed
requirements. In light of the stringent FRA requirements for intercity
passenger rail grants, we also request the subcommittee to waive the
current statutory requirement that projects be part of an approved
State rail plan, since this requirement might curtail thoughtful and
well advanced efforts already underway by the States.
Northeast Corridor Infrastructure and Operations Advisory
Commission.--The Governors thank the subcommittee for providing funding
for the Northeast Corridor Infrastructure and Operations Advisory
Commission (Commission). Consistent with its responsibilities defined
under PRIIA, the Commission is working actively to facilitate mutual
cooperation and planning among the States, Amtrak, freight railroads,
and the FRA for intercity, commuter and freight use of the Corridor--
and to also maximize the economic growth and the energy and
environmental benefits of the larger regional NEC Network.
The Commission has extensive responsibilities to set corridor-wide
policy goals and recommendations that encompass passenger rail
mobility, intermodal connections to highways and airports, energy
consumption, air quality improvements, and local and regional economic
development of the entire northeast region. It is also tasked to
develop a standardized formula to determine and allocate the costs,
revenues and contributions among NEC commuter railroads and Amtrak that
use each other's facilities and services. The Commission's work will
also guide the vision and service development plans that are a pre-
requisite to fund projects that can improve the capacity of the NEC. To
conduct the assessments required by Congress in a timely manner, the
Commission needs resources, data and expert analysis that exceed that
which is currently available through the staff of the States, Amtrak
and FRA. Continued funding in fiscal year 2013 will ensure the
Commission's ability to secure all essential resources for conducting
these assessments.
Other Programs.--A number of other national rail and intermodal
programs are important components of the evolving Federal-State-private
sector partnerships to enhance passenger and freight rail across the
country.
The Railroad Rehabilitation and Improvement Financing Program
(RRIF) can be an important tool for railroads (particularly regional
and short-line railroads) and public agencies to access the financing
needed for critical infrastructure and intermodal projects. We also
encourage the subcommittee to provide funding for the Rail Line
Relocation program, the Next Generation Corridor Train Equipment Pool,
and critical rail safety programs.
We support the continuation of the Transportation Investment
Generating Economic Recovery, or TIGER Discretionary Grant program, at
$500 million to encourage investment in multi-modal, multi-
jurisdictional or other road, rail, transit and port projects that help
achieve critical national objectives.
Adequate funding is needed for the Surface Transportation Board to
carry out its expanded responsibilities for intercity passenger rail
corridor service, including its specific responsibilities under PRIIA
regarding equitable cost-sharing formulas among States, Amtrak and
commuter railroads.
community development block grant
The CONEG Governors urge the subcommittee to provide funding for
the Community Development Block Grant (CDBG) program at least at the
fiscal year 2012 level of $2.95 billion. By enabling States to invest
in improved local infrastructure, rehabilitated affordable housing, and
local economic development and jobs, the CDBG program provides needed
assistance to redevelop and improve neighborhoods and communities
nationwide.
conclusion
In conclusion, the CONEG Governors urge the subcommittee to:
--Fund the highway obligation ceiling at the $42 billion level and an
expanded TIFIA program;
--Maintain Federal public transit funding at no less than the fiscal
year 2012 appropriated levels, with full funding for the
transit formula and capital investment programs, and preserving
the historic funding balance between these programs;
--Fund Amtrak at levels that will support sound operations and a
balanced capital investment program, including the NEC capacity
improvements;
--Maintain provisions to fund the Northeast Corridor Infrastructure
and Operations Advisory Commission;
--Provide funding for the Intercity Passenger Rail Service Corridor
Assistance Program for corridor planning and capital
investment, including provisions for multi-state corridor
planning;
--Provide funding for such national rail programs as the Next
Generation Corridor Train Equipment Pool, the Rail Line
Relocation program and the RRIF program;
--Provide $500 million for the TIGER program;
--Provide adequate funding for the Surface Transportation Board; and
--Maintain funding for the Community Development Block Grant at the
$2.95 billion level.
The CONEG Governors thank the entire subcommittee for the
opportunity to share these priorities and appreciate your consideration
of these requests.
______
Prepared Statement of the Institute of Makers of Explosives
interest of the institute of makers of explosives
The Institute of Makers of Explosives (IME) is the safety and
security association of the commercial explosives industry. Commercial
explosives underpin the economy. They are essential to energy
production, construction, demolition, and the manufacture of any metal/
mineral product. Explosives are transported and used in every State.
Additionally, our products are distributed worldwide, while some
explosives must be imported because they are not manufactured in the
United States. The ability to transport and distribute these products
safely and securely is critical to this industry.
background
The production and distribution of hazardous materials is a
trillion-dollar industry that employs millions of Americans. While
these materials contribute to America's quality of life, unless handled
properly, personal injury or death, property damage, and environmental
consequences can result. The threat of intentional misuse of these
materials also factors into public concern. To protect against these
outcomes, the Secretary of Transportation (Secretary) is charged under
the Hazardous Materials Transportation Act (HMTA) to ``provide adequate
protection against the risks to life and property inherent in the
transportation of hazardous materials in commerce by improving''
regulation and enforcement.\1\ The Secretary has delegated the HMTA
authorities to various modal administrations, with primary regulatory
authority resting in the Pipeline and Hazardous Materials Safety
Administration (PHMSA).
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\1\ 49 U.S.C. Chapter 51.
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PHMSA regulates hazardous material (hazmat) transportation so
closely that it may not be moved any distance, via any mode of
transportation unless a Department of Transportation (DOT) regulation,
permit or approval authorizes the movement of a material. This blanket
prohibition against transportation unless there is a specific DOT
authorization for that transportation makes efficient consideration of
such authorizations critical to the industries involved and the
millions of workers they employ, as well as to the national defense,
the security of our homeland, and the economy at large. Accordingly,
how PHMSA performs its regulatory function has a significant impact on
our industry.
significance of phmsa's special permits and approvals program to the
commercial explosives industry
The permits (designated ``special permits'') and approvals that
PHMSA issues require applicants to establish that the function to be
performed provides an equivalent or a greater level of safety than
would be achieved by conforming to the agency's rules. They are not
authorizations that allow someone to do something unsafe that otherwise
would be prohibited under the rules. In both instances, the
authorizations are issued to specifically identified individuals, in
response to detailed applications (that are incorporated by reference
in the authorizations), under criteria that are defined by or at least
as stringent as the applicable regulations. These conditions can be
changed by PHMSA at will, with limited rights for affected parties to
petition for redress.
The process of applying for and maintaining such authorizations
involves more paperwork and accountability than is required to petition
for rule changes. Moreover, holders of these special authorizations
face the constant risk of having them revoked, suspended, or modified.
All special permits and many approvals also have expiration dates,
requiring timely filing of applications for renewal. All require
reporting of the holder's experience with the authorization so that
PHMSA can properly evaluate the appropriateness of the authorization.
The biggest difference between a special permit and an approval is that
a special permit is an alternative means to comply with the regulations
in domestic commerce, while an approval may apply to domestic or
international transportation and can only be issued if there is a
specific reference to the activity authorized by the approval in
PHMSA's regulations.
Currently, there are thousands of special permits and approvals
within the PHMSA program; many have been renewed without change for
decades. Entire industries now find themselves regulated through
special permits and approvals. The commercial explosives industry is a
case in point. Billions of pounds of bulk explosive precursors and
blasting agents are transported annually in the United States in
vehicles operating under special permit. Without these permits, the
industry would collapse. Likewise, the commercial explosives industry
is uniquely dependent on PHMSA's approval authority. Manufacturers of
commercial explosives, as opposed to other classes of hazardous
materials, may not self-classify these products. The Hazardous
Materials Regulations (HMR) require that new explosives be classified
by PHMSA before they are offered for transport. These explosives
classification approvals are the largest type of approval issued by the
agency. Prior to approval, the HMR require that explosives be examined
and tested by a laboratory approved by PHMSA. The testing criteria are
based on standards recognized worldwide, and typically cost tens of
thousands of dollars per application. The expense of this rigorous
testing, both in terms of product sacrificed as well as the costs of
the tests, is borne by the applicant.
Congress never intended special permits or approvals to be a long-
term solution for the transportation innovations they authorize. The
expectation is that proven special permits and approvals that have
future, long-term use would be incorporated into the HMR. According to
DOT, no deaths have been attributed to packages shipped under special
permits or approvals for decades.\2\ PHMSA's failure to incorporate
proven special permits into its regulations now exposes many industries
to the current whims of agency action.
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\2\ PHMSA claims that a maritime incident in 2008 which resulted in
three deaths was caused by the violation of a special permit. However,
the deaths were not the proximate result of a special permit violation.
Testimony in the resultant litigation showed the deaths were due to
negligence of a number of parties involved in the shipment.
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phmsa's fiscal year 2013 budget increase request and user tax are
unjustified
As noted above, the HMTA requires that PHMSA's regulations be risk-
based. The agency, in turn, measures the success of its hazmat safety
program by the number of transportation-related deaths and ``serious
injuries'' (i.e., hospitalizations) are attributed to the hazardous
materials.\3\ The agency acknowledges that these numbers ``have
declined an average of 4 percent every 3 years over the long term.''
\4\ Last year, 11 deaths, all due to human error, not a failure of a
regulatory standard, were attributed to hazardous materials. None,
since the early 1970s, have been attributed to commercial explosives.
This contrasts with thousands of deaths annually that result from
crashes involving large trucks, for example. Despite these compelling
statistics and the current budget climate, PHMSA requests a 19.7-
percent increase over fiscal year 2012 and 22 new positions, a 12.6-
percent increase in full-time positions (FTP), for the hazmat program.
Completely unjustified is PHMSA's proposal to devote 24 percent of the
agency's budget to the processing of applications for special permits
and approvals where there is no record of death.
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\3\ DOT 2011 Annual Performance Report, February 2012, page 9.
\4\ Fiscal Year 2013 PHMSA Budget Justification, page 3.
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While investigations into the Special Permits and Approvals program
in the last Congress revealed that PHMSA had misplaced many documents
from applications, none were attributed to a death or serious injury.
Instead of asking holders of these authorities to provide the missing
documents, PHMSA proceeded without notice and comment to restructure
the program from one that took weeks to process applications to one
that takes months, with double or triple the paperwork, and to
establish a complex tiered system of applications reviews, including
costly site visits, based on unpublished and unknown standards. In
short, the agency created a paperwork empire, with no commensurate
safety benefit. The cost and delay that have resulted from the agency's
unfettered administrative actions are impediments to U.S. businesses
dependent on these authorizations in the global race to market.
To finance this new special permit and approval processing
hierarchy, PHMSA requested, as it did in fiscal year 2012, user fees of
between $700 and $3,000 per application. PHMSA estimates that the fees
will generate $12 million. This user ``tax'' is without merit:
--The user fee revenue would be used to underwrite the agency's
general fund, although only a fraction of the regulated
community are holders of special permits and approvals.
--No death has been attributed to special permits or approvals since
1971 when agency records began to be kept.
--The Federal Government, not private companies, is the largest
holder of approvals and special permits. The Government will
pay no fees.
--Historically, fees have not been imposed on foreign entities for
fear of retaliatory fees on U.S. exports giving foreign
shippers a competitive advantage in the United States.
--PHMSA states that it needs funds to implement its Special Permits
and Approvals Action Plan. However, PHMSA and the DOT/Office of
Inspector General have said that the action plan implementation
is complete.
--Nowhere in the budget request does PHMSA reveal its special permit
and approval workload. Yet, the agency has reported to industry
that there is no longer a backlog of applications, suggesting
that the agency is managing with current resources.
--PHMSA estimates it processes 25,000 applications per year. At
25,000 applications per year, the cost per application should
be no more than $533. Using the $700-$3,000 fee range, PHMSA
will generate between $17.5 million and $75 million in new
revenue; nearly 1.5 to over 6 times the $12 million the agency
estimates it will need.
--Additional Federal workers will have to be hired to administer and
collect the fee.
--It is the business activity, not the size, of a company that
determines how many applications may be filed. Many payers will
be small businesses.
--With the fee, there would be no incentive for PHMSA to incorporate
proven special permits into the Hazardous Materials
Regulations.
--The fee would be payable per application, creating an incentive for
PHMSA to deny or reject applications on trivial pretexts thus
generating new fees.
--Other DOT modal administrations issue approvals or what amount to
special permits; none assess fees.
--This program, which provides safety benefits to the public, has
been successfully run for decades without user fees. PHMSA's
proposal could be the start of a trend for user fees for other
regulatory actions including letters of interpretations or
petitions for rulemaking necessary for compliance and good
government.
PHMSA claims that the House Transportation and Infrastructure
Committee mandated the programmatic changes necessitating the fees.
However, there is no such statutory requirement, and neither has
Congress provided PHMSA authority for this user fee. This user fee is
really a hidden tax on companies that innovate and produce goods needed
strengthen and rebuild the U.S. economy. The user fee initiative should
be rejected.
Rather than be party to the agency's costly empire building scheme,
including six new FTP this year, the subcommittee should be asking what
the agency is doing to ``streamline'' the application process; why
``increasingly stringent monitoring'' of permit and approval holders is
necessary given the safety record of these entities; how the agency
hopes to ``accelerat[e] incorporation of special permit[s] into the
HMR'' when no new resources above baseline were requested to support
rulemaking activity; and why the agency is devoting scarce staff
resources to second-guess the results of government-established tests
performed at government-approved laboratories for explosives
classification approvals.\5\
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\5\ Fiscal Year 2013 PHMSA Budget Justification, pages 68 and 100.
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other budgetary issues to consider
Staffing and Workload.--PHMSA's budget request provides no baseline
empirical workload metrics to judge PHMSA's performance or the merit of
the budget request. For example, the request is silent on the causes or
rates of special permit or approval denials and resubmissions, which
would drive workload and user fee receipts. The information, when
provided, is prospective, not retrospective. The agency's budget
increase is driven by requests for new FTP. These staffing enhancements
are mis-allocated. The subcommittee should deny these requests:
--Field Operations (FO).--The number of FO positions has nearly
doubled since 2003 to 63 FTP, with a FTP increase of 16 in
fiscal year 2010. This year, PHMSA is requesting another 12
FTP, with no more justification than that the agency has only
been able to inspect ``2 percent of facilities under their
jurisdiction.'' However, a 2-percent inspection rate may be
appropriate given the ``minimal rate of non-compliance'' within
the regulated community.\6\ At the same time, PHMSA provides no
retrospective information on the actual number of inspection/
investigation reports have been filed and how the inspections
are categorized.
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\6\ Fiscal Year 2013 PHMSA Budget Justification, page 67.
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--Radioactive Materials.--PHMSA requests two additional FTP to
address emergency threats from radioactive materials. However,
quantities of high level radioactive waste or spent nuclear
fuel are not moving from nuclear power plants in the absence of
a permanent repository. Likewise, PHMSA's concern about cargo
containers arriving in U.S. ports with surface radioactive
contamination is a Customs and Border Protection concern. This
request is without merit.
Grants Programs (GPs).--PHMSA operates three GPs funded by fees
assessed on the hazardous materials community. We have long looked for
evidence of program accomplishment and question the agency's claims
about achievements ascribed to these programs. In 2005, Congress
directed the agency to annually provide a detailed accounting of all
grant expenditures.\7\ In the intervening 7 years, the agency has
released only one such report, and that report did not provide the
retrospective accounting necessary to determine if grant recipients
were using funds appropriately.\8\ This year, an audit of the GPs by
the Office of Inspector General found systemic mismanagement and misuse
of grant funds.\9\ PHMSA's request increases the fees allocated to
administer the GPs from 2 percent to 4 percent although such fees are
limited to 2 percent by statute.\10\ These programs warrant increased
oversight by the subcommittee.
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\7\49 U.S.C. 5116(k).
\8\ http://phmsa.dot.gov/staticfiles/PHMSA/DownloadableFiles/Files
/Report_to_Congress_HMEP_Grants_Program 2005_2006.pdf.
\9\ OIG, DOT, AV-2012-040, January 12, 2012.
\10\49 U.S.C. 5116(i)(4).
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conclusion
The transport of hazardous materials is a multi-billion dollar
industry that employs millions of Americans. This commerce has been
accomplished with a remarkable degree of safety. PHMSA has silenced the
voice of the regulated community by refusing to submit its special
permit and approval ``standard operating procedures'' and ``fitness
criteria'' to notice and comment rulemaking. The subcommittee needs to
make difficult decisions about where to save scarce Federal resources.
Cutting the self-contrived administrative bloat from PHMSA's hazmat
safety program would be a place to start. In addition to rejecting the
proposed user fee, we strongly recommend that the subcommittee deny new
staffing requests as explained, but redirect any new resources to
enhance PHMSA's information technology and rulemaking capacities.
______
Prepared Statement of the Institute of Makers of Explosives
interest of the institute of makers of explosives
The Institute of Makers of Explosives (IME) is the safety and
security association of the commercial explosives industry. Commercial
explosives underpin the economy. They are essential to energy
production, construction, demolition, and the manufacture of any metal/
mineral product. Explosives are transported and used in every State.
The ability to transport and distribute these products safely and
securely is critical to this industry. At some point, virtually all
explosives are transported by truck. Among these explosives are
products classed as Division 1.1, 1.2, and 1.3 materials, which with
other select hazardous materials, may only be transported by motor
carriers holding a ``hazardous materials safety permit'' (HMSP) issued
by the Federal Motor Carrier Safety Administration (FMCSA). According
to program data, carriers of explosives make up the largest segment,
roughly half, of the universe of HMSP holders.
Our industry has maintained an exceptional safety record for
decades. According to the Hazardous Materials Information System
(HMIS), no deaths have been attributed to commercial explosives since
the Department of Transportation began collecting data in the 1970s.
Despite the safety record of our industry, we have members who struggle
when it comes maintaining their HMSP qualification.
implementation issues
We will be the first to admit that we failed to appreciate the full
impact of the disqualifying out-of-service (OOS) thresholds when FMCSA
finalized the HMSP rule in 2004. First, the preamble and the regulatory
text set forth in the 2003 proposal, as well as the preamble to the
HMSP final rule, describes the agency's intent to issue HMSPs to motor
carriers with a ``satisfactory'' safety rating.\1\ Those without a
satisfactory safety rating would be eligible for a temporary HMSP if
they have ``a crash rate in the top 30 percent of the national average,
or a driver, vehicle, hazardous materials, or total [OOS] rate in the
top 30 percent of the national average.'' (Emphasis added.) Second, the
``or total'' OOS rate suggested that the 30 percent national average
disqualification would, in the aggregate, disqualify only 30 percent of
carriers. As FMCSA has implemented this program, however, these were
not the standards that a carrier could rely on to obtain a permit.
Instead, no HMSP may be issued to a carrier who performs in the top 30
percent of each OOS category.
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\1\ 68 FR 49737, 49752 and 49753 (August 19, 2003); 69 FR 39367,
39352 (June 30, 2004).
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Since the HMSP program's inception in 2005, we have urged FMCSA, in
meetings, letters, and petitions, to relook at this program and make
needed reforms. Over these 7 years, the HMSP program has been plagued
by administrative missteps including double counting OOS inspections
and thousands of erroneous denials of applications. Questions remain
unanswered about the statistical basis used by FMCSA to calculate the
program's most critical criterion, the hazardous material (hazmat) OOS
rate. We have documented the inherent unfairness of a system that
relies on OOS rates. Roadside inspections are not random (nor should
they be given limited resources), nor are they without the bias of
personal judgment. Further, the methodology used to determine
``significance'' of the inspection data lacks statistical confidence.
Even if a carrier survives this flawed qualification process, it
provides no assurance that the same level of performance will enable
the carrier to retain its HMSP as carriers are subject to a relative,
not absolute, standard of ``safety.'' Please know that we do not object
to a HMSP; we do object to the bias and uncertainty that this program
breeds, especially when the program has shown no nexus to safety
enhancement.
safety benefits of the hmsp unproven
FMCSA estimated that implementing the HMSP program would prevent
seven hazmat truck-related crashes per year. The agency stated that the
safety benefits derived from the projected crash reductions would be
``large because of the number of conventional crashes that may be
prevented.'' This has not proved to be the case. The experience after
the nearly 6 years of the HMSP and during the 6 years immediately
preceding the implementation of the HMSP shows that: \2\
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\2\ Data from the Hazardous Materials Information System (HMIS),
12/13/2011.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1999-2004 2005-2010 All hazmat highway incidents
-------------------------------------------------------------------------------------------------------
HMSP material 1999-2004 2005-2010
Crashes Fatalities Crashes Fatalities ---------------------------------------------------
Crashes Fatalities Crashes Fatalities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Explosives (1.1, 1.2, 1.3)...................... 9 \2\ 13 \2\ ........... ........... ........... ...........
RAM (HRCQ \1\).................................. 4 ........... 1 ........... ........... ........... ........... ...........
TIH............................................. 43 ........... 46 ........... ........... ........... ........... ...........
Methane......................................... 1 ........... ........... ........... ........... ........... ........... ...........
-------------------------------------------------------------------------------------------------------
Total..................................... 57 ........... 60 ........... 1,909 62 2,190 60
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ It may be that none of these crashes are HRCQ. From the data in HMIS, it was possible to eliminate some incidents that were clearly not HRCQ. Where
there was doubt the incident was counted.
\2\ The HMIS includes records of two off-highway, non-crash incidents that resulted in fatalities involving materials covered by the HMSP. Both
incidents involve fireworks stored on trucks, and both incidents occurred after delivery. Consequently, the American Pyrotechnics Association disputes
whether these incidents are transportation-related. In 2003, four workers were killed after the local government asked that a show for another
location be removed from the site. In 2009, five workers were killed while setting up a show using a truck as a workroom for assembling the display.
For HMSP holders, this record highlights the need for an immediate
reconsideration of the disqualifying standards that are threatening
their livelihoods. Keep in mind that the vast majority of carriers
subject to the HMSP are not long-haul, freight-all-kinds carriers. They
serve niche markets that rely on local, often rural delivery, and
require specialized equipment. As such, these carriers do not frequent
routes with inspection stations. Once these carriers get into trouble
based on the non-random, often subjective OOS calls by inspectors, it
is virtually impossible for these carriers to accrue sufficient
``good'' inspections to overcome the ``bad.'' For example, it is not
uncommon for a carrier to have less than 15 inspections in the 12
months prior to the expiration of the carrier's HMSP. If two of those
inspections result in an OOS \3\, it would take 56 ``clean''
inspections to requalify the carriers. And, the later into the 12-month
qualification period the second OOS occurs, the more unlikely it is
that a carrier could recover. These carriers do not have the option to
carry non-HMSP freight while working to requalify for a permit. The
irony is that, when these carriers get into jeopardy, FMCSA does not
routinely suspend or revoke the HMSP; rather the carrier is allowed to
operate until it is time to apply for renewal. The regulations allow
for appeals when permits are suspended or revoked, but not if the
carrier is applying for renewal.
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\3\ This assumes that the OOS citation was corrected issued. CSA
experience shows that FMCSA's ``Data Q'' process is overwhelmed and
State ability and/or willingness to expend resources on these
challenges is a growing concern.
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request for expedited relief
Last year, FMCSA accepted a petition for rulemaking from IME and
other affected industry associations filed to reform the HMSP
disqualification standards. While we are pleased that FMCSA has
accepted our petition, we are disappointed that ``the agency has
determined that this rulemaking should not be initiated until the CSA
Safety Fitness Determination (SFD) final rule is published, as it will
be used as the basis for initiating this rule.'' \4\ (Emphasis added.)
We would like to strongly suggest that the HMSP rulemaking should take
precedence over the SFD rulemaking. First, the HMSP program is being
used now as the SFD standard for covered materials. Covered carriers
that do not meet the contested HMSP standards may be shutdown. Non-HMSP
carriers do not yet face this outcome. Second, the problematic HMSP
disqualification standards are based on inspections and OOS
determinations. These same metrics are expected to be the basis of the
standards to be proposed in the SFD rulemaking. Third, the HMSP
regulated community is very small relative to the universe of carriers
that will be subject to the SFD. We believe FMCSA should immediately
act to fix the HMSP disqualification standards and export that refined
SDF model to the larger commercial trucking universe under CSA.
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\4\ Letter to IME from FMCSA, November 14, 2011, page 1.
---------------------------------------------------------------------------
The agency's reluctance to immediately address the shortcomings of
the HMSP is particularly troubling because implicit in FMCSA's plan to
address by rulemaking many of the issues raised by industry is an
acknowledgment of deficiencies with the current program. These
deficiencies will persist over the intervening years between now and
the time that they are resolved through the rulemaking process. The
adverse impacts to the regulated community are undeserved.
Given these facts, we are concerned that neither legislation nor
regulation will move fast enough to prevent relatively good carriers
from losing their HMSP and, as explained, being put out of business
based on limited data anomalies. We have asked FMCSA to immediately
address these pressing concerns by issuing an interim final rule (IFR)
to at least provide for an additional level of fitness review prior to
the denial, revocation, or suspension of a safety permit until such
time that the agency proceeds with the full rulemaking based on our
petition. The additional level of administrative fitness review would
consider the safety management controls of the applicant or holder not
just OOS violations rates, and it would provide the applicant or holder
an opportunity to file a corrective action plan to address identified
concerns.\5\
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\5\ This opportunity should not be available to applicants or
holders that present an imminent hazard or evidence of a pattern of
willful and knowing non-compliance with safety regulations.
---------------------------------------------------------------------------
We have not heard from FMCSA whether the agency would be willing to
pursue the IFR option we have described. At the same time, it is
concerning to us that nowhere in FMCSA's fiscal year 2013 budget
estimate does it reference, let alone discuss, the issues described.\6\
Justice will not be served by inattention to these pressing concerns.
The uncertainty of when FMCSA will be able to carry out the HMSP
rulemaking coupled with the urgency to take some action based on
acknowledged program deficiencies compel us to ask the subcommittee to
deny funds to administer this program until FMCSA provides interim
measures to ensure that HMSP holders are not denied permits based
solely on the flawed disqualification standards in place now.
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\6\ The HMSP is mentioned once in the Department of Transportation
Annual Performance Report, Fiscal Year 2011, page 22, ``FMCSA will
continue to seek to implement programs and regulations that `raise the
bar' to entry into the motor carrier industry, including. . . expanding
enforcement of and compliance with the [HMSP] requirements. . . .''
---------------------------------------------------------------------------
conclusion
Neither IME nor its members object to the need for a HMSP. We do
object to the current standards for disqualification. They are not
risk-based. Inspection frequency and outcome do not seem to correlate
to crashes or fatalities. Thank you for your attention to these
concerns.
______
Prepared Statement of the National American Indian Housing Council
Chairwoman Murray, Vice Chairwoman Collins and members of the
subcommittee. I am submitting this statement regarding the President's
budget request (PBR) for fiscal year 2013 on behalf of the National
American Indian Housing Council (NAIHC). My name is Cheryl A. Causley
and I am the chairwoman of the National American Indian Housing Council
(NAIHC), the only national tribal nonprofit organization dedicated to
advancing housing, physical infrastructure, and economic and community
development in tribal communities throughout the United States. I am
also an enrolled member of the Bay Mills Indian Community in Brimley,
Michigan, and the Executive Director of the Bay Mills Indian Housing
Authority. I want to thank the subcommittee for the opportunity to
submit written testimony for the subcommittee's consideration as it
reviews the PBR.
background on the national american indian housing council
The NAIHC was founded in 1974 and has, for 38 years, served its
members by providing invaluable training and technical assistance (T/
TA) to all tribes and tribal housing entities; providing information to
Congress regarding the issues and challenges that tribes face in terms
of housing, infrastructure, and community and economic development; and
working with key Federal agencies to address these important and, at
times, vexing issues, and to help meet the challenges. The membership
of NAIHC is expansive, comprised of 271 members representing 463 \1\
tribes and tribal housing organizations. The primary goal of NAIHC is
to support Native housing entities in their efforts to provide safe,
decent, affordable, culturally appropriate housing for Native people.
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\1\ There are approximately 566 federally recognized Indian tribes
and Alaska Native villages in the United States, all of whom are
eligible for membership in NAIHC. Other NAIHC members include State-
recognized tribes that were deemed eligible for housing assistance
under the 1937 Housing Act and grandfathered in to the Native American
Housing Assistance and Self-Determination Act of 1996.
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brief summary of the problems regarding housing in indian country
While the country has been experiencing an economic downturn that
many have described as the worst global recession since World War II,
this economic reality is greatly magnified in Indian communities. The
national unemployment rate seems to have peaked at an alarming rate of
nearly 10 percent; however, that rate does not compare to the
unemployment rates in Indian Country, which average 49 percent.\2\ The
highest unemployment rates are on the Plains reservations, where the
average rate is 77 percent.\3\
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\2\ Bureau of Indian Affairs Labor Force Report (2005).
\3\ Many of these reservations are in the State of South Dakota,
which has one of the lowest unemployment rates in the Nation. On some
South Dakota reservations, the unemployment rate exceeds 80 percent.
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Because of the remote locations of many reservations, there is a
lack of basic infrastructure and economic development opportunities are
difficult to identify and pursue. As a result, the poverty rate in
Indian country is exceedingly high at 25.3 percent, nearly three times
the national average.\4\ These employment and economic development
challenges exacerbate the housing situation in Indian Country. Our
first Americans face some of the worst housing and living conditions in
the country, and the availability of affordable, adequate, safe housing
in Indian Country falls far below that of the general U.S. population.
---------------------------------------------------------------------------
\4\ U.S. Census Bureau, American Indian and Alaska Native Heritage
Month: November 2011. See http://www.census.gov.
---------------------------------------------------------------------------
--According to the 2000 U.S. Census, nearly 12 percent of Native
American households lack plumbing compared to 1.2 percent of
the general U.S. population.
--According to 2002 statistics, 90,000 Indian families were homeless
or under-housed.
--On tribal lands, 28 percent of Indian households were found to be
over-crowded or to lack adequate plumbing and kitchen
facilities. The national average is 5.4 percent when structures
that lack heating and electrical equipment are included.
Roughly 40 percent of reservation housing is considered
inadequate, compared to 5.9 percent of national households.
--Seventy percent of the existing housing stock in Indian Country is
in need of upgrades and repairs, many of them extensive.
--Less than half of all reservation homes are connected to a sewer
system.
There is already a consensus among many members of Congress,
Department of Housing and Urban Development (HUD), tribal leaders, and
tribal organizations that there is a severe housing shortage in tribal
communities; that many homes are, as a result, overcrowded; that many
of the existing homes are in need of repairs, some of them substantial;
that many homes lack basic amenities that many of us take for granted,
such as full kitchens and plumbing; and that at least 250,000 new
housing units are needed in Indian Country.
These issues are further complicated by the status of Indian lands,
which are held in trust or restricted-fee status. As a result, private
financial institutions will generally not recognize tribal homes as
collateral to make improvements or for individuals to finance new
homes. Private investment in the real estate market in Indian Country
is virtually non-existent, with tribes almost entirely dependent on the
Federal Government for financial assistance to meet their growing
housing needs. The provision of such assistance is consistent with the
Federal Government's well established trust responsibility to American
Indian tribes and Alaska Native villages.
the native american housing assistance and self-determination act
In 1996, Congress passed the Native American Housing Assistance and
Self-Determination Act (NAHASDA) to provide Federal statutory authority
to address the above-mentioned housing disparities in Indian Country.
NAHASDA is the cornerstone for providing housing assistance to low
income Native American families on Indian reservations, in Alaska
Native villages, and on Native Hawaiian Home Lands.
The Indian Housing Block Grant (IHBG) is the funding component of
NAHASDA, and since the passage of NAHASDA in 1996 and its first fiscal
year of funding in 1998, NAHASDA has been the single largest source of
funding for Native housing. Administered by the Department of Housing
and Urban Development, NAHASDA specifies which activities are eligible
for funding.\5\ Not only do IHBG funds support new housing development,
acquisition, rehabilitation, and other housing services that are
critical for tribal communities; they cover essential planning and
operating expenses for tribal housing entities. Between 2006 and 2010,
a significant portion of IHBG funds, approximately 24 percent, were
used for planning, administration, and housing management and services.
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\5\ Eligible activities include but are not limited to down-payment
assistance, property acquisition, new construction, safety programs,
planning and administration, and housing rehabilitation.
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american recovery and reinvestment act and fiscal year 2010 indian
housing funds
NAIHC would like to thank Congress for its important work to
increase the much-needed investment in Indian housing during the past
several years. In fiscal year 2010 the American Recovery and
Reinvestment ACT (ARRA) of 2009 provided over $500 million for the IHBG
program. This additional investment in Indian Country supported
hundreds of jobs, permitted some tribes to start on new construction
projects, and assisted still other tribes in completing essential
infrastructure for housing projects that they could not have otherwise
afforded with their yearly IHBG allocations. Tribes have complied with
the mandate to obligate the funds in an expeditious manner, thus
helping stimulate tribal, regional and the national economies.
In addition to ARRA funding, Congress appropriated $700 million for
the IHBG in fiscal year 2010, the first significant increase for the
program since its inception. This positive step reversed a decade of
stagnate funding levels that neither kept pace with inflation nor
addressed the acute housing needs in Native communities. As you know,
the Congress did not continue the upward trajectory in Indian housing
funding and the appropriations have remained flat for each the past two
fiscal years at $650 million.
the president's 2013 budget request for the indian housing block grant
President Obama released his fiscal year 2013 budget request on
February 13, 2012. The PBR established total spending of level of $3.80
trillion, up from an estimated $3.79 trillion enacted in fiscal year
2012. This spending level includes $44.8 billion in budget authority
for HUD, a 3.2 percent increase above the fiscal year 2012 funding
level.
Despite the increase in overall HUD spending, the administration
has proposed level funding for the Indian Housing Block Grant (IHBG) at
$650 million for fiscal year 2013. Were the President's budget proposal
to be accepted, it would mark the third consecutive year that the
budget would be flat-lined. The budget proposal also includes $60
million for the Indian Community Development Block Grant (ICDBG), the
same level of funding that was appropriated in fiscal year 2012, and
zero funding for the widely acclaimed training and technical assistance
(T/TA) program. NAIHC respectfully requests that funding for the 2013
ICDBG be set at $100 million for the much-needed housing,
infrastructure and economic development activities that the ICDBG
provides, and that the T/TA funding be no less than $4.8 million.
The NAIHC is the only national Indian housing organization that
provides comprehensive training and technical assistance (T/TA) on
behalf of tribal nations and their housing entities. Because they know
the value added by NAIHC, the NAIHC membership has voted unanimously
during each of their annual conventions since 2006 to support a
resolution that seeks to set aside a portion of their own Indian
Housing Block Grant funding to support NAIHC's T/TA program. In
addition, NAIHC members have expressed concerns about the quality of
training provided by HUD contractors. Again, to ensure high quality T/
TA, the NAIHC should be funded at not less than $4.8 million.
I want to again express, on behalf of the 271 tribal housing
programs representing some 463 tribes that make up the NAIHC
membership, our sincere gratitude for the subcommittee's support. It is
worth noting that the ARRA funding spend-out rate for tribal programs
exceeded the spend-out rate of HUD's non-Indian ARRA-funded programs.
Spending rates for the tribal programs were at the 95 percent level,
which is fully 10 percent more than the total HUD expenditure rate of
85 percent. When tribal communities are provided access to much needed
housing funding, they are able to efficiently and effectively utilize
these dollars to address the longstanding housing and infrastructure
needs of their communities. Sustained Federal investment in housing and
infrastructure for Native peoples is essential to maintaining the
momentum gained by recent investment.
other indian housing and related programs
The Title VI and Section 184 Indian Housing Loan Guarantee Programs
The President's budget request includes $2 million for the Federal
guarantees for Financing Tribal Housing Activities, also known as the
Title VI Loan Guarantee program, and $7 million for the Indian Housing
Loan Guarantee Program, also known as the Section 184 Program. The
Title VI program is important because it provides a 95 percent loan
guarantee on loans made by private lenders, which is an incentive for
lenders to get involved in the development of much needed housing in
tribal areas.
The Section 184, Indian Home Loan Program, is specifically intended
to facilitate home loans in Indian Country. NAIHC believes that, based
on several years of experience, the PBR for these two programs, funded
at $2 million for the title VI program as requested in the PBR, but
respectively request that the funding for the Section 184 program be
restored to the $9 million level that was enacted for fiscal year 2009.
Indian Community Development Block Grant
While appreciated, the President's proposal of $60 million for the
ICDBG is insufficient to meet the current needs for essential
infrastructure, including sewer and running water, in Indian Country.
We request that this program be funded at $100 million.
Native Hawaiian Housing
Low income Native Hawaiian families continue to face tremendous
challenges, similar to those that tribal members face in the rest of
the United States. The President's funding request of $13 million for
the Native Hawaiian Housing Block Grant is appreciated; however, NAIHC
recommends this program be funded at $20 million. And the budget
includes no funding for the section 184A program in Hawaii. While it
has taken some time to get this program started--because lenders are
not familiar with the section 184A program--providing no funding would
be a step backward for Native Hawaiian families working toward
homeownership. We urge Congress to consider this before agreeing to the
administration's proposal to eliminate funding for the program.
training and technical assistance and the proposed transformation
initiative
The President's proposed budget eliminates entirely the much-
needed, exceptional T/TA that has been provided by NAIHC since the
inception of NAHASDA. The provision of T/TA is critical for tribes to
build their capacity to effectively plan, implement, and manage tribal
housing programs. Eliminating funding for T/TA would be disastrous for
tribal housing authorities and would be a huge step in the wrong
direction. Tribes need more assistance in building capacity, not less.
Since NAIHC's funding for T/TA was restored in 2007, requests for
T/TA have steadily grown. The funding that NAIHC is currently receiving
is insufficient to meet the continuous, growing demand for T/TA.
Therefore, we are forced to make difficult decisions regarding when,
where, and how to provide the most effective T/TA possible to our
membership.
The budget request proposes an agency-wide Transformation
Initiative Fund (TIF) with up to 0.5 percent of HUD's total budget,
which would draw funds away from essential housing programs, including
$3.3 million from the IHBG account, ``to continue the on-going
comprehensive study of housing needs in Indian Country and native
communities in Alaska and Hawaii.'' While the NAIHC membership believes
the TIF may have merit, we do not believe that transferring nearly $3.3
million from the IHBG is a wise or even defensible use of IHBG funds.
More importantly, the $3.3 million affects funding that has
historically been appropriated to NAIHC for T/TA. As I have previously
noted, the NAIHC membership has repeatedly taken the position that a
portion of the IHBG allocation should be provided to NAIHC for T/TA,
which is a reflection of their confidence in NAIHC and the continuing
demand for the essential capacity-building services that we provide. We
request that funding in the amount of $4.8 million for T/TA be included
in the fiscal year 2013 budget.
conclusion
NAHASDA was enacted to provide Indian tribes and Native American
communities with new and creative tools necessary to develop culturally
appropriate, safe, decent, affordable housing. While we value and
appreciate the investment and efforts that this administration and the
Congress have made possible, NAIHC has very specific concerns,
enumerated above, with the President's proposed budget for the Indian
housing funding levels and hopes that Congress, with the leadership of
this important committee, will work with the NAIHC and the
administration to recognize the acute housing needed that continue to
exist in tribal communities.
Consider these needs against a backdrop that includes the following
observation from the Government Accountability Office (GAO) in their
report 10-326, Native American Housing, issued in February 2010 to the
Senate Committee on Banking and the House Committee on Financial
Services which noted that the following:
``NAHASDA's first appropriation in fiscal year 1998 was $592
million, and average funding was approximately $633 million between
1998 and 2009. The highest level of funding was $691 million in 2002,
and the lowest was $577 million in 1999. For fiscal year 2009, the
program's appropriation was $621 million. However, when accounting for
inflation, constant dollars have generally decreased since the
enactment of NAHASDA. The highest level of funding in constant dollars
was $779 million in 1998, and the lowest was $621 million in 2009.''
\6\
---------------------------------------------------------------------------
\6\ See GAO Report 10-326 at www.gao.gov/products/GAO-10-326.
The needs in Indian Country have not lessened since this report was
issued just 2 years ago. In fact, a cursory review of the Department of
Commerce's Bureau of the Census suggests the needs continue to increase
along with a growing and ever younger population. In a report prepared
in November 2011 \7\ the Census reported that:
---------------------------------------------------------------------------
\7\ See Census at http://www.census.gov/newsroom/releases/archives/
facts_for_features
_special_editions/cb11-ff22.html.
---------------------------------------------------------------------------
--The Nation's American Indian and Alaska Native population increased
by 1.1 million between the 2000 Census and 2010 Census, or 26.7
percent, while the overall population growth was 9.7 percent;
--The median income of American Indian and Alaska Native households
was $35,062 compared with $50,046 for the Nation as a whole;
--The percent of American Indians and Alaska Natives that were in
poverty in 2010 was 28.4 percent compared to the 15.3 percent
for the Nation as a whole; and
--The percentage of American Indian and Alaska Native householders
who owned their own home in 2010 was 54 percent compared with
65 percent of the overall population.
I wish to conclude this written testimony by thanking Chairwoman
Murray, Ranking Member Collins, and all of the members of this
subcommittee for allowing us to express our views and our aspirations.
NAHASDA is a key element in improving the overall living conditions in
Native America. The path to a self-sustaining economy is not achievable
without a robust housing sector and tribal housing conditions will not
be improved without adequate funding. NAHASDA is not just about
constructing houses. It is about building tribal communities--
communities where health and safety are a top priority and where
education can take place. Not only is the tribal economy impacted, but
so too are the lives of families and individuals who live in
substandard housing.
I know we can count on you to support our efforts. Together, we can
continue the important work of building communities in Indian Country.
Your continued support of Native American communities is truly
appreciated, and the NAIHC is eager to work with you and your
professional staff on any and all issues pertaining to Indian housing
programs and living conditions for America's indigenous people.
______
Prepared Statement of the University Corporation for Atmospheric
Research
On behalf of the University Corporation for Atmospheric Research
(UCAR), I submit this written testimony to the Senate Committee on
Appropriations, Subcommittee on Transportation, Housing and Urban
Development, and Related Agencies, for the committee record. UCAR is a
consortium of over 100 research institutions, including 77 doctoral-
degree granting universities, which manages and operates the National
Center for Atmospheric Research (NCAR). I respectfully urge the
subcommittee to support:
--The Federal Aviation Administration's (FAA's) Research, Engineering
and Development account--$180 million, including $18 million
for the Weather Program and $10 million for Weather Technology
in the Cockpit.
--FAA's Facilities and Equipment account--$285 billion which includes
$57.2 million for System-Wide Information Management (SWIM) and
$23.8 million for Common Support Services.
--The Federal Highway Administration's (FHWA's) Intelligent
Transportation Systems (ITS) program--the full request of $110
million which includes $46.1 million for IntelliDrive V-V and
V-I Communications for Safety and $15.5 million for Dynamic
Mobility Applications.
Life and property could be spared, and economic performance
improved across the Nation, if weather information were utilized more
effectively by decision makers such as airline pilots, personal vehicle
drivers, and the trucking industry. Over the past two and a half
decades, the Department of Transportation (DOT), in partnership with
NCAR and the academic community, has creatively and economically
developed technologies to foresee weather-related problems and mitigate
the effects of meteorological hazards, including wind shear, icing, and
turbulence. Leveraging the expertise of the research community, the FAA
and FHWA depend on their partners to develop weather-resilient systems
and infrastructure. I would like to comment on the following programs
that support continued collaborative partnerships between the DOT, FAA,
and FHWA and the atmospheric science community:
federal aviation administration
Current and projected growth in the volume, complexity, and
economic importance of air transportation clearly demonstrates the need
for a new paradigm supporting air traffic services in the 21st century.
Many new factors compound the new century's challenge to safe and
efficient air operations. For example, aircraft passenger and freight
load requirements will be 2-3 times higher, increasing use of polar
routes will introduce new hazards to crews and passengers, and new
navigational technologies that allow more flexible routing and
separation of aircraft are not fully compatible with the current air
traffic control system. Capacity will become an increasingly limiting
factor at many airports. Efficiency of flight operations en-route will
become more critical. Since weather conditions seriously affect air
traffic operations (the cost to divert a flight, for example, is
upwards of $150,000), the manner by which weather is observed,
predicted, disseminated and used within air traffic decision processes
and systems is of critical national importance. Thus, it is critical to
invest in Federal research and development efforts that will help
mitigate these costs and increase safety.
faa research, engineering, and development (re&d)
The fiscal year 2013 request continues important work in current
research areas, including aviation weather research. The proposed
budget supports enhanced Next Generation Air Transportation System
(NextGen) research and development efforts in the areas of air-ground
integration, weather information for pilots, and environmental research
for aircraft technologies as well as 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 2013 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 Aviation Digital
Data Service (ADDS). This strong collaboration between the FAA and the
National Weather Service provides the latest forecasting breakthroughs
to the entire aviation community to help reduce significant safety
hazards and major causes of system delays. Using ADDS, accurate
forecasts of aviation weather 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 will not support the
R&D needs of the Weather Program. The request for this program is down
from the fiscal year 2010, fiscal year 2011, and fiscal year 2012
funding levels and is operating at half the level of funding of 10
years ago. Yet our skies have become more crowded, with more than
87,000 flights in each day according to the National Air Traffic
Controllers Association, and the need for this research greater. To
address the challenges and to meet the research needs of NextGen, I
urge you to support $18 million, at a minimum, for the Weather Program
for fiscal year 2013.
Weather Technology in the Cockpit.--Pilots currently have little
weather information as they fly over remote stretches of ocean where
some of the worst turbulence is encountered. At the very least,
providing pilots with an approximate picture of developing storms could
help guide them safely around areas of potentially severe turbulence.
In addition, the most vulnerable pilots, those engaged in General
Aviation activities, are forced to make critical weather decisions in
the cockpit without support of a ground-based dispatcher for
assistance. Weather Technology in the Cockpit is launching a project to
develop a mobile meteorological capability for use by this community.
Weather Technology in the Cockpit 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
disappointed that the President's fiscal year 2013 request of $4.8
million for this small but life-saving program was reduced almost 50
percent from fiscal year 2012 levels. I urge the subcommittee to fund
the Weather Technology in the Cockpit program at $10 million, at a
minimum.
faa facilities and equipment
Within Facilities and Equipment, I would like to call your
attention to the following extremely important programs:
NextGen Network Enabled Weather (NNEW).--Delays in the National
Airspace System (NAS) are primarily attributable to weather. According
to the FAA, over the last 5 years more than 70 percent of delays of 15
minutes or more, on average, were caused by weather. Weather also
affects safety. Between 1994 and 2003, weather was determined to be a
contributing factor in over 20 percent of all accidents. Currently,
most operational decision tools do not utilize weather information
effectively or at all. 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.
The NNEW multiagency project is 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-Dimensional (4-D) Weather Data Cube. This will provide
standardized information from disparate contributors and locations, to
a variety of end-users such as air traffic managers and pilots.
In the fiscal year 2013 request, the NNEW activity is listed under
System-Wide Information Management (SWIM). Funding for the R&D work
contributing to the 4-D Weather Data Cube will come from Common Support
Services within SWIM, requested at $23.8 million. These services
disseminate aviation weather information in a network enabled
environment. From fiscal year 2008 to fiscal year 2012, UCAR helped the
FAA frame and establish this effort under the name NextGen Net-Enabled
Weather (NNEW). I strongly urge the subcommittee to support the $23.8
million request for Common Support Services within System-Wide
Information Management (SWIM) and recommend that Congress retain the
NextGen Network Enabled Weather (NNEW) title.
NextGen Reduce Weather Impact.--The current weather observing
network of the National Airspace System is inadequate to meet the needs
of NextGen. The NextGen Reduce Weather Impact program will increase
network capacity, reducing congestion and meeting projected demand in
an environmentally sound manner. Working with appropriate scientific,
modeling and user communities, current sensor information and
dissemination shortfalls will be identified and evaluated. Technologies
for optimizing and improving automated aircraft weather reporting will
be investigated to meet NextGen requirements. The Reduce Weather Impact
portfolio will leverage the NNEW transformational program that will
interface with NOAA's 4-D Weather Data Cube, for universal common
access to weather information. To continue the work of NextGen Reduce
Weather Impact, I urge the subcommittee to increase the fiscal year
2013 funding for the program from the requested $16.6 million to $43.2
million.
federal highway administration
According to the National Highway Traffic Safety Administration,
there are over six million vehicle crashes on average each year.
Twenty-four percent of these crashes--over 1.5 million--are weather-
related. Weather-related crashes are defined as those crashes that
occur in adverse weather (i.e., rain, sleet, snow, and/or fog) or on
slick pavement (i.e., wet pavement, snowy/slushy pavement, or icy
pavement). On average, 7,130 people are killed and over 629,000 people
are injured in weather-related crashes each year. The FHWA Road Weather
Management Program seeks to better understand the impacts of weather on
roadways, and promote strategies and tools to mitigate those impacts.
UCAR and its partners are key contributors the FHWA's vision of
``Anytime, Anywhere Road Weather Information'' for road users and road
operating agencies. Central to this commitment is the FHWA's
Intelligent Transportation Systems program within its Research,
Technology and Education Program.
Intelligent Transportation Systems (ITS) within the Department of
Transportation's Research and Innovative Technology Administration
(RITA).--The Connected Vehicle Technology (formerly IntelliDrive)
program remains the centerpiece of the DOT ITS 2010-2014 Strategic
Research Plan. This program creates partnerships between government,
industry, academia and others to specify, develop and produce the
necessary technology to continuously gather and broadcast information
about a moving vehicle, including its surrounding weather conditions.
An example of leading edge applications and services supported by
ITS is the Vehicle Data Translator, a prototype tool being developed at
UCAR that will give drivers near-immediate information about unforeseen
hazards. The system, which underwent field testing this past winter in
Minnesota and Nevada, will inform drivers of what weather conditions
they can expect to encounter in the next few seconds and minutes,
giving them a critical opportunity to slow down or take other action.
Once the system is operational, an onboard digital memory device will
collect weather data such as temperature, and indirect indications of
road conditions such as windshield wipers being switched on, or the
activation of antilock brakes. The processed data will then be used to
warn motorists about upcoming hazards--everything from icy roads to a
nearby vehicle that is being driven erratically--and suggest alternate
routes, if appropriate. The system will also alert emergency managers
to hazardous driving conditions and help road crews clear snow more
efficiently.
To meet its core research and technology transfer mission, and
support projects like the Vehicle Data Translator, I urge the
subcommittee to support the requested amount of $110 million for ITS,
which includes $46.1 million for IntelliDrive V-V and V-I
Communications for Safety and $15.5 million for Dynamic Mobility
Applications.
On behalf of UCAR, I want to thank the subcommittee for its
leadership in supporting research and development and technology
transfer programs within the FHWA and FAA and for your commitment to
ensuring safer, more efficient air and road travel. I urge you to
support these relatively small but critically important R&D programs
within the FHWA and FAA fiscal year 2013 budgets.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
American:
Indian Higher Education Consortium, Prepared Statement of the 127
Public Transportation Association, Prepared Statement of the. 129
Blunt, Senator Roy, U.S. Senator From Missouri, Questions
Submitted by..................................................46, 81
Coalition of Northeastern Governors, Prepared Statement of the... 132
Collins, Senator Susan M., U.S. Senator From Maine:
Prepared Statements of..................................7, 59, 91
Questions Submitted by.....................................45, 124
Statements of...........................................5, 57, 90
Donovan, Hon. Shaun, Secretary, Office of the Secretary,
Department of Housing and Urban Development.................... 1
Prepared Statement of........................................ 11
Summary Statement of......................................... 8
Durbin, Senator Richard J., U.S. Senator From Illinois, Questions
Submitted by................................................... 117
Feinstein, Senator Dianne, U.S. Senator From California,
Questions Submitted by......................................... 120
Galante, Hon. Carol, Acting Federal Housing Administration
Commissioner and Assistant Secretary for Housing, Department of
Housing and Urban Development.................................. 53
Prepared Statement of........................................ 61
Summary Statement of......................................... 59
Institute of Makers of Explosives, Prepared Statements of the.135, 139
Kohl, Senator Herb, U.S. Senator From Wisconsin, Questions
Submitted by................................................... 41
LaHood, Hon. Ray, Secretary, Office of the Secretary, Department
of Transportation.............................................. 85
Prepared Statement of........................................ 96
Summary Statement of......................................... 93
Lautenberg, Senator Frank R., U.S. Senator From New Jersey:
Question Submitted by........................................ 124
Statement of................................................. 100
Leahy, Senator Patrick J., U.S. Senator From Vermont, Questions
Submitted by.................................................43, 119
Murray, Senator Patty, U.S. Senator From Washington:
Opening Statements of...................................1, 53, 85
Prepared Statements of..................................3, 56, 88
Questions Submitted by......................................38, 79
National American Indian Housing Council, Prepared Statement of
the............................................................ 143
Pryor, Senator Mark, U.S. Senator From Arkansas, Prepared
Statement
of............................................................. 93
University Corporation for Atmospheric Research, Prepared
Statement of
the............................................................ 147
SUBJECT INDEX
----------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Federal Housing Administration
Page
Additional Committee Questions................................... 78
Appraisals....................................................... 82
Capital Reserves................................................. 74
Commercial Lending............................................... 82
Evaluating Risk.................................................. 79
Federal Housing Administration (FHA):
As Part of the Administration's Efforts To Bolster the
Housing Market............................................. 67
Fiscal Year 2013 Budget, Overview of the..................... 63
Mutual Mortgage Insurance (MMI) Fund......................... 71
Reform....................................................... 60
Role in Supporting the Market................................ 56
Solvency..................................................... 81
Streamline Refinance Program................................. 70
Fiscal Soundness of FHA's Mutual Mortgage Insurance Fund......... 56
Housing Counseling............................................... 61
Mortgage:........................................................
Insurance Fees............................................... 73
Scams........................................................ 78
New Proposals To Aid the Market.................................. 56
Real Estate-Owned (REO) Properties............................... 76
Responding to the Market Disruption.............................. 62
Risk Assessments Tools........................................... 74
Support for FHA Operations....................................... 57
Treble Damages................................................... 83
Underwater Mortgage Relief....................................... 77
Office of the Secretary
Additional Committee Questions................................... 38
Administrative Fees.............................................. 33
American Indian, Alaska Native, and Native Hawaiian Programs..... 50
Budget:
Highlights................................................... 5
Proposal Concerns............................................ 4
Changes in Medical Deduction for Section 8....................... 41
Collaborations With Other Agencies............................... 49
Cost-Savings in Rental Assistance Programs, Tough Choices........ 18
Creating an Economy Built To Last................................ 12
Department of Housing and Urban Development (HUD):
Fiscal Year 2013 Budget...................................... 4
Goal 1: Strengthen the Nation's Housing Market To Bolster the
Economy and Protect Consumers.............................. 14
Goal 2: Meet the Need for Quality, Affordable Rental Homes... 16
Goal 3: Utilize Housing as a Platform for Improving Quality
of Life.................................................... 20
Goal 4: Build Inclusive Sustainable Communities Free From
Discrimination............................................. 21
Goal 5: Transform the Way HUD Does Business.................. 25
Oversight.................................................... 5
Duplicative Economic Programs.................................... 45
Emergency Solutions Grant (ESG).................................. 37
Federal Housing Administration (FHA):
Indemnification.............................................. 28
Solvency.....................................................4, 46
Government-Sponsored Enterprises (GSEs).......................... 47
Home Investment Partnerships, Tough Choices...................... 22
Homeless Assistance Grants....................................... 50
Homelessness..................................................... 47
Housing:
Market Challenges............................................ 3
Counseling Assistance, Funding What Works.................... 15
Impact of Cuts:
On Rural Areas............................................... 44
To the Community Development Block Grant (CDBG) Program and
HOME Investment Partnerships Program on Rural Areas........ 43
Increasing Efficiencies: Modernizing the Housing Opportunities
for Persons With Aids (HOPWA) Program.......................... 21
Information Technology (IT) Modernization........................ 40
FHA Modernization Project.................................... 38
Leveraging Power of Sustainable Communities Funding, Funding What
Works: The..................................................... 23
Meeting the Housing Needs of Women Veterans...................... 41
Minimum Rent Increase............................................ 36
Moving the Needle:
Making Substantial Progress.................................. 13
On Veterans Homelessness, Holding Ourselves Accountable...... 13
Mutual Mortgage Insurance (MMI) Fund............................. 27
On-Going Rural Assistance........................................ 49
Project-Based Rental Assistance (PBRA):
Short Funding................................................ 29
Tough Choices................................................ 17
Proposed Rule for HOME........................................... 44
Rapid Re-Housing Program......................................... 36
Rental Assistance................................................ 42
Responding to the Crisis......................................... 11
Rural Housing and Development.................................... 48
Section:
8 Voucher Funding............................................ 32
202 PRAC Units............................................... 42
Settlements With Lenders......................................... 28
Substandard Units in Maine....................................... 30
Sustainable Housing and Communities.............................. 50
Taking Jobs-Plus To Scale, Funding What Works.................... 19
Wood Pellet Boiler Systems....................................... 34
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
Accomplishments.................................................. 89
Additional Committee Questions................................... 117
Air Quality--Union Station and Diesel Emissions.................. 117
Amtrak Gateway Tunnel............................................ 107
Biofuels......................................................... 114
Chameleon Carriers............................................... 113
Columbia River Crossing Bridge................................... 113
Contract Towers.................................................. 111
Department of Transportation's Budget Proposal and SAFETEA-LU,
the............................................................ 89
Distracted Driving............................................... 103
Emergency Relief Fund............................................ 119
Federal Aviation Administration (FAA)............................ 121
Airport Privatization Program--Midway and Other Airports..... 118
Ferry Systems.................................................... 109
Freight Rail..................................................... 116
Fuel Economy Labels.............................................. 123
General Highway Privatization.................................... 119
High-Speed Rail...............................................114, 123
Highway Trust Fund (HTF) Insolvency.............................. 104
Honolulu Rail Project............................................ 112
Innovation....................................................... 94
Investing in America's Future by Rebuilding Our Infrastructure
and Creating Jobs.............................................. 96
Los Angeles Subway System........................................ 122
Mariah's Law..................................................... 105
Modernizing Our Nation's Transportation System Through Research
and Technology................................................. 98
National Rail Plan............................................... 108
Next Generation Air Transportation System (NextGen).............. 110
Passenger Facility Charges (PFCs)................................ 110
Pipeline Safety.................................................. 120
Pressing Forward on Safety....................................... 99
Priority Corridors............................................... 106
Rebuilding Our Infrastructure.................................... 94
Reincarnated Motor Carriers...................................... 111
Restoring Amtrak Service to Montreal............................. 120
Safety........................................................... 95
Fitness Determination........................................ 102
Sequestration.................................................... 105
Tiger Grants..................................................... 107
Transit Funding.................................................. 108
Truck Safety..................................................... 123
Veterans To Work................................................. 106
Vow To Hire Heroes Act........................................... 100
-