[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2014

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED THIRTEENTH CONGRESS
                              FIRST SESSION
                                ________
   SUBCOMMITTEE ON THE DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND 
         URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS
                       TOM LATHAM, Iowa, Chairman
 FRANK R. WOLF, Virginia            ED PASTOR, Arizona
 CHARLES W. DENT, Pennsylvania      DAVID E. PRICE, North Carolina
 KAY GRANGER, Texas                 MIKE QUIGLEY, Illinois
 TOM COLE, Oklahoma                 TIM RYAN, Ohio                 
 JAIME HERRERA BEUTLER, Washington  
 DAVID P. JOYCE, Ohio               
                                    

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mrs. Lowey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                Dena Baron, Cheryle Tucker, Doug Disrud,
                    Carl Barrick, and Brian Barnard,
                           Subcommittee Staff

                                ________

                                 PART 4
                                                                   Page
 Oversight Hearing: Management Issues at Departments of 
Transportation and Housing and Urban Development..................    1
 Oversight Hearing: Sandy Disaster Relief and Recovery............   59
 Federal Transit Administration...................................  111
 U.S. Department of Transportation................................  143
 Department of Housing and Urban Development......................  185
 Federal Aviation Administration..................................  239
 Federal Railroad Administration..................................  527
 Outside Witness Testimony........................................  565

                                ________

         Printed for the use of the Committee on Appropriations
                                 Part 4

TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES 
                                FOR 2014
                                                                      ?
?

 DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND URBAN DEVELOPMENT, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2014

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED THIRTEENTH CONGRESS
                              FIRST SESSION

                                ________

   SUBCOMMITTEE ON THE DEPARTMENTS OF TRANSPORTATION, AND HOUSING AND 
         URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS
                       TOM LATHAM, Iowa, Chairman
 FRANK R. WOLF, Virginia            ED PASTOR, Arizona
 CHARLES W. DENT, Pennsylvania      DAVID E. PRICE, North Carolina
 KAY GRANGER, Texas                 MIKE QUIGLEY, Illinois
 TOM COLE, Oklahoma                 TIM RYAN, Ohio                 
 JAIME HERRERA BEUTLER, Washington  
 DAVID P. JOYCE, Ohio               
                                    

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mrs. Lowey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
                Dena Baron, Cheryle Tucker, Doug Disrud,
                    Carl Barrick, and Brian Barnard,
                           Subcommittee Staff

                                ________

                                 PART 4
                                                                   Page
 Oversight Hearing: Management Issues at Departments of 
Transportation and Housing and Urban Development..................    1
 Oversight Hearing: Sandy Disaster Relief and Recovery............   59
 Federal Transit Administration...................................  111
 U.S. Department of Transportation................................  143
 Department of Housing and Urban Development......................  185
 Federal Aviation Administration..................................  239
 Federal Railroad Administration..................................  527
 Outside Witness Testimony........................................  565

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 85-070                     WASHINGTON : 2013

                                  COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\      NITA M. LOWEY, New York
 FRANK R. WOLF, Virginia            MARCY KAPTUR, Ohio
 JACK KINGSTON, Georgia             PETER J. VISCLOSKY, Indiana
 RODNEY P. FRELINGHUYSEN, New JerseyJOSE E. SERRANO, New York
 TOM LATHAM, Iowa                   ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama        JAMES P. MORAN, Virginia
 KAY GRANGER, Texas                 ED PASTOR, Arizona
 MICHAEL K. SIMPSON, Idaho          DAVID E. PRICE, North Carolina
 JOHN ABNEY CULBERSON, Texas        LUCILLE ROYBAL-ALLARD, California
 ANDER CRENSHAW, Florida            SAM FARR, California
 JOHN R. CARTER, Texas              CHAKA FATTAH, Pennsylvania
 RODNEY ALEXANDER, Louisiana        SANFORD D. BISHOP, Jr., Georgia
 KEN CALVERT, California            BARBARA LEE, California
 JO BONNER, Alabama                 ADAM B. SCHIFF, California
 TOM COLE, Oklahoma                 MICHAEL M. HONDA, California
 MARIO DIAZ-BALART, Florida         BETTY McCOLLUM, Minnesota
 CHARLES W. DENT, Pennsylvania      TIM RYAN, Ohio
 TOM GRAVES, Georgia                DEBBIE WASSERMAN SCHULTZ, Florida
 KEVIN YODER, Kansas                HENRY CUELLAR, Texas
 STEVE WOMACK, Arkansas             CHELLIE PINGREE, Maine
 ALAN NUNNELEE, Mississippi         MIKE QUIGLEY, Illinois
 JEFF FORTENBERRY, Nebraska         WILLIAM L. OWENS, New York          
 THOMAS J. ROONEY, Florida          
 CHARLES J. FLEISCHMANN, Tennessee  
 JAIME HERRERA BEUTLER, Washington  
 DAVID P. JOYCE, Ohio               
 DAVID G. VALADAO, California       
 ANDY HARRIS, Maryland              
   
 ----------
 1}}Chairman Emeritus    
                                    

               William E. Smith, Clerk and Staff Director

                                  (ii)


          DEPARTMENT OF TRANSPORTATION APPROPRIATIONS FOR 2014

                              ----------                              

                                          Thursday, March 14, 2013.

 OVERSIGHT HEARING: MANAGEMENT ISSUES AT DEPARTMENTS OF TRANSPORTATION 
                   AND HOUSING AND URBAN DEVELOPMENT

                               WITNESSES

CALVIN SCOVEL III, INSPECTOR GENERAL, DEPARTMENT OF TRANSPORTATION
DAVID MONTOYA, INSPECTOR GENERAL, DEPARTMENT OF HOUSING AND URBAN 
    DEVELOPMENT
MATHEW SCIRE, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY INVESTMENT, 
    GOVERNMENT ACCOUNTABILITY OFFICE
PHILLIP HERR, MANAGING DIRECTOR, PHYSICAL INFRASTRUCTURE GOVERNMENT 
    ACCOUNTABILITY OFFICE
    Mr. Latham. All right, the subcommittee will come to order. 
And we welcome, today, HUD's Inspector General, David Montoya, 
DOT's Inspector General, Calvin Scovel, Mathew Scire--am I 
close? Good, good--GAO's Director of Financial Markets and 
Community Investment, Philip Herr, GAO's Director of Fiscal 
Infrastructure.
    The subcommittee looks to your offices for help for us to 
conduct critical oversight to ensure our tax dollars are well-
spent, and, actually, go to meet our nation's housing and 
transportation needs. This oversight is even more important at 
a time when we must shrink the federal budget and deal with our 
mounting debt. Waste, fraud, and abuse should never be 
tolerated, but this is especially true in today's budget 
climate.
    We look forward to your testimony today, and we'll look 
closely for your work to make the tough decisions that will be 
required as we put together this year's transportation/HUD-
funding bill. This is our first subcommittee hearing in FY 
2014, so we will look forward to your testimony to inform our 
questions for the cabinet's secretaries when they come.
    I would ask that each of you limit your opening remarks to 
five minutes, and we'll also limit each round of questions to 
five minutes.
    Before I recognize you for your opening statements, I am 
pleased to finally welcome Mr. Pastor as our new ranking member 
of the subcommittee. I look forward to working with you, in the 
bipartisan tradition for this subcommittee that funds some of 
our nation's most critical infrastructure investments, with an 
eye towards stewardship of the taxpayer's dollars.
    So, I am honored to recognize you for your opening 
statement.
    Mr. Pastor. Well, first of all, good morning, Mr. Chairman, 
and good morning to everyone here. Sorry I was a little bit 
late, but you know where I was at, and thank you, Mr. Chairman.
    And I also look to work with you this year. I know the 
subcommittee has been a committee that works in a bipartisan 
manner, and I expect that we will----
    Mr. Latham. Absolutely.
    Mr. Pastor [continuing]. Continue to do that. And so I look 
forward to working with you.
    And I want to thank you for calling this oversight hearing. 
It provides a good opportunity for the subcommittee to examine 
the key management challenges facing the Department of 
Transportation and the Department of Housing and Urban 
Development.
    Many of the issues are not new to us, whether it's DOT's 
role of safety oversight, the FAA's transition to NextGen, or 
HUD's risk management FHA.
    This morning, I'm interested in learning how progress can 
be made to address these challenges, especially under the 
condition of sequestration, as it takes hold in each agency. 
Some management issues will require better oversight on the 
part of DOT and HUD, while others will require resources at a 
time when our budget is as tight as it is.
    I look forward to this hearing, and hearing the thoughts of 
our panel.
    With that, I turn it back to you, Mr. Chairman, so we can 
get to the testimony, the questions, and thank you for a good 
day.
    Mr. Latham. You bet. Thank you.
    We will begin with HUD's Inspector General, Mr. Montoya. 
Your full, written statement will be included for the record, 
and you're recognized for five minutes.
    Thank you.
    Mr. Montoya. Yes, sir. Good morning, sir. Thank you. 
General Latham, Ranking Member Pastor, and members of the 
subcommittee, thank you for the opportunity to discuss HUD's 
management challenges, and my office's oversight of its 
programs.
    Since becoming Inspector General, I have continued to meet 
with Secretary Donovan and his senior staff on a regular basis 
to discuss the various management challenges the Department 
faces, including those I will briefly mention.
    Let me begin with FHA's mutual mortgage insurance fund 
capital ratio, which has been below the required two percent 
level for the past four years. And each year has seen a further 
decline.
    Based on the latest actuarial study, in November 2012, the 
ratio fell below zero, to -1.44 percent, which equates to a 
-$16.3 billion against an active portfolio of $1.13 trillion.
    While the Department has made changes to address the fund's 
finances, I would highlight three areas of continued concern.
    First, the FHA actuarial model is complicated, and 
difficult to audit and use for risk management and strategic 
planning purposes.
    Two, we continue to recommend modeling at the midterm or on 
a quarterly basis.
    And three, HUD's unnecessary exposure when paying claims on 
loans that were not qualified for insurance further depletes 
the fund.
    FHA remains slow to implement a rigorous claims review 
process, and, when necessary, going back to the lenders to 
recover losses.
    Since Fiscal Year '01, OIG has annually reported on the 
lack of an integrated financial management system, including 
the need to enhance FHA's management controls over risk 
portfolio of integrated insurance and financial systems.
    Since 2003, HUD has spent more than $35 million, and does 
not have a modern operational core financial system to show for 
this investment. While there are various reasons, such as the 
complexity and magnitude of the projects that are required to 
migrate to a new financial system, it was a lack of proper 
project management or mismanagement and not funding, which 
caused this critical project's delay.
    HUD's integrated disbursement and information system, known 
as IDIS, which supports the Office of Community Planning and 
Development's formula grant programs, including community 
development block grant and home programs, continues to be an 
area of distress, as we believe HUD's design and implementation 
of IDIS is not in compliance with federal financial management 
systems requirements.
    Because we could not come to an agreement on our 
recommendations, we forwarded our concern to the GAO, who has 
been reviewing this matter, given the potential wider impact to 
other agencies.
    A continuing challenge for HUD is its Moving to Work 
program, which has been a demonstration program since 
approximately 1999. It provides public housing authorities the 
opportunity to devise and test innovative, locally-designed 
strategies that are aimed at using federal dollars more 
effectively.
    However, a 2012 GAO report found that the Moving to Work 
program guidance does not specify that plans ensure that 
performance is quantifiable and outcome-oriented.
    By not identifying the performance data needed to assess 
the results of the program, HUD is unable to effectively 
evaluate the program. HUD has also not developed a systemic way 
to identify lessons learned, to get the benefit intended and 
expected from a demonstration program.
    We have disagreed with HUD, who has indicated that it 
intends to expand the number of Moving to Work participants, 
because of my office's longstanding concerns.
    Because of this, I have launched an initiative designed to 
compile our previous work on problem areas that we and others 
have reported on over the years, to provide HUD and the 
Congress a clearer path to correct enduring problems in this 
area.
    With regard to HUD's HOME program, our efforts continue to 
focus on problem grantees and connected issues of inadequate 
controls, not always meeting the objectives of the program to 
provide affordable housing, or not always meeting local 
building code requirements.
    HUD has proposed new rules, which, if implemented, should 
strengthen HUD's future enforcement authority. In a recent 
audit, we concluded that if the new regulations are properly 
implemented, they will address our prior findings in most 
areas.
    However, in two key areas, oversight of field office 
monitoring activities and the reliability of data contained in 
HUD's IDIS information system, remain open audit 
recommendations.
    In closing, I would also mention that the Department faces 
a significant management challenge in monitoring disaster 
program funds, especially in light of the additional work it 
will have with Sandy Disaster Recovery.
    My office is strongly committed to working with the 
Department and Congress to ensure that these important programs 
operate efficiently and effectively, and as intended by 
Congress.
    I am happy to answer any questions.
    Thank you.
    Mr. Latham. Thank you very much, Mr. Montoya.
    We will now have Mr. Scire, with the five minutes.
    Mr. Scire. Mr. Chairman, Ranking Member Pastor, members of 
the subcommittee, thank you for the opportunity to be here 
today, to discuss our work on HUD programs, including the FHA 
mortgage insurance program, and HUD's voucher and Moving to 
Work programs.
    Since 1934, FHA has been an important player in the 
mortgage market, especially for first-time home buyers. FHA 
insures these loans under its mutual mortgage insurance fund.
    Last year, I testified before this subcommittee on the 
health of the fund. Since then, FHA's independent actuarial 
review reported that the fund's economic value had become 
negative, meaning that the net present value of future cash 
flows on outstanding insurance, which were a -$47 billion, 
exceeded the fund's capital resources.
    Needless to say, the fund, once again, has not met the 
minimum two percent capital requirement; the fourth consecutive 
year this has been the case.
    HUD attributes the most recent decline in the fund's 
economic value to several factors, including changes in 
expectations for house prices, continued declines in interest 
rates, and changes in the model itself.
    HUD recently announced a series of steps it plans to take 
to shore up the fund, including raising premiums, requiring 
borrowers to pay annual premiums for longer periods of time, 
and reducing losses on defaulted mortgages.
    We also note that FHA had previously raised premiums, 
tightened underwriting, and taken other steps to manage its 
growing workload and improve risk management.
    Further, FHA has enhanced its loan performance model by 
moving to a technique we recommended, which should result in 
more accurate estimates of the fund's economic value.
    Nonetheless, there is more that FHA can do. For example, it 
can complete risk assessments of FHA programs, and complete its 
workforce and succession planning, as we recommended.
    There is also more that FHA and the Congress can do in 
framing expectations for FHA going forward.
    Because of concerns about FHA's financial conditions, the 
continuing uncertainty over the resolution of Fannie Mae and 
Freddie Mac, and the potential impact of their resolution on 
FHA, we included FHA in our high-risk issue, modernizing the 
federal role in housing finance.
    Let me now turn to our work on the voucher and Moving to 
Work programs. As you know, the voucher program is the single 
largest HUD program for making housing affordable for very low-
income renters. Last year, it helped 2.2 million such 
households. We have reported that the program's cost, even 
after controlling for inflation, had increased 8.8 percent 
between '03 and '10. Almost half of this increase was due to 
issuance of new vouchers; the remaining increase is due to 
increase in subsidy payments and administrative fees.
    We assess options for cost savings, including reducing 
subsidies, which represent about 90 percent of total costs and 
administrative fees.
    These options generally would increase tenant payments; for 
example, requiring tenants to pay a $75 minimum rent could 
result in either $67 million in cost savings, or serving an 
additional 8,600 households. For families with children 
affected by such a change, this would equate to a monthly 
payment increase of $27.
    Proposals for reforming administrative requirements for the 
voucher program also could lead to increased efficiencies and 
cost savings, though likely not the same scale as subsidy 
payment reforms. These include conducting inspections or 
reexamining household income less frequently, and some of these 
proposals are an outgrowth of the Moving to Work program, the 
MTW program.
    However, our assessment of the MTW program, as the IG just 
mentioned, raises serious questions about HUD's program 
evaluation and monitoring. And the IG went into some of the 
specifics there.
    Looking ahead, given the demand for most efficiently using 
limited budgetary resources, it's critical for HUD to build on 
its efforts to ensure the financial solvency of the FHA 
insurance fund. At the same time, the continuing demand for 
affordable rental housing for households with limited income 
make more pressing that HUD, working with Congress, work to 
improve efficiency of these programs.
    Likewise, you face important policy decisions in terms of 
framing the role that FHA should be expected to play, and in 
weighing the depth of subsidy provided through housing 
assistance programs and the potential impact changes in subsidy 
may have on individual households and the number of households 
that may be served.
    And we look forward to supporting the subcommittee's 
efforts in this regard.
    This concludes my opening remarks.
    Thank you, again, for the chance to speak today. I would be 
glad to take any questions you may have.
    Mr. Latham. Very good. Thank you very much.
    Now we will go to DOT, the Inspector General, Mr. Scovel.
    Mr. Scovel. Chairman Latham, Ranking Member Pastor, members 
of the subcommittee, thank you for inviting me to discuss the 
Department of Transportation's top management challenges.
    DOT spends over $70 billion annually on a wide range of 
programs, and continues to demonstrate its commitment to ensure 
safe and reliable transportation systems.
    Some of the nine challenges we reported in November are 
longstanding, while others are new. Today, I will focus on 
actions DOT needs to take to enhance aviation and surface 
safety, ensure effective stewardship of resources, and 
effectively implement transportation infrastructure programs.
    Safety is the Department's top priority. In this past year, 
FAA made important progress toward meeting new safety 
requirements.
    However, FAA needs to fine-tune how it collects and uses 
safety data to identify operational errors by controllers, and 
how it addresses pilot safety concerns.
    According to FAA, a 50 percent increase in operational 
errors reported between Fiscal Years 2009 and 2010 was due to 
new voluntary reporting procedures. Yet, our audit found that 
there were actual increases in errors.
    Without complete and accurate data, FAA is challenged to 
identify trends and the root causes of errors, and proactively 
mitigate safety risks.
    For pilots, FAA needs to ensure airlines adjust pilot 
training and qualification programs to meet new requirements 
that will take effect this summer.
    FAA also needs to target aircraft repair stations, based on 
risk, to make the most of its inspector resources.
    Currently, FAA continues to emphasize completing mandatory 
inspections at locations, regardless of risk, and has yet to 
determine the number of inspectors it needs nationwide, due to 
an unreliable staffing model.
    In terms of surface safety, DOT has worked hard to remove 
unsafe commercial drivers and carriers from roadways, and MAP-
21 provides new tools to enhance its efforts, such as giving 
DOT greater authority to take action against reincarnated 
carriers--a critical safety concern we reported last spring.
    However, MAP-21 also presents new oversight challenges, 
including the new National Tunnel Inspection Program and new 
rail transit safety oversight responsibilities.
    Turning next to DOT's stewardship of taxpayer dollars--
while DOT received a clean opinion on its financial statements 
for the last six years, longstanding financial management 
weaknesses have limited its ability to maximize its return on 
investments.
    Our review flagged significant inactive grant funds, and 
prompted DOT to identify over $2 billion that could be applied 
to active projects.
    In response to our recommendation, DOT recently issued 
guidance to improve monitoring of grant obligations.
    Controls over the Department's contracts and IT investments 
could also be strengthened. Poor contract structure and 
software issues for FAA's $2.1 billion ERAM program have led to 
a four-year schedule delay, and could result in cost overruns 
approaching $500 million.
    FAA is working to resolve these programs.
    The Department also needs an Enterprise architecture for 
its 400-plus IT systems, which cost about $3 billion annually. 
With an IT architecture, DOT could realize cost savings, reduce 
duplication and technical risks, and better align IT 
investments with the Department's mission.
    DOT plans to issue an Enterprise architecture policy by 
July.
    DOT also will need to address its information security 
deficiencies, a material weakness for the last two years.
    Two-thirds of the information security recommendations we 
have made since 2009 have not yet been implemented.
    Our work also highlighted areas where DOT can better 
safeguard investments in key transportation assets.
    For example, DC's Union Station requires DOT's attention to 
properly manage mounting debts, and develop new funding streams 
to support needed structural repairs before the station becomes 
a safety concern.
    Finally, DOT needs to effectively implement transportation 
infrastructure programs, while protecting its significant 
investments.
    FAA has not set realistic expectations for modernizing the 
nation's air traffic system. FAA spends about $1 billion 
annually on NextGen, and plans to spend $2.4 billion more by 
2017 on six programs that are key to NextGen implementation.
    However, FAA has yet to fully develop an integrated master 
schedule for these programs to address risks, make informed 
cost and schedule tradeoffs, and determine what capabilities 
will provide air space users with the greatest benefits.
    The Department also faces challenges to increase states' 
accountability for $40 billion provided annually in highway and 
bridge investments.
    At the same time, it must meet new MAP-21 requirements to 
deliver highway projects faster, and manage investments in 
surface programs based on performance.
    A new priority for the Department is establishing effective 
controls over $13 billion in Hurricane Sandy relief funds. Most 
of DOT's relief funding went to FTA's public transportation 
emergency relief program, established last summer through MAP-
21. FTA needs to get this new program up and running, while 
also rewarding $2 billion in relief funds by the end of the 
month--this month, Mr. Chairman.
    This concludes my prepared statement. I would be happy to 
answer any questions you or members of the subcommittee may 
have.
    Mr. Latham. Thank you very much for your testimony.
    Mr. Herr, you are recognized for five minutes on the GAO's 
work on transportation issues.
    Mr. Herr. Great. Thank you, Chairman Latham. Thank you, 
Ranking Member Pastor and members of the subcommittee.
    I am pleased to be here to discuss GAO's work on key 
management challenges facing the Department of Transportation.
    The nation's transportation system is critical to the 
economy, and affects the daily lives of most Americans. It's 
also undergoing strain, and cost estimates for repairs and 
upgrades are in the hundreds of billions of dollars.
    For this reason, surface transportation financing remains 
on GAO's list of high-risk programs, a report that was just 
issued last month.
    Today, I will focus on three key challenges facing DOT. 
First, leveraging surface transportation investments to 
maximize national interests, improving surface and aviation 
safety, and effectively implementing the NextGeneration air 
transportation system--or NextGen.
    First, DOT must leverage investment in surface networks to 
meet national goals and priorities. Since I testified on this 
topic last year, there has been progress, as acknowledged by 
the IG, via MAP-21, to clarify federal goals and rules, and 
require linking federal programs to performance, as GAO has 
previously recommended.
    However, DOT still faces challenges relating to 
transitioning to a goal-oriented performance-based approach 
which entails new responsibilities, targeting funds to 
priorities such as the nation's freight network, which will 
require significant coordination efforts, and managing 
discretionary grant and credit assistance programs--an area 
both GAO and the IG have highlighted as a challenge.
    I would also note emergency relief programs have been a 
particular challenge over the years for DOT.
    And, finally, overseeing the federal aid highway program, 
and the new Public Transportation Emergency Relief Program, and 
the funds provided after Hurricane Sandy.
    In terms of safety, though we have seen an overall decline 
in traffic fatalities and injuries in recent years, and our 
nation's air travel system is one of the safest in the world, 
there are still challenges in this area.
    Our recent work on safety highlights the need for 
improvement in data and oversight, and to better target 
resources. For example, our recent work on chameleon carriers 
talked about the importance of data and analysis that is 
critical to identify carriers that pose the highest safety 
risks.
    Reliable transit safety data will also be essential for 
FTA's new oversight program, and data is a vital component of 
FAA's new risk-based safety management system.
    DOT also faces several key challenges implementing NextGen. 
Delivering and demonstrating benefits such as capabilities that 
will provide operators with a return on their investments and 
NextGen avionics, keeping key acquisitions within cost 
estimates and on schedule--in essence, managing highly 
interdependent systems, and using the best tools and approaches 
to do so--and keeping NextGen on course while sustaining legacy 
equipment and facilities that will continue to be the core of 
this national airspace system for a number of years.
    In summary, DOT's key challenges are to leverage 
investments, improve safety, and implement NextGen. Addressing 
them will require collecting and using high-quality data to 
support performance-based management, as well as making risk-
based decisions.
    Also, developing and maintaining robust oversight to 
operate effectively in a constrained environment, while 
overseeing a range of new and emerging technologies and grant 
programs.
    And, finally, ensuring clear communication across the 
operating administrations, but also with external partners, 
Congress, and the public.
    In closing, I would just like to say, thanks for the 
opportunity to be here today, and I am happy to answer any 
questions.
    Mr. Latham. Thank you all very much for your opening 
testimony.
    It is not a question, but I just want to kind of make a 
statement. With all we have to cover today, I am not going to 
go into the subject of airport revenue diversion, but I want to 
tell you that I continue to have members who are very 
interested in the subject--in particular, with LAX. Just this 
week, I received another letter of concern from two members 
from California, and it has been an interest and concern from 
both sides of the aisle; it is not any kind of partisan issue.
    As you pointed out, last year--you have done work in this 
area for a long, long time--and especially on LAX. And I know 
your people are continuing their efforts, and I appreciate 
that, and I am sure that all those members will continue to 
have their interest--and I certainly will, too, to make sure 
that this is taken care of.
    I don't know if you have anything to say. There is not a 
question, but I just wanted to make sure that----
    Mr. Scovel. Yes, sir. I want to acknowledge that we do have 
work underway. We anticipate completing it by the end of this 
year. I believe we have kept your staff informed along the way, 
and we are also informing FAA about our findings to make sure 
that we never catch them by surprise on important matters like 
this.
    Again this is an important issue--certainly for this 
committee, for us, and for the agency.
    Mr. Latham. Okay, thank you. And another member concern 
here--but, Mr. Scovel, take a moment to also commend you and 
your staff for the MWAA audit this past year. I know Mr. Wolf 
knew something was up. I have to tell you, I never imagined it 
would turn out to be as long and far-reaching an investigation 
with multiple front page stories on the Washington Post.
    How confident are you that the leadership there is 
effectively changing the culture of their operation?
    Mr. Scovel. Thank you, Mr. Chairman. My staff did an 
outstanding job on that project, and it was virtually an all-
hands-on-deck effort in order to get it done.
    We issued a couple of products last year in May and 
November to try to close the loop on as many of the outstanding 
issues as we possibly could, and we understand that there are 
probably still more.
    We issued 12 recommendations with numerous subcomponents to 
the Department and to MWAA, the airport authority charged with 
administering Dulles and National. We have kept in frequent 
touch with them. Three of our recommendations are closed; the 
other nine are still open, meaning MWAA and the Department have 
agreed to our recommendations, they have given us a timeline, 
they are on the way toward trying to effect our recommendations 
in matters such as contracting, travel, ethics, governance, 
transparency, HR resources, hiring, gifts--right across the 
board that you mentioned were the subjects of numerous media 
stories.
    If you are asking me to give them a grade, of course, I 
think any self-respecting IG would have to say it is incomplete 
at this point. They have signed on to an implementation date of 
June 30th, 2013, in order to have things done, to have 
documentation in place, and to supply us with the references we 
need in order to assess their progress.
    Right now, I am confident we have their attention. Mr. 
Potter has been in frequent communication with us. I have met 
with him. I have discussed it with the Deputy Secretary and the 
Secretary. The Department has an Accountability Officer in 
place, and we have spoken with her on numerous occasions. March 
1st was the last face-to-face meeting we had with her.
    So, we have open lines of communication. We are seeing how 
they will do. We will assess their complete performance once we 
get everything back, and we will certainly keep you and Mr. 
Wolf informed.
    Mr. Latham. Is there a need for some kind of an oversight 
board or some authority? And, also, are the states inclined to 
actually look into this and do oversight?
    Mr. Scovel. I don't know about the states; they have 
certainly taken a great interest in MWAA's deficiencies--
particularly Virginia, since Dulles and National are both in 
the state.
    Part of the reason for my hopeful prognosis for MWAA is 
that there have been changes in the composition of the board, 
and they have brought a refreshing new outlook to their weighty 
responsibilities.
    As far as continued oversight, it is clearly needed because 
when we began the MWAA effort, it was clear that MWAA had 
never--or at least in a long time, since GAO last did its study 
many years ago on MWAA's contracting practices--been used to 
the kind of oversight scrutiny that we were prepared to give 
and that we give to other agencies in our own Department 
regularly.
    And we encountered a little bit of pushback at first. They 
corrected their outlook to us. We got what we needed. We were 
able to arrive at the conclusions we did.
    However, human nature being what it is, things tend to 
unwind over time. And while much-needed changes may be put in 
place in response to our recommendations, but if there isn't 
continued oversight, those changes may unwind, and things may 
loosen up to the detriment of proper fulfillment of all their 
responsibilities.
    So, I would say some oversight is needed; whether that is 
to be us, another IG, or some other entity.
    Mr. Latham. Authority, some way.
    Mr. Scovel. Exactly. Those are policy decisions for the 
Congress and the Department, but we would strongly urge some 
continued oversight of MWAA.
    Mr. Latham. Okay. I failed to mention it earlier, but if 
GAO has any comments on what the Inspector General talks about 
on any of these subjects we cover today, you know, and the 
other way around also--if GAO says something, and you want--I 
just want to get in shortly to the--or briefly to the NextGen. 
And you talked about it in your testimony.
    Really, going more about what the progress that they are 
doing, as far as establishing costs and deadlines, when do they 
expect to deliver a comprehensive plan?
    Mr. Scovel. Mr. Chairman, if I were to summarize--our view 
is that planning, on FAA's part, with regard to NextGen, has 
rarely if ever been much of a significant problem. They have 
been pretty good about putting out plans and concepts, and 
trying to inform the Congress and the public of what shape 
NextGen might take.
    Where there have been significant problems--and continue to 
be--is in the execution of those plans.
    For instance, a NextGen implementation plan update is due 
out this year. Yet, our experience with FAA's actual use of 
that plan has been that it has been not properly utilized. It 
hasn't been the most effective tool for FAA to execute, or for 
the Congress to judge FAA's performance against that plan.
    That led to one of our recommendations a year or two ago 
for what we have come to call an integrated master schedule. 
Think of a whiteboard in a war room, with every NextGen-related 
program matched up against a timeline. As tasks are completed 
and, even more important, as delays and problems are 
encountered--technical delays, funding delays, or staffing--
whatever they might be--you can see the ripple effect down the 
line through NextGen because so many of these programs have 
complex interdependencies.
    What happens, for instance, with regard to ERAM? That 
ripples all the way down the line through the rest of NextGen.
    Such a tool, I think, would certainly help FAA, and it may 
well be a very useful insight for the Congress in making its 
important decisions.
    Mr. Latham. You mentioned a $500 million cost overrun. Last 
year, they were talking about $330 million.
    Mr. Scovel. Right.
    Mr. Latham. What was changed? Why is it----
    Mr. Scovel. Yes. Specifically, you are referring to the 
ERAM program.
    Mr. Latham. Right.
    Mr. Scovel [continuing]. Which, properly speaking, is not 
part of NextGen; it is a foundation for NextGen.
    Mr. Latham. Right.
    Mr. Scovel. As you know, ERAM is the automation platform 
that controllers need to use in the 20 en route centers that 
control high-altitude, long-distance air traffic.
    This was a program that was supposed to be completed at the 
end of 2010 for $2.1 billion. Because it is software-intensive, 
there were lots of gremlins and hiccups along the way. FAA had 
to re-baseline ERAM out to 2014, with what they estimated at 
the time to be a $330 million cost increase.
    Since then, $44 million more have been reprogrammed--with 
the consent of OMB. I am told--from the operations account, 
specifically to ERAM. So, that puts them up to $374 million.
    Our concern, looking at the burn rate for the ERAM 
contract--which is $12.6 million per month--if that were to 
continue at that same rate through the stated deadline for ERAM 
of the end of 2014, that would put them at another $101 
million. So, that would be $475 million total.
    MITRE, in a study, had estimated as much as $500 million at 
one point. So, we are certainly within the ballpark of $500 
million.
    Mr. Latham. Okay. Mr. Pastor, did you have any comments on 
that, or----
    Mr. Herr. I was going to note that GAO's work on NextGen 
has also pointed to the need for cost and schedule risk 
analysis.
    One thing we have recommended to FAA is adopting the GAO 
cost guide, which is actually a very useful tool, and provides 
criteria that can be applied to these kinds of programs. DOT 
and FAA are in the process of adopting some of that.
    So, I would second the idea that this kind of thing will 
give you more oversight and more visibility into the progress 
of the program.
    Mr. Latham. Okay. Thank you.
    Mr. Pastor.
    Mr. Pastor. Excuse me. A common thread that I found in all 
four of your presentations is that either the inability to 
collect data, or the lack of data, the evaluation of the data, 
and then using that data to improve whatever it may be--whether 
it be safety, or whether it be collecting this, that, and the 
other.
    And I would ask all four of you to--in looking at these two 
departments, what generally seems to be the problem? I mean, I 
would think that, by now, they would have, you know, the best 
computers available to them--or whatever--and that they would 
be able to collect the data and do that.
    But all four of you said, whether you were talking about 
HUD or Transportation, is, ``We have problems being able to 
evaluate, because they are not collecting data, or it is 
inefficient data, or, you know, they are not using the data.''
    So, if I could just get a general comment on what you have 
seen with these departments, and what keeps them from being 
able to be more effective--and you can start with either end.
    Mr. Montoya. Thank you Ranking Member Pastor. With regard 
to HUD, it is twofold. With regard to their financial system 
that they are trying to implement, it is basically a lack of 
planning, improper planning at the front end before they start 
spending money, the contractors. With regard to the programs, 
it is really a lack of verification of data that is coming in. 
HUD depends on thousands of people downstream to provide them 
the data, to put the data into their systems, but there is no 
oversight on behalf of HUD to ensure that the system is correct 
going into the system in the first place. So we are not sure 
that we can actually depend on the data. There is no 
verification of the data, if you will. And so that has to do a 
lot with the lack of resources on the part of HUD to do it. So 
their dependence is on these other state and local authorities 
to do that.
    Mr. Pastor. So the lack of resources is to be able to do 
oversight with the contractor at the local level?
    Mr. Montoya. Right, right, in a number of ways. For them to 
actually go into every one of these different entities, to do 
it themselves, right, what we have struggled with is why they 
do not at least do some sort of systemic sort of method by 
which they can go in and take different organizations to look 
at, especially those that are the most troubled or the ones 
that we seem to have more problems with, to at least look at 
those. And just radically go out there and look at different 
various sizes of these organizations to look at it. You do not 
have to look at 100 percent of them, but you should have some 
sort of mechanism to be looking at some of them on an ongoing 
basis, and there is not even that going on.
    Mr. Pastor. So is it the lack of equipment, faulty 
equipment? Are they still using paper and pencil? I mean how 
would you assess the equipment capability that they have?
    Mr. Montoya. Well, for us, a lot of their IT infrastructure 
is very old, especially in their financial arena. It is 15 to 
30 years old. It is Cobol. It is very expensive to upkeep and 
maintain. So part of that is some of these--we had one occasion 
where we were doing an audit and they were not using 
appropriate electronic accounting systems to account for about 
$2 billion in funds. So a lot of it has to do with old aging 
systems. A lot of it has to do with just not adequate enough, 
not robust enough, oversight on the part of the staff.
    Mr. Scire. Maybe I can join in here.
    Mr. Latham. Yes, I would like for you to join the 
discussion.
    Mr. Scire. On the discussion of HUD, I agree with what the 
Inspector General has said. Some of the comments that I had 
made involving, for example, the Moving to Work program is 
really a failure to identify the information required to do 
program evaluation. So it could be that HUD is doing a better 
job in terms of the data that is needed for operations than 
they are for doing program evaluation. So it is difficult to 
say whether or not because of the poor data that FHA is getting 
in the Moving to Work program, what sort of results you are 
getting. Is it quantifiable? And so that is the problem we see 
within that program. And we see that in other programs.
    The other thing I would say in terms of systems that 
support program operations is the importance of requirements 
definition, in really trying to take all the right steps to 
understand what sort of information is required at each of the 
different levels that are actually operating the program.
    Mr. Scovel. Thank you, Mr. Pastor. I am looking at a list 
of some of our most pressing open recommendations for the 
Department of Transportation, and several of them do involve 
data collection, identification of the data, elements that are 
needed, actually collecting it, then investigating to the 
extent that that is required, and actually analyzing it. If I 
could just mention a couple, one has to do with federal 
highways and how dollars are allocated against the need to 
rehabilitate deficient bridges. Of the six hundred thousand 
plus bridges in the country, a quarter of those at least are 
deemed to be structurally deficient or functionally obsolete. 
Yet for years, if ever, the Agency and the Congress have never 
been able to determine how many highway or bridge dollars are 
actually going into fixing those deficient bridges. After the 
I-35W bridge collapse in Minneapolis in 2007, I testified at a 
hearing with the then Administrator of FHWA and he was asked 
that question. He testified that he believed that they would, 
with a very labor-intensive effort that they would, kind of 
pen-and-pencil kind of effort, that they would be able to trace 
dollars to specific bridges. When they went back, they were 
unable to do it. We audited them and found out that they were 
unable to do it. It has really to do with the data elements 
that are required to be presented by states in their highway 
and bridge projects to the Agency. A deficient bridge, 
typically involves interchanges and ramps and guardrails and 
everything else. All of that is one big package that in the end 
they are unable to say how many bridge dollars are going to fix 
that bridge structure. FHWA with the help of AASHTO, the state 
highway, and the transportation association, are trying to 
refine the data elements, press those out to the states so that 
the states will be on the hook to present those up to FHWA and 
give the Agency and the Congress much better insight into 
bridge expenditures and the overall inventory of deficient 
bridges. That is an example of one thing that you are talking 
about. It is identifying actually what is needed and down at 
the most grassroots level making the changes.
    Another one, though----and I can understand that. But 
another one, which I find more disheartening, is what I would 
characterize almost as an institutional resistance to 
collecting the data. We have made a couple of recommendations 
to FAA. One was a result of an NTSB investigation into the 
fatal Colgan crash in 2009, where a regional aircraft in 
Buffalo went down killing 50 passengers. Both pilots were found 
to have been very much fatigued by NTSB. Fatigue was not cited 
as a causal factor, but it was a significant concern mentioned 
in the NTSB's final report on that accident. As a result, we 
were charged with auditing pilot training and qualification and 
a number of other things for FAA. We recommended that FAA begin 
to collect data through the carriers on pilot commuting 
patterns and trends, so that they could then see if there is a 
link to fatigue. FAA and the industry are reluctant to do that. 
It is deemed to be a benefit of the employment for pilots to be 
able to live on the West Coast, say, where one of the Colgan 
pilots did, and be able to commute back to Newark and carry out 
the job. It happens all the time. Many pilots are commuters; 39 
percent of the Colgan pilots operating out of Newark at the 
time of the crash were commuters of more than 400 miles. It is 
common sense that extensive commuting may lead to fatigue, yet 
the Safety Regulatory Agency is reluctant to press that with 
the carriers and the pilots as a whole.
    Mr. Latham. Why.
    Mr. Scovel. Um.
    Mr. Pastor. No, that is fine.
    Mr. Scovel. I do not know. I wish I did. Frankly, we 
tussled. We tussled with the Agency on that recommendation 
because we got that pushback. They finally agreed to survey the 
available data to see what may be out there with the view of if 
there is a gap in the data, then they might talk with us 
further about actually doing something.
    Mr. Pastor. Well, I can tell you unequivocally coming from 
the West Coast to the East Coast causes fatigue.
    Mr. Herr. Let me just add to the question. I think the DOT, 
like many agencies, is transitioning from collecting 
information to having to analyze it and make good use of it. 
One area that I mentioned in my oral statement is looking at 
the chameleon carriers. These are trucking firms that have been 
put out of business. They come back under another guise. We did 
some work a few years ago looking at how DOT and FMCSA could 
better target these carriers. And the analysis we did was able 
to identify some of these at-risk carriers in a way that I 
think can show FMCSA a way toward making some of those changes.
    Another area where data is important, it is right in front 
of us now, is trying to understand bringing drones into the 
civil airspace. One of the things that we highlighted in our 
statement today is the fact that FAA needs information from DoD 
and other groups like DHS that are involved in efforts to 
understand what some of the risks are. And then from that 
information, use that to develop standards in risk profiles. I 
think it is very important to collect the information, but then 
the next piece is to be able to do the analysis. For some of 
these analyses, like some of the work that we did at GAO 
identifying at-risk carriers in the trucking industry, we had 
Ph.Ds with statistical backgrounds doing that work. It is not 
just punching a few numbers. It actually requires a fair amount 
of due diligence to go through that amount of information, but 
it is very important because it is helping DOT make that link 
between these investments and then the actual performance.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Latham. Thank you. Mr. Cole.
    Mr. Cole. Thank you, Mr. Chairman. First of all, thank all 
of you for being here and your testimony. Let me say upfront, 
because I am going to say a few harsh words, none of them 
directed at you. I kind of think of you as the four good guys 
that are trying to help us deal with our problems and help the 
agencies manage themselves better, and I appreciate that more 
than I can say because I think those are real problems. And 
some of the points I am going to make I am going to make 
through you to the Department, certainly not at you.
    And last point, I almost never do prepared statements, but 
I have one issue at least that I want to do that on. And so let 
me just read this for the record.
    HUD Section 184 program supporting mortgages for Native 
Americans. This program is really important to me. Before I was 
in Congress, I actually sat on a Tribally-owned Bank Board and 
saw how important these programs are and how much benefit they 
did. That particular bank, I think, originates more 184 loans 
than any bank in Indian country. It works all across Indian 
country, not just in Oklahoma where I am from. Section 184 
loans are often the only route open to Native Americans to 
become homeowners. Unfortunately, HUD and OMB management of the 
program over the last few years has left a great deal to be 
desired. In the space of about 24 months, we have seen the 
program run out of funds twice because of the administrative 
errors and the elimination of the mortgage refinancing 
component. The most recent funding shortfall, and particularly 
the reaction of the administration to it, is simply 
unacceptable. Rather than the lenders of an impending problem 
work with borrowers and develop contingency plans, the 
administration simply cut off all funding. This has left 
dozens, if not hundreds, of families around the country in a 
lurch not because of the sequester or any budget woes that we 
are so familiar with in Washington, D.C., but because of what 
surely looks to me like incompetence and simply neglect and 
indifference. I ask for consent, Mr. Chairman, to submit for 
the record a few brief summaries of the travails of the 
families in Oklahoma and elsewhere that have experienced this. 
And all the names, all the personal information, have been 
eliminated so the privacy of the people can be protected, but 
they are real cases. As these stories detail, real people have 
been left at the altar by HUD in an unfeeling and unwarranted 
decision-making process that I am told, I hope inaccurately, 
but I am told comes straight from the Office of the Secretary. 
It is one thing to make a mistake and try to correct it. It is 
another to willfully and needlessly harm the very people the 
Department is charged with helping. We would not treat veterans 
this way. We would not treat FHA applicants this way. We 
certainly should not be treating Native Americans in what I 
consider a rather shoddy and outrageous way. Sorry to be this 
strong, but I feel really strongly about this.
    Two questions, probably most appropriately directed to you, 
Mr. Montoya, but I obviously appreciate any GAO perspective as 
well. What is the Department going to do or is it doing 
anything to ensure that this never happens again? In particular 
I am concerned about the use of an abrupt cutoff rather than a 
transition with no warning to the lender. People literally have 
let go of one home, have assurance of a guarantee, and then all 
of a sudden cannot get the financing. It is a really bad 
situation.
    Mr. Montoya. Yes, sir. Thank you for your question. I will 
have to ask for your forgiveness because I am not well up on 
this particular issue, but what I will tell you----
    Mr. Cole. Somebody listening will be though.
    Mr. Montoya. Well, I am listening. I am listening.
    Mr. Cole. No, I know you are.
    Mr. Montoya. But what I can tell you is that certainly 
contrary to my discussions with the Secretary and with a lot of 
his senior staff is we still deal with the aftermath of the 
robo-signing or loan origination servicing piece where the push 
for HUD has been to try to mitigate and work with these 
homeowners, giving them advance notice, to save the homes, to 
save the families, and the financial burden that they will 
experience. So, quite frankly, I am concerned about what I am 
hearing, and I certainly will commit to you to get back to you 
once I get back. But outside of that, sir, I cannot give you 
any specifics and I apologize.
    Mr. Cole. That is fair enough. Now I know you will take the 
time and look into it and others will as well. And I would love 
to be wrong, but this is the information that I am getting both 
from families that are dealing with the situation and more 
importantly from people who administer the program through the 
banking system.
    Second question, when you are----
    Mr. Pastor. Tom, could I just jump in real quick?
    Mr. Cole. Yeah, please.
    Mr. Pastor. When the CR was being developed, this issue 
came up. And this anomaly--is that what they called it? And I 
was concerned like you because obviously we represent in 
Arizona a number of Native Americans, and I brought up the 
issue of why this was happening. And much to my surprise, I was 
told that the administration was going to shut it down. But 
then in continuing to want to stay informed, I am told that the 
Senate has, I guess, corrected it and possibly--but I would 
agree with you that a program like this, you just do not stop 
midway because there are people who are going to be affected 
and as they are working their way to getting a home or whatever 
they are achieving with this program, just to abruptly cut it 
is the wrong thing to do. And so I join you in that because I 
think that is the wrong way to go.
    Mr. Cole. I appreciate that very much, Ed, and I have heard 
the same thing about the Senate working on it. And we have not 
seen the language yet, but I know there is a serious effort 
underway.
    But the other thing if you would, Mr. Montoya, when you are 
looking into this, I would love and the GAO as well any 
recommendations on how or whether the law needs to be changed 
so that, again, Native Americans are not singled out for some 
different sort of treatment than other loan categories. And, 
again, I do not think we would let this happen to VA loans or 
FHA loans and to me these are all specified categories of 
borrowers that we are doing certain things for. It should not 
happen here either. It ought to be pretty consistent treatment 
across the board. So if you could look into that; and, again, 
if GAO particularly had any recommendations on what to do, I 
would love to hear them.
    Mr. Scire. If I could just add that we have previously done 
work looking at management of credit programs and the authority 
levels for those and made recommendations about informing the 
Congress and others in sufficient time to be able to provide 
additional funding, if you will, or to adapt to what is 
happening with the demand for that particular product. That was 
the case in the HUD Multifamily Loan programs, so I would be 
glad to work with the Committee on looking more deeply into 
these questions.
    Mr. Cole. Well, that would be extremely helpful. Mr. 
Scovel, one for you, if you would. And, again, I am using not 
just parochial, but I guess this is my day to be parochial. As 
you may be aware, the state of Oklahoma--and there is no reason 
why you would be--we have six FAA contract towers and three of 
those are actually in my district. And from testimony and 
reports that the office of the IG has done in the past, it is 
clear to me that you clearly understand the cost savings and 
the value and large impact that these contract towers can have. 
It concerns me the FAA when it made a decision as part of the 
sequester, so I do not want to put this all off on them. Let us 
congressionally take some responsibility here, but they shut 
down as I understand it 78 percent of all the contract towers 
across the country. That seems a really disproportionate hit to 
me on what is supposed to be an across-the-board kind of cut. 
Do you have any sort of rationale or have you looked at this in 
any way where you could explain to us why that decision was 
made for that particular piece of their budget, to take that 
level of a hit?
    Mr. Scovel. Thank you, Mr. Cole. I do not know that I can 
go all the way to the final answer for your question, but let 
me tell you what we do know. Thank you for your acknowledgement 
of long-term efforts of our office regarding federal contract 
towers. We do know contract towers. We have been doing this 
work since the late 1990s. In fact, when we contacted your 
office before the hearing today, your staff was kind enough to 
inform us of your own interest and the fact that you had three 
federal contract towers facing shutdown in your district. So we 
were able to pull some numbers on those specific facilities, 
too.
    We have found--twice in the late 1990s, early 2000s, and in 
the most recent audit that we completed in 2012--that federal 
contract towers represent significant cost savings over FAA-
operated towers with an equivalent level of activity. These are 
low activity towers where we are comparing contract to FAA 
towers. On average, it costs $1.5 million per year less to 
operate a contract tower than an FAA tower. We have said all 
along the same level of safety, but, in fact, our 2012 audit 
found a lower number and a lower rate of safety incidents at 
federal contract towers than at FAA-operated towers. Comparing 
these for acceptance, virtually transparent to the flying 
community; in fact, we talked to pilots who said, ``You know, I 
cannot tell the difference these days between a contract tower 
and an FAA-operated tower.''
    When it comes to sequestration, what we have found--and 
this is not by way of an audit, so I want to qualify my remarks 
with that--it appears to us that when FAA was looking for ways 
to make their target of $637 million cut due to sequestration, 
they were looking to identify and safeguard their core 
functions. Contract towers they deemed could be an area where 
cost reduction measures could apply. The methodology that they 
chose was to take 150,000 operations, take off one operation 
per year over 2012, and use that as a threshold and match that 
up against another threshold of 10,000 commercial operations--
air taxi, air ambulance, regional jet, or whatever it might be. 
Those are commercial operations. Towers, whether they are FAA-
operated or contract towers, that fell below those thresholds 
were to be considered for closure. It turned out that 189 
contract towers, including all three in your district and one 
just outside your district, fell under those thresholds. In 
addition, 59 FAA-operated contract towers fell below the 
thresholds. A total of 248 towers nationwide are facing 
closure, and 61 federal contract towers would survive, making 
those thresholds.
    That is my understanding of the methodology and the 
rationale.
    Mr. Cole. Thank you very much.
    Mr. Scovel. When I look at it and look particularly at the 
timing of decisions and analyses, clearly the earlier you begin 
planning for an event like this, the more options you are going 
to have. As you close in on the deadline, which ultimately 
turned out to be March 1, options inevitably fall off the table 
and you are left sometimes with a very bad set of alternatives. 
That may have been what was facing FAA by the time they got 
late on the calendar.
    Mr. Cole. Thank you. Thank you, Mr. Chairman.
    Mr. Latham. Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman.
    Mr. Latham. You are welcome.
    Mr. Ryan. It is good to be here. Good to be on this 
Committee. Very excited about being with you all. Just quickly 
from the IG, how is sequestration affecting your office and 
some of the priorities that you have had over the last several 
months and years?
    Mr. Montoya. Thank you for the question, Mr. Ryan. With 
regards to my office, I have been in office for about 15 months 
now. So upon my arrival, we were addressing some concerns this 
Committee had had about a number of facilities and space issues 
that I had that were quite large. So we have basically spent 
the last year at downsizing the number of facilities we have, 
the size of them, looking at our contracts and cutting back on 
those, lowering our staffing because of supplementals that we 
had that were going to be ending in 2012. So we were on a road 
towards downsizing, if you will.
    Mr. Ryan. Where were you when you first got in 15 months 
ago, employment wise?
    Mr. Montoya. Employment wise? We had about 712 when I came 
on in December of 2011. Now we are down to about 630. So we 
have come down further than we would have liked. But because we 
knew that sequester was looming and potentially a continuing 
resolution, we elected to go ahead and go below the threshold 
we thought we would be comfortable with our appropriations. And 
by having done that, we are positioned quite well and as of 
now, we do not believe we will have to furlough anyone and will 
be able to keep up with our oversight efforts. Now, that does 
not come without pain points. I mean we still have lost too 
many people and so that impacts not only the work we are doing 
on the number of issues I mentioned, but, of course, on Sandy 
oversight and some of the remaining disaster monies that were 
on the Gulf Coast. And, quite frankly, disasters will come with 
the summer months coming. So it does not come without its pain 
points, but I think we are positioned well and we are certainly 
positioned well enough to get through this. And then once we 
do, then we will hopefully get back up to more safer, more 
normal, numbers for us. But for now, we have just been 
adjusting and prioritizing as necessary, taking those things 
that are more critical first.
    Mr. Ryan. I am new here, so bear with me for a second. So 
you go from 712 to 630. What are the programs that have to go 
on the back burner because of that?
    Mr. Montoya. Well, most of my appropriations come in 
salaries and expenses. So really it is bodies because that is 
what we do. We do oversight. So whether it is audits, reviews, 
evaluations, investigations, that is really what my core 
mission is, I think for most IGs. We have very little money in 
travel and training and these other things. So really for me to 
cut back to the numbers I need to, it has to come from bodies, 
people. So having done that, really what it means that is less 
audits that will be completed this year, certainly prioritizing 
what----
    Mr. Ryan. How many less do you think? Ballpark?
    Mr. Montoya. I think last year we did about 180 is what we 
put out. We are on path now to put out maybe 140 this year. And 
a lot of that was not just on our downsizing, but it was on the 
amount of work we have been doing on the loan origination loan 
servicing that we saw as the aftermath with the financial 
crisis. So that certainly impacted. Let me correct you. For 
2010 and 11--correct myself, excuse me--it was about 196 audits 
that we had done. So for 2013 we are looking at about 140 that 
we will do. And investigations I could not tell you. What we 
will do there is just prioritize the type of case we will look 
at. That means sort of the lower end type of case we just will 
not look at or we will give to a local authority, and we will 
look at the higher dollar, more expensive if you will, type of 
financial fraud that we could see in the Department.
    Mr. Scovel. Thank you, Mr. Ryan. Greatly appreciate your 
interest in how sequestration has affected our office. We are 
fortunate, like Mr. Montoya, in that we have been taking steps 
for a long time now to try to position ourselves, and we do not 
see the need in fiscal year 2013 to furlough any of our staff.
    Here is the situation we were in, and I want to make full 
disclosure because my office did receive some amount of extra 
funding to carry out our Recovery Act responsibilities, plus we 
also received some extra funding to oversee FTA in their Sandy 
relief efforts. We do have that, but had we not taken the 
stringent cost reduction measures that have been underway in my 
office now for over 20 months, we would be facing furloughs 
this fiscal year. As I mentioned, we will not have to.
    FY 2010 we were at 418 on our staff base budget. Today, the 
effect of sequestration on our budget has allowed us to staff 
only to 373. That is almost an 11 percent reduction in staff 
over the last three fiscal years. Like the office of Mr. 
Montoya, we are salary heavy as well. We do not have hardware. 
We do not have acquisitions and contracts and programs and 
grants; 75 percent of my budget goes to pay salaries and 
expenses for our staff. We were going to have to take a hit 
against staff and probably go to furloughs had we not done 
things like a staff hiring freeze since August 2011. We took 
that knowing that we were facing a tough situation in fiscal 
2012. In August 2011, of course, the Budget Control Act passed 
and we had to plan against the possibility of sequestration. We 
were well positioned to do that, and we buckled down on it.
    We reduced our staffing level by letting go our rehired 
annuitants and term and temporary employees that we had brought 
on for the Recovery Act. We have reduced our footprint, and we 
let go of some leased space, both investigations and audit 
related, outside the Washington area. We have limited our 
technical expertise contracts. We had a buyout for early 
retirements and separations in the summer of 2012 and shed 14 
more staff that way. We suspended our student loan repayment 
program, which was quite modest to begin with. I told my staff 
we would be recycling paper clips before we sent anybody out 
with no pay due for a low status, so the student loan repayment 
went. We also cancelled our participation in the Department 
Honors Attorney program and saved $95,000. In the view of some, 
it is not big money, but in the view of staff who have to go 
home perhaps with no pay, that counts. It all counts.
    Mr. Ryan. Are there any innovations within both of your 
offices where we could use technology to help cover more 
ground, where you can find some baselines of programs or work 
that people are doing? And then finding through technology or 
through them having to log in certain numbers, certain 
variables, that may pop up that would say hey, this is a 
priority or something weird is going on over here? I do not 
know your business well enough to know what that even would be, 
but are we exploring these kinds of options with technology to 
try and broaden your scope and deepen the work that you can do 
in areas that you would find necessary?
    Mr. Montoya. Thank you for the question, Mr. Ryan. It is an 
excellent question, and I am really glad you asked that. One of 
the first things I did when I came onboard was to look at our 
data mining analytical capabilities, and we had a limited form 
of that. And what I have done over the last 15 months while we 
have been downsizing is some of the critical hires that we have 
made have been in our IT sort of arena. We have hired a 
statistician. We have hired a specialist in data analytics, 
predictive analytics. I oversee a program that is a $40 billion 
a year program, and so my hope is that as we develop the 
capabilities to do not only data analysis, data mining, but to 
analyze the information. Kind of like what Mr. Herr said 
earlier; it is great to get all this data in, but if you are 
not looking at it, if you are not analyzing it, mining it, 
seeing what it tells you, then it really does not mean 
anything. So we are on a fast pace to be able to do not only 
the data mining portion of it, but the predictive portion.
    Mr. Ryan. Do you do that yourself or do you contract that 
out?
    Mr. Montoya. We have been doing that ourselves. It is far 
cheaper to do it ourselves. And we have specialists that 
understand the programs. They understand the intricacies of how 
the programs work and where the funding comes from and these 
sorts of things.
    So, quite frankly, to your answer, yes, we are building on 
our capacity and it is my hope that if we get this right, I do 
not necessarily need to have another 712 staff, not that I 
would not deny that if you offered it. I am just saying that my 
hope is that with these data analysis predictive capabilities, 
it sort of drives where we need to be, where we need to be 
looking. And to the extent we can do that, we can become a lot 
sharper at the tip of that spear, if you will, to get to where 
we need to be than to wait for it to happen and then come back 
in to pick up the pieces if you will. It is more of a 
preventive sort of thing or as one person had said it, it is 
sort of skating to where the puck is going to be, if you are 
into hockey. You want to skate to where the puck is going to 
be. You do not want to really wait until the last second 
because you are never going to get there. So that is what we 
are focused in on.
    Mr. Scovel. We have done some of that as well on the 
investigation side. We have worked to develop our own 
predictive data analytic capability, and it has proven to be 
fruitful for us on investigations.
    We have also made good use of what is called the Operations 
Center over at the Recovery Board. They have some very capable 
and sophisticated databases that they were able to mine, not 
only for my office, but for any IG in the community these days. 
They have opened the door for cases and allegations that do not 
even need to be recovery related, but that may help us in the 
rest of our work.
    On the audit side, we are able by the nature of our work to 
do less of that. My concern is simply making sure that we are 
able to update the computer systems and connections that we 
have, particularly between headquarters and the field, so that 
we are able to move back and forth the significant amounts of 
data that we have to in order to bring the analysis to bear on 
it. My office has about two-thirds located in Washington and a 
third located in field offices across the country. To the 
extent that we can better communicate, it will certainly make 
for a better product for us. Right now we are hampered on the 
IT front by just the hardware and the communications links that 
are a generation or two behind.
    Mr. Ryan. Great, thank you. I will submit a question for 
the record with regard to the pipeline and hazardous material 
safety administration oversight. Thank you, Mr. Chairman.
    Mr. Latham. We have totally blown to Hell my 5 minute rule. 
Mr. Quigley.
    Mr. Quigley. Thank you, Mr. Chairman. You know, Mr. 
Chairman, when I was lucky enough to be appointed on this 
Committee, I started talking about transportation. And my 
predecessor put his arm around me and said, by region you mean 
Chicago, right? But I am sure he would appreciate my asking you 
a little bit about the oversight of the Federal Railroad 
Administration on the Railroad Rehabilitation and Improvement 
Financing program. I understand your office is starting to look 
at that. They were authorized to provide up to $35 billion in 
loans and loan guarantees to railroads and other entities, and 
they have gotten less than 5 percent of this money out. Could 
you let us know how a system like Metra who is curious about 
this how your inquiries on this are going?
    Mr. Scovel. We will. I'm not in a position to advance a 
most general answer to you at this point. We have just 
announced an audit into the RRIF Program. Your numbers are 
absolutely right, $35 billion authorized, five percent or so 
actually used by systems throughout the country.
    It's been a point of consternation and concern for the 
Department as well as for the Congress because it's an avenue 
to--we hope everyone does--to get money out to systems that can 
best use it. Yet no one has been able to put their finger on 
why it's so underutilized. We have a very small team of 
economists plus some auditors in my office who are going to 
study it and see what the impediments are. What are the reasons 
why it's not being used more extensively? We'd be happy to 
speak with you further, sir.
    Mr. Quigley. If you could, what's a typical timeframe? 
Typical's probably a tough word for something like this to be 
completed?
    Mr. Scovel. Sure. We shoot for 10 months. In all candor, we 
rarely make it. Often it's more 12 to 14 months, but we'll do 
all we can on this one knowing your interest.
    Mr. Quigley. And I appreciate your following up with us. 
Let me ask Mr. Montoya first about something else, cyber 
security issues. Can you speculate or give us your best 
information about cyber security issues at HUD?
    Mr. Montoya. Yes, sir. We recently completed an audit of 
Ginnie Mae and just generally some of our other audit work on 
their IT system. And there have been a number of concerns that 
have been raised with just the security of the systems and 
their oversight. It can range anywhere from their failing to 
lock out an individual who's left the organization, for 
example, to generally on most computers if you try to log in 
and you hit the wrong password three times it locks you out, 
well in the case of Ginnie Mae there was no such thing. You 
could have been doing this forever and it would never have 
locked you out.
    So, those types of vulnerabilities we've been looking at 
and recently provided that audit. I specifically have spoken to 
Ginnie Mae's senior staff about that. Certainly issues that 
they're going to be looking at. But we have not had any 
indication that we've had any serious breaches per se, but 
there are definitely vulnerabilities and it all goes back to an 
earlier statement I made about how poor their IT infrastructure 
is and how old and dated it is and the trouble that they're 
having getting this stuff more robust and real time if you 
will.
    Mr. Quigley. Mr. Scire, do you want to join in on that?
    Mr. Scire. We haven't done any work on cyber security at 
Ginnie Mae.
    Mr. Quigley. Okay. Mr. Herr, the same questions that 
relates in your testimony, you talked about the fact that DoT 
has to improve its workforce planning and hiring for cyber 
security personnel. You see this an issue government-wide with 
your experience?
    Mr. Herr. Yes, our team at GAO that focuses on IT has 
highlighted this is an issue across government. In the case of 
DoT in particular, they are near the bottom of agencies that 
OMB ranks in terms of compliance with the FISMA standards. 
That's a troubling development we've seen. I'm happy to follow 
up if you have some additional questions.
    Mr. Quigley. Thank you. Any other panelist on the issues of 
cyber security within the realms they cover?
    Mr. Scovel. Thank you sir, just very quickly my office does 
the annual FISMA audit for DoT. Mr. Herr is absolutely correct. 
DoT has been near the bottom for a number of years. However, 
both with secretaries and deputy secretaries in the past 
administration and in this one, it's had their full attention. 
Their best intentions have been largely hamstrung not so much 
by funding constraints but by prioritization. In order to keep 
systems up and running and fully operational on a day-to-day 
basis, that's where funds and limited manpower have needed to 
be prioritized.
    In their estimation cyber security, not only at DoT but 
across government often takes a second row seat.
    Mr. Quigley. Priorities aside, why is it so difficult to 
retain the personnel needed?
    Mr. Scovel. I speak from experience because last week we 
lost a very capable IT security person who, in fact, went to 
the private sector. That's where they often go. More 
flexibility, more money, all of those kinds of reasons. To talk 
about your interest in cyber security, he led our penetration 
testing of the U.S. Merchant Marine Academy, and we found then 
that the systems that the Academy relied on to protect student 
data, medical data, application data, social security numbers, 
all of that was wide open. We got into it within a couple of 
hours. We presented those results to the Department, and 
they're working on fixing it.
    Mr. Quigley. Well, thank you all for keeping us up at 
night.
    Mr. Latham. Thank you, Mr. Quigley. Mr. Joyce, did you have 
any question? I think you're----
    Mr. Joyce. Thank you, Mr. Chairman. Yes, I was wondering as 
far as in a letter sent to Secretary LaHood on March 7th by the 
transportation infrastructure chairman Bill Shuster and Senator 
Thune, it was noted the yearly travel budget for FAA employees 
is approximately $179 million? Could this be an area of 
potential waste?
    Mr. Scovel. Possibly. I must put that in quotes and 
italicize it because we haven't audited that. I can't even 
verify that that number is correct. I have no reason to believe 
that it's not. From my experience trying to run my own office, 
which is a vastly different kind of operation and a much 
smaller scale, there are typically cost saving measures that 
can be taken around travel. We've put them in place to 
beneficial effect in my operation and that level of scrutiny 
may well bear fruit for FAA as well.
    Mr. Joyce. Certainly possibly inefficient at least?
    Mr. Scovel. Yes, perhaps.
    Mr. Joyce. Thank you. I yield back.
    Mr. Latham. Thank you very much. I think on this round 
we've--well, we're going to quit at least by noon but we will 
actually enforce the five minute rule on this round, okay? Some 
really good stuff here but I wanted to go to the earlier 
testimony, Mr. Montoya, about FHA and the fact that, you know, 
they have a negative one point four four percent and you'd said 
the sixteen point three billion negative?
    Mr. Montoya. Yes, sir.
    Mr. Latham. Okay. And you say they're hard to audit. They 
should have quarterly reports. They're paying claims that they 
shouldn't be paying apparently.
    Mr. Montoya. Right, sir.
    Mr. Latham. Okay. Big question. I mean how soon, are they 
going to have to go the Treasury to ask to get money or?
    Mr. Montoya. We won't know that, sir, until the President 
puts his budget numbers out. So, I couldn't tell you that. I 
don't think anybody knows at this point.
    Mr. Latham. You have any comment here?
    Mr. Scire. We'll know a lot more when the budget is out 
though we get some indication through the financial statement 
audit which indicates that there would likely be a $16 billion 
upward re-estimate. So, the budget would need to show that the 
new book of business and any policy changes that FHA might 
implement would bring in a similar amount or more.
    Mr. Latham. But if it's hard to audit how are you going to 
base anything on real information, real data?
    Mr. Scire. I don't question that it's hard to audit. I 
think that the actuarial review actually gives you useful 
information, what they've done with the actuarial review in 
moving toward this technique of stochastic simulation, we think 
that gives you more accurate estimates of the value of the 
mutual mortgage insurance fund. So, I think that is a real 
important resource for information about where FHA stands and 
that is what we have right now. It's telling us that 
considering expectations for loans going forward that the fund 
has a negative value.
    Looking ahead, once the budget is presented then one would 
need to drill into the assumptions that are used for coming up 
with the estimates. Those assumptions are different than what 
is in the actuarial review. And so, that is something that one 
could definitely take a look at, how reasonable those 
assumptions might be.
    Mr. Latham. You testified about the claims situation. How 
is this happening that they're paying claims that they 
shouldn't?
    Mr. Montoya. Well, our concern, much of what we've been 
doing with regards to our review of lenders and services and 
the claims that they put in, the falsities they created, it 
might----
    Mr. Latham. Intentionally? I mean, is fraud?
    Mr. Montoya. Hard to tell. A lot of it was fraud. Certainly 
the Robo signing piece was fraud where they were signing 
documents that they had not actually overseen or notarizations 
that they weren't present for, those sorts of things.
    Mr. Latham. Have they been referred to criminal?
    Mr. Montoya. Most of what we've done on those particular 
cases, the Department of Justice hasn't taken any of those 
individuals per se criminally. We've looked at the company as a 
whole to reclaim some of those monies as we've been doing over 
the last year and a half.
    A lot of what we have been doing with regards to reviewing 
these loan files, loan file reviews is what we call them, is 
really a programmatic issue. And what we've been stressing to 
HUD is that they really need to be a lot more robust on this 
and not just depend on the work we've been doing. But the 
reality is the way the FHA insurance fund is setup is 100 
percent of the claims will get paid right after a claim is 
made.
    So, really in fairness to HUD it's always an after the fact 
scenario where they're coming back to look at the loan file. 
And if they believe that it was poorly underwritten only then 
do they go back after the money. So, it is kind of a catch-22 
for them. So, it's difficult for them but we keep stressing is 
that they do more of that review and kind of along the lines 
that we did but we used data analysis, if you will.
    We used statisticians to pool statistical representations 
of these loans that had gone either into default or to claim to 
identify a universe, let's say 100 and then we looked at those.
    So, those kinds of things is what we're stressing HUD to do 
and it kind of goes along with the question Mr. Ryan asked 
earlier about using data analytics to be able to do this stuff 
for us.
    Mr. Latham. But if you get garbage in I mean, you testified 
earlier you're not getting good information to begin with.
    Mr. Montoya. Right, right. Correct and that's the concern. 
I think really from the standpoint of when you have a hundred 
percent guarantee quite frankly, you're going to get garbage in 
because there's really no financial stake, right, not to make a 
loan, if you will, if you know that on the back end if it goes 
bad you're going to be made whole. So, that therein lies the 
inherent problem with, I think, that sort of idea.
    Mr. Latham. I was handed a piece of paper, four and a half 
minutes.
    Mr. Montoya. I'm glad to see, Mr. Chairman, that you as 
well are being held to that.
    Mr. Latham. I will stop myself.
    Mr. Montoya. Yes, sir. Thank you, sir.
    Mr. Pastor. If you need additional time I'll use----
    Mr. Latham. Come on!
    Mr. Pastor. Thank you. Multi-housing Association, one of 
their concerns is as the economy is starting to improve as they 
see it, and now you see the apartments and multi-housing, that 
that industry is beginning now to show some growth and people 
want to invest and you have--and they're very concerned about 
FHA. Not so much about the problems you bring to us today but 
that it continued to exist and be able to participate because 
in many cases this is where they're going for the funding 
because in the private sector either is not lending or is 
lending at such high fees that it makes it unprofitable to--
    And so, they're worried about the economy and their 
particular industry. And they're concerned if there is reform, 
if we do have reform in the future where FHA will be. I really 
couldn't assure them of where it's going to be but they're very 
interested what FHA has been able to do and what it can do for 
their industry. Yet, with the problems they have what do you 
anticipate?
    Mr. Montoya. Well, sir, I certainly couldn't comment on 
where reform will go.
    Mr. Pastor. Sure.
    Mr. Montoya. I'd be as interested in that as anybody. So, 
it's hard to tell. Quite frankly, FHA is well beyond its 
original mission on the amount of exposure they have. So, my 
discussions with them are as they are pulling back, trying to 
get back closer to their original mission. How that will impact 
what was available before, there will be, I'm sure, some 
impact. But where the Congress and FHA will take reform I 
couldn't tell you.
    But I think at the end of the day with FHA pulling back 
from where it is and the sheer size it has become, there are 
going to be impacts to single or multi-family.
    Mr. Pastor. Probably negative?
    Mr. Montoya. Well, you won't have as much absolutely.
    Mr. Scire. What I would point out is that it's inextricably 
linked with the resolution of Fannie Mae and Freddie Mac 
because they also serve part of this market. There is also a 
connection here with the low income housing tax credit which is 
the biggest federal support for production of affordable 
housing.
    So, I think moving forward and looking at what the role of 
FHA will be, it will be very important to consider the 
companion roles of these other ways of supporting housing 
finance.
    Mr. Pastor. In reading your report and I can't remember 
which one, we talked about the inspectors. The FAA and how 
we're contracting more to private companies and the inspectors 
seem to be utilized not as well as it should be in terms of 
where they're at and what they're doing.
    In the past we have added more inspectors and we're not 
doing a good job with what we have. With sequestration coming 
what do you anticipate's going to happen to this whole safety 
of the aircraft due to the problems it will have to the 
inspectors?
    Mr. Scovel. Thank you, Mr. Pastor. Certainly this committee 
and the Congress face that dilemma of how much to fund when it 
comes to a priority like safety. Some will say you can never do 
too much. However, in today's environment, clearly we're at 
that place, and the Congress needs to look to the Agency to do 
all that they can to use everything that they have already been 
allocated.
    Our work with regard to FAA and aviation safety inspectors 
shows that the staffing model is not yet a useful tool for 
driving budget and plans. I see your book is open to a graph 
showing the wide fluctuations in the number of recommended 
staffing positions that FAA's own staffing model has presented 
it. It's gone all the way from the 300s up to the 900s in the 
space of about 20 months. It's not because inspectors are 
walking out the door but rather it's some deficiency with the 
staffing model that FAA and the Volpe Center, which produces 
the model for them, need to work out.
    In the meantime, for you and for my office, it does show 
that those numbers are unreliable. To take that a step further, 
the Agency has not yet taken, fully absorbed, and applied all 
of our recommendations with respect to basing inspectors' work 
assignments on the basis of risk and targeting those scarce 
inspector resources to areas where they're most needed.
    We have an audit underway, and I mentioned it in my opening 
statement, concerning repair stations, both domestic and 
overseas, performing contract maintenance for our airline 
carriers and the degree that FAA applies oversight to those. 
They're sending inspectors out on a rote basis. You've got to 
hit every station every year. They rarely make that. There's no 
effort to quantify and analyze the risk that's presented at 
specific stations to make sure that they get the oversight and 
the degree of scrutiny that they need.
    Mr. Latham. Thank you. Mr. Cole.
    Mr. Cole. Just for the record I will always yield you time, 
Mr. Chairman, when you're up against the five minute rule. It's 
one of my jobs. I just have one question, Mr. Montoya. As I'm 
sure you're probably aware, this Committee has historically 
been and appropriately been very concerned about unobligated 
balances in NAHASDA, the Indian housing program. And with this 
fiscal climate that we have now, undoubtedly we're going to be 
looking at that even more intently.
    As you may be aware, tribes receive their funds through 
NAHASDA generally have a significant amount of bureaucratic red 
tape to go through. They have NEPA statements and compliance, 
environmental impact studies and the like and that's all before 
they can obligate any funds. At the same time, it appears to 
me, I used to hear a lot about the tribes coming to the office 
and this was their point of view. That HUD takes an inordinate 
amount of time to award the dollars that are part of program.
    HUD just last month, just got around to awarding the fiscal 
year 2012 dollars for the program. And that puts the tribes 
like 18 months behind the eight ball in terms of being able to 
move through the process in a timely fashion. Do you know or do 
you, have you thought of any reforms that HUD can and should 
take to ensure that there's a more timely dispersal of the 
funds and the tribes have enough time to plan and actually use 
the resources they've been given?
    Mr. Montoya. Well, sir, I'll have to admit to you we've not 
had a lot of body of work done in Native American country. And 
I recognize how important that is. I was with the IG's office 
at the Department of the Interior and so very familiar with the 
Native American country. But we haven't had a lot of work but 
I'll tell you after having heard your two concerns here today 
I'm beginning to wonder why we haven't done more work and I'll 
be looking to do more of that because it sounds like your 
constituents are bumping up against some pretty long waits, if 
you will, which for me the rest of HUD doesn't seem to be 
bumping up against.
    So, I will certainly add that to my list of items to look 
at and get back to you, sir.
    Mr. Cole. I really, really appreciate certainly seeing a 
lot of the housing on reservations and it's a very difficult 
and challenging situation.
    Mr. Montoya. Yes, sir. I will get back to you.
    Mr. Cole. Thank you so much. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Cole. Mr. Quigley do you have 
any questions?
    Mr. Quigley. No, sir.
    Mr. Latham. Mr. Joyce? Okay. Mr. Herr, earlier you talked 
about the unmanned aircraft systems and the challenge that has 
for the FAA. And they're supposed to be integrated into the 
system, national system by 2015, is that correct?
    Mr. Herr. Yes.
    Mr. Latham. Do you know--noted they're challenged in this 
effort by limitations and its ability to share data with the 
DoD?
    Mr. Herr. Correct.
    Mr. Latham. It's got to be a high priority both for the 
research and commercial airspace industry. Can you elaborate as 
far as the data challenges that they face and maybe suggest 
ways that they could improve access to the processing of the 
data.
    Mr. Herr. Yes. Thanks for the question. It terms of this 
issue it's FAA getting data from DoD in particular. And what we 
found in some earlier work was that there was a, for lack of a 
better word, data dump. They were given a lot of information by 
DoD. It wasn't necessarily readily usable by FAA to help make 
some of the determinations about safety and performance.
    My understanding is they've entered into an MOU now with 
DoD and have brought in a contractor so they can help have a 
better sense of data needs. MITRE is the contractor to do the 
work, and identify some of the key data fields. From that, 
it'll be important to develop the standards, procedures, rules 
and then roll that out, train the controllers and also do 
certifications as warranted for the people that will be 
operating these. Then, hopefully have it ready for the next 
steps.
    Mr. Latham. It's going to take a multi-Agency effort with 
FAA, the DoD, DHS. Do they have the organizational leadership 
structure in place to do this?
    Mr. Herr. A lot of this is being done out of their joint 
planning and development office, which we refer to as JPDO. 
What my colleagues who that focused on this work at GAO have 
reminded me is that they're focused on the safety side, the 
avionics. But I think that as Mr. Pastor mentioned when he came 
in in a light comment about the drones, there's a lot of other 
concerns beyond just the integration into the civil airspace 
that is part of this.
    FAA has its piece but it's also going to be challenged to 
work with these different parties. I think consistent with the 
conversation we had earlier about demonstrating progress, there 
are also milestones in the FAA re-authorization bill that they 
still are working to meet. And they need to be doing that in a 
timely way as well.
    Mr. Latham. Okay, thank you. Mr. Scovel, do you think they 
have the proper organizational structures in place to meet the 
mandate and then also have you identified any weak links or 
vulnerabilities that they have?
    Mr. Scovel. Organizational structures as the Committee well 
knows, FAA has established a UAS integration office. It's 
tasked with pulling together air traffic equities in this 
matter as well as flight standards, meaning aircraft 
certification, pilot training and medical concerns. As the 
Committee's hired skeptic, we'll have to say the jury's still 
out on how well this integration office will function.
    We have seen FAA struggle in the past particularly in the 
NextGen area where interests of air traffic, flight standards 
and airports have all needed to be woven together. Whether it's 
been under the JPDO or under the newer organization that FAA 
still is putting into place, it hasn't been fully successful. I 
think we have to hang a question mark yet on whether this 
integration office can actually do it.
    To follow up on Mr. Herr's observation that FAA's interest 
is safety and efficiency of the NAS in many respects: in the 
past, FAA has been quite good at that. Yet this is an entirely 
different beast when we encounter UAS integration because of 
the privacy interests. Everybody recognizes that there is 
potential for this country economically speaking. My numbers 
show perhaps $89 billion in the industry over the next 10 
years, thousands of jobs. It's a race that's ours to lose at 
this point because we're that far ahead with the military 
aspects of UAS technology. Yet on the civilian side it's much 
different when we see filibusters in the Senate, and we see 
communities right here in Virginia legislating, attempting to 
ban drones in that community's airspace. FAA is going to have 
to wrestle with all of that, and they're not well-equipped to 
do that right now. It's reflected in the fact that in the 
solicitation that they sent as invitations to participate in 
the six test site areas. They inquired of the applicants, 
``Tell us what you think your priority or your privacy measures 
ought to be.''
    Rather than stating that as a requirement up front, they're 
looking to get all the input they can, which is not a bad 
strategy given the dearth of experience and expertise that 
exists in FAA on this point right now.
    Mr. Herr. Mr. Scovel's comment prompted me to remember 
another point. They were looking up to staff up the office, our 
understanding is they have about 20 people in the UAS office. 
So, they were just beginning to get the people involved. So, 
it's a long term effort.
    Mr. Latham. You are not instilling confidence. Mr. Pastor?
    Mr. Pastor. Well, I'm going to go and just ask a question 
on TGen. I think I've been living with TGen now for about eight 
years I guess. And I guess it was moving forward but deja vu 
all over again, they have the problems. Now we have the 
sequester and the capital program will be reduced by $137 
million.
    Obviously, that's going to have ramifications and what do 
you project some of the problems it's going to cause as we try 
to develop this system and get it in place one of these days?
    Mr. Scovel. Thanks, Mr. Pastor. It will have ramifications 
in the development of some of these capital projects that are 
part of NextGen or closely allied to it by way of foundational 
programs. While we can safely say it will have effects because 
of gaps in FAA's ability to project those effects down the line 
of NextGen programs all the way to full program implementation, 
I don't know that we or FAA can say exactly at this point.
    This would get me back to a point that I made earlier about 
the value of our integrated master schedule recommendation to 
FAA and to the Congress. When events like sequestration come up 
and cuts needs to be made to specific programs or there are 
technical difficulties that become an impediment to quicker 
execution of a program, FAA is unable to see how that will 
influence the timing and sequence down the line. A master 
schedule may well help them do that.
    FAA, to be totally fair to the Agency, has accepted that 
recommendation. They have embraced it and they are working to 
produce that master schedule by the end of this year.
    Mr. Pastor. What is the probability that they're going to 
have it done?
    Mr. Scovel. Fair at this point. I'd say at least 50/50.
    Mr. Pastor. So, that probably means it's not going to get 
done.
    Mr. Scovel. I can't prejudge as the IG, even as the hired 
skeptic.
    Mr. Latham. If you say 50/50 that looks pretty darn----
    Mr. Pastor. That's pretty darn good by our experience for 
sure. You know, I remember when this whole thing got started we 
were going to be working with NASA and bringing in the airlines 
and we had the air traffic controllers and everybody going's to 
be involved. And then we were having problems coordinating it 
and then it just got further and further behind. In your 
opinion, what is the status of it today?
    Mr. Scovel. Of NextGen?
    Mr. Pastor. NextGen.
    Mr. Scovel. ERAM, for instance, is going to get done by the 
end of 2014.
    Mr. Pastor. Four years late?
    Mr. Scovel. It will be four years late at that point. It 
won't be the same ERAM that was advertised to be completed at 
the end of 2010. It'll be a somewhat reduced and shrunken 
version of ERAM. It'll need to be plussed up with technological 
improvements for the rest of the decade at least and probably 
into the '20s.
    Other programs haven't been fully fleshed out by FAA yet. 
Programs like terminal modernization, ADS-B, SWIM, and DataComm 
have been identified in segments and funded and baselined in 
smaller segments, which gives us some assurance that at least 
that segment may stand a chance of getting done on time. 
However, they haven't projected what the programs will deliver 
all the way, and they haven't linked it all together in terms 
of timing and sequence yet.
    You'll remember, sir, FAA's original prediction was that 
NextGen would be complete, bought and paid for--$20 billion for 
government, $20 billion for the industry--by 2025. This is not 
going to happen. It's going to be 2035 perhaps. Our estimate 
and other knowledgeable sources say 2035 at the earliest and 
perhaps after that and cost figures double or triple the 
original $20 billion for government.
    Mr. Herr. I would just underscore the importance of these 
integrated plans. There are tools to help manage these complex 
systems and looking at the risk and cost analysis is an 
important way that agencies like FAA can better manage the 
risks of these kind of purchases. The dollars are big, and it 
gives rise to some of the terms people use, ForeverGen not 
NextGen because the timeline is so long, which I think is 
unfortunate. Mr. Scovel referenced the timeline that his office 
is considering. These are complex endeavors but they're also 
having to maintain the existing infrastructure while this is 
rolling out.
    One of the things I identified in my statement is a $310 
million backlog in maintenance for these older facilities. 
You're going to start to get into the position of having to 
maintain these old radar systems. We're going to maintain these 
old buildings until NextGen happens. Those are good, important 
oversight questions for your committee.
    Mr. Latham. I'm going to enforce the one minute rule on 
you. And I would invite everyone, you know if you have more 
questions submit them and we'd appreciate very much your 
response to those. The NextGen thing I'd go back, if I'm not 
mistaken the Bush Administration when they shut out basically 
the air traffic controllers from any part of input on the 
system I think delayed the whole thing a lot. And it really got 
off to a rocky start because they didn't include the people who 
were going to be running the system and the experts in the 
system.
    Mr. Pastor. You remember though right in the middle of a 
contract negotiation, remember they were having those----
    Mr. Latham. Right. Let me just say thank you for the great 
job that you all do for us and we want to continue to rely on 
your expertise and your great work in the communications.
    Okay, one question, for each of you very briefly, is there 
anything in each of your Departments that you see as a 
potential problem that nobody is looking at today?
    Mr. Montoya. That no one's looking at?
    Mr. Latham. That no one's even thought about. I mean are 
you concerned that there's something, see signs of something 
popping up here?
    Mr. Montoya. Yeah, I'd be afraid of what I don't know. No, 
I don't know that the problems, the major issues that we have 
we haven't already teed up. Part of what I think my data 
analytics, predictive analytics capability will do is hopefully 
find those anomalies that none of us ever knew about. So, 
that's really my hope with where we're going with our IT 
oversight capability, sir. Thank you.
    Mr. Latham. Okay. Mr. Herr.
    Mr. Herr. The area that's not hidden but it's one topic I 
mentioned in my oral statement that's on our high risk list: 
surface transportation financing. We've had the Federal Gas Tax 
at the same level since 1993. It's well-known we're looking to 
go to the General Fund. It makes it very difficult to fund 
infrastructure with this kind of arrangement and so, I'd be 
remiss if I didn't mention that issue as it's something we 
highlight.
    Mr. Latham. I don't think anybody knew that that was an 
issue.
    Mr. Herr. Well, it's not a hidden issue but it's also one 
that----
    Mr. Latham. It's absolutely critical and we got to find an 
answer to it.
    Mr. Scire. Yes, I would just highlight two. They are known 
but they're very important issues that really need resolution. 
One that we highlight in our high risk update is modernization 
of the housing finance system. And so, there's still a lot of 
work yet to be done to figure out where we'll end up at the end 
of the day.
    The other is, and we do highlight this, is the idea of 
overlap fragmentation and duplication across the various tools 
that the federal government uses to support housing. From tax 
expenditures to grants to loans and so forth and I know there's 
been some attempt here particularly in the multi-family arena 
to try to bring together and to make more uniform some of the 
requirements that all the different programs operate under. But 
we think there's more that can be done. And there's a lot more 
that can be done in the single family arena in trying to look 
for opportunities for consolidation across agencies.
    Mr. Latham. You've transmitted those suggestions or 
you're----
    Mr. Scire. Yes, we have and I'd be glad to provide those. 
http://www.gao.gov/products/GAO-12-554.
    Mr. Latham. Authorizers and everything also?
    Mr. Scire. Yes.
    Mr. Latham. Okay. Yes. You have the last word.
    Mr. Scovel. I will try to keep it short. Really nothing 
new. Surface financing and cyber security haven't been 
mentioned, but those are perennial concerns. I'm with Mr. 
Montoya. I worry about what I don't know.
    Mr. Latham. Right.
    Mr. Scovel. Because the question always is, testifying 
before any committee, ``Mr. IG, where were you on this?'' When 
we're unable to get to it, that's what keeps me up at night.
    Mr. Latham. Very good. I appreciate your testimony and we 
will be in touch and keep up the great work. Thank you. 
Adjourned.

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                                            Friday, March 15, 2013.

         OVERSIGHT HEARING: SANDY DISASTER RELIEF AND RECOVERY

                               WITNESSES

JOHN PORCARI, DEPUTY SECRETARY, DEPARTMENT OF TRANSPORTATION
FRED TOMBAR, SENIOR ADVISOR FOR DISASTER PROGRAMS, DEPARTMENT OF 
    HOUSING AND URBAN DEVELOPMENT
MARION McFADDEN, CHIEF OPERATING OFFICER AND LEAD COUNSEL, HURRICANE 
    SANDY REBUILDING TASK FORCE, DEPARTMENT OF HOUSING AND URBAN 
    DEVELOPMENT
    Mr. Latham. The subcommittee will come to order. I want to 
welcome everyone to a rare Friday hearing. Thank you, everyone, 
for being here.
    This is an oversight exercise on the work and the funds 
going into the recovery from the devastation of Hurricane 
Sandy. Our witnesses today are the Honorable John Porcari, 
Deputy Secretary to the Department of Transportation; Mr. Fred 
Tombar, Senior Advisor to the Secretary on Disaster Recovery at 
the Department of Housing and Urban and Development; and Ms. 
Marian McFadden, Chief Operating Officer of the Hurricane Sandy 
Recovery Task Force. Welcome, all of you.
    Hopefully today we will learn a bit more about how the 
Departments and the task force will take responsibility for 
these activities and these dollars. Overall the Congress 
provided $50.5 billion, with the Transportation/HUD 
subcommittee making up $29 billion of the funds. That is a 
staggering amount of money, and by sheer volume there is a lot 
of oversight to be done.
    In hindsight, looking at the funds and the results of what 
was provided after the Gulf Coast storms, I don't know if the 
Federal Government has shown that it knows how to plan, 
oversee, or implement the strategy for how the CDBG dollars 
will be used effectively. There is no emergency CDBG program 
authorization to follow, or formula to use, to determine the 
best and appropriate response for the scale of such a response.
    I think we can all agree that the way we have gone about 
addressing disaster recovery in this country has been 
inconsistent. Speaking for many thousands of counties and 
families in the 43 States with a declared disaster in 2011, I 
can tell you we didn't see a Sandyesque response from the 
administration. There wasn't a $50 billion request or response 
that year. The members of the--THUD Subcommittee managed to 
carve out a total of $400 million in CDBG for all those 
affected by the 2011 disasters, roughly 33 cents on the dollar 
of damage. Ironically, New York was the big winner that year, 
receiving most of the money after Hurricane Irene.
    Hurricane Sandy comes, and in no way am I downplaying the 
damage caused by the storm, but the CDBG request comes in at 
about $4 to $5 for every dollar of damage. It is kind of hard 
for me to explain that discrepancy back home to the communities 
that were under water, or completely blown off the map, 
receiving pennies or nothing at all to rebuild.
    So in addition to how we got to this number, I have some 
questions on how the Departments will allocate those funds, how 
they expect the grant recipients to use the funds, and what 
specific roles the task force will play in this recovery.
    We welcome our witnesses, and we look forward to your 
testimony and your answers to our questions. I will recognize a 
few people here for their statements, and then the witnesses, 
and we will move on.
    First of all, Mr. Pastor.
    Mr. Pastor. Good morning, Mr. Chairman.
    Mr. Latham. Good morning.
    Mr. Pastor. Thank you very much.
    I'd like to welcome all the panel members. I look forward 
to hearing your testimony.
    This is an important oversight hearing. Passing the 
supplemental appropriation bill in January was the right thing 
to do by providing relief to the communities that were 
destroyed by Hurricane Sandy. The ranking member of the full 
committee Mrs. Lowey, who will join us a little later, knows 
firsthand about the damage that occurred in New York.
    We must make sure that the Sandy funds first are 
distributed efficiently and effectively to repair the damage to 
the transportation and housing infrastructure, and, secondly, 
that critical improvements are made to help prevent damage to 
these facilities in future storms.
    With that, Mr. Chairman, I thank you for the time, and I 
turn back my time to you so we can get back to the questions.
    Mr. Latham. Okay. I don't know if there are any other 
Members here that wish to make any kind of a statement at this 
point. No, okay.
    We will hear from our witnesses now. Please summarize your 
remarks, and your full written testimony will be included in 
the record.
    So we will start with Mr. Porcari. Welcome.
    Mr. Porcari. Thank you, Chairman Latham, Ranking Member 
Pastor, and members of the committee. We appreciate the 
opportunity to discuss the Department of Transportation's 
accomplishments implementing the Disaster Relief Appropriations 
Act of 2013. And let me first thank the subcommittee for its 
critical role in appropriating these funds. We know that we are 
stewards of these funds, and it is something that we take very 
seriously.
    When Sandy hit, the damages didn't just take a tragic human 
toll, it also dealt a devastating blow to the regional 
transportation system. As soon as the storm was identified for 
potential landfall along the east coast, DOT staff began 
working with FEMA to monitor the storm's progress and prepare 
to assist where needed. We activated our emergency response 
team and embedded response team members in local emergency 
operations centers.
    Fifty-eight DOT employees were deployed to the joint field 
offices in New York and New Jersey to help restore 
transportation and infrastructure immediately afterwards and to 
provide FEMA with additional assistance in the immediate 
aftermath. As a result, the Federal Highway Administration was 
able to provide $59 million in quick-release emergency relief 
funds just days after the storm hit to New York, New Jersey, 
North Carolina, Rhode Island, and Connecticut, and help start 
repairs on damaged roads and bridges.
    Despite substantial damage to its air navigation services 
equipment, the Federal Aviation Administration restored normal 
air traffic operations quickly by working around the clock to 
repair and replace equipment. Our Maritime Administration 
provided ships that fed and housed 968 emergency responders and 
ensured that 11 vessels were able to carry more than 2.7 
million barrels of petroleum products into the affected area. 
Our Federal Transit Administration worked with the General 
Services Administration to procure 250 buses that replaced lost 
commuter rail and transit service in New Jersey.
    All of these immediate response efforts helped restore 
affected transportation systems as quickly as possible. And, 
again, thanks to this committee, the Disaster Relief 
Appropriations Act of 2013 provided $13.1 billion to the 
Department of Transportation and has allowed us to continue 
efforts to support our State and local partners with long-term 
transportation recovery and restoration efforts.
    This will go a long way toward rebuilding from Hurricane 
Sandy. However, let me be clear. Sequestration will cut over 
$650 million from funds recently provided through the Disaster 
Relief Appropriations Act of 2013. The brunt of these cuts will 
be felt in our work to strengthen our critical transit and rail 
infrastructure in the face of future natural disasters.
    DOT has make significant progress in implementing the 
Disaster Relief Act. On February 6th, the FTA published a 
notice in the Federal Register about the availability of the 
first $2 billion in funding for repair work, and we have 
already received several grant requests. FTA has allocated more 
than $390 million to date as the first installment of Hurricane 
Sandy relief funding, and next week we anticipate announcing 
more than $150 million in additional grants to States that 
include New Jersey and New York. These reimbursements were 
carefully vetted and will begin to alleviate the financial 
burden on the hardest-hit transit agencies.
    The Federal Highway Administration (FHWA) has been using 
its well-established emergency relief program to provide 
Hurricane Sandy funding to address highway repairs. FHWA 
allocated $489 million in funding to the States affected by 
Hurricane Sandy. Amtrak has spent $17 million on recovery work 
to date, which includes repairing tunnels and signals, draining 
flooded areas, and removing debris. The Federal Aviation 
Administration continues to address Hurricane Sandy damage at 
LaGuardia, JFK, Newark Liberty, and Teterboro Airports. Most of 
this damage was at FAA facilities, and includes repairs to 
roofs, walls, navigation systems, power and equipment.
    We are ensuring that funds provided in the Disaster Relief 
Act and are managed properly and with the same strong internal 
controls used to administer other reimbursable funds at DOT.
    As we continue our Hurricane Sandy response efforts, we 
recognize our success is due in large part to our effective 
relationships with State, regional, local--and local partners. 
They have been critical to our understanding of local needs and 
continue to be important as we continue our recovery and repair 
work.
    With that, let me thank you again for inviting me here 
today, and I will be happy to answer any questions.
    Mr. Latham. Thank you very much for your testimony.
    [The information follows:]

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    Mr. Latham. Mr. Tombar.
    Mr. Tombar. Chairman Latham, Ranking Member Pastor, and 
members of subcommittee, thank you for the opportunity to 
testify today regarding relief and recovery from Superstorm 
Sandy, particularly with respect to the actions of the 
Department of Housing and Urban and Development. As Senior 
Advisor for Disaster Recovery to HUD Secretary Shaun Donovan, I 
have been deeply involved in those activities. And I am joined 
today by Marion McFadden, who is currently serving as the Chief 
Operating Officer of the Hurricane Sandy Task Force, 
established by President Obama and chaired by Secretary 
Donovan. We will both be pleased to answer any questions for 
you.
    Superstorm Sandy and a nor'easter that followed had an 
immense and varied impact. The storm directly affected more 
than 17 million people, and Superstorm Sandy caused tens of 
billions of dollars in damage and is estimated to be the second 
most costly storm in American history.
    The Federal response to Sandy continues to involve 
unprecedented cooperation among Federal, State, local and 
tribal authorities. HUD, FEMA and other parts of the Department 
of Homeland Security, as well as Departments of Transportation 
and other Departments and agencies, are all working together in 
coordination with State, local, and tribal officials.
    HUD's response to Sandy built on our experience from past 
major storms and disasters. I have addressed these efforts in 
my written testimony and would like to briefly summarize them 
now.

                             HUD'S RESPONSE

    Immediately after the storm, HUD provided help to storm-
displaced families to find temporary replacement housing, gave 
direct assistance to persons living in and owners of HUD-
assisted housing damaged or destroyed by the storm, worked to 
encourage the private sector to help displaced families, and 
deployed HUD personnel to help staff FEMA disaster recovery 
centers and do other storm-related work.
    HUD made several regulatory changes to benefit those 
impacted by the storm, including providing foreclosure 
protection for storm victims with FHA-insured mortgages through 
a mandatory 90-day moratorium on foreclosures. On January 31st 
of this year, we extended that moratorium for an additional 90 
days. We are also offering assistance to storm victims who must 
rebuild or replace their homes.
    HUD is providing help to affected State and local 
governments in the form of technical assistance to HUD 
grantees, waivers of existing rules so that existing Federal 
CDBG and HOME funds can be used for disaster relief, and work 
with State and local governments and tribes to develop interim 
housing plans and to provide loan guarantees for housing 
rehabilitation. These efforts are ongoing.
    I would like to turn now to the longer-term Sandy recovery 
and rebuilding efforts, including the recent supplemental 
funding provided by this committee and the whole of Congress, 
and the work that the Hurricane Sandy Task Force--Rebuilding 
Task Force is doing.
    As you are aware, on November 15th, President Obama 
announced that HUD Secretary Donovan will provide coordination 
in support of rebuilding efforts, and issued an Executive Order 
on December 7th providing that Secretary Donovan would serve as 
the chair of the Hurricane Sandy Rebuilding Task Force. The 
Secretary's responsibilities are in accord with the National 
Disaster Recovery Framework and involve cooperating closely 
with FEMA and the 20 other agencies already involved in 
recovery efforts.
    The focus of this task force is on coordinating Federal 
support as State, local, and tribal governments identify 
priorities, design individual rebuilding plans, and, over time, 
begin implementation. The Secretary is the Federal Government's 
primary lead on engaging with States, tribes, local 
governments, the private sector, nonprofit community and 
philanthropic organizations, and many others on long-term 
Hurricane Sandy rebuilding.
    On January 29th, President Obama signed the Disaster Relief 
Appropriations Act of 2013. The supplemental funding bill funds 
FEMA projects; is support for Small Business Administration and 
its disaster loan program, and HUD Community Development Block 
Grant money. These funds will be provided to communities as 
well as for a range of other critical projects.
    Federal agencies and departments have already begun the 
process of making this money available to State and local and 
tribal governments in the region. HUD announced the first round 
of allocations of CDBGDR funding, totaling $5.4 billion. This 
represents fastest-ever allocation following the signing of an 
appropriations bill.
    The role of this task force is not to dictate how funding 
is used; it is to find ways to leverage and maximize the impact 
of Federal dollars, and to help communities access this funding 
and use it in support of their development priorities.
    The Disaster Relief Appropriations Act also provides 
funding to help impacted communities effectively mitigate 
future risk of disaster and prevent losses of this magnitude.
    Both HUD and the task force look forward to continuing to 
work with this committee; subcommittee; others in Congress; and 
our Federal, State, and local and tribal partners to help make 
local rebuilding visions a reality and to support communities 
that are rebuilding in a way that makes them stronger, more 
economically competitive, and better prepared to withstand the 
next storm.
    Thank you again for the opportunity to testify today. Ms. 
McFadden and I will be happy to answer any questions you have.
    Mr. Latham. Thank you very much.
    [The information follows:]

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    Mr. Latham. Ms. McFadden, did you have a statement?
    Ms. McFadden. I do not, sir.
    Mr. Latham. Okay. Again, thanks to everyone.
    We will be operating under the 5-minute rule. We are 
actually going to enforce it today. We will have some votes 
here within an hour, so we need to keep moving.
    I will start with the task force itself. It was created in 
December. It is a new player in the disaster recovery business. 
I am not sure if we are totally aware of what its role is.
    Ms. McFadden, I am just wondering, are you planning on 
utilizing the entire $8 million for the DRF, and how many 
people have you hired? How many more you expect to hire? Are 
there people detailed from other agencies? If you could, give 
us the number and where those people are. Is there an 
organizational chart for the task force?
    Ms. McFadden. Okay. Thank you for your questions. Be happy 
to make an organizational chart available to you.
    We currently have 48 members on board, which represents 29 
new hires under the Stafford Act; one volunteer on an OPA from 
a nonprofit organization; and the balance are detailees, the 
bulk coming from HUD. We also have DHA-FEMA detailees, and 
Energy and NOAA detailees to the task force.
    We are expecting to use the almost $8 million provided to 
us through an IAA with FEMA. We have about eight members in New 
York and eight members in New York--excuse me, in New Jersey, 
and the balance in Washington.
    Mr. Latham. Okay. Have you convened or presided at meetings 
of the task force so far? And, if so, who all attended? If 
there are some examples about how you have worked with FEMA, or 
is there a schedule for the rebuilding strategy?
    Ms. McFadden. Yes, sir. We have convened meetings of the 
Cabinet members. We have virtually the entire Cabinet 
participating. We have also had designees provided from 20 
different agencies established in the Executive Order, and 
informal meetings. We are meeting with different working groups 
essentially weekly.
    I am sorry. Please tell me the rest of your question, sir.
    Mr. Latham. Well, working with FEMA--and is there a 
schedule for the rebuilding strategy?
    Ms. McFadden. The Executive Order asked for a rebuilding 
strategy to be submitted to the President within 180 days of 
the first convening, which was February 5th. So we took that 
out to August 2nd.
    And, yes, we are working very closely with FEMA, both here 
in Washington, and in New York and New Jersey, close 
coordination with the joint field offices.
    Mr. Latham. Okay. If the task force, I guess, is supposed 
to disband after 60 days when the strategy is completed, how 
are you going to monitor the progress and have accountability 
at that point?
    Ms. McFadden. So we have established the project management 
organization function which grows out of the Recovery Act as a 
way of ensuring transparency and the spend across the Federal 
Government. And we are very much cognizant of the fact that we 
will be gone by the end of the fiscal year and the need to root 
that function, as well as all of the various policy issues and 
areas that we are looking at, a need for permanent owners 
across the interagency.
    Mr. Latham. Okay. Can you tell us how much has been 
expended on travel, and what is the plan for future travel 
expenditures? The plan we have seen includes $295 per night for 
hotels, which is above the per diem. Explain to us how you can 
circumvent the per diem rates.
    The plan also includes $3.3 million for contract services 
to include strategic counseling and stakeholder management 
consulting. If you could tell us how those contracts were 
competed, and who was awarded the contracts, the period of 
performance, and a copy of the 180-day work plan for the 
contracts. If you could provide those, actually, outside.
    Ms. McFadden. I would be happy to provide you with 
everything that you have requested, sir.
     We have no intent of going beyond the per diem, so I am 
not sure where that----
    Mr. Latham. Two hundred ninety-five is in your spending 
plan.
    Ms. McFadden. I will look into that. It may be that it is 
an estimate based on New York rates and New Jersey rates. But I 
will get back to you with that information.
    In terms of the period of the performance for the 
contracts, we are not expecting to use contractors throughout 
the entire duration of the 180 days. The period of performance 
was stacked at the beginning of the task force during start-up 
phase. When we were unable to fully staff the task force, we 
relied on contracts, one contract that had been competed by the 
Department.
    Mr. Latham. So it is all under one contract?
    Ms. McFadden. The bulk is under one contract, sir. We did 
request funding for the ability to do stakeholder management 
contracts, but we have not utilized that authority yet. And we 
also have one staff member who is provided under contract for 
secretarial services. But the bulk is the strategic contract.
    Mr. Latham. Okay. My time is up.
    Mr. Pastor.
    Mr. Pastor. Mr. Chairman, I am going to yield to the 
ranking member.
    Mr. Latham. Yes. If you would like an opening statement. We 
welcome Mrs. Lowey.
    Mrs. Lowey. Thank you so much. And I would like to thank 
Chairman Latham and our witnesses and congratulate my friend 
from Arizona from becoming the new ranking member of this great 
subcommittee. And I thank the witnesses for appearing before us 
this morning.
    Whether it is a low flood insurance estimate for homeowners 
or a small business disaster loan with less than ideal terms, I 
have heard numerous complaints from my constituents that the 
assistance has been inadequate, and resources aren't 
comprehensive.
    Mr. Tombar, I applaud the Department for recently 
allocating $5.4 billion of the $16 billion Community 
Development Block Grants that you received in the Sandy 
supplemental. I hope you will spend some of your testimony--and 
I hope I didn't miss all of it--elaborating on what methodology 
HUD used to calculate this initial allocation, and how HUD made 
the determination to prioritize certain counties over others.
    The Sandy relief bill also included almost $11 billion for 
the newly authorized Public Transportation Emergency Relief 
Program, which will repair and prevent future damage to transit 
systems. As you know, numerous subway tunnels flooded; took 
months to restore full service to all areas. And since New York 
and New Jersey depend heavily on public transportation in their 
daily lives, it is incredibly important that these repairs and 
improvements are advanced in a timely manner.
    So I thank you very much, Mr. Chairman, and I will save my 
question for when it is my turn.
    Mr. Latham. Okay. Mr. Pastor, do you have questions?
    Mr. Pastor. I have some questions, but--
    Mrs. Lowey. You want me to ask questions?
    Mr. Pastor. I will yield to her. I will get my 5 minutes.
    Mrs. Lowey. You are so kind.
    Mr. Pastor. She started with CDBG. I am also interested in 
how they got to that number and how they are going to allocate 
it.
    Mrs. Lowey. Okay. So after many months of touring my 
district and speaking to hundreds of small business owners and 
homeowners affected by Sandy, I have determined that both 
Rockland and Westchester Counties suffered roughly equal damage 
from Hurricane Sandy. I have reviewed FEMA's unmet individual 
assistance and SBA's disaster loan program data. They confirm 
my on-the-ground experience. Yet Rockland is categorized as a 
most impacted and distressed county, while Westchester is not.
    So can you please explain to me what estimates and 
methodology were used for determining the most impacted and 
distressed counties designation in the initial round of 
allocations, and should I be concerned that Westchester will 
not get all the support it needs through the CDBG program 
because it lacks this designation? And how will HUD allocate 
the remaining two-thirds of the funds? And, like Rockland, 
could Westchester also be designated a most impacted and 
distressed county in future awards?
    Mr. Tombar. Thank you, ma'am, for your question.
    Let me first say that we have a very detailed description 
of the methodology that we use for allocations that we will 
provide to the subcommittee following. But I will try my best 
to summarize the procedure that we use, without embarrassing 
the statisticians and economists who worked on this back at our 
headquarters office.

                              UNMET NEEDS

    Essentially you pointed out two sources of data that feed 
into what we call an unmet needs analysis. The methodology that 
we have used for HUD disaster recovery funds is to try, to the 
extent possible, to meet the unmet needs, if not totally on a 
pro rata basis. So we will look across the damaged and impacted 
areas to determine unmet needs based upon FEMA registrations 
and their analysis of the extent of damage. And subsequently 
and especially for business losses, we will look at the SBA 
applications and their estimates of damage, and what is covered 
by both of those agencies, and what is estimated to be covered 
by private insurance. And that gives us a sense of what the 
unmet needs are.
    I should say that this first allocation focused 
specifically on the needs of--the unmet needs from housing and 
from business loss. They did not take into account what it 
usually is, the largest driver of an unmet needs analysis, and 
that is infrastructure damage. And the reason we did not take 
that into account is because it typically takes FEMA much 
longer to arrive at determinations of what the overall 
infrastructure damage to disaster-impacted areas is. They go 
through an extensive process through--their project worksheet 
process, they call it--and based on that, will identify what 
those needs are.
    You asked about subsequent allocations. There are a couple 
that you can expect. One is Congress directed us to use the 
money that was provided in disaster CDBG supplemental funding 
not only for Hurricane Sandy-impacted areas, but also to go 
back and look at those areas impacted in calendar year 2011 and 
other disasters of 2012. We have not made the allocations to 
those impacted places yet, but we will plan to do so sometime 
in the near future.
    There is also a requirement in the appropriation that we 
make funds available for disasters that occurred this calendar 
year. And, obviously, we need to wait until December 31st to 
know conclusively the impacts of disasters this calendar year.
    So we will make that allocation for 2011 and 2012 
disasters. There will be another one for 2013 disasters 
sometime subsequent to this calendar year. And once we have a 
better understanding of the infrastructure unmet needs, we will 
make an allocation based upon that. And it is very likely that 
the determination about the most impacted counties will 
broaden, change in some way, and we will make our allocations 
accordingly.
    Mrs. Lowey. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Latham. Thank you.
    Ms. Granger.
    Ms. Granger. Thank you, Mr. Chairman.
    I don't know whether this question is to Ms. McFadden or 
Mr. Tombar, because you both talked about the task force. But 
do you plan to provide progress reports as you develop the 
plans?
    Mr. Tombar. That is hers.
    Ms. Granger. Ms. McFadden.
    Ms. McFadden. We are providing those reports to the White 
House, and to the NEC and NSF staff, and the Domestic Policy 
Council.
    Ms. Granger. So we could have that access also?
    Ms. McFadden. I believe so.
    Mr. Tombar. Yes.
    Ms. Granger. Okay. And I have another question, and this is 
for Mr. Tombar. And it has to do with the supplemental $16 
billion for community housing. For Sandy and other eligible 
disasters for 2011 through 2013, could you give me an example 
or some examples of the past natural disaster projects, and 
also how you are handling concerns that monies for those would 
take away from money for Sandy's efforts?
    Mr. Tombar. Thank you, ma'am. It is a very good question.
    As the chairman mentioned, there are places that were 
impacted by disasters last year, in calendar year 2011. In 
fact, it was one of the worst disaster years on record. I think 
there were some disasters, major disasters, in 48 States 
totaling over 80 in total. And the chairman mentioned that this 
subcommittee provided $400 million in disaster CDBG that we 
have allocated to those places that were most impacted.

                          DISASTER MITIGATION

    The language, as you point out, in the disaster 
supplemental that was just provided by Congress directs the 
Department to go back and I call it ``plus up'' those places. 
The $400 million, while a very generous allocation, 
appropriation to us, wasn't enough for us to allocate to the 
total estimates of unmet need that existed. So what we are 
doing is taking into account the allocations we have already 
made, the details on the unmet needs that remain, and making a 
subsequent allocation that will be forthcoming, I would 
imagine, within 2 or 3 weeks that will give additional 
resources to address those unmet needs that remain.
    For 2013, I would like to tell the Secretary that we 
canceled all disasters for 2013 so we don't have to worry about 
that, but I am not as good of a predictor of the future as I 
would like to be. So the plan is to hold back some of the 
appropriation that you all provided to the Department to 
address those as, in fact, we have been directed to do.
    Ms. Granger. Thank you.
    Mr. Latham. Could I just use some of your time here?
    Ms. Granger. You may, Mr. Chairman.
    Mr. Latham. What was your request for 2011? Four hundred 
million was greater than what you requested, wasn't it?
    Mr. Tombar. I cannot remember the details of that request. 
I don't recall.
    Mr. Latham. How did you come up with $17 billion this time, 
and you way undershot what it was in 2011, where the 33 cents 
on the dollar of damage, and this is about a $4 to $5 per 
dollar of damage?
    Mr. Tombar. Sure. The way we arrived at the numbers from 
one year to the next I cannot answer with complete certainty 
now, but we can follow up with a question on that. But I will 
say that we do recognize that $400 million, given the extent of 
the damage last year----
    Mr. Latham. You don't know what the request was from the 
administration?
    Mr. Tombar. I don't recall it was. It was made several 
months ago, and I am sorry, I can't remember the details. I 
don't want to make something up without full recall.
    I should say about the $16 billion that has been provided, 
one of the things that we know is that it is--and in your own 
State, actually, Cedar Rapids proves this point--that it is 
very important to, as States and communities recover from 
disasters, to do projects that will mitigate against future 
disasters. The mitigation, unfortunately, is a lot more costly 
than building back as it was. And so you will see in the 
principles of the requests that we put forward this time from 
the President----
    Mr. Latham. That was in 2008.
    Mr. Tombar. Yes, sir, I understand. But what Cedar Rapids 
did with the funds in 2008 puts it in a better position should 
another disaster of that type happen in that community. By 
moving everyone out of the Time Check neighborhood, it assures 
that, as floods have happened in that community before, that 
when it floods again, that there will be nothing for it to 
destroy.
    Mr. Latham. You are out of time, Ms. Granger.
    Ms. Granger. You used it very well.
    Mr. Latham. Mr. Quigley.
    Mr. Quigley. Thank you, Mr. Chairman.
    D.C. can be a very isolating place. I haven't toured the 
sites, as Mrs. Lowey and many others have, but I think it is 
fair to not confuse activities and organizational charts with 
effectiveness. When will things get fixed? Now, we can't 
control everything that local governments do and how quickly 
they move even in coordination with us, but for the things we 
can control, as with the FAA, what is the time frame? When will 
most of these things be repaired? When will they all be done?
    Mr. Porcari. It is an excellent question. Starting with 
aviation--and, again, we had four airports that were 
essentially closed, LaGuardia, JFK, Newark and Teterboro. The 
work on the navigational aids, we had, first of all, 
prepositioned supplies and personnel before the storm hit. We 
had generators with a week's worth of fuel ready to go. Given 
the intensity of the storm, some of the navigational and other 
facilities were actually destroyed. So in the case of an 
instrument landing system, for example, that had to be 
replaced, we had the spare parts in our depot in Oklahoma City. 
We built it there, built it in a trailer there, transported it 
to the site. And we had partial openings at several of the 
airports within the first 24 hours.
    I should also mention before the storm hit, working with 
the airlines, they pulled down their schedules in advance so 
that aircraft, crews, and passengers were not stranded at the 
airports.
    At the same time, the Port Authority of New York and New 
Jersey, they operate the four airports, was repairing their 
portion of the equipment, which included the landing lights, 
taxiway lights, and other air-side equipment.
    We were very pleased that as the water levels receded, we 
were able to remove debris, get the NAV aids back up, and have 
partial service very quickly in the airports.
    With transit, because most of the tunnels flooded, it was 
more difficult. The recovery started with bus bridges, for 
example, using buses instead of heavy rail and commuter rail 
systems. I had mentioned in my testimony that with the General 
Services Administration, we had procured up to 250 buses that 
were privately procured to use on a temporary basis for New 
Jersey Transit. In New York and Connecticut, bus bridges were 
used as well.
    From our perspective, there was an extraordinary level of 
cooperation with the transit systems throughout the storm event 
and afterwards in restoring service. I would point out that 
there are portions of the transit system that are still not 
reopened because of the damage, but the bulk of the regional 
system is operating.
    On the highway side, for the Federal-aid-eligible highways, 
our long-established emergency relief program in New Jersey, 
New York, and Connecticut in particular moved very quickly to 
get that ER funding out to the recipients. We have a day-to-day 
working relationship through our division administrators with 
those State DOTs. As they identified damage, they had 
contractors in place through preapproved contracts, got the 
work done, and in some cases we got the emergency relief 
funding on the highway side out to them within hours of their 
request.
    Mr. Quigley. Given the limited time we have, can you give 
me your best guess on when the balance of things would be 
repaired to the extent you possibly can tell.
    Mr. Porcari. In general terms, most of the highway work is 
done. The aviation work is largely done. Rebuilding our spares 
inventory and doing mitigation, raising and hardening some of 
the aviation structures, some of that still needs to be done.
    The real work is on the transit side. There are cases in 
some of the flooded tunnels where the entire signaling system 
was ruined because of the saltwater, and it will be 24, 36 
months or more in some cases before full restoration of those 
facilities.
    Again, the systems are operating on a stop-gap basis. The 
permanent repairs and the mitigation work, which will harden 
the system in the future, will take much longer; in some cases, 
a matter of years. I would say that we already have allocated 
on the transit side about almost $400 million. We actually have 
outlays on the highway side, and we are working on a daily 
basis with our partners on the local and State level.
    Mr. Quigley. Thank you, Mr. Chairman. I yield back.
    Mr. Latham. Thank you, Mr. Quigley.
    Ms. Herrera Beutler, do you have any questions?
    Ms. Herrera Beutler. No, thank you.
    Mr. Latham. All right. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. I commend you for 
holding this hearing on this very important topic. And I also 
thank the witnesses for their testimony and the good work that 
both Departments are doing.
    As the ranking member on Homeland Security, I want to focus 
in both the case of HUD and DOT on the intersection between the 
FEMA efforts and your Departments' efforts and the way this 
coordination is taking place going forward.
    So I want to start with HUD. As Mrs. Lowey already noted, 
HUD has been required to make initial awards of 33 percent 
within 60 days of enactment of the supplemental, and those 
allocations have taken place. Her focus was on what determined 
the allocations in the initial round. I want to focus on the 
uses to which that money is being put, and particularly on the 
intersection with FEMA's housing efforts, both the immediate 
response and the longer term.
    I visited New York last week with Chairman Carter of our 
subcommittee. We were able to go to lower Manhattan as well as 
to the Rockaways and some of the beach areas that were most 
affected. One of the things that is immediately striking, 
certainly in lower Manhattan, but also across the region that 
we saw, is there are no FEMA trailers. For better or worse, 
that is a problem we don't have.
    One of the reasons there are no FEMA trailers, as I 
understand it, is there is no place to put FEMA trailers in 
many of these areas. But, more seriously, there has been a 
decision to handle emergency housing, short-term relief, in a 
different way. And as I understand it, that was a decision in 
which you participated and where some CDBG money has 
facilitated this solution. People are being put back in their 
homes much more quickly. And there are emergency repairs going 
on, as I understand it, even when there might be some questions 
in some cases about the long-term habitability of that home. 
People are being put back in their homes, where possible, 
through emergency repairs. And then, hopefully, many of those 
places can be more extensively repaired, and people can stay in 
their neighborhoods.
    In other cases, they won't be repaired. Some of those areas 
may be cleared. There will be mitigation efforts to rebuild 
back more soundly and, in some cases, to clear areas that are 
just going to be vulnerable no matter what we do.
    So I know that there has been a blending of CDBG and FEMA 
efforts in this endeavor. I am not sure that I understand the 
division of labor every step of the way. I know the CDBG monies 
are being used to provide matches in many cases.
    But I wish you could elaborate. I would appreciate your 
elaborating what the mix of funding, the mix of efforts has 
been here. And then maybe also reflect on not just the positive 
sides, but some of the possible downsides of this approach, 
because do you have to wonder in some of these cases where this 
housing has been very severely damaged whether we may be 
creating facts on the ground, so to speak, that actually will 
make long-term mitigation, long-term rebuilding more difficult, 
or at least that is one conceivable outcome, of course, that we 
want to avoid. So I wonder if you could just, first of all, 
outline the effort and then address these issues.

                             HUD/FEMA FUNDS

    Mr. Tombar. Sure. Thank you, Congressman Price.
    As you pointed out there is an intersection, in fact a 
pretty considerable intersection, between the work of HUD and 
FEMA. It begins, actually, before the storm even hits the 
shores of the United States, we work together on coordination, 
on responses. As I pointed out in my testimony, we actually 
deployed HUD staff to work in FEMA's disaster recovery centers, 
and did a wholesale inventory of our portfolio of properties 
that had units available, and made those available to disaster-
impacted families. This is something that we routinely do, and 
certainly was done in the case of Hurricane Sandy.
    As Congresswoman Lowey's question pointed out, there is a 
reliance on FEMA data as well as SBA data in our allocation 
decisions about where unmet needs exist. And so it is based 
upon those data that we actually made the allocation, the 
initial allocation, of the $5.4 billion, as you pointed out.
    You mentioned the emergency repair program. This is a 
program that FEMA did under its authority for the first time, 
and that was to address, where there are opportunities, the 
low-hanging fruit, if you will, homes that could be repaired 
rather briefly, quickly with minor repairs of less than $10,000 
to get people back in their homes.
    Mr. Latham. Thank you. The gentleman's time has expired. We 
are trying to get around to everybody this morning.
    Mr. Joyce.
    Mr. Joyce. Thank you, Chairman. And I would certainly give 
any of my 5 minutes to you if you had follow-up on the question 
that you ran out of time on.
    Mr. Latham. No.
    Mr. Joyce. Okay.
    Thank you for coming.
    Mr. Tombar, if you would, do you know, is there any 
significant data that shows that due to the Hurricane Sandy, 
that buildings have been abandoned?
    Mr. Tombar. There indeed are some buildings that have been 
completely destroyed by the storm in places. So, yes, they have 
had to, because of safety reasons, been abandoned.
    Mr. Joyce. Will a significant amount of the money that has 
been appropriated to you be used to demolish those buildings?
    Mr. Tombar. The demolition is typically covered by FEMA 
public assistance. So we don't expect that HUD CDBG dollars 
will necessarily be used in demolition since there is already a 
source of funding in the Federal Government for that. But there 
could be projects for which there is a gap in the FEMA 
assistance that HUD may come along, and HUD's funding may come 
along and match the FEMA assistance to help with some of those 
projects. It is conceivable. But by and large, FEMA's 
assistance covers those types of things under public 
assistance.
    Mr. Joyce. Thank you. I yield back.
    Mr. Latham. Thank the gentleman.
    Mr. Pastor.
    Mr. Pastor. Mr. Chairman, I yield my time to the ranking 
member.
    Mr. Latham. The Gentlelady is recognized.
    Mrs. Lowey. I just want to thank the Chairman and the 
generosity of my friend Ranking Member Pastor.
    It is true that my district has experienced the one--what 
do they say, once-in-100-year storms twice in the last 2 years, 
with Hurricane Irene and Sandy. And as I visit with my 
homeowners and business owners, you see that they are really 
making some very critical decisions: Should they repair? Should 
they relocate? So getting this information early and the 
assistance they need is so very important.
    I wanted to follow up with you, Mr. Tombar, because HUD 
announced $5.4 billion for the initial round of CDBG 
allocations. And the allocated funds were made to address the 
unmet housing and economic revitalization needs for Hurricane 
Sandy. However, the allocation does not reflect unmet needs 
from Hurricane Irene or Tropical Storm Lee, even though 
grantees like New York State plan to address these needs in 
their proposed CDBG action plans.
    So for my homeowners that are trying to figure things out, 
who have unmet needs from both hurricanes, it would be very 
helpful if they had received all the funding at once so that 
they can really plan, enter into contracts to repair their 
homes.
    Why didn't HUD include unmet needs for these past storms 
into its calculations for this allocation? And I just wonder 
how that decision was made. I guess you were concerned that you 
would be taking funds from Sandy if you dealt with the other 
unmet needs, but very often one builds upon the other.
    Mr. Tombar. Certainly. And let me say I can appreciate the 
pain and the anguish that you go through just seeing the impact 
on your community. I am a New Orleans native and actually had 
the experience of going back to New Orleans after the storm and 
running the housing recovery program for the State of Louisiana 
following that storm, hurricane Katrina, and know that this 
is--the work that you are talking about has a real and human 
impact.
    But to get to your question about the allocation and its 
use not only for Hurricane Sandy victims, but for Hurricane 
Irene and Tropical Storm Lee victims, we have given the State 
of New York the ability to use its portion of the $5.4 billion 
allocation to address the needs from last year's disasters as 
well.
    The truth of the matter is, as I said in my initial answer 
to your first question, is that we will be coming behind and 
giving additional funding to the State of New York primarily 
driven by the needs that will arise from infrastructure damage 
yet unseen. I will tell you from my own experience, the $1.8 
billion that has been allocated, while the needs are great, 
recovery is hard, and it will take a while for them to spend 
all of that money.
    And so knowing what the needs are and what the plans were 
for last year's disasters, what we suspect will happen is that 
those will be addressed first and foremost because they are 
already, if you will, in the pipeline. So I would expect that 
your constituents would see immediate assistance given to them 
from this initial allocation. And given the fact that there 
needs to be planning and infrastructure capacity, if you will, 
put in place to address the more current needs from Hurricane 
Sandy, we would expect that that money would start to spend a 
little bit later.
    Mrs. Lowey. Perhaps I will just ask one more, couple of 
minutes left, of Deputy Secretary Porcari.
    In February, the FTA issued a notice soliciting 
applications for the first $2 billion in recovery funding, and 
less than $500 million has been awarded for repair and recovery 
thus far. Is there anything you are doing that could speed up 
the remaining $1.5 billion? And could you update us on how the 
Department intends to allocate the remaining funds?
    Mr. Porcari. It is an excellent question. First I need to 
again thank the committee for the appropriation for Sandy 
relief. We are trying to move both quickly and carefully, and 
so, for example, we have set up a financial stewardship task 
force as part of this and brought in our inspector general as 
part of the process, so as the funds are expended, we know we 
are doing it right.
    But of the first $2 billion, the intention with that for 
the Federal Transit Administration is to reimburse as quickly 
as possible for work already done to alleviate some of the 
cash-flow issues for the transit systems. That $390 million--
and you will very shortly see subsequent awards on that--has 
been doing that. We have been working, literally, on a daily 
basis with the transit agencies. And as we go past the $2 
billion mark, the interim final rule which establishes the 
emergency relief program for the Federal Transit Administration 
is well along, it is under review right now, it will be 
followed by guidance very shortly. We expect that that rule and 
guidance will be in place before the allocation of the full $2 
billion. So there will be no interruption to the transit 
systems, Amtrak, or the regional rail operations. We are trying 
to balance moving the money out the door to the agencies 
quickly with the need to make sure that we have the proper 
controls in place.
    I should also mention it started immediately in the 
aftermath of the storm with the mission assignment that FEMA 
gave us for project management oversight, where we used our 
project management oversight contractors to look at the damage.
    Mr. Latham. Thank you very much.
    Mr. Porcari. Thank you.
    Mr. Latham. Mr. Dent.
    Mr. Dent. Thank you. I appreciate you all being here today.
    Sandy, obviously, was a big issue for me. I had a half a 
million people in my congressional district, half a million 
people out of power. Thankfully the storm, the brunt of the 
storm, did not hit my constituency as we had anticipated by the 
modeling. Sadly, for our friends in the East, in New Jersey and 
New York, they took the brunt of it and paid a very heavy 
price. That said, we had some real impacts in the Eastern 
Pennsylvania.
    But my main concern today is about the--I guess, some of 
the housing programs. I think the first round of allocations 
for CDBG disaster relief was about $5.4 billion, if I am not 
mistaken.
    What is the interaction between the existing CDBG funds and 
many of these relief funds that you are overseeing?
    Mr. Tombar. Thank you, Congressman, for your question.

                      EXISTING/SUPPLEMENTAL CDBGS

    The existing CDBG funds, as I point out in my testimony, 
and HOME funds that are existing, immediately after the storm 
declaration of disaster we make those funds known to our 
grantees that they have the ability to request waivers from us 
to use those funds for disaster recovery and relief efforts 
should they choose. While we made that offer, none of the 
existing grantees actually executed in this particular case a 
decision to do that. We had no requests for waivers there.
    The supplemental CDBG funds really in a substantial way 
provide enough resources to address the needs that are there. 
That which these grantees typically get on an annual basis in 
terms of appropriation usually is--far outweighs the needs that 
communities have that are directly hit by major disasters, 
major catastrophic disasters like Hurricane Sandy. So what the 
subcommittee did this time is what we have seen happen in the 
past to help address those needs that we know are unmet by 
existing resources.
    Mr. Dent. I know you have allowed for waivers for CDBG HOME 
dollars. Are the relief funds, are they being firewalled at 
all?
    Mr. Tombar. In what way, sir?
    Mr. Dent. Well, firewalled from--you know, I'll say the 
CDBG funds and the relief funds. Is there any firewalls there?
    Mr. Tombar. Well, those funds have to be used specifically 
to address impacts of the disaster. That is what the Congress 
directed us, and that is certainly what we are providing in a 
way of our notice as guidance to the grantees, that their plans 
must be tied to the impacts of the disaster, and that the 
funding must be used in that way.
    Mr. Dent. Okay, because we have had some issues where I 
have seen some communities I will say misappropriate CDBG 
funds. I saw one of those in my own community actually, and it 
is just an issue that has been a concern to me, that the CDBG 
funds are--they are being used for the purposes for which they 
are intended. And I had written the Department about this 
previously. And I just wanted to make sure that there is no 
abuse of these funds, particularly in the aftermath of the 
storm. Again, my constituency was hit extremely hard by this; 
more wind damage thankfully, very little--no flood damage in my 
areas. But that is my main concern.
    I thank you for your attention, and I will yield back to 
the chairman.
    Mr. Latham. Thank the gentleman.
    HUD published a notice of requirement that any rebuilding 
must include a green standard. Is there a statutory requirement 
for this under the block grants?
    Mr. Tombar. No, sir, there is not a statutory requirement.
    Mr. Latham. Is there a requirement in the supplemental?
    Mr. Tombar. The supplemental request that the President 
made, as I was saying in an earlier answer, said that we--we 
were requesting the funds in a supplemental to--in addition to 
just addressing the needs that exist, to mitigate against 
future disasters and to build back, quite frankly, smarter, 
safer, and stronger than what existed previously. And knowing 
that----
    Mr. Latham. So there is no requirement.
    Mr. Tombar. Excuse me?
    Mr. Latham. There is no requirement from the supplemental?
    Mr. Tombar. No, sir. No specific requirement for the 
standards that are there. But there is the flexibility for us 
to make policy determinations.
    Mr. Tombar. But there is the flexibility for us to make 
policy determinations about what, in fact, would be----
    Mr. Latham. Where do you get that authority?
    Mr. Tombar. From the supplemental.
    Mr. Latham. There is no mandate, so you are doing just 
whatever you want to, any requirements you want to with the 
money. No authorization.
    Mr. Tombar. Not at all, sir. What we are doing is taking 
advantage of what is an opportunity. Unfortunately, 
catastrophes like Hurricane Sandy both present us with a 
challenge and with an opportunity, and the opportunity there is 
to build back, as I say, smarter, safer, and stronger than what 
existed previously.

                           REBUILDING SMARTER

    When a home is substantially destroyed, and it may be an 
existing home with old windows and doors and things like that, 
it makes sense to build it back in a way that is more--that 
would be more economically feasible going forward and offers 
better energy efficiency for the residents, especially since 
the money, as you know, is directed by and large to low- and 
moderate-income people. Having the ability to put in high-
efficiency windows, or high-efficiency HVAC systems that would 
lower their ongoing energy costs, that is something that, you 
know, that the Secretary made a determination.
    Mr. Latham. You have the checklist and standard. How much 
additional is this going to increase the cost of the repairs? 
It is already a very expensive area. And also, is there an 
abundance of certified materials and contractors in the area to 
handle all this?
    Mr. Tombar. I am not sure about the supply chain for the 
materials in the area, but I will say that the cost of doing 
these type of things when there is a substantial rehabilitation 
or an overall complete rebuild are greatly diminished by doing 
it otherwise, if you were just to do a rehab on a home that did 
not require a huge level of rebuilding or rehabilitation.
    Mr. Latham. What is the payback?
    Mr. Tombar. There are studies that speak to that.
    Mr. Latham. Do you have those?
    Mr. Tombar. We can certainly provide those to the 
committee.
    Mr. Latham. I mean, it would take decades. I mean, these 
people are sitting out there right now, and you are increasing 
the costs dramatically, slowing down the whole process of them 
getting into a home again. On a commercial building, you could 
maybe see the benefit. But the payback on a lot of these is not 
going to be in these homes for that long. This to me is 
pretty----
    Mr. Tombar. I can say from personal experience, I did----
    Mr. Latham [continuing]. Amazing.
    Mr. Tombar [continuing]. Gut rehab on my home about 5 years 
ago, and it was a 1923 home that had beautiful stained-glass, 
wood-frame windows, but they didn't hold anything in or nothing 
out. And we took advantage of the opportunity of doing a gut 
rehab to put in better windows, and my utility bills have gone 
down considerably. Put in high efficiency HVAC systems in place 
of the window units, and the oil-furnace heat, and have seen a 
return on investment.
    When you are doing the type of repair and rebuild that 
homeowners are going to have to do now to get back in their 
homes, it makes sense to do these things that will in the 
future----
    Mr. Latham. Where do you get the authority for the mandate?
    Mr. Tombar. Well, the authority comes directly from the 
supplemental itself.
    Mr. Latham. Is there a mandate that you do green projects?
    Mr. Tombar. No, sir.
    Mr. Latham. Right.
    Mr. Tombar. No mandate, but the authority.
    Mr. Latham. Right. There is no mandate.
    Mr. Tombar. No, sir.
    Mr. Latham. Right.
    My time is expired.
    Mr. Quigley.
    Mr. Quigley. Mr. Tombar, the question I asked earlier, to 
the best of your ability, in the end what people want to know 
is when will things be fixed? Given the time frame and how the 
sequences are going for funding, again, in this case some of 
this is out of our hands, but the opportunities are there for 
things to get done. If we had this hearing in 6 months, a year, 
2 years, at each point what would you tell us percentagewise 
how much has returned to normal, how much has been rebuilt?

                             SPENDING RATE

    Mr. Tombar. So, there is a requirement that the Congress 
put on this money that from the time the money is obligated, 
that the grantees have 2 years to spend it. So we would expect 
that there would be a pretty rapid spend-down rate for this 
money. How does that translate in terms of percentage of 
overall rebuild? I really couldn't tell you. I will tell you 
that it is difficult recovering from a disaster like this. It 
is difficult and often slow and incremental. And so----
    Mr. Quigley. Well, in the Gulf Coast there wasn't enough 
money, and it didn't come soon enough, right, to help everyone?
    Mr. Tombar. Some people's judgment is that, yes, that there 
was----
    Mr. Quigley. Well, years later things weren't done, right?
    Mr. Tombar. There are still needs that remain in the Gulf 
Coast.
    Mr. Quigley. And how long ago was that?
    Mr. Tombar. Hurricane Katrina was in 2005.
    Mr. Quigley. I am aware you understand this, but in the end 
that is the final analysis, sort of the grade we get as a 
country, how quickly does a community come back. So it had to 
have been one of the two: Either there wasn't enough money, or 
it didn't get to them soon enough that it took that long to 
restore and rebuild. Will those issues exist after Sandy?
    Mr. Tombar. Well, I will tell you, it is rather complex. We 
have grantees. For example, the State of Louisiana, in a year 
prior to Hurricane Katrina and the resources that were provided 
by the subcommittee to that State, they received around $30 
million in CBDG funding. They went from $30 million to $13 
billion. There was a need to create an infrastructure capacity 
for the spending of that money.
    That is going to be the challenge in all of the places that 
are looking to recover now. The money is provided to them, but 
they have to work to build that capacity to implement their 
programs and provide the assistance.
    Mr. Quigley. Let me put this another way. I have only been 
here 4 years, but you can feel like Bill Murray in Groundhog 
Day. I have been through this hearing before sort of scenario. 
You can appreciate that.
    Mr. Tombar. Certainly.
    Mr. Quigley. So to spare those here in the future having to 
ask the same questions, maybe this is the best way to ask the 
question. When we look back, what are the questions when we 
say, why didn't it get done sooner? So if we are here in 3 
years, and everything is not done, and, heaven forbid, as long 
as it has been since the Gulf Coast, you know, the questions we 
are going to ask is why did it take so long? Why does it take 
so long, and what are the pitfalls that we need to overcome to 
get this done quickly?
    Mr. Tombar. I will tell you, part of the difficulty is at 
times the Federal Government, quite frankly, gets in the way. I 
know from my own experience on the ground working in post-
Katrina recovery, housing recovery, that the agency I work at 
wasn't always a good partner.
    The President made a directive to the entire Federal 
family, and that was, find ways to cut through red tape; find 
ways to help these communities recover as expeditiously and as 
thoroughly as possible. It is the main justification, I would 
say, for the Hurricane Sandy Rebuilding Task Force, which 
forces all of the Federal agencies to come together, come up 
with a comprehensive plan working with the State, local, and 
tribal communities to find out how we best can assist them and 
cut the red tape. I think that more than anything else this 
will have a positive impact on the speed of recovery and how 
well the recovery goes overall.
    Mr. Quigley. I appreciate your candor and your efforts.
    Mr. Tombar. Thank you.
    Mr. Quigley. Thank you. I yield back.
    Mr. Latham. Thank you, Mr. Quigley.
    I yield to the gentlewoman from Fort Worth.
    Ms. Granger. And I will give my time to Mr. Dent.
    Mr. Latham. Mr. Dent. 
    Mr. Dent. Thank you.
    Thank you, Representative Granger.
    Just a couple of things. As relates to Sandy supplemental 
funding for the FTA, $10.9 billion, I know, for new emergency 
relief programs, up to $5.4 billion can be directed to 
mitigation efforts. I know on February 6th, you put out a 
notice of availability for $2 billion, and you targeted those 
funds for local repair projects, grant requests for various 
transit agencies, including $390 million to SEPTA, Southeastern 
Pennsylvania Transit Authority.
    My main question is since you had this transfer authority 
up to $5.4 billion, these projects to reduce risk of damage 
from future disasters in the areas impacted by Hurricane Sandy, 
I am concerned that these precious emergency relief dollars 
might be diluted on the, say, nice to have but nonessential 
infrastructure projects. Can you elaborate a little bit on 
that?
    Mr. Porcari. Congressman, it is a great question. We can't 
afford to put any of these funds toward the nice-to-have 
projects. We are going to be very hard pressed, given the 
mitigation needs for the transit in inner-city passenger rail 
program, to even cover most of the critical funds. We are 
working through the task force--this is one of the values of 
the task force--to make sure that we have an across-the-board 
understanding of mitigation. We have been communicating 
directly with the transit agencies and Amtrak on some of the 
preliminary minimum qualifications for that mitigation.
    But in general we know that, because we have been through 
two of these storms in the same metropolitan area in just under 
2 years, that we need to rebuild to a stronger standard. This 
is the cost-effective thing to do rather than to rebuild to the 
same standard every time. We are confident that we can cost-
effectively use these mitigation dollars. While we are in the 
early stages of identifying projects, it is very clear that 
there will be more eligible projects that will be cost 
beneficial than we will have available funding.
    Mr. Dent. All right. And you are going to be awarding these 
grants on a rolling basis.
    Mr. Porcari. Yes, we will.
    Mr. Dent. Okay. And how is the Department of Transportation 
assessing the priority of the grants being issued? Is it on a 
first in, first out regardless of magnitude of damage, or how 
are you doing this?
    Mr. Porcari. Well, on the $2 billion that we have already 
noticed for award, that is for work that has already been done 
either internally through what are called force accounts at the 
transit agencies, the work that they contracted for 
immediately. So we are essentially reviewing invoices and 
documentation for work already done and reimbursing. As we go 
forward, it will be on a rolling basis, and we will 
competitively, on a merit basis, rank projects for mitigation 
eligibility.
    Mr. Dent. Thank you. I yield back to Representative 
Granger.
    Ms. Granger. I yield back my time.
    Mr. Latham. I thank the gentlewoman.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Tombar, I want to give you a chance to finish your 
answer to my question. Of course, in the meantime questions are 
swirling around here about how quickly we can build back, 
whether we should build back to sounder standards, whether we 
should pay attention to mitigation and containing future costs 
and so forth. But all of this, of course, went into this 
decision I was focusing on to bypass some of the normal 
temporary housing steps, and to try to get people back in 
immediately to their homes with temporary repairs, sometimes as 
a prelude to longer-term repairs, sometimes not.
    But I know that it involved a combination of FEMA and CBDG 
funds, and you are envisioning, of course, a CBDG world going 
forward. So I still needed to get to the transit issue, but I 
do want you to finish up the overview you were providing.

                            REBUILDING RATE

    Mr. Tombar. Sure. I will try to make it quick.
    Under the National Disaster Recovery Framework, there is a 
process by which we engage the Federal Government, led by HUD 
and FEMA, with the States through what is called the State-Led 
Housing Task Force. That task force actually makes the 
determinations about what will be the best forms of assistance 
given the impact of the disaster, given what the availability 
in resources are in the impacted area, of the types of 
assistance that will be provided.
    And so the absence of trailers, as you pointed out, in New 
York State was a decision driven by local governments and by 
the State and worked through with the Federal Government. We 
tried to find other sources of housing for people and have been 
successful in most cases. In New Jersey, we fortunately had a 
vacant military base that we were able to provide some repairs 
to units that were there and house a number of families there. 
There are trailers some of the communities in New Jersey have 
decided that they would want, and so those exist. Other people 
are being housed in apartments with their FEMA assistance.
    The FEMA assistance, though, is capped at $31,900. That is 
both for their rental assistance and for the repair cost of 
their home. And so the extent to which that money gets used to 
pay for rental assistance, it defrays from the amount of money 
available for the repair of the home. This is where CBDG comes 
in to help close that gap that exists between private 
insurance, the assistance that someone may have received from 
FEMA or SBA, any unmet needs that remain.
    Mr. Price. So the near-term use of the CBDG funds is 
heavily directed toward matches of that kind to close those 
gaps.
    Mr. Tombar. Well, typically the near-term assistance that 
you see the Federal Government giving is usually through FEMA 
and its resources out of the Disaster Relief Fund. HUD's 
assistance can be used in cases if a State determines that--a 
State or local government determines that there is a need for 
it. But the immediate temporary housing assistance, that is 
authority and resources given to the Administrator of FEMA, and 
they are used in that way and have been in this particular 
instance.
    Mr. Price. So just to clarify, in this instance now, at 
what point do the CBDG funds enter the picture?
    Mr. Tombar. Typically for the rebuilding efforts. So it 
would be to rebuild and not for temporary housing.
    Mr. Price. But what about the short-term rebuilding to keep 
people in place temporarily?
    Mr. Tombar. Again, that was done with FEMA assistance.
    Mr. Price. All right. But the longer-term rebuilding is 
where the CBDG comes in and fills the gap?
    Mr. Tombar. Yes, sir.
    Mr. Price. All right. Mr. Porcari, the Transit 
Administration within your Department has received the bulk of 
the transportation funding, almost $11 billion, and you have 
been required to complete, which you have now completed, a 
Memorandum of Understanding with FEMA, and to develop interim 
regulations before the bulk of the funding can be awarded.
    Can you give us an update on that memorandum, the state of 
the interim regulations, when they are going to be finalized; 
and what kind of share at the end of the day you and FEMA are 
going to have for this work on the damaged transit 
infrastructure?
    Mr. Porcari. It is a great question, sir. It has been a 
very good working relationship with FEMA. As you pointed out, 
the Memorandum of Agreement between FEMA and the Federal 
Transit Administration is already signed. Before that, working 
under a mission assignment from FEMA, we had our project 
management oversight contractors out there evaluating the 
damage for both FEMA and FTA. FEMA personnel were deployed with 
us as part of that.
    We expect that the interim final rule which is required by 
the appropriation will be in place well before we go through 
the first $2 billion of funding and into the next tranche of 
funding. The interim final rule in draft form will be out in 
the next several weeks. Draft guidance will immediately follow 
that. Mindful that this interim final rule and guidance will 
affect our response to future disasters as well, it needs to 
encompass the entire country and all kinds of emergencies that 
it might be used for, so we are trying to make sure that it is 
broad enough to incorporate all that. We are confident that we 
are well ahead of the curve in terms of having that interim 
final rule ready and the guidance that would be behind it.
    Mr. Price. My time is expired. Thank you, Mr. Chairman.
    Mr. Latham. Mr. Joyce. Did you have another question?
    Does anyone have another question for the record?
    Mr. Pastor. I will submit a question.
    Mr. Latham. Mr. Price, did you want to continue?
    We are about to vote on the floor, so Members may have 
additional questions to submit for the record, to which I would 
hope you can respond.
     I just was going through the draft anyway of the green 
building retrofit checklist, which is several pages here, but 
you have got down to what kind of light bulbs you can put in, 
what kind of water systems can be installed. Any carpet 
products used must meet the Carpet and Rug Institute's green 
label or green label-plus certification for carpet pad and 
carpet adhesives.
     One thing, I would ask for the record what the request was 
for the storms in 2011.
    Is this stuff available? I mean, you are going to keep 
people out of their homes. When you go through the checklist, 
it is unbelievable that is the case--and I would hope that we 
could streamline the situation.
    A lot of people are very much in need that need to get back 
into some type of shelter, and without any kind of authority to 
do this type of thing, I am concerned that we are not going to 
be using a lot of money to the best use long term.
    So anyway, with no other questions, we will adjourn the 
hearing. Thank you all very much.
    [Questions for the record follow:]

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                                          Thursday, March 21, 2013.

                     FEDERAL TRANSIT ADMINISTRATION

                                WITNESS

PETER M. ROGOFF, ADMINISTRATOR, FEDERAL TRANSIT ADMINISTRATION, U.S. 
    DEPARTMENT OF TRANSPORTATION
    Mr. Latham. Okay, the hearing will come to order. I 
apologize to the witness for having a little delay with votes 
this morning, but I think we are going to skip our statements 
here and go right to your opening statement, and then to 
questions if that is okay.
    Mr. Rogoff. Very good.
    Mr. Latham. Mr. Administrator, you are recognized for your 
statement.
    Mr. Rogoff. Thank you, Chairman Latham, Ranking Member 
Pastor, and members of the committee. Thank you for inviting me 
here today to highlight the Federal Transit Administration's 
progress towards implementing key provisions of MAP-21, which 
made many bold policy changes the administration has fought 
for. These changes come at an especially critical time for 
public transportation. But for Hurricane Sandy's impact on 
transit systems in the Northeast in 2012, the United States 
would have recorded its highest annual level of transit 
ridership since 1957 with 10.5 billion trips taken. We are 
seeing transit ridership increase across the board, whether it 
is bus, light rail, commuter rail, or bus rapid transit. We 
have transit agencies that are experiencing double-digit 
ridership increases without any expansion in service.
    So despite facing an array of funding challenges, it is 
vitally important for the FTA to make progress toward 
implementing MAP-21. Nowhere have we made more aggressive 
progress in implementing MAP-21 than in standing up our new 
Emergency Relief Program. Hurricane Sandy was the worst public 
transit disaster in the history of the United States, affecting 
more than 40 percent of the Nation's transit ridership at the 
height of the storm.
    The Obama administration first proposed the establishment 
of an Emergency Relief Program for transit in its FY 2012 
budget, and fortunately, MAP-21 put that program in place prior 
to Hurricane Sandy. The Disaster Relief Appropriations Act 
originally granted $10.9 billion to FTA to reimburse transit 
agencies for response and immediate recovery, and to mitigate 
the impact of future disasters. That amount was subsequently 
reduced by $545 million as a result of the sequester. Still, we 
are very grateful to this committee for providing that level of 
assistance for our most transit-dependent region of the 
country.
    In just over 6 weeks since President Obama signed the 
Disaster Relief Bill into law, the FTA has responsibly 
allocated more than $500 million to reimburse the hardest hit 
agencies in New York, New Jersey, and elsewhere. We are on 
track to allocate the remainder of the first $2 billion of the 
disaster aid by the end of March, as this committee stipulated 
in the Disaster Relief Act.
    At the Obama administration's urging, Congress granted FTA 
historic new authority to provide long overdue Federal safety 
authority for public transit, and we welcome this 
responsibility. Our goal is to implement a safety management 
system approach that improves safety using commonsense 
standards that will add value without adding a great deal of 
cost or burdensome regulations.
    We recognize that a one-size-fits-all approach to safety is 
not the best approach for the unique needs of individual 
transit agencies. FTA will set a national framework and then 
work with each transit agency to develop a safety system that 
targets their greatest safety vulnerabilities, and even between 
like-size systems, those safety vulnerabilities may be 
different. Meanwhile, we have begun to work closely with 
affected Governors, our Transit Rail Safety Committee and other 
stakeholders to embark on a rulemaking and widespread education 
process.
    Keeping our transit systems safe goes hand in hand with 
bringing our aging systems into a state of good repair. 
Following on the administration's budget proposal, MAP-21 
established a needs-based formula program for rail, ferries, 
and busways and initiates a new National Transit Asset 
Management Program that will cover all transit systems.
    This program will help the industry tackle deferred 
rehabilitation, replace outdated transit assets, and support 
ongoing maintenance efforts that are key to maintaining a 
transit network that continues to provide reliable and 
desirable service for the American public. We see this 
initiative as central to our ability to make sure that the 
investments that this committee has made in transit in the past 
are well looked after, and that the ridership is getting 
quality service for the investments we made.
    I appreciate this committee's support for the policy goals 
in MAP-21; however, I want to remind the committee that FTA 
faces several budget challenges that hamper our ability to 
address all of these goals. Overall, the sequester struck $656 
million from FTA's budget. It reduced program funding for our 
Capital Investment Grants Program by just less than $100 
million. This will mean that few, if any, additional New Starts 
construction projects will be fundable in the real future. Even 
more troubling is the fact that ongoing major New Starts and 
Small Starts projects will experience increased borrowing costs 
as FTA will now be required by sequestration to slow its 
scheduled grant payments to projects for which we have already 
made written financial agreements.
    Even without the sequester under MAP-21, our capital 
investment program was authorized to receive 10 percent less in 
funding when compared with amounts available to carry out the 
projects in recent years. These are just some of the 
significant challenges that directly affect our programs and 
the record number of transit riders we are serving.
    FTA will continue to do all we can to make progress to live 
up to the promise of MAP-21 with the resources made available 
to us. Thank you, and I would be happy to answer any questions 
you have.
    [The statement of Mr. Rogoff follows:]

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    Mr. Latham. Thank you very much. MAP-21 made a number of 
changes in the bus formula program. Some call it streamlining, 
but it really is a massive shift of national funds to the large 
rail systems, leaving just pennies for bus-only systems. Iowa 
has one of the oldest operating fleets in the country. Our 
state of good repair needs are great. Over 54 percent of Iowa 
buses are operating beyond their useful life, and yet the 
return on our contributions to the trust fund is minimal.
    Under SAFETEA-LU, Iowa could replace about 41 buses a year. 
Under MAP-21, it will only replace about 22 in the first year. 
That is almost a 50 percent decrease.
    Can you explain what happened to the formula in MAP-21 
shorting the bus-only transit systems like we have in Iowa? How 
would you propose to make it more equitable for the allocation 
of funds under the formula? Specifically, how would you address 
state of good repair in a state like Iowa?
    Mr. Rogoff. I can, Mr. Chairman, and I have heard this 
concern from a number of regions around the country. Just to 
provide a very brief bit of history, the administration did 
propose that the Bus Discretionary Program that was available 
for years under SAFETEA-LU and prior authorization acts be 
folded into a formula program for state of good repair. 
However, the administration's proposal proposed that new State 
of Good Repair Program be available for the bus-only operators, 
and it also proposed sizeable funding increases for the 
program.
    So when I went around the country advocating that this 
policy change take place, I also assured the bus-only operators 
in multiple public statements that they would certainly get no 
less than they were getting before.
    MAP-21 went a different way. The Congress took some of that 
money for the bus discretionary program, put it in the State of 
Good Repair Formula program, limited that State of Good Repair 
program only to what we called ``fixed guideway'' operations, 
mostly rail, and then used a smaller amount of money, really 
less than half, for the bus-only operators.
    So there is no question that they took a hit here. And I 
think it is something that needs to be revisited in--I don't 
know if you call it MAP-22, but whatever the next 
reauthorization is. When we proposed this policy, the dollar 
level for the program was more than $1 billion more than what 
MAP-21 provided, and that would have provided plenty of money 
for the bus-only operators and others, but MAP-21 went a 
different direction.
    Mr. Latham. The administration submitted a proposal.
    Mr. Rogoff. The administration submitted a budget.
    Mr. Latham. The reality is that for the first time since 
Eisenhower, an administration has not had a proposal.
    Mr. Rogoff. Well, I will put it this way: The 
administration, through its budget proposals, showed what 
programs that we would consolidate and I did testify before the 
Senate Authorizing Committee on this specific proposal. 
However, no, we did not formally submit a legislative message 
on that.
    Mr. Latham. There is not one.
    Mr. Rogoff. There was not one, no, sir.
    Mr. Latham. It has come to my attention that the Department 
asked for and got a provision added to MAP-21 that transit 
systems serving areas of 50,000 to 200,000 population will no 
longer be designated a designated recipient of the FTA funds. 
What was the reason for the change in status, and can you tell 
me if the FTA consulted any of those affected communities 
before insisting on that provision? Is there any thought of the 
impact on those communities?
    Mr. Rogoff. In your last question you pointed out that we 
did not have a proposal, so I don't think that we could have 
proposed this either. But I think more importantly, we sought 
clarity in who the designated recipient would be. We did, 
obviously, and we do have regular consultations with 
communities. I think this has worked better in some 
communities, than others. We are currently working, if you 
will, on a one-by-one basis to make sure that it is understood 
who the designated recipients are, and that local 
decisionmaking is determining how funds are suballocated.
    Mr. Latham. You still have all of the regulations in effect 
for those communities, but they are not getting any funding? 
How do you keep the regulations in place?
    Mr. Rogoff. Well, if I follow you correctly, they are 
certainly getting funding through the suballocation from the 
designated recipient. It is not like they were cut off from 
Federal funds. It is really the process of who is doing the 
local decisionmaking as to how funds are allocated.
    Mr. Latham. Okay. Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman. Welcome.
    Last week we had GAO and the Inspector General from the 
Department of Transportation, and we talked specifically about 
some of the programs within the agencies, but one of the things 
that I talked about with them in terms of the hearing was the 
capacity of the agencies to be able to collect data, evaluate 
the data, and then use the information available so that you 
could have better practices and find out what is happening.
    You now have a new assignment through MAP-21, and less, at 
least administrative moneys, I don't think are there, and with 
sequestration added to that, and so as you collect, how do you 
see your IT in terms of collecting the data from the local 
agencies, bringing them up and evaluating them, and then using 
them as management tools to continue either supporting, or you 
know, changing things as things are not working out?
    Mr. Rogoff. I would say Mr. Pastor, we do robust data 
collection, but the methodologies we use and the questions we 
are asking I think need to be reformed and updated. Every 
transit agency that receives Federal funds is required to 
submit data to the National Transit Database. Some of that data 
is used to run our formula programs, using data including 
ridership, miles that they operate, et cetera.
    The new safety responsibility brings a considerable new 
data-collection effort, but it is not really just on FTA's 
part. You heard me say in my opening statement that we are 
really committed to trying to do this new safety responsibility 
in a way that adds value, but does not add a lot of cost and a 
lot of burden. One of the ways individual transit agencies do 
that is by establishing a safety management system where they 
have to collect data on their own operations, and use that data 
to identify their greatest safety vulnerability. And for one 
agency it may be the skills of their operators, and how many 
minor accidents are happening that should not have happened 
with appropriate training. For another agency it may be the 
condition of their equipment. And they will get that 
information through data collection.
    So we are looking for ways to expand this for the purpose 
of safety, and to do it in a cost-effective manner. As someone 
who finances a large portion of the transit agency's expenses, 
in these times it is not in my interest to issue huge 
burdensome new requirements, but it is actually through the 
data collection that transit agencies can do this much more 
efficiently and much less expensively than hard and fast 
regulatory one-size-fits-all rules that some other DOT agencies 
have done in the past.
    Mr. Pastor. The other point that kind of stuck out with me 
was that just the equipment that is available to your people, 
or in--I don't know about FTA in particular, but it seems that 
at least through the whole agency, that the equipment itself 
was greatly outdated and needed to be modernized. Do you have 
that same problem in your agency?
    Mr. Rogoff. We do. There is no question that no one would 
argue that DOT is on the cutting edge of IT. So let me give you 
an example, and it is a very big game changer for us. We are 
working on, we have a computer interface with every transit 
agency, and the way we cut grants is through our so-called 
``TEAM'' System. That system is very old, very user unfriendly. 
My 15-year-old would laugh at it if I showed him what one has 
to go through to communicate between the FTA and its grantees.
    We are, even with scarce funds, developing a new open-
architecture system. We are years behind in getting it 
launched, but we hope to get it into play in the next couple of 
years.
    Mr. Pastor. The question that I have, your Capital 
Investment Grant reduced by $100 million?
    Mr. Rogoff. Yes, sir.
    Mr. Pastor. And we were out there with the City of Mesa as 
they were cutting ribbons for the expansion of the Metro 3 
miles further east, but what is going to happen to that 
particular segment of the extension, of the transit extension 
as an example how sequestration is going to slow things down or 
require a new way of thinking in terms of funding and getting 
things done?
    Mr. Rogoff. Well, as I mentioned in my opening statement, 
the combination of the CR with sequestration means that for the 
first time in a very long time the agency will have less money 
than we need to fully accommodate the amount that would be 
required to fulfill all of the funding commitments made for 
2013 in each of the full-funding grant agreements that we have 
signed.
    We have not made any decisions yet in terms of how we will 
apply that against individual grants, but it is going to slow 
our progress on the entire New Starts program until we can get 
a funding level consistent with the signed commitments, of 
which Mesa is one.
    Mr. Pastor. Yeah. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Pastor.
    Mr. Dent.
    Mr. Dent. Thanks, Mr. Chairman. Good morning.
    MAP-21 increased funding for the TIFIA program from $122 
million to $1 billion a year. This funding increase plus a 
change in the law allows project costs under TIFIA loans to 
increase, I think, from 33 to 49 percent. Have these changes 
been effective in tracking more loan applications in State and 
local governments and public-private partnerships?
    Mr. Rogoff. Well, I cannot speak to the impact of that 
particular policy change. Obviously, TIFIA is one program where 
there has been extraordinary growth in interest. Prior to being 
nominated for this position, sir--I worked on the Senate 
Appropriations Subcommittee on Transportation, and there was a 
time when we were actually rescinding TIFIA funds from lack of 
interest and lack of use.
    That has completely turned itself around, especially as the 
financial markets have changed and the demand for TIFIA is now 
far exceeding even the increased numbers authorized under MAP-
21.
    TIFIA is doing great work, not just obviously for transit 
projects, but also for highway and other projects, port 
projects, where the credit subsidy is having a real impact on 
people gaining access to private capital at very affordable 
terms. So yes, DOT has a considerable demand and MAP-21 did do 
us well by providing considerable additional authority.
    Mr. Dent. And as you are aware, too, MAP-21 streamlines 
some of the project development processes that were established 
limits on environmental reviews and consolidated steps that FTA 
has got to take in the project process. What are the impacts of 
these changes having in practical terms for the FTA and the 
grantees?
    Mr. Rogoff. Well, they are very positive in that we just 
recently--jointly with the Federal Highway Administration--came 
out with a rulemaking to expand the number of categorical 
exclusions. You know, a great many, almost all transit projects 
are inherently environmentally beneficial, so it has always 
been a frustration if they have to go through a very painfully 
long environment approval process. So this mad effort enables 
us to get projects through the pipeline more quickly, and it 
enables the taxpayers and the transit riders to get the 
benefits of the improvements more quickly.
    Mr. Dent. Yeah, and another issue with respect to MAP-21 
and that new formula grant program for buses, it is really 
going to bus rapid transit, what I have seen in my reviews of 
this infrastructure development is that BRT systems seem to 
have a forward leaning, or forward leaning alternative to light 
rail in terms of flexibility and economic feasibility, 
especially. This concept of BRT, as you are probably aware, is 
getting a lot of attraction in other countries. How does BRT 
fit in FTA's vision for modernizing, expanding, improving 
transit options in our communities?
    Mr. Rogoff. Well, we are an advocate for BRT in certain 
corridors where it makes sense. You know, in certain corridors 
based on the density or other factors, only rail is going to 
make sense. But BRT, if you can give it a designated lane, if 
it does not have to co-mingle with other traffic, it can move 
an extraordinary number of passengers at a very affordable 
cost. There are other tools that BRT can use like signal 
priority where every time a bus approaches a traffic light it 
is always green. If you are selling the fare media to 
passengers not as they board the bus, but before they board the 
bus, you can move a lot of people very efficiently.
    It works in some corridors, not others, but we are funding, 
especially through our Small Starts program, a number of very 
successful BRT projects.
    Mr. Dent. And on the issue of Sandy, which established a 
new Emergency Relief Program within FTA, FTA's new Emergency 
Relief Program was authorized under MAP-21 and it appears that 
the Sandy funds were used, Sandy funds were the first infusion 
of funds, I think, used for that program.
    Mr. Rogoff. Correct.
    Mr. Dent. What is the process for deciding which 
applications receive funding?
    Mr. Rogoff. Well, consistent with the Disaster Relief 
Appropriations Act, those dollars are limited just to those 
impacted by Hurricane Sandy. At present we are taking 
applications. We just did our first tranche of allocations for 
response and recovery. In the next few months, we will be 
coming out with guidance on how we will handle applications for 
mitigation, an important investment that this committee made in 
seeing to it that there not be a recurrence of these disasters 
in terms of their impact on transit agencies.
    Mr. Dent. Are you getting requests in a complete package, 
or on a piecemeal basis?
    Mr. Rogoff. We have invited the applications on a rolling 
basis. We did one solicitation for the first tranche of money. 
We established a deadline of March 8. Consistent with the 
direction that was in your appropriations act, we will at the 
end of the month allocate the first $2 billion. At that point, 
the window will be open for people to come to us with eligible 
response and recovery costs as they are ready to come to us.
    Mr. Dent. Thank you, and I yield back.
    Mr. Latham. Thank you, Mr. Dent.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. Greetings, 
Administrator, glad to have you here.
    Mr. Rogoff. Good to see you.
    Mr. Price. I want to commend you. I don't remember an 
Administrator of your agency that has had a more hands-on 
approach than you have had. It seems to me that your experience 
as a staffer in this institution has served you well. You are 
hands on, you do master details, and you are a good 
communicator. You have paid attention to Members' needs to 
understand the program, understand the process, and you have 
communicated well with the local communities who are involved 
in that, so I commend you for that.
    Mr. Rogoff. Thank you.
    Mr. Price. I think you have opened up this agency in a very 
positive way, and I think you have modified the processes in 
positive ways as well, administrative means, and also from the 
MAP-21 legislation. You have reformed the evaluation criteria. 
You have streamlined the process for New Starts. Cost-
effectiveness is still a criteria, but the administration has 
begun to evaluate projects in a more robust manner, land use, 
increased mobility, economic development, and we have been 
looking for that for a long time. So I commend you for that as 
well.
    I wonder also, I will ask you three questions in rapid 
succession here. I wonder if you have also thought about what 
the Federal share might be? I know it is already down to 50 
percent from 60, but are there variable kind of Federal shares 
that could be significant enough to get a new project off the 
ground and would help you stretch the funding and add yet more 
flexibility to the program?
    I think a lot of communities would settle for a lesser 
Federal share in exchange for more rapid approval, and more 
flexible criteria.
    Secondly, I wonder right now what the balance looks like, 
and what kind of balance you are trying to maintain between the 
expansion projects, and the new New Starts. There are a lot of 
promising expansion projects around the country, I know that. 
They meet the needs of our Nation's largest metropolitan areas, 
but of course, there are a lot of communities wanting to get 
going with transit systems. And I wonder what kind of balance 
you are aiming for there, and what you have been able to 
maintain.
    And then finally, of course, we are concerned about the 
effect of sequestration, and the current budget situation more 
broadly on all of this.
    In your testimony, you noted that sequester would take $100 
million from New Starts. You expressed concern about your 
ability to fund projects in the pipeline. I assume that means 
the payment schedule for New Starts that already have a full 
funding grant agreement. I wonder what it might also mean for 
putting projects in the pipeline, putting new projects in the 
queue, so to speak.
    Mr. Rogoff. Well, let me take each of those in order. As 
far as variable Federal shares, this is something that we have 
talked about. This committee has been very clear through its 
direction that we should not consider or bring forward New 
Starts with a Federal share more than 50 percent. I have been 
concerned at times, especially during the recession, that 
communities would struggle because of the downturn in sales tax 
revenue to be able to leverage that 50 percent. Yet they are 
communities very much in need of a transit improvement. I worry 
a little bit about New Starts becoming a program of ``haves'' 
and ``have nots.'' Especially when you consider a city like 
Detroit, which ranks 109th in its available transit service, 
but probably 9th in terms of the demand for transit services. 
It is very hard to get there because of their local financial 
circumstances. We have been working on ways and fortunately 
there is a private investment that will serve as the local 
match for some of their BRT improvements, but that arrangement 
required special legislation.
    You asked about expansion versus new New Starts. I have to 
admit, we have not really come at it from that perspective. We 
have considered the projects as they have been brought to us by 
local sponsors. Some of those are cities brand-new to the New 
Starts program. Others are expanding. Some of those expansions 
in busier cities will generate more ridership than some of the 
new ones, and the law we have does not make a distinction 
between how we approach them. We have been trying to advance 
the local vision really of everybody that applies to the 
program.
    On the impact of sequester it is notable. The result of 
sequester in combination with the CR means that the final 
number for New Starts this year will be some $400 million less 
than what the President proposed. Now, the President proposed 
those increases not just because we are supportive of these 
projects. We also requested the increase in this program to 
accommodate the pipeline that we knew was growing.
    So we are now in a situation where we will not have enough 
funds, at least this year, to fully fund all of the collective 
agreements that we have signed. We hope that that will change 
next year. We always, when there is a decrement to an 
individual project, we add it on at the end, so someone whose 
payment schedule may end in 2017, the amount that they may not 
get in 2013, we would customarily add on in 2017, and that has 
been the precedent of the agency for several years.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Price.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman, and thank you 
so much for being here. I have a few questions, and some of it 
is going to kind of follow-up on what you were just talking 
about. I am going to try and--I want to put all of these 
questions out there, because I would like answers to all of 
them, but forgive me for a moment if I give you a little bit of 
a list and then perhaps we could discuss it. Your testimony 
mentions streamlining efforts to the New Starts program which 
was, as mentioned, reauthorized in MAP-21. These streamlining 
efforts do not include changes to project qualification or 
requirements, do they?
    Mr. Rogoff. Well, those are pretty broad terms.
    Ms. Herrera Beutler. The requirements for the grants. I 
mean, specific requirements. It does not propose changing or 
altering the requirements that you are supposed to follow to 
make a grant, right?
    Mr. Rogoff. Well, it does propose changes to the process we 
hope to streamline, so let me give you an example if I could.
    Ms. Herrera Beutler. Yeah.
    Mr. Rogoff. Earlier under SAFETEA-LU, there were two 
separate processes at the beginning. You had to do a separate 
alternatives analysis to qualify for the FTA, and yet a 
different alternatives analysis, similar, but slightly 
different, to get through the environmental process through 
NEPA. We eliminated the separate FTA process because we thought 
there was----
    Ms. Herrera Beutler. Redundancy.
    Mr. Rogoff. It was redundant and we were able to work with 
the NEPA alternatives analysis and move forward.
    Ms. Herrera Beutler. Okay.
    Mr. Rogoff. And that just saves people money and saves 
people time.
    Ms. Herrera Beutler. New Starts that required, and I think 
you were talking, you mentioned at 50 percent. New Starts 
requires a local match, a stable and reliable capital financing 
plan, and the sponsoring agent to display the ability to fund 
the O&M before the grant is approved, correct?
    Mr. Rogoff. That is correct.
    Ms. Herrera Beutler. New Starts program is designed only to 
pay for a portion of the initial cost of building a transit 
project. So is it safe to say that once a project is, and this 
is where I would like your clarification, that once a project 
is complete, the Federal Government will pay, or will not pay, 
or will not have a financial role in going forward. To be more 
specific, if the cost estimates of an operations and 
maintenance are incorrect, heaven forbid, and the real costs 
are higher to the local communities, they are the ones on the 
hook for the excess, right? They cannot come back to the Feds?
    Mr. Rogoff. Well, not for operations. And for capital 
funding, we normally, when we sign a full funding grant 
agreement, the Federal contribution is capped.
    Ms. Herrera Beutler. Okay.
    Mr. Rogoff. And if there are cost overruns, we do not 
provide additional Federal funds for them. I think it is 
noteworthy, however, that we have gotten a lot better as an 
agency at cost estimation----
    Ms. Herrera Beutler. On the capital piece.
    Mr. Rogoff [continuing]. And evaluating risk. Well, also on 
the operating piece.
    Ms. Herrera Beutler. Okay.
    Mr. Rogoff. But we don't fund grants for the operations of 
a New Start project. That is generally derived from State and 
local sources. Sometimes operations come in higher, sometimes 
they come in lower, sometimes agencies choose to actually 
increase the frequency of service. So there are a number of 
cities, light rail in Charlotte, in Mr. Pastor's backyard into 
Phoenix, where ridership has far exceeded on light rail what 
was initially expected.
    Ms. Herrera Beutler. Well, and I think, and just so I can 
get the rest of these in here.
    Mr. Rogoff. I am sorry.
    Ms. Herrera Beutler. That is the goal, right? That is a 
good scenario.
    Mr. Rogoff. It is a good scenario.
    Ms. Herrera Beutler. Back to the local match. What is the 
maximum percentage amount New Starts can fund transit projects? 
If the transit project is part of a larger capital construction 
project, like light rail on a six-lane bridge. Are New Starts 
eligible to pay for the non-transit portion of that project?
    Mr. Rogoff. Well, since we are going to speak specifically 
of light rail on a six-lane bridge that I think we are both 
familiar with, you need to recollect that there is special 
legislation that was enacted for that project that said the 
State contributions to the highway portion would count as the 
match for the transit portion. So in the case of that unnamed 
project, sometimes referred to as the Columbia River Crossing, 
this language enables us to provide $850 million for that 
project which was more than----
    Ms. Herrera Beutler. So wait. Let me ask this in a 
different way.
    Mr. Rogoff. Sure.
    Ms. Herrera Beutler. So the New Starts, so there was 
special legislation that allowed the New Starts grant----
    Mr. Rogoff. There was.
    Ms. Herrera Beutler [continuing]. To provide more than the 
50 percent match?
    Mr. Rogoff. The way it was structured was to basically 
recognize that this is a unique project. It is not just a 
transit improvement. It is obviously a $2.5 billion highway 
bridge as well for one of the most congested highway bridges we 
have got. And the way that legislation was structured allows 
basically the contributions of the States toward the highway 
portion to count as the local match for the transit portion. 
There are similar things----
    Ms. Herrera Beutler. Wait a minute.
    Mr. Rogoff. I am sorry.
    Ms. Herrera Beutler. But does that mean that the New Starts 
program is giving more than 50 percent?
    Mr. Rogoff. Of the transit costs?
    Ms. Herrera Beutler. Of the transit costs.
    Mr. Rogoff. Yes, it would be.
    Ms. Herrera Beutler. And we allowed that in special 
legislation?
    Mr. Rogoff. Yes, ma'am.
    Ms. Herrera Beutler. Because that seems contradictory to 
the way that New Starts grants are.
    Mr. Rogoff. These special provisions were not unheard of in 
years past. There were several done, whether they were for New 
Jersey, or Utah, or other places.
    Ms. Herrera Beutler. Okay. I think that is all for this 
round. Thank you. I yield back.
    Mr. Latham. Thank you.
    Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman. Thank you, and I had a 
chance to look through your testimony, and I appreciate what 
you have been able to do the last couple of years. I know it 
has been an up and down, I guess would be a good way to put it.
    One of the issues that I want to ask you about is the 
alternative fuel vehicles, and some of the research that is 
going on there coming through MAP-21. The Clean Fuel Bus Grant 
Program was eliminated and a competitive deployment program was 
created to advance low or no emissions vehicles and facilities, 
and the research program was authorized at $70 million. But 
under the CR and sequestration, it is going to go down to about 
$42 million. And coming from an older industrial area in Ohio, 
Youngstown, Akron, I think part of creating an overall economic 
renaissance to try to bring young people back, these are the 
kind of things that we need to be looking into.
    So what will you not be able to do? What activities are you 
going to have to pare back because of the sequestration and 
some of the cuts, and if you could just let us know what some 
of the benefits have been from the research that has gone on.
    Mr. Rogoff. Well, the FTA has over decades, really, played 
a leadership role in advancing the state of the art on clean 
fuel buses. We now have in commercially available form zero 
emission buses. One manufacturer in particular, who really 
started as a grantee just at the very birthing of the clean 
fuel zero emission bus program, and now those are being sold in 
increasing numbers across the country.
    You are correct. We do have a new research program under 
MAP-21. The funding was reduced. It is going to slow our 
progress to try and get the next generation on the ground. We 
are still going to implement the program with whatever 
resources we have, but in terms of the number of participants 
that we can accommodate, and how quickly we can advance the 
science, is going to be hampered.
    Mr. Ryan. Thank you. So this is a public-private endeavor?
    Mr. Rogoff. It is a public-private endeavor because we 
obviously are not going to develop the ``Federal bus.'' I hope 
we never do. It is really about trying to provide some seed 
capital for innovative science-oriented developers to get a 
commercially viable bus. So there are really two challenges. 
One is the science, and then when we have that commercially 
viable bus, how do we get the price down such that it is really 
competitive?
    A lot of bus agencies now are buying hybrid-electric buses. 
The cost penalty to buy a hybrid-electric used to be, you 
really had to be sort of cutting edge to decide that you were 
going to go that route because they did not provide a pay back. 
Now, the fuel savings on purchasing a hybrid-electric bus pays 
itself back and if you can put up the capital up front, it is 
in your financial interest to buy it.
    Mr. Ryan. And how long will it take to pay off and get your 
money back?
    Mr. Rogoff. Depending on how intensely the bus is used, 
somewhere between 8- and the usual 12-year service life, but 
you should certainly make the money back by the end, the end 
being 12 years.
    Now, you have got situations like Mr. Latham's where you 
have a great many bus operators that are operating buses beyond 
their useful life. In that particular case, the gas savings, 
assuming that the equipment can be kept up, will pay itself 
back year after year. You will have long since gotten your 
return on investment.
    Mr. Ryan. I just think there is a lot of opportunity here 
given----
    Mr. Rogoff. I agree.
    Mr. Ryan [continuing]. The research, the opportunity for 
the businesses to benefit from this, but also the whole energy 
independence idea. And here in eastern Ohio, and western PA, 
and New York with all of the new developments with natural gas, 
it seems to me this would be a prudent way for us to proceed to 
continue to make these investments, and also which would not be 
necessarily your end, but incentives for public transit in 
cities, and you know, different regional authorities to have 
the ability and businesses to benefit from incentives to move 
in this direction. And it could be a job creator in so many 
different ways, cleaning the environments. A lot of these 
cities, we all know what the pollution is like in some of these 
cities as well.
    Mr. Rogoff. Absolutely. You know, I would add that there is 
a second piece to that, and that is our aggressive enforcement 
of the Buy America Act.
    It is not just about funding the research. It is also 
making sure that the fruits of that investment result in 
domestic manufacturing jobs. When we first came in, the number 
of Buy America waivers issued by the FTA was about 47 a year. 
We are now down to three, and we are not happy about those 
three. So we have been very aggressive in insisting that the 
taxpayer dollars that this committee puts forward for transit 
be invested in U.S.-made products to the maximum extent the law 
allows. And that will be a key part of the new low-emission bus 
program--to make sure that we get the benefits of that research 
here in the United States.
    Mr. Ryan. Great. Amen.
    Mr. Latham. Thank you very much, Mr. Ryan.
    The CR extends the funding level for the New Starts program 
for fiscal year 2012 level at $1.955 billion, with a 5 percent 
cut for the sequester.
    How are you implementing the sequester on the Full Funding 
Grant Agreements?
    Mr. Rogoff. Well, I don't have a complete answer for you 
yet, Mr. Chairman, but we will certainly keep you advised. The 
final amount between the House and Senate on New Starts was 
just finalized in your concurrence of the Senate amendment on 
the last vote. So with that now final number, and the impact of 
the sequester, I will be going to the Secretary and talking 
about how we try and shoehorn these commitments into the 
available funding, but we do not have a methodology established 
just yet.
    Mr. Latham. Are you providing funds for any project not 
under the full funding agreements, and if so, why? How can you 
justify cutting the projects under agreement and funding other 
projects?
    Mr. Rogoff. Well, respectfully, sir, you are asking me 
about the details of a plan that has not been developed yet. 
But the priority of the agency has always been for the Full 
Funding Grant Agreements we have signed. But until we have a 
complete methodology, I will need to come back to you on that, 
and perhaps the Secretary and I can visit you after that 
decision is made and just explain it personally in your office.
    Mr. Latham. Okay. We got introduced to the new MAP-21 
program rather quickly this winter with the Transit Emergency 
Relief Program. The supplemental provided a total of $10.9 
billion to repair transit systems damaged in the hurricane and 
other transportation needs.
    I would like to commend FTA and the Department for working 
with the transit authorities to get everyone moving again. I 
understand that the Memorandum of Understanding with FEMA as 
required by MAP-21 and the supplemental, has been signed. Can 
you tell us in a nutshell what is FEMA's responsibility, versus 
what is FTA's responsibility in the aftermath of the event? Is 
it straightforward what your roles are?
    Mr. Rogoff. It is. It is particularly straightforward if we 
have available funding in the FTA Emergency Relief Program. And 
this committee also was able to answer the call there and get 
us funding promptly so that we could put it to work. I will 
say, our partnership with FEMA has been a very positive one, 
one that I think some of us might have questioned could be so 
positive and successful going in. But right after the storm, 
FEMA gave us a mission assignment so that FEMA and FTA staff 
could work side by side up in the region doing cost validation 
even before we had a President's budget request, and before the 
committee had acted.
    So one of the reasons why we have been successful in 
getting money on the street quickly is we had done a lot of 
that cost validation work in advance. Once the President put 
forward his request and made it clear that that funding would 
all go to the new FTA Emergency Relief Authority, and then the 
Appropriations Committees followed suit, it was clear that the 
funding would go through FTA with FEMA assistance. And our 
principal role there is just making sure that there is no 
duplication, that there is no double dipping, if you will, that 
someone somehow got reimbursed for something from FEMA and also 
for the same expense from the FTA. And we have good procedures 
in place to make sure that does not happen.
    Mr. Latham. The transit emergency funds of about $2 billion 
was to go out for immediate needs, and then about $5.4 billion 
is really for anything authorized under Titles 23 and 49, which 
pretty much covers everything under the sun at the Department, 
and another $3.5 billion is for the regular Transit Emergency 
Relief Program.
    Who will make the decisions on the $5.4 billion for the 
general transportation money? Will it be you, the Secretary, or 
a task force?
    Mr. Rogoff. In terms of the transfer to other agencies, I 
expect it to be the Secretary because it is transferred--right 
now the only transfers I know being contemplated are transfers 
within the Department of Transportation, and this may be there 
to bring some resources to bear on Amtrak's infrastructure. As 
you know, sir, up in the New York, New Jersey region, the 
infrastructure is shared by Long Island Railroad, Metro North 
Railroad, Amtrak, and New Jersey Transit. They all have a lot 
of shared infrastructure, some of which are Amtrak assets, and 
if we are going to address the needs of the entire system, we 
need to be able to get some money to--Amtrak, who is not an FTA 
grantee. Amtrak is certainly part of the mix up there that 
needs to be dealt with. So any of that transfer authority would 
be dictated by the Secretary.
    Mr. Latham. Okay. Do you know what factors will be brought 
into determining the allocations? Particularly, for the 
mitigation part of it.
    Mr. Rogoff. Well, mitigation is an eligible expense under 
the FTA program, so that would not necessarily require a 
transfer. But we are looking at the mitigation investments as 
sort of the next step. There are going to be some smaller 
mitigation investments so when you are making the investment in 
the restoration of an asset, you can also make that investment 
strong enough to mitigate the possibility of the flooding 
recurring next time.
    There are also some big-ticket mitigation investments being 
looked at up there that we are going to be----
    Mr. Latham. Such as?
    Mr. Rogoff. Well, there are investments that will do a lot 
to protect water encroachment on things like major rail yards 
and other shared assets. It is a very complicated picture 
because as some people have pointed out, if you protect one 
railroad's asset, one tunnel of one railroad, you could, in 
protecting the Metro North, worsen the impact on the Long 
Island Railroad or Amtrak. So this really needs to be a 
regional discussion. And we are leading a regional discussion.
    The Deputy Secretary and I met with all of the general 
managers up there with Secretary Donovan some weeks ago, and we 
are going to insist on regional cooperation and regional 
solutions on these bigger ticket items.
    Mr. Latham. Thank you.
    Mr. Joyce, do you have a question? Excuse me. Mr. Pastor.
    Mr. Pastor. Mr. Chairman, we are going to submit our 
questions for the record in the interest of time.
    Mr. Latham. God bless you.
    Mr. Joyce.
    Mr. Joyce. No, Mr. Chairman, I apologize for being late 
though.
    Mr. Latham. Ms. Herrera Beutler.
    Ms. Herrera Beutler. One more.
    Mr. Latham. Sure.
    Ms. Herrera Beutler. Just for my curiosity because this was 
a little bit before my time. Going back to the issue you were 
talking about of the special legislation, did you have a hand 
in writing that special legislation when you were on staff 
prior to your role as Administrator?
    Mr. Rogoff. I don't recall if I was on the subcommittee 
staff at the time of that legislation. I am trying to remember 
now.
    Ms. Herrera Beutler. Thank you. That was it.
    Mr. Rogoff. I could get you more. I will just have to 
research what year that was and get you a more definitive 
answer.
    Ms. Herrera Beutler. That would be great.
    [The information follows:]

    Upon further review, Mr. Rogoff was nominated to serve as 
Administrator to the FTA on April 8, 2009, at which time he recused 
himself from all FTA beusiness with the Senate THUD Appropriations 
Subcommittee. Mr. Rogoff was confirmed by the Senate on May 21, 2009, 
and began work at the FTA immediately thereafter. The legislation in 
question was not reported by the Senate until August 5, 2009.

    Mr. Latham. I think I just have one more.
    FEMA is reporting that another $545 million will be paid by 
the DRF and backfilled for the sequester's effect on transit 
disaster money. Is that true that the DRF if is backfilling 
sequester?
    Mr. Rogoff. Well, let me put it this way: I would be 
surprised in the following respects. Yes, we did lose $545 
million as a result of the sequester, and I will have to look 
into this. But we also made clear that that $545 million would 
not come off of the response and recovery funding. It would 
come off the mitigation funding. Mitigation funding is 
something that is eligible under the FTA program.
    I am not sure it is eligible under the DRF, so that 
observation puzzles me, but I will certainly look into it.
    Mr. Latham. Well, FEMA is giving us the impression that 
they need to make $545 million available to FTA for the 
disaster costs. You are not aware of it?
    Mr. Rogoff. I am not, sir. I will say this. There may be 
certain costs that FTA will not be able to reimburse for under 
our program that FEMA would, but as I mentioned earlier, we are 
going to make sure that it is not duplicative payments for the 
same item. There is going to be a clear accountability and 
eligibility chain before any of those payments happen.
    As of now, FEMA was about the business of getting started 
on making some payments for transit, and once we worked with 
FEMA, and got the appropriation, those payments did not happen. 
They literally handed their worksheets to us, and we picked 
them up and brought those expenses to bear on the FTA program, 
so there has not been any duplication to date, and I will have 
to look at that other observation. That is the first I have 
heard of it.
    Mr. Latham. Is there any loophole that says a recipient, if 
they ran out of money, then they could go to FEMA?
    Mr. Rogoff. Well, there is. On the overall observation of 
running out of money, we are optimistic that we have plenty to 
handle response and recovery for Hurricane Sandy.
    Mr. Latham. Do you have extra?
    Mr. Rogoff. No, I would not call it extra. It is the money 
for mitigation. And we consider it unfortunate that we lost 
that $500 million for mitigation due to sequester. Like I said, 
it is the first I have heard of FEMA proposing to backfill it. 
And I am not sure they could for mitigation. We are very 
confident we have enough money for response and recovery.
    Mr. Latham. Any member have any more questions?
    Okay.
    I think we will conclude in the interest of time here, 
because there are members that are going to be leaving town 
shortly. You can all submit questions for the record, which we 
will be doing also.
    But with that, we thank you for your testimony.
    Mr. Rogoff. Thank you for your time, sir.
    Mr. Latham. All right, very good.
    Thank you, the hearing is adjourned.
    [Questions for the record follow:]

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                                           Tuesday, April 16, 2013.

                   U.S. DEPARTMENT OF TRANSPORTATION

                                WITNESS

HON. RAY LaHOOD, SECRETARY OF TRANSPORTATION
    Mr. Latham. The Subcommittee will come to order. Today we 
welcome Secretary of Transportation Ray LaHood to testify on 
behalf of DOT's fiscal year 2014 budget request.
    I know this may be the last time that you testify before 
us. We wish you the very, very best. I look forward to your 
testimony.
    This year, the department is requesting authority to spend 
$77 billion in fiscal year 2014. This represents an increase of 
$6.5 billion, or 9.2 percent from last year, which is a healthy 
increase in the current environment.
    Once again, the budget includes $50 billion for ``immediate 
transportation investments.'' This is a proposal we have seen 
three times before and is structured similar to the fiscal year 
2009 stimulus package. Also similar to the stimulus package, it 
is not paid for or offset by reductions elsewhere.
    The President assumes a total of $214 billion to pay for 
two reauthorization programs and to shore up the Highway Trust 
Fund, which the CBO expects to have financial solvency issues 
in 2014. The budget proposes to pay for this with anticipated 
savings in the Overseas Contingency Operations fund, which is, 
for a lot of folks, is a dubious source, at best.
    While the Highway Trust Fund is having financial difficulty 
paying for its current obligations, the administration's budget 
proposes to reopen the recently passed MAP-21 and fund rail 
programs from the trust fund.
    And just when you think it can't get worse for the 
struggling trust fund, the budget proposes a 330 percent 
increase in rail funding, the largest increase in this entire 
budget.
    To put it in perspective, the budget request would increase 
the entire transportation budget by $6.5 billion; rail would 
receive $5 billion of the $6.5 billion increase. We are moving 
from one tight budget year to another.
    This is an expensive proposal to put forth in this 
environment, especially with no realistic way to pay for it 
all. Moving transportation funds to the ``mandatory'' side of 
the ledger will only exacerbate our challenges, as mandatory 
programs are the largest contributors to our budget problems. 
And using OCO funds is not a realistic option.
    Many members hope that the drawdown of our forces in Iraq 
and Afghanistan will provide an opportunity to reduce the 
spending and the deficit and not serve as an excuse for even 
more spending. We have the difficult job of determining how to 
allocate a limited pot of funds among the programs within our 
jurisdiction. I am looking forward to hearing more details 
about your budget.
    Again, we welcome you, Mr. Secretary.
    Before I recognize you, I would ask Mr. Pastor for his 
opening statements.
    Mr. Pastor. Good morning, Mr. Chairman.
    Good morning, Mr. Secretary. And thank you, Mr. Chairman, 
for the recognition. I also want to welcome Secretary LaHood 
this morning. And since this is--as you said, this may be his 
last appearance before this subcommittee as Secretary of 
Transportation, I want to thank him for his service to our 
country as the Secretary of Transportation. He truly has been a 
champion of safety and also a champion to invest in our 
transportation infrastructure. And so I want to thank you again 
for your service.
    Secretary LaHood. Thank you.
    Mr. Pastor. And wish you the best.
    Secretary LaHood. Thank you.
    Mr. Pastor. Mr. Secretary, a few weeks ago, we finished our 
work on the fiscal 2013 appropriation process where many 
transportation programs were put on auto pilot at the funding 
levels below the fiscal year 2012 funding level. In addition, 
Department of Transportation must absorb nearly $960 million in 
cuts due to sequestration that went into effect in early March. 
While not fully implemented and as of yet, these reductions 
will hit the operations of the FAA most dramatically and will 
significantly lower the base line for many transportation 
programs. President Obama has submitted a robust funding 
request for the Department of Transportation. With two small 
exceptions, the fiscal year 2014 budget fully funds the 
authorized levels included in MAP-21 for Department of 
Transportation's highway, transit and safety agencies.
    The budget also proposes a significant increase in rail 
programs and includes funding to continue to modernize our 
aging air traffic control system. These investments are 
important to our economy and necessary to maintain and improve 
our nation's transportation system. I look forward to your 
testimony.
    Thank you, Mr. Chairman, I yield back.
    Mr. Latham. Thank you, Mr. Pastor.
    After the Secretary has given his opening statement, we 
will alternate and proceed with the 5-minute question rounds.
    And with that, Mr. Secretary, invite you to present your 
opening statement; your full written statement will be included 
in the record. And you are recognized for 5 minutes.
    Secretary LaHood. Thank you, Mr. Chairman, and Mr. Pastor, 
and other members of the committee.
    I always look forward to the opportunity to come back to my 
old committee that I served on for 8 years and talk about our 
Fiscal Year 2014 budget. Since day one, President Obama and all 
of us at the Department of Transportation have been committed 
to putting people back to work, rebuilding and repairing our 
infrastructure. We have also worked tirelessly to ensure that 
our aviation, highway, rail transit, and pipeline systems are 
the safest in the world. The President's 2014 budget provides 
the necessary resources to continue and expand these efforts. 
The President is requesting $77 billion for the Department of 
Transportation for fiscal year 2014, a 6 percent increase over 
2012 funding levels.
    The President's budget also includes an additional $50 
billion for immediate investments to support critical 
infrastructure projects, such as improving America's roads, 
bridges, transit systems, boarder crossings, railway, and 
runways. Together, these proposals will help us create jobs and 
invest in the 21st century transportation that business needs 
to compete.
    Inner city passenger rail continues to be critical to our 
efforts to improve intermodal connectivity and increase travel 
options--Four years ago, President Obama laid out his vision 
for high-speed rail. That vision has not been blurred or 
diminished, and we are working hard to fulfill it. Today, we 
have trains hitting 110 miles per hour in the Midwest, and the 
initial segment of Nation's first 220-miles-per-hour high-speed 
rail network is set to break ground in California this year. We 
have invested in multi-modal train stations in communities 
across the city, creating jobs and revitalizing downtown 
districts in the process.
    The President's 2014 budget continues this effort with a 
bold rail reauthorization proposal that will provide $40 
billion over 5 years to invest in projects that strengthen and 
enhance rail services. As part of this proposal, $6.4 billion 
is included to significantly improve existing inner-city 
passenger rail service, develop new high-speed rail corridors, 
and strengthen the economic competitiveness of the freight rail 
system.
    The President's 2014 budget also fully supports the 
authorized funding levels contained in MAP-21. We are proposing 
$53 billion for our highway transit and highway safety programs 
in 2014. The President's budget also includes increased 
investment in highway traffic safety. The President is 
proposing over $560 million for NHTSA to support state highway 
safety initiatives. These grants will help us save lives and 
reduce injury. In addition, the President's budget includes 
increased funding to expand our bus and truck safety programs. 
President's budget requests $255 million for Pipeline Hazardous 
Material Safety Administration, most of which will increase 
pipeline safety. And, finally, the President's plan provides 
$15.6 billion for the FAA to continue to support the safest 
aviation system in the world. This includes furthering our 
commitment to NextGen. Through NextGen advancements, we are 
improving safety, capacity, and the efficiency of air travel. 
The President's budget requests includes $1 billion to continue 
to advance critical NextGen investments.
    So, with that, Mr. Chairman, and Ranking Member, and 
members of the committee, why don't I just conclude and answer 
your questions. Thank you.
    [The information follows:]

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    Mr. Latham. Thank you very much, Mr. Secretary. And again 
welcome. Thank you for the great job that you have done at the 
department.
    Secretary LaHood. Thank you.
    Mr. Latham. After 7 years of short-term extensions, the 2-
year surface authorization act, MAP-21, was recently enacted. 
Although the DOT budget request would fund the highways, motor 
carriers, and safety programs at the MAP-21 levels, which is 
$55 billion, it also reopens MAP-21 midstream to pay for a 5-
year, $40 billion rail package from the trust fund as mandatory 
spending. The fiscal year 2014 costs exceed $6 billion, which 
is a hefty increase compared to the $1.5 billion in rail 
funding for fiscal year 2013. As we are all aware, Congress 
didn't receive a surface transportation reauthorization 
proposal from the administration. I just wonder when we can 
expect the proposal from the administration about the official 
rail reauthorization package that has your 5-year, $40 billion 
proposal.
    Secretary LaHood. Well, as you know, Mr. Chairman, the 
President has been focused since he was sworn into his second 
term on sequestration, on guns, and on immigration. And I 
believe that when you all finish working on, certainly, guns 
and immigration, you will see a bold plan put forth by this 
administration, which will include funding.
    Mr. Latham. Well, we would like to continue to know what we 
are paying for before we appropriate the funds, obviously. As 
early as possible, I would really like to see the legislative 
text that you are proposing. I assume that is forthcoming.
    Secretary LaHood. It will be a part of the President's 
vision once he is not busy with these other matters.
    Mr. Latham. So it is contingent upon getting----
    Secretary LaHood. It is contingent upon you all taking 
action on three things that you all have been paying a lot of 
attention to, guns, immigration, and sequestration.
    Mr. Latham. Okay. The Highway Trust Fund will begin having 
problems meeting its current obligations on the transit side in 
2014. The budget proposes to augment the trust fund with a 
total of $214 billion from the Overseas Contingency Operations; 
$40 billion of it is from rail, $89 billion from surface or for 
surface transportation, and $85 billion to make the trust fund 
solvent.
    Given that paying for your budget proposal in the OCO was 
equivalent, really, to putting the expenses on the credit card 
and even the administration has admitted that, is there any 
other way of funding the request? Or, if not, what programs are 
you ready to----
    Secretary LaHood. Well, for 2 years, the first 2 years that 
I was in this job, you all criticized us for not coming up with 
a way to fund transportation. So you can't have it both ways 
here. I know you will have it both ways, but you shouldn't have 
it both ways. For the last 2 years, after receiving criticism 
for the first 2 years for no funding, we have come up with a 
funding mechanism. Now, there really is an account with this 
money in it. And what the President proposes is to take half of 
the money and apply it against the deficit and take the other 
half and give part of it to the Department of Transportation to 
fund our programs. This is not made up. This is not a fiction. 
There really is an account where this money exists. And that is 
how the President proposes and this administration proposes to 
do the pay-for, which you asked us to do for 2 years in a row. 
And for the last 2 years, that is what we have intended to do.
    Mr. Latham. There is money in that account?
    Secretary LaHood. Yes, sir, there sure is.
    Mr. Latham. Has it been appropriated?
    Secretary LaHood. $600 billion in savings from Iraq and 
Afghanistan.
    Mr. Latham. Has it been appropriated?
    Secretary LaHood. That I don't know, Mr. Chairman. I assume 
this high-powered staff that you all have sitting behind you 
knows the answer to that.
    Mr. Latham [continuing]. Money in the account.
    Secretary LaHood. Then you ought to appropriate it because 
it is there, it is savings.
    Mr. Latham. Isn't there a problem with converting all the 
transportation funding to mandatory and without providing any 
kind of a long-term revenue source?
    Secretary LaHood. Well, as I indicated a few minutes ago, 
the President will have a bold vision and a pay-for once he is 
able to persuade all of you to do something on guns and 
immigration. And hopefully fix sequester.
    Mr. Latham. My time has expired. Thank you.
    Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman.
    I want to deal with the airport improvement program. You 
propose $450 million reduction to the FAA's airport grant 
program, AIP, bringing the funding to the--in the 2014, down to 
$2.9 billion from a 3.43. Entitlement funds would only be 
preserved for small- and medium sized-primary airports; 
nonprimary airports would lose their annual entitlement of 
$150,000 per year. The large-hub airports will lose their 
entitlement funds but will be eligible for discretionary funds 
and will be allowed to raise passenger facility charges from 
$4.50 to $8 per passenger.
    Mr. Secretary, changes to the passenger facility charges, 
the PFC, are typically handled through the authorization 
process. If the PFC is not increased, how much, if any, does 
the administration request change.
    Secretary LaHood. Well, the Airport Improvement Fund, AIP, 
is funded at $2.9 billion. And the proposal uses the Federal 
money to support small- and medium-size airports. It also lets 
airports raise the passenger facility charge from $4.50 up to 
$8. This way, the larger airports have the flexibility to use 
the funding as they think best. That really is what this 
proposal is about.
    Mr. Pastor. But I--the question I have is, if you don't 
have the authorization process, and the PFC is not increased, 
what do you do with the reduction in funds? Are you going to 
relook at it and make another determination if we don't have 
the passenger--the PFCs? Because this, I think, was brought 
about a year ago, same idea.
    Secretary LaHood. It was.
    Mr. Pastor. And nothing happened.
    Secretary LaHood. It was proposed a year ago. Sylvia tells 
me we go back to the current funding at $3.35 billion.
    Mr. Pastor. Okay.
    Secretary LaHood. Yes. I should have mentioned that Sylvia 
Garcia is our Acting Secretary for Budget and Programs and 
Chief Financial Officer.
    Mr. Pastor. You have a great person.
    Secretary LaHood. I agree with that.
    Mr. Pastor. I have had a--well, she many times has me on my 
knees begging for requests. Now that she is in a higher role, 
my respect continues with her. And I am very happy that she 
will continue the funding at last year's level.
    What was the rationale for eliminating the annual 
entitlement of $150,000 for the small, nonprimary airports?
    Secretary LaHood. I will have to get back to you for the 
record on that, Mr. Pastor.
    Mr. Pastor. The other one is, what benefit do the small, 
small, non-primary airports get out of your proposal, if any 
benefit?
    Secretary LaHood. I will get back to you for the record on 
that.
    Mr. Pastor. Okay.
    We recently had the FAA announce closures of some control 
towers. I think it was 149 that were scheduled, and now that it 
is delayed to June 15th. Do you think there will be further 
revisions on the towers that have been already named to be 
closed by the June 15th date?
    Secretary LaHood. Well, this brings up the point about how 
dumb and difficult sequester is. It is a dumb idea because it 
is a meat-ax approach to budgeting. And there is not much logic 
involved in it. And there is not much consideration given to 
really looking at the merits of certain programs and really 
making judgments where to cut or whether a program is a good 
program or not. So that, for starters, sequestration has made 
it very difficult. We have to come up with a billion dollars. 
At the Department of Transportation, we have 55,000 employees; 
47,000 are FAA employees. The lion's share of the billion 
dollars, over $600 million, has to come from the FAA. So we 
have just sent letters to our employees telling them that they 
may be furloughed up to 11 days. Now, these are Federal 
employees. Federal employees don't make a lot of money, but 
they serve the American people. At the FAA, their primary 
mission is safety. And so the decisions about closing airports 
has been very, very difficult. I represented for 14 years 20 
counties in Illinois. And I had a lot of small airports. And so 
I know the difficulty in announcing that an airport is going to 
be closed, particularly in rural America or an area outside of 
a metropolitan area. These are not decisions we wanted to make, 
but we had to make. And our plan is to continue with the 
announcements that we have made. The reason for the delay and 
the reason that we asked the court for the delay till June 15th 
is to make sure we get it right. And to make sure that we can 
do what we say we are going to do.
    Mr. Pastor. I yield back.
    Mr. Latham. Thank you, Mr. Pastor. Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you for your time. You 
probably--you might have an inkling as to what I am going to 
ask you about. It is about the Columbia River Crossing Project 
in Portland. We have talked about this. You were recently out 
in my State Leg talking to the State lawmakers about whether or 
not to fund this project. And you have made it clear it is an 
Obama Administration priority. I understand that there are 
about three New Starts programs that have not received full 
funding grant agreements but is still a priority; they are 
still receiving money, even though they haven't had the grant 
signoff. This is one of them.
    And I wanted to point out a couple of things and get your 
take, because I have some real concerns with how this project 
is moving forward. And having just heard you talk about the 
negative impacts as you see on--because of sequestration, I 
think it is really--these are salient points for you to 
consider as you are promoting this project in its current form.
    One of the things that--and I have just asked the project 
sponsors about, you know, in Seattle, the big controversy over 
this bridge is that--and the administration is promoting this--
is the light rail piece. You know, a lot of us are beginning to 
call for a bus rapid transit instead because it more cost 
effective. Everybody knows the bridge--it is a Federal--I think 
it is a Federal responsibility. It is on I-5, connects Canada 
to Mexico. It is the last drawbridge on I-5. So the fact we 
need to change it and make it save I don't think is the 
argument. It is what it looks like.
    And seems like a lot of folks from outside our region keep 
promoting the light rail piece. We are starting to say bus 
rapid transit is more cost effective, and the numbers seem to 
bear out. In the last about 5 years--the average per-mile cost 
of light rail nationwide is about $35 million. There has been 
about two projects in our neck of the woods that have 
significantly exceeded that; one is in Portland, where it is 
$179 million per light rail mile; and one is--the latest one is 
in Portland, which is $204 million per light rail mile. These 
are really expensive, partly because of the soil and there was 
elevated pieces, and they had a tunnel, significant 
environmental or--there were a lot of challenges. So it is not 
usually this expensive.
    However, the plan that the administration is promoting 
right now would be the most expensive in the Nation at $293 
million for a 2.9-mile expansion. So it is $293 million per 
mile for light rail on this bridge. My biggest concern is my 
constituents and whether they are going to have to pay the cost 
overruns here, because there is no justification for these 
numbers. In fact, if you look at how this money is going to be 
spent, $7 million would be spent on a Hood River Channel 
restoration 60 miles east of the facility; $10 million for a 
curation facility, also known as a museum; $3 million for 
Oregon's mass transit organization, TriMet, in South Portland. 
So, as you can see, there a lot of stuff built into this cost 
that this administration is still promoting. And I hear you 
talk about cuts and costs and overruns elsewhere. I guess I 
would ask, do you think this is all worth it for 1 minute off 
the commute time that this bridge and this project would save, 
according to the CRC's own documents?
    Secretary LaHood. Well, first of all, we are not building 
the bridge to get somewhere faster.
    Ms. Herrera Beutler. Oh, really? That has been one of the 
reasons that has been sold.
    Secretary LaHood. DOT has never promoted building anything 
to get anywhere faster. We don't promote things to get places 
faster. We don't promote building roads or bridges to get 
places faster.
    What we have promoted is the idea that for 10 years, people 
in the region have planned this. The people in the region 
decided what this project would be.
    Ms. Herrera Beutler. So can I challenge you on that, Mr. 
Secretary?
    Secretary LaHood. You can. But at some point, I would like 
to finish answering your question. But if you want to challenge 
me, go ahead.
    Ms. Herrera Beutler. Well, just on that statement. Because 
this is an incredibly important issue for my biggest county. We 
are still hovering around double-digit unemployment; we have 
been for 4 years. They are going to pay the lion's share 
portion of this cost. And these people just in November voted 
down the local matching tax that is required, under my 
understanding, for a New Starts grant. So, yes, there are 
those, particularly from outside of this county, that have 
called for light rail to come into Clark County. But it is 
not--I guess--I think you need to understand it is not this 
county that has asked for it.
    Secretary LaHood. This is not a county bridge. This is a 
regional bridge. This is----
    Ms. Herrera Beutler. So is the department going to pick up 
the cost overruns that comes from it?
    Secretary LaHood. This is not a county bridge. It is a 
regional bridge. It connects two States over the Columbia 
River. It is an unsafe bridge. It is a bridge that needs to be 
replaced. There is no dispute about any of that. This is not a 
one-county bridge. This is a bridge that connects North 
America, from Canada to Mexico. This is a regional approach. It 
is a two-State approach. It has been in the planning for 10 
years.
    Now, we didn't make up the idea that there ought to be a 
transit line. That was done by the people over a 10-year period 
who planned the bridge.
    If you all in the region decide that you don't want a 
transit line, so be it. But you are going to start over. It is 
going to take you another 10 years to plan what you want. And 
it is, I think, for the people that have been planning it for 
10 years, it is a little bit of a slap in the face. But if 
things have changed and the people that planned this over 10 
years want to change the design of the bridge, so be it. We 
will take our money and go somewhere else. And you can all 
start over with the environmental impact statement and take 10 
years to plan a bridge that needs to be replaced.
    Ms. Herrera Beutler. Thank you.
    Mr. Latham. Gentlewoman's time as expired.
    Mr. Quigley.
    Mr. Quigley. Thank you, Mr. Chairman.
    Good morning, Mr. Secretary.
    Secretary LaHood. Good morning.
    Mr. Quigley. Thank you for your service.
    Secretary LaHood. Thank you.
    Mr. Quigley. Speaking on behalf of the mayor of City of 
Chicago, we will take that money.
    When I got on this committee, I talked about the region all 
the time, as you are. And, of course, he reminded me that by 
the word ``region,'' I mean Chicago. So once I understood that, 
I was just fine.
    Let me ask you a question relating to something you had 
touched on before, but let me ask it in a way that you can give 
a very succinct answer to. The president's budget allows for an 
increase in the passenger facility charge up to $8 for the 
large hub airports, given that they would give some of that 
back to FAA so that it would go to the smaller regional 
airports for their infrastructure needs. Just how critical is 
that increase to smaller airports and the larger airports in 
the coming years?
    Secretary LaHood. Well, we know that airports all over the 
country, whether it is O'Hare or Peoria or other large hub 
airports, all are going to need some modernization over the 
next several years. Some will need additional runways. Some 
will need to lengthen runways. These airports, whether they are 
in Chicago or in Peoria, are an economic engine for the 
community. They provide jobs. And so we want to recognize that 
we are not just going to fund the big airports, but we have an 
obligation to work with the smaller airports, too.
    Mr. Quigley. Right. And this fund hasn't been--this fee 
hasn't been increased since 2000, I believe, if that is 
correct.
    Secretary LaHood. Yes.
    Mr. Quigley. Let me ask you another question about positive 
train control. As you know, the Rail Safety Act in 2008 
mandated that this be in place by, I think, 2015. We are now 
hearing from the Federal Railroad Administration, CRS, and the 
GAO of all published reports saying this isn't going to happen. 
Your thoughts on whether or not----
    Secretary LaHood. It is going to happen. This is our number 
one rail safety program. Positive train control is about 
safety. Our number one agenda, what we get up every day and 
think about at DOT is safety. This will be done.
    Mr. Quigley. I am not arguing one point or another. I guess 
the question I am asking is, it appears that both freight and 
commuter rail are saying they don't have the time or the 
resources to get this done in time. So how do we get to this 
point by 2015?
    Secretary LaHood. Well, I think that--I don't know about 
the time part. But this is an expensive proposition.
    Mr. Quigley. I want to get it done, too.
    Secretary LaHood. This is not something that we made up at 
DOT. Congress passed this. And they passed it on the safety 
aspect of it.
    Mr. Quigley. And I am not questioning that at all, Mr. 
Secretary. And I am all for safety. But you would--you raised a 
nuance there when you said the timing issue. And I think that 
is all anyone is raising now.
    I just want to know, is it possible to get it done by 2015, 
and what would it take to get it done by that time?
    Secretary LaHood. Our goal is to get this done. Obviously, 
we need the resources to get it done. And it is our number one 
rail priority.
    Mr. Quigley. Okay. I look forward to working with you if 
there is a--if it is going out to get the resources, fine. If 
it is working with my freight and passenger lines that run 
through our district and our region, I would be glad to work 
with you on those.
    Secretary LaHood. Thank you.
    Mr. Quigley. I guess the only question is not whether it is 
getting done; it is, how the heck do we get it done by 2015?
    Secretary LaHood. It will be difficult. But we have that as 
a goal.
    Mr. Quigley. All right. Thank you, Mr. Secretary.
    I yield back.
    Mr. Latham. Thank you, Mr. Quigley.
    I don't like sequester any more than you do. But were you--
and the administration, the White House, the Press Secretary 
said it was a White House idea, and they insisted on it because 
it would be so horrible. Were you contacted by the White House 
before they insisted on this sequester?
    Secretary LaHood. Well----
    Mr. Latham. About the ramifications that----
    Secretary LaHood. We all, obviously, had our input into the 
idea that if there was a sequester, there would be shared pain 
across the administration.
    Mr. Latham. But when they proposed it, you were not asked 
about specific----
    Secretary LaHood. We didn't take a vote on it.
    Mr. Latham. I am sure. And I appreciate that candor.
    Question about nationwide investments. There has been a 
concern about how we as a government can address transportation 
problems obviously that affect us systemwide, nationwide, and 
how we resolve moving freight from the West Coast ports inland 
and how we resolve the bottlenecks in places like Chicago or 
Fort Worth or the choked I-95 corridor. In SAFETEA-LU, the 
authorizers tried to create a program for projects of regional 
and national significance. But that all got earmarked. And in 
the stimulus bill, the Senate tried to address it by creating 
TIGER, which seems to hang around forever. And MAP-21 created 
1-year authorization for a national TIGER-like program but 
didn't continue that authorization for 2014. Apparently, that 
was not a priority.
    Can you give us any evidence that DOT is using the 
discretionary program to address nationwide projects?
    Secretary LaHood. Sure.
    Mr. Latham. And is there any office or program or anything 
at the department that looks at this on a nationwide basis?
    Secretary LaHood. Sylvia Garcia, Acting Assistant Secretary 
for Budget and Programs runs the TIFIA program.
    Mr. Latham. She should. She will do it well.
    Secretary LaHood. And that is a program that you all 
provided a lot of additional money. The TIFIA program is a loan 
program that we have about $750 million this year and over a 
billion next year. That money was provided in MAP-21. It was a 
way to say that big projects need to have an opportunity to 
leverage other dollars. And we just announced that we are going 
to consider a loan to completely redo the Riverwalk along the 
Chicago River. We are working with New York on a large bridge 
project, the Tappan Zee Bridge project. They submitted a 
letter.
    I think we have about 29 letters of interest for the TIFIA 
loan program. Almost all of these, Mr. Chairman, are projects 
of national significance. They are big projects. They are 
projects that can't be funded out of any one pot of money. They 
need private dollars, which is what TIFIA really----
    Mr. Latham. Riverwalk in Chicago is a project of national 
significance?
    Secretary LaHood. Yes. The Chicago River is a natural 
resource that can benefit thousands of people.
    Mr. Latham. We have of a river walk in Des Moines, too.
    Secretary LaHood. Fine, submit a letter. We will be happy 
to take a look at it.
    Mr. Quigley. Didn't know you had a river.
    Mr. Latham. We have got several. We flood all the time.
    Why didn't you propose funding the Authorized Projects of 
National Regional Significance program? And if we are going to 
provide funding in 2014 for TIGER, wouldn't it make sense to go 
with an authorized program or a--rather than one that was made 
up?
    Secretary LaHood. Well look, Mr. Chairman, we don't pass 
the bills, you all do that. We now have a TIGER 5 program that 
we are announcing $475 million for. We didn't dream that up. 
That was passed by Congress. You all like TIGER. Somebody 
around here does. We have had five programs. And what it funds 
are innovative, creative projects that there is no other place 
to get the money from. Some of which are in Iowa, by the way, 
which I will be happy to provide you a list of. These are 
opportunities for communities to come to DOT with innovative, 
creative ideas, and there is no other pot of money. And 
Congress seems to like it because you have given us five 
different opportunities to----
    Mr. Latham. Is it authorized?
    Secretary LaHood. No, sir, it is not. We don't authorize 
programs; that is your job.
    Mr. Latham. Right.
    Secretary LaHood. But if you give us the money, there are 
plenty of places around the country that are clamoring for ways 
to innovate in transportation.
    Mr. Latham. How much of that is going to go to, quote, 
``high-speed rail''? And it was interesting earlier, you said 
the department never looks at speed or time to get somewhere as 
a consideration of projects. Isn't high speed rail, whatever 
that is, supposed to get people there faster?
    Secretary LaHood. We have never promoted high-speed rail on 
the speed aspect of it. In Illinois, they invested over $3 
billion to fix up the tracks to get trains from Chicago to St. 
Louis going from 79 miles an hour to 110. That was their 
decision. In California, they have a plan in place that they 
have been working on for 10 years where we have invested over 
$3 billion. Their trains will go 200 miles an hour. On the 
Northeast Corridor, we have invested over $3 billion, not to 
get trains to go faster--although Amtrak is working on that--it 
is to fix up 50-year-old, aging catenary and infrastructure.
    So our investments go where there are Governors or 
stakeholders, some who want to fix up infrastructure, some who 
want to buy new cars, some who wants trains to go faster.
    Mr. Latham. With the announcements you are going to have on 
the TIGER 5, is there high-speed rail money in that?
    Secretary LaHood. No. There is no earmark for any program, 
no. If you look at the notice that will be out on Friday, it 
just simply says there is $475 million.
    Mr. Latham. $475 million.
    Secretary LaHood. That is correct, yes.
    Mr. Latham. Mr. Dent, are you ready?
    I am sorry, Mr. Pastor.
    Mr. Pastor. Talk about sequestration, I agree with you; it 
is a bad idea, and we did vote, and I voted no for it because 
it was a bad idea then. So but we have to live with its 
ramifications.
    I am going to go back to the control towers: 149, in April, 
they are going to be shut down, but then made the decision that 
we would go into June.
    Now, as an example, and what I am asking the question, in 
Glendale, there is a control tower that is in very close 
proximity to Luke Air Force Base. Luke Air Force Base is 
getting the F-35s. And it has always been a high priority for 
FAA because you have Luke so close to the traffic coming from 
Glendale and Maricopa County that that control tower had some 
significance in terms of safety. And so I am going to ask the 
question this way: In the determination of going from April to 
June, will there be consideration on the different airports 
that were deemed to be closed to say because of different 
factors we are now going to take this airport off the list? Is 
this one of the reasons that you went from April to June or 
what is the reason that we----
    Secretary LaHood. In the beginning, Mr. Pastor, we did 
consult with our colleagues at the Defense Department about 
airports that were near military facilities, and we consulted 
with our colleagues at the Defense Department when there were 
airports that had Air Guard units on those airports. And we 
went with their judgment on this. We didn't want to close a 
tower if it was going to have an impact on something that the 
Defense Department thought would be a serious detriment to the 
unit that is there or to an airport nearby.
    And the reason that we extended the time was to give our 
lawyers, really, more opportunity to answer some of the 
concerns that had been put forth by the plaintiffs and also to 
give airports an opportunity. Some airports are actually going 
to put the money up to keep these open. Because in the 
President's 2014 budget, there is money for these airports. And 
so some communities are finding the resources to keep the 
airports open. Frankly, number one, it was for legal reasons, 
but number two, it was to give communities a chance to see if 
they could find their own resources.
    Mr. Pastor. I am going to yield back and wait for the next 
round. Go into a different line of questioning.
    Mr. Latham. All right. Thank you very much, Mr. Pastor.
    Mr. Dent.
    Mr. Dent. Thank you, Mr. Chairman. Good morning, Mr. 
Secretary.
    Secretary LaHood. Good morning.
    Mr. Dent. Great to see you again.
    Secretary LaHood. Thank you.
    Mr. Dent. Few things. MAP-21, as you know, was an important 
step toward improving our Nation's transportation, 
infrastructure and systems as well as maximizing efficiencies 
within the department. I recognize the department is working to 
implement the reforms and promulgate regulations directed by 
the new law. I am interested in your prioritization of these 
initiatives in the constrained budgetary environment.
    Specifically, I want to highlight an issue one of my 
constituents has brought to my attention. For a few years now, 
a company in my district has voiced serious concerns about the 
Federal Motor Carriers Safety Administration Hazardous Material 
Safety Permit Program, HMSP, I guess. As you are probably 
aware, this is a safety permit program for motor carriers of 
certain hazardous materials. It is intended to ensure a higher 
fitness standard than is required of regular trucking 
companies.
    Under the program, a carrier's fitness is based in solely 
on limited out-of-service violation history. My constituent's 
frustrations are twofold. He believes the standards used to 
evaluate carriers do not accurately measure safety; and, two, 
current rules do not provide an appeals process prior to 
automatically being denied a permit. These seemingly arbitrary 
rulings are having real consequences and effect on their 
livelihoods, and actually it favors very large companies over 
smaller companies. Pursuant to MAP-21, Federal Motor Carrier 
Safety Administration is conducting a study of Hazardous 
Material Safety Permit Program. That study should be completed 
this summer, as I am told and reported to Congress by an 
October 1st deadline.
    Mr. Secretary, I want to acknowledge that your agencies 
have been extremely responsive to my office when we have made 
inquiries, and I want to thank them for their professionalism 
that they have always extended to me and to my office. And I 
know Administrator Farrell has been personally engaged on this. 
I am just looking for your commitment that you will seriously 
consider this industry stakeholder feedback in the HMSP study 
and pursue recommendations highlighted in that report.
    In the meantime, I would simply ask that you utilize your 
agencies to the fullest extent possible to review, where you 
have authority, to pursue administrative remedies, expedite 
interim resolutions as soon as possible. This is a big issue 
where I live.
    Secretary LaHood. Sure. Of course, you have my commitment 
to listen to your constituent and to listen to you and to see 
if there is a way that we can be helpful.
    Mr. Dent. Thank you.
    It is a very important issue to us. I just wanted to make 
you aware of it.
    And the second, obviously, on the issue of the contract 
tower program, the administration's decision to close the 
contract towers has gathered a lot of attention, obviously. 
Since the administration originally slated the first round of 
closures of, I guess, 149 towers to begin on April 7th, but I 
guess now decided to delay the closures until June 15th, how do 
you plan to keep these 149 towers open until June 15th if, as 
the administration has claimed, you don't have any flexibility 
on those cuts?
    Secretary LaHood. Well, we found the money to do it. And 
that is why we went to court and asked for the extension.
    Mr. Dent. Do you foresee any further revisions to the list 
of the 149 contract tower closures now that the FAA will be 
funding the towers at least until----
    Secretary LaHood. I think the only revision would come if a 
community came to us and said we have the money to keep the 
tower open. We don't have the money to keep them open. We just 
simply don't.
    And let me just say, too, Mr. Dent, this has been painful. 
As I said to Mr. Pastor, as someone who represented a fairly 
rural district, I know how important these airports are. And I 
know there is going to be job loss when an airport tower closes 
and an airport closes.
    Mr. Dent. I just wanted to say, I know in my district, the 
one contract tower feels they could--they could manage this 
without a closure, responsibly and within budget. I just wanted 
to share that with you.
    Secretary LaHood. We have told airports, if you can find 
the money to keep your airport open, we will make sure the 
paperwork gets done so that can happen.
    Mr. Dent. Okay.
    Secretary LaHood. We will not stand in the way.
    Mr. Dent. Thank you. I will deliver that message back to 
them. Thank you, Mr. Secretary.
    And, finally, I know you are familiar with my interest in 
pipeline safety. And I certainly appreciated your visit to my 
district back in 2011, shortly after that terrible explosion in 
Allentown that killed five people. And so I wanted to thank you 
for all the work you have done on pipeline safety. Obviously, 
it made some positive progress on the issue with the Pipeline 
Safety Job Creation Act of 2011. I see that yearly inspections 
rose to 46 percent in 2011 to 1,340. And PHMSA has fulfilled 
the goal of hiring 135 inspection enforcement staff. I know 
PHMSA has experienced challenges in filling vacancies. And I 
noted that there was a request for direct hiring authority. I 
wanted to see if you could comment on those issues.
    Secretary LaHood. Well, first of all, let me say thank you 
to you for your leadership and to Congress for passing a very, 
very strong pipeline safety bill that gave us the authority to 
hire additional people. All of the people that you authorized, 
we have hired. And you will see from the President's budget we 
are asking for additional inspectors. We think that is the way 
to really correct the problem. And we appreciate what Congress 
has done.
    Mr. Dent. Thank you, sir.
    Mr. Latham. The gentleman's time has expired. I apologize 
to Mr. Joyce. I actually recognized Mr. Dent out of turn there, 
since you arrived earlier.
    But Mr. Quigley.
    Mr. Quigley. Thank you, again, Mr. Chairman.
    Mr. Secretary, I know you are occasionally fond of pointing 
out that we created many of these Frankenstein legislative 
monsters that you have to address. Well, here is at least one 
more. The pilot program in MAP-21 that helps get programs 
through an expedited fashion through development, engineering, 
and construction, some of it is through a public/private 
partnership. As you know, there is a little provision in there 
that says they have to be in a state of good repair to be 
eligible for this, which means almost no one who is a large 
entity is eligible to qualify for what could be a very helpful 
program. Could you comment on that and----
    Secretary LaHood. What I would like to do, Mr. Quigley, is 
check with some of our administrators and see if that language 
has inhibited us from really moving ahead. I don't have the 
specifics on that. Obviously, I am aware that Congress wanted 
to cut short the time within which we approve projects. But I 
need to really look at what we have been doing on that. I don't 
have a good answer for you, but I will get it for you.
    Mr. Quigley. I appreciate it. It seems to be contradictory. 
Here is the agencies that need this most would be the ones 
least eligible for those funds. So appreciate it if you would 
get back to us and/or our staffs.
    Talking a little about core capacity. I believe it's $120 
million in fiscal year 2014. Can you comment on the process for 
how that is going to be allocated for 2014, whether it will be 
a competitive process for those funds?
    Secretary LaHood. Again, I will have to get back to you. 
Rather than just trying to talk off the top of my head on that, 
I would rather get you the specifics.
    Mr. Quigley. Okay. That is fine.
    Thank you, Mr. Chairman. I would yield back.
    Mr. Latham. Thank you, Mr. Quigley.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    Morning, Secretary.
    Secretary LaHood. Good morning.
    Mr. Joyce. In your 2014 budget, I recognized there was yet 
another tax on the commercial aviation industry. As a matter of 
fact, there is $100 per aircraft departure tax, which would 
cost our Nation's airlines roughly $1 billion annually. 
Passengers already pay more than their fair share of taxes, 
roughly 20 percent on every fare that is out there, and on a 
roundtrip fare. The Future of Aviation Advisory Committee that 
you convened in 2010 identified the raising aviation tax burden 
as an obstacle to the viability and global competitiveness of 
the airline industry, which lost over $50 billion and nearly 
one-third of its workforce over the past decade. Are you 
concerned about these Federal--the rising federal aviation tax 
burden? And, second, did your department conduct an economic 
impact analysis on the proposed departure tax?
    Secretary LaHood. This is a proposal that the 
administration has promoted for 4 years. It is a way to raise 
some income. And the answer to your question, whether we did an 
economic study, I don't know that we did. But if we did, I will 
make it available to you.
    Mr. Joyce. That would be great. By chance, did you do--is 
there the same type of taxes on the railroad industry?
    Secretary LaHood. There is no tax like this on freight 
rail.
    Mr. Joyce. Is there any other tax on any other industry 
similar to what you are doing to the aviation industry?
    Secretary LaHood. We will look. We have jurisdiction over a 
lot of transportation industries. Rather than just saying no, 
let me make sure I know what I am talking about.
    Mr. Joyce. I appreciate that. Considering it is probably 
the safest form of travel in the Nation, we would certainly 
want to make it competitive, wouldn't we? Or keep it 
competitive.
    Secretary LaHood. We have the safest aviation system in the 
world.
    Mr. Joyce. Secondly, sir, I apologize because I was late, 
but three hearings at one time make it a little rough to be 
here.
    On NextGen, did you discuss that when you gave your 
remarks?
    Secretary LaHood. No, I didn't, other than to say that the 
President's budget does continue our substantial resources for 
NextGen. We have made very good progress on NextGen in 
implementing it around the country, and we will continue to do 
that. The FAA bill provides significant resources over the next 
couple of years to really make progress.
    Mr. Joyce. Better integrate those and develop processes for 
new performance-based navigation procedures and ensure 
stakeholders have needed information on NextGen to facilitate 
investment decisions like the GAO had requested, does DOT agree 
with those recommendations?
    Secretary LaHood. I would have to go back and look and see 
what they said.
    Mr. Joyce. Well, they said that the FAA should better 
integrate NextGen efforts, develop processes for selecting new 
performance-based navigation procedures and ensure that 
stakeholders have needed information on NextGen progress to 
facilitate investments.
    Secretary LaHood. I am sure we have done all of that.
    Mr. Joyce. Do you think NextGen will be implemented within 
the proposing timeline? And what barriers would you foresee?
    Secretary LaHood. The one big barrier is sequestration. It 
is a big headache for us. It is going to eliminate some of the 
resources either for the people--I mean, we are furloughing FAA 
employees, and we have told them the furlough would be up to 11 
days, some of those people are working on NextGen. So the 
process is going to be slowed down by that.
    Mr. Joyce. But wouldn't NextGen make the airline or make 
the whole issue more efficient, eliminate the need for towers 
if everything progressed the way you see it?
    Secretary LaHood. Well, we have never said that. What we 
have said about NextGen is that it will make flying safe, 
guiding planes in and out of airports more directly, save jet 
fuel, and relieve air congestion around major airports.
    Mr. Joyce. And require major investments by not only the 
government but also by the airline industry.
    Secretary LaHood. Of course. And we have talked extensively 
with the airlines about that.
    Mr. Joyce. So it would be fair to them to keep forward with 
this investment in their industry? Are we going to be able to 
keep ours--end of the bargain?
    Secretary LaHood. We are going to keep up. At FAA, safety 
is our number one priority, but NextGen implementation of 
NextGen is what people work on every day. And we have a good 
plan.
    Mr. Joyce. I appreciate your work. Thank you very much.
    Secretary LaHood. Thank you.
    Mr. Joyce. I yield back.
    Mr. Latham. Thank you, Mr. Joyce.
    Complete the round here. Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    I guess I am a little baffled to hear all this talk about 
concern over sequestration when you are supporting the most 
expensive light rail build in the country. And it is most 
expensive by over $100 million per mile.
    But since it looks like--safety is a huge issue for you all 
and for us, whether it is FAA or highways or transit. And you 
rightly pointed out this is a regional bridge, and safety is 
the issue. It is obviously not to get people or freight moved 
more quickly over the bridge; it is safety.
    Is the DOT still interested in this regional bridge and the 
safety of it if we locally choose to put a different form of 
mass transit on the bridge other than light rail?
    Secretary LaHood. We will work with stakeholders, 
Governors, Members of Congress, elected officials on projects 
where we think it is important for the region and for the 
safety of the region.
    But I want to be clear about this, and this is what I said 
when I was in you state recently: If the people that have been 
working on this for 10 years, and now there are other people in 
place that want to substitute their judgment for the people who 
put this plan in place----
    Ms. Herrera Beutler. What people are you talking about?
    Secretary LaHood. Planners.
    Ms. Herrera Beutler. Planners.
    Secretary LaHood. Previous Governors, previous legislators, 
who have passed money in order for this project to go ahead. 
Communities.
    Ms. Herrera Beutler. Well, not--my community recently voted 
down funding for it.
    Secretary LaHood. This is a regional project. I know that 
there is one community and one county out of multiple counties 
and multiple communities that doesn't want this. I get that.
    Ms. Herrera Beutler. Well, let me clarify. We want you to 
invest and make this safer. We believe that is your 
responsibility. The problem is----
    Secretary LaHood. If you don't like the transit piece of 
this, so be it. Start over, though. That is what you have----
    Ms. Herrera Beutler. I am reclaiming my time on that, Mr. 
Secretary. Reclaiming my time. Reclaiming my time.
    Secretary LaHood. Fine. Go ahead.
    Ms. Herrera Beutler. This project has been redesigned two 
times in the last 3 years. Completely redesigned. You didn't 
pull your funding then. So are you saying that the only way we 
are going to get the Federal support is if we have light rail? 
Is that the only way that you are interested?
    Secretary LaHood. If you take the light rail out of this 
project, you take a major component part out of it, you start 
the environmental impact statement over again.
    Ms. Herrera Beutler. They didn't start the environmental 
impact statement over when they redesigned it 2 years ago 
because they hadn't designed it properly. Those people you 
talked about who have designed for it the last 10 years 
engineered a bridge that didn't pass engineering muster. So 
there have been some necessary remodifications.
    As it currently stands, the Coast Guard and the Army Corps 
of Engineers cannot permit this bridge as it is built because 
the light rail deck on the bottom makes it too short. There are 
companies in my region who cannot pass under the bridge if they 
build it as it is. So it is right now not even--it is not even 
permitted.
    So you are telling me the only way we are going to get this 
money if we build this bridge, that is too low with the right 
rail on it, that is the only way that you are interested? And 
you feel beholden to previous Governors over the citizens in 
this region?
    Secretary LaHood. We take our cues from the people that are 
in charge.
    Ms. Herrera Beutler. Well, guess what? I am one of those 
now. And the folks in my region are saying we need to do better 
with their money.
    And I would argue that they would want us to consider 
freight mobility and people moving faster, not just the safety. 
Safety is huge; that is the Federal responsibility. But to ask 
them to pay tolls and taxes? This one community is going to pay 
the lion's share?
    And for you to say that there are previous working groups 
that we are beholden to, not the American taxpayer, that 
baffles me. Are you not concerned about the costs coming out of 
this community that has had double-digit unemployment over the 
last----
    Secretary LaHood. I believe that, having been at a meeting 
with the Coast Guard, that the matter of the permit will be 
settled. I also know that there are now three businesses that 
are being talked to about their opportunities and the way to 
mitigate the business that they will lose, and I think those 
issues will be resolved.
    Ms. Herrera Beutler. So, having met with the exact same 
folks several times, one of those businesses--one job for them 
is a $500 million manufacturing job. So we are talking about a 
lot of jobs in our region, manufacturers, workers, on just one. 
There is no way to change or mitigate for them. And I know that 
you all have been talking to them, because they keep bringing 
it up.
    In that, are you saying that, back to the original point, 
the USDOT is only interested in this project if the 
mitigation--say the mitigation is we change the form of mass 
transit, we change it from light rail to bus rapid transit. Are 
you saying, then, that the DOT wouldn't consider that 
mitigation, they wouldn't then also be supportive of putting 
that form on the bridge and----
    Secretary LaHood. Well, I have never heard any discussions 
with any business people where they want to change the light 
rail. They are more interested in raising the height of the 
bridge, which I believe the Coast Guard is looking at now.
    And if you have an objection----
    Ms. Herrera Beutler. My time has expired.
    Secretary LaHood. If you have an objection to the transit, 
and that is a major portion of this project, it changes the 
project.
    I don't make this stuff up. This is the law. It is Federal 
law that was passed by Congress: Start over with another 
environmental impact statement that reflects what the project 
is going to look like and where the money is going to come 
from; hold public hearings so everybody knows.
    Ms. Herrera Beutler. May I respond to that, or should I 
wait?
    Mr. Latham. Go ahead.
    Ms. Herrera Beutler. I guess they have already redesigned 
the project a couple of times without you all requiring them to 
start over. And I will provide for your office a list of areas 
where you all have circumvented or have at least skirted 
current law to move this forward.
    So I am very anxious to follow the law in this process, Mr. 
Secretary, and I would hope the Department is as well.
    Mr. Latham. The gentlewoman's time has expired.
    We will start a new round, and we will start----
    Mr. Pastor. You want to start?
    Mr. Latham. All right.
    Mr. Secretary, your rail reauthorization proposal totals 
$6.6 billion in fiscal year 2014, which is obviously an 
extremely large increase compared to the fiscal year 2013 level 
of $1.54 billion.
    I found it concerning that it was proposing a shift in 
responsibility from the States and private industry to the 
Federal Government. For example, the Rail Authorization Act 
passed 5 years ago mandated that private rail firms install 
positive train control by December of 2015 on their own track. 
Your budget proposes that the Federal Government fund the 
positive train control on Amtrak routes and commuter rail 
lines.
    In addition, your budget proposal would transfer $85 
million from the States for Amtrak State-supported routes to 
the Federal Government. Why are you proposing to shift the 
burden to the Federal Government, especially with our current 
budgetary concerns?
    Secretary LaHood. You mean on passenger rail?
    Mr. Latham. Yes.
    Secretary LaHood. Because it is----
    Mr. Latham. Well, on----
    Secretary LaHood. Go ahead.
    Mr. Latham. Positive train control, right.
    Secretary LaHood. Look this is a very expensive 
proposition, and it is also a mandate from Congress, and it is 
also a priority.
    Mr. Latham. Apparently, it has not been an issue of money. 
The private rail firms pay for this. And in August, the FRA's 
report indicated the delays were associated with technical 
issues, such as spectrum, and not necessarily with any funding 
issue.
    So I don't understand why we want to shift it to the 
Federal government rather than have the original deal, as far 
as who was going to pay for it.
    Secretary LaHood. We consider positive train control our 
number-one rail safety priority.
    Mr. Latham. It is huge.
    Secretary LaHood. And we believe that in order to implement 
it, we have to put some money where our mouth is.
    Mr. Latham. Are you saying it is a money issue rather than 
a technical issue?
    Secretary LaHood. I would say that the technical aspect of 
this is not as critical as how do you pay for it.
    Mr. Latham. That is not what the FRA is saying, though.
    Secretary LaHood. Well, the FRA is resolving the technical 
aspects of it with the railroads.
    Mr. Latham. Just to go back----
    Secretary LaHood. If you are asking me which is more of a 
problem, it is the money part.
    Mr. Latham. Okay. Again, that is not what they said.
    Going back to one of our favorite subjects, the stimulus 
bill provided $8 billion for a new high-speed rail program, and 
the fiscal year 2010 bill provided another $2.5 billion for 
high-speed rail.
    After $10.5 billion and 5 years, do we have anything that 
looks like a nationwide investment in high-speed rail? And do 
we even have one corridor that has been noticeably improved, 
either passenger or freight, after the $10.5 billion of 
taxpayer investment?
    Secretary LaHood. Well, we have invested over $3 billion in 
the Northeast Corridor, and we have trains running there very 
regularly. Part of that investment is in infrastructure. Part 
of the investment is in States where Governors have wanted to 
increase service or fix up infrastructure.
    In Illinois, we have invested almost $3 billion, all of it 
in infrastructure to fix up the tracks. And I have ridden on 
those trains from Chicago--the train from Chicago to St. Louis, 
and I have seen where the money has been spent.
    In California, they will break ground on their high-speed 
rail initiative this year. We have invested over $3 billion. 
The assembly there voted last summer to sell bonds upwards of 
between $6 billion and $8 billion as part of their investment.
    We have made a lot of progress in 4 short years--in 4 short 
years. It took us 50 years to build the interstate system. And 
the idea is that this is a major infrastructure program, and it 
is not going to be built overnight.
    Mr. Latham. Define ``high-speed rail.''
    Secretary LaHood. Pardon me?
    Mr. Latham. Define ``high-speed rail.''
    Secretary LaHood. Well, the Congress defines ``high-speed 
rail'' as 110 miles per hour. That is the way they have defined 
it in legislation. California's trains from San Francisco to 
San Diego will go 200 miles an hour. In Illinois, the trains, 
once the infrastructure investments are completed, will go 110 
miles per hour.
    It is going to be difficult to get trains consistently to 
go 110 miles per hour on the Northeast Corridor----
    Mr. Latham. Well, they have to be electrified to be able to 
do the high speeds, right?
    Secretary LaHood. The California trains will be 
electrified.
    Mr. Latham. And not----
    Secretary LaHood. The one in Illinois is not electrified.
    Mr. Latham. The initial operating segment in California 
will not be electrified.
    Secretary LaHood. The part in Fresno, the reason they are 
building it there is so they could put the catenary up and use 
it as a test area.
    Mr. Latham. Okay.
    Mr. Pastor. I see my time has expired.
    Mr. Pastor. Thank you, Mr. Chairman.
    As you know, the House has passed its budget. The Senate 
has its budget. You are now talking about the administration's 
budget. But if there be a resolution of all three budgets maybe 
way down the road, and, as appropriators, after we finish the 
hearings, I am sure we will start the markups, and I would 
assume that the allocations that will be given out will be 
probably based on the Ryan budget that passed the House.
    And the question is, it is going to be hard to accommodate 
many of your requests that you have done in this budget. What 
would be your priorities in terms of now 4 years of Secretary 
of Transportation, what do you think would be the priorities 
that you think need to be continued as we go forward in 
appropriating the money for fiscal year 2014?
    Secretary LaHood. I think we will always have safety as our 
number-one priority in all modes of transportation, whether it 
is aviation or truck or cars.
    Our NHTSA organization is the top safety agency in the 
world. People come from all over the world to talk to our staff 
on safety. They are the best. They are the ones that rate cars. 
They are the ones that implemented, 20 years ago, Click It or 
Ticket, and now 86 percent of us buckle up. They are the ones 
that work with Mothers Against Drunk Driving, and we have taken 
a lot of drunk drivers off the road. They are the ones that got 
States to pass .08.
    And so it will always be safety, Mr. Pastor. If you are 
asking in terms of programs----
    Mr. Pastor. In terms of programs.
    Secretary LaHood. Yeah, I mean, we have to keep our roads 
and bridges in a state of good repair. We do have a state-of-
the-art interstate system, and we have to make sure that we 
maintain our interstate system and our bridges so that they are 
safe.
    But in terms of new initiatives, there is no secret around 
here about what the President's vision is for the next 
generation of transportation, and that is high-speed rail. That 
is the President's vision. He announced it 4 years ago. We have 
invested $12 billion.
    I have been to 18 countries looking at high-speed rail, and 
the common theme in every country is it required a national 
government investment, the way that we did with the interstate 
system. The only way we are going to have a high-speed rail 
program in America is if the Federal Government steps up and 
makes the investment.
    We have invested a lot in other forms of transportation, 
like light rail in your State, streetcars in other communities, 
bus rapid transit in other communities. So we try to work with 
our partners, whether they be Governors or mayors or planners, 
to do what we can in communities to try and meet their needs.
    So safety number one; state of good repair for our roads 
and bridges, making sure that they are safe. But in terms of 
the next generation of transportation, it is high-speed rail.
    Mr. Pastor. In that component that you describe as safety, 
is that NextGen?
    Secretary LaHood. NextGen is a big part of it. We have the 
safest aviation system in the world, and NextGen will only 
enhance that.
    Mr. Pastor. I heard you say that air traffic controllers 
were going to be furloughed maybe up to 11 days. And the input 
that air traffic controllers, or some air traffic controllers 
have in the development of NextGen is very important. And I am 
assuming that they are participating in its development.
    Secretary LaHood. They are participating. They are on all 
of our committees and all of our working groups, and they are 
an intimate part. They have to be.
    Mr. Pastor. And we have been wanting to implement NextGen 
in the near future, but with sequestration in the way, what is 
going to happen to that timeline?
    Secretary LaHood. It is going to slow down our ability to 
meet the timetables that we have set for NextGen.
    Mr. Pastor. Do you have any idea to what extent?
    Secretary LaHood. Well, we have told employees that they 
are going to be furloughed up to 11 days. We hope it is not 11 
days, but it is up to 11 days. Some of these people are working 
on these projects, but I want to assure you and every member of 
the committee, safety will not be compromised.
    Mr. Pastor. Well, talking about safety, it is the Homeland 
Security who made the decision. Has FAA or Secretary--well, 
Transportation taken the comment on bringing the changes in the 
homeland security on what can be brought on planes in terms of 
knives----
    Secretary LaHood. That is not in my----
    Mr. Pastor. I understand, but----
    Secretary LaHood. That is not in my portfolio.
    Mr. Pastor. But safety on airlines, safety on different 
modes of transportation is. So does the Department have any 
comment and/or--in ensuring that airlines are safe and that 
people that work in the industry are safe?
    Secretary LaHood. For all of the things that we have 
jurisdiction over, safety remains our number-one priority.
    [The information follows:]

               Comments on TSA Weapons Interpretive Rule

    This is a significant change in TSA policy that may have profound 
impacts on the safety of flight crew members and passengers in aircraft 
cabins (as opposed to flight decks). As TSA is aware, the number of 
unruly passengers on planes has increased in recent years, and these 
unruly passengers pose serious risks to flight crew members and other 
passengers aboard planes. The issue has become such a serious concern 
internationally that the International Civil Aviation Organization 
(ICAO) has taken the matter up. As I have said, safety is our top 
priority and I will encourage TSA to consider these risks in 
determining whether relaxing the definition of ``weapon'' is 
appropriate. At a minimum, TSA should provide a public discussion as to 
why this change would not increase the risk to flight crew members and 
passengers in aircraft cabins.

    Mr. Pastor. Thank you, Mr. Secretary.
    Mr. Latham. All right. And I will just--on that subject, on 
the NextGen, I think one of the biggest delays that has 
happened was the previous administration when they did not 
include the controllers in the whole development of NextGen.
    Mr. Pastor. Well, they had the contract issue, so that 
was----
    Mr. Latham. Well, that was, you know--the people running it 
should be involved in designing the----
    Mr. Pastor. I agree.
    Secretary LaHood. Yeah, but look, you all deserve credit 
for passing an FAA bill. I mean, we went without a bill for 
almost 6 or 7 years. And now, with the passage of the bill, we 
have the resources to do it.
    Mr. Latham. All right. We digress.
    Mr. Dent.
    Mr. Dent. Thanks. Thanks, Mr. Chairman.
    Mr. Secretary, just one final question. And thanks again 
for all the work you have done here at the Department the last 
few years. We will miss you. I guess this may be your last 
hearing.
    Secretary LaHood. Yes.
    Mr. Dent. And we will miss you. And thanks for the good 
work you have done.
    Just one quick question. In 2012, this subcommittee 
identified flaws in the NHTSA National Automotive Sampling 
System and provided funding to fully modernize the data 
collection system. The volume of crash data being input into 
the system is coming in at 20 percent of the volume that was 
originally intended for the database. Additionally, the quality 
of the data has diminished.
    If properly implemented and maintained, this database is 
going to provide important data to support policy decisions and 
be an invaluable tool to all stakeholders by providing feedback 
on which technologies truly are improving highway safety and 
which ones are not working.
    Stakeholders in my district have voiced concern that 
NHTSA's plans for modernization are not clearly defined. Could 
I please ask you to get back to me the status of the 
modernization?
    Secretary LaHood. Sure.
    Mr. Dent. That is a----
    Mr. LaHood. Will do it.
    Mr. Dent. Thank you. And how much of the $25 million has 
been spent to date?
    Secretary LaHood. Okay.
    Mr. Dent. And then, how is NHTSA engaging with interested 
parties, suppliers, automakers, safety advocates, the medical 
community, research organizations, to ensure that we are 
leveraging both public and private resources to the greatest--
--
    Mr. LaHood. Sure.
    Mr. Dent [continuing]. Extent possible?
    Secretary LaHood. Yep. Will do it.
    Mr. Dent. That is it. I mean, I don't expect an answer 
right now----
    Mr. LaHood. Yep. We will get back to you.
    Mr. Dent. Thank you so much.
    Mr. LaHood. Thank you.
    Mr. Dent. And I will yield back.
    Mr. Latham. Thank you, Mr. Dent.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    To follow up on the last part, when we were talking about 
the CRC and the bridge height issue and actions that DOT has 
taken to mitigate or hopefully mitigate, one of the things that 
I think is important for you all to consider--I know there are 
three businesses, and we will see what happens. My hope--this 
is the third or fourth, depending on who you talk to, largest 
river system in the country. It serves all the way up--
obviously the Columbia River, all the way up into Idaho and all 
the four States surrounding. The ag industries use this river 
traffic.
    Is it wise to look at this project and say, okay, we are 
going to mitigate for these two or three businesses that are 
there now and we are not going to worry about future growth and 
capacity; as long as we can get these three businesses 
mitigated, moved over, we are not going to worry about the 
bridge height or the cap that it puts on the river? In terms of 
impeding the flow of commerce, is that of concern?
    Secretary LaHood. We would take our cues on that from the 
people that live in the area. I mean, the reason that we became 
aware of the height issue is when businesses came to us. And we 
recognized that it was a problem, and that is when the 
mitigation really began.
    Look, if the leadership in the community, the business 
community and others say, other businesses are going to be 
inhibited or the future growth for the economy, we would 
certainly listen to that, of course.
    Ms. Herrera Beutler. Well, and I don't know if we CC'ed 
you, but I know that we sent to the Coast Guard--the Members of 
Congress who live up the river in the different districts, sent 
a letter in saying just that, because there are public ports 
that go up beyond us. That is not my district or my area, but 
folks have raised that same concern.
    And just to clarify, come back to your interest in this 
project and the region, would DOT still be willing to fund a 
regional bridge that increases safety, or makes it safe in the 
event of a catastrophic earthquake or so on, if the transit 
portion were something other than light rail?
    Secretary LaHood. Well, that decision hasn't been made. And 
until the decision is made, we are operating under the 
assumption that the plan that is in place is the one that has 
been selected.
    And so I am not going to answer a hypothetical, given the 
fact that there are 10 years of planning and there is a project 
in place, and one State has already passed their local match 
and we are waiting to see what the other State does. If your 
State decides to do something different and doesn't want to put 
up the match, then we will see where that takes us.
    Ms. Herrera Beutler. So, I guess, I am gauging your 
interest in the safety of the bridge irrespective of what mode 
of transit is used on it, not whether or not each State 
believes the bridge needs to be built or what they want to put 
in for it.
    Mr. LaHood. Well----
    Ms. Herrera Beutler. The controversy is over the mode of 
transit.
    Secretary LaHood. Let me be clear. We like this project. 
This is the one multimodal project in the country of national 
significance. If this project is built, you will become a model 
maybe for the world but certainly for the country, where two 
States and a region that connects North America can build a 
multimodal bridge. We like this project.
    Ms. Herrera Beutler. So can I ask you to consider a few 
things? I realize it looks good on paper and it adds to the 
talking points, but the really important thing in my mind is, 
obviously you all have not drilled down into whether this even 
pencils.
    Did you know that we have to build parking garages in 
downtown Vancouver to meet the density requirements for light 
rail? Do you know that it does not pencil in our region? I 
mean, what you are bringing over from Portland is actually in 
the red, and part of the reason we are rejecting it is we don't 
want to have to pay off their debts.
    If you were willing to truly make it a multimodal project 
that meets--and what you said, works with communities to meet 
their needs, you would be flexible and balanced and willing to 
help change this into--add bus rapid transit, add something 
that we can afford and that meets our needs.
    We literally have to build parking garages and assume 
people are going to drive to those parking garages for us to be 
legal to get the new-starts grant. That, to me, seems like you 
are really pounding a square peg into a round hole. Is that----
    Secretary LaHood. Well, the idea that we are not flexible 
is not accurate at all. When somebody came to us and said the 
bridge isn't high enough and it is going to impact businesses, 
what did we do? We went to the Coast Guard. And----
    Ms. Herrera Beutler. The Coast Guard has not permitted it.
    Secretary LaHood. Let me finish. The idea----
    Ms. Herrera Beutler. But wait, wait, wait.
    Secretary LaHood. The idea that we are not flexible is not 
true. We have shown a lot of flexibility.
    Ms. Herrera Beutler. You are telling me that unless we do 
the bridge as you like it, you won't give me the hypothetical, 
yes, that you are still involved.
    Secretary LaHood. We are trying to mitigate with the 
businesses who asked for a higher bridge so they can 
accommodate their businesses. That sounds like a lot of 
flexibility to me.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    Mr. Latham. The gentlewoman's time has expired.
    And I think we are going to adjourn the hearing here.
    I ask unanimous consent that Members are allowed to revise 
and extend their remarks. And if you would respond to written--
--
    Secretary LaHood. I sure will.
    Mr. Latham [continuing]. Questions----
    Mr. LaHood. Absolutely.
    Mr. Latham [continuing]. That they may have.
    On a personal note, and I hope Mr. Pastor would join me, 
thank you for your service at the Department. We hate to see 
you leave.
    Secretary LaHood. Thank you.
    Mr. Latham. We don't always agree on every issue. You 
defend the indefensible pretty well sometimes.
    Secretary LaHood. Well, let me add my thanks to this 
committee for always having transportation as one of your top 
priorities. You have all been great to work with. Thank you.
    Mr. Latham. And you should be commended for your safety 
initiatives. Texting, the distracted-driver stuff is really a 
huge step forward.
    Secretary LaHood. Thank you. Thank you.
    Mr. Latham. And I commend you for that.
    Secretary LaHood. Thank you.
    Mr. Latham. Unless there is anything else, Mr. Pastor, we 
will adjourn the hearing. 

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                                         Wednesday, April 17, 2013.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                WITNESS

HON. SHAUN DONOVAN, SECRETARY, DEPARTMENT OF HOUSING AND URBAN 
    DEVELOPMENT
    Mr. Latham. The hearing will come to order. I want to 
welcome Secretary Donovan here this morning. Thank you for your 
testimony and for your continued service at HUD, your 
competence and hard work at the Department continues to be very 
much appreciated. I really appreciate the conversations that we 
have. It is very, very important to try to reach the goals that 
we all have in mind.
    Consideration of the fiscal year 2014 request must be put 
in proper context, as anomalies like FHA receipts and sequester 
make fair comparisons very challenging. Gross spending is 
higher in this request than has been previously enacted. While 
I understand some increases are due to the rising cost of HUD 
rental assistance, the increases are not entirely explained by 
HUD's existing liabilities.
    The request adds nearly a billion dollars to new 
initiatives, new demonstration programs, and large increases to 
existing programs. Just to cite a few examples, $200 million is 
requested for a Neighborhood Stabilization Initiative, a 
narrowly targeted program not funded by this Subcommittee in 
recent years. Also, Choice Neighborhoods, another narrowly 
targeted program, is quadrupled to $400 million in the request. 
These increases are particularly puzzling in the context of a 
request that also proposes to cut core state and local 
partnerships like CDGB and HOME.
    Looking beyond funding levels, I am deeply concerned by the 
lack of a comprehensive reform proposal in the budget. Neither 
the authorizing Committees nor the administration appear to be 
committed to leading the way on this issue. While I appreciate 
the inclusion of some legislative savings ideas, cherry-picking 
authorizing provisions just to accommodate more spending 
elsewhere is no substitute for genuine leadership on reform. 
Without something comprehensive, it will only get more and more 
difficult to keep pace with the growing cost of assisting 
vulnerable households and forging pathways to self-sufficiency.
    Mr. Secretary, I think we can both agree that even in this 
fiscal environment, protecting households currently served by 
HUD should be a top priority. However, we must also fulfill a 
duty to the American taxpayer to get serious about deficit 
reduction. HUD's request goes exactly in the wrong direction on 
deficit spending and appears out of touch with fiscal reality. 
This Subcommittee will take a hard, line-by-line look at what 
can be accommodated in the current environment, particularly 
among the grant and demonstration programs in this request that 
have nothing to do with meeting current HUD commitments.
    I am looking forward to an open and productive discussion 
with you as we continue through the process, and I thank you 
again for your hard work at the Department. I think we all have 
a lot of questions and ground to cover today, so with that I 
will yield to my distinguished ranking member, Mr. Pastor, for 
his opening remarks.
    Mr. Pastor.
    Mr. Pastor. Good morning. Good morning, Mr. Chairman. And 
thank you, Mr. Chairman, for the recognition. I also want to 
welcome Secretary Donovan this morning.
    Mr. Secretary, you have had a busy few months spearheading 
the Federal government's recovery efforts from Hurricane Sandy, 
an issue I know that is vitally important to my ranking member, 
Ms. Lowey.
    When we finished our work on the fiscal year 2013 
appropriation bill last month, we tried to preserve the housing 
safety net for our nation's most vulnerable populations. 
However, cuts due to sequestration undermine our aim. I am 
particularly concerned that many public housing authorities 
feel that these lower funding levels are insufficient to keep 
every person who we housed last year in a home this year.
    President Obama has submitted a funding request that 
protects housing for vulnerable populations that we house. 
There are increases for the Section 8 program, and a modest 
increase for the public housing program. While I support these 
increases, I am concerned that the growth in these programs may 
come at the detriment of the rest of the program in the 
Department.
    I look forward to your testimony this morning. And Mr. 
Chairman, thank you. And I yield back.
    Mr. Latham. Thank you, Mr. Pastor. I see the Ranking Member 
of the Full Committee is here. If you have an opening 
statement, Ms. Lowey, please go ahead.
    Ms. Lowey. Thank you very much, Mr. Chairman, and Mr. 
Ranking Member. And I would like to thank you for your efforts 
on these very important issues. And I join you in welcoming 
Secretary Donovan.
    First, Mr. Secretary, I want to thank you for your 
assistance with designating Westchester County a most-impacted 
and distressed county for the first allocation of Sandy Relief 
funds from the Community Development Block Grant Disaster 
Relief Program. I appreciate your Department honoring my 
request and that of Governor Cuomo and some of my House and 
Senate colleagues, to take a second look at the designation. As 
I review your budget request, I am pleased that the Department 
is prioritizing funding to maintain current levels of rental 
and homeless assistance.
    While our economy is in recovery, some of our fellow 
citizens are being left behind. The president's budget should 
honor our commitment to assisting their recovery as well. 
However, like a number of my colleagues, I am concerned about 
the long-term health of the Department in the face of the 
sequester. For example, through its housing assistance 
programs, HUD serves millions of low-income seniors and 
disabled individuals. However, like other low-income programs, 
such as SNAP, these housing programs are not protected from the 
sequester. As you know, HUD's own estimates project that 
125,000 individuals and families will lose voucher assistance 
under sequestration, likely increasing homelessness for these 
populations. Additionally, state and local units of government 
rely on CDGB to help with vital investments and economic 
revitalization, affordable housing, and infrastructure. I fear 
they will soon have to manage with less support in order for 
the Federal government to meets its obligations to our most 
vulnerable citizens.
    Mr. Secretary, I do not envy the task before you. I hope 
that your testimony today will provide reassurance about the 
difficult choices ahead for HUD. I look forward to working with 
my colleagues on the Committee and the secretary to continue to 
review the president's budget request to ensure that we 
adequately fund the initiatives that will aid our citizens who 
are most in need while supporting economic development and job 
creation throughout the country.
    Thank you, Mr. Secretary. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Ms. Lowey.
    After the secretary, we will proceed with five-minute 
rounds in standard order this morning. With that, Mr. 
Secretary, I invite you to present your opening statement. Your 
full statement will be in the record. You are recognized for 
five minutes.

                 Secretary Donovan's Opening Statement

    Secretary Donovan. Thank you, Chairman Latham, Ranking 
Member Pastor, Ranking Member Lowey, members of the Committee.

                        HOUSING AND COMMUNITIES

    Today I would like to discuss how HUD's fiscal year 2014 
budget proposal will help grow our economy from the middle 
class out by supporting the ongoing recovery in our housing 
market and creating ladders of opportunity in communities 
across the country. As the president said, our economy is 
strongest when we expand opportunity and reward the hard work 
of everyone. HUD's budget would do this by supporting the 
creation and retention of 620,000 jobs.
    We followed four main principles in creating the 2014 
budget. The first was to continue support for the resurgent 
housing market while encouraging the return of private capital 
and rebalancing the nation's housing finance system. Today the 
housing market is playing a key role in our economic recovery. 
Rising home values lifted 1.7 million families back above water 
and home equity grew by more than $1.6 trillion in 2012.

                                  FHA

    FHA continues to play an important role in this effort, 
ensuring nearly 1.2 million single-family mortgages in 2012. 
However, due to the loans insured during the economic crisis, 
the fiscal year 2014 budget projects that FHA will need $943 
million in support from the Treasury. As you know, any decision 
to draw from the Treasury depends on the actual performance of 
the fund during the current fiscal year. We have taken 
aggressive steps to protect the fund and are already seeing 
strong results, even with stress from the troubled reverse 
mortgage program and the now banned seller-assisted down 
payment programs. In fact, while the gross budget authority HUD 
requests in fiscal year 2014 is $47.6 billion, a 7 percent 
increase over the fiscal year 2012 enacted level, offsetting 
receipts from FHA and Ginnie Mae totaling $14.5 billion bring 
the cost to the taxpayer to only $33.1 billion, almost 12 
percent below the fiscal year 2012 enacted level. Despite this 
progress we continue to take responsible administrative action, 
and the fiscal year 2014 budget calls on Congress to further 
assist in stabilizing the fund.

                    IMPROVING HUD'S HOUSING PROGRAMS

    The second principle we used in developing our budget, as 
you mentioned, Mr. Chairman, was to protect current residents. 
Currently, there are 5.4 million families who live in HUD-
assisted housing, a number we have increased by more than 
219,000 over the last three years through better management. 
These households earn just $12,500 a year on average, and 
nearly two-thirds have a member who is elderly or disabled. 
Fully funding renewals of this assistance consumes 84 percent 
of our proposed budget just to keep current residents in their 
homes, support homelessness prevention programs, and provide 
basic maintenance to public housing.

                   BUILDING ON EXISTING PARTNERSHIPS

    The third principle we followed was to build on existing 
partnerships, helping to create ladders of opportunity while 
embracing smart, effective, efficient government. As the 
president said in his state of the union address, in too many 
hard-hit communities the life chances of a child are determined 
not by her talents but by her ZIP code. The promise zones 
proposed by the president expand investments by HUD, the 
Departments of Education and Justice, and other agencies, while 
coordinating and streamlining this work to maximize our impact 
and reduce cost. The $400 million we have requested for our 
Choice Neighborhoods program represents a significant increase 
that will allow us to transform public and assisted housing in 
our hardest hit neighborhoods and ensure our children are 
prepared for the 21st century economy.
    Building on the success of three rounds of Neighborhood 
Stabilization Program funding, a $200 million competitive 
Neighborhood Stabilization Initiative within our Community 
Development Block Grant program will address the needs of 
neighborhoods that continue to suffer the negative effects of 
abandonment and foreclosure of privately-owned housing.
    We have also proposed reorganizing the Office of 
Sustainable Housing and Communities and relocating it within 
the Community Planning and Development Office as a direct 
result of feedback from this Committee. This new Office of 
Economic Resilience would offer 75 million in integrated 
planning and investment grants that support local investments 
in infrastructure and other development to create jobs and 
build diverse resilient economies.

                      REDUCING REGULATORY BARRIERS

    The final principle we used in creating this budget was to 
increase sufficiency, reduce regulatory burdens, and provide 
flexibility to our partners, allowing them to better manage 
resources.
    I look forward to working with Congress to enact the 
Section 8 reforms proposed in our budget which would save 
approximately $2.8 billion over the next five years and 
streamline outdated statutes governing our public and assisted 
housing. Expanding initiatives like the Rental Assistance 
Demonstration and the Moving to Work program will allow more 
public housing authorities the flexibility to pilot innovative 
strategies that will better serve residents and save taxpayers 
money.
    This budget also continues the Transformation Initiative, 
allowing us to propose increased investment in programs we know 
work and stop funding the ones that do not. And to hold our 
partners accountable for the funding they receive. Perhaps the 
best example of this approach is found in Opening Doors, the 
administration's plan to end homelessness, which has 
dramatically reduced chronic and veterans' homelessness over 
the last two years. Because we know these programs save lives 
as well as taxpayer dollars, our budget proposes 10,000 new HUD 
VASH vouchers, and a significant increase in our homelessness 
assistance grants.
    Unfortunately, sequestration seriously threatens our 
ability to serve families, communities, and veterans across the 
nation with hundreds of thousands likely to lose the assistance 
we have worked so hard to preserve. While we are attempting to 
reduce these impacts, there is simply no way to prevent serious 
damage this year or the resulting consequences for fiscal year 
2014 unless sequestration is reversed with a Balanced Deficit 
Reduction Plan proposed by the president.
    I look forward to working with you, both on the fiscal year 
2014 budget and on reversing the harmful cuts imposed by 
sequestration. Thanks for the opportunity to testify today. I 
look forward to your questions.
    Mr. Latham. Very good. Thank you, Mr. Secretary.
    As you mentioned, HUD's budget anticipates it will use its 
permanent, indefinite authority to access $943 million from the 
Treasury to reserve against future losses in the FHA portfolio. 
And while HUD is taking steps to stabilize the broader 
portfolio, including five premium increases, little has been 
done to stabilize the HECM program, which is projecting losses 
and entirely offsets any surplus reserves from the forward 
mortgage market.

                              FHA REFORMS

    In the narrative portion of the budget, you mention 
additional steps to shore up your losses, but these fall under 
the authorizers' jurisdiction. These reforms would decrease the 
chances of having to use the permanent indefinite authority in 
the future. Can you tell us what progress you have made with 
the authorizers as far as these reforms to strengthen FHA 
programs and to limit the need for these funds?
    Secretary Donovan. Absolutely. First of all, I think you 
make a very important point, that if you look at the new 
business that we are making and even the entire book of the 
standard single-family programs and you were to look separately 
at the reverse mortgage program, the fund would actually be in 
a $4 billion positive position rather than in the negative $940 
million. So the reverse mortgage program alone is a critical 
element of what we need to do.
    We did take steps a few years ago to create a new option 
under the reverse mortgage program called the Saver. For a 
range of reasons I will not bore you with today, that program 
did not have as much take-up as we expected. Many of these were 
capital markets related, but the bottom-line was that forced us 
to take the step of actually consolidating, so essentially 
stopping the full draw program that was causing the most 
damage, and not allow any new loans under that program pending 
broader reforms.
    And so I think the most critical authority we are asking 
for from the authorizers is instead of having to go through the 
full notice and comment rulemaking process which might take 18 
months or so, to allow us through Mortgage E-Letter to make 
important reforms that I think we broadly agree on to the 
reverse mortgage program quickly. If we are not able to do that 
this year, we will have to take more dramatic steps on pricing 
and other things that will both protect the fund but I also 
fear could have negative impacts on seniors. So it is critical 
that we get this done before the end of the fiscal year.
    I have reached out and we are working with the authorizers. 
As you know, we got a vote that was broadly bipartisan on a FHA 
reform bill last year. I am hopeful that we can have the same 
progress in the House, but I have already reached out to 
Chairman Hensarling, to the ranking member, to make sure that 
we are moving quickly on that. And certainly, we are actively 
involved in discussions right now.
    The other changes that are most important would--because we 
are making significant money on new loans, is to help us better 
collect and make better returns on older loans that are causing 
so much of the damage. So particularly increasing our 
enforcement authorities is a critical step that we need to 
take, and we do have four specific proposals in the budget on 
enhancing our ability to increase returns on those older loans.

                        AUTHORIZING LEGISLATION

    Mr. Latham. Do they require authorizers to act on those?
    Secretary Donovan. Those four, yes, they would. But I will 
say there are many steps that we can and are taking, short of 
getting authorizing legislation, we have instituted loan sales 
and ramped them up dramatically, which has increased our 
returns substantially on those older loans. It is a more 
efficient way to dispose of certain loans. We are in the 
process of issuing guidance on short sales that will help both 
minimize losses to the funds and allow families to move on if 
they are not going to be able to stay in their homes. And so 
there are a set of other steps we can and are taking, but we do 
believe that these six reforms--two on HECM, four on 
Enforcement--are absolutely critical to get done. And I pledge 
to you we will work as hard as we can to get those done with 
the authorizers.
    Mr. Latham. Have you made formal legislative proposals to 
the authorizers?
    Secretary Donovan. We have.
    Mr. Latham. In language?
    Secretary Donovan. In language. I would say one of my 
concerns is that there is debate about the future of the 
housing finance system, as there should be. We believe strongly 
there ought to be reform of Fannie Mae and Freddie Mac. And 
there ought to be reforms to FHA that are done in concert with 
that in terms of our loan limits and other steps. But I think 
it is very important that we move quickly on these steps to 
shore up the fund and not delay those with the broader 
legislation that might move on housing finance reform. So we 
are urging all of your colleagues on the authorizing side to 
help us move quickly on FHA reform that helps the fund and 
leave some of the broader mission questions for legislation 
that can be done in concert with changes to Fannie and Freddie.
    Mr. Latham. I see my time has expired. Thank you.
    Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman.
    I would like some clarification on the CDBG and the 
Neighborhood Stabilization Initiative. While the overall number 
for the CDBG grant program is about the same as last year's 
budget request, the funding request for the formula grant to 
cities, counties, and states is at the lowest level since 1976. 
This lower level is due to the creation of the $20 million 
Neighborhood Stabilization Initiative within the CDBG program 
that you have proposed.
    I believe it was two years ago that you and I visited a 
number of--at least several neighborhoods that had the 
Neighborhood Stabilization Program and very successful, and we 
saw families getting the keys to homes that had been rehabbed, 
and obviously, the families had been counseled and they 
qualified and they were in new homes that were lost when we had 
the housing problems. Now, how is this program, this new 
initiative different than the housing program that we saw that 
was initiated in 2008?

                 NEIGHBORHOOD STABILIZATION INITIATIVE

    Secretary Donovan. So this program builds on the success of 
Neighborhood Stabilization. We do not consider it a new 
initiative because we have now, through $7 billion, three 
rounds of Neighborhood Stabilization, which are effectively at 
an end now. We have seen over 100,000 properties that are 
renovated or rebuilt or demolished, frankly, where that is the 
best outcome, and we have created about 85,000 jobs. We have 
also--and this is why we felt this was an important proposal--
what we have seen is not just the job creation that you might 
traditionally get through CDBG, we have also seen in 75 percent 
of the neighborhoods where we have invested this money, vacancy 
rates are down and home prices are rising relative to 
surrounding communities. And what does that mean? You not only 
get the jobs directly from construction, but you get--because 
homeowners are doing better in those neighborhoods, increased 
consumer spending, stronger economies surrounding that for 
other reasons as well.
    So we are in the position, and this goes back to--if we are 
going to prioritize the 84 percent of the money in the HUD 
budget to keep existing families in their homes, the pressure 
on our other programs is going to be intense. We are going to 
have to make very difficult decisions. Do I believe that CDBG 
and HOME should be increased from their current levels? 
Absolutely. But I also felt when we were looking at having to 
make difficult choices specifically on CDBG, we felt $200 
million directed to this Neighborhood Stabilization Initiative 
would get us, first, better acceleration of the housing 
recovery that we are seeing, and also more job creation than we 
would by keeping that $200 million just in the CDBG formula 
program.
    So it is a difficult decision. I understand the concerns 
that you and the chairman express about this. And I would love 
to be able to do both, but when we are making difficult choices 
we felt this $200 million, knowing what we now know about the 
success of Neighborhood Stabilization, is a good investment and 
builds on it.
    The last thing I would just say, we are trying to leverage 
the power of our 108 loans in CDBG. That is why we have put 
them together. As you know, 108 is a program to leverage 
private capital that can be brought in through a loan guarantee 
in CDBG. We believe that the $200 million plus the power--we 
are proposing to double 108 capacity in CDBG--could bring not 
just $200 million but potentially billions of dollars in 
private capital to leverage that that could further increase 
the job creation through this initiative.
    Mr. Pastor. Well, CDBG is very popular with local 
governments, as you well know.
    Secretary Donovan. For good reason. I ran the largest CDBG 
program in the country before coming here.
    Mr. Pastor. So how do you envision this neighborhood 
initiative? Is it going to be part of the decision-making for 
the mayors and county commissioners and the governors in some 
cases to--as they consider the blight in their community, that 
they will look at this imitative? Because right now they can 
address some of these issues with the CDBG money as it comes 
into the local jurisdictions. I mean, how is it going to work 
with the local politicians in making CDBG decisions?

                          COMPETITIVE FUNDING

    Secretary Donovan. So we would expect to run a competition 
that would be targeted at the places that have the greatest 
need. As you know from your own district, certain parts of the 
country were hit harder than others, and while we have made 
great progress in the housing market, we still have a series of 
neighborhoods and communities around the country that are 
really still suffering from the housing crisis. And so we would 
run a competition. We would target it to those places. Again, I 
understand that there is concern about not having as much CDBG 
formula money, but we believe that by targeting that $200 
million to the places that are still hurting the most, 
requiring through a competition that that be leveraged 
substantially with private funds, that we could end up getting 
more job creation and more acceleration of our housing recovery 
through using that $200 million for Neighborhood Stabilization.
    Mr. Pastor. Jim, just a short question, if I may.
    Have you determined already the 20 competitive sites that 
you would direct this money to?
    Secretary Donovan. We have not. And even the idea that it 
would be 20 is not set at this point. We would obviously be 
willing to work closely with the Committee to try to shape this 
in terms of eligibility and need. With Neighborhood 
Stabilization written in the legislation was a series of 
criteria for targeting that money, so we would love to work 
with you on how exactly to target it.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Latham. Do you have any communities in mind, Mr. 
Pastor?
    Mr. Pastor. Well, there are about three or four.
    Mr. Latham. Ms. Granger.
    Ms. Granger. Thank you.
    I would like to talk to you about the Sustainable Community 
Investment grant program. One of my constituents in North 
Texas, the North Central Texas Council of Governments, is 
currently using a grant award to address regional development 
planning issues, especially as they relate to Fort Worth and 
Tarrant County. The Livable Military Communities project will 
help develop a comprehensive plan for local planning issues. We 
have a large base that is based in a small city, and they do 
not have the staff and the funds to do it effectively. So I 
would like to know how this type of work will be continued 
beyond the grants that were issued in the previous year, 
particularly in areas that did not receive a Sustainable 
Community grant. And it is my understanding this program will 
include grant funding for implementation costs related to 
recommendations by the grant recipients. What criteria will HUD 
be using in prioritizing communities that will undertake in 
these planning efforts?

                        REGIONAL PLANNING ISSUES

    Secretary Donovan. So first of all, I would just say we are 
very encouraged by the work that is being done in your district 
on this. It is exactly the kind of regional focus we like to 
see. And the idea that it is focused on a local issue of great 
importance--not just to you, to the community--but to make the 
community a better place for military families to allow them 
not just to lower their housing costs but also to lower their 
transportation costs and create neighborhoods that are going to 
provide more jobs for the community. So I think it is a great 
example of what we are trying to achieve with this effort.
    Specifically, what we are proposing is $75 million. And one 
of the changes we are proposing this year based on feedback 
from the Committee is to, going forward, focus more on 
requiring implementation strategies so that we know these plans 
are not going to sit on a shelf but they are actually going to 
move toward implementation. Obviously, if we do not get 
funding--the last two years we have not gotten funding for 
these planning grants--we are not going to be able to do that 
going forward. So obviously getting that done. We also are 
going to require a greater focus on job creation and economic 
development going forward. I think the example in your district 
has done that but we want to make sure that all of the grants 
are maximizing job creation.
    The other thing I would say that is important here 
specifically for your community, one of the things that we are 
working on is a preferred status for communities that have won 
these planning and implementation grants, to be able to get 
access to the funding they need for implementation. In other 
words, if what is necessary to carry this out would be 
infrastructure investment, whether it is through bus, rapid 
transit, road repairs or construction, we would create a 
preference in the Transportation Department, HUD, and other 
funding programs so that this grantee would be able to come in 
and get a head start, if you will, on the implementation 
funding that is necessary. That is something we have already 
started in HUD programs, and we will be rolling out soon with 
the Department of Transportation, EPA, and other infrastructure 
agencies, that effort.
    Ms. Granger. Good. Because you are right. They will just 
sit on a shelf and not be used.
    Let me ask another question about this program. In your 
agency request you have the Sustainable Communities Investment 
program relocated to the Office of Economic Resilience. Can you 
explain the reasoning for the move?

               SUSTAINABLE COMMUNITIES INVESTMENT PROGRAM

    Secretary Donovan. This is directly based on conversations 
that we have had with this Committee. One of the concerns that 
we heard is how does this really work with the main block grant 
programs? And so one of the things we are requiring of grantees 
is that they have some skin in the game by bringing not just 
their community development block grant and home funding, but 
also bringing private capital. We also felt that by bringing 
these together, frankly, we would create a more efficient 
organizational structure and potentially save dollars within 
HUD's budget by consolidating the program. The change in name 
is really focused on this emphasis on job creation; that every 
one of these plans has to demonstrate clearly where the job 
creation and the savings are that it is producing.
    Ms. Granger. Good. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Ms. Granger.
    Ms. Lowey.
    Ms. Lowey. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary.
    Under the supplemental, grantees must abide by a 24-month 
expenditure deadline for federal grants on critical recovery 
and Mezoian C projects. Considering the depletion of resources 
across the executive branch because of the sequester and the 
environmental reviews and regulatory requirements that must be 
met before construction begins, I am extremely concerned that 
some of the big infrastructure projects, such as housing 
development, subway repairs, water treatment plants, will not 
be built or will be built poorly to meet the deadline.
    Now, you are the leader of the Sandy Task Force. I would be 
interested to know if you are planning to work with OMB to 
grant waivers since this is an issue shared by a number of 
departments. CDBG funds are also subject to this 24-month 
expenditure deadline. How are you going to work with grantees 
to structure the release of CDBG funds so that projects which 
will take longer than two years will be undertaken by the 
grantee? And can you deal with this issue by granting waivers 
or is congressional action necessary to fully resolve this 
issue? But it is a real problem that has been brought to my 
attention.

                     24-MONTH EXPENDITURE DEADLINE

    Secretary Donovan. So first of all, the short answer is 
yes, we have the authority to grant waivers, and we do not need 
Congress to further act to be able to do that. What I would say 
overall, and this is shaped very much by my experience on the 
Gulf Coast. As you know, HUD has been deeply involved in the 
recovery of the Gulf Coast from Katrina and from other 
hurricanes--Ike, Gustav, et cetera. And you know, frankly, in 
too many cases we have seen that the money has not moved 
quickly enough to help people recover, and there has not been 
sufficient urgency and discipline imposed by the Federal 
government on doing that.
    So we felt strongly, and we worked with Congress. For the 
first time ever there is this 24-month requirement in there, 
and I was a supporter of that. And we have seen through our 
experience in the Recovery Act that by setting deadlines, 
holding grantees' feet to the fire, we actually do get better 
performance. And most importantly, quickly help to families and 
communities.
    Having said that, you are absolutely right that there are 
certain types of projects, large-scale infrastructure, 
resilience, mitigation projects, that will not be able to meet 
a 24-month deadlines. We have begun a detailed process with OMB 
and the grantees to look at certain types of investments and to 
create a waiver process that would allow not, you know, with a 
lot of red tape, but up front here are the categories where we 
are going to be willing to waive it and to allow agencies and 
grantees to come in and have sort of preapproved authority if 
certain conditions are met for those to go beyond the 24 months 
and to establish more reasonable deadlines for those kind of 
projects. But we do believe that the large majority of 
projects--housing redevelopment, rebuilding small businesses, 
getting boardwalk back on the shore--all of these are types of 
projects where we ought to be able to meet the 24-month 
deadline. And for the ones where we should be able to, we will 
keep that timeline.
    Ms. Lowey. Thank you very much. Thank you, Mr. Chairman.
    Mr. Latham. The gentleman from Oklahoma, Mr. Cole.
    Mr. Cole. Thank you, Mr. Chairman.
    First, by my personal privilege, we have the mayor of 
Lawton, Oklahoma standing up back there. That is my second 
largest city and fourth largest in the state of Oklahoma, home 
of the Field Artillery, and civic leaders in Tulsa where my 
colleague, Chairman Granger visited to be honored by the 
Comanche Nation for her work on their--the Navajos think they 
were the first code talkers but it was really the Comanches. 
Kay helped get that straightened out, so she was honored.
    Mr. Pastor. There is still debate on that.
    Mr. Cole. Pardon?
    Mr. Pastor. There is still debate on that.
    Mr. Cole. Well, not really. I will let you take that up 
personally with the Comanches.
    If I could, Mr. Secretary, and I am new to this Committee 
and I wanted to bring up a couple of matters related to Indian 
housing questions that I have. Years ago, before I was in 
Congress, I sat on a bank board, a tribally-owned bank, and 
probably is the largest single originator of Section 184 Loans 
for Native Americans, not just in Oklahoma but really all 
across Indian country. And they tell me that there has been--
they have twice had funds cut off in the last few years where 
we basically just ran out of money with almost no notice 
whatsoever and they had a lot of loans in process. Literally, 
people who had left their homes, you know, counting on 
getting--this had been preapproved but we just ran out of money 
and they had no notification and no ability to help people that 
they might have kept where they were at. So this has been a 
matter of a great deal of concern to them.
    Can you tell me, are you aware of the problem and what, if 
anything, are we doing to make sure that does not happen again?

                        CREDIT SUBSIDY SHORTFALL

    Secretary Donovan. Absolutely. And this is a challenge we 
have in a number of our loan programs, not just the 184 
program. But basically what happened was that we have, through 
the appropriations bill, credit, subsidy, and commitment limits 
for how much business basically we can do in each of these 
programs. The amount of business that we had during the first 
months of this year exceeded our expectations and basically at 
the end of February we ran out of credit--so-called credit 
subsidy. And there was about a month where we could not approve 
new commitments. We went ahead and closed ones that we had 
already authorized, but we could not do new ones. We worked 
with the Committee to, in the continuing resolution, get an 
anomaly that added, I think, $12 million in new credit subsidy 
that it would allow us to move forward, and we do believe that 
is sufficient for the rest of the year.
    Mr. Cole. That helped, but had we not had a CR, which was 
just, you know, we were sort of fortunate that that vehicle was 
coming along, you know, we would have left a lot of people 
hanging.
    Secretary Donovan. Honestly, we have had this experience in 
our other programs in the past where we have had to get 
standalone legislation done. And I would say if we do not get 
standalone legislation for our multifamily and health care 
programs, we are going to have the same exact problem in mid-
August. And here is what concerns me the most about this. That 
is a $5 billion increase, not in credit subsidy but in 
commitment authority for our multifamily programs. If we do not 
get that, we think we will lose 22,000 jobs that are being 
created by these new either hospitals, multifamily 
developments. We also would have fewer refinances that would 
happen. These are making--because of record low interest rates 
they are making our fund safer for the taxpayer by doing the 
refinancing. And on the multifamily programs we actually make 
money. So there is $200 million that the taxpayer would lose 
out on if we had to shut down those programs in mid-August. So 
this is not something that is unique to the Section 184 
program. It is something that we have in the past been able to 
work well with Congress on, but obviously, getting that 
legislation through, as you said on the CR, was absolutely 
critical. And we are going to have the same challenge going 
forward on our multifamily and health care programs later this 
year if we do not get legislative relief.
    Mr. Cole. Well, I would like to work with you on that, and 
frankly see what we can do to maybe be a little bit more 
precise in our estimates so that, again, we can get the lender 
a little bit of advanced notice because we literally had a lot 
of families that were adversely impacted, you know, not 
deliberately by the lender. They are the point of contact so 
they take the grief.
    Secretary Donovan. I completely understand.
    Mr. Cole. Okay. I will yield back, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Cole.
    Mr. Quigley.
    Mr. Quigley. Thank you, Mr. Chairman. Good morning, Mr. 
Secretary.
    Secretary Donovan. Good morning.
    Mr. Quigley. Secretary, as you know, a lot of the agencies 
and foundations, organizations that deal with HIV/AIDS are in 
my district. Many of them are concerned about is the Department 
looking or considering consolidating HOPWA into the Homeless 
Assistance program? Whenever something like this happens there 
is a concern that the Agency loses focus or initiative or 
emphasis on that particular issue. Can you run through the 
Agency's thinking about this and where that process is?

            COMBINING HOPWA AND HOMELESS ASSISTANCE PROGRAM

    Secretary Donovan. And let me be very clear, Congressman. 
What I am talking about here is the staffing and oversight of 
the program within HUD; not the programmatic dollars 
themselves. We have proposed in the 2014 budget to fully fund 
the HOPWA program. In fact, every year in very difficult fiscal 
circumstances, the president has proposed full funding for the 
HOPWA program, and he will continue to defend the program as a 
very important investment.
    But we are planning to move forward with bringing together 
the staffing for the HOPWA program with our other special needs 
housing programs. Part of that, frankly, is just the fiscal 
challenges that we have under sequestration, and we have to 
look for efficiencies everywhere we can.
    But there is also a programmatic reason to do that. As the 
epidemic has evolved, what we have seen is that more and more 
people that are struggling with HIV and AIDS are also folk who 
are at imminent risk or are actually already homeless. And what 
we want to do is find ways that we can better align these 
investments. Again, we are not proposing to consolidate the 
programs, but we are looking to better align the work that is 
being done on the ground with families and individuals with HIV 
and AIDS with the work that we are doing around homelessness. 
And we think we will actually get better results by doing that 
programmatically, and that is one of the reasons, along with 
the fiscal challenge we have, to try to align the staffing and 
the oversight of these programs.
    Mr. Quigley. Now, as Cook County commissioner I learned all 
too well how important housing was for the care issues for 
people with HIV/AIDS.
    Secretary Donovan. Absolutely.
    Mr. Quigley. And I would be glad to work with you to 
maintain those efforts.
    In your testimony you mentioned loan limits, a particular 
area of frustration for me because I understand the concept. I 
understand why they were there. But what I appreciate your help 
with is the fact that the borders, the boundaries are not in 
particular accordance with the financial reality. So sometimes 
an area will be skewed far below what it should be, 
dramatically hurting housing possibilities in that area, and 
hurting the housing market. So as a result, conforming loan 
limits in parts of a district like mine are far below where 
they should be and it curtails activity. Could you comment on 
that or what we can do to try to at least address some of those 
issues?

                         RAISE FHA LOAN LIMITS

    Secretary Donovan. Yes. So I do believe, the Administration 
believes, as I said in my testimony, that we have to continue 
to find ways to shrink the government's footprint. We made 
progress on that. FHA's market share has been shrinking. It is 
back to roughly where it was in 2000. But we still have further 
steps that we need to take on that front. And ultimately, we 
believe that Congress ought to allow FHA's loan limits to go 
back to the level that they were before the HERA legislation 
raised them to about $730,000 in some places.
    Having said that, I recognize that that is a national 
question; that there are particular districts where the 
boundaries of how we set loan limits are not particularly 
aligned with the realities of the housing market. I saw this in 
New York City, and often we are going on metropolitan scale 
decisions. So what I would suggest is we would be happy to 
follow up with you and have specific conversations about the 
areas that you are concerned about and to see whether there is 
something that we can do to better align the boundaries that we 
work with with the realities of the housing market.
    Mr. Quigley. And I appreciate that.
    In closing, Mr. Chairman, what I have learned here in just 
a short period of time on this Committee is that secretaries 
have a way of reminding us that a lot of this bad legislation 
is our fault. I get it. But there are some things, and I think 
you just pointed to one of them, where the secretaries can act 
unilaterally and change some of this that is creating a 
hardship.
    Secretary Donovan. On the specific boundaries, we do have 
some--not complete flexibility, but I do have some, and we 
ought to talk about that.
    Mr. Quigley. Very good. Thank you.
    Mr. Latham. The gentleman's time has expired. I do not know 
if you have anything to do with the bridge in Washington, but 
if we could have Ms. Herrera Beutler.
    Ms. Herrera Beutler. He is going to dodge that subject 
today.
    Mr. Latham. Ms. Herrera Beutler is recognized.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    I actually wanted to kind of go back to the last part of 
the answer you gave to Mr. Cole, because that was something I 
have been hearing a lot about was the commitment authority and 
concerns, whether it is hospitals or multifamily housing, that 
the commitment authority is going to be insufficient.
    I guess I did not understand that that is something you may 
have known about prior to this CR, but this is something we 
need to fix. You cannot just start in the middle of something 
like this significant and then, oh, we ran out of money, 
especially considering, from what I understand, that the 
program kind of covers itself, at least as far as the 
multifamily housing piece is concerned. Can you speak to that a 
little bit more?

                     INCREASE COMMITMENT AUTHORITY

    Secretary Donovan. It does. And even just that extra--
currently, we have $25 billion in commitment authority. We are 
asking to go up to $30 billion, just that extra $500 million--
that extra $5 billion, sorry, in commitment authority would 
return about $200 million to the Federal government. So the new 
loans, we think the sort of profits, if you will, on those are 
about $200 million.
    Ms. Herrera Beutler. So for the extra $5 billion in 
authority you will get another $200 million?
    Secretary Donovan. We would earn for the taxpayer about 
$200 million.
    And I will say, this is something that we did try to get 
into the CR. I think there are broader concerns that stopped it 
around this issue I just raised of what is the government's 
footprint, should we be shrinking FHA's footprint? As you have 
heard, I do believe over the longer term that we should do 
that. I think this is the wrong way to do it by stopping us. 
These are literally projects ready to go. Shovel-ready as they 
say. And we are talking about 22,000 jobs that would not be 
created just with that $5 billion in commitment authority.
    And I would also say this is not an issue that only affects 
particular districts. One thing I would point to, critical 
access hospitals in rural areas are a substantial part of our 
investment in our hospital program. Small multifamily 
properties are often the beneficiary. We know in Ms. Granger's 
district, for example, Texas is a place that is significantly 
dependent on investments from this program.
    Ms. Herrera Beutler. So if it were not an anomaly and it 
was standalone legislation or the idea of it, would it then bag 
a zero or negative--I mean, would it have a negligible CBO 
score? Can you guestimate on that?
    Secretary Donovan. The score would be positive because of 
the money that we are making on these new loans.
    Ms. Herrera Beutler. Wow.
    Secretary Donovan. So, now, I am not sure that it would be 
scored and we would have to work, but if it is scored by CBO it 
would have a positive score because it does return.
    Ms. Herrera Beutler. And it is not that the commitment--it 
is not that these things are going to be built, it is the 
commitment authority. It is not that they have not been----
    Secretary Donovan. All this says----
    Ms. Herrera Beutler. It is in the pipeline already; is 
that--am I understanding that right?
    Secretary Donovan. Working in the pipeline, we are well 
along. They have presented architectural plans to us. They have 
negotiated with their contractor. I mean, these are not sort of 
glimmers in the eye of developers going forward.
    Ms. Herrera Beutler. It is process across country?
    Secretary Donovan. Real projects. We could show you the 
holes in the ground. We could show you the plans. We could, you 
know, you can meet the contractors that are ready to have 
plumbers and other folks start on the jobs. And it is 22,000 of 
them.
    Ms. Herrera Beutler. That is a pretty big deal.
    Can I switch topics on you? I think I still have a little 
bit of time.
    Section 8 project-based Rental Assistance Program. I have 
no idea. Everybody keeps using the section and law where 
everything is from. I am not that good yet.
    The budget proposal indicates that $10.2 billion requests 
will enable the 12 months of funding, but I have been told, and 
we keep hearing, whether it is sequestration or flat funding 
for our fiscal year 2013, we are actually short what is 
expected. Can you tell us if the $10.2 billion request for 2014 
will actually fund the contracts for a full 12 months?

                             PBRA SHORTFALL

    Secretary Donovan. It is sufficient to fully fund these 
project-based rental assistance contracts. And I want to be 
clear. This is over a million apartments around the country, a 
million families. It is sufficient assuming that the 
president's budget proposal, which is what this is part of, 
obviously, is adopted. And so to be clear, the president has 
proposed a way to reverse sequestration while still reducing 
our overall budget by $1.8 trillion. If sequestration remains, 
we will be, even with our request, $1.2 billion short in this 
project-based rental assistance account in 2014. What that 
means is that we would have to short-fund contracts. There 
would not be sufficient money for a full year of funding. And 
that is something that we are very concerned about.
    Ms. Herrera Beutler. My time is up. We will circle back 
around. Thank you.
    Mr. Latham. Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman. Mr. Secretary, good to 
see you again.
    Secretary Donovan. You, too.
    Mr. Ryan. I will try to get through a couple questions 
here.
    Hardest hit funds? I am working with Congressman Joyce and 
Congresswoman Kaptur about trying to see how some of these 
funds can be used for demolition. How do you feel about that?

                       DEMOLITIONS AND TARP FUNDS

    Secretary Donovan. I am well aware of these efforts. We 
have actually hosted meetings at the White House between HUD, 
Treasury, the National Economic Council. And I am fully 
supportive of that flexibility. Ultimately, this is a legal 
question of what can--the hardest hit funds, they are part of 
TARP. What they can be used for. And so we are working actively 
to try to be as creative as we can in terms of how these could 
be used.
    Mr. Ryan. Great. Okay. We will look forward to working with 
you on that.
    Secretary Donovan. I would also say that the Neighborhood 
Stabilization Initiative that we have proposed as part of CDBG 
would give significant ability to be able to do demolition, to 
fund land banks, to do other things that I know are of 
particular importance to you and to others on the Committee.
    Mr. Ryan. Yeah. I mean, we have had some success with a lot 
of this.
    Secretary Donovan. A great deal of success.
    Mr. Ryan. In Northeast Ohio, and I think that was the 
original intent, was the older industrial cities, that have a 
lot going on. It is just amazing. You know, I use the example 
all the time in Cleveland, which is not necessarily my 
district, but you have the Cleveland Clinic. It is one of the 
best health care, you know, operations going in the world. And 
one block outside of it is the poorest neighborhood in the 
country. And some of these programs have been really 
successful.
    I just want to ask you one other question or make a 
comment. The Neighborhood Stabilization, we had an issue in 
Youngstown because when the formula was written it was for folk 
who had been affected through the housing crisis in the last 
few years. Some of these older communities, like Youngstown and 
Akron and Cleveland and some of these others, we have had 
chronic foreclosure issues since the collapse of the steel 
industry. So there was a process there where we were not 
necessarily qualifying for some of the grant money and it 
became harder and more hurdles for us to jump over. So I just 
want to get that on your radar screen as you are going through 
some of these other programs and ideas to make sure that we are 
not locking out communities that have had these chronic issues. 
Because, as I said, there are a lot of very positive things 
going on.
    And as we are trying to lure--and that is why I just love a 
lot of what you are doing and what the president is pushing--we 
are in the process now of luring young people back to these 
communities that left 20, 30 years ago--maybe they are not as 
young as I think I am still--that want to come back and now 
they are seeing downtown revitalization. They are seeing a lot 
of the dilapidated homes go down. And that is why I think the 
work you are doing is very, very important, and part of an 
overall comprehensive economic development agenda that local 
communities like ours can tap into. We have got the Additive 
Manufacturing Institute that the president is pushing these 15 
innovations in, so that is in Youngstown. Plus the Neighborhood 
Stabilization we are starting to begin to piece together. That 
is why I think these are great programs that the more they get 
ramped up, the more economic development is going to happen in 
one of the older industrial cities that lifts everybody up in 
the process. So I want to thank you for that.
    Question on the promise zones. Can you just mention about 
them? I am sorry I came in late, but if you could just talk 
about those for a second. And again, I wanted to make sure that 
with the promise zones, places like Youngstown and Akron do not 
somehow locked out because the formula is not written the way 
we would be able to benefit from.
    Secretary Donovan. So I would say on both these--
Neighborhood Stabilization, as well as the promise zones--we 
want to work close with the Committee. The ranking member 
mentioned this as well. How exactly we set the formulas are 
based on legislative language in the Appropriations Act. So we 
want to work closely with you to make sure we get that right.

                             PROMISE ZONES

    Let me talk for a moment just about the promise zones. This 
is something the president talked about in the state of the 
union address. It is something we all believe in the 
administration is deeply important. And I want to be clear. 
This is not a new program; this is taking the work that we did 
in the first term at HUD, Department of Education, at Justice, 
Health and Human Services--that is focused on our most 
challenged neighborhoods and is proposing to significantly 
increase those investments for the work we are doing at HUD, a 
Choice Neighborhoods investment up to $400 million. Focusing 
things like Neighborhood Stabilization into those communities. 
Focusing the work that we are doing through our rental 
assistance demonstration in those communities.
    But I would also say one of the things that we have learned 
in talking to mayors and others in community organizations, 
businesses in these communities, is that too often these 
programs can be, you know, siloed and, well, one department 
does not know what the other department is doing on these. So 
the idea of promise zones is to link all of these together and 
to have a single federal team on the ground in these 
communities, working to make sure that we coordinate and 
improve the way these investments are being made together, both 
in urban and rural communities.
    USDA is deeply involved through their strike force effort 
to make sure that we are doing it in rural communities as well. 
And we would have a set-aside for rural communities as well.
    Mr. Ryan. If I could just mention in 10 seconds that having 
Ag involved, too, in the urban programs, because the urban Ag 
people are jonesing to get more urban Ag in their communities, 
and it ties into edible classrooms and a more comprehensive 
plan. So thank you.
    Thank you, Mr. Chairman.
    Secretary Donovan. Thank you.
    Mr. Latham. Thank you, Mr. Ryan.
    We have completed the first round here, but I want to go 
back to the indefinite authority with Treasury, the $943 
million. And I think that estimate was February, that that is 
what the number was going to be. And the actual amount you will 
need I guess will be determined September 30th. What chance is 
there of it being less than that? Or do we know?

                          LOAN VALUE ESTIMATE

    Secretary Donovan. I wish I had a crystal ball on that. 
What I can tell you, last year, as you remember, Mr. Chairman, 
we did have a negative estimate in the budget, about just under 
$700 million. And we were able to end the year with about a $3 
billion surplus. Part of this is just loan volume. And 
honestly, I cannot tell you whether we are going to exceed our 
loan value estimate. Part of it is the improvements that we are 
making, not just through premium increases but other steps that 
could help us there as well.
    I would say that the $943 million was our best guess, our 
best estimate at that point, and I am--honestly, I am concerned 
without putting a percentage chance on it, that we will need to 
draw at the end of the year, given what we know at this point. 
But I am also not going to give up until, you know, a day 
before the end of the fiscal year because I do want to make 
sure we are doing everything we can. And these legislative 
proposals that we have are a piece of what we can do to make 
sure we minimize the chances.
    Mr. Latham. Okay. Getting back to HECM, you mentioned that 
you would like the authority to issue mortgaging letters; to 
undertake several reforms at HECM as soon as possible, such as 
restricting lump sum payments and requiring financial 
assessments and requiring borrowers to escrow taxes and 
insurance. In the meantime, HUD would implement a full 
rulemaking process on the issues.
    Have you begun that rulemaking process? When do you plan to 
publish the Notice of Proposed Rulemaking?

                              HECM REFORMS

    Secretary Donovan. Obviously, we would prefer not to have 
to do the full rulemaking, but we have begun drafting the 
details. July, we would be prepared to formally begin the 
rulemaking process if necessary, but I also want to be clear. 
We have taken a series of steps, even short of the rulemaking; 
instituted new counseling procedures; new steps on taxes and 
insurance, even though we cannot currently require the escrow 
without the rulemaking. They have, both in our counseling and 
our work with lenders, made sure that they are more focused on 
this and the way that they are managing those. So there is a 
range of steps that we can and have taken. And, in fact, we 
have seen better performance. We have cut the faults about in 
half for the 2011 too on an applies to applies basis. So we do 
think that some of those steps we have taken are having a 
positive effect. But that does not short circuit the need for 
this authority to do the changes without full notice and 
comment rulemaking.
    Mr. Latham. When did you become aware of the problems with 
HECM? I will ask that first.
    Secretary Donovan. So we had concerns right from the 
beginning of the administration, which is why we put together 
this Saver program. We were hopeful that we would see a more 
substantial shift than we did. Part of the problem, again, not 
to get in the weeds, is Fannie Mae stopped providing a 
secondary market outlet for the reverse mortgage programs, 
which meant that we ended up seeing a lot more of the fixed 
rate, full draw program, which is the problem. And the other 
thing I will say, this is a program that is more sensitive to 
what is happening with home prices than any of our other 
programs. And so a bit of this was we expected to see home 
prices begin to recover earlier. When that did not happen it 
produced a much more negative effect on reverse mortgage.
    Mr. Latham. Explain why.
    Secretary Donovan. Because these are mortgages that tend to 
last much longer, and they are also based on the value of the 
home. The recoveries are based more on the value of home than 
the ability to pay. It is a reverse mortgage, and so it is not 
about the ability to pay. It is really all about the home 
value.
    And therefore, when you see the substantial changes in home 
prices that we saw, it tends to drive losses as a percentage 
much higher on the reverse mortgage program than you would on 
the other programs.
    Mr. Latham. Have you foreclosed on any individuals?
    Secretary Donovan. Unfortunately, we have. I do not have 
the numbers right in front of me. I would be happy to get you--
I think it is something north of 1,000. And a lot of this is 
related to property taxes and insurance. It is why this escrow 
proposal is absolutely critical. And look, these are enormously 
difficult decisions to make--1,200 is the number of 
foreclosures that we have seen.
    Mr. Latham. All right.
    Secretary Donovan. We have also, counsel, this is one of 
the reasons why our counseling programs are so important; there 
is no other source of funding for counseling for reverse 
mortgages other than HUD's counseling budget. We are proposing 
a $10 million increase in that budget to $55 million because we 
do think particularly for HECM, it is incredibly important that 
we have adequate counseling as seniors who are making these 
decisions.
    Mr. Latham. Thank you.
    Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman.
    Mr. Secretary, about a month ago we had the IG and GAO in 
an Oversight meeting talking about some of the issues that HUD 
was being confronted with. And one of the issues was your 
computer system and I guess if I was to summarize it--old, 
outdated, ineffective system, software, needs to be modernized. 
And so the inefficiencies are there. And so reports that are 
needed or recordkeeping is probably not at its best. I am sure 
probably you have been told that that seems to be the 
assessment by your own people.
    Secretary Donovan. Not just told; I have seen it myself.
    Mr. Pastor. What are you doing in terms of bringing the 
system up so that your efficiencies are increased, 
modernization is occurring?

                 IMPROVEMENTS TO HUD'S COMPUTER SYSTEMS

    Secretary Donovan. First off, I would say as the new 
ranking member on this Committee, I have been very pleased with 
the partnership that we have had with this Committee to invest 
through our Transformation Initiative and our working capital 
fund in technology. I am a big believer that we can do a lot 
better on this front, and I think we have begun to make some 
real strides.
    Just to give you a few examples, our FHA Transformation 
Initiatives are really bearing fruit. We are on schedule, on 
budget with those efforts. One of the things that we have just 
introduced this past quarter is new automated ways to approve 
and monitor FHA lenders. Significantly can lower our costs and 
improve recoveries for the taxpayer. We are working very hard. 
We have put in place a new automated procurement system that is 
a substantial improvement over what we were doing before. We 
have a next generation management system for our voucher 
program.
    We are also, I will tell you, looking at places that we can 
outsource. We are looking at our financial systems. We felt 
that the prior program that would have remade our whole 
financial systems with essentially a new system. We took 
another look at it and decided that is not the way to go; we 
can save more money and do this more quickly by perhaps 
outsourcing to another government agency that already has the 
capacity to do this. So there is a range of different ways that 
we are looking at this. And I have been very pleased with the 
partnership on it.
    The other thing I would say is we just have too many 
systems. And so we have set a specific goal for next year to 
reduce the number of systems we have at HUD by 10 percent as a 
first step towards further consolidation going forward. So 
those are a few examples of what I think is improvement. And if 
you talk to GAO and the IG, I think they would agree that we 
are making progress on this but we have got a long way to go to 
get to the place we need to be.
    Mr. Pastor. How would you define ``a long way''?
    Secretary Donovan. I think it depends on which of these 
systems, but we have what are essentially plans that by the end 
of this second term we ought to be in a much better place. So 
my long-term vision is four years.
    Mr. Pastor. This is cyber security week here at the House, 
and one of the problems that we will be discussing is privacy 
and within your system you have a lot of personal data of the 
people you are assisting at Housing.
    Secretary Donovan. Absolutely.
    Mr. Pastor. And loans. You have all that information. And 
everybody thinks that cyber security only concerns terrorist 
acts and that type of--the need for that type of security. But 
in many cases it is just people who are hacking and wanted to 
have information and just are challenged by systems. As you 
design your systems and you modernize and all that, what are 
you doing? Just make sure that the privacy of the clients is 
being secured.

                             CYBER SECURITY

    Secretary Donovan. It is a great question. It is both 
privacy of the folks that we serve. Obviously, we are looking 
at their incomes. There are a whole range of information that 
is very private. Their health status in many cases. But also 
HUD employees as well. And protecting that information.
    This is something that my deputy secretary has really taken 
on as an agency-wide project. We put in place specific plans to 
protect either by removing, for example, social security 
numbers and other information that we collected but did not 
need, or where we do need that information to ensure that it is 
encrypted and protected. We are about 90 percent of the way 
through those plans, and we expect that by the end of the 
fiscal year we will be 100 percent complete on instituting 
those plans. We will be happy to work with you given your 
experience on your other Committees. Happy to work with you in 
more detail about the specifics of those.
    Mr. Latham. Thank you, Mr. Pastor.
    Ms. Granger.
    Ms. Granger. I just have one short question. It has to do 
with the Transformation Initiative. Do you think you will need 
authorizing legislation on some of the changes you are making?

                               IT FUNDING

    Secretary Donovan. This is something we have worked well 
with the Committee on. We do not think it is separate 
authorizing legislation. What I would say--and this has been I 
think the essence of the sort of conversation debate we have 
had with the Committee--we have proposed consistently to build 
some flexibility into the Transformation Initiative by saying 
allow us to use up to a half a percent of a range of programs 
to do this, and in response there is often concern, well, we do 
not want to take away money from those programs. And so it has 
tended to be a hard dollar number.
    What I would say is many of the things that we work on, 
whether it is with the housing market--disasters is another 
very good example--you cannot plan for exactly what is going to 
happen in those. And as an example, in Texas we have had 
significant back and forth in work with the state land office 
around making sure that we are getting disaster relief from Ike 
and Gustav to the right places.
    We would not have known at the beginning of the year that 
we had those needs, before the disaster struck, but I think if 
you go ask the state they would say the technical assistance we 
have been able to provide through the transformation issue has 
been enormously beneficial, and frankly is going to save a ton 
of money on the backend because we are going to make better 
choices on how we are using that money. And it is going to be 
used faster and more effectively.
    So I would just urge that as the Committee considers our 
request on the transformation issue, it is not just the amount 
of money but the ability to continue to make changes during the 
year. We are obviously going to come back in our operating plan 
to get your concurrence and to work with you on that, but if we 
lock it in at the beginning that it can only be X amount and we 
do not have the flexibility to move between accounts during the 
year. It hurts our ability to respond to things like Gustav and 
Ike in Texas.
    Ms. Granger. Thank you.
    Mr. Latham. Thank you, Ms. Granger.
    Mr. Ryan. Thank you, Mr. Chairman.
    I would just like to maybe dig a little deeper on the urban 
farming approach within the administration. So if you could 
just talk about that emphasis within your department and how it 
is going and what your new plans are, and maybe how it fits 
into the promise zones in urban areas.

                        URBAN FARMING INITIATIVE

    Secretary Donovan. Yeah. This is something that we have 
done a significant amount of work on in partnership with USDA 
and also some other agencies. I would say that the Neighborhood 
Stabilization effort has been one particular way that we have 
really been able to support the initiative. Obviously, creating 
contiguous parcels where you can do urban farming is a key 
piece of this. There is often from my experience also there can 
be environmental clean up or other costs associated with it or 
building these gardens in a way that has a specific way of 
protecting whatever has grown from any contaminants that might 
have been in the soil. And so Neighborhood Stabilization has 
been a very flexible tool to do the demolition, combined with 
CDBG and some other funding sources.
    The other thing I would say though that probably does not 
get as much attention is the work that we have done in what we 
are proposing to call our Office of Economic Resilience to do 
planning that would connect. We have seen a number of grantees 
who believe, as you do, that this is a big source of 
opportunity for jobs. In communities where frankly population 
density has shrunk over decades, and to do planning that would 
connect, well, who are actually going to be producing this? Who 
are the farmers and other networks that you can connect to? And 
also, what are the distribution channels for this food? Because 
obviously growing it, producing it is one thing but where it is 
actually sold, creating the connections, whether it is to local 
markets or more broadly to regional distribution networks is a 
very important part.
    And one of the things that is unique about these planning 
and implementation grants is they really do create regional--
and CDBG does not do this, right? CDBG goes to individual 
communities. There is not a source of planning money that is 
regional. And you know from your own experience the northeast 
Ohio focus that we have had is multicounty, multi-jurisdiction, 
and it really is one of the few ways that HUD can fund a 
regional economic development plan that would include food 
distribution but might include other key steps around urban 
farming.
    Mr. Ryan. Yeah, no, I think that is really a smart approach 
and lays the groundwork for the kind of growth that I think can 
come from it.
    Also, within the urban farming initiative, one of the 
things we are working on now is how do we take, as you are 
already working with the Department of Agriculture, how do we 
take some of the subsidies that go to big Ag now, and how do we 
just take a sliver of those and drive those into co-ops that 
may be operating in urban areas so that you have wage issues in 
a lot of these cities where people are maybe making $30,000 or 
$40,000. And I know this is not an Ag hearing, but I think you, 
in your department, would be instrumental in a program like 
this to where a family or 10 families or 15 families that 
participate in a co-op in an urban area that maybe get some 
subsidies for their family at the end of the year for producing 
food in a food desert in an urban area and try to get some of 
that investment back into the urban areas.
    So I think all of this can tie together. And with the 
education program where we are starting edible classrooms, so 
where these kids can utilize the edible classroom during the 
school year but then have this urban gardening experience, 
urban farming experience at the end of the day where you tie in 
business class to the marketing at the farmers market and on 
and on and on and on.
    But I want to just thank you for your leadership because I 
think you get this in a way that a lot of people do not. And we 
would love to just continue to work with you and innovate and 
do this in a more creative way. So thank you for everything and 
your staff have been terrific, too, along the way.
    Secretary Donovan. I appreciate it. I am married to a 
landscape architect, so I give her a lot of credit for waking 
me up about this.
    But I would also say that I think the Fresh Food Financing 
initiative that we have put together as an administration is 
also a big opportunity here. I am obviously not an expert on 
the farm bill and those changes but I do think it is also about 
bringing private capital to these kinds of initiatives. And I 
think we have done a lot there that we might be able to work 
with you as well.
    Mr. Latham. The gentleman's time has expired.
    Mr. Cole.
    Mr. Cole. Thank you, Mr. Chairman.
    I am going to stay on the subject of Indian housing, but 
move to another area, NAHASDA block grants for tribes. And as I 
am sure you are aware, we quite often have a lot of unobligated 
balances out there. I know this Committee has been very 
concerned about that and appropriately so given how difficult 
some of the timing or some of the fiscal challenges we have 
are.
    But I am told, and again, I am new to this so I would 
appreciate being educated, I am told that there are a couple of 
problems here that lead to this. One is that Indian tribes have 
a lot of environmental processes and bureaucratic hoops that 
they have to go through before they can actually get the money. 
Second, the Department has been sometimes pretty slow in 
getting the money out to the tribes. I think that the fiscal 
year 2012 money did not come until like February of 2013, that 
sort of thing. So can you tell me, one, are there some reforms, 
some things we need to do in the process to speed this up from 
your standpoint, make it easier to do this; and second, do the 
tribes have some sort of unique set of difficulties in actually 
expending the funds that you make available, which really are 
the backbone of a lot of tribal housing programs in places that 
are really very remote and very much in need of what you are 
doing? So it is not a critical question. I just want to figure 
out how to make these things work better.

                      TRIBAL HOUSING BLOCK GRANTS

    Secretary Donovan. I think it is a combination of issues. 
And one, I think we should be very clear that we operate with 
these tribes in a nation-to-nation relationship. And so there 
is, I think, both legally and programmatically a flexibility 
that they are afforded and a sort of limitation on what 
enforcement we might take based on that relationship that is 
different than our other grantees. And so part of this is where 
we do have real challenges about performance and other things. 
How do we work with them? And I think that is one piece of this 
I would mention that you did not.
    But I also would agree part of it is environmental; part of 
it honestly is just land ownership, for example, is often very 
complicated on tribal lands. And even I have experienced, you 
know, frustrations in--I remember meeting a family on one of my 
tribal visits that the family was trying to buy their mother's 
home and it had taken over a year to get approval to put a lien 
on it with the mortgage; right? So there are challenges like 
that that are not just environmental as well.
    And I do think, you know, to say for HUD, there are things 
that we can and should be doing to speed up our own processes. 
We have made some progress on that to be able to allocate 
faster. There have also been lawsuits and other things that 
have held us back from doing it that we are trying to resolve. 
But part of this is also--and I think Congresswoman Granger 
asked about our Transformation Initiative--providing technical 
assistance to some of the tribes with the largest unexpended 
balances has been very, very important, both Native Hawaiian is 
one example where we have had some challenges at the local 
authority. We are working through that with them. The Navajo 
tribe, others that we are working with, and we are seeing 
acceleration of spending, but it is going to take us, given 
some of those unexpended balances, probably a year or two to 
work through those.
    Mr. Cole. We seem to have a lot of these problem folks in 
the Southwest regional office. And again, I am not being 
critical of anybody because I do not know, but is there a 
bottleneck there or does it just happen to be the concentration 
of where you have got a lot of obviously large tribal entities?
    Secretary Donovan. I think it is largely. We do not see 
differential performance geographically. Such an enormous share 
of the funding goes into that southwest area.
    Mr. Cole. Okay. Last question. I would just ask--I would 
love to get a brief from your office on just the range of 
Native American programs that you run and what you are doing 
because, again, I am new to this Subcommittee and could use the 
education.
    Secretary Donovan. NAHASDA is obviously the single largest 
and most--and it will require reauthorization. So this is 
obviously the Appropriations Committee, but I would just point 
out it would be critical to make sure that we get that 
reauthorization on a timely basis. We also have a proposal to 
deal with mold in Indian country in the budget this year as 
part of the Indian Community Development Block Grant. And that 
is a major health challenge that we have seen among tribes.
    Mr. Cole. And I am sure, Chairman, we would never 
appropriate if the authorizers had not authorized; right?
    Mr. Pastor. Gentleman, would you yield? Mr. Cole?
    Mr. Cole. I am out of time, but certainly.
    Mr. Latham. Go ahead, Mr. Pastor.
    Mr. Pastor. On behalf of the Nation of the original code 
talkers, we want to thank you for asking this issue. We 
appreciate it.
    Mr. Latham. The gentleman's time has expired.
    Mr. Cole. Let us just let the--read the Empire of the 
Summer Moon, and we will let the Comanche--I will send them 
Blood and Thunder and we will see who is the tougher.
    Mr. Latham. I seem to have lost control.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    I wanted to--I will ask for a little bit of a clarification 
on the end of the last answer and I will reread that question 
just because I was not totally following it. But I also--let me 
get this other question in and then let you answer how you 
choose.
    I am very pleased to see HUD is doing the Veterans 
Assistance--the VASH vouchers. It is Veterans Affairs 
Supportive Housing vouchers--there we go--targeting homeless 
veterans. As you know, the program requires a pretty intense 
wraparound or service coordination with this population. And I 
have heard from some of my local housing authorities that 
because of the administrative fees that have been reduced, and 
just basically I am having folks tell me it is insufficient. 
Some housing authorities are returning the VASH vouchers and 
are not able to administer this program.
    How is HUD going to put the VASH program on firmer footing 
to help achieve the important national goal of ending chronic 
veteran housing by 2015?
    And then, so you can either start with that one or the last 
part, I did not understand--so I was asking about the $10.2 
request and whether that is short. And I heard no and yes. So I 
heard $10.2 will fund it based on what we are expecting the 12-
month period to be, but then I also heard--is that contingent 
on you getting more money? I did not understand that.

                        IMPACT OF SEQUESTRATION

    Secretary Donovan. Let me try to be as clear as possible on 
this.
    If sequestration is not reversed, the funding that we have 
requested for 2014 will be $1.2 billion short in the project-
based----
    Ms. Herrera Beutler. So you did not ask for what you are 
expecting the expenditures to be; you asked for an amount 
hoping that also there is an addition of the sequestration?
    Secretary Donovan. All of the president's budget is 
constructed--he has proposed a way to reverse sequestration. 
And he believes that we ought to get a resolution this summer, 
hopefully, that would reverse sequestration and put in place a 
more balanced deficit reduction plan.
    Ms. Herrera Beutler. Okay.
    Secretary Donovan. So all of the budget, not just HUD's, is 
based on that assumption.
    Ms. Herrera Beutler. The assumption that sequestration is 
reversed?
    Secretary Donovan. Is reversed. That is correct. We believe 
that is the right policy. It is the right direction to go. And 
I will also say that as we were preparing the budget, it was 
not clear whether or not sequestration would go into effect. We 
were still hoping that we would be able to avoid that. So part 
of this----
    Ms. Herrera Beutler. I have got to call you on that one 
because the budget was almost two months late. I mean, we had 
dealt with--sequestration had gone into effect, but that----
    Secretary Donovan. Sequestration was delayed until the end 
of February.
    Ms. Herrera Beutler. And we got the budget----
    Secretary Donovan. We were deep into preparation for the 
budget well before then.
    Ms. Herrera Beutler. I get that. But by the time we 
actually got it, sequestration was a known entity. So I do feel 
a little concerned because who knows? You know as well as I do. 
We have no idea what is going to happen this summer, so I guess 
I would say I am a little concerned with having--you made the 
request that you are going to be doing contracts with private 
entities and they are moving forward with Section 8, knowing 
that it is all contingent on getting additional money in there.
    Secretary Donovan. I completely agree with you, 
Congresswoman. And, in fact, I would say this is only one of a 
huge number of concerns I would have if sequestration is not 
reversed. Even with changes this Committee made to do an 
anomaly around our homeless program, we still have 60,000 
homeless folks that are likely to be back out on the streets. 
We have 125,000 families that have vouchers that are likely to 
lose their housing and be at risk of homelessness. You 
mentioned----
    Ms. Herrera Beutler. I was going to say, now maybe we 
should segue to the VASH question.

                              VASH PROGRAM

    Secretary Donovan. To go to the VASH question----this is, I 
think, very important because sequestration did not make direct 
cuts to veterans programs. VASH was fully preserved. The 
problem is the housing authorities that run those programs 
depend on fees to be able to basically do the work. And those 
fees have now been cut below 70 percent. So they are basically 
receiving two-thirds of what they should be receiving.
    Ms. Herrera Beutler. Fees from you all?
    Secretary Donovan. From HUD to run the Section 8 voucher 
program. VASH is a form of Section 8 voucher, and we have seen, 
last year, before sequestration, there were 12 agencies that 
refused these VASH vouchers.
    So just think about it. You are a housing agency whose sole 
mission is to serve folks with housing. You are saying no to 
serving homeless veterans; right?
    Ms. Herrera Beutler. Because they did not feel like it was 
sufficient.
    Secretary Donovan. Because they did not have the money. And 
that is 12 last year, which is the highest we have ever had 
before sequestration went into effect. We have had already this 
year in the first three months, 13 housing authorities turn in 
their entire voucher programs. Say to us, ``We just cannot 
administer vouchers anymore.'' And that is only 13 in the first 
quarter, again, before sequestration went into effect.
    Ms. Herrera Beutler. And I apologize.
    Secretary Donovan. This is one of many enormously harmful 
effects of sequestration that I am very concerned about. I hope 
we will talk more about that.
    Ms. Herrera Beutler. Thank you.
    Mr. Latham. Thank you.
    Mr. Joyce. Thank you, Mr. Chairman. And thank you for being 
here, Secretary.
    Secretary Donovan. Welcome to the Committee.
    Mr. Joyce. I apologize for being late, and I understand 
from the copious notes taken by my legislative director that my 
questions were already answered by Congressman Pastor--asked 
and answered--and Congressman Ryan. So thank you for your being 
here.
    Secretary Donovan. Thank you.
    Mr. Latham. Mr. Secretary, your budget includes--we talked 
about Section 8 reform--a number of reforms aimed at reducing 
program costs, as well as administrative burdens on public 
housing authorities which you were just talking about. We saw 
most of those reforms in last year's budget, and still we have 
not seen any movement on a reform bill. Will these reforms be 
part of a larger Section 8 reform effort with the authorizing 
earlier this year? Or are you looking at fiscal year 2014? Or 
is it your expectation that we, on the Appropriations 
Committee, do these reforms?

                      SECTION 8 REFORM LEGISLATION

    Secretary Donovan. I hope that is not the path that we need 
to take. You know that I reached out to you, Mr. Chairman, and 
Ranking Member, a few days before we released the budget. I 
also reached out directly to Chairman Hensarling, to the 
Ranking Member, and also to make sure that I had conversations 
on the Senate side as well. We are very, very focused on trying 
to get the Section 8 reform bill done this year within the next 
two months. And I do think we are making progress on that.
    Mr. Latham. Where?
    Secretary Donovan. Excuse me?
    Mr. Latham. With who?
    Secretary Donovan. I think both on the Senate Side, 
Chairman Johnson, and Ranking Member Crapo have shown interest 
in doing that. I do think, frankly, what has held us up in the 
past. There have been broad agreement. There have been a couple 
what I would describe as poison pill types of issues around 
immigration, around the Moving to Work program as I would 
describe as small in the overall frame of it that we have not 
been able to get past. I think we have to be able to try to 
push. And I think if I could call in your help and the ranking 
members to emphasize the importance of these changes, we are 
talking about just from that legislation $383 million in 
savings next year.
    We have other proposals in the budget that are not in that 
reform legislation that we could get done just on an 
appropriations basis that would put us over $500 million. But 
that legislation, obviously, is incredibly----
    Mr. Latham. What can you do without authorization? I mean, 
are there other reforms?
    Secretary Donovan. We have been taking steps. And just----
    Mr. Latham. Regulatory standards?
    Secretary Donovan. Absolutely. Streamlining simplification 
that we can do.
    And if I can just step back for a second. One of the things 
that really is most important in driving the costs here are new 
units. We have about 150,000 new vouchers over the last four 
years. We have talked about VASH, but lots of this comes from 
if a public housing development is in terrible condition or a 
multifamily, we issue vouchers; right? So lots of that growth 
and cost is really new families that are being served or that 
may be moving from our other programs.
    If you take that out, the growth and costs in rents is 
really between 2 and 3 percent each year. That is inflation. 
And the fundamental problem is that incomes have been going up 
at about 1 percent. So what has happened is not that the costs 
of the units are going up that quickly; it is really that we 
are at a time when rents have continued to rise but people's 
incomes are not. And so that is meant that HUD's share of the 
cost has gone up by 3 to 4 percent. And we have very detailed 
information on this that we would love to share with you.
    Mr. Latham. So what can you do administratively to solve 
it?
    Secretary Donovan. So I will give you an example. We 
changed the cost increase factor for our project-based programs 
in a way that significantly reduced the increase in costs. We 
have begun to take back the reserve balances that are beyond 
what these buildings need to do renovation and maintenance, and 
we have reinvested those in other programs. So we have a whole 
series of changes that we have made administratively. We also 
believe that energy efficiency is a real opportunity here and 
we are looking at ways to lower the cost. We spend billions of 
dollars on utilities each year. Part of it is sub-metering so 
that residents have the incentive to lower their own utility 
consumption. Part of it is just smart investments as we are 
replacing boilers and other things to do high efficiency. Other 
things like that have an enormous potential to lower our costs 
in the long run. We will not see as much next year, so 
legislation can do more next year, but this multiyear can help 
us significantly. And a lot of that we can do administratively 
and do not need legislation on.
    Mr. Latham. Okay. Thank you.
    Mr. Pastor.
    Mr. Pastor. I want to follow up on my colleague's question, 
Ms. Herrera Beutler.
    If public housing authorities are turning back vouches due 
to sequestration and inability to continue their administrative 
responsibilities, so that means that next year's renewal 
baseline, which is based on this year's leasing will really be 
affected. And as you look to next year and the baseline being 
affected, it is going to cost some major problems in our whole 
public housing efforts.
    Secretary Donovan. Absolutely. And let me try to be 
specific on the voucher program. We think it is about 125,000 
families. Most of that comes from families that are on a 
waiting list today, would have gotten a voucher over the next 
few months, and instead are going to end up sitting on that 
waiting list, maybe becoming homeless depending on what their 
situation is, but that in some ways is the least visible loss 
of units because it is a family that is not already in a home 
that is going to be kicked out.
    We do have though 750 housing authorities where even if 
they completely stop leasing, they are not going to be able to 
deal with sequestration. And what does that mean they have to 
do? They literally have to start taking back vouchers from 
families that are already out looking for apartments. They are 
going to have folks that are evicted. They are going to have to 
raise rents for residents.
    Let me just give you a few examples. Des Moines has had to 
already reduce rents, payment standards, and utility allowances 
to try to meet the 100 folks that it needs to cut off the 
program. In Congresswoman Granger's district, Fort Worth 
Housing Authority has pulled back 99 vouchers from families 
that were already out renting apartments. And they have to get 
to a total of 200 that will be off the program by the end of 
the year.
    Congresswoman Beutler's Thurston County took away vouchers 
from 26 families and has to reduce overall leasing by about 150 
units. So these are real impacts that are happening as we speak 
in terms of families that are going to lose housing where their 
payments they are going to have to make are going to go up so 
much that they are going to be evicted, end up homeless. These 
are real impacts that are happening right now.
    And over 750 housing authorities is a huge number to have 
to be dealing with what we know are going to be shortfalls, 
even if they do not lease a single voucher for the rest of the 
year.
    So sequestration, this kind of blunt, indiscriminate way of 
cutting the budget is not the right away to approach it.
    Mr. Pastor. So what happens to your baseline for next year? 
Is this lessened by this number of people now who are not 
getting vouchers this year?

                             SEQUESTRATION

    Secretary Donovan. In some ways it is the opposite effect 
of what is happening on the project base. The project base, 
because we have signed contracts with those owners, it 
increases the need next year. For vouchers, it may decrease it 
some, but that really depends on what strategies agencies need. 
Some of them have reserves, for example, that they are using to 
try to get through this period. If they use reserves and do not 
lower the number of families served, that means their baseline 
stays the same. Others that are having, like I mentioned in 
Thurston County, in Des Moines that are cutting families off 
the program, there you are going to have a lower baseline next 
year. But honestly, until we get closer to the end of the year 
we are not going to know exactly those impacts because housing 
authorities are still in the process of trying to figure out.
    I also would just go back to the fundamental point that we 
do believe, the president believes there is a different 
alternative here, which is to put in place a balanced deficit 
reduction plan, $1.8 trillion in savings, and reverse 
sequestration. That would allow us to not have those impacts on 
the baseline next year. And most importantly, those 125,000 
families that are going to lose the help that they need.
    Mr. Pastor. Well, I have to tell you, I agree with my 
colleagues that if you read today's paper of the probability of 
having a conference on the two budgets between the House and 
the Senate, it really has curbed my enthusiasm that this thing 
is going to happen. And so this summer is going to be very 
interesting if what you are basing your budget on is--how 
realistic it is going to be.
    Secretary Donovan. We do have information. We have been 
able to sort of run the budget in different ways, and we can 
provide the Committee information around the sequestration 
levels and what those impacts are. So it is not like we are--we 
do not have that information, it is just that this is how the 
budget is presented and we can get you the alternate ways of 
looking at it working with you on the specifics.
    Mr. Latham. Thank the gentleman.
    Mr. Cole.
    Mr. Cole. I want to pick up on the line of questioning that 
we are going through right now and just offer an observation 
and get a response.
    I am worried if you are planning on sequester totally going 
away because that is just politically not likely to happen. And 
you know, again, I hope there is some sort of larger settlement 
sometime this summer. I agree with your timing on that. I voted 
for all those settlements when we have come to large arguments 
before. But the idea that all of those cuts will disappear and 
magically move over I think is not likely to occur. I am not 
going to say fanciful, but pretty close.
    So it would be helpful if we had some of those alternative 
scenarios because I think you are going to likely end up 
managing with considerably less than your budget projects if it 
is based on a total restoration of the sequestered money.
    And I would give that advice, by the way, to anybody else, 
not always happily. Because we are having to deal with these 
same kind of issues in defense and Indian health in a variety 
of ways. But you know, to think that there are the votes here 
to get that kind of total restoration I think is very unlikely.
    Secretary Donovan. As I said, we are doing contingency 
planning. We do have information that we can work with the 
Committee on that looks at these alternatives. I mentioned the 
project-based account. We know that it would be a $1.2 billion 
hole and can be clear about what those impacts are. But I do go 
back to--even if some may say it is unlikely, the president 
still strongly believes that this is the right path and that we 
ought to work towards that. And he is not going to give up 
until the very last day when he can.
    Mr. Pastor. Well, it would be nice to be able to arrive at 
a deal before the very last day. But I suspect everybody will 
be giving up something at some point about mid-summer.
    I yield back.
    Mr. Latham. Thank you, gentleman.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. I guess I wanted to echo that in 
thinking about this, you know, I, too, have voted for some of 
the big deals because I think we need to govern. So I am not 
coming at this from an unreasonable perspective. But I know you 
refer to the president's budget as balanced. Does it balance? 
Does the president's budget balance?
    Secretary Donovan. It produces $1.8 trillion in savings, 
which when you add that to the $2.5 trillion that we have 
already produced through other agreements that have been 
reached over the last few years, gets us to a place that 
broadly economists, nonpartisan economists agree puts our 
fiscal house in order.
    Ms. Herrera Beutler. So it does balance? It comes to 
balance?
    Secretary Donovan. The definition for what the president 
seeks is to get to a place where our debt is under control and 
where we are on a path to long-term fiscal stability. And he 
believes strongly that we can do that when everybody does their 
fair share.
    Ms. Herrera Beutler. And I agree with that. I know the 
talking point that I have heard now from several secretaries is 
balanced, balanced, balanced. So I know that is part of the 
descriptor that has come with the mandate of making these 
requests on the Hill. I just find it curious that it is a 
different way. It definitely is his vision, and I respect that 
that is the direction he is going to go, but it is hard to call 
something that does not ever actually come into balance, 
regardless of whether economists think it is good or not--I 
think there are people who would like it; there are people who 
do not like it--but it does not actually balance. So I just--as 
we go into this next phase, as a lawmaker who has demonstrated 
she is willing to govern and to come together on big deals, I 
guess I need to understand that you have a plan within HUD for 
fulfilling those contracts--his budget, our budget aside--I 
mean, working with what you have in the next six months.

                               SHORT FUND

    Secretary Donovan. Let me be as clear as possible about 
those contracts. We have signed those contracts with private 
and nonprofit owners. We cannot go back on them. And so if 
Congress does not appropriate the money to be able to pay those 
contracts, what we will do is short fund them. And that will 
mean that for contracts expiring later in the year--I think 
close to 75 percent of them--they will not get 12 months worth 
of money, and we will have to in the following year come back 
and put the remaining amount of money on those.
    There have been times in the past where we have had to do 
that. It is not the right way to run a railroad because what it 
means is that: One, owners will start to get out of the 
programs and will lose decent affordable housing; two--and this 
is one of the critical things about our programs. They are 
deeply connected to the private sector. One of the things that 
is good about our programs is that they raise and rely on 
private investment. They rely on the efficiencies of the 
market, and when there is uncertainty about whether we are able 
to honor our contracts----
    Ms. Herrera Beutler. There are ramifications.
    Secretary Donovan. That makes it more expensive to run 
these projects. The interest rates on the loans will go up. The 
reserves that are required--I used to run an affordable housing 
lending business--the reserves that are required to do this 
will go up and it will make these programs--ironically, if we 
think it is cutting costs, it is actually raising costs.
    Ms. Herrera Beutler. And I agree with you that the real 
implications of short funding a contract are going to cause 
good partners to get out, which is why I am so focused on 
making sure----
    Secretary Donovan. I assure you, Congresswoman, we have a 
plan to do that. We will be able to deal with it. It is a bad 
thing and I have every hope that we can work with this 
Committee to get to a way to resolve this so we do not have to 
go through those bad things.
    Ms. Herrera Beutler. Great. Thank you. I yield back.
    Mr. Latham. Thank the gentlewoman. I recognize Mr. Dent.
    Mr. Dent. Thank you, Mr. Chairman. Mr. Secretary. Thanks 
for being here today.
    Secretary Donovan. My pleasure.
    Mr. Dent. Obviously, in this difficult fiscal climate we 
are dealing with some real funding restraints. This Committee 
has a responsibility to make some tough decisions in setting 
those priorities. We will have to continue to balance where our 
limited federal resources are most effectively and efficiently 
directed.
    Last month, I attended a meeting with Housing and 
Redevelopment officials from across the country, and I also met 
with local constituents. One of the concerns I heard throughout 
those discussions was that while they are struggling to do more 
with less resources, they are also significantly impacted by 
increasing administrative burdens and regulatory limitations. 
Obviously, we have to ensure proper oversight, but many of the 
PHAs have said to me that it would make a huge difference in 
managing their budgets if they had more administrative 
flexibility.
    I wanted to highlight two very specific examples. One of my 
local housing authorities spoke with me about the burden of 
required energy and Green Physical Needs Assessments (GPNA) 
program, I guess. Well, this may be a valuable tool for the 
Department. I am not convinced it provides sufficient return on 
investment at the local level, and I am very concerned that 
housing authorities have to divert resources from their core 
mission of ensuring residents' needs are met. That is the one 
very specific issue they raised to me.
    The second one was, I understand under the Section 8 
program authorities have to provide 30 days notice for a rent 
change. But if they are going to change the payment standard, 
you know, the maximum monthly housing assistance payment for a 
family, it requires two years' notice.
    Providing housing authorities more flexibility there may be 
a way that they can stretch limited resources. That was a very 
specific issue that they had raised with me that they thought 
could help them as they deal with sequester. That would be 
extraordinarily helpful to them. And so I think it is really 
critical that HUD strikes that appropriate balance between 
minimizing unnecessary burdens on the PHAs while continuing to 
oversee that these funds are being utilized prudently.
    I am interested in hearing what you are doing to evaluate 
if there are ways you can alleviate some of those particular 
administrative burdens, particularly during these rough times. 
But the rent issue was a big deal to many of them.

                         ADMINISTRATIVE BURDENS

    Secretary Donovan. So this rent issue is a very tough one 
because what you are talking about is extremely low income 
families where even relatively small increases in rent for them 
could mean eviction or homelessness. And so typically what we 
do, as you said, is provide significant notice and ability for 
them to ramp up. And again, to be clear, this is if the Housing 
Authority is going to make a system-wide change, say everybody 
is going to be required to pay more.
    We do have the authority to waive that in cases where it 
truly is an emergency. But I will say, we want to use that very 
sparingly. So what I would suggest, what we do is work with 
housing authorities. I mentioned the 750 housing authorities we 
identified that really do have shortfalls, even if they stop 
leasing. We are prepared in extreme cases to use that 
authority, but I do not want to use it where there are other 
alternatives that could lower costs and not put families at 
risk. And that is the balance.
    Mr. Dent. You do understand that I think many of these 
communities really want to maximize the number of people who 
are getting Section 8. That is why they are proposing this. I 
think, you know, a two-year notice is a lot of time. And if 
there were greater flexibility it would really help out some 
folks in places like Lebanon and Dauphin County in 
Pennsylvania, Lehigh County, Berks, where they have come to me 
and said--they all seem to agree that this was a proper remedy 
that would really help them stretch their limited Section 8 
dollars to support more people. That is why I am making this 
request.
    Secretary Donovan. Again, it is something that we will do 
where we think it is the right alternative. But understand, we 
have to be sure that this is not going to hurt lots of families 
in the interest of helping others. And so we are happy to work 
with you on that.
    On the Green Physical Needs Assessment, we do believe, and 
we have seen this particularly with larger housing authorities, 
that this kind of analysis actually saves money in the long 
run. We understand that because of sequestration it is hard to 
have the funding to do this right now, and so we are looking at 
deferring that step as a result of. And we will provide 
flexibility to housing authorities on that.
    Mr. Dent. The communities, at least the housing officials I 
spoke with at these conferences, were very clear that this is 
something they wanted.
    Secretary Donovan. We also, I would add, have a number of 
proposals, both legislatively and also many things that we are 
doing beyond the two that you focused on to provide greater 
flexibility. We proposed in the budget to merge or to allow 
``fungibility'' we call it between the operating and capital 
fund. That provides lots of flex. And there are many other 
things that we could provide you information on that we think 
can help provide greater flexibility right now.
    Mr. Dent. Thank you.
    Mr. Latham. By mutual agreement here I think we are going 
to close the hearing. I want to thank you again for your great 
work at the Department and the continued communication. 
Obviously, we have got some real challenges on the budget. You 
had your talking points down very well with a balanced approach 
and all those good things. I have asked other people, if it is 
so horrible, why did the president propose it and insist on 
sequestration? But I will not ask you that. We want to continue 
to work with you and we have got to get reforms so that we can 
make this work.
    Secretary Donovan. Agreed.
    Mr. Latham. Hopefully, if there is anything I can do as far 
as pushing the authorizers, I would love to do that. It is 
going to be very difficult over their objections to be able to 
have any of the reforms in our bill here, in the appropriation 
bill. Hopefully, there is an appropriation bill this year, 
rather than what we have seen in the past. But the main thing--
Mr. Pastor and I want to continue to work very closely with 
you.
    So with that we will thank you again and we will adjourn 
the hearing.
    [Questions for the record follow:]

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                                         Wednesday, April 24, 2013.

                    FEDERAL AVIATION ADMINISTRATION

                                WITNESS

MICHAEL HUERTA, ADMINISTRATOR, FEDERAL AVIATION ADMINISTRATION
    Mr. Latham. The hearing will come to order. And this 
morning we welcome FAA administrator Michael Huerta to testify 
on the FAA's budget request for fiscal year 2014. This is the 
administrator's second appearance before the Subcommittee and 
his first appearance as the Senate-confirmed administrator of 
the FAA.
    I think the biggest question on everyone's mind today is 
sequestration and the effects or furloughs on the air traffic 
control system. While I firmly support and pursue the principal 
goals of achieving targeted reforms to reduce government 
spending and balancing the federal budget, I do not support 
across-the-board cuts like those mandated in the Budget Control 
Act. These cuts simply punish everyone, rather than 
specifically target the great number of outdated, wasteful, and 
duplicative functions being funded with our taxpayer dollars. 
In short, arbitrary, nontargeted, across-the-board cuts are no 
way to run a government. However, an across-the-board sequester 
was what the president proposed and we are now operating under 
this law.
    In an effort to avoid the arbitrary $1.2 trillion in cuts 
mandated by the Budget Control Act, I have twice voted with the 
majority of members in the House to pass common sense 
legislation that would have replaced sequestration with 
targeted spending cuts of an equal dollar amount. 
Unfortunately, the U.S. Senate never considered anything that 
would have replaced sequestration with targeted spending cuts 
of an equal dollar amount. Unfortunately, the U.S. Senate never 
considered either of these bills; thus, sequestration was 
triggered.
    Further, this goes to show that we need to return to 
regular order and consider appropriation bills in their 
entirety and not rely on continuing resolutions to fund the 
government. Under a CR, there is no way for us to prioritize 
cuts or protect programs related to the safety of the American 
public. We have questions today about how the FAA evaluated the 
safety impacts of these decisions, the transparency displayed, 
and how you got to your furlough and contract decisions. And 
finally, what is the FAA doing to mitigate these effects after 
two days of disrupted air traffic activity. The safety of our 
air space cannot be subject to political posturing.
    As for the business of the president's fiscal year 2014 
request, the FAA is requesting 15.6 billion in discretionary 
budget authority, which is a decrease of 350 million below 
fiscal year 2012, mostly due to reduction of the Airport Grants 
Program. The president has also requested $3 billion in 
mandatory funding for the FAA in the fourth round of a 50 
billion stimulus request. Until you propose a pay-for, we 
cannot give this request serious consideration.
    Similarly, the president has chosen to include new and 
increased fees in this budget that have been rejected year 
after year. I also have questions regarding the FAA's ability 
to meet its mission ensuring safe air travel while modernizing 
our nation's air traffic control system through NextGen 
investments. The FAA has seen a number of schedule slippages 
and cost overruns in its NextGen programs, which could threaten 
air space modernization at a time when our first mandate in 
Congress is to reduce spending and bring our budget to balance.
    Finally, I would like to commend you for your leadership 
and open communication with Congress as you met some recent 
challenges such as working to resolve the Boeing Dreamliner 
battery issue. I am hopeful we can have a similar cooperative 
and open dialogue regarding the implementation of 
sequestration. We look forward to your testimony.
    I would like to recognize Ranking Member Mr. Pastor for any 
opening remarks.
    Mr. Pastor. Good morning, Mr. Chairman. Thank you.
    I would like to welcome FAA administrator, Michael Huerta.
    We are starting to feel the effects of sequestration on our 
system. FAA must cut more than 630 million to its programs, 
more than 485 million in operations alone. Every employee will 
be furloughed up to 11 days and nearly 150 contract towers are 
threatened to be cut down. Since Sunday, 10 percent of FAA's 
workforce has been furloughed each day, and that will continue 
each and every day as long as sequestration is in effect. We 
are already seeing delays in the air traffic system. On its 
worst day last year, the air traffic control system had 3,000 
delayed flights. FAA estimates that as many as 6,700 flights 
will be delayed daily.
    No one should be surprised by these impacts. Secretary 
National Airspace System predicted delays in February, and our 
ranking member, Ms. Lowey, issued a report early on 
highlighting the potential impacts of sequestration. And this 
is not just a problem for fiscal year 2013. Sequestration will 
hit 2014 as well. We must sign a comprehensive government-wide 
solution as you have recommended, Mr. Chairman.
    I know the administration would agree with me that the 
FAA's most important asset is its workforce. Every controller, 
inspector, airport grant administrator, manager, and rank and 
file employee, is critical to FAA's success. I hope that we can 
find a way to do better by them and reach a resolution to 
sequestration without raiding one account to the detriment of 
another. Put another way, we should not spare one set of 
employees only to sacrifice others.
    We are here today to discuss FAA's fiscal year 2014 budget 
request. With the exception of the AIP proposal, it freezes 
funding at roughly the fiscal year 2012 levels. I look forward 
to your testimony, Mr. Huerta. Thank you, Mr. Chairman. I yield 
back.
    Mr. Latham. Thank you, Mr. Pastor.
    We are pleased to have the chairman of the full committee 
here this morning for his statement.
    Mr. Rogers. Thank you, Mr. Chairman. Mr. Director, welcome.
    We have got a lot of questions for you this morning. The 
first one is going to be how come you did not tell us about 
this beforehand, the sequester impact on the layoffs, the 
furloughs? Not a word. Not a breath. You did not forewarn us 
that this was coming. You did not ask advice about how we 
should handle it. You did not inform the Congress of this 
sequester impact and what you plan to do about it. In fact, the 
entire administration has done the same thing. They have not 
told the Congress how the sequester impact will impact each 
agency. And the Congress cannot operate like that. This 
imperial attitude on the part of the administration, and you 
are the most recent example of that imperialism, is disgusting. 
And then to turn around and try to blame the difficulties in 
flying on the Congress, having not informed us of what you 
planned to do, is unacceptable.
    I hope you have some answers for us today. But the first 
question I want answered is why did you not tell us about it 
beforehand. What else are you planning to do that you have not 
told us about? And why is it that the administration will not 
come to the table and talk about a substitute for sequestering? 
There are all sorts of ideas floating around, and yet the 
administration refuses to come to the table and talk about it. 
Instead, they simply start shutting down airports, if you will, 
closing towers, and now, furloughing airline controllers, 
airport controllers.
    It would be easy for the administration to come forward and 
say, ``Okay, let us talk. Let us see if there is a way around 
all these impacts of sequester.'' I do not like sequester. It 
is across the board. It is unintelligent. It cuts good things 
with bad. The people elected the Congress and the 
administration to choose the good things from the bad things. 
And yet we have, with sequester, abdicated that responsibility. 
But it is time for the administration, and you are the first, 
to come forward and talk about ways to avoid sequester. And as 
long as you refuse to do that, the American public is going to 
suffer.
    I yield back.
    Mr. Latham. Thank you, Mr. Chairman.
    We have the ranking member of the full committee, Ms. 
Lowey. You are recognized.
    Ms. Lowey. Thank you, Mr. Chairman. And welcome 
Administrator Huerta.
    Employee furloughs at the FAA necessitated by the failure 
of Congress to replace ill-advised across-the-board cuts are 
causing inconvenience and economic losses to individuals, 
families, businesses, in New York and across the country. But 
frankly, it is mystifying to me that some are surprised by 
these delays or blame FAA for Congress's failure.
    On February 11th, the Department of Transportation told 
Congress that given the magnitude of budget cuts to the FAA, 
``it will be impossible to avoid significant employee 
furloughs,'' requiring a reduction in air travel to a level 
that can be safely managed by the remaining staff and causing 
delays and disruptions across the country. Without action by 
Congress, this situation will get much worse before it gets 
better. FAA estimates the number of daily flight delays will be 
more than double the highest level of delays on a single day in 
2012. Across-the-board budget cuts are having a severe impact 
on American families' incomes, as well as services and 
investments critical to our economic competitiveness. We must 
replace these mindless cuts with a renewed focus on jobs, 
economic growth, and a balanced package of long-term deficit 
reduction.
    I agree that this has been very disruptive, but it is 
amazing to me that those who are responsible for the sequester 
do not understand that we have to get rid of the sequester. We 
are blaming on for the impact on vital services. I do hope the 
Congress can get together in a bipartisan way. We have not had 
a conference on the budget. We are ready to move as 
appropriators, and I know the chairman and I can move 
effectively together. But unless we get started and start 
working together, the reality of the sequester is seen. The 
sequester took place beginning March 1st. Here we are--March, 
April, May. I cannot understand why people are surprised that 
this sequester has serious impacts.
    I yield back.
    Mr. Latham. I thank the gentlewoman.
    After the administrator's opening statement we will proceed 
with the five-minute rounds, alternating in the standard order. 
Administrator, we invite you to present your opening statement. 
Your full statement will be included in the record, and you are 
recognized for five minutes. Welcome.
    Mr. Huerta. Thank you, Mr. Chairman. Thank you, Chairman 
Latham, Ranking Member Pastor, Chairman Rogers, Ranking Member 
Lowey.
    I am pleased to have the opportunity to be here today to 
discuss FAA's budget for fiscal year 2014. As you are aware, 
this is my first appearance before you as the confirmed 
administrator of the FAA. We have a great number of challenges 
and opportunities ahead, and I look forward to a long and 
effective relationship with this Subcommittee.
    The FAA's fiscal year 2014 budget request is $15.6 billion. 
This budget upholds our critical safety programs, while also 
deploying key NextGen benefits to our stakeholders and 
modernizing our aviation infrastructure. It does this at 
funding levels that are $351 million lower than in fiscal year 
2012, a 2.2 percent decrease, which is part of the president's 
overall effort to reduce the deficit.
    The FAA's proposed budget for 2014 assumes a long-term 
solution to our nation's budget deficit and no sequester. The 
2014 proposed budget would allow us to maintain staffing for 
air traffic control and aviation safety. It would allow us to 
maintain capital investment in both airport infrastructure and 
FAA facilities and equipment and fund research and development.
    The budget requests $1 billion for NextGen, which is an 
increase of about 7 percent above 2012. This request would help 
us continue to mitigate congestion in busy airspace above 
metropolitan areas, and it would help us with the continued 
deployment of radio transceivers that allow us to use very 
precise satellite-based information to control air traffic.
    The FAA is requesting $9.7 billion in our Operations 
account. This represents an increase of just about a half a 
percent above the fiscal year 2012 level. This request will 
enable us to run the agency on a day-to-day basis. It ensures 
the safe operation of the airlines and the certification of new 
aviation products. It would also enhance the safety of the 
commercial space transportation industry and provide overall 
policy oversight and management of our airspace.
    The Operations budget includes an additional $30 million to 
maintain and operate the new En Route Automation Modernization 
(ERAM) system that became operational over the last two years. 
ERAM is at the heart of NextGen. It helps advance our 
transition from a ground-based system of air traffic control to 
a satellite system of air traffic management.
    The 2014 budget also allows the FAA to meet the dual 
challenge of maintaining the capacity and safety of the current 
system while moving forward with our comprehensive 
modernization and transformation efforts. The majority of the 
$2.8 billion requested for facilities and equipment is to 
sustain legacy areas. This includes aging infrastructure, power 
systems, information technology, navigational aids, and weather 
systems.
    This year's request for Research, Engineering, and 
Development is $166 million, a decrease of 1 percent from 2012. 
We intend to continue critical research in NextGen and in other 
areas, such as fire research and safety, propulsion and fuel 
systems, advanced materials research, alternative fuels, aging 
aircraft, and unmanned aircraft systems.
    Our budget emphasizes cost efficiency and reflects the hard 
choices we must make to provide the most benefit to the flying 
public. As a result, we are proposing to modify the mix of 
funding available for airport development projects. The budget 
would allow commercial service airports to increase passenger 
facility charges from the current maximum of $4.50 to $8.00. 
This gives airports greater flexibility to generate more of 
their own revenue, and it allow us to reduce our request for 
the ongoing airport grants program by about $450 million. This 
change focuses federal resources on smaller airports that do 
not have the passenger volume to generate their own revenue, 
yet are still important to our nation's air transportation 
network.
    The President's 2014 budget request represents a balanced 
approach to achieving a long-term solution to our nation's 
budgetary challenges. This is critical when we consider the 
impact of the sequester on our aviation system. The cuts 
required by the sequester forced us to slash contract expenses 
and furlough 47,000 of our employees for up to one day every 
two weeks.
    With 10 percent fewer hours available from each employee, 
there are impacts on all FAA operations. At air traffic 
facilities, this imposes limits on the amount of air traffic we 
can safely allow to take off and to land. It means that our 
safety inspectors will work fewer hours and it will take longer 
to certify new aircraft for the market.
    I want to emphasize that as we undergo the difficult 
process of implementing these deep cuts, we refuse to sacrifice 
safety, even if it means less efficient operations. Since 
February, we have publicly described the possible effects of 
the sequester, and over the past few weeks we have been working 
with our industry partners, including the airlines, to share 
more detailed information on the impacts we expect at our 
nation's largest airports. We are tracking airport delays 
throughout the system and making adjustments where possible to 
minimize delays. It is my hope that we can work together to 
rally around our nation's air transportation system and protect 
the great contribution that civil aviation makes to our 
economy.
    Mr. Chairman, this concludes my prepared remarks. I would 
be pleased to answer any questions you may have.
    Mr. Latham. Thank you very much. And I guess we are all 
concerned about the air traffic controllers and the effect that 
that is having.
    You believe that you have done everything possible to 
minimize the effects of the furloughs?
    Mr. Huerta. I do.
    Mr. Chairman, we have to reduce our budget by $637 million 
between now and September 30th. Under the rules of the 
sequester, the Airport Grant Program was exempted, as were all 
the grant programs of the Department of Transportation. What 
that means is that it falls disproportionately on the operating 
side of the budget. We are projecting savings from the furlough 
of approximately $220 million. And so what that means is that 
we have cut more heavily in nonpay areas--contracts, 
information technology, travel, and a wide variety of other 
nonpay expenses. To reach the large number that we need by 
September 30th, we have no choice but to look at furloughs as 
well.
    Mr. Latham. Can you assure the American people that what 
you are doing will have no effect on safety?
    Mr. Huerta. It will have no effect on safety but what will 
suffer will be efficiency. When we have to reduce the number of 
controllers that we have available to handle air traffic, it 
means that we have to do things like combine sectors, reduce 
arrival rates at major airports and the capacity of our major 
En Route facilities. The result from that are ground delay 
programs, flow control measures, all of which have impacts on 
the efficiency of the system. But what we are focused on first 
and foremost is to maintain safe operations.
    Mr. Latham. I was taken back at the same time we are 
talking about cuts to new or essential services on air traffic 
control. The secretary announced that he was giving out $474 
million in Tiger Grants for livable and sustainable communities 
from the department, which is not authorized, not defined in 
law anywhere even what that is. Do you have any ability to 
transfer any of his money? Have you requested any money to be 
transferred?
    Mr. Huerta. Under the framework of the sequester act, we 
have to cut equally across programs, projects, an activities. 
The way that works out in the FAA's budget is, as you know, Mr. 
Chairman, we have four colors of money--our operations account, 
our Facilities and Equipment account, our Research Engineering 
and Development account, and then the Airport Improvement 
Program. Within each of those accounts there are further 
subdivisions. The largest share is our Operations account, and 
that is organized according to the FAA's lines of business. For 
example, Air Traffic, Aviation Safety, Commercial Space.
    As I said before, the Airport Improvement Program is 
exempt, therefore, the cuts are applied equally across the 
other three colors of money. That means that they 
disproportionately fall on operations.
    Operations represents some 61 percent of total FAA 
appropriations, and of that amount, approximately 70 percent of 
it is pay for the employees that perform the important safety 
critical functions. To get to the numbers that we need to get 
to, while we have cut quite dramatically in the areas of 
contracts and other nonpay expenses, we are nonetheless forced 
with the choice of needing to reduce the amount spent on 
salaries. That is where the furlough comes in.
    Mr. Latham. To my question, have you asked for any transfer 
authority of the funds that obviously the department has got 
hundreds of millions of dollars sitting in other accounts 
there. Have you asked for any transfer? This is from a program 
that is not authorized, has on definition, and it is money 
sitting there supposedly.
    Mr. Huerta. I cannot speak to what is available in other 
parts of the Department of Transportation budget, but within--
--
    Mr. Latham. Is there any discussion at the Department about 
maybe making a request to transfer money into essential 
services?
    Mr. Huerta. I think what the administration has been quite 
clear on is that the sequester being an across-the-board 
impact, we agree with you, it is not an appropriate way to run 
the government. But, we are complying with the law as it has 
currently been passed.
    Mr. Latham. Is there no discussion about asking to 
transfer----
    Mr. Huerta. There have been many options.
    Mr. Latham [continuing]. High priorities?
    Mr. Huerta. There have been many options floated, both in 
the Congress and within the public generally about 
opportunities for transfer. But until something is actually 
enacted, we have to live with the law as it is currently 
passed.
    Mr. Latham. So you have not asked for any authority to 
transfer--you have not--the money that is sitting there in 
other accounts?
    Mr. Huerta. We have taken full advantage of the 
flexibilities that we have.
    Mr. Latham. That is not my question.
    Mr. Huerta. As I said, there have been many discussions 
that have taken place about transfer authority, but until 
something is enacted, we do not have any reason to plan for it.
    Mr. Latham. Okay. You are still not answering the question, 
obviously.
    Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman.
    A year and a half ago when the 12 wise men failed to 
complete their work and we voted on the Budget Act that passed 
the House and the Senate, sequestration was a possibility. And 
there was always, I guess an expectation that it would not 
become a probability. But in, I think, January of this year, 
OMB started at least issuing memorandums to the agencies that 
it may be a probability and as we are getting closer into 
March.
    Now, when did the FAA, with its limitations and its 
flexibility, was allowed by law and policy begin preparing for 
sequestration?
    Mr. Huerta. We began preparing with the start of the fiscal 
year as we saw it as a possibility.
    Mr. Pastor. October?
    Mr. Huerta. Yes. But those efforts really became much more 
urgent after we started at the beginning of the calendar year 
when we were seeing that this was becoming a distinct 
possibility. At that time, as you pointed out, Mr. Pastor, the 
Office of Management and Budget provided guidance to all 
agencies within the federal government, and we began looking at 
our planning.
    In February, the Secretary and I both spoke about what 
these impacts would look like. We did talk at that time about a 
very high likelihood, in fact, a need to furlough our employees 
and the operational impacts that that would have on large 
facilities. At the same time, we also talked about the need to 
reduce our contract expenditures, and that got us into the 
conversation about contract tower operations.
    Throughout all of this, our focus has been on managing 
these cuts in such a way that we minimize to the extent 
possible the impact of these on the largest number of 
travelers. But at the same time, we have to achieve the savings 
of $637 million between now and the end of the fiscal year.
    As we have worked through this, what we are attempting to 
do is mitigate the impacts as best we can. For example, we 
canceled a training program altogether for a new class of 
controllers that would otherwise be taking place at the 
aeronautical center. That is our pipeline for new controllers. 
We have significantly canceled or significantly slashed other 
training, as well as discretionary travel and discretionary 
activity so that we can focus on other activities.
    Controllers have been asked to return to their home 
facilities, this takes them away from collaborative workgroups 
that are focused on implementing new technologies. It enables 
us to mitigate the impacts of the loss of controller hours due 
to furloughs. And so we have been taking aggressive actions to 
try to mitigate the impact of this, but there are impacts.
    Mr. Pastor. In the memorandum that they sent to the 
agencies they said to use any available flexibility to reduce 
operational risks and minimize impacts on the agency's core 
mission and services of the American people. Core mission is 
obviously the air traffic system. What flexibility have you 
made yourself available so that the core mission is not 
minimized?
    Mr. Huerta. We have transferred Operating resources to the 
extent allowed by law, 2 percent, from other operations 
accounts into protecting our air traffic and our aviation 
safety core responsibilities. So what suffers as a result of 
that are some of our longer term activities, such as 
investments and research activities associated with NextGen. 
That is a tradeoff that we think is important to make with the 
goal of preserving safety and the efficiency of the system to 
the extent we can.
    Mr. Latham. In an article I think I read yesterday, it 
talked about how you have furloughed air traffic controllers 
but in order to ensure safety, that you have controllers being 
paid overtime. And so the issue is really having and meeting 
the objective of the core mission.
    Mr. Huerta. We have dramatically reduced all scheduled 
overtime, and we are preserving overtime really to deal with an 
emergency situation.
    For example, there might be a situation where due to 
illness or other activities that we do not have the expected 
complement of staffing at a facility. That, combined with the 
furlough, can lead to a dramatic and significant operational 
impact, and so through the judicious use of overtime we are 
able to mitigate that somewhat. Nonetheless, we still have 10 
percent fewer available hours to schedule in these facilities.
    Mr. Pastor. Thank you, Mr. Chairman. I yield back.
    Mr. Latham. Thank you, Mr. Pastor.
    I recognize the full committee chairman, Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman. Thanks for holding 
this hearing.
    There are those who say that you are imposing these 
furloughs, bringing pain to the American people, for the 
purpose of shifting political blame for the difficulties 
caused. A little bit like shutting down the Yellowstone 
National Park to draw attention to the problem.
    What do you say about that?
    Mr. Huerta. That is not true. We are focused on maintaining 
our core operational and safety responsibilities, and doing it 
to the best extent that we can, given the constraints of the 
furlough.
    Recognizing that 70 percent of our operations budget is 
people and that the FAA is an operating agency, our effort has 
been to do everything that we can to cut in other areas before 
we hit our safety/critical functions that are carried out by 
people. Those are air traffic control, maintaining the airway 
system, and maintaining the highest levels of aviation safety.
    The hardest thing that we have to do is reduce these hours. 
But in order to hit the target we need to hit--we do not really 
have any choice.
    Mr. Rogers. All of this is a surprise to the Committee, to 
the Subcommittee, to the Congress, to the world. We read about 
it in the newspaper. And this Subcommittee and the 
Appropriations Committee, of course, is the Committee that has 
to find ways to fund the government's operations. And yet you 
did not tell us about what you planned to do. How come?
    Mr. Huerta. Mr. Chairman, we have been talking about this 
since February. We have talked about our need to reduce our 
contract expenditures and thereby to withdraw federal funding 
and close federal contract towers. At that time we also talked 
about the need to furlough our employees, and we said that that 
would lead to significant delays of up to 90 minutes at major 
hub facilities. As our planning has continued and we have done 
more granular analysis, those discussions have continued, and 
now we are at the place where we actually have to take the 
actions in order to achieve the savings.
    These are all bad choices. I will be the first to 
acknowledge that. But in order to comply with the guidelines 
with the sequester law, we have to take these actions.
    Mr. Rogers. I wish you had told us earlier so we would have 
had a chance to plan and perhaps to write or find a way against 
the problem.
    Now, when you decided to close those 149 contract towers, 
you said that your goal was to minimize the disruption to the 
maximum number of travelers. But when you decided to find 
savings and labor costs just now, you imposed 11 days of 
furloughs across all FAA employees regardless of how critical 
those employees are to the mission of safe, efficient, air 
traffic control. Can you explain? It seems to me that we had 
some contradictory reasoning when it came to decisions 
regarding contract towers versus the FAA air control workforce 
who are furloughed equally, no matter how operational essential 
they are. Can you explain that?
    Mr. Huerta. Yes. Let me take first the contract towers. Our 
focus on contracts was with the intent of minimizing the amount 
of furlough days that our employees would have to suffer 
through. In looking at our contracts, we focused on the largest 
areas of where we could achieve contract savings, and the third 
largest of those contracts are expenditures in our contract 
tower program. We decided to look at the lowest activity 
facilities, those towers that have fewer than 150,000 annual 
operations and 10,000 commercial operations. All but one of 
these towers currently operate for some portion of the day in a 
non-towered capacity, so they have existing rules on how to 
operate as a non-towered airfield. And so in the contract area, 
we felt that this was the most efficient way and the most 
effective way to achieve the savings we needed to achieve.
    Turning next to the impacts on the FAA's workforce. Our 
effort on the contract side was to bring the furlough number 
down to 11. To ensure that we had to realize no more than one 
per pay period or 10 percent of the available hours. As we 
looked at the National Airspace System we did, in fact, 
consider whether we should look at a differential impact 
between facilities. We came to the conclusion that the National 
Airspace System is an interconnected network. Weather phenomena 
or how aircraft are moved throughout the system not make any 
distinction between large air facilities and small air 
facilities. An airplane may move from a small facility to a 
major hub to another major hub to another small facility. Its 
crew in the course of a day will travel from a wide variety of 
other facilities. The purpose of this is for the airline to 
maximize the use of their asset and of their available employee 
hours. Conducting furloughs in an unequal fashion would still 
lead to disruption and delays throughout the system because of 
these network impacts and the relationships between the larger 
and the smaller facilities.
    Second, the effect of the sequester is basically a pay cut 
for controllers and technicians; to do this in any other way 
would cause even more disruption in the system. If you look at 
the long history of pay cuts in the airline industry, every 
single one has been applied equally, to like groups of 
employees. Employees at different facilities still have to work 
together, and that is difficult when you are treating them 
inequitably. Over 70 percent of our Operations budget is 
devoted to payroll, and the agency cannot put itself in the 
position of choosing winners and losers between airlines and 
where their hubs are located and geographic areas of the 
country relative to other areas.
    Mr. Rogers. One final question, Mr. Chairman.
    Air traffic control is funded in the air traffic 
organization within FAA which has $2.2 in nonpayroll 
activities, including consultants, contracts, travel. Why were 
you not able to find $387 million in sequester savings in that 
very sizeable nonpayroll budget?
    Mr. Huerta. We looked at our nonpayroll budget and we have 
had dramatic reductions in that. Let us take that consultant 
line item that you reference, sir.
    The largest single consultant contract is a services 
contract that provides telecommunications infrastructure 
between all FAA facilities. Everything in that category are 
nonconstruction contracts.
    Our second largest contract is aviation flight service 
stations. And our third largest is our contract tower program.
    Where we have achieved cost savings are things like 
training, travel, and within information technology as a result 
of efficiencies. But we simply could not get to the number we 
need without also looking at salaries. We imposed a hiring 
freeze that has been in place since the start of the year, that 
became a total freeze at the beginning of March. We have 
canceled contracts with all of our contract employees, and all 
of our temporary employees have been laid off. All with the 
goal of minimizing the impact on payroll expenditures of FAA 
employees.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Ms. Lowey.
    Ms. Lowey. Thank you, Mr. Chairman. And thank you, Mr. 
Secretary for your presentation.
    Frankly my colleagues, it is mystifying to me that some are 
surprised by these delays or blame the FAA for Congress's 
failure. And I would like to repeat again that on February 
11th, the Department of Transportation told Congress that given 
the magnitude of budget cuts to the FAA, ``It will be 
impossible to avoid significant employee furloughs requiring a 
reduction in air travel to a level that can be safely managed 
by the remaining staff and causing delays and disruptions 
across the country.''
    We are hearing today that some of my colleagues believe we 
should exempt the air traffic controllers, technicians, and 
inspectors from furloughs. However, I have not heard anything. 
We have not heard any proposals to do something about the 
requirement that the FAA reduced $485 million in fiscal year 
2013 from its operating budget due to sequestration. I am 
laughing because I find most of my constituents are all upset 
about what is happening at the airport, but not only can they 
not pronounce sequester; they do not really understand what it 
means but they are certainly learning the impact.
    Can you tell us if these groups of employees were to be 
exempt from the overall furlough requirements: (1) What impact 
would it have on the rest of your workforce? And what impact 
would this have on how you implement sequestration for fiscal 
year 2014 for fiscal year 2014?
    Now, I want to say again that I know the chairman and I 
would like to work together. The Budget Committee--the House 
has passed a budget, the Senate has passed a budget--they still 
have not gone to conference. Now, if and fact they do not go to 
conference, Chairman Rogers and I will proceed; however, if we 
do not do something specifically to roll back sequestration, 
what impact would this have on how you implement sequestration 
in fiscal year 2014? We have seen what sequestration is doing 
right now.
    Could you please respond?
    Mr. Huerta. Sure. Regarding your first question, in terms 
of classifications of employees and if there were to be an 
effort to exempt certain classes of employees, our pay account 
in our Operations budget represents about 70 percent of the 
total. Of that, some 40 percent pays for air traffic 
controllers. An additional 14 percent is technicians and 
supervisors. Those are the people that maintain airway 
information, radar, and other facilities to ensure that it 
actually works to deliver air traffic. Air traffic supervisors 
are another 10 percent and then we move to our aviation safety 
responsibilities. Our safety inspectors and supervisors 
represent about 9 percent, and our field support for air 
traffic is 7 percent.
    What all of this says is the number and percentage of those 
activities which are headquartered or overhead activities are a 
very small percentage of the total. So to exempt the safety 
critical operations and employees within the agency--since 84 
percent of our employees are in the field dealing with safety-
critical functions, it does not get us there. We really have to 
focus on the entire workforce.
    Would you like me to respond to your second question?
    Ms. Lowey. Yes.
    Mr. Huerta. Your second question was on impacts of FY 2014 
and beyond. We really do not have certainty moving forward 
until we have a clear understanding of what our appropriation 
will look like for fiscal year 2014 and what will be the 
ultimate resolution of the sequester. The sequester is a multi-
year program, and the combination of not knowing what the long-
term perspective on that, combined with needing to understand 
what 2014 will look like, leads to a great deal of uncertainty. 
Having certainty on that is very important.
    Ms. Lowey. Thank you, Mr. Chairman. And I do hope, I would 
say to Chairman Rogers, that we can move forward through 
regular order, analyze these budgets, and not put in place even 
greater cuts. And you have explained very elegantly the impact, 
and it is just not a matter of moving around 2 percent of the 
budget. This is serious, and I do hope we can move ahead on a 
serious budget and roll back the sequester, which is causing 
such damage not only in this area but in other areas of the 
budget. And it is clear that it is up to the Congress to do it. 
We have the authority.
    Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Ms. Lowey.
    The gentleman from Oklahoma, Mr. Cole.
    Mr. Cole. Thank you, Mr. Chairman. What a great day to have 
your first day of testimony, huh?
    Just clarify a matter for me if you could, administrator. 
Did the OMB ever direct the FAA at any time to furlough 
controllers during sequestration or was this your idea from the 
get-go?
    Mr. Huerta. We received no direction from the Office of 
Management and Budget. For us it was a mathematical exercise. 
We had to find $637 million. We focused first on the contract 
activities and whatever savings we could yield there. Whatever 
increment was left we knew that we had to get out of payroll 
savings.
    Mr. Cole. Let me ask you about the contract. And you have 
already partially touched on this and I appreciate the 
explanation. Just by way of clarification so you know, we have 
six contract control towers in the state. I have three in my 
district so we were hit pretty hard by this decision. Three 
that lost, you know, support, so to speak. We have been able 
through a variety of measures to keep a couple of those open 
locally.
    It is my understanding that we have 251 contract towers. We 
essentially defunded 149 of them, around 60 percent of the 
total. That seems disproportionate in what is a 5 percent 
across-the-board cut. Granted, somewhat substantially increased 
because it had not been set at the beginning of the fiscal 
year. So can you explain to me why so much it and that 
particular program?
    Mr. Huerta. The Program Projects and Activities within the 
FAA are defined by the color of money and then within that by 
our lines of business. What that means is that one PPA would be 
air traffic. That is a combination of contract activities and 
payroll activities. We wanted to focus on first and foremost 
what could we reduce in the contract area that would enable us 
to minimize the impact on employees. As you have heard me say, 
the contract tower program represents a very large expenditure 
within that account. We believe it is manageable because these 
are relatively low activity facilities, fewer than 150 total 
operations and 10,000 commercial operations on an annual basis. 
All of these towers have experience, or all these airports have 
experience, with the exception of one, of operating in a non-
towered capacity. There are well-established rules of how a 
non-towered airport would operate.
    The tradeoff is for every dollar of savings that I am not 
able to achieve in contracts, that hits the payroll account. 
Now, the payroll account is where we fund the employees that 
operate the large facilities. That is the tension and the 
tradeoff that we have to look at. As I have said, none of these 
are good choices. These are extremely difficult and disruptive 
choices, but it is the law as it is currently enforced and we 
have to carry that out.
    Mr. Cole. Have you looked at it airport by airport? I mean, 
did you go down to that level of detail? Did you also take into 
account when you were making these--I would agree with you, 
very difficult decisions. You know, some of these things are 
very close to military facilities as well and have a military 
function.
    Mr. Huerta. We started with just the traffic count that we 
talked about, the 150,000 and 10,000. Then we considered what 
the impacts of certain of these facilities that were adjacent 
to major hub airports. Do they serve some important traffic 
function that enables how those hub airports operate? Then we 
consulted with the Department of Defense and Homeland Security. 
They provided their priority facilities and every priority that 
they identified we elected to exempt from closure under this 
framework.
    Mr. Cole. Okay. I have got some other questions but I am 
not going to have time to pursue them so I will just yield back 
my time and wait for the next round, Chairman.
    Mr. Latham. I thank the gentleman.
    Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Mr. Chairman.
    I know that this line of questioning is going to continue. 
I am going to take a chance and ask something else.
    Mr. Huerta. Okay.
    Ms. Herrera Beutler. So general aviation user fees or fees, 
I am actually not inclined to call them fees unless there is a 
nexus between the use and what the money collected then goes 
for. Otherwise, I call it a tax.
    Both administrations have proposed them in general over the 
last several years, but this administration now has multiple 
times. I have seen this movie before. You all propose it and 
then Congress says no. Partially, I would assume because the 
general aviation community or the industry employs 1.3 million 
people. That is $150 billion to the U.S. economy, and a lot of 
those trickle down. It is small business. So in my neck of the 
woods that is what we are. We are small business. And so it is 
very important to me.
    And I guess I would like to ask, it still is very unclear 
to me--I should preface this. The one response I do not think 
would be appropriate is sequestration because you have asked 
for this money before and have not explained how it is going to 
be used and we have not given it. Why do you think now is a 
good time to ask for it again? And what is the nexus? I mean, 
what is the use? And can you justify this?
    Mr. Huerta. Sure.
    The FAA's budget is supported through a combination of 
aviation trust fund and general fund resources. In proposing 
this, what the administration is simply saying is that we would 
like to place a higher reliance on trust fund activities where 
fees are paid by the users of the aviation system. We have had 
this whole discussion about the need to reduce federal 
spending, and we believe that to the extent that we could raise 
significant resources from the users of the system, that that 
would be of significant benefit in dealing with our larger 
fiscal challenges that we as a country need to deal with.
    Now, in terms of what the fee would cover, it would reflect 
the fact that the government provides significant air traffic 
control services, aviation services for the benefit of the 
aviation community, and the fee would, for us, no matter what 
kind of flight it is, it costs us the same to operate it within 
the air traffic control system. The notion is that there are 
services that are provided to the aviation community, and what 
we are really looking to do is to see if we can recover that 
through the use of fees.
    Ms. Herrera Beutler. In terms of what is paid in general 
through licensure and ability to use certain airport hangars, 
purchases of planes, all the taxes that go into all that, so 
you are saying that does not come close to playing a role in 
maybe, hey, I am using this facility. I am also paying taxes 
and fees and licensure fees and so on and so forth associated 
with it. You do not think that comes?
    Mr. Huerta. It does not completely cover the cost of 
operating the aviation system.
    Ms. Herrera Beutler. No? Okay. Thank you.
    I yield back.
    Mr. Latham. I thank the gentlewoman.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    Mr. Secretary, I have a few questions regarding NextGen.
    Mr. Huerta. Sure.
    Mr. Joyce. I was wondering if the FAA is spending a billion 
dollars per year on NextGen, which we would agree is needed to 
address future air traffic demand, given that domestic and 
international operations are down 12 percent since 2007, do you 
think we should consider deferring long-term NextGen programs 
before implementing furlough of air traffic controllers?
    Mr. Huerta. There are two dimensions to the response to 
your question, sir. The first is the NextGen program primarily 
is funded from our Facilities and Equipment account and our 
Research, Engineering and Development account. We do not have 
flexibility to transfer between those accounts and the 
operating account, which is the account where we are seeing the 
significant impacts associated with the furlough.
    The second point that I would like to make is that these 
are investments that have significant long-term benefits in 
making the system operate much more efficiently and able to 
handle the expected growth of traffic that we expect without a 
commensurate increase in cost. I think it is pennywise and 
pound foolish to delay and defer the investments that we need 
to make in this long-term infrastructure that are actually 
going to make the system operate much more efficiently down the 
road.
    Given where NextGen is funded from, the Facilities and 
Equipment and the Research, Engineering, and Development 
account, we do not have the flexibility to move those funds to 
our Operations account absent some change in the sequester law.
    Mr. Joyce. Thank you. And I understand then from what you 
are saying is that you intend on going through with the 
implementation of NextGen on a timely manner.
    Mr. Huerta. That is correct. We will see some delays that 
will result from the effects this year. For example, we have 
collaborative work groups that involve aviation stakeholders, 
air traffic controllers, facility managers, and airports that 
have been planning for the deployment of much more optimized 
and efficient routes for transit in and out of airports. This 
program, which we call Metroplex, allows for airlines to use 
more direct routing, to use things called optimized profile 
descents, but they all have the same benefit--reduced fuel 
burn, reduced emissions, and for some communities, significant 
reduced noise.
    As we are furloughing employees we do not have the luxury 
of assigning air traffic controllers to be working in these 
collaborative workgroups. We have instead recalled them to 
their home facilities so that they can actually work on moving 
air traffic as we deal with the impacts of the sequester.
    Mr. Joyce. Well, the GAO has indicated that lack of 
controller training in the new procedures has prevented them 
from being used. You are not doing anything to correct that?
    Mr. Huerta. We have been doing a lot to correct that. We 
have had to put it on hold to deal with the immediate impacts 
with the sequester. We had actually, in response to GAO, 
invested a significant amount in ensuring that we have 
appropriate controller involvement and training. It has 
resulted in great benefit in these procedures and these NextGen 
investments being used by the aviation industry. We have had to 
pause that while we deal with the immediate operational 
challenges to mitigate the impacts associated with furloughing 
our employees.
    Mr. Joyce. I see that sequestration seems to be the answer 
of the day, but what barriers do you foresee other than 
sequestration and implementation of NextGen?
    Mr. Huerta. Well, as we look to implement NextGen down the 
road, this represents a significant technological 
transformation. It moves us from a system of air traffic 
control to a system of air traffic management. Those are all 
good things. That is something that needs to be done 
collaboratively with the aviation industry and with all of our 
stakeholders and with our workforce. Some have likened it to 
buying the latest technology and turning it on, I think of it 
as a significant transformation in how we operate. That means 
that we have to work as a shared responsibility to maintain 
safety and operational efficiency with the users of the 
aviation system, and we are committed to doing that. It also 
means that we have to invest in the things that you have talked 
about--training and operationalizing all these investments that 
we are making.
    I think of it this way--we are not investing in technology 
for technology's sake. We are investing in technology to yield 
benefits. If we cannot measure and achieve the benefits for the 
aviation community then we are not doing our job.
    Mr. Joyce. Thank you. Mr. Chairman, I see I am out of time.
    Mr. Latham. Thank the gentleman.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Good morning. I appreciate you being here, and I appreciate 
the earlier answers you have given which I will not ask you to 
go over again regarding the impact of sequestration and the 
kind of flexibility your agency does or does not have in 
dealing with these personnel reductions or furloughs and the 
reduced service at major airports--things that all of us know 
to be highly undesirable. And yet we have to say they are very 
much in line with the intent of sequestration, which was to be 
unacceptable. The intent of sequestration was to make deep and 
indiscriminate cuts and to be unacceptable and to force 
everybody to the table to conclude a broader, longer term 
budget agreement.
    Sequestration does not touch the main drivers of the 
deficit; we all know that. It barely touches entitlements. It 
does not touch tax expenditures. Those are the main drivers. It 
goes back yet again to discretionary spending, and cuts it in 
ways that, as I say, were designed to be unacceptable. And so 
to pretend that it does not really need to hurt very much, and 
that the president or the FAA with a flick of the wrist could 
make this different, is disingenuous. We need to fix the 
problem, which is to get a long-term budget agreement as 
opposed to pretending that damage control, putting out this 
fire and then that, is a budget policy. It simply is not a 
budget policy and it is not going to work. And the sooner we 
can get to a long range budget agreement the better off we are 
going to be.
    Let me turn to aircraft certification, which has not been 
raised this morning and I do want to raise it. You are well 
aware that aviation manufactured products can only go to market 
once they are certified. You also know that the FAA has been 
unable to support the current level of industry activity within 
the current average certification wait time of six to nine 
months, which puts American aviation manufacturers at a 
competitive disadvantage when compared to foreign companies. 
Furthermore, the number of new technologies requiring 
certification is expected to increase as we implement NextGen.
    So in recognition of this under the last FAA 
reauthorization, Congress included language to identify some 
needed reforms in the certification process and to focus FAA 
resources more effectively on critical activities, involving 
safety, for example, while beginning to address the backlog of 
certification requests. I wonder if you can give us an update 
on the implementation of these reforms. What are some of the 
specifics for increasing the timeliness and effectiveness of 
the certification program? What kind of challenges are you 
encountering?
    Mr. Huerta. Well, thank you, sir.
    The certification process is something that is extremely 
important for the reason that you have talked about. New 
products cannot come into the market without having FAA 
certification. Aviation represents the technological frontier; 
it is our largest export industry. It is a very significant 
creator of jobs in the country. With direction from Congress we 
have focused very much on how can we take better advantage of 
our certification resources.
    We have recognized that fundamentally preserving safety is 
about managing risk, and managing risk involves developing 
data. Where are we likely to have problems and how do we focus 
our inspection and oversight responsibilities on the areas that 
might have the greatest potential for problems? We have been 
tasked by Congress, and we have aggressively moved on relying 
on designations of trusted agents in organizations throughout 
the aviation industry so that we can share the responsibility 
for bringing new products to market. They could do a lot of the 
legwork but we never give up our responsibly ultimately to 
certify and ensure that new products are safe before they come 
to market.
    Nonetheless, it is an evolution that needs to take place 
over time. And what we have seen is a real pickup in the pace 
of requests for new certification, and I think that reflects 
positive economic trends within the industry. But the flipside 
of it is that the aviation certification workforce is hit by 
the same impacts as everybody else right now. That causes us to 
focus on aircraft and parts in service at the expense of 
certification activities for the immediate term as we are 
dealing with the impacts of this year.
    Mr. Price. Well, the fiscal 2014 request for aircraft 
certification service is about level I note--213 million. It 
does seem to underscore your commitment to providing the 
funding and staffing necessary to ensure more timely 
certification. What about the funding and staffing levels? How 
is that related to the situation you just described?
    Mr. Huerta. Well, the staffing for us is something--we have 
staffing models that look at the full scope of our need for 
resources in aviation safety. That has proven to be a complex 
process and we continue to work to refine it. What we are 
trying to do is strike the appropriate balance between having a 
responsible budget request, recognizing the tight fiscal 
conditions that we are in, but at the same time providing 
resources that will support our continued growth and evolution 
in our certification activities.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Price.
    Mr. Dent.
    Mr. Dent. Thank you, Mr. Chairman.
    Mr. Huerta, just a few things, particularly with respect to 
the notifications about the furloughs and what is happening 
with air traffic control. I know a lot of those notifications 
occurred this week. I think a lot of the American public felt 
frankly blindsided--the airlines, the unions, airports, and 
most importantly of all, the flying public. You know, compared 
to the way the contract tower issue was handled, I got the 
sense that the FAA had, in fact, consulted with other 
interested partners and stakeholders, like the Department of 
Homeland Security and the Department of Defense. You know, why 
were DHS and DoD given that courtesy, as they should have been, 
with respect to the contract towers, but it seems that all the 
other folks that I just mentioned--the airlines, the unions, 
the airports, and the flying public--just feel completely 
blindsided by this decision?
    Mr. Huerta. Sir, when we talked about the contract tower 
decision back in February, we, at the same time, did say that 
we expected impacts on major hub facilities and that it would 
be as a result of furloughs of FAA employees. I think it is 
fair to say that the thing that captured the media attention 
and that was something that became, I think, a matter of 
intense public focus was the contract towers. These longer term 
impacts, which at the time we said would not emerge until 
later, despite our efforts to talk about them, they were things 
that really did not sink in with people; that we were expecting 
to see this.
    Last week, nonetheless, when we began that process, what we 
did was we asked each of our air traffic facilities to build 
schedules based on 10 percent fewer available hours per each 
pay period per employee, and those form the basis for us to use 
the tools that we use every day to model our ability to handle 
aircraft within the air traffic system. Those operational 
details were what we provided last week to the users of the 
system. We are continuing to monitor it and have been 
monitoring it since Sunday as we have worked through to do 
everything that we can to mitigate the impacts of these. But we 
have been talking about this since February.
    Mr. Dent. One other thing, too, there was an editorial 
today in the Wall Street Journal entitled ``Flying the 
Government Skies,'' and I realize it is an editorial and it is 
an opinion and you may or may not agree with what they said, 
but there is just one paragraph I thought that was interesting 
and I would like you to respond to it. They said, ``Ponder this 
logic, if that is the right word. The sequester cuts about $637 
million from the FAA, which is less than 4 percent of the $15.9 
billion 2012 budget, and it limits the agency to what it spent 
in 2010. The White House decided to translate this 4 percent 
cut and it has the legal discretion to avoid and do a 10 
percent cut for air traffic controllers. Though controllers 
will be furloughed for one of every 10 working days, four of 
every flights will not arrive on time, so basically a 4 percent 
FAA spending cut that is translated into delays of 40 percent 
of flights.''
    I would like you to respond to that.
    Mr. Huerta. What we are responding to is the need to find 
the savings in half of the year. That one furlough day per pay 
period gets us about $220 million of the total savings I need 
to achieve of $637 million between now and the end of the year. 
These are not great choices. These are all difficult impacts. 
We have focused first on achieving savings in contracts, 
achieving savings in nonpay expenses with the idea of 
minimizing the impact on FAA employees. But we had a gap that 
we needed to close and we had no choice.
    Mr. Dent. And one other thing, too. With respect to 
contract tower program, the administration's decision to close 
the contract towers has garnered a lot of attention here in 
Congress as you know. The Capital City airport in my district 
is going to be impacted by the contract tower closures. I have 
heard from Cap City, as well as the Airport Council. They cite 
that DOT's inspector general is saying that the contract tower 
program is a cost-effective method of providing air traffic 
control. My assumption is that the closure decisions were based 
on flight volume and revenues generated at these tower 
airports. What, if any, analysis was conducted in parallel to 
analyze the impacts these closures will have on operations and 
safety of neighboring airports?
    Mr. Huerta. When we looked at this we focused first on the 
activity level of each of these facilities, and these represent 
the lower activity facilities throughout the system. We did 
consider effects on adjacent hub airports and consultations, as 
you noted, with the Department of Defense and Homeland Security 
on whether they wanted us to exempt particular facilities. We 
did exempt every one that showed up on their priority list.
    In terms of the operations of these airports, we are not 
doing anything that is not safe, but an airport that is non-
towered operates differently. Generally, the difference is it 
operates less efficiently in order to maintain the highest 
levels of safety. We did analyze each of these airports, and in 
looking at each of these airports, one thing that was apparent 
was that all but one of them operate for some portion of the 
day non-towered already. They have well-established procedures 
of how to operate in this capacity.
    Mr. Price. Thank you.
    Mr. Latham. Thank the gentleman.
    You had mentioned earlier on the contract towers apparently 
you contacted or got guidance or direction from Homeland 
Security and DoD. Who else did you talk to on these decisions?
    Mr. Huerta. Within the federal government it was those two 
agencies. We consulted with airports to determine if these 
serve an important function and if it is related to a hub 
airport. Then sent our operations teams out in the region.
    Mr. Latham. Did you get any direction either from the 
Department or from the White House as to how to inflict 
sequesters?
    Mr. Huerta. We shared what our analysis showed with respect 
to the operations of the facility with our colleagues at the 
Department but we did not receive any specific direction from 
them.
    Mr. Latham. From the White House?
    Mr. Huerta. No.
    Mr. Latham. Mr. Dent was asking about engaging of the 
stakeholders, and again, do you want to tell how and when you 
engaged the airlines as to what your plans were?
    Mr. Huerta. We talked generally starting in February that 
we expected the sequester would result in the closure of 
contract towers, and we identified a level at that point, and 
we talked about the process. We also said that we would be 
furloughing our employees and that that would have significant 
impacts at major hub facilities. Then we went through the 
process in two parallel tracts: On the contract tower side, the 
consultations that I referenced in my response to Mr. Dent; on 
the air traffic side with FAA employees we went through the 
scheduling process that I had----
    Mr. Latham. When did you do that?
    Mr. Huerta. When did we do that?
    Mr. Latham. Yeah.
    Mr. Huerta. Starting----
    Mr. Latham. Last week?
    Mr. Huerta. Starting in February and then into March. Where 
we first had to make a determination of what were the minimum 
number of furlough days and that is where we made the decision 
to plan for one per pay period. That was handed out to all of 
our facilities and they did their analysis in the course of the 
month of March. They needed to build schedules that would 
reflect this reduction in hours. That was shared in granular 
detail with the airline industry last week.
    Mr. Latham. Why did it take till last week? If you wanted 
them to adjust their schedules, to me--and you keep talking 
about February 11th that you had all the planning in place--why 
could you not share that earlier rather than just wait? And 
there was no detail as to what your plans were, and you just 
said until last week.
    Mr. Huerta. We did share with them what we expected broad 
systemic impacts to be. We did not have the information until 
it had actually been built by the facilities and we understood 
how it would affect particular rates at each air traffic 
facility. We shared that after we had done the appropriate work 
on it to make sure that we were confident that this represented 
an expected outcome as a result of these activities.
    Mr. Latham. So even though you are telling us that we all 
knew about everything February 11th, you did not tell anybody 
at the airlines to change their schedules or to adjust to it 
until last week? They got no detail until last week; is that 
correct?
    Mr. Huerta. We told the airlines that they should expect 
impacts as a result of a reduction in available hours for air 
traffic facilities starting in February, and we continued to 
make that case. What we shared last week were specific 
operational details.
    Mr. Latham. So they could not do anything until last week?
    Mr. Huerta. I would not agree with that. They could 
certainly plan for a general reduction in capacity.
    Mr. Latham. But if they do not know what that means, how 
can they plan?
    Mr. Huerta. The same way that we do; to plan for various 
scenarios.
    Mr. Latham. Without any specifics as to what you are going 
to do?
    Mr. Huerta. We have been saying that we were going to 
furlough employees one day per pay period for a long time. That 
is a 10 percent reduction in available controller hours.
    Mr. Latham. Moving on, I guess.
    Last year you spent $149 million in travel. What have you 
done to reduce the steps or what steps have you taken to reduce 
travel? And how much are you going to save this year?
    Mr. Huerta. Last year we did spend--it was in fiscal 2012--
$149 million. That represents 2 percent of the operating 
budget. We have reduced that to $125 million this year. And 
that is limited to operational travel; for example, an aviation 
safety inspector needing to get to a particular facility to 
conduct an inspection or a technician needing to conduct work 
in repairs of facilities.
    Mr. Latham. My time is expired.
    Mr. Pastor.
    Mr. Pastor. Thank you, Mr. Chairman.
    Now that you have made that determination about the 
furloughing and hours and pay periods, et cetera, what are you 
doing to continually communicate with the airline industry so 
that they can continue to play and avoid the problems that they 
have had in the last few days?
    Mr. Huerta. We have an every two hour operations call with 
the operations teams at the airlines. That takes place at our 
command center, which is located out in Warrenton, Virginia. 
What we share with them is what we are finding in terms of 
specific facility impacts as they develop over the course of 
the day, what airports might have introduced such things as 
ground delay programs, where we have to implement activities 
such as flow control programs so that we can manage it. And 
then, of course, you have to overlay on top of everything the 
weather. That will also affect how a facility is going to 
operate.
    We want to keep that level of communication because what we 
need to understand is the network impacts of how all of these 
combinations of impacts at different facilities take place. The 
command center is really where all of that comes together and 
these conversations take place every other hour within the 
course of a day.
    Mr. Pastor. You had to extend the closing of the towers, 
the contract towers till June; correct? And that was because of 
a lawsuit. As I understand your testimony this morning, 
basically, that determination was made because of your EPA's--
in order to ensure safety with the air traffic controllers you 
decided 149 contract towers was the number that you had to 
eliminate. Now, you are in court right now and we do not know 
what the decision is going to be, but what if the court says 
your decision does not merit closure so you have to reopen 
them?
    Mr. Huerta. I cannot comment on how the litigation will 
come out. I am not a lawyer.
    Mr. Pastor. Oh, just a for instance. I mean, take that as a 
hypothetical.
    Mr. Huerta. For instance would be for every dollar that I 
am unable to save through contract tower savings, then I have 
to find savings someplace else--either in other contracts or in 
payroll expenses. And so that could theoretically increase the 
number of days that I would require for furlough.
    Mr. Pastor. Now, as I understand your testimony, you looked 
at other contracts.
    Mr. Huerta. Yes.
    Mr. Pastor. And the determination is that you could not do 
it so you went to the furloughing of the air traffic 
controllers. Is it possible to relook at the contracts you have 
that you decided not to deal with in this round and maybe now 
knowing the problems that we are having with the delays, that 
you might be able to relook at that and say, well, I am going 
to go back to salaries and see if I can bring back more air 
traffic controllers and continue to avoid not the contract 
towers but the other contract cuts that you could make?
    Mr. Huerta. This is something that we are evaluating on a 
regular basis.
    First the contracts; Yes, we have established targets for 
savings for particular contracts, and I have talked about some 
of the areas where we focused. Contract towers is one but we 
have also focused on training contracts. We focused on 
equipment expenditures for spare parts, as well as maintaining 
inventory so that we could respond quickly to things like 
outages and so forth.
    What we do not want to do is cannibalize contracts to the 
effect that while we might be able to preserve employees, they 
would not be able to carry out their jobs because they do not 
have equipment, they do not have the tools they need to 
actually do their jobs. But that is something that we will 
monitor and we will continue to monitor very carefully as we go 
through these weeks and months ahead.
    If I am able to achieve higher levels of savings in 
contracts, yes, then we can certainly, as we get later in the 
year, consider whether we have the ability to relax the 
furlough. That is something we will continue to monitor.
    Mr. Pastor. Mr. Chairman, I have the yellow light so I will 
yield back.
    Mr. Latham. Thank you, Mr. Pastor.
    Mr. Rogers.
    Mr. Rogers. When did the furlough policy go into effect? 
What date?
    Mr. Huerta. The furlough itself went into effect with the 
pay period that began on Sunday, April 21st.
    Mr. Rogers. When?
    Mr. Huerta. Sunday, April 21st. The furlough itself. We had 
to notify employees. There were two notifications starting 
about five weeks ahead of that where we notified them of the 
possibility of furlough and then the intent that we were 
actually going to carry it out.
    Mr. Rogers. So that was April when they got the word in 
detail?
    Mr. Huerta. No, no, no. They got the detailed word--I will 
get back to you with an exact date but we did provide them an 
official notification that it would start, and I think it was a 
week or two before April 21st.
    [The information follows:]

    The FAA delivered official furlough decision notices to all 
affected employees on April 10, 2013. These notifications were 
mailed via certified mail to all employees in bargaining units 
that requested such delivery. Other employees received their 
notices electronically through their FAA email accounts. The 
notice informed affected employees that they would be subject 
to furlough beginning April 21 through September 30, 2013 and 
that furlough times would be no more than 11 workdays or 88 
hours.

    Mr. Rogers. Well, nevertheless, it was, what, a week ago? 
Ten days ago?
    Mr. Huerta. Yes.
    Mr. Rogers. Did I hear you correctly say that you first 
gave the airlines and airports and the infrastructure notice of 
how this thing was going to be applied last Wednesday?
    Mr. Huerta. No. What I said was that we provided 
notification to them of the general impact. We provided 
operational details on Tuesday.
    Mr. Rogers. I am not worried about general impacts. I want 
you to tell us when you told them the details of which 
airports, at what times they would have trouble. Now, that was 
last Wednesday as I understand it.
    Mr. Huerta. Tuesday.
    Mr. Rogers. Last Tuesday. Pardon me.
    Mr. Huerta. Yes.
    Mr. Rogers. Which was a few days before it went into 
effect.
    Mr. Huerta. That is correct.
    Mr. Rogers. And we have got hundreds of airports. We have 
got dozens of airlines. We have got millions of Americans 
wanting to make their plans for travel. Why did you wait until 
that long to tell these functionaries--the airlines, the 
airports, and the personnel--the detailed impact of sequester? 
Why wait that long? You have had this under consideration as 
you have said for several months, but you waited until hours 
before it was to be placed into effect to tell the relevant 
stakeholders. I find that shocking. A shocking lapse of 
management. Would you comment on that?
    Mr. Huerta. We built detailed schedules within each of 
these facilities, and we shared this information with the 
airlines as we had it.
    Mr. Rogers. And that was a few hours before it went into 
effect? But you have been doing this for months. Why could you 
not have brought them in earlier so that they could make their 
plans?
    Mr. Huerta. We have been talking about general impacts.
    Mr. Rogers. General impacts again. I am not worried about--
they knew the general impacts.
    Mr. Huerta. But we have been talking about reduction in 
available controller hours of 10 percent for months.
    Mr. Rogers. But you did not tell them which airports, which 
airlines, which times.
    Mr. Huerta. We told them that they should expect 
significant impacts at major hub facilities.
    Mr. Rogers. Well, la-de-dah. Everyone knew that. That is 
what sequester is all about.
    But it is important for them to plan their schedules and 
their hours and their planes and the airports, their management 
personnel. They needed to know detailed impact on them as early 
as could be had. And you had months to do that and yet you 
refused. I find that shocking.
    Mr. Huerta. I do not think we refused. I would say that 
what we wanted to do was conduct a proper schedule and analysis 
of it and then provide them the best information we could.
    Mr. Rogers. How did you inform them?
    Mr. Huerta. We informed them in a meeting that we had at 
the command center.
    Mr. Rogers. A meeting?
    Mr. Huerta. Yes.
    Mr. Rogers. Between whom?
    Mr. Huerta. Our operations team led by our air traffic 
organization.
    Mr. Rogers. Now, when did you inform the airlines, the 
airports?
    Mr. Huerta. We talked----
    Mr. Rogers. How did you inform them?
    Mr. Huerta. We talked in a meeting. We have had a number of 
meetings with the aviation industry, first about contract 
towers and then talking about the impacts associated from the 
furlough.
    Mr. Rogers. So you mean you got all the airlines in the 
room?
    Mr. Huerta. We get together with them every day in an 
operational capacity.
    Mr. Rogers. And there are hundreds of airports. Did you 
have them in the meeting?
    Mr. Huerta. The airports, not every airport is affected by 
the impacts of the furloughs, but we certainly identified 
through their associations the major impacted airports.
    Mr. Rogers. So you did this with a conference call?
    Mr. Huerta. No, with a meeting.
    Mr. Rogers. Did you ask them for their input, their 
suggestions, their ideas?
    Mr. Huerta. We are continuing to have that conversation. We 
shared with them this is what our analysis showed and we will 
continue that discussion every day going forward.
    Mr. Rogers. Did you take into account the complaints, the 
information that they gave to you?
    Mr. Huerta. Absolutely.
    Mr. Rogers. Were they shocked when you told them at the 
last minute of the impact on their airport, airline?
    Mr. Huerta. You would need to talk to them about what their 
reaction was but they expressed great concern.
    Mr. Rogers. Now, you mentioned I think that there were some 
long-term projects that FAA has invested in and that you do not 
really want to take much from those projects for fear of 
derailing the progress. Can you tell us what those projects 
are?
    Mr. Huerta. That is the investment in our Next Generation 
Air Transportation System.
    Mr. Rogers. In light of the current situation, do those 
projects really have priority over the operation of commercial 
air space?
    Mr. Huerta. There are two pieces to that answer. The first 
is I do not have the flexibility to transfer from my Facilities 
and Equipment account which funds those projects to the 
Operations account. But the second point is these projects will 
have important benefits for efficiency long term. And I think 
that we need to get on with making those investments to ensure 
efficiency.
    Mr. Rogers. Have you asked the Congress for those changes 
to allow you to do that?
    Mr. Huerta. No.
    Mr. Rogers. That is what I thought.
    I yield.
    Mr. Latham. Thank you, Mr. Chairman.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Let me briefly revisit this matter of the contract tower 
closures.
    In February, you anticipated the closures at 149 contract 
towers. In March, you announced that you would delay the 
closure of those towers until June. So you have stretched out 
that timetable. And you have already talked some about the kind 
of consultation that took place at various levels and has 
continued to take place about this. Let me ask you about the 
consultation that takes place with the local communities, the 
airports, airport authorities. I understand that some 
communities, maybe 50 or so, are trying to come up with their 
own resources to keep towers open as part of the FAA's 
nonfederal contract tower program. What steps would need to 
happen to make that a reality? How can you facilitate that 
transition? And let us say that transition does occur. There 
are various questions one might have about what happens to the 
FAA's equipment in the towers and so forth. Can you shed some 
light on that?
    Mr. Huerta. Sure.
    About 50 have requested the ability to locally fund the 
federal contract tower that is currently existing within their 
particular community, and it is relatively straightforward to 
effect. It is simply a change in who is paying for the cost. We 
have offered that they could simply cover the cost of the FAA's 
contract or we have put them in contact with the contractor 
directly in order to negotiate their own agreement and their 
own contract to carry out the contract tower services.
    Getting to June 15th does enable more time for those 
arrangements to be worked out. As it relates to the equipment 
in the facility, we have adopted a very liberal approach. If a 
community wants to take over the use of the equipment, we will 
continue to make it available and maintain it for that purpose 
to manage through this transition.
    Mr. Price. Thank you. So you can make good use of this time 
you think in these cases?
    Mr. Huerta. Yes.
    Mr. Price. All right. Let me return to another item raised 
earlier, the NextGen performance-based navigation procedures.
    You spent a lot of resources to develop this, to develop 
these new procedures to streamline the arrivals and departures 
in the airports. Of course, the industry supports the 
implementation of performance-based navigation procedures. It 
will reduce the number of miles, the amount of fuel consumed.
    Just a couple of questions about this. There have been some 
GAO studies that have indicated that one gap in this program 
may be a lack of controller training in the new procedures that 
has prevented them from being used fully. I wonder what you are 
doing to correct this, how you assess this, and what kind of 
corrective measures you have underway. And then here, too, what 
impact has and will sequestration have on the development of 
these performance-based procedures, especially in the Metroplex 
environment? You talk about the desire to protect this program. 
You talk about the fact that you do not have unlimited 
flexibility to transfer funds back and forth. What I am asking 
is what you anticipate the practical effect of sequestration is 
likely to be near term, middle term.
    Mr. Huerta. Sure.
    When the IG identified for us the matter of controller 
training, that is something that we concurred with. We have 
actually made it a significant area of focus. Controller 
training is essential. Not just training but also consultation 
with controllers in a collaborative fashion to actually 
understand how a new piece of technology or a new procedure is 
actually going to work, and what are the benefits that we are 
trying to get out of it? All of that is extremely important to 
being able to yield benefit and ensure that the thing actually 
gets used. That has been an extremely high priority for us.
    We have focused on the deployment of technology systems 
such as ERAM and TAMR, but also on procedures--the performance-
based navigation procedures that you talked about.
    There is a near-term impact of our scheduling problem this 
year because in order to focus on preserving the activities of 
the operation we have called back controllers to their home 
facilities, and that is affecting their ability to work in the 
collaborative work groups as we work through sequester. The 
President's Budget for 2014 assumes that the sequester has been 
resolved, and it does provide resources to enable us to restart 
those collaborative activities and to ensure that we have the 
appropriate levels of involvement and training.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Price.
    Mr. Cole.
    Mr. Cole. Thank you, Mr. Chairman.
    Mr. Administrator, I want to pick up where you left off 
because that was actually the line of questioning I was 
interested in pursuing earlier. You assume or the budget 
assumes for fiscal year 2015 sequester will end. What do you 
base that on? Are there in the budget alternative revenues or 
cuts that would, you know, justify that assumption?
    Mr. Huerta. Well, the entire president's budget is based on 
a premise that the sequester is resolved and we simply conform 
to that.
    Mr. Cole. Has the president put forward a plan as to how it 
would be resolved?
    Mr. Huerta. Well, I think the president has put forward a 
plan that represents an appropriate balance between needs to 
make investments but at the same time----
    Mr. Cole. Not exactly my question. I mean, does he tell us 
how he would replace the cuts?
    Mr. Huerta. Well, I think what the president is suggesting 
is that there needs to be an appropriate balance of 
expenditures and revenues.
    Mr. Cole. Are you making alternative plans that if this 
assumption--I mean, it seems to me that is what got us into 
this problem. I think everybody assumed the sequester would not 
occur. The president made that commitment in the campaigns, his 
regional idea. Honestly, I think that was probably the 
consensus in Congress as well. So I am not beating up on the 
president, but everybody assumed it would not happen. It seems 
to me a pretty dangerous thing to assume this is going to all 
go away.
    Mr. Huerta. Well, as I said, until we have the 2014 budget 
resolved and the issue of the sequester resolved, that does 
create for us a great deal of uncertainty in our ability to 
plan going forward.
    Mr. Cole. Are you thinking about possible scenarios 
internally if you have to live with the sequester?
    Mr. Huerta. Yes.
    Mr. Cole. Could you tell us what some of those things would 
be? And as you do that, just, again, you have operated within 
the limits of the law now, obviously. If you could change--what 
ways would you change the law today if you knew you had to 
operate this way? What additional flexibilities might you like 
that under current law you do not have?
    Mr. Huerta. Well, I think the policy question that this 
tees up is what does this mean for the National Airspace System 
and the operation of the aviation system in its totality? We 
have put forward a plan that would suggest that lower activity 
facilities are an area where we would want to perhaps focus on 
withdrawing federal resources. The rationale behind that is 
that these facilities can continue to operate safely and that 
they have less of an impact on the total operation of the 
National Airspace System. Now, as we know, that is not 
something that everyone agrees with but that represents 
certainly what a path forward could be.
    Mr. Cole. What about the grants program? That has been one 
of the sheltered areas under current law. Would that be 
something you would recommend changing as well?
    Mr. Huerta. Well, we have put forward a proposal to change 
the structure of the grant program, and for large airports to 
enable an increase in the passenger facility charge from $4.50 
to $8.00. This is, I think, widely supported by the large hub 
airports. What that would free up is it would enable us to have 
a smaller AIP program, and that program could then be focused 
on the smaller airports.
    Mr. Cole. You do that assuming that sequester would go 
away. I am suggesting it may not go away. And so given that, 
would there be additional--it might be more money. 
Particularly, I do not know what it would be but do you have 
other ideas? Because I do think it is a long way from certain 
that the sequester will disappear.
    Mr. Huerta. Well, I think there are two dimensions to that. 
One is the nature of what is the will that we all have for 
where the federal interest is in aviation. Is it in all 
facilities providing the basic level of services? Or should we 
focus on the larger facilities?
    Related to that is the appropriate balance between short-
term and near-term investments. You have heard me express the 
view that we should not sacrifice the long term because that is 
how we get maximum efficiencies and savings in the future. Then 
there is the balance between operations and infrastructure. The 
question that you are asking is perhaps we need to relook at 
that balance. And I think that is certainly an appropriate area 
of consideration for the appropriators for Congress generally, 
and that is something that we need to as a country figure out 
going forward if we are going to live with these constrained 
budgets in the future.
    Mr. Cole. Well, as a word to the wise, and again, I am not 
singling you out. I think this is a problem we face in very 
single budgetary department that I deal with, but we assumed 
this thing was not going to happen and it did. I would be very 
careful about assuming that it would all go away because I am 
not at all convinced that it will. Thank you.
    Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Cole.
    Mr. Quigley is recognized.
    Mr. Quigley. Thank you, Mr. Chairman.
    Good morning, sir.
    Mr. Huerta. Good morning.
    Mr. Quigley. The president's budget allows airports like 
O'Hare to raise their passenger facility charges up to $8.00 in 
exchange for their willingness to spread some of those dollars 
to smaller airports as well to improve facilities. Given 
everything we understand with tight money and the 
sequestration, is this not the only way a lot of these 
improvements are going to take place?
    Mr. Huerta. Well, the president's proposal would reduce the 
base AIP program. If everyone that has a PFC, raises it to 
$8.00, it does provide them with significant offsetting 
benefits and they are able to raise local resources to fund 
very significant improvements. That is something that is 
supported for the most part by the large airports. That enables 
us to focus the AIP program on those areas where they do not 
have the base of traffic that they would be able to generate 
sufficient revenues through a PFC.
    Mr. Quigley. So not just the large hubs but all the 
airports should, you would think, support allowing these 
airports to raise their fees?
    Mr. Huerta. I cannot speak for all of the airports, but in 
general, airports that have a passenger facility charge like 
having a passenger facility charge. They like the ability to 
generate local revenues, because for them that gives them a 
greater degree of certainty and ability to plan for long-term 
infrastructure programs.
    Mr. Quigley. Let me talk--because the horse is not quite 
deceased--on sequestration here and what you are doing. Can you 
talk a little bit about the policy decision? I believe the 
expression was it was going to be like a spread so that 
everyone feels the pain when you had these furloughs. The 
policy decision to do this across the board versus perhaps 
taking less strain off the large hubs, I guess the rationale on 
the one hand would be the volume, the sheer volume and how many 
people are connecting through these large hubs. Perhaps if we 
wanted to minimize the impact we would reduce the furloughs in 
those locations.
    Mr. Huerta. We did look at that option and the conclusion 
that we reached is that the National Airspace System is very 
much a interconnected network; that aircraft, crews, and 
passengers move through the entire system, and the way that 
aircraft get moved through the system is a combination of both 
large hubs and smaller facilities. Weather and other phenomena 
also factor in and what we concluded was that conducting the 
furloughs in an unequal fashion would actually still produce 
significant disruptions and delays throughout the system and 
things that we could not possibly completely understand or 
mitigate.
    The other thing is that what happens in a particular 
facility is affected by a number of factors. Clearly, our 
availability to accept aircraft at that facility is one factor, 
but other factors relate to how an airline chooses to build its 
schedule and how it chooses to manage its traffic as it goes 
through there. We concluded that we could not be in the 
business of picking winners and lowers between particular hubs, 
particular geographic locations, or one facility versus 
another; that the most equitable way to deal with these network 
impacts was through a universal application of the furlough 
equally across the system.
    Mr. Quigley. Let me suggest that there is a calculus here 
that you describe that is beyond my pay grade, and I respect 
that. But with all due respect, I have a hard time believing 
that Atlanta, Chicago, and several other hubs impact on the 
entire system is, even with connectivity, is a lot bigger, no 
matter how you slice this, than several of these very small 
regional airports.
    Mr. Huerta. Well, let me just cite the examples over the 
last couple of days. One of the things--where we have an 
application of the furlough; what we have seen is there are 
differential impacts on different days based on what we are 
seeing in terms of actual traffic and weather situations. For 
example, over the last two days there have not been significant 
impacts in Chicago. Now, we are seeing that today. What we have 
seen in terms of impacts in Atlanta have, for the most part, 
not been as bad as what we would have modeled----
    Mr. Quigley. We are not in the busy summer travel season 
yet either.
    Mr. Huerta. Fair enough. What we are trying to anticipate 
as we work through this is what are things going to look like 
as we get into the busy summer travel season, and that is part 
of the discussion that we need to keep going.
    Mr. Quigley. All right. And I understand you do not want to 
pick winners and losers. I think you might want to pick volume 
versus smaller volume.
    Thank you, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Quigley.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    Following up on my colleague's question, you had mentioned 
before in your testimony that there were some airports that 
were not impacted by this?
    Could you tell me which ones those were?
    Mr. Huerta. It is a number of airports. For example, the 
Washington airports, they have a lot of available capacity that 
they are able to manage, and so the impacts, we would project, 
would be less than we would see in some other areas of the 
country. The major impacts that we see are in places like all 
three New York airports. It is a complex air space to operate 
within. These are very large facilities and are complicated to 
manage the air space and complicated to staff. And so that is 
one example of where we would see that.
    I mentioned Atlanta. Atlanta is one where the impacts could 
be significant or they could be manageable, that is largely a 
function of the design of the airport. They have five parallel 
runways, so they have a lot of available capacity to operate 
within at that airport. It is the relationship between the 
facilities but also the design of the airfield and the 
schedules that airlines have.
    Mr. Joyce. But the cuts you decided to make were uniform 
across the board.
    Mr. Huerta. Because we determined that the network impacts 
on the entire system were such that if we were to do anything 
different, that there would still be significant disruptions 
and it would put us in the position of picking winners and 
losers.
    Mr. Joyce. Because I am somewhat new with this bear with me 
for a moment. When was the first time you heard the term 
``sequestration'' and that it may apply to your budget going 
forward?
    Mr. Huerta. It was in the whole discussion that took place 
with the original passage of the Budget Control Act.
    Mr. Joyce. Did you prepare alternative budgets?
    Mr. Huerta. Alternative?
    Mr. Joyce. Budgets. One with the money that you thought you 
were going to get and another one with sequestration.
    Mr. Huerta. What we started focusing on at the beginning of 
the fiscal year was to plan for what would a cut look like 
against our budget; yes.
    Mr. Joyce. Okay. In that cut, did you cut any 
administration?
    Mr. Huerta. Yes.
    Mr. Joyce. Could you tell us what you cut?
    Mr. Huerta. We did significant reductions in all of our 
nonpay activities along the lines of what I talked about--
training, travel. We cut----
    Mr. Joyce. You cut from $129 million I heard you say to 
$125 million in travel?
    Mr. Huerta. One forty nine. One forty nine.
    Mr. Joyce. I am sorry.
    Mr. Huerta. One forty nine to $125. We also reduced our IT 
expenditures through a consolidation. The savings this year for 
that are about $36 million. We have put a hiring freeze on. We 
got rid of contracts that were personal services contracts, 
essentially letting go contract and temporary employees.
    We have greatly reduced our expenditures in spare parts and 
equipment and everything associated with that. And then in 
terms of the overhead functions--things like general counsel, 
finance, and so forth, I think a disproportionate reduction in 
those areas all with the goal of preserving the operating 
mission of the agency.
    Mr. Joyce. Okay. And those preparations took place over 
months?
    Mr. Huerta. Yes.
    Mr. Joyce. Who do you represent do you feel--the American 
public, the airline industry? Who would you view as being your 
end client?
    Mr. Huerta. The American public.
    Mr. Joyce. Okay. And if the aviation industry serves the 
American public and moves us across the country, why would you 
think that only last week would be a good time to bring them in 
and act in concert with them--or as you say you told them what 
you were going to do--why would you not have engaged them 
earlier on and asked them for their input so they could do the 
proper reductions in their schedules so we could act in concert 
to serve the American public?
    Mr. Huerta. We have been working as diligently as we can to 
deal with what is an unmanageable situation. None of these are 
great choices, and what we wanted to do was to identify as 
precisely as we could impacts and manage them as best that we 
possibly could. As information became available we did share it 
with them.
    Mr. Joyce. I was not here for it, sir, so I just want to 
know why we are all of a sudden getting to this point and it 
seems in the last week it has all come into play when you have 
so many big stakeholders here that should have all been at the 
table from the get-go to make it work.
    Mr. Huerta. I have been talking about it since the start of 
the year.
    Mr. Joyce. I understand that. You said that a couple of 
times you have been talking about it but you just told the 
people who were servicing the American public on a daily basis 
about it last week. Last Tuesday you indicated.
    Mr. Huerta. No, we have talked about what they should 
expect in the way of impacts, what the impacts on our budget 
was. Last week what we were talking about was specific 
operational details.
    Mr. Joyce. Last week?
    Mr. Huerta. That is correct.
    Mr. Joyce. Last Tuesday?
    Mr. Huerta. That is correct.
    Mr. Joyce. And you never felt that you should engage them 
before last Tuesday on what the schedules could do?
    Mr. Huerta. We engage with them on a daily basis in 
operating the National Airspace System. But what we shared with 
them was specific schedules that we had built based on the 
impact of the furlough.
    Mr. Latham. The gentleman's time has expired.
    Mr. Joyce. Sorry, Chairman.
    Mr. Latham. I thank the gentleman.
    We are going to hopefully have a quick last round here, and 
I know your schedule--I think we are about noon to depart. But 
a couple questions that I have yet.
    There is a lot being made about the fact that domestic 
flights are down 27 percent from 2000 levels, and yet the 
budget has grown 109 percent since 1996. Can you explain the 
math on this and why the operation budgets are up that much but 
operations are down?
    Mr. Huerta. Well, simply put, the nature of the system has 
changed quite dramatically. The biggest increase has been 
consistent with the economy as a whole, an increase in payroll. 
We are a people-driven organization.
    Second, we have made significant investments in new 
technology since that time, and that is with the long-term goal 
of transforming from a radar-based system to a satellite-based 
navigation system in the years ahead. We have also introduced 
significant new procedures that are intended to yield benefit 
for the traveling public through reduced fuel burn and greater 
efficiency in the system. We are in a period of time where as 
we introduce the new technologies we need to continue to 
maintain the old technologies. Long term there will be 
significant savings.
    Mr. Latham. You know, when we went through the process of 
doing the continuing resolution, OMB sent up a list of hundreds 
of anomalies to address individual funding problems and 
mandatory that you had to pay raises to some people so we had 
to fix this or we could not continue. Was there an anomaly 
request to fix the furlough problem?
    Mr. Huerta. I cannot comment on what OMB might have sent 
up, but we were certainly discussing with the FAA and the 
Department of Transportation what this impact was going to be.
    Mr. Latham. So you never talked to OMB about an anomaly to 
fix the problem?
    Mr. Huerta. We shared with them what we expected the 
impacts to be.
    Mr. Latham. I thought you said you did not talk to them.
    Mr. Huerta. No, we had discussions about how we were going 
to manage and what we expected the impact to be.
    Mr. Latham. But you did not request that they bring an 
anomaly on their list of hundreds of changes that they needed 
to do the CR?
    Mr. Huerta. Well, I am not familiar with a list of 100 
changes that they may have sent.
    Mr. Latham. Well over that. Across the government wide they 
had a list of things that they needed in the CR to address 
certain problems. And apparently, but you did not tell them 
that you had a problem?
    Mr. Huerta. No, it was well known that we had a problem, 
sir.
    Mr. Latham. So they did not respond to your request?
    Mr. Huerta. I cannot comment on those discussions that 
might have taken place.
    Mr. Latham. You do not know if there was a request?
    Mr. Huerta. I cannot comment on how priorities were 
established within the continuing resolution. I really do not 
know.
    Mr. Latham. But you are not aware of their having any 
request to Congress to fix this?
    Mr. Huerta. I am not aware of that.
    Mr. Latham. Okay. So they insisted on the sequester back 
with the Budget Control Act and then when they have this 
problem that is very disruptive to the American people they 
made no effort to fix it? No request?
    Mr. Huerta. As I said, I am not familiar with what might 
have been sent up on behalf of the government as a whole.
    Mr. Latham. I am going to quit a little bit early here but 
can you again look the American people in the eye and say the 
sequester will have no effect on safety?
    Mr. Huerta. Yes. The impact will be on efficiency, but we 
will not do anything to compromise safety.
    Mr. Latham. Okay. Mr. Pastor.
    Mr. Pastor. I am going to follow my colleague, Congressman 
Cole, in that this budget is based on sequestration being 
removed by 2014 or the 2014 budget. But I have to tell you my 
expectation is that, as I said in my opening statement, that 
2013 we had sequestration and there is great likelihood that 
2014, I think we are going to be at least part of the fiscal 
year in sequestration. I hope that regular order comes about 
and we have Chairman Rogers here and we had Ranking Member 
Lowey who I think would do it if possible. But I would join 
Congressman Cole to say that sequestration is going to continue 
into 2014 and we should all be prepared for it.
    Mr. Latham. Thank the gentleman.
    Mr. Rogers.
    Mr. Rogers. No questions.
    Mr. Latham. Mr. Cole.
    Mr. Cole. No questions.
    Mr. Latham. Mr. Joyce.
    Mr. Joyce. No questions.
    Mr. Latham. Wow. Maybe I should run the furlough.
    Obviously, there is a lot of frustration from a lot of 
folks, and you are keenly aware of that. But I would hope that 
as we go through this process for next year that we keep an 
open communication line because we have some real tough 
decisions to make and there is a lot of concerns that we all 
have about going forward certainly with emphasis on safety but 
let me just say we want to continue that relationship. It is a 
difficult situation, obviously, but I wish you had come to us 
to actually let us know what we could do to fix the problem. We 
have heard nothing before and that is the frustration I think 
shared by Chairman Rogers and a lot of us here, but these are 
not insurmountable problems if, in fact, we cooperate and work 
together.
    With that, thank you very much for your testimony today. 
And the hearing is adjourned.

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                                          Thursday, April 25, 2013.

                    FEDERAL RAILROAD ADMINISTRATION

                                WITNESS

HON. JOSEPH C. SZABO, ADMINISTRATOR, FEDERAL RAILROAD ADMINISTRATION
    Mr. Latham. The subcommittee will come to order.
    This morning, we welcome FRA Administrator Joseph Szabo to 
testify on the FRA's budget request for fiscal year 2014.
    We welcome you back, Mr. Szabo.
    This year, the FRA is requesting authority to spend $6.6 
billion in fiscal year 2014. This represents a $5 billion 
increase over fiscal year 2013 funding, or a 330 percent 
increase, one of the largest increases in the budget.
    This includes $2.7 billion for Amtrak, which is doubled 
from the fiscal year 2013 level. It also includes $3.7 billion 
for a new rail service improvement program, which could be used 
to fund high-speed rail investments, which are eligible under 
this new account.
    The budget assumes that $214 billion in savings from the 
overseas contingency operations will be used to shore up the 
Highway Trust Fund. It proposes to use $40 billion from this 
bolstered trust fund to finance a 5-year rail reauthorization 
proposal.
    It is widely known that CBO expects the trust fund to go 
broke in 2014, and the withdrawal of forces from Iraq and 
Afghanistan does not create a real offset. The administration 
seems hopelessly confused about the fact that budgets do not 
assume that wars go on forever. I cannot make it any plainer 
for you than to say Congress has not and would not have 
appropriated funds for operations overseas in years that follow 
the departure of our forces. That is absurd. This ridiculous 
proposal is yet another accounting gimmick that this budget 
puts forward to justify even more unsustainable spending.
    This proposal is particularly frustrating in a year when 
the American people are expecting leadership from all of us on 
fiscal responsibility. This is an expensive proposal to put 
forth in this environment without any real way to pay for it. 
As you know, we are under significant financial constraints. 
With that said, I am looking forward to hearing a more detailed 
explanation of your budget.
    We welcome you again, Mr. Szabo.
    Before I recognize the Administrator for his opening 
statement, I recognize Mr. Pastor for his opening comments.
    Mr. Pastor. Good morning, Mr. Chairman. Thank you, Mr. 
Chairman.
    I also want to welcome the Federal Railroad Administrator, 
Mr. Szabo. Welcome to the subcommittee and this hearing on the 
2014 appropriation budget.
    The president's budget request for the Federal Railroad 
Administration includes the biggest increase within the entire 
DOT budget. The budget includes a total of $6.6 billion for 
FRA's programs and activities, of which $6.4 billion is 
requested in mandatory funding for two new rail accounts.
    Key components of the new current passenger rail service 
program include: capital and operating support for long-
distance routes, transitional assistance for States as they 
begin to cover the full operating and capital costs of State-
supported routes, and critical funding to address the state-of-
good-repair backlog on the Northeast Corridor.
    In many ways, Mr. Chairman, the state-of-good-repair 
funding builds on your new initiative you proposed in the 
fiscal year 2013 bill and Amtrak's capital account for the 
bridge and tunnel program. I am hopeful that we can get further 
in the process this year.
    Finally, I am pleased that the budget request includes $70 
million for rail planning. As you may recall, I urged that we 
include funding for planning when President Bush requested this 
intercity rail passenger grant program a few years back. Sound 
planning and analysis is essential for the development of any 
new transportation project.
    I look forward to Mr. Szabo's testimony and discussion 
today.
    And thank you, Mr. Chairman. I yield back.
    Mr. Latham. Thank you, Mr. Pastor.
    Mr. Latham. After the Administrator, we will proceed with 
5-minute rounds, alternating back and forth in our normal 
procedure.
    With that, Mr. Szabo, we invite you to give us your opening 
statement. Your written statement will be included in the 
record. You are recognized for 5 minutes.
    Mr. Szabo. Very good.
    Chairman Latham, Ranking Member Pastor, members of the 
committee, thank you so much for this opportunity to discuss 
our 2014 budget request.
    This budget represents a multiyear blueprint for investing 
in the next era of American freight and passenger rail and 
reflects an emerging consensus that rail is the mode of 
opportunity.
    We are requesting $6.6 billion for fiscal year 2014, 
including $6.4 billion for the development of a national high-
performance rail system program, the first of a 5-year, $40-
billion rail authorization. The program will be focused on two 
connecting priorities: modernizing our existing rail system and 
building an enhanced passenger and freight network to meet 
future demand.
    Our budget also requests funding for expanding key safety 
initiatives that have helped to make 2012 the safest year in 
railroad history.
    Further, as part of the President's initiative to invest 
$50 billion in transportation infrastructure this coming year, 
we are requesting $5 billion for rail projects. In the next few 
decades, America's transportation network will need to move 100 
million additional people and 4 billion more tons of freight 
per year, and it will need to do it safely, reliably, and 
efficiently.
    But today our airports and highways are stretched close to 
their limits, with congestion costing our economy more $120 
billion a year. These challenges underscore the need to invest 
in more underutilized transportation alternatives, such as 
rail, which can be the most cost-effective, least oil-reliant, 
and most environmentally friendly mode to move people and 
freight.
    Congress recognized this need in 2008 when it passed with 
broad bipartisan support two landmark pieces of legislation: 
the Rail Safety Improvement Act and the Passenger Rail 
Investment and Improvement Act. And both have helped fuel the 
resurgence of American rail.
    Since these projects were passed, railroad accidents have 
fallen to record lows, while Amtrak's ridership and on-time 
performance have risen to record highs and freight intermodal 
traffic has surged to near record levels. Over the past 4 
years, historic levels of public and private investment have 
been made in safety improvements, passenger rail equipment, 
corridor upgrades, and freight capacity.
    The key elements of PRIIA and RSIA are now set to expire at 
the end of this fiscal year. And as much as we have 
accomplished, much more needs to be done to rebalance our 
Nation's transportation network.
    Our budget proposes to take a more coordinated approach to 
enhancing the Nation's rail system--a holistic, integrated 
strategy that addresses safety, passenger and freight service 
improvements, and strong planning. Our new approach builds on 
the core principles of PRIIA and RSIA, and it better reflects 
both our on-the-ground experiences and the complex reality of 
our rail system, which runs mainly on privately owned track, 
carrying a mix of passenger and freight trains.
    Much of the rail infrastructure we rely on today was built 
by past generations of Americans who acted on our behalf. Now 
is the time for our generation, for the sake of our children 
and grandchildren, to recapture that visionary spirit. But to 
do so, sustained and predictable Federal funding for rail 
programs is a necessity.
    For decades, Congress has funded highway, transit, and 
aviation programs through multiyear authorizations that provide 
guaranteed funding that enables States, local governments, and 
the private sector to plan for and make transportation 
investments. Around the world, major rail systems have been 
developed through similar multiyear funding programs. So to 
build the rail network that our economy needs, we are proposing 
to adopt this approach for rail by establishing a new rail 
account of the transportation trust fund. Given the enormous 
pent-up demand for rail projects, this is an appropriate step 
forward.
    For the $10 billion this administration has invested in 
high-speed and higher-performing intercity passenger rail, we 
have received applications requesting funding for more than 
seven times that amount. And since 2009, 75 environmental and 
engineering studies and 30 State rail plans and corridor plans 
are under way, creating an even stronger pipeline for future 
projects. With your support, we can safely position our rail 
network for its increasingly vital role in meeting the Nation's 
transportation challenges.
    In closing, I want to thank the committee for their work to 
address the rail needs in the Northeast region resulting from 
Hurricane Sandy. Work is ongoing to make critical investments 
needed to restore and revitalize services in the area. However, 
we are not able to access all of the funds that were 
appropriated for Amtrak, so we will continue to work with the 
committee to resolve the underlying concerns and modify the 
legislative language to make all of the funds available.
    Thank you very much, and I look forward to your questions.
    Mr. Latham. Thank you very much, Mr. Szabo.
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    Mr. Latham. Last week, as I am sure you know, Secretary 
LaHood testified before our subcommittee, and I really need 
some clarification on a few topics that we discussed at that 
hearing. Secretary LaHood stated, and I quote, ``DOT has never 
promoted building anything to get anywhere faster. We don't 
promote things to get places faster.'' Quote, ``We have never 
promoted high-speed rail on the speed aspect of it.''
    Why have you proposed spending billions of dollars on the 
high-speed rail program if speed is not a factor?
    Mr. Szabo. I can't directly, you know, attribute to what 
the Secretary, you know, the point he was trying to make in his 
comments, but I can say this about our program: Our program has 
always been about the performance of passenger rail. It is 
about a higher-performing passenger rail system. And, of 
course, our proposal going forward is about a higher-performing 
passenger and freight rail system.
    Ultimately, it comes down to the safe, reliable, and 
efficient movement of people. And so it is a matter of 
understanding what is the market need between city pairs, what 
types and levels and frequencies of service that best meet that 
market need.
    And so, certainly, speed is an element. I think likely the 
point the Secretary was trying to make is that speed cannot and 
should not be the only element.
    Again, when it comes to our rail program, there are markets 
where true high-speed rail core express service is appropriate 
because of the distances to be traveled and the population 
densities to be served. But, certainly, there are other markets 
where just by having higher-performing service, regional rail 
service, 90 to 100 miles per hour, because of the lower capital 
costs, actually are much more efficient serving those markets.
    And then there are, of course, those smaller communities, 
those feeder routes that feed into the larger core system, 
where 79-mile-per-hour service is, in fact, the most efficient 
and most cost-effective way to connect them to the broader 
network.
    Mr. Latham. I guess that leads perfectly to my next 
question. The FRA is insistent upon upholding a 125-mile-an-
hour performance standard for rail equipment purchased by the 
Federal funds instead of 110 miles an hour.
    If going faster doesn't matter, why take such an 
affirmative stance on the higher standard when the 110-mile-an-
hour technology may be more cost-effective?
    Mr. Szabo. Yeah, easy answer, and it is about being most 
cost-effective.
    You need to keep in mind that our program has three tiers 
of service. There is that core express service, which is those 
speeds of, you know, 150 to 220 miles per hour. And then the 
middle tier is that regional express service, which operates at 
speeds from 90 to 125 miles per hour. And then the third tier, 
you know, the feeder service and merging routes, operates at 
those speeds 79 to 90 miles per hour.
    So under PRIIA, Congress directed us to bring together all 
the stakeholders--the States, Amtrak, the equipment 
manufacturers--essentially to come up with standardization 
specifications for each of those three tiers of service. And so 
what the States and Amtrak and the equipment providers have 
come together on is a standard that fully meets the needs of 
that regional express tier, up to 125 miles per hour.
    I mean, the key here is you don't want to have a standard 
that isn't going to meet the need of the service in that 
category. And since service in that category will in many 
places be going 125 miles per hour, you need a locomotive that 
goes that fast.
    And by standardizing it and bundling it--we just saw in our 
first procurement in the Midwest where, through the 
standardization and the bundling, the bids came in about 35 
percent lower than expectation.
    And so Illinois wants to ensure that their locomotives can 
operate at 125 miles per hour. Michigan has expressed the same 
need. California's locomotives are going to have to go 125 
miles per hour for them. And so, as this procurement is 
bundled, you need to make sure you can reach your top speed. A 
locomotive designed for 125 miles per hour can still go 110, 
but the opposite is not true. If you purchase a locomotive that 
is restricted to 110 miles per hour, you are limited forever, 
including the 30-, 40-year life of that locomotive.
    Mr. Latham. All right. I think that sounds like a conflict 
with what you said previously, but my time has expired.
    Mr. Pastor.
    Mr. Pastor. Since sequestration is the biggest topic of the 
week, the FRA has to make $82 million in cuts due to the 
sequestration. The bulk of these cuts will come from the 
Amtrak. FRA's operating and research programs will be reduced 
by a total of nearly $11 million.
    What other reductions have you made to meet your 
requirements under the sequestration?
    Mr. Szabo. Yeah, we have had essentially to take a look 
at--you know, turn over every rock and look in every corner of 
the organization to take a look at where savings can be 
achieved. And, of course, we have made our 5 percent across-
the-board cuts. It has meant, in many cases, delaying in 
hiring. We have made significant cutbacks in travel and 
conference.
    You know, the goal has been for us to absorb more pain at 
headquarters, to make sure that we protect the ability of rank-
and-file inspectors to make inspections out in the field and, 
you know, try to make certain that our core safety mission is 
not affected.
    But, you know, we did some real due diligence and began 
preparing actually a couple of months in advance by 
strategically not filling positions and making significant 
reductions in travel, canceling contracts.
    Mr. Pastor. So has it affected the safety or efficiency of 
running the railroads?
    Mr. Szabo. It certainly has made our challenge greater. 
Again, our priority has been to protect and preserve rank-and-
file inspections. So, you know, our goal is to try and make 
sure that it does not come back and bite us in the behind on, 
you know, achieving our continuous record of safety 
improvements. But, certainly, there is a risk if sequestration 
continues long-term.
    Mr. Pastor. Well, I think that that is a high probability. 
Yesterday, we had the FAA, and the budget that was being 
discussed had included one of the conditions that sequestration 
would have been lifted. And I and I think Congressman Cole both 
suggested to the Administrator that, in my opinion, 
sequestration is going to continue in 2013 and go forward to 
2014. And whenever it is lifted, it is going to be quite a 
ways.
    So I think that would be the probable situation. And so I 
think that is what you should also plan for, as you do other 
alternatives.
    Mr. Szabo. Congressman, obviously, the longer that 
sequestration is in place, the greater our risk becomes and the 
greater our challenge is. You know, but it is my responsibility 
to try and make sure that it doesn't have a deleterious effect 
on safety.
    You know, we are very, very proud of the fact that we have 
a significant record of continuous safety improvement over the 
past 5 years. This hurts. It sets us back. We are dealing with 
it. But the longer it is there, the greater our risk that it 
ends up rooting itself in deleteriously affecting railroad 
safety.
    Mr. Pastor. Within the rail service improvement program, 
$70 million is requested to coordinate planning for rail 
projects. And I will tell you that, as you probably may be 
aware, we are trying to connect two major metropolitan areas in 
Arizona----
    Mr. Szabo. Phoenix and Tucson, yes, sir.
    Mr. Pastor [continuing]. Phoenix and Tucson, that would 
connect 85 percent of the population and also would connect to 
the Amtrak. So it gives the connection down in Tucson. And so I 
am very happy that we had the initial grant provided by the 
Federal Government, and Arizona Department of Transportation is 
planning and going forward.
    Is this how you see the $70 million to be used, by local 
authorities and et cetera?
    Mr. Szabo. Planning today saves capital dollars tomorrow. 
It is so important that strong planning be done, that States 
and regions be able to take a look at their transportation 
needs and do good planning, having the option of using the 
transportation mode that is most efficient for the journeys 
that need to take place in moving people and goods.
    There is some great planning work being done there in the 
Southwest that I would love to spend some more bringing you up 
to speed on. But the other important thing is to continue the 
planning for the Northeast Corridor, the NEC FUTURE project. 
And it is imperative that the good work that has been started 
be allowed to continue there. Our planning dollars are going to 
expire there this August, and we are really going to lose 
synergy if we have to shut down that work. And this is one of 
the world's strongest intercity passenger rail markets, as well 
as a very heavily utilized freight market.
    Mr. Pastor. I yield back, Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    Apparently, Mr. Cole does not have a question at this time, 
so I recognize Mr. Dent.
    Mr. Dent. Thanks, Mr. Chairman.
    Good morning, Mr. Szabo.
    Mr. Szabo. Good morning.
    Mr. Dent. Just a few things. First, thanks for being here.
    In light of the sequestration, can you explain how you are 
prioritizing your spending decisions?
    And, specifically, I am concerned--yesterday, as was 
mentioned, we had Administrator Huerta in here from the FAA 
discussing, you know, the issues with the FAA and air traffic 
control. Could you let me know if we could anticipate similar 
types of problems for Amtrak in light of the sequester?
    Mr. Szabo. At this point, even though there has been a 5-
percent across-the-board reduction to Amtrak, at this point, 
you know, it won't entail any direct disruptions of service.
    You know, again, obviously, the longer these things go on, 
the longer that they continue, the greater the risk is, you 
know, in being able to maintain, in our case, from FRA's 
standpoint, the level of safety that we are responsible for 
achieving and, in Amtrak's case, the level of service that they 
are expected to achieve.
    Mr. Dent. Have you requested any flexibility yet from 
Congress in the event that, you know, we would have to make 
some adjustments to Amtrak's schedules? Have you requested any 
flexibility, at this point?
    Mr. Szabo. At this point, there hasn't been the need for us 
to come and request flexibility from you. Again, we have done 
our due diligence and we have made our plans to get through the 
fiscal year 2013 at the sequestration levels. My priority, you 
know, has been, again, to protect those rank-and-file 
inspectors out there. But there would be concern that, long-
term, it can manifest itself and have a deleterious effect on 
railroad safety.
    Mr. Dent. Okay. Well, in the event that there is going to 
be a problem, we just hope that your administration would 
notify stakeholders in a timely manner, unlike the FAA, which 
clearly did not give any stakeholders forewarning of what was 
about to happen, whether it was--in that case, it was the 
airports, it was the airlines, it was the unions, and, of 
course, the flying public. We just hope that if there is going 
to be a repeat event, that there is better communication.
    Mr. Szabo. Yeah, we continue to coordinate very, very 
closely with Amtrak. I mean, it is on a near daily basis.
    Mr. Dent. Well, thank you.
    And I have no further questions, Mr. Chairman. I yield 
back.
    Mr. Latham. Thank you, Mr. Dent.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Welcome, Administrator. We are glad to have you here. 
Appreciate your good work.
    I want to talk to you about the section 209 transition 
assistance. As a State that has invested heavily in intrastate 
Amtrak service and has seen that service flourish and grow, we, 
of course, have a very strong stake in this going well and 
taking on this responsibility in a way that lets us continue 
and even increase the service.
    We are one of the States that is going to be financially 
responsible for supporting State corridor services under 
section 209 of the Passenger Rail Investment and Improvement 
Act beginning on October 1st of this year. North Carolina is 
also one of the States that has served on the State working 
group which developed the section 209 methodology in 
partnership with Amtrak.
    Now, we both know States didn't ask for this change.
    Mr. Szabo. Right.
    Mr. Price. But they have agreed to pay for the expenses 
directly associated with operating their routes, a percentage 
of overhead costs for supporting services, and capital fees to 
help keep trains and infrastructure in good repair.
    The States had been given a preliminary estimate about the 
cost that would be required under section 209 versus what they 
are paying now, that the difference would be about $100 
million. But last Friday, Amtrak indicated the cost for States 
would be $120 million, a 20 percent increase.
    States don't feel they have received the level of detail 
necessary to support the new additional costs. The States that 
are assuming this new fiscal responsibility need to be able to 
justify expenses to their State legislatures and leadership. 
The last thing we would want to happen is for States to be 
forced to reduce service come October 1 because the new cost 
discrepancies are not resolved.
    So I wonder what you are doing to work with Amtrak and the 
States to ensure that the costs are being allocated 
appropriately among the various entities and that the costs are 
adequately justified to all parties concerned.
    Mr. Szabo. Yes, Congressman, I think several things.
    First off, under the statute, actually, the Surface 
Transportation Board is the governing body that has the 
authority to adjudicate any disputes between the States and 
Amtrak in the numbers. But we believe there is an important 
role that we have to play in making sure that there is full 
transparency to the numbers, that there is a good understanding 
of what constitute these numbers, that there is a fair 
allocation of these numbers. And so, you know, we are engaging 
with both Amtrak and the States to try and better clarify the 
understanding of those figures.
    In addition, as part of our budget proposal and our 
reauthorization proposal, you know, we do propose that there be 
transitional assistance for the States so the burden doesn't 
just drop on them like an anvil.
    And it is not new money for this fiscal year. It is money 
that originally would have been a part of Amtrak's budget that 
now would go to help the States with the first year of their 
payment of their 209 obligations and taper off in subsequent 
years, you know, to a point to where it completely diminishes. 
And then it does become the State's full responsibility to pay 
the cost of operating their corridor service.
    So we think there are two roles that we can be helpful in: 
one, in better understanding the number, ensuring transparency, 
and then providing this tapering-down financial assistance.
    Mr. Price. I want to get to that in just a moment, but can 
you shed light at this moment on this recent shift, on this 
recent 20 percent increase in the estimated cost?
    Mr. Szabo. I do not have those figures. You know, but staff 
is working with the other staffs at the States and Amtrak to 
try and better understand accurate costs.
    Mr. Price. And you can submit that for the record, the 
justification or the rationale?
    Mr. Szabo. We will get you something for the record, 
definitely.
    Mr. Price. Your numbers.
    Now, the fiscal 2014 budget, to come to that----
    Mr. Szabo. Yes.
    Mr. Price [continuing]. Includes $300 million for State 
corridors, including the 209 transitional assistance. And 
recently you indicated that, of this $300 million, $85 million 
be designated for transition assistance and the remaining $215 
million for equipment.
    How did you arrive at these funding levels? How is this 
funding going to be distributed to the States? Can you provide 
additional information on what equipment costs you have in mind 
here?
    Mr. Szabo. Yeah, part of the responsibility that the States 
end up assuming under PRIIA section 209 is the capital costs 
relative to the equipment. And so the additional costs that are 
in there are making sure that legacy costs are addressed, you 
know, as the States meet their new responsibility, you know, 
for maintaining the equipment as well as replenishing and 
replacing the equipment.
    And it would be a grant application process. The States 
would need to apply to us, and we would administer that grant, 
taking a look at their numbers for operating as well as the 
capital costs that they would be responsible for.
    Mr. Price. All right.
    Thank you, Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    This has to do with Iowa more specifically, but, as you 
know, the Chicago to Iowa City passenger rail project is under 
way, with the Illinois portion of the project from Chicago to 
Moline having started. And Iowa is still working on a service 
development plan to analyze the project----
    Mr. Szabo. Right. Right.
    Mr. Latham [continuing]. To build it out all the way to 
Council Bluffs, Omaha.
    Recently, $18 million of Iowa's project funding was 
transferred to the Illinois portion of the project to cover a 
``cost change.'' I am told that this transfer is not in 
accordance with the agreement in principle between Iowa DOT and 
the Illinois DOT. We were advised that the FRA made the 
decision to shift the funding.
    Can you tell me what statutory authority under which you 
stepped in and carried out the shifting of the funds, 
especially since cost overruns are expressly defined as costs 
over and above the amount funded by the Federal intercity 
passenger rail funding?
    Mr. Szabo. Chairman, we are very comfortable that the 
decision that we made was not only authorized but proper. For 
the record, we will actually cite whatever----
    Mr. Latham. Statutory authority.
    Mr. Szabo [continuing]. Statute that is appropriate there.
    [The information follows:]

    No statutory authority was provided by FRA to the Committee 
as of time of printing.

    Mr. Szabo. But the key here is, because the construction is 
now moving forward on Chicago to Moline, there are now costs 
that the Illinois side of the project are incurring that they 
otherwise would not have incurred. And so it was appropriate--
these were costs that actually would have later fallen into the 
Iowa side of the project.
    And so it is not that money was taken from Iowa; it is that 
the actual cost got shifted, and therefore the dollars, 
likewise, got shifted.
    Mr. Latham. Federal funds are not supposed to cover State 
cost overruns.
    Mr. Szabo. It is not about a cost overrun. We will be able 
to--for the record, we will make sure that we get you a very, 
very clear breakdown on our decision. I am comfortable with our 
decision and believe it is the right one.
    And for the record, you know, we are holding that Iowa 
piece in abeyance, hoping that Iowa chooses to move forward, 
but it is the last of our high-speed rail grants that is not 
obligated at this point. So, you know----
    Mr. Latham. What is your definition in that case of ``high-
speed''?
    Mr. Szabo. Under the high-speed rail program. Actually, 
Congress' definition, the statute that Congress established 
under PRIIA, made the definition speeds up to 110 miles per 
hour. And that is Iowa DOT's vision for that project.
    In our case, under our program, that would actually be the 
second tier of service. That would be what we would call 
regional express service that falls into that 90-mile-per-hour 
to 125-mile-per-hour category.
    Mr. Latham. When it was proposed, they said it would be 53 
miles an hour.
    Mr. Szabo. Yeah, I do know what Iowa's vision is. Like I 
say, Iowa DOT's vision for that project is 110-mile-per-hour 
service. So it is the second category.
    It certainly may have qualified or could have qualified 
under the first tier, under feeder service, you know, that 
would fall into the top-end speeds of 79 to 90 miles per hour. 
But your State DOT, their vision is for 110-mile-per-hour 
service on that line.
    Mr. Latham. Your budget--I don't know if I have time for 
this in this round, but your budget includes a vision for a 5-
year, $40-billion rail proposal. Secretary LaHood, responding 
to my question as to when the administration would formally 
submit its reauthorization proposal, stated that the President 
was busy with issues of gun control, immigration reform, and 
sequestration.
    Further, he stated that receiving a proposal from the 
administration was contingent upon, basically, Congress taking 
action on immigration reform, gun control, and sequestration. 
That is interesting to me, since the President insisted on 
sequestration himself and he has not made any proposal as far 
as immigration reform or gun control.
    Are you at least working on your reauthorization proposal, 
or are you waiting for gun control and immigration and 
sequestration to be addressed before you start? Or what is 
the----
    Mr. Szabo. From a rail perspective, we are absolutely 
working on our reauthorization proposal. And what you have 
before you is, you know, that blueprint.
    We clearly believe that rail is the mode of opportunity, it 
is the mode of need when you take a look at our transportation 
challenges, and that we need to achieve parity for rail, like 
we have for other transportation modes, ensuring a dedicated 
fund set up for rail investments and making sure that we can 
advance the safe, reliable, and efficient movement of people 
and goods. And we think rail has a significant role to play.
    Mr. Latham. Just to complete the thought, what 
circumstances will you be permitted to formally submit your 
reauthorization, and when can we expect it? Because we have 
issues here that you are talking about, amounts that we don't 
know, they are just mystery amounts, in what you are talking 
about as far as the big proposal in your budget.
    Mr. Szabo. We look forward to continuing to work with your 
staff to have provide all information that we are able to 
provide in moving forward.
    Mr. Latham. When do you expect and under what circumstances 
will you have the reauthorization proposal to us?
    Mr. Szabo. Well, I am not in a position where I can speak 
about DOT's reauthorization proposal. But like I say, certainly 
from a rail perspective, we have given you a great blueprint 
here, and we look forward to continuing to provide additional 
information to try and make this vision a reality.
    Mr. Latham. Thank you.
    Mr. Pastor.
    Mr. Pastor. In my round of questioning when we talked about 
planning, at the end of your testimony you brought up the 
Northeast Corridor and talked about funds, that they were going 
to lapse at the end of the fiscal year. And you showed some 
concern, and so I go back to that so that you may further 
explain what your concern is and, if it does lapse, what are 
your plans so that we have an idea of how you propose to 
address it.
    Mr. Szabo. Well, of course, the hopes would be to find a 
legislative fix so Amtrak could have access to the $86 million 
that was intended for their use for Hurricane Sandy 
remediation. And so we need to work with the committee and make 
sure we come up with language that folks are, you know, 
comfortable with to hopefully make those dollars available so 
Amtrak can move forward with some very important projects in 
the Northeast.
    Mr. Pastor. All right.
    In your budget, you have $675 million to address Amtrak's 
state-of-good-repair backlog and to replace aging equipment on 
the Northeast Corridor. You also have the moneys that was 
available through Sandy.
    How is that being coordinated so that the money is being 
spent in a more efficient way so that we don't have duplication 
or something falls through the crack? Because, obviously, you 
are dealing with Sandy problems now and you want to repair 
things up to state. So there must be some similarity in the 
situation.
    Mr. Szabo. Yeah. Well, I would break it down into three 
components. You know, there are those projects that need to 
move forward today to make repairs to damage caused by 
Hurricane Sandy and to try and harden the resiliency of those 
assets to make sure that they can withstand a storm in the 
future.
    But over and above that is the serious backlog of state of 
good repair on the Northeast Corridor. And so if you take a 
look at our program under current passenger rail services, over 
the life of the 5-year proposal that we are putting out there, 
we are looking to bring the entire Northeast Corridor to a 
state of good repair.
    Now, that doesn't allow it to grow, you know, for the 
future. It only allows it to function today at its, you know, 
peak efficiency. For it to grow for the future, you actually 
have to go down into the second leg of our budget proposal in 
the rail service improvement program. And Amtrak then would be 
able to apply for the grants that would be available there to 
start meeting, you know, that vision for the future, with true 
220-mile-per-hour trains and the ability to grow the services 
based on market needs.
    Mr. Pastor. But I guess the crux of the question is, you 
probably have infrastructure and equipment that was injured by 
Sandy which probably was part of the backlog that you need to 
bring into good repair. And so what I guess the question is: In 
dealing with the situation that is similar to that, how are you 
doing that to ensure that, once you deal with the damage 
brought by Sandy and being part of the backlogs, that you can 
accomplish the repair so it will go for the period of time you 
anticipate?
    Mr. Szabo. Through good transparency through our grant 
oversight management of Amtrak. You know, those are exactly the 
types of things that we would be drilling down into to ensure 
that there is no level of duplication. So it would be through 
our grant management program.
    Mr. Pastor. And is some of the effort--as I understand, 
there was a committee that was looking at the coordination of 
the damage and repair dealing with Sandy. As I recall, it was 
Secretary Donovan who was kind of the head of that committee?
    Mr. Szabo. Yes. Yes.
    Mr. Pastor. I am assuming, then, you also have people on 
that effort. And how are you being informed of what----
    Mr. Szabo. No, you bet we do, Congressman, that we are 
engaged in that effort with Secretary Donovan. And we are doing 
our due diligence, our oversight to make sure we are 
comfortable with the accuracy of the numbers that get submitted 
to us and, again, through our grant oversight, then making sure 
that it is not duplicated elsewhere.
    Mr. Pastor. Okay.
    I will yield back, Mr. Chairman.
    Mr. Latham. I thank the gentleman.
    Just to kind of go back over a little bit on the proposal, 
you realize for us to consider your rail proposal we need to 
understand every detail of it here. And without----
    Mr. Szabo. Sure.
    Mr. Latham [continuing]. A copy, it is impossible to 
understand it.
    On the very first page of your budget justification, it 
says, ``The rail proposal is integral to the President's plan 
to spur immediate job creation and economic growth through 
investment in transportation infrastructure.'' And, it 
certainly appears that you believe the rail reauthorization 
proposal is important. I am really hopeful, eternally 
optimistic that you will find it important enough to actually 
send it to us so we can see it.
    Is there--you don't have any timeline as to when you will 
have the rail proposal?
    Mr. Szabo. Well, we will continue to make information 
available to you and continue to work with your staff to, you 
know, fill in whatever questions it is that you have.
    Mr. Latham. We want to know what your proposal is.
    Mr. Szabo. I mean, the document before you is the blueprint 
that really lays it out, the different components of, you know, 
how we ensure that we are investing in the future of safety by 
expanding our risk-reduction program, confidential close-calls 
reporting, investing in the technology that we need to advance 
safety, making sure that we are doing a better job of tracking 
and following data. It is an invaluable way to become that much 
more efficient with safety.
    And then making sure that we have the ability not only to 
bring the existing passenger rail assets, the Amtrak network--
broken down by business line, again, for that full transparency 
and accountability--but bringing it to a state of good repair. 
And then allowing the opportunities for States and regions to 
continue to do good planning to meet their future 
transportation needs. Have the opportunity to apply for capital 
grants for freight and passenger rail investments that have a 
clear basis in market need, you know, and that have clear 
public benefits.
    And advance a research and development program that, again, 
not only meets our safety needs but allows us to meet the next 
generation of rail needs, advancements in the Transportation 
Research Center in Pueblo, Colorado, instead of having to do 
some of this testing of equipment overseas, to have the ability 
to do that here in the United States.
    To make sure we are doing good workforce development. If 
you take a look at the railroad industry, it is a whole group 
like me that are getting gray in--you know, everybody is going 
to be walking out the door and retiring together. And so for 
rail to meet the role that it is going to have to play, there 
has to be strong workforce development, not just for the 
industry itself, but to strengthen States' and regions' and the 
Federal Government's ability to plan for and execute good rail 
projects.
    Mr. Latham. Well, I think one example, without any details 
of what the proposal is, is positive train control. Secretary 
LaHood stated that the problems with the PTC are financial 
rather than technical and that FRA was resolving the technical 
difficulties. Your budget requests an amount for PTC for 
Amtrak. I would add that we are not sure of the exact amount 
since you haven't submitted the proposal, there is no 
reauthorization proposal.
    Does this mean that if we provide the mystery amount that 
is in your request, that you can achieve implementation by 
2015?
    Mr. Szabo. I think the Secretary----
    Mr. Latham. Do you see our dilemma? There are no specifics.
    Mr. Szabo. Let me help clarify the record. There are both 
financial as well as technical and programmatic challenges for 
the industry to meet full--full--PTC deployment by the 2015 
deadline.
    Mr. Latham. Does Mr. LaHood know that? That is not what he 
said.
    Mr. Szabo. No, he does. He does. And, again, I don't want 
to pick at his words, but I will say this for the record: The 
financial challenges that he was talking about are what public 
agencies face, Amtrak as well as the commuter rail operators. 
The financial challenges for them are significant, very 
significant, and, without question, a hurdle for them to meet 
the 2015 deadline.
    For the freight rail industry, it is less of a financial 
challenge, and it is more the availability of radios and 
spectrum.
    And so the report that we submitted to Congress last fall, 
you know, really outlined the challenges that the industry is 
facing from a technical and programmatic standpoint. It does 
indicate that they will achieve partial deployment by 2015, but 
full deployment by 2015 is very unlikely.
    Mr. Latham. Okay. I will have a follow-up here, but I am 
out of time.
    Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Administrator, let me turn to the high-speed and intercity 
passenger rail items in your budget. Your fiscal 2014 budget 
request includes $6.5 billion for a new national high-
performance rail system.
    Now, I understand this assumes a reconfigured 
authorization, so the program structure is somewhat undefined 
at this point. But I would like to ask you a few questions 
about how you see this program working.
    Mr. Szabo. Okay.
    Mr. Price. In the first place, how are you building on the 
key sections of PRIIA, section 301, 302, 501, which have 
established the capital grants programs for the States and for 
Amtrak? What are the continuities and the innovations here?
    Mr. Szabo. You know, our goal to date has been to build out 
good projects, build them on time and on budget. And North 
Carolina has been a great example of a State that has been 
doing just that, with a couple of their projects coming in 
actually ahead of schedule and under budget. The program that 
we have put together allows those good projects to continue on.
    North Carolina has just done a tremendous job in making 
capital improvements between Raleigh and Charlotte that are not 
only going to increase the speed of trains but it is going to 
improve the reliability of service. Most importantly, it is 
going to improve the safety of the service and the safety for 
motorists.
    Mr. Price. Well, as you know, this has been an aspiration 
for a long time. And we do feel like the State has been 
rewarded for the early planning and early investment it made in 
passenger rail. But there is no way this would have happened 
without the funds provided through the Recovery Act. And we are 
grateful for that, and we appreciate your commendation of what 
we have done with that money.
    Mr. Szabo. Yeah, the Sealed Corridor that you folks are 
building out and the ability to work with those communities and 
understand their vehicular and pedestrian traffic needs and 
coming up with a, you know, very comprehensive plan to close 
crossings, build overpasses, build underpasses, it just 
improves the efficiency of the rail service while improving the 
safety of the rail service and the safety for motorists and 
pedestrians. And the fact that 50 grade crossings are going to 
be closed between Raleigh and Charlotte by working with those 
communities is just a huge achievement.
    Mr. Price. Well, I want to thank you for your commitment to 
developing a 21st-century rail system.
    Within that $6.4 billion is $3.7 billion for new intercity 
rail development. That appears to be a successor to the 
previous high-speed rail program. Unfortunately, as you know, 
high-speed rail hasn't been funded since fiscal 2010. That is 3 
years of zero dollars for this program. We, of course, hope we 
can avoid another year where this investment gets completely 
shut out.
    We tend to hear in the news about some of the struggles 
with specific projects. I wonder if you can give us a general 
idea of where things are with the existing Federal dollars and 
projects under way. You have just done that with respect to 
North Carolina, but where do we stand with the money that is 
still being spent out?
    And, of course, the implication is that this won't last 
forever and that we pay a price for these successive years of 
zero funding. In the absence of new Federal funding, what 
evidence have you seen that States and localities are 
continuing to invest and have interest in high-speed rail? To 
what extent is that or might that fill some of the gap?
    Mr. Szabo. Yeah, there are several States that continue to 
not only make progress but move forward on their own dime on a 
limited basis.
    Our goal is to continue to build good projects, build them 
on time, build them on budget. And the success that I outlined 
in North Carolina is being captured essentially in every region 
that we have made investments in.
    In the Midwest, through the dollars that have been 
invested, 80 percent of Chicago-Detroit will be at sustained 
speeds of 110 mile per hour. Approximately 75 percent of 
Chicago-St. Louis is going to be at those sustained speeds of 
110 miles per hour with an entirely new fleet of equipment all 
funded from the existing investments. Much of that work is 
already operating today. Orders have been placed. And so it is 
on schedule and on budget, with some things actually coming in 
below bid estimate for the equipment.
    You go out to the Northeast Corridor, and good work has 
been done on the corridor itself to improve the efficiency, 
reliability, and safety of existing operations on the Northeast 
Corridor, while nice improvements have been made on some feeder 
routes. New service was returned to Brunswick and Freeport, 
Maine, to great celebration. Ridership is beating all of the 
projections. Revenues are beating all of the projections.
    You go out to the Pacific Northwest, we just had a ribbon-
cutting yesterday on the King Street Station. That work is 
complete. Not only does it enhance the efficiency of the 
station, more importantly it enhanced the safety of the station 
by making it able to withstand a seismic event, which is 
important out there, making renovations to prevent mudslides 
from blocking out the corridor, and a series of improvements 
that are going to reduce trip times, improve reliability 
substantially, and, again, enhance the safety of the operations 
there, and allow the Pacific Northwest to achieve their goal of 
carving off an hour between Portland and Seattle while 
advancing service to hourly departures.
    So, I mean, you can go to every region and there is a 
success story of this nature that has already happened today.
    Mr. Price. Thank you.
    Mr. Chairman, I know my time has expired. Let me just ask 
you----
    Mr. Latham. It has more than expired.
    Mr. Price. All right. I want to ask for an item for the 
record, if I might, and I will be very brief.
    Mr. Latham. You are more than welcome.
    Mr. Price. I appreciate those success stories and commend 
you for them.
    Mr. Pastor. Let me yield a minute of my time.
    Mr. Latham. Okay. The gentleman is keeping us honest.
    Mr. Price. All right.
    I appreciate the success stories and commend you for them, 
but I do want to know the other side of the story. Maybe you 
can furnish this for the record. I want to know what gets 
stopped in its tracks, so to speak, what doesn't get completed, 
what plans don't get fulfilled if we continue with this pattern 
of no funding. I mean, we really do need to know that side of 
the story.
    Mr. Szabo. We will provide that for the record. I think 
there is good information we can provide from both standpoints, 
a very clear update on what has been done and then what good 
work gets put at risk if additional funding isn't made 
available. And of particular concern would be the work on the 
Northeast Corridor.
    Mr. Price. That is exactly what I think we need. Thank you.
    Mr. Latham. Mr. Pastor.
    Mr. Pastor. I think in the last set of questions, you 
brought up the Pueblo, Colorado, center.
    Mr. Szabo. Yes.
    Mr. Pastor. Before I ask a question on that, let me go back 
to what--your budget proposes to fund reach and development in 
two separate accounts. The budget requests $32 million in 
general funds for railroad research and development and $55 
million in mandatory funds for a new railroad research, 
development, and technology program.
    The basic question that I have is, why can't you do the 
research under the one program? What requires you to now set up 
two programs?
    Mr. Szabo. Well, the first one is what has been our 
historic, traditional program, which has more of a safety 
focus. I mean, we have done some great work under that program. 
And, actually, I would love to come brief you on some of the 
good work that we have done under that program.
    But the second part of it is taking a look at what it is 
really going to take to grab the future.
    Mr. Pastor. Does the second part mean the $55 million?
    Mr. Szabo. Yes. Yes. And to make sure that we can upgrade 
our test facility there in Pueblo to ensure that, instead of 
having to farm out this testing across the globe to other 
countries, that we have the ability to test high-speed rail 
equipment here in the United States, to make sure we are doing 
the good workforce development that is not only going to meet 
the industry's needs but, again, government at the State, 
regional, local, and Federal level to plan for and execute good 
rail projects, to make sure that once again our country 
captures the opportunity to be an exporter of this intellectual 
property, this talent, and this equipment instead of having to 
import it from Asia and from Europe.
    We really want the United States of America to become a 
leader in rail. We are a leader today in freight rail. We want 
to see that role grow and be enhanced. And we want to become a 
leader in passenger rail through a balanced program that 
embraces high-speed, regional, and good feeder service, just 
like they have in Europe and Asia.
    Mr. Pastor. So the $25 million that is going to the Pueblo, 
Colorado, test site or facility, that is for high-speed rail 
technology?
    Mr. Szabo. Yeah. It allows us to upgrade the facility there 
to meet our future needs--in particular, the ability for it to 
become a world-class test center for high-speed rail equipment.
    It is a world-class test center in a lot of other areas. We 
want to make sure that it keeps that world-class setting in 
particular in this area, where we are a little bit deficient, 
has the ability for grow.
    Mr. Pastor. And the remaining $30 million will go where 
under that new account?
    Mr. Szabo. Again, that new account is about upgrading the 
test center and the workforce development. For the record, we 
will itemize out for you everything that falls under that 
category, Congressman.
    Mr. Pastor. Okay. All right.
    I yield back, Mr. Chairman.
    Mr. Latham. Thank you, Mr. Pastor.
    The California High-Speed Rail Authority's latest business 
plan assumes a total of $32 billion in Federal funding for the 
project over the 10 years from fiscal year 2014 to 2023 period. 
Congress so far has only provided $3.3 billion of that funding. 
California's funding plan assumes another $28 billion over the 
next 10 years.
    Is it the policy of the administration to provide that 
additional $28 billion for this project over the next 10 years?
    Mr. Szabo. Well, let me say this. Under our program, this 
is a grant program to where you have to apply for on a 
competitive basis and be deemed the most meritorious--one of 
the most meritorious proposals in that hopper. So there is no 
automatic guarantee that California gets dollars.
    Now, having said that, we remain very committed to that 
project. We remain very bullish on what we believe that project 
is going to mean for the people of California. And, certainly, 
the fact that, you know, the bids just opened last week came in 
substantially below budget--the range of the budget estimates 
was, I think, between $1.2 billion to $1.8 billion, and they 
came in less than a billion dollars. So, you know, we are 
already going to be able to start work out there and do it 
under budget.
    And, of course, the goal here is to make sure that as 
incremental pieces are constructed that they have immediate 
usability, and so there is never an island that is left out 
there that doesn't have value that it can provide the traveling 
public.
    Mr. Latham. So what you are saying for California, there is 
no certainty that you are going to continue to fund that $28 
billion. And if that is the case, how can they proceed if they 
are not knowing if the funding is going to be there?
    Mr. Szabo. They have to compete just like anybody else. 
They have to compete just like anybody else. Now, again, we 
remain committed to the project. We think it is a worthy 
project. But they have to compete.
    And, certainly, their goal needs to be to continue to do 
good work, build out with the dollars that they have available, 
and, of course, get that project to a point to where there is a 
tipping point for private investment. Private investment is 
going to have to be a very, very important part of the 
California high-speed rail project.
    And so it is going to be that balance between the public 
dollars that the Federal Government and the State provides to 
get to a point where private dollars can come in and 
essentially get it over the tipping point.
    Mr. Latham. I am still very concerned about uncertainty out 
there. Especially, because in December last year, you amended 
the grant agreement with the California High-Speed Rail 
Authority to allow the authority to spend its Federal grants 
first.
    Mr. Szabo. You bet we did, because it saves the taxpayers 
$100 million to $150 million. So, you know, this is consistent 
with----
    Mr. Latham. Which taxpayers?
    Mr. Szabo. All taxpayers. It saves the project, it saves 
the project $100 million to $150 million.
    And so this is one of those wise things that you do to save 
dollars. It is consistent, it is consistent with other grant 
programs inside the DOT. There is nothing unique or unusual 
here. It is just a sound business practice.
    Mr. Latham. Well, it is unusual to have the Federal 
Government fund 100 percent of something that is supposed to 
be----
    Mr. Szabo. No, Congressman--no, because the match--
California's match is still required. Their 50-percent match 
does not go away. It comes into the project later.
    But, again, this is consistent, this is consistent with the 
approach used in other DOT modes. And so it is not something 
that is unique.
    Mr. Latham. Okay.
    Mr. Szabo. And, Chairman, if I can, you talked about the 
uncertainty, and you are right. You know, for private investors 
to come in, there has to be certainty. For States to do good 
planning, there has to be certainty.
    And this is all the more reason why we need to have a 
program that goes on into the future, so States can do the good 
planning that they need, so private investors have the 
opportunity to come into these projects with that certainty 
that they are going to be looking for, and, again, that rail is 
put on parity with the other transportation modes like 
aviation, highways, and transit, not left out there like an 
orphan.
    Mr. Latham. What, basically, you are saying is that the 
stimulus, the $2.6 billion, this is a way of spending that out 
before the deadline in 2017, as far as expending those funds.
    Mr. Szabo. Chairman, I would argue that it is a way of 
maximizing return to the taxpayers by saving $100 million to 
$150 million on the segment.
    Mr. Latham. How does it save that money, again?
    Mr. Szabo. For the record, we will provide that to you or 
come brief that to you. But that is the projection. That is the 
projection, sir.
    Mr. Latham. Save the Federal Government and taxpayers?
    Mr. Szabo. Save the project.
    Mr. Latham. Okay. Say you fund 100 percent or 80 percent 
over the next 2 years of the project, and the project--I mean, 
California, I don't know if you have heard, is not in great 
financial condition. If they cannot come up with the money, the 
project dies, are they still on the hook for the Federal part?
    Mr. Szabo. Well, absolutely.
    You know, two things. Again, first off, we are ensuring 
that every piece that gets built has functional utility, has a 
use that the traveling public will be able to take advantage 
of, to ensure that there is never an orphan left out there as 
this project, step by step, moves forward.
    In addition, in addition, California is absolutely on the 
hook for the balance of that Federal grant. Through our grant 
agreements, we have assured that. There is no free ride here.
    Mr. Latham. Okay.
    Mr. Price, did you have questions?
    Mr. Price. No further questions.
    Mr. Latham. Mr. Pastor.
    Mr. Pastor. I don't have any further questions.
    Mr. Latham. You are very short-winded.
    Mr. Pastor. Well, he did such a good job here, I----
    Mr. Latham. He did. I know.
    Mr. Pastor. And I read all the material. But there will be 
questions for the record, Mr. Chairman.
    Mr. Latham. On California, if we are funding 100 percent 
initially--you are well aware that there are potential delays 
of the project. I think there are some lawsuits out there. They 
haven't bought the land yet.
    Mr. Szabo. Actually, they have started land acquisition 
this week.
    Mr. Latham. They haven't bought the land yet. Are you 
saying that if this gets bumped into fiscal year 2014-2015, 
that that 100 percent guarantee is going to extend to those 
years, then, if, in fact, they are not ready to go?
    Mr. Szabo. I am not sure I follow the question, but, 
certainly, let me say this: Our job is to make sure that the 
grant agreement that we have with California is met. It is our 
obligation to enforce that. And, certainly, we are going to 
ensure that the terms of that agreement are adhered to.
    Mr. Latham. But you have a 100 percent guarantee for fiscal 
year 2013. You are paying--Federal share is 100 percent for 
this year.
    Mr. Szabo. Again, I am not sure I understand your question, 
Chairman, but----
    Mr. Latham. It is your agreement with them.
    Mr. Szabo [continuing]. Again, the approach that we are 
using, there is nothing unique or unusual about it. In fact, it 
is the encouraged practice in some of the other modes in cases 
of this nature. It is often used. I don't believe it is the 
first time we have done it in FRA.
    You know, so, yes, it was a different approach from what 
our original grant agreement said. But based on the fact that 
it saves $100 million to $150 million and is widely used in 
other transportation modes, it was deemed to be the most 
appropriate step in going forward. It is about saving costs 
inside the project.
    Mr. Latham. The California project's business plan assumes 
Federal funding for the project of $2.2 billion per year in 
fiscal year 2015 and again in 2016 and again in 2017, rising to 
$3 billion per year thereafter.
    If next year Congress enacts its 2015 appropriation and 
authorization agenda and the amount provided for the new high-
speed rail projects in 2015 is the same as it was in 2011, 
2012, and 2013, which is zero, do you have a contingency plan 
in place to assist California for an orderly wind-down--if you 
need to shut down the project?
    Mr. Szabo. Well, I would certainly hope, in its wisdom, 
Congress will understand the need to move forward with making 
rail a viable transportation mode and putting it on parity with 
highways, aviation, and transit. And so I would hope Congress, 
in its wisdom, would choose to move forward with an approach to 
where States and regions can plan and execute with certainty in 
meeting the traveling public's transportation needs.
    Under the grant agreement with California high-speed rail, 
we have carved it up into pieces to, again, ensure that there 
are immediate transportation benefits for each and every piece 
that gets built, to ensure that there is always a return to the 
public.
    Now, it would be a crying shame if the people of California 
aren't able to reap the full benefits and efficiencies that 
come out of the build-out of that entire system, but our 
contingency is to make sure that at least each piece that gets 
built has functionality.
    Mr. Latham. You know, you are fully aware that the funding 
has been zero. You are still spending stimulus money.
    Mr. Szabo. Well, we have allocated--we have, you know, 
allocated all of our dollars, and, you know, good projects 
continue to be built out. There is about $3.6 billion in 
projects that are either complete, under construction, or set 
to go into construction. Next 2 years are going to be our 
biggest construction years on record.
    And so, you know, again, this is about ensuring a pipeline 
of projects, allowing States and regions certainty, the ability 
to do good planning. You know, we have been building highways 
for 80 years now. State DOTs are good at it. They always have a 
supply of projects on the shelf as dollars become available.
    For rail to reach, you know, reach the--the level that it 
has to reach in helping eliminate congestion, reducing fuel 
consumption, improving air quality, and being part of a 
balanced transportation network, it has to be put on parity 
with the other transportation modes.
    Mr. Latham. Back in October of 2009, the California 
authority stated in its application form that it would address 
the STB jurisdiction issue. And it seems pretty clear that the 
authority has known of the need to address the question, yet 
waited till the last minute to properly request the 
determination as to the jurisdiction. And the DOT has not 
properly ensured the authority's compliance, at this point.
    What conversations or communications, oversight actions 
have you had with the authority over the past 4 years to ensure 
that they comply with the construction licensing authority?
    Mr. Szabo. Well, I think it is important to note that never 
at any time were they in noncompliance of our agreement. And 
so, you know, it is----
    Mr. Latham. They need it to go forward.
    Mr. Szabo. And it is a matter of timing. But certainly 
there was never, ever, ever, sir, a point where they were in 
noncompliance. And so it is a matter of timing of when they 
felt it was appropriate for them to move forward with applying 
to the STB.
    Certainly, we believe that sooner is better than later. But 
the important thing is that we do not view the filing or the 
decision of the STB as a significant risk to the project or a 
significant risk for delay. As I mentioned, California is 
moving forward with land acquisition now, as we speak. And so 
there are several things that they are going to be able to 
continue to do concurrently with engineering, acquisition, as 
they await a ruling from the STB on construction.
    Mr. Latham. Apparently, Congressman Denham had to write a 
letter to remind them that they needed authority. And they are 
asking for an expedited review.
    Mr. Szabo. They were aware that they needed authority. So, 
again, it is just a matter of timing, a matter of timing of 
when they chose to apply.
    Mr. Latham. But they have known for 4 years they had to do 
it.
    Mr. Szabo. Yeah, and we have known.
    Mr. Latham. And they waited till the very last second to do 
it.
    Mr. Szabo. It is matter of timing. I mean, again, it is----
    Mr. Latham. Okay.
    Do you have any other questions, Mr. Pastor?
    Mr. Pastor. No, Mr. Chairman.
    Mr. Latham. If not, we will, I am sure, be submitting some 
questions for the record.
    [The information follows:]

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    Mr. Latham. I appreciate very much your testimony today. 
Look forward to working with you. We have a lot of challenges, 
obviously. We would love to see the reauthorization proposal so 
we could fill in some blanks as to what we need to do.
    But, with that, again, thank you for your testimony, and 
the committee is adjourned.
    Mr. Szabo. Thank you, Mr. Chairman.
    Mr. Latham. Thank you.

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